Commons Sitting of 8 April 1965

Preamble
The House met at half-past
Two o'clock

PRAYERS
[Mr. SPEAKER in the Chair]

MESSAGES FROM THE QUEEN
The VICE-CHAMBERLAIN OF THE HOUSEHOLD reported Her Majesty's Answer to the Address as follows:
I have received your Address praying that on the ratification by the Government of the Federal Republic of Germany of the Convention set out in the schedule to the Order entitled Double Taxation Relief (Taxes on Income) (Federal Republic of Germany) Order 1965, a draft of which was laid before your House, an Order may he made in the form of that draft.
I will comply with your request.
The VICE-CHAMBERLAIN OF THE HOUSEHOLD reported Her Majesty's Answer to the Address as follows:
I have received your Address praying that the South-East Asia Treaty Organisation (Immunities and Privileges) Order 1965 be made in the form of the draft laid before your House.
I will comply with your request.

ORAL ANSWERS TO QUESTIONS
  ECONOMIC AFFAIRS

    South-West Regional Headquarters
    Sir H. Studholmeasked the First Secretary of State and Secretary of State for Economic Affairs if he will state the estimated cost of the proposed regional headquarters for the South-West at Bristol, the estimated annual cost of running it, the number of extra civil servants required, and the cost of their salaries; and how the cost of this regional organisation will be met as between central and local government.
    Mr. Peter Millsasked the First Secretary of State and Secretary of State
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    for Economic Affairs what is the cost of setting up the new South-West Regional Development Board; and how much it will cost to run per year.
    The First Secretary of State and Secretary of State for Economic Affairs (Mr. George Brown): These costs cannot at present be precisely estimated, but the whole of the expenditure will be borne by the Central Government.
    Mr. Geoffrey Wilsonasked the First Secretary of State of Secretary of State for Economic Affairs why Bristol was selected as the administrative centre for the South-West Regional Council rather than a location more central to the South-West Region; and if he will make a statement.
    Mr. Peytonasked the First Secretary of State and Secretary of State for Economic Affairs what considerations led him to select Bristol as the regional centre for the South-West; and whom he consulted before coming to this decision.
    Mr. George Brown: I decided on Bristol as the administrative centre after weighing all the facts and all the views. As I said in the House on 10th December, the Councils are free to meet where they like in their region.
    Mr. Wilson: But is not the First Secretary aware of the difficulties that have arisen in connection with the National Health Service which has its regional headquarters in Bristol, much to the inconvenience of the western area?
    Mr. Brown: I understand this point, and I took a long time to make up my mind about it. I have a lot of sympathy with people who think that it would be better to have the administrative centre for the South-West somewhere other than Bristol, but when one has taken all that into account, in the end, administratively, economically and practically, one is driven back on Bristol. I can assure the hon. Gentleman that I did not decide this lightly.
    Mr. Peyton: Is the First Secretary of State aware that we do not take great comfort from being told that it took him a long time to make up his mind? What we would like to know is whom he consulted. Will he consider what is

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    to him the quite novel expedient of consulting the Members of Parliament for the area concerned?
    Mr. Brown: I can only say that I did my best.
    Mr. Hopkins: Is the Secretary of State aware that this is probably the first sensible decision he has made?
    Mr. Hayman: May I ask my right hon. Friend to bear in mind that I agree with the hon. Member for Bristol, North-East (Mr. Hopkins)? I believe that Bristol is by far the best centre in the South-West region, because the region needs a powerful centre.
    Mr. Peter Mills: Will the First Secretary of State bear in mind that there is a very real difference between the people of Devon and Cornwall and those nearer Bristol and that it would be a considerable help and encouragement to us in the far South-West to have the centre at Exeter, which would give us a sense of doing something and being something?
    Mr. Brown: We are all constituency Members and we all have to consider our constituents, but if the South-West Region is more concerned with regional development and prosperity than with the Members' addresses to their own constituents I think it will decide with me that Bristol is clearly the best centre.
    Mr. Thorpe: Disregarding the lecture which the right hon. Gentleman has just given us, is he aware that as a matter of fact it is far easier from most points in Devon and Cornwall to get to London than it is to Bristol? Is he aware that Bristol, in the view of the West Country, is the Near East—a completely different part of the world? If the First Secretary is not prepared to reconsider this decision, will he bear in mind that there is the Severn Basin and then Devon and Cornwall and there may well be a case for two sub-divisions? Further, if one may be optimistic, will the right hon. Gentleman give very serious consideration to Plymouth or Exeter or Taunton, or anywhere but Bristol?
    Mr. Brown: The purpose of these regional planning bodies is not to travel. I recognise that if anyone wants to travel it might be better to travel to London than to Bristol from the South-West, though I do not know why anyone in
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    the South-West should want to travel anywhere. But the purpose is not travel. The purpose is to plan the prosperity of the region and, having looked at it all with much sympathy for the views of the hon. Gentleman, Bristol seemed to me to be the best place from which to do that. On the point of sub-regional growth or committees or boards, I can only repeat the reply I have twice given in the House. If that is the view of the people in the region on the council and on the board, I would be very delighted that it should be done.
    Mr. Robert Cooke: Is the First Secretary of State aware that the phrase "driven back on Bristol" is somewhat unfortunate? Will he take the question of communications, which is the key to the whole area, most seriously and press on energetically with the plans made by the former Government for improved communications in the South-West?
    Mr. Brown: I do not want to press on energetically with anything the former Government did, but we will do our best to improve on it.
    Mr. Peyton: In view of the unsatisfactory nature of the reply, I beg to give notice that I will raise the matter on the Adjournment, when I hope that the right hon. Gentleman will be here.
    Mr. Speaker: That seems to have got a little extended as a form of notice.

    Nationalised Industries
    Mr. Ridsdaleasked the First Secretary of State and Secretary of State for Economic Affairs whether he will introduce legislation with a view to reforming the present machinery for consumer consultation over price increases in the nationalised industries.
    Mr. Wingfield Digbyasked the First Secretary of State and Secretary of State for Economic Affairs whether he will review the various consultative committees of the nationalised industries, with a view to taking steps to increase their effectiveness and to make them more representative of the consumer.
    Mr. George Brown: No, Sir, there seems no need.
    Mr. Ridsdale: Will the right hon. Gentleman form an independent consumer representation to the price review

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    body, and is he aware that a large number of people have no faith in his claim to be the best protector of consumers and regard him and the Chancellor of the Exchequer as the best two one-armed bandits in the country?
    Mr. Brown: If that was the point of the whole operation, it hardly seems to have been worth while.
    Mr. Channonasked the First Secretary of State and Secretary of State for Economic Affairs whether he will bring to the attention of the price review body the increases in prices imposed by the nationalised industries since mid-February.
    Mr. George Brown: No, Sir.
    Mr. Channon: Why on earth not?
    Mr. Brown: Because it would be very silly.
    Mr. Channon: Does not the First Secretary of State recognise that price increases by the nationalised industries are the Government's responsibility to some extent and it is only fair that these matters should be borne in mind? If his price review body is to work, why should not all prices be considered by it?
    Mr. Brown: I have a Question later on today on which I shall be saying that, if private industry could stand up to the criteria we enforce on the nationalised industries, I would be very happy.
    Mr. Geoffrey Lloyd: If the First Secretary of State is right in the view he has taken so far, is it not right that these matters should be submitted to the consideration of an impartial body?
    Mr. Brown: We have many impartial bodies which already look at proposals for price increases in the nationalised sector. They have to satisfy the Government, and I can assure the House from personal knowledge that they have to go through a very rigorous examination. I have made it perfectly plain that I do not rule out referring their cases also to the new body.
    Mr. Patrick Jenkinasked the First Secretary of State and Secretary of State for Economic Affairs by what criteria he determines the level at which the charges made by nationalised industries should be fixed in order to secure the economic
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    use of national resources consistent with Her Majesty's Government's policy for incomes and prices.
    Mr. Howeasked the First Secretary of State and Secretary of State for Economic Affairs by what standards, consistent with Her Majesty's Government's policies for incomes and prices, he determines whether the prices charged by nationalised industries are at a lower level than the economic use of the country's resources requires.
    Mr. George Brown: The prices and charges of the nationalised industries are determined by the industries themselves taking into account the two considerations referred to in my reply of 4th February to the hon. Member for Tynemouth (Dame Irene Ward).
    Mr. Jenkin: I thank the right hon. Gentleman for his reply. Does he not agree that there is no alternative to this but what the market will bear? Does he not recognise that this is the appropriate criterion?
    Mr. Brown: The public sector seems to be almost the only sector where that consideration is not the determining one.
    Mr. Shinwell: Is it not also true that before price increases are made by nationalised industries the Ministers concerned have to be thoroughly satisfied?
    Mr. Brown: I hoped that that was the burden of an answer I gave on a previous Question.
    Dame Irene Ward: Since quite a lot of control is presumably exercised by the right hon. Gentleman over prices in the nationalised industries, when can we expect any of the prices to come down, because they have done nothing but go up, up, up?
    Mr. Brown: All the nationalised industries suffer from the fact that private enterprise puts its charges up to them. What the nationalised industries have done is to absorb a very large part of the costs pushed on to them. I hope that as a result of the new body we shall establish this as the general practice.
    Mr. Wainwright: Does my right hon. Friend agree that during the period up to 1957 when coal was in short supply the price of imported coal, which ran to the

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    figure of £70 million, had to be borne by the National Coal Board?
    Mr. Ridsdale: Would the First Secretary of State do his best to ensure that fuel supplies at the cheapest price are available both to industry and the consumer, from whatever source?
    Mr. Brown: Yes, and I am sure that having a nationalised fuel industry is the best way of doing it. We were not doing very well last time it was in private hands.

    Hotel and Catering Industry
    Mr. Blakerasked the First Secretary of State and Secretary of State for Economic Affairs if he will arrange for the setting up of an Economic Development Committee for the hotel and catering industry.
    Mr. George Brown: Yes, Sir. Consultations with the industry will begin shortly, and I hope that a committee will be established by the end of summer.
    Mr. Blaker: That reply will be very welcome. In the establishment of this committee will the right hon. Gentleman bear in mind the contribution which the industry is already making to our balance of payments. Does he not think that a bit more backing from the Government could help the industry to increase this contribution?
    Mr. Brown: All relevant considerations will be borne in mind.

    Industrialist Advisers
    Mr. Bruce-Gardyneasked the First Secretary of State and Secretary of State for Economic Affairs what is the total number of industrialists now employed directly or indirectly by his Department in an advisory or part-time capacity; and what is the total number of man-hours which these people may expect to devote to this work during the course of a full year.
    Mr. George Brown: Seven industrialists are employed in my Department on a full-time basis as temporary civil servants.
    Mr. Bruce-Gardyne: Is the right hon. Gentleman aware that that does not really answer the Question which I asked? I asked for the number of in-
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    dustrialists employed by his Department in an advisory or part-time capacity? If this information is not available, will the right hon. Gentleman see whether he can make it available, since I suggest that many of these people might be better employed if they could get on with their proper job of producing more goods for export?
    Mr. Brown: That was a jolly silly supplementary question, because I did answer the Question and give the hon. Gentleman an exact answer: that I have seven industrialists from top posts in industry—whom the hon. Gentleman may not like—employed on a full-time basis in my Department; I have no others.

    Short Brothers and Harland
    Sir Knox Cunninghamasked the First Secretary of State and Secretary of State for Economic Affairs if he has finalised his plans for providing work, other than the manufacture of aircraft, for Messrs Short Brothers and Harland of Belfast; and what is the estimated number of employees who will be engaged on such work.
    Mr. George Brown: Consultants will shortly be appointed to advise on the diversification of Short Brothers and Harland's operations. Until they have examined the situation it will not help to make a statement. I am visiting Short Brothers and Harland myself very soon.
    Sir Knox Cunningham: Will the right hon. Gentleman bear in mind that the cancellation of the TSR2 and other aircraft has thrown the whole aircraft industry into considerable confusion and anxiety, and will he try to get an early decision on Shorts so that the firm can give some hope to the people employed by it?
    Mr. Brown: Knowing both the workers and the management in Shorts, I can assure the hon. Gentleman that they have much more faith and hope in us than they ever had in his Administration.
    Mr. McMaster: Nevertheless, is not the right hon. Gentleman aware that, in view of the hope that this firm would get further sub-contract work from the British Aircraft Corporation on the VC10 and the effect of the cancellation of the TSR2 on this prospect, this matter is extremely

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    urgent and the delay in appointing consultants is not satisfactory?
    Mr. Brown: I do not know how the hon. Gentleman can talk about the delay in the appointment of consultants when we are doing it after only six months in office while the party opposite did not do it in 13 years. I would not worry too much, if I were he, for the future is being looked after.
    Mr. Marten: Does the right hon. Gentleman realise that under the previous Government employment was steady at about 6,000 a year?
    Mr. Brown: I would advise the hon. Gentleman to ask the management and workers of Shorts what they thought about that Administration.
    Sir Knox Cunningham: Will the right hon. Gentleman continue the undertaking to employ 6,000 at Shorts given by our Government?
    Mr. Brown: I stand by my original Answer.

    South-Western Regional Plan
    Mr. Websterasked the First Secretary of State and Secretary of State for Economic Affairs when he expects to publish the south-western regional plan.
    Mr. Evelyn Kingasked the First Secretary of State and Secretary of State for Economic Affairs when the southwestern plan will appear.
    Mr. George Brown: It is too early to say. The South-West Economic Planning Council will shortly be established and must, of course, begin its work before a plan can be formulated.
    Mr. Webster: May I congratulate the right hon. Gentleman on sparing the time to come here to deal with these Questions? It is really a change. Is he yet in a position to say who will be the chairman of the body, and will he deny any rumours that he is finding great difficulty in finding a chairman?
    Mr. Brown: I will deny the rumours. I cannot answer the intermediate point. As to the hon. Gentleman's first point, when I do not come here hon. Members opposite all come, but when they know that I will come they all stay away.
    Mr. Thorpe: Since the plan is still in embryo, and we look forward to its publication with interest, will the right hon. Gentleman carefully reconsider the decision to site Bristol as the centre of this region? Is he aware that there is feeling amongst members of all political parties in the South-West that Bristol is not the logical centre—
    Mr. Speaker: Order. This will abut itself upon Question Nos. 19 or 20.
    Mr. Websterasked the First Secretary of State and Secretary of State for Economic Affairs on what criteria he proposes to base the South-West Regional Plan.
    Mr. George Brown: That it takes account of the particular needs of the South-West Region and considers how these can be integrated into a national plan to contribute to faster economic growth and prosperity.
    Mr. Webster: I thank the right hon. Gentleman for that very generous expression, but will he be a little more specific and say whether he intends to set up a national board to acquire and carry on any business, investigate and demand any information of any business in the area, or survey any business or any property, as is to happen under the Highland Development Board to be set up by the Highland Development (Scotland) Bill, which has been stated by a Member of the Cabinet to be the prototype of regional development?
    Mr. Brown: I cannot see that the South-West is part of the Highlands. In any case, that is not the Question the hon. Member put down. I answered the Question he did put down.

    Yorkshire and Humberside
    Mr. J. H. Osbornasked the First Secretary of State and Secretary of State for Economic Affairs what are his plans for the Yorkshire and Humberside region; on what criteria these plans will be based; and whether he will make a further statement on the powers to be given to the Yorkshire and Humberside Planning Board.
    Mr. George Brown: The plan for the region has yet to be formulated. It will provide for the needs and capacities of the region within the framework of

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    the national plan. I set out the powers of the regional planning boards in my statement to the House of 10th December.
    Mr. Osborn: While thanking the First Secretary for that statement, may I reiterate the fears expressed by my hon. Friends. [HON. MEMBERS: "Question."] Will the right hon. Gentleman assure us that he will not bring in legislation in the same form as the Highland Development (Scotland) Bill?
    Mr. Brown: Again, I do not quite see how the South-West gets into the Highlands, but if the hon. Gentleman wishes to put a Question down on that matter, let him please do so and I will try to answer it.
    Mr. Heath: Has not the First Secretary read the statement of his right hon. Friend the Secretary of State for Scotland that the Highland Development Board set up under the Highland Development (Scotland) Bill was the prototype for all regional development in the United Kingdom? This is a matter for which the right hon. Gentleman is responsible. Will he either confirm or deny that the proposed Highland Development Board is the prototype for regional development in the United Kingdom?
    Mr. Brown: The right hon. Gentleman is trying much too hard.
    Hon. Members: Answer.
    Mr. Heath: We have already suffered enough—[Interruption.]—from the flatulent replies of the First Secretary. Although he has now decided not to treat the House with contempt but actually to come here, now that he is here will he kindly give the House some reasonable and sensible answers?
    Mr. Brown: Now you are trying even harder.
    Mr. Speaker: No, I was not trying at all. We were doing rather well; let us continue with Questions.
    Mr. Geoffrey Lloyd: Mr. Speaker, is it in order for the First Secretary in his exuberance actually to insult hon. Members?
    Mr. Speaker: No. The point is that Answers should, prima facie, be confined to the matters raised by the Questions.
    Mr. James Johnson: To come back to Question No. 17, can my right hon. Friend make any comment or statement on or give any information about any special events in the Humberside region, particularly in view of the statement made by the Chairman of the Yorkshire and Humberside Region, the Chancellor of Leeds University, about the importance of Humberside, and its future as a growth point in Yorkshire?
    Mr. Brown: I made it perfectly plain at the beginning, and made it plain to the Chairman, whom I met only recently, that if those concerned feel that it would be a sensible thing to set up sub-regional organisations I am all for it and encourage it. But, having established these people, I wish them to use their own authority and make their own decisions.
    Mr. Osborn: I asked about criteria and I am not satisfied that I have had a full answer.
    Mr. Brown: I would be surprised it the hon. Gentleman were satisfied, but, to repeat my original Answer, the criteria are that the organisation will provide for the needs and capacities of the region within the framework of the national plan.
    Mr. Webster: On a point of order. Mr. Speaker. In view of the unsatisfactory nature of the reply, I propose to raise the matter on the Adjournment.
    Mr. J. H. Osbornasked the First Secretary of State and Secretary of State for Economic Affairs if he will make a further statement on the structure of the Yorkshire and Humberside Region Planning Board and Council; if he will publish in the OFFICIAL REPORT the names of those serving on the Board and the Council; and what special arrangements he is making for the South Yorkshire sub-region and Sheffield.
    Mr. George Brown: The names of the Council were published in the OFFICIAL REPORT on 31st March. The Board consists of officials of the Departments concerned with regional economic planning: the Chairman is Mr. W. G. Onslow, of the Department of Economic Affairs. I have not made any special arrangements for the Sheffield area.
    Mr. Osborn: I congratulate the right hon. Gentleman on announcing the names last week, but he will be aware that this Question was on the Order Paper a considerable time before that. Nevertheless, we welcome the appointrnent of the officers, in spite of the fact that the First Secretary has anticipated the Question. What we would like would be the First Secretary's reassurance that the region in South Yorkshire will he given closer consideration by the Chairman, who comes from Leeds and has expressed concern for the North.
    Mr. Brown: I am sorry that the hon. Gentleman has been overtaken by events, but that is always a risk in this life. As to his other point, I can only repeat that I leave this kind of decision to the councils and boards, because I believe in local autonomy.

    South-West Regional Development Council
    Mr. Charles Morrisonasked the First Secretary of State and Secretary of State for Economic Affairs by what criteria he intends to establish the South-West Regional Development Board.
    Mr. George Brown: I presume the hon. Gentleman is referring to the South-West Regional Council. I hope to announce the members of the Council shortly and I shall appoint those people who seem to me to represent the interests of the region as a whole.
    Mr. Morrison: Does the First Secretary of State intend that the Council should be empowered to set up or carry on and undertake any business?
    Mr. Brown: No.
    Mr. Morrison: Are we to understand from the evasive answers of the right hon. Gentleman to Questions 16 and 17 that he intends that these regional boards shall have dictatorial planning powers?
    Mr. Brown: It is very difficult to answer a vague question like that which goes back to a Question we have long since dealt with.

    Newspapers
    Mr. Patrick Jenkinasked the First Secretary of State and Secretary of State
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    for Economic Affairs whether he will refer the recent increases in the prices of certain national newspapers to the price review body.
    Mr. George Brown: No decisions have yet been taken on the cases to be referred to the National Board for Prices and Incomes.
    Mr. Jenkin: Does the First Secretary of State recognise that certain popular newspapers have had the largest percentage price increases in the last twelve years of almost anything but that at the same time their quality has increased? This shows the futility of this whole exercise.
    Mr. Brown: I presume the hon. Gentleman means the exercise of publishing newspapers, but I am not called upon to pronounce upon that.

    Wages, Salaries and Productivity
    Mr. Ian Lloydasked the First Secretary of State and Secretary of State for Economic Affairs what estimate he has made of the current underlying rate of increase in productivity; how this compares with the major wage claims outstanding; and if he will make a statement.
    Mr. Biffenasked the First Secretary of State and Secretary of State for Economic Affairs if he will list the six major wage claims outstanding; and, in respect of such claims, what annual wage increase would be consistent with the present underlying rate of increase in productivity.
    Mr. George Brown: The six largest groups of workers with current wage claims are the ancillary workers in the National Health Service, workers in the retail co-operative societies, workers in the shipbuilding and ship-repairing, workers in general printing and provincial newspapers, workers in unlicensed places of refreshment and postmen. I understand that a claim is also about to be submitted for coalminers. On the relation of wage increases to the underlying rate of increase in productivity, perhaps the hon. Member would be good enough to await the statement I shall be making after the end of Questions.
    Mr. Lloyd: Is the right hon. Gentleman aware that whereas the economic

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    magnitude he described as the total of wage claims outstanding may possibly be determined within plus or minus 1 per cent., the underlying rate of increasing productivity, according to the best authorities, is determinable only within plus or minus 5 per cent.? How does the right hon. Gentleman propose to deal with this dichotomy?
    Mr. Brown: I wish to heaven that the situation was as simple as that.
    Mr. Lloyd: I beg to give notice that, owing to the unsatisfactory nature of the reply, I shall raise the matter on the Adjournment at the earliest opportunity.
    Mr. Onslowasked the First Secretary of State and Secretary of State for Economic Affairs if he will take steps to ascertain the number of outstanding wage claims for salaried workers; and what estimate he has made of the extent to which the granting of such claims would result in rising prices.
    Mr. Biffenasked the First Secretary of State and Secretary of State for Economic Affairs if he will take steps to ascertain the number and nature of outstanding wage claims by salaried workers.
    Mr. George Brown: I am aware of current claims covering a little under 1½million salaried workers. Many salaries are, however, determined by domestic negotiations and it would be impracticable to obtain information about them all. The effect of these claims on prices will depend not only on the size of pay increases actually given but also on the extent to which they can be absorbed by employers or offset by improved efficiency.
    Mr. Onslow: Does the right hon. Gentleman not accept, in the light of his own reply, that this is a field of which extremely little is known and that such efforts as he is attempting to make are virtually useless in the light of his ignorance?
    Mr. Brown: That seems to me a remarkable comment. [An HON. MEMBER: "Sensible."] It may well be so; nevertheless, we are making an attempt to deal with it, which was never made before.
    Mr. Biffen: Is the right hon. Gentleman aware that that is an extremely pertinent question? Is he aware that it is a developing trend that salaries, as opposed to hourly wages, comprise an increasing amount of the total national wage bill? Will he, therefore, set in train some inquiries to see whether or not he can obtain the information which he does not now possess? Will he tell the House whether he regards the absence of this information as having any seriously detrimental effect on his proposed incomes policy?
    Mr. Brown: I am sorry, but it sounds to me as if hon. Gentlemen opposite have not been following what is happening. We are making exactly these inquiries. We are dealing with this vast gap in the situation which hon. and right hon. Gentlemen opposite left behind them, but I do not share the venom which they seem to feel when they talk about salaried workers.
    Mr. Biffen: Owing to the unsatisfactory nature of the reply, I beg to give notice that I shall raise the matter on the Adjournment at the earliest opportunity —without venom.

    South East Study
    Mr. Bostonasked the First Secretary of State and Secretary of State for Economic Affairs what progress he is making with his review of the South East Study; and when he expects to complete it.
    Mr. Chatawayasked the First Secretary of State and Secretary of State for Economic Affairs whether he has yet completed his review of the South East Study.
    Mr. George Brown: The review of the South East Study is a difficult and complex matter, and must be based on the information on both population and economic trends now becoming available. I shall announce our proposals as soon as possible, but it is too early to say when that will be.
    Mr. Boston: Does my right hon. Friend realise that many of us on this side of the House, and in the South-East generally, are very glad that very thorough consideration is being given to this review? Can he give any indication

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    when the review is likely to be ready? Can he also say what form the report to Parliament will take and whether he has envisaged some sort of replacement of the former South East Study?
    Mr. Brown: That indeed could be so. It is too early yet to say how we shall do it and in what form, but I assure my hon. Friend that we give a great deal of attention to this. It is a tremendously important issue. I assure him that we shall make a statement in the form most convenient to Members of Parliament and to people in the region as a whole.
    Mr. Deedes: Apart from Members of Parliament, is the right hon. Gentleman aware that a great number of public authorities and other interests are holding back their plans in expectation of hearing from him what the main plan is to be and that much material towards this plan has been available for a long time?
    Mr. Brown: I am well aware that they were holding up their plans for a long time before we came to power. We have had only six months yet but we shall do this much faster than what happened before.
    Miss Quennell: Is the right hon. Gentleman aware that in the debate yesterday he indicated that he proposed to instruct the regional planning bodies to concern themselves with the redeployment of human resources in the regions? Does he appreciate that he now appears to be unable to indicate whether a planning body for the South-Eastern Region will be available? Could the right hon. Gentleman tell us what planning machinery he proposes to construct?
    Mr. Brown: The remark, which the hon. Lady misquoted, referred to redeployment on the TSR2 question. As long as there is not a new regional planning machinery for the South-East we shall have to try to do that centrally with as much consultation as we can manage with the authorities in the area. I promise the hon. Lady that the consultation will be as much as we can possibly manage.
    Mr. Costain: What consultation is the right hon. Gentleman having with county councils in general and Kent County Council in particular on this matter?
    Mr. Brown: A great deal of consultation is going on with everybody concerned, but first we had better ourselves begin to make some general appreciation of how it looks to us and then we can have more fruitful talks with them.
    Sir D. Renton: In view of the fact that the South-East Region at present runs all the way from the Wash down to Southampton Waters and that East Anglia has special problems of its own, would the right hon. Gentleman consider the possibility of making a separate region of East Anglia?
    Mr. Brown: I at least know this region at first hand. This is something which I have very much in mind. The East Anglian requirements are one of the reasons why I shall not be rushed and I shall make a very full and considered decision at the end and announce it to the House.
    Mr. Heath: Is the right hon. Gentleman aware that there was absolutely no hold-up by the last Government in announcing their views on the South East Study? Is he aware that the review itself was carried out very speedily by the officials concerned in a total of two years? Is the right hon. Gentleman aware that his right hon. Friend the Minister of Housing and Local Government has already implemented half of the South-East Plan as formulated by the last Government but that he, the First Secretary, announced during the election that the whole South-East Plan would be abolished by the Labour Government when they came to power? Is he aware that the reason why he is holding it up now is in order somehow to get himself off the hook he caught himself on during the election? Is he also aware that meantime the whole of the plans for the people of the south-eastern area are being delayed and that he is responsible for that delay?
    Mr. Brown: The right hon. Gentleman is still trying too hard. In part he was inaccurate, in part he misquoted, and as far as the last Government were concerned it was very easy to express views if one did not intend to be responsible for them afterwards.
    Mr. Deedes: In view of the unsatisfactory nature of the reply, I beg to

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    give notice that I shall raise the matter on the Adjournment at the earliest opportunity.

    Consumer Goods and Foodstuffs
    Mr. Shinwellasked the First Secretary of State and Secretary of State for Economic Affairs what progress he has made in the reduction and stabilisation of prices of household consumer goods and foodstuffs.
    Mr. George Brown: Until the National Board for Prices and Incomes is in operation it is difficult to give a precise assessment. I am glad to say, however, that as a result of my appeal, a number of traders have reduced or stabilised their prices.
    Mr. Shinwell: Would my right hon. Friend not agree that the stabilisation, if not the reduction, of prices is of vital importance? Can he give the House an assurance that he will make a progress report from time to time?
    Mr. Brown: Yes, indeed. I thank my right hon. Friend. When we have the Board established, one of the things in which it will help us, quite apart from what it does itself, is with evidence and facts which we can report to the House, and I shall be glad to make periodic reports.
    Mr. Bruce-Gardyne: Is it not the fact that the reductions in price which have occurred in this sector have been entirely due to the elimination of resale price maintenance by my right hon. Friend the Member for Bexley (Mr. Heath) and, further, that the party opposite did its best to avoid taking any decisions when this whole matter was before the House?
    Mr. Brown: With respect, it is not true. If the hon. Gentleman will come and have a chat with me, I will show him how hard we had to struggle to get these prices down.

    North-East
    Mr. Shinwellasked the First Secretary of State and Secretary of State for Economic Affairs to what extent the regional organisation he has created for the North-East will avail itself
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    of the experience and advice of the local authorities in the area.
    Mr. George Brown: I have emphasised to the Northern and to all the other Economic Planning Councils, the Economic Planning Boards and the Regional Officers of the Government Departments concerned that they must keep in the closest touch with the Local Authorities in the regions; and that the success of the operation will largely depend on the degree of mutual advice and co-operation which they can establish.
    Mr. Shinwell: I thank my right hon. Friend for that answer, but can be assure us that it is not the intention that the regional board shall supersede the administrative and other functions of the local authorities?
    Mr. Brown: I can certainly give that assurance. I have insisted on this all the way through. I go further and say not only to my right hon. Friend but to any hon. Member that, if there should at any time be evidence that there is any intrusion here, I shall be very glad to have it brought to my attention.
    Mr. R. W. Elliott: Has the right hon. Gentleman noted the adverse comments of a well respected and veteran trade union leader in the north-east of England who has criticised the ending of well established machinery for consultation in the area through the appointment of these regional councils, and will he take it that in the North-East there is still considerable suspicion at the appointment, as against the election, of regional councils?
    Mr. Brown: I know the latter part of what the hon. Gentleman says to be untrue. As regards the views of Sir Mark Hodgson, a very well respected man and a very old friend of mine, he and I have discussed this and I know that he is looking forward with a lot of interest to the way the new machinery works out.
    Mr. Shinwell: Is my right hon. Friend aware that I have been familiar with the situation in the North-East for longer than the hon. Gentleman, and I know that the North-East is very well satisfied with the situation?
    Dame Irene Ward: Will the right hon. Gentleman be kind enough to give us the views of the local authorities and

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    personnel on Tees-side which certainly are not in line with the view put forward by the right hon. Member for Easington (Mr. Shinwell)? Further, will be give us an assurance that the new supremo for the North-East does not think that he will be giving all the advice either up there or down here, as there are quite a lot of Tories in the North-East who have their views, too?
    Mr. Brown: I am never quite sure whether the Tories in the North-East are up there or down here, but they are never around when the time comes. As regards the first and serious part of the hon. Lady's question, it is not for me to convey the views of the local authorities. I shall be very glad to have them.

    West Midlands Regional Council
    Mr. Geoffrey Lloydasked the First Secretary of State and Secretary of State for Economic Affairs what procedures he used to select names for nomination to the Regional Economic Council for the West Midlands.
    Mr. George Brown: I consulted the local authority associations, the Trades Union Congress, the national employers' organisations, and others with a substantial interest, and added some names of my own.
    Mr. Lloyd: I acknowledge that the right hon. Gentleman has appointed many excellent representatives of industry and important education institutions, but does he not think, on reflection, that, in the interests of securing acceptance of the council's activities, it was a mistake to confine the local government representatives from Birmingham to two representatives from only one political party, especially as Birmingham is the centre of the West Midlands Region in respect of which the right hon. Gentleman said yesterday the Government were pursuing a constructive industrial policy?
    Mr. Brown: I noticed that, when the right hon. Gentleman talked about excellent representatives, he referred only to employers and education institutions. I have appointed some excellent representatives of trade unions, too. As regards Birmingham, let me make quite plain that I have not appointed any of these people as representatives at all. They are there
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    because they are important, outstanding and very good people in the region who will look after the region as a whole.
    Mr. Snow: Is my right hon. Friend aware that the areas outside Birmingham by no means accept the general proposition that Birmingham is necessarily the hub of the West Midlands? Further, will he take it that we are well content with the Labour Party representatives and the trade unions leaders whom he has appointed?
    Mr. Heath: Is the right hon. Gentleman aware that, in view of the facetious frivolity with which he has hidden his ignorance this afternoon in answering our questions—
    Mr. Shinwell: On a point of order, Mr. Speaker. May I, with respect, draw your attention to the fact that, quite recently, the right hon. Member for Bexley (Mr. Heath) tried to inflict a speech on the House and he is now beginning a speech—[HON. MEMBERS: "What is the point of order?"]—by indulging in a most irrelevant remark which has nothing to do with Questions?
    Mr. Speaker: The right hon. Gentleman is quite right. The purpose of a question is to seek information or to inspire action. An accusation of facetiousness does not necessarily assist.
    Mr. Heath: I was about, I hope, to inspire action by the rest of my question, which is to suggest to the right hon. Gentleman that we should, in future, much prefer the dull but honest attempts of the Minister of State rather than his own.
    Mr. Brown: By whatever methods I hide my ignorance, it is impossible for the right hon. Gentleman to hide his.
    Mr. Speaker: Order. I very much doubt that these elegant exchanges enhance the reputation of the House.

    FIXED INCOME GROUP
    Q 1. Mr. Eldon Griffithsasked the Prime Minister if he will revise the social security system and the tax system so as to provide greater benefits for those who live on fixed incomes, if necessary by reducing the benefits now paid to wage and salary earners who are less hard hit by inflation.
    The First Secretary of State and Secretary of State for Economic Affairs (Mr. George Brown): I have been asked to reply.
    No, Sir. The problems the hon. Gentleman has in mind cannot be dealt with in this way.
    Mr. Griffiths: I congratulate the First Secretary on substituting for the Prime Minister, but will he accept, without offence, that we wish the Prime Minister a speedy recovery from what, I hope, is a temporary indisposition?
    Does not the right hon. Gentleman agree that many of the assumptions on which the Welfare State was founded nearly 25 years ago are getting out of date, and will he, therefore, consider appointing a Royal Commission to investigate the Welfare State so that those who receive benefit and do not need it may give up a little for those who need benefit and, very often, do not get it?
    Mr. Brown: I am much obliged to the hon. Gentleman for his kind words, which
    I shall convey to my right hon. Friend.
    We are ourselves already conducting an examination on how to change this, and we shall be bringing proposals to the House in, I hope, the not-too-distant future.
    Sir Alec Douglas-Home: As the cost of living has risen nearly two points in the last five months and the Government turned down the Bill prepared by my hon. Friend the Member for Abingdon (Mr. Neave) which might have helped the very old, will the right hon. Gentleman treat this matter with urgency?
    Mr. Brown: The right hon. Gentleman the Leader of the Opposition, having failed for so long to deal with the same Bill and having raised the cost of living by a lot more, ought to be a little more gentle about reproaching us now.
    Mr. William Hamilton: Will my right hon. Friend give an assurance that, whatever the result of the Government's review may be, there will be no room in it for the kind of miserable donation to people of a certain age which the right hon. Gentleman the Leader of the Opposition offered?
    Mr. Brown: Under this Administration, the idea of donations from lairds is out.
    Mr. Ridsdale: Will the First Secretary do his best to protect non-contributory pensioners, especially from the severe imposition which the Chancellor of the Exchequer has put on old people by his new tobacco tax?

    RHODESIA
    Mr. Wallasked the Prime Minister what consultations he has had with the Rhodesian Government subsequent to the Secretary of State's visit to Rhodesia.
    Mr. George Brown: My right hon. Friend's communications with the Rhodesian Prime Minister remain confidential.
    Mr. Wall: Can the right hon. Gentleman say whether the Prime Minister's proposals could lead to a negotiated settlement for independence before there are dangerous pressures built up during the Prime Ministers' Conference?
    Mr. Brown: I have absolutely nothing to add to my original reply.
    Mr. Sandys: Can the right hon. Gentleman say whether it is proposed to have any further talks, either here or in Salisbury, between the two Governments?
    Mr. Brown: I believe that both sides of the House would do much better to leave this matter as I have put it.
    Mr. Fisher: What meaning does the right hon. Gentleman attach to the statement by Mr. Ian Smith just after the visit of the Secretary of State for Commonwealth Relations, in which Mr. Smith said he considered that the ball was now in the British Government's court? Does that imply that there is any further initiative that Her Majesty's Government can take to solve this problem?
    Mr. Brown: I would really prefer to leave this as I have put it, for very real and serious reasons.

    BRITISH RESIDENTSOVERSEAS (ASSISTANCE)
    Sir W. Teelingasked the Prime Minister if he will instruct British representatives in the Commonwealth and in foreign countries to inform him how many British subjects in their areas are destitute or nearly destitute and over 60 years of

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    age; and if he will then examine the possibility and the cost of allowing these people the equivalent amount of money that they would receive in the United Kingdom under public assistance.
    Mr. George Brown: No, Sir. Her Majesty's Government cannot contemplate an extension of social welfare services to persons who choose to live abroad. As my right hon. Friend said in reply to the hon. Member's Question on 25th February, the Government are ready to repatriate destitute citizens. When repatriation is not suitable, the Government are sometimes prepared to consider other forms of financial relief.
    Sir W. Teeling: Does the right hon. Gentleman realise that after the last war the Socialist Government were quite capable of providing food parcels for people who were in the same sort of condition abroad? Is he aware that, both in foreign countries and in the Commonwealth, there are many British people in their 70s and 80s whom it would be cruel to bring back to England, where they have no place to go and no relatives?
    Does not the right hon. Gentleman think that, as The People pointed out in an article the other day, the appalling conditions of some of these people on the Riviera and in Malta—[Laughter.] Hon. Members may laugh but the people involved are old nurses and retired elderly people. Surely our consuls and High Commissioners would be quite capable of Ending out what these people need and giving them the same as they would get if they were on National Assistance in this country? Would not this be cheaper the long run?
    Mr. Brown: The hon. Gentleman has been misled to some extent by the article in the People. I appreciate the situation, however. There are elderly ladies who have spent most of their life abroad. But the hon. Gentleman is on the wrong point. When repatriation is not suitable, as I have said, we do sometimes find other ways of giving relief. In this way, a very substantial amount is being paid by way of help and relief to people such as these. For obvious reasons, one does not want to spell it all out but I assure the hon. Gentleman that we do a good deal in that direction.
    Mr. Tilney: Is the right hon. Gentleman aware that a considerable number of
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    British citizens live in India who are either too old to come back or cannot face our climate? Is he aware that these people or their parents have served this country very well in the past?
    Mr. Brown: I find this climate a bit hard, but I do not think that is a reason for paying me to go elsewhere.

    NUCLEAR-POWERED SHIP
    Commander Courtneyasked the Prime Minister if, in view of the prolonged delay in the provision of a prototype nuclear ship for trial purposes, of doubts regarding the most suitable reactor for the purpose and of the importance of this programme to both the Royal and Merchant Navies, he will transfer responsibility for this development from the Board of Trade to the Admiralty Board of the Ministry of Defence as the authority which is best equipped for the purpose in terms of design capacity and marine nuclear experience.
    Mr. Wallasked the Prime Minister whether, in view of the fact that four countries are now building nuclear-powered surface ships, he is satisfied with the machinery for co-ordinating the activities of the Board of Trade, the Ministry of Defence, Ministry of Technology, Ministry of Economic Affairs and the Treasury regarding the development of a British prototype nuclear-powered surface ship, which has now been under consideration for a number of years; and if he will now centralise this responsibility.
    Mr. George Brown: The proposal that the Government should provide finance for the design and construction of a prototype nuclear-powered merchant ship is under review. My right hon. Friend sees no reason to alter the responsibilities of the Ministers who are concerned with the various considerations affecting this proposal.
    Commander Courtney: Is the right hon. Gentleman aware that it is nearly a year since the Padmore Committee reported and that since then the Government have done absolutely nothing to advance this project except to attempt concealment of a matter which is

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    becoming increasingly evident—namely, that they have had to give up their favoured type of reactor employing a moderator principle which was discarded by the Americans and the Germans three years ago? Is it not time that the Government handed this business back to the Admiralty?
    Mr. Brown: We have spent six months on it. The hon. and gallant Gentleman is quite right—his Government spent two years on it and reached no decision. We will do better.
    Mr. Wall: Is the right hon. Gentleman aware that this question has been under consideration by committees for six years and that the last committee reported that no further information could be gained until we had a prototype at sea? Since then, the right hon. Gentleman has set up another committee under the Atomic Energy Authority. That was four months ago. Is it not about time that we had some coordination?
    Mr. Brown: The hon. Gentleman is right. We have been responsible for the last four months. His Government were responsible for the previous five years and eight months.
    Mr. Woodburn: Is my right hon. Friend aware that tremendous benefits will flow to the country whose scientists first break through the problem of making economic nuclear equipment for merchant ships? Can he give us any information as to whether our scientists are making progress in this development?
    Mr. Brown: It is an exceedingly difficult question. It is assumed that the delay is perhaps due to the fact that the Government or the Civil Service do not want to reach a decision, but that is not the case. It would be very difficult to answer the last part of my right hon. Friend's supplementary question, but the subject is being taken seriously. If we do not want to score political points off each other, perhaps I can say—[HON. MEMBERS: "Oh."]—if right hon. and hon. Members opposite score off us we shall score off them. As I was about to say, members of the last Government know that this is a very hard matter to decide. We have taken into account what was done
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    under the last Government and will make a decision as soon as it can sensibly be made.

    LAND RECLAMATION
    Mr. Corfieldasked the Prime Minister what are the responsibilities of the Minister of Land and Natural Resources in regard to the reclamation of land for which there is no prospect of obtaining planning permission for residential, commercial, industrial or other development but which has been rendered useless for agriculture by the continued existence of the remains of former service installations.
    Mr. George Brown: My right hon. Friend the Minister of Land and Natural Resources is concerned with the overall strategy of land use and will contribute advice on techniques and the economic aspects of reclamation.
    Mr. Corfield: Does it help administration to split these functions between the Minister of Land and Natural Resources and the Minister of Housing and Local Government, who is in charge of land use and planning? Is it not clear that the job would be better done by one or the other?
    Mr. Brown: That is a different question. In practice we think that the system works better this way. The Minister of Housing and Local Government has an enormous load of responsibility and we thought it better to put this job on someone else.
    Mr. Maxwell: Will my right hon. Friend bear in mind that every parish in the country has two to ten acres of land which has been accumulated over the years and on which no building has taken place? If this land could be made available for development and the building of houses, it would be likely to save millions of acres of agricultural land of which we are so desperately short?
    Mr. Brown: I am sure that there is a great deal in that. If my hon. Friend would put the question down, I would be glad to look into it.
    Mr. G. Campbell: Is the right hon. Gentleman aware that what he said does

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    not apply to Scotland, where one Minister has both these functions? The Minister of Land and Natural Resources has no responsibility in Scotland.
    Mr. Brown: I can only answer Questions put down. If the hon. Gentleman wants to put down a Question in other terms I will answer it in those terms.

    SAND AND GRAVEL
    Mr. Corfieldasked the Prime Minister what are the responsibilities of the Minister of Land and Natural Resources in regard to ensuring that there are adequate supplies of sand and gravel to meet the needs of the construction industry.
    Mr. George Brown: I would refer the hon. Member to the Answer which my right hon. Friend the Minister of Land and Natural Resources gave to a Question by my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris) on 8th March. The economic survey of mineral resources will include sand and gravel.
    Mr. Corfield: Is the right hon. Gentleman aware that, when my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) put down a Question to the Minister of Land and Natural Resources, responsibility was accepted for the availability of sand and gravel, but that when I put a Question on that subject it was transferred to the Minister of Public Building and Works? This is very confusing. Can the right hon. Gentleman help us by telling us the dividing line and whether there is any particular object in it?
    Mr. Brown: I am sorry the hon. Gentleman got confused. We will try to unconfuse him. I will look at what he has said.
    Sir A. V. Harvey: Will the right hon. Gentleman take steps to see that the local authorities are given full powers to ensure that sand pits are left in the condition they should be, particularly in east Cheshire?
    Mr. Brown: That is a totally different question. It would be better if the hon. Gentleman would put it down on the Order Paper.
    Mr. Costain: The right hon. Gentleman referred to the fact that one Minister has a very big load of responsibility. Does not he appreciate that we are trying to ascertain what is the load on the other Minister involved? Our inquiries suggest that he has no load at all and this is what worries us.
    Mr. Speaker: Order. We are concerned only with the load on one Minister, and then only in so far as it consists of sand and gravel.

    INCOMES POLICY (STATISTICAL INFORMATION)
    Mr. Higginsasked the Prime Minister which Government Department will be responsible for supplying the statistical information for the implementation of the Government's income policy.
    Mr. George Brown: The Department of Economic Affairs, Sir.
    Mr. Higgins: Would I be wrong in thinking that all the essential information required to verify whether the incomes policy is successful or not would normally be provided by the Ministry of Labour? Is the right hon. Gentleman aware that, on 23rd February, the Minister of Labour suggested that he could not provide much of this essential information?
    Mr. Brown: I answered the Question on the Order Paper. If the hon. Gentleman puts down another one, I will look at that.
    Mr. Biffen: Will the right hon. Gentleman convey to the Prime Minister that the First Secretary of State displays a most good-natured indifference to the necessity of having first-class statistical information? Will he also convey to the Prime Minister the fact that that impression was more than underlined by the way in which the First Secretary of State answered his questions earlier today?
    Mr. Brown: It would be very dangerous for the Deputy Prime Minister to convey that to the Prime Minister. The hon. Gentleman must do it himself.
    Mr. Patrick Jenkin: Will the right hon. Gentleman reply to the Question? What

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    steps is he taking to ensure that there is no overlapping and duplication in the collection of statistics?
    Mr. Brown: There is no overlapping at all. These statistics are centralised. Departments consult each other and use common services. That is why I said that I had answered the Question in the terms in which it was put down. The Department of Economic Affairs is the co-ordinating Department in these matters.
    Mr. Sandys: On a point of order. The First Secretary referred to himself as the Deputy Prime Minister. Is he in fact Deputy Prime Minister?
    Mr. Speaker: I do not think that it raises a point of order, but it is a matter of fairly general knowledge.

BERLIN (SOVIET AIRCRAFT)
Mr. Maudlingasked the Secretary of State for Foreign Affairs if he will make a statement about incidents caused by Russian jet fighters in Berlin.
The Minister of State for Foreign Affairs (Mr. George Thomson): On several occasions this week, notably on 7th April, Soviet aircraft have flown at extremely low altitudes over Berlin. Some of these aircraft have infringed the control zones of the three airports in West Berlin and have endangered the safety of normal traffic and the lives of their passengers. Other aircraft have caused sonic booms and fired machine guns over the Western sectors of the city.
Such flights are dangerous and unjustified in themselves and a deplorable attempt to intimidate the civilian population of the city. The Western allies in Berlin have on several occasions lodged protests with the Soviet authorities in the Berlin Air Safety Centre about these activities, particularly those on 7th April. The Western Ambassadors in Bonn have lodged a strong protest with the Soviet Ambassador in East Berlin and have requested him to put a stop to these activities.
I shall be making the views of Her Majesty's Government clear to the Soviet Ambassador when he calls on me, at my request, later this afternoon.
Mr. Maudling: Will the hon. Gentleman make clear what reactions he received to these highly justified protests? Should not this remind us that despite great preoccupations with South-East Asia, there are still dangers nearer home than that?
Mr. Thomson: Yes, Sir. We are aware of the dangers inherent in this situation. We and our allies have tried deliberately to keep the temperature down in this situation over recent days, and we regard the kind of action taken yesterday as quite unjustifiably creating unnecessary dangers. I shall be glad to keep the right hon. Gentleman informed of any reply.
Mr. John Hynd: Will my hon. Friend assure the House that, although our agreements with the Russian authorities to date clearly lay it down that Berlin is an open city, controlled by the four Powers, while protesting against these actions we have no intention of copying such dangerous and irresponsible tactics when the East German Government, or so-called Government, is meeting in Berlin?
Mr. Thomson: Yes, Sir. The meeting of the Bundestag in Berlin does not conflict in any way with the quadripartite status of the city. Meetings of the Bundestag have been held on a number of occasions over recent years without causing tension. The present meeting of the Bundestag was in no way provocative in either intention or character. I must confess that for the life of me I cannot see why a meeting of a free and democratic assembly should be considered a provocative action.
Mr. Maxwell: In view of the considerable danger in the air corridors of Berlin, will not my hon. Friend agree that the proper thing to do would be to invite Her Majesty the Queen to cancel her trip to Berlin?
Mr. Thomson: That is another question.

BUSINESS OF THE HOUSE
Sir Alec Douglas-Home: May I ask the Leader of the House whether he will state the business of the House for next week?
The Lord President of the Council (Mr. Herbert Bowden): Yes, Sir. As already announced, the general debate on the Budget Resolutions and the Economic Situation, will be brought to a conclusion on MONDAY, 12TH APRIL.
Second Reading of the Dangerous Drugs Bill [Lords], and the remaining stages of the Industrial and Provident Societies Bill [Lords], which are consolidation Measures.
TUESDAY, 13TH APRIL—Report stageof the Budget Resolutions. Debate on the official Opposition Motion of censure.
Lords Amendments to the Rivers (Prevention of Pollution) (Scotland)Bill.
Motion on the Land Drainage (Scot-and) Amendment Order.
WEDNESDAY, 14TH APRIL—Remaining stages of the Control of Office and Industrial Development Bill.
THURSDAY, 15TH APRIL—It is expected that the House will meet at 11 a.m., that Questions will be taken until 12 noon and that the House will adjourn at 5 p.m.
In view of the desirability of finding time to debate the Opposition censure Motion, it will be necessary to ask the House to return not on Tuesday, 27th April, but On MONDAY, 26TH.
Sir Alec Douglas-Home: I have few comments on the business for next week except to say that I hope that the last few words of the right hon. Gentleman do no. suggest that there is anything reprehensible in the Opposition moving a Motion of censure in what they consider to be the national interest and haling with a matter in which thousands of people are very much concerned.
We are quite prepared to give up a day of the Recess to debating an issue which we consider to be of concern to the national interest. I am bound to add that I think that it must convey to the House that the Government's business is in a pretty good mess if they cannot do it otherwise.
What does the right hon. Gentleman propose to do about Questions on Monday, 26th April?
Mr. Bowden: The right hon. Gentleman will recall that on Tuesday evening I said that the Government would be
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prepared to find time for what was then the proposed Motion of censure by the Opposition, and that we have done. It has meant an adjustment in the time for the Recess. There is nothing sacrosanct about coming back on a Tuesday after the Easter Recess. We have come back on other days on other occasions, although certainly not for very many years.
It is felt that it would be in the best interests of the House to follow the roster of Questions for 12th April, which is Monday of next week, or anyone who subsequently had a Question would be disadvantaged. I have said before about the Government's business, and I now repeat, that we have enough business for five years.
Mr. Shinwell: What business is it proposed to take on Monday, 26th April?
Mr. Bowden: At this stage, I cannot say what business will be taken that day. It will be announced on Thursday, or another day, of next week and it will he legislation.
Mr. Grimond: Is the Leader of the House aware that on a day upon which the First Secretary is about to make an announcement on more work for more pay it cannot be wholly inappropriate that the House should be asked to do a little more work, considering it has just had a lot more pay?
Sir B. Janner: Has my right hon. Friend noticed that more than 70 hon. Members have added their names to my Motion about appointments to watch committees? Is he aware that there is considerable concern throughout the country about this matter? Can he find some time so that we can discuss the Motion?
[That this House, taking note of and sharing the profound concern and misgivings of the borough police authorities in England and Wales as to the provision made in section 2 of the Police Act 1964 for the appointment of magistrates to Police authorities, calls upon the Secretary of State, pending the introduction of amending legislation, to amend the Police Act 1964 (Commencement No. 1) Order 1964 so that the provisions whereby the borough magistrates appoint one third of the watch committee shall not, as

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thereby provided, come into effect on 1st June, 1965.]
Mr. Bowden: I promised on a previous occasion to draw this matter to the attention of my right hon. and learned Friend the Home Secretary, which I have done. This proposal needs an amendment to legislation which has not yet been tried, and I think that it is the view of my right hon. and learned Friend that we should at least see how the new system works.
Mr. Boyd-Carpenter: Can the right hon. Gentleman clear up what he meant about Questions on 26th April? Am I right in understanding him to mean that the Order of Questions which he intends to take on that day is that which would normally have arisen on 3rd May.
Mr. Bowden: No, Sir. The order of Questions on Monday 26th April, will be precisely the same as on Monday, 12th April, that is to say, it will start with the Ministry of Labour, the Foreign Office and the Ministry of Land and Natural Resources. This is the only way in which it can possibly work without anyone being disadvantaged.
Mr. William Hamilton: Will my right hon. Friend consider that it would be more convenient for Members who live outside London to sit on Good Friday rather than on Monday, 26th April? Can he say by what authority the Government and the Opposition Front Bench between them decided on the change in the rota of Ministers answering Questions? Would it not have been desirable, right and proper that the House should have been consulted before this decision was taken?
Mr. Bowden: Having had a long experience in trying to work out Question rotas, I assure my hon. Friend that the worst possible thing would be for the House to try to decide how it should be done. This is an experiment. I am hoping that during the six weeks between Easter and Whitsun we shall reach every Minister at least once.
Lastly, I am sure that it is the wish of the whole House that we should not sit on Good Friday.
Mr. Ridsdale: May I press the right hon. Gentleman to suspend the rule for
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today and on Monday because there are many hon. Members who want to speak in the Budget debate and, indeed, on Tuesday and Wednesday? Six hours—almost a whole day—have been occupied by four Front Bench speeches and the best of them—that of my right hon. Friend the Leader of the Opposition—took only 20 minutes.
Mr. Bowden: It was probably the best speech from the Opposition Front Bench. However, I do not think that we can increase the number of days from four.
Sir D. Walker-Smith: Reverting to the order of Questions for 26th April, can the right hon. Gentleman say whether the repeat order which he has selected is in accordance with the precedent to which he referred and how old this precedent is?
Mr. Bowden: Not without notice. It takes some doing to carry in one's memory Order Papers of the last 30 years or so.
Mr. Blenkinsop: Would my right hon. Friend consider devoting part of Monday, 26th April, to discussing the Government's most valuable and interesting White Paper on the future of the arts?
Mr. Bowden: I have not lost sight of the importance of a debate on the arts, but I have already said that legislation will be dealt with on that day.
Mr. Eldon Griffiths: In view of the quite remarkable achievements of the United States and the Soviet Union in space during the last week or so, would the right hon. Gentleman consider providing time for a debate on this country's activities in space research and development?
Mr. Bowden: I cannot promise anything firmly at this stage.
Sir D. Glover: May I have confirmation of the right hon. Gentleman's promise that there would be no other business going on in the House when we debate the Committee stage of the Murder (Abolition of the Death Penalty) Bill on Wednesday next week? Last Wednesday there were two Committees sitting and we had Divisions at the same time. Can the right hon. Gentleman see that this does not happen again?
Mr. Bowden: No, I cannot give that promise. When we debated this matter in the House, it was made absolutely clear that there might be other Committees sitting on Wednesday mornings.
Sir Ian Orr-Ewing: Would the right hon. Gentleman convey to the Secretary of State for Defence that the debate on Tuesday will be much more enlightening if the full facts are given at the opening of the debate by the Government spokesman and we do not have to read them in he next day's newspapers or on the tape while the speech is being made?
Mr. Bowden: As this is a Motion of censure, the opening speaker will be from the Opposition Front Bench. However, I am sure that my right hon. Friend who will follow will give all the details required.
Mr. Woodburn: In view of the breakdown of the negotiations in Vienna to get a uniform colour television agreement, is it the intention of the Postmaster-General to give the House some information next week on the prospects for the future?
Mr. Bowden: I am not aware of any such statements at the moment, but I will convey the wishes of my right hon. Friend to the Postmaster-General.
Mr. Gresham-Cooke: Would the right hon. Gentleman have a look at early day Motion No. 119, which is about the transfer to the Exchequer of some of the rate burden in residential areas where there is not very much industry?
[That this House deplores the delay of the Government in bringing about an early transfer of at least part of the educational rate from the local authorities to the central Exchequer; draws the attention of the House to the burden this is placing on the retired and others, especially in areas with little industry; and urges the Government to take urgent action to remedy this.]
Would he note that there are now over 50 signatures to this Motion, and could he say whether it is likely that there will be a debate on it in the near future?
Mr. Bowden: I cannot promise that there will be a debate in the near future, but I have already promised a debate on it. I thought at the time that we might take the Allen Report with it.
Mr. Lipton: In connection with my Protection of Deer Bill, which aims to make stag hunting with hounds illegal, has my right hon. Friend noted that on the last two Fridays the only Member to shout "Object" to the Bill was an official Opposition Whip? Is this in accordance with the best traditions of the House on Private Members' Bills? If so, what will my right hon. Friend do about it?
Mr. Speaker: I do not think that the question whether it is in accordance with practice relates to the business for next week. I do not know about the rest of it.
Sir Rolf Dudley Williams: Is the Leader of the House aware that yesterday morning there was chaos throughout the Palace of Westminster? There was a Committee upstairs considering a Private Member's Bill and a Committee of the whole House was considering the Murder (Abolition of the Death Penalty) Bill. In view of this confusion, which was directly the responsibility of the Leader of the House who has made a muck of the Committee stage of the Murder (Abolition of the Death Penalty) Bill, will the right hon. Gentleman arrange for Standing Committee C to meet on Mondays at 10.30? After all, Members of the House are now paid adequately and there is no reason why they should not come back on Sundays, so that they might start work early on Mondays?
Mr. Bowden: I understand the hon. Gentleman's difficulty. He wanted to be upstairs in Committee and downstairs in Committee at the same time. However, the Bill on which he was serving has, I understand, been Reported, so he will be quite free to come down here next Wednesday morning.
Mr. van Straubenzee: Reverting to the Wednesday morning when the Government business was taken through the House under the guise of a Private Member's Bill, will the right hon. Gentleman have a word with those nominally in charge of it and convey to them the fact that it arouses very deep-seated and genuinely felt feelings and that to move the Closure on every major and important Amendment at the earliest possible moment is not the right way to deal with a Bill of this kind?
Mr. Bowden: The question of when or when not to accept a Motion for the Closure is a matter for the Chair and not for me.
Mr. Marten: Does the right hon. Gentleman recall that last Thursday I expressed anxiety that the statement on the TSR2 might be wrapped up in the Budget? He said to me that he could not understand why I had this anxiety and gave me an assurance that the statement on the TSR2 would be made in the House. It was, in fact, made in Committee and not in the House. I understood "in the House" to mean in the House—and there is a difference.
Mr. Speaker: We are trying to deal with the question of business now. I gather that there is to be a Motion of censure, in which all that would seem to be relevant.
Mr. Marten: I was wondering whether the Leader of the House could next week make a statement explaining why his assurance given to the House was dishonoured by the Secretary of State for Defence?
Mr. Bowden: This is the last part of the Motion of censure. I should have thought that every detail of it could be adequately debated at that time. I gave an assurance that a statement would be made in the House, and it is perfectly true that when the House is in Committee within this place it is in Committee and not in the House. But I certainly meant here and not upstairs in Committee.
Mr. Gregor Mackenzie: Reverting to the order of Questions to be answered by Ministers, may I ask my right hon. Friend whether he is aware of the concern, particularly of Scottish Members, that the Secretary of State for Scotland would have less opportunity of answering Questions under the new system than he had in the past? Will my right hon. Friend give a guarantee that he will examine the matter after this period of Questions has passed?
Mr. Bowden: I do not think that that is quite the case. Questions for the Secretary of State for Scotland are now taken on Wednesdays and he will certainly be reached once and probably twice in six weeks, which is doing pretty well.
Several Hon. Members rose—
Mr. Speaker: We should be trespassing on other business if we continued with this.

PRICES AND INCOMES POLICY
The First Secretary of State and Secretary of State for Economic Affairs (Mr. George Brown): With your permission, Mr. Speaker, I should like to make a statement on prices and incomes policy.
Following the signing of the Joint Statement of Intent on Productivity, Prices and Incomes, last December, I laid before the House on 11th February a memorandum on the machinery of prices and incomes policy, prepared by the Government in agreement with the representatives of management and unions, Cmnd. 2577. This memorandum stated that the National Economic Development Council would keep under review the general movement of prices and of money incomes of all kinds; and that a National Board for Prices and Incomes would be set up to examine particular cases in order to advise whether or not the behaviour of prices or of wages, salaries or other money incomes is in the national interest as defined by the Government after consultation with Management and Unions.
I am glad to be able to tell the House that agreement has now been reached on the considerations which, in the national interest, should guide all concerned with prices and incomes, including the National Board for Prices and Incomes in its investigation of individual cases referred to it by the Government. These considerations are set out in a further memorandum which has been endorsed by the National Economic Development Council and accepted by the representatives of the Trades Union Congress and of the four employers' organisations who were concerned with the two previous stages of our discussions on prices and incomes policy. This memorandum is being published in a White Paper which is now available in the Vote Office.
This concludes the third stage of our discussions on prices and incomes. Although the main discussions have had

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to be confined to those organisations which are most generally representative of the interests of employers and workers, the conclusions as endorsed by N.E.D.C. will, I hope, be accepted by all organisations and individuals concerned with questions of prices or incomes. Their acceptance will be an essential factor in implementing the national plan for economic development and so making possible a more rapid rise in real, as opposed to money, incomes.
I am also authorised by the Prime Minister to inform the House that Her Majesty the Queen has been pleased to indicate her approval of the membership and terms of reference of the National Board for Prices and Incomes to be appointed under Royal Warrant. Details are set out in the second part of the White Paper published today.
In addition to the right hon. Aubrey Jones, the Chairman, the Board will include:
Joint Deputy-Chairman:

Rt. Hon. Hilary Marquand.

Members:

Mr. J. F. Knight.

Mr. R. G. Middleton.

Dr. Joan Mitchell.

Lord Peddie.

Mr. P. E. Trench.

Mr. Robert Willis.

I hope to announce the name of the second Joint Deputy-Chairman very soon.
Mr. Heath: The First Secretary will be aware that what he has told us this afternoon adds very little to what he told us yesterday in his speech, beyond the names of the members of the Board. The right hon. Gentleman has announced the publication of two White Papers. We will study those carefully and make our views known.
Mr. Grimond: May I ask the First Secretary to say a little more about the phrase
"individual cases referred to it by the Government"?
Does this mean that the Board will consider only cases of increased prices or wage claims referred to it by the Government, or can it act on its own initiative?
Secondly, will it consider these cases after they have taken effect—that is, after
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agreement for higher wages has been reached, or when prices have been put up—or when a claim is made? Thirdly, can the right hon. Gentleman tell us what is the magnitude of the outstanding claims now awaiting consideration?
Mr. Brown: In reply to the right hon. Gentleman's first point, yes, the Board will consider cases referred to it by the Government, and I attach enormous importance to this fact. The National Economic Development Council, on the other hand— the right hon. Gentleman will know that I have made the Chairman of the Board a member of the N.E.D.C. to maintain the link—will consider the general pattern in these matters and so the two things will be covered.
In reply to the right hon. Gentleman's second question, about whether the Board will consider cases before or after they have taken effect, it can be either. It will be a matter for consideration of the merits of particular cases whether they are referred beforehand or afterwards. That will be a decision which the Government can take. In addition, people might ask for a case to be referred; somebody might ask for it to be referred beforehand.
In reply to the right hon. Gentleman's third point, which he raised yesterday in the debate, I have looked this matter up. Although one must not attach too much importance to comparisons at any given point in the year—there are many fluctuations—the figures are quite interesting. One year ago, 6,400,000 manual and 990,000 salaried workers were covered by outstanding pay and hours claims. At present, 2,565,000 manual workers and 1,680,000 salaried workers are covered by claims. Therefore, whatever else these figures prove, it does not look like a build-up in the pipeline.
Mr. Maxwell: May I congratulate my right hon. Friend most warmly on the splendid progress that he is making towards bringing about the national incomes policy? May I ask him, further, whether he has started any studies to prevent the taxpayer's money being used for the financing of the purchase of obsolescent plant and what steps he is taking to get the Government to use their purchasing power to compel industry to modernise itself and increase its exports?
Mr. Brown: I am obliged to my hon. Friend. That seems to be a different question, but my right hon. Friend the Minister of Technology and I are at present discussing those very matters.
Mr. Godber: The First Secretary has replied to the question by the Leader of the Liberal Party about claims and awards and whether they should be referred as claims or awards. Would he not agree that it would be far preferable in general if it were claims that were referred and for them to be dealt with speedily? The right hon. Gentleman made the point that it might take two or three months, but he would, I am sure, agree that claims should be considered more speedily than this.
Mr. Brown: That is a considerable conversion, since the last Government sent only awards and then took two years over their decision.

WAYS AND MEANS
Considered in Committee [Progress, 7th April].
[Dr. HORACE KING in the Chair]

AMENDMENT OF THE LAW
Question again proposed,
That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance, so, however, that this Resolution shall not extend to making—

(a) amendments of the enactments relating to purchase tax so as to give relief from tax, other than amendments making the same provision for chargeable goods of whatever description, or for all goods to which any of the several rates of tax at present applies;

(b) amendments of the provisions of the Finance (No. 2) Act 1964 relating to temporary charges on imports so as to give relief from the duty imposed by those provisions, other than amendments making the same provision for all goods chargeable with that duty.

BUDGET RESOLUTIONS AND ECONOMIC SITUATION
3.58 p.m.
The President of the Board of Trade (Mr. Douglas Jay): The right hon. Member for Bexley (Mr. Heath) yesterday afternoon made a vehement and, I thought, rather synthetic attack on almost all the tax changes proposed by my right hon. Friend the Chancellor of the Exchequer. If, however, the right hon. Gentleman is so violently opposed to all these tax changes, it is rather odd that he could not persuade any of his hon. Friends to vote against them. They did not vote against any one of the Resolutions.
I do not think that anyone has yet been impressed by the efforts of hon. Members opposite to work up a clamour against these tax increases. The country is really not as simple as hon. Members opposite sometimes imagine. No doubt, if our resources were slack and unused, large tax cuts might be possible, but they are now, thank heaven, very fully employed and, therefore, it is restraint and not stimulation which is plainly needed.
If restraint is necessary, how else do hon. Gentlemen opposite propose to

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apply it? If they do not like my right hon. Friend's tax increases, which other taxes would they raise instead? They do not seem to answer that, and I think it is the obvious insincerity of this attitude which accounts for the very poor showing of the party opposite in the public opinion polls at the present time. The real complaint of the right hon. Member for Bexley against the Government yesterday was that we were setting out, among other things, to redistribute wealth in this country. We certainly are, and we mean to go on doing so.
Or do hon. Gentlemen opposite, in the course of their criticisms, really advocate now a new deflation like those of 1957 or 1961. with all the long-term damage that they did to this country? We rejected that solution last autumn, despite all the difficulties that faced us then, and, of course, the decision to run the economy at full capacity and overcome the overseas deficit at the same time faced us with an exceedingly formidable task.
We always knew that. The alternatives would be easier, but they would have been fatal to the country in the long run. Or would the party opposite, if they had had responsibility, have simply let things rip last autumn and watched the deficit widening into catastrophe?
We now know that for the first nine months of 1964, the overseas deficit was widening and widening under the management of the right hon. Members for Bexley, and Barnet (Mr. Maudling), and that neither of them, nor the Leader of the Opposition, did anything about it except to make soothing statements to the public in the hope of leading them into a lethargy of false optimism.
Let us look at what really happened. We now know that, despite the reversal of trend which has occurred since last October in both exports and imports, we finished the year with an overall deficit of £745 million. Clearly, therefore, if the trend had not been reversed, that deficit would have been even worse than it was.
In the first nine months of 1964, under the management of the party opposite, production was stagnant, and exports first rose and then actually fell. During that period imports were running at nearly 16 per cent. above the previous year. In
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the three months August to October, 1964, imports were still 16 per cent. higher than in the corresponding months of 1963. Industrial production, according to the official index, stood still from January to September last year. Exports were actually falling, in a world of rising trade, from April to September. Seasonally adjusted, exports in the three months July to September of last year were 2 per cent. lower than in the first quarter of the year.
That was the situation bequeathed to us in October last by right hon. Gentlemen opposite. We decided to achieve three objectives: a fall in imports, a rise in production, and a rise in exports. Hon. Members opposite know the action that we took, and I will, therefore, look at the record since in terms of hard fact.
Imports, which had been rising at 16 per cent. a year, were by the three months December, 1964, to February, 1965, about 5 per cent. lower than in the previous three months. The American dock strike in February had something to do with those figures, but if hon. Gentlemen really think that the import surcharge had nothing to do with so sharp a reversal, they have to explain the fact that in the three months December to February last, the latest period, imports bearing the surcharge—which. in July to October of the previous year, were actually 24 per cent. higher than in the corresponding months a year earlier —were 7 per cent. lower than in the previous three months, while total imports were 5 per cent. lower. That means, of course, that imports bearing the surcharge fell a good deal more sharply.
I know that there has always been a sharp disagreement between the right hon. Member for Barnet and the right hon. Member for Bexley about the surcharge. The right hon. Member for Bexley tells us that the whole thing was a mistake, but the right hon. Member for Barnet not merely favours it, but claims to have invented it. On 26th October last he said:
"I made arrangements in the summer"—
that was last summer—
"for the whole range of possible measures either to limit imports or stimulate exports to be examined. All the various possibilities involved difficulties, but of those we examined and worked out import surcharges and a

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scheme of relief to exporters relating to the burden of indirect taxation seemed the most promising."
That was what we thought, too, and we still think that now.
Next let us look at industrial production which had been stagnant for nine months up to September of last year. In the three months November to January of this winter, it was 3 per cent. higher than in the previous three months, and 6 per cent. higher than in the corresponding months a year earlier. Most crucial of all, exports, which were dropping last autumn, were 6 per cent. higher in the latest three months December to February than in the previous three months.
Since some hon. Gentlemen opposite, no doubt for patriotic reasons, have tried to argue that our exports to E.F.T.A. were damaged by feeling about the surcharge, I am sure that they will be relieved to know that exports to E.F.T.A. as a whole were also 6 per cent. higher in the three months December to February than they had been in the three months before that.
Sir Alexander Spearman: The industrial production figure, published in November last year, was 8 points above the previous year. Is the right hon. Gentleman claiming that the increase in production up to November last was due to the Labour Government?
Mr. Jay: What I am saying, and the hon. Gentleman can look it up for himself, is that the index was static from January to September, 1964.
Hon. Gentlemen opposite argue that this remarkable improvement in the trend of exports, imports and production had nothing to do with the surcharge, the export rebate, or any of the policies pursued by the Government, that it was all pure coincidence. The right hon. Member for Barnet, even though I know that he is anxious not to get a reputation for being too clever by half, and I admit this, has a more subtle explanation for this than the right hon. Member for Bexley, because he told us in January that the improvement in exports then announced was all due to the previous Government. He told us a little earlier that the difficulties which faced the £ in
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November were all due to the present Government. So, what happened in November was due to the present Government, but what happened after Christmas was due to the previous Government.
Mr. Reginald Maudling: The right hon. Gentleman has got this wrong. It was not I who said that the difficulties in November were due to the present Government. It was the Prime Minister.
Mr. Jay: If the right hon. Gentleman really wants people to believe that what happened after Christmas was due to the previous Government, but what happened before was due to the present one, he will have a hard task in persuading them of that.
I believe that the main credit for the marked recovery in exports since last autumn, and the new consciousness of the urgency of exports, goes to British industry itself, to all those who are producing, transporting and selling our exports, both visible and invisible. But the Government's measures have unquestionably helped, both by increasing that sense of urgency, and by greatly improving the export services offered to industry, and from now on the effects should be even greater.
In October we launched both the export rebate scheme, and the extension of the British National Export Council to the Commonwealth, and, of course, the rise in vehicle duties announced by my right hon. Friend this week will further increase the value of the export rebate. In January, I announced a further instalment of export promotion measures, and I should like to tell the Committee how these have developed since. We then reduced the minimum for Export Credits Guarantee Department bank guarantees for over three years from £100,000 to £50,000 with the necessary finance at the fixed rate of 5½ per cent., and the banks, together with the Bank of England, arranged that for financial guarantees the fixed 5½ per cent. rate would be offered for the whole period of the loan instead of only the first five years.
The effect of this extension, particularly in the shipbuilding industry, has been even more encouraging than we expected. Since January, overseas orders for ships to be built in British shipyards have

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increased sharply, and new inquiries have doubled. The orders from abroad announced in this 10-week period amount to nearly a quarter of a million tons of shipping. That is twice as much as the tonnage ordered from abroad in the whole of last year and, incidentally, equal to the export orders placed in British yards during the whole of 1963—itself the best year for export orders that the shipbuilding industry had enjoyed since 1957. That will greatly assist the shipbuilding towns, which are so largely located in under-employed areas.
Next, in my statement in January I said that the British National Export Council had undertaken to organise, with Government help, a new scheme for outward and inward trade missions, and market research projects. The Council has so far received 41 applications. Of these, 10 have already been approved. Some have been launched, and the others are being examined. Meanwhile, the E.N.E.C. and the Commonwealth Export Council have extended their system of area export committees to include all Commonwealth countries. The Councils now cover a large part of the world, and 170 senior British businessmen are giving their services, through this machinery, to the new export drive. I should like to thank them now for their efforts, which are typical of the heartening response from industry generally to the export campaign of recent months.
One of the first moves of Sir William McFadzean, as Chairman of the B.N.E.C., was to invite major British exporters to help in the selling of the products of smaller companies, with less fully developed export organisations. Partly as a result of that, and with the help of the B.N.E.C. and other organisations, the Board of Trade will shortly publish a booklet giving full details of the firms which—either in response to this invitation or in other ways—have offered to help exporters or potential exporters. This booklet will include the names of nearly 400 manufacturing firms covering a very wide range of products.
Since my statement in January the B.N.E.C. has also set up an expert working party to test the feasibility of organising a national export selling organisation, whose main job would be to sell directly on behalf of small and medium-sized companies. Market studies
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are being carried out in both the North American and West German markets, because research of this kind is felt to be necessary before final decisions can be taken on the practicability of such a scheme. If it stands up to this test we shall go ahead with it.
In partnership with industry we are also promoting a number of overseas trade fairs and British Weeks all over the world. Major British Weeks will be held in Amsterdam next month, Milan in October, and Hong Kong next March. as well as a major British exhibition in Tokyo this autumn. We are supporting about 50 British store promotions which will be held abroad this year—20 in the United States, 20 in Canada, and 10 in Europe.
Government expenditure on overseas fairs will be 50 per cent. higher this year than last. This programme will include 50 joint venture projects, in which the Board of Trade collaborates with industry in specialised fairs to promote British exports. These will be organised this year at Cologne, Frankfurt and Hanover; and British pavilions will display British goods at Johannesburg, Budapest, Poznan and Moscow.
At the same time, since January the Board of Trade has held 35 meetings with major British exporting industries to review their export programmes and explain the facilities which the Government offer to them at home and abroad. This week we have also launched a major advertising campaign in the British Press to publicise the many services provided by the Board of Trade, including the E.C.G.D. and overseas posts, to help industry with its export problems. These services are already intensively used, but we think that still more firms could employ them to push their exports or to break into export markets for the first time.
Meanwhile, a team of six British trade commissioners from Australia will shortly be touring this country and interviewing 900 British firms in order to strengthen contacts with the Australian market.
That is a brief summary of some of the measures taken since January. But I said at the time that the programme announced then was only an instalment, and we have now taken further decisions.

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First, on the ever more crucial export credit front, where this country has made a great advance in recent months and already offers facilities equal to or better than most of our competitors, we propose, first, to increase the standard minimum percentage of insurance cover by the E.C.G.D. from 85 per cent. to 90 per cent. That will help all exporters and not simply those benefiting from the new bank guarantee facilities of last January.
Secondly, the system of bank guarantees, carrying 5½ per cent. fixed interest rate, will be extended to credits down to two years, and not three years as formerly. Thirdly, the charge for the bank guarantee will be reduced by 50 per cent., because, in my view, our experience over recent years has been sufficiently favourable. Where we are making a profit we can reduce prices. In due course, we shall see whether we can come down further.
Fourthly, the proportion of the credit normally covered by the bank guarantee will be raised from 90 per cent. to 100 per cent., and that will also extend the scope of the special 5½ per cent. interest rate. It means that, in practice, we can now assist borrowing from the bank to the full value of the credit, even though the insurance cover is only 90 per cent. All these changes will take effect immediately. They were all said by the previous Government to be impossible.
I apologise for the technicality of all this, but export credits are extremely important in the contemporary world, the E.C.G.D. is doing an invaluable job, and our experience since January has encouraged us to make further advances.
I have also decided to make some changes—again in the interests of our exporters—in administering drawback of import duties. Drawback is designed to relieve the exporter of paying duty on materials which he needs to import, although without unnecessarily stimulating imports. In future, it will be administered on the assumption that promotion of exports is always in the national interest, unless it can be shown that some other damage to the economy will result. This means that we shall assume that the exporter himself is the best judge of the needs of his customers abroad. He will normally obtain drawback unless it
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appears that harm would be done in some other way—for instance, by causing a net loss to the balance of payments.
My Department will be discussing with representatives of industry the detailed way in which this work will be carried out in practice. My right hon. Friend the Chancellor has also agreed to seek, in the Finance Bill, to amend the law so as to simplify and improve the administration of drawback. This we shall be able to explain fully in the Second Reading debate on the Bill. All this should streamline work on drawback applications and will, I am sure, be welcomed by exporters.
Finally, on the export front, the British Travel Association, with Government help, is stepping up its campaign abroad to attract tourists to this country. I have also made arrangements, after discussion witth the B.B.C., for its external services to give a rather truer picture abroad of British industry than some which have prevailed recently. At the same time—and the right hon. Gentleman asked about this yesterday—we are working hard to simplify export documentation, through the Joint Liaison Committee which exists for this purpose.
These are some, but not all, of the things which the Board of Trade is doing, in partnership with industry, to expand our exports more quickly, but they are no more the end of the story than the instalment which I announced in January, and I hope that as time goes on we shall broaden the campaign even further.
Mr. Robert Maxwell: I should like to say, as an exporter who exports 80 per cent. of his total production, that these are splendid and practical steps which will be warmly welcomed by British industry. May I ask my right hon. Friend whether he can say anything about the discussions he is having with his colleagues at the Foreign Office and what that Department is doing to help British exporters in the same practical way as his Department?
Mr. Jay: My hon. Friend knows that steps were taken and announced earlier to improve services existing in posts abroad. In this respect the two Departments are working together, and I think that there is general agreement that progress has been made there, too.

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At the same time, we are determined to mobilise the still unused resources of manpower and productive assets in our own country. I have always believed that the surest and quickest way to achieve an increase in national output is to bring these resources in underemployed areas into productive employment. The best way to do this is to pursue an expansionist policy over the country as a whole, to restrain excessive development in congested areas and to steer expansion schemes to those districts where resources are idle. These are the objectives which we have been pursuing both in the general economic policy of the Government and the distribution of industry policy of the Board of Trade during these last six months.
Unemployment has already shown a marked fall and is still falling. The register of wholly unemployed in Great British showed a fall from 1·8 per cent. in March, 1964, to 1·5 per cent. in March, 1965. In Scotland, the fall was from 4·1 per cent. to 3·3 per cent.; in the Northern region, from 3·6 per cent. to 2·8 per cent.; and in Cumberland and Westmorland, from 3·8 per cent. to 2·8 per cent. In the North-Western development districts, mainly Merseyside, the fall was from 4·4 per cent. in March, 1964, to 3·2 per cent. in March, 1965.
All these falls were bigger proportionately, it should be noted, than in Great Britain as a whole. This means that the unbalance is already being reduced. Only in Wales as a whole was there a slight increase, but that was from a fairly low figure, from 2·5 per cent. to 2·7 per cent.
We have continued throughout these months to impose a tougher policy in granting I.D.C.s in all the congested areas. The Control of Office and Industrial Development Bill is already restraining new building in London and, therefore. the drawing power of the South-East.
Mr. Stanley R. McMaster: Will the right hon. Gentleman say something about the position in Northern Ireland, where unemployment is very much heavier than in any development district in Great Britain? I hope that similar efforts will be directed to reducing the unemployment in Northern Ireland.
Mr. Jay: The drop in Northern Ireland has beer from 7·3 per cent. 6·6 per cent. It is still much too high and we
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are determined to go on doing all we can to help.
Now that the Control of Office and Industrial Development Bill has passed its Committee stage the Board of Trade is prepared to consider applications for office development permits, though firm answers can, of course, be given only after the Bill has received the Royal Assent.
In the development districts, in addition to the 29 new advance factories which I announced in November, two new industrial estates are now being erected at Bellshill, in Lanarkshire, and on South Tees-side. The number of new industrial schemes coming forward is already encouraging. In Wales, Scotland, the Northern and North Western regions, during the six months from October, 1964, to March, 1965—that is to say, the last six months, approximately—I.D.C. approval was given to 491 schemes offering an estimated additional employment to 36,420 people compared with a total of 31,670 for schemes approved in the previous six months. The total financial assistance offered under the Local Employment Act—I think that even my right hon. Friend the Chancellor will welcome this—in all the development districts in Great Britain rose from £10,987,000 during the four months from July to October of last year to £16,489,000 in November last to February this year.
Just to give a few examples of development schemes coming forward, at Cambuslang, in Lanarkshire, Hoovers are to spend £3 million on extending plant to employ 4,000 people as against the present 2,450. At Workington, there are two larger paper manufacturing extensions now under construction which will cost over £5 million and, at Milford Haven, Gulf Oil are to build not merely a refinery, but a major petro-chemical plant. Before the end of this month I hope to announce the letting of the Pressed Steel factory, near Swansea, to a large firm, which will give long-term employment to this area.
Mr. Eric Lubbock: Just as the building of advance factories has become part of the restriction on I.D.Cs. in congested areas, have the Government any policy for building advance commercial premises in development districts? May I also ask what lead the

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Government are giving by moving their offices out of central London into these regions?
Mr. Jay: We are doing the second, and the building of commercial premises in development districts is a perfectly possible policy for which we have powers. We have begun factory building which I think is, on the whole, the first priority. I will bear in mind the suggestion made by the hon. Gentleman.
I have also removed from the so-called development districts stop-list all the areas in South and South-West Wales which were on that list. There were no areas on it of the North-East Coast, Scotland, West Cumberland or Merseyside. This has restored large areas in industrial South Wales to full and active development district status. I believe that if we continue present policies resolutely, and add new instruments where they are needed, we can count on a continuing fall in unemployment in those areas, and in time a real industrial regeneration. Serious problems and serious pockets of unemployment and underemployment still persist. Therefore, there must be no letting up, in my view, and no complacency, because I believe that the natural drift of employmnt to the South-East is a powerful force which will set in again if at any time the effort to restrain it is relaxed.
Thus, on both the home and the overseas fronts I believe that we are moving nearer to overcoming the unbalance which has weakened our economy for so long. Nevertheless, having given all these figures, I trust that the Committee and the country will not be too easily optimistic or underrate the toughness of the task that faces us, above all, in paying our way in the outside world. Repeatedly, since the war, both the country and the Government have become too optimistic too soon. We are trying, at the moment, simultaneously, to achieve growth by running our economy at full capacity, to aid other countries poorer than our own —particularly in the Commonwealth—to maintain defence forces abroad, to keep the peace and help our allies and to maintain a reserve currency. We are doing this in a world where the monetary and credit system is, plainly inadequate.
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In addition, we are also trying to continue our liberal import policy, and indeed to expand world trade much faster by a major effort to bring the Kennedy Round to a successful conclusion. There are overwhelming reasons, I am convinced, for concentrating our efforts at this stage on securing the maximum result from the Kennedy Round negotiations. Success here would widen our export markets, particularly in the United States and in the E.E.C. It would greatly assist the developing countries by extending the tariff cuts to them, and it would lower the barriers between E.F.T.A. and E.E.C. in much the most practical method at present. The Kennedy Round negotiations are now being pushed forward in Geneva. The main industrial countries tabled their exception lists from the proposed overall cut in industrial tariffs last November, when ours was one of the shortest of all. These lists have been systematically examined since the New Year. Agreement has now been reached on the procedure for negotiating on agriculture. I do not know why the right hon. Member for Bexley yesterday had to say, about the Kennedy Round, that two years have gone by and that it has hardly even got off the ground. For 18 months of those two years he and his right hon. Friends were responsible for it.
Therefore, this remark, like some others of his, did not seem to me particularly helpful. Of course, this important enterprise will take a long while yet, but is worth being patient and working hard and long, because of the vast improvement and the results which can be achieved. Meanwhile, the sharp improvement in our own trade balance over the last six months encourages now some solid hope that we may, before too long, overcome the deficit and again earn a surplus, if we do not relax. The figures which I have given show that we are moving in the right direction, but the House and the country must not expect that every monthly trade return will look better than the previous one. There is a long and hard struggle ahead of us, in my opinion. We have the power to win it, but it will not be won if, either on the home or the overseas front, we give up or let up too soon.
4.32 p.m.
Mr. Peter Walker: While welcoming the proposals made by the

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right hon. Gentleman the President of the Board of Trade concerning the improved facilities for E.C.G.D., and the improved credit facilities which are available, I must confess that his speech, in his usually lucid manner, was somewhat different from the speeches we heard from him when he debated previous Finance Bills of a Conservative Administration.
Many of the right hon. Gentleman's favourite themes were missing. We had no powerful passages on the wickedness of the increase in National Insurance contributions, nor did we have his usual cogent intellectual thesis on the horrors of indirect taxation. The right hon. Gentleman is seldom sentimental, but I remember that in years gone by he became a little sentimental when he dealt with the working man's tobacco and beer. Even this sentimentality was lacking this afternoon.
Perhaps the right hon. Gentleman no longer shares those views so eloquently expressed by the present Chief Secretary to the Treasury, the hon. Member for Gloucester (Mr. Diamond), in the debates on last year's Finance Bill. The Chief Secretary argued that a tax on tobacco had five times the effect on the elderly and the lower income groups that it had on the wealthy. On that question, the comment of the Chief Secretary was one which is particularly applicable to the Budget. Referring to the part of the Bill dealing with the increases in indirect taxation, he said:
"Part I of the Bill does nothing in terms of an incomes policy; nothing in terms of regional employment policy; and nothing in terms of national progress. It merely reveals the Chancellor's desire to have a final 'dig' at the worker."—[OFFICIAL REPORT, 7th May, 1964; Vol. 694, c. 1481–2.]
It is interesting that within less than six months of taking office, the Government should be digging at the worker with greater gusto than ever before.
I had hoped that the President of the Board of Trade would have devoted more time to commenting upon our current trade figures. One of the most striking features of the Chancellor's speech was the contrast with the speech which he made last November, a very real contrast between the facts as now known
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and the predictions made by the Chancellor in his first Budget. There is a difference in the trading figures in the last three months, and the trading figures which we could reasonably have anticipated from the Chancellor's comments but five months ago. The recent figures not only show that the Chancellor's predictions last November have proved to be completely false; they also show that the predictions made by my right hon. Friend the Member for Barnet (Mr. Maudling) have proved to be completely correct.
In his Budget statement last November, the Chancellor said:
"There is good reason to believe that the charge on imports will yield a substantial saving on our import Bill approaching £300 million a year."—[OFFICIAL REPORT, 11th November, 1964: Vol. 701, c. 1028.]
This statement can only be interpreted one way, to mean that the Chancellor believed that these items upon which the surcharge was imposed would be reduced by about £300 million a year.
We have now obtained the figures for December, January, and February, three months during which the 15 per cent. surcharge was in full operation. Indeed, one would judge from the announcement that the surcharge was to be reduced at the end of April that these months were months in which the surcharge was successfully in operation. But the facts presented by an examination of these trade accounts show that the predictions of the Chancellor that the surcharge would reduce our imports by £300 million a year have proved to be completely fictitious.
During these three months, the fall in our imports of manufactured goods and chemicals, the items upon which the surcharge was imposed, has been a fall over the previous three months of £22 million, £18 million of which is accounted for by the American dock strike. Instead of a drop of £75 million in a quarter, as one could have anticipated from the Chancellor's predictions, there has been a true drop of only £4 million. If one compares each quarter's figures with the similar quarter in the previous year, the figures are even more alarming. Rather than there being the fall in our imports of manufactures of which the President of the Board of Trade made such a great

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deal when he was on this side of the Committee, there has been a rise in our manufactured goods during the last quarter of £16 million. There has, however, been an improvement in our total import position, but that improvement has taken place not, as the Chancellor predicted, in those spheres where the 15 per cent. surcharge had been imposed, but in that sector which my right hon. Friend the Member for Barnet predicted, in the sector of raw materials and foodstuffs; in fact, in the sector where there had been stockpiling before the General Election.
Here the fall in imports is £45 million, compared with the previous quarter, and £67 million compared with the similar quarter of the previous year. In fact, the whole basis of the Chancellor's 15 per cent. surcharge has proved to be completely wrong in terms of the figures for the last quarter. This is because of one of the omissions which there were from the statements of the First Secretary of State and the Chancellor of the Exchequer during their first few months of power. If only the Chancellor had then claimed that our overseas investments had been built up to £11,000 million. If only the the Government had then made clear that much of the adverse balance of trade was due to stockpiling before the election. If only the Government had made clear that more than half of our deficit on balance of payments had been on capital account. If only they had then stated that exports were rising, imports were falling, and production and savings were at an all-time high.
Instead, they decided, for political purposes, to suppress these facts. How heavily they and the country have paid for this suppression. Yesterday, the First Secretary tried to argue that the Labour Party was unaware of the position. He and the Committee know that the country had been made aware before the election of the adverse balance of payments for the first six months of 1964 and of the adverse balance of trade for the first eight months of 1964. The policy which was being pursued was right, in accordance with the terms of the speech made by the present Prime Minister at Swansea, in January, 1964. When the Prime Minister stated categorically on 23rd November that the crisis had been a crisis of confidence, he was
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right. [An HON. MEMBER: "Read it."] Perhaps hon. Members would like to hear exactly what he said, because it is a very important passage, and is well worth repeating. What the Prime Minister said was:
… in the course of the past week there has been this new development arising from confidence factors."—[OFFICIAL REPORT, 23rd November, 1964; Vol. 702, c. 933.]
This is perfectly clear and, of course, we know what those confidence factors were. They were, first, the publication of the White Paper by the First Secretary; secondly, the pronouncements of the President of the Board of Trade and the Foreign Secretary in various places abroad; and, thirdly, the completely inappropriate inflationary Budget of the Chancellor. In fact, most of the inflationary tendencies of the last few months have resulted directly from the actions of the Government.
Yesterday, the First Secretary announced that he intended to send out 300 letters to leading industrialists about our balance of payments. This is not the first time that the First Secretary has embarked on a little letter writing. Hon. Members will recall that after a week of banner headlines stating that prices were rising throughout the country, the First Secretary made the dramatic announcement that he had been informed that prices were rising and that he would take action and write to some of our leading manufacturers and trade associations concerned asking them for an explanation of why prices were rising.
I recall listening to a news bulletin in which the B.B.C. announcer broke the news to the nation that a spokesman from the Ministry of Economic Affairs had stated that the letters would be sent out when they had been written and signed. What planning! We have never been informed of what replies the First Secretary received. Perhaps he would publish them. Perhaps he would tell us whether they informed him that one of the reasons for the increase in industrial costs had been the 6d. on petrol tax, that another reason had been the 7 per cent. Bank Rate, that another had been the 15 per cent. surcharge, imposed on many items of plant and machinery required for the modernisation of Britain.

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Doubtless, if the First Secretary sends out another set of letters to the same industrialists they will now be able to supply him with some recent extra items, such as the extra burden of the motor licence duty on commercial vehicles, the elimination of the initial allowance on motor cars used by commerce and industry—an action, in effect, identical to the Chancellor increasing Purchase Tax by 10 per cent. on all cars used by industry and commerce—the increased postage rate, a further increase on industrial costs, and the increased National Insurance contribution.
At a time when it is vital for our industrial production to compete in world markets the Government have, within less than six months, burdened industry with the increased cost of transport, the increased cost of postage, the increased cost of borrowing money, the increased National Insurance contributions, and they have increased general taxation. What a way to help a great industrial nation to become more competitive!
Mr. Maxwell: Would the hon. Gentleman like to tell the Committee why the right hon. Member for Barnet (Mr. Maudling), when introducing his last Budget, made a promise to Parliament and the country that if action was required to correct his Budget proposals he would not hesitate to take it, that, first, he did not do so and—[Interruption.] I have two more questions to ask.
The Chairman: Order. The hon. Member for Buckingham (Mr. Maxwell) has made one speech. Many hon. Members want to speak, so he must make his intervention brief.
Mr. Walker: If the hon. Member for Buckingham (Mr. Maxwell) will read the White Paper prepared by his right hon. Friend the First Secretary he will see in it. that on 26th October, after the First Secretary had taken over his office, he stated that no measures of a deflationary type were needed in the economy. During only the last five months the measures we have had in this Budget have become necessary.
Do not let the First Secretary argue that the export rebate scheme will make up for all these increases. There is no rebate for the increased cost of postage or the increase in the Bank Rate, a Bank
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Rate that has been kept at 7 per cent. for twice as long as that for which my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) imposed a 7 per cent. Bank Rate.
I remember Lord Mitchison, the former Member for Kettering, in one of his many vigorous and attacking speeches, describing the 7 per cent. Bank Rate as "a vicious thumbscrew on British industry". Little did we realise that the upraised thumb to be seen on all Labour posters at the time of the General Election campaign was the thumb awaiting the screws of a 7 per cent. Bank Rate.
And as for the President of the Board of Trade saying that the Government will not embark on the deflationary policies of 1961, there must be many people who wish that he would, for my right hon. and learned Friend the Member for Wirral did not take £500 million in extra taxation. He did not impose a 15 per cent. surcharge or increase Income Tax. There are many things about this credit squeeze and this deflationary period which are far less attractive than those of my right hon. and learned Friend the Member for Wirral.
Mr. Jay: He succeeded in raising unemployment to over 700,000.
Mr. Walker: He also succeeded in tackling the problem in such a way that the Bank Rate could be reduced in 10 weeks and so that the whole of our overseas borrowings could be paid within 12 months. In circumstances such as these it is no use the First Secretary writing letters to which he should know the answers. The only difference between the 300 letters he now proposes to send out and the 300 he previously sent out is that this batch will cost him 33 ⅓per cent. more.
As to the increases in industrial costs, these could severely endanger the excellent export prospects which the Government inherited. I cannot help feeling disturbed by the report published on Monday by the Association of British Chambers of Commerce, in which, in answer to a questionnaire sent to its members particularly concerned with exports, it obtained replies showing that there had been a fall in orders during the past four months. It would be interesting to know how much

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of this fall was due to the inflationary effects of the actions of the Chancellor of the Exchequer. Although the right hon. Gentleman mentioned that the figures for exports to E.F.T.A. had improved, he did not mention—and I appreciate that statistical information here is not available—what happened to our orders in E.F.T.A. during recent months, remembering that this is different from the question of the actual deliveries which were made.
If one looks at the Government's actions on nearly all our major industries, one sees that they have had the effect of creating economic uncertainty. Agriculture is unhappier and more discontented now than at any time since the war. Many farmers are talking not in terms of expansion, but of getting out of certain forms of production. The coal, gas and the electricity industries are all in a position of uncertainty, awaiting the pronouncement of the Government's national fuel policy.
The steel industry stands in the condemned cell while it awaits nationalisation and the aircraft industry has been deprived of many of its major projects, or has had projects like the Concord frowned upon and belittled by the utterances of Government spokesmen; the transport industry has no knowledge about its future and the road haulage industry is uncertain whether it will be nationalised. Indeed, all our major and fundamental industries have been made unstable and uncertain by the actions of the Government.
The President of the Board of Trade was at least happy about one thing in the Budget. He expressed it at the beginning of his speech. For once, he rose to speak with a beaming smile and said how delighted he was about the taxation proposals of the Chancellor. Perhaps I should remind the Committee of the words used by the present Minister of Housing and Local Government, the right hon. Gentleman the Member for Coventry, East (Mr. Crossman), when, in writing about the present President of the Board of Trade, he stated:
"Somewhere in his breast there resides a masochistic passion for high taxation…"
I would expect, therefore, that such a masochist would praise the taxation proposals of this Chancellor.
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I recommend both the Chancellor and the President of the Board of Trade to read the article written by tthe present Minister of Housing and Local Government when reviewing the President of the Board of Trade's book "Socialism in the Sixties", for, having referred to the right hon. Gentleman as a masochist and a person with a passion for high taxation, he went on to say—and this is important to note:
"But what if the capitalist refuses to lay his golden eggs as tamely and altruistically as the domestic hen. Labour Government that relies on taxation as its main socialising instrument will soon lose the confidence of the business community on which it relies".
They were wise words, written by the present Minister of Housing and Local Government, and they should be heeded by the Chancellor and the President of the Board of Trade.
It is also vital that the Government should suppress their natural hostility towards the City of London. A study of the White Paper on the Preliminary Estimates of National Income and Balance of Payments, 1959–64, shows that for every £ we receive in visible exports we receive more than 10s. in invisible earnings. Year after year we have enjoyed a substantial surplus on our invisible earnings. Leaving aside Government overseas expenditure and receipts in each of the last six years, there has been a surplus of more than £400 million in our invisible earnings, which, in 1964, reached a record of £610 million.
The biggest single item of our earnings comes from interest, profits and dividends, built up by the major overseas investment that has taken place over the last decade and the second single biggest item comes from services, such as banking and insurance. I urge the Government to consider the proposal, so far rejected by the President of the Board of Trade, that a special council should be created on the lines of the export councils particularly to foster and help to develop those services that provide our invisible earnings. If the President of the Board of Trade decides not to follow this suggestion, I ask that he will at least give careful consideration to the possibility of co-opting on to the existing export councils one, two or three people representing the invisible earnings factor in those regions as well as the visible earnings.

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In fairness to the right hon. Gentleman, I must say that we have already welcomed several actions he has taken to stimulate the economy. There is his introduction of the Monopolies and Mergers Bill—based, as it is, on the White Paper introduced by my right hon. Friend the Member for Bexley (Mr. Heath)—though we regret that it contains one or two items that a similar Bill presented by this side would not have contained. We welcome, also, the manner in which he is adhering to the Resale Prices Act. His conversion is understandable, because in terms of reducing prices this Measure has been much more effective than the First Secretary.
There are several other things that the President of the Board of Trade could usefully do to assist the economy. My right hon. Friend the Member for Bexley had done much to prepare for the introduction of a new Companies Bill, which could have a great effect on industrial efficiency because it would ensure that investors, creditors and the general public would be given fuller information about the activities of companies. But I must warn the right hon. Gentleman that if he takes this type of useful action he cannot expect to do particularly well in this Administration, because it is not action that has been at a premium with them, but public relations.
In this, the President of the Board of Trade is a long way behind the First Secretary. But I hope that he will not study the First Secretary's techniques, because then, instead of producing a useful Monopolies and Mergers Bill, he will doubtless gather together six of the leading practitioners of monopoly and, before the television cameras, get them to sign a declaration of intent.
It is action that is needed—action to be more competitive, and to provide a more efficient economy. The lesson that the Government should learn is that it is the competitiveness created by the Resale Prices Act that has brought down prices. The other lesson they should learn is that incentive is far more useful than punishment in stimulating production.
The Government have not only placed a heavy burden on industrial costs, but have also placed a heavy burden on the individual. There must be many a young scientist. technician, or business execu-
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tive who now bitterly recalls the flattering words spoken by the party opposite in the pre-election era. It was the young scientist and the young technician whom Labour was to encourage and care for when it came to power. We had the glowing words of the Prime Minister at the Labour Party conference in Scarborough, in which he stated:
"One message I hope this Conference can send out not only to those who are wondering whether to emigrate or not, but to those who have already emigrated is this. We want you to stay here. We want those of you who have left Britain to think about coming back."
How different was that Labour Party conference message from the message that would now have to be sent by the Labour Government.
That message would now be, "If you have stayed in Britain, or if you have returned, we have increased your Income Tax, your mortgage repayments are higher than ever before, the burden of your rates will this year reach record levels, your petrol tax has been increased, your motor vehicle licence has gone up and the cost of living is rising steadily". The message they would now send to any British technician or scientist who may be working in the American aircraft industry would be, "Do not come back to the British aircraft industry. The British aircraft industry is coming out to you."
The Chancellor of the Exchequer (Mr. James Callaghan): I congratulate the hon. Gentleman. As I take it that he is speaking for the Opposition, and not for himself, I would ask him: is he saying that in present circumstances the Opposition would not have increased taxation?
Mr. Walker: I shall give the same answer to that question as the Chancellor gave when he was on this side during our discussion of the last Finance Bill. What taxation is increased, and the nature of the taxation, is tip to the Government of the day to—[Interruption.] I say that if it were not for the crisis of confidence created by the right hon. Gentleman there would be no need for this increase in taxation. Not only have the Government failed the technicians and the young scientists and the young business executives, but—
Mr. Walter Monslow: Will the hon. Gentleman tell

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the Committee what assistance the previous Administration gave to industry and exports?
Mr. Walker: It would be a very long list, because the difference between a Conservative Government and a Labour Government—[Interruption.]—is that in the great majority of Conservative Budgets taxation has come down, whereas—[Interruption.]
The Chairman: Order. I must ask hon. Members not to interrupt from a sitting position. We all have the dignity of the House and Committee in our hands. We can hurt it.
Mr. Walker: One thing I can say is that the exports of the hon. Member for Buckingham (Mr. Maxwell) did rather well under a Conservative Government.
Not only have the young scientists and young business executives done badly under this Government, but they have also come across a Government who have been unwilling to create the type of economic conditions which these young business executives and scientists need to create the wealth of the country. I would say that the greatest con-condemnation of the Budget and of the Chancellor of the Exchequer were given in the Chancellor's own words. They were spoken in his Budget statement, in which, pathetically, having rejected the idea of improving investment allowances for new plant and machinery, he said:
"At the same time, it has been represented to me that, in order to foster modernisation and the growth of the economy. we need an incentive which gives a particular arid positive stimulus to the adoption of new techniques of production. I should welcome further discussion of this subject so that we can consider whether there are better ways of helping industry. I have set myself the task of looking into the whole question in the forthcoming year."—[OFFICIAL REPORT, 6th April, 1965; Vol. 710, c. 257.]
For two years the right hon. Gentleman was shadow Chancellor of the Exchequer, and for nearly six months he has been Chancellor, but he has devoted his time to the creation of a complicated Capital Gains Tax which does nothing to solve our immediate problems, and a complicated Corporation Tax which probably does positive harm. The subject that he has pushed aside
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and now tells the nation he is coming round to consider, the subject that is left to the future, is how to stimulate new techniques of production and modernisation. Socialism first, modernisation lagging a long way behind.
In their short period of office, the Government have not advanced to new economic frontiers. They have retreated to the old barricades in terms of international trade. They have retreated to the barricades of the 15 per cent. surcharge and reactionary taxation. At home, they have retreated to the barricades of the 7 per cent. Bank Rate, penal taxation and extension of nationalisation. To advance to new and exciting frontiers demands a policy that would arouse the bitter prejudice of the party opposite, for the policy now demanded is one of giving the maximum encouragement to the enterprise and initiative of the individual; and it is this policy that we shall apply when, in the near future, we return to power.
5.0 p.m.
Mr. David Ginsburg: It is a pleasure to follow the hon. Member for Worcester (Mr. Peter Walker) in his maiden speech from the Opposition Front Bench. I do not know quite what political significance we should attach to his arrival there. It is common knowledge that he was at a certain stage very close to the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd). One wonders whether this means rather more Draconian economic doctrines for the Conservative Party in place of the more expansionist policies which the right hon. Member for Barnet (Mr. Maudling) used to advocate. Another intriguing thought that occurs to me is the hon. Member's opposition to the Common Market. He has arrived as an economic spokesman with the right hon. Member for Bexley (Mr. Heath). We will watch with very great interest to see how the doctrine of the Conservative Party on that aspect of policy develops.
We heard a very vigorous speech from the hon. Member, but I would urge him to verify his references a little more. According to him, everything the Government were doing was wrong. In particular, he took the most gloomy view of the surcharge on imports. He complained that the surcharge was very slow to bite. I urge the hon. Gentleman to

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be a little more patient and perhaps also to read an article which appeared last year in the Bulletin of the National Institute of Economic and Social Research on the Canadian import surcharges. That article showed conclusively that there is a long time-lag in the operation of the surcharge, but that when a surcharge begins to bite it bites very hard. I hope that my right hon. Friends will take comfort from this and can expect that the surcharge will very shortly have very significant effects.
The hon. Member indicated that the crisis with which the Government have been contending for the last six months was not so much a crisis on the visible account as a crisis on the invisible account, on the capital account, and that we ignored this fact. This criticism is rather rich. In over five years of debates in the Chamber we have spoken year after year about the weakness of the capital account and the weakness of the invisible account. My right hon. Friends need no defenders here. If the hon. Gentleman will study my own speeches over the last five years, he will find that practically every speech I made in an economic debate was devoted to an exposition of our economic weakness in this area. I said so again in November when we debated my right hon. Friend's first Budget.
On Tuesday the Chancellor of the Exchequer recognised that he had a very difficult task indeed. He had, first, to protect sterling and shore up the balance of payments. He had at the same time to maintain full employment and foster the modernisation of the economy. On the first score, the immediate defence of sterling, the signs are encouraging. The battle is on its way to being won. In the defence of the £ very harsh measures have had to be taken. Yesterday the right hon. Member for Bexley and today the hon. Member for Worcester have made great play with the Government's increases in taxation. The right hon. Member for Bexley said that we had raised taxes in two Budgets by £500 million. I do not know exactly how the right hon. Gentleman computed this figure, whether it was a gross or a net figure. It is worth commenting in passing that of the total amount which the State is taking away in taxation the substantial amount of £85 million is being
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returned to the community in terms of greater social benefits, of which my right hon. and hon. Friends strongly approve.
Let us agree that taxation has been increased in the Budget. Apart from the Income Tax, it has been increased by about £160 million. An increase of this character, whatever the private feelings of hon. Members opposite may be, was advocated by most responsible financial experts overseas and by financial journalists and experts in this country. Indeed, from my readings of the Press, my right hon. Friend the Chancellor of the Exchequer took a fairly low figure. In the Financial Times on Monday of this week both Professor Paish and Professor Kahn were advocating between £300 million and £400 million being taken out of the system. Therefore, I take it that the right hon. Member for Bexley and his supporters cannot seriously be suggesting in this debate that my right hon. Friend should simply have sat back and done nothing and left the gap on the balance of payments wide open without taking some drastic action. If the Opposition think that it was wrong to increase taxation and wrong to take action of this kind, they should say so. If not, their criticism of the higher taxation policy outlined in the Budget is naïve and irresponsible.
My right hon. Friend the Chancellor of the Exchequer is to be congratulated on his courage. He is also to be congratulated on the action he has taken to strengthen the capital account on the balance of payments. However, there was very little about that in the speech of the hon. Member for Worcester. It has been our capital account, quite apart from the visible account, which has been a source of weakness to the economy. As I said earlier, in the last Parliament I sometimes felt a lone wolf, if that is an appropriate metaphor, towards the Government of the day when I used to speak on this esoteric subject. I am gratified that at long last my right hon. Friend has taken action here. One of the things I used to advocate in the last Parliament was that an attempt should be made to strike a balance sheet from the point of view of the national economy and resources of the overseas operations of British oil companies.
Although I strongly support the action which has been outlined with regard to

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our invisible account, I still think there is much more room for further information and for further studies to be undertaken. For instance, the Committee may like to know that in 1960 United Kingdom subsidiaries operating overseas remitted about £72 million in dividends to this country. In 1964 those subsidiaries remitted about £103 million. So there has been an increase in dividends coming back from United Kingdom subsidiaries of about 40 per cent. In 1960 foreign companies operating in this country remitted £58 million. In 1964 those selfsame foreign companies remitted £94 million, an improvement of about 60 per cent. It is also worth noting that in 1960 both foreign companies operating here and British companies operating overseas remitted about 46 per cent. of their earnings in dividends to their home countries. In 1964 British subsidiaries overseas remitted 47 per cent.—virtually no change—whereas foreign subsidaries operating here remitted 57 per cent. Therefore, it can be said seriously and dispassionately that there is a very good case indeed for believing that not all British capital invested abroad is as efficient as it should be, and this is a very strong justification of some of the unpleasant actions which the Government have had to announce.
I should like to go further in this connection and suggest that the Department of Economic Affairs as well as the Treasury could look into this situation. It is necessary to look at it not just from an accounting point of view but also from the point of view of industrial efficiency. British investment abroad is highly desirable, but in conditions of operational efficiency. Without any doubt some valuable case studies could be undertaken.
Comparisons might be possible between the efficiency of British firms operating overseas and American and Swiss firms operating overseas and in this country. Much might be learned from such a comparison which would assist in securing more efficient overseas investment. We should not rely on fiscal measures alone to put this problem right. It is vital for the country in the long run to have substantial investment overseas, but it must be value for money to the economy of the country.
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A second point arising from this is that the problem which we face in investment overseas pinpoints the vital importance of greater incentives for direct exports from this country. It may well be that it is easier to market abroad from a British subsidiary overseas, especially when tariff barriers are high. Nevertheless, the Committee and the Government should be under no illusion that to the economy, the balance of payments and the wealth of the country, direct exports from this country bring a far bigger return on sales than do dividends remitted in respect of sales by a subsidiary company overseas. If I am right in my diagnosis, the case for even greater exports overseas cannot be over-stated.
Therefore, while welcoming the recasting of the national tax structure which was outlined by the Chancellor on Tuesday, I should like the Chancellor and the Government to look again at two specific things—at the export rebate situation and also at the whole structure of indirect taxation in this country. The export rebate scheme was a very good move, but I wonder whether even at this stage it would not be possible to alter the basis of computation of the rebate. At present it applies to all exporters. Could not a base level for the rebate be introduced in respect of existing export performance and then where a company exports above its present level the rebate would apply, but it would be a very much more substantial rebate? If the Government considered doing this, the rebates could be concentrated intensively on what really matters, namely, new export business, which is what the country needs, and not be spread thinly over the whole field of our exports. I realise that this scheme involves administrative problems. Nevertheless I hope that my colleagues will look seriously at it, because I believe that it will provide a stimulus to greater exports which are still badly needed.
Are the Government satisfied that more could not be done to make the structure of indirect taxation more conducive to exports? The experience of the last Conservative Government showed that one does not make exporting easier simply by making the home market more difficult. The last Government and the

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former Chancellor of the Exchequer rejected the added value tax when the Report of the Gordon Richardson Committee was received. Nevertheless, I should like to ask the present Chancellor to use his ingenuity, whether in that way or sonic other way, so that a much greater reform of our indirect taxation system could be undertaken which would provide a much greater stimulus to exports than the present rebate scheme Provides.
On Tuesday the Chancellor said that he would not cut the foreign travel allowance, but he urged people in this country to take their holidays in Britain. Today I was very glad to hear the President of the Board of Trade refer to a perhaps even more important thing—the vital necessity of getting people from overseas to spend their holidays here. Quite apart from what we heard this afternoon, I suggest to the Government that there might be concessions to the foreign visitor in indirect taxation, which would not be any breach of any international agreement—they are given by some countries—and which would encourage more people to come to this country. This is self-interest. It is also important to stress that if we want to keep up the level of British travel overseas this is the most vital action that we can take to protect the foreign balance.
Once the country has won the battle for sterling—and the latest news about the reduction in the French bank rate is encouraging for us—it is vital to be sure that the economy is not being squeezed too hard, because without a buoyant economy we do not get the level of productivity increase which is absolutely vital for the British economy. I expressed some anxieties about the sluggishness of the economy in November and I was proved wrong, but the risks at this moment are probably even greater than they were in November. My own bias has always been that of an expansionist. I should therefore like to read two quotations in justification of the anxieties which I hold.
The first from the Government's own Economic Report on 1964 states on page 16:
… while the growth of consumers' expenditure at current prices was much the same during 1964 as it had been during 1963, in real terms this represented a much reduced
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growth of expenditure. Perhaps surprisingly, consumers do not seem to have stepped up their money expenditure at the expense of savings in order to maintain, at least in part, the rise in the volume of their consumption: personal savings continued to be high in relation to this disposable income."
There it is. Expenditure is not rising, perhaps, as much as one would wish.
My second quotation comes from the Bank of England Quarterly Bulletin of March this year, page 14:
"On the other hand, some doubts were being expressed whether the rise in retail sales —and the very high level of activity in the motor industry—would be fully maintained in the New Year. There was also still much uncertainty concerning the eventual consequences for demand and for business confidence "—
of the measures which have been taken at the end of the year—
"Taken together, these measures constituted an appreciable deflationary force, the effects of which might become increasingly apparent as time went on."
Both those quotations show that within the public service there is some concern not about the present level but about what may emerge for the future level of economic activity. The Chancellor was perfectly right to ensure that demand does not get out of hand, and he was morally right, therefore, to introduce tax increases. But equally one cannot be sure about whether demand will hold up sufficiently. I take my last quotation from a short report on the City page in The Times yesterday to reinforce what I am saying. The heading is "More Debts Overdue" and it is said:
"Who says the credit squeeze is not biting hard? Latest figures compiled by Trade Indemnity, leading underwriters of credit insurance, suggest that it is causing some sectors of the economy real hardship."
A little later it is said:
"It serves to reinforce what has been proved often enough in the past"—
this is what I emphasise to my right hon. Friend—
"that while the economy seems to operate very much as before during the early phases of policies aimed at disinflation, the delayed action effect can be severe when it eventually shows through."
To sum up: in the medium term, the measures which the Chancellor and the First Secretary are rightly taking to streamline our taxation and industrial system will bear progressive fruit, but in

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the short run it is the Government's judgment of the level of economic activity which is vital. The Chancellor has a host of instruments at his disposal for giving relief to the economy the moment he decides that it is necessary so to do. I emphasise that a reduction of interest rates at the appropriate time could well be the most desirable development in a few months. It could stimulate demand, which may be necessary a few months hence, but equally important it would reduce the cost of servicing the National Debt. All I say at this stage is that, if there is any tendency—an eagle eye will have to be kept open from now on—for the economy to slacken off, the Chancellor should have the courage to act without delay just as he has had the courage in past months to act in defence of sterling.
5.23 p.m.
Mr. Ronald Buxton: I ask the House to show its usual indulgence towards one more maiden speech. It is rather difficult to be entirely non-controversial about a Budget, but I shall do my best.
First, a few words about my constituency, Leyton, which, as hon. Members know, is a suburb of northeast London. Quite a number of hon. Members visited Leyton during January. I am sorry that there was snow on the ground at that time and Leyton was not at its best. I hope that some of them will come again in May when the flowers are out, the gardens are blooming and the shrubs are in flower along the roads. Then they will see a difference. Leyton is a lovely place in the summer time.
The people of Leyton are well known throughout the country and, perhaps, throughout the world because of the sturdy independence of their views which they have expressed on several occasions. I have worked in Leyton for many years. I started there in 1947 as a civil engineer —I am a qualified civil engineer—and I have known Leyton very well for a long time. Last week, Leyton was involved in a shot-gun marriage when we joined Walthamstow and Chingford, finding ourselves no longer in the County of Essex but now part of the new Borough of Waltham Forest and starting off on our adventures as part of the Greater London area.
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We cannot claim great natural beauty for Leyton. I heard one of my hon. Friends from Scotland making his maiden speech from this very bench not long ago and talking about the beautiful hills and valleys of his constituency. We cannot claim that sort of beauty for Leyton. Nor can we claim famous ancient monuments, although we do have a fine church dating from the sixteenth century and a Conservative club built in the seventeenth century—two ancient monuments worthy of mention. Nevertheless, although we can make no great claims to natural beauty or ancient monuments, we have a fine history which goes back to Roman times. The name Leytonstone reminds us of the stone set by the Romans on the edge of the marshes bordering the River Lea which marked the beginning of the Roman Road which went to Colchester. Throughout history, Leyton has played a part. King Harold had land there, and other famous people have been connected with Leyton.
One hundred years ago, my constituency was just two villages set in the fields near the River Lea. It was a popular place to live. There were fine houses in Leyton, and the City merchants used to journey by carriage day by day to and from their businesses in London. My own grandfather was one of these. He lived near Leyton Church and he used to travel daily to and from the City brewery business in which he was a partner. I have that family connection. Later on, after the railway came, the villages were built up and, gradually, they came together in one entity to form the town as we know it today. Curiously enough, some of the older folk still living in Leyton talk of the rivalry between the two villages which used to prevail 100 years ago.
We have a certain amount of industry in Leyton, not so much large industry but small and medium-sized companies which work away and are very keen to export. They are very active now in trying to arrange an export council. My own company, a medium-sized engineering company, is one of these.
We are proud of our borough services. Our library is one of the finest in the London area. I am sorry to say that, since our amalgamation, the rates are now the highest in the Greater London area; but, never mind that, we get fine

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value for our money. I should mention also our well-known football team. Leyton Orient has done sterling work in the past and, even if it is at the moment not at the top of the league, it is struggling very hard and will, I am sure, come up again before very long.
We have one great disability in Leyton, the high average age of our people. Next to Worthing, Leyton has, I believe, the highest average age of population. Some statistics are available and these show that there are 16,000 people of pensionable age in my constituency out of a total electorate of 66,000, that is to say, 25 per cent., which is a very high proportion. Whether or not it is due to the great longevity of our people in Leyton or whether it is that old Leytonians do not like to leave when they retire from work, the fact remains that the problem is becoming serious, and this is why I shall devote a later part of my speech to the position of pensioners and old people generally and the impact of the Budget upon them.
I wish to refer to my predecessor, who now serves with distinction in another place. Lord Sorensen was connected with Leyton for a very long time. For 32 years he served as Member, first for West Leyton and then, when the constituencies were combined, for Leyton. Over all those years, he and his wife became associated with practically every aspect of the life of the borough. Lord Sorensen was a Minister of the Unitarian Church before becoming a Member of Parliament. He had a burning zeal for social service and worked in very many social service activities, as hon. Members will remember.
Lord Sorensen's other great interest was the under-developed countries. During his Parliamentary career he paid many visits to Africa and India in the course of Parliamentary business. He was a member of the Pethick-Lawrence Commission which laid down the terms of reference for the granting of independence to India. He served with distinction on that body. All of us, I believe, welcomed the honour bestowed on Lord Sorensen in November by the Prime Minister.
As I have said, we in Leyton face the problem of a rising average age. This problem will perhaps occur all over
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the country in a few years' time. The pattern set in Leyton may well be followed throughout the country. Whatever has been done by the Budget for pensioners, I am sure that hon. Members will agree that they are still among the worst off people in the community.
It is true that pensioners had a rise the other day. Some have called it the "Irishman's rise", but that is not altogether true. They are still among the worst off members of the community, however. The Chancellor said in his statement that he hoped that we would soon achieve a modest living for the elderly. At the moment, I believe that it is very modest and for some it is really hard living.
It is true that the Budget gives some tax relief to pensioners and we are glad to see them. On the other hand, they will have to pay more for their tobacco and beer. On the whole, I do not believe that their position has improved. I am sorry that this should be so. Perhaps next year they may be luckier.
We are providing quite a lot of extra money for the new pension increases. The sum being provided for the latest increases is £270 million, and in order to meet that cost the National Insurance Fund is being increased by £332 million. It is worth noting that, out of that £332 million, the sum of £265 million comes from extra contributions. Indeed, the extra contributions will, at this early stage, though not later, pretty well meet the outgoings of the new increases.
The Exchequer will be playing its part according to the laid-down formula and this will come to £67 million in the current year. Thus, the National Insurance Fund for the time being will be £60 million better off. I would have hoped that, with so much surplus money, some of it might have been put aside for those elderly people who do not receive any pension at all. I want to talk about them a little later, as their need is very great and I hope that it will soon be recognised.
The 6d. extra on the Income Tax was to help towards the pension increases. It is worth noting that 6d. on the Income Tax yields £130 million—more than double the amount being contributed to the Fund at the moment. There is, therefore, a sum of money that we could use

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perhaps for those elderly people who are not receiving benefit at the moment. The total Exchequer contribution for 1964–65 towards the National Insurance Fund was £212 million. Let us compare that with some other figures. Defence takes over £2,000 million; education, another social service, takes £1,365 million. The total Exchequer revenue is £7,400 million. These are tremendous sums of money, yet only £230 million is the Exchequer contribution to the National Insurance Fund.
Surely we are guilty of being too mean towards elderly people, those who are least able to fight. The £212 million provided by the Exchequer represents only one-sixth of the total available in the Fund. The rest, £1,000 million and more, comes from the contributors to the Fund. The Treasury, in fact, just primes the pump which produces the money from the contributors. Yet, as so often seems the case, it is the Treasury which calls the tune over pension increases.
I am not sure that this is right. With their huge contributions, the electorate and industry should have a chance to call the tune of raising pensions. It is really a case of the tail wagging the dog at the moment since the Treasury produces only one-sixth of the amount but seems to keep the level under strict control. I believe, however, that the national, conscience is being stirred. It is time that we had a reappraisal. The standard of living of our pensioners should be raised above the breadline. They are, perhaps, the weak link in our chain of social services.
Perhaps, if the Treasury cannot be more openhanded, the contributors can be called upon to bring pensioners to a high level. Pensioners look for security, but there are absurd flaws in the scheme. There is no built-in protection against inflation. There should be safeguards against depreciation and devaluation of currency.
So often, increases are linked to political rather than economic events. Party manifestos or general elections are more likely to be the signal for pension increases than budget surpluses or satisfactory balances of payments. I hope that this concept of political considera-
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tions in pension increases will die and that we shall be able instead to provide a long or medium term plan for the improvement of the position of our old people.
There are, I believe, two factors to be considered for the future. First, we want to provide some form of built-in security against inflation so that there is protection against what happened in 1948–51, when the value of the low pension of 26s. went down and pensioners were left worse off. Secondly, I believe we should have some way of linking increases in pension to average earnings in the country. Today, the average earnings total £17 10s. How small £4 a week seems in comparison with that.
We should aim to increase the percentage of what pensioners get compared with average earnings. Instead of being about 25 per cent. as now, it should rise to one-third or to 35 per cent. and we should make a long-term plan with this in view. I am sure that the country would respond if the Exchequer took the lead with a plan, along these lines, to provide pensioners with the security they look for.
In the short-term, there is the case of those without pensions at all. Pensions are a question of priorities in providing money from the Exchequer for so many people. But here, surely, is a case which deserves special consideration. The cost would not be too high. Out of the 6d. on Income Tax only 1½d.would be required to provide a modified pension for these people. They were disappointed on 26th March and I hope that very soon, whichever way it is done, whether by an incomes guarantee or whether provided by the Opposition, if they return to power, something will be done to provide reasonable pensions for them.
They, above all, are the victims of inflation. Many of them saved up for their old age and invested their money, some before the war in War Loan and others in Goverment stock, yet others in National Savings. All these have suffered severe depreciation and the earnings that these elderly people put on one side for their old age have so often been reduced in value.
Today, the young seem to have tremendous opportunities before them, opportunities for enterprise of every sort.

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But the elderly have little opportunity. They have the growing hardships of old age, the problems of failing health and perhaps the expenses of an invalid partner to look after. Perhaps they have a family which does not accept the responsibilities towards its old people which the older generation used to accept.
In London, of which Leyton is a part, the problem is greater because of the higher cost of living for these people and the higher rents and the higher expenses with which they have become involved. Some of the progressive boroughs could help a lot if they would compile registers of elderly people so that the aid available, both municipal and private, could be canalised directly to them. We might inaugurate a national senior citizens' day rather like Mothers' Day or Fathers' Day, so that the attention of everybody could be directed to their needs.
Last year's Budget resulted in a surplus of £440 million. The Treasury is overflowing with funds and yet all the nation is spending on the elderly out of the Exchequer is £270 million, less than 3 per cent. of total revenue. Year by year the number of pensioners increases. It is now 12 per cent. of the population and in a few years it will rise to 15 per cent. and possibly more. I believe that we can do more for our old people. I am sure that we are not spending enough on them and that what we are spending we are not spending right.
I hope that when he prepares his Budget next year, the Chancellor of the Exchequer will be able to save something more for the old people. I hope and trust that those outside the scheme will be brought in and that those in the scheme will be given an assurance that the promises of the politicians will, in the long run, be translated into reality.
5.42 p.m.
Mr. G. A. Pargiter: It is a long time since I had the pleasure of immediately following a maiden speech and having the opportunity to congratulate an hon. Member, as I now congratulate the hon. Member for Leyton (Mr. Buxton) on his speech. When he rose, I wondered what sort of non-controversial speech one could make on a Budget. I admired the subject he chose, medieval Leyton, leading up to old
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people, and so on. Had I closed my eyes, I could have thought that the speech came from behind me instead of from in front of me; and no one can claim that a speech is less controversial than that.
I appreciate the sincerity with which the hon. Gentleman spoke on behalf of old people, not only in his constituency but everywhere. They were sentiments which were echoed everywhere in the Committee and might have been echoed by the then Government at any time during the past 13 years. They failed to do so, but, although I remind the hon. Gentleman of that, there is no reason why he should not prod the present Government into doing something. We shall listen to him with great interest, especially on this subject. I hope that he will return to it.
I have been interested in the condemnation by some hon. Members opposite of the Chancellor's taxation proposals. Their speeches have singularly lacked any alternative. The alternative to increasing taxation is to reduce consumption or reduce expenditure, and I challenge right hon. and hon. Gentlemen opposite to say precisely what expenditure they would reduce if they would not increase taxation. I recollect that the contribution of the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) was to increase unemployment to 700,000. I agree that that is a contribution to reducing expenditure, but if hon. Members opposite want to try that sort of solution again, they ought to have the courage to say so, rather than simply criticise what the Government are doing to provide a balanced economy.
From hon. Members opposite we hear the cry that the Government have increased taxation. We are now suffering the sins of commission because of the sins of omission by the previous Government over the past two years, when they knew that the condition was building up and yet completely failed to deal with it. They had no intention of dealing with it until after the election. Conditions got worse and worse until we had a deficit bigger than any we have previously known. That is the situation which the present Government now have to put right.

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When hon. Members opposite talk about what they did to reduce taxation, we can all recollect their techniques when they were in power. They increased taxation between elections and reduced for the purposes of elections. They have done that consistently for the time that I have been in the House, and I have heard Budget statements for 20 years. The present Opposition have never had much alternative to taxation when it came to trying to balance the economy.
This afternoon we heard about the emigration of the young scientists. One would suppose that coincident with a Labour Government there has been an emigration of young scientists, but there do not appear to be any figures to show that emigration under the Labour Government has been any greater than under Tory Governments. The bone of contention between us was that we said that it was Tory policies which led to emigration—the failure to provide opportunities, and so on—much more than is the case under this Government, so that this charge falls rather flat.
Mr. R. Gresham Cooke: The hon. Gentleman should have read the newspapers this morning when he would have seen that the queues outside Australia House for emigration were longer than they have ever been.
Mr. Pargiter: I think that it will be found that the total numbers will be no greater than on previous occasions. I commend to the hon. Gentleman the final figures of emigration compared with those for when his party was in power.
The challenge we make is to ask hon. Members opposite what they would do if there were not an alteration of taxation. What would they do without as an alternative to what the Government propose? Yesterday, in his condemnation of the Chancellor's proposals for alteration of the tax system for company profits, we heard the right hon. Member for Bexley (Mr. Heath) say that in view of the tax proposals boards of directors would be more concerned with looking at their capital structure than with improving the efficiency of their organisations.
That was one of the most damaging comments which I have ever heard from the Tory Front Bench. It is an incen-
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tive to boards of directors not to bother about the efficiency of their organisations, but to take a careful look at their capital structure to see how they can legally avoid paying tax. That was the implied suggestion. It is regularly implied and there is nothing new about it. It is virtually what the right hon. Gentleman said.
Mr. William Clark: I am sure that the hon. Gentleman means to be fair to my right hon. Friend the Member for Bexley (Mr. Heath), who said that, in view of penal taxation, more and more professional man hours would go into trying to find loopholes through penal taxation. It had nothing to do with the lack of efficiency in industry.
Mr. Pargiter: The right hon. Gentleman said that they would be doing this rather than attending to the efficiency of their industries. He used those words and the hon. Member can read them. If half the brains and intelligence employed in the City and elsewhere in looking for loopholes in the taxation system were applied to securing a more efficient economy, we would be in a far better position.
This is beyond question. We saw in the Press yesterday that somebody had thought up the ingenious loophole that he would be willing to fly foreign visitors here so that he could sit in on company lunches. This is the type of mind which goes into the question of how to avoid tax rather than honourably meeting it.
It is suggested that tax is such that it tends to increase costs. I have been in industry for a long time and know that it is inevitable that from time to time costs increase. The first thing which the sort of organisation with which I have been connected considers is whether there are ways and means of absorbing increased costs. The challenge of increased taxation, or any other form of increased cost, when methods are improving every day, is to see how we can overcome increased costs rather than say that prices should go up.
We have been living beyond our means, and we must get within our means. This must essentially be a challenge to industry which I am satisfied, in spite of the prognostications of right hon. and hon. Members opposite, is, in the main, willing

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to try to meet it, and it will get what assistance is possible from the Government to meet it.
Those are my general observations. There is one specific matter which the Chancellor of the Exchequer mentioned in his Budget to which I want to refer, and that is the Public Works Loan Board and its operations. I welcome very much my right hon. Friend's decision to increase from 20 to 30 per cent. the borrowings which local authorities can make from the Board. This is not because the interest rates are all that much lower. They are a little lower, because it is an easier way of borrowing money than waiting for the market or going to the market.
There are many problems facing local authorities in borrowing money. They go back, in the initial instance, to the period when the Conservative Party was in office and the decision of right hon. and hon. Members opposite to drive local authorities into the open market. They prevented local authorities from having the benefit of the facilities of the Board by saying that it was their job to go into the ordinary money market and that it was not the Government's job to provide money for local authorities for their social services. It was a deliberate act on their part, because it was far more profitable to the City that local authorities should go for their money to the City than to the Board and have the advantage of the credit and facilities of Government borrowing.
Local authorities could not all get into the market at the same time because of difficulties about which everyone Knows—the necessity to queue to get into the market and the shortage from time to time of mortgage money, and so on. Local authorities were, therefore, unable to get money, and were driven into the short-term money market in order to finance their ordinary day-to-day operations. That situation continued up to the present time. Now, many local authorities, because of their inability to get into the money market and because they cannot get enough money from the Public Works Loan Board, are paying very nearly 10 per cent. for day-to-day money.
This is an extraordinary and alarming figure. This is the figure which local
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authorities are having to pay for the purpose of running their social services. This is not unconnected with the rise in rates. It is certainly time that the Government did something about this, so that local authorities were relieved from the need of going into the money market and borrowing short money at this rate. What incentive is there for anyone with money to invest to put it into long-term investment if he can get nearly 10 per cent. on day-to-day money? It is much more profitable for people to invest it long at 6 or 7 per cent., or even more. With the best will in the world, local authorities are unable, because of the need to queue up before issuing stock, and so on, to get into the market for anything like the amount of money required.
The Chancellor of the Exchequer has decided to increase the availability of the Public Works Loan Board to the extent of 50 per cent. of the requirements of local authorities in certain areas with the intimation that, at some time, this will be available to the whole country. I ask my right hon. Friend to consider the desirability of making this available to the whole country immediately, because there is a very urgent need to deal with the question of short-term money and to get local authorities out of the hands of the short-term market. It will always be convenient to go to the short-term market for certain money, but if the figure reaches unhealthy proportions it is not good for the taxpayer or the ratepayer. It is certainly not good for the ratepayer.
I recognise that my right hon. Friend is making a start in this respect, but it is by no means enough. There is a need to do more. Equally, there is a need for it not to stop at 50 per cent. But if the necessity for local authorities to borrow short-term money continues, I would ask whether they might be given the advantage of short-term borrowing through the Government or Government agencies—perhaps through the Public Works Loan Board—rather than be at the mercy of the money market. That is, perhaps, the main burden of my argument.
I congratulate my right hon. Friend the Chancellor of the Exchequer on his Budget speech. As I have said, I have

723
sat through many Budgets during the 20 years that I have been here. Whether one liked the Budget or not, it was one of the most lucid that I have heard during the whole of my time here. I hope that the measures which my right hon. Friend has proposed will be carried through and that they meet with the success that they deserve. I hope that we shall hear less of the carping criticism of the taxation proposals concerning companies and that we shall in future be able to enjoy some degree of confidence.
I should like to say something about gilt-edged. I should have thought that people who bought gilt-edged as an investment with the idea of holding them to maturity, and who are content with a relatively modest return on their money, with possibly a 2 per cent. capital appreciation—it is seldom very much more at the time of maturity—might be treated differently from those who gamble in gilt-edged. There are many institutions which buy and hold gilt-edged, and I hope that the Chancellor of the Exchequer will consider this matter again with a view to seeing whether he can give them some encouragement, not to gamble in, but to hold, gilt-edged, because this must make for greater stability of the nation's money which is constantly being turned over at the behest of the City.
I am grateful for the opportunity to congratulate the hon. Member for Leyton on his maiden speech, and I thank the Committee for listening to my remarks. I hope that the Chancellor of the Exchequer will consider the two points which I have put to him.
5.58 p.m.
Mr. J. Bruce-Gardyne: I should like, first, to join the hon. Member for Southall (Mr. Pargiter) in offering congratulations to my hon. Friend the Member for Leyton (Mr. Buxton) on his maiden speech. I am afraid that my congratulations, as a very new Member myself, are somewhat devalued. I can only tell him that what I lack in connoisseurship of maiden speeches I make up for with a very clear remembrance of my ordeal when I made my maiden speech. I am sure that we are all glad to have my hon. Friend here and that everybody on this side hopes that we shall hear from him many times
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again for many, many years in the future.
I should perhaps say that I have very few connections with Leyton. The nearest that I can think of is that I spent two or three years in Bulgaria, which, also, has a very high age group in its population. It is said there that the reason for their longevity is that they subsist on yoghourt and garlic. I do not know whether this is true also of Leyton.
I do not intend to follow the hon. Member for Southall, in his discussion of the problems facing local authorities in raising their finances, except in one point to which I shall come later. We all realise that the Chancellor has been trying to solve a delicate equation in this year's Budget. He had, on the one hand, to avoid exasperating those who had bailed him out overseas. On the other hand, he had to avoid provoking the wrath of his right hon. Friend the First Secretary, or upsetting the mission on which his right hon. Friend has embarked—the formulation of an incomes policy, about which we have heard so much from the right hon. Gentleman both today and yesterday. Finally, the Chancellor had to serve up the package in a form which was sufficiently palatable to his hon. Friends below the Gangway, who, we all know, have had a good deal of unpalatable stuff to take from their right hon. Friends in recent months.
It was the first part of the equation—the effort to re-establish the Government's credit abroad—that really mattered. The rest—Corporation Tax, Capital Gains Tax, the abolition of business entertaining and of initial allowances for business cars —were so many burnt offerings on the altar of the First Secretary's illusions. These burnt offerings have many undesirable features, some of which have been pointed out by my right hon. and hon. Friends and to one of which I should like to return in due course. But the most undesirable feature is that those burnt offerings are quite simply irrelevant where, indeed, they do not positively cut across the task of producing a more efficient and competitive economy. Hon. Members opposite call these measures—the Corporation Tax and the Capital Gains Tax—social justice. Some of our international creditors have rather cruder language for them. They call them

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manifestations of the "English sickness", of which the most obvious symptom is an inability to recognise the disease from which one is suffering.
The Chancellor has also decided to restrict home demand by about £165 million worth of new taxation. I do not dispute that the Government were bound to take this amount of money out of the economy, given the situation in which they found themselves. They should, perhaps, have gone further. The hon. Member for Colne Valley (Mr. Duffy) yesterday accused my right hon. Friend the Member for Flint, West (Mr. Birch) of stressing irrelevancies when he called for the reimposition of National Health Service prescription charges. Of course, chat is not the sort of matter that makes he difference between solvency and insolvency for the country, but the removal of the charges is precisely the sort of method which strikes our creditors and those who helped right hon. Members opposite in November as being totally irrelevant to the solution of the problems facing the country and a sign, indeed, of our unwillingness to get down to facing those problems. The Chancellor would have done well to heed the advice of the Governor of the Bank of England and to make a more serious attempt to cut back the growth of Government expenditure.
Hon. Members opposite, however, have continued to reiterate that this is not a situation of their creation. We have heard a great deal about this during the debate and I do not want to retread a lot of well-trodden ground. I feel, however, that we still have not had the right explanation of what happened last autumn. I am inclined to agree that the Chancellor of the Exchequer did not create this situation and that he inherited it. He inherited it, of course, from his right hon. Friend the First Secretary, who charged in from the very moment of the election with his well-known exuberance and determination to devise an incomes policy which was to be the solution of all our difficulties.
To obtain the signature of the Trades Union Congress to the First Secretary's Statement of Intent, all sorts of good things had to be promised. Those good things were bound to be inflationary. Therefore, to safeguard the balance of payments against the threat that this
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inflation would create, the First Secretary had to persuade his colleagues to rush the imposition of the surcharge. To the astonishment of right hon. Members opposite, our friends overseas reacted violently to this flagrant breach of our international obligations.
To pacify our friends overseas, the President of the Board of Trade had to be rushed off to Geneva to assure them that the £ was on the verge of collapse and that that was the only method of saving it. The extraordinary thing—extraordinary only to the right hon. Gentleman—was that he was believed. Indeed, the very crisis that the First Secretary was complaining about as being upon us was produced.
However, the First Secretary, nothing deterred, ploughed on. The hapless Chancellor was required to give advance warning of the Corporation Tax and the Capital Gains Tax in precisely the form which was calculated to create the maximum possible loss of confidence in sterling at home and abroad. And so the central bankers had to come to our rescue. We are now paying the price of the First Secretary's folly. This price has got to be paid. In this instance at least, hon. Members opposite can legitimately claim that they now have no choice but to break their election promises.
The Chancellor has told us—the First Secretary repeated it yesterday and the President of the Board of Trade has referred to this—that right hon. and hon. Members opposite regard the Budget as an instrument of national and regional planning. I should like to say a brief word about this subject of regional planning. I suggest that in this Budget we have seen hardly a glimmer of a sign of the Budget being used as an instrument of regional planning. There is, it is true, a small gesture towards local authorities by giving them increased access to the Public Works Loan Board.
This is welcome so far as it goes, but it is by no means clear what the scope of this modest concession will be. It remains to be seen whether it will be confined to development districts or whether, as I hope, it will be extended to the whole of Scotland, for example. I very much hope that right hon. Members opposite will not take the advice of their hon.

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Friend the Member for Southall and extend this concession to all local authorities, because in that event it would cease to be in any sense an instrument of regional planning.
We badly need assistance of that sort in Scotland where, as the President of the Board of Trade this afternoon reminded us, the level of unemployment is still 3·3 per cent. or rather higher than the rate which was regarded as necessitating an urgent injection of fresh demand when it applied to the country as a whole two years ago. Of course, the right hon. Gentleman pointed out this afternoon that there has been a marked and continuing decline in unemployment in Scotland and I am glad to see this. He seemed to take credit for it but it all follows of course from the policies that were so effectively introduced and carried through by my right hon. Friends when this party was in power. We should remember this. It was a remarkable achievement to absorb a loss of 70,000 jobs in the Scottish economy in three major traditional industries and, indeed, to absorb additional employment on top of that. These are merely the foundations on which the present Government are carrying on.
Far from doing anything to stimulate expansion in Scotland, however, the Chancellor has continued to impose and even to extend a series of measures which bear particularly hardly on enterprises operating in areas which are at some distance from their markets, like those of Scotland. We continue to suffer from the 7 per cent. Bank Rate and from the increase of 6d. in the duty on petrol. Now, on top of that, we have the doubling of the cost of commercial vehicle licences. That, again, is a particularly harsh blow to firms and businesses in Scotland.
There is one aspect of this increase in the vehicle licence fee which interests me. The right hon. Gentleman decided to take £48 million in the form of new taxation on motor vehicles of all sorts, but the bulk of that new taxation went on commercial vehicles, thereby increasing firms' costs, particularly the costs of firms operating at some distance from their markets, and putting firms in Scotland at a particular competitive dis-
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advantage compared with firms near their markets.
The right hon. Gentleman preferred to put the bulk of the increase in taxation on commercial vehicles, for the simple reason, I suggest, that the drivers of commercial vehicles are not likely to be influenced in their voting habits by the degree of tax which their vehicles have to pay. The right hon. Gentleman hesitated to put a big increase of taxation on motor cars, for the simple reason that the owners of cars have a substantial voting voice.
During the debate hon. Gentlemen opposite have invited us to suggest the changes of taxation that we would introduce. I should like to see the Chancellor switch the emphasis in this taxation from commercial vehicles to private motor cars. That would be fair to the country as a whole, and would not impose further burdens on industry in Scotland.
Mr. Peter Shore: I take the point made by the hon. Gentleman, but we have not yet had any information as to the extent to which this relatively small increase in the licence fee on commercial vehicles will raise the costs of firms, let alone the cost of living. Unless the hon. Gentleman can give us a little information about that, he is labouring the point much too long.
Mr. Bruce-Gardyne: There is no question of a guess. Road haulage firms have been advised to put up their rates by 5 per cent. as a result of this taxation.
Mr. Shore: Is the hon. Gentleman really suggesting that the proposed 5 per cent. increase is due to this small increase in the licence fee? Is it not rather due to the general accumulation of costs over the last year since the last increase?
Mr. Bruce-Gardyne: I suggest that the hon. Gentleman read the announcement to which I have referred. It was stated quite clearly that the increase was due to an increase in labour costs, but, above all, to the increase in taxation imposed by the right hon. Gentleman.
The Financial Secretary to the Treasury (Mr. Niall MacDermot): I am sure that the hon. Member does not want to mislead the Committee. In announcing the increase in the licence fee of commercial vehicles the Chancellor said that

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it would result in an increase of between 2 per cent. and 4 per cent. per capacity ton mile. I do not think that that figure was challenged by the trade associations.
Mr. Bruce-Gardyne: I do not think it was, but even that range of 2 per cent. to 4 per cent. is a pretty substantial slice of the 5 per cent. increase which the Road Haulage Association is suggesting to its members.
The Chancellor has the effrontery to say that the Minister of Labour's Bill for providing redundancy payments is the key element in his regional policy, that it is designed to encourage mobility and to discourage the hoarding of labour. Can hypocrisy go further? How will the Bill operate? It will apparently impose on employers an obligation to pay up to £600 per employee whom they declare redundant. Many of us feel that £600 would be a cheap price to pay to be rid of the right hon. Gentleman the Chancellor of the Exchequer, and the First Secretary of State, but how can they seriously imagine that the Bill will have any effect other than to encourage the hoarding of surplus labour?
I have already heard of one firm with a hopelessly uneconomic factory unit which it was intending to close down, but the directors reckon that if and when the Bill becomes law they will be saddled with this uneconomic factory forever, because it will not be worth while making the redundancy payments.
If we want to discourage the hoarding of labour, encourage the mobility of labour, and, at the same time, right the imbalance of our economy we should, I suggest, have a thoroughgoing differential payroll tax with rates perhaps ten times as high in the South-East and the Midlands as in Scotland, the North-East and perhaps Northern Ireland. That would discourage the appalling waste of resources which goes on in areas of over-employment. It would encourage the introduction of labour-saving machinery, and would encourage firms to move lock, stack arid barrel to areas where there was freedom to expand, but not necessarily labour available locally for them to take on. That would deal not merely with areas of high unemployment, which ate already dealt with by the operations of B.O.T.A.C., but still more with areas
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of depopulation such as we find in many parts of Scotland.
I am not surprised that the Chancellor has not seen fit to include truly constructive ideas of that sort in his Budget, because it is painfully clear that the Government have utterly misunderstood the basic defects in the economic structure of this country. The First Secretary waxed very emotional yesterday, the day before, and again today, as is his wont, about his incomes policy and the Prices and Incomes Board. We have heard a great deal from the right hon. Gentleman and from many of his hon. Friends about "little Neddies" and the wondrous panoply of panels on the construction of which he has spent so much energy. The philosophy behind all this seems to be that if only we can get both sides of industry round an infinite multitude of tables, and get them to waste time compiling abstract formulae for the expansion of exports, all our troubles will be miraculously solved.
The First Secretary said:
"The challenge … to effect the necessary change in the structure of our economic society … can be met. Provided only that both sides of industry co-operate (a) with each other, and (b) with the Government, and at national, regional and shop-floor levels."—[OFFICIAL REPORT, 7th April, 1965; Vol. 710, c. 531.]
I think that there is already far too much common ground between both sides of industry, far too much community of purpose in pursuit of the easy way out for management and labour alike, far too much agreement on the easy way out involving restrictive practices and the avoidance of genuine competition at all costs.
Now we are to have an incomes policy, the purpose of which is to discourage both sides of industry from taking out of the market what the market can offer to them, the assumption being that if we restrain earnings and incomes, eventually we shall make ourselves more competitive internationally. What are the facts? Between 1959 and 1964 hourly earnings in manufacturing industry in this country went up by 35 per cent. In France, they went up by 50 per cent. in Germany by 54 per cent., and in Italy by 74 per cent. Does that really suggest that we have been suffering from wage inflation over the last five years? There is one country which has had a lower

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rate of wage inflation than this country, and that is the United States, but she has also a very much higher level of unemployment than most people in this country would regard as tolerable.
Mr. Ted Fletcher: The hon. Gentleman referred to an increase of 50 per cent. in wage rates. Would he agree that over the same period dividends increased by 70 per cent.?
Mr. Bruce-Gardyne: The figure that I quoted for wage increases was not 50 per cent., but 35 per cent. My point was that it was lower than in competing countries. I mention this because we cannot possibly explain our inability to compete internationally by reference to wage costs inflation.
The hon. Member for Colne Valley last night produced some interesting theories, with many of which I agree, about the reasons for our failure to compete in export markets. But he was dealing with the symptoms and not looking at the cause. The cause is not far to seek. It is quite simple. It is the lesson of productivity. Between 1959 and 1964, productivity in manufacturing industries rose by 26 per cent. in France, 30 per cent. in Western Germany, and 41 per cent. in Italy. In Britain, it rose by 20 per cent. No wonder we cannot compete. Yet we blithely ignore the evidence in front of our eyes.
It is two years since the Shawcross Committee reported—two years since its evidence was published and the chairman of one of the leading companies in this country was quoted in public as saying that he was employing up to 40 per cent. more labour than he required—and this in one of the areas of highest over-employment in this country.
Mr. Dan Jones: We have been saying that for years.
The Temporary Chairman (Mr. J. C. Jennings): Order. If hon. Members wish to interrupt they must do so in the orthodox way.
Mr. Bruce-Gardyne: Nothing in the Budget is in any way designed to deal with the problems of inadequate productivity and wastage of labour. The right hon. Gentleman's famous Statement of Intent made a passing bow in the
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direction of the need for increased productivity. My case is that his whole network of planners and his incomes policy will not make it easier to solve the problem; it will make it all the more difficult. If his incomes policy succeeds—about which I am extremely doubtful—it will make it less uneconomic and more tolerable for firms to continue to employ surplus labour that they do not need, and the underlying problems facing our economy will be blurred over by what is to my mind an irrelevancy.
What we have in this country is a combination of high tariffs—which the right hon. Gentleman has made far higher—a taxation system which virtually excludes any contribution based on pay rolls and the number of people employed by various firms, and wholly inadequate legislation against restrictive practices on the part of both sides of industry. This combination of factors has produced a situation in which a half-day's work for a full day's pay is almost the norm. Many hon. Members on both sides of the Committee, if they were honest, would be prepared to admit this.
Mr. Dan Jones: No—indeed not.
Mr. Bruce-Gardyne: I suggest that many would.
Mr. Dan Jones: The hon. Member must not commit us.
The Temporary Chairman: Order. I did ask the hon. Member to intervene in the orthodox way. Will he please observe my Ruling?
Mr. Dan Jones: On a point of order. Is it fair that the hon. Member should be able to commit us without our having an opportunity to reply?
The Temporary Chairman: Hon. Members will have the opportunity to do that if they catch the eye of the Chair. It is quite in order for the hon. Member to make his speech as he is doing.
Mr. Bruce-Gardyne: I am grateful to you, Mr. Jennings. I was not committing the hon. Member to anything. I said that many hon. Members on both sides —not all, but many—would be prepared to admit that there is a good deal of truth in the strictures published in the famous article by Mr. Allen in the Sunday Times a year ago.

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I suggest that the proposed Corporation Tax fits into the general pattern. Yesterday, the Chancellor told us that by discriminating against the distribution of dividends and in favour of retention he would encourage productivity and the growth industries. I suggest, as my right hon. Friend the Member for Bexley (Mr. Heath) pointed out, that it is far more likely that the corporation tax will have precisely the opposite effect. I want to quote a few sentences from the Report of the Royal Commission on the Taxation of Profits and Income which have not yet been drawn to the attention of the Committee. The Report says:
"Nor is it advantageous for the economy that the level of dividends should be kept down …The market value of shares in industrial and commercial enterprises is artificially depressed and an obstacle placed in the way of raising new capital."
It may be too much to expect the Chancellor to take note of that Report, but perhaps he will look more carefully at what some of our competitor nations are doing. West Germany, which has discriminatory taxation against undistributed profits, has achieved a rate of growth, a stability in prices, and an improvement in balance of payment figures, which have been the envy of virtually every other country. I suggest that this is not altogether surprising. There may be a very close correlation between these facts. But the Chancellor proceeds in precisely the opposite direction.
The remarkable thing is that what he is doing—and it is a curious thing for a Sacialist Chancellor of the Exchequer to be doing—is to leave it to the board rooms, good, bad, or indifferent, to decide exactly what to do with their profits, instead of encouraging firms to look to the market for their capital requirements, so that they can be judged on their financial record of productivity and growth.
We have heard much about the need to encourage efficiency and competition in the economy. I suggest that nothing in the Budget makes any contribution to the achievement of these aims. I notice that the Liberal Party with its usual perspicacity, described this as a "wind of change" Budget. I am sorry that the Liberal Party is not here this evening. I suggest that in truth the Budget is a mixture of hot air and old-fashioned pre-
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judices, wrapped up in a cocoon of hackneyed and largely irrelevant measures.
6.28 p.m.
Mr. Joel Barnett: The hon. Member for South Angus (Mr. Bruce-Gardyne) was at least honest enough to say that he agreed that taxation should be levied. Indeed, he thought that more should be levied, and he gave us the only two suggestions that we have had from hon. Members opposite. First, he suggested that the increase in the taxation of vehicles should be transferred from commercial vehicles to private vehicles—
Mr. Bruce-Gardyne: I am sorry, but I did not suggest that the tax should be taken off commercial vehicles and put on paraffin; I suggested it should be put on private motor cars.
Mr. Barnett: That is what I said. His other suggestion was for a pay roll tax. Conservative Chancellors have had it in their power to impose such a tax, but they have not sought to do so. To that extent the hon. Member is not in agreement with his right hon. Friends, although he is in agreement with other of his hon. Friends, especially the hon. Member for Worcester (Mr. Peter Walker) who made some very sneering references to the efforts of my right hon. Friend the First Secretary of State. Some right hon. Gentlemen opposite would not have said the things that have been said here this afternoon about the chance, difficult as it is, to achieve an incomes policy. I am sorry that this sort of sneering manner has been adopted by some hon. Members opposite.
We have had some very interesting contributions from the benches opposite. Yesterday we had a speech from the right hon. Member for Bexley (Mr. Heath). A more irresponsible speech from a supposed statesman and potential leader of a party I have never heard. I believe that speech did a disservice to the House of Commons and to the nation and ultimately it will prove a disservice to the right hon. Gentleman and his political chances. That type of speech is not necessary from a man who is the shadow Chancellor. The right hon. Member for Bexley showed himself ignorant of the basic laws of the Inland Revenue,

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when he referred to entertainment expenses. I will come to that later.
Yesterday we had a witty and urbane speech from the right hon. Member for Flint, West (Mr. Birch) but, in common with a number of hon. Members opposite, the only constructive suggestion the right hon. Gentleman made was that perhaps we should go back to the ideas perpetrated by Chancellors in the Budgets of 1957 and 1961. I am sure that even he would concede that over the past 13 years successive Chancellors have not succeeded in getting us out of the difficulties we are in. We heard an interesting speech from the hon. Member for Louth (Sir C. Osborne). He said that the choice was between unemployment and inflation and he did not want inflation. I suggest that neither alternative is before us. The hon. Gentleman went on to say that he would like the 7 per cent. Bank Rate reduced immediately to 4 per cent. He said he did not believe that the 7 per cent. Bank Rate was bringing in the funds which it was intended to attract. This may be true, and I should be interested to know whether there has been any research into that aspect of the matter.
There have been some pretty merciless criticisms of the Budget in this Committee and no doubt we shall hear them in the country. The criticisms have been varied. Hon. and right hon. Members and people outside have been critical, but none has come up with a simple answer to the problems which face us. No doubt my right hon. Friend the Chancellor would agree that it is easier to criticise than to frame a Budget designed to deal with those problems. Criticisms from budding Chancellors all over the country and from each side of the Committee, and criticisms from illustrious editors and economists should be tempered with the realisation that none of us has all the answers. If we had, we should have been in duty bound to give them to the previous Government.
I want to come to some of my own criticisms which are tempered in the way to which I have referred. We are entitled to ask what the Budget has done to deal with the problems regarding sterling and the balance of payments, exports, growth and investment, and whether the
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tax proposals are reasonably fair. In broad terms, I believe that the Chancellor was right to take the steps he did in the circumstances in respect of sterling. He had little alternative. If he had to take the action he did—although I would not have extracted so much because by nature I am an incurable optimist and favour a sustained rate of growth—I believe that my right hon. Friend took it in as fair a way as possible.
I am concerned about his actions on Government expenditure. I wish to refer particularly to Government expenditure on defence. I believe that the burden of defence expenditure is beyond our capacity to sustain. We have heard from hon. Members on both sides of the Committee that we should cut Government expenditure, but rarely have we heard details about where it should be cut. Indeed, some of the people who say that we should cut Government expenditure are those who ask for better roads, better schools, better houses and better pensions, etc., without suggesting where the money should come from. I believe that too many people have delusions of grandeur about our military rôle abroad. They want to have their cake and eat it. In particular, I refer to our military rôle east of Suez and the expenditure relating to that.
I am no military expert—indeed I do not know who is—but I can see that it is not easy to cut our commitments in Europe, for example. I think that our financial commitments in respect of our forces east of Suez are such as to put the Chancellor in a position where he has had to frame his Budget, as it were, with one arm tied behind his back. According to a Written Answer to a Question which appeared on the Order Paper yesterday, our expenditure on our rôle east of Suez—the direct cost—is about £320 million. This excludes any overhead element, which would seem to indicate that the approximate total cost must be about £400 million to £500 million. Even with this amount of expenditure we do not know whether it has been decided that the force we have east of Suez is at its present size for economic or for military reasons.
I do not suggest that we should cut the forces east of Suez by 1,000 or by

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10,000. If I did I should, rightly, be accused of jeopardising the lives of our Service men, but do we know whether the force of 50,000 in the Malaysian area is that size for economic reasons, because that is all we can manage, or for military reasons, because it is the right size? Have we discussed this with our Commonwealth friends in the area and told them clearly that, much as we sympathise with their predicament, we are not in a position to do more, and it would not help them or us if we bankrupted ourselves by having a force in the area of a size which we could not afford? We should suggest to our friends that while we cannot, and would not, wish to pull out of our commitments overnight, we cannot continue to sustain a rôle which we can no longer afford. We should suggest to them that they start looking to the United Nations and to other friends in the area, because it is not within our capacity to sustain that sort of defence rôle.
Cutting this type of Government expenditure is, I believe, one way in which we can help to strengthen sterling and, indeed, the whole economy. Economists have suggested that in this Budget the Chancellor should have taken a certain amount. Various figures have been given. Some said he should have taken nothing and some have said that the figure should have been anything from £100 million to £400 million. In the event, the Chancellor has taken £250 million, or about £160 million or £170 million and cut certain items of Government expenditure to make a total of about £250 million. In common, I trust, with all hon. Members, I hope that this action, together with what was said by the Prime Minister in Paris, will make clear to the world once and for all that we have no intention whatsoever of devaluing sterling. Some of the speeches made by hon. and right hon. Members opposite have not helped in that respect.
I know from experience that there are professional men, brokers, bankers and other financial advisers who in recent months—no doubt with the feeling that it was in the best interests of their clients—have been telling their clients, "There is a distinct possibility of devaluation and therefore I recommend that you do such-and-such a thing with your sterling. "This is what they have been saying.
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Some have even gone so far as to say that there is not a possibility but a certainty, in other words using the word "when" rather than "if". I suggest that those people should now take the opportunity to tell their clients that what is good for the nation is also good for their clients. We in this Committee should tell them categorically that it would not help the country if we were to devalue and that we have no intention of so doing.
I should like the Minister to clear up a small point which I noticed on the question of savings. It is a small point but an important one on the increased interest of 5 per cent. which is to be allowed at Post Office Savings Banks. The position in Trustee Savings Banks is that the first £15 of interest in ordinary accounts is not taxable, whereas the first £15 of any other interest, indeed, all the interest, in the special investment department of a Trustee Savings Bank has to be charged the full amount of tax. What is to apply in the case of the special Post Office savings account?
On the question of growth, the Chancellor said yesterday, and has said on many other occasions, that what he wants to see is that those who earn are given some incentives. I do not believe that there is any real incentive in the Budget for those who earn their living. What we need as a nation is that the people who earn their living should work even harder. Those of us on both sides of the Committee who have some experience of workers in industry have seen that in many ways they have a greater knowledge of our tax system than have many hon. Members. For example, women workers understand that when it comes to a Wednesday or Thursday night and they have earned a certain amount, the tax will be so much that they do not bother to work on the Thursday or Friday, or they come in at 10 o'clock and leave at 4 o'clock. A man might say, "Never on Saturday, because the tax is too high." We can say to them, of course, "If you earn another £3 and are paying tax at 6s. in the £, you will have earned income allowance, and will have a fair amount left."
It is no good arguing the niceties of the situation. Workers are not doing the extra work we need precisely because of this aspect of our tax system. I would

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not want to increase the disincentive, by increasing direct taxation. I am sorry that the Chancellor did not take a little more by way of indirect taxation and give some relief in direct taxation. I think that it is not impossible to devise some form of relief. I think that it would be a more pleasant pastime for Dr. Kaldor than devising ways of further extraction. We should consider discriminatory personal allowances, earned income and reduced rate reliefs—something which people in the lower bracket could appreciate and understand. In the lower bracket, I include young executives earning £1,500 to £3,000 a year. We need to give them some tangible reward for increased effort. There is nothing in the Budget for them.
We must ask, what has the Budget done to provide incentives for exports? Indirectly, the abolition of entertainment expenses except for overseas buyers will be an incentive for directors if they want to continue having their entertainment and eating it, either to go abroad or to bring overseas buyers here. But this is a very indirect and incidental matter. I accept the difficulties in the field of exports. The President of the Board of Trade outlined some of the things which he has done. I am not satisfied that enough is being done. I know that it is not easy; one has only to look at the many reports of the high-powered conference organised by the Financial Times recently.
Sir William McFadzean said:
"Nothing can ever alter the fact that trade is a private matter for the man who is bearing the risks."
Mr. M. I. Prichard, managing director of F. Perkins, said that the failure to export was primarily a failure of marketing. Mr. Stokes of Leylands said:
"Strengthening your efforts in the market you are attacking. Go into his home market and give him hell."
There was also the comment of Sir Thomas Bland
"Given the will to export …"
and others. All these comments are true, but again, they suggest nothing tangible. And it is not easy to find anything tangible
I am not very happy about the £75 million to £80 million which we are
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spending now on the export rebate scheme. The rebate is very often taken, in the case of the large exporters, by the importer abroad, as exporters in this country will know only too well. On the other hand, the small exporter often finds this a very little incentive. It is the small and medium-sized exporters whom we need to help. For them, the export rebate is of so small a proportion that they cannot appreciate its value.
We all accept, I am sure, that the problem of exports is one which is a vital matter for the country. The export battle is now our greatest battle and we must begin to treat it as such. If we can get economists and industrialists into the upper echelons, why cannot we take successful businessmen, on a temporary basis, into embassies and regions of the Board of Trade? Give them an incentive. Let them take their wives and children with them if they go abroad. After all, we send Army officers to far-flung corners of the world and allow them to take their wives and children with them. Why not do the same thing in this field? We must recognise that this is an important and vital battle, which we must win. With the best will in the world, sending brilliant civil servants and economists is not the answer. It would not be a bad idea to send them on a lease-lend basis to industry for some practical experience.
The Budget has not done anything for investment in industry except, as the Opposition complained, there is in real terms a reduction in the investment allowance. They are quite right. But if we reduced the tax to 20 per cent., it would reduce the value of the investment allowance even further. What we should be asking ourselves is, are the investment allowances a real incentive? I have felt from my own experience for a long time that they are not really an incentive at all, judging by the way clients discuss this matter with me.
I was glad to have my views confirmed most emphatically by the Report of the National Economic Development Council on investment in machine tools. This is an astonishing and explosive document when one sees how many small and large firms decide their investment policy. About 95 per cent. do not take any notice of the investment allowance. It is no use our saying that what we have to do

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is give bigger investment allowances. What we have to do is to find an alternative. I believe that the alternative can in the end only be straight cash subsidies.
I would make it very much a discriminatory subsidy. I am surprised that businessmen, the N.E.D.C. and the people who drafted this document were so naïve as not to understand why this has arisen. What they do not seem to understand is that when businessmen are looking at their accounts they are looking at the net profits, before tax. Because they get tax allowances by way of investment allowances, and so on, does not enter their minds at that point. They are, as I say, concerned with net amounts. If, for example, a firm buys a machine for £1,000 and decides to write it off over, say, 10 years, the businessman will, at the end of the year, allow a certain amount for depreciation and continue to keep in mind the net profit. The fact that more tax relief will be obtained as a result of having the machine does not come into the calculation.
It must always be remembered, therefore, that the net profit is the important amount. It is a terrible thing that we have really been giving substantial allowances all these years to no avail. For this reason, I feel that we should have discriminatory allowances. It is ridiculous that the same 30 per cent. investment allowance should be given to somebody who is furnishing houses for furnished lettings, or a director who is furnishing his office as for a highly important piece of machinery which we very much need for increasing productivity, I hope, therefore, that the Chancellor will look at this matter urgently with a view to changing the whole system.
Are the tax proposals fair? The Budget is inevitably over-shadowed by the Corporation Tax and Capital Gains Tax. We will have many opportunities late into the night of discussing these matters in detail. In general terms, one must recognise that the Corporation Tax was a necessary reform. Even the right hon. and learned Gentleman the Member for Wirral (Mr. Selwyn Lloyd) is on record as saying that he wanted to see a single company tax.
I was at one time critical of my right hon. Friend taking up so much time this year and so many pages of the Finance Bill on a measure having no immediate
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effect, because it will not have any effect this year. However, it is vital that we have this sort of thing on the Statute Book and get it out of the way so that we can get on with the long-term job.
Businessmen should not allow themselves to be deluded into the belief that this innovation is bad. Indeed, my own association, of which the hon. Member sitting on the Opposition Front Bench, the hon. Member for Nottingham, South (Mr. William Clark) is a member of the council, has for years advocated the adoption in principle of such a system. Of course, there were reservations, but in the main those reservations, when they are examined, were basically concerned with the tax ultimately to be paid and were not against the basic principle of having a single corporation tax. The Capital Gains Tax is, I believe, an act of justice and fairness to other heavily taxed people and, indirectly, this will be felt to be so by those who must earn their living and who are taxed under P.A.Y.E.
I turn to the other measures dealing with evasion and avoidance. The Chancellor could have done much more. He dealt with the abuse of covenants in one sense and this will no longer be allowed as a deduction for Surtax. However, he did not deal with the general question of covenants, trusts, tax loss companies, which are advertised, and I think that most professional people expected that this was going to stop. This was a comparatively simple matter when one considers that one could have said "You can no longer carry it forward", but on the question of tax evasion, and particularly in regard to entertainment expenses, I was appalled at the ignorance of the right hon. Member for Bexley, when he referred to the emotive words of grouse moors, and so on, and said that if there was abuse the Inland Revenue should be told to do something about it.
Under the present system the Inland Revenue cannot do anything about it because under Schedule D as it stands, provided an expense is wholly and exclusively incurred—it does not have to be necessarily incurred, as for P.A.Y.E. —then whether it is a grouse moor or anything else, if a company takes a grouse moor for the purpose of entertaining buyers that is allowable under the present system. It is no use telling an

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inspector of taxes that he must disallow it because, under the present system, he is not entitled to do so.
Mr. Bruce-Gardyne: Is the hon. Gentleman not aware that in the vast majority of cases these grouse moors are owned by companies so that they may be used to entertain foreign customers? Does he really think that the Budget will really deal with that?
Mr. Barnett: If they are entertaining foreign customers then it will be all right under this Budget, so I do not know why the hon. Gentleman is complaining—unless he means that a grouse moor in Scotland which is used to entertain English buyers means that the buyers are, in that case, foreigners.
It has already been said that people will be looking for loopholes. Because the Budget has dealt with one minor aspect it must be agreed that other loopholes are distinctly possible. For example, the Chancellor has said nothing about gifts. I do not want to give anybody ideas—they probably have enough already—but suppose a company decides that rather than entertain a buyer it will give him a voucher to buy himself a meal. Presumably this will be allowable because gifts are still allowable—and some very lavish gifts are given these days.
There are many unscrupulous buyers who frequently hold companies and directors to ransom, directly and indirectly, by suggesting to them the types of gifts they would like. I honestly believe that when company directors have had an opportunity to think about this matter a little more they will come to welcome these changes. I believe that when they realise that they can spend their evenings at home with their wives and children, rather than having to go out with buyers whose company invariably bores them to tears, they will be highly delighted. Many directors have told me that they have been bored by the company of many of the people they must entertain.
I am sure that if directors knew that their competitors were not getting any particular advantage by giving bigger gifts or entertaining at a more lavish level, they could save their money and do what they have for long been telling
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me they want to do, which is to sell on merit. I am sure that when they get round to thinking about this they will see that my right hon. Friend has been very kind to them.
In one respect I urge my right hon. Friend to be careful in dealing with the whole question of the Inland Revenue and tax affairs generally. I recall saying in a speech which I made in the Budget debate last autumn that I would rather have a much wider tax base, but if we are to have our present system we must be very careful to ensure that we do not create a monster—a society which I would not want to see, and I am referring to the position whereby a taxpayer is assumed guilty of evasion and must then disprove the inspector's figures rather than the other way round, as is normal under our law.
The inspectors, who are, as I said in the autumn debate, doing a fine job in the main, rightly and regularly make checks on taxpayers' capital growth. Often there is no simple explanation of that growth and to give the explanation to the inspector frequently necessitates long hours of work and study by accountants. Incidentally, this work is not chargeable for tax purposes by the taxpayers concerned. In these circumstances, the inspectors often demand to see the taxpayer. Often an innocent taxpayer who has not done anybody any harm and who has a simple explanation is called to attend. The mere thought that he has to go to see the inspector worries him terribly, and inspectors of taxation should be aware of these feelings. It can often cause suicidal tendencies in the most innocent of taxpayers. I would ask the Chancellor to be very careful in the framing of legislation. Whilst one wants to see a much fairer tax system, one would not want a system in which citizens lived in a state of perpetual fear of tax inspectors—
Mr. A. E. Cooper: I agree with the hon. Gentleman in all that he has said, and I would say to the right hon. Gentleman the President of the Board of Trade that all that is proposed in this Budget will make liars, cheats and "spivs" of people who are fundamentally honest.
Mr. Barnett: I think that the hon. Gentleman has missed the point, because

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to disallow entertainment expenses makes the task very much simpler. Instead of accountants having constant arguments and negotiations with inspectors of taxes as to whether an entertainment expense is allowable, with the inspector wanting to see the client to find out how he entertained whom, to disallow the item altogether makes life easier for all concerned. But, as I say, I would not want to see ordinary citizens treated as criminals. I do not want a state of affairs in which people live in a perpetual state of fear of having to see an inspector of taxes.
That is a minor criticism of the general content of the Budget. In the main, I think that the tax proposals are reasonably fair, and will be seen to be so. As I think that hon. Members opposite would concede, the Chancellor has had little alternative with regard to the amount that he had to take out of the economy but, while he had no alternative this time I hope that his hands will be untied, at least in regard to defence expenditure, by the time he brings in his next Budget.
7.3 p.m.
Mr. John Biffen: It is a pleasure to follow the hon. Member for Heywood and Royton (Mr. Barnett). Fairly early in the lifetime of this Parliament I saw him in the Members' Dining Room, reading the Financial Times, and today he has referred to himself as an incurable optimist. I can only say that if the Financial Times has been his reading fare during the last few weeks he certainly needs to be an incurable optimist.
I agree with the hon. Member's remarks on the need to make a very careful assessment of our military commitments east of Suez, because I am quite sure that it is only on an assessment of fundamental decisions, such as our rôle in the world, that we can possibly take some of the remedial action that will have to be taken. It is not, however, in that direction that I want to address my argument, but to the more immediate matter of the incomes policy and some of the information given to us earlier today by the First Secretary.
I should say at once that on both sides of the Committee, and certainly on these benches, we fully appreciate that the Chancellor and his colleagues are engaged in the hard, unrelenting task of defending the£. It is fully appreciated that that is
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the discipline they accepted in their very first days of office, and to this end they have been obliged to raise consumer taxation in the Budget.
I agree—as, presumably, hon. Members opposite last year did not—that increases in consumer taxation have a very real relevance to the maintenance of the parity of the £ sterling. I do not cavil at the figure of £160 million, which is the amount by which direct consumer taxation has been increased; to be blunt, if I had any criticism at all it would be that it erred on the low side.
I hope that the hon. Member for Heywood and Royton will allow me to make my remarks without feeling that I am in any sense sneering, because I believe that we should be entitled to make a thoroughly detached and sceptical analysis of the proposals of the First Secretary of State without, as it were, being prejudged as being cavalier, or patronising, or sneering at the very considerable amount of activity that the First Secretary has undoubtedly shown working towards this policy.
I want to establish one reason why that policy deserves very careful scrutiny, and that reason was given by the right hon. Gentleman himself yesterday. He said that the incomes policy was pretty well a cornerstone of the Government's entire economic policy, and I do not think that hon. Members opposite would disagree with me when I say that the fundamental point of their economic policy is the maintenance of the £ sterling. Nor will they disagree with my view that we should examine the right hon. Gentleman's proposals very carefully, and in a spirit of detached but none the less fairly searching criticism.
My first concern arises from a belief that for many years now we have endured and come to expect inflation under Conservative Governments and Labour Governments. I believe that this has an enervating effect on the public and on political discussion, and that there is a predisposition even now—and here I agree with my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) —to look for the soft option if one can find it. I am particularly anxious that the incomes policy is not chosen as a soft option, and as an alternative to really vigorous Government control of

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total spending, which, I believe, will be vitally necessary.
The first point of my scrutiny of the actions of the First Secretary of State concerns measurement and criteria. There has been a great deal of talk that this is a policy related to productivity. Indeed, the argument that has been advanced has been that we must relate a rise in money incomes to the rise in productivity, and that if the rise in money incomes exceeds the rise in productivity it will result in continuing inflation, and a corresponding disadvantage for us in the export markets.
To some extent my interest in this proposition was sharpened by the reaction recently shown when the Dunlop Rubber Company distributed to its workers its own, as it were, small-scale declaration of intent which said:
"… but increases must be earned before they can be paid. In some parts of the Company productivity has lagged behind earnings; this must be corrected."
That remark, doubtless following a Press conference, was picked up by the heavyweight dailies, such as The Times and The Guardian.
It was reckoned in some parts of the company that productivity had increased by only 5 per cent. while earnings had gone up by 6 per cent. But the whole point was not that productivity and earnings should be matched, but that earnings would have to be measurably below productivity to enable that amount of productivity to be transferred to those parts of the community that would never have a chance to justify increased earnings by increased productivity.
The most obvious example of such people is that of the pensioners. It is also true that a large number of people in public service industries would probably be unable to justify a claim for increased wages in terms of rising productivity. Although the example of Dunlop was immediately seized upon by the Press as being a bull point in the incomes policy, to my mind it showed a frightening misunderstanding of one of the points the First Secretary of State is trying to achieve. We must apply the strongest scrutiny to how this policy is being interpreted, because I believe that there is a disposition to choose the soft option.
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I would cast an even more serious scrutiny on the whole question of how productivity is measured. This point was raised by my hon. Friend the Member for Portsmouth, Langstone (Mr. Ian Lloyd) at Question Time today. All that my hon. Friend got from the First Secretary of State in reply to his question was a fraternal "raspberry". My hon. Friend asked the First Secretary of State whether he was aware how extraordinarily difficult it was to measure productivity. The right hon. Gentleman said, in an expansive manner, "Dear boy, God bless you, brother, you have not half an idea of the sort of difficulties there are". This is fair enough on his part, but we are talking about something which is supposed to be at the very heart of the Government's policy to defend sterling.
I want to draw the Committee's attention to some comments by Mr. Paul Chambers, in an address he gave to the Royal Statistical Society on 25th November, 1964. The title of the address was "Statistics and Intellectual Integrity". He said this:
"I have yet to see a productivity index … which is both reliable and useful. … No method of measuring the productivity of I.C.I. as a whole, or of a division, has been devised which is meaningful, of practical use, and reasonably simple to compile."
These are fighting words. I would not presume to have the wisdom or experience either to underline or refute them. I hope that when the points made to the First Secretary of State by my hon. Friend the Member for Langstone are put in a debate on another occasion to the right hon. Gentleman they will not be dismissed in this rather offhand and knockabout fashion. These are issues of such importance that they should be intelligently answered in Parliament.
Another point about the incomes policy which deserves very careful scrutiny is the problem of sanctions. By way of introduction I want to quote from the speech the First Secretary made to the American Chamber of Commerce on 9th December of last year:
"In the end, as is usually the case in Britain, agreement will be reached without any talk of sanctions."
I assure the Committee that this quotation is in context. The right hon.

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Gentleman was not speaking specifically of the incomes policy. He was talking generally of the whole panoply of economic arrangement which he hoped to set in train through his Department to cover regional planning, incomes policy, and the lot.
This is a bit of a triumph of hope over experience. I have not been in the House of Commons very long, but I suspect that an analysis of past Government action over many years would lead one to be very chary about government by exhortation. The idea that in the end it will all be one big happy family rolling along in the same direction on a self-appointed road causes me much scepticism. On this matter, I endorse the remarks made by my hon. Friend the Member for South Angus.
I refer to page 21 of the Economic Report on 1964 containing a table on wage drift. This problem is at the very core of the policy to which the First Secretary of State has set his hand. Clearly, the problem of wage drift, which is the result substantially of negotiations going on at plant level, I suspect, is very formidable. A very good case could be made out for plant-level negotiations. I think that there would be general agreement on both sides of the Committee teat the Fawley agreement, or the Mobil agreement, referred to yesterday by my right hon. Friend the Member for Bexley (Mr. Heath) were the type of decisions one would like to see extended throughout industry.
The table on page 21 of the Economic Report shows that last year the calculation of wage drift was plus 2·4 per cent. This is the drift constituent of an increase in average hourly wage earnings excluding the effect of overtime of 8·1 per cent., so just under one-third was contained in wage drift. Are we to suppose that it will be within the capability or competence of the First Secretary of State and those who advise him on prices and incomes to get down to plant level? There are thousands of locations within the economy at which the decision on pay rates are made. It is not a question of getting national agreement in London. It is fundamentally a question of controlling right through the full workings of the economy.
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This is of particular significance, because the table shows that for the years 1959, 1963 and 1964 the average wage drift was 1¾ per cent. This would make it almost impossible to have a meaningful decision on national wage bargaining because the amount which can be controlled by national negotiation is, on the criteria set out in the White Paper published this afternoon, reduced to not much more than 1 per cent. or 1½ per cent.
The other conclusion I draw from this table is that only in 1958, 1961 and 1962, three years when the economy was responding to the policies of either my right hon. Friend the Member for Monmouth (Mr. Thorneycroft) or my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), was the wage drift reduced to totally negligible quantities. Therefore, it is relevant to ask whether there is any hope for an incomes policy without the type of control, and deliberate control, over total demand which was exercised by my right hon. and learned Friend the Member for Wirral and my right hon. Friend the Member for Monmouth.
In all too many cases—an instance was last night in the speech of the hon. Member for Colne Valley (Mr. Duffy)—the incomes policy has been represented as an alternative to the policies of those two ex-Ministers. What worries me, above all—I suspect that in this sense I shall now be flagrantly partisan, but I hope that hon. Members will accept that this is a very genuine conviction—is that all the talk about doing this through co-operation will not be a lasting aspect of the Government's policy, because I believe that basically hon. Members opposite genuinely and with thorough conviction are interventionists.
I believe that eventually all the arrangements, all the paraphernalia now associated with the First Secretary of State's Department, will call forth from hon. Members opposite more and more strident cries for sanctions to ensure that the national plan is implemented. I believe that the logic of the national plan, of the N.E.D.C. and its derivatives, and the centralised influencing of incomes will inevitably lead to a demand for teeth. The signs of this are already appearing.

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I would refer hon. Members to an article which appeared in the New Statesman, in March of this year, by Mr. Michael Posner, which is very indicative of what a growing number of hon. Members opposite think. He said:
"What we need is not a Neddy-type 'plan' in which the growth of, say, motor-car sales is merely a market-research projection. The industry should be told in advance that only a certaain rate of growth of home sales will be permitted, and any greater increase will be restrained by hire-purchase or tax regulation."
If it is thought that these remarks are a strangled cry from the far Left opposite, and not indicative of a return to the kind of controls which we had operating in the economy during the time of the Labour Government—
Mr. Barnett rose—
Mr. Biffen: If the hon. Member will bear with me I will tell him why, because I have with me a quotation from an article written by the President of the Board of Trade, who, I am sorry to see. is not in the Chamber to nod enthusiastic endorsement of the authorship.
When the right hon. Gentleman was on this side of the Committee he wrote in the Statist of 12th July, 1963:
"For one thing the excellent organising machine, perfected during the war and available in 1945, has been dismantled and demoralised by the Tories. For this reason alone the next Government will be miraculously efficient and lucky if it does as well as that of 1945."
Those are the words of the President of the Board of Trade and I think that they clearly indicate the kind of yearning for a more sophisticated machine. This is why I have a suspicion, which was reinforced when I read in the OFFICIAL REPORT the comment of the hon. Member for Ashton-under-Lyme (Mr. Sheldon), to whom I apologise for not having notified that I would refer to it. He said:
"I would go even further and say that what we need is controlled investment …"—[OFFICIAL REPORT, 6th April, 1965; Vol. 710, c. 373.]
Mr. Barnett: I appreciate that the hon. Member sincerely believes that the incomes policy striven for by my right hon. Friend the First Secretary is completely unattainable, but I have been
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following his argument and, as far as I can see, the only alternative that he is suggesting is that we should revert to the sort of policies carried out, or perpetrated, by his right hon. Friend the Member for Monmouth (Mr. Thorneycroft) and his right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd). If that is the sort of thing that the hon. Member is suggesting, he will accept that over the past 13 years there was no real achievement.
Mr. Biffen: I certainly do not accept that there has been no real achievement during those years, but if it is any encouragement to the hon. Member I assure him that I support the policies of my right hon. Friend the Member for Monmouth and my right hon. and learned Friend the Member for Wirral. I would go further and say that I would have had a much more vigorous policy to introduce greater competition and lower tariffs for this country.
It will, therefore, come as no surprise to the hon. Member that I believe that many of the arguments which have been advocated from the benches opposite, and, indeed, from this side of the Committee, concerning regional planning or an incomes policy, may sound perfectly reasonable, or certainly innocent, but I have an abiding suspicion—and nothing said during the debate has removed it —that these policies could well be the Trojan horses of Socialism and that we shall have more and more calls for direct intervention in the economy from hon. Members opposite when the shortcomings of exhortation become more and more apparent.
As long as hon. Members opposite decry the policies of control of total expenditure as practised by the right hon. Friends to whom I have referred, I am certain that the shortcomings of that exhortation will become sooner and sooner apparent. Therefore, personally I think that my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) was quite right to warn against the dangers of the Trojan horses of Socialism. I am surprised that an anonymous contributor in the Spectator, when discussing the conclusions of a P.E.P. pamphlet "Planning for Growth", which was referred to last night by my right hon. Friend the Member for Flint, West (Mr. Birch), and finding that the

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conclusions were very similar to those of my right hon. Friend the Member for Wolverhampton, South-West, said:
"The P.E.P. pamphlet 'Planning fox Growth' goes far down the road towards Mr. Enoch Powell's lonely hermitage."
The anonymous correspondent of the Spectator should know that that road is thick with pilgrims. We had almost daily converts.
Mr. Alan Day, of the Observer, has become almost Powellian in his views of the economy. In the absence of the Liberal party I might say that it is almost on that road. This, of course, may account for its disappearance this evening. In a pamphlet produced by the Liberal Party Mr. Layton and Mr. Lamb wrote:
"One does not have to agree with Professor Paish's figures to share his scepticism about the effect of an incomes policy. …"
I hope, therefore, that hon. Members opposite do not think that it is in any sense a sneer, but rather that it is in a genuine spirit of scrutiny and concern that a great deal of doubt and criticism has been expressed about the activities of the First Secretary of State.
In future, I hope that the battles between us in Committee will be fought in more precise terms over more sharply defined political and economic philosophies There is no harm at all in that. It is better to have honest conflict rather than to have a fuzzy bipartisan euphoria to persuade ourselves of the virtue of accelerating public expenditure and Government supervision. The Chancellor can console himself that this Budget will at least provoke conflict. We can only hope that it will save the £.
7.27 p.m.
Mr. Peter Shore: I hope that the hon. Member for Oswestry (Mr. Biffen) will forgive me if I do not follow him in his interesting argument about an incomes policy. It is only part of the total field that we are covering in the debate and therefore I content myself with a short observation. I do not think that we on this side of the Committee had any illusions about the difficulties of getting an incomes policy. We know that it is a very difficult thing to attain. What has impressed us on this side, and obviously has not impressed hon. Members opposite, is how terribly difficult it is not to have an incomes policy. It is not that we are, as it were, seeking to take on extremely
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difficult tasks because we feel that we want something to do.
The fact is that we feel that we have been driven to accept and work for an incomes policy because the clear evidence from the last 13 years is that the British economy will not work satisfactorily unless there is an incomes policy. It is extremely reactionary, although extraordinarily interesting as a commentary on the intellectual history of the Conservative Party in opposition and the different factions within it, to hear the hon. Member for Oswestry merely putting forward the view that we have no alternative but to accept the periodic bouts of sharp deflation which was experienced under his right hon. Friend the Member for Monmouth (Mr. Thorneycroft) and his right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) whom he celebrates but whom many of us feel do not deserve such enthusiastic remembrance.
Mr. Biffen: I fully accept that the hon. Gentleman holds that view, but will he not agree that many European countries, particularly France, Italy and Germany, with which this country's performance has been unfavourably compared by his side of the Committee, have managed to get along without an incomes policy, and will he agree also that the restrictive policies adopted by the Italian Government made the policy of my right hon. Friends look mildly inflationary rather than deflationary?
Mr. Shore: I do not want to pursue this too far, and I particularly do not wish to be lured into a comparison of this country's situation with the very different circumstances of other European countries. The hon. Gentleman knows about the difference perfectly well. I shall stick to the United Kingdom and its problems in my speech, and I shall be as brief as I can because I know there are others who wish to follow.
First, a general view of the Budget. I should like the Chancellor and his right hon. Friends to know that it has given me a great deal of pleasure. It is an extraordinarily good and imaginative Budget. It is a Budget which will win more converts as we go along because it really does relate to our basic problem. In other words, I specifically reject the

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accusation which has been made from the benches opposite, and I hope in a moment to show how it does, in fact, contribute to what we can at least share as the objectives of British economic policy today. But we cannot begin to talk sense about the Budget and its aims, and we certainly cannot evaluate its contribution, unless we are clear at the start about the problem which confronts us.
I have heard the speeches from the Front Bench opposite during the last few days and I, like other hon. Members on this side, have been extremely disappointed by the whole quality of their analysis of our difficulties. I shall make some party points in a few moments, but I say that in a rather non-party way. I think that right hon. and hon. Members opposite will agree with me in their hearts. The right hon. Member for Bexley (Mr. Heath) put up a miraculous performance yesterday. He managed to speak for 72 minutes—
Mr. Cooper: Seventy-three.
Mr. Shore: —on Britain's problems and the Government's proposals to solve them, yet he managed throughout those 73 minutes to avoid mentioning once that we had a balance of payments deficit last year of £750 million. It was a remarkable achievement. The hon. Member for Worcester (Mr. Peter Walker) who spoke this afternoon has the same curious blind spot. Of course, this total failure to confront the basic problem leads to a very poor analysis from the other side of what are the underlying causes of our problem and to a lot of thoroughly irrelevant criticism of the Budget proposals.
Hon. and right hon. Members opposite must be afflicted by this blind spot—we had better get this out of the way because it throws dust in our eyes—because they are led to put forward alternative explanations of what is wrong with the British economy. Not for them any mention of the fundamental £750 million balance of payments deficit. That just does not exist. Presumably, it would have corrected itself, if one is to draw inferences from the Front Bench speeches opposite. All they were concerned about was what they call the flight of confidence or the panic caused
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by the measures which the Government took last November. My reply to them is this. Is it not at least probable that there is a close relationship between the largest balance of payments deficit in recent history and the considerable loss of confidence in the £? It must be so, of course.
Mr. Cooper: Will the hon. Gentleman give way?
Mr. Shore: Not for the moment. I should like to develop the point further, and then I shall give way.
I remind hon. Members of what appeared in the Bank of England Quarterly Bulletin published not two weeks ago. Analysing what happened in the last quarter, it makes the point that there were movements of funds out of London month by month during the previous three or four months on a quite considerable scale. In September, 200 million dollars left the United Kingdom. My right hon. Friend was not Chancellor of the Exchequer in September. In October—
Mr. Gresham Cooke: There was the prospect of an election.
Mr. Shore: Well, really! In October, 215 million dollars left. In November, 270 million dollars left, and in December —unless I have the figure wrong—about 400 million dollars left the United Kingdom. In other words, over the whole four months there was a considerable movement of funds.
In the first six weeks of that period—I am trying to be serious even though hon. Members opposite are not—there was not a Labour Government, but there was a growing realisation abroad that, to put it frankly, we were running into the biggest underlying balance of payments problem we had had since the war. It is no good right hon. and hon. Members opposite saying that foreign bankers are not worried if the British Government, in a single year, manage to incur a balance of payments deficit equal to the whole of our gold and dollar reserves. Of course they are concerned, and rightly so. In fact, one can say about this confidence crisis and what happened this year that it is probably the first time since the war when foreign bankers had genuine reason to be concerned about the safety of the £.

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As soon as the facts were known, the Labour Government made their decision, and in many ways it must have been the most difficult decision that my right hon. Friends had to take. They decided to tell the truth about the balance of payments deficit and its size instead of evading the issue. From the previous Administration we have had no suggestion of a figure between £750 million and £800 million. Nothing like that was ever indicated by right hon. Members opposite during their last months in office—not a whisper. I can remember when the National Institute published its first estimate saying that it looked as though the balance of payments deficit in the course of 1964 would be between £550 million and £600 million. It was pooh-poohed by all the official briefers in the Treasury and the Board of Trade at the time. Every month's figures were scorned and ridiculed by those now sitting on the Front Bench opposite. This attitude is just not good enough. In fact, there was a genuine confidence factor, and there was bound to be, arising out of the basic weakness of the British economy at that time.
Mr. Cooper: It would be immodest of me to ask the hon. Gentleman to read the speech I made after the Budget on Tuesday. I can only tell him that his arguments now have no validity whatever. On our trading figures as shown in the Government's White Paper alone, we made a profit on visibles and invisibles of £57 million in the year. The deficit of £802 million, which the hon. Gentleman omits, was on Government spending, half of which was on loans to overseas territories, under-developed territories, and on capital investment overseas—
The Deputy-Chairman (Sir Samuel Storey): Order. The hon. Gentleman cannot make the speech again.
Mr. Shore: I should hope not. It was bad enough the first time. It is absurd to say, after all these years, that one must not count overseas military expenditure, one must not count Government aid programmes, one must not count capital investment overseas, with the idea that it is not part of the balance of payments.
Mr. Cooper: The under-developed territories?
Mr. Shore: Is it or is it not a cost which we have to bear, and does it enter into our balance of payments? The answer must be "Yes".
Mr. Cooper: Would the hon. Gentleman like to stop it?
Mr. Shore: I want now to come to the other half
Mr. Cooper rose—
Mr. Shore: In a moment. I want now to come to the other half of the confidence problem. We all know that there was a confidence factor at work.
Mr. Cooper: Only in the Labour Government.
Mr. Shore: The point is, who lost confidence in November? It is an interesting question to ask and to answer.
Mr. Cooper: It was in the Labour Government.
The Deputy-Chairman: Order, I hope that the hon. Member for Ilford, South (Mr. Cooper) will not continue to make interventions sitting down.
Mr. Shore: The conventional and intellectually lazy answer is that the people who lost confidence in Britain were the overseas bankers—the "gnomes of Zurich", as they are sometimes called, and people of that kind. I do not know whether hon. Members opposite have had the chance to see the very respectable comments on this thesis. One appeared in The Times on 21st December, written by a Mr. Heymann, who is a considerable Swiss authority on currency matters and banking and the balance of payments. He wrote
"… non-resident liquid sterling holdings were already short long before the change of Government on October 16 ".—
I have already demonstrated that—
"and the wave of short-selling £s by foreign speculators has been far exaggerated by superficial or uninformed publicity. The uncomfortable truth is that, when the dust has settled and the counting has been completed, it will be seen that, of all the sterling offered over the exchanges during the past two months much more than half, and probably nearer three-quarters than two-thirds, has been the result of precautionary covering transactions by United Kingdom residents for imports of goods and the payment abroad for every conceivable type of services."

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This distinguished Swiss gentleman went on:
"… in recent weeks discipline and restraint have been thrown to the winds and the impact that this scramble for cover had had abroad—especially among Britain's most loyal friends —has been appalling."
I now turn to what is a corroborative quotation from the Financial Times. An editorial on 20th January quantified the effects of British movements of capital or British speculative activity on the balance of payments. They based it on the returns of two of our larger commercial banks. The Financial Times said
"Of the £650 million to £700 million of extra foreign exchange commitments by British firms in 1964 as opposed to 1963, not much more than £100 million can be attributed to the growth of trade. What is emerging is the picture, in fact, of a major exchange crisis quite different from the 'Gnomes of Zurich' view."
In other words, the massive flight of capital that has come about was the result of decisions taken in London and not abroad.
Mr. Cooper: Rubbish.
Mr. Shore: The hon. Gentleman can contest my facts but at least I hope that the Committee will go with me as far as accepting that I have given bona fide evidence of what happened. This is really rather important.
Right hon. and hon. Members opposite have a part to play in this confidence question. They have attached so much importance to it. According to them, confidence is everything. According to the right hon. Member for Bexley, we are all having to suffer new taxation because of confidence. One would have thought, therefore, that if he really believed that he would have addressed himself not only to the Government but to hon. Members opposite and the problem of how they could prevent deterioration of confidence.
I have a suggestion to make to hon. Members opposite. About 230 of them are connected with boards of industry. I do not know how many are company directors, but a large percentage are. They could all do a valuable service to the nation if, at the next meetings of their companies—some are members of many companies—they asked their officials to
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give them certain information. They should ask those officials, "How much foreign currency are we holding today? How much were we holding this time last year? Will you please account for the difference?" If hon. Members opposite do this they will make a far greater contribution to the strength of sterling than by simply paying what looked remarkably like lip-service from the Front Bench yesterday.
Mr. Cooper rose—
Mr. Shore: No. I will not give way on this occasion because, quite frankly, the hon. Member cheated a little and took far too long last time.
Mr. Michael Alison: Will the hon. Gentleman give way to me?
Mr. Shore: Certainly.
Mr. Alison: I am grateful to the hon. Gentleman. I shall not keep him a moment. I am trying to follow the logic of the argument that the question of confidence was not the cause of the run on sterling but that the cause was the growing deficit on the balance of payments. Will the hon. Gentleman recognise that the serious deficit in our visible balance of trade mainly occurred in the early months of 1964 and not in the last four months, when the run started?
Mr. Shore: There were several factors. I am trying to put forward a much more serious analysis than a number of right hon. Gentlemen opposite have contributed. There were several factors at work but I must start with the fact—and I am sure that hon. Member's opposite will agree—that if one has a whopping payments deficit, one's currency is in danger and that is why one must give absolute priority to closing the gap. Such a deficit causes loss of confidence but, of course, other factors can reinforce it.
What we have had in the last two or three months is the almost unique occasion where massive movements of money have gone on as a result of decisions in London as opposed to decisions in Zurich and elsewhere. I say to hon. Members opposite with close connections with British industry and boardrooms that they have a duty. I have made a few suggestions as to how they

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can contribute to strengthening the £ and the British economy.
I would also suggest how my right hon. Friends may in a modest way make a contribution. It might be useful for the Governor of the Bank of England to address himself to this question the next time he makes a serious public speech, for his is a voice of authority, as we know. with considerable appeal to the people on whom we would hope his words would have effect.
I hope now that we have the background to the economic situation a little more clear. It is one of confidence movements. It centres around a major balance of payments deficit which was not mentioned by right hon. Gentlemen opposite either yesterday or today. Having established the problem I want now to turn to consider how I believe the Budget will contribute to its solution.
First. I would say to hon. Gentlemen opposite who have had such fun in pointing out different tax increases and how the Budget omits all kinds of things that they think ought to have been in it, that they have missed the whole point of the economic policy of the new Government as compared with the policy of the last Administration.
Because they believe in planning—and how effective that planning is may be criticised—a Labour Government will obviously use many measures to achieve its aims other than those which will be found in the Budget. It was one of the great limitations on the policies of right lion. Gentlemen opposite that for the most part they were confined to the use of the tax instrument and monetary policy. It took them 10 years to realise that these were crushing limitations and it was not until 1961 that the right hon. and learned Member for Wirral first put forward his notion of some form of consultative plan, some means of escaping from the limitations imposed upon him.
What we have done since we came to office is to pursue an economic policy which is relevant to the needs of the country, but we have been doing it, partly through monetary, financial and budgetary policy, but far more through direct policy as the first instalment of oar planning measures. I do not want to go into these in great detail, but I will mention the four crucial aspects of
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this policy with which the Budget seems to be helping.
The first way in which our approach to our problems sharply distinguishes itself from that of hon. Members opposite is our belief that the way in which to tackle the balance of payments problem is not to throttle the whole economy, but to try as far as possible to deal directly with the causes of unbalance. This policy first found its expression—according to hon. Gentlemen opposite it does not make much difference—in the use of the surcharge, which was an attempt to operate directly on over-large imports.
Secondly, we have managed to achieve the first incentive to exports which any Government have produced in the postwar period. I agree that it is not enormous, but it is certainly something, and it was done within the first few weeks of office—the export rebate.
Now the Budget comes along and the Budget proposals affect the balance of payments and are directly relevant. We have only to look at the balance of payments figures to see that half of the deficit is due to the outflow of capital. Some of that outflow is certainly necessary and where it is linked to the kind of activities which will create demand for our exports it is very good, but that is not by any means true of all the capital which leaves Britain, and in particular we should distinguish between direct investment and portfolio investment, because portfolio investment does not carry that kind of pull for future purchasing from British industry.
In this Budget, the Government have acted directly on this factor. They are using exchange control more vigorously and they are using the Corporation Tax which will certainly cease to make overseas investment the kind of attractive thing which it is today. Frankly, that is what we want. Of course if we reach a situation where it is no longer necessary, it is not beyond the wit of man to devise ways and means of removing handicaps, or restoring a positive benefit to overseas investment, but for our own problem it is a direct action to try to deal with one half of our balance of payments gap and it seems to be wholly admirable.
I now turn to the other two aspects of policy and how the Budget will affect

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them. We have had considerable discussions on the issue of an incomes policy. I said at the beginniing of my speech that there was a difference between us, and the basic difference is that I cannot imagine our surviving without an incomes policy, whereas hon. Members opposite think only of the difficulties of achieving one. It is the overwhelming disadvantage in Britain of not having one which disturbs me.
I am therefore convinced that we have to try to get an incomes policy and we know that to get it rewards must be fair as among different parts of the community. I believe that an effort has been made at least as far as the tax system is concerned and that things will be very much fairer than they have been in the past. It was always nonsense to expect people to accept an incomes policy when the largest incomes in the country were not earned but arose out of capital transactions, capital gains and property dealing. This was absurd and something had to be done about it and at last a Capital Gains Tax has come before us.
Admittedly, the initial yield from this tax will be small, but if anyone thinks that this is just small beer, he should reflect on the fact that values on the stock market of shares in British industry have risen since 1951 from a figure of about £8,000 million to more than £22,000 million in 1965, an enormous increase, not a penny of which has been taxed. I am delighted that my right hon. Friends have introduced a Capital Gains Tax. It should have been introduced long ago and I have a feeling that there are many hon. Members opposite who in their hearts do not disagree. What has been done regarding tax avoidance will also contribute towards an incomes policy.
My third comment about a part of the Budget which seems to contribute to a solution of our big problems is the excellent judgment which the Chancellor of the Exchequer has used in deciding just how much he should take out of the economy. This is a most difficult exercise for anybody. It is terribly important, because if the Chancellor has misjudged and has taken out too much, we have reason to be anxious about employment in the winter, and if he has
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not taken out enough, we may be under pressure with prices rising and so on later in the year. This is a matter of judgment and I think that he has got very near it.
Some have criticised the Budget for being too harsh, but I do not think that it is. I think that my right hon. Friend was right to be harsh. Taking into account not only the new taxes, but, as hon. Members opposite have delighted to point out, the taxes introduced last November, there is a substantial disinflationary impact on the economy. I am convinced—and it is very important to get the words right—that it is disinflationary and not deflationary. I do not think that we shall grind to a halt, because some powerful expansionist forces are working in the economy and my right hon. Friend is taking out just about the right amount.
There was one remark in the Chancellor's statement which encouraged me very much. It was when he referred to the years of tax reform and tax change which lie ahead. I am very glad that he said that. He has produced two taxes in one year which are more radical than anything produced in the last 14 or 15 years. It is tremendously encouraging, indeed, exhilarating, to hear him say that there are years' more to come. I shall look forward to Budget day with a keen sense of anticipation, but I should like to put three points which I hope the Chancellor will have time to consider between now and next Budget day.
The first concerns exports incentives. I ask him not to give up the search for some form of incentive for exports through the tax system. Right hon. Gentlemen opposite did not begin a serious search for a tax incentive until very late in their period of office and the Richardson Report is by no means the last word on the matter. I hope that with great intellectual vigour my right hon. Friends will go ahead and search for a genuine tax export incentive.
Secondly, I hope that my right hon. Friend will take the very good advice of my hon. Friend the Member for Heywood and Royton (Mr. Barnett) and have a close look at investment allowances. I too read the two N.E.D.C Reports on investment decisions generally and investment in the machine tool industry. They must

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have frightened hon. Members opposite almost to death because they are the people who believe so passionately in the free enterprise profit system. But the only conclusion that one can draw from these reports is that the free enterprise system is not even rational, because all the people who are supposed to be making decisions about the best use of the national resources are not in fact making them.
Most of them were using techniques which are rejected by the Reports as being hopelessly inadequate in giving any reasonable guide as to where investment should take place. Nearly all of them were making their decisions about investment problems on a pre-tax rather than a post-tax basis. After reading the N.E.D.C. Reports, there is not much left of all the boasts about allowances, and so on, by the right hon. Member for Barnet (Mr. Maudling) two years ago or that tremendous hoo-ha about how he was providing dynamic incentives for British industry. I hope that my right hon. Friend will look at this whole question very seriously indeed.
Mr. Cooper: Would the hon. Gentleman do me the courtesy of giving way now?
Mr. Shore: Yes.
Mr. Cooper: The hon. Gentleman derides private enterprise, but the fact is, as the Chancellor of the Exchequer said on Tuesday, that since the end of the war private enterprise has built up our overseas reserves from nothing to £11,000 million. This is a very considerable achievement.
Mr. Shore: At the end of the war, or at least at the end of the period of office of the last Labour Government, I think that I am correct in saying that British exports were about 24 per cent. of the world's total. Last year, they were 14 per cent. This is a very good measure of the very limited success of British private enterprise. It is the kind of complacent attitude exhibited in interventions of that sort which makes me despair of the future of British industry.
Mr. Ian Lloyd: I wonder whether the hon. Gentleman would concede that the majority of the techniques to which he has been
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referring have been imported from the United States?
Mr. Shore: I willingly concede that, but I would not draw any large conclusions from the American experience. We have had similar arguments before about European comparisons with Britain. We had better miss out such arguments this time.
My last suggestion to my right hon. Friends is this. I am worried—and I assume that they are, too—about the effect of our corrective measures. I am sure that they will make a tremendous difference to our balance of payments during this year. I am sure that they will bite and that by the end of the year, if not earlier, we shall be very nearly in the black.
This is happening with the United States. When the two biggest trading nations in the world, both operating reserve currencies, move from a substantial deficit position into balance, there will be a tremendous strain affecting the whole liquidity system of the Western world. I urge my right hon. Friends to give a very great deal of thought to this matter and to enter active negotiations, not only with America, but with the other nations concerned, and make an early review of this problem, leading, I hope, to successful action.
8.4 p.m.
Mr. Donald Box: The hon. Member for Stepney (Mr. Shore) was so warm in his welcome of the Budget when he began his speech that I concluded that he did not smoke, did not drink and never drives a car. In regard to the reserves of this country and the behaviour of industry, he might be interested to know that the Shell Transport Company, which is one of the three largest holders of sterling in the world, takes no evasive action whatsoever in reducing the level of its holdings of British currency.
Earlier this afternoon I was glad to hear the news of the President of the Board of Trade that he was increasing the development areas in certain parts of Wales. I was particularly pleased to hear that he had at last found a new tenant for the Pressed Steel factory at Swansea. This is an oblique tribute to my friend Hugh Rees, who sat for

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Swansea, West for five years, and who was untiring in his efforts to find a tenant for this factory.
Mr. Dan Jones: I hope that the hon. Gentleman is not saying that it is the former Member for Swansea, West who has been responsible for finding a tenant for this factory. If he is, he wants to think again.
Mr. Box: If the hon. Gentleman knew the history of this matter—
Mr. Jones: I do know the history.
Mr. Box: —he would know that the former Member for Swansea, West did a tremendous amount of groundwork which, I have no doubt, contributed to the finding of a new tenant for this factory.
Mr. Dan Jones: Propaganda.
Mr. Box: Listening to the Chancellor of the Exchequer in introducing his rather gloomy Budget and listening to the First Secretary of State were less enjoyable experiences. In contrast to the extravagant promises of the pre-election period, the taxpayer may well be forgiven for feeling that he is paying for a very expensive hang-over, not as a result of 100 days of dynamic Socialism, but rather as a result of 165 days of sheer debauchery by this rake's progress of a Government, with the Chancellor of the Exchequer as a sort of macabre figure presenting the bill.
We realise that for the first time in his life the Chancellor of the Exchequer was facing the facts of life, in contrast to the fiction of Labour Government policy. I think that we all recognise the dilemma in which he found himself. Indeed, we had sympathy with him when he found that he was taking part in a sort of economic tug of war between the First Secretary of State and the Governor of the Bank of England. Of course, the choice before him in preparing his Budget was unenviable. On the one hand, if he was tough he was bound to be unpopular with his supporters. On the other, if he was tender with us he was bound to earn the disapproval of our foreign banker friends.
It was, therefore, no surprise that the right hon. Gentleman chose a compromise
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between these two extremes and, as a result, managed to upset nearly everybody. On the one hand, he has taken a vicious swipe at industry and business, both at home and overseas, and, on the other, by giving a few superficial concessions to the elderly and savers, he obviously fancies himself as a sort of Mary Poppins of Downing Street—"a little bit of sugar to help the medicine go down." In this case, the sugar is not sufficient to take away the nasty taste.
As we all know, the Corporation Tax and the Capital Gains Tax were foreshadowed many months ago. We understand that Corporation Tax is to be levied at not less than 35 per cent. and not more than 40 per cent. The recommendation to introduce the Corporation Tax is in line with the minority Report of the Royal Commission on the Taxation of Profits and Income of which Dr. Kaldor was a signatory. But we must also remember that it was in direct contrast to the majority Report of the Commission, which came out strongly against a single tier tax system.
I was glad to hear the Chancellor of the Exchequer repeat that he intended to keep his word not to use the Corporation Tax to impose penal burdens on company taxation. But we must remember that a 1 per cent. increase in Corporation Tax is equivalent to £30 million of revenue. There is already the flexibility between 35 per cent. and 40 per cent., which was indicated by the right hon. Gentleman, so that may mean that he will be tempted to take a further £150 million from this source. We must remember, also, that any future increase in Corporation Tax will affect the whole of company taxation as opposed to Profits Tax only in the past.
I question the wisdom of introducing Corporation Tax in such a way as to cause a certain amount of confusion and uncertainty to management in deciding future dividend policy. It seems to me that no allowance is being made in respect of dividends, which, although they are subject to Income Tax, are paid out of profits, which have already borne Corporation Tax as well. Therefore, they are subject to double taxation. That seems to me to be doubly unfair.
The attraction to the Chancellor of what amounts virtually to a withholding

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tax is obvious, for there is less tax on undistributed profits and more tax on distributed profits. As has been pointed out by several speakers in the debate, however, this policy is being adopted at a time when most progressive European countries are doing just the opposite. I find this very odd, to say the least.
Another aspect of this is whether it is in the best interests of the economy and industry that large sums should be ploughed back into companies rather than kept in circulation. I have always understood that capital was best if it was circulated and that it would stimulate industry. There is no evidence that either management or the Government have really found a better solution of how to spend the money, and it is probably best left in the hands of the individual shareholder. Some companies, I fear, will accumulate so much fat in the form of ploughed-back profits that they will become sitting ducks for takeovers. Here again, this seems an odd philosophy from a Government who deplore the activities of what are known as the Cotton-Clore axis.
I suppose that the tax that the Chancellor relishes most is the Capital Gains Tax. If this had been introduced with a considerable reduction in the present penal rate of taxation, it would probably have been more generally welcomed by all sides of industry and finance. I note that the speculative short-term gains tax, introduced by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), is to be continued. We all know that the revenue from this source will be very small, but the point that is missed here by many people—and I speak from personal business experience—is that this short-term speculative gains tax has considerably reduced speculation. There is no doubt that many people who were speculating frequently have now stopped doing so as a result of that tax.
What concerns me about the Capital Gains Tax is how the Inland Revenue will cope with the great increase in work that is bound to result. We all know that within the Treasury, and certainly among accountants dealing with the Inland Revenue throughout the country, the quality of the staff being recruited in the Inland Revenue is a matter that causes grave concern. We are entitled
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to ask where the extra skilled staff are to come from.
Mr. Dan Jones: Get computers.
Mr. Box: Possibly.
Holders of gilt-edged will be dismayed to find that they are not exempted from the Capital Gains Tax in respect of the capital element on redemption of the stock. Here we have a serious breach of faith by the Government and one which will not be quickly forgiven, either by the holders of gilt-edged or those who deal in the stock and, not least, by trustees, who are finding their work increasingly difficult with so many unknown factors of national and international politics entering into considertion of what are the best stocks to buy. The Chancellor has done a grave disservice to trustees, who are carrying out a very difficult job, by putting this additional difficulty in their way.
In these circumstances, it is hardly surprising that the Government have on several occasions recently suffered the humiliation of having to ask the Government Broker to go in and support the gilt-edged market. This position is likely to get worse before it gets better, and it will get worse for several reasons.
First, with the capital element on redemption in the past presumed to be tax-free, here was some way of coping with the continued fall in the value of money. That attraction has been removed. Secondly, there is an element of retrospection in the tax, as many people bought dated gilt edged believing that the capital element would be tax free. Thirdly, the Government must take into account that within the next 12 months they have to fund or redeem £1,686 million of gilt-edged stocks. Fourthly, if they are successful in introducing steel nationalisation, steel stock will add to the saturation of the gilt-edged market.
I have done a little research on the behaviour of the 3½ per cent. Steel Stock 1979–81, as it was then called, which was issued in respect of nationalisation on vesting day, 15th February, 1951. Dealings started the following day and the stock immediately went to a three points discount for anyone who wanted to sell. It finished up at 97–99. During the following twelve months, it drifted steadily until 12 months later, on 18th February, 1952, it stood at 87–89.

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In other words, anyone who had accepted Steel Stock in compensation for his steel shares found, if he wanted to sell within 12 months, that he had to accept £13 per £100 less than he expected to do, and the only material change in those 12 months was an increase in the Bank Rate of one-half of 1 per cent. to 2½ per cent. Happy days. As estimates of the amount that is expected to be issued in the event of the steel industry being nationalised range from £750 million to £2,400 million, right hon. and hon. Members will recognise that this is a serious matter for gilt-edged stability.
Every time I hear the Chancellor speaking of profits, I cannot help feeling that he reveals a sort of pathological hatred for them, and yet profits, as opposed to the profits from capital gains, are the lifeblood of the country, and competition stimulates the circulation of that lifeblood.
Mr. Dan Jones: The Chancellor said so.
Mr. Box: He does not give that impression. When I think of profits, I cannot help remembering the industrialist who insisted on putting up in his factory a large notice which read, "The biggest crime I can commit against my workers is not to make profits." This was a profound and wise truth. Right hon. and hon. Members opposite give the impression that they are inclined to forget that wages, pensions, insurance, new factories, equipment, the Welfare State, education, health, hospitals and roads all come out of profits. They would do well to ram this down the throats of some of their supporters.
Despite this prejudice against profits, the Chancellor has emphasised the importance of savings by making one or two small concessions to savers, but I wonder whether these are sufficient to stimulate or even to maintain savings at their present level. In a world where a good deal is heard about devaluation or the dangers of devaluation of the £ abroad, we are inclined to overlook that a good deal of devaluation of the £ is going on at home.
I refer to the constant erosion in the value of money. This is one of the most severe deterrents to saving today. There
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are several contributory factors. First, when we get wage increases without the certainty of increased productivity. Secondly, when the Government spend money, as they sometimes admittedly have to, on unproductive developments. Thirdly, when we suffer from what I would describe as too much welfare. In my opinion, the Welfare State in its present form is a very mixed blessing. It is excellent when it is used properly to help the weak, but it becomes insidious when it is abused, and there are abuses going on in the Welfare State at present.
The country has gone welfare mad. In many cases we seem determined to squander the benefits of the Welfare State on those who shout loudest, do the least, and spend the most, rather than on those in need, the loyal, and those who are prepared to suffer in silence. I was very disappointed that the Chancellor did not promise inquiry into the whole structure of the Welfare State as a matter of some urgency.
We have a typical example in the mining industry. As a result of the increase in sickness and injury benefits which was brought about in the early part of this year, it is now possible for some grades in the mining industry to get more when they are sick or injured than they get when they are working. For example, a married man with a wife and two children can now get £13 9s. 6d. per week when he is sick or injured, whereas a Grade I surface worker gets £11 14s. 6d. In other words, when a man is off sick he gets £1 15s. a week more than he does when he is working. Under these circumstances, it is no wonder that 50 per cent. of the labour force in the mining industry takes part of each week off, and that from 20 to 25 per cent. takes the whole of each week off. These are official figures.
That compares with a pre-war figure—and all these figures include sickness and injury—of 5 to 7 per cent. It is a clear indication that everybody in the coal industry knows that this is going on, and that a large percentage of the claims for sickness and injury are not genuine. After three weeks, when a medical certificate is signed, a further check is made, and this, of course, is a direct temptation to a man, if he wants to, to take off two

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weeks and then go back to work and go through the same operation again.
The hon. Member for Burnley (Mr. Dan Jones) can cluck like an old hen, but I have taken the trouble to check these facts. When one recognises that it now costs the National Coal Board nearly £4 a week to keep a man on its books, whether he is working or not, and when one realises that this degree of total absenteeism is costing about 10s. per ton, it is not difficult to realise why the coal industry is in such a deplorable state.
The story is told in the Welsh Valleys that recently a doctor, fed up with this abuse, put as the cause of sickness on the bottom of a certificate, "Plumbum pendent". For those who do not understand Latin, like myself, that means "swinging the lead", and nobody has raised an eyebrow.
Mr. Dan Jones: I am obliged to the hon. Gentleman for giving way. I speak as an ex-miner. The hon. Gentleman does not know what he is talking about. Coal mining is the most hazardous occupation in the country. I do not dispute those figures, but surely the hon. Gentleman has the good sense to realise that if what he is saying is true it is as much a condemnation of the medical profession as of the miners.
Mr. Box: It is possibly a condemnation of both in these circumstances. The hon. Gentleman may be interested to know that I have tabled a Question to the Minister of Power asking him for the statistics which should throw up the evidence without doubt, and no doubt the hon. Gentleman can look at them. I also recommend that he makes some inquiries amongst his colleagues who are also ex-miners.
I turn now to interest rates. The kindest thing to say is that on this subject the Chancellor is very naïve indeed. We have had a 7 per cent. Bank Rate before, in 1957, and 1961, but the circumstances of the current 7 per cent. rate were somewhat different from those occasions. We all remember the hard day's night of 22nd November, when there was an all-night sitting at 11, Downing Street, and the unpalatable decision was taken to increase the Bank Rate to 7 per cent., but the real concern came the following morning when the Cabinet found that
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the £ was not responding to its action. The rest is now history, but the consequences, the earth tremors, the shock waves, will be felt in many spheres for a long time to come.
The most important consequence of the 7 per cent. Bank Rate is the completely altered interest structure which has taken place throughout the finances of the country. We all know that personal overdrafts are up, but so are industrial overdrafts, and this adds to the cost of production. The gilt-edged market is weak, and, as we heard today, local authorities are paying unprecedentedly high rates for short and medium-term money. All this has had the effect of distorting the money market for essential capital for new issues.
To give one example, a firm called Martin Cowley—it is a firm of constructional engineers, and therefore cannot he accused of being in any frivolous line of business; it has subcontracted for the Severn Bridge—recently issued a loan stock which is not only convertible on favourable terms into ordinary shares over several future years, but bears an interest rate of 2 per cent. over the Bank rate, with a minimum of 7 per cent. In other words, that money is being obtained at a cost of 9 per cent. We remember, too, the famous issue of £50 million stock by the L.C.C. at 6¾ per cent. which it is passing on to would-be house purchasers at 7¼ per cent.
The cumulative effect of all this has fallen most heavily on the building societies, for they have to compete not only with the interest yields obtainable on Government stocks, but also with the deposit rates offered by local authorities and hire-purchase companies. The building societies were, therefore, faced with a choice of watching their deposits dwindle, and as a result having to refuse loans on mortgage to would-be borrowers, or of raising their deposit rates, and they raised their deposit rates.
But this, in turn, has forced them to raise their mortgage rates as well. I see from the newspapers this evening that there is a threat that they will go even higher, rather than lower. We cannot help being sympathetic with them in their feeling aggrieved at the monstrously unfair attack of the Chancellor. He is the demon in this pantomime. The mortgage rates cannot come down until deposits

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become more plentiful, and this is likely to be some time in the future.
One direct result of the 7 per cent. Bank Rate is undoubtedly higher council house rents and rates, although for some reason which escapes me this has been denied by the Chancellor on several occasions. In a Question on 19th January last—and I warned him of this point and gave him notice that I would raise it—I reminded the right hon. Gentleman that council house rents in his constituency were increasing, with effect from 1st April, by 33⅓ per cent., and that rates were going up by 18 per cent. In his reply to my supplementary question he said:
"There is. of course, no link between the temporary increase to 7 per cent. in the Bank Rate and increases of the order referred to by the hon. Gentleman".—[OFFICIAL REPORT, 19th January, 1965; Vol. 705, c. 21.]
Yet, at the same time, his city treasurer and his Labour colleagues on the Cardiff City Council had this to say:
"The increase was brought about to keep pace with the soaring building costs and interest charges".
I am forced to the conclusion that the Chancellor does not understand interest rates, or is being misleading, or—a third possibility—believes that an increase in the Bank Rate by a Conservative Chancellor is a completely different thing from an increase by a Labour Chancellor.
I have been undertaking researches in relation to a speech made by the right hon. Gentleman during a cost of living debate on 11th March, 1964. At that time he was very keen to quote the position of Cardiff, where his and my constituencies lie. He paid a special visit there to ascertain the facts. This is what he found:
"In Cardiff, we have short-term borrowings of about £30 million for varying periods between seven days and 12 months. The average increase in the cost of borrowing is about ½ per cent. since the increase in the Bank Rate."
He was there referring to an increase in the Bank Rate on 28th February, 1964, from 4 per cent. to 5 per cent. He went on to say:
"This will mean for Cardiff alone an extra burden of £200,000 per annum. This is equal to a 4d. rate."
He may be interested to know that at present it is running at the rate of £320,000 per annum.
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The right hon. Gentleman went on:
"Some will be recovered by putting up the
rents of council house tenants, some by an increase in the general rates, some through rent deficiency payments, some through general grant, but one way or another the additional cost to the people of Cardiff will be 4d. in the £ on the rates. I asked the Chancellor last week what he intended to do to insulate the domestic economy against the effect of the increased Bank Rate, because he told us, and we always understood, that the purpose of the increase was not to slow down the economy but to prevent the outflow of funds."
The right hon. Gentleman finished with this classic question:
"Why should the Chancellor visit his failure in terms of protecting sterling on to the Cardiff City Council?"—[OFFICIAL REPORT, 11th March, 1964; Vol. 691, c. 457–8.]
Why indeed? We may well pose the same question tonight. Why should the Chancellor visit his failure in terms of protecting sterling on to the Cardiff City Council or any other council? Yet he had the temerity, in the same speech, to refer to my right hon. Friend the Member for Barnet (Mr. Maudling) as squint-eyed, and having a brass neck, and referred to his making a toot on his penny whistle. Hon. Members can draw their own conclusions as to the quality of that deplorable speech. One thing that I can assure the right hon. Gentleman is that that penny whistle would cost a good deal more this year than last year.
It is not surprising, therefore, that almost everyone in Cardiff has a good word for the Chancellor—although it is not a word which is frequently used in polite company. This is a deplorable Budget, brought about by the inept handling of our economy by the right hon. Gentleman and his colleagues. If anyone had suggested last October that he would introduce a Budget like this within six months he would have been told that he was a monstrous liar. If the people had realised that he would introduce a Budget like this they certainly would not have voted for him at the General Election. The Budget represents the high cost of Socialism to the country today.
8.34 p.m.
Mr. Hugh Jenkins: Listening to the hon. Member for Cardiff, North (Mr. Box) I began to wonder why we do not all leave for the South Wales

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coalfields in order to enjoy the enormous privileges and pleasures which apparently are experienced by those who work there. It is difficult to realise that the kind of occupation sketched in by the hon. Member is not one which most of us would care to undertake. I shall not follow the hon. Gentleman further on a subject about which I am not experienced, but, having discussed the matter with colleagues who are, it seems to me that the picture he drew was, to say the least, somewhat one-sided.
I should like to refer to one or two items which do not appear in this Budget and which I think should have been included. Perhaps they may form part of a Budget in the future. Hon. Members who are new to the House are a little doubtful at first about offering criticism on any great scale. But after a while, one begins to feel that one must utter a word of criticism before losing that freshness of vision which a newcomer has to offer.
Listening to the speeches made in this Committee and elswhere, particularly by Front Bench speakers opposite one sometimes has a feeling of unreality about the whole thing, as though it were a ritual performance instead of an attempt to deal with the real problems facing the country. I am thinking particularly of the performance—I think that is the right word—of the right hon. Member, for Bexley (Mr. Heath) on television last night, He seemed, in every sense of the word, to be giving a party political performance. He failed to deal with the realities of the problems which face the country. The right hon. Gentleman may have felt that he was making an effective party political speech about the Budget, but he did not seem to me to be making the sort of speech which would impress anyone who had switched on the television in order to obtain information on the subject, and to listen to a coherent, understandable and serious exposition which it would have been possible to make of the Conservative attitude. I feel that the right hon. Member for Bexley—I am sorry that he is not present—failed, as it were, to advance his political chances by what he had to say on television.
I wish to refer to an aspect not only of the Budget but of the general trend of our economic and financial policy over the last few years which seems to me to
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have escaped public notice, but which ought to have been noted. I should like to assure hon. Members opposite that I am not about to launch an attack upon them. The traditional barriers between private enterprise and the public sector have become eroded. More and more we are finding that a feature of our economy over the last 10 years has been a development in the use of public funds, either as loans or financial capital, for private enterprise. This has developed to a point where it has become extraordinarily prominent.
Looking through the Estimates I note various sums. There is a figure of £31 million; capital grants of £154 million; a loan of £50—a figure of £200 million from the public purse put into various forms of private enterprise for various purposes during last year. This amount seems to be likely to exceed £300 million in the next year. This is an enormous amount of public money put into the bolstering up, the securing, the advancement and the necessary support of private enterprise in fields in which private enterprise cannot, for various reasons, find the money in the ordinary way. I suggest to the Chancellor that he should look seriously at a position in which the public sector is being used as a cow to provide essential financial milk for the private sector, but obtains no control over the use of public money which it is giving.
In some areas, the private sector comes to regard the public money which is put into it as something which it receives as a right. One knows—there should not be any argument on this point—that the farming community depends absolutely upon the input of public money, and cannot exist without it. The farmer is so used to it that he gets very cross if it does not go up to the degree which he thinks it ought to go up. He has no reason to complain if it goes down, because it never does. My right hon. Friend the Minister of Agriculture has been put through it very badly, not because he has reduced the element of public money going in—public money without any element of public control, I would add. Nobody submits any accounts, nobody knows what happens to the money and none comes back, except in terms of the broad benefit to the community. Money goes into agriculture, into aircraft—
Notice taken that 40 Members were not present;
Committee counted, and, 40 Members being present—
Mr. Jenkins: I want to suggest to my right hon. Friend the Chancellor of the Exchequer and to my hon. Friend the Financial Secretary, who will reply to the debate, that they should pay some attention to this economic feature of our time to see whether the public interest does not need a greater element of control than it has at present. I suggest that when public funds are found and are put into such a large-scale enterprise as the computer industry, there ought to be public shareholding; that the community should acquire shares in return for the money which goes into the enterprise. When there is large-scale investment in private enterprise, a public director should sit on the boards of such enterprises so that the public interest may be served and may be watched.
Mr. Gresham Cooke: I have followed the hon. Member's argument very carefully. I have listened to the debates and heard the rows in the Chamber over the farming industry in the last few weeks. I should have thought that there was enough Government control there in the Price Review. I have been connected with the receipts of Government grants for research, and I might tell the hon. Member that there is always a Government official on the board of a research organisation run by industry which receives a grant.
Mr. Jenkins: We are all familiar with public participation in loss: I want to see the development of public participation in profit. While many hon. Gentlemen opposite take the view that the function of public money is to participate in loss, we want to see it securing surpluses, and if more and more public money is to be put into industry, shares should be held by the Government in return for the investment that is made. In important cases a public director should sit on the board to see, even if there is a loss, where the money is spent and to supervise the rate of the loss.
Another point not mentioned in the Budget speech, and something on which I suspect a great deal of waste is occurring, appears to be the growing expenditure on
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civil defence. This has grown in the last few years from £10 million to £15 million, to £20 million, to £24 million now, and the figure for next year will probably be much more. The curious thing about it is—and this is accepted by people who have studied the subject; I spent some time studying it as a member of the L.C.C.—that it is either ridiculously too small or absurdly too large.
If we are contemplating the defence of the community in a nuclear war, in the real sense of the word, then £24 million a year is ludicrously inadequate; that is, if we are contemplating the possible dispersal on a massive scale of the population, the building of shelters throughout the country and the sort of massive preparation involving the dispersal of 50 million people. The cost of that would distort the economy to such a degree that it is not even to be contemplated.
Neither this nor the previous Government said that they were contemplating civil defence in the nuclear age in any real sense of the word. What we are doing is organising a token civil defence. If so, £24 million is far too much for that purpose and, as long ago as 1961, when the L.C.C. took the view that there was no effective defence for Londoners in a thermo-nuclear war, The Times—an excellent newspaper, which I commend for its correspondence columns—stated:
"In short, the common feeling seems, not unreasonably, to be that total nuclear war is unlikely but that it would virtually annihilate this country if it came. Is there any other basis. then, on which Civil Defence might be more convincingly justified?"
It went on to suggest that the civil defence forces, if they were converted into some form of civil emergency service to deal with disasters such as fire, flood, aircraft and railway crashes, would have a more credible function to perform. They would also have the reserve capacity of acting as a disaster force in the unhappy and unlikely event of there being some sort of nuclear accident.
I suggest, therefore, that in consultation with his colleagues my right hon. Friend the Chancellor of the Exchequer should view this item with a rather sceptical eye and, possibly with his right hon. and learned Friend the Home Secretary, see whether they can look together at this piece of expenditure in such a way that if they decide, as I feel they

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might, that to do the job properly the figure should not be £24 million but £240 million, and if my right hon. Friend cannot find £240 million, then he might say that it might as well be £2 million or less.
I am glad to see my hon. and learned Friend the Financial Secretary on the Treasury Bench, because I believe that he has something to do with Government support for the arts. I am sure that hon. Members on both sides will welcome the small increase in this expenditure as being good and useful. Over the last 10 years, from being a very careful and parsimonious country over aid for artistic matters, we have gradually caught on to the idea that it is right, proper and reasonable for public funds to be put not only to the economic development of the community but to its artistic development also.
I understand that we are to debate this subject after Easter but I should like to mention one matter now. We see in the White Paper the removal of this responsibility from the Treasury first to the Ministry of Works and then to the Department of Education and Science. It is right that this should be so, because recall the Prime Minister saying before the election that the Treasury is not naturally a spending Department; that its function is to survey other people's expenditure, and not itself to spend.
But if responsibility for this particular area of expenditure is being transferred, let the transfer be total. I believe that the present position is that the Treasury intends itself to subsidise the Royal Opera House, Covent Garden, and the National Theatre in a special and particular way by means of a small sum—or a large one in the case of the Royal Opera House—related to box office revenue. I should like this arrangement to be further considered. I want the Ministry responsible for the arts to be totally responsible for the arts, and for all sectors to come within the purview of the Department of Education and the Arts Council.
If there is time, I should like to hear some comment on the future of the British film industry, which is in a very parlous condition at present. That is not an unusual position for it to be in. It is a state of affairs that has happened before, and may happen again. The industry's affairs are at present in front of
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the Monopolies Commission, and it might be said that this is therefore no time to take action, but the independent British producer is rather in the position of a child sitting in front of a two-headed tiger —the duopoly of the Rank and the A.B.C. distribution circuits. He finds great difficulty in getting his product shown, and is in grave danger of being gobbled up by the tiger. The Monopolies Commission is in the process of deciding whether the tiger is a tiger. I believe that everybody knows that there is a monopoly here. Unless some interim action is taken, there is a grave risk that, by the time the Commission has decided that the tiger is a tiger, the tiger will have swallowed the child.
These are some of the specific points I wanted to make on the Budget. I have not spoken in the magisterial terms which my hon. Friend the Member for Stepney (Mr. Shore) employed to deal with the general sphere of economic development. Instead, I have endeavoured to direct attention to a number of specific points which still need to be dealt with. I do not wish it to be thought, because I have dealt with these particular points, that I do not support the general lines of the Budget. In general, this is a good Budget. Despite what the hon. Member for Cardiff, North said, it is widely accepted in the country as being a good Budget. It does not deal with everything. A number of problems remain to be tackled.
What the Budget does is to put first things first. It begins fundamentally to change what might be called the infrastructure of our economic situation. Hon. Members should not be deluded into thinking, because the increases in the taxation on cigarettes and alcohol have followed fairly traditional lines, that the Budget is in itself a traditional Budget. We have heard rather conflicting views about this from hon. Members opposite. Some have suggested that this is the mixture as before, that there is nothing new or exciting about it, and that it is not the type of Budget which will make any impact. Other hon. Members have expressed a quite different view; they have suggested that this is fundamentally a Socialist Budget which takes steps about our economy which will bring ruination.

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Hon. Members opposite should make up their minds. What sort of Budget is it that my right hon. Friend has produced? Is it, as the hon. Member for Cardiff, North, suggested, a Budget of which the Chancellor of the Exchequer should be ashamed? Or is it, as seemed to be suggested in some speeches which have been made from the Opposition Front Bench, a Budget which in some respects at any rate is not very dissimilar from the Budget which hon. Members opposite would have introduced if they had been in office?
In general, my feeling is that this is in a long sense an interim Budget which precedes, as my right hon. Friend the Chancellor of the Exchequer suggested, a number of other Budgets which will bring our economy into a posture internally more socially advantageous, in which the benefits of our society will be more fairly spread among the community as a whole, and which, as to our foreign relations, will place us in a position in which we can pay our way abroad so that never again shall we be in the position when anyone can even have an excuse for saying that our foreign policy is determined because we are not financially in a position to follow an independent line. I do not believe this to be the case. I do not believe that it is necessary for this country to condition the conduct of our foreign affairs by the nature of our international economic position, but I do suggest that it would be just as well if we got ourselves into the position where that charge cannot be brought. This Budget is a move in that direction.
9.0 p.m.
Mr. William Clark: Whatever the hon. Member for Putney (Mr. Hugh Jenkins) thinks, whether this is an interim or an annual Budget, it is the second Budget that the Labour Government have introduced and in both of them they have increased taxation. The underlying principle of the Budget was the balance-of-payments position and the strength of sterling. I think that the Chancellor of the Exchequer will agree that it is extraordinary that in his two-hour speech he did not mention the word "sterling". Nevertheless, the balance-of-payments was the main theme and we on this
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side of the Committee, as the right hon. Gentleman well knows, agree that the defence of the £ is absolutely vital.
It is not a question of making party points when we on this side point out that possibly the Government can run the finances of the country a little better. The speeches today, led off by the hon. Member for Southall (Mr. Pargiter), who, as he explained, cannot be here now, blamed the Tories for the mess left last October. This is the general consensus of opinion from the benches opposite, but hon. and right hon. Members opposite should think back. If they look at both they will agree that spot and forward sterling in October was reasonably stable. When sterling started to run away it was immediately after the first Budget to be introduced by the present Chancellor.
This is indicative of the fact that their own panic measures brought upon themselves this sterling crisis. Cmnd. 2629 shows how our deficit last year of £745 million was made up. We on this side of the Committee were saying this at the time of the General Election. My right hon. Friend the Member for Barnet (Mr. Maudling) said as far back as April of last year that there would be extra stock-piling and that our capital investment abroad was going up. The Government's own White Paper proved that the £745 million deficit last year was made up by an increase in stocks over 1963 of £367 million and an increase of £371 million on investment.
The idea of the Budget, presumably, is to remedy the balance-of-payments position in which we now find ourselves. There is no point in crying over spilt milk. This has occurred and we have this balance-of-payments problem. We have to increase exports, but, as my hon. and right hon. Friends have pointed out many times, what incentive is there in the Budget to increase exports? I cannot find any, but, in fact, the reverse. Far too little emphasis has been placed on invisible exports.
I remind the Committee that the same Cmnd. 2629 showed that last year we were receiving from overseas investment a gross figure of £1,300 million which after deduction of tax still gave us a net income of £863 million. This is no mean figure. We should be trying to

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increase it. I hope that I can prove to the satisfaction of the Committee that the imposition of the Corporation Tax will activate against any increase in our overseas investment. I am sure that the Financial Secretary to the Treasury will take this point. We have had this argument frequently recently when we have been discussing double taxation agreements.
The effect overseas on our profits because of the imposition of a Corporation Tax will be that we shall lose advantages in terms of taxation. I would refer the Committee to the example of some of the international giants, such as Shell. No one would say that Shell is not an extremely loyal and important company to this country. Its main income comes from abroad and, therefore, it will be hit by the Corporation Tax. If the company wants to maintain dividends it must dip into reserves fairly heavily. An article in the Financial Times, a few days ago, said that the imposition of a Corporation Tax of 40 per cent. would cost Shell about £50 million. This was a quite authoritative article.
Let us take the point to its conclusion. If it will cost Shell £50 million, the consequence will be that, to maintain its present dividend, the company must dip into reserves, but, if it dips into reserves for that purpose, because of the dual ownership of Shell—60 per cent. is owned by Holland, as is well-known—then, to pay shareholders in this country, many of them quite small, the same dividend, it must pay Holland the same increased dividend. This will act against our balance of payments. I beg the Chancellor to follow right to the end the effect of his Corporation Tax.
In his Budget speech, referring to the desirability of investing overseas, the Chancellor said:
"There might have been a case for such exceptional treatment in the 19th century when the capitalist system generated a volume of saving". —[OFFICIAL REPORT, 6th April, 1965; Vol. 710 c. 262.]
which could be profitably employed abroad. In the 19th century, of course, this country was a net exporter of capital, and there was very little competition in overseas investment. The situation today is vastly different. Does the Chancellor suggest that we pull out of the race to
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invest overseas? I earnestly warn him that, if we do, we shall find our balance of payments problem worsened as a result of the very action which he is advocating. The Minister of State, replying to the debate last night, said that the overseas reception was favourable. Of course, it would be favourable. Our foreign competitors do not want us to invest abroad; it is easier for them if they can do it without competition from us.
The serious aspect of the Corporation Tax as it hits overseas companies is this. Existing companies in this country with overseas income—I am thinking of Shell, Courtaulds, I.C.I., Unilever and the rest—cannot change their structure, change their domicile or do anything about it. If the Chancellor does not change his mind about dividends from overseas companies, they are stuck with it and have got to stay that way. But this is no encouragement for any new business to start a subsidiary overseas. The Chancellor should remember that companies in this country which go overseas do not always do it because they want to. Many companies go overseas in order to jump the tariff walls. Many which have gone into the Common Market, India, Australia and elsewhere and established factories have done it in order to jump the tariff wall. If it will not pay them tax-wise, will they continue to do it?
There is more involved in our figure of invisible exports than the gross amount of £1,300 million. There are many subsidiaries overseas which, if they did not have control in this country, would not get the exports. Our figure of exports of goods going overseas is increased in this way. Many of these companies, subsidiaries of British companies, bring us a massive amount of currency from abroad for technical assistance, and so on, and this would be lost to us if we said, "Let us all be Little Englanders and trade in our own backyard ".
I hope that the Chancellor will think about this again. He must not penalise overseas investment. I assure him that he is penalising overseas investment by the imposition of the Corporation Tax.
Mr. Callaghan indicated dissent.
Mr. Clark: Of course the Chancellor does not agree, but he has not, to the

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satisfaction of the Committee or anyone else, shown that he is not penalising them.
Then there is the question of the overseas trading corporations. We accept that the right hon. Gentleman has always been diametrically opposed to the old policy, but I do not think that the developing countries will be happy about the change. What is the position if a company sets up a subsidiary board to help a developing country whose Government gives a tax-free holiday? Of course, this has to be passed on, and that was really the birth of the O.T.C.s. Why abolish them now? If the right hon. Gentleman is diametrically opposed to them, why should not he have merely ensured that more and more dividends were repatriated? To give up everything simply because the Government did not like the old system when they were in opposition is not a very responsible attitude.
The Corporation Tax does not stop at overseas investment. In this country, it will discourage dividends. The right hon. Gentleman has said so. He went on to say that it would mean the ploughing back of profits and that this would lead to greater efficiency. But my right hon. Friend the Member for Bexley (Mr. Heath) pointed out, very aptly, in his excellent speech, that it could lead to stagnation. The Chancellor laughs. But, on the one hand, he says that management is not good enough, and, on the other, he says we should let it have more money and encourage it to retain profits.
Mr. Callaghan: I did not mean to laugh, but I could not help smiling because one of the most dynamic industrial systems in the world is the United States, which has had a corporation tax system for many years and very low yields of dividends.
Mr. Clark: I will come to that. The right hon. Gentleman says that the tax will discourage dividends and encourage ploughing back. It is all very well to say that companies will plough back this money, but it could lead to idle management.
No doubt the right hon. Gentleman has done his arithmetic, as we have. The same slice of gross profit passed through as dividend means a reduction under the
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Corporation Tax of 19·43 per cent. What will that do for the small saver and the retired person? In an excellent maiden speech, my hon. Friend the Member for Leyton (Mr. Buxton) drew attention to the old people. Many of them have small incomes from investments. They will suffer a cut in dividends because of the Corporation Tax.
The Chancellor must pay attention to this argument about the payment of dividends. It is fallacious to say that the company is better able to deal with this matter rather than the investors. I am sure that the hon. Member for Hayward and Royton (Mr. Barnett) would agree with this. To achieve greater investment is not necessarily done by allowing companies to retain more dividend. The better way is to give it back to the investors who will reinvest it. Only then will we get the growth we so badly need.
The Chancellor paid great attention to what Germany was doing, but as my right hon. Friend the Member for Bexley, my hon. Friend the Member for Cardiff, North (Mr. Box) and my hon. Friend the Member for South Angus (Mr. BruceGardyne) said, what he is doing with the Corporation Tax is the complete reverse of what the Germans are doing. I am sure that the right hon. Gentleman knows the figures. On distributed profits, the Germans are charged 15 per cent. On undistributed profits, the plough back, they are charged 51 per cent. That is the complete reverse of what the Chancellor is trying to do. I recommend him to read the Report of the Neumark Committee to the E.E.C.
That Report recommended that the member countries of the E.E.C. should get nearer to the United Kingdom-German system. I will give the right hon. Gentleman a little arithmetic. If he takes £100-worth of profit under our present tax system the gross dividend, if the lot is distributed, is 74·468 per cent. The Chancellor was being rather casual in what he had to say about a Corporation Tax, because the difference between a rate of 35 per cent. and 40 per cent. is £150 million. However, on the present system the gross dividend on £100 is £74·4. With a 40 per cent. Corporation Tax, that will drop to £60. Under the German system it would be £76·56. That was what was meant when it was suggested that the E.E.C. countries

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should move towards the United Kingdom-German system. I promise the Chancellor that he has got this the wrong way round.
Many of my hon. Friends have spoken about the Capital Gains Tax. In Committee on the Finance Bill we shall have an opportunity to discuss the many anomalies which are bound to arise. The Chancellor is budgeting for a borrowing of more than £700 million. Consequently, it is desperately vital to maintain the confidence of the small saver and the small investor generally. That cannot be done with a Capital Gains Tax in this form. At this hour, I do not want to deal with the anomalies, but such a tax is bound to have a deterrent effect on small savings, and I should have thought that the Chancellor could have provided for some exemption limit.
As my hon. Friend the Member for Cardiff, North said, if there is no exemption, with a gilt-edged issue below par the Government will be breaking a contract. The Chancellor seems not to agree, but he knows that if a gilt-edged stock is issued below par, say, at 4 per cent., the investor knows that, allowing for the amount below par at which it is issued, the net yield will be 4¾ per cent., or 4½per cent. if the Government do not issue below par, they will have to up the rate of interest. This, too, is a matter which we shall have to discuss in Committee.
The Chancellor announced the 5 per cent. deposit account with the Post Office Savings Bank. We all welcome any extension of savings, but he was careful not to say whether these accounts would enjoy the same exemption on the first £15 of interest which the 2½per cent. deposits have had. His hon. Friend the Member for Heywood and Royton was also worried about this point. I understand that in the Treasury these two taxes are known as the "Cap" and "Cor" taxes. When a Cockney realises how the Budget will hit him, he will say "Cor! What a Budget!"
Some consumer taxation has been raised, but the sop to the Left-wing of the Labour Party is what has been done about business expenses. [Laughter.] It is all very well for the Chancellor to laugh, but what will small commercial travellers, for instance, feel about the
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cutting of business entertainment, whether they are selling socks, or insurance policies, or whatever it may be? Commercial travellers will be among the people who will be caught.
I am sure that an interesting article in the Financial Times this morning will not have escaped the notice of the Chancellor of the Exchequer. It appears in "Men and Matters". The quotation is:
"The only really angry reaction which has come my way is, of all people, from an Inland Revenue official. 'I'd like to see an example of these luxury penthouse flats and grouse moors', he grumbled. What does the Chancellor think we've been doing? We've been through every claim over £2,000 in a year with a toothcomb, down to the smallest detail, and I don't know what you can keep in the way of yachts on less than that. A racket, indeed! It's a slander, that's what it is!'"
The writer goes on:
"Well, at least, Mr. Callaghan can claim to he the first Chancellor to give businessmen and tax inspectors a common grievance".
I think that the Chancellor of the Exchequer should think again about this matter.
Before I leave the question of the balance of payments, I should like to say a few words about the TSR2. As far as one can discover, cancellation of the TSR2 will cost us dollars. I beg the Chancellor to urge his right hon. and hon. Friends to think very clearly about this. If we are short of foreign currency, it is ludicrous to dismantle an efficient part of our industry to pay dollars for some other aircraft. I am not discussing the merits or demerits of either of them.
In the Budget the Chancellor has added to industrial costs the increase in heavy vehicle duty. How he can put another 50 per cent. on this duty, 6d. on petrol, and 6d. on tax and still say that prices should not go up is beyond me. The right hon. Gentleman cannot do this.
My right hon. Friend the Member for Flint, West (Mr. Birch), in an excellent speech yesterday, made the valid criticism that the Department of Economic Affairs had devalued the Treasury. This is a serious matter for our economy. The Chancellor knows that I have tackled the First Secretary of State on this many times in the House. I cannot for the life of me see why the Chancellor of

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the Exchequer should not be on the Board of the N.E.D.C. It is nonsense that he should not be, and I am sure that the Chancellor agrees with me. I am sure that the split between the Department of Economic Affairs and the Treasury is doing harm in that it is possible that the left hand does not know what the right hand is doing. The First Secretary of State is walking about like the "Mr. Goldfinger" of the Government. But the snag is that he is making the Chancellor of the Exchequer "Odd Job". This we do not want. The First Secretary should allow the Chancellor to play his proper rôle in planning, and so on.
Most of this Budget is a swipe at capitalism in its general sense.
Mr. Jay: Hear, hear.
Mr. Clark: The right hon. Gentleman says "Hear, hear". If that is his philosophy, there is no future for the country under his guidance for the simple reason that, as my hon. Friend the Member for Louth (Sir C. Osborne) and others have said—and my hon. Friend the Member for Oswestry (Mr. Biffen) made a valid point about this—we can have a sound economy only if we increase productivity and live within our income.
My hon. Friends and I will give all the help that we can to support the value of sterling, but I beg the Chancellor of the Exchequer and right hon. and hon. Members opposite not to sneer at the Opposition when we have the audacity, as they think, to criticise some of their policies. If we are not allowed to criticise what the Government do, there is no point in having an Opposition. It would be a derogation of our duty not to oppose.
The Corporation Tax is easily the most far reaching and it could have a detrimental effect on our invisible exports. But there is no point in killing our future simply because of dogma. Let us have a Corporation Tax if the Government want one, but do not let it operate so that it penalises people who are bringing hard currency into this country. Not only the Labour Party, but the nation as a whole will suffer because of this.
My main criticism of the Budget is that it does nothing to help those in the
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community who are creating wealth. This nonsense about being envious and jealous of anybody who makes money or earns a high salary and thinking that he is a twister is as out of date as it is untrue. The pathological hatred that some members of the Government have for capitalism is so out of date that it should be dropped. [Interruption.] The Chancellor says that I am old-fashioned, but in the operation of the Corporation Tax I am told that he has gone back 10 years in the taxing system of the E.E.C. It is no good the pot calling the kettle black.
The only comfort that we can get from this Budget is that the electorate are realising the folly of having voted for Socialism. Safe in that knowledge, I think that the days of the Government are numbered and I will do all I can, with my right hon. and hon. Friends, to see that they are put out of office at the earliest opportunity.
9.26 p.m.
The Financial Secretary to the Treasury (Mr. Niall MacDerniot): First, I have the pleasurable task of congratulating a maiden speaker, the hon. Member for Leyton (Mr. Buxton), who made what I can characterise as a traditional maiden speech. He made it with great charm and delighted hon. Members on both sides. I am sure that we all look forward to hearing him again. I would only say to the hon. Member as one who, like himself, first came into the House of Commons by winning a seat at a by-election from the Government, that he must not let himself be too disheartened when he loses that seat at the next General Election. I can tell him that for some curious reason, it seems to be the tradition on both sides of the House to help hon. Members in that plight to find another seat, and sometimes one with a greater degree of security of tenure.
I intend to devote my remarks mostly to the criticisms which have been made of the tax changes involved in my right hon. Friend's Budget. First, however, there are a number of detailed taxation points, mostly in connection with Capital Gains Tax, which my right hon. Friend did not have time to deal with in his Budget speech but which hon. Members on both sides, and in particular the interested bodies who have made

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representations about them, would be glad to have explained in advance of the Finance Bill and the White Papers which will be published. I will therefore deal with them first.
The first of these points relates to trusts. The question here is whether, in the case of settled property, the liability for Capital Gains Tax on realised gains should rest on the trustees of the settlement or on the beneficiaries. Our proposal is that it should rest on the trustees. In other words, the trustees will be liable to tax on any gains which they realise when they turn over the assets in the trust. The beneficiaries will not be liable to Capital Gains Tax if they dispose of their interests.
The trustees will also be liable to tax on any gains accrued in respect of the whole assets of the trust at the time when any life interest comes to an end as if those assets had been realised at that time. This is necessary to ensure that property which has been put into the trust does not escape its fair share of the liability to tax which will arise when property passes on a death. To avoid excessively frequent charges of this kind on a trust, the Finance Bill will contain a provision that such a charge will not be imposed on a trust more frequently than once every 10 years.
In addition, we shall provide that where a life interest is secured on particular assets, no Capital Gains Tax charge will be levied on any accrued, but unrealised, gains in respect of those assets until that life interest itself comes to an end. For discretionary and other trusts which have no life tenants, we also propose a charge on gains accrued on the whole assets of the trust at 10-yearly intervals.
My next point concerns wasting assets. As my right hon. Friend the Chancellor of the Exchequer told the Committee, the Finance Bill will contain special provisions related to the treatment of wasting assets. By wasting assets we mean assets whose life is limited, such as leases or copyright, where the life is limited by law or contract, or assets like machinery which are inherently subject to wear and tear because of use or the passage of time. It would obviously be unfair in such cases if the Capital Gains Tax calculation, when the assets were disposed of, were based directly on the original purchase price.
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We therefore propose to introduce rules, the effect of which will be that expenditure on the acquisition or creation of wasting assets with a life of 50 years or less will be treated as being exhausted by reason of use or enjoyment or the effluxion of time over the life of the asset. As a result, when the asset comes to be disposed of, the gain or loss will be calculated by reference only to the appropriate residue of the original cost.
A wasting asset is, after all, known from the outset to involve the owner in capital consumption which he incurs for his own use and enjoyment, as for example in the case of a premium paid for a private lease. There is no reason why this private capital consumption should qualify for relief against an individual's other capital gains, whether by creating a "loss" on the disposal of the asset or by reducing any gains which arise on that disposal.
Capital allowances will of course continue to be given for machinery or plant and other qualifying assets, and these allowances will not be affected by the provisions relating to wasting assets.
The next point to deal with is certain exemptions from Capital Gains Tax. My right hon. Friend has already announced that gains realised by charities and superannuation funds which qualify for exemption from Income Tax will also be exempt from Capital Gains Tax. There will be similar exemptions, either in whole or in part, for certain other bodies which enjoy favourable treatment for Income Tax. I must ask hon. Members to await the Finance Bill to see a complete list of those who will qualify for relief, but it will include such bodies as friendly societies, registered trade unions, and bodies like the British Museum.
The next point deals with double taxation relief in relation to capital gains. As hon. Members are aware, individuals who are resident, or ordinarily resident, in the United Kingdom, and are of United Kingdom domicile, will be liable to Capital Gains Tax in this country on all the chargeable gains they realise, wherever the underlying assets are situated. It is, therefore, possible that in some cases a liability to tax will arise in this country on a gain which has already borne tax in some other country abroad. We do not envisage that the gain should

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be doubly taxed, and the Finance Bill will contain provisions giving double taxation relief in these circumstances. The intention is that the relief should be given in the same way as the existing double taxation relief for taxes on income.
The next point deals with works of art. We have received a number of representations that there should be a general exemption from Capital Gains Tax for works of art. We are unable to accede to this request, which we think would be indefensible in principle, and would lead only to widespread evasion. We propose that there should be an exemption, comparable to the existing Estate Duty exemption, for important works of art and other objects of national, scientific, historic or artistic interest when they change hands by gift or on death.
This exemption will follow the lines of the exemption in Section 40 of the Finance Act, 1930, as amended. It will continue to apply so long as the objects in question are enjoyed in kind and are not sent abroad. If they are sold, Capital Gains Tax will be chargeable, unless the sale is to a national university or local authority collection in this country.
While dealing with the subject of the arts, perhaps I might answer the point raised by my hon. Friend the Member for Putney (Mr. Hugh Jenkins) who asked whether the Treasury retains a direct responsibility in relation to the National Theatre and the Royal Opera House. The answer is that both these receive their grants through the Arts Council, and responsibility is being transferred, along with responsibility for the rest of the Arts, to my right hon. Friend the Secretary of State for Education and Science.
Sir Douglas Glover: Does the hon. and learned Gentleman mean that if I sold a Goya—I have not got one, but assume that I have—to a museum for £100,000, I would pay no Capital Gains Tax, but if I sold it to Mr. Smith, I would have to pay £30,000?
Mr. MacDermot: No—I am afraid that it does not mean that. The exemption is comparable with the exemption which
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already exists under our Estate Duty law. This is a fascinating subject, but I am sure that the Committee has already found it sufficiently tedious without asking me to go into further detail.
Mr. Edward Heath: We are very interested in this point, if the hon. and learned Gentleman would like to explain it now.
Mr. MacDermot: If the right hon. Gentleman wants further enlightenment, in short the position is that in respect of works in this category—they must be works of national importance when a person dies, if they form part of his estate they can be exempted from Estate Duty. The exemption continues as long as that person or his successors continue to enjoy the works in kind, and do not send them abroad. If they sell them, the exemption normally ends and the duty becomes payable. If, however, an exempted article is sold to one of the named collections—whether it be a university, or a national or local authority, collection—duty does not have to be paid. The effect is that a collection can obtain a work of art at a lower price. The advantage is shared between the national collection and the executors of the estate.
The next subject is the exemption, which will be of considerable importance to local authorities, concerning both the Capital Gains Tax and the Corporation Tax. As the Committee will be aware, local authorities are liable to Income Tax on trading profits and other income. They can also be liable to Profits Tax. Like other taxpayers, however, they are entitled to a set-off for the interest they pay on borrowed money. The practical upshot is that in the great majority of cases local authorities do not ultimately bear any tax liability. Nevertheless, the need to examine the position year by year gives rise to a great deal of rather unproductive work for inspectors of taxes and finance officers of local authorities. The total revenue produced for the Exchequer is not great, and might be expected to be even less under the Corporation Tax.
When the Corporation Tax comes into force local authorities, being corporate bodies, will automatically cease to be liable for Income Tax. My right hon. Friend proposes, for the reasons that I have indicated, that they should also be

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excluded from liability for Corporation Tax. To avoid any possible misunderstanding I should make it clear that they will still be responsible for accounting to the Revenue for the Income Tax which they deduct at source when paying interest or other charges. The cost to the Exchequer of this exemption will be about £750,000. In conformity with the decision about Corporation Tax, my right hon. Friend proposes that local authorities should equally be exempt from the Capital Gains Tax.
I now turn to the arguments put forward principally by the right hon. Member for Bexley (Mr. Heath) against my right hon. Friend's Budget proposals. His main criticisms were that the Budget does nothing to secure a pattern of taxation which will serve the requirements of a modern and dynamic policy and does nothing to increase efficiency in exports, and that in it the Chancellor gives no account of his stewardship of our financial affairs. All these allegations were repeated this evening by the hon. Member for Nottingham, South (Mr. William Clark), who also complained that the word "sterling" was not contained in the whole statement.
There seems to be a remarkable discrepancy between the reaction of hon. Members opposite and the reaction in the world outside—both at home and abroad.
I think that the general view is that this has been a tough and courageous Budget; that it is a real attempt to measure up to the needs of the situation; that my right hon. Friend has shown a determination to tackle the immediate balance of payments situation and also to introduce measures which will set a beginning to finding a solution to our chronic long-term problems. Even the reaction of the City of London appears to have been far more favourable than many hon. Members expected—I will not say in the case of hon. Members opposite, hoped.
The right hon. Member for Bexley, in a moving passage in his speech yesterday, told us what great harm would be done to those companies on which we depend so much for their trading overseas. The right hon. Gentleman said:
"When we look at the sort of companies affected, they are I.C.I., Shell, Unilever, the cement companies, Dunlop, Metal Box, Courtauld, Schweppes, the insurance companies,
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Hawker Siddeley and other great companies of that kind. They are the ones which will be changed by the Chancellor."—[OFFICIAL REPORT, 7th April, 1965; Vol. 710, c. 499.]
The general reaction today does not appear to have been the same as that suggested by the right hon. Gentleman. In fact, not a single one of the shares of the companies he mentioned has gone down in price at all. [An HON. MEMBER: It was discounted.] If it was discounted then obviously something far more stringent and tougher against these companies was anticipated than the proposals contained in the Budget. Shares of I.C.I. in fact went up today by 10½d. In respect of Shell, which apparently, according to the hon. Member for Nottingham. South was to be ruined, there was no change at all. Cement shares which were mentioned—I think virtually all of them —have gone up. Associated Cement is up by 1s. and Tunnel by 1s. 7½d. Dunlop, Metal Box, Courtaulds are up, and so on. Of the insurance companies, 18 are up and three down, and Hawker Siddeley is up by 10½d. The headline is:
"Index up 4.4 as share recovery goes on."
I turn now to the main taxes introduced by the Budget and the criticisms put forward against them. First, the Capital Gains Tax. There has been remarkably little criticism of the decision in itself to introduce a Capital Gains Tax. There has also been, I think, little if any—I think no—criticism of the decision to maintain the short-term tax in addition to the long-term tax. I do not think that there has been much criticism—there was some suggestion from the right hon. Member for Bexley—of the decision to have a flat rate for the tax. The first criticism, which was again repeated today by the hon. Member for Nottingham, South and by other hon. Members, was of the decision by my right hon. Friend that gilt-edged securities should be subject to Capital Gains Tax.
We received many representations on this subject. In our view the effect on the market of the tax have been greatly exaggerated. Exactly similar fears were expressed at the time when the short-term tax was introduced in 1962 and those fears turned out to be ill-founded. The fact is that most of the large operators in gilt edged will not be affected by the Capital Gains Tax. I commend to the

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attention of right hon. and hon. Gentlemen the article in The Times of 17th March analysing the gilt-edged market.
Sir D. Glover rose—
Mr. MacDermot: I would rather not give way.
Banks and other dealers are already subject to both Income Tax and Profits Tax on gains on realisation. Another large block of investors in gilt edged are already exempt and will remain exempt, namely charities and approved superannuation funds and overseas investors. The chief change will be in the existing position of life assurance companies, which have about 12 per cent. of the non-official holdings.
Mr. Nigel Birch: The hon. Gentleman is dealing with the question of switching, which will, of course, affect the gilt-edged market. The real objection to applying Capital Gains Tax to the gilt-edged market is that many securities were issued at a low rate, below par, on the full understanding that that profit would be tax-free. This is fraudulent.
Mr. MacDermot: I will not give way to the right hon. Gentleman again. It is a waste of time to do so.
Mr. Birch: Answer.
Mr. MacDermot: I am about to. I cannot answer every argument at once. I was dealing at the moment with the first argument, that this would disturb dramatically the operation of the market and destroy the market. Another argument which has been put forward is this breach of contract theory, particularly in relation to the short-dated securities. If this argument is followed, its implication is that the Government may never alter rates of tax. [HON. MEMBERS: "No."] Of course it is. Any alterations in a rate of tax from which a benefit is to be derived will alter the position of the recipient, the taxpayer.
Mr. Birch rose—
Mr. MacDermot: I will not give way. The last time I gave way…
The Chairman: Order. Both Front Benches are getting into the habit of setting a bad example to the rest of the
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House in shouting to each other across the Floor.
Mr. MacDermot: The next criticism against the tax put forward by the right hon. Member for Bexley was that the rate of 30 per cent. was too high. This is not a criticism, I think, which has been widely voiced. I confess that one of the few doubts I had while listening to my right hon. Friend delivering his speech was whether the rate of the tax had not been pitched too low. When I saw the faces of hon. Members opposite when they heard the announcement, I thought that they would have difficulty in trying to persuade the country that they thought that it was a penal swingeing rate, particularly compared to the rates of Income Tax.
The third complaint he made was that the tax took no account of inflation. My answer is to ask why this tax should be singled out for a built-in hedge against inflation. It is not only capital gains which can contain an inflationary element. The ordinary wage earner who gets a wage increase in order to keep pace with the rising cost of living frequently, by that increase, is brought into a higher tax bracket and may have to pay at the standard rate. He does not get any relief from the increase in taxation which results from it. We all want to see inflation held in check, but building defences against inflation into the structure of a tax system is not a satisfactory way of trying to achieve that goal.
His next criticism was a wider one and I think was levied against both the main taxes—that they tax wealth and redistribute it. The real purpose he says of both taxes is to secure the redistribution of income. Indeed it is, and we make no apology for that. On the contrary, to us it is a justification of these taxes. It stops a large amount of increased earning capacity from escaping the tax net.
One has only to compare the position of the ordinary wage earner, who has to pay taxes on the whole of his income—and the hard way; by deduction in advance—with the wealthier person who, under a supposedly penal rate of taxation, may be in the happy position of living at a far higher standard of living, with his wealth continuing to increase, becoming richer and richer, because a large part of his spending power escapes

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the tax net because it is in the form of capital gains.
This is an elementary act of social justice, one which is understood widely throughout the country as such and one which we regard as being an essential preliminary to being able to obtain any agreement for a prices and incomes policy.
The final criticism levelled against the tax was that we have reached a position in which football pools and bingo are all exempt from any form of taxation. After an interruption, the hon. Gentleman corrected himself about that. It is indeed a popular fallacy. Football pools are, of course, not exempt and 25 per cent.—
Mr. Heath: The recipients are.
Mr. MacDermot—of every stake in football pools goes to the Exchequer. That goes to reduce, by 25 per cent., the pool out of which the winnings are paid.
Mr. Biffen rose—
Mr. MacDermot: If that does not affect the recipient, I do not know what it does.
Mr. Biffen rose—
Mr. MacDermot: I must get on. The hon. Gentleman went on to compare a bingo session with capital gains.
Mr. Biffen rose—
The Chairman: Order. If the hon. and learned Gentleman does not give way the hon. Member must resume his seat.
Mr. MacDermot: It made me wonder whether the hon. Gentleman had ever been to a bingo session. If that is his idea of a candyfloss society, it is certainly not ours.
Mr. Biffen rose—
Mr. MacDermot: I will not give way.
Mr. Biffen: Why not?
Mr. MacDermot: Because I have given way enough. I have a lot to say and I do not have much time in which to say it.
We come to the Corporation Tax. Here the hon. Gentleman said, and tightly, that there is a genuine difference of view between the two sides of the
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Committee. We consider that it is better for the tax system to offer an inducement in favour of ploughing back. He and his hon. Friends consider that it is better to favour distribution. His contention is that the inducement to plough back is not an inducement to a dynamic, growth economy and we think that it is. He claims that it is not the survival of the fittest but the survival of the fattest.
He sought to support his argument by a criticism of what I said in the debate on the German Double Taxation Relief Order. On that occasion I said that we were about to catch up with the Germans, who had and who had had for some time a corporation tax. I said that the new taxes would bring our tax system into closer approximation with theirs. That is true, but I was not talking about the rate of taxation but the system of txation.
Mr. Heath: Really?
Mr. MacDermot: Before the right hon. Member for Bexley shakes himself to bits, could I point out to him that it has never been possible, under the German tax system, as it is here, for shareholders to be credited with tax which is supposed to have been paid by the corporation when no tax has ever been paid at all? It has never been possible in Germany or any European or North American country to allow double taxation relief on earnings of foreign subsidiaries of resident companies so that the foreign tax extinguishes the personal income tax liability of shareholders. It has never been possible in Germany to reclaim income tax on a dividend which is deemed to have been paid net of tax when, in fact, no tax at all has been paid because it was extinguished by capital allowances. These are all part of our system which will be changed by the Corporation Tax, which happens to be the thing about which I was speaking.
It is true that since 1953 the Germans have adopted a differential rate of Corporation Tax which favours the distribution of profits.
There was a special reason for that. The Germans had no capital market of any significance, and 80 per cent. of their industrial finance came from undistributed profits. Since the rate of their corporation tax is high—and I do not know

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whether the right hon. Gentleman is suggesting that we should adopt the German corporation tax rate—fast-growing firms found difficulty in obtaining finance. The German idea was to make it possible for a capital market to develop, but up to now they have not been very successful in obtaining that market.
Our situation is different. We have a highly-developed capital market, and we have no wish to discourage access to it. That is not our objective. Our objective is to increase the rate at which dynamic firms can grow, by lowering the burden of taxation on ploughed-back profits. It is all very well for the right hon. Gentleman to talk about this being a question of the survival of the fattest; the fact is that a new enterprise has no choice except to grow out of undistributed profits or to borrow the capital it needs, and it is only the already well-established firms with good prospects which can have recourse to the market for equity issues. This reduction in the burden of taxation on undistributed profits is a far more important factor in encouraging the young and the dynamic companies, not yet well established, when seeking to break through the ring.
The right hon. Gentleman then complained that the Corporation Tax would mean double taxation, but he did not waste much time on that, and I do not propose to do so either.
He argued that it would do great harm to our companies overseas; that it was putting another, I think, 41½ per cent. on the dividend as a burden on the companies if they pay at standard rate. I think that he meant if they seek to pay the same net dividend but, even then, I suggest that his proposition is not accurate. However, we can leave the technicalities of these arguments to the Finance Bill debates. The essential point here is that we are seeking to remove the bias in favour of overseas investment which is built into our system, and which is unique in it. It is no good right hon. and hon. Members opposite trying to invent a British-German tax system that does not exist. There is an inherent distinction between our system and theirs, and between our system and virtually every other tax system in the world in this respect.
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The right hon. Gentleman agreed that over the years we had over-invested abroad—or perhaps it was the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) who agreed with that proposition. He also accepted that it was sensible to take remedial action to reduce the investment dollar pool in the interests of our reserves. But hon. Gentlemen opposite, whilst agreeing that we should take action to deal with the immediate symptoms of our balance-of-payments problem, held back from accepting the need to grapple with the roots of the problem, which is this bias in our tax system.
It is quite wrong for hon. Members opposite to try to depict us as being in the position of Little Englanders. As my right hon. Friend has said, we have no intention of stopping the export of capital abroad. What we must do is to keep it within bounds, to moderate it within the terms of what we as a country can afford. If this is done, we can continue to be net exporters of capital, as we have been in the past, but not to do so in a way that will submit us to the continual and recurrent balance-of-payments crises which have been bedevilling this country ever since the war.
Whereupon Motion made, and Question, That the Chairman do report Progress and ask leave to sit again.—[Mr. Fitch]—put and agreed to.
Committee report Progress; to sit again upon Monday next.

PRESTON POLICE (FORMER CHIEF SUPERINTENDENT)
Motion made, and Question proposed, That this House do now adjourn. [Mr. Fitch.]
10.0 p.m.
Mr. Peter Mahon: I wish to refer to the case of Mrs. Marquis. I am pleased to have the opportunity of pleading this widow's case on the Floor of the House of Commons. To read her first letter to me should serve her case well. The letter reads as follows:
"Dear Mr. Mahon,
I am writing to you in respect of the death of my late husband, Chief Superintendent F. K. Marquis, the Deputy Chief Constable of Preston. The following summary will enlighten

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you, and it is by the provision of this information, that I would hope you may be in a position to render your help and guidance. He died as a serving police officer, and there are certain unfortunate circumstances concerning his service about which I should be glad of your advice.
My husband had an illness which necessitated hospital treatment and an abdominal operation in 1963. It was thought that the trouble had been cleared up, but a medical check twelve months later, in the summer of 1964, showed the necessity for a further and immediate operation. This took place in August of last year, and, owing to his internal condition, a colostomy operation was performed.
Unfortunately, his health did not maintain the improvement which had been expected and the Police Authority resolved, after considering a medical report upon his health at a meeting held on 17th November, 1964, to terminate my husband's police service on medical wounds with effect from 1st December, 1964, when he would have completed 26 years 56 days' police service, and award him a medical pension with commutation of one-quarter of that amount for a lump sum of £3,132 13s. 6d.
My husband died seven days after the meeting of the Police Authority and before their resolution could take effect. Had he lived another week he would have died as a police pensioner. and, in addition to my widow's pension, I would have benefited by the aforesaid lump sum.
I should like to say that the Chief Constable of Preston, Mr. F. Richardson, his senior officers, and the Town Clerk of Preston, Mr. W. E. Lockley, have all been most helpful and sympathetic at all times during the indisposition of my husband and since his death. Both the Chief Constable and the Town Clerk have taken an interest in my welfare and have investigated the position concerning the death of my husband as a serving police officer before his retirement had taken effect.
Everyone has been most kind, and I know that the Town Clerk personally consulted authorities at the Home Office to see whether there was any way in which I could be spared the dual loss of my husband, and his commutation award. The Police Authority is advised, however, that this cannot be done because he died as a serving police officer and the resolution of the Watch Committee was annulled by my husband's death on November 24th, 1964.
My position is now such that it will be necessary for me to take up employment and this I propose doing in the very near future. My pension as a police widow will amount to £324 19s. 1d. from the Police Authority plus 15s. a week from the Preston Borough Police Widows' and Orphans' Fund. As I am under the age of 50, I am not eligible for a widow's pension from the State. I should like to explore every possibility as to whether a more favourable decision could be obtained about the award of my late husband's commutation benefit. If you require any further particulars about the matter. I am sure that the Chief Constable or the Town Clerk of Preston would be pleased to supply them.
In conclusion, I would like to extend my sincere thanks for your kind help in this matter.
I remain.
yours sincerely,
Eva Marquis."
It will be agreed that this is a most intelligent letter from a reasonable person. I have been most impressed from the very start by the dignified manner in which Mrs. Marquis has presented her case.
The gravamen of my complaint is that so literally to interpret the rules governing the Police Pensions Regulations, in this most unusual case and in such extenuating circumstances, constitutes, in my humble, opinion the gravest possible injustice. I have been everywhere, I have seen everyone, I have been treated with the greatest possible courtesy and consideration. Tremendous sympathy has been extended, but, in cases such as this, sympathy is as mustard without beef—it burns without relief.
I am asking for the practical expression of the sympthy which has been expressed so abundantly. It is positively ludicrous and absurd and reprehensible that regulations are so rigidly framed as not to allow the milk of human kindness to flow in a case where there is so much sorrow and hardship. Are we masters of our own house? I have been informed during my endeavours that were it not for possible future strictures from an omnipotent figure known as the district auditor, there would be no obstacle in obtaining a more generous interpretation of the provisions of the fund.
To me and my constituents, that Mrs. Marquis must, for the rest of her life, abide by an adjudication of this sort would appear to be a sin crying out to heaven for vengeance. It has come home to me very forcibly in recent months that it does not follow as a natural corollary that a Member of Parliament is a person with a great sense of responsibility. But 32 years in local government, during which I have been a member and chairman of a watch committee and many other committees, have given me, I hope, a keen sense of purpose and responsibility.
I am not asking for the flood-gates to be opened so that irresponsible claims may be made or met, but I am asking in

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all humility once more that the regulations be looked at again and that if sanity prevails this widow be given her entitlement of £3,132 13s. 6d., the sum which is being withheld from her because her husband died six days too soon. To my mind, this is a debt of honour.
A unanimous decision was made by the watch committee on 17th November, 1964, and it would have been ratified by the full council at its meeting on 1st December, 1964. There are seven days standing between this widow and elementary justice. Can we, with the widest stretch of the imagination, be expected to believe that that mild-mannered man, the district auditor, is the one who will stand between Mrs. Marquis and a full expression of the justice to which she is rightly entitled? For the life of me, I cannot believe this to be so. I cannot believe that it ought to be so.
Mr. F. K. Marquis was a police officer with an impeccable record. For more than 26 years of his life he rendered devoted service. Today, there are greater rewards and inducements to service in the police forces than ever before, yet, with it all, there is scarcely a police force in the country which is not seriously undermanned. There must be a reason for this. Could it possibly be that, in the hearts and minds of people who might be inclined to serve, there is a lurking fear that, "when the chips are down", in sickness, in injury or in death, they or their dear ones may not receive the consideration they deserve, that in some way or other justice will not always reign supreme? Is it this which is militating against recruitment to our police forces?
This man started on the beat. I have never believed that the punitive approach alone will eliminate crime. In my long experience, I have discovered that the man on the beat is the best antidote to crime. I hope that, as a result of these representations, a change will be made in the inadequate provisions of the Police Pensions Regulations so that a commutation of a quarter of the amount of the pensionable sum, namely, £3,132 13s. 6d., will be awarded to Mrs. Marquis retrospectively.
10.14 p.m.
The Joint Under-Secretary of State for the Home Department (Mr. George Thomas): My hon. Friend the Member for Preston, South (Mr. Peter Mahon) addressed the House with deep sincerity, and we all appreciate that behind his appeal tonight there is a fund of good will for Mrs. Marquis. My hon. Friend has pursued this matter with great diligence. In the House, he has pursued me as spokesman for the Home Office. He has come to see us at the Home Office. No hon. Member could have fought harder or more diligently than my hon. Friend has. I gladly pay him the tribute that he has fought for Mrs. Marquis in a manner which does him credit as well as the House of which he is a distinguished Member.
This case is not a matter for our discretion. If it were our discretion to exercise compassion, my hon. Friend would not have needed to pursue us with the diligence that he has. The case of a widow of a man who gives many years of faithful service to the police and who dies as a member— indeed, as the deputy chief constable of his force—is one that is bound to arouse our deepest feelings.
My hon. Friend has correctly told us the facts. The widow's ordinary pension of about £325 a year under the Police Pensions Regulations is being paid. If the husband had lived a week longer, with the result that his own retirement pension would have become payable, about £3,000, representing part of his pension which he had decided to commute for a lump sum, would have formed part of his estate on his death.
There are two things that I must make clear at the outset. The first is that this is a matter primarily for the local police authority. As we have been reminded, the police authority has considered this case sympathetically and in detail but it has not been able to find any way in which it can help. The second thing, as my hon. Friend will appreciate from the correspondence and discussions which I have had with him, is that the Home Office would very gladly advise how Mrs. Marquis's position could be improved if we could see any way of doing so. I know that my hon. Friend says that sympathy is not enough, and I understand his position, but with the best will in the world we cannot ignore

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the provisions of the Police Pensions Regulations or the facts of the case.
Mr. Marquis had been ill for some time before he died and he was, of course, during this time entitled to sick leave on full pay. It became clear, however, that he would never be able to resume his police duties and the police authority was faced with the need to decide whether his pay ought properly to be replaced by pension. In other words, it had to decide, as it is required to do under the Police Pensions Regulations, the date on which Mr. Marquis should retire on medical grounds.
The decision that he should be retired on medical grounds was taken on 19th November, 1964, and the police authority decided that he should be awarded an ill-health pension as from 1st December, 1964—just a fortnight later. The police authority acted in this case, so it thought and I believe, with feeling for the Marquis family. It accepted his notice that he wished to surrender part of his pension for a lump sum.
Unfortunately, within a week, on 24th November, Mr. Marquis died. The Police Pensions Regulations provide for the award of a pension calculated according to the length of a man's service and his average pensionable pay on retirement. Before 1st August last, a policeman, if the police authority agreed and he satisfied it that he was in good health, could surrender part of his pension in return for a lump sum calculated from tables prepared by the Government Actuary. His pension would then be reduced by the amount which he had surrendered.
As from 1st August, last year, it became possible for the first time for a man who was obviously very sick to commute part of his pension. My hon. Friend would not have been raising this Adjournment debate tonight if Mr. Marquis had died before 1st August, because there would have been no question at all of his having the right to commute part of his pension without a medical examination. The improvement which was introduced last August was made as the result of proposals put forward by the police staff associations. in Mr. Marquis's case no medical test was required under the amended provisions, and his pension, unfortunately, never materialised, because he
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died before the date fixed for his retirement on medical grounds. There was nothing he could surrender in return for a lump sum. The sad fact is that he died before his pension, and, therefore, his lump sum never became payable.
When a policeman dies in service, whether it be a matter of days, weeks, or months before the date fixed for his retirement, for whatever reason, no retirement pension is payable and his widow and dependants receive the appropriate widow's pension and allowances, if the conditions laid down in the regulations are satisfied. We have given the most careful and specific consideration to this case, but the regulations are quite specific and have to be observed.
The circumstances of a case like this arise from the structure of the police pension scheme which rather differs from some other public service pensions schemes in that the police scheme provides for a pension and an opportunity to surrender part of it for a lump sum, whereas most other public service arrangements provide a lump sum and a correspondingly smaller pension. Again, in the case of a widow the police arrangements provide for a pension, but, except in certain circumstances, there is no provision for converting it into a lump sum. Other public service arrangements provide a lump sum payment to a widow whose husband dies in harness in addition to a smaller pension.
This is not to say that police pension arrangements are less generous than those of other public services. Indeed, in some respects they are more generous than other pension schemes. It is merely a matter of the structure of the scheme and the staff side knows that if it wishes to have a different structure, the official side would be very willing to discuss the matter.
The House will appreciate that this is not a case of interpreting the regulations too rigidly. There are no provisions which would enable this payment to be made to Mrs. Marquis. We have to be careful not to create injustice by the special treatment of a particular case. We must also avoid establishing the principle that if a benefit is not payable under a pensions code, because the conditions for the benefit have not been satisfied, the benefit should be paid extra-statutorily.

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I know that, with his long and wide experience in local government, my hon. Friend will appreciate this.
This is a hard case in which a police officer died within a week of being entitled to receive £3,000. There will be examples of those who die within a fortnight, or within a month, or within six weeks, or within three months. Where are we to draw the line? Wherever the line is drawn, there will be a hardship case inevitably produced by somebody who would be a day outside.
Therefore, the choice is not before us as to whether we should exercise our discretion. The House has put upon us the responsibility to administer the Regulations and to observe them as fairly and evenly as we can. There is nothing that I would prefer to do than to meet the request of my hon. Friend on grounds of
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compassion and humanity and of common decency. Any hon. Member holding the responsibility which we hold in the Home Office would, I know, be only too pleased if he could give a favourable reply to the request so movingly presented to the House by my hon. Friend.
This is one of the most difficult cases with which I have had to deal, and I wish in my heart that I could have stood at this Box tonight and given an answer which would bring joy to Mrs. Marquis as well as to my hon. Friend. Unfortunately, there is no legal way by which I can do this. I have to assure my hon. Friend that we have leaned over backwards to try to find a way to help, but it just is not possible within the Regulations as they stand.
Question put and agreed to.
Adjourned accordingly at twenty-six minutes past Ten o'clock.