HC Deb 17 May 1965 vol 712 cc1016-122
Mr. W. R. Rees-Davies (Isle of Thanet)

I beg to move Amendment No.1, in page 1, line 16, to leave out subsection (1).

I move, also, to leave out Schedules 1, 2, 3, 4, which cover the whole range of beer, wines and spirits, both British and otherwise.

The Chairman

Order. The hon. Member is to move his first Amendment only. The others are consequential and will be discussed with it.

Mr. Rees-Davies

Yes, Dr. King, I was about to say that the main Amendment is the first one and that the others which are discussable with it are Amendments Nos. 4 to 7, in page 121, line 1, leave out Schedule 1; in line 31, leave out Schedule 2; in page 122, line 1, leave out Schedule 3; and, in line 23, leave out Schedule 4.

As my right hon. Friend the Member for Bexley (Mr. Heath) has already said, we have begun a long and arduous task. The first thing that we want to get clear is that this group of Amendments pinpoints generally the policies of Her Majesty's Government and the principles upon which they operate. It is useful as a pipe-opener for the general range of the debate later and I will try to set out briefly the backcloth against which the Government's policies are set.

The purpose is to penalise private people with punitive taxation, to permit profligacy in the public sector quite openly, to deny personal pleasures to the public, particularly to the purse of the pensioner, and to push up prices. These generally will be the resultant effects of the Budget as a whole and these will be seen, in particular, in relation to these Amendments.

As the Minister of Housing and Local Government was sipping his glass of Chablis in Prunier's, which resulted in his losing his papers at the time, and as the First Secretary was taking a good pull at his gin to fortify himself after his recent escapades and to drown his sorrows at the recent results, the Chancellor of the Exchequer, whom I am delighted to see here, was reminding himself of his philosophy last year on the subject of whisky and "purple hearts" and was being reminded by those in the Official Box how he could get out of the difficulties of what he said on that occasion. Unfortunately, when he considered these matters with his colleagues they overlooked the attention which they ought to have given to their philosophy which we on this side of the Committee have always said attacks the simple pleasures of life.

It is basically because we on this side believe in reducing taxation and have always said that the Socialists believe in a rapid increase of taxation in the private field, but never believed in a control over their profligacy in the public field, that these Amendments pinpoint one very useful aspect of this debate.

Last June, the Chancellor first of all attacked the then Prime Minister, who had made it quite plain that if the Labour Party was returned to power there would be an increase in taxation. The present Chancellor said: The Socialists may be going to raise taxation in the future. I do not think that that is true, and certainly the Prime Minister has no occasion for saying it.' The right hon. Gentleman also said, referring to our record, that It is a record which I am sure the Government will be proud to publicise among their records—that they have raised taxation on spirits to the highest level ever. This Government have now not only broken the record on spirits twice running and gone off with the cup, but they have done it also on wines and on beer as well to a level never achieved before.

4.0 p.m.

The most attractive observation which the Chancellor made at that time was when he was amusing on this point and said: We have had a lot of discussion about drugs, I read that Professor Capps, a professor of forensic medicine, has said that as many people take drugs today as drink. I do not know what he includes among the drugs … while a bottle of whisky costs 45s., one can buy purple hearts … for 6d. a time". It is sad to have to eat one's words, but the public are entitled to know that, last year, the Chancellor was strongly expressing the view that in no circumstances should there be a higher rate of penal taxation on wines and spirits. He said—these are his words—that those who have been directing their attention against alcohol might ask themselves whether we have now reached a situation in which they might transfer their activities".—[OFFICIAL REPORT, 2nd June, 1964; Vol. 695, c. 945–6.] I start by drawing attention to those observations, because I shall show quite plainly that on certain items we have now reached the limit. The law of diminishing returns is operating. What will the general effects be? First, there will be growing demands for pay and income rises to meet the standards which the normal man and women expects today. If you ask the ordinary person to pay a penal amount more for his wines, his spirits and his beer, there will be a profound effect on the First Secretary's incomes policy for which the right hon. Gentleman claims so much. It will drive a coach and horses straight through it by leading to further pay demands.

The second effect will be that those who cannot afford to pay these increases will suffer rationing by the purse, something which profoundly affects many constituencies where there is a large number of elderly people and those living on small fixed incomes who cannot hope to find more money to meet the increases.

The third effect—this is a matter about which I know a certain amount myself—will be on the tourist trade. This year, there has been a higher number than ever before coming in from overseas, and many of these people stay for their holidays in this country. It is not idle to suggest that a good many people, when they go on holiday, want to drink a good deal more than, perhaps, they drink otherwise, and when they come here as tourists they like to be able to sit down and have good food and good drink, to go to the "pubs" and enjoy themselves.

We have now reached a stage when prices are so high that many people claim that it is more expensive to feed here than it is to feed in Paris—and, goodness knows, that is high enough. Undoubtedly, the cost of a meal, if one drinks at all, is so high now compared with other tourist countries that there is a serious effect upon the tourist trade. The recent increases will in due course have to be carried by the public—they have been carried by the trade to a large extent hitherto—and this is likely to have a growing adverse effect upon restaurants, hotels and other sections of the trade.

The export trade, also, is affected in this way. There is acute resentment at the continuance of the import surcharge imposed last October. True, it has been reduced to 10 per cent., but no indication has yet been given that this charge, which was originally to be carried for only a few months, is not likely to be something of a permanency. The tax now applied by the Budget on top of the surcharge will lead to a form of double taxation which was really never intended by the Chancellor, according to his stated aims last October when he said the purpose was purely to reduce imports. We now find that the resultant effect, in fact, is double taxation. It is worth remembering that both wines and spirits have been regarded as foodstuffs, but they were specially excluded from the exemptions which were applied to foodstuffs at the time.

The next factor which calls for attention is the complete lack of imagination in the Budget. There are other directions in which the Chancellor could have looked to find the tax, if tax was required, and, in any case, I am by no means certain that his present proposal will succeed. It certainly does not succeed if the purpose be to siphon off some consumer expenditure at this level, because, although it may have some such effect, on the one hand, there will be increased demands, on the other. If it be the purpose, which I should have regarded as a proper purpose, to secure the maximum yield for the Treasury, there is no doubt that we have reached the stage when the higher taxation will produce a lower yield and will not achieve the purpose of obtaining the full benefit of taxation for the benefit of the Treasury.

I turn now to each of these items in turn. First, the wine and spirit trade. Here we have broken all known records. It is true that 10 per cent. was put on by my right hon. Friend the Member for Barnet (Mr. Maudling) in April, 1964. There was then the further tax of 15 per cent. applied by the surcharge in October, 1964, and now, in April, 1965, there is over 4s. a bottle on spirits—taking into account, of course, the necessary costs of interest borne by the trade in respect of the 4s. increase—and there is the best part of 1s. on wines. A bottle of whisky or gin now carries 34s. in taxation, and this in a trade in which there has been no complaint that the ratio of overheads and profit margins to prices was not reasonable.

What is the position in which the Treasury finds itself here? Consumption per head of the population per year is about three bottles of wine and about three bottles of spirits. Plainly, if further revenue for the Treasury were desired, there is immense scope for expansion, particularly in wines. But there is scope for expansion only if the purpose is to secure the maximum yield by having moderate and, if possible, reduced prices. The evidence provided by the Budget is quite to the contrary. Taxes have been imposed recklessly and without regard to the basic purposes of taxation in this connection, namely, to secure the maximum benefit to the public by the highest yield to the Treasury. The law of diminishing returns has at last begun to operate in two respects.

For the first quarter of 1965, there was a fall in imports of wines from 5¼ million gallons to 4¼ million gallons, a quite dramatic fall. In spirits, the fall has been from 1,146,000 proof gallons to 711,000, again an immense fall. It may be true that this is due in substantial part to people holding off buying as a result of the 15 per cent. surcharge, but it is equally true that the new charge now being put on by the Chancellor has led to prices which many members of the public now find intolerable and are not willing to pay.

Evidence on the question of yield is not far to seek. The Chancellor will recall that, in 1949, when wine consumption was falling badly, Sir Stafford Cripps halved the duty on bulk light lines, and the resultant effect was that, over a period of years from 1949 to 1963, consumption increased no less than 13 times; it went up once almost for every single year, year by year. The revenue to the Exchequer increased by over 8 times. Significantly, bottled light wines were not included in that reduction of tax. The result of their inclusion in 1960, however, was an increase within three years of 230 per cent. in the yield of the revenue on light wines.

It is impossible to deny that if one takes a sensible reduction in taxation one increases consumption and overall revenue. This is a clear, plain case. Therefore, if the Chancellor has imposed the taxes not to secure a benefit and yield to the Treasury but for some other purpose, it must be one of two. It must either be to prevent inflation, in which case I say he is wrong because it will increase the demand and prices will rise, or it is in the pursuit of syphoning off private purchasing power in order to assist the public sector, a matter about which we complain so bitterly.

Mr. James Tinn (Cleveland)

Would not the hon. Gentleman agree that, while a reduction in the tax on wines might have a beneficial effect on the revenue to the Treasury, the increased consumption would have a harmful effect on the balance of payments?

Mr. Rees-Davies

I will deal with that argument in some detail in a moment. It is a fair point to make about harm to the balance of payments, and it ought to be replied to, and I shall deal with it.

I want to continue my argument on the main question of yield and consumption. I deal, first, with whisky. I am not a Scot and do not drink whisky. I have never touched it in my life. I know that that is a terrible thing to admit, but if one is partly Irish and partly Welsh and, in fact, a Man of Kent, that is perhaps some excuse for not drinking whisky. In Kent we pro- duce our own beverages, though they have not perhaps such a high alcoholic content.

The consumption of whisky was 73 per cent. more in 1964 than in 1939. It is nothing like as great as the amount which used to be drunk in the 'twenties, and the reason is the heavy rates of taxation imposed by both sides of the House of Commons over many years. But no one has previously achieved a double tax such as that which hit the industry in October and now hits it again, to such an extent that the retail price of whisky is now 48s. 6d. a bottle. I suggest that if more revenue is required there, a substantial reduction in tax would lead to a very much higher yield of revenue. I am sure that there will come a time when the Treasury will have to look in that direction in order to meet the heavy burdens now on the Department.

Another thing to be considered is the cost to the wines and spirits trade. Every time the Government have made these tax changes—it has happened thrice in the last year—the result has been to cost the trade a fortune. It has had to print new brochures and publicise new trade rates. On top of that, the trade now has to face an additional 33⅓ per cent. in the postal charges for sending out the brochures. The last change was made by the Chancellor before Christmas. All this has led to a great waste in both materials and manpower, because everything that was done in November now has to be done over again.

It is a good thing that what is being done now is being done at this time of the year, but, if the Chancellor had intended to do it, it would have been simpler if he had put up this rate of taxation as well as the import duty last November and so saved some of the expense.

Mr. John Rankin (Glasgow, Govan)

Would not the hon. Gentleman agree that during the period the retailer of whisky has adapted his measure, which is not defined by Statute, to meet these circumstances and is still making a gross profit, which is quite difficult to define?

Mr. Rees-Davies

I would not agree with the last point. Of course, the measures are changed. If, within a couple of years, the price of whisky rises to such an extent as it has done, it becomes like the nectar of the gods and one has to pay for and treat it in that vein. But the gross and net profit margins at the moment, in view of the attempt by the trade for a short period to carry this immense and penal taxation, are very low. I do not think that they can be maintained for ever. It will be very difficult to maintain them as they are in the future.

4.15 p.m.

I turn to what I think is the strongest of all the cases. I would ask the Chancellor to be good enough to try to give this matter separate consideration from the other matters. I refer to the position of port wine. I was concerned with my hon. Friend the Member for Rye (Mr. Bryant Godman Irvine) with the representations for a reduction in the incidence of taxation on port wine in 1958 and 1960.

I would remind the Committee of the ludicrous situation in which the Chancellor found himself in relation to this trade. In 1939, port wine was sold to the extent of 3,840,000 gallons. Ten years later, in 1949, the quantity had fallen to about a third—1,430,000 gallons. Following representations in 1958 and 1960, the duties were about halved, to assist port wine—from 50s. to 26s.—and the consumption began to increase steadily—it increased by over 200,000 gallons. The trade was just getting under way when port wine was retaxed. The tax has now gone up to 35s. per gallon, so that more than half of the tax has been reimposed.

There were three simple reasons for the lengthy representations which took place. First, it was thought reasonable that people should be allowed to drink port wine. It is very widely based. Women drink it. People of all classes and all kinds drink it. The consumption had fallen a great deal. Also, we were dealing with a country of great friendliness to our own—Portugal. A large amount of British capital has been put into the port wine trade of Portugal, and that capital is closely linked with one of our most friendly allies in E.F.T.A. Portugal's trade with us depends upon her being able to import goods from us, and for that purpose port wine is one of her main exports.

As to the balance of payments, in 1964 our exports to Portugal amounted to £35 million and our imports from Portugal were £25 million. Therefore, an increase in the export of port wine to this country would still leave us with a very substantial favourable balance of trade with Portugal.

There is a special case here. This has been recognised in previous years on both sides of the House of Commons. Therefore, I would ask the right hon. Gentleman to look into the port wine trade and consider whether he cannot entirely exempt port, which is a particular form of wine, from duty. The result of what has happened is that there has already been a marked falling off not only in the amount of port being brought into the country, but in its consumption. Shortly, we shall have to start all over again on the path of trying to bring about an increase in consumption. That will bring benefit in the way of yield to the Treasury. It will also bring benefit in another way. Looking to the future, I would say that one of the nicest drinks if one has a little leisure is port wine. It really helps. It is better to drink port after dinner than brandy. I would add that I like port. I drink it.

Mr. Rankin

The hon. Gentleman should sell it.

Mr. Rees-Davies

I am trying to sell it. It is a pity that, having gone on many deputations over the years, to try to secure a fair opportunity for the trade, I see the whole thing reversed this year at one stroke and all the good undone by this very silly provision.

There is a tax of 35s. a gallon on heavier sherries. The tax before the war was 8s., so the rise has been 4½ times. It is now about 5s. 6d. a bottle. There is great anger and resentment in Spain at the retention of the surcharge, just as there is in Portugal and France. Our exports to Spain last year totalled £67 million and our imports £60 million, so this is another case in which we would be entitled to a substantial increase of sherry and port while still retaining a proper balance of trade. It would benefit the Treasury and certainly do no harm to our balance of payments. The figure of consumption of sherry has shown some increase, but I am informed that, following this latest tax increase, it will show a substantial fall.

Then there is the question of taxation on beer. We would agree that tea and beer affect every individual in the country. Basically, we are a tea and beer drinking nation. I am prepared to concede that a further 1d. a pint on beer plus another 1d. resulting from increased overheads in the past year means a total increase of 2d. a pint. I concede that this is not yet reaching the law of diminishing returns because, in the main, beer is a cheap drink. But when the Chancellor lifts a pint of beer to his lips he drinks his first half pint as tax. Only with the other half does he get the enjoyment. It is a deplorable picture.

It was always considered that the tax on beer could not get beyond 8½d., but now we are reaching new and dizzy heights. The tax has gone up to 9½-d. If one levies an increase on a man's beer it is pointless to argue that he will not, in union negotiations, manage to gild the lily a bit and claim a higher wage which will include something to compensate for the rise in the price of beer.

The duty on beer has gone up by four times compared with pre-war. It used to he 2½d. a pint. The actual price of beer, however, has only gone up by just over three times. The price level of beer, without the heavier tax increases, would therefore, be in line with other classes of goods. If the price of beer charged by the brewers had been allowed to rise at the same rate as the taxation, the cost would now be 1s. 11d. a pint instead of 1s. 7d.

Mr. Rankin

But when a man drinks a pint of beer he knows that he is drinking a pint and that the measure is safeguarded by Statute. The amount is denoted on the glass. Would not the hon. Gentleman agree that the same should prevail with spirits instead of leaving the matter to be wangled?

The Chairman

Order. Whether or not the hon. Member for the Isle of Thanet (Mr. Rees-Davies) agrees is not in order in this debate.

Mr. Rees-Davies

I am glad, Dr. King. We shall have to debate the measures on a more suitable occasion. However, there is enough force in what I am saying and no doubt in what my hon. Friends will be saying to draw the Chancellor's attention to this matter.

What will be the effect of this additional tax on beer? There will be a fresh impetus to rising prices, further wage claims and a perfectly natural desire by the unions to want more, with spiralling prices as a result. What has been the position of the beer industry? It has installed modern bottling methods. It has kept its overheads down by efficiency. The total labour force is only 70,000 throughout the country. It is a pity that, at a time when brewers have managed to keep the labour force at a reasonable figure, overheads down and prices fairly reasonable, they find themselves going "over the top" because of the new tax.

Mr. Eric Lubbock (Orpington)

The hon. Member for the Isle of Thanet (Mr. Rees-Davies) was asked whether he would deal with the balance of payments argument. He must have something to say on that, for we must recognise that the difference between imports and exports from one particular country may not be relevant to the question of the balance of payments as a whole.

Mr. Rees-Davies

I have dealt with the cases of Spain and Portugal. I shall not go into the general question whether or not the surcharge is desirable, since that would not be in order. But one is entitled to point out, for instance, that France is the second highest consumer of whisky in the world and that it is one thing to have a surcharge for some months to secure a dramatic drop in imports but quite another to maintain it so long against the French, who largely depend upon their exports of wine to us just as our exports of whisky to them are so important to us.

In the case of such imports and exports, there is a fair balance of trade between Britain and France in wine and whisky just as there is a balance with Spain and Portugal. The fair balance of trade in such commodities with these countries should be borne in mind when the Government consider the retention of the surcharge which, in my belief, should not be held on indefinitely.

Mr. John Hall (Wycombe)

Does not my hon. Friend recall that, after the surcharge was imposed, there was a campaign in France against the drinking of whisky in an attempt to stimulate the sale of wine?

Mr. Rees-Davies

I am glad that the French are not tempted to resist altogether the pleasures of life. If the Chancellor continues with this type of provision, however, he will be hitting basically many pleasures of life. In practical terms, he will not be getting the yield for the Treasury that he could get. To argue that one prevents inflation by this type of charge on the public is to live in cloud cuckoo land.

The Chairman

In discussing the Amendment moved by the hon. Member for the Isle of Thanet (Mr. Rees-Davies) the Committee may also consider Amendment No. 2, in the name of the hon. Member for Rye (Mr. Bryant Godman Irvine), in page 2, line 4, at end insert: Provided that the last-mentioned rates of excise duty shall not be charged on British wine being such intoxicating liquor as is mentioned in subsection (1) of section 2 of the Finance Act 1956 (excise duty on strengthened cider and perry) and that the rate of excise duty set out in Schedule 4 to the Finance Act 1964 shall accordingly continue to be charged on such British wine.

Mr. Bryant Godman Irvine (Rye)

I beg to move, in page 2, line 4——

The Chairman

Order. The hon. Gentleman can speak about his Amendment, but he must not move it.

Mr. Bryant Godman Irvine

I was interested to hear the careful survey by my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) of the variety of beverages available to people in this country. But I was saddened that he did not find time even to mention the beverage I am asking the Chancellor to consider. It is a beverage with which the right hon. Gentleman will be familiar because, for nine years, I have from time to time asked the Committee to look at the problem. Indeed, if my memory serves me right, a long time ago the right hon. Gentleman himself gave be some slight encouragement in the matter.

The Chancellor said today that he hoped that a little flexibility would be shown in the Committee. I am now giving him a magnificent opportunity, because I hope that he will be flexible in considering strengthened cider. I put on the Notice Paper some words which came directly from those moved by the Opposition last year. I hope that they commend themselves to the Chancellor. Over the years I have been embarrassed on some occasions by the support given to me by the then Opposition over the question of strengthened cider. This is an opportunity for them to be able to make good some of the intentions which they have expressed during that period. The solution——

4.30 p.m.

Sir Rolf Dudley Williams (Exeter)

Can my hon. Friend say whether any of those who supported him in the past are among the seven Government Members in the Committee at the moment?

Mr. Godman Irvine

I thought that it was an indication of the support being given by Government Members to the Chancellor's Budget.

Sir Douglas Glover (Ormskirk)

The support they have on those benches is far greater than that which they have in the country.

Mr. Tinn

If the hon. Gentleman has any doubt about the support for the Chancellor's Budget he has only to call for a Division and we will be glad to show him the support.

The Chairman

I think that we have had enough badinage. We must get back to perry.

Mr. Godman Irvine

The case I have put on a number of occasions to the Government has been that this beverage is made entirely from British produce and benefits the people who grow apples and pears in this country. It is, therefore, a matter which should receive support from the Treasury. There is a product known as British Wine and the Chancellor knows perfectly well that it has as its foundation must, which is imported and it does not, in fact, do the farmer and the horticulturist any good at all. That is why I ask the Chancellor to consider this matter and see whether he cannot pay more attention to fortified cider than the hon. Member for Thanet was able to do when he was making his survey.

There are three reasons for my asking the Chancellor to look at this proposal favourably. The first is that when we last considered it the then Member for Kettering, now Lord Mitchison, said that on only one occasion had wine duty been reduced and that was during the period of Sir Stafford Cripps as Chancellor. That seems to be a precedent which the present Chancellor might like to follow. Secondly, over a period of nine years I have had on most occasions support from the then Opposition and it seems that this is now a very good opportunity for them to act on the principles that they expressed on those occasions. At the moment the Government do not seem to have found many ways in which they can please the farmers, so here is a modest proposal which the farming community could support.

I would like to commend to the Chancellor the following observations by the then Member for Kettering, in the debate last year, when he said: The Tory achievement in this matter appears so far to have been confined to a reduction introduced when Lord Amory was Chancellor, only in respect of sparkling wine and port. Now the Government have an opportunity to reconsider their proposed increase in respect of a humbler beverage, and to do so in the interest of many growers."—[OFFICIAL REPORT, 2nd June, 1964; Vol. 695, c. 959.] I hope that those words will commend themselves to the Chancellor.

Dr. Reginald Bennett (Gosport and Fareham)

Before I address myself to the Committee in support of the Amendment so ably moved by my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) I should declare an interest, although it might be better to precede that, in turn, by declaring a lack of interest on the benches opposite, in that only one Minister, one Whip and one P.P.S., who have no option but to he here, are sitting opposite, plus two back benchers out of the whole of the Labour Party. Only those two are interested in this greatest, or bulkiest, of Finance Bills.

After declaring this lack of interest, I declare my own interest by pointing out that I am a member of the committee of management of a co-operative wine society, with about 40,000 members. I have, therefore, some reason to know from the trade side just how shattering this incessant upping of the duties on wines and such things is to this country.

This is the second attack which has been delivered by the right hon. Gentleman in only a few months on the trade and the people. It is an attack, in the first instance, on an almost universal pleasure and one with a great deal of social content. It is a blessing to the community as a whole and everybody knows it. It is also, as my hon. Friend pointed out, an imposition of rationing by purse on the people who live on pensions and small fixed incomes. My constituents at least are concerned and I am quite sure that this disservice to their simple pleasures will be treated by them with even more emphasis in the future than this Labour Government were treated on Thursday and Saturday and other days last week.

This is a straight-out attack on one of the simple traditional pleasures of everyone in the country and I think it is most reprehensible on that ground alone. It is, of course, crippling for the industry. It has put up the cost of attempting to circulate price lists and it is cutting down the turnover out of which the money to pay those costs could be met. It is bound, in turn, to be reflected by the fact that the countries with whom we deal on the Continent of Europe——

Notice taken that 40 Members were not present;

Committee counted, and, 40 Members being present

Dr. Bennett

Thank you, Dr. King. I am glad such a large number of Members opposite has been collected to listen to my powerful speech. I see that they are not now interested. How unfortunate that they have produced a big Bill and they do not even like it. I know that the Under-Secretary of State for the Home Department, the hon. Gentleman the Member for Cardiff, West (Mr. George Thomas), has no particular interest in this first Amendment. Perhaps, indeed, he would like to go further than the first Amendment. I am glad that he has come back to listen to the heart-rending words I am going to use.

Sir Rolf Dudley Williams

My hon. and gallant Friend will realise that the Assistant Postmaster-General is here today. He has just put the cost of postage up 33⅓ per cent.

Dr. Bennett

Yes, adding greatly to the cost of transmission of these lists.

The Chairman

Order. Committee debates may be a little broader than debates in the House, but not as broad as that.

Dr. Bennett

I will confine myself to the fact that the Assistant Postmaster-General will not have so much of a thirst from licking stamps in the near future.

I was about to say, when I was so graciously interrupted, that we were bound to be faced with retaliation from the continental wine-growing countries. They have been growling—annoyed and furious—at the surcharge which was so unfairly levied on their produce, in a way which is still incomprehensible because the basis of price on which the surcharge was made was never clearly stated.

They are being subjected, quite obviously, to a further callous impost on their goods and they will, I am quite convinced, have no option but to discriminate against British exports in the same fields. This is the only thing they can do. I shall deplore this, but so shall we all, because the Chancellor of the Exchequer will lose more by the restriction in trade than he will gain from these extra imposts on beverages.

I cannot think why he has done this. I can only believe that he finds this tax the easiest way of "raising the wind" when a floundering Administration are in difficulties for money. This seems to be the obvious thing, because this is a finite product—one which can be caught and taxed—and it is the easiest victim which has thus been selected for victimisation.

My hon. Friend the Member for the Isle of Thanet thought that there were two reasons why the Government were inflicting this further tax, but I believe that there is another. I hope that this will interest the hon. Member for Cardiff, West and that he will stay to hear it. I suspect that hon. Members who represent those large cities in South Wales have been got at by the teetotal wing of their party, and that this imposition is another gesture of appeasement to yet another rebellious wing of the Labour Party. I believe that, in the name of the hon. Member for Cardiff, West and his hon. friends, we are being subjected to what I can only describe as "creeping prohibition", or teetotalism by the backdoor.

I think that that is the only possible reason, apart from the Government's general difficulty of raising money, for this absurd tax-upon-tax being clamped on perfectly innocent and valuable beverages within a few months. I therefore add my voice to the protests which have come from all over the country against this grossly unjust and improper imposition.

Sir D. Glover

When he moved the Motion at the beginning of our proceedings today, the Chancellor of the Exchequer said that the Budget was a reforming Budget. Although it may be a Budget to bring about many alterations, it is certainly not a reforming Budget. I cannot see any reform in putting more and more impositions on the enjoyment of the people.

As I walk home at night along Parliament Street, and pass the statue of Oliver Cromwell, I am very much inclined to see in his features much of the physiognomy of the new Chancellor of the Exchequer.

Mr. Callaghan

I am very flattered.

Sir D. Glover

The right hon. Gentleman may say that he is very flattered, but the Lord Protector got into power on a policy very similar to that on which the present Government got into power, and then ground the faces of the people and brought about a society in which there was no joy, but only trouble and tribulation. He was eventually thrown out and 305 years had to go by before the people ever allowed a similar organisation to get back into power. After seven months, they have lost the support of the people.

The Chairman

Order. I enjoy the historical reminiscences, but we must come to the Amendment.

Sir D. Glover

I do not want to go too wide and I suggest that I am speaking to the Amendment which tries to stop the Government from taking away from the people the ordinary joys of the average human being. What do the Government proposals mean? They mean that there is to be a further increase slapped on smoking, which brings solace to many millions.

The Chairman

Order. The Amendment on smoking has to come later.

Sir D. Glover

The proposals mean increased taxation on drink. That made in Scotland and known as spirits, wines imported from overseas, and even cider and wines produced in this country are all to bear increased taxes, although by no stretch of the imagination could that be said to have any effect on our balance of payments problem.

4.45 p.m.

I now want to go some way with the Chancellor of the Exchequer on these imposts. Every Chancellor has found it convenient to increase the taxes on wines, spirits, beer, and so on, when he has wanted to reduce consumption, the amount of money spent over the counter or over the bar, in other words, to reduce the demand on our resources.

If the Chancellor were logical in this increase, and were carrying his policy through to any logical conclusion, he might get my reluctant support—and it would be very reluctant if I gave him my support at any time. However, the Chancellor's present policy is rather like the new-fangled taps. There are two taps, hot and cold, but all the water comes out of one spout. What is now going on is that the Chancellor is turning off the hot tap, but turning on the cold tap as much as he can. The public is being asked to face these increased burdens on incomes while, at the same time, the Government's policy in the public sector is to open the tap wider and wider, so making these impositions on the individual pointless and self-defeating.

The real criticism of the provisions in this part of the Finance Bill is that they would not be necessary if the Chancellor were carrying out a proper, frugal manipulation of the country's economy. These taxes only represent the belief of the Labour Party that one can get strength through misery.

Mr. Thomas Swain (Derbyshire, North-East)

Is the hon. Gentleman saying that with his usual convenient loss of memory?

Sir D. Glover

There is no loss of memory.

Mr. Swain

Has he forgotten the time when he supported his right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), who put a tax of 15 per cent. on children's mineral waters, sweets and chocolates?

Sir D. Glover

I did not find it pleasant to support those proposals.

Mr. Swain

They went through.

Sir D. Glover

If the hon. Gentleman will allow me to continue the argument, may I say that I did not find it pleasant to support those proposals, but as there was a stop at both ends of the economy it was a coherent policy for reducing the demand on our resources. The present Chancellor of the Exchequer is making the public suffer all these impositions, but is opening the tap at the other end and so not reducing the demand on our resources.

Mr. Swain

Would not the hon. Gentleman agree that giving £83 million to the Surtax payer was closing the tap at one end while taking revenue from other people?

Sir D. Glover

That intervention was very helpful, but that was not done in the same Budget.

Mr. Callaghan

As a matter of historical fact, Surtax was reduced in April and the regulator was increased in July.

Sir D. Glover

If the right hon. Gentleman had thought that there was something wrong about that, he would have done something about it in his Budget. He knows perfectly well that what was done was essential, or the brain drain would have been even heavier than it now is.

Mr. R. J. Maxwell-Hyslop (Tiverton)

Would my hon. Friend agree——

The Chairman

Before the hon. Member for Tiverton (Mr. Maxwell-Hyslop) intervenes, and in case his intervention is out of order, can I remind him that we are discussing not the Budget in general and a previous Budget, but the Amendment? I think that the digression has gone far enough.

Sir D. Glover

Thank you for your protection, Dr. King. I was assailed from this and the other side of the Committee and, as you will appreciate, in such conditions it is very difficult to keep in order. I was doing my utmost to keep to the narrow point of the Amendment. The trouble is that when I make speeches in the House of Commons, so many hon. Members opposite cannot take it that I am always interrupted. I do not mind a bit, because usually they help me to make my speech.

To go back to the Amendment, my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) made the case so widely and fully that it is not necessary to enter into any long discussion on wines, because my hon. Friend's argument for not making these tax increases on the basis of the individual commodity concerned was so strong that I am sure we will all support him if he presses his Amendment to a Division.

The important reason which I have made is that these impostes are acceptable to Parliament and could be acceptable to the country only if they were part of a coherent plan which the Chancellor had put to the nation. I oppose these increases because the Chancellor has not made such a coherent or viable plan to overcome the problems that confront him.

Mr. J. Grimond (Orkney and Shetland)

In many ways it seems unnecessary to go over this debate, because we had it last year, when a powerful and incisive speech was made by the Chancellor against the proposals which he is now defending. I recommend hon. Members to read what the Chancellor said. I wish to give the following quotation from his speech of 2nd June: It should be taken into account that the increased tax enters into the retail price index. I have constantly made the point about various actions of the Government in this connection. By their own acts they make their own incomes policy more difficult … He said that his predecessor … by means of this Clause"— which increased the price of beer— is helping to raise the cost of living. Every pint of beer drunk in clubs and 'pubs" will affect the cost of living. Only yesterday Mr. Frank Cousins pointed out in a speech the difficulty which he and his executive will find, because of the increased cost of living, in moderating wage claims. The right hon. Gentleman the Member for Nuneaton (Mr. Cousins) has a lot of difficulties in life, poor man. Here the Government, as they have done with rents and general interest rates, are operating against them. The Government's left hand does not know what its right hand is doing. The trouble about the present Government is that their left hand knows all too well what their right hand is doing.

The Chancellor was eloquently supported by his hon. Friend the Member for Bermonsdey (Mr. Mellish), who is now Joint Parliamentary Secretary to the Ministry of Housing and Local Government. Referring to the Conservative spokesman, the hon. Gentleman said: The right hon. Gentleman really does not know what is going on outside. He has said that this tiny little tax makes not the slightest difference. To the vast majority of the people of whom my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) was talking, it is a tremendous hardship. One would think that those were conclusive arguments, but they were very ably rebutted—and by whom? They were rebutted by the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), who was at his blandest. The right hon. Member pointed out that an increase in the tax on beer and spirits was neither here nor there. He said that it would, of course, marginally raise the cost of living, but what was that, he asked. He said: The effect of increasing the beer duty is one-fifth of a point—a variation which quite a minor fluctuation in the price of vegetables can produce."—[OFFICIAL REPORT, 2nd June, 1964; Vol. 695, cc. 948, 951.] So we have been through all this before. The only difference this time is that the minuet has changed sides. [An HON. MEMBER: "What did the Liberals say last year?"] I will come to that. I have no doubt that we have been consistent throughout.

To be serious about this matter, I do not think that the Budget as a whole has been widely criticised on the ground that it is too deflationary. There are many people who, bearing in mind the situation inherited by the Government, would be prepared to support certain increases in the taxes on consumption. But, whilst we have to broaden the basis of the taxes on consumption, we cannot go on, year in, year out, simply increasing the taxes on beer and spirits. I leave aside tobacco. The stage is being reached when, in terms of total consumption, these taxes are having an effect which would be disastrous to the Revenue if they were continued. They are actually being increased.

I notice, although this was not made clear by the hon. Member for the Isle of Thanet (Mr. Rees-Davies), that taking into account the extra tax, the amount which the Inland Revenue will collect from the tax on spirits, beer and wines this year will be higher and not lower than the estimate. Therefore, the total revenue will be higher. I think that I am right in saying, however, that consumption will not be higher.

I wish to make a brief constituency point. In my constituency we have two distilleries. They make an enormous amount of money for the Revenue and they are playing an important part in the export trade. They are worried lest it be thought that we can indefinitely carry on the export trade of whisky with a declining home market. They certainly feel that we cannot do this. I do not want to exaggerate—they are doing reasonably well and I do not want to cry wolf too loudly—but there will come a time when all the extra taxation which it is from time to time necessary to place on consumption, and which is always levied on this trade of beer, wines and spirits, will harm this trade, which is vital to the Exchequer and to our exports.

If the Chancellor is embarking on a course of fiscal reform, high in his priorities in the coming year should be an examination of the ways of raising taxation on consumption and broadening the base. Whether this is done by an overall sales tax or whatever it may be, I am certain that we have to come to this sooner or later. I know the objection to it, but we cannot continue to pile taxation upon a few commodities simply because they are ready at hand.

The main criticism which can be made of the Chancellor is not that he has introduced a Budget which is overall unduly deflationary, but that the Budget, taken into account with the other parallel measures, will not encourage investment in private productive industry. That is the real criticism of the Budget. Therefore, I merely leave those two points with the Chancellor. While I sympathise with him in the dilemma which he faced last autumn, surely high on his priority list should be an examination of the whole structure of taxation on consumption, and surely, also, in his fiscal taxation measures, he should not do anything more to discourage productive investment.

Mr. Ian Gilmour (Norfolk, Central)

I gather from the Chancellor's presence that he will be answering the debate on this unpopular subject. I admire his courage, if not his sensitivity. As we have already heard from my right hon. Friend the Member for Bexley (Mr. Heath), the recent electoral swing in Cardiff was 15 per cent. and in the Rumney Ward it was 23 per cent. That is very nearly a cricket score. Indeed, Mr. Ted Dexter's batting average this year is only 26 and I dare say that he now wishes he had stuck to politics.

In the Budget debate last year, the then Leader of the Opposition, now Prime Minister, said that in 1960 Lord Amory had waited until after an election to introduce taxes of this kind and he was surprised that my right hon. Friend the Member for Barnet (Mr. Maudling) had done it before an election. I dare say that the Chancellor is now feeling rather the same sensations and wishing that he had done it after rather than before the elections.

When I say that I do not admire the right hon. Gentleman's sensitivity, it seems to me that he might have been wise to have emulated his hon. Friend the Chief Secretary and stayed away from the debate on this subject, because, as the Leader of the Liberal Party has said, he made his views on this matter very plain last year, as, indeed, did the Chief Secretary.

Therefore, this debate should have been answered by the Financial Secretary to the Treasury, who, as the lawyers say, could have come to this debate with clean hands, because as far as I can see he was one of the hon. Members opposite who did not make an intervention on this subject last year and did not expatiate at great length on the iniquities of indirect taxes and how very much they hurt those who were least able to bear them.

The Leader of the Liberal Party has already quoted the Chancellor of the Exchequer concerning the balance of payments. He did not quote him on the question of those who were least able to pay these taxes. On 15th April, he said: Yesterday's increases in the taxation on tobacco and alcohol shift the burden against the wage earner, against the man at the bottom end of the tax scale, and they increase the level of indirect taxation."—[OFFICIAL REPORT, 15th April, 1964, Vol. 693, c. 435.] 5.0 p.m.

That is quite true. It is that much more true this time because the increases are that much larger. Although it would be possible to argue that it was right to do it last year, but wrong to do it this year, it could not possibly be right, logical or conceivable to argue that it was wrong last year and right this year. It has now been doubled. The Chancellor said it was wrong to do it once and now he is doing it twice. It is not a question of a "minuet changing sides"—if a minuet does change sides——

Mr. Grimond

I am obliged to the hon. Gentleman for his correction. With respect, what I meant was the people who dance a minuet.

Mr. Gilmour

With respect to the Leader of the Liberal Party, that is still not quite right. One side has definitely changed, but we have not. It is reasonable for us to say it was right last year and wrong this year, but it is not possible for members of the Labour Party to say that what was wrong, in their view, last year should be done to an even greater extent this year. Therefore, I hope that the Chancellor does not think that that is just a question of partners dancing a minuet, and changing sides.

I agree with the right hon. Member for Orkney and Shetland (Mr. Grimond) that it is high time that the tax basis was broadened. I fully understand that the Chancellor may at the moment be more intent on broadening his electoral base, but, nevertheless, it is high time that the taxes on consumption were looked at and that whisky, beer and wine did not get a "drubbing" every time.

Mr. Emrys Hughes (South Ayrshire)

Like the Leader of the Liberal Party, I have a distillery in my constituency, but I do not think that I am entitled to place constituency interests before the interests of the nation as a whole. [HON. MEMBERS: "Oh."] I do not think that there is any reason to interrupt me at this point.

If we carry the argument advanced by the Leader of the Liberal Party to its logical conclusion we should continue to cheapen whisky to help the home market. That is a rather strange deviation from what used to be considered orthodox liberal doctrine. I remember when the Liberal Party was regarded as the chief political opponent of the vested interests of the drink trade. Here, by implication—I wonder what the non-conformist element in the Liberal Party will think of it—the Leader of the Liberal Party is advocating a cut in the price of whisky. I regard that as a most reactionary deviation from what used to be the old Liberal policy.

The Leader of the Liberal Party said that we should reconsider the whole system of taxation. Surely that is what the Chancellor is trying to do. We have heard no constructive alternative to taxing whisky. If we do not tax whisky, are we to tax milk? Imagine the uproar there would be if the Chancellor tried to do that. Are we to spread the burden broadly? When the Chancellor was in difficulties, and introduced a tax on petrol, which was a broadly spread tax, the Liberal Party opposed that. It seems that on this question the Leader of the Liberal Party is going down the slippery slope to perdition, and I want to save him from that.

Mr. Michael Noble (Argyll)

I am inclined to agree with the right hon. Member for Orkney and Shetland (Mr. Grimond). There has not been over-much criticism of the Budget on the ground that it was too deflationary. There has been, and I think there still is, considerable criticism because it has done very little to help exports and practically nothing to increase the efficiency of industry. The right hon. Gentleman said that he was making a narrow constituency point because he has a distillery in his constituency. So, indeed, have many hon. Members on this side of the Committee.

Unlike the hon. Member for South Ayrshire (Mr. Emrys Hughes), I do not regard the distilling industry in Scotland as a narrow constituency issue. I regard it as one of the most important industries in Scotland and, therefore, I hope that the Committee will forgive me if I talk mainly about the whisky industry.

Unlike my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies), I cannot honestly say that I have never drunk whisky. I can honestly say that occasionally I have drunk gin. To please the hon. Member for South Ayrshire, I might say that I have, on a few occasions, even allowed vodka to pass my lips. I have also, I am glad to say, drunk wine from time to time both light and heavy and occasionally I have had a glass of cider or perry.

It is whisky which, I think, important from the point of view of the interests of Scotland and although my hon. Friend the Member for the Isle of Thanet spent a good deal of time discussing the philosophy of the Socialist Government in their attitude to drink, pleasure and other things, I look on this problem much more as one not of their philosophy but of their policy towards industry.

The whisky industry is peculiarly Scots. I know that it is possible to buy bottles in Spain which are labelled Scotch type whisky, and in Japan one may get bottles with small print on the label indicating that it was not made in Scotland, but whisky the world over is a Scots drink and the reason is very largely——

Sir Rolf Dudley Williams

What about Irish whiskey?

Mr. Noble

Irish whiskey, if I may correct my hon. Friend, is something which is spelt differently and tastes much inferior to Scotch whisky.

The Scottish whisky industry is famous the world over, largely because of the efforts of the people who make it to sell it abroad. I think it remarkable that in the last six years the exports of whisky have risen from £56 million in value in 1958 to an estimated £92 million last year. If they have any sort of reasonable luck, in spite of the efforts of the Chancellor of the Exchequer, the whisky exporters will certainly sell over £100 million of exports this year. This is a considerable achievement, even in a country like Scotland, which takes a particular pride in the high ratio of its industrial production which is exported. Now 80.2 per cent. of the whisky produced is exported. The figure is even higher than that for textiles, which are high in this admirable list, and 50 per cent. of the exports go to America.

A point made by my hon. Friend is worth drawing to the attention of the Committee again. Scotch whisky represents only 50 per cent. of the spirits consumed in this country. Before the war it was 70 per cent. The reason for the fall is the distillers of whisky have answered the appeals of successive Chancellors to do everything to boost exports, even though, as has often been the case in the past, it meant cutting consumption at home by rationing the amount of whisky available in restaurants, pubs and other places. The second reason why it has taken a considerable time for the consumption of whisky at home to rise to anything like its pre-war level is the relative tax position. I did not quarrel with my hon. Friend the Member for Isle of Thanet when he made a special plea for port and followed it with a special plea for sherry. I do not find that either of these drinks lie as happily and pleasantly on my stomach as a good glass of whisky. I think that the Chancellor was wrong to abolish the prescription charges and put up the price of whisky. He would have done better to put down the price of whisky, when he would have found that there would be a great deal less illness. This is a purely personal point of view.

Mr. Emrys Hughes

If the revenue is decreased by this Amendment being carried, what would the right hon. Member tax?

Mr. Noble

If the hon. Member will help me in my desire to get back a Government from this side of the Committee, I shall be able to tell him exactly what we would do. At the moment, without getting wildly out of order, I think that it would be a little difficult to pursue the hon. Member's suggestion.

In the case of port, sherry, British wines and even of cider, perry and gin, there have been Chancellors of the Exchequer since the war who have thought it right, for one reason or another, to reduce the rate of duty on these items. But there has not once been a Chancellor, of my party, I am ashamed to say, or from the other side of the Committee, not even from the Liberal Party, who has made any attempt to reduce the duty on whisky. I have heard it said when discussing these problems with my friends in the industry in Scotland—I have often wondered whether it was a valid reason to put forward—that if we increase the duty on whisky in this country it acts as a stimulus to other Governments to put up the price of whisky in their countries as well. They say, reasonably enough, that if the British Government thinks that it is reasonable to pay 48s. 6d. for whisky and that that is a reasonable price, then they will put up the price in their countries and see if their people will pay it.

It is significant—I think the Chancellor knows this—that since April of this year alone Peru, Northern Rhodesia. Malta, Ireland and Switzerland have put up their duties on Scotch whisky. The inevitable result is a rise in price and. probably as a result, a good deal more difficulty in getting exports into those markets. Switzerland has been over the last year or two the most important new country to which we have been sending greatly increased amounts of whisky.

The real reason that I should like to try to persuade the Chancellor to look favourably at this particular one of the items which we are discussing is that it is considerably important to Scotland as a whole in the employment it gives. A good deal of this employment—as Scottish hon. Members know—is in parts of the country where it is difficult to get alternative ways of employing people. I think first, because they are my particular favourites, of the distilleries which produce the malt whiskies. They are almost all concentrated in outlying glens of Scotland and on the islands. A very small distillery in my own constituency was opened recently on Jura. It was the first industry to come to the island for a century. Although the employment which it offers is small, a very valuable extra amount of wages comes in week by week to a small community.

When one thinks of Glenlivet, Talisker, Glanmorangie, Bruichcladdich, and Laphroaig these names slip off the tongue at least as gently as their products slip down the throats of the tired or the thirsty. Although it has not the same Gaelic sound, there is in the constituency of the right hon. Member for Orkney and Shetland a distillery at Highland Park which I am certain would be able to produce a great number of barrels from its very large stocks in order to cheer up his supporters, who were perhaps a little depressed over the weekend.

5.15 p.m.

The malt distilleries may be the heart of the Scottish whisky distilling industry, but the grain distilleries are certainly larger in size and just as important for the employment which they give. One cannot help thinking of places like Dumbarton in the South and Invergordon in the North, where again much new employment for considerable numbers of people has been given in the last year or two. In looking round to see where he could raise the money, the Chancellor may have felt, because of the example given to him by earlier Chancellors, that it would not do any harm to put even more tax on Scotch Whisky.

Mr. Robert Maxwell (Buckingham)

Hear, hear.

Mr. Noble

The hon. Gentleman who is so enthusiastic is probably better able to pay for it than many.

The point which is significant is that though exports have been rising very well—I think to the pleasure of the Chancellor; certainly to the pleasure of his predecessors—and though the home market has been rising very slightly, it is clear to those of us who know the position in Scotland today that the stocks of whisky maturing are increasing very steeply. There must come a time, if there is any turndown in exports or in home consumption, when there will inevitably be a risk of a very considerable drop in the employment in these distilleries. They cannot go on building up stocks at this rate in case the Chancellor changes his mind.

Mr. Maxwell

Would the right hon. Member not agree that whisky is not a necessity and that those who do not wish to pay the increased tax need not buy it or consume it? Would not a great deal better use of the Committee's time be made if we spent our time on dealing with those items in the Bill which really matter to the nation?

Mr. Noble

If the hon. Gentleman had taken the trouble to come into the Committee more than about ten seconds ago I should be more inclined to judge whether or not his contribution was likely to be useful. Whether he likes it or not, this is a matter of great importance to the country from which I come.

The suggestion which I would make to the Chancellor, because I do not want to be purely destructive in my criticisms of this part of the Bill, is that I believe, if his wish is to do something which would give substantial encouragement to Scotland and its employment and particularly to the Highlands—some of his colleagues are trying to get the Highland Development Bill through the House at the moment—that he should at least consider seriously the possibility of a differential in the tax on British spirits, and give some preference to Scotch whisky. I think that he could justify it on two grounds. The first is, as I said, that it would be a differential to help the areas which certainly need it. The second is that there is far more skill in the production of whisky than there is in the production of gin and vodka. It is certainly necessary to mature these for a great deal longer before they are fit to drink.

If my hon. Friend the Member for Isle of Thanet would like me to, I should be only too delighted to offer him a little eleven-year-old single malt whisky. Perhaps from that, he would acquire a taste for an alternative to brandy or port after a good dinner.

We in Scotland have welcomed, even though we do not entirely approve, the habit which has grown over the world of drinking Scotch on the rocks. I am speaking for a great number of my countrymen when I say that in respect of this action in the Finance Bill we in Scotland think that the Chancellor is doing his best to drive the Scots on to the rocks. We understand only too well that there are very few people in the country who will want to drink his health and that therefore the extra cash will not do them very much harm. But we also appreciate that there are millions of people in the country who will want to drown their sorrows in a little Scotch whisky—and these words will not be wholly unfamiliar to the Chancellor of the Exchequer, because he used them from this side of the Committee last year.

Mr. A. E. Cooper (Ilford, South)

We have had a number of speeches arguing the merits of particular drinks and why they should not be taxed, but I think that we should try to be rather more fundamental and ask ourselves not so much what is the harm which will be done in parts of the countries and industries affected by the tax but why the tax is necessary at all. The answer lies clearly in the complete and utter incompetence of the Chancellor of the Exchequer and the Prime Minister since last October. There are the guilty men.

The Temporary Chairman (Sir Herbert Butcher)

Order. The scope for debate on this Amendment is limited.

Sir Rolf Dudley Williams

On a point of order. Surely my hon. Friend, in drawing attention to the fact that the reason for these taxes was the questionable behaviour of the Chancellor of the Exchequer, was in order.

The Temporary Chairman

When the hon. Member for Ilford, South (Mr. Cooper) goes out of order, I will so inform him. I was giving him warning signals.

Mr. Sydney Silverman (Nelson and Colne)

The hon. Member for Ilford, South (Mr. Cooper) is saying that the necessity for these taxes lies in the incompetence of the present Chancellor of the Exchequer. If that is in order, would it be in order for those on this side of the Committee to say that it was due to the incompetence of previous Chancellors of the Exchequer? We could pursue the debate for a very long time.

The Temporary Chairman

I think that we should get on with the Amendment in Clause 1, page 1, line 16.

Mr. Cooper

I come back to my proposition that we are entitled to discuss the proposed taxes on the basis of their necessity and why they have been brought forward at this time. I cannot believe that I can possibly be out of order in developing such an argument. Having regard to the speeches over the weekend by the Chancellor of the Duchy of Lancaster and the Chief Secretary, may I put the position on the record and state that these taxes have been imposed to get the Government out of the mess into which they got themselves. Let us quote one or two things which right hon. and hon. Gentlemen opposite may not like. Speaking on 30th September, 1964, at Norwich, just prior to the General Election, the Prime Minister said: I repeat what I have said throughout the year. I do not believe that we are facing any danger to sterling, any run on the £, because the loan facilities available to us have been increased from the International Monetary Fund, from the United States and from Europe.

The Temporary Chairman

Order. I am sorry, but the hon. Member must not pursue that line of argument.

Mr. Cooper

Subsequently the Prime Minister went to America and made a speech drawing attention to the fact that we have these vast reserves of £11,000 million. If these reserves were available at the time, why did not the Chancellor——

The Temporary Chairman

Order. The hon. Member must please relate his remarks to the Amendment before the Committee.

Mr. Cooper

I am delighted to ask for your guidance, Sir Herbert. Can you quote from Erskine May to show that I am out of order in discussing the reasons for a particular tax?

The Temporary Chairman

The hon. Member must not ask me to quote from Erskine May. He must develop his argument in terms of the Amendment before the Committee and if I think that he is going out of order I must draw the matter to his attention.

Mr. Cooper

When the Chancellor opened his Budget in the very first sentences he said, "My task this year is to withdraw £250 million from the economy". He proceeded to argue why it was necessary to do so. In a two-hour speech he went through the various items of taxation which we are debating and which form part of the £250 million which he said that he had to withdraw.

Mr. Maxwell

On a point of order. Did we not deal with this on the Second Reading of the Finance Bill? Surely it is not in order to deal with it now?

Sir D. Glover

Further to that point of order. Surely it must be in order to deduce reasons to show that if other things had been done these increases would not have been necessary.

The Temporary Chairman

That may well be, but not on the Question proposing that the subsection should stand part of the Bill.

Mr. Cooper

It is unfortunate that right hon. and hon. Gentlemen opposite are unwilling to face the facts. We are fully entitled to discuss why these taxes are being put on at this time. We are entitled to an explanation why the unfortunate people of this country are to suffer these further imposts.

Mr. Sydney Silverman

On a point of order. Is it in order to debate the Second Reading of the Finance Bill all over again on each Amendment as it arises, Clause by Clause? If not, ought we not to stop it now?

The Temporary Chairman

I have already made my Ruling clear. I should be grateful if the hon. Member for Ilford, South would debate the Question whether subsection (1) should stand part of the Bill.

Mr. James Dance (Bromsgrove)

Surely it is in order, if the Chancellor tries to put on this extra taxation, to ask him why it is necessary?

The Temporary Chairman

The question before the Committee is whether taxation should be imposed on spirits, beer, wine, British wine and tobacco. Any arguments indicating that those commodities should not be taxed are in order, but it is not in order to have a general debate on the whole field of national taxation.

Mr. Cooper

I base my argument on the point which you have just made, Sir Herbert, when you said that any argument was in order which shows that these items should not be taxed. I submit that the case which I am putting is to show precisely why these taxes should not be imposed. Again I ask for your guidance and suggest that if I pursue that line of argument I am in order.

The Temporary Chairman

The hon. Member must keep his argument within the terms of the Amendment before the Committee, as, indeed, has been done by hon. Members who have already addressed the Committee.

Sir Arthur Vere Harvey (Macclesfield)

On a point of order. My hon. Friend the Member for Ilford, South (Mr. Cooper) referred to the Prime Minister's visit to Washington. Surely if he were to refer to the possibility of the Prime Minister drinking some export whisky whilst in Washington he would be in order.

The Temporary Chairman

We had better see how we get along without further points of order.

Mr. Cooper

I will content myself at this stage by saying that had wiser and sounder financial policies been followed by the Chancellor and his colleagues these taxes would be quite unnecessary. Further, had—

The Temporary Chairman

Order. The hon. Gentleman must assist the Chair by not continuing with that line of argument.

Mr. Cooper

These taxes which we are now asked to pass simply give a nudge to higher prices generally, therefore to higher wages and therefore to roaring inflation. They will have a serious ultimate effect on our export potential.

5.30 p.m.

Mr. Julian Ridsdale (Harwich)

I support the remarks of my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) when he so ably moved the Amendment. Our attention has been drawn to the Committee stage of last year's Finance Bill and to some of the comments of the right hon. Gentleman who is now the Chancellor of the Exchequer. Last year he described the Finance Bill as "nasty, brutish and short". I suggest that this year's is nasty, brutish and long.

I recall my right hon. Friend the Leader of the Opposition saying that if the Socialists were elected they would introduce higher taxation. The right hon. Gentleman who is now the Chancellor said that he did not think that that would be so. How right my right hon. Friend was. Indeed, in Committee on last year's Finance Bill, the present Chancellor said: The plain truth is that the duty on spirits is higher today than it has ever been in the whole history of these duties. It is a record which I am sure the Government will be proud to publicise among their records—that they have raised the taxation on spirits to the highest level ever. What the Chancellor said before assuming his present office should be digested as the background to the action he is now taking. Indeed, the right hon. Gentleman said last year that the Government were making it too expensive to drown our sorrows, and added: It is an astonishing thing that while a bottle of whisky costs 45s. one can buy purple hearts in the black market for 6d. a time".—[OFFICIAL REPORT, 2nd June 1964; Vol. 695, c. 945–6.] The present Chancellor said that when we were debating drugs last year. If the right hon. Gentleman really believed the words he was saying then, surely we should bear in mind now the comparability between the high price of spirits and the accessibility and price of drugs. Has not the Chancellor done absolutely nothing to help the arguments which he adduced last year?

I have been impressed with the remarks that have been made about the harmful effect of the high prices of spirits, including British wines, on our export trade. [Interruption.]

Mr. Dance

On a point of order. Is it in order for hon. Members opposite to keep up a continuous tirade of interventions from a seated position?

The Temporary Chairman

Order. Hon. Members must not intervene in a sedentary position.

Mr. Ridsdale

I appreciate that hon. Gentlemen opposite do not like being reminded of the words used by the Chancellor last year, particularly since he has done nothing to correct some of the wrongs about which he was complaining at that time.

Perhaps more important is the tax on beer. The price of beer enters into the retail price index and many facets of life. The increased price will not help the Government to secure their incomes policy. The cost of wine and beer is weighted at about 63 points in the cost of living index compared with household goods at 62 points. Every pint of beer that is consumed in the coming months will, therefore, be bound to affect the cost of living. Not long ago the Chancellor said that there would be a one point rise in the cost of living, but considering that 2 or 3 million workers are being affected by this Budget—and have had their wages adjusted to meet price increases—what does he now consider will be the overall cost in terms of the purchasing power of those whose wages are attached to the cost of living index?

Has the Chancellor fully considered the human problems involved; the additional 1d. on a pint of beer which must be paid by the elderly? The old folk like their pint of beer, including the non-contributory pensioners for whom the Chancellor has done nothing and about whom the Government have acted so callously in the way they treated the Bill which was introduced by my hon. Friend the Member for Abingdon (Mr. Neave) and another Bill in the House of Lords recently.

In last year's Finance Bill debate the Joint Parliamentary Secretary to the Ministry of Housing and Local Government, the hon. Member for Bermondsey (Mr. Mellish), thought that dock workers could absorb the tax quite easily. Why have the Government imposed taxes on those who can least afford them? The hon. Member for West Ham, North (Mr. Arthur Lewis) said last year: … old-age pensioners in my constituency … are in the position that possibly the only pleasure they get out of life is their pint of beer.…"—[OFFICIAL REPORT, 2nd June, 1964; Vol. 695, c. 952.] That is precisely what the Chancellor has done, despite all the boasting that he and his colleagues have been doing. The Chancellor said last year that another small burden was being placed on the shoulders of those who were least able to afford it, yet his first action on assuming office was to increase the price of beer still further for those who are least able to afford it.

I would have preferred to see economies in Government spending. I do not like high taxes. The Government should have set an example by making economies, for they should not seek sacrifices from the poorest section of the community and do nothing themselves. In addition to all this, the country will have to find £600 million for steel and——

The Temporary Chairman

Order. I hope that the hon. Gentleman will observe my earlier Ruling.

Mr. Ridsdale

We must broaden the basis of taxation and at the same time make economies in Government spending. Only by doing that will we prevent taxes like these from falling on one small section of the community—and this time it is those who are least able to afford it on whom the heaviest burden is falling. Because the Government's taxes are not spread widely enough they are inflationary and they will make it difficult for the finances of the country to be put in proper order.

Sir A. V. Harvey

I want to thank my hon. Friend the Member for Isle of Thanet (Mr. Rees-Davies) for so ably moving this Amendment. I confess that I was very surprised when the Chancellor of the Exchequer put this increased charge on beer. Of course, we all know what the right hon. Gentleman said last year, but one can quote many things said by a Government when in Opposition, and I discount a great deal of it. We knew last year that he did not mean a great deal that he then said. But why he had to put a 1d. a pint on beer I do not know. We can tax a commodity or a luxury up to a certain point, but to tax it beyond that point merely kills the returns that the Exchequer badly needs. The consumption of wines and spirits is down this year, and I am sure that that trend will continue when the impact of other measures is felt by the public at large.

There is no doubt that the surcharge imposed by this Government has had a serious effect on whisky exports. The French reacted very badly to the surcharge on their wines and silently resisted the consumption of whisky. That reaction has taken place elsewhere. We shall not know the full impact of that step for many months to come. My right hon. Friend the Member for Argyll (Mr. Noble) has referred to growing stocks of whisky in the distilleries. Those stocks represent money locked up, and instead of being in the distilleries they should be circulating and earning money for the country. This great trade as a whole is now nothing more than a Government tax collector.

It should also be remembered that wine is now not only drunk in the exclusive clubs and restaurants. It is drunk by millions of people—and a very good thing, too—who have gone abroad for their holidays and have acquired the wine-drinking habit. I remember just before the war driving in a motor car with Sir Winston Churchill. He asked me, "Do you want to live to be a great age?" At my age—this was more than 25 years or more ago—I thought that I would. Sir Winston said, "Then you have to do two things; you have to get your feet off the ground whenever you can and drink whisky fairly liberally in the evening." I am sure that is good advice. I have heard eminent medical people recommending whisky for elderly people whose blood is running thin——

Mr. Emrys Hughes

Bernard Shaw did not follow that advice and he lived longer than Sir Winston Churchill.

Sir A. V. Harvey

Yes, he went completely the wrong way, I am sorry to say, for many years of his life.

Whisky is now cheaper in many Continental countries than it is here. We have been told that it has gone up in price in Switzerland, but it is still cheaper there than it is here. It is also cheaper in Italy and in many other countries. It seems quite extraordinary that the producer country should charge its own people more for it. We must have a stable home market it we are to have good exports. Sir Stafford Cripps, when Chancellor of the Exchequer, saw the danger and reduced the price of wine.

Most serious of all is the effect this increase will have on our tourist industry. We know that prices in France are now probably comparable with those in New York, and the result has been a steady drift of tourists from France to Italy and Spain, and even as far away as Greece. We should try to get them here. We need to attract tourists from North America and elsewhere, but the prices are now becoming exorbitant and we may well lose tourists who might otherwise come here on these cheap package tours from the United States. Although they are Americans they cannot pay the prices charged here——

5.45 p.m.

Mr. Maxwell

I am extremely concerned that hon. Members opposite will bring harm to our tourist trade if they keep on harping on high prices. Our prices are still the lowest, even with this slight extra cost, and hon. Members opposite do damage to the tourist trade by that kind of talk.

Sir A. V. Harvey

The hon. Member should cast his mind back to what happened in the House a year ago. He was not here then, I know, but he can read of it in HANSARD, or some of his right hon. and hon. Friends can tell him. We have to act as one in protecting the £, but when we come to the tourist industry hon. Members must be allowed to present the facts as they see them. I am not exaggerating. We have here an industry that can earn hundreds of millions of pounds for us, but we have to give it the facilities, and we must beat other countries to it. I have given France as an example of what can happen, and I do not want that to happen to us. The Chancellor must look at this taxation very closely.

My right hon. Friend the Member for Bexley (Mr. Heath), with his Resale Prices Act, has helped the Chancellor here. As a result of that Measure, whisky came down about 5s. a bottle in the supermarkets. That has more or less levelled out the new taxation, but I have no doubt that the price of whisky will again creep up to that charged in the off-licences.

The Chancellor is a fairly level-headed man—[HON. MEMBERS: "Hear, hear."]—I knew him before he became Chancellor of the Exchequer. I remember him when we were at the Admiralty. He has said earlier that he will be broadminded and will listen to the arguments that are advanced in regard to tourists, whisky imports, and so on. I hope that he will be fair-minded and will not mind giving way on certain matters if the argument moves that way. He has this enormous Finance Bill, which has been put together in a few weeks or months. Many eminent accountants, some of them the biggest in London, tell me that they do not yet begin to understand it and will need months to unravel its meaning. It will provide a field day for the lawyers and accountants for a year or two after it becomes law. I ask the right hon. Gentleman to look at all the things that have been mentioned and to be prepared to give way where there is a good argument.

Sir John Eden (Bournemouth, West)

I little thought that so soon after having rather reluctantly supported an increase in these duties in previous years I would find myself in a position of having once again—and this time, perhaps, more openly—to deplore a further imposition. It seems to me extraordinary that the Chancellor of the Exchequer should have pressed these further imposts on these products. I join with other of my hon. Friends who deplore these increases for the general reason that they represent an increase in taxation overall. I sympathise with some of my hon. Friends who have tried to find out the basic reasons for these increases.

I respect your Ruling, Sir Herbert, and shall not attempt to pursue that line of argument, but these duties represent a real and general increase in taxation and it is for that reason, first and foremost, that they are to be deplored. They are to be deplored because they are imposed on wines, beer and spirits no less than other forms of taxation on other commodities are deplored. The duties we are discussing already yield about £576 million, and I believe that the right hon. Gentleman now hopes to get £616 million out of beer, wine and spirits.

That in itself underlines the phenomenal significance of these commodities. It underlines the degree to which their consumption affects everybody. We are not dealing with articles the purchase of which is limited to a few selected categories of people. We are dealing with drinks which are consumed by everybody. The fact that they are so much a part of our daily life is underlined by the amount of revenue which the Chancellor expects to get, even though he is making this fourth increase in four years in the duties on them. My disapproval of the proposals in the Bill and for this Amendment are because these imposts add to the general increase in taxation. This is one of the many increases that the Chancellor is imposing in addition to those which other Members of the Government have imposed. From today, for instance, we have to meet increased postal charges.

My second reason for supporting the Amendment is that while manufacturers, makers or purveyors of beer, wines and spirits well understand that this is an easy, ready to hand, manner of raising the amount of revenue which the Chancellor requires and while they would not expect to be relieved of all forms of duty, they nevertheless are fully justified in asking that the imposition of tax on their products should be at any rate fair. Surely there is ample ground for saying that beer, wine and spirits carry such a high proportion of taxation already that the Chancellor could have looked to other sources of revenue which are no less ready at hand.

My hon. Friends and I have in mind taxes on certain aspects of betting, or on betting altogether. Previous Chancellors have considered that. I think that the present Chancellor is still looking at such a proposal. When answering this debate, I wonder whether he could say——

The Temporary Chairman

It would then be out of order.

Sir J. Eden

If I may be allowed to complete my sentence, Sir Herbert, I was about to ask if the Chancellor could say why he had found it necessary to turn again to these three commodities to find further revenue without bringing forward other matters which now are free of tax.

Mr. Swain

In view of the fact that Conservative Chancellors had the job of implementing increased taxation on these commodities during the last four years, does the hon. Member consider that it is the prerogative and right only of a Conservative Chancellor to implement taxation on these so readily taxable commodities? If so, for how long has the Conservative Party realised that these three commodities are already taxed to the limit?

Sir J. Eden

The hon. Member will understand, as I do, the difficulties imposed upon us by the rules of order in seeking to keep as closely as we are able to the terms of the Amendment under consideration.

That prevents me replying as fully as I should like, but in one sentence the reason why these taxes are so particularly pernicious in this Bill is that they are only one element in a general range of taxation increases. Under previous Budgets, taxation has been reduced and that has made such imposts more tolerable. The hon. Member must recognise that the present tax makes it more difficult for people to afford the increased costs which taxes generally necessarily impose upon them.

My hon. Friend the Member for Harwich (Mr. Ridsdale) spoke of the effect the tax will have particularly on elderly people's enjoyment. Hon. Members opposite, just as hon. Members on this side of the Committee, know that in a club or a "pub" elderly people can be seen enjoying their only opportunity of a social gathering in a general meeting place where they can have a glass of beer or some other drink. One may argue that 1d. on beer is not much by way of an increase and that if a person wants beer he will find the extra 1d. to pay for it, but this increase must be seen in the general context of taxation increases right across the board.

That is why these increases are so pernicious and why it is so difficult for people to absorb them literally. A former Secretary of State for Scotland, my right hon. Friend the Member for Argyll (Mr. Noble) spoke most movingly and eloquently about whisky. Whisky is a great earner of foreign currency. One difficulty which my right hon. Friend did not elaborate, although he touched on it, is that whisky takes a long time to mature. Stocks have to be held for many years. The industry must find considerable difficulty in planning ahead, bearing in mind that it has been subjected to so many increases in duty, that the level of stocks must be connected with what is anticipated to be likely home sales and the support to which the product will have in overseas markets.

I hope that the Chancellor will have another look at the proposed further increase in these duties. I well recognise that this is an easy way of getting revenue. I have no doubt that he will say that people will go on drinking and I have no doubt that they will do so. I have no doubt that he will deny that the increase will affect people in a specially hard way. He might even go so far as to say that it would be a good thing for the people in view of the overall financial circumstances in which the Government have placed us if we all had to tighten our belts.

This is so typical of Socialist philosophy that he may trot it out again and suggest that we must be disciplined, that he will determine what is good and what is not good; he will determine what we should spend in our leisure hours and on our pleasures. This is a form of compulsory spending which we on this side of the Committee deplore.

The increase will especially hurt people of limited means. It is rationing by the purse with a vengeance. This is most extraordinary for a Socialist Government who, in their earlier incarnation, imposed physical rationing. They dare not do that now, but they bring in rationing by the purse, which is more despicable. I therefore hope that the Chancellor will reconsider the proposal.

6.0 p.m.

Captain Walter Elliot (Carshalton)

I rise to support the Amendment. We have had two Socialist Budgets, one in November and one in April. As we know only too well, they have imposed a colossal burden of extra taxation on the nation. An increase in taxation is endemic in Socialism. I do not suppose that even the most controversial Member opposite would contradict me when I say, "The Socialists put them on, and we take them off".

It is a long time since Budgets were introduced only for the purpose of raising money by taxation to meet expenditure. Today, Budgets are brought in for the almost equally important reason of controlling the economy. We have heard a great deal from members of the Government about the purpose of the two Budgets. We have been told that they are to control the economy, to stabilise prices, and so on. If that is so, is this imposition the best way to do it? I should have thought that we wanted to encourage manufacturers and retailers to stabilise prices.

We have heard a great deal about the effect of a soft home market and of some manufacturers taking advantage of it and increasing their prices. As we know, inquiries are proceeding now into why the prices of the products of three industries have risen or are rising. That charge cannot be levelled against the wine, spirit and beer industries. They have not been taking advantage of a soft market, if it is a soft market. They have maintained extraordinarily stable prices over the last decade.

Mr. Swain

Is the hon. and gallant Gentleman aware that every brewery company in the Midlands, including the Allied Brewery Company, put up the price of their beer by 1d. a pint almost immediately prior to the Budget? Was that deflationary?

Captain Elliot

The hon. Gentleman is wasting a great deal of time by his interventions. I want to get on with the debate.

I was considering the matter over a decade. I am sure that the hon. Gentleman would agree that, apart from the effect of the imposition of extra duty, the prices of wines, beer and spirits have remained remarkably stable. When the First Secretary of State writes to the Chancellor of the Exchequer and asks his reasons for increasing the prices of these commodities, will the Chancellor put a copy of his reply in the Library for us all to see?

If manufacturers with good records are to be treated like this, why should they keep their prices steady? What is their reward for doing so? I want to quote something said by the Prime Minister in 1961: What we need … is a system of industrial taxation that does far more to reward enterprise in expanding firms and, at the same time, penalises the slothful firms, and those which refuse to play their part in the national economy."—[OFFICIAL REPORT, 26th July, 1961; Vol. 645, c. 456.] I suppose that it would be fair to say that the Prime Minister included amongst the progressive firms those which keep their prices stable. I want to know what these impositions do to encourage such firms. Surely our object must be to encourage those industries. These increases have the reverse effect.

These increases do not penalise only the rich. Back bench Members and members of the Government have had a large increase in their salary. They will not feel the weight of these impositions. Those who will feel the weight are the old-age pensioners, the poor, and the retired people with modest incomes. Those old, lonely people who have a glass of wine, spirits or beer as solace—[Laughter.] Hon. Members opposite may laugh. They may think that this is fun. They welcome these increases in prices for those people. I am sure that this will be noted in the country.

Mr. Lubbock

In view of what the hon. and gallant Gentleman has said, it would be very interesting for the country to know whether it is the policy of the Conservative Party to repeal these increases if it ever gets back into office.

Captain Elliot

I do not want to stray beyond the limits of the Amendment. A study of the debates on the last Budget will show the hon. Member for Orpington (Mr. Lubbock) that I spoke against similar impositions then.

Mr. Lubbock

What did the hon. Gentleman do when the duties were raised in the last Conservative Budget in May, 1964?

Captain W. Elliot

I thought that I had made it clear that in the 1964 Budget I supported an Amendment. The hon. Gentleman should study the record. I argued to the effect that the duties should be repealed. I believe that the imposition of these extra duties will discourage the firms which we ought to encourage. They will increase the cost of living. They will give an upward twist to the spiral of prices and as such will undermine the policy which has strenuously been pushed by the First Secretary. They will fail in their purpose.

Sir Rolf Dudley Williams

I have listened to discussions on this type of Amendment many times since I have been a Member of Parliament. I have listened to about 15 Budgets. On practically every one of those there were debates on the question of an impost on alcoholic liquors and on tobacco. When I watch a Chancellor of the Exchequer struggling against criticism of these taxes, if I can find anything to say to encourage him or anything on which to congratulate him I always desire to do so.

I wish to pay my tribute to the present Chancellor of the Exchequer. Already this afternoon he has pulled off a remarkable coup. He now has in the Chamber more back benchers than officials in the Official Box. I have no doubt that the whole of the Government Whips' office has been working overtime to persuade sufficient Members to come into the Chamber and listen to the devastating criticisms being made of the Budget.

Mr. Herbert Butler (Hackney, Central)

I have come into the Chamber particularly to hear the hon. Gentleman.

Sir Rolf Dudley Williams

I must confess that that is a tribute which is often paid to me, certainly by my hon. Friends. My experience is that during some of my speeches hon. Members opposite make different remarks.

I see that I have already succeeded in driving the Chancellor from the Chamber. Not only has the Chancellor succeeded in getting a few extra Members into the Committee. He has brought off a greater achievement—he has managed to get the hon. Member for Manchester, Cheetham (Mr. Harold Lever) here. I have heard some great speeches by the hon. Member for Cheetham. I have heard him make some lengthy speeches. I once heard him make one about short loans for long boats, or was it about long loans for short boats? That was a very entertaining speech. I hope that in due course we shall hear him applying his mind to the extra imposts which the Amendment, so ably moved by my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies), is designed to remove.

I want to make a few criticisms before I come on to my general remarks about the Amendment. It is an affront to the House of Commons that members of the Government have shown so little interest in the Amendment and, indeed, in the Committee stage so far. We now have a junior Treasury Minister present. I have no doubt that the Chancellor has found it urgently necessary to leave the Chamber for a short time. No doubt there is business to he done in his Department. I am sure that he has plenty of problems there.

But why is not the Minister of Technology here? Why is he not here this afternoon to support the Chancellor? Why does not he come here and say that the purpose of these extra burdens which are to be placed on wage earners is to enable the Chancellor to maintain wage stability? Does the Chancellor believe that this is the sort of Budget which will make it easy for the First Secretary to negotiate wage stability with the trade unions? The First Secretary is not here, for this reason. When the Prime Minister formed his Government in October last he was faced with some grave problems. He realised that the Chancellor—I do not wish to be offensive—had only somewhat limited intelligence and, in order to take full charge of the Treasury and of our economic policy——

The Temporary Chairman

Order. The hon. Gentleman must direct his remarks to the matter before the Committee.

Sir Rolf Dudley Williams

I was afraid that you might find it necessary to draw my attention to that fact, Sir Herbert. I shall, therefore, leave the remainder of my remarks to the interesting speech which I propose to make on a later occasion, perhaps on the Third Reading.

If we are to discuss these Amendments, it is important that we should have with us the Ministers responsible for guiding the economic affairs of the country, and one of the most important Ministers in this respect is the First Secretary. The Chancellor has only limited authority. He is only the cashier, so to speak, but our economic affairs, as was the case when my right hon. Friend the Member for Barnet (Mr. Maudling) was Chancellor of the Exchequer, are the responsibility of the First Secretary. I should like to know from the First Secretary whether he considers that imposts of this nature will assist him to maintain wage stability. It is important when introducing new taxation that it should not be of the kind which will automatically lead to higher wage demands.

We must also consider the burden which is put on people with limited incomes. Reference has been made to old-age pensioners. Some elderly people, of course, are quite wealthy, but I am thinking of those who have few resources. These people will be hard hit by these taxes. Reference has been made to speeches which were made by hon. Members opposite last year in criticism of Government policy. The present Joint Parliamentary Secretary to the Ministry of Housing and Local Government, the hon. Member for Bermondsey (Mr. Mellish), was very voluble last year. I am surprised that he is not here, because I would have thought that he, of all Members, would want to speak on this subject. He made a lengthy speech in the course of which he said: … in a constituency such as I represent, where one in every five is an old-age pensioner … the main pleasure of the men is to have a smoke and a drink. The Chancellor, in the same debate, made a similar remark, as follows: As my hon. Friends have pointed out, when one takes into account the other burdens put upon the pensioner, it means that there is a further small burden put on the shoulders of those who can least afford it"—[OFFICIAL REPORT, 2nd June, 1964; Vol. 695, cc. 951 and 954.] I should have thought that the right hon. Gentleman, speaking as he must with the authority of his party, would at least have had a few Members behind him to voice some criticism of these proposals.

We have heard no criticism from the Government side of these proposed increases in taxation. We had a rather trivial speech from the hon. Member for South Ayrshire (Mr. Emrys Hughes), who said that he was in favour of higher taxation on whisky, so far as I could understand it. I do not know what his constituents will have to say to him when he returns to his constituency. It is a monstrous increase.

I remember the criticisms which were made when the old-age pensioner concessions on tobacco were removed. Is the right hon. Gentleman going to introduce concessions for old-age pensioners? I have a personal interest in this matter. I am only eight years removed from being an old-age pensioner. If I find that the price of whisky is the same as it was before he got busy, I shall not look forward to that time with enthusiasm. Is the right hon. Gentleman going to give relief from this burden of taxation, or is he going to say "We put the pension up—not so high as Members' salaries went up, but at least we increased it." In fact, what happens is that the pension goes up, prices and taxation increase and the pensioner is worse off.

6.15 p.m.

The real basis of this proposed increased taxation is that the Government believe in high taxation. This is one of the techniques which they propose to employ, and they think that by doing so they can ensure social justice. I remember that the late Sir Stafford Cripps tried that one on and it was a complete failure. We had stagnation. People left the country for other countries where taxation was lower——

The Temporary Chairman

Order. The hon. Member is tending to stray from the Amendment before the Committee.

Sir Rolf Dudley Williams

I beg your pardon, Sir Herbert. I was trying to confine my remarks more closely to the Amendment.

I say to the Government that to increase taxation does not increase production. The more that taxation is increased the more stagnation we get. This proposal is just another of the techniques which the Socialists always employ. My party believes in the alternative, that by reducing taxation we increase production and get greater wealth.

Mr. Robert Cooke (Bristol, West)

I am glad to be able to take part in these Committee proceedings as a Member representing a city which has a number of notable industries, including the aircraft industry, which was recently crippled by the present Government and amongst other things, a wine producing and bottling industry of no mean significance.

Also, I follow in the constituency of Bristol, West a Tory Chancellor of the Exchequer, the late Sir Michael Hicks Beach, who actually reduced the duty on whisky. Indeed, if one wants to go back into history, we had in Bristol not long ago a byelaw which prohibited wheeled vehicles around the dockside lest the rumbling of the wheels should disturb the wine sleeping in the cellars beneath. Having said that, I speak with no personal financial interest in the wine trade, though anyone who represents a constituency where so many famous operators in that field have their headquarters could not be otherwise than interested from a constituency point of view.

I want to draw the Chancellor's attention to a particular effect which the increase in the duty on spirits particularly will have. The other day the Chancellor answered a Question of mine about the distribution from Government offices of spirits and wines purchased at wholesale prices and distributed in small quantities by people working in those buildings. I should make it clear that I put this Question down not to attack those people operating in that way from Government buildings, but because it was the only way that I could draw the right hon. Gentleman's attention to these matters. I know that this happens all over the country.

The increase in duty will continue to encourage the breakdown of the whole off-licensing structure. We had a Licensing Act some years ago. I was in the House at the time when we made it a little easier for the public to obtain drink from various outlets and a little easier for people who wanted to sell drink to get licences for their premises. This is a continuing process.

The point I wish to make is that the savage increase in duty on spirits will encourage this breakdown. The right hon. Gentleman must have this point in mind when he makes this proposal. It is a consequence of his action which he must take into account when legislating in the future. If by making these increases he is condoning the whole breakdown of the off-licensing structure in the country, well and good from his point of view, but we as a Committee have to look at both sides of the question.

There is no doubt that this increase will continue that process. One might even envisage that in the future all drinks will be bought wholesale by private individuals and distributed among their friends. This could easily make for lack of control over the sale of drink, and even lack of revenue to the Chancellor of the Exchequer, which would be a terrible thing from his point of view. It might also have extremely dangerous social effects, because one is encouraged by present high prices to try to obtain spirits at the best price by buying wholesale by the dozen. This might well be injurious to health and one might be encouraged to imbibe rather more than is good for one. This is an effect of the present increase which the Chancellor must take into account.

There is a different situation with regard to wine. Wines drunk in moderation can be a positive boon to health.

Mr. Percy Grieve (Solihull)

Hear, hear.

Mr. Cooke

I am glad to hear one of my hon. and learned Friends echoing that sentence. My hon. and learned Friend possibly finds on occasions that wine can be thought-stimulating or thought-producing, or perhaps it makes a dull and uncongenial brief that much more attractive to read. Certainly, the right hon. Gentlemen opposite share this view with me, as we have seen recently when Ministers of the Crown are happily engaged studying their papers and wining and dining themselves.

Quite apart from the happy social effects that wine drinking can have, which will be certainly injured by these increases, there is also the medicinal side of the picture. Wines in moderation are frequently prescribed for circulatory diseases. If one has a reduced circulation in the peripheries a little alcohol added to the bloodstream can dilate the capillaries and have a beneficial effect. [HON. MEMBERS: "Hear, hear."] I am glad that so many of my hon. Friends share my views, but even if this appears to be humorous to the Committee it is a true scientific fact that wines and spirits, and particularly wines, have their place in this respect.

The other effect which this increase in duty on wine may have can be detrimental to the whole future of the appreciation of wine. This is an age when the general public are becoming more and more appreciative of the benefits to be obtained from discrimination in this field. The days of Gin Lane and of wholesale debauchery have long since gone and the public are much more responsible in their use of alcoholic beverages. This increase in duty will have an extremely bad effect on the steady improvement in the public attitude and in popular appreciation of wine, because the duty is the same for the poor wines as for the good. Whether one buys poor or good wines one is still paying a greatly increased duty and there is no encouragement to go for the more expensive.

This positively discourages the appreciation of the more expensive, and it certainly discourages the laying down of expensive wines against the future. One will not be able to afford to lay down as much as one did in the past. I find it almost impossible to lay down any at all. I have not purchased a single bottle of wine since the Budget, and stocks are getting low. This discouragement of laying down wines will mean that in a future year there will be serious gaps when one finds that nothing has been laid down for 1965 because of this tremendous increase. One will have to buy at greatly enhanced prices and profiteering will take place. The Chancellor will not gain anything by the fact that laying down has been put off, and the public will be the losers, as is usual when there are these increases.

Another point concerns those of very modest means who can afford to spend only 12s. 6d. or 15s. for a bottle of sherry, and one cannot do very well at that price these days. If this is their limit they will have to go in for cheaper brands of drink. In the end this will be injurious. The cheap and nasty is encouraged, as usual.

As for the economic effects of the imposts, there is one serious one which my hon. Friend the Member for Bournemouth, West (Sir J. Eden) has already touched upon. This is the effect which the increase can have on the export trade. I hope that it is no secret to hon. Members opposite—if they do not realise it they certainly should do so—that we cannot have a healthy export trade in wines from this country unless we have a securely based home market and can arrange for supplies to be available in the foreign lands where the wine is produced.

Sherry is one of our Bristol specialties and is well known all over the world. A number of brands of Bristol sherry sell for large numbers of dollars in the United States. If a country which is bottling sherry for re-export to the United States finds its home trade severely threatened by increases in duty it may not be able to give continued orders to the sources of supply in Spain. We have already had difficulties there because of some other political activities on the part of hon. and right hon. Members opposite.

If the flow of wines from these foreign countries is interrupted it could well happen that we might never have the trade back because other countries would step in and say, "Britain will not take so much, so perhaps we can help you out." Some of the best wines are already in short supply in France, Spain and Portugal and we could lose for ever our pre-eminence in this trade. I know that one can make jokes about drink, and that some have been made this afternoon, but I hope that I have made it clear to the Government that, apart from the to-ings and fro-ings normal to any Amendment to the Finance Bill—and sometimes there are grave issues and sometimes some not so grave—this could be a serious source of damage to a vital export as well as a cause of inconvenience at home.

The concluding thought must be that exports, whether up or down, will have an effect on everyone in this country, but it is perhaps not so easy for everyone to see the effects. The ordinary man in the street does not know much about finance and the balance of trade, but the ordinary man knows what happens to him. He knows what happens to his purse and his bit of shopping on Saturday mornings and his little pleasures. The cruellest cut of all was when the First Secretary, in a broadcast after the Budget, was asked about the increases in duties on wines, spirit and tobacco, the very things on which the consumer would be hardest hit. I have not the exact words of his reply. It is difficult sometimes to remember some of the things that the right hon. Gentleman says on television, and perhaps sometimes he cannot remember them himself. On this occasion, if I may paraphrase, he said that he really did not care twopence about it, and neither did any of his hon. Friends.

That is the attitude of this Government to the small man, the ordinary man in the street. I hope that they will bear his interests in mind as well as the greater issues, the matters of trade to which I have referred, in which my City and my constituency are vitally concerned.

6.30 p.m.

Mr. Dance

I feel that a series of Chancellors have "caned" the drink trade very hard. It has been an easy way to collect taxation, but I am sure that we are reaching the point when we shall kill the goose which lays the golden eggs. In other words, the rate of taxation is now too high.

I must declare my own interest in the trade to the extent that I own a small wine business. Quite a lot of things have been happening in our trade recently. In the first place, we have, at quite considerable cost to ourselves, improved the amenities and condition of the places in which people can drink. Public houses, for example, have been enormously improved; they are not the old gin palaces of the past. This has cost money, and people will invest money in this type of improvement only if they hope to see a return.

I know that already, as a result of the measures brought in by the Budget, takings are going down. It is a great misconception that the margin of profit on the selling of drink is extremely high. It is not so at all. Moreover, if one is trying to be competitive, as one does, of course, one has to compete against the supermarket which is selling whisky, gin, and so on, at very much reduced prices.

What is not always understood is that the supermarkets do not give the service which the smaller place does. In one shop with which I am connected, a man came in at half-past ten the other day and said that he wanted a bottle of whisky. When it was offered to him, he said that he wanted it at the supermarket price. When my manager said that he could go round to the supermarket and buy it, he replied, "But they are not open".

The point is that we have to compete with the supermarkets. As my hon. Friend the Member for Bristol, West (Mr. Robert Cooke) said, people would like to stock up from the supermarkets to the detriment of the normal dealers. If we price them out of the trade there will be a very detrimental effect on society as a whole. It must not be forgotten that most of the customers are not the sort of people who go to the Ritz, or Claridges. This tax affects every person who goes into a working men's club, or the ordinary shop. The effect is penal upon them.

To bring the point hom, I give this little illustration. Two summers ago, my wife and I went on a cargo boat round the Mediterranean. When I tell hon. Members that the "cost of living" was 12 "bob" a bottle and that it is 48s. 6d.

here at home, they will realise roughly how much the Government are taking out of it.

Mr. Maxwell-Hyslop

And was not that bottle at 12s. a much higher proof, because it was exported?

Mr. Dance

I am grateful to my hon. Friend; I think that it was at least five degrees higher. In addition, of course, the shipping line which sold the drink was not giving it away; it must have made a profit on it as well. This really brings home to one just how much the State is taking out of the ordinary citizen's pocket by the duty on whisky.

Notice taken that 40 Members were not present;

Committee counted, and, 40 Members being present

Mr. Dance

I am most grateful to my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) for bringing other Members in to hear the important point I was making, that, on a boat trip I was making round the Mediterranean two summers ago, the cost of whisky, at a higher proof than the whisky one can buy in the shops at home, was 12s. a bottle, and the shipping line itself must have made a profit on it. Yet, as I say, we are now asked to pay 48s. 6d. a bottle. This brings home how much we have to pay in duty.

It is not just a matter of whisky, of course. I support what has been said by my hon. Friend, the Member for Bristol, West on the subject of wines. For generations, our London insurance market has been renowned, and, were it not for the great London insurance market, our invisible exports would dwindle greatly. But we also have a great market for port. Much of our port is brought into this country in cask, it is bottled here, and it is re-exported throughout the world. I have tasted first-class British export port in Sweden, for example. It will be an extremely bad thing if we price ourselves out of laying down this port not just for our own drink, but for re-export throughout the world.

Beer is a British drink. Only last Friday, I went round a steel works, and I was told that every time a vat, or whatever it is called, is tapped, all the men concerned have a pint of beer. Knowing what the heat was like last Friday, I could well imagine that the rate of evaporation would be fairly great, and I am sure that they all deserved and needed their pint of beer. If we put up the price, those steelworkers will have the right—in fact, anybody working in heavy industry might have the right—to say, "We want a bit more to cover the increased cost". I sincerely hope, therefore, that the Chancellor will reconsider his proposal.

This increase on all forms of drink will create hardship in one way or another. As I have said, beer is a typically British drink. It is part of our British way of life. Beer is drunk in clubs and "pubs" by people in all walks of life. I urge the Chancellor not to drive this British way of life out of existence.

Mr. Charles Morrison (Devizes)

I support the Amendment so cogently moved by my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies) and admirably supported by many of my hon. Friends. I find it a little depressing that on this day in particular I have to support an Amendment to reduce one of our taxes, because I have read in the newspaper that President Johnson will ask Congress tomorrow to cut excise taxes by £625 million on 1st July, by an equal sum next January, and by a further £147 million between 1967 and 1970.

I have referred to that report because I wish to draw the attention of the Committee to President Johnson's reason for cutting taxes. He said that the booming economy in the United States, about which we hear so much at the moment, was bringing in greater revenue from general taxes than had been expected, that the new tax cuts would help to keep the economy flourishing, and that they would also remove handicaps from small businesses and families with middle and low incomes. That is the exact opposite of what is being done in this country now.

The Opposition believe that high taxation is symptomatic of Socialism. Even so, it is very remarkable that after such a period of time the Government should not have been able to introduce some more imaginative types of increased taxation than an increase in these excise duties. One would have expected them to introduce something more far-sighted.

But there it is. This type of action is steadily eroding the so-called incomes policy of that sad person, the First Secretary.

Mr. Maxwell-Hyslop

Would not "dissolving" be a better term than "eroding"?

Mr. Morrison

If my hon. Friend thinks so, I am prepared to bow to his opinion in this matter.

Speaking to a group of young Socialists the day before yesterday, the First Secretary said that it was the intention of the Government to draw the attention of the country to the record and legacy of the Conservative Government and to emphasise what they had done.

The Deputy-Chairman (Sir Samuel Storey)

Order. The hon. Member appears to be straying away from the Amendment.

Mr. Morrison

I am grateful to you, Sir Samuel, for keeping me on the straight and narrow path. I was about to say that I would hope that the First Secretary would draw the attention of the country to the lower Excise duties which existed under a Conservative Government.

My hon. Friends have dealt in great detail with most of the direct disadvantages of the increase in duties, and I shall not take up time by repeating them, but I think that the Committee ought to be aware of some of the rather more indirect disadvantages of the increase. It was stated in the Sunday Telegraph yesterday that the number of emigrants has risen by 25 per cent. and they gave a variety of reasons for leaving this country. Most were going abroad to find better opportunities, and some were complaining about the taxation burdens. This increase in Excise duties will merely add one more item to the burden of taxation.

It is this type of action, coupled with the growing insecurity and loss of confidence, which is making the Labour Government very unpopular. Although we all know that the days of the present Government are numbered, they would probably remain a little longer in office if the Chancellor were prepared to accept the Amendment.

Mr. David Webster (Weston-super-Mare)

I have great pleasure in supporting the Amendment. The late Mr. Ernest Bevin must be turning in his grave. At the time of the Treaty of Dunkirk he approved of action to reduce the cost of imported wine, saying "I do not mind if the price of wine goes down provided that it goes down for the working man as well". I support that view. Taken in conjunction with the 15 per cent. surcharge on imports, the Government's measure is doing great damage not only to the economy as a whole but particularly to various sections of it.

I am glad to see the hon. Member for Bristol, South (Mr. Wilkins) present. Bristol has been dealt a very heavy blow. Its aeronautical industry has suffered. So has its tobacco trade. The hon. Member's views on this subject have been faithfully and well put. Also, Bristol's wine trade has been dealt a very heavy blow. I think that "below the belt" would not be an unhappy way of describing it in this context.

6.45 p.m.

We have had mumblings from the Government side asking what happened in previous Budgets. In 1958 Lord Amory substantially reduced the duty on beer. That is a matter in which I take great interest. On another occasion my right hon. Friend the Member for Barnet (Mr. Maulding) made me "legitimate". I have been brewing my own beer for a considerable number of years. It is very good beer and costs very much less than the beer produced by the commercial brewers. But I did not realise that there was a 99-year-old law on the subject. I had taken the opinions of two judges on the matter, and so it was an honourable error on my part. But I had been brewing without an Excise licence. I discovered that in the middle of a Budget. It was a matter of great alarm and concern to me, and I wrote to the Chancellor and apologised, and I sent him a picture of a country brewer from The Times of 99 years ago. With an odd Victorian sense of humour, it was Mr. Gladstone—I am glad to see the Leader of the Liberal Party here—who imposed the duty on home brewing. The picture was of an old lady who was putting a terrible home-made concoction down the throat of an unwel- come and unhappy visitor, and she was saying that because of the imposition of duty she would never brew the drink again, and the caption was "What a pity!"

There have been occasions in the past when the Conservatives have been responsible for the country's affairs and have reduced the duty and the Excise charges and made it more reasonable for people to live a happy life.

Mr. W. A. Wilkins (Bristol, South)

Always just before a General Election.

Mr. Webster

Just after a General Election on two occasions. I would comment in that respect that the country has noted that the postal charges went up immediately after the local authority election. Otherwise the postal votes would have been rolling in much faster than they have done.

As an expatriate Scot, whisky is a subject in which I take the deepest interest. My right hon. Friend the Member for Argyll (Mr. Noble) spoke with great knowledge and wisdom on this subject. I understand that he did not speak about the tremendous evaporation losses which the whisky industry suffers. However, he spoke about the beneficial effects of whisky, and I agree with him.

The late Mr. Duff Cooper referred to this at an international conference on alcohol which he attended many years ago. The conference was held under the ægis of the League of Nations. A report was to be prepared about the evils of alcoholism. The conference discussed the subject in general and agreed that alcoholism was evil and must be stamped out. A number of high principles were accepted. Then the French delegate moved that wine and brandy should be left out because of their very great medical benefits. This was accepted. Then the Netherlands delegate moved that gin should be left out. In the end each country moved to leave out its own particular product. The British representative, who was a Scotsman, moved that whisky should be left out as well.

These products all have great advantages. I would mention, in particular, rum. As anyone who has been in the Services knows, to improve the morale of the troops on occasions they are given a tot of rum. Having served with Gurkha troops, I know the beneficial effect of giving them a tot of rum and their great sorrow when the tot is served too late when they are on a military expedition. I notice my hon. Friend the Member for Plymouth, Devonport (Dame Joan Vickers) present. Many of her constituents have been drinking rum for many years while serving in the Navy. When one gets into the position of being what the doctors rather piously call "an habitual drinker", one gets a taste for the stuff, and when one retires as a Service pensioner on a pension meanly fixed by the present Government and still wishes to have one's tot of rum and one has lost the privilege of freedom from the Excise men, that is hardship indeed. I hope that all my hon. Friends will support the Amendment because there is great evil in what is being done.

I should like to know whether the Chancellor of the Exchequer consulted his right hon. Friend the First Secretary before he put on this excise impost. This is most important. The beer duty is a considerable element in the cost of living index and it will follow, to use the Prime Minister's expression, as the night the day—and we will probably see a bit of that during the debates on this Finance Bill—that there is bound to be an extra weighting to the wage claims which are put forward.

The First Secretary of State is always talking about percentages—3 per cent., 100 per cent., 4 per cent.—and various numbers and things like that. One of my hon. Friends has spoken of the steel industry. We know that in that industry people who have a heavy perspiration loss need beer to make up for that loss. [Laughter.] This is factual. I am surprised that all three hon. Members on the benches below the Gangway opposite are laughing about that. They seem to know little about the subject.

I am not a port drinker to any great extent, but we have great trading links with Portugal and Spain. There is great doubt whether our friends the Portuguese will declare 1964 a vintage year as a result of the combination of the import surcharge and the duty which is imposed upon port. One of the great alleviations in the life of man is a little liquid pleasure. The Chancellor, in a mood of pious pomposity, has contrived to some extent to take it away.

Mr. Maxwell-Hyslop

There are about 108 Amendments and new Clauses on the Order Paper, but if there was one which one could be certain would have drawn the First Secretary of State, if not like a bee to a honeypot at least straight to his place on the Front Bench, it would have been this first Amendment, not because of an excruciating pun because the right hon. Gentleman is First Secretary of State, but because it has to do with the taxation of liquor. I should have thought that it would prove irresistible. However, life is full of surprises.

I do not want to concentrate upon the more expensive things in the four Schedules which would be affected if the Amendment were passed. I was entranced, as well as intrigued and informed, by the excellent speech of my right hon. Friend the Member for Argyll (Mr. Noble). When he drew the attention of the Committee to the effect that this might have on, for instance, drinking "Cutty Sark" on the rocks, I was moved to wonder whether the State brewery at Carlisle might produce a whisky called "Cutty Wreck" which would show this magnificent ship on the rocks in a different sense of the word.

I am far more concerned with much the least expensive items, that is to say, cider and British wines. Presumably Clause 1, like the rest of the Bill, is designed, however inappropriately, to do two things. One is to finance the extravagances of Socialism and the other is to ameliorate in some way the economic disaster into which we have been drawn by the Government to date. In so far as it designed to do the latter, I should have thought that the occasion would have been taken to increase the differential in taxation between drink produced in this country and imported drink so that our balance of payments could benefit by the giving of a financial inducement to the consumption of home-produced liquor rather than to imported liquor. This, presumably, would be a logical follow-on to the 15 per cent. import surcharge.

If there is any rationality in the Chancellor's thinking—and I agree that it is not altogether reasonable to assume that there is—I should have expected that the difference in the rate of taxation between light British wine still at 16s. a bottle would be much greater than the 6d. which separates that from Commonwealth or the 2s. 6d. which separates it from foreign. Surely, the occasion could have been taken to give a much greater incentive to the British producers of alternatives to imported wine.

Again, beer and cider are primarily drunk for purposes of quenching thirst as well as for enjoyment, and certainly the less expensive wines are consumed for the same purpose. If, therefore, we had had not an increase but a reduction in beer duty accompanying such increase in taxation on wines, however gastronomically undesirable this might be, at least one could make a case for it in terms of the balance of payments; and in the condition to which the Government have reduced the country one might be prepared to make a sacrificial gesture and sacrifice gastronomic considerations to economic considerations. Indeed, it is a sacrifice which, I am sure, all of us would be not only ready but willing to make.

One has only to look at the Schedules which would be eliminated by this excellent Amendment to realise that this occasion has been allowed to pass by entirely by the Government. Whether the First Secretary of State noticed this, and, indeed, what his responsibilities in this matter are, none of us knows, but the net effect is that the cost of living index has been put up. This is quite unchallengeable. Hardship has been inflicted on a considerable number of people and inconvenience on an even greater number.

The incentive to smuggling has been increased. If anyone thinks that this is a purely theoretical consideration, I would point out that some unhappy constituents of mine have only recently been released from one of Her Majesty's prisons because they found even the previous rates of duty so high as to place upon them an irresistible temptation to bring into the Port of Teignmouth contraband of an intoxicating nature which was innocent of the payment of any British duty.

Therefore, when there is such evidence that otherwise honest people at the previous rates of taxation find this temptation, which it would be inaccurate to describe as a new one, irresistible, the Government's moral guardians should consult their conscience about whether any further stress should be placed in such a direction or in such a kind.

Not only have temptation, hardship and inconvenience all been increased by the Clause, but even the economic opportunity of increasing the comparative disadvantage of drinking imported as opposed to home-produced liquor has been thrown away. It has been thrown away, but one wonders whether it has been thrown away consciously or negligently. Is this a deliberate act of Government policy to reduce the percentage difference between home-produced and imported wine, or is it due to negligence? If it is due to negligence, it is, I suppose, in a sense excusable. When, however, one has a document of 226 pages, it would, I suppose, be uncharitable to blame the Government for the first couple of hundred omissions of things that they ought to have done or the first couple of hundred of mistakes which they have made in doing things which they ought not to have done.

Even making allowances for considerations such as that, let us hope that having got only to the first Amendment, this is not the beginning of a trend which will make itself even more manifest as the debate continues for so many hours of so many days and of so many nights.

7.0 p.m.

Mr. Peter Walker (Worcester)

I would like, first, to congratulate my hon. Friend the Member for Rye (Mr. Bryant Godman Irvine) on bringing forward this Amendment, enabling us to debate this subject. I would like also to express very real sympathy with the Chancellor of the Exchequer, because during the afternoon he has been under considerable attack. There have been many criticisms of the manner in which he has conducted his policy and he has been virtually without support from his own side the whole afternoon.

I would have expected that when their own Chancellor was under attack hon. Members opposite would have rallied round, but there has been not one speech from those benches in support of the Chancellor's proposals and we can only presume that, on this issue as on many others, many of the back benchers on the side opposite are in disagreement with those on the Front Bench. What is also noticeable is the absence of certain Members from the Front Bench opposite, who, I would have thought, would have been here throughout the debate. I speak particularly of the First Secretary of State.

This is after all, of all the Clauses in the Finance Bill, the one which has the most direct effect upon the Government's incomes policy. Not only has the First Secretary been absent throughout the afternoon, but there has not been one Minister from the Ministry of Economic Affairs present. I can only presume that such little interest is now taken by the Government themselves in their own incomes policy that on a matter such as this they did not consider it of importance to be in attendance.

There are many other absentees among those who spoke last year in a debate on the same Clause, upon the social problems involved in this particular type of increase in taxation. For example, we had passionate speeches from the Prime Minister, from the Chief Secretary, from the Members for Fife, West (Mr. William Hamilton), Romford (Mr. Ron Fletcher), Bermondsey (Mr. Mellish), Leek (Mr. Harold Davies), West Ham, North (Mr. Arthur Lewis), Glasgow, Govan (Mr. Rankin), East Stirlingshire (Mr. Woodburn), Rotherham (Mr. O'Malley), Blyth (Mr. Milne), and Middlesbrough, West (Dr. Bray).

All of these last year considered it important to put the case against this particular type of taxation even though smaller increases than now proposed were involved. Why are they absent? Why have they not propounded the same arguments to this Chancellor as they did to the last? I hope that the Chancellor will give a very full reply to the points which have been made in this short debate in connection with trade, specific drinks and with the Government's incomes policy. I must confess I am a little disturbed that during the last four excellent speeches the Chancellor was away and as far as I can see the Member he left on the bench was taking no notes whatsoever. It may be necessary for me to repeat some of the points that have been made.

Mr. Callaghan

I have notes.

Mr. Walker

I am relieved to hear that and I hope the Chancellor will study them very carefully before he replies because, like most of the points made this afternoon, they are very important ones.

The first section of this debate deals with the problems relating to specific drinks and I hope that the Chancellor will comment upon the point made by my hon. and learned Friend the Member for the Isle of Thanet (Mr. Rees-Davies) about our trade in port. Portugal is a very important trading country and there is considerable disturbance as far as the general trade in port is concerned. I hope that some specific comment will be made. I also hope the points made by my hon. Friends the Members for Rye and Tiverton (Mr. Maxwell-Hyslop) will be met.

I am particularly involved in the position of perry and cider. It will be interesting to hear the Chancellor's views on this topic this year. I hope that he will make this concession to this industry. Lord Mitchison, who was formerly the Member for Kettering, spoke on this subject last year. He described it as a simple drink. He said: It is good; indeed, it is excellent. It is made not entirely of apples, but mainly of apples. He went on to say: … the Government have an opportunity to reconsider their proposed increase in respect of a humbler beverage, and to do so in the interests of many growers."—[OFFICIAL REPORT, 2nd June, 1964; Vol. 695, c. 958–9.] Now the Government have an opportunity to reconsider their proposed increase in respect of the humbler beverage and to do so in the interests of the drinkers and the growers. I hope the Chancellor will tell us exactly what he will do as far as these two drinks are concerned. I would like to ask the Chancellor what information he has available when he decides to increase taxes such as these. What information has he of declining sales in particular types of drinks so that he is not hampered by proposing the imposition of a tax which will only result in the application of the law of diminishing returns? I would like to know what studies he made as to the difference in the current sales of British wine as opposed to foreign wine, heavy as opposed to light, and generally to know how he decided to make this particular schedule of increases.

A very important point in all this is the question of whisky. With a name like mine I would appear to have a vested interest in this particular type of drink. But alas, I do not have one. I do recognise how very important this matter is to the industry in the Highlands. There will be some disappointment in the Highlands that their case was almost so completely neglected by the representatives of the Liberal Party this afternoon. I believe they now look upon themselves as a kind of Celtic nationalist party, with most of their representation coming from that area. All we had from them was a cautious reference by the Leader of the Liberal Party that he did have a constituency interest, that there were one or two distilleries in his constituency.

Mr. George Y. Mackie (Caithness and Sutherland)

I am waiting for an assurance from the hon. Gentleman that his party would repeal the duty on whisky.

Mr. Walker

I am glad that the hon. Member has arrived in the House to listen to the debate. I did not hear his party ask for this particular relief earlier this afternoon. If I may say so, all we heard from the Liberal Party was that it had views, but, as always, we did not gather what its views were. We shall be interested to know—there will be an opportunity for Liberal Members to speak later—exactly what their views are on this topic.

My right hon. Friend the Member for Argyll (Mr. Noble) went into great detail on this problem. He recognised the real problems of the Highlands in this matter and raised the question of the increase in stocks. Has the Chancellor any information on this? What increase in stocks is taking place at present?

Mr. Webster

Is it not regrettable that there is not a single Scottish Minister here to listen to this very important matter?

Mr. Walker

It is regrettable, but, of course, it is now becoming to be accepted.

Mr. George Lawson (Motherwell) rose——

Mr. Walker

If I may, on behalf of my hon. Friend, I welcome the Member from Scotland. I hope that after I sit down he will make a contribution to the debate and give us his views about the problems of the whisky industry in Scotland and the particular effects of this Clause upon it. I am sure the whole Committee will listen with interest to the speech which the hon. Gentleman will make upon this particular topic.

I ask the Chancellor what information he has as to the immediate reaction of overseas countries in increasing the duty on whisky after increases here. Has this been the general pattern in the past, because our exports of whisky are being specifically handicapped by this type of provision? Knowing what a very important point it is, I hope that considerable attention will be given to it by the Chancellor, together with the point made by my hon. and gallant Friend the Member for Macclesfield (Sir A. V. Harvey).

The tourist industry is very important and has doubtless made representations to the Chancellor on this issue. My hon. Friend the Member for Macclesfield specifically dealt with the problem of beer and the fact that this type of taxation would have an effect on the incomes policy.

This brings me to the next section of my remarks, the effects of this taxation on the Government's incomes policy. The Chancellor of the Exchequer was very explicit on this subject last year. His words have been quoted back at him, and I do not wish to repeat them, but I would like him generally to comment on what he said last year about the effect of increases such as these, on beer and alcohol, on the cost-of-living index.

Last year, he made the staggering point that the content of the Retail Prices Index relating to alcoholic drinks was higher than that for household goods, higher than that for general miscellaneous-services and almost as high as that for fuel and light. I must, therefore, ask him what has changed his view from last year. Why has he decided that something which he strongly argued last year to affect the cost-of-living index should be used in this year's Budget as a major taxation proposal?

Some hon. Members opposite have suggested that we should not spend too much time discussing this Clause. It is interesting to note that the proposals in this and in Clause 5 are the only things which the Chancellor is doing in this Budget this year. All the other proposals, which are to take so much of our time later, are general plans for a Socialist economy of the future. The provisions in these two Clauses are the only things which the right hon. Gentleman is doing in terms of his financial policies within this Budget, and the whole emphasis is on indirect taxation and especially on this form, which, as he rightly pointed out last year, has a considerable effect on the cost-of-living index.

Will the right hon. Gentleman explain, particularly in view of the quotation which he made last year about Mr. Frank Cousins—[HON. MEMBERS: Order."] No, the quotation mentioned Mr. Frank Cousins, who was not a Member of the House of Commons at that time. That is why I used that expression rather than refer to him by his constituency. The Chancellor then said: Only yesterday Mr. Frank Cousins pointed out in a speech the difficulty which he and his executives will find, because of the increased cost of living, in moderating wage claims. Here the Government, as they have done with rents and the general interest rates, are operating against them. The Government's left hand does not know what its right is doing."—[OFFICIAL REPORT, 2nd June, 1964; Vol. 695, c. 948.] What were the views of the Minister of Technology yesterday this year? What does he think of this increase this year? He can still refer to it as his executive, as he is still general secretary of his union. In that capacity, does he consider that this will make it more difficult for him and his colleagues on the executive of that union to keep to the Government's incomes policy?

The Chancellor has to explain why he has favoured this form of taxation more than any other when it obviously has such a direct effect on his incomes policy. He must go on to explain his justification in terms of using this type of taxation. Last year there were those who argued that it was wrong to use this type of taxation because it so specifically hit two commodities. The Chancellor himself last year described the people who went along to the local club and who had a pint of beer at the beginning of the evening and two or three pints during the evening, this being pleasure and enter- tainment to them. Other people, like the Chief Secretary and the hon. Member for Bermondsey, gave delightful and homely descriptions of the effects on a specific class of people.

7.15 p.m.

The hon. Member for Govan made a splendid speech saying that it was an anti-Scottish provision. I am pleased that the Chancellor has brought these two provisions into one Clause, because last year the hon. Member for Govan was declared to be out of order when these issues were dealt with in separate Clauses, because he said that they were unfair to Scots who, when they had a glass of beer, followed it by a "chaser", so that they got caught both ways—once on the beer and once on the whisky. He was declared to be out of order because at that time we were discussing only beer. This afternoon he could have made a good speech about the whole prejudice against the Socts.

I remember the Chief Secretary arguing last year that if we had to have this form of indirect taxation it would be better to use the regulator, to increase the tax rate over the whole sphere and not just specialise on these two taxes. The hon. Member for Ebbw Vale (Mr. Michael Foot) said how wrong it was for the Government to depend on taxes on tobacco for their future revenue and that the tax should gradually be eliminated.

What has made the Chancellor, who has been a long-standing advocate of concentrating on direct as opposed to indirect taxation, this year, in his first major Budget, concentrate so heavily on this form of taxation? Why has he decided to do something which immediately results in an increase in the cost of living? This form of revenue now means a tremendous volume of taxation for ordinary people, for it now amounts to no less than £616,000,000 in a full year, as my hon. Friend the Member for Bournemouth, West (Sir J. Eden) pointed out. For every family of four it is now about 15s. a week on beer and wines and tobacco, and yet it is on this area in respect of the incomes policy and in respect of the effects on the cost-of-living index that the Chancellor has decided to concentrate.

The best comment on this was made by the Chief Secretary, whom I now welcome to this part of the debate. He described a similar provision in the Finance Bill last year in these words: … achieves nothing in terms of an incomes policy; nothing in terms of a regional employment policy; and nothing in terms of national progress. It merely reveals the Chancellor's desire to have a final 'dig' at the workers. I must in all fairness say that my hon. Friend the Member for Nottingham, South (Mr. William Clark) quickly shouted "Nonsense" and the Chief Secretary went on to reply: The hon. Gentleman will no doubt have an opportunity later to explain why that is nonsense."—[OFFICIAL REPORT, 7th May, 1964; Vol. 694, c. 1481–2.] This year, the Chancellor will have an opportunity to explain why that is nonsense and I hope that he will now give the Committee a very full explanation.

Mr. Callaghan

With those last words, I think that I ought to give way to the hon. Member for Nottingham, South (Mr. William Clark) and to get him to explain why he thinks that it is a lot of nonsense. I have no doubt that he would do it better. I am willing to let him have a go if he would like to do so.

After about three and a half hours or more of debate there is no doubt that the last drop of juice has been squeezed from the grape, the last hop has been squeezed from the press and there is no more malt to be distilled into the whisky. If I myself have heard these quotations once, I have heard them half a dozen times. Without offence to anyone, I hope that we shall get more than one brief circulating among hon. Members opposite if we are to have many weeks of debate over the next month or so. However, I have no reason to complain of the quotations from my own speeches——

Mr. Robert Cooke

I speak from no brief; I have seen no brief.

The Chief Secretary to the Treasury (Mr. John Diamond)

That was obvious.

Mr. Callaghan

My hon. Friend says that that was obvious, but I was about to say that the hon. Gentleman made one of the few relevant constituency speeches, taking a particular interest in his wine.

I was about to say that I was very flattered to hear all these quotations from my own speeches of last year. I was very conscious last year, when making them, that I might be in this position this year, and my expectations have been wholly fulfilled. That is why I took very little part in the Committee stage of the Finance Bill last year, but apparently not little enough.

I used to make speeches such as those that we have heard from hon. Members opposite and I used to listen to the replies of the kind which I have no doubt I am about to make. I found them unconvincing then, but I shall find them more convincing tonight when I make them.

The plain truth is, of course, that there has been a great deal of synthetic indignation throughout the debate. Anyone who has listened knows that there has been no real passion about this and no real depth of feeling. As the right hon. Member for Orkney and Shetland (Mr. Grimond) said, the partners have reversed themselves in the minuet. I will try to give some reasons why it is necessary to raise this taxation and why I have done it in this way. I will try to reply to some of the frustrated Second Reading speeches we have heard.

The question asked by some hon. Members was, basically, why should I not have found some other form of taxation? Others asked why I should have raised taxes at all. The hon. Member for Worcester (Mr. Peter Walker) was silent on this point, so we do not know the view of the official Opposition on it, although I gathered from him, from his reference to direct taxation in an intervention, that I needed to raise additional taxation. Does he agree with me that I needed to raise additional taxation, or would he have preferred me to find some other form of taxation than this one?

Mr. Peter Walker

As I explained in my earlier speech, my view is that if the right hon. Gentleman had never been Chancellor there would have been no need for this extra taxation.

Mr. Callaghan

But I am Chancellor and the hon. Gentleman has to face the situation as he finds it, whether he likes it or not, and he is still not answering my question. I assume that he believes that we should have raised the extra taxation in other ways. That deserves a reply.

I took the view that this was the year in which to do this because of the increase in direct taxation which took place in the autumn. We have to maintain a balance in these things. I raised direct taxation in the autumn to pay for the old-age pensions to a very large extent, and succeeded in doing so. I therefore thought that this was the year in which I should turn over to indirect taxation, thus keeping a balance.

The cost of the Amendment would be between £49 million and £52 million and I regret to say that I cannot advise the Committee to accept it on that ground. Assuming that there is agreement in the Committee that additional revenue is needed, the Amendment would make a substantial hole and I would have to find the money from some other source. I regret, therefore, that I cannot accept the Amendment.

I want now to come to detailed points. The hon. Member for Rye (Mr. Bryant Godman Irvine) made a speech, as he has done before, about the possibility of exempting perry and fortified cider from the duties. I have spoken in the past on his behalf. But I must now tell him that, having read and studied the case against his proposal, I am fully convinced of that case and I cannot support him any longer. Unfortunately, we have never before had a Chancellor who explained this case to the Committee. That is why I was not convinced before. I never realised what a good case there was against the proposal of the hon. Member for Rye. I do now.

The change was made in 1956 because the National Association of British Wine Producers represented that British wines were having to meet increasing and unfair competition from certain kinds of cider and perry, the strength of which was well above the normal for such products and which was obtained by special processes of manufacture and comparable to the strength of British wine. This higher strength was generally obtained by the addition and fermentation of sugar in quantities calculated not to sweeten the product, but to increase the alcoholic strength to a level much above the normal level of cider.

I am glad now to give the hon. Member for Rye my reasons and I am sure that, after hearing them, he will not want to put his case again. It was necessary both to protect the Exchequer against the loss of British wine duty, because this perry and cider was so strong, and to hold a balance as much as possible in the fiscal treatment of alcoholic beverages. At the same time, it was not the wish to impose duty on ordinary cider, and accordingly the minimum strength at which the artificially strengthened perries or ciders became dutiable was fixed at 15 degrees of proof spirit, which is above the strength that cider or perry made by the simple fermentation of apple or pear juice would normally reach. Ordinary cider has since been made liable to Purchase Tax as a soft drink by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd). But strengthened cider and perry have continued to be classed as British wine.

The interesting thing is that most large producers of strengthened ciders and perries decided to reduce the strength of their products to less than 15 degrees of proof and this removed them from the scope of the duty. That was quite legitimate. Indeed, it was one of the purposes of the increase. But one manufacturer has not done so and it is his case that the hon. Member for Rye is quite properly putting. I have seen correspondence in the past and the hon. Member has written to me about it.

The case basically against the Amendment is that the object of the 1956 provision was to remove the unfair fiscal advantage the cider producers were receiving. The Amendment of the hon. Member for Rye would relieve strengthened cider or perry altogether and give their producers a fiscal advantage over wines of similar strength. This would be unfair and contrary to the intentions of the 1956 change.

Mr. Bryant Godman Irvine

I am obliged to the right hon. Gentleman. Although he may not have appreciated the strength of the case against him previously, most other hon. Members have read precisely these words that he has just read last year.

Mr. Callaghan

I can only congratulate those advising me for giving that advice both to me and to my predecessor. I think, on reflection, that Lord Mitchison was going a little too far when he said that no deep principle was involved but that this was just another case of Government stinginess. I would like to withdraw those remarks.

There have been, Sir Samuel, from the Chairman, some Rulings concerning complaints in this discussion that we were not stopping a rise in public expenditure, which would be the alternative. I take it that you would not allow me to go into that at present and, therefore, I shall not do so except to say, in passing, that this is a singularly inapt remark to make in a year when I am undertaking to keep down the increase in public expenditure to 4¼ per cent. I will leave the matter there.

Mr. Peter Walker

Will the right hon. Gentleman give way?

Mr. Callaghan

I do not think so, on that point, because the hon. Gentleman would be as out of order as I would be. A great many speeches have been made on the subject and I have confined myself to one question. I think that we might call it a draw.

In referring to the speech of the right hon. Member for Orkney and Shetland, I would pay personal tribute to the distillery, the Highland Park, to which he introduced me on an earlier occasion. I fully appreciate its products and I am glad to tell him that I examined carefully, as did my predecessors, I am sure, the question of elasticity in the treatment of these products before deciding whether to increase the taxation on them.

The hon. Member for Worcester asked me particularly about the effect on consumption. I will gladly give him my information. Spirit consumption has been going up steadily year by year. For example, in 1960 it was 15.3 million proof gallons and last year it was 18.7 million proof gallons. There seems to be a steady increase every year in exports and I am glad to say that they are keeping up well.

When I saw the whisky distillers recently, I thanked them on behalf of all of us—and I am sure that I speak for the committee as a whole—for the great efforts they are making in exports. If more industries could obtain a record like that—about 80 per cent. of total production exported—the task of all of us, wherever we sit in this Committee, would be very much easier. The same thing is true about the trends of consumption for both wine and beer.

7.30 p.m.

Mr. Noble

Having paid that just tribute to the people who make and export whisky, is the right hon. Gentleman going to leave the matter, with these people getting hit on the head whatever they do in the same way as others who are not achieving this export effort?

Mr. Callaghan

Although it was alleged that I had done nothing to help exports, regarding the whisky industry I can say to the right hon. Gentleman—I have no doubt he will pass it on to his friends—that the export rebate is a considerable help to the whisky industry. The figure of rebate to the industry for 1965 in respect of exports is expected to be a little over £1 million. It may be as much as £1¼ million. This is a very substantial help. I hope that the right hon. Gentleman will not say that £1 million is of no consequence.

What the selling industries have to do—indeed, some are already doing it, and I have no doubt that the whisky manufacturers, who are very much alert in the field of exports, are doing it already—is to use rebates for the purpose of promotional advertising abroad, to send representatives abroad and generally to step up their efforts. That is what the rebate was intended for and I think that £1 million will be spent in that direction.

I am glad to say to the right hon. Gentleman that the answer to his question is, "No". I am certainly not hitting them on the head, I am doing my best, in the circumstances in which we are, to give a great exporting industry as much help as possible.

Wine and beer consumption is growing, although that of wine is much faster. We have heard a lot of Jeremiahs from the other side of the Committee. The consumption of wine is growing fast. We were told by one hon. Member that consumption was going down. The hon. Member for Worcester asked whether I knew the figures and whether I knew the difference between the two. I am glad to tell him that I do. The import of table wines has been increasing at the rate of 16 per cent, a year for the last three years, a very considerable increase. The import of sparkling wines increased by 18 per cent. per year and the sales of fortified wines have been increasing at the rate of 9 per cent. per annum.

Despite the increases visited on them by previous Chancellors the sales of all these wines have been moving ahead very substantially. So far as I can see, there is no indication of any element of retaliation. There are others, who, after all, like drinking Scotch whisky whatever charge is put on it, and I hope that they will long continue to enjoy it.

The same is true of beer. I got out two figures while the hon. Gentleman was speaking. Five years ago the consumption was 26.2 million barrels. Last year, it was 30.1 million barrels. There again, consumption has gone up, although not so fast as the consumption of wine. This may be because of a change in public taste, I do not know, but consumption of beer has gone up with the other two; so although it is quite right to call attention to the possibility that at some time in the future the taxable limits on these beverages may be reached, it would be quite untrue to say that the position has been reached today. It is not so. Consumption is still moving up and I have placed my expectations of additional revenue upon the extrapolation of the figures we have had.

I say to the hon. Gentleman that I do not take a figure in the dark or stab a pin in it. We look carefully at the possible effect of increases of duty on the industries. I had the advantage of seeing the whisky manufacturers and discussing these matters with them, and reading representations made by the brewers and those concerned with wine. I am afraid, therefore, that I must reject the Amendment.

The revenue is needed. It is needed to lessen the pressure of demand. I believe that the duty is beginning to have that effect, although when I go, as I did last weekend, to some of the clubs in my constituency at Cardiff, I do not find that it is having the depressing effect which some people seem to think.

For example, pensioners, about whom we are told and, for whom I certainly voiced complaints last year, did not say much to me about it. I found that they were saying, "Thank you very much for the increases in pension which we started to draw on 27th March". They have found it possible to absorb some increase here in their increase in pension. Therefore, I do not think that the case for the pensioners in the past is applicable on this occasion and in this year.

I must ask the Committee to reject these Amendments and support the Government in their endeavour to raise the necessary revenue.

Mr. Heath

I had not intended to intervene in the debate on this Amendment—and I do so now only briefly—but there are at least three of the remarks which the Chancellor has made which are so astonishing that I do not believe they should be allowed to pass without further mention.

The Chancellor commenced by saying that he knew that he was going to get caught out by what he said in debates in this Committee last year. He admitted this quite frankly. He went much further. He said that he had tried to take as little part in those debates last year as he could because he realised how difficult it would be for him if he became Chancellor the next year.

This is, first of all, the clearest possible indication that the right hon. Gentleman did not agree with what the then Opposition did last year, because he knew it was dishonest. Secondly, he said that even with the part which he did take he knew that he would get caught out on the arguments about policies which he would not be able to carry out in practice. Has ever a Chancellor come to the Government Dispatch Box and said with such clarity, lucidity and absolute frankness exactly how his policy has been spoken with two voices? Never before have I heard it said at that Dispatch Box in this way.

The right hon. Gentleman went on to say that there was not depth of feeling in this debate. My right hon. and hon. Friends have been pointing out, fairly, the consequence of the action taken by the Chancellor. There is no doubt that these extra duties produce hardship for a considerable number of people. There is no doubt that this action does make the incomes policy much more difficult. The present Minister of Technology was right last year when he said so. He is right this year when, as Minister of Technology and still as General Secretary of the Transport and General Workers' Union, he says exactly the same thing, that the Government side of the Committee must be realistic. We did not hear a word about that from the Chancellor. We did not hear a thing about incomes policy and the impact of this legislation on the incomes policy.

What is the position? The Chancellor has told us that he knew last year when he opposed the measures carried through by my right hon. Friend the Member for Barnet (Mr. Maudling) that he might have to do it himself this year and that he would then justify it. The Leader of the Liberal Party said that the minuet had now changed sides. I always thought that the minuet was a rotary movement, and that it is difficult to change sides when making a rotary movement, but I believe that here there is an important point which I wish to make.

What we object to, and have done in the whole of this Parliament, is that the Chancellor, when we discussed the previous Budget, should have opposed measures which he tells us he knew he would have to carry out and justify and which he is now justifying in this Parliament. That has been the key to the behaviour of the party opposite all through the General Election and ever since. That is what we object to, that hon. Members opposite speak with two voices; that they know all the time they have to carry out policies for which they were blaming and criticising hon. Members on this side of the Committee. That is the fundamental aspect of their policy to which we object.

The second astonishing thing is this. When asking my hon. Friend the Member for Worcester (Mr. Peter Walker) what was his attitude towards indirect taxation, the Chancellor said he assumed my hon. Friend agreed that he had to raise the necessary money. My hon. Friend said that if we on this side of the Committee had been in the Chancellor's place we should not have had to look at it from the same point of view. We would not have had to make the same sort of calculations. The Chancellor said that this is not good enough, that what we must do is work on the basis that he is Chancellor and is in a mess. He says, "Because I am the Chancellor and because I am in a mess, what would you have done?" This is not a fair proposition, because we are not the Chancellor and we would not have been in a mess. This is the second astonishing thing which the Chancellor has said today.

He said that we have to take into account the fact that in his first Budget he brought in direct taxation. He should have said that there was not a mention of it in his second Budget speech. There were two Budgets and two Finance Bills, and only now have we heard them brought together.

The third astonishing thing was that he urged and supported the Amendment in opposition when it was moved before by my hon. Friend the Member for Rye (Mr. Bryant Godman Irvine). Having read the case, he said that he is now absolutely convinced and is absolutely against my hon. Friend. This is the most astonishing statement. What does it mean? Does it mean that he never read the case before when supporting my hon. Friend and never bothered to listen to what he said, or that when he was under tutorials from Nuffield they taught him one case which supported my hon. Friend, but now that he is under the influence of the Treasury he is absolutely convinced the other way? The Treasury has triumphed yet again, and what a triumph.

When the Chancellor was reading out his statement, I was reading the statement of a year ago in the OFFICIAL REPORT and the words were exactly the same——

Mr. Callaghan

The Amendment is exactly the same.

Mr. Heath

—not only the arguments, but the exact phraseology and sentences. Does the Chancellor need to be convinced in exactly the same words and in the same sentences? There is a serious point here. We would have respected the Chancellor if he had put this into his own words. I believe that there is a very important point of democracy here. It is apparent that the Chancellor is just rejecting this Amendment without any real consideration, is reading out the brief which has been put in front of him and producing exactly the same arguments.

People outside do not understand this attitude in the least——

Mr. Callaghan

Is the right hon. Gentleman supporting the Amendment?

Mr. Heath

We did not support it last year, but the Chancellor did. Now he comes along as Chancellor of the Exchequer and says, "I am reading out what is in front of me and therefore these are the reasons for rejecting the Amendment." That is not good enough for the general working of the Parliamentary system. This is a fundamental point. We expect the Chancellor of the Exchequer in discussion on future Amendments at least to be straight with us in explaining why he has changed his views. He has not explained why. He just read it out.

Mr. Wilkins

The right hon. Member is reading something out.

Mr. Heath

The hon. Member will not find any brief here. This is all written out——

Mr. Wilkins

I only meant that this is a very well-noted speech that the right hon. Gentleman did not intend to make.

Mr. Heath

I do not wish to claim any undue modesty, but my hon. Friends saw me writing while the Chancellor was speaking——

Sir D. Glover

On a point of order. I saw my right hon. Friend make these notes while the debate was going on. He had blank sheets when he started.

Mr. Wilkins

That is not the point. He said that he did not intend to make a speech.

Mr. Heath

It was only when I heard the Chancellor's opening words that I began to make notes. I started with a tabula rasa and I have finished with a tabula rosa.

7.45 p.m.

My final point is that, carrying this one stage further, I put it to the Chancellor that he and his party achieved success in the General Election in October by a very narrow majority very largely on his criticism of economic policies, which he termed "stop-go". He has admitted this afternoon that he knew all the time that he would have to pursue the same policies when he was in power, if he got in. We shall never find the answer to our economic problems which have faced every Government and every Chancellor since 1945 until the party opposite stops trying to make political capital out of economic actions and treats the matter seriously so that the people of this country can understand what it is about.

This is absolutely fundamental to everything which we do in economic affairs. I hope, now that the Chancellor has frankly confessed his soul, that in future he will adopt this attitude on public platforms as well as in the House.

Mr. Callaghan

I do not think that I should complain about the speech of the right hon. Member for Bexley (Mr. Heath). The one who should complain is the hon. Member for Worcester (Mr. Peter Walker). He has been hoiked down to the Front Bench and given the opportunity of winding up the debate and then, when he has made his speech, he finds that his right hon. Friend cannot contain himself and has to speak. I am very sorry for him. I would say to the right hon. Member for Bexley that if he is going to lead a team it is not a bad idea to let them get on with their own work from time to time.

As for his other supercilious comments about Nuffield, I am surprised that he should say that, because he has recently accepted an invitation from that college to become a visiting Fellow. He shares their hospitality with me and I hope that he will not sneer at them. He was obviously allowed to go as wide as he did in his general comments, but, having sat and listened to the debate, I find it extremely odd to hear him talking about political speeches being made about economic problems, because what we have heard this afternoon, as I have said, is a whole series of frustrated Second Reading speeches which should properly have been made on the Finance Bill. He has added to them himself.

What we are discussing—I do not think that the right hon. Member mentioned it—is the duty on wines, spirits and beer. I did not hear any of these three words cross his lips, so busy was he trying to make an economic case out of a political matter——

Mr. Ridsdale rose——

Mr. Callaghan

I am dealing with him, not you.

Hon. Members


Mr. Callaghan

You know that I do not mean you, Sir Samuel. I can only deal with one at a time.

If we are to run this Finance Bill in a reasonable way, I hope that the right hon. Gentleman will accept the normal convention that when there have been two speeches from the Front Bench, at least as far as the Front Benches are concerned, we should then vote. [HON. MEMBERS: "Nonsense."] I have sat through proceedings on Finance Bills for many years and hon. Gentlemen cannot shout me down on this. There is a well-known convention that, although no Front Bench can control the back benchers, at least they can control themselves. The generally accepted convention for many years has been that, once a speech has been made from the Front Bench and a speech has been made from the other side, as far as the Front Benches are concerned we should vote.

When the right hon. Member for Bexley reflects on this, he will see that we shall get into a lot of difficulty unless we accept the normal convention which has operated in the past in the House. I do not believe that he intends to depart from it. Therefore, I hope that we can now proceed—I see that the right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd) is aching to get to his feet. There are lots of other Amendments on which he can display his eloquence.

Mr. Geoffrey Lloyd (Sutton Coldfield)

As the right hon. Gentleman has referred to me, I must repudiate this idea of a convention that it is not possible for a Front Bench speaker to reply when he is dissatisfied with a Government statement.

Mr. Callaghan

I sat for 13 years and have often been dissatisfied, but because some conclusions had to be reached I contained my dissatisfaction. The right hon. Member for Sutton Coldfield was missing from the active affairs of the House for years before last October. He has now peen rejuvenated and come back again. I am sure that we shall have many speeches from him. In the years of his absence, that is the way we ran it.

If we are to run it differently, we shall do so——

The Deputy-Chairman

Order. I think that the right hon. Gentleman is getting very far from the Amendment which we are discussing.

Mr. Callaghan

I entirely agree. I have made the point and I leave at that, because I take it that we are going to pursue these matters in the way we have in the past. I hope that we can come to a conclusion on the first Amendment, on which we have now spent four hours.

Mr. Heath

To make this clear, so that there is no misunderstanding during the weary days and nights of discussion which lie before us, I must say that I cannot possibly accept the Chancellor's suggestion that there is a convention that a member of the Opposition—either from the Front Bench or the back benches—having moved the Amendment, nobody follows the Government Front Bench if dissatisfied with the reply. In my experience, including four years as Chief Whip, it has almost always been the case that when an Amendment is moved from this side of the House this side of the House follows the Government spokesman. In fact, if the right hon. Gentleman will refer to the debate on this Amendment last year he will find that Lord Mitchison, then the hon. and learned Member for Kettering, spoke both before the speech of my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd Carpenter) and again afterwards.

Mr. Ridsdale

I must stress how disappointed I am that the Chancellor did not deal with the effect of his tax increases on wages, particularly when he has the Minister of Technology sitting on the Front Bench and particularly in view of all the remarks which he made last year about——

The Deputy-Chairman

Order. I do not think that that comes within the Amendment.

Amendment negatived.

Mr. John Farr (Harborough)

I beg to move, Amendment No. 3, in page 2, line 8, at the end to insert: but the rates of duties of customs and excise on tobacco manufactured, or intended for manufacture as pipe tobacco, shall remain unchanged. Unlike the last Amendment, this is a new Amendment. The last Amendment has appeared in one form or another in Finance Bill debates for quite a number of years, but I think that my Amendment has not appeared in any guise before the Committee in recent years.

I was glad to hear the Chancellor say that during the debate he would seize every sensible opportunity to improve the Bill, and I suggest that this is one of the rare opportunities which he may seize to do something new, refreshing and sensible for a change. I am not appealing against the incidence of Tobacco Duty generally. Every hon. Member realises that every Chancellor, and certainly every Socialist Chancellor, must have a ready method of raising revenue. For years revenue has been readily raised by increasing the duty on tobacco and drink.

I am asking the Chancellor to adopt a sensible new innovation. For years the standard formula of Chancellors when in fiscal trouble has been "A penny on the pint and 6d. on cigarettes". A 1d. on a pint of beer includes, in this Bill, the whole range of alcoholic beverage, with an increased duty, and 6d. on cigarettes includes the whole range of tobacco goods, including pipe tobacco, cigars and cigarettes

I am asking him to adopt a more sophisticated approach by putting his duty, if he needs money, only on cigarettes and cigars and not on pipe tobacco. It would be right, perhaps, if I here declared an interest, although I suppose that very few hon. Members who took part in the debate on the last Amendment have not an interest in the general imposition of duties on wines. I move my Amendment, however, entirely on medical grounds.

May I draw attention to a statement of the Medical Research Council which appeared in both the British Medical Journal and the Lancet on 29th June, 1957. It starts with the words: The increase in lung cancer … Perhaps I may read some words which are extremely relevant to the argument which I am addressing to the Committee: The increase in lung cancer. In their Council Report for 1948–50 the Council drew attention to the very great increase that had taken place in the death rate from lung cancer over the previous 25 years. Since that time the death rate has continued to rise and in 1955 it reached a level more than double that recorded only ten years earlier: 388 deaths per million of the population in 1955 compared with 188 per million in 1945. Among males the disease is now responsible for approximately one in every 18 of all deaths. The Report went on to say that certain comments could be made on these statistics—comments which were included in the opening remarks of the Report. One of the comments which the authorities who drew up the Report were unanimous in putting forward was that the trend over the last few years indicated that the incidence had not reached its peak.

Later in the Report—I will not trouble the Committee with this—there is a reference to official inquiries which have taken place in the United States, Finland, Germany, Holland, Norway, and Switzerland, as well as in the United Kingdom, all of which agree that there is more lung cancer occurring in smokers than in non-smokers.

Two very far-reaching, significant and detailed inquiries relating to this matter, both in the United States and in the United Kingdom, indicated that lung cancer was more liable to occur in those who smoked cigarettes than in those who indulged in pipe tobacco. One of the conclusions in this Report on Tobacco Smoking and Cancer of the Lung, produced by the Medical Research Council, is that a higher mortality has been noticed in cigarette smokers than in pipe smokers. A further point which has been noticed is a higher mortality in smokers than in non-smokers. In addition, there is a higher mortality in heavy smokers than in lighter smokers.

But it is particularly the first conclusion of the Report to which I would draw attention—that a higher mortality existed in cigarette smokers than in pipe smokers, and on this I am basing my appeal to the Chancellor of the Exchequer. It is more or less the linch pin of my case.

I have, however, further documentary evidence of a substantial nature to which I will briefly refer showing that lung cancer and many other diseases are more likely to occur in those who smoke cigarettes than in those who smoke other forms of tobacco. This conclusion is also supported by a report which I have in my hand of the Royal College of Physicians, published in 1962. There is a good deal of evidence in this Report showing that many of the diseases and illnesses in this country are more prevalent among those who smoke cigarettes heavily, or who smoke them at all, than in those who do not smoke. This Report of the Royal College of Physicians rather sensibly produced four or five courses of action which it would recommend any Government to take. One significant recommendation was that the Government should increase the tax on cigarettes and adjust the tax on pipe and cigar tobaccos.

8.0 p.m.

The third piece of medical evidence I wish to submit comes from a report published by the United States Department of Health, Education and Welfare. Entitled, "The Risk of Developing Cancer", it stated that the risk of developing cancer of the lungs for cigar and pipe smokers, the combined group, was greater than for non-smokers, but much less than for cigarette smokers. A section of the report dealing solely with pipe smoking stated that it was found that even for men smoking 10 or more pipefuls a day and men who had been smoking pipes for more than 30 years the risk of death from lung cancer was little, if at all, higher than the risk for non-smokers.

That concludes the outline of the medical evidence which I have assembled. I hope that the Chancellor will agree that the cost of making this concession, in monetary terms, would be relatively insignificant. I urge him, realising that he needs to raise money from somewhere, to increase the duty on other forms of tobacco if he must but, just this once, to give it a try, based on the medical evidence, and exempt pipe tobacco from the increase. He could try it this once to see if such a step would be beneficial to the health of the nation, perhaps by encouraging those who must have some form of tobacco solace to swing from cigarettes to pipes. This has been done in other countries recently with success.

I appreciate that the right hon. Gentleman needs to raise revenue and that tobacco and alcohol are ready victims for him to milk when necessary. However, I urge him to abandon the ham-fisted approach which has become a habit among, I regret to say, successive Chancellors of both parties and to take an enlightened step forward. He should not whitewash the lot, so to speak, but take an enlightened alternative which all public and medical evidence endorses.

I believe that the right hon. Gentleman is enlightened enough to mark my concluding words. In our debate on the previous Amendment a great deal was said about the old-age pensioner. I am sure that the Chancellor realises that in Britain the pensioner has an important role to play. However, in nine cases out of 10 the pensioner has a pipe in his mouth. I urge the right hon. Gentleman, in an enlightened and forward-looking manner, to do something to make it easier for the pensioner to enjoy his tobacco and, I hope, thereby live a year or two longer.

Mr. Raymond Gower (Barry)

I hope that the Chancellor feels that my hon. Friend the Member for Harborough (Mr. Farr) presented his case not only in a persuasive but in an extremely moderate way. I hope, too, that he feels that there is a great deal of substance in what my hon. Friend said.

All the evidence suggests, as my hon. Friend, pointed out, that the habit of cigarette smoking is dangerous in many ways, not only because of the risk of lung cancer. It is more dangerous to health than other forms of smoking. The history of tobacco taxation shows that increases in the duty do very little, if anything, to deter the cigarette smoker. In other words, when there is a general increase there is a period of a few weeks during which a number of people give up the habit, but they are quickly replaced by youngsters who become regular smokers and by people taking up the habit once again. Indeed, over the years the sales of cigarettes have continued to rise at a high rate, with all the dangers that my hon. Friend pointed out.

We also have a considerable amount of evidence to show that appeals to cigarette smokers—even propaganda and adadvertisements—telling them of the dangers of cigarette smoking have proved ineffective. We see, therefore, that not only should cigarette smokers be warned and helped but that they should be given positive inducement to change their smoking habits; and such inducement is contained in the Amendment. I would have been pleased had my hon. Friend included cigars for exemption.

Mr. Robert Cooke

My hon. Friend the Member for Harborough (Mr. Farr) did not, in fact, exclude them from the exemption about which he was speaking.

Mr. Gower

Nevertheless, I would have preferred my hon. Friend to have treated cigars as he has pipe tobacco, because the evidence shows that cigar smoking is much less dangerous than cigarette smoking.

Mr. Webster

Is not this rather like the question, "How fat is a fat man?". Would it not be difficult to define such things as the length of a cigar, remembering that there are many types and lengths of cigars? Would that not lead us on to arguing about the lengths of various types of cigarettes and which should and should not be exempt?

Mr. Gower

My knowledge of the length of cigars cannot be compared with that of my hon. Friend. I merely say that the available evidence indicates that cigar smoking, like pipe smoking, is far less dangerous than cigarette smoking, and I would, therefore, have liked cigars to have been treated in the same way as pipe tobacco. However, that can be done in the future. My hon. Friend has suggested a most valuable start in this discriminate, selective form of taxing tobacco. I know of instances on the Continent where this method has been successful. There are a number of countries where the tax is not all at the same level.

I therefore hope that the right hon. Gentleman will feel that here he has an opportunity to do something of tremendous value in terms of a Finance Bill. He can help his right hon. Friend the Minister of Health in his very difficult campaign against cigarette smoking. I strongly support the Amendment. I hope that it will be supported on both sides of the Committee, and I hope that the Chancellor will have little hesitation in accepting it.

Mr. Ridsdale

Of all the reforms about which the Chancellor has talked, the one essential thing that he has not done has been to broaden the basis of consumer taxation or make economies in Government spending. The result is that the increased duty on tobacco must bear heavily on those least able to pay it. This was recognised by the previous Labour Government, which provided tokens to lessen the impact of the duty on old-age pensioners and people with minimum means, who were thus able to continue with something they would not have been able to do.

Do the Government intend to bring in such a scheme now, especially in view of the difficulties of the noncontributory pensioners? Will the Chancellor of the Exchequer tell us why he is not able to help this special section of the community by some sort of tax remission, even though he may not be able to go as far as the Amendment suggests? No tax bears so heavily on those least able to afford it as does this one.

I have looked up some examples, and can find none better than that provided in last year's debate on the Finance Bill by one who is now a fellow Minister of the Chancellor at the Treasury. In that debate the hon. Member spoke very eloquently of the need to help those least able to afford this duty, yet, once again, we have the hardness and the hypocrisy of some hon. Members coming out and working against those whom last year they were seeking so very eloquently to help.

That eloquent spokesman last year said that an average family of two adults and two children and an income of between £1,750 and £2,000 a year, paid about 2 per cent. of their spendable income on Tobacco Duty. He said that a similar family with in income of between £11 and £13 a week paid not 2 per cent. but 5½ per cent. of their spendable income on the duty. The burden on that family was three times as heavy as that on the first. He also gave the example of the old couple with an income of between £4 and £11 a week who, between them, spent between 6 per cent. and 7 per cent. of their spendable income, not on the tobacco but on the duty on the tobacco. That represented a very big proportion of their income—but the Chancellor of the Exchequer has turned the screw even tighter this year.

8.15 p.m.

The right hon. Member for Sowerby (Mr. Houghton), the Chancellor of the Duchy of Lancaster, supported by the present Chancellor of the Exchequer and a number of hon. Members opposite, moved an Amendment to the Finance Bill of 1960 to exclude this class of people from payment of the Tobacco Duty. He was supported by the Prime Minister and many hon. Members opposite with very eloquent speeches, but the first thing they now do is to put this burden on this section of the community.

In the debate on the previous Amendment today the Chancellor of the Exchequer said that pensioners this year had had a pension increase which would help them pay for the increases on beer and other items, but I would remind him that his right hon. Friend the Chancellor of the Duchy of Lancaster said, in 1960: I hope it will not be said that, although there is an increase in the Tobacco Duty affecting old-age pensioners this year, reliefs were given to them last year … which offset the addition which they will have to pay for their tobacco and cigarettes."—[OFFICIAL, REPORT, 18th May, 1960; Vol. 623, c. 1363.] I hope that the Chancellor of the Exchequer will not use that argument tonight, but will tell us why it is not possible to reintroduce the token scheme. I hope that he will tell us why he has altered his opinion and now believes that an increased burden should be put on these people because, without an adequate explanation, such an action will be not only taken as hypocritical, but mean as well.

Mr. Webster

I have pleasure in supporting my hon. Friend the Member for Harborough (Mr. Farr), who will have earned the gratitude of all pipe smokers. There is something about tobacco right down its history since it was brought here from North America and described by that Scottish King, James I, as a "noxious weed", that has got at the Puritan in all our souls. There has been a movement in the customs of the people away from smoking pipes—which often had to be smoked up chimneys—to a stage at which people smoke their cigarettes in public.

The incidence of lung cancer has increased very rapidly during that swing from the pipe to the cigarette. Many of us require tobacco to release us from nervous tension. It has been said by responsible Ministers on both sides of the House that in time of tension something is needed to help relaxation. If one accepts the assumption that people will smoke in any case, surely something should be done to give a concession that will swing them from the cigarette to the pipe.

I sympathise with what was said by my hon. Friend the Member for Barry (Mr. Gower) about cigars, because reports on lung cancer have stated that it is safer to smoke cigars or pipes than it is to smoke cigarettes. The difficulty about including cigars would be in distinguishing between the cigar and the cheroot, or the cigar and the Manikin, or the cigar and any other thing—there is also, of course, the Corona Corona. We would need a very complicated schedule.

Mr. Gower

It may be that my hon. Friend is absolutely correct, but I assume from the cheapness of cigars in Holland that they must carry much less duty than cigarettes do there. I am sure my hon. Friend, who has been in that country, has noted how very cheap cigars are in Holland.

Mr. Webster

I was there a fortnight ago and I do not wish to detain the Committee by talking about what I was doing there.

A pipe, although it may be a filthy thing after a time if it is not kept properly, has some effect in condensing nicotine and various carcinogenic byproducts of tobacco when the smoke travels from the burning bowl to the mouthpiece. I have noticed that several Ministers of the Crown—the Minister of State, Board of Trade, for example—sport ingenious devices with metal condensers. That is either for the purpose of making the pipe whistle in the wind or to condense the nicotine in the tube and cool the smoke. The hon. Gentleman is not present now, but I would not expect him to be so while we are discussing this subject.

I expect that the Chancellor, like other Chancellors, will say that the problem is that people would abuse this concession by using pipe tobacco to roll their own cigarettes. The number of people who roll their own may amount to a few thousand, but as a total percentage of the cigarette-smoking population it would be remarkably small. Any amount of revenue lost in that way should be borne in mind and accepted, but if we can swing people away from the habit of smoking tobacco direct in the mouth to smoking tobacco through a mouthpiece, we should do so. Many pipes are today fitted with ingenious types of filters. This is most helpful in cutting out the carcinogenic content which goes into the mouth.

I have noticed that the Postmaster-General is preventing the advertisement of cigarettes on television, but that in his election address that he was pictured sporting a pipe. I have also noticed that in society the pipe-smoker is most vilely discriminated against. If one goes to an important dinner, and smokes a pipe, one becomes non persona grata. If one goes into an aeroplane and smokes a pipe it is not approved of. If one goes to a theatre and smokes a pipe there are loud shouts of disapproval. We have a Prime Minister who not only cleans his own shoes, but also smokes a pipe, so we might expect a concession from the Chancellor in accepting this proposal.

Mr. Robert Cooke

I am sorry to oppose my hon. Friend the Member for Harborough (Mr. Farr) on this Amendment. He is always delightful company, but sometimes I have had to forgo his company because of a particularly foul pipe. I also dissent from my hon. Friend the Member for Weston-super-Mare (Mr. Webster).

Having made what the Chancellor described as the best constituency speech on the last Amendment, about wine, I might be considered as making not so good a speech on this subject because Bristol is a headquarters of the tobacco industry. I must oppose my hon. Friend the Member Harborough because I think his proposal is discriminatory. Although he seeks to help a group of people, and my hon. Friend the Member for Harwich (Mr. Ridsdale) made a good point about old people who get a particular enjoyment —one of their very few enjoyments—from a pipeful of tobacco, I cannot support an Amendment which discriminates in this way.

Much play has been made about the effects of pipe-smoking and cigar-smoking on lung cancer. We have had a number of learned reports on the subject, but I suggest that they are often contradictory and there is not yet enough conclusive evidence to back the sort of case which my hon. Friend made. At least it is a disputed point among the scientific experts.

There is discrimination in advertising on television. This nanny of a Government have put a final ban on the advertising of tobacco on television, but before the ban was proposed there was a difference. Cigarette advertising was postponed to a particular part of the evening, whereas pipe tobacco was advertised earlier. My view is that there was a great deal too much tobacco advertising, although I would not have discriminated against it as this Government have done for people can make up their own minds.

If this Amendment were carried it would have far-reaching social consequences of which surely my hon. Friend has not thought. He said that it would drive people away from smoking cigarettes to the smoking of pipes. That is all very well for men. I suppose men would go back to Victorian and Edwardian habits, every man would be smoking a pipe, wearing a long beard and a tall silk hat as they used to do in this House, but what about the women? Are we to drive women into smoking pipes instead of cigarettes? [HON. MEMBERS: "Why not?"] I ask hon. Members who say, "Why not?" to reflect and consider how inelegant that would be.

Mr. Farr

If my hon. Friend inquired of women folk he would find that a woman would far rather have a husband around alive and kicking smoking a pipe than have no husband at all.

Mr. Cooke

I should hesitate to ask my hon. Friend's wife what she thinks of his pipe. I should refrain from doing so for fear of causing trouble. The idea of large numbers of women smoking a pipe is absolutely abhorrent to the Committee.

My hon. Friend the Member for Weston-super-Mare made a good point on the subject of evasion. The Chancellor must be extraordinarily worried at the prospect of having discrimination in favour of pipe tobacco so that one could buy the stuff and roll one's own cigarettes. There would be an intense advertising campaign to increase, "Roll your own". One could buy tobacco in bulk and have a machine in which it was rolled and then distribute cigarettes to one's friends. It would be illegal to do it as a business and to sell to one's friends, but I am sure the licensing system would break down.

Mr. Farr indicated dissent.

Mr. Cooke

My hon. Friend shakes his head, but that is because he has not a devious mind like some people have.

Mr. Farr

I hesitate to interrupt my hon. Friend again, but I wish to point out that in some countries where this concession is made it is limited to pipe tobacco in flake form. I defy even my hon. Friend with his ingenuity to get a piece of tobacco in flake form into a cigarette.

8.30 p.m.

Mr. Cooke

I do not know if I would be out of order if I pursued this in detail. Having visited the factories of the British American Tobacco Company and the Imperial Tobacco Company in Richmond, Virginia, and seen a good deal of tobacco production of one kind and another, I can assure my hon. Friend that a very passable cigarette could be made by some ingenious process even out of the sort of tobacco—I nearly said "muck"—which my hon. Friend smokes. I am sure that the tobacco is of very fine quality. It is only that it gives a very foul impression when it is being digested or ingested, or whatever it is that happens in that machine of his.

I am sure that my hon. Friend was well-meaning in proposing the Amendment. If it is carried, we shall have a chaotic state of affairs. I doubt whether it will achieve the object my hon. Friend maintains it will have. For a time it might help those who, heaven knows, need helping in these days of increased prices and discrimination against the needy. The present Government's policies hit those sections of the community far more than they hit any other section of the community. However, in the end it might back-fire on those very people. This is what my hon. Friend has not realised.

If this concession led to a wholesale evasion of duty and the loss of revenue from Tobacco Duty, what would be the Chancellor's reaction? He might try to increase the Tobacco Duty, which might result in the law of diminishing returns playing its part. He might find that it was a wasting revenue. Even if he did not find that, he might have to have resort to other means of raising revenue. My hon. Friend said that tobacco is fair game and is one of the ways in which the Chancellor can get some ready money easily. If the Chancellor found that money was not coming very easily by this means, he might cast his eye on other methods of taxation.

For that reason, if for that reason only, although my hon. Friends have made out a very strong case according to the evidence they have produced, I take the view that this concession might be of temporary benefit to those who definitely need help and might in the long run merely cause the Chancellor to cast his net over a wider field, and I could not support any proposal which would encourage him to do that.

Mr. William Shepherd (Cheadle)

I support the Amendment. Although it is not true that we can assent to the statement made by my hon. Friend for Weston-super-Mare (Mr. Webster) that we know what the carcinogenic substances in tobacco are, I nevertheless hope that we shall not follow the line taken by my hon. Friend the Member for Bristol, West (Mr. Robert Cooke) and take the view that there is any real practical doubt as to the evil effects on health of cigarette smoking. This suggestion does a grave disservice to the health of the nation. I hope that even those who represent tobacco manufacturing cities will refrain from doing such a disservice to their fellow men.

Mr. Robert Cooke

My hon. Friend has leaped to the conclusion that I said that smoking was not injurious to health. I said nothing of the kind. I merely said that my hon. Friend the Member for Harborough (Mr. Farr) was perhaps in error in thinking that there was such a great distinction between smoking a pipe and smoking cigarettes. All smoking is injurious to some people, particularly bronchitic people, to whom all kinds of smoking would be absolutely fatal.

Mr. Shepherd

If my hon. Friend reads the report of his speech in HANSARD, he will see that he cast some doubt on the validity of the reports. I take the view that it is a disservice to the nation's health to cast any such doubt.

I hope that the Chancellor of the Exchequer will turn his mind to some form of fiscal discrimination designed to induce people to smoke other than cigarettes, even though we cannot accept the contention of my hon. Friend the Member for Harborough (Mr. Farr). A few odd posters stuck up in waiting rooms in the establishments of public health authorities and a few demonstrations on the television are not sufficient to cause people to realise the magnitude of the danger to which they expose themselves and are no inducement to choose one form of tobacco as compared with another. Therefore, if the Chancellor is not able to accept the Amendment, I hope that he will turn his mind to the possibility of inducing people to accept those forms of tobacco which are less injurious to health.

I ask the Chancellor to consider two matters. First, he is losing much revenue by cigarettes being sold to our troops at very low prices, if they are not issued free. It is clearly incompatible with improving public health by cutting down smoking to supply cigarettes to the Armed Forces at nominal prices. The Chancellor ought not to lose that revenue. He should obtain that revenue by changing the system.

I ask him to consider another anomaly in connection with the supply of tobacco. I refer to the anomaly that the Government refuse to allow the cheaper form of cheroot to be imported into this country. The cheaper form of cheroot is that which has a synthetic wrapper. It is exactly the same in many ways as a cigarette having a synthetic wrapper or a near synthetic wrapper. The Treasury hold on to the absurdly outdated view that the cheroot and the cigar are the same thing. In fact, they are not.

A cigar is generally rolled from a leaf entirely, whereas a cheroot is shredded tobacco in the same way as a cigarette, with an outer wrapper which in many cases is very similar to the wrapper of a cigarette. Yet I have had a long correspondence with one of the previous Ministers at the Treasury and persistently the Treasury has refused to allow into this country a cheroot with an artificial wrapper. This is absurd, because the leaf wrapped round the cheroot merely increases the cost of the cheroot and prevents us enjoying in this country cheroots at a low price as one can enjoy them in other parts of the world.

I ask the Chancellor to consider this old-fashioned notion of the Revenue. It is absurd to talk about protecting the revenue. It is simply that trade classifications and long practice have caused us to take the view that there is a material difference between a cigarette on the one hand and a cheroot on the other, whereas in the form of manufacture there is practically no difference at all.

There ought to be a policy of fiscal inducement to consume other forms of tobacco than cigarettes. We should consider, first, the supply to troops at normal prices, and secondly, the impediment to importing into this country, or even manufacturing here, the cheapest form of cheroot.

Dr. Bennett

This Amendment offers the Committee an opportunity which should have been taken, and which I am surprised was not taken, before my hon. Friend the Member for Harborough (Mr. Farr) moved the Amendment, to differentiate between different types of tobacco.

It is overwhelmingly obvious, no matter what rearguard actions are fought to prove to the contrary, that the persistent smoking of cigarettes gives rise to a very high liability to lung cancer. I understand that it is due to the combustion products of the cigarette. I do not know enough of the chemistry to be able to say whether it is because the tobacco in cigarettes is heavily laden with nitrogenous salts, such as potassium nitrate, though the latter would obviously appear to be present because one can see the mauve-coloured spluttering in the tobacco while it is burning. It is known that benzpyrene and other materials cause the irritation which, when prolonged, produces cancer. The cigarette is overwhelmingly established now as being responsible.

I can remember going with other Members of the House round the Royal Marsden Hospital a few years ago just after the first American report was issued on lung cancer and cigarette smoking. We found that lung cancer was going up while other forms of cancer were not. It was, therefore, not diagnosis which made it easily detectable. We also discovered that a research worker had found that lung cancer was not peculiar to humans. There was on record a case of a cow suffering from lung cancer, and I remember that some of my colleagues were trying to find out what brand she smoked.

There is no doubt that it is cigarettes which overwhelmingly cause this disease, although cancer of the tongue was well-known in the days of the old clay pipe when combustion products dribbled down the stem of the pipe on to the tongue of the smoker. Cancer of the lip was also known. Those forms of cancer have largely disappeared, and the rather more highly developed forms of pipes which are smoked nowadays have perhaps somewhat reduced the incidence. At any rate, there is not the same chronic irritation.

I come back to my original contention, that I am surprised that the Government have not taken the opportunity of producing a deterrent which they have talked about so much and which they appear to have taken seriously enough to put this impulsive ban on cigarette advertising on television. They have put that into force, but have not taken the obvious fiscal steps of making a differentiation between lethal and non-lethal tobacco.

This is a most reasonable Amendment. Its purpose has been neglected far too long. It will do nobody any harm if the Chancellor took proper notice of it. It is consistent with the policy which one part of the Chancellor's Government has put into action that he should take a parallel line of action or that other Departments of the Government should withdraw their activities. It appears that the left wing of the Government does not know what their right wing is doing and this makes an inconsistent pattern of something which deserves to be taken seriously.

Mr. Michael English (Nottingham, West)

I am glad that the hon. Member for Bristol, West (Mr. Robert Cooke) was opposed to the Amendment, because it gives me a clear conscience about supporting it and still preserving the delicate balance that exists in the Committee. I would support the principle, although the Amendment may be wrongly worded.

I would start by mentioning the question whether or not cigarette smoking is carcinogenic. The hon. Member said that there was some doubt. There is no conclusive evidence that cigarette smoking causes cancer, or if there is I do not know of it and I do not think that any hon. Member has mentioned it. But we often decide things on evidence which is less than conclusive. My hon. Friend the Member for Nelson and Colne (Mr. Sydney Silverman) would, no doubt, point out that we have been known to hang men on circumstantial evidence, and there is a less degree of evidence than is absolutely conclusive upon which we often arrive at conclusions.

I think, therefore, that the Government were, in principle, quite right to accept the scientific advice which said that there was sufficient evidence to lead to the belief that cigarette smoking caused cancer. Hon. Members will recollect that I objected at the time on the Floor of the House to the ban imposed on television advertising. This was not because I did not believe that cigarette smoking may well cause cancer. It was simply because I thought that a ban merely on one medium of advertising alone has certain limitations and that we should have considered the whole field first before taking action on one part of it. There was also the reason that I would certainly like any Labour Government that I supported to consider the effects upon the workpeople in the factories if we succeeded in discouraging cigarette smoking.

It so happens that the factories which are partly in my constituency are not merely producers of cigarettes, but also, to a minor degree, of pipe tobacco. I should have thought that there is the same degree of evidence as there is for the carcinogenic qualities of cigarettes that pipe-smoking does not have the same effect. This is a strong argument, and the hon. Member for Harborough (Mr. Farr) is to be congratulated on this, for a fiscal step in this direction if it is practicable. The Amendment is probably impracticable, for the reason that there are all sorts of pipe tobaccos which could conceivably be used for making cigarettes, though they might not be palatable to present tastes. But the hon. Member for Harborough also pointed out that in other countries similar fiscal incentives are given for pipe tobaccos in flake form. The principle behind the Amendment should be considered by the Government and possibly later they could move an Amendment putting the matter in a legitimate form so that there could be little evasion.

It is for these reasons that I would support the Amendment to the degree I have stated.

8.45 p.m.

Sir D. Glover

This is one of the Amendments which I should not support because I do not think that it is correctly drawn, but I am sure that all hon. Members understand and have a great deal of sympathy for the motive of my hon. Friend the Member for Harborough (Mr. Farr) in putting it before the Committee.

The whole business of tobacco smoking is really one of the most illogical habits that the human race has ever become addicted to. Why millions of people all over the world—I am one of them—should buy something simply in order to send it up in smoke and, not to be satisfied with that, to hold the stuff in their mouths while they send it up in smoke and take the smoke down into their lungs at the same time, I really cannot understand.

Why Sir Walter Raleigh, or whoever it was who first brought the weed to this part of the world, was so successful, I shall never know. People try to give up smoking time after time. I give it up for a week and then I start again; and I am sure that this applies to many right hon. and hon. Members as it does to the great mass of smokers in the country.

All Governments, since the medical reports came out, have been quite illogical in their approach to this problem. One should not forbid tobacco advertising on television and, at the same time, raise the tax and increase the revenue to the Exchequer, although I quite accept that the Chancellor would be in an awful predicament if we all woke up tomorrow morning and said that his right hon. Friend the Minister of Health had convinced us that we must give up tobacco smoking. His revenue would be down to the tune of about £1,000 million a year. I do not know quite what he would do. But, of course, this is what the Government should be hoping for if they really believe that there is a great danger to health in smoking.

There is danger to health in most of our activities in life. We had a debate earlier this evening about alcoholic drinks. I am sure that alcoholic drinks do not do us any particular good, but they help us to keep going. I am sure that they help the Chancellor of the Exchequer to keep going late at night during a long debate on the Finance Bill. Many things are a danger, or not very good for health, but, now that tobacco smoking has, I think, been shown to be dangerous, I should thank any Government who made it more difficult or more unpleasant for me to continue my evil and health-destroying habit.

The Chancellor should, I suggest, seriously think about this matter. I realise that he cannot do something dramatic at once, because of the burden it would put on the revenue, but he ought to begin thinking of ways to offer an advantage to people who smoke pipe tobacco, if the medical profession thinks that is less injurious to health, or, perhaps, to encourage people to smoke cheroots or cigars if they are less injurious to health. Over 20 years, he could balance his revenue none the less, because, with a reduced tax, the consumption of pipe tobacco over the years would grow and he would probably draw in greater revenue from that source.

In my view, we have reached the point when any Government in power ought to ask themselves, "Are we being logical, are we being honest, in our present policy of drawing more and more revenue from an activity which we really should discourage?" They ought to be doing everything in their power to encourage other activities which are not so injurious to health.

Notice taken that 40 Members were not present;

Committee counted, and, 40 Members being present

Mr. Peter Walker

We are all grateful to my hon. Friend the Member for Harborough (Mr. Farr) for tabling the Amendment. This has been an interesting and important debate. I am pleased that the hon. Member for Nottingham, West (Mr. English) joined in and made a very interesting contribution. I hope that the fact that the moment he rose the Whip wrote down his name will not mean that he will be in any way dissuaded from joining in our debates later during the Committee stage. We look forward to hearing similar contributions from him on other Amendments.

This Amendment gives the Government an opportunity to make clear exactly what their attitude is on the general question of encouraging or discouraging various forms of smoking. I thought that my hon. Friend made a very good case, upon medical grounds, for some form of discrimination. My hon. Friends the Members for Cheadle (Mr. Shepherd) and Ormskirk (Sir Donald Glover) supported that view, while other hon. Members seemed to favour also including cigars. What is interesting is that during the last few months the Government have decided to show discrimination in one sphere and to discourage smoking by limiting the advertising on commercial television. I am not certain what the Government hope to achieve by that. I wonder whether they genuinely hoped that it would result in less smoking.

It is interesting to look at the Treasury estimates of the revenue expected from this form of taxation. On the basis of the rates of taxation for last year there was a Budget estimate of £958 million, and an out-turn of £982 million, and the estimates before the Budget changes for 1965–66 were virtually identical to those for 1964–65. Was this to suggest that in the considered view of the Government the action that they took to restrict advertising on commercial television was expected to have very little effect on the amount of smoking? If the Government's view is that for health reasons smoking should be discouraged, will they take other measures, and will those measures mean that the estimate of the revenue from the tax this year is not likely to be correct? If the only measure which the Government are taking is to stop the advertising on commercial tele- vision, which according to their own estimates makes very little difference, it indicates that the only purpose of the action was to show hostility to commercial television and not to have any effect on the pattern of smoking.

My hon. Friend the Member for Harborough suggested that the Government should concentrate on encouraging pipe smoking. I speak with some element of guilt on this topic, being a complete nonsmoker. I neither help the Chancellor with his revenue nor, I hope, impair my health. However, can the Chancellor tell us what the distribution of smoking is at present between pipes and cigarettes? Would he say whether he considers that the suggestion by my hon. Friend is a possibility? In view of the remarks of my hon. Friend the Member for Barry (Mr. Gower), could he say what it would cost if there was similar discrimination in favour of cigars?

My hon. Friend the Member for Harwich (Mr. Ridsdale) made an important point about the hardship caused to a great many old-age pensioners by the increased cost of smoking. I remember reading the debates—I was not then a Member of Parliament—which took place when the tobacco coupons were withdrawn in 1957. I should like to clear up a little misunderstanding which arose on 27th April when the Financial Secretary was answering Questions on this topic. In the reply of the hon. and learned Gentleman there was, I think, an implication that the Labour Party opposed the abolition of the coupon because we were not at the same time increasing pensions. On the contrary, we substantially increased them. The then Government brought in an increase of 25 per cent. in pensions when the coupon was withdrawn. When one examines the recent increase in pension and the increased tobacco tax one finds that the old-age pensioner who smokes heavily will be paying an amount per week extra well equivalent to the value of the tobacco coupon in terms of the additional taxation that the Chancellor is imposing.

I have only one hostility to the Amendment. It will give particular assistance to the Prime Minister, and as we are told that the Prime Minister is not to be included in the discrimination on the question of business expenses, I see no reason why he should have a particular favour in this case.

Mr. Callaghan

This has been a very interesting debate, and I thank the hon. Member for Harborough (Mr. Farr) for the manner in which he moved the Amendment and I am also grateful for the way in which he was supported by, among others, the hon. Member for Barry (Mr. Gower) and the hon. Member for Weston-super-Mare (Mr. Webster). As the hon. Member for Harborough clearly stated, the effect would be to exclude pipe tobacco from the increase in the Tobacco Duty proposed in the Budget.

The hon. Gentleman used, in support of this view, medical evidence that I think is certainly getting stronger about the effect of cigarette smoking upon health. The endorsement last year by the United States Surgeon-General of the opinion expressed by the Royal College of Physicians on the matter is an important development. The College said in 1962 that cigar and pipe smoking could be considered less injurious than cigarette smoking. That is a powerful reinforcement of the case against cigarette smoking and we should regard the matter as serious. Certainly, I do.

However, I have regretfully to say that I cannot do anything this year both on ground of the duty that I would lose at the moment on the ground of sheer practical administrative difficulty. This may not appeal very much to the hon. Member for Harborough, but at the moment it would not be possible for me to accept the Amendment.

The position is that leaf tobacco is subject to duty at uniform rates, irrespective of the type of tobacco or the purpose for which it is subsequently used. The hon. Member for Bristol, West (Mr. Robert Cooke) made that point. There is no difference between tobacco used in the manufacture of cigarettes and much of that used in the manufacture of pipe tobacco.

If a differential rate of tax on pipe tobacco were introduced, it would become necessary to charge different rates of duty on certain types of tobacco leaf, according to whether it was made into cigarette or pipe tobacco. The hon. Member for Harborough asked why we should not limit it to flake tobacco. I immediately sought guidance on that and apparently it does not seem quite as clear as might appear. I have a great deal of sympathy with what the hon. Gentleman asks, and I would not like to brush his idea to one side. There are, however, I repeat, certain administrative difficulties.

One country where it has been tried has found it impossible to work in this way and the Government there have had to extend the tax to other forms of tobacco. However, I would like to look into all these matters, but I cannot say that I can do anything this year. Many United Kingdom tobacco factories make both cigarettes and pipe tobacco and, at present, there is not the close revenue control which would be necessary if segregation had to be maintained between leaf destined for cigarettes and leaf destined for pipe tobacco.

9.0 p.m.

The hon. Member for Worcester (Mr. Peter Walker) asked whether I could give a breakdown of the various ways in which tobacco is used. I cannot do so as between cigarettes and pipes but one thing that I find surprising is that rather more tobacco is used for making into "roll your own" cigarettes at the moment than for pipe smoking. It would therefore be necessary to find some way if distinguishing between manufactured tobacco according to the use to which it was to be put. If the "roll your own" tobacco attracted the lower rate, the only effect of the Amendment might be to encourage the transfer of the making of cigarettes from the factory to the home. There are these practical difficulties which have to be looked into.

The question was put by the hon. Member for Worcester and by the hon. Member for Harwich (Mr. Ridsdale) about tokens for pensioners. I think it has been the experience of all of us who saw those tokens in use that, whatever may have been said in the past, they did operate very unfairly as between pensioners who smoked and those who did not. I think that was the basic reason why the last Administration eventually abolished them. I feel that to reintroduce a disparity of that sort would be likely to cause more a sense of grievance than satisfaction.

I was interested in the point raised by the hon. Member for Cheadle (Mr. William Shepherd) about cheroots and supplies to troops. I learned something about cheroots tonight from the hon. Member that I did not know before, and I would certainly like to look into that particular point. My hon. Friend the Member for Nottingham, West (Mr. English) made one or two points in which he tended to break away from the party line, thereby displaying that independence which we have all come to associate with him. I can assure hon. Members that, despite what the hon. Member for Worcester said, the Whip was not writing his name down at all. He was just urging me to come to a conclusion as quickly as I could.

We ought not to leave this matter purely on a basis of administrative difficulties, although I think that they are real and convincing. I do not think that it is possible to say in reply to the hon. Member for Worcester what the effect of the ban on television advertising is likely to be. It is still going on. I saw them last weekend, so it cannot possibly be having an effect by now. I hope it will have some effect, that was certainly the intention, but I can assure him that it was not dictated by hostility to the television commercial channel. There is no reason why it should be. I hope the hon. Member will accept it from me that this was a genuine attempt by the Government through the Minister of Health to try to lessen this temptation, if that is the right word, and that there was no other reason.

Dr. Bennett

May I ask the right hon. Gentleman who in his Department attempted to evaluate what difference the banning of cigarette advertising on television is likely to produce?

Mr. Callaghan

The Department has not made any such evaluation, but it has made an evaluation on the fall-off in smoking that may take place as a result of the increase in duty, and I have taken that into account in reaching my Budget figures.

Dr. Bennett

A temporary falling off.

Mr. Callaghan

I do not know whether temporary or not. It does not seem to be possible to stop people smoking, although I speak with some diffidence on this, never having started. I hope hon.

Gentlemen will not say I have a prejudice against smokers. Everybody recognises this is a field in which duty is easily raised. Successive Chancellors have found this out and I feel with regret that I cannot accept the hon. Gentleman's Amendment, although the purpose of it in relation to lessening the health fears which he expressed, is something which I would like to explore during the course of the coming year.

Sir D. Glover

I wonder if the Chancellor would explore the possibility of any system of drawback.

Mr. Gower

The Chancellor has said he will examine the administrative difficulties. Will he take note of the fact that there appear to be fewer administrative difficulties in the case of cheroots, mentioned by one of my hon. Friends, and small and large cigars? It seems it would be fairly easy for the distinction to be drawn between cheroots and cigars on the one hand and cigarettes on the other. Perhaps he could give an assurance that in looking at the position of pipe tobacco he will also look at that.

Mr. Callaghan

There are other difficulties which I will not go into at the moment. Although I would not rule it out, I would not like the hon. Member for Barry (Mr. Gower) to think that I was breaking a pledge if I came back and said that it was not possible to do it.

Amendment negatived.

Clause ordered to stand part of the Bill.

Schedules 1 to 4 agreed to.