HC Deb 09 June 1967 vol 747 cc1457-555

11.4 a.m.

Mr. Desmond Donnelly (Pembroke)

I beg to move, That this House recognises that, at all levels, the complexity of government and the levels of taxation have increased, are increasing, and must be diminished to liberate the creative energies of the British people. I begin by stating my terms of reference. The Motion goes to the very roots of British society, referring to the complexity of government at all levels—for reasons which I shall explain later—and covering Government expenditure also because the level of Government expenditure is regarded by many at home and overseas as a reliable guide when assessing our capacity for economic growth. This is where confidence comes in. The question being asked by our overseas creditors and holders and users of sterling is this: can Britain do it? How much will people here give up in compulsory taxes, rates, contributions, levies and all, for whatever worthy purposes, without loss of incentive to effort and efficiency and without an irresistible demand for larger pay packets which will only keep the spirals of inflation turning?

May I, at the same time, make two other matters clear? Some hon. Members have made speeches recently about incentives in a partisan context. My Motion is in no sense partisan. It is not an attack upon this Government except in so far as it is a Government. My Motion is a radical attack upon all Governments of recent years, and, in so far as right hon. and hon. Members opposite held responsibility for the affairs of this country in those feeble and supine years of the last decade, they are more culpable than any occupant of the Treasury Bench today.

Second, I wish to make clear that, in dealing with taxes and incentives, as I shall in the latter part of my remarks, I shall not be speaking in the sense of wishing to secure specific privileges for any individual. At root, what I am concerned about is the humanity of the State towards the individual. What I am representing, really, is a radical reaction on behalf of the individual against the State.

I come now to the substance of the matter: first, a few words about government and the way in which the trends are developing; second a few words—a very few, because of the debates which have taken place in the Chamber recently—on taxation and incentives; third, a few words about some of the tentative remedies and the reactions which we might have to the current trends.

First, government. In the development of human society—this is a general thought—we have moved from the city State to the nation State, and we are now moving towards the super-State. The basic reason for people's changing from tribal customs to city States and then to nation States has been the need to defend themselves, to promote their commerce, and, sometimes, less audibly stated perhaps, to go and attack others as well. But, by definition, the apparatus of the State has been very closely associated with defence.

We in this country, for a considerable time, have found that the nation State of 35 to 50 million people has been a satisfactory unit. It enabled us to become the centre of the largest Empire in the history of the world so far. But recent trends have changed all that. The end of the European civil war has witnessed greater shifts in world balances of power than at any time since the fall of the Roman Empire, and we have found that the 50 million nation State is no longer a satisfactory unit for defence or for commerce.

The advances of modern technology have made a nonsense of the size of the defence unit which we control today from the House of Commons. The rising costs of research and development, more sophisticated technologies, and the expanding techniques of production engineering have meant that we must have much wider markets to receive the benefits of modern technology. Therefore, the 50 million nation State has ceased to be a viable unit for the kind of purposes which, I think, would attract right hon. and hon. Members on both sides.

On the other hand, as this trend has been taking place in one sense, there has been a trend in another sense. As the incidence of government has widened, as the responsibility of government has become intimately associated with almost every facet of national life, the complexity of the decisions to be taken has increased enormously. The consequence has been that with the centralisation of the decisions here in London we have found ourselves in a traffic jam of monumental proportions in decision-making.

We have local government in this country, but the local government is only as strong or as weak as its powers of raising money and determining its own priorities in expenditure. Its opportunities for raising money are marginal these days and practically gone. There may be investments by local authorities, but these have to be determined at the centre. Thus we may have formal local government but the real local government of Britain is based at Westminster. It is not surprising, therefore, that local government as we knew it is now merely a shell or facade.

It is understandable in these circumstances that when Government decisionmaking all round in Whitehall is looked at in certain ways there is frustration and disappointment. This has had an impact in a number of ways, and I will deal with one. Frankly I wonder whether any Government is competent to take all the decisions that Government have been taking recently. The present Government were elected with their principal ethos that they would provide an economic society. But no Government in modern times have altered more plans more quickly than they have in recent months. Some of these circumstances may be the result of external influences. We have been blown off course from time to time. But it might be wise for some of my right hon. and hon. Friends to ponder whether the fault is not in themselves.

I give a specific illustration. In the National Plan it was said that our economic growth would proceed at 4 per cent. per annum. Government plans have a direct bearing, or may have, on the investment programmes of large industrial enterprises. If the forecast is wildly wrong it causes serious disjointing in industrial life. We had the 4 per cent. figure. However, it was a political decision. It was an expression of hope rather than an accurate appraisal. In these circumstances, I was surprised that only the other day the Chancellor of the Exchequer reduced the figure from 4 per cent. to 3 per cent. without very much being said about it. I suspect that the figure of 3 per cent. is not related to reality, and that it may well be a figure closer to 2 per cent.

The reason for this mistake is basically that we are dealing not with economic facts, but with the field of psycho-economics. The complexities of modern society are so great that it is not possible to arrive at an accurate forecast of this nature. I am illustrating the inhibiting effects of the complexities of government.

There is the view expressed about government by intimidation. I do not subscribe to that view. I think that that is a narrow, partisan and somewhat spurious concept. But a real problem is created by government by uncertainty. I give two illustrations of this. The Monopolies Commission was asked to look at petrol stations and the holdings in them of oil companies. I have four oil companies as constituents of mine. For five years the Monopolies Commission considered the level of investment that oil companies should be permitted in local petrol stations. Meanwhile the oil companies had to take certain decisions and go ahead or else nothing would have happened. Nevertheless, the result of that decision was to inhibit progress by certain oil companies.

As another illustration, the brewing industry has at the moment been referred to the Monopolies Commission on the question of tied houses and investment in hotels and, therefore, the tourist trade, an important foreign currency earner. As long as the Monopolies Commission is sitting on this matter there will always be an atmosphere of uncertainty overhanging the industry, which is a very important one to the national economy.

I give another illustration of government by uncertainty—Corporation Tax. We all knew that Corporation Tax was coming, but one very large industrial concern that I know had to determine at some stage what it thought might be the likely figure. So its investment plans and planning arrangements were geared to a concept that the rate would be 37½ percent. In fact, it was 40 per cent. This makes an important marginal difference in the amount of money which the enterprise will have available for future investment and expansion. This is an example of government by uncertainty, and it shows how the complexity of it causes a considerable amount of trouble.

Mr. Gilbert Longden (Hertfordshire, South-West)

Is there not an even more glaring example in the Land Commission with its six-year limit?

Mr. Donnelly

I should be happy to go into that, too. It is an arguable point. Perhaps the hon. Gentleman will expand on it at a later stage.

I come to another aspect of the planning procedures with which the Land Commission is totally dissociated. If one moves from the centre to the local, again, one finds a considerable number of difficulties and uncertainties. The whole planning procedure is extremely complex, and it is stultifying, and as it is presently operated it is inhibiting and slowing down.

Let us look at specific examples. I can give one from my constituency. The Esso Petroleum Company is one of my constituents. That company undertook to drill for oil in the Bromley District Council area about six months ago, and a restriction was placed upon it by the Bromley Council, of whose partisan views I have no idea, but I suspect that they are more akin to hon. Gentlemen opposite than to me. The Bromley Council said that the company could drill, but only if it did so for eight hours a day and not 24 hours. This made the operation uneconomic, and the company picked up its drills and went away. That sort of bumbledom is not conducive—

Mr. Eric S. Heffer (Liverpool, Walton)

Would my hon. Friend tell us where the drilling was likely to take place? If it was near houses, imposing a restriction of eight hours a day would be very sensible.

Mr. Donnelly

It depends on the place. The drilling was to be at Knockholt. It was near houses. The question is: which takes priority—industrial expansion or housing? It is a question of whether my right hon. Friend want to build better houses at some later date, perhaps as a result of the industrial proceeds of this company's efforts, or to stay with the present situation.

Let me give another illustration of the way in which this operates. There was recently a fire at the West London terminal of the Esso Company. Staines Urban District Council has tried on a number of occasions to have the whole complex removed by Esso. I have here a quotation from a local newspaper, the Herald and News, which says: Councillor Benen-Stock … thought there should be a Chinese Wall around the site. He really hoped that somehow or other they could clear the whole terminal away. This sort of attitude is not conducive to economic expansion.

When we get to planning procedures, there is a large number of examples. Every Member has constituents coming to him with complaints about delay in planning appeals and the apparently irrational decisions which are sometimes taken. I have two examples of this.

The planning application in the first example was submitted in September, 1958, to the local authority. In October, it was deferred to the county council. In May, 1959, the application was refused. In December, 1959, an appeal to the Minister was heard. In May, 1960, the Minister allowed the appeal. That was 18 months after the first application. The period May, 1960, to November, 1962, was spent on detailed discussions with the local authority about the timing and siting of a peripheral road, the provision of school sites, the approval of the outline application and discussion of the detailed application. In November, 1962, more than four years after the original application, detailed approval was given.

In the second example, the initial application to the local authority was made in May, 1962. In August, 1962, it was turned down. This was quite a quick decision. In April, 1963, an appeal was heard by the Minister. In July, 1963, the Minister gave his approval. From July, 1963, to August, 1964, there were negotiations with the local authority again. In August, 1964, an outline plan was submitted to the local authority. In March, 1965, outline consent was received subject to amendment of the road pattern. In October, 1965, there was outline consent to the revised road pattern. In February, 1966, four years from the start, the whole project received detailed consent.

Is this a rational and wise way to conduct our affairs? During my working life I have been concerned with town planning. I was Director of the Town and Country Planning Association and I am a supporter of planning. What I am concerned about is the administrative delays and apparent irrationality which are creating a natural human reaction against the whole concept of planning. Unless we address ourselves to this matter, the whole idea of planning will be swept away. What do we do about it? I have touched only briefly upon the periphery of these governmental complexities and some of the difficulties. The problem to which the hon. Member for Hertfordshire, South West (Mr. Longden) referred is a very much larger problem.

Obviously, when one thinks of the super-State one is thinking in terms of the trend towards Europe. On this, I am in accord with the Government most heartily. When it comes to the nation State, we must look radically at the procedures of the House of Commons and its responsibilities. The only way in which we can get this log-jam of decision-taking broken up is by devolving from this House a large number of matters which come before it now.

One has only to look at the Order Paper at Question Time day after day to see the minutiae of detail which comes before the House constantly. We must look to wider groupings of local authorities as well. We have to devolve a large number of what one might call the incidence of government to regional, elected authorities or parliaments. This is the only way we shall be able to clear the Order Paper of all but those matters of high policy and decision-taking which should really be the concern of this House.

But, as I said, when we do that, we have to look at local authorities at the other end of the scale. The Royal Commission on Local Government is sitting and proposals are to be brought before the House by my right hon. Friend the Secretary of State for Wales shortly. I have a sad feeling that all these proposals when they emerge will be far too conservative in their nature. We want to move much further than this. If we are to remove some of the business from this House, such as details of health, housing and education within the broad framework of national policy which would be decided here, to elected regional parliaments, we have to be prepared to knock out one of the other tiers of local government and move towards single-tier local government.

I have the honour to represent a whole county. There are 12 local authorities in my constituency. We have to find about 350 to 400 councillors and aldermen to man the councils, to say nothing of the large number of officials. Is this a wise way to conduct our affairs? It would be far more practical to have one or two single-tier local authorities covering my area. Other hon. Members will have their own views and analogies on possible dispositions which might be considered.

The Financial Secretary to the Treasury (Mr. Niall MacDermot)

Is my hon. Friend proposing one tier below the regional level or just the regional level and nothing else?

Mr. Donnelly

The regional level and one level below that. My regional authorities would perhaps be regional parliaments. For example, there would be one for Scotland.

Mr. William Baxter (West Stirlingshire)

This is a very interesting point. It is not new. Some of us have propounded this theory for some time. Both my hon. Friend the Member for Pembroke (Mr. Donnelly) and I would like to see some devolution to certain areas, such as Scotland, of a certain amount of self-government. Under that authority, would my hon. Friend have another tier for minor local authority service?

Mr. Donnelly

I agree with my hon. Friend. I thought that I had made that clear.

Of course, we would also have a regional parliament for Wales and may be the English might be permitted to have a regional parliament as well. I do not subscribe to separatist movements because they are based on economic drivel and cannot be supported by reputable economists in any country. Certainly, as far as Wales is concerned, the separatist movement is not supported by a single figure of stature in Wales or by a single industrialist of substance. That is probably true of Scotland, as well. But the frustrations which have led to these separatist movements would be met by the kind of proposal my hon. Friend the Member for West Stirlingshire (Mr. W. Baxter) referred to. The separatists have a case, but it is not the one they make.

Those are my broad thoughts about how one might reduce the complexity of government. I turn now briefly to taxation. I do not wish to go over the ground that has been ploughed so carefully and in such partisan fashion during the week but there are two central problems. The first is the problem of incentives and of penalising certain individuals. I accept the need for a certain measure of redistribution of income by taxation. I am not arguing the rich man's case.

At the same time, we must recognise that there are leaders in society and that they have the same right to justice as any other member of society. They should not be penalised because they are the front runners in industry, commerce or science. It is the penal nature of the taxation of the leaders of these industries which is, first, unfair, and, secondly, detrimental to the national good, because these people are the locomotives pulling the train of economic expansion.

I will give two examples. The other day I was in California, talking to a leading scientist connected with the recent lunar research. He left me to adjust his cameras on the moon and I thought to myself, "How exciting". He is a British scientist, and he told me that the three chief members of his team were also British. His principal incentive was the exciting nature of the work, but he pointed out that there was a monetary problem. He said that he earned about 14,000 dollars a year in Britain and his take-home pay was about 8,500 to 9,000 dollars. In the United States he earned 42,000 dollars a year and his take-home pay was 30,000 dollars. He said, "How can you expect me to ask my family to go back to the United Kingdom in these circumstances, much as I should like to do so?"

In The Accountant of 3rd June, page 734, there is an extraordinary computation which, as far as I can ascertain, is accurate, where a single man with a gross income of £24,000 in 1961–62 would need an income of £90,365 2s. 1d. in 1965–66—four years later—to have the same purchasing power from his net income. That is a caricature, but the point is that people should not be penalised by this ridiculous tax. All parties are equally culpable if they allow this sort of thing to continue.

Another aspect of the incidence of taxation which has been dwelt upon from time to time is that a disproportionate amount of effort, especially in terms of financial thinking, is going into the study of taxation and, in certain circumstances, the avoidance of taxation. This is an undesirable trend in any society, but it operates in its worst form in most large companies, which employ their own private army of tax advisers, where investment decisions are taken with a view to the net tax gain rather than the overall increase in productivity or the national interest. This is something which the Financial Secretary will find in almost every responsible boardroom, and it is a regrettable situation.

I say no more about taxation, but we ignore the problem at our peril. We are indulging in trench warfare across the House without addressing ourselves to radical solutions.

On the wider aspects of Government expenditure and where it might be cut, there is, first, defence. The first priority of any Government, by definition, is defence. It does not have to be an overriding priority, but it is the first priority. There is a very limited amount we can gain in the short run by defence cuts. The trends in the arenas of instability in the Orient lead one to think that the problems which will confront the richer nations and the more socially responsible nations, both in terms of aid and defence looking down the end of the street into the beginning of the next century, will impose very heavy burdens on the richer nations, particularly the United States, although we cannot exclude ourselves. Even if we turn to Europe we cannot turn our backs on mankind.

On the wider area of the Welfare State, we all take pride in the improvements in the social services and the remarkable changes in attitude and social justice which have been manifested in recent years. There has been a complete revolution in attitude towards social justice in all parts of the House. Nevertheless, the current trends impose serious problems which have to be faced and met. The current welfare bill is running at about £6,500 million a year.

That is a huge figure, but anybody projecting the demands and trends of the current day into the 1980s must be prepared to face expenditure of £8,000 million to £9,000 million a year. In real terms, it will still come in the 1980s regardless of financial adjustment. This imposes very serious challenges, because we have reached the limit of the national Exchequer's (powers by taxation to provide money for these purposes.

How can we get more money? The present bill for the Health Service is £1,300 million, education approximately £1,600 million, and social security is running at £2,500 million. Supplementary benefits alone, which my right hon. Friend the Member for Sowerby (Mr. Houghton) was responsible for, are running at about £380 million and there has been a very considerable increase in the past year of £63 million. The figure for housing is £800 million. How are we to meet the demands in the future if we cannot raise any more by taxation?

Are we satisfied with the current standards in these welfare services? The National Health Service has many facets which are matters of national pride, but overall are we not trying to do too much with too few resources in almost every aspect of the Health Service, whether it is the hospital service, the consultant position, the provision of drugs or the provision of general practitioners' services? The resources are never big enough for the demand.

An estimate has been made by Professor Miller, which appeared in a recent issue of Encounter, that if we gave the same priority to medicine in this country that is given to it in America, where there is no overall health service, we would need another £500 million right away. If there is any hon. Member who knows how we can raise £500 million next year for this purpose, let him stand up.It cannot be done.

There is the demand for higher standards in education and the need for increasing the status of teachers and better rewards especially for the leading teachers. Where is that money coming from?

Then there is the whole range of social security, and this brings me to the real crux of the problem. Either we have to establish priorities which include all sections of the community, or we shall destroy the overall value—slowly in the first place, but more quickly later—of our general welfare schemes. This is the fundamental choice facing us. Sooner or later, we shall have to address ourselves to it. We can either establish priorities and cut some of the services altogether— I would be in favour of cutting the free drug system and perhaps having a higher prescription charge than we have had in the past; this is a partial solution, but it is a small item in the larger scheme— or we have to look much wider and ask ourselves whether we should not have a selective Welfare State with selective operation of benefits.

Here I come to the crux of the matter. The overall basis of our social services is based on Lloyd George and Beveridge and implemented by my right hon. Friend the Member for Llanelly (Mr. James Griffiths) and Aneurin Bevan. The Beveridge Report, which is the cornerstone, was drafted in the 1930s in an era of poverty, a situation of low wages, and in circumstances where the demand and requirements and attitudes of this nation were different from what they are today and even more different from what they will be in the 1970s and 1980s. Is there not a strong, irresistible case for a new appraisal—a new Beveridge inquiry, perhaps—of the whole concept of the Welfare State?

The danger of all this is that, haying the principle of universality, we are failing to meet the needs of the people who are the poorest. For instance, there is a report on the front page of The Times of today which underlines exactly what I am saying. Referring to the pension increases which are likely to come in November, it says: It is virtually certain that the decision to increase pensions has had the effect of setting back an increase in allowances for larger and poorer families until next spring". This is because we persist in the policy of universal benefits for everyone.

There is a certain amount of political trepidation from time to time as to whether a selective Welfare State would be popular, but I wonder whether we sometimes listen too often to the strident and vocal minority and not enough to the general and less vocal and quieter thinking of the nation. I have in mind a survey undertaken by Mass Observation, on 3rd and 4th April, this year. It is true that it was not a very large survey taking in only 2,000 people, but it was widely drawn. The questions and answers are interesting. I do not say that they are the final accurate definition, but they are an indication of a trend.

Two questions were asked: Under which of the two systems do you think you would be prepared to pay your taxes—that they should be spent on social benefits and services for everyone, or spent on social benefits and service for those who need them most? Support for the universal was about 35 per cent. and for the selective about 65 per cent., while those who did not know were about I per cent. The interesting thing about this application of universality is that, taking the upper and middle classes and then the semi-skilled and unskilled and in between what the survey called the lower middle and the skilled, then those in favour of universal benefits among the upper classes were 47 per cent. and those for the selective were 53 per cent., while at the other end of the income scale, among the semiskilled and the unskilled, those for universal benefits were 29 per cent. and those for selective benefits 71 per cent.

In other words, the broad majority of the working class knows which side its bread is buttered. This is an interesting message which should be pondered by my hon. Friends on these benches, because this is the only way in which we can have a satisfactory Welfare State.

If we operate this and want to have a Health Service, those who are prepared to pay for it should be entitled to choose their benefits, and whether they should receive their benefits in the form of vouchers or cash or whatever it may be are matters for discussion and argument. But the central point is whether the Government will depart from universalism in this aspect of welfare and, if so, they must pursue the course of the selective Welfare State.

Those are the central issues which are facing the economy. In terms of government, we must simplify; in terms of initiative, we must give incentives. From time to time we pay lip-service to the adventurous members of our community. We took vicarious pride in the small honour conferred on Sir Francis Chichester the other day, but I am sure that such is our adhesion to conservative mediocrity at the moment that Sir Francis Drake would never have made either Front Bench of the House.

Every hon. Member should take a very careful look at the trends which are facing the country. I conclude with two warnings—and I apologise for having taken up the time of the House for so long. First, the great empires like Rome taxed themselves out of existence. I do not know how many hon. Members have read Gibbon, but I advise the 600 or so who have not to take a little time off to study it. If they do not take too long, they will find the country still running when they come back, but the country will not run indefinitely if people are denied incentives to work and invest; for these lie at the root of the true ethos of economic expansion. We are reaching the danger point now. Britain is on the road to being the Portugal of the year 2,084. The trends are there for all to see, and no man in public life can escape his responsibility.

Secondly, when a nation reaches a certain stage of administrative rigidity, radical reform, or even adaptation to new conditions, becomes impossible. The need for reform may be clear to the administrators themselves and widely advocated by intelligent and responsible people, but change can be prevented by bureaucratic complexity and by the disorientation of motive and lack of adaptability and initiative among the very class of men necessary to implement that change.

At this point revolution becomes inevitable. No modern political figures can afford to dismiss as mere academic humour the writings of Professor Parkinson, nor forget De Toqueville's penetrating insight into the causes of the French Revolution.

Mr. Speaker

Quite a number of right hon. and hon. Gentlemen want to speak in the debate. I hope that I shall be able to call them all; hon. Members can help me by being reasonably brief.

11.46 a.m.

Sir Douglas Glover (Ormskirk)

I am very glad to be called to follow the hon. Member for Pembroke (Mr. Donnelly), who has made a fascinating and brilliant speech, a speech which very much needed to be made and which should form the bulk of the thinking of people in public life, not only in the House, but throughout our national affairs.

There is no doubt that in our desire to produce fairness and justice and to remove the frictions which existed in a previous generation we are rapidly becoming in danger of bringing the machine to a total halt. We so clutter ourselves with rigidities that nothing can be done. I agree that much of our thinking is wildly out of date.

I was very interested in what the hon. Gentleman had to say about the National Health Service. We have to tackle the problems of the Health Service with the eyes and the minds of the 1960s and the 1980s rather than of the 1920s and the 1930s. On every public platform it is said that we have a Health Service which is the envy of the world. Compared with many medical services elsewhere, our Health Service stinks. It is far from being the envy of the world and it shows every sign not of improvement. but of gradually deteriorating.

This is because, with the general overall level of taxation, the public is not prepared for a swingeing increase in taxation and yet, as the hon. Member said, we probably ought to be spending another £500 million on the Service. People would be prepared to pay that money if they had greater choice about how it was spent, if they felt that it belonged much more to themselves and their families.

I would like the Health Service to be reorganised so that everyone in the country was compulsorily insured at what I would term the bottom scale of B.U.P.A., so that they would automatically get the services which they now get from the Health Service, but all the other scales up the ladder would be entirely voluntary, so that anybody could pay for an increased benefit for his family and himself as his income increased. The hon. Gentleman is quite right to say that if we had the courage to bring in a system of that sort, we should find that increased amount being spent on health which he considers to be essential.

At present, a large number of people, when they have to go to hospital, feel that they have no rights at all and that they are there as suppliants of the State. When Mary goes into hospital to have a baby, she goes into the largest ward. But suppose that her husband visited her and said, "Mary, my income is going up; I am earning more money. I shall insure on the next scale so that you have our next baby in a ward which has four beds". This trend would be going on all the time and, as a result, the Health Service would get more money. It is essential that the Health Service gets more money if it is to prosper.

By 1980, and certainly by the turn of the century, even with the present Administration messing up our affairs, at the present-day purchasing value of money there is no doubt that the average income should be well over £2,000, perhaps £2,500, a year. If that is the sort of society which we are to build, people will want to make their own decisions as to how they spend their money. We are not talking about people living in a soup kitchen atmosphere. Before the war these people would have been looked on as solidly middle-class, perfectly able to look after themselves and to make their own decisions. If we are to build a responsible, vigorous and dynamic society, we must give a great deal more responsibility slowly and carefully back to the individual family and citizen.

Our society has been brought almost to a standstill in our desire to be fair. The hon. Member for Pembroke talked about planning. On small planning matters—for instance, the shape of a house which is to be built—months of delay are involved and there is an enormous amount of expenditure. What does it boil down to?—one man's opinion against another's. It is a case of the opinion of the architect employed by the Ministry against that of the architect employed by the individual citizen. Who is to say that the architect employed by the Government or the State has even as much architectural "know-how "—the probability is that he will have slightly less, because probably he will be earning less—as the architect employed privately? The probability is that we are getting less beautiful buildings rather than better buildings and suffering from months and months of delay in the process.

Last year or the year before I made a speech about tax avoidance. I am against tax avoidance. I said that if we went on in every facet of our national life as we went on in connection with tax avoidance, we should bring the nation to a standstill. I am sure that that is true. We have succeeded in getting an enormous number of brains—paying the Civil Service a great tribute—in every sector of life whose sole job is to stop somebody else doing something. That would be all right if we had a surplus of brains for which we wanted to find a job.

In a Bill which we dealt with recently we created a Land Commission. There was not a pool of highly skilled surveyors, architects, solicitors, and so on, to man the Commission. So where did they come from? They came from the private sector. This means that in the next two years the Land Commission will slow down all the activities of land and house purchase, but because 2,000. 3,000, or 4,000 of the most highly skilled of the people whom we need for advice will have been sucked into the Ministry there will be longer delays. Local architects, surveyors and solicitors will be overworked, and they will put up their prices. The sum total will be that property dealings will cost, perhaps not the State directly, but the citizens of the State collectively, more than it cost before. There will be greater delays.

The same thing applies to tax avoidance. Of course, no one wants to encourage tax avoidance. The brains which should be used in the productive effort of the country in the export, scientific, and commercial fields are, not in ones and twos but in tens of thousands, either working in the Treasury or the Board of Inland Revenue to stop people doing things. In private industry, as the hon. Member for Pembroke said, there are tax experts, solicitors, and so on, in every large establishment all trying, first, to understand the law, which takes a lot of doing, and secondly, having understood it, trying to minimise the amount of tax that the company has to pay.

If all those brains were put into the productive effort of the country, we should be talking about not a 4 per cent. growth, but a 6 per cent. growth. Over the last 30 years, in our efforts to be fair and to make quite certain that nobody gets out of the starting gate before anybody else, we have introduced so much control and inhibition that we have taken out of our industrial, inventive and constructive effort probably 20 to 25 per cent. of the brains who should be helping to increase productivity.

I should have liked to talk about regional government, but I will leave that for another occasion. If we do not begin to liberate the energies of the people, accepting that in the process there may be some unfairness and that freedom has its risks, and if we do not give a greater incentive to effort, initiative and graft, I fear that the hon. Member for Pembroke may be only too accurate when he says that in the next century, or 100 years from now, we shall be the Portugal of Europe.

11.58 a.m.

Mr. James Griffiths (Llanelly)

I always listen carefully to my hon. Friend the Member for Pembroke (Mr. Donnelly). He is stimulating, provocative, and sometimes, as he knows, annoying. But I have a great regard for him, and a pleasure which I have enjoyed for many years is to go and speak in his county and support him. I know that he has the confidence of his people, and that his seat is as secure as the rugged stone of St. David's Cathedral. As Member of Parliament for Pembroke, he is the custodian of our national cathedral.

My hon. Friend raised a large number of points in his very interesting speech. You, Mr. Speaker, asked us quite rightly, to be as brief as possible, since every Member present has come here because he wishes to participate in the debate. I therefore propose to say just a few words about two of the problems which my hon. Friend raised.

I begin with the problem of the complexity of Government, which is due to the complexity of the rapidly changing society in which we live. We have entered the age of the scientific and technical revolution. Unless we can find a way to plan the use of the great forces which are being unleashed and which are transforming our industry, society and life for the benefit of the whole of our people, then I fear the future.

My hon. Friend spoke of the problem of managing the economy and the affairs of the country. He stressed how complex it had become because of the growing complexity of society, and he made a plea for some form of devolution. One of the big problems we have to face everywhere, wherever the new industrial revolution is emerging, is the depersonalising of the individual. I speak here as an old industrialist. Everything is getting bigger. The biggest danger in our society is that things will take over at the centre and man will be put on the circumference. This is our problem in industry, the problem of the large unit and of mechanised industry. The average worker has the feeling that he is becoming depersonalised, becoming a number.

The other day, I went with a contemporary of mine to one of the big industrial groups, I spent my working life in a small unit of 200 people. We knew one another. If we did not know one another's real names, we knew the nicknames. We were persons to one another, individuals and human beings. We shared a fellowship. When we saw this vast place the other day, my friend said that, in these modern industrial units with 10,000, 15,000 or 20,000 workers, people get lost. They are only numbers—XY/2345, or whatever it is. They cease to feel themselves to be human beings.

Towards the end of his Motion, my hon. Friend speaks of liberating the creative forces and energies of our people. We shall never be able to do this in industry unless we can find a way by which the workers can express their creative energies, not just in tending machines but in their actual jobs and lives and in governing industry. I look, therefore, to industrial democracy to release these creative energies in industry.

I turn now to another aspect of government. We all realise that, in these small islands, with a population of 50 million and the complexity of society and administration, people feel that Whitehall is becoming dangerously remote. The time has come to look again at the distribution of power as between central and local government. I was privileged to be a Minister in the 1945 Government. One of the first tasks which we undertook—we did it in the first Session—was to reorganise our social insurance and health services. I take the example of the National Health Service, though there are many others. In the process of creating the Welfare State, we transferred from local authority to central authority services which, I believe, could best be performed, if we could find the right unit, within local government.

I wish that it had been possible, and I wish that it were still possible, to have local control of our health services in the hands of democratically elected bodies. In Wales, for the purposes of the National Insurance Act and the National Health Service Act, we chose as our region the whole of Wales. Everyone agreed, and no one now disputes, that this is the best way of handling our hospital services, on a regional basis. We had no regional units to which the task could be entrusted, so we had to appoint them.

But it remains true that in our social services—I have taken the example of the Health Service—we have taken some services away from the local authorities, and by so doing we have weakened those authorities and, I believe, the services themselves. I agree with my hon. Friend when he says that the time has come to think again about the redistribution of power as between central and local government; but, if we are to do that, we must think also about what units of local government are required to perform certain functions and administer certain services.

I have been, and still am, against what is sometimes suggested—it was proposed the other day for Wales by the hon. and learned Member for Montgomery (Mr. Hooson)—that is, a separate Parliament, a Welsh Parliament, a Scottish Parliament, an English Parliament—a Yorkshire Parliament, and so on, however it may be.I have opposed this for Wales because the suggestion is that such a Parliament would have control of our economic life. In my view, economic separatism in the 1960s, 1970s and 1980s is not worth consideration. It is a stupid idea. All parts of Britain are so interwoven in their economic life and social services that any attempt to separate them would be a reactionary step, not progressive at all.

Mr. Peter Bessell (Bodmin)

Will not the right hon. Gentleman accept that the proposals put forward by my hon. and learned Friend the Member for Montgomery (Mr. Hooson) did not provide for total economic separation of Wales from the rest of the country?

Mr. Griffiths

Very well. Then why call it a Parliament? This is my point.

We look forward soon to hearing the proposals of my right hon. Friend the Secretary of State for Wales for the reorganisation of local government. I should like to see—I think that this is what my right hon. Friend is thinking about—a community council. The old parish with its council is not now the appropriate unit, and I believe in cultivating the community spirit. I should like there to be community councils through which the community could provide services for itself and, more than that, express its feeling of neighbourhood. This is vital. If our people lose their roots, if they have no means through which they can express their neighbourliness, the real feeling of community goes.

After that, I would take a larger region to replace the existing rural districts, urban districts and the rest, Then, for Wales, I would have an elected regional council. I should not call it a Parliament. We cannot have more than one Parliament, and it is far better to call it an elected regional council.

To this elected regional council I would at once hand over some of the planning functions. I would hand over to it communications. We cannot now plan our communications within the confines of small units such as the parish or the district. I would entrust to it the administration of the hospital service.

The present Government set up the economic councils, appointed by the Minister. We have one for Wales, and it fell to me as Secretary of State at the time to appoint it. The functions of economic planning within the region, also, should go to the elected regional council.

If we can establish regional councils of that kind—I hope that we shall—power will be brought nearer the people. I am all for bringing power nearer to the people, wherever this is possible. I hope, therefore, that we shall be bold enough in this Parliament to recast and reorganise our system of local government, and that in so doing we shall not be afraid of the word "regionalism" or of creating new units of local government to which we can entrust functions which now clog the machine here in Westminster.

I come now to another aspect of the matter, the high level of taxation and all that flows from it, to which my hon. Friend referred. I do not accept many of the new views that are held about taxation. Perhaps it is because I am an old-fashioned Socialist that I believe that we must combat this idea that public expenditure is always wasteful, while private expenditure is always beneficial. I have always held the view, and I tell my constituents this, that the value people get out of the money they spend collectively is infinitely greater than that spent privately.

For example, would it be suggested that all parents should pay for their children's schooling? Of course not. But, unfortunately, this and similar myths have been growing in our society. Galbraith has shown to where this would lead us; private affluence and public squalor, side by side.

I do not share the view that people are being taxed out of existence. Nor do I accept that there is so much waste in public expenditure. Certainly, there should be less waste in private expenditure as well. I have never accepted that reductions in taxation automatically solve our problems. The taxation rate depends on whether the money raised is used wisely to provide the services which our people need.

During the next year or two the House may be considering the whole reconstruction of the services embodied in the Welfare State. As one who had a part to play, 21 years ago, in the establishment of some of these services, I offer a word of warning. We must be careful about this idea of selectivism. Who will select?

There is an argument for relating some benefits to need. Why has the climate of opinion in Britain in the last 30 or 40 years been against that argument? I suggest that—and I want to be cool about this and not upset hon. Gentlemen opposite—it was the Tory means test of the 'thirties which caused the trouble. It debased what is otherwise an extremely good concept; each according to his ability and each according to his need. Hon. Gentlemen opposite debased it in what they did to the unemployed in the 'thirties, and the memory of that still lingers.

When one mentions selectivity today, people are bound to ask, "What do you mean by that?" They are bound to say, "Do you mean, by selectivity, what we had in the 'thirties, because there was selectivity then?" I hope that none of us here is not ashamed of the selectivity of the 'thirties. If we are now to recast our whole social service structure with selectivity in mind, we should think twice before doing anything.

I remember meals for school children beginning in this country. We regarded it not merely as providing meals, but as a great opportunity to develop fellowship among children. I have always believed it to be one of the best investments we ever made—not only for the health of our children, but in bringing them together around a common table. This enables children to cultivate a real sense of fellowship. I hope that we will not take a narrow view of this sort of service, but will realise that the social services not only provide for our bodily needs, but also for the spiritual and moral needs of our children.

Reference has been made to our National Health Service and the set-up in the United States. Would hon. Members like to see the American set-up here? A young friend of mine went to work on research in America some time ago and took his wife with him. His wife was taken ill, went into hospital and, at the end of the week, my friend received the bill. In sterling, it was £120. That is the American health service. Does any hon. Member suggest that we should introduce that here? We are told that the Americans spend enormous sums of money on their health service. At those charges, they can afford to.

I am not saying that everything is perfect with our Health Service. From the opportunities I have had to travel—and I still try to be a student—I have come to the conclusion that our Health Service is the best in the world. By all means improve it in every possible way, but for heaven's sake do not destroy it.

We are living in a secular and materialist society. With my background and kind of outlook I am happiest when meeting our young people in comprehensive and grammar schools. They are fine youngsters. I appeal to the Press to give the delinquents a rest for six months—not to make so much fuss of them—and pay more attention to the large majority of teenagers in Britain. They are fine young people who are anxious to serve. I know many of them who give a year or two of their lives to serve in Africa, Asia and elsewhere. What makes me proud and confident in the future—what makes me able to look to the year 2000 with confidence—is the feeling that we need not fear what is coming. We will still be a great nation, primarily because of the attitude of the youngsters in our schools.

Nevertheless, their creative energies will need something more than personal affluence. They are already asking for more than that. They want the opportunity to serve and give of themselves. They want to join with others to make Britain and the world a better place in which to live.

12.17 p.m.

Mr. Eldon Griffiths (Bury St. Edmunds)

I congratulate the hon. Member for Pembroke (Mr. Donnelly) on having initiated this debate. He is a man of perception in economic matters, largely because of his experience in industry. He is also a man of courage, particularly political courage, for it must not have been easy for him to have raised this subject.

I was interested in his reference to Sir Francis Drake, who singed the beard of the King of Spain—or should it have been the King of Portugal? I suspect that the hon. Gentleman has singed a number of hon. Members, although perhaps not in the area of the chin. I regard the most important phrase in the Motion that which states that taxation … must be diminished to liberate the creative energies of the British people. I say that because our biggest single problem as a nation is that large numbers of people, particularly the young—as the right hon. Member for Llanelly (Mr. James Griffiths) pointed out—are better educated, are much more aware of the world around them than were their counterparts of the last generation and are bursting to see their talents fully utilised.

The great majority of them feel that they are confronted with a society in which big unions, big business and big Government deprive them of the essential feature of life, which they regard to be their personal individuality. The search for the rôle of the individual within the nation is crucial in our economy. Senator Kennedy, President Kennedy's brother, put it well when he said of American youth: Confronted with the cascade of Government regulations today, the young feel like a salmon trying to get up the Grand Coulee Dam. That is true of Britain's young people, who feel surrounded by complexity and deluged by regulations. They feel unable to serve and prevented from getting ahead. The principal reason is because in Britain today the relationship between effort and reward has become sadly out of balance. He who makes more effort, stays later at the office, does a more conscientious job at the work bench, risks more of his private savings in his business, no longer gets that markedly extra reward. On the contrary, he faces the penalty of higher taxation for his extra effort.

At the other end of the firmament, he who makes less effort, he who lies down on the job, he who goes home early—be he director or shop floor steward—the man who risks less, no longer suffers a very great penalty for his lack of effort, or his indolence, to call it by its proper name. In too many cases the man who makes less effort is bailed out from the consequences of his own idleness by his trade union, in some cases, or by the Welfare State.

Until we get back to a situation where extra effort clearly equals extra reward, and less effort means conspicuously less reward, we shall not galvanise or liberate the energies of the people.

An example is the brain drain, about which much was said the other night in the debate on the Finance Bill. The hon. Member for Pembroke said that there are in the United States today large numbers of British people who have gone there partly for the adventure, to put their talents to the fullest use, and also to seek some money. I was one of those—I will not emphasise the brain part, but I was certainly part of the drain.

I went to the United States in 1947–48. I was fortunate to be able to make a good deal of money, and to accumulate from the work I did a small amount of capital on which I am now living. I am glad to say that I came back to Britain, because this is where I belong. From 15 years' personal experience in the United States I can tell the right hon. Gentleman the Member for Llanelly (Mr. James Griffiths) that there are large numbers of our former citizens who have gone there, and who will not come back because of the level of taxation on their extra earnings in America.

In Santa Monica, California, I met only a few months ago a group of about 20 young Englishmen who had gone to the Californian aircraft industry. I spent an evening with them, trying to persuade them—and here I hope that I have the support of the right hon. Gentleman— that Britain is a land well worth returning to. Again and again, as I went round the table asking why they had left Britain and would not return to it, the crucial response I had was that the taxes were too high.

I realise that there is much more to it than that, but until the level of taxation on high incomes is reduced in Britain—and I trust that my right hon. Friend when in power will tackle this problem speedily—we shall continue to lose to America large numbers of our best citizens, and those now there will not come back.

The Motion refers to the cost of government. The hon. Member for Pembroke looked at that side, perhaps, from the top level—the House of Commons looking out towards the country—and cited a number of global figures. I should like to look at it from the worm's eye view, from the viewpoint of the ordinary family, such as I have in my constituency.

Ordinary families have some fairly simple needs. I should say that their first need is a roof over their heads. If they are renting a house, the rent has gone up—and during the last three or four years it has gone up rapidly, particularly for council houses. If they are buying a house, the price has gone up very steeply. The mortgage rate, in particular, has been at its highest level ever. And whether they are renting a house or buying one, the rates have gone up. Therefore, on the first necessity of the ordinary family, the present Government have occasioned a drastic increase in the cost of a family having a house.

Secondly, the ordinary family wants some heat and light in the home. These items are largely within the control of the Government, for it is nationalised industries in every case that provide these essentials. If the family heats its house by coal the price has gone up, because the nationalised Coal Board has pushed it up. If gas is used, that has gone up as well, and the same thing has happened with electricity. Across the board, the second necessity of the ordinary family—heat and light—has gone up, and gone up steeply.

The third thing the ordinary family must have is a little savings against the day it may have misfortune. One of the most basic instincts in our people is to lay aside a little for a rainy day. Yet, as the hon. and learned Gentleman the Financial Secretary knows, savings have continued to go down at the same time, and almost proportionately—does the hon. and learned Gentleman dispute this?

Mr. MacDermot

The hon. Gentleman says that savings are continuing to go down. That is not true—they are going up.

Mr. Griffiths

I said "proportionately". The Financial Secretary heard me say that.

Mr. MacDermot

If the hon. Gentleman studies the trend in recent weeks and months, he will see that, either proportionately or absolutely, savings are going up.

Mr. Griffiths

I should be glad to argue the subject with the Financial Secretary in more detail on another occasion, but I am sure, Mr. Speaker, that if I pursued it now I would be called to order. I assert that the proportion of people's income saved has dramatically dropped. Savings have declined as a proportion of the people's earnings.

The consequences of these things for the ordinary family, whether in the home they need, in the heat and light they must have, in their savings, or in a bit of pleasure, is that the cost has gone up. I do not know how the hon. and learned Gentleman takes his pleasure, but if one takes a glass of beer, the price of that has gone up—

Mr. Speaker

Order. This is a fairly broad Motion, but it is not universal.

Mr. Griffiths

I recognise, Mr. Speaker, that I have strayed well outside the rules of order, so I will now return to the second aspect of the Motion, which is "the complexity of government".

I accept the Galbraithian notion that in a more sophisticated and complex society it is probably inevitable that the Government will take responsibility for a progressively larger number of decisions within the economy. Professor Galbraith has put forward that view, and it is difficult to dispute it. I suggest that it is happening in the United States as well as here. There is this difference, however. The other night the Financial Secretary told us, in terms, that his Government believe in intervention; that they believe in intervening in very many aspects of our life, whether economic or social. I should like to draw the attention of the House to some of the consequences of this intervention.

I believe that such intervention has enmeshed industry and agriculture in a thicket of controls and restrictions, and that they have to spend far too much time hacking their way out. I give just two examples. First, we have the well-known planning blight. All over the country there are occasions when the planners hope that a certain urban area may be developed in the future, but there is frequently a time lapse during which Whitehall or various local authorities are seeking to make up their minds or, more frequently, when local authorities are seeking to discover whether they will get loan sanction to proceed with the plan in question.

During the period of delay—which, regrettably, can run to two, three, or even four years—many people find themselves unable either to sell their property or to develop it, because they cannot foresee the future, and there is no possibility of a market for the sale of what they own.

I mentioned this the other day in a constituency speech and I have been surprised to receive from all over the country scores of letters giving precise examples of how planning blight is getting in the way of the individual's right to benefit from his own property. The hon. and learned Gentleman the Financial Secretary knows that this is true. I hope that when he replies to the debate he will recognise that planning blight is one of the complexities of modern life which is interfering with the individual's right to develop his own property and his talents.

I refer to a particular firm in my constituency, the largest one and one of our better export firms. Last year, it sent £5 million worth of machinery to the Common Market countries. Over a number of years it benefited from investment allowance. The new arrangements made by the present Government would allegedly improve the firm's position, but in fact the firm discovered that for some strange administrative reason there is a £25 limit on any item being eligible for investment grant.

The firm, like so many in Britain, has sophisticated machinery. Many of the parts which it makes are cut after templates or patterns are laid on the steel. The templates, without which these sophisticated machines could not be made, frequently cost less than £25. Collectively, they are essential to the assembly of any of the machines the firm produces, but because, individually, each separate template or pattern costs less than £25, the whole has been disallowed for grant. Months have gone by and many letters have had to be written and the complexity and pernicketiness of these provisions have impeded the firm in its exports and discouraged its board of directors.

I turn to the sheer size of government which is arising from the interventionist attitude of right hon. Gentlemen opposite. The total number of people on the Gov- ernment payroll now stands at 5,725,000, I am advised. Local government has well over 2 million, the National Health Service 621,000, the nationalised industries 1½ million, the Civil Service well over 1 million, and civilian employees of the Armed Forces, 422,000. This enormous number, representing 5.7 million employees of government, is unwieldly and unnecessarily large. It adds to the complexity and expense of government and gets in the way of the initiative and enterprise which we must have if Britain is to succeed.

Along with the sheer size of government, there is the fact that the complexity of legislation brought forward is overloading even this huge machine which we have established. There is the Land Commission, which has added to the burdens of the Inland Revenue, as the hon. and learned Gentleman knows more than most, an enormous new set of responsibilities. I will not give examples, but I rest on a quotation from Mr. Anthony Christopher, Assistant General Secretary of the Inland Revenue Staff Federation, who said at the Federation's annual conference the other day that there were 24 million pay-as-you-earn cases last year which had still to be reviewed, and which would lead to 4,500,000 statements to be assessed.

He also said that there were 400,000 letters more than a week old which have not yet been touched, as well as an ordinary week's letters on hand. He added that there were nearly 800,000 statements of overall tax liability of two years ago still to be carried out, and added.

This has to be done in a branch where one in three at present employed on taxation is on some form of training. The additional new responsibilities to the Revenue, and, in particular, the addition of the Land Commission, has required these dedicated and proud men to delegate more and more work to untrained inadequately experienced youngsters within their machine. The consequence for the ordinary citizen is the cluttering up of government which the figures Mr. Christopher referred to demonstrate.

None of these things is solely the responsibility of the present Administration. It is the consequence of larger government and of the greater complexity of modern society. Nevertheless, the interventionist philosophy of those on the Front Bench and the fact that they have had so many splendid plans which have not worked have led to an overburdening of the machine, apart from the increase in the size of the machine and the destruction of the possibility of getting ahead through high taxation for many of the youngsters of our country. Therefore, I entreat the Financial Secretary, when he replies, to recognise the essential justice of what the hon. Member for Pembroke said this morning and to say to the country, "We recognise the problem and will try to mend our ways".

12.36 p.m.

Mr. R. B. Cant (Stoke-on-Trent, Central)

I am very glad to have this opportunity to speak on this theme because I think that in politics it is not an original idea but something which recurs from time to time. I suspect that those who put forward the proposition are either those who suffer from the sort of wide-eyed innocence of youth or the frustrations of middle, bordering on old age. There is no particular personal reference here. We all know that the Marxists hoped that, once they had assumed power, once they had established the Communist State, the State machine would itself wither away. I wonder if Lenin is in a position to reflect on the evolution of the Soviet Administration and whether he wonders that the Revolution has been betrayed, or whether he always expected that this sort of thing would happen.

I began my political life, as I suppose many in this House began theirs, in local government. One's reaction to this sort of experience is, I suppose, variable. I have always been interested in people who exercise power. Although I hope I can say with honesty that I have never wanted to exercise power myself, the corridors of power fascinate anyone who engages in politics. It was quite obvious to me, having been in local government for some time, that the corridors of power did not exist in the town halls of our localities but somewhere in this great wen of London. If power existed, it would rest here.

When I was elected, quite surprisingly, to the House of Commons, I thought that I would at last make contact with the seat of power. I came into this august Chamber and looked around the benches, which are sometimes full but generally as empty as they are today. I looked at many hon. Members who have always been eminent. They had appeared on television and some were famous while some, of course, were not so famous. What surprised me was that, despite the fact that so many had written about the State, the great Leviathan, the tyrant, all these people in the House of Commons were human. Some were more human than others, but even the mighty could smile. I did not know what would happen when one pricked them with a pin—whether they would bleed. They had all the attributes of humanity. My right hon. Friend the Prime Minister is often equated with something more than humanity, but even he is the most gentle and charming of creatures.

I therefore wondered where the power lay. I sometimes let my eyes wander up to the electorate in the Strangers' Gallery, thinking that they had the real power in that they sent us here or dismissed us. But that could not be true, I thought. So I looked at the Fourth Estate—but we know that the Press has no influence.

Then I thought that the true power must lie somewhere, perhaps on a bench in the House, tucked away in a corner, on which bench there would be from time to time, but apparently not this morning, certain members of the Civil Service. I thought that perhaps the true power lay, not with the people, not with the Press, not with politicians, but with the Civil Service. I know some of these men. I went into offices which had been generally designated as belonging to Whitehall. I found that even civil servants were very human people.

I will not prolong this theme. I suspect that this great Leviathan, this terrifying instrument of tyranny, is not as dreadful as some have asserted it to be. I admit that it is complex. If I have a theme this morning, it is that government will become more complex and that taxes will undoubtedly increase.

My main hearing is in economics and I shall spend the remaining minutes of my speech dealing with this point of view. Most people believe that Britain is governed more than any other country and that we bear a heavier burden of taxation.This belief is nonsense. If some quantitative yardstick can be used to measure the burden of expenditure of taxation, perhaps some worth while conclusion can be drawn. May I give one general conclusion from the brilliant group of articles by Mr.Jay which have appeared in The Times. I gather that he has a brilliant father, so we can expect him to write brilliant articles. The results of his researches completely fail to corroborate the view that Government expenditure and taxation in the United Kingdom are out of line with those in other industrial countries. In fact the private sector in the United Kingdom is carrying less of a burden than its counterpart in the majority of other countries.

I will give one or two figures. In the United Kingdom personal consumption accounts for 81.2 per cent. of the gross national product.

Mr. Douglas Houghton (Sowerby)

No. That is Government and personal consumption.

Mr. Cant

I am sorry. In the E.E.C.countries it is 76 per cent. Especially if defence expenditure is eliminated, we in this country are in a favourable position. This country is in such a situation that it is almost inevitable, if We are realistic and if we do not just resort to vague, meaningless generalisations, that in the next 10 to 15 years, without changing in any radical way our policies, particularly those connected with welfare, Government expenditure will rise considerably.

The reasons are fairly obvious. Or are they? Is it generally appreciated that this country has had a minor population explosion and that by 1980 our population will have increased by 6.1 million but that from this increased population there will be available for work only an extra 800,000? These are not theories or vague projections into the future. They are inevitable facts.

Even worse, as the population changes the age structure will change. The burden on Government expenditure will be greater, because those age groups which make the greatest demand on public expenditure will grow disproportionately. I mean the young and the old.

Other things must be accepted. Whether we like it or not, service expenditure is incapable of massive increases in productivity, because those who work in welfare and elsewhere simply do not work with huge machines, which are automated, press-button operated, and so on. They work as individuals performing a service.

Taking up a point raised by the hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths), in the development of any economy as it becomes more affluent the State must take corrective action to ensure that too much of our affluence is not caught up in private consumption, leaving public consumption deficient.

The general conclusion for this country is that, given a reasonable rate of economic growth, which I put at about 3 per cent. per annum, given the same commitment in absolute terms to defence—we hope that this can be cut—the greater demand for economic resources by the public sector, inevitable unless we want to cut our standards, must mean that we shall have to moderate our expenditure on personal consumption.

If we are to keep the balance of payments, private consumption, public consumption, investment equation in balance, as we must do, over the next 10 to 15 years a growth in personal consumption of more than 2½ per cent. cannot be allowed. This is less than we have had in the last two decades.

How is this to be done? The lamentable conclusion is that it can be done only by raising the levels of taxation. This is why I said that my theme would be that Government expenditure—the impact of government as a whole upon the economy—will grow and that the levels of taxation will increase.

How are we to achieve this increase in the levels of taxation? We must not kid ourselves that we can use the magic formula of revenue buoyancy—that more people getting into higher income brackets as national income increases will be an automatic "pay-off" that will give us the money we require. We shall have to use the levels of taxation if we are to do what we want to do in order to shift resources from private consumption. When discussing this question of tax burdens, we may be very much led astray if we believe that we are the heaviest taxed nation in the world.

Mr. Eldon Griffiths

In view of the hon. Member's clear perception of the increasing proportion of gross national income likely to be taken by taxation, can he explain how his understanding of this entirely eluded those who drew up the National Plan? Why was it not stated in the Plan that this was likely to happen?

Mr. Cant

If one takes 4 per cent. growth, one is dealing with 1 per cent. of a figure of gross national product which is around £36,000 million at the moment. I am afraid that that is the secret. I hate to give it away. My own assessment of future economic growth has never been more than 3 per cent. I am on record as having said that.

Returning to the tax burden, I ask my hon. Friends opposite to stop talking about it as though we were borne down by a disproportionate tax burden. Let us get the facts straight and look up the figures in the beautiful new orange book from O.E.C.D., which is much better than our Green Papers, White Papers and Blue Books. All the facts are set out there.

I do not want to take too long. My final point is that if we have reached the limits of direct taxation on individuals and companies—and there seems to be general agreement that we have reached it today—the only other place we can put increased taxation is on indirect taxes on spending or on social security. The significance of this is that either type of taxation would increase costs—the one thing we must be extremely careful about increasing, especially costs in relation to exports.

People who say, "Let us devalue the £ in order to reduce costs; this is the great magic formula for achieving what we want to achieve", should bear in mind that indirectly the £ is already devalued because our social security taxes are so much lower than in the Common Market countries in particular. If we begin to step up social security taxes to provide extra revenue, as well as introducing an added value tax to provide extra revenue, we shall push up costs, and in the years to come may have to adopt the other form of devaluation, not through differential and lower social security taxes, but the other form, the one that we never speak about in the House.

12.54 p.m.

Mr. Peter Bessell (Bodmin)

The House is greatly indebted to the hon. Member for Pembroke (Mr. Donnelly) for putting the Motion before us as it concerns not only the government and administration of the country but particularly the individual Members of this House. I have a great deal of sympathy with the hon. Member. He is frequently in difficulty with his party and I am frequently in difficulty with mine. Therefore, we may have a mutual sympathy on these matters.

Mr. Eldon Griffiths

We are all one this morning.

Mr. Bessell

Perhaps so. Much of the speech that we heard from the hon. Gentleman conformed admirably with traditional Liberal policies. Therefore, I can welcome almost without qualification all his comments.

We should all limit ourselves in our speeches because a number of hon. Members wish to participate in the debate. As many voices as possible should be heard today because of the importance of the subject. I shall, therefore, keep a very close eye on the activities of your right hand, Mr. Speaker.

The right hon. Member for Llanelly (Mr. James Griffiths) made a very important point when he said that the difficulties and complexities of Government largely emanated from the complexities of the society in which we live. I believe that he is absolutely correct. The technological advance of the past few decades has brought a totally different form of society, which, in turn, has almost inevitably created a complex governmental system. That does not make the complexity of the system any more desirable, but in tracing the history of the present position it is important to recognise its causes. The right hon. Gentleman made a particularly valuable contribution by drawing the attention of the House to this matter.

Secondly, the advance of the social services and the very much better order of society which we enjoy today, which has been rightly attributed to the work of David Lloyd George, Lord Beveridge, Aneurin Bevan and others, has created further additional complexities and, inevitably, a much larger Civil Service, with a consequence increasing burden of taxation for the maintenance of that service. This is also inevitable, and it would be foolish to pretend that it can be altered or even that it would be desirable to alter it drastically.

Not only have we created these much wider governmental services and incurred the much greater cost of maintaining them, but it inevitably follows that there falls upon the Civil Service a much wider responsibility than at any time in the past. This growing responsibility is a source of concern to everyone. We have heard many statements in recent years, some from authoritative sources, others less authoritative, to the effect that we are having an increase in bureaucracy which may be dangerous to the freedom and liberty of the individual.

There is something to be said for examining the dangers of any increase in bureaucratic institutions. At the same time, we must recognise that the people who administer the Civil Service today are carrying out a very difficult task. I should not like any remarks I make this afternoon to be regarded in any way as a criticism of those men who sit in the dark offices that line Whitehall or in other places, because we know too well the difficulties under which they operate. But the technological advance, the advance in social services, the greater responsibility of the State through the Civil Service, and the increase in the power of the Civil Service must be a source of anxiety to us.

I also believe this argument can be further extended. The central Government here at Westminster bears an intolerable burden, a burden that was never anticipated as our democratic system of Parliament evolved. The burden upon individual Ministers is often more than any man should be asked to bear. We all know the large numbers of individual cases which every Minister of the Crown must deal with, week by week and year by year.

I recently noted a statement in the Press that hon. Members must deal with approaching 700,000 individual constituency cases each year. I think that figure is correct. I represent a rural constituency, and between November, 1964, and March, 1966, I dealt with just under 8,000 individual problems which had to be referred either to local government officials or to Ministers of the Crown, and of those 8,000 just over 5,000 had to be referred to Ministries here in Whitehall through the Minister in charge.

Clearly, this is a burden which, in equity, cannot be borne by Ministers of the Crown today. One of the strongest arguments for a system of devolution of government is just that. I take the point made by the right hon. Member for Llanelly that he does not want to see an economic separation of Wales, or of any region, from the rest of the country. I do not believe that this would, at the moment, be realistic. But there is a strong case for taking away from the Ministries in Whitehall many of the responsibilities which they are shouldering. Because the burden is too great, they are not able to do their work either to the satisfaction of the people or, I suspect, to their own satisfaction, let alone the satisfaction of the Ministers responsible for them.

Let us consider for a moment the problems of the various regions, whether Scotland, Wales or the south-west of England. The people living there have a far more intimate knowledge of the problems confronting them, a knowledge which can be acquired only by residence in the area concerned. If those people had the handling of many of the matters of difficulty which arise between the people, whether as individuals or cor-porately, and the Ministries concerned, not only would they be able to deal with them more efficiently because of their greater knowledge but the burden upon the central Government would be reduced and, consequently, its own efficiency would be increased.

In addition, we should have faster as well as more accurate attention to many of the individual problems referred to by hon. Members today. I think particularly of the planning problems referred to by the hon. Member for Ormskirk (Sir D. Glover). These are a constant source of irritation not only to individuals and Members of Parliament but, very often, to the local authorities themselves. The Minister of Housing and Local Government, weighed down as he is by so many responsibilities, cannot possibly give the attention necessary to each of the many appeals which come before him. It would be far wiser if such appeals were dealt with at a regional level. The people finally responsible for making the deci- sion would make it with much wider knowledge of the area concerned and of the advantages and disadvantages of allowing an appeal.

I pay tribute to Her Majesty's Government for at least making a start in the devolution of government. The establishment of the regional economic planning councils gave many of us a sense of hope, and I am only sorry that they did not go much further and establish elected bodies to deal with the problems of the regions. The present set-up is wholly unsatisfactory and has often caused more dissatisfaction than existed before the councils were established. For example, not only are they not elected but, in the case of the South-West Economic Planning Council, at least, meetings are held in secret. Minutes are not circulated and the agenda is not even available to the clerks of the local authorities concerned. All that the Press knows about the council's deliberations comes from prepared statements issued at the end of meetings. There is no democracy in this. It is more than bureaucracy; it is dictatorship at its worst.

After two years of the existence of the Economic Planning Council in the Southwest, we are still waiting for it to hatch its egg. It has not yet produced its oft-promised report, though I understand that it is now about to emerge. The only recommendation which the council has made to the Government, in relation to the Portbury scheme, was turned down flat.

However good the Government's intentions were—I do not question that for a moment—the way in which they have made a start on regional government by the appointment of these councils has not only been entirely unsatisfactory but has caused a far greater sense of grievance than existed before.

The special problems of the neglected areas—I think here of Wales as well as of Scotland and Cornwall, and I am sure I take the right hon. Member for Llanelly with me—can be tackled in the long term only by elected bodies representing the areas and representative of the people living there. Cornwall has high unemployment and a very low wage rate in comparison with the rest of the country. A man earning £10 or £11 a week in Cornwall today is regarded as lucky; often, the alternative is the dole. Depopulation has resulted in an ageing population and lack of opportunity for our young people in Cornwall. All this stems directly from the increasing power of the central Government and the failure of their administration to take account of the peculiar problems of regions like Cornwall.

Within the past few weeks, we have had the news that electricity charges are shortly to be substantially increased. This is a matter over which only the central Government have control. I do not believe for a moment that they have taken proper account of the burden which this will impose upon people living in areas remote from the large centres of population. In Cornwall, we already have the unemployment, low wages, ageing population and little opportunity for growth to which I have referred. This year, we have the special difficulty which our tourist trade is suffering. It will be an intolerable burden to have further electricity charges put upon us. If we had devolution of government of the kind to which the hon. Member for Pembroke referred, a regional administration would make sure that burdens of that kind did not fall upon the population for which it was responsible.

The hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths) has reminded us that it is impossible for people, irrespective of their income, to avoid certain basic costs of living. He referred to fuel, to electricity and coal. I have on other occasions raised the question of coal prices in the House, and on this occasion I say only that it is quite wrong that, in Cornwall, we should have to pay more for our coal than people do elsewhere. Those with the smallest income have to pay the highest price. Again, this is not the result of wilful misbehaviour by the central Government, not the result of a desire of someone in a Whitehall office to impose a miserable burden upon a neglected area of the country. It is the result of a total absence of understanding, an understanding which can be obtained only through local knowledge.

We have many assets in Cornwall which have not yet been developed. For example, I have pleaded with the Government, over the past two and a half years, to develop our tin mines. This would not only assist Cornwall but would help our balance of payments as well. But, today, tin mining is being developed in Cornwall by private industry, with private capital. The profit will accrue to American companies, whereas it should properly accrue to the Government. This is a grave reflection upon the level of consultation, or lack of it, with the people who know the area.

The same applies to the china clay industry, one of the most important industries of the South-West. I pay tribute to the company which operates it. But here is a natural asset which could have been developed in the past and could have given far greater profit to the country, although I would not for a moment advocate that it should remain in any hands other than those which possess it today.

Cornwall is contributing in terms of agriculture, tourism, its ports and other facilities a very considerable amount to the general economy of the country. I have real sympathy with those who suggest that the devolution of the Government should include a separate regional government for Cornwall alone. A strong case can be made out for it. We are contributing a great deal to the economy of the country and receiving very little in return.

The problems of Government spending have been referred to. The National Health Service, which has been mentioned, is one of the most important services in the country, and, indeed, in many ways it sets an example to the rest of the world. Hon. Gentlemen opposite can take pride in the fact that it was their party which introduced the legislation which enabled us to have a National Health Service on the scale that we enjoy today.

But there is a serious run down in the National Health Service, something which must be dealt with as a matter of urgency. Thousands of people in all parts of the country are desperate for hospital beds. I have on my files cases of people who have been waiting for two or three years for operations. The operations may not be terribly urgent, but this is causing those people undue and needless suffering. More and more of our doctors are going abroad instead of staying here, because of the attractions available to them there in terms not only of money but of better facilities for experiment and promotion of the medical services generally and greater opportunities for the use of their talents.

The Government must get their priorities right. It should be possible to avoid the wastage of money that is going on within several branches of the Civil Service. I believe that amalgamation of certain Government Departments would make available money which could be more usefully used for the expansion of the National Health Service and for attracting people into the Service in areas where they are desperately needed. Centralisation within the National Health Service is again a subject of great concern to many of us, such as the tendency to provide hospitals in one area of a county so that many people have to travel considerable distances. This causes unnecessary distress and suffering.

Not much has been said about the power of the Executive this morning. One of the most disturbing things of the past 50 years has been that so much of the power of the people and the power of individual Members of Parliament has been transferred to the Government. We all know the difficulties which exist in Parliament because of the Whip system. We know how often people have to put aside their deepest beliefs and convictions in order to maintain their loyalty to their party and retain the Government in office. I do not believe that this is the correct way in which democracy should operate. I do not believe that it should be necessary for parties to impose upon individual Members this kind of stringent control which robs them of their freedom of conscience and frequently prevents them from representing what they believe to be the beliefs and interests of people who elected them.

This power of the Executive, this power of the Whip system and this power which is vested in the Cabinet and the Prime Minister is something which I hope the House will find an opportunity to debate urgently within the next few months. We are fast reaching a state where democracy is only a word and the authoritarian system which has replaced it is working to the detriment not only of Parliament but of the people as a whole.

When I read the Motion I could not help feeling that it is not the complexity of Government which worries me most in the last analysis. What worries me most is its over-simplification because of the coercion which is used and which often compels Members to vote for things in which they do not believe because there is no other way of maintaining a strong Government. Why it should be so invidious for a Government to be dependent sometimes upon the votes of Opposition Members in order to carry through their policies I do not know. Why they should feel it is necessary instead to compel the Members of their party to do that which they know is wrong is something which is disturbing people at all levels of society in the country.

I believe that this kind of oversimplification within a highly complex system, a system which once worked well but is working now to the disadvantage of the regions and of individuals in the remoter parts of the country, needs to be examined in far greater depth than is possible in a debate of this kind.

1.16 p.m.

Mr. William Baxter (West Stirlingshire)

Like most hon. Members who have spoken, I congratulate my hon. Friend the Member for Pembroke (Mr. Donnelly) on raising this issue.

My hon. Friend pointed out in a masterly fashion the need for the reorganisation of national government and the need for setting up certain regional councils or governments, and that has been reiterated by the hon. Member for Bodmin (Mr. Bessel). The right hon. Member for Llanelly (Mr. James Griffiths) made clear that the minds of many hon. Members were turned in the direction of some regionalisation or system of local government parliaments, such as one for Scotland, one for England and one for Wales. It has also been hinted that there is a need for a fundamental change in our national government.

I remind hon. Members of the simple fact that two Royal Commissions are now reviewing the basis of local government, but that excluded from their remit is the very question which is troubling us this morning—how much of central Government activity can be put on the shoulders of a new local government structure or local parliamentary structure, such as has been advocated for Scotland.

Since I have been a Member of Parliament I have been very disturbed by the fact that Members on both sides of the House seem not to have risen to the responsibility of the day and age in which they are living. It is true, as one hon. Member has said, that the development in scientific and technical knowledge over the last 50 or 60 years has been tremendous, so tremendous that it has surpassed that of the past million years of the existence of man. Greater achievements and greater revolutionary thoughts have been brought into being in the last 50 years than since man was conceived.

The difficulty of this state of affairs in Parliament is that our Parliamentary system and we as Members of Parliament have not been able to match the advancement in scientific and technical thought. We are still working away in the dim, distant past with our ideas and conceptions of what we should be and should have. Even when we hear Ministers of Defence explain new techniques and methods of war, their thoughts and conceptions are always based upon the wars that have been fought in the past, and never grasp the terrific scientific and technical change that has taken place even during the last 15 to 20 years. This is one of the tragedies of our Parliamentary system and it applies to some extent to our taxation system, as well.

A review of our taxation system is long overdue. But, here again, there is the great fallacy of the House of Commons in that no committee or commission is ever asked to look at this fundamental need. We accept the methods adopted 50 years ago as being applicable to future generations. That is one of the tragedies. Governments over the last years have based their conceptions of taxation on what has gone before. Politicians believe apparently that they have some divine right to be able to spend other people's money much better and more sensibly than they can do themselves. This belief grows with the passage of time. It is the great conceit that overtakes the better judgment of an M.P. which he held before arriving here. Whenever a man comes to this House this great ego overtakes him and the sensibility towards life that he once had.

Again, in our taxation system large numbers of people are employed to take money from one pocket and put it in another and vice versa. I have had some experience of private industry. In my office, I employ three girls for one purpose only—to operate the P.A.Y.E. system and various Government Orders. They have to be paid from the point of the pick on any particular job that my men are working on. The overhead represented by those girls must be paid for and it never appears in the balance sheet of the Government. Nevertheless, it comes from the productivity of those employed in my establishment.

But, of course, this is not sufficient for the powers that be. The lack of trust that permeates our deliberations is in the taxation system as well. The tax authorities will not accept what these girls do as being correct. They have to duplicate their work in the tax office. They employ girls there to do exactly the same work that my girls are paid to do.

We have an excellent body of people called chartered accountants who are under an obligation on the basis of their calling to be as truthful and correct as humanly possible. They sign every balance sheet, clearly indicating that they have scrutinised with great deliberation the transactions of the business, and they certify the correctness of the accounts. But that is not sufficient for the tax authorities. They have to duplicate the whole thing.

What makes anyone imagine that, because a man is employed by a Government agency, he is more honest or reliable than the man employed by private enterprise? There is need to look at the structure of taxation to see whether it cannot be simplified and a greater degree of trust placed upon various individuals.

This is well indicated even in private business at the present time. There has grown up the great obsession that everyone must be looked after by someone else. Even the ordinary visitor to a factory nowadays has to go through a "security office", give his name and address and explain all about himself and what he is doing there. All this adds considerably to the cost of production.

We here are the people who are more or less to blame. A good example is that of the Land Commission. We wanted a simple device to take into the possession of the people as a whole, with fair compensation, land designated under the town planning legislation. But that simple project is couched in such parliamentary terms that even the most able Queen's Counsel cannot understand its full implications and give a proper explanation of what it means. Here is another cause of the duplication and complication which add so much to cost.

Another simple illustration is that of training in industry. One almost requires a solicitor to fill in the Government forms because of the implications and meanings to be read from them. One must fill in form A and form B, then get the apprentice to fill up form C. Over and above that, one pays 1 per cent. of gross wages in the building industry—which can be a considerable amount—for training and then applies for repayment of that money. This is just the story of taking money from one pocket and putting it into another and then putting it back in the first pocket.

The Selective Employment Tax tells the same story. Farmers have to pay the tax. Then they apply to get it back. It is the most stupid and out-dated idea of working things that I have ever come across. It very much needs an overhaul.

Mr. Donald Dewar (Aberdeen, South)

Does not my hon. Friend agree that, if S.E.T. were to be collected in any other way, extra civil servants would have to be employed, which would not commend itself to him?

Mr. Baxter

I cannot understand the attitude of my hon. Friend. He cannot have been listening to what I am saying. The idea that, if farmers did not have to pay out the money in the first place and then have to be paid it back, we would be adding to the number of civil servants, is an example of the woolly thinking that some hon. Members, even on this side of the House, indulge in.

Mr. John P. Macintosh (Berwick and East Lothian)

The Chancellor of the Exchequer clearly explained that this machinery was adopted for Selective Employment Tax because these people happened to be there and that we would not need extra people if we used the existing machinery. Machinery to operate S.E.T. in the way my hon. Friend suggests would have required a new office. I am surprised that my hon. Friend does not understand that.

Mr. Baxter

My hon. Friend appears to be acknowledging my point. His attitude is, "Whatever the Chancellor says must be correct, because he knows better than you and I." But the Chancellor does not know better. I am a farmer. I have to pay S.E.T. to Inland Revenue officials and then I get it back again. The Chancellor does not do that, so he does not know what takes place. In theory, the Chancellor may be right, but there is the old belief that a ¼ lb. of practical experience is worth 1 lb. of theory.

When we develop the story of S.E.T., we find that it was necessary not from a taxation basis, but to get over the difficulties of the G.A.T.T. It was a ham-fisted method of trying to get over the agreement and, furthermore, it was not a morally correct thing to get over that agreement. If one looks further into the matter, one finds the misdirection of taxation due to misconceptions and wrong motives. It is time we addressed ourselves to a different conception, one that used to be accepted in this country— that the individual is more important than the State. He has to be remembered. When a man marries and has a family his chief responsibility is to his wife and family. He should not be superseded by the State in this responsibility.

We have gradually departed from this conception, because of too many factors. Not the least was the low wages paid half a century ago, or even less, bad housing conditions and educational facilities. Because of these social inequalities a school of thought developed that we should subsidise many facets of our everyday life. A system was evolved where rents, education, all the social services were subsidised and family allowances were paid. Farmers are subsidised by another system and this is inequity at its worst. Farmers are subsidised so that the cost of food can be reduced to those who are able to pay economic prices for it as well as the poorest of the poor.

There is a fundamental basis which could be introduced to get over many of the problems of our taxation system. This is an idea that is not new. I was a member of the old I.L.P., if my hon. Friends know what that means. We used to advocate a basic wage—a fair day's work for a fair day's wage—a basic wage in the mining industry, for example. My father was a miner.

I support the Government, because they have the right concept in their incomes and prices policy. If we can bring about a better understanding with the unions and others concerned about a basic wage embraced in the wage structure, many of the subsidies I have mentioned could go and the onus of responsibility would be put back on the head of the family to see that his family is provided for—and woe betide any man who did not do his duty for his family, because as legislators we would pass laws to see that he was properly attended to.

This is the basic conception which we should be developing and which I am happy to see my right hon. and learned Friends in the Government have conceived—to get the basic wage structure of lower-paid workers up to reasonable dimensions so that many of these aspects of social services would not be subsidised for better off people, such as M.P.s. Only those who required subsidies, the lower-wage earners, would get them.

How can this be done? It might be said that this would undermine certain small industries. I am talking here of clerks and such people earning £10 to £12 a week. If their basic wage is raised to £20 or £23 or more, depending on the scheme, it would mean that many small industries might find it difficult to meet their national or international commitments. This is the only area where subsidising should take place during the difficult period of transition.

The Civil Service has in its ranks some excellent people, but there is no incentive and there must be incentive to get the best out of anyone in the sports field or at work. There is no need to decry it. This is the prowess of man—he wants to be a competitive creature. He cannot be otherwise. It is the basic structure of his nature. There is no incentive in the Civil Service. Somebody said, "Oh, would I had the power!", but I demand power, I am hungry for power to put my views into operation. An incentive system should be introduced into the Civil Service in such a manner that there would be a complement for each Department, not only in staff, but in money. If the head of the Department could reduce numbers and make his organisation efficient, his salary would be increased, but if he made it less efficient, he would depart as quickly as possible. There is no great virtue in keeping civil servants in the Service if they are inefficient. A round peg in a square hole, or a square peg in a round hole, is not desirable.

People in the Civil Service who are not able to meet its requirements should be dispensed with. I have no doubt that there is a niche somewhere in the world where they can earn a living and do productive work. Over the years a school of thought has developed that if someone becomes a civil servant he must die a civil servant. This is not good for the Government or the individuals involved.

Mr. Houghton

Dying is never good.

Mr. Baxter

That is very debateable. When I look around me I think that it might be very desirable.

Without efficiency in the Civil Service, the problem becomes very difficult. Not only does it have an effect on taxation, but it has a psychological effect on employees in all establishments. I know of a Department which was set up a short time ago not very far from my business. It advertised for juniors to make tea and things like that—it is well-known to be that type of job—and offered £12 a week. This puts out of focus the wage structure in private business. It may seem a joke to my hon. Friends, but they do not run businesses. A business must be profitable. When a businessman puts in a price for any commodity, he must have regard to his wage structure. If it is knocked out of joint by the acts of a Government Department—I am all for high wages, but they must not go out of focus—that can considerably upset its workings.

This is a subject which should have caused the House today to be packed, the subject of trying to get a greater degree of efficiency into our system of government and ways and means whereby our tax system could be altered, adjusted or amended, to grasp the nettle of the difficulties which the future will bring in its wake. As my hon. Friend the Member for Pembroke so rightly said, with an increasing world population there will be 100 per cent. more people than have been brought into being since man became man. It is a very sobering thought. New techniques, ideas, approaches, breadth of vision and experimentation are required to overcome the difficulties, not of the past but of the present and of the future. If we do not look at this through new eyes and evolve new conceptions, then, like my hon. Friend, I give little hope for this country by the end of the century.

1.40 p.m.

Mr. John Smith (Cities of London and Westminster)

I am grateful to the hon. Member for Pembroke (Mr. Donnelly) for introducing this subject and for activating the hon. Member for West Stirlingshire (Mr. W. Baxter), who has given us a foretaste of what regional Parliaments will be like and who has put forward some good, practical conservative principles as would be expected from a Member of Parliament who, like myself, has also been concerned with business.

One of the examples of the complexity of government is that we have spent the whole of this week in Committee on the Finance Bill and, as a result, although this is a subject of which parts interest me very much, I have been up until one o'clock in the morning every night of the week and have not been able to give it the amount of thought which I should have liked. I will, therefore, deal with it briefly and tackle only a few specific matters.

The first question to ask is why government is so complicated and the answer is that it is complex because we do not think enough about it. We do not think enough about it because we behave like any inefficient firm which says that it is too busy doing its job, too busy running the office, to sit back for a day or two and consider whether it could be run in a better manner. If we get things right at the top, all other things flow from that. I should, therefore, like to consider first the role of the House of Commons.

The rôle of the House has varied through the centuries, oscillating between supporting and criticising the Government. It contains this contradiction within itself and consequently at different times its rôle has leaned more to one side and at other times towards the other side. We are not even agreed among ourselves about what the balance should be, what the job of the House should be. At the moment, the rôle of the House has clearly come to be overwhelmingly to support the Government.

As a rider to that, I should like briefly to consider what is happening in the House. We are long past the day when voting was reasonably fluid. We are past the days of the nineteenth century when debate went on as long as anyone wished to speak and when, in the course of it, the prospects of the voting changed and the outcome could not be certain until the vote was taken.

That is a line which is worth pursuing a short distance, but not very far. It is a pity that Governments now adopt the convention that if they are defeated on almost any Measure, however trivial, they must resign, or that at least it is a tremendous blow to their prestige. If we could get away from that, we could remove some of the ossification from our debate.

However, I will not pursue that, because whipping is imbedded in our system and it is impossible to remove it. We must accept that the House is no longer so much of a debating Chamber. It is absurd to suppose that what one says here will alter the views of the party opposite. One may as well canvass the Sphinx. It is really an exercise in public relations.

The most we can do in our present circumstances, which I do not believe to be necessarily correct, is as the hon. Member for Stoke-on-Trent, Central (Mr. Cant) adumbrated, to influence the Press, which may catch the fancy of the public and if it does, the Press will blow up the issue and comment on it, which may, in turn, influence the thinking and possibly the actions of the Government. But that is a remote way of setting about it and it is partly due to what we actually discuss here.

Some of the matters which we discuss here are very general. We are long since past the days when the primary discussions here were on matters of foreign policy and defence and how to finance them, which were relatively simple issues. Matters now are much more complicated and are either so general that it is almost impossible for us to have access to sufficient and adequate facts to discuss them properly—we often discuss in an afternoon something which it would take a Royal Commission many years to consider; and a Royal Commission's membership is selected because it is qualified to discuss the matter—or they are so technical that only a fraction of us can understand what is going on. This week we had a discussion on "top-slicing" of insurance companies, and I very much doubt whether anyone in the House understood it. Two hon. Members were briefed on it—one on our side and the Government spokesman—but it is doubtful whether anyone else actually understood it.

There is the myth of the expert. It is said that it is useful to have here people from outside because they are experts in certain subjects. If I may say so, I am relatively expert in some subjects, but I find that when they come up, the amount which I know about them prevents me from speaking, because I know enough to realise that to make sense and contribute sensibly on them I should need to know a good deal more.

The complexity which we create here is partly due to the fact—and the hon. Member for West Stirlingshire said this—that few of us here have been administrators. In an afternoon we blithely pass Measures such as the Land Commission Act, having no idea of the complications which we are creating. They appear to be quite simple, but we have no idea of the administrative tail involved. Anyone who has ever worked in a business knows that. There may be made what appears to be a simple suggestion, but when someone has worked out exactly what has to be done all the way through, there will be several pages of difficulties which may or may not be overcome.

Like judges, who do not necessarily see the effects of the sentences which they mete out, we do not see the administrative effects of the legislation which we pass. This is one of the causes of the present wave of nationalism, of results such as we had in Carmarthen. People do not really want to fill up licence application forms in Welsh; they do not want to govern themselves particularly, although that is what they say; they simply want less government. For example, in 1963—I happened to see this figure and I would have looked up a more recent date if I had had time—there were 1,500 pages of Statute law and 790 Statutory Instruments. All that probably flowed from relatively simple debates.

The next part of the argument is that there is no specification for the job in the House. There is no "job-specification" for a Member of Parliament. Outside the House, if a firm wants to engage a man to perform a task, it writes out the specification for the task and sees whether various people will fit it, but there is no job specification here and, as a result, on the whole we do nothing properly. We are spread much too thin. One aspect of that was mentioned by the hon. Member for Bodmin (Mr. Bessell), namely, the service which we give our constituents.

Mr. Houghton

The hon. Gentleman will know that in the House we are all classified as self-employed persons, so I suppose that we make our own work and our own specifications for it.

Mr. Smith

We all do this job in our individual and different ways. That is admirable. For most of us, it consists in deciding what we should leave out. But there should be an elementary specification of the job so that the talents which we possess are not drained away.

The hon. Member for Bodmin mentioned our service to constituents. I have a very large, literate and well-equipped selection of voters. They all have views and many of them have typewriters and secretaries, as well. In the first year that I was a Member of Parliament, I sent out 18,000 letters. I find that constituents will write to their Member about anything. They treat him as a sort of low-grade pagan god who may be able to do anything; it is worth trying and if by chance it does not succeed one can always stick a pin into him.

The running of such a broken-backed, ill-equipped welfare service is an albatross round the necks of Members and, more so, round the necks of Ministers. But I do not seek to change that. It has many advantages. It keeps one in touch with one's constituents. But if we are to do that, we must have conditions of work in which it can be done. I mention that very briefly, since I do not wish to enter into details today, but it is an example of how we do not devote enough time to thinking about our proper job and how it should be done. Office, paper and welfare work should be done in the most efficient conditions and simply put behind one for the rest of the day so that more time can be spent in research and finding out the views of one's colleagues and attending here.

But we operate in conditions rather like those of a boarding school unexpectedly evacuated to a large early Victorian club. We work in a building designed at a time when the most that any Member would do would be to pen an occasional note to one of his colleagues.

What should be done about this? The points that I wish to make on the simplification of government are these. We should review the functions of government and of Parliament. I do not think that we should do that ourselves. It is a common fallacy in business that one's own business is very special and that nobody else understands it and, therefore, we must reorganise it ourselves. What is special is the art of reorganising businesses, and we should go to an organisation which knows about that. There are many firms in the world, not necessarily in Britain, which have reorganised successfully organisations a great deal larger and, if one can imagine it, a great deal more tangled up than Her Majesty's Government.

Secondly, we should review the functions of Members of Parliament. This is best done simply by stimulating discussion. I feel, as I suppose I am bound to feel in view of my background, that the rôle of a Member of Parliament should probably be that of an outside director of a firm and that we should not seek to grab the controls but should limit ourselves to criticism, advice, appraisal and scrutiny.

As part of the review, we should consider the question of this building. I am a Fellow of the Society of Antiquaries, as I believe you are, Mr. Deputy Speaker. I served on the Museums Commission for many years, and this building gives me constant pleasure. It is in one way particularly suitable because it is itself a compromise. It is a Georgian building in Gothic fancy dress. Sitting here is very much like sitting in the back seat of an Edwardian motor car. But our frame of mind is affected by this building. Indeed, this building is our frame of mind.

I have here a few extracts from the Martin-Buchanan Report on the Whitehall Plan. Sensibly, we do our best to keep people out of this building, but the Martin-Buchanan people got in to the Palace of Westminster and described it in the Plan as follows: … a lengthy system of corridors and cross-corridors serving an excessive number of small, unlit and largely unusuable compartments … about 60 per cent. of the total ground floor area cannot be adequately lit or ventilated by natural means … walls occupy 26 per cent. of the total area … the conclusion to be drawn … is that the Palace of Westminster cannot deal with the present … let alone the developing needs of the future". Of course, that is a town planner's view, but it is of interest. My view is that, since there is a vacant site for the first time in centuries on the other side of Parliament Square, then, as part of the review of our functions, we should consider putting an extrovert, adaptable building on it. The Prime Minister talks in the House of modernising Britain. I do not think it very suitable that he should do that in one of the most charming but old-fashioned places in the island.

I will deal very briefly with the second part of the Motion, on taxation. First, I deal with the question of the liberation of energies. A lot is said in the House about the high earnings of some people— executives, and so on. Some people say that they must have high earnings if they are to put their backs into the job. Others say that it is socially undesirable and that no one should have much more than anyone else. I am not concerned with that at the moment. I do not think that top executives work only for money. We are a bit idealistic here. I presume that we are all idealists. We could not possibly be working for money because most of us are capable of earning a great deal more outside. But money enters into the question with other people. I felt a good deal of pain at the loss of earnings when I became a Member of Parliament.

However, if money enters into the question, what is wrong with that? It is no worse than the pursuit of honours, for example. Surely who makes the money is less important to the country than that the money should get made. As hon. Members are aware, the State gets it all in the end. We cannot remove money from circulation. Nobody nowadays in a modern complex State can make money in the sense they can found a dynasty. The most that they can do is to borrow time. I should have thought that it was much more important that the State should concentrate on generating resources than in trying to make certain that some people should not have what, after all, is a fractional amount more than others. If that is the carrot which gets them to pull the national cart along, they should be allowed to have it.

The hon. Member for Pembroke spoke about the complication of taxation and the high levels of taxation which led to the decline of the Roman Empire. In my view, it is not the amount of tax but the complication of the taxation system which deters people. I should like to give an example from my experience. I have a great deal to do with the complexities of tax. Many years ago, purely as a relaxation, I started running a gross fund—that is, a fund which is not subject to taxation. I felt that all the energies I put into it would be directly employed in whatever was the purpose of the fund.

Whereas most enterprises which are subject to tax have to be pushed along, this one, to which I turn in the evenings occasionally and which was started with a sum of money well within the pockets of any hon. Member, now has an income in six figures. If we can remove the deterrent effect of complications from people, we liberate their energies.

High taxation must be complicated. It is no use complaining about that. It has to be complicated to avoid hard cases and to prevent evasion. But I should like to make one or two suggestions. The hon. Member for West Stirlingshire developed the case, which I will, therefore, not develop, that there should be less taking away simply to give back. The Selective Employment Tax is an example. This week—I have not the HANSARD reference, and I hope that I quote it correctly—the Chancellor told us that a couple earning £1,700 a year, with one child, in fact received more from the State than they paid in direct taxation. There is a good deal of scope for taking away less where it is simply done in order to give it back again. I also think that we should approach taxation in the frame of mind that people are capable of managing their own affairs and that it is not the end of the world if some fail. The safety net which we stretch under them should be there all right, but it should be a sagging net and, therefore, much cheaper.

We should pay more attention to the cost of collecting taxes—and I do not mean just the cost to the Revenue. There has been a development in taxation which makes this important, in that the cost of collecting taxes now falls much more on the people who are taxed than on the Revenue. I do not mean that in absolute terms, but whereas, in the past, the whole cost fell on the Revenue, now some of the cost falls on the economy. P.A.Y.E. is an obvious example, and there are other examples, such as the Stamp Duty on cheques. I feel that when assessing the worth of a tax, regard ought to be paid to the cost to the economy of collecting it.

In a bank there are people whose job it is to discover mistakes in the books. Naturally, they have to be fairly intelligent people. Every so often most banks work out the cost of finding out each mistake in the clearing in terms of wages, premises, and so on, and they do not bother to look for mistakes which cost less than the cost of discovering them. That process could well be adopted in Governments.

I should like, finally, to mention the question of licences. This is a form of taxation which can be particularly complicated, both in raising it and also in its effect on other legislation. Legislation is before us at the moment in a rather obnoxious, coercive Bill, for collecting television licences, and also other legislation about car licences. There are many other licences in the economy. In both those cases, raising money from television and from motor cars, a licence is not the right way to do it. A licence is a way of controlling something dangerous or taxing something which is not used all the time. There are much simpler methods of collecting the television duty—methods by which the duty could not be avoided—and that also applies to motor cars.

One of the original purposes of the motor car licence was to make sure that the car was insured. Nowadays, in many cases, the person who does not take out a licence is the person who does not insure it, either. The document which ought to be on the windscreen is the third party insurance cover or the road fitness certificate. The way in which to tax motor cars is through the taxation of fuel, which would benefit those people who do not use their cars as much as do others. Licences should be looked at.

These matters of taxation are aspects of the larger problem of complexity in Government. Historically, the British, and particularly the Scots, have been good at governing other people. That is now very unfashionable, and there seem to be few openings for it nowadays. But we are very bad at governing ourselves, as we have heard today. As we can no longer deploy our talents in running the countries of other people, I feel that we could with value turn to a review of the functions of our own government, both how it is done and where it is done.

2.6 p.m.

Mr. Douglas Houghton (Sowerby)

There are two points in a debate at which a Privy Councillor may seek to intervene, Mr. Deputy Speaker, and to catch your eye without annoying other people. One is earlier in the debate, when other hon. Members have not had time to become impatient—which was the course chosen by my right hon. Friend the Member for Llanelly (Mr. James Griffiths). The other is when no other hon. Member in the Chamber at the time has a prior claim on the attention of the House, which is the point at which I rise.

I am very glad to be able to follow in the debate my own Member of Parliament, the hon. Member for the Cities of London and Westminster (Mr. John Smith). I have been wanting to see him for some time. May I say at once that I admired the erudition and thoughtful-ness of his speech. If he had gone on much longer I might have been tempted to vote for him. But if he wants—

Mr. John Smith rose

Mr. Houghton

I have much more to say to my Member of Parliament before I give way to him. If he wants to study the activities of bureaucracy at first hand perhaps he will have a look at the circumstances in which Bessborough Gardens has recently been enclosed, much to the annoyance of the local citizens. If I was the Chairman of the Public Accounts Committee I should want to know whose money was being spent in Bessborough Gardens and who authorised it, because, as far as I understand the position, a firm of contractors has embarked on a job which has not yet been authorised by the Ministry of Transport. I leave that problem in the hon. Member's lap.

Mr. John Smith

I am always glad to be able to curry favour with my constituents, however odd the place in which I meet them. The matter of Bess-borough Gardens has been drawn to my attention by two other constituents, both of whom are Members on this side of the House, and I have looked into it. It is a much more serious matter than some other things which are drawn to my attention, such as burst pipes, but I hope that the right hon. Member will not write to me about it. I assure him that I will deal with the matter, provided that he does not write to me about it.

Mr. Houghton

Having had the special privilege of meeting my Member of Parliament personally and having ventilated my grievance, I promise that I will not trouble him by correspondence.

This is what we call a wide-ranging debate. Almost anything is in order. We have had such contrasts, as that which we witnessed a few moments ago, when my hon. Friend the Member for West Stirlingshire (Mr. W. Baxter) sat down and my own Member of Parliament rose to follow him in the debate, in the treatment of the Motion moved earlier by my hon. Friend the Member for Pembroke (Mr. Donnelly). The temptations for diversionary excursions from one's main theme are very great.

I will permit myself this comment on a remark made by the hon. Member for the Cities of London and Westminster about the functions of the House as a public relations body. This day last week we had well over 300 Members of Parliament here, and never fewer than 100 in the Chamber throughout the whole day. Why? Were we discussing the Middle East? No. Were we discussing the destiny of Britain? No. Were we discussing productivity or the tyranny of the bureaucracy or the burden of taxaation or the disincentives of the whole economic and social set-up? No. What were we debating? Abortion. That brought more than 300 hon. Members into the Chamber. Why? Because they knew that every vote counted and that the debate mattered on a question of considerable social, emotional and public importance. When the House realises that it is functioning effectively, hon. Members will be here. When it feels that it is not functioning effectively, they will not be here.

Reference has been made to the absence of civil servants from the official box during this debate. I suggest that the reason is because they know that today my hon. and learned Friend the Financial Secretary cannot lose—that is, apart from the fact that he does not need them. We should spend less time on some of the public relations functions of this House and more time on effective legislation.

There is an abundance of legislation waiting to be discussed. There are many problems with which we cannot deal in the meagre allotment of private Members' time. The arrogant assumption by Governments for decades that the time of the House belongs to them—that they concede something and call it "private Members' time", when private Members have conceded their time to Government; we do this at the beginning of every Session, mostly like sheep—has resulted in the time belonging to private Members being frittered away on Government legislation and activity when we have important matters of our own for which we should reserve time for discussion. The hon. Member for the Cities of London and Westminster did a good turn in drawing attention to some aspects of our work which we sometimes overlook.

Selective Employment Tax has been mentioned and I cannot let that pass without comment. I have two subjective judgments to make about S.E.T. First, I view it with acute professional jealousy, as a former tax gatherer. I believe that no Department can collect taxes as efficiently as the Inland Revenue. Secondly, again as a former tax gatherer, I see little sense in a tax where one refunds more than one keeps. That always goes hard with the tax gatherer. He does not like repaying more than he has collected. Any tax which involves that state of affairs must be a Humpty-Dumpty sort of tax. As for the cost of collection, I hope that hon. Members will not run away with the idea that S.E.T. has not cost something in administration. It has, although there was an alternative to this tax which could have been collected by the Inland Revenue for no more, and probably for a great deal less, than S.E.T. While the temptations for diversionary exercises are great, I will not follow that one.

Far too little attention is being given to the question of the machinery of Government from outside. There is a close preserve in matters relating to the machinery of Government. Prime Ministers like to keep the machinery close to themselves, and, within Government, matters which relate to this machinery get little or no collective discussion. We are missing some outside review of the machinery of Government and we perhaps need a new Haldane Committee. If there are any hon. Gentlemen on the benches opposite who might like to do so, they might care to work to give us an up-to-date, complete and thoughtful review of the machinery of Government in modern times.

I hope that the Report of the Seebohm Committee, which we are expecting shortly, will spark off consideration of the whole question of the machinery of Government in the social services. At present there is an enormous rag bag. To appoint the Seebohm Committee required a conference of four senior Ministers to agree on its composition, because four Government Departments had a finger in the Seebohm pie. It was nominally appointed by the Home Office, but interest in the work and composition of the Committee was widely spread. I sincerely hope that, while the question of central Government machinery was not within the terms of reference of Seebohm, what the Committee recommends on the review of personal social services at local authority level will compel reconsideration of the central machinery.

My experience leads me to the conclusion that no co-ordinating Minister in the Government can co-ordinate what will not be co-ordinated because of the several and separate responsibilities of Ministers of the Crown who claim to have a degree of responsibility for their Departments, both to the Government and Parliament, which makes effective co-ordination almost impossible.

End of diversionary excursions. Since the Motion refers to taxation twice in four lines, it is not surprising that there should have been some discussion of taxation. My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant), With his customary skill and understanding of the economic and taxation problems of the day, referred to the mythology which has gained considerable currency about the level of taxation in Britain. It is a legend here that taxation is too high, that Government expenditure is too high and that we are the highest taxed country in the world.

When we examine the figures we discover that this mythology is not borne out by the facts. The conclusion to be drawn from the articles to which my hon. Friend referred is that personal consumption is too high; that, relevant to the gross national product, personal consumption in Britain is higher than in Japan, West Germany, Switzerland, the Netherlands, the United States and France. If one adds personal consumption to Government consumption one gets, in relation to the G.N.P., no less than 81 per cent. going in personal and Government consumption.

What is suffering in these circumstances? The high total of personal and Government consumption is leaving far too little for Government investment as well as private investment. This is the lesson to be drawn from the analysis given in the articles in The Times. That is why we are finding such difficulty in raising our rate of economic growth. We are paying the price for having eaten the seed corn in years past, and this goes back many years.

The emotions of victory first created this great demand for the rewards of victory—for better conditions, improved standards of living and so on—while other countries, which had no claim to the rewards of victory but only to the dregs of defeat, set about the reconditioning of their economy, with considerable external aid, and have attained a higher rate of economic growth than we have. We see the extraordinary spectacle of, for example, Japan, which is now the primary shipbuilding nation. The lessons which we can draw from some of the things that have happened in other countries are that we must be content with a much slower rate of growth of personal consumption if we are to set aside the requisite amount of G.N.P. for private and public investment.

Another feature of public expenditure, upon which I confess I had serious differences of opinion with my colleagues when I was in the Government, is the way in which transfer payments are regarded as part of Government expenditure. Mr. Peter Jay, in his articles in The Times, excludes social benefits from Government expenditure and adds them to personal consumption, because he says, rightly in my view, that the transfer payments are the transfer of one kind of personal consumption to another, or personal consumption from one person to another.

It makes a considerable difference to the level of public expenditure if one excludes this vast and growing amount of social benefits, so it must be said in passing that the total of personal consumption which Mr. Peter Jay arrives at includes the benefit of social payments—

Mr. Brian Walden (Birmingham, All Saints)

I am following my right hon. Friend's argument with very great interest. I noted that he said that the level of personal consumption is too high and must not go any further. Is not another possibility that the nature of personal consumption could change; that people could spend money on different things, and buy for themselves some of the things now provided through Government expenditure?

Mr. Houghton

I am greatly obliged to my hon. Friend for encouragement in what otherwise might be a day of heterodox speeches.

The demographic features referred to by my hon. Friend the Member for Stoke-on-Trent, Central are of considerable importance but are being overlooked in much of the discussion on the social services of the future. In the year 1990 it will be possible for the Minister of Social Security for that time to present a season bingo ticket to the 10-millionth retirement pensioner. Ten million retirement pensioners—no wonder that the Government Actuary was asking in a recent address to some insurance men whether the country could go on … indefinitely pensioning off our productive population at age 60, or even at age 65. The point about age 60 is that, as we all know, women retire five years earlier than men—

Mr. Ronald Bell (Buckinghamshire, South)

And live longer.

Mr. Houghton

And live longer, as the hon. and learned Member says. Of the present 7¾ million people in retirement 5½ million are women, because they qualify five years earlier. There are at present four widows to every idower,and the Government's Actuary points out that as the years go by the ratio will worsen. We have at present 600,000widow pensioners under age 60, and many more women who are on social benefits of one kind and another through breakdown n marriage—desertion, separation and so forth. Therefore, the larger number of women than men benefiting from social services, both because of the earlierage of retirement and the higher mortality risk of men, will become a very big factor in the finances of the social services of the future—

Mr. Bessell

The right hon. Gentleman is developing an argument with which I fully agree. Would he agree that it is a very strong argument for the abolition of the earnings rule?

Mr. Houghton

I must not be diverted into that subject. The abolition of the earnings rule would, ipso facto, abolish the retirement condition, and that raises entirely new considerations in relation to social benefits. I hope that hon. Members will not be led astray into thinking that the abolition of the earnings rule would affect only the 47,000 people who at the moment get a reduction in their pensions because they are earning above the limit. It would abolish the retirement condition affecting many more people, and would be very costly to the scheme itself.

I stress the demographic considerations not only in relation to older people but in relation to young people. The dependency ratio will grow with the years— that ratio being the number of children up to the age of 14 and those people over the retirement age. As my hon. Friend pointed out, there will be relatively fewer productive workers to bear the strain of the support of dependency as the years go by.

Let us look at the conclusions that were reached in the articles written by Mr. Peter Jay in The Times. We have all read them, and we are greatly indebted to him. He was, of course, a civil servant for a time—apart from being the son of quite a brilliant father whose brain is only muddled, as far as I know, on the Common Market. From Mr. Peter Jay's studies we have derived considerable enlightment on matters that require elucidation and explanation.

The warning is there of what lies ahead; of the increasing dependency of old and young; of the increasing cost of maintaining existing standards, apart from from improving them; of the danger of diverting too much to personal consumption—holidays and horses instead of machinery; of the danger of falling behind in the economic race in an increasingly competitive world because we are living too well and investing too little. I know that the remedy would be the higher economic growth for which we are all hoping and praying and working, but it is a long time in coming, and we suffered the acute disappointment, as my hon. Friend said of seeing a figure which was virtually stuck in the National Plan falling behind the expectations we had at that time.

What are some of the things that can be done? My hon. Friend the Member for Birmingham, All Saints (Mr. Walden) suggested a moment ago that one way would be to change, or encourage the change of the pattern of personal expenditure. There is some merit in that idea. I take one example. The size, the efficiency, the services, the expenditure upon the National Health Service is a Government decision arbitrarily taken in relation to other aspects of Government expenditure. There is no possibility in the National Health Service of responding to consumer demand, because we give the consumer no scope for getting what he wants. The Government have decided what kind of National Health Service can, in their view, be afforded out of public expenditure.

I believe that a great many people would be prepared to pay something for the National Health Service provided they could be sure that it would be improved if they did so. This is not an attempt to contract out of the National Health Ser- vice. This is not an attempt to go into the private sector of health. It is a movement to buy a better health service for all. It may be important, in facilitating that, to enable it to be done at the point of receiving some of its services.

I naturally turn for the solution for many of these problems of what we call selective benefits to the use of the structure of our personal tax system. Again, the words "selective benefits" can be misleading. There are some fields of social benefit in which no selectivity at all is justified; for example, benefits by virtue of contributions, benefits as of right. Supplementary benefits, we already concede, are on a discriminatory basis. Un-covenanted benefits could be put more on a discriminatory basis if we can find an acceptable way of discrimination.

In passing, I am dead against means-testing low-paid workers at work, absolutely implacably opposed. There is an alternative, a sophisticated, acceptable alternative which I profoundly hope the Government will adopt, even if it means delaying this matter until next year. That is interlocking a scheme of child allowances and children's allowances for tax with a social security scheme. It would not be 100 per cent, perfect, but it would be 100 per cent, acceptable.

Mr. James Griffiths

My right hon. Friend knows that I agree with him, but hon. Members opposite who call for selectivity will not swallow that.

Mr. Houghton

I am defining my own position at the moment. I accept that there are dangers of being misrepresented and getting misunderstood on a matter of this sort, but when we look around we see that of all the means tests at present the greatest is that of Income Tax. No one feel humiliated in paying Income Tax. I have never heard a worker say that he felt humiliated because someone made a decision of how much of his pay packet was to be paid away. It is a quirk in the English character— I am not decrying it, in some ways it is a noble one—by which a means test to pay is accepted as a civic duty but a means test to receive is rejected as charity.

When we look around we find rent rebates, rate rebates, university grants, supplementary benefits, family allowances and the rest which are all, I believe, to be looked at in relation to the reverse side of the Income Tax structure. We have the returns of income and all the machinery of the Inland Revenue to go into people's affairs. We have all this amazingly flexible and skilful coding system which can do almost anything at present on the pay-as-you-earn side. Many people do not realise how skilful and sophisticated it is. It was a great disappointment of my political life, certainly the greatest disappointment I had when I was in Government, to see the income guarantee and all which could have come from it go on to the rocks in the economic crisis of July, 1965. I believe that with that we would have been well on the way now to something which would have opened up new possibilities of deciding benefits on principles akin to, and acceptable along with, the converse of income taxation.

That is the message I have in this debate. I am glad of the opportunity to give it. I believe we should keep this in mind. It may be a little way off. The administrative difficulties, I know, are great, but they are not insuperable. It always takes me a long time to listen to administrative difficulties being explained by the Inland Revenue when I remember that they issued a White Paper to say that pay-as-you-earn was impossible and then, within two years, they introduced a scheme. Never accept the judgment of a Department on administration. In present circumstances, we have machinery, electronic processes and computers which have the possibility of performing tasks on a large scale, which would have been impossible a few years ago.

Mr. Ronald Bell

I have been trying to follow the trend of thought of the right hon. Member, but I must confess to having lost it. He was saying that there was a difficulty in introducing the element of choice or personal responsibility in the matter of social services. Then he said his solution for this was to be found in an interlocking scheme of child allowances and children's allowances in the Income Tax payments scheme, but I do not think he followed that by saying how he would apply it to solve the problem.

Mr. Houghton

I am sorry that I did not do that. I agree that I did not. What I suggest for consideration in that connection is the use of the coding system, the multi-use of the coding system, over the whole range of our means tests at present. Then, for the purpose of defining payments which may be made under the National Health Service, using the same instrument—the same coding system—we should decide who shall pay and who shall pay what in the National Health Service. This is a diversion from taxation to personal expenditure.

My hon. Friend the Member for Birmingham, All Saints pointed out that at the moment the pattern of personal consumption is beset by the environment of Government expenditure, especially in regard to the Health Service. If part of the cost of the National Health Service could become part of personal expenditure instead of being wholly Government expenditure out of taxation, I believe there would be a more willing contribution of the additional resources to the Service which it badly needs and will have difficulty in getting from taxation. I think a lot of people would welcome this as a contribution, making a contribution of their own, to a better National Health Service—a diversion of their own personal expenditure from perhaps useless purposes, or purposes not having such a high priority in their minds, which could be used to make a better Health Service.

I throw that out without any doctrinal prejudices one way or another. I think it is something which should be considered. I hope that out of this debate there will come from a range of thought on various matters the kind of agenda for later debates which will enable us to go into these matters in greater depth. What I feel conscious of, as I am sure other hon. Members do, is that in this wide-ranging debate there have been a number of items which we have not considered in depth and examined as closely as would be justified on another occasion. But at least we have probably provided the agenda for another occasion. I hope that some of the ideas which have been expressed will be followed up later.

2.37 p.m.

The Financial Secretary to the Treasury (Mr. Niall MacDermot)

I apologise for intervening when one of my hon. Friends still wishes to speak in the debate, but if I am to intervene I had better not leave it to a later moment rather than this. All of us would share the judgment of my right hon. Friend the Member for Sowerby (Mr. Houghton) that if there has been any unsatisfactory feature about this debate it is that it has covered such an extraordinarily wide subject that it is difficult to have one coherent line of debate. Certainly, we are grateful to my hon. Friend the Member for Pembroke (Mr. Donnelly), if for nothing else, that the debate elicited the speech we have just heard from my right hon. Friend the Member for Sowerby.

My hon. Friend the Member for Pembroke, in opening the debate, struck a very high note. There is a broad sweep to the Motion and there was a very broad sweep in the way in which he introduced it. He told us that he was not introducing it in any partisan spirit, and that became quite obvious when we heard his speech. What he was criticising was successive Governments, over a period of years, and he was taking a constitutional point about what should be the scope of central Government first and foremost, and, secondly, what sort of levels of public expenditure and taxation we should consider right.

The wording my hon. Friend has chosen in the Motion is such that inevitably, if it were approved by the House, it would be pursued in a partisan way. Some of the speeches in the debate, particularly that by the hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths), were clearly cast in a purely partisan spirit.

I therefore hope that, in the spirit in which my hon. Friend introduced the Motion, when we conclude our debate he will take the view that it is not necessary to press it to a Division. If he did so press it, then, for reasons which I shall show, I should have to advise the House not to support it.

I will seek as far as I can to respond in the spirit in which my hon. Friend presented the Motion. He began with the theme of the need for decentralisation or devolution of government. He said that our population of 50 million is one which hitherto may have been apt for our governmental needs but, he suggests, now suffers from the defect in some respects of being too small and in others of being too large. In respect of matters like defence, of general economic planning, and particularly of an adequate commercial market, 50 million is too small. It is for this reason, amongst others, that my hon. Friend welcomes the Government's decision to apply for entry into the Common Market.

My hon. Friend then said that there was a need for greater decentralisation of government and alleged that the complexity of modern government was such that, centralised to the extent that it is, it inhibits progress. This is a theme which I have been interested in ever since I first took an interest in politics, because I have always liked the definition of democracy of, I think it was, Wilfredo Pareto, namely, that that system of government is the most democratic in which people participate the most in the making of decisions which will affect them in their daily lives. Therefore, by instinct I am a decentralist.

I was, therefore, anxious to see what sort of examples my hon. Friend would give to illustrate his thesis. I thought that the examples he gave rather missed the target he was aiming at. The first matter my hon. Friend criticised to illustrate his theme was the 4 per cent. growth rate prediction in the National Plan, now reduced, due to changing economic circumstances, to 3 per cent.

I am not sure what my hon. Friend's criticism is—whether it is a criticism that we attempted to have a National Plan at all—I do not think it is that—or that we dared to predict a growth rate, or that we predicted the wrong growth rate and, I think he suggested, did so insufficiently on economic grounds and allowed a political element to enter into the judgment of that growth rate and induce an optimism about the figure which, in the event, has not proved to be justified.

The latter may be a justified criticism, but I think that it decreases the strength of my hon. Friend's argument on the question of the need for more decentralisation. If a figure is to be put forward for a growth rate, it must be done at a national level. I would answer my hon. Friend by telling the House of an answer I heard given by a prominent industrialist at a lunch party I attended not long ago in the City when this point was raised. The industrialist said, "Of course, we need the Government to set a target, giving us their forecasts. We know that they will not get it right, above all, in the first instance, any more than we do in our own businesses. With experience, and in time, the Government will undoubtedly improve on the forecast, but it is a necessary part of the Government's function to have a National Plan and to put the picture to us as best they are able".

My hon. Friend's second example was the Monopolies Commission. He complained of the delay in the Commission's consideration of matters relating to petrol stations and the brewing industry. I take my hon. Friend's point about delay. One wants improvement throughout a great deal of government to avoid delay wherever we can. But what is the relevance of this to centralisation or decentralisation? Does my hon. Friend object that there is a Monopolies Commission? Does he object to the functions being performed at all, or does he want them performed at the regional level? If these functions are to be performed, they must be performed at a national level. If we want to make the Commission do its work more quickly, we must make it a more powerful and a more effective and probably a bigger organisation with more staff, which will not diminish the size of the central governmental machine.

My hon. Friend's next illustration of the way in which he suggested the complexity of government was inhibiting progress was the uncertainty arising about what the rate of Corporation Tax would be on the introduction of the tax. This misses the target completely. No business ever knows what is to be the tax rate for the coming year. If we had not changed to the Corporation Tax system, business would not have known what the rate of Income Tax would have been in the following year.

What my right hon. Friend the Chancellor of the Exchequer did was to remove the uncertainty as to whether we were to go for what I may call the continental system of tax, where there is a high rate of Corporation Tax and a low rate of withholding tax, or go for the system, which we adopted, of a low rate of Corporation Tax and a higher rate of withholding tax.

My right hon. Friend the Chancellor gave a bracket and said, "We do not normally predict and say in advance what our tax rates will be, but I will tell you now that the rate of Corporation Tax will be between 35 per cent. and 40 per cent. and it will not be more than 40 per cent." The company to which my hon. Friend referred decided to make its decisions on the assumption that the rate would be 37½ per cent. The company thus took the average figure. It did not take the most cautious figure, which, in the event, it would have been wiser to have taken. In fact, business was helped considerably by my right hon. Friend—

Mr. Peter Hordern (Horsham)

I hope that the Financial Secretary is not attempting to deny that there was considerable uncertainty in industry for a full year about the rate of Corporation Tax. Although it was predicted that it would vary only between 35 per cent. and 40 per cent., this very uncertainty disrupted industry greatly.

Mr. MacDermot

I can only say—how stupid can you get? If we had not introduced the Corporation Tax, there would either have been complete uncertainty, because it might have been any rate at all of Income Tax, or business would have assumed, without any basis for the assumption, that the rate would remain unchanged in the following year. All we did was to draw attention to the fact that the shift to the Corporation Tax system would not produce a basic shift in the level of company taxation.

That—neither more nor less—was what was meant. I know that hon. Members opposite tried to stir up a whole atmosphere of uncertainty, but the figure which was given was one to show industry that there was no need for it to fear that there would be any radical change in tax rate.

My hon. Friend the Member for Pembroke then turned his attention to the local government field and gave examples here. He began by drawing attention to the delays which occur in the whole of the planning machinery. My hon. Friend will carry the whole House with him on this subject. It is a matter to which the Government are giving attention, and my right hon. Friend the Minister of Housing and Local Government stated that he is to publish a White Paper later in the year bringing forward proposals for overhauling the planning machinery with a view to streamlining it and removing many of these delays. I do not think that anyone would quarrel with my hon. Friend's proposition here.

My hon. Friend went on to give an example of what he called the bumbledom at local authority level in planning matters by citing a decision of the Bromley Council in relation to an oil drilling project at Knockholt. My hon. Friend complained that the drilling operation was allowed to take place for only eight hours a day and not for 24 hours a day and that it thus became uneconomic to do the drilling.

I know nothing whatever about the case. I do not know whether there has been any appeal against the decision. However, I am sure that my hon. Friend does not live in Knockholt. He dismissed any suggestion that this could possibly have been a right decision by saying that it was not conducive to economic expansion. He said that the question is: which takes priority?

That is one of the questions. The other, as I pointed out in an intervention, is: who is to decide? That is the crucial question. If my hon. Friend wants more decentralisation and will leave all decisions about drilling to be decided at the Knockholt or Bromley level he will not get any drilling. If he wants them decided on the basis that the economic considerations must take priority, then they must all be decided centrally, because that is where the economic considerations are likely to prevail.

One must try to strike a balance and see that before the decision is taken both considerations are taken into account and weighed up. At the end of the day it must be decided at some level. One's aim is to allow the decision to be at a local level so far as possible but if a matter is of sufficient national importance we must have machinery for withdrawing the decision to a national level. It is, at the moment, the procedure for doing this which involves what we all regard as unacceptable levels of delay.

My hon. Friend suggested that the form of decentralisation that he would like to see would be a two-tier system of local and regional government, one tier of regionally-elected councils with a regionally-elected Parliament and below that one further tier of local government. That is one of the main set of proposals which has been put before the Royal Commission on Local Government by those who want to see more regional government. The alternative proposals, which have been supported by the evidence of a number of central Government Departments at official level, is for a rather greater number of smaller regions— about 40 city regions—again with one tier of local government below them.

I do not want to go into all the pros and cons of these two proposals, or to develop the argument, because we must await the Royal Commission's Report before having a factual basis on which we can take a rational decision about this. At this stage, all I would say is that many people take the view that if one went for the smaller number of larger regions one could not have only one other tier of local government; one would be driven, in effect into a three-tier system. One of the arguments in favour of the greater number of city regions is that one could then achieve what many people think is the desirable object, and that which my hon. Friend was advocating, namely, a two-tier system of local government.

Mr. Bessell

Before the hon. and learned Gentleman leaves that point, can he explain what would happen in the case of counties under the system he advocates? Would they be separate regions in the same sense as city regions?

Mr. MacDermot

I do not want to be drawn into this, but the general conception is that one would get a region comprising what at the moment would be one county, or perhaps two, and a city which would be a centre to that region. It would be a transformation of the present county level, I think, with one other level of local government below it. It does not follow that regionalism in this sense will result in any reduction in the total size of the public service. Nor will it necessarily result in any great increase in speed of decision-making, unless one is to devolve a great deal of decision-making power to a lower level. This is where the crux of the problem arises as to what are the functions that one envisages should be devolved.

The hon. Member for Cities of London and Westminster (Mr. John Smith) said that what people who voted for the nationalists in Wales wanted was not more government, but less. I doubt whether he is right. I think that what they want is the effects of more government. They want more industry and work brought to their area, and that will not happen if they are left entirely to their own devices. They want central Government assistance.

So did the hon. Member for Bodmin (Mr. Bessell) in the examples he gave about the tin mining and china clay industries in the South-West Region, and his complaint about coal prices in that region. All these problems, if they are to be solved, will not be solved by regional government, but by central Government. I think that what the hon. Member envisages is that if he has a regional Parliament he will have a louder and more effective lobby for the interests of the people in his area. That may be a very good thing, but it will not in itself speed up the machinery or reduce its size. Those are the problems with which we have to come to grips, but decisions must clearly await the report of the Royal Commission.

My hon. Friend then turned to the part of his Motion which deals with taxation.

Mr. James Griffiths

My hon. and learned Friend will appreciate that the Government of which he is a member and of which I was a member is already committed to regionalism. We have set up regions for economic and social planning in England, Scotland and Wales. Parliament must at some time consider what is to be their future. Are they to be continued? If so, will it be in their present form, or will there be a demand—this is the problem—that their powers should be transferred to a democratically-elected body rather than appointed bodies?

Mr. Speaker

Order. I hope that we shall not have too many interventions at this stage, for there are still hon. Members waiting to speak who have been here all day.

Mr. MacDermot

I entirely agree with my right hon. Friend. By their actions the Government have shown their interest in the development of a regional structure. The appointment of the Royal Commission may prove to be a decisive step in that direction.

I now turn to the taxation aspect. As my hon. Friend the Member for Pembroke said, this matter has been discussed fairly fully in recent debates on the Finance Bill. During those debates my right hon. Friends the Chancellor and the Chief Secretary have exhaustively dealt with what I would call the heresy that our present taxation is acting as a disincentive to the effort we need in all parts of the economy. If my hon. Friend had heard those speeches he would not argue as he does now.

I wish briefly to summarise the arguments. First, the overall burden of taxes in Britain is not high by international standards. In 1965, the last year for which comparable figures are available, 34.2 of G.N.P. was taken as taxes and social security contributions in this country— less than in France and West Germany, and well below the E.E.C. average of 37.9 per cent. It is not even true that we pay more in direct taxes. The proportion of G.N.P. paid in direct taxes, including social security contributions, was 18.4 per cent., compared with an average of 32.7 per cent. in the Common Market countries.

Second, it is not until over about £15,000 a year income that the effective burden of direct taxation is higher in Britain than in other Western countries, and the complaint that marginal rates of taxation are higher here than elsewhere is true only for incomes above £5,000 and at the point where the person first becomes liable to the standard rate. Figures were given showing that a reduction of 6d. in the standard rate of Income Tax would help the average wage earner in this country earning £1,000 a year to the extent of about 3d. a week.

Then we had an argument about the brain drain. One of the principal countries supposed to draw talent from the United Kingdom, Australia, has generally higher levels of personal taxation than in Britain, and the drain from this country appears first to have become serious at the time when the Conservative Government were introducing special Surtax reliefs. No fewer than four inquiries have been made in this country into the supposed deterrent effect of the tax level on overtime working, and they have yielded no evidence in support of the alleged disincentive effect. In fact, they have provided evidence against it.

All the evidence shows that it is higher earnings, greater opportunities and increased scope in their work which prove the attraction for people who leave this country to work abroad. We had the example given of the scientists who were doing work involving photography of the moon, and we were told how one of them was earning in the United States 42,000 dollars as compared with 14,000 dollars equivalent which he could earn in this country. After tax, he was left with 30,000 dollars in the United States. If we exempted him entirely from tax on his 14,000 dollars in Britain, what would be the result? If he is basing his decision on where he will have the greater remuneration and higher standard of living, nothing we can do by way of tax rates in this country will provide an inducement to him as against the net 30,000 dollars which he can earn in America. Therefore, I cannot see that the tax rates can be the determining factor in a case of that kind.

The other complaint my hon. Friend made was this. He said—one often hears it brought up in argument—that too much skilled brain power is devoted to seeing how people can avoid the effect of taxes, and he said that there was a tax adviser in every board room. I am not sure what conclusion he draws. I am sure that there are at least as many tax advisers in board rooms in the United States as there are in this country. Having tax advisers in the board room may be no bad thing. It is evidence that we are able, through our tax system, to influence decisions in the board room, which, after all, is one of our objectives in taxation, enabling taxation to be an effective instrument of Government policy on economic planning.

Next, my hon. Friend directed attention to public expenditure, saying, very fairly, that if one were to criticise the level of taxation one must say where the savings could come in public expenditure. I shall not develop the argument on this at length. As a general principle, I do not accept that our present level of public expenditure is necessarily too high either in relation to the balance between private and public provision to meet individual and community needs, or in relation to the scale of public expenditure in other advanced countries. My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) dealt effectively with this aspect of the matter, and I need not repeat his argument.

It is far from the case—this is another popular myth—that the level of public expenditure here, whether on goods and services or on transfer payments, is unduly high in relation to other comparable countries. It is yet another myth that United Kingdom expenditure on social security is higher than on the Continent. It is just not true. On the contrary, several Continental countries have more generous social security schemes than we have.

My hon. Friend went on to give his panacea, arguing that we must seek our reduction in expenditure in the social security field and that we should aim to restrain the growth of the social services by departing from the principle laid down by Beveridge of comprehensive and universal benefits and services, including a free universal Health Service. My right hon. Friend the Member for Sowerby, with his immense experience and knowledge, commented upon this aspect in a way which he is able to do both from greater knowledge and greater freedom than I can command, speaking from the Dispatch Box. Hon. Members will not expect me to comment in any detail, or try to make any policy pronouncement on a matter of this kind, but, obviously, what is proposed here raises an extremely difficult choice.

On the one hand, it is simpler to have universal benefits which are not subject to any test, be it a means test or an income test. On the other, the universal approach is expensive, and if we want to channel extra help where it is most needed we are forced back to some complex system of testing need, or income, which is another way of arriving at need.

If we want to introduce widespread charging into the National Health Service, as suggested by a number of hon. Members, we must consider the social effects of imposing charges, the complications of collecting them and making special concessions to those who cannot pay, the need to make the best use of our medical resources, and the extent to which charging would further this aim.

I think that within each branch of the social services there has to be a similar balance of considerations. Sometimes the argument for free and universal services will prevail; in other cases, such as school meals, it has long been recognised that the balance of advantage is in favour of levying a charge. Again, we combine the National Insurance system, which is universal, with a selective system of supplementary benefits. I think that each case has to be considered on its merits and reviewed from time to time, recognising that the advantages of simplicity and the arguments for economy will pull in opposite directions.

As hon. Members know, growth in public expenditure on the social services is a matter of great concern to the Government, not least because of the claims that it makes on the resources of the economy, but also because of its implications for taxation. It is, naturally, something that we shall be considering as part of the review of civil expenditure which my right hon. Friend the Chancellor of the Exchequer announced in his Budget speech. In that review, we shall certainly be concerned to ensure that public expenditure, of which this forms an important part, will not grow faster than the economy can afford. On the other hand, we shall also be determined to ensure that programmes of high social priority are maintained and that our policies, as up to now, continue to advance the cause of social equity.

There are many other issues which have been raised in the debate on which I should have liked time to comment. With regard to the relationship between the Executive and this House, we know that important experiments are being carried out at the moment. I also have not time to answer the charges made in connection with the expansion and growth of the Civil Service since we have been in power. That is, of course, directly the outcome of the decisions about policies that we have made. If people want the Civil Service to be reduced it can only be by the abolition or reduction of some of those policies.

I do not think that anyone will dispute that the civil servants themselves— some sectors of them are under strain and are stretched—are doing a magnificent and loyal job in trying to carry out the important responsibilities that we have put upon them. The only general comment that I would make in this respect is that after more than two and a half years now in my present office, where I have considerable responsibilities in relation to the Civil Service, over and over again it has been impressed on me that with regard to the attitudes, outlooks and procedures in the Civil Service which are sometimes the subject of public criticism we come back to the fact that these are dictated by and are the result of our insistence upon the responsibility and public accountability of the whole Civil Service to this House. If we want to change these attitudes we must think first about our own attitudes on the subject of public responsibility.

I throw that out as a thought. I have not time to develop it. It would be opening up a new theme—and, goodness knows, we have had enough themes already in the debate. I have been interested in listening to the debate. As I have said, I invite my hon. Friend not to press the Motion to a Division, for that would introduce a controversial note which largely has been lacking up to now.

3.10 p.m.

Mr. Peter Hordern (Horsham)

It is my privilege to congratulate the hon. Member for Pembroke (Mr. Donnelly) both on the terms of the Motion and on the admirable way in which he moved. If his opening remarks were such as to lead us to believe that it would not be a partisan speech, he will forgive me if I say that we took it in perhaps a slightly different sense. The speech of the Financial Secretary was more a demolition operation than one of support. If we feel tempted to publish it in full as a Conservative Political Centre pamphlet the hon. Gentleman will appreciate that his remarks very much suited our book.

The debate has been one of absorbing interest to me. If the hon. Member for Pembroke produce some stimulating ideas, he was certainly followed in this by the hon. Member for West Stirlingshire (Mr. W. Baxter), who aroused some comment from those eager eagles behind him. My hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) also spoke in an equally stimulating and original vein. It would be wrong not to try to draw some common lines which ran throughout their speeches.

All three hon. Gentlemen were good enought to spend some time on the conditions in which we have to work in this House. I have recently returned from a visit to the United States, where I spent some time in Washington and visited a number of Congressmen and Senators. It is impossible not to believe that the conditions in which they work are not infinitely preferable to those we have to suffer here. As a private Member, one works in a room, if one is lucky enough to have a desk, with 10 other hon. Members. There is one telephone in the room and even that has to go through a switchboard. It makes no sense to consider ourselves as an efficient body in those circumstances.

My hon. Friend the Member for the Cities of London and Westminster said that it would be a good thing to have an extrovert, efficient and adaptable building in which to work. That is a large assumption, because it means that we are sufficiently extrovert and adaptable ourselves to be able to use such a building efficiently. I think that these two attributes could be properly ascribed to us, but whether we are also efficient, I do not know. However, the system leads to considerable frustration. The method by which we conduct our business in Government has been the same for many years—indeed, for centuries. But it would be foolish not to recognise the changes that have occurred in other organisations and in business generally throughout the country.

I do not see why we should not examine, or have examined, the system in which we and the Government operate by an outside managerial body, which, I am sure, could make many suggestions both of practical value and of rather more fundamental value about what it is that we are trying to do. I hope to come back to that consideration. It is right to say, and it would be foolish not to recognise, that we as a country try to adopt a completely different system of government from that followed, for example, in the United States—and it is by no means certain that ours is the best. We hold very dear as a principle that the Government should be entirely responsible, and what generally happens is that the Opposition wait until the pieces start to drop. Then the Government pay the penalty. In the United States the system is different. Their consultations, by means of Congressional committees, take place while Government policy is being constructed. It would be foolish to think that our system is right in all circumstances.

One cannot help but observe over the course of the century the marked difference in the weight of government and taxation which has occurred. A woman writing her memoirs a few years ago referred to the occasion when the Liberals introduced their first Budget in which they raised Income Tax to the high sum of 11d. in the £. She said, "We all thought that Papa looked too ashen to recover".

Until August, 1914, a sensible law-abiding Englishman could pass through life and hardly notice the existence of the State beyond the Post Office and the policeman. He could live where and how he liked and without a passport. Before the First World War the level of taxation was £200 million. Today, Government expenditure amounts to a little over £14,000 million.

I hope the hon. Member for Pembroke will not think me churlish in saying that we should have preferred the title of this Motion to be "The reduction of Government and taxation". Whether one is following Professor Parkinson or not, I believe that there is a close connection between the number of civil servants and the increase in taxation which this country has had to bear. For example, on 1st April, 1939, the number of non-industrial civil servants, excluding the Post Office, was 191,000 and the standard rate of Income Tax was 5s. 6d. On 1st April, 1950, the number of civil servants was 434,000, and Income Tax had increased to 9s. 6d. at the standard rate. By April, 1960, under a Conservative Administration, the number of civil servants had fallen to 382,000 and the standard rate was reduced gradually until it reached the level of 7s. 9d. On 1st January, 1967, the number had increased to 425,000, and the latest figures show the number is 457,000 with the standard rate now at 8s. 3d.

I am not trying to claim any justification for Parkinson's Law, but Government expenditure is growing too fast compared With the growth of national productivity and consumes, however judged, far too high a proportion of the gross national product. What is worse, the Government seem quite powerless to exert any control over the pace of this advance.

We know what happened to the National Plan when the Government announced their intentions about increasing public expenditure. I hope it is not indecent to dig up that old skeleton of the National Plan, but it is at the root of our troubles today. That Plan aimed at a growth rate of 25 per cent. between 1964 and 1970, an annual average of 3.8 per cent., which the Conservative Government achieved during the last six years of their Administration. Under the present Government the economy has grown at less than half this rate—not 25 per cent., but 15 per cent., is all we are likely to achieve by 1970. The disturbing feature of the increase of only 3 per cent. in the gross national product which the Chancellor is expecting this year is that it lies entirely in the public sector. We on this side of the House do not object to increasing expenditure in the public sector, but it is madness to let it rip without any comparable increase in productivity.

The annual Vote on Account shows that the main part of Government spending is to rise during the current tax year by no less than £660 million; that is to say, 8½ per cent. at current prices or 5 per cent. at what is laughingly described as constant prices. The difficulty, of course, is that with the best will in the world we cannot export houses and hospitals and schools, and the more of the gross national product which we subsume by these admirable projects, the less we are able to pay in the world.

Even if it were desirable, as we think, to cut expenditure on Government account, very much of it which goes on the basic infrastructure of the economy, what are the real prospects for doing so, given the way in which Government, and particularly local government, expenditure is currently carried out? I am sure that not nearly enough work has been done to examine the difficulty of controlling local government expenditure. During the years 1960–65, while Government expenditure increased by rather less than one-third, local government expenditure increased by two-thirds. Of course a great deal of it is as a result of national policy, education, for example, but in the use of current expenditure only half of that increase can be ascribed to education and much of the other half can be put down to the growth of civic amenities.

Of course the deficiency grants from the Exchequer only have the effect of shielding councillors from the deterrent which they would otherwise have of the burden on the rates. And when we have, as we have had in the last three years, local authorities borrowing short on the bond market and attracting hot money from overseas countries in order to carry on civic expenditure, we can appreciate what a dangerous and difficult position it is.

We await with interest the Report of the Royal Commission on Local Government. It seems certain that there will be found to be economic advantages in larger units of local government, but I profess a personal preference which is that I would like a form of Estimates Committee set up to examine expenditure by local authorities as it is actually incurred, that Estimates Committee to issue regular reports. It is impossible to believe that waste does not occur and that a nationwide review of local government expenditure as it happens would not prove to be a very fruitful exercise. As it is, the figures for local government expenditure between 1960 and 1965 show that had the increase been at only the same rate as Government expenditure, there would have been a saving of some £600 million, and the need for tighter control of the growth of local government expenditure seems abundantly clear

Tighter control, then, is one way in which it is reasonable to expect some improvement in reducing the total volume of local government and Government expenditure. The Labour Party can never seem to us to show any convincing enthusiasm for reducing Government expenditure. If anything, hon. Members opposite regret that its growth in relation to what needs to be done is very disappointing. Let me, therefore, for a moment try to draw the consequences of an increase in the gross national product of some 15 per cent. by 1970, which is the best which appears to be in prospect at the moment.

The increase in money terms would be about £5,000 million, of which the increase in public expenditure, assuming a 4½ per cent. annual increase, which is what the National Plan predicted, would take up some £2,700 million. If from the figure of £2,300 million remaining one deducts £500 million for the improvement required in the trade balance—also in the National Plan—and a further £600 million for investment in the private and nationalised industries, which is merely the same proportion of the gross national product as actually occurred in 1964, then the amount available for increased personal consumption will be £1,200 million, which represents an increase of about 1 per cent., compared with 3 per cent. over the previous decade. Therefore, leaving aside all questions of additional taxation which may be required, this minute increase is not one which this or any other Government would find politically tolerable. The case for a reduction in Government expenditure will therefore become overwhelming, even if it is not seen to be so now.

I wish now to turn to some proposals which have already been mentioned and which have been made by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) and which quite clearly represent the difference in attitude of hon. Members opposite and my hon. Friends.

Mr. Mackintosh

This is a private Members' debate, not a debate on a Government Motion.

Mr. Hordern

If the hon. Gentleman wishes to interrupt, would he rise to his feet and do so?

Mr. Mackintosh

I did not wish to take up time, but I should like to point out that we are discussing a private Member's Motion. This is one of the rare occasions on which private Members have a chance to put their point of view. We have had a half-hour Government speech and a 20-minute official Opposition speech. I do not think that this is doing a service to private Members' time.

Mr. Hordern

The House will note what the hon. Gentleman has said. Personally, I do not propose to take much notice of it.

I was outlining, because the Financial Secretary did so very eloquently, the reasons for Government expenditure. It is right that the Opposition view should be put. Therefore, I will give as briefly as I can the reasons for the cuts which we have suggested. If we were to adopt the system of levies on agriculture, we would save £30 million and there would be an additional saving of £25 million from the present system of agricultural support payments. As hon. Members opposite know, we have in mind making charges for school meals which would bring in about £15 million and reintroducing prescription charges, with appropriate reliefs, which would make a saving of £25 million.

Those are categories which can be clearly defined and quantified, but there are other savings which can be made which are not so readily quantifiable but which can arise because of the essential difference in outlook between the two sides of the House. Among these I count the Land Commission, the I.R.C. and the nationalised steel industry. Here savings are not in costs alone. The fact that they exist at all casts a blight on the proper functioning of a free economy. We talk, therefore, not only in terms of savings available for a reduction of taxation, but of removing restrictions from the proper functioning of the economy.

I come to a third influence on which far too little attention is focused, and that is what I call productivity in Government. This means not more civil servants, more policy and more expenditure, but defining the task and then considering the best means of attaining it by any and every means available to us. As the House knows, my right hon. Friend the Member for Wallasey (Mr. Marples) has produced a booklet entitled "No Choice for Change" in which he described the total audited savings made by the Defence Department in the United States by a means called value engineering techniques. He said that in 1963 these savings amounted to £500 million, in 1964 to £1,000 million and in 1965 to £1,650 million. The proportionate reduction in this country would be of the order of £400 million.

These reductions are largely associated with the development of the computer.

Let me emphasise that it is not the installation of the computer itself which produces efficiency, but the disciplines and tests which can be applied to existing policies. Not only does the computer replace or render redundant so much of the tedious and repetitive work which has to be done in the Civil Service, but it can supply at once the information required on which to formulate rational policies.

During the last 18 months, I have visited the United States, France, Germany, Holland and Italy primarily to study how they run their economies. I could not fail but be impressed by the way in which they use the latest techniques in computer technology. Hon. Members on both sides of the House have had the opportunity of seeing some of these techniques, and I do not wish to elaborate on them now.

Mr. MacDermot

May I issue an invitation to the hon. Gentleman to visit some of ours?

Mr. Hordern

That is very kind of the hon. and learned Gentleman. In view of that, I must give an example of what I found in those countries. I recall very clearly visiting the building in which the records of the Italian Navy are kept. The Italian Navy is not one of the largest in the world and I do not wish to comment on its efficiency. It has 30,000 men. Its records are looked after by five men. All of the records are comprised in four reels of tape. I should like to know—no doubt the Financial Secretary can give me an answer—how many men are required to look after the records of the British Navy. I am certain that there are more than five. This is a typical example. Another example of which the hon. and learned Gentleman must be well aware is that in the United States it takes only three weeks to produce the production index. If proper techniques are used, why do we take seven weeks in this country? This is a point to which the Government must devote more attention.

It is not simply a question of using last year's Bradshaw, as Mr. Macmillan once said, but of relegating the technological advances and techniques to the boffin's canteen. That is why we are not getting enough productivity in Gov- ernment. In the United States the Report of the National Commission on Technology and Automation estimated that the typical time between a technical discovery and the recognition of its commercial potential had fallen from about 30 years before the First World War to 16 years between the wars and nine years after the last war. It is still falling rapidly.

No Government can afford not to make the best use of modern technological advances, and it is my charge that the Government are not making sufficient use of these advances. There are more computers in the Government service in the United States than there are in the whole of this country. When I was in Washington a short time ago, a member of the Congressional Economic Committee complained to me that there were only two computers to check the Government's own calculations. We have not many computers here. That is not necessarily a sign of efficiency, but it is an indication of the way in which things go.

Anyone who has had experience of business and industry knows what tremendous advances have been made by the use of modern techniques in recent years. It is my firm impression that the same cannot be said of the Government in their administration. While the Government are quite happy to have business men on all the "Little Neddies" and other outside advisory-bodies, they are not too keen on having them within the fabric of government itself. This is a complete contrast to the experience in the United States where there has been a constant interchange of expertise between universities, business and government. That is not so in this country. The impression that one gets is that the Treasury is living in a world of its own, quite divorced from the business community. There is, in my view, a need for fewer economists and more men of business. We want to go longer on practice and very much shorter on theory. The House knows that we on this side of the House are committed to the Beeching approach to the railways, and we think that that kind of approach could be used much more widely in particular in matters such as the coal industry.

I turn for a moment to the need to reduce the taxation of personal incomes. This subject has been fully debated during the week on the Finance Bill, and I make just one point in refutation of what the Financial Secretary then said. During the debate on Income Tax my right hon. Friend the Member for Enfield, West— as reported in c. 878—said, It seems that the severity of direct personal taxation in this country is greater than in any other remotely comparable country, except perhaps Sweden."—[OFFICIAL REPORT, 6th June, 1967; Vol. 747, c. 878.] Even in Sweden where both husband and wife have earned incomes these are treated separately for tax purposes. It was a little disingenuous of the Financial Secretary to stop short at 1965 when quoting the level of the gross national product taken by taxation.

Mr. MacDermot

I did not stop short. Those were the latest figures available.

Mr. Hordern

The figures which my right hon. Friend quoted were 34.6 per cent. in 1965, 37.6 per cent. in 1966, and 391 per cent. as an estimate for 1967–68. I do not think that we can make a proper comparison on the basis of the share of taxation of the gross national product under a Conservative Government when we are now confronted with a Labour Government.

I will not detain the House longer because we have had many debates on the level of taxation and the House is clear about our views and the way in which we plan to reduce the level as soon as we get back to power. But, in conclusion, I thank the hon. Member for Pembroke for having raised the subject. None of these questions of the reduction of taxation or, indeed, the power and scope of government can be of any great significance unless as a country we manage to increase productivity. We think that the best way of doing that is to reduce taxation and to get greater efficiency in the techniques of Government. We thank the hon. Member for Pembroke for having initiated the debate.

3.35 p.m.

Mr. Donald Dewar (Aberdeen, South)

In the interests of two hon. Members who have sat patiently listening throughout to this debate, I will occupy only one-third of the meagre amount of time that remains for this discussion. I have enjoyed listening to the debate, particularly to the contribution of my hon. Friend the Member for West Stirlingshire (Mr. W. Baxter), who always brings his own particular brand of Poujadism to the House. I also enjoyed the weighty and interesting contribution of my right hon. Friend the Member for Sowerby (Mr. Houghton).

My hon. Friend the Member for Pembroke (Mr. Donnelly) will know that this debate and Motion will probably enjoy less enduring fame than that of its stylistic predecessor in the eighteenth century. And if one goes back to the eighteenth century, one would probably find that people were just as interested in taxation matters, since they believed that they, too, were being overtaxed. Trying to disabuse people of this idea with the aid of statistics, however reliable and well-prepared, is one of the most difficult political propaganda tasks imaginable. It is rather like trying to convince the housewife that the index of retail prices shows that the prices in the shops are not spiralling as fast as they used to. Both tasks are quite impossible.

The much quoted articles in The Times by Peter Jay, and his calculations made in them, have done something to undermine some of the more blatant prejudices which have been paraded and displayed today. One fact brought out in those articles which surprised me more than the total amount of taxation compared with other countries was that only Germany has a lower rate of rise of taxation and that this has been the case for the past 10 years or so. I agree with my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) that it is difficult to envisage or predict a time when there will be a fall in the total proportion of the gross national product that will have to be taken in taxation, at least in the foreseeable future.

There is, of course, a case for a certain amount of redistribution. However, I do not want to associate myself too closely with some of the remarks made on the benches opposite; for example, those made by the hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths) about the youth of this country. I am always a little suspicious of such remarks because I consider it somewhat arrogant to suggest that there is a definable band called "youth" who can be put on one side and are not fully integrated into society. If such a group can be defined, then I suppose that I am a year or two nearer to it than he is.

Certainly, the "youths" I know are not interested only in financial returns. The hon. Member for Bury St. Edmunds gave me the impression that, in his view, these people thought that the strongest should achieve the most, while the weakest could go to the wall. The hon. Gentleman said that the youth of Britain did not want to have to "constantly be bailing people out". It is a sad commentary on the present state of affairs and on our outlook if we accept what the hon. Gentleman said, for the result would be that the brain drain could not be stopped and we could not retain our labour resources until comparable salaries to those paid in, for example, North America, were offered to them.

Mr. Eldon Griffiths rose

Mr. Dewar

I will not give way. Very little time remains.

Mr. Eldon Griffiths

The hon. Gentleman referred to me.

Mr. Dewar

If what the hon. Gentleman said is true, then we shall never get a stable emigration situation.

We must try to broaden the tax base and find a better way of spreading the burden fairly over the population. This is one reason why I have supported the Selective Employment Tax and the regional employment premium concept. I have regarded them as one way by which the Government are attempting to achieve these aims.

Having said that, however, I should point out that I have been sad to see how these policies have been received in my part of Scotland—how typical has been the reaction to this type of Government initiative. Many people in Scotland are convinced that they have been victimised by these new taxes. Indeed, the political correspondent of the Glasgow Herald stated in a front page article on 2nd June that S.E.T., because it penalises the service industries, … which employ about 60 per cent. of Scotland's workers, is a burden to Scotland. Exactly the same point was made from the Conservative Front Bench on Monday when we debated the regional employment premium. People who make this type of comment are being either mali- cious or unaware of the true position, as one can see by looking at any of the available statistics; and they are not hard to find.

The National Institute of Economic and Social Research points out in its May review that the proportion of the Scottish working population in the service industries, 46.6 per cent.—actually below the British average—and that the proportion of the work force in the premium range of categories 3 to 16 of the Standard Industrial Classification is almost exactly the same as in the British work force. We are, therefore, not victimised, and if we add the £40 million that we might get from the regional premium, the situation is dramatically changed.

It is so often the case that one finds people not prepared to look at the facts. So many of them think that in some way they have a particular burden to bear, have been particularly picked out for unfair treatment, and are being victimised by the Government's tax machinery. It all goes to show that those who preach reform most enthusiastically, who suggest that the problem is even more staggering than it is—and I admit that there are very real difficulties in finding an equitable distribution of the tax burden—are those who are slowest to come forward with practical measures that might be expected to alleviate the problem.

They are those who, when others bring forward imaginative and flexible suggestions, say that these are not generally acceptable and that they will fight them to the last ditch. It is an old story, and one which, during the last few months, has been constantly paraded in the Scottish Press and on Scottish platforms. What we have heard from some hon. Members today only underlines it once more.

3.41 p.m.

Mr. John P. Mackintosh (Berwick and East Lothian)

I much enjoyed the speech of my hon. Friend the Member for Aberdeen, South (Mr. Dewar). I mean no discourtesy to the hon. Member for Horsham (Mr. Hordern) or to my hon. and learned Friend the Financial Secretary when I say that. I feel strongly that the little time private Members have to debate far-ranging Motions not strictly on party lines should be allowed to private Members. I appreciate that answers are wanted to questions, but official party statements from the two Front Benches restrict the already small period of debate available to private Members.

I want to speak on the other half of the Motion—not on the taxation side, which has been so ably dealt with and discussed, but in the simplification of government. I believe that what has caused a great deal of difficulty is not our capacity for technology and research and for thought and progress—I think that is as high as ever—but a weakness in our capacity to devise administrative techniques to back up these other qualities.

Let me give one or two quick illustrations. It took 20 months to build the original Ml motorway, a most creditable achievement, but the paper planning and other work took eight years. It took five years to build the Forth Road Bridge—a fantastic engineering achievement—but it took 20 years to organise it, plan it, negotiate, and get it all fixed up.

I have a chart on the wall of my study at home which shows the amount of time taken by my county council to decide on and then build primary and secondary schools. It shows a series of columns for the various forms that are necessary—S.B.1, which has to be sent in the first place to get permission to build; S.B.2, sent in connection with planning; S.B.3, which shows the amount of air and space for each child—and so it goes on up to S.B.9, after which the authority can start building the school. I have a very competent local authority, but the average time it takes to build a secondary or primary school from first application is five years. Schools started in 1958, 1959 and 1960 were being finished in 1964, 1965 and 1966.

I could give very many other illustrations of this kind. The rebuilding of the Edinburgh Royal Infirmary—the university hospital—was being discussed when I was a student, and when I joined the staff in 1954 they were contemplating the action which produced the plan that was then turned down by the local authority, no doubt for very good reasons. The result is that those responsible are still talking about the matter. I recently met the man responsible for planning and carrying out the project, and asked him, "How are you getting on?" He replied, "I hope that we will get it done before I retire"—and he is a man of my own age. This is the kind of administrative problem we are facing.

I take the Financial Secretary's point entirely that this is not due to lack of ability in our Civil Service, in which we have some brilliant men. It is due to procedures we have laid down for public accountability and for fair treatment of private rights, particularly those stemming from the Crichel Down episode and the Franks Committee. Tremendous expertise is put into building motorways, into medical research and literary work, but we have not applied similar thought in running the machinery to getting the same protection in a shorter period. We should try to lay down as a principle that it should not take longer to do the paper work of planning for a Government building or a school or a road than it takes physically to construct them.

I am shocked when I look 100 years back and see that our individualistic forefathers built up this country during the period of the Industrial Revolution. They covered it with a network of railways in 10 years. Yet it has taken us 20 years to build a few miles of motorway. They built a fine railway from Glasgow to Edinburgh in six months and we took eight years to plan part of a motorway. We have actually built five miles so far of this motorway which so far as I can see will not be completed in my lifetime.

In the way in which we handle special problems of administration we should look at the local authority system, which is out-of-date. If it is incapable of handling the job we should look to central Government. On this point a peculiar fetish grips us that central Government can do all sorts of things, but can not actually carry them out. It can plan schools, but cannot build them, and it can plan roads, but it cannot construct them. It is a mystery why Her Majesty's Government always act through another agent, and use regional boards and commissions as ad hoc agencies.

In a difficult area such as the Highlands, every time we grapple with a problem we produce another ad hoc body. On the problem of depopulation of the Highlands, there are the seven county councils which have extensive planning powers and very complete powers in many fields. There are the agricultural executive committees, the White Fish Authority, the Herring Industry Board, the Forestry Commission, the Red Deer Commission, the North of Scotland Hydro-Electricity Board, the Highland Transport Board and the Crofters Commission. On top, there is the Highland Development Board, not superseding any of these but laid on top. They are all bodies with an amour propre which have to be consulted. It is a miracle that we achieve anything in those circumstances.

Take another problem such as tourism and the countryside. We have planning powers in local authorities, but they are too small and diffuse to handle these things. The Scottish Office has been planning these matters and thought it appropriate that we should float yet another intermediary ad hoc body, a Countryside Commission. It would have been far simpler to have done this by direct Government action. We are in a weak position at the moment administratively in that our administration is not dishonest or incompetent, but that it is exceptionally hard worked, and its procedures have not been thought out. We have no remodelled local government, we have not a regional government and we are frightened to give things to the central Government. We should adopt a suggestion which, I believe, was made by my hon. Friend the Member for Pembroke (Mr. Donnelly), of having three tiers, a local council system of a quite reasonable size to undertake the most local functions and a regionally-elected council which, in Scotland, would be a Parliament for Scotland, and one for Wales. I would divide England into the nine standard Treasury regions for this purpose and focus functions on that level. Finally, what could not go there would go to the central Government.

Each level of functions would, therefore, be controlled by an elected representative body. It should be the aim of Government between these to sweep aside all ad hoc bodies, all the various boards and commissions, and concentrate the power in bodies where it can be properly debated and controlled in a democratic fashion.

In conclusion, we should look at our planning procedures, our whole procedure for the authorisation of public works, and see if we can reduce the period of authorisation without endangering either accountability, which we could improve, or the principle of protection of the rights of the private citizen. I do not think that it is an easy task, although many people do. I am not one of those crude anti-administration people. The administrators do a splendid job running the machine, but others—additional people—are needed to examine methods of improving it.

If we had the administrative backing for our technology and research, and if we showed the same ability in that field, it would do a tremendous amount to increase the efficiency of government, its speed, its accountability and, therefore, the happiness and prosperity of the community.

3.51 p.m.

Mr. Brian Walden (Birmingham, All Saints)

Neither the time available nor the scope of the debate enables me to be as comprehensive as I should like to be. Therefore, I shall not try to be. With respect to all those who have spoken, especially my hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh), with the whole of whose excellent speech I agreed, I shall put to the Government what I think is the most important single fact to come out of the debate and that which calls for the most important and difficult decision.

It relates to the question, mentioned by my right hon. Friends the Members for Sowerby (Mr. Houghton) and Llanelly (Mr. James Griffiths) and other hon. Members, of the relationship between Government expenditure as a percentage of the gross national product, personal consumption as a percentage of the gross national product, the growth rate that we expect to get over the next four or five years, and the amount of money that the Government have pledged themselves to spend on improvements in the social services and on education and on spreading the welfare net wider so that some people who do not at the moment fall within it will, quite rightly, be brought within it.

The overwhelming question for the Government, as it is the overwhelming question for our creditors, as it will be the overwhelming question at any election which we fight, is: how is it to be done? Is it to be done through raising the money by additional direct taxation? Even my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) did not suggest this as a solution. He rightly said that we are not the highest taxed people in the world; we are the third highest taxed, with the highest degree of personal consumption. It is those two figures together which create the problem. Even my hon. Friend did not suggest that it should be done on direct taxation. He said that it should be done on indirect taxation. He then, as a consequence, rightly went on to say that, if we do that, production costs will be hit. My right hon. Friend the Member for Sower-by said that he was sorry, as I know that he is, because I know of the wonderful work that he has done, that the income guarantee could not go through. It could not go through because it would have hit production costs. That is why we never got it, because the employer's contribution would have had to rise, and we all know what that would have meant.

The sour apple must be bitten into. We have a very high level of personal consumption as a percentage of G.N.P. Previously in the House I have condemned the years in which that was allowed to become habitual, the years in which people were allowed to dream that they really were earning in a national sense what they were spending. At least I am prepared to face reality. It has happened. We shall not reverse the process now. Nor am I so politically naive as to suppose that any party would attempt to do so while in office. A party which did so would have no chance of winning the next election. This is as true of the Tory Party as it is of the Labour Party.

My right hon. Friend the Chancellor of the Exchequer knows it. He has already said that a gentle rise in personal consumption is to be permitted. Where do we get the money from for financing a better educational system, better social services and wider provision of them? There can be only one answer. Some of the money now spent on personal consumption must continue to be spent on it, but on personal consumption of a different kind. My right hon. Friend the Member for Sowerby put it perfectly when he said something to the effect that it was a matter of horses and beer or health.

It has already been said that to bring our Health Service up to the standard of priority granted by the American structure we should need to spend £500 million per annum. Nobody in his right senses imagines that the Treasury will make that money available. There is not a hope, so health will get a low priority in this country. Why? Because the State cannot spend enough money on it, and it does not allow the individual to spend his money on it to anything like the same extent that he would if he were given a choice. My right hon. Friend rightly said that this is not to speak of dismantling the National Health Service.

This party has become theological about these issues, I am afraid. To claim that people ought to pay within the Health Service for better service seems to me to be a better kind of Socialism than we are getting at the moment. What we are now getting is a stalled engine. The State will not make the money available because it cannot do so without sharp increases in taxation which will either hit production costs or incentives, and the individual is not allowed to so do so.

The Government and the Cabinet must face this issue. They must make a decision on which way they want it. There is only one conceivable way that they can have it. Either all the pledges are meaningless and the social services and the educational system will not be improved, and more and more people will not be brought within the ambit of State provision, or the universal principle must go. It is one or the other. We must permit charging within the service. The Financial Secretary—an old friend—said that it was difficult, but my right hon. Friend the Member for Sowerby said that although it is difficult it can be done. One can erect such an administrative structure. I do not want to go into it in detail at this late stage, but it seems to me that the P.A.Y.E. system is one way of doing it, that one can tie it to that system, which has proved so successful in its own sphere.

Those are things to be resolved. What needs to be said first is that the Government have the will, that they are prepared to see charging and some of the burden now being carried by Government expenditure switched to personal consumption, which will remain a very high proportion of the G.N.P. in this country and will go higher. The Government need to say that they are prepared to be selective. It is nonsense that we should talk about family allowances for the third child straight across the board. The principle is so bad that nobody tries to justify it; it is justified by reference to administrative difficulties. Nobody supposes that giving this money to Surtax payers is the right way to spend money on the social services. We are denying people in need because we are too dogmatic or petrified to face up to the fact that assumptions we made in the past are no longer valid. We cannot at the same time maintain the universal principle and expect that we can increase benefits.

It has been said several times that it could be done if we had a high rate of growth. Yes, but some of the sums involved are very large. With a growth rate of 5 or 6 per cent. per annum one could conceivably pay for it out of growth, but we shall not get a growth rate of anything like that. The Treasury's estimate is 3 per cent., and I have some doubt about that.

Therefore, we are in a box from which we can escape only by violating assurances we have given or raising taxation sharply. I agree with my hon. Friend the Member for Stoke on Trent, Central that it will rise anyway, but the effect of having to spend this large sum and raise it through the taxation system will push it up further. Either we do all that or we violate our pledges.

It being Four o'clock, the debate stood adjourned.

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