PUBLIC EXPENDITURE AND RECEIPTS BILL

HC Deb 20 February 1968 vol 759 cc245-365

Order for Second Reading read.

3.55 p.m.

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

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

The main purpose of the Bill is to enable savings in public expenditure to be made. It achieves this partly by reducing certain items of expenditure and partly by increasing certain receipts; but the policy changes involved are substantial and need careful consideration.

I would refer to the statement on public expenditure which my right hon. Friend the Prime Minister made on 16th January. He, laid the greatest stress on the need to achieve a progressive and massive shift of resources from home consumption, public and private, to the requirements of export, import replacement and productive investment. The shift from private consumption will, I imagine, be fully discussed in a month's time in the course of the Budget debates. The Measures necessary to achieve a shift from public consumption can, in the main, be implemented without legislation. The Bill before us deals with those Measures for which legislative authority is required.

Following up my right hon. Friend's statement on 16th January, the House discussed the issues involved in a debate lasting for two days. In a month's time we shall again be discussing during the course of a debate lasting several days all the relevant aspects of our economic situation. I do not imagine, therefore, that the House would wish me to spend time today in commenting on the economic situation, other than to say that nothing has happened during the course of the last month to alter our view that the Measures described by my right hon. Friend the Prime Minister must be carried out as soon as possible and as fully as possible so as to get the maximum benefits from devaluation.

Mr. J. J. Mendelson (Penistone)

Surely my right hon. Friend is not going to address the House on the important provisions in this Bill without trying to prove that they are economically relevant to increasing our exports and releasing resources for manufacture for exports?

Mr. Diamond

These proposals have been placed in their context. They were placed in their context very fully by the Prime Minister, and there was a very full debate in which all hon. Members had an opportunity to share. I have referred to the matter briefly, and I shall return to this point later. I hope my hon. Friend will have an opportunity of explaining more fully the point about the economic background which he has in mind.

I was saying that it is necessary for us to have regard to the economic background and to what my right hon. Friend the Prime Minister said a month ago and to what has happened since, and to proceed on the basis of obtaining the fullest benefit from devaluation. That is why we are introducing this Bill at this early opportunity.

Before coming to the major proposals of the Bill, I think it would perhaps be convenient for me to deal with certain minor provisions which, though closely related to the general theme of my right hon. Friend's statement, were not in fact specifically mentioned by him. These are to be found in Clauses 5 and 6.

Clause 5 deals with the difficulty we are in with regard to a number of fees and charges for Government services which, because they are fixed by Statute, have tended to become out of date and out of line with the cost of the services rendered. We propose to take powers to vary such fees and charges by order. As the Clause makes clear, these powers will be exercised either to increase the charges up to—but not beyond—the point where we broadly cover the cost involved, or, possibly, to abolish the charges altogether where the yield is likely to be such that it is not worth while collecting them.

Schedule 3 lists the various enactments involved and includes two sets of charges to which I should perhaps refer briefly as they are of considerable public interest. First, there are the registration fees payable in respect of certificates for birth, marriage and death. When this Bill becomes law it is intended that these fees shall be raised, and discussions are already in train with the local authority associations. Secondly, there are the charges payable under the Road Traffic Act in respect of hospital treatment given to victims of road accidents. At present hospitals, whether within the National Health Service or outside it, can claim from a motorist admitting liability or from his insurance company the cost of treating the victim of an accident, but this cost is subject to a limit of £50 for in-patient treatment and £5 for outpatient treatment. These limits, which were fixed in 1934, are clearly ripe for reconsideration.

Continuing the process of disposing of the "small change" according to the right hon. Member for Enfield, West (Mr. Iain Macleod), I should like to refer to the provisions of Clause 6. As the House will be aware, when the Board of Trade, after a careful investigation, decides to make a building grant in a development area, they are required first to consult the Board of Trade Advisory Committee, which we all know as B.O.T.A.C. Because the number of building grant applications has risen substantially in recent years, this requirement to consult B.O.T.A.C. leads to disproportionate expenditure of time and administrative resources. Many of the applications are for quite small projects costing £10,000 or less, and it is accordingly proposed that in the smaller cases the Board of Trade should have the discretion not to consult—that is, to act without consulting B.O.T.A.C.—thereby saving time and money and speeding up the development area projects.

Lord Balniel (Hertford)

Am I right in understanding that this removes the right of appeal when a grant is refused?

Mr. Diamond

I will note that. I hope that by the time my right hon. Friend the First Secretary replies to the debate he will have discovered the answer. I could not give it offhand, I regret to say.

I turn to the major provisions of the Bill. It will be seen from the Summary of Financial Effects to be found at the end of the Explanatory and Financial Memorandum that the immediate effect of Clauses 1 and 4 is to increase expenditure. Perhaps I should explain, therefore, how it comes about that Clauses increasing expenditure are to be found in this Bill.

Clause 1 provides for increased contributions to the National Insurance Fund. It is expected that the current year's operations of the fund will show a deficit of some £75 million, and if there were no increasing contribution further deficits would follow in 1968–69 and in 1969–70, by which time the balance remaining in the fund might be insufficient to finance the demands made upon it. Accordingly. increased contributions are required from all concerned—that is, from employed persons, employers, self-employed persons and non-employed persons—according to the details which will be found set out in the First Schedule. These in turn will lead to an increase in the Exchequer contribution of £13 million in a full year.

I should like to refer to the Report of the Government Actuary which accompanies the Bill, Cmnd. 3532, and which sets out the reasons for the worsening of the situation to which I have just referred. Summarising them shortly, they are, first, the continuing number of sicknes claims; secondly, the continuing increase in the proportion of men retiring as soon as they reach the age of 65 or, if they continue working. retiring as soon as may be after that; thirdly, pensioners are living longer, or, as one Lobby correspondent put it to me in a much more dramatic phrase, they are dying less often; fourthly, we are experiencing a fall in the total working population, and this has led to a shortfall in contribution income.

It is, of course, a cardinal principle of our insurance system that income and outgoings should be kept reasonably in balance and it follows, therefore, that we must take this opportunity to increase the scale of contributions.

Dr. David Owen (Plymouth, Sutton)

Could my right hon. Friend say whether the estimation of the fund going into deficit is based on the fact that earnings will remain constant from 1967 to 2005, which was the basis of the previous actuarial estimation last year?

Mr. Diamond

If my hon. Friend has considered the Government's Actuary's Report, which I hope he has, he will have seen that all relevant considerations have been taken fully into account.

Mr. Eric S. Heffer (Liverpool, Walton)

Could my right hon. Friend indicate in which of the payments to which he has referred the greatest amount has been paid? Has it been in sickness payments, unemployment benefit, increased pensions, or where?

Mr. Diamond

My hon. Friend did not allow me completely to answer the intervention of my hon. Friend the Member for Plymouth, Sutton (Dr. David Owen). I take it that my hon. Friend is referring to the four reasons which I gave—

Mr. Heffer

Yes.

Mr. Diamond

—and is asking for their contributions to the total effect. I do not have a sufficient breakdown of the figures, but again I will endeavour to ensure that by the time my right hon. Friend the First Secretary replies he will give my hon. Friend such information as is possible.

I say to my hon. Friend the Member for Plymouth, Sutton that I do not think that it is necessary to consider the level of remuneration in 2005 to ascertain a reasonable indication of the likelihood of the deficit this year, the following year or the year after. If he looks at these three years, he will see that the deficit in each case has been carefully computed and that the net effect of continuing with the present rates will leave an insufficient balance in the fund to cope with the cash demands which may be made upon it. He and I would not like a situation like that to arise. That is why we must have regard to the Actuary's advice and increase the contributions. But it is clear from what I have said about increasing the contributions that this is a matter which would have arisen irrespective of the recent review of public expenditure.

The new rates are set out in the respective parts of the First Schedule and call for explanation, I think, in one respect because it is a matter which I would not wish the House to misunderstand, although the amount involved is small. I can best describe it as the situation relating to the disappearing ha'penny.

In his statement on 16th January, my right hon. Friend the Prime Minister referred to an increase of 6d. a week for employees and 6d. a week for employers. But a careful scrutiny of the rates shown in Schedule 1 reveals that a fully em- ployed adult male pays an increase, not of 6d., but 6½d. To make matters worse, the increase for the employer is not 6d. but 5½d. Let me therefore explain straight away that this has been done in order to get rid of the ha'pennies in the final amount, and that justice has been done, because this variation has been the offset.

A similar adjustment has been made in the increase in the National Health Service contribution to which I shall be referring in more detail shortly. There the proposed 6d. increase on the employee has been reduced to 5½d. and a corresponding ha'penny has been added to the employer. The increases proposed are therefore in total precisely as forecast by my right hon. Friend and in each and every case the ha'penny in the final charge has conveniently disappeared.

The Government Actuary's Report sets out the full effect of these proposals and I do not imagine that the House will wish to spend further time on the other provisions of Clause 1 which can perhaps more conveniently be discussed at the Committee stage.

Mr. Joel Barnett (Heywood and Royton)

Why should we have to accept increasing regressive taxation to increase the National Insurance stamp at this level and to make a charge for prescriptions rather than increase the National Insurance stamp slightly more and not reintroduce prescription charges? Could my right hon. Friend explain the logic of the case?

Mr. Diamond

Very simply. My hon. Friend is mixing up two quite different things. The National Insurance Fund must stand on its own feet. Prescription charges are a separate matter.

Lord Balniel

The stamp for the National Health Service does not go into the National Insurance Fund. It has been quite separate since 1957.

Mr. Diamond

I am grateful to the hon. Gentleman. That is exactly what I was saying to my hon. Friend, and it is the kind of interruption that I get only too rarely.

I was about to refer to Clause 4, which arises from the Government's decision to reduce civil defence preparations to a care and maintenance basis and to disband the Civil Defence Corps and the Auxiliary Fire Service. It is intended that the run-down of civil defence should be completed by the end of March 1969, and the Clause makes provision for the payment of compensation to those who lose their employment or otherwise suffer loss or diminution of emoluments.

The terms on which compensation will be paid will be set out in regulations, and it is intended to follow the general pattern adopted in other cases of statutory compensation, for example, on the reorganisation of local government. Altogether, between 2,000 and 2,500 persons may be affected. We believe that the great majority will find other jobs within local authorities or elsewhere, and my right non. Friend the Minister of Labour will give every possible assistance to that end. But to the extent that they suffer loss, the regulations will provide effective help. The payments are unlikely to exceed £250,000 in a full year, and I expect that in the event the total will turn out to be well within that figure.

I now turn to the important proposals in the remaining two Clauses, Clauses 2 and 3. Clause 2 provides for the 6d. increase in the National Health Service weekly contribution, which will total £25 million in a full year. The relevant considerations were explained very fully by my right hon. Friend the Prime Minister, and there is little I can add to his statement at present. As he indicated, the intention is to reintroduce prescription charges in the spring, along with arrangements for refunding them to those in financial aid and to war pensioners—

Mr. Mendelson

Refunding.

Mr. Diamond

I repeat—along with arrangements for refunding them to those in financial need and to war pensioners. Arrangements will also be made to exempt from the charges the elderly, children, the chronic sick and expectant and nursing mothers. The present position is that my right hon. Friend the Minister of Health is having discussions with the medical profession about the best methods of organising an exemption scheme, and is about to consult other interests concerned. He will be making a statement as soon as he can, and is well aware of the widespread interest in the subject—

Mr. Mendelson

Opposition.

Mr. Diamond

Bearing in mind the difficulties to be overcome, it is inevitable that it should take a little time to work out fully satisfactory exemption arrangements. These matters, however, are not the subject of the Bill or the Clause. The Clause deals with the separate matter of the National Health Service stamp, a matter which for practical purposes is closely tied to Clause 1 and the National Insurance Fund. Having regard to the administrative problems and expense involved, both to employers and Government Departments, it would clearly not be possible to contemplate introducing the higher National Insurance and National Health Service contributions at different dates. In view of the facts brought to light by the Government Actuary's Report, it is most important that the National Insurance Fund should secure the increased income from the higher contributions as soon as possible.

Clause 3 provides for the ending of free milk for secondary schools, a decision which I know is regarded with considerable anxiety. [HON. MEMBERS: "Hear, hear."] Let me, therefore, first relate some of the considerations involved. The facts are that about 93 per cent. of primary schoolchildren have, and will continue to have, free milk. However, with secondary schoolchildren the popularity of milk has been falling steadily for some time. By last year the number of secondary schoolchildren at maintained schools taking milk had dropped to 60 per cent. This year the figure has dropped further to 58 per cent. Although it would perhaps be going too far to say that the evidence on nutritional grounds is at present conclusive against the need for continuing the present policy, it certainly points that way, and we are advised that one could not base a case for retention on the nutritional evidence.

We very carefully considered the possibility of providing free milk for some secondary schoolchildren on grounds of special need, and we decided to continue free milk for children at special schools. But we have reluctantly concluded that it would not be possible to select from secondary schoolchildren in ordinary maintained schools those who should receive free milk while their fellows were not receiving milk in school at all. Great difficulties are obviously inherent in selecting individual children on nutritional grounds, or grounds of family financies. In particular, there is the overriding human difficulty that any such provision would inevitably single out children and lead to considerable embarrassment.

Mr. Frank Allaun (Salford, East)

Will my right hon. Friend accept that there are thousands of secondary schoolchildren from poor homes, mainly with disabled fathers, broken homes or widowed mothers, who are going to school each day with no breakfast and who have had nothing to eat since 5 o'clock the previous evening? Does not he think that this mean, miserable cut of £5 million a year is far outweighed by the damage to the health of these children that milk would have prevented? Even if some children do not need it, thousands do, and both free milk and milk that is paid for will be lost under the cut. I plead with him to reconsider it, even at this late stage.

Mr. Diamond

I have taken my hon. Friend's point. I am most anxious that he should not lose his right to be called in the debate, though it is not for me to say, by intervening at too great a length. He asked if I was aware that too many children are attending school on an empty belly, and what I am doing about it. Had he allowed me to carry on to the next sentence, I would have told him. What I am doing is to deal with the problem of free school meals. Considerable efforts are now being made in co-operation with the local authorities to improve the take-up of free school meals, and that is the answer to his point. A survey published last summer disclosed that only about 50 per cent. of the children eligible for them were receiving free school meals. Accordingly, a campaign has now been mounted to draw parents' attention to the availability of free school meals where the parental income falls below a certain level. Moreover, as from April this year free meals will become automatically available—

Mr. Emrys Hughes(South Ayrshire)rose—

Mr. Leo Abse(Pontypool)rose—

Mr. Speaker

Order. We have had a fair number of interventions.

Mr. Diamond

The Government are making arrangements as from April—

Mr. Emrys Hughes

On a point of order. I submit that we have not had a fair number of interventions, because there has been no intervention by a Scottish hon. Member and no explanation of how Scotland is affected.

Mr. Diamond

I shall be only too happy to give way to my hon. Friend, as I have to everybody else, without question. But surely he would not ask me to give way to somebody who has not yet risen or to somebody who invites me to do so in the middle of a sentence. He is a patient friend of mine, and I am sure that he will be willing to wait until the end of the sentence, or even the end of the paragraph, and then I shall listen carefully to what he has to say. In the meantime, may I remind him, because this is what he was particularly interested in, that as from April this year free meals will become automatically available to fourth and subsequent children, irrespective of income.

Mr. Emrys Hughes

I am sorry if I asked my question prematurely. The figure of £5 million is for the whole country. Can my right hon. Friend break it down to give the Scottish figure? In view of the rather different conditions in Scotland, will my right hon. Friend get the Secretary of State for Scotland or another Scottish Minister to deal with the Scottish aspects?

Mr. Diamond

I am sure that my hon. Friend will wish to pursue this matter when we come to the Committee stage and break down the details. I will see whether it is possible to give him the information he seeks later today.

Mr. Abse

Will my right hon. Friend explain how it will help the thousands of children living in poverty, who are receiving free school meals and, consequently, have a demonstrable need for school milk, that other children are to receive free school meals?

Mr. Diamond

I know that this is a painful matter for my hon. Friend the Member for Pontypool (Mr. Abse), because he and I have discussed it. We are all human beings and we are all fathers. [HON. MEMBERS:" Not all of us."] Many of us are. Indeed, I was going on to say that we are not only fathers but grandfathers.

My hon. Friend referred to a demonstrable need for milk. But that is not a case he can demonstrate. He cannot demonstrate the need on nutritional grounds at the ages of those attending normal secondary schools. We have been into that position most carefully, and it is because that case cannot be demonstrated and for that alone that we feel able to put forward this proposal, which I know is not very welcome.

But I assure the House that the Government are well aware of their responsibility for the health of the nation's children and are satisfied that we are acting responsibly in recommending the proposals in Clause 3. The decision to end free milk at secondary schools was not taken with any pleasure, however much one can justify it on economic grounds. But the same can be said of many of the decisions announced by my right hon. Friend the Prime Minister a month ago. Many of them were extremely painful to take.

There have, of course, been many other proposals for improving the lot of our people which my colleagues in the Government have pressed upon me but which, on economic grounds, I have been unable to accept. Such proposals have thus never been included in any programme and have never become known to the House. Any one of us can think of methods of improving aspects of our welfare services at a cost of additional public expenditure. But that is not the question.

The question is, having regard to the rate at which the welfare services have improved and to the increasing share of public expenditure which has gone into them, and in a situation where a reducing share is going to defence, how we can, in present circumstances, adjust our proposals so that we give the fullest possible effect to our scale of values and our sense of priorities in public expenditure without at the same time putting an unbearable burden on the economy. I sug gest that we shall best achieve that objective by carrying through the proposals in this Bill.

Mr. Mendelson

My right hon. Friend, in illustrating the general economic background, was surely supposed to try and prove how cutting out school milk would release resources for the export drive. He has not done so.

Mr. Diamond

My hon. Friend must not be irritated.

Mr. Mendelson

I am.

Mr. Diamond

He should not be.

Mr. Mendelson

I am not the only one.

Mr. Diamond

Perhaps he will do me the courtesy to hear what I am saying. I related these matters to their context. We can all propose measures or resist measures for economy. We can all propose measures for improving or economising on the welfare services. But that is not the whole question.

The question is, given that we have to put on our economy a bearable burden, how can we apportion what we are doing in terms of public expenditure to the welfare of all concerned? This rests on a sense of priorities. One cannot judge one item on its own within the total of what we can afford and the economy can bear. These new proposals are the best that the House can follow in this context.

4.25 p.m.

Lord Balniel (Hertford)

The Chief Secretary to the Treasury has made a characteristically courteous and clear speech, but I was surprised by the way in which these Clauses, with their very substantial social implications, were explained so cursorily and superficially. The Bill raises the National Insurance contribution quite substantially—something which used to be described by hon. Member opposite as a regressive poll tax.

Mr. Ian Mikardo (Poplar)

It still is so.

Lord Balniel

Indeed, it still is so described by many hon. Members opposite. The Bill also raises the cost of the National Health Service stamp, something inextricably intertwined with the decision to impose prescription charges.

The Bill also provides for compensation for Civil Defence workers because of the abolition of Civil Defence. This is that part of defence which by no stretch of the imagination can be described as having an offensive potential. It also abolishes free milk in secondary schools. The Government are burying their sacred cows and the only lament is a Treasury brief. I must say that the mutes at this funeral are the Secretary of State for Education and Science, the Minister of Health and the Minister of Social Security. It is surprising that so few of them are present at this debate. Indeed, it would have been reasonable for one of them to have taken part.

Mr. Diamondrose—

Lord Balniel

No. I would rather continue.

HON. MEMBERS

Shame.

Lord Balniel

This Bill is concerned with a hotch potch of odds and ends involving the legislative implementation of the Prime Minister's statement last month. We voted for our Amendment in the debate on that statement, but we did not vote on the main Question, and it is right to state at this stage that it is not our intention to vote against this Bill. Equally, as we are to have no explanation from the Secretary of State for Education and Science, the Minister of Health or the Minister of Social Security, it is right and reasonable to ask the Government to consider taking the Committee stage on the Floor of the House.

I do not intend to refer to that part of the Bill concerned with civil defence, because an Order will have to come before the House and we shall then have an opportunity of debating that decision. I prefer to devote the major part of my remarks to the increase in the National Insurance contribution and the National Health Service stamp. In broad terms, the stamp is to be increased by 1s. a week for an employed man—6½d. to come from him and 5½d. from his employer. The sum of 5½d.. will come from the employed woman and 4½d. from her employer. A similar increase is being made in the contribution to be paid by self-employed persons. The contribution for a self-employed person is to go up by 8d. for a man and 7d. for a woman. This increase in the contribution follows hard on the neels of an increase in contribution only last November. Payment into the National Insurance Fund is on a tripartite system. It is partly paid for by the employer, partly by the employee, and partly by the Exchequer.

So Exchequer contributions also will have to be increased. In his Report the Actuary shows that in 1969–70 the additional contributions which will be brought in by this Bill will amount to £50 million. Consequently the taxpayers' additional contribution will have to amount to £13 million.

Before dealing with the National Insurance Contribution, I want to refer to the increase, as a result of this Bill, in the National Health Service stamp. As I pointed out, helpfully, to the Minister in an interjection, the National Health Service stamp is entirely separate from the National Insurance Fund. Nonetheless, in the eyes of the public these two are absolutely indistinguishable. They are paid for on the stamp. They are both paid for out of the same purse or pocket. It is right, however, to point out that the 1s. increase in the National Insurance contribution has absolutely nothing to do with the devaluation package announced by the Prime Minister in January. The increase in the insurance contribution flows from the National Insurance Act of last year and is necessary in order to stop the Fund going into deficit.

Here, to confirm my interpretation, I want to quote from what the Prime Minister said in his speech of 16th January. He said: I have referred to the National Health Service stamp. The House ought to know that quite apart from the expenditure review, and for quite other reasons, a further 1s. 6d. for employees, 6d. for employers, will be needed to prevent the National Insurance Fund from going into deficit. This will be done at the same time as the 6d. increase in the National Health Service contribution which is calculated on the stamp."—[OFFICIAL REPORT, 16th January, 1968; Vol. 756, c. 1588.] The National Health Service stamp is being increased for a totally different reason. It is being increased by 6d. as part of the package deal announced by the Prime Minister, and it will bring into the Treasury an additional £25 million. The picture for the general public is that there is a 1s. increase in the National Insurance contribution and a 6d. increase in the National Health Service stamp. This follows on two previous increases in contribution which have been made since the present Government came into office. The employed man's contribution went up by 2s. in March, 1965, and by a further 2s. only last November. Under the present Government's administration, the stamp which the employed man, the working man, has had to pay will have gone up from 11 s. 8d. to 16s. 8d. when this Bill becomes law. This is an increase of 5s. or 40 per cent., and it is an increase which is a good deal more than the percentage rise in wages during the same period of time.

The stamp is forming a higher proportion of the wage than it did when the present Government came into office. I find it rather astonishing that such a Measure can be produced by a party which, when they were in Opposition, so regularly and bitterly complained about increases in the contributions on the stamp. We know that the Leader of the House regarded the measures of July, 1966, as being a dash for freedom and that today he regards this package deal as being a great stride towards Socialism. It was the Leader of the House, when in Opposition, who said this about a 1s. increase in the contribution: So heavy is the burden put on the worker now by saying that all workers must pay the same that everyone earning under £15–£16 a week is being mulcted of far more than the share due from him for the rest of the social services. This, of course, is the old evil of the poll tax on the poor. Each time the Government put one shilling on that tax they make the burden more intolerable."—[OFFICAL REPORT, 28th January, 1963; Vol. 670, c. 657.] This Government have not put Is. on that tax—they have put on 5s. They have done it at a time when they have frozen wage levels. It was not only the Leader of the House but the Prime Minister, too, in those far-off, carefree days in Opposition, who was equally forthright in attacking increases on the stamp. It was he who accused the Conservative Government: … in times of crisis, of increasing stamp contributions which bear heavily on those whose needs are greatest and whose incomes are lowest. That was in a speech at Swansea on 25th January, 1964.

All this has changed now. The wicked poll tax has been transformed, in more high falutin' language, into the contributory insurance principle. On Friday when I urged that the very elderly, who had even been forbidden to contribute to the National Insurance Scheme, should be allowed a small pension, made up only of the tax element, not of the Contributory element, we heard the Minister of Social Security defend this principle with a kind of fixed rigidity, as if it was the law of the Medes and Persians.

Mr. Mendelson

I do not expect the hon. Gentleman to make the Government's case, speaking from where he does, but he must put into the record of the House that while his Government used to put up the poll tax and not improve the benefits very much, this Government have put up the poll tax but have very considerably increased benefits. He has not said a word about that yet.

Lord Balniel

Speaking immediately in reply to the hon. Gentleman, and very much off-the-cuff, I want to point out first of all that earnings were going up. Also, if I remember rightly, the pension was put up five times. It was certainly put up more than the rise in the cost of living. In addition, the increase in the contribution, which I certainly accept we made when in office, was made at a time when there was reducing taxation, combined with rising earnings. The great difference now is that the contribution is being put up; the economy is stagnant; more people are unemployed; and taxation is also being increased.

In the existing insurance scheme, certainly I accept the value of the contributory principle. It is not something which it utterly unalterable, but it has considerable value. However, on this occasion, the Government are under-estimating the effect of this sequence of increases in contributions on the lowest-paid worker. The effect on the lower-paid worker will be severe, especially for families living at or below the supplementary benefit level. When one takes into account rising costs following devaluation, rising fuel prices, the increase in the weekly stamp, the reintroduction of prescription charges, and the ending of free school milk, it will not be very long before that 7s. increase in family allowances has been whittled away completely.

Time and time again in these debates, we have pointed out that, for the family really in need, the 7s. increase is totally inadequate. It will leave a quarter of a million children living in families not at but below the supplementary benefit level. The increase in the weekly stamp is now to be added to their burden. If only the Government could concentrate realistically on giving more generous help to the poorer families, taking into account the liability of the weekly stamp, I would be very much happier about the Bill.

So far, I have spoken about the impact on the general standard of life of the increase in the stamp. Now I want to refer specifically to the 6d. increase on the National Health Service stamp. The decision of the Government to raise the National Health Service stamp is part of the package deal which is connected with the reintroduction of prescription charges. When prescription charges were abolished, I queried whether this was the right priority in the Health Service. It does not seem to be a moral issue. It is an issue of the method of financing the Health Service, and the Health Service is desperately under-financed. With limited sums of money, it seemed more important to concentrate our efforts on the building of new hospitals, the upgrading of old wards and the better payment of nurses and doctors. But the fact remains that the Health Service today is seriously under-financed. Roughly, it is financed as to 85 per cent. by taxation, 11 per cent. by contributions, and 4 per cent. by private payments.

I do not disagree with the Government's decision to reintroduce prescription chargesߞ

Mr. Mendelson

The hon. Gentleman voted for it. It is his party's policy.

Lord Balniel

I make no apology for that. I think that there are higher priorities in the Health Service, and I do not disagree with the decision to re introduce prescription charges.

Mr. Eric Ogden (Liverpool, West Derby)

The noble Gentleman said that he did not disagree with the reintroduction of prescription charges. Will he make it clear that his party also agrees with their reintroduction?

Lord Balniel

I am speaking on behalf of the Opposition Front Bench, and, of course, what I say represents the view of my party.

Some method must be found for raising the totality of the finance which backs the National Health Service. The Prime Minister has decided to reintroduce prescription charges at the proposed rate of 2s. 6d. per item. Without any exemption, except for those on supplementary benefit, this would have brought in £50 million a year. However, the Government have decided to extend the former list of exemptions, and this has halved the revenue which will be forthcoming from the charges.

Mr. Mendelson

That is quite incorrect.

Lord Balniel

The hon. Gentleman says that that is incorrect. All that I can say is that that is what the Government themselves have said. Does the hon. Gentleman want me to quote the Prime Minister's words?

Mr. Mendelson

At the most, the saving will be between £8 and £12 million. The hon. Gentleman is wrong, not the Government.

Lord Balniel

Perhaps it is rash of me to do so, but I have taken the Prime Minister's words at face value. He said: The scheme as initially introduced would save about £50 million in a full year. But the further exemptions, which we regard as fair and necessary, would reduce this saving to about £25 million … and we propose to make this good by increasing the National Health Service employees' contribution by 6d. as soon as possible."—[OFFICIAL REPORT, 16th January, 1968; Vol. 756, c. 1588.] The original revenue which would have been brought in by the reintroduction of prescription charges has been halved by the decision to extend the list of exemptions. The House is entitled to an explanation of exactly what progress is being made in securing arrangements for these exempted categories—the elderly over 65, children up to 15, expectant and nursing mothers and, in particular, the chronic sick. This matter is related directly to the increase in the stamp.

I want to ask one question, and I hope that I can have a categorical answer at the end of the debate. Will the refund arrangements and the exemption arrangements come into force simultaneously with the reintroduction of prescription charges? The House is entitled to an answer to that question when deciding whether to agree to this proposed increase in the National Health Service stamp. If the exemptions do not come into force at the same time as the charges, not only will the chronic sick and the elderly pay a prescription charge of 2s. 6d. for every item, but they will also be paying the increased National Health Service stamp which is designed specifically to meet the cost of the exemptions.

Mr. Emrys Hughes

Does the hon. Gentleman include the lower-paid workers with the chronic sick and the others?

Lord Balniel

That is a question which the hon. Gentleman ought to address to the Government, because that would eliminate virtually all of the revenue-raising propensity of the prescription charges—[HON. MEMBERS: "Answer."] My answer is that I have long held the view frequently expressed by hon. Members on these benches that, if prescription charges are to be reintroduced, there should be exemptions for those living on supplementary benefit, those living at supplementary benefit level, expectant and nursing mothers, the elderly and, if they can be defined, those who are chronically sick.

It would be very easy from this side of the House to talk like right hon. and hon. Members opposite did when they were in Opposition. I could say that what the Government are proposing is monstrous and that the whole Bill should be withdrawn. I feel that the Government under-estimate the hardship which they will cause. No one in this House can see how the Prime Minister is implementing his pledge to protect the most vulnerable sections of the community. If I took that line we would still surely be left at the end of the day with the problem of how to pay for the rising cost of pensions. How ironical it is to read their schemes of 1957 called "National Superannuation". How ironical that "Signposts for the Sixties" promised that the introduction of half-pay on retirement would be One of the first jobs of the next Labour Government … How misleading it is to read the 1966 Labour manifesto, which said, Our plans for a far-reaching reconstruction of social security were well-advanced when we took office in 1964". Obviously those plans have collapsed in ruins. Instead, we have what everybody in the House recognises is no more than a facade of a social security review. My guess is that as we come closer to an election some kind of rough and ready earnings-related pensions scheme will be introduced. But what a far cry from those definite promises to introduce the minimum guaranteed incomes scheme, to use the Prime Minister's own words, "without delay".

We should examine carefully the reasons given for the increase in insurance contributions, because they have nothing to do with the package deal. They are of considerable significance to the whole financing of the future of our social services. When the National insurance Act, 1967, was introduced, the Government Actuary last summer considered that the contribution rates due to start last autumn would be sufficient to last until 1970 to finance the present level of benefits. He said that the increased contribution would be … more than is needed to meet the direct cost of the increased benefits. Since he wrote his report a number of new factors have emerged which have completely upset his calculations. The most important of these are the lower mortality rate among pensioners, the trend towards earlier retirement, and a fall in the working population.

The trend towards earlier retirement is very dramatic—if anything can be dramatic in a Government actuary's report. In 1959 about 47 per cent. of men claimed retirement pension on reaching 65. By 1967 this figure had reached 66 per cent. For many people with hobbies and money early retirement and a prolonged expectation of life—perhaps retirement from 60 to the age of 80—is an ideal situation. However, anyone who has worked in geriatrics knows that this ideal is by no means always achieved. Retirement, irrespective of financial background, can create real psychological problems for the man, and also for the wife.

I have no intention of delaying the House much longer. Obviously I would be out of order were I to develop the broad structure of reform I would like to see in our system of pensions. However, I do put forward one consideration specifically tied to the question of the increase in the National Insurance contribution. On social grounds, there are many arguments for saying that a sudden jump from full-time employment one day to complete retirement the next day is often bad for the morale of elderly people. I do not want to push anybody who desires to retire into staying in work a single day longer than he wants. However, I do feel that the Government and industry should perhaps consider together the possibility of removing an obstacle which stands in the way of those who would prefer to retire gradually.

One reason why it is very difficult, from an employer's point of view to maintain an elderly person in part-time employment, is that he has to pay a full contribution on the stamp. Is there not room for some kind of flexibility to be developed? Would it not be possible for a reduced contribution to be paid by employer and employee where the employee is elderly and only wants to undertake part-time work? I think that this suggestion merits serious consideration by the Government.

The Bill is mainly designed to finance not improved social services but the existing social services. It involves taxation in the shape of contributions and taxes to the value of £16 million. It is the third National Insurance contribution increase since the present Government came into office. It goes alongside the fact that since the present Government has been in office taxation has been increased by £1,300 million.

The Prime Minister has said many things. He has implied that it is wrong to increase the National Insurance stamp contributions at times of crisis. He has said that he would protect the most vulnerable sections of the community. He has said that he would not increase taxation. He said that just one day before the public went to vote. I suppose that, so far as the House is concerned, what the. Prime Minister says is utterly irrelevant. But we have a new Chancellor—the white hope of the Labour Party, the Sir Galahad, the liberal, the intellectual, the cultivated Chancellor. I think it is right that we should know what he says. I quote from his book, "The Labour Case. Why should you vote Labour?"

Mr. fain Macleod (Enfield, West)

Why indeed!

Lord Balniel

Why indeed! In his book the Chancellor says: The commitments of the Labour Party's policy—provided they are not all rushed through in the first year, which nobody has ever suggested—can be carried out comfortably without any question of an increase in the tax burden. On the contrary, they should leave room for substantial tax reductions. The social service promises of the Labour Party certainly have not been rushed through in the first year of their Government. Taxation has been increased by £1,300 million. We now wait to see what the present Chancellor's first Budget will be.

4.57 p.m.

Mr. Ian Mikardo (Poplar)

The noble Lord the Member for Hertford (Lord Balniel) has made a powerful criticism of the Bill largely on the ground that some of its provisions are regressive and throw disproportionate burdens on those in the community least able to bear them. On this ground he launched a powerful attack on the Minister introducing the Bill, and, for good measure, on a whole archipelago of other Ministers for not having resigned on account of the Bill.

He told us that his opposition to the Bill was so great and his condemnation of it so total that he would not indicate any disapproval of it by dividing the House. Though I always listen to the noble Lord with great attention and respect, from the moment he uttered that sentence I could not see any significance in anything he said afterwards and I could not believe that any serious-minded hon. or right hon. Member on either side could attach any importance to what he said.

I do not find shadow boxing a very entertaining spectacle. I do not find the issuing of challenges, followed by an ignominious flight from the arena, a very heroic posture, or one, above all, worthy of a noble gentleman. Like the noble Lord, I, too, object to many provisions of the Bill on the grounds that they are regressive, and I will say at once that wild horses will not drag me into a lobby tonight to vote for it. I nail my colours to the mast at once.

Principally, this is because of the regressive nature of some of these measures. Few people understand how, even before these measures, the burden of tax was spread through the community. If one asked an ordinary chap to draw a graph, of which the horizontal axis was annual income, rising from £200 or £300 to goodness knows how many thousands, and the vertical axis was the percentage of total income paid in tax of all forms, and asked him what it would be like, he would say, "It will be an ascending curve, perhaps a parabola, with the percentage of income paid in taxation going up very rapidly as the income goes up." I could do all this much better, Mr. Deputy Speaker, if it were in order for me to have a blackboard.

But that is not what such a graph would show. What it would show is the aspect of a trough. It would begin at a certain point, at the level of the poorest people, showing the percentage of income paid in tax of all sorts, and would gradually fall, as income increased, to a certain point, and then start to rise again. It is only at the level of the very richest man that the percentage paid in tax would be as great as the percentage paid by the poorest man.

This may surprise many people and may seem very mysterious, with all these progressive rates of Income Tax, but the solution of the mystery is very simple. It is the stamp. It is the poll tax which represents so much higher a percentage of the income of the lowest income families than of the highest, and reverses what would normally be the progressive rate of taxation.

The poorest and the richest in the land both pay about two-sevenths of their incomes in taxation of all forms, and those like us, between the poorest and the richest, pay a lower fraction—and that cannot be right. It should be the business of this House, and certainly the business of the party now in Government, to put it right and to ensure that the bearing of burdens is dished out in proportion to the width of the shoulders and that those who are best able to bear should have most to bear.

The measures in this package deal, some of which are enshrined in the Bill and some of which we still have the dubious pleasure of awaiting, not only do not reverse this regressive process but add to it. Only one tax would be more regressive than the stamp and that is a tax on bread. Apart from that, no tax is so regressive. I know that I cannot ask the Chancellor of the Exchequer to anticipate his Budget, but if it includes a tax on bread—which we would all regard as unthinkable—it would not be out of line with the philosophy behind the package deal and the Bill. That is why I am so affronted by this Measure.

We have heard much about the necessity for cutting Government expenditure, and there is a good deal of confusion, on this subject, about what are cuts in public expenditure, what are cuts in private expenditure and whose private expenditure is affected. An ordinary family, with a couple of kids at secondary school, on the implementation of this Measure, must find additional amounts of money—and very considerable amounts, when the prescription charges return. Some people, who are fairly well off or even moderately well off, will find that money without trenching into the normal pattern of their essential expenditure. It will come out of savings or out of smokes or drinks or out of having a more modest holiday or out of providing a little less towards the profits of the football pool promoters, but it will come out of something that will not cut into their normal expenditures.

But there are thousands of families in my constituency for whom these additional burdens can be met in only one way and that is by cutting their expenditure by an equivalent amount of essential expenditure. Therefore, these are not cuts in public but in private expenditure and in the private expenditure of only the poorest people. That is not what I came into this House for. That is not what I joined my party for nearly 40 years ago, and it is not what I have been working for all these forty years—and I am not going to start supporting that sort of thing now.

I was a little shocked by the defence of the Clause relating to school milk by the Chief Secretary. As I understood it, his argument was that two-fifths of the kids do not want the milk so let us take it away from the three-fifths who do. With great respect, this is below the Chief Secretary's normal standards of logical appreciation. It does not seem to fit.

He said that it is hard to justify it on need. The Treasury will treat people as if they were statistics. Not all people are alike or in the same circumstances and, of course, the need is a terribly varying factor in different sectors of the community and different parts of the country. Would my right hon. Friend say that there is no need for this milk in the poorest parts of Poplar or in the Gorbals in Glasgow? He cannot just dismiss the matter in this global way.

We are told in the Explanatory and Financial Memorandum that we shall save about £5 million in a full year on this school milk provision. The figure of £5 million in conjunction with the word "school" plucked a chord in my memory, and I thought hard when I was in my bath this morning until it came to the surface. Five million £s is given as tax relief to the public schools on account of the fiddle by which they are registered as charities. So we chisel £5 million off the parents of children going to State schools and give a precisely equal amount to the parents of children going to public schools. If the Chief Secretary bases his assessment of what is right on need, that seems to me a cockeyed assessment, because, by and large, I should think that the parents of children going to State secondary schools are not quite as well off as the parents of children going to public schools.

I for one will not be a party to this business of taking from the poorer in order to subsidise the richer. I am getting a bit puzzled by the Government's priorities. The £5 million a year for school milk is equivalent to a little more than the subsidies given by the Government to private industry in two days. Every two days throughout the year private industry gets from the Government in subsidies in one form or another as much as will be saved on school milk in a year. Two or three large companies, perhaps even a single large company, will get this much. Although it may be done for worthy purposes in the interests of expansion or of development of the underdeveloped areas, in the end the beneficiary is the private shareholder.

If we are to make people bear burdens like this so that there is plenty of money to give in subsidies to the private sector so that the shareholders benefit—and, looking at the movements on the Stock Exchange, they have not been doing too badly—it seems to me a reversal of what should be going on. Since this is part of a general economic plan, I would say to the Chief Secretary that if he is looking for savings let him look at the very large amount of money being doled out, in some cases with very little scrutiny, and which do not stand up to serious examination.

I remember that my right hon. Friend the Chancellor of the Duchy of Lancaster, when he was a back-bencher, was the first to mention in the House the begging bowl of private industry. It does not have a begging bowl any more. It found that it was too small and got filled up too quickly; it could not hold all the boodle. It has now abandoned the begging bowl and instead has acquired a croupier's rake and is busily shovelling in the shekels from every corner of the taxpayers' table. We are asking people to pay the cost of it. There are all these mergers and amalgamations going on, with the Government feeding in money in the way of interest-free loans for which the taxpayers are paying.

No doubt private industry is strengthening itself, and, incidentally, strengthening the economy—I concede all that—but it can do it whilst leaving the taxpayer to bear the social costs of the operation. If there is a merger or if rationalisation takes place, some people are made redundant. Private industry should worry: the State pays. Some people need retraining. Again, private industry should worry: the State pays. This is the reverse of the way in which the priorities should be worked out. The taxpayer is paying the social cost of restructuring industry. Working men are suffering the consequences and are having to pay more on their stamp and in all sorts of other ways for it.

I should not mind if this operation were effective. It is bad enough to bribe a man if the end result is that he does the thing for which he was bribed, but if we bribe him and he does not do it we have the worst of all worlds. We are bribing entrepreneurs to go into advance factories in the development areas. Sixty-one of them are empty. We say, "Hard luck on the poor miners". The Minister of Power says that it is a running-down industry, there is not much we can do about it, and men will have to come out of the mines and go into other jobs.

The noble Lord the Member for Hertford said something about pre-election exchanges. My hon. Friends will recall that among the pre-election new thinking was the necessity to get some public enterprise into these areas. Where is it?

Sir Cyril Osborne (Louth)

Why support them?

Mr. Mikardo

If the hon. Gentleman had come in earlier, he would know the answer to that question.

Where are these enterprises? The Postmaster-General says that he has to import telephone equipment because he cannot get it from industry in this country. Why does he not arrange to have it made it Durham or in Scotland or in Wales? What is happening instead is that some of the money which we are dragging out of poor people by the Bill is going into a kitty from which rich companies are being subsidised to do the job, and they are not doing it.

Mr. John Pardoe (Cornwall, North)

Is the hon. Gentleman suggesting that we in Cornwall, who cannot get a railway service from a nationalised industry, should make it ourselves?

Mr. Mikardo

I was not talking about a railway service. The hon. Gentleman knows that I was not talking about a railway service. I think that he will concede that his intervention was a bit of a flop.

The priorities in the package deal from which this Measure flows are wrong. An earlier leader of the Labour Party with whom, it is true, I had many disagreements but whose integrity we all respected, whether we agreed with him or not, said, as so many other people in the Labour Party have said, that Socialism is about equality. He did not mean, and nobody who talks in that vein means, a national cake which is chopped into 50 million equal parts which are then dished out. What he meant was that in a civilised society, in a society which likes to think of itself as a moral society, an enormous difference between the best-off and worst-off sections of the community is offensive to every decent man, whatever his party. What he meant was that we should exert ourselves constantly towards narrowing the gap, perhaps by ensuring that as overall things get a bit better those at the bottom of the scale get proportionately more than those at the top of the scale.

I was brought into this movement, to which I have devoted all my adult life, by reading Tawney's essays on Equality. I re-read them last week, and they stand up as well todays as they did nearly half a century ago. I believe that economic and social purpose means bit by bit—and I appreciate it takes time—removing and reducing the offensiveness of this very wide gap. I will support any measure that moves in that direction and I will oppose any measure that moves in the opposite direction. That is why, wherever else the Government may get support for this measure tonight, it will not get it from me.

5.21 p.m.

Mr. Marcus Worsley (Chelsea)

The hon. Member for Poplar (Mr. Mikardo) started his speech by chiding my noble Friend the Member for Hertford (Lord Balniel) for stating that he did not intend to vote against this Bill. The hon. Gentleman went on to say that he did not intend to vote against the Bill either. He indicated that he would not have supported the Government but, since my noble Friend indicated that so far as this side of the House is concerned there was not to be a Division, the hon. Gentleman was not saying anything very grand or brave.

Mr. Mikardo

I know the hon. Gentleman is not the sort of man to take an unfair advantage. He must realise that there is an enormous difference between the refusal of an Opposition to divide the House and the refusal of back-bench Members of the Government party.

Mr. Worsley

The hon. Gentleman chided my noble Friend for lack of courage, but goes on to say that he does not intend to support his own opinion by going to the Lobby himself. There is no great courage in abstaining in a Division which does not take place.

Mr. Pardoe

I would inform the hon. Gentleman that there are three parties is this House and that we have every intention of dividing the House.

Mr. Mikardo

If the Liberal Party had not divided the House, I would certainly have done so.

Mr. Worsley

I am most grateful to the hon. Gentleman, who has clarified the issue. This is not what he said in his speech. He indicated in his speech that he did not want to support the Government. In view of his remarks now, I withdraw what I said. I was intending to go on to say that I listened to his speech with great interest and at first found myself agreeing with him much more than I expected. I would now like to revert to that aspect—the financing and poll tax aspect—of the National Insurance Scheme.

In regard to Clause 4, obviously I do not oppose the compensation in civil defence, but I do bitterly oppose the loss of employment. This Government are proposing to reduce the most urbanised society in the world to a state of unpreparedness in civil defence which no other Western country knows. Although two Ministers on the Front Bench find it impossible to listen to this, this is the most serious single step taken in the years they have been in Government. The right hon. Gentleman the First Secretary comes to the House, passes this off lightly and, when it is raised by an hon. Member opposite does not listen to the debate.

The First Secretary of State (Mr. Michael Stewart)

It is true that I made a comment to my right hon. Friend, but the hon. Gentleman is not entitled to say that I was not listening.

Mr. Worsley

The right hon. Gentleman gave a good impression of not listening. I withdraw my remark if this was a kind of gloss on my remarks. I hope he was saying that he thoroughly regretted the treatment which the Government have given to civil defence. It is the first duty of the Government to provide for the safety of the citizens. There is no duty which should come before that. This Government, as a political sop, are putting civil defence on a care and maintenance basis.

Nevertheless, I understand from the words of my noble Friend and the assent of the Home Office Minister, who was formerly in his place, that there will be a full opportunity to debate this matter, which will be the occasion for a full discussion on civil defence. All I wish to do is to indicate my opposition to the policies that make Clause 4 necessary.

Mr. Emrys Hughes

For many years during the Conservative Administration I was asking for a debate on civil defence from the Conservative Leader of the House, but I could not get it.

Mr. Worsley

I was supporting the hon. Gentleman in that demand. I could not agree more about the neglect in this House—and I do not think this is a party matter—in the past about civil defence. The hon. Gentleman and I hold different views about the matter, but I think it is wrong that neither of us had the chance of arguing this on the Floor of the House. I regret that, without this background of discussion, the Government have taken this disastrous decision.

In regard to the first two Clauses, like my noble Friend, I find it extraordinary that the Government Actuary should have produced two Reports during the last 12 months—one in June last year and one this month—which show such radical differences.

I always have a healthy regard for actuaries. I feel that they had a higher wisdom. They use figures in a way which impresses me enormously, so I cannot think that it is the fault of the Government Actuary. To make statements so radically different at such short intervals must indicate that his calculations have been based on quite insufficient data. It underlines the fact that we are groping in the dark in all these matters of social policy. Our demographic intelligence has failed conspicuously since the war to warn us of the movements of population and of the situation with which we were going to be confronted.

In December of last year, I asked the right hon. Lady the Minister of Social Security how many full-time qualified research workers she had in her Department. She replied that she had three. We are basing both the structure and the finance on an exceedingly elaborate and important social service on guesswork.

Now I believe that this Actuary's Report is likely to be only the tip of an iceberg of financial crisis which is going to attack the National Insurance Fund in the years that lie ahead—a crisis caused by entitlements against the Fund running ahead of contributions to the Fund.

The Actuary's Report mentions two matters on which he now regards himself as having made a mistake last year. He thought then that the lighter mortality rate was a temporary feature. I cannot imagine why he should have thought that. It seems an exceedingly naive point of view. Surely if he had been backed up by a proper intelligence department in the Government he could have avoided that mistake. The Government Actuary also notes in his Report that there has been a fall in the total working population. Surely this is something which could have been foreseen with rather more clarity than has been the case in the past.

I believe that these features are likely to continue. We ought to know something about the period after 1970. This Report of the Government Actuary deals only with the next couple of years. It says nothing about the latter period. The First Secretary owes it to the House to share with the House a little of his thoughts about the future period. It is clear from the increases which have been made that the Government must intend a further rise before decimalisation, because the new stamps are expressed in decimalised units.

It has been said that an increase in the total population of over six million is expected between 1966 and 1980 and that less than one million of that six million will be of working age. In other words, the facts that the Government Actuary has adduced in his curent Report are likely to become even more effective in future years than they are today. My personal belief is that the present flat rate contribution will not take the strain. Clauses 1 and 2 are another nail in the coffin.

In 1948 the total stamp for a man was 9s. ld. I am talking and shall continue to talk of the contribution of employer and employee together. Under the Bill, and including S.E.T., as, to be fair, we must for a very large section of the population, it will be either 58s. 2d. or 63s., according to whether a person is contracted in or contracted out. The present contribution is seven times greater than the original contribution. This is a rise incomparably higher than either the rise in wages or the rise in the cost of living. The real increase in taxation, as the hon. Member for Poplar correctly called it, has been enormous. In round terms there is a £3 addition on a worker's wages.

Already—in this I am wholly with the hon. Member for Poplar—this level is cruelly high for vulnerable people, particularly those who for family reasons can work only part-time. A good example is a woman looking after an aged relative, but this applies to women over a very large range who have family responsibilities and to those whose ability to earn is impaired through disability, through age, or for any other reason.

The employment of such people is actively discouraged by our present system of a high poll tax. It is worth saying in passing that such people tend to work in trades which attract the full rate of S.E.T. Lighter jobs tend to be service jobs and to be subject to the full 63s. tax, even for a part-time worker—provided he works over 21 hours. This high level of contribution is one of the principal reasons for the scale of family poverty in families whose head is in work.

I turn to consider those reaching retirement age. My belief—I hope that I can carry the House with me; my noble Friend spoke on these lines—is that in a society where people live much longer and are much fitter much longer they should be encouraged not to work at full pitch until a certain single date in their lives and then retire and from that moment onwards do nothing. I believe that they should change gear, as it were. I believe that men and women should be prepared, at an age which would vary but which might be anything between 55 and 65, to take less responsibility and less demanding work, either in their own profession or in other professions.

Social policy should be aimed at encouraging this. Our present social policies have the exactly opposite effect. Such people are losing their earning capacity. They are taxed with this poll tax at nearly the same level as those whose earning capacity is not impaired. We should take steps—this would be a comprehensive measure—to encourage such gradual retirement. The present system, per contra, encourages the elderly to retire when for their own and the national good they would be better doing a lighter job. It turns them thereby needlessly from potential contributors to the fund into beneficiaries of the fund. Therefore, the very existence of this high poll tax contributes to the financial crisis which I see ahead.

I personally believe that we shall have to turn from the present flat poll tax system, which is perpetuated by the Bill, which has all the unfairness which I have indicated and which the hon. Member for Poplar indicated, and which is harsh and counter-productive, to a percentage system which takes account of ability to pay. Such a system would have enormous advantages. It would, first, ensure that the lower remunerations were taxed for social benefit at lower levels. It would also build into the system as incomes and salaries rose an increase so that the rate of stamp would not need constantly to be adjusted. The increase in wages would automatically produce an increase into the fund.

Finally, the introduction of decimal currency which is now near enough actively to influence our social policies would be a very good moment to switch to a percentage system. It would be much easier to work a percentage system on a decimal currency. I therefore urge the Government, as part of the great review which the right hon. Gentleman in his peroration will no doubt tell us is in existence, though we see no evidence of it, to consider replacing the flat rate poll tax with a percentage tax as part of decimalisation.

5.40 p.m.

Dr. David Owen (Plymouth, Sutton)

In February, 1966, the Government published one of the best White Papers which this Government have produced, on Public Expenditure, Planning and Control, Cmnd. 2915. I think that one of the most precious responsibilities of a back bench Member of Parliament is to guard the control of expenditure. I feel that today public expenditure is out of control and that there is no coherent planning or strategy lying behind it. This is the most serious situation which faces us.

Although I shall talk about specific measures, it is a matter of great urgency to have a committee to investigate the control of all public expenditure which will tie in with Cabinet reviews, Treasury procedures and with this House, so that we can follow its working year by year. We should not have a committee purely to deal with public expenditure in individual sectors such as health, education and social security. What we are involved in is the exercise of balance, and this is a major subject to which we should address ourselves, because at present only the Government have to effect a balance between competing priorities. In the present post-devaluation situation, I accept that there must be some cuts in public expenditure, and what is of concern is the balance between cutting the growth of public expenditure and cutting the growth of personal spending.

I was opposed to cutting public expenditure in the summer of last year, because it seemed to be postponing the evil day when we should have to devalue, but now I fully accept that there is an economic case for it.

Many of us have drawn attention to the Government Actuary's Report. The situation is so strange that it seems to stem from incompetence or a refusal to face the statistics. In June, 1967, we had a 6d. increase in the National Insurance poll tax, and we were told this would carry us on until 1970, but now the Government come back to us, in February, 1968, and demand another increase, and demand it on an actuarial basis. Either there is something wrong with the Actuary or there is obvious incompetence, and this sort of incompetence cannot go on.

The Government have a very serious responsibility. Having said this, I would point out that I accept the global figure of these proposed cuts in expenditure, though not some of the individual cuts. The years 1968–69 and 1969–70 are important years, and the Chancellor of the Exchequer will be forced to cut the annual increase in personal consumption of 3 per cent. which people have become accustomed to in this country for some years, to a nil rate of growth in 1968–69 and a fractional increase in 1969–70. To those of my hon. Friends who consider that there should be no cuts in public expenditure I would point out that the alternative is to make cuts in personal consumption. We can argue about individual cuts, but we are talking about the global arithmetic at this stage. In the National Plan period the annual growth rate of public expenditure will now average slightly under the 4¼ per cent. envisaged in the National Plan. This must be judged against the 4 per cent. annual economic growth rate on which these figures were projected.

In the summer of last year I felt anxious that a Socialist Government faced with this situation of poor economic growth would make ruthless cuts in public expenditure and allow the rise of personal consumption to continue. This is naturally popular, even with some supporters of the Labour Party. The Government have in fact either by accident or design been unable to control public expenditure, and it has increased at the expense of personal consumption. That is quite right, and I believe that as a result they have achieved the right balance in this situation.

If we are then to argue about individual items, it is for us to show what we would cut and to put forward other cuts, which would take effect immediately, in 1968–69 and 1969–70, when they are urgently needed.

Mr. Mikardo

The speech which is being made seems to be based on the assumption that the Government estimate of a growth or no-growth rate is correct. The hon. Member has already criticised one set of Government figures. Is he aware that the General Council of the T.U.C. totally disagrees with the Government's estimates of growth?

Dr. Owen

If we manage to get greater growth, well and good, but we shall get it only if we restrain the demand at home, and to a certain extent this is part of the case to which I was trying to make a contribution.

People say that many of these cuts make little economic sense in that they are not restraining home demand, but the aim is also to produce savings in the years immediately ahead. Cuts were introduced in public expenditure in January, but still it will grow overall by 2.8 per cent. in 1967–68 to 1969–70. Before the Opposition make their usual attack on public expenditure, they should remember that it grew at a substantial rate even in their own period, largely due to the run-away inflation in 1963–64.

This is the background of public expenditure. In considering it we must realise that in comparison with other countries, including America and most of the E.E.C. countries, in the last decade we have spent less on social security and have had a much higher level of personal consumption. There is a myth of our being the most overtaxed country in the world, but this is nonsense. We have neglected public expenditure and have allowed public squalor to grow up in the midst of private affluence. Our effort must be to put back the emphasis on public expenditure even at the expense of personal consumption.

The Government must try to develop a strategy in seeking cuts in all the social services. In the Health Service increased charges may be a tax on sickness, which is to my mind very hard to defend. I would prefer us to look for a system of charging in the Health Service which is not a direct tax on sickness, and that is why I welcome the Amendment which is suggested in this Bill to the Road Traffic Act.

Before playing about with charges in connection with the Road Traffic Act, I suggest that the Government should consider a wider proposal which would bring in far more money. It is estimated that 100,000 people were admitted as inpatients to the Health Service in the last year for which we have figures as a direct result of road accidents, and the cost was some £10 million to the National Health Service. Out-patient cost would probably amount to another £5 to £10 million, making a total of between £15 and £20 million. It would be perfectly possible to go to the motor insurance companies centrally and present a bill for road traffic accidents at the end of the financial year, and get their actuaries to make an apportionment, the global sum being paid into the National Health Service.

To those who are against charging in principle I say that this is not a charge on sickness but on motor car users, who are, by and large, the more affluent members of our population. The burden of road traffic accidents on the National Health Service in terms of finance and manpower is very real. One has only to look at the amount collected under the existing system of charges to see that. In 1958–59 it was £357,113, and in 1965–66 it was £633,193. There has been a rapid increase in the number of road traffic accidents and the cost to the National Health Service. Simply to add to the existing system, raising the maximum contribution from £50 or £5, will bring in very little revenue, and the money will be very expensive to collect.

I wonder if sufficient attention has been given to a memorandum prepared by the Association of Hospital Management Committees and the Association of Chief Financial Officers which clearly shows the expense of collection. A survey in Wales in 1957 showed that the cost in staff time engaged in the collection of this income in the Welsh Hospital Group alone, including finance department staff and other clerical workers, amounted to £3,622 or 30 per cent. of the income produced. A further survey by the Manchester branch of the Association showed the clerical costs of emergency treatment as being as high as 89.5 per cent. of the income. To increase the charge for emergency treatment would be ludicrous, and I hope that the Government will not do that. The cost of collecting further treatment charges was 15. per cent. Taking the total income of 139 hospital groups, supplying information 32.9 per cent. of the amount brought in was absorbed by the costs of collection.

Those facts must have been known to the Ministry of Health for many years. When it becomes clear that there must be cuts in the Ministry's budget I wish that it would look for changes that it could make without damaging the National Health Service. My right hon. Friend the Minister of Health was right not to choose to cut the hospital building programme. To have done that, as some of my hon. Friends suggested, would have been a savage blow to the whole fabric and structure of the National Health Service. In effect, it would be a tax on sickness, because adequate resources would then not be available, and it would also be financial nonsense.

How many people realise how much of the present expenditure in the N.H.S. is non-current? Little more than one tenth. The problem we face is that we meet very high maintenance costs in keeping existing hospital beds in old-fashioned hospitals. The maintenance-tocapital ratio of providing an existing bed in a good hospital, which costs £2,000, as opposed to a perfect bed in a new hospital, costing £9,000, is one to 4½. Any private industry, faced by these figures, would immediately push ahead with hospital building. It makes economic sense, and therefore it should not be cut.

But there are other areas where cuts could be made. The principle of amenity beds has been in the N.H.S. for some time. They give privacy, for which the patient pays, but they do not give the pre-emptive right to a private bed. If another patient must go into that bed because medical reasons make it vitally necessary, the person who is paying must move out. The charge for the beds is at present hopelessly unrealistic, and we could make much more money from them than we do now. At present they bring in £342,482 a year. Why not advertise them? How many people know that the facility exists? It is right that the N.H.S. should aim to provide a varied consumer service. What is wrong is to allow somebody to buy specialist skills and equipment at the expense of others whose medical need is greater. But privacy means a great deal to a businessman or a professional man, and if he is prepared to pay for it I cannot see why the N.H.S. should not start to make money from the amenity beds. [Interruption.] And if a docker wishes to pay for an amenity bed I do not see why he should not.

The N.H.S. is grossly under-financed. Those who object to private practice, as I do, must face the fact that if enough money is not spent on the N.H.S. more and more people will opt out of it. By rigidly rejecting any alternative financing system, we are damaging our Health Service. That does not mean that I want random financial charging in the N.H.S. To introduce a system of charges for consultation would be total anathema to me; it would be a great barrier to a patient seeking the primary consultation. I shall not go into the argument about prescription charges, but many people feel that they form a great barrier to consulting. I think that that fear is exaggerated, but I agree that it is justified in some cases. If my hon. Friends really believe in the N.H.S. we must be more objective about financing it.

I return to the question of the National Insurance Fund. Why do we continue with short-term sickness benefit? I cannot see why it should not be a responsibility imposed on the employers for which they will have to make a minimum standard of provision laid down by law, with safeguards for the disabled. For example, if employers were made responsible for the first two or three weeks of sickness there could be a saving to the Fund of £70 million or £100 million. Was this discussed in Cabinet as an alternative to raising the National Insurance Fund contribution? Did my right hon. Friend look at the whole financing of the Fund and consider that as a way of saving £70 million or £100 million in a year, and, what is more, saving it very rapidly within the next financial year?

There are other areas in which we can look rather more realistically at financing. It has been said that we must move away from the regressive poll tax. Most of us on this side of the House have long since believed that we must have a graduated contribution, compulsory, perhaps even including a contribution from married women who work. That would introduce to the N.H.S. a system of contributory financing which is much fairer than the present system. We are told that this would take a long time, and that we must wait for the social services review. But all the time we wait we see short-term measures introduced which simply damage the social security framework, and that is very serious.

I find it very hard to understand how in the statement of my right hon. Friend the Prime Minister on 16th January it was possible to say that we would have a generous system of exemptions from prescription charges, which I support—though many of my hon. Friends will point out how difficult it is to implement—and proposed making this £25 million good by increasing National Health Service employees' contributions of 6d. as soon as possible. Those two matters are unrelated. I do not see the logic of the argument, unless it is said that my right hon. Friend the Minister of Health must make a certain amount of cuts in his own Budget, of £29 million in 1968–69 and £31 million in 1969–70. If that is the order that goes to my right hon. Friend, why not consider the alternative methods of saving money?

To judge from the Answers to Questions put to the Ministry, I do not see evidence that it has ever looked at alternative finance. When forced to make economies in its budget, it looked for the only thing to hand, which was prescription charges. I cannot understand the difficulties. Certainly, when given a direct choice between cutting the hospital building programme and imposing prescription charges my right hon. Friend chose rightly, and I support him. But he should never have been put in the position of having to make that choice. We must have contingency planning in the Ministries, but it is still absent.

Hon. Members opposite may cheer, because they think that what I have to say next is exclusively their policy, but it is not. We must link together the Ministries of Social Security and Health and put them under one Minister, a Secretary of State for Social Affairs, speaking in the Cabinet for that Department and balancing the claims of the existing different Ministries. This is utterly vital.

The Government are causing considerable upset by some of these measures to people who believe desperately in these services. Probation officers, social workers, doctors—and there are quite a number of Socialist doctors—and others are finding it increasingly hard to justify this piecemeal approach to social security. We cannot go on talking about waiting for the review. This has become a problem of great urgency.

There is also a problem in that, while increasing these contributions, we are already seeing a situation in which poor families, desperately in need of the new increase in family allowances, are finding that it is not going to be enough, and just as the Government are having to ask the House for increased contributions so they should further increase the family allowances.

I know that this is unpopular and that people say there are no votes in it. But the Chancellor of the Exchequer is, I believe, aiming for the system of give-and-take, tying together benefits and fiscal policy, for which we have asked for two years. I hope that he will soon follow this with an increase in the family allowances, because that is badly needed.

The whole concept of financing the social services must be looked at realistically by the present Government. I know that there is extreme anxiety about increasing charges. It is felt that by doing sc we open the floodgates to abuse, or that we are creating two services. I am extremely worried by the fact that, in the health services, the private sector is continually growing even though 95 per cent. of the people do not feel dissatisfied with the N.H.S. The dissatisfaction is largely confined to administrators and people who work in the National Health Service. But there are people who genuinely feel dissatisfied and unless we match resources to need, we shall create two services simply by refusing to face the facts of life.

Having said that, I pay tribute to the fact that we are maintaining high levels of public expenditure and I say to my hon. Friends that when the Budget comes they will find that it will have to cut domestic consumption. They will not like that either. But we cannot, in the present economic situation, have it both ways. Far too many of us are trying to have it both ways.

The Government have made the right choice in keeping public expenditure to reasonably high levels and in making cuts in personal consumption but I am under no illusion that this move will be popular with many people. Nevertheless, I believe it to be right.

6.3 p.m.

Sir Cyril Osborne (Louth)

I apologise to the hon. Member for Poplar (Mr. Mikardo) for intervening when I had missed the first part of his speech. But I came into the Chamber especially to hear him. He is one of the most attractive and amusing debaters. What he said provoked me to take part, but I apologist for not being here for the beginning of his speech.

The hon. Member damned the Bill hip and thigh, but he will not oppose it because, he says, the Liberals are going to do that for him. He is still supporting the Government responsible for this policy. Since he so bitterly opposes that policy, however, I would have thought that he could not continue to support the Government. After hearing his moving and humane speech, especially on the case of children's milk, I cannot understand a man of such depth of feeling and sincerity not refusing the Whip and helping to destroy the Government he feels responsible for so much social harm.

Most hon. Members will agree that this is a miserable Bill, which has practically no friends except those sitting on the Government Front Bench.

Mr. Emrys Hughes

The hon. Gentleman is mistaken. The spokesman for the Opposition Front Bench said that right hon. Members opposite would not divide against it.

Sir C. Osborne

That does not make them friends of the Bill. Nor is the hon. Member for Poplar going to vote against it. It is fair to say that this is a miserable little Bill with few friends in the House. If there were a free vote tonight and no electoral consequences, the Bill would be thrown out neck and crop. [Interruption.] Seven Labour candidates have tried to throw me out of Louth and all have failed.

Mr. Emrys Hughes

How is the hon. Gentleman going to vote?

Sir C. Osborne

The hon. Member for Plymouth. Sutton (Dr. David Owen) said that public expenditure was completely out of control and that some cuts were inevitable. He said that this sort of incompetence cannot go on. But this is his own Government—the Government he is going to support. Yet he says that such incompetence cannot be allowed to go on. I hope that that sort of message will go to the voters in the by-elections in the next few weeks. They will show him. But he made one mistake. He said that the only way to get economic growth was to restrain home demand.

Dr. David Owenindicated dissent.

Sir C. Osborne>

I wrote his words down. If I have mistaken him, I apologise, but we shall see in HANSARD just what he did say. But the hon. Gentleman is wrong. He is looking at the problem from the wrong point of view. It is not that we want continuously to cut and cut. What we have to concentrate on is how we can increase national productivity, the amount that the Government have to deal with. We have to increase what is available. Why are we in this mess? Why are the cuts necessary? Why this Bill? These are all direct consequences of the Prime Minister's statement in July 1966.

Herbert Butler (Hackney, Central)

And Lord Thorneycroft.

Sir C. Osborne

Lord Thorneycroft is not Prime Minister. The Prime Minister sits on that side of the House. I can understand that hon. Members opposite feel uncomfortable about all this. If this Bill had been brought in by a Tory Government, they would have been raving mad against it. Only a Ramsay Macdonald could have brought this from the Labour benches. This is 1931 all over again. The ghost of Ramsay Macdonald is walking in the Labour ranks today.

Why is all this necessary? It is because the Prime Minister said, in his tragic speech of July 1966, that this sort of adjustment would be necessary. Why? Because, he said, we were spending more than we earned. What is the gap in our accounts which makes it necessary to bring in a miserable little Bill like this, which is only part of a bigger package?

As I understand it—and the right hon. Gentleman will correct me if I am wrong—our indebtedness as a nation is almost £800 million a year. By itself this sounds a big figure. That is the extreme amount by which we are in the red. But the gross national product is about £30,000 million a year. We are, therefore, on the wrong side of the balance by about 6d. to 9d. in the £ at the most. That is all. But the way the Government are tackling it is to cut that 6d. instead of increasing our income by 6d.

Why cut the people's standard of living all the time? Why cut the social services, of which both sides of the House have been so proud? Why not tackle the problem from the right angle and say, "Let us get 6d. more into the kitty"? This is the way to tackle the problem, and I am surprised that the Government have not faced it this way. The right hon. Gentleman inherited from the present Foreign Secretary the National Plan. If that had succeeded, as the Foreign Secretary boasted it would, this miserable Bill would not have been necessary, nor would the Prime Minister's policy of July, 1966. It is because the Government's economic policy is such a miserable failure that this Bill is necessary.

In order to help, even with this futile policy, the Government have had to borrow many hundreds of millions of pounds from the gnomes of Zurich, at whom their supporters have so often sneered. We have had to go on our hands and knees to borrow money from them. Last time the Chancellor signed a Letter of Intent, in which the Government agreed that three times a year the foreign bankers would be allowed to inspect our books to see if this sort of thing was necessary, if it were justified. They can look over our shoulders and say, "You can do this, you can do that, that is wrong, that is right".

When I asked the Prime Minister last week if Members of this House could have the same facts given to them as the international bankers were to receive, he said "No". I would like to know whether the right hon. Gentleman the First Secretary can justify the economic facts of our nation being given to foreign bankers but denied to Members of this House. Is this the sort of democratic Government of which the Labour Party are so proud? [Interruption.] This Government has been mishandled by the Labour Party, and not the Tories.

This is what I should expect hon. Members opposite, if they were sitting on this side of the House, to be fuming about. Before we can really judge whether this is necessary we ought to have the economic facts given to us. Would the right hon. Gentleman deal with this?

The one Clause in the Bill that is the least defensible is Clause 3 which is to cut school milk. It says that milk shall no longer be provided to pupils of secondary schools. If the Labour Party over the years, for as long as I can remember, have thumped one cause harder than any other, it has been that children at school should be reasonably well fed and that one of the best ways to help that was by free milk. This has been a cardinal feature of the Labour Party. Now they are running away from it. [An HON. MEMBER: "What would you do?"] I am not running the country—it would not be in such a mess if I were.

This is the tragedy of the party opposite. They are running away from the principles upon which their power was based. It was this sort of appeal that they made in 1966 which got them the unexpectedly huge majority. They know that they are ratting on their own people. They are letting the old people down. That is why they look such a group of guilty men. The hon. Member for Ebbw Vale (Mr. Michael Foot) used to love to play with the phrase "guilty men". He should come and sit on this side of the House and look at the guilty men, who run away from the most sacred principle that their party has ever had.

The total saving through the Bill is £16,780,000. It is quite a sum, but it is tiny compared with the problem facing us, which is not one of saving but of earning. Hon. Members should look at my side of the problem for a little while. I had a Question to the Prime Minister today that vitally affects this Bill. I asked him: … in view of the fact that November's rise of 1½ per cent. in industrial production was still below the pre-squeeze of July 1966, when he expects his target of 4 per cent. annual increase to be achieved. As usual the Prime Minister sidestepped the issue and gave a half-truth an3wer, the sort that we now expect from him. May I remind hon. Members opposite of the true facts. These are why this Bill is necessary. I have here the monthly Digest of Statistics for January 1966, table 46 of which shows that, seasonally adjusted, industrial production, for all industries, in July 1966—when the Prime Minister said that he was bringing in this new and horrible policy which his party would scarcely accept—stood at 135. The next month it was down to 134, in September down to 133, October down to 132 and November down to 131. This Bill, to save money, is necessary because our industrial productivity has continuously fallen.

If the rise that the Prime Minister promised this House and the country had been achieved, there would have been heaps of money in the national kitty, making this Bill unnecessary. It is the failure of the Government to get increased industrial production that has made this Bill necessary. What is such a tragedy is that we are concentrating our efforts on cutting and cutting, when the Government should be devoting their attention to increasing production. It is on this that they stand condemned.

The latest figure of industrial production is only 134, still one point below the 1966 figure, when the Prime Minister said that we were in such a desperate mess. If his promise of a 4 per cent. annual increase had been achieved, we would by now have had industrial production up to 141, and that would be giving us scores of millions of pounds more in the national revenue, making such a measure as this unnecessary.

It is because the Labour Party have failed so miserably on the production front that they are condemned—not only from below the Gangway but even by those in the centre, by the hon. Member for Plymouth, Sutton (Dr. David Owen), who spoke so half-heartedly in support of this miserable Measure. I regret that this Bill is necessary, for the sake of the people who are to suffer the consequences. I would urge the Government to turn their attention to industrial productivity, to get more money into the kitty, so that this step will not have to be repeated.

6.18 p.m.

Mr. Michael Foot (Ebbw Vale)

Before coming to some of the matters to which the hon. Member for Louth (Sir C. Osborne) and others have referred, I should like to say, as my first comment on the Bill, that I think it is of extremely dubious constitutional propriety. When we had the general package presented to the House in January some of us objected, not only because of its particular content, but because of the way in which some measures which we accepted were wrapped up with others which we found extremely distasteful. The crisis was caused because many of us believed that this was an improper way for the Government to present their measures to the House. We thought that it was exploiting the procedures of the House to assist the Government, and that they ought never to have resorted to such a step. It appears in this Bill that they are resorting to that kind of device again.

There are some Clauses in the Bill dealing with matters of which all of us on this side of the House would approve. However, they are combined with other measures which are entirely unconnected and, by wrapping up the package in this way, we are denied the right to deal with the matter as we ought as a House of Commons.

In the history of the House of Commons, there was a considerable process of what was known as "tacking". It usually arose in disputes between this House and the House of Lords. Measures were introduced by Governments in bygone days, and tacked on to them were features which the Government knew would be objectionable but which they hoped to get through both Houses. That went on until about 1702, and no one would wish the Labour Government to revert to that precedent.

It is contrary to the proper procedure of this House, and, if hon. Members turn to page 836 of Erskine May, they will see this statement: As for the modern equivalents of bills of aids and supplies, namely, Consolidated Fund and Finance Bills, the rules of order of the House of Commons exclude the possibility of foreign matter being tacked to such bills by way of amendment; and respect for constitutional practice prevents the inclusion of such matters among their original provisions. By presenting this Measure in this fashion, the Government have not shown a proper respect for the constitutional practice laid down by Erskine May. It may be that the House of Lords would decide to regard the Bill as one in which the Government have resorted to the old practice of tacking. If it did, there would be a constitutional crisis. However, certainly there is a constitutional crisis inside the Labour Party because of this process of tacking, and I know that I speak on behalf of many of my hon. Friends when I say that the more that the Government revert to the practice of tacking to get measures through the House, the more hostility they will arouse.

All Governments have to present unpopular measures, though I must say that this Government have exceeded their quota. However, it is much better for the Government to present them quite clearly and individually and tell us that they ask us to vote upon them, instead of trying to mix them up with others.

I come now to Clause 3, which many of us find particularly offensive. I need hardly remind hon. Members that it deals with school milk. Certainly there are hon. Members on this side of the House who did not find the Chief Secretary's explanation at all satisfactory. He said that there had been some kind of examination which had shown that, from a nutritional point of view, it was not necessary to maintain the supply of free milk in secondary schools.

It is very peculiar that we have not had that examination presented to us before and that it cropped up only when the Government discussed these measures over Christmas and in the early part of January. I had heard before no serious argument from the Government for stopping the provision of free milk in schools. All previous reports have indicated the opposite conclusion to that presented today.

If one examines the material provided so efficiently by the Library as background information for this debate, he will see that all the material tells in the opposite sense to that presented by the Chief Secretary. The National Food Survey of 1964, which I gather is the latest information available, does not point to the conclusion that the Chief Secretary has presented. That survey emphasised that the families who derived special benefit from the provision of school milk were the largest and poorest ones. By taking away school milk, we have selectivety in reverse with a vengence. The poorest people will be hit worst, and they are the families who, according to every survey, it is most difficult to help.

My hon. Friend the Member for Plymouth, Sutton (Dr. David Owen) advocates quite rightly an expansion of family allowances to deal with the situation. But we are forced to the conclusion that it is an absurd way to come to the assistance of our poorest families who have been causing the greatest concern for some years to be considering a measure which will hit them hardest.

It is quite wrong for the Government to think that they can force through a measure demanding that we should abandon the provision of school milk on the trumpery evidence which we have been offered from the Treasury Bench. There will be an opportunity of debating this in Committee, and the Government will have to produce much better evidence than any that they have offered us today if they are not to be, as I hope, defeated in Committee.

No one can deny that the provision of free school milk in secondary schools is as simple a piece of Socialism as one could imagine. It has been operating successfully for 20 years. We have not had a single scrap of evidence to contradict the opinion of most medical authorities who have said that it has made a great contribution to the nutrition of our children. It is difficult to calculate what would be the condition of children's teeth and their general standard of health if the milk had not been provided.

Most of the evidence provided by the Library underlines the conclusion that the provision of free milk in our schools has been an important contributory factor to the welfare and improving nutritional standard of the people. We have not had a scrap of evidence telling against that claim. It is shameful that a Labour Government can propose that we should abandon this Socialist measure after it has been in operation for 20 years.

My hon. Friend the Member for Poplar (Mr. Mikardo) touched on one of the aspects of the measure which has caused us the greatest concern. It is the further heaping of burden upon lowest-paid workers. No one can deny that the package with which we were presented in January hit hardest the lowest-paid worker. He was hit by the 2s. 6d. prescription charge, hit by rising prices resulting from devaluation or pre-devaluation, hit by the previous proposal for curtailing school meals for certain categories of children and, above all, hit by the steady increase in the poll tax. Accumulated together, all these burdens fall hardest on the lowest-paid worker.

My hon. Friend the Member for Plymouth, Sutton says that part of the argument is whether the cuts are generally necessary. That is an argument into which I should like to enter, but, within it, there is also the question of making the cuts fair, as he acknowledged. In presenting the whole package to the House, it was part of the Government's claim that it was a fair package. We say that it is grossly unfair, and one of the aspects making it so unfair is the item about the stamp which is presented to us in this Bill. It is said that when this increase comes into operation, there will have been increases totalling 5s. imposed by the Government. As some of my hon. Friends have said, in saying that, it is only fair to compare it with the increase in benefits. That is a justified retort, but it is not a sufficient retort, and certainly it is not one which is likely to satisfy any of my hon. Friends.

As opposed to right hon. and hon. Gentlemen opposite, we on this side of the House have fought three General Elections on the pledge that we would abolish the poll tax. There is not the slightest doubt about it. We have said that there is a remedy for this situation. There is not a single hon. Member on this side who is not opposed to the poll tax and who has not condemned it as being grossly unfair. We were sent here partly because we said we would uproot this evil at last.

I remember the debate about old-age pensions in November, 1964, when the Government went ahead with an increase in pensions, but said, "Our aim is to proceed as soon as we can to fulfil the pledges we have made in carrying through the abolition of the poll tax and the comprehensive scheme for pensions."

One of the most attractive features of the new pensions plan drawn up by the Leader of the House, acting on behalf of the Labour Party, was that it abolished the poll tax. Yet once again we are being asked to vote for a measure which says that the poll tax is not merely to continue, but that the burden of it is to be made heavier than ever. It is an intolerable situation in which to place elected Members of the House of Commons. One of the most grievous aspects of present-day politics is the growing belief of many people that election pledges do not count. They do count. It would have been scandalous if this measure had gone through without severe protest against what is being done.

What is the Government's position about abolishing this poll tax'? Why did not they consider it on this occasion? Is it because the plans are not prepared? The Labour Party scheme for abolishing the poll tax and overhauling the pensions scheme was produced in 1957–11 years ago. I can understand the previous Minister of Pensions not introducing the scheme in October, 1964. It would have been difficult to have done so then. But not three years later. The plan must be in the Ministry, so why is it not introduced? The most likely reason—the most creditable reason to the Government—is that they believe that it would impose considerable financial burdens on the Exchequer and that this is not the best moment to do it, because certain people who survey the finances of this country would not like it.

In the debate in October, 1964, about raising pensions, my right hon. Friend the Member for Sowerby (Mr. Houghton) at the end said that it was very difficult for us to go ahead with the increase because the gnomes of Zurich would not like it. In those days even Ministers used the phrase "the gnomes of Zurich". My right hon. Friend the Member for Sowerby said that we were not going to have to care about them in future; we would go ahead with our plans none the less. But we have not gone ahead with our plans. They have gone back into the pigeon holes.

Did the Government consider in December and January when they were looking at these cuts whether they could introduce the fair Labour Party system for dealing with pensions rather than continue with the unfair Conservative plan? They may say, "We did not have time. It had to be done in a terrible rush." One answer to my hon. Friend the Member for Plymouth, Sutton, who was saying that these proposals looked at in isolation do not stand up to examination by those who have studied the social services, is that it had to be done in a great rush.

Why such a rush? Because they feared another run on the £, because they had signed the Letter of Intent, and because they were concerned about the general economic situation. That is the answer, is it not? We all know it. It was because a panic had been worked up in the country. In my opinion the panic went beyond all bounds. We had almost plunged ourselves into a state of morbidity in the way in which we discussed our economic affairs. Taking the past 20 years, despite all the qualifications made in all parts of the House about the way it has been done, this country has improved its economic situation very greatly. We have increased our exports tenfold as against a sixfold increase in imports. Our economic position is not as described in the Daily Mirror. Our economic position is strong. Therefore, one of my main charges against the Government, and one of the reasons why I believe that what they did between December and January was so much to be criticised, is that they allowed the mood of panic to sweep across the country unchecked and even encouraged. It may be that they have recovered a little of their poise now, but this Bill is one of the legacies of that spasm of hysteria.

This is not the Public Expenditure Receipts Bill; it is the Cecil King (Appeasement) (No. 1) Bill. We have coalition measures without a coalition. The Front Bench opposite approves of the Bill. We shall have the Cecil King (Appeasement) (No. 2) Bill in a week or two when the Government have worked out a scheme for applying the exemptions to the prescription charges, if they ever can. They had not worked it out when they presented the package to the House of Commons. They came along and said to us, "You must vote for this, even though we do not know what it means."

Sir C. Osborne

Why did you vote?

Mr. Foot

I did not. The hon. Member for Louth (Sir C. Osborne) jumps to conclusions so fast it is hardly possible for us to get a word in. That is why some of us would not vote and why we propose to continue our opposition to a Measure which we think arises from that period of hysteria, which should be forgotten. Certainly it should be drastically amended. We believe that by adopting this course we will be performing a service for the Government, for the Labour movement outside, and for the people who sent us here.

The Bill introduces a shameful proposal for abolishing a Socialist measure, the provision of milk in schools, and it imposes very heavy burdens on the lowest-paid workers in defiance of all the methods for dealing with these problems which we have advocated at three General Elections.

If the Government continue upon the course of presenting measures such as this to the House of Commons they will never recover their position in the country. Governments are entitled to think about their support in the country—indeed it is their duty—but they should be thinking how they can rebuild the confidence of their own supporters, let alone the floating voters. Soon the only supporters the Government will have will be the floating ones. The others will have sunk.

It is a question of rebuilding the support, first, of our own supporters. We will not rebuild it with unjust measures of this nature. We will not rebuild it with measures which destroy Socialist measures which we have had for 20 years or more. We will not rebuild the confidence of the Labour movement by asking people to dismantle the Health Service. That trick has been tried once before. It does not work. It has been tried and it had to be rectified. It involved a long painful process inside the Labour movement to try to rescue the Government from the mistake of making attacks on the welfare services which have chiefly been built by the Labour movement, and of which it is so justly proud.

Some of us refuse to vote for this Measure. The more we can get to abstain from voting for the Bill tonight the better it will be for the health of the Government. Sometimes some of my hon. Friends say, "Are you not trading on somebody else's action; are you not abstaining in the hope that others will go into the Lobby and enable you to escape from your difficulties?" I am not trading on such a hope. I am asking as many hon. Members as possible on this side to abstain from voting for this anti-Socialist measure. The more hon. Members on this side who do that, even to the point of inflicting a defeat on the Government, the sooner we shall change the course of Government policy, the sooner we shall start to rebuild the strength of the Labour movement, and the sooner we shall get the kind of Government that the people of this country voted for and deserve.

6.40 p.m.

Mr. John Pardoe (Cornwall, North)

I go much further than the hon. Member for Ebbw Vale (Mr. Michael Foot). I ask hon. Members not to abstain but to join the Liberals in dividing the House, and to vote with us. That is my position because I believe that this is a disreputable piece of legislation. It is almost incredible if one looks back to the 1964 election, to realise that, just three years later, we are facing this kind of shame- ful legislation. We are continually being told, whenever we raise social security matters, that we must await the great, all-pervading review and the next step in it. I do not know whether the Government will tell us that this is one of the next steps, but, if it is, it is not one which I intend to take.

If this is a pitiful Bill, the official Opposition are a good deal more pitiful. The noble Lord the Member for Hertford (Lord Balniel) made a strong attack and did not say one good word for the Bill, but he will not vote against it. Why not? Does he agree with the Bill? He said that he does not. I believe that this is part and parcel of the deadly consensus which has this country in its grip—"hands across the Dispatch Box," "unity to all and sundry." Did the noble Lord recommend this ignoble posture to his party, or did he recommend a different course which they would not follow?

Lord Balniel

Perhaps I can help the hon. Gentleman. Surely he recollects our major economic debate, when we put down a reasoned Amendment stating our views on the totality of the cuts which were necessary to rescue the economy from the total mismanagement which had resulted in devaluation, but we did not vote against the main Question and it seems logical that we should not vote against the specific reductions in expenditure which are contained in the Bill.

Mr. Pardoe

I do not think that two faults make it any better. I am aware that the noble Lord's party did not vote with the Liberals when we divided the House against the cuts on that occasion. They should certainly have joined us tonight or, better still, have divided the House themselves. I suspect that the reason why the Tories will not join us in the Lobbies is that any mention, however passing, of cutting school milk is enough to get Tory support for any Bill, however disreputable.

I will not deal at length with the civil defence measures, but I am not happy with the lack of definition of the words "care and maintenance". The noble Lord did not refer to these measures, either, with the ingenious excuse that he would be able to do so on an Order later on. He need not be so coy. He is his party's spokesman on social security and, therefore, is ignorant of civil defence. So am I, but I am not coy about it. But this is the first time that ignorance has ever stopped the Conservative Party from speaking about something—

Lord Balniel

I am sorry to interrupt the hon. Gentleman again, but we will be able to debate civil defence on the Order. Let me make it clear. We do oppose the Government's decision to abolish the Civil Defence Corps. I do not claim a specialised knowledge of the subject, but I make it clear, on behalf of the Opposition, that we are opposed to the abolition of the Corps and we will record our views on the Order.

Mr. Pardoe

By fits and starts throughout my speech, we may elicit the Conservative Party's attitude.

We have been told that the Bill is part of the measures to make devaluation work. For my money, it is part and parcel of the evidence that no preparations were made to make devaluation work before it was upon us. One can only say that if one has advocated devaluation over a long period. I have advocated it for at least three years within and without the House, and I believe that a contingency plan should have been drawn up for it. We warned the Government time and again that it would come, but, when it came, no plans were in the pipeline and no contingency thinking had been done.

We have been told that one of the reasons for the Bill is the shortfall in the National Insurance Fund. We have been saying over and over again that this is inevitable. Of course there is a shortfall in the Fund and there will continue to be, because the whole system of insurance has been overtaken by inflation. Therefore, as we have said, it is time to reorganise the financial structure of our social security system. The Government should have known this. They have been warned often enough, not only from these benches but from their own side.

I have consistently opposed, on behalf of my party, the poll tax. We have urged the abolition of the weekly stamp and individual contribution records. We have an alternative. We have said that it should be replaced by a social security tax related to earnings. It is necessary that this tax should be clearly differentiated from the body of taxation. If it is merely part of the Income Tax, for instance, it will be raided for east of Suez or any other follies of some future Government.

We have said, therefore, that it should he a percentage tax on a firm's pay-roll, with two-thirds from the employer and one-third from the employees. It should be collected by the Inland Revenue. which would simplify administration, and it should be totally reserved for social security purposes. That is immensely important.

Almost every time one speaks on social security, one must deal with the myth of the National Insurance Fund. There is, of course, no such Fund, in the sense that one normally refers to it, in insurance terms. Why the Government Actuary has been called into this matter at all I do not know, since I see no actuarial element in our social security procedure. There may be a small relic of it somewhere, but it is difficult to find.

So, there is no insurance principle, no Insurance Fund and no actuarial element. It is time that the Government realised that major changes have taken place in the financial structure of our social security system and swept it away and started again.

I would not mind these increases so much if Labour had improved the general service in line with its promises, but when one reads through "National Superannuation", published in 1957, or "New Frontiers for Social Security", published in 1963, one sees that these have become the tombs of Labour's idealism.

One certain principle which was established in those pamphlets was that contributions were to be related to earnings. The speeches of right hon. and hon. Members opposite in and before the election campaign of 1964 showed that Labour was not in the least modest about their proposals or lacked confidence in their ability to put them into practice. For instance, in his election address in 1964, the Prime Minister said: An income guarantee will ensure that everyone has enough to live on as a right and without recourse to National Assistance. This will come without delay. Yet three years later, it still has not come.

Since then, there have been restatements by hon. Members opposite that they still believe in this. The right hon. Lady the ex-Minister of Pensions, who had to resign from that position, said in a television broadcast on 22nd March, 1966, which I am sure she will remember: Must people really wait until the next century before they get a decent pension? The Tories seem to think they should. The Labour Government will create a fair and just scheme far everyone now, not in the 21st century. Our scheme will give retirement on half pay arid built-in safeguards against any rise in prices. Labour have abandoned all their plans which they had when they were in opposition, and have replaced them with a review which is not a policy. The Conservative Party has no alternative to offer, because if they had an alternative they would not be too ashamed to vote in the Lobby tonight. We do have an alternative and that is why we claim the right to divide this House tonight, and we certainly shall do so.

Our alternative, stated in certainly the last three elections, is that there should be a flat-rate basic pension which is large enough for people to live on, so that they should not have to crawl for what used to be called National Assistance and what is now called supplementary benefit. There should be a flat-rate basic pension across the board, and it should be equal to at least half the average earnings of a man in industry. It should remain that proportion of the national wage, so that the pensioners of this country continually share in the growing wealth of the nation. I remember that kind of phrase coming from hon. Gentlemen in the last election campaign and in the one before that. But I say that it is very dangerous if the Government get involved above a flat rate for earnings-related benefits, because I believe that this will involve them in all manner of complications. It is very much better to leave bespoke pension policies to the private sector, and for the State to confine itself to paying an adequate flat basic rate on which people can live. So I ask the Government to leave that part of it—the tailor-made part—to occupational schemes.

I should now like to turn to what the hon. Member for Ebbw Vale called a "Socialist policy of school milk." I was not entirely certain in my own mind that it was a Socialist monopoly. What I find extraordinary about the Government, is that their only alternative to free milk seems to be no milk at all. It would have been perfectly possible, if they were really up against the financial wall, to exact some sort of charge for milk. I have shown them a way in which they can do this, without any of the difficulties of selecting between the poor children and the better-off children. So it is absolute nonsense to suggest that the only alternative to free milk is no milk, or the Conservative solution of charging the full price to everyone. I have said that we should amalgamate the price of milk and the price of meals at an economic level, and we should then add that benefit as though it were in kind to the taxable income at the end of the year on the Income Tax form.

Those of us who are parents put on the Income Tax form what we receive in family allowances and we are taxed on it. There is no reason at all why we should not have a figure inserted there of the value of school milk and school meals which our children have received in the course of the year, and we should be taxed on that. It would be perfectly possible to upgrade this amount in such a way that the payers of standard rate Income Tax would pay the whole economic cost back to the Exchequer.

There would be no collection of the money in the school classrooms; no teachers and no other kids would know who was getting the free milk or the free meals. None of those problems would be present; they would all disappear. I am sorry to repeat this again and I expect that the Joint Parliamentary Secretary to the Ministry of Social Security, who is now on the Front Bench, has heard this before. But I have said, over and over again, that this is the policy which the Government should follow and I have explained it in detail in letters to him in the past.

There is, of course, a very considerable difficulty in the proposal—and this was mentioned by the right hon. Gentleman who spoke from the Government Front Bench—of selecting children on nutritional grounds or on grounds of poverty.

I accept that. It is terribly difficult to tell who requires milk for nutritional reasons and that is why I do not advocate that that should be done.

On National Health contributions, it is true—and it has been said already by hon. Gentlemen opposite and on this side—

Rear-Admiral Morgan Giles (Winchester)

Before the hon. Gentleman leaves the subject of schools and taxation forms, would he also agree that it would be equitable to put on the taxation forms at the end of the year the amount which people who educate their children in the private sector have saved the country, and to allow tax accordingly?

Speaker

The debate is wide, but not as wide as that.

Mr. Pardoe

I should be delighted to follow that particular hare, Mr. Speaker, but I shall bow to your Ruling on that. National Health contributions have had to increase because, as we all know, the National Health Service is hopelessly under-financed. It will still be hopelessly under-financed when we increase these contributions. They will not make a halfpenny worth of difference to that. We are spending this year a much lower proportion of our resources on the health service than many countries in Europe, and certainly far lower than in America. In fact, the proportion of our resources which goes into health has not increased since 1949, whereas in many countries in Europe it is increasing by 1 to 2 per cent. every 10 years. So, again, I ask the Government not to come to this House with a miserable, pathetic Measure to put the odd pennies on the insurance contribution, but to come here with a thought-out scheme for re-financing the health service to provide it with an increasing share of the nation's resources. I should have thought that was a Socialist priority. If the Government have forgotten that it is a Socialist priority, it is certainly a Liberal priority.

They have also said that these increases are to pay for the exemptions, and the Financial Secretary said—and these are his very words—that the Minister of Health was discussing these exemptions with the doctors and was "about to discuss arrangements with

other interests." So here, again, is the great state of preparedness which some of us might, I suppose, have been led to expect. They are "about to discuss arrangements," but they have committed themselves to exempting whole categories of people, such as the chronic sick—how do you define them?—the old, the children and all the rest. I am all in favour of these exemptions, but one thing I know is that they cannot be done.

There is no way by which this can be organised, and the Government should never have committed themselves to that promise without a full-scale investigation as to how it could be done. The Government must not go to the doctors now and ask the doctors how they are going to get them out of the mess into which they have got themselves. It is not their business; it is not the chemists' business. These discussions should have been held much earlier.

So the Government's social policy is today a thing of shreds and patches. They have lost all sense of purpose in the social field. Hon. Gentlemen opposite who oppose these Measures should vote against them. There is no Motion on the Order Paper in which they can pick holes; no words to which they can take exception as they have done in the past on some occasions, excusing themselves from voting for that reason. There is no fear, either, that they will defeat the Government. We are not yet quite large enough for that. What is more, they will not even have to rub shoulders with the Tories in the Lobby. There would be no unpleasantness like that.

Are they at the next election to go to their constituents behind their party's slogan, which will inevitably have to be, "Go with Labour for the guts to break our promises." It is no good, after their party has been defeated at the next election, saying that they lost because the Government did not do the right things, as their children will ask them, "Daddy, what did you do when the Labour Government took the wrong turning?" They will say, "We sat on the grass and took our boots off" and their children will rightly despise them. What is the point of having conservative measures from a Labour Government? One might just as well have them from a Conservative Government. They might actually work; I doubt it, but they might. I hope that hon. Gentlemen who feel this way will vote with us tonight in the Lobbies. If they do not, they will be exercising their conscience by the seat of their pants.

6.59 p.m.

Mr. J. J. Mendelson (Penistone)

When my right hon. Friend the Chief Secretary to the Treasury began to introduce the Bill today I felt sorry for him. As he went on presenting the case which he tried to make I felt even more sorry for him. For us on this side, this is a serious argument and a serious debate. That is why my right hon. Friend found himself in such a difficult position.

The scene changed completely when the noble Lord the Member for Hertford (Lord Balniel) intervened. It was reduced to the level of obvious hypocrisy and humbug. My hon. Friends and I showed the noble Lord that we did not intend to take any humbug from him. The noble Lord had the face and the effrontery to talk about shifting the burden on to lower paid workers. Only a few months ago he was at the Conservative Party conference at Brighton, where the right hon. Member for Enfield, West (Mr. Iain Macleod), who sat next to the noble Lord this afternoon, but who kept very quiet, triumphantly carried the Conference and established himself as a potential third leader by advocating a policy which would raise an addition £1,000 million in indirect taxation and shift the burden from direct taxation to indirect taxation. Could there be clearer evidence of the desire of the Tory Party to put the main burden, if it was ever returned to power at a general election, on to the shoulders of the lower paid workers? Therefore, much time can be saved in this debate by dismissing the humbug and the hypocrisy of the Conservative Party and by concentrating on the argument among those who really feel and know about those things, namely, the Labour side.

Before continuing with the case I wish to advance, it ought first to be agreed amongst us that we shall not get very far in this debate if we try to score points on the misery of withdrawing school milk and on the policy of adding to the poll tax. Speaking for myself, I do not believe that I can teach any of those on the Government Front Bench—those that are here today and those who are away doing their work in their Departments—any single point about the measures contained in the Bill. We have been through it all before. It is the leading figures in the Government who have taught me a good deal of what I know about the irrelevance of these measures. It would waste the time of the House and misconceive the argument if I were to try once more to go into great detail about them.

I turn, instead, to consider the reasoning and the reasons behind the Bill and why a Government like the Labour Government should come to the House and expose themselves to the kind of criticism which they knew would be coming their way, knowing all the arguments which would be advanced against them and knowing that they had no case to make in reply.

It was miserable to a degree this afternoon to see my right hon. Friend the Chief Secretary, who is normally a brilliant artist of Parliamentary debate and who leaves most of us, with perhaps three or four exceptions on both sides, standing 50 yards from the post when he has a case, not able to put forward any argument at all and merely stating that the Government had come to some conclusions because they had some—reportsunidentified—to the effect that two-thirds of the children involved in secondary schools did not need the milk, that it was very difficult to find a scheme by which some of the others who did need it, on his own admission, could be supplied with the milk, and that, because the means test arrangements would he so difficult as to make it administratively impossible, the Government had to proceed with what they were now doing—depriving those who need it and asking the House to vote for it.

In passing, my right hon. Friend referred to the prescription charges. He brought the tidings to the House—I shall be brief about this, as my right hon. Friend was—that a great administrative inquiry was being conducted at present into how the refunds and the exemptions could be arranged. My right hon. Friend seemed to be worried that there might be some impatience in the House to learn when this administrative inquiry would be completed.

I want to establish one point and put my right hon. Friend's mind at rest. I say on behalf of most of my right hon. and hon. Friends that, if the Government discover, as I am sure that they must discover, that it is administratively impossible to bring forward a scheme which could apply exemptions, even on their own terms, and if they come to the House and say that they have tried but have failed, there will be no misery on this side: there will be understanding and approval.

I believe that the background to the matters before us this evening is to be found much more in international politics and the atmosphere created by the Opposition in this country than in any details of social inquiries. I quote from the Financial Times of Friday, 16th February, under the heading: Jenkins to get Budget advice from I.M.F. team". The dateline is Washington, February 15th: A team from the International Monetary Fund will be looking over the shoulder of Mr. Roy Jenkins, Chancellor of the Exchequer, while he makes his preliminary Budget calculations next week. It would be wrong, I was told on good authority today, to assume that this team will actually participate in the writing of Britain's Budget—but, on the other hand, it will state its own idea of the extent to which the I.M.F. believes demand should be cut, and the figure thus produced by the Fund team is one from which Mr. Jenkins will certainly be constrained to work. When the Letter of Intent was first sent off, I asked for an Adjournment debate under Standing Order No. 9. I gave as my reason that, if the Letter of Intent was adhered to, there would be legislation flowing from these undertakings which many hon. Members would find it impossible to support. Today we are in the presence of some of these measures. It was, therefore, not lightly that some of my hon. Friends and I voted against the Letter of Intent.

A question was asked from the other side—what is the constitutional propriety of insisting on a vote upon this? The answer is to be found in the first instalment this afternoon. The imposition of prescription charges and the withdrawal of free school milk have been built up into a sacred cow in reverse by the Opposition and by ill-informed opinion in this country.

For years there has been a campaign against certain aspects of the Health Service. Many men in public life have been whispering about the withdrawal of school milk. Some of these very rich men have now left their reserve of the whispering campaign and come out in an open advertisement. We have witnessed the obscene spectacle of millionaires demanding that free school milk be withdrawn from primary schoolchildren as well.

However, the Government must accept much of the blame, because they are opening the door to such proposals. Therefore, the two reasons which I believe that the House should be carefully considering are, first, that the Government have accepted the wholly fallacious argument that, to be internationally credible and to enjoy and preserve the credit of international bankers, either in the standby credit, which we have not yet drawn on, or in some other future credit, they must establish their identity as tough men who will deal in tough measures with the British people. That is the first serious argument that forms the background to this debate. This something we must argue about with my right hon. Friend the Chief Secretary, unlike the details of whether children should have school-milk.

The second ground is the atmosphere of hysteria in Britain. Nobody has contributed more to this than the Press lords and members of the Opposition. Time and again when I was listening to the noble Lord saying how we must have a reasonable, calm approach to these measures I was reminded of the campaigns which many members of the Opposition have conducted, directed against allowing anybody abroad to feel confidence in our economic position. They have made a major contribution in creating this atmosphere of hysteria. They are at it again. In their campaign of vilification against the Prime Minister personally, they are deliberately saying to people abroad that nobody should believe anything the head of the British Government said. That is their case. It was not repeated this afternoon by the noble Lord, but that has been their case time and again. Their contribution to the creation of this hysteria has been used by others to demand that these measures should be carried out by the Government.

The noble Lord was carrying out the kind of operation which the Conservative Party will be carrying out in the country in the coming months. They have established a demand for certain Conservative policies, that is to say the withdrawal of school milk and the reimposition of prescription charges; and the Conservative Party in fact went into the General Election in 1966 demanding the reimposition of prescription charges. They will add the word "Socialism" and go to the electorate and call these measures Socialist measures. I warn the Government that an argument presented in that way could be very effective. Those of us who urge the Government to stop in their path before it is too late will be found to be the true friends of the Labour Party, working for its future success in the next election.

Lord Balniel

The hon. Gentleman is being provocative. It is reasonable to remind him, and it is within the recollection of the House, that he told me not to believe what the Prime Minister had said in his speech on 16th January, when the Prime Minister said that the introduction of prescription charges would cost £50 million and that the National Health Service contribution would raise £25 million. He specifically told me not to accept the word of the Prime Minister.

Mr. Mendelson

I said nothing of the kind. When the noble Lord was quoting at me the Prime Minister's figures, I said, "Do you always accept everything the Prime Minister says?". I was referring to the kind of campaign of vilification to which I have alluded. I was coming to the argument involved in the figures. Reliable estimates have now been put forward—and we have not yet had any evidence from the Treasury Bench to show that these estimates are incorrect—showing that, once one has worked out a system of exemptions, once one has exempted all the categories mentioned by the Government, once one has calculated the short-fall on prescriptions which will then be used, one finds that the maximum figure of savings will be £12 million. That was my point earlier this afternoon.

I must move away from that and get back to my main arguments. What is involved here is a mistaken strategy, and that is why the Government keep on telling us that nobody likes these measures. They keep on talking about the package deal, of which we have the first part this afternoon, as if it were an act of nature. What we have never been told is, who imposed what on whom? Where was the package concluded? What Cabinet Minister banged the table and said, "We must have this particular measure", such as the withdrawal of school milk and the imposition of prescription charges'? Of course, they cannot talk about that. There is no question that the Government have accepted the misguided strategy that they must prove their credibility, both to Tory and other opinion at home and to bankers abroad, by trying to carry out these measures.

This brings me to my final point. Nobody can provide a shred of evidence that these measures are relevant to the release of real resources for the export trade; my conclusion is that to make devaluation work—which is now an agreed national policy and a matter on which the Government received the full support and the confidence of the entire Labour Party after devaluation—the problem involves releasing real economic resources and moving them away from producing things which are mainly needed at home, or which are not particularly needed at present, and to use those same economic resources to produce goods for export.

If someone from the Treasury Bench were to tell me that the Post Office must stop producing certain things for the home market because some of those products could be switched to exports, I would defend it, vote for it, and explain it to the people at large in the country. But where one deals with school milk and the imposition of the large sum of 2s. 6d. for a prescription, there is no relation whatsoever between such a measure and the release of real economic resources.

We are not even in a situation in which we are over-employed, a situation in which we have to take people from doing one particular job, even if that job might be useful, to put them on to the export trade. We still have 600,000 people available, and if one exempts 180,000 as permanently unemployable, it leaves over 400,000 people who are not at work. It is a problem of absorbing these real resources and of putting them into the export trade.

With a sad heart, I conclude that there is no case which the Treasury Bench can make on this matter. There are many of us, knowing that there is no case for these measures, who feel that we cannot support them. Therefore, we urge the Government to turn away from and to change this misguided, dangerous policy before it is too late.

7.16 p.m.

Rear-Admiral Morgan Giles (Winchester)

Clause 4 of the Bill provides for compensation for civil defence employees for loss of employment, and so on, as a consequence of the policy of the Government. I wish to address myself for a short time to the narrow point about these civil defence employees.

Clause 4 gives the Home Secretary wide powers to make regulations with regard to the future of these men. I should like from him a specific assurance that the terms which they will be given will not be less generous than those which have been offered to local government officers made redundant, for instance, by the formation of the Greater London Council, or by boundary changes and so on in the past.

The civil defence officers feel most strongly on this matter. Indeed, the Association of Civil Defence Officers has organised a rally and a protest march in London next week, when it intends to present a petition to the Prime Minister. We must surely recognise that these civil defence employees have loyalties and ambitions, hopes and fears, like anybody else. The real point is that they do not want to be abolished at all—the compensation which they want is to retain their jobs. In reply to a Parliamentary Question which I put down on this subject last week the Under-Secretary of State at the Home Office told me, when I asked what factors he had taken into account when deciding the Government's policy, that they were three-fold. First, he was considering the current level of civil defence expenditure; secondly, he mentioned our financial circumstances; and thirdly, he spoke of the risk of a nuclear attack.

On these three points one must comment that, at the current level of civil defence expenditure, as shown in the Explanatory Memorandum, the saving will be £20 million. We do not know exactly how this is calculated, but the majority of the people employed in the civil defence organisation are volunteers on very small bounties. So the £250,000, which is also mentioned in the Memorandum to the Bill, does not at first sight appear very generous to the professional officers who helped train these volunteers. It is to be hoped that some of these officers will be transferred to other local authority work, but that will not compensate for the abrupt halt in what these men consider to be a crusade to educate the public on how to look after themselves in the worst sort of disaster which could come to the country.

A man would indeed be advertising his bankruptcy if he cancelled his fire insurance on his house and then urged his local council to sack the fire brigade. Is this the pass to which the economic policies of the Government have brought the nation?

Last summer, the then Home Secretary addressed the W.R.V.S. General Council. He said: We reject the argument that a nuclear attack would mean that any precautionary preparations had been useless. This would amount to saying that, if the worst should happen, we should leave things to take their course in a community totally unprepared and uncared for. This would be an abdication of responsibility. A Government must take reasonable steps to safeguard its people both in peace and war, and this we intend to do. Now the right hon. Gentleman is Chancellor of the Exchequer. Then, he was talking to civil defence volunteers and officers whom we are now considering. We should be told clearly what has happened on the international scene to make that policy so recently declared by the Chancellor invalid. That explanation must also be conveyed without delay to the civil defence officers whose terms of service he intends to terminate so abruptly.

Last Thursday, when this subject was being discussed, the Joint Under-Secretary of State, in reply to a further Question concerning whether it was the Government's policy to keep the organisation in a state from which it could be rapidly reactivated if needed, said: Yes, sir. It can indeed be reactivated … we are preserving the operational physical assets and the core of knowledge and expertise which would enable us to raise the level of civil defence rapidly if necessary, and the warning and monitoring system is being continued it existence. When asked how this organisation would be manned, the hon. Gentleman replied: … a great deal of work is being done by those in Government and local authority service thereby maintaining and manning the essential elements … Later, he said: The initial training required to support a continuously ready system of central and local government in war might cost about £2 million."—[OFFICIAL REPORT, 15th February. 1968; Vol. 758, c. 1552–3.] So we have the absurdity that, while £20 million is claimed to be the figure saved by abolishing civil defence in peace, we are told that it would cost only £2 million to raise it and man it in war time. One can only hope that the terms of compensation being offered to the displaced officers are based on figures not as phoney as those I have quoted obviously are.

One cannot emphasise too much that these civil defence officers deserve extremely well of their country. Their success can be judged—and they would be happy to be so judged—by the response of some of the volunteers in many parts of the country, who have refused to be disbanded. According to press reports, they are content to forgo their bounties and travelling expenses and some together to preserve some continuity in this vital task without support from the Government. This is a tremendous tribute to the way they have been guided and trained by the civil defence officers. It is right to point out that the officers are not concerned so much with their detailed compensation but are bitterly concerned at the Government's reckless dismantling of this vitally important organisation which they have built up.

A civil defence assistant controller wrote the following to me on behalf of his staff: For we, who have no axe to grind and certainly no grandiose sense of our competence. know, and can say with all honesty, that if the Government thinks that after any lapse of time a sudden alarm to arms will conjure up an effective organisation for civil defence based on us as in the past, they are most grievously mistaken. If the Government insist on hurtling down this Gadarene slope, and if the compensation for these officers is to be fair, it must be extremely generous.

7.27 p.m.

Mr. Eric S. Heffer (Liverpool, Walton)

This House is being asked to support a Bill which, like the package before it, can only be described as far as I am concerned as a piece of Parliamentary sharp practice. My hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) made the point that the Bill should not have been presented in this way. I agree with him, because when we look at its contents we find that some parts are more than acceptable to hon. Members on this side, while others—and the Government are fully aware of the views expressed—are anathema to hon. Members on this side.

For example, we have at the same time the abolition of free school milk in secondary schools and the speeding up of the process of building grants in development areas. I do not know of any hon. Member who would object to the speeding up of the process of building grants in development areas. Everyone will accept this as a progressive move. Changes in various fees are also largely acceptable. But when it comes to the question of milk being abolished in secondary schools and of workers once again being forced to pay another Is. per week in extra contributions for National Insurance, then I say that that is not acceptable to hon. Members on this side.

The Government have no right, and had no right when the package was first brought in, to place hon. Members in a position where they have to say to their constituents, "This is what we fought the election on, but we are going to vote against it in the House of Commons." I could not honestly go back to my electorate and say that, while I fought for the abolition of prescription charges, I now accept them. Perhaps some right hon. Members on the Front Bench do not care whether their election pledges were given or not. But I do care, and I am certain that most hon. Members agree that when they say something to those who vote for them they expect it to be carried out, or to hear a very good reason why it should not be carried out and why we are not prepared to do it. No good reasons have been advanced.

This Bill has both a positive and a negative side. Unfortunately, it is overwhelmingly negative, particularly in regard to National Insurance contributions.

As regards National Insurance contributions, we have to look at it fairly closely and see what is involved. In 1963 the contribution by the worker was 11s. 8d. per week. It is now going to be 16s. 8d. per week. This may not mean very much to somebody who is earning £100 a week, or £60 a week, or even £40 a week, but to a worker earning £10 per week before tax—and it is interesting to note that there are just on 2 million employees in this country who are earning between £10 and £12 per week before tax or any contributions are taken out—that extra contribution of 1s. a week is an intolerable burden.

It is no good talking about equality of sacrifice. There is no such thing as equality of sacrifice when, as has been said so often this afternoon, there is a poll tax across the board where people are paying exactly the same amount. To the £10 a week man 1s. is quite different from 1s. to the £100 a week man.

We also find that since the Labour Government took power contributions have gone up by 5s. per week. There was a positive side. In fact, the contributions from the employers, when there were increases to be made, were increased by a higher amount each time than those from the workers. With each contribution the workers paid less and the employers paid more. This was a deliberate policy by my hon. Friend the ex-Minister of Pensions. In this Bill the policy is being reversed. The workers are paying 1s. and the employers 6d.

My hon. Friend the Member for Plymouth, Sutton (Dr. David Owen) made an interesting point. It was a very thoughtful speech, but I did not entirely agree with him. I certainly agreed with him regarding no cuts in social services. Last June we were on the same side of the fence fighting the same battle. I cannot understand why we can be on the other side of the fence now that cuts in social services are being carried out.

My hon. Friend made an important point in saying that the employers should be forced to pay for short-term sickness. I am not sure whether his proposal is the best method. The same conclusion could be arrived at by putting the employers' contributions up to a higher level than those paid by the workers. That has the same effect, and that is what we were beginning to do. The ultimate was to bring in an entirely new scheme, which has been lost somewhere along the line in some review. I believe we could have continued the process of putting up the contributions of the employers to a higher level than those of the workers.

We ought to have alternatives, and that is one alternative. Why was it not done? Because we have been pussyfooting around the C.B.I., the Bank of England, the City, the international bankers and the Conservative Party in that period; because there has been a philosophy developed in our party in that period that apparently we have to be tough. Tough with whom? The employers; the bankers; the international bankers; the City; and the Conservative Party. They all say we have to be tough with the workers. But the workers are the people who elected us into power and expect us to carry out our policies on their behalf.

We can have an Iron Chancellor; we can lose all our support; we can go into the next election with a bunch of generals from the Front Bench and a few secondary generals from the back bench and no army behind us. This is how we are going on at the moment. It is important to remember why we were elected into this House and who we were elected to represent.

All my working life I have been a worker until I came into this House of Commons. I was very proud of that. I do not regard myself now as doing an honest day's work in the way I used to. I work very hard, but I do not make the same contribution towards the wealth of this country as I did when I worked in a factory or on a building site. But the workers elected me, and I represent them. I may not be working with them at the bench, but I consider it is my responsibility to represent people I have always worked with and who elected me into the House of Commons to be one of their spokesmen. They expect us as Labour Party supporters to be tough with our enemies; not to pussy-foot around, not to compromise with them, and not to give away every strategic position as we are at the moment without one shot being fired by the Opposition.

Mr. Frank Hooley (Sheffield, Heeley)

They do not even bother to vote.

Mr. Heffer

They do not need to vote. We just give away our positions. We cannot go on much longer like this. I am not talking about some stupid coalition or Conservative Government. The time has come when we, as a party, have to get back to the basis of our beliefs. We believe in a change in our society, and that means that we bring those at the lower levels of the ladder higher up rather than push them down. At a time of this Is. increase in the contribution, rents are also being increased in Liverpool by an average of 8s. 9d. a week. Bus fares have gone up; rail fares have gone up by a local decision, not a national one. This can be done at local level. All this is going on and our people are the ones who are getting the blunt end of the stick. We cannot have it much longer, and I say, as a worker representing them, we are sick of it. Those are harsh words, very harsh words—

Mr. Stanley Orme (Salford, West)

Fully justified.

Mr. Heffer

—but they have to be said at this moment of time. For we still have time—not very much time, but we still have it, and we can reverse the trend, we can get a better redistribution of wealth in this country.

We talk about having to take £800 million out of the economy. It was £400 million at first. Yesterday I discovered it was £800 million. I suppose that next week it will probably be even more. All this has got to be taken out of the economy. Remember, it comes out of the pockets of our people. They buy less.

We have got to find an alternative. I am not going to say that I know exactly what the alternative is, but we have to tell the civil servants that this is what we will not do, and we have got to find alternatives. We have got to raise this money in a different way.

One word on the question of school milk. I remember that when I was a boy going to school my mother gave me the money to buy milk. I think it was one-third of a pint that one got. I think that pre-war—in 1934—when this was brought in rind one had to purchase it, less than 50 per cent. of the children took advantage of it, because obviously they could not afford it—or it was not there to be taken advantage of. Now it is 58 per cent. or 60 per cent. That is a vast step forward. But that milk helped me very much. I will tell my hon. Friends this, that my brother died of tuberculosis when he was 21. Why? How did he get it? Because one lived in rotten, damp conditions in houses which ought not to have been lived in, because one could not get food that one should have got.

All that has largely been eliminated, but it is our responsibility as Socialists to continue with the important, vital social services which have been beneficial to the poor among our population and the fact that we as a Socialist Party are going back on what we did in 1946 is an absolute scandal. There is no justification for it whatsoever.

I do appeal to my hon. and right hon. Friends even at this late stage to reconsider the position. What is the amount to be saved on school milk—£5 million. We give £100 million per annum in the regional employment premium to various employers some of whom do not require any of it at all. Of that money £5 million could have been knocked off to save the free milk.

I finish on this note. I do urge my hon. and right hon. Friends to reconsider this whole matter. I feel very deeply about this. I feel passionately about it. Somewhere along the line we took decisions which were wrong decisions, wrong decisions because we have not had the courage and the strength and the boldness to stand up and fight. The time has come when we must fight. If this Labour Party went down fighting, well and good; but to go down by giving away our positions to the enemy without firing a shot in defence is absolutely disastrous and scandalous.

7.44 p.m.

Mr. George Younger (Ayr)

One of the things which makes having these debates in this House very well worth while is the standard of the contributions which are made when issues are discussed about which many people feel deeply. I should like to say what a pleasure it has been to see the absolute and obvious sincerity of hon. Members who have spoken, particularly on the other side of the House, and particularly the hon. Gentleman the Member for Liverpool, Walton (Mr. Heifer). I want to make it clear that I did not agree with all that he said: I suppose I disagreed with most of what he said, but when hon. Members are prepared to make speeches of that level of sincerity they make real contributions to Parliament, and I hope that the hon. Gentleman will not himself under-estimate the value of the contribution which he made.

Of course this matter is bound to raise the strongest feelings among many Members. It is bound to raise those feelings because it affects the lives of so many of the people who elected us to come here to represent their interests. It raises strong feelings, too, among those who feel strongly about these matters because by many of the Clauses of this Bill specific pledges made to the people who elected us are being broken by this Government. None of us, even those of us not of the Labour Party, ought to take such matters lightly.

I am very glad that the hon. Gentleman the Member for Walton and others have not taken these things lightly, because they matter very much indeed and they matter to us as Members of Parliament. They matter, too, to the standing of Parliament, the standing in which Parliament and politicians are generally held all over the country. I hope no hon. Members will feel that we take these things lightly, because ill will among the general public towards politicians naturally rubs off not on just one party or the other, but on everybody in all parts of the House, and that is something that none of us should take lightly.

We are debating this Bill against what the hon. Member for Plymouth, Sutton (Dr. David Owen), I think it was, called the background of public expenditure having got quite out of control. This may not be generally agreed, but I believe he was quite right in saying that, and it has got out of control, not because the Government have been rushing around and spending in a profligate manner, which would be quite bad enough, but because the economy from which the money comes has been declining, or at least relatively declining.

The awful lesson which has to be rubbed home, to many Members of the House certainly, but also to many people in the country, is that we simply cannot run steadily expanding social and welfare services if the basic economy is failing to expand. That is the fundamental point, and that is why the Government have today come to the point of introducing a Bill which I am certain 99 per cent. of hon. Members of the Labour Party thoroughly regret and deeply hate having to do. The reason for it, however, is that the basic economy of the country has been prevented from expanding for such a long time, at least three years now. If we can get that across, and if we do nothing else, in this debate, then I think that may lead to some of the harsh decisions which must be taken being taken by the Government, to avoid our getting into this position again.

I find myself in complete agreement with what the hon. Gentleman for Ebbw Vale (Mr. Michael Foot) started his speech by saying. I do not claim to be an expert in Parliamentary procedure and I do not suppose that I ever shall be, and I cannot make my comments from the same knowledge which the hon. Gentleman has after all his years in this House, but as an ordinary back bencher faced with this Bill and trying to make up my mind whether I support it or am against it and what I feel about it as a whole is a most terribly difficult task. It is a difficult task for hon. Members to be faced with a Bill like this, and the reason is that it is a conglomeration of different measures from different Departments of the Government, but all brought together in one Bill upon which we are supposed to make up our minds in one debate. It poses very great difficulties for hon. Members when measures are introduced in this way.

Clearly, it also poses very great difficulties for the Government in handling the debate. There is no doubt that there are practical difficulties. For instance, we certainly ought to have the Minister of Health here when a matter of such importance to his Department is being discussed. Certainly, we ought to have had the presence of the right hon. Lady the Minister of Social Security when matters of this kind are discussed. Perhaps it would be pressing the point too far to say that the Home Secretary should have been here all the time because of the reference to compensation to civil defence officers, but the point is there nevertheless. There are so many different subjects involved that it is physically impossible for all the principal Ministers concerned to be present all the time, but, because of the importance of the individual items, they ought to have been here, prepared to answer and to listen to the points which have been so well made in the debate.

I turn now to the background to the increase in the National Insurance contribution. It has already been pointed out that, only in June, 1967, we had the last increase. On that occasion, it was raised for mechanical reasons, so to speak, in order to keep the National Insurance Fund in proper financial balance. We were told that it was necessary for that reason and it would see things right for some time to come. Indeed, I believe, though I am not certain, that it was said that it would see things right until 1970.

When the Prime Minister made his announcement on 16th January, one assumed that we were supposed to accept the present proposed increase in the contribution because it was part of the post-devaluation package and it had to be brought in, regrettably, on that account. But not so. The reason for this increase also is actuarial. Purely for accounting reasons, there must be another 6d. increase now.

As the hon. Member for Plymouth, Sutton put it so well, it is incredible that we are so lacking in reliable information that the Government can say in June one year that an increase is necessary and will last for three years and then, only six or seven months later, justify the introduction of another increase on mechanical and accounting grounds. To adopt the words of the hon. Member for Walton, this is something which we cannot allow to go on.

If the information on which we are working is so inadequate that that sort of thing can repeatedly happen, the Government would carry with them backbench Members of all parties in providing the necessary resources to give better and quicker information. We should not cavil if that provision could be made by voting more money or making more people available. The running of a modern Government is complex enough, without our having to work on such patently inadequate information as these recent changes in the stamp have revealed.

Now, the question of the rise itself. I shall not repeat the observations already so well made by hon. Members about the effect of the extra contribution on employees, and particularly on those at the lower end of the income scale. The point has been well made. It has been true of all increases in the National Insurance contribution, and there have been many in past years. Whenever there is an increase, it falls hardest on those who can bear it least.

Nevertheless, it should be said that, at this time, the increase comes at a point when almost everything else, except the wages which people earn, is going up. There is a concentration of adverse factors on the family budget. We should take this seriously on both sides, not shrugging it off as just another price increase. The stamp contribution is going up at the same time as people's rents are going up, at the same time as their fares for getting to work are going up, at the same time as the cost of goods in the shops are going up, in spite of what the Consumer Council says, at the same time as taxes have been increased for those whose income qualify for Income Tax, and at the same time as all manner of other charges such as the prescription charge are going up. There is, as I say, a concentration of rises, to which this will add another 1s. a week.

While we are considering the position of the less well off sections of the community, I must add a word about those parts of the country where average earnings are substantially lower than they are in the more prosperous parts. I do not overstate the case, but these matters are important for those who live in the more remote areas. The difference in average earnings between the South-East of England and Scotland generally is estimated—this is to put it modestly—at between £1 and £2 a week. The 1s. rise may seem small, but it is another burden, and a relatively greater burden in areas where average earnings are lower and where, at the same time, the cost of living is in many respects high. This is, therefore, a problem which affects the development areas and remote places more heavily.

The hon. Member for Walton spoke of the regional employment premium. Doubtless, the regional employment premium is going to many who do not really need it. It is a thoroughly indiscriminate way of dishing out help to industries whether they are useful or not, whether they export or not, and whether they are deserving or not in many ways. As the House knows, we on this side intend to abolish the Selective Employment Tax and all that goes with it. However, if we are seeking a way to help the regions, it would be very much better to devise a system which gave help to people in the regions who are finding life more expensive and difficult because of the factors to which I have referred. If the regional employment premium money were used in that way, some of it at least would be much better spent than it is at present, being dished out indiscriminately, right, left and centre, regardless of need.

Now, the compensation proposed for redundant workers in civil defence. This is a matter which we take lightly at our peril. Of course, it is the easiest thing in the world, in the circumstances of early 1968, when one is looking for economies, to say, "Here are a few millions. If we cut them off absolutely here and now, no one will notice. No one will mind except those who are directly concerned. In six or nine months or a year, nothing catastrophic will happen as a result of the cut—certainly nothing compared with the great outcry when prescription charges are put up". Yet, in the long term, is this not, perhaps, the most irresponsible decision of all?

Have we reached the stage when we cannot afford to spend, perhaps, £10 million on an insurance policy to ensure that, if ever the unspeakably dreadful horror were to happen to Britain when there was some form of nuclear explosion or a catastrophe like that, possibly not through our fault, possibly because another great Power, by mistake, sent a nuclear device towards us, there would be people who could render vital service to the nation? None of us here today can foresee the many possible reasons for such a disaster, yet, for the sake of £10 million or so, the Government are prepared to disband completely the small company of devoted people who have, largely without remuneration, set themselves the task of finding out what would be needed and how it might be possible to save lives, however few, in such a catastrophe.

It is the easiest thing in the world to shrug it off, to say that it will never happen, that it could not happen and that even if it did, there would be no point in saving lives, but that is a terribly irresponsible attitude. For the sake of trying to square the books in this rather shabby money-saving exercise, which has to go on for other reasons, it is sad that this organisation should be scrapped, leaving the country in what might be unforeseen circumstances with no means of looking after people and saving life. It may be a consolation to the Government that this dreadful eventuality is unlikely and, if it happens, they are unlikely to be there to take the blame, but, none the less, the blame will be theirs.

I hope that they will have second thoughts about entirely abolishing civil defence. I do not know whether it is of any help, but I can tell them that those concerned would be more than willing to meet them any part of the way to carry on this service for little or no cost. If they have to provide it for virtually nothing, on a voluntary basis, with the minimum equipment and help and so on, they will do so as a service to the community. I hope that at any rate the Government will pay tribute to the spirit of those prepared to do for nothing what apparently costs too much to contemplate at the moment.

I should also like more information about this small change in the procedure for building grants in development areas. I know that the functions of the Board of Trade Advisory Committee have been largely reduced because of the change in the method of paying incentives and industrial grants and so on, but I wonder what is envisaged as a successor to the Advisory Committee. Clause 6 says that there shall be substituted for the present wording: 'after consultation, if the Board see fit, with the advisory committee (that is to say, an advisory committee appointed for the purposes of this Act by the Board)' I should like a little explanation. I find it difficult to understand exactly who is to have to consider these matters and it would be helpful to know exactly what is involved in applying for grants, by whom they will be considered and how.

I suppose that it is inevitable that the discussion should have centred round the two main and most painful things which the Bill involves—an increase yet again in the price of the Health Service stamp and the introduction of the 2s. 6d. charge for prescriptions. There has been same little misunderstanding about this last issue and I want to make it absolutely clear that this is one part of the Bill with which I wholeheartedly agree.

I have always said that the prescription charge should remain and I said that its removal was a mistake and I always called for it to be brought back. I never went so far as to say that the charge should be increased from 2s. to 2s. 6d., but I will not cavil at that 6d. either way. In some respects, the removal of the charge was probably the only election pledge of 1964 which was fully arid completely and immediately and swiftly implemented. I said that it would be a mistake from the point of view of the country's economy and expenditure on the Health Service generally, and it has been proved beyond all doubt that my view was correct.

The hon. Member for Plymouth, Sutton congratulated the Government on choosing between bringing back the prescription charges and cutting the hospital building programme. If that had been the choice, I would have congratulated them, because it would have been absolutely right to bring back prescription charges rather than cut the hospital building programme. But that was not the choice, for the hospital building programme has not been left. It has been cut and we know it. There have been announcements to this effect. A sort of editorial in the current edition of the magazine of the Scottish Western Regional Hospital Board starts with these words: The Secretary of State's announcement that the starting dates of a number of large capital projects in this region have been put back by various periods of up to a year is a bitter blow. I entirely agree that it is a bitter blow and I hope that the hon. Member for Sutton will appreciate what the Government have done. They have brought back prescription charges and cut the hospital building programme in one fell swoop, something which we shall not let go without mention.

Mr. Laurence Pavitt (Willesden, West)

Why is the hon. Gentleman so keen on putting an indirect tax on sick people, a tax which only the sick pay and from which only the healthy are completely exempt, when a 1¼ per cent. increase across the board could be absorbed and would give far more to the Exchequer than this charge?

Mr. Younger

I respect the hon. Gentleman's known sincerity on this issue and I am equally sincere the other way round. I have always believed that the prescription charge should be paid by all those people who are able to pay it and that the exemptions should cover all those unable to pay it. I have never been able to understand the great difficulty, suggested by several Governments, in the way of framing the exemptions. This seems much simpler than anyone cares to suggest. I have always favoured a system which would allow a doctor to prescribe on prescription forms of different colours for each category of exemption. In this way we could cover the chronic sick, old-age pensioners, children and expectant mothers. I cannot see that not to have a charge for prescriptions is justified when the Health Service as a whole is so desperately short of money.

Mr. Hooley

How does the hon. Gentleman propose to distinguish between wealthy old-age pensioners—and there are some—and poor old-age pensioners? Would a doctor be authorised to investigate the means of each patient?

Mr. Younger

That would be an excellent refinement. I do not know whether that would be possible, but if the hon. Gentleman cares to try to devise a method, I should be glad to help him. Perhaps he has in mind putting forward a Ten-Minute Rule Bill in which I can support him. When the Health Service is so short of money, it is completely unjustifiable that people who are well off should be able to get ordinary prescriptions for nothing. In the best of all possible worlds, that would be lovely, but when the Service is so short of money, this is the wrong priority. I have always said so and I say so now and I am glad that at last the Government have come round to my view.

8.8 p.m.

Mr. Emrys Hughes (South Ayrshire)

I have some sympathy with the view of the hon. Member for Ayr (Mr. Younger) that the Bill is a conglomeration of different items. As I shall speak largely about the situation in Scotland, I might say that it is rather a haggis of a Bill. We have oatmeal and liver and onions and everything mixed up into a most un-appetising and indigestible morsel. I can say that, because I am objective about these matters.

I want to deal with a subject which has troubled many hon. Members opposite, civil defence. I suppose that civil defence is the oatmeal and the other ingredients. One hon. Member laments the fact that not much has been said about civil defence for a very long time. When I was in Opposition I frequently asked the Leader of the House when we were to have a full day's debate on civil defence, but we never got it. Civil defence is presumably the defence of the civil population, but when it came to discussing how to defend the civil population we never had a day in which to discuss it; only now, when civil defence is being virtually wound up and the Government are going to save ultimately £20 million on it, do we have some attention being devoted to this subject.

If we are to have a war at all, I sympathise with hon. Gentlemen who say we need civil defence; but apparently the Government have come to the conclusion that we are not going to have a war, and I understand that in his last television speech in America, when tactical nuclear weapons were discussed, the right hon. Gentleman the Prime Minister dismissed the matter as "sheer bloody lunacy" I agree with him on that.

The Government have come to the conclusion that civil defence must be put on a sort of care and maintenance basis. They have knocked off £20 million, and now hon. Members opposite are complaining about it. I do not complain about this, because in the event of nuclear war I believe that civil defence is largely an impossibility; but in that case the Government might reconsider the question of cutting down some of the causes which may result in a nuclear war.

I wonder whether hon. Gentlemen opposite would say that nuclear war is now something against which we must not prepare, because it is obvious from the preparations being made by the Government in other directions that the Government are preparing for possible nuclear war. Otherwise we should not have had a Polaris submarine firing off an expensive weapon costing a million dollars. There must be the possibility of a nuclear war, or the Government would not throw away our money in this way. I am told that they sent a piper to be present on that occasion. I do not know what he played—perhaps a lament for the British taxpayer!

We have this dismissal of defence against nuclear war and at the same time the piling up of atomic weapons on the assumption that we are going to have a nuclear war. If we are going to cut out nuclear defence, there is a much greater reason for saying that it is impossible to defend the civil population in a nuclear war and we should therefore cut this enormous preparation for a nuclear war for which we shall be asked to pay, probably next week.

I sympathise with those hon. Members who say that the volunteers in civil defence are worried about their organisation being wound up. I was interested to learn that they were to have a parade of posters protesting against civil defence cuts, and taking place in Whitehall—a sort of Aldermaston march in reverse!

If the Government adopt the idea that a possible nuclear war is sheer bloody lunacy—I apologise for using the word "bloody", but it is the word used by the Prime Minister—then we have to examine carefully the enormous bill which is still going to be met by the taxpayer under a Bill which we shall be asked to sanction when the so-called Civil Estimates come before us. I sympathise with those who ask for better treatment for these volunteers, but I have come to the conclusion—and I support the Government on this—that they cannot do very much, and it is time to be realistic, so that this part of our organisation should be wound up, with a saving of £20 million.

Now comes an item which we on this side of the House object to very strongly, and that is saving at the expense of school milk. As has been pointed out already, this has occupied the minds of the Labour Party for very many years. I remember that when James Maxton came to the House of Commons this was one of the first things which led to the suspension of the Clyde Group. Some Conservative Ministers at that time were advocating cutting school milk, and Maxton called a Minister who did this a murderer for depriving slum children of their milk. The House did not have so much imagination as the Clyde Group, and Maxton and his colleagues were carried out protesting. Now, however, we have a Labour Government, for which Maxton and others gave their lives, saying "We are desperately hard up; we must cut school milk and students' bursaries and make other economies of this kind."

What about school milk? It has been pointed out that these cuts will bear hardest on the poorest of the poor. I remember hearing the Prime Minister make a very able speech at the last Scarborough conference, in which he referred to the achievements of a Labour Government and to the crimes of a Tory Government, and in giving a catalogue of the sins of the Tories he said "What the Tory Party did was to put a heavy weight on prescription charges and put a burden on the poorest of the poor, who were least able to bear it." That is what the Prime Minister said, and so we believe that we are justified in making the strongest possible protest in this House at the present time.

I speak for a constituency in Scotland where there is a certain number of miners who are comparatively well paid, but there will be closures of the pits, and I have been told only this week that there will be pockets of unemployment in some of the isolated mining villages. Although I believe that the Board of Trade is doing its best in many ways, yet we are likely to see an increase in unemployment in these mining villages during the next year, and our older people will not be able to get jobs. It is the elderly who will suffer, people over 51. Many of them are suffering from what is called "miners' disease", a chest disease, and these people will have need of prescriptions.

The poor people and their families will suffer. Some of the younger men will have children going to school. The increase in the cost of living—everybody in Scotland knows that the cost of living is going up—the increased charges and the reduction in income will bear heavily on the children going to secondary school. It will not be those who go to Gordonstoun who suffer. There will not be much suffering by the people who go to Rugby, Eton or Harrow. But anyone acquainted with working-class life knows that there is a grave danger that, as a result of shrinking incomes, there will be hardship among the people receiving the lowest wages.

I protest against this. It is completely unworthy of a Labour Government. In making our protest and refusing to vote, we are expressing the will of our constituents. The question will naturally be asked: suppose there is a very large abstention among Members on the Labour benches, will the Government fall? Suppose by some accident, by some computation which is impossible to imagine, with the Opposition lining up as a coalition with the Government, that the Government were to carry the Motion by only one vote; or suppose that by some miracle they were defeated on this issue. Would the Prime Minister hasten to Buckingham Palace and put his resignation before the Queen? Not on your life! This is the bogy which has frightened some of my hon. Friends.

I have heard the Prime Minister accused of many things in the last few months, on many occasions unfairly and unjustifiably. I have never indulged in those accusations. But I have never heard him accused of having suicidal political tendencies. Therefore, if the House asserted itself, if Members voted as they should vote, the Government would be in a very difficult position. What would they do the next day? There would be a Cabinet meeting in Downing Street, and the Prime Minister would say, "Lady and Gentlemen, the House has come to a certain decision. Are we going to the country?". They would put up their hands in horror and say, "Oh, Harold, no, no, no." Then the Prime Minister would come to the House next day and say, "The Government are going to do the democratic thing and accept the majority decision of the House of Commons". Of course, that is what has happened before—from time immemorial.

Therefore, I urge my hon. Friends not to be deluded that we shall have a General Election if the House rightly decides that school milk, prescription charges and all the rest of the social security cuts are not necessary in the interests of the country. I have not the slightest idea about what goes on in the Cabinet, except when I read the "leaks". But I know that the Cabinet has been discussing these things. I am, I hope, a House of Commons man and believe that this House should be the boss of the country and not the Cabinet. The Government should pay more heed to what the House thinks. I should be delighted tonight if the Government got a severe shaking on this matter. I hope that they will get it, if not on this issue, then on prescription charges. It will be a good thing for the Government, a good thing for the country, and a good thing for the future of the Labour Party.

8.25 p.m.

Mr. Edwin Brooks (Bebington)

This is a Second Reading debate, but there have been occasions, notably in some of the recent speeches from this side of the House, when one has gained the impression that this is a Report stage debate, with Clauses 1, 2 and 3 being fought line by line. I think that this degree of acrimony is inevitable in a Bill of this sort when we are trying to discuss its principle, because it is an unprincipled Bill. It is a rag bag of a Bill and, with due deference to my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes), it is a Scotch broth of a Bill.

Nevertheless, my hon. Friends must ask themselves why the Government have felt it necessary to bring forward the Bill. We are perhaps living in unprincipled times, and at times like this, just as the devil has all the best tunes, so sometimes the Left seems to have a good chance of capturing all the best causes. This is one of the difficulties when we have an argument over policy being muddied to some extent by the debate over party tactics, leading to polarisation within the Parliamentary Labour Party which makes the debate on policy all the more difficult and bitter.

The Government, who have the right to expect the support of Members who are elected to maintain a Labour Government in power, should nevertheless recognise that many of us who go into the Lobby with the Government have some very grave reservations about the events not only of the last few weeks and months but since October 1964. This is the Government who pride themselves on their pragmatism. At times I am tempted to say, "A pox on pragmatism!" We have had too much of it.

That is not to say that there is not a time for realism. Indeed, I think that even within the Bill there is a sign of welcome realism, but, like my hon. Friend the Member for South Ayrshire, I agree that the time is long overdue when we should have ended this sham and delusion of civil defence. There are good things in the Bill, but the realism of it has been absent from many of the debates which we have had.

I think that it was my hon. Friend the Member for Liverpool, Walton (Mr. Heller) who somewhat chastised my hon. Friend the Member for Plymouth, Sutton (Dr. David Owen) by asking why, apparently, he was no longer fighting to oppose the social cuts which several hon. Members, myself included, lobbied about last September. He asked, "Where is the difference now?" The difference is simply that we have devalued. Devaluation was no victory it was a defeat, and there is no doubt that some of my hon. Friends, including some of those who tonight so passionately attack the Government, completely misunderstood just how much of a defeat it was and is bound to be seen to be in the months ahead when it casts its shadow.

Let there be no doubt that if the country must have a second devaluation later this year or next year, it will not be just a defeat for the Labour Government. It will not be just a defeat for social democracy, although it will be that, for my lifetime. It will almost certainly be a defeat for Parliamentary democracy. Many of us on both sides of the House are well aware, as we have debates on our economic predicament, that there is an ominous resemblance between what is happening in this country in the late 1960s and what happened in France in the late 1950s. There is a growing mood of bitter disillusion with the institutions of Parliamentary democracy.

We, too, have those who call for a strong man. We have the strong men, the Cecil Kings—or perhaps one should say the Cecil King-makers—seeking in some of our erstwhile colleagues men who will put the Government straight and the country right by making Great Britain Limited their goal and objective. It is a curious thought that those who put forward this idea were at one time those who looked upon the problems and difficulties of our society from a Socialist standpoint. There is sometimes a danger in our excessive patternalism that we shall move into what is not very far removed from National Socialism.

It has been said several times tonight that public expenditure is out of control, and I think that that is true. We have had several examples tonight, and one could easily add more. One could cite the fact that in one of the sacred cows we were told was not to be sacrosanct, the Concorde supersonic airliner, we have had an escalation of costs by 3½ times in five years. The intramural expenditure on the aeroplane, in addition to £500 million research and development charges, amounts to £28 million borne by the British. When we are discussing priorities, as we must be implicitly when we discuss the Bill, it is relevant to ask for whom that type of extravagant venture is designed. Which of our constituents who voted for us in the full flush of enthusiasm in 1964–66 are particularly enamoured with the thought of flying across the Atlantic so fast that they will take a whole day to catch up with the time changes. The intramural expense of £28 million for those costs has escalated three times in two years, yet tonight we are having a bitter and difficult argument for hon. Members on this side of the, House about the odd £1 million here and there.

A few years ago the Government took a decision which I supported, and still support, to cancel the TSR2. One of the really alarming things was not the argument for or against the plan but that the cancellation charges which were expected at the time of cancellation proved to be wholly in error by a factor of almost two to one. That again shows how public expenditure is now reaching crisis proportions and threatening the very sovereignty of Parliament over the basic task of allocating priorities, which must be measured in terms of financial expenditure.

We have talked a great deal about priorities in the debate. So much of what my hon. Friends have said has been to argue, as one can readily understand, that the priorities in the Bill, particularly those exemplified in the first three Clauses, are wholly mistaken. We have talked about sacred cows. I do not know what is wrong with having sacred cows at times. I suppose that one can scare the life out of a sacred cow by behaving like a bull in a china shop, and to some extent that is what we have done in the panic reaction to some of the problems we faced in December and January. The problem, which I suppose is inherent in any modern advanced society, is reconciling growth with some sort of social principle of democratic equality, call it what one likes, and the inevitable tension between the two.

I think that at times we have forgotten the lessons of history. Looking back over the past 100 years, we find that the sort of growth rates which we seem to take for granted in Britain, Western Europe and elsewhere today as being quite compatible with our institutions of government have only rarely been achieved since 1870 in this country. It is the exception rather than the rule to have growth rates of 4 per cent. a year continuously. We must recognise that this will not come about simply by repeating the old nostrums.

Hon. Members have made the point that it is because the Government have failed to ensure an increase in production that so many of these problems have come upon us, but when we look at these problems of growth I sometimes think that those, on this side of the House, who feel strongly about problems such as Health Service charges are ignoring that history does not stop still and that many of the problems which they are talking about tonight are problems which they experienced 30 or 40 years ago. There is no doubt many of the problems which a country with 3 or 4 million unemployed had to face in the 1930s are not the problems which are being faced today. It is essential to have at least an understanding of the need for change in our social priorities.

It may be said that to cut out milk from secondary schools is a cheap and nasty way of getting economies, and I certainly could not rejoice at such a step in itself or in any other framework. Let us, however, ask ourselves whether, perhaps because of the last 30 years or so of growing State paternalism, we are beginning to produce in the minds of people an assumption that the whole responsibility for bringing up families and running their lives, is fundamentally the responsibility, not of themselves, but of the State.

It has been said, for example, that one alternative to taking away the free milk would be to increase family allowances, but many hon. Members have expressed anxiety that that might not in practice lead to the children in need being given the nutrition which the loss of school milk involves. What we are saying is that we cannot trust people to look after their own children. Let us have no doubt about public attitudes. That is what lies behind so much of the public objection to the increases in family allowances which certainly hon. Members on this side publicly advocate.

It is often said that a person who gets a family allowance immediately spends it on bingo, on drink or on tobacco. That is a wilfully mischievous misrepresentation. It is to some extent true, however, that in certain parts of our society too many people rely upon the State to bail them out of the difficulties into which they get themselves. This is a problem of paternalism which comes back to my earlier point about the attitude of the Chairman of the National Coal Board: let us surrender our freedom to those who know, and all will be well. Of course, those who know are always the ones who put forward proposals like that, and when they get into power they are difficult to shift.

Inevitably, a debate of this sort is bound to stray widely because we are discussing some of the major problems which face us as a country and, certainly, us on this side as a Labour movement. Some of those who are representing Britain as a country on its last legs are talking nonsense, and mischievous nonsense. As has been pointed out tonight, this country has a splendid record since the war in the development of exports. It is a first-class effort by a country which has bled itself white defending freedom in two world wars.

Let us not forget the price which has been paid by a million men in the First World War and by vast treasure as well as human life in the Second World War. The country has made a spectacular recovery in so many respects from the effects of those disastrous wars. We should be proud of that achievement and far less willing constantly to compare ourselves adversely with those on the Continent against whom not so long ago we were defending our freedom.

It has been said that we are a strong country and therefore do not need to carry out these economies. This policy is going to the wrong extreme, because the fact remains that our position in the 'thirties, in terms of the balance of payments was, as we all know, fortunately helped by the possession of vast overseas investments. To some extent what we are seeing in the 'sixties is our coming to terms with end of an empire. This is a painful process, involving very considerable economic reorganisation and sacrifice.

It is all the more difficult for this reorganisation and sacrifice to be carried out by a Social Democratic Government, given the sort of mixed economy and mixed society that we have in the context of an essentially world capitalist order, than it might be perhaps if we were all too tamely to follow the nostrums offered to us by the party opposite. The task is still worth fighting for, and my criticism of this Government is that they have been far too timid as a Social Democratic Government. They have been far too pusillanimous at times in following the orthodox, the conventional wisdom.

My hon. Friends who have expressed their intention of abstaining tonight should not think that they are the only ones concerned about the future of this Bill, and this Government. This is a difficult decision for any of us, but what is important is that the argument over policy should go on and should not be diverted, deflected or distorted by arguments of personalities and the problems which inevitably arise over disagreements about the tactics as distinct from the essence of what this argument is all about.

8.42 p.m.

Mr. Hector Monro (Dumfries)

I do not want to follow the hon. Member for Bebington (Mr. Brooks) in his very sincere speech. As usual he has explained his own views carefully and persuasively. I want to put a very short point relating to Clause 4 and civil defence. It has to do with the compensation which is vitally necessary, although it is very disappointing that this should arise.

The permanent staff of the Civil Defence Corps has set a wonderful example to the volunteers, who in return responded to their leadership and training, becoming a first class service. I have no doubt that those who are employed on the permanent training staff of the Corps will have no difficulty in finding jobs, even in the present trying times because of their qualities of leadership and their training. We must treat them generously because they came into civil defence with the expectation of a whole-time career, reaching until retirement age.

To be suddenly put out of their jobs at very short notice must be a very shattering blow to them. This applies not only to those members of the permanent staff of local authorities, joint police committees and watch committees who are responsible for running civil defence, but also to the civil defence college staff at Taymouth Castle and at Sunningdale, all of whom have done exceptionally fine work.

The hon. Member for South Ayrshire (Mr. Emrys Hughes) never believed in civil defence, and I will not follow his arguments. There are aspects of the work other than that dealing with the nuclear deterrent. Civil defence now plays a most useful part in dealing with any national disaster, such as Aberfan or the recent hurricanes in Scotland. There civil defence played a very full part, having immediately at its disposal radio communication facilities, emergency cooking, and the general "know-how" to deal with such abnormal situations.

This is not the moment to pay tribute to the Civil Defence Corps, to its permanent staff or to its volunteers. Those tributes will be paid later. However, when the Government bring in the Order to implement Clause 4, I hope that they will be as generous as possible. It has been a cruel decision for the Civil Defence Corps' permanent staff to have to be told that they must leave their jobs at the end of March. They have given long hours of work, often well into the night, with the consequential interferference in their domestic arrangements. It has not been an easy task. However, they have always risen to the challenge and done a first-class job. January and February will hold sad memories for the Civil Defence Corps and will go down as the time when its members learned that the end of the road for them was in sight. The Government will regret their decision. I think that they made it hastily without realising its full implications.

When we return to power, I am certain that we will realise the great value to the nation of the volunteer spirit. I hope that we shall set up a Civil Defence Corps which will be of great value to Britain and bring it up to the highest state of modernisation in the context of the national situation as it will be then. I am certain that we will do something on those lines. In the meantime, I commend the volunteer spirit which the Civil Defence Corps has shown. Because of that, I hope that the Government will be as generous as possible.

8.47 p.m.

Frank Hooley (Sheffield, Heeley)

I will not comment on the arguments of the hon. Member for Dumfries (Mr. Monro) except to say that I hope that the Government have given some consideration to the problem of rendering civil assistance in peacetime and are satisfied that the apparatus necessary is completely adequate when the formal civil defence mechanism is wound up.

I do not share the view of some of my hon. Friends that the International Monetary Fund is a body to be viewed with suspicion and dislike. I believe that the I.M.F. is an extremely important mechanism in international affairs. It has contributed a great deal towards the solution of certain problems that the country has encountered in the last 20 years, in addition to contributing to the maintenance of a system of international payments and currency transactions without which grave catastrophes might have befallen the economic systems of the countries of the world. Without the standby credit which has been negotiated, this country might have been forced into economic policies which were far more disastrous for our people and for the world at large.

If anything the Fund has not developed a sufficient sophistication and a sufficiently advanced rôle in the world's monetary affairs. We shall not solve our balance of payments problems and those of the United States until the International Monetary Fund has power to manage a reserve currency to supplement sterling and the dollar. Unfortunately, that day is so far ahead that we nave been forced into devaluation to solve our immediate problems. Consequently, we have to consider those policies which will make devaluation work from the point of view of our own affairs.

It is argued that to make devaluation work it is necessary to divert resources from public and private expenditure so that we can concentrate on exports. I am not persuaded that public expenditure takes an undue proportion of our national wealth. Figures which I have seen seem to indicate that, by comparison with other advanced industrial countries, we are by no means out of line. Where we are out of line is not in public expenditure but in private consumption, which takes an undue proportion of the wealth that we produce. Therefore, I am not happy about the proposals which the Government have made for cutting public expenditure, because I am not sure that they are sound in pure economic terms.

There is a certain logic in cutting back on things like roads and schools where there are physical resources being used and where we can possibly dispense with the use of labour and materials and divert them to other projects which may contribute to export. However, I can see no logic in cutting expenditure on school milk which can make no contribution to export performance and can only be damaging in a general way to the health of schoolchildren.

It has been suggested that only 60 per cent. of school milk is taken up. On a rough calculation, this must mean that about 2 million children take it. To take away this facility from about 2 million children is retrograde and foolish. It seems fantastic to argue that a social service which has existed for many years should be discontinued when we are in fact richer than we have been for a long time. I cannot see any economic or social logic in this action.

Mr. David Winnick (Croydon, South)

Would my hon. Friend not agree that if milk is to be discontinued it should be done only after a great deal of research and not as a panic economic move?

Mr. Hooley

This is part of my argument. I am not persuaded by the arguments advanced that there is a logical case for this action in either economic or social terms.

Concerning private expenditure, clearly one weapon is taxation. I am appalled that the Government have chosen a method of taxation which is regressive and falls severely on the lower income groups. It is accepted all round that taxation in the form of the insurance stamp is regressive and bears most hardly on the poorest families. I will illustrate this with some figures. The 16s. 8d. stamp represents 7 per cent. of the gross income of a man earning £12 a week and 5.5 per cent. of the gross income of a man earning £15 a week. Translating that into terms of the wealthier, it is equivalent to a £140 annual charge on a man earning £2,000 a year, and a £350 annual charge on a man earning £5,000 a year. The order of charge we are making on the lower income groups is 7 per cent. for a man earning £12 a week and 5.5 per cent. for a man earning £15 a week. This demonstrates that the limit has been reached and in fact surpassed for levying taxation of this kind on people in the lower income groups.

I do not see why we cannot, at the stage of sophistication in tax matters that we have reached, substitute for this evil poll tax a graduated social security tax which can be levied according to income. It would have many advantages. It would produce greater revenue at a time when employment was high and the economy booming and provide even more funds for our social services.

It seems entirely wrong that we should persist in the flat-rate contribution, which is not sound in insurance terms. The flat-rate contribution provides only 60 per cent. of the Insurance Fund. It is not a serious actuarial calculation. I regard it as an out of date form of taxation and I hope that the Government at an early date will replace it.

3.54 p.m.

Mr. Eric Ogden (Liverpool, West Derby)

I will take two points from the debate. Clause 4 provides compensation for possible redundancy among civil defence workers. I cannot understand why the Opposition are prepared to allow this Clause to go through unchallenged, bearing in mind all the implications in it for further measures on civil defence. I do not see the logic of saying, "We will accept Clauses making provision for redundancy", without putting their opposition into more concrete form than they Lave tonight.

I deal first with the suggestion about alternative sources of revenue. Hon. Members opposite have opposed the S.E.T. and the regional employment premium. This assistance to industry and employment in the development areas is the reason why I am here tonight, because in 1964 and 1966 in Merseyside and other development areas there was a great feeling that the imbalance of the economy between the "two nations" of the South-East and the other regions was wrong and that these two measures would help correct the balance.

It is said that penance is good for the soul, and I have been doing my penance by sitting here tonight to share responsibility for the Bill. If penance is good, my soul should be improved, but I found no joy in the debate. Yet I doubt whether it does politicians harm to eat a Hale humble pie from time to time. The noble Lord the Member for Hertford (Lord Balniel) and some of his colleagues made some party points but at least had the grace to show restraint.

The hon. Member for Louth (Sir C. Osborne), however, said that we were guilty men. It is a strange trial in which the accused on this side have outnumbered the accusers, the Opposition, throughout the debate, in which a series of speakers have been called from this side simply because the Opposition could not call up more reserves, in which the Liberals, who will divide the House tonight, were absent for large parts of the debate, in which the official public prosecutor, the noble Lord, agreed with the actions of the accused if not with the reasons for them—I think that he would agree that he mainly favours those measures in the Bill—in which half the accused have added their own charges against my right hon. and hon. Friends above the Gangway, and in which the independent prosecutor from the Liberal benches stirred up mayhem and mutiny.

My hon. Friend the Member for Liverpool, Walton (Mr. Heffer) was a little unfair to suggest that the only friends of the Bill are on the Government Front Bench and that some of our friends on the Front Bench cared little about their election promises. I do not think that they like the Bill any more than we do.

I notice that fourteen right hon. and hon. Gentlemen have spoken before me. The order of calling rather disturbed me, since six Conservative abstainers were called and five Labour abstainers—selfconfessed, honest men—and one Liberal opponent. Only with the falling-off of the debate on that side were some Labour supporters called. My speech makes the total—

Mr. Deputy Speaker(Sir Eric Fletcher)

Order. I assume that the hon. Gentleman is not making any reflection on the Chair.

Mr. Ogden

If that was the impression, Mr. Deputy Speaker, it was not my intention. I make the tally 5–1 at the moment against those prepared to go into the Lobbies for or against the Bill—

Mr. Emrys Hughes

if my hon. Friend had been here a little more assiduously and a little earlier, he might have been called.

Mr. Ogden

If my hon. Friend had eyes in the back of his head, he would have seen that I have been here for a lot longer than he has.

If Parliamentary reform had advanced to the stage at which only those prepared to vote could take part in the debate, this Bill would have had its Second Reading hours ago. I like this Bill as little as my hon. Friends, either above or below the Gangway. It is a hotchpotch. The only reason for it or for our supporting it is that necessity compels—and it might have been a great deal worse.

I have heard many hon. Members putting forward suggestions about what we should or should not do in regard to Government expenditure. No new ideas seem to have been put forward tonight and, certainly, the ideas which were put up have already been put up, considered and rejected. But what shall we do when our own Government receive points to consider and then turn down those proposals? Should we sulk? Should we thank the Liberals for giving us a chance to abstain, or should we vote against the Government? After all, as my hon. Friend the Member for Ayrshire, South (Mr. Emrys Hughes) has said, this is not a vote of confidence in the Government; this is a two-line Whip. There are no terrible penalties for those who support or do not support or abstain on this. No one tells us how we should vote. As I see it, it is not a question of whether we should or should not go into the Lobbies to support the Government, in order to avoid a general election. It is not an exercise in persuasion; we should be leaving it a little late if we tried to persuade the Government tonight. Certainly, it is not a question of conscience and I do not think anyone has put that forward tonight.

As I see it, the question over the broad issue—and, again, I like this Bill as little as any—is whether I have to accept my share of responsibility for the Bill being here tonight, whether I have to decide that I support this Government only when they do what I want them to do, or whether I have to share responsibility and support them when they do things which I do not like. I have put forward my ideas and the Government have turned them down. There is only one answer as I see it, and that is that I was sent here to support the Government when they are right, and also to support them in the Lobbies when they are wrong. Persuasion is a long way off, but it will be extremely interesting to find out just who goes into the Lobbies tonight.

9.0 p.m.

Mr. Michael Alison (Barkston Ash)

The hon. Member for Liverpool, West Derby (Mr. Ogden) cast a few aspersions about the relatively empty benches on this side of the House today. But I hope he will get my point when I tell him that we on this side of the House believe in what one might describe as the division of labour; that is to say, if there is going to be plenty of criticism coming at the Government from its own benches, why be here? The criticism is evidently present and the division of labour is a rational, political and economic procedure, so I hope we shall hear no more about that tonight.

I should like to start by saying that this Bill really cannot be called a very momentous one in terms of the sheer scale of finance which it involves. It is effecting reductions in Exchequer and local government expenditure amounting to some £17 million. This may be compared with the latest total of Civil Supplementary Estimates which I have here—it is a bulky volume—for the year ending 31st March this year, which gives us an increase in projected Government expenditure of £562 million; a figure which is 30 times as large as the cuts which we are talking about this evening. So against this relatively small financial Measure, we have the continuing process of what one might call the natural momentum of growth in Government expenditure. When one compares this Bill to the total Government expenditure which is likely to be realised for the years 1968–69 and 1969–70, as the Chief Secretary knows very well, we are in the figures of £15,000 million, and by comparison the figure in this Bill is eclipsed almost into extinction. So it cannot be called a very momentous Bill in terms of the sheer scope of finance.

But it has a wider significance which is out of all proportion to the simple scale of finance involved, to the mere cuts in expenditure of £17 million-odd, because the Bill amounts to the first specific statutory proposals to come forward before this House from the Government, implementing those momentous announcements from the Prime Minister of 16th January this year. In other words, it is the first tangible product—this rather limp and tawdry little Bill—of the new thinking process going on behind the scenes in the Government following devaluation. Put another way, it is the spearhead—and we are bound to regard the Bill in this light—of the Government's attack upon the new problems facing this country in the year of devaluation.

One is bound to make an appraisal of the Bill in this context, not simply in terms of the volume of money involved, but as an instrument of change, as a spearhead of attack upon the nation's problems. Against this background, the Bill can only be described as utterly laughable. What a trumpet note it sounds to the country for the advance into the promised land that the Prime Minister held before us—the promised land of higher exports, of import substitution, of a huge increase in productive capacity to get industry on its feet again, let alone the promised land of Socialism.

By talking about trumpet notes I have been diverted from dealing with the rather vivid description given by the hon. Member for Liverpool, Walton (Mr. Heffer) of the way the forces were likely to divide tonight, with the generals on this side, as he picturesquely described us, marching without their army away from the sound of the gunfire, with the little Liberal Party marching towards the sound of the gunfire, and, I imagine, with the hon. Member for Walton and his colleagues below the Gangway pussy-footing with the Opposition in the Members' Lobby on an abstention. This is the sort of note of advance that the Bill sounds. It is laughable.

The laughter is bound to dry in one's mouth as one considers the Bill against the background, not only of the task it is meant to achieve in terms of reforming the Government's economic policy, but of the more human aspect of the hurt it will do. It is legitimate to consider this as the first aspect. The first charge that the First Secretary will have to answer, and the main criticism of the Bill by the Opposition, is that it will hurt people. Our main indictment in criticising the Bill and the Government's whole economic policy, of which the Bill is simply the tip of the iceberg, is that this bungling mismanagement of Government economic policy is what has resulted in what can only be described as a crisis measure. Whenever the Government respond to a crisis, it is always people who get hurt rather than things. A Government in control of an economic situation can moderate and adapt national policies for investment and for the deployment of productive resources so as to control the procedures affecting things. But when a Government are involved in a crisis, when something hits them, when the economy is blown off course, to use the euphemism of the day, it is people who get hurt before things.

Let me give a vivid illustration by quoting something which the Chancellor said when discussing the measures which would have to follow devaluation. I quote a passage from the speech he made the day after the crisis measures were announced: It is also the reason why, in many cases, we have had to go for identifiable cuts involving policy changes. Only in this way is it possible to make substantial short-term savings without the economic nonsense of stopping construction schemes halfway through, or failing to provide running costs after capital expenditure has been incurred."—[OFFICIAL REPORT. 17th January, 1968; Vol. 756, c. 1792.] The economic nonsense that the Chancellor talked about was the polite but academic way of saying that if the car has to stop suddenly it is the "bods" inside it who will get hurt. It is a roundabout way of saying that if you are hit by a crisis, you have not the time, the scope or the room for manoeuvre to do rational things in terms of investment projects in nationalised industries. You go for the cuts that hurt.

The indictment against the Government is that the first instrument which they produce in response to a crisis is something which is going to hurt people. It is going to leave unaffected the investment programme of the nationalised industries in the short-term and inanimate things of that nature, but it is the people who get hurt first. This is always the effect in response to a crisis over which the Government have no control.

Eric Lubbock (Orpington)

I was wondering why, in view of the hon. Gentleman's criticisms, he is not going to help us and divide against the Government on this Bill.

Mr. Alison

The hon. Member for Orpington (Mr. Lubbock) must hear me out. I hope that I shall be able to satisfy him by the end of my speech.

I should like to turn to the first category of people who are going to get hurt. Here my eye falls, as it always does in these sorts of debates when social services and cuts are under review and when there is criticism in the wind for the Government. upon the hon. Member for Penistone (Mr. Mendelson). One remembers vividly the immediate reaction he had to the Prime Minister's announcement on 16th January. In almost the first supplementary, he put a very fair question to the Prime Minister about the 8 million lower and lowest-paid workers and how they were going to be affected by the prescription charges.

It is fair for the Opposition to criticise the Government—and I am not going to accept any accusation of humbug from the hon. Member for Penistone—on a Measure which, although we approve of it in part, we totally disapprove of the context and the manner in which it was introduced. The truth about these new impositions upon the category of people to whom the hon. Member for Penistone drew attention is that not only will they get the full blast of the return of prescription charges, but that they will get the full blast of the poll tax, the increase on the stamp.

The point which we want to stress is that this comes in the face of a period of severe restraint on wages, in a period of massive and deliberately permitted increases in prices in basic commodities resulting from devaluation. It comes within the context of the niggling extra charges after devaluation, such as the extra electricity charges, and in the context of goodness knows what we are going to find in the Budget. It is a fair point for the Opposition to make that we disapprove of this sort of change in the context in which it is taking place.

The hon. Member for Penistone has a long-enough political memory to recall that Lord Butler, when a Member of this House, as Chancellor of the Exchequer introduced a Budget in 1952 which brought in for the first time since the war a cut in the food subsidies, which worked out at a cut of something like £250 million or £200 million off the food subsidies. It resulted in an imposte per capita on the community at large of perhaps 1s. 6d. per head in the extra cost of living. But this was associated with a packet which was very different from the one which the Government are presenting to the nation tonight. It was associated with substantial increases in social service benefits, in family allowances, in tax allowances and, indeed, with a drop in the Income Tax rates. This was the context in which a perfectly valid Tory philosophy was introduced.

One of the things that makes the mud of humbug fall lightly on Members on this side of the House is that we notice that friends of the hon. Member for Penistone and those who sit with him have done nothing in the last two years about urging the reintroduction of food subsidies, which would have been a rational programme to argue.

Mr. Mendelson

I have also been here long enough to remember that in one of the Budgets during the Tory Administration they at one and the same time returned £81 million to Surtax payers, £19 million of unearned income, and they put up the social service and prescription charges. My fear is that if the party opposite got into power again, they would do exactly the same thing and concentrate all the burdens on the lower-paid workers.

Mr. Alison

Whatever the hon. Member may say, I can tell him that the country at large is sighing a deep sigh, "Give us back Tory Budgets" in the light of what we will get on 19th March. It is all very well for the hon. Member for Penistone to argue that point, but what about the reductions in Surtax? Have the Labour Party reintroduced them on a comparable scale? Have they reintroduced food subsidies? They criticise the cuts, but they do nothing about them. Their arguments, therefore, are not very convincing and certainly not damaging.

We say that this tawdry, irrelevant instrument is so completely disconnected with the real needs of the country that we must have an assurance from the First Secretary that it fits into some kind of rational scheme as the main justification for the changes which the Prime Minister announced. My heart beat as one with the hon. Member for Penistone and his hon. Friend the Member for Walton in asking precisely where in the Bill is the spearhead of change and the instrument for causing a massive shift of resources from home consumption to exports and to investment. We cannot find them anywhere.

It is not only the category to whom I have referred who will be hurt by the Bill—and it is the people who will be hurt whom we should be thinking about tonight. It is the Government's policy to introduce as a measure of economic change something which will change people and not things. That is part of our indictment against the Government.

Our concern is not only for the people who will have to pay more and who will get less, but with the category which s referred to in Clause 4—the civil defence workers, about whom I want to say something.

The compensation item in Clause 4 might at first sight give cause for gratification but I think that the reverse will be the truth. The pay-off which this trivial sum of £250 million represents will be regarded by the professional and voluntary civil defence workers as almost a humiliating and insulting bribe to get out of the picture of national voluntary service. It is like getting a sixpenny tip from a millionaire, and it is an insult to the whole corps of voluntary workers.

We come back to the question which has been put from below the Gangway on the Government side: what conceivable relevance can this sort of Measure have to the massive shift of resources—by which we are bound in some degree to mean manpower—to exports?

The forces involved, the Civil Defence Corps, the Auxiliary Fire Service and the Territorial Army Volunteer Reserve—they are in many cases the people who will be hit—are part-time people who give voluntary service after working hours. It is extremely difficult to see how the disallowing on financial grounds of their contribution to the community will make any difference to the Government's avowed programme of shifting resources to export industry. Exactly the reverse will happen, as far as I can see, by taking away from a great many people who give valuable time and service in a voluntary capacity, often after hours, to these admirable and necessary national services. They will go to the clubs or the pubs, stay at home or go to the shops. Instead of a massive shift of resources into export there will be a tendency for more people to have idle hands and go spending.

The economic implications which underline this Bill are the most worrying. There could be some justification for these measures if we could have a real assurance that they could be part of the hard base upon which the Government were proposing to build up some rational edifice of economic strategy for the future. This is our real anxiety. We can see nothing arising from this Bill which points to the necessary changes for getting the economy straight which are going to lead to a long-term solution of our problems.

I was very struck by observations of hon. Members, particularly the hon. Member for Plymouth, Sutton (Dr. David Owen), when he spoke about the expenditure of the Government being out of control. This is a fair point. This is where one gets the demoralising, stark and completely rational contrast between what the Government are doing with the left hand and the right hand. On the right hand is this trifling instrument of expenditure coming before the House involving £17 million and hurting a lot of people in the process—quite unnecessarily in some cases. On the other side is the massive continuing growth of uncontrolled Government expenditure.

How do we know at the end of this current financial year that the Government will not come forward with another huge volume of Civil Estimates which have flowered and blossomed in an uncontrolled way to negative the policy of cuts? This is the problem affecting the House—this problem of the people we are cutting off by surgery in this Bill who will be unable to participate in the automatic growth of Government expenditure. There is this £562 million of increased Civil Estimates for this year—it makes one's heart weep—against the sort of things we are having to deal with this evening.

One item was the substantial increase in expenditure by the National Coal Board as a result of advertising costs in connection with the nationalisation of steel. This is going up by something like 70 per cent. in the Civil Estimates, a figure of £40,000. This is allowed to get through, but this Bill cuts off aspects of expenditure which affect people very directly and personally.

Mr. Emrys Hughes

How does it compare with the advertising costs for the Army, Navy and Air Force? Does the hon. Member object to that?

Mr. Alison

I believe we ought to be defended, and I believe that advertising, where it is related to potential exports, is a good thing, but to allow the Government to increase their expenditure by about 50 per cent. and to bring about a cut in this Bill of these figures shows complete irrationality.

I would like to draw attention to some of the ways in which the Government could make a rational programme of change. Surely the first point is the need to do something about the shift of resources, as the Prime Minister described it. There has to be some rational programme for a true shift of resources. This must mean, above all, a shift of manpower. This is the problem we find in the Government's programme so far.

The only thing that could contribute towards a shift in resources is to cut back in those resources where manpower is used wastefully. We have scope for this in the field of nationalised industries.

Mr. Speaker

The hon. Member would not be out of order if he were to come to the Bill.

Mr. Alison

I bow to your Ruling, Mr. Speaker, and look to where Government expenditure might be shifted. Surely the first shift should be towards exports, but there is nothing which the Government have produced this evening that can conceivably be called a more rational use in the nationalised industries of the things they use, or rational in the Government's policy for the development areas. The First Secretary knows the planning in the D.E.A. intimately and must be aware that, in the context of our present difficulties, the policies originating in the D.E.A. for outlays of huge sums of money across the board for development area policy—

Mr. Speaker

Order. This is a wide debate, but it is not as wide as to cover the whole of Government policy and expenditure, and the hon. Member must come to the Bill.

Mr. Alison

I am trying to pin my remarks to Clause 6—[HON. MEMBERS: "Hear, hear."]—and the provisions for relieving the Board of Trade of the need to examine building grants in the development areas. [HON. MEMBERS: "Hear, hear."] I am glad the penny has dropped all around, Mr. Speaker.

The point about this is that this is going in precisely the wrong direction. Surely the present outlays of Government money in the development areas is the most irrational of their policies at the present time that we could conceive. Huge outlays are going to keep men in the same jobs very often. It is a fact that these areas are not notable for their contribution to exports. [HON. MEMBERS: "Nonsense."] This is absolutely true.

Mr. Ogden

Nonsense.

Mr. Alison

I dispute this with the hon. Member. I have seen the Port of London Authority report which examines the origin of exports, and the overwhelming majority of exports originate in three standard regions, and they are not development areas. Indeed, over 50 per cent. by value of exports originate from 100 firms. Yet the Government try to make a broadcast spread of aid to the development areas. The Government continue to lay out these huge sums of money for development areas and, indeed, take power under the Bill to increase them. That could not be more irrelevant to the needs of the country for a shift of resources to exports.

To use the phrase I used before, this Bill is the spearhead of the Government's attack on our real economic problems, and it is really a pathetic instrument which will achieve absolutely nothing at all. We want to hear tonight some really convincing arguments from the First Secretary not only upon the reasons why this first instrument the Government put before the House should be one which hurts people and has very little effect on the changing of things, but upon where and how it will contribute anything at all to the shift of resources to exports. To achieve that must mean making the most productive use of manpower and of every productive factor, and the First Secretary must explain what will be the effects of the Bill upon the economic prospects of the country, let alone the political prospects of the party opposite, and we hope to hear something reassuring from him tonight.

Mr. Lubbock

The hon. Gentleman promised to explain to me, before concluding, why he is not going to vote against the Bill. Would he kindly do so?

Mr. Alison

I gladly reply to the hon. Gentleman's question. I am sure he will not expect me to elaborate upon the difficulties of doing that. We have expressed our reasonable criticisms of the Government's policies and the terms of the Bill, but having supported the broad principle of Government retrenchment we should lay ourselves open to criticism if we attacked individual items of the Government's package.

9.30 p.m.

The First Secretary of State (Mr. Michael Stewart)

Before I say anything else, I must take up some of the remarkable observations of the hon. Member for Barkston Ash (Mr. Alison) about the development areas. It is true, as he says, that a considerable proportion, too high a proportion, of this country's economic and export activity has been concentrated in a limited number of areas. But that is exactly what is wrong. Because that has been the situation for many years, we have time and again faced the difficulty that, if we tried to expand the whole economy, we produced overheating it certain areas while depression remained in others. This has hampered the whole job of getting our economy right.

That is the point of regional policy and help to development areas, to which, apparently, the Conservative Party is now opposed.

Mr. Alison

I am obliged to the right hon. Gentleman for giving way so soon. How does he reconcile the policy of massive shift of resources to exports with, simultaneously, massive shift of resources to the development areas? He cannot have it both ways.

Mr. Stewart

The point is that a number of activities which in the past have been carried on only in certain areas can be carried on in the development areas, where there is the labour available.

In this connection, I refer also to the regional employment premium. Several hon. Members who spoke about the regional employment premium were under the impression that there is a sum of £100 million which, if it were not spent on the regional employment premium, would be available to be spent on something else. That is not so, as was made clear when the House debated the matter. To a large extent, this is a self-creating sum. It is paid in respect of increased economic activity which in turn makes the payment possible. It is not true that, if we stopped paying the regional employment premium, we should have that amount of money to spend on other things. It is that point which has been neglected by those who have attacked the regional employment premia.

I come now to the Bill itself. Many hon. Members have observed that it is a Bill dealing with a fairly wide range of subjects, and the presence of a large number of Ministers has been demanded. During the debate, every Department concerned in the Bill has been represented at some time on the Front Bench, and during nearly the whole of the debate the attendance on the Government Front Bench has outnumbered the total attendance on the opposite benches, Front Bench and back benches. The excuse given by the hon. Member for Barkston Ash was that the Conservatives did not come to this debate because they were relying on my hon. Friends to do their work for them. I do not know how my hon. Friends relish this vision of them as substitutes for the Conservative Party. I must say that they are a good deal more vocal and entertaining than anyone we ever hear on the opposite side.

Mr. Mikardo

And right, too.

Mr. Stewart

The hon. Gentleman was highly contemptuous of the Bill. It was in his language, a spearhead which gave out an uncertain note. At the same time, it was an inadequate base for the Government's policy. Let me spell it out. The Government have taken a large number of major decisions. Whether they are agreed with or not, it is not disputed that massive decisions have been taken. But some of the largest of them do not require legislation. For example, the very important decisions with regard to defence do not require legislation to implement them, except for the comparatively small item dealt with in Clause 4 of the Bill. The Bill then, apart from Clause 1, which is in a special category, is simply that part of the Government's measures which happens to need legislation. The facts that these measures are a small part of the whole policy is merely because some things require legislative change while others can be changed administratively. We should be clear about the nature of the Bill.

I shall first answer some questions about the Clauses and then questions about the larger aspect of policy and how the Bill fits into policy. I was asked a number of questions about the Government Actuary's Report. I was asked whether he assumed a constant level of earnings. The answer is that he has done so since 1964. Previously, in his reports he used to assume an increase of 2 per cent. per annum, which was hardly more realistic. The basic reason why he assumes a constant level of earnings is that if he did not, and if he postulated some rate at which earnings rose, he would have to make a similar assumption about the rise of benefits. If neither is assumed, one gets, none the less, something like the picture of the extent to which the Fund is paying its way.

I was asked what had caused the imbalance which Clause 1 is intended to rectify. Among the benefits themselves, the growth in the payment of retirement benefit is by far the largest item, amounting in 1967–68 to about two thirds of the total by which the Fund is put out of balance. In the two subsequent years the amount by which retirement pensions will increase will be equal to the total by which the Fund is put out of balance. The other items tend to cancel each other, some being plus and some minus.

My hon. Friend the Member for Plymouth, Sutton (Dr. David Owen) felt that the Actuary should be more farseeing. There are limits to human capacity for far-sightedness. It is possible—it is not so very difficult—to estimate in the near coming years what will be the number of people of retirement age. It is very much more difficult to foretell whether a tendency for people to retire at 65 rather than 67, or 67 rather than 69, will increase, decrease, or remain the same. That is the kind of factor which creates these difficulties. This is the kind of subject on which study continually proceeds, but it would be wrong to suppose that we have had to make this reconsideration because of sheer carelessness in ignoring obvious facts.

Mr. Hooley

Does not this argument indicate that in fact an actuarial calculation in the real sense is impossible?

Mr. Stewart

There is something in that, but my hon. Friend is in danger of arguing too much. If there is a contributory scheme, there has to be some relation between what one expects to pay out and what one expects to get in. The fact that it is difficult to make that calculation exactly for a long period ahead is not a valid reason for not trying to make it as far as human knowledge can go.

A major part of the argument about Clause 1 was the suggestion that this was a poll tax. I do not dispute that. I do not dispute that that is a serious objection. One can consider the alternative of making increases in the graduated rather than the flat-rate contribution. I do not believe—and I think that hon. Members who have studied these things would agree with me—that that would have been more welcome, or that people would have regarded it as fairer than what we have done, because this part of the scheme is subject to severe criticism.

I accept that the remedy to this problem is the creation of a real earnings-related scheme in both contributions and benefits, related more thoroughly and fairly to earnings, and that is a task on which we are now engaged. I must ask my hon. Friends to accept that the Government are not just sitting idle, but that this is a major undertaking requiring consideration of every kind of worker and every kind of problem with which he may be faced. We shall get on with it as speedily as we can. I accept that, looking beyond the 1970s, a continued reliance on the flat rate would not stand the strain.

Mr. Michael Foot

Does my right hon. Friend say that this Measure is not now prepared and that the Government have not prepared the full, graduated pension scheme to which we are pledged? If so, why is it not used?

Mr. Stewart

It is not yet completed. It is a very long and a very complicated task.

Miss Margaret Herbison (Lanarkshire, North)

Before that point is left, I understand that my right hon. Friend says that there would be a great many complaints if there were a graduated contribution, but what consideration has been given to putting the heavier part of it, if not the whole 1s. 6d., on the employers of this country, rather than another 1s. on the workers?

Mr. Stewart

I accept that. Sharing was considered, but we have to weigh up the effects of such a measure on industrial costs, when the increase of our exports is a major matter of policy. I shall take up this point about low-paid workers a little later on, if my hon. Friends will be patient.

On Clause 2, I was asked about the preparation of an exemption scheme and for details of it. I do not propose to give them here. These discussions are proceeding, but they are confidential. I am confident that we shall be able to produce an exemption scheme, as was said in the original statement. I was asked if the increase in the National Health stamp and the exemptions would be simultaneous. I cannot pledge that they will be simultaneous to the day, but there will be no substantial gap in time between the two things.

The hon. Member for South Ayrshire (Mr. Emrys Hughes) suggested that not only are we to have prescription charges but that the hospital programme has been cut as well. That is not so. The things to which he referred occurred for reasons which he will find out if he consults the Secretary of State for Scotland. They are not connected with this package at all no part of this package reduces the hospital building programme, and I would remind him that it was not this Government who cut the Ayr hospital out of the hospital building programme.

On Clause 3, I agree with everything said by my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) about the nutritional value of milk for primary school children, but so far as secondary school children are concerned, for some years past at medical and school teachers' conferences this question has been argued to and fro, and the Department of Education and Science has had certain medical advice about it. The answer was exactly as described by my right hon. Friend the Chief Secretary, that it cannot be said with certainty that this is medically necessary. I am putting it no higher than my right hon. Friend the Chief Secretary put it, but I would add that it is a totally different problem from that of the distribution of milk in primary schools, the value of which is undoubted.

I am prepared to give way to my hon. Friend the Member for Ebbw Vale, but I hope that I shall not have to do so too often.

Mr. Michael Foot

What does my right hon. Friend mean by the words "medically necessary"? Are those words taken from an official report? If so, will he present it to the House? Does not he agree that it is medically advantageous that as many children as possible should have school milk? Is he not avoiding the charge made against him?

Mr. Stewart

The proposition of secondary school milk is very different from any proposal about primary school milk. [Interruption.] I listened with patience to my hon. Friend the Member for Poplar (Mr. Mikardo); I hope that he will listen to me.

A number of hon. Members showed interest in Clause 4. I must point out to hon. Members opposite that it is not open to them to be always demanding reductions of public expenditure and then cry out whenever anything that they particularly like happens to be touched. I believe that, in the general context of the measures, this measure, which saves £7million in a full year, was necessary. I can give the assurance that the provision for compensation will be substantially on the same terms as for local government employees who are affected by local government reorganisation. It will be based on what is called "the Crombie code".

There are two points to answer on Clause 6. One hon. Member seemed to think that the Clause creates a substitute for B.O.T.A.C. It does not. This is merely a matter of drafting. B.O.T.A.C. remains in existence. The sole change is that the Board of Trade does not have to consult B.O.T.A.C. unless it thinks it necessary to do so. Consultation is now at its discretion. About half of these grants are for £3,000 or less, and it was felt that it was not necessary to go through this procedure for many of them.

I was asked whether the Clause took away the right of appeal by people who had been refused grants. I do not know quite how to answer that. I suppose that the answer is "No", because there never was any right of appeal; the situation remains exactly as it was. It has often happened that people who have been refused grants have asked the Board to reconsider the matter either directly or by approaches through hon. Members, and that they can still do.

I should deal with a point which I meant to deal with in connection with Clause 2, because it refers to the very interesting and important speech of my hon. Friend the Member for Plymouth, Sutton. He asked whether money to pay for people in hospital injured in street motor accidents could be collected by a levy on the motor insurance companies. I listened to that with interest. I shall communicate it to my right hon. Friend the Minister of Health. It is certainly worth examining. My hon. Friend also raised the question of a higher charge for amenity beds. I think that the answer is that I do not believe that pursuit of that line would give anything comparable to the sums of money involved.

I have, I hope, dealt with the points raised on the Clauses. The main interest of the House has been in the relationship of the Bill to economic policy as a whole and the effect of it on the poorest people.

Mr. Heffer

I asked a question which I hoped would be answered. I asked what was the percentage of the deficit of £75 million paid in unemployment benefits.

Mr. Stewart

I referred to that earlier. I said that by far the greater part of the increase in benefits is in respect of retirement benefit. I cannot give the actual figure for unemployment benefit—I will do so later—but it is comparatively small. Retirement benefit accounts for about two-thirds of the whole.

On the question of the relationship of all this to the whole economic situation, it is not disputed that it is necessary for the country to improve its balance of payments. The hon. Member for Louth (Sir C. Osborne) urged that we should think of doing that more by increased production than by cuts. I would agree, and I suggest that he looks at the speech I made in last year's Budget debate, when I described the various measures being taken by the Government for the very purpose of increasing production. They are now beginning to bear fruit in the figures of higher productivity per man engaged in industry that we are now seeing. But, of course, that does not necessarily happen speedily enough to deal with the immediate balance of payments problem and that is why, although the hon. Gentleman's point is important, it cannot be the whole answer.

One could also deal with an adverse balance of payments by cutting overseas expenditure, particularly military expenditure, and we have done that on a considerable scale. But when both encouragement to productivity and reduction of overseas expenditure have been done, it still remains true—and I do not think that any hon. Member, however critical of the Bill, has been able to dispute this—that there must be a shift to exports at the present time.

Sir C. Osbornerose—

Mr. Stewart

I am sorry. I cannot give way now.

Sir C. Osborne

The right hon. Gentleman referred to me.

Mr. Stewart

If I thought that that meant that I had to give way to the hon. Gentleman, I would not have referred to him.

The shift to exports must mean that both private and public consumption cannot expand as fast as we had planned or hoped. I want to emphasise what I said in an earlier debate, that it is not proposed actually to cut down either social expenditure or private consumption, but the rate at which they increase must be limited. [Interruption.] Hon. Members must put any particular item in the context of the whole package. If they study the statement of my right hon. Friend the Prime Minister they will see that there has been an expansion of about 40 per cent. in all major social services over the past three years. It is against that background that we must consider the matter.

One hon. Member urged that we have too much private consumption and too little public expenditure. Without entering into the whole argument about that, I must ask him to consider that in recent years and in the current year we have been increasing public expenditure very considerably on the most laudable and necessary objects. But, in the light of that, it is not unreasonable to say now that the rate of increase must be slower than before.

It is from that situation that what is called a package comes. I use the word "package" deliberately because it was constructed not, as my hon. Friend the Member for Plymouth, Sutton feared, without any philosophy but with regard to the fact that one cannot put the whole of the cut on any one service. The whole cannot go on defence, though there is some cut of defence. There is some cut in aid to industry, and there is a cut in private consumption. [Interruption.] Perhaps my hon. Friend will notice what is being done about the payment of investment grants—

Mr. Mikardorose—

Mr. Stewart

I am sorry. I cannot give way.

Mr. Mikardo

How much is the cut in aid to industry?

Mr. Stewart

It is in the Prime Minister's statement, in the passage about investment grants.

Mr. Mikardo

I have read it. It does not answer the point.

Mr. Speaker

Order. We cannot argue by cross-talk.

Mr. Stewart

If every one of the 630 Members were asked exactly what package he or she would have constructed, no two Members would produce exactly the same package. We weighed up what we believed was right in general and that is what we commend to the House. But it must be commended as a package. It is easy enough for an individual Member to say, "I do not like this item. Take it out". When both sides of the House had finished with it, there would be no measures left at all. Government, neither by the present Government nor by any other, cannot be conducted in that way and that spirit. We have put forward a series of measures which we believe hang together and which are necessary.

That part of the debate to which I listened with most interest, and about which I have felt most deeply throughout all this business, is how this affects some of the poorest people in the country. I listened to the speech of my hon. Friend the Member for Liverpool, Walton (Mr. Heffer). I beg him to realise that those of us in the Labour Party who disagree with him on this matter feel quite as deeply as he does about the needs of working people and have as wide an experience of those needs. [Interruption.] All I ask is that those who support the Government should be granted as much right to claim sincerity for their views as he and other hon. Members have for theirs.

Mr. Mikardo

Tell Mr. Schweitzer.

Mr. Speaker

Order. Hon. Members have been listened to. Right hon. Gentlemen must be listened to as well.

Mr. Stewart

This question has to be looked at against the background of the very many things the Government have already done to help the poorest people in the country. In the last three years, there has been an increase in the real value of the retirement pension on a scale which I do not believe has ever before been achieved in three years. There have been increases in supplementary benefits and, what is of particular value to the poorest people, alterations in the administration and the whole approach to it, so that many of those who need supplementary benefit now apply for it, and it is intended later this year to give a further increase in supplementary benefits.

In addition to expanding these traditional services, we have brought in new social services like redundancy payments which have been of great value in removing what might otherwise have been serious hardship.

Mr. Mikardo

The Government also brought in redundancy.

Mr. Stewart

There has also been the rate rebate scheme, which has been of great value to some of the poorest in the land and that has been extended. There will also be the increase in the family allowances in April.

I do not underestimate—and I have the kind of constituency which does not enable me to do so—the problems of some of our poorest fellow citizens and I am glad to be a member of a Government who have rendered them very valuable service and who, apart from the ordinary social services, have delivered them, particularly in London, from the rapacity of private landlords. All these things were worth doing and I am proud to be a member of the Government who did them.

Now we have to face the fact that we are doing things that are disappointing and discouraging, but the worst service we could do to the poorest of our fellow citizens would be to dodge difficulties so that this country never got out of the troubles which have faced it since the end of the war. For the reasons I have given in this speech and on other occa-

sions, I believe that what we are doing now, unattractive as some of it is, is relevant to the job of re-establishing this country's finances and that I believe to be one of the most valuable services we can render our poorest fellow citizens. I believe this Bill to be necessary and I commend it to the House.

Question put:—

The House divided: Ayes 216, Noes 8.

Division No. 60.]	AYES	[10.0 p.m.
Albu, Austen	Ennals, David	MacPherson, Malcolm
Alldritt, Walter	Ensor, David	Mahon, Peter (Preston, S.)
Anderson, Donald	Fernyhough, E.	Mallalieu, E. L. (Brigg)
Archer, Peter	Finch, Harold	Mapp, Charles
Armstrong, Ernest	Fletcher, Raymond (Ilkeston)	Marks, Kenneth
Atkins, Ronald (Preston, N.)	Foley, Maurice	Marsh, Rt. Hn. Richard
Bacon, Rt. Hn. Alice	Ford, Ben	Mayhew, Christopher
Bagier, Cordon A. T.	Forrester, John	Millan, Bruce
Barnes, Michael	Fraser, John (Norwood)	Miller, Dr. M. S.
Barnett, Joel	Galpern, Sir Myer	Milne, Edward (Blyth)
Baxter, William	Gardner, Tony	Mitchell, R. C. (S'th'pton, Test)
Bence, Cyril	Garrett, W. E.	Molloy, William
Bennett, James (G'gow, Bridgeton)	Gordon Walker, Rt. Hn. P. C.	Moonman, Eric
Binns, John	Grey, Charles (Durham)	Morgan, Elystan (Cardiganshire)
Bishop, E. S.	Griffiths, David (Rother Valley)	Morris, Charles R. (Openshaw)
Blackburn, F.	Griffiths, Rt. Hn. James (Llanelly)	Moyle, Roland
Boardman, H. (Leigh)	Hamilton, James (Bothwell)	Murray, Albert
Bottomley, Rt. Hn. Arthur	Hamling, William	Neal, Harold
Boyden, James	Hannan, William	Oakes, Gordon
Braddock, Mrs. E. M.	Harper, Joseph	Ogden, Eric
Bray, Dr. Jeremy	Harrison, Walter (Wakefield)	O'Malley, Brian
	Hart, Mrs. Judith	Oswald, Thomas
Brooks, Edwin	Haseldine, Norman	Owen, Dr. David (Plymouth, S'tn)
Brown, Hugh D. (G'gow, Provan)	Hattersley, Roy	Page, Derek (King's Lynn)
Brown, Bob (N'c'tle-upon-Tyne, W.)	Hazell, Bert	Palmer, Arthur
Brown, R. W. (Shoreditch & F'bury)	Healey, Rt. Hn. Denis	Panned, Rt. Hn. Charles
Buchan, Norman	Henig, Stanley	Parker, John (Dagenham)
Buchanan, Richard (G'gow, Sp'burn)	Hobden, Dennis (Brighton, K'town)	Pearson, Arthur (Pontypridd)
Butler Herbert (Hackney C.)	Horner, John	Peart, Rt. Hn. Fred
Callaghan, Rt. Hn. James	Houghton, Rt. Hn. Douglas	Pentland, Norman
Cant, R. B.	Howarth, Robert (Bolton, E.)	Perry, Earnest G. (Battersea, S.)
Carmichael Neil	Howell, Denis (Small Heath)	Price, Thomas (Westhoughton)
Carter-Jones Lewis	Hoy, James	Probert, Arthur
Castle, Rt. Hn. Barbara	Huckfield, Leslie	Pursey, Cmdr. Harry
Chapman, Donald	Hughes, Rt. Hn. Cledwyn (Anglesey)	Randall, Harry
Coe, Denis	Hughes, Roy (Newport)	Rees, Merlyn
Coleman, Donald	Hunter, Adam	Reynolds, G. W.
Concannon J D	Hynd, John	Rhodes, Geoffrey
Corbet, Mrs. Freda	Jackson, Colin (B'h'se & Spenb'gh)	Richard, Ivor
Craddock, George (Bradford, S.)	Janner, Sir Barnett	Roberts, Albert (Normanton)
Crawshaw Richard	Jay, Rt. Hn. Douglas	Roberts, Gwilym (Bedfordshire, S.)
Cronin, John	Jenkins, Rt. Hn. Roy (Stechford)	Robinson, W. O. J. (Walth'stow, E.)
Crosland, Rt. Hn. Anthony	Johnson, Carol (Lewisham, S.)	Rodgers, William (Stockton)
Crossman, Rt. Hn. Richard	Johnson, James (K'ston-on-Hull, W.)	Rogers, George (Kensington, N.)
Cullen, Mrs. Alice	Jones, Dan (Burnley)	Rose, Paul
Dalyell, Tam	Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)	Ross Rt Hn. William
Davidson, Arthur (Accrington)	Jones, J. Idwal (Wrexham)	Rowlands E (Cardiff. N.)
Davies, Dr. Ernest (Stretford)	Jones, T. Alec (Rhondda, West)	Shaw, Arnold (Ilford, S.)
Davies, G. Elfed (Rhondda, E.)	Kelley, Richard
Davies, Ednyfed Hudson (Conway)	Lawson, George	Sheldon, Robert
Davies, Harold (Leek)	Ledger, Ron	Shore, Peter (Stepney)
de Freitas, Rt. Hn. Sir Geoffrey	Lee, Rt. Hn. Frederick (Newton)	Short, Rt. Hn. Edwart (N'c'tle-u-Tyne)
Delargy, Hugh	Lewis, Ron (Carlisle)	Short, Mrs. Renée (W'hampton, N. E.)
Dewar, Donald	Lipton, Marcus	Silkin, Rt, Hn. John (Deptford)
Diamond, Rt. Hn. John	Loughlin, Charles	Silkin, Hn. S. C. (Dulwich)
Dobson, Ray	Luard, Evan	Slater, Joseph
Doig, Peter	Lyon, Alexander W. (York)	Small, William
Dunn, James A.	Lyons, Edward (Bradford, E.)	Snow, Julian
Dunnett, Jack	McBride, Neil	Spriggs, Leslie
Dun woody, Mrs. Gwyneth (Exeter)	McCann John	Stewart, Rt. Hn. Michael
Eadie, Alex	McGuire, Michael	Symonds, J. B.
Edelman, Maurice	McKay, Mrs. Margaret	Taverne, Dick
Edwards, Rt. Hn. Ness (Caerphilly)	Mackenzie, Gregor (Rutherglen)	Thomas, George (Cardiff, W.)
Edwards, William (Merioneth)	Mackintosh, John P.	Thornton, Ernest
Ellis, John	Maclennan, Robert	Tinn, James
English, Michael	McMillan, Tom (Glasgow, C.)	Urwin, T. W,
Varley, Eric G.	Wellbeloved, James	Willis, George (Edinburgh, E.)
Wainwright, Edwin (Dearne Valley)	White, Mrs. Eirene	Woodburn, Rt. Hn. A.
Walden, Brian (All Saints)	Wilkins, W. A.	Wyatt, Woodrow
Walker, Harold (Doncaster)	Willey, Rt. Hn. Frederick	Yates, Victor
Wallace, George	Williams, Alan (Swansea, W.)
Watkins, David (Consett)	Williams, Alan Lee (Hornchurch)	TELLERS FOR THE AYES:
Watkins, Tudor (Brecon & Radnor)	Williams, Clifford (Abertillery)	Mr. Alan Fitch and
Weitzman, David	Williams, Mrs. Shirley (Hitchin)	Mr. Joan L. Evans.
NOES
Davidson, James (Aberdeenshire, W.)	Steel, David (Roxburgh)
Grimond, Rt. Hn. J.	Thorpe, Rt. Hn. Jeremy	TELLERS FOR THE NOES:
Hooson, Emlyn	Wainwright, Richard (Colne Valley)	Mr. Eric Lubbock and
Mackenzie, Alasdair (Ross&Crom'ty)	Winstanley, Dr. M. P.	Mr. John Pardoe.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.—[Mr. Fitch.]

Committee Tomorrow.