HC Deb 19 March 1968 vol 761 cc355-75

Postponed Proceeding on Question: That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance, so, however, that, without prejudice to any authorisation by virtue of any Resolution relating to purchase tax or selective employment tax, this Resolution does not extend to the making of amendments of the enactments relating to either of those taxes so as to give relief from tax.—[Mr. Roy Jenkins.]


Question again proposed.

8.51 p.m.

Mr. John Lee

When the debate on the Budget was interrupted, I was giving qualified support for the Budget proposals. I am bound to say that after the weeks of morbid prognostication in the Press, culminating in the near hysteria of the last few days, I suppose that it will be an agreeable surprise for the Chancellor to gain any support at all.

There are a number of proposals in the Budget which command support because they are meritorious. I have mentioned that most of us would welcome the family allowance changes. Most of us would regard the raising of the limit for personal savings in National Savings Certificates as a wholly admirable proposal. We can bear with fortitude the increased betting duties, and most of the Purchase Tax proposals do not really deserve much opposition. Some of them are quite obviously justified not only in terms of their being on luxury goods but also because marginally, at the increase in the tax levied might help to canalise them on to the export market.

From this side of the House the most desirable and welcome measure is the special levy on investment incomes. If it had not been included I would have been extremely disappointed. One knew that there were bound to be proposals bearing hardly on people of small incomes. One feared, and to some extent those fears were fulfilled, that the Government, obsessed as they are with operating a mixed economy, would bring in a disproportionate number of measures of that kind.

Even though it may be regarded quite unmistakenly and unashamedly as a political sop, it is a very welcome sop for many of us. It is not a substitute for a wealth tax. It is, after all, a tax on income and not on accretions of private wealth. It is welcome none the less. I hope that by next year the Chancellor will have got round to a genuine wealth tax. In spite of the high rates of taxation that have prevailed for so many years, and in spite of two world wars and enormous Government expenditure, whether desirable or not, there still remain enormous private fortunes. The distribution of private wealth is less equitable than in the United States. When one bears these things in mind, one realises that we are a long way from being an equal society.

I read not long ago that even now the Duke of Norfolk is worth more than Charles Clore or Sir Isaac Wolfson. In other words, the old feudal wealth which has accumulated over the centuries is bigger even than the enormous fortunes which entrepeneurs have built up in the post-war years or even in the inter-war years. That is the measure of the task which the Chancellor had to undertake.

Let us examine the objectives that the Budget was supposed to accomplish. There were three that my right hon. Friend should have had in mind. The first was to accomplish a shift in resources to exports without causing intolerable internal inflation; the second was to emancipate our economy from foreign financial control; the third was to accomplish some measure of shift towards equality. My right hon. Friend has made a skilful though by no means wholly adequate attempt to deal with the first, has largely ignored the second and has tentatively touched on the third.

In dealing with the first objective, the Government rely too much on repressing demand, both by statutory control of wages and by other restrictive measures in the Budget, to ward off inflation. It should be said—and I do not know how far this is the view of those of my hon. Friends who think as I do on the left of the party—that I do not regard the special levy, welcome as it is, as a sufficient sop to ward off the objections we have to statutory control of wages. Even the fact that dividends are to be brought within the ambit of the new prices and incomes Legislation—and why were they not there before?—still does not really justify such measures. I am sure that this control of wages will create a great deal of resentment.

The one valid point which the Leader of the Opposition seemed able to make in his rather frantic firework display was the fact that every time the Government introduce prices and incomes legislation they say it is for the last time—rather like the old lag whose safe-blowing job is always the last one he will do. This has the effect of causing a cynicism and it will undoubtedly evoke a great deal of resentment.

One of the major aspects of my right hon. Friend's speech was the all too little reference to the international exchange crisis. This has happened probably for two reasons: first, that the Budget was probably prepared some days ago, before this became as acute as it is; secondly, there was very little in the fiscal measures the Chancellor brought in today that would have a direct bearing on the problem. Nevertheless, it is clear that the effect of this international exchange crisis is very likely to stultify the efforts that the Government have in mind. No amount of energetic effort in the export market, even if accompanied by successful measures to hold down prices so that we are not priced out of our market, is going to be successful if the entire system of foreign exchange is going to collapse.

I have some admiration for General de Gaulle in many matters, but I am bound to say that What he has been doing over the last two or three months in respect of the "gold rush" is utterly mischievous; he has done a considerable disservice to the whole world. What the Government now have to face is the fact that there may not be a boom in 1970–71, because experts could be strangulated by lack of liquidity. The measures taken over this weekend are by no means a complete answer. The two-price system may very well break down and the central bankers will be tempted to operate in the black market of the second price. It is not a solution to the fact that the dollar will continue to be weak and the Americans may be obliged to devalue the dollar. If they do, then we are faced with a situation in which many of the benefits which would have been derived from devaluation will be rendered nugatory. The Government made a profound mistake in not devaluing three years ago. Having failed to do that, it was a mistake not to devalue in July, 1966. To that extent, they have wasted three years and are very much to be blamed for the situation which now exists.

I have no enthusiasm for the increased standby arrangements. I voted, with 16 of my colleagues, against the standby arrangements last November. This is not going to do anything to ward off the day when this country is emancipated from overseas' control.

The most critical, and certainly the least justifiable omission in the Chancellor's references—few though they were—to the international aspect of the matter, was the way in which he referred to overseas portfolio investments and referred to the fact that the Government takes 25 per cent. of the realisation of sales and credits to the reserves. He then smartly put it on one side and said nothing more about it. My hon. Friend the Member for Lewisham, West (Mr. Dickens) and other hon. Members have done a great deal of work on this, and it seems strange that this matter has been left on one side.

Although we are a poor nation in many ways, we still have a great many assets overseas. The time has come when we should be realising them much more rapidly than we are. One argument that might even appeal to some hon. Members opposite, who obviously do not find this sort of proposal to their taste, is that, in so far as we might undertake the realisation of overseas fixed assets, we might very well be cutting our losses. It has been known to happen more than once that British assets were confiscated by an overseas government. It happened in Argentina and in Mexico before the war. It might be a good idea, from the purely selfish point of view, to realise these assets and to put the proceeds into the reserves.

My hon. Friend the Member for Lewisham, West is mainly concerned with portfolio investments. Certainly those are the ones which should be realised first in the measures which must surely be taken sooner or later to lessen the burden which we bear as a banker for the sterling area.

I cannot understand why the Chancellor should be so coy about this. He wrote about it in pamphlets frequently when the Labour Party was in opposition. He said that what was most likely to stultify our progress was the fact that we would undertake social measures which were not to the liking of our creditors and that they would withdraw their funds at awkward moments, so bringing matters to a standstill. That is precisely what has happened several times in the last three years. Therefore, I find it all the more surprising that the Government have not yet decided to grasp that nettle.

I said that we might find that the effect of the international exchange crisis would stultify our attempts to get an export boom moving and to sustain it in the period 1970–71. I said that what might cause it, besides the problems that we are having with exchange control, is internal inflation. I cannot understand why the Government are so reluctant to resort to the comprehensive kinds of control over internal prices that we had in the war and post-war years. The fact remains that they were remarkably successful.

It may be that the Prime Minister has a bad conscience about this, because there is a bit of the Prime Minister's history about which the House should be reminded. When he was President of the Board of Trade just after the 1950 Election, he had a bonfire of controls. He got rid of a great deal of price controls and he reopened some of the commodity markets.

Mr. Arthur Lewis

And prices went up.

Mr. Lee

Then we had the Korean war, and we paid for it. The country paid for it economically, and this party paid for it politically. It was one of the reasons why we disappeared into limbo for 13 years.

It is high time that the Government realised that, if they are to leave a large part of the British economy in private hands, the only way in which they can hope to run it properly is to do so with the kinds of controls that we operated in that period. What we do not want is the increasing subsidy to private enterprise that we see today. Hon. Members opposite frequently complain about the amount of Government expenditure, and control of Government expenditure is one of the most important constitutional functions of Parliament. However, when one considers some of the ways in which Government contracts have gone astray, particularly in the aircraft construction industry, hon. Members on both sides have every right to be vigilant. But I wonder how many complain about the amount of financial assistance which is given to private enterprise without very much control.

I notice that the figure for direct financial assistance in the last year of Conservative Government, before there was any S.E.T., before the S.E.T. refunds and premiums and before the Industrial Reorganisation Corporation, was some £347 million. The corresponding figure for 1966–67 is £447 million. We do not have a private enterprise economy or a fully nationalised one. What we really have is a private system subsidised by the taxpayer.

When this party was in opposition, my right hon. Friend the Member for Battersea, North (Mr. Jay) wrote about money being invested in the form of equity. He pointed out that, when an insurance company invests in firms, it demands equities which are relative to its holding. Surely this should be the same in the case of the Government. If the Government are to provide financial assistance—and I view with a great deal of suspicion and distrust that this should be so—the least we can demand is that they should take an equity in whatever is being invested in. This is supposed to be the objective behind the Industrial Expansion Bill, but the whole effect was spoilt when Ministers fell over each other to deny that there was any attempt thereby to gain control of the firms or organisations in which the money was to be invested.

The other day I put down a Question to the President of the Board of Trade asking about those cases where financial assistance had been given to firms whose reserves were perfectly adequate to carry out the development for which the money was provided. I received the reply—this related to finance under The Local Employment Act—that there was no record at the Board of Trade to say what firms were in a position to finance development from their own reserves, but they were being financed out of grants. Not only that, but that, in the opinion of the President of the Board of Trade, it would mean a disproportionate amount of time would be wasted in finding this out. This is a most extraordinary situation. If Government money is being provided we should have the strictest possible control over it, and, wherever possible, the moment that a Government Department or the Government generally provide finance for private enterprise, that is the time the Government should seriously seek to nationalise it.

A number of hon. Members have sat through the debate on the affairs of the Birmingham Corporation to take part in this debate and I would not wish to delay their entry. Having found myself in the peculiar position of my speech being bisected, I do not wish to take advantage of the situation.

In conclusion, I must say that the Government have reached the stage when they have very little time left in which to recover their political position. If they really wanted to inspire their demoralised supporters, the best thing would have been a really good thumping soak-the rich capital levy. They have not done so. The special contribution, welcome though it is, may well not be sufficient. If by this time next year we are still in the position politically that we are today, I doubt very much whether anything the Chancellor can do, skilful though he is, as he has demonstrated this afternoon, will be able to pull the chestnuts out of the fire.

9.1,1 p.m.

Sir Robert Cary (Manchester, Withington)

I hope that the hon. Gentleman the Member for Reading (Mr. John Lee) will not expect me to follow his theme about wealth and the creation of wealth. This is a free society, and if wealth is created privately and honourably earned it is an immense asset in a free society. I deplore that it should become the subject of spiteful and envious attack, motivated sometimes politically. In response to one sentence uttered by the Chancellor of the Exchequer today, I could not help but raise the cry, "The politics of envy."

I should like to begin on a personal note. It was my privilege to first enter the House of Commons in 1935 with the late father of the Chancellor of the Exchequer who, as Vice-President of the Miners' Federation, had been elected the Member for Pontypool. We talked early in that Parliament because my own industrial constituency along the Lan cashire-Cheshire border contained the Manchester collieries at Swinton and Pendlebury. The Chief Secretary knows the area well. My only wish today was that the Chancellor's gracious father had been present to witness his son discharging with great responsibility and courage that task at the Treasury Box. When I think of the intervening 35 years, perhaps the House will not misunderstand me when I say, all honour to the son of a former Member of this House who discharged his task with such competence at that Box today.

There are some other sides to this matter which perhaps the House will allow me to touch upon. The Chancellor of the Exchequer said nothing today about the curtain raiser yesterday, and in my constituency I have found the deepest anger at the announcements—the almost shock announcements—made by the Gas Board and the Post Office. The charges for gas are to be higher by something in the neighbourhood of 2s. 2½d. in the £. When I think of the effect of that in the small side streets of Manchester or Salford, I consider it an immense imposition.

Mr. Ralph Turvey, who is a full-time member of the Prices and Incomes Board, said, in making this announcement, that the new gas prices ought to come into operation as soon as possible. In addition to that, there was the ancillary information that the charge for rental of the telephone at home will be increased by £2, the cost of a first-class delivery letter will now be increased to 5d. and there will be other charges on telephone calls, parcels and postal orders, the two latter—parcel and postal orders—striking directly at the working people.

All these charges will come to £70 million, and I believe that the Gas Board charges will amount to something in the neighbourhood of £25 million to £30 million. These are further impositions which are to fall upon the country, and there are to be some electricity adjustments which will fall on industry, I think. So beyond the figure given to us today by the Chancellor of the Exchequer of something in the neighbourhood of £1,000 million there are these additions which came in what might be called the local Budget the day before. I wonder whether my constituents, when they read the late papers tonight and the news tomorrow morning, will have any anger left for the right hon. Gentleman the Chancellor of the Exchequer.

I found one confusing matter, and perhaps other Members have run into this same problem. I said literally to my own supporters that this came as complete news to me, that I had absolutely no knowledge of these charges which are to be made. They knew I would be on my way here to listen to the additions today and half of them rather suspected that. Yet in some ways Members of Parliament ought to deal more directly with some of these matters. We ought to know, we ought to have some information, and we ought even to have the power to comment before these things actually happen. I had none, and I object to all outside bodies which act outside the range of Parliament. I also object to Parliamentary problems being put into the hands of judges, Royal Commissions and other neutral bodies or individuals. Many hon. Members of this House have read the words of Professor Bernard Crick, who puts it very well in saying: This is really the root of the malaise in contemporary British Government—the belief that is growing up in Downing Street and Whitehall that if anything useful is to be done, it must be taken out of politics. My life is smothered in politics. There has grown up a cult of 'Wise Men' who are to be consulted if anything 'goes wrong', distinguished public figures, but never politicians, all with an aura of 'very responsible fellows indeed' about them, to hide how politically irresponsible they are, For political decisions should be made by politicians, who can be held responsible by the electorate, not by distinguished figures who cannot be. I would much rather be indicted by my supporters in Manchester for knowing something about it, than having to say rather weakly, "I did not know anything about this, and nobody has ever bothered to tell me". I am the only target for them for any sort of representations that I can make to the Government of the day through you, Mr. Speaker.

There are many other matters in the Budget on which I could touch, but with competence and skill my right hon. Friend the shadow Chancellor in opening the debate tomorrow will deal with these matters. I would just like to put to the Chancellor three matters on which there is agreement. I thank him and congratulate him for leaving the public service vehicle out of fuel taxation. The House knows of my deep interest in transport, and, like his predecessor, the Chancellor knew that, combined with the information which has come to us about increases in gas, electricity, and telephone charges, to leave the public service vehicle in for that further taxation would have meant an outbreak of mass fares applications through the traffic commissioners.

I also congratulate the Chancellor on at least giving official recognition—even though it is to be on a free vote of the House I do not doubt its outcome—to a national lottery.

Mr. Ron Lewis (Carlisle)


Sir R. Cary

The hon. Gentleman may say "Shame", but that was cried by some Members on both sides of the House when Mr. Harold Macmillan produced the Premium Bond scheme, but it has been a thumping good success. The Chancellor now intends to capitalise on the work done by a former distinguished Prime Minister by having a weekly jackpot. Let us say that that was halfway, and official recognition of a national lottery by a free vote is to put on the seven league boots and go the full distance.

Above all, and this touches everybody's pocket, I congratulate the Chancellor on leaving out the standard rate of Income Tax. I had a former distinguished occupant of No. 11, Downing Street not far from me today. During the run in and the tactical dispositions made by the Chancellor we thought that we were coming to that. Within my small compass I had taken a small bet on whether it would be 1s. or 9d. on the standard rate. I felt rather flummoxed, rather like last year's National at the twenty-second fence, there was no race.

Finally, and I do not mean this offensively, it is the Government who are in the box, not the Opposition. I notice that frequently hon. Gentlemen opposite try to steer what is after all a shadow Government into the box, as though they were under scrutiny by the nation. The scrutiny has to go to the Treasury Bench, and I say to the right hon. Gentleman that today's panic stems from our own frantic devaluation in November and the world's loss of faith in sterling which was allowed to go unchecked for months. We remember the bitter complaints in December that we had to wait until this predictable date today. Today's savage economies will not stop the Government spending an extra £1,000 million next year. Today the Government demand a curb on spending, yet they put up their spending ten times faster than private spending Today, of every extra £ which the nation earns, the Government snatch and spend 15s. Today, there is mountting anger in the hearts of our people and the Government will ignore it at their peril.

9.25 p.m.

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

I welcome the Budget, partly because elsewhere some time ago, the Chancellor invited some of his hon. Friends to offer him suggestions in a democratic exercise. In opening the discussions, I made certain suggestions, many of which are in the Budget, which I, as a new Member, find very gratifying. The only difference which we appear to have had is that I suggested the very unpopular course of raising the standard rate of Income Tax on earned income by 3d. and on unearned income by 4d. He has preferred other routes, including an increase in S.E.T. In this course, I believe—I. hope that I do not provoke hon. Members too much—that he was right and I was wrong.

In assessing the present Government's record, any reasonable politician on the other side would concede, I think, that this. Government have had more bad luck than any other in British history, at any rate in this century. One should remember that some people tried last week to imagine whether anything else could possibly happen and concluded that we had exhausted our misfortunes, yet this was followed by the international monetary crisis over the weekend. We have survived the weekend very well. Certain decisions were taken of which I do not wholly approve, but which suggest a modest compromise.

Senator Kennedy might have reflected on this crisis, particularly as it affected the United States, in making his bid for the Democratic nomination. I recall reading about the Democratic nomination of 1896, when an equally good-looking, equally young aspirant to the nomination, a politician called Bryan, thought of a way to clinch it for himself. His speech then became known as the "cross of gold" speech, when he said: You shall not press down on the brow of labour this crown of thorns. You shall not cruify mankind on a cross of gold. Rather than entering the lists for the nomination by using Vietnam and other agonising problems for the United States Government, if Senator Kennedy had said that he would eliminate gold from the United States consideration of future international monetary reform, he might have made sure of winning the nomination easily. He might also have reflected that if he won the nomination and followed Bryan he would lose the election.

I welcome the Budget because it is realistic, although it is bound to have a political backlash. The Chancellor has taken an enormous amount in extra taxation. Whether or not the total is right and he has achieved the right balance between direct and indirect taxation I do not know and only the future will tell. It is ironical, however, that the greatest criticism is likely to come about the extra taxes imposed on the motorist. Of all the status symbols possessed by the average working man, the motor car is probably his greatest, perhaps ranking even higher than his house. Nor will I comment on the incomes policy because I still remain implacably opposed to it, for reasons I have expressed in the House previously.

While I do not wish to lecture the House, the remarks of the hon. Member for Manchester, Withington (Sir R. Cary) call to mind the fashions that have existed in economics over the years. The key to our economic salvation has had more discussion than most other subjects. We start with league tables representing the relationship between investment and gross national product. That fashion was followed by the passion of some people for economies of scale related to the Common Market. Becoming even more fashionable, one might consider the Philips curve and its relationship to unemployment and the economy, and then move on to the ultimate, Paishism, with which the Prime Minister flirted some time ago.

We were told by many people that incomes policy was the only answer to cost inflation, but recently we have discovered that the great problem which we must overcome to become a viable economy is that of personal consumption. Our personal consumption, as a percentage of the G.N.P., exceeds that of all other industrial countries, we are told, but most students of O-level economics have known that for some time. At this stage in our economic destiny this appears to be the nigger in the woodpile.

Hon. Members have not stressed the fact—probably because this is not a vote-catcher—that if one wants to solve one's problems by suppressing consumption, it is easier to suppress public than private consumption. We have, therefore, shifted to the point made in the closing remarks of the hon. Member for Withington; his suggestion that we will not solve our problems until the Government put such a reign on public expenditure that, as a proportion of the G.N.P., it is substantially decreased. A more sophisticated version of this theory of public expenditure as the root of our misfortunes has been provided by a new architect of economic policies on the benches opposite—the right hon. Member for Streatham (Mr. Sandys), who is sometimes referred to as the shadow Leader of the Opposition. Speaking last weekend, he went a stage further. I agree that he was reflecting the doctrine of certain other more prominent right hon. Gentlemen opposite. He said that unless any Government can finance their public expenditure either through tax revenues or borrowing in the market they are on the road to disaster.

There may be something in this. It is a doctrine made fashionable by a well-known Frence politician, M. Rueff. He talked about l'impasse, about this hiatus between expenditure and revenue which led to the necessity for borrowing from the banking system. In this country financial journalists have coined a highly technical phrase for this means of finance to which Governments are occasionally driven. They call it "funny money", not real money or market borrowing, but the sort of borrowing of a last resort which comes in some mysterious way through the money-creating powers of the commercial banking system.

I would concede that a Government must keep their eye on this particular problem because, if they do not, it is quite possible that the creation of this funny money may have serious consequences for another aspect of policy to which the Chancellor referred when he spoke of credit control. We must keep this in mind because it is the failure of the Government to evolve adequate and effective fiscal and monetary policies containing our use of resources within the supply of resources available that has led us to two defeats. One was the need to resort to incomes policy and the other the need to resort to devaluation.

I do not want at this time of night to get involved in technicalities, but I think it undoubtedly true that this Government have tended to follow the doctrine and the policy of hon. Members opposite when they were the Government because, if any part erected Keynesian deficit finance into a way of life when it was intended to be only a temporary expedient to overcome periods of acute unemployment, it was the party of hon. Members opposite. Continuously they added year after year to the National Debt in this way. Now they point an accusing finger at my right hon. Friends, but truth is truth and one must concede it.

We are getting to a stage in which if we are not very careful we shall make the operation of monetary policy difficult. In an article in the October Lloyd's Bank Review, Professor Cramp, after exhaustive investigation of this problem, came to the conclusion that if we have these very large deficits the power of the banking system over the supply of money is very limited indeed. There are other aspects of this problem which if I had time I would discuss. If hon. Members opposite had had the measure of political integrity with which I have always credited them, one of the things they would have done almost immediately through the voice of the Leader of the Opposition would have been to congratulate the Chancellor on achieving what in fact they had asked him to do.

The most important achievement of this Budget, without any doubt, is that what we used to call in the halcyon days before today "the net borrowing requirement" has been cut from well over £1,000 million to £358 million; and if it is not possible for the Chancellor of the Exchequer to find £358 million through the issue of short- or long-term marketable securities then I shall be very surprised indeed. He will certainly do that without having to have recourse to the sterling counterpart of the funds that come from abroad by borrowing or a reduction in reserves which have been a source of so much financial support for Governments in the past. That is the main point I want to make. But the Chancellor of the Exchequer has done what I am sure hon. Gentlemen opposite felt it was quite beyond his capability to do. He has reduced this net borrowing requirement, not only through reducing expenditure, as I would concede, but through raising taxes to such a degree that the finances of this country will be under much greater control in the future than they have been in the past.

In my final point I come back to the general situation. This has been a hard Budget. Without any doubt there will be criticism. Our great problem is whether or not we have the time to show the British people that this policy is going to pay off. If the Chancellor of the Exchequer has to say as General de Gaulle said of the devaluation of 1958 and 1959: "La verite c'est la séverité", let us hope that our devaluation and our fiscal and monetary policies will prove to be as successful for this country as they were for France.

9.42 p.m.

Mr. Patrick Wolrige-Gordon (Aberdeenshire, East)

I listened with very great interest to the hon. Gentleman the Member for Stoke-on-Trent, Central (Mr. Cant) and, in a sense, I agree with much of what he had to say. My only real concern is that a Budget is much more than the compilation of sums and of various figures of one sort or another. What matters is what the people of this country think of it and how they react to it, if we are really going to get out of our difficulties. I want to say straight away that I feel that the effects of this Budget, particularly on Scotland, will be extremely severe.

First and perhaps most obvious, is the increase of 50 per cent. in the Selective Employment Tax. We all heard the Chancellor of the Exchequer speak this afternoon about provision for certain hotels in rural areas—a vague definition if ever there was one. We shall certainly be very anxious to find out from the Government as quickly as possible where those hotels are, which ones they are and why this should affect hotels in one area and not in another. I can see great difficulties of definition in this particular respect. I certainly hope that the Aberdeen area will be included. The question of the tourist trade, in particular, is one that my right hon. and hon. Friends and I have pursued in the interests of Scotland, and we are glad to have even this small recompense for a sorely tried and potentially very valuable industry.

Scotland does not consist only of hotels. There is a great deal of service industry, particularly in the development area—the whole country, as it now is—which is sorely affected by the Selective Employment Tax. It has had a serious impact on the employment of our people, which will inevitably be aggravated by the increase in the tax. The philosophy behind the tax that one simply uses it to switch men from service to manufacturing industries does not apply when there is no alternative manufacturing industry and spare capacity in the country.

Another point concerns the increase in transport charges. I rejoice, as we all do, that certain of the more iniquitous parts of the Transport Bill have at last been dropped, thanks to the pressure from this side of the House. But the incidence of taxation on the transport industry will still be very severe, and again most seriously affects Scotland, which has such long lines of communication with the other parts of Britain. No Government and no reorganisation can deal with that.

The only chance for Scotland is to have efficient, cheap and flexible transport. After the Chancellor's work this afternoon we can be quite convinced that that transport will not be cheap. Not all of Scotland's roads are full of huge lorries carrying vast transformers, boats, propellers and so on from one part of the country to another. There are many parts of the country on which the removal of the abnormal load tax has no effect. They are still sorely affected, and their economy is threatened by the way the Government are approaching transport problems and policy.

My final point on Scotland is that the increase in the taxation of spirits affects the people of our country more than anybody else.

We heard today a very comprehensive and able speech by the Chancellor of the Exchequer which has raised taxation more than any Budget in memory. Right hon. and hon. Members opposite cheered themselves hoarse over it. To me that was an astonishing display which I believe they will live to regret. I remember when twopence on a packet of cigarettes imposed by a Conservative Chancellor made them hoarse with rage. Today that is a fraction of a Budget which has increased taxation in a full year by £923 million—a lot for anybody to swallow. Moreover, it is set against a background of crisis not in this country alone but in the whole of the western world's monetary system.

The main missing factor in this crisis has been confidence. As far as I understood the Chancellor's aim today, the whole exercise was designed to try and win back confidence abroad in the economic direction of the country. I hope he succeeds. But when one sees the Western world's monetary system coming in danger yet again of collapse, I hope that we shall move into a recognition that economics is not only concerned with figures and that bad economics are not only a result of bad Government but a symptom also of disease and not the disease itself.

Even the issue of confidence, which the Chancellor has attacked so carefully, still depends, I think, as much on what people think of him as on what they think of his policies. But the other issue which concerns me is what I felt to be a complete lack of vision in his speech. What aim does he think our country should have in 1968 which the Budget is designed to help it achieve? I think that he set this country's aim as £500 million surplus on the balance of payments. That is a worthy aim. But what sort of response does he think that aim and the Budget in which he enshrined it will get in Britain? How will the British people respond to this kind of concept of what their lives are to be given to?

I think that we can guess their response because of the right hon. Gentleman's expressed intention, and that of the Government, to take further statutory powers to control prices and incomes and almost everything else one can think of. Medi ocrity presents no challenge to the British people who will not stir themselves to achieve minimum goals of small-minded men. There is greatness in this country which the Government have totally failed to inspire or reach in any way. Do not let the Government congratulate themselves as they bully and drive this great nation into their small acres. It is a bad teacher who has to use the stick. The Government have failed already, will fail again and will fail not only because they have devalued the British £ but because they have devalued and under-rated the British people.

9.53 p.m.

Mr. Laurence Pavitt (Willesden, West)

In view of the little time left, I hope that the hon. Member for Aberdeenshire, East (Mr. Wolrige-Gordon) will forgive me if I do not follow him too far in the debate. I want to make a quick response to the hon. Member for Manchester, Withington (Sir R. Cary), with his very warm and human tribute to the Chancellor of the Exchequer, which struck a chord in most of us. This is one of those occasions when one warms to this place, which at other times can be very frustrating. When one hears a tribute like that of the hon. Gentleman, it strikes a spark across the Floor of the House and I want to join in his tribute to my right hon. Friend.

My right hon. Friend, of course, has not pleased all of us, and never will. But the way in which he has taken such tremendous responsibilities on his shoulders on behalf of us all is something that we on this side are very much aware of, and, in the critical comments we are likely to make in the next few days, I hope that he will bear in mind that, in the major job he has done, he has our warm appreciation. Apparently if there was anything to be touched he seems to have touched it—people who want to get married—early or late, old-age pensioners, bingo players, car drivers and the rest.

I want to concentrate on a small but important matter. I am a Co-operative M.P. I strongly objected to the Selective Employment Tax when it was brought in. I did all I could at that time to oppose it, and I must inform my right hon. Friend that I shall fight this fresh impost of an additional 50 per cent. tooth and nail. The division between production and distribution, between goods and services is a false one and has gone too far.

We cannot divorce these things. Service once was a good thing, a word we were proud if, not something of which one was ashamed. The way that this tax operates means that it is the housewife who has to pay. As a child I remember that the initials P.B.I. were very mysterious to me and arose from the First World War. When I was old enough to know rude words I learned to understand that the P.B.I. meant the people who bore the brunt of the fight, the "Poor Bloody Infantry".

These days when it comes to the economic battle it is the P.B.H., the "Poor Bloody Housewife". She has to bear most of the increasing prices, whereas the pay packet that her husband gives her is very much the same. I welcome what my right hon. Friend said about not introducing a valued-added tax. I rejoice that that has not happened yet, because it would be a tax on food, and so far no Government of any political persuasion has made a direct tax on food. I hope it will never be imposed. S.E.T. is however an indirect tax on food. To give an example from the concern about which I know most—the Co-operative Movement—75 per cent. of the total amount of the trade done by it is in food and fuel. At the moment co-operative societies are paying £10 million on S.E.T. and this will now go up to £15 million, so that £11,500,000 will have to be directly absorbed on the basis of bread, butter, milk, tea, butchery and so on, the basic ordinary commodities that the housewife buys.

While the Movement has been able to absorb as much as possible without passing it on to prices it is inevitable that prices must now rise. I welcome my right hon. Friend's comment that he would take special measures to keep prices down, but with 3,000 different prices bearing on the Cost of Living Index, he has an almost impossible task. The moment that one talks about wages, the whole trade union movement rises up, and the moment that one talks about dividends the whole of the Confederation of British Industry rises. But when one talks about prices and the various mechanisms that we have tried to erect to deal with rises, such as in gas and electricity, then all the consumer com mittees have about as much effect as a snowball in a baker's oven. We are just unable to mount the same kind of pressure when it comes to dealing with prices.

For that reason I very much resent this fresh impost, up to 37s. 6d. from 25s. for each person employed in the distributive trades. Apart from anything else, the anomalies are fantastic. This impost is based on the Standard Industrial Classification, which was brought forward in 1948 and revised in 1958, for an entirely different purpose to that with which S.E.T. deals.

Apart from the impact on the Cooperative Movement may I point out how badly this affects the Health Service. I am a member of the North-West Metropolitan Regional Hospital Board. Last year we paid £1,000,478 in S.E.T. and a whole band of accountants and reams of book-keeping was needed for that. At the end of that time, we got another lot of accountants to give it back again. The result is that we have a Government Department, the Ministry of Health, paying it out on the one hand and the Treasury giving it back with the other. This strikes me as bad economics, bad use of a limited labour force, and a waste of effort that could be better used in increasing exports.

In another sphere the Minister of Health has done a sterling job in trying to ease the load on the general practitioner by encouraging him to use ancillary services. With S.E.T. he is discouraged from using these, so the taxpayer pays £7,500 for a doctor to be trained and then instead of clinical medicine he is filing cards and writing letters—a job that a typist could do but she cannot be afforded because of S.E.T. I would have liked more time to develop my theme, because there are many comments that I would have liked to have made. I accept that there are benefits in the exemption of hotels in the Development Areas, but other service industries are just as important. The Co-operative Movement will vigorously oppose in every way that it can this fresh impost upon consumers, because it is the consumer who, at the end of the line, will have to pay the bill.

Debate adjourned.—[Mr. Gourlay.]

Debate to be resumed Tomorrow.