Commons Sitting of 12 May 1970

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS
BARCLAYS BANK D.C.O. BILL [Lords]
Read the Third time and passed, without Amendment.
BARCLAYS BANK TRUST COMPANY BILL
Read the Third time and passed.
CUMBERLAND COUNTY COUNCIL BILL
Read the Third time and passed.
NOTTINGHAM CORPORATION BILL [Lords]
Read a Second time and committed.
OXFORDSHIRE COUNTY COUNCIL BILL [Lords]
Read a Second time and committed.
WESTERN VALLEYS (MONMOUTHSHIRE) SEWERAGE BOARD BILL [Lords]
Read a Second time and committed.
BRITISH TRANSPORT DOCKS ORDER CONFIRMATION BILL
Considered; to be read the Third time Tomorrow.
COATBRIDGE BURGH ORDER CONFIRMATION BILL
Considered; to be read the Third time Tomorrow.

ORAL ANSWERS TO QUESTIONS
  PUBLIC BUILDING AND WORKS

    Construction Industry
    Mr. Costainasked the Minister of Public Building and Works what further proposals he has for alleviating the present level of unemployment in the construction industry; and whether he has discussed these with the industry's representatives.
    Mr. Gordon Campbellasked the Minister of Public Building and Works whether he will now institute a review of the conditions in which construction firms are having to operate and of the state of the industry.
    Mr. Michael Shawasked the Minister of Public Building and Works whether he will now hold a further meeting with the construction industry leaders about the state of trade in the industry.
    The Minister of Public Building and Works (Mr. John Silkin): My normal contacts with the industry are adequate in the light of the announced Government measures.
    Mr. Costain: But does not the Minister appreciate that unemployment in the building industry is now the highest that it has been for many years? Does he not realise that this is due to the Government's policy of increasing the cost of building? Would it not be a splendid thing if he got on with some of the much-needed building work? If he cannot support house building, what about getting on with prisons?
    Mr. Silkin: The hon. Gentleman is always very exuberant at this time of day. The measures announced by my right hon. Friends the Minister of Housing and the Chancellor are already having their effect on the confidence of the building industry.
    Mr. Campbell: What will the right hon. Gentleman do about the intolerable burdens facing the construction industry, the full weight of which cannot be assessed much beforehand—including transport costs, S.E.T. and B.S.T.?
    Mr. Silkin: There is a question about the costs of the construction industry later on the Order Paper, and it would be out of order for me to deal with it at the moment.
    Mr. Shaw: Is the right hon. Gentleman satisfied that his Department is as close to the industry as possible in getting correct information for forecasts? Is it not a fact that last year his predecessor forecast an increase in output of no less than 4 to 5 per cent., but it turned out to be a decrease of some 3 per cent.?
    Mr. Silkin: I am fairly happy about the forecasting which has been done, since the building E.D.C. and the National House-Builders Registration Council seem to have come to much the same conclusion. Of course, forecasts are only forecasts of trends and inevitably need to be revised as time goes on.
    Mr. Heffer: While accepting that unemployment levels in the building industry are too high, and that much more needs to be done to solve the problem, may I ask my right hon. Friend whether he saw the other day a B.B.C. television programme in which a building worker said that he was working on " the lump " and at the same time drawing unemployment benefit? Does this not suggest that the figures of unemployment in the building industry are somewhat inflated as a result?
    Mr. Silkin: My hon. Friend has a valid point. Undoubtedly, the growth of nominal self-employment is reflected in unemployment figures, but I hope that before the end of this Session we shall have dealt with that problem.
    Mr. Costainasked the Minister of Public Building and Works what estimate he has formed of the likely effect of the Budget proposals on output in the construction industry.
    Mr. John Silkin: The effect of the Budget proposals will be to enhance the prospect of an increase in output this year and of a greater increase in 1971.
    Mr. Costain: Should not the Minister frankly admit that that is wishful thinking? Does he not realise that one of the proposals in the Budget is to give special concessions for building industrial factories, but they have to be built within two years? How does he reconcile that
    1038
    with the fact that it takes two years to plan and erect a building of this kind? [HON. MEMBERS: " Too long."] Does he not realise that this is one side of the industry which is reasonably busy? Would it not be better to get on with that which is lagging behind?
    Mr. Silkin: The industry has asked for some time that there should be a drop in Bank Rate and easier credit facilities, among other things. It has also asked for an increase in mortgage facilities. All these things have now been given to it. As to the industrial building allowance, this is for work actually commenced. It does not have to be completed by 1972. The allowance is for a reasonable period.
    Mr. Frank Allaun: Is it not a fact that while the Budget has provided additional credit for house buyers it has not done so for house builders? Will the Minister speak to his right hon. Friend to impress on the banks that they should give priority loans to house builders?
    Mr. Silkin: As my hon. Friend is aware, bank lending is to be allowed to increase by, I think, 5 per cent. during this year. That is a direct help to house-builders. The construction industry is being afforded more priority in the granting of loans, and, of course, the drop in Bank Rate from 8 per cent. only six weeks ago to 7 per cent. is a further help.
    Mr. Chichester-Clark: Despite what the right hon. Gentleman said about the Budget proposals, are they not an attempt to use the building industry as an economic regulator, which is exactly what the Minister earlier deplored? Can he not reconcile some of these conflicts with his colleagues?
    Mr. Silkin: I certainly deplore the use of the building industry as an economic regulator for numerous reasons. The Chancellor was endeavouring to protect the industry from the cross-winds, and I think he has succeeded to a very agreeable extent.
    Mr. Frank Allaunasked the Minister of Public Building and Works if he will state the number of building workers unemployed at the latest available date.
    Mr. Speedasked the Minister of Public Building and Works if he will list

    1039
    in the OFFICIAL REPORT the number of construction workers unemployed in April in each of the last 10 years; and whether he will make a statement.
    Mr. John Silkin: The number of wholly unemployed workers in the construction industries in April, 1970 was 114,726. I shall circulate in the OFFICIAL REPORT the numbers unemployed in April of each of the last 10 years. There has been a steady reduction in the numbers unemployed since January, and I expect this trend to continue under the stimulus provided by the Budget proposals
    Mr. Allaun: Is my right hon. Friend aware, in addition, of the numbers of workers who have left the industry, and of the fall in the number of apprentices? As the housing section is hit worse than the other section, would he take some new steps to assist it?
    Mr. Silkin: I take my hon. Friend's point. I am very concerned about this. Nevertheless, I think that, on reflection, he might agree with my hon. Friend the Member for Liverpool, Walton (Mr. Heller) that the growth of the lump of self-employment has added unnecessarily to the figures.
    Mr. Speed: Is it not a fact that the April figure is again the highest unemployment figure in the construction industry for at least 30 years? Is the right hon. Gentleman satisfied that if nothing further is done the numbers will go down to a more realistic figure of perhaps 20,000 or 30,000 unemployed in the industry?
    Mr. Silkin: I certainly believe that we are on a downward trend now. I hope and trust that the measures which have been announced will have their effect.
    Following is the information:

    Number of wholly unemployed in the Construction Industries

    April. 1960

    …

    …

    49,700

    April, 1961

    …

    …

    40,780

    April, 1962

    …

    …

    60,351

    April, 1963

    …

    …

    91,547

    April, 1964

    …

    …

    57,986

    April, 1965

    …

    …

    44,349

    April, 1966

    …

    …

    44.204

    April, 1967

    …

    …

    97,003

    April, 1968

    …

    …

    106,846

    April, 1969

    …

    …

    105,843

    April, 1970

    …

    …

    114,726

    Mr. Eyreasked the Minister of Public Building and Works how many bankruptcies have occurred in the building industry in the 12 months ended 30th April, 1970, and in each of the two preceding periods of 12 months.
    Mr. John Silkin: Information for 1970 is not yet available. The number of bankruptcies in the construction industries in England and Wales in the calendar years 1969, 1968 and 1967 were 957, 831 and 860 respectively.
    Mr. Eyre: Is the right hon. Gentleman aware that these figures represent an enormous increase in bankruptcies compared with earlier years, particularly with 1964? Is it not a distressing comment on Government policies, particularly when one thinks of the lost building output and rising unemployment?
    Mr. Silkin: I deplore bankruptcies in the construction industry as in any other industry, but we must not over-emphasise the situation. The number of bankruptcies is more than in previous years but not overwhelmingly more, and the figures we have are only up to 1969. I expect the trend to be better this year.
    Mr. Hugh D. Brown: Is my right hon. Friend not grossly under-estimating the public interest in this matter, especially in Scotland? There, firms with household names have gone into liquidation and there has been hardship to house purchasers and considerable alarm when some companies which have gone into liquidation have sprung up into existence again under a different name after a period of months has elapsed.
    Mr. Silkin: I was asked about bankruptcies. There is a difference between bankruptcies and liquidations, one being a question of ordinary individuals and the other of companies.
    Mr. Jopling: Is the right hon. Gentleman aware that many firms in the building industry, while not in danger of liquidation or bankruptcy, have taken such a beating over the last few years that they will find it hard to increase house production and other building when we get a Conservative Government to give them the go ahead?
    Mr. Silkin: I am not in a position to prophesy what is going to happen in 30 years' time.
    Mr. Heffer: As private enterprise has miserably failed in this industry over the past few years, will my right hon. Friend indicate that in the plans of the next Labour Government we will introduce a public building corporation and bring this industry under proper control on the basis of public ownership?
    Mr. Silkin: This is a point which my hon. Friend has made from time to time, and I still think it is very worthy of consideration.

  Scotland (Visit)
  Mr. Gordon Campbellasked the Minister of Public Building and Works if he will make an early official visit to Scotland.
  The Parliamentary Secretary to the Minister of Public Building and Works (Mr. Charles Loughlin): My right hon. Friend and I have been to Scotland five times in the past 12 months, and we both have plans to visit Scotland at least three times before the end of this year.
  Mr. Campbell: Is the Minister aware of the great concern in Scotland about the difficulties facing the building industry there, especially in view of the liquidation in the last three months of three large well-known firms, all of which have been engaged in public contracting?
  Mr. Loughlin: We are aware of the difficulties affecting the building industry all over the country, but I would not have thought that the industry's difficulties in Scotland are as great as the hon. Member suggests. I am not always sure that it is wise to refer to liquidations and bankruptcies and to suggest in such references that these are the cause of particular difficulties. These arise for other reasons as well.
  Mr. W. Baxter: When my hon. and right hon. Friends visit Scotland in the near future, as I hope they will, will they look at the suggested new prison for women to be built at Cornton, near Stirling, and give consideration to the fact that this project will cost £1½ million and, I understand, is to be built by borstal boy labour? Will he look into the matter to ensure that the interests of the building industry are safeguarded?
  Mr. Loughlin: I certainly will.

  Bolton Committee (Departmental Evidence)
  Mr. Jeffrey Archerasked the Minister of Public Building and Works whether he has now obtained the permission of the members of the Bolton Committee to publish his Department's evidence to that body.
  Mr. John Silkin: I have now arranged to provide copies of this evidence for the Library and others who may be interested.
  Mr. Archer: While I welcome the Minister's decision, may we know why this has not been done for such a long time?
  Mr. Silkin: There is no particular reason why it was not done before. It is simply that the matter did not arise until now.

  Brick Stocks
  Mr. Jeffrey Archerasked the Minister of Public Building and Works whether he will make a further statement on the present brick stockpile.
  Mr. Speedasked the Minister of Public Building and Works what action he now proposes to take to reduce brick stocks from their present high levels.
  Mr. John Silkin: At the end of March stocks of bricks were 1,124 million. As I said in the House last month, I expect the industry to benefit progressively from the measures announced by the Government to stimulate the housebuilding programme.—[Vol. 799, c.198.]
  Mr. Archer: Does the Minister agree that this is another Labour record, a record glut? Will he be kind enough to explain the remarks of his right hon. Friend the Member for Huyton (Mr. Harold Wilson) about " planning the bricks "?
  Mr. Silkin: I find the present brick stocks far too high. On that I think the hon. Member and I would agree. Nevertheless, the fact remains that as demand increases so the surplus is shown in its true capacity. I am seeing members of the Brick Development Association tomorrow and I think they will point out that if there were a great expansion now

  1043
  what appears to be a large glut might not be so large.
  Mr. Speed: Will the right hon. Gentleman confirm that stocks of bricks this spring have been the highest in our history? Will he confirm that the brick manufacturers probably believed the Prime Minister in his remarks about the National Plan and expansion which never came about?
  Mr. Silkin: Certainly the brick glut, or stockpile, at the moment is the highest there has been. As to the second part of the hon. Member's question, it is certainly higher than it ought to have been, but I noticed that Sir Ronald Stewart, Chairman of the London Brick Company, was quoted in the Financial Times on 6th May as saying that there are signs of strenthening in demand.
  Mr. Ronald Atkins: Does my right hon. Friend agree that the infusion of many new Labour councillors to the local authorities will do a great deal to expand local authority building?
  Mr. Silkin: I think that if we go on like this there will be more Labour councillors than there are bricks.
  Mr. Chichester-Clark: In view of the Prime Minister's pledge to plan the bricks and the fact that the target of the National Plan has been missed by no less than 33 per cent., can the right hon. Gentleman say whether we are likely to have on television a pledge to plan the bricks or not to plan the bricks this time?
  Mr. Silkin: I think that if the hon. Member waits, let us say, until the end of the year he will find that the brick situation is very satisfactory to all parties.

  British Standard Time
  Mr. Crouchasked the Minister of Public Building and Works if he will undertake further research into the effect upon construction output of all-the-year round British Standard Time.
  Mr. Chichester-Clarkasked the Minister of Public Building and Works whether he will place in the Library a copy of the report of his National Consultative Council on the subject of the effect of British Standard Time on the construction industry.
  Mr. Loughlin: The requirements of the current review of British Standard Time are met by the survey of the industry recently undertaken by my Department on behalf of my right hon. Friend's National Consultative Council. Copies of this were placed in the Library on 16th April.
  Mr. Crouch: Will the Parliamentary Secretary bear in mind that the Government are to take a decision in July or August on the whole future of British Standard Time? Will he make the strongest representation to the Home Secretary that B.S.T. has added £30 million to building costs?
  Mr. Loughlin: Without accepting wholly what the hon. Member has said, we will of course accept our responsibility for stating the case on behalf of the industry to the Home Secretary.
  Mr. Chichester-Clark: To strengthen the Minister's hand, will he consider conducting a survey of the other Government Departments to find how much their time has been wasted and their costs have been raised by this ridiculous decision?
  Mr. Loughlin: It is not our job to consider surveys of other Departments, as the hon. Gentleman knows.
  Mr. Heffer: In view of the fact that the survey carried out by the Ministry came down firmly, on both the trade unions' and the employers' side, against continuation of British Standard Time, will my hon. Friend draw the attention of other Departments concerned about the future of British Standard Time to this and ensure that the construction industry does not have another winter with British Standard Time?
  Mr. Loughlin: I would not be prepared to guarantee that we shall not have another winter on British Standard Time. Our job is to represent the interests of the building industry in this examination of the effects of British Standard Time. This we shall do.

  Whitehall (Martin Buchanan Plan)
  Mr. Allasonasked the Minister of Public Building and Works if he will hold a public inquiry into the deviations which have been announced from the Martin Buchanan plan for Whitehall.
  Mr. Loughlin: No, Sir. The Martin Buchanan Reports were welcomed by the Government as a broad framework within which future development in the area should take place. That is still the position.
  Mr. Allason: Since the Martin Buchanan Report was based on the exclusion of through traffic from Parliament Square, is it not highly unrealistic to continue to work on portions of that plan when its main prop has been pulled away?
  Mr. Loughlin: I do not think that any useful purpose would be served in setting up the public inquiry for which the hon. Gentleman asked.

  Bristol (Departmental Expenditure)
  Mr. Ellisasked the Minister of Public Building and Works what expenditure he has sanctioned in the Bristol area in each of the last five years.
  Mr. Loughlin: Not all the information is readily available. However, the main expenditure on capital and running costs for accommodation provided by the Ministry, including that for the Post Office and other repayment clients, in and around Bristol was for the five years starting 1965–66 as follows:

  £710,000.

  £950,000.

  £2,230,000.

  £1,760,000.

  £2,250,000.

  Mr. Ellis: Will my hon. Friend confirm that this marks a significant increase in the amount of expenditure in the Bristol area? Will he accept my congratulations to his Department and the Government, as this reflects the Government's intention, and their carrying-out of that intention, to provide the citizens of Bristol with telephones and a greater degree of public services than ever before?
  Hon. Members: Too long.
  Mr. Loughlin: Some hon. Members say " Too long ". I thought that my hon. Friend's supplementary question was almost too good. I can confirm that the expenditure is a substantial improvement on the yearly expenditure in the last five years in office of the Conser-
  1046
  vative Party. I thank my hon. Friend for his congratulations.

  Building and Construction Firms, Scotland
  Mr. Buchanan-Smithasked the Minister of Public Building and Works (1) why information is not available regarding building and construction firms in Scotland which have gone into liquidation in recent years; and if he ill make a statement;
  (2) why information is not available regarding the number of building and construction firms in Scotland which have gone into liquidation in recent years; and if he will make a statement.
  Mr. Loughlin: Records have not been kept in the form previously requested by the hon. Member. I have, however, now obtained limited information from the first quarter of 1969, which, with permission, I will circulate in the OFFICIAL REPORT. No information is available for other than limited companies.
  Mr. Buchanan-Smith: In reply to an earlier Question the Minister said that he was not concerned about liquidation figures as pointers to the health of the industry. Will he accept that we in Scotland are concerned about the figures of liquidations of building firms in Scotland? Is he aware that 18,000 building and construction workers in Scotland, 9½ per cent. of our building labour force, are unemployed? We in Scotland want to see something done about this.
  Mr. Loughlin: I do not think that my right hon. Friend said that we were not concerned about liquidations anywhere. We are concerned about them. But we ask hon. Members to be careful about attributing liquidations and bankruptcies solely to the political climate.
  Mr. Maclennan: Does my hon. Friend agree that information could never be entirely helpful in explaining these matters unless there is a full disclosure of accounts going back over the years, which the Opposition have always resisted, and that we should have to make very careful studies of managerial practices over that period of years?
  Mr. Loughlin: That was precisely what I meant when I respectfully

  1047
  cautioned hon. Members about attributing liquidations and bankruptcies solely to political issues.
  Following is the information:

  CONSI RUCTION INDUSTRY LIQUIDATIONS OF LIMITED COMPANIES BEGUN IN SCOTLAND

  Compulsory

  Creditors'

  1969—

  March Quarter

  2

  7

  June Quarter

  3

  5

  September Quarter

  1

  9

  December Quarter

  1

  7

  7

  28

  1970—

  March Quarter

  9

  5

  Historic Buildings (Compensation Payments)
  Mr. Peter M. Jacksonasked the Minister of Public Building and Works what sums were paid out during 1969 in compensation under the terms of Part II of the Historic Buildings and Ancient Monuments Act, 1953; and whether he will specify the number of applications for compensation which were received.
  Mr. Loughlin: The figures are £14,709 and eight respectively.
  Mr. Jackson: I am rather disappointed by that figure, which is somewhat down on the 1966 figure, when it was thought proper to spend about £20,000. May I also draw my hon. Friend's attention to the report by Sir David Walsh on the protection of field monuments and his conclusion that monuments are being destroyed at such a rate that the problem needs speedy and decisive action? That means spending money. Will my hon. Friend give an assurance that more will be spent in future years?
  Mr. Loughlin: We are very concerned about it. We want to give every possible assistance, and we do so, even to the extent of facing up to the cost of compensation. If my hon. Friend has particular cases in mind I shall be glad to consider them.

  New Construction (Cost Index)
  Mr. Christopher Wardasked the Minister of Public Building and Works what change he expects in the index in the cost of new construction in the course of 1970.
  Mr. John Silkin: It is too early to make a reliable forecast of the movement in construction costs in 1970.
  Mr. Ward: Is the Minister aware of the E.D.C.'s estimate that construction costs may rise by between 5 and 7 per cent? Is not that disturbing? Does the right hon. Gentleman plan any measures to combat that rise?
  Mr. Silkin: The National Federation of Building Trades Employers believes that there should be about a 3 per cent. rise as a result of the increase under the productivity agreement, provided employers do not get a return in productivity. But they probably will, and that is the point of it. Material costs are expected to rise by 2 to 3 per cent. The whole forecast must be seen in the light of those two assessments.

  House-building Output
  Christopher Wardasked the Minister of Public Building and Works what was the value at constant prices of house-building output in each of the past three years; and what estimate he has made of the likely value of house-building output in 1970.
  Mr. John Silkin: In 1969, output of private contractors was £968 million valued at 1963 prices, in 1968, £1,088 million and in 1967 £1,044 million. The total value of work done is likely to be less than in 1969 but a rise in the level of activity will follow the rise in completions in the private sector which has already started. This rising trend is expected to persist in 1971.
  Mr. Ward: How can the Minister remain so complacent while the building industry crumbles away in his hands, with record brick stocks, record unemployment and the housing programme falling off? Will he recommend his right hon. Friends to abolish the S.E.T. and betterment levy and give priority to loans for house-builders and let them get on with the job?
  Mr. Silkin: The hon. Gentleman is out of date as regards lending. He must reread the speech of my right hon. Friend the Chancellor. If he thinks that I am complacent about the house-building situation, what must he think of his own Government, which built only four-fifths

  1049
  of the number of houses we have built, and spent £40 less for every £100 we are spending on roads, hospitals and schools?
  Mr. Ashton: If we are talking about the value of the output, would my right hon. Friend lend one of his staff to work out what a value-added tax would mean for output, to help the Opposition cost their proposals for a value-added tax on houses?
  Mr. Silkin: The effect of a value-added tax would be not to crumble the building industry but to blow it up.
  Mr. Chichester-Clark: Having made his boasts about his house-building achievements, which will deceive nobody, will the right hon. Gentleman tell us when he expects the level of private house-building to rise to the levels attained in 1964?
  Mr. Silkin: The measures already announced are beginning to take their effect on house-building. The hon. Gentleman will appreciate that these measures take a certain amount of time to carry through. Nevertheless, the situation is still infinitely better than it was during the period of the last Government.
  Mr. Eadie: Is my right hon. Friend aware that in Scotland in two years more private houses were built under the present Government than in any similar period for over 30 years?

  Economic Development Committee for Building
  Mr. Crouchasked the Minister of Public Building and Works when he next proposes to attend a meeting of the Economic Development Committee for Building.
  Mr. John Silkin: On Monday, 6th July.
  Mr. Crouch: I am delighted to hear that the right hon. Gentleman is going back there again because I hope that he will take some action regarding its former gloomy forecast for private house completions. Additional costing in the building industry look like rising—
  Mr. Speaker: Order. Supplementary questions must be questions.

  Pigeons, Central London
  Mr. Dodds-Parkerasked the Minister of Public Building and Works why, in view of the City of Westminster's large expenditure on anti-pigeon activities, he continues to licence bird-food sellers in central London.
  Mr. Loughlin: We do not consider that the modest arrangements in Trafalgar Square have any significant effect on the pigeon problem.
  Mr. Dodds-Parker: Will the hon. Gentleman consult the Department of Health and Social Security and the Greater London Council, since the Government are unable to protect the ratepayers of London even from this form of chemical warfare, and do something about the growing pollution and danger to health which thousands of people in the area believe to be going on?
  Mr. Loughlin: I am sorry that the hon. Gentleman is so carried away by his own eloquence because, unfortunately for him, the two licensees to sell bird food in Trafalgar Square are both disabled ex-Servicemen. One was licensed ten years ago and the other eight years ago. It was nothing to do with this Government. He had better direct his attention to his right hon. Friends.
  Mr. Maclennan—
  Mr. Dodds-Parker—
  Mr. Speaker: Mr. Maclennan.
  Mr. Dodds-Parker: On a point of order—
  Mr. Speaker: Order. Mr. Maclennan.
  Mr. Dodds-Parker: I rose to a point of order, Mr. Speaker.
  Mr. Speaker: Order. I understand the hon. Gentleman's enthusiasm for pigeons but I have called the hon. Member for Caithness and Sutherland (Mr. Maclennan).
  Mr. Dodds-Parker: On a point of order, Mr. Speaker. In view of the abusive—
  Mr. Speaker: Order.
  Mr. Dodds-Parker:— reply of the hon. Member the Parliamentary Secretary—
  Mr. Speaker: Order. The elementary rule of order is that when Mr. Speaker is on his feet an hon. Member sits down. The hon. Gentleman will get his point of order in a moment. Mr. Maclennan.
  Mr. Maclennan: Will my hon. Friend consider drawing the attention of the devotees of hare coursing to the greater attractions of the ancient sport of bird liming? Perhaps we could then get them off the moors and into London where they could do something.
  Mr. Loughlin: What we are dealing with here is the problem of pigeons in Trafalgar Square. There is a health problem, quite apart from the problem of aesthetics. But I do not think that the withdrawing of licences to sell bird food would improve the situation, because we had the same problem before the licences were issued. It would be extremely difficult to stop the general public from feeding the pigeons in any case.
  Mr. Dodds-Parker: On a point of order, Mr. Speaker. In view of the abusive reply of the Parliamentary Secretary—
  Mr. Speaker: Order. The hon. Gentleman must give notice in the conventional way.
  Mr. Dodds-Parker: In the conventional way then, whatever the conventional way is to reply to an abusive and irrelevant answer by a Minister, I beg to give notice that I shall seek to raise this matter on the Adjournment.

  Historic Buildings, Sheffield (Expenditure)
  Mr. Hooleyasked the Minister of Public Building and Works what was the total central Government expenditure on the maintenance or preservation of historic buildings in Sheffield in 1969–70.
  Mr. John Silkin: My Department is not responsible for the preservation of historic buildings in general but as the lessor of a historic building in Sheffield we spent £1,930 on it in 1969–70. No other central Government funds were spent on maintenance or preservation of historic buildings in Sheffield in 1969–70.
  Mr. Hooley: Does not my right hon. Friend agree that it is desirable and neces-
  1052
  nary that some central fund should be made available, especially to industrial cities like Sheffield, where the number of buildings worthy of preservation is limited and may be eliminated by the process of redevelopment?
  Mr. Silkin: The listing of historic buildings and the matters arising therefrom are for my right hon. Friend the Minister of Housing and Local Government.

  NATIONAL FINANCE

    Shipping Companies (Selective Employment Tax)
    Mr. Eadieasked the Chancellor of the Exchequer what revenue from selective employment tax has been received from shipping companies engaged in the export trade during 1969 and to the nearest available date.
    The Minister of State, Treasury (Mr. William Rodgers): I regret that this information is not available.
    Mr. Eadie: Is my hon. Friend aware that it has been represented to me by people engaged in the export trade that this is a deterrent to the furtherance of the export cause? As the revenue is surely not all that much, does not my right hon. Friend think that something could be done? Surely S.E.T. on these companies is not worth levying, considering the revenue involved.
    Mr. Rodgers: The objections, if they have been made in the terms my hon. Friend sugegsts, are a little wide of the mark, because shipping companies do not pay the tax for foreign-going seamen and can get it refunded for most of their other staff.

  Foreign Long-Term Loans (Payments)
  Mr. W. H. K. Bakerasked the Chancellor of the Exchequer how much capital repayment and how much interest falls due for payment during the current financial year on long-term loans to Her Majesty's Government from foreign Sources.
  The Financial Secretary to the Treasury (Mr. Dick Taverne): With permission, I will publish the information in the OFFICIAL REPORT.
  Mr. Baker: What is the amount of money available in Government funds for the repayment of these debts and what proportion will come from " hot " money?
  Mr. Taverne: Repayment of the long term debt is calculated in the balance of payments forecast which are contained in the Financial Statement. The hon. Gentle- man will have noted what the Chancellor said about the question of " hot " money in his Budget speech.
  Following is the information:

  £ million

  Repayments Capital

  1970–71 Interest

  U.S.A.—

  Line of Credit

  …

  27

  27

  Lend Lease

  …

  4

  4

  E.C.A.

  …

  5

  3

  M.S.A.

  …

  1

  —

  Export-Import Bank

  …

  43

  11

  Canadian Credit

  …

  8

  8

  Germany E.P.U.

  …

  10

  1

  Deutsche Bundesbank

  …

  —

  1

  Offset Agreement

  …

  —

  2

  Portugal

  …

  5

  —

  Total

  …

  103

  57

  Note:Small repayments of not more than £0.5 million in the year due under two sterling loans to the United Kingdom are not included in the above table.

  Government Departments (Payments)
  Mr. Fortescueasked the Chancellor of the Exchequer what is the cost to the Exchequer of each payment made by the Paymaster-General on behalf of a Government Department.
  Mr. Taverne: I would refer the hon. Member to the answer I gave on 24th February to my hon. Friend the Member for Nuneaton (Mr. Leslie Huckfield). —[Vol. 796, c. 291.1
  Mr. Fortescue: Would the hon. and learned Gentleman confirm that inquiries made since then, and possibly not yet complete, make the figure nearer 2s. than the 6d. given in the answer then?
  Mr. Taverne: No, that is not correct. I had seen a computation which was quite inaccurate because it did not allow for the maintenance of the Department's payroll of more than half a million public service pensioners.
  Mr. Heller: In view of the excellent work which the Paymaster-General did in
  1054
  helping to save the jobs of the workers at Cammell Laird, is my hon. and learned Friend aware that any increases which may come from the Paymaster-General's office are acceptable so far as I am concerned?
  Mr. Taverne: The Paymaster-General and his office of course work with the maximum of efficiency.
  Mr. Fortescueasked the Chancellor of the Exchequer whether, in view of the recent increase in the cost to the Paymaster-General's Office of such transactions, he will now arrange for Government Departments to arrange payments of salaries and pensions, and other financial transactions, through the National Giro rather than through the Paymaster-General's Office.
  Mr. Taverne: There has been no significant recent increase and the unit cost is likely to decrease. Departments are already free to use the National Giro for any financial transactions where it is economical, efficient and convenient to do so.
  Mr. Fortescue: Is the hon. and learned Gentleman aware that from recent Parliamentary Answers it is clear that Government Departments do not use the Giro very much? Will he go to Bootle and see the great amount of unused capacity there, and will he encourage Departments to take their business away from the Paymaster-General so that he can concentrate to the maximum on the work of helping industry, such as the hon. Member for Liverpool, Walton (Mr. Heffer) has mentioned, instead of concentrating on archaic activities?
  Mr. Taverne: I agree entirely with the hon. Gentleman that use of the Giro should be encouraged. I use it myself, and I hope many Members will. When it comes to Government payments, large payments are more economically made through the Paymaster-General's Office. It is only when there are small payments that it is more efficient and economical, as in the case of the 50 million payments by the Department of Health and Social Security, for which the Giro is used.

  Newspapers (Criminals' Memoirs)
  Mr. Arthur Lewisasked the Chancellor of the Exchequer whether, in view

  1055
  of the loss to the public revenue involved in the present tax arrangements regarding criminals who write their memoirs for newspapers, he will seek to change the present law so that money paid by newspapers to convicted criminals for memoirs is not an allowable expense to be off-set against profits for tax purposes.
  Mr. Taverne: No, Sir.
  Mr. Lewis: Is my hon. and learned Friend aware that that is a very disappointing reply? Is he further aware that many people detest the fact that newspapers pay criminals vast sums of money for writing so-called memoirs? They can cease to buy the paper, but they are not aware that as taxpayers they are subsidising the newspaper proprietors. Will he ensure that this is stopped because it cannot really be a legitimate business expense to pay these criminals such vast sums?
  Mr. Taverne: There is a serious problem here, but after looking into it very carefully I am satisfied that the line of approach suggested by my hon. Friend is not practicable. There are difficulties about the scope of the disallowance, definition difficulties and difficulties of identifying payment in the case of all criminals.
  Mr. Brooks: Since there is some considerable doubt about the authenticity of the latest batch of memoirs being circulated, which might well render the newspaper liable for false pretences under the Trade Descriptions Act, how does my hon. and learned Friend satisfy himself about the authenticity of the various claims made?
  Mr. Taverne: The only question with which the Revenue is concerned is whether the expenditure was incurred for the purpose of earning profits. If any definition of this kind were attempted, we should need to know whether it would apply to relatives and associates of criminals. We should have to identify each contribution made, and it would be quite impossible to tackle it in this way.
  Mr. Lewis: In view of the unsatisfactory nature of that reply, I beg to give notice that I shall seek to raise this matter on the Adjournment at the earliest opportunity.

  TRANSPORT

    British Railways (Newspaper Advertisements)
    Mr. David Steelasked the Minister of Transport whether he will give a general direction to British Railways to refrain from publishing newspaper advertisements inviting motorists to travel by rail, in view of the offence which is caused to those persons living in areas from which British Railways have withdrawn their services.
    The Joint Parliamentary Secretary to the Ministry of Transport (Mr. Albert Murray): No, Sir.
    Mr. Steel: Is the hon. Gentleman aware of the newspaper advertisements which appeared recently in the Edinburgh Evening News suggesting that people were more or less criminals unless they took the opportunity of travelling by rail? Is he further aware that this is offensive to people in those parts of the country where services have been withdrawn?
    Mr. Murray: British Railways have a duty to themselves to encourage people to travel by rail. I do not see that it gives any offence to anyone who does not have a rail service. As the House knows, the hon. Member has been quite keen on the service mentioned.

  M6, Great Barr Interchange
  Mr. Christopher Priceasked the Minister of Transport on which date he now estimates the Great Barr Interchange on the M6 will open.
  The Joint Parliamentary Secretary to the Ministry of Transport (Mr. Albert Murray): In July this year.
  Mr. Price: Is my hon. Friend aware that when it is open the stretch of road between this inter-change and the City of Birmingham will be one of the most congested stretches of road in the West Midlands? What does his Department intend to do to relieve that congestion?
  Mr. Murray: I assume that my hon. Friend is talking about the A34. Traffic routeing plans have been made to relieve congestion which may occur on this road during the period between the opening of the Great Barr Interchange and the completion of the programmed improvements of the A34.

  PRIME MINISTER (BROADCAST)
  Mr. St. John-Stevasasked the Prime Minister whether he will place in the Library a transcript of his broadcast concerning Government policy in the This Week programme on Thursday, 16th April.
  The Prime Minister (Mr. Harold Wilson): I did so, Sir, on 20th April and also repeated an extract from the broadcast in the House on 28th April.—[Vol. 800, c. 1049.]
  Mr. St. John-Stevas: How does the Prime Minister reconcile the high moral sentiments he expressed in that broadcast with the proposed Labour Party advertising campaign, which constitutes a dive into the political gutter—
  Hon. Members: "Oh!"
  Mr. St. John-Stevas:—which the Prime Minister personally authorised?
  The Prime Minister: Since the hon. Gentleman put this Question down three weeks ago he must have had more knowledge of the advertising than I. As to the dive into the gutter, there is no such dive here. If there were, those who are diving would find themselves in the company of people who have been there for three years.
  Mr. Alfred Morris: While thanking my right hon. Friend for his reply to the original Question, may I ask whether he is aware that Her Majesty's Opposition appear to be operating a kind of " unofficial secrets " Act? If he hears anything at all about the Wheatcroft Report, commissioned by the right hon. Member for Bexley (Mr. Heath) and the right hon. Member for Enfield, West (Mr. fain Macleod), the publication of which is more than four months overdue, will he tell us about it immediately?
  The Prime Minister: These are not matters for me. There are important Questions on the Order Paper about Government responsibilities. My hon. Friend would not wish me to be responsible for the variations of Conservative policy, either on V.A.T. or on anything else.
  Mr. Thorpe: In view of this Question, can the right hon. Gentleman please
  1058
  arrange for the plastic models to be placed in the Library—[Laughter.]—so that the electorate, who we want to be properly informed on various matters as they come to the election, can decide which of the two is the lesser of the two evils?
  The Prime Minister: On the first part of the question, I will direct the right hon. Gentleman's remarks to those who are concerned with these matters to see whether it can possibly be arranged. On the latter part of the question, I notice that this is the second time running that the right hon. Gentleman has tried to get into the act as to who is the least of the three evils. If he insists on being in the act I will now claim to be the least of the three evils.

  N.A.T.O. (Ministerial Meeting)
  Mr. Martenasked the Prime Minister if he will invite the heads of North Atlantic Treaty Organisation countries to a meeting in London.
  The Prime Minister: I have no plans to do so, Sir, but my right hon. Friends the Foreign and Commonwealth Secretary and the Defence Secretary will be attending Ministerial Meetings of N.A.T.O. in May and June.
  Mr. Marten: In the meantime, could the right hon. Gentleman clear up the difference of opinion which appears to exist between himself and the Secretary of State for Defence? Does he recall that on 28th April in this House he said that our nuclear deterrent would be withdrawn from N.A.T.O. only if N.A.T.O. were to collapse, and in no other circumstances? Is he further aware that the Secretary of State for Defence on 4th February said that we retain the right to use it independently if we wish to do so? Could the Prime Minister explain to the House the difference between the two statements?
  The Prime Minister: I have been answering that question for several weeks and I have no doubt that I shall be answering it through the next Parliament and the one after that. It would give no satisfaction to the hon. Gentleman, even if he should be here, because my right hon. Friend and I both made clear that there is no difference between us on this question.
  Sir G. de Freitas: Does my right hon. Friend recall that about 10 years ago he was a delegate at the semi-official N.A.T.O. Parliamentary Conference? Will he consider making this conference more official so that there may be real parliamentary criticism of N.A.T.O. Ministers, because defence is far too important to be left to Ministers of Defence?
  The Prime Minister: I certainly recall that meeting in November 1962. It was one of the more agreeable meetings that I have attended, and I think that most hon. Members from either side of the House who attended what was then the N.A.T.O. Parliamentarians Meeting would agree with my judgment. I am certainly prepared to consider what my right hon. Friend has said.

  SOUTHERN AFRICA
  Mr. Hooleyasked the Prime Minister if he will seek a meeting with other heads of Governments in Western Europa to concert national policies towards southern Africa.
  The Prime Minister: I would refer my hon. Friend to my reply to a question by my hon. Friend the Member for Croydon, South (Mr. Winnick) on 16th April.—[Vol. 790, c. 1567–8.]
  Mr. Hooley: Off the cuff I do not recall the answer to that Question, but the Prime Minister will be aware that we have an arms embargo against South Africa while France is selling all the arms it can; we are imposing sanctions against Rhodesia, whilst Italy and Germany are trading merrily with that country and we are refusing N.A.T.O. arms to East Africa while Portugal is using them in colonial wars. Would not there be some point in seeking to harmonise Western European policies in this racially inflammable area?
  The Prime Minister: The right place for co-ordination in these matters, as my hon. Friend will agree, is the United Nations, which has declared itself unequivocally. We are following the United Nations resolution on arms to South Africa, and any who want a different policy would have to consider our interest in trade and investment, and the great importance of our trade and investment
  1060
  north of the Zambesi, but apparently some right hon. Gentlemen are prepared to put this at risk. I cannot accept what my hon. Friend said about Germany and Italy. If there are cases of individual traders going against the policy of their Governments I should be glad to be informed of them.
  Mr. Grant: Will the Prime Minister confirm positively that, contrary to the views of many of his hon. Friends, he wants to increase trade with South Africa?
  The Prime Minister: It has never been in doubt that, while we have placed a ban on arms to South Africa, we wish to increase trade in peaceful commodities, which we have been doing. Although I have been warned from the benches opposite for five and a half years consistently that our trade with South Africa would suffer because of the arms embargo, this has not been the case.
  Mr. Winnick: Is my right hon. Friend surprised by the large number of people in all walks of life, including some hon. Members opposite, who are opposed to the South African cricket tour? Does not he agree that the Cricket Council and the M.C.C., if they do not recognise their original blunder in inviting the team and do not cancel the tour, will show themselves totally insensitive to race relations. to the Commonwealth and to common decency?
  The Prime Minister: In my recent public statement on this I was not concerned to talk about blunders. What I said was that if these proposals were now withdrawn this action need not be a sign of weakness or panic and would be respected by many people, so I do not want to put it in that way. In view of the threat to the Commonwealth Games in Edinburgh as a result of this, and in view of the danger that many countries in future will not want to play cricket with us, I think that there is a case for reconsidering the decision. If the Leader of the Opposition had identified himself with my proposals I believe that the Cricket Council would have thought again, because it is probably more responsive to him than to me in these matters. While the Home Secretary is prepared to make available all the police necessary to maintain law and order, if the tour were cancelled there would be

  1061
  much less call on those police, who should be dealing with the prevention of crime and the preservation of law and order.
  Captain W. Elliot: Is the Prime Minister aware that shore-based South African aircraft are co-operating with the Royal Navy in exercises in the vicinity of the Cape? Is he satisfied that those aircraft are up to date, and if they are not, does not he think it important that they should be up to date?
  The Prime Minister: I have nothing to add to what was said on the supply of aircraft in my announcement to the House in, I think, November, 1964. I do not think that has very much to do with the irresponsibility of right hon. and hon. Gentlemen opposite in wishing to stir up community problems in this country.

  AIRPORT AND INDUSTRIAL DEVELOPMENT
  Mr. William Hamiltonasked the Prime Minister if he will take steps to improve the co-ordination between those Ministers responsible for airport development and industrial development, respectively.
  The Prime Minister: My right hon. Friends already work closely together on this matter, Sir.
  Mr. Hamilton: Does my right hon. Friend recognise that for far too long Turnhouse Airport, Edinburgh, has been under-developed in comparison with other airports in the United Kingdom and that, however good industrial development has been on the east side of Scotland in the last few years, it could and would be better if Turnhouse Airport had the additional runway and the other terminal facilities for which we have been campaigning for so long?
  The Prime Minister: Yes, I recognise the problems; I have been there and discussed this on the spot. I recognise the need for an early decision about the future development of the airport. Very large sums of public money are involved, and the alternatives should be subjected to a full cost-benefit analysis to enable the right decision to be reached. My right hon. Friend the President of the
  1062
  Board of Trade or one of his colleagues hopes in the near future to make a statement on the runway development at Turnhouse.
  Sir A. V. Harvey: Could not the Edinburgh authorities learn something from the Manchester City Council's development of Ringway, which is one of the best subsidiary airports in the country?
  The Prime Minister: Yes, I agree with what the hon. Gentleman says about Ringway, but different considerations are involved in Turnhouse. Turnhouse is a staging post for aircraft services to remote areas and islands, and those services are in the nature of a public or social service.
  Mr. Thorpe: Does not the Prime Minister agree that the prospect of industrial development in remote areas turns largely on good communications? While many of us are grateful for what the Board of Trade has done by way of grants and loans to increase employment, particularly in the South-West, the present view of the Board of Trade is that airport development is exclusively a matter for the local councils concerned, which have very limited financial resources. [Interruption.] May I shout over the barrage of the Opposition and ask whether the Board of Trade does not think it has greater responsibility and should take a closer interest in industrial development by way of airports?
  The Prime Minister: While thanking the right hon. Gentleman for what he said in parenthesis, which will no doubt be recalled in coming months, I agree with him and accept—and so does my right hon. Friend the President of the Board of Trade—the need for better air facilities in the remoter parts of the United Kingdom. One of my big difficulties with both Leaders of the Opposition is to explain to them that it is not possible to keep on pressing at the same time for more expenditure and for a reduction of taxation.

  SCOTTISH TRADES UNION CONGRESS
  Mr. William Hamiltonasked the Prime Minister if he will make a statement on his recent discussions with the Scottish Trades Union Congress.
  The Prime Minister: I had no formal discussions, but I addressed the Congress and I had a number of informal talks with officers of the S.T.U.C. both on Scottish and on more general issues.
  Mr. Hamilton: Will my right hon. Friend say whether the Scottish T.U.C. approved the Government's regional policies for development in Scotland, and what it thought about the official Tory Opposition's policy of abolishing investment grants and reverting to industrial growth points, and the Tory plan to oppose the Government's attempt to keep the U.C.S. alive?
  The Prime Minister: The members of the Scottish T.U.C. did not go into all these questions with me because they, being realistic people, are concerned only with the policies of the present and likely future Government. On all that has been said by right hon. Gentlemen on investment grants, both attributively and non-attributively, their policy is a prescription for a great decline in development areas, making colliery closures and other questions worse. On Upper Clyde Shipbuilders, I saw a deputation of 100 shop stewards, and also discussed this question with members of the S.T.U.C. General Council. Our policy on this has been quite clear, and I am shocked to see reports that the Conservative Opposition are opposed to our policies for saving the Upper Clyde shipbuilding yards.
  Sir K. Joseph: Will the Prime Minister acknowledge that the regional policy of Her Majesty's Opposition is firmly to keep a differential investment incentive in the development areas? Will he further confirm that the Trades Union Congress in its Economic Review this year urges more selectivity in the use of taxpayers' money in the development areas, just as the Opposition are doing?
  The Prime Minister: The right hon. Gentleman has spoilt his supplementary by an interview in The Times Business News in February and an article in the Spectator more recently—
  Sir W. Bromley-Davenport: Get on with the answer.
  The Prime Minister: I am addressing myself not to the intellectuals of the Conservative Party but to the more obtuse minds on the Front Bench.
  1064
  The right hon. Gentleman has written these things. It would appear to be Conservative policy to get rid not only of investment grants but of R.E.P., on which there is a seven-year pledge to the business firms who went there. If the right hon. Gentleman denies that, he will no doubt get up and say so.
  In regard to shipbuilding, the right hon. Gentleman can tell the House at any time convenient to him—I do not press him now—whether he supports the aid given by the Government to save Upper Clyde and the support given last week to save Cammell Laird.
  Sir K. Joseph: We agree with the Government—
  Hon. Members: Oh!
  Sir K. Joseph:—that R.E.P. should be phased out after seven years. We also agree with the Minister of Technology that the taxpayer has now made his last grant or loan to Upper Clyde Shipbuilders.
  The Prime Minister: The right hon. Gentleman is now saying something very different from what has been said by the Conservative Party, because I understand that it was using investment grants for its tax remissions. If that is not so, if investment grants are to be maintained in development areas or are to be replaced on an equivalent basis by investment allowances, hon. Members opposite cannot claim a penny piece of investment grants for tax remissions.
  I apologise to the right hon. Gentleman, since he has been so nice to us, that I did not answer his earlier question. He deludes himself if he thinks that the T.U.C. document about selectivity represents Opposition policy. The Opposition's selectivity is based on cutting down a great part of the help to development areas. The T.U.C. policy is to maintain all our general grants but to produce further specific grants over and above in areas of greater difficulty.
  Mr. Shinwell: Now that the official spokesman for the Opposition has made a public declaration of agreement with the Government on many items, could we have the General Election at once?
  The Prime Minister: These matters do not necessarily depend on a consensus

  1065
  between the Opposition and the Government. We have not yet a consensus on investment grants, investment allowances, infrastructure grants and other questions which are absolutely basic to Tory claims about taxation between the right hon. Member for Leeds, North-East (Sir K. Joseph) and the right hon. Member for Barnet (Mr. Maudling), and, of course, we have had total silence from the Leader of the Opposition.

  BILL PRESENTED
    OIL IN NAVIGABLE WATERS
    Mr. Roy Mason, supported by Mr. Secretary Crosland, Mr. Anthony Wedgwood Benn, Mr. Secretary Ross, Mr. Cledwyn Hughes, Mr. Secretary Thomas, Mr. Anthony Greenwood, Mr. Gronowy Roberts, and Mr. Maurice Foley, presented a Bill to amend the Oil in Navigable Waters Acts 1955 and 1963: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 183.]

PILOT LADDERS (SAFETY)
3.35 p.m.
Mr. A. P. Costain: I beg to move,
That leave be given to bring in a Bill to assure the security of boarding ladders, and reduce the risk of accidents to pilots.
My purpose in asking the House to give time for this Measure is that, despite repeated applications and Questions in this House by myself and other hon. Members, the Board of Trade has failed to bring in regulations to ensure that the fixing of pilot ladders on merchant ships is up to the standard demanded by other maritime nations.
I should like to explain that my attention was drawn to certain deficiencies in the law when a pilot constituent of mine came to see me on 22nd May, 1968, to discuss a fatal accident involving one of his colleagues when disembarking from the motor vessel " Afric " off Dover on 3rd August, 1967. When the cause of the accident was explained, I thought it incomprehensible that this country, as a leading maritime nation, did not have legislation to ensure that pilot ladders were properly secured to a ship's bulwarks.
The normal means of access from a pilot vessel to the deck of a ship is by rope ladder, which is not ideal even in the most favourable conditions; and when the ship is rolling it is a dangerous operation. When the pilot reaches the top of the bulwark it is not unreasonable for him to expect that the most hazardous part of the operation is over. But at the end of the rope ladder he has to clamber over the top of the bulwark and down a series of steps to the deck. To assist him in this operation it is usual to have a stanchion which he has a perfect right to assume is attached to the ship itself.
The cause of the fatal accident to which I have referred was the fact that when the pilot was disembarking from the vessel he went up the ordinary step ladder from the deck to the bulwark, turned round to take hold of the stanchion and, unfortunately, the bulwark steps were not attached and a slight roll of the ship caused my constituent to be thrown in the water and resulted in fatal injuries to him. There have been other accidents of this sort since that time which, fortunately,

1067
have not proved fatal, but it has been only by the grace of God that other people have not been killed.
The dangerous combination of bulwark steps and ladder stanchions has been recognised by the leading maritime nations as a serious threat to life. In 1964, the International Standardisation Organisation put forward Recommendation No. 8.799, about pilot ladders, in a technical committee. Work on this question by that committee led, in 1966, to the adoption of a draft recommendation which, subject to a few modifications of an editorial nature, was approved by the following member bodies: Belgium, Canada, Czechoslovakia, Finland, France, Germany, India, Israel, Italy, Japan, Republic of Korea, Netherlands, New Zealand, Norway, Poland, Spain, Sweden, Switzerland, Thailand, Turkey, United Kingdom, and the U.S.S.R.
No member body opposed the approval of the draft recommendation and it was then submitted to the I.S.O. Council, which decided, in July, 1968, to accept it as an I.S.O. recommendation. It was reasonable to expect that as the United Kingdom is a member of the body which approved the draft, pilot ladder regulations would be introduced to include the barring of handhold stanchions being attached to gunwale steps.
But when, on 23rd July, 1969, I asked the President of the Board of Trade whether he would introduce new regulations concerning bulwark ladders and stanchions in compliance with the I.S.O. recommendations, I was told:
" No. We do not consider that the I.S.O. Recommendation is in wide enough terms to cover the many different designs and shapes of vessels involved. However, a Statutory Instrument will shortly be laid before the House amending the Merchant Shipping (Pilot Ladders) Rules 1965 to make compulsory the provision and firm securement of handhold stanchions in conjunction with bulwark ladders. This amendment will give statutory effect to recommendations contained in Merchant Shipping Notice No. M.558 issued in June."—[OFFICIAL REPORT, 23rd July, 1969; Vol. 787, c.386.]
Although nine months have elapsed, the Statutory Instrument has not yet been laid, and it is clear from the reply
1068
that I received to a Question which I asked the President of the Board of Trade on 29th April that the matter has not been settled, although there was a meeting between the pilots and the Board of Trade on Friday last, which appears to indicate that the process of consultation has been greatly accelerated as a consequence of my proposal to introduce this Bill.
I understand that the Board of Trade has at last decided to make regulations. However, apparently they are to apply only to British ships and not necessarily to foreign ships. As well over 85 per cent. of the ships piloted in this country are foreign, it is difficult to understand why it is proposed to restrict this safety requirement to British ships.
My Bill is designed to ensure that the legislation regarding the safety of pilot ladders in this country is equal to if not better than that of all other maritime nations. I consider that this can best be achieved by accepting the recommendations of the United Kingdom Pilots' Association. I am sure that the House will agree that this organisation is a most responsible and respectable body. It has the privilege of having the Home Secretary as its president.
In asking leave to bring in the Bill, I assure the House that, between now and the Bill's possibly receiving the Royal Assent, if the Board of Trade gets on with its job and brings in the necessary regulations I will not waste any more of the time of the House.
Question put and agreed to.
Bill ordered to be brought in by Mr. Costain, Sir Beresford Craddock, Mr. R. Chichester-Clark, Mr. Gower, Mr. Ian Lloyd, Mr. Ray Mawby, Mr. David Price, and Mr. John Tilney.

PILOT LADDERS (SAFETY)
Bill to assure the security of boarding ladders, and reduce the risk of accidents to pilots, presented accordingly, and read the First time; to be read a Second time upon Friday, 10th July, and to be printed. [Bill 179.]
ORDERS OF THE DAY

  FINANCE BILL
  (Clauses, 11, 12, 13, 14 and 35, and new Clauses relating to the matters referred to in the Order of the House [5th May].)
  Considered in Committee.
  [Mr. SYDNEY IRVING in the Chair]
  3.45 p.m.
  Mr. lain Macleod: On a point of order, Mr. Irving. On the Order Paper there appears a list of Clauses which we are to consider in Committee of the whole House, and then there is a reference to the Procedure Motion passed by the House on 5th May. If we follow that literally, it means that the new Clauses, I presume, will come at the end of the Clauses on the Notice Paper. In fact, I think that it will be for the convenience of the Committee if new Clauses 1 and 3 follow Clause 13 which, without prophesying, may come tomorrow.
  I believe that this will require a Government Motion to be put on the Order Paper later today. But I thought that I should draw the attention of the Chair and the Chief Secretary to this point and ask the Chief Secretary whether he intends to put down an appropriate Motion later in the day.
  The Chairman: I am grateful to the right hon. Gentleman for having given me notice of that point of order. It will certainly require a Government Motion to rearrange the order of business as he suggests. I understand that this is acceptable to the Government and that the Chief Secretary proposes to put down a Motion on the Order Paper this evening.
  The Chief Secretary to the Treasury (Mr. John Diamond): That is so.

  FINANCE BILL
    Clause 11

      CHARGE OF INCOME TAX FOR 1970–71
      Mr. John Hall: I beg to move Amendment No. 1, in page 10, line 23, leave out 41·25 ' and insert 37·5 '.
      The Chairman: I understand that, with this Amendment, we are discussing Amendment No. 2, in line 23, leave out 41·25 ' and insert 40 ', and Amendment No. 3, in line 23, leave out 41·25 ' and insert 41 '.
      Mr. Hall: For the benefit of those who, like me, share the late Sir Winston Churchill's dislike for " those damned dots ", the effect of the Amendment is to reduce the standard rate of income tax by 9d. from 8s. 3d. to 7s. 6d.
      The cost of this proposal has been estimated, as near as I can estimate it, at about £525 million in 1970–71. Before any hon. Member opposite adds this to the reliefs proposed in the Bill, comes up with a figure of about £770 million, and suggests that it is perhaps too large a sum to offer in reliefs this year, let me make it clear that, if the Committee decided that it was important to give worth while reliefs from direct taxation, obviously the Budget strategy would need to be recast.
      We would need to consider, for example, the estimate of consumer expenditure in the current year and whether it is likely that the increase in wages and salaries, now running in excess of 10 per cent., will increase consumer expenditure considerably, or whether rising prices, of which we have had no reliable estimate. are likely to more than offset the impact of rising wages. That is one judgment which would have to be made, and no doubt there would be disagreement between the two sides of the Committee about the answer.
      We would have to decide what room should be made for a further growth in public expenditure. In his Budget speech, the Chancellor of the Exchequer said that, in his Budget strategy, he had made allowance for a further modest growth in public expenditure during the current year.
      We would have to consider what changes it might be necessary to make in taxes on spending, as opposed to taxes on income and savings. We would have to consider to what extent the buoyancy of the revenue could be further stimulated by the reduction in income tax.
      I make these points to emphasise that we cannot consider the total net cost of this proposed tax change in isolation

      1071
      However, I hope to be able to convince the Committee of the major importance of the proposal, and I have no doubt that my arguments will be strongly reinforced by powerful speeches by my right hon. and hon. Friends.
      Last year, my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) moved a similar Amendment, though he contented himself with asking for a reduction of 6d. in the standard rate. I have been tempted to increase the bid by 50 per cent. and to ask for 9d. for four main reasons.
      The first is that, since the present Government last raised the standard rate from 7s. 9d. to 8s. 3d. in the 1965–66 Budget, the rate has unchanged, and I am sure that, in his heart of hearts, the Chancellor of the Exchequer must be distressed by this standing reproach to him.
      My second reason is that the Chancellor must be appalled by the burden of taxation which has been placed on the nation over the years since this Government came to office. Even allowing for the reductions proposed in the present Bill—
      Mr. Robert Sheldon: The hon. Gentleman said earlier that the cost of this proposal was £525 million. However, the cost of reducing income tax by 6d. was said by my right hon. Friend in his Budget speech to be £225 million. Therefore, the cost of reducing it by 9d. would be about £330 million or £340 million, surely.
      Mr. Hall: I would be happy to accept that correction. I made such calculations as I could, and I did not want to err on the optimistic side. I am sure that the correct figure will be given by the Chief Secretary, whose opportunity for calculating the sums accurately is greater than mine. If the figure is nearer to the estimate of the hon. Member for Ashton-under-Lyne (Mr. Sheldon), my argument is strengthened rather than weakened. I am obliged for his intervention.
      Moving to my second reason for my optimism in choosing 9d. rather than 6d., I was referring to the burden of taxation placed on the country since this Government came to office. Even with the reductions now envisaged, the burden is still in excess of £3,000 million more
      1072
      than if the tax rates in force in 1964 had remained unchanged. It is a remarkable achievement that, within five years, the Government can impose such a swingeing burden of taxation on people. In some ways, we must give them our reluctant admiration that they have been able to achieve such a target in such a comparatively short time.
      We have in the Government some record holders concerning Budgets. I believe that the present Chancellor of the Exchequer holds the record for imposing tax burdens. In 1968, he imposed a tax burden of £923 million and broke the record that had existed for 17 years. The previous record was in 1951, when the late Mr. Gaitskell introduced a Budget imposing a tax of £400 million. I think that the Chancellor would wish to make another record whilst he is still in office. He would want to establish the record for being the first Socialist Chancellor of the Exchequer to give a worth-while reduction in direct taxation. That is another reason why I put forward the Amendment.
      My third reason is that, as an honest man, the Chancellor must be uneasy at the contrast between the promises made to the electorate and their performance.
      I hesitate to refer again to that notorious broadcast of the Prime Minister's on 15th September, 1964. I think that it is written on most people's hearts. The implication of that broadcast was picked up in propaganda and speeches even after the 1966 election. There is no doubt that people believed that the programme that had been laid before them by the Labour Party could be carried out without any general increase in taxation. They have been sadly disillusioned, but that is what they believed. I think that the Chancellor, who is a man of honour, would wish to do something, however small, to reduce the gap between the promise and the harsh reality of the day.
      My fourth reason for moving the Amendment, and for being so optimistic as to suggest a reduction of 9d., is, to quote the Chancellor's words:
      " We cannot be indifferent to the disincentive effect which very high taxation on earned incomes might have."
      The right hon. Gentleman said that almost three years ago to the day. I think

      1073
      that he would find a great measure of agreement on both sides of the Commit- tee for that statement.
      The Chancellor has returned to this theme on various occasions. The last occasion on which he developed it to any extent was in his Budget speech on 15th April last year, when he said:
      " I referred last year to the fact that, what- ever the evidence or lack of it, high direct taxation is widely believed to be disincentive, and that this could have a stultifying effect upon the development of the economy. That was one reason why, with considerable difficulty, I avoided increases in direct taxation last year, and why I am not proposing any now. Indeed, I have carefully considered whether, even in a year as difficult as this, it would be justifiable for incentive reasons, and for the encouragement of savings, to mitigate slightly the rates of tax on high earned incomes."—[OFFICAL REPORT, 15th April, 1969; Vol. 781, c. 1031.]
      The Chancellor having considered the possibility of reducing the rates of tax on high earned incomes in a year as difficult, by his own admission, as 1969, all who listened to him then looked forward with eager anticipation to 1970, and that anticipation was heightened when the Budget speech was prefaced by his glowing account of the strength of the economy. But, of course, we were gravely disappointed, because all that the Chancellor did, in effect, was to take out of tax again those whom inflation had put in, and who will find themselves again in the tax bracket within a matter of weeks. A demonstration of the fiscal yo-yo was not quite what we expected from the Chancellor's previous warnings about the disincentive effect of high tax.
      The Amendment gives the right hon. Gentleman the opportunity to think again and to back up his words by deeds. But perhaps this is expecting too much. Per- haps his words on the disincentive effect of high taxation are as meaningless as his words about rising wages, when he warned the nation in his television broad- cast that wages were rising too fast. But he is doing absolutely nothing about it.
      Many arguments for reducing income tax have been advanced over the years. None has lost its validity, but perhaps some have lost their impact. Although, during the Tories' 13 years, we managed to reduce the standard rate from 9s. 6d. to 7s. 9d., the rate has never gone below 7s. 9d. over the last 30 years. I am reminded of my maiden speech in this
      1074
      House 17 years ago, when I referred to Colbert's statement:
      " The art of taxation…consists of plucking the maximum number of feathers from the goose with the minimum amount of hissing."—[OFFICIAL REPORT,. 21st January, 1953; Vol. 510, c. 236.]
      The taxpayer goose has been plucked at such a high rate for so long as to become almost anaesthetised by the pain. But there is a growing consciousness on the part of this goose that it is becoming more naked and that it is becoming increasingly difficult to grow more feathers.
      This is an understandable reaction when we reflect that, although the standard rate has remained unchanged since Labour last increased it to 8s. 3d. in the 1965–66 Budget and despite some improved allowances, as a percentage of the gross national product the amount taken in direct personal taxation has risen from 9·5 in 1964 to 13·4 in 1969. By contrast, the percentage of the gross nati5nal product taken in personal direct taxation during the 13 years of the last Tory Administration, between 1951 and 1965, remained almost unchanged. It moved from 9 per cent. to about 9·5 per cent. during that period.
      That is a most interesting contrast. We were able to keep the percentage of income and surtax both as a percentage of the gross national product and as a percentage of personal incomes steady during that time because we reduced the rates during that period from 9s. 6d. to 7s. 9d. and almost doubled personal allowances because savings also increased during that period.
      The increase in the amount taken in recent years is due largely, I suppose, to what is called the " buoyancy of income tax revenue," which means that, unless the rates are reduced, the taxpayer is suffering a real, although disguised, increase in taxation. I think that the Chancellor recognised this when he said:
      " The continuing rise in incomes and prices means a more than proportionate inccrease in the yield of income tax—so that the real burden of the tax rises ".—[OFFICIAL. REPORT, 14th April, 1970; Vol. 799, c. 1242.]
      There is little doubt that this " buoyancy ", when it arises through inflation and is not a real increase in income, creates a genuine sense of grievance, although the cost is not fully understood.

      1075
      We have considered in our past debates on this subject the evidence of the effect of high tax on what is called the brain drain. The evidence, to a large extent, is inconclusive; but it is generally agreed on both sides that there is some brain drain and that it is more likely to affect the younger able men, both business executives and professional, who believe themselves capable of earning high incomes and, therefore, see a better opportunity of keeping a higher proportion of their incomes by taking their services overseas.
      4.0 p.m.
      Mr. Joel Barnett: Surely the hon. Gentleman has read the Jones Report on the brain drain, which runs completely counter to everything that he has just said?
      Mr. Hall: Yes, I have read it, and it is not accurate to say that it runs counter to everything that I have said. As I said, the evidence is largely inconclusive. It has never been denied that it has some effect, although the effect, as the Jones Report showed, is far less obvious than perhaps many people might have been led to expect.
      We have considered, also, in the past, the effect of tax rates in force in other countries. We are up against the difficulty of comparing like with like. International comparisons can be pushed too far, as the Chancellor himself said in replying to a similar debate last year. But there is no doubt, to paraphrase his words on that occasion, that our direct taxation rates are in some respects more progressive and heavier than those in other countries. That is not just my opinion: it is a paraphrase of the words which appeared in c. 1276 in our debate on last year's Finance Bill on 13th May, 1969.
      The Chancellor has already made it clear that he accepts the disincentive effect of high personal taxation. He shows an awareness of the fact that failure to reduce the standard rate at times when incomes are being pushed up by inflation is the equivalent of increasing taxation. I am sure that he is aware of the particularly harsh effect of a high standard rate over a long period on those on fixed incomes. He must be aware that switching the emphasise away from direct taxation has a favourable effect on
      1076
      savings, which should allow him or his successors to reduce taxation still further.
      And the right hon. Gentleman must feel, as a man of honour—whatever opinion he may have of the electorate's memory or intelligence—that he should do something more to honour Labour's election promises. The Amendment enables the Chancellor to do what he knows, in equity, should be done.
      Mr. Sheldon: I heard with interest the calculations of the hon. Member for Wycombe (Mr. John Hall), which seemed to spoil his argument. I was not sure whether he started off from the desire to reduce income tax by 9d., or the desire to cut taxation by over £500 million. Assuming that he had £500 million to spend, he could have reduced income tax by nearly 1s. 3d., and could have achieved his goal of obtaining an income tax rate of about 7s., but, by getting the figures wrong, he neither produced what he wanted nor got the accuracy which we have a right to expect from those who speak from the Opposition Front Bench.
      I say that we have a right to expect it, but we have not had it in recent weeks. The rot started with the right hon. Gentleman, the Leader of the Opposition, who made the biggest schoolboy howler of all when he talked about £796 million being the current deficit in 1968, instead of the real figure of £309 million. The right hon. Gentleman did not, then or subsequently, seek to withdraw that statement, and I hope that, on this occasion, the courtesy and the gracefulness of the hon. Member for Wycombe will allow rather better standards of accuracy to be obtained from them during the weeks and months of this Committee stage.
      We are in a danger of getting into a complete muddle on the whole problem of incentives. In the Budget Statement of 1968, my right hon. Friend used the argument of incentives as a justification for not increasing income tax rates in that year, a time of considerable stringency, when rather large sums of money were needed for the Revenue. My right hon. Friend the Chief Secretary, discussing the negative income tax on Second Reading, pointed out that the incentive argument was the important factor against its introduction. In the same speech, discussing overtime, he brought into use the incentive argument and said that it was a valid

      1077
      argument in connection with overtime and the disincentive effects of high tax rates upon the working of overtime.
      So hon. Members, very senior Members, whose words are heard with great care, are using incentive arguments when it suits their case and not using them when it does not. This happens all over the House and I suppose that I am no exception. What I want to see is some of this £15,000 million which my right hon. Friend raises each year used to carry out some social survey to find out what are the incentive and disincentive effects.
      I pursued this last year and the year before. Not making much progress, I dropped the matter, but I am sorry to see that we are in a greater muddle than ever. People in advertising and selling use motivational research with considerable advantages. The Government's Social Survey was, of course, set up to do this work. We can do the kind of work which will show, before we make these vital decisions, whether or not to raise thousands of millions of pounds in this way or that, what people's attitudes are.
      Of course, the results will not be black and white—they never are in these cases —but we can get some advantage and put an end to some of the ignorant nonsense which is spoken on this matter. So, if we are to raise large sums of money, we can surely afford to spend trivial sums to check that people are acting as the Government assume they will act. The Government make decisions on the assumptions that people will act in certain ways, and it is worth spending money to find out if they are right.
      We can decide to spend money to see whether people are acting under the pressure of incentives as we assume they do in relation to investment grants. This point was well taken by the Minister of Technology, who has undertaken to carry out an investigation into the use of investment grants. I asked for this to be done also in relation to the regional employment premium, and I am now asking for it in relation to income tax. It is the same problem. If we are to make these big financial assumptions that people will act in a certain way, it is worth spending a few hundreds of thousands of pounds to find out whether we can obtain any useful information.
      1078
      That is all I want, but I am very sorry to see that, although we use the same argument, there is not a whit more evidence this year than last year, or last year than the year before. This should be one of the responsibilities—by no means the most important, of course—of the Treasury.
      Mr. Hugh Jenkins: Would my hon. Friend agree that this investigation might take into consideration the possibility that failure to increase surtax rates at the higher levels may be a disincentive at lower income levels?
      Mr. Sheldon: All this can be subject to examination and investigation by some of the many techniques which are used in this sphere.
      I turn now to the shape of the income tax structure. We all know that these nonsenses are faced by any Chancellor during the short term in his period of office. He tries to get at some of the essentials, which is all he can do in that limited period, and he does not always take into account the big opportunity open to him to shape income tax to produce the kind of varying rates of taxation which we require.
      The present system of income tax started, before my right hon. Friend's proposals this year, at a fairly low level of incomes; this means that the marginal rates for people coming into tax were at a fairly low level. They started climbing at about £2,000 to £4,000, and the rates of tax rose considerably. The percentage of income going in tax rises most considerably at the level of between £3,000 and £8,000 a year. Thereafter, it begins to taper off as the highest levels of surtax are reached. It finishes its tapering off at 18s. 3d. in the £. That is the shape of the curve.
      The curve is so shaped because succeeding Chancellors have tinkered with it from time to time. This curve can be any shape that we want. We can decide that a person on such-and-such an income should pay a certain amount of tax. This is the most elementary proposition of all. However, if my right hon. Friend tried to carry this elementary proposition into effect he would be unable to do so, because the whole structure is involved. If he decided to give the man on £4,000 such an increase, automatically the man on £7,000 or £8,000

      1079
      would get an even larger increase. My right hon. Friend cannot change the shape of the curve.
      If there is one most elementary thing that any Chancellor ought to have under his control it is the control of deciding what levels of the community pay what levels of tax. It is the most elementary duty of the Chancellor to get that simple proposition put into effect. However, the structure of the tax is so awful and so antiquated that he cannot do even this. Therefore, when my right hon. Friend set out to help those at the bottom—in this action he was applauded—he distorted even further the shape of the curve. However, he took this step for a very good reason.
      What we want to ensure is that Chancellors in future will be able to produce a scheme which can provide for any rates of tax that a Chancellor thinks fit for any levels of income. This is by no means a difficult proposition. It is much easier, for example, than the measures carried out by the Finance Act, 1965. What we need is a percentage of income tax payable for each level. This can be done, but not by the use of complicated slices. Slices bring their further complications. We can have percentage systems.
      Unfortunately, this Chamber is not the place where systems of this kind can be elaborated upon, because one has difficulty in presentation. If a Select Committee were examining methods such as these, we might have a better understanding and discussion of some of the crucial problems in taxation which are at present denied to us. So we are stuck with the present system of income tax. We must hope that eventually we shall get the kind of examination for which so many people are pressing.
      [Mr. HARRY GOURLAY in the Chair]
      4.15 p.m.
      Sir Eric Errington: Does the hon. Gentleman realise that the question of the administration of the Inland Revenue was examined by a Select Committee? The conclusion arrived at was that it would take three or four years to put any change into effect.
      Mr. Sheldon: Yes; I read the Report of the Select Committee, of which the
      1080
      hon. Gentleman was the distinguished Chairman. I will not say that I fully accept the arguments used by the Inland Revenue. It is not an uncommon experience, when one is asked if one is overworked, to reply in the affirmative. I believe that there was not quite sufficient investigation as to the point the Revenue made in that connection.
      I believe, though, that the Revenue needs breathing space when major reforms of taxation are introduced. I am saying, not that changes should necessarily be introduced now, but that work on this should be in process. Putting any change into effect comes later. What worries me is that preparation, which must antecede the result by some months, is not being done.
      A very interesting Written Answer given to the hon. Member for Worcestershire, South (Sir G. Nabarro) gives the proportions of tax as they have changed over the past few years. One of the things that bother me is the mild switch —I would not dream of blaming my right hon. Friend the Chancellor for this —away from direct taxation in particular to purchase tax.
      I regret this, because I believe that the present excessive hostility to income tax and the very high rates of income tax, although this feeling is always there, because everybody objects to paying income tax, is based upon a lack of expansion of the kind that I would hope to see. At periods of high rates of growth, high levels of income, and high increase in productivity, I believe that income tax would be no more reacted against now than it has been in the past. Because of this, and because of the ways in which income tax can be the fairest kind of tax, I hope that we shall proceed once again in due course to the use of income tax as the main weapon of taxation and increase it further in comparison with other taxes.
      Mr. John Nott: What is the hon. Gentleman's objection to leaving more money in people's pockets and letting them decide how they spend their incomes? Why does he want the Government to take it all? Why does he want the Government to decide? This is the argument between income tax and purchase tax.
      Mr. Sheldon: The hon. Gentleman does not seem to have read the Written Answer to which I have referred, which dealt merely with the percentages of tax raised, by comparison one with the other. I am comparing income tax with purchase tax, income tax with petrol duty, income tax with selective employment tax. Whether we raise a large sum of money by way of income tax or a relatively small amount does not affect the argument. Given the sum of money it is desired to raise, I want to see an increasing proportion of it being raised by direct taxation.
      What we are seeing at present is this move away from that because the rates of growth and the rates of increase in consumption patterns, in wealth, and so on, have not been as high as we hope will be the case not too long from now. [Laughter.] Yes, we have the basis for very rapid expansion. Expansion itself will follow in due course. We now have the opportunity to make use of this as a means of getting a larger proportion of taxation raised by way of income tax. I hope that we shall once again choose this happier of the several evils before us.
      Mr. John Hall: The hon. Gentleman cast some doubt on the figure I quoted at the outset of my speech for the cost of implementing the Amendment. At that stage I did not wish to intervene to correct the hon. Gentleman, because I was sufficiently modest to think that I might be mistaken. Having looked again at the figures, I think that we are both right; because we are taking a different basis of calculation.
      I arrived at the figure of £525 million —the higher estimate of the cost of implementing the Amendment—by taking into account the Budget changes whereby most of the reduced rate stand is now charged at the standard rate. The lower figure to which the hon. Gentleman referred relates to the change in the standard rate as an alternative to the Budget proposals—that is, with the retention of the reduced rate unchanged by the Amendment.
      As I say, I think that perhaps we are both right in our bases of calculation; but, in my view, the figure I quoted is more likely to be the actual cost of implementing the Amendment. No doubt the Chancellor will confirm or deny this.
      Mr. John Boyd-Carpenter: Amendment No. 2, which stands in my name and which the Chairman directed should be taken with Amendment No. 1, is a more modest affair than Amendment No. 1 and proposes a reduction of only 3d. in the standard rate of income tax. Perhaps it is more modest because I am a more modest man than my hon. Friend the Member for Wycombe (Mr. John Hall).
      As to its cost, in view of the exchange which has just taken place between my hon. Friend the Member for Wycombe and the hon. Member for Ashton-under-Lyne (Mr. Sheldon). I must put it on alternative bases. On the basis adopted by the hon. Member for Ashton-under-Lyne, who, I think, based himself on the Chancellor of the Exchequer, its cost —I am subject to correction by Treasury Ministers—would be about £112 million to £115 million a year. If one adopted my hon. Friend's more sophisticated intellectual processes, it would be appreciably higher, but I leave that calculation to the Chancellor, who has the advantage of sources of advice and of calculation not, for the moment, open to me. However, it is a smaller proposition, simply 3d. off the standard rate.
      If the Chancellor were to rise and say that he will accept my hon. Friend's proposal to reduce the standard rate by 9d., I should not wish to interfere with him in that benevolent act. Indeed, were he to do so I should be only too glad to withdraw my more modest proposition. On the other hand, the Chancellor may well think—and here, I come to the first point that I want to put to him—that whereas so large a change as my hon. Friend proposes might not fit in with his own ideas on the conduct of the economy, a reduction of 3d. in the current year is a reasonable proposition, perhaps subject only to the criticism that it is over-modest.
      I know that it used to be the common form, or conventional wisdom, in Budget debates that wherever any hon. Member proposed a reduction in taxation the Chancellor would say, " Either you must challenge my Budget judgment, or you must suggest some other increase in taxation to compensate for the loss of revenue resulting from the reduction which you are proposing." The Committee will recall that this dialectical device has served

      1083
      successive Chancellors of the Exchequer and Chief Secretaries remarkably well in the past.
      I do not think, however, that it is material to this afternoon's discussion, for this reason. I hope that the Chancellor will not think it personally offensive, because it is not so intended, if I say that there was an air of utter unreality about the part of his Budget speech in which he set out his Budget judgment. He came to the conclusion, having dealt with the matter with a lucidity and style which the whole Committee envies, that he could release—I shall not use the phrase " give away ", because the money is not his to give away—purchasing power of about £200 million in a full year, and he based his proposals on that Budget judgment.
      I do not think that there was one hon. Member who did not realise how artificial and arbitrary that figure or, indeed, any figure, is in the circumstances of this year. With wage inflation galloping, as the Chancellor acknowledged, with the amount going into consumption through massive wage increases rising every week, and with no one, and particularly not the Chancellor, giving us any forecast of how far these will go in the course of the year, is it not wholly artificial to say that the release of £200 million of purchasing power is right, wise, and sound, and that £300 million to £320 million would be wholly unsound? The truth is that nobody, not even the Chancellor, can, in the circumstances of this year, be anything like as precise.
      If one is dealing with the sort of figure which my hon. Friend the Member for Wycombe suggested of £540 million, it is arguable that a change of that order has some relevance, but with a figure of £200 million, £300 million, or £400 million, in the circumstances of this year, with the uncertainty which has resulted from the collapse of the Government's incomes policy, I should not have thought that it was worth wasting the time of the Committee arguing this degree of divergence from the Chancellor's Budget judgment. The truth of the matter is that neither the Chancellor nor any hon. Member of the Committee knows with any degree of accuracy how much additional purchasing power will be released in the course of the present financial year.
      1084
      Then we come to the justification for a reduction, however modest, in the level of direct taxation. I always listen with interest when the hon. Member for Ashton-under-Lyne speaks on these matters, because he is both clear and interesting. I differ from him wholly, however, in respect of what he said about the balance between direct and indirect taxation. I agree very much with the intervention of my hon. Friend the Member for St. Ives, which the hon. Gentleman did not answer. Surely it makes for a healthier economy if, in increasing degree, people are able to retain and spend as they think fit what they have earned, and the necessary State revenues increasingly fall on consumption rather than on earnings?
      If that affects the index of retail prices we have, of course, to cushion those who will be adversely affected by improving social benefits. When Lord Butler, as he now is, in his enormously important Budget of 1952, did away with a great many subsidies—and doing away with subsidies is rather similar to increasing indirect taxation—by means of substantial social service increases he took care of those who would otherwise be hurt by the changes, and left the rest of the community free to lay out their money in increasing degree as they thought fit.
      There is also the point to which the hon. Member for Ashton-under-Lyne did not direct his mind, that that kind of approach helps savings. The man who has substantial earnings and keeps a substantial share of them will know that he will pay no further tax if he does not spend the money but puts it into savings. This is a positive incentive to save rather than to spend. It is a platitude of the debate—I apologise for mentioning it—that all Chancellors of the Exchequer, and notably the Chancellor's predecessor, have again and again emphasised that the higher the level of saving the lower need be the level of taxation. This, therefore, seems a strong argument for reducing the level of direct taxation.
      Mr. Barnett: The right hon. Gentleman said that it is possible to cushion those who would be hurt by increasing social benefits. He will be aware that about 8 million people do not pay income tax, and that many millions more would get a very little relief from the Amendment,

      1085
      or from taking 1s. off the standard rate. How would he help those who would not get any benefit from social security? Or is he proposing that these millions of people should be subject to social security?
      Mr. Boyd-Carpenter: I am suggesting though I shall be reproached by the Chair if I go too far in this direction, that we should combine taxation policies of this kind with considerable developments of social security, including—and this affects the hon. Gentleman's calculation—family allowances, which is the form of social security which has the peculiar merit that it is payable to people on low earnings though in full work, and to people who are therefore the most vulnerable, if they have families of any size, to a rise in prices.
      It is possible—and I commend to the hon. Gentleman the experience of 1952 to which I referred—when making changes of this kind, with intelligent administration of the social services, linked with taxation policies of this kind, to secure that those who are in a position to earn are stimulated to better earnings and better savings, while hardship is avoided for that section of the community which is not in a position to earn, or to earn adequately.
      Mr. William Baxter: I am interested in the right hon. Gentleman's line of argument. There is another section of the community which he must bear in mind. I am thinking of the widowed women and the elderly, who have set incomes. If increases in the cost of living result from an adjustment of taxation, surely that section would need to be helped? Has the right hon. Gentleman anything to say about these people?
      4.30 p.m.
      Mr. Boyd-Carpenter: I am not absolutely certain which section of the community the hon. Member has in mind. There are, of course, the age allowances and age relief for those on quite modest incomes who otherwise would be in the taxation field. I have the strongest enthusiasm for relative as well as absolute increases for the older pensioners and equally for handling, through the supplementary benefits scheme, problems of the very old whom I think the hon. Member has in mind.
      Mr. Baxter: They are relying entirely upon a few pounds invested here and there to give a reasonable income. This cannot be increased, but if the cost of living goes up many of those in a small but important section of the community would be in difficulty.
      Mr. Boyd-Carpenter: I agree that they are very important. Let us divide them into two. There are those in the taxation field, which goes down very low in spite of the Chancellor's concessions. They get income tax relief and age allowances. For those below that the disregards allowed for supplementary benefit are now too low and require adjustment upwards. I have cases of the kind described by the hon. Member in my constituency. They would be very substantially helped by tackling the problem of disregards. If the hon. Member asks my views on this matter, I should say that this is the main method by which I would tackle them.
      A further argument for attacking the level of direct taxation is one with which the Chancellor is, I think, very familiar. In an age of inflation there is an automatic increase in the burden of any progressive system of direct taxation. People whose earnings have not risen in real terms, have increased money earnings. They are raised automatically year by year, if the Chancellor does just nothing, into higher levels of taxation, and a higher proportion of their incomes becomes subject to tax.
      Unless the Chancellor of the day is continually making reductions in the rate of direct taxation, there is an automatic increase in the gravity of the burden even for those whose incomes have not in real terms increased and which in some cases have decreased. I am sure the Chancellor understands this.
      I agree with the hon. Member for Ashton-under-Lyne that more scientific research into the whole impact of income tax legislation should be done, but I think that the Chancellor has accepted that there is a harmful, or possibly harmful, effect on our economy from these rates of income tax. He went on to say, in the paragraph immediately following that quoted by my hon. Friend from the Budget statement last year:
      " I have come to the conclusion that, desirable though such a reduction would in many ways be, I must concentrate this year on more vulnerable sections of the community. I would

      1087
      emphasise, that I regard an increase in one of the earned income allowances as a high priority for a later Budget."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1031–2.]
      It is a great pity that the Chancellor has not tackled that in this Budget, despite his acknowledgment of the need to give it high priority. I hope that before this debate ends we shall hear from the Chancellor what has caused him to change his mind. He undoubtedly caused the House to think last year that he was contemplating in the near future, as soon as he had money to dispose of, moving in this direction. The fact that he appeared to wrestle with himself at the Box unsuccessfully last year, when he had no money to give away, must indicate that last year he felt that these arguments, some of which my hon. Friends and I have been using, have real force and that the strength of our economy would be greater if earnings at all levels bore less taxation than they do at present.
      I quoted in the Budget debate comparisons in respect of taxation on the higher levels of earnings between this country and our main competitors. I will not weary the Committee by repeating all the figures, but they are very striking as one gets to the higher levels. It used to be the case in the party opposite that there was no sympathy to be had for those on the higher levels. It was suggested that no one should have earnings of that kind. Experience in government has, I gather, taught them differently. Certainly, Ministers now cannot take that view. They are responsible, rightly in my view, for paying pretty substantial salaries to the heads of nationalised industries, sometimes in excess of £20,000. They must accept that there are numbers of people who are worth salaries of that kind.
      It makes a mockery of paying salaries of that sort if we take from those people by very high progressive taxation such a high proportion as is taken at present and a much higher proportion than our main competitors take from comparable people in their countries. The advantage of reducing the standard rate as we have suggested is that it would give some help and encouragement in the income tax scale from the bottom to the top.
      In all seriousness, I put to the Chancellor that if he is concerned, as he must be with his sources of information, about
      1088
      certain tendencies and aspects of the economy and feels, as he felt last year, that he wants to give a modest encouragement to workers, earners and producers at all levels from top to bottom, here is an instrument to his hand.
      I think it a pity that he did not take this initiative at least to this modest degree and couple it, as my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) said in the Budget debate, with social security improvements to aid those whom taxation changes cannot aid. Be that as it may, here is a chance to do something to give a stimulus to our flagging economy.
      Mr. Nott: The hon. Member for Ashton-under-Lyne, (Mr. Sheldon) raised the whole question of taxation and incentives. To some extent I agree with him, because to ask whether individuals would work harder if personal taxation were lower is rather like asking if a soldier would fight harder if he were paid more, or whether a curate would preach harder if the Church Commissioners upped his stipend.
      No one knows the answer. Such research as there has been on incentives, by the Royal Commission on Taxation of Profits and Income and others, has been very limited and on the whole completely inconclusive. I very much doubt whether a survey of the sort suggested by the hon. Member would produce any of the answers he seeks. In the end, I think that all of us would have to make up our minds on incentives one way or another. I doubt whether motivational research on the issue would take us very far.
      Mr. Sheldon: It may well be that we would not get a great deal of results to be evaluated at the end of the day, but when spending these amounts of money some part should be related to research of this kind, because the incidental answers produced might be of value.
      Mr. Nott: I have no objection to research of this kind; indeed, I would favour it.
      Political Economic Planning is attempting to raise funds for this type of research. I should prefer sums to be raised by P.E.P. rather than by a Government Department for this purpose. However, if the hon. Member wants it and it would not cost too much nor raise public expenditure, I take the point he made.

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      I have no doubt that if the Church Commissioners were to up the stipend of curates it could be that they would intone more piously and soldiers might fight more fiercely if their pay was increased. But it could also be that both the curates and the soldiers would find a way of spending their additional money in extra leisure, so who can say whether the effect would be this or that? Nobody knows.
      What seems likely, however, is that a higher disposable income for the people, or for the soldiers or curates I have mentioned would be likely to raise standards generally and change the attitudes of those affected, because it would extend the range of personal choice. Therefore, we must return sovereignty to the individual as my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) has said.
      Up to half the average person's income is taken from him in taxes, rates and contributions of one form or another. All that is left to him is an ex post facto expression of approval or disapproval of how the politicians have spent half his income at a five-yearly General Election. We should be seeking to return sovereignty to the individual so that our tax system no longer reflects a sort of benevolent State paternalism, under which the Government spends large sums of money on behalf of the individual.
      If given a choice of a net disposable income of £1,000 a year or £1,100, most normal human beings—and in that definition I charitably include some hon. Members opposite—would choose the higher sum. Some hon. Members would no doubt donate the extra £100 of disposable income to the poor. Some of them, being truly representative tribunes of the people, would spend it, like their electorate, on bingo. Fine. Others would no doubt save it and put it in a sock under the bed. But they would be saving more and spending less, and in the process losing it from inflation, thereby achieving many of the Chancellor's economic objectives.
      Those who spent it on bingo would at least be certain of some prize, and would be providing betting revenue duty to the Exchequer. That is an area of certainty both for the individual and the State which is not necessarily present
      1090
      when the Chief Secretary gives money for the development of Concorde and for saving Cammell Laird. These are exaggerated examples. I do not mean to dwell on them, but I want to show that private expenditure and saving are no more and no less likely to be in the national interest than Government expenditure and saving, and that assuming private and public expenditure and saving balance, the net result is only to extend the range of individual choice and limit Government choice. That is a wholly desirable objective, because the State should be the servant and not the master of the people.
      4.45 p.m.
      The Chief Secretary and the Chancellor between them have, so their colleagues tell us, been very tough on Government expenditure. The Chief Secretary is now being touted around by the Prime Minister to cost the Conservative Budget. Before he takes on that job he should seek the professional advice of Mr. Aubrey Jones and get himself a 10-year service contract with some good compensation clauses, because he may not keep the job for very long.
      If the Chief Secretary returns to private practice in June or October, or even May, 1971, he will be in great demand not by the new Conservative Government to cost their Budget but by businessmen like me, because he has great experience of writing, off revenue losses against capital, at the expense of the taxpayer, without any penalties: the railways, the airlines, the lot—you name them and the Chief Secretary has written off large sums of money. It was he who steered through the House with great ability the 1966 Finance Act, which made that almost impossible for private firms. So he will be in great demand. I look forward to meeting him in his private capacity.
      I make my remarks primarily about the right hon. Gentleman, because he has held his office throughout the period of the Labour Government. While he has held his job the proportion of personal tax related to the gross national product has risen from 12 per cent. to 164½per cent., wholly because he and his colleagues were initially unable to control public expenditure, and then, having got it under some control, largely while

      1091
      the present Chancellor was in office, they have had to tax more and more to withstand the inflationary spiral which the Chancellor's predecessor and the Chief Secretary were responsible for setting in train.
      The Chancellor is bound to say that average rates of tax generally in this country are lower than in some other European countries. But we are debating personal rates of tax. A person in the United Kingdom with an income of £2,500 a year, which is not a colossal income, pays 22 per cent. in personal tax. Comparative figures are 8 per cent. in the United States, 12½ per cent. in Germany and 5·4 per cent. in France. So there can be no doubt that the person earning £2,500 a year is paying a much higher proportion in personal taxation than his counterpart in the United States and European countries.
      Mr. J. T. Price: Does the hon. Gentleman include in that analysis the indirect taxes the individual is paying in the countries he is citing? He should quote the whole composite picture of direct and indirect taxation, and not one segment.
      Mr. Nott: I am trying to keep in order. We are discussing personal taxation. I said several times that I was referring to the proportion of personal taxation taken from the individual in the countries I mentioned and in this country.
      I would be delighted on some other occasion to discuss the point the hon. Gentleman makes, because it is interesting and brings me logically to my next point, the whole question of marginal rates of tax and not the average rates of tax. It is the marginal rates that show up the deficiencies of our system.
      The Chancellor has scored another first for Socialism in this year's Budget. To an acknowledged record rate of marginal tax on the highest incomes he has added the highest level of marginal tax in the Western world on the low-income-earner. I am aware of no other country in the Western world where an extra £1 of income can change a person's tax status from a nil assessment to one of practically one-third of his income—6s. 5d. in the £—before allowances. This is a solid Socialist achievement brought
      1092
      about by the abolition of the reduced rate band.
      Now I will make a point of no partisan consequence. Hon. Members opposite may even agree with it more than some of my hon. Friends do. We go through the exercise of discussing year by year personal taxation and its marginal rates almost oblivious of the fact that our discussions are to a large extent only partly relevant for many people earning between £15 and £25 a week. This is because we exclude the whole question of welfare contributions and benefits. It is impossible to make constructive progress in these debates when we have simply to debate the reduction of income tax without referring to contributions and benefits. We are trying to discuss an issue which cannot be discussed in isolation.
      The highest rates of marginal tax in this country—and I use the term " tax " to include any compulsory levy upon the citizen which is directly related to his income and his work, namely, income tax, pension contributions, and national insurance—are upon the average wage-earner. It is the average wage earner who can bear the highest rate of marginal taxation. He can in certain circumstances bear a higher rate of marginal taxation than the surtax payer at 18s. in the £, and I shall show how. The simplest example is that of the earnings rule related to the retirement pension, which may produce a marginal rate of 100 per cent. at certain income ranges. If a pensioner earns more than a certain amount, he loses his pension altogether, or a large proportion of it. This can produce a marginal rate of 100 per cent.
      I have no time to quote the latest pamphlet produced by the I.E.A., but I hope that hon. Members will read it. It is by Professor Prest and is called " Social Benefits and Tax Rates ". I will give two examples. There are in the pamphlet a large number of tables showing implicit marginal rates of tax upon wage earners earning between £10 and £30 a week. If rent and rate rebates, uniform allowances, student grants, supplementary allowances and the rest are taken into account, it is possible to show that persons earning between £10 and £30 a week can, in certain cases, pay an implicit marginal rate of over 100 per cent. on every extra £ of income. While the implicit marginal rate is zero for the

      1093
      provision of school meals at £16 a week, it is 75 per cent. when the man gets to £17 a week. So we have these debates on reduction of personal taxation—of which I am in favour—but what we are talking about is a subject which cannot be isolated from the whole question of social contributions and social benefits.
      The problem of the aggregate marginal taxation rate, which includes social contributions and social benefits, dwarfs the subject of income tax, since it covers the majority of families. The working man is right and the politicians are wrong. The working man looks at his disposable net income after tax of all kinds and knows that he is paying far more on his incremental earnings than the politicians and the experts claim.
      The Inland Revenue sends out this form I have here, which is nothing more than Socialist propaganda, to tell people that they do not understand what rates of tax they are paying and that they have it all wrong. But the working man has got it right. He looks at his net disposable income, and if one takes into account the social contributions and social benefits, tax and everything else, he is right and the politicians are wrong. He understands what he is getting and knows perfectly well that he is not getting in his pocket what the Chancellor and the Inland Revenue tell him that he is getting.
      I conclude my commenting on the outstanding feature of our tax system. It is, indeed, the outstanding feature of all high taxing modern States. It is that a reasonable progression in a personal tax system is becoming steadily more difficult to achieve every year, and when the hon. Member for Ashton-under-Lyne says that he would like to feel that the balance was more weighted towards direct taxation, I reply that it is becoming increasingly more difficult to have a progressive income tax system. The reason for this is that inflation is all the time moving more and more people into the tax net on the one side, and, on the other side, individuals who pay tax are paying more and more—I am talking now of real terms. They are paying a greater and greater proportion of their real income in taxation even if the standard rate is not going up and remains static.
      Modern States are demanding more and more revenue, have to get it from somewhere and are attempting in part to get
      1094
      it from the income tax payers. The system is out of hand. As demands by modern States for more revenue increase, greater taxes will have to be imposed upon the average wage earner and the poor if the State levies such a high proportion of gross national product in tax as it is levying now.
      I see that the hon. Member for Salford, West (Mr. Orme) nods. I would point out to him that if all incomes over £5,000 a year were to be confiscated by the State, so that no one had more than £5,000 a year, this would only mean that each individual in the country got about 12s. a week more. This is because 80 per cent. of the yield of the revenue comes from people whose incomes are £2,000 a year and less. I believe that one can apply this argument also to a proposed wealth tax. But it would do no good because the savings ratio would fall. There would be less savings and the poor people one was trying to help would be poorer and not better off by taxing the rich in the way the hon. Gentleman wants to do.
      A Conservative Government would be determined to reverse the trend to a larger public sector. A Socialist Government might hold public expenditure, but would not reverse the process and start reducing the size of the public sector. If we do not reduce the size of the public sector, I do not see how it will be possible not to levy higher taxes on expenditure and on employment, which is very much more regressive than higher taxes on people's personal incomes.
      The Chief Secretary to the Treasury started as a poacher—as an accountant, which is an honourable profession. But he has turned gamekeeper, not of the sort Lady Chatterley would approve of but of the sort employed by the Forestry Commission—reliable but dull. I cannot use a term that was once used by Mr. Aneurin Bevan, but I would say that the Chief Secretary has become a predator. He is robbing the rich fairly successfully and there is not really very much more robbing of them that he can do. Soon, he will have to start on the poor.
      I look forward to the day when my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), who really is true game as opposed to a predator, who may occasionally appear to be hatching something, is in office. He

      1095
      is hatching some golden eggs. If we win the election, as I know we will, I look forward to a radical recasting of the personal taxation system and to tackling the crucial need for personal incentives and the relationship of the tax system to the social security system. When that happens, these debates will become more meaningful.
      5.0 p.m.
      Mr. Barnett: I am always delighted to follow the hon. Member for St. Ives (Mr. Nott), who puts forward interesting views on the tax system. I thought that he was a little unfair to my right hon. Friend the Chief Secretary to the Treasury in his comments about my right hon. Friend's sexual abilities. I was surprised to hear him using the ringing phrase that we need to return sovereignty to the individual. That sort of phrase is more suited to the hon. Member for Worcestershire, South (Sir G. Nabarro). It is a fine-sounding phrase, but the hon. Gentleman should examine what, in practice, for example, taking 9d. off the standard rate of income tax would do for the individual, not even for the lower-paid worker.
      The average worker on £25 a week with two young children under 11 would get about 4s. a week. The right hon. Member for Altrincham and Sale (Mr. Barber) waxed lyrical about what the 3s. a week would buy, which the Chancellor was giving away, when he talked of people being able to buy a bottle of H.P. sauce and some candyfloss. I do not know what he imagines people will get for 4s., but, certainly, it would not be a great deal for that average worker. So returning sovereignty to the individual is not evident in the Amendment.
      I am a little sad that, despite all the evidence in our debates in recent years, the disincentive effect of direct taxation has not been proved. One needs to be somewhat sceptical of the degree of disincentive in the levels of direct taxation. We still have that argument. Today, we have had once again the argument about the brain drain, despite the fact that there has been a good deal of evidence that this is far from being the major reason why people emigrate. We have not yet had an international comparison, except in a minor way by the hon. Mem
      1096
      ber for Wycombe (Mr. John Hall), who quoted somewhat out of context.
      If one takes £2,500 as a particular income, which is hardly typical in this country anyway,and then ignores, because one is discussing only the standard rate of tax, all other taxation and social security, one can do anything with the statistics. One says, " I cannot discuss that now; I am only discussing the £2,500 a year man, because I am discussing the question of taking 9d. off the standard rate." This is juggling with figures and it is unworthy of the hon. Gentleman. He would recognise, if he discussed the matter in its proper context, that the disincentive argument is far from proven. But we still get this argument for switching from direct to indirect taxation.
      The right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), whom I hold in the highest regard as Chairman of the Public Accounts Committee and for other reasons, sought to argue that, because the Chancellor could have been incorrect in his Budget judgment that £200 million was the amount which he could " give away "—or the other phrase which the right hon. Gentleman used—this year, he could have been wrong. Of course he could. Before the Budget, I recommended to my right hon. Friend that he should give away more, but, although he could be wrong to the tune of £100 million either way, to suggest that he could have been wrong to the extent of £540 million without it affecting his Budget judgment is perhaps going a little far.
      Mr. Boyd-Carpenter: The hon. Member must have misunderstood me. I made the specific point that my Amendment, costing, on his hon. Friend's calculation, about £110 million or £112 million, was within the ambit this year of uncertainty in the Chancellor's Budget judgment. But I went out of my way to concede that the £540 million to which my hon. Friend the Member for Wycombe (Mr. John Hall) referred, would raise different considerations. I think that the hon. Gentleman must have misunderstood me.
      Mr. John Hall: The figure which I quoted was not £540 million, but £525 million.
      Mr. Barnett: The hon. Member began by quoting £525 million and I assume that his argument was based on that £525 million. If it was not, his calculations were clearly based on a false premise. He started with that figure and I assume that he had it written into his speech, until he went out and got another one or told us how he found it.
      Mr. John Hall: The hon. Member is getting confused. My figure throughout was £525 million. I sought to verify that and intervened to explain it. The Amendment to which my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) addressed himself was a different one, proposing a different reduction in tax, and was referring to about £100 million—£120 million, which my right hon. Friend thought would be well within the Chancellor's Budget judgment.
      Mr. Barnett: I am doing the hon. Gentleman the credit of assuming that, as he used £525 million, he assumed it to be within the Budget judgment of his right hon. Friend the Member for Enfield, West (Mr. Iain Macleod). If it is not within what his right hon. Friend would have construed as his Budget judgment, perhaps the right hon. Gentleman will explain to us in due course what figure he did have in mind. But, judging from his speech, either the hon. Member for Wycombe differs from his right hon. Friend, or the basis of his judgment is giving away an additional £525 million, not to mention all the other figures which we will get in later Amendments. So the Budget judgment of the right hon. Gentleman is clearly very different.
      Although this debate has not been quite so bad as some in recent years, the reason that I am sad about these arguments on switching from direct to indirect taxation is that we should examine new methods of personal taxation. That is why I was very pleased to hear the hon. Member for St. Ives talk about the other aspect as well—social security benefits. Clearly, this is part of the whole scheme of taxation in the wider sense of the word.
      One of the things which make these debates about knocking 9d. off the standard rate rather sad is that they show a total lack of understanding of what
      1098
      effect it will have and of the problem which faces us. We keep hearing—we heard it again from the hon. Member for St. Ives—that, if the Opposition were to win the next election—as does not seem likely now—we would see a new personal taxation system. We have heard this from the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) and we have had these odd sentences now and again about this new system, about a complete change in the personal tax system.
      But I have not yet heard what the new system is which they propose. We have had some details from the right hon. Member for Wolverhampton, South-West (Mr. Powell). He wants to knock 4s. off the standard rate of tax and, naturally, goes somewhat further—at least, this week—than the official Opposition, but that is not a complete recasting of our whole personal taxation system. But, from the Official Opposition, we have heard nothing. This is why the taxpayers generally, despite the fact that income tax is extremely unpopular with them, find the Opposition's case on taxation without credibility, because they constantly come up with a simple 9d. off the standard rate. Incidentally, this year, unlike last, when they proposed only 6d., they have managed to get the hon. Member for Worcestershire, South with them by upping it by 50 per cent.
      There is a need for new methods of personal taxation. That is why I was rather sorry to hear what the Chief Secretary said on Second Reading. He appeared to close his mind completely to any question of a negative income tax. I do not pretend that it would necessarily provide all the answers to the problems of personal taxation, but my right hon. Friend said that he had reached conclusions, which suggests that he has closed his mind on the matter. Yet we have a negative income tax already. He said that the reasons that he opposed a negative income tax were: first, its complexity; second, that it would not respond quickly enough; third, the cost; and, fourth—which is rather interesting—the question of incentives. But we have a negative income tax now, through our social benefits, which is very complex. It is not satisfactory to suggest that because of its complexity we cannot have a negative tax system.
      Mr. Nott: The present system surely contains far greater disincentives than could conceivably come about through rationalisation of the system for negative or reverse income tax.
      Mr. Barnett: Yes, there is at least a possibility, and I will come to that, but I am not prepared to say that negative income tax will automatically solve everything.
      The Chief Secretary called in aid the White Paper on National Superannuation and Social Insurance, Cmnd. 3883, paragraph 108:
      " The undesirable effects on the development of occupational schemes, and on savings generally, would occur whatever method of applying a means test was used."
      This argument goes to the root of the Opposition's belief that they could get more savings. An adequate " means-tested " welfare system would have an effect on savings. If there were no welfare system, and people had nothing to expect when they reached retirement, they would save personally. So a system of negative income tax would have a disincentive effect on savings. The system which we now have of negative income tax—that is, income tax and social benefits—also has a disincentive effect on savings, but to use that as an argument for saying that we cannot have a negative income tax system is totally false.
      The other point made by my right hon. Friend was that of cost. Considerable inquiry would be needed to find out the cost in comparison with any conceivable alternative. The cost cannot be taken out of context but must be compared with our present cumbersome system. As is stated in paragraph 108, to which I have referred, the Government do not have details of rents, and this is an argument for not being able to deal with the current year. The P.A.Y.E. scheme is administered on the previous year's figures and not on the current figures. Supplementary benefits are dealt with on a current basis. I cannot see why a system amalgamating social benefits and income tax cannot be devised on a current basis as opposed to the previous year basis, particularly with the expected totally computerised P.A.Y.E. scheme in 1972. So that argument does not stand up.
      The P.E.P. broadsheet by Brown and Dawson, of January, 1969, did not
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      adequately deal with the disincentive effect on people at the lower end of the scale. There is no disincentive because they do not pay income tax, but if a 30 per cent. rate were applied on the negative income tax system there would be a disincentive. Nevertheless, both the Chief Secretary and the P.E.P. document showed conclusively that the disincentive effect at that level would not be very great. So the answer could be in a more streamlined system of negative income tax than the present cumbersome system of income tax and social security. I readily accept that there are many variations of a negative income tax system. Hon. Members opposite are under a delusion if they believe that a negative income tax system would greatly reduce the levels of direct taxation. If the direct taxation paid by people at the higher end of the scale is to be substantially reduced this can be done only by taking the money from somebody else or from somewhere else; it will not be done by a miracle.
      I entirely agree with the right hon. Gentleman that the answer lies in family allowances and clawback. Until we have a negative income tax system this is the only way in which something can be done. But by this method one is helping only those families with more than one child who are not paying tax. Nothing is being done for the millions of families with fewer than two children who are not paying tax, and very little is being done for those at the very lowest end of the scale. If £200 million a year is given in reduced direct taxation to those at the higher end of the scale, this amount must inevitably come from those at the lower end of the scale.
      Mr. Boyd-Carpenter: Why?
      5.15 p.m.
      Mr. Barnett: If the right hon. Gentleman argues that it will come from higher growth and greater productivity, this has to be proved. The right hon. Gentleman is proposing to give it away before he gets it.
      Mr. Boyd-Carpenter: The hon. Gentleman has anticipated my objection. A proper stimulus to the economy such as was given by Sir Winston Churchill's Government led to a steady improvement in social benefits combined with a steady

      1101
      reduction in tax rates, which resulted from an ever-increasing national product, a smaller proportion of which taken in taxation produced a higher tax yield.
      Mr. Barnett: The statistics of the last 20 years will not get us very far. I have been very critical of the levels of economic growth achieved, but I do not stop at 1964; I go back much further than that. The levels of economic growth over the last 20 years have been shockingly bad. I do not think that the right hon. Gentleman can prove that levels of direct taxation at a specific point in time caused a specific level of increased growth.
      Mr. Julian Ridsdale: I have been following the hon. Gentleman's argument, but, surely, if we want increased growth we must have increased investment, which means increased savings. How can one get increased savings with increased taxation and a Budget surplus of £200 million?
      Mr. Barnett: I should be delighted to follow that argument on another occasion. It is a complex argument, and 9d. off the standard rate does not solve it.
      Mr. Ridsdale: It is a start.
      Mr. Barnett: The article which appeared in The Times yesterday seems to represent the Opposition's case on taxation. The article suggested that if, say, £1,000 million were given away in reduced taxation this would stimulate growth. This is a matter of living in hope. It is like the shopkeeper who was waiting to increase his sales when he went bankrupt. It would be a very interesting Chancellor of the Exchequer who gave away £1,000 million in reduced taxation because he expected that that amount would be saved.
      There is need for a fundamental revision in our personal taxation system. On Second. Reading I argued that there should be an amalgamation of income tax and surtax. I can see no argument for retaining this crazy system, apart from that put forward by Inland Revenue officials who in evidence said that they were overworked but would not want any change even if it resulted in fewer people being employed in the surtax office. I agree that the highest levels of surtax should be knocked off, but at the same time I would combine that with a
      1102
      wealth tax and a gift tax—although perhaps I would not carry hon. Members opposite with me on that matter. In the short term I should like to see the earned income relief go, which these days is an anachronism since it confuses the taxpayer into thinking that he is paying more than he is. This can be a great disincentive.
      Something should be done to recast the whole of the structure of personal allowances. This would involve some additional work for the clerical grades of the inland revenue, but I see no reason why a Government should not do something they think right simply because there are not sufficient Inland Revenue clerks to do the work. This would be a crazy argument for not carrying out a particular policy. In the long term there is an absolute need to look into the whole question of restructuring the tax system together with social benefits which are part of the same process.
      The time may now be ripe for a Royal Commission to look into the matter of personal taxation, including social benefits. This is a vital matter, and since it would take some years for such a report to appear there would by that time be a more objective understanding of the matter, including perhaps the sort of research which is needed. In that way we would get a more objective view of the personal tax system than we are likely to get in the narrow debates which take place in this House.
      The right hon. Member for Enfield, West has spoken on previous occasions of the need for simplicity in our tax system and has mentioned the American system of self-assessment. I would draw the right hon. Gentleman's attention to an item in The Times on 23rd April, 1970, which dealt rather well with any possibility of our wishing to do anything in this direction. The item said:
      " A prime target is the new tax return form, which is so complex that a more than elementary knowledge of algebra is a great advantage to anyone filling it in. Professor Friedman has calculated that 75 million Americans have spent a total of 300 million man-hours struggling with the form—the equivalent of 150,000 men working 40 hours a week for 50 weeks a year. It has provided a great windfall for tax accountants busy advertising their services at prime time on the television networks and the Tax Reform Act of 1969 is now widely known as the Accountants' and Lawyers' Relief Act of 1969."

      1103
      As a member of that profession, I declare an interest and make it clear that I do not want that sort of relief. I should be interested to know whether the right hon. Gentleman is in favour of moving to that sort of system.
      Mr. R. H. Turton: There was a disagreement between the hon. Member for Ashton-under-Lyne (Mr. Sheldon) and my hon. Friend the Member for Wycombe (Mr. John Hall) about the yield of a reduction in the rate of income tax. The present Chancellor of the Exchequer has made great progress in giving to the House information in White Papers on public expenditure. It would be a great help if at the same time he could give similar information to the House on the revenue side. It would help our calculations before reaching the Committee stage to know exactly what was involved in a reduction of 1s. in the standard rate. I hope that this matter will be considered.
      It is obvious that the hon. Member for Ashton-under-Lyne was using last year's timetable—
      Mr. Sheldon: I was quoting from my right hon. Friend's words in his Budget Statement.
      Mr. Turton: That is what I was saying. The hon. Member is forgetting that it is just like an out-of-date railway timetable. I nearly missed my train this week because my timetable which was current last week is no longer current. I make my suggestion about that further information since I have been impressed by the work done in the present Government in giving information from the Treasury. I hope that more use can be made of that information by other means in the future.
      The real problem is whether we can afford the £525 million which would be involved if the Amendment were accepted. The yield of income tax was £4,337 million in 1968–69 and £4,900 million in 1969–70, a rise of £563 million. That was at a time when the Chancellor could not give anything away and had to be very stringent. This year he expects to get £5,653 million from income tax, which is a further rise of £753 million—at a time when the Chief Secretary, on Second Reading, has said that this Budget was intended to give great relief
      1104
      to income tax payers. In fact the Chancellor is taking from income tax payers this year £753 million more than he took last year. He is taking some £2,600 million more than the last Conservative Chancellor took from the income tax payers in the last complete year of Conservative Government.
      This has a disincentive effect on all workers at all rates of income tax. It is nonsense to say, as the hon. Member for Heywood and Royton (Mr. Barnett) said, that this concession would mean only 4s. a week. Direct taxation as high as it is at present does not encourage people to work harder or to produce more. This is one of the main reasons why the growth of the economy is so slow at present compared with other countries.
      Mr. Ridsdale: Will my right hon. Friend agree that there is a great disincentive in that the individual is not able to save? This is why we are not getting the investment we should be getting in manufacturing industry to produce more.
      Mr. Turton: That is part of the picture. They feel they do not want to work harder because the Government take much of it from them because of a high rate of taxation amounting to 41·25 per cent. They do not feel there is any incentive in saving. A further adverse effect is that people feel that the best thing to do is to gamble their money at bingo because at least the Government will not take their winnings in taxation. Such an attitude is morally bad for the nation. What worries me in the disincentive effect involved in the Chancellor not lowering the standard rate for people on low incomes.
      5.30 p.m.
      In 1968–69, a single man earning £13 a week paid £82 7s. 8d. tax a year. Last year, he paid £82 8s. 11d. In other words, the Chancellor of the Exchequer took an extra 1s. 3d. from him. That was at a time of stringency when the right hon. Gentleman had to be hard. Now that he has given widespread reliefs, the single man earning £13 a week will pay £82 16s. 5d. in the year. The right hon. Gentleman will take another 7s. 6d. from him. In those three years, a person in that position has been given no relief. although his £13 a week buys about 15 per cent. less than it did three years ago.

      1105
      Yet he is paying more tax and, if his wage is increased by £1 a week, he will pay an extra £13 tax in the year under the present Budget. That is why this Budget is very hard and will become very unpopular later in the year. My advice to the Prime Minister is that it would be wise to get out quickly and go to the country. Later on, people will discover the weakness of this Budget.
      It will bear very hard on industries such as agriculture. Broadly speaking, the married farm worker does not normally pay tax under P.A.Y.E., except at harvest time. Under the present Budget, he will have to pay 6s. 5d. in the £ on all overtime earnings. This is the great weakness of this Budget.
      If the standard rate is reduced from 8s. 3d. to 7s. 6d., I agree that it will not make all that difference. But it will make some difference. A high rate of tax coupled with the abolition of the bands acts as a disincentive to growth in the economy, and it will be extremely unfortunate in its effect in trying to achieve greater productivity.
      My hon. Friend the Member for St. Ives (Mr. Nott) talked about marginal relief. I do not think that the Chancellor of the Exchequer realises how this works under the present Budget system on old people with small incomes. He has given some relief but altered the band slightly. Only this week, I have heard from a constituent of mine. He is an ex-Army man with an income of £15 10s. 9d. a week. He is over 65 and married. Last year he paid 9s. in the £ on all his income over the marginal limit. Under the right hon. Gentleman's present proposals, my constituent will pay 10s. in the £ on all his earnings over the marginal limit. That cannot be fair. He is treated as if he were a surtax payer because he has earnings over the limit of something like £64. That is why a high rate of tax at 8s. 3d. in the £ makes for great hardship on people in that bracket. Of course, if he had not got that £64, the right hon. Gentleman's proposals would relieve him. But he has £64 more, which is about £1 5s. a week, and, for that reason, the Chancellor of the Exchequer takes half of the excess in income tax.
      The Chancellor of the Exchequer (Mr. Roy Jenkins): While I agree that there
      1106
      is this difficulty about the marginal relief provisions, the right hon. Gentleman's constituent's total tax bill will be less than it would have been had it not been for my Budget changes, especially those relating to age exemption.
      Mr. Turton: I agree, but the right hon. Gentleman has to remember that the amount of money which old people have buys that much less than it did last year.
      In working out his Budget evaluation of the problems of old people, the right hon. Gentleman has to think not only of the concession itself but of the concession in the arena of high inflation, which is hitting old people. I have always felt that no civilised Government should tax people who are over 65, especially the husband and wife who have between them less than £20 a week. They should all be taken out of tax. They are having a hard struggle, and it is quite wrong to tax them.
      If we are to get the growth of the economy that all sides of the House want to see, we have to tackle the problem of direct taxation. We have also to tackle the question of the share of the gross national product which is taken at present by the public sector. It has grown this year to 51·25 per cent. Until we can get that down to 35 per cent. of the gross national product, this country will not get the growth that we require. One way of doing that would be to adopt this Amendment.
      I hope that the Government will think again about the problem of high taxation and about whether it is right this year, when there should be concessions, to take £753 million more from income tax payers than was taken last year.
      Mr. David Waddington: Like my right hon. Friend the Member for Thirsk and Malton (Mr. Turton), I should like to refer to a case to illustrate the fact that people on quite lowly incomes are caught well within the tax net and are paying tax on a level which would shock ordinary members of the public if they fully appreciated the position.
      Before dealing with that case, perhaps I might comment on the speech of the hon. Member for Heywood and Royton

      1107
      (Mr. Barnett). I was not altogether surprised to find that I agreed with some of his remarks. I was glad to hear him urging an amalgamation of income tax and surtax. I was even more glad to hear him say that a good case could be made for reducing the highest rates of surtax.
      I part company from the hon. Gentleman when he talks about a wealth tax. I can see the logic of the argument that the yield of a wealth tax could be used to reduce the highest rates of surtax, but I do not believe that a Labour Government could be trusted to use the yield from a wealth tax to reduce surtax. There may be others who are more credulous than I, but I would not trust a Labour Government to use it for that purpose.
      I do not wish to destroy the amicable atmosphere of this Committee, but I sometimes despair of hon. Gentlemen opposite. Hardly a person in the country does not feel that the rates of direct taxation are far too high. One has only to walk round the streets of any town to meet people who feel in their bones that they are paying too much in direct taxation. I suppose that it is conceivable that they are wrong, although I do not accept it. But that is not the point. The point is that people feel that they are paying too much in direct taxation and that, if they put more effort into their jobs and work overtime, they will not get a fair reward since far too much will be taken from them by the tax man. I am sure that the right hon. Gentleman will accept that that is an unhealthy state of affairs.
      I object strongly to the defeatist approach which we hear so often from hon. Gentlemen opposite. The theme is, " You may be right. We may be overtaxed. But there is nothing we can do about it. We are stuck with present levels of Government expenditure. You Tories make rash and irresponsible pledges to the country, but nothing can be done." I do not accept that.
      The other day, I had an argument with the Minister of State, Department of Health and Social Security. When I commented on the fact that we on this side were pledged to remove S.E.T., he asked where we would raise the £600 million. I do not accept that there is no room in our system for reductions in
      1108
      expenditure. We will get nowhere if hon. Members opposite merely say, " Nothing can be done. We are stuck for ever with our present rates of taxation, and people must accept them as a permanent feature of our life."
      I have another criticism to make of the Government rather than of hon. Gentlemen. I object strongly when I open my income tax return and out falls a leaflet which seeks to persuade me that I am not paying as much tax as I am. It is not the function of the Inland Revenue to whitewash the Government. In any event, the argument on the back of the form which has been sent with income tax returns is entirely spurious. The first sentence on the back of the form reads:
      " We know how much tax is stopped from our pay. Few of us know our average rate for the year. But this is the sensible way of looking at tax ".
      I do not agree with that. In terms of incentives, we are entitled to look at the marginal rate and at what we will have to pay by way of taxation if we earn another £5 by way of overtime. It is a completely spurious argument which is set out on the back of that form which accepts that the only thing which matters is the average rate of tax.
      Mr. Ronald Bell: No doubt if it had borne on it the imprint of the Labour Party office, my hon. Friend would not have objected so much.
      Mr. Waddington: I would not. I think it is going a bit far to distribute leaflets of that kind at the expense of the taxpayer. It never happened under a Conservative Government.
      Mr. Ridsdale: Does my hon. Friend agree that it would have been better if the indirect tax that a man paid was also included, because that would almost have doubled the figure?
      Mr. Waddington: Yes. There was no attempt to give a complete picture. They are highly selective figures which do not illustrate what we all know to be the case—that so steeply graduated is our direct taxation system that the ordinary man knows that he will get precious little reward for extra effort.
      People know that where there is a will there is a way. They know that

      1109
      when the Conservatives were in power there were massive reductions in direct taxation and at the same time considerable increases in welfare payments and other social benefits. We are entitled to say to the people, " We did it before and we can do it again ". We are entitled to ask people to look at our record and to say, " We can be trusted, unlike those who have been engaged in Government in the last few years ".
      I said that I wanted to mention a particular case, because few people realise how very nearly all-embracing the tax net is and how many people of lowly means are being soaked by the tax man.
      The case that I have in mind concerns an elderly lady, crippled with arthritis, who, being unable to look after herself, lives in a nursing home in Grange-over-Sands. Her income is derived from a war widow's pension of £359 and a retirement pension of £245, a total of £604 a year or £11 12s. a week. She now pays £11 1ls. a week to the nursing home, leaving her with virtually nothing for herself. Yet she has received a tax demand for £64 6s. for the income tax year 1969–70. There is something seriously wrong with a taxation system which allows that to happen to a person who has made few demands on the State during her life and has done her best not to be a burden to the State in the evening of her life. It is small wonder that in her letter she said:
      " If this lot get back again, the voters deserve all they get."
      Mr. Roy Jenkins: I intervene briefly at this stage not necessarily with a desire to bring the debate to an end. We have had a fairly good and wide-ranging debate. This opening debate on the standard rate of income tax naturally tends to be wide-ranging and fairly lengthy. I have no doubt that the right hon. Member for Enfield, West (Mr. fain Macleod) will wish to speak after me, and it may be that other hon. Members also wish to speak. However, it may be convenient if I speak at this stage.
      I will begin with the question which is fairly well understood on both sides, namely, the cost of the Amendment. Both the hon. Member for Wycombe (Mr. John Hall) and my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) were right on certain assump-
      1110
      tions. In reply to the right hon. Member for Thirsk and Malton (Mr. Tartan), I must say that it is possible that the hon. Member for Wycombe was proceeding on a more up-to-date timetable than my hon. Friend. The cost in a full year would be £525 million if the Amendment, as I take it is the intention, is superimposed on the Budget changes. If it is assumed that the Budget changes do not exist and we go back, the cost would be approximately what my hon. Friend suggested. But I understand that is not the intention. In so far as there has been confusion about that, that is the difficulty.
      I should add, without wishing to debate the matter—it would be out of order and inappropriate—that this cost should be seen in relation to another Official Opposition Amendment which proposes surtax reductions amounting to £115 million in a full year on top of the £525 million proposed in the Amendment.
      The right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) quite rightly said that his Amendment was more modest and would cost, on either assumption, only a third of that put forward in the Official Opposition Amendment. It is indeed somewhat more modest, and the Amendment in the name of the right hon. Member for Devon, North (Mr. Thorpe) and his hon. Friends is even more modest. Its modesty becomes positively frightening.
      Mr. Richard Wainwright: I rise simply to point out that our Amendment is selected for debate alongside the others, but no one has yet had an opportunity to explain it.
      Mr. Jenkins: I noted that. I also noted that, before the last speech from the Opposition, no Liberal Member rose to his feet That may partly account for the fact that you, Mr. Deputy Speaker, did not call a Liberal Member. Had an hon. Member from the Liberal benches risen to his feet, I might have felt it necessary to wait a little longer before intervening in order to hear a speech in support of the Amendment. In the circumstances, I thought it reasonable to rise when I did.
      The right hon. Member for Kingston-upon-Thames said that reducing the matter to his modest proposals it became a question of £200 million or so, which

      1111
      was neither here nor there in the circumstances of this year. He said that this was well within the margin of any Budget judgment. This being so, I am grateful that my right hon. Friend the Chief Secretary has been Chief Secretary under me, not the right hon. Member for Kingston-upon-Thames, because a Chief Secretary to the Treasury who took the view that £200 million was neither here nor there in any circumstances would not be a very satisfactory Chief Secretary.
      Mr. Boyd-Carpenter: The Chancellor puts it very entertainingly. Whereas on the Chief Secretary's side £200 million is there and can be laid hands on, spent or not spent, the whole point of my observation was that in a Budget judgment in the circumstances of this year neither the Chancellor nor anybody else knows whether it is there or not.
      Mr. Jenkins: I dispute that point. There are uncertainties in every year and there are particular uncertainties in particular years. This year is not unique in having uncertainties. We have had a moving wage situation in the past—
      Mr. Boyd-Carpenter: Not on this scale.
      Mr. Jenkins: While I agree that the rate of wage movement is considerable and successive, it is easy to see differences out of proportion and believe that it is qualitatively different from what we experienced in the past. We experienced a movement of earnings of 8 per cent. last year, and very much the same in the preceding year. This did not mean that it was not possible to budget with accuracy—and we came very close to the forecast—and retain tight control over consumption. I do not take the view that circumstances are qualitatively different. Nor do I take the view that circumstances are such that one can afford to treat a sum of £200 million as of no importance.
      Whatever sums we are considering, there is a big difference between the proposal of the right hon. Member for Kingston-upon-Thames and that of the Official Opposition. Perhaps I might for a moment deal briefly with the right hon. Gentleman before turning to the Official Opposition. Clearly the proposition to reduce the standard rate by 3d. was a conceivable option which, within the
      1112
      terms of my Budget judgment, I could, and did, consider. It would have been theoretically possible to have combined this with some sort of more limited threshold scheme such as I did to take some people out of tax.
      In his speech on the Budget the right hon. Member for Enfield, West rather indicated that that is what he thought 1 ought to have done within the terms of my Budget judgment. One reason, perhaps the most powerful reason, though there may have been others, why I rejected this was that to have done it within the terms of my Budget judgment and the cost which I thought feasible would have produced an odd and indefensible switchback effect. It would have had the effect of giving benefit to people on a low rate of income, then the benefit dying away, and then coming back again. This would have been the inevitable effect, within the amount of money one could afford, of having combined a threshold scheme with 3d. off the standard rate. It would have been difficult to defend, and it would not have produced any more benefit for the average wage earner about whom we have heard a certain amount from the hon. Member for St. Ives (Mr. Nott). On the contrary, it would have produced less for the average wage earner, and even the scheme of the Opposition—the far more generous, far less modest scheme of 9d. off the standard rate, which is far beyond what we could prudently afford—would have given very little more to the average married wage earner with two children than my scheme would, and at a far greater cost. It would have given very little more because it would have given very much up the scale.
      Could we have afforded this? One basis put forward by the Opposition why we could is the question of savings. They say that we would get more savings. We had several interventions from the hon. Member for Harwich (Mr. Ridsdale), who I thought rather misunderstood the relationship between savings and investment, but I shall not go into that as it is not directly relevant to the issue before us. The hon. Gentleman said that we could depend upon savings. I attach value to savings, and I recognise that in recent circumstances it has been difficult to get a fully adequate level of savings. I think that this will remain a continuing

      1113
      problem, but one which we should endeavour to solve. However, to, assume that if we make a tax reduction, which we want to make for other reasons, we can pretend that we shall get a totally unrealistic proportion of that saved, and to count those savings in advance on the credit side of the balance sheet, is a recipe for improvident finance which would undoubtedly create the most difficult and dangerous circumstances. The true relationship is to encourage savings and to count our chickens when they are hatched, and not well before they are hatched.
      The other matter is the reduction in public expenditure. On this the hon. Member for St. Ives spoke at some length, but with some interest. I was not sure how far the right hon. Member for Enfield, West, was enthusiastically cheering his hon. Friend at that point. He cheered him at the end, but I was not quite sure about how far the hon. Gentleman was carrying his right hon. Friend with him during that part of his speech.
      What the hon. Gentleman said, in effect, was that what was essential was to get a lower proportion of the national income devoted to public expenditure. I challenge this assumption. I think I can claim that during two and a half years at the Treasury, with the assistance of my right hon. Friend the Chief Secretary, who has done more of it than I have, there has been a tighter control over public expenditure than for a long time past; certainly a far tighter control than there was when the right hon. Member for Kingston-upon-Thames was Chief Secretary, and the right hon. Member for Barnet (Mr. Maudling) was Chancellor. There is no question about that.
      Mr. Boyd-Carpenter: We spent a good deal less.
      Mr. Jenkins: The rate of growth was very rapid indeed, as were the increases which took place subsequently, but the rate of growth in national income was concentrated into the period when the balance of payments was going overwhelmingly wrong. It was a 1963–64 phenomenon, and if one takes the other period one finds that that was not so, but that, too, is somewhat wide of the debate.
      Mr. Michael Alison: That was at a time when the right hon.
      1114
      Gentleman was urging that the economy should grow, and that we should go for a 6 per cent. to 9 per cent. growth rate.
      Mr. Jenkins: I do not think that that deals with the point at issue, which is that there was a high rate of growth in public expenditure. I should have looked up the context in which that quotation was used. I do not believe that it bears exactly the interpretation which was put upon it.
      Mr. Boyd-Carpenter: However good humouredly the right hon. Gentleman made his observations, I am sure he will accept that when my right hon. Friend the Member for Barnet (Mr. Maudling) was Chancellor, and I was Chief Secretary, national expenditure as a percentage of the gross national product was conspicuously below what it is today, and that most hon. Gentlemen opposite, including himself, were always urging an increase.
      Mr. Jenkins: We were not urging an increase any more strenuously than the Opposition have been urging increases recently. While it may, as a percentage of the national income, have been low, it was rising rapidly, and if what was projected at that stage had continued undoubtedly it would have risen at least as rapidly as it has done recently.
      It is not the case, as I think the hon. Member for St. Ives admitted freely and frankly, that our total level of public expenditure as a percentage of national income is out of line with the general run of comparable countries. It is higher than a few, and it is lower than quite a few. It is at about the middle among the advanced industrial countries. In all such countries, under a wide variety of Governments, there is a strong continuing tendency for public expenditure to rise, both absolutely, and as a proportion of the national income. This happens at differing paces, under different Governments, because it is virtually impossible in a modern industrial society to cope with community problems which are thrust up by the modern wealth-producing process itself without the community undertaking greater and greater responsibilities for curing them, whether they are social, environmental, or other problems.
      If the right hon. Gentleman sets his face firmly in this direction, he is doing

      1115
      so against the recent experience of every civilised country in the world which is endeavouring to make sense and to make living conditions tolerable in the midst of different and complex modern problems. I do not believe for a moment that the right hon. Gentleman would succeed in doing this. Of all the Opposition's claims the most unconvincing is their attempt to reconcile a general desire to reduce public expenditure with a long and increasing catalogue of items for increases in public expenditure.
      They have failed to convince many of their old allies. There have been few more devastating articles than that by Andrew Alexander in the Daily Telegraph last September, in which he suggested that the increase in expenditure would be £1,000 million under the programmes of the right hon. Gentleman, to which there might be offset savings of £500 million, leaving a net increase of £500 million. I believe that hon. Gentlemen opposite are failing signally to convince the country on this issue.
      My only disappointment at the recent move of public opinion is that we may no longer have the opportunity, to use a famous phrase, to go forward together and put these brave matters to the proof and see what the right hon. Gentleman would really do. My belief is that he would not reduce public expenditure and that he would find it very difficult to fulfil his taxation pledges. He would not fulfil them fully. He would go some way—just about far enough to unbalance the economy and put us back into real trouble again without doing what he said he would do. In other words, we would, very effectively, have the worst of both worlds.
      6.0 p.m.
      We have heard less in this debate than in the similar one last year about international comparisons, and perhaps for very good reasons. Last year, we had a rather selective speech by the right hon. Member for Bexley (Mr. Heath) who took some figures and announced them as though they were the ultimate word which could be spoken on this subject. My own belief, as I said last year, is that, in this field, one can prove almost anything by international comparisons and that one can produce international comparisons to prove almost any thesis.
      1116
      I took last year, and I take again, comparisons for United Kingdom rates of marginal tax—the hon. Member for St. Ives said that marginal taxation was the crucial thing—at what might be regarded as the middle management levels of £5,000 a year, where the United Kingdom compares very favourably with four or five other major countries and again is in the middle of the table. The position is not dissimilar at £7,000 a year. It is worse when one reaches the high rates of tax and in some ways it is not very good at the lower end of the scale—though the last thing which follows from that is that the main taxation concession to which we should devote £525 million is a cut in the standard rate by 9d., particularly when accompanied by a cut in surtax of £115 million as well. That is not a convenient way—
      Mr. Nott: Would the right hon. Gentleman tell us what it would be at £5,001 a year instead of £5,000?
      Mr. Jenkins: At £5,001, it would be substantially improved, owing to my surtax threshold provision—
      Mr. Nott: It does not affect earned income.
      Mr. Jenkins: Yes, of course it does. It affects the rate at which surtaxable income begins, whether for earned income or for unearned income, so the hon. Gentleman is quite wrong. At £5,001 a year, the position would be affected precisely by the surtax threshold scheme, which leads me effectively to my last point.
      The right hon. Member for Kingston-upon-Thames, who made an interesting speech—I apologise for referring to it constantly—quoted me fairly as saying last year that, in a difficult year, I gave high priority to trying to increase one of the earned income allowances. He wondered why I had not done it this year. This is a fair and essential question, which I should try to answer. But if it is thought that this was the right way to proceed—the right hon. Gentleman's speech implied that it was—I am not sure why the Opposition have not put down Amendments to do this, rather than the series which we are discussing, which would do something quite different.
      Anyway, I said that I gave priority to that. This year, I had a little, only a

      1117
      very little, more room for manoeuvre. I decided that it was necessary to give the bulk of the concessions at the lower end of the scale, and, of course, dealing with earned income allowances would have dealt exclusively with incomes above £4,005 a year if one dealt with the lower one and the cost would have been substantially higher if one dealt with the higher one. So I though it right to give the bulk of concessions there.
      But I thought it also right to do something towards the upper end of the scale too. I believe that, bearing in mind the immense complication, the cost of collection, the number of people coming into what was intended to be a minority tax, it was better—although it was a difficult choice—to give priority to the surtax threshold, rather than to the earned income relief. But I would not withdraw from what I said previously—that I do not believe in the character-building benefits of high direct taxation paying. This is not beneficial in itself. I in no way retract from what I said in 1969. I certainly stand by that.
      But there is one consideration— I believe that the country generally appreciates this—which is of far greater importance even than giving direct taxation concessions, even if it would increase incentives. That is, not to act in a way which would unbalance the economy and put us back into national difficulties, not, in other words, to give away more in the Budget—I accept here the phrase of the right hon. Member for Kingston-upon-Thames: " give away " is a bad phrase and perhaps a better one would be " release "—than is justified on what is the best Budget judgment that I can make. I believe that the country prefers that to an extravagant Budget, and it would certainly be an extravagant Budget if we were to accept this Amendment. So, when they come to vote, I would ask the Committee to reject it.
      Mr. Iain Macleod: I follow the Chancellor, in the spirit in which he spoke, in no way to close the debate. I hope that we shall hear from a number of my right hon. and hon. Friends and also from the Liberal spokesman.
      I regard this as the most important Amendment, and probably the most important debate, in the whole Committee stage of the Finance Bill.
      1118
      Let me start with the question of the cost. It was not without significance that this debate began with an argument about cost in which the hon. Member for Ashton-under-Lyne (Mr. Sheldon) proved to be wholly wrong and my hon. Friend the Member for Wycombe (Mr. John Hall) proved to be wholly right. With respect to the hon. Member for Ashton-under-Lyne, having been wrong on this matter—although I understand why he was wrong: he just ignored the Budget —and then having launched into a detailed attack on hon. Members on this side, when the matter was pointed out to him he might, because he is normally fair in these matters, at least have withdrawn the attack which he based on an entirely incorrect premise—
      Mr. Sheldon Mr. Sheldon rose—
      Mr. Macleod: Well, if the hon. Member wants to withdraw now—
      Mr. Sheldon: I am very happy to withdraw. I put my judgment on the same basis as the right hon. Member for Kingston-upon-Thames (Mr. Boyd Carpenter) and the Chancellor. It is a pity, though, that in this connection the Leader of the Opposition, who made a most egregious error, which has been pointed out to him again and again, has not seen fit to withdraw his error.
      Mr. Macleod: I am content, for the moment, with the hon. Gentleman's withdrawal. He was on a wrong basis.
      But what is much more important than a difference about cost, which is now resolved, is that there is a clear difference of philosophy between the two sides of the House, which has been coming out in a number of speeches, and which I want to emphasise.
      The Chancellor referred to the cost of later Amendments. With respect, one should not do that in considering a Finance Bill. Every Finance Bill since I have been a Member of the House has, if one takes the total of the Opposition Amendments—whether the Opposition be Labour or Conservative—been vastly in excess of anything which the Chancellor of the day could conceivably meet. But we take those Amendments one by one. I am happy to make an offer to the Chancellor. If he will accept this one, I will drop all the others, and, indeed,

      1119
      I will move no further Amendments throughout the proceedings on the Finance Bill I cannot say fairer than that.
      What is important—the Chancellor, not surprisingly, showed himself a little sensitive about it right at the end of his speech—is that, because he has not moved this year in direct taxation, he is in breach of everything which he has said on direct taxation for some years past. Let me quote some things which he said, as Home Secretary, in 1967 in London:
      " we cannot be indifferent to the disincentive effect which very high taxation on earned incomes might have. The Labour Party, as the 1966 Election showed conclusively, is a Party with an appeal to all income and occupational groups. Furthermore, we desperately need a competitive and thrusting business climate."
      That is what he said in 1967.
      In 1968, even in that year in which he took more taxation than any Chancellor has done in war or peace, the right hon. Gentleman made a virtue out of not increasing direct taxation, and said:
      "This I believe to be justified on the grounds of incentive."—[OFFICAL. REPORT, 19th March, 1968; Vol. 761, c. 296.]
      I quote again the words the right hon. Gentleman used last year:
      "I would emphasise, however, that I regard an increase in one of the earned income allowances as a high priority for a later Budget."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1031–32.]
      So we have had the Chancellor's undertakings in 1967, 1968 and 1969; and they have been broken. The Chancellor made no bones about it. He tried to explain it, but he did not deny that those undertakings have been broken in 1970.
      I have not the slightest doubt why the Chancellor decided to go back on the undertakings, or, if that is too strong a word, as it probably is, on the indications which he has given over the years in and out of Parliament. He did it purely on grounds of relative popularity. He did it because, in crude terms, the teenagers, who get one of the biggest benefits from his Budget, have votes and the children in poverty have no votes. That is the philosophy that underlay this Budget. That is one of the reasons why I said in my Budget speech that, given the Budget judgment—
      Mr. Roy Jenkins: What have children in poverty got to do with the question whether or not I increased one of the earned income allowances, which is what I thought the right hon. Gentleman was applying himself to?
      Mr. Macleod: They have everything to do with it, because in this Budget the Chancellor was, in my submission—he can deny this if he likes—moved entirely by electoral, political and popularity considerations. He left out of consideration children in poverty, because they have no votes.
      Mr. Roy Jenkins: The right hon. Gentleman cannot get away with that. He was applying himself directly to an argument following up what the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said, that I had indicated in 1969 that I gave a fairly high priority to reducing the rates of tax on high earned income. There may be a case for that. There may be a case for doing something to help children in poverty. But to confuse the two issues, as the right hon. Gentleman is deliberately doing, is to misrepresent the whole position. and the right hon. Gentleman knows this.
      Mr. Macleod: I am sorry that the right hon. Gentleman is so sensitive about what he has done. I should have thought that he would have stood by it.
      I made quite clear in my Budget speech—I repeat it—that, given the Budget judgment—which I do not accept —I should have taken 3d. off income tax, which the Chancellor said at the time would cost £110 million, done something about allowances, and dealt for the rest with child poverty. That is not a popular thing to put forward, and I know it. I know very well from the postbag I have had since that that is an unpopular suggestion to make. But I believe it to have been the right one to make. I believe that the Budget would have been a much better one if the right hon. Gentleman had taken those considerations into account.
      Whether or not the right hon. Gentleman has been consistent over the years, the one thing that is surely beyond dispute is this. In office and out of office, we on this side have been consistent either in urging when we were in opposition or

      1121
      in achieving when we were in government reductions in direct taxation. I am not for the moment arguing whether we were right or wrong to do this. I am talking about the philosophy that divides the two sides. I say that it cannot be denied that for very many years we have, in office and out of office, pursued the theme that is implicit in the proposal now before the Committee.
      As one of my hon. Friends has said, when people, talking about our plans for a reduction in direct taxation, say, " You cannot at one and the same time reduce taxation and improve the social services ", we are entitled to give the simple answer—" We did it ". We did it over those 13 years.
      Mr. BRYANT GODMAN IRVINE in the Chair]
      6.15 p.m.
      This is not a matter for argument or for talking across the Despatch Boxes. We can have our differences there. But it is in the record books that we reduced rates by £2,000 million. It is in the record books that in nine out of our 13 Budgets we reduced direct taxation. It is in the record books that we reduced the standard rate, with which we are particularly concerned at the moment, by 1s. 9d. and that we never increased it. It is in the record books as well that over that period the social services in real terms, taking all price considerations into account, were increased in value by 40 per cent.
      It is not possible in opposition to reveal details of rates and budgetary matters that one has in mind. Therefore, I understand and do not resent the criticism which has been made in newspaper articles. Although, for obvious reasons, one cannot prove the future, one can call the past in aid. The past shows conclusively that what we have done we can do and we will do again.
      Then we had a very interesting speech by the hon. Member for Heywood and Royton (Mr. Barnett). I congratulate the hon. Gentleman on making an excellent speech on Second Reading and then persuading the Sunday Telegraph to pay him a fee for the same speech in the guise of a newspaper article last Sunday. I wish the newspapers were as generous with me.
      There was much in the hon. Gentleman's speech with which I agreed. I will come to one or two specific points later. The hon. Gentleman argued—my hon. Friends the Members for St. Ives (Mr. Nott) and Nelson and Colne (Mr. Waddington) argued in the contrary sense—that, because it can be shown that somebody on average wages or thereabouts gets only a few shillings from the reduction in the standard rate, this is not perhaps of the first importance and that the question to ask is: who is it who feels that direct taxation in Britain is too high and that he would benefit greatly, in energy or in any other way, from a reduction?
      The answer is one which the hon. Gentleman sometimes laughs at, but I do not. It is the people who feel this—the people in his constituency and those in mine. People such as the hon. Member for Ashton-under-Lyne ask for inquiries, commissions, and so on. There may well be a case for these. I would like to have more detailed information. We in opposition have spent a good deal of money on conducting just such inquiries.
      Over the years it has been fascinating to watch how direct taxation, which for a long time ranked about ninth, tenth or eleventh if people were asked what they were worried about most, for some time now has been running second only to prices. This is what the people feel. I have no doubt that this is why they want a reduction in direct taxation, because the theme of choice is not one that I scorn as the hon. Gentleman does.
      The first choice that people should have is that of spending more of their own money. With that, choice will be returned from Ministers and Ministries back to the people. That is the philosophy lying behind this suggestion.
      Mr. Barnett: The right hon. Gentleman is confusing what people feel and what they will actually get from, for example, this Amendment or anything along these lines. Of course I accept that people feel they would like to have cuts in taxation, but this Amendment, or any analysis of it, shows that that is not what they would get. It shows that the right hon. Gentleman's tax policy lacks credibility.
      Mr. Macleod: I take up the hon. Member's argument, but not his postscript,

      1123
      which I leave for another time. In a phrase used by my hon. Friend the Member for St. Ives in his admirable speech, I believe that people know and politicians such as the hon. Gentleman do not know. There are all sorts of considerations, considerations of psychology among others, which the hon. Gentleman entirely leaves out of account in doing a simple slide-rule calculation about what people on £2,000 a year, or £25 a week, or whatever it may be. would have.
      I turn to the question touched on by the Chancellor in relation to savings. I have made clear many times that I have never thought that the Chancellor really understood the importance of savings. We have an Amendment on the Notice Paper which we may come to tomorrow. It may be more appropriate to discuss those matters then. The Chancellor has perhaps read, and, if not, I recommend him to read, an article on savings which appeared recently in the Westminster Bank Review by Brian Reading and, I think, David Lomax. It convincingly put forward the argument that the proportion saved from tax reductions is vastly higher than orthodox theory has so far concluded. I think it is unproven and dangerous to count those chickens before they are hatched, but I think the Chancellor under-estimates, and has always under-estimated, the importance of savings in reduction of taxation.
      We all know that there is what we call a vicious circle of high levels of public expenditure, particularly if they are combined with low levels of growth, leading to high and higher levels of taxation, and so the vicious circle goes on. I suggest that there may be a virtuous circle of the exact opposite in which lower levels of taxation will lead to more and more money being saved, therefore less pressure on demand, and therefore the possibilities in this circular exercise of still further reductions in taxation. The Chancellor ought to look at the possibilities in that. I know that intellectually he understands that this is possible. His speeches, which I have quoted, must mean that he is not too far apart on direct taxation from the sort of philosophy I am putting before the Committee. But what he must do is make a start in this field. The sort
      1124
      of start is indicatted to him on the Notice Paper now.
      The last point I take comes back to something said by the hon. Member for Heywood and Royton. Apart from reductions in direct taxation into which it would obviously be out of order to stray too far, simplification is almost as important. I absolutely agree that there is no need to have surtax as a separate tax. Of course it can be combined with income tax; the two can merge.
      On the question of self-assessment the hon. Member quoted amusingly from someone who said, in effect, that America with its tax system was " hell for chartered accountants ". What does he think it is in this country with the system we have at present? It is worth remembering that the staff of the Inland Revenue and its comparable opposite number in America are of roughly the same size and in America they collect, I think, 12 times as much tax from four times as many people. On self-assessment the opportunities are exciting and encouraging. I have not made a commitment beyond that, but we have studied it and I believe that it will repay the Government to study it very closely indeed.
      We are now agreed on the cost of this proposal. The Government feel that it is both too much and wrong. We feel that if the Chancellor was determined to reduce direct taxation it could and should be met. I think we have shown fairly clearly in this debate that what we are putting forward is absolutely consistent with everything we have said not only in our six years of opposition but in the 13 years of government as well. What we have preached and what we have practised have gone hand in hand. We shall when we have the opportunity as a Government—I use the words I have used many times—drastically reduce both income tax and surtax. This Amendment is the right sort of start, and I commend it to the Committee.
      Mr. Richard Wainwright: Speaking for the Liberal Amendment, I offer no support whatever to the proposals for sweeping reductions in income tax. My Liberal hon. Friends and I will certainly not support in the Lobby the Conservative Amendment.

      1125
      While on the subject of the Conservatives, I remind the Committee of the startling contrast between the coyness of the Conservative Front Bench about their alternative taxing proposals and the generosity of several back-benchers, notably the hon. Member for Heywood and Royton (Mr. Barnett), in coming clean with the Committee about their suggestions. I hope that in a future contribution the hon. Member for Heywood and Royton will go even further with his elucidation of a negative income tax. Dealing with the frequently held objection to a negative income tax that the system would not respond quickly enough to sudden need, he made the point that the Supplementary Benefits Commission responds quickly. He went on to say that he could not understand why the P.A.Y.E. system could not be adapted to respond with equal speed.
      I hope the hon. Member will explain why a system called income tax, which is meant to deal with income on an annual basis, could respond with speed to a sudden need. I have always thought that it was one of the most humane aspects of our present supplementary benefits system that where people in the course of the year undergo sharp changes of fortune from high wages to virtual destitution—or the other way round, when a period of destitution is followed after a few months by high earnings—the Supplementary Benefits Commission normally does not, subject to certain exceptions, claw back what it has given during the period of misfortune. To transfer our present system of benefits to the framework of the income tax would be to introduce a most complex, inhumane and slow-moving system whereby people who had benefits because of hardship during the early part of the year would be assessed to repay those benefits in respect of quite high earnings later in the year. That seems an insuperable objection to a negative income tax system such as the hon. Member outlined.
      I come to the Liberal Amendment which, as I say, is not intended to advocate in the context of May, 1970, sweeping reductions in taxation. It is true, as the Chancellor pointed out, that we have gone to extremes to dissociate ourselves from any idea of a tax bonanza in the context of May, 1970. This is for two main reasons. It is partly
      1126
      because we do not believe that anybody outside the small circle of ladies who want to bring back the birch and the stocks believes in the possibility of sweeping reductions in direct taxation during the present year. To the mass of the people, as recent opinion polls have tended to show, the promise of sweeping reductions in direct taxation does not carry serious weight when they are deciding how they might vote at an election.
      6.30 p.m.
      More important, with a great movement towards increased earning irrevocably under way, this is plainly not the moment to offer a large income tax bonus as well. If we had had the foresight to equip ourselves with a flexible system of imposing direct taxation, if the Inland Revenue had been computerised during the years of Tory administration and we could have had an up-to-date system of administering direct taxation, there would have been a powerful case for anticipating the present rapid advance in earnings by interpolating from the Government side before the present pay negotiations began a reduction in income tax with the possibility—I say no more—of fore- stalling some of the tremendous pressure now behind the movement for higher earnings. But now that the higher earnings campaign is so thoroughly under way and for the moment unstoppable, until whichever party returns to power almost immediately imposes a very severe squeeze, it seems to me ridiculous and bordering upon dishonesty to advocate very sharp reductions in income tax rates.
      Our modest Amendment therefore is intended to run up a flag for three causes. The first is the cause of real flexibility in our direct tax system. We suspect—though I hope that this can be denied with some evidence—that the clerical side of the Inland Revenue is so gummed up that anything less than 6d. off the standard rate is regarded in official quarters as not worth the administrative upheaval that it would cause. If that is so, it is unpardonable. There is in the public mind a confusion between the different levels in the Inland Revenue at which there can be administrative stress and blockage. Liberal Members accept with great regret that in the higher echelons of the Revenue, which are still wrestling with the effects of the 1965 Finance Act and the complications from subsequent

      1127
      Finance Acts, there is an extremely difficult situation which cannot be removed quickly owing to the length of the training period required. But this is an entirely different aspect from clerical difficulties, which, if they exist, should be put right with speed.
      I accept that the Government were under a handicap in that computerisation was not started under the previous Government, but the sheer clerical operation of administering any change, however small, in the standard rate should be surmounted by a country with a proud tradition of Government service. We shall be very distressed if our suspicions are correct that modest reductions in the standard rate are no longer considered administratively worth the candle.
      Second, although we accept the Chancellor's sincerity in saying that he would like to mitigate slightly the effect of direct taxation on incomes, we should like to see a token of his recognition that in a period of rapid inflation, and with a rapidly-ascending scale of direct taxation such as we have, certainly after this year's Budget, merely to leave the standard rate as it was at a time when more and more people are reaching the top earned income rate is to increase the pressure of direct taxation.
      If the Chancellor is to give real evidence of the genuineness of his concern about the present level of direct taxation, he should acknowledge the inflation argument, which I need scarcely point out is not the same as the healthy buoyancy of the Revenue argument. If people over the whole country were earning larger real incomes and having much more spending power in terms of goods at their disposal, that would be another matter. What I am talking about is sheer naked inflation, which makes rapidly-ascending tax scales more of a burden as the years go by without the Government's having to increase them. To that extent, a token reduction at least is required.
      I come now to the third of the flags which we wanted to run up with our innocent-seeming Amendment, which of course we shall not dream of pressing to a Division.
      Hon. Members: Shame!
      Mr. Wainwright: My constituents in the West Riding are used to working to very fine margins, but I am not sure about all the other Liberal electorates.
      Third, we would like to state our fear about the status of the standard rate. As the volume of earned income suffering only the earned income rates of tax, and mostly the lower earned income rate—the 6s. 5d. rate—increases much faster than unearned incomes, there seems to us a great danger of the standard rate going the dismal way of the old profits tax and the present corporation tax under both the other parties. These very important revenue-yielders have not been paid by a large number of voters. This seems to us, as democrats, an extremely dangerous situation.
      Under successive Conservative Governments the rate of profits tax, a valuable yielder but representing very few votes, went slyly up and up. Under Labour Governments, perhaps a little more understandably, the rate of corporation tax, also paid by only corporate bodies which themselves have no votes, and very few of whose members in relation to the total electorate have votes, has gone up. There is a danger of the standard rate, to which Liberals attach great importance, going the same way, and there may be a tendency for the present and future Governments to alter those tax reliefs which, as the right hon. Member for Enfield, West (Mr. fain Macleod) has just pointed out for instance in the case of young voters can have a very considerable electoral effect—to alter the various reliefs and allowances and leave the standard rate untouched. If that is the trend, we as democrats would greatly regret it.
      I have been able only to voice these as suspicions tonight, but I hope that either during this debate or later the Government will be able to give us some reassurance.
      Mr. Ridsdale: Listening to the hon. Member for Colne Valley (Mr. Richard Wainwright), I feared that the Liberal Party is living in the past. The hon. Gentleman must recall that about 100 years ago the Liberal Government of the day were defeated because they raised income tax by 3d. I had hoped that the hon. Gentleman would have a little more courage a hundred years later. I am sorry that he has not.

      1129
      I am torn between supporting the Amendment of my hon. Friend for Wycombe (Mr. John Hall) and that of my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter).
      Mr. Boyd-Carpenter: Why not both?
      Mr. Ridsdale: I could easily support both, but I shall come down in favour of the Amendment of my hon. Friend the Member for Wycombe. I do so largely because, although I had what the Chancellor has said at the back of my mind, the Chief Secretary is sitting on the Government Front Bench, and I recall the years when we used to advise him, in 1965, 1966 and 1967, that it would be wise not to increase Government expenditure at the speed at which it was being increased ahead of the growth in the gross national product.
      Exactly the same arguments were put by the Chancellor and by hon. Gentlemen opposite then as they are putting now—" No, we cannot do that, because it is impossible to do." But what was the result? The result was that Government expenditure in 1965 increased by 6·5 per cent. and the gross national product by about 1·2 per cent.; in 1966 Government expenditure increased by about 6·5 per cent. and the gross national product by about 1·2 per cent.; and in 1967 Government expenditure increased by about 9·7 per cent. and the gross national product by 1·7 per cent. This led to devaluation. This was the chief factor in devaluation.
      I am putting this argument forward because the Chancellor is giving to us now exactly the same constrictions—he has picked me out as being not prudent in some of the proposals I put forward. But thank heaven I am not a Socialist Chancellor; thank heaven I have no supporters at my back saying, " I am going to have a wealth tax to stop savings."
      The proposal in Amendment No. 1, which I support, would not be brought about unless it was part and parcel of other measures. What a great difference it would be to have a Conservative Government in power to restore confidence, to get over, once and for all, the fear of a wealth tax, which is such a deterrent against savings. Other methods would also be used to encourage investment.
      1130
      But this is the crux of our economic position and the Chancellor and the Chief Secretary know it full well.
      The Chancellor, in his donnish way, lectured me about investment and saving and said that I did not understand. But I had an Adjournment debate on this subject because I think the crux of our position is that we are not getting investment into manufacturing industry. If we get investment into manufacturing industry, it will be perfectly possible to do exactly what my hon. Friend the Member for Wycombe wants because we shall increase the gross national product.
      Since the Chancellor says we have not had any international comparisons, let me just give some to the Chief Secretary. Over the last 10 years, investment in manufacturing industry in Japan, because of savings, has been twice the rate of ours annually, and this is why steel production in Japan now is 100 million tons, compared to about 25 million tons here. This is the crux of the problem. This is why Socialism has failed, because it has failed to encourage savings.
      It is on this theme that I wish to talk on this Amendment. When one looks at the kind of tax and the disincentives that go right through the economy of the country today, and the effect on the ordinary individual, then one understands full well why we are not getting the kind of investment in manufacturing industry that there is in Japan—indeed, in West Germany as well, whose rate of investment is half as much again as ours over the last 10 years.
      6.45 p.m.
      Is it right that a single person earning £29 a week—this is what a skilled plasterer or bricklayer can earn—should pay in tax £335 a year, and another £50 for National Insurance, a total of about £380? When one allows for a proportion of his money to be spent on alcoholic drinks, tobacco, etc., all indirect tax, I estimate that he is paying out another £220 annually in indirect taxation. I estimate that a single man earning £29 a week pays to the central Government about £600 a year, excluding what he pays local government as well.
      This is the disincentive. The country cannot afford to save because such individuals are overtaxed. In the name of

      1131
      Socialism we are trying to create an over-burdensome economy, a luxurious economy, without concentrating on and seeing that investment goes into manufacturing industry and our gross national product increases.
      We have learned a lot about equal pay recently. A ward sister on average draws about the same rate of pay as a plasterer, about £29 a week. I estimate that her tax position is about the same as that of the skilled plasterer, and I estimate—I think it is an under-estimate—that she pays about one-third of her income in direct and indirect taxation, or over £600 a year, to the central Government alone. With figures of this kind, I can well understand the strong feelings of my hon. Friend the Member for Nelson and Colne (Mr. Waddington), who spoke so admirably in this debate, coming from the marginal seat that he does and having just fought a victorious battle. He knows the feeling in the country and how people are being constrained, feeling clamped down in a straitjacket because of the amount of Socialism and Socialist taxes we have.
      I ask the Chief Secretary to correct one figure on direct taxation, and that is the net figure of taxation for nurses, for the total pay of nurses, which the Secretary of State for Social Services spoke about yesterday. I am wandering slightly outside the Amendment here, because what I want to do is to continue my argument to emphasise the kind of burdens of taxation that there are on the people on £29 a week.
      Let us look at the person on £20 a week. Is it right for a single man earning £20 a week—this is what a railway-man earns in North-East Essex; it might be higher in the hon. Gentleman's part of the world—who has to do overtime as well on Saturdays and Sundays, to pay £186 15s. 6d. in tax? He is perhaps a few shillings better off because of the Finance Bill.
      I have mentioned the effective rate because there is a complete deception about what a man has to pay. The Inland Revenue puts a pamphlet into people's pay packets, under the instructions, no doubt, of the Chief Secretary, but it does not state the true position because it says nothing about indirect taxation at all. I estimate that the effect-
      1132
      tive rate for a man on £20 a week is about £375. Over one-third of his hard-earned income goes to the central Government. There are also local government rates as well.
      What is the position of women earning this amount of pay? On the basis of equal taxation for women, I estimate that a staff nurse in a hospital earning £20 a week pays about £375 a year to the central Government, including £186 15s. 6d. in income tax. This is why I feel so strongly and support Amendment No. 1. I believe that if some effort is made to reduce taxation we shall get the savings which are so necessary into manufacturing industry and thereby increase the gross national product and again be in a position to get the economy moving.
      A large number in North-East Essex are paid about £16 a week. Is it right for a single man earning £16 a week to pay £132 in income tax, plus £140 in indirect taxation? Let us remember also that this is the kind of tax burden of many single women, such as our secretaries, who are earning this kind of wage. This is why people feel so strongly and again why I support the Amendment.
      The Chancellor referred to the principle of savings. I want to point out how much of total expenditure, both current and capital, should be met by taxation. I know that the right hon. Gentleman can argue cogently in such a debate and dot the i's and cross the t's and tell me that I am not being prudent. But the object of putting down an Amendment like this is that we should have a star to aim at. There should be a pointer to where we want to go. We do not wish to be irresponsible or imprudent. Across the Floor of the Chamber, hon. Members can call each other irresponsible but the point is whether it is right to meet the capital needs of the Government as well as their current needs out of taxation.
      In 1968 the current account of the Government involved some £14,399 million and the capital account some £4,773 million. In 1970–71 the estimate puts the total current spending at £16,657 million and capital expenditure at £5,340 million. For roughly every 21s. taken in tax 5s. goes in capital spending. This trend has grown progressively over the last five years.

      1133
      Public expenditure on capital account must be financed by genuine borrowing and not from current revenue from taxation. I am sure that the Treasury is wondering how to get out of the straitjacket it has got into with the Budget surplus it has. How dearly it would like to see that Budget surplus invested in manufacturing industry so that we could produce more wealth. The Amendment is a pointer in the right direction. We did it in Government because the one thing that matters to a Government is that people should have faith and confidence in them.
      People will have confidence in a Conservative Government. We shall get more capital coming in from abroad. We shall have no threat of a wealth tax. We shall take measures to help over estate duty. We hall get away from many of the views of many hon. Members opposite, and we shall be able to get investment once again into manufacturing industry. People who have looked after their own finances prudently do not look after the country's finances imprudently. This is why it is important to see that we take prudent action, and I am certain that we should take that action if we followed the excellent advice of Amendment No. 1.
      Mr. Kenneth Baker: Any discussion of income tax has to start from the irrefutable fact that over the last six years the yield has gone up very substantially—from about £300 million in 1964 to about £5,000 million this year. This is an icrease of about 60 per cent., or 10 per cent. a year. In 1964 income tax represented about 9½ per cent. of the gross national product. It now represents about 13½ per cent. If the Prime Minister's famous pledge about not increasing taxation in the life time of a Parliament were applied now to income tax, we should not be discussing a reduction of 9d.;he would have to be proposing a reduction of 3s. in the standard rate. That is the size of the problem.
      An argument put by the hon. Member for Heywood and Royton (Mr. Barnett) is the current heresy being put about this year. It is that the incentive argument on direct taxation is not very important. This has been stated also by the hon. Member for Ashton-under-Lyne (Mr. Sheldon), who has been pressing the Chancellor to have an examination of the effect on incentive in relation to direct
      1134
      taxation. The hon. Member for Heywood and Royton wrote an article in The Sunday Telegraph last Sunday. He started with characteristic modesty by saying that he had not been invited to do so before and would probably not be invited again. Having read his argument, I would not dissent from that judgment.
      The nub of the hon. Member's argument is that if one reduced the standard rate of income tax by Is. in the £, a man earning £20 a week would be only 5d. a week better off. One can turn that argument on its head. If it does not encourage a man to work harder by a reduction of Is. in the standard rate, giving him an extra 5d. a week, it would not discourage him if one increased the standard rate by ls. in the £ and increased his income tax by 5d. a week. The hon. Gentleman is saying that it has neither an incentive nor a disincentive effect, but he would not think of putting it in those terms in his election address because he knows that his electors in Heywood would have none of it. They did not, incidentally, even have a chance to vote for Labour candidates in the county council elections there because the six Tories were returned unopposed. His electors know only too well that they are over-taxed.
      When hon. Members say that they lack evidence of this, I ask them to come to my surgery on Saturday mornings. Last Saturday, a man came in and showed me what he had got for working that morning. It was 20s. He almost physically assaulted me, believing that I was responsible for the income tax which had been taken off his wage for that morning's work. I managed to divert his spleen from me to a poster close to my headquarters bearing the Prime Minister's face and saying, " Labour's ideals are yours, aren't they? " If what the Labour Party stands for is no real reduction in indirect taxation but a claim by members of its Finance Committee, who are most eloquent and knowledgeable on this subject, that the disincentive argument is irrelevant, it seems to me that it is retreating from any sort of commitment to a reduction in direct taxation. This has not been spelled out clearly from the Front Bench.
      7.0 p.m.
      As a result of the buoyancy of our economy and particularly of wages, more

      1135
      and more people are sucked into the tax net each year. As I said on Second Reading, the 2 million who are dropped out will become a regular feature of almost every Budget from now on. Every Chancellor will automatically have to drop out 1 or 2 million from the tax net each year if the present system remains unreformed. I refer to this group as the Treasury's " yo-yo ". They are dropped out this year and they will be bouncing back towards the end of the year and most will be back in the net by the next Budget.
      What was interesting was that the Chancellor recognised this. He has always recognised this, and it is strange that he has not acted on it now that he is Chancellor. Tonight he said that income tax was meant to be a minority tax. It has now become a majority tax. It was devised to tax only a very small band of very rich people and it has slowly worked further down through society. The net result is considerable inequity at the bottom level and the top level, with very high marginal rates for the poor wage earner and the very rich wage earner.
      I turn to the general need for a reform of the tax system. Almost every speaker has said that reform is needed. Our system is so complicated now that I should think that all hon. Members present tonight, apart from those who are accountants, do not know what their marginal rate of tax is or what their marginal rate was last year. When a taxation system is not understood, it is bound to fall into disrepute. Eventually, taxes which are in disrepute will not be paid. So there is a compelling need for thorough-going reform.
      Where does one start? I used to be a great enthusiast for tinkering with the system, making it simpler here, clearer there, expressing things as percentages, reducing some of the allowances and making them payable through the social security system. But that is only tinkering. The only answer now, I think, is to rewrite our tax system and combine it with the social security system, as has been advocated tonight.
      But before we reach these Elysian fields, we should make a start by eliminating the obvious anomalies; the two-
      1136
      ninths earned income allowance could be rounded off to 30 per cent. and the one-ninth to 15 per cent. But I would go further. I should like to see the distinction between earned and unearned income abolished altogether. This distinction, ironically, was introduced by the person who was the subject of a biography by the present ChancellorAsquith—in his second Budget in 1907. Up to then it had not existed, and what was interesting about that important Budget
      Mr. W. Baxter: On a point of order, Mr. Irvine. May I be told to what Amendment the hon. Gentleman is speaking?
      The Temporary Chairman: I was under the impression that we were discussing Amendment No. 1.
      Mr. Baxter: Do I understand that the comments to which we are listening appertain to that Amendment?,
      The Temporary Chairman: I could not hear what the hon. Gentleman said, so I find it a little difficult to answer. If anything were out of order, I would have drawn the attention of the Committee to it.
      Mr. Baker: I am grateful for your Ruling, Mr. Godman Irvine. As I was saying, when Asquith brought in the distinction between earned and unearned income, it was only after a Select Committee on Income Tax, chaired by Sir Charles Dilke, came up with this suggestion. It had been set up only six months before and had been given instructions to report within six months. The point is that one can introduce important changes in income tax and income tax law without a Royal Commission which will sit for two, three, four or five years. It can be done, if the will is there.
      This distinction is unfair. Unearned income is savings income and in one way or another it has already been taxed, because it arises from capital. If it is inherited, one pays death duties. If it has been gained during one's life, there is capital gains tax, and if it is saved out of income—least likely of all—it has already borne income tax. So this discriminatory rate is a form of double taxation.

      1137
      But what was most disappointing was that neither the Chancellor nor hon. Members opposite made any declaration or commitment to reform the tax system. The Chancellor has backed away from that. It is very depressing that after six years we have made no progress towards simplification of our tax system. It may be that the accumulated weariness of six years has deposited this burden on the Treasury Bench and that they are devoid of ideas. Being devoid of ideas, they now attack the personalities who lead the Conservative Party.
      Reducing taxation is a means, I believe, of motivating people, particularly the managerial classes. Our economic problems will not only be resolved by trade union legislation. They will basically be resolved by better management. To stimulate and encourage industry and middle-rank managers, we must reduce the rate of income tax. What has the Labour Party done for these younger managers and middle managers? It has put up income tax, denied them the chance of share options, disallowed the interest on loans which they would take out to buy shares in their companies and discouraged them when they need to be encouraged.
      So my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) has clearly delineated the basic difference between the two sides of the Committee. We are committed to reducing direct taxation so as to encourage people to keep more of what they earn, because we think, as John Stuart Mill said over one hundred years ago, that any society is only as creative and active as the individuals who make it up are creative and active.
      Sir Brandon Rhys Williams: I am an incurable optimist and I will start by expressing the hope that the Committee will never again have an unrealistic debate of the kind which we are bound to have when considering the standard rate of income tax in isolation from all the other money-raising and money-spending activities of the Government. It is useful only if it allows us to run over some basic considerations about what the Government are doing in the direct taxation of incomes.
      I do not know precisely what the national taxable income will be in
      1138
      1970–71, but, for the convenience of the Committee, let us suppose that it is about £30,000 million, that being the total amount of income liable for direct taxation. If income tax were being levied at 41·25 per cent., the yield should be at least £12,000 million. Even if we reckon that there is a substantial allowance for earned income, which one ought to bear in mind, and which brings the average marginal rate for most people down to about 6s. 5d.. one would still expect income tax to yield about £10,000 million. But the Government's forecast of what they will receive from the operation of an income tax at a standard rate of 41·25 per cent. is £5,653 million. One might have expected a standard rate of over 40 per cent. to yield at least £12,000 million, or £10,000 million taking account of the earned income concession. Yet the yield is to be only about half that amount.
      We should ask ourselves, where have all the millions gone? The hon. Member for Heywood and Royton (Mr. Barnett), who made some interesting and worthwhile comments on the subject of negative income tax, will join me in recognising that the negative concessions which have developed over the decades in the income tax structure—some Members may say that they are eating its heart out—are more effective than the income tax system itself in that they are taking £6,000 million out of the hands of the Exchequer. They are making the standard rate of tax into a hollow mockery. There are highly undesirable side effects of the existence of this hollow mockery, and that is why I hope that this will be the last time that we shall have an unrealistic discussion of this kind.
      Income tax contains an enormous and forgotten secret welfare state for the better off. Suppose that income tax was simply intended to raise £5,600 million. The rate of tax could be under 20 per cent.—half the standard rate which the Government propose in the Budget. The point that I wish to make, which is perhaps more surprising even than the conclusion I have reached so far is that taxes on income do not raise any money at all. They do not raise any money at all when viewed in the context of what the State does in raising money from individuals and dispersing money and services back again to individuals.

      1139
      I think it is just a curious coincidence, and probably not a manifestation of the Treasury mind, that the yield of direct taxes—that is, income tax, surtax, national insurance contributions and selective employment tax, which must be regarded as a tax, although an oblique one, on income—that the State's money-raising operation more or less balances with its expenditure on family allowances, national insurance benefits, supplementary benefits, education and health. Therefore, the State's direct money-raising activities and money-spending activities —the relationship between the individual and the State—may be said to come to precisely nothing in raising revenue for the general purpose of the State's expenditure on its own projects. Income tax is simply one component in a giant re-distributive system at the end of which, taking one year with another, the State keeps virtually nothing.
      Viewing income tax as a component of a vast re-distributive system, we must recognise that it is part of the Government's social purpose rather than of their money-raising activities. Considering income tax from the social or money-transfer point of view, the unreality of the survival of a so-called standard rate, be it 41·25 per cent. or any other, must be seen. It is a completely artificial leftover. If we allow left-overs to remain in our thinking on taxation, we shall never be able to modernise our tax system in the way in which all hon. Members have been asking the Government to do.
      7.15 p.m.
      I hope that, in future, national insurance contributions and selective employment tax will be taken into the account simultaneously with considerations of the standard rate of tax. This is particularly important at present when we are on the verge of making the national insurance contribution a wholly earnings-related tax. At the same time the Chancellor of the Exchequer, in his Budget, announced that he would make selective employment tax earnings related as well. For fictional purposes at election time, it may be desirable to pretend that income tax remains wholly separate from the other tax on income which we call a contribution, and the further tax on income which is called an employer's tax.
      1140
      But 41·25 per cent. becomes more and more meaningless when one bears in mind the enormous negative welfare state which is carried along within the income tax system and all the other activities bearing directly upon income—particularly the other income-related taxes represented by the national insurance system and selective employment tax.
      With regard to positive concessions, it has always surprised me that the Government, having decided to raise family allowances and to reduce child allowances in the 1968 Budget, took fright and did not go any further with the movement so as to achieve the simplification which seemed to be in their minds when they started on this journey. Having reached an unsatisfactory halfway house where they had neither made family allowances enough nor simplified the taxation system by abolishing child allowances, they stuck. The needle is in the groove, and we look to someone to give it a push so that this interesting tune may continue. But again this year the Budget gave us no clear indication of the Government's thinking on the positive concession.
      I fear that if we persist in talking about a standard rate of 41·25 per cent. or any other rate without bearing in mind what the Government are doing simultaneously by raising money from the public and distributing it, not only will the debate in Committee be seen to be meaningless, but it will become increasingly meaningless to the public.
      My hon. Friend the Member for Acton (Mr. Kenneth Baker) asked how many members of the public have any idea of their marginal rate or their actual rate of tax. The income tax system has become incomprehensible. The tax which people pay, even if one considers income tax in isolation from the rest, has nothing to do with the standard rate. Some people will be paying a marginal rate of 41·25 per cent., but they will be relatively few. The vast majority of the population are paying a marginal rate of 6s. 5d. and an average rate which is much less than that. Thus, the income tax sets out to raise £12,000 million but is producing less than half that amount. It has the maximum disincentive effect and it is a relatively ineffective means of raising revenue from the public.
      It is appropriate at this stage to say a few words on the subject of negative

      1141
      income tax, although I do not want to repeat my remarks on Second Reading. However, I hope that we shall learn to drop the unfortunate expression " negative income tax ", and that we shall think in terms of much more realistic concepts, such as positive allowances. Family allowances have been with us since 1945 and they are well understood by the public, whereas negative income tax will never be understood by the public because it is barely comprehensible even to experts.
      I think that it was the right hon. Gentleman the Member for Sowerby (Mr. Houghton) who started to popularise the expression " receive as you need ". That certainly does convey a meaning. For those who finish down on their transactions with the State it is appropriate that they should call their system " Pay as you earn ", and for those who end up up on their transactions with the State it is appropriate to use the expression " receive as you need ". But the complexities of pay as you earn are made infinitely worse when one puts a mirror underneath them and tries to value the claims for benefit that result from a so-called negative tax system. I do not know whether it was Norman Macrae, in the Economist, or an American writer who invented the expression " positive tax credits ", but it makes very much better sense and is much more meaningful altogether than " negative income tax ".
      When talking about positive tax credits or " receive as you need " or any other phenomenon I hope that this Committee will look at the entire money raising and money spending operation of the State as a single operation. If one is examining the operation of a two-stroke engine one does not attempt to consider simply what is happening when the cylinder head is moving in one direction. One must consider the efficiency or otherwise of a two-stroke engine by looking at the movement up as well as the movement down. So let us learn to look at the redistribution of income, which is in fact what income tax is, as part of a single operation. Do not let us fuddle ourselves with concepts like 41·25, which really, I suppose, was not even a nineteenth century concept in origin, but an eighteenth century one. If we could only see what the Government are doing by raising money by way of direct tax and then refunding it
      1142
      either in the form of positive tax credits, or services for which people would otherwise have to pay themselves, we begin to get a sense of what really happens in this relationship between the individual and the State.
      I should like to look at it in another way as well. There ought really in due course to be two fundamental considerations in the Budget. One of them is the net position of the State, and the other is the net position of the individual. It is, I think, impossible for hon. Members at the present time to see what effect the Budget has in terms even of standard categories of families at stereotyped income levels. I doubt whether there is a single hon. Member—and I do not want to impugn the efficiency of highly qualified Members—who could work out 50 standard stereotyped examples showing the effect of all the tax and benefit relationships of individuals with the State without making a mistake.
      I was grateful to the officers of the Inland Revenue last year when they made these calculations for me—as I understand, for the first time—showing the effects of family allowances, national insurance contributions and income tax over a range of incomes and over a range of stereotyped family circumstances. At first they protested when I asked for this to be done; they said it had never been done before; but when I pressed it upon them they agreed to do it. They were very obliging and worked out tables and covered a lot of paper with figures. What those figures show is not only the complexity of the relations between the individual and the State but the anomalies which are arising and of which we are only just beginning to be aware.
      A properly balanced budget on established accounting notions is possibly a pre-Keynesian idea. But it would be advantageous if the Government presented their Budget figures, among the other innovations which they are giving us, so as to show the direct taxation and the direct spending for individuals as a single self-balancing, or nearly self-balancing, entity. One would then be able to take out the re-distributive activities of the State completely from the rest of the Budget, and see what the State is doing in raising money for its own purposes and what it is doing by way of raising money from one individual

      1143
      to give back to another—one could see the circulatory activities in the Budget. That should be published quite separately and seen as a separate activity of the State.
      Most important of all, we must see clearly the net position of individuals after they have completed their statutory transactions, in both directions, with the State. We would then understand better what we are only beginning to get a glimmering of, and that is, the true marginal tax effect on individuals. I have asked the Chancellor of the Exchequer to give us the results of any field survey on the disincentive effects of taxation. I hope that we shall have an informative answer from him on that in due course. My own feeling is that, even if he has some information, it will not be nearly enough, for instance, to enable the Committee to form an opinion as to whether a marginal rate of tax of 41·25 or another is the right one for the good of the economy as a whole. Till we have some conception of the extent to which the State may raise money from individuals without damaging the economy we cannot form any concept of what the State ought to be doing in the way of redistribution of income. I have a very strong suspicion that this marginal rate of 41·25 is damagingly too high, but we must have reliable data.
      There are some bands of income where 41·25 has no disincentive effect, but there are likely to be other bands where it has an extremely adverse effect. If I had to make a guess I would not be able to say whether this 41·25 has the most adverse effect in terms of incentive at the lower ranges of income or at the higher ranges, although I have made some some study of this subject. I have no accurate data to go on; I have not an inkling of an idea whether it has a particularly adverse effect at the lower ranges or the higher ranges. If the Chief Secretary has, I hope he may communicate his thoughts to us on this subject tonight.
      We have not only to think about the disincentive effects of marginal rates of tax. We should also look at the whole social problem of the alienation of the individual from the community. There is no doubt at all that since the war the direct taxation of individuals has
      1144
      produced a distinct sense of alienation of the individual from the community. Of course, in war time, tax rates had to be very high, and for obvious reasons; but since the war far too little attention has been given to this effect, and to the fact that no one is paying his tax willingly now. Not that people paid their taxes willingly before the war or for that matter in the eighteenth century; but there is now a growing sense that it is proper to fiddle one's tax, and that is a highly undesirable and dangerous development. I do not know whether it is a reversible development, but it ought not to be allowed to go on any more. My feeling is that in the tax-paying public's mind there is a growing sense that tax is being used as punishment; that it is being used in an arbitrary way and that it is incomprehensible. What one should have in paying one's tax is a sense that one is making a contribution to a club to which one is happy to belong. At 41·25 per cent. one cannot have that feeling of belonging.
      I conclude by making one specific recommendation to the Committee, one-half of which might be echoing what was said by the hon. Member for Heywood and Royton (Mr. Barnett), that a Royal Commission should be appointed to study the redistribution of income; alternatively, a Select Committee of the House should be set up on direct taxation and social benefits. However this subject is approached, it is becoming increasingly necessary for us to take into account the entire picture and not to have further debates such as we are having this evening in which we look at the standard rate of tax in isolation from everything else.
      [MR. SYDNEY IRVING in the Chair]
      7.30 p.m.
      Mr. Diamond: I always listen to the speeches of the hon. Member for Kensington, South (Sir B. Rhys Williams) with great interest. I hope that I shall not embarrass him by saying that he always expresses novel views in a fresh way. One never knows quite what is coming next, except that it will be interesting, and stimulating. He had much to say tonight on matters which are of great interest to me and on which I have spent a great deal of time. These are matters which are not so very controversial and on which we could do more

      1145
      of the things which both he and I would like to see done.
      I agree with the hon. Member that " negative income tax " is not a good title. It is a label which includes a whole host of different articles. The hon. Gentleman asked whether the Government would publish some of their findings. I have considered this carefully, and I do not think that the considerable work that the Government have done is appropriate for publication, although it is appropriate for debate.
      I very much hope that there will be an occasion for a debate on this general topic. The arguments are serious and important, and everyone's inclination is in the same direction, to try to find a measure whereby we can deal selectively with poverty and need in a way that serves as a simplification of our tax structure, saves expense and is more efficient. If this were possible, everyone would want to see it done. I very much hope that there will be an occasion to go into this in considerable detail. I am sure it would be of help to the Government and might also be of help to the House of Commons.
      The hon. Member for Colne Valley (Mr. Richard Wainwright) spoke first. I am sure that, as the Chancellor of the Exchequer has already spoken fully, the hon. Member will not expect me to do more than refer briefly to what he said. He, too, referred to negative income tax, and he must have spent some time considering its difficulties because he seemed to be fully aware of some of them. He asked the Chancellor to make a token reduction to show that he was still aware of the inclination which he expressed earlier with regard to the tax on high earned incomes. When we come to a debate on surtax I may have the opportunity of catching the Chairman's eye and of saying in what direction and to what extent my right hon. Friend has made not a token but a very considerable reduction in the tax on high earned incomes.
      The hon. Member for Harwich (Mr. Ridsdale) spoke with considerable feeling and drew my attention to two points. The first was the need to have regard to the views of his hon. Friend the Member for Nelson and Colne (Mr. Waddington), who was refreshed by recent meetings with the electorate, and we all recognise that that is very important refreshment.
      1146
      The second was the need to avoid at all costs a tax on wealth which would be such a deterrent to savings. As always, I listened carefully to the speech of the hon. Member for Nelson and Colne, who advocated, with considerable fervour, on the basis of his recent refreshment by the electorate, a wealth tax coupled with a reduction in surtax. Apparently, there is not complete unanimity on the benches opposite on what is and what is not a deterrent to savings, but that is something for the hon. Gentleman to take up with his hon. refreshed Friend.
      I was also much interested by what the hon. Gentleman told me about the priorities in giving reductions in taxation. He gave examples of nurses, railway-men and those at the bottom of the scale who should receive help. If I may bring his mind back to the essence of this debate, the Chancellor has proposed a reduction which will mostly benefit those at the bottom of the scale. He has done this because, as everybody recognises, and as the hon. Member for Acton (Mr. Kenneth Baker) said in his intervention a moment ago, although the total impact of tax in this country compares equally with similar countries, we are disparate in two respects, first, at the high levels and, second, at the low levels.
      The Chancellor thought it right on this occasion, the first occasion when it has been possible to make a serious alleviation in the tax burden, to help first at the bottom end. I am perfectly happy that the Committee should be fully aware that this is the difference in approach between the two sides. We are going for, and we think it right to go for, help where it is most needed, at the bottom of the scale.
      This is exactly what we have done. We have given help where need is greatest. We have not given help where need is least, which is at the top of the scale. Standard rate relief, as everybody knows, is the most regressive form of relief, in that it helps those at the top disproportionately. That is why we are against this proposal.
      Mr. John Hall: I am delighted that the Chief Secretary wound up the discussion on the Amendment, because it has given me an opportunity, in view of one or two uncomplimentary things that have been said about him this afternoon.

      1147
      to express my personal regard and respect for him. I was interested to hear my hon. Friend the Member for St. Ives (Mr. Nott) refer to him as a gamekeeper. I suggest that he may not be the kind of gamekeeper who would have appealed to Lady Chatterley, but I am sure that he would have appealed to Lady Chatterley's husband. It was perhaps suggested that the right hon. Gentleman was occasionally dull, but I say categorically that I regard him with great respect because he is always courteous, always clear, always persistent—
      Mr. lain Macleod: And always wrong!
      Mr. Hall: —and, when he is dealing with my Amendments, as my right hon. Friend has said, always wrong.
      I welcomed the right hon. Gentleman's remarks about looking forward to a debate on negative income tax. This is an interesting and complex subject on which the whole Committee would welcome a debate. I should like to know how one would deal with the cases now dealt with through the social services, which would be difficult to deal with under a form of negative income tax. I hope there will be an opportunity to debate this before long.
      The Chief Secretary rather spoilt what he said at the beginning by saying that the Chancellor of the Exchequer had brought about a serious alleviation of the tax burden, and that the relief was directed to the bottom end of the scale where it was most needed. If the single man, the teenager and those with no real responsibilities who are certainly not on the poverty line are regarded as those in greatest need of relief, the Chancellor has succeeded in his aim. Despite that, as the Chief Secretary knows, he has left this country still with a burden of £3,000 million plus more tax than when the Government came to power. The Tory administration for 13 years managed to reduce taxation by a total of £2,000 million. The present Government have managed to increase it consistently year by year, until we now have an increased burden of £3,000 million. That is not a record to be proud of.
      At the beginning of my remarks in moving the Amendment there was some slight difference of view about the amount
      1148
      the Amendment would cost, and I was delighted to hear the hon. Member for Ashton-under-Lyne (Mr. Sheldon) withdraw his criticism of what he described as my inaccuracies. I am glad he put that matter right.
      But the suggestion has run through the debate that the amount suggested was too much. As I tried to point out at the beginning of my remarks—and I take full responsibility for not having made myself clear—if there were to be a worthwhile reduction in direct taxation, the Budget system as a whole would have to be re-cast and there would have to be various changes depending on the judgment of the economic outlook for the year to enable an effective reduction in the impact of direct taxation to be brought about. I was not suggesting at that time that to hand out, to use the phrase used by hon. Members opposite, £525 million, plus the £115 million that we are told the surtax Amendment would cost, would be the right thing to do. But it would be the right thing to do against the background of a different Budget strategy.
      It was also suggested that my Amendment produced a relief of only 4s. a week to the average married man on the average industrial wage. I gather that it was being said that unless a worth-while and large increase is given to the man on the average industrial income, one should not be given at all and that we should ignore most of the highly-paid craftsmen, artisans and middle-range executives and professional men, quite apart from those in the higher-income brackets. That does not seem to be a philosophy which would commend itself to the country as a whole.
      The Amendment, as the right hon. Gentleman knows, was designed to stimulate debate on the tax system as a whole so far as it affected direct taxation and to get some idea what we might do about it. In that respect the Amendment has been successful since we had had interesting suggestions and contributions from both sides of the Committee. There have naturally been more contributions from this side of the Committee because there have been more members who have spoken from this side. But the result has been extremely interesting.
      My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) sounded

      1149
      the matter out very well. He said that the Labour Government by and large through their philosophy and the way in which they handle their affairs are a Government of high taxation. They are unable to see how taxation can be reduced. No matter what ideas are put forward for a reduction in the burden of taxation on the people of this country, there are always arguments from the Government benches saying that it cannot be done. On the contrary, during the years of Conservative administration we were a Government which were always finding ways in which taxation could be reduced. Not only did we succeed in reducing taxation during our years of office, but we did so against a background of increasing social service benefits and facilities.
      If the country has to choose on the basis of the record of two Governments
      in office, there is no doubt whatever that it will choose to support a party which has shown that when in office it can do the things it promises to do, that it can reduce taxation and still increase the standard of living of all people in the community. There is no doubt which party the country will choose. I suggest to my right hon. and hon. Friends that in pursuance of our philosophy and our policy of reducing taxation, making it possible for our people to exercise free choice in how to use their earnings and money, they should join with me in supporting the Amendment in the Division lobby.
      Question put, That the Amendment be made:—
      The House divided: Ayes, 153, Noes 231.

      Division No. 124.]

      AYES

      [7.44 p.m.

      Alison, Michael (Barkston Ash)

      Goodhart, Philip

      Monro, Hector

      Allason, James (Hemel Hempstead)

      Gower, Raymond

      Montgomery, Fergus

      Archer, Jeffrey (Louth)

      Grant, Anthony

      Morrison, Charles (Devizes)

      Astor, John

      Grant-Ferris, Sir Robert

      Nabarro, Sir Gerald

      Atkins, Humphrey (M't'n & M'd'n)

      Grieve, Percy

      Neave, Airey

      Baker, Kenneth (Acton)

      Griffiths, Eldon (Bury St. Edmunds)

      Nicholls, Sir Harmar

      Baker, W. H. K. (Banff)

      Gurden, Harold

      Noble, Rt. Hn. Michael

      Balniel, Lord

      Hall, John (Wycombe)

      Nott, John

      Bennett, Dr. Reginald (Cos. & Fhm)

      Hall-Davis, A. C. F.

      Onslow, Cranley

      Biggs-Davison, John

      Hamilton, Michael (Salisbury)

      Orr-Ewing, sir Ian

      Birch, Rt. Hn. Nigel

      Harrison, Brian (Maldon)

      Osborn, John (Hallam)

      Boardman, Tom (Leicester, S.W.)

      Harvie Anderson, Mils

      Page, John (Harrow, w.)

      Body, Richard

      Hawkins, Paul

      Pearson, Sir Frank (Clitheroe)

      Boyd-Carpenter, Rt. Hn. John

      Heald, Rt. Hn. Sir Lionel

      Peyton, John

      Boyle, Rt. Hn. Sir Edward

      Higgins, Terence L.

      Pike, Miss Mervyn

      Brown, Sir Edward (Bath)

      Hiley, Joseph

      Powell, Rt. Hn. J. Enoch

      Buchanan-Smith, Allick(Angus, N & M)

      Hogg, Rt. Hn. Quintin

      Price, David (Eastleigh)

      Buck, Antony (Colchester)

      Holland, Philip

      Prior, J. M. L.

      Bullus, Sir Eric

      Hordern, Peter

      Pym, Francis

      Burden, F. A.

      Howell, David (Guildford)

      Quennell, Miss J. M.

      Campbell, B. (Oldham, W.)

      Hutchison, Michael Clark

      Ramsden, Rt. Hn. James

      Campbell, Cordon (Moray & Nairn)

      Jenkin, Patrick (Woodford)

      Rawlinson, Rt. Hn. Sir Peter

      Carlisle, Mark

      Jennings, J. C. (Burton)

      Renton, Rt. Hn. Sir David

      Cary, Sir Robert

      Joseph, Rt. Hn. Sir Keith

      Rhys Williams. Sir Brandon

      Cookie, Robert

      Kaberry, Sir Donald

      Ridley. Hn Nicholas

      Corfield, F. V.

      Kimball, Marcus

      Ridsdale, Julian

      Costatn, A. P.

      King, Evelyn (Dorset S.)

      Royle, Anthony

      Craddock, Sir Beresford (Spelthorne)

      King, Tom

      Russell, Sir Ronald

      Crouch, David

      Kirk, Peter

      Sharples, Richard

      Crowder, F. P.

      Kitson, Timothy

      Shaw, Michael (Sc'b'gh & Whitby)

      d'Avigdor-Goldsmid, Sir Henry

      Knight, Mrs. Jill

      Silvester, Frederick

      Dean, Paul

      Lane, David

      Speed, Keith

      Deedes, Rt. Hn. W. F. (Ashford)

      Legge-Bourke, Sir Harry

      Stainton, Keith

      Dodds-Parker, Douglas

      Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)

      Stoddart-Scott, Col. Sir M.

      du Cann, Rt. Hn. Edward

      Lloyd, Rt. Hn. Selwyn (Wirral)

      Summers, Sir Spencer

      Elliott, Capt. Walter (Carshalton)

      McAdden, Sir Stephen

      Taylor, Frank (Moss Side)

      Elliott, R.W.(N'c'tle-upon-Tyne, N.)

      MacArthur, Ian

      Temple, John M.

      Emery, Peter

      Maclean, Sir Fitzroy

      Thatcher, Mrs. Margaret

      Errington, Sir Eric

      Macleod, Rt. Hn. Iain

      Turton, Rt. Hn. R. H.

      Farr, John

      McMaster, Stanley

      van Straubenzee, W. R.

      Fletcher-Cooke, Charles

      McNair-Wilson, Michael

      Vaughan-Morgan, Rt. Hn. Sir John

      Foster, Sir John

      McNair-Wilson, Patrick (New Forest)

      Waddington, David

      Fraser, Rt.Hn.Hugh (St'fford & Stone)

      Maddan, Martin

      Walker, Peter (Worcester)

      Galbraith, Hn. T. G.

      Maginnis, John E.

      Waker-Smith, Rt. Hn. Sir Derek

      Gilmour, Ian (Norfolk, C.)

      Maude, Angus

      Walters, Dennis

      Gilmour, Sir John (Fife, E.)

      Maudling, Rt. Hn. Reginald

      Ward, Christopher (Swindon)

      Glover, Sir Douglas

      Maxwetl-Hyslop, R. J.

      Weatherill, Bernard

      Glyn, Sir Richard

      Mills, Peter (Torrington)

      Wells, John (Maidstone)

      Godber, Rt. Hn. J. B.

      Mitchell, David (Basingstoke)

      Wiggin, A. W.

      Woodnutt, Mark

      TELLERS FOR THE AYES:

      Williams, Donald (Dudley)

      Wylie, N. R.

      Mr. Reginald Eyre and

      Wolrige-Gordon, Patrick

      Younger, Hn. George

      Mr. Walter Clegg.

      Wood, Rt. Hn. Richard

      NOES

      Abse, Leo

      Ginsburg, David

      Morris, Charles R. (Openshaw)

      Albu, Austen

      Golding, John

      Moyle, Roland

      Allaun, Frank (Salford, E.)

      Gordon Walker, Rt. Hn. P. C.

      Mulley, Rt. Hn. Frederick

      Alldritt, Walter

      Gray, Dr. Hugh (Yarmouth)

      Murray, Albert

      Archer, Peter

      Greenwood, Rt. Hn. Anthony

      Neal, Harold

      Ashley, Jack

      Gregory, Arnold

      Newens, Stan

      Ashton, Joe (Bassetlaw)

      Grey, Charles (Durham)

      Norwood, Christopher

      Atkins, Ronald (Preston, N.)

      Griffiths, Eddie (Brightside)

      Oakes, Gordon

      Atkinson, Norman (Tottenham)

      Griffiths, Will (Exchange)

      Ogden, Eric

      Bacon, Rt. Hn. Alice

      Hamilton, William (Fife, W.)

      O'Halloran, Michael

      Barnes, Michael

      Hamling, William

      Orbach, Maurice

      Barnett, Joel

      Hannan, William

      Orme, Stanley

      Baxter, William

      Harper, Joseph

      Oswald, Thomas

      Beaney, Alan

      Harrison, Walter (Wakefield)

      Padley, Walter

      Benn, Rt. Hn. Anthony Wedgwood

      Haseldine, Norman

      Paget, R. T.

      Bennett, James (G'gow, Bridgeton)

      Healey, Rt. Hn. Denis

      Palmer, Arthur

      Bessell, peter

      Heffer, Eric S.

      Pannell, Rt. Hn. Charles

      Bidwell, Sydney

      Henig, Stanley

      Pardoe, John

      Bnne, John

      Herbison, Rt. Hn. Margaret

      Parker, John (Dagenham)

      Bishop, E. S.

      Hooley, Frank

      Parkyn, Brian (Bedford)

      Blackburn, F.

      Houghton, Rt. Hn. Douglas

      Pavitt, Laurence

      Blenkinsop, Arthur

      Howarth, Robert (Bolton, E.)

      Pearson, Arthur (Pontypridd)

      Booth, Albert

      Hughes, Rt. Hn. Cledwyn (Anglesey)

      Pentland, Norman

      Boston, Terence

      Hughes, Roy (Newport)

      Perry, Ernest G. (Battersea, S.)

      Bray, Dr. Jeremy

      Hynd, John

      Perry, George H. (Nottingham, S.)

      Brooks, Edwin

      Irvine, Sir Arthur (Edge Hill)

      Price, Christopher (Perry Bar)

      Brown, Rt. Hn. George (Belper)

      Jackson, Peter M. (High Peak)

      Price, Thomas (Westhoughton)

      Brown, Hugh D. (G'gow, Provan)

      Janner, Sir Barnett

      Price. William (Rugby)

      Brown, Bob(N'c't1'e-upon-Tyne, W.)

      Jay, Rt. Hn. Douglas

      Probert, Arthur

      Buchan Norman

      Jenkins, Hugh (Putney)

      Randall Harry

      Buchanan Richard (G'gow Sp'burn)

      Jenkins, Rt. Hn. Roy (Stechford)

      Rankin, John

      Butler, Herbert (Hackney, C.)

      Jones, Dan (Burnley)

      Rees, Merlyn

      Cant, R. B.

      Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)

      Rhodes, Geoffrey

      Carmichael, Neil

      Jones, J. Idwal (Wrexham)

      Richard, Ivor

      Carter-Jones, Lewis

      Jones, T. Alec (Rhondda, West)

      Roberts, Albert (Normanton)

      Coleman, David

      Judd, Frank

      Roberts, Rt. Hn. Goronwy

      Concannon, J. D.

      Kelley, Richard

      Roberts, Gwilym (Bedfordshire, S.)

      Craddock, George (Bradford, S.)

      Kenyon Clifford

      Robertson, John (Paisley)

      Crawshaw, Richard

      Kerr, Dr. David (W'worth, Central)

      Rodgers, William (Stockton)

      Cronin, John

      Kerr, Russell (Feltham)

      Roebuck, Roy

      Crosland, Rt. Hn. Anthony

      Lawler, Wallace

      Rose, Paul

      Dalyell, Tom

      Lawson, George

      Ross, Rt. Hn. William

      Davidson, Arthur (Accrington)

      Leadbitter, Ted

      Shaw, Arnold (Ilford, S.)

      Davidson, James(Aberdeenshire, W.)

      Ledger, Ron

      Sheldon, Robert

      Davies, Dr. Ernest (Stretford)

      Lee, Rt. Hn. Frederick (Newton)

      Shinwell, Rt. Hn. E.

      Davies, Rt. Hn. Harold (Leek)

      Lee, John (Reading)

      Shore, Rt. Hn. Peter (Stepney)

      Davies, Ifor (Gower)

      Lewis, Ron (Carlisle)

      Sillars, J.

      Davies, S. O. (Merthyr)

      Lomas, Kenneth

      Silverman Julius

      de Freitas, Rt. Hn. Sir Geoffrey

      Loughlin, Charles

      Slater Joseph

      Delargy, H. J.

      Lubbock, Eric

      Small William

      Dell, Edmund

      Lyon, Alexander W. (York)

      Snow, Jullan

      Dempsey, James

      Lyons, Edward (Bradford, E.)

      Spriggs, Leslie

      Diamond, Rt. Hn. John

      Mabon, Dr. J. Dickson

      Steele, Thomas (Dunbartonshire, W.)

      Dickens, James

      MacColl, James

      Swain, Thomas

      Dobson, Ray

      MacDermot, Niall

      Symonds, J. B.

      Doig, Peter

      McElhone, Frank

      Taverne, Dick

      Dunn, James A.

      Macdonald, A. H.

      Tinn, James

      Dunnett, Jack

      McGuire, Michael

      Tuck, Raphael

      Eadie, Alex

      Mackenzie, Gregor (Rutherglen)

      Urwin, T. W.

      Edwards, Robert (Bilston)

      McKay, Mrs. Margaret

      Varley, Eric G.

      Edwards, William (Merioneth)

      Mackie, John

      Wainwright, Richard (Colne Valley)

      Ellis, John

      McNamara, J. Kevin

      Walden, Brian (All Saints)

      English, Michael

      MacPherson, Malcolm

      Walker, Harold (Doncaster)

      Evans, Fred (Caerphilly)

      Mahon, Peter (Preston, S.)

      Wallace, George

      Fernyhough, E.

      Mahon, Simon (Bootle)

      Watkins, David (Consett)

      Finch, Harold

      Mallalieu,J.P.W.(Huddersfield,E.)

      Watkins, Tudor (Brecon & Radnor)

      Fitch, Alan (Wigan)

      Mapp, Charles

      Weitzman, David

      Fletcher, Raymond (Ilkeston)

      Marks, Kenneth

      Wellbeloved, James

      Fletcher, Ted (Darlington)

      Marquand, David

      Wells, William (Walsall, N.)

      Forrester, John

      Marsh, Rt. Hn. Richard

      Whitlock, William

      Fraser, John (Norwood)

      Mellish, Rt. Hn. Robert

      Wilkins, W. A.

      Freeson, Reginald

      Mendelson, John

      Willey, Rt. Hn. Frederick

      Galpern, Sir Myer

      Millan, Bruce

      Mitchell, R. C. (S'th'pton, Test)

      Williams, Alan (Swansea, W.)

      Gardner, Tony

      Moonman, Eric

      Garrett, W. E.

      Morgan, Elystan (Cardiganshire)

      Williams, Alan Lee (Hornchurch)

      1152

      1153

      Williams, Clifford (Abertillery)

      Winnick, David

      TELLERS FOR THE NOES:

      Willis, Rt. Hn. George

      Whistanley, Dr. M. P.

      Mr. Ernest Armstrong and

      Wilson, William (Coventry, S.)

      Woodburn, Rt. Hn. A.

      Mr. Ioan L. Evans.

      Clause 11 ordered to stand part of the Bill.

    Clause 12

      SURTAX RATES FOR 1969–70
      Mr. John Hall: I beg to move Amendment No. 7, in page 11, leave out lines 3 to 12 and insert:

      Per cent.

      The first £500

      …

      …

      Nil

      The next £500

      …

      …

      2·5

      The next £1,000

      …

      …

      7·5

      The next £1,000

      …

      …

      12·5

      The next £1,000

      …

      …

      17·5

      The next £2,000

      …

      …

      22·5

      The next £2,000

      …

      …

      27·5

      The next £2,000

      …

      …

      32·5

      The next £3,000

      …

      …

      37·5

      The remainder

      …

      …

      40

      The Chairman: With this Amendment, we may discuss the following:
      Amendment No. 5, in page 10, line 33, leave out Subject to subsection (2) below '.
      Amendment No. 6, in line 37, leave out ' £2,000 ' and insert £2,500 '.
      Amendment No. 8, in page 11, leave out lines 7 to 12 and insert:

      Per cent.

      The next £1,500

      …

      …

      25

      The next £2,500

      …

      …

      27·5

      The next £2,500

      …

      …

      30

      The next £3,000

      …

      …

      33·75

      The remainder

      …

      …

      37·5

      Amendment No. 9, in line 13, leave out subsection (2).
      Mr. Hall: I start with a statement which I am sure will be accepted by both sides of the Committee. It is that surtax in this country raises taxation on the incomes of people more steeply and to greater heights than in any other comparable country. No country can match our top marginal rate, which is now 91·25 per cent. On top of that, every now and again we impose a further burden on the surtax payer. Hon. Members will remember the 10 per cent. surcharge which was imposed in July, 1966, on surtax liabilities for 1965–66. They will remember the imposition in the Budget of 1968, when there was a special charge of 3s. to 9s. in the £ on investment income over £3,000. That
      1154
      was an additional surtax charge which resulted in some cases in the imposition of a rate in the £ of 27s. 3d. Those are just the odd additional burdens which have been put upon surtax payers who, compared with all international comparisons, are already very heavily burdened.
      Nowhere in the Western world is initiative, drive, inventiveness, intelligence and willingness to work so severely financially penalised. Nowhere amongst our major industrial competitors is enterprise, risk-taking and saving so financially discouraged.
      Even this Amendment leaves the top marginal rate at 81·25 per cent. Had the previous Amendment been adopted, the top rate would have been rather less. But even if this Amendment were accepted, our rate would still be higher than that of any other Western country. Sweden comes somewhere near us with something like 80 per cent. of the total which can be taken from the taxpayer in national or local tax, but it includes the net wealth tax which is imposed in that country. That contrasts with the United States of America, which I understand is now considering reducing its top marginal rate from 70 to 60 per cent. It also contrasts with the recommendations of the Canadian Royal Commission which reported last year and asserted that, on equity grounds, the marginal rate should never go above 50 per cent. We have not gone as far as that in this Amendment. But it is a move in the right direction which should commend itself to the Treasury Bench.
      Although I have mentioned one or two comparisons with other countries, it is not easy to make accurate comparisons. There are other factors which affect the total tax taken, especially from the top income tax payers. There are the various forms of poverty tax, which differ from one country to another and which may affect personal tax. There may be a wealth tax, as there is in Sweden. There may be different forms of death duty which must be taken into account when looking at the total burden and impact of surtax generally.
      Above all, I suggest that the comparison is affected by the treatment in

      1155
      other countries of the taxing of the joint incomes of husbands and wives, and also by their treatment of what we laughingly call unearned income.
      I should like to give an example of the effect of our system, certainly in the surtax bracket, on insisting that husband and wife are taxed as one tax unit. Taking a husband and wife with the same earned income each, they would be slightly better off married under our system of joint assessment up to £5,000 of joint income. That is if they were both earning and their incomes were the same. Above that the difference becomes striking, so that a married couple would be much worse off than if they were living separately. For example, at £10,000—that is, each having an earned income of £5,000—they would be paying £1,032 or thereabouts more than if separately assessed. At £20,000 they would be paying £3.850 more than if assessed as individual taxpayers. But if, as is often the case, the husband's earned income and the wife's investment income are combined, again taking the case where they have an equal income, one derived from earned income and the other from unearned income, under our system the married couple would be worse off from a joint income of £1,000 upwards. So that if the wife has an unearned income the situation is very much worse under our tax system.
      There is no doubt that at certain levels of income an agreed divorce would be profitable to both parties. I suppose that the only thing that saves the Treasury and enables it to go on gaining more revenue from married couples than it would get from them separately is the reluctance by most married couples, fortunately, to depart from the normal conventions. Perhaps against the present background of a more permissive society the Chancellor may have to look again at the way that he taxes married couples.
      I suppose that one reason why it is always difficult to get changes in surtax rates is because there are few surtax payers. This is especially so now that the Chancellor has excluded those on the margin. There are probably well below 400,000 surtax payers at the moment. The out-turn from surtax payers in the last full year 1969–70 was £255 million.
      1156
      It is anticipated that this year we shall get £277 million, which is £3 million less than if we had not excluded the number on the margin. The Chief Secretary will correct me if I am wrong when I say that the number to be excluded is about 185,000.
      Most of the increase between the out-turn of last year and the anticipated out-turn for the current financial year will be a tax on inflation which will leave the surtax payer worse off in real terms. Any surtax payer whose income is increased by only enough to take account of the increase in prices is pushed inexorably into a higher surtax bracket and, as a result, the real value of his earned income declines.
      I will give examples of what I mean. Let us take a situation where prices are rising by 3 per cent. per annum. In recent months they have been rising faster than that, but I will take 3 per cent. If a man has an earned income of £10,000 it will be necessary for him to increase his gross earned income by more than 6 per cent. per annum to prevent a real fall in his purchasing power. With an income of £12,000 a man must increase his gross earned income by over 7 per cent. If a man has an income of E16.000 he must increase his gross earned income by 11 per cent. Going up to £19,000, which is rather less than we are now paying the heads of the nationalised industries, a man must increase his gross earned income by over 13 per cent. per year if he is to maintain the purchasing power of his income.
      To take a more realistic increase in prices which we have experienced over recent months, a rise in prices of 5 per cent., at £10,000 a man would need to increase his gross earned income by 11 per cent. per year and at £19,000 by over 22 per cent. per year. I hope, therefore, that the Government have in mind increasing the salaries of the heads of the nationalised industries by amounts of this kind. If they do, they will be the only employers who are able to do it effectively.
      It is very difficult for companies to give rises of the magnitude that I have mentioned to top income earners. It is difficult for a number of reasons—not only the reaction of the workers throughout the company, but throughout the country as

      1157
      a whole. Yet, if they do not give increases of this kind, they will be imposing a falling standard of living on top executives from whom they are asking increased responsibility and better results. This does not seem fair or equitable by any standards.
      It is true that the few who get the high salaries which attract surtax tend to attract the envy of the many whose incomes are more modest. Envy is not only an unattractive trait in human nature, although very prevalent in most of us, I suppose; but, if it is translated into imposing unfair tax penalties, it can be positively economically harmful.
      It is sometimes said that we live in the age of the common man. This may be so. But it is the uncommon man who provides the leadership, the inspiration, and the driving force which makes a country great in every sense of that word. It is economic nonsense to penalise the uncommon man and to rely on the other motive forces which impel him to work. We all agree that money is by no means the only reason why people work. It is sometimes the least of the reasons. We cannot go on relying on that indefinitely.
      It is also true that the existing surtax levels tend to keep down the level of management and top management salaries. This also has the effect of lessening the differentials throughout the country. But worse, it creates problems, especially for companies operating internationally which have a base in this country. Any United Kingdom company with a number of overseas operations is constantly finding the problem of moving its people about if, by so doing, they change their tax structure. Certainly if we enter the Common Market, more attention will be paid by executives in this country to the salaries paid to their commensurate opposite numbers throughout Europe, and certainly within the Common Market area.
      I have some experience of companies which have associated companies operating overseas. With increasing frequency I have drawn to my attention the comparison between salaries here and those of people doing the same kind of work overseas. Yet, if companies were to increase salaries here to a commensurate level in purchasing power, taking into account all the differences in the cost of
      1158
      living in other countries, they would merely be coming up against the surtax ceiling and a lot of the benefit of the increased salaries would be taken away.
      The Chief Secretary is well aware that the present rates are unjust because they place our top men and women at a financial disadvantage compared with their overseas counterparts. I think that he will also agree—the Chancellor of the Exchequer has already agreed—that very high penal rates have a disincentive effect. The Chief Secretary, because of his professional experience outside the House as well as his experience as Chief Secretary, I am sure, will agree that the high rates are causing top executives and members of his profession to spend a great deal of time trying to find ways of limiting liability to surtax; time, energy, and thought which could far more profitably be devoted to the expansion of industry. I am sure the right hon. Gentleman will agree that a reduction in surtax, or a return from surtax arising from a cut in rates, would be more than made good within a short time. The effect of these high rates on those who are, and have been, living on fixed incomes from savings which are savagely penalised must be to discourage savings.
      I have a feeling that the Chancellor —and the Chief Secretary. too—would he prepared to do something to relieve the burden on surtax payers, and to reduce the levels to something more in line with those which operate among our major industrial competitors, but he hesitates only because of the emotional reaction which one still gets from some members of his party, both inside and outside the House, against any action which is designed to restore equity in the treatment of high income earners. I think that that reaction is probably even greater among the less thinking members of the party opposite when it comes to dealing with the inequity of treatment of those living on incomes from savings.
      If we want to keep this country moving, we must stop penalising so savagely those on whose leadership and enthusiasm we depend. If we want to get the growth which we have been talking about for so long but failing lamentably to achieve, we must stop preventing able men and women from getting the maximum advantage from the services they render to their companies. We must

      1159
      not stop them from accumulating worthwhile savings which enable them to have a real stake in the country. We must give the maximum encouragement to the best in this country to make the most of their abilities, in the knowledge that they are being fairly taxed. I suggest that as a start towards achieving that wholly admirable aim the Chief Secretary should accept the Amendment.
      Mr. Boyd-Carpenter: It is difficult to have a debate about surtax without introducing, possibly on both sides, an element of emotion, or indeed of prejudice. But I think it is becoming more and more widely accepted that surtax at its present very high levels has a large number of adverse and harmful effects. Certainly taxation at this level, and particularly at the level at the top of the scale, gives every possible incentive to those concerned to resort to every lawful device to mitigate its effect. This leads to transactions of great complexity. In due course these are followed up by the Inland Revenue which produces Finance Bill Clauses of even greater complexity, and quite a large part of some of the best intellect of the country is concentrated on this warfare between—if the Chief Secretary does not mind once again the somewhat embarrassing gamekeeper analogy —between gamekeeper and poacher. I am not introducing Lady Chatterley. This is a product of the incentive given by taxation at these high rates to use any lawful device to avoid it.
      It is curious that a tax which has these effects—and I think serious economic effects as well—is not, as the Chief Secretary knows, one of the major supports of the revenue. According to the Government's Red Book, the yield of the tax expected this year after the changes are made is £277 million. The Chancellor, in the most good natured way, rebuked me on an earlier Amendment for having suggested that a sum of £200 million was within the possible area of error in the Budget judgment. He made the most aggressive comment that he preferred the present Chief Secretary to his predecessor!
      8.15 p.m.
      So I must make it clear that I am not underrating the significance of a sum of £277 million. But against the background of a yield of income tax
      1160
      foreseen for this year at £5,653 million, or an estimated yield of taxation in excess of £15,500 million, it is fair to say that this is not one of the major supports of the Revenue. Indeed, I do not think that the Chief Secretary will quarrel with me when I say that much of the origin of this tax and of many of the increases which have taken Place in it derive more from social and political than from strictly fiscal considerations.
      Indeed, fiscal considerations point the other way. The Chief Secretary will recall the admirable article in the Economist on 11th April, just before the Budget, in which that wholly impartial journal suggested that if, for political reasons, a relief in company taxation, which was its first choice, was not given in the Budget, the second best choice would be the abolition of surtax. It said:
      " If surtax was totally abolished "—
      I hate to criticise the Economist's grammar, but I should have said " If surtax were abolished "—
      " the addition to consumption would be much less than 200 million a year because a lot would go in savings and the prospects for risk-taking and executive mobility in the enervated British economy would be transformed ".
      It added a wise comment that that would not happen, either.
      It is clear that we start this discusison on the basis, first, that though surtax makes a contribution to revenue, it is not a great one against the background of total revenue, and that the fiscal arguments for it, certainly at present rates, are somewhat dubious. One then comes to the question, does it positively do damage? Here we are to some extent in the realm of opinion, although it seems front my judgment of human nature that if we tell a man that we propose to take 91·25 per cent. of what he earns above a certain level in taxation we diminish in some considerable degree any financial inducement to him to undertake extra work or extra responsibilities.
      The next and significant point is that in this respect we differ enormously from the practice of foreign countries. In the earlier debate the Chancellor rebuked my right hon. Friend the Member for Enfield, West (Mr. Ian Macleod) in the context of his proposal to reduce the share of the national product taken in taxation. The right hon. Gentleman said that he was

      1161
      troubled because my right hon. Friend was setting himself against the current practice of every civilised country in the world. I think that the Committee will recognise the Chancellor's always agreeable phraseology, but I call this argument in aid, because in respect of surtax this is exactly what the Chancellor is doing.
      The Committee may remember that in my speech on the Budget I referred to the Question which the Financial Secretary answered in a Written Answer on 12th February, but as it is germane to this issue I should like to call it to the attention of the Committee once more. I asked the Chancellor
      " what percentage of the next £1,000 of his earnings above £5,000, £8.500, £10,000 and £15,000 a year is now retained by a married man with two children under eleven years of age; and what are now the comparable figures at current rates of exchange for a similar man after payment of direct taxation in the United States of America, France, West Germany and Japan based upon information he derives from international organisations."—[OFFICIAL REPORT. 12th February, 1970;Vol. 795, c. 394–5.]
      The figures which the Financial Secretary gave in his reply are extremely significant. I shall not quote all of them. This is all earned income. All the examples predicate a married man with two young children under 11 years of age. It is obvious that he will be a young up and coming man earning big money because, obviously, he is considered by his employers to be a man of great ability: he is a key man.
      At the level of £5,000 a year, which was the figure quoted in the earlier debate, the Englishman retains 57·3 per cent. of his further earnings, the American retains 73·5 per cent., the Frenchman 75·4 per cent., the West German 63·3 per cent., and the Japanese 48·4 per cent. So it is fair to acknowledge that at this level the Japanese are worse than we are.
      I will not weary the Committee by reading the intervening figures. Going straight up to £15,000 a year—that is a level of earnings equivalent to three-fifths of what the Government pay the Chairman of the Iron and Steel Board—the Englishman retains 15·7 per cent. of his further earnings, the American 47·8 per cent., the Frenchman 61-3 per cent., the West German 49 per cent.—more than three times as much—and even
      1162
      the Japanese 30 per cent.—nearly twice as much.
      I am glad that the Chancellor has returned, because I can tell him that a little while ago I quoted to the Committee his very eloquent passage of rebuke to my right hon. Friend the Member for Enfield, West during our earlier debate, when he accused my right hon. Friend of setting himself against the current practice of every civilised country in the world. In the matter of surtax at the top rates, that is precisely what the Chancellor is doing.
      I need no further argument. I merely ask the Chancellor to apply his sound regard for the principles of every civilised country and accept an Amendment which, even if accepted, would not put an Englishman in these income brackets in as favourable a position as his counterpart in most of our more formidable competitors, but it would at least diminish the gap.
      Sir Gerald Nabarro: I apologise to the Committee for the fact that, though I have my name to Amendments concerning income tax which were debated earlier, I was not present to speak to them, due to the misfortune that the first day in Committee on the Bill on the Floor of the House coincided with an engagement entered in my diary 15 months ago to address business men in the Top Rank Suite in Birmingham at 2.15 p.m. today. As I fulfilled that engagement, and as I could not catch a train to London earlier than 3.15 p.m., I missed the income tax debate. I apologise to the First Secretary for having done so. I hope that I shall be forgiven. I am privileged to speak on this equally important subject of surtax, to an Amendment moved so ably by my hon. Friend the Member for Wycombe (Mr. John Hall).
      I was thought to be rather a crank and out of step with the remainder of my regiment in 1966 when I moved an Amendment to bring about a reduction in surtax, and the Labour Party laughed it to scorn. I moved identical Amendments in 1967 and in 1968 and spoke to one in 1969.
      It has been very satisfactory for me to observe that the whole of the Conservative Party now conforms to the view which I expressed four years ago, with

      1163
      scant support from behind me—only one or two aberrationists in my party con- formed at that time—that surtax in Britain was vastly too high and should be abated.
      Nearly all the reasons have already been given for a relief of the inordinately high levels of surtax which exist in Britain. I do not regard the Chancellor's modest relief of the lower level of surtax payers between £2,000 and £2,500 a year as in any way an expression of solicitude towards them. On the contrary, he did it this year only because of the impossibility of collecting the small sums involved with the number of staff available to him in the surtax office.
      This point was brought home to me very forcibly in my constituency when a university professor came to me a few months ago and brought me a surtax demand showing that he had been assessed for four years simultaneously. The demand had been made that he paid four years' surtax— that is, the previous year, then due, plus three earlier years— all in one lump sum. I inquired whether he had made his tax returns punctiliously and was told that each one had been rendered on the due date by his accountants.
      The fact is that the surtax office has gradually in recent years been falling farther and farther behind in dealing with assessments and within the last 12 months it has developed into an intolerable position of arrears with no hope of recovery. The only reason why the Chancellor has dealt with the lower level of surtax payers in this Budget is simply the position of the bureaucracy. I hope that the Chancellor or his spokesman will be honest enough to confess that when he winds up.
      There are two classes of persons calculated to raise the anger at once of Socialists, Fabians and Left-Wing spokes- men, everywhere, if these two classes of persons should have the temerity to ask either for more pay or for relief in the form of higher allowances or lower taxes. The first are Members of Parliament. The second are surtax payers. Members of Parliament I shall not deal with in the course of this speech.
      Surtax payers ought to be dealt with penetratingly by every member of my
      1164
      Party. The Conservative Party should go very much further than it has gone. We should say that we shall precipitate this issue at the General Election and regard it as a major feature of our policy. Today it is necessary to pay a top executive about £20,000 a year to leave him with a net income of comparable purchasing power to an income of £10,000 in 1960. In the space of a short 10 years both inflation and increased taxation have caused the gross income and the cost to the company paying the executive concerned to double.
      For example, let me take the endearing case of the right hon Aubrey Jones, formerly a member of my party. He has been paid £15,000 a year as the Chairman of the Prices and Incomes Board. It is said that he is to be paid £18,000 a year as the Chairman of the Commission for Industry and Manpower. People tend to criticise an increase of £3,000 in his gross income. He is a public servant. The net sum accruing to Mr. Aubrey Jones as a result of his increase will be of the order of £280—£3,000 gross in order to give him an increase of £280. This is quite ludicrous.
      8.30 p.m.
      I am sorry that the Chancellor has ostentatiously walked out, thereby dissociating himself from any reference to surtax. What we should all do is to recognise that every advanced industrial nation pays its leaders on a scale scores and scores of times greater than its artisans and best skilled men, and those top leaders of industry, trade, commence and the professions are generally the nation's best brains. There is no cacophony of protest from the Labour benches.
      Even the Labour Party, notwithstanding its protestations of egalitarianism on the hustings, has now embraced that principle; even the Labour Government has been prompted in recent months to raise from £12,500 a year to £20,000 by easy stages the sums they pay the chairmen of nationalised industries. " Oh but," they say, " we cannot otherwise have the Lord Melchetts of this world running our steel industry." I am not, of course, suggesting that Lord Melchett is one of the nation's best brains, but he is the person selected by the Labour Party to run the British Steel Corporation. There is also the

      1165
      case of Lord Robens as the Chairman of the National Coal Board.
      They must be paid £20,000 a year because it is the market rate, says the Labour Party, and because it is necessary to reward those men as blue-chip leaders, outstanding fellows—and of course to furnish sinecures for worn-out Labour politicians put out to grass from time to time. So the Labour Party accepts the principle for members of the party and others of its own choice within the ambit of its professional patronage, but denies it when the same principle is applied in private industry, trade, commerce and the professions.
      My view is approximately this, and it has often been stated in the House before. I believe that it is impeccable, unexceptionable and incontrovertible that if this nation, as a leading industrial power and a sophisticated and advanced nation of West, wishes to set up in competition with the United States of America it had better have taxation arrangements for its top executives comparable to, and in hot competition with, the taxation rates paid in the United States. Fleetingly, my hon. Friend the Member for Wycombe (Mr. John Hall) referred to this point.
      The highest-paid full-time professional man in the United States of America is probably the President of General Motors. I suppose that his income is of the order of the equivalent of £250,000 a year. On the last dollar he earns he pays 70 cents in taxation and retains 30. That is the equivalent in this country of saying that in the last pound an Englishman earns he should be allowed to keep 6s. and pay no more than 14s. in tax.
      I would prefer a system under which income tax at the standard rate was 6s. 8d. in the and the top level of surtax on incomes over £15,000 a year was also 6s. 8d. in the £, so that the highest earner paid 13s. 4d. in the £ on every £ earned over £15,000 a year. In other words he pays £2 out of £3 in taxation and retains £1 out of the last £3.
      I would regard it as too sharp a change to advocate the removal in one step from 18s. 3d. in the pound where the aggregation of the standard rate of income tax and top level of surtax is at present, down to 13s. 4d.;namely a re-
      1166
      duction of 4s. 1ld. in the pound. I have therefore today contented myself, with many of my hon. Friends, by setting down Amendments in harness on the Notice Paper, the earlier Amendment to reduce standard rate of income tax to 7s. 6d. in the pound and Amendment No. 8 to reduce the surtax gradations in such a fashion as to make them acceptable step by step up to a maximum level of 7s. 6d. so that the top level paid by any earner would be 15s. in the pound or £3 out of the last £4 and £1 would be retained.
      Later I would hope that my party would go on to the principle of £2 out of £3 maximum taxation and £1 out of £3 retained, which I regard as entirely equitable and comparable to the system practised in the United States of America and widely practised elsewhere.
      What the Chancellor has done this year makes no progress whatever towards these principles. The Chancellor's measure this year is a measure of expediency. He has reduced the amount of surtax to be collected by a miserable £3 million, from £280 million to £277 million, thereby—so he says—removing 185,000 surtax payers in the bracket between £2,000 a year and £2,500 a year from liability to assessment to surtax.
      Those who have slide-rules in their pockets or who are good at mental arithmetic will divide 185,000 into £3 million and arrive at the conclusion that the average relief accruing to this lower band of surtax payers is of the order of £16 4s. each, a very small sum. It is not due in any way to the solicitude of the Chancellor of the Exchequer to surtax payers but simply to try to relieve the bureaucracy, so the Chancellor tells us, by having 320 bureaucrats translated to more rewarding work this year and 360 translated to more rewarding work in a full year, subject to this proviso or caveat. I enter it now. He is guilty of the most violent and wishful thinking. It will not come off, not for a moment. Inflation will kill it.
      It is instructive that the Chancellor of the Exchequer went out of his way in his Budget speech to point out that had he not taken this step this year there would have been 600,000 surtax payers in 1970–71 whereas in 1960–61 there were fewer than 300,000 surtax payers.
      Mr. Roy Roebuck: One of the reasons for that was the prosperity of the country under Labour, with more people being paid better salaries.
      Sir G. Nabarro: Perhaps the hon. Gentleman would allow be to pursue my speech and I will deal with his point about wages and inflation in a moment.
      In his Budget Statement, the Chancellor made this point very clearly:
      " Over the past seven or eight years, the total number of surtax payers has almost doubled, and if nothing was done there would be nearly 600,000 surtax payers for 1970–71 compared with 286,000 for 1961–62. As things stand, it would cost £850,000 to collect £4 million of surtax from those with surtaxable incomes between £2,000 and £2,500, a collection cost of no less than 21 per cent. This compared with an average collection cost of 1·5 per cent. for Inland Revenue receipts as a whole."—[OFFICIAL REPORT, 14th April 1970;Vol. 799, c. 1248.]
      In other words, what the Chancellor omitted to say—had I been Chancellor, I should have used the figure at once—is that it was costing 14 times as much to collect this modicum of surtax from the lower band of surtax payers between £2,000 and £2,500 a year as it cost to collect revenue over the whole field.
      Obviously, that position is untenable, but it arises not from the increased prosperity of the nation, as the hon. Member for Harrow, East (Mr. Roebuck) would have us believe, but from vicious inflation. The nation is no better off as a result of continuous increases in wages and sal-arises, because prices rise as fast. But even discounting this fact, the fact is that the Chancellor continuously increases for all of us the amount of tax which we have to pay. Every time wages rise—this applies to the dockers, for example—those wage earners are brought into increased sums of income tax and surtax to be paid.
      I remember a controversy, which would interest the Chief Secretary, on the eve of the poll in the Kidderminster Town Hall at the 1959 General Election, when I stood on a platform in front of 200 electors and said, " If you return me again for Kidderminster, the first thing I propose to do in the House of Commons is advocate the reduction of surtax," and I did. The Labour crowd at the back of the hall broke out into their usual cacophony about " reduction of taxes
      1168
      for the rich." I singled out one of them, a broadloom carpet weaver, he was, with his wife working on the back of the loom. I knew them both and what their wages were approximately, and I knew that both of them, in that year, with their incomes aggregated, would be earning about £2,600 and would receive a surtax assessment of £600, as it was in those days. Of course, today it would be much more.
      The fact is that the ordinary London docker today, had the Chancellor not put up the commencing point for surtax to £2,500, would have had a surtax assessment. My hon. Friends may think this a good thing—
      Mr. Roebuck: Hear, hear.
      Sir G. Nabarro: I am glad that the hon. Member thinks that it is a good thing that the dockers should pay surtax. Perhaps he would go down to the Albert Docks and explain that to them—
      Mr. Roebuck: I did not say that—
      Sir G. Nabarro: The hon. Member said " Hear, hear "—
      Mr. Roebuck: What I meant was that it was a good thing that the dockers were well paid for the excellent work which they do for the community and that this party has rid them of the curse of casual labour.
      Sir G. Nabarro: I have never objected to the ending of casual labour. All I am trying to say to the hon. Gentleman—it is very difficult to drive it into his thick head—is that wage inflation, proceeding on the chronic scale of the last few years, brings into surtax assessment vastly more wage-earning and salary-earning men and women than we ever intended should pay surtax.
      This is indisputable. The fact that only 286,000 men and women paid surtax in 1960–61, whereas 10 years later it is 600,000, is only partially due to the improvement in wage conditions and is most largely due to inflationary tendencies, and notably due to the violent inflation which has occurred since 1964.
      I do not want the nation to feel that the Chancellor of the Exchequer has indulged in a kind of solicitude for surtax payers. All he has had to do, after pressure by the Commissioners of Inland Revenue, is relieve the lower band of

      1169
      surtax payers simply because Inland Revenue are so far behind with their assessments.
      My principle—I am glad it is now embraced by the Front Bench and shortly to be implemented by the Tory Party in office--is that no more than 15s. of the last pound earned by the highest salary earner in Britain should be taken in tax, as an aggregation of income tax and surtax;7s. 6d. in income tax and 7s. 6d. in surtax. I shall remind my right hon. and hon. Friends sitting on the back benches behind me, when they are in office, of these admirable principles, as a first step towards the 6s. 8d. and 6s. 8d. provisions I have related tonight, a maximum of 13s. 4d. in the £, enabling £1 out of every last £3 earned to be retained by the earner, and only £2 of it to go in tax.
      I warmly support this surtax Amendment, and I hope that if an unsatisfactory answer is forthcoming from the Chief Secretary, then my right hon. and hon. Friends will take the matter to a Division.
      [MR. CAROL JOHNSON in the Chair]
      8.45 p.m.
      Mr. Roebuck: The hon. Member for Worcestershire, South (Sir G. Nabarro) is never reticent about bringing his peculiar financial problems to the attention of either the House or of Committees of the House, and we have heard from him this evening a further plea for very high surtax payers. The hon. Gentleman put his plea in such eloquent terms that one was bound to have a little sympathy for him. However, whatever sympathy first came to one, one then pondered. One reads that the hon. Gentleman is also rather profligate in as much as he has been betting money on a Conservative Party win at the next election. If the hon. Gentleman is so profligate and foolish as to do that, he deserves little sympathy when he brings his other problems to the Committee of the House. I understand that tomorrow's Gallup Poll will show that the Labour Party is seven points ahead.
      When the hon. Gentleman spoke about wage inflation I fear he overlooked a most significant fact—that over the period since 1964 wages have gone up by 10 per cent., taking account of the increase
      1170
      in the price of goods. It would therefore be possible for me to argue, without interruption from the hon. Gentleman opposite, that the nation is much more prosperous now as a result of having a Labour Government, and that this is why a number of people have moved into surtax. I am sure that, in his heart of hearts, the hon. Member for Worcestershire, South, being, as he often says, a good Tory, has no objection to high wages, to people earning high money as distinct from people getting a great deal of money from interest payments.
      The hon. Member for Wycombe (Mr. John Hall) opened the debate in a gloomy frame of mind. He listed all sorts of things that he felt had gone wrong. But one of the good results from the surtax policies which have been pursued by successive Chancellors in this Government is the big turn round in the balance of payments. The hon. Gentleman complained particularly about the 10 per cent. which was added at one time, but this was a contribution to deal with the very difficult situation inherited by the present Government from the previous Administration.
      Mr. John Hall: I do not think that I was complaining exactly. I was pointing out the additional imposition placed upon already hard-pressed surtax payers, and did so merely for the record.
      Mr. Roebuck: I take the point. If the hon. Gentleman wants to argue why it was necessary to make this additional imposition, I am sure that we on this side would be happy to take him on. All I am saying is that it was necessary because of the state of the country, and that it is an indication of the success of our policies that the nation is now in a very happy position from an economic point of view.
      Mr. Hall: Was it in the same state in 1968 when the Government imposed a special charge of 3s. to 9s. on personal dividend income?
      Mr. Roebuck: All these things fit into the necessary pattern of very tough measures which the Government had to impose to get the country out of the difficulties into which the Conservative Government had plunged it. The proof of the effectiveness of those measures is

      1171
      shown by the Finance Bill. It is shown by the fact that the balance of payments is running at a record £550 million surplus compared with the deficit of £800 million when the Conservatives were thrown out of office. I do not think that it is yet the time to slacken off on this policy. It would be foolish for my right hon. Friend to accept the Amendment because the time is not right. We need to keep these clamps on for some time yet in order to ensure that the prosperity which the nation has now achieved is deep seated.
      I have some sympathy with the point the hon. Member for Wycombe made with regard to married couples with high incomes being lumped together for the payment of taxation. This is an anomaly and it has a disincentive effect, particularly with regard to women with young children, who also have to employ child minders or nannies and then pay selective employment tax. I have some sympathy with that view, and if as the year progresses it is possible to make some easement, that should be my right hon. Friend's first priority in this field. But the time is not yet. The Amendment should be resisted.
      Sir Henry d'Avigdor-Goldsmid: Our annual debates on surtax are not usually well attended. I cannot say that this year is an exception. I suppose that this is because the speeches follow a certain predictable pattern. However, it is still something worth debating because, clearly, the net results of the tax make so little difference to the Exchequer that we should really think a little about the cost of it and also about the cost of collecting it.
      I have the greatest sympathy for people like Mr. Aubrey Jones who are in positions of great responsibility and whose earnings after tax enable them to keep a roof over their head and their children at school. They do not enjoy any job security and it is most unlikely, when we have had our General Election, that Mr. Aubrey Jones will find that he has job security, unless he has taken the precaution to get a good service agreement, and I am not in a position to express a view on that.
      Leaders of industry suffer a special degree of insecurity which they have no
      1172
      means of removing. The hon. Member for Worcestershire, South (Sir G. Nabarro) I see has taken the trouble to equip himself with the Financial Times. We cannot open any paper these days without reading about chairmen of companies biting the dust for one reason or another. They fail to administer the company to the satisfaction of the shareholders and they are out. They may get a golden handshake but not a large one.
      Is there any point in charging surtax at all? I used to make this speech when there very very few surtax payers. Now there are an increasing number, more people this year than ever before. Next year I daresay that I shall be speaking and that there will be even more such people. It is clear that these penal rates of surtax are the exception rather than the rule. That is why there is such an enormous struggle involving not only the best brains of the Bar but the best brains of the Inland Revenue in a contest, usually long drawn-out and unsatisfactory. There is this fantastic difference between a capital gain and a gain subject to income tax.
      One of the advantages of sitting as a back-bencher is that one can deliver one's own opinion without committing anyone else to it, and in my own eccentric way I should have thought that we ought to have a much closer aggregation between capital gains tax and the top surtax, which would drive a lot of artificiality out of our transactions. People who enjoy a high standard of living in this country are not basically those who earn huge sums but those fortunate to have private fortunes. If a visitor from Mars were to be given the job of Chancellor he might very well suggest that our country would run a great deal better if surtax did not exist and to take its place we had a modest capital tax of some sort—although we have had quite enough taxes from the present Government. Such a tax would not be difficult to collect and justice would be seen to be done. Those who took the risk and kept companies going would have the rewards which in other countries go with those positions. They do not go with those positions here, and that is one reason why our economy is suffering. I am not talking about a brain-drain; it is not a fashionable phrase. But it is something with which we must live—the fear of a

      1173
      brain-drain of people without capital who can earn in another country a salary which gives them a living standard which is not obtainable here.
      9.0 p.m.
      I know that all hon. Members are too honourable and too single-minded to think of financial reward. It is obvious that they would not become Members of Parliament if they were obsessed with financial reward. But when people take huge responsibilities and big risks there should be a reward which they can measure in financial terms, and that is not the case today.
      Mr. Roebuck: Is the hon. Gentleman suggesting the old capital levy, a wealth tax, or what?
      Sir H. d'Avigdor-Goldsmid: I am pleased to see the hon. Gentleman in his place. I am talking about the undesirability of charging surtax at the current rate. If the hon. Gentleman wants a seminar on economic thought, I am sure that that can be arranged for him, but I am not here to provide it.
      Mr. Roebuck: The hon. Gentleman referred to what he called a capital tax. I am asking him to elaborate. Does he mean the old capital levy which was suggested by Sir Stafford Cripps in the 1930s, or is he thinking of the form of wealth tax advocated by some of my hon. Friends in the Tribune group? Would the hon. Gentleman enlighten us?
      Sir H. d'Avigdor-Goldsmid: I see no reason to enlighten the hon. Gentleman. He is much better read than I am. He reads Tribune: I do not. The hon. Gentleman's intervention is irrelevant. We have had numerous forms of capital tax. They have always been described as once-for-all. I leave it to the hon. Gentleman's imagination and his reading of Tribune or some other publication to make up his mind. I am addressing myself to the question of surtax.
      Surtax as charged on the earner is an anomaly. I am glad that my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) went so far in our debates last year as to say that when a husband and wife earned substantial income it was an anomaly that the earned income allowance should apply only to the husband. This would be a minor
      1174
      concession, and I am hopeful that when there are two earners in a family they will both benefit when we take office.
      But that does not go far enough. Earned income should be free of surtax for any reasonable figure. I agree that that might lead to the anomaly which happens that people try to translate so-called investment income into earned income. I therefore come nearer and nearer to the conclusion that we should do without surtax altogether.
      My right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said that it brought in £277 million. It causes the most enormous complication at Somerset House. It is a fantastically difficult tax to collect. We would function as efficiently, with just as much revenue being collected, if we had self-assessment. Our economy would do a great deal better if there was a high limit of freedom from surtax on earned income. I should have thought that this was possible of introduction.
      My hon. Friend the Member for Worcestershire, South made some rather sneering remarks about some heads of nationalised industries. I do not regard them as in any way inefficient in the work that they do, nor, I think, does my hon. Friend. But no reward for those jobs has any meaning in current terms. People do that work because it attracts them and, if they fail in their task, they lose their jobs, and without any compensation that I am aware of. So this seems to me to be an overwhelmingly strong argument for taking another look at the whole of this farrago of surtax.
      As I say, one can make speeches of this sort from the back benches without in any way committing one's party, but I very much hope that the Government will show some willingness to consider adopting my views to a modest extent, and I hope that my right hon. Friends, when they in their turn come to office, will think them worth considering, too, and will consider raising very substantially indeed the earned income exemption from surtax, exemption which should in any case be given to both husband and wife when they are working and living together, and will seek in some way to give people reward for

      1175
      taking these great responsibilities and great risks which go with high office in great companies today. Who are the surtax payers? They are, to a great extent, the big salary earners. I feel that those who do not earn big salaries but have investment funds on which they pay tax are not so hardly hit by this imposition. In that spirit I recommend the Amendment to the Committee.
      Mr. Percy Grieve: I support the Amendment moved by my hon. Friend the Member for Wycombe (Mr. John Hall) as being a modest mitigation of a situation which is not only unjust to surtax payers but frequently today cruelly unjust, and, to take up the closing observations of my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), most cruelly unjust most frequently to elderly retired people and single women living alone on investment incomes. It is really not good enough on this side of the Committee to recommend the mitigation of the cruel impact of surtax today and the penal impact of surtax and then limit only to earners the observations which we make, because there is a powerful case for mitigating and remedying the injustice which there is to those who receive investment income of many classes and at many levels.
      The truth of the matter is that the levels and rates of surtax and the starting point of surtax, which date back to the 'twenties and 'thirties, when money had an altogether different value from what it has today, and when £2,000 a year, the then starting point of surtax, was not an unhandsome income, are unjust today, and have utterly failed to take account of the galloping inflation which we have had particularly since the Labour Government came into office in 1964. If anything were designed to illustrate this I would suggest to the Committee that we should look at comparative figures of the purchasing power of incomes after tax in 1939 and today.
      For that reason, at the end of March, I put down a Question to the Chancellor of the Exchequer. There was a Written Answer on 6th April. The Question was:
      " what income is necessary today for a married man with two dependent children to produce the equivalent purchasing power, after tax, of an income in 1939 of £500, £1,000, £2,000, £3,000, £5.000, £7,000, and £10,000 a year, respectively, on the basis in each case that
      1176
      the income is wholly earned, wholly investment, and half earned and half investment, respectively."—[OFFICIAL REPORT, 6th April, 1970;Vol. 799, c. 16.]
      I think the members of the Committee who may not have seen this at the time will agree with me when I read out the figures that they are quite devastating in the light they throw on the effects of the present surtax level and in particular on the fact that the starting point for surtax on investment incomes remains still, until the slight concession made by the Chancellor of the Exchequer in the present Bill, what it was in the 1930s. These are the figures.
      To give a married man with two dependant children the equivalent purchasing power of an income in 1939 of £500 a year, if his income is all earned he needs today £2,450;if it is all from investment he needs today £2,700;and if it is half and half he needs £2,570 a year. To have the equivalent of £1,000 a year in 1939, he needs today to earn £4,620, more than four times as much, and to have from investments £5,990, and, half and half, £5,250.
      Then comes perhaps the most revealing figure of all. It is at the more modest level of income that the effect is the most devastating. To have the equivalent of a pre-war income of £2,000 a year, a man needs to earn now £10,400 a year. If his income were ail from investments he would have to have £24,800 a year and, half and half, £11,200.
      I pause at that £2,000 figure for a moment because, taking the investment income figure to produce an income of £2,000 a year at 5 per cent., a man in 1939 would have had to have a capital of £40,000. To have an equivalent income now to £2,000 a year of £24,800 a year, he would have to have well over £1½ million. These figures make absolute nonsense of the cry on the Government side of the House for a tax on wealth, which is said to be so unequally distributed. If there is to be that wealth tax for which hon. Gentlemen clamour, there will have to be either a drastic reduction or a complete abolition of surtax, which my hon. Friend the Member for Walsall, South was tentatively suggesting to the Committee as one possible solution.
      As the figures go up, we go almost into the realms of fairyland. To have the equivalent of a pre-war income of £3,000

      1177
      a year, a man today needs to earn £26,400 a year, more even than Mr. Aubrey Jones. From investments he would require £49,300 a year and, half and half, £26,400.
      9.15 p.m.
      Then we come to £5,000 a year, the salary which before the war was considered proper for Her Majesty's judges to maintain them in a state of independence—a salary which, if my memory is right, they had been drawing since the year 1831, when the £ was worth even more than it was in 1939. To have the equivalent of £5,000 a year today, judges would have to be paid £68,000 a year. The other day judges' salaries were raised to a figure in the region of £12,000 per annum. If a man were to seek the same purchasing power for his investments as an income of £5,000 a year would have given him before the war, he would now have to have £90,900 a year, and at half and half £68,000.
      I will quickly pass over the next group of figures. Taking the figure of £7,000 before the war, the equivalent figure of earned income now would be £102,000, £125,000 would be its equivalent in unearned investment income, and at half-and-half £102,000.
      At that very high level, according to these figures, the distinction between investment income and earned income almost completely disappears. It is precisely on the lower levels of investment income on which many retired people and single women have to live that the cruel burden of these crushing and penal taxes bears most hardly.
      Finally, to get the equivalent of a pre-war income of £10,000—we are now perhaps in the realms of fairyland, or in the group of a few great tycoons—£146,000 is required in the way of earnings, and £169,000 a year income from investments.
      I said that these figures graphically illustrated the fact that levels and rates of taxation designed for a different period in the life of our country and different money values were the result of galloping inflation. The effect of inflation and high taxes imposed by the present Government can be illustrated by comparing those figures in the matter of investment income with similar answers that I received on 20th May, 1968, in col. 43 of the OFFICIAL REPORT, from the then
      1178
      Financial Secretary to the Treasury. I asked the same Question then but with regard only to investment income. The answer was given for a married man with no children. The Committee will note that a married man with two children would be slightly more favourably treated.
      The figures then are very interesting because they show what taxation and inflation have done in the intervening two years. The figures then were for the equivalent of £500 a year and a man required £2,190, compared now with £2,700;for £1,000 he required £4,900, compared now with £5,990;and for £2,000 he then required £18,000, compared now with £24,800. I shall not weary the Committee by going on with these figures. The comparable figures at all levels show what the further crushing burden of taxation and galloping inflation have done to peoples' incomes.
      Perhaps the prejudice of hon. Members opposite when this subject is discussed is shown by the small attendance. At present there are on the other side of the House five hon. Members, of whom two are Front benchers. There has been only one intervention from the other side. This shows that the Socialist Government have completely closed their mind to a grave injustice in our tax system, a grave injustice which they have mitigated only slightly this year as a matter of mere convenience and not as a matter of righting injustice. But the effects of surtax at these levels not only bear heavily and hard upon people; they do harm to the country, in more than one way.
      First, I want to make one plea about the hardship which it imposes. Living in my constituency there are a large number of retired people who built up prosperous but frequently small businesses in the Midlands and who, when retirement age came, sold their businesses hoping to live on the proceeds in their old age. In many cases, their businesses were sold for £50,000 or perhaps even £100,000. When invested, that sort of sum yields an income of £2,500, £4,000 or £5,000. Their standard of living suffers a crushing blow unless they are to spend capital indefinitely, not knowing how long they will live. Having done a lifetime of service to the country and to industry by building up their businesses, such people are no better off than persons would have

      1179
      been in 1939 with incomes of £500 a year or thereabouts. That is no way to reward energy, initiative, ambition, and the qualities which go to make a country great.
      There are ill effects upon the country itself. One of the ways in which people can avoid this crushing burden when they retire is to leave the country, take as much of their assets with them as they can, and get themselves domiciled abroad. I regret to say that that is happening today on a scale which the country can ill afford.
      I have seen another aspect of this problem in my travels abroad. In the Far East, there are many people who have built up flourishing businesses or earned and put away capital in the exercise of their professions. In another age, they would have looked forward to retirement in their home country in their old age and their not so old age, since often they are in a position to come home when they are far from old. When asked what they intend to do when they give up the Bar in Hong Kong or retire from plantations in India, they say that they cannot afford to come home. The capital which they would have brought with them and which over many centuries has helped enrich this country and sustain it is lost to us when they retire to somewhere else in the Commonwealth or Europe—in fact, anywhere in the world—where they will be better off than if they come here.
      Finally, it is impossible to measure the effect which taxation at these levels has upon savings. We are urged by Treasury Ministers to save. They know that it is only by the saving and reinvestment of money that our financial and economic position can be improved, yet they refuse to take the elementary measure which my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) suggested. If surtax were abolished, it would merely reduce the revenue by some £277 million a year, which would enable the very people who are in a position to save and reinvest in industry to do so. I hope that the time will not be long delayed—I am confident that it will not—when we shall right what has become a scandal and a disgrace.
      Mr. Peter Bessell: We have had an extremely useful debate this
      1180
      evening on the whole issue of surtax. We have also had some very able speeches in support of the Amendments. I was particularly interested in the figures given to the Committee by the hon. Member for Wycombe (Mr. John Hall), and the usual and normally able way that he moved the Amendment came very close to convincing me.
      I was even more interested in the speech by the hon. Mmber for Worcestershire, South (Sir G. Nabarro). He has rightly reminded us that for many years he has been a pioneer of the reduction of surtax. Indeed, he has advocated, and still does, the eventual abolition of a tax which clearly has a most inhibiting effect upon the growth of talent and the exploitation of the best brains in Britain.
      The hon. Member for Worcestershire, South was about to quote from today's issue of the Financial Times. Unfortunately, he was not able to do so before resuming his seat. He has passed that paper to me. The point that he was going to make is worth noting. The letter in question reads:
      "Sir, last year wages and salaries rose by 7½ per cent., after tax disposable incomes by 5½ per cent., prices by 5 per cent., leaving only ½per cent. increase in real living standards. Fifteen steps forward and 14 steps back."
      Sir G. Nabarro: Hear, hear.
      Mr. Bessell: The only thing which could be said in mitigation of any policy which produces that result is that it is better to go 15 steps forward and 14 steps back than to go 14 steps forward and 15 steps back. Beyond that there is little that one can say.
      I am concerned about the effect on surtax at its present level, even allowing for the concession which the Chancellor has given—I recognise that a concession has been made to those in the surtax bracket at the lower level—on investment in this country. I had an experience recently which is worth recounting briefly to the Committee. I was engaged in persuading an overseas corporation to establish a factory in this country. We had reached the point in our discussions where it was apparent that the overseas company intended to proceed. I may add that it would not have done so had it not been for the Government's development aid programme in the development areas. I do not hesitate to take this opportunity of

      1181
      paying tribute to the Industrial Development Act, 1966, which was the determining factor. But when we had reached the point in the negotiations where it was clear that it was going ahead, the accountants representing the company—a major international firm of accountants —raised the question of how many of the company's employees would be required to live in this country on a permanent basis. It was discovered that 18 would be the minimum, because of the advanced nature of the technology used by that company. The accountants pointed out to the directors of the company that there would be a considerable loss of income in real terms to those executives, although living costs would be lower, because we have a much higher tax structure.
      9.30 p.m.
      At that moment, although I was well aware of the argument that was taking place and the correctness of the accountant's figures, my heart missed a beat because I thought that the efforts which I had made to get this company to come to this country might, after all, be frustrated. In the event, the decision was to go ahead anyway, and I am glad that that decision was reached, but I thought that it served to underline the stupidity of a policy which seeks to penalise those whose brains and ability are greatest by making them pay a very much higher rate of tax.
      It is almost true to say that we have reached a point in our taxation system where the more stupid a man is, the lower his ability, the less he is likely to be penalised by the State; the greater his ability, the greater his brain-power and training, the worse will be the deal that he will get from the Inland Revenue. We know the effect of a high level of taxation is to cause many of the best brains in this country to seek occupation overseas, where they will enjoy more favourable rates of taxation.
      In addition, as was said by the hon. Member for Wycombe, a great deal of time and a vast amount of money are expended each year by some of the best accounting brains in this country, including, no doubt, my hon. Friend the Member for Colne Valley (Mr. Richard Wainwright), in seeking ways—
      Mr. Richard Wainwright: No.
      Mr. Bessell: My hon. Friend denies it. I was going to suggest that he was one of those distinguished accountants who seek ways of relieving the burden of tax on their clients. My hon. Friend says that he does not do that. I am almost inclined to be glad that I am not one of his clients, but I know, as does the Chief Secretary, that the time of many accountants is literally devoted to finding ways of relieving the burden of taxation upon their clients and upon the client companies which they serve. A high level of taxation, particularly of surtax, has a genuine disincentive effect upon the output of those in the brackets of income which attract surtax.
      Earlier on I mentioned the speech of the hon. Member for Worcestershire, South. I have looked carefully at the Amendment moved by the hon. Member for Wycombe, Amendment No. 7, and at Amendment No. 8 in the name of the hon. Member for Worcestershire, South. With respect to the Member for Wycombe, I think that the Amendment tabled by the hon. Member for Worcestershire, South is more realistic.
      Sir G. Nabarro: Hear, hear.
      Mr. Bessell: I am glad that the hon. Gentleman agrees with me. I expected that he might. If we are saying that the problem with a high level of surtax is that it acts as a disincentive to those in the medium and lower brackets of income, rather than those in the higher brackets, then clearly a concession of the kind envisaged by the hon. Member for Worcestershire, South would be more appropriate than that suggested by the hon. Member for Wycombe. If we were to have a vote on Amendment No. 8, I should find myself torn in deciding into which Lobby I should go, because I think that it is a realistic and important Amendment.
      I have no doubt that if the Committee were able to accept that Amendment it would be very popular in the weeks or months of electioneering that lie ahead. If all that one hears is true, it is likely to be weeks rather than months. It would certainly be popular with a certain group of people; a group which contains a large and growing number. As the Chancellor reminded us in his Budget speech, it contains about three times the number that it did a couple of decades ago.

      1183
      However, these Amendments must be considered carefully and realistically. I wish our financial condition were such that the Government could accept the Amendment in the name of the hon. Member for Worcestershire, South. I emphasise that that is the Amendment that I prefer. I recognise, too, as the hon. Member for Harrow, East (Mr. Roebuck) correctly stated, that this moment in time, when, happily, the nation's balance of payments is at last in a favourable position, is not the moment to make a concession of this kind. Moreover, if there are to be concessions in tax, I am convinced that they should be made first to those who are paying the standard rate—those who are, after all, the lowest wage earners. I should like a reasonable concession to be made to them in next year's Budget. I should like to see some improvement made in the small concession made in this Clause.
      Although there is a grave effect upon incentive, although there is an underlying danger to investments from overseas, and although the broad principle of the reduction of surtax is right and should be pursued, in this year, when we have passed through so many difficult months and emerged into a very much greater and much more hopeful position fiscally, I believe that the Chancellor would be right to resist the Amendment, however tempting and worthy it may be in other respects.
      I hope that the Chief Secretary will be able to give an assurance that at some future date he will be able to make this concession. I say that in no partisan sense. The hon. Member for Wycombe has already made it clear, that, if the Conservatives are returned as the Government at the next General Election, they will make a concession. Therefore, we already have an undertaking from this side. I should like a similar undertaking to be given by the Government.
      Sir B. Rhys Williams: I am glad to have the opportunity to make a brief contribution to this discussion. However, I rise with some trepidation. The Chief Secretary was very flattering about my earlier contribution; I am afraid that he will be disappointed by my contribution this time and, if he were to say so, I should be wounded.
      1184
      I want briefly to touch on four arguments which the Government should bear in mind in connection with their surtax policy. One is the obvious economic argument. Of the total of £5,930 million brought in by surtax and income tax combined, it is estimated that in 1970–71 surtax will account for only £277 million, or less than 5 per cent. of the total.
      I have argued before, and no one has ever gainsaid what I have said, that if surtax were to be remitted there would be no loss of revenue, because the money would come back to the Inland Revenue in the form of a higher yield of income tax. I am not saying in a snide way that in such conditions people would declare their incomes in a more ready way than they do now. I am saying that they would be prepared to earn more, and that would be better for the economy as a whole.
      Even if I am wrong about that I do not think that I am—it would still be possible to allow for a remission of taxation, because there would be a sharp increase in the arisings of savings. As quite a large part of the Budget surplus is aimed at creating savings which are not forthcoming from the private sector, it would be possible to reduce taxation pound for pound with the extra amount of savings which would result from the reduction of surtax.
      I want to talk about the disincentive effects of surtax. It is very difficult to adduce positive evidence on this point. An examination of the motives and careers of those at the top of industry who are earning between £30,000 and £50,000 a year does not constitute a properly selected sample of all those affected by surtax. Interviewing those people, one can learn that many of them have fought their way to the top of their companies and to these salary levels in spite of the fact that they do not really gain any commensurate material reward. But this is not to argue that surtax does not have a disincentive effect, because the people one should be meeting to get a representative sample are the people who have not fought their way to the top of any business because they realise that it is not worth while.
      My evidence on this is partly personal in that I spent a number of years in an employment agency, where it was part

      1185
      of my work to interview people who were seriously thinking of taking jobs at much higher salaries. I know that there is no question that surtax is one of the most serious factors which a man takes into account when deciding whether or not to make a move to a new company.
      But it is not only then that surtax is important. One of the problems which are very well known in personnel management is the difficulty of getting a man at the head of a function in a company, through which he has risen during his career, to move into general management. It is not too difficult to have young men working under one who are doing what one has done oneself, but the risk for a man approaching the top of his career in industry comes when he has to give orders to men who are doing something which he has not done himself. This is the crucial problem. When a man has reached the top of a particular tree, in production, research or the commercial functions, he has to decide whether he will make a final move, at which point surtax has its most biting effect. If he does, he is moving into a much higher risk area, because he is no longer at the top of his own function but in general management.
      The fact that it is difficult in this country to get men to take serious responsibility in general management is a direct reflection. I am convinced, of the incidence of surtax. A man who moves into general management is moving into the limelight, and if something goes wrong with a firm for which he has taken responsibility, he is named and may lose his job. If he remains, however, in a relatively cosy position as head of a department, he knows he is not exposed to that risk.
      I said that this was a well known fact in personnel management, but it is commented upon by outside observers as well, who talk about the dearth of suitable people in management in the British economy. I implore the Government to take seriously what I am saying. One of the principal reasons for the shortage of men ready to take risks in general management on salaries is surtax.
      Another problem which arises from personal experience in personnel management is the problem of the extinction of what one might call the " self-winding " manager, or the man of independence in
      1186
      the middle of his career. It is common place that many companies have a bigger requirement for young men than they have for old men on their staffs. They face the problem of what to do in a situation in which, perhaps they have two men reaching 40 for every one who retires.
      What one wants to find is that a large number of men in industry, by the time they have worked 20 years, have accumulated enough savings to be independent and to make their own plans and not have to leave their plans in the hands of others because they are anchored to one employer. Many people in this country —I suppose tens of thousands—begin to wonder where their career is leading them at the age of 40 or 45, because then they realise that there are not enough vacancies for them in their organisation for them to continue a satisfactory career trajectory. They should have enough savings, through direct savings, putting aside their own earnings—that is, not being liable for surtax—or through some system of stock options, for them to be able to decide for themselves and float off into some other career.
      But while we have this continual punishment parade for the more successful in the form of these exceptionally high marginal rates of taxation on men who are trying to contribute the most in an industry, we shall find this problem of the man of 40 who suddenly loses speed and initiative.
      9.45 p.m.
      Mr. Barnett: I entirely take the point about the very highest levels of surtax, but surely of the thousands of people that the hon. Gentleman is talking about at the age of approximately 40, the younger executive type of persons, there would not be that many who would have above £5,000 a year anyway. So very few of them will be paying surtax.
      Sir B. Rhys Williams: That appears to be a useful contribution, but it is not so. [Laughter.] I am making a serious point. By the time he is 40 or 45, the person I am speaking of should be earning a high salary but also getting unearned income from his own investments. The concession to which the hon. Member has referred is one which allows him to draw his earned income without incisions from surtax.

      1187
      I will say a few words on what seems to be the moral relationship in the State's use of this surtax weapon. If I differ from my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod), whose Amendment has been selected for discussion, it is because it does not go far enough. Let us examine whether the State has a right to take any man's income in this way. All politics is an aspect of the relationship between the one and the many, and surtax is the particular aspect we are considering.
      I have had the good fortune to know more than one man who regularly earns more than £100,000 a year on the Stock Exchange. Those who earn that amount are very ingenious and hard-working individuals. One wonders, however, what sort of contribution they would be able to make if they were suddenly transported to a desert island where every mineral and natural resource was available but they were the only persons there.
      Suppose that the climate is ideal and to hand there is gold, silver, iron, all sorts of precious metals, vegetation and animal life, but they are left to their own devices to make the best they can of that. Suppose that once a month a ship calls at the island to collect what these marvellous characters produce, and to sell in the market that produce at the highest possible price. It is inconceivable that such a man could earn £100,000 by his sole endeavours, even in the most ideal natural surroundings.
      If a man is able to earn £100,000 on the Stock Exchange he is not alone in creating that wealth. He is able to create it in an environment which we are providing. Therefore, we too are entitled to some of that £100,000. [HON. MEMBERS: " Hear, hear."] I am glad to notice the relief among hon. Members opposite, who perhaps began to wonder whether there was any moral basis for taxation at all. They now realise that there is a certain moral justification for continuance of a tax system.
      Sir Douglas Glover: If my hon. Friend's description of the island is right, I am willing to go and live there any time he likes for far less than £100,000.
      Sir B. Rhys Williams: If it is true that very high salaries are earned partly by
      1188
      the man who takes the initiative and risk but partly by all of us together, there must be a fair division of that newly-created wealth which results from the endeavours of the individual.
      The question I am bound to ask is: how can society's share in the creation of this fresh wealth which arises from the endeavours of one man be more than half the total amount of that wealth? How can it be said that if a man has created £100,000 of fresh value, society gave £60,000, £70,000 or £80,000 and his contribution was less than half?
      I support what is done in the United States of America and other countries. A provision should be brought in that in no circumstances should a man have to pay more than half of the wealth he creates by his own endeavours. On the marginal £, tax should never be more than 10s. This is something the Government should anchor to.
      Mr. Gwilym Roberts: I am trying with some difficulty to follow the hon. Gentleman's arguments. It seems to me that he is suggesting that by these entrepreneurial activities the gentleman he is talking about is entitled to half the wealth created. But it may well be that the result of his initiative is borne into fruit by the work of a hundred others. On that argument, since they have equally made a contribution, he should receive only one part in 101 of the additional wealth.
      Sir B. Rhys Williams: I congratulate the hon. Gentleman. He is stumbling towards the great economic truth about the division of labour. Those others who contribute in that way may also have salaries, capital gains or whatever it may be. We hope that when the Government have transformed our tax position everyone in our society will be earning £100,000 a year. If we could clear away our mental blocks, there is no reason why that should not happen.
      I want to conclude with a word of warning to the Government. If tonight for some reason they are hoping to form another Government in due course, they will have to choose their re-entry slot just right or they will go into outer space and remain there for the rest of their time. The way in which they must do it is to convince the British public that what they do is morally sound, and they will

      1189
      not be able to do that if they continue the class war. Surtax is simply an aspect of the class war. If they want to show that they have evolved from that and are worthy to lead the nation again, they should start by accepting the Amendment.
      Sir D. Glover: I listened fascinated to my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams). I have a feeling that the delicious island he has described is probably part of the Virgin Islands, and I can assure the Committee that that is no place for me. With any of these Eldorados there is always a snag, and I think my hon. Friend has produced it here. I am prepared to stay in this country and pay the great rates of tax that I do, and not be in the situation he describes on that island surrounded by gold, jewels and so on but with no use for them and no one to turn them into a useful product.
      I now turn to the Amendment, and I want to be very angry. My hon. Friend was right when he said that surtax was one of the last vestiges of the class war. I am not objecting to taxation on its present basis, but it is absurd that our society is governed in this way. I say to the House and my right hon. Friends, who will shortly have the responsibility of dealing with our affairs—
      Hon. Members: They will not.
      Sir D. Glover: I am not at all disturbed. [Interruption.] That is one seat I shall not win, anyway. Whichever party is in power, there is another point that we must begin to take into account. It was that great, erudite person, Sir Paul Chambers who, during the last war, produced P.A.Y.E., which altered the whole of our taxation structure. As a result of P.A.Y.E., the bulk of the nation pay their taxes before receiving their income. If we ask any so-called working man—the chap on the shop floor, or the middle executive, anyone drawing up to about £4,000 or £5,000 a year, what he earns, he never replies that he earns f3,000, £4,000 or whatever it is a year. He immediately replies that his take-home pay is such-and-such a figure. This is a problem that both sides of the Committee will have to take into account.
      Although in a strange way the burden of taxation weighs on those people and is a great disincentive to effort, overtime
      1190
      and so on, the fact that the money paid in tax is never in their hands before they pay it has a traumatic effect and influences the way they react. They somehow do not realise that they are paying that amount of money. The person who does realise that he is paying tax is the chap who writes a cheque for £50 in surtax, because when one is in the surtax bracket one has to pay the tax direct oneself, and it becomes real; or the money was in one's bank account before one signed the cheque. Under the P.A.Y.E system, however, the money to pay tax is not in one's bank account. It never gets there and one never handles it, so somehow it is not in one's possession.
      On both sides of the Committee, we accept that a good deal of irresponsibility is growing up in our society. The average person today, with our Welfare State and so on, goes home knowing that his health, unemployment and retirement are all taken care of. He knows that all he has to do is to put in the jam jar—many people, funnily enough, still keep them today—£5 for rent, £2 for rates, £6 for housekeeping, and ten bob for the gas. Having done that, he has £10 left and he says to his wife, " Let's go out and spend it ". This has a great deal to do with why our society, per capita, in real terms spends a higher percentage of its income on consumer goods than anywhere else in the world. Because of this atmosphere, the average person has no other responsibility, and therefore what is left after he has done those few little transactions is just spending money.
      The Government have never succeeded in getting any of that spare money into savings. When we Conservatives were in power, we increased savings from £100 million a year to £2,000 million a year. This shows that were we in office we could achieve such a result again. My right hon. Friends are being very moderate in their suggestions about surtax. Since the present Government came into power—I am not trying to make a cheap party point—the value of our money has gone down by 25 per cent.—in other words, the cost of living has gone up by 25 per cent. When we were in office, I thought the level of surtax was absurd. It was equal then to a person in 1939 being asked to pay surtax on an income of £300 or £400 a year. Anybody in 1939 would have

      1191
      thought it crazy if a person on that sort of income had been made to pay surtax. But even the figure of £2,000 a year, which applied when we were in office, is now worth £1,500, so we are now taxing people as being wealthy and privileged who, in pre-war terms, are earning the equivalent of about £300 a year. This is absolutely crazy. Whichever Government are in power, if we are to get initiative and drive, will have to push up this figure to much nearer £4,000 or £5,000 for the whole community and not just for the earned income group.
      10.0 p.m.
      We must take account of the gradual erosion of the value of money that occurs—and again I do not want to be party political—in the Welfare State. It goes on gradually year by year. Even under the Tories it went on, although at a much lower rate. Now we are very nearly reaching galloping inflation and, indeed, when my hon. Friend said, in humorous vein, that we would all be on £100,000 a year, my reaction was that it might well come true. When I was a schoolboy in the 1920s, my brother was in Paris. During the German inflation, he sent me a bill for 10 million German marks. Two years previously, that bill had been worth £1 million, and yet by the time he sent it to me it was not enough to buy a box of matches. I am not suggesting that this is going to happen here, but our rate of inflation is going on at a sufficient rate which should worry every responsible politician in the country.
      When we get inflation going on at a rate faster than the manufacturers and producers can assess their prices for the season, we are in trouble, but we have reached that point under the present Government. For example, people in the clothing industry want to fix prices at which to sell their goods for the next six months, but with rising costs and inflation they are finding that the prices at which they start a season mean that, if maintained, they will be running at a loss at the end of it.
      The other day in the House we heard the pathetic story of Cammell Laird. That situation came about because of wage increases and other increased costs. The firm accepted contracts only two years ago at a value of money which no longer
      1192
      exists today. It is therefore running at a loss, and unless the State does something about it it will go bankrupt. Surely both sides of the Committee must realise the problem we have to face.
      Let us get away from the idea that, with the debased currency we are dealing with, an income of £2,000 is wealth beyond the dreams of avarice. It is nothing of the sort. The hon. Member for Harrow, East (Mr. Roebuck) knows this perfectly well. He is a journalist. He knows that the chaps who produce the articles he writes—if they ever get published—are earning £3,000 to £4,000 a year. They are surtax payers. Do they think that they are amongst the wealthy? Of course not. Their high salaries are only because of inflated and debased currency. They should not be paying surtax. They should be excused from it altogether.
      I am not quite certain that I agree with my hon. Friend who talked about someone earning £100,000 on the Stock Exchange. I wish that he would introduce me to that person. I would have a go myself, although on a much smaller scale. In any case, I do not think that to earn £100,000 in that way is most desirable in the national interest. This man must be a very clever person, but he is an exception.
      The number of people paying surtax has doubled in the last four years, not because the real earnings of the people have gone up but because of inflation and the devaluation of the standard of money. I am perfectly prepared to serve as a Member of this House for £3,250 a year, but I now discover that half my colleagues want a rise because their income is no longer buying what it did in 1964, when we got the last rise. But it is not their salaries which have gone down. The value of their money has eroded. This applies to other people in industry and commerce.
      The Chief Secretary is no fool in these matters and he would be wise to advise the Committee to accept the Amendment. It goes a limited way in the direction we should like to go because it would bring a little more realism into the whole process of the valuation of money in real terms. A pound note or a 2s. piece have only a certain purchasing power and if that purchasing power goes down that

      1193
      coin has been debased. It does not mean that I have got more pay if I get an increase merely to try to keep in balance with that debasement. All parties must accept that we have a debased currency as compared with 1945. One of the most pressing and important matters is to reassess the whole basis of surtax on a much more brutally realistic basis than this Amendment proposes, so that we should not tax ordinary people who have shown incentive and who have worked hard, while at the same time catching the sort of person who makes £100,000 on the Stock Exchange. When I first came into the House we always talked about bachelors with an income of £100,000. But nobody ever met him.
      Mr. Roebuck: Ted Heath.
      Sir D. Glover: No, I do not think so. He is a little below that. But I do not want to weary the Committee at this late hour. I hope that my right hon. Friends have taken note of what I have said. Whichever party is returned to power at the next election must tackle this problem. It is no use our closing our eyes to it and pretending that it does not exist. It is a real problem and the sooner we face the issue the sooner we shall get some respect in the nation.
      [Mr. SYDNEY IRVING in the Chair.]
      Mr. Terence L. Higgins: I intervene briefly since we have had a wide-ranging debate. It is right that the emphasis should have been on the whole question of the effect of surtax on incentives. My hon. Friend the Member for Kensington, South (Sir B. Rhys Williams) was right to point out that the effect was especially severe on a particular group of people, namely those who are just changing their job and may be coming within the surtax range, and the so-called self-winding managers. This group of people is the most affected and is a group on which the country relies to a great extent for the economic growth which we must have to achieve our objectives.
      I should like to put one or two questions to the Chief Secretary. But unless he feels able to accept this Amendment right hon. and hon. Members on this side of the House will feel it right and proper to vote on the Amendment. May we
      1194
      have from the Minister an estimate of the actual cost of the Amendment? It would be true to say that the figures will only be one-thirtieth of the tax reductions the Government would have to carry out to fulfil the Prime Minister's pledge not to increase taxation over the life of the Parliament.
      Our overall attitude has already been clearly expressed today by my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod). There is one analytical point I would take up. In regard to surtax payers it is wrong to suppose that the effect in purely financial terms—that is to say the cost to the Revenue—is the same as the effect on the level of demand in the economy. It is likely to be the case that a high percentage of the tax relief given to surtax payers would be saved.
      But in many ways the Chancellor's intervention this afternoon, when he seemed to be speaking on the surtax rather than the income tax Amendment, was extraordinary. We should not count on possible savings in taxation when estimating a particular tax change, but it is surely the case that this matter should be taken into account in the overall economic strategy. Therefore, I hope the Chief Secretary will refute the impression in the Chancellor's statement that no such calculation is made in making the Government's economic assessment. If so, we are in the hands of a Government acting very irresponsibly.
      The second question is: what is the Chief Secretary's view of the effect which the Amendments would have in terms, not merely of the loss of revenue, but of aggregate demand in the economy?
      An examination of the figures for income tax and surtax in the Red Book suggests a very peculiar situation. There is implicit in the figures given for expectation of revenue from both taxes an estimate of what will happen to income. The implication from the expected change in the revenue for income tax seems to be that the Government expect incomes subject to income tax to rise by about 9 per cent. The revenue is expected to rise by about 18 per cent., but the normal relationship concerning buoyancy and the increase in prices is about two to one. When one looks at the surtax level, the figure appears to be only about half that amount. In other words, the Government seem to be assuming that income

      1195
      tax incomes will go up at roughly twice the rate of surtax incomes. Is that the case? If it is, it has very important implications for the sake of the economy.
      Overall, we are concerned primarily with the question of incentive and, to some extent, the question of the brain drain. We are still losing a considerable number of highly skilled executives overseas, although some may be coming back from America and then, faced with our surtax structure, going to work on the Continent. But the main reason why we must move towards a reduction in the surtax level for incentive purposes is that it is the only way in which we can hope to get the economy moving.
      The Government's concessions are not adequate or well thought out. Probably about 90 per cent. of the people who will gain from them are not the whizz kids or the thrusting executives but, to a large extent, people who have a small amount of unearned income. Therefore, the Government's measures are not adequate. The marginal rate of tax between about £5,800 and £6,000 is astronomical. The first £182 of income at that level liable to surtax is taxed at 72 per cent. on earned income and 81·25 per cent. on unearned income. This is bound to have a disincentive effect for people moving from just below the surtax level to above it. This means that business must pay a considerable amount more.
      The only answer to the problem is to move towards a reduction in general surtax levels. The Government's measures are wrong in principle, and I hope that my right hon. and hon. Friends will join me in supporting the Amendment in the Lobby.
      Mr. Diamond: The hon. Members for Kensington, South (Sir B. Rhys Williams) expressed anxiety lest he should fall in my high esteem. He should have had no such anxiety. I said on an earlier occasion that he could be relied on to express a novel thought in a fresh way. Listening to his self-winding man in that delightful island of his, none of us was disappointed. The hon. Gentleman asked a question to which I will turn at the end of my intervention—whether what is proposed is morally sound. That is the test, and I gladly accept that it is the test.
      1196
      Let me start by saying, on the assumption that the Committee will not require further discussion of the Clause on the Question, That the Clause stand part of the Bill, what it is the Government are proposing to do and what the Amendments suggest in its place.
      10.15 p.m.
      What the Government are proposing to do I am bound to refer to, because the impression I got from the speech made by the hon. Gentleman the Member for St. Ives (Mr. Nott) was that it was not fully understood, and if one gets that impression from the speech of such a knowledgeable man as the hon. Member far St. Ives one can reasonably assume that there are many of his colleagues who have not fully taken the point. What the Government are doing is raising not the level at which income becomes taxed but the level at which surtaxable income becomes liable to surtax, which is quite a different thing.
      For example, in the normal case of a married man with two children and possibly a fraction, a very small amount, of mortgage interest payable, he would not start to be liable to surtax on an earned income under £6,000 because, as the hon. Member knows, he gets his allowances. Whereas previously it has been about £5,500 for such a person, or £5,100 for a person with no special allowances attributable to surtaxable income, the increase will affect the man, and I reckon that what we are proposing is a measurable benefit for those in that level of earned income.
      I cannot define the level of earned income of a whizz kid. Nor can anybody else. I think it is fair to say one was thinking of encouraging the go ahead managerial types of the kind the hon. Gentleman the Member for Kensington, South was referring to, and to whom other hon. Members have referred; we are thinking of this kind of level of income. The Government are, therefore, making a measurable contribution towards that point of view. I thought I ought to mention that because I thought the point had not been fully taken.
      The Government are doing it for the reasons the Chancellor gave, not only because of the effect of assisting those who are liable to surtax, and as a real token, if I may refer back to a discussion

      1197
      we had on a previous Amendment, of his view that some marginal relief ought to be applied where possible to higher earned income, but also because of the need to have regard to the vastly increasing number of small surtax payers, the cost of collecting these small amounts, and the wisdom, therefore, of giving a concession which has its beneficial effects, which costs £4 million to £5 million, and removes a large number, 185,000, from liability to surtax.
      Coming to the Amendment, I was asked what would be its cost. The cost in a full year would be £115 million. The cost in this year would by £92 million. The estimate of the income arising for this year is exactly three times that. So what the Opposition are proposing is, in one Amendment, the reduction of surtax by one-third. That would produce a substantial benefit to the average surtax payer; if one simply takes the number of surtax payers and divides it into the amount proposed to be saved, it would be £324 on average for each such surtax payer. That is a substantial sum. The argument has been that the starting point is too low and that it compares unfavourably with the levels of total tax payable in other countries—
      Mr. Higgins: Will the Chief Secretary tell us what the effect is likely to be on the demand in the economy?
      Mr. Diamond: I cannot give an answer to that without notice. I was asked what the cost in resources was. Every one of the costs which one takes into account for Budget purposes is costed both for financial and resources cost. I cannot give the resources cost without notice. I can either write to the hon. Gentleman or, if he will put down a Question, I will give him the Answer. I take his point that it is not the full financial cost; nobody would suggest that it is for surtax.
      I recognise that the levels of tax payable, including income tax and surtax, are high at high levels of income and, above, say, £7,000 a year uniquely high. I do not attempt to duck those figures. One gets a better comparison than a simple translation at the ruling exchange rate by taking a comparison based on the proportion of the income bracket in the country concerned and converting it on the basis of the income bracket, that is,
      1198
      by taking the first 10 per cent. or the second 10 per cent. and converting on that basis. That is a more realistic comparison and it has been attempted by economists. But it does not matter. We are agreed on the essential, that at high levels of income, and certainly above £7,000 a year, our rates are high, indeed uniquely high.
      The justification which I am putting to the House is not that the rates are not high for surtax at those levels—not at low levels but at those levels. What I am putting to the House is how do we exercise our priorities and what should we do first on any basis of morality which would appeal to all hon. Members, and that is what the hon. Member for Bodmin (Mr. Bessell) was arguing when he was saying " not this year ". The question presents itself to any Government, not as a consideration of what should be done in absolute terms, but as a choice of what one does first. Given my right hon. Friend's Budget judgment, I say unhesitatingly that it would have been morally wrong—and I hope I carry with me the hon. Member for Kensington, South—in advance of and instead of the modest relief which we have offered to those at the bottom of the scale, to introduce an amendment which would have extinguished the liability of a large number of surtax payers, saved them the amounts of money which I have indicated and reduced the total burden of taxation by one-third in one year. I rest on that argument. It cannot be said that the rates are not high, but I am not satisfied, nor could anybody be satisfied, of the disincentive effect. We each have our individual views, but nobody can prove this.
      As for the hon. Gentleman who interviewed the managers who would not be prepared to remove from departmental responsibility to overall responsibility in view of the surtax effect, I hope that he came to the conclusion that that was a good test whether the man ought to be given that kind of responsibility. I would reach that conclusion immediately. A man who is afraid of responsibility, whose desire to make a contribution to a company is limited because his surtax will start at 2s. in the £ or whatever, is not a man on whom responsibility can be placed. It is something outside my experience, and outside the experience of

      1199
      anyone who has ever sat on these Benches, that a person considers his surtax liability before taking on responsibility.
      On the subject of incentive, what the Opposition are proposing is the disincentive of giving a higher benefit, but higher relief to those with unearned incomes than to those with earned incomes. I do not say that was the major purpose of the proposal but it is built into it. This is what they will vote on if they press the Amendment.
      Sir G. Nabarro: Before the right hon. Gentleman sits down, he has listened painstakingly to the whole debate and will know that several speeches have expressed approval for the gradation in Amendment 8. The right hon. Gentleman says that the cost of Amendment No. 7 is £92 million this year and £115 million in a full year, the £92 million being approximately one-third of the total surtax yield of £277 million this year. Would
      he now apply himself to the Schedule in Amendment No. 8, which should be seen and not heard, and give me the figures in response to that Amendment, a preference for which was expressed by many of my hon. Friends? If it were more convenient, I would, of course, table a Parliamentary Question for this Friday, having regard to the current circumstances.
      Mr. Diamond: That is a reasonable request and I am sorry that I did not answer earlier. I heard what the hon. Gentleman heard, namely, the measure of approval for his Amendment, which is a much more responsible Amendment than that put forward by his own Front Bench. The cost of the hon. Gentleman's Amendment would be £85 million for a full year and in the current year £60 million.
      Question put, That the Amendment be made:—
      The Committee divided: Ayes 150, Noes 229.

      Division No. 125.]

      AYES

      [10.28 p.m.

      Alison, Michael (Barkston Ash)

      Glyn, Sir Richard

      Mawby, Ray

      Allason, James (Hemel Hempstead)

      Godber, Rt. Hn. J. B.

      Maxwell-Hyslop, R. J.

      Archer, Jeffrey (Louth)

      Goodhart, Philip

      Mills, Peter (Torrington)

      Astor, John

      Gower, Raymond

      Miscampbell, Norman

      Atkins, Humphrey (M't'n & M'd'n)

      Grant, Anthony

      Mitchell, David (Basingstoke)

      Awdrey, Daniel

      Grant-Ferris, Sir Robert

      Monro, Hector

      Baker, Kenneth (Acton)

      Grieve, Percy

      Montgomery, Fergus

      Baker, W. H. K. (Banff)

      Griffiths, Eldon (Bury St. Edmunds)

      Morrison, Charles (Devizes)

      Balniel, Lord

      Gurden, Harord

      Nabarro, Sir Gerald

      Bennett, Dr. Reginald (Gos. & Fhm)

      Hall, John (Wycombe)

      Neave, Airey

      Biggs-Davison, John

      Hall-Davis, A. G. F.

      Nicholls, Sir Harmar

      Birch, Rt. Hn. Nigel

      Hamilton, Michael (Salisbury)

      Noble, Rt. Hn. Michael

      Boardman, Tom (Leicester, S.W.)

      Harrison, Brian (Maldon)

      Nott, John

      Body, Richard

      Harrison, Col. Sir Harwood (Eye)

      Onslow, Cranley

      Boyd-Carpenter, Rt. Hn. John

      Hawkins, Paul

      Orr-Ewing, Sir Ian

      Boyle, Rt. Hn. Sir Edward

      Heald, Rt. Hn. Sir Lionel

      Osborn, John (Hallam)

      Buchanan-Smith, Alick(Angus, N & M)

      Heath, Rt. Hn. Edward

      Page, John (Harrow, W.)

      Burden, F. A.

      Higgins, Terence L.

      Pearson, Sir Frank (Clitheroe)

      Campbell, B. (Oldham, W.)

      Hiley, Joseph

      Peyton, John

      Carlisle, Mark

      Hogg, Rt. Hn. Quintin

      Pike, Miss Mervyn

      Cary, Sir Robert

      Holland, Philip

      Powell, Rt. Hn. J. Enoch

      Chataway, Christopher

      Hordern, Peter

      Price, David (Eastleigh)

      Clegg, Walter

      Hornby, Richard

      Prior, J. M. L.

      Cooke, Robert

      Howell, David (Guildford)

      Pym, Francis

      Cordle, John

      Hunt, John

      Rawlinson, Rt. Hn. Sir Peter

      Corfield, F. V.

      Hutchison, Michael Clark

      Rees-Davies, W. R.

      Costain, A. P.

      Jenkin, Patrick (Woodford)

      Renton, Rt. Hn. Sir David

      Crouch, David

      Jennings, J. C. (Burton)

      Rhys Williams, Sir Brandon

      Crowder, F. P.

      Kaberry, Sir Donald

      Ridley, Hn. Nicholas

      d' Avigdor-Goldsmid, Sir Henry

      Kimball, Marcus

      Ridsdale, Julian

      Dean, Paul

      King, Evelyn (Dorset, S.)

      Royle, Anthony

      Dodds-Parker, Douglas

      Kirk, Peter

      Russell, Sir Ronald

      Elliot. Capt. Walter (Carshalton)

      Lane, David

      Sharples, Richard

      Elliott, R.W.(Npc'tle-upon-Tyne, N.)

      Legge-Bourke, Sir Harry

      Shaw, Michael (Sc'b'gh & Whitby)

      Emery, Peter

      MacArthur, Ian

      Silvester, Frederick

      Errington, Sir Eric

      Maclean, Sir Fitzroy

      Sinclair, Sir George

      Eyre, Reginald

      Macleod, Rt. Hn. Iain

      Smith, Dudley (W'wick & L'mington)

      Farr, John

      McMaster, Stanley

      Smith, John (London & W'minster)

      Fletcher-Cooke, Charles

      McNair-Wilson, Michael

      Speed, Keith

      Foster, Sir John

      McNair-Wilson, Patrick (New Forest)i

      Stainton, Keith

      Fraser, Rt. Hn. Hugh(St'fford & Stone)

      Maddan, Martin

      Stoddart-Scott, Col. Sir M.

      Galbraith, Hn. T. G.

      Maginnis, John E.

      Summers, Sir Spencer

      Gilmour, Ian (Norfolk, C.)

      Maude, Angus

      Tapsell, Peter

      Glover, Sir Douglas

      Maudling, Rt. Hn. Reginald

      Taylor, Edward M.(G'gow, Cathcart)

      Taylor, Frank (Moss Side)

      Walker, Peter (Worcester)

      Wolrige-Gordon, Patrick

      Temple, John M.

      Walker-Smith, Rt. Hn. Sir Derek

      Wood, Rt. Hn. Richard

      Thatcher, Mrs. Margaret

      Walters, Dennis

      Woodnutt, Mark

      Tilney, John

      Ward, Christopher (SWindon)

      Turton, Rt. Hn. R. H.

      Wells, John (Maidstone)

      TELLERS FOR THE AYES:

      van Straubenzee, W, R.

      Wiggin, A. W.

      Mr. Timothy Kitson

      Vaughan-Morgan, Rt. Hn. Sir John

      Williams, Donald (Dudley)

      and Mr. Bernard Weatherill

      Waddington, David

      NOES

      Abse, Leo

      Fraser, John (Norwood)

      Marquand, David

      Albu, Austen

      Freeson, Reginald

      Mason, Rt. Hn. Roy

      Allaun, Frank (Salford, E.)

      Galpern, Sir Myer

      Mellish, Rt. Hn. Robert

      Alldritt, Walter

      Gardner, Tony

      Mendelson, John

      Archer, Peter (R'wley Regis & Tipt'n)

      Garrett, W. E.

      Millan, Bruce

      Armstrong, Ernest

      Ginsburg, David

      Mitchell, R. C. (S'th'pton, Test)

      Ashley, Jack

      Golding, John

      Moonman, Eric

      Ashton, Joe (Bassetlaw)

      Gray, Dr. Hugh (Yarmouth)

      Morgan, Elystan (Cardiganshire)

      Atkins, Ronald (Preston, N.)

      Greenwood, Rt. Hn. Anthony

      Morris, Charles R. (Openshaw)

      Atkinson, Norman (Tottenham)

      Gregory, Arnold

      Moyle, Roland

      Barnes, Michael

      Grey, Charles (Durham)

      Mulley, Rt. Hn. Frederick

      Barnett, Joel

      Griffiths, Eddie (Brightside)

      Murray, Albert

      Baxter, William

      Griffiths, Will (Exchange)

      Neal, Harold

      Beaney, Alan

      Hamilton, William (Fife, W.)

      Newens, Stan

      Bennett, James (G'gow, Bridgeton)

      Hamling, William

      Norwood, Christopher

      Bessell, Peter

      Hannan, William

      Oakes, Gordon

      Bidwell, Sydney

      Harper, Joseph

      Ogden, Eric

      Binns, John

      Harrison, Walter (Wakefield)

      O'Halloran, Michael

      Bishop, E. S.

      Haseldine, Norman

      Orbach, Maurice

      Blenkinsop, Arthur

      Healey, Rt. Hn. Denis

      Orme, Stanley

      Booth, Albert

      Heffer, Eric S.

      Oswald, Thomas

      Boston, Terence

      Henig, Stanley

      Padley, Walter

      Bray, Dr. Jeremy

      Herbison, Rt. Hn. Margaret

      Paget, R. T.

      Brooks, Edwin

      Hooley, Frank

      Palmer Arthur

      Brown, Rt. Hn. George (Belper)

      Houghton, Rt. Hn. Douglas

      Pannell, Rt. Hn. Charles

      Brown, Hugh D. (G'gow, Provan)

      Howarth, Robert (Bolton, E.)

      Parker, John (Dagenham)

      Brown, Bob (N'c'tle-upon-Tyne, W.)

      Hoy, Rt. Hn. James

      Parkyn, Brian (Bedford)

      Buchan, Norman

      Hughes, Rt. Hn. Cledwyn (Anglesey)

      Pavitt Laurence

      Buchanan, Richard (G'gow, Sp'burn)

      Hughes, Roy (Newport)

      Pearson, Arthur (Pontypridd)

      Callaghan, Rt. Hn. James

      Hynd, John

      Pentland, Norman

      Cant, R. B.

      Jackson, Colin (B'h'se & Spenb'gh)

      Perry, George H. (Nottingham, S.)

      Carmichael, Neil

      Jackson, Peter M. (High Peak)

      Price, Christopher (Perry Barr)

      Carter-Jones, Lewis

      Janner, Sir Barnett

      Price, Thomas (Westhoughton)

      Coleman, Donald

      Jay, Rt. Hn. Douglas

      Price, William (Rugby)

      Concannon, J. D.

      Jenkins, Hugh (Putney)

      Probert, Arthur

      Crawshaw, Richard

      Johnson, James (K'ston-on-Hull, W.)

      Randall, Harry

      Cronin, John

      Jones, Dan (Burnley)

      Rees, Merlyn

      Crosland, Rt. Hn. Anthony

      Jones, Rt. Hn. Sir E1wyn(W. Ham, S.)

      Rhodes, Geoffrey

      Dalyell, Tam

      Jones, J. Idwal (Wrexham)

      Richard, Ivor

      Darling, Rt. Hn. George

      Jones, T. Alec (Rhondda, West)

      Roberts, Albert (Normanton)

      Davidson, Arthur (Accrington)

      Judd, Frank

      Roberts, Gwilym (Bedfordshire, S.)

      Davies, E. Hudson (Conway)

      Kelley, Richard

      Robertson, John (Paisley)

      Davies, Dr. Ernest (Stretford)

      Kerr, Russell (Feltham)

      Rodgers, William (Stockton)

      Davies, Rt. Hn. Harold (Leek)

      Lawler, Wallace

      Roebuck, Roy

      Davies, Ifor (Gower)

      Lawson, George

      Rose, Paul

      Davies, S. O. (Merthyr)

      Leadbitter, Ted

      Rowlands, E.

      de Freitas, Rt. Hn. Sir Geoffrey

      Lee, Rt. Hn. Frederick (Newton)

      Ryan, John

      Delargy, H. J.

      Lee, Rt. Hn. Jennie (Cannock)

      Shaw, Arnold (Ilford, S.)

      Dell, Edmund

      Lee, John (Reading)

      Sheldon, Robert

      Dempsey, James

      Lewis, Ron (Carlisle)

      Shore, Rt. Hn. Peter (Stepney)

      Diamond, Rt. Hn. John

      Lipton, Marcus

      Sillars, J.

      Dickens, James

      Lomas, Kenneth

      Silverman, Julius

      Doig, Peter

      Loughlin, Charles

      Slater, Joseph

      Dunn, James A.

      Lubbock, Eric

      Small, William

      Dunnett, Jack

      Lyon, Alexander W. (York)

      Snow, Julian

      Eadie, Alex

      Lyons, Edward (Bradford, E.)

      Spriggs, Leslie

      Edelman, Maurice

      Mabon, Dr. J. Dickson

      Steel, David (Roxburgh)

      Edwards, Robert (Bilston)

      McCann, John

      Steele, Thomas (Dunbartonshire, W.)

      Edwards, William (Merioneth)

      MacColl, James

      Swain, Thomas

      Ellis, John

      MacDermot, Niall

      Tavern, Dick

      English, Michael

      Macdonald, A. H.

      Tinn, James

      Ennals, David

      McElhone, Frank

      Tuck, Raphael

      Evans, Albert (Islington, S.W.)

      McKay, Mrs. Margaret

      Urwin, T. W.

      Evans, Fred (Caerphilly)

      Mackenzie, Gregor (Rutherglen)

      Wainwright, Richard (Colne Valley)

      Evans, loan L. (Birm'h'm, Yardley)

      Mackie, John

      Walden, Brian (All Saints)

      Faulds, Andrew

      Maclennan, Robert

      Walker, Harold (Doncaster)

      Fernyhough, E.

      McNamara, J. Kevin

      Wallace, George

      Finch, Harold

      MacPherson, Malcolm

      Watkins, David (Consett)

      Fitch, Alan (Wigan)

      Mahon, Peter (Preston, S.)

      Watkins, Tudor (Brecon & Radnor)

      Fletcher, Raymond (Ilkeston)

      Mahon, Simon (Bootle)

      Weitzman, David

      Fletcher, Ted (Darlington)

      Mallalieu, J.P.W. (Huddersfield, E.)

      Wellbeloved, James

      Ford, Ben

      Mapp, Charles

      Wells, William (Walsall, N.)

      Forrester, John

      Marks, Kenneth

      Whitlock, William

      Wilkins, W. A.

      1202

      1203

      Willey, Rt. Hn. Frederick

      Wilson, William (Coventry, S.)

      Williams, Alan (Swansea, W.)

      Winnick, David

      TELLERS FOR THE NOES:

      Williams, Alan Lee (Hornchurch)

      Winstanley, Dr. M. P.

      Mr. R. P. H. Dobson

      Williams, Clifford (Abertillery)

      Woodburn, Rt. Hn. A.

      and Mr. Ernest G. Perry.

      Wills, Rt. Hn. George

      Clause 12 ordered to stand part of the Bill.
      Mr. Diamond: I beg to move,
      That the Chairman do report Progress and ask leave to sit again.
      Mr. Iain Macleod: I accept the Motion. However, for the convenience of the Committee I should like the Chief Secretary to confirm that he has been able to table a Motion to meet the point of order which I raised at the beginning of our sitting today so that we may take the Clauses tomorrow in the order of Clause 13, followed by the new Clauses on savings.
      Mr. Diamond: I am grateful to the right hon. Gentleman. I shared his view that that would meet the general convenience of the Committee, and such a Motion has been tabled.
      Question put and agreed to.
      Committee report Progress; to sit again Tomorrow.

  HOSPITAL ENDOWMENTS (SCOTLAND) BILL
  Order for Second Reading read.
  Bill referred to the Scottish Grand Committee.—[Mr. Milian.]

  FLEETWOOD-POULTON RAILWAY PASSENGER SERVICE
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ernest G. Perry.]
  10.40 p.m.
  Mr. Walter Clegg: The subject of this debate is the imminent closure of the Poulton-le-Fylde to Fleetwood railway passenger service in my constituency. This involves the closing of the 'Thornton Cleveleys, Burn Naze and Fleetwood passenger stations. It is not my intention to chide the Minister in this debate. I am much more anxious to convince and persuade him that this passenger service should continue in existence.
  As I understand it, the service is due to close on 1st June. What I am asking for is a reprieve at the eleventh hour. There is not time in this debate to outline the full history of this passenger service closure. Suffice it to say that it was bitterly opposed by the Thornton Cleveleys and Fleetwood councils, by those using the line, by many local organisations, and, not least, by the National Union of Railwaymen.
  A public inquiry was held on 1st May, 1969, by the Transport Users Consultative Committee, which was fully attended by objectors. Indeed, it was one of the best attended inquiries I have ever seen; and in my profession I have seen many inquiries. On 23rd May, 1969, the inquiry reported to the Minister that the withdrawal of this train service would cause hardship to a number of people who use it to reach their employment, a small number of people would suffer a great deal of hardship, the remainder hardship to a lesser degree, inconvenience would be suffered by people who travelled to the area for holidays, etc. That is as published in the Press hand-out. It concluded:
  " The Committee cannot see any means of alleviating the hardship."
  As the Minister knows, I wrote and asked him if a copy of the full report of the inquiry could be made available. I am told that this is a confidential document between the Minister and the consultative committee. For the life of me, I cannot see why. In a planning inquiry
  1206
  the inspector's report is published in full. In a court of law the judge's conclusions are given in full. All we get in this case, after a full day's hearing of a great many complaints, is a Press statement of nine lines.
  If justice is to be seen to be done, I should have thought that the people of my constituency were entitled to see the report in full; because, after all, the consultative committee is supposed to represent travellers' interests. So why should this be kept secret?
  On 26th February, 1970, the Minister consented to the withdrawal of the service and said that he was not prepared to give grant-aid to keep the service open. I appreciate that the Minister has to be careful about the way he handles public money, and I would expect him to ensure that any money granted to keep the service open should be well spent. He has the public interest to consider, and I respect that. Equally, I have the interests of my constituents to consider, for I believe that they will suffer considerable hardship if the closure takes place.
  The Minister wrote to the town clerk of Fleetwood in April, 1970. I cannot be more specific about the date, because that is how the Minister's letter is dated —just " April, 1970 ". The letter ended in these terms:
  " In the end the Minister came to the conclusion that, nothwithstanding the report by the North Western T.U.C.C., the social needs of most of the present users of this rail service could be met adequately by strengthening the bus service, with particular reference to the needs of commuters. Moreover, there did not appear to him to be really strong economic reasons for continuation of the passenger service. In these circumstances, the Minister did not feel that he would be justified in paying grant-aid for a service between Poulton and Fleetwood even when account was taken of the possible cost reductions."
  They were the Minister's reasons in April. What are the reasons why he should have a change of heart now?
  First, the situation has changed, because since the inquiry the pattern of railway travel in the Fylde area has been altered. From his letter of 26th February, I believe that the Minister took these changes into account, but I also believe that he did not attach sufficient weight to their impact, which has been to make Poulton-le-Fylde a much more important

  1207
  station, and with the improved main line services at Preston, to which, as a regular user, I am glad to pay tribute, British Rail can attract more people than ever to its services. An efficient feeder service from Fleetwood to Thornton Cleveleys would surely be a further attraction. At a time when British Rail services are proving more attractive, it is strange that this feeder service from Fleetwood should be closed down.
  The financial effect on the new services to Blackpool North also appears to have reduced the amount required to operate an all-day service on the Fleetwood spur. The first figures which we were given showed that this would cost, first of all, about £90,000 and later £120,000, but I now understand that British Rail could operate a full day's services for £55,000. I further understand that negotiations are likely between the two local authorities involved. Fleetwood and Thornton Cleveleys, and that, in certain circumstances, the local authorities might be prepared to contribute from the rates a substantial sum. I am convinced that they could not bear the whole cost of £55,000, but would it not be possible for the Minister at this stage to join these negotiations, to see whether the burden could not be shared among the Minister, British Rail and the local authorities, with a tripartite agreement which would keep the rail service open?
  Second, it is wrong for British Rail to close this service before it has tried to operate it on a cheaper basis than at present. British Rail knows that it will have the full co-operation of the National Union of Railway-men. Indeed, I would like the service run as the union suggests. After all, the union members know their jobs. It seems defeatist that British Rail has not tried to run the service differently before it closes it, really trying to make economies.
  Third, the passenger possibilities at Fleetwood are still developing. We expect to have an Isle of Man steamer service and a steamer ferry service to Barrow, and both could induce further passenger potential. Both Fleetwood and Thornton Cleveleys are improving their resort facilities, and it would clearly be a tragedy for them if the closure hindered this development.
  1208
  Fourth, and perhaps most serious, is the employment situation in Thornton Cleveleys and Fleetwood. The kernel of the problem is that the statistics show that there are just not enough jobs in the two towns to provide work for the unemployed. In December, 1969, there were 581 people in Fleetwood chasing 50 jobs, and in Thornton Cleveleys there were 458 people chasing 10 jobs. In the wider travel-to-work area in which we are now included for unemployment statistics, we had 3,689 people competing for 145 jobs.
  It is clear that since North Fylde is neither a development area nor an intermediate area the creation of extra jobs there will be very difficult. The only help we get, which costs nothing to the Government or anyone else, is that we can have i.d.c.s. with reasonable speed. Our unemployment is well above the national average and has been for some years. It is a persistent problem, and if we are to get these people back into employment we cannot afford to close the rail service which would help them to commute to jobs further a field. It is obvious that if there are not enough jobs for the travel to work area itself, the people must go outside. If the jobs will not come to the workers in my constituency, the workers must go to the jobs.
  The rail service will be of particular importance if, as we hope, new jobs are created by the new town at ChorleyPreston—Leyland. and this will be a new growth point in the area if people are enabled to reach the area, and the best way by far would be rail. Indeed, looking at the long term, it would seem that with huge population developments in that area it would be wrong at this point in time to close this link line to Fleetwood.
  There is no real feeling of certainty in the constituency that the proposed new bus service alternative will be effective. We have a guarantee for two years: what happens at the end of that time is in the lap of the gods. My constituents have written to me to tell me that they are not at all certain that the Ribble bus services can supply the new services required because of the already great strain on its existing resources. If these bus services did break down before the two years were up we could be in a very difficult situation indeed.

  1209
  I believe that the reasons I have given are good and cogent ones why a further attempt to avoid this closure should be made. Once the service is lost it may never be regained. As I have said, my constituency has a difficult employment problem to solve, and it will not be easy to do it. I believe that the existing rail service to Fleetwood and Thornton Cleveleys plays an important part in the unemployment problem, and with our present situation it is essential that nothing be done which would worsen the position.
  I repeat that we have no Government grants or aid of any kind in the Fylde, and to that extent we are on our own, but there is something that could be done by the Government to help us, and that is to postpone the rail closure. Other parts of the country receive help. The development areas have far lower unemployment figures than those in my constituency. Other industries receive help. I do not believe that it is too much to ask that the Government should now help an area of high unemployment, as my constituency is, by keeping the rail service open.
  I appeal to the Minister even at this late stage to see whether by means of talks between himself, the local authorities—which are prepared to contribute—and British Rail this line so deeply vital to my constituency cannot be kept open.
  10.53 p.m.
  The Joint Parliamentary Secretary to the Ministry of Transport (Mr. Albert Murray): I am glad that the hon. Member for North Fylde (Mr. Clegg) has raised the question of the Minister's consent to the Railways Board's proposal to withdraw all passenger services between Poulton and Fleetwood. I realise that it is of much concern to his constituents, and I hope that I can answer some of the points he has made. My hon. Friends the Members for Carlisle (Mr. Ron Lewis), and St. Helens (Mr. Spriggs), have also, over many months, urged strongly the retention of this service. I would also like to mention the constructive proposals put forward by the Joint Fylde Branches of the National Union of Railwaymen.
  Hon. Members will know that under the provisions of the Transport Act, 1968, and in the light of our overall railway policy, it is for the Government to decide in cases such as these whether it would
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  represent value for money for them to provide a specific grant for the retention of an unremunerative passenger service. In making a decision, my right hon. Friend takes full account of all social and economic factors.
  The basic facts of the case are as follows. Up to 4th May most of the trains from Fleetwood ran as far as Kirkham, where connection was made with the main service between Blackpool and Manchester, which then ran to Blackpool South station. But, as a result of an extensive review in the autumn of 1968 of a large group of rail services radiating from Preston, the Blackpool services now run predominantly from Blackpool North Station. One effect of this has been that a good service to Preston and Manchester is now provided from Poulton station, to which the hon. Gentleman referred, which is only about one mile from Thornton, where the station is, and seven miles from Fleetwood by road. The Railways Board announced some time ago that if the Minister gave his consent to its closure proposal it would build a car park for 50 cars at Poulton station.
  The total daily number of people using Fleetwood, Burn Naze and Thornton-Cleveleys stations has been about 750. Up to 75 of these have used the rail service to travel the 2½ miles from Fleetwood to Burn Naze, where there is a large I.C.I. works. These people can be as well catered for by bus. In the summer about 400 people daily have used the rail service off-peak for occasional travel such as shopping.
  It has been argued that the service is essential for holiday travel to Fleetwood or onward by the hovercraft service to the Isle of Man. But there is no evidence that substantial numbers use the rail service for this purpose, and there appears to be no other economic reason which would justify retention of a passenger service. In any case, there are extensive long-distance coach services to Cleveleys and Fleetwood from the West Riding, East Lancashire, the S.E.L.N.E.C. area, the Midlands and London.
  The most difficult problem, which has exercised us greatly, concerns the regular longer-distance rail commuters, of whom there have been approximately 200 on weekdays—about 100 to Preston, 80 to Manchester and a further 20 to other places in S.E.L.N.E.C. or Merseyside. Of

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  these 200, about 150 live in Thornton-Cleveleys, and the remainder in Fleetwood; and some of them live quite a distance from the railway stations.
  There are already regular bus services between Fleetwood, Thornton-Cleveleys and Poulton railway station. The journey times of these buses vary between 28 and 32 minutes, depending largely on whether they take the direct route or the longer route via Thornton-Cleveleys station. If allowance of 10 minutes is made for bus-rail interchange at Poulton station, the overall journey times from Fleetwood to Preston and Manchester in the peak would be increased from about 40 minutes to a maximum of about 60 minutes, and from just under 90 minutes to a maximum of about 115 minutes respectively. From Thornton-Cleveleys the comparable maximum increases in journey times in the peak would be about 15–18 minutes. My right hon. Friend in taking his decision realised that the longer journey times would not be welcome, particularly for those travelling from Fleetwood to Manchester or Merseyside. Nevertheless he did not consider that this would involve real hardship.
  However, we have examined most carefully the possibility of retaining a modified rail passenger service between Fleetwood and Poulton at an acceptable grant-aid cost, despite the fact that the present level of earnings does not even cover the movement costs. It was assumed that in order to achieve maximum economy the line would be singled and that Fleetwood, Burn Naze and Thornton-Cleveleys stations would be unmanned and pay-train working introduced instead.
  The three possible services we have considered are an all-day service consisting of 18 trains each way, an alternative service of five trains each way each rush hour, and a peak-hour only service of three trains each way each rush hour. The annual grant-aid required for these services would be £55,000, £46,000 and £42,000 respectively, compared with £123,000 for the longer Kirkham—Fleetwood service. These costs have been calculated on the basis used for all grant-aided services. They take account of the fact that freight services will continue to run over the line. The joint track and signalling and terminal costs have been
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  allocated between the passenger and freight services in accordance with the published formula so that each service bears its fair share of these costs and neither profits at the expense of the other.
  Since the case for retention of a rail passenger service between Fleetwood and Poulton rests in the last resort on the needs of the 200 or so longer-distance weekday commuters, this means that an all-day service could be provided only by paying an annual grant equivalent to about £275 for each one of them. This seems excessive given that, in my right hon. Friend's judgment, most of these commuters will not suffer more than insignificant inconvenience if they have to rely in future on an improved bus service which would link with the new rail service at Poulton.
  It was with real regret—and I say this most sincerely—that my right hon. Friend concluded that on this occasion he must dissent from the conclusions of the North-Western Transport Users' Consultative Committee.
  Moreover, it remains most important to limit public expenditure where possible. If the Government spend money, which comes from the taxpayers, on grant-aiding rail passenger services for which there is not a strong social or economic need, there is less money available for other desirable projects, many of which also meet social and economic needs.
  It was for these reasons that my right hon. Friend gave his consent to withdrawal of the rail passenger service subject to the provision of certain additional buses. The routes and timings of these buses were worked out with great care so as to take account, in so far as was practicable, of the individual needs of displaced rail passengers.
  Since the Minister's decision, Fleetwood and Thornton-Cleveleys councils have backed their strong protests with the practical action that the hon. Gentleman mentioned. They have offered to provide grant-aid equivalent to a penny rate—which, taking the two councils together, is about £10,000—for an all-day service. But as the annual cost of this service would be £55,000 there remains a gap of £45,000.
  The Minister does not feel that he would be justified in bridging this gap.

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  The most that he would be prepared to consider—and this is not to be taken as any kind of promise—would be an amount equal to the estimated loss of contributory revenue, together with the amount of these costs that will fall to be reallocated to other grant-aided services following the withdrawal of this one. In total, this would amount to only about £9,000—which would still leave £36,000 to be found.
  I realise that the provision of this further amount would impose a heavy burden on the ratepayers of Fleetwood and Thornton-Cleveleys, and their councils may well consider that it is not practicable. But the decision on whether a rail passenger service is to continue between Fleetwood and Poulton on this basis effectively rests with them. As I
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  have said earlier, my right hon. Friend does not think that there is a case for his meeting this cost.
  This has been a difficult and complicated rail closure case. The various factors have been examined in great detail and with great care. At the end of the day, it was the Minister's conclusion that the social and economic need for this passenger service was not sufficient to justify his refusal of consent to the Railways Board's closure proposal.
  In saying that, I would also like to pay a tribute to the hon. Gentleman for the way in which he presented the case.
  Question put and agreed to.
  Adjourned accordingly at four minutes past Eleven o'clock.