§ 4.5 p.m.
§ Debate resumed.
§ LORD BALFOUR OF BURLEIGH
My Lords, in resuming the debate on the Second Reading of the Finance Bill, I shall not follow the remarks which the noble Lord. Lord Beveridge. directed to one particular Part of the Bill. From what I could understand of what the noble Lord was saying. there is a good deal of substance in his complaint. So far as I am concerned, I should like to express my gratitude to the Government for having done what they have to make pensions for self-employed persons easier to acquire. I only want to say a few words to your Lordships about the point to which my noble friend Lord Selkirk, who introduced the Bill, referred as the main feature of the Bill; that is to say, 385 the increased incentive to saving. On that point, the noble Lord, Lord Pethick-Lawrence, from the other side of the House, did not say very much. I must say that, considering the small appetite with which the noble Lord said he was coming to the meal provided by the Government, I admired the way in which he smacked his lips over his criticisms. We all enjoyed enormously what he said and I want later to refer to the eloquent appeal that he made at the end of his speech.
So far as Premium Bonds are concerned —and I am concerned with them purely from the aspect of saving—all the noble Lord, Lord Pethick-Lawrence, said was that he thought they were undignified. The noble Lord did not express the criticism on moral grounds which other people have expressed. I respect greatly the people who have objections on moral grounds; they are perfectly entitled to their own opinion. But I should think that they must feel slightly uncomfortable, if they object on moral grounds to these Premium Bonds, about the revenues which the Government derive from the tote. Many of them, I expect, have moral objections to liquor; and, if so, they must writhe under the immense revenues the Government derive from that source. I am sure they do not writhe as much as I do when I have to pay nearly £2 for a bottle of Scotch whisky; nevertheless, I hope that they do writhe, if they feel like that about it. My only criticism of the Premium Bonds is that I think the prizes are too small. I do not consider £1,000 sufficient if it is to compete with other attractions of the kind, and I should like to see the prizes a good deal bigger.
The aspect of saving that I want to impress on your Lordships to-day is that of the importance of personal saving in the matter of the provision of risk capital. If our industry is to continue to be dynamic and competitive, it must have a constant supply of fresh risk capital. The immediate point that I want to impress upon your Lordships is the importance of arranging, if we can, for some part of that supply of risk capital to be derived from the wage earners themselves. I do not want to go into statistics in my remarks to-day, and therefore I will not attempt to make any estimate of the thousands of millions of pounds of the national revenue passing through the hands of wage earners at the moment—it 386 must be a substantial proportion of the national income. If only we could somehow manage to direct some part of those wages into a share in the ownership of industry, and in the profits of industry, that would be a tremendous gain, both from a social and from an industrial point of view.
Hitherto, profit-sharing has taken the form either of co-partnership or of some distribution of profits by successful firms. That seems to me to be quite admirable where an established business is concerned, but there are great difficulties in trying to apply that to anything in the nature of new industry. Indeed, I think the progress made by profit-sharing has been disappointing, and I want to suggest to your Lordships one reason why that. should be so. I think that if an established business wished to set up a profit-sharing system for its workers, it would be far better if they did it in the form of a distribution of a share of the equity. If they would make some unconditional distribution of shares, it would be far better than giving some conditional share in their profits. I know that certain great firms are attempting something on those lines, and I believe that one of the great difficulties standing in the way resides in taxation. I wish to appeal to the noble Earl in charge of the Bill in this House to make a special effort to get the Treasury to consider the question of taxation in that particular matter, because I believe that if we could induce profit-sharing in the form of distribution of shares, rather than by payment of cash, it would be a great advance.
What I have said refers to established industry, but new ventures in industry also require a constant supply of risk capital. Here we see very clearly that the equity shareholder who provides the capital is a risk taker, and for that reason I feel that investment in new ventures is not so suitable for the wage earner. If he puts his money into some business which is not established, and things go wrong, then he loses not only his money but, maybe, his job and his money; and that would not be good. But there is a way, I venture to suggest. in which the risk could be spread, and is being spread, by which the wage earner could still do his share in supplying capital for new industry; and that is through the investment trusts. An investment trust holds a portfolio of every class of investment, 387 and it is interesting that for the last fifteen or twenty years shareholders in investment trusts have seen an appreciation of their capital, by and large, sufficient to compensate for the fall in the purchasing power of money. Indeed, an investment in an investment trust holding has been better for the investor than a holding of what are still rather euphemistically called "gilt-edged" stocks.
I wonder whether—I ask out of ignorance—those who manage the great funds, such as the trade union funds or the Co-operative Movement funds, are aware of the virtues of the investment trust companies as a field of investment? I feel confident that people who manage great funds like that could hardly over-look such important avenues of investment. That is all to the good; but, even if that is so. it does not quite meet the point I am making, which is that I think the most important element would be the individual investment by the wage earner in such things as unit trusts. There are investment trusts which issue their stock in small holdings—it may be 5s.—and if the wage earners could be encouraged, whether by trade unions, employers or whoever you like, to invest in that way, I feel that it would be of great value.
I am endeavouring in what I am saying to keep absolutely clear of any element of Party politics. I do not want to argue about distribution of wealth, except to say this (and here I hope that I may get agreement from everybody, in all quarters of the House): however much we may disagree about the proper way to distribute wealth, we can all agree that it is important that more people should own more property, and particularly in the form of ownership of industry. Of course, the way to secure that is to secure the greatest possible increase in the national wealth. Therefore, I would ask the Government to study most carefully whether anything can be done through some alteration in taxation, both on the main issue of distributing scrip instead of profits in profit-sharing, and also by helping investment trusts which issue small value shares. What we have to do is to increase our productivity. I think our standard of living has gone a little ahead of our productivity, but if only we can do it, we can first of all catch up with the productivity, 388 and after that, if we can all pull together, we have a vista of a gradually increased standard of living.
On that note, I should like to say to the noble Lord, Lord Pethick-Lawrence, how much I admired and agreed with the most eloquent appeal which he made at the end of his speech. He is, of course, perfectly right that our sacrifices are not yet complete. I agree with him that if the people of this country can be made to understand the position they will respond. In the darkest hour of the war we had a sheet anchor. In those days I always thought that the thing that would come to our rescue would be the building up of an Air Force—and, to a large extent, so it happened. In the days through which we are living now, which are fraught with great anxiety, as the noble Lord, Lord Pethick-Lawrence indicated, the sheet anchor to which we have to cling is the integrity, the brains and the quality of the people. If they can be made to understand and to participate, then I feel sure that all will be well.
§ 4.17 p.m.
My Lords, the noble Lord who has just spoken enjoys a prestige in the City and in this House which would be hard to equal, and it is his intervention—of which he was kind enough to inform me a little while ago—that has drawn me into this debate. I would otherwise have hesitated to try to add to what has been already said so well about our Labour point of view by the noble Lord, Lord Pethick-Lawrence, and what will be said with the full authority of the Party by the noble Viscount, Lord Alexander of Hillsborough, at the end.
As Chairman of one of the smaller clearing banks, and as one who was, in that capacity, privileged to hear Mr. Macmillan's recent meeting that was so widely publicised, I feel in a certain difficulty about offering any free opinion about the policy he is pursuing. I might not have intervened at all were it not that I think the noble Lord, Lord Balfour of Burleigh, has raised a matter which I and others can discuss with full freedom; and although it sounds rather technical, it is of far-reaching significance which can be understood by anyone who takes a little trouble. I should like, therefore, not to commit my Party at this stage, but, 389 having spoken to a number of my political friends and found them not unsympathetic, to offer a few thoughts about the best method of producing a greater flow of savings from the small investor. I have in mind particularly those sections of the community who are now better off than they used to be.
I would develop my argument, which will not be long drawn out, in five stages. First of all, I think we can agree, if we can agree to nothing else in economics, that, apart from the necessity of harder work, which the noble Lord, Lord Pethick-Lawrence, so rightly stressed, the one major economic development which is beyond all argument desirable and essential is a greater flow of savings from the community as a whole. By that, I mean a greater disposition to save and a greater reluctance to spend. Whatever may be the precise statistical situation—and, like the noble Lord, Lord Balfour of Burleigh, I will not trouble the House with any figures, or hardly any to-day—there is no doubt that somewhere in our community there exist a large number of people, millions of people (it is the pride and glory of the Labour Party, rightly or wrongly, that these people are in this position now) who are better off, both absolutely and relatively, than they used to be. I am thinking, of course, of the people who are not on the lowest level of income but have an income which affords them, at any rate, more than a bare subsistence.
This large section of our community may reasonably and fairly in their own interests and in the interests of the country—I am not asking them to make a sacrifice, though I am not trying to prevent anybody from making a sacrifice—be asked to save more than they are doing now. I am not talking of one section particularly—I do not want to imply that other sections should not be expected to save anything at all—but I think that the more comfortable members of the community are too ready to-day to say (whether in a spirit of resignation or even with pride I do not know), "Of course, I cannot save with taxation as it is; it is impossible." It is impossible, assuming a certain standard of living. To take one example. I suppose there are many noble Lords and other people outside this House who, when they have a daughter growing up, 390 feel that it is a minimum requirement that they should provide a dance for her when she comes out. Twenty-five years ago that used to cost £300; to-day it may be £600 or more. If it is to be regarded as a sine qua non of our civilised existence—and the London season, I am told, is one of the gayest of all time—that no reduction is to be effected there, we can look only to the poorer sections of the community for savings.
But I am not out to be controversial. If we consider seriously this idea of more savings, we might ask reasonably whether any voluntary modification is to be suggested by Her Majesty's Government in the standard of life of the well-to-do. I think that that is a point which the noble Earl would perhaps wish to add to when it comes to his turn. But, at the moment, I am not thinking of that; I am thinking particularly of the large number of people—what one might call the "masses"—who could save without disturbing their standard of life.
Having got as far as that, I agree heartily with the noble Lord, Lord Balfour of Burleigh, that this immense social group in question should be introduced to the possibility of buying equities or ordinary shares. I agree with him absolutely. In view of the steady inflation and the uncertainty (I will say a word later on about whether in the long run it will be checked), the enthusiasm of these new investors for buying Government securities is bound to be somewhat limited. It is difficult in their own interests to induce them to put their small accumulations into Government securities beyond a certain point. We know the great work done by the noble Lord, Lord Mackintosh of Halifax. I am sure that he is aware of the limitations in that field. We cannot blame these small investors if they frequently prefer consumption to buying securities whose real purchasing power has deteriorated so seriously in recent years. I agree with the noble Lord, Lord Balfour of Burleigh, that, provided the issue is presented to them attractively by people whom they can trust, there seems no reason why this large section should not be persuaded to put their money into high-class equities in a very big way. In this way, great addition can be made to our national total of savings.
391 When we come to the problem of how this appeal should be made, of course, we may not find it so easy. I am certainly far from ruling out schemes, whether of co-partnership or otherwise, which have been or may be launched by reputable firms, but it seems to me that the Government themselves should assume a responsibility, and not only in the way suggested by the noble Lord, Lord Balfour of Burleigh. It seems to me that if this idea that we are discussing is a sound one, the Government cannot content themselves by offering vague and general benedictions about the sale and purchase of ordinary shares among working people. The Government themselves should, I feel, give a lead by asking the National Savings Movement to work out a scheme which would encourage and mobilise the savings of the small man with a view to the investment of those savings in ordinary shares.
I would break off to quote this one small collection of figures which was provided recently in a very striking article in the Financial Times by Mr. Wincott:The immediate point is that a recent report of the Economic Commission of Europe recorded that over the period 1950–54 there had been a 41 per cent. increase in fixed investment in Western Germany, one of 38 per cent. in Italy, 22 per cent. in the Netherlands and 19 per cent. in France. Apart from Greece, Britain came next to the bottom, with 16 per cent., and Belgium was the only country which achieved no appreciable change in the volume of gross fixed investment.So we were practically at the bottom, a long way behind the leading European nations in terms of fixed investment during the years 1950–54.
All the time that I am talking about increasing the flow of savings, it is with a view to their being used in productive investments. Obviously, once the Government began on a course of this kind, they would be assuming a heavy responsibility. They would be using machinery such as that presided over by the noble Lord, Lord Mackintosh of Halifax, with so much ability; machinery partly, at any rate, paid for by the State, though much of it is, of course, voluntary; and they would be doing that to make available new funds which would for the most part go into private industry. One must face these facts at the beginning if one is to be candid. I am assuming that it is in the national interest that all this should 392 be done. Assuming that the money is successfully collected, it would clearly be necessary for highly skilled officials of the National Savings Movement—and it may be necessary to appoint some new experts in this field—to administer the distribution of the funds collected.
Pausing for a moment before I come to the conclusions, I would say that there are three conceivable objections, though I do not think that any of them are in any way destructive. We are all aware of the deep and sincere feelings of anxiety aroused in many quarters, including some religious quarters, by the Premium Bonds; but surely even the most austere of us (and no one could have listened to the noble Lord, Lord Lawson, speaking on this subject without feeling moved) would not consider that the arguments which can be deployed against Premium Bonds are applicable here. Surely there are few, if any, of us who feel that it is a gamble of a morally reprehensible kind to buy equities; and if well-to-do people of high morals or just ordinary morals feel entitled to buy equities, why should not these same equities be made more widely available to smaller investors and humbler citizens? Otherwise, it is a case of one lot of facilities for the rich and one for the poor.
A second, and at first sight a more plausible, objection is that a policy of this kind, officially patronised and encouraged, might seem to involve an admission that inflation is inevitable. It might seem like a confession of defeat in the anti-inflationary struggle. I quite agree that there is a point here which has clearly to be watched with much care when we reach the stage of presentation. But, in the first place, I would consider a course of the kind I am suggesting to be justified and valuable, even if we could be quite sure that inflation was not going to continue. And if there is inflation, it is something you can fairly recommend to the small investor. None of us, taking a long view of secular trends in this country or abroad, will guarantee that there will be no inflation whatever in the years ahead. Therefore, I hope we shall not find some over-prudent officials in the Treasury who will try to dismiss the idea at the very beginning on the score that it would be a kind of defeatism in the struggle against inflation.
393 Lastly, someone may come forward to tell us that this new flow of investment into ordinary shares will diminish the funds available for buying gilt-edged and so undermine our national credit and in other ways defeat the purposes of the Chancellor. But surely this criticism is to misunderstand completely the purpose of what is suggested. The whole object of the exercise is to increase the total flow of savings, to make sure that the money that is now being used on consumption goes into investment for the first time. Therefore I do not think that in the long run gilt-edged securities need suffer—I am glad to see the noble Lord, Lord Balfour of Burleigh, assents. I hope that once this is fairly grasped the anxiety about the effect on gilt-edged will evaporate.
When we come to a detailed choice of methods. a considerable variety confronts us. I will not detain the House with outlining possibilities to-day. It would certainly be unwise to be prematurely dogmatic. I do not propose to enter now into the relative merits of unit trusts and investment trusts or other methods of spreading risks. I agree entirely that the money will need to be spread in one way or another. It might be desirable for the National Savings Movement to organise what would amount to an investment trust or a unit trust on its own. It might be that in that way the public would be most reassured. There are many questions of ways and means which would need to be hammered out. But the first and great thing is to get the principle accepted; and, when it is accepted, I hope most earnestly that it will not be treated as one of those interesting but speculative brain waves which can be pursued when there is plenty of time for them. I hope that it will be treated as a matter of high priority which, if it is worth pushing forward, should be pushed forward without a moment's delay.
As I say, this is not a matter on which it would be right for me to try to commit the Opposition in advance, but such contacts as I have had with my political friends have been encouraging. I can add that I have discussed it with some of those most actively connected with the National Savings Movement. There, again, I have found them not unsympathetic to exploring these ideas. With hopeful earnestness, therefore, I submit them to the Government and to the House.
§ 4.32 p.m.
§ THE EARL OF PERTH
My Lords, as the noble Earl, Lord Selkirk, has said, the rise in prices and the rise in the cost of living is to-day of first concern to every man and woman; and clearly the Budget has been directed with this particular thought in mind, and to check the rise. For example, there has been no overall taxation relief, despite an enormous surplus, not only for this past year but also for the coming year. Indeed, it is remarkable how ready we are to accept with hardly any comment a surplus of £400 million or over this year, whereas in the tame of Sir Stafford Cripps, when such a surplus was budgeted for, it was considered both courageous and exceedingly "tough." We have heard criticism that the cuts in Government expenditure are not sufficient, but it should be remembered that these cuts are made against a background in which, over the years, there have been rising costs of administration. Lastly, and most important, there is the encouragement of the voluntary saving, on which I wish to elaborate a little later.
During the debate on the Budget in another place, a promise was made, I think by the Chancellor of the Exchequer, that in next year's Budget there will be taxation relief for companies operating overseas. This is most welcome news,and most important and it is none the less welcome because it is overdue. I would only plead for boldness in carrying out this taxation relief—that is to say, the Government should go all the way in affording relief, even though it may cost £70 million, the estimate which has been made—even if they have to raise compensating taxation in other ways to do it. investment overseas through saving overseas is of the greatest importance in keeping the sterling area together and in strengthening the ties of the Commonwealth.
Coming now to savings, a subject which has been touched on by many noble Lords, and which has been the subject of a most interesting suggestion by the noble Lord, Lord Balfour of Burleigh, and commented on by the noble Lord, Lord Pakenham, I should first of all like to turn to the question of Premium Bonds. I have a vested interest in this matter, because about eighteen months ago I made a suggestion for them in this House and rather got into hot water. It 395 is relatively easy for an individual to advocate such a course, but it is difficult and needs courage and persistence for the Government to carry it out. I congratulate them. I regret only one thing—the long period that it is going to take to bring them into operation. I am sure that there are great administrative difficulties. All the same, over a year seems to me to be a long time.
More important: if only we could get the work going quickly, it would be clearly of the greatest value, because savings now will be worth very much more than savings in a year or nine months' time. I therefore have one concrete suggestion to make, which I hope the Government will consider earnestly—incidentally, it fits in with what the noble Lord, Lord Balfour of Burleigh, said about prizes. My suggestion is that in the first draw which is to come within eight months of the start of the scheme, those who subscribe before Christmas and the New Year should be encouraged by extra large prizes. I think the result of that might be that the scheme would get off to a good start. If justification be needed, it is to be found in the fact that, whereas in the subsequent draws the period for calculation is only six months, in this case it will in fact be for eight months; therefore, I think it would be both right and proper to have bigger prizes in the first draw. If they proved a success, then we could go on like that. But anyhow, let us start with bigger prizes.
§ THE EARL OF SELKIRK
I am not following the noble Lord's point. Is he suggesting having the scheme run for eight months, for a certain period of subscription quite different from others, or is he accepting the six months in general?
§ THE EARL OF PERTH
I accept the six months in general. but I understand that it was said in another place that we should be allowed to subscribe in November and December. If you calculate from November to June, that is an eight-months' period, whereas all the subsequent draws are for six months. In the way that I have suggested, we might have bigger and better prizes for the first draw. This would encourage people and get the scheme off to a good start.
Lastly, I come to a point which, while not strictly relevant to a Finance Bill, is 396 concerned with saving and is therefore important in the battle against inflation. Over the last six months, wages have increased by some £300 million. If only a relatively small amount of this could have been saved against a rainy day, rather than spent. what an important and valuable thing this would have been! This brings me to a suggestion which I have made twice before to your Lordships—that part of any demand for increased wages should be in the form of payment into a fund against the loss of a job or other uncertainties. Earlier, the Economist called this a "constructive suggestion", although I must confess that I rang them up on the telephone and drew their attention to it before it was said.
I make no apology for bringing this matter up a third time—indeed. at the present moment, we are all well aware of the question in the form of adequate compensation for dismissal. Unhappily, it is the subject of a strike between one of our leading motor companies and the trade unions. This being so. I do not want to elaborate on it in any way that might be misunderstood. It is a matter. I know, which is full of pitfalls and practical difficulties. For example. who is to decide when and how the fund is to be spent? Is it to be a nation-wide scheme, or rather a matter for individual companies and individual unions? Will it cause immobility of labour or make labour move irresponsibly? Such questions, and many others, need most careful study. While the value of such a fund in producing savings and so combating inflation was what originally appealed to me in making the suggestion, it has clearly now become a matter of current importance in dealing with redundancy due to the changing pattern of our economic life. I therefore hope that Her Majesty's Government will take a lead in calling trade unions and employers together to study this whole matter, not only on the basis of the present localised strikes but on a much broader and nation-wide basis. In this connection, American practice and experience, especially. for example, in their motor trade and what has lately been announced as one of the terms of settlement of the American steel strike, may have particular relevance.
As others have said, it is still too early to judge, by the yardstick of whether it checks inflation, whether or not the Finance Bill is a good one. The trade 397 balance figures for the first six months of the year are, however, an encouraging pointer, and the results of the savings drive, with all its inducements, not only Premium Bonds but others, have still to be seen. But I believe this drive will succeed. It is of vital interest to the country that it should, and I hope that to this end Her Majesty's Government will accept my suggestion for bigger and better prizes to be given in the first Premium Bonds draw.
§ 4.43 p.m.
§ LORD BROCKET
My Lords, we have heard expressions of opinion about Premium Bonds which appear to be similar to the policies of some Governments, though not necessarily this one— "Too little and too late". Like other noble Lords who have spoken, I am in favour of Premium Bonds, particularly with bigger prizes, but I am worried by the fact that many people in this country are inclined to think that the Premium Bonds scheme announced by 'the Chancellor of the Exchequer in his last Budget will be the means of getting over all our difficulties. I know that noble Lords and all educated people would not think so, but I find, in moving about the country, that the last Budget was regarded by many as a Budget to cure all our difficulties through Premium Bonds. I hope, therefore, that Her Majesty's Government will continue to stress the great seriousness of our present position.
Two most important and outstanding factors at the present time are, of course, inflation and the excess of imports over exports. In regard to inflation I do not agree with Lord Selkirk's policy of reducing demand. Noble Lords will remember that in the last Autumn Budget introduced by Mr. Butler £112 million of extra purchase tax was put on. I believe the theory was that that action would reduce demand. but all it did was to increase demands for increased wages; and it is quite obvious that the more purchase tax is increased, the more the workers will want increased wages with which to buy goods. I believe that the last Autumn Budget can be shown to have been a mistake, because it immediately set off the demand for more wages. I am not personally against workers getting good and reasonable wages, but the noble Earl, Lord Selkirk, told us that wage rates are now 6½ per cent. higher than at the end 398 of last year. The unfortunate point is that we depend a great deal for our prosperity on our exports; and wages form the basis of manufacturing costs. 'The higher wages go, the less we can compete with foreign countries. In this connection, we had from the noble Earl figures for exports of motor cars from Germany, which last year were 14 per cent. of the total car exports and have now gone up to just over 30 per cent. That is because Germany has managed to keep production costs static, or nearly static. During the last five years, our costs of production have gone up by 30 per cent., and it is that 30 per cent. which is putting us out of world markets. Of that there is no doubt at all. It is absolutely essential that our costs of production must be not only stabilised but reduced.
In this connection. I am sorry to see from newspapers to-day that various resolutions against wage restraint are to he brought up at the autumn meeting of the Trades Union Congress. I can quite understand that, for I rather doubt whether wage restraint could ever be carried out under a Conservative Government. Under Sir Stafford Cripps that policy undoubtedly was carried out by a Labour Government, because the workers would take from a Labour Chancellor of the Exchequer what they would never take from a Conservative holder of the office. The problem of inflation produces different views. The view of Her Majesty's Government appears to be that if demand is reduced and taxation is kept high, that will help to cure inflation. The view of many other people is that high taxation and high purchase taxes arc in themselves inflationary. The higher purchase tax is put, the higher wages must be to enable people to purchase the goods and pay those purchase taxes. The higher the purchase tax, the higher the wages and salaries paid by companies must be, in order to enable recipients of the net amount to live. In my view, that causes further inflation and seriously affects our export trade. It is said by many people that income tax and surtax are so high that there is no way of rewarding the higher executives of industry. Of course there may be ways of doing so, particularly after retirement, but there is no way of giving a higher executive in industry proper remuneration for his work.
399 With regard to savings, there is no doubt at all that in the old days the greatest savings and greatest investments of risk capital in industry, as the noble Lord, Lord Balfour of Burleigh, mentioned, came from the wealthier members of the community. Here I am not thinking in terms of Party politics, but it was the surplus, or cream, of the income of the richer members of the community which went into savings and into industry, and which helped to develop our overseas possessions. All Governments since the last war are to blame for the fact that since 1945 some £2,000 million has been taken in death duties. The figure up to the end of the last financial year was £1,855 million, and I presume that by now it will have reached just about £2,000 million.
Some people are in favour of death duties as a method of taking capital away from one class and giving it to another; but it does not work out in that way. That amount of capital has been taken and almost entirely spent as income by the State. If there is a big Budget surplus this year one may say that death duties, which are the capital of the citizens, could be regarded as earmarked for that surplus; but unless there is a surplus it is always spent by the State, purely as income. I regard that as a most serious factor in the economy of the country—and a very bad factor. One reason why the Trinidad oilfields offer from the United States had to be accepted was that this country cannot afford to develop oilfields in its overseas possessions. It was quite obvious that the offer would have to be accepted because taxation in this country has been far too high for far too long.
There is one point that I would make about incentives. There is no doubt that the rate of production in this country is not satisfactory at the present time. In industries with which I am associated I see every day that the rate of production is not satisfactory. That applies in particular to such trades as the building trade and various export trades. There are different reasons for this. One is this lack of incentive. Workpeople who put in overtime have bigger demands made on them under the Pay-As-You-Earn system. A managing director, if he does well and gets an offer of increased salary, is faced with the prospect of having to 400 pay more tax. There is really very little incentive for people in industry at the present time in this country. In other countries there is more incentive. Unless export trade can be developed in this country as it should be developed, we shall fall further and further behind those nations which we defeated in the last war.
The trouble with regard to imports, I feel, can be put right only by physical control. I do not think it can be remedied by increased purchase tax, for the reasons I have stated, and also because these imports will continue to come in. It may be that the General Agreement on Tariffs and Trade, generally known as "G.A.T.T.", prevents us from imposing physical control on imports. But if it is at all possible I think the question of physical control of imports should be looked at extremely carefully. If I may make a suggestion, it is that the Chancellor of the Exchequer should make deals—if I may be allowed to use that term—with foreign countries. He should be put in a position to say to a country, in effect; "If you wish to continue sending us your cheap carpets you will have to buy more of our products." Although I sit on this side of the House, I cannot help feeling that I agree with noble Lords on the other side of the House and members of their Party in another place, who have stated their belief that imports will have to be physically controlled.
Then there is the question of agriculture. I am not out of order in mentioning agriculture, because, although we have agricultural debates in this House, it is true that agriculture is affected very much by the workings of the Treasury. I feel that agriculture is almost the only industry in this country which is worth—to use a term which perhaps is not very attractive—subsidising more. Food produced from the land of our own country saves imports, and I think it would be well worth while paying more towards British agriculture in order that it may produce more food and save our imports, even though the process might be uneconomic in the ordinary sense. I feel that agriculture could be helped very strongly by such an organisation as an agricultural bank. It is too much to ask small farmers to pay 6½ per cent. for their overdrafts. I believe that agriculture might be very substantially helped 401 if overdraft rates were fixed at a lower level. It must never be forgotten that this is an industry which is of vital importance to the country.
I am not going to keep your Lordships any longer, except to say that at the present time, in my view, the country requires more leadership than it is getting from the top. In the war, our then Prime Minister, Sir Winston Churchill, gave a lead in the darkest days. That lead was followed, and it acted as a beacon light for the remainder of the war. At present we do not seem to have the leadership which we should have. People in this country, and other countries as well, like to be told in an authoritative manner what to do. I believe that unless there is an appeal from all political Parties. including the Party of noble Lords opposite, we shall not overcome inflation. I believe that the country is in a serious condition. If the workers feel that a Conservative Government want them to do various things which they do not like doing, they might well accept the necessary direction from members of their own Party. The position, as I say, is exceedingly serious. If wages keep on rising, and costs of production continue to go up, we shall find our export trade in a very serious condition indeed. I should like to ask the Government seriously to consider whether high taxation is inflationary or not. Many people consider that it is. If the Government take high taxation to its real limit, and continue to put an enormous surplus to reserve, we shall find that there will be very little left for the inhabitants of this country to live upon, and certainly no incentive for them to continue to work to the best of their ability.
§ 4.56 p.m.
My Lords, I rise for just a few moments to mention one matter in connection with the Finance Bill. In another place considerable support was given by Members on all sides of the House to suggestions made with regard to the reduction or abolition of entertainment tax in general, and, in particular, entertainment tax on the living theatre. I think it was evident that the Chancellor of the Exchequer had considerable sympathy with views which were expressed, and he gave an undertaking that the matter would be considered next year. I regard this question as one of 402 some importance, and I should like to ask the noble Earl, Lord Selkirk, whether, in his reply, he would tell us something of the Government's intentions in this matter, which is one of very grave concern to all connected with the theatre industry. Largely because of this tax, as it is levied at the present time, the theatres are going through a most difficult period. Indeed, many of them are having to close their doors.
§ 4.57 p.m.
VISCOUNT ALEXANDER OF HILLS-BOROUGH
My Lords, I must in the first instance apologise to the noble Earl, Lord Selkirk, for not being in the House when he was moving the Second Reading of the Finance Bill. I can assure him that I was in the building, but some urgent work cropped up which I had to attend to. I am sorry that I did not hear what he had to say. I must also apologise to my noble friend Lord Pethick-Lawrence for not having heard the whole of the speech he made in expressing our views from this side of the House. From the latter part of his speech it was clear to me that he attained that general high standard which we always know we can expect from him, and he gave us an excellent broad survey of the Government's financial policy with regard to the situation in the country to-day. I enjoyed very much the latter part of his speech.
I do not propose to speak for long but I should like to refer to one or two matters especially. I do not think that the Government can get away from the fact that they are facing very great difficulties to-day—difficulties which they could have avoided. The country will not let them forget the type of Budget which was introduced in 1955 by Mr. Butler. The people will not allow them to forget that. And the people themselves will not forget the promises which were made at the General. Election. They will not forget the spectacle which now faces Birmingham. Oxford and Coventry of long queues of workpeople. people who are angry at the way in which they have been suddenly "stood off" from their work, largely as the result, they believe, of the credit squeeze. That certainly is not popular. Nor do the people of this country at large, in my view, believe that the Government's general policy is the correct one, or that it is succeeding. That is my own impression. And I have 403 gathered support for that from reading different types of newspapers, local weekly organs, as well as some of the regular provincial papers.
I was interested to hear the appeal of the noble Lord, Lard Balfour of Burleigh, for the stimulation of working-class savings. His plea was put in such a way that it seemed to me that the financiers are very short of the amount of capital they want to develop industry at large, overseas as well as here. I should say that, if we had wanted to get into a sound financial position in spite of the great burden placed upon us by the triennial programme of expenditure on armaments in the years 1950 to 1953, we should never have led the people of, the country "up the garden" by asking them to believe that in a "free for all" they could have things on a better basis than they could under controls. That was the first great mistake. The country was completely misled. Controls were taken off, and though for a time things continued on their own momentum, now we are having to pay the price of Government policy and. in my view, particularly of the disastrous Budget of Mr. Butler in 1955, just before the General Election.
There has been a great turning of the workers to look up some of the posters issued at election time: "Earnings up: living better: vote Conservative". "It's full employment: vote Conservative". Now the squeeze policy which is going on and certain increases of taxation which are in the Finance Bill show clearly the Government's policy. Whilst, because of the present inflationary situation, it can be described as disinflationary, does it differ in any sense from the general disinflationary policy adopted after the First World War, with such disastrous results? That is what the workers fear. And so long as they have that fear, you are not going to get the effort from them that we got in 1945 and 1951, which resulted in putting up our export trade 75 per cent. in volume above pre-war. The Government had better make up their minds to find some additional method of controlling the situation to the credit squeeze, which hits everybody quite indiscriminately and is certainly going to cause considerable unemployment.
I was interested in hearing what the noble Lord, Lord Balfour of Burleigh, said about investments, and also what my 404 noble friend, Lord Pakenham, said in following this up. I was particularly interested because I have spent most of my life in a business in which we depend for capital on continuous lending from the workers. The great thing with our investments is that, to the investor, an invested pound is always a pound. It is there to be had at exceedingly short notice. It cannot be removed altogether from the term "risk capital", because the societies trade with it; nevertheless, even though the amount to be invested by each person is limited by the general rules—what a company would call their articles of association—,there has been accumulated in the industrial and provident societies over £300 million of share and loan capital. I should think that that section of the working class would look carefully at any suggestions that their savings operations in future should be diverted into industrial share investments.
But there is no reason at all why workers should not have shares in the industries in which they are employed and I am not against that in principle—I assure my noble friend Lord Pakenham of that. But I think we need to point out the possible reactions in the case of some workers. If the suggestion by the noble Lord, Lord Balfour of Burleigh, could be brought into general practice in co-partnership schemes, in which the shares were issued to workers without some of the strings attached to them with which they are issued at the present time, there might be a good development on that line. But in a co-partnership scheme in an industry which is not a public utility where the demand is steady, there is always the risk of reaction on the part of the workers in a time of slump. That is the great trouble. As to investment trusts, I am not at all sure that in the long run you would get such an investment in these trusts as would lead to a disinflationary effect, because many investment trusts to-day are paying high rates of dividend; and I would say that, unless all dividends were rigidly saved, they would tend still further to increase the purchasing power of the holders of those investments. I cannot say off-hand that the whole of it would necessarily be in the direction of encouraging inflation.
§ LORD BALFOUR OF BURLEIGH
There is also the side of encouraging production. I think it is very important to 405 give wage earners a direct incentive in the production of their companies. I hope the noble Viscount will bear that in mind.
VISCOUNT ALEXANDER OF HILLS-BOROUGH
That is one of the important arguments which can be used in favour. As l say, I am not against this in principle; I am only pointing out some of the possible difficulties which may arise in the minds of the organised workers about the effect on the money position.
The other point I wanted to speak about was raised by the noble Lord, Lord Brocket. As both he and I are interested in agriculture, I suppose we ought to declare an interest. I still think that the Government are making a grave mistake by not carrying out their full intended programme of 1951. They are gradually dropping away from the 1947 Act and the position in agriculture is much more difficult now than it was four years ago. There is a great opportunity to help to adjust the balance of economy in this country by having more agricultural production and less imported foodstuffs, both for human beings and for cattle. We could do a great deal in that respect. The noble Earl shakes his head, but if he thinks it over before he rises to speak, and remembers that the production of British agriculture is up in volume by 40 to 50 per cent. over the pre-war production, lie will realise that if it were not for that, with our increased population, we should have to import even more to-day, in volume, of our animal and human food requirements than we did pre-war. If the Government could—as we think they could —still further increase the volume of agricultural production here, they might, in this difficult time of trade balances, help our trade balance in that respect. I do not think that sufficient attention has yet been given by the Government and their experts to that particular point.
I was exceedingly interested to hear the noble Lord, Lord Brocket, come down quite firmly and unashamedly on the side of physical control of imports. While I am sure that he would not want to associate that in any way with the kind of economic planning which we have always supported from this side of the House, it is a tribute to the fact that, as more than one Conservative Peer has said in the last two years, the Government 406 cannot hope to deal with the whole inflationary position merely by the kind of credit squeeze we are having now—putting up the bank rate, and a few taxes such as purchase tax. That undoubtedly has had a serious effect.
I do not know what the noble Earl, Lord Selkirk, will say about this, but I should like to have his view. What the workers cannot get out of their minds—and I am able to speak to a good many of them from time to time, in ones and twos—is the idea that the Government, when they speak through the mouth of the Chancellor of the Exchequer, and say: "Why make a fuss just now'? Our policy is just beginning to show results", are trying to secure what the Economist has been pressing for so long—that is, a maximum of 750,000 unemployed (they hope they can keep that figure as a maximum) in order to secure greater mobility of labour. That is rather a tough prospect for people who are in work and buying their houses, and who, after the war, are looking forward to at least the joy of more settled conditions, to face up to. While I entirely agree with my noble friend Lord Pethick-Lawrence that, if there is any difficulty at any time in the State. if you tell the British people the whole truth they will always be willing to help to the best of their ability, nevertheless, I think the Government have got to be able to put a much better impression upon this indiscriminate credit squeeze, and the general deflation that is going on, than that which is being given to the worker at the present time. I should not like to comment further upon the criticism made by the noble Lord, Lord Brocket, of the lack of leadership at the top. I think that it comes so much better from him than from me, that I can leave the matter there. I agree with him that the position to-day is extremely serious, and promises to be even more so, unless something is done to improve it.
Listening, as I have been, to this short debate, naturally my summing up of it is rather discursive. But one last word I should like to say in supporting what my noble friend kindly raised in his speech with regard to the special inducements given, by remission of income tax, on certain investments in the Post Office Savings Bank, the trustee savings banks and the like. I feel strongly that there 407 is an exceedingly good case for extending the exemption from tax, now given on the interest on the first £600 of investment in those institutions, to the industrial provident and friendly societies. The position in the co-operative section of the industrial provident and friendly societies I have already indicated; that is to say, that they are capitalised upon the continual lending of capital by their members. The members are limited in amount to a total of £500 each—and it has only recently been increased to that amount—and although that maximum is there, to-day the average shareholding amongst these members is not more than about £21. Of course, some of the members hold up to the old maximum of £200, and some of them are now beginning to work up to the £500 maximum. So that there are a large number of people who would not be brought into this argument that I am now making.
But with all those people, for those who are concerned about the return on their money, this inducement to take it out and put it into the Post Office, or into the Trustee Savings Bank, is, as certain as I am standing at this Box, only going to cause a removal of savings to another place. While I am entirely in favour of the policy of the Government in inducing these investments in the Post Office and trustee banks, I think there should be an equal inducement with regard to the investors in these other institutions. For never let it be forgotten that these institutions, the industrial provident and friendly societies, are themselves large holders of Government stock and large investors in public funds. During times since the war when there have been heavy decreases in prices of certain gilt-edged securities on the market those institutions have taken a fairly hard rap, but they have met the position quite straightly, and successfully. I do not think it is quite fair that their members' savings should now be attracted away from their own movement, which has its own bank, in order to be placed into other forms of banking at a preferential rate in regard to income tax. I do not want to stop what the Government have done in favour of these people, but I feel that the same privilege should be extended to these others.
I hope that, however bad the policy of the Government may be in dealing with 408 the general financial situation, when we return after the Recess there will be an improvement in the position. None of us. to whatever Party he belongs, wants to see our country go down for the sake of any purely temporary Party advantage; we want to see our country back upon the prosperous road. I hope that when we return, the Government having taken note of the debates in another place and here will be able to make some new suggestions to bring about a better financial situation.
§ 5.20 p.m.
§ THE EARL OF SELKIRK
My Lords, we have had a broad debate which has covered a number of aspects of policy, though, curiously enough, there are one or two aspects which it has not covered. For instance, it has not covered the I plateau to which my noble friend referred and of which I would only speak in passing. I am sorry the noble Lord, Lord Pethwick-Lawrence, had to return to the 1955 Budget. Singularly enough, the same amount of money that was enforced as an economy is still considered not very impressive. The economies are almost exactly the same amount as the reduction of taxation the year before. I thought it was curious that the noble Lord did not seem to realise that the two amounts were roughly the same.
The noble Lord, Lord Beveridge. although delighted to find that, in the old and hackneyed phrase, "Beveridge is not enough," still was not satisfied that sufficient variation was permitted within the schemes under Clause 22. Of course, the clause deals with a specialised form of insurance, and I recognise that those who have insured up to the present time are not likely to have insured in exactly the form in which Clause 22 is cast. But I think it is right that it should meet as closely as possible what we consider from the national point of view to be the best form of insurance for retirement. The noble Lord wants lump sum payments at a certain time by way of endowment insurance. Quite frankly, the Chancellor of the Exchequer examined that closely and said that with insurance built up of premiums free of tax he did not feel justified in making a concession of that character. I am given to understand that Paragraphs 378 and 388 of the Millard Tucker Report were not considered very favourably, but I cannot pass any further judgment on what has been said.
409 The noble Earl, Lord Perth, can. I think, take some pride in the Premium Bonds which are being introduced. I am sorry that he and the noble Lord, Lord Balfour of Burleigh, do not find the prizes adequate. But nothing is necessarily final in this world, and alterations may be made in due course. My right honourable friend will certainly examine the point of making the first period run for eight months, but I think the noble Lord is wrong in what he said. You buy your certificate in one month, six months elapse, and the draw takes place on the eighth month, so, as I understand it, it is only running for a period of six months. I should have thought it was more important to keep a steady flow of contributions for Premium Bonds in the initial months, when, if I guess right, there will be a large demand.
There has been considerable pressure to-day from the noble Lord, Lord Balfour of Burleigh, and from the noble Lord, Lord Pakenham, and a moderate form of blessing from the noble Viscount, Lord Alexander of Hillsborough, for making certain forms of equity shares available for the small holder. It is extremely interestirg that the proposals should be made, and I can say quite clearly that the Government would welcome any form of saving which would appear attractive to the possible holder. I should have thought this was probably a matter which would be much better run by private institutions than by Government institutions. I should have thought it was a matter where private judgment and private ability was of greater importance than Government organisation. I can add that these proposals have already been submitted to the Treasury and have been closely examined by the Financial Secretary. I have no doubt that he will examine carefully the remarks that have been made to-day.
The noble Lord, Lord Brocket, raised a number of interesting points, among which he said that high purchase tax.was inflationary. All kinds of things can be called inflationary, but the fact remains that in the articles on which purchase tax was placed there has been a reduction in home consumption and an increase in export. Those are the facts. What I have emphasised is that we have attempted to attack this problem over the whole field; we do not rely on any one simple point. I must confess that there was one 410 statement which the noble Lord made which filled me with astonishment. He said that the public expect to be told what to do in an authoritative manner. I confess that I never think the public want to be treated like that. We know that in some countries that sort of thing is indulged in, but I do not think that is what the public expect in this country. When you come to leadership, of which the noble Lord spoke, I would say that leadership in war and a Coalition Government is a very different thing from leadership in peace. Anyone who expects the same sort of leadership is expecting something which this country will not have amidst Party warfare, and I think it is unfair and unreasonable to expect it.
The noble Lord, Lord Brocket, referred to agriculture, as did the noble Viscount, Lord Alexander of Hillsborough. I am bound to say that, whichever way we look at them, agricultural subsidies are considerable. and they increase each year by a substantial amount. I do not think anyone doubts that agriculture is well worth subsidising; and in recent years production has substantially increased. How far the noble Lord could make a case for further subsidisation, I have some doubts. In this world, where, if anything, there is an excess of agricultural produce, we have to be careful, or at least to keep within limits the extent to which agricultural subsidies are extended.
The noble Lord, Lord Gifford, referred to entertainments tax. I do not think he will expect me to say much, because it would be quite absurd for me to anticipate what will happen. What I can say is that these points are under review, and have been carefully examined. The noble Viscount, Lord Alexander of Hills-borough, said that he believed—and I have no doubt, perfectly truly—that the country will accept something provided that they are told frankly. I think it is a pity to harp too much on this question of unemployment. After all, on the latest figures there are, in total, still twice the number of vacancies there are unemployed, and the figures for June are about as low as they have ever been at this time of year. What is important is to emphasise the need for redeploying labour. I will not go over the point, but if the noble Viscount wishes I shall be happy to 411 elaborate the measures which the Ministry of Labour have for dealing with this problem. They are well known, and there is nothing particularly new about them. They are extensive, and the Ministry of Labour are happy to put their full strength at the disposal of those who have, or want, to seek other employment. I think on the whole present measures are working extremely well.
I should like to quote a letter which the noble Lord, Lord Beveridge, wrote to The Times, beause I think it represents the problem we are in to-day. He said this:Whether the Chancellor will succeed in his attack on inflation depends not on him alone but on those others in whose hands at present the fixing of wages and prices in terms of money lies. The claim to sovereignty for each industry in fixing money wages is as dangerous as the claim to sovereignty for every nation in preparing for war.I am sure that that is the case, and I am sure that the words we are speaking to-day will carry some, if not great, weight in that direction, I am sure, for that reason, that the words with which the noble Lord. Lord Pethick-Lawrence ended his speech are words on which we can entirely agree: that we have a tremendous task but not an impossible one. I wish to thank your Lordships who have taken part in this debate.
§ On Question, Bill read 2a: Committee negatived.