Sitting of 17 April 1956

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

  Elder Yard Chapel Chesterfield Bill [Lords]
  The Chairman of Ways and Means (Sir Charles MacAndrew): I beg to move,
  That, in the case of the Elder Yard Chapel Chesterfield Bill [Lords], Standing Orders 179 and 180 be suspended and that the Bill, as amended in Committee, be taken into consideration Tomorrow.
  The only Amendment made to the Bill in Committee was necessitated by the death of one of the Elder Yard Chapel's trustees who are referred to in the Bill. I am therefore moving this Motion to save the promoters from having to incur the expense of reprinting and re-depositing the Bill.
  Question put and agreed to.
  Bill, as amended in Committee, to be taken into consideration Tomorrow.

ORAL ANSWERS TO QUESTIONS
  TRADE AND COMMERCE

    United States Tariffs
    Mr. Fernyhoughasked the President of the Board of Trade the exports from Great Britain to the United States of America upon which the United States Government increased the tariff during 1955.
    The Minister of State, Board of Trade (Mr. A. R. W. Low): The United States Government increased the tariff on bicycles in 1955. I am aware of no other tariff increase in that year affecting United Kingdom exports.
    Mr. Fernyhough: Can the right hon. Gentleman say whether any representations were made to the United States Government about this increase, in tariffs? Is
    818
    he not aware of the increased tariffs on underground pipes? Will he not make it clear that the time is coming when we shall have to restrict our dollar imports to what our dollar exports are?
    Mr. Low: Without commenting on the last part of that question, the matter of underground pipes is separate and was related to dumping. It was not a straight tariff increase. We have made representations about bicycles, about which many Questions have been answered, and we are still negotiating compensation.

    Tobacco and Whisky
    Mr. Stokesasked the President of the Board of Trade the comparative prices per lb. paid for tobacco shipped from the United States of America in 1955 and 1939, respectively; and how this increase compares with the increase in the price per bottle of whisky shipped from the United Kingdom to the United States of America at the same dates.
    Mr. Low: The average c.i.f. value per lb. of unmanufactured tobacco imported from the United States in 1955 was roughly four times and the average f.o.b. value per proof gallon of whisky exported was roughly double the corresponding 1939 average.
    Mr. Stokes: Does the Minister not think that the price we are charging for whisky is far too low? Is he aware that United States consumption of whisky is 300 million gallons a year and that we supply only 2½ per cent. of it? Scotch whisky is only a snob drink in the United States—[HON. MEMBERS: "Oh."] I said in the United States. If we doubled the price of whisky, the price of a tot would go up by only 15 per cent. Snobs would have to continue being snobs and the volume of whisky exported to the United States would, therefore, not go down.
    Mr. Low: The right hon. Gentleman is himself a manufacturer and knows how to get the best price for his products. I have no doubt that whisky producers know how to get the best price for their product.
    Mr. Stokes: That is not the point. The Board of Trade continually evades this. It is perfectly obvious to everybody who studies the figures that prices generally increased by three times and yet these

    819
    brilliant Scotch distillers get only 10 per cent. more for whisky. Will the right hon. Gentleman take over the export of whisky to make sure that we get a proper price in dollars for our exports?
    Mr. Low: The answer to the last part of the supplementary question is "No." I must ask the right hon. Gentleman whether he has ever met a Scotsman who sells something at a price lower than he can get for it?

    Anglo-Japanese Trade
    Mr. Bottomleyasked the President of the Board of Trade if he can yet make a statement about the Anglo-Japanese trade talks.
    Mr. Low: Yes, Sir. The mid-term review of the arrangements made last October has been concluded and the agreed record of the results is being initialled this afternoon. It was decided that those arrangements were working satisfactorily and that no change in them was necessary. Provision is being made for additional trade over the next six months amounting to about £150,000 each way.
    The new quotas secured for our exports cover chemical products, manufactured foodstuffs and light engineering goods; and the new quotas conceded for imports are additional canned salmon—which covers more than half the £150,000—canned peaches and loquats, artificial pearls, some plastic goods and slide rules.
    Mr. Bottomley: I thank the Minister for his reply and congratulate him on the successful conclusion of the trade agreement. Would he agree that, in view of our present balance of payments difficulties, it would be better if we had not taken the least essential goods?
    Mr. Low: No, Sir, because we have made arrangements for increased exports to Japan which will maintain the balance.

    Textile Labelling (Laundering Instructions)
    Miss Burtonasked the President of the Board of Trade if he is now in a position to give some details concerning the voluntary agreement reached by the laundry organisations, the British Standards Institution and the representatives of his Department on the problem of textile labelling for washing and
    820
    cleaning purposes; or when he expects to be able to do so.
    The Parliamentary Secretary to the Board of Trade (Mr. Derek Walker-Smith): I am glad to say that full agreement has been reached between representatives of the laundries and textile and clothing associations, under the aegis of the British Standards Institution, on a code of recommended laundering instructions, which will be published as a British Standard very shortly.
    Miss Burton: Is the Parliamentary Secretary aware that hon. Members on this side of the House are very glad that these years of negotiation have at last reached a successful conclusion? May I ask whether the hon. and learned Gentleman would consider publishing the terms of this agreement in the OFFICIAL REPORT?
    Mr. Walker-Smith: I will certainly give consideration to that as the hon. Lady requests, but, of course, the publication of the Standard is a matter for the British Standards Institute, as she will appreciate.

    Petrol Distribution
    Miss Burtonasked the President of the Board of Trade if he is aware of public concern at the restrictive practices now being put into effect in petrol distribution; and if he will now refer the matter to the Monopolies Commission.
    Mr. Walker-Smith: My right hon. Friend is aware of public concern in this matter. He is considering further references to the Commission, but he is not in a position to make any further statement at the present time.
    Miss Burton: May I ask the Parliamentary Secretary whether, if I send to him documentary evidence on this matter from both sides, it may perhaps hasten the President's decision?
    Mr. Walker-Smith: I am always very glad to receive communications of any sort from the hon. Lady.

    Motor Industry
    Mr. Chapmanasked the President of the Board of Trade what decrease in exports of passenger cars and of commercial vehicles and tractors, respectively, occurred in the first quarter of 1956, compared with 1955.
    Mr. Low: The information is not yet available. I would ask the hon. Member to await publication of the Trade and Navigation Accounts for March.
    Mr. Chapmanasked the President of the Board of Trade what approximate increase in motor car exports he expects in 1956.
    Mr. Low: I would expect the motor car industry, as any other industry, to increase its exports as much as possible. The motor car manufacturers have expressed their determination to do so, but neither they nor I would venture to forecast in April their exports for the year.
    Mr. Chapman: Is the Minister aware that the whole country realises now that the right hon. Gentleman is indulging only in platitudes when he makes remarks like that and that no one really believes that the Government expect that there will be a substantial or even significant increase in motor car exports this year? [HON. MEMBERS: "Why?"] Because of the figures already given. Why do not the Government put a sense of urgency into the meeting of the National Advisory Council, and any other bodies which they have, in order that the country as a whole may know whether the amount of steel, investment and so on in the industry is being used properly at present?
    Mr. Low: I am certain that the motor car manufacturers have plenty of drive and that they also have more confidence in themselves than the hon. Gentleman has in them.
    Mr. Stokes: If the motor car manufacturers have not the slightest idea of what they are to export, how can they plan for production at all?
    Mr. Low: A motor car manufacturer may well have a very good idea of what he is planning to work on. The Question relates to the industry as a whole.
    Mr. Chapmanasked the President of the Board of Trade whether he has now considered the representations made by the executives of 20 trade unions, meeting in conference in Birmingham on Monday, 9th April, that a full Government inquiry should be made into the extent of the difficulties of the motor car industry, its organisation and distribution costs and its export prospects; and
    822
    whether he will arrange such an inquiry so that the full position may be known.
    Mr. Osborneasked the President of the Board of Trade what reply he has given to the representations of the Amalgamated Engineering Union for a Government inquiry into the motor industry; and, in accordance with the Government's general policy of restraint in wages and profits, if he will make it clear to both sides of industry that both profits and wages will have to come down unless, by greater productivity, the quality of our cars is improved and the prices reduced.
    Mr. Low: My right hon. Friend has just received the representations to which these Questions relate. He will, of course, study them carefully. But he will have in mind that the motor car industry consists of a number of individual companies competing strongly with each other and with other overseas competitors and that the circumstances of the motor car industry have been very fully discussed at recent meetings of the National Advisory Council for the Motor Manufacturing Industry. Both sides of the industry are represented on the Council and are fully aware of the matters referred to by my hon. Friend the Member for Louth (Mr. Osborne).
    Mr. Chapman: Is the Minister aware that this demand for an inquiry is now backed by the Confederation of Shipbuilders and Engineering Unions, representing well over a million workers in this country who are, in fact, expressing the very gravest doubt about the conduct of the industry and the refusal of the Government to do anything about it? Does not a demand from an organisation of workers as big as that mean anything to the Government?
    Mr. Low: The hon. Gentleman will have noticed in the answer that my right hon. Friend will study representations made to him. He will also have noticed, and should be aware of the fact, that there is good consultative machinery already through which trade union representatives can make known their views.
    Mr. Osborne: Would not my right hon. Friend agree that the more information about the industry that responsible trade union leaders can have the better, particularly if we are to get their co-operation to increase production; and will he

    823
    do his utmost to see that they get the information for which they are asking?
    Mr. Low: That is the importance of the National Advisory Council for the Motor Manufacturing Industry, which has been in existence for some years and on which there are two trade union members.
    Mr. Chapman: Two trade union members!

    Wheat Imports
    Mr. Godman Irvineasked the President of the Board of Trade from which countries, and to what value, imports of wheat for the years 1953, 1954 and 1955, respectively, are included under

    IMPORTS INTO THE UNITED KINGDOM OF WHEAT

    —

    1953

    1954

    1955

    Cwt.

    £

    Cwt.

    £

    Cwt.

    £

    From other foreign countries (as in Accounts Relating to Trade and Navigation, December 1955)

    …

    …

    6,004,629*

    8,741,100*

    8,597,782*

    11,611,481*

    11,794,542*

    16,406,732*

    of which:—

    Finland

    …

    …

    …

    109,931

    164,844

    41,788

    57,069

    —

    —

    Sweden

    …

    …

    …

    362,552

    520,665

    1,730

    4,658

    24,348

    67,282

    Denmark

    …

    …

    361,706

    489,194

    6,459

    8,564

    73,443

    137,162

    W. Germany

    …

    …

    —

    —

    —

    —

    15,343

    24,260

    Netherlands

    …

    …

    —

    —

    80,929

    112,647

    252,189

    415,309

    Belgium

    …

    …

    655,098

    1,012,471

    1,122,116

    1,575,979

    1,251,417

    1,742,165

    Switzerland

    …

    …

    —

    —

    —

    —

    5

    10

    Italy

    …

    …

    …

    201,055

    242,669

    —

    —

    —

    —

    Hungary

    …

    …

    —

    —

    —

    —

    55,931

    70,109

    Bulgaria

    …

    …

    348,962

    488,558

    256,867

    322,766

    —

    —

    Roumania

    …

    …

    —

    —

    60,933

    71,977

    —

    —

    Turkey

    …

    …

    …

    39,409

    53,852

    23,762

    38,295

    —

    —

    Tunis

    …

    …

    …

    —

    —

    39,611

    49,711

    51,136

    77,436

    French Morocco

    …

    —

    —

    13,684

    16,379

    55,902

    97,862

    Canary Islands

    …

    —

    —

    139

    84

    —

    —

    Syria

    …

    …

    …

    273,348

    479,059

    364,140

    618,935

    19,013

    46,006

    Lebanon

    …

    …

    —

    —

    —

    —

    21,041

    35,910

    Israel

    …

    …

    …

    —

    —

    —

    —

    1

    6

    Iraq

    …

    …

    …

    —

    —

    19,685

    28,438

    104,354

    175,287

    Uruguay

    …

    …

    —

    —

    —

    —

    2,220,025

    3,059,170

    Argentine Republic

    …

    3,652,568

    5,289,788

    6,565,939

    8,705,979

    7,650,394

    10,458,758

    NOTE: The figures for 1955 are not completely comparable with those for previous years because they would include any wheat for sowing which was previously excluded.

    Baskets
    Mr. J. Patonasked the President of the Board of Trade what he proposes to do about the import at unfair prices of the special baskets largely used in East Anglia and known as potato pickers.
    Mr. Low: I have no information which would enable me to compare the prices at which baskets of home manufacture and imported baskets are being sold.
    Mr. Paton: Is the Minister aware that the production of these baskets occupies
    Other Foreign Countries in Class A, Division 5, of Accounts relating to Trade and Navigation of the United Kingdom.
    Mr. Low: As the answer contains a number of figures, I will, with permission, circulate it in the OFFICIAL REPORT.
    Mr. Godman Irvine: Can the right hon. Gentleman say from the figures what purchases were made behind the Iron Curtain in the three years in question?
    Mr. Low: I should have to add up the figures and I would rather that the hon. Gentleman did that for himself.
    Following are the figures:
    the basket makers at the Norwich Blind Institution for six months of the year, and that they sell them at the very keen price of 7s. 6d.? How can they compete with imported foreign baskets at 5s. 9d. which includes substantial Import Duty? Is it possible to do something to stop this unfair competition?
    Mr. Low: I have no evidence that imports have recently increased very substantially. There are quotas and, with one small exception, they are no bigger than last year. Although it would be

    825
    entirely inconsistent with our general policy and international obligations to re-impose quantitative restrictions for protective purposes, if the hon. Member will produce evidence of hardship to blind basket producers, I will examine it to see whether any case merits exceptional treatment.
    Mr. Collins: Is the Minister aware that blind basket makers in many rural areas who make baskets for six to eight months of the year are losing their employment because Dutch baskets are being imported at little more than the bare cost of trade union rates of wages, and that this is a new development? Will the Minister see whether there is a concealed export subsidy, or will he receive a deputation from the blind basket makers?
    Mr. Low: I have said that I will examine any evidence of special circumstances.
    Mr. Nabarro: Are there any Russian baskets coming in?

    Arab Boycott
    Sir L. Plummerasked the President of the Board of Trade what advice and help he has given to British exporters who have been threatened with boycott by Arab countries as a result of their trading with Israel.
    Mr. Low: How far the Board of Trade or Her Majesty's Commercial Diplomatic Officers in the countries concerned can usefully give help or advice depends on the circumstances of each case, which may vary widely. It is, of course, for the firms themselves to decide in the light of their own views and interests, whether or not they will comply with the requirements of the Arab boycott.
    Sir L. Plummer: Is the Minister aware that certain Arab countries, encouraged by their success in stopping flights of B.O.A.C. to Israel, are putting every pressure they can on British exporters to stop British trade with Israel? Will he consider what positive steps can be taken to protect those exporters from this form of blackmail?
    Mr. Low: As regards protests made by Her Majesty's Government to those countries, that of course is a matter for my right hon. and learned Friend the Foreign Secretary. We neither accept nor
    826
    condone this practice, and we have been able to give help to individual exporters, particularly if they have been wrongly blacklisted.

    Mining Lease, Hemerdon (Wolfram Production)
    Mr. Studholmeasked the President of the Board of Trade if he will consider reopening the Hemerdon mine if it can be shown that there are reasonable prospects there of the economic production of wolfram.
    Mr. Walker-Smith: Negotiations are proceeding for the transfer of the Government's mining lease at Hemerdon. If these negotiations are successful, decisions about the future of the mine will rest with the new owners.
    Mr. Studholme: Will my hon. and learned Friend keep me informed of developments when he is in a position to do so?
    Mr. Walker-Smith: I will certainly co-operate with my hon. Friend in his customary zeal for the good of his constituents.

    Scrap Metals and Waste Paper (Salvage)
    Mr. Doddsasked the President of the Board of Trade, in view of the need for restraint in respect of imports, what consideration has been given to steps to encourage a greater effort to increase the collection in this country of scrap for use in the production of steel.
    Mr. Low: The Iron and Steel Board have no reason to suppose that there is any large amount of ordinary scrap not being collected by scrap merchants, whose business it is. The recovery of some kinds of scrap presents special difficulties, in particular the separation of old tins from household refuse. The scrap merchants and the iron and steel industry are setting up district committees to deal with the problem of old tins, and my right hon. Friend the Minister of Housing and Local Government is about to send a letter to local authorities asking them to renew their efforts to help in the recovery of iron and steel scrap from household refuse.
    Mr. Doddsasked the President of the Board of Trade, in view of the saving

    827
    to be effected in the importation of wood-pulp by making better use of the waste paper that is available in this country, if he will consider reintroducing an intensive Government waste paper salvage campaign to replace the present inadequate local campaigns.
    Mr. Walker-Smith: The Waste Paper Recovery Association already co-operates with most of the local authorities and continues to achieve valuable results. I do not consider that any significant extra saving in imports of woodpulp would result from an intensive Government salvage campaign for waste paper.
    Mr. Dodds: Do we need or do we not, more scrap metals and more waste paper? If we do, is the hon. and learned Gentleman not aware that there are substantial quantities that are not being reclaimed? Will he ask his right hon. Friend to take a more active leadership in putting it over to the nation that what the country needs today is to avoid the waste which is at present taking place?
    Mr. Walker-Smith: I do not think the hon. Gentleman has the situation accurately. Stocks of waste paper are at present unusually high for this time of year. What we have to do is to get the maximum salvage of waste paper without creating storage difficulties.

    Exports to China
    Mr. Hurdasked the President of the Board of Trade what estimate he has formed of the potential demand for farm tractors in China; and to what extent British manufacturers are now permitted to supply this demand.
    Mr. Low: I have not the information necessary to form such an estimate. As my right hon. Friend the Minister of State for Foreign Affairs informed the House on 11th April, licences to export a limited number of tractors have been issued.
    Mr. Hurd: May we take it that this limited number of tractors represents samples and that it is hoped that business will result? Will my right hon. Friend assure us that if there are offers of business from China the Government will give every facility for the export of the tractors and agricultural machinery so long as they have no strategic or military importance?
    Mr. Low: All we know at the moment is that the Chinese want small numbers of various types, probably to try them out. That is the position at the moment. We have not yet got as far as the position which my hon. Friend has mentioned.
    Mr. Hector Hughes: Does the right hon. Gentleman realise that he has not given the real reason for the diminution in the export of agricultural machinery? Does he realise that the real reason is the shortage and bad allocation of steel? Will he consult the Minister of Supply with a view to rectifying that situation, particularly in Aberdeen?
    Mr. Low: I do not think that is the real reason. The hon. and learned Gentleman has forgotten that the responsibility for steel was transferred from the Minister of Supply many months ago.
    Mr. Goughasked the President of the Board of Trade whether, in view of his decision to grant licences for sample tractors to be exported to China, he will now permit British marine engines of similar power to be exported as samples in response to outstanding Chinese inquiries.
    Mr. Low: Marine engines are not in the same category as agricultural tractors.
    Mr. Gough: Would not my right hon. Friend agree that many of the engines are precisely the same as those used on tractors and, furthermore, that a large group of our exporters are already exporting marine engines of from 7 h.p. to 4,000 h.p. to both the Soviet Union and satellite countries? What difference is there between them and China?
    Mr. Low: The difference lies in the purposes for which the engines would be used.
    Mr. Snowasked the President of the Board of Trade (1) which Government Departments have to be consulted by his officials before a licence can be granted for the export of galvanised sheet to China; and what steps are being taken to reduce time from the submission of the application to the granting of the licences; and
    (2) how many officials within his Department have to consider or scrutinise each application for a licence for the export of galvanised steel to China.
    Mr. Low: Galvanised sheets are on the embargo list to China. Applications have to be considered carefully before exceptions are approved and extra information may have to be asked of the applicant. There is consultation with interested Departments in the normal way. Decisions on applications giving complete information take about a week.
    Mr. Snow: Is the right hon. Gentleman aware that in many cases applications take considerably longer than that, and that certain questions are asked which his Department knows perfectly well exporters cannot answer? Why is the treatment of British shippers so markedly worse than the treatment which other countries allow to their own shippers in the export trade?
    Mr. Low: I do not accept that our treatment is markedly worse. We have a procedure to go through. I have personally investigated a case about which the hon. Gentleman wrote to me, and I am satisfied that, although there was a mistake in part of that case, the ordinary procedure is working quite well.
    Mr. Snowasked the President of the Board of Trade whether he will take steps to ensure that British companies are not frustrated in competing with Japanese companies by the lengthy consideration of applications for licences to export to China goods on the permitted list or goods which may be the subject of quantitative controls.
    Mr. Low: There is no quantitative control list for China. Licences for goods on the permitted list are issued within about two days of the receipt of the application, apart from exceptional cases where the information available is insufficient to establish the facts readily.
    Mr. Snow: Is the right hon. Gentleman satisfied that British shippers receive parity of treatment as compared with Japanese shippers, and is he aware that at present orders to a total of 15,000 tons of galvanised sheeting are being supplied by Japanese shippers while his Department is holding up the licences for British shippers?
    Mr. Low: I repeat that I have looked into the case about which the hon. Gentleman told me, and I am satisfied that we do all we can to hurry up our decisions.
    Mr. Shinwell: Is it not a complete farce that Japan, Belgium and other countries which desire to be associated with the West should be permitted to export what are regarded as strategic goods to China when our own traders are prevented from doing so?
    Mr. Low: I think the right hon. Gentleman has misunderstood the Question. This refers to the exceptions procedure, and exceptions are allowed in certain cases.
    Mr. Shinwell: Why does the right hon. Gentleman seek to cover up the refusal of the Government to relax the present position by talking about procedure? Do the other countries which I have mentioned have regard to procedure, or are we the only one which does?
    Mr. Low: All countries have regard to the exceptions procedure.
    Mr. Snow: In view of the unsatisfactory nature of the reply, and of my belief that the right hon. Gentleman is thoroughly misinformed, I beg to give notice that I will raise this matter on the Motion for the Adjournment.

    O.E.E.C. Agreement (Artificial Aids to Exporters)
    Mr. Bottomleyasked the President of the Board of Trade how far the agreement to abolish artificial aids to exports has now been carried out by member countries of the Organisation for European Economic Co-operation.
    Mr. Low: The reports submitted by those countries to which the Organisation's agreement applied are being studied within the Organisation and I would ask the right hon. Gentleman to await the completion of these studies. Of the other member countries, Greece and Turkey are exempt from the agreement. In the case of France, it was agreed that a date should be fixed after which she would be bound by the Organisation's agreement to discontinue these artificial aids to exporters. It has not yet been possible to agree a date. Meanwhile, Her Majesty's Government will continue to impress upon the French Government their concern that all her artificial aids to exporters should cease.
    Mr. Bottomley: As the negotiations have been going on so long, can the right hon. Gentleman say that Her Majesty's

    831
    Government are not responsible for the delay? If that is the case, ought not more energetic action to be taken to stop these hidden export subsidies?
    Mr. Low: Her Majesty's Government have made representations energetically and, as the House will be aware, have had some success in that at the end of last year the German Government discontinued their artificial aids.

    United Kingdom—Mombasa Shipments
    Mr. C. Howellasked the President of the Board of Trade what amount of delay is experienced in finding shipping space for exports to Mombasa; and what steps he is now taking to assist exporters in that direction.
    Mr. Low: About twelve months for ordinary commercial cargo; goods classified as essential by the East African authorities can be shipped without delay. The remedy for the present difficulties lies in the expansion of the port and railway facilities at Mombasa and I am glad to say there has been some improvement in recent months.
    Mr. Howell: Will the Minister have another look at the matter? I have a letter from a member of his own political party, the manager of a well-known firm in the Midlands, who states that he has a number of orders awaiting shipment, and says:
    "As these orders are mainly for the Mombasa market it would be very interesting to know for what reason nearly two years …"
    Not one year.
    "… elapses before goods can be shipped owing to lack of space, which is the answer always given by the shippers."
    In view of the discrepancy between the period of one year mentioned by the Minister and the period of two years mentioned by that person, would the Minister have another look at the matter?
    Mr. Low: I am constantly having a look at this matter, which is obviously of great importance to our trade, but the hon. Member will find—so will his friend—that the delay has shortened this year from 16 months in January to about 12 months now.

    Coal Production, West Fife
    Mr. Hamiltonasked the President of the Board of Trade if he is aware of the anticipated decline of coal production in central West Fife in the course of the next few years; and what steps he intends to take to encourage the introduction of alternative industry.
    Mr. Walker-Smith: I am informed that the National Coal Board expect in the next five years some decline in mining employment in the Cowdenbeath-Lochgelly area and a considerable expansion at neighbouring coalfields some ten miles away. The need for other employment will continue to be kept under review.
    Mr. Hamilton: Has the Minister had access to figures supplied by the National Coal Board for a longer period than five years? Is he aware that over the next 20 years or so employment for coal miners in that area will be virtually non-existent? Will he look at those figures and, in the light of them and figures for other parts of the country, re-draft or modify his policy for the distribution of industry?
    Mr. Walker-Smith: I have not got the figures for 20 years ahead. The figures for the next ten years, however, show a net increase of 4,780 jobs in the coal-mining areas to which I have referred. I will certainly continue my researches beyond that point in response to the hon. Member's invitation.

    Hong Kong Imports
    Mr. Gowerasked the President of the Board of Trade the total quantity and value of imports from Hong Kong during March; and the figures for March, 1955.
    Mr. Low: Figures of the total quantity of imports of all kinds are not available. I would ask my hon. Friend to await publication of the value figures he requires in the Trade and Navigation Accounts for March.
    Mr. Gower: Is it not a fact that there has been a large increase? Can my right hon. Friend say whether a large proportion of the goods are of Japanese origin?
    Mr. Low: There certainly has been a substantial increase in the first two months of this year, but our imports from Hong Kong are still substantially below our exports to Hong Kong.

    Lettuces (Import Duties)
    Mrs. Castleasked the President of the Board of Trade whether, in view of the high price of lettuce, he will suspend the import duty of 20s. per cwt.
    Mr. Low: No, Sir. It would not be appropriate to vary the tariff on short-term changes in the level of supplies or prices.
    Mrs. Castle: Is the right hon. Gentleman aware that in London lettuces are fetching 1s. 6d. each and have been doing so for some time? Is it not absurd to call this a protective duty if it cannot be varied according to whether or not protection is necessary? Does it not merely become a tax on food?
    Mr. Low: As my right hon. Friend has frequently said, it is important to have tariff stability. It would be a great mistake to vary tariffs from time to time according to the conditions of supplies and prices.

    Exports to Indonesia
    Miss Vickersasked the President of the Board of Trade the present position regarding the export of capital goods to the Republic of Indonesia.
    Mr. Low: The export of capital goods to Indonesia is not restricted. United Kingdom exports to Indonesia last year amounted to £11.2 million of which about one-third were capital goods.
    Miss Vickers: In view of the large potential market represented by Indonesia's 80 million population, will he consider granting extra credit facilities to enable Indonesia to purchase capital equipment? Might I draw attention to the article in The Times today which says that Russia is offering Indonesia economic aid on the same basis as she has done to India and Afghanistan? Will my right hon. Friend consider what he can do?
    Mr. Low: Credit facilities are available for our exports for Indonesia. It would be wrong to consider any special arrangements for that area alone.

    Gramophone Records
    Mrs. Jegerasked the President of the Board of Trade whether he will refer gramophone records to the Monopolies Commission.
    Mr. Walker-Smith: My right hon. Friend is considering further references to the Commission, but he is not in a position to make any further statement at the present time.
    Mrs. Jeger: Is the Minister aware that there is a widespread feeling among the public that they are not sharing in all the benefits that have accrued from recent technical developments in recording? Will the right hon. Gentleman consider including gramophone recordings in his references to the Monopolies Commission?
    Mr. Walker-Smith: I do not think I can usefully add to the answer that gave. In so far as the hon. Lady refers to the restrictions on the public use of gramophone records
    Mrs. Jeger: I had in mind the cost.
    Mr. Walker-Smith: If the hon. Lady is concerned with the cost, I cannot usefully add to my previous answer. In so far as the costs stem from agreements between two or more manufacturers, that is, of course, a matter dealt with under the present Restrictive Trade Practices Bill.

    Eastern European Countries
    Dr. Kingasked the President of the Board of Trade to give figures for the exports by the United Kingdom for the years 1954 and 1955 to Bulgaria, Czechoslovakia, Poland, Hungary, and Roumania, respectively; and the percentage increase or decrease in respect of each country.
    Mr. Low: As the Answer contains a number of figures, I will with permission, circulate it in the OFFICIAL REPORT.
    Dr. King: Is the right hon. Gentleman aware that a number of Western European countries are rapidly increasing their trade with the satellite countries? Can he tell the House at the moment whether the figures which he has got show an increase? Will he do all he can to step up, having regard to military security considerations, our exports to those countries?
    Mr. Low: There are substantial increases for some of the countries.
    Following are the figure:

    —

    1954

    1955

    Percentage increase or decrease in 1955 over 1954

    £

    £

    United Kingdom exports to:—

    Bulgaria

    592,608

    797,060

    +35

    Czechoslovakia

    1,788,766

    2,822,237

    +58

    Poland

    7,918,353

    6,399,372

    -19

    Hungary

    1,612,295

    2,143,941

    +33

    Roumania

    1,155,343

    1,119,614

    -3

    Commonwealth Rubber Industry
    Mr. Sorensenasked the President of the Board of Trade what further representations he has received from growers of natural rubber within the Commonwealth and from Malaya, in particular, in respect of co-operation between them and the manufacturers of synthetic rubber with a view to ensuring an expanding market for both commodities.
    Mr. Low: My right hon. Friend has not recently received representations on this point. But I am informed that a mission of United Kingdom rubber manufacturers has this month visited Malaya, where frank and cordial discussions on these problems took place.
    Mr. Sorensen: Do I presume from the Answer that, in fact, some representations have been received, and that some effort has been made? Can the right hon. Gentleman say what steps are being taken by his Department to encourage this co-operation and co-ordination?
    Mr. Low: This visit took place, and that was a step to encourage explanation and co-operation.

  NATIONAL FINANCE

    Wages and Salaries
    Mr. Fernyhoughasked the Chancellor of the Exchequer (1) the number of people working for wages in 1938 and 1955, respectively; and what percentage they took of the national income; and
    (2) the number of people working for wages and salaries in 1938 and 1955, respectively; and what percentage they took of the national income.
    The Financial Secretary to the Treasury (Mr. Henry Brooke): Information on the numbers of wage-earners and salary-earners is, I regret, not available for either 1938 or 1955, and separate figures of wages and salaries are not yet available for 1955. In 1938, wages took 37 per cent. of the gross national product and salaries 18 per cent., totalling 55 per cent. In 1954, wages took 39 per cent and salaries 20 per cent., totalling 59 per cent. In 1955, wages and salaries together took 60 per cent.
    Mr. Fernyhough: In view of the considerable increase in the numbers of wage-earners and salary-earners between 1938 and 1955, would not the right hon. Gentleman agree that the share which they are taking of the national cake is not the share to which the Government should direct their attention, but that their attention should be directed to the 40 per cent. which has been taken by the non-earners?
    Mr. Brooke: I think the hon. Member is swinging to conclusions.

    Suggestion Schemes
    Mr. Pageasked the Chancellor of the Exchequer what organised suggestion scheme is in operation in his Department; how many suggestions are received from employees through that organisation annually; how many are adopted; what awards are made for such suggestions; and what he estimates to be the savings made by the adoption of employees' suggestions.
    Mr. H. Brooke: A permanent suggestions committee consisting of members of the official and staff sides of the Departmental Whitley Council receives and considers suggestions submitted by members of the Treasury staff. During the past nine years 27 suggestions have been received, of which seven were adopted. Small monetary awards for suggestions adopted have been made in three cases. It is not possible to assess the value of the savings effected.
    Mr. Page: Having regard to the fact that these figures do not seem very good as compared with the results of other organised suggestions schemes, may I ask my right hon. Friend whether he would consider appointing some person to rejuvenate the scheme, not only in his own Department but also in other Departments, in view of the fact that great

    837
    economies can be achieved from these organised suggestions schemes?
    Mr. Brooke: I am only responsible for the Treasury, but I do not think that we need rejuvenating. As people who have to deal with the Treasury discover, the Treasury is a very efficient Department already.

    Cinema and Theatres (Entertainments Duty)
    Mr. Swinglerasked the Chancellor of the Exchequer what representations he has received in favour of the reduction of entertainments tax on cinemas, with particular reference to the plight of the small cinema proprietor and the need to find greater financial resources for film production.
    Mr. H. Brooke: My right hon. Friend has had representations from the various associations concerned with the film industry and also from individual cinema proprietors. These representations dealt with the situation in the film industry generally, including the position of the smaller cinemas and the financial resources of British film production.
    Mr. Swingler: Without wishing to anticipate any proposals, may we expect that entertainment will be a feature of the forthcoming Budget statement?
    Mr. Brooke: I would advise the hon. Gentleman to wait and see.
    Dr. Kingasked the Chancellor of the Exchequer the number of theatres now paying entertainments tax.
    Mr. H. Brooke: It is estimated that about 350 places of regular theatrical entertainment now provide dutiable entertainments.
    Dr. King: Will the Minister set against that figure the figure of about 50 theatres which have closed down during the last few years because of the burden of Entertainments Duty, and will he convey to his right hon. Friend the Chancellor what a bad thing it will be for Britain if the Entertainments Duty is now to destroy the living theatre?
    Mr. Brooke: It is quite true that about 50 of these places have closed down, but I think again that the hon. Member is jumping to conclusions if he states that they have been closed down because of the burden of Entertainments Duty.

    Property Income (Overseas Payments)
    Mr. Osborneasked the Chancellor of the Exchequer why property income paid abroad, as shown on page 10 of Command Paper No. 9729, has increased from £251 millions in 1950 to £382 millions in 1954 and £446 millions in 1955; and what are the chief items in last year's figures.
    Mr. H. Brooke: A major factor in the increase is the rise in interest on foreign Government loans from £1 million in 1950 to £41 million in 1955, due almost wholly to payments on the United States and Canadian Lines of Credit and the Lend Lease Settlement Loan. Nearly alt the rest of the increase is due to interest on sterling liabilities, profits earned lit the United Kingdom by foreign controlled companies, and taxes paid to foreign Governments on income accruing to United Kingdom residents.
    Mr. Osborne: Is it possible to have these detailed figures given in the OFFICIAL REPORT?
    Mr. Brooke: I have answered my hon. Friend's Question, and I will see whether I can give him any further information.
    Mr. Jay: Is not the increase in the Treasury bill interest to overseas holders this year one important factor in this rise?
    Mr. Brooke: I said that one factor was the increase in the interest on sterling liabilities, and about one-third of the total increase is in taxes paid to foreign Governments on income accruing to United Kingdom residents.

    Nationalised Industries (Loans)
    Mr. Grimondasked the Chancellor of the Exchequer the present total indebtedness of the principal nationalised industries to the banks and to the Exchequer.
    Mr. H. Brooke: The total amount authorised for temporary bank borrowing by nationalised industries on 31st March, 1956, was £89 million. Exchequer advances are to the National Coal Board only, and amounted to £267 million on the same date.
    Mr. Grimond: May I take it from that answer that those are the amounts

    839
    actually outstanding or authorised? Secondly, how do they compare with the amounts outstanding at the beginning of the credit squeeze?
    Mr. Brooke: Those are the amounts authorised. They were not wholly taken up at that time. I would require notice with regard to the second part of the supplementary question.

    Local Authorities (Loans)
    Mr. Grimondasked the Chancellor of the Exchequer what is the amount of money raised by the local authorities on the market and by mortgage since 7th February.
    Mr. H. Brooke: Four local authorities raised a total of £8 million by issues of stock. As my right hon. Friend explained to the House on 7th February, we have no precise figures for loans raised on mortgage, but it is estimated that such loans raised and already arranged amount to about £35 million.
    Mr. Grimond: Can the Minister say whether any local authorities which have been forced to approach the market have been refused accommodation, or have been unable to obtain accommodation upon suitable terms?
    Mr. Brooke: The arrangements announced in the autumn by my right hon. Friend the Lord Privy Seal, when Chancellor, was that an authority would have access to the Public Works Loan Board if it were unable to borrow upon reasonable terms in the market.

    Coins (4d. pieces)
    Mr. K. Thompsonasked the Chancellor of the Exchequer if he will arrange for the minting of groats.
    Mr. Chetwyndasked the Chancellor of the Exchequer whether, in view of the increase to 4d. of call-box telephone calls and the inconvenience to the public in having the requisite number of coins available, he will reintroduce the fourpenny groat.
    Mr. Collinsasked the Chancellor of the Exchequer if he will now consider the minting of fourpenny pieces.
    Mr. H. Brooke: The addition of a further coin denomination to those already in use would be attended by various practical difficulties, and it would
    840
    complicate the giving of change and checking of accounts. I would therefore prefer to await evidence that there is serious need for a groat.
    Mr. Thompson: Does not my right hon. Friend consider that it would be a very great convenience, in many ways, to have 4d. pieces in circulation, particularly if we could have a lot of them?
    Mr. Chetwynd: As under this Government's policies 4d. now only has the value of 3d. could not the right hon. Gentleman transfer the 3d. bit to a 4d. bit? Would not that get over his difficulties?
    Mr. Brooke: I think that that might complicate matters still further.
    Mr. Collins: Can the right hon. Gentleman say whether his decision has been influenced by the belief that, owing to this Government's policy, before the coins could be minted the minimum charge for a telephone call would be 6d.?

    £ Sterling (Value)
    Lieut.-Colonel Liptonasked the Chancellor of the Exchequer the present internal purchasing value of the £ sterling, taking the value in October, 1951, as 20s.
    Mr. H. Brooke: Taking the internal purchasing power of the £ as 20s. in October, 1951, it is estimated that the corresponding figure for February, 1956, is 17s. 9d. This estimate is based on the consumer price index between 1951 and 1955 and the index of retail prices since then.
    Lieut.-Colonel Lipton: Is not the internal purchasing value of the £ about the only thing that the Government have brought down in the last few years? Should we not give debit where debit is due—to the present Government?
    Mr. Brooke: We have not allowed the value of the £ to dive as it did under the Labour Government in 1951.
    Captain Pilkington: Will my right hon. hon. Friend confirm that the value of the £ fell by 6s. between 1945 and 1951?

    National Trust, Wales (Transferred Properties)
    Mr. Gowerasked the Chancellor of the Exchequer in how many cases in the last five years land in Wales has

    841
    been accepted for the National Trust in satisfaction of death duties; and if he will make a statement.
    Mr. H. Brooke: Two properties in Wales, both part of the Penrhyn Estate, were transferred to the National Trust in 1951, after acceptance in satisfaction of death duties. There have been no other cases in the last five years.
    Mr. Gower: Has my right hon. Friend noted that some people in Wales have advocated the setting up of a separate National Trust for Wales? In his future consideration of this problem, will he bear in mind that however strange it may seem to some critics, it is possible that some people in Wales would be more likely to leave property to such a a separate Welsh body?
    Mr. Brooke: I had noted that my hon. Friend has a Question on the Order Paper to the Minister for Welsh Affairs for Thursday. I had much better not anticipate my right hon. and gallant Friend's answer.

    Double Taxation Agreement (India)
    Mr. Remnantasked the Chancellor of the Exchequer whether he has now signed an agreement with India for the avoidance of the double imposition of Estate Duty; and in what way details will be published.
    Mr. H. Brooke: Yes, Sir. A draft Order in Council with the text of the Agreement scheduled to it was laid before the House on Friday last.
    Mr. Remnant: Will my right hon. Friend say whether by this agreement sterling companies will no longer have to pay death duties on the estates of their shareholders?
    Mr. Brooke: I should not like to give an answer on specific points in the agreement without notice. Perhaps my hon. Friend will study the agreement and then put down further Questions to clarify any matter.

    Tax Evasion (Covenants)
    Mr. G. M. Thomsonasked the Chancellor of the Exchequer if he will make an investigation into the extent of tax evasion being engaged in by parents who make mutual arrangements to use
    842
    seven-year covenants to obtain tax relief on the cost of their children's school fees.
    Mr. H. Brooke: All practicable steps are taken by the Inland Revenue to detect attempts at evasion of tax in this and other ways. It would not be in the public interest to go into details, but I assure the House that they can be safely left to watch over this matter.
    Mr. Thomson: Is the right hon. Gentleman aware that there is evidence of considerable tax evasion in this respect? Is he aware that the Evening Standard recently published interviews showing that there were several hundred covenants of this nature at Marlborough School and 1,300 at Shrewsbury School? Is this not sufficient evidence for his Department to take action?
    Mr. Brooke: If the hon. Member has evidence, I shall be grateful if he will give it to me. I assure him, however, that the Inland Revenue goes into these matters with great care and that it is not possible to deceive the Inland Revenue except by telling lies.
    Mr. Vane: Would it not be wiser if, later in the afternoon, we could be told that it is no longer illegal for parents to enter into deeds of covenant with places of education for the benefit of their children?
    Mr. S. Silverman: Would the right hon. Gentleman care to explain how, apart from Inland Revenue inspectors, a man can deceive anybody except by telling lies?
    Mr. Brooke: I am certainly not prepared to say anything which would help evildoers to discover in advance the methods used by the Inland Revenue to detect their misdoings.

    Civil Service Pay (London Boundaries)
    Mr. Beswickasked the Secretary to the Treasury (1) when he expects to complete the review of the boundaries of the present areas of London, intermediate and provincial, into which the country is divided, for salary purposes of non-industrial civil servants;
    (2) in view of the special accommodation difficulties, and consequent expense, to which civil servants employed at London Airport are liable, if he will

    843
    consider bringing that area within the London boundaries for salary purposes, and thus bring the non-industrial civil servants into line with the industrial civil servants employed at the airport.
    Mr. H. Brooke: The boundaries of these areas are covered by an agreement with the National Whitley Council. If the staff side ask for a review, their proposals will be considered through the normal machinery.
    Mr. Beswick: Is it not the fact that requests have been made and, further, that in the case of the industrial civil servants the cost of living around London Airport is accepted as being as high as in the London area? Will the right hon. Gentleman therefore look into the matter as one of urgency?
    Mr. Brooke: I was not aware of any request being made by the staff side. If a request for a review is made, certainly it will be considered.

  IMPERIAL INSTITUTE
  Dr. Strossasked the Chancellor of the Exchequer whether he will make a further statement on the possibility of preserving the tower and facade of the Imperial Institute.
  Mr. H. Brooke: I cannot at present add to the reply which I gave to the hon. Member on 15th March. Discussions are proceeding between the Architect of the London County Council, which is the planning authority, and the College authorities and their architects.
  Dr. Stross: May I thank the right hon. Gentleman for that reply, in view of the fact that the subject is obviously not closed and that consideration has been given to this very important matter? Will he bear in mind that many of us in all parts of the House in no way disagree about the importance of scientific education, but we are very anxious indeed to see that something should be done to retain this building?
  Mr. Brooke: I cannot add anything at the moment. The London County Council is the planning authority, and these discussions are proceeding.

  MR. BULGANIN AND MR. KHRUSHCHEV (VISIT)
  Mr. Healeyasked the Prime Minister whether he will discuss with the Russian Prime Minister the maintenance of peace between Israel and the Arab States.
  Mr. Warbeyasked the Prime Minister whether he will propose to Messrs. Bulganin and Khrushchev, during the course of his discussions with them, the participation of the Union of Soviet Socialist Republics, together with France, the United States of America, and other arms-exporting countries, in a consultative committee which would have the function of regulating the supply of arms to Middle East countries until such time as a definitive peaceful settlement of the Israeli-Arab conflict is achieved.
  The Prime Minister (Sir Anthony Eden): I have already said that the main purpose of the visit of the Soviet leaders is to discuss the many issues that today divide the world. The talks will be confidential, and I am not prepared to disclose what particular points or arguments will be raised by Her Majesty's Government.
  Mr. Healey: In view of the fact that reports have been received that the American Administration are now considering inviting the Soviet Union to associate itself with arms control, under the 1950 Declaration, cannot the Prime Minister at least give us some assurances on this point?
  The Prime Minister: The hon. Member is very experienced in these affairs, and I think he will appreciate that it would be unusual—and, I think, very unwise—for me to launch into anything in the nature of an agenda before this meeting takes place. Clearly, if I answer his Question I shall have to answer the questions of others who wish to know whether the items in which they are interested are on the agenda, and there will be no end to it.
  Mr. Warbey: Will the right hon. Gentleman bear in mind the representative opinion, expressed by Mr. Walter Lippman, that it is better to fix upon the Soviet Union the responsibility for sharing, as an equal partner, in the maintenance of peace in the Middle East rather

  845
  than exclude her from all influence in that part of the world?
  The Prime Minister: For a great many years I have had the pleasure of reading Mr. Lippman's articles with very great care.
  Captain Waterhouse: Will my right hon. Friend bear in mind in these discussions that it has always been British policy to exclude Muscovite influence from the Levant?
  Mr. Jack Jones: Will the Prime Minister give the House an assurance that, despite the fact that these talks are to be confidential, he will make every effort to get as many commercial travellers into Russia as we have fellow travellers in Britain?
  The Prime Minister: Thank you very much.
  Mr. Lewisasked the Prime Minister whether, during the forthcoming visit of Marshal Bulganin and Mr. Khrushchev, he will arrange for them to spend part of a Sunday morning at the Speakers' Corner, Marble Arch.
  The Prime Minister: No, Sir; Mr. Bulganin and Mr. Khrushchev will be at Chequers on Sunday morning. For examples of British oratory they will have to rely on their visit to this House, where, Sir, I think that you will agree that controversial matters are occasionally raised.
  Mr. Lewis: I appreciate that the visit to Chequers will be important and, equally, that the visit to the House will be of interest, but is the Prime Minister not aware of the fact that one of the greatest free democratic forums is Speakers' Corner at Marble Arch, and, whilst there may not be any clowns with top hats there, it is just as important for these visitors to go there as to come here?
  The Prime Minister: I do not think that that forum is exclusive. I do not think that I would wish to put it above the standing of this House.
  Mr. S. O. Daviesasked the Prime Minister why arrangements have not been made for Marshal Bulganin and Mr. Khrushchev to visit Wales; and if he is aware that the Welsh people are taking exception to the manner in which their hospitality is thus ignored.
  The Prime Minister: The programme for the Soviet leaders' visit is a very full one. I regret that it has not proved possible to include in it a visit to Wales on this occasion.
  Mr. Davies: Is not the Prime Minister aware that his treatment of Wales has been angrily noted by the Welsh people? Is he not also aware that the Welsh nation is really getting tired of this habitual disregard of its interests and, particularly, its instinctive hospitality? Why did he not allow these distinguished visitors to go to Wales as he has to Scotland? What special reasons did he have?
  The Prime Minister: We have discussed this matter many times. The programme has been arranged—as I think the House generally agrees—with a view to getting the maximum discussion. Naturally, it was not at all that I wished to slight Wales in any way. If these conversations go well, some visitors might come back again for the purposes of travel. If they wish to do that, no doubt the traditional hospitality of Wales will be open to them.
  Mr. Davies: The Prime Minister has deliberately offended the Welsh people. Will he take note of that?

  CYPRUS (ARCHBISHOP MAKARIOS)
  Mr. Bevanasked the Prime Minister if Her Majesty's Government will clearly lay down the conditions under which the Governor of Cyprus would be prepared to renew negotiations with Archbishop Makarios.
  The Prime Minister: There can be no question of negotiation in Cyprus until law and order are restored. The recent talk which my right hon. Friend the Colonial Secretary had with Archbishop Makarios did not encourage any hope of a successful outcome to further negotiations with him. In the circumstances, I have no statement to make about discussions with him.
  The position of Her Majesty's Government in respect of constitutional progress has, however, been made clear in the White Paper, and that offer still stands.
  Mr. Bevan: Are we to understand that the statement made, or alleged to have been made, by Sir John Harding—that he would never recommend negotiations with Archbishop Makarios—represents the Government's policy? Is the right hon. Gentleman not aware that history is full of statements as foolish as that, and that negotiations have subsequently had to be undertaken with leaders who have been repudiated? Will the right hon. Gentleman be careful not to say something now which he may have to undo later on, and which may be an obstacle to negotiations?
  The Prime Minister: My right hon. Friend asked the Governor about the statement to which the right hon. Gentleman has referred, and he informed my right hon. Friend that what he said was that he could not recommend Her Majesty's Government to renew negotiations with Archbishop Makarios—and he gave his reasons. I can see no cause to take exception to that.
  Mr. Bevan: Has not the right hon. Gentleman now actually said the same thing, namely, that he will not negotiate with Archbishop Makarios? Is it not unwise to say something now which may be a barrier to negotiations?
  The Prime Minister: If the right hon. Gentleman will look at my reply he will see that I have been very careful in the words I have used. At the same time, I must point out to the House that if law and order is restored it will not be due to Archbishop Makarios. I am certainly not prepared to enter into a commitment of any kind in the matter of future negotiations.
  Sir R. Jennings: Is the Prime Minister aware that the whole House and country are behind the Government in their action?
  Mr. J. Griffiths: May I ask the Prime Minister a question arising from his original reply to my right hon. Friend, from which I understood him to say that there would be no negotiations until law and order were restored? When law and order are restored, with whom do the Government propose to negotiate? If at that stage they find that a settlement is impossible without negotiating with Archbishop Makarios, will they then be prepared to negotiate with him?
  The Prime Minister: The right hon. Gentleman asked with whom we would negotiate. That is hardly for me to say at this stage. The first stage is the restoration of law and order. That really involves the removal of fear, by which I mean the removal of fear, above all, from the Cypriots themselves. When that situation arises, there may be possibilities of negotiation with personalities whose names we have at present no reason to list.
  Mr. Bevan: Does that mean that the Government are quire clear about those with whom they would not negotiate but are quite blurred and vague as to those with whom they would negotiate?
  The Prime Minister: I do not think that when the right hon. Gentleman reads my Answer he will come to that conclusion. I have chosen my words extremely carefully and the position is, as I stated it. It is a definite and clear position on which to rest.

  LOCAL GOVERNMENT

    Suggestions Schemes
    Mr. Pageasked the Minister of Housing and Local Government what organised suggestion scheme is in operation in his Department; how many suggestions are received from employees through that organisation annually; how many are adopted; what awards are made for such suggestions; and what he estimates to be the savings made by the the adoption of employees' suggestions.
    The Minister of Housing and Local Government (Mr. Duncan Sandys): There is no organised scheme of this kind.
    Mr. Page: Why not?
    Mr. Sandys: These suggestion schemes do not always produce very productive results. For example, the former Ministry of Town and Country Planning had a scheme which in six years produced eleven suggestions.

    Synthetic Detergents (Report)
    Mr. Doddsasked the Minister of Housing and Local Government if he will make a statement following consideration of the final report of the Committee on Synthetic Detergents.
    The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. J. Enoch Powell): My right hon. Friend does not intend to make a statement until the report has been published and its contents considered by all concerned. It will be published as soon as it can be printed.

    Rating Valuations (Repairs Allowances)
    Mr. Ridsdaleasked the Minister of Housing and Local Government whether he will consider bringing up to date the statutory allowance for repairs, with a view to helping small businesses over their rating assessments.
    Mr. Ness Edwardsasked the Minister of Housing and Local Government, now that the new valuation lists are in force, what steps he proposes to take in the light of the recommendations made by the Edwards Committee in September, 1954.
    Mr. Sandys: These matters are being considered as part of the general review of the finance of local government which I announced earlier, and which is now well under way.
    Mr. Ridsdale: Is my right hon. Friend aware of the great difficulties of the small shopkeeper at the present time? Will he do all that he can to allay the anxieties of these people as much as possible in the review?
    Mr. Sandys: All aspects of the problem will be covered by the review.

    Rural Water and Sewerage Schemes
    Mr. Swinglerasked the Minister of Housing and Local Government why his Department's grants towards the costs of rural water and sewerage schemes are paid only when the final accounts have been submitted; and if, in view of the financial difficulties of rural local authorities, he will revise this procedure so as to commence payments as soon as schemes have been approved.
    Mr. Powell: The amount of grant cannot finally be fixed until the capital cost is known, but where the burden on the rates is specially high my right hon. Friend is prepared to make payments on account al an earlier stage.

    Miners' Houses, Newcastle-under-Lyme
    Mr. Swinglerasked the Minister of Housing and Local Government if he has considered the suggestions put forward by the Newcastle-under-Lyme Borough Council in a letter from the town clerk to his Department dated 9th April concerning housing for miners, with particular reference to the need to include local miners in any special scheme; and if he will make a statement.
    Mr. Sandys: Yes Sir, and I shall be sending the Council my reply very shortly.

    Housing Programmes
    Mr. Blenkinsopasked the Minister of Housing and Local Government how many local authorities have indicated their intention to discontinue house building in their areas.
    Mr. Sandys: None so far this year.
    Mr. Blenkinsop: Will the Minister keep in touch with the situation to ensure that local authorities know that it is the general desire of the House that they should continue to build further houses?
    Mr. Sandys: Yes, of course.

    Hostel Accommodation (Old People)
    Mr. Blenkinsopasked the Minister of Housing and Local Government whether he will recommend local authorities to make fuller use of their powers to provide hostel accommodation for old people.
    Mr. Sandys: This is a matter which in my opinion local authorities are best able to decide for themselves in the light of local needs.
    Mr. Blenkinsop: Is the Minister aware that certain local authorities have discontinued proposals with which they were intending to proceed under the 1949 Act because of the increase in interest rates? Will he try to take action to ensure that extra provision of this kind for old people is proceeded with?
    Mr. Sandys: There are the wishes and the needs of the older people to be considered. It is not purely a matter of

    851
    finance. There are very many older people who do not wish to be put into hostels.
    Dame Irene Ward: May I ask my right hon. Friend to bear in mind that the accommodation for older people is not satisfactory? Will he also bear in mind that we are getting rather tired of just being told this is a concern of the local authorities? If he could give some guidance to the local authorities, and if he felt like doing so, would he please do so?
    Hon. Members: Answer.
    Mr. Sandys: I think that the House generally wants now to hear my right hon. Friend the Chancellor of the Exchequer.

ORDERS OF THE DAY

  WAYS AND MEANS
  Considered in Committee.
  [Sir CHARLES MACANDREW in the Chair]

  BUDGET PROPOSALS
  3.32 p.m.
  The Chancellor of the Exchequer (Mr. Harold Macmillan): Very many years have passed since I first heard a Chancellor of the Exchequer open his Budget. For a young and newly elected Member, it was a great occasion. I remember it very well. Of course, in those days there were not so many rival attractions. The Chancellor of the Exchequer of the day was the then Member for Epping. Now he is my right hon. Friend the Member for Woodford (Sir W. Churchill). Quite a lot has happened since then—to him, and to us.
  It was said at the time that my great predecessor was quite surprised to find himself at the Treasury in the winter of 1924—but not half so surprised as I was, thirty-one years later. Naturally, I could not tell the Committee today the details of that Budget all those years ago; but I do remember the scene very vividly. I remember, too, how the dullest and most prosaic of topics leaped into life under his magic touch. Rows of figures were marshalled into battalions and regiments by the master's hand. It was more than the opening of a Budget. It was the launching of a campaign. Since those days I have heard many Budget speeches, but no Chancellor since then—certainly, in my mind—has left quite the same romantic memory.
  Indeed, his successors have sometimes seemed more like schoolmasters than commanders. To tell the truth, I have often thought of Budget day as rather like a school speech day—a bit of a bore, but there it is. The parents and the old boys like it. These occasions are very similar, for an unfortunate audience has to sit and listen to a long speech before it is told of the fortunate prize winners. The analogy is not, of course, perfect, because on Budget day there are quite likely to be impositions as well as prizes for distribution. Sometimes there are nothing but impositions. However, the additional

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  uncertainty, I suppose, adds to the suppressed excitement, and the speech, therefore is received with all the greater impatience, which I can well understand.
  On this occasion, when I am introducing my first Budget, I shall try not to prolong the agony. I certainly do not think that it is necessary to start with the usual long review of the events of the last financial year. I will content myself with a brief assessment of the present state of the economy, with a quick backward glance to show the recent movements of what, I think, are called "the key economic indicators".

  BUDGET PROPOSALS

    BALANCE OF PAYMENTS
    I will begin with the balance of payments. By all the rules, the year 1955 should have been a good year. The outflow of dollars from the United States continued at a high level. Output was growing rapidly in all major manufacturing countries and trade between them was increasing at an exceptional rate. The primary producing countries, in general, remained prosperous and provided good markets for manufactured goods—America sending out more dollars than she received: world trade increasing: markets good. Everything, therefore, seemed in our favour.
    Yet, as the Committee knows, in spite of the favourable external circumstances, the balance of payments figures were disappointing. The United Kingdom current account balance with all areas over the calendar year was in deficit to the extent of £103 million. That is £308 million down on 1954. This deterioration was equally divided between visible and invisible trade. It is true that much of the fall in the invisible surplus was due to exceptional circumstances, such as a sudden expansion of oil companies' expenditure. All the same, the position as a whole is disappointing and unsatisfactory.
    Now I come to the balance of the sterling area as a whole with the non-sterling world. This fell from a surplus of £97 million in 1954 to a deficit of £181 million in 1955, Of this deterioration of £278 million, no less than £251 million was due to the United Kingdom.
    The result of these unfavourable balances is, naturally, reflected in the reserves. Ultimately, of course, it is
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    the sterling area's trading account that matters. If that is good, there is no reason to worry too much about reserves or the cash account, for, in the long run, if the trade balance is right, the cash account will be right, also. But if the trade account is bad, the cash account will suffer. So it has proved. Of course, the reserves are affected by many other considerations. But what I have said is broadly true.
    During 1955, we lost £229 million from the central gold and dollar reserves, which, at the end of the year, stood at £757 million. This was a loss of nearly a quarter. Over the turn of the year—that is, this year—the reserves began to show improvement. In January, they increased by £11 million and in February by £21 million. The March figure showed an increase of £24 million. That is all right as far as it goes, but we have—and we might as well face it—a long way to go.
    The truth is that our reserves, which now stand at £813 million, are really insufficient for their purpose. They represent, in fact, only about 8 per cent. of the annual turnover of sterling area trade with the non-sterling world. In this sense, whether at the figure of last year or the figure of this year, we are really trading beyond our capital resources. We lack just that extra amount of strength which would allow us to take the swings in our balance of payments with comfort. We must, therefore, increase the reserves. To do this, we must correct the balance of payments. If we can do this, the rest will follow.
    Our position in the European Payments Union has been even more markedly affected than our gold and dollar reserves. Our E.P.U. deficit, which was over £90 million in the third quarter of 1955 and nearly £30 million in the fourth quarter, was, in January, only about £4 million and, in February, about £8 million. In March, which, of course, should be a good month, it fell to only about £100,000, so that is an advance. With the wide transferability of sterling, of course, it is not only the normal current transactions with Europe of the United Kingdom and the rest of the sterling area which affect the monthly E.P.U. settlement, but also transactions with a large part of the rest of the world.
    As regards the balance of trade, January was not a good month. The excess of imports over total exports was £74 million, compared with a monthly average of £62 million in the last quarter of 1955. It was only slightly better than the figures for the earlier quarters of 1955. In February, the excess was reduced to just under £50 million, but February is normally a low month for imports. In March, the deficit was again reduced to £47 million. This is encouraging, although it is too early yet to say that a better trend is firmly established.

    INTERNAL SITUATION
    It is against this somewhat sombre background that we must now have a look at the gay scenes, painted in bright, not to say glaring, colours, in the foreground of our picture. On the home front, 1955 was a year of great prosperity for the mass of ordinary men and women in this country. Everyone had a job; consumption again rose appreciably; and investment also increased. But, in total, demand rose faster than output, and, in consequence, the economy was overstrained. Prices went up; there were shortages of labour and material; imports increased, exports were held back from the foreign market to be consumed at home. So the balance of payments suffered.
    Industrial production in 1955 was 5 per cent. higher than in 1954, a smaller increase than the 7 per cent. of the previous year. Productivity, or output per man, rose less than in 1954—about 2 per cent. instead of 5 per cent.
    It reminds me of the story of the darky porter on one of the trans-continental trains. An English traveller asked him what was the average tip. He replied, "Our average, sah, is five dollars, sah. But ah may say, sah, that very few people come up to the average." I hope that average productivity will do better in the future and will go well above the average!
    Meanwhile, the increase in demand was too much for the increase in output. It is true that the increase in total personal consumption was rather less than the increases of the previous two years. Unfortunately, as the Committee knows, it was concentrated on our overloaded
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    engineering industries. Motor cars, television sets, washing machines, and similar products were in great demand—and all, of course, in competition with precious exports.
    There was, at the same time, a sharp increase in fixed investment. Expenditure on plant, machinery and vehicles, after allowing for price changes, rose more than in any year since 1947. More orders were placed for capital goods than deliveries made, and so order books and delivery dates lengthened; and, despite heavy imports, many types of steel were scarce. Stocks of raw materials, work in progress and finished goods rose sharply and all this added to the strain on the economy.
    The number of jobs waiting to be filled was substantially more than the number of unemployed, and unemployment remained at record low levels throughout the year. Employers competed with one another for labour, and wages and salaries went up by 8 per cent. Profits also increased by 8 per cent., and import prices went up by 3 per cent. As a result of the consequential cost of increases, prices, of course, increased, too. Retail prices were 4½ per cent. higher than in 1954, the price of manufactured goods was 3 per cent. up and export prices 2 per cent.
    All these are symptoms of severe inflation. The strain was heaviest on the building and engineering industries; and the most important initiating factor in producing the inflation was the upsurge in industrial investment. For this, the Government accept part of the responsibility. I think everyone on both sides of the Committee will agree that we need a high level of investment in this country. It was to help achieve this that my predecessor, in two successive Budgets, stimulated investment first by the initial allowances, then by the investment allowances.
    In the long run we want all this investment and more. But the rise was too sharp and sudden for the economy to sustain with all its other burdens. One force acts and interacts upon another. The investment boom has stimulated both consumption and a sharp rise in stocks—particularly of work in progress—as the pipe-lines of industry become full to overflowing.
    I need not go over again here all the various measures taken to moderate the

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    boom, by restricting credit, raising taxes and cutting Government expenditure. They have all been discussed at length in this House, I think only six weeks ago. These measures took longer to act than we expected. They had to be—and they were—continually reinforced. The economy is still running at a very high level. But I think we have learned this lesson from the events of the past year. We cannot afford to run our economy flat out, with more jobs than men to fill them, more orders than industry can meet, easy profits at home and rising costs.
    It would be, of course, very nice if we could do so—at least for some people, for we much remember that there are victims as well as beneficiaries of inflation. It would only be nice, even for the majority, so long as it lasted; and it would not last for very long. There is really no future in importing extra materials that we cannot afford, in order to turn them into extra goods that we do not export. We must, therefore, pay for these imports honestly by our exports; and not by drawing on the reserves.

    MONETARY POLICY
    In our efforts to check the inflation, the Government have relied very largely on monetary policy. The extent to which we have done so is, of course, the subject of controversy. I will not burden the Committee with an account of the course of Bank Rate and other rates, or the movements in bank deposits and advances. The facts and figures are fully set out in paragraphs 34 to 38 of the Economic Survey. The question is, what conclusions are to be drawn from the experience of last year? How shall we apply those conclusions in 1956?
    On the debit side, I put the increased cost of servicing the National Debt, including that part of it which is held abroad, and the time that it takes for monetary measures to achieve the desired results. On the credit side, I claim that monetary policy has, in fact, operated with increasing effect as the year proceeded, thanks to the persistent pressure exercised on the monetary system, both by the interest rate and by the control of credit through the banks and the Capital Issues Committee.
    Of course, since this technique had not been used for many years—and even then
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    under vastly different circumstances—there are many new problems, especially as between the Exchequer and the monetary system. But two things at least are plain. First, no one has yet found an easy way to restrict credit without high interest rates. I am told that if I appoint a committee, I may find out how to do it, but I am not altogether sanguine about this. Secondly, monetary policy cannot "go it alone". It can only operate effectively in conjunction with fiscal and other measures to check demand, taken by the Government of the day and supported by an informed public opinion.

    EXCHEQUER OUT-TURN 1955–56
    After these preliminary excursions into the highlands of economics, I must return to the plain. I must tell the Committee how the Exchequer has fared in the last year, both as regards revenue and expenditure. It has always been the practice to give the figures item by item, but I think that this is a somewhat wearisome exercise. The full and detailed figures are in the hands of hon. Members, so I will content myself with a summary.
    I start with revenue and expenditure above the line. First, revenue. Inland Revenue duties came to £2,539 million, an increase of £61 million over the estimate. All the components of this total were up on the estimate except for death duties, stamp duties and Excess Profits Levy. Customs and Excise produced £2,013 million, £85 million above the April estimate. Almost everything was up, including beer—for it was a fine summer, and a fine summer gives equal satisfaction to the public and the Revenue authorities. Motor vehicle duties and non-tax revenue at £341 million was £37 million above the estimate. So, total revenue above the line was £4,893 million or £183 million above the estimate. So much for the revenue.
    Expenditure above the line was estimated at £4,562 million. It came out at £4,496 million, £66 million below the estimate. Consolidated Fund services were £45 million up, defence £89 million down and civil supply £22 million down.
    Now for the summary above the line—estimated surplus £148 million, actual surplus £397 million, or £249 million up. Next, below the line. Receipts were

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    £219 million, up by £27 million. Payments were £757 million, £19 million less than the forecast. So the total net payments turned out at £538 million, or £46 million less than was expected. As a result of all this, the amount which had to be borrowed was not £436 million as had been forecast. It was £141 million, or £295 million less.

    NATIONAL DEBT
    It is customary at this point to refer to the National Debt. Some addition—the £141 million just referred to, less certain adjustments which brought it down to £106 million—was made to the total of the debt. The addition, of course, was more than accounted for by Exchequer advances for productive investments, on which the borrowers pay interest and sinking funds to the Exchequer. The details as to the composition of the debt, are given in the Financial Statement. It is worth noting that, in spite of this increase of £106 million, there was a decrease of £143 million in that part of the debt covered by Treasury Bills.
    The total of the National Debt now stands at £27,040 million. It might interest the Committee to know that on 3rd September, 1939, it stood at about £8,400 million. On 4th August, 1914, it stood at about £645 million. These figures fill one with a certain awe. There are few nations, victors or vanquished, in these forty years that have so honourably tried to meet their obligations, at home and abroad. The service of the debt cost us £638 million—just about the same as the 1914 debt—or nearly 3s. on the Income Tax. The funded debt is a dull, dragging burden; the unfunded a constant and acute anxiety. No one who contemplates these figures can fail to draw the lesson.
    Whatever the temporary difficulties from which we may suffer by trying to run too fast, if we stand still we are lost. Inflation must be curbed, because runaway inflation ends up by being itself restrictionist. But deflation—in the sense of seeking stability by courses which, among other things, would result in an increase in the debt burden in relation to the national income—that is out of the question. We must all be expansionists, but expansionists of real wealth. The
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    problem of inflation cannot be dealt with just by cutting down demand; the other side of the picture is the need for increasing production. The only question is at what rate, for what markets, and how best guided our expansion is to be.
    There is one comfort in it; it has all happened before. If the Committee will allow me, I will venture to read a famous passage from one of Macaulay's Essays—so relevant that I venture to repeat it:
    "We cannot absolutely prove that those are in error who tell us that society has reached a turning point, that we have seen our best days. But so said all who came before us, and with just as much apparent reason. 'A million a year will beggar us,' said the patriots of 1640. 'Two millions a year will grind the country to powder,' was the cry in 1660. 'Six millions a year, and a debt of fifty millions!' exclaimed Swift; 'the high allies have been the ruin of us.' 'A hundred and forty millions of debt!' said Junius; 'well may we say that we owe Lord Chatham more than we shall ever pay, if we owe him such a load as this.' 'Two hundred and forty millions of debt!' cried all the statesmen of 1783 in chorus; 'what abilities or what economy on the part of a minister, can save a country so burdened?'."
    These are very striking figures from past epochs, almost as striking as those of the last fifty years—from £650 million to £27,000 million. The essayist then went on to ask, with commendable optimism:
    "On what principle is it that, when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
    That is very apt to our present circumstances.
    We have done it before, we can do it again; but we shall need, as our fathers before us, prudence and daring—in the right proportions—and, above all, the instinctive judgment as to the right policy at any moment and the courage to apply it.

    EXCHEQUER PROSPECTS 1956–57
    I now turn from ascertained facts, to estimates—from the past to the future. First, the revenue. Inland Revenue duties in 1956–57—that is the coming year—on the existing basis of taxation, are expected to yield £2,700 million, an increase of £161 million on the out-turn of last year. From Income Tax we expect to collect £2,102 million, or £159 million more than last year. This increase is due partly to the higher profits of 1955–56 which will be assessed in 1956–57, and partly to the effect in a full year of the increases in wages and salaries which have been

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    negotiated in recent months. We expect the yield from Surtax to rise by £5 million to £144 million.
    From Profits Tax we expect to receive £216 million in 1956–57 compared with £192 million last year. This increase of £24 million is partly the result of higher profits, but also reflects the increase made last autumn in the rate charged on distributed profits. Death duties and stamp duties are expected to yield £170 million and £63 million respectively. In each case there is a reduction from the 1955–56 yield, to take account of the lower Stock Exchange prices now ruling. Finally, £4 million may be expected from delayed settlements of the Excess Profits Levy and £1 million from other duties.
    The revenue from Customs and Excise duties on the existing basis of taxation is estimated at £2,130 million in 1956–57, compared with an out-turn of £2,013 million last year.
    Mr. Harold Wilson: Will the right hon. Gentleman give the total again for the Inland Revenue side of it?
    Mr. Macmillan: The Inland Revenue duties on the existing basis are expected to yield £2,700 million, an increase of £161 million on the out-turn of last year.
    I now come to the revenue from Customs and Excise. It is estimated at £2,130 million compared with the out-turn of £2,013 million. The principal items in this total are: tobacco, £680 million; Purchase Tax, £510 million; beer and other alcoholic drinks, £409½ million; oil, £340 million; duties under the Import Duties Act, 1932, £71 million; entertainments, £39¼ million; and betting, £27½ million. These are all estimates on the existing basis of taxation.
    To this revenue must be added £92 million for motor duties, bringing the total tax revenue to £4,922 million, an increase of £283 million on the out-turn for 1955–56. From non-tax revenue I expect £268 million, or £14 million more than actual yield in 1955–56. Total revenue on the basis of existing taxation is thus expected to yield £5,190 million, an increase of £297 million on last year's out-turn.
    I turn now to expenditure. I estimate the total expenditure above the line at £4,758 million, an increase of £196 million on the Budget estimate for
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    1955–56. The Consolidated Fund services, at £778 million, account for £79 million of this increase.
    Supply expenditure in 1956–57 is estimated at £3,980 million, or £117 million above the estimate last year. Within this total—the total supply expenditure of £3,980 million—defence, at £1,499 million, is only £5 million above last year's estimate, but civil expenditure at £2,481 million is £112 million above the estimate for last year. The major item in this increase is £107 million for social services, of which national health and education account for £39 million each. Development of atomic energy will require an additional £18 million, and other items showing increases include civil superannuation, £10 million more; roads, £8 million more; police and fire services, £7 million more. On the other hand, there will be savings of £24 million on home defence.
    The figure I have given for civil expenditure is based on the published Vote-on-Account. This did not, however, take account, on the one hand, of the reductions in the bread and milk subsidies which I announced on 17th February and which will save £35 million in 1956–57, or, on the other hand, of the results of the Agricultural Price Review, which were announced on 15th March and will require an additional £22 million in the coming year. Revised estimates embodying the changes will be presented shortly.

    BALANCE ABOVE THE LINE
    Above the line, therefore, on the basis of existing taxation and measures already announced, the prospects are for a surplus of £445 million. This compares with an estimated surplus for last year of £148 million and a realised surplus of £397 million. I repeat—it is an important figure—on the basis of existing taxation we expect a surplus of £445 million above the line.
    During the year there will, of course, be overspendings and underspendings, as in previous years. Some items are already known to us. I hope that the Civil Service staff associations will accept the offer to carry out with certain modifications the proposals of the Royal Commission on the Civil Service. Certain pay increases have been made meanwhile. The cost, none of which is covered by

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    the estimates, will be £12 million, apart from the Post Office.
    Another known item on the other side of the picture is the removal of the remainder of the bread subsidy. The Government have decided that this should take effect at the end of September. It will produce a saving of about £12 million this year and about £23½ million in a full year. It is not necessary to repeat the arguments for this step, which was fully debated on 20th February. There are other items which are uncertain. There is, for example, the prospect of an increase in teachers' pay. I must bear all this in mind. So much for above the line.

    BELOW THE LINE
    Now I come to below the line, and in this field I shall have some changes to propose. First, let me forecast expenditure on the existing basis. This, at £678 million, is £98 million less than the estimate for 1955–56, and the receipts of £225 million are £33 million higher than the forecast made a year ago.
    The main difference in the expenditure side comes from an estimated decline of £100 million in loans to local authorities. Repayments from local authorities are estimated to rise by £10 million, yielding a net improvement of no less than £110 million. This, of course, is mainly due to the expectation that this year they will raise more of their necessary finance in the stock and mortgage markets. Loans to the National Coal Board are expected to be £25 million less, and I estimate that £27 million less will be required to meet outstanding claims for compensation under the Town and Country Planning Acts. Loans to the Potato Marketing Board, at £5 million, and to the Sugar Board, of £10 million, are new items of expenditure which have arisen since last year. On the other side of the account, the proceeds from the liquidation of the Raw Cotton Commission, which produced £15 million in 1955–56, have now practically come to an end. On balance, the forecast for below the line items shows a deficit of £453 million, or £131 million less than the estimate made last year for 1955–56.
    To sum up: estimated surplus above the line, with present taxation, £445 million: estimated deficit on services at present financed below the line, £453
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    million. Not quite Mr. Micawber's ideal—but uncommonly near it! Unfortunately for the appearance of the thing—it makes no difference to the reality—I have certain changes to propose which will, apparently, though only apparently, rather spoil this pretty picture. It would be nice, of course, to show and proclaim an overall balance in 1956–57. It would sound well at home and abroad. It would be good advertising. But, as hon. Members know, this particular form of calculation depends on what items you choose to include in or exclude from the Budget arithmetic below the line. What matters, of course—the only thing that matters—is whether the total amount of saving by the whole nation, whether compulsory or voluntary, is sufficient to meet the needs of investment, and what Budget surplus is required to make that cerain.

    FINANCE FOR THE NATIONALISED INDUSTRIES
    This leads me to the difficult and complex question of the method of financing the nationalised industries. On this, I fear I must ask the Committee to tolerate a considerable digression. Often as we have debated, inside and outside Parliament, the pros and cons of nationalisation from the point of view of management, I do not think there has been so much public attention given to the question of finance. Yet ever since the war, it has been necessary to raise very large sums, sometimes running into £300 and £350 million a year, for their capital requirements.
    In some cases, as with the railways, the years of war led to great destruction of capital assets. In others, as with the mines, the working out of old pits has made it necessary to spend immense sums in opening new pits and bringing older ones up to date. Again, the rapid development of industry, particularly the metal-using industries, as well as the vast housing schemes, has made necessary a rapid expansion of gas and electricity, both of production and distribution.
    Before nationalisation, the necessary capital would have been raised by the many and diverse bodies concerned in one or both of two ways. The new money might come from their own resources—that is, from trading profits made and not distributed but ploughed back—or the new money might be raised, by various

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    channels and in various amounts, on their own credit on the market. [An HON. MEMBER: "Or it might not be raised at all."] Today, for reasons which are well known to the Committee—I am only giving a purely factual account of the position—the amounts made available from profits are not significant. I reckon that, of the total capital expenditure in coal, gas, electricity, transport and airways since the nationalisation of these industries, over £1,600 million, or about 60 per cent., has had to come from external borrowing. But the Committee will also observe another difference. Before nationalisation, these services were financed largely by money raised on the borrower's own credit. Now the new institutions pledge the credit of the nation.
    Perhaps this is right—since they are nationalised institutions, subject to the limitations and responsibilities which the State has put upon them. Perhaps, like the pelican, traditional symbol of maternal devotion, the State should feed its off-spring with its own blood. All the same, from the point of view of the national credit, it is uncommonly embarrassing. Of course, a number of institutions have been in the habit of borrowing from the State—that is, from the Exchequer. For instance, local authorities. But since their own credit allows them to borrow from the market without any Treasury underwriting, there is no reason why they should not do so more and more, and I shall certainly press forward with this policy, initiated by my predecessor. The ultimate aim perhaps ought to be that the nationalised industries should be able to do the same. Hon. Members will have read with interest, and, I hope, approval, the suggestion made by the Herbert Committee in relation to the Central Electricity Authority. The time may come when this could happen. Perhaps electricity and gas might be the pioneers—I do not know.
    But, frankly, neither these industries nor coal or railways have—if I may use a vulgarism—a cat in hell's chance of doing so in present conditions—and for two reasons, two very simple reasons. The first is that, as the nationalisation Acts are drawn, the industries concerned cannot pledge their undertakings as security, and, also, they are not left with an unfettered ability to fix charges. Who, therefore, would lend money without Treasury guarantee on this basis?
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    Secondly, even if we could overcome this difficulty, the very size of their requirements adds to the difficulty of flotation on their own credit—at least, in present circumstances.
    At present, apart from coal—its capital has always been raised in a different way—the capital required is raised ultimately; we hope it is raised ultimately—from the market investor, as and when the market completely absorbs these issues. Generally, the borrowing starts with bank advances. From time to time these are followed by issues of stock carrying a Treasury guarantee. But if this stock is not taken up, or not fully taken up, then they have to be supported by the Exchequer. In recent months, support of this nature has had to be substantial and prolonged. If the nationalised industries are to carry on their programmes, further large issues will soon be necessary, doubtless with similar consequences.
    Two embarrassing results will follow. First, official "support"—this word is a term of art, of which many hon. Members will no doubt appreciate the significance—can, in fact, only be given, by and large, by borrowing the necessary funds on Treasury Bills. This, of course, impedes the whole operation of our monetary control. It kicks the ball, as one might say, through one's own goal. Secondly—this is also very important—the necessity of making frequent issues on the basis of Government credit, often at inconvenient times for particular nationalised industries which have reached their borrowing limits with the banks, prejudices the national programme of borrowing, re-financing and funding.
    For the time being, therefore, it would, in my opinion, and I hope the Committee will agree, be far better to face the reality, and for the Exchequer to be in control of the whole operation. I propose, therefore, as a temporary measure, to meet these capital requirements out of the Exchequer. Bank advances for capital expenditure will gradually be repaid. These industries will in future look to the banks only for their normal requirements of short-term capital.
    I propose to move a procedure Resolution in order that Parliament may embody the necessary provisions in the Finance Bill. These provisions, of course, will be limited both as to time and as to amount. The new system will only be for two

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    years; the maximum sum will be £700 million. This, I would emphasise, is for industries other than coal which is already, and has always been, financed by the Exchequer below the line. If these proposals are accepted, I estimate that issues may be required of some £350 million in the year 1956–57. This figure must therefore be added to the estimate of the nominal deficit below the line. So disappears, by my own murderous act, my beautiful overall balance!
    Nevertheless, I am sure that we shall gain substantially from this plan. First of all, it gives us, technically, far more control of the situation, and enormously assists the authorities faced with their problems of dealing in general with the National Debt. Of course, it makes no difference to the method by which the physical programmes of the various Boards are approved by the Departments concerned and by the Treasury. Still, if one actually presses the fee oneself into the piper's hand, one has a better chance of influencing the tune. Naturally, my purpose will be that this sum for the nationalised industries, with other borrowing by the Government, should be successfully absorbed by the public during the year—that is, draw in real savings and not depend on inflationary finance. But in the end, neither the nationalised industries, nor the Government, can borrow, except upon a purely inflationary basis, more than the nation is able and willing to lend.

    ECONOMIC PROSPECTS 1956–57
    From the financial prospects for the Exchequer during the coming year following the normal course of these speeches, I now turn to the economic prospects. Here, alas, there is no true science which can give us certainty in this uncertain field. Some people feel that what passes for such is more like astrology than astronomy. Lyndoe or Old Moore may turn out just as reliable as Professor What's His Name or Dr. So and So. I do not share this extreme view. Nevertheless, I think that we should all agree that if there is such a science, it is not an exact one. There are too many unknowns and to many variables. Then I am told that some of our statistics are too late to be as useful as they ought to be. We are always, as it were, looking up a train in last year's Bradshaw.
    Some of my friends on both sides of the Committee feel this very strongly. They feel also that we might improve matters if we had some sort of a committee or commission—not a novel, but a very respectable proposal. Before the war there was a committee presided over by a distinguished fellow clansman of mine—a most learned lawyer and a most charming personality—Lord Macmillan. His committee was about monetary policy. I do not think that he would have claimed any personal knowledge of this matter; indeed, he had none, but in our country that is the way we run committees best. Broadly speaking, the same goes for Ministers. We call it Cabinet government.
    These friends of mine think that some means ought to be found to get us earlier information of what will happen and to devise more precise and perfect weapons for dealing with trouble both before and when it comes; so let us have another Macmillan Committee. That is one plan. Then there is another, more ambitious, but in a way more dynamic. Many years ago, when we were in the throes of an apparently permanent deflation, some of us used to study these matters with all the impetuosity of youth. My hon. Friend the Member for Aberdeenshire, East (Sir R. Boothby), and the present Governor of Northern Ireland and I, together with that brilliant and well-loved figure, Oliver Stanley, once collaborated in a little volume on these matters. It was called "Industry and the State," and was published in 1927.
    After receiving, a few weeks ago, a deputation led by my hon. Friend, I took down a copy from my library shelf out of curiosity. I find that, after reference to what was already being done in the U.S.A., we said this:
    "We therefore wish to emphasise the necessity of setting up something of the nature of an Economic General Staff in this country, to advise and assist the Government of the day."
    We went on:
    "It is clearly impossible to cure a patient until the malady has been diagnosed, and subsequently kept under observation.
    Cabinet Ministers are, by the very nature of their administrative duties, prevented from doing either of these two things."
    I wonder which of us wrote that!
    As one grows older, one gets a little shy about these high-sounding nomenclatures. It may, or may not, have been the result of what we wrote that in 1950 the Economic Advisory Council was set up to report to the Cabinet on economic policy. During the war, this arrangement was superseded by the Economic Section—now, of course, a part of the Treasury. Of course, the Central Statistical Office did not exist thirty years ago.
    Nevertheless, I am still conscious of a certain gap in our defences in this matter and the need to strengthen our technical and administrative armoury. We must continually improve our statistics, in form and timing. We shall, of course, have to make further calls on the co-operation of industry. I am sure that this will be readily given. More complete and more up-to-date information will not only help in the proper ordering of the national economy, but it will help industries themselves by enabling them to foresee more accurately the conditions in which they will have to operate.
    So much for the reinforcement of our statistical arsenals. How are we to use these weapons? It is certainly true that the pressure of day to day work is so great that Ministers have too little time to think ahead. On the other hand, it is no good thinking ahead in a kind of vacuum, without that close contact with actual problems which Ministers—from both sides—obtain when in office. However, some improvement can and should be made. While conditions within which the economy of the United States has to be managed are very different from ours, yet there is undoubtedly much to be learned from a study of their methods. In a word, I feel sure that we can do a good deal, without embarking on a tedious investigation or setting up too elaborate a structure, to improve the machinery available to us. I am considering all this very carefully; and, as soon as more immediate preoccupations are out of the way, I hope to make progress.
    But that is for the future. In the meantime, the Chancellor of the Exchequer has to reach a decision today and to indicate to the Committee, in guarded phrases, if not in precise estimates, the factors which he has taken into account in forming his own judgment. From the Economic Survey and the other documents recently published, hon. Members
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    will also be forming their own conclusions. We have to assess the outlook for the balance of payments—the crucial test. We all know our debts—whether on loans, or in sterling balances. We all realise our obligations throughout the world, if we are to play our part in the world. We all know our need, not merely to balance the account, but, if we can, to earn a substantial surplus.
    What is the outlook? One place where we can expect to do better is in our invisible trade. Last year, our invisible surplus fell by £148 million. Half of that immense sum was on oil, due to heavier payments, a very large part of them being "once for all" special payments of tax and royalties. Oil earnings will go on increasing, and our net oil income this year should be well on its way back to the 1954 level. Hon. Members will know that receipts of defence aid have been falling off for some time, but our invisible earnings from offshore sales have started to rise and are expected to be much larger this year than last.
    Further, we took a bad knock last year in shipping payments—£80 million up. We had to hire more foreign ships and pay higher rates to bring in the goods we bought abroad, particularly bulky things like coal and timber. This year, we should not have to import so much coal and timber and the rise in our other imports should be checked, while our earnings from shipping will go on rising.
    All this is encouraging. But what will really determine our success or failure is the balance of our visible trade—exports and imports. This, in turn, will depend on our success or failure in limiting the demands we make on our home production. If these are too high, the gap is filled by increasing imports and reducing exports. The questions which the Committee and the public have the right to put to me—the questions which, with the burden which I have to carry, I put to myself, day by day—are these. Have we done enough? Is the trend in demand already changing? Can the measures which we have taken be relied upon to overcome inflation?
    It is usual for Chancellors of the Exchequer, at this stage of their argument, to try to judge the trend of the main elements of demand and to set these against an estimate of our own production. It is in the light of these assessments that the question of fresh taxation

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    or remissions has to be decided. This year I do not think that any detailed forecast of this kind would give us much help. Hon. Members must remember the various steps which were taken by my predecessor. Those which I announced in the middle of February—a few weeks after I succeeded to my present office—are so recent as to be fresh in their memory. None of them can as yet have had its full effect.
    The object of present economic policy, whatever weapons are employed, must be to switch some labour and resources from less necessary to basic production—from production for home consumption to production for export. Of course, if we were operating in a closed economy with vast natural resources, or if we were under a totalitarian system, we could order everybody about and command, by the most ruthless methods, automatic obedience. That would be different, but in our country it is another story. In an island like ours, with a free system which we are determined to preserve, with a large population depending on its exports to pay for half its food and nearly all its raw materials, the Government of the day, of whatever complexion, are the servants of the people. But if the people are to be well served, they, too, have a part to play.
    To succeed in its purpose, the redeployment of labour, which must be secured by any control, whether monetary, fiscal or physical should be allowed to take place as swiftly and smoothly as possible. The more smoothly it takes place, the less interference there will be with production. How far have we moved in this direction? There are now signs that the pressure of demand is easing a little. But we still have an excess demand for resources. There are still more vacancies than there are persons unemployed; expenditure on fixed investment is still rising, and consumers' purchasing power has been increasing.
    The main evidence of an easing of demand is confined to one sector of the economy—the industries producing consumers' durable goods—and that, of course, has been affected both by the new hire-purchase regulations and by seasonal slackness. We cannot, therefore, say with any certainty that we are definitely moving in the direction in which we must
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    go. That is why I have said that any detailed assessment of the course of demand and of production would not help us. For such an assessment would imply a degree of knowledge, which I do not think we possess, as to the exact position at which we stand today.
    In looking to the future, I must first consider the credit squeeze and related monetary measures. We have placed a good deal of reliance on these—higher money rates, sharper control by the Capital Issues Committee, restrictions on hire purchase and all the rest. In its use of the monetary mechanism, the policy of the Government has been much discussed by professional commentators and intelligent amateurs. Now it is my turn for a few moments. I have already explained our new plans with regard to the financing of the nationalised industries. Although there will be no relief by these changes as such, the authorities will technically be better placed. I shall also be in a better position to work out plans for the future which may give us real improvement.
    It would be unwise, and, indeed, it would defeat the purposes of monetary policy, if I were to attempt to forecast the course of interest rates in the coming year, or to measure the part that credit restriction will be called on to play in our affairs. But it is plain that for the time being credit restrictions must continue.
    There is another question to which I would briefly refer. I have been given a great deal of advice about the question of the credit base and the need for the banks preserving a proper liquidity ratio for that purpose. As I understand, it has always been our practice for the conventional liquidity ratio to be determined by the clearing banks in accordance with their views of sound banking practice. But they would naturally take into account, on this as on other matters, any recommendations put forward by the Governor of the Bank of England acting on behalf of the central authorities, and reflecting the needs of the general economic situation.
    Further, I am advised that under the Bank of England Act, 1946, the Bank, subject to Treasury authority, has the power to give statutory force to any recommendations it may make to the banks about liquidity ratios. However, it is often true that many things are better done on a voluntary basis, by

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    honourable understanding, rather than by legal regulation—by unwritten law rather than by prescribed code.
    Before making changes in a system which has on the whole worked well, we should need to be very certain that the changes would bring more advantages than disadvantages. What matters is not the method but the result. In any event, I think it is right to say that the British banking system has shown that it can combine tradition with flexibility, and that it is able and willing to conduct its business with full regard to public policy.
    Carrying out a disinflationary policy is not pleasant, and I am fully aware of the difficulties it involves for the banks and for their managers and staffs throughout the country. So much for monetary policy. Monetary policy and fiscal measures must go hand in hand. Today, we are mainly concerned with another instrument which I have in my hand—the Budget and the Budget policy.
    Is a surplus of £445 million enough? Is it too much? It is easy to err—it is human to err; but I confess that I would rather err on the safe side. A misjudgment on the side of over-optimism might have the gravest results. Any heightening of the inflationary pressure—indeed, any delay in reducing it—might prove disastrous. But an error in the opposite direction would be far less harmful—and far more easily remedied. If we want to reverse the process and increase purchasing power or generally to reinflate, it would be very simple to do so.
    We have learned only too readily how to turn the taps on. Even Lord Keynes never told us how to turn them off a bit. Should we go on a little too far in the policy of inflation, I look forward to the day when a joint deputation from the F.B.I. and the T.U.C. comes to see me asking for the abolition of Surtax, Income Tax and Profits Tax and the immediate reduction of all indirect taxation. It is very easy to do it the other way if we go a little too far in one direction. Meanwhile, I am determined that this Budget shall dispel any lingering doubts, at home or abroad, as to the determination of Parliament and people to secure the welfare and solvency of the nation. I have, therefore, decided that any benefits which I may have to propose shall make no inroads on next year's surplus. Indeed, the surplus must be fortified rather than
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    depleted. In other words, any prizes which may be distributed must be more than balanced by impositions.

    SAVINGS
    I have now finished my account of the past year and my estimate of the prospects for the coming year, both in the financial and in the economic fields. I am grateful for the patience with which the Committee has listened to this necessary but somewhat arid exposition. I now turn to my main proposals. All of them, although in different senses of the word, may be regarded as having the same purpose; they may all be summarised by the word "Savings".
    First, I would like to deal with personal savings. If we are to get our balance of payments "out of the red" and restore an adequate margin on the right side; if we are to press on with investment in the means of production at home and overseas, our first and most urgent need is to restore, maintain and develop, among all classes of our people, the habit of saving.
    Some modern critics will, of course, tell us that the only prescription for inflation is a large Budget surplus. Does anyone read Dickens nowadays—except, of course, the Russians? If so, they will remember Mrs. Pardiggle in Bleak House. "My family," boasted this philanthropic lady, "are not frivolous. They spend the whole amount of their allowance in subscriptions, under my direction … they enrol their contributions, according to their ages, and their little means." Just so—first pay out far more money to the people than it is good for them to have. Then take it all off them again by taxation. It is as simple as shelling peas.
    This method is called "public saving"—that is, an excess extracted from the citizens, singly or corporately, above what is necessary to carry on the work of Government. But what may be necessary for an emergency cannot be erected into a system. In war, we give up many of our liberties in order to secure them all. But if we make a habit of it, it will grow on us—or rather on our masters—and we shall never escape. Mrs. Pardiggle will reign in Treasury Chambers for ever.
    I can—and in times of difficulty like this, I must—reinforce and sustain the efforts of private savers, individual or collective. But it will be a far better

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    thing when the habit of saving has been so rebuilt and reinforced that a Chancellor can begin to reduce the terrible burden of taxation, so oppressive to energy and effort and enterprise in so many spheres, and when he feels that he can do this without risking a serious degree of increased consumption and a fresh inflationary crisis.
    He will best be encouraged on such a course when he is confident that reduced taxation would largely and almost automatically pass into the increased savings of a prudent people. In the meantime, while I must continue to make use of the processes described by the hateful phrase, "public saving," I want to do all I can to encourage the efforts of the private savers. I have some plans for a start.
    It is customary for the Chancellor to pay his tribute to the National Savings movement and its voluntary workers. This is no empty ceremony. With all our political differences, we in this Committee are united in our acceptance of the need for savings and our support of the savings movement. It has been a difficult year for the movement. A fine summer does not nourish savings; although, as I have already observed, it helps the Exchequer in other ways. Nor do rising prices help, even accompanied by rising wages. For these and other reasons, we cannot declare a net gain in the field of small savings in the last financial year. This is, I know, a disappointment to the movement and its leaders. But it has no cause to be discouraged. I have complete confidence in its ability to play a decisive part in my plan of campaign for 1956. For the news I have for Lord Mackintosh and his movement is that I am moving them right into the front line, with new objectives and equipped with new ideas and new weapons.
    First, the objectives. The financial critics tell me that I must reduce bank deposits and the floating debt if I am to reduce the money supply. Very well. Let us see bank deposits turned into National Savings. As the National Savings rise the Treasury bills will fall. In this way, the National Savings movement will carry out a funding operation of the most effective and beneficial kind, and will prove itself a powerful ally in the battle against inflation, Therefore, I
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    say, let its first slogan be, "Save to Fund: Save for Solvency: Save for Security."
    There is, however, something more. One of the most important tasks before us today is to ensure that, while maintaining our world-wide approach to the problems of trade and finance, we should lose no opportunity of taking a lead in strengthening the economic ties between this country and the Commonwealth and between this country and Europe. Thus, we should aim at developing the mutual interests of these great groupings within the framework of our wider policies. For this, our position at home must be strong.
    Nothing is more important than an accumulation of savings. We must have capital resources. We must have stability for our currency. We must have ammunition in the cold war, to develop other countries as well as our own, and to play our part in the struggle for the soul of the neutral world. So I say that we must save to be free. Aye, and I am not ashamed of it—save to be great!
    So much for the new objectives. What are the new weapons? The first and greatest need of the Savings movement is confidence in the currency. The saver needs to be assured that money will not lose its value. In this, the Budget must play its part. But the thoughtful saver will also realise that this is a matter in which he is helping himself, because a vigorous Savings movement is itself the best protection that we can have against inflation. But if the movement is to be vigorous it must have new securities to sell, and I will try to give them.

    SAVINGS CERTIFICATES AND DEFENCE BOND
    First, there is the question of putting a new cutting edge on the old tools. The National Savings Certificate is, by common consent, the leading small savings security. The current issue yields £3 0s. 11d. per cent. tax free, if held to maturity in ten years. I feel justified in offering the small saver a higher return, and a shorter period in which to earn it. There will, therefore, be a new issue, opening on 1st August, of a 15s. certificate rising to 20s. in seven years. The yield, if held to maturity, works out at £4 3s. 11d. per cent. tax free. The limit on holdings of the new issue will be 600 units.
    I have said that the new issue will open on 1st August. Till then, the current issue will remain on sale, and I would urge everyone who can not to miss the chance of increasing his holding of the current issue before it closes. For the benefit of those who hold the maximum, I am raising the limit on holdings of the current issue from 1,200 units to 1,400 units.
    Next, the Defence Bond. Here again, I feel justified in offering the saver a higher return. On 1st May, the current 4 per cent. issue will be closed, and a new issue will open yielding interest at 4½ per cent. and encashable at par on six months' notice, but with a premium of £2 per cent. if the bond is held for five years, or £5 per cent. if it is held for its full currency of ten years.

    SAVINGS BANK DEPOSITS
    I now come to the Post Office and trustee savings. These are integral parts of the Savings movement. Money saved in these institutions is effectively lent to the Exchequer. The rate of interest, fixed by Statute since the last century, is 2½ per cent. I do not propose to change that; for I believe that the Savings movement is better off with a savings bank rate that does not fluctuate with the market but stays fixed whether money in the market is cheap or dear. But I do propose to accept another suggestion which the Savings movement has often put forward. I am not sure that it has ever been very sanguine that any Chancellor would agree to it, but I propose to agree to it now. I propose to exempt from Income Tax the first £15 of income accruing to an individual from deposits in the Post Office Savings Bank or the ordinary department of a trustee savings bank.
    Naturally, no more than £15 will be exempted in the hands of one individual, however many deposits are held. Moreover, this interest, grossed up by reference to Income Tax at the standard rate, will be chargeable to Surtax. The cost to the Revenue, as regards existing deposits, will be about £8 million in 1956–57 and about £10 million in a full year.
    The exemption from Income Tax does not apply to interest earned by deposits in the special investment department of the trustee savings banks. This is the
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    field in which the banks can use their own initiative to earn good rates of interest for their depositors, by investment on terms which take full advantage of present market yields. I want to be sure that the banks have full scope for this activity. The law at present sets a limit of £1,000 on the amount that a depositor may hold in the special investment department. I am laying an Order before Parliament which will take effect early in June, and will raise the limit to £2,000.

    RETIREMENT PROVISIONS OF THE SELF-EMPLOYED
    I now pass to another aspect of saving. I propose to give effect, though in a simplified and modified way, to the recommendations of the Second Millard Tucker Committee on relief to the self-employed in respect of provision for retirement. This will grant relief from Income Tax and Surtax, within certain limits, in respect of premiums paid to provide a deferred annuity on retirement. The relief will apply to professional men in practice, to individuals and partners in businesses which are not companies, to controlling directors of companies and finally, to employees who are not entitled to any benefit under schemes set up by their employers. It will be a condition of relief that the benefits secured by the premiums shall be payable as annuities and not as lump sums.
    The relief will be limited to premiums not exceeding £500, or 10 per cent. of earned income in any one year. The cost to the Revenue of this relief will be small in the first year, perhaps £7 million, but may rise to about £30 million to £50 million in subsequent years, according to the extent to which advantage is taken of the relief. But, as I expect it to lead to a large amount of new savings, the effect on the economy should be the reverse of inflationary.
    I would remind the Committee that the scheme covers a very wide range. The potential beneficiaries will be numerous. The self-employed themselves number perhaps 1½ million. They range from the city accountant to the village grocer. Then there are the many employees whose jobs are not pensionable. For all of these—whether the self-employed or the people who are not in some scheme in a business in which they are employed

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    —the scheme will be a measure of fiscal justice. It will also increase the savings that we want.
    As a corollary of this new relief, I propose to carry out a related recommendation of the Tucker Committee and to relieve from Income Tax the annuity funds of life assurance companies, in so far as they represent invested premiums arising from deferred annuity business for the self-employed or from the reinsurance of approved superannuation funds. This will cost about £½ million next year, but the cost, of course, will increase later.
    I also propose to give effect to the Tucker Committee's recommendation that purchased life annuities not connected with a pension scheme should no longer be taxed in full, but that the part representing a return of the purchase money should be exempt. This will be of considerable benefit to those—and there are many—who are too old to secure any great advantage from the deferred annuity scheme. It will cost about £1 million this year and about £2 million in a full year. So much for that class of saving.

    STAMP DUTY ON CONVEYANCES
    Now I come to an old love of mine—the owner-occupier. There is no better stimulus to saving than house ownership, and I believe that many more people will commit themselves to it if the initial costs are reduced. I therefore propose to reduce the rate of Stamp Duty on house purchase. The present rates are 10s. per £100 up to £500 with a sliding scale up to £3,450, when the rate becomes £2 per £100. The new rates will be 10s. per £100 up to £3,500 with a sliding scale up to £5,000. Above £5,000 the full rate of 2 per cent. will apply. This relief will cost £4 million this year and £61¼ million in a full year; but it will help savings.

    PREMIUM BONDS
    Finally, I have something completely new for the saver in Great Britain; that is, a Premium Bond. Let me say at once that this is not a pool or a lottery, where you spend your money. The investor in the bond which I propose is saving his money. He will get it back when he wants it. But as long as he holds it saved, his reward, instead of interest, is the chance of winning a tax-free prize.
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    The idea is, of course, not novel. Various forms of it have been advocated in the Press recently, and schemes of this kind are being operated by the State in more than one country overseas. But, hitherto, the State in this country has fought shy of using chance as an incentive to save—I suppose for two reasons.
    First, there has been the fear—and, I hope to show, the unreasonable fear—of moral objections to rewards for saving based upon fortune. Secondly, there has been reluctance to lay out the organisation—it is, of course, a big organisation—which has to be made ready before the public can be invited to subscribe with the risk that the public may not like it. But I venture to conclude that the moral objection is not really valid, and that the prospects of success make the outlay on organisation well worth while.
    Let me deal with the moral objection. This is not gambling, for the subscriber cannot lose. Let me put it in this way. This is an encouragement to the practice of saving and thrift by those members of the community who are not attracted by the reward of interest, but do respond to the incentive of fortune. My object is to invite the people to save for interest—in which case they buy the new Defence Bonds—or save for the chance of a prize, according to their preference.
    The details of the scheme will be announced later. There is a great deal of organisation to do, but this is an outline of the essential features. It will be a £1 bond. There will be a limit on individual holdings—at any rate, at first—for we want the savings of ordinary people. The limit might be 250 to start with, or a little more; I am not quite certain. A holder will get back his £1 on giving due notice. Each £1 bond that has been held for a fixed period will qualify for a draw to take place every three months. As for the prizes, I have in mind to begin with an annual prize fund equal in amount to 4 per cent. of the bonds drawn, divided into prizes ranging from a few top prizes of £1,000 to a larger number of prizes of smaller amount.
    Now I come to organisation. To handle the new money subscribed to these bonds on the large scale which I confidently expect, my right hon. Friend the Postmaster-General has a big organisation to plan and build up. This, of

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    course, goes on top of all the work which I hope my proposals regarding Savings Certificates and Defence Bonds will be giving him in the coming months. The Premium Bonds themselves must be printed in very large numbers. They will be held as savings, and that means that he must organise a register for each individual holder. The drawing arrangements are themselves a somewhat novel administrative problem. For all this, premises must be obtained and staff recruited. The Post Office must be given time to get ready.
    I doubt whether we shall really be ready until the end of this year, or the beginning of next year. [HON. MEMBERS: "Oh!"] We will get on as quickly as we can. I am sorry to have to ask you to wait so long, Sir Charles, but I suggest that while you are waiting you might put some money into the savings bank so as to have it ready for the Premium Bonds.
    At any rate, this interval can be put to good use by another body that is vitally concerned in my plan—the National Savings movement. Naturally, I have not been able to consult the movement in advance. I hope that after studying the terms they will feel that it preserves and encourages the principle of thrift for which the movement stands and works. I offer all this new range of securities as a challenge to the National Savings movement. What increase in national savings will the movement get? I am sure, very large. The securities are really attractive to every class of saver. To make them so, I have broken rules. It is now up to the movement to break all records.

    GOVERNMENT EXPENDITURE
    I now come to another field in which the Government must make an effort of saving parallel to that which it is urging on private individuals. That is the field to which I made some brief reference earlier—namely, Government expenditure. We all know how difficult has been the task of effecting real economies. But let us be frank. War and the conditions following war produce a general atmosphere in which the whole idea of economy is necessarily weakened. We have got to make a new effort, and get back to the point of view that however small a saving may be it is worth making.
    In my room at 11, Downing Street there is a picture of Mr. Gladstone, a copy of the famous Millais portrait. I am told
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    that some former Chancellors—I will not specify them—could not stand those eyes looking at them, day by day, reproachful and nostalgic. The picture was, therefore, during certain periods removed. Anyway, it is there now. We must all admit that there was a great deal to be said for the older approach. In those days, it was the expenditure that had to be justified, and not the reduction in it.
    As regards defence expenditure, the net estimates for this year do not show any increase in spite of rising costs. Indeed, making allowances for the new rates of pay for the Armed Forces—which are likely to cost an extra £70 million—the real pressure of the defence bill upon our resources of manpower and materials should be smaller. Nevertheless, the task of adapting the needs of defence to new interpretations of strategical and tactical concepts must go on all the time. I am authorised by the Prime Minister to say that he and the Minister of Defence, with the other Ministers concerned, are taking special steps to ensure that the defence programme, and particularly those items most affected by recent changes in strategic thinking, are adapted to the new conditions as rapidly as possible and with maximum regard to the need for economy. I feel sure that we shall be able to find worthwhile savings as a result.
    So far as civil expenditure is concerned, without injury to the purposes which are common to us all, I believe that there is still room for economy. Even modest economies are worth making. They can be made both in central and local government, if economy is the order of the day—if people are economy-minded. The Prime Minister announced in his Bradford speech that we are determined to make savings in administration. He put as the objective a reduction of 10,000 to 15,000 in the Civil Service. I believe that this can be achieved, and that perhaps still more can be done. Any economies, of course, whether in defence or in civil expenditure, fall into different classes; some become immediately operative; some only help us a little in the first year, but fructify later.
    As the Committee knows, it is normally the practice for the Estimates to be discussed in the course of the autumn between Government Departments and the Treasury. They are finally settled by Ministers in the early months of the calendar year, so that they can be presented

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    to Parliament at the proper time. This year, the Government have decided that a review of all Government expenditure, civil and military, should be put in hand at once. It will be continuous and comprehensive. It is an essential part of the effort which the whole nation is asked to make this year.
    It has often been suggested that this work should be undertaken by some outside body. There are, of course precedents for this, but I do not think that this is the right means to adopt. Ministers are responsible and they must carry their responsibility. Although there are many individual detailed matters in which outside advice can be helpful to a Minister, yet it must be the Cabinet as a whole which must take full responsibility. In any case we intend to do this work ourselves.
    With the full approval of my right hon. Friend the Prime Minister and of my colleagues, I can say that we are determined that this economy drive should bring us, over the whole field, savings amounting to not less than £100 million in this current year on services provided for in the Estimates as published. So much for Government saving.

    CHANGES IN THE TAX CODE
    Before I turn to the third facet of savings, that is, the rôle which public saving must in our present circumstances continue to play through the medium of the Budget surplus, I must ask the indulgence of the Committee for a short while to describe certain minor provisions, designed to maintain and strengthen the tax code, which are to be included in the Finance Bill.
    The Finance Bill will, of course, contain the Clauses to give effect to the Government's decision to suspend investment allowances which has already been announced. Hon. Members will recall that in my February statement I made two exceptions to the general rule—these were shipping and scientific research. There, the investment allowances will remain. To these, I now propose to add approved fuel-saving equipment which is installed by way of replacement or modification in existing industrial premises. I think that these three have an absolute priority today. The Bill will also contain legislation to correct
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    defects in the Profits Tax law, which were revealed by decisions of the courts last year in cases known to the initiated as "Heelex" and "Universal Grinding Wheel".
    I propose to carry out the Royal Commission's recommendation that expenditure on what is known as cutting and tunnelling in connection with an industrial building or structure—and this will include dredging—should qualify for capital allowances including the initial allowance. This will be of particular importance to the construction of dry docks. I propose, also, certain changes, based broadly on the recommendations of the Royal Commission, in the basis of taxation of foreign employments; and a change in the residence rules so that in future an employee of a company who goes to work wholly abroad will have his tax liability dealt with on the same basis, whether or not he continues to maintain a home in this country. I think that that has considerable importance from the export point of view.
    In the Estate Duty field, I propose to remove a hardship which can arise where an annuity is charged on settled property, and to carry out an undertaking of my predecessor to grant relief from duty in certain cases of compulsory purchase of land. There will be a number of other minor proposals in the field of direct taxation with which I need not bother the Committee now, but which can be studied when the Bill is published.
    There are also one or two minor matters relating to Customs and Excise with which I propose to deal. The first concerns cider and perry. These drinks have for many years been excluded from the scheme of duties on alcoholic drinks, and I do not propose to introduce a duty on cider or perry as such. However, there has recently been a rapid growth in the production of certain special types of cider and perry, of an alcoholic strength much above that of the ordinary product, and comparable in that and other respects with dutiable British wines. In order to protect the Revenue and to remove an unfair competitive advantage, I propose to extend the British wine duty to include cider and perry of a strength of 15 degrees of proof spirit or more.
    I am advised that, in general, cider and perry made by the ordinary processes do not exceed this strength; but to avoid any possible hardship, particularly to

    885
    farm-house producers, I propose to provide for the exclusion of cider and perry from the duty even if this limit is exceeded, provided it is established that they have been made wholly by simple fermentation of natural apple or pear juice. This distinguishes those traditional beverages from more sophisticated products, made—I am told—from a wide variety of fruit and vegetables. This change will operate as from 18th April, 1956. It is estimated that the Exchequer will benefit to the extent of about £400,000 in a full year and £350,000 this year.
    Secondly, I propose to close a loophole in the law of a very different kind. I am informed that an increasing number of people have been able to acquire motor cars of the shooting brake type in such a way as to avoid, in whole or in part, the Purchase Tax to which these vehicles are liable. I am including a Clause in the Finance Bill to stop this form of evasion.

    MAJOR TAXATION CHANGES
    I now turn to the means of preserving and strengthening the prospective Budget surplus. We certainly cannot afford to take any risks. I am intending to place very considerable reliance upon the success of the new savings campaign with the whole body of the public. I believe that voluntary savings may bring us something of an order of magnitude far beyond anything yet achieved. I have explained the Government's purpose to make a saving of expenditure of the order of £100 million this year; and I would say frankly that, if I had not been fortified by the willingness of my colleagues to co-operate in this task, I would have felt it my duty to propose very heavy increases in taxation. But public saving, that is compulsory saving, must, in present circumstances, much as I deplore it, still play an important rôle. I have to be, this year at any rate, another Mrs. Pardiggle after all. The difficulty is to measure the need, and to find the means which do the least injury to the morale of all our people.
    That our economy is basically sound and in many ways stronger than for many years, we all know. We have escaped from the siege economy of the war and the years immediately following. It may be that in the first thrill of freedom we
    886
    have gone a little too far in the other direction. That is not to be wondered at; fresh air is rather intoxicating. But we must be careful. The whole world is watching us today. It will judge us largely by the degree of self-control and self-discipline of which we can prove ourselves capable. The prize of success is great; but so is the penalty of failure. For those whom we are asking to save, we must provide a stable £. For the whole sterling area and all that this implies, politically as well as economically, we must ensure that our balance of payments shall improve and our reserves reasonably well built up. The period of strain comes in the second half of the year. We must do everything we can now to prepare ourselves to take that strain.
    How do we stand on the above the line surplus? The savings package which I have announced is estimated to produce a tax loss of £20 million in the year 1956–57. Of course, if the result is, as I hope, to stimulate savings on a very large scale, this tax loss is far more than offset from the point of view of inflation. It will pay for itself many times over. Nevertheless, I must be scrupulous. Even in so good a cause I cannot allow my surplus to be reduced by this £20 million. Moreover, I want not merely to maintain the surplus but to increase it. I want to send a message which really will be understood that we are determined to protect the £; determined to overcome our present difficulties. No one should doubt here or overseas, that there will be made that extra effort required to achieve success.
    We have £445 million already in hand. What ought the reinforcement to be? I have thought a great deal about this—I have also had quite a lot of advice. In the end I have reached the decision that I must look in about equal proportions to indirect and direct taxation for the purpose.
    Let me take, first, indirect taxation. The Committee will recall that the Tobacco Duty was raised sharply in 1947 and again by a smaller amount in 1948. Since then, the duty having remained unchanged, the prices of cigarettes and other tobacco have risen relatively little. The duty is a good deal less burdensome than it was eight or nine years ago. Whilst I am fully aware of the contribution already being made to the Exchequer

    887
    by smokers—the duty yielded £668 million last year—I am sure that part of the additional revenue which I need at the present time can best be obtained from this source. I accordingly propose to raise the duties on leaf tobacco by 3s. 0d. a lb. and to make corresponding adjustments in the rates chargeable on imports of cigars, cigarettes and other manufactured tobacco. The effect will be, for example, an additional 2d. on a packet of 20 cigarettes. It is estimated that this increase in duty will bring in £28 million in a full year and £27 million in the present financial year. The new rates of duty will come into effect as from tomorrow.
    I have naturally had to consider the arrangements under which old-age pensioners are given partial relief from the tobacco duty. This scheme had its origin and justification in the large increase in duty in 1947, which raised the price of tobacco out of line with the post-war increases for other goods. In present circumstances I do not propose to extend it to cover the relatively modest increase now proposed. [HON. MEMBERS: "Shame!"]
    Mr. George Thomas: Too mean for words.
    Mr. Macmillan: Now I come to direct taxation. After much consideration, I conclude that it would not be conducive either to increased incentives or to the successful operation of the savings campaign to place a further burden upon the Income Tax payer. I have therefore decided to secure my purpose in the field of Profits Tax. I propose to increase the rate of tax on distributed profits by 2½ per cent. and that on undistributed profits by 1½ per cent. The effect will be to increase the rates to 30 per cent. and 3 percent. respectively. The increases will take effect as from 1st April, 1956 and there will be the usual provisions for dealing with accounts which overlap that date. The yield next year will be £30 million. It is true that in 1956–57 these increases will not actually reach the Exchequer. They come in a year after. They will not therefore directly swell the surplus. Nevertheless the deflationary effect will not be deferred. The tax to be paid next year will have to be taken into account by boards of directors in formulating dividend policy and expenditure programmes
    888
    during this year. It will, in fact, be saved.
    Before I sit down I have one further proposal to make. I am conscious of the burden which is borne in these expensive days by parents of the large family, and I have looked round for some small concession to help them. It must be something the benefit of which is widely spread, even more widely than the Income Tax field. I have in fact found it in the field of Family Allowances. A Family Allowances Bill will, we hope, be passed into law this Session. Its purpose is to raise the age to which the allowances will continue if children remain at school or apprenticed. The Government propose to ask Parliament to add to this an increase in the Family Allowance scale for the third and subsequent children at the rate of 2s. a week. The cost in a full year will be £10 million. If as we hope this change can operate from 1st October, the cost will be £5 million for this year. This of course will be in addition to the £2¼ million a year which is required to raise the age limit, for which we have already made provision in the Estimates.
    Let us see how the balance sheet now stands. The savings package will cost £20 million. The Family Allowances £5 million—£25 million in all. Against this tobacco will bring in £27 million, the end of the bread subsidy £12 million and miscellaneous tax changes £1 million—£40 million in all. As a result £15 million will be added to the estimated surplus above the line, making it £460 million in all. A further £30 million of profits will be earmarked in this year, and although the money will not accrue to this year's surplus it will help to buttress and support it. The reduction of Government expenditure of £100 million will bring further reinforcement. With all these measures together I claim that our main objective will have been attained.
    Naturally, I regret that I cannot propose all the various alleviations and mitigations, in the realm of both indirect or direct taxation, which have been pressed upon me. For the time being, these must wait. This is a savings Budget. The Budget surplus, the Government saving in expenditure, and private savings will make a foundation upon which we can take up without danger the task of increasing investment for the future. The rate of our progress during recent years has made it necessary to slacken the pace

    889
    a little, but the great forward march goes on.

    CUSTOMS AND EXCISE
    1. Tobacco
    Motion made,
    That—

    (a) as from the eighteenth day of April, nineteen hundred and fifty-six, the duties of customs and excise chargeable on tobacco under section three of the Finance Act, 1947, shall be charged at the increased rates set out, as respects duties of customs, in the first of the following Tables, and as respects duties of excise, in the second of those Tables;

    (b) as respects tobacco on which there have been paid duties of customs or excise at the said increased rates drawback shall be allowed at the rates set out in the third of the following Tables.

    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

    TABLE I

    Customs Duties

    Description of Tobacco

    Rates of duty per pound

    Full rates

    Preferential rates

    Tobacco unmanufactured—

    £

    s.

    d.

    £

    s.

    d.

    containing 10 lbs. or more of moisture in every 100 lbs. weight thereof—

    unstripped

    3

    1

    2

    2

    19

    7½

    stripped

    3

    1

    2½

    2

    19

    7⅞

    containing less than 10 lbs. of moisture in every 100 lbs. weight thereof—

    unstripped

    3

    2

    2

    3

    0

    5½

    stripped

    3

    2

    2½

    3

    0

    5⅞

    Tobacco manufactured, viz.:—

    Cigars

    3

    11

    1

    3

    8

    1⅝

    Gigarettes

    3

    6

    8

    3

    4

    3½

    Cavendish or Negro-head

    3

    5

    8

    3

    3

    5

    Cavendish or Negro-head manufactured in bond

    3

    3

    8

    3

    1

    8½

    Other manufactured tobacco

    3

    3

    11

    3

    1

    11½

    Snuff—

    containing more than 13 lbs. of moisture in every 100 lbs. weight thereof

    3

    3

    2

    3

    1

    3⅞

    containing not more than 13 lbs. of moisture in every 100 lbs. weight thereof

    3

    5

    8

    3

    3

    5

    —[Mr. H. Macmillan.]
    The CHAIRMAN put the Question thereupon forthwith, pursuant to Standing Order No. 86 (Ways and Means Motions and Resolutions).
    Question agreed to.
    The CHAIRMAN then proceeded successively to put forthwith the Question on each further Motion made by a Minister of the Crown, save the last Motion.
    2. Strengthened cider and perry
    Motion made, and Question,
    That for the purposes of the excise Acts cider or perry of fifteen degrees of proof or greater strength shall on or after the eighteenth day of April, nineteen hundred and fifty-six,

    891
    be treated as sweets unless it has undergone no other process than a single process of fermentation, was made from apple or pear juice which at the beginning of that process was in its natural state, and contains no ethyl alcohol derived from other materials; except that—

    (a) an excise licence shall not be required before the twenty-fifth day of April, nineteen hundred and fifty-six, for the making for sale or rendering sparkling of any cider or perry which is treated as sweets by virtue of this Resolution, nor before the eighteenth day of July, nineteen hundred and fifty-six, for the dealing wholesale by any person in any such cider or perry which he or a predecessor in his business has acquired or ordered before the said eighteenth day of April; and

    (b) an excise licence extending to sweets shall not be required before the said eighteenth day of July for the selling by retail or keeping on any premises by any person of any such cider or perry which he or a predecessor in his business has ordered before the said eighteenth day of April.

    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.—[Mr. H. Macmillan.]
    put and agreed to.

    PURCHASE TAX
    3. Charge of purchase tax on conversions of motor vehicles, etc.
    Motion made, and Question,
    That, as from the first day of June nineteen hundred and fifty-six, purchase tax shall be chargeable in respect of mechanically propelled road vehicles of certain descriptions (and in particular cars of passenger carrying types) where the vehicles are made or completed otherwise than in the course of a business which ordinarily includes the making of those vehicles, where they are produced by reconstructing, converting or adapting other vehicles, and in like cases, and provision shall be made for the payment and recovery of that tax and for other matters arising out of the new charge to tax.—[Mr. H. Macmillan.]
    put and agreed to.

    INCOME TAX
    4. Income tax (charge and rates for 1956–57)
    Motion made, and Question,
    That income tax for the year 1956–57 shall be charged at the standard rate of eight shillings and sixpence in the pound, and, in the case of an individual whose total income exceeds two thousand pounds, at such higher rates in respect of the excess as Parliament may hereafter determine.
    892
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.—[Mr. H. Macmillan.]
    put and agreed to.
    5. Relief from income tax on savings bank interest
    Motion made, and Question,
    That—

    (a) for the purposes of the Income Tax Acts other than surtax interest on deposits with the Post Office savings bank or ordinary deposits with a trustee savings bank which forms part of an individual's total income shall be disregarded up to fifteen pounds; and

    (b) for the purposes of the foregoing paragraph the income of a married woman living with her husband shall not be deemed to be his income;

    and it is expedient for the purposes of any Act of the present Session relating to Finance to authorise such incidental charges to surtax as may result from increasing for the purposes of surtax the total income of an individual which for the purposes of income tax chargeable at the standard rate is reduced by the disregard of interest on savings bank deposits.
    But this Resolution shall not require any change to be made in the amounts deducted or repaid under section one hundred and fifty-seven (pay as you earn) of the Income Tax Act, 1952, before the sixth day of July, nineteen hundred and fifty-six.
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.—[Mr. H. Macmillan.]
    put and agreed to.
    6. Suspension of investment allowances
    Motion made, and Question,
    That investment allowances shall not be made for the year 1955–56 or later years of assessment in respect of expenditure incurred after the seventeenth day of February, nineteen hundred and fifty-six, except as may be provided by any Act of the present Session relating to Finance.—[Mr. H. Macmillan.]
    put and agreed to.
    7. Income tax in respect of offices and employments
    Motion made, and Question,
    That new provision shall be made for charging income tax on the emoluments of offices and employments.—[Mr. H. Macmillan.]
    put and agreed to.
    8. Income tax (persons carrying on annuity business)
    Motion made, and Question,
    That, in the case of persons carrying on the business of granting annuities, it is expedient—

    (a) it any provision is made for relieving from tax in whole or in part the income of part of any such person's annuity fund (being a provision having reference to annuity contracts designed to secure superannuation benefits or other provision for a person's retirement), to authorise such charges to tax as may result in particular cases from treating that part of the fund and the remainder thereof, and the annuity contracts and annuity business to which each is referable, separately for tax purposes, and in particular for the purpose of determining how far any annuities are to be treated as paid out of profits or gains brought into charge to tax; and

    (b) where any such person is not charged to tax under Case I of Schedule D in respect of the annuity business carried on by him, to provide for charging to tax the profits arising to him from that business or from any part of that business treated separately as aforesaid.—[Mr. H. Macmillan.]

    put and agreed to.
    9. Income tax (incidental charges)
    Motion made, and Question,
    That for the purposes of any Act of the present Session relating to Finance it is expedient to authorise all such incidental charges to income tax (including charges for past years of assessment) as may result—

    (a) from any provision directing that the question whether a person is resident in the United Kingdom for income tax purposes shall be decided without regard to a place of abode maintained in the United Kingdom for his use;

    (b) from any provision treating overseas income as chargeable by reference to the time when it arises or is treated as arising, instead of the time when it is received in the United Kingdom, in certain cases where the person chargeable transfers it to the United Kingdom in the first year in which he is able, or from giving any such provision retrospective effect;

    (c) from any provision exempting pensions payable to persons resident outside the United Kingdom in respect of service in India, Pakistan, the colonies or certain other territories, or from giving any such provision retrospective effect;

    (d)from any provision extending the class of liabilities which are charges on residue for the purposes of Part XIX of the Income Tax Act, 1952.—[Mr. H. Macmillan.]

    put and agreed to.

    PROFITS TAX
    10. Increase of profits tax
    Motion made, and Question,
    That, as respects chargeable accounting periods ending after the end of March, nineteen hundred and fifty-six, the enactments relating to the profits tax shall be amended by—

    (a) substituting thirty per cent. for twenty-seven and a half per cent. as the rate of any tax not being a distribution charge; and

    (b) substituting twenty-seven per cent. for twenty-five per cent. as the rate of any relief for non-distribution; and

    (c) adjusting the rates of distribution charges to take account of reliefs for non-distribution given at the new rate;

    and in connection therewith provision shall be made for the following matters, that is to say, for dividing, either generally or for particular purposes, chargeable accounting periods falling partly before and partly after the end of that month, for treating wholly or partly as a distribution for a chargeable accounting period ending after the end of that month dividends declared on or after the seventeenth day of April, nineteen hundred and fifty-six, and for adjusting the relief to be given on repayment of loans previously treated as distributions.—[Mr. H. Macmillan.]
    put and agreed to.
    11. Profits tax (miscellaneous provisions)
    Motion made, and Question,
    That it is expedient to authorise all such charges to the profits tax (including charges for past chargeable accounting periods) as may result—

    (a) from amendments of the law relating to allowances, deductions or charges for income tax purposes;

    (b) from amendments of the law as to the cases in which, and periods for which, grouping notices under section twenty-two of the Finance Act, 1937, may be given or are to have effect after the seventeenth day of April, nineteen hundred and fifty-six, or as to the consequences of a body corporate by or as respects which a grouping notice has been given satisfying (after that day) the conditions for exemption from tax under subsection (2) or (3) of section thirty-one of the Finance Act, 1947;

    (c) from any provision directing that sums applied after the seventeenth day of April, nineteen hundred and fifty-six, in reducing share capital or in repaying loans shall in certain cases be taken into account in whole or in part either as being distributions or as reducing the amounts which, after a trade or business has ceased, are to be treated as distributions of capital.—[Mr. H. Macmillan.]

    put and agreed to.

    ESTATE DUTY
    12. Estate duty (settled property subject to annuity)
    Motion made, and Question,
    That it is expedient to authorise all such charges to estate duty as may result from amendments regulating the charge to duty where settled property subject to an annuity passes on a death.—[Mr. H. Macmillan.]
    put and agreed to.

    STAMP DUTY
    13. Life annuities
    Motion made, and Question,
    That every instrument being a grant or contract for payment of a purchased life annuity shall be chargeable with stamp duty under paragraph (3) of the heading "Bond, Covenant or Instrument of any kind whatsoever" in the First Schedule to the Stamp Act, 1891, and not otherwise.—[Mr. H. Macmillan.]
    put and agreed to.

    GENERAL
    Amendment of law
    Motion made, and Question proposed,
    That it is expedient to amend the law with respect to the National Debt and the Public Revenue, and to make further provision in connection with Finance, so, however, that this Resolution shall not extend to amending the enactments relating to purchase tax otherwise than by reducing any of the several rates of tax generally for all goods to which that rate applies.—[Mr. H. Macmillan.]
    5.34 p.m.
    Mr. Hugh Gaitskell: In accordance with the usual convention, I rise to make a few preliminary observations on behalf of the Opposition on the Budget statement to which we have just listened. Tomorrow afternoon my right hon. Friend the Member for Huyton (Mr. H. Wilson) will develop our criticisms and comments upon the Budget and, indeed, upon the whole economic situation which lies behind this not very inspiring Budget.
    As one of the four ex-Chancellors in the House of Commons, I cannot help feeling considerable sympathy with any Chancellor of the Exchequer when he opens his Budget statement. I was glad that the right hon. Gentleman paid a tribute to the right hon. Gentleman the Member for Woodford (Sir W. Churchill). It is, of course, the thirty-first anniversary of the first Budget statement of the right hon. Member for
    896
    Woodford. Although I do not think any of us would regard his period at the Treasury as quite the most glorious in that right hon. Gentleman's career, nevertheless our affection for him is such that we are glad that that act of recognition took place.
    As regards the manner of the right hon. Gentleman the Chancellor of the Exchequer in presenting his Budget statement, while some might be disposed to say that the speech was on the long side for the amount of new proposals which it contained, this impression was relieved for us by many witty passages, by elegant and flowery language, and at moments when we were perhaps becoming rather worn out by some of the detail he happily allowed us to drift off into calmer waters for the time being. We are grateful to him for that.
    It was not much of a surprise to us that the right hon. Gentleman avoided any review of 1955. My right hon. Friend the Member for Huyton will remedy that omission tomorrow afternoon. Of course, the facts are not in dispute. Indeed, even the Chancellor of the Exchequer used the phrase about that year that it was a period of severe inflation. Everything, such as it was, which has been said this afternoon about it, and everything which has been written in the Economic Survey, proves abundantly all the criticisms put forward by the Opposition in recent months.
    The right hon. Gentleman was not really very much more forthcoming about the prospects for 1956. He gave a certain number of instances of what might happen on the one side or the other, but he certainly was determined not to be caught himself as an "Old Moore". We are therefore left in some doubt as to how he really feels about the economic prospect which lies ahead for the country.
    Turning to the proposals which he put forward, I would first note the contrast between the right hon. Gentleman's approach to the problem which we now face and his insistence that we must be on the safe side, that we must build up the surplus, with what the right hon. Gentleman the Lord Privy Seal had to say by way of background when he was introducing his Budget last April. As regards the particular measures, we do not see any objection to what he is going to do in the financing of nationalised

    897
    industries. I must confess that I did not feel very impressed with the argument which led to the decision that the Treasury should in future take over the raising of money for the nationalised industries, presumably making arrangements for repayment and so on as is already done with the National Coal Board. But, as it stands, it seems to us to be a harmless and possibly an advantageous step. Certainly, if it gives the Government a greater assurance that the level of investment in the nationalised industries can be exactly what the Government wish it to be, I do not think that we would raise any objection to that.
    The other measure to which he referred very early in his statement was something which we certainly cannot let pass without comment. That was the announcement, made very casually, that the bread subsidy was to come off in September. I do not know whether the right hon. Gentleman really feels that his activities in January, when he announced the initial cut in the bread and milk subsidies, have had a happy effect on the wage-price spiral, or whether he really feels sufficiently complacent about this present measure not once again driving up the cost of living still further. That is something to which we shall certainly wish to return during the debate.
    As to the proposals to encourage saving, I think we would all agree that it is desirable to have a higher level of saving, though I think the Chancellor was being rather unkind to his hon. Friend the Economic Secretary in the very astringent comments he made about public saving. Only a few days ago the Economic Secretary made a speech in which he warned everybody that it was very necessary to have a high degree of public saving and that we must get used to the idea of large Budget surpluses.
    With one or two exceptions, the measures which the right hon. Gentleman has announced do not amount to a great deal. It surely was in the normal course of events to be expected that there would be a new issue of National Savings Certificates at a higher rate of interest, because, of course, the rate of interest has gone up. The same applies to Defence Bonds.
    The proposal which will certainly attract most public attention is the announcement that there are to be premium bonds on which prizes are to be
    898
    awarded. I thought that the right hon. Gentleman was a little disingenuous in his defence of that particular measure. I do not think that it is quite convincing to say that a prize is not a lottery or quite convincing to say that those who invest in these bonds after all sustain no loss, when they are not to receive any interest upon them. Whatever our views may be, I think that it is better to argue this thing out without trying to pretend that the premium bonds are something which they plainly are not.
    As regards the other proposals, we shall have to study in detail what the Chancellor said about the recommendations of the Millard Tucker Report. In passing, I would say that I entirely agree with one proposal that the right hon. Gentleman has made, and that is that there should be exemption for, I think it was, the capital part of the life annuity which has been purchased. That is a matter which we on this side of the Committee wish to see remedied. We put a new Clause on the Order Paper to deal with it, not in last year's Finance Bill, because we were not allowed to do so then, but in the Finance Bill of 1954.
    As to owner-occupiers, it may certainly be an advantage to have a lower rate of Stamp Duty but, frankly, it goes a very little way indeed towards relieving these admirable people of the very heavy burdens which the Government have already imposed upon them.
    As to public expenditure, the right hon. Gentleman will forgive me if I feel a little cynical about his remarks upon that subject. We used to hear a great deal from hon. and right hon. Gentlemen opposite not merely about the need for cutting public expenditure but about the possibility of doing it. They went into the 1951 General Election with that as their main slogan, but after the present Lord Privy Seal had been at the Treasury for some years he was forced to admit that the figures showed only too clearly that the possibilities of substantial savings in public expenditure without touching upon policy were remote, and the Prime Minister committed himself in his recent speech to that point of view.
    I am a little surprised that the Chancellor, in referring to this matter, could only give us, first, in respect of defence, the announcement that there was to be

    899
    a vague kind of inquiry: what exactly it was, we were not able to follow, but the Prime Minister was going to take it in hand personally. I hope that the Prime Minister succeeds in getting his colleagues to take notice of him in this matter.
    In respect of civil expenditure, we were given a rather extraordinary hope—I think that this was definitely a bit of "Old Moore"—that there was going to be a 100 million saving, but no indication whatever as to how it was to be saved and what changes in policy would be necessary in order to achieve it.
    On the question of the Tobacco Duty, I speak with diffidence, because after the 1947 Budget I gave up smoking altogether. Therefore, it would be very unreasonable for me to speak at any length on the subject, but I think that one must make two comments. To those who do smoke, this tax is already a very heavy one indeed, and I think that it was really rather a mean and unnecessary step that the Chancellor should have denied to the pensioners the exemption from this increase of duty which they have had from previous increases of duty.
    The Budget is certainly not a very significant one. Nobody would say that these measures, taken as a whole, amount to very much. Our main criticism is, first, that the economic situation has been allowed to drift into this position where the Chancellor no doubt is compelled to impose at best a standstill Budget and, at worst, as we are led to suppose—we have not seen the figures in detail—one which involves a net increase in taxation. Secondly, our criticism is that the Chancellor has missed an opportunity for putting right a great deal that was wrong with our taxation system. He has refrained from making the big changes. The introduction of a capital gains tax might have been considered. There are changes which are badly needed so that the tax burdens can be made to fall where they ought to fall—upon those who can bear them most easily instead of, as at present, upon those people who can bear them the least easily.
    These are the first reactions of the Opposition which we on these benches would like to put forward. We certainly cannot be inspired by the Budget to greater efforts, and nothing that has been said has led us to doubt our conviction
    900
    when the Chancellor got up to speak that so long as the present Government are in power we shall continue to have economic and financial difficulties of the present kind.
    5.45 p.m.
    Mr. Eric Johnson: I count myself very fortunate to be the first hon. Member on this side of the Committee to have the opportunity of congratulating my right hon. Friend the Chancellor of the Exchequer not only upon the lucid way in which he delivered his Budget message, but upon its contents. Indeed, the Leader of the Opposition did not seem to find a very great deal in it to criticise. I am sure that my right hon. Friend will know that I mean it as a compliment to him when I say that the lucidity of his speech was well up to the standard of his predecessor.
    I have suggested before that the only way in which we can break the vicious circle of wages and prices out-pacing each other is for private industry to take the lead by holding down prices. I am glad to say that in some instances, greatly to industry's credit, that has been done, but it is not an example which has been followed as widely as we might have hoped. Indeed, I cannot feel that any great contribution to the fight against inflation has been made by the decision announced in the last few days by two companies to increase dividends and, in one case, to make an issue of bonus shares. That is all the more true in the case of one firm which is engaged in the engineering industry. It seems unwise to increase dividends when demands are being made for increased wages in the same industry.
    It is equally true that not much help has been forthcoming to the Chancellor from the other side of industry. The index of weekly wage rates rose by 4 points between October last and the end of February, although the Index of Retail Prices rose by only one during that period. I do not suggest for one moment that increased wages are the only cause of the rise in the cost of living, as the Economic Survey points out, the main cause of the general rise in prices in 1954–55 was that incomes rose about twice as fast as output.
    The tragedy of this state of affairs is that it is those who are not able to protect

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    themselves by increasing their incomes through successful wage claims, or in other ways, who are hit the hardest. I have in mind the old-age pensioners, people who are living on small fixed incomes, retired people, many professional people and small businessmen, self-employed people and the disabled. I should have been glad, therefore, if we had had in the Budget some wider concessions to help those people than my right hon. Friend has found himself able to make, though in the case of the larger families the increase in family allowances will be very helpful. However, my right hon. Friend has not gone as far as I had hoped he would be able to do, although I recognise his difficulties.
    I had hoped to hear something about speeding up the repayment of post-war credits. I can never accept what we are told about it being impossible to do this even in cases of hardship, because it is altogether too difficult to define. I suggest to my right hon. Friend that if his officials in the Treasury are unable to do that he should ask them to consult the officials of the National Assistance Board, who are doing that very thing every day.
    I had also hoped that we might have heard of some concession to the disabled, particularly to the limbless ex-Service man. Perhaps we shall hear something in that respect later in the year. On the other hand, I was glad that my right hon. Friend referred to closing the loophole in respect of shooting brakes. He also made some observations about the investment allowance, and I thought he might have said that he would stop the initial allowance on motor cars bought for business purposes. I believe that an unnecessarily large number of motor cars are bought for that purpose, and that some sections of industry might realise that it is not only the Government who are supposed to effect economies.
    As to the tax changes, it is difficult to grasp them all and to make any comment upon them so soon after my right hon. Friend has sat down. It is a task beyond my powers, at all events. However, I certainly would not disagree with his proposal to increase the tax on distributed profits, though I cannot think that it is a wise step to tax undistributed profits.
    I had hoped that my right hon. Friend would seize the chance to adopt a more painless method of extracting revenue
    902
    from the public, and that he would introduce further duties on betting. It will be recalled that on 9th March the House debated the Report of the Royal Commission on Betting, Lotteries and Gaming and, as a result, the Government undertook to introduce legislation as soon as practicable to rectify the chaotic state of our betting laws. I do not think it necessary to await that legislation before introducing new duties on betting. Indeed, if that were done, I believe it would be a powerful, and yet a relatively painless, method by which my right hon. Friend might fortify the Revenue. It might be less painful perhaps than the increased tax on tobacco, for instance.
    Last year, the Treasury took £21 million out of the £71 million staked on football pools. It is hard to say how much was taken out of the £350 million which, it is estimated, was staked on other forms of betting such as horse and dog racing. I do not think that it could have been more than £20 million, even taking into consideration the Income Tax paid by bookmakers on their profits. At present, the Exchequer levies a duty on betting, both on the tote and through bookmaking on dog tracks. It does not do so on horse racing. I believe that that should be remedied.
    Undoubtedly, the largest amount of money is staked with the off-the-course bookmaker, who pays no duty. It is estimated that the amount of money staked in that way is between £140 million and £170 million. I shall not go into details as to the possible method of obtaining revenue out of that large sum, but I would recommend my right hon. Friend to look again at the most ingenious Question put to him on 27th March by the hon. Gentleman the Member for West Ham, North (Mr. Lewis), which seemed to suggest a valuable way of getting revenue from that source.
    I was glad to note what my right hon. Friend said about personal savings. Although today there are probably more people in a position to save than there were twenty years ago, because many more people have something left over after providing for the bare necessities of life, I believe that there is less inclination to save than there used to be. There are three main reasons for that. The first is that people have naturally come to expect a much higher standard of living.

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    Today, there are attractive things to buy which people could not afford to buy years ago, so there is much more inducement to buy things one likes.
    Secondly, I believe that the great advance made in schemes for essential services has, unfortunately, created a tendency in people to leave the State to take care of them in sickness or old age. Thirdly, there is little or no inducement to save when the value of money is falling, as my right hon. Friend said. To put it mildly, it is extremely irritating to buy a Savings certificate for 15s., and to receive 20s. in ten years' time, only to find that much more could have been brought with the 15s. ten years earlier. That is undoubtedly the reason why the large investor turns away from Savings bonds and from fixed interest bearing securities, and puts his money into ordinary shares, where there is some hope of increased dividends, of bonus issues and of capital appreciation. Whereas, the small potential saver goes in for the football pools.
    The proposals made by my right hon. Friend will go a long way towards remedying that state of affairs. I was glad to hear what he said about Premium Bonds. I have long been an advocate of going even further, of introducing a straightforward State lottery. I know that this suggestion has not been favourably received so far. It had been my intention to draw the attention of my right hon. Friend to the fact that a recent visitor to the Soviet Union told me that, surprisingly enough, there is a system of savings there whereby the fortunate saver has the value of his savings greatly increased as the result of a draw. I am not aware whether in the Soviet Union people are able to draw out their increased savings after they have benefited in that way. However, I am glad that my right hon. Friend has introduced Premium Bonds. It is the kind of bold and imaginative suggestion such as I had hoped we would get from him.
    In the past I have put forward another suggestion for savings which has not yet received a favourable reception, although it has nothing to do with gambling. The suggestion is for an Empire savings certificate. The answers that I have been given on more than one occasion was that the existing facilities were adequate, but now it appears that this is not altogether the
    904
    case. I believe, therefore, that there should be some form of certificates which would be earmarked for colonial development, and that investors might be offered a choice of the various countries in which they would like their investments used. The Government frequently make loans or grants to various parts of the Colonial Empire, and it might be attractive to investors to interest themselves financially in a specific part of the Empire.
    Another attractive method would be to try to make an arrangement with the Commonwealth Governments whereby the modest investor would be given opportunities to invest in small units in the development projects now going on in different parts of the Commonwealth. I have in mind particularly Canada, which is very worried about the amount of capital from the United States by comparison with that coming from this country. I think that if such a scheme was introduced and it was taken up by the Canadian Government, it would have a very wide appeal.
    I have one other suggestion in regard to savings which I believe would be attractive, and that would take the form of a road loan. We are all painfully aware at the present time of the shocking state of our overcrowded roads and of the growing need for modern motorways between our great cities and the curtailment of the appalling loss of life which is taking place on the roads almost every day. It is generally admitted that if help could be given in providing these great motorways, the result would be a considerable saving in the cost of transport and in the lowering of prices.
    Of course, when we suggest these things we are invariably told that they are too expensive and that we cannot afford to build roads at the present time on the scale we would wish. The truth is that we cannot afford not to build them. I do not believe that it would be difficult to devise some scheme to finance the building of roads by borrowing from the public on reasonably attractive terms. I believe that that would be effective because I think that people are more likely to save money and invest it if they are investing it for some objective which they personally approve, such as the building of roads.
    I believe that many motorists, and indeed everyone concerned about the loss

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    of life on the roads, would readily invest their money in a road loan if they knew that something definite would be achieved. That seems a more attractive way of investing one's money than putting it in Savings certificates, or whatever we may call them, when we do not know what the Government will do with the money after they have borrowed it. I think that that may be a useful suggestion.
    As my right hon. Friend said, although not in so many words, this year's Economic Survey began with the words:
    "In 1955 the world's economic conditions were highly favourable."
    For Britain, unhappily, I believe that 1955 was a year of wasted opportunities.
    Lieut.-Colonel Marcus Lipton: That was the Government's fault, too.
    Mr. Johnson: I believe that one of the reasons for that—as the hon. and gallant Gentleman is so interested in it—was high costs, which were largely inflated by high and increasing wages. I do not for one moment minimise the great difficulties we are facing at the present time. Yet I think that we should be encouraged by views which I saw expressed recently in the American Journal of Commerce, which said that we were winning our battle against inflation. I think it is true to say that those who stand on the outside often see best what is going on. In his economic message to Congress this year, President Eisenhower said that the lasting prosperity of the nation depends more on what individuals do for themselves than what the Federal Government do or can do for them.
    It is my belief that too many people in this country, in all walks of life, and in every kind of business have forgotten the truth of that statement. I believe that the sooner we get back to that point of view the better it will be for the country.
    6.5 p.m.
    Mr. Joseph Slater: The Chancellor has told us today that it is not expected that we shall have to import as much coal this year as we did last year. I hope that that will be so. I hope that we shall not have to import as much coal as we have had to import on previous occasions, because the liability of having to meet the cost of
    906
    imported coal is reflected within the accounts of the National Coal Board.
    I was not at all clear about the meaning of the statement which the right hon. Gentleman made on the financing of the nationalised industries. Moreover, it must be remembered that those engaged in the coal mining industry today are now considering whether or not they should continue working the Saturday shift. Hon. Members on both sides of the Committee know full well that the working of the Saturday shift in the mining industry brings in approximately 12½ million tons of coal, which is vital to this country. Therefore, I say, at the commencement of my remarks, that people inside that industry who are burdened with high indirect taxation, such as the taxation on tobacco and cigarettes, will not take too kindly to the Chancellor's action in further increasing the duty on tobacco and cigarettes.
    I remember the Chancellor's predecessor making an announcement to the House of Commons that it was the taxation on tobacco and on drink which were the two major instruments in providing the accommodation necessary to our education system and the greater part of our social services. We are reaching a serious state of affairs when we have to depend on these two things to provide money for our social services.
    Hon. Members will agree, I am sure, that we have had from the right hon. Gentleman today another reiteration of a hard luck story. We seem to be getting this now from the Government in power. We have known for some time that the measures that have been taken by the Government during the last few years have fallen on that section of the community least able to bear them. It appears to me, from the announcements made today, that such will continue to be the case. There is no easement for the ordinary member of society in the proposals submitted by the Chancellor in his Budget, especially when we find that the bread subsidy is to be eliminated by September of this year.
    I know that hon. Members opposite may say, "Look at what the Chancellor is seeking to do. He is to give further increases in family allowances by bringing the third member of the family into the ambit of family allowances." But any

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    policy of retrenchment by a Conservative Government falls most severely on those least able to bear the burden.
    It appears to me, from the views expressed by many people in my constituency within the last few months about the policy that is being pursued by the Government, that they are finding it most difficult to meet the demands which they are being called upon to meet. We have found that the Government, ever since they came into power, and when faced with difficulties, have always resorted to methods which can have only one effect—the imposing of greater hardship on the ordinary people. I say to the Chancellor that it is no use his thinking that he can fob off people at this time because of the serious economic position in which the Government now find themselves. He must give consideration to the people most in need of it.
    There is now, in my constituency, great dissatisfaction about the Government's attitude. I know that some people will say that we have heard this before, but I want to tell it again in connection with the present position. It is their attitude towards the high interest rates which is affecting the position, particularly in regard to the new town at Newton Aycliffe. Protest meetings are being held within the new town. That is unfortunate, but it is, nevertheless, the case. Petitions are being organised against the increasing rents caused by the high interest rates being imposed upon the Corporation.
    The local Press have publicised most objectively reports of what has been taking place within these meetings. It is unfortunate that the Corporation has now been brought to a position similar to that of local authorities—having to stonewall against its tenants because of the actions of the central Government in increasing interest rates. It means that rents are now being charged, in some cases 4s. 6d. more than were being paid until recently.
    Like many hon. Members, I am tired of people, especially Government supporters, seeking to draw comparisons between increases in wages and the cost of living. It seems to me that many items today are looked upon as luxuries, available only to those who are more fortunate in this world's goods than are their fellow men. But the ordinary
    908
    member of society is most anxious to receive the same treatment as those who are in a better position; the ordinary people say that they, too, have a right to these so-called luxuries.
    The war created certain conditions which we have not yet overcome. One of them is the fact that so often both husband and wife have to go out to work. The hon. Member for Sheffield, Hallam (Sir R. Jennings) will agree that this was never the position in our county before the war. Possibly a few went out to work, but it was not the general principle.
    Young couples today who wish to set up house in the new town in my constituency are both compelled, in the majority of cases, to go out to work to pay the rent and to set up house. This is bringing great hardship upon these people.
    The Government still have time to give further consideration to this matter. They may think that time is on their side. They may feel that they have a few more years to run before this Parliament comes to an end, and that people will forget about the harsh treatment they have had. Personally, I do not think that the people will forget, nor do I believe that the electorate have forgotten the slogan by which the Conservatives, at the last Election, said that they would mend the hole in the purse. It appears to us that the hole in the purse is getting larger and larger.
    I hope that the Government will give further consideration to the problems of the less fortunate of our people. In time of crisis certain actions have to be taken. Local authorities and ordinary people are being restricted in their activities, and this has been brought to pass because of the Government's lop-sided attitude. The Conservative Party has had power vested in it since 1951, but it has been unable to carry us into a position in which we can say that we are travelling along the road to prosperity.
    6.15 p.m.
    Mr. Douglas Marshall: I believe that I can agree with the hon. Member for Sedgefield (Mr. Slater) in one point with which he opened his speech: we sincerely hope that there will be no necessity this year to import the same amount of coal as we have imported in the past year. I hope that the hon.

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    Member will forgive me if I do not follow him any further in the points which he made, but I want to address my mind particularly to a subject which in its way, perhaps, has a specialised interest in connection with the creation of new wealth.
    Listening to the Leader of the Opposition today, it appeared to me that his chief theme is likely to be the causes of the present climate of our economic position more than an actual attack on the Budget. In listening to my right hon. Friend the Chancellor of the Exchequer, the feelings which I had were rather deep. Everything which he has done since he became Chancellor has had a theme running through it, and without reading, understanding and appreciating the three White Papers which have been before us lately, it would not be easy to understand the exact position which he took up at the Box today.
    I do not wish tonight to develop the points which he made, first, because I want to read them more thoroughly and, secondly, because I could not help thinking that the different attitude which he is to take towards the financing of the nationalised industries, as well as the savings part of his Budget and similar measures, will of themselves result in a squeeze action in the monetary market and thereby again set the theme which he wants to produce—that of reducing consumer demand for the moment. If we are to take action in those circumstances, the action we are likely to take can never be popular. The consumer never sees any particular reason why someone should stop him consuming what he wants to consume.
    Underlying the whole of this theme, it appeared to me that the Chancellor had grappled with the point and wished ultimately to come to a point of expansion which alone could deal with our difficulties. For that reason, I wish to talk tonight upon one particular aspect of taxation. A most important point in our economic life, whereby we can not only help maintain our standard of living but raise it, concerns a method whereby we can create new wealth. Possibly no measure would be more profitable to the people of this country than the creation of new wealth by winning raw material from our land—raw material
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    from our own land is wealth to and profit to our people.
    It is my belief, which is shared by many who are much more technically expert than myself, that millions of pounds worth of raw materials lie hid in the hills of Cornwall and Devon and elsewhere in the United Kingdom. The necessary information about this mineral wealth is already available, and the amount of information which has been gathered over the years is indeed considerable.
    If hon. Members will forgive me for one moment I should like to refer to a book which has just been published on the question of mining. It is a view given by one of our leading mineral engineers about part of Cornwall. His estimate of the value of potential reserves of tin in this one area alone was no less than £50 million. His report was debated by the Institution of Mining and Metallurgy and was not seriously challenged. In fact, there is no dispute in technical circles in the United Kingdom that the minerals are there.
    What, then, is preventing us from winning this wealth? How are we preventing people from winning it? It is the present method of taxation. Suggestions which I shall put to the House tonight could be embodied in the Finance Bill this year and would make a considerable difference to the possibility of producing new wealth. It would not be sensible for the Government to project themselves into this business. That is not because it is not the Government's business. However, a committee set up under the chairmanship of the late Sir Lionel Phillips, a leading mining engineer, many years ago reported in this way:
    "In most industrial enterprises, and certainly in mines, there is an element of hazard which fortune seekers are willing and are bound to take, but which the Government ought not to, and permanent officials never would take."
    It is the duty of the Government to promote a climate in which mines could be developed and worked. That climate could be promoted in the Finance Bill by introducing a system of taxation as applied to wasting assets in Canada.
    I have tried to make what I am about to say as simple as possible. Taxation is generally a wearisome subject, generally a complicated subject and sometimes rather difficult to explain. When a mine

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    has reached the profit stage, the profits are not merely profits, but are, in fact, part of a return of capital, for when the mine is exhausted little is left but a large hole. I can illustrate my point by referring to the Canadian system of taxation. When a British company opens a mine, say, in Africa—no new mines are open here now, because of the reasons I am about to put—and adjoining it is a Canadian company, the British company, in making a profit, is subjected to the high rate of Income Tax, but the Canadian company, on the other hand, is much better off, because it receives exemption from tax during the initial period of full production.
    The Canadian system more or less follows that fashion. I should like to give the points of the Canadian system. Metalliferous and non-bedded mineral mines are not subject to Income Tax on income derived from the operation of the mine during a period of 36 months commencing on the date at which the mine came into production. There is a special depletion allowance made as a deduction from income of 33⅓ per cent. of the net aggregate profits. There are capital cost allowances with special accelerated rates for the purposes of amortisation of mining machinery, equipment and certain underground works. There are special preproduction expenditure allowances and many other points of a rather similar nature.
    This has made Canada able to operate not only in Canada, but in many parts of the world in the creation of new wealth for Canada. Lately, the Canadians have approached Eire and there is a Bill which I believe has passed through both Houses of the Eire Parliament, but which has not yet become law, which is to embody the Canadian system so that Canada will be able to promote, exploit and discover new wealth in Eire.
    In Australia, legislation has just been passed—and there was previous legislation—for exactly similar purposes. This is because the Australians themselves wish to develop, or to get someone else to develop, the new wealth that may be lying hidden in the hills and elsewhere in Australia. That provision is contained in Section 23 of the Commonwealth Income Tax and Social Services Contribution Assessment Act.
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    At home, we are neglecting our chance of obtaining this new wealth. However violently hon. Members may disagree—and rightly so—over certain principles, all hon. Members desire that our standard of living should be maintained and increased. We all know the real economic difficulties which face us. No hon. Member who has studied the subject can think that the objective will be easy to reach. On the other hand, it is the will of our nation, which, generally, has the ability to see its will implemented. That should make it all the more possible, and possibly the more easy, to take advantage of every opportunity in the land.
    The suggestion which I have put to the Financial Secretary and to the Chancellor has been agreed by Canada, Eire, Australia, and possibly by many other countries. I am heartened by the fact that on 6th July, 1949, I moved a Clause similar in intent to these suggestions and that the present Lord Privy Seal then supported me. I hope that the House will forgive me for quoting what my right hon. Friend said. It was:
    "I appeal to the Government, therefore, to pay attention to the arguments which have been put forward and to the needs of the mining industry in Cornwall which, perhaps, is the most historic and most important of our counties. I say that with the full realisation that my forebears sat for Cornish rotten boroughs for many centuries. In the interests of the tradition which I have the honour still to represent in the House,"—
    My right hon. Friend always declares his interest—
    "I should like to feel that Cornwall was properly looked after by the Government."—[OFFICIAL REPORT, 6th July, 1949; Vol. 466, c. 2293.]
    So should I. But over and above that fact of Cornwall there stirs within me this question of gaining new wealth for our country, and I sincerely trust that my right hon. Friend will consider this matter before the introduction of the Finance Bill.
    I hope that all hon. Members realise that what I am suggesting will not rob the Treasury of one penny. At present, no-one is exploiting or looking for mineral wealth—not been done for a great many years—because of our taxation position. Therefore, if the Treasury accept what I have suggested, if nothing is won, there is no change in the present position. But if anything

    913
    should ultimately be won in the form of mineral wealth, then, ultimately, nobody stands to gain more than the Treasury itself. The Treasury is the representative of the nation and, therefore, the nation stands to gain. That is the new wealth for which I look.
    6.32 p.m.
    Miss Elaine Burton: Like the hon. Member for Bodmin (Mr. D. Marshall) I wish to deal with a specific matter. I hope that the hon. Member will not think me discourteous if I do not follow his argument. To be quite honest, I should be unable to do so because I have no knowledge of that particular subject.
    I am glad to see the Financial Secretary present tonight, because I wish to make some suggestions to him, two of which would not cost him any money at all, so I think he may be disposed to look upon them favourably. I regret very much that in his Budget speech the Chancellor of the Exchequer made no mention at all about what I would call the recreation or the leisure of the people of this country. It is with that subject I wish specifically to deal.
    I am, of course, aware that one can divide the subject into two sections. The first I should call the recreation, or the leisure or the sport of all our young people. Separately from that, in view of my own interest in the matter, I should take the attainment of championship standard in sport, and I hope tonight to be able to show that what I have to say deals with both those aspects. I think also it would have been fitting had the Chancellor felt able to examine this matter this year, because this is Olympics year, which comes round only once in every four years.
    Those of us interested in sport know that during the last two or three years a great change in the attitude of the ordinary people to sport has taken place in the whole world. I should say that that change of outlook was quite inevitable. It has taken place throughout the world in connection with the social changes in our society. Whatever Government we have in power in this country, the British people are notoriously opposed to sudden change. We do not mind change when we have become used to it, but it has to be brought about gradually, which I think it a very Fabian expression.
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    In the world of sport the resistance to change in this country has had the effect that we have been left far behind in comparison with other countries. We have been left far behind because we have not faced the inevitable change. I am making no attack on the Government in this connection, because what I am saying applies to us all. But I believe that unless we do something about this matter, we shall not only lose touch, but we shall be left so far behind that it will be quite impossible to catch up.
    I have been interested in sport since my youth. Going back a good many years, the basic attitude towards sport, particularly in this country, has been, "Sport is only a game. It does not matter if you lose." I know that we do not want our goalkeepers crying against the goal-posts when the ball has gone into the net and a goal has been scored against them; but I submit that the idea I have been speaking about is now old-fashioned and out of date.
    Everyone would agree that the world has changed considerably since the Olympic Games were revived in the 1890s. At that time there were few professional athletes of any description. All of us who read the sporting columns of our newspapers will agree that probably every month or every week there appear some arguments about what I would call "amateurism" and "shamateurism", and about "professionalism" "and "semi-professionalism".
    I do not think that any hon. Member interested in sport would fail to agree with me that whether we consider county cricket, Soccer or lawn tennis, in most cases it costs a great deal more for clubs to maintain an amateur than a professional. The laws are entirely archaic and out of date. It is very unusual for me to go to the military for my quotations, and I do not know whether it will do my case any good; but I think the two following quotations are interesting.
    I find that it is almost exactly four years ago that Field Marshal Lord Montgomery said:
    "Whether or not the Olympic games should or should not be amateur is a question of opinion. That they have ceased to be amateur is a question of fact."
    Now I am coming right up to date, to last month, and I wish to quote a comment from no less august a person than the

    915
    President of the M.C.C., Field Marshal Lord Alexander. He said:
    "The Olympic games were set up, I am sure, as a means of testing the best athletes in the world … let everybody compete, then there can be no arguments afterwards."
    Any of us who have played games or taken part in sport at all will agree that we cannot have different sets of rules, or different interpretations of rules, applying to one competition. I do not know whether the Financial Secretary is keen on sport but I can assure him that at the moment the interpretation that we in the United Kingdom are applying is hopelessly unfair to our reputation in the athletic world and also to our athletes. We are trying to cling to a rigidly amateur system which, if I may be colloquial, I would describe as being as dead as the men who first framed it. It belongs to the past.
    Whether that is a good or a bad thing may be a matter of opinion but it certainly is a fact. I can also assure the Financial Secretary that we are almost the only country in the world today which attempts to cling to that interpretation. The right hon. Gentleman may be wondering where he comes into all this, but he will realise in a few minutes. I am trying to build up such a strong case that he will be bound to give me some grains of comfort.
    In the changed aspect of society I believe that big-time world sport is no longer the privilege of the favoured few. It is the right of every healthy youngster in this and every country. Let us take the question of national prestige. I do not know whether the Financial Secretary knows the name of John Disley, one of our competitors at the Games at Helsinki four years ago. John Disley said something the other day which meant a great deal. He said:
    "Once you step across the water with your passport in your hand and the Union Jack fluttering on your breast, for 'sport' you can read national prestige'."
    That is important. Whether it is a good or a bad thing may be a matter of opinion, but it is undoubtedly a fact. I am sure that I need not emphasise that a British team abroad is a team of ambassadors today.
    That fact is gradually being realised. Two years ago, when Roger Bannister broke the four-minute mile, I can remember the Foreign Office rushing him
    916
    off to America. His appearance did a great deal of good to British interests there—and not only to British sporting interests. I know that many of us had criticisms to make of the methods of the Foreign Office on that occasion. It got into rather a mess in what it did, but its heart was in the right place, and it was obvious that the fact that prestige in these matters was important had seeped through to officials.
    I am sure that those of us who have been fortunate enough to go to other countries have been told by our representatives there—whether they be trade representatives, consuls or others—that there is no doubt that British victories in the world of sport in the country in which they are living make their job of selling Britain and British goods just that much easier. That is really and truly a fact.
    With all the evidence which is available, and which has not just suddenly come to light, I find it very difficult to understand why Governments—I do not say this Government alone—have failed to take advantage of this medium. It cannot be that they are not interested in promoting the British way of life or in keeping the British flag flying abroad, because we have the British Council and its artistic efforts, to which we give a great deal of money. Why cannot we do something in this new direction? I would ask the Financial Secretary whether we can afford to ignore this form of international good will, because that is what we are doing.
    I would ask him that question in any year, but in this year there are two further relevant questions to be considered, both connected with the job of selling Britain, which is also the job of the Treasury. First, can we afford to be outclassed at a world gathering such as the Olympic Games simply in order to hang on to an obsolete Victorian principle? Secondly, can we afford to leave the field of sports success to all the other countries? Many people as well as myself are asking those two questions, which have additional weight when it is realised that they were posed by Dr. Meisl, writing in World Sports recently. World Sports is the official magazine of the British Olympic Association, and he is the foreign editor.
    We must make a choice, realising that sport is one of the most effective and most peaceful methods of propaganda which is open to us today. Either we can continue

    917
    to compete internationally, not under impossible handicaps but upon equal terms, or we can cease to do so, withdraw, and regard sport merely as a healthy means of recreation and leisure.
    I now come to the part to be played by the Treasury. Whichever course we adopt, the Government must come into the matter. The British Olympic Association Appeals Committee has set itself a minimum target of £75,000 this year in order to send our team to Australia. It hopes to obtain as much as £100,000. I am not a pools fan, and I do not know if the Financial Secretary is—although I am sure that he gets the same literature through his letter box as I do—but I am assured that £75,000 is one top dividend on the treble chance pool.
    Mr. G. Thomas: For 6d.
    Miss Burton: For 6d. I take my hon. Friend's word for that.
    The Committee is struggling to get £75,000 in order to send our team to Australia, and yet we had £25 million poured into the Treasury last year from the tax on football pools and from entertainment tax on professional sport. This afternoon the Chancellor of the Exchequer had something to say about the morality of lotteries. I do not know whether or not he was on dubious ground there, and I am not dealing with lotteries—but the question of morality may come into what I am going to deal with now. From what the Chancellor said this afternoon, what I am now going to say should not meet with any moral opposition from him.
    Is the Financial Secretary aware that the Italian Olympic Committee has an income of £2 million per annum from football pools; that athletes from Western Germany at the Games this year will be backed by football pools which, by the beginning of this year, had handed over £63,000 to help the team, and that Sweden's pools made an immediate contribution of £12,000 towards the cost of sending its team to the last Winter Olympics? Yet we still go round, cap in hand, begging for money to send our teams to every international event that comes about. That is defeatist, out of date and out of touch with public opinion.
    As I said at the beginning, I am concerned not solely with the attaining of championship standard in sport but with physical training, recreation and the
    918
    leisure of all young people. The last Annual Report of the Amateur Athletic Association stated that in England and Wales there are now 136 cinder tracks, of which 75 are private, leaving only 61 for the public. The Report also mentioned the question of coaching, which is of considerable concern to instructors of young people. It also said:
    "There is a danger that boys after leaving school particularly those with aptitudes for field events will be lost to the sport and regular outdoor recreation unless clubs cater for them not only in providing competition but expert coaching."
    If we compare this situation with that in Scandinavia we can see how far behind we are. I do not suppose that the Financial Secretary is aware of the figures, but I am sure that he will examine them afterwards. Sweden has 7 million inhabitants and 800 public cinder tracks. With our population of 50 million, we have 61 cinder tracks. Finland has a track in every town and in nearly every country district, built and maintained by local councils. Their use is free.
    There is no doubt that we have fallen far behind other countries, for three reasons: first because we have not given enough money to provide facilities for physical recreation; secondly, because we have imposed a heavy tax upon sport—and I was very distressed at the fact that the Chancellor of the Exchequer, this afternoon, did not withdraw the tax upon professional sport—and, thirdly, because of our attitude towards amateurism. It is only right that I should pay my tribute to the British Olympic Association and all the sporting bodies which have been struggling with this every-growing task, but I believe that we have now reached a period when they should be given some help.
    I would inform the Financial Secretary that if the Appeals Committee of the British Olympic Association succeeds in raising this £75,000 we should be able to send a team of about 150 athletes to Australia. The maximum number which we could send would be 450, but I will be honest with the Minister and tell him that even if we had enough money I do not think that we should be able to send 450. But we should be able to send more than 150. I believe that the U.S.S.R. and the U.S.A. are each sending teams of about 300 members. I ought to make plain here that the Association is being

    919
    caused some distress because it knows that if it succeeds in raising this £75,000, or even £100,000, not one penny can go towards training our young people or improving the standards of our top athletes. Every single farthing must go towards the cost of sending our people to Australia.
    If the Financial Secretary were a high diver—although I do not imagine that he is—he would be in a much worse position than he is now, sitting upon the Government Front Bench. I wonder if he knows that there is no indoor 10-metre diving board south of Blackpool. How does one practise in the South? A high diver has to go to Blackpool to practise. That is ridiculous. As for our gymnasts, it is not a question of whether we have any good enough to compete against the rest of the world. They cannot get the equipment in this country to enable them to train to Olympic standard, because they have not the money. So I could go on right along the line.
    Governments in this country have never helped. The Labour Government in 1948 did not give a penny towards the Olympic Games in this country, neither did the present Government in 1952. That is not the case in the Commonwealth. Australia is contributing towards the Games in that country, and when Canada sends teams abroad she makes a contribution.
    I have three suggestions to make to the Financial Secretary. I hope that he will look with favour on at least one of them. First—and this concerns the Olympics only—the Government should consider sponsoring an issue of special stamps during Olympics year. The millions of people who watch sport week after week would welcome a chance of contributing towards the cost of sending a decent team to the Games. This is not a new idea. Scores of special postage stamps have been issued either for propaganda purposes or in aid of national Olympic Games funds during the past fifty years. I can assure the Financial Secretary that I can even give him some of the stamps, if that would help to bolster up my case. Most of those stamps had a small surtax, the net revenue of which went towards financing the national Olympic team. If other countries can do that, why cannot we?
    920
    My other two suggestions deal with the whole question of youth, leisure and recreation, to which I would add the Games because the two points cover the whole. First, I come to the question of football pools. I have already given examples of cases in which pools help national athletes. I would only add this rather formidable list of countries. In Germany, Italy and Switzerland, money is paid into a fund administered by a Government-appointed committee or trustees. Norway, Denmark, Sweden and Finland all operate similar schemes, except that in Norway the fund is for sport and scientific research. If all those countries do that, I should have thought that we could do something.
    Secondly, I suggest that there should be a Government grant. Every hon. Member and people outside the Committee will recognise that many sportsmen have misgivings whenever this is mentioned, because they wonder if it will mean Government interference in sport. I can assure the Financial Secretary that I for one am no believer in the necessity for a Ministry of Sport. I do not believe in Government interference in sport, and I do not think the sporting organisations would stand for it.
    However, I do believe that in those countries which I have mentioned, where help is obtained from the State, there is no question of State interference. People are apt to say that in the Iron Curtain countries there is State interference but I have never heard that said of the Scandinavian countries. I think that there are two sides to this question. I believe that the sporting organisations in this country are coming round to the viewpoint that something has got to be done, if only the best way of doing it can be found.
    It is not for me tonight to suggest a scheme in detail, having made financial suggestions, but I would say that it seems to some of us that it might be useful to consider the formation of a British sports council. That would be for the sporting organisations themselves to decide, and not for this House. If there were a British sports council, or some other overall body, such an organisation would be able to administer a grant which was given by the Government, as in other countries.

    921
    We want more playing fields, more running tracks and flood-lighting so that these can be used at night. Also—of great importance—we want more and better changing accommodation so that people can go straight from work and have a shower afterwards. We want more training coaches and instructors. These are not luxuries. They are essential today as much for fitness and leisure as they are for the Olympic Games, and I hope that the Financial Secretary will consider this idea.
    6.55 p.m.
    Mr. Ronald Russell: I am very glad to have the opportunity of following the hon. Lady the Member for Coventry, South (Miss Burton) because I have a great deal of sympathy for everything she has said, and perhaps it is appropriate that I should follow her because I represent the constituency where most of the Olympic Games were held in 1948.
    One of the two points that I want to raise has a great deal of bearing on what the hon. Lady said. I believe that our attitude to sport is as much out of date as is some of our propaganda today, particularly in the Middle East. Sport has become a business, whether we like it or not. Foreign countries treat it in that way, and if we are to compete against them we must adopt the same attitude.
    The main point that I want to make tonight, which has already been touched upon by my hon. Friend the Member for Blackley (Mr. E. Johnson) concerns the injustice of the 10 per cent. Tote tax on greyhound racing. This is particularly important to my constituency, as it affects Wembley Stadium. The retention of this tax without a corresponding tax on the horseracing Tote is an unfair and unjust discrimination against greyhound racing. I believe that is admitted on all sides, and I only hope that possibly before we dispose of the Finance Bill the Chancellor will be able to consider remedying this injustice, because it is having a harmful effect on all greyhound racing stadiums, of which Wembley is only one.
    Another tax which affects greyhound racing is the bookmakers' licence duty. This applies to greyhound racing but not to off-course bookmakers nor to those operating on horserace courses. That tax has reduced the number of bookmakers who attend greyhound race meetings, and that,
    922
    coupled with the Tote tax, has succeeded in diverting much greyhound racing betting from tracks to off-course sources which are untaxed.
    There is also the effect of Entertainments Duty on sport, which seems to be directed against professionals only. Wimbledon pays no Entertainments Duty at all, but if a professional tennis match is staged at the Empire Pool in Wembley it is subject to Entertainments Duty of more than 30 per cent. While amateur tennis players play more or less throughout the year, I am told that most professional tennis players have other jobs and usually play in their spare time. Therefore, there is not the distinction between them that the words "amateur" and "professional" suggest.
    Since the abolition of the duty on cricket two or three years ago by the present Lord Privy Seal, a Test Match at Lords pays no tax at all. Yet most of the players who take part are professionals. On the other hand, the Cup Final, which, no doubt, will be visited by many hon. Members in three weeks' time, raises tax amounting to about 15,000. There is no logic in such a distinction.
    It is greyhound racing which has made it possible for Wembley Stadium and the Empire Pool to be equipped as a sports centre which, I think, is almost unique in the world. The Olympic Games were held there in 1948 free of any rental charges, and, altogether, £200,000 was spent by Wembley Stadium on improving dressing room accommodation and on other improvements as well as on constructing the road that is known as Olympic Way, which makes a magnificent approach to Wembley Stadium. Since the tote tax came in in 1948, the Stadium and the Pool together have paid in national taxation and local rates no less than £4,644,000, yet their net profits for the same period were only £241,000, out of which the shareholders have received £197,000. In other words, the share of the shareholders is about 4 per cent. of the amount paid in taxation.
    Many other centres of entertainment and of art are charges on public funds, instead of providing sources of revenue. There are, for example, the Royal Festival Hall, Covent Garden Opera House, and the Arts Council. This year, the Arts Council is receiving a subsidy of £885,000,

    923
    and I am not complaining of that in any way whatever; I think it is thoroughly justified. What I do complain of, however, is that when the arts side of entertainment receives a subsidy of that kind the greyhound racing side of it should be taxed to the extent which it is, and in the indiscriminate way in which it is taxed.
    Therefore, I am asking that greyhound racing should be relieved of the unjust discrimination from which it has suffered ever since the tote tax was introduced in 1948. I am not going to suggest whether or not it should be abolished or whether it should be applied to off-the-course betting on horse racing. It would be too unpopular, I think, but I do suggest that this discrimination ought to be removed, because it is damaging greyhound racing at the present time.
    I want now to turn to something quite different, and deal with the economic policy of this country since the end of the war. I caught one phrase in the speech of my right hon. Friend the Chancellor which, unfortunately, I cannot remember exactly, but in which he made some reference to the Commonwealth. I hope it means that he is to take a new look at the attitude of this country towards the Commonwealth as far as our overseas trade is concerned, because if one thing is quite certain it is that the policy of this country, pursued not only by the present Government but by the Government of the party opposite, has not succeeded in its purpose. Although we have increased steadily, I think I am right in saying, the total value of our exports—and nobody will deny the need for increasing our exports—it is quite clear that our share of the export markets of the world is gradually decreasing.
    I do not look for evidence of that to any anti-Government source. I look to the Government's own Bulletin for Industry, produced by the Treasury itself. In the March issue of that publication, there are two very revealing tables comparing our export trade in the first nine months of 1955, against the first nine months of 1954, with the exports of some of our major competitors. In the first nine months of 1955, the increase in the value of our exports to the rest of the world as a whole was 6 per cent., but the increase of those of Western Germany
    924
    was 17 per cent., of the United States 12 per cent., and of Japan 24 per cent.
    If I may give one or two more figures to break these figures down into areas, they reveal an even more alarming state of affairs. Whereas the value of the increase in our exports to O.E.E.C. countries in Europe was only 2 per cent., that of the United States was 25 per cent., that of Western Germany 18 per cent., and that of Japan 44 per cent. About half the total increase in the exports of these four countries to all the world was to these O.E.E.C. countries, so we have a very small share of that total increase. Even to the rest of the sterling area, which I think I am right in saying means the whole of the Commonwealth, less Canada plus a few other countries which form part of the sterling area, the corresponding figures are: United Kingdom, 4 per cent.; Western Germany, 28 per cent.; United States, 18 per cent.; Japan, 48 per cent.
    These are very alarming figures, and, surely, all go to show that the policy of this Government under the General Agreement on Tariffs and Trade of not taking advantage of discrimination in international trade—the latter policy we pursued before the war, dating from the introduction of our own tariffs in 1932 and the extension of Imperial Preference under the Ottawa Agreement of the same year—has been a failure. We are not succeeding in capturing the share of the increase in exports of the whole world that we ought to have, and, therefore, I hope that the Chancellor will look at this problem most seriously and consider whether there should not be a revision of our whole policy, so that we can take advantage of the Commonwealth markets which do exist and which are protected for us to a certain extent by the tariff preferences set up before the war, but which require investigating to see whether these preferences are still adequate and up to date in the light of post-war conditions.
    I know full well that we have no say in what advantages the self-governing countries of the Commonwealth can give us. We can only make representations and approach them. We cannot in any way, and I am not suggesting that we should, compel them to do what we want, but what we could do ourselves, if we were

    925
    freed from the international obligations which we assumed under G.A.T.T. is to give them additional advantages for their products, mostly primary products, which Australia in particular would appreciate, because the value of many of the preferences in existence now is hopelessly inadequate in the light of the increase in prices. We could give a lead to these countries, which, when they realise its value, they would be only too willing to follow.
    After all, the Imperial Preference system which now exists was not originally set up by this country, but by Canada, in 1898, when Canada gave a unilateral grant of Imperial Preference which was eventually taken up by Australia, New Zealand and South Africa, but which was not followed up by this country to anything like the same extent as the Dominions until we introduced our protective system in 1932. We cannot expect Canada to follow again the wonderful example which she gave us 50 years ago, because Canada is now in a rather exceptional position, being somewhat tied to the American economy.
    I do not think that Canada would be able or willing to consider this until a substantial change had taken place in the attitude of the rest of the Commonwealth first. It is up to us to give that lead. The present conditions show that the policy so far pursued by this country has not succeeded. It is, therefore, right to change it. I hope that the Chancellor will be able to give serious consideration to this whole policy with a view to remedying the position.
    I am sure that most hon. Members, certainly those on this side of the Committee, are delighted with the innovations which my right hon. Friend has introduced in the Budget. The Leader of the Opposition, who, understandably, is not now in his place, spoke of the Budget as being "Not inspiring". I thought it was the exact opposite. I regard it as a most inspiring and imaginative Budget, such as we were given to expect from my right hon. Friend. His innovations to encourage savings are what are wanted and what we on this side of the Committee believed would come. I am sure that they will do an immense amount of good. I regard them as inspiring and believe they will do this country a great deal of good.
    926
    That apart, I hope my right hon. Friend will look into the vital question of our whole attitude, first, to Commonwealth trade and, secondly, to the unjust taxation still operating against greyhound racing, which affects many greyhound racing stadia in different parts of the country.
    7.12 p.m.
    Mr. F. Blackburn: I am sure that the hon. Member for Wembley, South (Mr. Russell) will forgive me if I do not follow his observations on the question of greyhound racing. Possibly later, in our consideration of the Finance Bill, we shall have an opportunity to debate that subject. I shall have something to say later about exports and foreign trade, but I would rather do so in my own way.
    I was particularly interested in the hon. Member's last few remarks, in which he described this as an inspiring Budget. If there is one adjective which could not be applied to the Budget it is the word "inspiring". Had it not been for his last remarks, I had intended to say that we had heard three speeches from the Government side with scarcely a single word in praise of the Budget. That would have been true up to the last few words of the hon. Member for Wembley, South.
    First, we had a speech from the hon. Member for Blackley (Mr. E. Johnson), who is usually very good at finding something to praise in Government Front Bench speeches. I have never been able to decide whether that was through innocence or political loyalty. On this occasion he had very little to say in praise of the Chancellor's speech, and he complained bitterly that there was nothing in it to deal with the cost of living, nothing for old-age pensioners or the disabled, and nothing for those on fixed incomes.
    Dame Irene Ward: Hear, hear.
    Mr. Blackburn: I knew I should have the full support of the hon. Lady.
    The hon. Member for Bodmin (Mr. D. Marshall) took us into the Cornish tin mines. It is indeed difficult to get back to the subject of the Budget after having been taken to the Cornish tin mines and to the Olympic Games. The hon. Member for Bodmin said there was a theme running through all the Chancellor's pronouncements at various times. That

    927
    seems very difficult to find, because the Chancellor puts things in so many words. I am sure there was never an occasion when so many words were used to say so little. We heard him speak for about 110 minutes today in order to tell us that there was to be a new edition of National Savings and that we were to have a State lottery. There was little else in what the Chancellor said to us.
    The Chancellor did not, during his long speech, go into the history of the economic position, and I am certain that my right hon. Friend the Leader of the Opposition was right when he said he could understand why the Chancellor had not dealt with the economic position of 1955. After all, the Chancellor himself said that 1955 should have been a good year. Later he said, "Everything seemed in our favour." I suppose that everything was in our favour, except for the fact that we had a Conservative Government.
    The Government's record is condemned in the very first sentence of the Economic Survey:
    "In 1955 world economic conditions were highly favourable."
    The Economic Survey goes on:
    "Output was growing rapidly in all the major manufacturing countries, and trade between them was increasing at an exceptional rate."
    Later on the same page, the Economic Survey explains how well the countries of Western Europe have done, whereby industrial output has risen by about 11 per cent. above the 1954 level. In Germany the rise was 16 per cent. and in no country was it less than 7 per cent. Later it explains how well the Americans have done, increasing their output by 11 per cent.
    It is not until we reach page 7 that we find how Britain has done, and we find that home output is up by 3½ per cent. If we look at what happened to the reserves and to imports and exports, to production, to the effort to keep down the cost of living and to capital investment, the Government are to be condemned on all sides. They would have taken the credit if the country had been leading in such matters. Since we are at the bottom of the league in most of them, the Government must take their share of the blame.
    928
    Our reserves are at about the same level as they were in 1945. This Government came into office in 1951 to save the country when reserves were running out; but reserves are far lower today than they were when the Government came in in 1951. We have to measure the Government's success against these factors, and we must measure the Budget against the effect it will have upon them.
    Imports have increased considerably during the past year, because the Government are not prepared to take action in order to restrain imports. They say, "We will not introduce import control because that will mean rationing". It is strange that it has not meant rationing in Australia, where the Government have imposed import control, and it is strange that it has not meant rationing in this country, despite the fact that 50 per cent. of our dollar imports are already under control. We are importing into the country things which are not necessary. Freedom is all very well when the country is not in difficulties, but in an economic crisis we cannot afford to have imports which are not essential for the country.
    Consider the industry of my constituency—cotton. The Government are not prepared to do anything about the enormous increase in the imports of grey cloth from India and Hong Kong. Because, by an accident of history, as the President of the Board of Trade said, when the Ottawa Agreements were made there were no exports of cloth from either India or Hong Kong, the Government are not prepared to do anything whatever. Nor are they prepared to do anything about the increase in the import of yarn. Consequently, the cotton industry finds itself in great difficulty.
    I am not one who says that the Government should make the position such that the home cotton industry can have a clear field in the home market—it must fight for the export markets like anyone else; but the Government are making it easy for India and Hong Hong by saving, in effect, "Come along here. There is no tariff. This is the easiest market in the world for you to get into."
    In exports also we have failed badly. We are at the bottom of the list of nations who have increased their exports. Practically every other major country has

    929
    done better than we have. The same is true of production. Under the Labour Government, we were leading in building up our gold and dollar reserves and our production and in increasing our exports. Today, the exact reverse is the case, and we have one of the worst records for our increases in exports and in production and in the matter of our gold and dollar reserves.
    The Government were brought in to solve the question of the cost of living. Is there anything in the Budget that will help to bring down the cost of living?
    Lieut.-Colonel Lipton: Nothing at all.
    Mr. Blackburn: We must look also to the future prosperity of the country and its capital investment. When speaking at Geneva, the Financial Secretary to the Treasury used some of the same arguments as were used in the Budget debate a year ago and also in the autumn Budget discussions, when the former Chancellor of the Exchequer said that they had been too successful in persuading private industry to increase its capital investment. Capital investment, however, is so important to our future prosperity that we ought to be prepared to take a risk. It is no use lagging behind the other major countries, as we are doing. Whatever has to be cut down, it should not be capital investment.
    The Chancellor of the Exchequer referred to the subject this afternoon when he said that everybody would agree that we need a high level of investment, but, he added, the rise was too sharp and too sudden. That is the same thing as was said twelve months ago and also in October and November, when the Economic Secretary said:
    "The policy of the Government is directed to slowing down the tempo of investment which is not of the greatest national urgency."—[OFFICIAL REPORT, 10th November, 1955; Vol. 545, c. 1988.]
    We could agree with those concluding words, but who was left to decide what was of the greatest national urgency? It was not the Government, but the banks. The Bank Rate was put up, and it was left to the banks to decide in which directions the capital investment should be made.
    We have to judge the Chancellor's speech today against the problems of the balance of payments, of imports, exports, production, the cost of living and capital
    930
    investment. What was there in his speech which gave any answer to those questions? We all agree that a high level of saving is important. I do not know what trouble the right hon. Gentleman will meet with his lottery. It is rather naive to say that because one cannot lose, it is not a lottery.
    Mr. G. Thomas: One can lose, all right.
    An Hon. Member: And lose the interest.
    Mr. Blackburn: One can lose the interest, as I am reminded.
    We must be realistic about this. If anybody opposes the lottery, I hope that he will oppose the whole principle of the Government making money from betting. It is not very sensible to say that although we are prepared to take great sums from the football pools and from betting on the racecourse, we are at the same time opposed entirely to any new form of lottery. Let us be honest about it. If we oppose the one, we should oppose the whole lot.
    What did the Chancellor mean by his reference to Government expenditure? He is to cut down to the extent of £100 million, but he gave no indication of where the cuts are to be made. Hon. Members behind him came to life when the Chancellor said he would cut Government expenditure, and they applauded loudly when he said he would cut it by £100 million. I should very much like to know where the economies will be made. If it is possible now to economise to this extent in Government expenditure, what have the Government been doing over the past few years that they have not managed to achieve those economies before?
    I shall not say much about the increased duty on tobacco—as I am a smoker, I shall not argue against it—but it is rather mean that the old-age pensioners must bear the additional 2d. on a packet of twenty cigarettes. What is there in the Budget to help the old-age pensioner?
    Mr. Percy Shurmer: Nothing.
    Mr. Blackburn: What is there to help the disabled or those on fixed incomes? Nothing.

    931
    As I said earlier, the Budget must be judged against the problems which face the country. Not even the most enthusiastic supporter of the Chancellor of the Exchequer is likely to say that the right hon. Gentleman has today produced anything that can in any way measure up to the problems now confronting us.
    7.28 p.m.
    Mr. John Howard: Two of the last three hon. Members who have spoken have referred to tax relief on sport of one kind or another. I had intended to enter a plea for the smaller professional football clubs and also for the live theatre. Possibly the Committee has already heard sufficient about tax relief, and therefore I shall content myself by referring to these two matters in a few sentences.
    So far as the professional football clubs are concerned, we are, as the hon. Lady the Member for Coventry, South (Miss Burton) underlined, taking a great deal out of sport and putting nothing back into it. There are opportunities for art and culture to receive subsidies through the British Council, and I wonder whether it is possible to divert some of the funds at the command of the British Council to support our Olympic team.
    Many of the smaller professional clubs are financed by their directors, supporters' clubs and so on, and notwithstanding that the clubs operate at a considerable loss, it is still necessary to pay over to the Exchequer a considerable sum in Entertainments Duty, which comes directly from the pockets of those who have interested themselves in the clubs. I hope that my right hon. Friend the Chancellor of the Exchequer can look at that matter again.
    Many theatres have closed during the past year, and it is felt that if the tax continues at the present rate many more theatres in the provinces will have to close. It may be, of course, that even the alleviation of entertainments tax will not save these theatres. Today we have rather more exacting standards; we expect a high quality of entertainment and performance in the provinces, and we therefore would expect a theatre to stand on its own merits and standard of performance rather than on any form of subsidy or assistance by the lifting of any
    932
    existing taxes. It would, however, be a step in the right direction if theatres could be encouraged to develop a higher standard through being allowed to retain a higher proportion of the takings at the box-office.
    Lieut.-Colonel Lipton: If all hon. Members who put down their names in favour of the abolition of entertainments tax will record their vote during the Committee stage of the Finance Bill, we shall be able to compel the Government to do something about it.
    Mr. Howard: The hon. and gallant Member has stated a truism.
    I turn from entertainments taxes of one sort or another to other aspects of the Budget. The hon. Member for Stalybridge and Hyde (Mr. Blackburn)—who is no longer in his place—asked what the Chancellor has achieved in his Budget. My right hon. Friend has set out to solve a number of problems. A number of questions are being asked both inside and outside the House. What steps are being taken to maintain full employment? That, I think, is one of our priorities. What are we to do to narrow the gap between exports and imports? How shall we encourage investment and increase our ability to compete for overseas markets? How are prices to be stabilised? Finally, how are we going to ensure that the value of our currency is maintained?
    All those matters are of vital importance to our economy and to the standard of life enjoyed by everyone in this country, by old-age pensioners and by all the various sections of the community which have been mentioned today.
    The Chancellor has concentrated his reply in one word—savings. He has pinned his faith to an increase in savings, so that we can reinvest in industry, so that we can expand our production by ploughing back and withdrawing from circulation some of the excess earnings in our internal economy.
    Where has he looked for the savings? If we are to try to encourage savings, we must look to the different sectors of the community for them. First, let us look at limited companies. There is not a great scope in that sector for savings. In the limited company sector, we find that in 1955 savings out of profits amounted to some 43 per cent. already ploughed

    933
    back by limited companies, only 21 per cent. being paid out in dividends. That compares favourably with pre-war figures, those for 1938, when only 29 per cent. was saved and 47 per cent. paid out in dividends.
    There is thus not a great deal of scope there for additional savings. The Chancellor has, however, added a little incentive by stepping up the rate of distributed profits tax by 2½ per cent., so that any company which might toy with the idea of increasing its dividend and thus decrease its savings will at least know that there will be a further impost payable to the Chancellor if it does so.
    When the Chancellor moves to the private sector, he has two classes of the community to whom to look—the professional classes, the self-employed, and those comprised within the expression "other incomes," as I think it is put in the White Paper. He has to look to those two sectors for his savings.
    If he looks to the self-employed, he will find that their incomes have risen proportionately less than have the incomes of any other sector of the community since the war. In fact, while weekly wage earners have increased their incomes by 3½ times between 1938 and 1955, the middle range of self-employed people have found their incomes rise only by some two and a half times during the same period.
    The self-employed section of the community has passed on less of the rising prices than any other section. The profits of the self-employed have not risen in anything like the same proportion, either as incomes or as the profits of companies; so that the self-employed man, the professional man, has not been able to pass on to his consumers that which other sections of industry and the community have not hesitated to pass on.
    If the Chancellor is to appeal to the self-employed, he must give them some margin out of which to save. I was delighted to hear this afternoon that he is proposing to extend to the selfemployed—that is to say, everybody from the professional man to the greengrocer—the same opportunities to pay for a pension which at present belong to the civil servant and the employee in industry. That is a particularly valuable step forward for professional people.
    934
    In this country, the professional man enjoys a very high reputation for both integrity and competence. If we are to continue to recruit into the professions the right type of individual, we must be able to offer the same opportunities for pension on retirement as would be received by those entering commerce, the Civil Service, or local government. The proposal announced this afternoon goes all the way to meet the demand for a pension on retirement.
    The next sector to which we must look for investment savings includes those who look upon an investment as the postal order which accompanies their fooball pool coupon which they send off on a Wednesday or Thursday in the hope of gaining a prize. They look upon an investment as the amount which they pay to the football pool promoter each week in the hope of securing a quite enormous dividend in the form of a prize.
    The proposal of the Chancellor is to introduce bonds which attract no interest but which will be drawn in some way—I do not know whether a hat or drum will be used—and the lucky holder of a particular bond will receive a prize of some sort. That is a type of saving which I think will appeal to a very wide section of the community. There is an opportunity to put aside £1 at the end of the week—that was a minimum subscription mentioned this afternoon, and there will be opportunity to accumulate one's savings for a special occasion, admittedly without interest, and at the same time cherish the hope that one of these days one's bond might be drawn and be the means of securing a substantial increment to one's savings. I assume there will be no tax payable on drawings from the bonds.
    The hon. Member for Stalybridge and Hyde was rather challenging in his remarks about betting. These bonds are surely somewhat comparable, though the amount is greater, with any issue at less than par. When a bond is issued at, say, 97 and is ultimately repaid at 100 or 101, the same principle of premium applies as would apply to the bonds which the Chancellor proposes to issue as part of the savings scheme. As no Income Tax is applied to the premium on the redemption of bonds issued at a small discount,

    935
    I presume that precisely the same principle will apply in this case and that no tax will be payable.
    The Financial Secretary to the Treasury (Mr. Henry Brooke): I can assure my hon. Friend that the prize, if he wins it, will be tax-free.
    Mr. Howard: I am sure that we are all relieved to hear that. It will fortify our desire to subscribe to these bonds, in the hope that we may be fortunate prize winners.
    Mr. R. J. Mellish: After considering this matter since the Chancellor spoke, may I ask whether the hon. hon. Member does not think that there may be great danger here? Since the gambling instinct is rather prevalent, will there not be a tendency to draw money from Post Office savings to buy the bonds in the hope of getting extra cash by way of prize money?
    Mr. Howard: I do not think that it makes any great difference if we transfer savings from under one heading to another. They are still savings, and purchasing power is being drawn off. I think that my right hon. Friend was right to take a gamble. The proposal opens a wider opportunity to save, and also provides the chance of a substantial gain, if one happens to be lucky in the draw.
    It is important to concentrate upon increasing our savings. The Chancellor has made a gesture to the self-employed who, until the weight of taxation became completely intolerable, made the greatest contribution to savings. It has only been in recent years that the weight of taxation has prevented them from playing a full part in adding to our national savings. The present concession, which is partly a tax relief and partly a contribution to savings, will restore the balance and give the self-employed classes a fair deal.
    The emphasis in the Budget has been on concessions and not on new taxes, but the tobacco duty proposal has surprised quite a number of people. It has also dismayed a number of those who appeal for the old-age pensioners, though until we have the figures before us we should be most unwise to express any opinion on how much per week the new imposition is likely to mean to old-age pensioners.
    936
    It is bound to make some difference, but until we have the figures I think that we should hold our criticism.
    Mr. Tom Brown: It is very easy to calculate. Old-age pensioners are allowed only one voucher on one ounce of tobacco a week.
    Mr. Howard: The hon. Member's arithmetic is probably better than mine and I will not attempt to follow his example by performing the calculation. Usually at this time of the year, in my practice as an accountant, I have to perform a number of calculations after the Budget, but for the first time I have been spared the usual cogitations on the effect of new rates of tax. Private incomes are not affected this time, and the only effect upon the income of companies is the additional ½ per cent., making 3 per cent. on profits—quite a small impost—and a deterrent of 2½ per cent. on distributed profits, which I view as another shot in the locker designed to encourage savings.
    I should like to commend the Budget to the Committee. As a member of the professional classes who has benefited quite considerably from the Budget, I believe that it will be a great source of encouragement to youngsters who are thinking of entering the professions. It will be an encouragement to them to know that they can enter the professions with a reasonable chance of getting to the top and providing for their old age as well without being overburdened by the need to raise capital to buy their way into a practice.
    7.46 p.m.
    Mr. R. Moss: There can be no dispute that the immediate aims of the Government should be, first, to close the adverse gap in our balance of payments, and, if possible, achieve a surplus, secondly, to check inflation so that the wage-price competition can be ended and savings encouraged and, thirdly, to do both these on the basis of full employment—a fact which the Chancellor omitted to mention in his Budget statement.
    Full employment is of very great importance to the country now. In the Midlands much anxiety has been caused by the pockets of short-time working and unemployment in the motor car trades. The three objectives I have mentioned

    937
    should be the objectives of any Government in the present situation, but the context in which these objectives have to be achieved is also important.
    In 1955, conditions were extremely favourable to Britain, but let us consider one or two of the manifold aspects of failure last year. First, there was an adverse balance of payment: of £103 million, and between 1954 and 1955 there was a deterioration in that respect of £308 million. I am glad that my own calculations are the same as those of the Chancellor of the Exchequer. Secondly, there was a vast deficit with the non-sterling world of over £300 million, which represented a deterioration of £250 million between 1954 and 1955.
    Thirdly, Britain's share of world trade has been falling, though the hon. Member opposite who made that point ought also to have said that it is easier to improve exports on a narrow base than it is to achieve a similar percentage of exports on a broad base. That should be borne in mind when one compares the performance of this country with the performances of countries overseas.
    Fourthly, particular industries have met with difficulties in 1955, and hon. Members on both sides of the Committee feel concern about the pockets of short-time working and unemployment in various parts of the country. In my own constituency, it is the motor industry in particular which is suffering in this respect. Fifthly, our gold and dollar reserves have declined by over one-fifth last year or, as the Chancellor put it, by nearly one-quarter. That is a very serious decline in a country situated like ours, a country which, though an island, is based on an international economy, part of which is beyond the control of any British Government.
    Sixthly, the general price level inside the country has been rising. Out of 50 countries which submit statistics to the United Nations only eight have fared worse than has Britain in this respect. Lord Aldenham said in February that the cost of living had risen in 1951 by 2·1 per cent. in Western Germany, by 2·8 per cent. in Canada, by 3 per cent. in the United States, by 7 per cent. in Holland and by 20 per cent. in Britain. I believe in what the present Prime Minister said in his broadcast of 1951, that statistics
    938
    do not matter; people know whether prices are rising or not.
    Lastly, I think that we shall have to continue to import vast quantities of oil and some coal and steel during 1956. That will throw a burden on our balance of payments this year. All this is happening at a time when world trade has been expanding, when other countries have ben accumulating gold and dollar reserves, and when the terms of trade have not moved markedly against us.
    The Government have a poor record in this respect. That is my honest opinion—I am a student before I am a politician. As far as imports are concerned the Government had to find £547 million less in 1952 than in 1951, £604 million less in 1953 than in 1951, £482 million less in 1954 than in 1951. On the other hand, exports in 1952 were up by £79 million, they were down by £78 million in 1953 and up by £69 million in 1954. In this, I am supported by an article in the current edition of the Westminster Bank Review, which states:
    "It appears then from the balance-of-payments point of view external conditions in the last few years have been uniquely favourable to this country and, to the extent that difficulties have occurred nevertheless, the nation has only itself to blame for them."
    It is internal causes which have been responsible for the inflation of the last few years. The Government, therefore, have been rather like the grasshopper which sang in the summer—they had an Election when the weather forecast became doubtful. A cloud no bigger than a man's hand has upset the party opposite. Hon. Gentlemen and right hon. Gentlemen opposite should have read their Shakespeare better, particularly his words—
    "It is the bright day that brings forth the adder and craves wary walking."
    More recently, of course, the right hon. Gentleman has had some encouragement. The gold and dollar reserves have been rising again and the gap in our trade balance has been narrowed. However, these developments do not go far enough, as the Chancellor of the Exchequer said this afternoon. For the first quarter of 1955 the trade gap averaged £77 million a month. For the first quarter of 1956 the monthly average has been £57 million a month. Yet in the first quarter of 1954 it was only £40 million a month. Therefore, we have a long way to go. It is in

    939
    the light of these difficulties and problems that the Budget statement made today has to be considered.
    I want also to mention certain long-term considerations which seem to me to be extremely important. The first is to ask whether the Government still hold to the belief in an expanding economy, and if so, to what extent? In the current issue of Lloyds Bank Review it has been shown that over the period between 1950 and 1965 the industrial output of the Soviet Union will have increased by 300 per cent. By 1963, Russia will have the present output of the United States of America, and by 1965 Russia will have 77 per cent. of the American output for that year.
    To take one or two instances, Russian output of coal and lignite will have increased by 127 per cent., oil by 255 per cent., and crude steel by 155 per cent. It is in the light of this expansion in Russia, and the fact that over the same period between 1960 and 1965 the industrial output of the United States of America will have increased by 91 per cent., that we must judge our own performance.
    If competitive co-existence is to be the governance of the future, this country must do likewise. We must have plans for expansion, even if not as big as those which exist in Russia and the United States. At any rate, we must bend every nerve and sinew to expand our own economy if we are to exercise any influence in the world of the future. The rate of expansion is, therefore, important, and the Government would do well to clarify their plans in this respect to the Committee during the Budget debate.
    The second long-term question which arises is whether the Government believe that full employment can be maintained and economic expansion continued, on the basis of devotion to Keynesian techniques, adumbrated in times of mass unemployment and applied now to a very different economic system. Mr. D. J. Robarts, of the National Provincial Bank, and Sir Oliver Franks, of Lloyds Bank, are both doubtful about this. One of the reasons is the growth of the self-financing company, which is mentioned in paragraph 71 of the Economic Survey for 1956. The reasons why these two bankers think that the policy which the Govern-
    940
    ment have pursued hitherto is doubtful of success are as follows, taking the two together.
    First, they point out that this country is no longer a creditor nation. Secondly, they say that the Bank Rate would have to be raised to a point at which unemployment is created, if it is to be effective. Thirdly, they say that Government expenditure is five times what it was before the war, yet it cannot be cut without a major change of policy. Fourthly, they say that higher taxation blunts the effect of higher interest rates. Fifthly, they point out that this country is exposed to greater external vulnerability in these times than in the past. Lastly, they indicate that companies must finance themselves more out of profits today than they have done in the past.
    Therefore, this raises the serious question as to what techniques are the best in the circumstances of today. In my opinion, no Government should be a slave to principles simply because they have operated in the past, but should always be willing to try out new techniques in an attempt to achieve the long-term objectives which this country must reach.
    The third question is whether inflation can be checked and Tory promises redeemed, without reference to defence expenditure. This is running at £1,500 million a year or, say, £30 per head per year in this country or 12s. per head per week. I can understand an intelligent argument about defence expenditure and its impact upon our economy. What I do not support is the continual ignoring of defence expenditure as though it did not exist.
    In the most recent debate we had upon the economic situation the right hon. Gentleman the Chancellor of the Exchequer did not, so far as I remember, even mention defence expenditure in his analysis of inflation. My right hon. Friend the Member for Huyton (Mr. H. Wilson) gave four reasons lying at the base of inflation, including defence, and proceeded to ignore it in the rest of his speech. It does not seem to me to be intellectually honest to try to deal with the question of inflation without dealing also with the impact of Defence expenditure upon it.
    The right hon. Gentleman is reported to have said, on inflation, "It is a simple

    941
    thing, so simple that I sometimes wonder why everybody does not see it." I must confess that I did not find it a simple thing, particularly after reading the article by R. F. Harrod in the Economist, where he makes out a case to show that wage increases have only been of trivial importance in this inflationary period and the major factor in the causation of it was the vast increase in industrial investment, amounting to 80 per cent. increase over the average of the period 1949 to 1952 or 1953. As a matter of fact, the analysis of inflation is very difficult for the expert, let alone for the layman. I could appreciate a reasoned argument; in fact, I should enjoy listening to one from the Government, upon the impact of defence expenditure upon the economy so far as inflation is concerned, but I cannot believe that it should be continually ignored because it is bound to have some effect.
    The fourth consideration is that no Government can succeed in any of these tasks unless they are understood and supported by the people. The party opposite, in this respect, is a victim of its own propaganda. I should like to know whether the Government really believe in the economies of the kitchen at "Grey Gables," which is described in the following terms;
    "It was a scene of turmoil from early morning until late at night—swarming with people who shoved and pushed and obtained what they wanted by reaching over the bent bodies of others."
    If that is Tory economics it is out of date. The party opposite should be intelligent enough to adapt itself to changing circumstances.
    Perhaps the Government believe in the words of a former Anthony, who said:
    "Mischief, thou are afoot
    Take thou what course thou wilt."
    Even the Chancellor is reported to have said, in a previous speech, that all sections of the community were greedy. He accused all sections of the community of greed. It is true, as the Bible says, that
    "He that is greedy of gain troubleth his own house."
    That may yet be the greatest indictment of this Government. If it is true that all sections of the community have become greedy, we have removed ourselves even further from the idea of mutual service. If we have, it represents a moral deterioration. The Government must not
    942
    behave as though the people were economic scarecrows. I do not believe for a moment that the working-class will allow themselves to be pinched in the Tory nutcrackers unless they are persuaded that any sacrifices which have to be borne in a situation of this kind are fairly shared.
    Insofar as any Government convinces the people that the sacrifice is to be a national one, and that those sections of the community which are worse off are to be cushioned to some extent against this sacrifice, I have always believed, and believe now, that the people will do their best to support the Government in their attitude to achieve economic viability.
    I support those parts of the Budget which encourage savings because I believe that there is a very close connection between savings and the satisfaction of the need for investment. I believe that there is a close connection between savings and rising prices, and I agree with those parts of the Budget, but I cannot for the life of me see how, in a Budget which has been built up as this has been, the Chancellor of the Exchequer, who has been said to be intelligent, courageous, imaginative and strong, can come to the House of the Commons today and, in a long speech, put forward so small a Budget. I cannot see how this Budget measures up to the enormous problem we have to face, and I myself would have supported even a Tory Government which had brought forth measures which were capable of meeting the situation.
    8.7 p.m.
    Squadron Leader A. E. Cooper: I hope that the hon. Member for Meriden (Mr. Moss) will not think me too presumptious if I congratulate him very sincerely on what I think was a close and well-reasoned speech. I can only hope that the right hon. Member for Huyton (Mr. H. Wilson), when he speaks tomorrow, will reach the same high standard of objectivity and impartiality that we have heard within the last twenty minutes.
    The Economic Secretary to the Treasury (Sir Edward Boyle): Perhaps my hon. Friend would allow me to associate myself with those remarks.
    Squadron Leader Cooper: The annual Budget to which we are subjected really makes this House of Commons into almost

    943
    a Council of State, because the Budget, which, in olden days, was simply a means whereby the Government provided themselves with sufficient revenue to pay for their expenditure, is now something far more important. It controls the whole prosperity of the country. Therefore, because it is now so important a part of our lives, we must examine it very carefully.
    The first observation that I have to make concerns the accuracy of Treasury Estimates. For years, since the war especially, Treasury Estimates have been very much in error, both in the time of the Labour Government and in the six years that this Government has been in office. Figures have been put to the House showing what was the estimate of expenditure in a year and at the end of that financial year they have been shown to be hopelessly wrong. In the present year, the error is more than 5 per cent. We may think that that is not a very big error to make in any circumstances, but when we are dealing with figures which reach the astronomical proportion of £5,000 million, then 5 per cent. is a very serious error to make. I think that in consequence of these continuous errors over the years, one is at least entitled to question the infallibility of the Chancellor's economic and financial advisers.
    This Budget is a continuation of a series of Budgets which go back to the days of Sir Stafford Cripps, and I think that we must look back to those days for a few moments and relate them to the situation in which we find ourselves today. The hon. Gentleman the Member for Stalybridge and Hyde (Mr. Blackburn) made a few party points and tried to show how much worse off we are than in the days when he and his right hon. Friends supported the Government of the day.
    It is fair to point out, however—and I think that hon. Members opposite would admit this—that in the first five years they were the Government of the country they had, on average, £350 million annually of American money—Marshall Aid—which cushioned them against the very serious balance of payments problem. Notwithstanding the fact that that money was available, in one year they
    944
    were forced to devalue the £. Since we have been in office we have not had the benefit of any aid from the United States, other than small sums in defence aid—small, that is, in relation to the sums which the Labour Government had. For all those years we have stood on our own feet.
    I ask hon. Members to consider the argument objectively. The position is that the people of this country are very much better off than they were six years ago. Our present difficulties are the result of our trying to do too much with too few resources in our hands. I entirely agree with the hon. Member for Meriden that we have to consider the whole of the techniques of financing our affairs, without any regard to past principles.
    I should like to return to an argument which I have put to the House on a number of occasions. I sincerely and honestly believe—and I know that the Economic Secretary believes this, too, because he made a similar statement in the House some years ago—that the present weight of our Budget is in itself inflationary and that unless and until we can make very serious inroads into the level of Government expenditure and the level of taxation, we shall continue to be faced with these crises on balance of payments account. Not only shall we be faced with them directly as a result of high taxation, but, in their turn, they will bring continuing demands for higher wages which, in the end, will price us out of foreign markets.
    It must be borne in mind that at this time when, as the hon. Member for Meriden said, we must be thinking in terms of greater productivity, high taxation means that there is no incentive either for the industrialist to produce more or to the man at the bench to work harder. There is no incentive if his pay packet at the end of the week shows no increase commensurate with the extra effort.
    I want to interpose a comment here about the value of the £ in relation to foreign currency. I confess that I am not competent to talk technically on such matters, but I am advised by some merchant bankers that they firmly believe that the present pegging of the £ is bad from this country's point of view. I do not suggest that we should have free

    945
    convertibility, but I am advised that to peg the £ at 2·80 dollars means that, because of pressures from European countries, the £ will always be fixed at the lower level.
    If the £ were permitted to find its own level it would probably fall 20 or 30 cents in relation to the dollar, but it would have rather a different effect from that of the devaluation of the £ when the Labour Government were in power. That is not meant as any criticism, but in those days there was a very rigid system of import licences, we had little in the way of free exchange convertibility and there was a small amount of goods in the pipeline.
    Today, there is a considerable quantity of raw materials, already paid for, on the way to this country, and large stocks are already in existence here. The result of such a policy would be this: although for the moment there would be very little extra cost to us on such imports, the value to exporters at present would be considerable. I am advised by some merchant banking houses in the City of London that in about six months' time, as a result of such a policy, they would expect the £ to have reached parity at about 3 dollars. I am not competent to talk technically on the subject or to say whether that argument is correct, but I put it forward for consideration by the Economic Secretary as he sees fit.
    May I return to the speech of the hon. Member for Meriden? The Budget must be judged by its effect upon three things—the fight against inflation, increased productivity, and greater exports. I think the whole Committee will commend my right hon. Friend for the steps which he has taken to encourage savings. I do not pretend that 100 per cent. of the people in the country will like the idea of a premium bond, but, nevertheless, we must recognise that this is an imaginative step forward in the sense that it attempts to catch the public imagination on a vital problem. Indeed, it might be the only way in which public imagination can be so caught. That is all I will say on that subject.
    I should like the Economic Secretary to consider another aspect of savings. My right hon. Friend this afternoon drew attention to the rise in the National Debt and the enormous cost to the country in servicing that debt year by year. We
    946
    must not forget that although we must have increased savings to a considerable extent, as they are made those savings will increase the National Debt and that automatically will increase the annual charge which has to be met.
    Much as I respect my right hon. Friend and the Conservative Government, of which I am a supporter, I dislike Governments spending money, because they never spend it wisely, and I would much prefer some arrangement to be made—this will be quite heretical to hon. Members opposite—through the Stock Exchange whereby the ordinary man in the street could subscribe his 2s. 6d. or 5s. or £1 in small units of productive industry. The money obtained out of industry could thus go back into industry to help industry finance itself for the further steps which we must take in redeveloping our industrial machinery. It should not be impossible to work out some means whereby the individual could co-operate and help in that way.
    I turn next to the question of productivity and exports. First, I was very disappointed that my right hon. Friend made no reference whatever to the coal industry and to the part which it has to play. I am not a coal miner and, frankly, I should not like to be one. However, I should not like hon. or right hon. Gentlemen opposite to imagine that because it is an unpleasant job, it is necessarily the most dangerous in the country. The most dangerous job in the country is the simple task of walking across the road, and we have to accept that fact. [HON. MEMBERS: "Oh."] I do not intend to be mealy-mouched about this, whatever reaction I get from hon. Gentlemen opposite.
    The plain fact is that the coal industry has let us down. It is the one industry which has shown no increase in productivity since the end of the war, notwithstanding the fact that vast sums of money have been poured into it for re-equipment.
    Mr. G. Thomas: That is not true.
    Squadron Leader Cooper: I was particularly careful to refer to the coal industry and not to the coal miner, because the difficulties there are probably due to a combination of all parts of the industry, from the top management downwards.
    We can as a Parliament, not necessarily as a Government, set as one of

    947
    our targets for this financial year the task of seeing how we can get an additional 40 million tons of coal. One or two hon. Gentlemen opposite ask how we can get the miners. I should like to point out that when the opportunity to get more men to go into the mines came—I am speaking of Italians—the National Union of Mineworkers would not have them. [An HON. MEMBER: "Why should they?"] Hon. Gentlemen opposite really cannot have it all ways.
    Mr. T. Brown: The hon. Member is making a rather scathing condemnation of the British miner. I warn him not to do it, because it does no good. Is he aware that since 1948 the British miner has worked 400 extra shifts to help the nation in its economic difficulty? Our miners volunteered to do Saturday work and have worked on Saturdays without a break for eight years. If that is letting the nation down, I do not understand what the hon. Member means.
    Squadron Leader Cooper: The plain truth is that the nation is not getting anything like the amount of coal it wants, nowithstanding the extra shift. Every other industry in the country has made enormous increases in productivity and that has not happened in the coal industry.
    Mr. Brown: There is a reason.
    Squadron Leader Cooper: Now the hon. Member says that there is a reason for it. In other words, he gives me my argument. We have to remember that because we are not getting the coal from our own country, we are having to spend £80 million in foreign currency to bring it from abroad. As a Parliament we ought to see how we can get this extra coal. That should be our great task. If we can succeed in doing that, our future prosperity is assured.
    In ordinary exports British industry has a task to perform which is well within its power. During the financial year we should set industry a target of increasing exports by about £300 million. I believe that that can be done. Last year I went to Austria, Italy, Switzerland and France on business; the year before I went to Portugal, Spain and Italy, and the year
    948
    before that to the Scandinavian countries and Holland. I claim to have some knowledge of the conditions which exist in those markets. About a year ago they used to think that it would be a good thing for the Chancellor to offer some tax concessions to industry to assist in developing export markets, but on further consideration I do not think that that is the way in which we should set about this problem. We are told that both the Germans and the Dutch have now withdrawn their trade subsidies and I believe that we shall now find ourselves better placed than we were.
    One or two hon. Gentlemen opposite have made the point that we have not increased exports last year as fast as have other nations and that we are finding our prices rather high. To both those points there are good answers. It must not be forgotten that we have been exporting solidly since 1945 and that our percentage increase is based on a much higher figure—which we have already attained as a result of about 10 years of trading—than is the figure of, say, Germany, or Holland, which did not start exporting until a few years ago. The next point—and this is very important, especially where German competition is concerned—is that the Germans had no trade unions of any real consequence until two or three years ago. They also had an enormous unemployment problem arising from the influx of refugees from Eastern Germany, all of which they had to absorb.
    We must admit that they have made prodigious efforts in Germany and have built up an enormously powerful State. The trade unions are now beginning to assert themselves and, as a result, wages in various industries in Germany are beginning to increase. I believe that in due course they will reach parity with wages paid in our own industries. I am, therefore, not worried about our ability to increase our exports. I believe that that can be done and that the figure of £300 million in extra exports during this financial year is something which is well within the capacity of British industry.
    I should like my hon. Friend the Economic Secretary to see how the Government can help industry further. It should be in the best interests of the Government to see that industry gets its goods at the lowest possible prices and

    949
    that every handicap to getting goods at the lowest prices is removed, or at least partially removed, because our prosperity depends upon our ability to export. Unless we can export at reasonable prices, we shall have difficulties, notwithstanding what I have said already.
    The petrol duty is very exorbitant at present and its effect upon raw material costs in industry and in the cost of distribution of foodstuffs and things of that nature is very considerable. It is very difficult to make an exact calculation of the effect of the petrol duty upon raw materials, but with the chemical industry the best information I can get shows that no less than £3 a ton is added to costs and that is often the difference between getting and losing an order in a foreign market.
    There is then the question of the white oil duty. We return to this subject year after year, whether on the Government side of the House, or on the Opposition side. The duty was originally imposed by error and has remained on the Statute Book ever since. It is a direct tax on a vital raw material of many industries and although machinery exists for drawbacks and rebates for certain purposes, nevertheless considerable machinery has to be operated at considerable cost to the nation.
    To repeal this tax would certainly not be inflationary. The gross cost to the Exchequer would be about £30 million, but the Chancellor would get back in increased taxation from companies not less than £15 million or £16 million of that; and there would be consequent saving in administration. I ask the Economic Secretary to bear in mind that when we raise this question year by year we do not do so because we like to, but because we think that it would make a very real contribution. The whole system of drawback on raw materials on which Customs duty has been paid should be extended to enable manufacturers to compete more favourably in foreign markets.
    Now I come to my final point on Purchase Tax. I do not think that any hon. Member likes this tax. Indeed, many were appalled when they heard the Chancellor say this afternoon just how much is now brought in by Purchase Tax. It can only have a distorting effect on industry and it may be shown clearly that the
    950
    tax is one of the factors limiting the possibilities of increased exports at the present time.
    Let us consider the motor car industry. A motor car manufacturer knows that he has a certain market in this country for a car costing, shall we say, £1,000. That is the amount which a purchaser is prepared to pay, but it includes about £300 of tax; so that the manufacturer has to consider the car he is to construct not in terms of £1,000 but of £700, or even less, because there are distributors' profits to be considered. In consequence, the buyer gets just about what he pays for from that point of view and he does not get a car so well designed or efficient as a car of a similar price manufactured in a foreign country.
    No other country saddles itself with this vast tax obligation and the effect is felt not only in the motor car industry but in many other industries. The time has come when Purchase Tax should be abolished and replaced by a general sales tax. I am sure that in the not too distant future that is a step which will have to be taken.
    One of my hon. Friends described this as an inspired Budget. Hon. Gentlemen opposite consider that "inspired" is the last adjective which should be applied to it. One of my hon. Friends said that this Budget is like the Venus de Milo—what there is is good.
    Lieut.-Colonel Marcus Lipton: What does the hon. and gallant Member think?
    Squadron Leader Cooper: I think that what there is is good. The incentives to saving are vital to our prosperity and the small imposts which have been made will, not hurt anybody. In the months to come, if the country can see that this Budget is having the effect which the Chancellor believes that it will have, everyone will be very happy.
    8.34 p.m.
    Mr. George Chetwynd: In opening his Budget statement, the Chancellor indulged in some nostalgic reminiscences about the 1925 Budget, the time when he first came to this House. The interesting thing to me is that at that time the right hon. Gentleman was representing the constituency which I now represent. When we met in 1945 it was my good fortune to replace the right hon.

    951
    Gentleman and to send him to seek a fresh constituency. Therefore I have followed his activities since with considerable interest.
    We were led to believe that today the right hon. Gentleman would don the mantle of the "Iron Chancellor" and give the country the medicine that it really needed. More in sorrow than in anger I must say that his speech was a complete disappointment to those who expected him to take that line. In fact, it was an extremely lengthy speech, but there was very little in it.
    At one stage the Chancellor said that the eyes of the world were focussed on this House. From my reading of the popular Press I think that they are focussed on a little Principality somewhere else; and indeed there was a Monte Carlo atmosphere about the Chancellor's speech. Admittedly he made his speech with some grace, and with his reference to savings he was inviting us to save for a rainier day—[HON. MEMBERS: "Oh."] But when he came to his reference to a lottery I thought he was qualifying for the position of head croupier at the Monte Carlo Casino.
    In his speech today the right hon. Gentleman conducted an inquest on Tory party policy over the past four years, with particular reference to its failure to meet the situation in the last year. The ample documentation in the popular edition of the Economic Survey is the most damning indictment we could have of the Conservative Party in office.
    My complaint about the Budget statement is that it left out altogether the main problem of the cost of living; and until we have dealt successfully with that and achieved a reduction in the cost of living, I do not believe that this Government can hope to grapple with the other problems which beset them. There were no proposals in the statement today to bring down the cost of living. The only proposals which is contained; the removing of the bread subsidy, etc., are designed to have the opposite effect.
    We are now facing a position in which we are supposed to exercise restraint in our demands for wage increases, etc., but at the same time those demands are aggravated by Government action. In spite of rising dividends and rising profits, there was no appeal from the Chancellor
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    for restraint on that side. It is my belief that no Tory Chancellor of the Exchequer can successfully appeal for restraint unless his measures appear to be fair to all sections of the community. There should be fairness between all sections. It is precisely because the Budget does nothing upon those lines that it must be condemned.
    Squadron Leader Cooper: That is really very unfair, because one of the main proposals of the Budget is to increase the Profits Tax.
    Mr. Chetwynd: A few moments ago one hon. Member opposite said that that will have only a small effect; in fact, it was the hon. and gallant Member himself who said it—so he can hardly plead that now. I said that the Chancellor had made no appeal for dividend restraint, and I think that that fact will be borne out by the record tomorrow.
    Let us examine the Chancellor's plea in regard to savings. He is appealing for extra savings, and the only source of those extra savings is the very small saver. The proposal which he advances will not improve the position very much. Either the small saver will save enough to invest in this lottery, or premium, as it is called, thereby foregoing the interest that he would normally get, or he will withdraw what savings he has and reinvest them in something which will later give him a higher rate of interest. The net accumulation of new savings in that respect will be very small indeed.
    That position will arise because the Chancellor has not asked himself who in our community today has surplus cash which he can save. From where is this extra saving to come? It will certainly not come from the workpeople in my constituency, or from the people living upon fixed incomes, who are finding that with the ever-rising cost of living their incomes are scarcely enough to meet week-by-week costs. We must look to some other section of the community for that saving. The Chancellor has had the very bold idea of the Premium bond, which is as near to a lottery as makes no difference. Whether or not it will succeed I do not know, but it will run into severe criticism in the country. I should have thought a better proposal would have been to offer a far higher rate of interest upon ordinary National

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    Savings Certificates. That would have been a much more sensible way of tackling the problem.
    Another matter which frightens me, and will cause my hon. Friends great concern, is the Chancellor's statement that somehow, by some means unstated and unspecified, he will save £100 million in Government expenditure this year. Where is that saving to come from? In every Budget debate that we have had so far, every Chancellor of the Exchequer has said that every day, throughout the year, every Government Department is doing its best to save money. We know that we cannot get a saving of that magnitude unless some change in Government policy takes place.
    Mr. E. Fernyhough: I wonder whether the Chancellor has taken account of the possibility that the Germans will not be making any contribution to the four divisions which we still have in Germany.
    Mr. Chetwynd: That is another of his headaches.
    My gravest fear is that this £100 million will come out of the education programme. We all know that the school building programme has fallen behind in respect of plans and schedule. I am convinced that it is one of the easiest things for the Government indefinitely to postpone the building of new schools. That is one direction from which they can derive a considerable amount towards the £100 million which they hope to save. We are absolutely right to press them for more details of this proposed saving, so that the country can see whether it amounts to a change in Government policy or whether the Government hope to achieve the saving by means of blind cuts in staff.
    I now come to the imposition of 2d. upon the price of a packet of cigarettes. I have no direct interest in this matter, because I do not smoke, but I have some interest to the extent that all the people who smoke provide services which I need. It is surely the meanest possible action to add this 2d. to the price, and to let it apply to everybody, including the old-age pensioner who, at the moment, receives concessionary tobacco. If he were excluded I think that the amount of money involved would be quite insignificant, and the ill will which this
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    action will arouse among that section of the community will surely offset any gain to the Treasury by the inclusion of old-age pensioners.
    When one considers the complete removal of the bread subsidy and the addition of 2d. to the price of a packet of cigarettes, one asks oneself what kind of encouragement is being given to men in productive industry to increase their production. That is a most important matter which concerns us all it is probably the one thing which can save us. There again, the Chancellor has shown a complete lack of imagination. Under the heading of family allowances he has tried to give some easement to those with large families, but I am not at all sure that he could not have achieved the same purpose either by including the first child in the allowance or by increasing Income Tax allowances in respect of children. To give it only to the third child will once again set family against family. It will cause intense disquiet among different families, and I think the Chancellor will lose on the transaction.
    One other question which emerges on the occasion of every Budget is that of post-war credits. Something was done in that matter a year ago, but since then we have all been inundated with letters from constituents in circumstances of hardship, who have perhaps £20 or £30 of post-war credits to their entitlement. We are told year in and year out that the Treasury cannot devise a scheme whereby the need of these people can be assessed and the credits paid out to them.
    The National Assistance Board or the Treasury could surely undertake that job once the Treasury had decided that the policy was right. Every day the National Assistance Board is assessing need and exceptional hardship, and I should have thought that compared with the working of the lottery which the Chancellor has proposed, it would have been a simple matter to organise the repayment of post-war credits in cases of hardship.
    On the question of benefits, or lack of benefits, I am convinced that the time has now come when we ought to lump together the National Assistance allowance and the retirement pension and do away with the National Assistance allowance so far as possible by increasing the basic rate of the retirement pension.

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    More than one-third of the old-age pensioners and retirement pensioners are, I believe, drawing National Assistance grants, and I should have thought that we should either tie the pension to the cost-of-living index or add the pension and National Assistance grant together so as to provide a consolidated sum for all retirement pensioners.
    We were promised that this would be a revolutionary Chancellor who would do something bold and imaginative which would force people to realise the difficulties with which this country is faced. I do not think he has done that. I should like the Economic Secretary to the Treasury to consider a proposal which I have tried to work out in detail during the last few days. It concerns our exports. We all know that during the past year our exports have been lagging. According to the official figures, they have increased in volume by about only 4½ per cent. over the previous year, whereas world conditions have been favourable for an expansion of our overseas trade; and whereas our 1955 export performance was unsatisfactory and our share of world trade has been declining, our competitors on the Continent and overseas have been increasing their share.
    Our aim must be to give an incentive to producers to export rather than to sell on the home market. Why have we failed so far? Why have we slipped back? The main reason is the attractiveness of the home market. It is much too easy to sell on the home market. Therefore, manufacturers have taken the easier course instead of going all out for the export drive. The Government will not consider physical controls and allocate materials, and although I should prefer that policy to be adopted, I can appreciate that they are not likely to do so.
    I therefore ask the Government to consider an unconventional means of stimulating exports, which is this. Why not link export performance with the incidence of Purchase Tax at home? By that, I mean that where there are two manufacturers making precisely the same kind of goods, one doing his best to export and the other not pulling his weight, some inducement should be given to the former to give him an advantage over the other. It could be done in this
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    fashion. The manufacturer of motor cars, for instance, could be told, "For every motor car you export overseas, you shall be allowed to sell one motor car on the home market free of Purchase Tax." In the case of chemicals, pottery, textiles and so forth, for every £1,000 worth of goods exported overseas, the manufacturers should be allowed to sell the equivalent value on the home market free of Purchase Tax. If it could not be done in that way, perhaps it could be done by a return of tax to the manufacturer when he certifies at the end of the year that he has exported goods to a certain value overseas or when he has improved on his previous performance.
    I know it sounds a little difficult to work such a scheme, but I believe it could be applied over a sufficiently wide field to make it a worthwhile proposition. Obviously it cannot apply to a manufacturer who is producing solely for the home market, but then, of course, the position would not arise.
    Mr. Fernyhough: How would my hon. Friend apply his scheme to the coal industry? If it were free to export, it could export 50 million tons of coal, but if it did, it would have serious economic repercussions on home industry.
    Mr. Chetwynd: That would not apply, because the coal industry is not competing with the coal industry at home. It is where we get competing manufacturers producing the same kind of goods at home, one of whom is doing his export job while the other is not.
    Mr. R. E. Winterbottom: In the event of two manufacturers supplying the market with precisely the same goods, one of whom, as I understand my hon. Friend, would be free from Purchase Tax, while the goods of the other would be charged the Purchase Tax, does not my hon. Friend see what confusion there would be, and what is his solution to that problem?
    Mr. Chetwynd: The argument is that if the consumer can buy the article cheaper, he will do so, and that will naturally encourage the other manufacturer to go into the export market. That is the whole purpose of the suggestion.
    I think it is worth considering, and I do not think it would be beyond the capabilities of Customs and Excise

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    officers, who could work out the D scheme, or the Treasury officials who can work out the details of the lottery scheme. If they were agreed on the principle of giving this incentive to exporters, I am sure that they would not find it completely beyond them. It is the sort of thing that may not meet with Treasury approval, but I think that it merits careful consideration, and I hope that something will be done about it.
    I am sorry, for the sake of the country, that the Chancellor has not measured up to the task which he had before him today, and I hope we shall be spared an interim Budget during the coming year.
    8.53 p.m.
    Brigadier O. L. Prior-Palmer: I should like to follow the hon. Member for Stockton-on-Tees (Mr. Chetwynd) very briefly on some of the points he made. I think that his last suggestion needs a very cold towel and very careful thought. I was myself a little surprised to find that there was no incentive given to industry to export, but I gather that other countries have tried the idea and have abandoned it, so that it may well he that it is impossible. It may be that that is not the best way of doing it, and that a rebate of the Purchase Tax or something like that is not capable of being operated. Therefore, I cannot say any more about that suggestion, except that I do not think that the hon. Gentleman's scheme would really be very practicable.
    The hon. Gentleman also said that nothing had been done in the Budget to reduce the cost of living. Let us remember that this Budget has to be considered in relation to two other Budgets which we have only just had, and that many things were done there. After all, another term for the cost of living is inflation—wages or costs chasing each other, whichever it is and it is that vicious circle which every Chancellor since the war has failed to break, so that there is nothing new about it.
    The former Chancellor, my right hon. Friend the Lord Privy Seal, in the autumn and in the recent Budget, attempted to do as much as he possibly could at that time to stop these rises in prices, as well as restrict the home demand for goods. In other words, it was an attempt to curb
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    inflation, and as the Chancellor said today, it is early yet to see how far those measures have had effect. One must wait and see what is their effect before passing judgment upon them.
    Mr. R. E. Winterbottom: The hon. and gallant Gentleman is a Member of a party which has advocated free competition as a means for bringing down prices. Is he aware that, in spite of the fact that world prices have been falling for a considerable time, our prices have been rising? We have freed the markets and have gone in for free competition. In the face of that, can the hon. and gallant Gentleman still argue about rising prices?
    Brigadier Prior-Palmer: Most certainly. The standard of living in this country is very much higher than in those countries of which the hon. Member has been speaking. None of us wishes to see that standard of living cut in any way, but if some action is not taken it will automatically be cut, prices will fall drastically, and we shall have large-scale unemployment.
    Mr. Winterbottom: Ask the Chancellor to restore the subsidies.
    Brigadier Prior-Palmer: The hon. Member for Stockton-on-Tees also said that nothing had been done to curb distributed profits, but 2½ per cent. has been added to the tax on them, and I should have thought that that was a fairly reasonable curb. He said that nothing had been done about National Savings, or the lottery, as he called it, but if he had listened carefully to the Budget he would have heard that interest rates on National Savings certificates have been increased. As for his comment on the suggestion that we should cut £100 million in the expenditure of Government Departments, the hon. Member said exactly the same sort of thing about the present Chancellor when he was Minister of Housing and Local Government and said he would build 300,000 houses. I have every confidence that when my right hon. Friend says he intends to do it, he will do it; but at least there is no harm in setting up a committee to look into the matter, and I shall have certain comments to make about that.
    One parrot cry of hon. Members opposite for a long time has been that

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    we are cutting education. In fact, the expenditure on education this year will rise from £342 million to £500 million—an increase, not a cut, in the coming year.
    I was very pleased to hear the suggestions in the Budget about savings. We all know that certain classes of the community are unable to save, such as those living on small, fixed incomes and the wage earner, with a family, earning £8 or £9 a week. He is living literally from hand to mouth, as we all know.
    We equally realise, if we are honest, that there are an enormous number of wage earners and professional people earning very much larger salaries than that. In the steel industry some are taking home £18 and £20 a week. Good luck to them. I do not grudge them it for one single moment, because they are producing the finest steel in the world at the cheapest possible price. If two or three people in the family are earning, and they are living in a council house, they are fairly well off.
    A commercial traveller in my constituency, who has friends in the area of the steel industry, told me of one house into which £48 was going each week. The occupants had bought their television and radiogram and they were trying to get rid rid of the money. This is because there has not been a tradition to save in many of those families. If we can encourage such people to save one-tenth of the amount of money which goes into the house every week, we shall be nearly out of the wood. A vast number of people are earning very good wages today, and deserving every penny of them, but they have not been brought up in the tradition to save. How could they have been, when wages were at the level which existed in the old days? This is something new for them to learn.
    Mr. F. H. Hayman: Is the hon. and gallant Member not aware that nearly every shopkeeper in an industrial area runs a small savings club, through which the working-class family is able, by savings, to buy bigger and costlier items and better clothing?
    Brigadier Prior-Palmer: That is only an infinitesimal proportion of what it is necessary to save to get the economics of the country right.
    Mr. Hayman: The hon. and gallant Member is speaking as though the working-class has never saved. I suggest to him that the savings in the way I have outlined are enormous.
    Brigadier Prior-Palmer: The hon. Member has mistaken what I said. I do not want to define a particular area, But I have lived in it and I know perfectly well that in that area, and certain other areas of the country, there has never been a tradition of saving. There are other areas where there is such a tradition. The Scots are very thrifty people, as are the Welsh. I hope that in those sections of the community in which the very much higher wages are earned the Chancellor's savings scheme will have the right effect.
    I wrote a letter to The Times a little while ago—hon. Members may have noticed it. I believe that a great deal of the pressure for higher wages comes from the married man, and rightly so. I am glad, therefore, that family allowances are being raised for the third child and subsequent children in a family. At one time I put forward a strong case for an allowance to be paid in respect of the first child, who is usually the most expensive. Perhaps my right hon. Friend will be able to consider this suggestion at a later stage of his proposals. It would be a good thing if he could put it into effect at this stage.
    We have in some way to bridge the gap between the present day and the arrival of the atomic age in fifteen or twenty years' time. That is a problem which would face any Government in office today.
    One of the two major factors of the moment is exports and the other is the economy within the country, both individual, Government and local authority. It was at one time stated that there would need to be a major change of policy before any economies could be effected. I am glad that the Chancellor has discarded this theory—temporarily, at least—and believes that it can be done in other ways than by a major change of policy. No one, on either side of the Committee, would tolerate an attack on the social services by a cut in the Health Service or in education.
    Anybody with experience of administration in Government Departments knows the extravagance which goes on.

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    Examples have been published in various books, but on a day like this there is not time to enumerate all of them.
    Mr. Blackburn: Is the hon. and gallant Member now discarding entirely the statement of his right hon. Friend the former Chancellor of the Exchequer that no great economies could be made without a change of policy?
    Brigadier Prior-Palmer: I was suggesting precisely that the Chancellor has apparently discarded that theory and has decided that there is scope for saving £100 million—at least, he has set up a committee to consider it. I do not believe that a major change of policy is necessary to effect these economies. I am saying precisely that. The main trouble is that we are at present spending £4,717 million as against £919 million in 1937–38, which, in my view, is a completely disproportionate increase for what we are getting.
    The cost of the National Health Service and of education, without being cut in the slightest, needs looking into. Anybody who has served on a local authority or hospital board knows this only too well. I do not believe that anyone is satisfied with the Report on the National Health Service. People in the Service have said that the Guillebaud Committee did not have the correct terms of reference and was not capable of discovering the real trouble. There have been vast increases in staff, in motor cars and many other things, as anybody who serves on a local authority and remembers how things were run formerly is well aware. Unless these matters are investigated much more closely than was done by the last committee of inquiry we shall not achieve the desired result.
    Do hon. Members realise that it costs £5 a head for everybody who is looked after by the National Health Service? Many insurance companies who charge much smaller premiums can give better benefits than are obtainable from the Health Service. I have taken advantage of both systems and I know which pays the best. I do not have to pay so much, although, of course, I still subscribe to the National Health Service through taxation. If that is true, there must be something wrong somewhere which should be inquired into.
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    No one, on either side of the Committee, would agree to a cut in the number of school places or teachers—in fact, we want them to be greatly increased. But is it really sensible to have 26,000 children denied school places and then to build great palaces for those who have them? I invite any hon. Member to come to my constituency and look at the new Worthing Technical College which has been built. Of all the gross extravagances I have ever seen, that really is the greatest. Of course there must be adequate air. Of course there must be cheerful surroundings. But there is no need to have enormous murals, and fish ponds, metal staircases, and all the rest. Those things may be very desirable, but we cannot afford them in these days.
    As a comparison, take the situation of Worthing High School. I do not commend the circumstances in which the High School exists; it is high time that such a state of affairs ceased. It carries on its work in Nissen huts, but in the realm of education it has the highest university scholarship rate of any high school in Britain.
    It is not necessary to house schools and colleges in marble palaces in order to achieve a good standard of education. One must strike a mean between the two as a standard which the country can afford, which at the same time is a practical one, in order that money will be available to build more schools and provide more school places. I suggest that great extravagance has been shown by the Ministry of Education in its building plans, and the specifications ought to be gone through with a fine-tooth comb. Otherwise, we shall not be able to build any more.
    The export trade is a subject on which much can be said. We are in process of passing through the House the Restrictive Trade Practices Bill. That Bill refers to industry. Is it really too much to ask the trade unions to look at their own affairs also in this matter? It is no use denying that there are restrictive practices on the trade union side of industry.
    The Government have given a lead in this matter, and are very unpopular in the country for having done so. They have incurred great unpopularity but have taken their courage in both hands in order to do what they believe to be right. Is it too much to ask the trade unions to do

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    likewise, for their own sake as well as for the sake of the country? It is only intelligent self-interest; unless we can compete with Germany and Japan at the right sort of prices, and offer the right delivery dates—they are even more important—we shall go down. We shall have unemployment; our standard of living will be lowered. The very people who are practising these out-of-date methods will be the first to suffer. They are, I am afraid, prisoners of their own old-fashioned doctrines, and the sooner they break them down the better.
    We all know the difficulties that the trade unions have in these days as a result of infiltration by Communists, who are doing everything in their power to try and prevent that sort of reform taking place. Good luck to those who are fighting them tooth and nail. I am not a trade unionist, although I was in one of the greatest trade unions there ever was—the British Army; and I know that no member of the trade union movement will take it amiss from me when I say that their situation is very much like that which we sometimes find today in politics. Those who went about speaking in the last Election know it only too well.
    There is apathy. Trade unionists will not attend their branch meetings, and then they wake up the next morning to find a Communist chairman or Communist treasurer, who will tear up the book of rules and write new ones to suit his schemes. That is the danger. We wish the trade union movement luck in its efforts to try to stamp out the work of people who are endeavouring to ruin this country.
    Everybody on both sides of industry has to realise that the cold wind of competition is blowing through the world, and we cannot afford not to deliver goods on the day promised. We are losing markets now because goods are not delivered on the delivery date, as well as because their price is too great.
    I am very grateful to hon. Members opposite for taking from me, one who is not an industrialist, what I have said about the trade union side. I am now going to hit at the other side, because they are to blame as well. I dislike intensely the expression, "the two sides of industry". It makes me sick, because for thirty years I served in a concern
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    where it was heaven help the man who mentioned the phrase. It was one team working together towards one objective—the saving of the country.
    Mr. R. E. Winterbottom: Oh, no.
    Brigadier Prior-Palmer: Does the hon. Member like having two sides in industry and having people fight one another instead of going forward together? Surely, working together is a far higher ideal. But it needs a great deal better leadership than we are getting today.
    Mr. Winterbottom: If the hon. and gallant Gentleman is talking about the two sides, he should apply it to the Army as well.
    Brigadier Prior-Palmer: If the hon. Member wants to talk about the Army I should be grateful if he would do it on another occasion when we are discussing the Army Estimates, and not today.
    If the employers in industry were slightly more enlightened in their attitude towards their employees—though some are very good indeed—perhaps we should not have some of the troubles which we are experiencing today.
    I am quite sure that due to the fact that we have had high taxation, the incentive has been lacking to do more work or to increase one's salary beyond a certain point. People in the management side of industry are not working in the way in which similar people are working in Germany. Our people go to the office too late and leave too early for lunch and go back to their offices after lunch too late. Some, not all by any means, indulge in far too large a meal during the luncheon break. They drink their gin-and-bitters and glass of brandy whereas in Germany similar people are out for lunch for half an hour at the most.
    An American told me that he arrives at the office usually at the same time as his employees, and the first thing he says is, "What can we do to improve on what we did yesterday?" The Englishman very often says, "Everything all right, boys?", and if the answer is, "Yes" he says, "I am going to lunch at 12".
    All this arises from swingeing taxation, which means that at the £1,500 or £2,000 a year level it does not pay to work any harder or to earn any more. The sooner

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    we get rid of this inflation and get the country on a stable basis so that taxes can be reduced and the old incentives reintroduced the better for all concerned.
    I should like the Economic Secretary to the Treasury to take note of a different point. It relates to State scholarships. It is entirely wrong that the means test should be applied to the gross incomes and not to the taxed incomes. We are now reaching a stage, taxation being what it is, when a large number of extremely able young men are unable to go to the university because the means test is applied to the gross income and not to the taxed income of their parents. I hope that the Economic Secretary will have a word with the Minister of Education on the point. If we are to have the technicians we need we require all who can go to a university to do so and to secure a scholarship for the purpose.
    There is a point concerning married women's income. The lumping together of the incomes of a married man and his wife for Surtax purposes is a relic of the past. It originated in Peel's Act of 1842, based on an earlier Act of 1797, under which married women were not allowed to have property or incomes of their own. It has persisted ever since, and it is acting as a great deterrent to women going into business or industry once they are married. If they marry men earning £2,000 a year as executives, and then they take on jobs, the first penny they earn is immediately taxed—
    Mr. Douglas Glover: Surtax.
    Brigadier Prior-Palmer: I was talking of Surtax, of course.
    I know of the case of a woman who tried to become a teacher for five months after she married. She found that she could not afford to pay anyone to look after her children or to help in the home when she was out, so she had to give it up. Something ought to be done about this matter. A resolution on the matter was passed by the Conservative Party before the last Election, and the view it expressed was inserted into the Conservative Party manifesto at the Election, but nothing has been done.
    Finally, I make another plea for those living on small fixed incomes who are not old enough to qualify for the old-age
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    pension, who have just enough money to put them above the National Assistance level, and who have no other income. They are not affected by any reliefs in Income Tax because they are outside the Income Tax range. They are above the National Assistance group and below the old-age pension group. Living on £150 or £120 or year, some are nearly starving.
    It is difficult to see what can be done for those people. Obviously, the long-term policy is to reduce the rising cost of living by abolishing inflation. One thing which must never be done, as I think my hon. Friend the Economic Secretary will agree, is to increase Purchase Tax on the necessities which these people have to buy. It is no use the Minister saying, as he once did, that if we do that it prevents the spending of money on other things. These people have no money to spend on other things. Already some of them are giving up one meal a day, and something should be done to help them.
    Is it not justice that an increased scale of National Assistance should be given to somebody who can make out a case on those lines? There are not many of those people. I do not suggest that the entire range of National Assistance should be increased, because that was done only recently. Some of these people, however, are living in houses too large for them, which were bought in the old days when it was the fashion to save by buying house property, and they must continue to live in their houses. I am afraid that the Minister of Housing and Local Government missed a great opportunity recently when he did not do something to assist local authorities to build old people's homes for this section of the community.
    My final word is about the Service in which I have been for thirty years. Will my hon. Friend please see if he cannot remove the tax on education allowances given to families serving in this country, as is done in the case of those serving abroad?
    Sir Thomas O'Brien: Will the hon. and gallant Gentleman not agree that he exaggerated a little in his remarks about trade union restrictive practices, and also about the extravagances of some of the employers and representatives of trade associations

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    in this country? Would he not agree with me that much of the two hours or two and a half hours' lunch time are devoted to talks not only with trade union leaders but with other people, and that the time spent on the Continent and in the United States in that way is more extravagant in hours than in this country?
    Brigadier Prior-Palmer: I am grateful to the hon. Gentleman. I agree that that is what they say to their wives and, in a large number of cases, that is probably true, but there are exceptions, and I was referring to them.
    9.20 p.m.
    Mr. J. Idwal Jones: I have followed the speech of the hon. and gallant Member for Worthing (Brigadier Prior-Palmer) from the beginning. There are some points in his speech with which I agree. I am very pleased indeed that the party opposite was not in power in 1945 because, according to the argument of the hon. and gallant Member, we would not have had an Education Act in operation in 1945 because the country could not afford it. I have been in the teaching profession for over 35 years, and I am only too well aware of the frustration there has been all along the years because the Governments have been afraid to spend money on education on the ground of economy.
    There were sufficient grounds for economy in 1945 and the axe of economy would have been wielded then had there not been a Labour Government. I sympathise very much with the hon. and gallant Member on the question of the means test on students going to universities. When my son was at the university he had a State scholarship, and I was submitted to a means test, but I feel that had the party opposite been more sympathetic about the means test in the days of depression we would have been more sympathetic towards the means test on State scholarships. It is a case of the chickens coming home to roost.
    We came here this afternoon expecting to hear Budget proposals which were new, bold, original and courageous, and we have been disappointed. I quite agree with the proposals for saving, and I have been surprised that the Government have not introduced such a measure during the last five years. The only new proposal that was put forward was the Pre-
    968
    mium Bond proposal. The Chancellor tried to prove that it was not a lottery and not a gamble. The fact that he tried to prove that it was neither a lottery nor a gamble was to me a sufficient proof that in his heart he was convinced that it was both. He said that the subscriber did not lose anything. What he does lose, of course, is the interest on his money; and so we have come to the day when we see gambling receiving constitutional sanction by the Government.
    I want to go on to something else which I think is very serious. Every Chancellor of the Exchequer, during the past few years, has been very preoccupied with the question of sterling. This problem has existed for many years. Unless something is done methodically and a long-term policy adopted, I am afraid that we shall continue in this position. In the financial columns of the daily Press we are invariably told how sterling has strengthened. When it has strengthened there is great joy in the City and when it has weakened we are informed that we are heading for a crisis and that the nation is overspending.
    When the £ strengthens the Chancellor is congratulated on the success of his policy. When the £ weakens people are rebuked for overspending. All this is doing harm. It is reminiscent of the weather reports which we get every day. I am afraid that it is true that the Chancellor and previous Chancellors as a whole have been over-anxious about the changes of the economic weather. Weather changes, climate, does not change. Whereas the Chancellor has been over-anxious about the economic changes of weather, he has not succeeded in acclimatising the country to a sound economic order.
    I will explain what I mean. Last summer, the then Chancellor was believed to have said some words in private conference in Paris. There was an immediate run on sterling. In February last year the then Chancellor raised the Bank Rate, and a few days later he was able to report that the £ had strengthened. In December, it was rumoured that the Chancellor was leaving the Treasury and the £ weakened.
    The News Chronicle, on 11th April this year said:
    "The lodestar of the market yesterday was a new upward thrust of the £ sterling, which

    969
    reached a level which it had only reached once this year. … The reason? If there was any specific event of the past 24 hours which was responsible for the movement, it was, of course, President Eisenhower's new statement on America's attitude towards the Middle East."
    The Manchester Guardian, the same day, stated:
    "Americans are again buying sterling in London."
    This is temporarily very encouraging, but, clearly, there is something seriously wrong when we are so much at the mercy of a chance remark or a rumour or even an expression of policy by the head of a foreign State.
    Hot money is not reliable, and it behoves us not to congratulate ourselves unduly when hot money flows into our coffers. Hot money is the so-called friend who deserts us in our hour of need. Our economy should be a ship majestically ploughing the oceans and not a barque which can be toppled over by a shark always on the look out for its prey.
    Consequently, I am of the opinion that we must obtain an economic order and an economic stability which will render us independent of fluctuations in hot money. If we cannot obtain that I am afraid that the land to which we belong and of which we are so proud, will have lost its greatness and its glory. It is because I feel that the Budget does not meet this situation and does not offer a long-term solution to the present situation that I should like to crave the indulgence of the Committee for a further short period.
    I think it will be fair to say that the Budget is complementary to the White Paper on the economic implications of full employment, recently published by the Government. The mind and outlook behind the White Paper are the mind and outlook behind the Budget, and, as we had reason to suspect, the one is as prosaic and as unimaginative as the other.
    The White Paper, like the Budget, focused our attention on the continued rise in prices, a phenomenon well known to every household throughout the length and breadth of the land. The White Paper attempted to analyse the cause of rising prices. The Budget is an attempt to solve the problem of rising prices.
    970
    My hon. Friends and I are not convinced that the Government have a correct diagnosis of the situation. We are not convinced that the methods which they propose will bring about a radical solution of our problems. We are not convinced for the simple reason that there is far too much emphasis on the wages side of the problem. I know that wages are a factor in the situation, but it is wrong to suggest that the country's present economic and inflationary position is due to wages reaching their present high level. Wage increases are the result of the situation and, unless the Government settle the situation, there is no solution to the problem of high wages, if we want a solution to that problem.
    It is the over-concentration on wages and the opinion that our woes and economic difficulties are traceable to over-spending on the part of the people that I wish to call in question. I do so because I believe that the policies followed by the Government since 1951 have been wrong and have not been conducive to national economic recovery. I admit that there has been a tendency for wages to rise, but that is not peculiar to this country and there is nothing fundamentally wrong in wages rising. In fact, that can be the measure of an improvement in the standard of living. We are continually being told that increases in wages in this country are outstripping increases in production. We are told that that is the main difficulty.
    The popular version of the White Paper states quite definitely:
    "Earnings have risen much more than output-per-man. So labour costs per article have risen by about 30 per cent."
    We are told that in Germany earnings and output per man have risen together, so that labour costs have risen hardly at all. That is not the complete picture. There is a very important part of the picture which is still obscured. Increases in wages do not precede rising costs. People demand higher wages, because costs are already rising and it is usually the case that by the time the wage claims have been granted the cost of living has already risen, and we are exactly where we were before.
    Hon. Members opposite call this the wage-price spiral. I do not object to the Government calling it the wage-price

    971
    spiral, provided that hon. Members opposite will allow us to call it the price-wage spiral. Both terms are equally correct. It is the case of the dog chasing its tail and while we are arguing whether it is the head chasing the tail, or the tail leading the head, that takes us nowhere. We have to decide why earnings are outstripping output. That is the fundamental question. Why have they not outstripped output in Germany?
    If we can answer that question, we have the answer to why we lost our markets last year when world conditions were so favourable. The answer is in inflation. The Government say that if the problem of inflation is solved, we can get out of our difficulties. My opinion is that the Government have gone astray since 1951, because they have over-emphasised the monetary side of the problem, rather than the production side. That is the dilemma in which we now find ourselves. It is the dilemma of the credit squeeze and the Bank Rate policy which the Government have consistently followed since 1951.
    If they persist in this policy, they will succeed in reducing wages and in reducing the pressure of wages, and in that sense, of course, they will achieve their purpose. The cost will be a lowering of the nation's productive investment. When productive capital investment is reduced, productive capacity is also reduced. That is the crux of the problem. If capital production is restricted it follows that the situation will be aggravated, because it results in a decline in the productive capacity of our country. It is equally obvious that if Britain's productive capacity lags behind that of other countries, the cost to this country will be higher than in other countries and we shall price ourselves out of the markets. Moreover, if our productive capacity lags behind that of our customers obviously the cost will be higher to this country than to our customers and we shall have an adverse balance of trade.
    The whole situation revolves round the problem of increasing our productive capacity. We should concentrate on bringing it to the maximum and in a period of full employment that can be done only by capital investment. That is why the credit squeeze policy and that of indiscriminate investment restriction has been disastrous to this country. The
    972
    policy which the Government have pursued is diametrically opposed to the policy which they should have pursued.
    Sir E. Boyle: I have listened with interest to the hon. Gentleman. I agree with him that the capacity of the country to compete in the world markets depends in large measure on the level of investment. But in that case surely he should not oppose us if we try to curb excess demands, to some extent at any rate, by curbing consumption, that is to say, by such things as increasing Purchase Tax and cutting the bread subsidy.
    Mr. Idwal Jones: I will come to that point in a moment.
    The error of the Government is comparable in magnitude only with the policy pursued by the Government between the two wars, when they followed a policy of economy at a time when they should have followed a policy of prolific spending. The Government know this quite well, because the White Paper states:
    "Management must strive to ensure maximum expansion of output by progressive investment in the most effective capital assets by the introduction of the most modern industrial techniques. …"
    No truer words ever came from a Government.
    But example is better than precept and those words ill become a Government which has pursued a policy of investment restriction and credit squeeze. One cannot put a man in a strait-jacket and expect him to put on flesh; and that is exactly what has been happening.
    In the Economic Survey of Europe for 1955 we read that
    "… the ratio of new investment to national income in Britain is the lowest in Europe."
    In page 35 of the same publication we read:
    "In most European countries the ratio of gross fixed investment to gross national product has been higher since the war than it was before … the only country for which it has fallen is the United Kingdom …"
    In page 46, we find the following revealing figures with reference to investments in the manufacturing and distribution industry at 1948 prices: 1950, £267 million; 1951, £249 million; 1952, £193 million; 1953, £191 million; 1954, a slight increase, £204 million. In other words, there has been a steady decline in the productive capacity of this country.

    973
    We have reached a record in the restriction of capital investment. That is why we have priced ourselves out of the market, and increased the gap in our balance of trade. Our productive capacity has lagged behind that of our competitors and customers. Consequently, we have lost our fair share in world markets in a period when everything around us was favourable, as the Chancellor said this afternoon.
    The Chancellor also said that the strain was heavier upon the building and engineering industries, and that the most important factors in producing inflation was the upsurge of industrial investment. That, of course, is true, but that was the direct result of the restriction upon capital investment which occurred after 1951, so that when the orders came in in 1955 our economy was not able to meet them. We failed to deliver the orders. That was the biggest single factor in producing the inflationary situation which now exists.
    I want to make a brief reference to the comparison between Britain and Western Germany. Here again, the explanation is given in the Economic Survey of Europe, which says:
    "In the early part of the period per capita volume of gross fixed investment was greater in Britain than in Western Germany, but the rapid investment in Western Germany meant that already by 1953 the absolute volume was higher than in the United Kingdom, and by 1955 considerably higher. At the same time the Western German volume of private consumption per capita which in 1950 was less than two-thirds that of the United Kingdom improved so much that by 1954 it was only one quarter below that of the United Kingdom and in 1955 the gap narrowed further."
    Germany has recovered because she has concentrated upon capital investment. We have gone down because we have cut it. So, today, we find ourselves in a position which is practically beyond solution. That is why I was surprised to find, this afternoon, that the Chancellor put forward no new idea other than the one to which I have already referred, namely, the Premium Bond proposal.
    Since 1951 the Government have sown the wind and today they are reaping the whirlwind. The surprising thing about the situation is that they do not appreciate or realise the folly of their ways.
    9.43 p.m.
    Mr. G. R. Howard (St. Ives): I hope that the hon. Member for Wrexham (Mr. Idwal Jones) will forgive me if I do not
    974
    follow his arguments, as there is not very much time left before ten o'clock. I want to stress two aspects of the financial situation as it strikes me at the moment. Whatever their political views may be, most hon. Members would probably agree that one of the good things about the debate is that it has been fair and constructive, with Members taking a broad view of the problem. Most would also agree that the country is really looking for a lead. It is not much good exhorting people to save, and do this, that and the other thing, if the Government do not appear to be doing the same thing.
    That is why I welcomed the words of the Chancellor when he said that the Government should have to justify the expenditure and not just a reduction in it. That may be a change in policy, but it is a very good one. Too often, lately, Ministers have said, as the Postmaster-General did a day or two ago, "Now then, up go the charges." I want to see a different attitude on the part of Ministers and Government Departments in these matters, and I hope that Ministers will send for their Principal Secretaries and others and say, "I want this increase to be justified, and I am going to take a lot of convincing as to just why this extra cost has to be passed on straight away to the public without any possibility of Departmental economies".
    What sort of savings can we look for? Consider the cost of the Treasury. I understand that in 1938 the Treasury cost us £389,629. Today it costs us £3,402,509 which represents an increase in costs to this country of 800 per cent. If anyone tells me that there is no room for reduction there, I am afraid that I cannot agree.
    No doubt, many hon. Members will have seen the Report, issued today, of the Committee appointed to review the provincial and local organisation and procedures of the Ministry of Agriculture, Fisheries and Food. Paragraph 552 of the Report says:
    "Our proposals also point the way to considerable economies. We are satisfied that their implementation over a period could result in savings approaching 1,000 staff costing up to £1 million per annum."
    That is in one section of the Ministry of Agriculture and Food. Am I right in

    975
    saying that there are still 5,606 civil servants still employed in the Ministry of Food? What are they doing?
    Mr. W. R. Williams: Would the hon. Gentleman go further and say that if we were to reduce National Service we should save several million pounds?
    Mr. Howard: We have to consider the enormous commitments in which we are involved all over the world. After all, it is the peace of the world that is involved.
    I should also like to know how much of the £28,145,000 that is devoted to the B.B.C. is going to train young men in this country to go out to Egypt and preach hate propaganda against us. I should like to see that side of the B.B.C. expenditure reduced. I hope that the Committee will examine the sort of conditions, which I know to be true because I was told by somebody who broadcasts, in which half the time spent in broadcasting to Greece is taken up with music. That does not seem to me to be the right way to combat Greek propaganda against this country.
    Then there is the duplication of functions. Take, for instance, the duplication of functions as it applies to the Ministry of Fuel and Power and the National Coal Board. Is it necessary to have these two bodies working alongside with so much duplication? Can we not have a certain amount of reorganisation and streamlining so as to cut down the expenditure?
    Let us consider the expenditure of the Coal Board. The administrative and non-industrial staff employed by the Coal Board numbered about 30,000 at the end of 1946; 34,500 at the end of 1947; 38,270 at the end of 1948; 39,000 at the end of 1950; 40,000 at the end of 1955. That represents an increase in staff of over 38 per cent. since 1946. On the other hand, the number of wage earners on the colliery books has increased from 696,746 to 710,000, an increase of little over 1 per cent. That seems to be quite out of balance. There must be something wrong there. I want to know from the Government how far they can probe into that sort of thing under the new arrangements which the Chancellor announced in connection with financing the nationalised industries.
    976
    Whatever any of us thinks, I am sure that none of us who really believes in the health and welfare of our people would ever wish to see any cuts in the National Health Service. There is no reason, however, why we should not examine whether or not the money is well spent. I know of a case which was brought to my notice last week which was not fault of the man concerned. It is entirely due to the organisation of the service.
    A patient in hospital found that a bell would not work, and a car came from some miles away, bringing the man who was to do the job to put it right. All that was needed was a piece of wire, but the man could not go five minutes' walk down the road to an electrical shop where he could have bought the wire. Not at all; that is not done. He had to go some miles back in the car to the place where all the equipment is stored in order to get a piece of wire. Surely we can do something to cut out that sort of thing, which is only one small example.
    I wonder how many people are employed under the regional hospital boards. I am told by people who are working and giving wonderful service in these voluntary organisations, the management committees, etc., that they seriously wonder whether we could not find some economies in the regional hospital boards, and thereby allow more money to be spent where it is needed—at the bedside in the hospital. If a hospital does not spend the amount of its full budget in one year, it finds that the amount is cut down in the next. There is no question in all this of cutting down the amount of the money spent on the service; it is simply a question of seeing where that money goes and how it is spent.
    Then, there is the effect on the cost of living of the increasing cost of coal and transport, which, after all, forms a very vital part of the cost of living, because everything else depends on it. I hope that some further inquiry will be made and some action taken that will help remedy the present situation.
    My last problem is very difficult to speak about, but I have talked to several hon. Members on both sides of the House, and they agree with me. It seems to me that, when we are facing an extremely difficult situation, when both sides of the

    977
    House, in their different ways, wish to see full employment maintained, when our economy is balanced on a very narrow margin, it really does not do much good for people in industry to be blaming each other all the time, workers blaming management and management blaming workers.
    I think there is a great need for industrial leadership. There must be something extremely wrong when we get these cases of men being "sent to Coventry." Those of us who have been in the Services and have served with these men know what fine men they are. We could not get any finer anywhere. Most of them, in many cases amateurs, were able to face up to anything that came before them, and I suggest that the reason why they did their job so magnificently throughout the war was because the Services lay great stress on leadership.
    I am reminded of a story I was told the other day. The managing director of a factory was taking a friend of mine, a retired naval officer, round his works. They spent three hours going round, and not once did the managing director introduce this friend of mine to any of the men in the factory. That shows that there is something badly wrong in that factory, and it was indicated again by the fact that when the managing director at last got back to his office he seemed to be relieved to get there. I wonder what sort of job that factory turns out, because it seems to me that the question of human relations in industry is so vitally important.
    I say this in all sincerity: many of us have been worried by the appalling lack of moral standards in so many people in this country towards their jobs—be it the men we heard about just now who are "fiddling" their expense accounts and spending hours over lunch on the excuse that they are talking business when they are doing nothing of the sort, or the men who are "fiddling" the firm's time. In a country which calls itself Christian, it would be a fine thing if many of us who criticise other people started to look at our own side of the picture to see whether
    978
    we are doing our best to serve our country.
    An hon. Member said to me this afternoon, "This moment is rather like the 'phoney' war period in 1940, because everybody is waiting for something to happen and expecting something to happen; they are longing to be given a lead." At no time would that lead be more appropriate than at this moment. Tomorrow, two men are to visit these shores whose ideology is very different from ours. To some people they seem to have achieved a materialistic success which they say is lacking in this part of the world. Surely it is for us to prove that our way of life, our ideas and Christian beliefs, can produce a better answer than that of materialistic atheism.
    The country realises the danger. It has not been lulled into a sense of false security. The people know, just as they knew in 1940, that the situation is serious. They may not say much about it, but I am sure that they are waiting for that lead, and I am equally sure that, as hon. Members on both sides of the Committee have said, that we can never achieve that kind of success and co-operation which we had during the war unless we do it together.
    I hope that, rather than criticising each other and the shortcomings of others in industry and in our national life, we shall try, with the help of God, to see how we can get together and earn our living and get our country back into a sound condition again.
    Whereupon Motion made, and Question, That the Chairman do report Progress and ask leave to sit again—[Mr. E. Wakefield]—put and agreed to.
    Resolutions to be reported Tomorrow.
    Committee also report Progress; to sit again Tomorrow.

    ADJOURNMENT
    Resolved, That this House do now adjourn.—[Mr. E. Wakefield.]
    Adjourned accordingly at two minutes to Ten o'clock.

NATIONAL FINANCE
  Exchequer Expenditure (Roads)
  Exchequer Expenditure (Roads)
  Road Fund Licences (Receipts)
  Road Fund Licences (Receipts)
  Purchase Tax (Pressure Cookers)
  Purchase Tax (Pressure Cookers)
  £ Sterling (Purchasing Power)
  £ Sterling (Purchasing Power)
  Public Service Pensioners
  Public Service Pensioners
  Public Service (Elderly Persons)
  Public Service (Elderly Persons)
  Balance of Payments White Paper
  Balance of Payments White Paper
  COST OF LIVING
  COST OF LIVING
EMPLOYMENT
  Scientists and Engineers
  Scientists and Engineers
SCOTLAND
  Road Programme
  Road Programme
  Fish (Air Transport)
  Fish (Air Transport)
  Dundee Technical College (Accommodation)
  Dundee Technical College (Accommodation)
  Municipal Elections (Rejected Nomination Papers)
  Municipal Elections (Rejected Nomination Papers)
  Higher Education (Students and Grants)
  Higher Education (Students and Grants)
  Gairloch and Ullapool (Port Category)
  Gairloch and Ullapool (Port Category)
  Local Government Finance
  Local Government Finance
  Agricultural Land (Building Sites)
  Agricultural Land (Building Sites)
  Housing
  Housing
  Forth Road Crossing (Report)
  Forth Road Crossing (Report)
MINISTRY OF WORKS
  Spadeadam Scheme (Staff)
  Spadeadam Scheme (Staff)
BRITISH ARMY
  Troops, Phrenaros (Investigations)
  Troops, Phrenaros (Investigations)
  London Assembly Centre
  London Assembly Centre
  Air Compressor Machines (Sales)
  Air Compressor Machines (Sales)
  BRITISH PROPAGANDA (PRESENTATION)
  BRITISH PROPAGANDA (PRESENTATION)
  DISARMAMENT SUB-COMMITTEE (WHITE PAPER)
  DISARMAMENT SUB-COMMITTEE (WHITE PAPER)
AGRICULTURE, FISHERIES AND FOOD
  Egg Marketing Board (Inquiry)
  Egg Marketing Board (Inquiry)
  SOUTHERN CAMEROONS (UNION DES POPULATIONS DU CAMEROUN)
  SOUTHERN CAMEROONS (UNION DES POPULATIONS DU CAMEROUN)
SCIENTIFIC AND INDUSTRIAL RESEARCH
  Air Pollution (Measurements)
  Air Pollution (Measurements)
HOME DEPARTMENT
  Timothy Evans
  Timothy Evans
LOCAL GOVERNMENT
  Cardiff Development Plan
  Cardiff Development Plan
MINISTRY OF SUPPLY
  Surplus Army Vehicles (Disposal)
  Surplus Army Vehicles (Disposal)
TRADE AND COMMERCE
  Czechoslovakia (Negotiations)
  Czechoslovakia (Negotiations)
TRANSPORT
  South Molton Street
  South Molton Street

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR On the Woolsack.
Prayers
2.35 p.m.

CASTLE GATE CONGREGATIONAL CHURCH BURIAL GROUND (NOTTINGHAM) BILL
Read 3a, and passed.
IPSWICH DOCK BILL
Read 3a, and passed.

PROPOSED SEVERN ROAD BRIDGE
LORD MERTHYR: My Lords, I beg to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether, because of the great and increasing need of improved road traffic facilities between the areas affected, they will proceed without further delay with the construction of a bridge over the River Severn; if necessary imposing a toll, so that no charge would ultimately fall upon public funds.]
THE CHANCELLOR OF THE DUCHY OF LANCASTER (THE EARL OF SELKIRK): My Lords, as the House is aware, my right honourable friend the Minister of Transport and Civil Aviation met representatives of the local authorities and other commercial and industrial interests concerned to discuss proposals for the crossing of the River Severn. There was full agreement in regard to the general lines the bridge should take and that it would be partly, at least, if not wholly, financed by tolls. The scheme, in the opinion of the Minister of Transport and Civil Aviation, will cost somewhere between £14 and £16 million. The Minister recognised quite frankly the economic value of the bridge to the country, but at the present time he was not able to say what priority in construction he was able to give to the bridge. He hopes to be able to reach a decision on this matter in six months.
LORD MERTHYR: My Lords, I am greatly obliged to the noble Earl for the Answer which he has just given. May I ask him one supplementary question: namely, if construction of the bridge has to he deferred for a substantial time—which I hope it will not be—will the Government give consideration to improving the ferry facilities which, without saying anything against the owners of the ferry (I do not know who they are), cannot now be described as very efficient?
THE EARL, OF SELKIRK: My Lords, I will certainly report what the noble Lord says to my right honourable friend. I am afraid that at the moment I have not the answer to the point.
EARL HOWE: Is the noble Earl aware that the Answer he has given in reference to the Severn bridge is almost the same answer that has been given in regard to practically every proposed road and bridge improvement since the war?
THE EARL OF SELKIRK: My Lords, I think the proposals we have made, leading at the present time to the crossing of the Thames at one place and the Clyde at another, represent at least some improvement on what the noble Earl has said.

RESTRICTIONS ON ANGLORUSSIAN TRADE
2.37 p.m.
LORD TREFGARNE: My Lords, I beg to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether their attention has been given to that part of a statement made by Mr. Bulganin on April 11 to the special correspondent of a leading newspaper in which Mr. Bulganin described present restrictions on trade between the two countries as "a strange anachronism of the past"; and whether, having regard to the fact that any removal of the existing limited embargoes on strategic exports to Communist countries would injure our relations with the U.S.A. and be as yet unjustified on security grounds, they can make a statement offsetting the concern that has already been aroused in the U.S.A. and to some extent also in this country, by Mr. Bulganin's disclosure of a prime object of the Russian visit.]
THE MINISTER or STATE FOR FOREIGN AFFAIRS (THE MARQUESS OF READING): My Lords, I have read the statement referred to by the noble Lord. Her Majesty's Government would welcome from the Soviet leaders any positive proposals which might lead to an expansion of peaceful East-West trade. But, like every other country, the United Kingdom must have regard to its own security, and so long as tensions exist there are bound to be limitations on trade in strategic goods. Her Majesty's Government's attitude on this subject is well known.
LORD TREFGARNE: My Lords, is the noble Marquess able to say that there will be no material raising of the embargo on strategic goods during the forthcoming negotiations, without prior consultation with our Allies, who are so vitally interested in this subject?
THE MARQUESS OF READING: My Lords, in all these matters we always deal through the international channel which has been set up for the express purpose of handling particular transactions of this kind.
LORD TREFGARNE: But in view of the extremely aggressive denunciation of strategic controls by the Soviet Premier, is the noble Marquess unable to give the assurance for which I have asked?
THE MARQUESS OF READING: I thought I had given it. I said that we always deal in a particular way, which is through the international channel. The noble Lord asked whether we are going to do it singly or unilaterally.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, may I ask the noble Marquess whether it would not be advisable, in spite of Questions raised in this House, to keep one's mind open and free when one goes to the conference table with these important representatives. As your Lordships know, I do not agree with a lot of their policy, but we ought not to tie ourselves up in advance by giving any pledges; and, in any case, we certainly should retain as much freedom to develop our trade as the United States does; and on all occasions.
THE MARQUESS OF READING: I do not disagree with what the noble Viscount has said, and I do not think that anything I said was contrary to his contention.
VISCOUNT ELIBANK: My Lords, arising out of the Question and Answer, may I ask the noble Marquess whether he is aware that, whatever may be said by Mr. Bulganin, the fact remains that many British industrialists, here and in Hong Kong, are most anxious to see the end of the China embargo which prevents them from trading on an equal footing with their competitors in the Soviet bloc. May I ask, further, whether he is aware that trade with China means little or nothing to the American economy but is of growing importance to the British economy?
THE MARQUESS OF READING: My Lords, I should have missed a contribution from the noble Viscount on any subject of this kind. I am afraid that all I can say on the subject which he has raised is that it does not arise in any way out of the Question on the Order Paper.
LORD REA: My Lords, is it not the fact that the implication of this Question, particularly as it was interpreted by the questioner, that Mr. Bulganin's disclosure of a prime object of the Russian visit is to discuss the relaxation of the embargo on strategic materials, is not the case, and that that is not necessarily the prime object of the visit?
THE MARQUESS OF READING: My Lords, I do not know what are the matters that will be raised at the discussions which are to take place, or in what form the Russian leaders are likely to raise them. I can only await developments.

THEFT OF TATE GALLERY PICTURE
2.40 p.m.
LORD STRABOLGI: My Lords, I beg to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government if they will make a statement about the reported theft of the painting Jour d'Eté by Berthe Morisot, from the Tate Gallery on April 12.]
THE EARL OF SELKIRK: My Lords, at about 11.10 on the morning of Thursday, April 12, the Director received a telephone call from the Irish Press Agency telling him that they had received a telephone call from someone describing
1044
himself as an Irish art student who claimed to have stolen one of the Lane pictures that morning. The Director caused the Lane pictures to be checked and it transpired that Jour d'Eté by Berthe Morisot was missing from its place on the wall in Gallery 24. The police were immediately informed. The theft would appear to have taken place between 10.30 and 10.50.
During this period it so happened that the attendant in charge of Gallery 24 was, in addition, responsible for the supervision of the three adjoining galleries and corridor. The attempt is invariably made to ensure that no one man is responsible for more than two galleries. This, however, is not always possible, and on this particular morning the arrival of some bronzes at the docks necessitated the detailing of a man to accompany them, and the arrival of the forthcoming German exhibition, consisting of over 100 large packing cases, called for the services of 5 men. The available strength was still further reduced by the illness of 5 men and 3 on annual leave. The front part of the building is complex in design. It is thought that this fact helped the thief, who may have chosen the moment when one man was relieving another on duty in the front hall. The Trustees are urgently reviewing their security arrangements. The picture was recovered yesterday evening following a call from the Irish Embassy, to whom it had been handed in by an unknown woman. The Director is satisfied that it is intact and undamaged.
LORD STRABOLGI: My Lords, I thank the noble Earl for his reply, arising out of which I should like to ask him a further question. As it appears that the theft was not discovered for at least twenty minutes and then only as a result of a telephone call, and as special security regulations for the Tate Gallery were drawn up in 1953 whereby artists who are copying pictures have to leave the building through a special check post at the side entrance and must leave all their impedimenta behind in the building between their visits, do not Her Majesty's Government think that these regulations have been contravened? The painting was obviously taken out by the main public entrance, as is borne out by the photograph which appeared in The Times on April 16.
THE EARL OF SELKIRK: My Lords, I have said that the Trustees are reviewing their security arrangements. I agree with the noble Lord that there are special rules for students who may make copies of pictures, whereby they take their pictures in and out by a side door, with careful checking. I do not think that the staff was inadequate, because so far as we are aware all the requests of the Trustees have been met in recent years. I have no doubt, however, that the Trustees will carefully review the position, although I do not feel that because something is stolen it is necessarily proof that there is carelessness within the building.
LORD STRABOLGI: My Lords, is the noble Earl aware that it is sometimes possible to walk through the whole of the Continental Rooms of the Tate Gallery without encountering a single attendant? I have done so myself.
THE EARL OF SELKIRK: My Lords, I am sure that the Trustees will carefully bear in mind what the noble Lord has said.

SMALL LOTTERIES AND GAMING BILL
Brought from the Commons; read 1a, and to be printed.
TRANSPORT (DISPOSAL OF ROAD HAULAGE PROPERTY) BILL
Brought from the Commons; read 1a, and to be printed.

JUSTICES OF THE PEACE ACT, 1361 (AMENDMENT) BILL
Order of the Day for the House to be put into Committee read.
Moved that the House do now resolve itself into Committee.—(Lord Merthyr.)
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL OF DROGHEDA in the Chair]
Clause 1:
Right of appeal to quarter sessions
1.—(1) Where, under the Justices of the Peace Act, 1361, a person is orderd by a magistrates' court (as definied in the Magistrates' Courts Act, 1952) to enter into
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a recognisance with or without sureties to be of good behaviour, he may appeal to a court of quarter sessions.
LORD MERTHYR LORD MERTHYR moved, in subsection (1) after "1361" to insert "or otherwise". The noble Lord said, With the permission of the Committee I will deal with all the Amendments which stand in my name together. Your Lordships will recall that during the Second Reading debate I indicated that it was my intention to move the Amendments in order to extend the scope of this Bill. Your Lordships will remember that, as it is now drafted, the Bill extends only to the right of appeal against an order made by justices against a man under the Act of 1361—that is, a statutory order—to find sureties to be of good behaviour. Since this Bill was first introduced, it has been pointed out that it would be useful to extend this right of appeal to another power which justices now possess and which is not a statutory but a Common Law power—that is,the power tobind over a person to keep the peace. That power is more commonly used than one might suppose. I believe it would be desirable to extend the scope of this Bill so as to include the Common Law power to bind over to keep the peace. These Amendments are all designed to that end, and I think they all stand or fall together. If your Lordships feel that this is a desirable power to give an appellant I would ask you to pass these Amendments; if your Lordships think otherwise, I have no wish to press them. I beg to move the first Amendment.
Amendment moved—
Page 1, line 5, afte7 ("1361") insert ("or otherwise").—(Lord Merthyr.)
On Question, Amendment agreed to.
LORD MERTHYR: My Lords, this Amendment is consequential. I beg to move.
Amendment moved—
Page 1, line 8, after first ("to") insert ("keep the peace or to").—(Lord Merthyr.)
On Question, Amendment agreed to.
LORD MERTHYR: I feel that it is necessary to make it quite clear that this Bill does not affect rowers which justices possess to bind over a defendant who has been convicted under some other Act. This Amendment is drafted to make that abundantly clear. I beg to move.
Amendment moved—
Page 1, line 21, at end insert—
("(3) Nothing in this section shall apply in relation to any order an appeal from which lies to a court of quarter sessions apart from the provisions of this section.")—(Lord Merthyr.)
On Question, Amendment agreed to.
Clause 1, as amended, agreed to.
Clause 2 [Short title and extent]:
LORD MERTHYR: This Amendment is consequential. I beg to move.
Amendment moved—
Page 1, line 25, leave out from ("the") to second ("Act") in line 26 and insert ("Magistrates' Courts (Appeals from Binding Over Orders)").—(Lord Merthyr.)
On Question, Amendment agreed to.
Remaining clause, as amended, agreed to.
LORD MERTHYR: This Amendment also is consequential. I beg to move.
Amendment moved—
In the Title, leave out ("Justices of the Peace Act, 1361") and insert ("law relating to orders of justices of the peace requiring persons to enter into recognisances to keep the peace or be of good behaviour").—(Lord Merthyr.)
On Question, Amendment agreed to.
Title, as amended, agreed to.
House resumed.

RABBITS BILL [H.L.]
2.51 p.m.
Amendments reported (according to Order).
Clause 1:
Offences relating to rabbits
1.—(1) Subject to the provisions of this section, a person shall be guilty of an offence under this subsection if,—

(a) he—

(i) sells, or offers or exposes for sale, or gives away a live wild rabbit or transfers to another person the property in a live wild rabbit (whether with or without any further consideration) for a consideration which consists of, or includes, the transfer by that other person of the property in other goods; or

(ii) buys, or offers to buy, or accepts as a gift a live wild rabbit or acquires from another person the property in a live wild rabbit (whether with or without any further consideration) for a consideration
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which consists of, or includes, the transfer to that other person of the property in other goods;

(b)) he conveys, procures to be conveyed or consigns for conveyance from one place to another a live wild rabbit; or

(c) he turns loose a wild rabbit.

(4) In this section "wild rabbit" means a rabbit other than one which is of a type commonly kept in captivity and has been born in captivity and kept continuously in captivity since birth.
LORD SHERWOOD LORD SHERWOOD moved, in subsection (1) (a), to leave out "wild" (where that word first occurs). The noble Lord said: My Lords, the list of Amendments in my name may seem formidable and I have no doubt that I could speak for an hour on each of them, but I will not ask your Lordships to endure that. Obviously the first Amendment is the one on which I stand. This Bill has been through a rather painful process, and that process has not been one which I, at any rate, have enjoyed. We are now getting to the stage where Bills are introduced by Private Members which provide for the imposition of penalties, and various loose phrases are brought in. The reason I have put down this Amendment is that I cannot understand the definition contained in the Bill of the term "wild rabbit"; I cannot understand the difference between a wild rabbit as defined and a tame rabbit. The definition in the Bill has been drafted, I presume, by the Law Officers of the Crown, and the Lord Chancellor, no doubt, has approved. They put it this way—in Clause 1 (4) of the Bill.
"In this section 'wild rabbit' means a rabbit other than one which is of a type commonly kept in captivity and has been born in captivity and kept continuously in captivity since birth."
A lot of the lions and tigers which figured in events in the Colosseum were born in captivity. Yet what consolation would it have been to the Christians, when they were put into the arena at the Colosseum, to be told that it was only a tame tiger or a tame lion that was approaching them?
On the basis of this definition, what is the difference between a tame animal and any animal that is born in the Zoo? I am myself a member of the Zoological Society and I know that large numbers of animals are born, including such strange hybrids as the "liger". According to

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this definition animals born in the Zoo, I presume, are tame, and therefore they should be let loose amongst us all. If you pass this Bill you will have accepted this definition as explaining the difference between a tame and a wild rabbit. I do not agree with the definition. How many tame rabbits do you think there are? It is no good your saying that you can pass a Bill like this and leave out tame rabbits, including merely wild rabbits. I have made a good many inquiries, and my information is that more than half a million householders keep tame rabbits—tame rabbits, that is, according to the definition in this Bill, which, as I said, has been drawn up no doubt by the Law Officers of the Crown—and a large proportion of these animals are breeding rabbits. Millions of young ones are born every year. If you think you can get rid of the rabbits in this country by exterminating merely wild rabbits you are going to make a great mistake.
I know there are people who say that the tame rabbit never can become a wild rabbit. That, of course, is not true. I know they say it in Scotland. I could cite a number of cases to your Lordships: here is one of them. One Christmas I gave a children's party and I had a very reputable conjurer down to entertain the guests. He was named, I think, Professor Beaufort. He brought some tame rabbits with him for the purposes of his show. A short time after his return to London he wrote me a letter—and his letter was followed by a lawyer's letter—saying that I had stolen his rabbits. He declared that when he got home his rabbits were missing. In the beginning, I took no notice but when I received the lawyer's letter I said, "This is silly," and I made inquiries to find out what had happened. Well, certainly it was a cold day that Christmas when he came to my place, and the Professor had to be entertained in the kitchen. I could not say what happened, but I was told that he was eventually put on the train by a police sergeant. They stopped plaguing me on this matter when I refused to admit the validity of a claim for £50. Then in the Spring I looked out of my bedroom window down on to the lawn. There I saw white rabbits, black rabbits and speckled rabbits running about. Sherwood Lodge is now in the hands of the Coal Board;
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it has been taken away from me. But if any noble Lord likes to go there he will still see in the woods white rabbits, black rabbits and speckled rabbits. So it is no good saying that tame rabbits do not breed and breed on. They do. The tame rabbit is just as dangerous as the wild rabbit.
The noble Lord, Lord Merthyr, has said that only wild rabbits are included in this Bill, and he has put in, and the Government have supported him in it, a thing which I dislike very much. That is the new idea that the Minister can make special areas, within which scientific research or scientific experiments may be carried out. I asked before what is to be the size of such an area, because, after all, the rabbit is not an unproductive animal. It has been proved that something like £15½ million is produced through the fur trade in consequence of the use of rabbit skins. To my mind, it looks as though questions which are not purely scientific and not purely connected with research are going to arise out of this proposal. Can you lay down areas in which rabbits can be developed under the restrictions which I presume the Minister will impose, if he is able to do so?
There are many people in the hat trade, and in various other trades who are dependent for a livelihood on rabbits. We do not want to have the situation again as it was, but the control that is being offered by the Government is merely for scientific research and not for any form of industry. It may mean nothing to the Government, but there are many people who deal with the rabbit trade and who will be bankrupted. A tame rabbit can still be sold for something like 2s. a pound and its pelt for up to £1—I believe that that is the highest figure, and I am told that the average price paid by the fur trade is 12s. This Bill is going to put that trade out of existence, by allowing tame rabbits only for scientific research. I never like words of this sort. I am always suspicious of a Minister who says that anything is in the interest of "scientific research".
By this Bill we are allowing rabbits to be kept in this country under control: but they are coming back. I have warned your Lordships several times of what has happened in the Isle of Wight.

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There were none there in December, but since then I have killed 600 rabbits. They are also coming back elsewhere. I read in The Times yesterday that they were returning in Hampshire. It is suggested that the only way to deal with them is through pests officers. But we cannot afford pests officers. They cost a great deal of money and have to cover a great deal of ground. The only thing we can do is to make it possible for people to sell rabbits when they are dead. That cannot be done now, because there is no market. No tenant farmer of mine would employ a rabbiter at £7 10s. 0d. a week unless he could sell what that rabbiter might produce. It is an impossible situation, and unless we are careful, we shall have a position worse than we had before. If the noble Lord, Lord Merthyr, wishes to make sense of this Bill, he must include all rabbits and not merely one type of rabbit. That is why I beg to move this Amendment.
Amendment moved—
Page 1, line 9, leave out ("wild").—(Lord Sherwood.)
LORD MERTHYR: My Lords, I have listened with great care to what the noble Lord has said, and I can only repeat, with great respect, that I find it sometimes a little difficult to discover whether the noble Lord is in favour of rabbits or against them. I should like him to answer a few questions in his reply in order to try to answer that conundrum. To accept the noble Lord's Amendments, which, as he says, are a series dealing with the same point, would considerably extend the scope of this Bill. He has told us that half a million people keep tame rabbits. I agree with that figure, and I might add that approximately 50,000 rabbit fanciers exhibit tame rabbits at shows. Bearing these figures in mind, what is the effect of these Amendments?
At an earlier stage of the Bill the noble Lord said [OFFICIAL REPORT, Vol. 196, col. 946]:
"I heartily dislike this Bill."
Why, then, does he wish to extend its scope? The noble Lord said:
"It is growing ever greater."
Why does he want to make it greater still? He told your Lordships (col. 947):
"I dislike adding to the scope of this Bill."
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What is he doing to-day? He said:
"It offers more and more opportunity for people to give away their neighbours."
If this Amendment is passed, it will enable another half a million people to give away their neighbours. On Second Reading the noble Lord said [OFFICIAL REPORT, Vol. 196, col. 772]:
"I do not like the penalties which are provided in the Bill."
Why, then, extend those penalties to another half million people? Finally, the noble Lord said (col. 773) that it would
"torture every child who lets loose a tame rabbit."
With respect, that statement was not correct, because the Bill as it stood applied only to wild rabbits. But if the noble Lord's Amendments were passed, his statement would become correct. Then, to use the noble Lord's own words, it would "torture every child who lets loose a tame rabbit." That is not what I want to do but that, apparently, is what the noble Lord seeks to do by this Amendment. These are the questions I would like to ask him, if he would be good enough to answer, so that your Lordships can decide on the merits of this Amendment.
In his speech just now, the noble Lord commented upon the fact that this was a Private Member's Bill and that it used loose phrases. I admit that perhaps that is a common fault in Private Members' Bills, but the definition clause has been most carefully drawn, as I pointed out on Second Reading. I also said then, and say again, that this definition clause has been accepted by the interests to which the noble Lord has referred: the fur trade and the organisations which represent the keepers of domestic and tame rabbits. They do not object to it. But what would happen if this Amendment were passed? A whole army of people would then object to the Bill. Fifty thousand people would then be prevented from exhibiting their tame rabbits, and half a million people would be seriously inconvenienced in keeping their tame rabbits.
Surely, one answer to the noble Lord's difficulty is the word "commonly", which appears in the definition clause. If the noble Lord would study that word, in all its implications, I suggest that some of his difficulties would be removed, and he might then be able to understand the

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definition clause, as he is not able to do at present, as he has told us. The noble Lord says that I should never get rid of rabbits by this Bill. I never said that I could. This Bill does not attempt to do more than try to get rid of a few rabbits. What it really does is to prevent people from increasing the supply of rabbits. There is not a word in the Bill about exterminating rabbits or getting rid of rabbits, and I do not pretend for one moment that this Bill will get rid of the noble Lord's rabbits in the Isle of Wight, or rabbits elsewhere. As I said on Second Reading, what I am attempting to do is to prevent people from quite deliberately, and with a purpose, spreading rabbits all over the country and increasing them for their own ends. That is a very different thing from trying to get rid of rabbits.
The noble Lord dealt with these areas of experiments. That Amendment was moved on behalf of Her Majesty's Government, and I think I had better let the representative of the Government defend that clause. However, I would say to the noble Lord that I myself know of one of these areas, because it happens to be near my own home. It is a small area, and it is wired in extremely carefully. The point of this clause, which was moved on the Committee stage, is that if the clause had not been put in the Bill, that experiment would have had to be ended, because that wired-in enclosure would then be removable under the Pests Act. The noble Lord will see that this clause is, in a way, an Amendment to the Pests Act, and it is in order to enable these experiments to continue that the clause was put in. Although I did not myself move the clause, I believe that there is value to the country in these experiments, and therefore that the clause is justified and is a good one.
The noble Lord says that rabbits are coming hack. I entirely agree with him. The question between us is whether this Bill, if it is passed into law, will help rabbits to come back or will prevent them from coming back. I say that this Bill, if it is passed into law, will do something—it may not be much, but something to prevent rabbits from coming back, because it will prevent people from deliberately, and, I might almost say, with malice aforethought, helping rabbits to come back. The noble Lord, with, I
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think I am right in saying the same objects—though I am not sure—says that it will have the opposite effect. We must wait and see. Finally, the noble Lord says that the tame rabbit will escape. That I cannot deny, and I must face it. On that point I have only this to say. I ant prepared to take that risk, and I believe it is better to do that than to do what the noble Lord wants and extend this Bill to cover all tame rabbits. If we extend the Bill to cover all tame rabbits, as we are asked to do, then the consequences will be most unfortunate. It will harm a large number of entirely innocent people, who will then have a considerable grievance and will be justified in opposing the Bill. If we do not pass these Amendments, then I can see at once that we run a small risk—and I do not think it is more than a small risk—that a few tame rabbits will escape and populate the countryside. Opinions may differ as to the fertility of tame rabbits which have escaped into the country, and I will not go into that point this afternoon.
With regard to what the noble Lord, Lord Kinnaird, said on the Committee stage of the Bill, I have, as I promised, gone into the point he raised—it was much the same point as I have just mentioned. On the whole, I am convinced that this Bill is better than the original draft in that respect, and that it is wise altogether to exclude tame rabbits from this Bill. There was one respect in which the original Bill included all rabbits, but that is altered in the present Bill. I concede that there is some case for making it an offence to turn loose any rabbit—and that is one of the noble Lord's Amendments—but on all the other Amendments on the Order Paper I must say, most emphatically, that in my humble opinion there is no case for their being accepted. I must ask your Lordships to reject these Amendments because, in my view, if they were passed this Bill would fail completely in its purpose; it would arouse considerable opposition and cause a lot of trouble. Therefore, I ask the House not to accept the Amendments.
THE EARL OF LISTOWEL: My Lords, I cannot help feeling that some of the surprises that the noble Lord, Lord Sherwood, has sprung on us in the course of this Bill are almost as startling as the

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surprises achieved by the man who produces a rabbit from a hat. A short time ago, the noble Lord asked us to accept an Amendment of his which would have meant the rejection by your Lordships of the Bill. If that had happened, the number of rabbits in the country would have increased considerably. The noble Lord is now submitting an Amendment to your Lordships which, if it were accepted, would decrease the rabbit population, both wild and tame. He is adding tame rabbits to the class of rabbits which would exist in far smaller numbers in time to come if his wishes were acceded to by your Lordships.
I have one powerful objection to the Amendment moved by the noble Lord which I should like to submit to your Lordships for consideration, and which, indeed, was alluded to by the noble Lord, Lord Merthyr. It is this. The noble Lord's Amendment would at once make this a controversial Bill, because, as the noble Lord, Lord Merthyr, pointed out, the people who are interested one way or another in tame rabbits are quite numerous, and they would express their opposition in a proper but no doubt emphatic manner. I have no doubt that your Lordships will take that opposition into consideration and, having done so, will probably decide in favour of the Bill. On the other hand, I am certain that if the Bill went to another place with this prohibition of the keeping of tame rabbits the matter would at once become controversial and the likelihood that the Bill would be passed would be small indeed. Therefore, I hope your Lordships will reject this Amendment, in order to preserve the uncontroversial character of the Bill, on which its survival, certainly in another place, and possibly here also, will depend.
LORD SALTOUN: My Lords, when I read the ancient laws of my country, I am astonished and envious at the simplicity of their language and the exactitude with which they are observed. I am very willing to support a Bill couched, as this one is, in quite simple language, and to leave to the courts of our country the task of defining on any occasion what a "live wild rabbit" is.
LORD REA: My Lords, the matter is purely one of clarification, but I should
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like to ask the noble Lord, Lord Merthyr, whether he said, as I understood him to say, that he would not oppose the Amendment relating to the turning loose of a rabbit, irrespective of whether it is tame or wild. I understood him to say in the later part of his speech that he wished to oppose all the Amendments. I may be a little previous in coming to the fifth Amendment now, but it might be helpful to know at this stage, whether he does accept that Amendment.
LORD MERTHYR: My Lords, if I may have your Lordships' leave to speak again, the answer to the noble Lord's question is that I do oppose all the Amendments. I did concede that there was an arguable case for that particular one; but, on balance, I am convinced that the disadvantages outweigh the advantages.
LORD SHERWOOD: My Lords, I should like to say a word or two, as I moved this Amendment. Having been a Whip in another place, I am not entirely as politically foolish as I may appear. I opposed this Bill, and I still oppose it: it is the one way of making it almost impossible that the Bill would pass if it went to another place. That is the reason why I have moved this Amendment. I think it is fundamentally a bad Bill, and because it is a rural Bill it can be imposed only by the rural police, of whom there are few. It can be done only by people giving away their neighbours, which I dislike. And I do not think it is workable. It started by a wrong method. It has been encouraged and brought on by the Government and by the Minister, who added curious addenda to it, including the proposal regarding scientific research, which had nothing to do with the ideas of the noble Lord, Lord Merthyr, when he started this Bill. It is a Bill which is not going to help at this time. It is not going to get rid of the rabbits, if you really want to get rid of them, as the noble Lord obviously does—it will remain a mystery to all your Lordships whether I do or not, because I have not disclosed it. All I am saying is that if the noble Lord wishes to get rid of the rabbits he must get rid of the lot; it is no good going half way. These methods are wrong, and therefore I still wish to press my Amendment.
LORD MILNER OF LEEDS: My Lords, are we not going to hear the Government's view on this matter? I am not particularly interested in the Bill, but I am sure noble Lords will wish to hear the Government's view on it. Apparently they have drafted the Bill, and the noble Lord is entitled to an answer to the case he has put forward.
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY of AGRICULTURE, FISHERIES AND FOOD (EARL ST. ALDWYN): My Lords, this is a Private Member's Bill and my feeling was that the noble Lord, Lord Merthyr, had dealt more than adequately with all the points brought up. As I am on my feet there is one point I should like to make, and that is that, while I do not pretend to be an authority on the Standing Orders in this House, it seems to me extraordinary that we should have a long discussion on a clause in the Bill to which there is no Amendment on the Paper at all. I do not think I should add anything to what the noble Lord, Lord Merthyr, said about the Amendments on the Paper, and I entirely support what he has said.
On Question, Amendment negatived.

DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH BILL [H.L.]
3.24 p.m.
Order of the Day for the House to be put into Committee read.
Moved that the House do now resolve itself into Committee.—(The Marquess of Salisbury.)
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL. OF DROGHEDA in the Chair]
Clause 1:
Reorganisation of scientific and industrial research
1.—(1) The Department of Scientific and Industrial Research (in this Act referred to as "the Department") shall be placed under the charge of a Council for Scientific and Industrial Research (in this Act referred to as "the Research Council") whose functions under this Act shall be exercised on behalf of the Crown and whose members shall be appointed by the Lord President of the Council, after consultation with the President of the Royal Society.
(2) In the exercise of any powers or the performance of any duties conferred or imposed upon them by this Act, the Research
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Council shall comply with any directions which may from time to time be given to them by a Committee of the Privy Council for scientific and industrial research consisting of the Lord President of the Council and such other members as Her Majesty may from time to time appoint; and for the purposes of the Ministers of the Crown (Transfer of Functions) Act, 1946, the expression "Minister of the Crown" in that Act shall include that Committee.
(3) The Research Council shall be charged with the organisation development and encouragement of scientific and of industrial research and with the dissemination of the results of such research, and may in particular establish or develop institutions or departments of institutions for investigation and research relating to the advancement of trade and industry.
(4) The Research Council may make grants for the purposes of any of their functions under the last foregoing subsection and may also make grants for post-graduate instruction in science or technology.
LORD CHERWELL LORD CHERWELL had given notice of an Amendment to add to subsection (1):
"one third of the said members being scientists holding or having held academic posts."
The noble Lord said: I should like to apologise to the House at the outset for my absence during the Second Reading debate. Had I been here I should have wished to join in the tributes to Sir Ben Lockspeiser for the admirable way in which he carried out his variegated and difficult tasks. I would also have expressed misgivings as to whether it will be possible to find men of sufficient distinction and status who are able and willing to give the large amount of time which a Council, which is executive rather than advisory, will have to devote to the activities of the Department. Still, I must hope for the best.
The reason for moving my first Amendment is, I think, fairly obvious: I am anxious that: the Department should continue to support and foster scientific research, including basic scientific research, as it has done hitherto. Unlike the noble Lord who has addressed us and seemed to be disturbed by the view of parti-coloured rabbits on his lawn, I have a great belief in scientific research. When the Department was first set up there was a good deal of argument as to whether it should be called the Department of Industrial and Scientific Research, or the. Department of Scientific and Industrial Research. In the end it was decided—

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quite rightly, in my view, since all industrial research is primarily based on scientific research—that the word "Scientific" should come first. I am anxious that this intention should not be forgotten, and that the excellent work which the Department has done in supporting scientific research in the universities should continue.
It may be said, of course, that this arrangement, by which a good deal of pure academic scientific research is supported by the Department, is somewhat odd and that it ought to be the responsibility of the University Grants Committee or some similar body. Still, that is the way things have developed, and I am anxious that no fundamental change should be made at this stage without the closest consideration. It has been said that the present system is untidy. But tidiness is not everything. Indeed, I have heard it said—fortunately I have no experience of it—that many households have broken up because of the insistence on excessive tidiness of one partner or the other. Some industries, of course, are enlightened and realise the importance of fundamental research. But some are not. It is to ensure that the scientific aspect of the Department's activities is not lost sight of that I hope the Government may be prepared to accept the Amendment I have put down.
There is one slip in the Amendment before the Committee which I hope I may be allowed to correct now. With the permission of the Committee, I desire to insert at the beginning of my Amendment, by a manuscript Amendment, or however it is done, the words "at least," which were omitted by a typist's error. Thus the Amendment would read, at the end of the first section of the first clause:
"at least one-third of the said members being scientists holding or having held academic posts."
I am sure that the Lord President who is now in office will ensure that fundamental science is properly represented on the Research Council. But, unfortunately, Governments change and the post of Lord President of the Council is not a permanent appointment. For this reason, and not because I am in any doubt as to the intentions of the Lord President, I hope that the Government will see their way to accept my Amendment in the form I have just read out,
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or, if preferred, in some similar form which will satisfy my objective. I beg to move.
Amendment moved—
Page 1, line 12, at end insert ("at least one-third of the said members being scientists holding or having held academic posts.")—(Lord Cherwell.)
THE LORD PRESIDENT OF THE COUNCIL (THE MARQUESS OF SALISBURY): I am sure that everybody in this House appreciates, and sympathises with, the purpose underlying the Amendment which the noble Lord, Lord Cherwell, has just moved. But all the same, I hope that he will not press it. I can assure him that I do not say this because I want fewer scientists on the new Council. On the contrary, I understand that, under the present system, in the existing Advisory Council there are already more than the one-third of the membership who are scientists. I can assure him that I have no wish to see that proportion reduced under the Bill which is now before your Lordships. With the noble Lord, I believe that scientists are at least as necessary as industrialists on this particular Council. But I believe—and I think other noble Lords will agree with me in this—that it is undesirable to allocate specific proportions of membership of a body of this kind to representatives of this or that section of the community; because, if that were done, it would in my view only stimulate a demand for further allocations of membership, and eventually this body would become a mere aggregation of delegates of this or that interest instead of being what I am certain it ought to be, a body of members chosen for their own personal qualities and qualifications.
Moreover, the provision that the President of the Royal Society should be brought into consultation in connection with the membership of the new Council should in any case, I imagine, be an entire safeguard to ensure that science is properly represented. I can assure the noble Lord that there is really no difference of intention between him and me over this matter. In view of what I have said and the assurance I have given him, I hope that the noble Lord will not press the matter.
LORD CHERWELL: In view of what the noble Marquess has said, I am certainly glad and ready to withdraw the

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Amendment. I ant certain the assurance he has given will give a considerable amount of comfort to many of my friends. The argument that we do not want to have a whole lot of categories specified is a strong one. Therefore, I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
LORD CHERWELL LORD CHERWELL moved, in subsection (3), after "industrial research" to insert:
"including the provision of such help to science and research in the universities as has heretofore been provided by the Department of Scientific and Industrial Research."
The noble Lord said: With your Lordships' permission, I will take the second and third Amendments standing in my name together, as they are closely interlocked. After what has been said, I do not think I need detain the House vary long in moving these Amendments. As I have said, the Department has done most valuable work in supporting scientific research in the universities, and most of us would agree that it would be a disaster if this work were reduced or, worse still, stopped. But I am not at all clear whether the words in the Bill allow the Research Council to continue with this work. I know that one could interpret the words in subsection (3) of Clause 1:
"The Research Council shall be charged with the…encouragement of scientific and of industrial research"
so as to include giving help to science and research in the universities. On the other hand, a Council in which the industrial point of view predominated—a matter on which I hope I have now been reassured—might consider that this was only a secondary part of its functions, or, indeed, that it should be left to some other body.
As I have said, the Department has done invaluable work in the past by giving maintenance grants to students who had taken their first degree to enable them to carry on post-graduate research and obtain higher degrees. Not long ago, I gather, it was proposed by some industrialists, with the support of the Board of Education, that the number of these maintenance grants should be cut down so as to force the young men to take posts with industrial firms or become schoolmasters. This is an instance of the shortsighted attitude of mind towards
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fundamental research which I deplore and which causes anxiety to many of us in the universities. Of course, these men working on maintenance grants for higher degrees do so under general supervision, and it might be held that they are covered by subsection (4) of Clause 1 which Ientitles the Research Council make grants for post-graduate instruction in science or technology. But as these men are, in effect, carrying out independent research with only some general supervision, the Research Council might quite well decide that they were not covered by this clause. A fortiori this would hold for senior research awards made to men who have completed their post-graduate training and who have, in the words of the regulation,
"exceptional aptitude for original and independent research".
Therefore I suggest that the words "and research" should be inserted after the word "instruction" in line 9 on page 2 of the Bill. Even more remote from any instructional aspects are the grants made for the development of what are called "researches of exceptional timeliness and promise," which have hitherto been encouraged by the Department and which form a most valuable aspect of its functions.
Finally, as the Lord President knows, the Department has since 1945 made available large sums of money to enable nuclear research to be carried on in the universities. The apparatus required for this tends to be excessively expensive, and unforeseen calls for support are apt to develop which cannot easily be met by by the University Grants Committee. The gigantic machinery, costing sometimes millions of pounds, can obviously not properly be allocated to the various universities and I think the present intention is to erect such apparatus in a national centre to which accredited senior members from the universities will have access. But unless nuclear research is to die out, it is essential that a considerable modicum should continue at the universities if only to prepare men to use the big machines in the national centre. This will require apparatus that is expensive by university standards—say, some hundreds of thousands of pounds, though not, of course, in the million-pound class.
My impression is that it is intended that the provision of apparatus of this

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sort should continue to be one of the responsibilities of the Department of Scientific and Industrial Research, but I can well imagine the new Council taking the line that it should not be saddled with this difficult task. I am very greatly concerned lest anything of the sort I have mentioned should happen, and it is for that reason that I wish to insert after "research" in line 3 of subsection (3) of Clause 1, which describes the responsibility of the Research Council, the words
"including the provision of such help to science and research in the universities as has heretofore been provided by the Department of Scientific and Industrial Research."
Unless the Council is definitely enjoined to go on doing this, it might well, if it so pleased, decide to discontinue all these most important functions. A Government Department is not apt suddenly to change the scope of its activities, even if this is recommended by an advisory committee, but an executive Council, with all the enthusiasm of the new broom, may think it ought to use it to make a clean sweep; and it is this which many of us in the universities fear. I hope that the Government will relieve our anxieties by inserting n the Bill words such as I have suggested, or words having the same effect. I beg to move the second Amendment.
Amendment moved—
Page 2, line 3, after ("research") insert the said words.—(Lord Cherwell.)
LORD WILMOT OF SELMESTON: I hope the Government will find it possible to accept the two Amendments to which the noble Lord, Lord Cherwell, has spoken: they are directed to the same broad purpose. It was with some such misgivings in mind that I myself attempted, on Second Reading, to extend the consultations when the Council was being appointed. But since I appreciate that the manner which Lord Cherwell has chosen is a far better way of securing this purpose, I should like to confirm that I myself have heard from university sources considerable misgivings of the same kind. For that reason, I hope that the Amendments can be accepted.
THE MARQUESS OF SALISBURY: Like the two preceding speakers, I will, if I may, deal with both these Amendments of the noble Lord, Lord Cherwell, together. I think that these Amendments
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are due to a misunderstanding on the part of the noble Lord and those who take the same view as he does. I think that in their minds there is a suggestion that the effect of the wording of this new Bill will be to limit and even reduce the scope of the work which has hitherto been done by the D.S.I.R. I can assure the noble Lord, Lord Cherwell, that there has been no intention on the part either of myself or, so far as I know, of anybody else, in any way to limit the objects for which the funds of the D.S.I.R. can at present be used or will in future be used.
As I see it, in reality Clause 1 (3) is very widely drawn indeed. I will remind your Lordships of the wording of it. Clause 1 (3) says:
"The Research Council shall be charged with the organisation, development and encouragement of scientific and of industrial research and with the dissemination of the results of such research, as may in particular establish or develop institutions or departments of institutions for investigation and research relating to the advancement of trade and industry."
Those words are tremendously wide. I should have thought that they must include anything which the noble Lord, Lord Cherwell, or the noble Lord, Lord Wilmot of Selmeston, or anybody else could possibly wish, including the words of the noble Lord's own Amendment—namely,
"including the provision of such help to science and research in the universities as has heretofore been provided by the Department of Scientific and Industrial Research."
After all, the greater includes the less, and the universities are included in the wider scope of subsection (3). I think that the new words are not a contraction of the present scope of the D.S.I.R., but represent an extension of the words which were used in the original Order in Council which referred to the organisation and development of scientific and industrial research. Nothing that there is in the words which I have read conflicts with that.
LORD CHERWELL: The point we are anxious about is that this is permissive and the new Research Council may take a different view from that which has hitherto been taken by the Department.
THE MARQUESS OF SALISBURY: It has always been permissive. So far as

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I know, there has never been an obligation on the D.S.ILR. to do this, that, or the other. The scope is defined and was defined by the Order in Council and it has been left to the D.S.I.R. to apply this definition in practice as they wish. I have no reason to suppose that they would wish to limit it any further. I do not know what ground the noble Lord has for thinking that that is so. There is no difference in the new plan from what there was, so far as I know, under the old one. At the same time, I am most anxious that there should he no misunderstanding in matter because I well realise that it has given rise to a certain amount of anxiety. If, after what I have said, the noble Lord and other noble Lords still feel that the meaning is not clear and that there might be implied a certain limitation of the scope of the work of this new body, I will see whether we can meet him.
I have made inquiries and I understand that the exact wording of his first Amendment which we are now discussing will not do in its present form; but I ant quite ready to see whether it can be drafted in other words so as to give effect to what he wants. If I can get that, I suggest either that he or I should discuss it and that he should put down an Amendment on the Report stage, or, if he is agreeable, that I should put it down as a Government Amendment. But I assure him that, in my view, and from all the inquiries that I have made, it is not really necessary. The existing words in fact cover all he wants, including, so far as I know, nuclear research. In view of this assurance, he may decide to leave the wording as it is. I am entirely in his hands over that matter and I will do whatever he prefers.
Perhaps I can now say a word about the second Amendment which, as he has said, is closely allied to the first. Here again, I think there is some misunderstanding in the mind of the noble Lord. Subsection (4), to which his Amendment refers, reads as follows:
"The Research Council may make grants for the purposes of any of their functions under the last foregoing subsection and may also make grants for post-graduate instruction in science or technology."
The first part of subsection (4) refers back to subsection (3) and enables grants to be given for any of the purposes which
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are enumerated in subsection (3). The second part of subsection (4), by the second half of the sentence, then goes on to add another purpose—instruction. It says:
"may also make grants for post-graduate instruction in science or technology."
That is new; it is something which the D.S.I.R. could not do before. But it does not detract from the other functions; it merely adds an additional purpose to which grants may be allocated.
Here, again, I do not know whether what I have said makes the position clear, but if it does not, I shall be quite ready to see whether we cannot split up subsection (4), adding the first half of subsection (4) to subsection (3) and making it clear that A refers to grants for the purpose of subsection (3); and then limiting the new subsection (4) to the additional purpose which has now been introduced—namely, instruction. I personally think that that would improve the wording of the Bill. I think it would make the position clearer. I should be most ready to do that if the noble Lord wishes.
EARL WINTERTON: My Lords, I should like to put a point to the Lord President. I am quite incompetent to speak on the scientific aspect of this clause, but this is an administrative question. It so happens that I was lunching with a distinguished Member of your Lordships' House—as he is not present, I cannot mention his name as I have not his authority to do so—and, after paying tribute in conversation to the admirable work done by the bodies to which this Bill refers, he said that he thought that a weakness in our scientific system in Britain was that there was no Minister directly responsible for bringing continued pressure to bear upon industries to make use of the discoveries made. He mentioned, in particular, certain new methods in the use of coal for power purposes. The question which I direct to my noble friend the Leader of the House, is this. Clause 1 (3) says:
"may in particular establish or develop institutions or departments of institutions for investigation and research relating to the advancement of trade and industry."
In the event of important discoveries being thus made, I suppose it would be the duty of the President of the Board

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of Trade to bring the matter to the notice of industry—or would it be the duty of my noble friend's Department?
THE MARQUESS OF SALISBURY: I think the noble Lord, Lord Cherwell, may know this, and the noble Earl need not think that industry does not keep in close touch. There are about fourteen research stations at the present time, and most of them are in the closest contact with industry. In addition, there are a number of co-operative Research Associations—I think they number about forty—which are largely financed by industry and have only comparatively small grants-in-aid from the D.S.I.R. I do not think, therefore, that such a situation exists. I may be quite wrong, but I think that if the new Executive Council suddenly happened on something very important and new it would be for them to bring that to the notice of industry. I have no doubt that they would do so, for that is the purpose for which they exist. I should not like to say that it would be the job of the present bodies to do so. Rather I should think it would be for the Executive Council themselves to take the initiative in the matter. In fact they are the only people who could do so.
EARL WINTERTON: I am very much obliged.
LORD WILMOT OF SELMESTON: I should be glad if the noble Lord, Lord Cherwell, would proceed with these Amendments under the offer which the Lord President has made. The importance of fundamental research could be lost sight of in the future, in the clamant claims of more immediate industrial purposes; and the change which takes place means, of course, that this is an executive body charged with full responsibility under the Crown for this administration. I think it is very important, therefore, that Amendments on the lines suggested by the Lord President should be embodied in the Bill so that this change will not in any way interfere with the recognised importance of fundamental research in the universities.
LORD CHERWELL: I am grateful to the Lord President for what he has said, and I agree with the noble Lord, Lord Wilmot of Selmeston. I should like to see these words, or something like them, embodied in the Bill. The possibility which frightens us is that this new
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Research Council will have the right to go on encouraging science in the universities but is not enjoined to do so, and that it might take a totally different line from that hitherto pursued. Your Lordships will see, in the Bill, a broad general expression of its tasks:
"The Research Council shall he charged with the organization, development and encouragement of scientific and of industrial research and with the dissemination of the results of such research."
Then there is an exceptional provision:
"and may in particular establish or develop institutions or departments of institutions for investigation and research relating to the advancement of trade and industry."
I take it that that means research associations. If those are more or less specified, one would like to see help to the universities specified as one of the activities in which they ought to indulge. If the Lord President could manage to get some form of words to make that clear it would give great reassurance.
THE MARQUESS OF SALISBURY: I can reassure the noble Lord. I shall be very happy to do that, but I would again emphasise that it has never been a feature of the D.S.I.R. that it is enjoined to do any particular thing. The Department has very wide scope for its research and inquiries, and it is, and always has been, left to the Department to develop those researches as best it can. I feel that it must continue to do so. With that limitation, I shall be quite prepared to see what I can draft, and if and when I find a form of words I will get into touch with the noble Lord, Lord Cherwell, to see whether he approves them.
LORD CHERWELL: I thank the noble Marquess.
LORD MILNER OF LEEDS: Following upon what has been said by the noble Marquess I should know, but I am afraid I do not, whether the Department publishes a report with the results of its researches. If so, that would, of course, go some way to carrying out what the noble Earl Lord Winterton, inquired about. Clearly the results ought to be made available in some form and I presume the Department issues a report year by year or at intervals. I now gather from my noble friend Lord Wilmot of Selmeston that it does publish a report, though I gather that it is not in a very detailed form.
THE MARQUESS OF SALISBURY: It would be impossible to produce in detail the results of all the research at fourteen research stations. Industries which deal with these particular subjects know perfectly well that research is going on in them, and it is always open to them to go to a station at any moment to consult people there and to find out the results of what is going on. It is equally open to them to send their own problems to these stations and get them resolved there, so that there is no question of any chasm between the two sides.
EARL WINTERTON: I apologise for intervening again, but as the noble Lord, Lord Milner of Leeds, has referred to my speech I should like to make it plain that I was trying to discover which Minister would be responsible for trying to secure implementation of the reports. The information which I have—admittedly secondhand, because I cannot use it without authorisation from my noble friend who is a distinguished Member of your Lordships' House—suggested that there was lack of machinery to secure the use of the very valuable results of these investigations. After what the noble Marquess the Leader of the House has told us, I am quite satisfied that that is not so.
THE CHAIRMAN OF COMMITTEES: Does the noble Lord, Lord Cherwell, wish now to withdraw his Amendments, so that a form of wording may be found before the Bill leaves this House?
LORD CHERWELL: In view of what the noble Marquess has said, I ask leave to withdraw the first Amendment, and I will not move the second; and I hope that we shall find an agreed form for the next stage of the Bill.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
Remaining clauses agreed to.
LORD WILMOT OF SELMESTON: Before we pass this stage, I should like to thank the Lord President for the figures which he sent me. I asked whether he could give me a statement showing total Government expenditure on research in all departments, but he has informed me that the figures I have received are available in various places and I am very grateful to him. I feel however that it would be helpful if at some time these figures could be codified or assembled so as to make quite clear what we are doing with the money Mat is spent in this way.
House resumed.
THE MARQUESS OF SALISBURY: My Lords, I beg to move that this Report be now received. In doing so, I should like to say one word. It is this: there are, in fact, no Amendments, and therefore there will be no separate Report stage. But I have promised to consider one or two points and see whether Amendments can be tabled. In a case like this, such Amendments will have to be put down on Third Reading. I know your Lordships do not like Amendments on Third Reading—I do not like them either—hut these are rather unusual circumstances, and I hope the House will understand if this procedure is adopted.
Moved, That the Report be now received.—(The Marquess of Salisbury.)
On Question, Motion agreed to: Bill reported without Amendment.

WEST BROMWICH CORPORATION BILL
Brought from the Commons; read 1a, and referred to the Examiners.
House adjourned at two minutes past four o'clock.