Sitting of 7 June 1961

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  LONDON COUNTY COUNCIL (GENERAL POWERS) BILL [Lords] (By Order)
  Second Reading deferred till Wednesday next.
  TEESSIDE RAILLESS TRACTION BOARD (ADDITIONAL ROUTE) PROVISIONAL ORDER BILL
  As amended, considered; to be read the Third time Tomorrow.
ORAL ANSWERS TO QUESTIONS
  ROYAL AIR FORCE

    Malta (Service Men's Wives)
    Mr. K. Lewisasked the Secre of State for Air whether there are any restrictions on wives of airmen joining their husbands who are based at Malta.
    The Secretary of State for Air (Mr. Julian Amery): Apart from the normal rules there are no restrictions on wives of airmen joining their husbands in Malta at public expense.
    Mr. Lewis: Is my right hon. Friend aware that I am very happy to have that reply? I had heard that it was otherwise.

    Belfast Aircraft
    Mr. Marshasked the Secretary of State for Air when he anticipates the Belfast aircraft will come into service.
    Mr. J. Amery: As my right hon. Friend the Minister for Aviation told the House on 21st December last, the Belfast is due to come into service in 1964.
    Mr. Marsh: Does the Minister still think, in view of the time that it has
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    taken to get this aircraft into service and the fact that originally it was to some extent intended to be a commercial proposition as well and also in view of the other prototypes which are now emerging, that it is still likely to be anything other than obsolete when it comes into service?
    Mr. Amery: No, Sir. We do not think that it will be obsolete at all. We think that it will fulfil the task allotted to it.
    Mr. Stratton Mills: Is it not clear that there are not sufficient freighters for Her Majesty's Forces and that when this plane comes into effect there will be the need for a great many more? Will my right hon. Friend consult his right hon. Friend the Minister of Aviation about placing more orders for this plane?
    Mr. Amery: I see my hon. Friend's point, but he will realise that the number of planes which we order is related to staff plans and other considerations and that it is not just a number drawn out of a hat. We think that this is the number we need. It may be that subsequent events will show that we need more. If so, I have no doubt that we shall take the right course, but, at the moment, it is the number that we need.
    Mr. Marsh: If this aircraft is to have some commercial potentialities as well, surely the number of ten is rather small to be of real value?
    Mr. Amery: It is not for me to discuss the commercial potentialities of the aircraft. The military requirement is for ten.

    Troop Transport, Middle East
    Mr. Marshasked the Secretary of State for Air what improvements have now been made for the transport of troops and equipment by air in the Middle East.
    Mr. J. Amery: There have been no recent changes in the composition of the theatre transport force based in Middle East Command.
    Mr. Marsh: Even with the British Forces in the Middle East so thin on the ground, is it not becoming increasingly obvious that the Government's ability to transport them has been woefully inadequate? With the situation in the

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    Middle East becoming increasingly unpleasant, this is a highly dangerous situation, and does not the right hon. Gentleman think that he should do something to improve that situation?
    Mr. Amery: As I cannot accept either of the assumptions in the hon. Gentleman's supplementary question, I am sure that he will not expect me to accept his conclusion.

    Officers' Wives (Overseas Accommodation and Travelling Expenses)
    Mr. Wainwrightasked the Secretary of State for Air what would be the approximate cost to the Exchequer if facilities for accommodation and travelling expenses were granted to enable wives to join their husbands who are officers of the Royal Air Force stationed abroad, and whose ages range between 21 years and 25 years.
    Mr. J. Amery: Seventy thousand pounds a year.
    Mr. Wainwright: Does not the right hon. Gentleman consider that this amount is rather small in comparison with the total cost of conveying officers abroad? In view of that fact, will he not now consider accepting the principle of equal travelling and accommodation allowances for equal responsibility?
    Mr. Amery: No, Sir, I am afraid not. The consideration in our view has never been a financial one. As the hon. Gentleman points out, the sums at stake are relatively small. We take the view that in the early years of an officer's service it is better for him to be unmarried, and we do not therefore want to give an incentive to early marriage.
    Mr. Wainwright: But does not the Minister realise that young men today are getting married earlier, that they have the responsibility of married life and that they would be far happier than they are at the present time if their families were transported abroad with them?
    Mr. Amery: We have very carefully considered all the considerations at issue here, and, while I see the hon. Gentleman's point, I am afraid that we have reached a different conclusion.
    Mr. Cronin: Will the right hon. Gentleman give further serious consideration to this? Hon. Members on both sides have indicated that they are disturbed at this brutal separation of newly married officers from their wives. Under present conditions they are left with a thoroughly harsh choice between celibacy and impoverishment.
    Mr. Amery: I see the hon. Gentleman's point, but we have looked at this carefully and we came to a different view.

    Children (Education Allowances)
    Mr. W. Hamiltonasked the Secretary of State for Air if he will consider the introduction of a flat rate of education allowances for assisting officers, airmen and airwomen in the education of their children when serving abroad or liable to frequent changes of station in the United Kingdom, instead of the present system of maximum allowances of £150, £175, and £200 a year for the first, second and third and subsequent children at boarding schools, and only £50 a year for children attending day schools.
    Mr. J. Amery: No, Sir. Education allowances are intended to help Service parents to meet the extra cost of ensuring continuity of education for their children. A flat rate would not take account of the difference in the cost of boarding and day schools.
    Mr. Hamilton: Is the right hon. Gentleman aware that it is a private decision of parents whether they send their children to a private school, either a boarding or a day school? How can the right hon. Gentleman defend this kind of discrimination against parents who choose to send their children to day schools and in favour of parents who choose to send them to boarding schools? Surely this is a private decision which they ought to finance themselves?
    Mr. Amery: It is not altogether a private decision. Discrimination is sometimes not of human origin. There are quite a number of families who have no relatives or guardians with whom they can leave their children, and for them a boarding school is the only choice.
    Mr. Hamilton: How can the right hon. Gentleman defend a flat rate of £50 for the parents who have their children at day school with no distinction between the first, second, third and subsequent children, while there is this discrimination for parents who send their children to boarding school?
    Mr. Amery: The problem which arises with a day school is that to an existing household is added an individual, or it may be more than one individual. The allowance given in respect of that child is intended as a contribution to the upkeep of the child at home. In boarding schools it is very difficult to discriminate or differentiate between the educational and maintenance costs. The maintenance cost plus the education cost collectively becomes rather high, and the added burden to the individual family is considerably greater.
    Mr. Cronin: Does not this amount to a direct subsidy from the Air Ministry to private fee-accepting schools?
    Mr. Amery: No, Sir. I do not think that it does.

    Exercise Mayflight
    Mr. Croninasked the Secretary of State for Air why the Valiant bombers proceeded to dispersal airfields in the recent exercise Mayflight before taking off on a simulated operational mission.
    Mr. J. Amery: One of the objects of the exercise was to practise the dispersal arrangements.
    Mr. Cronin: Are we to understand that the strategic nuclear deterrent of this country, or at least most of it, which has cost an enormous amount of money, depends largely on receiving sufficient notice to proceed to its dispersal airfields before proceeding on operational missions?
    Mr. Amery: No, Sir. I am sure that the hon. Gentleman will realise that there are many different situations in which the strategic force could be called on to operate. Some of these would allow for dispersal, and it is therefore important to have good dispersal arrangements. The exercise was an attempt to test every feature of the strategic force, including its dispersal capability.

    Armoured Cars (Air Transport)
    Mr. Croninasked the Secretary of State for Air what facilities the Transport Force now has for moving armoured cars by air.
    Mr. J. Amery: The Beverley can carry all types of armoured car at present in service with the Army.
    Mr. Cronin: As the armoured car is a particularly valuable weapon for dealing with the brush war type of campaign, will the right hon. Gentleman ensure that Beverleys are available in sufficient quantities in all the possible theatres where they might be (used?
    Mr. Amery: This is one of our primary preoccupations all the time.

    Aircraft Factory, United States (Members' Visit)
    Mr. Shinwellasked the Secretary of State for Air what assistance was given by his Department to certain hon. Members to enable them to accept an invitation to visit the Lockheed aircraft factory in the United States of America.
    Mr. J. Amery: None, Sir.
    Mr. Shinwell: If as reported in the Press, a public relations organisation has stated that it obtained Parliamentary authority, does the right hon. Gentleman's Answer mean that so far as the Air Ministry is concerned that is incorrect? Does the right hon. Gentleman know what is meant by obtaining Parliamentary authority, other than from the Air Ministry?
    Mr. Speaker: Order. The Minister cannot be asked to explain a statement by a public relations agency for which he is not responsible.
    Mr. Shinwell: What I want to know from the Minister is whether consent was given or authority obtained before hon. Members were invited to go to the United States to inspect the Lockheed aircraft factory?
    Mr. Amery: As I said, the Air Ministry had nothing to do with this and I am, therefore, not in a position to say whether anybody else gave authority. No authority was given either by me or to me by the House.
    Mr. Shinwell: On a point of order, Mr. Speaker. If you prefer it, I can raise this matter at the end of Questions, but it seems to me that we are entitled to ask about the movements of hon. Members. [HON. MEMBERS: "Why?"] That is what I intend to do whether hon. Gentlemen like it or not, even if there is resentment when we inquire into their movements, particularly When the movements are unofficial in character but in some respects related to their Parliamentary duties. Are we not entitled to do that?
    Mr. Speaker: I do not know what is the point of order. The point of order in my mind was merely that in accordance with the rules and practice of the House an hon. Member cannot ask a Minister to comment by way of denial or otherwise on statements for which there is no Ministerial responsibility. I was not objecting to the right hon. Gentleman's supplementary question after he re-framed it. I only stopped the right hon. Gentleman from asking his question in its original form. That was all.
    Mr. P. Williams: May I thank my right hon. Friend for the authority he gave me to visit Middleton St. George and to fly in a Javelin aircraft?

  MINISTRY OF DEFENCE

    German Troops (Training, Pembrokeshire)
    Mr. Donnellyasked the Minister of Defence whether he will make a statement on the agreement reached by the British and German Governments regarding the training of German troops in Castlemartin, Pembrokeshire.
    The Secretary of State for War (Mr. John Profumo): I have been asked to reply.
    I have nothing to add at present to the reply given by my right hon. Friend the Prime Minister to the hon. Member for Merthyr Tydvil (Mr. S. O. Davies) on 30th May.
    Mr. Donnelly: Is the right hon. Gentleman aware that, as my constituency is involved, so far as I can tell there is no local feeling about this? Nevertheless, may I ask him for some explanation? Will he explain why it is essential for these Germans to come here instead of
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    having training facilities in Germany? Secondly, will he say what is actually involved, the numbers, and so on? Thirdly, will he say whether these German troops will be under the general command of the tank range commander?
    Mr. Profumo: As regards the first part of the hon. Gentleman's supplementary question, I think that the answer is because the present demand for training areas is so great that it would otherwise be impossible for the Germans to fulfil their N.A.T.O. commitments. The second part of the supplementary question was, I think, about the extent to which this proposal runs. It is still, of course, only a proposal, but the proposal is for one battalion in the first instance. The hon. Gentleman is right in the assumption in the last part of his supplementary question. It will, of course, be under the range authorities.
    Mr. Paget: As there seems to have been some misunderstanding about this, can the right hon. Gentleman tell us whether there is anything new about German soldiers serving and training in England? For how many years has it been going on?
    Mr. Profumo: There is something new in this proposition, to the extent that we are considering according German armoured units some facilities for training at Castlemartin, but I do not think that there is any difference in principle. The principle is the same as allowing our American allies to have facilities in the Hebrides.

    Commonwealth Defence Installations, Kenya
    Mr. Wallasked the Minister of Defence what sums have been spent on Commonwealth defence installations in Kenya during the past five years; and what sums are necessary to complete these projects.
    Mr. Profumo: I have been asked to reply.
    Three million pounds and about £7 million respectively. These figures do not include installations for local defence.
    Mr. Wall: Does my right hon. Friend agree that this place is of great importance to the whole Commonwealth, and will he therefore give consideration

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    to transforming it into a Commonwealth as opposed to a purely British base? Also, does he agree that it is particularly important to these East African territories which may soon become independent and which are unlikely to be able to afford adequate defence installations of their own?
    Mr. Profumo: I think that the arrangements we have for the present are adequate for what I might call Common wealth purposes. We are constantly in touch with Commonwealth members to see what is required as circumstances change, and I agree with the last part of my hon. Friend's supplementary question.

    West German Defence Minister (Visit)
    Mr. Pagetasked the Minister of Defence whether he will make a statement as to his negotiations with the Defence Minister of the West German Republic.
    Mr. Profumo: I have been asked to reply.
    I have nothing to add to the Answer given by my right hon. Friend to the hon. Member for Merthyr Tydvil (Mr. S. O. Davies) on 31st May.
    Mr. Paget: Could the right hon. Gentleman give us any indication when something could be added to it? We have been led to believe that negotiations took place as to the co-ordination from both a financial and an arms point of view of the N.A.T.O. forces, particularly in respect of Germany and the balance of payments problem there. We have been told that there were some orders, including 200 guns. Surely at some convenient point we should have a better statement than that.
    Mr. Profumo: If the hon. Member is not wholly satisfied with the statement made at the time, perhaps it would help him and other hon. Members if I give an undertaking that I will circulate in the OFFICIAL REPORT the official Press communiqué which was released after the talks. That might make it easier for hon. Members to see the matter in perspective.
    Following is the communiqué.
    VISIT OF HERR STRAUSS
    MINISTRY OF DEFENCE: PRESS COMMUNIQUÉ
    At the invitation of Mr. Harold Watkinson, the British Minister of Defence, Herr Franz Josef Strauss, the Minister of Defence of the German Federal Republic, paid a brief visit to this country this week and had discussions with Mr. Watkinson in the Ministry of Defence. The Minister of Aviation also took part in the discussions.
    This was one of the regular series of meetings between the N.A.T.O. Ministers of Defence. On this occasion one of the main reasons for the meeting was to examine progress made in co-operation between Great Britain and the Federal Republic in the development and production of military equipment and German procurement of conventional weapons from British production.
    The meeting also took account of the recent Anglo-German staff talks which it was agreed served a useful purpose for Anglo-German co-operation.
    Herr Strauss confirmed the firm intention to take the British 105 mm tank gun for the German standard tank. An order for the first 200 guns and ammunition would be signed very shortly; another 300 guns would be contracted for later and would probably be followed by a further two thousand to match Germany's eventual need for tanks. Herr Strauss also confirmed that the contract for 50 Seacat missiles was about to be completed and that it was the intention of his Government to buy two prototypes of the British mortar spotting radar Green Archer. Direct orders for the Orpheus engine are being increased and substantial orders for Rolls Royce "Tyne" engines are in prospect for the "Transall" transport aircraft which is under joint Franco-German development.
    The Ministers decided to conclude an early agreement for the joint development of a VTOL light-weight Strike fighter aircraft on the basis of the Hawker P1127 and also agreed to develop jointly, in association with France, the Rolls Royce RB162 engine.
    Technical and industrial teams will meet in the very near future to carry on this work.

    Armed Forces (South Africans)
    Mr. P. Williamsasked the Minister of Defence whether arrangements will be made to enable South Africans who are presently members of Her Majesty's Forces to remain in those forces.
    Mr. Profumo: I have been asked to reply.
    For the time being there is no difficulty and in any case authority does exist for the Services to recruit limited numbers of men who are not of British nationality. It is unlikely therefore that any special arrangements will be necessary.

    Germany (Destroyers)
    Mr. Pagetasked the Minister of Defence what consultations have taken place within the North Atlantic Treaty Organisation as to the rôle within the organisation to be performed by the 6,000-ton destroyers that West Germany is proposing to build.
    Mr. Profumo: I have been asked to reply.
    The force requirements, to meet which the Federal Republic has now been permitted to build eight 6,000-ton destroyers, were recommended by the Military Committee of N.A.T.O. and approved by the North Atlantic Council.
    Mr. Paget: Can the right hon. Gentleman give us some indication as to what they are for? How is it imagined that surface ships could be used in the Baltic for war against the East or indeed in any German waters? If the ships are not to be used in German waters, where are they to be used? It seems an odd reply.
    Mr. Profumo: This was done through N.A.T.O. I understand that these ships are required for assignment to SACEUR in accordance with approved N.A.T.O. plans. The Question asked what consultation took place and in my answer I addressed myself to that. If it was not the answer which the hon. and learned Member had in mind, perhaps he will put down a more specific Question.
    Mr. Wall: As these ships are twice the size of a British destroyer, should not they be classified as cruisers?
    Mr. Profumo: I am not sufficiently conversant with all the niceties of the Royal Navy to answer that supplementary question. I have tried to answer the Question on the Order Paper.

    N.A.T.O. (Conventional Forces)
    Mr. Swinglerasked the Minister of Defence if he will set out in tabular form an analysis of the conventional Armed Forces which Her Majesty's Government contribute to the North Atlantic Treaty Organisation and of the proposed contribution of the Federal German Government to the North Atlantic Treaty Organisation, to which he has consented.
    Mr. Profumo: I have been asked to reply.
    No, Sir. Information about the force levels of our allies in N.A.T.O. is derived from N.A.T.O. classified material which is passed on to us on the understanding it is not divulged.
    Mr. Swingler: As quite a lot of information is divulged, may I ask this question: in view of the fact that the Foreign Office automatically agrees to every recommendation by Western European Union to raise the limits on German rearmament, is it the policy of the Ministry of Defence that any limits on the German armed forces should be maintained, or are we to regard that as a dead letter? Is it part of the Government's set policy to make Western Germany the dominant military Power in Europe?
    Mr. Profumo: It is part of the Government's policy to see that the Federal Republic plays a full part in N.A.T.O. That is all that is happening, and it is happening only with the agreement of the authorities concerned.
    Mr. Swingler: That does not answer the question. Is it the Government's policy, in the light of what the right hon. Gentleman has just said, to agree to Western Germany becoming the dominant military Power in Europe?
    Mr. Profumo: If the hon. Member looks at what I have said, he will see that I have answered that. [HON. MEMBERS: "No".] I certainly have, and I shall go no further than that answer. It is the Government's policy to see that Western Germany plays her full part as a full partner in the N.A.T.O. alliance. I have said nothing about a dominant part. We are all partners in this, and we all play the part which we are required to play by N.A.T.O.
    Mr. Paget: Is it not true that neither we nor the French are fulfilling our obligations to N.A.T.O. and that, therefore, we are in no position to do anything except to slay "Thank you kindly" to one who is?
    Mr. Profumo: No. I entirely repudiate that. We are all playing the part which we are asked to play. The forces contributed by the Federal Republic are

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    in accordance with the force requirements approved by the N.A.T.O. Council.
    Mr. Grimondasked the Minister of Defence if he is satisfied that the conventional forces of the North Atlantic Treaty Organisation are adequate to en sure that an accidental or minor incursion would not lead to full-scale nuclear war.
    Mr. Profumo: I have been asked to reply.
    Yes, Sir. The purpose of the current review by N.A.T.O. of its strategy is to ensure, among other things, that they remain so in changing circumstances.
    Mr. Grimond: Is the right hon. Gentleman aware that the increased emphasis which his right hon. Friend placed on conventional weapons is very welcome but that it arouses great questionings in many minds as to where these conventional weapons are? For instance, will he confirm or deny that most exercises down to brigade level in Germany presuppose the use of atomic arms? Has there been any improvement in the N.A.T.O. forces, other than the Germans now serving on German soil?
    Mr. Profumo: I answered a similar question in another connection the other day and perhaps I should paraphrase it. All the exercises for which we are responsible which are carried out in Germany are carried out in accordance with the directive of SACEUR. They all presuppose some nuclear attack because in our view it would be wrong to overlook this. In that view I am very much borne out by what the United States Deputy Minister of Defence said in Washington yesterday. Our allies agree. But if we have an exercise which is set for that purpose, we also start by assuming conventional warfare, and we are therefore constantly training in both roles. The present N.A.T.O. reappraisal is designed to see whether we are right. For the time being my right hon. Friend and I are sure that we are on the right lines.

    Nuclear Weapons
    Mr. Shinwellasked the Minister of Defence, in view of his speech to Western European Union on 1st June, if he will say in what circumstances Her Majesty's Government would decide to use the nuclear weapon first.
    Mr. Profumo: I have been asked to reply.
    As my right hon. Friend the Minister of Defence has made clear on a number of occasions, we do not think it in the best interests of defence to disclose to a possible aggressor the circumstances in which nuclear weapons might be used.
    Mr. Shinwell: Did not the Minister of Defence say at Western European Union that in the event of an attack by an aggressor with superior conventional forces we should retaliate with a nuclear weapon? The Minister has mentioned the statement made by the Deputy Defence Minister of the United States. Has he not said that if conventional forces of a superior character are used against them they intend to unleash the nuclear weapon? Do I understand that that is the policy? Does it indicate a change?
    Mr. Profumo: I will answer the last part of the supplementary question first There is no change in the Government's policy. If the right hon. Gentleman studies my reply, I am sure that he of all people would agree with it. I am not willing to discuss hypothetical matters nor to disclose information which might be of value to a potential enemy.
    Mr. Peyton: Does not my right hon. Friend agree that it would be the height of folly, having possessed ourselves of a deterrent, to say that we would not use it until that event which we seek to deter had taken place?
    Mr. Shinwell: Why does the right hon. Gentleman suggest that I am asking him to disclose information when, if the Press reports are correct—and as far as I know they have not been challenged—his right hon. Friend said categorically at Western European Union that in the event of an attack by an aggressor with superior conventional forces we should unleash the nuclear weapon?
    Mr. Profumo: Perhaps the right hon. Gentleman would read my right hon. Friend's speech.
    Mr. Shinwell: I have no copy of it.
    Mr. Profumo: The hon. and learned Member for Northampton (Mr. Paget) has one, I imagine. If not, I will send the right hon. Gentleman a copy. My

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    right hon. Friend made no mention of this at all in his speech. In answer to a question after his speech, my right hon. Friend gave a reply which was purely a repetition and similar to many previous statements which he has made on this subject.
    Mr. Emrys Hughes: Does the right hon. Gentleman think that we could defend Berlin by conventional weapons? What would be left of Berlin if we tried to defend it with nuclear weapons?
    Mr. Profumo: I do not think that this was a question of defending Berlin. We are here discussing the Western European Union and the speech which my right hon. Friend made in the context of N.A.T.O. strategy. That does not affect Berlin.
    Mr. Paget: According to the Press, what the right hon. Gentleman said is fairly clear. But does it matter in these days what one says, because nobody will believe what is said one way or the other? What seems to be important is the posture taken. We have forces which are being trained, disposed and organised to operate with atomic artillery, and have not adequate artillery for any other purpose, and which are quite inadequate in numbers for a conventional rôle. By that are we not saying very much more emphatically what my right hon. Friend the Member for Easington (Mr. Shinwell) suggested was said by the Minister of Defence?
    Mr. Profumo: I agree with the hon. and learned Gentleman that it does not matter what one says because no one is going to believe it. But it does matter that I shall say nothing, and I am not going to say anything.

  RAILWAYS

    Victoria Line
    Mr. F. Noel-Bakerasked the Minister of Transport whether he has yet authorised the construction of a new Victoria underground line.
    The Minister of Transport (Mr. Ernest Marples): No, Sir. I would refer the hon. Member to the reply I gave to the right hon. Member for Vauxhall (Mr. Strauss) on 31st May.
    Mr. Noel-Baker: Is not this becoming a ludicrous situation? Is not the traffic in London getting worse? Obviously this line is eminently desirable from every point of view. Why cannot the Minister take a decision about it?
    Mr. Marples: The real point is that this line has to be considered with the requirements of the railways as a whole. There is now a new Chairman of the B.T.C. and naturally there will be a reassessment.

  ROADS

    Colchester By-pass
    Mr. Buckasked the Minister of Transport what plans he has for the improvement of road safety on the Colchester by-pass, with particular reference to the entrance to Arclight Works.
    The Joint Parliamentary Secretary to the Ministry of Transport (Mr. John Hay): Our engineers are discussing this problem with the management of the Arclight Works and the Borough Council.
    Mr. Buck: I thank my hon. Friend for that reply. Would not he agree that it is an alarming situation when there are 900 men pouring out on to an unrestricted road? Will he give this matter close attention and, see that action is taken at an early date?
    Mr. Hay: We are fully aware of the problem outside these works. A similar problem is encountered in a great many other places where a large number of people are leaving or arriving at work almost simultaneously, but we will certainly go on trying to find a solution in this case.

    Carriageway Markings
    Mr. Russellasked the Minister of Transport if he is aware that lane markings and directional arrows painted on the roadway are more prevalent in Scotland and the North of England than they are in the South of England, especially the London area; and, as they have proved their advantages as a guide to traffic, if he will speed up their provision all over the country.
    Mr. Hay: These carriageway markings are already in general use on trunk

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    roads throughout the country. In the London Traffic Area for which my right hon. Friend is the traffic authority we intend to increase their use wherever it is practicable and advantageous.
    As regards other roads, we have no evidence that local highway authorities in the South of England are lagging behind those in the North and in Scotland in the application of the markings.
    Mr. Russell: Whether or not there is any evidence in the Department, there is plenty of evidence on the roads that we are lagging behind in this problem in the South compared with the North and also compared with abroad. Will my hon. Friend try to speed up the provision of these markings, because they are an invaluable help in directing traffic to the right lines?
    Mr. Hay: I am sorry, but I must disagree with my hon. Friend. I have asked for an inquiry to be made. The use of carriageway markings is fairly uniform over the country and there is no evidence to show that in the North or in Scotland they are more generally used than in the South. I think hon. Members will agree that their use is extending rapidly throughout the country.

    King's Lynn By-pass
    Mr. Bullardasked the Minister of Transport if he will now state in which year it will be possible for work to start in connection with the King's Lynn by-pass.
    Mr. Hay: As my hon. Friend will know, we were unable to include the classified road section of this by-pass in the three-year programme which we announced recently. I cannot at present say when it will be possible to authorise this scheme or the trunk road section to the south.
    Mr. Bullard: Will my hon. Friend take particular note of the reports which must be reaching him, and to which I have drawn his attention, of very great congestion in the town of King's Lynn? In case he thinks that this is a question only of holiday traffic, will he bear in mind that for many days of the week industrial and commercial traffic in the town is paralysed? As the Norfolk County Council is anxious to include one
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    section of the road in its programme, will he give sanction for it at the earliest possible moment?
    Mr. Hay: We shall give sanction to it as soon as we practically can, but I should emphasise to my hon. Friend that we have now agreed on a grant of £91,000 in 1962–63 for the railway-road extension scheme in King's Lynn, which I think he agreed some time ago should be the first of the routes to be dealt with in this area.
    Mr. Hilton: Is not the hon. Gentleman aware that in recent weeks this area in King's Lynn has had the unenviable record of having 7 miles or more of stationary traffic on its roads? Norfolk County Council for many years has pressed the importance of this bypass which has now become an urgent necessity. Is it not time we had some action in this connection? We welcome people to Norfolk, but do not want them to have to stay in their cars all day long because we want them to come back again.
    Mr. Hay: I think the fact that there are so many cars shows that the welcome is being responded to cordially.

    Parking Meters, London
    Mr. Mellishasked the Minister of Transport if he will make a statement of his present policy regarding the use of parking meters in London.
    Mr. Marples: Parking meters have made a large contribution towards solving the traffic problems of central London. There are already 5,380 meters there and there will be nearly 6,300 by July. I expect a number of other areas to be metered by the end of 1961.
    Outside the central area, I welcome the initiative of Woolwich and Croydon in introducing parking meters. I hope that other local authorities—outside as well as inside the central area—will soon follow their example.
    Mr. Mellish: The right hon. Gentleman will be aware that many of these parking meters are allied to traffic wardens. Will he make a comment on the statement of magistrates in London that there is a state of chaos in the courts because of the present set-up? Does he contemplate the traffic warden situation

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    alongside parking meters as a system which has to go on?
    Mr. Marples: The hon. Member has put down a series of Questions about traffic wardens to the Home Office. I hope that he will direct his inquiries there, because this comes under the jurisdiction of the Home Office.
    Mr. Mellish: As the Minister was himself responsible for the Bill which was introduced about traffic wardens and parking meters, providing that traffic wardens must be there, he should not push me off on to the Home Secretary. That is the oldest trick in the world.
    Mr. Marples: It may be the oldest one, but it happens to be the correct one.

    Wrexham (By-Pass)
    Mr. Idwal Jonesasked the Minister of Transport what plans have been made for the construction of a road by-passing Wrexham and the industrial villages of the area, thus relieving the traffic on the dangerous stretch of the A.483 between Pulford and Whitehurst; and whether he will make a statement.
    Mr. Hay: An Order laying down the line of a by-pass for Wrexham and Ruabon was made in April, 1958. Proposals for a new line further north are under consideration.
    Mr. Jones: While thanking the Minister for that reply, may I ask him whether he is aware that A.483 between Pulford and Whitehurst has been black-listed by the A.A. for its bad accident record? Is he also aware that in the past six years there have been 1,156 accidents on that section of the road, 19 of which have been fatal? Is the Minister further aware that certain widening schemes along this road are increasing the danger at well-known dangerous bottlenecks?
    Mr. Hay: We are well aware of some of these facts. I ought to point out that before we can proceed with improvements to this road and with the building of a new road there, we shall have to go through the statutory processes that are laid upon us by Parliament, and the provision of the land for the new road north of Ruabon is one of the things we have to do. That we are getting on with now.

  TRANSPORT

    Great West Road (Right Turns)
    Mr. Peytonasked the Minister of Transport if, for an experimental period, he will ban all right turns on the Great West Road.
    Mr. Hay: No, Sir. Our engineers are studying various means of reducing traffic delays at the junctions on this road. At some, an improved layout may be desirable. At others, the right turn may be banned and an alternative route indicated. It would be wrong to ban all right turns without considering the traffic requirements at each junction.
    Mr. Peyton: I am sorry to have to say that I find that reply very disappointing. Is not my hon. Friend aware, and has not he been aware now for some time, that the congestion on the Great West Road is becoming quite intolerable? Is not he aware that this suggestion at least contains the germ of something which might make it possible to get along this now very dangerous road where the problems and hazards are not in any way cured by the imposition of a futile speed limit which nobody observes?
    Mr. Hay: We are well aware of the problems on this road. That is one reason why we are looking forward to a considerable improvement when the London-South Wales motorway is completed—[HON. MEMBERS: "When?"]—fairly soon. The London Traffic Management Unit is making a comprehensive survey of traffic conditions, and I can tell my hon. Friend that we are not just dealing with the banning of right turns here. There are a number of other devices and methods which it is intended to use and which are tailor-made for each individual junction. It would not do simply to ban all right turns and leave it at that.

    London-Essex Coast (Holiday Traffic)
    Mr. Ridsdaleasked the Minister of Transport whether, with a view to speeding up the flow of traffic from London to the north-east Essex coast, he will consider making a series of one-way routes to deal with peak-time holiday traffic.
    Mr. Hay: No, Sir. A one-way traffic system in a rural area, even if it would help holiday traffic, would be likely to cause grave inconvenience to the local users of the roads. The local authorities responsible are, however, arranging for alternative routes to the Essex coast to be signposted, and for the police to divert traffic from main roads when necessary.
    Mr. Ridsdale: Is my hon. Friend aware that I regard that as a very unsatisfactory reply? Is he aware that until he can expedite the work on the Stanway by-pass and the Brentwood bypass and at Gallows Corner more radical schemes are needed to overcome the serious problems arising from the increased flow of traffic to the north-east Essex coast? Will my hon. Friend please stop being so complacent about it?
    Mr. Hay: These are pretty hard words for my hon. Friend to use. I tried to answer the Question on the Order Paper which suggested that my right hon. Friend should make a series of one-way roads in rural Essex. I have given reasons why we do not think that a suitable method for dealing with the problem. I can assure my hon. Friend that there are many other things that we are trying to do, including looking into the problems on the various roads which he mentioned. I hope that these will have some alleviating effect.
    Mr. B. Harrison: Will my hon. Friend realise that nothing could be more inconvenient to people living near that road, and that it is quite impossible over many hours of the weekend to get across it or to get on to it? Is he aware that something must be done either by way of by-passes or by the adoption of the idea of my hon. Friend the Member for Harwich (Mr. Ridsdale).
    Mr. Hay: Perhaps my Answer was not quite so discouraging as was thought by my hon. Friend the Member for Harwich (Mr. Ridsdale).
    Mr. Ridsdale: In view of the very unsatisfactory nature of the reply, I beg to give notice that I shall endeavour to raise the matter on the Adjournment.

    South-West (Alternative Routes)
    Mr. P. Browneasked the Minister of Transport what progress has been
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    made with the re-signing of routes to the south-west in order to encourage holiday traffic to use alternative routes.
    Mr. Hay: With the co-operation of the highway authorities and the motoring organisations, eighteen routes in Wiltshire, Gloucestershire, Somerset, Dorset and Devon have been signposted as alternatives to main routes which are liable to congestion in summer.
    Mr. Browne: Is my hon. Friend aware of the importance to the West Country of the holiday industry? Does he appreciate that this alternative route business is a palliative and that what we really need is a higher priority of Government spending on roads in the West Country?
    Mr. Hay: Yes, Sir. The large deputation from many local authorities in the West Country which I recently saw on behalf of my right hon. Friend impressed that point upon me very forcibly.

    Commission's Employees (Trade Unions)
    Dame Irene Wardasked the Minister of Transport what general directions he has given to the British Transport Commission with regard to membership by their employees of appropriate trade unions.
    Mr. Marples: None, Sir. I do not consider that this is a matter in which a general direction would be appropriate.
    Dame Irene Ward: Has the attention of my right hon. Friend been directed to damages awarded to an employee of B.O.A.C. dismissed by the co-operation of the trade unions and the Board of B.O.A.C? May I have an assurance from my right hon. Friend that the British Transport Commission will not get itself involved in politics or involved in any controversy about trade unions? May I have an assurance that the Commission will be fair, strong and resolute in trying to look to the interests of the Commission as a whole and not in getting rid of employees on grounds for which it probably has no reason?
    Mr. Marples: I realise that my hon. Friend has strong views on this subject, but membership of trade unions within a nationalised industry is a matter of management and not an appropriate one for the Minister to intervene in.

    Vehicles (Direction Indicators)
    Mr. Spriggsasked the Minister of Transport whether his attention has been drawn to the larger type of road transport vehicles which are not fitted with trafficators; and what consideration he has given to this matter in his efforts to reduce road traffic accidents.
    Mr. Marples: The fitting of direction indicators is not yet a compulsory requirement for any class of vehicle; I do not expect to decide whether or not to make direction indicators compulsory until we have had experience of the working of new regulations affecting indicators, where these are already fitted, proposals for which I have circulated for comment. The proposals are based on the recommendations of a Working Party of the Economic Commission for Europe. Detailed comments are now being received and studied.
    Mr. Spriggs: Will the Minister of Transport, when looking at this problem of trafficators, also consider the problem of the size of the vehicles now being produced for our roads, and the size of the cabs, as well as the difficulties of following traffic in observing the signals given by the drivers of these very large vehicles, and also the danger which these vehicles constitute on the roads today?
    Mr. Marples: Yes, Sir. That will be one of many considerations which we have in mind. These regulations have been circulated, and I am now awaiting comments. It is very important that we should make absolutely certain before we make anything compulsory that it is the right signal. I very much hope that we can get an international standard, so that cars going to the Continent will have to comply with the same standards as here.
    Mr. J. T. Price: The right hon. Gentleman has referred to the problem of trafficators on these large vehicles—these outsize vehicles, I might say. Some articulated vehicles are over 100 feet long, carrying weights of up to 150 tons. Is the Minister aware that for the past three years I have been constantly assured in this House that the Ministry has an inter-Departmental committee considering the whole question of out
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    size vehicles on the roads, but that nothing emerges from the consideration of this committee? Is it not time that we got some definite lead from the Government as to what we are to do about these monstrosities?
    Mr. Marples: I am afraid that the hon. Gentleman's supplementary question is misconceived. I can send him details of quite a lot that has been done on heavy vehicles.

    Motor Vehicles (Construction and Use) Regulations, 1955
    Mr. Grant-Ferrisasked the Minister of Transport if he is yet in a position to make a statement as to the early amendment of Regulation 21 of the Motor Vehicles (Construction and Use) Regulations, 1955.
    Mr. Hay: We hope shortly to make and lay before the House an amendment supplementing Regulation 21 by requiring the excess fuel device to be so placed that it cannot be used while the vehicle is in motion.
    Mr. F. Noel-Baker: Can the Minister say what he means by "shortly"? Is he not aware of the very great deal of feeling about this matter, which has been the subject of endless delay and excuses from the Ministry? May we have an assurance that we shall have a debate before the Summer Recess?
    Mr. Hay: I hope so, but I cannot say for certain, and I cannot give an exact date. The work on this is very far advanced now, and I hope that it will be settled before very long.
    Mr. Gresham Cooke: When my right hon. Friend is considering amending legislation, will he include in the Regulations the words "annoyance or inconvenience to the public", because it is a strongly held feeling that the police would have a much easier task in prosecuting offenders if these words were in the Regulations?
    Mr. Hay: I will have a look at that, but this is a somewhat complex and technical matter. I would not like to give a firm, categorical assurance, but we will consider that technical point and we shall take advice on it.

    London Traffic Survey
    Mr. Straussasked the Minister of Transport whether he will make a statement about the London traffic origin and destination survey that he announced a year ago; by whom it is being conducted; when it commenced work; when its report will be available; and whether he is satisfied that its scope is comprehensive enough to provide the information necessary for the long-term flowing of London traffic.
    Mr. Marples: Messrs. Freeman, Fox and Partners were appointed by the L.C.C. and myself in December last, to advise on the form and organisation of this survey. Their report has been fully considered by my advisers and by those of the L.C.C, and I hope that the contract will be let this month. The field work can then begin with the ending of the holiday season.
    The final report will probably take eighteen months to two years to prepare, but it will be preceded by interim reports. It will be the largest study of its kind undertaken anywhere in the world, and I am satisfied that it will provide us with the information we require.
    Mr. Strauss: May I ask the right hon. Gentleman two supplementary questions? Will the survey provide all the information necessary for planning the road system of London twenty or thirty years ahead, or is it not a survey on too small a scale for that? Secondly, why has there been all this delay? It was in the summer of last year that this important survey was announced, and now it is to be many months before it is to be started. Surely, this is wholly unnecessary. Is it not just another example of the delaying methods of the Ministry of Transport?
    Mr. Marples: I do not think so at all. First, as to the scope of the survey, it will be wide enough. In terms of the population to be covered, it is already the largest traffic survey in the world, and to increase its size would make it unmanageable. Therefore, I think that it will give us all the information we want. There has been no delay, for this reason: it was necessary for the consultants themselves to consider the terms of reference to see whether they
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    could make suggestions, and for the L.C.C. to make its own suggestions, so that the actual terms of reference, when they started work, would ensure that we get the right sort of report. I hope that the L.C.C. will consider it in its Roads Committee on 9th June, and get it through the full Council by the 20th, so that we can move straight away.
    Mr. Wade: Will the survey assist the Minister to consider the effect of dual carriageways in the central areas of large cities like London, having regard to the very strong criticism made and the probability that the creation of dual carriageways in central areas merely brings in increased traffic and ultimately adds to the congestion?
    Mr. Marples: The main objects of the survey are, outside the L.C.C. area, to establish the design capacity of main motorways and trunk roads leading into London, and to enable the design capacity and optimum general location of main crossing or ring roads to be decided; and, inside the L.C.C. area, to allow the best general location and design capacity of the main new and improved roads to be decided.

  SHIPPING

    Nuclear Power
    Mr. Grimondasked the Minister of Transport if he will now make a statement on the application of nuclear power to merchant shipping.
    Mr. Albuasked the Minister of Transport what decision he has made on the proposals to build a nuclear-powered tanker.
    Mr. Straussasked the Minister of Transport if he can now make a statement about the award of a contract for the construction of a nuclear-powered tanker.
    Mr. Willeyasked the Minister of Transport whether he will now make a statement on the building of a nuclear-propelled merchant ship.
    Mr. Marples: I regret that I am still not in a position to announce the Government's decisions in this difficult matter. I will make a full statement to the House as soon as possible.
    Mr. Grimond: Is the Minister aware that this Answer must be added to the growing list of Answers which have given something less than complete satisfaction to the House? Is he aware of the anxiety being caused at the mounting delay in this matter? Can he give a firmer indication when this statement will be made?
    Mr. Marples: I am afraid that I cannot. It raises complex and very complicated issues. We want to make absolutely certain that we are using our limited resources to the best possible effect.
    Mr. Albu: Is the Minister aware that the problem is not in designing a ship which might be most economical in use but in giving the British shipbuilding industry some experience of the technique of building ships capable of using a nuclear reactor? Is he aware that if we do not make progress soon British shipping will be even more backward than at present?
    Mr. Marples: I cannot accept that from the hon. Gentleman. The matter was more clearly put in a leader in The Times which stated that the truth is that a truly promising reactor for merchant shipping has not yet been developed anywhere and that we ought to use our limited resources for developing one.
    Mr. Strauss: After all the steps have been taken with the contractors to get estimates and so on, is there really a possibility that no contract at all will be given? Is it a matter of delaying for a short time to see which contract should be given or whether the contract should be amended, or is there a possibility that no contract at all will be awarded by the Government?
    Mr. Marples: At this stage I would rather make no pronouncement about that.
    Mr. P. Williams: Is not the important thing here not the question of building a ship but of designing a commercial nuclear-powered reactor which is suitable?
    Mr. Marples: I agree with my hon. Friend, and that is one of the things which has been exercising my mind.
    Mr. Willey: Is not the Minister aware that his inability to take a decision is
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    disturbing the shipping and shipbuilding industries? May we assume from the fact that his hon. Friends have withdrawn their Questions from today and transferred them to next Wednesday that he will make a statement next Wednesday?
    Mr. Marples: The hon. Gentleman must ask my hon. Friends about their intentions. I cannot tell him what they are. The real point in this matter is that we should make the correct decision, not necessarily a speedy decision.
    Dame Irene Ward: May I ask my right hon. Friend to circulate in the OFFICIAL REPORT the number of occasions on which he has told us that he is going to give us an answer "quite shortly"? Can he define what he means by "quite shortly"? Why has he altered his technique and when will the answer be given?
    Mr. Marples: My reply, which I phrased very carefully, was "As soon as possible".

    Shipbuilding
    Mr. Albuasked the Minister of Transport what action he proposes to take arising out of the Report of the Sub-Committee on Prospects in the Shipbuilding Industry and the Report on Research and Development Requirements in the Industry made by the Department of Scientific and Industrial Research.
    Mr. Willeyasked the Minister of Transport what action he has taken about the Report of the Sub-Committee of the Shipbuilding Advisory Committee.
    Mr. Marples: Most of the recommendations in the Report of the Sub-Committee of the Shipbuilding Advisory Committee are addressed to the industry, and I will keep in touch with the industry about their implementation.
    The further improvements in the services of the Export Credits Guarantee Department announced by my right hon. Friend the President of the Board of Trade in April are relevant to the recommendation about credit facilities. I am considering the other two recommendations addressed to the Government, which relate to possible scrapping schemes and to orders for Government ships.

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    My Department and the Department of Scientific and Industrial Research are pursuing the studies recommended in the latter's Report.
    Mr. Albu: Does the Minister not agree that both these Reports were compromise documents, not objective studies? Is he aware of the facts behind the Reports, on which they were based? Particularly, is he aware of the very severe criticisms made of the marine engineering industry in the Report by the Department of Scientific and Industrial Research? What action does he propose to take to make improvements in that industry?
    Mr. Marples: I am aware that to some extent they are bound to be compromise documents with all the interests on the Sub-Committee of the Shipbuilding Advisory Committee, but we are holding discussions with both shipping and shipbuilding interests and the D.S.I.R. on the question of research, which I think most important.
    Mr. Willey: One again, will the right hon. Gentleman try to face taking decisions on these matters? Now that he is scrapping a large section of his legislative programme, will he give more time to these urgent problems of British shipping and shipbuilding?
    Mr. Marples: The question of a decision in this case does not rest with the Minister alone. For example, one of the recommendations of the General Council of British Shipping is that more research should be done. Therefore, I asked it for a list of the research it had in mind. So far I have not received a list. When it comes it will be studied straight away.
    Mr. Albu: Can the Minister say in particular what is likely to be the future of P.A.M.E.T.R.A.D.A., which has been criticised as an organisation which is more likely to restrict than to promote new ideas?
    Mr. Marples: I cannot say what the outcome will be, but that is one of the things being considered by both sides.
    Mr. P. Williams: When my right hon. Friend talks about scrapping shipping, will he be careful not to engage in a policy which will lead to a decline in the gross tonnage of the British Mercantile Fleet?
    Mr. Marples: That is one of the things which the shipbuilding employers have asked me to discuss with them and I am discussing it with them.
    Mr. Hector Hughes: Will the Minister look back over his record and that of his predecessor in this matter and realise that it is some years since the Government promised to give precedence to consideration of this problem, which affects not only the prestige of Britain but also employment in Britain's shipyards? Will he say why the Government are dragging their feet? Is it the scientists or the Government who are dragging their feet in this matter?
    Mr. Marples: Nobody is dragging his feet.

    Government Assistance
    Mr. Rankinasked the Minister of Transport whether, in view of the fact that the Government have decided that aid to the Cunard Steamship Company in relation to the maintenance of an express passenger service on the North Atlantic is desirable in the national interest, he will consider other cases where equally cogent reasons can be shown for Government help.
    Mr. Marples: The Government's view is that the circumstances which impelled them to help in the maintenance of the British trans-Atlantic express passenger service are unique.
    Mr. Rankin: Is the Minister aware that the suggestion in this Question is one of the recommendations of the General Council of British Shipping? I think it is also supported by his own sub-committee on shipbuilding. Will he not agree that it would be helpful if he could say to the other shipping areas, Belfast and Tyneside, that when the new Cunarder comes to Clydeside, as already promised, they too will have his attention with regard to this sort of development?
    Mr. Marples: In reply to the second part of that supplementary question, the new "Queen" has not been promised to any particular yard. It will go according to merit. In regard to the first part of the supplementary question, if the General Council of British Shipping has any application to make no doubt it will make it, and we shall look at it when it is made. I do not think it can find comparable circumstances.

    Goole (Dock Appliances and Machinery)
    Mr. Jegerasked the Minister of Transport whether he is aware of the complaints from all sides of the industry that the dock appliances and machinery at the port of Goole are inadequate and unsatisfactory and that in consequence there is a loss of efficiency and trade; and whether he will advise the Rochdale Committee to extend its investigation so as to include the port of Goole, the only port in the West Riding of Yorkshire.
    Mr. Marples: I am aware that the British Transport Commission has received certain representations about the maintenance, improvement and further development of the port of Goole. Such matters are primarily for the Commission's own commercial judgment and decision It is for the Rochdale Committee to decide whether to extend its inquiries at a later stage to include the port of Goole.
    Mr. Jeger: Is not the Minister aware of the importance of the port of Goole, not only to existing Continental and coastal traffic, but also in the framework of the Common Market negotiations and discussions?
    Mr. Marples: Yes, Sir, I am; but it is common sense and logic that the Rochdale Committee will go to those ports which have the heaviest volume of foreign dry cargo traffic, and thereafter, I have no doubt, they will look at Goole.

    Government Policy
    Mr. P. Williamsasked the Minister of Transport whether he will now make a further statement of the Government's policy towards British shipping.
    Mr. Marples: My discussions with the General Council of British Shipping on the recommendations made in its Survey Report are not yet complete.
    Mr. Williams: While recognising the difficulty of pursuing this matter at Question Time, and also recognising that it is not strictly the responsibility of my right hon. Friend, may I ask him if he can give an assurance that he will support the idea of a debate on shipping and shipbuilding before the Summer Recess?
    Mr. Marples: I would rather leave that to my right hon. Friend the Leader of the House.
    Mr. Mellish: Cannot we have something more specific from the Minister? He is to leave the question of traffic wardens to the Home Secretary and the question of a debate to the Leader of the House. When is he going to do something himself? Cannot we have a debate soon?
    Mr. Marples: I accept the implication, and, as the hon. Gentleman has Supply Days at his disposal, no doubt he could put that subject down for debate.

  POST OFFICE

    Correct Address (Advertising Campaign)
    Mr. D. Smithasked the Postmaster-General what effect the Post Office "Put the Correct Address" advertising campaign has had on the public; and if he will make a statement.
    The Assistant Postmaster-General (Miss Mervyn Pike): I assume that my hon. Friend has our Press advertisements in mind. So far, we have been concerned with measuring, through readership and comprehension surveys, the impression these advertisements make on the public. From this point of view a survey on the campaign in February and March this year is encouraging.
    Mr. Smith: How are the Postal Code experiments going? Is it planned to extend them to the rest of the country in the near future?
    Miss Pike: At present the experiments are going very well indeed, and we hope that in time we shall be able to go much further with this plan.

BALLOT FOR NOTICES OF MOTIONS
  Public Schools (Entry)
  Mr. Prior: I beg to give notice that on Friday, 16th June, I shall call attention to the need for a broader-based entry of boys to public schools and for Government support in this matter, and move a Resolution.
  Reception Areas (Planning)
  Mr. MacColl: I beg to give notice that on Friday, 16th June, I shall call attention to the importance of having a planned programme for the provision in reception areas of employment and social services for people displaced from large built-up areas through re-housing and redevelopment, and move a Resolution.
  Former Overseas Officials (Pensions)
  Mr. N. Pannell: I beg to give notice that on Friday, 16th June, I shall call attention to the disadvantages suffered by pensioners formerly employed overseas either directly or indirectly by Her Majesty's Government, and move a Resolution.

COMPLAINT OF PRIVILEGE
3.32 p.m.
Mr. Peter Rawlinson: Mr. Speaker, I seek to raise a matter of Privilege, of which I have given you written notice. It arises from column 62 of the OFFICIAL REPORT of 5th June, which was published on 6th June. It is a Question by the hon. Member for Southall (Mr. Pargiter), set down for Written Answer, and the Written Answer by the Attorney-General.
I have delayed raising this matter because I have attempted to communicate with the hon. Gentleman. I have written to him, telegraphed him and, indeed, telephoned, but I have only just learned that he left this country for abroad. I deeply regret that he is not present now, but the fact that he was not present at the time when the Answer was published plays some part in my submission.
I accept that often the rule is that Members are solely responsible for what they put in their Questions or comments. This Question was not expressed to seek confirmation of certain facts. It inquired whether the Attorney-General was aware of certain definite facts. These facts, if true, meant that a citizen was guilty of a serious crime and infamous conduct and, if false, must have done that citizen very grave injury.
The facts which the hon. Gentleman stated were that a gentleman called Mr. Frederick Beezley, as an officer of the
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Attorney-General's Department, was engaged in a certain investigation and that he deliberately delayed the investigation
"in order to make it impossible to take legal action against the company".—[OFFICIAL REPORT, 5th June, 1961; Vol. 641, col. 62.]
This is obviously an extremely serious charge against a person who, it appears, was an officer of the Director of Public Prosecutions and was a premise to a Question alleging that he had obstructed the course of justice.
From the Answer which was published in the OFFICIAL REPORT it appears that Mr. Beezley was not an officer in the Attorney-General's Department, but was in the office of the Director of Public Prosecutions; that he was not concerned in the investigations at any stage; that there was no delay in the investigations, which were completed in time to permit the institution of criminal proceedings; and that the hon. Gentleman had produced no evidence to support his allegation.
In my submission, the Question and Answer in that form raise an important matter of principle. I want to make it plain that I do not know the citizen concerned. I have had no communication from him or with him. Where an hon. Gentleman formally accuses a citizen in circumstances which attract much publicity and which, if false, must do the citizen grave harm, and does this by means of seeking a Written Answer only, and then, by leaving the country precludes himself from taking the earliest opportunity—[HON. MEMBERS: "Oh."] He precludes himself from taking the opportunity if he wishes to withdraw and apologise, because as he posed the Question it might be that the Answer showed that he was wrong. If he was wrong, he would doubtless wish to apologise and withdraw.
In my submission, privilege ultimately means the protecting of the rights of Members, which exceed those of the ordinary citizen, solely in order that that we can perform our functions as Members of the House. These rights carry responsibilities not to set out matters recklessly, otherwise other citizens suffer, Parliament suffers and the reputation of the House is lowered in the eyes of the country if redress cannot be given to an injured citizen.

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Where this differs from many other cases and amounts, I regret to say, to a contempt is that if, in a debate, a reckless charge is made an hon. Member is in a position immediately to withdraw it and apologise if he thinks fit. However, where an accusation calls for a Written Answer and the hon. Member is then absent, there is no opportunity for the spirit of the House to prevail upon the hon. Member to withdraw.
In my submission, this presents a prima facie case of an abuse of the privileges of the House. Alternatively, I seek your guidance, Mr. Speaker, as to how the House can, in the interests of its own reputation, request either that the hon. Gentleman speedily produces the evidence which he did not care to produce before he absented himself from the House or, alternatively, speedily and honourably withdraws so that the citizen can get from the House the redress which he cannot get from the courts.
Mr. Frederick Lee: On a point of order. Is it not unfortunate that the hon. and learned Member for Epsom (Mr. Rawlinson) should say that an hon. Member has left the country, in a rather remarkable connotation, when my hon. Friend the Member for Southall (Mr. Pargiter) is visiting the United States on a very important County Council Association visit representing a very important council in Britain?
Mr. Sydney Silverman: On a point of order. We are discussing the propriety of these matters. If the hon. and learned Gentleman wanted to make a statement of this kind concerning my hon. Friend the Member for Southall (Mr. Pargiter), was it not his duty to find out where my hon. Friend was and, if he was not available, to postpone this accusation until he was here?
Mr. R. T. Paget: On a point of order. With great respect, without commenting at all upon bringing in names in a Question—I certainly would not wish to defend that practice in any way—is it not an abuse of the proceedings of the House to raise as a matter of Privilege something which the hon. and learned Member for Epsom (Mr. Rawlinson) knows, and we all
1090
know, has nothing whatever to do with Privilege?
Hon. Members: Oh.
Mr. Speaker: I lost a word which the hon. and learned Gentleman addressed to me. I ask him to be good enough to repeat it.
Mr. Paget: I am sorry, Mr. Speaker. Is it not an abuse of the proceedings of the House to raise as a matter of Privilege on an occasion such as this a matter which the hon. and learned Gentleman and everybody else in the House knows has nothing whatever to do with Privilege? The procedure is perfectly clear. Where the conduct of an hon. Member, within his rights, in the form of a Question he tables, is considered improper, the procedure is to put down a Motion to that effect. To raise it as a matter of Privilege when it has nothing to do with Privilege is an abuse of the procedure of the House.
Mr. Speaker: I must rule on this—if I have now escaped from further advice in the matter. I am very anxious that nothing I should say should be thought—it would not be thought in the House, but might be thought outside—to mean that this House would not, in certain circumstances, be alert to protect the citizen against the activity of one of its Members. I am not saying that. Supposing there was a case—I am not saying that it is this one—where an hon. Member knowingly and deliberately put a false and defamatory allegation about a citizen into a Question, and thereby used the procedure and paper of this House to give publicity to the allegation while he himself was protected, I imagine that it might well be that the House would think that there was an abuse of procedure such as to constitute a contempt, and that the House would undoubtedly think it right to deal with it, because such a statement could only be challenged here in the House, and the House would want to look after the rights of its Member, on the one hand, and the rights of the citizen, on the other. That is what I would feel about it.
It seems to me that what I have to do is to rule whether or no the hon. and learned Gentleman's complaint raises a prima facie case of contempt, a breach of Privilege in the form before me. All I have is the allegation against the

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individual which the hon. Member put in his Question, and for which he takes responsibility, and the assertion of the Attorney-General in his Answer that there was no evidence to support that allegation.
I cannot judge between the hon. Member and the Attorney-General—only the House can do that—so I am quite unable to rule whether or no the statement was prima facie untrue or not, and even if I had material on which I could say that the statement was prima facie untrue, I have, of course, no material whatsoever on which to say that the hon. Member, in making that assertion in the Question, did so knowing its falsity, and deliberately, in such a way as to constitute an abuse of the procedure of the House.
I therefore rule that the complaint does not raise a prima facie case of contempt or breach of Privilege. The House and all else will understand that my so ruling has no more effect than this: that the complaint cannot take priority over the Orders of the Day. Whether or no the House thinks fit in due course to investigate the matter further by any means it thinks fit is left quite unrestricted by my Ruling. For my own part, I must say that I would be astonished if the House were to do anything about it before the hon. Member was back and present.

ORDERS OF THE DAY

  FINANCE BILL
  Considered in Committee [Progress, 1st June].
  [Sir GORDON TOUCHE in the Chair]

  FINANCE BILL

    Clause 11.—(SURTAX: RELIEFS FOR EARNED INCOME.)
    3.44 p.m.
    Mr. Douglas Houghton: I beg to move, in page 8, line 5, after "of" to insert "assessing and".
    The Chairman: I think that it would be convenient for the Committee to discuss with this Amendment that in page 8, line 5, to leave out "for" and to insert:
    "in respect of income arising in"
    and that in line 6, to leave out "of assessment".
    Mr. Houghton: As you say, Sir Gordon, this Amendment can be taken in conjunction with those that you have mentioned.
    As this is the first of a series of Amendments to this Clause, perhaps I may be permitted to make some brief preliminary remarks about our general approach to the matter. We on these benches are against Clause 11 as a whole. We shall oppose it, amended or unamended, because in our view it has no rightful place in this Bill and in the Budget in the context of the present economic and social situation.
    We are against it, against what went before it in the way of supplementary Budgets, and against what is in Clause 11 now but, without prejudice in any way to our opposition to the Clause as a whole, we have put down these three Amendments, which are designed to correct faults in the Chancellor's own proposals. Even if we accept the right hon. and learned Gentleman's own premises as the basis for the proposal in Clause 11—which, as I have just said, we do not—we consider that he is mistaken in three respects.
    First—and this is dealt with in the Amendment I am now moving—he gives incentives retrospectively to all self-employed persons who are assessed under Schedule D on the profits or gains of the

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    preceding year. This is precisely what the Chancellor said he wished to avoid when putting a forward date to the Surtax reliefs in this Clause, and I will be returning to the detail of this Amendment in a moment.
    The second of our three Amendments to Clause 11 deals with the incidental advantage that is given to unearned income by the relief which the Chancellor proposes for earned income. By reason of the reduction in earned income for the purpose of the charge to Surtax, the Surtax rate on unearned income is consequently reduced. We have tabled the second Amendment to rectify that fault.
    Thirdly, we think that the Chancellor should have restricted or excluded from any business expenses deductible from the Surtax assessment certain types of expenses in which the taxpayer shares some amenity or personal benefit. We contend that these are flaws in a Clause the general principles of which we disagree with as much as with the proposals themselves.
    With that introductory explanation, I will now deal with the first of our Amendments. In his Budget statement on 17th April, the Chancellor had this to say about Surtax reliefs:
    "The changes I propose will be applicable to incomes earned—I repeat earned—during this new financial year and thereafter. In other words, the changes will affect what is payable on and after 1st January, 1963."
    I myself thought that the Chancellor made an aside at that point, although it is not recorded in the OFFICIAL REPORT. I thought that I heard him say that there was no point in giving incentives when the money had already been earned; but I may have been mistaken.
    Be that as it may, what the Chancellor is doing under his present proposals is to give retrospective incentives to a certain class of Surtax payer. He intended that the reliefs he was giving should relate to income being currently earned now. He stressed two points. One was that the reliefs would be given to earned income—and we have another Amendment later to deal with the fact that, as I said a moment ago, unearned income will consequentially benefit from the reliefs given.
    The Chancellor not only stressed that the relief was to earned income, but
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    that it was to income being earned, as he said
    "…during this new financial year and there-after."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 820.]
    I quite understand the logic of his approach. He wanted to give this stimulus now, and there was no point, in pursuance of his general objective, in giving retrospectve benefit. So he wanted the benefit of these reliefs to be reflected immediately in these incentives to those who are earning incomes in this new financial year and thereafter.
    I suppose that the Chancellor's intention was that the 400,000 key men and women in Britain, including the whole of the Treasury Bench, should, upon hearing of these tax reliefs, show renewed vigour, energy and enterprise. Slothfulness was to be banished, intolerance dissipated, resentment removed, work to rule was to be abandoned and all drags on the fullest use of brain, skill and enthusiasm were to be removed from Monday, 17th April, at 6 p.m., the day of the announcement of their fiscal emancipation.
    One can almost hear the hum of their increased activities. It was certainly the Chancellor's intention that this should happen. But we find, incidentally, that by the method of assessment for Income Tax under Schedule D the Chancellor is conferring retrospective incentives on people who have already earned the money and cannot possibly now give him any reward for the initial period over which they will get their Surtax reliefs.
    I refer, of course, to all of those in business on their own—professional men in private practice and other self-employed persons—who are assessed under Schedule D on the profits of the preceeding year. As we all know, SurTax assessment are based on the Income Tax assessments made for the same year. For 1961–62, Surtax will be levied under Income Tax assessments for this current Income Tax year 1961 to 1962.
    The Surtax assessments are not, however, made up until the Income Tax assessments for the year have been settled, and that is why there is a period of eight months after the end of the Income Tax year before the Surtax assessments are completed and the notices and demand notes are sent out.

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    As the Chancellor pointed out in his Budget statement, the Surtax assessments for 1961–62 will be the first in which these reliefs are given and the reduced Surtax will be payable on 1st January, 1963. As we can see, whereas those in employment during 1961–62 will be taxed on the incomes they are earning now, in the case of tax assessments on profits and gains—for the individual trader and professional man in private practice, and others similarly self-employed—Income Tax for the current year, 1961–62, will be on the amount of profits or gains earned in the Income Tax year 1960 to 1961, because the basis of assessment in this year is the profits and gains of the preceding year.
    In those circumstances, it follows that Clause 11 gives relief to these people on incomes which were already earned—earned, indeed, before the Chancellor rose to his feet on 17th April. And there is no point either from the standpoint of incentive or fiscal justice in relieving incomes which were earned before the Chancellor announced these proposed reliefs. We cannot, therefore, agree to retrospective incentives. We do not think that they make sense. Indeed, the Chancellor's only possible excuse for introducing Clause 11 into the Bill is that he believes that it will add to the economic and industrial strength of the country.
    As my hon. Friends and I said on Second Reading, there can be no justification for Clause 11 on the ground of equity, when it was preceded by earlier measures imposing higher National Health contributions and additional Health Service charges. The Chancellor raised substantial additions of revenue by those two previous measures. No one would tolerate what the Chancellor is proposing in Clause 11 unless he believed that it had something to do with the strengthening of our economy at this time.
    The Chancellor cannot say that the number of Schedule D Surtax payers is so inconsiderable that it was scarcely worth worrying about this particular anomaly. There are, in fact, as far as I can trace, about 50,000 individual Surtax payers—traders, professional men, and so on—who have Schedule D assessments of more than £2,000 a year. There are 50,000 others who are in partnerships
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    where the Schedule D assessments are also more than £2,000 a year. Not in all cases of partnerships is each partner liable to Surtax, if the total profit of the partnership is only £2,000 or £2,500 a year. I quote these figures from Table 38 in Command Paper 1258, which is the Report of the Commissioners of Inland Revenue. Traders and professional men and other self-employed persons in the Surtax range are neither inconsiderable in number, nor in the total income on which they pay Surtax.
    My hon. Friends and I hope that it will not be too hard on the self-employed Surtax payers to say to them that the reliefs from Surtax in their case should be deferred for a year, so that the incentives we wish to give them shall apply at a time when they can be reflected immediately in greater effort, greater efficiency and in other ways which will be revealed when they receive the incentive.
    Sir Derek Walker-Smith: While the hon. Gentleman is considering this point, will he, in addition to the question of incentives, appreciate that it is a principle of Income Tax law that there should be equity between taxpayers? Would he give an undertaking whether, if at any time in the future Surtax is raised should the party opposite come into power, there will be a similar deferment of operation in respect of profits of Schedule D taxpayers?
    Mr. Houghton: It would, of course, depend on the circumstances in which Surtax was raised. This is not a fiscal operation. It is, as I see it, an economic operation. The Chancellor is using the instrument of taxation to achieve certain economic objectives. I cannot see any other purpose for the proposal he is making in the context of the present situation.
    I agree with the right hon. and learned Gentleman the Member for Herefordshire, East (Sir D. Walker-Smith) that if we defer the concession on the ground that this concession is related to a special effort, to give it prematurely would not further that objective. We should, further, certainly have to consider, if Surtax were increased in the future, whether a deferment in their case would be justified,

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    having regard to the deferment in Clause 11 which is now proposed.
    If we leave it as the Chancellor proposes, ray hon. Friends and I consider that the Schedule D taxpayer will have undue advantage over the Schedule E taxpayer, because the Schedule E taxpayer will have to sing for his supper before he gets the reward. He is exerting himself now to justify the relief that he will get in the year 1961–62 on the income that he is earning now. But the self-employed business or professional man will get relief on income earned during the year 1960–61; that is to say, he will get relief before he has bestirred himself—
    4.0 p.m.
    Mr. Michael Shaw: How would the hon. Gentleman deal with this proposal that he is putting forward with regard to the opening years of professional assessments and also, indeed, with regard to the closing years? Clearly, it would be possible to get out of this difficulty in many cases by having a cessation of partnerships and starting new partnerships later.
    Mr. Houghton: The hon. Gentleman, for whom I have a great respect and who is an accountant, is trying to complicate my argument. He is trying to make things difficult for me. What I am trying to do is to convince the Chancellor of the Exchequer that if there is any sense at all in Clause 11 it does not make sense to apply these incentives retrospectively to a certain section of the taxpayers concerned. That is what I want to get over to the Chancellor, and I do not want to be deflected by any accountancy complications raised by the hon. Member for Brighouse and Spenborough (Mr. Shaw).
    This is a perfectly simple point. As we shall see later, when we come to other aspects of Surtax, there has been an abundance of manipulations of liability to Surtax to achieve certain purposes or to place limits on reliefs which might not on logical grounds have any limit at all, but which have been imposed as a matter of judgment especially in the relations between one citizen and another and one group of taxpayers and another.
    I think that in this case it can be argued that fiscal equity would require
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    that all Surtax payers should get their reliefs at the same time on the same Income Tax assessment made in the same year—and that is perfectly logical—but I want to pin the Chancellor down to the motive behind Clause 11 and I do not want anyone to help him wriggle out of it. The truth is that unless the added incentives, which the Chancellor said were the mainspring of his approach to Clause 11, are in the forefront the whole time, they are merely an excuse, and I do not think that the Chancellor would try to deceive the Committee and the country by using incentives as a blind for reaching some accommodation with the Conservative Party on the whole question of the high levels of taxation and the better-off.
    I know that it is absolutely in the tradition of the Conservative Party to relieve the rich of tax and to impose it on the poor. We know that. It has done it this year. Indeed, the echoes of our protest against it have hardly died in the corridors of the House. Only a few weeks ago we were opposing the imposition of additional Health Service charges and National Health contributions and some of us said that this was the preliminary to reductions in Surtax. I stated that publicly. I said to my constituents, "You watch. This is merely a curtain-raiser to the reliefs on Surtax". Everybody knew it was coming.
    I gave examples of the introduction of Health Service charges and National Health contributions several years ago at a time when earned income relief was extended for Income Tax purposes to incomes between £4,000 and £10,000 a year. In fact, I believe I am right in saying that earned income relief was extended from £2,000 to £10,000 a year only a few weeks after the introduction of additional Health Service charges and National Health contributions.
    I am asking the Chancellor to dispel this belief that this is how the Tories behave. He said that incentives lay at the root of the proposals that he was making in the Budget, and I want to keep him to that. If I keep him to that, then I think that we on these benches are justified in pointing out one of the weaknesses of the method by which he proposes to do it. With great respect to my hon. and learned Friends, I do not see that we can justify giving Surtax reliefs for a period

    1099
    when, for all we know to the contrary, lawyers were turning down briefs, solicitors were rejecting business, accountants were delaying producing their accounts to inspectors of taxes and when there were other evidences of laziness, resentment or indolence owing to the high levels of taxation, all of which are now to be remedied by these Surtax reliefs. We see no reason for giving reliefs during a period when these undesirable features may have been in evidence. Those reliefs should be related to conscious effort to justify them.
    I have taken rather a long time in moving this Amendment because I was deflected from my main task, but I hope that there may be opportunities of dealing with any further arguments which hon. Members opposite may raise in the course of the debate.
    Mr. John Diamond: Clearly, two views about this matter are held in this Chamber. There is the view expressed on the benches opposite, that Surtax relief is an encouragement to effort. There is the view held on this side of the Committee, that relief from Surtax is the plea put forward by those who find themselves in a soft spot and would like it to be softer. The view that I hold very strongly is that all the arguments advanced from the benches opposite for reductions in Surtax are "phoney" and are known to be "phoney", and that this Amendment demonstrates that to the full.
    My hon. Friend the Member for Sowerby (Mr. Houghton), who introduced the Amendment so forcefully and fluently, referred to an aside by the Chancellor which did not appear in the OFFICIAL REPORT. In fact, there is in the OFFICIAL REPORT a statement which is as clear as a bell, when the Chancellor said, in the debate on 17th April:
    "It would be illogical to reduce what is already payable on past effort on the ground of giving an incentive to future effort."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 820.]
    Let us examine what the Chancellor has said, not in the high hopes which my hon. Friend has expressed of producing some logicality of treatment on the other side of the Committee, but merely to demonstrate, as I am convinced the Chancellor knows, that this so-called incentive is utter poppycock and that
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    everybody who has considered it has found it to be utter poppycock, that no careful investigation has shown one iota of evidence that reduction in Surtax is an incentive of any kind and, indeed, that the evidence is overwhelming that it is the reverse for the commonsense reason that if a person needs something he works to get the money to buy it, and that if the tax is higher he has to work the more to have the net cash left over with which to buy what he wants. That is common sense, proved by every single investigation which has taken place.
    I repeat that I am not on the same high level as my hon. Friend the Member for Sowerby. I have no hope of producing sincerity or logicality on the other side of the Committee. I limit myself to demonstrating the utter falsity of the arguments which have been deduced. The first argument is that "it would be illogical to reduce what is already payable on past effort on the ground of giving an incentive to future effort." Those who make efforts are people assessed under Case II of Schedule D, people who carry on professions, people like the hon. Member for Brighouse and Spenborough (Mr. Shaw) and myself and many other professional people in the House, people who work very hard in the House and outside, people on whose judgment a great deal of business decisions are made, people on whom, therefore, the prosperity of the country depends to a certain extent.
    Mr. Ellis Smith: To a certain extent.
    Mr. Diamond: I said "to a certain extent". I do not exaggerate. I say that these are all people who ought to exert the greatest effort in the work of the country. We all share that view.
    The Chancellor's theory is that, if we reduce their Surtax, that will be an incentive, but we must not reduce it retrospectively because that would be nonsense. It would indeed be nonsense. All these people are assessed on the basis not only, as my hon. Friend rightly pointed out, on the previous Income Tax year's income but, much worse than that, on the basis of the accounting year ending within the previous Income Tax year. I will give an example to explain what I mean.

    1101
    My birthday is on 30th April. I hope that everyone will take due and proper note of that so that I shall receive the right sort of communications from the respective sides of the Committee. I am a professional man and, as a matter of coincidence, I end my accounts on 30th April. On 30th April, 1960, I ended my accounts, and the effort which I put in in the distant twelve months from 1st May, 1959—it is almost prehistoric—until 30th April, 1960, resulted in the income I earned which will be assessed for the tax and Surtax on which I will receive relief under these provisions which we are discussing now, that relief being supposed to be an inducement to make me work harder.
    What greater piffle than that could anyone produce? It is work I did in May and June, 1959. I was not then even able to direct arguments against the Chancellor, because he was not in that office then. This demonstrates how ridiculous it is for the Chancellor to say that his proposal is based on an incentive for this very large class of taxpayers and Surtax payers.
    The hon. Member for Brighouse and Spenborough tried to blind my hon. Friend with science. He was, of course, quite unsuccessful because my hon. Friend has a very scientific mind. He has probably spent as many years on these matters as the hon. Gentleman has spent months. The hon. Gentleman knows full well that there is this complication of the year of assessment which the Government obstinately refuse to alter. In spite of the recommendations of the Institute of Chartered Accountants, to which the hon. Gentleman and I both belong, in spite of the recommendations of the Royal Commission, in spite of the common sense of the matter, and in spite of the fact that, if it were altered, all sorts of unpleasant and unsatisfactory dodges for tax avoidance would be avoided, the Chancellor, in his judgment, has hitherto obstinately refused to alter that basis of computation and, as a result, we have, apart from anything else, many Clauses in this Finance Bill to cope with it in terms of taxation overseas. We have put down a new Clause to deal with it. No doubt the hon. Member for Brighouse and Spenborough, with his knowledge, logic, professional understanding, and loyalty to his profession, will support that
    1102
    Amendment in argument and in the Division Lobby when the time comes.
    It is recognised that the present year of assessment basis lends a certain technical complication to this matter, but that does not alter the argument one iota. The Chancellor was not right in saying that this relief would be an encouragement or incentive to effort and he could not possibly have thought that it was. With all the advice available to him, the right hon. and learned Gentleman must have known that there is an enormous body of taxpayers for whom there is a settled case provided in respect of whom it just could not possibly be suggested that his proposal would be an incentive because the past effort had occurred so far back as almost to have been forgotten.
    This is why we are determined to continue our opposition. We do so not only because, as my hon. Friend the Member for Sowerby has said, our Amendment shows the illogicality of the Chancellor's position, but because—I say this for my part, at any rate—it shows the insincerity of his position. It shows that he is determined to help the Surtax payer in this obnoxious way and is determined to do so at a time when all manner of burdens have been put on the backs of the poorer sections of the community. This is the occasion the Chancellor chooses to give to the richest section the remission of about half of their Surtax burden. It is utter nonsense. It is utterly unjust. It should be shown to be so by every hon and right hon. Member.
    4.15 p.m.
    Mr. Bruce Millan: I have very little to add to what my hon. Friends have said. The point is very clear. It is a simple point of principle. The right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) asked my hon. Friend the Member for Sowerby (Mr. Houghton) what would happen in reverse if there were a question of putting up the Surtax rate at some future date. It is not very easy to draw an analogy with that sort of circumstance because we are not here discussing just any sort of remission of Income Tax. We are dealing here precisely with the argument which the Chancellor advanced for introducing the remission of Surtax at this time.

    1103
    The Chancellor might have said, for instance, that there was a need to stimulate demand in the economy, that we ought to reduce taxation and allow a certain amount more money to go to consumers to circulate in order to increase demand. If he had said that, the argument that the remission of tax should be deferred for a year would not have applied. Then, I think the argument of the right hon. and learned Gentleman about the reverse process might have had some substance. But that is not this case.
    The argument here is whether the provisions of the Clause meet the considerations which the Chancellor himself enunciated. The primary consideration, in the Chancellor's view, was the need to give incentives. He himself said, very succinctly, that
    "It would be illogical to reduce what is already payable on past effort on the ground of giving an incentive to future effort."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 820.]
    The simple point is that that is what he is doing. He is giving an incentive based on past effort. By the very premises on which he bases his case for the remission, that cannot be a reasonable proposal.
    As my hon. Friend the Member for Gloucester (Mr. Diamond) said, we by no means accept the Clause as a whole. We are violently opposed to it in principle. But, even accepting the Clause in principle, it would still be possible for the Chancellor to accept the Amendment which does no more than bring the Clause more into line with his own declared intentions.
    Another point arises in answer to the hon. Member for Brighouse and Spenborough (Mr. Shaw). My hon. Friend the Member for Gloucester spoke about the number of people whose basis of assessment under Schedule D raises difficulties. There is an even simpler answer than that. If the hon. Gentleman turns to the terms of the Amendment, he will see that it does not speak of the year of assessment at all. The Amendment to page 8, line 5, refers to "income arising in", not the year of assessment, but at a particular period. There is not any question of it being based on the year of assessment.
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    Under the Amendment to page 8, line 6, the words "of assessment are specifically excluded. Even the technical point of the hon. Member for Brighouse and Spenborough—that is all that it was—about commencing years, and so on, is not valid in relation to these Amendments. It is a pity to have to labour the point at considerable length, but it seems that we are not to have any other speeches from hon. Members opposite. Therefore, since the two interjections which have been made by hon. Members opposite are to represent the total contribution from that side of the Committee, they have to be answered in detail.
    As I have said, the point is a simple one of principle. We are not by these Amendments frustrating in any way the intentions of the Chancellor of the Exchequer as set out in his Budget statement. Therefore, I think that we have every right to expect the Chancellor to accept the Amendments.
    Viscount Hinchingbrooke: I wonder when the Opposition's attack on Surtax is to develop. We were told in newspapers over the weekend that a broadly-based attack was to be instigated by the right hon. Member for Huyton (Mr. H. Wilson) which would last some hours and that after that we would get down to detail and would go through the night. When is the major question of Surtax to be discussed? Is it to be discussed under these Amendments?
    Mr. Harold Wilson: May I remind the noble Lord that under the rules of order we cannot discuss the general principle of a Clause until we reach the Question, "That the Clause stand part of the Bill"? What we are permitted to do on these Amendments is to debate what is in them. They relate to the special exemption of Schedule D and the unfairness of it compared with Schedule E, a subject on which the noble Lord has tabled Amendments in past years. We did not criticise him when he was dealing with those Amendments for not talking about much wider issues.
    Viscount Hinchingbrooke: The right hon. Gentleman is wrong and is inhibiting himself. The way to launch an attack on Schedule E—I should not have to

    1105
    tell the right hon. Gentleman this—is to table a wrecking Amendment, and then he can discuss the whole operation of Surtax. I realise that on the Question, "That the Clause stand part of the Bill" we cannot enlarge on what should have been done in previous years, or what should be done next year. All that we can discuss is what is in the Clause.
    The right hon. Gentleman's attack has failed so far. I am curious about the technical means by which it will now develop. The party opposite has started in a very mild way on this point of postponing the operation of remissions of Surtax on Schedule D taxpayers. Then we are to get down to something equally jejeune. I wonder when the great attack is to develop.
    The right hon. Gentleman is quite right in saying that in previous years I have done something to try to approximate the weight of taxation under Schedules E and D and will try to do so again. I have a slight contribution to make, although it has not come to your notice, Sir Gordon, and that is to bring the operation of Surtax forward one year, which is precisely the opposite to what right hon. and hon. Members opposite wish to do. My reason was that I was surprised and made a little unhappy by the words of the Chancellor of the Exchequer in his Budget statement which have already been quoted. He said:
    "Of course, so far as Surtax is concerned, the amount due next January will be upon income already earned in the past. It would be illogical to reduce what is already payable on past effort on the ground of giving an incentive to future effort."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, cc. 819–20.]
    The argument that it is an incentive to earn well this year depends on what the Government do to the wretched taxpayer the year after next. This has a Communist ring about it, which surprises me when I recall that I used to sit at the feet of my right hon. and learned Friend when he was a Liberal, at Cambridge University.
    Does the Chancellor really maintain that incentive is so much involved in this? Incentive depends on the status of a taxpayer and his circumstances in relation to the effort which he makes. If the effort does not produce a reward which will enhance the status, the effort is simply not made. Whether one is a profit-maker, salary-earner, or a man of
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    independent means makes not the slightest difference. It is very surprising that my right hon. and learned Friend, having taken the plunge over Surtax, on which we all congratulate him, has not made it applicable to next year and has refined the matter by reference to incentive.
    My right hon. and learned Friend's case is somewhat compromised by one or two speeches which have been made by hon. Members opposite. As the hon. Member for Sowerby (Mr. Houghton) said, the Chancellor has already conceded the principle of equity rather than of incentive in providing that Schedule D Surtax payers pay on an income already earned. We have not had his reply yet, but if he has conceded this for the Schedule D Surtax payer he has passed the point of no return on incentive. He is talking about justice. We want him to talk about justice and equity and not about this spurious method of incentive which does not operate in the Surtax racket—[Laughter.]—Surtax (range at all. I said "racket" and I repeat it advisedly, because I think that there are some rackets in the Surtax range.
    My right hon. and learned Friend has conceded the principle of equity for the Schedule D Surtax payer. I should like him to be generous and even at this late stage to bring the whole operation forward by one year so that the principle of equity is equally conceded to Schedule E taxpayers.
    Mr. Douglas Jay: Will the noble Lord clearly tell us his view? Does he consider that the changes in the rate of Surtax have an effect on incentive or not?
    Viscount Hinchingbrooke: It is a question not of incentive, but of doing justice to the Surtax payer, who is still called upon to pay enormous sums of his saved income or earned income long after the sociological need for it has passed.
    I have made this point in previous debates. Surtax was justifiable in the 1920s and 1930s as a means of redistributing income when we had serious unemployment and very great poverty. It is not defensible in modern times. I should like it done

    1107
    away with and consolidated in a graduated Income Tax with a maximum rate of 10s. on the upper range of income.
    Mr. Jay: May we take it that the noble Lord considers that this change will have no effect on the incentive to work?
    The Economic Secretary to the Treasury (Mr. Anthony Barber): I will not, at this early stage, follow my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) with any provocative remarks concerning the Opposition. The hon. Member for Sowerby (Mr. Houghton) explained that the purport of these Amendments was to prevent the new Surtax reliefs in respect of earnings from applying to any income which, although it might be reflected in the Surtax assessment for this year of assessment, 1961–62, actually arose before 6th April this year.
    That being the purpose of the Amendments, I could not follow the reasoning of the hon. Member for Gloucester (Mr. Diamond), who said that he thought that incentives were all poppycock. As the sole purpose of the Amendments is, as I understand, to limit the Surtax reduction to income which arises in the future, I cannot see how he can have any alternative but to vote against the Amendments.
    Reference has been made, I think by the hon. Member for Gloucester, to two interjections from this side of the Committee. I thought that my hon. Friends were "on the ball" in each case. I should like later to deal with the two points which they raised.
    Reference has also been made to what my right hon. and learned Friend the Chancellor of the Exchequer said in his Budget speech. He did not say that the Surtax payable as the result of past earnings would be unaffected in every case. He used the words which have been quoted as an explanation of why he was not proposing any Surtax relief which would be a burden on the Exchequer during the current financial year.
    4.30 p.m.
    My right hon. and learned Friend went on to describe his actual proposals. The hon. Member for Sowerby fairly quoted
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    the following words from my right hon. and learned Friend:
    "The changes I propose will be applicable to incomes earned—I repeat earned—during this new financial year and thereafter."
    My right hon. and learned Friend then went on, however, with some words which the hon. Member for Sowerby quoted rather sotto voce, but which, I would have thought, were of particular importance in connection with this debate. My right hon. and leaned Friend went on to say:
    "In other words, the changes will affect what is payable on and after 1st January, 1963."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 820.]
    So far as I know, until these Amendments appeared, and, indeed, certain suggestions were made by the Opposition, it had never occurred to me, nor, I would have thought, to anybody else with whom I have been in contact, that these proposals of my right hon. and learned Friend would not apply to Schedule D taxpayers in the same way as they apply to Schedule E taxpayers.
    Mr. G. R. Mitchison: Since the two sentences that the hon. Gentleman has quoted are obviously inconsistent, will he tell us which of them his right hon. and learned Friend meant?
    Mr. Barber: What my right hon. and learned Friend was saying in his Budget speech, and what he said subsequently, was that the purpose of his proposals was to provide incentives. Before I come on to the differences between the method of assessment under Schedule D and Schedule E, perhaps I might deal with the point raised by the hon. Member for Sowerby, which is relevant in the context of what has just been said by the hon. and learned Member for Kettering (Mr. Mitchison).
    The hon. Member for Sowerby referred to the large number—he was quite right in saying that it was a large number—of Schedule D taxpayers. What is important is that but for the Budget changes the number of Schedule E taxpayers paying Surtax in January, 1963, would have been nearly double the number of those who had earned income from Schedule D. My right hon. and learned Friend said again and again that he thought that these proposals were desirable to give an immediate incentive

    1109
    to salaried Surtax payers—that is, to those assessed under Schedule E. Therefore, in dealing with these Amendments, what we have to consider is whether, bearing in mind that the bulk of this relief will go to the Schedule E taxpayers, it would be reasonable to apply different and novel rules to those who are assessed under Schedule D.
    The hon. Member for Sowerby said that he did not think it would be too hard on those people. As a matter of equity—and in a matter like this one cannot ignore equity—I would have thought that to deny the same concession to the taxpayers with earned in come under Schedule D would be most unfair and inequitable.
    Mr. H. Wilson: How does the hon. Gentleman come to argue that this is the same concession? Even though we oppose the whole proposal, in the first Amendment we are trying to put Schedule D people on the same basis as those on Schedule E so that they do not get any tax concession until the income has been earned. Surely the Economic Secretary realises that the Chancellor is giving more to the Schedule D than to the Schedule E people, because the concession is retrospective, but not for the Schedule E people. How can he say, therefore, that we must treat Schedule D and Schedule E people the same when that is what we are trying to do by the Amendment?
    Mr. Barber: I do not accept what the right hon. Gentleman has said. My hon. Friend the Member for Brighouse and Spenborough (Mr. Shaw) referred, in passing, to the commencement and cessation provisions. I shall refer to them presently, because I hope to show to the right hon. Gentlemen satisfaction that over the years there would be no advantage whatever to the Schedule E taxpayers. The right hon. Gentleman has misunderstood the position.
    The effect of the Amendments in that salaries earned in 1961–62 and tax for that year under P.A.Y.E. would lead to a reduced Surtax bill on 1st January, 1963, but that business and professional profits earned in 1961–62 would lead to a reduced Surtax bill on 1st January, 1964. For those assessed under Schedule D, there would be no Surtax reduction on 1st January, 1963.
    1110
    Such a result overlooks the fact that under the law as it has existed for many years the profits of 1960–61—that is, the year of assessment, which is past—are taken to represent the income of 1961–62 for the purposes of assessment. The hon. Member for Sowerby describes this as being incidental to the method of assessment, and he is right. This is a pure technicality. I suggest that it would be an abuse of that technicality to hold it against the business man and to say, in effect, "We are giving a new relief on earned incomes as from 1961–62, but because the law assumes, as a result of a technicality, that your earned income for that year is measured by your earnings for the year before, you will get nothing until January, 1964."
    Mr. Jay: Surely the Economic Secretary must agree that if the whole change is being made on the ground of incentive, what is not a technicality is the year in which the earnings are actually received.
    Mr. Barber: The right hon. Gentleman is ignoring the effect over a period of years of doing what he wants to do, which would operate to the disadvantage of the Schedule D taxpayer. I repeat again that my right hon. and learned Friend throughout has been perfectly consistent in saying that the object of his proposals was to provide incentive. But there has never been the slightest suggestion that in doing what he considers best in the interests of the country the Schedule D taxpayer should be treated differently from the Schedule E taxpayer, in a way which has never been done before.
    Mr. Mitchison: Will the hon. Gentleman explain, in plain English, how an incentive is given to anybody who has already earned the money?
    Mr. Barber: I am sorry that if the hon. and learned Gentleman has not followed what I have said, I cannot help him much further. I have already read out what was quoted fairly by the hon. Member for Sowerby, who read out the words of my right hon. and learned Friend, that
    "the changes will affect what is payable on and after 1st January, 1963."
    The hon. and learned Member, and, I am sure, all his colleagues on Che Opposition Front Bench, knew perfectly well that that was to apply to Schedule D

    1111
    earnings as well as to Schedule E earnings.
    My hon. Friend the Member for Brig-house and Spenborough mentioned, in passing, the cessation provisions of those who are engaged in Schedule D occupations. He asked a question of the hon. Member for Sowerby, who was rather coy in his reply. Perhaps I can put a suggestion to the hon. Member for Sowerby. The assessment made on the trader or the professional man for this year of assessment, 1961–62, is intended to be a charge on the income he makes through carrying on business during that year, notwithstanding that there is the statutory rule under which the income is measured by reference to the profits of a previous accounting period. This principle applies to the years which follow.
    Whatever the period for which such a man continues in business after 6th April this year up to his retirement, his business profits will be exposed to Income Tax assessments and, consequently, to Surtax assessments for precisely the number of years and months contained in that period. In this respect, his position cannot be distinguished from that of the Schedule E employee who is paying his tax currently in respect of a salary and paying his tax under P.A.Y.E., who will be similarly exposed to Income Tax and Surtax liability for the precise period from 6th April this year to the date of his retirement.
    It seems to follow that common fairness would demand that Surtax reliefs in respect of earnings should operate from the same year of assessment whatever Schedule applies.
    Mr. Leslie Hale: Does that mean that it should apply to professional men, who have retired, in respect of fees payment of which they have postponed until after they have retired, and with particular reference to former practising barristers?
    Mr. Barber: I think that it was recognised that we were dealing with the overwhelming majority of those assessed under Schedule D on a preceding-year basis, and not the very few people assessed on a cash basis.
    The Committee should be under no illusion at all about the consequence of the Amendments. The result would be that the overwhelming majority of tax
    1112
    payers under Schedule D would receive no relief in the Surtax payable until 1964.
    Mr. Diamond: Hear, hear.
    Mr. Barber: The hon. Member says "Hear, hear", but I would remind him of what his right hon. Friend the Member for Huyton said on Second Reading when, in referring to Schedule D, he said that it was
    "…a field which embraces a multitude of sins…".
    I would ask the right hon. Gentleman and the hon. Member for Gloucester who these sinful people are whom the Opposition wish to penalise.
    Do they include the provincial shopkeeper who has built up his business until he is earning £2,500 a year? Do they include the tenant farmer who, by enterprise, has brought himself into the Surtax paying group; the owner of a filling station who ignores the eight-hour day, the accountant, the solicitor, the doctor and the dentist? All these people, according to the right hon. Member for Huyton, come within the field of the sinful and must be penalised. Because of a technicality they are to be told that they will receive no reduction until 1964, not through any fault of their own but simply because it has been laid down by law for thirty-five years that they are to be assessed on a preceding-year basis.
    The right hon. Member for Huyton let the cat out of the bag when he imported this question of morality into his speech on Second Reading concerning Schedule D taxpayers, and it was quite apparent that what he said was motivated by pure political prejudice. The hon. Member for Glasgow, Craigton (Mr. Millan) said that the matter with which the Amendments deal was a point of principle. I have made inquiries and I have found no cases—
    Mr. H. Wilson: Would the hon. Gentleman quote the sentence which I used about a multitude of sins? He has made a lot of play about it and, as I thought, childish references to it.
    Mr. Barber: Perhaps it was a rather childish passage to make a childish comment upon, but this is what the right hon. Gentleman said:
    "The argument that he used is true for Schedule E, for which it is the 1961–62 income

    1113
    that is relevant, but it is not true for the very large field of surtaxable income earned under Schedule D, a field which embraces a multitude of sins in terms of tax avoidance, business expenses and the rest."—[OFFICIAL REPORT, 4th May, 1961; Vol. 639, c. 1649.]
    What the right hon. Gentleman is saying, of course, is that his observations concerning tax avoidance and business expenses apply to the field of Schedule D, which includes people like shopkeepers, doctors, dentists and farmers.
    I was making it clear to the Committee that I can find no case, and I have asked the Inland Revenue to look back, where, under any Government, a change in basic rates of taxation has not been applied uniformly in respect of the year of assessment to taxpayers regardless of whether they were assessed under Schedule E or Schedule D. My right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) was absolutely right to raise the question of what the Opposition would do if it were to increase the rates of taxation. The hon. Member for Sowerby, quite understandably, gave a somewhat guarded reply, but the identical principle that my right hon. Friend is applying has been applied in the past when the basic rate has been increased.
    The last increase in Income Tax or Surtax was made in 1951 by the right hon. Gentleman the present Leader of the Opposition. That related to the year of assessment 1951–52 and hon. Members opposite should know how it was applied to Schedule E and Schedule D. Those assessed under Schedule E paid the increase in respect of their earnings after 5th April, that is to say, actual earnings, but Schedule D payers paid the increase in respect of money earned in the accounting period which ended prior to the Budget. If the Labour Government thought that they should bear the increase on that universally accepted basis of assessment, I cannot see why these people should not have the benefit of a reduction on the same basis.
    4.45 p.m.
    Mr. Jay: That change in taxation was not made on the ground of incentive. It was made to restrain expenditure by taxpayers. The whole basis of this argument is the Chancellor's statement that he is making this change wholly on a quite different ground of incentive.
    Mr. Barber: I have been over all that ground before and I would only add, for the benefit of right hon. Gentlemen opposite, that my right hon. and learned Friend has again and again explained the object of the change, but it does not follow on the ground of equity that we should treat Schedule D taxpayers, who are in the minority of taxpayers, differently from those who pay under Schedule E.
    I can see no reason in equity why the sort of people to whom I have been referring, the tradesmen, the farmers, the professional people, the doctors and the dentists, should be penalised merely because taxation is being reduced. They bore the burden when it was increased and they should now receive the benefit when it is decreased. To defer until 1964 the reduction in Schedule D liability for Surtax would be inequitable in the extreme and I would ask the Committee to reject the Amendment.
    Mr. H. Wilson: I am surprised not only at the very inadequate answer from the Economic Secretary to the Treasury, but also at the fact that he was put up to reply. I am surprised that the Chancellor, who is so much involved in the Surtax proposals, did not see fit to reply to the Amendment. I hope that before it passes from the Committee the right hon. and learned Gentleman will explain himself. Some of my hon. Friends have said that the Chancellor's sincerity is in question. I think that is rather too strong, but his logical consistency is in question as a result of the Government's attitude to the Amendment.
    Before coming to the general argument, I should like to refer to one or two points made in passing by the Economic Secretary. The hon. Gentleman did not deal with the main points about incentive at all. When he was asked about it he said that he had been over the point, but he did not go over it. He passed it. He never attempted to answer the point made by my hon. Friend the Member for Sowerby (Mr. Houghton). The second point is the hon. Gentleman's psychological Freudian attitude in always going back to 1951 when he possibly can.
    Mr. Barber: The only reason why I went back to 1951 was that I had to go back to that year to find the last increase in basic Income Tax or Surtax.
    Mr. Wilson: The year 1951 is to the hon. Gentleman like the Freudian psychologist's reference to the child's desire to go back to the womb. Almost every Speech he has made has been on that basis. I think that he gets this from the Prime Minister, who cannot make an economic speech without going back to 1951. The hon. Gentleman thought that 1951 was in some way relevant, but, as my right hon. Friend the Member for Battersea, North (Mr. Jay) pointed out to him, what happened then was a change in rates. The Clause which we seek to amend makes no reference to change. It is a relief on earned income, and what we are saying is that even within the Chancellor's argument, which we do not accept, it would be logical for Schedule E and Schedule D to be treated in the same way. All the hon. Gentleman can tell us is that in 1951 Schedule E and Schedule D were treated in terms of time, of years, in the same way as the Government are treating Schedule E and Schedule D today.
    Quite apart from the question that that, as I have said, was a change of rate and this is a change of relief, there is another point. In 1951, the Royal Commission was sitting. The then Chancellor of the Exchequer, now the Leader of the Opposition, had appointed the Royal Commission to go into this and many other questions. One of the questions that it went into was the timing of the Schedule D and Schedule E taxation. One of its recommendations was that Schedule E should be put on a current year basis. I will not say that that was sub judice but it had been considered by Lord Radcliffe and his colleagues, and it is obvious that when my right hon. Friend made that change in 1951 he applied the rules in terms of time as they already stood, but he had thrown this question and other questions for consideration by the Royal Commission.
    It is six years since the Royal Commission reported, and this recommendation has not been accepted. To judge from the logic of the hon. Gentleman's reply—if I may use such a word in connection with his speech—it would appear that the Government have no intention of accepting that recommendation by the Royal Commission for very many years to come.
    There was the rather silly point about a multitude of sins. We shall have to
    1116
    be careful with the phrases we use if hon. Gentlemen are to base whole speeches on them. The hon. Gentleman spoke of my reference to a multitude of sins and referred to provincial shopkeepers—I do not know why he goes only for the provincial ones—farmers, petrol station proprietors, solicitors, and so on. He suggested that I thought all those people were sinful people and that I was trying to bring some moral connotation into play. I was not, and the hon. Gentleman knows it.
    I hope that the hon. Gentleman knows—at all events, the Inland Revenue knows—that there is far more tax avoidance with Schedule D than with Schedule E. We all know it. I do not think the Chancellor would deny it. Many of us have had regard to the sins of tax avoidance and to the abuse of business expenses, on which the Chancellor produced a highly moral sermon in the middle of his Budget speech. We all welcomed the sermon, but we should have liked action as well. The subject of business expenses is always within the Schedule D and not the Schedule E field. It is appropriate for one to say when referring to these things that they are found much more in connection with Schedule D. Therefore, for the hon. Gentleman to argue that I was suggesting that the Scottish doctor, the provincial shopkeeper and the Welsh petrol station proprietor were sinful was a childish use of words.
    We must now come to the main question, because the hon. Gentleman, I thought, entirely failed to deal with the arguments of my hon. Friends. First, we have the question of the motive behind the Clause. We have made it plain—I thought that my hon. Friend started the debate off very usefully by pointing this out—that we oppose Clause 11 as a whole and that we intend to vote against it. That does not, however, prevent us—I am sure that the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) takes this point—from moving a series of Amendments to deal with particular points.
    The first Amendment is designed to show the complete illogicality of the Chancellor's position in that some things which are supposed to be incentives, which, by their very nature, can only be prospectives, are being handed out on

    1117
    the system of retrospective incentive. Our second Amendment is to deal with the unfairness of the expenses point, and to bring that into the Surtax computation. Another Amendment deals with the problem of unearned income so far as that is concerned.
    To move these Amendments does not mean that we in any way concur with the Chancellor's proposals in the Clause, but we felt that these matters should be debated. When we have passed the stage of the Clause standing part of the Bill and have then been defeated, we cannot say that we should like to go back and try to move some Amendments. Once Clause 11 stands part of the Bill we can move Amendments only to Clause 12 and later Clauses. That is why we are moving these Amendments at this stage, but that is only a subsidiary to our main intention of voting against, and, we trust, defeating, Clause 11 later.
    I am sorry once again to inflict on the Chancellor the words that he actually used, but he has related this to incentives. This is Clause 11, and the only justification that he has attempted to put forward for it is the question of incentives. This upsets the noble Lord the Member for Dorset, South. The noble Lord does not think that it should be related to incentives. He thinks that it is almost Communist in its approach. He thinks that the matter should be judged in terms of social justice. We all have our different ideas of social justice, and I think that the noble Lord's conception of it is, on the whole, unique—and it is probably all the better that it should be. However, no one on this side of the Committee has heard any argument at any stage during the Budget debate, the Finance Bill or at any other time to suggest that the Chancellor really pretends that there is any social justice in this Clause.
    The Chancellor has not put the Clause forward on this basis. Many of us warned the Chancellor in speeches in the country before 2nd February that we were afraid that the Government were contemplating increasing the charges on the Health Service, increasing the poll tax contribution, to find a little financial manoeuvring power for the right hon. and learned Gentleman to use in Surtax concessions. The Chancellor will remember that there were a great many
    1118
    inspired statements in the Press about his intentions on Surtax. The President of the Board of Trade—we are glad to see him here this afternoon; he and I were in foreign parts at the weekend—created a precedent by the freeness with which he spoke before the Budget about the likelihood of Surtax concessions.
    Whether that speech was just a careless indication of what the right hon. Gentleman knew that the Chancellor of the Exchequer intended—actually, he never does anything in a careless manner, or tries publicly to put pressure on the Chancellor—I do not know. It is difficult to speculate about his motives. However, certainly from, roughly speaking, Christmas onwards there was a good deal of inspiration of the Press from Government sources that something was going to be done about Surtax. That was one reason why we felt it necessary then to warn particularly against probable changes affecting the National Health Service.
    Mr. Ellis Smith: Does that kind of thing really go on in Government circles?
    Mr. Wilson: We know that a great deal was said in the Press about what was intended. It might not have had a lot to do with the Chancellor of the Exchequer, because he was discreet in this matter. In fact, he said nothing at all. It had much more to do with the Chancellor of the Duchy of Lancaster, for it comes under his Department. But no one except the noble Lord has pretended that this has anything to do with social justice, and he thinks it is unjust at that.
    But we feel that this is characterised by social injustice. The social injustice is in increasing taxation on the poorest people in the country while giving tax concessions to the richest people. It cannot be described as anything but social injustice. Every hon. Member in the Committee except the noble Lord sees that point.
    Nevertheless, the Chancellor—to do him justice, if I may use that word again—has not really tried to make much of any question of fairness or equity in this matter. He is quite cynical about it. It is true that he got a little lyrical one night while winding up the Budget debate and started

    1119
    telling us about the terrible time that the £5,000 a year people have. But he has never addressed himself to the rather simple point, put to him by my right hon. and hon. Frends, that if it is so difficult to live on £5,000 a year how can one live on £500 a year, or the old-age pension? As I say, the right hon. and learned Gentleman has never addressed himself to that question, but, obviously, if his argument is right about the £5,000 a year people, we must be right about some of the others.
    I see that the Chancellor is getting excited now. The very mention of that lyrical passage at five minutes to ten o'clock at the end of the Budget debate, the Chancellor's "finest hour", is enough to get him in a state of subdued cancellarian excitement. It is, however, fair to say that the right hon. and learned Gentleman has never made this point about justice. The President of the Board of Trade, in the Budget debate, described it as a belated act of social justice, but the Chancellor did not go as far as that.
    The Chancellor has been quite straight about this. He said that this is a question of incentives. He said it clearly on television on Budget night. He said it clearly on the radio on Budget night, in an obviously prepared speech. He said it in the House, and I apologise for again reading these words, but the Economic Secretary has not understood their full import. The Chancellor said:
    "I do not, however, feel able to provide for any relief of direct taxation to take effect in the year 1961–62."
    That is what upset the noble Lord.
    "That will be a disappointment to many. Of course, so far as Surtax is concerned, the amount due next January will be upon income already earned in the past. It would be illogical to reduce what is already payable on past effort on the ground of giving an incentive to future effort."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 819–20.]
    5.0 p.m.
    If those words have any meaning, the Chancellor should accept the Amendment. The Economic Secretary gets up and tries to explain this away. He says that that is why he was explaining that he could not do anything about Schedule E Tax for this year. But the hon. Gentleman used an extraordinary argument.
    1120
    He said that, of course, this is mainly to help the Schedule E taxpayer, and, since it is mainly to help him, we must not do anything beastly to the Schedule D taxpayer. His argument was that there are more Schedule E taxpayers than Schedule D taxpayers. He has never given us the figures. I wish that he would produce figures of the number of people affected, and the number of people who will pay tax under Schedule E and Schedule D when the Bill becomes law.
    The hon. Gentleman said that because this was designed to help Schedule E tax payers we must be particularly generous to Schedule D taxpayers and give them a fine bonus concession on money they have earned where incentive cannot possibly operate.
    Mr. J. T. Price: Retrospective legislation.
    Mr. Wilson: This is retrospective incentive. I have never heard anyone say that an incentive can be retrospective in its effect. I want to hear either the Chancellor or the Economic Secretary defend this argument that an incentive can apply retrospectively.
    Those are our main arguments. My hon. Friend the Member for Gloucester (Mr. Diamond) went a bit further than my hon. Friend the Member for Sowerby, but I am entirely at one with my hon. Friend the Member for Gloucester. I do not accept the Chancellor's incentive argument, nor do any of my hon. Friends. If he justifies the Clause on the incentive argument, the logic of that is that he must accept the Amendment. The Economic Secretary tried to deal with my hon. Friend the Member for Gloucester by putting forward the feeble argument that if he felt there was something in the incentive argument to make him support the Amendment, he should support the whole Clause.
    Our argument is simple. The Chancellor bases this on incentive. We shall give reasons later for disagreeing with the points about incentive which the Chancellor has made on many occasions. When the Question "That the Clause stand part of the Bill" is put we shall produce an unanswerable case showing why hon. Members should vote against it. But if, by some mischance, the Clause

    1121
    should go through, to provide a logical meaning to what the Chancellor has said it is right that it should contain this Amendment.
    Mr. Diamond: Before you occupied the Chair, Sir Norman, I permitted myself the use of a word which was inelegant but nevertheless in order. I described the argument of the Government that Surtax relief was an incentive to harder work as poppycock. I was not ruled out of order, but the Economic Secretary challenged me and asked how I could say that it was poppycock and yet speak to the Amendment. I am speaking to the Amendment to demonstrate that it is poppycock, and the Economic Secretary's reply has proved that it is, because, if it were dealt with on the basis of logicality, he would be compelled to accept the Amendment, but he has rejected it.
    I want to detain the Committee for a few minutes to go through the argument he put forward for rejecting the Amendment. The Economic Secretary had in front of him a copy of HANSARD containing the Chancellor's Budget speech. As usual when dealing with a difficult section of the Chancellor's speech, as usual when dealing with one sentence which was unfortunate from his point of view, he chose to allay our fears, as he thought, by referring to a later sentence.
    It is a simple matter to find two sentences within the same paragraph of the Chancellor's Budget speech which mean precisely opposite things, but I invite the Economic Secretary to come back to the sentence to which I referred, and to which my right hon. Friend referred, but which he carefully avoided, namely, the one which allegedly demonstrates that this is an incentive, and that it would be illogical, therefore, to use it in respect of past income.
    The Chancellor went on to refer to this change being applicable to
    "incomes earned—I repeat earned—during this new financial year and thereafter."
    That was also wrong, as we shall see in a later Amendment. There is a reference to incomes earned and to a certain extent incomes unearned, as we shall see in later Amendments. The Chancellor then said:
    "In other words, the changes will affect what is payable on and after 1st January, 1963."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 820.]
    1122
    It is a very appropriate phrase. It is a very different phrase, a complete non sequitur, because if the hon. Gentleman thinks about it, what his noble Friend the Member for Dorset, South said was right. This problem can be dealt with either on the basis of incentive, or on the basis of equity, and the noble Lord dealt with it on the basis of equity. The noble Lord is right. If we deal with it on the basis of equity—equity as he sees it and not as I see it—it is equitable to deal with all classes of taxpayers at the same time.
    If one deals with it on the basis of equity, one does not base the incentive on relief arising in January 1963. That is not an incentive. An incentive is what one gets now. A bonus is what one gets at the end of the week. That is an incentive. Those of my hon. Friends who are well versed in trade union activities will bear me out on this. They would not consider an incentive which was addressed to the worker saying, "The harder you work this week the more you will get by way of a bonus in eighteen months". They would tell the person who offered that type of bonus where to place it.
    That is not an incentive. As the noble Lord said, if one is dealing with incentive on the basis of equity, it must be something which one can obtain in the near future. An incentive would have to be something which one obtained in 1962, not in 1963. On the basis of equity which the Economic Secretary was adducing the incentive would have to apply in 1962.
    The Economic Secretary said several times that on the basis of equity we have to deal with the Schedule D man in the same way as the Schedule E man. I am saying that they should be dealt with either on the basis of equity or we should stick to the Chancellor's words and assume that he meant what he said and deal with them on the basis of incentive.
    If this were dealt with on the basis of equity, the relief would be granted next January, but the Chancellor cannot do that because he cannot afford it. One has only to look at the total out-turn for the year to see that this means about £83 million in a full year, and the basis of the Chancellor's Budget speech was that he had to have a certain net surplus at the end and he could not possibly

    1123
    afford £83 million out of the current year.
    The Chancellor wanted to get the best of both worlds. He wanted to balance his Budget reasonably this year and get the credit for Surtax relief next year, and skilfully and shrewdly bring in an unusual Clause in the Finance Bill to prevent the House of Commons next year from deciding whether the 1963 Surtax relief should apply, and prevent us discussing it in a year's time. He wanted to get it all in in one fell swoop. On the basis of equity there is nothing whatsoever to support the Chancellor's argument. On the basis of equity this step should have been taken a year earlier, and should apply to both Schedule D and Schedule E.
    But the Chancellor has referred to it on the basis of incentive, and it is no use the Economic Secretary avoiding the issue. We are discussing a tax Bill, and the Economic Secretary should not try to avoid the fact that the Chancellor said specifically that we cannot logically give tax relief without doing so as an incentive, in respect of income which has already been earned and effort already made. All this demonstrates that the incentice is utter poppycock.
    The Economic Secretary has used the argument of equity, which is a different one entirely. There is nothing to substantiate it. The fact that the Government insist on sticking to the terms of the Bill as drawn in this respect, and to give Surtax relief to people who earned their incomes and put in their efforts months and months ago, demonstrates this absolutely. The effort put in as early as the end of April and the beginning of May, 1959, is the effort which the Chancellor, by this Surtax relief, purports to encourage. And I am expected to mince my words and not describe that as poppycock!
    Mr. Charles Loughlin: Is it not possible that the Chancellor originally intended to ensure that this Surtax relief was given as an incentive, and had no intentions of introducing it retrospectively? Is it possible that he has changed his mind for some reason?
    Mr. Diamond: The suggestion that the Chancellor has changed his mind
    1124
    involves the assumption that he made up his mind in the first place, and, also, that he had a mind to make up and had given some thought to the matter—and I do not accept that. I repeat: this cannot be argued on the ground of incentive or equity. Back-bench speeches from both sides have been directed to the argument, first, that it is invalid on equity grounds, as the hon. Member for Dorset, South (Viscount Hinchingbrooke) demonstrated; and, secondly, that it is invalid on incentive grounds, as all the rest of us have demonstrated.
    That is why I referred to the question of sincerity. The Chancellor's sentiments are those of a man who has sincerity, and who sincerely believes that a person earning £5,000 a year, with the present rates of Surtax, finds it difficult to make ends meet. None of those who listened to his speech can doubt that that is what he feels, deep down. I argue that the £5,000-a-year man finds himself on a soft spot, and wants to make it softer. He wants to pay less Surtax, so that he can more easily afford the things which the Chancellor referred to. All this talk about incentive is utter poppycock.
    5.15 p.m.
    Mr. John McKay: I am anxious to see the real fight started. To my mind all this talk about incentive and equity is a side issue. When the Government instituted the main provisions of the Bill they were not thinking in terms of equity and incentive; they wanted to give some free gifts to the supporters of the Tory Party, regardless of the question whether it was equitable or otherwise. I suggest that the Amendment is a useful educational effort to ventilate this matter and to indicate the inconsistency shown by the Government, but I believe that the large majority of the Labour Party wants to get down to the main battle. It is wise to try to make these provisions more consistent, but I hope that the Labour Party will not prolong the agony. Let us get down to battle.
    The Temporary Chairman (Sir Norman Hulbert): I hope that the hon. Member will soon come to the terms of the Amendment.
    Mr. McKay: If the hon. Member for Dorset, South (Viscount Hinchingbrooke) can enter into a discussion about getting

    1125
    down to the battleground, I cannot see why I should not be allowed to do so. I want to get down to the battleground, and so do all my hon. Friends, including those on the Front Bench. We all want to get down to the battleground. Let us not prolong the agony on small Amendments. Let us get them through and get down to a debate on the Question, "That the Clause stand part of the Bill." Then we will all be free to battle.
    Mr. Loughlin: I hope the Committee will forgive me if I do not follow my hon. Friend the Member for Wallsend (Mr. McKay) on to his battlefield. Like him I want to debate the question "That the Clause stand part of the Bill", but I feel sure that I should be ruled out of order if I pursued the matter at too great a length now
    I agree with the two statements so far made by my hon. Friend the Member for Gloucester (Mr. Diamond), but I have a feeling that when the Chancellor of the Exchequer originally said that it would be wrong to provide a retrospective incentive—whether or not my hon. Friend is correct in saying that it is also questionable whether the Chancellor has a mind—he was reflecting his true point of view on this issue. I wonder what has ensued which has caused him to change his mind and to cause us to have inflicted upon us this afternoon the type of argument advanced by the Economic Secretary. If ever there was an attempt completely to avoid the issues it was the speech made by the hon. Gentleman a few moments ago. It is not unusual for him to try to do this. I have listened to him trying to do so more often than not when he has been replying to debates.
    If the Chancellor of the Exchequer originally intended that this tax relief was to be an incentive, he and the Economic Secretary cannot very well claim that there should be a retrospective incentive. I have for a long time been responsible for negotiating wages in industry. We always had the greatest difficulty in getting any retrospective increases. I can well imagine what those who represent industry would have said to me if I had said, "If you give us a retrospective payment as from a year ago that will constitute an incentive to the people I represent". I think that the best way out of this dilemma—of course, I do not challenge for one moment the sincerity
    1126
    of the Chancellor, although I sometimes challenge his ability—would be for the right hon. and learned Gentleman now to explain either why he made the original statement in error, that the Surtax relief was intended to be an incentive—if, in fact, he made the statement in error—or why there has been this subsequent shift from the position which he established at that time.
    By coming to the Dispatch Box and explaining the matter the right hon. and learned Gentleman might satisfy some hon. Members a little more than the Economic Secretary to the Treasury has so far done. If the right hon. and learned Gentleman only explains away the statement which he made in his Budget speech, then I think he will be doing justice to the Committee and to himself. I, like most of my hon. Friends on this side of the Committee, will when the occasion arises later in the debate—perhaps in the early hours of tomorrow morning—have a lot to say about the whole issue of Surtax relief.
    The reason why I am pursuing the matter at this stage is that I think that it is correct that if one proposes something on principle one can still put down Amendments of this kind to mitigate as far as possible the evils of it. I hope that the Chancellor will make a statement, because I think that he has a responsibility to the Committee to explain what he said in his Budget speech.
    The Chancellor of the Exchequer (Mr. Selwyn Lloyd): As the hon. Gentleman has very courteously asked me to make a statement, I will do so. However, I do not propose to get involved in the wider arguments about incentive and the suggestion that all incentives are poppycock. That was the argument put forward. I am going to deal with the Amendment.
    I at once give the Opposition the point about Schedule D Surtax payers not paying until January 1964 on their earnings during the financial year 1961–62. I say quite frankly straight away that my points about incentive and future efforts apply to about two-thirds of the people in this category, in other words, to those assessed under Schedule E. I accept the logic of what is said that, including Schedule D, this is giving a retrospective benefit. Therefore, the question I had to decide was whether

    1127
    it was desirable or feasible to exclude the Schedule D payers from this Clause.
    I came to the conclusion, for the reasons very clearly put by my hon. Friend the Economic Secretary, that relief should operate from the same year of assessment as earnings that were assessed under it. It is neither feasible nor desirable to have things operating in different years. I had to decide either to postpone the whole thing so that there was no relief until January 1964, or to proceed on the basis that the relief should come into effect in January 1963. The remarks about incentives and future efforts apply only to about two-thirds of the people concerned. I ask the Committee to reject the Amendment.
    Mr. Mitchison: That, I am afraid, is a most unsatisfactory explanation. The right hon. and learned Gentleman made a Budget speech which, presumably, had been carefully prepared. He said not one word in that speech about the dilemma which he now tells us confronted him and which he resolved in the way he did. On the contrary, the right hon. and learned Gentleman defended the proposals that now appear in the Finance Bill on lines which were perfectly clear but which contained quite obvious inconsistencies.
    I make no apology to the Committee for referring again to exactly what the right hon. and learned Gentleman said. I hope he will see that what he says now is quite inconsistent with what is proposed in the Finance Bill and quite consistent with what is proposed in the Amendment. In saying that, I take the view—I have always taken it—that the idea that reductions in Surtax are useful as incentives is nonsense. The Royal Commission on Taxation thought so and said so many years ago, and I have never heard any sound reason to the contrary.
    What I am concerned with is the state of the right hon. and learned Gentleman's mind and, what is even more important, the state of the minds of hon. Members opposite who wish to support him on this matter. They ought to consider exactly what they are doing and why they are doing it. The right hon. and learned Gentleman said:
    "Of course, so far as Surtax is concerned, the amount due next January will be upon income already earned in the past."
    1128
    That statement is quite correct.
    "It would be illogical to reduce what is already payable on past effort on the ground of giving an incentive to future effort."
    That statement is perfectly correct, and it is absolute nonsense to defend as an incentive something which relates to past earnings. The right hon. and learned Gentleman went on:
    "Nevertheless, I consider that there is force in the arguments against the present level of Surtax. In the modern world, the work of the manager"—
    that is Schedule E—
    "the scientist"—
    who may be Schedule E or Schedule D—
    "the technologist"—
    exactly the same applies—
    "is of increasing importance, not only to himself but to the community. In other countries there are much higher rewards for individual effort and skill."
    All these words apply equally to Schedule D and Schedule E and I should have thought that the sound foundation for any incentive argument lay much more in the Schedule D than in the Schedule E cases. I can hardly conceive that a manager will be goaded into immediately higher efforts by an increase in his net income, but I can see a case, with which I disagree, for saying that those who are practising privately in some profession or other or who are earning their income under Schedule D methods might be induced to work harder on those lines. I repeat, so that there may be no misunderstanding, that I do not believe that to be the case. I accept on that the view of the Royal Commission.
    What I am concerned with is what the right hon. and learned Gentleman thought. He went on to say in his Budget speech:
    "Therefore,"—
    that is, purely on grounds of incentive—
    "I want to do what I can to ensure that the present incidence of Surtax does not act as a disincentive to those who have positions of responsibility in our industries and elsewhere in our national life. Accordingly, I think it right to take action to modify, as far as earned incomes are concerned the present rules."
    This was no general change in the rate of Surtax. That had been rejected earlier in the same speech.
    "The changes I propose will be applicable to incomes earned—I repeat 'earned'—during this new financial year and thereafter."

    1129
    That is a very good argument if one really believes in incentives of this character but clearly does not include incomes which had been earned before this financial year. However, in the very next sentence the right hon. and learned Gentleman said:
    "In other words, the changes will affect what is payable on and after 1st January, 1963."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 819–20.]
    5.30 p.m.
    We must assume that the Chancellor of the Exchequer has some elementary idea of our tax system, and, making that assumption, those two statements are wholly inconsistent and we have not heard from anybody which of them the right hon. and learned Gentleman meant at the time. Is it the fact of the matter that his mind and motives were in such a state of confusion that he himself had no idea which alternative he was to adopt and that it required the actual drafting of the Finance Bill to confront him with the dilemma which he put before us today?
    I take an entirely different view of what happened. I believe that the right hon. and learned Gentleman wanted to make a Surtax concession which he thought he could justify on grounds other than those of broad equity. I understand his difficulty. The prescription charges had just been increased and a poll tax had been levied on contributors to National Insurance, and in those circumstances it would have been very difficult, even for the most confirmed and embittered Tory, to defend on grounds
    of equity a concession to Surtax payers at that moment.
    Accordingly, what the right hon. and learned Gentleman did was to defend on grounds of incentive something which could not be put forward on those grounds, for if it was incentive that he meant and if it is incentive that he still means he has no conceivable ground for resisting the Amendments. The only argument against them was that they would tell differently in one case or the other, but that is not the question. The only proposal here is that we desire to encourage those who make these valuable contributions to our national life to do more and whether we should make certain tax changes for that purpose.
    Are we in Bedlam in this place? Do we really suppose that we will give any encouragement to anybody by giving him tax relief in respect of that which he has already earned? One would have thought at times that we were in a lunatic asylum, or at a meeting of the Primrose League. Are we really trying to give this incentive? If we are, clearly the Amendments should be accepted.
    The right hon. and learned Gentleman's defence indicated the choice he has finally made, but that is no defence of the proposals put forward in these terms and on these grounds in his Budget speech.
    Question put, That those words be there inserted:—
    The Committee divided: Ayes 175, Noes 235.

    Division No. 191.]

    AYES

    [5.33 p.m.

    Abse, Leo

    Davies, S. O. (Merthyr)

    Hale, Leslie (Oldham, W.)

    Ainsley, William

    de Freitae, Geoffrey

    Hall, Rt. Hn. Glenvil (Colne Valley)

    Albu, Austen

    Delargy, Hugh

    Hamilton, William (West Fife)

    Allaun, Frank (Salford, E.)

    Diamond, John

    Hannan, William

    Allen, Scholefield (Crewe)

    Dodds, Norman

    Hart, Mrs. Judith

    Awbery, Stan

    Dugdale, Rt. Hon. John

    Healey, Denis

    Benson, Sir George

    Ede, Rt. Hon. C.

    Henderson, Rt. Hn. Arthur (Rwly Regis)

    Blyton, William

    Edwards, Rt. Hon. New (Caerphilly)

    Herbison, Miss Margaret

    Bowden, Herbert W, (Leics, S. W.)

    Edward, Robert (Bilston)

    Hill, J. (Midlothian)

    Bowles, Frank

    Edwards, Walter (Stepney)

    Hilton, A. V.

    Boyden, James

    Evans, Albert

    Holman, Percy

    Braddock, Mrs. E. M.

    Fitch, Alan

    Holt, Arthur

    Brockway, A. Fenner

    Fletcher, Eric

    Houghton, Douglas

    Broughton, Dr. A. D. D.

    Foot, Michael (Ebbw Vale)

    Howell, Denis (Small Heath)

    Butler, Mrs. Joyce (Wood Green)

    Forman, J. C.

    Hughes, Cledwyn (Anglesey)

    Castle, Mrs. Barbara

    Fraser, Thomas (Hamilton)

    Hughes, Emrys (S. Ayrshire)

    Chapman, Donald

    George, Lady Megan Lloyd (Crmrthn)

    Hughes, Hector (Aberdeen, N.)

    Corbet, Mrs. Freda

    Ginsburg, David

    Hunter, A. E.

    Craddock, George (Bradford, S.)

    Gordon Walker, Rt. Hon. P. C.

    Hynd, John (Attercliffe)

    Cronin, John

    Greenwood, Anthony

    Irvine, A. J. (Edge Hill)

    Crosland, Anthony

    Grey, Charles

    Irving, Sydney (Dartford)

    Darling, George

    Griffiths, Rt. Hon. James (Llanelly)

    Jay, Rt. Hon. Douglas

    Davies, G. Elfed (Rhondda, E.)

    Griffiths, W. (Exchange)

    Jenkins, Roy (Stechford)

    Davies, Harold (Leek)

    Grimond, J.

    Jones, Rt. Hn. A. Creech (Wakefield)

    Davies, Ifor (Gower)

    Gunter, Ray

    Jones, Dan (Burnley)

    Jones, J. Idwal (Wrexham)

    Owen, Will

    Steele, Thomas

    Jones, T. W. (Merioneth)

    Padley, W. E.

    Stewart, Michael (Fulham)

    Kenyon, Clifford

    Paget, R. T.

    Stones, William

    Key, Rt. Hon. C. W.

    Pannell, Charles (Leeds, W.)

    Strauss, Rt. Hn. G. R. (Vauxhall)

    Lee, Frederick (Newton)

    Parker, John

    Stross, Dr. Barnett (Stoke-on-Trent, C.)

    Lee, Miss Jennie (Cannook)

    Pavitt, Laurence

    Swingler, Stephen

    Lever, L. M. (Ardwick)

    Pearson, A. (Pontypridd)

    Sylvester, George

    Lewis, Arthur (West Ham, N.)

    Peart, Frederick

    Taylor, Bernard (Mansfield)

    Loughlin, Charles

    Pentland, Norman

    Taylor, John (West Lothian)

    McCann, John

    Plummer, Sir Leslie

    Thomas, Iorwerth (Rhondda, W.)

    MacColl, James

    Price, J. T. (Westhoughton)

    Thompson, Dr. Alan (Dunfermline)

    McInnes, James

    Probert, Arthur

    Thomson, G. M. (Dundee, E.)

    McKay, John (Wallsend)

    Randall, Harry

    Thornton, Ernest

    Mackie, John (Enfield, East)

    Rankin, John

    Timmons, John

    MacMillan, Malcolm (Western Isles)

    Redhead, E. C.

    Ungoed-Thomas, Sir Lynn

    MacPherson, Malcolm (Stirling)

    Reid, William

    Wade, Donald

    Mallalieu, E. L. (Brigg)

    Rhodes, H.

    Wainwright, Edwin

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

    Roberts, Albert (Normanton)

    Warbey, William

    Manuel, A. C.

    Roberts, Goronwy (Caernarvon)

    Weitzman. David

    Mapp, Charles

    Robertson, John (Paisley)

    Wells, Percy (Faversham)

    Marsh, Richard

    Robinson, Kenneth (St. Pancras, N.)

    Wells William (Walsall, N.)

    Mason, Roy

    Ross, William

    White, Mrs. Eirene

    Mellish, R. J.

    Shinwell, Rt. Hon. E.

    Whitlock, William

    Mendelson, J. J.

    Short, Edward

    Willey, Frederick

    Millan, Bruce

    Silverman, Julius (Aston)

    Williams, D. J. (Neath)

    Milne, Edward J.

    Silverman, Sydney (Nelson)

    Williams, W. R. (Openshaw)

    Mitchison, G. R.

    Skeffington, Arthur

    Wilson, Rt. Hon. Harold (Huyton)

    Monslow, Walter

    Slater, Mrs. Harriet (Stoke, N.)

    Woodburn, Rt. Hon. A.

    Morris, John

    Slater, Joseph (Sedgefield)

    Woof, Robert

    Moyle, Arthur

    Small, William

    Yates, Victor (Ladywood)

    Neal, Harold

    Smith, Ellis (Stoke, S.)

    Noel-Baker, Francis (Swindon)

    Snow, Julian

    TELLERS FOR THE AYES:

    Oliver, G. H.

    Sorensen, R. W.

    Mr. Rogers and Mr. Lawson

    Oram, A. E.

    Soskice, Rt. Hon. Sir Frank

    Oswald, Thomas

    Spriggs, Leslie

    NOES

    Agnew, Sir Peter

    Crosthwaite-Eyre, Col. O. E.

    Hollingworth, John

    Aitken, W. T.

    Cunningham, Knox

    Hopkins, Alan

    Allason, James

    Dalkeith, Earl of

    Hornby, R. P.

    Balniel, Lord

    Dance, James

    Hughes-Young, Michael

    Barber, Anthony

    d'Avigdor-Goldsmid, Sir Henry

    Hurt), Sir Anthony

    Barlow, Sir John

    de Ferranti, Basil

    Hutchison, Michael Clark

    Barter, John

    Digby, Simon Wingfield

    Irvine, Bryant Godman (Rye)

    Batsford, Brian

    Drayson, G. B.

    Jackson, John

    Baxter, Sir Beverley (Southgate)

    du Cann, Edward

    James, David

    Beamish, Col. Sir Tufton

    Duncan, Sir James

    Jenkins, Robert (Dulwich)

    Bell, Ronald

    Elliott, R. W. (Nwcstle-upon-Tyne, N.)

    Johnson, Eric (Blackley)

    Bennett, F. M. (Torquay)

    Emmet, Hon. Mrs. Evelyn

    Johnson Smith, Geoffrey

    Bennett, Dr. Reginald (Gos & Fhm)

    Fell, Anthony

    Joseph, Sir Keith

    Berkeley, Humphry

    Finlay, Graeme

    Kerby, Capt. Henry

    Bevins, Rt. Hon. Reginald

    Foster, John

    Kerr, Sir Hamilton

    Biggs-Davison, John

    Freeth, Denzil

    Kershaw, Anthony

    Bingham, R. M.

    Galbraith, Hon. T. G. D.

    Kirk, Peter

    Birch, Rt. Hon. Nigel

    Gammans, Lady

    Lambton, viscount

    Bishop, F. P.

    Gardner, Edward

    Lancaster, Col. C. G.

    Black, Sir Cyril

    Glyn, Dr. Alan (Clapham)

    Langford-Holt, J.

    Bossom, Clive

    Glyn, Sir Richard (Dorset, N.)

    Leavey, J. A.

    Bourne-Arton, A.

    Goodhart, Philip

    Leburn, Gilmour

    Box, Donald

    Goodhew, Victor

    Legge-Bourke, Sir Harry

    Boyle, Sir Edward

    Gower, Raymond

    Lewis, Kenneth (Rutland)

    Brewts, John

    Grant, Rt. Hon. William

    Lindsay, Martin

    Bromley-Davenport, Lt.-Col. Sir Walter

    Grant-Ferris, Wg. Cdr. R.

    Linstead, Sir Hugh

    Brooke, Rt. Hon. Henry

    Green, Alan

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Brooman-White, R.

    Gresham Cooke, R.

    Longbottom, Charles

    Browne, Percy (Torrington)

    Grimston, Sir Robert

    Longden, Gilbert

    Bryan, Paul

    Grosvenor, Lt.-Col. R. G.

    Loveys, Walter H.

    Buck, Antony

    Hamilton, Michael (Wellingborough)

    Low, Rt. Hon. Sir Toby

    Bullard, Denys

    Harris, Frederic (Croydon, N. W.)

    Lucas, Sir Jocelyn

    Bullus, wing Commander Eric

    Harris, Reader (Heston)

    Lucas-Tooth, Sir Hugh

    Butcher, Sir Herbert

    Harrison, Brian (Maldon)

    MacArthur, Ian

    Campbell, Sir David (Belfast, S.)

    Harrison, Col. J. H. (Eye)

    McLaren, Martin

    Carr, Compton (Barons Court)

    Harvie Anderson, Miss

    McLaughlin, Mrs. Patricia

    Carr, Robert (Mitcham)

    Hastings, Stephen

    McLean, Neil (Inverness)

    Cary, Sir Robert

    Hay, John

    MacLeod, John (Ross & Cromarty)

    Chataway, Christopher

    Heald, Rt. Hon. Sir Lionel

    McMaster, Stanley R.

    Chichester-Clark, R.

    Henderson, John (Cathcart)

    Macmillan, Maurice (Halifax)

    Clark, William (Nottingham, S.)

    Hiley, Joseph

    Maddan, Martin

    Cleaver, Leonard

    Hill, J. E. B. (S. Norfolk)

    Maitland, Sir John

    Cooke, Robert

    Hinchingbrooke, Viscount

    Manningham-Buller, Rt. Hn. Sir R.

    Cordeaux, Lt.-Col. J. K.

    Hirst, Geoffrey

    Markham, Major Sir Frank

    Corfield, F. V.

    Hobson, John

    Marples, Rt. Hon. Ernest

    Costain, A. P.

    Hocking, Philip N.

    Marten, Neil

    Critchley, Julian

    Holland, Philip

    Mathew, Robert (Honiton)

    1132

    1133

    Matthews, Gordon (Meriden)

    Quennell, Miss J. M.

    Temple, John M.

    Maudling, Rt. Hon. Reginald

    Rawlinson, Peter

    Thatcher, Mrs. Margaret

    Mawby, Ray

    Redmayne, Rt. Hon. Martin

    Thomas, Leslie (Canterbury)

    Maxwell-Hyslop, R. J.

    Ridley, Hon. Nicholas

    Thomas, Peter (Conway)

    Mills, Stratton

    Ridsdale, Julian

    Thomton-Kemsley, Sir Colin

    More, Jasper (Ludlow)

    Robinson, Sir Roland (Blackpool, S.)

    Tiley, Arthur (Bradford, W.)

    Morrison, John

    Rodgers, John (Sevenoaks)

    Turner, Colin

    Mott-Radclyffe, Sir Charles

    Roots, William

    Turton, Rt. Hon. R. H.

    Nicholls, Sir Harmar

    Russell, Ronald

    Tweedemuir, Lady

    Nicholson, Sir Godfrey

    Scott-Hopkins, James

    Vaughan-Morgan, Sir John

    Noble, Michael

    Seymour, Leslie

    Vickers, Miss Joan

    Nugent, Sir Richard

    Sharples, Richard

    Vosper, Rt. Hon. Dennis

    Oakshott, Sir Hendrie

    Shaw, M.

    Wakefield, Edward (Derbyshire, W.)

    Orr, Capt. L. P. S.

    Simon, Rt. Hon. Sir Jooelyn

    Wakefield, Sir Wavell (St. M'lebone)

    Orr-Ewing, c. Ian

    Skeet, T. H. H.

    Walker, Peter

    Osborn, John (Hallam)

    Smith, Dudley (Br'ntf'rd & Chiswick)

    Walker-Smith, Rt. Hon. Sir Derek

    Osborne, Cyril (Louth)

    Smithers, Peter

    Wall, Patrick

    Page, John (Harrow, West)

    Smyth, Brig. Sir John (Norwood)

    Ward, Dame Irene

    Page, Craham (Crosby)

    Spearman, Sir Alexander

    Wells, John (Maidstone)

    Partridge, E.

    Speir, Rupert

    Whitelaw, William

    Pearson, Frank (Clitheroe)

    Stanley, Hon. Richard

    Williams, Dudley (Exeter)

    Peel, John

    Stevens, Geoffrey

    Williams, Paul (Sunderland, S.)

    Peyton, John

    Steward, Harold (Stockport, S.)

    Wills, Sir Gerald (Bridgwater)

    Pickthorn, Sir Kenneth

    Stodart, J. A.

    Wilson, Geoffrey (Truro)

    Pike, Miss Mervyn

    Stoddart-Scott, Col. Sir Malcolm

    Wise, A. R.

    Pilkington, Sir Richard

    Storey, Sir Samuel

    Wolrige-Gordoo, Patrick

    Pitman, I. J.

    Studholme, Sir Henry

    Woodhouse, C. M.

    Pott, Percivall

    Sumner, Donald (Orpington)

    Yates, William (The Wrekin)

    Powell, Rt. Hon. J. Enoch

    Talbot, John E.

    Price, David (Eastleigh)

    Tapsell, Peter

    TELLERS FOR THE NOES:

    Prior, J. M. L.

    Taylor, Edwin (Bolton, E.)

    Mr. Gibson-Watt and

    Prior-Palmer, Brig. Sir Otho

    Taylor, W. J. (Bradford, N.)

    Mr. Gordon Campbell.

    Pym, Francis

    Teeling, William

    Mr. Houghton: I beg to move, in page 8, line 5, to leave out from "of" to the end of line 6 and to insert:
    "calculating surtax to be charged under the next following subsection".
    The Deputy-Chairman (Major Sir William Anstruther-Gray): I think it would be convenient also to discuss the Amendments in page 8, line 19, at end insert:
    (c) to the total income, reduced by the amount of any deductions under the two foregoing paragraphs, there shall be added the amount of any surplus expenses as hereinafter defined.
    (2) For the purpose of charging surtax for the year 1961–62 or any subsequent year of assessment, the income of an individual shall be deemed to be his income as calculated under the foregoing subsections, if, and only if, the income so calculated and the charge on that income for surtax are less than the income and the charge for surtax would be, if this section had not been enacted.
    and in page 9, line 7, at end add:
    (4) In this section the phrase "surplus expenses" means—

    (a) any expenses incurred by way of entertainment; and

    (b) any other expenses of a personal character (being expenses in respect of travelling, subsistence or the like) allowed in relation to a source of income, and so allowed in excess of the amount of one quarter of the gross income (being the income before deduction of any such expenses) derived from that source.

    Mr. Houghton: When I moved the first of the three groups of Amendments
    1134
    upon which the Committee has just divided I explained that they were designed to correct faults in the Chancellor's proposals on the basis of his own premises without prejudice to our own opposition to the Clause as a whole. What we have just dealt with has been described in the course of the discussion as retrospective incentives. I now come to the question of expenses deducted from the Income Tax assessment and, therefore, automatically reflected in the Surtax assessment.
    5.45 p.m.
    The Amendment proposes to exclude from any deduction from the Surtax assessment any allowance made against the Income Tax assessment in respect of expenses incurred by way of entertainment. Secondly, we propose to restrict the deduction from the Surtax assessment in respect of certain other expenses to one-quarter of the gross amount of income derived from that source.
    The Amendment makes no difference to the business expenses which can be claimed or allowed against the relative Income Tax assessment. We can deal here only with what shall be deducted from the Surtax assessment. Hitherto, what has been allowable from the Income Tax assessment has been equally allowable from the Surtax assessment. The earned income as reduced by the set-off for expenses has been assessed

    1135
    to Surtax, the simple principle being that whatever the Income Tax assessment that is taken as the basis for Surtax.
    We now propose a breach in the traditional basis of assessing income to Surtax. We consider that we have justification for this having regard to the liberal reliefs which the Clause proposes to give to Surtax payers. I know that the Financial Secretary or the Chancellor, whoever replies, will stress the traditional identity between the amount assessed for Income Tax as being also the amount assessed for Surtax.
    Surtax is a superstructure on taxation of income and the same rules in determining what is chargeable have applied to both. We propose to break that traditional link in one respect. I agree that it is not very logical to have a different basis of assessment for Surtax from the basis of assessment of Income Tax on the same income, but there are numerous examples of differences of treatment for Surtax purposes based, not on logic, but on the judgment of the Chancellor of the Exchequer and of the House of Commons on what is right and proper in certain circumstances.
    For example, the exemption of the first £15 of interest on Post Office or trustee savings applies to Income Tax only. That exemption is not carried into the field of Surtax. Personal allowances which are set-off against the Income Tax assessment are not fully set-off against the Surtax assessment. As the Committee knows, personal reliefs may be set off about the Surtax assessment only to the extent that there is an excess over the single person's allowance of £140. In the past, earned income relief given for Income Tax purposes has not been extended to Surtax. The Clause proposes for the first time to give earned income relief to Surtax. So I do not think that our Amendment can be opposed on the ground that it is an objectionable change in the traditional treatment of Surtax. I think that it is a flexible tax which we can adjust to the circumstances of the time.
    We feel that the reliefs given in Clause 11 on earned income are so generous, one might even describe them as drastic, that now there is no case for allowing the Surtax payer to set off against his Surtax assessment certain expenses
    1136
    which, while allowable for Income Tax purposes, are objectionable as a deduction from Surtax. On this Clause or in this Bill we cannot deal with the rules applicable to deductible expenses either under Schedule E or Schedule D. We can deal only with those matters in relation to Surtax. That is why we have confined our proposals to Surtax. Had we been free to do so, I think we should certainly have wished to carry our proposals, and probably others too, into the sphere of Income Tax.
    It is difficult to discuss this proposed restriction on expenses deductible from Surtax assessment without making some reference to the wider question of expenses and taxation. I think I can say that there was some encouragement for this Amendment in the references which the Chancellor himself made in his Budget statement. He said:
    "I have been exercised in my mind about the tax treatment of expenses allowances and benefits in kind received by directors and other senior executives. The question of business entertainment is closely linked."
    The right hon. and learned Gentleman went on to say that many firms pursued a strict policy in these matters and nothing he had to say applied to them. He continued:
    "I think, however, that there is something behind this strong feeling which undoubtedly exists that some so-called business entertaining goes further than purely business motives. This is an unhealthy feature both on business and social grounds. I ask those concerned most seriously to consider whether some curtailment in the extent and scale of entertainment can be achieved without affecting business efficiency. It is a matter very difficult to deal with by legislation, but I shall review this matter again next year and I do not reject altogether the possibility of legislative action then."—[OFFICTAL REPORT, 17th April, 1961; Vol. 638, c. 815.]
    In Clause 20 of this Bill the Chancellor is taking the positive step of proposing to reduce the amount of money spent on motor cars which might qualify for relief for capital expenditure. But, in general, this year the Chancellor has given some sort of warning that he has the matter in mind. He has not uttered any threat about retrospective legislation, which I can quite understand, having regard to the fate of other threats of a similar kind in recent years. What the right hon. and learned Gentleman is really doing, I suppose, is binding over the offenders to be of less extravagant behaviour during the next 12 months.

    1137
    If there are physical signs that they have not heeded this warning he may be moved to do something. We want him to go some little way towards checking this abuse at the same time as he gives these liberal reliefs to Surtax payers.
    It has been suggested in some Press comments recently on this matter that now directors and business executives, and men in business on their own account, will get such liberal reliefs from Surtax that they will probably be able to afford to pay for their own lunch. I think that the message should go out from this Committee that that is what we expect them to do. In fact, we might go further and say that if they entertain a guest for business reasons they might keep an eye on the main chance and pay for his lunch too. But we do not think that the present liberal method of dealing with expense allowances should be carried into the Surtax field when the substantial reliefs are being given in this Bill.
    On the general question of expenses, my own view is that it is not a tightening up of administration which is required so much as a tightening of the law. I do not believe that this abuse can be effectively checked by closer scrutiny and more exacting administration. This problem is full of emotional reactions of all sorts and kinds, and it is very disagreeable work to do. It may not be as disagreeable for accountants as it is for Income Tax inspectors, but it is disagreeable work to do. Very often it leads to heated arguments and distasteful personal interviews with taxpayers. There is a limit to what the taxpayer will stand in the scrutiny and examination of his claim, the implied suspicion of his motives and even of his honesty. I believe that the only solution to this problem is a limit to allowances by law.
    If we had to go to inspectors of taxes and negotiate an allowance for a wife, or children, or for a housekeeper, what a time everybody would have. Those who have expensive wives; those who had economical wives—those who might even have two wives—would have to disclose to the inspector just what they spent on their womenfolk. We might be told about the children's taste in toys and what has to be done to keep them sweet. Keeping up with the Joneses is no longer
    1138
    only an adult occupation, it now includes the children as well, and we can all imagine the sort of chaotic conditions there would be in such discussions with the Income Tax authorities. So by law we have said that a married man's relief is so and so; a single person's relief is so and so; the allowances for children are such and such, and for a housekeeper similar. I think that the principle of carrying formal allowances for Income Tax and Surtax purposes into the range of expenses is very strong.
    A great deal of mischief arises from the willingness of employers and employees to introduce a system of gross allowances for expenses. Instead of the employee claiming expenses necessarily incurred on some system of subsistence and travelling expenses or allowances for entertainment on specific and possibly vouched expenditure, an overall payment is made to cover all these things. That suits the employer because he has not to deal with individual claims. It suits the employee because he has not to render a detailed claim to the employer. The real substance behind this arrangement is that it leaves the employee free to contrive to get the maximum advantage personally from his expenses allowance. That, I think, is one of the big sources of difficulty and abuse in connection with expenses allowances. The taxpayer in those circumstances can overload his claim with items which his employer would disallow but which the Income Tax people must accept. It is a means of getting the maximum net benefit from a gross payment of salary inclusive of expenses.
    6.0 p.m.
    I think this is monstrously unfair on the Inland Revenue, because claims which should have been rendered against employers are rendered against them. In connection with tax reliefs for expenses, the Inland Revenue has no real means of deciding what is a fair standard of expenses and what is not. In many cases the employer does not come into it at all. The employee is left to tell his own story uncorroborated by the employer in a number of cases. If we had that system in the public sector there would soon be a public outcry against it.
    We do not get this in the public sector because all allowances are scheduled and subject to rule. That

    1139
    applies to any hon. Member of this House travelling on House of Commons business, to every Minister travelling on official business, on every trip abroad of a Minister or permanent official. Local government officers and those in nationalised industries and in the public services are subject to a set of rules about their expenses claims and their maximum allowances are usually fixed. It is only in the private sector of industry and commerce that this problem arises.
    I believe there is a very good case indeed for applying, as far as possible the principle now operating in the public service to private industry and commerce as well. I think it would end a great deal of abuse. I doubt whether it would restrict the legitimate activities of those concerned. For my part, I should have absolutely nothing to do with any entertaining claim whatever as a deduction from taxable income or taxable profits. I would be as drastic and sweeping as that, because nothing short of that would clean up the abuses of people entertaining themselves, their friends and colleagues and business associates on claims which they make either against the firm or against their taxable income and profits to the Inland Revenue.
    In this Amendment we can make only a very small gesture towards that ultimate though drastic proposal. What we propose by this Amendment is that on Surtax—which is the only thing we can touch in this Amendment—we should exclude, as the Amendment suggested to page 9, line 7, says:
    "any expenses incurred by way of entertainment."
    That is item No. 1. The other thing we propose to do is not wholly to exclude claims for certain other expenses but to restrict them. I think it a very modest restriction which we seek to impose. What we say is that:
    "other expenses of a personal character (being expenses in respect of travelling, subsistence or the like) allowed in relation to a source of income, and so allowed in excess of the amount of one quarter of the gross income (being the income before deduction of any such expenses) derived from that source."
    That wording is in the associated Amendment, to page 9, line 7.
    1140
    Is this proposal objectionable from the point of view of the Chancellor? It would, of course, fortify the Revenue to a comparatively small extent. It would check some of the abuses as they are extended into the Surtax field. It would be a tightening up of the law in one of the fields of taxation and would not be excessive at that. The Chancellor would probably welcome its general purpose and its financial benefit from the point of view of the Exchequer but might feel that this is rather jumping the gun which he is holding in his pocket for possible use next year. If he is to tell us that all that is wrong with our Amendment is that it is premature, that this is the sort of thing he has in mind to do next year, of course we might think again. However, we know that in this connection Chancellors tend to be willing to strike but are afraid to wound.
    The difficulty the Chancellor has in doing more than throwing out the hint he did in his Budget Statement is that he is dealing with a large number of people who are very generous supporters of the Conservative Party. I am sorry to say that, but it is no good blinking the facts of life in the political world. We are constantly being accused of getting our money from the trade unions. We are not ashamed of it and never tried to hide it. We publish our accounts, but we are never able to get the truth out of hon. Members on the benches opposite about where they get their money from. We know that a lot of it comes from the sources which are now standing to benefit most from Clause 11 and all that it seeks to do. In that sense, our Amendment would be objectionable to them.
    I know that also there are certain problems of administration. I am perhaps as sensitive as any hon. Member to problems of administration in the Inland Revenue, because I have been dealing with or listening to them for nearly forty years. There are some purposes in taxation for which one must exert every effort to overcome administrative difficulties and which have an overriding social or economic purpose. This is one. There would be no particular difficulty in disallowing from all expenses claims against Schedule E amounts allowed for entertaining and also to apply the restriction which is

    1141
    referred to in the Amendment to page 9, line 7, as regards other kinds of personal expenses.
    I admit that it would be more difficult to make this provision in assessments under Schedule D where so much is hidden in the general expenses of the business. There is a whole reform to be done in the method of rendering accounts for assessment under Schedule D and an insistence by law on the revelation of items of charges against taxable profits which at present have to be dug out by diligent scrutiny by inspectors of taxes. That would not be insuperable as a matter of administration under this Amendment. I certainly concede that the Chancellor of the Exchequer has a difficult matter in hand on this. A less courageous and steadfast Chancellor might be frustrated and turned aside from it, but I have hopes that the Chancellor really meant that something should be done about it.
    My final point is this. I know that it can be said that all this is marginal. I heard Mr. Paul Chambers giving an address to the Income Tax Society the other day. He made a speech in public and referred to the fuss there is about expenses of directors and others and suggested that on the whole it was marginal from the point of view of the national revenue. I do not dispute that.
    What I do say, however, is that the manifestations of this expenditure are a grave offence to many people who are being compelled to lead economical and not very exciting lives because the Government have imposed upon them heavy contributions for insurance and the National Health Service. They are taxpayers as well, and feel that there is something wrong with the alleged equity of our system of taxation when some people can clearly be enjoying themselves quite extravagantly and others can afford an evening out only once in a blue moon.
    It is socially disturbing. It arouses resentment. It casts the deepest suspicion on the effectiveness of the Revenue machine, and a lot of people think that these signs of extravagance must be due to a lot of tax dodging and evasion and a failure of the Inland Revenue to do its job properly. Some part of it is undoubtedly due to avoidance and evasion of tax, and to taking the fullest advantage
    1142
    of the expenses rules that there are, although I am sure that a lot of it flows from the enormous capital gains that some people are making at present, and on which they are paying no tax at all. I think that this is adding to the extravagance which we see around at present.
    A good deal of this could be called commercial extravagance, in which firms treat their customers and salesmen think that they have to treat those with whom they wish to do business. I have said more than once that it is a great pity if our overseas buyers have to see British goods through the bottom of a wine glass, but that is apparently how they have to look at what we have to sell. Apparently, they are not in a fit state to examine the quality of British goods unless they have been dined and wined beforehand, or, if they look at the quality of the goods before being dined and wined, at least they have to be dined and wined so that they will give an order. These are conditions of doing trade which should not be encouraged, and our Amendment goes a little way to putting some check upon the level of expenses in these two directions at the present time.
    I do not think that I ought to strain the patience of the Committee, or your own, Sir William, by going any further on these Amendments, because I might be tempted to hang a good deal on a comparatively small peg. I cannot deal adequately with this Amendment without sketching in the general background, which leads us to want to do something however small, about this matter.
    Viscount Hinchingbrooke: Time after time we have heard the hon. Member for Sowerby (Mr. Houghton) on this theme. For years past he has been going at it. He is the most attractive, the most popular and the most agreeable spoilsport it has ever been my privilege to meet. He is a very much nicer man than Mr. Scrooge.
    The effect of doing what the hon. Gentleman wants to do would be to turn this country into a meagre, impoverished, unexciting, boring, depressed, grey and distracted country, rather equivalent to Albania or that sort of country behind the Iron Curtain. If anyone wants to reorientate our society and put it effectively behind the Iron Curtain, from the sociological point of view, he would adopt this Amendment.

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    I can never quite understand the desire of the Opposition for this, because they are supposed to be deserting the theory of pure Socialism and are accepting more and more the advantages of a competitive commercial society. They are taking pride in being members of the Western world, but if the Western world is to win over Communism it has to show some results from capitalism, and the sort of results which capitalism best shows are a high standard of living, a ladder of opportunity, a chance that a man who works hard in his early life will rise to enjoy some the benefits which the hon. Gentleman is so anxious to repress by legislation. Therefore, I can see that if this Amendment were passed we should collapse the ladder of opportunity down to the first rung, and a lot of earnest people who are wondering whether they should join the Conservative Party or the Socialist Party will desert any kind of invitation which the hon. Gentleman and his hon. Friends put out.
    6.15 p.m.
    I cannot understand their attitude. They are introspective, psychotic and altogether not to be comprehended on this theme, and I very much trust that, as we return to this theme year after year relentlessly in what has now become, from the public point of view, I should say, a very boring way, in the end we shall win our point of view and put it across. The mischief today is not that there are these enjoyments, these opportunities and these excitements, this glitter and glamour in public life which even Socialist newspapers exemplify on their front, middle and back pages with great enjoyment, but that all this is experienced by a comparatively narrow band of people.
    Time after time, we have suggested to successive Chancellors that the only way in which real justice can be done is to reduce Surtax on all persons to such a level that they can, out of their net retained income—all of them—enjoy some of these privileges and opportunities. Since the war, it is only the business world and a certain section of Schedule E taxpayers in the professional classes who have been allowed expenses and entertainment allowances and who have been able to opt out of the consequences of the drastic Surtax proposals which
    1144
    successive Governments in their un-wisdom have imposed.
    The real answer, if we want to maintain an elevated standard of life, an exciting life, with a real ladder of opportunity for everybody, is that the rates of Surtax, as I suggested in a previous Amendment, should be consolidated with Income Tax, making it something like 10s. in the £ on the top range of income, so that these opportunities will be available to everybody, not only to successful and prosperous commercial classes. I wish we could convince the Socialist Party that that is the real answer, so that it would turn right about face, forget its out-of-date political beliefs and recognise that the country as a whole wants to see these things, provided that they are not grossly exaggerated, and that we do not live in the somewhat exaggerated and fantastic state of some Oriental empires of the past.
    I quite agree that there are scandalous excrescences in all this, which must be avoided in any sober, Christian society like ours, but, at the same time, let the Opposition understand that the real mischief is this overall, crashing imposition of paying 17s. or 18s. in the £, from which only the business classes can escape. Until we correct that, we shall have a situation which they themselves continue to despise.
    Mr. Sydney Silverman: Will the noble Lord answer one question for me? I am interested in his proposal to abolish Surtax, consolidate it with Income Tax and have a top rate on higher incomes of 10s. in the £. It is obvious that this would entail a severe loss of revenue. Does he make his proposal on the assumption that expenditure will continue at the present level? If so, how does he propose that the Chancellor of the Exchequer should raise the revenue which he would sacrifice if his proposal were adopted?
    Viscount Hinchingbrooke: The hon. Member knows very well that private Members are constitutionally barred from suggesting proposals for increasing taxation.
    Mr. Diamond: I support very strongly everything my hon. Friend the Member for Sowerby (Mr. Houghton) said in favour of the Amendment. I do so for a variety of reasons, including all those

    1145
    he mentioned. However, before getting down to the detail of the Amendment I want to put it in perspective. I have spoken on this subject before and have been, perhaps, a little misunderstood by some of my hon. Friends. I will repeat it now in order to get it properly and thoroughly understood, I hope.
    I am almost in the position of regretting every minute we devote to the discussion of expenses and the prevention of tax avoidance on expenses, because I would far rather we devoted the time to the discussion of the real matter of preventing avoidance of proper tax liability on capital profits and things which are really material. Those are the material things. They are the methods whereby millions of pounds are saved. Expenses are the methods whereby pounds are saved. In terms of proportions I should be much happier if we could discuss the material things. However, we cannot. On the Amendment we are limited to expenses.
    On expenses, I share my hon. Friend's view that this is not a matter to be dealt with by more severe administrative rules, by greater scrutiny on the part of the Revenue, or more lengthy scrutiny or tougher instructions by the Treasury. It has reached the stage, in many cases, at which the relationship between the taxpayer and the Revenue, which must exist, has to be based on understanding. It is our job to ensure that effective taxes are spread evenly. We on this side must not forget that the taxpayers are the people who pay the taxes. If there were a strike of taxpayers, we should be in very serious difficulty. We must try to bring about a relationship between the Inland Revenue and the taxpayer which is based on understanding of one another's positions. The Inland Revenue official has to do his duty. The taxpayer has to pay his taxes, but he is a human being and his human frailty of not wishing to pay over what he has earned must be understood.
    I have said that to put the matter in perspective. I will now say why I strongly support the Amendment, which is not directed to administrative action but to an alteration in the law. I will deal, first, with the point made by the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke). How right he was when he said that the Western world
    1146
    should win the battle. He did not follow that up by mentioning that the way in which one of the leaders of the Western world—the newest leader, namely, the President of the United States—is proposing to win this battle is by tackling, first and foremost, the great unpopularity and the great evil which affects the whole economic attitude of the American businessman, namely, the concentration on the expenses racket. Mr. Kennedy has sent a message to Congress to deal with this matter. He did this within three weeks of being elected the new President of that great capitalistic, private enterprise society, the United States of America.
    Let me say how right the noble Lord was to draw attention to the need to remove this evil from our society if we are to win the battle. This is a vital matter, because there is an attitude of unrest on the part of many people who see this going on and cannot understand how it happens. They think that there is a lack of administrative effort, and so on. That is not so. This is an attitude which is being adopted more and more by the business community. Somehow or other it must be moderated. It has gone wild in the United States. It is going wild here. It becomes more and more exaggerated every year.
    We have only to listen to the complaints of the businessman himself to know that this is true. For example, a London manufacturer of ladies' clothing would say that if he had to entertain a buyer from the Provinces who visited London once a year to make his purchases, it was sufficient, ten years ago, to take him out to lunch, buy him a sherry and a glass of wine, and perhaps one cigar.
    Mr. Emrys Hughes Mr. Emrys Hughes (South Ayrshire) rose—
    Mr. Diamond: I hope that my hon. Friend will allow me to finish my illustration. Then I will give way.
    Today, the manufacturer has to entertain the buyer to lunch and dinner. He has to take him out to a party at night. [An HON. MEMBER: "And his wife."] Very likely. I do not know these details—somebody's wife, anyway. When all this is over, and the manufacturer has incurred all this expense, the buyer goes back to his provincial city and presents

    1147
    his own boss with a chit for the expenses which have been paid by somebody who entertained him.
    Sir Douglas Glover: I rise only because the hon. Member for Gloucester (Mr. Diamond) keeps looking at me. He knows that I am in that trade. All my trading life I have had a rule that I never allow a supplier even to buy me a drink.
    Mr. Diamond: I am not relying on my imagination for this. I am quoting what a businessman told me in one instance. I have heard of other instances which show, as I am sure the whole Committee will accept, that the practice of entertaining and spending is increasing, not reducing. The general level is increasing. Indeed, the business community needs to be helped against itself, because they are in competition. The more one man goes in for this, the more another has to go in for it. We must set a standard.
    It is a difficult matter to deal with. I shall now consider what is the best method to adopt. The Royal Commission examined this problem and came to the conclusion that expenses should be allowed on the basis of their being reasonable, as opposed to the present definition. It suggested that the criterion should be whether the expenses are reasonably incurred. The Government did not accept that, because to accept the view that the Inland Revenue had to decide what was reasonable would run counter to the whole basis on which the relationship between the Inland Revenue and the taxpayer exists. The relationship can continue only on the basis that the taxpayer runs his own business, decides his own affairs, and is the judge of what is or is not reasonable, and that the Inland Revenue accepts that view and taxes him on the results of his activities, be they wise or foolish, reasonable or unreasonable.
    Therefore, the Government were not prepared to accept the recommendation of the Royal Commission. But the position has got worse and worse, and the Government are now driven to doing something. In this very Finance Bill, in the question of motor cars, which is closely related to this matter, they are saying for the first time that the Inland
    1148
    Revenue will take the decision as to what is reasonable. They are saying that a motor car of £2,000 is reasonable, but one of £5,000 or anything over £2,000 is not reasonable. For the first time the Government are being driven to make a breach into the previous continuing relationship between the Revenue and the taxpayer. They are right to be driven to do this, because there is no alternative. Expenditure of this kind is mounting and the business community needs helping against itself.
    6.30 p.m.
    The Amendment moves on precisely the same philosophical argument. It goes on the basis of what the Chancellor of the Exchequer has said. Indeed, he has said it on the Bill. I wish the noble Lord would read what his right hon. and learned Friend has said. This is what his own Chancellor said in his Budget speech about business expenses:
    "I think…there is something behind this strong feeling which undoubtedly exists that some so-called business entertaining goes further than purely business motives…I ask those concerned most seriously to consider whether some curtailment…"
    The Chancellor also said:
    "It is a matter very difficult to deal with by legislation"—
    Indeed it is, as I have illustrated—
    "…and I do not reject altogether the possibility of legislative action…"—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 815.]
    That is a very clear warning of what is in the Chancellor's mind. We are helping the Chancellor over expenses set against Surtax for the simple reason that we cannot do so in relation to Income Tax without being out of order. We are dealing with this purely on Surtax grounds for that reason alone, but what we say in this Amendment—which the Chancellor should view very sympathetically—is that the situation has got beyond the bounds where the discretion of the businessman can be relied on to decide what rate of entertaining, travelling and other expenses is reasonable. Now, the tax gatherers—the Inland Revenue—have to intervene, and say, "We think that a certain thing is reasonable."
    As to entertainment expenses, nothing is reasonable. This is not a great departure from the present law and practice because, as can be confirmed by those

    1149
    hon. Members who are in the same profession as I am, under the existing law entertainment expenses are not allowed at all in many cases—not at all. I will not go into details, but there are very many cases in which they are not allowed. We say that entertainment expenditure should be disallowed completely for Surtax purposes.
    We also say, echoing what the noble Lord has said, that inasmuch as all taxpayers with incomes of less than £5,000 a year have been relieved completely of Surtax—completely—and so get this large net income, they should themselves pay for their own lunches and entertainment. As this relief is being made, it is now reasonable that the very thing the noble Lord is suggesting should take place; these people should pay for their lunches from their own pockets—
    Mr. Raymond Gower: Would the hon. Gentleman explain what would happen, if this Amendment were incorporated into the Bill, in regard to such expenses as are occasioned by a limited company of which one of the directors is paying Surtax? Assuming that it is a one-man company and these expenses, in effect, were greater than the proportion specified in the Clause, what would be the effect on that man's Surtax?
    Mr. Diamond: I shall come to that. The Amendment I have in mind is divided in paragraphs (a) and (b). I have dealt with (a), and will deal with the other. That is why we say that entertainment expenses should be disallowed completely for Surtax purposes.
    We come to expenses of a personal character. These are defined, and nobody would argue whether or not this definition is completely right. Nobody can say for certain what is the best way of defining that point. One does the best one can. The whole difference in the approach here is that one is allowing for the first time, as in the motor car Clause appearing later in the Bill, the Inland Revenue to say what is reasonable or not, because the taxpayer is no longer able so to control expenses of this kind as to keep them within reasonable bounds.
    I think that this approach is right. It is justified on motor cars, and now on entertaining and personal expenses. Some hon. Members may have a better
    1150
    formula for achieving this purpose, but our formula is a good one. It sets some relationship between expenses incurred and income earned. That is a normal business approach. One could justifiably incur expenditure up to a certain point, but beyond that it could only be incurred, not for business but for personal purposes.
    To reply fully to the hon. Member for Barry (Mr. Gower) would take me into certain technicalities, but he will understand that there are certain circumstances in which the director of the public company is charged under Schedule E with expenses incurred by him on behalf of the company, and he is then left to argue with the Inland Revenue as to whether those expenses were wholly and necessarily incurred, and so on. Therefore, for certain purposes, that gentleman's expenses would be limited in this way. Entertainment expenses—no reduction for Surtax purposes; no allowance—and, in other circumstances, expenditure reduced in accordance with the formula laid down.
    I say that this Amendment is wholly in line with the latest approach of the Government, as shown in the Clause dealing with motor cars. I say that this is wholly appropriate at this time, when Surtax is being considerably reduced in all cases, and extinguished in the case of all people with incomes under £5,000 a year so as to enable them to meet this expenditure from their own pockets. It is a proper approach, it is well timed, and it should be accepted by the Government.
    Mr. I. J. Pitman: I should like to take up one point—and it is not an unreasonable playing with words. The hon. Member for Gloucester (Mr. Diamond) spoke a great deal about "reasonable" expenses, and said that in terms of motor cars, as dealt with in a later Clause, it was the Government who were deciding what was reasonable. But what the Government are really doing is to decide what is legal. At no stage have we in this House ever wished, because it leads only to capricious government, to have such points as what is reasonable to be decided anywhere but in the law laid down.
    The hon. Member should have used the word "necessary". Under the existing law, the taxpayer or the man

    1151
    incurring expenses has to justify those expenses as being necessary. It is open to the inspector—and, as we all know, it very frequently happens—to argue with very great cogency that such-and-such an expense is not necessary. This may appear to be a legal or quibbling point on words, but I think that that correction should be made in respect of what the hon. Gentleman has just said.
    The Financial Secretary for the Treasury (Sir Edward Boyle): I think that I can claim a reasonable degree of impartiality in this debate because I have not a wife—expensive or otherwise—but I am not sure that I would be an entirely conforming citizen either in the ideal State of the hon. Member for Sowerby (Mr. Houghton) or that of my hon. Friend the Member for Dorset, South (Viscount Hinchingbrooke). I start by saying in reply to the hon. Member for Gloucester (Mr. Diamond) that I think he was drawing too close an analogy between this Amendment and Clause 20. In Clause 20 we do not ask the Inland Revenue to decide what should be the maximum amount proper for a car; we are asking this Committee to decide that there should be some limit on the capital allowances, which is a rather different matter. That is a Clause where the Committee has to decide the maximum figure.
    Those who heard the hon. Member for Sowerby speak on the last day of the Budget debate, in which he made a remarkable statement, as I thought at the time, that a Labour Government
    "…would disallow all entertainment as a business expense charged against taxable profits"—[OFFICIAL REPORT, 20th April, 1960; Vol. 638, c. 1405.]
    will not, I think, have been surprised to see this group of Amendments on the Notice Paper. Their combined effect, as the hon. Member for Sowerby very clearly explained, would be to cut down the new Surtax reliefs on earned income by reference to a taxpayer's "surplus expenses". These expenses are defined in the Amendment as, first, any entertainment expenses; and, secondly, other personal expenses which have been allowed for Income Tax purposes in respect of travelling, subsistence and so on, provided that they exceed one-quarter
    1152
    of the gross earnings from the particular source of earned income.
    Mr. Mitchison: To that extent.
    Sir E. Boyle: Yes, to that extent.
    Before coming to the wider issues raised by the Amendment there are two preliminary points which I must make. In the first place, this Amendment, as the hon. Member for Sowerby recognised in his speech, would introduce a new and, in my view, objectionable form of discrimination as between our treatment of Income Tax, on the one hand, and Surtax on the other; because the effect of this Amendment would be that a taxpayer would have to pay Surtax on expenses which had been proved to be legitimate and had been allowed for Income Tax purposes.
    When a director or a company official puts in his claim for expenses, either these expenses should be allowed or they should not be allowed. I can see nothing that can be said for a system which allows them for Income Tax purposes but which brings them in again when considering the man's Surtax liability.
    It seems to me that the comparison between expenses and personal allowances—although it appears a reasonable one at first sight—is really a fallacious one, because all expenses which are allowable under Schedule E are expenses of earning the income and they vary from case to case. But fairness demands that the actual expenses be allowed or disallowed, as the case may be, before getting down to the taxable income. Personal
    allowances—marriage allowances and child allowances and so on—reflect expenses not of earning but of spending income. We give these personal allowances because, naturally, it costs more to live if one has a family than if one has not.
    Fairness here demands that account should not be taken of actual expenditure because actual expenditure in the case of allowances would surely benefit the wealthier families as against the poorer ones. This analogy drawn by the hon. Member for Sowerby, as between expenses, on the one hand, and personal allowances on the other, was not really very sound because, in the case of Income Tax allowances, we do not take into account the actual expenditure of individuals, whereas it is of the essence

    1153
    of the case in considering matters of business expenses that we take into account actual expenditure.
    Mr. Diamond: The hon. Gentleman has pointed to the illogicality of deducting expenses for Income Tax purposes and not allowing them for Surtax purposes which is proposed in the Amendment. Could he tell us how we can put forward an Amendment which would be accepted by the Table which would provide for a reduction of expenses for Income Tax purposes? If not, will the hon. Gentleman make the illogicality complete by introducing an Amendment himself?
    Sir E. Boyle: I hope that the hon. Gentleman will do me the courtesy of listening to what I have to say. Even if such an Amendment were put down, I could not advise the Committee to accept it. I thought it was reasonable to point out what seemed to me to be an objectionable feature of the Amendment as drafted, particularly as the hon. Member for Sowerby, in moving the Amendment, had drawn attention to this.
    There is a second preliminary point concerning the drafting of the third Amendment. The definition of personal expenses in paragraph (b) of the Amendment refers to
    "(b) any other expenses of a personal character (being expenses in respect of travelling, subsistence, or the like)…"
    It is not very clear from those words just what "the like" expenses refer to. I should judge that this kind of phrase would cause a good deal of trouble to administer, especially remembering that the treatment of business expenses is one of the hardest tasks facing any tax inspector today.
    6.45 p.m.
    I want now to say a further word, in reply to the hon. Member for Sowerby, concerning each of the two main categories of expenses covered respectively by paragraphs (a) and (b) of the third Amendment. First, I will say a word about entertainment expenses. There is, I agree, a rather widespread feeling in Britain today that there is a good deal of unnecessary extravagance in the matter of business entertainment. The Chancellor, in his Budget speech, referred to this as
    1154
    "an unhealthy feature both on business and social grounds,"
    and said:
    "It is a matter very difficult to deal with by legislation, but I shall review this matter again next year and I do not reject altogether the possibility of legislative action then."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 815.]
    The Chancellor certainly gave no encouragement in his Budget speech to that section of business opinion in this country which is inclined to talk as though this matter of expenses was something with which the Government and Parliament have no right to interfere. I certainly would not quarrel, and I know the Chancellor would not quarrel, with a great deal of what was said by the hon. Member for Sowerby about the social aspect of this matter, particularly when he said that it disturbs many people of all political parties, or of no political party, who have to live in rather straitened circumstances on fixed incomes.
    But that is different from saying that all entertainment expenses should be disallowed for tax purposes. Indeed, as I said in the Budget debate, it would be very difficult to imagine a proposal which is less helpful from the point of view of our export trade. I noticed that during the Budget debate, in response to an interjection by the hon. Member for Wycombe (Mr. John Hall) the hon. Member for Sowerby admitted that there was a case for differentiating between expenses connected with exports and those connected with home sales.
    Even as regards purely home entertainment not directly connected with the export trade, I do not believe that it would be wise or fair to go as far as the hon. Member for Sowerby proposes. I said in an earlier debate, and I repeat,
    "that the strength of our balance of payments reflects our competitive economic performance over the economy as a whole".—[OFFICIAL REPORT, 20th April, 1961; Vol. 638, c. 1422.]
    I do not believe that our competitive economic performance would be improved if all business entertainment expenses were to be disallowed for tax purposes.
    The fact that there is some unnecessary extravagance surely does not, as a matter of equity, justify a complete prohibition of any deduction for entertainment. Such a prohibition would penalise

    1155
    not only those who are extravagant but those many individuals and companies the cost of whose entertainment of business connections is strictly controlled.
    Concerning the second proposal, that expenses for travelling and subsistence should be disallowed in so far as they exceed one-quarter of the gross earnings from any particular source of earned income, I suppose the idea behind this second half of the Opposition proposal is that some of the expenses which are at present allowed ought not to be, and that those who travel on business ought to be content with a lower standard of expenditure than they actually incur.
    It is quite true that if a taxpayer makes a business trip the Revenue cannot, except in extreme cases, disallow part of that expenditure on the grounds, say, that he could have travelled more cheaply, or that he could have stayed in a less expensive hotel. In my view, any detailed inquisition of that kind would be wrong in principle and would prove impossible in practice. As the hon. Member for Sowerby said, there is a limit to the amount of questioning, verbally or through correspondence, which taxpayers will put up with.
    Even if it could be shown that there is unnecessary extravagance in this kind of expenditure, the disallowance of anything incurred above an arbitrary fraction of income, which is what hon. Gentlemen opposite are proposing, would prove unfair. Such a rule would have no effect on the man who makes only a few business journeys, but it would hit hard at the man who has to be away from home for a considerable part of the year, and the total of whose perfectly legitimate expenses—measured by any ordinary standard—may considerably exceed one-quarter of his gross salary.
    Such a rule would also work unfairly for the man whose duties do not generally include a great deal of business travel but who in one year has to spend a number of months overseas—perhaps in visiting subsidiary companies, or organising an export drive for his firm. If this proposal were accepted, that man might find, in that particular year when he felt himself contributing more directly to Britain's export trade than
    1156
    ever before, that his allowable expenses would be seriously cut down, however reasonable in scale they were. Such a state of affairs would obviously strike the average business man as singularly unjust, frustrating and unreasonable.
    Mr. Diamond: Why would the business man feel so frustrated about this kind of allowance being determined in an arbitrary way, when he has got used to the position in which other allowances that he gets for his plant and machinery and so on are determined in an identically arbitrary way? He cannot argue about it. It is not his decision. It is the Inland Revenue's decision.
    Sir E. Boyle: In the first place, the basic rates of some capital allowances—for example, the initial allowance and the investment allowance—are decided not by the Inland Revenue but by the House. The point that I was making was simply that we know very well that cases of grievance where expenses are incurred arise when people have (been busy on work in the export field. A man whose duties do not generally include a great deal of travel abroad but who in one particular year has to spend a number of months overseas, perhaps to help organise an export drive for his firm, would probably feel himself contributing more directly to Britain's export trade than ever before that year, and he would have an understandable grievance if his allowable expenses were seriously cut down in those circumstances.
    I have tried to explain that my right hon. and learned Friend the Chancellor fully realises the importance of this subject of expenses, not only on business grounds but on social grounds as well. We fully realise on this side of the Committee that if we are to win the battle of ideas in the world at the moment it is extremely important that there should not be cynicism about the way in which the capitalist system works. I entirely agree. But I can only advise the Committee that these Amendments that we are now discussing are defective technically; they would introduce a new and, I believe, objectionable form of discrimination into our tax system; they would be harmful to our export trade; and, most important of all perhaps, because equity between individuals is the essence of our tax system, they would not work out fairly as between one businessman and another.

    1157
    For those reasons, I hope that the Committee will reject these Amendments.
    Mr. Millan: Since this is such a complicated question, and it is so difficult to get a really effective way of dealing with business expenses, naturally, quite a lot of what the Financial Secretary has said must be accepted by hon. Members on this side of the Committee. I would certainly accept right away a number of the things he said by way of technical objection to the Amendment, and I would not argue with him.
    However, as the hon. Gentleman appreciates, this Amendment would not be taken on its own. From the point of view of consistency as between Income Tax and Surtax, if there were to be an amendment of principle of the kind adumbrated in this Amendment for Surtax, there would have to be an appropriate amendment in respect of Income Tax. As my hon. Friend the Member for Gloucester (Mr. Diamond) has pointed out, it is impossible for us to keep in order and, at the same time, to propose, in this Clause, Amendments relating to expense allowances for Income Tax purposes. We are perfectly aware of this point. But it is a technical objection and it does not get to the heart of what we are trying to do here.
    The same applies to the question of drafting. The Financial Secretary said some disrespectful things about the wording of paragraph (b), but, again, I think that he will appreciate that it is extremely difficult to get definitions of expenses which are both comprehensive and precise enough to do exactly what one is trying to do; and, no doubt, if the will were there and the principle were accepted we could get a better form of words than we have in our proposed paragraph (b).
    Sir E. Boyle: I drew attention to this point largely because I think that those words illustrate the great difficulty of legislating on this subject. I quite understand the desire of the hon. Member for Sowerby (Mr. Houghton) to be comprehensive in his drafting. On the other hand, I think that the hon. Member, with his precise mind, would agree that enormous difficulties will arise if we use words such as "or the like" in a Statute dealing with business expenses. The presence of these words in the Opposition Amendment reveals clearly the
    1158
    enormous difficulties of legislating on this subject.
    Mr. Millan: I accept that. I am not blaming the Financial Secretary for taking advantage of the wording which we have used and saying that it might be impracticable. I do not say that the wording of this Amendment is absolutely the best wording that one could get, but the important point is the question of principle, and that is what we are really concerned with having discussed.
    With respect to the Financial Secretary, he said that the principle involved in this Amendment is different from the one which the Government were introducing with regard to motor cars. If I followed him correctly, he said that in the case of this Amendment we were asking the Inland Revenue to decide something and that in the case of the Clause relating to motor cars we were asking the House to decide something. But there is nothing in the present Amendment which says anything about discretion being granted to the Inland Revenue. In fact, we lay down certain rules in the most precise terms; and, indeed, the Financial Secretary found fault with the Amendment precisely for that reason. We had laid down a particular percentage of the gross income as a maximum expense to be allowed for Surtax purposes. It seems to me that the basic principle behind this Amendment, whether or not the wording is effective and whether or not this Amendment could work in principle, is exactly the same as the principle behind the subsequent Clause dealing with motor cars.
    I should like to say a word about the two different rules which are applied to expenses under Schedule D and Schedule E. I am willing to admit that this Amendment would not touch entertainment and other expenses which come under Schedule D, in the sense that they are charged directly to the companies or firms concerned and are not under present law attributable to individuals. I agree that one could not catch that sort of expenditure under this Amendment. This is, in fact, the kind of expenditure which many of us would like to see cut, because a great deal of expenditure on entertainment, and so on, is expenditure by the company concerned and never is placed to the account of any particular person.

    1159
    When we come to the Schedule E rule, under which directors of companies and other senior officials with incomes of more than £2,000 a year have to make certain returns to the Revenue and argue their expenses, one of the difficulties about that Schedule E situation is that a great many of the expenses which directors may have incurred will never have to be accounted for by them, because the expenses will never be paid by them and refunded to them by the company. They will be paid direct by the company. A director may give an expensive lunch. The bill will be rendered by the hotel to the company and will be paid by the company. It will never come within the expenses of the director, so far as Schedule E is concerned, and he will never have to argue with the Inland Revenue about it. I confess at once that I think it is almost impossible to deal with that, and I do not pretend that the Amendment deals effectively with that kind of expenditure, assuming that it is extravagant, as in many cases it is.
    7.0 p.m.
    However, the fact that we cannot deal effectively with that kind of Schedule E expenditure or the particularly difficult cases does not justify inaction about other kinds of expenditure with which we can effectively deal. In his Budget speech the Chancellor admitted that a great many people were concerned about the expenses question. Many people felt that rackets were going on. Many people in business feel the same, and I dare say that a great many businessmen who are themselves guilty of extravagant expenditure would be only too glad if the Government were to prohibit it because they find it sometimes an embarrassment and something which they do not greatly like to do. But the Government have done nothing. They have introduced no proposals at all. They have suggested that they might do something next year. We want something done this year. The fact that we cannot deal with everything effectively in a Clause on Surtax does not mean that we should not try to do something in this case.
    There is one thing which could be done under Schedule E quite easily. One of the most fruitful sources of extravagance and tax avoidance arises when
    1160
    companies pay individual employees not a refund of their expenses as they have incurred them and justified them to the company, but a lump sum payment by way of expenses regardless of what the individual may actually spend. It can be argued that the individual may spend rather more or rather less and the lump sum paid represents some sort of average of what he is likely to spend in the circumstances of his employment. That is the justification given for it, but we know very well that in many cases these lump sum payments are excessive and well beyond what an individual can be expected to spend in the normal course of his employment.
    What happens in many cases is that the individual is put in the position of having to argue with the Inland Revenue about whether the expense allowances he has been paid are justified or whether an additional assessment should be made. Of course, it is very difficult for the Inland Revenue to carry on sustained argument in cases of that kind. There must be very many cases where the Inland Revenue feels that an individual is being paid an excessive amount and that his claims are not justified, but, because of the difficulties of the situation, the need to get evidence, the difficulty of disproving statements which the individual has made, the difficulty of getting back to the company which has washed its hands of the whole affair, and so on, the Inland Revenue, in the last analysis, simply gives up.
    We could put a stop to that sort of thing by the simple prohibition of the practice of paying lump sum expenses. The payment of lump sum expenses really amounts to a device by which a company converts taxable salary into tax-free expenses. In other words, instead of giving a man £500 extra on his salary, it gives him an extra £500 on his lump sum expenses allowance, that is, £500 beyond what he can reasonably be expected to pay in his employment, and then it leaves him to persuade the Inland Revenue that that is all right and have the £500 tax free.
    There is an important principle here. The Government ought to do something about it. It would not be difficult to do something effective by prohibiting lump sum payments. There would be no injustice to the individual who spends large

    1161
    sums of money quite legitimately in the course of his employment or business because the company concerned, instead of paying the lump sum, would have to pay him refunds based on his actual expenses and, presumably, the employee concerned would see that he did not suffer under that alternative arrangement. It is not, of course, a foolproof method of abolishing the practice of paying excessive expenses, but it is something which the Government ought to take up. The Government have done nothing this year in this or in any other direction. We are, therefore, entitled to ask them to consider the proposals we advance and answer them in detail.
    I do not pretend that everything in the Amendment is practicable. Probably, a certain amount of it is not. I do not pretend that it provides a completely just and fair way of meeting the problem. If one lays down an arbitrary proportion of income as a maximum, certain people will be adversely and unfairly effected. But, despite those qualifications, I have no hesitation whatever in wholeheartedly supporting the Amendment. It represents an honest attempt to deal with the expenses problem. Since the Government have done absolutely nothing this year except make a vague threat about next year, a threat which I myself think that they have little or no intention of carrying out, I ask the Committee to support the Amendment.
    Mr. A. E. Cooper: This Amendment is a nonsense. As accountants, the hon. Member for Gloucester (Mr. Diamond) and the hon. Member for Glasgow, Craigton (Mr. Millan) know that it is a nonsense.
    Every chairman and managing director of every company would like to cut down the expenses of his co-directors and his representatives to the minimum so that, at the end of the financial year, he may show the best possible result. No one can deny that that is so.
    Mr. Mitchison: I think that we are in danger of being confused here. The hon. Member is talking about the expenses of a company. All we are talking about is expenses in connection with Surtax, which companies, with certain irrelevant exceptions, do not pay.
    Mr. Cooper: It would be rather nice if the hon. and learned Member allowed me at least to begin my speech. Then he might understand what I am talking about.
    Mr. Mitchison: We will wait and see.
    Mr. Cooper: If the Amendment were passed in its present form, evasion would be so easy that in subsequent years the hon. Member for Gloucester would come forward with Amendments to do away with what he is proposing today. Under the present regulations, anyone whose salary exceeds £2,000 has to justify his expenses to the Inland Revenue. If a company director wished to incur substantial expenses, all he would need to do would be one of two things, either to open an account with the hotel or restaurant where the entertainment took place, or take with him somebody on the staff whose salary was less than £2,000 a year. In consequence, the Amendment would be nullified. Nobody could deny that that is so. Therefore, this Amendment is nonsense, because it could be evaded so easily.
    The question of expenses by company directors and executives is a bogy which has been built up over the years, and it is to an extent far greater than is justified on the facts. I said at the outset that every company chairman, every managing director and every sales director—I happen to be in that category-wishes to keep expenses down to the lowest possible level. We do not authorise expenses which are extravagent or greater than is necessitated by the circumstances.
    Let us consider one or two things which might happen. In my own case, within the last fortnight we have had, unexpectedly, six visitors from the United States who are closely connected with my own business. They were in England for a week. Very substantial sums of money were expended in that week to look after them and to ensure that their creature comforts were attended to. Under the existing law of this country those expenses are allowable for tax. Some hon. Members may think that the expenditure involved was extravagant. On the face of it, it was, but when directors or executives of my own company go to the United States, as they often do, three, four or five times a year—
    The Temporary Chairman (Mr. George Thomas): Order. I hope that the hon. Gentleman will confine himself to the expenses of individuals rather than of firms. I believe that it has already been ruled that our discussion must be limited in that way. Indeed, the Amendment limits it in that way.
    Mr. Cooper: Thank you, Mr. Thomas. At the end of the day someone has to sign the bill. If the director of a company signs the bill, then, at the end of the month or at the end of the year, the Inland Revenue comes to him—
    The Temporary Chairman: Order. We must confine ourselves to a discussion on individual expenses. We are not discussing firm's expenses under this Amendment.
    Mr. Cooper: Let me deal with my own case. If I went out this evening with a customer and signed the bill, at the end of the financial year the Inland Revenue would ask me to account for that matter notwithstanding the fact that the expenses which I had incurred were on behalf of my company. I am merely relating my own case to that of my company. Surely I am not at odds with the Chair on this matter.
    The Temporary Chairman: If the hon. Gentleman is seeking a Ruing, I would say that he has been here long enough to know that, when we are dealing with individual expenses, we are dealing with individual expenses. I know that I can rely on his good judgment.
    Mr. Cooper: That means that I have an amber rather than a red light.
    All that I am saying is that, while we may as companies and individuals incur very substantial expenses in this country in looking after individuals from abroad, when we go to other countries they look after us in very much the same way. All of us would very much like to see companies' and individuals' expenses reduced to the minimum, but my honest opinion is that this Amendment is a nonsense and can be evaded without difficulty.
    7.15 p.m.
    Mr. Eric Fletcher: On the whole, this has been a very well-tempered debate. Certain points have emerged from it upon which there is a
    1164
    good deal of agreement on both sides of the Committee.
    First, it seems to be generally accepted that this matter arouses a great deal of public concern which is not limited to any one party. My experience is that the concern about expense allowances and the opportunities of abuse which arise from the present system is fairly general.
    The second thing which has emerged is that this is a matter which it is very difficult to deal with by legislative action. I agree with some of what the hon. Member for Ilford, South (Mr. Cooper) has said. Like the Minister, some of my hon. Friends have pointed out the difficulty of dealing with this matter by legislative action. I appreciate the technical defect of the Amendment. The Minister said that one objection to the Amendment is that it would lead to inequality between one taxpayer and another. He said that it was the primary object of our fiscal legislation to avoid such inequality. I appreciate that, and would like to expand it a little.
    It is obvious that some people have to travel much more than others. Some individuals' travelling expenses may, quite legitimately, exceed their income. Other people may not have to travel at all. It depends on an individual's job. Therefore, I can appreciate the technical criticisms which can be made about an Amendment which attempts to limit travelling allowances and similar allowances to a proportion of income.
    A glaring case in which expenses exceed income is that of the British Ambassador to Washington who gets an expense allowance which is far larger than his salary. As far as I know, no one has criticised that. [Interruption.] I do not know whether the amount is reasonable or not, but one assumes that it is. Equally, in the business world there may be isolated examples of people who are continually travelling—
    Mr. J. T. Price: Since my hon. Friend has raised the matter of ambassadorial expenses and expenses paid to the Foreign Service, this is a matter which was extensively examined by the Select Committee on Estimates in the years when I was a member of it. It heavily criticised the system. For some

    1165
    reason, the House has never agreed to debate the Select Committee's Report.
    Mr. Fletcher: I am grateful for that intervention, because it leads to the conclusion that I was about to draw, which is this. Every individual case must be looked at on the facts and on its merits. It is obvious that if we try to lay down a hard and fast rule there is bound to be some injustice somewhere.
    One of the reasons why the present system of expense allowances causes such deep public concern is that it creates inequality between one taxpayer and another. It is commonly said that taxpayers who pay tax under Schedule E have nothing like the same advantages, concessions and opportunities of deciding for themselves what a reasonable expense is as taxpayers who are charged under Schedule D. It is because of that basic inequality between the system of taxation under Schedule D and taxation under Schedule E that such great public concern is aroused.
    I differ, I think, from my hon. Friend the Member for Sowerby (Mr. Houghton) in this respect. This is a matter which could be dealt with far more efficiently—perhaps not completely satisfactorily, but far more satisfactorily—administratively rather than by legislation.
    I have not before me the text of the message which the President of the United States has recently sent to Congress, but the fact that this problem exists in the United States as well as in this country convinces me that it is something which must be dealt with, and dealt with fairly quickly, if we are to remove the great sense of injustice that prevails among the public because of the opportunities of abuse that the existing system permits.
    If everybody dealt with this matter completely conscientiously, there would be no trouble. I have no doubt that a great many people have real scruples in deciding how much they would legitimately spend by way of entertaining other people when engaged on business enterprises, but different people apply different standards. On the other hand, there are notorious examples of abuse and it is commonly thought that there are cases of gross abuse. I should
    1166
    have thought that the remedy was tighter administrative control.
    I was disappointed when the Minister said that there was a limit to the kind of inquisition to which the taxpayer would submit.
    Sir E. Boyle: I was not saying that. I was echoing what had been said just before by the hon. Member for Sowerby (Mr. Houghton) with his considerable knowledge and experience of these matters. I take full responsibility for my own remarks, but I was struck by the emphasis which the hon. Member for Sowerby gave to the same point.
    Mr. Jay: To be fair to my hon. Friend the Member for Sowerby (Mr. Houghton), what he said was that with the existing law there was often difficulty for the tax inspector, but that if the law were altered in the ways which he proposed the tax inspector's position would be strengthened.
    Mr. Fletcher: I am in the position of having to deal with two interventions concurrently, and I will do my best.
    My view is that without any alteration of the law much more could be done by inspectors of taxes. I was not sure whether the Minister accepted that view or dissented from it. I began by saying that I did not entirely agree with my hon. Friend the Member for Sowerby that this is a matter which could be dealt with only by legislative action. When the Minister echoed my hon. Friend's remarks, I thought he agreed that there was a limit to what the taxpayer could stand.
    Is that really so? Surely, the ordinary, honest taxpayer has no objection to proper inquisition by an inspector of taxes concerning his Income Tax return. He has no objection to saying that he had to incur a certain amount of travelling expenses because his duties took him here, there or everywhere, or because he was engaged as a salesman for a firm involved in the export trade, or any other trade, and had to entertain people.
    My view is that some of the existing abuses could be effectively cured if there were rather more investigation by inspectors of taxes with regard both to lump sum payments that are made to some employees and also with regard to some of the claims submitted by individuals for expenses.
    Mr. Cooper: Has the hon. Member ever had to submit to interrogation by the Inland Revenue on the question of company expenses? I can tell him from experience that the interrogation which one receives at the hands of the Inland Revenue is very searching and one is a very lucky man in 1961 to get away with anything.
    Mr. Fletcher: I am glad to hear that and I am glad that the hon. Member has not been able to get away with it. His intervention was salutary. If it were generally known that it is difficult to get away with improper expense claims, that would be all to the good.
    The difficulty, and the reason why the Amendments are put down and the subject is being discussed, is that there is a general opinion among the public which the Chancellor of the Exchequer confirmed in his Budget statement when he said that there was a considerable amount of abuse. That is the basis of our argument. The public feel that there is a good deal of abuse. If the hon. Member for Ilford, South is right and there were a great deal of vigilant inquisition by inspectors of taxes, there would be no need for this argument. The hon. Member, however, is wrong. The Chancellor of the Exchequer is right, and public opinion is right, in thinking that a lot of people get away with improper claims for expenses and that there is a good deal of abuse. That could be corrected without legislative action if there were many more people like the hon. Member who were subjected to close, careful scrutiny and inquisition about their expense claims.
    Therefore, the Chancellor and the Financial Secretary, having given technical reasons for resisting the Amendment, would be serving a purpose to the community if they were to indicate that all possible steps will be taken by inspectors of taxes to see that abuses in this regard are checked.
    Mr. Loughlin: It is, perhaps, of singular importance that the hon. Member for Ilford, South (Mr. Cooper) should have made his statement about ability or inability to "get away with it". At the time the hon. Member made his interjection, I was looking at what the Chancellor himself said in the Budget debate. It might be for the
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    benefit of the Committee if I quote from the Chancellor's remarks on this question of so-called business entertaining expenses.
    The Chancellor said:
    "I think, however, that there is something behind this strong feeling which undoubtedly exists that some so-called business entertaining goes further than purely business motives. This is an unhealthy feature both on business and social grounds."
    It is generally accepted throughout the whole community that there are gross abuses of the expense claims that are allowed. Whilst there may be technical reasons why the Government resist the Amendments, if one takes the Chancellor's statement at its face value it is incumbent upon the Government to face the position to which the right hon. and learned Gentleman referred.
    There is no great difficulty in doing that. The Chancellor gave the clue to this, because in his Budget speech, from which I have quoted, he went on to say:
    "It is a matter very difficult to deal with by legislation, but I shall review this matter again next year and I do not reject altogether the possibility of legisative action then."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 815.]
    Furthermore, while there may be technical difficulties in implementing the Amendments which we have submitted, it is apparently not outside the bounds of possibility, according to the Chancellor—not according to my right hon. and hon. Friends—that this matter might be dealt with by legislative action. Whilst I sympathise very much with the hon. Member for Ilford, South in not being able to "get away with it", as he termed it, if one examines the full implications of that statement one must conclude that it is of a despicable type. It amounts to saying that it is difficult to avoid one's responsibilities to society, and a person who holds that point of view is not fitted to be a member of society.
    Mr. Mitchison: The Amendment relates to a particular Surtax concession. It is, therefore, confined to individuals and it is impossible within its terms to meet the objection that what is allowable on Income Tax ought also to be allowable on Surtax and vice versa. Whatever the merits of that may be, all that the Opposition can do in debating a Finance Bill is to seek to limit

    1169
    the conditions under which a particular Surtax concession is made. If we had been able to deal with other matters, such as the expenses of companies or expenses in connection with Income Tax, we should have put down a much more sweeping Amendment, that is sweeping in the sense that it would have been a good deal more complicated, and necessarily so.
    7.30 p.m.
    What we are considering is merely personal expenses and we are not seeking, as the Financial Secretary put it, to prohibit anything. We are merely considering to what extent this expenditure should be allowed against a Surtax concession which is being given at a moment when it has produced a great deal of social outcry, and not only on this side of the Committee. It is not unreasonable to say that when a concession of that sort is made at a moment when Health charges are being increased and a poll tax put on contributors to the National Health Service, it is right to look critically at expenses if they are to be allowed in connection with this Surtax concession. The purpose of the Amendment therefore is to write back for this purpose certain categories of expenditure.
    It seems to me that the whole question of expenses has reached a stage when something must be done about it by way of legislation. I am applying that to what we are considering under the Amendment. Legislation is curiously sketchy on the subject. There is a strict rule under Schedule E and none at all under Schedule D, except that the expenses must have been incurred for the purposes of trade. What is to be deduced about expenses is the result of practice and Royal Commission Inquiries and so on. Matters have reached a stage which the Chancellor himself recognised in a passage in his Budget speech when he said that something really must be done, a passage which has been widely quoted since. There is public indignation, for good and sufficient reason, on a matter on which necessarily public information is rather limited.
    The trouble about Schedule D expenses is that no doubt they have to be incurred for the purposes of trade, but it rests with those who conduct the trade to decide what is necessary for that purpose. The consequence is that the
    1170
    inspector of taxes is in a difficult position if he seeks to question Schedule D expenses on the ground that they are not necessary. He does question them from time to time and cases come before the courts. But we all know too well that too much is allowed to persons.
    I agree broadly with my hon. Friend the Member for Sowerby (Mr. Houghton) that it is not really a question of administrative improvement, though there may be something in that, but that it has substantially reached the point where some changes of a legislative character ought to be made. Indeed, the Chancellor himself foreshadowed something of that sort unless there was marked repentance and improvement in the business world about it. This is the question that we have to consider.
    The Financial Secretary's speech was, like all his speeches, most reasonable in substance and most interesting for what is omitted. I was waiting to hear from him what the Government had in mind, on what lines they thought to proceed, and whether they thought that the general lines of the Amendment were right or wrong. We had nothing of the kind from the hon. Gentleman. We had the sort of point which he made when he said that a line would be unfair in some cases. But, of course, when any line is drawn it is always unfair in certain cases. When we come to consider the £2,000 line drawn for motor cars, which is a similar case to this, no doubt it will be said that it is unfair. Either we are not going to draw a line at all in these cases or we must draw a line which is bound to have something of the arbitrary in it.
    We take entertainment in the Amendment because that was a specific thing which the Chancellor himself mentioned as a matter which was causing public anxiety. This would be an unjustifiable Amendment if we sought to prohibit that. It might be less justifiable if we tried to deal with it from the point of view of the company employing the person. If the company pays it, well and good- It has nothing to do with the Amendment, but if the individual pays it he should not be allowed the benefit of that matter when it comes to this Surtax concession. That is the point we are discussing in connection with entertainment.

    1171
    I turn from that to personal expenses. It is very easy to raise technical objections to any Opposition Amendment. I have hardly known of one to which there was not some technical objection or other. There might or might not be difficulty in defining personal expenses which were like those for subsistence and travel. I myself doubt whether there would be that practical difficulty, but if we are ever going to deal with expenses at all it is clear by now that some legislative provision is needed.
    If the Government do not like what we propose, what is the alternative? Will they give up the whole business because, although there is public indignation about it, administrative improvements are insufficient and legislative improvements are impossible? I do not believe that any self-respecting Government would do anything of the sort. I should have wished to hear from the Financial Secretary some clear indication that the Government recognise, agreeing as they do with my hon. Friend the Member for Sowerby, that administrative improvements are not enough and that legislative changes would have to be made and some kind of line taken by this Committee as a legislative body on this question.
    That was substantially what nobody
    from the other side of the Committee, including the hon. Gentleman, mentioned. I was much touched by the speech of the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke). It reminded me of the poem of the Bishop of Norwich beginning "Farewell rewards and fairies". The noble Lord told us that if there were no expense accounts in this country we should be reduced to the condition of Albania, a country with which he is no doubt better acquainted that I am. It was a lovely, picturesque figure, but I really doubt whether contributions of that kind to a discussion of a serious social problem are more than the casual ornaments attaching to a rather difficult question.
    We feel that something has to be done in this matter, that as regards this Surtax concession excessive expenses will be allowed in aid of it unless an Amendment of this kind is carried, and since no one can suggest to us a better way of doing it, and since I think it is generally agreed that our Amendment on these lines is not an unreasonable one, we propose to press it to a Division.
    Question put, That the words proposed to be left out stand part of the Clause:—
    The Committee divided: Ayes 240, Noes 165.

    Division No. 192.]

    AYES

    [7.41 p.m.

    Aitken, W. T.

    Campbell, Gordon (Moray & Nairn)

    Emery, Peter

    Allason, James

    Carr, Compton (Barons Court)

    Emmet, Hon. Mrs. Evelyn

    Balniel, Lord

    Carr, Robert (Mitcham)

    Fell, Anthony

    Barlow, Sir John

    Cary, Sir Robert

    Finlay, Graeme

    Barter, John

    Chataway, Christopher

    Freeth, Denzil

    Batsford, Brian

    Chichester-Clark, R.

    Galbraith, Hon. T. G. D.

    Baxter, Sir Beverley (Southgate)

    Clark, Henry (Antrim, N.)

    Glover, Sir Douglas

    Beamish, Col. Sir Tufton

    Clark, William (Nottingham, S.)

    Glyn, Dr. Alan (Clapham)

    Bennett, F. M. (Torquay)

    Cleaver, Leonard

    Glyn, Sir Richard (Dorset. N.)

    Bennett, Dr. Reginald (Gos & Fhm)

    Cole, Norman

    Goodhart, Philip

    Berkeley, Humphry

    Cooke, Robert

    Goodhew, Victor

    Bevins, Rt. Hon. Reginald

    Cooper, A. E.

    Cower, Raymond

    Biggs-Davison, John

    Cordeaux, Lt.-Col. J. K.

    Grant, Rt. Hon. William

    Bingham, R. M.

    Cordle, John

    Grant-Ferris, Wg. Cdr. R.

    Birch, Rt. Hon. Nigel

    Corfield, F. V.

    Green, Alan

    Bishop, F. P.

    Costain, A. P.

    Gresham Cooke, R.

    Black, Sir Cyril

    Critchley, Julian

    Grimond, J.

    Bottom, Clive

    Crosthwaite-Eyre, Col. O. E.

    Grosvenor, Lt.-Col. R. G.

    Bourne-Arton, A.

    Crowder, F. P.

    Gurden, Harold

    Box, Donald

    Cunningham, Knox

    Hamilton, Michael (Wellingborough)

    Boyle, Sir Edward

    Currie, G. B. H.

    Harris, Frederic (Croydon, N. W.)

    Braine, Bernard

    Dalkeith, Earl of

    Harris, Reader (Heston)

    Brewis, John

    Dance, James

    Harrison, Brian (Maldon)

    Bromley-Davenport, Lt. Col. Sir Walter

    Davies, Rt. Hn. Clement (Montgomery)

    Harrison, Col. J. H. (Eye)

    Brooman-White, R.

    d'Avigdor-Goldsmid, Sir Henry

    Harvey, John (Walthamstow, E.)

    Brown, Alan (Tottenham)

    Deedes, W. F.

    Harvie Anderson, Miss

    Browne, Percy (Torrington)

    Digby, Simon Wingfield

    Hastings, Stephen

    Bryan, Paul

    Doughty, Charles

    Hay, John

    Buck, Antony

    Drayson, G. B.

    Heald, Rt. Hon. Sir Lionel

    Bullard, Denys

    du Cann, Edward

    Henderson, John (Cathcart)

    Bullus, Wing Commander Eric

    Duncan, Sir James

    Hiley, Joseph

    Butcher, Sir Herbert

    Eccles, Rt. Hon. Sir David

    Hill, Mrs. Eveline (Wythenshawe)

    Campbell, Sir David (Belfast, S.)

    Elliott, R. W. (Nwcstle-upon-Tyne, N.)

    Hill, J. E. B. (S. Norfolk)

    Hinchingbrooke, Viscount

    Matthews, Gordon (Meriden)

    Spearman, Sir Alexander

    Hirst, Geoffrey

    Maudling, Rt. Hon. Reginald

    Speir, Rupert

    Hobson, John

    Mawby, Ray

    Stanley, Hon. Richard

    Hocking, Philip N.

    Maxwell-Hyslop, R. J.

    Stevens, Geoffrey

    Holland, Philip

    Mills, Stratton

    Steward, Harold (Stockport, S.)

    Hollingworth, John

    More, Jasper (Ludlow)

    Stodart, J. A.

    Holt, Arthur

    Morrison, John

    Stoddart-Scott, Col. Sir Malcolm

    Hopkins, Alan

    Nicholson, Sir Godfrey

    Storey, Sir Samuel

    Hornby, R. P.

    Nugent, Sir Richard

    Studholme, Sir Henry

    Hughes-Young, Michael

    Oakshott, Sir Hendrie

    Sumner, Donald (Orpington)

    Hurd, Sir Anthony

    Orr, Capt. L. P. S.

    Talbot, John E.

    Hutchison, Michael Clark

    Orr-Ewing. C. Ian

    Tapsell, Peter

    Irvine, Bryant Godman (Rye)

    Osborn, John (Hallam)

    Taylor, Sir Charles (Eastbourne)

    Jackson, John

    Osborne, Cyril (Louth)

    Taylor, Edwin (Bolton, E.)

    James, David

    Page, Graham (Crosby)

    Taylor, W. J. (Bradford, N.)

    Jenkins, Robert (Dulwich)

    Partridge, E.

    Temple, John M.

    Johnson, Eric (Blackley)

    Pearson, Frank (Clitheroe)

    Thatcher, Mrs. Margaret

    Johnson Smith, Geoffrey

    Peel, John

    Thomas, Leslie (Canterbury)

    Joseph, Sir Keith

    Peyton, John

    Thomas, Peter (Conway)

    Kerby, Capt. Henry

    Pickthorn. Sir Kenneth

    Thornton-Kemsley, Sir Colin

    Kershaw, Anthony

    Pike, Miss Mervyn

    Tiley, Arthur (Bradford, W.)

    Kirk, Peter

    Pilkington, Sir Richard

    Turner, Colin

    Langford-Holt, J.

    Pitman, I. J.

    Turton, Rt. Hon. R. H.

    Leavey, J. A.

    Pitt. Miss Edith

    Tweedsmuir, Lady

    Leburn, Gilmour

    Pott, Percivall

    van Straubenzee, W. R.

    Legge-Bourke, Sir Harry

    Powell, Rt. Hon. J. En ch

    Vickers, Miss Joan

    Lewis, Kenneth (Rutland)

    Price, David (Eastleigh)

    Vosper, Rt. Hon. Dennis

    Lindsay, Martin

    Prior, J. M. L.

    Wade, Donald

    Linstead, Sir Hugh

    Prior-Palmer, Brig. Sir Otho

    Wakefield, Edward (Derbyshire, W.)

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Pym, Francis

    Wakefield, Sir Wavell (St. M'lebone)

    Longden, Gilbert

    Quennell, Miss J. M.

    Walker, Peter

    Loveys, Walter H.

    Rawlinson, Peter

    Walker-Smith, Rt. Hon. Sir Derek

    Low, Rt. Hon. Sir Toby

    Redmayne, Rt. Hon. Martin

    Wall, Patrick

    Lucas-Tooth, Sir Hugh

    Rees-Davies, W. R.

    Ward, Dame Irene

    MacArthur, Ian

    Ridsdale, Julian

    Webster, David

    McLaren, Martin

    Robinson, Sir Roland (Blackpool, S.)

    Wells, John (Maidstone)

    McLaughlin, Mrs. Patricia

    Rodgers, John (Sevenoaks)

    Whitelaw, William

    MacLeod, John (Ross Cromarty)

    Roots, William

    Williams, Dudley (Exeter)

    McMaster, Stanley R.

    Russell, Ronald

    Williams, Paul (Sunderland, S.)

    Macmillan, Rt. Hn. Harold (Bromley)

    Scott-Hopkins, James

    Wills, Sir Gerald (Bridgwater)

    Macmillan, Maurice (Halifax)

    Seymour, Leslie

    Wilson, Geoffrey (Truro)

    Macpherson, Niall (Dumfries)

    Sharples, Richard

    Wise, A. R.

    Maddan, Martin

    Shaw, M.

    Wolrige-Gordon, Patrick

    Maginnis, John E.

    Simon, Rt. Hon. Sir Jocelyn

    Woodhouse, C. M.

    Maitland, Sir John

    Skeet, T. H. H.

    Yates, William (The Wrekin)

    Markham, Major Sir Frank

    Smith, Dudley (Br'ntf'rd & Chiswick)

    Marples, Rt. Hon. Ernest

    Smithers, Peter

    TELLERS FOR THE AYES:

    Mathew, Robert (Honiton)

    Smyth, Brig. Sir John (Norwood)

    Mr. Gibson-Watt and Mr. Noble.

    NOES

    Abse, Leo

    Evans, Albert

    Irving, Sydney (Dartford)

    Alnsley, William

    Fitch, Alan

    Jay, Rt. Hon. Douglas

    Albu, Austen

    Fletcher, Eric

    Jeger, George

    Allaun, Frank (Salford, E.)

    Foot, Michael (Ebbw vale)

    Jones, Dan (Burnley)

    Allen, Scholefleld (Crewe)

    Forman, J. C.

    Jones, Elwyn (West Ham, s.)

    Awbery, Stan

    Fraser, Thomas (Hamilton)

    Jones, J. Idwal (Wrexham)

    Baxter, William (Stirlingshire, W.)

    Gaitskell, Rt. Hon. Hugh

    Jones, T. W. (Merioneth)

    Blyton, William

    Galpern, Sir Myer

    Kenyon, Clifford

    Bowden, Herbert W. (Leics, S. W.)

    George, Lady Megan Lloyd (Crmrthn)

    Key, Rt. Hon. C. W.

    Bowles, Frank

    Ginsburg, David

    Lawson, George

    Boyden, James

    Gordon Walker, Rt. Hon. P. C.

    Lee, Frederick (Newton)

    Braddock, Mrs. E. M.

    Greenwood, Anthony

    Lee, Miss Jennie (Cannock)

    Brockway, A. Fenner

    Grey, Charles

    Lever, L. M- (Ardwick)

    Broughton, Dr. A. D. D.

    Griffiths, W. (Exchange)

    Lewis, Arthur (West Ham, N.)

    Castle, Mrs. Barbara

    Gunter, Ray

    Loughlin, Charles

    Chapman, Donald

    Hate, Leslie (Oldham, W.)

    Mabon, Dr. J. Dickson

    Cliffe, Michael

    Hall, Rt. Hn. Glenvll (Colne Valley)

    McCarm, John

    Corbet, Mrs. Freda

    Hamilton, William (West Fife)

    McInnes, James

    Craddock, George (Bradford, S.)

    Hannan, William

    McKay, John (Wallsend)

    Cronin, John

    Hart, Mrs. Judith

    Mackie, John

    Darling, George

    Henderson, Rt. Hn. Arthur (Rwly Regis)

    MacPherson, Malcolm (Stirling)

    Davies, G. Elfed (Rhondda, E.)

    Herbison, Miss Margaret

    Mallalieu, E. L. (Brigg)

    Davies, Harold (Leek)

    Hill, J. (Midlothian)

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

    Davles, S. O. (Merthyr)

    Hilton, A. V.

    Manuel, A. C.

    Deer, George

    Holman, Percy

    Mapp, Charles

    Delargy, Hugh

    Houghton, Douglas

    Mason, Roy

    Diamond, John

    Howell, Denis (B'ham, Small Heath)

    Mellish, R. J.

    Dodds, Norman

    Hughes, Cledwyn (Anglesey)

    Mendelson, J. J.

    Dugdale, Rt. Hon. John

    Hughes, Emrys (S. Ayrshire)

    Millan, Bruce

    Ede, Rt. Hon. C.

    Hughes, Hector (Aberdeen, N.)

    Milne, Edward J.

    Edwards, Rt. Hon. Ness (Caerphilly)

    Hunter, A. E.

    Mitchison, G. R.

    Edwards, Robert (Bllston)

    Hynd, John (Attercliffe)

    Monslow, Walter

    Edwards, Walter (Stepney)

    Irvine, A. J. (Edge Hill)

    Moody, A. S.

    1174

    1175

    Moyle, Arthur

    Rhodes, H.

    Taylor, John (West Lothian)

    Noel-Baker, Francis (Swindon)

    Roberts, Albert (Normarrton)

    Thomas, Iorwerth (Rhondda, W.)

    Oliver, G. H.

    Roberts, Goronwy (Caernarvon)

    Thompson, Dr. Alan (Dunfermline)

    Oram, A. E.

    Robertson, John (Paisley)

    Thomson, G. M. (Dundee, E.)

    Oswald, Thomas

    Robinson, Kenneth (St. Pancrae, N.)

    Thornton, Ernest

    Owen, will

    Ross, William

    Timmons, John

    Padley, W. E.

    Shinwell, Rt. Hon. E.

    Wainwright, Edwin

    Paget, R. T,

    Short, Edward

    Warbey, William

    Pannell, Charles (Leeds, W.)

    Silverman, Julius (Aston)

    Wells, William (Walsall, N.)

    Parker, John

    Skeffington, Arthur

    White, Mrs. Elrene

    Pavitt, Laurence

    Slater, Mrs. Harriet (Stoke, N.)

    Whitlock, William

    Pearson, Arthur (Pontypridd)

    Slater, Joseph (Sedgefleld)

    Wigg, George

    Peart, Frederick

    Small, William

    Wilkins, W. A.

    Pentland, Norman

    Smith, Ellis (Stoke, S.)

    Willey, Frederick

    Plummer, Sir Leslie

    Sorensen, R. W.

    Williams, D. J. (Neath)

    Price, J. T. (Westhoughton)

    Soskice, Rt. Hon. Sir Frank

    Williams, W. R. (Openshaw)

    Probert, Arthur

    Spriggs, Leslie

    Wilson, Rt. Hon. Harold (Huyton)

    Pursey, Cmdr. Harry

    Steele, Thomas

    Woodburn, Rt. Hon, A.

    Randall, Harry

    Stewart, Michael (Fulham)

    Woof, Robert

    Rankin, John

    Stones, William

    Yates, Victor (Ladywood)

    Redhead, E. C.

    Swingler, Stephen

    Reid, William

    Sylvester, George

    TELLERS FOR THE NOES

    Reynolds, G. W.

    Taylor, Bernard (Mansfield)

    Mr. Charles A. Howell and

    Mr. Ifor Davies.

    Viscount Hinchingbrooke: I beg to move, in page 8, line 14, at the end to insert:
    "under sixty years of age on the first day of April in the year of assessment and, in all other cases, the total income of the individual".
    The Chairman: I think that it would be convenient for the Committee to discuss with this Amendment the following Amendments:
    In line 19, at the end to insert:
    (2) For the purposes of this section the income of any person who is retired and was of the age of sixty-five or over on the seventeenth day of April nineteen hundred and sixty-one, and of any person under that age who was then retired from service overseas under the Crown, or shall since that date have so retired shall be deemed to be earned income.
    In line 19, at the end to insert:
    (2) For the purposes of this section the entire income of any person of the age of sixty-five years or over on the first day of the year of assessment shall be deemed to be earned income.
    In line 23, to leave out "subsection" and to insert "subsections".
    In line 23, to leave out "it applies" and to insert "they apply".
    In page 9, line 7, at the end to add:
    (4) For the purposes of this section the unearned income of a person aged sixty-five years or over at the beginning of a year of assessment shall be deemed to be earned income.
    In line 7, at the end to add:
    (4) For the purpose of this section the unearned income of a person aged sixty or over at the beginning of a year of assessment shall be deemed to be earned income.
    Viscount Hinchingbrooke: This is one of a number of Amendments put down by my hon. Friends and I and dealing
    1176
    to some extent with the principle of the assessment of saved income as against earned income. We seek to introduce an Amendment this year which will pave the way—we hope the Chancellor will note—for consequential and further Amendments in subsequent years.
    On this side of the Committee we are all grateful to my right hon. and learned Friend for having taken the plunge with Surtax for the first time that that has been attempted since the war. We all know from the temper of the Opposition that the water under which my right hon. and learned Friend has plunged is a good deal more tepid than some political commentators in past years have thought would be the case. It is quite apparent that the water is agreeable to bathe in. I hope that next year my right hon. and learned Friend will proceed on the path which we are now indicating to him.
    I was surprised to see from the changes which have been made this year to what extent we have recovered the ground lost since the war. Indeed, the Surtax scales today compare very favourably—if one can use a word of that sort about Surtax—with the figures in 1937–38.
    Mr. Diamond: Hear, hear.
    Viscount Hinchingbrooke: I do not defend the figures for 1937–38, for reasons which I have given on previous Amendments.
    The Chairman: The hon. Member must not go into that argument in too much detail, because that would be going too far from the Amendment.
    Viscount Hinchingbrooke: I am well aware of that, Sir Gordon. I will observe what you have said.
    However, the ground we have covered is not all the ground. In the higher ranges of Surtax we are still some way from the position of the period between the wars, but in the range covered by the Budget this year, £2,000–£5,000, we have got back nearly completely to it, with the exception of about £200 or £300 in each bracket, which is the extent to which, if my right hon. and learned Friend will accept our proposals, we will cover the ground completely.
    On the whole, my right hon. and learned Friend has been hard on the saved income element of those whose incomes are between £2,000 and £5,000 a year. He has gone for the earned income element and, in doing so, he has widened the ground between the two elements. On this side of the Committee, we have always taken the view that saved income is earned income which should attract the same sort of general level of taxation and we have been disappointed to find that the discrimination against saved income has been carried a stage further than before.
    Tables 77 and 78 of the Report of the Commissioners of Inland Revenue show the extent of saved income which there is in the incomes of the groups earning between £2,000 and £5,000 a year. It shows that at a figure of £27—million the investment income of those with a total income of £5,000 is nearly half that of the earned income, while for those with an income of £2,000 the fraction is not even as low as one-third. One always tends to think that moderately salaried individuals have relatively little in the way of savings or investments, but that is not so, as the tables clearly show.
    Mr. Jay: When the noble Lord uses the rather unusual term "saved income", does he mean the same as the Inland Revenue does when it uses the term "investment income", which includes inherited income? When he speaks of saved income, does he mean that to include inherited income?
    Viscount Hinchingbrooke: Yes, I do. I use the term "saved income" because there are some forms of property-owning which are not strictly investments, whereas income earned and saved can
    1178
    be invested in any sort of property. I take the right hon. Gentleman's point, but it would be out of order to pursue it further.
    We think that those who have saved income are just as important to the community as those who are earning it. So as to point up the case conclusively, we have put down an Amendment suggesting that at a time when income is no longer earned but is saved, we should apply a correction. One hopes that in subsequent years my right hon. and learned Friend will bring the age group which we here define down to the point when taxation begins to apply to the individual.
    There is a fashion today to say that it is only enterprising young men of commerce or science who ought to be considered in taxation matters. Those who are mad keen about production and production alone for its own sake will take that view, but society as a whole consists of a whole range of individuals. Looking at it objectively, nobody can say that one sort of person is more important than another. Society consists of an enormous range, from the artist to the scientist, from the poet to the practical man of business, and from the yogi to the commissar, as has been pointed out in a distinguished work by Mr. Arthur Koestler. I defy anybody to say that the scientist, technologist, successful motor car salesman, or the practical man of affairs should be any more an object for State benefit than anybody else.
    8.0 p.m.
    Perhaps the right hon. Gentleman will make clear, in his subsequent speech, the cause of his intense amusement. He must have parents who are retired, and who are no longer earning. Is he telling the Committee that he does not take pride in them, and think that they are making a contribution, in their retired state, to the society in which they live?
    Mr. Jay: I will not follow the noble Lord in his personal arguments, but he appears to be saying that we should make no distinction between one member of the community and another for the purposes of taxation. If we accepted that principle all our debates would be pointless.
    Viscount Hinchingbrooke: I am not saying that. My hon. Friends, who have similar Amendments on the Notice

    1179
    Paper, can speak for themselves, but I think that what they want, as I do, is the total abolition of discrimination between earned and unearned income. We cannot extend State patronage to those who happen to be generating money at a particular moment and say that they are more worthy individuals than those who have generated it in the past—
    Mr. Jay: Or inherited it.
    Viscount Hinchingbrooke:—or, by reason of their aptitudes or knowledge, have contributed to the success of society without very great earning power. I am talking of artists, philosophers, priests, judges and people in the lower ranges of income who are quite worthy members of society and are not in the dynamic earning classes.
    I have set the age limit at 60 because women retire at that age and, since they are independent Income Tax payers in their own right, if we are to put in a retiring age it is best to put it in at the lower end. My hon. Friends have Amendments which would introduce the principle at the age of 65. It may be that an important money differential is involved here, and that the cost of agreeing to a limit of 60 years of age would be too great for the Chancellor to bear this year. But whatever it is—60 or 65—the principle is the same, and we are all anxious to see the differential closed.
    My right hon. and learned Friend the Chancellor has three years, at any rate, before the next General Election, in which to tackle the question of Surtax in relation to these age groups, if he accepts the principle of the matter. Many Press commentators are continually saying that this mid-year, between elections, is the only politically safe year in which to make any reductions of this kind, and that, having taken the plunge this year, my right hon. and learned Friend must resist any further changes next year.
    My hon. Friends and I do not take that view. We do not want the Chancellor's sense of justice to be tempered by political fears that right hon. and hon. Members opposite will sweep into power at the next election. I am sure that he appreciates that under the leadership of this Government the country is sufficiently radical at the moment not to want any further
    1180
    steepening of these prejudices towards the views of hon. Members opposite, and that if there is to be any change it will be to the Right rather than to the Left.
    Therefore, my right hon. and learned Friend has plenty of time and opportunity in the coming years to make the sort of taxation changes that we want.
    Mr. Mitchison: Can the noble Lord tell us what the effect of any of the Amendments to which he has been speaking would be?
    Mr. Geoffrey Stevens: I lend my full support to the case which my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) has put forward in his Amendment. My hon. Friends and I have put down other Amendments which differ in two details from that of my noble Friend, one of those differences being rather important. The small detail is the question of date; my noble Friend's Amendment refers to 1st April and mine to the beginning of the year of assessment. I will not go into that point too closely. My noble Friend has selected the age of 60, and I have selected the age of 65. I will not quarrel with my hon. Friend about that, and if my right hon. and learned Friend is prepared to accept an age limit of 60 I shall be very satisfied.
    The hon. and learned Member for Kettering (Mr. Mitchison) asked what was the purpose of these Amendments. I can only assume that he has not read the Notice Paper, which I would have thought made their purpose abundantly plain. If there is any other hon. Member who is not clear as to their meaning I shall be very happy during the next twenty minutes to indicate what they intend to do.
    Mr. Mitchison: I can assure the hon. Member that I really want to know.
    Mr. Stevens: I should think that the hon. and learned Gentleman is the only Member of the Committee who is not aware of the intention of these Amendments.
    My noble Friend put forward one argument which strongly appeals to me, and which I mentioned in my speech in the Budget debate. In recent years there has been too much differentiation between the tax treatment of earned incomes and

    1181
    so-called unearned incomes. The term "unearned", especially from a taxation point of view, is singularly unfortunate. For a number of years I have been trying to persuade successive Chancellors that the name should be changed. The difficulty has bean to find any other nomenclature which would meet the situation. Perhaps it should be called "savings income", or "investment income", or something of that kind. But a large proportion of incomes which are now classified as unearned incomes have been earned by the sweat of the brow. They represent dividends and interest, and they have been derived from the self-denial of men who have worked extremely hard for a great many years. [Laughter.] I sometimes wonder how serious discussion can take place in this Committee, when statements such as that which I have just made are greeted with laughter. The truth of my statement is abundantly clear to anyone who has studied the industrial history of this country. Perhaps hon. Members opposite have not done so.
    The right hon. Member for Battersea, North (Mr. Jay) made a justifiable interjection during my noble Friend's speech. He said that if, instead of referring to these incomes as unearned incomes, we called them savings incomes or investment incomes, we should be including incomes which did not derive from the sweat of the brows of the people concerned. That may be true in some cases, but in a large proportion of cases they have arisen in that way, and for that reason I support my noble Friend.
    I have two other strong reasons for doing so. For many years prior to 1956 it was possible for directors and employees to have provided for them by their employers pensions on the date when they retired. The annual premiums for these pension benefits were not assessed as part of the incomes of the directors or employees for Income Tax or Surtax purposes. Until 1956 that was not possible for a self-employed person. In that year my right hon. Friend the Prime Minister, who was then Chancellor of the Exchequer, was seized of the point, and in his Budget he remedied that situation in some degree. Retirement pension provisions were incorporated in the Finance Act of that year which, although to a lesser extent than was competent for employees, none the less made
    1182
    it possible for self-employed people to set aside out of their gross incomes rather than their net incomes money to provide pensions on their retirement. But, quite obviously, there were a large number of self-employed people in 1956, who had reached such an age—I suppose I ought to declare an interest; I was one of them—that the cost of the premiums to provide a reasonable pension on retirement was quite prohibitive at that date. Furthermore, they had during their working life up to 1956, saved out of their net income—not gross income—so that these people, who either retired between 1956 and now, or who are going to retire in the near future, will be denied the advantage which my right hon. and learned Friend is conferring on other people by the provisions in Clause 6 of this Bill. That seems to me manifestly unfair and in great contradistinction to the action of my right hon. Friend the Prime Minister in 1956, when he tried to put self-employed persons on the same basis as employed persons.
    The third reason why I support this group of Amendments is that there is a most respectable precedent for them. Section 221 of the Income Act, 1952, as amended by Section 14 of the Finance Act, 1958, provides that the unearned income of elderly persons up to a certain limit shall for Income Tax purposes be deemed to be earned income, and that earned income allowances for Income Tax purposes shall apply. So I say that for the reasons given by my noble Friend, for reasons of equity and justice, bearing in mind the 1956 provisions, and for reasons of precedent, this group of Amendments should commend itself warmly to the Committee. I hope that my right hon. and learned Friend will find himself able to accept them.
    Mr. Pitman: I wish to support my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) and my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens). I join with them in thinking that the general principle of equity is absolutely valid for the concession to Surtax which has been granted in this year's Budget. Equally I claim that there is great expediency on the earned income side in the sense that I know of nothing which stops mobility of hired staff more than high Surtax. If an employer has

    1183
    an employee in the higher Surtax bracket or even paying Surtax at all, he knows that nobody else will tempt away that employee by an offer of increased salary because so little would reach the employee's pocket. The effect of this will be to make for mobility and stop a great many of the expense rackets which hon. Members on both sides of the Committee are anxious to stop, because they rise out of high rates of Surtax. Here there is equally a general principle and expediency.
    This arises from the fact that every hon. Member is satisfied that a return on capital, that is to say interest and dividends, is acceptable and good. The idea that it is something which is wrong has now vanished in this country. Today we have heard a lot about the war of ideas. In a capitalist, free enterprise Western world the war of ideas can be carried on only if there are savings and borrowings. Since, above all, Governments are great borrowers, I cannot imagine any person more than the Chancellor of the Exchequer who should be more out to encourage saving and, therefore, to put himself in the position of being able to borrow.
    8.15 p.m.
    There are four sources from which such savings—I propose to use the word "savings"—can arise. First, there are savings out of income. Hon. Members opposite may say that there is a difference of degree. From a small income that would be all right, but in respect of a big income it is not so good. I do not think that we can agree. But even if we did, from a big income is paid a big whack of Income Tax, Profits Tax and Surtax before there is any saving at all. So the class of savings that we are discussing has already borne its share of taxation. There is the possibility of inheritance. Equally, if it is small inheritance, hon. Members opposite have no objection and argue that the income from it should not pay Surtax because it is only a small inheritance, and so on. But in the case of a big inheritance the State takes up to 80 per cent. Why should the State take another whack out of it because of the magnitude of the income? By raising the figure to £5,000 we are not talking of a great increase in degree.
    1184
    There is another source of saving, what a man has saved and built up by his enterprise. At some time Lord Nuffield must have saved to build up the great Morris Motor empire, and no doubt in the saving the value of his enterprise increased. I am sure hon. Members would say that they wished that sort of thing to be encouraged and would not dissent from money from such a source helping a man in his old age. Finally, there is the possibility of savings by gifts inter vivos. I ask hon. Members to be realistic about this and appreciate that it is not the age at which gifts inter vivos are received. Indeed, here there is an element of definite saving. If someone has had such a gift at an early age and has not spent it, they have obviously saved it. The whole purpose of this principle of equity to which I have referred is that for the elderly particularly, and indeed in general for people of any age, the application of the concession on Surtax, regardless of whether it is earned income or saved income, is a valid general principle.
    When we come to the question of expediency, as was pointed out by my hon. Friend the Member for Langstone, we already have the precedent of Income Tax. If it is valid in principle for Income Tax, surely it is equally valid for Surtax. We then have the question of provision for old age and retirement. In our Amendment in line 19 we make the point that persons should not only be old but retired. That is linked with the point made by my hon. Friend about the way in which some people in this country have pensions. But at a date when we have so recently introduced a graduated pension scheme, the related injustice between them and the young is particularly hard.
    I happen to be a member of a firm which was one of the pioneers of graduated pension schemes. We started our pension scheme in 1934 so that by this time the fund has accumulated quite nicely. But anybody in a firm which started later is dependent on his own savings, his own inheritance which he has not spent, his own enterprise, or whatever it may be, to provide for his old age. In that respect I think it important to realise the distinction that the professional man has not until very recently even had that opportunity. I

    1185
    have said that I have had the opportunity since 1934, but my hon. Friend the Member for Langstone has not had it at all because be is a self-employed man. Professional self-employed men have had to put money aside to provide a pension. Their pension would be regarded as earned income if it came from the savings income were our Amendment accepted, whereas my pension would do so in any case because it comes from the pension scheme. On retirement a man suffers a big drop in income. I should have thought that that was just the time when the Chancellor would be very glad to do something for him so that he could have something coming in by the transfer from earned to unearned income, making the drop less.
    In the Amendment in my name there is raised the question of expatriate Crown servants. Those people have received a lump sum on retirement on the assumption that their career has been broken and that they have not had the same degree of income as they would have had had they been resident in England before that time. It seems that to treat their income accruing from that source as being unearned is a travesty of the facts. We have seen what has happened in the case of those serving in the Sudan. We have debated this kind of thing over and over again, and we have the greatest sympathy for people in that category. I suggest that we ought to include them with the elderly in this concession.
    I do not know what the cost would be. I put a Question to the Minister, but he was unable to answer it. I can conceive that it could be negative, because it might be that it would put an end to gifts inter vivos. People would be inclined to keep their money and to enjoy the income from it, whereas under the present system of high taxation on unearned income at a late stage in life, there is no encouragement for that to happen.
    Mr. Diamond: The fact that many of us on this side of the Committee have listened patiently during this debate should not be misunderstood as meaning that we have listened with sympathy to any of the arguments, or so-called arguments, from hon. Members opposite. I hope it will not be taken the wrong way by hon. Members opposite, with whom I am personally on the best possible
    1186
    terms, when I say (that I am astounded at the greed shown in the present attitude of back-bench Tories. It is right that that should be said, and said straight from the shoulder.
    Here we have a situation in which the richest section of the community is getting the greatest tax benefit in one fell swoop—taking the plunge, the noble Lord the Member for Dorset, South (Viscount Hinchinghrooke) said—and this is the occasion they use for not being satisfied with that but for attempting to say that those who do the work and enable those with unearned income to enjoy the benefits of that work without doing a hand's turn should be treated in exactly the same way. It is an astounding and immoral attitude, and it is also wholly impracticable, I shall show how impracticable it is.
    The fact of unearned income gives the person an extra claim on the total production of the community to which he makes at that point of time no contribution beyond his savings. We recognise that the savings are there.
    Mr. Stevens Mr. Stevens rose—
    Mr. Diamond: I shall give way in a moment, but I shall say something which will be less welcome to hon. Members opposite than what I have already said. Unless the worker continued to do his work—and I mean work in its broadest sense—the person with £1 million unearned income today would starve.
    An Hon. Member: And vice versa.
    Mr. Diamond: It may be vice versa. There would be no one to produce the food or to carry it and no means for the continuing of activity which all people enjoy in one form or another. The whole thing would come to a standstill and the unearned income would be of no use at all. It would be merely a beautiful picture.
    Mr. Stevens: In view of what the hon. Member has just said, is he taking any steps to bring about the removal of the earned income allowance for Income Tax purposes at present granted to the vast majority of pensions receivable by people in this country?
    Mr. Diamond: I am coming to that. I shall come to the hon. Member's reference to the age allowance. He should

    1187
    not be impatient. We have sat quietly listening to speeches by hon. Members opposite hoping that some hon. Member would show some temperance in his view and some realisation of the fact that the people who do the work are the people on whom we all depend. We hoped that there would be some appreciation of the way in which unearned incomes arise.
    Having explained that we all depend on the activities of people actively engaged in production, I should have thought it followed that we and the Chancellor should want to encourage those people. The whole purpose of the Surtax concession is to encourage people to greater work and greater productivity. We know that our export drive depends entirely on increased productivity. We are urging people all the time to do more work. Yet every speech made in favour of this Amendment has been in favour of our sitting on our respective backsides enjoying the product of the work of other people.
    Let us be clear how unearned income arises. In the majority of cases, as the noble Lord knows only too well, it arises through what by a curious euphemism he called "saved income". He knows that it arises from being born in the right cradle. I congratulate him on the fact that he was. Good luck to him but it is useless to pretend that because he was born in the right cradle everyone should treat the efforts of the workers in the same way as we treat the efforts of the spenders. Normally, unearned income arises from substantial savings which have come as a result of being born in the right cradle and receiving the income of one's family.
    The other major source of unearned income is untaxed capital gains. Having capital in the first place, the capital grows and increases by not being taxed. It is those two sources which provide the savings on which unearned income arises. It is nonsense for hon. Members opposite to say that the income is earned. Admittedly the amount saved in appropriate cases—not where it is inherited or is the result of capital gains—in the tiny minority of cases of capital saved out of earnings earned over the years is itself earned, but income from capital is not.
    1188
    There are two stages. The capital has been earned and has been subject to tax, and the argument of hon. Members opposite is that Surtax and Income Tax have been so high that it was not possible to save. It is not possible to save; in the normal way, substantial sums out of earnings. Where the savings come from inheritance, as the noble Lord knows, or from capital profits, these are two major sources. As the hon. Member for Langstone claims, many professional men have not been able to save very much, because of the high rates of taxation. Do not let us pretend that that income is saved income and give it fancy titles to make the proposition more attractive to both sides of the Committee.
    8.30 p.m.
    The simple fact is that this group of Amendments is paraded under the impression that it is an attempt to deal with old people who, having retired and reached the age of 65, are no longer able to carry on with their earning capacity, and who should, up to a limited point, as we do for Income Tax purposes, have a maximum of £800 to be treated as being earned income on the general grounds of humanity; and, on the logical grounds that, having retired, they were unable to earn, and this is something to take the place of the earned income allowance that they would be given if they were young and capable of continuing to earn. This has nothing to do with this group of preposterous Amendments, which I hope the Government will reject completely.
    Sir D. Walker-Smith: The hon. Member for Gloucester (Mr. Diamond) started his speech by saying that he was on personally good terms with so many of us on this side of the Committee that he hoped that we would not take amiss any of the strictures he made. Of course, we do not, because we appreciate the free play of keen debate between those taking part. As I entertain a high regard for the hon. Gentleman personally, I hope that he will not take it amiss if I animadvert on what he has just said to the Committee.
    I think that the speech of the hon. Gentleman supplied abundant proof, if further proof were needed, of the fact that although he is no doubt a very good chartered accountant, he is a very bad

    1189
    economist. He is subjected to these stresses and strains which always afflict what I believe are known as the intelligentsia section of the party opposite when they come into conflict between what their experience and economic knowledge teaches them to be true, on the one hand, and what is the party dogma, on the other. I can only say, of his speech, that if he believes what he said it is a condemnation of his intelligence, and that if he said it without believing it it is a condemnation of his sincerity and the duty which he owes to the Committee.
    Taken by and large, it was a remarkable speech, because it confused so many issues. In listening to the hon. Gentleman, one would imagine that Surtax today was purely an impost upon the rich. Of course, it started by being an impost upon the rich. When Supertax, as it was then known, was introduced, in 1910, it was a levy which began at £3,000, but only fell upon those with a total income, in the purchasing power of money in those days, of over £5,000. [Interruption.] If the hon. Member for Burnley (Mr. D. Jones) insists on making these sedentary interruptions, I cannot reply to them without following his bad example and getting out of order myself.
    Mr. Dan Jones: The very fact that it was at that level at that time does not make it right.
    Sir D. Walker-Smith: I now understand why the hon. Gentleman was so very reluctant to rise and make an intervention which would be recorded immortally in the OFFICIAL REPORT, to the wonderment of generations to come and to the great bewilderment of his constituents, if they ever do him the compliment of reading what he says.
    At over £5,000, it was an impost upon the rich. Of course it was, but today it is not a levy solely upon the rich. It is a levy on ordinary members of the community at £2,000, which equated with the purchasing power and the value of money in those days, bears a very different aspect indeed to the incidence and purposes of the tax when it was first put on. Therefore, it really is quite unbecoming and wholly inaccurate and inappropriate for the hon. Gentleman to try to get away with that "poppycock" which was the word he used earlier, in
    1190
    relation to giving benefits and concessions to the rich.
    Mr. Diamond: I want to follow, not to criticise. I do not follow the right hon. and learned Gentleman's argument. Is he talking about Surtax being levied only on those earning not less than £5,000?
    Sir D. Walker-Smith: That was in 1910.
    Mr. Diamond: The right hon. and learned Gentleman is talking about the previous position, which was £2,000. The present position is that Surtax is being levied on incomes of over £5,000. These Amendments seek that benefit over and above the concessions, which means that Surtax would not be payable on incomes less than £5,000.
    Sir D. Walker-Smith: The value of the hon. Gentleman's interruption was in inverse ratio to its length, which was considerable.
    The point I was on—I am sure that it was clear to every other hon. Member—was that it is wrong to talk in terms of an impost upon the rich. The pre-1961 Budget level of £2,000 must be contrasted with the 1910 level, with the then purchasing power of money, of £5,000 nominal value but probably about £20,000 contemporary value. It will now rise, as the hon. Gentleman said, in respect of earned income.
    These Amendments, which are a relatively modest contribution, but an important one, for reasons I shall develop, are designed to extend that relief not over the whole range of so-called unearned income, but merely in respect of unearned income, so-called, over the age of 65. There are two reasons for this—reasons of equity and savings.
    My next criticism of the hon. Gentleman's speech—I say this intending no personal offence, as he knows—is that he showed that he was a bad economist because of his total unawareness of the great importance of savings and investments in building up economic development, and thereby the standard of life of the people. Of course the contribution of the workers is necessary—but "workers" includes many people on the Surtax level. It is also necessary to have a high level of savings and investment.

    1191
    Here hon. Members opposite are in a political difficulty, for this reason. We believe in a high level of savings not only because it gives dignity and stability to the individual citizen, which is an important thing in itself, but also because it is the best means of countering simultaneously the evils of inflation, on the one hand, and high taxation, on the other. Hon. Members opposite have a different philosophy. They really do not want to see private savings. They want to see what are euphemistically called compulsory savings by high taxation. They want to see that for a very obvious reason. They are logical.
    All I criticise is their lack of candour in confessing it. They want to see compulsory savings in lieu of voluntary savings because it is a much better mechanism for a controlled economy. It is a much better basis for the control of the economy through the fiscal measures of taxation rather than through the traditional monetary method and methods of the market. That is why hon. Members opposite do not like savings. It was, therefore, quite frank of the hon. Gentleman to dismiss savings in the very perfunctory way in which he did.
    It points to a great divide between the attitudes of the party opposite and us on these benches. We believe in a free society, on the basis of a high level of voluntary savings. They believe in a controlled economy, on the basis of a high Budget surplus year after year, contributed to by high taxation and so-called compulsory savings. Therefore, we say that the basis of an incentive to savings is most important both for the individual citizen and the community as a whole, and we say that it is a right and proper incentive to savings that there should be an extension to the over-65's of the earned income relief principle in respect of Surtax which now falls on such a wide and varied range of people.
    That is the case, as I see it, in regard to savings. There is no question here of the retrospective incentive such as was criticised by the hon. Member for Sowerby (Mr. Houghton) earlier Obis afternoon, because this is an incentive that will apply to every young and middle-aged worker in the country, who will see that
    1192
    it will benefit him to save and invest because, at the end of the day, he will be allowed to get a better return on it than he does under the taxation of today.
    I should like to add just a word on the other aspect—on which I shall be brief, but it is important; that of equity. As the hon. Member for Sowerby and other hon. Members who were present will remember, two strands ran through our discussions this afternoon—the strand of economic incentive and the strand of fiscal equity. Economic incentive is a relatively new consideration in our Income Tax affairs. It is a consideration which historically existed in the field of Customs and Excise but not in that of Income Tax. It has been drawn into that field for, perhaps, an unenviable reason—the rates of Income Tax have become so high.
    On the other hand, fiscal equity is a basic, integral, traditional and continuing strand in our Income Tax affairs. It is, therefore, right that even though we now admit the principle of economic incentive, it should not erode or displace the primary principle of fical equity between taxpayers.
    The case in equity in regard to the income of people over 65 arises in the sense that they will not be able to benefit from the concessions on earned income as the younger and middle-aged people will. There are further considerations that arise. Many of these people are enjoying now the incomes built up by the fruits of their labours but, owing to the inflation of modern times, at a much lower real or purchasing value. And there is a special point about those who have not been able to take advantage of the provisions of Section 22 of the 1956 Finance Act, referred to by my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens).
    There is, therefore, a clear case in equity, just as there is a clear case on the economic and social grounds of savings. I think that it is a good case, and I should like to reinforce my hon. Friend's plea that the term "unearned income" is scarcely apposite. [Laughter.] The hon. and learned Member for Kettering (Mr. Mitchison), who laughs, knows far more about unearned income than I do—
    Mr. Mitchison: As the right hon. and learned Gentleman is so kind as to select

    1193
    me for comment in this way, will he tell the Committee, since he has not yet done so, whether it is consonant with fiscal equity to increase the Health Service charges and, at the same time, to accept these Amendments?
    Sir D. Walker-Smith: I am on record as saying that my enthusiasm for the Health Service charges was confined with, out difficulty within the bounds of decorum. But this is not within the Income Tax provisions and I am talking about equity within the ambit of the Income Tax law. On that, we say that there is a case, in equity, and I agree with my hon. Friends that the "unearned income" nomenclature is an unfortunate thing.
    The hon. Gentleman the Member for Gloucester referred to inherited wealth, but the high level of Estate Duty is intended to take care of that; and the majority of unearned income today would more properly be called retirement income, savings income or even deferred earned income. Therefore, we say that, on these grounds of savings and on equity, there is a strong case to do this and I commend the principle to the Chancellor. If he cannot accept this Amendment in the context of this year's Finance Bill he will appreciate that both in the social and economic context there is a strong case for this, and I hope that he will bear it in mind in future years.
    8.45 p.m.
    Mr. Millan: We have had an interesting speech from the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith). I imagine, since he has now retired to the back benches, that that is the sort of speech we can expect from him often in the future. He has, however, spoken at a rather high level, a level which I would be tempted to try to follow, particularly concerning his remarks about the Opposition's attitude to personal savings, and so on, and also concerning his admonitions of my hon. Friend the Member for Gloucester (Mr. Diamond) as to his lack of ability as an economist.
    But I will resist that temptation and come to the actual, practical Amendment which, after all, in theory, we are meant to be discussing. It is significant that the right hon. and learned Gentleman—and I say this without meaning any offence to him—has spoken with considerably
    1194
    more intelligence than have any of his right hon. Friends on this series of Amendments, but the high level of discussion which he injected into the debate is completely inappropriate to this subject.
    Returning to the point of the Amendment, hon. Members are being asked to extend the principle of the concessions which have been given in Clause 11 to unearned incomes up to a level of £5,000 a year. Of course, the fact that there are unearned incomes postulates that somewhere there are capital sums from which those unearned incomes are derived. Even at the lowest level of Surtax, at £2,000, assuming that the unearned income is at about 5 per cent. on the capital sum, there must be a capital sum of £40,000 available to the taxpayer.
    Rising to the £5,000 a year level—and the purpose of this Amendment is to treat all unearned income up to £5,000 as earned income—at a rate of interest of 5 per cent. there must be a capital sum of £100,000. Thus we have a plea made by hon. Gentlemen opposite for taxpayers all to have capital sums available to them ranging from £40,000 to £100,000.
    Viscount Hinchingbrooke: Is the hon. Gentleman aware that the capital sum about which he is speaking may not be available to them? I urge him to consider the question of annuities or people working under a trust.
    Mr. Millan: Nevertheless, a sum, in one form or another, is available. [HON. MEMBERS: "NO."] In the case of annuities, exactly the same position arises, with a sum being used to purchase an annuity. The analogy which the hon. Member for Portsmouth, Langstone (Mr. Stevens) drew with pensions is completely inappropriate, because a pension is a form of deferred earned income and is a legitimate subject for earned income relief. But an annuity is a legitimate device for using a capital sum in order to get a particular sum in unearned income per year. Even a person of 65 who has an annuity of £2,000 a year has basically a capital sum of a very considerable amount.
    Quite apart from annuities there are many people involved in these categories with which we are dealing who will have no annuities and will be drawing

    1195
    up to £5,000 a year in unearned income, in the form of dividends and interest, and that fact postulates that there is a capital sum of anything up to £100,000 available to them. As my hon. Friend the Member for Gloucester said, all this tear shedding for people with unearned incomes ignores one of the most conspicuous sources of inequity in our present taxation system, and that is the lack of taxation of capital gains.
    If the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) were to say to the Committee, "We ought to have a tax on capital gains and then you could give this sort of relief to the elderly taxpayer with large sums of unearned income" I could at least respect his sincerity, but I do not at the moment respect his sincerity at all.
    I am particularly suspicious when the right hon. and learned Member for Hertfordshire, East tries to carry this argument on to a high level, talking about principles of saving and the effect on the economy, but does not explain the facts which I have explained to the Committee—facts which must be available and known to the right hon. and learned Gentleman. We are entitled to bring out these facts, and we are also entitled to criticise hon. Members opposite and ask why we have not been given the facts that I have just indicated.
    I hope that there is absolutely no chance of the Government accepting these particularly misconceived Amendments. As my hon. Friend said, it is most extraordinary that when we have a Budget like the present one giving away large sums of money to the wealthier members of the community, their reaction is not one of grateful thanks but "What more can we get out of the Government?" I hope that the Committee will not be misguided enough to give any support to these Amendments.
    Sir Richard Pilkington: The attitude of the Opposition to these proposals is unfortunate, to some extent, from their own point of view, and I hope it will be noted throughout the country that those people who might benefit from the proposals made on this side of the Committee are treated by the Opposition to adjectives
    1196
    such as "greedy" and one hon. Member said derisively that his heart bled for them. I hope that the people whose situation would be improved by the proposals contained in these Amendments will note the attitude of the Opposition and will treat Members of the Opposition accordingly when the opportunity comes.
    I am also a little surprised at the attitude of my right hon. and learned Friend the Chancellor of the Exchequer to these proposals. He recently made a speech which was reported in The Times on 29th May under the headline, "Absolutely Vital Need for Saving". It seems to me that his present attitude is a peculiar way to approach what apparently my right hon. and learned Friend thought—and, indeed, what I am sure he does think—would be very beneficial. The importance of saving has, after all, been a theme, and rightly so, of this Government for some considerable time, but the proposed incidence of this tax relief, with the distinctions between earned and unearned income, falls upon certain citizens in a very harsh way indeed.
    I expect that many hon. Members have received many letters on this question. I have one from which I should like to quote because it puts the case in an effective way. This is from a man over 65 years of age who writes:
    "It is to be hoped that simple justice will be done to those savers of the past who had to provide for their own pensions. Otherwise a deep sense of injustice will be felt by those similarly placed to myself."
    He adds—I hope the Opposition will note this—
    "In conclusion, I have heard it said that even the Socialists might not have been so unfair".
    Little did he know of the speeches to be made by them this evening. I hope that he will realise the truth.
    Mr. Loughlin: I hope the hon. and gallant Gentleman will forgive me for saying that what he quoted did not seem to relate to these Amendments or to the issue involved. Will he quote the letter in full?
    Sir R. Pilkington: I will show the letter to the hon. Gentleman afterwards. I do not want to detain the Committee. I hope he will take it from me that the letter has in it no substance which would

    1197
    support his contention at all. The heart of the matter is in what I read.
    I realise that the Opposition have pursued this line because, after all, they had to have something to oppose and, presumably, they thought that this was a suitable subject. I will give one more quotation. Let the Opposition see whether they can square this with what they have been saying. It comes from their own newspaper, the Daily Herald, of 16th January last:
    "Surtax was meant to be a tax on the rich. Rut £2,000 now equals £700 pre-war. Even if (he starting level were raised to £5,000, the tax would still be discouraging people whom it was never meant to reach. People to whom £2,000 still seems a lot should not be jealous; for the present state of affairs is harming the interests of the whole country."
    The Opposition are prepared to deny many things, but surely they will not deny the mouthpiece of their own party in saying that. I suggest that hon. and right hon. Members opposite should withdraw all opposition to these proposals and join with us on this side in urging the Chancellor to accept our suggestions.
    Mr. H. Wilson: Will the hon. and gallant Gentleman read the part of the article dealing with the capital gains tax which the Daily Herald suggested should be adopted? Also, having regard to what he said and read about hardship to individual correspondents of his, will he say how many letters he and other hon. Members have received about the far greater hardships—I am still talking in terms of savings and past savings—of those who invested in gilt-edged and have seen their gilt-edged savings sharply reduced in value as a result of the Government's high interest rate policy?
    Sir R. Pilkington: I hope that this Government will deal with all hardships which are suffered today. I have not the article with me because it is not relevant to the point I was making. What I did read was the relevant part.
    Mr. Loughlin: The right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) conducted himself as an intellectual comic. I do not think that he satisfied many members of the Committee that his strictures on my hon. and right hon. Friends were as good as they may have appeared on
    1198
    the surface to be. I do not want to follow him in his wise-cracking fashion.
    We recognise that, apart from the efforts of those who work, there are other factors which go towards the good state of the economy, but that is not the issue involved in these Amendments. Hon. Members opposite have talked about the difficulties faced by the people for whom they are concerned. We are talking about those who receive a substantial income from capital gains.
    9.0 p.m.
    One hon. Member opposite referred to the sweat of the brow of the landlords, of the speculators on the Stock Exchange and of the land speculators, the boys who are earning fabulous golden hand-outs of one kind or another. It is nonsense for hon. Members opposite to talk about working people being able to save and to invest money. If it had not been for the imposition of charges of one kind or another by the Government, some of which are hitting many old-age pensioners, there would not have been any chance for the Surtax payer to get earned income, let alone unearned income, relief of the kind which the party opposite want for those who seek to get it on unearned income as well.
    If the Government entertain for one moment the Amendments of hon. Members opposite, there ought to be the greatest possible agitation at least in the trade union movement. When the right hon. and learned Member spoke about the worker who can see the possibility of future investment of his savings, the thought flashed across by mind of the number of industrial workers who are excluded, because of their rate of wages, from the Government's graduated pension scheme. It is sheer hypocrisy for right hon. Members opposite, like the right hon. and learned Member who was so clever with hon. Members on this side of the Committee, to talk about workers being able to save money as though all workers were able to do so.
    We have an affluent society only because of the plurality of the wage packet in the household. That is something which the right hon. and learned Member has to learn. If an industrial worker is able to save, it is only because his wife is

    1199
    going out to work as well. These Amendments clearly indicate the greed of right hon. and hon. Members opposite.
    Mr. Geoffrey Hirst: I have an Amendment down concerning this matter and also support another. I am grateful to my hon. Friends for the speeches which they have made, because they have covered many of the points which I otherwise would have made myself. Speeches like that of the hon. Member for Gloucestershire, West (Mr. Loughlin) make it only too clear why the Socialist Party is so completely unfit to govern. Hon. Members opposite cannot recognise the complete difference which there is in these subjects between the two sides of the Committee. No one has done more in this field than the Conservative Party. [Laughter.] Of course that is so.
    At the moment we are discussing the question of taxation relating to certain classes of people. Those who provide investment and saved income, which was one of the terms my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith) used—he certainly invented a few new ones—are a third partner in industry. We cannot possibly have progress in a free society unless we provide the conditions and circumstances whereby investment will be encouraged to grow and to fructify to everybody's benefit. Where would the big businesses, employing a vast number of people and doing a great export trade, be if it were not for that principle running through the smaller industries from which they have grown? That is fundamental.
    While I recognise, as I must do in realising the overall position, that my right hon. and learned Friend the Chancellor could not do all that I am sure he would have wished to do this year—and I am grateful for what he has done—I share the view of my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) that there is the danger that in doing what he has done in the way he has done it, we have opened a gulf rather wide in this context and have made it no easier for ourselves to bring about that element in equity which my right hon. and learned Friend the Member for Hertfordshire, East mentioned which is fundamental to our sound appreciation
    1200
    of economics—and it is a sound appreciation. That is the only thing of which I am frightened.
    Therefore, while I readily lend my support to the Amendments as an opportunity to express in this Committee views in which I wholeheartedly believe, I do not expect them to be accepted by many hon. Members opposite for the very reasons given by my right hon. and learned Friend. There is no argument about it. This is a fundamental approach. It is different. It is one of the great fundamental issues that divide the Tory Party from the Socialist Party. We may quarrel about details, but this approach is fundamental.
    I do not expect my remarks to be accepted with great glee on the benches opposite, but I trust that my right hon. Friends on the Front Bench, who will understand what I am talking about if hon. Members opposite do not, will take note of what has been said this evening. It is vitally important that however much good we have done in one sector, we should not make it more difficult for us to complete what is a sound policy based on practices which have been proved in the past.
    I, too, have received a vast number of letters, dozens of them—
    Mr. Loughlin: Read them in full.
    Mr. Hirst: I shall make my speech in the way I wish and I do not need the hon. Member's assistance.
    Several of the writers have expressed the feeling that there is injustice or hardship, that they are being treated differently from other people and they do not see why they should be. I do not think that they should be treated differently from other people.
    My hon. Friends have mentioned that the Estate Duty takes large cuts out of inheritances. What is wrong with a man working to try to provide something for the future for his children? His savings should not be penalised. Hon. and right hon. Members opposite, through their love of the taxation system to get a controlled economy, adore killing that sort of source of vital life blood in our economy. I beg my hon. and right hon. Friends to take a serious view of this matter and to note what we have had to say, because I

    1201
    know that they believe it in their hearts and that they would like to do it if the situation of the economy permitted. I hope that if it does not permit it this year, it will do so in the very near future.
    Sir E. Boyle: Let me make it quite clear, at the outset of my remarks, that my right hon. and learned Friend the Chancellor of the Exchequer fully realises the heavy impact of direct tax, both Surtax and the standard rate of Income Tax, on investment income. He also realises that this impact is felt in particular by many elderly and retired persons who have, in many cases, given a lifetime of service to the nation and, by the nature of things, cannot themselves gain from a great deal of the important social expenditure of today on matters such as education.
    Even so, there are a number of reasons why my right hon. and learned Friend does not feel able to accept any of these Amendments which have been so interestingly moved, supported and discussed. I will mention in particular three reasons. First, any blurring of the distinction between earned income and investment income would be contrary to the basis deliberately adopted by my right hon. and learned Friend when framing his Budget this year.
    Looking back over the past ten years, I do not think any one can say that the Government have neglected the personal tax problems of any section of the community. I gave a number of what seemed to me to be striking instances of how the Government have helped those with lower incomes when I wound up the debate on Second Reading. In the context of the Amendment, it is worth remembering that any elderly taxpayer dependent entirely on the proceeds of investment income and whose total income brings him within the ambit of Surtax must have gained substantially from the reduction of the standard rate of Income Tax by as much as 1s. 9d. since the present Government took office. My right hon. Friend made it quite clear both in his Budget speech and again when moving the Second Reading of the Finance Bill that he could not afford a major reduction of direct taxation this year. My right hon. and learned Friend was concerned to do what he could to give a dynamic boost to the economy, and he
    1202
    felt that one of the most effective ways of doing so would be to increase the incentives to people in managerial, scientific and other positions of responsibility by countering, so far as future earnings are concerned, the disincentive tendency of the Surtax structure.
    It was therefore of the essence of my right hon. and learned Friend's Surtax proposals and his whole Budget judgment—and here I quote from his speech—that:
    "…the relief will only flow from and be related to the amount earned."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 821.]
    I therefore must say frankly to my hon. Friends that as far as this year's Budget is concerned the Amendments which we have been discussing run counter to what was a fundamental aspect of my right hon. and learned Friend's Budget judgment.
    The second point concerns savings, and I listened with great attention to what a great many of my hon. and right hon. Friends had to say about it. I do not want to take up all the points made on savings this evening, many of them of great interest. There is one point, however, which I might take up from the speech of the hon. Member for Gloucester (Mr. Diamond), and one from my right hon. and learned Friend the Member for Hertfordshire, East (Sir D. Walker-Smith). The hon. Member for Gloucester interested me when he said that although he recognised that if a man was earning during his working life and saved money, that money was, so to "speak, most properly his, he felt rather differently about income gained from the capital value of his savings. Surely the hon. Member would not dispute for a moment, and I would not have thought that any hon. Member opposite would dispute, that the raising of the standard of living of workers depends largely on the rate of capital investment. I should think, therefore, that no sensible worker could possibly grudge the inclusion of interest on money saved, because it is entirely in the interest of the nation and of the great mass of the people that a man should be saving income in the course of his working life.
    Mr. Diamond: Nobody has said that they grudged that. We said that we drew a distinction in terms between earned income and income accruing from investment and not being earned.
    Sir E. Boyle: Interesting as I found his speech, my chief criticism of the hon. Member would be that in many cases he drew much sharper distinctions than were really justified.
    If I may say so to my right hon. and learned Friend the Member for Hertfordshire, East, one point in his speech where I could not go all the way with him was when he talked about the Budget surplus. Surely a very low overall borrowing requirement is really in the interest of a mainly free enterprise economy, because it means that more private saving becomes available for investment in the private sector. There are two sides to the Budget surplus, and I am sure that my right hon. and learned Friend will bear in mind the important bearing of budgetary policy on monetary policy as well.
    I fully agree that the last thing we want to do is to discourage saving by the professional man or woman in the course of their working life. In this context it is worth remembering that my right hon. and learned Friend's proposals will affect total tax on mixed incomes comprising some earnings and some income from investments. This is a matter which we shall be debating on a subsequent Amendment and, therefore, I shall not pursue it now.
    It is important also surely to remember that my hon. Friends' Amendments are not in any way limited to the income from investments which represent the accumulation of savings from past earnings. Indeed, I think it would be a practical impossibility to devise any form of words for precisely that purpose. Therefore, the reliefs which my hon. Friends suggest would be given equally to investment income arising from inherited wealth, or indeed from the reinvestment of the proceeds of capital appreciation that had no connection at all with earnings. Again, the pure rentier would get relief equally with the man for whose benefit these Amendments have been chiefly devised.
    9.15 p.m.
    Of course, it is perfectly true—I recognise this—that the existing Income Tax age relief is undiscriminating in the same way. But that, after all, is a relatively small relief designed to help elderly people with investment incomes of a very moderate size. I put it to the
    1204
    Committee that circumstances are very different when one is considering an Amendment that could give a Surtax benefit running up to as much as £1,775 in amount.
    I would tell my hon. Friends that I make this point and draw attention to these figures because my right hon. and learned Friend felt that relief in this way on this scale of investment income would not be justified in the present year at a time when he frankly told the House that he was unable to afford any general reduction of direct taxation.
    My third point is the most important of all, I think, and I ask my hon. Friends to consider it very carefully. I should have thought that it would be regarded as a quite intolerable anomaly if we were to retain the present age relief up to a limit of £800, with tapering provisions, and if the law were also to recognise a new hardship category consisting of elderly people with incomes of £2,000 and upwards. Surely such a state of affairs would be regarded—and with some reason—as extremely unfair by all those elderly taxpayers with incomes below £2,000 which are nevertheless too large to qualify for Income Tax age relief.
    Having said that and put those three points before my hon. Friends, I want to say that of course my right hon. and learned Friend realises very clearly indeed the danger of having too large a discrimination between earned income and investment income. I share much of the dislike that many of my hon. Friends have expressed about the term "unearned income", but I must equally say that, frankly, I was rather surprised to hear my noble Friend, in his very interesting speech moving the Amendment, say—if I understood him aright—that we ought to work towards no discrimination between earned and unearned income at all. All I would say is that this may be orthodoxy on the back benches today, but it was not orthodoxy when we discussed this subject some years ago. I do not remember any one making that point.
    I must tell my noble Friend that I certainly do not remember that point being made in, for example, the Budget of 1952 when the present Home Secretary raised the earned income allowance to 2/9ths, and I do not remember it

    1205
    being made during the Budget debates of 1957 when the present Minister of Aviation extended the earned income allowance into the Surtax field. While I absolutely agree that we want to be careful about too great a discrimination, it was my impression that there was a good deal of support not only in this House, on the Government benches, but in the country for the idea of some extension of the earned income allowance into the Surtax range.
    Viscount Hinchingbrooke: I would not care to associate my hon. Friends with this statement, but I feel very strongly that one can differentiate entirely between the situation which obtained some years ago and the present situation. In the situation that obtained after a major war when the nation was completely impoverished, everything was done by State action to encourage the entrepreneur to industrial effort, but when we arrive at an affluent society all sorts of different considerations applied.
    Sir E. Boyle: I greatly respect my noble Friend's convictions, as I hope he realises, but in view of what he said this evening I thought I was bound to raise this point, which seemed to me one of very considerable importance.
    Mr. Hirst: My hon. Friend is making a very unfair point in relation to the Minister of Aviation and all that. At that time there was a limitation on what could be done. My hon. Friend must know—it would not be proper for me to say it—what has been said outside this Chamber.
    Sir. E. Boyle: I do not profess by any means to know all that is said outside this Chamber. I would hesitate to say, and I think that in this I shall carry a large part of the Committee with me, that all the economic problems which we recognised in 1957 can now be said to have been solved once and for all by 1961.
    I come to the Amendment of my hon. Friend the Member for Bath (Mr. Pitman). There are certain serious difficulties about this proposal. When one considers the difficulties which have arisen in devising and administering a retirement condition in connection with a man's title to draw retirement pension, one would think very hard before deciding to introduce that
    1206
    concept into our tax law. I agree that at first sight retirement from the service of the Crown seems straight-forward enough, but what about those who, in the past, left overseas Crown service to take up another occupation?
    There is another point to be mentioned. Except in the case of persons retiring from Crown service overseas, by my hon. Friend's proposal anyone under 65 could never qualify for the relief, even though his Surtax liability came to be in question for a year of assessment falling wholly after the date when he became 65 and retired.
    I quite understand that those in Crown service are more likely than most people in other occupations to find their employment suddenly terminated, for example, when a former Colonial Territory becomes self-governing. However, I say frankly to my hon. Friend that I doubt whether the grant of a special tax relief designed for quite another purpose is the best way to help those people. In case I should sound unsympathetic about those people, I assure my hon. Friends that I regard the cost of the Overseas Service Act, 1961, as money extremely well spent. I believe that that Act and the White Paper of October, 1960, which preceded it, pointed towards the correct way of dealing with this sort of problem.
    Mr. A. P. Costain: Surely if those people who have served overseas come back to live in this country we shall get a tax gain, because they will come back only when we have a reasonable form of taxation? That is not making a sacrifice but helping the economy of the country and our sterling balances.
    Sir E. Boyle: I was trying to deal with the interesting and specific suggestions made in the Amendment of my hon. Friend the Member for Bath and merely pointing out that I think that there are difficulties about trying to help these people by a grant of a special tax relief, although I agree that it is very important that we should keep their needs in mind.
    For the reasons I have explained, I must invite my hon. Friends not to press their Amendment but to recognise that it is an essential element in my right hon. and learned Friend's Budget judgment this year that the Surtax reliefs

    1207
    should only flow from and be related to the amount earned. Of course, he recognises the danger of too great a discrimination between earned and investment income in our system of taxation, but he made his Budget judgment perfectly plain this year and, for that reason, I cannot advise the Committee to accept the Amendments.
    Mr. Mitchison: Sorry as I am to have missed a minute or two of the beginning of the hon. Member's speech, I want to say that the Opposition agree with his conclusions, and I should like to add one or two further reasons. I listened to the speeches in support of the Amendments, and I hope that I may be forgiven for saying that I wondered how much those hon. Members meant those speeches wholeheartedly and to what extent they had their tongues in their cheeks. Some of the arguments seemed absolutely incomprehensible in the light of one or two things which have been happening lately.
    The first is that hon. Gentlemen opposite, unanimously so far as I know, decided to increase the health charges, knowing perfectly well that that increase would apply especially to the old people towards a particular class of whom these Amendments are directed. What hon. Members opposite have been asking the Committee to do, having just imposed additional charges on the old the sick and the poor, is to give Surtax relief to those people who with some £40,000 of capital are getting an income of £2,000 a year or more from it. I find it difficult to conceive a more inconstant suggestion, at this time of day. I noticed that the first few hon. Members who spoke to the Amendments omitted to say what they were about. They talked about almost everything else, but not that.
    I would remind them of one other thing. The party opposite is responsible for a pensions scheme the effect of which is to remove from the taxpayer a number of increases, which will be put on to the contributors. At the last election that party rejected the pensions scheme put forward by the Labour Party, which was intended to give considerable assistance to elderly people. Yet, for a special class of elderly people—those who have what is called "saved income" of over £2,000 a year—hon.
    1208
    Members opposite are asking the Chancellor to extend a concession which, on social grounds, I would already regard as quite indefensible, and which we shall oppose in due course.
    What astonished me about the debate was to hear hon. Members—people whom I had hitherto regarded as tolerably sensible—talking about fiscal equity, and nonsense of that sort, in connection with this set of Amendments which deal with saved income, devised in the ingenious mind of the noble Lord to cover capital gains which might have been made after a lifetime of speculation on the Stock Exchange and to cover, again, a nice fruitful inheritance of the kind that many people will have received in their early years and contrived to cling to for the rest of their lives. We are being asked to support the socially desirable function of not spending an inheritance, and we are being asked to do so after what the Government have done in respect of Health Service charges, the poll tax and contributions. To get up and talk that sort of nonsense is an insult to the country.
    Amendment negatived.
    Mr. Diamond: I beg to move, in page 8, line 19, at the end to insert:
    "and
    (c) any deductions made under the foregoing paragraphs shall be disregarded for the purpose of determining the rates of surtax applicable to the unearned income (being any income other than earned income) of the individual in question and that unearned income shall be assessed for surtax as if the earned income (without any such deductions as aforesaid) were first assessed and thereafter the unearned income were assessed at rates appropriate to a supplementary assessment of the unearned income made immediately after the assessment of the earned income".
    As we have had several discussions on the purpose of the Chancellor's Budget, we had better start afresh. I take as my text an extract from the Chancellor's Budget statement. He said:
    "I want to do what I can to ensure that the present incidence of Surtax does not act as a disincentive to those who have positions of responsibility in our industries and elsewhere in our national life. Accordingly, I think it right to take action to modify, as far as earned incomes are concerned, the present rules. The changes I propose will be applicable to incomes earned—I repeat earned—during this new financial year and thereafter."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 820.]

    1209
    It is clear, therefore, that what the Chancellor had in mind, whether rightly or wrongly, were changes in the Surtax rates and in the burden falling on those who had earned incomes, and that he was most anxious to restrict help to those who earned their incomes, and was not intending to give relief to those who were not earning their incomes. I will repeat what he said:
    "The changes I propose will be applicable to incomes earned…during this new financial year and thereafter."
    That is what the Chancellor said, but when we refer to the tax tables it becomes immediately clear that what he said was not fully carried out by the provisions of the Finance Bill. In fact, instead of the Surtax provisions helping only those who earn their incomes they help those who have unearned incomes, by reducing Surtax liability.
    9.30 p.m.
    I do not know whether it is necessary for me to go into the figures again. They were put before hon. Members effectively by my right hon. Friend the Member for Battersea, North (Mr. Jay), during the debate on the Budget statement. My right horn. Friend said:
    "…a man getting £1,500 a year on earned income gels nothing from this Budget. But if he is receiving £1,500 of earned income plus £1,500 of unearned income, if single, he gets £42 a year."
    That makes it quite clear that a man who has, in addition to his earned income, unearned income of an equal amount, gets £42 reduction in Surtax relief because of his unearned income.
    "If he received £2,000 a year all earned he gets nothing at all."
    That is clear because there is no Surtax payable and there remains no Surtax payable. If a single man earns £2,000 a year he gets no relief.
    "But if he gets £2,000 a year earned income plus £2,000 a year unearned, he gets £80 a year to encourage him to more initiative and enterprise."—[OFFICIAL REPORT, 19th April, 1961; Vol. 638, c. 1285–6.]
    I can give more figures at length, if any hon. Member requires it, showing the effect at different ranges. But the short point is that the Chancellor said that he wished to help those people with earned income. The effect of this Amendment is to enable the Chancellor to achieve what he set out to achieve. It is as simple as that.
    1210
    We believed the Chancellor when he said that he did not want to help those with unearned incomes. We have put down this Amendment which would have the effect of making certain that those with unearned incomes did not benefit, while those with earned income continued to get the benefit. This Amendment seeks to give effect to the Chancellor's own wish that there shall not be Surtax relief on unearned income for people with a mixed income.
    The way in which this works is simplicity itself. It asks one to imagine a person's income being built up into a series of blocks. The first block will represent the earned income and on top of that would be put a second block representing his unearned income. That block would attract a certain level of Surtax which he must pay and for which he would receive no relief. So the person would pay Surtax on the second block which would then be taken away, leaving the lower block representing the earned income on which he would receive Surtax relief as provided for by the Finance Bill.
    I hope that I have made the provision clear. We are only helping the Chancellor to do what he wants to do and we are doing so in the simplest possible way. If accepted, this Amendment would have the effect of extinguishing the present Surtax relief under the Bill on unearned income, leaving the taxpayer with his full Surtax relief on earned income. I submit it very hopefully indeed to the Committee, as it is precisely what the Chancellor wants. It may be that the wording is not precise, and that the right hon. and learned Gentleman may have his own wording, in which case the Opposition, as ever, would be accommodating. At all events, it is an Amendment designed to do exactly what the Chancellor wants and I have no hesitation in believing that the right hon. and learned Gentleman will accept it.
    Sir E. Boyle: The hon. Member for Gloucetser (Mr. Diamond) said four or five times in the course of quite a short speech on this Amendment that it would do exactly what the Chancellor said he wanted to do in his Budget statement. If the hon. Member had read through three further paragraphs and ejaculations by my hon. Friend the Member for Kidderminster (Mr. Nabarro) he would

    1211
    have found that that is not so, but that the Bill as drafted carries out exactly the intention of my right hon. and learned Friend. My right hon. and learned Friend said:
    "These proposals will give no relief to incomes derived solely from investments. They will give maximum relief to incomes wholly earned. But because Surtax is a tax on total income they will affect the total burden of tax on mixed incomes comprising some earnings and some income from investments. But the relief will only flow from and be related to the amount earned. So, again, there will be an incentive to increase earnings."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 820–1.]
    The Bill, as drafted, carries out that intention exactly.
    I agree on one point put by the hon. Member. We are here on a relatively narrow and confined point and I do not think that on this Amendment we could have quite such a wide-ranging debate as we had on the previous Amendment. I think that I can put the issue to the Committee most clearly by giving a concrete example, not exactly the same but very nearly the same as the example I quoted in the debate on the Budget Resolutions.
    Take the case of a man with a mixed income of, say, £4,000 of earnings and £500 investment income. There is nothing between us, as the hon. Member for Gloucester fairly said, in that the man does not pay tax on the £4,000 of earnings. The sole question we have to consider is whether the £500 should be taxed as the Bill says, at 2s. in the £ or, as the hon. Member and his Friends say, the tax the £500 of investment income should be calculated at 4s. 6d. in the £.
    The view that investment income should be regarded as the top slice of a mixed income is no doubt theoretically a tenable one, but I say quite frankly that I think as a basis for the working of this Clause it would be quite unfair and would in the view of the Government operate as a strong disincentive to the acquisition of further income from savings. Indeed, I think one could carry the argument a stage further and put the point even more strongly by considering the position in the case I have just quoted if the taxpayer earned an additional £1,000 more.
    Under the Clause as drafted he would pay no further Surtax because the deduction for earned income relief and special
    1212
    earnings allowance would have increased by £1,000. Under the Amendment there would be no Surtax on the additional earnings as such, but the £500 of investment income, considered as the top slice of the total income, would be pushed up to a rate of 5s. 6d. in the £ solely because of the additional earnings. In the view of my right hon. and learned Friend this would be an extremely wrong feature in a scheme designed to encourage further earnings for effort and increased initiative. I think it would be quite indefensible to penalise and discourage saving by people during their working life in a way which would be certainly caused if we accepted the Amendment. I have no hesitation at all in advising the Committee to reject the Amendment.
    Mr. Houghton: I do not wish to bring the debate to an end. My hon. Friends may wish to comment further on what the Financial Secretary has said, but when he sat down I almost automatically got up. It all depends on how far the Chancellor wants to go.
    My hon. Friend the Member for Gloucester (Mr. Diamond), as the Financial Secretary said, kept saying that this Amendment sought to do what the Chancellor intended to do. This Amendment does what we thought the Chancellor intended to do. Now, we find that he intends, apparently, to do something more, and this Amendment seeks to check him from going too far. The Financial Secretary only a few moments ago, speaking to the previous Amendment, said that the proposals in Clause 11 were a dynamic boost to the economy. I have the greatest respect for the Financial Secretary, his choice of language and the sincerity with which he always addresses the Committee, but if he really believes that this is a dynamic boost to the economy, he will believe anything. One is inclined to ask, "Who and what is the economy, if this is a boost to it?"
    Another thing that the hon. Gentleman said was that Surtax relief was directly related to the amount earned, so we see how misleading a phrase can become. Of course, in the initial stages of the application of the proposals in Clause 11 to Surtax, relief is directly related to the amount earned, but it is also indirectly related to the amount of unearned income. What I wish to stress

    1213
    is that when these reliefs in Clause 11 have been given, the total gross income remains the same. They do not reduce the income; they increase the reliefs for tax purposes to be given against that income, so that the gross income in the hands of the taxpayer is the same before the reliefs and after. At the initial stage, the income is the same.
    What the Chancellor is doing is reducing the amount of Surtax payable on the same income as before, and to achieve that purpose he reduces the amount of chargeable income—not the amount of the income, but the amount of income to be chargeable to tax—so that he is free to vary the reliefs that he is giving on the gross income. It is a perfectly tenable argument to use against the Chancellor's proposals that, while giving the reliefs to earned income, he is consequentially giving quite substantial relief to unearned income as well.
    I am not saying that we were in any real doubt about this at the earlier stages of the debates on the Bill, because it seemed to follow from some comments which the Chancellor made at the earlier stages, but we deplore it, nevertheless. The Financial Secretary, a few moments ago, after saying that Surtax reliefs will be directly related to the amount earned, went on to say that the reliefs will affect the burden on mixed income. Indeed, he was using this very fact as an argument against the Amendment of his hon. Friends for still further relief on unearned income, and was drawing their attention to the fact that they are to get quite noticeable reliefs in Surtax on unearned income as a consequence of the reliefs being given on earned income.
    The example which the Financial Secretary quoted a moment ago was a a man on £4,000 a year. I take the case of a married man earning £4,000 a year with dividends of £500. If one takes the unearned income as the top slice of income for calculation purposes, the amount of Surtax on the £500 of dividends will be reduced from £107 10s. to £40. That is a very substantial reduction in the Surtax on unearned income for a man who, from the Chancellor's point of view, is on the rather modest salary of £4,000 a year, and other Surtax payers would stand to gain a greater benefit than that.
    1214
    9.45 p.m.
    This is a question of how far the Chancellor of the Exchequer wishes to go. There is no reason why, in giving these reliefs to earned income, he should not regard unearned income as taking its present place in the total computation of Surtax and at the same rate as it would be taxed at present before the reliefs to earned income are given. That seems to us to be the logical thing to do. There are no difficulties of administration. There is no justification, from the point of view of the Chancellor of the Exchequer's original intentions when proposing the Clause, why unearned income should share the benefit with earned income. We wish to differentiate between the two.
    This is the third fault in the right hon. and learned Gentleman's own proposal which we think should be remedied, even looking at them from his point of view. We made it clear at the outset, and we have repeated, that we are against the Clause as a whole. We think that it is wrong to propose reliefs on this scale in the Bill when additional taxation is being levied by the Bill and when prior to it very substantial additional charges were imposed upon the great mass of the people. We are, therefore, trying to discuss the matter on the basis of the right hon. and learned Gentleman's own approach to the proposals in the Clause and to amend them as seems suitable from his own standpoint.
    We certainly wish to press the Amendment. Whatever the Chancellor may think about giving a dynamic boost to the economy, whatever he may think about the justification for giving substantial reliefs to earned incomes in the Surtax brackets at present, we see no justification for giving consequential reliefs in respect of unearned incomes of better-off people only a few weeks after he levied several hundreds of millions of pounds by increased National Insurance contributions and Health Service charges. On that basis we shall press the Amendment.
    Mr. J. T. Price: I want to press the right hon. and learned Gentleman one point further on the explanations we have been given. The case made out by my hon. Friend the Member for Gloucester (Mr. Diamond) and supported from the Front Bench by my hon. Friend the Member for Sowerby (Mr. Houghton)

    1215
    has not been answered properly. The Financial Secretary, with his usual bright, breezy and urbane manner, carefully chose an example to illustrate his defence of mixed income. I am not complaining about his manner but the substance of his argument.
    As he spoke to us, I asked myself why he had chosen the example of a person with a mixed income of £4,500 a year. The first reflection produced the obvious answer, namely, that the ceiling for Surtax has been lifted to £5,000 a year from the original figure of £2,000. If the Financial Secretary had addressed his example and its effect on the tax to the reverse case, there would have been a much more spectacular result. He quoted the case of a taxpayer with an earned income from a profession or industry of £4,000 a year, to which must be added £500 a year received as unearned income from investment revenue.
    What would be the position in the reverse case of a man doing only nominal work and receiving an income of £500 from employment or profession but being in the fortunate position of enjoying an unearned income of £4,000 a year? There must be many cases where an individual, either by inheritance or other circumstances, is fortunate enough to have an income of £4,000 a year while, perhaps, carrying out quite nominal duties bringing in an earned income of £500.
    Where one has mixed income, the major part of which is unearned and the rest is earned, the person will get very much more than in the case quoted, unless the example is entirely wrong. Even in the case quoted by my hon. Friend the Member for Sowerby, a man with an unearned income of £500 a year stands to benefit by £60 from a transaction under this relief provision, so the man whose major income is from investments will be in an even better position. I should be very grateful to hear an explanation of what the position would be where the major portion of income is unearned, so long as it is under the ceiling of £5,000.
    Mr. Millan: The Financial Secretary said that this was a very narrow point, but perhaps that is the wrong word. It is a very simple point, but not a narrow one. An important matter of principle
    1216
    is involved. By this Amendment we are trying to restrict the relief given under the Clause exclusively to earned income. When one has mixed income it all depends what particular part of the income one takes as marginal income—the "top slice" of income, I think, is the term used by the Inland Revenue.
    What happens under the Chancellor's proposal is that the unearned income is taken as the top slice of the income, which means, whether or not one's relief flows, in the Chancellor's words, from the earned income that the actual relief is at the topmost marginal rate, which is a rate determined by the amount of unearned income as well as the amount of earned income. Because of the progressive rates of Surtax we are, in fact, treating the unearned income as the top slice of income, and by that means giving what we consider to be an unnecessary relief to people with unearned income, although the whole basic intention of the Clause is that the whole relief should go to those with earned income.
    There might just be a case for the Government to say that we should take both earned and unearned income as being progressive proportionately, so that one has an even spread of income from the bottom to the top, increasingly proportionately. Had the Government said that, it would have been possible to provide for it in the Clause, and there would have been a certain restriction on the relief for unearned income. But it seems to me to be completely indefensible that the Government should have chosen this method—which is not the only technical method—which has the effect of making the unearned income the top slice of income.
    What we are saying in this Amendment is that we should split the total income into the two categories of earned and unearned, and that they should be treated separately for the assessment of Surtax. We say that we should calculate the Surtax on the total, as it were, without the remissions under this Clause. One then gives not deductions from total income but remissions on tax calculated on total income, which has the effect, by the terms of the Amendment, of making absolutely sure that none of the relief flows to unearned income but is concentrated on earned income. As I

    1217
    have said, that meets far more consistently and logically what the Chancellor said were the basic purposes of the Surtax reliefs.
    The Financial Secretary gave an interesting example of someone with £4,000 a year earned income, and £500 investment income, receiving a £1,000 a year increase in salary. He said that the effect of that, if the Amendment were accepted, would be that that man would pay Surtax at a higher rate although, in fact, he had had an increase in earned income and not in unearned income.
    That is correct, but it is also true—and this is a reversal of the arguments used by the Chancellor and by the Financial Secretary about the reliefs flowing from earned income—that the increase in Surtax would have flowed from the unearned income and not from the earned. There would have been no increase in tax if he had had no unearned income. The fact that the increase in earned income meant that there was more Surtax payable does not derogate from the fact that it is still true that the increase in Surtax came from the unearned income. That is a reversal of the principle, as I have explained.
    My hon. Friends and I consider that the proposals we are making more consistently and logically follow what were the Government's intentions. Although it is a simple point, it is one of principle. We hope that the Financial Secretary will have something further to say about the matter and, if he has not, I hope that my hon. Friends will divide the Committee.
    Mr. Michael Foot: It has been said by hon. Gentlemen opposite that this is a narrow point, while my hon. Friends have said that it is a simple one. I hope that there will be one or two other hon. Members who, having listened to the debate, will dissent from the view that it is, indeed, a simple point.
    Despite the powers of perspicacity and persuasion of my hon. Friend the Member for Gloucester (Mr. Diamond), some hon. Members may still not be able to grasp the whole of the argument. I was not enlightened on the subject by the reply of the Under-Secretary, particularly since he appeared to select an example which suited him. This is a matter of some considerable complexity
    1218
    in Income Tax law and operation and, therefore, it is pardonable if some hon. Members are not able exactly to understand the position. Nevertheless, it is the duty of hon. Members to try to understand what is going on, and the Financial Secretary has not done as much as he might have to enlighten us.
    Although the issue may be complicated, two facts stand out clearly. The first is that the Government, in this proposal which my hon. Friends are seeking to remedy, intend, by their Surtax proposals, to give relief to certain forms of unearned income. Whatever the Chancellor may say, and whatever the Financial Secretary may say on his behalf by quoting some of the Chancellor's speeches—and I am not saying that he distorted them in any way—that was not the impression hon. Members got at the time of the Chancellor's Budget speech, and the impression given generally to the country. At that time the Government were intent on other impositions, saying that they would have to raise money in various other ways.
    It was never understood that the Government were, by their Surtax proposals, going to give a certain amount of relief to people on unearned income. The Government are, therefore, doing something which they did not make fully clear at the time and, considering that, hon. Members should have today received some justification for that from the Financial Secretary.
    10.0 p.m.
    Another matter arises. Whenever on Finance Bills hon. Members make proposals which would involve increased burdens on the Chancellor and on the Treasury the Financial Secretary replies, "I have great sympathy with this point of view, but I have had to examine the extra burdens which would be placed on the Exchequer and I have to tell hon. Members that we cannot afford it because we have to scrutinise every million pounds. We have to know exactly what is being spent".
    I think the Financial Secretary referred to an hon. Friend of mine using the same phrase on many occasions. The Financial Secretary used on many occasions the phrase "the Budget judgment of the Chancellor of the Exchequer". We are always told by Financial Secretaries that the Budget judgment of the Chancellor

    1219
    of the Exchequer is being worked out very carefully. But whatever may be the exact meaning of my hon. Friend's proposal, it surely means that if this Amendment were accepted it would be of some benefit to the Treasury.
    Why did not the Financial Secretary tell us how much money is involved? Has he made any estimate of what would be the benefit to the Treasury if this Amendment were accepted? When proposals of this nature are made, which would be of assistance to the Chancellor in his conduct of his financial operations, at least the Treasury ought to make as careful inquiries as they would make on occasions when people are proposing extra burdens to be carried by the Treasury.
    Perhaps the Financial Secretary would like me to continue speaking for a minute of two to enable him to make inquiries if he has not got the figure. If he has the figure, I am surprised that he did not give it to us in his earlier speech. I would be extremely surprised if the figure were not available in the House so that we could be told how much money the Treasury is prepared to lose rather than accept the Amendment. Will the hon. Gentleman tell me how much it is? Is it £2 million or £3 million? If it is, it would certainly cover all the extra charges which were imposed in respect of teeth and spectacles. Let us know exactly the figure which the Financial Secretary threw away without even attempting to inform the Committee of the amount involved. Let us be told exactly how much money the Chancellor, by rejecting this Amendment, is going to give to those with unearned incomes, what is the benefit he is giving to them which could have been used for other purposes.
    Sir E. Boyle: I rise to answer the last three speakers. The hon. Member for Westhoughton (Mr. J. T. Price) asked me about the case of somebody with an earned income of £500 a year and an unearned income of £4,000 a year. As a matter of fact, here there would be very little difference. Under the Clause as drafted the Surtax payable is £375. Under the Amendment the Surtax payable would be £400. The total difference in tax liability in that case would be only £25.
    1220
    In answer to the hon. Member for Glasgow, Craigton (Mr. Millan), who said that he felt this was an important point, I quite agree, and I am sorry if anything that I said suggested that this was not so. Obviously, this was a major point on which my right hon. and learned Friend had to decide, when framing his proposals this year, whether he should treat mixed incomes as they have been treated in the Clause or whether they should be treated as they are treated in the Amendment.
    In answer to the hon. Member for Ebbw Vale (Mr. M. Foot), one reason why this is an important point is that a considerable amount of money is involved. The difference from the point of view of the Exchequer is, I think, £13 million for 1962–63, and £19 million for a full year. Therefore, my right hon. and learned Friend obviously had to take an important decision on this matter. I can only repeat what I said before. In my view, to treat mixed incomes in the way that hon. Members opposite propose in the Amendment would, although it would save money from the point of view of the Exchequer, be too great a deterrent and discouragement to saving
    One point in the speech of the hon. Member for Craigton I could not accept. It is true, of course, that, if a man earns £4,000 and his earnings rise to £5,000, the additional Surtax under the conditions proposed in the Amendment arises on the £500. On the other hand, the increased rate—a fairly high increased rate—of 5s. 6d. in the £ arises from the additional earnings. I cannot help feeling that to say, "If you have been earning £4,000 and your earnings rise to £5,000, you must then pay at 5s. 6d. in the £ on even a quite modest amount of investment income derived from saving" would not be equitable. That was the reason, after considering the matter very carefully, both because of the point of principle and because of the amount of money involved, why my right hon. and learned Friend took the decision he did.
    I quite agree that a great many Clauses in the Finance Bill are not easy to follow. I imagine that the hon. Member for Ebbw Vale will agree with the lady who said to G. K. Chesterton that if St. Thomas Aquinas' account of God in his simplicity was right then God in his complexity must be very difficult indeed. However, after reading again

    1221
    the paragraphs in my right hon. and learned Friend's Budget speech which occur at columns 820 and 821 of the OFFICIAL REPORT of 17th April, it does not seem to me that that is an obscure passage. However much we may disagree in this Committee about the proper way to treat mixed incomes, I do not think that there is any plausible case for saying that my right hon. and learned Friend has intentionally or unintentionally misled the Committee.
    Mr. Jay: The Financial Secretary has made one of the most remarkable and revealing statements of this whole series of debates. He has now admitted that the Chancellor decided deliberately to give away £19 million not just on Surtaxed incomes, but on unearned Surtaxed incomes. We have now discovered that a very large proportion of the sums raised from National Insurance contributions and Health Service charges is to be given away to people paying Surtax on unearned incomes.
    My hon. Friend the Member for Ebbw Vale (Mr. M. Foot) understated the case against the Government and against what they propose. He said, very rightly, that this was not a narrow issue. I quite agree, but I think it is a fairly simple issue. The issue is that, whereas the Chancellor justified the whole of his Surtax reliefs on the ground that they would give an incentive on earned incomes, one finds, on looking at the tax tables, that he is giving a very large proportion of them to unearned incomes, not what the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) called savings incomes but inherited incomes as well as investment incomes in the general sense.
    What is actually happening can be easily explained by reference to the Chancellor's tax tables. Let us suppose that a single man has an earned income of £1,500. He has nothing from the Surtax reliefs. If he has also an unearned income of £1,500, he receives £40 a year in tax relief. In plain English and in common sense, that is a tax relief for unearned income. If he has an earned income of £3,000 a year, he receives from this Budget according to the tables a tax relief of £112. If he has also £3,000 unearned income, he receives a tax relief of £275. Again, in terms of common sense, that is an extra £150 or so by virtue of his unearned income.
    1222
    Going to the £10,000-a-year taxpayer, to whom the Chancellor has been more kind than to any other, if his £10,000? income is all earned he receives £350 in relief. If he has £10,000 unearned income also, he receives £775 tax relief. That is an extra £400 by virtue of his unearned income. That is what the Chancellor is doing.
    I am astonished that the Financial Secretary should lend himself to such a disingenuous and hypocritical proceeding as this. He read out the words which the Chancellor used in the Budget debate. I ask any hon. Member whether he would have thought from these words that the Chancellor was doing what I have been describing. The Chancellor said—and the Financial Secretary produced this as his trump card—
    "But because Surtax is a tax on total income they will affect the total burden of tax on mixed incomes comprising some earnings and some income from investments. But the relief will only flow from and be related to the amount earned."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 821.]
    That did not imply to any of us what the Chancellor is, in fact, doing.
    Sir E. Boyle: Those words apply directly to the example which the right hon. Gentleman has given. If in the case which he quoted a man's earned income fell, his tax liability would go up sharply.
    Mr. Jay: I can well believe that the Financial Secretary, by some form of semantics or pedantry, may be able to reconcile these words with what the Chancellor is doing. I am certain that no one in this Committee or in the country understood that that is what is being done.
    It is an exposure of the whole cynical, hypocritical nature of this Budget that we should have recommended to us and to the country these huge Surtax reliefs which amount to a reduction of nearly half in the total yield in Surtax on the ground that they are designed to increase incentive and to be a reward for earned income. Then when we look at what the Chancellor is actually doing we find that a very large part of the relief is going to unearned incomes.
    Sir Alexander Spearman: Is the right hon. Gentleman bearing in mind that unearned income will be reduced under this Budget by an increase in Profits Tax?
    Mr. Jay: That may or may not be so, but it was not what the Chancellor said when he was recommending these concessions.
    The fact is that the Chancellor says—and the Financial Secretary does not deny it—"If you have a large unearned income, you get increased tax reliefs through the Surtax concessions in the Budget". This was not the impression conveyed to us. All that the Financial Secretary can do in an attempt to palliate or excuse this hypocritical proceeding is to read out an almost unintelligible form of words which convey no meaning of the kind suggested to us. This is one of the most cynical and hypocritical humbugging performances that we have had from any Government in recent years, and it exposes the selfish, shabby and anti-social nature of the Budget and the excuses that we have had made for it today.
    Mr. Loughlin: The disclosure of the Financial Secretary that in practice this will mean the loss to the Chancellor of the Exchequer of £19 million is one of the most cynical things that we have heard. We do not know what hon. Members opposite think about this. It might be to the benefit of the Committee if they made some contribution to the debate instead of sitting on their backsides and interrupting.
    The Chancellor clearly indicated in his Budget speech—and it has been repeated again and again—that Surtax reliefs should apply only to earned income. In col. 820 of the OFFICIAL REPORT for 17th April, he not only stated it clearly and categorically, but he even used the words which have been repeated today. If we wanted to use the £19 million which is involved for the benefit of society, we might consider giving it to the teachers for the work which they are doing. That is precisely the figure about which there is difficulty in the teaching profession.
    10.15 p.m.
    I am not content to see the use of the Budget in this way whereby we can throw away without any consideration £19 million to people who do not need Surtax relief, and who have not earned the money anyway, when there are so many reasonable things that we could do with the £19 million, and, in particular, because the Chancellor clearly indicated to the House and to the country
    1224
    that his intention was to ensure that the Surtax reliefs should apply solely to earned income and in that way be an incentive.
    The Chancellor should reconsider the matter. He should understand that because he conveyed clearly to the House and to the country that any relief from Surtax should be specific to earned incomes, he will be failing in the responsibility of his office if he does not carry out the promise which he gave both to the House and to the nation.
    Miss Jennie Lee: Earlier this week, I received a letter from the Ministry of Pensions and National Insurance and, to make doubly sure, I received a similar letter from the Ministry of Health. Both of them referred to a matter which I regard as being related strictly to what we are now discussing.
    No one on this side of the Committee imagines that high taxation is desirable in itself. What we must always decide is what are the priorities in a civilised community. In those two letters, from different Departments, I was told that an old couple whose income was £8 a week, who were paying about 30s. a week for rent and who had reached an age when one or other or both of them were frequently ill and drawing prescriptions from their doctor, could not recover the 2s. per item for those prescriptions.
    The priorities are such that the letters went on to say that if either of the old people had a disease of such a nature as to require constant prescriptions, it would be in order for the doctor to prescribe larger amounts of medicine each time a prescription was required. There was no indication that we could so organise our taxation system as to relieve them from the anxiety of those prescription charges, nad yet tonight we are faced with the uncivilised, savage attitude and the lies of hon. Members opposite who, before the Budget, created public opinion that Surtax had to be reduced as an incentive to the export trade. That was the talking line of the Government.
    Now, it is clearly exposed that the export argument was simply a camouflage under which hon. Members opposite, in this disgraceful fashion, do not come to the rescue of the people who are doing a serious export job or to the

    1225
    rescue of anybody earning a living in any way for the benefit of the community. It is simply a bit more smash and grab of the kind by which hon. Members opposite still insist on charging 2s. per item for prescriptions, even from old couples who do not have enough
    income to provide proper nourishment and far less to pay for bills.
    Question put, That those words be there inserted:—
    The Committee divided: Ayes 160, Noes 229.

    Division No. 193.]

    AYES

    [10.20 p.m.

    Ainsley, William

    Henderson, Rt. Hn. Arthur (Rwly Regis)

    Parkin, B. T.

    Albu, Austen

    Herbison, Miss Margaret

    Pavitt, Laurence

    Allaun, Frank (Salford, E.)

    Hill, J. (Midlothian)

    Pearson, Arthur (Pontypridd)

    Allen, Scholefield (Crewe)

    Hilton, A. V.

    Peart, Frederick

    Awbery, Stan

    Holman, Percy

    Pentland, Norman

    Bacon, Miss Alice

    Holt, Arthur

    Price, J. T. (Westhoughton)

    Baxter, William (Stirlingshire, W.)

    Houghton, Douglas

    Probert, Arthur

    Blyton, William

    Howell, Charles A. (Perry Barr)

    Pursey, Cmdr. Harry

    Bowden, Herbert W. (Leics, S. W.)

    Howell, Denis, (Small Heath)

    Randall, Harry

    Bowen, Roderic (Cardigan)

    Hughes, Cledwyn (Anglesey)

    Rankin, John

    Bowles, Frank

    Hughes, Emrys (S. Ayrshire)

    Redhead, E. C.

    Boyden, James

    Hughes, Hector (Aberdeen, N.)

    Reid, William

    Braddock, Mrs. E. M.

    Hunter, A. E.

    Reynolds, G. W.

    Brockway, A. Fenner

    Hynd, John (Attercliffe)

    Rhodes, H.

    Broughton, Dr. A. D. D.

    Irvine, A. J. (Edge Hill)

    Roberts, Albert (Normanton)

    Castle, Mrs. Barbara

    Jay, Rt. Hon. Douglas

    Roberts, Goronwy (Caernarvon)

    Chapman, Donald

    Jones, Rt. Hn. A. Creech (Wakefield)

    Robertson, John (Paisley)

    Cliffe, Michael

    Jones, Dan (Burnley)

    Ross, William

    Craddock, George (Bradford, S.)

    Jones, Elwyn (West Ham, S.)

    Silverman, Julius (Aston)

    Cronin, John

    Jones, J. Idwal (Wrexham)

    Skeffington, Arthur

    Crosland, Anthony

    Jones, T. W. (Merioneth)

    Slater, Mrs. Harriet (Stoke, N.)

    Darling, George

    Kenyon, Clifford

    Slater, Joseph (Sedgefield)

    Davies, C. Elfed (Rhondda, E.)

    Lawson, George

    Small, William

    Davies, Ifor (Gower)

    Lee, Frederick (Newton)

    Smith, Ellis (Stoke, S.)

    Davies, S. O. (Merthyr)

    Lee, Miss Jennie (Cannock)

    Snow, Julian

    Deer, George

    Lever, L. M. (Ardwick)

    Sorensen, R. W.

    Delargy, Hugh

    Lewis, Arthur (West Ham, N.)

    Soskice, Rt. Hon. Sir Frank

    Diamond, John

    Loughlin, Charles

    Spriggs, Leslie

    Dodds, Norman

    Mabon, Dr. J. Dickson

    Steele, Thomas

    Dugdale, Rt. Hon. John

    McCann, John

    Stones, William

    Edwards, Rt. Hon. Ness (Caerphilly)

    MacColl, James

    Sylvester, George

    Edwards, Robert (Bilston)

    McInnes, James

    Taylor, Bernard (Mansfield)

    Edwards, Walter (Stepney)

    McKay, John (Wallsend)

    Taylor, John (West Lothian)

    Evans, Albert

    Mackie, John (Enfield, East)

    Thomas, Iorwerth (Rhondda, W.)

    Fitch, Alan

    McMillan, Malcolm (Western Isles)

    Thompson, Dr. Alan (Dunfermline)

    Fletcher, Eric

    Mallalieu, E. L. (Brigg)

    Thomson, G. M. (Dundee, E.)

    Foot, Dingle (Ipswich)

    Manuel. A. C.

    Thornton, Ernest

    Foot, Michael (Ebbw Vale)

    Mapp, Charles

    Timmons, John

    Forman, J. C.

    Mason, Roy

    Ungoed-Thomas, Sir Lynn

    Fraser, Thomas (Hamilton)

    Mellish, R. J.

    Wade, Donald

    Gaitskell, Rt. Hon. Hugh

    Millan, Bruce

    Wainwright, Edwin

    Galpern, Sir Myer

    Milne, Edward J.

    Warbey, William

    George, Lady Megan Lloyd (Crmrthn)

    Mitchison, G. R.

    Weitzman, David

    Ginsburg, David

    Monslow, Walter

    White, Mrs. Eirene

    Gordon Walker, Rt. Hon. P. C.

    Morris, John

    Wilkins, W. A.

    Grey, Charles

    Noel-Baker, Francis (Swindon)

    Willey, Frederick

    Griffiths, W. (Exchange)

    Oliver, G. H.

    Williams, W. R. (Openshaw)

    Grimond, J.

    Oram, A. E.

    Willis, E. G. (Edinburgh, E.)

    Hale, Leslie (Oldham, W.)

    Oswald, Thomas

    Wilson, Rt. Hon. Harold (Huyton)

    Hall, Rt. Hn. Glenvil (Colne Valley)

    Owen, Will

    Woodburn, Rt. Hon. A.

    Hamilton, William (West Fife)

    Padley, W. E.

    Woof, Robert

    Hannan, William

    Paget, R. T.

    Yates, Victor (Ladywood)

    Hart, Mrs. Judith

    Pannell, Charles (Leeds, W.)

    Hayman, F. H.

    Parker, John

    TELLERS FOR THE AYES:

    Mr. Irving and Mr. Short.

    NOES

    Agnew, Sir Peter

    Bishop, F. P.

    Bullus, Wing Commander Eric

    Aitken, W. T.

    Black, Sir Cyril

    Butcher, Sir Herbert

    Allan, Robert (Paddington, S.)

    Bossom, Clive

    Campbell, Sir David (Belfast, S.)

    Allason, James

    Bourne-Arton, A.

    Carr, Compton (Barons Court)

    Atkins, Humphrey

    Box, Donald

    Carr, Robert (Mitcham)

    Balniel, Lord

    Boyle, Sir Edward

    Cary, Sir Robert

    Barlow, Sir John

    Braine, Bernard

    Chataway, Christopher

    Barter, John

    Brewis, John

    Chichester-Clark, R.

    Beamish, Col. Sir Tufton

    Brooman-White, R.

    Clark, Henry (Antrim, N.)

    Bennett, F. M. (Torquay)

    Brown, Alan (Tottenham)

    Clark, William (Nottingham, S.)

    Berkeley, Humphry

    Browne, Percy (Torrington)

    Cleaver, Leonard

    Biggs-Davison, John

    Bryan, Paul

    Cooke, Robert

    Bingham, R. M.

    Buck, Anthony

    Cooper, A. E.

    Birch, Rt. Hon. Nigel

    Bullard, Denys

    Cordeaux, Lt.-Col. J. K.

    Cordle, John

    Jackson, John

    Renton, David

    Corfield, F. V.

    James, David

    Ridley, Hon. Nicholas

    Costain, A. P.

    Jenkins, Robert (Dulwich)

    Ridsdale, Julian

    Critchtey, Julian

    Johnson, Erie (Blackley)

    Robinson, Sir Roland (Blackpool, S.)

    Crosthwaite-Eyre, Col. O. E.

    Kerby, Capt. Henry

    Rodgers, John (Sevenoaks)

    Cunningham, Knox

    Kershaw, Anthony

    Roots, William

    Curran, Charles

    Kirk, Peter

    Russell, Ronald

    Currie, G. B. H.

    Lancaster, Col. C. G.

    Scott-Hopkins, James

    Dalkeith, Earl of

    Langford-Holt, J.

    Seymour, Leslie

    d'Avigdor-Goldsmid, Sir Henry

    Leavey, J. A.

    Sharpie, Richard

    Deedes, W. F.

    Leburn, Gilmour

    Shaw, M.

    de Ferranti, Basil

    Legge-Bourke, Sir Harry

    Shepherd, William

    Digby, Simon Wingfield

    Lewis, Kenneth (Rutland)

    Simon, Rt. Hon. Sir Joceyln

    Doughty, Charles

    Linstead, Sir Hugh

    Skeet, T. H. H.

    Drayson, G. B.

    Litchfield, Capt. John

    Smith, Dudley (Br'ntf'rd & Chiswick)

    du Cann, Edward

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Smithers, Peter

    Duncan, Sir James

    Loveys, Walter H.

    Smyth, Brig. Sir John (Norwood)

    Elliot, Capt. Walter (Carshalton)

    Lucas-Tooth, Sir Hugh

    Speir, Rupert

    Elliott, R. W. (Nwcstle-upon-Tyne, N.)

    MacArthur, Ian

    Stanley, Hon. Richard

    Emery, Peter

    McLaren, Martin

    Stevens, Geoffrey

    Emmet, Hon. Mrs. Evelyn

    McLoughlin, Mrs. Patricia

    Stewart, Michael (Fulham)

    Farr, John

    MacLeod, John (Ross & Cromarty)

    Stodart, J. A.

    Finlay, Graeme

    McMaster, Stanley R.

    Stoddart-Scott, Col. Sir Malcolm

    Fraser, Ian (Plymouth, Sutton)

    Macmillan, Rt. Hn. Harold (Bromley)

    Storey, Sir Samuel

    Freeth, Denzil

    Macmillan, Maurice (Halifax)

    Studholme, Sir Henry

    Galbraith, Hon. T. G. D.

    Maddan, Martin

    Sumner, Donald (Orpington)

    Gardner, Edward

    Maginnis, John E.

    Talbot, John E.

    Gibson-Watt, David

    Maitland, Sir John

    Tapsell, Peter

    Glover, Sir Douglas

    Manningham-Buller, Rt. Hn. Sir R.

    Taylor, Sir Charles (Eastbourne)

    Glyn, Dr. Alan (Clapham)

    Markham, Major Sir Frank

    Taylor, Edwin (Bolton, E.)

    Glyn, Sir Richard (Dorset, N.)

    Mathew, Robert (Honiton)

    Taylor, w. J. (Bradford, N.)

    Goodhart, Philip

    Matthews, Gordon (Meriden)

    Teeling, William

    Goodhew, Victor

    Maud ling, Rt. Hon. Reginald

    Temple, John M.

    Cower, Raymond

    Mawby, Ray

    Thatcher, Mrs. Margaret

    Grant, Rt. Hon. William

    Maxwelf-Hyelop, R. J.

    Thomas, Leslie (Canterbury)

    Grant-Ferris, Wg. Cdr. R.

    Mills, Stratton

    Thomas, Peter (Conway)

    Green, Alan

    Montgomery, Fergus

    Thornton-Kemsley, Sir Colin

    Gresham Cooke, R.

    More, Jasper (Ludlow)

    Tiley, Arthur (Bradford, W.)

    Grosvenor, Lt.-Col. R. C.

    Mott-Radclyffe, Sir Charles

    Turner, Colin

    Gurden, Harold

    Noble, Michael

    Turton, Rt. Hon. R. H.

    Hamilton, Michael (Wellingborough)

    Nugent, Sir Richard

    Tweedsmuir, Lady

    Harris, Frederic (Croydon, N. W.)

    Oakshott, Sir Hendrie

    van Straubenzee. W. R.

    Harris, Reader (Heston)

    Orr, Capt. L. P. S.

    Vickers, Miss Joan

    Harrison, Brian (Maldon)

    Orr-Ewing, C. Ian

    Vosper, Rt. Hon. Dennis

    Harrison, Col. J. H. (Eye)

    Osbom, John (Hallam)

    Wakefield, Edward (Derbyshire, W.)

    Harvey, John (Walthamstow, E.)

    Osborne, Cyril (Louth)

    Wakefield, Sir Wavell (St. M'ebone)

    Harvie Anderson, Miss

    Page, John (Harrow, West)

    Walker, Peter

    Hastings, Stephen

    Page, Graham (Crosby)

    Walker-Smith, Rt. Hon. Sir Derek

    Hay, John

    Partridge, E.

    Wall, Patrick

    Heald, Rt. Hon. Sir Lionel

    Pearson, Frank (Clitheroe)

    Ward, Dame Irene

    Henderson, John (Cathcart)

    Peel, John

    Webster, David

    Hiley, Joseph

    Pervical, Ian

    Wells, John (Maidstone)

    Hill, Mrs. Eveline (Wythenshawe)

    Pickthorn, Sir Kenneth

    Whltelaw, William

    Hirst, Geoffrey

    Pike, Miss Mervyn

    Williams, Paul (Sunderland, S.)

    Hobson, John

    Pilkington, Sir Richard

    Wills, Sir Gerald (Bridgwater)

    Hocking, Philip N.

    Pitt, Miss Edith

    Wilson, Geoffrey (Truro)

    Holland, Philip

    Pott, Percivall

    Wise, A. R.

    Hollingworth, John

    Powell, Rt. Hon. J. Enoch

    Wolrige-Gordon, Patrick

    Hopkins, Alan

    Price, David (Eastleigh)

    Woodhouse, C. M.

    Hornby, R. P.

    Prior-Palmer, Brig. Sir Otho

    Yates, William (The Wrekin)

    Hughes-Young, Michael

    Pym, Francis

    Hurd, Sir Anthony

    Quennell, Miss J. M.

    TELLERS FOR THE NOES

    Hutchison, Michael Clark

    Rawlinson, Peter

    Mr. J. E. B. Hill and

    Irvine, Bryant Godman (Rye)

    Redmayne, Rt. Hon. Martin

    Mr. Gordon Campbell.

    Motion made, and Question proposed, That the Clause stand part of the Bill.
    10.30 p.m.
    Mr. H. Wilson: The Amendments that we have been debating for the best pact of today have raised a number of important financial issues. Behind the financial issues there have been deep issues of political principle, and none more than in the Amendment that has, unfortunately, just been lost. We are now on the Question "That the Clause stand part", and this is a straight political debate between the two sides—there should be no mistake about that. This Question, in the circumstances of this year, both social and economic, raises the real difference between the two parties. I do not think that he Chancellor would deny that this is the central Clause of the Bill. This is what his Budget is about.
    The first point I want to make, as my hon. Friends have already said on previous Amendments, is that the sweeping Surtax concessions for next year contained in Clause 11 must be taken together with the social charges imposed in the spring, and nobody should make up his mind about whether the Clause should stand part of the Bill without setting it against that first February "Budget" introduced by the Minister of Health.
    Last winter, many of us warned the country that it was the Government's intention, first to impose health charges and then to use the revenue so gained for substantial Surtax concessions. From Christmas onwards it became clear that the Government were playing with this idea of Surtax concessions. I do not think that in all our fiscal history there has been such a succession of inspired statements put out by the Government that the Chancellor was to make these Surtax concessions. I have already said that I do not think that they emanated from the right hon. and learned Gentleman. We had the remarkable speech of the President of the Board of Trade in January, saying that the Surtax payers were badly treated and that something should be done for them. I have already asked today whether that was a little inspiration, a little kite flying on behalf of the Government, or whether it was the President of the Board of Trade using
    1230
    his own subtle form of pressure on the Chancellor. However that may be, it was clear from January onwards that this was in the Government's mind.
    Then we got, in February, the statement of the Minister of Health. We were asked to believe—and we went through the Division Lobbies night after night, and listened to arguments from right hon. Gentlemen opposite—that the economic position of the country in February was so desperate that we could not maintain the National Health Service without putting new and burdensome charges on those who were the least able to meet them. We were told that the Government's financial revenue position was such that we could not manage without an additional £45 million of revenue, raised in the most inequitable manner by poll tax contributions.
    That was the position in February. Two months later, the economic position of the country was such that the Chancellor could cheerfully hand out £85 million to the Surtax payer. Had there been such a remarkable recovery in the country's economic position between February and April? The gold position had got worse, the export-import position had got worse, the balance of payments position had got worse, production had not begun to increase at all. Yet, between February, when we had to put that burden on those least able to bear it, and April, when we handed out £85 million to the Surtax payers, had the economic position of the country changed so rapidly?
    The Chancellor, of course, will tell us—I think that he is making the note already—that the £85 hand-out is not for the current financial year but is deferred for a year, and that he does not lose that revenue for a further financial year; that we are badly off this year, but next year we will be so well off—and he knows it already—that we will be able to make this £85 million concession to the Surtax payer. On this one item the Chancellor is anticipating his next year's Budget statement, though from now to next April any question we put to him about any other tax changes will be greeted with the statement that he cannot anticipate next year's Budget statement. On Surtax, however, he is

    1231
    most unusually asking the Committee to legislate on next year's Budget.
    If he is confident that he will then have money—and he will tell us that he is raising it by Profits Tax—to hand out in next year's Budget, why does he not now say that a year hence he will remit the health charges and the poll tax? It is no answer to what I have been saying to say that the health charges were imposed this year and that the Surtax concession will be given next year.
    Aneurin Bevan used to talk of the language of priorities. The Budget is above all an expression in the clearest language of social priorities. The priorities which the Government have laid down in this year's Budget are the Surtax concessions. Our priorities—and we make no apology for them—would have been some means to ease the lot of the old and the disabled, measures towards strengthening investment and the application of science to industry.
    That is the difference between us, and that is what we are now debating. The Chancellor set the stage by imposing new burdens on the less well-to-do sections of the community. Many arguments were put forward by the Chancellor and the team of Treasury Ministers which he has been deploying during the course of the day in support of these Surtax proposals, and I will deal with them in a moment. The real reason why he has made these concessions is simple. I explained it in the debate on the Budget when I said that there was no mystery about it—it is what the Conservative Party is in business for. That is what it exists to do. I might have gone on to say that that is what business is in the Conservative Party for.
    In the Budget debates and on other occasions, of course, we have made it clear that we feel that direct taxation at all levels is too high. I give that point to the right hon. and learned Gentleman right away. But we feel that reductions in direct taxation should be planned and should be fair and should follow a system of priorities, being granted first to those in greatest need—child allowances, personal allowances, earned income allowances and so on.
    I have said before that the reason why taxation rates are so high in this country is that the tax base is so narrow. We
    1232
    have often used the analogy about building land and wanting to accommodate a certain number of homes when one has to build high if there is not much land—skyscrapers—whereas if the base is wider there is no need to go so high. It is similarly the case with the tax base. If the tax base is narrow, to raise a given amount of revenue there has to be a very high tax structure built on that narrow base.
    Our tax base is unnaturally narrow and it has been Government policy to see that it is kept narrow. The economic base of the fiscal structure has not been widened, as in other countries, by a steady economic expansion over the past few years. If we had been expanding production for some years, we could have afforded quite sweeping reductions in direct taxation, but, of course, the revenue base as a whole is too narrow because so much spendable income in this country avoids any taxation. We have already today debated business expenses in which very large sums of money are spent without being involved in taxation.
    There is a wide range of legal tax avoidance. I should be out of order if I dealt with that in detail, but the very fact that so many people are able to spend so much money without being accountable for taxation in respect of it means that the Chancellor has lost revenue which he would otherwise have had. That means that the ordinary taxpayer has to bear a higher rate of taxation than he otherwise would.
    Then, of course, there is the peculiar and anomalous and indefensible exemption from taxation of capital gains which for their part make, of course, very large contributions to the spending power of a relatively small section of the community. If the Chancellor had brought them into the net this year, then I believe substantial reductions in taxation over a period would have been possible, but I hope those reductions would have been concentrated first on those in the greatest need of tax reductions, especially those at the lower end of the income scale who are paying Income Tax.
    What are the arguments for this Clause? First it has been noticeable throughout all this debate and throughout the earlier debates on Second Reading and on the Budget that neither the

    1233
    Chancellor nor really any of his chief colleagues have attempted for one minute to defend their proposal on the grounds of social justice. At any rate, there is a limit to the amount of Treasury humbug on that. It is true that in the Budget debate the Chancellor described this as a belated act of social justice; he felt this was justified on the ground of social justice. The noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) said in a moving speech earlier that this could be judged only in terms of social justice and not in terms of economic incentive, and said it did not go far enough, and he called the Chancellor a Communist because of the inadequacy of the tax concessions in this Clause. However, by and large, no one, today at any rate, has said anything to justify this in terms of equity and social fairness.
    It is true that in one inspired moment at the end of the Budget debate the Chancellor did enter on that—for him—unusually moving passage when he drew attention to the hard lot and the great hardships suffered by the £5,000 a year man. And I think he believes it. I think he meant that. I think that was one of those occasions when the veil of a sort of cancellarian obscurantism was drawn aside and we saw the real man behind it. He bared his breast. He told us what really motivated his political actions. I think he believes it.
    If he does believe it—I have asked him this twice, and I hope he will seek to answer—if the £5,000-a-year man is suffering great financial difficulties and strains, what does he think about the £1,000-a-year man? Would he not agree that the £1,000 a year man is suffering correspondingly even greater strains and difficulties? I hope he will tell us about it. Or what about the £500-a-year man? Or what about the old-age pensioner?
    If the Chancellor really meant what he said about the £5,000-a-year man, then, of course, the logic is that those who are earning considerably less than £5,000-a-year, with no capital to draw on, with no business expenses, with no perks, with no capital gains, are obviously a great deal worse off. That, of course, should have motivated his Budget. If the £5,000-a-year man is so badly off, how does he justify the additional social charges imposed this year, and imposed
    1234
    under his direction, on the 20 million earning a great deal less than £5,000-a-year.
    This question has, of course, to be judged against recent earnings figures published by the Ministry of Labour. Nearly one in five of the working population of this country, 18 per cent., in fact, of the manual workers of this country, earn less than £11 a week. That is just over £500 a year; not £5,000, but £500. Another 10 per cent. earn between £11 and £12 a week; another tenth earn between £12 and £13; yet another between £13 and £14. In other words, half of the manual workers earn less than £14 a week, £700 a year. Nothing is done for them at all in this Budget, and yet we are asked to vote for the proposition, that this Clause stand part of the Bill, a Clause which limits all its benefits to a very small section of the community. Half the manual workers earn less than £700 a year.
    10.45 p.m.
    Why is it that we have this Clause? I hope that the Chancellor will tear the veil aside once more. I hope that he will take us into his confidence. It will probably be a late hour when he does it, and that is usually the time when he feels inspired and tells us a little about his innermost thoughts. I hope that he will tell us how he justifies his argument about the £5,000-a-year man on the one hand and the 10 million workers who get less than £700 a year on the other. Up till now—perhaps this is an unworthy suspicion, in which case I shall be glad if the right hon. and learned Gentleman can dispel it—my impression is that the Chancellor and hon. Members opposite look upon the people of this country as first-class, second-class and third-class citizens, and they demonstrate their sympathy with the £5,000-a-year man, because he is a first-class citizen, and apply different standards to the second and third-class citizens. This Clause is the pay-off for the first-class citizens.
    The attitude of hon. Members opposite reminds me of what happened in the old days when a stage coach was going uphill. The first-class passenger sat where he was and rode; the second-class passenger got out and walked, and the third-class passenger got out and pushed. That is the attitude which the

    1235
    Chancellor and his hon. Friends have displayed in this Bill.
    One thing that will not have escaped the notice of my hon. Friends is that this year has seen a greater reallocation of income between rich and poor, to the benefit of the rich, than in all the years since the war. We are now reaching the stage where there are lavish and conspicuous differences developing and increasing all the time, between the wealthy and the less wealthy sections of the community. We can think of many examples. This is partly due to the extremely large capital gains in the last few months; partly due to land speculation, which has reached fantastic levels; partly due to continued tax avoidance, and partly due to expectations under this Clause.
    We read of more and more examples of indefensible but lavish expenditure on the part of a very small section of the community. Only last week I read in the Daily Express social diary an account of a party, somewhere in Regents Park, which must have cost tens of thousands of pounds. All the details were given of the way in which the most expensive foods were flown in from all parts of the Continent and other parts of the world, and there was a full account of the way in which entertainers and bandsmen, and also chefs, were brought in from many other countries—all for one party for a small number of people to enjoy themselves. All that is being financed by the Surtax payers whom the Chancellor is helping, or it is coming out of capital gains.
    I now turn to something that the Chancellor has not dealt with. This may appear amusing to hon. Member's opposite, but it is not amusing when we contrast it with the letters quoted by my hon. Friend the Member for Cannock (Miss Lee) a short while ago. If there is any social justice in the minds of hon. Members opposite, they will not seek to justify this lavish expenditure going on when the Minister of Health can say, month after month, that the Government cannot afford to provide cars for paraplegic ex-miners. The Chancellor is encouraging this great contrast in living standards in this Clause.
    Since I have mentioned the question of social justice, perhaps I should refer
    1236
    to two aspects of the Clause which are particularly unworthy, in the application of a bad principle in an unjust way. It is not only that the Clause is basically unjust; its other unjust aspect is that the Chancellor has drawn it with no regard to need. The biggest benefits go to the single man. The Chancellor does not even draw a proper distinction between Surtax payers at any level, in the matter of social needs and commitments.
    Secondly, although the rubric to this Clause reads: "Surtax: reliefs for earned income," it contains specific concessions to those who have unearned incomes. The simple point put by my right hon. Friend the Member for Battersea, North (Mr. Jay) illustrated this. He pointed out that the £1,500-a-year man whose income is all earned gains nothing from the Bill, but if that man has another £1,500 unearned income he gains a great deal—about £40 a year. I am sorry. One has, I think, to get up to £10,000 a year before getting something approaching £40 a week from this Budget.
    But, of course, those who make the biggest gains as a result of the Chancellor's tenderness to the people with unearned income—despite all that was said by the noble Lord the Member for Dorset, South—are those who have large capital holdings. People with large capital holdings stand to make more capital gains, because it is true that over the past few years the wealth of this country has been distributed with more and greater inequality.
    Recently we have had authoritative figures. This Clause refers to persons in the main earning £2,000 a year and upwards. For those with incomes of £2,000 a year the average holding of capital is probably as much as ten years' income. The assessments made suggest that the average person earning £2,000 a year and upwards owns £20,000 worth of capital. On top of what he gets from the Chancellor he has the possibility of drawing capital gains, and probably gets them.
    At the top of the pyramid of this property-owning democracy there are about 20,000 people owning more than £100,000 of capital each and with an average holding of over £500,000. At the bottom of the pyramid we have 16,000 property-owning democrats who have less than £100 each and on average less than £50.

    1237
    It is to the top few that the Chancellor is making his tax concessions in this Clause. May I remind the Chancellor that 1 per cent. of the British adults own 43 per cent. of the total net capital of the country, with the top 10 per cent. of our people owning 79 per cent. of the total capital of the country. This shows a more unequal capital distribution even than in the United States. We can see that the Chancellor by the provisions of this Clause and by the people he is helping by tax concessions is not making concessions to those who should have been his first consideration.
    We have also to judge the Clause against the question of capital holdings. I think I have said enough to show, and I do not think that any hon. Member will contest it, that there is no claim of social justice in Clause 11. So now I turn to the other big argument, the question of incentives.
    As my hon. Friend the Member for Cannock said earlier, this is the great argument about which we heard so much and which was widely put around, that we should have a new look at our fiscal affairs and sweeping reductions in Surtax in order to help the exporters. What was it that the Financial Secretary said tonight—"to give the economy a boost."
    Referring in his Budget broadcast to the people who would be helped, the Chancellor said:
    "…they are a very important section of the community from the point of view of our productive effort…And I think this very high rate of tax, on people in that salary range, really has been a great disincentive to effort, and it is upon the effort of these people—the managers, the scientists, the technologists, the business men, the exporters, upon them that so very much depends—the well-being of us all."
    That was the argument of the right hon. and learned Gentleman, and we have had still more imaginative arguments put forward about how this was going to operate. I do not apologise for reminding the Committee again of the moving words of the hon. Member for Twickenham (Mr. Gresham Cooke) during the Budget debate, when he gave top executives a lecture on the hour at which they should rise. He said:
    "Some executives must get up a bit earlier in the morning. When I go to Germany I am always amazed to find that one can pick up the telephone at 8 o'clock or 8.30 in the
    1238
    morning and be sure of contacting the managing director at his works. Recently my daughter travelled across America and stayed with the families of American executives. She told me that the executives are in their offices by 8.30 in the morning and seldom leave before 6.30 in the evening. They take their lunch in the office. I know that in the North of England most executives get to the office at 9 o'clock, but there are too many in London who do not get there very much before 10 o'clock. I know that because I have seen some of them at Woking Station at 9 o'clock."
    I am glad that the hon. Member has just come in and is coming on to the night shift. I know he will not mind my quoting his words because they are imperishable. He said:
    "However, I think the Surtax remission will encourage the younger executives to get on and get up earlier—".
    At which point my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin) intervened, rather irreverently I thought, and said:
    "Give them alarm clocks. It will be cheaper."—[OFFICIAL REPORT, 19th April, 1961; Vol. 638, c. 1217.]
    We have all had our bit of fun with the hon. Member's quotation. I did by drawing a picture of the knockers-up migrating from Lancashire to Surrey to knock up these people at 7 o'clock in the morning.
    I hope the hon. Member will catch your eye, Mr. Thomas, tonight. I wonder if he could tell us what it is like on Woking Station these days. I wonder if he could tell us whether as a result of the Budget having gone through with a substantial majority and the prospects that Clause 11 might in due course also get a favourable vote in the Committee—although we shall do our best to stop it—that Woking Station is now a desert at 9 o'clock and the 7 o'clock Surtax specials are crowded with businessmen standing in the corridors. I hope that he will tell us about this, because he waxed very enthusiastic during the Budget debate.
    The truth is, as we have often argued, that not all Surtax payers are production engineers, scientists or exporters. The Economic Secretary to the Treasury told us something about Schedule D Surtax payers. He went through a long list which included provincial shopkeepers. Are they working harder? Is that to increase our exports? They are estimable people. Some of our best friends are provincial shopkeepers, but will they

    1239
    increase exports because they will be paying less in Surtax? He mentioned doctors. It might be a very serious thing if doctors worked too hard to get money and were in any way to fail to treat their patients properly. He mentioned, most oddly, petrol station proprietors. Are they to work harder because of the Surtax concession? I do not want to be unfair to anyone, but I should think it a rather odd system of social priorities that the petrol station proprietor should be helped and the teachers should be so badly paid. The Chancellor is responsible for both these things. Are they the key men of the economy?
    Even if we accept the argument that Surtax cuts provide an incentive, we cannot divorce the incentive from the social structure of the economy. We are building up a social structure which year by year is becoming more irresponsible and irrelevant; the problems we are faced with in giving more incentive to work harder and give the boost to the economy that the Financial Secretary was talking about.
    11.0 p.m.
    We read in the Press a week or two ago that skilled shipbuilding workers were leaving the Clyde to seek employment in Hamburg because our British shipbuilding industry—despite the injection of £18 million public money into it—cannot organise itself with sufficient intelligence and efficiency to provide work for those skilled men. We are losing them because there is no work for them here.
    But we are bringing skilled men and skilled organisers into the country, because we read at the same time that the Ministry of Labour was granting labour permits to bring over distinguished Frenchmen, skilled in their trade—croupiers—for the establishment of gambling saloons in this country. That is our system of priorities. We are running down one of our industries providing employment for skilled men and building up another. If we provide by the Clause incentives to people to do more gambling—I am not referring to the Stock Exchange or anything like that; I am talking about the new gambling industry which has been set up, not the old—is the Chancellor really going to say that his proposal will increase
    1240
    our exports, production and investments, make the country more dynamic, and increase the application of scientific discovery to industry? Of course it will not. The whole thing is humbug.
    While I am on incentives, I will mention the extraordinary thing unearthed in a debate earlier today, namely, the problem of the retrospective incentives under Schedule D. The right hon. and learned Gentleman told us in the Budget speech that he was sorry but he could not apply it this year. He said that it had to apply the following year because incentives must relate to the future and, therefore, income earned in 1961–62 will begin to qualify for the relief the following year.
    We pointed out that the very substantial number of Surtax payers who are assessed under Schedule D, who include all those who make profits from a trade or profession—many professional men, traders and others, and many people who can already do very well out of tax avoidance—will be getting this enormous tax relief on income they earned last year. The right hon. and learned Gentleman has been trying to maintain the extraordinary proposition that incentives under Schedule D can be retrospective in character.
    We therefore asked what the Chancellor thinks the Clause will do to increase investment in industry, to increase the use of science, to get the economy off the ground, and to overcome stagnation. If the Chancellor of the Exchequer really believes that the Clause will get Britain's economy off the ground and into the rhythm of steady expansion by an internal tax redistribution of this kind, it is rather like thinking that he can hoist himself into space by jacking up his own braces. That is the appropriate analogy.
    We intend that the Clause shall be fully debated. We deliberately restricted the number of Amendments we tabled. It is obvious that we could have tabled 100 Amendments to the Clause. We could have attempted to temper its effects and make it a little more socially just. It is fundamentally an unjust Clause and an economic irrelevance. For that reason, we shall vote against it in the Lobby tonight. I hope that my hon. Friends will not be backward in

    1241
    expressing their views on the relevance of the Clause, not only to the present state of the economy, but to the social measures introduced by the Government earlier this year.
    Mr. William Hamilton: I can understand the reluctance of some of my hon. Friends. They are due to come on at twelve o'clock, or at one or two o'clock in the morning. Therefore, I want to step into the breach. Whatever case can be made out for the relief of Surtax payers, it cannot possibly be sustained in the context of our national economy at this time. The context which the right hon. and learned Gentleman outlined in his Budget speech was that of an economy with inflationary tendencies and one in which prices were likely to rise. We have had some indications of price rises in recent days, with rises in the price of tobacco and bread, and with increases in rents and rates. These are all tendencies which the right hon. and learned Gentleman said he feared. Our production is lagging behind that of our competitors. Our exports are likewise lagging behind those of our international competitors. The Chancellor's share, as the Daily Mail expressed in an editorial article on 18th April, was to cut spending, although without cutting too deeply into home prosperity. This article said he had cut spending already but had also put a nice bit back into the pockets and the bank accounts of the Surtax payers.
    I want tonight to examine why this concession is possible, what are the reasons for it, and why it has been introduced at this particular time. It is possible, as my right hon. Friend has just said, by having taken cash from the blind man's hat. That is what has happened, because in recent months money has been taken from the sick, the old and the lower paid workers; and it is now being put into the hands of people who we think already have far too much.
    When I think of the Financial Secretary to the Treasury—who gets far more compliments than he deserves—I recall what he said during the Second Reading of the National Health Service Contributions Bill last February. He then said:
    "…I am sure that the Government have been right to show at the earliest possible moment that they were fully prepared, without delay, to take unpopular measures in order to
    1242
    leave room in our economy for those other demands on our national resources—exports, capital investment, and so on—which are so vital to our national well-being."—[OFFICIAL REPORT, 15th February, 1961; Vol. 634, c. 1423.]
    That was the quotation to which I think my right hon. Friend referred in that debate when he said we feared that those impositions on the lower-paid workers and the sick were the forerunner of the pay-off in this particular Clause. Later on we shall be discussing the pay-roll tax, but this is the pay-off tax. We say that the way was prepared in that earlier Bill, introduced by the Minister of Health, and let me in passing say that he will be one of those who will benefit from these Surtax proposals. Is his production going up as a result of these concessions? Is he going to bring in another Bill to justify the concessions he has got? God forbid. But it is in that sort of context that we are discussing this matter tonight.
    The Guardian stated recently that it wondered what were the Government's motives in imposing these charges. If, as my right hon. Friend says, the objective was to make way for a direct cut in taxation, there would rapidly be a first class political row. How right that is. How right it is that we should have this all-night and, I hope, all-to-morrow morning debate.
    An hon. Member: There is an Adjournment Motion.
    Mr. Hamilton: There will be no Adjournment debate before to-morrow afternoon. I hope my hon. Friend has backed a loser.
    Mr. R. J. Mellish: I am on a winner when I get to it.
    Mr. Hamilton: When this proposition was put forward in the Budget debates that this concession to the Surtax payers was being paid for from money got previously through the National Health Service Contributions Bill, the Government spokesmen said that we were quite wrong. They said they were proposing a 2½ per cent. increase in Profits Tax and that that took account of the Surtax proposals. But, of course, it does nothing of the kind.
    But it does nothing of the kind. The Profits Tax increase will bring in £70 million in a full year and this Surtax concession will cost £83 million in a full

    1243
    year, which means that there is a discrepancy of £13 million. But even if we accept that proposition, we should infinitely have preferred a capital gains tax. I admit that had there been a capital gains tax the attitude of many hon. Members on this side of the Committee might have been tempered somewhat towards the Surtax proposals—had the one been paid for by the other.
    When he defended that charge the Financial Secretary to the Treasury commented on the fairness of the editorial of the Guardian and said that it was a sensible non-political approach to the problem. But the Guardian also said:
    "This Budget will place Mr. Lloyd in the centre of political controversy. The big concessions that he has made to Surtax payers, unmatched by any reliefs to those at the lower end of the income scale, lay him wide open to attack from the left. For the first time since the Conservatives took office in 1951 a Chancellor of the Exchequer has chosen to move sharply against the strong current of opinion in favour of greater social equality."
    That is our complaint. One cannot divorce these concessions from the social context in which they are made. What are the purposes? I have read the reports of the debates both on the Budget and on the Second Reading of this Bill, and the variety of the reasons advanced by hon. Members opposite is astonishing. Some of them are quite blatantly contradictory. May I take the example of the Financial Secretary to the Treasury? He referred to a speech by my hon. Friend the Member for Jarrow (Mr. Ferneyhough) about the priorities to which a civilised community ought to have regard—maintaining minimum standards of social welfare, for example. The Financial Secretary said:
    "…when I consider the rising curve, in real terms of expenditure on National Assistance in recent years, I cannot help thinking that Britain today comes off fairly well by this test."—[OFFICIAL REPORT, 20th April, 1961; Vol. 638, c. 1422.]
    In other words, he said that we are doing very well by the people who are drawing lavish amounts of National Assistance and therefore we should not begrudge £83 million in Surtax concessions to 300,000 people in the top income brackets. This seems to me to be an uncivilised argument for him to use, although no doubt he produced it
    1244
    in very civilised terms from the Front Bench. He is a great expert at that, and we have many similar experts on the Government Front Bench.
    He, too, referred to the Guardian editorial in quite approving terms. But he should remember that that editorial said that it would have been far better—as I have said tonight—if this proposal had been coupled with a capital gains tax, and it also referred to the trend away from greater social equality.
    On the other hand, the hon. Member for Scarborough and Whitby (Sir A. Spearman) did not attempt to defend the concessions on social grounds. He said:
    "…my right hon. and learned Friend seems to be striking at poverty rather than at inequality. I do not believe that the nation as a whole minds very much.…"—[OFFICIAL REPORT, 4th May, 1961; Vol. 639, c. 1693–94.]
    I am not sure what he meant by that, unless it was that the Surtax payers were poverty stricken and he was taking the Chancellor's words at their face value when he referred to the "pauper on £5,000 a year."
    11.15 p.m.
    The hon. Member for the Isle of Ely (Sir H. Legge-Bourke) was much franker. He did not defend the concession on social grounds at all. He said during the Second Reading debate of this Bill:
    "I think that there is a genuine feeling among some hon. Gentlemen opposite that the principal object of a Budget is to do social justice, and therefore, because that is the principal object of a Budget, it must also be the object of a subsequent Finance Bill. There are other hon. Members—and I count myself as one of them—who believe that the purpose of a Budget and of the subsequent Finance Bill is totally different."—[OFFICIAL REPORT, 4th May, 1961; Vol. 639, c. 1706.]
    In other words, he was saying that the Budget has nothing to do with social justice at all.
    But the President of the Board of Trade does not agree. He used the words quoted by my right hon. Friend, that this was an act of social justice that was, if anything, overdue. Does he still adhere to that view? Does he still think that this is an act of social justice? Does he also say that it was an act of social justice to charge 2s. an item for prescriptions and to increase the National Health contribution by 10d. a week to the man earning £8 a week? Does he say that they are

    1245
    acts of social justice? I should like him to say. Why does he not do so? He does not answer, and I am not surprised.
    The Economic Secretary to the Treasury did not use this argument about social justice. He said:
    "It is a Budget of resolute purpose…it is to contain inflation, to moderate the growth of home demand…."—[OFFICIAL REPORT, 19th April, 1961; Vol. 638, c. 1178.]
    —but not the home demand of the Surtax payers. It is the home demand of other people—people from whom the Government take £49 million in increased National Health contributions. These are the people who have got to restrict their demand. The Government take £53 million from them and give £83 million to the Surtax payers. That is why they are restricting home demand.
    This argument of social justice has not been used today by any hon. Member, as far as I recollect. The great argument today, and one of the arguments of the Chancellor, was that of incentives. That is the thing—give these fellows something to work for. That was supported by the hon. Member for Louth (Mr. C. Osborne), one of the biggest droppers of bricks in this House—[HON. MEMBERS: "Oh."]—well, excluding the Government Front Bench. The hon. Member for Louth used these words, quoting from a Soviet document:
    "'Those who do more for society get more in return.' That is the best defence that I have found for what the Chancellor is doing in his Surtax proposals."—[OFFICIAL REPORT, 20th April, 1961; Vol. 63, c. 1474.]
    As he said that I looked at the benches opposite where a lot of the beneficiaries sit and I thought to myself, "If these are the fellows who are doing most for the country, then God help the country." I recall that one of them is the hon. Member for Wimbledon (Sir C. Black); he is one of the prime beneficiaries of this concession, and there are many more like him. He has never put in an appearance today. There has been no increased production from him as a result of these reliefs. Very few of them have been here. One would have expected the Chamber to be packed with the beneficiaries. Not a bit. They are on the trains back to Woking.
    There are those who will benefit but whose production I do not want to increase. I include the lawyers among them. The Chancellor will appreciate
    1246
    that point. I want their production to be completely stultified. The multiple director will benefit. I have mentioned one, the hon. Member for Wimbledon, and there are many more on the benches opposite—most of them in their positions not by any test of intelligence but as a result of their social standing, by being born in the right bed. The test is not one of ability.
    The idea of giving incentives to the people who matter was contradicted somewhat by a great expert on that side of the Committee, who also will benefit from these concessions, the hon. Member for Portsmouth, Langstone (Mr. Stevens). He has not put in an appearance today. The hon. Gentleman said, referring to the argument about disincentives,
    "On this side, we are inclined to exaggerate the effect from time to time."—[OFFICIAL REPORT, 18th April, 1961; Vol. 638, c. 1045]
    Obviously, the hon. Gentleman had been reading the Report of the Royal Commission. That is precisely what the Royal Commission said. There is no evidence to suggest that high taxation is a disincentive to increased production. I go further and say that it is probably more true of professional people than of any others that they take a pride in their work out of all proportion to the material benefits they receive. I know of doctors, consultants and others working in our hospitals who seem to pay no regard to their earnings. I was talking to a consultant in a maternity home in my constituency a few months ago who had been working for eight weeks solidly without as much as a half-day off. I am certain that he is in the Surtax range. What regard has he for these Surtax reliefs? What regard have people like that for what is in this Clause?—none whatever. The argument about the materialistic approach of these professional people is an insult to them. In any case, assuming that we are all motivated by base calculations of material reward, why single out 300,000 for this huge concession?
    The economic problems we face in production and exports are national problems to be solved by a united nation, by team work. In my view, the Government's Surtax concessions go a very long way to destroying that possibility. The Daily Sketch, a paper I do not usually read—no one on this side will blame

    1247
    me for that—in an editorial on 18th April said:
    "Mr. Lloyd's Budget emphasises the division of our working population into two groups, not the old-fashioned landlords and peasants but a potentially more dangerous division. On the one hand, he sees the wage earners who have no direct responsibility for the development of the enterprises which employ them. They draw their weekly pay packets, accept the deductions of P.A.Y.E., and are untouched by Schedule D assessments, expense accounts and capital gains. On the other hand, he sees the policy makers of industry, the managers, the scientists, the salesmen. These are the only people, Mr. Lloyd implies, upon whom Britain's development entirely depends. It is not simply that surtax payers get an incentive bonus and the average wage-earner gets nothing from the Budget. On the evidence of his own pessimistic report, it is a wonder Mr. Lloyd gave anything to anyone. The disturbing feature is his obsession with manipulating and controlling business as if that were the only source of our power and effort. As if nobody else requires enlisting when there is a need to boost the national effort."
    That attitude is summed up in the never-to-be-forgotten remarks of the Chancellor himself—that this miserable fellow on £5,000 a year gross is not rich and cannot educate his children and save. On that assumption we are a more illiterate nation than Nicaragua. The Chancellor says, "You fellows have to come up to date. You do not know the problems of these people on £5,000 a year." Let him come and live with me for a week and I will show him how to live on a fraction of £5,000 a year. The right hon. and learned Gentleman does not know how the ordinary people live. He has not a clue.
    In the same part of that immortal speech the right hon. and learned Gentleman asserted that we were out of touch and out of date—as out of date as he himself was in his rôle at Suez. Indeed, this is the mentality of Suez carried into the domestic economic front, a harking back to the gross inequalities and the imperialist jingoism of the nineteenth century. [Interruption.] If the hon. Gentleman has something to say, perhaps he would care to get to his feet and repeat it.
    Mr. William Yates: I am sorry. I was asking the hon. Member to throw a double-six.
    Mr. Hamilton: The hon. Gentleman had better go to sleep again. His contribution
    1248
    will be much more appreciated at the bar than it is here.
    Having talked about incentives and hardship to the £5,000 a year man, the Chancellor has sought to defend his proposal on moral grounds. Recently we have had rumours that he has been converted to a movement called Moral Rearmament. It would be interesting to know whether his conversion occurred before or after his Surtax proposals. I see the Chancellor shaking his head, but some of his hon. Friends are very concerned about this—and they have a jolly good right to be. We should like to know when his conversion took place because it is certainly probable that his proposals will help the financiers of that dubious organisation and replenish its coffers somewhat. There is no doubt about that.
    11.30 p.m.
    The Chancellor went on to talk about the incentives to many people in the managerial and professional classes who are now suffering from a substantial disincentive. Did he ever consider this proposition before he formulated this Clause? There are in the United Kingdom roughly as many teachers as there are Surtax payers. Which is the more important section—the 300,000 Surtax payers or the 300,000 teachers? He knows as well as we do that the negotiations on teachers' salaries have reached ignition point. He knows that for the first time in the history of their profession the teachers are threatening strike action. Why? It is because the Treasury has imposed an upper limit of £50 million a year on their wage increase, or just over half of what is being given to the Surtax payers in a full year. Does he regard the disincentive to the teachers as being a more important and vital thing than the disincentive to the 300,000 Surtax payers?
    What about the miners? There are about 650,000 of them. Of what use would be the managers and the scientists and all the people about whom the right hon. and learned Gentleman is so concerned if we did not have the coal? But if those miners had put in a wage claim for a flat-rate increase of about £2 a week, which would make a total wage demand of about £70 million a year, I can imagine the fury that would have

    1249
    been generated on that side of the Committee about the inflationary tendencies and the wicked irresponsibility of the claim.
    One could mention innumerable classes of people whose case is infinitely more deserving, socially and economically, than that of the 300,000 Surtax payers who are now being helped—social welfare workers, nurses, firemen, old-age pensioners. One could go on almost endlessly, and the more one considers the possible alternative uses of this money the more one is appalled by the Government's criminal folly and callous effrontery.
    There is, however, one possible explanation for this move that I have not yet heard advanced but which is probably more relevant than many people think. Part of the explanation lies in the internal politics of the Conservative Party. This is the pay-off, designed to satisfy the many and varied dissident elements in the Tory Party; the rebels who are howling for the blood, for instance, of the Colonial Secretary over Africa; the rebels who are screaming for more flogging, for more capital punishment, for more imprisonment; the rebels who have for years been bleating about Schedule A; who have been bleating for free drugs for private patients, for the shutting of doors to coloured immigrants from the Commonwealth.
    These people have found themselves on the barren ground. Their bloodcurdling yells have, as yet, had no effect. Their thirst for blood has been slaked by gold. That is part of the explanation of the Clause—the buying-off of the dissident elements in the Tory Party. The Chancellor has put himself well into the running to qualify with the Home Secretary for the title of the best Prime Minister we never had. The Surtax proposals are relevant only in that context and understandable only in that context. From the point of view of the national economy they are a monstrous irrelevance. I find that the workers, certainly in my constituency, are angry and cynical about the whole affair.
    In a short while we will have debates on the Floor of the House about Scottish affairs—a sign that the Ascot season is with us. We will see the top-hatted Surtax beneficiaries parading at Ascot, increasing their productivities, solving
    1250
    the nation's difficulties and the Chancellor saying, "You have to get your priorities right; you have to come up to modern thinking; you have to face the facts of life and realise that these poor top-hatted fellows at Ascot on their £5,000-a-year pittance have to get £83 million a year out of the old-age pensioners, out of the chronic sick, out of the £8-a-week and £10-a-week workers."
    Those are the priorities, and they are worse than the priorities of darkest Africa. The right hon. and learned Gentleman should now seek to join Mau Mau. The priorities of Mau Mau are more civilised than these. The right hon. and learned Gentleman ought to be ashamed of himself and ought to go and bury his head—and this Bill with it.
    Mr. Denis Howell: I congratulate my hon. Friend the Member for Fife, West (Mr. W. Hamilton) on the eloquent way in which he has put the Opposition's social priorities on so many fronts.
    One of the aspects of the economic state of the country which worries some of us is the continued desire to elevate the usurer, the wide boy, the spivs of our society to a position out of all proportion to their service to society and, conversely, at the same time to relegate the dedicated, those in the public service as compared with those with private interests. This is an extremely important piece of social philosophy, for the Budget carries this process one step further.
    Many people in the public sector of our national life are dedicated—teachers, those in the hospital service, nurses, doctors, those in the local authority services, firemen, policemen, public health inspectors. But there is a growing resentment and cynicism among those people about the lack of priorities which the Government give to them and which is badly contrasted by the priorities given to the Surtax payers and others making considerable sums of money. I would draw the attention of the Committee at this stage in particular to the incentive argument and to the hon. Member for Carlton (Sir K. Pickthorn), who reposes on the back bench on the opposite side of the Committee. No doubt the Committee will note the added incentive the Surtax concession has for him. It does not make him add a much more intelligent part to our affairs.
    Mr. H. Wilson: My hon. Friend must understand that that hon. Member has to be at a Woking Station at a very early hour of the morning.
    Sir Kenneth Pickthorn: Would the right hon. Gentleman kindly repeat his words, which were the only ones I have not heard in this debate so far? Would he kindly tell me?
    Mr. Howell: Would the hon. Member kindly repeat his words?
    Sir K. Pickthorn: I always do my best to keep my eyes, if not my ears, from the hon. Member.
    Mr. Howell: At any rate, I am glad to know that the hon. Member is with us on occasions.
    The point I was making was that it is an extremely critical commentary upon the philosophy of this Government that when money is wanted by people in the public service doing a dedicated job, doing work on behalf of the health of the community, it is virtually impossible to get that money; as also it is to contrast that extreme difficulty with the readiness with which the Government make Surtax concessions available.
    Think for a moment, for instance, of the nursing profession. Those of us who are engaged at all in work of a voluntary nature for the Health Service and hospitals are very worried about the intake of people of good quality into the Health Service—as we are very worried, too, about the intake of people of quality into the education service. When we think of the care of our sick, of the development of the characters of the youth of our country—
    Mr. A. R. Wise: Would the hon. Member like to tell the Committee how many rises in pay the nursing profession have had since the Conservative Government got in?
    Mrs. Harriet Slater: What a shocking wage it was—and is.
    Mr. Howell: As chairman of one of the largest hospitals in Birmingham, I would say that everybody in the hospital service, irrespective of political belief, is extremely worried about the future of the Health Service and about caring for the sick. In Birmingham we are exteremely
    1252
    worried indeed about what incentive we are going to have to get people who are not in the Surtax grade to look after the sick in the future.
    The point I am making is that, irrespective of the number of increases which nurses have had under the Conservative Administration since 1951, the undeniable fact is that there are fewer people entering the nursing profession today than for many years past.
    Hon. Members: Oh.
    Mrs. Slater: Yes. And is it not true that if it were not for the very high unemployment in Ireland we should be without many of the nurses coming here?
    Mr. Howell: I was not going to say that, but it is absolutely true and an interesting commentary upon other things, too, and upon what we get from the other side of the Committee, that if it were not for immigrant labour of one sort and another the whole of the hospital service of this country would have collapsed long ago. [HON. MEMBERS: "Nonsense"] These are facts of life. In response to the interjection of the hon. Member for The Wrekin (Mr. W. Yates), who said this would make me very happy, it does not make me happy at all. Those who have the job of trying to run the Health Service and are concerned about the future of the hospital service, anybody who has any experience of hospital administration, is extremely worried about the future and about what is going to happen. I happen to be the chairman of a Birmingham general hospital with 1,000 beds. Conditions are very bad there. In none of our wards at the moment—wards which should have no more than 28 patients each—are there less than 36 patients, and very often 38 or even 40. How can we expect young dedicated girls to nurse 38 or 40 patients, many of whom are in a very serious condition? I am talking of the Dudley Road Hospital, Birmingham.
    11.45 p.m.
    If the hon. Member for Dorset, South (Viscount Hinchingbrooke) wants to say something intelligent for a change I am willing to give way.
    Mr. John McCann: He is asleep.
    Mr. Howell: What he says when he is asleep might be more enlightening than what he says when he is awake. We are extremely concerned to know how we can get people into the public service. I have illustrated this fact by talking about the hospital and nursing service, but it applies throughout the public service. What sort of impression is made upon these young girls who are doing magnificent work—working for twenty-four hours at a time and nursing up to 40 people at a time—when they find they are expected to pay more in National Health contributions and when their friends and patients whom they have managed to nurse back to health have to pay additional prescription charges when they return to society?
    Mr. Wise: Is it possible to relate the distressing conditions in this hospital in Birmingham—of which the hon. Member is chairman—to the terms of the Clause?
    The Chairman (Sir Gordon Touche): The hon. Member is entitled to point it out, but he must not go too far into the question of the conditions in hospitals on the Question "That the Clause stand part of the Bill".
    Mr. Howell: It would be wrong to burden the Committee at this or any other time with the detailed problems of the Dudley Road Hospital when we are discussing the Question "That the Clause stand part of the Bill", but it is pertinent to point out the way in which the philosophy of making money available to Surtax payers which should be made available to people in the public service is undermining the whole structure of that service. It is indicative of the very outdated, Victorian social philosophy which we are now discussing. There is tremendous resentment throughout the National Health Service at the fact that the Government have got their priorities entirely wrong.
    Lest the hon. Member for Rugby (Mr. Wise) should think that I have an undue influence on the situation at the Dudley Road Hospital—not entirely a beneficial influence to judge from his remarks about the distressing situation there—I hasten to add that, although I happen to be the chairman, there is a Conservative majority. But we would all agree that the important factor which we have to consider is the problem of getting
    1254
    more nurses into the nursing service. This is bound up with the question of of the kind of rewards that should be given in our society. Are we in Budget after Budget to say to the best of the people coming from our schools, and even universities, that the rewards that society has to offer them can best be found in private industry and not in the public service? This is what the Government are continually saying. If people want to do themselves well in financial terms, if they want £5,000 a year or more in order to bring up their children, they ought not to go into the public sector of industry.
    It is true also of the teaching profession. We are extremely worried that the whole future of the youth of the country is in the hands of people who feel that they are dedicated and doing a first-class job but that their activities are not appreciated and recognised in the most important way in which the community can recognise such service, and that is by financial reward. When the Secretary of State for Scotland is resisting claims for increased salaries for teachers, when local authorities have to contend with the block grant system which so adversely affects local government, can we wonder at the tremendous resentment in the teaching profession over the disparity of treatment as between their pay and the financial rewards for Surtax payers who are the only beneficiaries from this Budget?
    These are matters of great concern to us all. If we serve as members of local authorities, or as governors of schools or on hospital management committees, we must agree, if we are honest, that there is tremendous resentment felt by people who consider that they are giving valuable service and who see all the time the monetary rewards going to the "spivs", the "drones" and the "wide boys" who are continually encouraged by hon. Members opposite.
    We have heard a lot about incentives, and there would be something to be said for these proposals if they did provide incentives for business men. We should be concerned about the fact that so many business men do not seem to have any idea about how to make either themselves or their business more efficient. [Laughter.] Hon. Members opposite may laugh, but the fact is that there are

    1255
    far too many businesses in this country, particularly smaller businesses, and, I am sorry to say, some family businesses, where the desire of the people at the top is to take a certain amount from the business each year. So long as they can get the £2,000, £3,000 or £4,000, or whatever the figure may be, from the business they do not care a hoot whether the business is modernised or efficient or whether they increase the sale of their products.
    As an industrial nation, one of our greatest difficulties in the future will be caused by the apathetic attitude of some business men who are not blazing a trail round the world selling British goods as they ought to be and securing a greater share of the markets abroad. But, irrespective of their efficiency or lack of it, they will receive the incentives provided in this Clause. It is wrong that people in the Surtax bracket should be helped irrespective of their business efficiency. This blanket method of helping Surtax payers is entirely parallel with the general provision of incentives in industry and the increasing of efficiency in industry.
    The people I have been talking about in the public services, dedicated folk who have not had the opportunity to amass great wealth, are very bitter indeed about those who can make tremendous capital gains entirely tax free. People who have been in teaching all their working lives, or in local government or the health services, have not had an opportunity to make capital gains, but they see the Government continually refusing to tax those who have made such gains while at the same time making it difficult for capital to be found for an improvement of the public services. This is another commentary on the policy of the Government, and the reason why we should object strongly to this Clause.
    Above all, I found in the Small Heath by-election, which I contested, a tremendous resentment among the working-class and the middle-class that the priorities of this Government were stated in such a way that Surtax payers could be given vast reliefs at the very moment when the old folk were denied and the sick were penalised. What sort of a society is it that in these times of difficulty the Government should deny the old people and penalise the sick yet three
    1256
    months later should make vast Surtax concessions of this sort? Consider the plight of the old. Time after time they complained to me in Small Heath, not only that they had to wait for six months to receive the miserable 7s. 6d. rise in their pension—they had to wait all through the winter—but when they got it they found they were worse off because 4s. 6d. was taken off the National Assistance payment. A 7s. 6d. increase was given with one hand and 4s. 6d. was taken away with the other. These are the facts of life. I do not know what the hon. Member opposite is saying.
    Mr. W. Yates: I was saying that exactly the same proposition applied when the Labour Government were in power.
    Mr. Jay: That shows how ignorant the hon. Member is of the facts, because when the old-age pension was raised in 1951 the National Assistance rates were raised by the same amount.
    Mr. Yates: The hon. Member may have that.
    Mr. Howell: The hon. Member has withdrawn his interjection and I can pass on. Even if what he said was true, we have had ten years of Conservatism—do we not know it! We must never forget that 1961, the year when the Surtax payer can be relieved of tax on an income of £5,000 a year, is the same year in which the old-age pensioner, the worst off member of our society, had a 7s. 6d. increase from which 4s. 6d. was deducted as a result of the deduction in the National Assistance rate. Are hon. Members opposite pleased at that comparison? Do they think when they try to boost the moral basis of our country that those are the sort of facts on which we should base our expansion?
    It has been suggested that the Chancellor of the Exchequer has gone over to M.R.A. I do not know if he has, but if so, it may have the beneficial result that we shall have absolute honesty. If we are to have a Chancellor wedded to the philosophy of absolute honesty, we may get rather more intelligent and revealing answers in future debates than we have had from him in past debates. Whatever we may think of M.R.A., if the Chancellor supports the tenets of

    1257
    absolute honesty and is a man of personal integrity, he will no doubt be able to tell us exactly how he reconciles giving Surtax concessions on this scale whilst at the same time reducing National Assistance payments to old-age pensioners receiving National Assistance. This is a social comparison which should be justified by hon. Members opposite.
    12 p.m.
    There are many people who need prescriptions to keep going. One can think of many such cases. We have debated the plight of diabetics many times. They need 5, 6 or 7 items on their prescriptions, and must have them continuously for the rest of their lives. They now have to pay 10s., 12s. or 14s. every time they take a prescription to a chemist's shop. This is the comparison which people make. It is far more revealing than any speeches made on either side of the Committee.
    One of the things for which I was grateful when I fought the Small Heath by-election was that it coincided with an epidemic of measles. It did not require speeches by me to bring home to the constituents the disastrous nature of the Government's policy on the Health Service. They were faced with the disastrous consequences every time they went to the chemist's shop to get the requisite medications.
    Mr. Wise: Does it take measles to make people vote Socialist?
    Mr. Howell: It may not take measles to make people vote Socialist, but at any rate the illnesses which inflict the supporters of our party are of a general physical nature and not of a psychiatric nature. The nature of the Government's policy will be brought home to people day in day out as they take prescriptions to chemists, and therefore they are likely to draw more sensible conclusions at the next general election than they did at the last.
    Other hon. Members want to speak. If the right hon. and learned Gentleman cannot give us replies which are couched in terms of absolute honesty and purity, we can speak again later in the debate. We on this side can all agree that the social philosophy and purpose embodied in the Budget and the Bill reveals now, as it has not been revealed for many years, the tremendous difference in out- 1258
    look and philosophy between the two sides. It reveals the social relevance of the policies of the Labour Party to the social problems of the day. It reveals the complete irrelevance of Tory policies, and this Tory Budget in particular, to the needs of the community, to the needs of society, and to the needs and welfare of individual members of society. For these reasons, I hope that we shall vote against the Clause.
    Sir John Barlow: We have heard so much about the iniquity of this Surtax concession that I want to bring the whole question into relevance and into its right perspective. Let the Committee not forget what this Government have done in the last ten years. They have done a tremendous amount for the lower paid workers. Ten years ago the single person's allowance was £110, but now it is £140. The married man's allowance at that time was £190, but now it is £240. The earned income relief was one-fifth, and now it is two-ninths—[AN HON. MEMBER: "Tell us about National Insurance charges."] The child's allowance was £70, now it is £100. Let us not forget that the standard rate of Income Tax was 9s. 6d. and that it is now 7s. 9d.
    I consider that this Government have repeatedly helped the lower-paid worker, and those of us who are in industry know of the great difficulties which the young, up-and-coming executive, and the middle aged executive, have had.
    Mr. E. G. Willis: On a point of order. Could I ask if it is not the tradition that if an hon. Member has an interest in the matter under discussion he will not be prevented from speaking and voting on that matter but that he must declare an interest?
    The Chairman: Not when it is a general interest shared with the community; only when it is a special interest.
    Sir J. Barlow: I was saying that the present standard rate of Income Tax is 7s. 9d. in the £ whereas ten years ago it was 9s. 6d. which shows clearly that this Government have helped, and rightly helped, the lower-paid people of our community. They helped them first and it is only right that the middle-aged executive should now have some concession.
    Mr. A. V. Hilton: After that brief interjection from the other side, I want also briefly to say that because of the very strong feeling in my constituency I am constrained even at this hour to say a few words by way of registering my protest against the Chancellor's proposal for this so-called incentive concession to the Surtax payers.
    I would make it perfectly clear at the beginning that I am not against incentive concessions. I am in favour of them. What I am against is one-sided incentives. In his Budget speech the Chancellor quite rightly said that he wanted to stimulate and increase production from our industry. We all want to see that achieved, but I must say that the Chancellor has some strange idea that the only way in which he is likely to get that increased production is by giving the higher paid workers—the highly paid salaried people—this big Surtax concession. If anybody is to have an incentive, then surely it should be made generally for all concerned. I can see at least one hon. Member opposite nodding in agreement with me.
    Mr. Loughlin: He is nodding in his sleep.
    Mr. Hilton: No. This was a genuine nod of agreement. There is no question of his being asleep.
    There are two sides to industry—the large majority, the workers, as well as the small minority who are being given this concession. It would not have been so bad if the workers had been ignored, but they are being asked to help to pay for the incentive concessions which the Chancellor is giving his wealthy friends.
    I have reminded the House on many previous occasions that the majority of my constituents are farm workers. They could do with an incentive concession. No worker in this country has a better production record than the British farm worker, and if the Chancellor has some incentive concessions to give, what about giving these workers a little bit of a hand-out. We should not expect it to be on the lavish scale of the concessions to the Surtax payer, but let us spread this gift among all the people concerned with increasing production in this country.
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    May I remind hon. Members that the minimum agricultural wage of the British farm worker is still only £8 9s. for a 46-hour week.
    Mr. Arthur Lewis: Can my hon. Friend describe how the farm worker must be suffering if the poor chap to whom the Chancellor referred finds it hard to manage on £5,000 a year? How does the farm worker manage on £8 a week?
    Mr. Hilton: The question is how does a farm worker, married with one child, manage to live and bring up his family on £8 9s. a week. It is one of the miracles of our modern society. How the farm worker manages to live on that meagre wage is one of the miracles of our time. I do not know how the £5,000-a-year man manages. I have been a farm worker and know what it is to live on a farm worker's wage, but I have never been in the £5,000-a-year group and it is fairly certain that I shall never get there, and I shall never be able to describe to my hon. Friend how they live. The farm workers have to pay for this incentive concession which the Chancellor is generously handing out to his wealthy friends. We have heard a lot today about business expense allowances. Will the Chancellor tell us what expense allowance the British farm worker gets?
    12.15 a.m.
    We are told that business men get quite useful allowances for cars and such things. Nowadays a good many farm workers, despite their low wages, manage to acquire cars—and they are not all secondhand. Surely, in view of their good record of service to this country, nobody would deny that they are entitled to motor cars. But the Chancellor does not give an allowance to the farm worker with a car; he charges him an extra 50s. a year for his car licence. It is a one-way traffic. He helps to find money for incentive concession to Surtax payers.
    We are told that approximately 300,000 people are likely to benefit from this Surtax incentive concession, and I do not think it would be difficult for the Chancellor to tell the Committee how many of those 300,000 are farm workers. However, I doubt whether a farm worker will come into this category.

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    I am sorry that the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) has left the Chamber, though I appreciate that he has been here a long time during this debate. He and other hon. Members opposite took exception to an expression used by my hon. Friend the Member for Gloucester (Mr. Diamond) and one or two other hon. Members on this side of the Committee when they referred to the "greed" of hon. Members opposite. The right hon. and learned Member for Hertfordshire, East was very indignant. I could not understand why he and his hon. Friends were so touchy about it. Is it not a fact that hon. Members opposite are displaying sheer greed in their attitude to this matter? What other interpretation can be put on their altitude?
    After all, the party opposite to a man voted in favour of the increased prescription charges and the increases in the National Health contributions. Those impositions were designed to hit the lowest paid worker, the sick, the poor and the old-aged, and hit them very hard indeed. If any hon. Member opposite has any doubt about how they have hit some of the poorer sections of the community, I should like to quote from a letter received from one of my constituents. This is nothing novel, because there have already been quotations from letters by hon. Members on both sides of the Committee during this debate.
    My constituent writes:
    "As I am a diabetic I have several items to get at regular intervals each item a separate shilling…I also have eye drops so further increases will be a drain on a slender income. Further I have had both legs amputated and am registered as a blind person."
    That unfortunate constituent of mine is being punished to that extent by the action of the Minister of Health, supported by the Chancellor of the Exchequer and the Tory Party.
    Mr. W. Yates: Did the hon. Member advise his constituent what to do?
    Mr. Hilton: Yes, I advised my constituent on what she could do, but, as many of us know—particularly those of us who have had the unfortunate experience ourselves in the past—going to apply for National Assistance is not a pleasant thing to do. That person who wrote this letter to me is one of those proud persons who would prefer to suffer
    1262
    in silence rather than apply for National Assistance.
    Mr. Yates: Did the hon. Member tell his constituent, as was his duty, that we pay taxes so that she could have National Assistance?
    Mr. Hilton: Yes. But many people are still too proud to apply.
    Hon. Members who supported those proposals which are hurting the poor, the sick and the aged will all support the Surtax concessions which, after all, are designed to benefit them. If that is not a case of greed, I should like somebody to tell me what is.
    In a derisory and sarcastic manner, the right hon. and learned Member for Hertfordshire, East said of a brief interjection by my hon. Friend the Member for Burnley (Mr. D. Jones) that it would be recorded in the records of the House for all time. The speeches and votes cast tonight by hon. and right hon. Members opposite also will be recorded for all to see. Not long ago they voted to hurt those least able to bear additional burdens, and tonight they will support this Surtax proposal of which they themselves will be beneficiaries.
    The Financial Secretary and other hon. Members have implied that we on this side are opposed to voluntary savings. Nothing is further from the truth. I should like some guidance from the Government Front Bench. We are desperately anxious to increase savings. Farm workers are desperately anxious to save, but can the Chancellor or one of his Front Bench colleagues tell me how farm workers are to save on their minimum wage of £8 9s. in view of the continued rise in the cost of living and the additional burdens imposed by the Government? The farm worker does not earn enough to participate in the Tory pension scheme, never mind being able to save to any extent.
    Mr. McKay: On this occasion we may be fighting a losing battle. [HON. MEMBERS: "No."] I mean when the voting is announced. One may be defeated at some point, but nevertheless the effect of one's actions may spread abroad and have a natural effect which will lead to victory. On this occasion we want to indicate our views as a Labour Movement about the Government's policy in the Budget.

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    In my younger days I was associated with a group of people who were always preaching the class war. That happened of necessity, because it existed whether one noticed it or not. My political experience in the House tells me that that matter has lain in abeyance for some time. But there has never been a clearer indication of class war than we have in this Budget. Class war on the part of people in authority means to me that they do not use their authority with discretion but their interest will guide them in their judgment. I have no doubt at all that this has been the influence which has brought this Budget into being.
    I used to study the unwritten constitution of Britain. I sometimes wondered what it meant. As I understand it from my political studies, for many years there was a general policy recognised by our Governments, and there was an unwritten principle, which was nevertheless recognised, in the constitution. In relation to taxation, I understood the unwritten constitution to mean that the Governments of the day recognised the principle that when they could give relief to our citizens—
    12.30 a.m.
    Mr. Diamond: On a point of order, Sir Norman. I am sorry to interrupt my hon. Friend, but I am very worried about the safety of an hon. Member. Just before you occupied the Chair, Sir Norman, an hon. Member opposite attempted to catch the eye of the Chair in order to make a speech in this very important debate. Immediately after that a Government Whip seemed to me to go round to the hon. Member and escort him from the Chamber. The Whip has returned; the hon. Member—I think it is the hon. Member for Rugby (Mr. Wise)—has not. As I am anxious about the safety of the hon. Member, could we have the assurance of the Whip that no harm has come to his hon. Friend for trying to take part in this debate and that the hon. Member will be allowed to try to catch your eye in the ordinary course?
    The Temporary Chairman (Sir Norman Hulbert): That does not seem to me to be a matter for the Chair.
    Mr. Jay: Further to that point of order, Sir Norman. It is surely a serious
    1264
    matter if the Whips are using forcible means of some kind, with which we on this side are not familiar, in order not only to prevent hon. Members opposite speaking in support of the Government but to prevent them being in the Chamber. If the Whip concerned is, in fact, present in the Chamber, it should be possible for him to explain what has happened.
    The Temporary Chairman: I am sure that the right hon. Gentleman is well aware that no hon. Member is obliged to obey any instructions coming from another hon. Member.
    Mr. McKay: I was dealing with the written and the unwritten constitution, and I do not think that the interruption has helped me very much. As I was saying, I understood the generally accepted position to be that when the Government of the day were in such a favourable position that they could help the citizens the relief was not confined to any one section of the community but was spread around. It was certainly generally accepted that the richest section of the community would not get the lot while the rest got nothing.
    The present Government have broken the unwritten constitution. A Government can do many things—some of them good. They can lead democracy progressively, or they can lead the people astray. It cannot be disputed that for ten years the Tory Government—
    The Temporary Chairman: Order. The hon. Member must keep closer to the Clause.
    Mr. McKay: At the moment, Sir Norman, you cannot see exactly what I am driving at, but my whole argument is designed to clear the air so that people can understand what is involved.
    To all intents and purposes, this Clause is the Budget. All the other provisions are flimsy and of little importance compared with this. Whatever the differences between us, it will be agreed that it is most important that in attempting to satisfy their supporters the Government should never go to the extreme of showing what an impartial examination would say was favouritism towards one section of the community, especially if that section is rich and influential.

    1265
    When the Government go to that extreme with a tremendous sum like £83 million, if democracy is alive and the trade unions and workers generally realise what has been done—
    The Temporary Chairman: Order. Clause 11 deals with Surtax and reliefs for earned income. I ask the hon. Member to keep nearer to that than he is doing at the moment.
    Mr. McKay: I will come more directly to the point.
    There is a possibility that when the workers of the country realise what is being done by this Clause, when it has been fully ventilated in the workshops and in the trade union congresses, class war will be roused among the other sections of the community. The Clause encourages that kind of thing. To my mind, the policy of the Government in the Budget and the Bill and this Clause particularly is such that there is a danger lying there of effects—perhaps after effects, perhaps immediate effects, but effects which will be felt, soon may be, in a month or two, perhaps—which will not be good for the country at large.
    Let us draw upon the experience we have had in this Committee and in the House. Not for one year, or two years, but for many years now we have heard a tremendous number of moans about the Surtax in particular and about taxation in general. I have listened both here and outside to learn what the attitude of the country at large is towards it, and I can tell the Committee that the loudest moans I have heard for years have been in this Chamber—and from the Government side of it. Hon. Members of the Government have been saying the Surtax payer has been handicapped and that there is an element in the situation—at any rate, before the Budget—which bears exceptionally heavily upon him.
    Have we a right conception of the Surtax payers? If we compare them with the rest of the community do we get the impression that they are hard hit?
    Mrs. Slater: That is what they say.
    Mr. McKay: Are they so uncomfortable? Do they feel so keenly the sacrifices they are making? Is their position such that they cannot do for
    1266
    the country as much as they otherwise could?
    Hon. Members opposite have been answering those questions affirmatively for years, and at last they got the Chancellor and his colleagues to conclude that there must be something in this complaint, that there must be something in this moaning and groaning of the Surtax payers, continued so long and so persistently. With the great intelligence those people have they have propounded their viewpoint strongly, certainly as strongly as possible. At last, after several years, the high officers of the Government have produced this Clause, giving relief to the Surtax payers, largely on the ground that they are badly hit as compared with the rest of the community.
    12.45 a.m.
    The general principle of taxation that has hitherto existed in this country is that after giving personal allowances to various sections of our people and after drawing in the taxation, if there is any money left over from Government expenditure it is used to relieve subsequent taxation in general. How much tax did the ordinary worker pay in 1938–39?
    The Temporary Chairman: I have asked the hon. Member on three occasions to keep to the terms of the Clause and not range over the whole taxation system.
    Mr. Hilton: On a point of order. Earlier in our discussions the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) devoted the major part of his speech to this sort of thing. Surely it is only right that my hon. Friend should be able to reply in a similar way.
    The Temporary Chairman: I am in the Chair now. I am concerned only with what is in the Clause.
    Mr. McKay: I was coming to the situation of the Surtax payer. We cannot discuss this question in isolation. The Government have not only to discuss the matter of relief to Surtax payers; they have to justify the action they are taking. They are breaking away from the practice which has become acknowledged in our Constitution—that reliefs should be divided fairly and squarely amongst the citizens.

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    In 1939 the ordinary worker paid no tax. but now he pays 5s., 6s., 7s., and even 7s. 9d. in the £. If the Surtax payers are entitled to grumble and grouse because they are having to pay more tax because they are getting more money, surely the millions of ordinary workers are entitled to grumble and grouse even more at the change that has come over the situation since 1939. The taxation principle which has worked regularly in the past is that when a citizen, whether he pays Surtax or otherwise, receives more money he is more highly taxed—
    The Temporary Chairman: I shall have to ask the hon. Member to resume his seat if he continues to range over the whole of the tax system.
    Mr. Loughlin: May I put a point of order on the question of making comparisons with industrial and other taxpayers in relation to the provisions of this Clause and the relief which is given to Surtax payers? It is point which I want to deal with if I am lucky enough to catch your eye, Sir Norman. It is the argument of the Government that Surtax relief has been given on the grounds that it is an incentive. Therefore, it is possible to argue that there ought to be incentives to other people who are equally important to the economy but do not earn as much. That is the point which my hon. Friend the Member for Wallsend (Mr. McKay) is making.
    Mr. McKay: The point is this—
    The Temporary Chairman: The hon. Member may argue any matter relating to the Clause, but it is not in order to raise any other taxation questions.
    Mr. Jay: Presumably it is in order for my hon. Friend to give reasons why the Government should not take the action which is proposed in this Clause? That is what I understood him to be doing, and surely that is in order.
    The Temporary Chairman: So long as the hon. Member relates his argument to the Clause it is in order, but as I understand his speech he has not been so doing.
    Mr. McKay: I do not want to go into too much detail. I want hon. Members to try to understand this problem. I was
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    under the impression that when an hon. Member was considering the question of relief to Surtax payers he was bound to consider the whole history of taxation and to consider whether the workers were paying more or less than the Surtax payers.
    Since the workers began to pay Income Tax the amount has been increasing year after year, because their incomes have been increasing. The same principle applies to the Surtax payers. They start at 2s. in the £ on the first £1,000 after £2,000. As they get more money the tax increases. A comparison between the situation of the Surtax payer and the worker reveals that on the average the worker pays more on the money on which he is taxed. I have taken the trouble to work this out. Surely this is a matter of interest and a matter which appertains to this Clause? This is what I have been trying to come to all this time. Of course, it has taken a long time, but to give a logical, educational explanation of the history of the situation it is useful to get some preliminary things over. Having got the preliminaries over, I want to come to the details. It may bore some hon. Members to hear the details—
    Mr. W. Yates: I have tried to follow the hon. Member since I came back into the Chamber. Could he explain the last bit of his argument again a little slowly?
    Mr. McKay: I shall try. As an example, I take the case of a man who earns £880 a year. That is about £100 above the average. The average earnings are about £15 a week. This is a good worker who has got beyond the average and there is no question that he has done his bit. He has a £20 allowance. He is a married man and pays tax on £429. That is his taxable capacity. On £60 he pays £5 5s. and on the £150 extra he pays at the rate of 4s. 3d., which is £31 17s. 6d. He then pays on another £150 at the rate of 6s. 3d., which is £46 7s. 6d. He has £69 taxable income left on which he pays 7s. 9d. in the £, which is £26 14s. That is £110 14s. paid in tax. In addition to his ordinary taxation, he pays 15s. a week, £39 a year, in National Insurance. That makes a total of £149 14s. 0d. which he has to pay. His average payment on £429 taxable capacity is 6s. 10d. including the July National Insurance payments.

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    1.0 a.m.
    What does the Surtax payer do with all the extra money he gets? Does he pay much more on the average than the ordinary hard working man in the pit or in the factory or on the farm? I am taking the Surtax payer with an income of £8,000. Surtax is paid on £6,000 of that, and the rate increases as the income rises. On the first £1,000 the rate is 2s. 3d., or £112. On the next £1,000 the rate is 3s. 6d., or £175. On the next £1,000 the rate is 4s. 6d., or £225. On the next £1,000 the rate is 5s. 6d., or £275. On the next £2,000 the rate is 6s. 6d., or £650. He thus pays £1,437 Surtax on £6,000. On average he pays nothing like the 6s. 10d. which the wage earners pays on his £880. The Surtax payer pays 4s. 9d. in the £ on the average. I am excluding his Income Tax. [HON. MEMBERS: "Oh".] I am contrasting the treatment accorded to the Surtax payer, rich beyond the dreams of the ordinary wage earner, with that accorded to the wage earner. Is this fair?
    Mr. Peter Tapsell: The figures of Surtax given by the hon. Gentleman must be added to the 7s. 9d. standard rate which the Surtax payer already pays in Income Tax.
    Mr. McKay: I do not see that there is any point in that intervention. So far I have not dealt with Surtax payers with incomes of more than £8,000. Some have £20,000 a year. This man pays Surtax on only part of the £20,000. He pays in reality £7,110 in taxation, and when one averages it out it is found that the Surtax element is such that the £20,000-a-year man pays only 7s. 5d. in the £ on all his taxable income of Income Tax, and Surtax is £7,100 on £19,300. If the ordinary wage earner is raised from his £880 to a higher figure it is found that he pays far more in the £ on taxable income than the Surtax payer pays with his £20,000 a year. I will leave that point for the moment.
    I would like to say finally that when the Opposition gets an explanation such as I have tried to give a little time is needed for the facts to sink in. I do not think that we have ever really gone into the details, which some hon. Members do not understand. There has to be a radical examination of this problem, which takes a tremendous amount
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    of time and some ability; there is some ability needed for this job.
    Let us now go ahead on to the question of the taxation of the ordinary worker and of the rest of the community who are paying Surtax. I would like to make that comparison and to explain to the Committee what are the facts. When the Tory Government was just getting used to its job in 1952 and wondering what it could do to help its friends, it largely believed that it was the people with large incomes who, not only as voters, but as people with a tremendous influence in the financial world and many other circles—
    The Chairman: The hon. Member must please get back to the Clause. I ask him for the last time.
    Mr. McKay: I just want to indicate what the Surtax payers have had in relief since 1952 and until 1961.
    How much has been given in those 10 years in taxation relief to people earning between £5,000 and £20,000 a year? What have they got out of the Government in gifts? In 1952 the £5,000-a-year man paid £2,496 in taxation, and in 1961–62 he will pay £1,401, or £1,095 less than in 1952. The £10,000-a-year man paid £6,546 in 1952 and will pay £4,027 in 1961–62, a relief of £2,519. In 1952 the £20,000-a-year man, who pays Surtax at 10s. in the £, paid £16,071 in taxation, and in 1961–62 he will pay £12,138; in other words, in those ten years he has been given taxation relief to the extent of £3,933. The £30,000-a-year man in 1952 paid £25,821, and in 1961–62 he will pay, according to the Financial Statement, £21,013. In those years he has gained £4,808.
    Let us see what has happened in those nine or ten years to the worker. We can then decide on the facts whether the workers should have some relief to compare with the tremendous relief being given to the Surtax payer. In 1952 the £450-a-year man paid £26. In 1961–62 he will pay £15 7s. 6d. In those nine years he has been relieved to the extent of £10 12s. 6d. The £700-a-year man paid in tax, in 1952–53, £87 18s. 4d. and in 1961–62 he will pay £66 12s. 9d. The amount of the relief is £21 5s. 7d. In other words the small man is given relief at the rate of 4s. 1d. a week between 1952 and 1961. The relief of taxation for the

    1271
    higher paid man on £700 a year is £21 5s. 7d. a year, or 8s. 2d. a week. He is now paying that mighty amount of 8s. 2d. a week less than he paid nine years ago. What a tremendous benefit the workers have got out of this Budget.
    1.15 a.m.
    Mrs. Slater: They pay more contributions, too.
    Mr. MacKay: Yes, they pay more contributions.
    I have dealt with the position of nine years. Now let me take the position of one year. A man receiving £3,000 gets taxation relief in one year of £100. The man receiving £8,000 gets in one year £990 relief. As for the man on £20,000, I am almost afraid to mention the relief that he gets lest I shock hon. Members and the workers in the country generally. By this Budget the man on £20,000 a year will get relief to the extent of £1,775 in 1961–62. Is that not a ridiculous situation? How can such a situation be justified by the Government and their supporters?
    The Government cannot justify the situation by any means that the ordinary people can understand. The people cannot understand the reasoning which has influenced the Government to do this kind of thing. The Government say this proposal will be an incentive. They say that there are a large number of Surtax payers, that these people are the elite of our country, the supervisors, people with intelligence, administrative ability, scientific knowledge and so on, who receive high incomes.
    True, these people may have had to pay large amounts in tax, but the practice of this country has been that if a man pays a lot in tax it is because he has received a lot, and whenever tax is taken from a man's income he always has enough left in the form of net income. But what do the advocates of this policy say? They believe that these people will not do as much as they could, because their net incomes will not be sufficient to give them an incentive. In other words, they have no morals.
    The Government acknowledge that the people to whom they are prepared to give thousands of pounds are of that character. There is no getting away from that. The
    1272
    Government admit that these people have so much money net now that they do not mind whether they have another £1,000 or not, so comfortable and satisfied with life are they. Most of them are not great intellectuals. Everybody who knows about directors knows that. A great number of directors, supervisors and administrators are not outstanding for knowledge or character. The Government admit it and say that their moral character is such that, having far more money than the ordinary person, they do not care whether they get any more.
    What regard have people like that for the country as a whole? None at all. The Government and the Chancellor say that. Government policy admits that they are men of that character. Can we allow this Surtax proposal to pass when we know, from the moral standpoint, that there is no justification for it? The Government are prepared to give £83 million to people of this kind and they try to justify it on the ground—they cannot prove it; it is just supposition—that it will be an incentive to the richest section of the community and some good will be done to the country in the end.
    The Government dare not say that on a public platform and expect support from their audience. I know that, and I do not believe that the thing can be justified on grounds of either public or private morals.
    I think that if we could get at the actual opinion of the representatives of the Treasury on the Government Front Bench it would be found that several of them had some doubt whether this should be done. It may be that they were not enthusiastic about this policy but have justified it to themselves after examination, and if they have done so, all I can say is that I do not admire their judgment. It cannot be a really impartial judgment if they have allowed selfish interest to intervene.
    I believe that in considering this policy the Government have not been particularly anxious about the general welfare of the community and have been thinking of other matters. They have a job to do. What kind of job is it? The Government have a special duty; but they seem to regard their special duty as not to the people at large but to a special section of the community. They believe that

    1273
    this special section has tremendous influence in the political world. They believe not only that they should pass policies for the good of the country at large but that in conjunction with that they must pass policies in favour of their rich supporters. That has been one of the influences.
    If impartial people could be found—sometimes it is difficult—to examine everything in relation to taxation and the Budget, they could not credit the Government with good judgment or a moral attitude worthy of admiration.
    Mr. M. Foot: Everyone on this side of the Committee will join in expressing thanks to my hon. Friend the Member for Wallsend (Mr. McKay) for his speech, not only for the manner in which he delivered it but for the detailed figures which he provided, which will be of great value to everyone who wishes to study what has happened in the debate and what the Government have been doing over recent years in their general taxation policy.
    It is all very well for some hon. Gentlemen opposite to attempt to jeer at those figures. Those figures demonstrate clearly that so far from it being the case that the Surtax payers have not had any reliefs over this period and that the Government have waited a very long time—eight or nine years—before coming to their rescue, they have been receiving reliefs throughout that period. Therefore, it was false for the Government to pretend that what they had done was to give reliefs to other sections of the community in previous Budgets and that only at the end, after they had satisfied everybody else, they came at last to do justice to the Surtax payers. My hon. Friend has plainly demonstrated that over the last eight or nine years they have received higher proportionate tax reliefs than have other sections of the community, and the higher the income the greater the relief. We have not heard any argument from the opposite side in this present debate, but my hon. Friend has destroyed a great part of the main argument previously used by hon. Members opposite.
    1.30 a.m.
    Another extremely apposite comparison arises from my hon. Friend's figures. Many quite proper comparisons have
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    been made by my hon. Friends between these reliefs and the increased charges imposed on the Health Service or on the National Insurance contributions. I well remember the arguments that were presented by the Minister of Health and, in particular, by the Financial Secretary during the debates on the increased National Insurance contributions.
    One of the main arguments by which the Financial Secretary sought to justify that increase was this. He said that nobody should complain too much about the increased National Insurance contributions because the proportion that the worker was paying out of his wages in insurance contributions was being kept about the same by the increases the Government were making. So that the poll taxation fell on all members of the community, but most hardly on those with the lowest incomes.
    Thus, only a few months ago, the Government were arguing that taxation should be increased in proportion to people's incomes. That was the Financial Secretary's main argument, but my hon. Friend's figures prove the direct opposite. Nobody can deny that the proportion paid in direct taxation has been going down. Whether the Government are right or wrong in doing that is another question, but the proportion paid in direct taxation has been diminished in relation to people's incomes in the last eight or nine years, but in the case of the poll tax, the proportion has been sustained.
    All this demonstrates quite clearly that the Government adopt an attitude to the poll tax form of taxation entirely different from that adopted towards direct taxation. They are much more liberal, much more eager to reduce the direct taxation than they are to reduce the poll tax, which is notoriously much more unfair. My hon. Friend has helped to underline the injustice of the whole Government approach to these taxation problems.
    I want now to deal with the Financial Secretary's reply to an earlier debate; and with this Clause which, as my right hon. Friend the Member for Huyton (Mr. H. Wilson) has said, is laughably described as "Surtax; reliefs for earned income". We now know that to be a falsification. At any rate, when the Government reprint the Bill for the Report stage that should be changed. It should

    1275
    read, "Surtax reliefs for earned income and for unearned income". The Financial Secretary will not deny that. He was very bashful about admitting what the figure was, and I thought that for a moment he believed that he would get away without disclosing the figure. I must say that I was amazed when I heard what it was.
    The Committee has an absolute right to consider what could be done with £19 milion instead of handing it over to people who are getting their incomes from unearned income. We could do a great deal with £19 million a year. We could certainly transform the situation in the coal industry, which has had to bear very heavy burdens and pay huge interest rates to maintain stocks of coal which it has had to build up over three years of depression in the industry. If the Government paid for the maintenance of those stocks required for the industry and the nation, rather than putting that burden on the coal industry, the industry would be transformed.
    The sum of £19 million a year would transform the situation of London Transport, which is running down because it cannot get the busmen, because it cannot pay them enough. With £19 million we could have a Cunarder every year, if anybody thought it worth while, with £1 million left to hand over to the Eagle airline on special terms, if that was wanted. Let hon. Members think of the time we have discussed the Cunarder Bill which we have still not finished and about which there are still to be lengthy discussions. The Government Know in their hearts that it is wrong to spend the money in this way, but with the way they are chucking it about in the Bill they could easily do it.
    Let hon. Members think of the interminable debates on the extra charges on spectacles and teeth. We could easily wipe out all those provisions for extra charges with this sum of £19 million which is to be given in reliefs not for earned but for unearned income. I know that it is to go to people who are earning some other part of their income, but it is still £19 million in respect of unearned income. The more it is considered, the more scandalous it appears that the Government should have decided to spend
    1276
    £19 million in giving reliefs in respect of unearned incomes.
    In previous debate the Government have said that their main reason for these reliefs is that of incentives. That is not the real reason and that whole argument has been ridiculed by my right hon. Friend the Member for Huyton. That argument cannot stand after the analysis by my right hon. Friend tonight and on other occasions.
    It may play a tiny part and perhaps that argument can be applied to a very small number among the 300,000 Surtax payers, but it must be a very small number, and even if there is a case for saying that it will be an incentive in these small number of cases, the Government are spending £83 million for what is bound to be a very small result.
    I do not believe that hon. Members opposite believe in the incentive argument. I agree with the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) that the reason why hon. Members opposite are in favour of the Surtax concession is that they regard Surtax as an unjust tax. They think it falls with unjust severity upon one section of the community and they want to bring relief to those people.
    That is what they really think. Why do they not say so? Because that is the part of the argument I should like to examine: what it is they really believe. They say it is unjust that people should have to pay taxes at this rate. Why do they not just say so and not muddle the matter up with esoteric arguments about incentives? This is, in fact, a psychological, rather than a financial problem. It is a problem of trying to discover what happens in the minds of hon. Gentlemen opposite which leads them to think that it is a piece of injustice that people should have to pay Surtax at the rate at which they have to pay it, but that it is not unjust that people should have to pay extra for things under the National Health Service. It is a psychological problem in the minds of hon. Gentlemen opposite, and I want to see if I can probe it to discover what is the real reason for the Clause.
    I can see something to be said for part of their case. It is an absurd arrangement, not only with Surtax but

    1277
    with other forms of taxation, that we give income to people and claw it back again. It is a very inconvenient arrangement, because it is bound to make people anti-social. Nobody likes paying taxes, whether Surtax, Income Tax or any other kind of tax. Therefore, to give people incomes with one hand and draw them back with the other is always bound to create some feeling of antagonism, and a feeling of antagonism towards the State which demands return of the incomes in tax. Therefore, in some respects it would be a much better arrangement if people did not have money in the first place; that would make it not necessary to take it back.
    In other words, our taxation system is merely an illustration of the absurd way in which we allow wealth to be owned in this country. If we were to try to solve this tax problem so that we should not have to be clawing back the incomes which we allow people to think that they have, we should have to change drastically the ownership of wealth in this country. Of course, the argument for a real overhaul of our tax system is that it could be carried out only if we had a big change in property owning. It is only in that respect that I say that hon. Gentlemen opposite have got any argument.
    To come back to the maim case of trying to examine what goes on in their minds when they think that what they are doing at this time is legitimate and just. They really think that the distribution of wealth in this country prior to taxation is a just arrangement. They think it is fair. They think it is just that some people should own most of the wealth of the country and that the rest of the public should have to own a very little of it. They think it is quite just that some people should earn £10,000 a year or £24,000 a year while, say, half the miners working as surface workers at the pits get less than £13 a week. They think it is perfectly just, and, indeed, they regard the system by which, clumsily and belatedly, taxation tries to restore a bit of justice into this unjust distribution as a piece of unfairness. It is because hon. Gentlemen opposite have such a lopsided and absurd view as to how the wealth which is produced by the community as a whole should be distributed that they think that it is a terrible burden that
    1278
    some sections of the community should have to bear heavy taxes.
    It is because they take such an absurd view that also they have got the rest of the economy cock-eyed. They have not got enough teachers, they have not enough miners, they have not got enough nurses, they have not got enough policemen, they have not got enough of a large number of other people who are the most necessary people in the community. What a wonderfully absurd society this is, particularly when we are supposed to be very successful in running it at the moment. We are supposed to be doing very well. Only a few months ago it was being said that we were carrying on our society more expertly than ever before, and were running our system marvellously. But at this moment, when we are supposed to be running it so skilfully, we happen to have a shortage of persons which most civilised peoples would regard as the most essential persons in the community. That is a wonderful achievement.
    1.45 a.m.
    But even more remarkable and wondrous is the remedy for this disease. We ought to be concerned with what is going to happen to our coal industry; we ought to be wondering whether many people in hospital will go without treatment because there is nobody to treat them, and we ought to be wondering how many people are going to get bashed to pieces because there are not enough policemen. Those are the problems which we should be trying to solve, if we are civilised. But they are not the problems that the Government are intent upon solving. They have introduced a Finance Bill in which the main provision is not designed to improve the lot of teachers, policemen, miners, workers in the steel industry, or other people who are doing the most necessary jobs.
    A little benefit may trickle through to the people who are doing a good job as a result of this Clause, but there is no guarantee of that. It is certain, however, that a lot will go to people over half of whose income is unearned. How can it be said that a Finance Bill in which that is the primary provision is relevant to what is happening in our society? This provision which the

    1279
    Chancellor has introduced is not merely a condemnation of his Budget; it is a condemnation of the whole society in which he believes.
    That brings me back to the psychological problem, which I was trying to examine. Many hon. Members opposite have been laughing and sniggering and drifting in and out of the Chamber as if what was being said did not matter. They talked as if hon. Members on this side of the Committee were not serious in their criticisms of this Finance Bill. We are very serious about it. Their jeers and sneers are merely a revelation of their own minds on this subject—merely a revelation of the fact that they cannot even see what is happening in Britain today, and cannot realise why what they are doing is so mean and inadequate and unfitting for what should be done in our society.
    Many of them believe that there is a great deal of strife going on in the world between the Communist society and Western society. I do not believe that the strife takes the form which hon. Members opposite describe, but if I believed as they do I would not be so complacent and so content about a Budget of which the principal feature is the giving of a little more to the rich, coupled with the hope that a little benefit will also trickle through to those who are performing some useful service to society.
    Taking these provisions together with the previous measures we have had, which we realised were preludes to the Budget, we see that this is a most squalid affair—and the Chancellor should be ashamed of himself. When he allowed the savage attacks to be made on the Health Service he knew what he was up to. It is no use his saying that he is balancing this concescession against the higher Profits Tax. If he says that, it is legitmate for us to argue that he is balancing it against the savage attacks on the National Health Service.
    The two things should have been incorporated in the same Budget. He would have shown more courage if he had done that. Why did he not have the courage to do it? I remember that Sir Stafford Cripps did it when he was Chancellor. He was rebuked by many
    1280
    people for it, but when he decided that it was necessary to reduce bread subsidies he made provision for it in the Budget, and he defended what he had done in the House, so that hon. Members could compare one form of expenditure with another. That is the honest way of doing it, and that is what an honest Chancellor would do.
    If he had shown real courage the Chancellor would have said, "I want the whole nation to know exactly what I am doing, so as to be able to see how I balance the nation's accounts." Instead of slyly attacking the National Health Service before introducing his Budget he would have brought forward those proposals in the Budget, and would have defended them in his Budget speech. If he had done that he would have had even greater hostility to the Budget and to the attacks on the National Health Service than he has had. But he did not want to do that, because hon. Members opposite—and this is another part of their psychological state—do not want the people to examine what is happening. They want to conceal it. They do not want people to know that the principal measure in the Budget is to hand out money on the scale which has been described. Indeed, so little do they want it to be known that we have only discovered at 1 o'clock in the morning that £19 million of this money will go in respect of unearned income. I hope that that fact will become known.
    It is not only a question—though that in itself is important enough—of us wanting the people of the country to examine how the wealth of the nation is to be distributed. It is also the case that if there is to be any industrial revival; if we are to change the face of the country; if we are to equip our country to face the next 30 or 40 years as we on this side of the Committee want to do, we shall have to make an end of these miserable, squalid Budgets and have Budgets which deal with the real problems of the nation.
    Mr. Dan Jones: I have been in the Chamber for over ten hours listening to the debate and I have been impressed by the levitous and humorous manner in which hon. Members opposite have accepted the arguments advanced from this side of the Committee. I do

    1281
    not say that with relish, but with a sense of dismay. I warn hon. Members opposite that there are people in the country who are following these deliberations very closely, and they are doing anything but laughing about them.
    I feel that these Surtax proposals are unjust and morally indefensible, and there are people more responsible than I am who feel the same way. I do not propose to deal with these proposals on the higher levels. I leave that to my right hon. and hon. Friends on the Front Bench. I wish to speak clearly and, I hope, with some sense of logic as a trade unionist. I believe that I should bring to the attention of the Committee what the T.U.C. thinks about it. If the Government represent 12 million people, the trade unions represent 9 million, and would be representing many more if those people who ought to have the protection of a trade union only had the sense to join one. This is what the T.U.C. thinks. It is an official comment:
    "The massive concession on Surtax is not justified either by considerations of fairness as between taxpayers or by reference to the nation's financial and economic situation. Far from acting as an incentive to greater effort, it will actually encourage those favoured by the concession to relax in the assurance of a free though not unsolicited gift of additional spending money. Following so closely on the increases in the health charges, it will be strongly resented by the great majority of ordinary citizens."
    I follow my hon. Friend the Member for Ebbw Vale (Mr. M. Foot) in saying that these glib and clever approaches from the benches opposite are not being endorsed by the trade unions. I feel very dismal about it. I have no doubt that when approaches for increases are made by the T.U.C. to the employers the answer will be that any concessions will lead to inflation.
    I want to draw attention to some facts affecting trade unionists, young people in the branches and districts. These figures I have been given cause great indignation, indignation which possibly will embarrassment to the Government and the country in the months ahead. If they do nothing else, these facts will take the smiles off the faces of hon. Members opposite. That is why I think it does not matter how a contribution is made in this debate it should be treated earnestly.
    1282
    My hon. Friend the Member for Walls-end (Mr. McKay), like myself, is emotionally inclined. I do not apologise about that. My hon. Friend was prone to make his remarks in a somewhat jumpy style.
    Mrs. Slater: It was a very well-thought-out speech.
    Mr. Jones: I withdraw that observation. The phrases of my hon. Friend the Member for Wallsend occasioned nothing but merriment on the benches opposite. The point I make is that no one could doubt the earnestness of my hon. Friend and no one could doubt the accuracy of the figures he gave.
    Mrs. Slater: Would not my hon. Friend agree that our hon. Friend the Member for Wallsend (Mr. McKay) was not only earnest, but had been extremely thorough in the way he had worked out the figures? The Solicitor-General had to get the help of the officials under the Press Gallery to check the figures. They had to work them out. I think my hon. Friend the Member for Wallsend deserves great credit for the energy he has shown and for the work he has done.
    Mr. Jones: I do not think I have taken any of that credit away. I think I made it plain that he ought to have been listened to in all seriousness. I objected to the way in which his remarks were received.
    I shall now deal with the figures which, I repeat, I have discussed with local trade unionists rather than national trade unionists. They reveal that a man earning £100 a week will tend to benefit to the extent of £10 a week and a man earning £200 a week will benefit to the extent of £25 a week. These figures have caused a tremendous amount of indignation among the people with whom I have discussed them. A single man earning £6,000 a year will benefit to the extent of £689, which is precisely four times the annual income of a single man who is an old-age pensioner. That is a thoroughly iniquitous situation when we are told that these concessions are given as incentives.
    My hon. Friend the Member for Ebbw Vale mentioned the teaching profession. If the Government were really in earnest about developing the economy, they

    1283
    would make the first approach by developing the technical schools and the teaching profession. Those people have had an award. I make no judgment of that award except to say that when the offer was made it was post-dated seven months. It has received the treatment which I think it deserved. Can we wonder at that when these people realise that the concessions give a great benefit to another section of the community who do not contribute nearly as much as they do to our economic well-being? Indeed, these people have analysed correctly that certain professional classes will receive under these Surtax arrangements a retrospective benefit for about eighteen months. It is, I repeat, iniquitous.
    2.0 a.m.
    I turn now to the observation made by the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke). The justification he gave for the Surtax concessions was that we have now eliminated unemployed people and poor people. I want to believe that the observation was made in all sincerity, but I cannot applaud the noble Lord's knowledge. The truth is that we have not eliminated unemployed people. There are vicious pockets of unemployment today. As I have told the Committee, I have been an unemployed person. Anyone who has shared my experience knows that it is not necessary for the man next door to be unemployed to make one realise the full impact of unemployment. It is not true that we have eliminated unemployment. It is an even greater untruth to say that we have eliminated poor people.
    The Fabian Society issued an excellent pamphlet some months ago entitled "The Submerged Fifth". It demonstrated that one-fifth of the population is living in a state of financial hardship comparable to that in which I lived as an unemployed person in the 1930s. It is only fair that we as legislators should try to get our priorities right. The speeches from the Opposition benches on this subject may not be as polished as the speeches of hon. Members opposite. However, I hope that our contributions smack of political honesty. I hope that they also smack of knowledge and earnestness and demonstrate that we are trying seriously to grapple with the
    1284
    problem which will undoubtedly confront us if we perpetuate this state of affairs.
    Mrs. Slater: The debate has, in the main, been concerned with whether the Government's Surtax proposal has put the priorities of the majority of the people in order as against the priorities of the few. We have been told repeatedly that the whole reason for granting this relief is as an incentive not for now but for the future. We were told that the whole purpose was that it would make a few people who are already reaping very good rewards much more anxious to reap heavier rewards, but not necessarily to do more work for them.
    The Clause is one of a long succession of moves by the Tory Government since 1955. It is a pay-off to a certain section of the public. We have had the pay-off for the landlords. We have had the payoff for the bankers. We are still having that with the increased interest rates. We have had the pay-off for the brewers. This is the pay-off for the folks who have talked the loudest on the Government benches and in the financial columns of the newspapers in the last two or three years, especially during the last year. This is one of a succession of pay-offs for the folks who took jolly good care that a Tory Government were returned to power.
    What about the priorities? I am just about tired of hearing hon. Members on the Government benches and people who write on behalf of the Tory Party claiming that we are now living in an affluent society. Whenever we discuss old-age pensions or widows' pensions, or matters of that sort, there is always someone from the other side telling us that one can walk along a street of council houses or a poor area and see all the television aerials. We are told that folk in these districts have washing machines, refrigerators, and things of that nature and that because of all this we are living in an affluent society.
    The fact remains that many of these people can have these things not because of a good wage but because the wife goes out to work, or because another section of the community—a section which is going to get some of this pay-off—the large finance companies dealing in hire-purchase have seen to it that the ordinary

    1285
    working people are encouraged and even forced by their methods to go in for large hire-purchase commitments. We are now getting to the stage where, because of this kind of affluent society, school medical officers, as in Stoke-on-Trent, and the National Society for the Prevention of Cruelty to Children, are deloring the fact that women in ordinary working class homes—in an affluent society—are being forced into nervous breakdowns as a result of this sort of pressure.
    What kind of people have got anything out of this Budget? In many respects most people are paying more, not ust because of the Budget but because of Tory policy over the past year in particular. My hon. Friend has just spoken of the farm worker, but the average wage in this country is between £14 and £15 a week. [AN HON. MEMBER: "Average earnings."] I doubt if there is any hon. Members opposite who could live on £14 a week because they simply have not learned to do so. In addition we have a large number of women going out to work, and their average wage is £6 10s. to £7 a week.
    These are the people who are now having to pay in order that the Surtax relief may be given under the provisions of this Clause. How is it going to be paid for? With a sob in their voices, when the National Health Insurance Contributions Bill was introduced, right hon. and hon. Members opposite told us that we must raise £49 million this year and £65 million subsequently not in order to give better benefits, but in order to build a few more hospitals or to improve some we have. But only £5 million of that was going to be spent on that side of the National Health Service, so somewhere in the coffers of the Chancellor there is this other amount of money which is going to be handed out to the people who, we are told, have been most hurt in these last few years—the Surtax payers.
    The hon. Member for The Wrekin (Mr. W. Yates) laughed and scorned at my hon. Friend when he spoke of the person who is blind and had had two legs amputated. The hon. Member asked, "Did you not tell him to go to the National Assistance Board?" Of course we do that Saturday morning after Saturday morning. The Minister of Health assured us that those people on the border line would be able to get relief on their prescription
    1286
    charges, but a person such as my hon. Friend spoke about, who would probably get a blind pension as well as his other benefits, would no doubt be just that little bit above the border line. No National Assistance Board officer, generous though he may desire to be—and I assure hon. Members opposite that many of them do desire to be generous—is able, because of the requirements of his duty, to give that kind of person any relief from the prescription charge. The hon. Member ought to find out what is happening in his own division about these questions.
    Mr. H. Wilson: The point ought not to be left there; it ought to be completed. Last year and the preceding year the Government turned down a new Clause, as no doubt they will this year, which would have given relief to blind persons.
    Mrs. Slater: Every year when we have sought to give such relief the Government have turned down our request because they have the majority to do so.
    That is not the end of the story. Where else will the Chancellor get a little more money? The workers will have a shock when they have to pay the increased old-age pension contributions. If hon. Members opposite had been in touch with the workers they would have heard many complaints about that increase, especially now that the workers know the little benefit which they will receive in return for their increased contributions. The workers will have another shock on 1st July, when further increases in the contributions will take effect. It is in this way, this insidious, back-door way, that the money is found to make these Surtax concessions possible.
    Whenever we talk about the aged we are told that if they were better managers they would make the money go further. We were told in the debate about the increased Health Service charges that we need not worry about the increase in the cost of the welfare food because some people gave it to their dogs. That attitude of mind among hon. Members opposite has not changed over the years.
    The Financial Secretary is interested in education; he served in the Ministry of Education. But now every local authority in the country has had its building programme cut, because we have been told that we cannot afford it. We have

    1287
    even had the stupid answer from the Minister of Education that we could not produce enough bricks to build the schools. We can tell him how to make the bricks: pay a decent wage to those who make them, and build factories rather than the skyscraper offices which we see every time we look over the Thames.
    We have been told that we could not increase the number of teachers. Hon. Members on this side of the Committee urged the provision of more teachers not only last year and the year before that but three years ago, because we knew what would happen. The Government's priorities are wrong. We have school classes of 40, 50 and more. Although the average may be lower than that, there are numerous classes in the country in which, because of a shortage of teachers as well as of buildings, there are far too many children. I have said before, and I repeat, that during the last two years in particular, since the Government got their huge majority, we have begun to see the Government implement the kind of things about which the Tories write in their pamphlets. We have no definite assurance yet that the working man and woman will not be called upon to pay for the education of their children before this Government leaves office.
    2.15 a.m.
    I speak for the women of this country who have to struggle—and many of them struggle hard week by week. An hon. Member opposite tried to show how liberal the Tory Government had been and said that taxation had been reduced, but he did not mention how the value of the £ had also gone down. This is an important factor among the housewives. When they go to the shops the £ buys less than it did when the Labour Party was in office. I speak for these people, the ordinary housewives who struggle week in and week out—[Interruption]—An hon. Friend of mine says "the extraordinary housewives". The housewives are the backbone of this country. They make it possible for their men to go to work to earn the money so that the executives may have these Surtax reductions for no executive could have Surtax relief if the ordinary man and woman did not pull their weight.
    1288
    I speak for those people who know what it is to struggle in order to keep their homes decent. Every working woman should have the necessities and the things which make life easier—much more so than those folk who can afford to pay people to do these things for them; and I must say I sometimes feel sorry for those who have to do it. The present Government are betraying the masses of the people by giving the last priority to the old, the sick, the children in our schools, the ordinary workers earning less than £14 a week and the womenfolk, while those receiving £2,000, £3,000, £4,000 and the poor old £5,000 a year, about whom the Chancellor almost cried, come first.
    It is worth staying up tonight if only a few of us can express our thoughts, just as apparently hon. Members opposite who are going to benefit from this Clause think it is worth staying up to make sure that the Clause is accepted.
    Mr. Richard Marsh: This has been an interesting debate—
    Mr. William Ross: Whatever else it has been, it has been no debate.
    Mr. Marsh: I was going to make the point that there is on the back bench opposite an hon. Member who is either bone-idle or dead. The hon. Member, who I believe occasionally sits, and who apparently has spent more time lying for Carlton (Sir K. Pickthorn), appears to think that Parliament is a place where he can come and sleep.
    Sir K. Pickthorn: I have had to say this once before. I have heard every word of this debate, except a small portion of one speech from the benches opposite. If I can choose an attitude which enables me to keep the light out of my eyes, I shall continue to do so.
    Mr. Marsh: I seem to have been very successful in—[An HON. MEMBER: "He is not dead, anyway."] I hear one of my hon. Friends say that the hon. Gentleman is not dead. My hon. Friend should produce a little evidence before he makes extravagant statements like that. The hon. Member for Carlton says that he is keeping the light out of his eyes. He is certainly keeping the light out of his mind.

    1289
    Without being pious about it, I think it is a pity that the House of Commons should come to be regarded as a place where hon. Members may come, with no intention of participating in the discussions, but presumably because it would cost 30s. a night to sleep elsewhere. If they have neither the interest nor the intention to take part in the discussion, one wonders why they leave the bar to come here for brief periods and sit on the benches opposite.
    It is a matter of concern that our discussion should be a one-sided affair without any contributions from hon. Members opposite. This is becoming a general practice now.
    Mr. Charles A. Howell: Let us not be unjust. It may be that their consciences are pricking them. They have a pecuniary interest in Surtax, and they may be recipients of relief. Perhaps they feel that it would, as it were, be ultra vires for them to support the Clause by speeches.
    Mr. Marsh: I must disagree with my hon. Friend. For a long time, I have thought that the possession of a conscience and possession of a card of membership of the Conservative Party were incompatible.
    Quite seriously, I make the point that we have now reached a stage when, on occasions when we have major debates, hon. Members opposite come into the Chamber—presumably because vacant seats are more readily to be found here—but have no intention at all of participating in the proceedings.
    Mr. Diamond: My hon. Friend ought not to be unfair. At least one hon. Member, the hon. Member for Rugby (Mr. Wise), did his best to catch the eye of the Chair a little earlier but unfortunately failed to do so. He was immediately escorted out of the Chamber by one of the Whips. I raised it as a point of order because I was very concerned about the hon. Member. I am happy to report that I have ascertained that he is quite safe. He is in good health. He has been effectively silenced. He has not returned to the Chamber, but he is well.
    Mr. Marsh: I do not think we need worry unduly about what happens to hon. Members who suddenly vanish from
    1290
    the Chamber. One feels that they might, perhaps, be better served with sheep dogs than with Whips, but nevertheless it is pleasing to know that when they do come here at least they vote. Even if they do not express any point of view at all, they show an almost totalitarian unanimity in the Lobby.
    This is an important subject about which we on this side feel very strongly, though not because it is felt that the Surtax payer has no case. If one considers the time which has elapsed since the present levels of Surtax were fixed, it is obvious that the Surtax payer has a case. I do not think it is disputed that the period of time which has elapsed gives rise to a series of perfectly logical arguments in support of raising the limit. Our contention is that there are other people who have a better case.
    The Chancellor of the Exchequer is in a very fortunate position. One might suggest that he is probably in a position which neither he nor the electorate ever expected him to hold. He is in the position of being able to distribute large sums of money and of being able to determine the things upon which he will spend the money. This is a pastime that all of us enjoy from time to time. Probably everybody in the House and most people in the country have spent some time in bed spending their £75,000 from Littlewoods, Copes, Vernons or one of the other football pools. They have worked out the things upon which they would spend the money. But with the Chancellor it was not a dream; it was a fact. He was in a position to get rid of a large sum of money and decide the things upon which he would spend it.
    Obviously, we all have different points of view and priorities. Some of us would feel that the most pressing need is to do something for the aged. Some would have a particular desire to do something for deprived children. Others would feel that our roads are such a disgrace and involve such an enormous loss of life that we have reached a stage when we should spend a great deal more money on them. People in the House and the country who so often hear of the tragedies and heartbreaks caused by diseases like cancer and rheumatism would think that we should spend a great deal more money on medical reasearch.

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    Every one of those objects is desirable. A case can be made for every one of them.
    Our case against the right hon. and learned Gentleman is not that he believes that the Surtax payer has a case, but that he believes that that claim takes priority over every other claim on the social scene. It is an argument not about the rights of Surtax payers but about priorities. That is an argument which inevitably arises in this Chamber when priorities are considered. It demonstrates time and time again the unbridgeable gulf between the two sides. It is an argument which expresses itself whether we are discussing taxation, the Health Service or any other aspect of our social life; the division of the House is automatic and complete. The reason is that the priorities of both sides have no relation to each other; the two sides of the House approach things completely differently. This is the fundamental difference between the two parties; it is a difference which is always with us. and we ought to stress it.
    Hon. Gentlemen opposite are quite sincere when they share out the lolly. They see nothing wrong. [Interruption.] It is a pleasure to see hon. Gentlemen opposite returning to the Chamber now, but it leaves me terrified about what must have happened to the bar, which must have been in some chaos. This brings me back to the point that every time we have a serious discussion on social priorities the House divides right down the middle because hon. Gentlemen opposite see the whole purpose of politics as a method of getting as much as they can for themselves or other people of a certain social group. It is distressing that they view their job at that level.
    Hon. Friends of mine have mentioned the Health Service staff. My hon. Friend the Member for Birmingham, Small Health (Mr. Denis Howell) made a considerable and valid point when discussing this. It is frequently argued that if one has an amount of money given away in one aspect of taxation one cannot determine the other things upon which it would have been spent.
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    2.30 a.m.
    In this case we know that some of the money was raised from the National Health Service—£65 million. What would we have done with this in the Health Service? We talk about shortages of hospital staff. Not one nurse pays Surtax—not even matrons pay it. Not a single radiographer pays Surtax. We have no laboratory technicians who pay Surtax. We run our National Health Service by trying to bring people here who come because there is poverty in their own countries. The trade unions, which could recruit people to the Health Service, are publishing leaflets in Polish. Hungarian, German and Italian, because this great Service—this once great Service—cannot provide proper standards of living for those who work in it and so attract recruits from among ordinary working people.
    Despite all that, when we raise £65 million from the National Health Service we do not use it to improve the Service. We do not use it to improve local government services. We use it is a contribution towards the Surtax payer. We are not criticising the Surtax payer. We are only saying that there are people who have a more immediate claim to this money.
    There is not an hon. Gentleman opposite who does not pay Surtax—[HON. MEMBERS: "What?"] Well, it is interesting to hear that they do not pay Surtax. This is a revelation; it makes us feel their interest in the subject is much more philanthropic than we had believed. It is certain, though, that many hon. Members opposite spend more on one meal in our Dining Room than some families can afford for food for a week. And in case, Mr. Thomas, you should feel for the moment that that is not related to this Clause, I come back to the point we have been trying to make all the time, that if one has £85 million to give away, this was not the most pressing need.
    This provision is not only immoral; it is downright dangerous. [Interruption.] It is a great pity that some hon. Members opposite, who seem to make peculiar digestive noises when they come into the Chamber on rare occasions, are not capable of contributing to the debate from time to time. One does not know whether they are permitted to speak

    1293
    after 10 o'clock, but if they are—and always assuming that they had something to say—it would be worth listening to them.
    The one thing we have not heard tonight is the case in favour of this Clause, although we have heard much said against it. One gathers that it used to be the custom that when a Government brought a Measure to this House they explained why people should support it, but this Government are becoming so arrogant with their majority of 107—although when one looks at the voting figures tonight one feels that we should get a new Patronage Secretary—that they no longer attempt to present their case, but merely wait for the Division bell, when they will push the Chang through and so decide the issue.
    Not only is this provision immoral, because it does not give to the section of the community which needs it most, but it is extremely dangerous, because one of the inevitable problems and the inevitable danger of the sort of economic system on which hon. Members opposite pride themselves is that there will always be an unbalanced economy and a possibility of inflation.
    The Government cannot tell the man who is earning £9 a week that he is wrecking the nation's economy if he asks for another 10s. or 15s. a week and at the same time give amounts at this level to a section of the community already earning £40 a week or more. If one asks, as I believe we must, all levels of the community to maintain some degree of wage restraint—because what is wanted for a time is not an increase in wage levels, but an increase in purchasing power—the man with a low income cannot be asked to show that restraint when the Government are giving away these vast sums to many people earning sums which are not considered large by hon. Members, but which are astronomical to men who can never hope to earn £15 or £20 a week.
    When we talk so glibly of a national wages average of £15 a week, we must remember that there are hundreds of thousands earning less than £12 a week, not only agricultural workers working for private farmers, but tens of thousands of workers in the direct employ of Parliament.
    1294
    We have heard the tale about what this Clause is intended to achieve—raise production and improve our exports. What a lot of hypocritical bunk this is! There is hardly an hon. Member opposite who believes it. Is it really believed that the young executive in this country has been on a sort of unofficial strike, waiting for his Surtax to be reduced?
    There is a feeling, much of it justified, that values in the country have got out of perspective and that there is too much of an obsession with material things, but I do not believe that the bulk of the people, in whatever job, particularly if they are fortunate—I repeat, fortunate—to have a job which requires the exercise of some skill and which takes their interest, regard the wage packet as the only factor which determines the ability which they exercise in their job.
    If it is true, and I cannot believe it is, presumably those with the lowest incomes, who are grossly underpaid in our society—technical people and white collar workers—are all slacking. There have been references to nurses. If the premise of hon. Members opposite were correct, one would assume that nurses were doing a slap happy job and were incompetent and deliberately careless in their work because they were not getting the cash. But of course that is not true.
    The young executive, the young technician and the young scientist moan about Surtax and complain about it, but it does not affect the efficiency with which he does his work. If it did we should be in very serious difficulty.
    But even if it did, if it were true that to reduce the Surtax levels would be to bring about this burst of enthusiasm and would cause everybody to work much harder, it would contribute nothing to the national economy. It would not necessarily do the nation any good, because it is completely indiscriminate. The manager of the bingo hall will get exactly the same relief as the doctor. The top striptease artiste, if she is paying Surtax—I am sure some of the top striptease artistes are—will receive exactly the self-same Surtax relief as the export manager. It is a completely indiscriminate sort of measure, and it will not have any valuable effect at all.
    Mr. W. Yates: On a point of order. Is it in order in a debate like this to bring in striptease artistes?
    The Temporary Chairman (Mr. George Thomas): It is in order to bring in anybody who pays Surtax. The hon. Member may continue.
    Mr. William Blyton: Further to that point of order. Have you noticed, Mr. Thomas, that two hon. Members opposite who have never had it so good are fast asleep?
    The Temporary Chairman: It is not a point of order for me whether hon. Members are awake or asleep.
    Mr. C. Howell: Surely it is not out of order for the hon. Member for The Wrekin (Mr. W. Yates), who came in only a few moments ago, to raise a point of order so that he can be reported in HANSARD and show that he is here?
    The Temporary Chairman: That is not a point of order.
    Mr. Yates: If the hon. Member himself had been here earlier he would have noticed that I have been here since 10 o'clock and that I have done my best to remain here ever since.
    Mr. Loughlin: The hon. Member came to hear about striptease.
    Mr. Marsh: I do not want to pursue the subject of striptease artistes—[HON. MEMBERS: "Go on."]—but I think that the importation into the debate of a contribution from anyone on the opposite side of the Committee who does work hard for his living would make for an improvement in the situation.
    The point I was trying to make is that even if the Clause were to have the effect—I deny that it would—of raising productivity by giving people a greater incentive, it is still a completely indiscriminate measure, because, as my right hon. Friend the Member for Huyton (Mr. H. Wilson) said in the Budget debate, it gives exactly the same benefit to the importer as to the exporter and will achieve nothing at all for the national economy. Therefore, one could not justify this measure on the ground of any contribution it will make to the nation's economy.
    One thing which is interesting about it is that now both sides of the Committee are agreed that there is something wrong with the national economy, and we are on both sides agreed that we ought to do something about the present
    1296
    economic position. Of course, it is not in a very happy state at present. This once great industrial Power now proudly boasts that it is way ahead of Belgium and Luxembourg and battling feverishly to stay afloat in the league tables. This is the state we have reached after ten years of Conservative rule. I agree that there is a need to do something about our economy.
    2.45 a.m.
    The competition we face at present is already causing us considerable economic embarrassment, and it is a great deal less than that which we can expect in the coming years. We find ourselves unable to compete on equal terms with West Germany, or with Japan. We have recently had a trade fair in Moscow, in the hope that we may be able to increase our exports to the Soviet Union. That is another issue, but hon. Members opposite—who seem to pin their faith for a solution of Britain's economic problems in an increase in trade between this country and Eastern Europe—are not on a very good horse. It would be very useful to increase our trade with those countries, but it would not meet the economic problems that face us today, and we have even bigger economic challenges to meet in the coming years. We have the problem of the enormous industrial potential of China, from whom we have had no competition as yet.
    This brings me to the argument that to lower Surtax levels, as an answer to the economic ills which face us, is to dodge the basis of the problem. If hon. Members opposite are seriously saying that they have lowered the Surtax levels not to have a field-day for themselves and their friends but for the good of the British people, and to do something—we know not what—for the British economy, they are completely missing the boat. What is wrong with our economy is lack of planning. What is needed to improve it is not the raising of the Surtax levels; it is not to give £85 million to a small section of the community. This does not have any real effect upon the difficulties which face us, and which will face us in the future.
    It misses the fundamental problem which faces us and which the Chancellor completely failed to face in his Budget, because he was so concerned with getting

    1297
    a few more votes—however these things are arranged at the Conservative Party Conference—when it comes to queueing up for the succession to the throne. He was so concerned with getting support for that that there was nothing in his Budget which was relevant to the economic problems facing us.
    The hon. Member for Dorset, South (Viscount Hinchingbrooke) would agree, perhaps for different reasons, that the Budget was irrelevant to the problems which face us. The big problems which face us, which were completely untouched by the right hon. and learned Gentleman, are problems of investment.
    The Temporary-Chairman: The hon. Member is now going very wide of the Question "That the Clause stand part of the Bill". He is making a Second Reading speech.
    Mr. Marsh: I apologise, Mr. Thomas, but it is difficult to discuss these Surtax proposals without discussing also the reasons for their introduction. I submit that the question which is particularly relevant to the debate is whether anyone is justified in introducing these changes. In so far as they have deigned to participate in any discussion of economic matters the Government have given us a series of reasons for the introduction of the Surtax proposals which do not appear to be genuine. If the reasons they advance are not genuine, obviously it causes many of my hon. Friends to approach this with a completely objective attitude when considering whether they are able to follow the Government.
    If the party opposite had approached the problems facing the economy in a different manner, they would have found, for example, hat a publicly owned steel industry might have contributed far more to the econom than the raising of the Surtax level.
    Mr. G. W. Reynolds: I am interested in the point that my hon. Friend aised about investment and the reduction in Surtax. Does he think that because of the Surtax reduction there is any possibility that some of the money, which will find its way into the pockets of some people, might be used for investment, or for some other purpose?
    Mr. Marsh: That is an important point. Investment presents one of the biggest problems at the moment. If it could be shown that the Government's proposals relating to Surtax would result in a large increase in investment they would be justified in asking hon. Members on this side of the Committee to support them. But the proposals are not likely to result in that. I am quite convinced that the noble Lord the Member for Dorset, South does not believe for a moment that the whole of the £83 million to be handed out will be saved and invested. If he did—which he does not—he does not believe that it would have a significant effect on the economy because it would require a great deal more than an investment of £83 million to achieve that.
    The reason why we oppose these proposals is they involve a major redistribution of the wealth of the country. That is something which this and successive Conservative Governments have been doing for the past ten years. In a brief but interesting contribution, the hon. Member for Middleton and Prestwich (Sir J. Barlow) suggested that this was an episode in a long series of taxation changes designed to improve the living standards of the people. That is perfectly true. One must be fair about it and admit that since the Conservative Party have been in power they have reduced taxation year after year and they have reduced the taxes paid by the people. But the significant thing is that only people with an income of over £23 a week net have benefited. Any person earning less than £23 a week pays more in tax contributions than he did ten years ago and any person earning more than £23 a week pays less. We have had a gradual shift of the financial burdens and charges from one section of the community to another.
    Not for a moment would hon. Members on this side of the Committee criticise the man who is earning £20, £23 or £30. a week. But we will not support any measure which would result in a move back to the inequalities which obtained before we started to remove some of them between 1945 and 1950. Hon. Members opposite have a different attitude towards these things. They make great loans and increase the pay of some sections of the community. The

    1299
    right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) gave us a good example. I believe that the right hon. and learned Gentleman was the first Minister when he was Minister of Health—after an agreement had been entered into between employers and employees—to refuse to honour that agreement and to say, "You may have reached agreement among yourselves, but you are not going to have the money". He stuck to that because he believed at that time that a small percentage increase for the people in the National Health Service who were earning £500 or £600 a year would disrupt the economy. Yet I am sure that he will go into the Lobby and support the disbursement of £83 million to people earning on the average £50 a week. This is the philosophy of the Conservative Party—all of us are equal, but some manage to be a great deal more equal than others. When one looks at hon. Members opposite one is reminded of Chrstmas pantomimes, "Ali Baba and the Forty Thieves", the removal from one section to another.
    The important point is that this was not just a surplus of £83 million, £65 million of which was deliberately raised by imposing additional hardship on the less better off section of the community. It was quite deliberately done, raising £65 million on the one hand and giving away £83 million on the other. To achieve that saving, the Government not only involved those people in higher contributions, but also achieved part of the Surtax concessions they are giving by economies in the social services to make up the balance.
    I put a Question in the House only this week asking why the locum tenens sessions for consultants under my local hospital management board had been reduced by 135. Only one argument was made in favour of that reduction—economy and the need to save money. If there were need to save money because the nation was in difficulties through the incompetenence of hon. and right hon. Gentlemen opposite, we would all join in an attempt to raise money to save the situation, but if it is suggested that we should cut down on the National Health Service, cut down on provisions for the chronic sick, and increase National
    1300
    Health Service prescription charges and contributions so that we can give reductions in taxation to the Surtaxpayer, we say that the priorities of hon. and right hon. Members opposite are radically wrong and very seriously wrong.
    I come finally to the point made by my hon. Friend the Member for Ebbw Vale (Mr. M. Foot). There is a great deal of talk in the House and in the country, indeed in the whole western world, about the methods of meeting and the need to meet the ideological challenge of the other half of the world. It is true, and I think most of us accept it whatever other arguments we may have, that the days when one could meet that sort of challenge by military force have dong since past. The big arguments today are not of battles and military force but of ideology and moral values. If the right hon. Gentlemen opposite provided this country with the sort of moral values we have in this Measure, if they go to the uncommitted section of the world and say that a capitalism and free enterprise society is one where if you are in power you grab as much as you can of the "lolly" for yourself and the weakest have the least while those with the most get a bit more—[Interruption.] That is the way hon. Members opposite do it. I wish they were all as honest as the ion. Member for Gravesend (Mr. Kirk) and were prepared to put it on record that that is the way they do it.
    3.0 a.m.
    Mr. Peter Kirk: I did not say what has been attributed to me. I said, "That is how they do it in the Soviet Union".
    Mr. Marsh: It would be unparliamentary if I suggested that the hon. Gentleman were not teling the truth when he said that that was what he said, so I will not say it.
    Mr. David Price: On a point of order. The hon. Member for Greenwich (Mr. Marsl) has cast aspersions upon my hon. friend the Member for Gravesend (Mr. Kirk). I confirm that my hon. Friend said what he claimed to have sad. I ask the hon. Member for Greenvich to apologise to my hon. Friend.
    The Temporary Chairman: I gather that the hon. Genleman's point of order

    1301
    is that he takes exception to something which the hon. Member for Greenwich (Mr. Marsh) has said. It would be wrong to impute any motive or to declare that an hon. Gentleman is not speaking the truth. If the hon. Member for Greenwich said that, I know that he will withdraw it. If he did not say it, nothing arises.
    Mr. Marsh: I understand what you say, Mr. Thomas, and I agree with it. I certainly would not have said it. If it were suggested that I did, then I did not. If I had, I would not have wanted to.
    Mr. Kirk: On a point of order. If the hon. Gentleman had apologised, I would have accepted it.
    The Temporary Chairman: Order. I think we should now return to the debate. We are getting a little out of hand.
    Mr. Marsh: I will obviously accept the hon. Gentleman's apology. In this modern world the ideological battle cannot be won with the sort of morals which are implicit in the Clause. This is an issue on which right hon. and hon. Members opposite will win. We know that. They will go through the Lobbies. They will not know why they will go through the Lobbies, but they will do so. They will all go through the same Lobby. Some of them will growl like a lot of angry rabbits at the weekend and tell their constituents what they will tell the Patronage Secretary if he dares say a word out of place, or they will write articles in the Evening Standard. But when it comes to the point, they will go through the Lobby and vote. They will win because they have a majority. [HON. MEMBERS: "Why have we a majority?"] They will go through the Lobby and get a majority because they solve their party differences, not on the basis of any political morality but—
    The Temporary Chairman: Order. The hon. Member must return to the Question "That the Clause stand part of the Bill".
    Mr. Marsh: I am sorry, Mr. Thomas. I was provoked by he unruly rumblings of hon. Members opposite.
    Mr. Willis: Furthe to that point of order.
    The Temporary Chairman: There is no point of order that I know of.
    Mr. Willis: May I have your guidance, Mr. Thomas? It would be in order to point out the electoral results of the Clause as exemplified in the Paisley by-election, when the Tory vote was slashed considerably.
    Mr. Marsh: I think all of us would agree that we must approach this issue, not as to who won the most votes—
    Mr. Willis: They won at Paisley. The Tory Party almost lost its deposit.
    Mr. Marsh: I wonder, Mr. Chairman, if we could arrange for two debates to go on at the same time? Hon Members opposite are gradually coming back, and I was trying to say that the important issue is the effect which any particular Motion of this Committee or this House has upon the people of the country. The Motion which we are asked to support this evening is for benefits for a small section of the community. It is one which has not real economic benefit at all. There are no moral reasons in favour of it. It is a simple basic piece of sharing out the spoils, shutting up Conservative ladies who thought that they were not getting quite so much as they should, especially when compared with the shipping companies and the airline operators and those other offshoots of Conservative enterprise. It is just one of those features of the rather undignified rat race which appears to be going on for the leadership on the other side.
    It bestows no benefit upon the ordinary people of this country, and when we next have a General Election I think that it will become obvious to the people that those hon. Members who supported the proposals tonight did so because their philosophy is such that they are out of touch with the people; out of touch with modern problems facing our society, subscribing as they do to a political belief—I should not have called it a philosophy—which is blatantly immoral and which causes us on this side to continue in the hope that we shall shift that lot from that side on to this, and eventually get rid of them altogeher.
    Mr. Edward J. Milne: I have followed this debate through yesterday

    1303
    and into this morning with the bewilderment that might be expected of a comparative newcomer. What has surprised me has been the reluctance of hon. Members opposite, who claim to be representative of a political party which believes in personal freedom, but who have been whipped into silence on a Bill which is not only of great interest to them, but which they themselves have admitted has given them a considerable amount of aid.
    I say that with due deference to the hon. Member for Middleton and Prest-wich (Sir J. Barlow), who indulged in a little private enterprise around midnight, and the hon. Member for Rugby (Mr. Wise), who endeavoured to speak but then had to be escorted from the Chamber; and the hon. Member for The Wrekin, who has used the speeches of other people in order to project his own ideas—[Interruption.]—I will withdraw the word "ideas"; perhaps they were not.
    Mr. W. Yates: On a point of order, Mr. Chairman. I object to the hon. Member withdrawing "ideas".
    The Temporary Chairman: That is not a point of order for me.
    Mr. Milne: No, and the point is not really relevant to the particular matter on which I wish to speak.
    The Clause is the foundation and the purpose not only of the Budget but of the Conservative Party. Last November, the Chancellor, who was facing his first Budget, began to sound warnings of the economic disaster which lay ahead of the country. He told us that we were running into an economic crisis. Not long afterwards the Minister of Health decided to increase the Health Service charges. In direct contrast to the empty benches now, in order to pilot that Measure through the House hon. Members opposite crowded on to the Government benches and into the Lobbies.
    Some of us felt at that time that they were merely carrying out their philosophy of attacking the weakest sections of the community—and that is what they were doing. But they were doing more than that; they were preparing the ground for the type of Budget which was introduced
    1304
    in April and for this type of Clause. They were flying economic distress signals, warning people that they must not ask for wage increases and paving the pay for the £65 million which they extracted from the poor, the sick and the needy in order that £80 million could be handed to those who are to receive these Surtax concessions.
    In relation to the philosophy of Toryism, that should not have occasioned us a great deal of surprise, but what did occasion a great deal of surprise were the reasons given for the imposition of the charges and the introduction of this Clause. We were told that the people working in the export trades were not working hard enough and that some incentive must be given to them. This was in sharp contrast to the treatment which had been received by people in various trades and professions who, because of the Government's policy, had been forced to seek wage increases.
    We reach a situation in which those who are supposed to be engaged in the export trade are told to be good little boys; we are told that they have not been working hard but that we can expect them to work harder if they are giver the concessions in this Clause. The economic fallacy of this is easily exposed. The export trade of this country does not depend on the Surtax payer. If every Surtax payer disappeared tonight it would make no difference to our export trade, because the people who have given this country its place as an exporting nation are those who produce the goods which are exported.
    If there were any logic in the Chancellor's argument the concessions in the Budget would not only have been spread over the entire range of the people employed in the export industries but would have been diverted into the section of the export trade more likely to lead to an increase in exports. But that was not the principal reason for or purpose of the Clause.
    3.15 a.m.
    As my hon. Friends have remarked, we have had ten years of Tory rule. Hon. Members opposite, when defending Measures of their own, have chided us on these benches by saying that this or that was done by a Labour Chancellor,

    1305
    or that this or that Measure was introduced during the lifetime of a Labour Government between 1945 and 1951. But what they conveniently ignore is the tremendous difference in the circumstances of the two periods. The people of Britain are beginning to see the effects of the differences on themselves, their families and their standard of living.
    The real test is made by looking at some of the industrial constituencies. It is from these constituencies that the nation's real wealth emerges. It is not the Clores, the Frasers and the others, the people who are benefiting from this Clause, who have made this contribution. Unfortunately, in the older industrial areas the older industries are declining—[HON. MEMBERS: "Hear, hear."] Some hon. Members say "Hear, hear," but they do not know what they are talking about because they have never made an attempt to analyse this problem. They are not concerned with the question of wealth production. They are concerned merely with extracting the maximum profit that they can from that wealth production without any regard to its effect on the nation or the nation's workers. We in the older industrial areas are watching the decline in our basic industries. If hon. Members opposite were really concerned about the export drive, they would start diverting some of the newer industries into the areas that I have mentioned.
    The President of the Board of Trade made a glowing defence of the Chancellor's Budget on the basis that justice was being done to the nation. But the President of the Board of Trade is the chief victim of the Chancellor's policy, and particularly of this Clause because if the President of the Board of Trade is going to tackle the economic problems of Britain and the export problems that flow from them, he will have to get much more assistance from the Chancellor of the Exchequer and the Government than he has had so far. It is no use talking of new policies and new ideas because the present Government have had ten years in which to set their wheels and their sights in the right direction and all that they have done in that period has been to change direction at different times to suit the pressure groups which have been applying pressure in order to extract these types of concessions.
    1306
    I remember saying during the by-election in my constituency that the nation would find in the course of time that the present Chancellor would have a more disastrous effect on the nation than he had as Foreign Secretary. That was a bold prophecy at the time, but the right hon. and learned Gentleman has at least done us the service of proving it correct.
    The economic crisis which the Chancellor predicted in November last year is upon us now. The Tory Party is shackled by its own slogans from previous elections. If hon. Members turn back to their election addresses of 1959, they will find nothing there bearing any relation to the type of Budget we have now in 1961. They will find no reference to the difficulties confronting the export trade, to increases in National Insurance contributions or National Health Service prescription charges, or to the possibility that their constituents would in times of ill health have to do as some of my constituents now have to do. Some people now, after visiting the doctor on a Monday or a Tuesday, find that the charges in respect of their prescriptions, sometimes two or three of them for different members of the family, cannot be met. The result is that the prescriptions are either left with the chemist until the Friday or are not even taken to the chemist until that day, when the wherewithal is to hand.
    When I raised this matter with the Minister of Health, he said he had not heard of that difficulty arising. That did not prove that it did not exist, of course. It proved only that neither he nor any other Member of the Cabinet, like the rest of hon. and right hon. Members opposite, were in touch with what is happening to ordinary folk.
    It has been said that £14 or £15 a week is the average earnings of industrial workers. [Interruption.] I can well understand the submerged frustration of hon. Members opposite after being whipped into silence for several hours. They have to have some outlet for their energies. But I am not the one who has compelled them to stay here. I can carry on just as well without their presence. When one examines the record of some hon. Members opposite, one finds—
    The Temporary Chairman: The hon. Member must now return to the Question "That the Clause stand part of the Bill".
    Mr. Milne: I bow to your Ruling, Mr. Thomas. After 10 years spent in examining the records of the Conservative Party, I do not think that anything that we may say will greatly alter the outlook and attitude of hon. Members opposite.
    What is particularly important is that at some stage in the development of the nation the people of Britain must realise how they have been hoodwinked during the last 10 years. In reference to the average weekly earnings of industrial workers, the figure of £14–£15 is very misleading. Millions governed by wages councils set up by Parliament have wage rates below the £9 mark. Many are in trades where they have no opportunity of adding to the basic rate. Even if we turn to voluntary agreements on joint industrial councils and other bodies, we find millions below the average figure.
    The hon. Member for Middleton and Prestwich talked about the tax changes which had taken place and which had had an effect on the lower-paid workers. But, as my hon. Friend the Member for Wallsend (Mr. McKay) clearly showed, many of those who will benefit from the operation of the Clause will get two or three times as much per week in Surtax concessions as the people to whom I have referred are getting from doing an honest week's work.
    If that is the kind of society that hon. Members opposite want they should cut out the cant and humbug from their election addresses and really tell us what they are aiming at. What they are doing is merely retaining the power, privilege and profit which has been theirs not only over the last 10 years but for centuries. The facts about the Government's economic policy given to us are very sketchy. If we have to accept them, we have to say that they apply not to the second half of the twentieth century but to the latter part of the nineteenth century. Our real quarrel with Toryism is not so much this or that aspect of policy but that hon. Members opposite are completely out of touch with the world in which we live. In short, they are completely
    1308
    unfitted to lead a great industrial nation in the second half of the twentieth century.
    Several hon. Members Several hon. Members rose—
    The Chairman (Sir Gordon Touche): The Chancellor of the Exchequer.
    3.30 a.m.
    Mr. Marsh: On a point of order, Sir Gordon. A number of hon. Members have been trying to take part in the debate all the evening—[Interruption.] I take it, Sir Gordon, that we still have only the one Chairman. I seek your guidance. Is it not possible for the Chancellor to speak at some length later in order that those hon. Members have a chance to speak?
    Mr. Loughlin: Further to that point of order, Sir Gordon. Is it the intention to close this debate after the Chancellor has spoken? Let me—
    The Chairman: That point does not arise now.
    Mr. Loughlin: Then when does it arise?
    The Chairman: That point does not arise now.
    Mr. Loughlin: Further to that point of order. Could I have your guidance—
    The Chairman: Order. No point of order arises now.
    Mr. Loughlin: I am asking you—
    Mr. H. Wilson: Further to that point of order, Sir Gordon. In order to know what is planned—and, after all, your Ruling is strangely reminiscent of Rulings we had some time ago—and in a genuine attempt to make progress, because I am not attempting to hold up the Government, would you permit me now to move to report Progress so that we can hear from the Government what their intentions are? I think that there is some misunderstanding, perhaps genuine, about the Chancellor's rising now. A number of hon. Member? want to speak, and there is a feeling that the Closure is about to be moved. That being so, may I move that you do report Progress, and ask leave to sit again?
    The Chairman: I would accept that after the Chancellor has spoken, as I have called the Chancellor.
    Mr. Lloyd: It may help to clear things up if I say that there is no intention to move the Closure after I have spoken, but I have been listening now for nearly live hours and thought that it would not be inappropriate to offer some remarks.
    It has been a very wide-ranging debate, and many side issues have been raised. The question of M.R.A. was brought up; I have no connection with that organisation. Reference was also made, by the hon. Member for Fife, West (Mr. W. Hamilton) to Mau Mau, and I have no connection with that organisation either. Mention has been made of the problems of full employment, of recruiting teachers, police, nurses, etc.; matters which I do not think are appropriate for a debate on this Clause. [HON. MEMBERS: "They are."]
    A lot of rough things have been said, about which I have no complaint to make—
    Mr. C. Howell: On a point of order, Sir Gordon. [HON. MEMBERS: "Sit down."] Is not a charge that hon. Members have been out of order in making those references a reflection on the Chair?
    The Chairman: I do not think it is a reflection on the Chair, but several hon. Members have gone very wide.
    Mr. Milne: Is it in order, Sir Gordon, for hon. Members opposite, when a Member is rising to put a point of order, to shout "Sit down"?
    The Chairman: It is not proper Parliamentary behaviour.
    Mr. Lloyd: As I was saying, a number of rough things have been said in this debate, about which I make no complaint, but, if I may say so, the speech of the right hon. Member for Huyton (Mr. H. Wilson) was more to the point than some others that have been made. I agree with some of the things the right hon. Gentleman said. I agree with his statement that direct taxation is much too high, and I agree with his statement that the tax basis is too narrow. I hope that one will have the opportunity to hear him develop further ideas on both points.
    The main criticism during this debate has been that I have my priorities wrong. The hon. Member for Greenwich (Mr. Marsh) admitted that the Surtax payers
    1310
    had a case, and the hon. Member for Fife, West said that his attitude to the problem might have been changed had the proposal been accompanied by proposals for a capital gains tax. I think there is general acknowledgement that something had to be done for the Surtax payer. It may not be particularly popular to do it, but I believe that in the present economic position of the country I have got my priorities right and that it is right for me to take this step.
    Mr. Marsh Mr. Marsh rose—
    Mr. Lloyd: I listened to the hon. Member without interrupting him and I think that he should now hear my speech without interruption.
    It is right to give the Surtax payer some relief next year—nothing in this year—because the level of direct personal taxation is very high in the United Kingdom, particularly for incomes over £2,000 a year. If comparisons are made with the position in Western Germany and the United States, it will be seen that there is a substantial difference between our scales and theirs. The rates of taxation are much higher in this country.
    If hon. Members look at Chart 4 in the May issue of the National Institute Economic Review, they will see not hypocritical bunk but the facts, showing that in this band of incomes, particularly between £2,000 and £10,000, a higher rate of tax is paid than is paid, for example, in Western Germany. That also applies to the marginal rates. At a gross income of £2,000 a year, an American keeps almost 80 per cent. of the next segment of his income and the West German about 72 per cent., but the Briton only 60 per cent. Of a gross income of £5,000 a year, the American retains about 68 per cent., the West German about 60 per cent. and the Briton only about 40 per cent.
    Mr. Jay: In quoting those figures, should not the right hon. and learned Gentleman add that the American marginal rate at the top level is higher than our own and that the amount kept in Sweden comes out lower than our own?
    Mr. Lloyd: I do not think there is any reason for including Sweden, because in these league tables which are all the time being thrown in my face it is not Sweden but always Western

    1311
    Germany which is mentioned. That is why I thought it appropriate to refer only to Western Germany and the United States in this context.
    Mr. George Lawson: While the tendency in America and Germany is to say that these people earn their incomes, is it not the case that in this country it is largely nepotism which results in their receiving these incomes?
    Mr. Lloyd: That does not reflect very well on the hon. Member or on industry in this country. That is not a fair comment.
    Mr. W. Hamilton: Everybody knows that it is true.
    Mr. Lloyd: I am certain that the figures which I have mentioned are a disincentive to people who, whatever may be said, are a very important section of the community.
    I do not agree with the hon. Member for Gloucester (Mr. Diamond) that the more people are directly taxed the harder they work. A high level of direct taxation is a disincentive. The Report of the Royal Commission has been mentioned, but the Commission was talking mainly about P.A.Y.E. I do not accept that its conclusion was against my proposal. The Commission discussed a different aspect of the matter on such evidence as was available to it.
    There has been some discussion of the reference by my hon. Friend the Financial Secretary to the Measure as a dynamic boost to the economy. I agree at once that these are not the only people who make a contribution to the economy. Many others contribute a great deal, but this section has a very great rôle to play. There are some who do not contribute as much to the nation's well-being as others, but basically this group of income receivers has a tremendous lot to give to the country's prosperity.
    I will be as precise as I can about the effects of this proposal. As the hon. Member for Bosworth (Mr. Wyatt) when seeking under the Ten-Minute Rule, to introduce a Bill to raise the Surtax level said, it will be an incentive to the younger executives to get on and make progress in their industries or professions. As my hon. Friend the Member
    1312
    for Bath (Mr. Pitman) said, I think it will make it easier to get people to move from industry to industry, and within industry from firm to firm, and also from place to place in this country. If anybody disputes the fact that the high level of taxation has been a disincentive to people moving, then he really does not know the facts of life. I think also that it will lead people to accept responsibility. Case after case has been reported of people not being willing to accept greater responsibility because they considered that on the Whole the additional reward was inadequate.
    Then there is the question of a husband and his wife both working. I think that what I have done will be a very substantial incentive to wives to work because up to now a large number of those who could work have been deterred from doing so, or from doing more, because of their being assessed with their husbands for Surtax. With this £5,000 level I think I have done a great deal to meet that disadvantage.
    I think another benefit will be that it it will bring some reality into figures of salaries. At present, because of the high level of taxation, we have astronomical salary figures. When people retain rather more of what they get, that will lead to more reality in salary figures.
    Mr. H. Wilson: The right hon. and learned Gentleman seemed to suggest that a lot of people are refusing to work. He just said that. He did not produce evidence. Will he give the evidence of cuts in salaries which have occurred since the Budget to take account of the suggestion he has just made? Has that happened?
    Mr. Lloyd: Of course not. The Budget has not been passed yet. I do not think the right hon. Gentleman really expected an answer to his question.
    The plain fact of the matter, and hon. Members opposite must accept it, is the changed value of money. I know that £5,000 sounds a lot, and of course, a man with £5,000 a year is a good deal better off than people with a small weekly wage. [Interruption.] Of course he is, but there is that remark which hon. Members have thrown in my teeth again and again, and what I said was that a man with £5,000 was not a rich man.
    Mr. Hilton: Tell the farm workers that.
    Mr. Lloyd: But hon. Gentlemen opposite have said that I would make the rich man richer. [HON. MEMBERS: "Hear, hear."] I was trying to point out to hon. Gentlemen opposite that a man with £5,000 a year is not a rich man. The figure which I gave—I give it again to the Committee—was that a man with £5,000 a year gross now has the same spending power as the man with £1,400 a year gross in 1937. I do not think that hon. Members, even on the other side of the Committee, would say that a man with £1,400 in 1937 was a rich man. [HON. MEMBERS: "He was."]
    I think the change embodied in the Clause will be beneficial to the economy. Not one penny is going to the Surtax payer this year. As I said in my Budget speech, almost the whole cost is covered by the increase in the Profits Tax. I think the Opposition is out of date in its approach to this matter. It has been said that this is a straight political debate. I certainly accept the challenge of a straight political debate. I think that what I have done is common sense and is in the interests of the economy, and I ask the Committee to pass this Clause.
    3.45 a.m.
    Mr. Houghton: It may be convenient if I make a few observations on the Chancellor's speech, without intending to bring the debate to an end, since a number of my hon. Friends may still wish to contribute to the discussion. I think I should express regret at this stage at the lack of co-operation from the benches opposite. What astonishes me is the fact that hon. Members opposite, who are supposed to be made of flesh and blood, have been reduced to a state of lifeless silence under the lash of the criticisms of my hon. Friends. I do not believe that the Patronage Secretary has silenced them. On other occasions when they have wished to say something and have wished to vote against their own Government the Patronage Secretary has not been able to restrain them. They must have been silent because they have nothing to say.
    Sir D. Walker-Smith Sir D. Walker-Smith rose—
    Hon. Members: Make a speech.
    Mr. Houghton: I have something to say. I will give way to the right hon. and learned Gentleman in a moment. He must let me finish my castigation first. A proposal of this kind, which is the main one in the Bill, in the most contentious Clause, should surely have been defended by hon. Members opposite. It is not fair to the House or to the country that all explanations and defences of this case should be left to the Government Front Bench. Hon. Members opposite must feel something about the explanation given by the Chancellor. The reason why we are left in such doubt as to the real motive behind the Clause is that so little has been said by hon. Members opposite. Does the right hon. and learned Gentleman wish to intervene now?
    Sir D. Walker-Smith: I merely wanted to ask the hon. Member if the explanation of the silence from these benches during the five hours of speeches of hon. Members opposite might be that they have not produced a single comment worthy of reply.
    Mr. Houghton: Have the fighting instincts of hon. Members opposite left them? Has their blood run so thin that they cannot get up and reply to the provocative speeches from hon. Members on this side of the Committee? What is the matter with them? They have been called almost everything, from knaves to fools, by my hon. Friends, yet they say nothing has been said that is worthy of reply.
    Mr. D. Price: May I assist the hon. Member in his dilemma? St. George is prepared to fight a dragon but not a mouse.
    Mr. Houghton: When the hon. Member was sitting on the bench below the Gangway a little while ago he did not say that we were mice; he said that he was bored. [Laughter.] I hope that hon. Members opposite are in the mood for a little serious discussion of the matter.
    Mr. D. Jones: Hon. Members opposite will lose their smiles in the months to come. [Laughter.] I hope they will remember my words. [Laughter.] They can enjoy their smiles while they can.
    Mr. Houghton: Whatever the motive behind the Clause, we fully understand

    1315
    its effect on the level of Surtax for 1961–62. And we have to put this proposal in Clause 11 in the context of the general situation accompanying this Bill and the Budget.
    Some speakers have seemed to suggest that the Chancellor was considering what to do with a surplus of revenue. That is not the position at all. This is not a distribution of surplus revenue. The right hon. and learned Gentleman is not distributing something which he does not want. This proposal is made against a background of the highest surplus above the line for ten years. Only the other day the Financial Secretary to the Treasury, in the debate on an Amendment which would have cost something over £4 million, declared that it was fundamental to the Chancellor's Budgetary strategy to retain a surplus above the line of over £500 million. That is the first thing.
    The second thing to remember is that these concessions are announced in a year in which the Chancellor has actually increased taxation for this year by £68 million, and next year, even after allowing for the Surtax concessions, there will be a net addition to taxation of £58,500,000. Against that background there has to be overwhelmng justification for what the Chancellor is proposing in this Clause.
    He said when he introduced his Budget that he could not give any general tax reliefs this year. Notwithstanding the reduction in the standard rate in 1959 and the postponing of further reliefs on personal allowances which we might have expected to have been introduced this year, the Chancellor has chosen this proposal in Clause 11 as the relief uppermost in his mind, and the most important to be done now. Therefore, I think the Committee is fully entitled to make some searching inquiries into the motives behind this proposal, because it is something quite exceptional in the context of the Budget and the economic position as a whole.
    A few moments ago the Chancellor reiterated what he has frequently said on earlier debates on the Bill and Amendments to this Clause, that he is virtually making an investment in strengthening the economy by giving incentives to
    1316
    people who have a valuable contribution to make to the wealth and well-being of the country. I think it understandable that some of my hon. Friends should doubt whether the Chancellor's reasons are genuine, but I want to look at them. I think it understandable that some of my hon. Friends should inquire whether some of these proposals are relevant to the divisions on the benches opposite. Perhaps this is not the occasion to delve into the sordid divisions and struggles for power which go on on the benches opposite—[HON. MEMBERS: "Oh."]—but I am quite sure that at a time when there are so many obvious divisions among hon. Members opposite it would be underestimating the Chancellor's sense of political advantage if we did not think that he was searching for some unifying proposal.
    I suppose that one reason why hon. Members opposite have remained so silent is that they agree with what the Chancellor is doing and are content to let him get on with it. [HON. MEMBERS: "Hear, hear."] That at least proves that the Chancellor has made a somewhat shrewd bid for unity on the benches opposite.
    I think it also quite legitimate for those of us on these benches to inquire whether there was anything in the mind of the Chancellor in making these proposals which would satisfy the expectations of the closest friends and supporters of the Conservative Party. I think there may be something in that. After all, people do not support parties without expecting them to fulfil their desires or beliefs of what they think good for the country as well as themselves. There was one reference, however, which I thought perhaps relevant, that even though some Surtax payers would not subscribe to the view that they were going to work harder or be any more efficient the proposals would still justify what the Chancellor proposed on the ground that the present level of taxation was unjust. Injustice in the Surtax range would have to be justified lower down. My hon. Friend the Member for Wallsend (Mr. McKay) gave the Committee many figures to suggest that lower down reliefs have not been as freely given as in those higher up. Was it really the motive in the mind of the Chancellor to keep key men happy at

    1317
    their work? If so, the proposition has to be looked at as an investment in efficiency and in higher productivity. The Chancellor must surely have some evidence available to justify the investment of £84 million in this way to achieve the purpose he had in mind.
    Personally, I dismiss the comparisons which he made with the levels of personal taxation in other countries. What is the reason behind that comparison? Is that merely a sense of comparative justice, or does he suggest that those other countries with allegedly lower levels of taxation in the higher ranges are in competition with us for brains and skill? Are the executives and technicians and professional men, civil servants and company directors leaving Britain for the countries were taxation is lower? There is no evidence that they are. Some are going, and it would be a great pity if some did not go to help build up the economies of other countries perhaps very much in need of their assistance. We have exported skill and service in the past, and I see no reason why we should not continue to do so, but that is no justification for reducing Surtax in England in order to keep people here. I do not think that can be the reason.
    Does this inequality in the level of taxation in the higher ranges put this country in a less favourable competitive position in relation to those other countries? I do not think that can hold water. The level of company taxation, Profits Tax and Income Tax, on industry may have some effect on cost of production or on profit margins which companies are looking for in their export trade, but as individuals, as executives and directors, I see nothing to suggest that by any differences in levels of taxation we are put in a less favourable competitive position.
    4.0 a.m.
    Moreover, in making these comparisons what is frequently lost sight of is the composition of the taxation in terms of redistribution for social service purposes. There is no National Health Service in the United States. Many people wish there were. The one cloud that hangs over every household in the United States is the fear of illness and the great expense of medical, surgical and hospital attention. Voluntary
    1318
    organisations are being formed which I believe will one day lead to a National Health Service in the United States. Any visitor to the United States, as hon. Members opposite know even better than I, is soon asked questions by Americans about the working of what they describe as "socialised medicine". Their own risk of illness may be an expensive one indeed. There are such questions as the cost of education and other social benefits, which are not available in the United States and are not available in similar form even in Western Germany.
    We must look at our level of taxation in relation to our social needs, our traditions, and the expression of our social obligations in the Welfare State which we have built up in the last fifteen years.
    Sir E. Boyle: The President of the Board of Trade said in the Budget debate that social expenditure has risen by 90 per cent. during the last ten years. That is a very important reply to the many hon. Members opposite who have talked about this Government redistributing income in favour of the better off. We must consider the social income and the great expenditure on the social services, quite apart from the 20 per cent. increase in the living standards of ordinary working people.
    Mr. Houghton: There is no doubt that my hon. Friends are right in saying that recently there has been a greater tendency for redistribution to relieve the direct taxpayer and place additional burdens on the flat-rate contributor. I am disposing of one of the points raised by the Chancellor in justification of the proposal in the Clause.
    The Chancellor then said that he was sure that the present level of taxation acted as a disincentive to a valuable section of the community. How does he know? No evidence has been produced to the Committee or anyone else to confirm that "certainty" about the high level of taxation being a disincentive. The Chancellor said that if we did not know of cases of people refusing to move or accept additional responsiblity because the net additional rewards would not be worth it, we did not know the facts of life.

    1319
    What sort of people are they who refuse to move or accept additional responsibility because the net rewards will not be worth it? These are key men. These are among the 400,000 men and women in Britain today on whom we are said to rely for the expansion of our economy, the health of industry, and the development of our services. If these men and women will demur at accepting what is clearly their duty, on the ground that the net rewards are not good enough, I doubt very much whether they would make the grade if they accepted. I have yet to meet any such person.
    I challenge hon. Members opposite—there is plenty of time before breakfast—to rise and give us actual instances of the type which the Chancellor says he is sure exists. Many junior civil servants have to move from, for instance, Peterhead to London with very little additional reward or hope of promotion. They do it because they conceive it to be their duty, because they have entered a mobile service. They have undertaken an obligation to serve where they are wanted. I should have thought that many of those to whom the Chancellor referred would have accepted similar obligations with the firms employing them. I think that that can be very much exaggerated, and when it comes to rock-bottom, there is nothing more in the Chancellor's remarks a few minutes ago than he has given us before, unsupported by the more convincing evidence which he must have felt challenged to give in reply to the scepticism and criticism which we on this side have levelled at the real reasons for the proposals in Clause 11.
    I think that the Committee, notwithstanding all the debate which we have had, can still be uncertain as to the real motive behind all this. Why did the Chancellor do it? What made him do it? Why did he go so far? If he did it on the basis of the sort of hearsay which he gave us a few minutes ago, then I think he has taken a budgetary proposal costing £84 million in a spirit of irresponsibility; for, not only is this Clause going to cost £84 million, but he has levied industry in order to make good the loss of taxation when the reliefs come to be implemented in a year's time. In that way he has justified not
    1320
    only the relief, but the accompanying additional taxation on industry to pay for it. That makes this step doubly serious and requiring fuller justification.
    We have a new phrase now which will no doubt be quoted. The Financial Secretary referred to this as being "a dynamic boost to the economy". If that is what it is, and we are to get it from 400,000 people, what about the other 20 million? They seem to have been completely overlooked. Does the Chancellor not realise that for £84 million he could have increased the personal allowance for single persons to £150 and the personal allowance for a married couple from £240 to £260, and the wife's special earned income relief from £140 to £150? He could have spread that £84 million over the whole of the direct taxpayers, and the Surtax payers included because they would have had the benefit of a spread of the personal reliefs. None of those reliefs has been increased since 1955, excepting that the standard rate of Income Tax was reduced more recently in 1959. There is one way in which he could have given a boost to the economy. He could have done it by spreading these benefits over the wider field, but he has chosen to concentrate on the very narrow front.
    This, I think, raises serious doubts. I should have thought that the Chancellor had doubts as to whether he will get from these reliefs the additional strength for the economy which he apparently believes will come. As we all know, there is a considerable proportion of the Surtax payers which consists, by the very nature of their occupation, of persons who will be unable to contribute any more to the strength of our economy. Indeed, some of them would strengthen the economy of the nation if they would get out of business and allow resources now used for useless purposes to be devoted to something much more worth while.
    The Chancellor's approach to this problem raises the fundamental question whether Britain will survive on this philosophy. It seems to me that the capitalist system will work only as long as greater effort and drive and higher efficiency can be bought with money; personal gain must lie at the root of all human activity if industry is to prosper and the country to survive. But when material gain loses its attraction, when

    1321
    men stop trying because more money alone fails to enable them to fulfil their personality, what do we do? We may be coming to the end of the capitalist road, because if these reliefs do not repay the Chancellor and the nation in terms of higher productivity and greater wealth, then this method of obtaining it will have failed and the country and the House will have to consider an alternative. If the carrot fails and one cannot use the stick, what, then, will make men work harder or be more efficient or be more adventurous or put more drive into their work?
    This is a serious gamble—one of the most serious fiscal and economic gambles that the Chancellor has undertaken. I also assert that there is nothing in the experience of the last substantial benefits to the higher income groups to give the Chancellor any confidence that he will get higher productivity and greater wealth from the step which he is now taking. I discern nothing from the wide extension of the earned income reliefs into the field of remuneration of the Surtax payer which would offer the Chancellor any encouragement in carrying that example further.
    I think that Conservative policy must be bewildering even to those who think that they support it, because it is not without significance that although this Clause is designed to boost the economy, we have Clauses 8 and 26 to put bits and curbs on the economy if it shows any signs of getting out of control—and it is a matter of speculation whether the boost or the curb will happen first. We appear to be getting rather nearer the curb than the boost.
    In the background to this Clause, and the whole approach to it, is the soul-destroying Conservative philosophy which is building a society governed almost exclusively by materialism and hope of personal advantage, a society which has been strongly and justly criticised by some of my hon. Friends. It makes me wonder what is the future of Britain if all the young people are to be subject to the attentions of the ad-men and the persuaders and are to see almost every aspect of human activity in terms of romantic love—even cigarettes, even beer. That is the sort of background which is drawn behind the Chancellor's hope that by offering relief to the Surtax payers he will in
    1322
    some mysterious but nevertheless tangible way show how much stronger the economy can become.
    4.15 a.m.
    Mr. Ross: My hon. Friend the Member for Sowerby (Mr. Houghton) gave hon. Members opposite something to think about—although while they have been in the Chamber they have spent most of their time jeering and conducting themselves with considerable levity. This links up closely with the leading article in The Times yesterday morning which wondered whether the Government are moving in the right direction and whether they have their moral values right in their present policy.
    This, to my mind, is the most serious part of this matter—the whole implication of what the Chancellor is doing, and this, being the one great thing that he is doing within this pessimistic Budget of his, is something which is bad for Britain. If this is the only way in which we can get the executives, the scientists and the exporters of Britain to work for Britain, heaven help Britain.
    I begin to wonder in what sort of spheres the people at the Treasury move when we get this story about the £5,000 man and his outlook. This is the outlook of the grouse moors. "Nigel was worried; he was very depressed." This is another bit of Tory gossip which came from the grouse moors of the Treasury playground. "It is anti-British but it makes good sense to me"—not "Patriotism and Britain come first," but personal gain. I had hoped that what my hon. Friend the Member for Fife, West (Mr. W. Hamilton) said about the Chancellor's interest in Moral Rearmament might have been true. I appeal to him now, while he still has time, to withdraw this Clause.
    Let us put the matter into perspective. Here is a Finance Bill following a Budget concerning which the speech of the Chancellor was one of the most realistic and best that we have heard for many years. He put clearly before the country the razor-edge balance of our whole economy, and he sought to strengthen his own hand by putting into the Finance Bill two great new powers which underlined the fact that we were required to act quickly. In respect of one of those powers, he visualised acting before

    1323
    August of next year. They are two great regulating powers. Is this the time to anticipate his Budget of next year by giving relief of £83 million to one section of the people? It is a denial of the reality which he himself tried to face. I cannot understand why the Chancellor does that.
    We had a speech from the Chancellor a short time ago in which he sought not so much to justify his proposal as to justify a silly reference he made in a speech. He spent all his time trying to justify the suggestion that a person with £5,000 a year is not rich. He said that one is only rich if one has a great amount of capital. Even on the logic of that statement, he should have introduced a capital levy or a capital gains tax into his Budget.
    The Chancellor suggested that we ought to make a comparison with a salary of £1,400 a year in 1937. My memories of 1937 are still quite vivid. I had just started out on my career as a school teacher at that time, and I was very lucky to be working at all because at that time Glasgow was not short of applicants for jobs, and those who were working would have looked at £1,400 a year as wealth beyond anything that they could ever hope to achieve. I was very fortunate because my father was in a good job. He was one of the kings of the working class, an engine driver, on £4 a week steady. That was real wealth. The Chancellor is just about as wrong in his notions about the pre-war world as he is about this.
    The right hon. and learned Gentleman cannot divorce what he is doing from what he has already done. He cannot ignore the fact that he came to us, having first sent Enoch the Baptist before him, to say that the only way we could have hospitals was by taxing the sick 2s. per item on prescriptions, by putting up the National Health Service contribution—this is still to come in July—by 1s. for a man—10d. for the man and 2d. for the employer—and in various ways raising an extra £65 million a year for the purpose. Then he says, "I shall be able to afford next year £83 million for 300,000 or 400,000 Surtax payers". It does not make sense.
    Will the right hon. and learned Gentleman move among the people? Why
    1324
    were the Conservatives completely deserted at the polls in Paisley so that they nearly lost their deposit when previously they had almost 20,000 votes? Because Conservative supporters were utterly dismayed and could not believe that in our situation the Chancellor could do something like that. I do not know why he has done it. It is said that he has done it to purchase popularity within the Tory ranks. If so, it will be very expensive for the nation, because it will cost more than £83 million.
    Other people will be affected. The Chancellor talks about helping the exporter. In Kilmarnock, we do quite a bit of exporting of carpets, boots and shoes, whisky, engineering supplies and so on. In the whole of Kilmarnock there will not be, I imagine, 300 people who will benefit from this Clause, but every single worker is working for export. What will their reaction be? They will think, "If this is the way things are done"—we all had the stuff from the Institute of Directors and we know about the activities of the pressure group all last winter, the articles in the Press and so on—"we will start too". They will start through their trade unions, and quite rightly so. Does the right hon. and learned Gentleman see what he is doing to the nation? It is not at all funny. This goes from one section of the population to another, and we shall become a rather shoddy nation in our moral values.
    In Scotland today the picture houses are all opening for "Bingo" sessions morning and afternoon. People are going in to labour in the casinos of London. We have it from the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) that the attractions of the expenses racket are indications of sober Christian society. What a muddle we have had from the one or two speeches made by hon. Members opposite.
    The Clause cannot be defended in relation to the situation today. The Chancellor tells us—we have had so many justifications for this—that it is to help the export trade. That was laughed out of court by my right hon. Friend the Member for Huyton (Mr. H. Wilson). Are all the people who will benefit from the Government's proposals in the export trade, are they

    1325
    all young, and are they all sufficiently uninspired as to be completely stationary and refusing to move? This is just not true.
    I reckon that as a result of what happened at Epsom last week many bookmakers have come into the Surtax class. They do not increase production. I do not know how they come into this in relation to the well-being of the nation. The more we examine this, the more the original reasons given by the Chancellor are shown to be utterly stupid.
    The President of the Board of Trade told us that it was a belated act of social justice. The hon. Member for Ormskirk (Sir D. Glover) told us about teen-age tycoons with £7 to £8 per week and said that it did not matter because they could pay this and that. Now he sits in silence; when he opens his mouth it is to jeer.
    Mr. Scholefield Allen: Or yawn.
    Mr. Ross: The Chancellor is giving £83 million to 300,000 Surtax payers, and £19 million of that is in respect of unearned income. How can he justify that in view of his preparedness to tax the 10s. widow? Social justice does not enter into it. The Government are just clothing the proposal with fine phrases. There are many other things that we could have done with the £83 million.
    I have just been dealing with correspondence about housing and overspill in Glasgow. We need new towns. The people do not like the Government's proposal. If the Tory Party are to be responsive to the feeling of the people—and the people in general are not always wrong—they must take this proposal away. Back-bench Members opposite are hoping that we shall have had the debate, controversy and argument this year and by the time the proposal comes into force next year people will have forgotten it and the General Election will be a year nearer. That may be the subtle timing of the proposal.
    It is quite wrong. Hon. Gentlemen opposite must appreciate that what is right for the Surtax payers is not necessarily right for the people of Britain as a whole, and that the Surtax payers are not the people who most need help at present.
    1326
    I wonder whether the silence of hon. and right hon. Gentlemen opposite comes from their inner feeling that this is wrong and that what we require is something much more realistic to get our priorities right and inspire the people with a certain measure of confidence. Let the Government not forget that they have had ten years, and that it is after that that they tell us that this is the only way to make Conservative freedom work. This is the only way to make the most Tory section of the community work, because 90 per cent. of the 300,000 will be not only supporters of but contributors to the Conservative Party. Is this the sort of bribe Britain needs to make her way in this world? If so, the Budget and the feeling behind it make me even more pessimistic about how we are to proceed if we have the present Government very much longer. I ask the Chancellor to withdraw the Clause.
    4.30 a.m.
    Mr. Laurence Pavitt: I thought that I might be one of the fortunate back benchers to hear and be able to answer at least one speech from the other side when I saw the Chancellor rise. What has happened in this debate is that my right hon. Friend the Member for Huyton (Mr. H. Wilson) with amazing foresight demolished most of the speech of the Chancellor before it was made, and the rest was entirely destroyed by my hon. Friends the Members for Sowerby (Mr. Houghton) and for Kilmarnock (Mr. Ross). The right hon. and learned Gentleman must have some of the qualities of the centipede. During seven and a half hours of debate I had thought that my various hon. Friends did not leave the Chancellor a leg to stand on, but he was still able to find his feet—though without being able to say anything new.
    The Chancellor told us that, in 1937, £1,400 was not the income of a rich man. What sheer nonsense that is to anyone who can remember 1937. The Spens Report, on which the doctors' pay was based, showed that the average all-sources income of the general practitioner was under £900 in 1939. The Health Service was based on the understanding that the general pracititioner's rate of pay in 1947 was £1,111. Yet the right hon. and learned Gentleman tells

    1327
    us that in 1937 an income of £1,400 was not that of a rich man.
    The Chancellor's other point was torn to pieces by my hon. Friend the Member for Kilmarnock; that young technologists, scientists and executives likely to be in the Surtax class, needed to have some incentive, and that he was providing that incentive by paying £19 million of advantage to people not on earned, but with unearned income. I fail to see how such a concession on unearned income can have the slightest bearing on the situation, nor can my hon. Friends. From the speeches that have been made during this rather long period, it is obvious that Clause 11 stinks in the nostrils of all my hon. Friends. I hope that the advice proffered by my hon. Friend the Member for Kilmarnock will be taken, and that the Clause will be taken quietly away, and withdrawn.
    Each of my hon. Members has spoken always from the point of view of his own knowledge and experience of people. My hon. Friend the Member for Norfolk, South-West (Mr. Hilton) spoke from the point of view of the agricultural worker. My hon. Friend the Member for Birmingham, Small Heath (Mr. Denis Howell), spoke of the way the interests of the hospital staffs had been affected by the whole of the Budget speech. Time and again we have had points from hon. Members speaking with knowledge of their constituencies, and of the industry, commerce or agriculture, in their areas. My hon. Friend the Member for Wallsend (Mr. McKay) displayed a terrific knowledge of figures, but as I find figures far more difficult than he does, I shall not follow him there.
    During this debate, we have been representing the ordinary people. As to the other side, it has often been said that the Establishment is full of faceless people. Perhaps the Surtax payers as part of the Establishment are some of these faceless people. If so, they have been aptly represented by the voiceless wonders in this Chamber—because, apart from the Chancellor's speech, we have had only one speech from the other side, and that was merely a short intervention.
    We on this side must interpret the intricacies of the Clause in terms of people.
    1328
    I must follow the general line adopted by most of my hon. Friends this evening and say that this extra hand-out of £83 million can be considered only in the light of the £65 million already taken in the previous budgetary exercise conducted by the Minister of Health and the Treasury. The two clearly stand in juxtaposition and it is in that context that I have to visualise the effect of these Measures on the people I know.
    We have talked of the language of priorities. I know a man who has cancer of the bowel, a very unpleasant and difficult disease with which to deal. He has a colostomy, which means that he has to have a drainage system from his abdomen. He requires five items on prescription every eight, nine, or ten days. He is not particularly poor, but he is an ordinary person trying to struggle along in an ordinary kind of job doing light work. He is coping with his disabilities very well, but this is the man who has to pay an extra 10s. every fortnight apparently in order that the Surtax payers shall have this incentive which, so far as I can see, does not exist.
    On the other hand, there is the chap to whom this concession will probably be given. I go back to my experience when for a short time I worked in a stockbroker's office—the only time I have had much to do with people paying Surtax. At that time, people paying Surtax used to get to the office at ten minutes to ten, go to the Stock Exchange at ten o'clock, come back for lunch at Simpson's at half-past twelve, and come back from lunch at half-past three, and then go back to the Stock Exchange for three-quarters of an hour and then, as has been said, go home to Woking after a busy day. Among those Surtax payers I did not see anyone who deserved to receive the product of the 2s. prescription charges. I am also concerned about the third Budget which we may get in the autumn and which may help to increase handouts similar to this sum of £83 million next year.
    The Surtax payers I know used to get cases of champagne and whisky every Christmas—all on the expense account and again part of the fringe benefits. I am now fighting the case of a man in my constituency who was given a bonus of £7 at Christmas but who, because he

    1329
    happened to be 69, had £5 2s. taken away because the gift was regarded as a bonus and was therefore liable under the earnings rule. Not only was he left with only £1 18s, but he has had an additional 2s. a week deducted from his pension in anticipation of his receiving a similar bonus next Christmas.
    That is the disparity, the gulf, the gap, between people like that and those affected by the Clause. Is it to be wondered at that we are indignant and distressed and that we are trying to do something for the ordinary people whom we meet in our everyday life? Yet we are faced with the absolute stone wall of the dogmatism of the Treasury Bench.
    My hon. Friend the Member for Ebbw Vale (Mr. M. Foot) discussed what could be done with the £19 million relief in respect of unearned income. We can all think of useful things which could be done with it. There is the whole question of a creative approach to the social services instead of the present mean and niggardly approach. There is the whole question of a dynamic in industry. All those things are being entirely missed for the sake of a pay-off to the friends of right hon. and hon. Members opposite.
    It has been suggested that this Clause is not only irresponsible but entirely irrelevant to the situation in which we find ourselves. This Clause is definitely obnoxious and unjust. I hope that the Chancellor, even at this late hour, will see his way clear to withdraw it. As we know, that is unlikely. We on this side will do our best to throw it out neck and crop.
    Mr. Loughlin: I want to oppose this Clause because I feel that it may do serious damage to the economy of this country in the next few months. I know that the Chancellor has argued that his intention in giving relief to the tune of £83 million to the Surtax payers is to ensure that those people whom he described, the executives, the managers, the technologists, and so on, would have an incentive to take initiative and to work with the intention of improving the economy. In his Budget speech he said that in looking at the future we should think not only of salaries and wages but of an increase in consumption in the next twelve months of some 3½ per cent.
    1330
    If he decides to give to the executives, the managers, the technologists, those people who pay Surtax, relief to the tune of £83 million, he cannot very well at the same time say that the incentive to the ordinary worker in industry, who is as vital to the economy of the country, in the next twelve months should be restricted to a 3½ per cent increase in wages, because that means that for every £5 the worker earns he should be restricted to an increase in the next twelve months of 3s. 6d.
    If the average earnings are in the region of £15 it means that the workpeople of this country will be restricted, if my arithmetic is correct, to three times 3s. 6d., which is 10s. 6d. We cannot very well argue that it is possible without creating inflation to spread £83 million in the form of Surtax reliefs amongst 300,000 people and at the same time say to the ordinary worker in industry that if he receives wage increases in the next twelve months in excess of 10s. 6d. it will be inflationary—assuming that he is earning at the average level.
    It is no good the Chancellor saying that this money he is distributing will not go into circulation for twelve months. I know no Surtax payer who will not be able to get a loan from the bank or who will not be able to get credit to purchase any goods he wants. He can spend this money in advance of receipt from the Chancellor.
    It is no good arguing that we can give £83 million to these people without its being inflationary but that we cannot afford to give workpeople earning £10 a week any more than 7s. in twelve months—even 7s. 6d.—because that would be inflationary. The Chancellor cannot expect the trade union movement or the industrial or distributive worker whose rates of pay are often well below £10 a week to pursue a policy of wage restraint when the Minister is, at the same time, giving relief to people who, by no stretch of the imagination, can be assumed to need it.
    4.45 a.m.
    I do not expect hon. Members opposite to agree with my view on the question whether it is right to give substantial reliefs of this kind to those who do not need them and, at the same time,

    1331
    to impose in one way or another, by the action of the Minister of Health, taxation on a good number of people who cannot afford it and who, at present, are suffering considerably as a result of its imposition. I recently talked to some old-age pensioners in my constituency. Some of them did not even know that they were entitled to get 2s. back on their prescriptions. I happened to be sitting in the waiting room of a hospital in my constituency where I chatted to a number of old-age pensioners, who told me that they were finding it extremely difficult to pay for the prescriptions which the medical practitioner attending them felt they should have in order to maintain a decent standard of health.
    I do not expect hon. Members opposite to consider this matter on the basis of social injustice, but if they claim to be the custodians of business I expect them to consider the issue on the basis of the question whether it will be good for business or for the country. I can tell them that many trade union officials will not be prepared to go to their workpeople and tell them that the 3½ per cent. to which the Chancellor referred in his Budget speech is the maximum that they are prepared to argue for around the negotiating table.
    Although they accept that they have a responsibility to ensure the continuance of a decent standard for their people they will quickly reach the point when they will have to ask themselves whether they have not also a right to take up the same attitude as that adopted by hon. Members opposite—that it is all right to extract the maximum. If we were arguing that we ought to have £1 a week more, and, having failed in our negotiations, decided on official strike action, hon. Members opposite would argue that we were holding the country to ransom. But the philosophy of the party opposite is that it is right for them to acquire the material goods of this life. They will do it at the expense of anybody, because if they will do it at the expense of pensioners and old people, they will do it at the expense of their own mothers. If they take that attitude, it is right that the trade union movement should do the same. If the party opposite can get the maximum amount of this world's goods without being charged
    1332
    with holding up the country to ransom, the trade union movement should have the same rights and privileges.
    Mr. F. H. Hayman: I do not intend to detain the Committee for long, but having listened to the debate for some hours I feel that I cannot contain myself any longer. The title of this Clause is—"Surtax: reliefs for earned income." The Financial Secretary told us that £19 million of relief would apply to unearned income. That information was not given us in the Budget statement. I have seen things in the last week which make me feel that, unless this House of Commons faces the reality of the position of Britain in the world, the country will go to ruin. Any thinking person who watched television last Saturday night and saw the dinner in Vienna and the concert that followed must have thought that the influence of Britain as a great Power had passed. The time of past glories of which hon. Members opposite continue to brag has gone. There were two men dominating Europe and the world and both were at an historic dinner wearing lounge suits. There were no fripperies such as must adorn banquets in Britain. If the Government and the Tory Party feel that they can glorify free enterprise to the bitter end, the workers have an equal right to exploit their power to the bitter end.
    Last night a man was interviewed on T.V. He said that he had left Britain to go to Jersey in order, as he said, to practise tax avoidance. That is a pretty despicable thing. Yet the Tory Party, which brags about Britain's power, is prepared to support the tax avoiders. Whether a man calls it tax avoidance or not, it is tax dodging. That man went to a part of the British Empire, which I suppose is still part of the United Kingdom, and expects to get British protection. I despise people of that kind.
    The Chancellor spoke about a man earning £1,400 a year in 1937 and seemed to think that it was a small amount. I recall that in 1937 in my constituency one worker in four was unemployed and in the country as a whole one in six were unemployed. In 1937 £1,400 was a quite respectable sum. We must realise that there has been a great change in power in the world and a great change in patterns of society.

    1333
    Last week the House debated Commonwealth Training Week, which was supported by hon. Members on both sides of the House. I spoke in a technical college in Falmouth last Friday night. The Minister of Education has refused point blank to grant enough money to expand that college. A fortnight ago I was in an ordinary school in Helsinki. There I saw a metal workshop which was far better than the metal workshop
    at the technical college in Falmouth. As a nation we cannot afford to neglect our technical colleges, yet in giving this £85 million relief in Surtax this Government are hampering the technical development of the country.
    Question put, That the Clause stand part of the Bill:—
    The Committee divided: Ayes 163, Noes 89.

    Division No. 194.]

    AYES

    [4.58 a.m.

    Agnew, Sir Peter

    Grant-Ferris, Wg. Cdr. R.

    Page, Graham (Crosby)

    Aitken, W. T.

    Green, Alan

    Pearson, Frank (Clitheroe)

    Allan, Robert (Paddington, S.)

    Gresham Cooke, R.

    Peel, John

    Allason, James

    Grosvenor, Lt.-Col. R. G.

    Percival, Ian

    Balniel, Lord

    Hamilton, Michael (Wellingborough)

    Pickthorn, Sir Kenneth

    Barber, Anthony

    Harris, Reader (Heston)

    Pike, Miss Mervyn

    Barter, John

    Harrison, Brian (Maldon)

    Pilkington, Sir Richard

    Beamish, Col. Sir Tufton

    Harvie Anderson, Miss

    Pott, Percivall

    Bennett, F. M. (Torquay)

    Hastings, Stephen

    Powell, Rt. Hon. J. Enoch

    Berkeley, Humphry

    Heald, Rt. Hon. Sir Lionel

    Price, David (Eastleigh)

    Biggs- Davison, John

    Hiley, Joseph

    Prior, J. M. L.

    Bingham, R. M.

    Hill, J. E. B. (S. Norfolk)

    Pym, Francis

    Bishop, F. P.

    Hinchingbrooke, Viscount

    Quennell, Miss J. M.

    Black, Sir Cyril

    Hirst, Geoffrey

    Rawlinson, Peter

    Bossom, Clive

    Hobson, John

    Redmayne, Rt. Hon. Martin

    Bourne-Arton, A.

    Hocking, Philip N.

    Ridley, Hon. Nicholas

    Box, Donald

    Holland, Philip

    Roots, William

    Boyle, Sir Edward

    Hopkins, Alan

    Scott-Hopkins, James

    Braine, Bernard

    Hornby, R. P.

    Seymour, Leslie

    Browne, Percy (Torrington)

    Hughes-Young, Michael

    Sharples, Richard

    Buck, Antony

    Hutchison, Michael Clark

    Shaw, M.

    Campbell, Gordon (Moray & Nairn)

    Irvine, Bryant Godman (Rye)

    Simon, Rt. Hon. Sir Jocelyn

    Carr, Compton (Barons Court)

    Jackson, John

    Skeet, T. H. H.

    Carr, Robert (Mitcham)

    Johnson, Eric (Blackley)

    Steward, Harold (Stockport, S.)

    Chataway, Christopher

    Kerr, Sir Hamilton

    Stodart, J. A.

    Chichester-Clark, R.

    Kershaw, Anthony

    Sumner, Donald (Orpington)

    Clark, Henry (Antrim, N.)

    Kirk, Peter

    Tapsell, Peter

    Clark, William (Nottingham, S.)

    Langford-Holt, J.

    Temple, John M.

    Cleaver, Leonard

    Leavey, J. A.

    Thatcher, Mrs. Margaret

    Cooper, A. E.

    Legge-Bourke, Sir Harry

    Thomas, Leslie (Canterbury)

    Cordeaux, Lt.-Col. J. K.

    Lewis, Kenneth (Rutland)

    Thomas, Peter (Conway)

    Corfield, F. V.

    Linstead, Sir Hugh

    Thornton-Kemsley, Sir Colin

    Costain, A. P.

    Litchfield, Capt. John

    Tiley, Arthur (Bradford, W.)

    Critchley, Julian

    Lloyd, Rt. Hon. Selwyn (Wirral)

    Turner, Colin

    Curran, Charles

    Longden, Gilbert

    van Straubenzee, W. R.

    Currie, G. B. H.

    Loveys, Walter H.

    Vickers, Miss Joan

    Dalkeith, Earl of

    Lucas-Tooth, Sir Hugh

    Vosper, Rt. Hon. Dennis

    d'Avigdor-Goldsmid, Sir Henry

    MacArthur, Ian

    Wakefield, Edward (Derbyshire, W.)

    Deedes. W. F.

    McLaren, Martin

    Wakefield, Sir Wavell (St. M'lebone)

    Drayson, G. B.

    McMaster, Stanley R.

    Walker, Peter

    du Cann, Edward

    Macmillan, Maurice (Halifax)

    Walker-Smith, Rt. Hon. Sir Derek

    Duncan, Sir James

    Macpherson, Niall (Dumfries)

    Ward, Dame Irene

    Elliot, Capt. Walter (Carshalton)

    Maddan, Martin

    Watts, James

    Elliott, R. W. (Nwcstle-upon-Tyne, N.)

    Maitland, Sir John

    Webster, David

    Emery, Peter

    Markham, Major Sir Frank

    Wells, John (Maldstone)

    Farr, John

    Mathew, Robert (Honiton)

    Whitelaw, William

    Finlay, Graeme

    Matthews, Gordon (Meriden)

    Williams, Paul (Sunderland, S.)

    Fletcher-Cooke, Charles

    Maxwell-Hyslop, R- J.

    Wilson, Geoffrey (Truro)

    Fraser, Ian (Plymouth, Sutton)

    Mills, Stratton

    Wise, A. R.

    Freeth, Denzil

    Montgomery, Fergus

    Wolrige-Gordon, Patrick

    Gardner, Edward

    More, Jasper (Ludlow)

    Woodhouse, C. M.

    Gibson-Watt, David

    Nugent, Sir Richard

    Yates, William (The Wrekin)

    Glover, Sir Douglas

    Oakshott, Sir Hendrie

    Glyn, Sir Richard (Dorset, N.)

    Osborn, John (Hallam)

    TELLERS FOR THE AYES:

    Goodhart, Philip

    Page, John (Harrow, West)

    Colonel J. H. Harrison and Mr. Noble.

    Gower, Raymond

    NOES

    Ainsley, William

    Bowden, Herbert W. (Leics, S. W.)

    Crosland, Anthony

    Albu, Austen

    Boyden, James

    Diamond, John

    Allaun, Frank (Salford, E.)

    Broughton, Dr. A. D. D.

    Evans, Albert

    Allen, Scholefield (Crewe)

    Castle, Mrs. Barbara

    Fitch, Alan

    Bacon, Miss Alice

    Cliffe, Michael

    Foot, Michael (Ebbw Vale)

    Blyton, William

    Cronin, John

    Fraser, Thomas (Hamilton)

    Gaitskell, Rt, Hon. Hugh

    Mabon, Dr. J. Dickson

    Short, Edward

    Gaipern, Sir Myer

    McCann, John

    Silverman, Sydney (Nelson)

    Ginsburg, David

    MacColl, James

    Skeffington, Arthur

    Gordon Walker, Rt. Hon. P. C.

    McInnes, James

    Slater, Mrs. Harriet (Stoke, N.)

    Greenwood, Anthony

    McKay, John (Wallsend)

    Slater, Joseph (Sedgefield)

    Grey, Charles

    Mackie, John (Enfield, East)

    Small, William

    Hamilton, William (West Fife)

    Marsh, Richard

    Spriggs, Leslie

    Hannan, William

    Mellish, R. J.

    Steele, Thomas

    Hayman, F. H.

    Mendelson, J. J.

    Swingler, Stephen

    Herbison, Miss Margaret

    Millan, Bruce

    Taylor, John (West Lothian)

    Hill, J. (Midlothian)

    Milne, Edward J.

    Thomson, G. M. (Dundee, E.)

    Hilton, A. V.

    Mitchison, G. R.

    Thornton, Ernest

    Houghton, Douglas

    Morris, John

    Wainwright, Edwin

    Howell, Charles A. (Perry Barr)

    Oram, A. E.

    Warbey, William

    Howell, Denis (Small Heath)

    Oswald, Thomas

    White, Mrs. Eirene

    Hughes, Emrys (S. Ayrshire)

    Owen, Will

    Whitlock, William

    Hynd, John (Attercliffe)

    Parkin, B. T.

    Wilkins, W. A.

    Irving, Sydney (Dartford)

    Pavitt, Laurence

    Willey, Frederick

    Jay, Rt. Hon. Douglas

    Pentland, Norman

    Willis, E. G. (Edinburgh, E.)

    Jeger, George

    Probert, Arthur

    Wilson, Rt. Hon. Harold (Huyton)

    Jones, Dan (Burnley)

    Randall, Harry

    Woof, Robert

    Jones, Elwyn (West Ham, S.)

    Reynolds, G. W.

    Lee, Frederick (Newton)

    Robertson, John (Paisley)

    TELLERS FOR THE NOES:

    Lewis, Arthur (West Ham, N.)

    Robinson, Kenneth (St. Pancras, N.)

    Mr. Ifor Davies and Mr. Lawson.

    Loughlin, Charles

    Ross, William

    Clause ordered to stand part of the Bill.
    Clause 12 ordered to stand part of the Bill.

    Clause 13.—(INCOME TAX RELIEF FOR NATIONAL INSURANCE CONTRIBUTIONS.)
    Motion made, and Question proposed, That the Clause stand part of the Bill.
    Dame Irene Ward: I have waited a very long time to make this speech, and I regret that the Government have decided to proceed with this Clause this morning. I say that because, as always, I find less interest shown in those living on small fixed incomes than is shown in those above that category. Although I much regret having to keep everybody here—and particularly do I regret having to keep the staff here—I have tried for ten years to win this battle and it would be most unwise, even at this hour, not to put the case I have to make.
    Clause 13 lays down the additional tax relief in respect of National Insurance contributions, which has been agreed and which has to be provided for in the Finance Bill, and I should like to explain what I feel about tax reliefs in respect of those contributions. The present additional amount, which in a full financial year apparently reaches the figure of some £15 million additionally, exacerbates the position.
    I will be as brief as I can and put my case as concisely as I can. The position is that people who pay Income Tax gain quite substantial reliefs, amounting I think, to more than
    1336
    £50 million in a full year, and the effect of that is that those who pay Income Tax get their retirement pensions with less personal expenditure than those who, because they have low incomes, no longer pay Income Tax but of course have no benefits under Income Tax reliefs on contributions paid. It means that those with lower incomes have to pay more for their retirement pensions than those who pay Income Tax, and that seems to me to be both unfair and inconsistent.
    Once again, we are acting against the best interests of widows. Following the alteration in procedure in the 1948 Act, widows may find, at the age of perhaps 35 to 40, that they are forced to return to work after having been away from work for a long time during their marriage. Many hon. Members, on both sides of the Committee, feel that the widow's position in insurance is rather poor. Yet by this provision many widows, who must find their National Insurance contributions, who do not have the benefit of a widow's pension under the present scheme, and who have a great struggle to pay their contributions, do not get Income Tax relief. The whole position is thoroughly incredible and difficult to understand.
    One of the stock answers which I am given by the Front Bench when I speak of those small fixed incomes is that it is very difficult to find a way to help them. I do not dispute that, but it makes me angry and disconsolate when action is taken deliberately to make the position of those living on small fixed incomes worse than is necessary. I have

    1337
    never understood why the Treasury has insisted on carrying on this absurd policy.
    I realise that varying sums, now reaching £50 million a year, have been given by the Treasury as partial relief on contributions to National Insurance, and I recognise that the Chancellor could not say here and now that he will withdraw that amount of relief. But there are other ways of using the money in National Insurance which would give everybody a fair deal. I have obtained some information from the Financial Secretary, who always tries to be cooperative in providing information; I wish that the Treasury would also be co-operative in a little action. I have the Financial Secretary's letter here. It is true that he claims that this point is theoretical, but I do not believe that he and the Chancellor, with their great ability and brains, cannot translate the theoretical into practice. It does not seem to me to very difficult.
    If this amount which the Treasury gives to the taxpayer were used in National Insurance contributions, there could be an all-round reduction in the weekly contribution, and that would be a much fairer way of dealing with the money. I am certain that my hon. Friends on both sides of the Committee agree—and I have friends on both sides. I hope that right hon. and hon. Gentlemen opposite have noted that my criticisms today are directed to my own Front Bench and not to back-bench Members on either side.
    I am sure that what I suggest would be a much fairer way of meeting the National Insurance contributions. I have noticed how often the increased contributions have figured in speeches. Everybody knows that they are a great imposition. I remember that at the time of the last General Election many of us said that those on lower incomes would have a lower contribution to pay. I have not found that that election pledge has made much headway. I am now giving the Chancellor an opportunity of redeeming an election pledge.
    5.15 a.m.
    I agree that it is rather annoying for people getting tax reliefs that anyone should suggest that new methods of spending this money should be found, but that is what I am suggesting. I am
    1338
    suggesting that if we have got £50 million of Treasury money to spare for a national fund to which everybody has an obligation to contribute, that money should be spent for the benefit of all and not just for the benefit of a few. Although it is rather difficult to ascertain by how much the contributions could be reduced, I understand that it would be in the nature of anything from 5d. to 1s. a week, at any rate for the employed person. That would be a great benefit. It also might provide this stimulus and incentive about which we have heard so much from the Chancellor and others.
    I want to make one or two points in relation to a letter which the Financial Secretary to the Treasury sent to me on 7th December, 1960. As I say, I have been fighting this battle for a long time. I have written various letters to The Times and occasionally one of the Treasury Ministers has come to me and asked whether I am going to raise the matter, but it has been very difficult to find an occasion on which to raise it, and I never thought that I would have to raise it at a quarter-past five on a dreary wet morning.
    The Financial Secretary said in his letter of 7th December:
    "As you know from my Answer to your first Question of 17th November, it is estimated that the amount of tax relief to insured persons on the National Insurance contributions in 1960–61 will be £48 million. If the tax relief were to be abolished, and the Exchequer were to pay this extra amount to the National Insurance Fund, the reduction in the National Insurance contribution that would theoretically be possible for an employed man would be just under 1s.; for other lower rates it would be less. This is perhaps all the more theoretical at present because in 1960–61 the National Insurance Fund is expected to be in deficit to the tune of £94 million, half of which is being met by a special Exchequer payment of £47 million. It would be very difficult to contemplate any reduction in contributions in these circumstances."
    That may well be so, but it is also very odd to contemplate that we can give over £50 million in tax reliefs, because if the fund is in deficit it means that it is in deficit over the whole field and not just in the field of the lower income groups. The whole reason for removing taxation is that people are supposed to be hard up. It seems a bit odd that they should be expected to bear their share of increased contributions, whereas those who pay Income Tax and have to

    1339
    pay increased contributions have increased relief on their Income Tax.
    I will leave out a paragraph in the letter which does not mean very much to me or to anyone else. [HON. MEMBERS: "Read it out."] Hon. Members opposite ought to understand that I do not miss points to take with the Chancellor. I am not leaving out anything which would be of advantage to the case I am advocating.
    "There is also the major point that there could well be repercussions on taxation policy in regard to pensions generally if national insurance contributions for pensions were no longer to rank for tax relief. As you know, contributions to occupational pensions schemes are generally relieved of tax. This is long-established policy, and there would be widespread criticism if it were to be changed; and the growth of these schemes might be impeded."
    Nobody suggests that the occupational pensions schemes should be changed. This is a National Insurance scheme covering everyone. Because people have had the benefit of occupational schemes of one kind or another or because there have been all sorts of "top hat" schemes, that is no reason why people who can save in a different way or who have different arrangements with their employers should deprive other people in National Insurance of a fair deal.
    The Financial Secretary goes on to say:
    "It was recognised in the White Paper on Provision for Old Age (Cmnd. 538, paragraph 17) that 'the growth of occupational pension provision has no doubt been encouraged by the tax reliefs which have long been accorded to contributions'."
    That is all right. Nobody wants to argue about that. But this is a National Insurance scheme in which everyone benefits. I know that there has been a slight alteration in the new graded scheme, but the basis of the whole thing on which the tax reliefs were based was that it was a national scheme and everybody was supposed to share in it. So I do not think that that sentence has anything to do with the case.
    "Moreover, if tax relief for occupational pensions contributions were withdrawn there would be pressure to exempt the pensions from tax. These pensions are however clearly taxable income and should not be specially exempt; and if they were to be exempted the loss of revenue would be substantial."
    1340
    There might be a good deal of pressure, but hon. Members will have noted that my Government can refuse to be influenced by pressure. I know that in many matters I am a lone voice, but, really, when we can talk of finding over £50 million for people who pay tax to enable them to get their retirement pensions at a cheaper rate than others, and yet we cannot find about £250,000 for old Regular Service widows, it is absolutely disgraceful. I say the same about other ranks too. It is nonsense. As for this idea about pressure to exempt pensions from tax, there are many people who would do very much better if the National Insurance pensions were relieved of tax when drawn. I think that the whole system should be recast. The Chancellor has always said that everything he is doing he will look at in the next five years, and perhaps he will see, in the next five years, whether that would be a good idea too. At least, I should expect him to do so.
    There is one thing which the Financial Secretary did not put in his letter. Perhaps he is beginning to realise that there is some sense in what has been said, although I do not suppose he really is. He has constantly argued hitherto that, of course, there are tax reliefs on the contributions, but when the pension is drawn tax is paid on it. But that need not necessarily be so. When people retire, in the main they drop their income—unless they are people like Dr. Beeching of the British Transport Commission; I do not know whether he is going to drop his pension or not. Thus, when one retires one may not be in the Income Tax paying category. One of the arguments used previously was that if one got one's Income Tax relief now one paid for one's retirement pension when one drew it. That is a very false argument. I was very glad that the Financial Secretary added to this rather peculiar letter by putting that little item in.
    The position is intolerable. I do not believe that any hon. Member thinks it is fair that this should be done for people who are in a position to have incomes on which they can get tax reliefs. I am certainly all for reduction in taxation—I agree that taxation is very high—but it ought to be fair. I do not see why those with incomes substantial enough to be taxed should get

    1341
    their retirement pensions at a cheaper rate than those in the lower income groups, who find the contribution very heavy. It is not fair that we should make them pay more for their retirement pensions.
    All the other extraneous things that have been put in the letter or have been stated from time to time by Treasury Ministers do not alter the fact that I think that this is monstrously unfair and a waste of public money. I would far rather see that money used for reducing contributions and giving everybody a fair crack of the whip.
    I am very grateful to hon. Members for having listened to this. I know that it must be a great bore. But, for once, I have been able to strike a blow for those in the lower income groups. I hope to get some sense out of a Treasury Minister tonight even if he feels rather cross that he has had to sit up a little late.
    Miss Margaret Herbison: I should be very surprised if an hon. Member took objection to staying a little longer on the important matter raised by the hon. Lady the Member for Tynemouth (Dame Irene Ward). It is a matter which causes a great deal of concern to many hon. Members on both sides of the Committee.
    I am not sure that I follow all the points made by the hon. Lady, or that I would support her wholeheartedly in the case that she has been making. What has she, in effect, been asking for? She has said that if no relief in Income Tax were given on National Insurance contributions the Chancellor would have £50 million which he could use to lower the rate of contribution for everybody. I think that there are other more sensible means of using the money.
    First, those who are living on small fixed incomes could be helped in many ways by the Government. But the hon. Lady also mentioned the lower-wage earners. Even some of the lower-wage earners have to pay Income Tax. From time to time I meet widows who, because of their families, have to go out to work, and they very often just come within the Income Tax range. In other words, some widows and some other low-wage earners come within the Income Tax range. If the Chancellor were to grant what the
    1342
    hon. Lady has asked, those widows and the lower-wage earners with whom I am concerned would suffer because this relief in Income Tax for National Insurance contributions was not given.
    5.30 a.m.
    I would say to the hon. Lady that there are other ways in which she could have helped these people—ways that neither she nor her hon. Friends tried to use—
    Dame Irene Ward: I agree with the hon. Lady, of course, but my difficulty was that I did not think that it would be in order on this Clause to develop what. I want to do for the people on small fixed incomes. If she wanted to know what I should like to do, I could make another very long speech, because I have all sorts of ideas on the subject. I had to restrict myself to the Clause. But I agree with the hon. Lady; we will get together one of these days and see what we can do for these people.
    Miss Herbison: I do not think that I am straying from the Clause, because I am explaining why I think that it would be wrong for the Chancellor to accept the hon. Lady's case. I am saying that she and her hon. Friends could have helped these people, but did not take the action that it was within their power to take.
    The last of the very long debates we had related to the extra contribution that was asked of everyone; from those who were working, widows on small fixed incomes—every single one of them was asked to pay an extra contribution for the National Health Service. The hon. Lady has quoted the figures given to her in a letter from the Chancellor or the Financial Secretary. The saving would amount to about 1s. for the adult male earner, and less for those earning less. The extra contribution is 10d. a week for the adult male and 8d. for a woman.
    In other words, the hon. Lady and her hon. Friends who are interested in the small fixed incomes and in the lower-wage earners then had it within their power to do what she now asks. They could have done it simply by voting against the vicious Measure brought forward by their own Government. The hon. Lady has been trying other ways—quite sincerely; I can say that because I know her well—to achieve this purpose.

    1343
    Quite a number of these people discuss this with me. One thing that particularly worries them is the additional prescription charges. Even if they have a small fixed income, they are very often above the level at which help can be given by the National Assistance Board to get the medicine which they so desperately need when they are sick.
    I repeat that the hon. Lady and her hon. Friends could have taken the action which she is now asking the Government to take, by helping to express in the Division Lobby our disapproval of those Measures which are bringing the greatest hardship and worry to those people of whom the hon. Lady spoke. By taking the National Insurance contributions out of relief, the hon. Lady would not help those in whom she is interested. There are several ways in which they can be helped, but not through the fiscal measures of the Government.
    Mr. McKay: I was very interested in the speech of the hon. Lady the Member for Tynemouth (Dame Irene Ward). I recently read two articles in a Newcastle newspaper which were about taxation and reliefs and which were written in the same spirit. With the present principle of financing the National Insurance scheme, those who, but for tax relief in respect of contributions, would be paying Income Tax of 5s. or 10s. a week, get their benefits more cheaply than the less well paid workers who would not pay tax in any case.
    The hon. Lady seemed to have a rather narrow view about National Insurance. Examining the problem of how the lower-paid workers can get their benefits as cheaply as those getting better wages leads to the conclusion that the contributions must be on a percentage basis. The National Insurance scheme is for the protection of the aged and sick and injured and it is only by having a percentage basis of financing the scheme that the lower-paid workers can get the benefits as proportionately cheaply as their better-paid colleagues. I think that it is high time that the whole principle and basis of financing this national organisation was changed to a percentage basis.
    Sir E. Boyle: I was just reflecting the last time that I had the pleasure of hearing
    1344
    my hon. Friend the Member for Tynemouth (Dame Irene Ward) at this hour of the morning was about nine years ago, on an Isle of Man Bill, when Mr. Geoffrey Bing was addressing us and she shouted out to him. "Take a hammer," and this got misreported in HANSARD as "Take that man out." I may not be able entirely to satisfy my hon. Friend tonight, but I hope I shall not induce her to swing a hammer at me or order me to be removed from the Chamber.
    My hon. Friend did not give me notice that she would read my letter of 7th December last year, and one rather forgets Departmental correspondence of a few months back. But, listening to her reading it, I thought it sounded reasonably well, and the only fault I could find was that it seemed to me a little wide of this Clause in some respects.
    Obviously, we cannot discuss, on this Clause, the whole operation of the National Insurance Scheme, because the Clause does have a very limited purpose directly related to the Clause we passed in the Finance Bill last year. The Clause increases by £3 the general flat-rate tax allowance of £15 for adult employees for National Insurance contributions which was introduced in last year's Act and, of course, the reason why we have a Clause this year is the changes in the flat-rate contributions there have been since last year's Finance Act was passed.
    To come to the point which my hon. Friend raised, my hon. Friend has made plain on several occasions, in correspondence with me, by letters to the Press, by Questions and speeches in this Chamber, her view that the tax relief for National Insurance contributions should be withdrawn and the money used to reduce the contribution rates for all contributors. Her argument is that this would benefit those who are less well off at the expense of those who are better off and, in particular, would benefit, she says, people on small fixed incomes with whom she is concerned.
    We cannot tonight debate the position in general of those on small fixed incomes, and I would only just say this to her, that I think, with respect, that she rather underrates in some respects our successes, considering the views that she

    1345
    and many other hon. Members on both sides have expressed about this at one time or another. We have considerably raised the limits of old-age relief compared with many years ago and there are benefits for small incomes in Income Tax relief as well.
    On the specific point my hon. Friend raised tonight, I can only say two things. The first is that I hold to what I said in my letter of 7th December, that the reduction of 1s. in the contribution was, as I described it in that letter, a theoretical reduction for the reasons I gave. The second is that while the Chancellor certainly has considered all my hon. Friend's representations very carefully, we do not believe that we should depart from the well-established principle that National Insurance contributions should, in principle, qualify for tax relief and income benefits arising from those contributions which pay tax.
    I think that my hon. Friend rather underrates the effects of taxing retirement pensions. It is estimated that the yield of tax on National Insurance retirement pensions will be about £40 million for the current year, and therefore, there is absolutely no substance in the argument or in any suggestion that the taxation of retirement pensions does not amount to much in practice.
    5.45 a.m.
    Although I know that many constituents and a number of hon. Members feel strongly about this matter, and raise it from time to time, it has always seemed to me reasonable in itself that retirement pensions should be subject to tax, because the income circumstances of retirement pensioners obviously vary widely. There is, in effect, a world of difference between a contractual retirement pension related to contributions and something like National Assistance, and to my mind the fact that the retirement pension is related to contributions—something, as it were, contractual—means that it is absolutely right that these pensions should be subject to tax in accordance with the individual income position of the pensioners.
    It is for those two reasons that my right hon. and learned Friend cannot agree to the proposal put forward by my hon. Friend, but I can assure her that we have considered the matter carefully. I have absolutely no hard feelings at all
    1346
    that she should have elected to raise this matter, quite properly, at this hour in the morning, on the Question, "That the Clause stand part of the Bill".
    Mr. Houghton: The Financial Secretary's remarks are reasonable. The Clause deals merely with the taxation side of the National Insurance contributions, and the adjustment made in it is due to the higher contributions now in operation. If any change were to be made in the tax reliefs for contributions it would obviously be necessary to consider the position of pensions when they came to be taxed. In fact, the whole scheme would probably have to be recast, taking the tax factor into account.
    Last year, my hon. Friends and I supported the Chancellor in introducing this flat-rate scheme, although it was subject to some criticism both in Committee and in the Press. I have had a number of letters from taxpayers saying that they are being cheated out of the full relief to which they would be entitled in the normal way upon the contributions paid. In some cases the taxpayers concerned have not fully understood that not the whole of the contribution ranks for tax relief, because some part of it is for sickness and unemployment benefit, and, since neither sickness benefit nor unemployment benefit is taxed, that part of the contribution which is related to those benefits is excluded from the tax relief given. That is the sort of thing that happens when benefits are exempted on the one hand and it is necessary to consider whether a tax relief on the contributions should be given on the other.
    These higher contributions were fixed last autumn. They were in the National Insurance Bill. We knew, at the time that the increased benefits for National Insurance were embodied in the Bill, what the contributions were to be. The Health Service contributions make no difference to this relief, because they do not rank for tax relief for the ordinary contributors. The adjustment made in the Clause is, therefore, a direct consequence of the change in the contribution rates introduced last autumn.
    We had the fantastic position that the whole of the P.A.Y.E. coding was being done under the old contributions when the new ones were foreseen, and the whole of that work is having to be done again, at the cost of 300,000 hours of

    1347
    overtime, merely because the increased contributions, known about last autumn, could not be incorporated in the coding analysis then under preparation. When one is looking for savings in administration, staff and costs the Chancellor could surely have foreseen—or somebody could have foreseen and advised him—the increased contributions that would have to be subject to adjustment in the Finance Bill this year.
    The provisions made in the Finance Act last year for this flat-rate contribution do not come into effective operation. They are in operation at this moment, but they are obsolete, and the recoding now being done is to provide the benefit of the higher deductions for this tax year, to which the provisions of last year's Finance Act apply. I think that a rather serious administrative muddle and I can tell the Chancellor that there is a great deal of annoyance in the Inland Revenue that overtime is having to be worked to do recoding that was known about six months ago.
    Question put and agreed to.
    Clause ordered to stand part of the Bill.
    Mr. Selwyn Lloyd: I beg to move, That the Chairman do report Progress and ask leave to sit again.
    I feel that the Committee would like very much to proceed with a debate on double taxation relief agreements, but at this hour in the morning, and in the circumstances, I prefer to move this Motion.
    Mr. H. Wilson: Despite the very strong temptation to go on and discuss these rather simple Clauses, I think that the Chancellor is wise. We have made very good progress and hon. Members will feel that we have had a very good debate, although we should have liked to have heard more from hon. Members opposite. Perhaps if we had we might not be adjourning at this time.
    We shall be ready, after having such rest and refreshment as we can get, to resume tomorrow. [HON. MEMBERS: "Today."] In Parliamentary terms I think that we resume tomorrow, as we are still on Wednesday's sitting. But I am not worried about that if it makes hon. Members opposite happy.
    1348
    Whenever we resume I hope that we shall make rather better progress in terms of Clauses per hour. That does not mean that I am suggesting that we did not make progress today, but I know that the Chancellor wishes to make a little faster progress.
    Question put and agreed to.
    Committee report Progress; to sit again this day.

  TAXICABS, LONDON
  Motion made, and Question proposed, That this House do now adjourn:—[Mr. Gibson-Watt.]
  5.53 a.m.
  Mr. R. J. Mellish: I wish to start by apologising to the staff of the House and everyone associated with the House of Commons, when it is performing its normal functions, for keeping them for another half-an-hour.
  The subject which I wish to raise is of paramount importance to many thousands of men who earn their living as taxi-drivers in London. We expect that the Minister when he replies to the debate will make a statement which will relieve them of their anxieties. I think that there may well be a serious position on the streets of London unless the right hon. Gentleman is clear about what he has to say.
  I will explain the story for the benefit of those who have taken the trouble to stay and listen. I speak for over 10,000 taxi-drivers in London and I am also putting forward the views of many owner-drivers. I speak, also, on behalf of proprietors of taxicabs. It is unusual for me to speak on behalf of employers, but I am doing so on this occasion. There is a united view on this matter, not only among the owners and drivers but also among many hundreds of thousands of workshop staff and clerical workers and people employed in ancillary industries associated with taxicabs.
  For a man to be a taxicab driver is not very easy. He has to pass the most stringent tests, imposed by Scotland Yard, as to his fitness to drive and his knowledge of London districts. Also, he has to produce for the benefit of Scotland Yard a taxicab which has passed the most severe test. Once he has done those

  1349
  things he is allowed to take his cab on the roads and to ply for hire. Every year that cab has to go back to Scotland Yard to be inspected to be sure that it conforms with the regulations. It should go out from this House that the taxi-driver is governed by very severe regulations laid down by this House. It ill becomes anyone, particularly a Member of Parliament, to question the regulations unless he himself is prepared to amend those regulations. Power to amend the regulations, of course, rests with the Government Front Bench.
  Last November, the Minister of State, Home Office, whom I am very pleased to see here to reply to this debate, replied to a question asked by the hon. Member for Hexham (Mr. Speir). In that debate the Minister said—and I think that it was an "off the cuff" statement—that he thought that it would be a good thing if, on the streets of London, we had smaller taxicabs. He may be right about that, but we understand that the regulations would have to be altered. Since he made that "off the cuff" remark, a number of things have happened. The London taxicab driver has been threatened with a wholesale invasion by smaller cabs coming on the roads. They are referred to generally as minicabs. One firm, Welbeck Motors, has made clear that on 19th June, next Monday week, it proposes to put on the London streets about 400 minicabs which, frankly and openly, will try to take away the normal trade expected to be done by the London taxicab driver.
  I make clear that neither I nor those whom I represent here have any abjection to Welbeck Motors or anyone doing a normal car hire business in London. That is a legitimate and a big business. If Welbeck Motors wish to do that no one would have any objection, but there is all the difference in the world between a car hire service and a taxicab business. A taxicab is driven round the streets and is for hire. It can be hailed by the ordinary Londoner or the tourist. In the case of the hire car one has to telephone to the base where the cars are stationed and a car is sent from the base to the customer. After the journey, it returns to the base. Welbeck Motors has indicated in advertisements—no one knows more about this than the Minister of State—that on 19th
  1350
  June it is sending on to the streets of London 400 mini-cabs. It has been said in the advertisements that the cabs will be radio-controlled and they have said, in my view quite flagrantly, that it is intended to get round the regulations.
  The Arm has suggested a number of devices. If, when a minicab is going along the road, a potential customer stops it, the driver will radio to the base and ask whether it is in order to take that customer. If this sort of thing goes on, and these minicabs come on to the roads in the numbers I have suggested, and ply for hire in this way—as they will be doing as against the normal taxicab—we shall face a great problem. There is a great deal of money behind the Welbeck Motors effort. I read yesterday that Mr. Isaac Wolfson has put a fortune into this project.
  The statements by the Minister of State have led the firm to believe that it can do this sort of thing and get away with it. Indeed, in a debate on television, some time ago, between a representative of the Transport and General Workers' Union and the owner of Welbeck Motors, the owner made it clear that the Minister of State had not conveyed the impression that what the firm intended to do would be wrong. The firm was encouraged by the ambiguity of some of the right hon. Gentleman's remarks.
  That is why I raise the matter tonight. I want to give the right hon. Gentleman a chance, before Welbeck Motors comes on to the streets, of making it perfectly clear that, if the firm comes on and attempts to ply for hire in the way it threatens, it will mock the regulations, the Home Office will take severe action, and the Government will ensure that the laws laid down by Parliament are not flouted or circumvented.
  The situation is dangerous. I have had the privilege of attending two mass meetings of taxi-drivers. I am usually associated with dock workers, who can get very angry, but I can honestly say that in my long experience I have never seen men so angry as the London taxi-drivers are today. The London taxi-driver has to pass the stringent tests to which I have referred. He now faces the threat of his livelihood being destroyed, perhaps, by people coming on to the

  1351
  streets who do not have to pass the fitness test, nor comply with the vehicle test, nor any regulations. Their living is threatened. We should all feel mad. I can only pay tribute to the union concerned, which has handled this matter with tremendous responsibility and done all it can to try to restrain the taxi-drivers from taking very severe action.
  At the last meeting which I attended, which was at St. Pancras Town Hall, I could sense that the attitude of the London taxi-driver was this. If Welbeck Motors comes on to the roads and attempts to interfere with taxi-drivers, as it has indicated through advertisements, I believe that there will be very serious scenes on London streets. I do not want that to happen. The union does not want it to happen. It can be averted if the Minister of State will make a serious statement from the Dispatch Box and give a warning to Welbeck Motors.
  I again thank the right hon. Gentleman for coming here tonight. I hope that this time he will remedy the mistake he made last November. If he wants the smaller cab on the London streets, and if there are hon. Members who want that—it may well be a very good thing—let us do it in the proper way. Let the Home Office discuss the matter with the taxi-cab trade. Let us talk about amending the regulations. It should be done in the proper way. The Government should not allow a firm of this kind and size openly and frankly to threaten taxi-drivers with what it intends to do, which must be, as I know he will agree, an affront of the existing regulations.
  I want the right hon. Gentleman to clear the position up tonight. Many people wait to hear his words. I am sure that he will choose them carefully. The London taxi-driver, like many other people, is providing a social service to Britain. He is often bitterly criticised. The hon. Member for Hexham, in the Adjournment debate last November, was very upset because he complained that he had to wait over ten minutes for a taxi. I felt very sorry for him, but I did not think that that was much of a complaint.
  It should be clearly said that the taxi-cab trade is not a closed shop. Any-one
  1352
  can be a taxi-driver, provided that he passes the tests I have referred to, that he is fit, and that he can afford a taxi-cab which today costs about £1,200. If he can do all these things, he can become a London taxi-driver. We must not allow this infiltration, this attempt being made by an outside firm, to destroy the livelihood of these men. I hope that we shall hear from the right hon. Gentleman words which will give us the assurances which these men have the right to expect.
  6.4 a.m.
  The Minister of State, Home Office (Mr. Dennis Vosper): As the hon. Member for Bermondsey (Mr. Mellish) said, last November I replied to an Adjournment debate in which my hon. Friend the Member for Hexham (Mr. Speir) argued, amongst other things, that the present conditions of fitness for London taxicabs are too exacting and that a lighter vehicle might well be put into service.
  In my reply I said that the Deputy Commissioner of Police for the Metropolis, to whom the statutory licensing powers have been entrusted, would be willing to consider on their merits any proposals for a lighter vehicle which might be put forward by the manufacturers or the trade.
  These remarks were not made "off the cuff," but rather after careful consideration and I repeat them now. Nothing that I shall say on this occasion will be "off the cuff," because I fully realise that my words will be scrutinised carefully by all those who are interested in this matter.
  What I then had in mind was the possibility of establishing a service of small taxicabs within the present publicly controlled cab system. It was not my intention to suggest the operation of unlicensed vehicles in competition with the established cab trade. Since I made those remarks, some proposals for specially constructed types of taxicab of lighter design have been received by the Deputy Commissioner, and those are now being considered.
  I should like to make it clear that there has been no change in the Deputy Commissioner's attitude about a possible relaxation of the present conditions, and I hope that the hon. Member will welcome this. Indeed, I am able to announce a further step to be

  1353
  taken which will give it practical expression. The Deputy Commissioner has decided to set up a small committee of engineers, independent both of the licensing authority and of the cab trade, to examine the present conditions of fitness, and to advise him whether, consistently with the need to safeguard the public, they could be modified.
  This committee will also have the duty of advising the Deputy Commissioner, on request, about specific technical points which may arise in the course of his consideration of any specific proposals for a new design of taxicab. It may well be that economic and technical considerations may prevail against the introduction of a new vehicle, but at least the trade should welcome a move which should facilitate progress consistent with the essential standards of fitness and safety.
  So far, I have talked only about licensed taxicabs which ply for hire and must now turn to the topic which principally concerns the hon. Member, namely, the operation of small private hire vehicles, commonly known as minicabs. I can say at once that the Government does not propose to allow the privilege of plying for hire, which is confined by legislation to licensed taxi-cabs, to be enjoyed by vehicles which are not subject to proper controls administered by a public authority or driven by people who are not subject to public control.
  The Home Secretary has, in fact, already made clear, in Answer to a Question on 15th March, that according to advice he has received, a procedure under which a vehicle could be hailed in the street and thereupon engaged for an immediate journey by means of a booking placed over a radio-telephone installed in the vehicle, amounts to plying for hire; and if that vehicle is not licensed as a taxicab an offence would be committed.
  I am advised by the Commissioner that, so far as the Metropolis is concerned, if evidence is forthcoming that this procedure is being operated by unlicensed vehicles prosecutions will be brought. It is recognised that "plying for hire" is nowhere defined by legislation, but there is ample judicial authority which shows what kind of activity is within the meaning of this expression.
  1354
  No evidence has yet come to the police to suggest that the radio controlled minicabs now in service have, with one possible exception which is being investigated, so far attempted to ply for hire.
  They have operated, so far as I am aware, quite properly, an extended hire car service under which a car is provided in response to a booking made with their headquarters over the telephone. They have claimed that it is their intention to make available a private hire service at charges which are within the reach of a much wider circle of people than have hitherto been able to use private hire cars.
  Nevertheless, it has been represented that the expected large increase in the numbers of these vehicles on the streets of London following the entry into this field of a major proprietor later this month will result in an undesirable state of affairs. It is argued that the licensed taxi service will inevitably suffer from such competition; that the presence of these additional vehicles on the streets will gravely accentuate traffic problems; and that their presence on parking sites in the central area while awaiting further instructions from their headquarters will result in a substantial withdrawal from the private motorist of the parking facilities at present available.
  My right hon. Friend the Minister of Transport, whom I have consulted about this matter, does not consider that these vehicles in the numbers now contemplated will add appreciably to the problem of traffic congestion, or diminish greatly the available parking space in the central zone. Subject to two qualifications, the Government's view is that there is room in our public transport system for a variety of services, and that the taxi service and the private hire operators both have parts to play.
  The taxi service caters mainly for the man in a hurry who wants a vehicle on the spot without having to make a prior booking—inevitably a time-consuming procedure. The private hire car, on the other hand, is suitable for the premeditated journey. To the extent that the entry into this field of additional firms operating smaller vehicles at a relatively low tariff will enable these facilities to be enjoyed by a wider section of the community, the development is in keeping with post-war trends in our society

  1355
  and fully accords with the policies of the present Administration.
  My first qualification concerns the possible impact of the minicabs on the public transport system. My right hon. Friend the Minister of Transport must be concerned to see the ordered development of the network of public transport services as a whole. He will watch the minicab experiment from this point of view, although these is no reason to suppose that the minicabs on the scale at present contemplated can have more than a marginal effect.
  My second qualification concerns the possible impact of the minicabs on the taxi service. The Government acknowledge that the taxi service bears a burden in the standards which are required in the construction of vehicles in the interests of the safety and convenience of passengers and the standards of knowledge which are required of drivers, and that, in return, they are entitled to some protection. This protection is provided by the ban which the law imposes on unlicensed vehicles plying for hire.
  If the minicabs confine themselves to legitimate private hire, they will not fall foul of this ban. But if there is evidence that minicabs operate in ways which amount—notwithstanding the adoption of dubious and probably ineffective methods for evading the law—to the public picking up of passengers, then the Government will not stand aside. Breaches of the law which can be supported by evidence will, as far as the Metropolis is concerned, be the subject of prosecutions.
  If I should be asked what the Government would do if these prosecutions
  1356
  were unsuccessful and it should thus be disclosed that the present law regarding plying for hire can be evaded, my answer must be that this is rather too far to look ahead at present. Before any question of fresh legislation can be considered the existing law must first be put to the test, and it is my present belief that it will be found effective.
  Mr. Peter Emery: Would my right hon. Friend make any comment about the reports which one has seen of minicabs not plying for hire but offering free lifts in order to advertise their existence and, in fact, placing themselves in certain parts of the Metropolis with the concept of spreading the idea of the minicabs and perhaps taking away, by means of free lifts, the trade from the taxicab? Has my right hon. Friend considered that point? If so, would he consider that that was a normal type of business that we would want to be encouraged?
  Mr. Vosper: I have already said that I do not want to give an "off the cuff" decision tonight. All that I can say is that the Commissioner of Police is watching the situation and will prosecute if he has evidence that the law is being breached.
  Mr. Mellish: As I understand what the right hon. Gentleman said, if Welbeck Motors, or any other firm owning minicabs, should attempt to go beyond the normal car hire business, they will be subject to prosecution by the police, and for that statement I am very much obliged.
  Question put and agreed to.
  Adjourned accordingly at sixteen minutes past Six o'clock a.m.

MINISTRY OF DEFENCE
  Berlin
  Berlin
  N.A.T.O. (Appointment)
  N.A.T.O. (Appointment)
  Germany
  Germany
TRANSPORT
  Rural Transport (Report)
  Rural Transport (Report)
  Motor Cars (Safety)
  Motor Cars (Safety)
ROADS
  Flyovers and Roundabouts
  Flyovers and Roundabouts
  Wales
  Wales
  Trees and Shrubs
  Trees and Shrubs
TELEPHONE SERVICE
  Telephones (Loud Speakers)
  Telephones (Loud Speakers)
  Kiosks, Durham (Gilesgate)
  Kiosks, Durham (Gilesgate)
  Police Headquarters, Leeds (Switchboard)
  Police Headquarters, Leeds (Switchboard)
POST OFFICE
  Letter Boxes
  Letter Boxes
  Stamp Books
  Stamp Books
WIRELESS AND TELEVISION
  Eurovision
  Eurovision
  Lineage and Colour
  Lineage and Colour
  HIGH COMMISSIONER FOR REFUGEES (FUNDS)
  HIGH COMMISSIONER FOR REFUGEES (FUNDS)
  GERMANY (BRUSSELS TREATY)
  GERMANY (BRUSSELS TREATY)
EMPLOYMENT
  I.L.O. (Assistant Director-General)
  I.L.O. (Assistant Director-General)
ROYAL NAVY
  North Borneo (Piracy)
  North Borneo (Piracy)
  Fishing Vessels (Protection)
  Fishing Vessels (Protection)
  Discovery II
  Discovery II
  H.M.S. "Leopard" (Visit to Angola)
  H.M.S. "Leopard" (Visit to Angola)
BRITISH ARMY
  Officers
  Officers
  Magazine
  Magazine
MINISTRY OF AVIATION
  Vertical Take-off Aircraft
  Vertical Take-off Aircraft
  Blue Streak
  Blue Streak
  Germany
  Germany
MAURITIUS
  Constitutional Conference
  Constitutional Conference
KENYA
  Police
  Police
NATIONAL FINANCE
  Bank of England Note Issue
  Bank of England Note Issue
  Local Loans Fund (Interest Rates)
  Local Loans Fund (Interest Rates)
HOME DEPARTMENT
  Clubs (Gaming Machines)
  Clubs (Gaming Machines)

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Manchester.

LORD FISHER OF LAMBETH
The Most Reverend and Right Honourable Geoffrey Francis Fisher, G.C.V.O., D.D. (late Archbishop of Canterbury), having been created Baron Fisher of Lambeth, of Lambeth in the County of London, for life—Was (in the usual manner) introduced.
The Lord Fermanagh (E. Erne)—Sat first in Parliament after the death of his father.
The Lord Rossmore—Sat first in Parliament after the death of his father.

THE HOMICIDE ACT AND MURDER STATISTICS
2.47 p.m.
THE EARL OF SELBORNE: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
ask Her Majesty's Government whether they can estimate the approximate number of murders that have been committed since the Homicide Act, 1957, was passed, and whether they can give a similar estimate for the number of murders that occurred in the corresponding period before the passing of that Act.]
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR THE HOME DEPARTMENT (EARL BATHURST): My Lords, the number of murders known to the police in England and Wales in the period from March 21, 1957, when the Homicide Act came into force, to the end of 1960, excluding cases originally recorded as murder but later found not to be murder, was 528. The number for the corresponding period before the Act came into force
1114
was 517. The figures for the two periods are not strictly comparable because the Act changed the definition of murder. The principal change was the introduction in Section 2 of the defence of diminished responsibility. In the period from March 21, 1957, to the end of 1960, 100 persons were found guilty under this section of manslaughters committed since the Act came into force. I regret that the figures for Soctland are not available in the form for which the noble Earl has asked.
THE EARL OF SELBORNE: My Lords, does that not show that there have been over 100 more murders since that Act was passed than there were before?
EARL BATHURST: My Lords, that is roughly correct.

COST OF DRIVING LICENCES
2.48 p.m.
LORD AIREDALE: My Lords, I beg leave 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 lengthening the validity of a driving licence to three years has affected the cost of renewal; and why the former annual fee of 5s. has been trebled.]
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF TRANSPORT (LORD CHESHAM): My Lords, the period of validity of full driving licences was extended by the Road Traffic Act, 1956, from one year to three years in order to reduce the work done by licensing authorities in issuing driving licences to over 10 million drivers. Although the cost of issuing a licence was not affected by this extension of validity, the annual cost of maintaining a record of each person to whom a licence has been granted also remains unchanged. The fee now payable every third year for renewing a licence has to cover the cost of maintaining the licence-holder's record for three years as against one year previously. During the passage of the Road Traffic Act, 1956, through Parliament it was made clear that the extension of the period of validity of full driving licences must not involve any loss of receipts to

1115
the Exchequer. The extension avoids the need for holders of driving licences to apply for a licence every year, and is thereby of practical benefit to them.
LORD SALTOUN: My Lords, may I ask the noble Lord whether, in those circumstances, the Government, in dealing with the Road Traffic Bill, will consider the position of people who forget to renew their licence? Because if you have to do it every year in January it is an easy thing to remember, but if the licence has a life of three years it is easy to forget whether you are in the second or the third year. Therefore, as the Government are a contributory party to the negligence in that respect, they ought to be willing to mitigate any penalties involved by such an omission.
LORD CHESHAM: My Lords, I do not think there is any greater onus on the Government in that case than there is at present to take responsibility for reminding people to renew their licences; because, so far as I am aware, the normal system of renewal reminders operates just the same.
LORD AIREDALE: I should like to thank the noble Lord for his Answer to my Question.

TRAINING OF MATHEMATICS TEACHERS
2.51 p.m.
LORD BOOTHBY: My Lords, I beg leave 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, having regard to the essential part played by school mathematics in the training of scientists and technologists, and in view of the present shortage of over 3,000 mathematical teachers in British schools and the fact that replacements are not matching retirements, they now propose to take action to avert the incipient disintegration of technological training as we know it in this country.]
THE LORD PRESIDENT OF THE COUNCIL AND MINISTER FOR SCIENCE (VISCOUNT HAILSHAM): My Lords, Her Majesty's Government have already taken action to meet the shortage of mathematics teachers in the
1116
schools, which they fully recognise to be a matter of serious concern—though I certainly do not accept the noble Lord's conclusion. The grave shortage of mathematics graduates able and willing to teach has been made known to the university authorities, and consultations are taking place with them about how the problem can best be tackled. My right honourable friend the Minister of Education has also taken measures to improve the supply of non-graduate teachers of this subject.
LORD BOOTHBY: My Lords, arising out of that Answer, may I ask the noble Viscount how it is that, although he was given full details of the actions taken by the National Science Foundation of America in regard to this matter—the provision of more adequate and better qualified teachers of science and mathematics—in 1959, Her Majesty's Government have not yet come forward with any concrete proposals for similar or better provisions for our own teacher-training profession? In view of the fact that time is now running out pretty hard on us, and that the shortage of teachers of mathematics in our schools is steadily increasing, will Her Majesty's Government now consider implementing the recommendations of the Southampton Mathematics Conference held in April of this year?
VISCOUNT HAILSHAM: Those are rather different questions. My noble friend cannot, of course, be unaware that the core of this problem is the provision of graduates; and although Her Majesty's Government have both a responsibility and an influence in this matter, the provision of graduates is within the province of the universities, and can be carried out only on the initiative of the university authorities. The University Grants Committee, as my noble friend is aware, do not provide earmarked grants of money; and I think the most I could say about the provision of graduates, which in my judgment is the heart of the matter, is that consultations are taking place with the university authorities as I have indicated. The provision of school teachers of a non-graduate character is, of course, much more directly within the sphere of influence of my right honourable friend the Minister of Education; and apart from other steps, of course, the

1117
provision of a three-year course as distinct from a two-year course has enabled him to take the opportunity of improving the standard in the teacher-training colleges.
LORD BOOTHBY: May I just ask one other question of my noble friend? Will he have a look at the possibility of co-ordinating Government policy a little more than it is co-ordinated at present? I feel there is too much departmentalisation among the Ministry of Education, his own Ministry, the University Grants Committee and the universities. They are all working in little separate compartments, and that is the main reason why we have not got a coherent, general policy for the vital provision of these teachers. May I ask my noble friend to look at the general question and see how much further co-ordination among the various Departments concerned could be achieved?
VISCOUNT HAILSHAM: Of course, "co-ordination" is a very happy word. I myself have taken a certain interest in this matter—although I am not sure that I ought to recognise it as being within the strict terms of my departmental responsibility—because mathematics have such a direct and important bearing on all forms of science. But I do not think that the House or Parliament would approve of the Minister of Education assuming any degree of responsibility over universities. This subject was fully discussed in a recent debate. However, I certainly will take note of my noble friend's suggestion.
BARONESS SUMMERSKILL: My Lords, in view of the serious repercussions in the world of industry and science if this shortage continues, has it been considered whether a special financial premium should be given to those who teach in mathematics and science?
VISCOUNT HAILSHAM: As the noble Baroness is aware, remuneration in the teaching profession is within the scope of the Burnham machinery, and I rather question whether the Burnham Committee would approve of having differential rates of pay in any form to teachers of particular disciplines—although, of course, graduate teachers, I think I am right in saying, do receive higher remuneration. I will certainly report the noble Baroness's question to my right
1118
honourable friend, but I think there would be difficulties in what she suggests.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I am sure the Lord President is fully aware of the anxiety of parents at the present time with regard to their own children becoming graduate students. There is great pressure being brought in the universities for women, especially, to give up ideas they have of going into the scientific and technological side of industry, but is it not a fact that many of them are now offered far better careers in the scientific side of industry than you are offering them? And if the Burnham Committee cannot meet that position, surely it ought either to be wound up or new Governmental directions given.
VISCOUNT HAILSHAM: My Lords, the anxiety of parents in relation to the present teaching of mathematics is not well-founded. I think the number of those passing the General Certificate of Education at "A" level is probably six times what it was not so very long ago. Teaching at the moment, although inadequate from the point of view of absolute requirement, has not, I think, given rise to anxiety among parents. I think my noble friend's Question was concerned with the future, and rightly concerned with the future, because, whereas between the wars practically the whole output of mathematics graduates went into teaching, certain developments in industry—in particular in the field of computers—have meant that a whole new range of opportunities is now open to mathematics graduates. This, I think, is one of the factors which is causing an acute shortage of teachers.
In reply to the latter part of the noble Viscount's question, I think I ought to say this. The whole quesion of remuneration of teachers is un important one; is and, of course, the Burnham machinery s apt for providing rates of remuneration over the whole spectrum of teaching, and is relevant to the question of a general shortage of teachers in the country. But I doubt whether the Burnham machinery, or remuneration through that source, is apt for meeting deficiencies in particular disciplines or in particular localities. I remember having this question before me when I was Minister for Education myself, and that was the impression I formed.
VISCOUNT ELIBANK: My Lords, would it not be helpful to the objective of the noble Lord, Lord Boothby, and indeed of the Government, if Latin were dropped from the curricula of scholastic establishments and the time spent on that devoted to mathematics and other subjects? Is the noble Viscount not aware that in our youth many of us devoted hours and hours to learning Latin at the expense of subjects which would have been far more useful to us in our later life?
VISCOUNT HAILSHAM: I think the noble Viscount is drawing too much on his own experience. The curriculum has slightly modified itself since the noble Viscount's youth.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, could we not have an assurance from the Government in some way about this? There is a great shortage of teachers of mathematics and science in the grammar schools today. There are a large number of undergraduates, men and women, who are taking courses which are usually combined—such as mathematics and physics, or mathematics and chemistry. They are offered very promising entries into industry. Must there not be some balance drawn by Her Majesty's Government as to which they shall press at the present time, and what should be done about meeting that situation? That is the kind of policy that the noble Lord, Lord Boothby, is surely looking for, and what we all want. You rare going to have non-graduate teachers of mathematics, and where will you direct them?—to the primary schools, to the modern secondary schools, or to the grammar schools? Many of them would not be up to the level of teaching required for the kind of qualifications that grammar schools want to see developed in their scholars if they are going to take honours degree courses in science and mathematics.
VISCOUNT HAILSHAM: My Lords, that is a whole series of questions. So far as the direction of teachers is concerned, that has not been—happily—the practice of the Ministry in this country, and I hope we shall never have to resort to it. The employment of teachers is on a voluntary basis, and is for local education authorities. As regards the provision of mathematics graduates, the
1120
shortage is indeed a serious one. But it is not only a shortage of teachers. I think one has to face the fact that if British industry is to compete effectively with its rivals in the world it must have its own supply of mathematics graduates as well. Indeed, this is one of the reasons why we particularly desire to increase the number of teachers.
What is really wanted is an increase in the total output of graduates. Obviously, questions of remuneration have to be settled, on whatever basis; we have always desired to keep that question, so far as we can, out of Party politics, for reasons which the noble Viscount opposite realises—they are important reasons. But I do not think the teaching profession can have the whole supply of mathematics graduates. That might be a serious thing for the future growth of industry. I think that answers the noble Viscount's question. There may have been points I have overlooked, in which case the noble Viscount will draw my attention to them.
LORD SALTOUN: My Lords, may I ask whether part of the difficulty may not be that the incidence of real mathematicians is very low? When I was young and reading mathematics, there were only about one or two per thousand who were real mathematicians and they were the people who went for the honours degrees.
VISCOUNT HAILSHAM: My Lords, I think this is a real difficulty to which my noble friend has drawn attention. It is not every mind which is capable of acquiring a mathematics qualification. But I am not at all satisfied that we have as yet exhausted the potentialities of mathematical ability. Nor—speaking personally; I do not know how far this would be the view of the Minister on this point—am I satisfied that the methods of teaching mathematics could not be improved in such a way as to attract to mathematical graduacy a number of people who hitherto have been put off it altogether.
LORD STONHAM: My Lords, is the noble Viscount aware of the acute anxiety amongst parents, because in many areas, London included, they have the greatest difficulty in getting their eleven-year-old children into secondary schools? Is this not one result of the general acute shortage of teachers, and

1121
can he say whether the shortage of mathematics teachers is more acute?
VISCOUNT HAILSHAM: My Lords, I should not like to go into the question of the general shortage of teachers under this head, or the problems of the London area. If the noble Lord wants an answer to that, he must put a Question down. But I do think the shortage of mathematics teachers is likely to become, and is already, very much worse than the general shortage of teachers. This applies to all graduate teachers, but to mathematics teachers in particular. The noble Viscount opposite is correct in thinking that, in relation to the natural sciences, mathematics does play exactly the same sort of part that, in the conventional curriculum of the past, Latin used to play in relation to the humanities.

PRIVATE BILL STANDING ORDERS
3.5 p.m.
THE CHAIRMAN OF COMMITTEES (LORD MERTHYR): My Lords, I beg to move the Motion standing in my name on the Order Paper. I think I should apologise for coming again to your Lordships to amend the Private Bill Standing Orders, but, as I said last time, I am anxious that they should be in a form as perfect as possible before they are reprinted. The Order which I now propose should be omitted applies to Bills seeking to construct tram-roads of railways gauge and connected to railways. Your Lordships will understand that Bills of that nature are very rare. The Standing Order imposes upon the Promoters of such Bills certain obligations under Statutes which are set out in the Order. Most, though not all, of those Statutes have now been repealed, and this Order would therefore need to be amended in any event. I am now satisfied that this Order is redundant and unnecessary, and could usefully and properly be omitted altogether. The Minister of Transport has been consulted and concurs. I beg to move.
Moved, That the following Amendment be made to the Standing Orders relative to Private Bills, etc.:—
Page 60, leave out Standing Order 136.—(Lord Merthyr.)
On Question, Motion agreed to: the said Standing Order amended accordingly.

THE ARMY ESTIMATES
3.7 p.m.
LORD NATHAN LORD NATHAN rose to call attention to the Memorandum on the Army Estimates, 1961–1962 (Cmnd. 1280) and to the problem of Manpower and Recruitment; and to move for Papers. The noble Lord said: My Lords, since the Motion standing in my name was placed upon the Order Paper, I have somewhat enlarged it so as to include a reference to manpower and recruiting, for that seemed to me to be the most important and crucial problem with which at this time we are confronted. For my part, I propose to limit the substance of my observations to that subject. It is important because the Army is now going over from a conscript to a voluntary basis, and it is doing so when there is plenty of evidence to suggest that the demands on manpower are likely to grow, rather than lessen, in the days ahead. Anyone who read the speech of the Minister of Defence two or three days ago at the Assembly of the Western European Union will have noticed the observation that "our responsibilities are immense". The question your Lordships are invited to consider to-day, in part, is whether the strength of the forces will be adequate to meet those "immense responsibilities".
Secondly, this subject is important because it is becoming pretty clear that Britain's allies are becoming increasingly concerned with the dangers presented by the spread of nuclear weapons. Certainly President Kennedy is aware of this, for he is making determined efforts to see that his own armed forces are redesigned so that a distinction is made between nuclear and non-nuclear elements, to fight nuclear and non-nuclear wars. In his statement recently, President Kennedy indicated a clear determination that the bias of the American forces should be increasingly directed towards conventional weapons rather than to nuclear.
He invited, indeed—or at least, there was this implication—the other members of N.A.T.O. to follow the same programme in principle. Therefore, it seemed to me rather disconcerting to read in the speech of the Minister of Defence the other day, when addressing

1123
the Assembly of the Western European Union, that he was adopting, or seemed to be adopting, a policy which did not at all square with that suggested by President Kennedy. Let it be borne in mind that there was an underlying suggestion in the statement of President Kennedy that if his associates in N.A.T.O. did not follow his lead in increasing conventional forces, there might be a risk of their not receiving from the United States the nuclear armaments which they had been led to expect, and upon which they have thus far been relying. It seemed to me that Mr. Harold Watkinson passed over that rather lightly. I merely mention that.
To return to the main subject of recruiting, in connection with Mr. Watkinson's speech I would quote a sentence from a leader in last Sunday's Observer, normally a journal most restrained and sober in its expression of opinion:
"It is hard to avoid the conclusion that British policy is based simply on the degrading fact that we cannot produce the soldiers to man our Armed Forces."
That statement, my Lords, poses the whole question which confronts your Lordships' House to-day.
Having put before your Lordships what I deem to be the crucial problem which we have to solve, I will with your Lordships' permission concentrate upon the question of whether the Army is going to attract enough young men as Regular soldiers to fulfil its requirements—what Mr. Watkinson has now described as its "immense requirements": whether the figure of 165,000, which is now considered the official minimum, is, in fact, adequate; or, indeed, whether that figure can be attained; and, if it is inadequate or cannot be reached, what is the Government's policy as to an alternative source to voluntary recruitment. For I believe that the critical question posed, not explicitly but implicitly, in Mr. Watkinson's speech, is the harsh question which can be put in three words, "Conscription or nuclear?". That is the problem which, it appears to me, we shall have to face if, as seems likely, the present figure for the military Forces should prove inadequate or prove impossible to attain. What we have to be most careful about is that any new
1124
arrangements are set on foot before the Regular Army gets to a position in which men are not available to train recruits.
I propose to concentrate on examining the figure of 165,000, though it is relevant to ask whether the requirement should not be met by a higher establishment, either of 220,000 or 190,000, as the Hull Committee and their two Reports recommended, in the time, I think, of the noble and gallant Field Marshal, or even of 180,000, which for a time appeared to be the Government's target as a minimum figure. I realise that it is not much good thinking of a higher figure when the possibility of obtaining the 165,000 is still speculative, as it is to-day. One important fact about this Government target of 165,000 Regulars must be made clear at the outset. This is the minimum figure, and it must be reached within the next eighteen months. Great, if optimistic, hopes are based on the probability of this. Nevertheless, this figure of 165,000 has never once been justified as a requirement; nor has it been justified as adequate to meet the needs. In a speech at the end of last year, the Minister of Defence said, fairly and squarely:
"This is the number with which we shall have to manage."
Coming from the Minister of Defence, these words indicate to my mind, and perhaps to your Lordships also, that the test was one not of military requirement but of finance. It was a budgetary question rather than a strategic question. And this goes to the very root of the safety of the country, as regards the strength of its military Forces.
The Government, indeed, have never asserted that 165,000 is adequate. They have only asserted that this is the number with which we "shall have to manage". This admission is all the more surprising when we read in this year's Statement on Defence that the Army's rôle is extended from what it was previously expressed to be to deter threats of trouble along what is called "the whole spectrum of possible aggression". That is a very tall order. That is a very wide area—"the whole spectrum of possible aggression"—and it covers a multitude of possibilities. I would invite your Lordships to look at

1125
the map and consider what that undertaking really means. I say that it makes a requirement on manpower far away above what would be needed if official defence policy were settled as being the ability to meet specific and isolated threats wherever they may arise within the area for which we have a present responsibility. I am not suggesting that this official deterrent policy is, in fact, particularly sensible. What I am suggesting is that there is a basic inconsistency between asking the Army to carry out this task over "the whole spectrum" and then admitting, by implication, that the number of men available to do it may fall far short of those that are needed.
My examination of what I would call this bare minimum of 165,000, which the Government hope to have in the Army by the beginning of 1963, when the last National Serviceman will in all probability have gone, is based on the best sources of information I have been able to tap, and I do not think that my figures are likely to be seriously challenged. I am not going to deal with officers because, though there are recruiting problems there, they are of a different category. Moreover, weaknesses in officer recruitment can usually be made good by special inducements and good publicity, as present admissions to Sandhurst seem to confirm. So I shall deal with other ranks—that is, with approximately 146,000, of whom about 110,000 are now in the Army on engagements of six years or more, and who will still be in the Army on and after January 1, 1963.
The recruiting sergeants' problem therefore, is to attract at least 36,000 men in the next eighteen months, or 2,000 men monthly. It does not sound a very large figure, but so far it has proved impracticable to attain it. At present, according to the latest figures, the March figures, issued by the Ministry of Defence, recruiting on six years' engagements or more is running at approximately 1,700 a month. From this, of course, one must subtract the 25 per cent. or so of men who are found to be physically or mentally inadequate or who buy their discharge within the first three months. Therefore, we can say that, provided we confine ourselves to this figure of 165,000, the task is to make good a monthly deficiency of
1126
around 700 men. So far that has proved impossible.
This is really the crux of the problem. The number of men required is not, as I have said, so enormous, but the fact remains that there is a requirement which is at present not being met. In my calculations I have excluded the three-year engagements, for which only 68 joined in March; but even if I add them, I do not see how they could give much guidance to the size of the Army after January 1, 1963. We have to remember that the size of the armed forces on one date has little significance by itself; it is the general pattern and shape of recruiting over the years that is really significant. I am sure that all of us would agree that to achieve even the minimum of 165,000 at the beginning of 1963, only to see this figure sadly diminished thereafter, would afford no satisfaction to the Government; it would only be a reflection on the method they are using to raise even this number of men. Six-year engagements and above do give us some idea of the numbers that will be in the Army in the next five years.
The official technique to make good this deficiency is apparently to rely on the extensive and expensive national television advertising recruiting campaign. It is pretty good. This has now been running two months and will absorb most of the Army's advertising budget for the rest of this year. I can understand the high hopes placed on this campaign, because a short pilot campaign last year produced good results. I should not like the Government to think that recruiting techniques of this kind are not welcome and cannot play a useful part in presenting the Army to the public and attracting the potential soldiers, but the fact must be faced that we are using sales promotion technique to satisfy a national defence requirement. I have nothing to say against sales promotion technique; it has great value in its right place and on the right occasion. But when all is said and done, it can only show the end product. It is not only the end product that is essential in bringing the case for the Army adequately before the public; it is the processing leading up to the end product that is really the more important. If they get through the processing all right, all is well; but showing the

1127
end product alone is really failing to deliver what they want.
Since the first results of the pilot scheme were not unsatisfactory, I hope your Lordships will not think me curmudgeonly in suggesting that this is still no guarantee of what is going to happen eighteen months from now. Forecasts in the advertising world are dangerous and difficult, as any advertiser will tell you. If the results are unsatisfactory there will not be much time in which to adopt alternative methods of meeting this minimum requirement.
A further curious thing that struck me in studying this television campaign is that, apparently, no market research has been done to find out what interests men about the Army or, alternatively, what does not interest them. I get the impression that the authorities assume that there is a basic type of young man who will join the Army whatever his personal or social circumstances. This was true before the war, when there was always a basic minimum who, from inclination, destitution or something else, joined up. That is why the British Army between the wars remained about the same size, despite slumps and unemployment. Today we have a far more purposeful society, and young men have many more opportunities than in the past for travel and promotion; and in competing through advertising for their favour, the Army will soon be competing directly with civilian employers, who may be expected to stand up for themselves in kind if they find that their "brighter sparks" are actually being drawn into the Services.
There are two further points that I think are worth mentioning. A lot of young men to-day are convinced, rightly or wrongly, that there is no point in being a soldier when a nuclear bomb can blow us to bits in five minutes. However irrational this view may be, it is widely held, and not only by the campaigners for nuclear disarmament. It is for the Government to show that there really are non-nuclear jobs to be done, as well. The second point is that we are not in a period of what the Americans call "clear and present danger". If we were, the situation might be a good deal easier.
I believe that advertising, whether it be by television or otherwise, can take
1128
us only a small part of the way. I think we have to make an appeal of a quite different kind. I have, if I may say so, some slight experience in recruiting, because it so happened that in the years immediately before the war I was Chairman of a committee called the National Defence Public Interest Committee. I was invited by the War Office, and then, in view of some measure of success, by the Air Ministry, and afterwards by the Minister of Home Security, to see what could be done to help recruiting. Well, I think I can say without undue complacency that the methods that were then adopted were successful beyond expectation. So that when it was desired to find recruits for the Territorial Army—in which I was primarily interested—or for the Auxiliary Air Force or the A.R.P., they used to come to me and say: "Will you organise something for us?
I may tell your Lordships that I had in Hyde Park what I may call "agricultural shows". I called them "agricultural shows" because that was the technique adopted. We had there all the latest equipment of the Army, to show it to the public. On one occasion that I have very much in mind at least 100,000 people attended; and the gathering was supported by senior Ministers of the Crown, who appeared personally and showed themselves to the public in order to indicate the interest they took and the importance they attached to getting recruits. I am not at all certain that something of that kind could not be done again: to take the Army, not through the streets of a village, but to the places where people can be assembled and where they can see all the latest developments and have them explained to them in some detail; to excite their interest and let them see what the Army is really up to. There is a great deal of ignorance in regard to what the Army is doing and what recruits will be called upon to cope with if they were in the Army.
I believe it would be worth considering—I do not put it higher than that—adopting an entirely new technique. Advertising is all very well in its way, but the best advertiser, the best ambassador, for getting recruits, is the satisfied soldier who is already in the Forces. But first you have to get him there; and then you have to make him into a satisfied propagandist in order to

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get others into the Army. In the early days of the war a welfare organisation was started. There was some opposition to it, but there was also a great deal of support for it. Ultimately it made its way. I believe that the day-to-day welfare of troops must be looked after by their regimental officers. They are the people closest to them, and should be the best qualified to look after them as soldiers. But remember that these soldiers are only civilians in uniform, and that they have their roots in civilian life. They have their relations and friends at home. They have the problems with which they are confronted by correspondence from home, and they also have their own future to look forward to.
I believe that something like a welfare organisation of the type which was pioneered during the war—I had something to do with it—might make people feel that they were being looked after. When I say "looked after", what I mean is this. I know from my experience of the Army and from experience as a hospital Chairman that when ordinary civilians get into uniform or are put into bed in pyjamas, somehow or other they are apt to lose their personality and characteristics and depend greatly on other people, because they feel themselves to be in a world to which they are not accustomed. The important thing is to keep their contacts with the world at home.
I would suggest to the Government—and I do it with earnestness—that in the realm of recruiting they should look at some of the processes which were adopted before, and, as regards the soldier in the Forces, especially as he progresses from a recruit to a trained soldier, they should introduce something in the nature of a service based, perhaps, on civilian assistance, which would keep him in touch with his home and make him feel that there was a real link still remaining with home. I believe that if we were to adopt some such steps as I have ventured, in broad outline, to indicate, we should find recruiting agents in the Army, recruiting among their fellows.
3.33 p.m.
LORD OGMORE: My Lords, I am grateful to the noble Lord, Lord Nathan, for putting this Motion down and giving us an opportunity of having this annual
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debate on the Army. For years past, many of us have taken part in the annual debate, and I am glad to say a good many familiar faces are taking part today—at least, the owners of familiar faces. We believe that these debates do something for the Army, and just occasionally, not immediately but in time to come, in subsequent Memoranda we can see some of the suggestions that we have made adopted by the Government—without, of course, any acknowledgment whatsoever. We do not mind that, so long as they adopt the suggestions that we have made. I feel that the noble Lord, Lord Nathan, in his powerful speech to-day has put his finger on the two main questions with regard to the Army, and I therefore propose, if I may, to follow him on the lines upon which he has opened the debate.
The first point was the important question about the nuclear capability of the British Army—the nuclear capability in relation, or in contrast, to its conventional capability. I must say that I agree with the noble Lord, Lord Nathan, that the position is not at all clear. I do not think anyone is clear, or could be clear, because the Government have been very confused on this issue, and the statements that have been made by Ministers and the various Departments are contradictory or at least confusing. Take paragraph 6 of the Memorandum which we are discussing to-day. It says:
"During the past year the tactical nuclear capability of the British Army of the Rhine has greatly increased; otherwise there has been no major change in the organisation of our forces there."
The criticism last year in your Lordships' House was that the nuclear capability was too great, and that there was not enough conventional capability. In fact, the Defence Paper of 1961 refers to this question in paragraph 11. It says:
"Finally, we maintain increasingly efficient conventional forces, mobile and well armed, and organised and deployed to protect our interests around the world; by their very presence they make an effective contribution towards the maintenance of peace."
Frankly, I think it is very difficult to justify those two paragraphs, one of which talks about the greatly increased nuclear capability of the British Army of the Rhine—which is, after all, our main Army—and the other which talks about increasingly efficient conventional forces.

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As the noble Lord, Lord Nathan, has said, the Minister of Defence, Mr. Watkinson, has stirred up the pond a little further. In the speech he made to the Assembly of the Western European Union lately he said:
"We believe that the deterrent must comprise both nuclear and conventional weapons. It is the balance between these different types of weapons within the alliance that, in our view, now needs re-examining in the light of present nuclear capabilities."
That is an oracular statement, if ever there was one. But what does it mean? In view of the two contradictory statements published this year, what on earth does that statement mean for those of us who are interested in the welfare of the Army, and in the defence of the country and of the Western Alliance?
The second point the noble Lord, Lord Nathan, made was as to recruiting. Here the position is not at all good, as he has said. Indeed, the Memorandum which we are discussing to-day itself is quite clear on the point; it makes no bones about it at all. In paragraph 35 it says:
"Table II compares recruiting results in 1957, 1958, 1959 and 1960. Regular recruiting in 1960 has been disappointing. It was 8·4 per cent. below that of 1959, but is still at a rate which would maintain an Army of about 180,000."
I should have thought that that was a very optimistic statement. If it maintains an Army of 160,000 we shall be very lucky, and for the reason which the noble Lord, Lord Nathan, who has done a good deal of work on this subject over the years, has given. The figures do not justify 180,000, or anything like it. Therefore we must look with concern on this question. For years past the noble Viscount, Lord Alexander of Hillsborough, and I, and other noble Lords in this House, have been pressing the Government on what would happen if the end of conscription came, with our very wide commitments (as, indeed, we have now) and increasing commitments and no real and satisfactory drive on the recruiting front. The noble Lord, Lord Nathan, has said that the alternative is either conscription or an all-nuclear force. I hope that that is not the dismal choice before us, because, quite frankly, I do not believe it is possible to go back to conscription.
LORD NATHAN: May I interrupt the noble Lord? I should like to make clear that when I said that we were being confronted by the stark question: "Conscription or nuclear", I was not putting it as my question, but as the question that arises impliedly from the speech of the Minister of Defence.
LORD OGMORE: I quite agree with the noble Lord. I was not misunderstanding him, but that was the question he postulated. As I say, I do not think we should be content with either. It is necessary for Parliament and the country to get down to the question of sufficient recruitment of the forces to undertake the task that they have to perform. I would say, in the first place, that we have to make up our minds to this fact, which people in this country have never made up their minds about; namely, that the Army must not be treated only as well as people in similar jobs in civil life; it must be treated a lot better. We must pay more than is paid for similar jobs in civil life, because when a soldier is going into the Army he has to sacrifice a certain amount of leisure and of personal control over his movements. He may have to go abroad for years.
Any of us who are interested in certain regiments know that this is the case. In my own Welch Regiment, the 1st Battalion has been serving around the world for years and years past, occasionally coming home for two or three months and then going out again. It is not easy in these days, with only one Regular battalion, to keep up recruiting, because the battalion is abroad for so many years at a stretch. In these circumstances if we have to persuade people who can easily get good jobs in civilian life to come into the Army we have to do better than civilian life is prepared to do, and that means we have, if need be, to spend a great deal more on the Army. It may be asked: where can the saving come from. I can suggest a way of saving £200 million. Drop the independent nuclear deterrent and save £200 million, and put that money where it can best be used—that is, to the Forces, to the pay and other requirements of the Armed Forces of the conventional type.
Another way in which I am told that a good many excellent recruits can be

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obtained is by forming Boys' Battalions. It is the experience of my own regiment and others—I am talking particularly about infantry—that if you can get boys into the Army they very often make the best soldiers and make the Army their career right to the end of their serving life. It is remarkable how many warrant officers have joined in this way. Again, I am told that at the present moment, while it is possible for boys with leadership qualities to go into young leaders' battalions, and for boys with technical qualities to go into apprentice battalions, there is nothing for the ordinary boy who has no special qualities. I know that it is the wish of the people concerned with the Forces in Wales, that some such battalion should be formed, so that we may retain that sort of boy. The idea is, put him into a Boys' Battalion, and then when he gets to the age of 17½ he would go into the regiment as a soldier. At the present moment, if he goes in at all he has to go in under some sort of subterfuge—as a bugler or drummer, for instance. If he has no interest in music he may not be any use as a bugler or a drummer but that is about the only way he can be brought in.
One thing I would suggest (and I have confirmed this with the military authorities in my part of the world; and the officers who are dealing with the men agree) on no account should there be any drop in standards. Your Lordships will remember that in the Defence Debate on March 14 and 15 this year, the noble Lord, the First Lord of the Admiralty said on March 14, and repeated it on the 15th [OFFICIAL REPORT, Vol. 229 (No. 52), col. 773]:
"The shortages, we believe, will be only limited and temporary, and there are ways other than the reintroduction of National Service for dealing with them—for example, by adjustment of medical and educational standards, and further civilianisation. All those methods would be examined."
I hope that the examination of the question of whether there should be any reduction in medical and educational standards will lead to the conclusion that there should be no reduction whatsoever. They are low enough as it is, and I do not think the Army should be expected to take considerable numbers of men who, either by reason of educational standards or medical unfitness, are unable to get a job anywhere else. It is important to maintain the standard of
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the Army. The smaller the Army is, the better, physically and mentally, it must be.
I have little more to say, because I am in the happy land, for me, rather unusual position of congratulating the Government so far as my own country of Wales is concerned on the results of the reorganisation of the Regular and the Territorial Army. So far as Wales is concerned, we have no complaints; in fact, we are quite happy about the results of the reorganisation. There was one problem which might have caused difficulty. As your Lordships will perhaps know, it was proposed that the distinguished Yeomanry Regiment, the Pembrokeshire Yeomanry, which is the only regiment in the British Army which has the battle honour Pembroke on its Colours—
LORD DYNEVOR: My Lords, may I interrupt the noble Lord? As a matter of fact, it is Fishguard.
LORD OGMORE: I am much obliged. It is Fishguard—a neighbouring borough. The reason is that the Yeomanry took part in repelling, or perhaps I should say in the subterfuges, which caused the French, who were at that time attacking Pembrokeshire, to throw in their hands. So this distinguished Yeomanry Regiment, with its very long history, remains; and I am glad to say that no difficulties have arisen. The whole thing was quite happily settled by reason of the good work of the Lord Lieutenant of Pembrokeshire Mr. Hanning Philipps, and the noble Viscount, Lord Bridgeman, Lord Lieutenant of Shropshire. We are very grateful to both of them for what they did on that occasion. So far as the Welsh Infantry Brigade Depôt is concerned, that is going particularly well—in fact, it could not be going better. I say this because I was one of the ones who had grave doubts about its being at Cwrt y Gollen. I am very pleased that my doubts were not well founded.
Finally, I wish to compliment the War Office on the rather striking design of the Memorandum, which is considerably more colourful than most Government documents, and also on the photographs which appear in it. They seem to have been well chosen, and they draw our attention to the various parts of the world in which the Army is serving with such

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distinction—a fact which I think reinforces what the noble Lord, Lord Nathan said about the very wide commitments of the Army.
I can only wish that the colour which appears on the Memorandum appeared also on the uniforms of the Territorial Army. Because if I have a complaint about the Commands and the War Office in this field it is that they are far too reluctant, in my view, to give colour to the Territorial Army. Without colour, and modern, up-to-date equipment, it is very difficult for the Territorial Army to recruit in the way it should do and to make the impact on the public mind that it should make. If you have a ceremonial parade, with a distinguished, or even Royal personage, battledress does not normally lend to the proceedings that colour which one would wish. I say no more on this, because the particular incident which gave rise to it was settled satisfactorily in our favour and, therefore, there is no need to say any more. I end by wishing all ranks of the Army, both Regular and Territorial, every possible success during the coming year.
3.49 p.m.
LORD HARDING OF PETHERTON: My Lords, having begun my military career in the regiment of which the noble Lord, Lord Nathan, was at one time Honorary Colonel, it is a great pleasure for me to take part in the debate on the Motion standing in his name. But I am, like him, very worried about the present state and future prospects of the Army due to the difficulty that is being encountered in solving the Army's manpower problem. And it is to that problem that I propose to address myself primarily in the remarks I make this afternoon.
Before I come to that, however, I should like to say how warmly I welcome the recent decision by Her Majesty's Government to bring back to this country a strong contingent of the Brigade of Gurkhas to stiffen the strategic reserve. As Colonel of the 6th Queen Elizabeth's Own Gurkha Rifles, which will provide the infantry battalion to be the first to come to this country in that contingent, I can assure your Lordships that this decision was received with the greatest enthusiasm
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by all ranks of that battalion, and that they look forward enormously to their tour of duty here in the United Kingdom. I am more than confident that they will do full justice to their great reputation while they serve here, and will maintain a very high standard of discipline, morale and efficiency.
I am certain that this decision will serve two very valuable purposes: it will add greatly to the strength of the strategic reserve, and it will encourage all ranks of the Brigade of Gurkhas in the belief that they are indeed an integral part of the British Army and will serve throughout the world side by side and on equal terms with their British comrades. That, as a factor in the morale and future of the Brigade of Gurkhas, is an extremely important one. So I would say, as Colonel of one of the Gurkha regiments, of the regiment that will be the first represented here in the United Kingdom, how very warmly I welcome this decision. I hope that no political inhibitions regarding the employment of Gurkhas as part of the strategic reserve will prevent their being used in any and every capacity in which British troops might be used in carrying out the rôle and function of the strategic reserve.
I cannot help smiling a little to myself when I recall that nearly two years ago I urged most strongly that this step should be taken—that a battalion of Gurkhas should be brought to this country—and I was told, some time after having urged this, that after very careful consideration it had been decided that the cost was prohibitive. Circumstances, of course, do alter cases, but that attitude, to my mind, typifies to a large extent the outlook of what I would call "penny wise and pound foolish" that has led, and continues to lead, to many of the frustrations and irritations which afflict the Army serving in various parts of the world to-day.
May I say at once, without any reflection at all on the National Service soldiers, who in my own experience and judgment have done a magnificent job for the Army and for the country, that I am a firm believer that the right answer for this country is an all-Regular Army raised on a voluntary basis, and I should be very sorry indeed to see us revert to a system of National Service. I think I should be almost even sorrier to see us

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adopt a system of selective service. I can imagine how I should feel, and the complications and the difficulties it would create for me, if I were commanding a battalion of infantry in which there was a small number of men who had been picked out by some arbitrary method to serve in the Army and in my battalion. I cannot help thinking that that would be a very disruptive and uphappy feature of any regiment or corps in the Army, and so I very much hope that it will be found possible to raise the men which the Army needs to carry out its tasks without recourse again to National Service on a universal basis and also without recourse to any form of selective service.
I have great admiration for the efforts which the Secretary of State for War and the Army Council are making to improve recruiting. The noble Lord, Lord Nathan, has referred to this already this afternoon. I am certain that those efforts have been carefully thought out and are being made on a sustained and really carefully prepared basis, but I feel very strongly that the Army Council, headed by the Secretary of State for War, in spite of all their preparations, their knowledge of requirements and of commitments and of the problems of recruiting, cannot be successful in this campaign unaided and on their own. I believe that they do need the public support of senior Ministers and the Government as a whole.
So far as I am aware, the Prime Minister has not made any public declaration that a fully manned, efficient and mobile Army is vital to the defence of this country. I know that he is deeply concerned with very serious matters, but to my mind this is a very serious national question, and I think, and I would submit with great respect, that some statement from the head of the Government is required in support of this recruiting campaign. Equally, so far as I know, the Chancellor of the Exchequer has not stated that, within reason, he is ready to provide the moneys and funds that will be needed to ensure that the country gets the Army that it wants and must have. I am not aware of any statement in public by the Foreign Secretary, for example, that an efficient, well-trained, highly mobile Army, up to strength and in good
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morale, is essential to his prosecution of our national foreign policy.
With respect, I do not think the Minister of Defence has, so far at any rate, created any great feeling of confidence in the future prospects of the Army. There was talk of 165,000 men being what was required; then the figure went up to 180,000, or it may have been 182,000; then it came down again to 165,000, and then at some stage or other there was talk of managing somehow. I do not think any self-respecting young man wants to commit himself to a full career in an organisation which he is told has got to "manage somehow". It is nearly as good as the old traditional method, which I hoped we had discarded, of muddling through somehow, I believe that the time is ripe—overripe—for senior Ministers of the Government and the Government as a whole to make it quite clear to the public in this country that we must have a fully manned and efficient Army, and that it is essential to the effective prosecution of our world-wide national policies and is something which we are going to get and they are determined we shall get.
There are other minor factors and features which to my mind are detracting from recruiting. There are rumours going around in the Army itself that there may be, or most likely will be, further amalgamations or disbandments. There are veiled threats that if regiments fail to get the numbers they need in order to maintain themselves at an effective strength, they will go to the wall. That would be all right if it were just designed to encourage healthy competition, and also if the facilities for recruitment that are open to various regiments were comparable. But they are not. As it is, it leads to a state of unhealthy competition, and also it leads to a search for numbers, just a hunt to get more and more, irrespective of quality. To my mind, this is largely responsible for the large run-out in the Army. These rumours are going around; I hear them from various quarters. I think it is important that they should be scotched, and that it should be made quite clear that there is to be no more of what I, with respect, call mucking about with the order of battle of the Army as it stands to-day.
There is a lack of funds and resources, a lack of energy and drive in carrying

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out improvements to accommodation and other amenities, particularly in the more remote parts of the world. Without going into any details, I think that if those responsible were to look into it, they would find that there are important requirements in accommodation in, say, Southern Arabia, which we strongly urged about two years or more ago but which are still waiting to be met. Referring again to Southern Arabia, I get the impression from the reports that I get, that in that theatre Transport Command, on which the Army depends for mobility and general transportation purposes, is still, in spite of the assurances and the steps that have been taken to improve the Command, still largely being run on a shoe string.
The noble Lord, Lord Nathan, referred to welfare. In my experience, the standard of welfare in the Army has greatly improved over the years that I have served since I was a young officer, largely due to the efforts of the various welfare organisations who devote themselves wholeheartedly and in a most dedicated way to the welfare of the Army. I would say that, generally speaking, the regimental officers of the Army understand their responsibilities to their men for welfare and for their contacts with civil life and their own families, their parents and so on. I think there have been great improvements in that respect. All the same, I was shattered to read in a recent report by the Army Benevolent Fund that the Army is lagging behind the other two Services in regard to welfare. If that is so—and I feel that they are in the best position to judge—then all those in the past, myself included, who have been responsible for the Army must take the blame. But it is primarily to the future that I should like to look. If the Army is behind the other two Services in matters of welfare, in spite of the great efforts that have been made by the voluntary organisations all over the world, then there is a field in which further efforts must be made and in which, if necessary, further funds from official sources must be found in order to put things right.
In themselves, some of the points that I have mentioned this afternoon may not appear to be of great or, certainly not of vital, importance to the
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future of the Army; but, taken as a whole, the general impression they create is one of indifference, of lack of interest and, above all, of lack of a firm, clear, long-term policy covering the future of the Army and the future prospects of those who serve in the Army. I regret to say that there is still an atmosphere of uncertainty about the Army as a career, about the future need for an Army, and the future prospects of young men who may go into the Army.
I am approached by a number of parents, guardians and relatives. Some of them come to me and say, "My son" (or "my nephew") wants to go into the Army. Do you think there is any future in the Army?" I do my best to try to convince them that there is. Others come to me and say that their son, their nephew or their cousin is soldiering and has said that he wants to come out of the Army because he does not believe there is any future in it; that his regiment may be going to be amalgamated; that he may perhaps find himself moved somewhere else and be in a company with people whom he does not want to be with—he wants to stay with his own regiment and the people with whom he has been brought up. I get these inquiries almost weekly, and I am approached by many people on that subject. I do my best to convince them that the Army has a great future, and that there is room for any young man of energy and enthusiasm who wants to lead an active and purposeful life in good company and at the same time to serve his country well.
There is a future for any young man or woman in the Army. But I should like to hear some of the senior Ministers of Her Majesty's Government say that in clear and emphatic terms; then I could speak to those who come to me with much greater authority and conviction by quoting them than I can purely by giving my own view and opinion. Changes there must be. Changes are the order of life. As equipment develops, as there are changes in tactical methods, there must be changes in organisation and equipment and in training. Those we must accept, and the Army will have to accept them. But that does not necessarily mean that there should be further changes in the order of battle, more

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amalgamations, or any continuing uncertainty about the future.
I would urge on Her Majesty's Government that they should make it abundantly clear to the Army itself and to the general public that there is a continuing need for a fully-manned, efficient, highly trained and high-moraled Army; and that anyone now serving in the Army, and anyone who may think of joining the Army, can count on a full and uninterrupted career in the regiment or corps of his choice.
4.8 p.m.
THE FIRST LORD OF THE ADMIRALTY (LORD CARRINGTON): My Lords, I am sure that all your Lordships will agree with me when I say how greatly obliged we are to the noble Lord, Lord Nathan, for the opportunity he has given us this afternoon of discussing Army affairs. I very much agree with the noble Lord, Lord Ogmore, when he said how valuable these debates are. I am grateful, too, for the speeches which the three noble Lords who preceded me have made.
No Army debate would be complete without a contribution from the noble Lord, Lord Nathan. We have all come to expect from him a most dispassionate analysis of the problems facing the Army, as well as a great many constructive suggestions. We have in no sense been disappointed this afternoon. Nor have we been disappointed in the speech of the noble and gallant Field Marshal who speaks with all the authority of a former Chief of the Imperial General Staff, or that of the noble Lord, Lord Ogmore, who speaks on these occasions every year and knows a great deal about the Army. All three noble Lords have concentrated primarily on the question of manpower and recruitment. I should like to do the same, because I believe that this must inevitably be the central issue in any debate on the Army to-day. My noble friend Lord Jellicoe will wind up, and he will answer any problems and any points which your Lordships make on other subjects.
Before I turn to the question of manpower and recruitment, I should like just to mention the speech of my right honourable friend the Minister of Defence, which was referred to both by the noble Lord, Lord Ogmore and by the noble Lord, Lord Nathan, who, as I
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understood, took him to task for concentrating too greatly on the nuclear capability of N.A.T.O. at the expense of the conventional side. I have had the opportunity of seeing the full text of the Minister's speech. I do not know whether the two noble Lords have, but perhaps I might be allowed to read from one passage of that speech something which I think will allay their fears. My right honourable friend said this:
"We recognise that there could be a danger in over-dependence on nuclear weapons. We recognise that if the conventional shield is too thin there would be a serious risk that an accidental or minor incursion would result in an all-out war. On the other hand, we do not believe that N.A.T.O. can or should provide such massive conventional forces as could hope to deal with any conventional attack, however large, without recourse to nuclear weapons. Such a policy might merely indicate that we should not have the courage ever to use nuclear weapons in any circumstances. Between these two extremes we must strike a balance within what the Alliance can afford without waste of resources."
He then went on to say:
"We consider in Britain that a qualitative improvement in firepower, mobility and other fighting characteristics should be considered just as closely as increasing the size of N.A.T.O.'s conventional forces beyond the levels at present planned. In other words, we believe that priority should be given to improving the effectiveness of N.A.T.O.'s conventional forces."
My Lords, manpower is certainly the problem which is most widely discussed; and whatever different views and opinions may be held about the Government's defence policy, there is no dispute from anybody about the need to build up and maintain a Regular Army of sufficient size to meet our national and international commitments. Plans, equipment, weapons and good intentions are not good enough unless we have sufficient men of the right type.
A good deal of doubt has been expressed in recent months about the validity of the recruiting and manpower targets which we have set ourselves for the Army, as well as about our ability to achieve them. There has also been a lot of speculation about what the Government will do in the event of failure to reach those targets, rather as though failure were a foregone conclusion. My Lords, ever since the Government decided to rely on smaller all-Regular Forces there have been gloomy prognostications, some darker than others, about the extent to which

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we should fall short of our aim without the aid of conscription. I am not going to pretend that we are out of the wood yet; and the Government are anything but complacent. But it is already clear that the gloomiest prophets are going to be confounded, and there is a reasonable hope that their worst fears will prove groundless. At all events, I will try to show in the course of my speech what the Government are doing to make certain that they are.
But, first of all, let us look at the aim. The Government are tackling the build-up of the all-Regular Army in two stages. The first is to achieve a volunteer strength of 165,000 officers and men by 1963, when the last of the National Servicemen will have left. We have made it clear, however, that we do not intend to stop there, and that the second stage will be to move on to a force of 182,000 men as soon as possible thereafter, so that the Army can not only fulfil its commitments but also achieve proper stability. The noble Lord, Lord Nathan, expressed some concern at the prospect that, having achieved our minimum target of 165,000 men, we might then see this figure steadily diminish thereafter. In fact, we are confident that once 165,000 is achieved we shall go on to 182,000 automatically. The reason for this is that as we recruit more Regulars the numbers of long-service engagements will increase and the numbers leaving the Service each year will diminish. The best calculation we can make at present is that we shall reach this higher figure in 1966 or thereabouts.
My Lords, the decision to base the all-Regular Army on these numbers was taken consciously and as part of the Government's plan to provide a balanced defence force, both nuclear and conventional, within the limits of what this country can afford, in manpower as well as in money. Bearing in mind our Alliances, N.A.T.O., S.E.A.T.O., and C.E.N.T.O., and the mobility and enormously increased fire power of modern weapons, it was, and is, the considered opinion of the Government that forces of this size will be adequate to enable us to continue to honour our international obligations as well as to safeguard our own national interests in those parts of the world where we might be
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expected to act alone. The Government have been quite consistent about this and nothing has happened in the last three or four years to suggest that this decision was mistaken.
The noble and gallant Field Marshal and, to a lesser extent, the noble Lord, Lord Nathan, both suggested that the prospects and role of the Army were still imperfectly understood. I do not think there is any reason why this should be so. They have been stated often enough and are re-stated most clearly and succinctly in the Explanatory Memorandum which we are discussing this afternon. I have certainly heard the present Foreign Secretary talk about the need for conventional forces and for an Army, and I have heard the Prime Minister do so as well. But if the noble and gallant Field Marshal is still of the opinion that something more needs to be done, I most certainly will discuss it with my right honourable friend the Secretary of State for War to see what more we can do.
But the rôle of the Army is, first and foremost, to contribute to peace and stability, which is our first line of defence, by maintaining a "military presence" in areas of potential trouble, from Western Europe to the Far East. And this the Army is doing in Hong Kong, in Singapore and Malaya; in the Arabian Peninsula, at Aden and Bahrein, and in East Africa. Nearer home, we have our garrisons in Cyprus covering the Mediterranean, and in Germany we are maintaining the strength of the British Army of the Rhine at seven brigade groups, which is the contribution which we have undertaken to make to N.A.T.O. Standing behind these frontline troops there is the rest of the strategic reserve in this country, which is at a high state of readiness to reinforce our position wherever that might be needed if trouble should, in fact, come.
The mobility and power of rapid concentration of these forces will be still further increased as our plans for the re-equipment of the Royal Air Force's Transport Command bear fruit in the next few years, and also when the Amphibious Warfare Squadron is replaced by the Navy's new assault ship. This pattern of world-wide deployment will be maintained with the all-Regular

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Army which we have set ourselves to provide and which we hope will grow steadily in efficiency as the volunteer principle is established. Of course, we could have chosen to have a much larger standing Army; but the possibilities of recruitment apart, this could have been done only at the expense of our national economy, on which our ability to maintain defensive forces at all depends, or at the expense of some other aspect of defence. Should we make do with a smaller Air Force or a smaller Navy in order to swell the ranks of the Army? It is, of course, a question of balance within the limits set by economic realities. We believe that we have achieved the right balance in our various aims, and that to upset it in any one direction would be foolish. So much for what we are aiming to do.
How is our performance matching our aims? It is, of course, too early yet to be certain that our first target of 165,000 men will be reached on time, just as it is too early to forecast a deficiency at this stage. No one can say with certainty whether existing trends of recruiting will continue, and the size of the future Army depends on a great many other factors as well. The number of recruits from civil life; how many men decide to stay on in the Army when their present engagements end; the percentage of recruits lost by wastage; that is, by discharge by purchase, on medical grounds, and so on—these are all considerations which must be taken into account in estimating how large the Army will be in eighteen months' to two years' time.
The noble Lord, Lord Nathan, gave us some figures of shortages which he said nobody would dispute. With respect to him, I do dispute them, because I think that he has greatly over-simplified the recruiting sergeant's problem and has not taken into his calculation account of the re-engagement and wastage factors, which could have a significant effect. I should prefer to stick to what we know. During the first four months of this year, the net increase (which, of course, is quite different from the total number of recruits every month), allowing for all the factors I have mentioned, was 1,854 men. The recruiting figures for April, which are published to-day—though I admit that this is only an isolated month, and that the comparison with last year is not quite fair, because
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Easter fell in March this year and not in April, as it did last year—were 1,840, compared with 1,708 in April, 1960.
My Lords, my right honourable friend the Secretary of State for War is taking urgent steps to improve recruiting, and particularly to encourage Regular soldiers at present in the Army to stay for a full career and so reduce the existing rate of wastage. It is still too early to judge the measure of success that these efforts will have, but we shall be better able to do this at the end of the year. We shall then be able to see how we are doing and what other exceptional measures, if any, are needed to bridge the gap before 1963. I cannot, in any case, promise that during the transition from a conscript to an all-Regular Army, and while the process of run-down and reorganisation is still continuing, all our overseas units will be fully up to strength. There is bound to be some fluctuation in numbers, and there will be times when we should like to have more troops available in a particular area. But our strategic reserves are stronger than they have ever been before, and their mobility, as I have said, is constantly improving. The situation is worrying, but it should be a passing phenomenon which we believe will largely vanish when the build-up and reorganisation of the Regular Army is complete.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, I should like to ask the noble Lord whether he is quite sure on what he has just said about the strength of the strategic reserve. We listened very carefully to the dispositions that he gave us just now of the Army forces, which have two compartments, I gather—seven Brigade Groups in Germany, and all those other States that had to be manned. I should have thought that, leaving out those still in preliminary training in this country, our strategic reserve must he, ipso facto, very small.
LORD CARRINGTON: The strategic reserve is larger than it has been. It is highly; mobile; it is extremely efficient, and it is well manned.
My Lords, for not far short of a generation National Servicemen have made a valuable contribution to the defence of their country, often at some sacrifice and with some hardship to themselves. But I do not think that there are many in

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your Lordships' House who will look forward to the end of National Service with regret, or who will dispute the Government's wisdom in seeking to achieve it. The system has inevitably been expensive. The conscript, with his comparatively short service and high proportion of time spent under training and in the pipeline, inevitably gives the Army less effective service, man for man, than the Regular soldier. Furthermore, Regulars have to be diverted to training conscripts, so that the administrative "tail" of the Army is increased at the expense of the "teeth". And the presence in the Army of large numbers of young men, however good they are, who regard their service with the Colours as no more than an incident in their lives, must inevitably tend to disrupt the spirit and morale of the whole force. I believe that the new and all-Regular Army will be vastly more efficient for its size than the old.
Now what are the Government doing to ensure that our planned numbers are going to be achieved? There is, I think, no single feature of Service life which one can isolate as being responsible for poor recruitment, and there is no one panacea that we can apply to put an end to all our difficulties overnight. Men either join or do not join the Forces for a variety of reasons. At all events, though the contrary has sometimes been suggested—indeed, it was suggested by the noble Lord, Lord Ogmore, today—I do not believe that pay is nowadays a factor. The Government's present policy is to ensure that the pay of Servicemen does not lag behind that of the comparable civilian: and, provided that the young man can be shown, as the noble and gallant Lord said, that the Army offers a worthwhile career with a financial reward which is not out of line with that which he can expect in civilian life, he should find Service pay sufficiently attractive.
That is certainly so in my own Service. As I go round and talk to the sailors in the Royal Navy, I seldom have any complaints at all about the pay. But, bearing in mind that the Army is in competition for recruits with the Welfare State, our first efforts must be in the field of public relations. We have to persuade the young man that the Army does, in fact, offer an attractive, varied and well-
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paid career, in which he can rind the satisfaction of comradeship and of exercising his talents to the full. We have to persuade him that the New Model Army is different from the old, that it offers better prospects and living conditions than the old, and that it has been purged of petty restrictions. And this is what the Government are now seeking to do, by means, first of all, of a major national television advertising campaign, mentioned by the noble Lord opposite.
We have great hopes of this campaign. The pilot scheme which was carried out last autumn in particular areas showed very encouraging results. Recruiting in those areas went up by 18 per cent. at a time when the rest of the country was showing a decline. It is still too early to make a full assessment of the results of the first phase of the national campaign, but already there are indications that it will be just as effective on the wider scale. This campaign will be supplemented by Press advertisements, posters and exhibitions and displays of the Army on a very much larger scale than in the past. It may interest the noble Lord, Lord Nathan, if I might have his attention for one moment, to know that we are doing very much as he suggests. During the summer months, parties of up to 200 of all ranks from 46 different units will be touring the recruiting areas for ten days or so. In addition, recruiting displays and stands will be present at over 500 shows throughout the country. At the same time, another 60 recruiting teams will be going up and down the country. I therefore think that the noble Lord's suggestion is being carried out.
The aim of all this publicity is to show that the Army provides a worthwhile career as a professional soldier in the service of the country. We have tried to make truth and realism the keynote. The message and aim we are trying to get across is that it is a tough life, and that a man has to be both good and determined to measure up to what the Army wants. If we have not advertised the chores and inconveniences of the soldier's life, neither have we played up the rosy side—for example, the free travel and opportunities for sport which the Army throws in free. In this way we are trying to maintain a balance in our advertising, while, of

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course, encouraging a positive and favourable reaction in the potential customer.
The noble Lord, Lord Nathan, asked me whether we had undertaken any market research. In faot, quite a lot of work has already been done on various aspects, and the Army Operational Research Group is at present carrying out a comprehensive study of the reasons why men join or leave the Army. A preliminary report is expected at some time during the autumn. At the same time, we are trying to do more to live up to this picture of the modern Army by introducing more opportunities of realistic and tough training abroad. We started large-scale, airborne exercises overseas last year, and these will continue in 1961 on an even wider scale. Nothing is more important than realistic and worthwhile training in peace time, and with an all-Regular Army it is essential to maintain the soldier's interest and to make him feel that he is training for an important job.
This year, troops from this country are going to train at battalion strength in Canada and Libya, and at Brigade Group strength in Cyprus, and it is intended to continue this sort of thing each year. Apart from holding the soldier's interest, training of this sort is in Line with our concept of a strategic reserve in this country ready to fly anywhere in the world at short notice—and the lessons learnt from Army/R.A.F. co-operation on these exercises would undoubtedly pay good dividends if real trouble should ever come.
My Lords, I said earlier that there was no one aspect of service life which one could point to as the stumbling block to Regular recruitment. But there is, of course, one problem which must loom very large in the eyes—not perhaps of young recruits so much as in those of the older men whom we must encourage to re-engage; for recruitment is not just a matter of the monthly intake; it is also a question of prolongation of service, because the longer men are prepared to serve, the fewer new recruits are needed. I refer, of course, to the problem of disturbance and family separation.
The next three measures which I want to mention are all designed to attack this problem, and so help recruitment
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by increasing the rate of re-engagement. The War Office are going all out to ensure that the married soldier lives together with his family for as long and as frequently as possible, and in conditions comparable to those he might expect to enjoy in civilian life. This means a vast programme of construction of married quarters, and this is being pushed ahead as fast as resources will allow. Since 1951, over 30,000 quarters have been built or reconstructed, and everything is being done to make these quarters as good as possible. At the moment, 6,500 new quarters are being built or planned in the United Kingdom alone, and another 3,700 will be ready abroad during the next year. This programme is being supplemented by the renting of furnished houses and by the more extensive use, for the time being, of unit caravan sites, with the War Office providing the ground and services and the soldier paying a rent.
Next, as my right honourable friend announced in another place last week, a new leave scheme is to be introduced to help all those serving overseas who are entitled to have their wives and families with them but who, for one reason or another, have to serve unaccompanied. This may be because, despite the Government's efforts, housing is not yet available, or because, for domestic reasons, the family cannot travel to join the husband. Under this scheme, men will be allowed one free leave journey to the United Kingdom if they are on an overseas tour of at least two years of which not less than 21 months will be unaccompanied.
Finally—though this is not strictly to bring families together while the soldier is serving—the Secretary of State is planning to introduce, with the help of building societies and insurance companies, an imaginative scheme which he has called "Save while you serve". This scheme will be a simple one, to encourage the soldier to put aside enough of his pay—which is nowadays, as I have said, good—while he is serving to enable him to buy a house, or perhaps a small business, when he finally retires. It will help to put him in the same position, at the end of his Army career, as he might have expected to be in after a comparable period of settled civilian employment. These three measures should go a

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long way to help the married soldier, and to encourage re-engagement.
The War Office, however, are very concerned with the third factor which affects the Army's prospects of reaching their manpower goal by 1963—I refer to the heavy loss of recruits who purchase their discharge within the first three months of their service. Many of these would probably have made good soldiers if they had been prepared to give the Army a rather longer trial. Here the first essential, of course, is to ensure that new recruits are given a sensible and interesting introduction to Army life. The War Office is seeing what can be done to eliminate cleaning and all those unnecessary household chores, to prevent over-concentration on training in the early weeks, and to create a happy atmosphere in depôts and units where recruits carry out their initial training. It is too early yet to see what the results of these efforts will be; but, they should all bear fruit in due course. But apart from this, an effective means of preventing a new recruit from taking a hasty decision during the early weeks of his Army career would undoubtedly be to place a ban on the exercise of his right to purchase discharge until he had served for a stipulated period. A ban during the first two months of service is in fact provided for in the new Army and Air Force Bill, which is at present being discussed in another place. As your Lordships will in due course have an opportunity to consider it, I do not propose to say any more about it this afternoon.
My Lords, I have spoken at some length, I am afraid, about the manpower aims of the Government, and the measures which we propose to take to improve the three factors which must contribute to the achievement of these aims—direct recruitment, re-engagement, and wastage. What if, despite our efforts, it becomes clear that the target will not be reached? The solution which springs most readily to mind is the reintroduction of conscription in some form or other. But conscription is not the only answer, and there are many different ways of overcoming shortages—particularly if they are likely to be temporary—such as adjusting entry standards (about which the noble Lord, Lord Ogmore, spoke), overseas recruitment, and the
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replacement of soldiers by civilians on a wider scale. The Government would have to reconsider all these possibilities, and we should do it in good time. But we are confident that the target is attainable, and our calculations, based on reasonable and not over-optimistic assumptions, show that this is so. I hope that I have also persuaded your Lordships that the Government are taking really energetic steps to make sure that the goal is reached.
Before I sit down, I should like to say a few words about the Territorial Army and the Army Emergency Reserve, because the picture of the Army's manpower would not be complete without a mention of these two forces. My right honourable friend did not devote a great deal of space to them in his Memorandum. The reason for this was that, as recently as last November, in the case of the Territorial Army, and February this year, in the case of the Army Emergency Reserve, some very important announcements were made and given full publicity. Command Paper No. 1216 sets out in some detail the future rôle of the Territorial Army and the reorganisation which it is now undergoing, in the knowledge of the fact that, with the end of National Service, it must depend entirely on volunteers.
The Territorial Army has been reorganised, and I am glad that the noble Lord, Lord Ogmore, finds that this reorganisation has been successfully carried out in Wales. It has been reorganised so that the units will have sufficient volunteers and enough modern equipment to train effectively. The establishment will be 190,000. About two-thirds of these, 123,000, will be active peace-time members of the Territorial Army, and this is a figure which we are confident will be met by volunteers. At the same time, in order to make up the difference on mobilisation, the remaining one-third of the establishment will be filled by members of the new Territorial Army Reserve, which is open to other ranks who have served at least four years in the active Territorial Army and have attended three annual camps. This reserve will not train, but its members will receive an annual bounty of £5 in recognition of their mobilisation liability.

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The rôle of the Territorial Army is clearly set out in the White Paper to which I have referred. If mobilisation should become necessary, it would provide units and individual reinforcements for the Regular Army overseas, particularly in Germany. It would also provide headquarters and units to aid the civil power and support the Regular Army in the United Kingdom. With this in view, the ten Territorial Army divisional headquarters have been amalgamated with Regular Army district headquarters, which, in their turn, are matched with Civil Defence regions. Finally—because no one can foresee the future with any certainty—not the least important rôle of the Territorial Army is to provide a framework on which, in a period of rising tension, general preparations for war can be made.
The Army Emergency Reserve, the successor of the old Supplementary Reserve, is perhaps less known in the country than the Territorial Army, but its tasks are equally vital. Apart from a small number of individual technicians, who are in a special category of their own, the Army Emergency Reserve is divided between officers and other ranks who accept a liability to serve before a Proclamation calling out the Reserve is issued (these are grouped in Category I) and those who will not be called up before general mobilisation, and who serve in Category II. Now that the National Serviceman has gone, we have reduced the numbers in this second category to 13,000. But Category I is a different thing. Its other ranks content is limited by Statute to 15,000. It is aimed primarily at a limited war. It would be a most uneconomic business to retain in the Regular Army specialist units which have no normal peace-time employment, such as, for example, port operating units, railway battalions, special postal units, and a host of others. On the other hand, if a limited war of any size were to break out, some, or all, of these units would be invaluable and might be needed very quickly.
The importance which we attach to this category of the Army Emergency Reserve is marked by the new individual bounty of £60 a year paid to officers and men who accept the pre-Proclamation liability. This is in addition to normal training bounties. I cannot stress too strongly the vital pant which the A.E.R.
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Category I plays in our plans for dealing with what one might call medium-scale emergencies—that is to say, situations short of global war, but of more seriousness than our small Regular Army can handle without specialist support. Anything that can be done,to make it as widely known as the Territorial Army will, I know, be most welcome to my right honourable friend, and I should like to enlist your Lordships' support to that end.
As I said at the beginning, I have concentrated primarily on the question of manpower and recruitment. I have no doubt that in the course of this debate those of your Lordships who follow me will have many criticisms and suggestions about the problem of finding men for the Army. Your Lordships may well be critical of some of the things we have done, and I can assure you that your criticisms will be noted and that any suggestions for imroving recruiting that you may make will be looked at with great care by the War Office. I hope that I have satisfied you that my right honourable friend the Secretary of State for War in taking positive and imaginative steps of his own to deal with our deficiency. But it is not possible for the War Office and its political head to solve this problem on their own. It requires the cooperation of everyone who believes that the British Army has a vital rôle to play and that it is essential that we should get an all-Regular Force of adequate size as soon as possible. I hope, therefore, that all your Lordships who have listened to me, whether you intend to speak in the debate or not, will do what you can to help us in this recruiting problem. The target is attainable. We must see that we get it.
4.44 p.m.
LORD NORRIE: My Lords, as an old soldier of two World Wars, I am convinced that the Army to-day serves as great a purpose as ever in its long history. I am grateful to the noble Lord, Lord Carrington, for his most informative survey. National Service has done this country an immense amount of good. Physical fitness and discipline are excellent tonics for the young. But there is little doubt that the inclusion of National Servicemen in the Army has had a bad effect on its efficiency. All the best N.C.O.'s are required in the training units

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to produce an endless stream of National Service soldiers who, by virtue of the shortness of their service, can never reach a really high standard of efficiency, good as they were and good as they are. Morale was bound to be affected in the barrack room, where half the soldiers were looking forward to leaving and returning to their own occupation, while the other half have joined for a career.
I am told, and I believe it, that morale has already considerably increased as the Regular content gets higher and National Servicemen waste out. In my opinion, it would be disastrous to return to any form of selective National Service, with all its disadvantages, and I entirely agree with the noble and gallant Field-Marshal, Lord Harding of Petherton. We must hope for the best as regards recruits, and if we do not get them we shall have to think again and take action, regardless of popularity or unpopularity. No doubt the Government have some scheme in mind.
Perhaps too much emphasis has been placed on numbers—such as 165,000 or 182,000, which have been mentioned—and not enough attention paid to potential commitments. Obviously, if we have potential commitments for five brigade groups and possess only four, we have not enough in the Army; whereas, if we have potential commitments for only four brigade groups, we are all right. I am convinced that we shall always need our quota of conventional troops and conventional arms, and we do not want to be misled by those who consider nuclear weapons in themselves sufficient. But whether we can afford to save the £200 million, as suggested by the noble Lord, Lord Ogmore, is another matter.
So far as possible, the Government have forecast what our commitments are likely to be and have planned the strength of the defence forces to meet the different contingencies. As your Lordships know, and as we have heard this afternoon, the eventual establishment of the all-Regular Army is to be 182,000, which excludes Gurkhas, colonial troops, W.R.A.C. and boys. Personally, I should like to see a larger Army but, having regard to the economic realities of the situation and the fact that not only the cost of the individual officer and man but also the cost
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of his weapons and equipment is mounting year by year, 182,000 is, I think, a reasonable compromise figure. On this we should be able to meet our commitments, although there is no doubt that within it we shall be tightly stretched. I was glad to hear the noble Lord, Lord Carrington, mention one thing, which had not been mentioned before—that is, that inherent in the acceptance of this figure is the assumption that in anything more than minor emergency, the Army Emergency Reserve and Section A of the Army Reserve will be available to bring units up to war establishment and provide extra administrative backing.
Sad to say, and your Lordships know it only too well, recruiting figures have been disappointing. May I remind your Lordships that the present upper age limit for recruits is 25, unless they have had some previous service, in which case some latitude is allowed. This seems to me to be a very low age, particularly in view of where our shortages lie—drivers, signallers, medical orderlies, and electronic and other specialist categories. Older men would be more experienced and therefore of better value up to almost any reasonable age—I would say up to between 35 and 40—and I think that this is a point which might be considered later.
The noble Lord, Lord Carrington, also mentioned that we have been losing a lot of recruits under Section 14 of the Army Act, whereby a recruit has the right to buy himself out of the Army within three months of attestation, for a sum not exceeding £20. I believe that the figure up to March 31, 1961, was 13·7 per cent. of the regular intake of men without previous experience, which is a fairly high percentage. I was glad to hear that some steps are being taken, which sooner or later may be before your Lordships' consideration, and I suggest to your Lordships that a recruit should remain in the Army for 12 weeks before he can purchase his discharge.
I, too, would pay tribute to the Secretary of State for the imaginative and excellent steps he has taken, and is still taking, to improve the recruiting situation. It is not easy, but I feel that the figures will improve, and we must not panic. I like the suggestion of the noble Lord, Lord Ogmore, about more Boys

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Battalions and I hope that this suggestion of the noble Lord will be examined. Television could well prove to be a paying medium for attracting recruits, if well-composed and executed. The alleged monotony and dullness of Army life is one of the supposed troubles, so far as recruiting is concerned, though I do not believe that there is all that dullness. The main thing is to remove the causes, if any, and I am told that this is being examined and will be done.
I am also told that it has been found necessary, on account of expense, to reduce the petrol allowance for armoured units in Germany, with the result that tanks and armoured cars are often confined to their car parks for long periods on end. German farmers do not like armoured vehicles any more than do our own farmers, but the cleaning and maintenance of vehicles can be a bit boring, if too prolonged. But I am sure that the greatest single factor affecting morale in Germany is the shortage of married quarters, and I am more than glad to hear from the noble Lord, Lord Carrington, that the War Office have this matter really in hand.
I have always strongly advocated that exchanges within the Commonwealth—Australia, Canada and New Zealand—would be wonderful value. For instance, would it not be grand to see a battalion of Grenadiers being sent to Australia for eighteen months or so, and an Australian battalion coming to Great Britain? The same exchange could be applied to armoured regiments. All equipment could be exchanged, and there would be no cost other than the transportation of the men by sea each way, and I think it would be real value for money. These ideas, I am afraid, good as they are, are invariably turned down for one reason only, and that is finance. But it is very refreshing to hear that recruiting will benefit from all the advantages of imaginative training and exercises for troops of this country which are to take place in Canada, Cyprus and Libya, and, I was also told, Portugal.
There is one matter which does not appear in the Estimates to which I would draw your Lordships' attention. I understand that my old regiment, the 11th Hussars—sometimes known as the "Cherry-Pickers"—at present an armoured car regiment, are to be converted to a tank regiment, and that a
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tank regiment is to be converted into the rôle of an armoured car regiment. The 11th Hussars and the 12th Lancers were the first two cavalry regiments to be mechanised and turned into armoured car regiments over 30 years ago. Armoured car regiments require specialised training and bear no similarity to the rôle of a tank regiment: in fact, the two rôles are completely different. The 11th have a wonderful record of armoured car work throughout the war, and it seems a great pity that this vast experience and background should now he eliminated. There is a danger that if a crisis did occur you would have the 11th untrained in tanks and another regiment untrained in armoured cars and, therefore, both non-operational.
I know there is a reason, and probably a sound reason, for this policy of interchange; and I also realise that there is a preponderant number of tank regiments in Germany which are likely to remain there in the same rôle for a number of years. Armoured car regiments, on the other hand, have a better chance of serving outside Europe, and for this reason it is considered healthier, from the corps point of view, that regiments should change their rôles rather than that there should be two separate outlooks within the corps. Personally—and I express only a personal opinion; it has nothing to do with my own regiment, who have never mentioned the subject to me—I am unhappy about the wisdom of this policy; but if the decision has been made, I am certain it will be accepted in the right spirit.
We must do all we can to help to encourage recruiting, and do nothing to belittle the Army, which has played a vital and continuing part in our fortunes: prized in times of danger and war; taken for granted, and often ignored, in times of peace; but always part of our life and heritage. The greatness of the British Army is based on its comradeship and its sense of purpose. So let us unite in keeping these qualities alive to-day.
4.53 p.m.
VISCOUNT GOSCHEN: My Lords, I, too, am grateful to the noble Lord, Lord Nathan, for once again starting off this debate on the Army. Like all noble Lords who have spoken so far, I have

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no doubt that the most important problem of the Army is the question of manpower. I should like to come down a little closer and discuss the matter from the point of view of the units.
As has been said, the problem of manpower divides itself into two. The first is recruitment, and that has been widely covered. I, too, would congratulate the Secretary of State for War and the Army Council, who have been doing a great job of work. Advertising the Army in order to persuade men to go into it is not something one takes too easily, but in fact it comes down to that. I think that sometimes people make a mistake when they say that we must glamorise the Army. I do not think that that is what the youth of to-day wants. What he likes is the training. I was glad to hear from the First Lord of modern equipment being taken round and shown in the various areas to everyone concerned. I am sure that if young men not in the Army were allowed to drop in parachutes it would produce thousands of recruits; it is always possible to get a large number of recruits for that kind of thing. The parachutists get more recruits because there is that extra bit of excitement which the young men like. I have said before that I was once told by a commanding officer who had just come back from Malaya that he never had any difficulty in getting recruits for his battalion out there. I am sure it is the excitement that the young men go for.
Then there is the question of inducing men to sign on and of keeping them in the Forces. The first question is whether we have the term of service right. I am sure that the present term of service—that is to say, six years—is right and is the one to aim at. But if it is going to be difficult to secure recruits, would it be possible (at any rate this is a line of thought) to reduce the term to four years with the Colours and eight years on Reserve. The Brigade of Guards have always had a short-service engagement of three years and nine years, and that has worked well. There is the possibility that in their case the terms might be "bumped up" to four years and eight years, and we could have that period for all. I think this is a point that cannot be dismissed out of mind. It may be that, to the young
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men, six years is "a bit of a mouthful" to take all at once. I am not certain in my own mind whether that is so or not. But if they had four years and a bounty after that, and a further bounty if they signed on after a further four years, that might induce more to join.
So far as I can make out from talking to various people (and the noble Lord, Lord Carrington, said this), there seems to be no single reason why men want to leave the Army after they have finished their term of service. I am not going into the matter of those who buy themselves out, and I refer only to men who come to the end of their service. Our aim is to try to get them to take on again. I think that in all units every man who comes to the end of his service and elects to leave is questioned as to why he does not want to take on again; and the answers, as in the old Ministry saying, are various and many.
The sense of purpose was brought out by the noble Lord, Lord Norrie. The men enjoy training, particularly when it is out of barracks; that is to say, when they go on to higher forms of training. What bores them is this repetitive training in barracks and fatigues. All of us who have been in the Services know that one has to have this initial and individual training, and there are reasons why it has to continue for a long time. One of the reasons has been mentioned already by the noble Lord, Lord Norrie—that is, lack of petrol. I understand that not only are the tanks and the armoured vehicles cut down on petrol, but the training of the infantry soldiers is also cut down a great deal. The other reason is that there are not enough training areas. This applies equally at home and abroad. In B.A.O.R., many units of different nationalities have to use comparatively few areas for what is called full training—that is to say, for the use of live ammunition, digging, and the use of armoured vehicles. That lack of training areas is very important. I have not myself served in Germany, but I understand that the situation there is very difficult indeed. Whether anything can be done about this I do not know, but I hope that Her Majesty's Government will take another look at it, because it is important to get these chaps out on training away from barracks and away from the fatigues—

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a subject to which I will come in a moment.
There are one or two small points about lack of realism which I should like to make. I am told that, although they all have the new rifles, there is very little blank ammunition to go with them for use on training. That is a pity. They have new wireless sets which they are very excited about, but they have very few batteries. This situation seems to ring a bell with me, because I think we have all said this a good many times before: what is the good of producing beautiful new wireless sets and having no batteries for them? The only thing they can do is to use them to give the men the initial training, and then hold them in store for the occasion of the big exercises, when everybody is looking on I hope the authorities can do something about this.
One thing which seems rather ridiculous to me is that, as I understand it, before exercises can be given some realism by means of thunderflashes and so on, the commanding officer's authority is required. I do not think I need say any more about that. The noble Lord, the First Lord, mentioned petty restrictions. I understand that these have been largely cut out, and those which remain are only for some specific reason, such as hygiene. The old-fashioned kit inspection, and so forth, are gone, and I understand that the restrictions on the use of plain clothes have been practically done away with. That, again, is a good thing.
I am told that very few men, when they are asked why they are leaving the Army, complain about the discipline. Some of them complain about how it is carried out, but that is all. Of course, it depends largely on the unit and on the warrant officers and sergeants who, after all, are the backbone of the whole unit. One must take into consideration that they feel that discipline has been relaxed a good deal in the last two years, and that they must keep what they have left. Do not forget, however, that those who leave talk to the young recruits or the young men whom we want as recruits. A man who leaves because he is dissatisfied or bored is a man who can keep another man away; and that is why I have broached these few points.
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A great deal has been said previously about the shortage of married quarters. We were pleased to head the noble Lord, Lord Carrington, say that a great deal is being done. I understand that in Germany, even after the order to go is given, there is the inevitable nine months of a contract. We are then into a new year, and the money goes. That surely is one of the difficulties of this yearly budget system. The young officers and the men—I was thinking particularly of the men—get married much younger nowadays, and they do not like leaving their wives behind, which is another reason for their leaving. The Army Council and everyone have done a great deal for the single soldiers with regard to accommodation in B.A.O.R. I understand that some of the barracks there are not up to standard, and the reason always given is that it is not known whether they are going to be a permanent station and, therefore, they have not been done up. But this does make a difference to the men.
Messing is mentioned in the Report which we are discussing. This, of course, depends enormously on units and on theatres of war. It is naturally much easier to produce good messing at home in England, where most, or the majority, of men go away on weekend leave, than it is in places abroad where they do not, and where they are in their unit all the time. I know of units in Germany who have spent as much as £100 a month because they do not consider the ration is enough. I should like Her Majesty's Government to take a look at that point. I understand that if anything goes wrong in the cookhouse, either with the equipment or the building itself, it takes an appallingly long time to get it mended.
On the question of pay, the noble Lord, Lord Ogmore, said he thought that we should pay more. I am led to believe that men who have been asked why they are not going to take on, or why they want to leave, say that they are adequately paid for the job they do. But there are in most units the really good men—and young ones at that—who could make more money outside. Of course, the ideal would be to pay them more, but whether we can afford it is another matter. I understand that in the Canadian Army they pay a little more than we do and that they have ten applicants for every vacancy on the

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establishment. The new uniform is generally welcome, but is it true that the contractors in the clothing trade can produce only 150,000 suits in a year? If that is all they can do, then the issue of this new uniform will be very slow indeed. A short word on the fatigues. The employment of civilians could be undertaken to a greater extent. One must remember that, with the run-down in the Army, the fewer men you have, the bigger percentage of those in barracks who will be on fatigues.
Most of my remarks apply to some extent to officers, but I will not go in detail into the question of officers. I understand that at Sandhurst now the numbers are going up, and I am delighted to hear it. I also understand that more boys go to Mons O.C.T.U. because if they do not like it they can come out after their short-service commission. I am not certain whether it is true, but I um told that it is the case, which is a pity, because obviously it is better for them to have full training at Sandhurst. The other point, of course, is that if they go to Mons O.C.T.U. they get to their units very much more quickly. A parent told me the other day, that her son put in his papers to go to Mons O.C.T.U. on January 1, or thereabouts; it took six weeks before he was given a medical examination and he was not called until June 1; that is six months out of his life when he is hanging about doing nothing. Possibly there may have been an error on one side or the other.
On the Friday before Whitsun, I went with a party—the noble Earl, Lord Lucan, was also with it—to the Hebrides, to see the firing of the Corporal missile. It was a very interesting day. I think in some ways it is rather a pity that when a whole crowd of Members of Parliament—if "crowd" is the right word for them; at any rate, a collection—goes on a journey like this it has to go in a chartered aircraft of rather ancient design, although perfectly safe. If we go to see one of the new weapons, to go by an aircraft made out of a Wellington bomber, seems to me to be, not going backwards, but not progressing very far in aviation. I am told it is cheaper for us to be taken up in a chartered aircraft than it would be for the Royal Air Force to take us
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in one of theirs. I have no possible means of knowing whether that is true or not, but it seems rather odd.
To get back to the Corporal missile: this time last year when the party went it failed to go up, and everyone was in great excitement. But this time it was really a very interesting performance altogether. I was very struck not only with the permanent staff there but with the regiment who fired the missile, which reached its target very well. I thought that the range was well run, and I understand they are very happy up in the Hebrides, except on the point we brought up last year: that, as there are no shopping facilities on the island, or practically none and the N.A.A.F.I. is very small, they have always wanted to be given four leave passes a year. Their position cannot be compared with that of men in Germany or on other foreign service. Nothing has been done and, so far as I know, they still get only three passes.
The thing that impressed me about the actual regiment which came over from Germany to the practice camp to fire the Corporal told us that although the Corporal may not be the answer, it has been of immense value. It has cost the nation practically nothing, and the amount of experience that this regiment has got out of it is really very heartening indeed. They are convinced that when they get their new missile—and they are hoping against hope that they will get it—the time it will take to convert this regiment will be very short indeed. I think, therefore, we can say that the Corporal has been of intense value. I should like to ask about another piece of equipment, the new troop carrier. It is mentioned in the Memorandum on the Army Estimates, but I am told that there are only about two or three, or very few in existence, with a battalion on Salisbury Plain. It says in the Memorandum that the troop trials—this came out some time ago—would be carried out. So far as I can make out, there are not very many about.
To go back to the subject of recruiting, I should like to say a word on cadet forces. They are one of the sources from which we expect to get recruits for the forces. I think there are two points that people who run cadet forces would like to make. One is that they think it would be of immense value if they could have

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a few modern rifles. It is the same old point that if you give modern weapons to people to take to bits and put together again and possibly to use even on a small range, it makes the interest that they take in the whole affair infinitely greater. If, instead of using old stuff, they can be allowed to use these, it will give them enormous interest. The other thing I am told is that in the more rural areas where the cadet forces have a hut, nowadays the one hut is in many cases too small for them. It is the old matter that they have not enough accommodation. With the new syllabus more studies have to be done and the actual accommodation is not enough. I hope that, if possible, we may see some improvement in this respect. It does not, I think, affect everybody, but I hope that for those who need bigger accommodation every effort will be made to get it.
This debate has ranged chiefly on manpower, but I think we all realise that the spirit and heart of the Army is just as it always has been, and that, if called upon, or even if not called upon, as we all hope they will not be, but merely in doing their ordinary tasks—and do not forget that one of the most difficult tasks the British Army has to perform is the semi-policing duties—that spirit will be revealed again. They are often asked to do these semi-policing duties and they do them with extreme courage, extreme restraint and also with extreme earnestness. I think we all wish the Army well in this next year, and we know in our heart of hearts that they, in their hearts, will carry out their duties as well as they have always done.
5.19 p.m.
LORD DENHAM: My Lords, the only points I want to add to this debate this afternoon are all about the Territorial Army. As I am at the moment in the middle of my annual fortnight's T.A. camp the subject is rather fresh in my mind. I have to be back in Norfolk to-night to rejoin brigade exercises, and I hope my noble friend and your Lordships will excuse me if I cannot stay until the end of the debate.
The table in the Defence White Paper which gives the analysis of strengths of the various reserves shows an increase of 6,000 normal volunteers in the Territorial Army—and by "normal volunteers" is meant those not
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connected with National Service. This is a very healthy sign, as few Territorial units are yet up to strength. The recruiting campaign is going well, and figures of new recruits are on the increase. But a very much more important figure than the number of new recruits who sign on in any particular year in the Territorial Army is the number of existing members of a unit who stay on for the second year, and then for a third year, and so on. It is absolutely vital, if the Territorial Army is to be a strong and efficient force, that the interest and amusement which its members can get out of it is at a very high level.
If the training is interesting and if Territorial members can feel that the spare time they are spending is not being wasted in any way, they will learn more from their training; they will more readily stay on for a following year or more, and they will be a better advertisement to their friends who are potential recruits. After all, the best recruiting propaganda of all is that given out unsolicited, and perhaps unconsciously, by serving members of Territorial units. The various points—I will not say complaints—I was going to raise about the Territorial Army, have almost all been raised, I am very interested to find, by my noble friend Lord Goschen concerning the Regular Army. While it is nice to think that we are not being left quite as much out in the cold as we thought, I feel none the less that these points should be considered for both. Just how interesting and enjoyable the training of a unit is is largely up to the individual unit itself. But the best of all units is very much limited by the means it has at its disposal.
I should like, first of all, to deal with equipment. The Territorial Army must always be the poor relation of the Regular Army. Its members recognise that fact. An instructor lecturing to Territorial officers not long ago on the latest equipment ended his talk by saying "You need not worry too much about this stuff; we have not yet caught up with the latest obsolete equipment" I am very glad to read in the Memorandum on the Army Estimates that, so far as the infantry are concerned, the new Territorial Army will have new radio equipment and self-loading rifles. I very much agree with what my noble friend

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Lord Goschen said about the importance of radio. It is very difficult to achieve realism in exercises of company strength or above without some form of efficient radio communication; and there is no more disheartening piece of metal to drag about the countryside than a wireless set that does not work.
I hope that to the list of new weapons that will be issued to the Territorial Army will be added the Mobat, when it is available, and the 35 rocket launcher. All these things will certainly provide very necessary and up-to-date training and interest. Like my noble friend I am also thinking of the smaller items of equipment lower down the scale, which are perhaps more necessary, in spite of being less expensive. We have very limited supplies of blank ammunition. With thunderflashes, again, we have the same difficulty, only perhaps very much more so. The same applies to 2-inch mortar smoke bombs and smoke canisters. Bulletted blank for light machine guns, which is absolutely necessary on an exercise to show that firing is coming from a light machine gun and not from a rifle, is not on issue to the Territorial Army at all. We are, I hope, a very long way away from the old days of the Territorial Army when all the umpires rode on white horses and people waved flags about to show from what direction fire was coming. The shortage of these comparatively cheap things stops the best got out of training, and I would go far as to say that if it is a choice between getting the new weapons and getting more ammunition for the out-of-date weapons we have got, we would have the old weapons with more ammunition every time.
I, too, should like to deal with the question of messing, and particularly the fatigues aspect of it. Territorial battalions either have two cooks on their strength or are given a cash allowance instead. But there are a great many more duties connected with messing than two cooks can do—duties for which no allowance is made at all. There are all the fatigues, such as washing up, scouring pans, peeling potatoes, all of which have to be done by fatigue men, and those men have to be taken off the training for which they signed on. With two
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weeks camp, which is not a very long period, the training has to be very carefully geared so as to teach the men as much as possible in as short a time as possible. The training leads on from the first day, when the new recruits get the very easy things explained to them, to the time when they go out on more advanced exercises at the end. If throughput that period men are taken away for fatigues, they are just not going to know what to do when the particular problem which they missed owing to fatigues crops up at the end.
The third point I should like to mention is that of uniform. It is perhaps again rather a small point, but the Territorial Army is not issued with any No. 1 dress. The best they have is a suit of battledress. I do not know whether it would be possible to issue the Territorial Army with something slightly smarter. My own regiment, the Honourable Artillery Company, has a longstanding duty and privilege of providing a Guard of Honour for any visiting Sovereign who comes to this country on a State visit, and is therefore invited by the Lord Mayor to the Guildhall. For that Guard of Honour we have forage caps and buff equipment, but underneath it battledress. It looks rather incongruous beside Regular troops in their smarter uniforms who happen to be near.
I realise that my noble friend who is going to reply will be thinking more in millions and of bigger questions, and that he will therefore probably not be able to give any reply about these very minor points that I have raised. But I should be most grateful if he could consider them. They are small points, but important ones, and it always seems to be the small points that matter most in the Army where morale is concerned.
5.25 p.m.
THE EARL OF COURTOWN: My Lords, to-day I shall deal with certain aspects of the Memorandum and of the Army of which I have personal knowledge, and possible more experience than some. One of those is concerned with the reserve forces. I am very glad to hear the noble Lord, Lord Denham, speak as a serving soldier of the Territorial Army. As a rather older soldier of this force, I have experienced many of the things which he has just now put before your Lordships' House. In my years in The

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Territorial Army, and connected with it, it has always struck me that in the past the War Office have not always thought far enough ahead in regard to the Territorial Army.
In my experience it is about every five years that the Territorial Army is reorganised. I think that in the past there has been too much a tendency to feel that "It is now being reorganised for the last and final time." Of course that is not so. Nobody really knows what the requirements are going to be five years ahead, four years ahead, or even perhaps one year ahead. In fact a few months after the last reorganisation, which I think was in 1956, when Anti-Aircraft Command was abolished, we were asked to help raise 48 Mobile Defence Corps battalions of the Army Emergency Reserve. They were never properly raised at all. The commanding officers had an almost impossible job, and the units have since been disbanded. There was a good example of how, although it is quite easy to destroy or to disband a unit, it is much more difficult to form a new one. Therefore, I am glad to see that in the recent reorganisation of the Territorial Army the theme has been towards amalgamation the whole way. With amalgamation, if at a later date the requirements are different, or an increase in units is required, the amalgamated units can be split up again.
The extent of amalgamation in the recent reorganisation has been great, but there is still the potential for future expansion. As I have just said, we do not know what are going to be the requirements next year or the year after. But there is the point always before us of the possibility that there will be ground-to-air missiles required from the Reserve Army. When Anti-Aircraft Command was abolished in 1956 we were told that this was going to be the responsibility of the Royal Air Force. Since then, I understand, there have been Regular Army ground-to-air missile units, and no doubt in due course there will be a demand for similar Reserve units. I would ask Her Majesty's Government, if and when this demand arises, to consider and to realise that it is much easier to split existing Territorial Army units, and raise the new units on that basis, than to try to start from scratch, whether the new
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reserve units are Royal Air Force or Army.
Necessary as this recent reorganisation may have been, I suggest that it was hardly handled in a way calculated to win the confidence of the Territorial Army. The Territorial Army Advisory Council was given the outline plan, confidentially, on July 12. The Council of Territorial Army Associations was consulted only a few hours before the announcement was made in Parliament, and the chairman of the Territorial Army Association was given the key plan only on July 21. Then the Territorial Army, the Territorial Army Associations and the innumerable people who are concerned with this, were given only from July 22 until August 30 to put forward their comments on it.
It is evident now, I think, that nobody who had any extended experience of the Territorial Army was consulted at all before the key plan was issued on July 22. Although five weeks may be thought to be a reasonable time to consider the alterations and amendments which one can make, on the other hand this occurred at the most inconvenient time of the year for all concerned. The commanding officers, in particular, are busy people. They are mainly of an age where they have young children at school. This was launched on top of them at the moment when they were setting off on their holidays. It was extremely difficult to get together the honorary colonels and the commanding officers of the various units who were concerned in these amalgamations.
The fact that this consultation was necessary was shown, I think, by the large number of amendments that were made to the ordinary key plan. Now that the amalgamations have been carried out, many officers and other ranks, both young and old, have been forced to give up their chosen hobby. The number of units has been reduced, and, as the noble Lord, Lord Carrington, said, units are now allowed to recruit to only 65 per cent. of their establishment. in some parts of the country—for instance in Northern Ireland—units were at 85 to 90 per cent. of establishment. It means that over the next two years they have to cut their numbers down, however many new recruits may be coming along and whatever their standard of training.

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Also, in view of what the noble Lord, Lord Carrington, said about the future of the Reserve Army, it seems to me that what we want is plenty of keen young officers and N.C.O.s who, for some reason or another, do not see their life in the Regular Army but are yet prepared to spend a good deal of their spare time in order to make themselves as efficient as possible through evening courses, weekend courses and through the fortnight's annual camp. It seems to me that the country needs these people to form a reserve to be tapped when required.
I suggest that Her Majesty's Government should consider a greater degree of flexibility in the recruiting arrangements that appear to be available at present. I understand that during National Service 85 per cent. of the National Service officers came from the South of England. One may think that that was a bad thing. Nevertheless, I think it was a fact. Therefore, it is more likely that there are available in the South of England a greater number of young reserve officers for Territorial Army training. I wonder whether the War Office would consider that fact in arranging the establishment of the new units. It is also the case that recruiting varies from one part of the country to another on account of special factors, such as unemployment, short-time working and so on. It is also true that certain parts of the country tend to react more quickly and more violently to national emergencies. This again requires to be taken into account. I feel that the plan, at any rate as it is known to me, shows a lack of flexibility and does not allow for the large number of reserves that we really need.
Now just a few words on the other branch of the Reserve, the Army Emergency Reserve. This is complementary to the Territorial Army and, in the main, fulfils different purposes. There may, however, be a tendency to rely on it for increased requirements of the Army due to the idea that it is, perhaps, cheaper. I had a feeling that attempts were made to form the Mobile Defence Corps units within the Army Emergency Reserve because, perhaps, they were cheaper than the Territorial Army. But in fact a number of Mobile Defence Corps commanding officers went round and tried
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to get accommodation at local Territorial units so as to help with their recruitment. I see, too, that the Memorandum says that:
"Many of the new Army Emergency Reserve units will be raised in regions, like units of the Territorial Army. This reorganisation will assist their recruiting, administration, and training, may give their members the opportunity for social activities like the Territorial Army, and will result in closer ties with the Regular and Territorial Armies."
It seems to me that that is bringing it much nearer the Territorial Army, and I think that the whole relationship between these two forces will require close scrutiny in future years. I know that already various Army Emergency Reserve units have approached Territorial Army associations to enable them to set up headquarters within existing drill halls. If that is so, they should be charged with the equivalent amount of expense in calculating the relative cost of the two forces.
The other point on which I should like to touch is the question of administration. Apart from what is included in the Memorandum, I know from my own experience that a great deal has been done to simplify administrative organisation and procedure, and I think this is a most excellent thing. Any enterprise which seeks to run its administration largely by regulations from the centre is bound to have cases which are not exactly met by the regulations, however carefully those regulations are drafted. What I call "administrative nonsenses" are bound to arise unless delegation is given down the line to make exceptions and unless flexibility is given in the interpretation of these regulations.
I was very pleased to hear (I do not think it has been referred to to-day) about the arrangement made for commanding officers of Regular battalions, and so on, to have a fund available to them to spend in any way they think fit on their own regiment, without previously having to refer the matter up the line for approval. This is just the sort of thing which enables people to make decisions on the spot, to remove what I call these "administrative nonsenses"—I am sure your Lordships all realise what I mean. But, in spite of this, one still bears of decisions, being made of the sort I have just referred to, and these have an extremely bad effect on Army propaganda.

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There are two particular fields to which I should just like to refer in connection with it. The first is recruiting. A great deal has been said this afternoon, and rightly so, about recruiting. I am delighted to see that the enlistment procedure is being streamlined and that steps are being taken to improve the standard of recruiting liaison staff. But recruiting a man is a personal contract between the Army, on the one hand, and the man, on the other. It is essentially a personal thing, and the requirements of different parts of the country vary very much one from the other. I wonder whether, in fact, enough delegation of authority is given to local recruiting officers to make decisions regarding local publicity without having to submit it to the centre. This may need the expenditure of a certain amount of money, without prior reference to higher authority on such things as posters, and so on. But, my Lords, requirements for local publicity may arise at very short notice, and if the local recruiting officer has to depend on reference back to the centre before he can, say, get a poster printed, it is obviously undesirable.
I have also heard that in parts in the country distant from London, where there are local daily papers, advertisements for the Army are not allowed to include the address of the local recruiting office but only the address of the recruiting office at (the War Office in London. I do not know whether that it true, and whether it applies to all parts of the country, like Scotland, Northern Ireland, the North of England, and so on. But if it is, it seems to be something that should be looked into, because many people who would make useful recruits will not sit down and write a letter to the War Office. On the other hand, they will call into a local recruiting office just around the corner. And if they do not know where it is, and there is no indication of the address of the local recruiting office in an advertisement, surely something is being missed.
The other point which I think we have to watch very carefully on the question of these "administrative nonsenses" is in connection with soldiers' families. I was glad to see in the Memorandum the statement that
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"It is the man or woman already serving who can make the most telling contribution to our recruiting figures."
I agree heartily with that comment, but I would add that the soldier's wife also has a great deal of effect on this—not so much, perhaps, on the man's joining the Army, but on the equally important factor which was mentioned, of his staying on. I would suggest that Her Majesty's Government should look very carefully at all the administrative aspects dealing with families to see that the regulations are not such that they lead to anomalies, as sometimes happens, and that local people, the local authority, make decisions which will put them right.
I heard the other day of one instance of the kind of thing I mean. It is, in fact, indirectly referred to in the Memorandum, where it says:
"The trial scheme of air trooping to Germany has been successful and we now plan a complete changeover to air trooping on this route by October, 1961.
"Air trooping is therefore now well established as the principal means of moving individuals and families."
It seems to me that this may mean that families are brought back to this country irrespective of the times at which they must move on to other parts of the country—parts very distant, in Scotland, Northern Ireland, or Cornwall; and it may be that there is only one train a day on which they can travel. It is necessary that this movement of families and of people should be kept to the time at which the majority of them have to catch trains.
I mention this point particularly because I have heard that certain schedules entail planes arriving back in England in the evening, too late for people going to Scotland or Northern Ireland to catch the night train. As a result, another day has to be spent by them on their journeys. It is this sort of thing, if this is correct, about which I suggest we must make sure that we do not tie people too closely to regulations. As one much concerned with administration in another sphere, I know how easily administration can be considered as an end in itself, and how convenient it is to administrators if regulations are carried out absolutely to the letter and no exceptions are ever allowed.
I am glad to see again in this Memorandum mention of the use of

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Organisation and Methods, Works Study, and other techniques (the Operational Research Team was mentioned), to try to find out what the situation really is, and I hope that matters will be put right where it is shown that "administrative nonsenses" are taking place. It is often so easy to make high-sounding reasons why the regulations cannot be altered or why exceptions cannot be allowed. Regulations are made for people, and not people for regulations, and constant vigilance must be exercised to see that the reasonable convenience of the people in the Army and connected with the Army is given its proper weight.
May I just finish, my Lords, by making a mention of the Army Benevolent Fund, as I am on the Council of that Fund, and mention of it was made by the noble and gallant Lord, Lord Harding of Petherton. It was not the intention of the Army Benevolent Fund Council that any reflection should be placed on the welfare of the Army. Its recent appeal, and the documents which Lord Harding of Petherton mentioned, had reference to the fact that the amount of money raised from the public on behalf of the Royal Air Force, through its Benevolent Fund, and by the Royal Navy, through its fund, is very much greater in relation to the size of these various forces than the amounts raised through Army channels, although the various Army charities, and also the Army associations, the regimental associations, do a lot of excellent work. The idea of the appeal which is now before us, and will become increasingly before us in future months, I hope, is directed at this fact. It is related primarily to the families in difficulties, and to old soldiers, rather than a direct reflection on the welfare of the serving soldier.
5.50 p.m.
LORD CHORLEY: My Lords, I hope you will forgive me if I turn a little away from the main current of the debate this afternoon to take up, once more, the rather difficult problem of the Army training arrangements on Dartmoor. Some of your Lordships may remember that when we had a debate on the Report of the National Parks Commission shortly after the Easter Recess I raised this problem, and on that occasion the noble Earl
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who is to reply again this afternoon gave me a reasonably sympathetic reply. Indeed, I should like to tell him that his speech on that afternoon gave a good deal of encouragement to those of us who are interested in the National Parks Movement. I have no doubt that his heart is very much in the right place in regard to these problems—as, indeed, I think, is the heart of the Minister of the Department with which he is rather particularly closely connected.
Of course, the trouble is that the Minister of Housing and Local Government, the Minister in question, is in competition with other Ministers who are often, unfortunately, rather more powerful in what one might call the Ministerial hierarchy, and who are not concerned with the preservation of natural beauty or with the access of their fellow citizens to the countryside or to the national parks. The recent chalk-pit case, which we have all heard so much about, is a very good example of this. The Minister responsible, I should imagine against his own personal inclinations, allowed himself to be, or had to be, overborne by the weight of the Minister of Agriculture and, as a result, there has been a great deal of feeling about it. I am sure that it is just the same in respect of Dartmoor. The Ministry of Defence and the War Department are very powerful in regard to these matters, and it must be very difficult for the noble Earl and for the Minister to struggle against them.
It was for that reason that I appealed to the Prime Minister himself to take a personal interest in these problems, as did the noble Earl, Lord Attlee, when he was Prime Minister in the time immediately after the war. His intervention in regard to these matters was undoubtedly, as I then said, the main factor in the smooth retransfer to the general public of many of the areas which had been taken over, and very properly and naturally taken over, during the war period by the Armed Forces for training and other war-time purposes. I doubt whether the present Prime Minister has quite the same personal interest in problems of this sort as the noble Earl, Lord Attlee. Indeed, I am sorry that his own holding of the office of Minister of Housing and Local Government is not looked back upon with any great feeling of enthusiasm by us in the

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amenities movement. But, after all, the Prime Minister is a very accomplished politician, and he must realise that there is a considerable and a growing section of public opinion which is very much concerned in these problems and which undoubtedly will, if it is not already doing so, begin to exert a good deal of influence on elections. If for no other reason, there is a considerable case there for the Prime Minister to take a personal interest in these problems.
Since the debate on the National Parks Commission Report I have had further communications sent to me in regard to this problem of the unsatisfactory character of the Army's use of Dartmoor, and it is for that reason that I decided to take advantage of the present debate, although, as I said at the beginning, it means that I am making a speech which is a little off the general line of the debate.
VISCOUNT BRIDGEMAN: My Lords, before the noble Lord goes on, would he be very kind and, in the course of his speech, explain to the simple soldiers among those of us on this side of the House exactly what is the unsatisfactory character of the Army's use of Dartmoor? We should like to know.
LORD CHORLEY: I devoted quite a lot of attention to that on the last occasion, though I have no doubt the noble Viscount was not there; but I naturally will say something about it this afternoon, too. The Army's use of Dartmoor, as I said on the last occasion, goes back a considerable distance. It goes back to a time before that splendid piece of English countryside, Dartmoor, had been designated as a national park. When it was made a national park the War Department was allowed to stay on and to continue the use of Dartmoor as a training ground, but the fact that Dartmoor was made a national park naturally led, I think, to the belief that the War Department's continuance there would be of a temporary character.
Of course, there were very cogent reasons why the use of Dartmoor as a training ground should not be terminated immediately. In particular, there were a number of well-built camps there which it would have been expensive and wasteful to replace, at any rate until they became obsolescent, at which time
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one would naturally expect that new camps would be built in other parts of the country where facilities are more reasonable for Army training. I understand, however, that the War Department intend actually to rebuild the two camps which are particularly important in this connection, the camps at Okehampton and at Plaster Down, and this has caused a great deal of feeling locally.
The Dartmoor Preservation Association and the Ramblers' Association, which represent very large numbers of people using Dartmoor for recreational purposes, have both sent resolutions of protest to the Minister of Defence and have not, so far as I know, yet had any very satisfactory reply from him. They, and other people who are using Dartmoor for recreational purposes, are very much afraid that there is here a proposal to spend substantial sums of the taxpayers' money on making these camps permanent—building them in a permanent form; replacing the Nissen huts which are there now by permanent brick structures, and in that sort of way—a move which would, in effect, lead to the consolidation of the Service's use of the Dartmoor National Park instead of, as had been anticipated and hoped, their going away to some other place which would be more satisfactory for training purposes. Because there can be no question at all but that the continued and growing use of Dartmoor in this way is going to lead to continual and increasing irritation, and indeed anger.
The amenities interests feel very strongly that there is a strong case against the rebuilding of these two camps. I understand that it is proposed to start this operation in 1963, and that it will take about three years to carry it through. This lends very strong support to the feeling that the whole object of this thing is to establish a permanent type of camp on Dartmoor. We know, and it is very right and proper, that very substantial sums indeed have been made available in the Defence budget for the purpose of improving and re-equipping the general buildings used by the Army for the troops in one way or another. Indeed, in the Daily Telegraph on February 15 of this year there was a comment to the extent that the money provided was so very liberal that it would enable as much rebuilding to be done as could

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in fact be "physically spent", which is a rather remarkable phrase.
While that is very right and proper in regard to the provision of ordinary accommodation for the troops, I suggest that to use money in this way for establishing two permanent camps in Dartmoor would be a very serious mistake indeed. It would undoubtedly lead to making permanent this exacerbation which is going on in Devonshire at the present time, and which is leading, from all the information I have, to a great feeling against the Army itself, which is most unfortunate. And this in spite of the fact that the General Officer Commanding, South-Western Command, General Cubbon, has been doing his best, and has built up an admirable reputation for what he is trying to do in order to establish good relations with the people in those parts.
In my view—and it is the view of the amenities people on the spot—there is no real cure for this problem except the release of Dartmoor by the Government from its use as a training area. Far from showing any sign of doing this, the training exercises have, as it were, been stepped up. My information is that they are now being extended over the whole of the national park area, in addition to the areas which were set aside, as I explained on the last occasion, partly for live ammunition training—which I believe is an area of about 30,000 acres—and a smaller area for the use of training with non-live ammunition.
The noble Earl, in his reply on that occasion, said that we ought to be grateful, because the Merrivale section of the moor, which extends to some 4,000 acres or so, had been relinquished. We should, if that were what one might call a genuine relinquishment; but my information is that this area which is a non-live ammunition section of the training ground has not in practice been given up, and that the Army are now to be found on occasion anywhere on the whole of Dartmoor, both in and out of the non-live sections which were set aside for them. Reports are continually coming in to the Dartmoor Preservation Association, I will not say of the depredations of the troops, but of the exercises and manœuvres of the troops in parts
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of Dartmoor which are outside the areas supposed to be demarcated. For example, I am told that they are now using Whitchurch Down, on the Tavistock side of the national park, for these training exercises; and other reports are continually coming in of the use of areas outside the allocated boundaries. Again, there are increasing reports about dangerous mistakes which are being made. I referred to the continual use of live ammunition which did not explode properly—a new type of ammunition which is being used, and which has exploded and very nearly caused a good deal of injury. Indeed, as the noble Earl knows, there have in the past been fatal accidents, and no doubt they are likely to recur.
The difficulty is that there is no really efficient arrangement in regard to these matters. Printed notices are put up saying that there will be no firing on a particular date. Naturally, ramblers make a mental note of that, and on that date arrive at Dartmoor for the purpose of walking across the moor, and then have found the ranges are in use after all. I have in front of me a letter, which was published in the Western Morning News of May 20 last, written by a Miss Christine Raikes, which says:
"Having seen in your paper of May 12 that the firing on Dartmoor was nil for May 13, I walked on the Moor.
"I was surprised to find the red flag flying on Lynch Tor. For future guidance of the public perhaps some explanation could be made."
I am told that this is quite typical of what happens. Also, the reverse is often the case: no firing is going on, but the red flag is flying all day. The result of that, of course, is that people begin to take a chance, and sooner or later there will be further fatal accidents, homes will be deprived of bread-winners, and the general state of exacerbation will be increased.
On the last occasion I suggested that provision should be made for a further inquiry to be held, at which all these matters could properly be gone into, evidence of this sort of incident could be put before the inspector, and the War Department could be allowed to make its reply, a proper investigation could be made, and the matter threshed out. The noble Earl said that he would look into that. I hope he has been able to

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do so, and that lie will be able to indicate that something rather more positive can be done than appears to have been done so far. That, I think, is all I need say, but I should like to assure your Lordships that this matter is very much a burning question, and I hope something can be done to deal with it.
6.8 p.m.
LORD AUCKLAND: My Lords, to continue on the rather general line of debate, I should like to say a few words, first on the subject of recruiting, which has been the principal standard of this debate. I gave the noble Earl who is to reply, and who was good enough to come and see me, notice of some of the points I am going to raise. One of the problems of recruiting in the "new Army", as it were, will obviously be to get the right calibre of man. Here the recruiting officer may be in a difficulty. It is always easy to point out to a would-be recruit the glamorous side, so to speak, of Service life—the sport, the free travel, and the opportunities for promotion. But it often happens that when one gets on to the subject of discipline, the man fights shy.
I should like to ask the noble Earl who is to reply—I have given him notice of this point—whether, when a would-be recruit comes to a recruiting office, the necessity for discipline is sufficiently stressed. Because one of the main reasons why a number of men are buying themselves out of the Army is, I am told, that they do not like the discipline. As I have said before in your Lordships' House, I think discipline in any Service unit and in any business unit, is essential; and while the number of 165,000 men may well be difficult enough to attain anyhow, it is essential that when a man does join the Army, particularly on a Regular engagement, he should be prepared to take a reasonable amount of discipline. Most can, but there are the few who will join the Army purely for the adventure of it, and they can do a great deal of harm. I did most of my service in the ranks, and in the unit in which I served, which was not an unreasonably harsh one, we had a handful of what are known as "barackroom lawyers", who rebelled against the slightest instigation of discipline or of "spit and polish". In a small all-Regular Army, a handful of these men could do a great deal of harm.
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The recruiting film which is being shown on television and the advertisement being shown by the I.T.A. illustrate fairly and convincingly what openings there are for men taking on a Regular engagement in the Army. I wonder whether the noble Earl who is to reply can give any estimate of how many men who sign on for a short-term engagement have the opportunity of going abroad for a reasonable time during their period of service. I realise that it is difficult to answer this question on the spur of the moment, but I think that a soldier who joins the Army for the love of it looks forward to overseas service rather than doing all this time at Tidworth, Aldershot or Cattaick. I think that manœuvres like the exercise held in Libya recently will do more good than anything to keep men in the Service.
As regards the figure of 165,000 men, I should like to ask the noble Earl, to whom I have given notice of the point, whether there is any possibility of the administrative side of the Army being decreased still further. In my opinion, much of the work done by orderly room clerks, transport clerks and others could be done by civilians or Servicewomen. During my National Service, I had the experience of being an orderly room clerk and I know that a good deal of the work which I did, which was not "top secret" or anything like that, could have been done either by a civilian or by a Servicewoman. At this point, I should like to pay tribute to the excellent work done by the Women's Service, particularly in the field of Army nursing.
On page 10 of these well-decorated Army Estimates is a picture of the new pay computer at Worthy Down. It looks a most involved bit of machinery, but I am sure it is very efficient. It will be interesting to know how much labour it will save. I believe that machines of this kind will release more men for operational duty, and it is in the context of operational duties that we must view the figure of 165,000 men.
Turning to the question of pay, I think it can fairly be said that a single man in the Service is well paid, considering that he gets his food, accommodation and clothes free of charge, but I am a little less happy about the married man. As pointed out by the noble Lord, Lord Nathan, who so admirably initiated this

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debate, the Services have to compete with industry and commerce, where rates of pay vary but in many cases are very favourable. I am not suggesting for a moment that pay in the Army is not in every respect anything less than good, but if there is to be any further increase in remuneration, I feel that preference should be given to the married soldiers, especially in the form of marriage allowance and disturbance allowance. Unless these points are looked into carefully, I feel that the Service will lose their most valuable manpower—the man in his middle thirties and early forties, who is the best type of officer and N.C.O. and who forms such an essential part of the Army's pattern.
Everything in the Army must depend on morale. Where I work I come into contact with many young men after they are released from National Service and I find that most of them have enjoyed it and admit that it did them good. I think that morale is a good deal better than it was five or even ten years ago. National Service might have a lot to do with that. Personally, I view the end of National Service with mixed feelings. It is essential from a financial angle. For obvious reasons, National Service is expensive, and a return to it now would be a retrograde step. It would certainly send up the Estimates to a very high figure and it would decrease the efficiency of the Army, which is now, I believe, very high.
In last year's debate on the Army Estimates, I made a somewhat scathing speech on Territorial Army equipment. I have shown it to two or three young friends in the Territorial Army and I am told that to-day equipment has improved tremendously, both in quality and in form. I think the Government deserve credit for that, and also for the great strides that have been made in regard to accommodation, particularly in Aldershot, where active work is going on in the building of new barracks. Here, again, accommodation is another important factor, and particularly married quarters. As has been stressed by my noble friend Lord Courtown and others, a great deal depends on the soldier's wife: if she is happy and comfortable, and the children are able to go to a reasonably good school, then the soldier is happy and he will stay on. This has been a valuable debate, and I am sure
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we all hope that the aims set out in the current Army Estimates will be reached effectively.
6.21 p.m.
THE MARQUESS OF AILSA: My Lords, like many other noble Lords who have spoken this afternoon, I wish to deal with the ever-present manpower problem and some of the peculiar aspects that seem to attach to it. I do not know whether it is realised that during the time in which this debate has been going on a man who entered the recruiting office in Glasgow and asked to join the Royal Highland Fusiliers, if he could produce no evidence that he had connections with the regiment by his father, his brother, or some other relative serving in it, or a letter of recommendation from an officer who had been connected with that regiment, would not be permitted to join, even though in every other respect, such as physical and mental health and so on, he was acceptable. But if he went to the recruiting office in Ayr and asked to join the same regiment, he would be accepted; and I have the impression that he would not need such a high standard of fitness and mental intelligence.
It may be wondered why this comes about, but for some strange reason that regiment, which, as your Lordships know, is one of the amalgamated regiments between the Royal Scots Fusiliers and the Highland Light Infantry—amalgamated, we understand, because they had difficulty in maintaining their numbers by recruits—cannot take men from the Glasgow area, but can take men from its country area; that is to say, Ayrshire. But, as we all know, the Army as a whole still wants men, and it seems ironical that it has to turn these men away. And there is no evidence that any man who has been turned away has joined another regiment. True, if he asked for another Scots regiment, he would be able to get in one of those. We should be able to get these men and not haggle over details, because they are sent to the Lowland depôt to train, where they train with other regiments of their own brigade and, so far as I know, they all wear the same cap badge.
Another aspect in the same connection that I should like to bring out is the effect that the removal of depôts from various

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localities is having and will have. I refer to this in connection with the same regiment. Originally, when there were two separate regiments there was a depôt of the Royal Scots Fusiliers and a depôt at Maryhill Barracks of the Highland Light Infantry. After the amalgamation the depôt at Maryhill Barracks was closed and the new regiment started its life at. Churchill Barracks, Ayr. So far as recruits went, it did very well. Last year it moved to Lanark, and next year or the year after it is to be moved to Edinburgh.
The thing that interested me was the recruits they got during the time the barracks was in Ayr. A lot of young men I know joined the Highland Fusiliers. They were not from military families, but were from families which I will call not pacifists, but agricultural families with a steady way of life, and the Army was a completely new adventure. It was not catching their imagination that was difficult, but getting them to persuade their mothers and fathers to let them go. They had to fight their own parents, who had heard about Army life and the iniquitous things that happen, as we all know, to people who join the Army. They thought: "What will happen to my son; where will he end up?". But the depôt being where it was in the country area, they all knew the town and had friends in the town; and they knew that when a man got his leave he would go and see an aunt or cousin or some friend he knew. It may be asked: what about Glasgow? But they, to a great extent, had spent their holidays in the same locality, so that they were quite happy to send their sons down to Ayr, which was not a strange place. Possibly Lanark is not a strange place to Glasgow folk, but it is to people in Ayrshire; and when they get to Edinburgh, it will be like going to a foreign land.
I noted when the noble Lord, Lord Nathan, made his speech the emphasis he put upon processing. There, I believe, is the most important part. We must bear in mind that for anyone joining the Army it is a tremendous change. A great many of these men will never have been away from home, and it will be the first time they have looked after themselves. To take them completely out of an environment to which they
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are accustomed can be difficult for all sides. They know it is a change, and of course they must accept the discipline, the training and everything else. But if they could feel that when this stops there is at least somewhere where they could go where they would be welcomed, with friendly faces around them, and looked after, it would make them a lot happier. And not only the intending recruits, but the parents who care for them will feel much easier in their minds.
The other point I want to hammer home is the old saying that the best advertisement of any commodity is a satisfied customer; and no doubt your Lordships agree with that. I think it is important to see that when people join the Army to serve in it for any period of time they can leave content. I say this with emphasis. I have had the privilege of volunteering for the British Army on two separate occasions, and I am glad to say that I was accepted on both occasions. The first time was in 1943, in the middle of the war, when at the age of dead-on-the-minute 17½. I entered Caterham Barracks. I was received firmly, but as if I was wanted, and I was treated in the same manner: good strict discipline, yes; but there was always that feeling that you were needed and you had a job to do; that maybe you were not quite what was expected, but at least they were going to make the best of it.
When I left the Army at the end of 1946 I should not have hesitated to recommend it as a life to anybody. But later, on the outbreak of the Korean War, it may be remembered that volunteers were called for, and I was one of those who volunteered. Having gone through the recruiting office, I was sent to a barracks in Yorkshire where I was greeted by the corporal of the guard who more or less told me to go home. I was told to get blankets and go to a barrack room. The only way I can describe it is that I spent the intervening period between leaving the Army and rejoining living in hostels supplied by various employers, and if any employer had told me to live in a hostel of that condition, not only I but any of the other employees would have walked out. It was not only dirty just from lack of attention, but dirty from degeneration over a number of years.

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But being the Army one had to grin and bear it.
Then we went through an undignified occurrence. We had rejoined under the impression that we would get the rate for the job. But, literally, no sooner had we been placed aboard the troop ship than we were all informed that we were in debt to the Army. We asked, "Why?" We were told it was because we had been overpaid. We had been paid at the rate for the job. Command Pay had no record of any special entry. So far as they were concerned we were recruits and would be paid as recruits. After a time we made this known to our officers commanding us, and they looked into the matter and had to apologise. But it was so, and the only way that we could be paid the rate for the job was by waiting until we got to Korea. We then approached the Area Commander and persuaded him to upgrade us. There was some peculiar paragraph in the Pay Regulations which permitted this. But I shall always remember a remark made by one of the men. He said: "Sir, what happens if we are killed before this Part II order comes out? What will our wives get?" One took it as a remark then, but the situation did arise, and in fact there were men killed before the Part II order came out. I do not know to this day what happened, whether they were paid as recruits or trained soldiers.
The other interesting thing was that, having been sent out to my battalion, I was posted as a wireless operator to an out-station where I stayed for about six weeks, and was then recalled and put in charge of a signal office. The first message I had to pass through declared me a deserter. Fortunately, I was able to put that right very quickly, and there were plenty of witnesses that I had been at my post during the time when apparently I was thought a deserter by the Army. But, having gone through those things, I will not talk about other tribulations suffered out there, because they are things the Army have to put up with; they are used to them. Having been finally discharged, I find it difficult now to recommend the Army to someone. I "took it", but it is very difficult when you think it is going to happen to somebody else.
I should like to say a few words about the Territorial Army. Much has already
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been said this afternoon on this subject, and I will just deal with one or two aspects, mainly to do with recruitment. I think your Lordships will know that there are certain categories of men which are not allowed to be recruited in any number. The categories I refer to are people in mining, railway employees, certain industrial men and motor mechanics. These cannot be recruited except in a very limited number. But when they can be recruited an even more difficult situation arises, for these men enlist with a term against their entry as "not for embodiment", and it is exceedingly difficult to find out either from the Ministry of Labour or War Office exactly what that term means. Should there be a mobilisation Order, what happens to these men? Are they sent home, or do you take them with you?
In many cases this results in an even more serious position than would arise if there were only one or two men affected. In some cases there are companies of 30 or 40 of these men all under this designation. I know of one company last year which went to camp about 60 strong, 44 of whom were members of the National Coal Board and 40 were not for embodiment; and of that 40 another 30 all worked for the same pit. What is a person to do with a mobilisation order for these men. Send them home? If a man said, "Sir, I want to go with you", does the company commander say, "I am sorry, I must still send you home because your job is down a coal mine"? I think it would make life a lot easier for people if the exact position of these men was cleared up, and if it were possible to recognise that situation so that a unit such as that could be designated a home-defence unit and trained with that in mind. These men cannot be taken away from jobs because they are trained men who would be vitally useful for civil defence. Then what happens? The officers know they are going to be taken away from them, and that any good which has been done by training these men during the days of peace is virtually wasted.
Another aspect of the Territorial Army recruiting is the rather touchy one concerning Class A reservists. Your Lordships may know that the Territorial Army is not allowed to recruit Class A

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reservists. This is slightly a mistake. We are all aware that that man is liable for recall to the Regular Army. Nobody is denying this. But he has just left the Regular Army. He is up to date—something which, as we must admit if we are quite honest, the Territorial Army have a great deal of difficulty in being. So if he goes to a unit they have an efficient man. He has worked the latest weapons very recently; he knows what the la test techniques are, and he could be a tremendous asset. Equally, it would keep him in contact with a military organisation. It would keep him alive, too, because he would know what was going on, and keep him up to the mark; and if he were called back he would not be so stale as if he had been working in a factory and had completely forgotten all he knew about the weapons he had been taught. I wonder if Her Majesty's Government have thought about that aspect.
Last of all, I should like to draw attention to the question of equipment. This has been mentioned before by other noble Lords referring to various aspects relating to some quite new weapons and some old ones. However, I am going to the most mundane level of equipment: mess tins, packs, water bottles—the little bits and pieces without which one can hardly live., let alone exist. These things are very hard to come by. I know that in many cases these have to be purchased, not from the Army (The Army will not sell them to-day), but from people in London here who deal in surplus Army equipment. It is rather ridiculous where there are people who can make use of these items. I know of an incident not so long ago where an infantry territorial battalion was allowed only two hydro-cookers and the dixies and utensils to go with them, so that if more than two companies were Out in training at one time somebody had to go short. Yet one of these companies I know purchased the complete outfit, hydro-cooker, dixies, ladles and everything of "W.D." equipment surplus to requirements.
I appreciate that it would be very difficult to increase the establishments as laid down for training units, but surely it is possible to send a note to the various Territorial Associations that this equipment is available. If it is to be sold as surplus, surely they can have first
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choice, and the equipment could be held there and put out to units when they wanted it. It is amusing, almost pitiful, to think of the number of times it has happened that, when equipment is needed but cannot be obtained through normal channels, it can be bought in the streets. The surprising thing is that it can be bought at a quarter of the price you would pay in the Army if you had to pay for it.
I should like to make one further comment. I think the noble Viscount, Lord Goschen, mentioned messing in regard to the Territorial Army and the Regular Army. Last year there was an occasion when a company of Scots Guardsmen were staying on my estate, and to assist them I called out two Territorial Army cooks. On the second day one of my cooks came to me and said: "If we fed our men that food they would leave us". I was staggered. I went over to see what these men were getting. I agreed; I should be ashamed to offer it to any man. After a day's work they were getting a pot of tea, a slice of bread, some cheese, a piece of lettuce and a round of Spam. Again it made one wonder. I would finally, like other noble Lords, ask that Her Majesty's Government should do something to show the many people who do their best to try to encourage people to join the Territorial Army or the Regular Army that the Government are on the same side. Quite frankly, we sometimes wonder.
6.40 p.m.
VISCOUNT BRIDGEMAN: My Lords, although I am certain that Lord Swaythling's Charollais bull is anxious to enter your Lordships' china shop, I hope I may be borne with for a moment or two while I try to say a few general things about the way this debate has gone. The first thing I should like to say is how grateful we on these Benches are to the noble Lord, Lord Nathan, for having again this year brought forward this subject in the way he does so well. Not only is he a great expert, especially on the Territorial Army, but we all know it is a subject very close to his heart.
I think we ought to be clear, and I think we have been clear this afternoon, what is the purpose of the Army debate as opposed to debates on defence.

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Nuclear matters belong, I think, almost entirely to defence debates, and so does the strategic disposition of forces such as the controlling of the Central Reserve. All these matters, however important they are to the Army, really belong to consideration on the inter-Service level. But, at the same time, many of these matters, such as the disposition of reserves, have a great deal more practical effect on those who belong to the Army than they do on those who belong to the Royal Navy or the Royal Air Force. So, from the domestic point of view as well as the strategic viewpoint, the concentration of reserves is an advantage not only to defence as a whole and to the handling of strategy but also to the welfare of those in the Army and those who are concerned with and live their lives in it.
To-day, with that kind of background, we are debating the domestic problems of the Army, and the Army Estimates. On a good many pages of the White Paper, there is not really a great deal to say. As the noble Lord, Lord Auckland, said, things like barracks and weapons and even vehicles are coming along in their own time. What is more, since we had a similar debate last year there has, to my mind, been a very notable absence of adverse comment on the Army and those running it. In these days, certain quarters are quick to take up any anti-Army cause—I am not referring for a moment to the noble Lord, Lord Chorley, who has left the Chamber, because I think my noble friend will probably have some counter arguments to put up, but I am thinking of all the ballyhoo which happens regularly every time a young soldier is refused permission to go to his aunt's funeral, and the week's ballyhoo we get every time a crooner is called up; and that is as good an argument for ending National Service as any other we have had this afternoon. If my right honourable friend the Secretary of State has gained some respite from ballyhoo of this sort, that is something, and we ought to congratulate him. I would associate with my right honourable friend his two senior professional advisers, civil and military, the Permanent Under-Secretary and the Chief of the Imperial General Staff.
I must ask for indulgence and say a word about the latter, Sir Francis
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Festing, who is giving up his three years' appointment at the end of this year, because he has been a friend of 40 years' standing since the day we met at the New Barracks at Gosport early in 1922. If one is to praise the present team in the War Office, it is no disparagement to say of them that whatever success they have had in looking after the Army is also due in part to the work which was put in by my right honourable friend's two predecessors. Not many good results happened in their time, but those results are now coming to hand, and we should be wrong not to take note that the harvest that they sowed is now being reaped in some measure. Therefore, in a lot of this field, particularly the field of military training, organisation and equipment, we should be content to leave the War Office alone and perhaps take note also that improvements in the equipment situation may well be due to the fact that the Ministry of Supply is no longer there to duplicate staff duties in regard to equipment.
My Lords, what remains at this late hour of the night? I think only two main things, as many noble Lords on all sides of the House have said: recruiting and the reserve forces. So much has been said about recruiting, particularly by my noble friend Lord Carrington, that I certainly do not want to go all over the ground again, but simply to sum up the position as I see it from what I have heard noble Lords say. I think we are all agreed on one thing, and that is that it would be the greatest disaster if for any reason National Service had to be reintroduced. But I would also say that I think it would be an even worse disaster if, when faced with the choice of reintroducing National Service or going short on the requirements of the nation, we failed to measure up to our responsibilities.
Having said that, I want to say immediately that I share the confidence which my noble friend has expressed that that state of affairs will not arise. When I say that, again equally I feel that we are by no means certain yet, however confident we are, that things will go right, and that we shall not go through a time when, as the Duke of Wellington said on another occasion, it is "a damned close run thing". However much we

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may want to think wishfully about recruiting, it is no good deluding ourselves into thinking that we are bound to reach the target whatever happens. I think the noble and gallant Field Marshal, Lord Harding of Petherton, made that point admirably in the speech which we heard from him. Therefore, I hope that the Government are not only taking every step to encourage recruiting but also have plans to deal with that unfortunate state, if it should occur, that for some reason the public, those Who could be recruited, fail to respond to the call of the recruiter.
One of the worst things that could happen from the point of view of our national defence, or of our strategy or our responsibilities to N.A.T.O., would be a dead point, where voluntary recruiting had fallen so low that certain units were ineffective, and at the same time we had no alternative measures. Another thing that we have to remember is that the shortage on the figure, whether you call it 165,000 or 168,000, or whichever figure it is, looms much larger in terms of the Army itself, because as long as the Army keeps to the same establishments, that shortage is reflected in every unit; and shortages in a unit inevitably turn into personal difficulties—postings which happen too quickly, overseas tours which happen too often and all the rest of it. Therefore, the shortage of recruiting, if unfortunately it is translated into these personal problems, is itself possibly a deterrent to future recruiting.
As I think has been made clear this afternoon, all this recruiting problem, although nominally a problem for the defence Services as a whole, is in practice a problem purely for the Army alone. The Royal Navy and the Air Force can get the recruits they want and do not feel the problem. Therefore the problem falls squarely on the shoulders of our right honourable friend the Secretary of State for War. For that reason I think we were all very pleased indeed to hear from my noble friend in front of me the energetic and active measures that are being taken to stimulate recruiting. When we are considering the measures which are being taken by the Government and the War Office, we ought also to pay tribute to the measures which every regiment that I know of is taking on its own initiative to assist with its own recruiting. That is something which
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has never happened in previous generations, to my knowledge, and it is something for which we ought to be most grateful to the regimental authorities, while bearing in mind that they are doing only what is in their plain interests.
Of the measures which have been suggested, there is, of course, the big public relations drive. That is all well and good, provided that the public relations drive corresponds to what I believe is the accepted role for advertising—namely, that you advertise only goods such as are actually for sale as advertised, and that any attempt to paint too rosy a picture of the Army would be at least as dangerous as an attempt to paint a too gloomy picture. In my mind there is no difference, in principle, between this problem of advertising and any other sales problem, and we shall succeed in this only if the goods which are advertised are being sold as shown.
There has been talk about altering standards. I certainly hope that we shall not alter the intelligence standard. To my mind, it is quite possible that certain standards of height or chest measurements or age might be altered for the people behind the front—for the "tail" units and not the "teeth". The announcement about families and leave was most welcome. There are the points which were raised by the noble Lord, Lord Ogmore, and by another noble Lord about boys and amalgamation. One point I would stress again, as I have done before: the possibility of offering a guaranteed job in Her Majesty's Service to everybody who signs on for twenty-two years. That would be the test of whether the Civil Service and those who control it are taking their share in putting over the Army's affairs.
Then there is the matter of pensions. We have had debates on pensions and I am not going to repeat what was said on those occasions, but I think this is the time to remind my noble friend in front of me of what we said then; that any improvements in matters like widow's pensions would certainly have a beneficial effect on recruiting. Lastly, there is the aged nonsense about uniform which has been raised by, among others, the noble Lord, Lord Denham. At this hour I say only that it is now fifty years since the

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Army, whether Regular or Territorial, has been allowed to have a full dress or No. 1 uniform for all ranks. I leave it at that, because to my mind, nothing fits that more clearly than Lord Courtown's definition of an administrative nonsense.
The other major point in this debate was that of the reserve forces. We have been extremely fortunate in having contributions from two noble friends who are close to the matter—Lord Denham and Lord Courtown. Here, as with other countries in N.A.T.O., the days are past when we could wonder whether there was any future for auxiliary forces because of nuclear weapons and so forth. We feel now that there is, and that conviction is growing stronger every day. Therefore it is just as well that the Territorial Army was saved from the perils of two or three years ago which Lord Courtown mentioned, and is still here to tell the tale and to take its place in home defence and in other tasks which may await it.
I listened carefully to what Lord Courtown said about this latest reorganisation of the Territorial Army as compared with the last one, the time when the home defence battalions of the Army Emergency Reserve were formed. I would certainly agree with him that the handling of this last reorganisation was a great deal better than the previous one, which had a number of unsatisfactory features. Where I would slightly differ from him is that my own impression of what went on was that the Territorial authorities were consulted a great deal more closely than they were last time, and that in nearly every case those consultations had the right effect. If there is any difference between him and me, I suspect strongly that it is because, as everybody knows, London possesses different problems with which he is much more familiar than I am.
So now we have a proper starting point for the Territorial Army and a proper starting point for the Army Emergency Reserve. I agree with those noble Lords who said how important it was that the Army Emergency Reserve units, if they are to have a corporate life, should be assimilated as closely as possible with the Territorial Army in everything except terms of service and liability for service, which of course have to be different. Now the way is clear
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for my right honourable friend to give the Territorial Army and the Army Emergency Reserve proper tasks, to decide what state of readiness they should have, and to give them the equipment to train for the state of readiness which is decided upon.
We have also to make the Civil Defence rôle more of a reality than it is. We have to deal with the other administrative nonsense raised by my noble friend Lord Ailsa about reserved occupations. I have not yet known a Secretary of State for War who has tackled the Minister of Labour properly on that point. We must have another look at Territorial Army administration generally. I feel quite strongly that the business, shall we say, in a county, of getting a new school or a new fire station or a new police station authorised by Whitehall, is much simpler than it is to get a new drill hall authorised—and that for two reasons: one is that, from experience, it appears that the Home Office, for example, are prepared to commit themselves to some reasonable expenditure two or three years in advance so that plans, and so forth, can be drawn up for police stations, whereas the War Office do not allow any such thing and the second is because the decentralisation of Commands carried out in 1946 has produced no good results, again for the simple reason that all that has happened has been a decentralisation of procedures with no decentralisation of financial responsibility. Therefore, whereas we have a three-tier structure in dealing with Territorial drill halls, we have only a two-tier structure, county to Whitehall, in dealing with requirements which come under the Ministry of Education or under the Home Office.
Then a point which links up both recruiting and the reserve forces; that is, the point of representation of the Army and of Her Majesty's Services in general, which has been touched on by a number of noble Lords. Now that National Service is on the way out we are losing, as I think, a very valuable means of representing that the Army is there and wants recruits. I know that the bad National Servicemen are the people who were in the news. I do not care about them. I am thinking about the good National Servicemen who went home on week-end leave and looked

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as a soldier ought to; and they, to my mind, were the great majority of the National Servicemen, whatever the newspapers may say. Now when we have lost them, if we adopt the policy, which I have no doubt is statistically right, of closing clown small drill halls in the Territorial Army and small units in the Army Cadet Force we shall be doing something which looks all right on the surface but will certainly militate against recruiting, both to the Regular Army and to the Territorial Army.
That applies not only to the Territorial Army, but also to the Army Cadet Force and the Combined Cadet Force, Again, on cadet representation, the new schools which are developing every day under the 1944 Act are schools with which the Army Cadet Force are not keeping pace, any more than the Territorial Army are keeping pace with the development of the new towns; and that is a service which ought to be performed quite irrespective of any petty views of economy.
So much, at this time of night, for the tasks which I think await my right honourable friend and all of us in and out of the Army who are trying to help him. I would add only two tasks which I hope he will be successful in undertaking. One is to get more detailed control away from the Treasury and into the hands of his own very capable finance officers. As I have said before in this House, I think, the control over Army matters in the Treasury is far more detailed, so far as I can see, than the control of similar matters in other Ministries. That must be wrong. I think it is a great cause of weakness in Army administration and I therefore think that it is a subject for inquiry.
One last word. I saw in the newspapers the other day that a small tattoo had been held at Aldershot in connection with the Horse Show. I beg and pray my right honourable friend on no account to allow tattoos to rear their heads again; because, if they do, the Army, which we care for so much and which has so big a rÔle to play in our national defence, will certainly not be ready for war when the time comes.
7.5 p.m.
THE EARL OF LUCAN: My Lords, the House at this time of the evening sometimes makes me think of the couplet of
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Omar Khayyám: a number of noble Lords seem to
"Have drunk their cup a round or two before,
And one by one crept silently to rest."
Whether they have gone to rest or not, I am not quite sure, my Lords; but we here want to wind up this debate as rapidly as we can, in view of the fact that the noble Lord, Lord Swaythling, is waiting to raise the question of the Charollais bulls.
My Lords, by common consent, nearly everybody has spoken almost exclusively about manpower and recruiting. I think that that is perfectly justified, though it leaves out of account so many subjects referred to in the Estimates and in the Memorandum, not least the subject which my noble friend Lord Chorley raised of the War Office's occupation of National Parks. But we must confine ourselves, I think, to the question of Regular recruiting: what is stopping it; what more can be done to ensure that the Army gets the recruits that it needs in the numbers and in the qualities that it needs. In passing, I would refer to what the noble Viscount, Lord Bridgeman, said: that the shortage covers all units and affects all units. I had understood that the shortage was primarily in certain skills, certain trades, and certain arms and corps; so perhaps it is not the kind of shortage which affects all units all over the world. I think that may be in some ways a more difficult problem, but it is in fact a rather specialised one.
I would say here, as the noble Viscount, Lord Goschen, said, that some of us were fortunately able to visit Benbecula and the rocket-firing range which is occupied by the guided-weapon regiments of the Royal Artillery from Germany. We saw a Corporal missile fired. One could say a great deal about that. The thing we must all hope for, of course, is a changeover from the liquidfuel to the solid-fuel weapons; and many other things can come in. But the point that struck me, about which I should like to ask Her Majesty's Government, is the question of the skill required in operating these new types of equipment.
Briefly, is it not the case that the Army is now moving into the state that the Navy and Air Force have been in for a good many years, where the extremely

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technical and specialised nature of some of the equipment means that a number of senior non-commissioned and commissioned ranks have to be technically highly qualified? Indeed, the point must arise where the most highly technically qualified persons will, by reason of seniority, become eligible for the higher ranks. And do we not there get into a state where there is a conflict? There certainly was in the other Services from time to time between the wars, when the ordinary deck rating or the disciplinary N.C.O. felt that he was being relegated to a less important position in the scheme of things owing to the promotion of these young, highly skilled, highly qualified, people. It is a big subject, but that is the sort of idea that came to me, and I offer it to Her Majesty's Government to see whether they have it in mind also and what they propose to do about it.
Now, my Lords, I was very glad that the noble Lord, Lord Carrington, the First Lord—not, as I think he was called, the First Sea Lord; not now, anyway—
LORD CARRINGTON: Or ever.
THE EARL OF LUCAN: —said that it was not pay alone which attracted men into the Services. I would go further and say that it is not pay, uniform or material comforts by themselves. Another thing I was glad was recognised by many speakers was that the soldier himself is the best recruiting sergeant. There we have, I think, the clue to any remedies for the present shortage. If a man goes on leave and meets his friends and says, "Yes, we had a wonderful patrol to the Buraimi Oasis", or, "We went up the bamboo forest in the Aberdares," or, "We did an amphibious exercise to Mirs Bay", then he really is "somebody" when he goes home. They see that he has been doing a worthwhile job; his status rises, and the status of the Army rises, in the eyes of his civilian friends and relations.
That was the basis of the Starred Question put down a week or two ago by my noble friend Lord Nathan, asking about Adventure Training in the Army. We are very glad it has been introduced, but it was disappointing that the Government could not give any definite details about the extent of this
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training. My Lords, training is obviously decentralised to units in lower formations, but do not the Army Council know what is going on in the Army? Is it not the directives from the higher command that have to put this Adventure Training into action? Do not higher commanders tell their juniors what training has to be carried out? It surely cannot be a very difficult task to say that every unit of a certain size must carry out so many exercises involving so many men in the year. It was most disappointing not to be told the details. For all we know, it was just a paragraph in the Memorandum. I suggest that the Government try to give a bit more detail about it.
Incidentally, it might have publicity value to give much more details of smaller exercises, wherever they may take place. My fear is that, instead of the man who goes home and says that he has been to all sorts of out-of-the-way places, you will get the man who says, "We had nothing to do. We just sat and sweltered in the sun, and there was nothing to do. Some people, I believe, went and did some exercise, but I never saw anything. I just sat and did cookhouse fatigue", and so on. That is my fear, and that is why I think the publicity campaign, both on television and by other means, which we all welcome, is an admirable thing.
The noble Viscount, Lord Bridgeman, said that you must have the goods for sale before you run an advertising campaign. I would say that you must make sure that the goods are of the quality specified. I would put it this way: that the Minister can give these instructions and adopt these policies and have them put out in pamphlets from Whitehall; but his job does not end there. His job does not end until he has imbued every rank of commander, from the Army Council down, with the idea that this new policy is a good thing, and is to be carried out wholeheartedly and to the limit of the resources. Talking of resources, the noble Viscount, Lord Goschen, spoke of training being impeded because of a shortage of blank ammunition and of batteries for wireless sets. I hope the Minister will be able to say that that is not true, because could there be anything more foolish than to allow limits like that to hinder a good programme of training?

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My Lords, the soldier must realise that he is doing an important and worthwhile job, and that his training is designed to that end. I will not go into the question of how much discipline, and what kind of discipline, is necessary to produce a good soldier, because we might be here all night if I did. But surely the training must be visibly related to the task that the soldier would have to carry out in war. I wholeheartedly support the noble Viscount, Lord Bridgeman, in what he said about tattoos. In fact, in our Army ceremonial training takes up a large part of the time—possibly too large a part. I saw a reference in a paper to some German N.C.O's. or officers who came over on exchange to a British unit, and who said, "We do not have time for any ceremonial drill like you do. How do you find the time?" I think that there is a point at which ceremonial drill and parades can take far too much time.
Another point is that, with all the training in the world, with magnificent exercises, large or small scale, unless the individual soldier knows what it is about and what he is doing he gets bored with it. I was with a party visiting an exercise in air movement from Abingdon to Wattisham, I think, with the Duke of Edinburgh's Regiment. They had produced a most admirable unit news-sheet for that exercise, giving some fictitious and some real information about the strategic and tactical idea on which the exercise was based. That news-sheet, circulated down to the private soldiers, gave them a chance to know what it was all about and what they were doing.
The noble Lord, Lord Carrington, said that they were out to persuade the public that the New Model Army is different from the old. My Lords, as I have said, it is on the success of that aim that the whole recruiting campaign depends; and from Whitehall he cannot be sure that waste of time and unnecessary routine tasks have been eliminated from the Army. I suggest that something like the Wolfenden inquiry, some independent civilian inquiry to examine the domestic affairs of units, the life lived in barracks by soldiers of all arms and in all quarters of the globe, might give the Minister a very powerful weapon. If an inquiry like that could give the Army a clean sheet, it would be magnificent propaganda. If an
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inquiry like that disclosed that things were not all rosy, that would, equally, be to the good.
Lastly, my Lords, there is one more thing that should be mentioned. I think the Army lacks glamour—and by "glamour", I do not mean what the noble Viscount, Lord Goschen, meant. He was thinking, I imagine, of uniforms, bands, and ceremonial. By "glamour", I refer to red berets, green berets; parachutists, commandos, and all the rest of it. The decision was taken long ago in the war—whether it was right or wrong, I do not know—to raise special units and special corps for the more arduous and exacting tasks of the war: airborne and amphibious landings, and that sort of thing. It may have been right or wrong, but it was done, and we are left with the commando conception, which is a very special unit with special tasks, and the airborne people, also with special tasks and badges. The Army misses all that.
It is really a vicious circle, because if the Army does not have glamorous jobs all over the world, these jobs falling to the Marines, there is that much less attraction for young men to go into the Army. When the Army units cannot be kept up to strength, the Government raise Royal Marine Commandos for those tasks overseas. I have the greatest admiration for the Royal Marines and used to know them very well indeed; but the fact that the Army is being cut down, and Royal Marine Commandos are being expanded and used for all the exciting jobs all over the world, must steal the limelight and the glamour; and the Army suffers. I would offer that thought also to the Government. My Lords, it is time that this debate came to an end. I would say that the Minister has the very best wishes of noble Lords on this side, and if any suggestions we have made help him that will please us.
7.23 p.m.
EARL JELLICOE: My Lords, I think our debate to-day has been useful. It has also been opportune, since it has come at a time, as your Lordships have learned to-day, when the Army is grappling with two basic problems: its transition from a mixed Regular and non-volunteer force to an all-Regular force; and the problem posed by the radical reorganisation of our reserve

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forces. Before saying anything else, I should like to assure your Lordships of two things. The first is that my right honourable friend the Secretary of State is receptive to new ideas, and I know he will wish carefully to consider the many suggestions which have been put forward in your Lordships' House this afternoon. Second, there is one thing about which he and the Government are quite adamant, and that is their determination to achieve a modern mobile Army of adequate strength.
I thought I might spread myself a bit at one moment about the rÔle of the Army to-day, but I have decided not to, since that rÔle has been made pretty clear in the Memorandum which we have been discussing, by my noble friend the First Lord and, indeed, by other of your Lordships. But to discharge its rÔle, the Army requires four tangible assets. There is, of course, the intangible, Napoleonic, one of morale. The four tangible ones are: adequate manpower; first-rate equipment; good training; and well-balanced reserve forces. May I, in winding up on this side of the House, just touch on those four factors?
As my noble friend the First Lord made clear, we have a double target as far as manpower is concerned. The first is to obtain an Army of 165,000 officers and men, all Regulars, all volunteers. The second is to build up from that to a force of 182,000 as quickly as possible. The first question—and I should just like to summarise, as it were, some of the remarks which have been made—is whether this is the right target. The critics suggest that with an Army of this size we shall not be able adequately to discharge our military commitments. They point to the fact that our resources are already stretched, and that in any given theatre the soldiers on the ground might even now prove inadequate in the worst case. If, then, the critics say, you are already stretched with an Army of about 213,000, will not the position become quite unmanageable when you are down to around 165,000 or so?
To that, my Lords, I would return the following answers. First, we propose to build up to 180,000-plus as quickly as possible. We do not hide the fact that the lower figure will present difficulties, albeit not insuperable ones. We also believe that the smaller Regular Army
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of the future will be in every way significantly more efficient than the larger mixed force which we have to-day. Manpower will not be expended, as to-day, on training National Servicemen. We shall not, as to-day, have a great many National Servicemen in the pipeline joining units abroad or returning to this country on discharge. And, as I hope briefly to show, we shall have a better equipped Army, rifle for rifle, gun for gun, tank for tank. Finally, the growing tactical and strategic mobility of the Army will steadily increase throughout the coming decade. All in all, I wish to reaffirm that it is the Government's considered judgment that, with an Army in the numerical range of 165,000 to 182,000, we have no reason to believe that this country will be unable to discharge either its national or its international obligations.
Assuming the target to be reasonable, the next question is: What are our prospects of hitting it? Without wishing to crystal gaze, and without wishing to dodge the fact that this is likely to be—in Lord Bridgeman's and the Duke of Wellington's phrase—a "close run thing", I would assure your Lordships that the Government are confident that this target is attainable. However, whether it is in fact attained or not—and at this stage that is as speculative as next week's Ascot's results—I can assure your Lordships of two things. First, if we do not reach that target it will not be through lack of trying. My noble friend has already outlined in considerable detail the vigorous and imaginative steps which my right honourable friend is taking to get the recruits we need. These steps extend, as my noble friend has shown, far beyond what the noble Lord, Lord Nathan, in what I thought was the only slightly unfair passage of his very constructive and objective speech, termed "sales promotion techniques."
Second, if in the course of the coming months it becomes clear that we are not going to reach our target, the Government are not going to sit idly by. Various other possibilities, to which my noble friend alluded, are open to us, and I can assure noble Lords that they are already being looked at very thoroughly. The possibilities, of course, include the reintroduction of some form of compulsory service, but that is by no means the only

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possibility. Neither the Government nor, I am sure, most people in the country, wish lightly to discard the very great advantages which flow from a purely Regular Army, every member of which, officer or man, has joined as an act of conscious and deliberate choice.
That said, I shall try to answer some, but not at this hour all, of the suggestions made in this debate on manpower. First of all, may I say how wholeheartedly I agree, like other noble Lords, with what the noble Lord, Lord Nathan (and I think I got his words right), said: "The best ambassador for getting recruits is a satisfied soldier already in the Forces". I am sorry that he is not here, but the moral of that was vigorously (I think that could be the adverb) rubbed home by my noble friend Lord Ailsa, and some of the incidents with which he regaled your Lordships are precisely the sort of thing which my right honourable friend is determined to see stamped out.
My noble friend Lord Goschen suggested that we should look at the possibility of introducing shorter-term engagements. I am sure that my right honourable friend will be glad to note that suggestion, since he is himself considering this possibility at the present time. My noble friend also referred to an incident where a young man anxious to go to Mons had to sit round waiting for six months. I should like to look at that, if I may, and write to him about what, on the face of it, seems quite unnecessary delay.
My noble friend Lord Courtown referred to the need for greater decentralisation in our recruiting methods. Parenthetically, may I say that I think he carried many noble Lords with him—he certainly carried me—in his plea for administrative flexibility and a sensible interpretation by everyone concerned of general administrative instructions. So far as the decentralisation of recruiting is concerned, especially of financial powers, my information is that the Army see an advantage in having recruiting funds controlled at Command or District level. However, I am assured that if a local recruiting officer requires funds for a particular scheme and if that scheme is judged to be worth while—Commands are very receptive to sensible, schemes at this moment—then he
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will get those funds. As regards instructions in local advertisements to apply to the War Office, my present information is that this applies only to officers and not to other ranks. But I will also look into this point.
My noble friend Lord Bridgeman strongly urged that it would stimulate recruiting if we could offer the potential recruit guaranteed employment in Government service after he left the Army. This is certainly an attractive idea, but it has a number of drawbacks. I have not time now to go into them, but I should be glad to put the position in writing to my noble friend. Meanwhile, may I just say this? I wonder whether, in this era of full employment, a guarantee of this sort is what people need or want. The present arrangements, which of course form part of a comprehensive Resettlement Service, seem to be pretty effective. In the twelve months which ended last March, 23,245 Regular soldiers left the Army but only 294 were registered as unemployed, and of these only 91 had been registered for six weeks or more. Those are pretty satisfactory figures. Surely, my Lords, these days, when a soldier leaves the Army, it is usually a home not a job which is the main problem confronting him. That is why I personally would put my money on my right honourable friend's "Save while you serve' scheme.
VISCOUNT BRIDGEMAN: My Lords, I think that one of the main attractions of the idea I put forward is that a soldier would have a pension scheme working through his entire life; and with everybody else in civil life having a pension scheme, a break in the thirties or forties is a very serious matter.
EARL JELLICOE: My Lords, I can see the advantages of that and I will write to my noble friend. My noble friends Lord Bridgeman and Lord Auckland touched on the related problems of entry standards and selection techniques. It is no easy matter, with a large machine, to steer a sensible course in this field. All I can say is that this is being kept under the closest review and that, whilst individual mistakes can and do occur, on the whole we think that the criteria for acceptance and the present machinery are sensible and sufficiently flexible.

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My noble friend, Lord Auckland, also asked if we were doing all we could whenever we could to replace the male soldier by the civilian or the member of the W.R.A.C. My Lords, I think the right answer is, by and large, Yes. There are some built-in limitations to the proportion of pen-pushing, ballpoint-wielding, civilians which the Army can employ. But the Army Council's policy is that wherever a civilian can be employed in place of a soldier he should be. In 1957 the ratio of Servicemen to civilians was 5: 3, now it is 6: 5; by 1963 it should be 1: 1. As for the W.R.A.C., your Lordships know the value of this fine corps. But its wastage by marriage—I hope your Lordships will excuse this loose language—is some 30 per cent. a year. It is below strength, unfortunately, and until that strength can be built up it would not seem sensible to pile increased responsibilities on it.
Finally there is the problem of the skilled tradesman to which the noble Earl, Lord Lucan, referred—the instrument mechanic, the staff sergeant, in Class X as it is called. Are the Army's methods of selecting and training skilled tradesmen right? Have we found the right way of fitting this rather special person into the life of the Army? I cannot give a discourse on this now, but I can say that the War Office are fully aware of the tremendous importance of these skilled technicians on whom the modern Army more and more depends. That is why the Army's apprentice schools are so important and why the possibility of expanding them is under study. At present recruiting for these schools, which do a splendid job, is satisfactory. I know that the War Office would be delighted to help if the noble Earl, or other noble Lords, would like to visit one of them—for example, Arbor-field, the R.E.M.E. Apprentice School, which has an exceedingly high training standard in the more difficult skills.
I confess that it is with some pleasure that I step from the problems of the Army's manpower on to the surer terrain of its equipment. In so doing I should like to repeat something which I said in the Defence debate last March—namely, that virtually all the equipment, personal or otherwise, with which the British Army of the Rhine was equipped as late
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as 1957 has already been replaced, or will be replaced within the next two or three years. The only change I wish to make to that statement is that it applies not only to B.A.O.R. but also to the Army as a whole. (I shall deal in a moment with the equipment of the Territorial Army).
I do not propose to weary your Lordships with a long shopping list of the Army's new equipment. Nevertheless, I should like to sketch the striking advance in the Army's re-equipment. I was glad that the noble Lord, Lord Norrie, drew our attention to this, because I think it is of great importance if only for the effect which first-rate equipment has on recruiting, as the Grigg Committee pointed out two years ago. May I first deal with the "Moss Bros." side of the Army—clothing and personal equipment? Issues of new combat clothing are starting in quantity this year, following the complete supply last year of the new pattern of web equipment. As for the daintier items, complete issues of the new raincoats and the new suitcases should be completed by next year. On the principle that ladies should come first, the W.R.A.C. will receive their new Service dress this year, with the men politely waiting until next year.
Much the same applies to personal weapons. Here it is really not a case, as some of the critics have suggested, though not to-day, of "jam to-morrow and no jam to-day". By the end of this year all Regular units should have been completely re-equipped with their full entitlement of small arms, including F.N. rifles. Later—within the next two or three years—the new F.N. general purpose machine gun will come into general service. This is designed to replace both the Bren and that patriarch of the battlefield, the old Vickers medium machine gun. Its weight will be only half that of the Vickers and its rate of fire far higher. At much the same time the 3-inch mortar will be being superseded by the new 81-millimetre mortar, which I am told is an absolutely first-class weapon. Therefore, well before the mid-'sixties (to use that hallowed phrase) the British army will have received a complete new range of infantry weapons.
As regards armour, your Lordships are already familiar with the present generation of vehicles—the ubiquitous Ferret,

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the Saladin armoured car and the Centurion tank. As for the Centurion, I would only remark that by the end of this coming winter armoured units will have received their quota of the up-gunned 105 millimetre version, probably the best all-round tank in the world today. The Centurion will be supplemented in a few years by the Chieftain, a lighter tank with an exceptionally powerful 120-millimetre gun. My noble friend Lord Goschen asked about the tracked armoured personnel carrier. At the moment, as your Lordships know, certain units are equipped with the Saracen, a wheeled armoured personnel carrier, and there has been a long-standing need (I would not put it stronger than that, but I would put it that strongly) for a tracked.armoured personnel carrier. We are confident that the new tracked A.P.C., with its powerful Rolls Royce engine will fill the bill. I can confirm that it is about to start on an extensive series of Army trials—it has already had its technical trials—and that its development, broadly speaking, is proceeding satisfactorily.
From the tank, my Lords, I come to its antidote. I was struck by a sentence in a slim red pamphlet entitled The British Army in the Nuclear Age, produced by the Army League a year or two ago. That sentence read:
"It is clearly in the West's fundamental interest to find some antidote to the tank, which still remains the key offensive weapon."
To my mind, this is a field in which the West, in general, including ourselves, may have lagged a bit behind. However, the situation is changing rapidly for the better, with the introduction into service of the Wombat Recoilless anti-tank gun as a replacement to the heavier and shorter range Mobat, and of the Malkara anti-tank guided weapon. Many, of course, would claim that what we most need—in particular, perhaps for the Strategic Reserve—is a really lethal tank killer which one man can carry. To that I would reply that we have under trial some very effective alternative small weapons as replacements to the old 3·5 inch Bazooka, in addition to the Vigilant, a promising anti-tank guided missile.
It is not only the infantry and the tank and anti-tank arms which are in the process of virtually complete re-equipment. The same applies to the Royal Artillery who are this year receiving
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the Italian 105-millimetre pack howitzer. It will be followed within a few years by the 105-millimetre self-propelled field gun, with a range far superior to any gun of its size and weight in the Western World. Thus, so far as the Regular Army is concerned, the 25-pounder will quite soon follow the Vickers machine gun into honoured retirement. So it is with the Royal Engineers; so it is with M.T., where all the "old crocks" have now been retired; and so it is with signals equipment: ten types of new wireless sets have already been issued since 1958 and more are due by 1963. My noble friend Lord Goshen, when talking of wireless sets, complained that we are short of batteries for some of the new sets, especially in Rhine Army. The answer, as I am given to understand, is that we are not, with one exception; and that exception is the new man-pack wireless (the A.41) the life of whose new-type battery was estimated to be 24 hours. Apparently, owing to the high transmitting-to-receiving ratio in B.A.O.R. (and I do not know why our troops in Germany are so talkative) its life has proved shorter. But a modified design is being made available very shortly.
Perhaps this is not the moment to refer to this, but, so far as blank ammunition is concerned, to which my noble friends Lord Goschen and Lord Denham drew attention, I might say that personally I have the greatest sympathy with what they had to say. There are, I understand, approved scales for things like training ammunition, and I will certainly see that any allegation that these are inadequate is investigated. It was certainly not my impression that there was any general shortage in either the Regular Army or our Reserve Forces, but I will have that point looked into.
My noble friend the First Lord has described the far-reaching steps being taken to reorganise and modernise the Reserve Forces, and a great many noble Lords have rightly concentrated attention on that sector. In dealing with the Territorial Army I hope to present as small a target as possible, since I know the size and accuracy of the Territorial guns trained on me at present, fore and aft. But before trying to deal with particular points about our Reserve Forces I wish to emphasise how keen

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my right honourable friend is that reorganisation should prove a real success—and a sign of it is the fact that he is spending many week-ends this summer visiting Territorial Army units. But enthusiasm on these matters is a two-way street, and I think all your Lordships were glad to see and hear from my noble friend Lord Denham, who has come straight from a training period. I hope that he was back in time for his exercise this evening.
I must thank the noble Lord, Lord Ogmore, in his absence, for his generous tribute to the way the reorganisation of the Reserve Forces has been handled in Wales. I will, of course, take careful note, as I am sure my right honourable friend will, of my noble friend Lord Courtown's strictures as to how the reorganisation was pushed through, and on which my noble friend Lord Bridge-man commented. The difficulty, as in many things in life, was, I understand, the time factor. The Government wanted—and I am sure my noble friend would agree with this—to get the reorganisation settled in time for it to become effective before this year's summer training period. This involved tackling it during the summer and early autumn last year, admittedly an awkward period. But it is certainly my understanding—and I was glad my noble friend Lord Bridgeman confirmed this—that very full discussions took place between everyone concerned.
Two of my noble friends, Lord Bridgeman and Lord Ailsa, have mentioned the gaps in our Territorial recruiting network which the reorganisation may cause, both for the Territorials and, indeed, also for the Cadet Forces. There may be difficulties here, but I must emphasise that the decision, as I understand it, to re-deploy to new areas is a local one—it rests with the Territorial Army Associations in conjunction with the Home Commands. Thus, permission has just been granted to build a new T.A. centre at Newton Aycliffe, near Darlington, where the local association knew there were sufficient volunteers. My noble friend Lord Courtown drew the House's attention to the danger that the Territorial Army may be in of losing good material, especially, I think, in Northern Ireland and Southern England—the one an area where Field
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Marshals are born, the other where they tend to die.
Of course, the new ceiling of 123,000 does carry with it this danger, but there are other factors. The new reorganisation will not become fully effective until May, 1963, and no ceiling for particular Commands has yet been decided. We should have until then to assess how things are going. There is also some provision for flexibility—the 65 per cent. rule is not sacrosanct. But, perhaps most important of all, the average annual wastage in all Territorial units is some 25 per cent. Thus, even with the new limits, there will be inflows as well as outflows.
A number of noble Lords, Lord Ogmore, Lord Denham and my noble friend Lord Bridgeman, drew attention to the question of more colour for the Territorial Army and particularly the need for a smart uniform. I am afraid that what I can say is not very encouraging on that point. There are no plans at present to equip the Territorial Army with No. 1 dress since other requirements are felt to have priority within the limits of money available. But the point which has been made has been taken and it will be looked into. A number of noble Lords also referred to the need to give the Territorial Army an adequate scale of modern equipment, and I think the House listened with sympathy to the description given by my noble friend Lord Ailsa of what one can term his example of "adventure buying" on behalf of a unit. As regards equipment, I should merely like to mention that £.12½ million has already been earmarked for the re-equipment of the Territorial Army, and this should serve to give units the feel of the new equipment. But, of course, it provides for only a limited scale of re-equipment. It may be on a much lower scale than, ideally, one would like; but it will help. For example, infantry battalions have already been equipped up to their scale with F.N. rifles, and each armoured car regiment is due to receive 12 Saladins.
My noble friends, Lord Bridgeman and Lord Goschen, rightly focused our attention on the Army Cadet Force and the Combined Cadet Force. I do not think I need labour the importance of these units. Suffice it to say that 15 per cent. of the Army's Regular soldiers

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have been in the Army Cadet Force and over 30 per cent. of the junior leaders. I should like to mention three specific suggestions which were put. One was a suggestion for forming Boys' Battalions to catch the boy who is neither a potential apprentice nor is particularly bright. A number of possibilities in that general field are, in fact, under study at the present time, and I will bring the suggestion of the noble Lord, Lord Ogmore, who first mentioned this, to my right honourable friend's attention. My noble friend, Lord Goschen, also had two specific queries about cadet forces. He mentioned accommodation and equipment difficulties. Accommodation is a problem, but it is in hand: £210,000 has been earmarked in this year's Estimates for Army Cadet Force accommodation, and this will provide for 50 new huts at a cost of £125,000—quite large sums.
On equipment, again we come up against the priority barrier. It would be nice for each cadet unit to have two F.N. Rifles, but even that would cost £80,000. However, perhaps something could be done, and indeed often is done, I understand, where there is good liaison between cadet forces and the Regular units or reserve units in their area.
A number of points were made regarding training. I will deal with only three. Of course, training in our new Army should be as realistic as possible. Both my noble friends Lord Goschen and Lord Norrie touched on the question of how the petrol cuts which were imposed on B.A.O.R. last year had interfered with realistic training. I am informed that they did not, in fact, affect training to any serious extent, but in any event the allocation of M.T. fuel to Rhine Army this year is, I understand, a great deal bigger than last year, and in the case of the most important of these fuels—M.T.80—it is twice as great.
The noble Earl, Lord Lucan, referred to the great importance of Adventure Training, both on its own merits and as a magnet for recruiting. May I just say that I am in entire agreement with what he has said. Might I add something which is perhaps more important? With that my right honourable friend is in entire agreement. I regret that I was not able, in replying to the Question by the noble Lord, Lord Nathan, earlier this week, to give precise figures. It is
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not because the Army are not keen on this idea; it is because of the decentralisation to Commands. I think more detailed figures could be produced if the noble Lord would like them, but it will take time because of the decentralisation.
Finally, while on training, I would refer to the point to which the noble Lord, Lord Chorley, spoke—namely, the use of Dartmoor by the Army for training purposes. When I replied to the debate on National Parks last April, a couple of months ago, I was wearing my National Parks deerstalker; as I have on now my small military bowler I am on this particular occasion in a slightly schizophrenic position. But I do not think that at this stage your Lordships will wish to debate this particular question in any great detail. May I just say that during our debate last April I undertook to look into the position and I have done so. I understand that the land which the Army still holds on Dartmoor is required for training; in particular, the live firing ranges are extensively used by the Territorial Army. The Royal Marines also make substantial use of this land and, as we know, the existing Royal Marine Commando in Plymouth will soon be joined by the new Commando there.
At present I cannot give the noble Lord much encouragement on this matter. There is not at present any intention to give up further land, although possible future redeployment may give the Army an opportunity of doing so. I would only add that the Army requirements here are kept continuously under review, and when they change any surplus land is given up as quickly as possible. The noble Lord referred to a number of reports which he had received. What I would suggest is that he should let me or my right honourable friend the Minister of Housing have those reports from the Dartmoor front, and I will gladly undertake to have the specific difficulties to which he has referred looked at attentively.
My Lords, in view of the hour I feel that it would be quite wrong for me to stand any longer between the noble Lord, Lord Swaythling, and his lowing herds. I am conscious that I have left a great many questions unanswered, and

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my noble friend the First Lord of the Admiralty or I will naturally write to those noble Lords who may have been left, as it were, in the air. May I end on this note? I think that this debate has again shown that your Lordships have the interests of the British Army very much at heart. These are admittedly—and let us be frank about this—not altogether easy days for the Army. Despite this, we remain confident that, with the co-operation of the nation, we shall succeed in building up the Army we need; and I am sure that your Lordships, with your intimate knowledge of the Army and its affairs, will be able to assist that process in a great many ways.
8.3 p.m.
LORD NATHAN: My Lords, I think I may perhaps be forgiven two or three non-controversial sentences. In the first place, I hope that the fact of this debate may become known to the Army, for I think the Army should be interested and concerned to know that your Lordships have spent five hours in debating its interests, both as to manpower and recruitment and as to equipment and its general condition, and that during those five hours two Ministers of the Crown have sat upon the Government Bench and an answer has been given by the two Ministers, one in the early part and one at the conclusion of this debate. I think it well that it should be known, if it can become known, that so much interest is taken by your Lordships in the welfare of the Army.
I might add that for about fifteen years the noble Viscount, Lord Bridge-man, and I have spoken in these debates, sometimes one of us on that side of the House and sometimes on the other; but either he or I have initiated this debate or taken some prominent part in it for all those years. I think that is another indication that the Army is not dealt with in your Lordships' House in any Party or partisan spirit. It shows that we are united in the hope of doing the best we can for the Army, and that that is the common objective of us all.
I was greatly interested in what the noble Earl, Lord Jellicoe, said just now about the target, that it was increased,
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as I understood him, from 165,000 to 182,000, if achievable. I am delighted that it should be so, and I shall watch with great interest to see how the passage of time brings forth the result. I said at the outset of this debate that I was doubtful whether 165,000 could be attained by the stipulated date. I have been somewhat reassured by what has been said from the Front Bench opposite, and I hope that my misgivings may prove to have been mistaken. If so, nobody will rejoice more.
Finally, perhaps I might just say this. There is not much discussion about the Territorial Army or Reserve Forces, although the noble Earl who has just sat down gave us a good deal of most helpful information. I am quite certain that I am the oldest Member of your Lordships' House here present who is going to camp this year with a Territorial unit. When I come back I shall have tested out to some extent what the noble Earl has said, and I propose by mutual arrangement, at some convenient moment in the autumn, to inaugurate a debate on the Reserve Forces and the Territorial Army. Meantime, let me tell the noble Lord that I am not quite certain when I go to camp what I am going to see. I started 25 years ago as Honorary Colonel of one regiment; in 1955 I became Honorary Colonel of three; now, as the result of the latest reorganisation, I think I am Honorary Colonel of what were nine separate units now amalgamated. I shall see them all assembled together, as one unit. Do not take me too seriously, my Lords. I am going to camp not for training but to encourage the others. Having said so much, and having been greatly interested in what has been said, and reassured by much of what has been said, I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

IMPORTATION OF CHAROLLAIS BULLS
8.7 p.m.
LORD SWAYTHLING LORD SWAYTHLING rose to ask Her Majesty's Government what steps they are going to take to ensure that the progeny of bulls of British beef breeds should be adequately compared with the progeny of the Charollais bulls, the importation of which they propose to allow; and to move for Papers. The

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noble Lord said: My Lords, perhaps the moment has come when we may beat our swords into ploughshares, or should I say into bull-ties? I feel I must at the outset disclose to your Lordships that I had the honour to be the President of the National Cattle Breeders' Association and introduced the delegation that gave evidence to the Terrington Committee, but I have no direct interest in the breeding of beef cattle. The National Cattle Breeders' Association consists of every recognised cattle breeding society in Great Britain—that is, 23 in number—and represents over 50,000 breeders. I do not, of course, propose to detain your Lordships with the arguments which were then outlined to that Committee, but there are one or two comments I should like to make.
It was stated by the Terrington Committee in their Report that adequate precautions could be taken against the importation of disease in a limited experimental importation. I hope that is true, but I would remind your Lordships that the disease is one of such vigour that, whatever the precautions one takes, there is always a risk. No better precautions could be taken than are taken at the Research Station at Pirbright, but even from there at least one outbreak has been traced. To my mind, we have to consider not only the question of the cattle of this country contracting foot-and-mouth and other diseases, but the impression that such an importation as is to be permitted makes on the minds of the authorities in other countries, especially in the United Stares of America and Canada. I understand that some countries stated categorically that they would take a serious view of such an importation. This would gravely imperil cur export trade, which the Government always seek to encourage. We learn now, from the statement made by the Minister, that he is satisfied that export from this country to these countries will not be impaired by this importation. I can only hope he is right.
The only other thing I would mention before coming to the point of my Motion is that it seems to me unnecessary to make this importation until evidence is available that the factors which it is believed by some people can be introduced by the Charollais breed are not already available from the established breeds in this country. We have information,
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too, that the Charollais bull, owing to his conformation, often gives the greatest calving difficulties, even when mated with cows of its own breed. How much more so may there not be risk of calving difficulties when mated, as is suggested, with cows of dairy breeds. The great stress of those who advocate importation is to use these bulls with Ayrshire cows. Be all that I have said as it may, the Government have decided, for better or worse, to permit this importation for experimental purposes.
When the Charollais bulls are imported and stand at A.I. centres, it is essential, to my mind, that the experiment should give us a proper comparison to judge on the merits of using Charollais for such crosses. The Terrington Report has gone into the question of methods of testing and, chiefly owing to expense, has recommended against any particular scientific trials. I should like to suggest to Her Majesty's Government that it could be well laid down that whatever farmers have the use of semen from these bulls for experimental purposes, they should at about the same time inseminate a similar number of their cows or heifers with semen from an approved bull from one of the beef breeds in this country. It should be made a condition of the provision of the insemination from a Charollais bull that all the resulting calves should be brought up as far as possible side by side, enjoying the same feeding and conditions as the other calves, so that they may be fairly compared.
I feel that there is a risk that the farmer will do his calves got by the Charollais bull on a scale or on a plane of nutrition in excess of the usual treatment of his calves, because he knows they will be of considerable interest to his friends and neighbours, who will all wish to come and see what they look like and haw they are getting on. There will be an unconscious desire to feed over-generously the calves which he knows well will be of special interest to other farmers, and so I feel it is essential that the calves to be compared with them should be looked after pari passu.
It must not be forgotten that the Terrington Committee recommended a limited importation for experimental purposes. I do not think they ever contemplated the importation of thirty bulls for

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use of A.I. indiscriminately—one might almost say quite commercially. This number of bulls could easily provide semen for 60,000 inseminations in the first year, well over 100,000 in the second year and an increasing number thereafter. If the bulls are so used, this importation could in no manner be described as a "limited experimental importation" but would appear to be a commercial undertaking. The receipts from the insemination fees could then in a short time reach well over a quarter of a million pounds.
I understand that the Ministry have recently approached the National Cattle Breeders' Association and other bodies, and have suggested that they should form a group to plan what is to be done. We have all seen in the Press statements made on behalf of the Milk Marketing Board which appear to be an announcement of what is actually going to be done. Do these statements reflect the Government's policy? It is vitally important that the Government should announce, and announce quickly, how this experimental importation is going to be used as an experiment to provide proper data as to the comparative merits of the Charollais bull with our own breeds of beef cattle. I would suggest that the stations where the bulls are to stand should be charged with the overall instruction, which it would be their own responsibility to see carried out, that no more than an arranged limited number of animals of each of the five main dairy breeds—British Friesian, Shorthorn, Ayrshire, Guernsey and Jersey—should be inseminated, and the animals chosen for insemination should be owned by people who will co-operate to the full in providing the data which is required to estimate the merits or demerits of such crosses.
It is necessary that it should be stated clearly whether these bulls will remain the property of the Government, and whether the Ministry will control effectively how they are to be used—how long they are to be used, and when they should be stood off to await the outcome of the experiment—and whether it will be the Minister's decision if these bulls are to be brought back into use thereafter. It is essential to remember all through that this should be a test of the bulls of the Charollais breed as compared with our own breeds. Commercial
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demand should not have any bearing on the final decision, but only the quality of the beef calves produced. By "quality" I mean not only quality as beef but also the conversion rate and all other matters that breeders have to consider.
In conclusion, I should like to repeat that I am sorry that the Minister has decided to permit this importation; but, as he has done so, I think it is necessary to know whether the Minister is going to control their use, or is it to be handed over to the artificial insemination authorities? Is it to be a national trial or an indescriminate use of bulls by a commercial organisation? It is necessary, I submit, that regulations be made to see that a fair comparison is made between these bulls and the very fine breeds of beef cattle which we have in this country. My Lords, I beg to move for Papers.
8.15 p.m.
LORD WALSTON: My Lords, this whole question of Charollais cattle and their importation is one which has been of considerable interest to farmers and to cattle breeders, but I cannot help feeling that in time to come it will be of even more interest to the situation in politics. What is curious about this is that the greatest opposition to the importation of these animals comes not from those people who normally are associated with Government interference and with bureaucracy—I speak for myself, and not my colleagues—but rather from those people who are the backbone of the Conservative Party throughout the country—the breed societies and the breeders of pedigree cattle. What is even more curious is that we now find the noble Lord, Lord Swaythling, who represents most ably in many aspects, a Party which has long stood for free trade and free enterprise, trying to bring about restrictions on what a private farmer may do; whereas many of us who are said to believe that "The man in Whitehall knows best" and so on, are the ones who are urging this freedom for the farmer. It really is a most curious reversal of what, in the public mind, are the usual rÔles of political Parties.
I am extremely glad that the Government have not allowed themselves to be influenced too much by some of their

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own supporters, and that they have taken this step of allowing a reasonable and fair importation of these cattle into this country. After all, what have we to fear, either as farmers or as breeders of pedigree cattle, or of beef cattle? I do not know what we have to fear. We may find that the animals which are coming in are so excellent and magnificent that we shall use them universally. If that were so, surely it would be to the benefit of agriculture and of the consumer. If, on the other hand, we find, as the noble Lord has suggested—and I think he may well be right—that our own breeds are every bit as good as the Charollais, nobody is going to bother in future, when we have had these tests, and they have failed, to go over to France, pay high prices for bulls and submit to the properly stringent quarantine regulations to bring them in, when in fact a Lincoln Red, or whatever it may be, will provide just as good, if not better, results. So it seems to me that the action which has been taken so far by the Government is admirable in all respects except one—namely, that it has taken so long to do it. But do not let us carp about that.
For the future, in regard to the tests which the noble Lord has mentioned, there again surely it is something which can to a large extent well be left to the farmer, to the butcher and to the consumer. They are all sensible human beings. No farmer is going to continue to use a Charollais bull, paying artificial insemination prices for it, if he finds in the end that he does not get from it a better animal, and one for which the butcher will give him a higher price. Equally, no butcher is going to continue to buy such a cross-bred animal unless he, in turn, finds that he can sell the carcase, suitably cut up, to the consumer for more profit than he can any other animal.
So this seems to me one of those cases where we can, to a large extent, leave the decision on these experiments to the good sense of the various people involved, without bringing in Government action, Government inspectors, Government regulations, or anything of the kind. But I hope and believe that, if not the Government themselves, at any rate the research stations which already exist (some Government-financed, some publically financed and some privately
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financed: I am thinking of the feeding stuffs merchants who carry out such tests) will all consider seriously the idea of having genuine scientific, well-controlled tests of the progeny of the Charollais bull compared with the progeny of any other bulls they care to choose. I believe that that will happen. I do not think there is any need for the Government to take any action to ensure this. But if it appears likely that nothing is being done on those lines, I very much hope that the noble Earl opposite will see that some steps are taken to ensure that such tests are carried out. I have no objection to the idea. I am just rather more trusting of the existing organisations than the noble Lord. Lord Swaythling, seems to be in this matter.
There is one further point which I should like to mention (I shall not detain your Lordships for many more minutes) and that is the future of this importation. I have already said that my only complaint against the Government so far was that they took too long to come to a decision. I would now suggest to them that, if they have not already done so, they should give some thought to what may transpire in the future, so that there will be no further undue delays. Let us assume that the Charollais does turn out to be a useful bull in this country. After all, let me remind your Lordships that we have profited in the past from the importation of cattle from overseas and livestock from overseas. The British Friesian cow, after all, was not born here originally; it came from Holland and the North West of Germany. The Landrace, after a considerable amount of opposition, has come in and, although it may not be better than the Large White pig, it is at least well-established now and has done no harm but some good to our agriculture. So it is perfectly possible that the Charollais, too, will be of benefit to farmers in this country.
What happens then? We shall want to bring in more bulls. If any more experimental female animals are brought in, we shall want to license the male progeny bred from these imported female animals. As the regulations stand—and I think they are good and correct—no bull can be used without being licensed, and it cannot be

1223
licensed unless it conforms to standards laid down by approved breed societies. That is as it should be. But there is no breed society for Charollais, and it is very difficult to suggest that there should be a breed society until the breed is here and has been proved.
I do ask the Government (perhaps the noble Earl will give an indication in his reply as to what he thinks) to say that his Department will begin to give thought to this matter, so that, as the years go by (it will be two or three years before we have the information), if the information shows that the importation of Charollais is going to be of some use, we may take any steps required without undue delay to enable further importations to be made, under properly controlled licences and regulations; and that there should be set up in this country, through the Ministry or some other body, such as the National Cattle Breeders' Association, some organisation which will, in co-operation with the Ministry, lay down suitable standards for the future licensing of these animals.
This is not a matter which we can pretend is of enormous overriding importance, but it is something to which, if we in this country are to retain our much-vaunted place as the stud farm of the world, we cannot turn a blind eye. We must always be prepared to bring in the best animals we can find from abroad, even across the English Channel; and, as we have done so often in the past, not only with animals but with human beings, we must absorb them into this country and make use of them for our own national advantage.
8.25 p.m.
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL WALDEGRAVE): My Lords, may I first say how grateful I am to the noble Lord, Lord Swaythline, for having consented to postpone his Motion from the original day put down, largely at my convenience. It was very generous of him, as I wanted very much to be here for this debate. The question of importing bulls of another breed of cattle into this country has aroused widespread interest: and I think I must, in view of what Lord Swaythling has said, briefly remind your Lordships what has led up to the present position, in which we are to have
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this trial importation of French Charollais bulls.
The proposal was first mooted in 1955 when the Milk Marketing Board for England and Wales asked the Ministry for permission to import Charollais semen to be used to breed from dairy cows of the British Friesian type. That proposal did not command any degree of support. Two years later, in 1957, it was the Experimental Husbandry Committee of the Agricultural Improvement Council which suggested that Charollais bulls should be imported from France, and the idea then was for controlled experiments on the results of cross-breeding with Ayrshire cows in parallel with experiments with other breeds of beef bulls. The National Cattle Breeders' Association questioned the wisdom of this suggestion on three main grounds. They wondered about the risk of importing cattle from France, where foot-and-mouth disease was endemic; they thought there would be a risk of prejudicing our livestock export trade; and they thought that damage might be done—I have never quite understood why—to the prestige of British livestock overseas.
By the end of 1958 we had before us an application to import Charollais from Messrs. Horlicks Farms and Dairies Limited (who operate two artificial insemination centres in Somerset), and there were also applications from a number of farmers in England and Wales, and Scotland, too. But there was no doubt that there were two strongly opposed schools of thought, and your Lordships will remember that the whole matter was remitted to an expert committee under the chairmanship of the late Lord Terrington.
His Committee went carefully into the pros and cons and came down in favour of the importation. I think I must read your Lordships the relevant paragraph (it is a short one), paragraph 114 of his Report. He says:
"Comprehensive veterinary safeguards that would both protect livestock in this country as well as meeting the technical requirements of overseas countries which import livestock from Britain are practicable. The suitability of the Charollais for cross-breeding can only be determined after a trial and we have weighed the objections of pedigree cattle breeders against the possibility that Charollais might provide for more beef production from dairy herds. We consider that there is a clear balance of advantage in conducting a trial of Charollais bulls for cross-breeding for beef with dairy cows and heifers in Britain."

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The Committee went further, and in paragraph 126 said:
"… the best arrangement will be for the Charollais bulls to stand at A.I. centres to permit a wide experimental use of their semen in dairy herds."
My right honourable friend the Minister of Agriculture and the Secretary of State for Scotland gave careful consideration to this Report and, in particular, to the health risk and the possible repercussions upon the international livestock trade. After satisfying themselves on these points, my right honourable friend made the statement (which I am sure the noble Lord, Lord Swaythling, well remembers) in another place on April 20, in which he said
"I am convinced that there will be no difficulty in applying the full rigour of our veterinary requirements to the importation of Charollais bulls from France."
He went on:
"In particular, we Shall satisfy ourselves that none of the animals we shall buy has been in contact with foot-and-mouth disease or has been vaccinated against it and we shall provide for fully effective quarantine on both sides of the Channel. In these circumstances, I have no reason to suppose that any interference with our traditional livestock trade will arise from this trial importation of Charollais bulls and I shall be arranging to obtain a limited number of bull calves from France. The bulls will remain Government property and we shall not allow them or their semen to be re-exported."
That was the Minister's statement on April 20. Now, my Lords, surely that was right. In the light of the Terrington Report, and in the light of the subsequent inquiries made by Ministers, it would have been wholly wrong and obscurantist to refuse to let people try these crossing bulls if they wanted to do so.
Accordingly, the importation we are going ahead with is this. The Government are going to import some 30 bull calves from this year's calving. The calves are born mostly in January, February and March, and the general practice in the area where Charollais cattle are bred is to vaccinate against foot-and-mouth disease around September. But because of the freedom from foot-and-mouth disease in that area—they have not had any there for ten years—vaccination 13 frequently deferred until later in the year.
We are therefore proposing to send over to France in July a mission, under the Ministry's Chief Livestock Husbandry Officer, to make a preliminary selection
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of calves, which we understand breeders will be willing to leave unvaccinated until the mission returns in October to make its final selection. It is, of course, absolutely imperative that we should have unvaccinated calves. The reason, as the Gowers Committee pointed out, is that vaccination can mask infection. The animals will be brought over towards the end of this year under careful veterinary supervision, and after quarantine both in France and in this country. They should be standing in A.I. centres and be available for insemination next spring.
I must emphasise that this is not intended to be a piece of scientific research. It is a practical experiment to see whether the beefing qualities of the French Charollais would make it a worthwhile additional crossing bull for producing beef from dairy cows in this country. The Terrington Committee said in paragraph 121 of their Report:
"We have come to the conclusion that it is the commercial use of the bull experimentally that will form the acid test. The decisive part of the trial will be the general view of the farmers who have experimented with the use of Charollais bulls in their herds. If most of those who have tried this cross want to continue with it and extend the use of the bull, it will reflect a favourable outcome of the trial."
Accordingly, the bulls will stand at A.I. centres, and so be available for wide use in the dairy herds.
The noble Lord, Lord Swaythling, suggested that 30 bulls are many more than is necessary for an experiment, and he quoted some figures to suggest that this importation was really pretty big business for the A.I. organisations. To take numbers first, I should not have thought that 30 bulls is excessive in view of the need to obtain a wide experimental use of them in our dairy herds. I do not think we shall be flooded with Charollais crosses. After all, I understand that there are 270 bulls of other beef breeds standing at the A.I. centres now, quite apart from large numbers used in the herds for natural service. As to the suggestion that this is really big business for the A.I. organisations, I must say I am not quite sure that I followed the noble Lord's figures. At any rate, I do not know where he got his quarter of a million pounds from.
LORD SWAYTHLING: My Lords, may I help the noble Earl? I have learnt that the 30 bulls, in their first year, can

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easily inseminate 60,000 cows and heifers; in their second year well over 100,000, probably 120,000 or more; and increasing numbers in the following years. In the three years, the £1 standard fee for those inseminations would easily amount to a quarter of a million pounds.
EARL WALDEGRAVE: I am much obliged. I see. I thought it was a quarter of a million pounds a year. If we take this figure of 30 bulls and we take the normal figure for inseminations of 2,500 a year—that is what it has worked out at with our beef breeds—30 times 2,500 will give about 75,000 inseminations. At £1 a time, that will be £75,000. That is the income, the revenue, that might be obtained in a full year, I should have thought, from 30 bulls, all of whom prove satisfactory.
But that is not the profit. We must not overlook the fact that, although the Government is purchasing these bulls and they will remain in Government ownership—that was a question that the noble Lord specifically asked—the cost of their purchase, shipment and incidental expenses will fall on those farmers who wish to experiment with them through their own organisations—that is to say, the Milk Marketing Board and the private A.I. centres. These organisations will reimburse to the Government all their expenditure on these bulls, and they will also undertake the commercial trials. Therefore, if you take the average insemination fee of about £1, and if you take (as, from the figures that I have seen, you should) an average profit of about 3s. or 3s. 6d. under existing conditions, one would expect that, in view of the additional expenditure that will be incurred in bringing these hulls over from France, the profit margin will be significantly less.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, could I ask a question on that? I did not quite gather from the noble Earl's figures whether in this case it is to be £1 for each lot of semen actually used or whether there will be the usual practice of up to three services by semen in respect of each cow being served.
EARL WALDEGRAVE: I have no doubt that the normal practices will be followed. These details will all be
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worked out; but I was trying to rebut the suggestion that there was going to be any vast profit in this matter. After all, some of the bulls may not come up to expectations, and they may have to be slaughtered for one reason or another. It is not impossible that their popularity may wane before the trial is over. So I do not think it is really a very fair criticism that this is going to be a sort of big business bonus. I want to emphasise that it is not intended that any costs should fall on the taxpayer, apart from those incurred in the limited tests to be undertaken at the Ministry's experimental husbandry farms, to which I wish to refer in a moment.
Nevertheless, I can assure your Lordships, and I can assure the noble Lord, Lord Swaythling, that there will be overall Ministry control, and that, broadly, this will take two forms. The Ministry will be the owners of the bulls, as recommended by the Terrington Committee. This will enable us to import them under the strictest veterinary control, and to give absolute assurances about their health. And if it becomes necessary or desirable in the light of experience to slaughter the bulls, then the Ministry, as owners, will be able to take the necessary action. So we own the bulls; that is the first thing.
The Ministry will also exercise control over the experiment and the form of records to be collected. We propose to set up a committee under the aegis of the Agricultural Improvement Council which will consider the records that ought to be collected and which will keep an eye on the progress of the experiment through a study of the records that are collected. We hope, indeed, that not only the A.I. organisations but also the National Cattle Breeders' Association will agree to appoint representatives to this committee. That is not to say that we have not ourselves given some very considerable preliminary thought to this problem. As a matter of fact, we have already had discussions with the Milk Marketing Board and the private A.I. centres, and subsequently with the National Cattle Breeders' Association. There is time for us to work out these detailed rules. After all, it will be about eighteen months at the earliest before any of these Charollais cross calves are born. But I can tell your Lordships the

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lines along which we are at present thinking with regard to this trial.
First, I must emphasise again that we are not thinking in terms of a full-scale scientific test of the Charollais against our native beef breeds. The facilities for such a test do not exist. Such a test would be extremely expensive and not necessarily conclusive, as the Terrington Committee indicated in paragraph (xv) of the summary at the beginning of their Report. Indeed, they made the point in a number of places, and particularly in paragraph 122, where they said:
"The breeders of pedigree cattle are not prepared to accept the result of any particular progeny test as conclusive in deciding the merits of the breed of cattle in which they are interested in comparison with other breeds."
I take no exception to that statement. This is understandable enough, because each test can measure only a few characteristics of the breed, and then only under a prescribed set of conditions. What we have in mind at the present time is a small Ministry test, within the limits of the facilities available to us, and a larger test under commercial conditions.
First, the Ministry test. Our experimental husbandry farms at Rosemaund, in. Herefordshire, and High Mowthorpe, in the East Riding, have for some years been conducting experiments with Hereford/Friesian crosses. These experiments should be about completed by the autumn of 1963, and we can then bring in some Charollais crosses on these farms and compare the results with those already obtained. These two farms could each rear about 60 calves a year. It may also be possible to use the Ministry's farm at Gleadthorpe, in Nottinghamshire, and perhaps the Norfolk Agricultural Station at Sprowston would be willing to help us. If so, those two farms could cope with 60 calves each, giving us a possible maximum of 240 for the four stations. Such a test undertaken on farms under the Ministry's control, and with facilities for individual feeding, weighing, et cetera, would provide useful information.
But the real evidence on whether or not these cattle are a desirable addition to our crossing breeds will come, I feel, from the commercial trial—one would almost call it the commercial try-out.
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We believe that we shall readily find farmers who are prepared, in addition to breeding and rearing Charollais crosses, to rear a proportion of British beef bull crosses alongside them. The idea would be to collect records on a standard basis covering weights from birth to slaughter and information about calving difficulties, age of slaughter, carcase assessment and the like.
This commercial trial might indeed be subdivided into two sections. The first might cover farms attached to Government-supported institutions, such as agricultural colleges and farm institutes, who may be prepared to co-operate with us. These farms would not have the facilities, perhaps, for such detailed trials as the Ministry's experimental husbandry farms, but they would be able to make wider breed comparisons. The Department's close association with such institutions would enable the National Agricultural Advisory Service to take a special interest in the progress of this particular section of the commercial trial.
The other section will be the private commercial farmers. I am confident that many of these will keep records, and I know that the A.I. centres have expressed their willingness to arrange for the collection of such records. Of course, in this section come firms like British Oil and Cake Mills, which I think the noble Lord, Lord Walston, referred to, and other commercial firms which have been doing experimental work. We have, therefore, three groups: a small progeny test on, say, three or four Government-controlled experimental farms; a commercial trial on farms attached to agricultural colleges and farm institutes; and a commercial trial along similar lines for the private farmer.
My Lords, I feel that I cannot go any further at this stage to spell out the details of what will be done, for this is a matter which the Committee to which I have referred will be giving its early attention, and on which we shall hope to have the assistance of the Milk Marketing Board, the private A.I. organisations, and also the National Cattle Breeders' Association. But I am sure that the Committee will take heed of the views that have been expressed by your Lordships this evening. I feel confident that we shall be able to supplement the general

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reaction of farmers to the worthwhileness or not of the Charollais by collecting facts and figures on a uniform basis on the lines I have indicated.
If I may be forgiven, I will not follow the noble Lord, Lord Walston, far into the future. I agree with him that I shall begin to give thought to this problem of the establishment of a breed society. Perhaps I have begun to give thought to it already. I am afraid that I cannot promise him that I will now, or in the very near future, give an indication as to in what direction my thoughts are leading. He has, of course, raised a serious problem. This matter will have to be considered carefully. If the tests are satisfactory, we shall have to see what follows after; but let us do the tests first, and take our fences when we come to them. I hope that what I have said today—and I apologise for having kept your Lordships for this length of time—may enable the noble Lord, Lord Swaythling, to feel that he could safely withdraw his Motion.
LORD SWAYTHLING: My Lords, before the noble Earl finishes his remarks, I should be grateful if he would tell us whether the announcement made by Dr. Edwards, on behalf of the Milk Marketing Board, published in the Press the other day, is in fact the agreed policy which is to be carried out. I understand that when the invitation was given to other bodies to form this group it was understood that no preconceived regulations were contemplated at that stage. But immediately afterwards this announcement by Dr. Edwards, on behalf of the Milk Marketing Board was published, and I should like very much to know whether the Government endorse it or whether it is not a true reflection of what has been settled.
EARL WALDEGRAVE: I am somewhat at a disadvantage because I do not know what was published. I am afraid that I have not in front of me the detail of the newspaper report referred to. It is perfectly true that these discussions were being held with the Milk Marketing Board, and others, when we were beginning to work out these rules and regulations which I have indicated. These will be chiefly the responsibility
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of this Committee, which we hope to set up, to help to work out. Without knowing exactly what is alleged to have been said, I should not like to attribute any blame. It is always difficult, when discussions are taking place in confidence. Intelligent anticipations can sometimes be made in the Press as to what might have been said. I should not like to accuse anyone, here and now, without knowing more of what is alleged, but I will certainly look out for it. Perhaps the noble Lord will give me these Press reports which he feels were unwise in some way.
8.48 p.m.
VISCOUNT ALEXANDER OF HILLSBOROUGH: My Lords, may I just follow the noble Lord, Lord Swaythling? I was held up in a Committee and could not be here to listen to his speech. I should like to say, however, that I am exceedingly interested in this matter. I feel that the Parliamentary Secretary has made a good case, based upon the Terrington Report, for the experiment to take place. I am concerned that the A.I. centres, apparently, have already decided, for example, to get rid of red beef Shorthorns standing there because they are not getting sufficient demand for them to justify the maintenance of the animals. I think the figures to which the noble Earl was replying (I did not hear them, so I cannot criticise them directly) would hardly be possible on the basis the noble Lord, Lord Swaythling, was reported to have suggested.
Because of what happens at A.I. centres in regard to the demand for red Shorthorns, and because British farmers are pretty conservative, I do not think that there will be a great rush by farmers, especially if there is a concentration on Ayrshire cows and heifers, because the Charollais is a big animal. I am not a Conservative in politics but as a farmer I would be rather conservative in this matter and see what results the experiments showed before joining in any general rush for Charollais. I think that the noble Lord, Lord Swaythling, ought to have some comfort from the details of the proposals the Government have made, and I think that the experiment ought to go forward.
8.52 p.m.
LORD SWAYTHLING: My Lords, the announcement in the Press that I mentioned just now was given fairly wide publicity in the farming Press. I have no doubt that the Parliamentary Secretary can find it in the Ministry, but if they have not got it, I can easily supply it. I was very glad to hear from him that the Ministry will keep overall control of the method by which these bulls are to be used, and that in a great many cases beef crosses of our own breeds are to be used alongside others. With regard to the extent to which the Charollais will be used, it must not be forgotten that a wide publicity campaign has been going on for a long time, which has gradually built up far more interest in this breed of bulls than I think it inherently merits. I was in France a week or two ago and met one of the biggest French agriculturists. He wondered what on earth we meant by this fuss about the Charollais bulls, because he thought that they would not do us any good, especially compared with our own breeds of cattle.
I thank the noble Earl for the care and trouble which he has taken in giving me a full Answer. I cannot say that
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I am completely happy about the way these bulls are to be used. I would mention once more the fact that the Terrington Committee, set up by the Government, suggested a limited experimental importation. I think that it would be wrong to use the bulls widely until results are known. It is quite a well-known habit with dairy bulls to stand them off to see what results their progeny will show. Therefore, I hope that the Government will make some regulation that, when sufficient inseminations have been made, these Charollais bulls will be stood off and not used widely until the results are known. Then it would be up to the Minister to decide if and when the bulls might be brought back into use. If experiments were considered to be really successful, they might be brought back straight away; and if they were unsuccessful, no doubt the Minister would have them slaughtered. In view of everything that the noble Earl has said, I ask leave of your Lordships to withdraw my Motion.
Motion for Papers, by leave, withdrawn.
House adjourned at five minutes before nine o'clock.