MISCELLANEOUS (Hansard, 10 April 1951)
HC Deb 10 April 1951 vol 486 cc878-953

22. Staffs of High Commissioners, etc.—Land Tax

Resolved: That the exemption from land tax conferred by section twenty-six of the Finance Act, 1925, on persons having or exercising employments to which section nineteen of the Finance Act, 1923, applies shall not extend and shall be deemed never to have extended to any person employed in any trade, business or other undertaking carried on for the purposes of profit.

23. Pakistan Trade Agreement

Resolved: That with a view to the fulfilment of the agreement made on the second day of April, nineteen hundred and fifty-one, between His Majesty's Governments in the United Kingdom and in Pakistan, the Ottawa Agreements Act, 1932, and any other enactment relating to customs which amends or relates to that Act shall have effect as from that day as if the said agreement were included among the agreements scheduled to the said Act of 1932, and as if accordingly any reference to a country the Government of which is a party to one of the scheduled agreements, or a country between the Government of which and His Majesty's Government in the United Kingdom any of the scheduled agreements was made, applied to Pakistan by virtue of the said agreement and not by virtue of the agreement made in the year nineteen hundred and thirty-nine between His Majesty's Government in the United Kingdom and the Government of India. And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

24. Amendment of law

Motion made, and Question proposed, That it is expedient to amend the law with respect to the National Debt (including the sinking funds therefor), Customs and Inland Revenue (including Excise), with or without amendments of the law relating to purchase tax of the following descriptions:—

  1. (a) amendments to exempt from tax, or charge with tax at the first or second rate (instead of a higher rate), goods comprised in Group 4, 11, 12 or 31 and now chargeable at the first rate, or goods comprised in Group 5 or 6 and now chargeable at the first or second rate, or goods comprised in Group 23 and now chargeable at the first, second or third rate, but so as not to prejudice the power of the Treasury to make orders under section twenty-one of the Finance Act, 1948;
  2. (b) amendments to make provision for the giving to the Treasury of advice and assistance in the exercise of the said power by a body to be constituted for the purpose, and for the powers and duties in that behalf of that body and other subordinate matters.

5.55 p.m.

Mr. Churchill (Woodford)

I think I shall be expressing the opinion of the whole House if I pay our compliments to the Chancellor of the Exchequer upon the lucid, comprehensive statement which he has made to us this afternoon, and upon the evident lack of hatred or malice which I felt was apparent while he was unfolding his proposals: We have had what is, upon the whole, an objective statement, and the proposals which have been made, for all the difficulty which attaches to many of them, have been designed as he himself claimed, as an honest attempt to solve the problems which lie before him. I have listened to many Budgets in this House, and have even contributed five myself. I am bound to say that I feel the right hon. Gentleman has placed himself, by his opening statement this afternoon, in a good position to conduct the long and severe debates we shall no doubt have on many aspects of the policy.

I would not like to turn to criticisms without saying that again I feel sure that the whole House would wish to send a message of goodwill and encouragement to Sir Stafford Cripps. [HON. MEMBERS: "Hear, hear."] If he is heavily burdened by affliction at the present time, it is largely because of the devoted manner in which he has endeavoured to serve the public. As one who has differed from him fundamentally in many ways, and worked with him as a trusted comrade in many others, I feel that the few words I have spoken might well carry the message of the House across the seas to him.

The speech to which we have just listened can, of course, only be considered in relation to the sombre background against which it stands. Here I cannot expect any longer to carry with me approving glances from those who sit opposite. After all, this is the seventh Budget which has been opened since the Socialist Party have become masters of our affairs.

Mr. Churchill

I was quoting the Attorney-General. We dwell in the aftermath of devaluation. I cannot help feeling that that dark shadow hangs over us now. It has increased by nearly a third the working and productive effort needed from Britain to make the exports out of which our vital supplies and raw materials have to be bought. The Chancellor referred to this. I have not his actual words, but they certainly stressed the fact that this 30 per cent. devaluation of our national products, relative to what we get in return, was a very heavy burden, and that weighs upon us all the time. There are, no doubt, other causes at work, but it is this hard, dominant fact of the aftermath of devaluation which impinges upon us at the present time. Much of the life energy of our island, already over-strained when the war ended, drained away from this cause, and also from unrequited exports and from lavish expenditure.

Those who hold that taxation is an evil must recognise that it falls upon this country in a most grievous manner at the present time, continually burdening the mass of the nation and continually clogging—I do not know why that word came into my mind—or, at any rate, hampering our efforts. There is to be an increase of taxation. I am not at all concerned today to examine even cursorily the detailed proposals which the Chancellor has made, but taxation is to be increased; it is to be heavier still. Naturally, many people will feel that the issue should be argued out very tensely as to whether other economies in Government expenditure might not have relieved us from the need of applying new burdens and new taxation.

Of course, we know the times are difficult. The Prime Minister told us the other day that the price rises were due to world causes, but almost in the same breath he claimed the whole credit for full employment for his own party. Everything that is bad is due to world events; everything that is good is due to the Socialist Party. That may be a very comforting theory, but I feel bound to warn the Chancellor of the Exchequer that it is not one which we can adopt as the basis upon which our debates on the Budget and the Finance Bill will be conducted.

If we take the whole period of the rule of the Socialist Party, I think it is fair to say that the mismanagement of our finances over the whole period tells the same tale, or almost the same tale in different terms, as the mismanagement of our defences. We must not be led by the agreeable presentation which the right hon. Gentleman has given us of these proposals into any weakening in our conviction of the grave financial position in which this country stands and of the very heavy drains which have been made, not only upon its accumulated wealth made since the war, but also upon the incentives and resourcefulness by which our future daily bread can be earned.

Of course, it is quite true to say that there has been a great increase in production, a steady annual increase, but compared to capitalist, free enterprise United States, the increase has not been on anything like the same level. If we take the whole period of Socialist rule, we must see that during this costly period we have fallen from the position which we held at the end of the war in almost every sphere of our activities and reputation at home and abroad. The Chancellor of the Exchequer is not primarily responsible for this; he bears his share of collective responsibility.

We shall, of course, study and consider with great attention the proposals which are now put before us. I should not attempt—I would not try even cursorily—to examine in these few remarks the proposals in detail or to judge them on the spur of the moment. It is our duty, however, to subject, not only the Budget, but the whole of our financial and economic position, to severe and searching examination, and we shall not fail to do it in the weeks and months which lie ahead. One thing, however, is clear, and that is that the necessary money for rearmament has got to be provided and that the House of Commons is the sole authority which should do its best to find it in the least harmful manner.

I shall certainly conclude, as I began, by thanking the Chancellor for what I think everyone will recognise was a remarkable Parliamentary performance which will, I trust, make the foundation upon which a high reputation as a Chancellor of the Exchequer—we are all in the club together—may be expected to rest.

6.5 p.m.

Mr. Paton (Norwich, North)

It would not be amiss for at least one back bencher on this side to add his word of congratulation and gratitude to the Chancellor of the Exchequer for the quite brilliant speech to which we have listened this afternoon. All of us will agree with the right hon. Member for Woodford (Mr. Churchill) in what he said about the lucid and comprehensive qualities of that speech, and I am very glad to voice the opinion of, I am sure, every Member on this side that my right hon. Friend has acquitted himself, not only admirably, but in such a way as to put himself at once into the front line of Chancellors of the Exchequer in the history of the country. That ought to be said, and I am very glad to have the opportunity of saying it.

I had originally intended making a very different speech but, fortunately, the nature of the Chancellor's statements today has made it quite unnecessary for me to make that particular speech. I welcome especially the speedy and generous way in which my right hon. Friend has on the whole met the very serious problems, which have been troubling so many of us, facing people who are living on retirement and widows' pensions. I am very glad that my right hon. Friend has at once conceded the case that was impressed upon him and his colleagues in the Government who deal with these matters.

One of my regrets upon this point is that the proposal is a little tardy in execution. I wanted to see this change made considerably earlier than 1st October next and at an earlier age than 70 years. I understand that it must be the subject of legislation in the House, and so, therefore, it will be possible for those of us who take a very special and deep interest in this matter on behalf of old and retired people to go into these questions very much more fully on another occasion. I will not, therefore, detain the House with this subject tonight, but I ask my hon. Friend the Financial Secretary, who now occupies the Front Bench, to press upon his right hon. Friend that there is a very strong case for bringing forward this welcome improvement in the conditions of retirement pensioners to the earlier age and to a much earlier date than 1st October next. These are the main points I wanted to put tonight.

I welcome very much indeed all the other proposals that are to be dealt with regarding retirement pensions. The incentives to remain in work over the age of 65 are also something for which we have been pressing. The increased increments are very good and valuable and on behalf of the Members on this side I give to the Chancellor a very hearty welcome for his proposals in this connection.

One other point which occurs to me on the general question of the taxation which has been proposed is with regard to the increase in the taxation on new cars from 33⅓ to 66⅔ per cent. The effect of this inevitably will be to bring a very large unearned increment in value to every possessor now of a motor car. It means that the second-hand car market again will boom, and I ask the Chancellor if it would not be possible in some way, perhaps by means of some kind of sales tax—I am throwing out this suggestion without, of course, having had time to consider it deeply—on such transactions to reap some benefit to the Exchequer from the inflated values which secondhand cars will now acquire as a result of the further increase in the Purchase Tax on new cars. It ought not to involve great administrative difficulties since every car is a licensed vehicle and, therefore, such transactions could quite easily be traced as between the buyer and the seller. I ask my hon. Friend on the Front Bench to give that suggestion some consideration. Here I think is something which is extremely good and justifiable upon which to impose a tax.

I conclude by expressing the gratitude and pride that we on the back benches feel in the performance of our Chancellor of the Exchequer. I happen to be one of the elder members of this movement which I represent in this House. In another year or so I shall have been half a century in the service of the Socialist movement of this country. I feel that it is particularly gratifying that I am able on this occasion to say these words of appreciation to a relatively young member of our movement, but one who already has achieved such high distinction.

6.12 p.m.

Professor Savory (Antrim, South)

I should like to join with the leader of our party in paying tribute to the admirable speech to which we have listened with so much pleasure. It was delivered in a way we could follow and understand, the diction was perfect and the articulation was extremely clear.

I am probably the only hon. Member of this House who heard the famous Budget introduced by the late Sir William Harcourt when he first brought up the question of Death Duties on landed estates. I was only a boy at the time, but since then I have made it my business, as far as possible, to listen to every Budget speech delivered in this House. If listening to some scores of Budget speeches would make me a financier, I could say that I am on the high road to acquiring that education. I feel there are certain points that it is necessary to raise. I am sorry to detain the Committee this evening, but I know by bitter experience that it will be very difficult to get in on a subsequent day and catch the Chairman's eye. Therefore, I ask your indulgence, Sir if I say tonight what has been on my mind for a long time.

Speaking as a representative of Northern Ireland I would point out that we view with great alarm the rapid growth of inflation. Its effect on all business concerns is readily seen in the widespread need for additional working capital, to meet rising prices and increasing costs of plant replacement and modernisation. With taxation at its present high level, no business can build up a favourable reserve to meet the increased capital requirements. This applies equally to all companies, private and public, but in the case of the private companies, of which we have so many in Northern Ireland, the situation is aggravated by the effect of Estate Duty legislation which became especially onerous from the year 1940 onwards.

The result has been that where a deceased person has made a transfer of any property to a company during the last five years of his life and he has received benefits, including dividends and interest, the company is liable for assessment of Estate Duty in respect of a large proportion of the assets. It does not matter of what the property transferred consists, whether it is business assets, whether it is cash payment on allotment of shares, nor does it matter how long ago this transfer took place.

The disquieting feature of all these Finance Acts is that through their provisions practically every private company may be brought within their operation. It may apply to a trading company formed 50 years ago equally with an investment company formed six years ago. The rates of duty on certain levels are now 50 per cent. higher than they were when the Act was passed. Where a person has had control of a company at any time within five years of his death the Act requires that the shares of the company should be valued on a net assets basis.

If one has regard to the disparity between the inflationary value of fixed assets and their going concern value, it is clear that the computed value of the shares is out of all proportion to their intrinsic value. The Act of 1940 is undoubtedly harsh in its application to the family company; and we have many family companies in Northern Ireland which have built up the prosperity of Ulster. I could mention a dozen straight away, but I do not wish to take up the time of the Committee. This type of private company has been built up in Northern Ireland by the frugality, by the thrift of its founders and the abstinence of its members in regard to dividends. The private company now forms an integral part of the commercial life of Northern Ireland. The continual ploughing back of profits which these private firms employ is a feature of the family company.

This ploughing back of the profits has precluded the members from building up outside reserves with which to pay Death Duties, with the result that we are beginning to see in our country the gradual elimination of the family company. This position is extremely serious. Every member of a private company is now being made fully aware of the implications of these Acts. We have been gravely perturbed at the incidence of Death Duties as they affect private companies. If the Estate Duty provisions of the 1940 Act remain unaltered and unmitigated in enforcement, the consequence to the private companies in Northern Ireland and to the economy of our country will be absolutely disastrous.

These statements and these figures have been put forth by a very eminent chartered accountant, Mr. John Bacon, who laid the case recently before the annual meeting in Northern Ireland of the Society of Chartered Accountants. I cannot help feeling that the time has come when it is no longer possible to keep on dipping, as was said by me on a previous occasion, into the so-called pool, the pool of the rich. There is no longer an unlimited pool of wealth in the hands of the rich from which the Chancellor can draw. The Government have already killed the goose which laid the golden egg—[HON. MEMBERS: "No."]—and have not used these stupendous Death Duties for paying off debt, because those duties consist really of capital, but have spent them and frittered them away as income.

I remember the time when it was possible for a private individual or a company to insure against Death Duties. Now, as a former Chancellor of the Exchequer, Sir John Anderson, fully admitted, that is no longer possible because the amount insured against Death Duties is added to the aggregated sum upon which Estate Duty is charged. Therefore, insurance against Death Duties has practically ceased. The result is that many beautiful estates, many of our most superb country houses throughout Great Britain, and also in Northern Ireland, are gradually disappearing. They are becoming country clubs or something of that kind. They were useful because they were educational. These country gentlemen threw open their picture galleries and opened their houses as public museums—

Mr. George Wigg (Dudley)

Once a year to the Tory Party.

Professor Savory

One could go over Chatsworth House every day of the week. One drove from Buxton by coach; it was one of the attractions of that delightful watering place. Now, if one goes round the country, one finds that these places are gradually being closed down. They were part of the amenities of this country, and they are all gradually disappearing.

Not very long ago I was being taken round his garden by a country gentleman who has always been the very best of landlords, who has always maintained his farms in the best possible condition, and has spent his rents on improving outhouses and buildings. He said to me, "I am still supposed by all the people in the country around to have the same income as my father—£50,000 a year—but after I have paid Income Tax and Surtax at 19s. 6d. in the £ my income is reduced to £4,500.

Mr. Wigg

Too much.

Professor Savory

I thought he was exaggerating, but when I examined the table published by the Chancellor of the Exchequer I saw that he was perfectly correct. He is a landlord who generously pensioned off his gardeners and coachmen, and gave their widows houses free on the estate—that was the way his wealth was distributed. These things are now no longer possible. One estate after another has to be parted with; and when the so-called "once-for-all" capital levy had to be paid, there was no income during three years.

I had the honour of speaking on the first Budget introduced by the Labour Government that came into power in 1945. That was in October, 1945. I spoke on the Third Reading, and although I do not like quoting what I have said on previous occasions, I would refer to what I said about the peroration of the then Chancellor of the Exchequer in opening his Budget. He described the enormous amount of expenditure on all sorts of things, good or bad, that he was proposing to undertake, and he concluded with these eloquent words: To do all these things and to do them well, as part of a coherent plan, steadily accomplished stage by stage during the lifetime of this Parliament—such shall be our aim, such shall be our pledge and our pride."—[OFFICIAL REPORT, 23rd October, 1945; Vol. 414, c. 1885.] I replied in these words: they will not do these things because before they attempt half of them they will be brought up by the threat of national bankruptcy. They are living in a fools' paradise. This rake's progress will bring them to a catastrophe even worse than that to which they brought the country in 1931, when a blow was struck at British credit from which it has never recovered. I said: I implore the Chancellor in the interests of the country to draw back before it is too late and save this country from the financial abyss into which he is going to plunge her."—[OFFICIAL REPORT, 11th December, 1945; Vol. 417, c. 235–6.] I agree with the Leader of the Opposition in denouncing the devaluation policy of last year, because I believe it was almost worse than the catastrophe of 1931. By it the Government have no doubt given a temporary stimulus to our export trade but now its effects are coming home to roost. We have to pay enormously increased sums for all our raw materials and we are beginning now in every industry—I know this to be the case in those with which I am familiar—to feel the pinch desperately. A financial situation can never be remedied by depreciating the currency. Dean Swift said that when the English Government introduced into Dublin the so-called Wood's halfpence, a debased coinage. That is what the Government have done by their devaluation.

Now we see the result. This increased taxation, this increased Income Tax, is not due merely to the needs of defence. It is due—

Commander Pursey (Hull, East)

Has the hon. Member heard nothing about re-armament?

Professor Savory

Re-armament should have begun long before, when it could have been done infinitely less expensively, when raw materials were very much cheaper. The Government have now to pay an enormously increased cost. They have to compensate for the neglect of those past years, when our defences were altogether insufficient for the crisis—and many a time, in addressing this House, I warned the Government of the crisis that was coming from the Far East, and was laughed at by hon. Gentlemen opposite. I can only say today that he "who laughs last laughs loudest."

6.29 p.m.

Lieut.-Colonel Lipton (Brixton)

The hon. Member for Antrim, South (Professor Savory) must be easily the gloomiest of those six or seven Conservative Members at present in the House. When the Chancellor of the Exchequer sat down, I seemed to detect relief on the benches opposite. I am quite sure that they were expecting a financial pronouncement very much worse and more drastic than the one which the House has heard today. It will take them some time to recover their warlike approach towards the Budget proposals which, had those proposals been more drastic, they would have manifested much more vocally tonight instead of waiting until tomorrow or the next day.

The Chancellor did not, of course, go into the whole of the economic background which has been the subject of previous debates. It is true to say that the effects of the re-armament programme have not yet been felt, and will not be felt for a little time to come, but it is bound to have an increasingly undesirable effect, both on the cost of living and on the raw material situation generally. That means that in order to cushion the lower income groups and old age pensioners against the effects of the re-armament programme we must devise a comprehensive plan based, in the view of hon. Members on this side of the Committee at any rate, on Socialist principles.

The international situation and the rearmament programme are indissolubly linked with the problems associated with the cost of living in this country. I can safely prophesy that hon. Members opposite will exploit to the utmost possible extent, on every possible occasion, the disgruntlement which is bound to arise over the cost of living while, at the same time, supporting the re-armament programme which is the main cause of rising prices. We know only too well that the two are intermingled and that they constitute a single problem. It will, however, serve the tactics of some hon. Members opposite to put these two problems into separate water-tight compartments for the purpose of pursuing their own partisan propaganda in the next few months.

It is clear that self-sacrifice and some degree of dislocation are inevitable, and it would be dishonest on the part of anyone claiming to fulfil his public responsibility to minimise the prospects that lie ahead. The basic requirements are fairly simple to analyse. One is that by increased production it will be possible to maintain living standards. This increased production and the needs of the defence programme may entail the re-imposition of the Control of Engagement Order. If that situation does arise the re-imposition of that order must be accompanied or, if necessary, preceded by all the physical controls, some of which were referred to by the Chancellor this afternoon. I would quote one or two examples of physical controls which have already become necessary. One is that labour and materials should not be frittered away on non-essential building, and this includes Government offices. There should be—and a start has been made—a ruthless limitation of profits. I am inclined to think that hon. Members opposite expected something much more drastic in that field than was announced this afternoon.

There must be a pruning of expenditure. The only difficulty with which we on this side of the Committee always find ourselves confronted, when trying to discover the views of hon. Members opposite in that connection, is that they will not specify the direction in which they want such economies to be introduced. I can think of one example where expenditure could for the time being be reduced, namely, in the field of increased television facilities. The Post Office has developed a technique which will enable sound and television programmes to be relayed over the ordinary telephone wires without interference with telephone conversations. That would be a much better way of effecting the economies required in this direction and would be a useful supplement to the steps being taken by the Chancellor to increase the tax on wireless sets. To a considerable extent wireless sets would be less necessary in the home market, and so would the present expensive television sets, if only the Post Office would relay these broadcasts over the ordinary telephone system. I point that out as an example; I have no time to develop the argument.

From the point of view of the consumer the Chancellor of the Exchequer has gone some way towards reducing the impact of the re-armament programme on the lower income ranges, and the increased scale of old age pensions will be gratefully received as the first instalment of what we on this side of the Committee always believe to be a very necessary process, namely, the redistribution of the wealth of the country. I am sorry that there was no reference by the Chancellor to the clothing and footwear position. In this field there is every justification, it seems to me, for pegging prices of utility ranges by a subsidy, and at the same time rationing utility goods; because, otherwise, in the case of clothing and footwear we shall find that rationing by price, and inflated price, will impose very considerable hardships. I am quite sure that people generally would prefer to have limited supplies at reasonable prices than unlimited supplies at prices they cannot afford.

I should have appreciated a reference by the Chancellor to the possibility of using the nationalised industries to a much greater extent than at present to help the consumer. In order to keep down the cost of living the Government should, if necessary, subsidise coal and transport. It might easily be cheaper to do that than to allow an inflationary rise of wages to chase after rising prices, which would result from a rise in the cost of such essential goods and services as coal and transport.

I have no doubt that economies could be introduced in many Government Departments. That is a matter to which from the points of view of administration, the Treasury should direct their attention in a more vigorous manner than in the past. I am not in a position to suggest specific directions in which economies of that kind can be made, but there is a general feeling, which is not without substance, that there is room for economy in this sector of our public expenditure. I hope that the Treasury will look more actively into this matter than they have done. Today, there are sufficient jobs to absorb any people who may be found to be redundant in the Civil Service. They could be taken into the ordinary industrial life of the community where some of them, at any rate, could perhaps do more useful work.

The decision of the Chancellor to recommend an increased tax on distributed profits will be welcomed on this side of the Committee. I should have liked a new tax on excess profits—that is to say, on dividends increased after a specified date. I deplore the absence of any reference to a tax on capital gains. Notwithstanding the very considerable redistribution of incomes in this country as a result of the administration of the Labour Government since 1945, the fact still remains that there is an inordinate gap between the very small minority who own most of the wealth of the community and the rest of the people.

Figures given in a useful pamphlet written by my hon. Friend the Member for Stechford (Mr. Jenkins), show this very clearly. One per cent. of the community own 50 per cent. of the capital wealth of the country. Five per cent. of the population own 75 per cent. of the whole of the property of the country, and that notwithstanding five or six years of Labour rule. That matter will have to be looked into. I ask the hon. Member for Galloway (Mr. McKie), who seems to be following this part of my argument with some interest, for reasons about which it would be unwise for me to speculate, to prepare himself for the day when the Labour Government looks into this problem. It has not been considered with the vigour which it deserves.

Mr. Ellis Smith (Stoke-on-Trent, South)

Is my hon. and gallant Friend aware that no one has given more attention to this aspect of our finances than the Chancellor himself? He is recognised as a great authority on it.

Lieut.-Colonel Lipton

That makes it all the more regrettable that there was no reference to it in his speech this afternoon. In my view, and I think I shall probably carry a few hon. Members with me, it is incompatible with a democratic society that this gross inequality should continue.

Mr. McKie (Galloway)

Put down an Amendment.

Lieut.-Colonel Lipton

That may be worth consideration, and I shall welcome the hon. Member's co-operation and support if I decide to do so.

The Chancellor's decision to impose an increase in the Purchase Tax on cars will go a little way towards absorbing the under-valuation which the catalogue price of new cars today represents. Even after the two-year convenant has expired, it is still possible for the owner of a new car to sell it at a price very much greater than what will be the new price after the small increase in the Purchase Tax of new cars which it is proposed to impose. While I am on this point, I also regret that there was no reference to a matter which I hoped would be included in the Budget, namely, the abolition of the distinction in tax between pre-1948 cars and post-1948 cars. Every year since the Budget of 1948, I have continued to refer to this anomaly and, in accordance with my tradition, I refer to my own position on this matter once again, and I express regret that no concession has been made to the owners of old cars.

The increase in Income Tax will not be objected to by the mass of the people who were expecting something in the nature of an increase to 10s. in the pound. The extra 6d. on the Income Tax which the Chancellor has recommended will provide about £75 million. If the tax had gone up to 10s., the further increase would have provided another £75 million, with which a great deal could have been done to relieve the hardship of old age pensioners and people in the lower income ranges, many of whom will not benefit at all from the concessions in the allowances for children and wives.

I hope that the spirit in which these proposals will be considered will be as non-partisan as possible. The people generally are prepared to put up with the restrictions and burdens which are inevitable during the next year or two to ensure what they believe is at stake—the safety of the country. I was pleased to note the words used by the chairman of the Lambeth Chamber of Trade in his annual report, when he gave expression to an admirable sentiment which, I regret to say, is not always echoed by officers of chambers of trade throughout the country. He said: I am confident that all traders will meet the future with grim determination and do everything possible to assist the preservation of peace by accepting these restrictions and burdens. I hope that those words will penetrate into the minds of some hon. Members opposite. It is inevitable that sacrifices will have to be made. We must not put—and the Chancellor's statement shows that we do not intend to put—the old age pensioner, the widow and the child into the front line. In other words, the social services and social security must not bear the main brunt of the impact of the defence programme.

The Economic Survey for 1951 said that the Government had set the nation two objectives: first, to push through with the Defence programme; second, and at the same time, to preserve our economic strength and independence. I should have been inclined to reverse the order for practical as well as psychological reasons. Without a strong economic base, to which reference was made by the Minister of Labour in a recent speech, there is no future for this country. It is inevitable that the crisis must be met and overcome and it can only be met and overcome by the continuous and developing application of the Socialist principle of fair shares, ensuring that the heaviest burdens are borne by those who are best able to bear them

6.50 p.m.

Sir Herbert Williams (Croydon, East)

I shall not be long on an occasion like this. We have had a very interesting Budget speech, delivered in a pleasant voice and in a pleasant manner, but I have one criticism. I wish the Chancellor would not be quite so pompous when he says, "I have something rather technical to say, and hon. Members need not listen, because they would not understand." That is virtually what he says. [HON. MEMBERS: "No."] Well, he says, "I am going to talk about something technical, and hon. Members can relax." That was the implication of what he said. Yet it was not technical at all, but the kind of thing one gets when one has the first examination at school at the age of nine. It is rather irritating when somebody lectures us on a rather low-grade subject. I heard one interjection that the Economic Survey was a bit of Old Moore's Almanack, and that was a fairly accurate description. At any rate, many of the statistics in it are pure and unadulterated guesswork.

The Chancellor referred to the desirability of people continuing to work when they are over 65, because he pointed out that, in 25 years from now—

Mr. Ellis Smith

That is all right; you have done no work.

Sir H. Williams

I do not think it is proper to tell you, Sir Charles, that you have done no work, because that is what the hon. Gentleman said. I have always regarded you as a most industrious person. Anyhow, I do not see what the point of that observation was, because the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith), knows that I served my time in the same trade as he did, and that he abandoned it much earlier than I did.

To return to the people over 65, I remember that, in a debate on the Beveridge Plan in which I took part when we were sheltering in Church House, I drew attention to some of the dangers involved in that plan. I pointed out that, in 30 years, there will be only two workers to sustain each old age pensioner. We had the same thing from the Chancellor today, many years later, and it is a very important consideration. If anybody studied the actuarial report which was published in connection with the Beveridge Plan he would see the forecast made there. Therefore, it has always been vitally important that people should continue to work for longer than they have done in the past; otherwise, the nation will crash in ruins. We shall have to do as the robins do when the youngsters kill off the old ones, which is a very unpleasant prospect for those who are my age.

Who are the biggest sinners in this respect? The Government themselves. [HON. MEMBERS: "No."] Yes. The number of people whom they force to retire at 65 is very high indeed. When the Financial Secretary to the Treasury reaches his office tomorrow morning, he will find a letter, almost verging on impertinence, on this very subject from me. I was taking up the case of a constituent of mine who does not want to retire. Unfortunately, he is unestablished, and he will be forced to be unemployed. He now has a job in the Home Office, and, so far as I know, he is quite competent to carry on for another few years. Why should he not do so when we are short of manpower?

When I was a member of the London County Council, during the war, I was often horrified when we were told that a man had to retire because he reached the age of 65, or that he could in some cases retire at 60. We cannot carry on the nation on that basis. I was delighted with what the Chancellor said about firms and private persons, but the Chancellor ought to address his remarks more particularly to the Treasury, because the Treasury is virtually the employer of all our civil servants and controls the rules and regulations about employment in the Civil Service. I have made numerous representations on this subject, and I understand that, on Friday of this week, a Private Member's Motion will be introduced on this very question, when many hon. Members who have studied the matter more exhaustively than I have done will have some strong things to say about the policy of the Government.

Private persons virtually cannot save any more today, whether they are professional men or employees of companies, and that also is true of the great range of employers. Today, nearly every company is building up a pensions scheme to provide its staff, when they retire, with the amount of income which, in the past, they used to provide by their own savings. Because of these pensions schemes, I find that firms, Government Departments and the rest are relucant to employ people unless they are very young, and so we have the appalling spectacle of able and competent men walking the streets of London because the door of employment is closed to them.

I am delighted with what the Chancellor said, though I think that he must do even more than he said he would do. He must bear in mind that the State and the nationalised industries between them employ nearly four million people. Therefore, I suggest that he might take the opportunity of addressing his remarks in those directions. I am delighted, also, to find that the Chancellor has pinched my brains. We are now discussing an important proposal, and hon. Gentlemen may perhaps vote for it on Monday night, if there is a Division. If he will look at the 24th Resolution (Amendment of law), he will find in paragraph (b) these words: amendments to make provision for the giving to the Treasury of advice and assistance in the exercise of the said power by a body to be constituted for the purpose, and for the powers and duties in that behalf of that body and other subordinate matters. I think it was last year, in the discussion on an Amendment, that I urged that a body should be set up similar in character to the Import Duties Advisory Committee, which was set up under the Import Duties Act, 1932, so that, when a body of traders was satisfied that the Purchase Tax was operating in an undesirable way, they had a body to which they could present their case, and which could act in a judicial manner and present its report to Parliament. If that was done, the same procedure would apply as applies under the Import Duties Advisory Committee, and the necessary order would have immediate effect, subject to an affirmative Resolution for an increase of Purchase Tax, or to a negative Resolution if the Purchase Tax was diminished. [An HON. MEMBER: "Does the hon. Member want to pray again?"] I do not pray against reductions in taxation; I am much too wise for that.

I now want to say a few words on the Profits Tax. From some points of view, the most evil thing in this Budget, particularly from the point of view of the stability of British industry and the future employment of the people, is the Profits Tax, and the Chancellor's interpretation of its present effects was quite wrong. Profits Tax is not borne by the shareholders, but by the company, and it is paid out of that part of its profits which are not distributed.

If the Profits Tax is 50 per cent. and the firm desires to continue its existing dividend, which would not be unreasonable, the amount deducted, instead of being 30 per cent., will now be 50 per cent., and, after that is deducted, there is 9s. 6d. in the pound, and that is the part which the shareholder bears. From the sums that are not distributed in dividends 10 per cent. is deducted, but the whole of the Profits Tax diminishes the amount of reserve, assuming that the payment to the shareholders remains unaltered, which is what most people desire.

The idea of shareholders being wealthy people is not correct. I am a director of a company which employs 400 people, and which has always been careful and prudent and has never chucked its money about. In the last year for which I worked out the figures, the tax free income of the shareholders as compared with the employees worked out in the ratio of one to 15. Payments in wages and salaries were 15 times as great as the amount distributed in dividends, tax free in both cases. The shareholders are four times as numerous as the employees, so that the average income of the shareholders was one 64th part of the average income of the employees. That is the kind of proportion which may exist in companies of quite moderate size and in public companies with widespread shareholders. That company used to distribute 10 per cent. It now distributes 15 per cent. When it first came into being 17 years ago Income Tax was, I believe, 4s. 6d. in the pound. Now the shareholders are getting 15 per cent. but the rate of taxation is double. In cash, therefore, they are now receiving roughly the same as they did in 1934, and in purchasing power they are receiving about a third. The suggestion that the increase which has taken place is improper is untrue.

Mr. Manuel (Central Ayrshire)

They can apply for National Assistance.

Sir H. Williams

Why should they? It is only incompetent people who get National Assistance. [HON. MEMBERS: "Oh!"] Well, perhaps that is wrong. [HON. MEMBERS: "Withdraw."] I agree that I was wrong; I was provoked. The interruption had no relevance, because a company is not qualified to apply for National Assistance, and I am talking about a company. [An HON. MEMBER: "What about the shareholders?"] Some shareholders may be applying for National Assistance. I do not know; I do not inquire. My duty is to act as a trustee for them, for which they pay me a moderate fee. They ought to pay me more.

Let me cite the case of another company with which I am familiar. For many years they had a reasonably prosperous business and regularly paid 10 per cent. The war came, and for the time being completely destroyed their ordinary business, but their plant and equipment was such that they could switch over to what they called war work, which, in their case, was far less profitable than their normal work. Then came the end of the war, after which they went through a difficult period trying to get back to their old work. At one time they paid no dividend at all. One year they paid 2 per cent. and the most recent declaration is 5 per cent. It would be reasonable for the shareholders to try and get back to the 10 per cent., which was their normal pre-war rate. Incidentally, that would represent to the shareholders much less purchasing power than they had before the war. For that they are to be penalised in two ways, first because of an Act of Parliament which may make it illegal to do that without Treasury consent, apparently—I was not clear about that part of the Chancellor's speech—and they are also penalised by a heavy addition to the Profits Tax.

What relation taxation bears to the total profits of a company depends naturally on what proportion they seek to put to reserve and what proportion they seek to distribute, and the calculation will vary. In one company for which I have worked out the figures, at the present time 12s. 6d. out of every pound which they make goes to the State and 7s. 6d. out of every pound defrays the whole of the dividends and the whole of the sums placed to reserve. Under the change proposed by the Chancellor the increase in the Profits Tax means an extra 2s. in the pound, and on top there is an increase of 6d. in Income Tax: that is an extra 2s. 6d.

In future, this company will be taxed to the tune of 15s. in the pound on all it makes. That is an unduly high proportion. It will trespass on the reserves which the company used to buy new plant and improve its buildings, and unless that process of buying new plant and so forth goes on continuously the company is bound ultimately to go out of business because it will not be able to compete effectively in the market. If I were an employee of the company the one thing I should want to see done would be the placing of adequate sums to reserve. Employees are as vitally concerned in the reserve as the shareholders, because, to a large extent, therein lies their security of future employment.

The Chancellor indulged in the usual complete misapprehension about bonus shares. Bonus shares do not mean that shareholders get anything which they did not get before. Let me take, for example, a company which issues bonus shares to ordinary shareholders, because they own what is left of the company after everybody else is paid out. Take a company with a paid up capital in ordinary shares of £100,000. As a result of careful administration and building up reserves they have reserves of £100,000. Other things being equal, the shares which were originally worth £1 are now worth £2, but their legal capital is half their actual capital. I think there is a lot to be said for getting the two level. It has the supreme advantage that directors can legally distribute in dividends any surplus of assets over liabilities and they can distribute the whole of the reserve fund if they like. If they decide to capitalise the reserve fund by a bonus issue they deprive themselves of the power to distribute those reserves in dividend. In other words, what is ploughed back has to stay ploughed in.

It is in the interests of the employees that when the reserve builds up there should be a bonus issue. One does not get cash with a bonus issue. One gets a piece of paper which says that a share which was once one is now two. In the ordinary way the market value drops by half, unless with a moderate bonus issue—not one at 100 per cent.—the directors having been careful in the past, every shareholder is entitled to a little more in cash and they seek to maintain the same rate of dividend when the capitalisation has gone up from, say, 100 to 120. That is not unreasonable, but if they do that it attracts taxation and if it goes to people who are rich it attracts surtax.

Mr. Ellis Smith

So the dividend is paid upon £2.

Mr. Smith

It could be.

Sir H. Williams

No. It has been paid on £2 before, in effect. What the hon. Gentleman is mixing up is the amount distributed in dividend and the rate of dividend in the past. There are a few people who like to do it because they like to conceal the rate of dividend. I have only heard one man say that. He said it to me in Victoria Street in 1920. He was a very prosperous gentleman at the head of a big business and his son is a Cabinet Minister today. I will not mention names because it might be a bit unfair. The story is true, however.

It is very desirable that bonus shares should be issued and there is nothing evil about it. But by stupid propaganda on the part of people who have not understood it, the idea has got around that there is some improper transaction involved. It is not improper. It is merely the recognition of a fact, and directors in future are to be prevented from doing something which would be in the interests of the shareholders and their workpeople.

There was a period in the Chancellor's life when he had the privilege of trying to instruct other people, and he must know that a bonus share is not the evil thing which he represented it to be today. How the Capital Issues Committee come into the picture at all I do not know. This means no movement of money. It only means a book entry and the casting of a burden upon the directors of signing a lot of new certificates; that is all. I hope we shall not have any more nonsense of that kind from the Chancellor or from any of his subordinates.

In some respects the Budget attracts me. I am delighted that Purchase Tax has been removed from dishcloths. I shall now be deprived of one of the things which I take with me on the platform. I very often take a dishcloth which I bought in Croydon to clean the windscreen of my car when it gets muddy. The man in the shop said, "I am sorry it is so dear, but it has to bear Purchase Tax at the rate of 66⅔ per cent." I used to take one of these dishcloths from my pocket when I spoke on Purchase Tax, and display it as a luxury article. I think the changes made at that end of the scale are very good, because it is absurd that the daily necessities of life should be subject to tax when the original purpose was to get revenue and to get it from luxuries.

I had not meant to speak so long. I would have spoken at less length if the interruptions had been a little more relevant, but at least some hon. Members have been induced to listen from time to time. There are certain aspects of the Budget which we shall have to denounce at the right time, and I have not the slightest doubt that there will be a number of Amendments to the Finance Bill when it comes along. I can certainly think of a few. I am sorry that the Financial Secretary to the Treasury has walked out, but I hope he will read my speech tomorrow on the subject of the employment of those over 65—I repeat myself to that extent. I hope we shall have a pleasant time for the rest of the night, because it looks as if we are to be kept much busier this Budget night than is customary.

7.10 p.m.

Mr. George Wigg (Dudley)

I was very interested when the hon. Member for Croydon, East (Sir H. Williams) let the cat out of the bag by saying that anyone who found himself receiving National Assistance was incompetent. He is not a hard-hearted man and I do not think he really wants to be unkind to the unfortunate but—

Sir H. Williams

The hon. Member might really play fair. There was an interjection. I made a casual remark. I subsequently realised that my casual remark in reply to the interjection was not quite warranted and I withdrew it. I do not think that in fairness he should pursue it.

Mr. Wigg

I did not catch the hon. Member's withdrawal. I think he is a very fly bird and that he began to catch up with what he had said and realised there were dangers in his statement. But I do not have to rely upon him for an interpretation of Tory economic and social theory. There is plenty of other evidence.

There was an occasion in the proceedings on the Iron and Steel Act, right at the end of the debate when my hon. Friend the Parliamentary Secretary to the Ministry of Supply was talking about the effect of the Act on the nation and on the steel shareholders. An hon. Gentleman opposite interjected and made it quite clear that in his judgment—and there were no objections from his side—the shareholders were in fact the nation. Perhaps the hon. Member for Croydon, East, will forgive me but there is not such a tremendous amount of difference between what he allowed to slip out and what slipped out that night at the end of the steel debate. It was perfectly clear from the whole of the speech of the hon. Member for Croydon, East, after he got going that the concern of the Tory Party is profits.

Sir H. Williams

After I had been speaking for three minutes I did at least say something about the Budget.

Mr. Wigg

I should be quite prepared to come down to the hon. Member's constituency and discuss all of his speech, including the part that has been withdrawn. I shall come back to his profit thesis in a moment. The first point to which I want to refer is a point which was raised by the hon. Member for Antrim, South (Professor Savory). He made a point often made on the Conservative platform up and down the country and which I am quite sure will be made up and down the country in the months that lie ahead. It is that if only the Conservative Party had won the last election and been in office they would have carried the re-armament programme through much quicker and sooner and, of course, much cheaper than we shall do. They say they would have got off the mark much quicker.

My hon. Friends should get a copy of "The Right Road for Britain" and read it. This was trotted out before the last General Election. It was produced way back in 1949. If my hon. Friends will read it they will not find in it any suggestions at all that the Conservative Party were thinking about defence even in 1949.

Brigadier Clarke (Portsmouth, West)

May I draw the attention of the hon. Member to the cost of living which the Socialists in their posters said they were going to bring down?

Mr. Wigg

I am quite willing to come to what was said at the last General Election. At the present moment what I am saying is that at the last election the Conservatives said nothing about defence. It is quite clear, of course, that when they are talking to an exclusively Conservative audience, and that often means that the I.Q. is not very high, they read their own publications and get away with it. Only the most innocent hon. Members opposite, like the hon. Member for Antrim, South, will come down to this Committee and repeat the story that on this side of the House we bear the major burden of responsibility for the kind of Budget we have today because we ought to have introduced the defence programme a long time ago and before costs began to rise. I hope very much we are not going to get any more of that particular nonsense, because it is poisonous nonsense.

Brigadier Clarke

If one lets the Army run down for four years, surely it is going to cost more in the fifth year to build it up again.

Mr. Wigg

If the hon. and gallant Member really thinks that, why did he not persuade the Leader of his party at the last election to come to the country and say, "What we are going to do if we get returned is to launch a great re-armament programme." If the Conservative Party really thought that and did not say so they are cheats, liars and humbugs and I am prepared to accept that interpretation. On the other hand, if they did not think that, they should not come down to the House of Commons and say, "Of course if we had got in we would have launched the re-armament programme earlier." Their re-armament record is pretty dirty, because in 1935 that is similar to what they did. Nobody has produced more evidence on that than the Leader of the Opposition. He pointed out in his books, which I quote so often, that in the 1935 election, Mr. Baldwin, as he then was, thought we should rearm but he had not the courage to tell the country. Here we are now in the same situation.

This is terribly important because to my mind if we are to get the people of this country to accept the burden of rearmament, what we have to do is to tell the truth, tell them what is the purpose of re-armament and what the consequences are going to be and ask them to face those burdens. The ordinary humble folk, after all, produce the arms and bear the burden not only of re-armament but also of war if that unfortunately, should come. In a democracy the only possible way is to tell them the truth, and if we have to tell them that truth we might as well start telling them tonight.

While very much of what he said attracted me, I am not at all sure that the Chancellor told us all the truth about profits. In Table 26 of the Economic Survey there are items in relation to undistributed profits. In 1948 the figure was £524 million. In 1951 that figure will jump to £780 million. I have no objections to profits as such. I am entirely at one with the hon. Member for Croydon, East in that, provided that the profits are honestly earned by service to the community. But when one gets an expanding range of profits to that extent it seems to me that the margin of profit in this country is far too high. Clearly one cannot ask the people of this country to bear the very great burden of re-armament in the first year—and we have to remember that the burden in the coming year is going to be very much greater in the second and third years—unless there is some guarantee that nobody is making any profit from re-armament.

Sir H. Williams

No profit at all?

Mr. Wigg

I am not saying any profit at all, but what is a reasonable profit. I do not consider some of the profits that are being made reasonable, and I think the Chancellor ought to have done more than he has done by the taxation of profits to take the profit out of re-armament.

Mr. Nabarro (Kidderminster)

I am grateful to the hon. Member for giving way, because he occupies the constituency next door to mine. He has made a statement about profits earned from re-armament. He will, of course, know that it is the standard practice of Government Departments on all armament contracts and sub-contracts to hold post-costings and that the rate of profit allowed has for the last 15 years been stabilised at 7½ per cent. of the average capital employed. That applies today, as it has applied since 1938.

Mr. Wigg

I have a much greater belief in the ingenuity of the employing classes in the hon. Member's constituency and in parts of mine than he has and in their ability to get round that arrangement. I am constantly being told that profits are no longer high enough, that no longer are there great pools of wealth. But it is astonishing how long people can live on their losses. In view of their standard of life, it is astonishing how long that can be done. I wish I could change places with them.

I have spoken in my constituency and supported the re-armament programme because I believe it is essential that this programme should be carried out. In return, my first demand is that there shall be no excessive profits.

Mr. Nabarro

Hear, hear.

Mr. Wigg

The second demand is that we shall look after the old, the very young, the sick and the helpless. What my right hon. Friend has done this evening for the old age pensioners is a step in the right direction, but I wish he had gone further and done something about family allowances. If prices continue to rise I hope he will do something about family allowances. In my view the cost of living will press very hardly upon mothers with large families, so I hope something will also be done about subsidising the utility range of children's clothes.

If those things are done we can find a way out of our difficulties—and that way is through greater efficiency and greater production. Provided there is a reasonable and fair method of distribution of wealth then, although the financial and economic task which the Chancellor has set the country seems very great—particularly when we remember that the task will be very much worse in the second and third years—we can reasonably expect our people to face the consequences.

I do not believe all the party opposite have turned their backs upon the past. Some no doubt have and some, I think, are ashamed of the kind of things they have said and the kind of things which were done by them between the wars. But if anybody opposite wants to get me out of my seat in my constituency one of the things he has to do is to eradicate in Dudley and the surrounding district the memory of unemployment and its consequences between the two wars. From time to time plenty of ammunition on unemployment is supplied to us not only by Members of Parliament but by other members of the Tory Party.

I return to this point because I believe that the greatest single obstacle to the throwing overboard of restrictive practices so that we may obtain the all-out production we need if we are to carry through the re-armament programme and still maintain our standard of life is, in fact, the memory of unemployment and the fear that if we have a Tory Government unemployment will return.

Brigadier Clarke

Will the hon. Gentleman admit that the Socialists have brought us as near to unemployment as is possible today in peace-time through lack of coal? They have had to advertise to state that if we continue to use so much coal there will be unemployment. I have seen that stated in advertisements produced by the Socialist Party—and that is a wonderful admission after five years of peace.

Mr. Wigg

If the hon. and gallant Gentleman examines everything which has ever been said by any hon. Member on this side of the House now or in the past, what he will not find is this: he will never find anybody on this side of the Committee stating that he believes we must have unemployment in order to solve our economic difficulties. On the other hand, we can find dozens of quotations to that end from the party opposite. Let me deal with a very recent speech made by Sir Graham Cunningham, speaking to the Putney Young Conservatives. He is reported in the "Richmond Herald" as saying: It has been said many times that the answer in this country to the spread of Communism is full employment. I believe that that policy is doing the exact opposite. I believe Communism is spreading faster through full employment than if people were out busy looking for jobs. Full employment is bound to end in catastrophe. Any workman can get another job if he decides to leave his old one.

Brigadier Clarke

What did the Minister of Works say the other day?

Mr. Wigg

That is only one quotation, but I could weary the Committee by reading dozens of quotations from Conservative Members and members of the F.B.I. on that subject.

Miss Irene Ward (Tynemouth)

I should be grateful to the hon. Member if he would tell me why the Socialist Government selected that particular gentleman to go to America to re-organise the whole of our export arrangements for dollar earnings, because it seemed to me that that was a very odd selection to make. I do not agree with Sir Graham Cunningham in the views which he expressed and which the hon. Member has just read.

Mr. Wigg

I entirely agree with the hon. Lady; I have been asking myself for a long time the question which she just asked. I do not know why that gentleman was selected and I wish I could find out. Nevertheless, I have quoted a statement which he made to a Conservative audience and—

Miss Ward

That does not represent the view of the Conservative Party.

Mr. Wigg

After all, it was a Conservative audience, and in any case it was not the first time that Sir Graham Cunningham had made this statement. The statement I have quoted was made just two months ago, in January, 1951, but on 30th July, 1946, Sir Graham said: In saying that full employment is not practical politics, what is meant is that industry must have a pool or a reserve of labour on which to draw. The only effective sanction to procure discipline, stabilise wages and improve efficiency is the fear of unemployment. The most recent acquisition of strength to the party opposite, the right hon. Member for Ormskirk (Sir A. Salter), had something to say on this subject. He said: There must, as a first step be the compulsion of unemployment in the existing industries. I am not complaining about this; I know that hon. Members opposite believe it. What I do complain is that they have not the guts to say so.

Miss Ward

We do not believe in it. I have listened to the hon. Gentleman talking about dishonesty, but he is making a completely dishonest statement.

Mr. Wigg rose

The Deputy-Chairman (Colonel Sir Charles MacAndrew)

I did not hear all that the hon. Lady the Member for Tynemouth (Miss Ward) said, but I heard part of it and she must not make remarks of that kind.

Miss Ward

On a point of order. I am not quite certain whether you were in the Chair at the time or not, Sir Charles, but the hon. Member for Dudley (Mr. Wigg) said the Conservative Party were dishonest and that Mr. Stanley Baldwin cheated. I take exception to that, and, if I may say so with very great respect, if it is not in order for me to use the word "dishonest" and to object to a statement of that kind being made about my leader, then it is not in order for the hon. Member for Dudley to use that term, either.

The Deputy-Chairman

Mr. Stanley Baldwin is not now a Member of this House. We do not talk about hon. Members in the way the hon. Lady was talking just now.

Mr. Wigg

I am very sorry if the hon. Lady is upset.

Miss Ward

I am not upset.

Mr. Wigg

If the hon. Lady is not upset, then I hope I shall never have the opportunity of seeing her when she is upset.

Mr. Fort (Clitheroe)

May I ask one question about the connection between restrictive practices and unemployment, because one of the things which worries me in an attempt to understand restrictive practices is that they are least in industries which suffered from unemployment as badly as or worse than others. As an example I would indicate the industry represented by the hon. Member for Rotherham (Mr. Jack Jones), which suffered from unemployment and which now has an absence of restrictive practices.

Mr. Wigg

A very powerful trade union has grown up in the steel industry in which the workers in the industry have confidence. Therefore, they are prepared, if the union comes to an agreement with the employers, to work out schemes which will do away with restrictive practices. On the other hand, in industries such as the pottery industry, about which my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) knows a great deal, or in the coalmining industry, it is perfectly clear that the memory of unemployment is burned so deeply that it cannot be eradicated in a short time.

Brigadier Clarke

It is not allowed to die.

Mr. Wigg

The hon. and gallant Member complains that it is not allowed to die. That is not my fault, but the fault of the Tory Party for using speakers like Sir Graham Cunningham.

If we are to carry through the rearmament programme and still maintain our standard of life in this country with all the shortages that exist, then, quite clearly, we must keep with us the industrial workers. That means that the Tories, particularly if they think there is a possibility of their becoming the Government of the country, a belief which I do not share, must turn their backs on the past. It would be good morals and sound policy if the Leader of the Opposition would say, "We know all the statements that have been made. We make a clean breast of it. We know that our past has been pretty terrible, but we ask the people of the country to forgive us. We will give a guarantee that never again will a Tory Government fall back on the policy of deliberately organising unemployment in order to keep down wages and to assure the mobility of labour."

Miss Ward

On a point of order. Am I not right, Sir Charles, in protesting against a statement of that kind? With great respect, I cannot see any difference between making a statement of that kind, which is inaccurate, and my saying that such a statement is dishonest.

The Deputy-Chairman

I am very sorry that the hon. Lady cannot see the difference, but I can assure her that there is a very considerable difference.

Mr. Wigg

Even if the hon. Lady happened to be describing the situation accurately, the fact remains that millions of people in this country, particularly those in the industrial areas, believe what I am saying to be true. I suggest, therefore, that it is very important that this belief if untrue, and as the hon. Lady thinks, unfair, should be nailed down.

As I say, I would like the Leader of the Opposition, on behalf of his party, to turn his back on the kind of statement which I have quoted and which was made in the last two months. I realise their dilemma. It is not so much that they would have to admit that they put through these policies in the past, but it would at once call into question the financial support which the Tory Party are getting. They have collected hundreds of thousands of pounds from industrialists. They did not do it for the good of the country or because of the old age pensioners, but for what the hon. Member for Croydon, East (Sir H. Williams), is so concerned about, as an insurance policy to protect their profits.

Mr. Nabarro

What about the tens of thousands of old age pensioners who subscribe to Lord Woolton's Fund?

Mr. Wigg

I much prefer the hon. Gentleman when he is on his feet saying what he is thinking than when he is sitting there muttering. That is a very bad habit.

I am quite sure that there are tens of thousands of old age pensioners who subscribed to the funds of the Conservative Party. After all, during the Festival of Britain the confidence tricksters will sell the same old stories and the same gold bricks. The problem of the Tory Party is how to get the people of this country to commit economic suicide, because there never would be a Tory Government here unless they got them to subscribe their half crowns. What I am quite certain about is that Lord Woolton's Fund did not all come from old-age pensioners.

Mr. Nabarro

I did not say "all"; I said tens of thousands, and I repeat it.

Mr. Wigg

I will even give the hon. Gentleman a hundred thousand at £1 a time, but that still leaves £900,000. If the hon. Gentleman likes, I will send him a copy of the circular sent out by Sir Hugh Chance and other close friends of his in the Midlands asking the industrialists there to subscribe to Lord Woolton's Fund as an insurance. He suggested that the basis of their contribution should be a half-penny in the pound of the wages bill.

Mr. Nabarro

Can the hon. Gentleman tell me the fundamental difference between an industrialist subscribing to the Tory Party funds, if he so wishes, and the Co-operative Societies subscribing to the Socialist Party funds? It is the same thing in principle. Therefore, what is the hon. Gentleman grumbling about?

Mr. Wigg

I assure the hon. Gentleman that I am not grumbling, and if he thinks I am he is quite wrong. Of course the Co-operative Societies have every right to subscribe to the Labour Party funds, as have the trade unions. The reason why they do it is because they are seeking to protect their members. The great industrialists subscribe to the Tory Party funds for the same reason.

All I want to do is to make clear, not only to my constituents, but to the great mass of the people in this country, the fundamental difference between the two parties. We on this side were brought into being by the people, and we have sought to maintain the standard of life of the working-classes and to look after the old age pensioners. That is what we are still trying to do. We are trying, not only to maintain, but to improve the standard of life of all those who work with hand or brain. On the other hand the Tory Party is a political conspiracy. It has managed by blackmail or near blackmail to get money from industrialists for the sole purpose of protecting their profits.

7.39 p.m.

Mr. Henderson Stewart (Fife, East)

The Committee knows the hon. Member for Dudley (Mr. Wigg) well enough not to take what he says very seriously. I do not wish to refer to much of what he has said, although there are one or two points which, I think, should be taken up with some seriousness. First of all, he said that we could only get out of our difficulties if we increased our efficiency and our productivity. That is quite true. But he and other hon. Members opposite must recognise that if we are to maintain and increase efficiency and productivity it is essential that the capital equipment of industry should become increasingly better and more efficient. We cannot escape that fact. I think it regrettable that today the Chancellor of the Exchequer had to do two things which will have exactly the opposite effect, two things which will discourage rather than encourage the improvement of our capital equipment. The first is to withdraw the special allowance for new equipment, and the second is to increase the Profits Tax.

My hon. Friend the Member for Croydon, East (Sir H. Williams) dealt with the Profits Tax very fairly, and pointed out that when this extra tax is imposed there will be relatively little left over to use for any purposes to increase the productivity of industry. I remember, and the hon. Member will perhaps recall too, how during the war we had a 100 per cent. tax. That would have appeared to meet the wishes of the most ardent Socialist. But what was the result? There is no one in the Treasury today who will suggest a 100 per cent. tax now, for the reason that it proved to be the most wasteful and uneconomic tax imposed on industry. It led to sheer unadulterated waste of tens of millions of pounds of the national resources. Therefore, it will never be repeated.

We are not being asked for that now, but we are getting on the way to it in a 50 per cent. tax. I do not feel that, in the long run, this substantial increase of the Profits Tax will be to the advantage of the productivity of British industry. That is a view I express tonight, and I have no doubt at all that in a year's time, or in two years, the House will be saying the same thing and regretting that this has been done.

Mr. Paton

How is it possible for a 50 per cent. tax on distributed profits to affect the productivity of industry?

Mr. Stewart

Do not let us get mixed up about this. A company can do two things with its profits. It can either distribute them in dividends, or it can put them to reserve. If they are not allowed to put them to reserve and if they are taxed on keeping them in reserve, or if they are taxed on making any profits at all, then their reserves automatically decline. There is no escape from that, and there is no use Members shaking their heads because that is the truth.

Mr. Glenvil Hall (Colne Valley)

The hon. Member is quite wrong. The point is that if a company puts them to reserve they pay only 10 per cent., but that if they distribute them they pay 50 per cent. It is as simple as that.

Mr. Stewart

I agree that it is as simple as that, I am not arguing anything different from what I just said. I am giving the broad facts. [Laughter.] It is no use Members laughing. I am saying what I said before, that if we take from a company a larger part of its profits, then the company is being left with far fewer profits. [HON. MEMBERS: "No."] That is so simple that it is not worth arguing. If more of the profits are being taken in tax, a company is left with fewer profits and has less to put into the expansion and development of its capital equipment. All I am saying is that it may well be, and I am sure it will be, that this increased tax will end by being regarded as by no means so excellent a device as some people think it is today.

Another thing that the hon. Member for Dudley said needs examination. I understand, of course, that Members opposite have to use their normal means of propaganda—no one objects to that. I know that in the past they have used unemployment as one of their strong points—and no one can object to that. But the hon. Member today, in our present situation and faced with this great re-armament programme, is wasting the time of the Committee in suggesting there is any possibility of unemployment in the years ahead. It is asking for too much forbearance to suggest that.

The fact is that whatever Government is in power, and everyone knows it to be the case, we are now facing, and shall be for many years to come, what is a wartime economy and to refer to unemployment is, therefore, completely irrelevant. The question of controls is equally irrelevant, because every Government will be committed to that policy—it will be an inescapable policy we shall all have to follow. I hope we shall not go on raising that in this debate as it is quite irrelevant to the future we see before us.

Mr. McGovern (Glasgow, Shettleston)

I do not know why the hon. Member deprecates this being brought up. He will remember, for example, that a member of another place, Lord Balfour, laid it down there that the Government were failing badly because there was not a great deal more unemployment in the country to discipline the workers in the factories.

Mr. Stewart

The hon. Member knows very well that that speech was made a considerable time ago and before this rearmament programme. I do not deny what anyone has said. I am merely putting before the Committee something which is inescapable, that in the circumstances of the time, and presented with this great new re-armament drive, the problem of re-armament is quite irrelevant. I say now that no Government will be faced with any such problem for a great many years to come.

Mr. Wigg

The speech of the noble Lord was made in another place in January, 1950, so it is only just over a year ago.

Mr. Stewart

That is exactly what I said—before this great re-armament programme was introduced by the Prime Minister. Therefore, it is quite irrelevant, and I hope I may leave it and not hear it again.

I think that the Chancellor deserves to be complimented for his suggestion about old age pensions. I heard his suggestion with great interest because my colleagues from Fife and I attended a conference of old age pensioners a few weeks ago, when they made their contributions and I made mine. My contribution was that urgent steps should be taken to encourage people to stay longer in industry. I am very glad that the Chancellor has accepted that principle, and I hope that we shall all support him in carrying it through.

I am glad also, and one offers tribute where one can, that he has decided against increasing the food subsidies. I thought that wise for the reason that while food subsidies may be good in principle, in the sense that they steady the rise in prices in times of war or crisis, there must quite clearly be some limit to them. The limit reached during the time of the right hon. Gentleman the Member for Colne Valley (Mr. Glenvil Hall) is probably the right one to which we should now stick. If we were to allow the figure of £400 million to rise to £800 million or £900 million, the burden of taxation would become so great that we should directly discourage output.

I make this further comment. I represent a division where a great many miners are now living, and I must report to the Committee, what I am sure will be agreed by every representative here of the miners, that the present rate of taxation is a deterrent to their work. There is no doubt about it. They complain bitterly; P.A.Y.E. is at such a level that they are very often discouraged from doing some extra job or task, because they realise that so large a part of the extra income will be taken in taxation. I regret that we have to face the prospect of increased taxation, coupled, as it is, with the increase in prices on so many goods. Therefore I am glad that we have not asked for a further increase in taxation to raise the amount of the food subsidies.

I heard with some interest and not a little surprise that to meet the great gap which exists between income and expenditure the Government—not only the Chancellor—have decided, at long last, that those who benefit from some branches of the National Health Service will have to make some direct contribution. I am referring to those who obtain new dentures and who will now have to pay about half the price, and to those who obtain new spectacles, who will also have to pay a substantial amount of the cost. That strikes me as a reasonable and sensible thing to do, and some of us have been asking it for a long time.

But it is not a little interesting that last week a distinguished member of the Government, no less than the Minister of Labour, was declaring publicly that he would not remain a member of a Government which levied precisely such a charge as this. [HON. MEMBERS: "No."] Oh. yes, he did, and all—

Mr. Stewart

At Bermondsey, a week ago. The hon. Member knows all about it. The question I am going to ask is: Was it a real threat or was it an idle threat? If it was a real threat, then, of course, the Minister of Labour must be expected to retire from the Government. If, of course, he does not resign from the Government, it means that the threat was quite idle, and that, of course, the rather terrifying picture which the right hon. Gentleman has created for himself, that he is a fearsome fellow in the Government, vanishes overnight, and we shall know that the right hon. Gentleman is not really worth worrying a great deal about.

Having made that threat, and having failed to stand by his undertaking, he then relapses into the position which, of course, he should all along have occupied. But it is an interesting reflection that upon this rather important and vital matter of making ends meet so prominent a member of the Government should apparently be at such sharp variance with other prominent members of the Government.

Dr. Morgan (Warrington)

The hon. Gentleman is being completely unfair in talking about a speech which he has not been able to quote, and at the making of which he was not present. He has obviously not got accurate information, as I have. The statement was completely qualified by the Minister of Labour, lately Minister of Health. What he said was that he would not remain a member of the Government if treatment during illness was charged for. He was not referring to accessories like denture treatment or spectacles. He was referring to personal treatment at a time when a person was actually ill and in bed.

Mr. Stewart

The hon. Member has made a very gallant defence of his right hon. Friend, but there is no doubt about it—

Mr. William Ross (Kilmarnock): rose

Mr. Stewart

Let me finish the sentence. The whole country read at the week-end, in every paper, precisely what was intended, and will draw the conclusions, and so I pass from the topic.

Mr. Ross

The hon. Gentleman is not being fair in passing from that topic without making things crystal clear by quoting the exact words of the Minister of Labour.

Mr. Stewart

I have not the exact words with me, but it does not make the slightest difference whether I have the precise words or not. I have said all that I wanted to say, and I will merely repeat that I shall be very interested to know what happens next.

Having said that, I have only one other word to say, and that is that, like everyone else in the Committee, I listened to the Budget speech and recognised that it was a very remarkable personal performance. In this Committee we may have what views we like about policies, but I hope that we shall always be able to pay a personal tribute to any Member when he performs a very fine job, as I think the Chancellor did today.

7.55 p.m.

Mr. McGovern (Glasgow, Shettleston)

With the concluding words of the hon. Member for Fife, East (Mr. Henderson Stewart), I quite agree. I think the Chancellor performed his task in a very fine manner today. He discharged his duties well, and I would say that, in the main, the Budget is a very creditable Budget to come from a Labour Chancellor at a time of such tremendous difficulty as that we are now passing through.

Whether or not the hon. Member for Fife, East, is accurate in the statement he attributed to the present Minister of Labour, I do not know. I did read in the Press some allusion to the Health Service, and about charges; and, of course, I could not explain any more than he could, what the detail of that pronouncement was. No doubt, in due course, the Minister of Labour can give to us the proper explanation of what was intended at that time. I think that what the hon. Member said about the charges of 50 per cent. for dentures and spectacles was a mistake.

I think it is a great mistake that, for the small amount that is involved, the Health Service should be disturbed to the extent of making any charge at all. One of the things that we took tremendous credit for was that people were able to get their dentures and spectacles free. There is a considerable section of the community who are in poor circumstances, and this charge will bear very heavily upon them. In spite of all the difficulties, I regret that this should be carried out, and that it should have been introduced in what I regard as one of the best Budgets I have heard introduced for a number of years.

On the other hand, I welcome the changes foreshadowed in the old age pensions, and the increase from 26s. to 30s. for a single person and from 42s. to 50s. for a married couple. However, I deprecate the fact that there is a postponement to October, because that is a very considerable time to ask old age pensioners to wait for that increase. I would say, further, that I have always had—and I have expressed it time and again—the greatest sympathy in the present difficult circumstances, with increased prices and the higher cost of living, with those people at the very bottom of the social ladder, who are unable to exert pressure through a trade union organisation to lower prices or to maintain prices or to raise wages and salaries. Old age pensioners, especially widows, have always had my greatest sympathy and have been a source of great anxiety to me, because of the heavy pressure exerted against their maintaining themselves and their standard of life—or of raising their standard of life.

There, again, is another weakness to which I should like to allude. The Chancellor said he thought there should be greater laxity in relation to those between 65 and 70, and that they should be able to continue in employment for a longer period if they so desired. I think that that is quite correct. Many men come to me and say that they have had compulsorily to retire—either from the service of a local authority or from some form of Government service. They have had to retire at 65 and they believe that they are quite capable of carrying on their job. It is all very well to say that they should go to some other form of employment. Surely the form of employment we should expect them to continue in is that employment to which they are used, for which they are trained, and in which they have worked for many years.

The Chancellor made a very wise change when deciding that old age pensioners shall now be allowed to earn 40s. instead of 20s. That is a genuine gain to old age pensioners in employment, which I am sure they will regard as a great boon. But we have not heard of any change being made for those between 65 and 70 who are either unable to get other employment or not able to take employment. It may be the intention to make some changes in the assistance given to them, but if not, if they are to exist on the pittance of 26s., what is otherwise a very good Budget will have done an act of injustice to that section of the community. I plead for reconsideration to be given to those between 65 and 70 who are not in employment, to whom an increase should be given consistent with the increase that is being given to those who are 70 years of age. The penalty at present imposed on those who at 65 are in employment should be removed.

The greatest injustice is the postponement of this addition to the old age pension to 1st October. Why 1st October? Other changes made in previous Budgets have been effective from the same night or the following day. Why not make it even 14 days after the passing of the Finance Bill? There would be no difficulty in paying these people back money even if it were decided to make the change from today. I cannot understand it, and I hope that there will be an alteration of the date from which this concession is effected. I also hope that consideration will be given to widows who, owing to the present high prices of goods, are on a very miserable standard of living.

Apart from those criticisms, I say this Budget performs acts of justice to those in industry. Reference has been made to the great hardship caused to those who would distribute their profits. The hon. Member for Fife, East (Mr. Stewart), who generalised, as he always does, failed to answer two points put to him in an interjection, because they completely knocked the feet from under the case he attempted to establish. It is not fair that the hon. Gentleman should raise points of that kind and then, when the sword is crossed with him in the cut and thrust of debate, not answer an interruption and admit that the "dolly" he put up had been knocked down and his case destroyed at its very inception.

At the moment everybody makes some contribution to the great re-armament effort. My hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) is against the re-armament programme, and we understand that. From the Opposition we hear clamourings for the rearmament programme; they complain that it was not started early enough and that it was not large enough. The Opposition are not playing fair when they question the contribution to be made by industrialists. Who should bear the burden of re-armament? Surely it should be those who are best able to bear it. Many people in industry are making substantial profits, and I am certain, as the Chancellor said today, that because of the re-armament programme these profits will be increased. These people should, therefore, make a very substantial contribution. I do not say that no profits should be made out the work carried out because of the re-armament programme, but I do say that no undue profits should be made out of the need of the nation because of our re-armament policy.

Hon. Members opposite have already said that the Government did not begin to build up the Army early enough; that they allowed the Army to run down. I remember that in 1945 a great clamour came from the Leader of the Opposition, and all members of the Conservative Party, that men were not being released quickly enough from the Forces. They wanted the soldiers brought back from every part of the world and sent to their homes and back into industry; they would have disbanded the Army almost entirely.

Mr. Joynson-Hicks (Chichester)

That is quite wrong. There was what is now called a "floor" to the limit of disarmament advocated by my right hon. Friend the Leader of the Opposition. The Socialist Government took very much longer to demobilise than we were advocating, and they ran the Forces down very much below the "floor" we advocated.

Mr. McGovern

My mind is quite clear on this. I was here at the time, and I remember the Leader of the Opposition attacking the Prime Minister because the Army was not disbanded speedily enough. That clamour went on day after day. The Government were put in the dock as the militarists who were holding on to these men, while the Opposition wanted them disbanded and sent home.

Mr. Henderson Stewart

I was accused of being unfair. The hon. Gentleman is now doing the same thing. If he wants ninepins to knock down, let us have them. The Leader of the Opposition did ask for a more speedy demobilisation, but he asked also for the retention of a much larger Army, Navy and Air Force than Ministers wanted and eventually gave us. That is the point.

Mr. McGovern

That is not true.

Mr. Stewart

It is true.

Mr. McGovern

That came at a much later stage, following afterthoughts on the international situation and the Fulton Speech of the right hon. Gentleman, when he began to face up to the realities of the international situation.

I do not want to go over the whole field on this, because the Committee is almost unanimously of opinion that the great re-armament programme is essential. We may regret its necessity, but undoubtedly we believe that it must be carried out, and that our Forces should be maintained to meet the growing international dangers which are evident to every man and woman in the country today. In that situation, if that is the mind of the nation, hon. Members opposite cannot plead that industry is being called on to pay too great a price in any sacrifices they are being asked to make to meet a Budget of this kind.

Finally, I think that all the additional burden on motor cars and Profits Tax and other things could have been substantially increased, because I do not agree that the limit of taxation has been reached. The Chancellor of the Exchequer, in his wisdom, has carried out what I would regard as an essential duty. He has brought in a moderate Budget which can be defended from any angle. In carrying out that policy, industrialists must play their part and make their contribution to this great re-armament programme from which many of them will gain tremendous benefit.

My main objection is on behalf of the old age pensioners, and my plea tonight is for a revision of the Chancellor's proposals with regard to them. Apart from that, I pay my tribute to the Chancellor, and say that I think the taxation proposals outlined by him will go down as one of the best contributions we have had from any Chancellor since the end of the war.

8.12 p.m.

Mr. Nabarro (Kidderminster)

Before attempting to follow the speech made by the hon. Member for Shettleston (Mr. McGovern), I would like to add my mite of congratulations to those of other hon. Members upon the speech delivered by the Chancellor of the Exchequer, which was a feat of endurance and an outstanding achievement of clear and lucid thinking.

If I may now turn to the point made by a number of hon. Members opposite in connection with industrial profits arising from the re-armament programme, I would, at the outset, re-echo the opinion expressed by the hon. Member for Dudley (Mr. Wigg) and the hon. Member for Shettleston, that we all desire to see no undue profit earned by the engineering industry as a result of Government contracts or sub-contracts placed in pursuance of the re-armament programme. It is almost a taunt by Socialist Members that hon. Members on this side of the Committee desire to make large profits from the Government's re-armament programme.

My reply is a very simple and factual one. Government Departments conduct post-costings on all contracts which have been placed, and the margin of profit before taxation which is allowed upon such contracts has been agreed by industry, and even by the trades unions over many years. It amounts to 1½ per cent. of the average capital employed in the business carrying out the contract, and that provision in itself is sufficient safeguard that no excessive profits can be made.

In this connection, I am sorry to see-that the right hon. Member for Colne Valley (Mr. Glenvil Hall) has left his; place, because in the last Parliament he was the Financial Secretary to the Treasury, and he would well know that "The Standard Conditions of Government Contracts" make that express provision. It is impossible to evade investigations by the Government auditors in that matter.

Mr. Manuel

The hon. Gentleman agrees that there is a 7½ per cent. margin of profit. He will also agree that there will be a vast expansion of certain industrial concerns in the country, and that if their turnover is doubled obviously their profits will be doubled.

Mr. Nabarro

The hon. Member possibly has not been connected with engineering production. I have had the advantage of working from the shop floor level up to the position of managing director in engineering concerns, and, therefore, I know from long experience what I am talking about. He has referred to turnover. Certainly, turnover will expand, but turnover can expand in a business without the average capital employed expanding, and the rate of profit is calculated on the average capital employed.

I wish to pass from that point, because in making it I am only responding to various aspects of the matter which have been referred to by hon. Members opposite. My main criticism of the Budget proposals is that they do not provide any outstanding incentive for increasing the rate of industrial production. In fact, with the one minor exception of the raising of the earned income allowance for old age pensioners, there is no other specific example of an incentive being provided to any section of workers in the country or to the managements or employers to raise their respective and collective outputs.

I think that I may be guilty of an oversimplification, when I say that to maintain our existing standard of living, or that to which we have been accustomed in the last 12 to 18 months, and still to maintain an overall balance of overseas payments, which means avoiding any overseas help in the shape of extensions of the American Loan or of Marshall Aid and being able to finance our re-armament programme, it is necessary to raise British industrial production by approximately 8 per cent. That is the figure which economists have quoted in the last three months, since the scope of the re-armament programme was made known in January last.

Last year the rate of increase of industrial production amounted to 4½ per cent. and, therefore, if we are not to suffer any drop in the standard of living during the currency of the re-armament programme it is necessary to double, approximately, the rate of increase of industrial production that we enjoyed during the period 1950–51. I should have thought that the Chancellor would have made special provision in the Budget for securing a re-doubled rate of increase of industrial production, but that is not the case.

Mr. Dye (Norfolk, South-West)

What kind of provision would the hon. Gentleman expect?

Mr. Nabarro

Provision could be made by fiscal means, notably through direct taxation. I belong to the school of thought which says, and I wrote this as the hon. Member may know, in a leading article in the "Birmingham Post" last January—

Mr. Ross

I never read it.

Mr. Nabarro

I am sorry about that; I will send the hon. Gentleman a copy. I suggest that an 8 per cent. increase in overall industrial production during the period 1951–52 and the increased revenue derived by the Chancellor therefrom, in direct and indirect taxation revenue, would itself be sufficient to pay for the increased burden of armaments during the first year of the re-armament programme. That is not an unreasonable argument. [HON. MEMBERS: "What about materials."] Hon. Members on this side of the Committee ask where the materials will come from. The only raw material which would cause me great anxiety if the rate of production increased by 8 per cent., which is the desirable optimum, would be coal. Coal is the yardstick by which all our industrial production must be measured, and if I am permitted to do so, Sir Charles, I will talk about coal mining for the next few minutes, without, as hon. Members opposite will be pleased to know, specific reference to opencast mining.

During 1950–51—that is in the coal year—we produced 204 million tons of deep-mined coal, to which must be added 12 million tons of coal derived from opencast workings, a total of 216 million tons. The Economic Survey for 1951 provides, on pages 12 and 13, paragraph 38, for an increase in coal production to 210 million tons of deep-mined coal and approximately 12 million tons of opencast coal, a total of 222 million tons of coal, compared with 216 million tons in the last completed coal year.

Thus there is provided in the Economic Survey only an increase of six million tons of coal or 2¾ per cent. of the coal production last year. If our rate of industrial production increases in 1951–52 at the same rate as it increased in 1950–51, that is 4½ per cent., the increase in coal production will only meet approximately one-half of the needs of that expansion of industrial production. Therefore, the danger is, that we may well have in the next year or two a shortage of coal output. It is to this problem that I wish to address myself for a few moments.

Hon. Members opposite—and I think it would not be an exaggeration to say that every predominantly mining constituency in the country is represented by an hon. Member opposite—devote a great deal of their time during fuel and power debates to talking about the mining of coal and particularly how to increase coal production. I believe that it is equally important to study the utilisation of coal as it is to talk about the raising of more coal. I tried to catch the eye of Mr. Speaker during the last coal debate on 1st February, as I hoped to make a speech upon the utilisation of coal. I am now going to touch on one aspect, which is fiscal, because it affects an important omission of which the Chancellor of the Exchequer was guilty this afternoon.

Out of the coal produced in this country last year 105 million tons were used for industrial production purposes, and that figure excludes coal consumed by the power houses. We know that in industrial establishments up and down the country there is in use in many instances, old, out-worn and dilapidated boilers, grates and firing equipment, much of which wastes coal on a prodigious scale. For 100 years we have grown up to the view that coal is cheap and an easily won commodity in Britain. The right hon. Gentleman the Secretary of State for the Colonies has said that on many occasions. He came to my constituency of Kidderminster and said it before I was elected. It did not stop me being elected. The problem is how to induce industrialists to instal equipment in their factories which would economise in the use of coal, and the Chancellor should do that by using the fiscal weapon.

If I had been Chancellor this is what I would have done. I would have said to British industry as a whole, "Any equipment that you install during the next three years which is demonstrably for the purpose of economising in coal consumption, I will allow you to charge against your revenue account, for profit and loss purposes and will admit the charge for the purpose of computing Income Tax and Profits Tax. I will not capitalise that equipment." The loss in revenue to the Treasury would be negligible, about half a million pounds every year, but what would that save in terms of coal? In my opinion it would save up to five million tons of coal a year. I do not say this on my own authority. Professor Simon, Professor of Thermodynamics at the University of Oxford, wrote as long ago as 1948 that it was possible to save 20 million tons of coal each year through scientific application of industrial usage of coal, and tackling rigorously and vigorously the plant which uses coal in British industry. I commend this point to the Chancellor, because on the Committee stage of the Finance Bill, I propose to return to it.

There is one further point upon which I may be allowed to touch in the few remaining minutes. A curious development of the Budget speech—and I beg leave to say that it was totally unexpected in all parts of the Committee—was the abrogation or withdrawal of the initial allowances for plant and machinery in industry running at the rate of 40 per cent.; and the abrogation and withdrawal of the initial and annual allowances on industrial buildings which were each running at the rate of 10 per cent. Hon. Members will remember that the Chancellor said he was going to find £170 million from this source, and I saw several hon. Members scratch their heads at that moment, wondering how it was possible that such a large sum of money could be whisked into the breach he was trying to close in finding the money necessary for the re-armament programme.

There has been considerable misapprehension in this Committee as to the nature of the industrial initial allowances for plant and machinery. I had an argument with the Financial Secretary to the Treasury on the Committee stage of the Finance Bill last year on the usefulness of these allowances, and I said on that occasion that they were only interest-free loans. Sir Stafford Cripps, the then Chancellor, agreed with me last year that that was so. The Chancellor today, by putting back this £170 million into his current year revenue account, is, in effect, mortgaging the future. He has to pay out every year, over the remaining life of the plant from which he is withdrawing the initial allowances, approximately one-tenth more in depreciation and wear and tear allowances.

So what the Chancellor is doing today is taking the £170 million by the abrogation or withdrawal of these initial allowances, and then paying in each of the next 10 years an additional £17 million in wear and tear and depreciation. That is a dubious move. I deplore the fact that the Chancellor has found it necessary to do this. The average age of a machine tool in Britain is reputed to be 22 years.

Mr. Nabarro

I know we have an identity and affinity of view on this point, so the hon. Member will also know that the average age of a machine tool in America is reputed to be nine years. Industrial production depends upon the efficiency, the modernity and the constant replacement and improvement of machine tools.

By withdrawing initial allowances the Chancellor is creating a disincentive to put in more often and more regularly improved types of machine tools and similar mechanical equipment. It is putting Britain at an even greater disadvantage against the United States of America than we have suffered during the last three or four years. That is a retrograde step, and I hope that when the Committee stage of the Finance Bill is reached there will be an opportunity to discuss, and perhaps to reverse, this drastic departure from a policy which hon. Members opposite will remember they subscribed to whole-heartedly, when Sir John Anderson, the then Chancellor of the Exchequer, in his Finance Bill of 1945, introduced for the first time the principle of initial allowances for industrial plant equipment and buildings.

We all heaved a sigh of relief on hearing that the Chancellor has found the money for the first year of the essential re-armament programme. I am not sure how tightly the shoe will pinch any section of the community for I have not yet had a chance to read his proposals in cold print or to go into each of them in detail. I hope the burden will be spread evenly over the whole community and, as an hon. Member opposite said, that those who can best afford to pay will make a larger contribution than those who can least afford to pay.

8.32 p.m.

Mr. Keenan (Liverpool, Kirkdale)

I do not intend to follow closely what the hon. Member for Kidderminster (Mr. Nabarro) has said. He commented rightly upon the waste of coal as it has been used for generations, but he did not blame the Labour Government for that. The hon. Gentleman said it would cost half a million to bring in improvements which would save—

Mr. Nabarro

Would the hon. Member allow me to interrupt? I am sure he does not wish to misrepresent me. The cost of the improvement would not be half a million pounds, it would be much more. I said that the loss in revenue to the Treasury would not be more than half a million by giving this concession.

Mr. Keenan

I think it would cost considerably more. However, my purpose in getting up was not to reply to the hon. Member for Kidderminster so much as to do what everybody else is doing, to make one or two observations on the Budget and to complain about the absence of some of the things which it might have contained.

I, like many other hon. Members, feel pleased, if not amazed, that we have got off so lightly. I expected that much more drastic measures would have been taken, and the steps that have been taken have not altogether pleased me. I cannot help remarking, for instance, upon the extraordinarily poverty-stricken condition which the employers of this country must be in. To listen to some of them complaining about their bonus shares and dividends one would think that in the near future they were likely to apply to the Assistance Board for help.

Certainly, from the way in which bonus shares have been talked about this afternoon, it seemed that there was no sleight of hand in connection with them. The hon. Member for Croydon, East (Sir H. Williams) suggested that the giving of a bonus share did not mean anything, but to me, if one share is given for every share held, it simply means that when the next dividend is paid, the shareholders are paid on two shares instead of one. That is a convenient way of hiding the profit. If, for instance, a dividend is paid on £200,000 as against £100,000 previously, the dividend is halved and it does not look so good a proposition.

Mr. Baldwin (Leominster)

I hope the hon. Member will realise that the same amount of dividend will be paid. The result is that if a bonus share is issued, the dividend has to be paid on two shares and must therefore be paid at half rate.

Mr. Keenan

That was what I was attempting to say. Without the issue of bonus shares, the paying out of profits would be called, say, 5 per cent., but when one share is made into two the same amount of dividend is paid and is called 2½ per cent. I am wondering why there has been so much effort this evening to hide this fact and to confuse the issue.

I want to express concern that food subsidies are being tied to the figure of, I think, £410 million. In the position in which we find ourselves today, all kinds of costs are going up and the increased cost of living is making itself apparent almost day by day. I am somewhat concerned because the incomes of neither the lower paid workers nor the pensioners are to be substantially increased. Unless something more is done with subsidies than has been done, the increased costs will fall on to these people, and if they do not have an increased income they will, obviously, be worse off.

Much has been said about the old age pensioners. I, with others, have long been concerned about this problem and with the Pensioners Association have made representations to the Departments concerned. Some of the suggestions which have been put forward are now embodied in what the Chancellor has said today. Provision for the basic increase which he has announced will, I understand, eventually be embodied in a Measure to be introduced by the Minister of National Insurance, but I am afraid that it will not go far enough on the question of the pensions. My hon. Friend the hon. Member for Shettleston (Mr. McGovern) has already said that pensioners between 65 and 70 years of age will not be affected, which means that the increase to be given next October will affect only pensioners, either contributory or non-contributory, over the age of 70. I very much fear that this will give rise to difficulties.

The real purpose of the change in pension rates by increasing the ages at which they are payable is due to the development which has gone on in this country as elsewhere. There is no doubt whatever that people's lives have been extended and that the past five or six years have shown them to be more healthy, physically as well as mentally, than ever before. The Chancellor said today, although it is nothing new, that unless something is done in the course of another generation, the day will come when one in five of the population will be of retirement age. We must face the need for something to be done to encourage the older people to remain in industry as long as they are able to do so. Whilst this is essential, it takes courage to initiate something of this kind, because it will not be possible for everybody to continue at work. We want rather to cushion the change by ensuring that the age group between 65 and 70 will not be penalised because of the changes we are making in anticipation for the future.

Another matter to which I did not hear the Chancellor refer, but about which I think something should be said, is the payment of allowances in addition to salaries. From what I am told and able to observe, it appears that a principal of a company, in addition to his salary, may have an allowance on which he escapes taxation altogether. So far as I can see there are large numbers of concerns in which directors are getting salaries of between £2,000 and £5,000 a year but that is not all the remuneration they receive for their services. It may be that some are drawing allowances as great or even greater, than their salaries and those allowances are paid out of the profits which the concerns make.

Mr. Baldwin

The hon. Member is making a statement which will not bear investigation. I suggest that he should try to get past a surveyor of taxes with that sort of thing and he would soon find that he was not able to do so.

Mr. Keenan

We all know of someone in business and we know that people escape the net. I suggest to the Chancellor that the time has arrived when allowances should be limited to about 10 per cent. of the salary. It may be that that is too little and that it should be made 20 per cent., but some attention should be given to this matter.

I am also a little concerned about what the Chancellor said with reference to the capital programme. I am not at all happy about it, but am very much afraid that if we do not watch the position very carefully the re-armament programme may have the effect of interfering with the housing programme. The rearmament programme may call for a great deal of work from the building trades, and may interfere with housing in some measure. Like many hon. Members, I am rather concerned about this and suggest that the Government should study the matter very carefully.

I have a young man living with me who spent seven years with the Services, mostly in Egypt, and he cannot get a house. He is only a young man and there must be thousands similarly placed. He has been home since 1947. How can we expect a chap like that to fight for his country when he has not the slightest chance of getting a house unless he wins a football pool with which to buy a house? Because of the desperate position of many such people, I urge the Chancellor to keep his eye on the question of housing. I do not want to see the programme interfered with because, if so, our people will continue to live under the bad conditions in which they are and they will not have any incentive.

An hon. Member opposite spoke about the re-armament programme and the defence of the country, and he said something about the contribution from income being demanded. If there are people who have no cause to complain about taxation it is those who own businesses or are in business. Never in the history of this country was there so much security for business of every kind as there is today under the Labour Government. There is no need to worry, there are not many bankruptcies and when there are they are very often brought about by arrangement. I understand that bankruptcy is a business in some lines of business.

There is no justification for the man of substance or the man in business, who has wealth and something to protect, to complain in comparison with the man who has literally nothing to protect but his freedom and liberty. When such people talk about taxation or in particular about increased taxation on profits and the effect on incentive, as the hon. Member for Kidderminster did, I am inclined to ask whether they want the Government to provide the incentive, and whether industry itself should not do it. There is much more justification for the man who works for wages to talk about the need for incentives. If industry took less profits and paid higher wages, as could be done in most industries, there would be greater productivity as a consequence.

I am rather pleased that the Government have not in this Budget done some of the things we were rather afraid they might be called upon to do. I would recall, however, that on the occasion of the last Budget I suggested that we might do something about family allowances, that instead of altering the incidence of Income Tax we might have paid a family allowance on the first child. That would have been a better approach. This Budget does nothing for the pensioner, although it is suggested that something is to be done a little later. It does nothing for the lower paid worker, because it is only those earning between £6 and £7 who will benefit slightly by the increased allowance of £10, which is intended to operate as an allowance for the first child. But the adoption of that method means that the lower paid worker, the man earning £5 or who still receives less than £5. will not benefit from this concession. That state of affairs must eventually be remedied.

Those facts explain why I am concerned about the increasing cost of living and why I consider that subsidies should be maintained to cushion the effect of that increase. I am satisfied that the profits made in industry could easily provide greater revenue than is taken. I am satisfied that the lower paid worker must be protected in greater measure than is the case at present. We must give him an incentive. If we do not do so we cannot expect him to respond in the way we hope. We must keep a close watch on that aspect and on our social services because a great deal depends on what is done about our elderly people, who can make a contribution to the country and its economy As I said earlier, I am very glad that an effort is to be made to encourage those who can do so to stay in industry. We must try to do something in that respect.

8.50 p.m.

Mr. J. N. Browne (Glasgow, Govan)

I am glad to have the opportunity of following the hon. Member for Kirkdale (Mr. Keenan), who raised three points with which I should like to deal. He spoke about the increase in the standard rate of pensions. I am sure that hon. Members on both sides of the Committee are extremely glad to know that at last something is to be done for the old age pensioners. We on this side of the Committee have been trying for a long time to better the lot of the old age pensioners. We have pressed for fuel allowances, coal allowances and an increase in the standard rate. Like the hon. Member for Kirkdale and the hon. Member for Shettleston (Mr. McGovern) I am worried as to why this increase should start in October. There may be some good reason for it, but I feel that the harsh attitude of the Ministry of National Insurance is carried even into their concessions.

There seems to be a tendency to say to those between 65 and 70 years of age, "You must stay at work. We will give you £2 instead of £1 permitted earnings, but you must stay at work; and we do not really believe it is the necessity of higher prices that calls for an increase in pension." I cannot see why this increase should not start from 65. I believe that this decision will cause a great deal of hardship to those who have retired and who cannot come back to work, but who have not yet reached the age of 70.

The hon. Gentleman also referred to the question of allowances against Income Tax. I should be glad of his advice if he can tell me how to do what he was maintaining that some directors did about their allowances. The Income Tax authorities are, quite rightly, keen about this matter, because everybody who avoids paying their just dues puts a heavier burden on someone else. Income Tax authorities need chapter and verse for every allowance, and there no such conditions exist as the hon. Member suggests. If he knows something which I do not know I hope he will tell me.

He also referred to housing. The other day in my constituency I visited a young couple living in one room six feet by 13 feet, which was sub-let to them for 7s. a week. Next door was the kitchen in which a man and his wife were living. In this room, six feet by 13 feet, there was one window, high up, and no fire. In it lived this young man and his wife and two children. They were expecting another child. The hon. Member for Dudley (Mr. Wigg) was congratulating himself and his party on the fact that they had got rid of the evil of unemployment, but under their rule we have been building up another evil just as bad and that is the evil which follows from the lack of housing accommodation. We dare not ignore the fact that in our midst we have housing conditions just as much a disgrace in this day and age as was unemployment between the wars. What did the Chancellor say about housing? He said that the defence programme would make increased demands on the capital invested in industry, and to some extent, on building. That was the only reference he made to housing that I can remember.

I would draw the attention of the Committee to a report which appeared in the New York "Herald Tribune" economic Review. That report states that a special report by the United Nations Economic Commission for Europe warns that housing needs should not be sacrificed because of the current international situation. Another report in the same publication says that the quarterly timber bulletin published by the United Nations Economic Commission to Europe says that the decision to cut the United States housing programme—which they have cut for 1951—would seem to indicate that the amount of timber available for overseas may be considerably larger than has been the case during previous years.

I believe that we shall find, as time goes on, that we dare not give housing any second priority. As we go ahead with re-armament, will not the housing programme be affected in some measure? But are not the housing conditions of the workers a part of re-armament? In face of this United Nations report, and in view of the terrible housing conditions which we in Glasgow know only too well, are we right to say that there should be any second priority for housing?

Mr. Ellis Smith

Is the hon. Gentleman aware that the Prime Minister has given the country an assurance that the minimum of 200,000 houses per year to be built will not be affected?

Mr. Browne

Yes, I am aware of that the point is that that is just the number of houses which are falling down. Housing conditions in some of our great cities are such as to constitute an evil every bit as bad as that of unemployment.

Mr. Emrys Hughes (South Ayrshire)

Would the hon. Gentleman agree with me when I say that housing should have priority over re-armament?

Mr. Browne

No. I should not be prepared to agree with that; but to say that it should have equal priority is as far as I think we can go, bearing in mind the safety of the nation.

Mr. A. Lewis

When the hon. Gentleman speaks of equal priority with rearmament, does he mean that housing should have the same urgency, the same opportunity for conscripting and directing workers into the industry, the same opportunity of getting money by taxation, and doing all that is now being done for rearmament?

Mr. Browne

I should not like to be pinned down to that. I am speaking in general terms, and I say that housing is an evil which is not adequately dealt with by this Budget or by the House of Commons, nor is the position fully realised by the country.

Mr. Lewis

How does the hon. Gentleman suggest that it should be remedied?

Mr. Browne

Housing should be given a greater degree of priority.

Mr. Baldwin

Put the Tory Party in.

Mr. Browne

I am sorry that the hon. Member for Shettleston (Mr. McGovern) is not in his place. He was rather doubtful about the effect of the new cost of dentures and spectacles on the lower income groups. I am sure that the National Assistance Board will ensure that there is no undue hardship. I think that it is proper to put the charge on spectacles.

There is one point which we should all realise. Every one is praising the Chancellor for having made an excellent speech. I wonder how many hon. Gentlemen really believe that the spiral of inflation has come to a stop. I wonder how many hon. Gentlemen realise that the Chancellor glossed over the effects of devaluation, and that he has made the best of the bad job which the Socialist Party have done. That is the best that can be said of this Budget. The Chancellor did not mention the terrible effect on industry of the mistake of having stockpiled money instead of goods. In relation to old age pensions, he has adopted the policy which we on this side of the Committee have advocated.

Mr. A. Lewis

Ten bob a week.

Mr. Browne

The Chancellor proposes to increase the Entertainments Duty. Last year we in Glasgow put forward a serious plea for the reduction of the Entertainments Duty on the lower priced seats. I am not sure that this will not cause great hardship. I should like to give a warning that I believe that unless the speedway business is given a reduction in taxation, we shall see in this Budget the beginning of the end of this form of sport.

I have been much concerned with the question of wireless sets for bedridden people. In 1945 the then Chancellor of the Exchequer gave a concession which provided that wireless sets for the blind should be free from Purchase Tax. That concession was accepted by the late Mr. Oliver Stanley on behalf of the Conservative Party as not being the thin end of the wedge. Now that the Purchase Tax has been increased, I hope that hon. Gentlemen on both sides of the Committee will support the plea that will be raised by some of my right hon. Friends and myself for freeing from Purchase Tax wireless sets which are given to bedridden people through properly organised societies, because otherwise a very deserving section of the public will be denied this concession.

My last point is a technical one, although I hope it will be noted and some answer to it given later on by a Government spokesman. It concerns the suspension of initial allowances as at 1st April, 1952. The point is that many firms order such large items of equipment as ships or large machines, which take far more than a year to instal. The only reason why they have been able to place these orders is that they have been able to say to the suppliers, "We can get 40 per cent. off, and that means that, instead of paying the Government, we can pay you"; otherwise, these orders would not have been placed.

I should like some clarification concerning this date, because I can conceive many ships being built and many installations taking place in factories which will not be completed by April, 1952. As I understand it, the allowance is given only when the job is completed, and it would have been wiser for the Chancellor to have said that this 40 per cent. allowance ceased with orders placed as from this moment. That would have been fair to industry, but, unless some clarification is given, there are many big jobs in progress today that will not be completed by April, 1952, and firms will be severely hampered and, possibly, will not be able to pay for the goods. I am sure that this is a point that will be dealt with, for it is already causing great concern throughout the country even though the Budget is but a few hours old. I therefore hope that some Government spokesman may answer me on that point.

9.3 p.m.

Mr. Boardman (Leigh)

It has become a custom for hon. Members on both sides of the Committee, following upon the Chancellor's Budget speech, to compliment him on his speech and proceed immediately to pick holes in it. It may be said that I want to do precisely the same thing tonight, but I would like to say that, having regard to the ordering of armaments now proceeding throughout the world, this is, on the whole, probably not a bad Budget.

I would like particularly to reinforce the plea made by my hon. Friend the Member for Shettleston (Mr. McGovern) to the Chancellor to look again into the question of the old age pensioners. I feel very strongly on this, because I see no reason for raising the figure to 30s. for a single person and 50s. for a married couple, for a man over 70 and a woman over 65, and doing precisely nothing for the man of 65 and the woman of 60. Earlier this year. I asked the Chancellor what was the current value of the 26s. and the 42s. compared with the value of those amounts in October, 1946, when the pensions rates were increased. The figures he gave me up to January, 1951, were to the effect that the 26s. was then worth 22s. 2d. and that the 42s. was worth 35s. 10d.

Despite all the difficulties facing us, I feel that it is incumbent upon the Government to see that the old age pensioners today are at least as well off as the Government intended they should be in October, 1946. I personally feel that I cannot go before a meeting of old age pensioners and tell them that we cannot meet their demands or give them an increase merely on financial grounds, because the burden will be too great, and, in the same breath, tell them that we propose to spend £3,700 million or more on armaments.

I also want the Chancellor to look again at the amount he is prepared to let the pensioner earn. I wonder why it was put at £2 a week? It makes me feel that it would have been as well if the Chancellor had contacted the Minister of Labour to find out what is the position of these people who are 65 years of age. I am sure that all hon. Members are receiving letters from constituents complaining that in many cases employers are telling them, despite full employment, that they are too old at 50. At any rate, it is becoming increasingly difficult for a man turned 55 years of age to get a job. If one were to go into the coalfields and see the men who have finished in the pits at 65 years of age, one would realise that there was not a cat's chance in hell of such men being employed again. Yet in the odd case where it is possible for such a man to get a job, we are limiting him to £1 a week on what he is already getting. We are penalising him by saying he cannot expect to get his pension increased.

I now want to say something about the proposed charges under the Health Service. I should like to make my position clear about this because, as soon as it became known that it was proposed to levy a charge of 1s. on prescriptions, I took up the matter with my right hon. Friend the Prime Minister. I cited the case of a woman with a big family—and it very often happens that the women with the biggest families live in the poorest houses—one of whose children comes home from school with a childish ailment, an ailment which, because of bad housing conditions, goes through the family like a prairie fire. I said that to charge such a woman 1s. for each prescription for her family was monstrous.

Having made my view quite clear to my right hon. Friend, I then abstained from voting on the matter, because I would not give my support to that prescription charge. The point is that if we accept the charge either for dentures or for spectacles, it strikes at the very basic principle of the Health Service. I have defended the scheme on no other ground than that it allowed people to get that which their health demanded and which they would not otherwise be able to afford.

It is already assumed that the old-age pensioner can go to the Assistance Board and get the amount demanded by the dentist or the optician. But we all know that today there are a lot of men who are not old age pensioners, men who are earning £5, £6, £7, £8 or £9 a week and who find it very difficult indeed to make ends meet. I can quite well see what will happen. Many of these men who really need treatment by the dentist or the optician will do what they did in the past, that is, go without it.

I think that is something at which my right hon. Friend the Chancellor ought to look again. I have never known a man have his teeth out when it was not necessary, although I have known people who went to the optician when it was not necessary. Some friends of mine even boasted that they had not only got one pair of glasses which they did not need, but two pairs. If we were going to levy a charge, I think it should have been done at the time the abuse was at its height, but not at the present time.

On the question of raising the Purchase Tax from 33⅓ to 66⅔ per cent., I do not think that even the Chancellor would claim that a radio set today is a luxury. Many radio sets, of course, are luxuries, but, after all, the radio set is a good channel of news. It was during the war, and it may well be so again. I think there is a case for my right hon. Friend considering exempting, say, a small radio set from Purchase Tax, a set which at any rate is capable of relaying the Home services.

Mr. A. Lewis

Below a certain price.

Mr. Boardman

Yes, below a certain price, or, if necessary, to allow manufacturers to make a special set, as they did during the war. However one looks at radio, whether as a source of entertainment or as a channel for news I should have thought that the Leader of the Opposition and the Prime Minister are very glad there is such a thing as radio when they want to appeal to the country.

Young people setting up home for the first time are already finding it crippling even to furnish two rooms; to do so the vast majority of young people are putting a millstone round their necks for a long time to come. To ask them to to add to the weight of that millstone not because the cost of producing radio sets has gone up but because we want to discourage the purchase of radio sets, makes me feel, when I hear stuff like that, that Whitehall is getting a long way from Wigan. I wish the Chancellor would take note of these points because they are points that really matter in working-class homes. If he will do that I think we can all afford to say that, on the whole, this is not a bad Budget.

9.11 p.m.

Colonel J. R. H. Hutchison (Glasgow, Scotstoun)

There are, perhaps, endless aspects and facets of the Budget and the problems it brings in its trail that we can follow and examine in the days that we have at our disposal to consider it. I want to tackle for a moment or two one aspect I have never heard mentioned in this Committee in the years I have had the privilege of sitting here. That is the question of collecting all the tax to which the Government is entitled under its existing tax regulations. I think the Financial Secretary to the Treasury will recognise at once what I mean. It is the illegal avoidance of tax which is going on at the present time.

There must be many people, perhaps several Members of this Committee, who at some time or another have come across someone who, if they had seen him clearly, would have been recognised as doing what he could to avoid paying his liability in taxation. This avoidance generally takes the form of trading in notes. I do not mean to imply that everybody who deals in currency notes is trying to avoid tax, but a very high proportion of those who deal in important sums in notes, have that idea in their minds.

It is of the utmost importance that the public should realise that whenever they can pay by cheque they should do so, not only in the interest of the country but in their own interest because every time they help somebody to avoid paying the taxation which is due they are, in fact, helping to raise their own rate of tax. I have no idea to what figure the total of tax might have risen if we had collected all the tax to which we are entitled at present. I am quite certain it is a very important figure. It might have avoided the 3d. or even the 6d. in the pound by which the tax has been raised today.

As the Financial Secretary well knows, the problem is very prominent in the minds of officials at the present time. A short time ago a committee of inquiry was set up by the Commissioners of Inland Revenue. I believe they decided to make test cases in three districts and become "tough," if I may use the expression, in those districts. The result of that toughness is not yet known. It will be a great enlightenment to hon. Members if these results are published and they know what they have yielded. The results might be very startling. Everybody knows that since the war, trained tax inspectors have been at a premium. With the P.A.Y.E. system and other complications of legislation they have not been able to tackle the jobs which ought to have been tackled.

At the same time—and I recommend the Financial Secretary to look into this question—there have been removed some people who were extremely important in the tax collecting system; they were called collectors of taxes, they were underpaid and I believe their office has now been abolished. They were static in an area and they knew what was going on in that area, whereas the tax inspectors are moved from area to area and when they move to a new district they have to start to learn all over again. The tax collector, on the other hand, was in the area all the time and could advise the inspector where he should look. I suggest that the Treasury should look again into the desirability of re-appointing tax collectors and paying them properly. I should be the last to advocate an increase in the number of Government officials, but if these officials are to recoup in tax collection many times their own cost, then their re-appointment would be well worth considering.

I ask the Financial Secretary to pursue this line of thought. Before we increase our rates of tax let us be sure that all those who ought to pay tax are, in fact, doing so. The remainder of us who are meeting our obligations are not only meeting 100 per cent. of our own obligations but some percentage of what somebody else ought to be paying. Let the public realise that every time they can pay some reasonable sum of money by cheque, and they do not do so, they are making it easier for someone at the other end to avoid his liability to taxation.

9.17 p.m.

Mr. James Hudson (Ealing, North)

The hon. Member for Antrim, South (Professor Savory) said earlier in the debate that he had heard the first of the Labour Budgets and was, therefore, able to compare it with this Budget. In fact, the Budget which he heard in 1935 was not the first Labour Budget; there were Labour Budgets before that famous occasion—and I have heard all of them, back to 1924. I think I can say that my right hon. Friend has played his part very well, when one recalls the many Labour Budgets which have been introduced to that Box. I shall not use any unnecessary superlatives. In craftsmanship, as a speaker at the Treasury Box my right hon. Friend has not yet reached the heights reached by Philip Snowden or the present Minister of Local Government and Planning or Sir Stafford Cripps, but in the probity of his approach and the sincerity of his statements about the problems with which he has had to deal, I think he has acquitted himself nobly.

This is a bad time and most of us expected the Budget to be very much worse than, in fact, it is. Indeed, as far as I can ascertain from hon. Members with whom I have discussed the matter, they already regard it as a great Budget because it is so much better than they had expected. I do not want to put it at too low a point, because I think it is a thoroughly capable Budget in view of the financial difficulties which we face.

I do not say that all the methods which have been adopted are methods to which I would give full approval. My hon. Friends have already expressed their point of view about the old age pensioners, for not quite as much has been given to the old age pensioner as should have been given to him. Those who are 65 and who have left their jobs will not easily persuade themselves to return to their jobs because they will receive a better pension if they remain at work until they are 70. I do not think they will be very satisfied with the provisions in the Budget in that connection. I am sorry that all the things we should like to have done, and which, I have no doubt, would have been done in a better time, cannot be done. Let us be frank about it. They cannot be done. Among the sufferers are the old folk, for whom, in particular, I think we are all sorry, in that they are left with something less than what we think ought to have been provided for them.

However, the Chancellor has faced up to the fact that, if we are to continue persuading the people, in a disciplined effort, to accept wages much lower than they have a right to expect in a time of great travail and difficulty, it is necessary to do something more than has been done previously about those taking profits. I observed, before the Chancellor's speech, an admission in the "Financial Times" that 664 industrial companies had made profits of £252 million this past year—an increase of £30 million on the profits made in the previous year, and an increase of 13 per cent.—and that at a time when every company was appealed to, with all the strength that the former Chancellor had in making such an appeal, not to increase its dividends and not to increase its profit taking.

I entirely agree with one of my hon. Friends who, talking about incentives, said that all these companies would have a much better opportunity to offer incentives to the workers by hand and by brain, if they would see that more of their profits found their way into the pockets of the people who actually helped to produce the goods on which the profits were made. The Chancellor has agreed that this issue about high profit level has to be faced. I am quite sure the Tory Party will find all sorts of excuses for the Amendments they will bring in, and for the efforts they will make to undo what the Chancellor is proposing.

I think the same thing applies to the insistence the Chancellor has laid on the necessity to stand by his capital programme. Some doubts have been expressed by my hon. Friends, for example, about housing, and whether the housing programme will be adhered to at the full rate that has been promised. Well, that depends, I think, as much upon us as upon the Chancellor. If we continue to insist, as I am sure we shall, from these benches—whatever the Tory Party do about their 300,000 houses—that the programme promised shall be proceeded with, we shall manage to keep to the programme of 200,000 houses that we intend to have built; and it will depend upon us, I do not think that any blame attaches to the Chancellor in that he has not found it possible to go beyond the capital programme.

There is one item in the Budget—not one I usually speak about in these debates—to which I must make some special reference, and that is the Purchase Tax. I listened to the Chancellor making out his case about all sorts of things like children's school bags—important in themselves, particularly to the children—and other articles of a similar kind that ought to be freed from this onerous tax; but at the end of the list which he gave the gift he was making amounted, I think, to about £3 million. What are we raising through Purchase Tax? I agree that Purchase Tax is collected from a large number of articles upon which it is quite valid to collect it—articles of a luxury and semi-luxury kind; but that is not the case with regard to the majority of articles upon which Purchase Tax is now levied.

Purchase Tax is levied on articles such as pedal cycles, sewing machines, electric lamps, linoleum, carpets, and floor coverings. The amount raised from articles of this sort—useful articles; articles which are in general demand by the ordinary people of the community-runs into hundreds of millions of pounds. The Purchase Tax raises about £300 million, so I was not exactly fired with enthusiasm when I heard that the Chancellor was making provision for lightening the Purchase Tax burden to the extent of a £3 million gift. We are thankful for small mercies, but he ought to have done better, and a good deal better, than that.

In our secondary schools and many of the elementary schools, built in the suburbs of towns like Manchester, Glasgow and outer London, it is the common thing for the schoolboy or schoolgirl to have a pedal bicycle. In a school not very far from the boundaries of my division, out of 700 children 300 go to school on their bicycles every day. What is the sense in having a 33⅓ per cent. tax on pedal cycles when they are so much of a necessity?

What is the sense in putting a 33⅓ per cent. on sewing machines? The woman who is trying to make ends meet, who, to clothe her children, buys a length of cloth instead of paying a high price for made-up clothing—particularly non-utility clothing, because very often the utility clothing is not available—pays 33⅓ per cent. Purchase Tax on the cloth and then pays 33⅓ per cent Purchase Tax on her sewing machine. Those who talk about incentives will appreciate it when I say that every disincentive is put in the way of the frugal, industrious woman, who wants to help her family out of these difficulties, by putting a tax of this sort on sewing machines and the length of cloth she buys.

Colonel Hutchison

Is not a sewing machine the best way of making both ends meet?

Mr. Hudson

The hon. and gallant Member supports what I am saying. I am sorry that on so many articles of this sort the Chancellor has not been able to concede to what some of us have been pressing for, for a very long time.

As I admitted at the beginning of my speech, today is a particularly difficult time for this matter to be put straight. Nobody has put the case about Purchase Tax better than the authority I shall now quote who, when it was first introduced into the House, said: It is a complicated tax. Prima facie it does not seem to fulfil any of the conditions which I should lay down for taxation … it … is only a kind of handy way of getting a certain amount of money into the Exchequer. It will not assist the finances of the country. Of course, he was wrong about that, because, clearly, if it raises £300 million it assists to a very considerable degree.

Mr. Ellis Smith

It was not intended for that.

Mr. Hudson

No, it was not intended for that. He went on: It will not assist the finances of the country, and I do not think it will meet the Chancellor's aim, that is, to suppress luxuries."—[OFFICIAL REPORT, 23rd April, 1940; Vol. 360, c. 92.] Certainly, that part of the statement was correct. That statement was made by the present Prime Minister when opposing Purchase Tax at the time it was introduced. I remember a number of other statements made by right hon. Gentlemen who now occupy the Front Bench who were equally doubtful about the effectiveness of this tax. Although we have this assistance to the extent of a £3 million remission, I am sorry that something more than that is not possible at the present time.

One other matter to which I wish to refer was raised in the "Manchester Guardian" this morning. It suggested that the debates on this Budget would have to justify what it calls an "arms budget," and would have to show that the measures introduced were equitable from the point of view of all the claims of all citizens in the community. To the extent to which I have mentioned, I think that the Chancellor has aimed at an equitable arrangement.

The hon. Member for Shettleston (Mr. McGovern) referred to the fact that this is an arms budget, but he did not justify the expenditure provided for arms in this Budget. I think that we have to make out a better case for the way in which the money provided for these arms, already costing very heavy sums, is to be used. It is all very well talking about providing arms against an eventuality in in the future which we fear. We are providing arms for carrying out a policy which is now being pursued, and what is taking place in Korea at this moment is a measure of the justification or otherwise of the great sums of money which we are providing, and for which we are calling upon our people to make sacrifices.

The actions which are now taking place in Korea, the threat of a war in China, and the breakaway by powerful military forces, over which we have no real control, in following policies which are not our policies, will make us more and more consider, as it ought to make us consider, whether we are justified in spending enormous sums on armaments, thereby drawing away from our people what could be so well spent in many other directions. Quite frankly, one result of this Budget ought to be to make us, on whatever side of the Committee we sit, find out, if we can, more and better methods of settling disputes and quarrels and the difficulties of the future, whatever they may be, than we are doing at present. Our reliance on the United Nations, our belief in collective security and the overpowering Forces of the Navy, Army and Air Force may be leading us, stage by stage, not to the security for which we hope, but to things which will make it harder for our people to live the freer and better life that we would like them all to have.

I am quite certain that if we want to justify this Budget we must take a great deal more care that there shall be pursued throughout the world peaceful methods for the settlement of disputes. If the line suggested by the new Foreign Secretary, by which he hopes to make his office truly a peace office, really becomes the line which this country is pursuing, that is the only way in which we shall find justification for this Budget.

9.35 p.m.

Colonel Gomme-Duncan (Perth and East Perthshire)

I follow with pleasure the hon. Member for Ealing, North (Mr. J. Hudson), who speaks with such conviction and vigour. He always starts off with a diatribe against the Tory Party which he does very nicely. He does not believe it in the slightest, but he does it very nicely. He did it the other day, and he did not believe it then any more than he does today He knows that the Tory Party is out just as much for the good of this country, as the Labour Party.

He talked about the reasons for spending all this money mentioned particularly by the Chancellor of the Exchequer in his most admirable Budget speech. This money is spent on armaments. What is it for? asks the hon. Member for Ealing, North. This is because there is no policy, and that it what makes it so dreadful in people's minds. There is no policy in Korea, and that is a point which can be laid to the discredit of the present Government perhaps more than any other in recent times.

Mr. Emrys Hughes

What sort of policy does the hon. and gallant Member want for Korea?

Colonel Gomme-Duncan

I want a policy so that the commander-in-chief and the troops will know what they are driving at and what is their objective.

The Chairman

The hon. and gallant Member must know that he cannot debate that policy in the Budget debate.

Colonel Gomme-Duncan

I was led astray by the hon. Member for South Ayrshire (Mr. Emrys Hughes), not for the first time. I shall revert to the question of profits. There is a sort of "hoodoo" over this word "profit" in the minds of Members opposite as though it were some wicked thing. It has to be borne in mind that the Chancellor of the Exchequer, whatever his political views may be, is entirely dependent for his revenue on profits of some kind or another. There is no other source of income for any Chancellor of the Exchequer in this country.

Why is it assumed that profits are wicked? If one wants to rouse the party opposite one has only to mention one of two words. The first is "landlord"; and the other "profits" and they go up like a rocket. It is an extraordinary state of affairs and very unfortunate. The hon. Member for Ealing, North, who was talking about profits, must know that that is the only source of income for the Chancellor, and if he wishes the Chancellor to have more money to do good things for this country, then the right hon. Gentleman will find it out of the profits of the country. Logically, if there are more profits, there is more money, and, therefore, the Chancellor has more to draw upon.

Less profits mean that the Chancellor has less money. Is that what the hon. Member wants? Surely we must be sensible about the matter of profits. No one wishes to see profiteering; it is a vile thing, but ordinary profits should be the object of everyone. What is a wage increase but a wish for profit? That is an honourable thing. Why should businesses not make more profit so that the country may have better services? There is nothing wicked about profits.

Mr. J. Hudson

Three years ago the Chancellor made an appeal to wage earners not to increase their demands for more wages. There was nothing wicked about getting wages, but in view of our national situation we were asked to forego a just demand for more wages. I was saying that it was equally incumbent upon the private receiver that he too should forego any effort to increase his profit. I gave the figures to show what the increase of profits had been.

Colonel Gomme-Duncan

But is it not a fact that out of profits come wages? [HON. MEMBERS: "No."] Then would hon. Members opposite tell me where wages come from?

Mr. A. Lewis

Out of labour comes profits.

Colonel Gomme-Duncan

Is it not a fact that wages come out of the profits from industry, and that if there are no profits in industry, there cannot be wages?

Mr. Lewis

From labour and material.

Mr. Gilzean (Edinburgh, Central)

Wages are a first charge. Profits are what is left over.

Colonel Gomme-Duncan

I go back to my original point from which I will not be diverted: that there is nothing fundamentally wrong in profits. If there are no profits the Chancellor will not have the income required for the health services, and all the other things which were founded by the Tory Party and adapted by the Socialist Party, as they will honestly admit. It is a fact that in 1944 we produced a plan for the health service—

Mr. Gilzean

The profit motive is unnecessary and immaterial.

Colonel Gomme-Duncan

In that case where will the Chancellor get the money for the health service? I ask the hon. Gentleman to give me the reason. He does not.

Mr. Gilzean

It is quite simple.

Colonel Gomme-Duncan

The hon. Member for Ealing, North, and other hon. Members opposite—I admit with sincerity—seem to think there is something fundamentally wrong in making profits. Nothing of the kind. I emphasise once again that it is a grave disservice to the country to put it out from this House of Commons that there is anything wicked in the making of profits. The workers in industry who contribute so valuably towards the making of those profits know or should be told that it is right that their work will make profits in order that the country may profit thereby. I hope we shall not have this constant denigration of the making of profit as something evil, instead of making it obvious that the making of honest profits is a sound thing, whereas profiteering is a vile thing. I hope the hon. Member for Ealing, North will back me up in that.

9.42 p.m.

Mr. Arthur Lewis (West Ham, North)

I had no intention of speaking this evening, but the hon. and gallant Member for Perth and East Perthshire (Colonel Gomme-Duncan) raised the question of profits. Is the hon. and gallant Gentleman not aware of the fact that vast undertakings in this country have been running for many years without profit, and running very efficiently in the interests of the people. Our present Civil Service, to which we all pay tribute, is not run as a profit-making concern but to give service to the people. Our local borough councils and local authorities are run for the service of the people, and some sections of those services are run at a loss because it is necessary to give that service to the people in most urgent need.

Colonel Gomme-Duncan

The work of the Civil Service and of the borough councils is invaluable, and I agree that they do not make profits, but would the hon. Gentleman say where the money comes from to pay the Civil Service?

Mr. Lewis

Yes, certainly. I interrupted the hon. and gallant Gentleman when he was speaking by saying that it is by the labour of the people. It is the profit coming from the labour and the material which enables the services I have mentioned to be carried on. Equally, our great military machine, of which the hon. and gallant Gentleman is a retired officer, is run without any question of profit.

Having dealt with that point, I want to deal with the Budget speech of the Chancellor. I say first, in all sincerity, and I think both sides of the Committee will agree with me 100 per cent. in this, that our only regret is that Sir Stafford Cripps could not have been present to hear that speech. He would have been proud, as we here are proud, that much of the good which will come from the Budget was due to his hard work when he held the most difficult office of Chancellor of the Exchequer.

We have said generally that the Budget is a good Budget, but we have, of course, complaints and points of criticism. One of the greatest of these which we have heard this evening from all sides, and from every speech which I have heard, has been about old age pensioners. We are all thankful for small mercies, but I believe that the old age pensioner could, and should, receive better treatment than is envisaged under the Chancellor's proposals. I believe that it is possible to give them more, and that they are worthy of it.

I may be asked where the additional money is to be found. I believe that nine out of ten honest and sincere people would not mind paying a little more Income Tax if they knew it would be given to those in most urgent need—namely, the old age pensioners. There would be no objection from any quarter of the Committee if the Chancellor were to introduce a new tax or to increase an existing tax for improving the lot of the old age pensioner, making the increase applicable on retirement at the age of 65 instead of 70, and doing so immediately instead of waiting until October.

I believe that this extra money could be got without a new tax and could be obtained by means of more efficient administration. The Opposition have consistently said that the Government should make savings, but they conveniently fail to make any suggestions or to say how the administration could be more efficient. My suggestion is to review the whole National Insurance scheme and to adopt a procedure whereby he who receives the most pays the most, and that from a certain date, a percentage of income should be paid, graduated if desired, which could be deducted from income and which would be the contribution for National Insurance. If the contribution was 1 or 2 per cent. of income, the person receiving £4 or £5 a week would during the year pay, say, 1 per cent., whereas the man receiving £5,000 a year would be in the happy position of paying a like percentage to help the lower income group.

This proposal has a double advantage in that through P.A.Y.E., the Inland Revenue Department and the existing Income Tax machine, the means are already in existence for collecting the contributions. Immediately, we could dispense with the system of contributions stamps, stop the useless and superfluous waste of paper and machines in printing the stamps, and do away with the present system of cards. The staff who are now uselessly employed on maintaining the cards and records could then be employed productively. That is in reference to old age pensions, but it could also apply to the National Health Service and the whole system of National Insurance. Equally, I believe it can apply to road and rail transport.

Mr. Ellis Smith

I think it would be a mistake to let that pass without pointing out that the Beveridge Committee investigated this matter. Evidence was given by the Trades Union Congress and similar organisations and the main principle was laid down of equal benefit for equal contribution. That eliminates the necessity for a means test and puts everyone on the same basis.

Mr. Lewis

I am not suggesting that there should be any alteration in the general scheme of benefit, but I am suggesting that there should be a graduated scale of contribution. I see nothing wrong with a man who is receiving £1,000 a year paying a few pounds extra to help the poor chap who is in need. This scheme has worked well in New Zealand and Australia. They have had it in operation longer than our service has been operated and we might learn from their scheme.

I was developing the same sort of argument in regard to road and rail transport. We heard from the Chancellor that there is to be an increase in duty on petrol. I hope that the Press will emphasise the point he made that there will be no necessity to increase road transport fares, but there may be a danger of that happening. I therefore feel it quite possible now to consider an all-in transport tax on civilians and private persons, what one can term a passenger tax on an annual basis followed by an industrial freight tax based on the capital overall turnover, or whatever may be decided upon. We could then do away with the need for the payment of people collecting tickets, of having machines for the production of tickets and the necessity of people collecting fares. All that is superfluous and they could be employed on production if we had an overall tax which could be budgeted for and dealt with on an annual basis. It would be a similar system to that which provides for the supply of water, local authorities' services and the health services.

An hon. Member opposite put forward a very reasoned argument for a reduction in the Entertainments Duty paid by speedways. I represent an area in which there is a speedway and at the moment it is charged a higher rate of tax because it is considered a "dead" sport and cognisance is not taken of the skill of the rider of the motor-cycle. As this is a sport which is followed by the family, who invariably do not gamble, I should like to support the hon. Member's argument that there should be a decrease to the lower tax for speedway entertainment.

My last point concerns housing. I represent the worst blitzed borough in the country. We lost more than a third of all our buildings and we have a formidable housing problem in West Ham. I believe that we should make it quite clear that whatever may or may not happen about armaments, whatever may or may not be necessary so far as munitions generally are concerned, there will be no interference with the programme of 200,000 houses per annum which the Government have been responsible for over the last five years. If we can get that assurance, and the assurance of the Government that there will be no cutting down of capital investment on houses, I believe that we can go to our people and say, "Here is a good Budget. The Government really feel for the ordinary people," and that we can count upon the support of those people for our efforts in the years to come.

Ordered, "That the Chairman do report Progress, and ask leave to sit again."—[Mr. Sparks.]

Resolutions to be reported Tomorrow; Committee also report Progress; to sit again Tomorrow.

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