Orders of the Day — Budget Proposals and Economic Situation

3.14 p.m.

Photo of Mr Reginald Maudling

Mr Reginald Maudling (Barnet)

I must admit, Sir Charles, that I had not expected to catch your eye in the course of these discussions, but my right hon. Friend the President of the Board of Trade is, as I think the Committee will be aware, indisposed with a poisoned tooth. I am sure that all of us know exactly how discomforting that particular affliction can be and wish him an early recovery therefrom.

In finding myself talking on these matters again—I hope the Committee will not look upon me as the bad penny that keeps turning up in our financial debates—I welcome the opportunity of saying a few things about the case put forward by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) in the course of his speech yesterday. I observed in a weekly paper recently that I was criticised for never saying anything which the right hon. Gentleman could not equally say. I hope this afternoon to have the opportunity to dispose of that particular criticism.

I should like, if I may, to start by saying that I admired very much the right hon. Gentleman's speech as a matter of Parliamentary oratory. I have listened to him on many occasions with great interest. I have seldom heard him make more bricks with less straw, and I congratulate him on the remarkable degree of support he had from his hon. Friends. I regret, however, that I find it more difficult to congratulate him on his logic. Indeed, I found the main point of the right hon. Gentleman's attack somewhat confusing and conflicting, as my hon. Friend the Financial Secretary has already pointed out.

We were told that this was an Election Budget, a bribe—designed, presumably—o I expect that language something rather similar to that was used and will be used by the right hon. Gentleman before the Election—to appeal to as many voters as possible. We were also told that it helped as few people as possible. I find that a little inconsistent. I must say that if the right hon. Gentleman thinks that my right hon. Friend would approach an Election solely by trying to obtain the votes of the City of London, his knowledge of political tactics is a little naive, at any rate, on his own showing.

As far as that is concerned I cannot help feeling that the main political, as distinct from the economic, attack of the right hon. Gentleman was distinctly self-destructive. But, also, I thought, he was a little inconsistent about the actual shape of the Budget itself. Does he consider that my right hon. Friend is wrong in reducing taxation by the amount he has done in this Budget? That seems to be a fundamental question, to which we did not receive a definite answer from the right hon. Gentleman. We had a most interesting speech from the hon. Member for Gloucestershire, South (Mr. Crosland) who went, as he sometimes does, rather further than his own Front Bench and, as I thought, quite definitely implied that it was wrong to reduce taxation by this amount.

I shall be interested to see whether he votes against the Budget Resolutions. I shall be even more interested to see what the right hon. Gentleman does, because on that occasion, surely, he will make it clear whether or not he thinks it right to reduce at this time the burden of taxation to this extent. Yesterday, he did not make that clear, for reasons which we shall all readily appreciate.

He went on to imply—leaving on one side whether or not it is right to reduce taxation and whether he would reduce it—in rather a different manner, that he did not like the reduction in direct taxation; that he would, on the whole, like reductions in indirect taxation. He referred in a generous fashion to beer, tobacco, petrol and a few other things—quite attractive matters to the electorate I should have thought.

Would the right hon. Gentleman have reduced indirect taxation at the moment? Would he have made cigarettes less expensive—dollar tobacco? Would he have made those less expensive? If he would, then what remains of his argument about the dangers of inflation? He really cannot have it both ways. With great skill he tried to do so, but at one and the same time he seemed to say that my right hon. Friend is running an unjustifiable danger of inflation, yet implied that he himself would go much further, because that, undoubtedly, was the purpose of his speech.

He obviously disliked the reduction in direct taxation. He obviously felt that my right hon. Friend went too far and that he should have paid more attention to the claims of indirect taxation, but I think that he did less than justice to the peculiar character of Income Tax as a tax. The range of Income Tax is surely the widest range of all taxes.

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Mr Hugh Dalton (Bishop Auckland)

More people drink than pay Income Tax—more people smoke than pay Income Tax.

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Mr Reginald Maudling (Barnet)

That is an interesting political comment. I am quite certain that the right hon. Gentleman will produce his usual statistics to make his point later in the debate.

Reduction of Income Tax affects many millions of taxpayers, and, indeed, their dependants, and, of course, the reduction of direct taxation is very different in its inflationary aspects from indirect taxation. Reductions of direct taxation provide an incentive to saving and to increased output; reductions of indirect taxation are surely more an incentive to increased spending. I would have thought that it has always been a classical doctrine of the economists that if there is any danger of increased demand we should concentrate on reducing direct rather than indirect taxation. When we come to the point on savings, surely the increase in personal saving since my right hon. Friend has been Chancellor has been conclusive proof of our argument that, by reducing direct taxation, saving is encouraged.

The other matter on which the right hon. Gentleman spoke was the position of companies. Apparently he dislikes the idea of companies having any relief of taxation. He talked about giving money away to them. I must say that, in the circumstances, "giving away" seems a little hard. After all, it was their money. I do not quite understand the right hon. Gentleman's objections to big companies. Admittedly, if any organisation is big it is likely to be more powerful, and that applies just as much to public as to private organisations. But, in general, I would say that if a company is big, it is because it has grown by its own efforts and its own efficiency. Surely, in the modern world, it is nonsense to imagine that the economy of the country can be conducted without a large number of thriving big companies side by side with the medium and small businesses to which we also attach great importance.

The right hon. Gentleman appeared to regret that this measure would mean tax relief for companies. I am glad that it does. I believe that by giving further tax reduction to industrial undertakings, we will help this country as a whole, because in the first place our industrial companies have to bear the burden of competition with other countries, in many cases with a far lower level of taxation than we have; and, secondly, from the savings of industry and the ploughing back of profits we can develop the new undertakings, factories, plant and machinery upon which our employment and standard of living depend. I consider it one of the good and most favourable factors of my right hon. Friend's proposals that they will enable British industry to make an even greater spurt than it has done in the last year.

The other thing about Income Tax in the right hon. Gentleman's remarks which interested me was his objection to the reduction in the standard rate. He said that no doubt we on these benches would argue that it is perfectly right when reducing taxation to reduce it more for the rich than for the poor, because the rich are paying more taxes. That, he said, was the difference between us. Does that mean that he would never reduce the standard rate? Does it mean that he considers that it is always wrong to bring in a reduction of the standard rate because it means more help to the higher taxpayer than to the lower taxpayer? I would be interested to know whether that is what he believes.

Then the right hon. Gentleman came to a different theme—I would have thought, a rather quaint theme for him. He talked about my right hon. Friend running away from the economic crisis and having an Election. Of all people, he is the last who should say that. In 1951, we were facing considerable balance of payments difficulties. In July, 1951, the reserves fell by 43 million; in August by 75 million; in September by 96 million; and in October we had an Election. What we did not have were any measures to do anything whatever about the situation. The right hon. Gentleman was content to continue and let this drain on our reserves grow and accumulate, without taking any measures of any kind whatever. That, of course, made the situation for his successor infinitely more difficult. What would he have done? He does not think it right to raise the Bank Rate, as he explained yesterday. But he believes in import restrictions. He believes in safeguarding sterling by controls and regulations. He had this apparatus of controls and regulations in his hands. Why did he not use it? Why leave it to my right hon. Friend to use?

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Mr Hugh Gaitskell (Leeds South)

I am obliged to the right hon. Gentleman for giving way; and incidentally, may I, first, congratulate him on his new appointment? He knows perfectly well that we did impose certain restrictions at the end of July, and we had prepared a lot more which were then put into effect by the present Government.

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Mr Reginald Maudling (Barnet)

I thank the right hon. Gentleman for his congratulations. The action that was taken was, from the figures I have given, utterly ineffective. The action which was planned was not made known to the public.

Photo of Mr Hugh Gaitskell

Mr Hugh Gaitskell (Leeds South)

I made it quite plain on a number of occasions in the course of the election campaign, first, that the economic situation was serious, and, secondly, that whichever Government came into power would have to impose severe restrictions on imports.

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Mr Reginald Maudling (Barnet)

I know the right hon. Gentleman issued warnings about the economic situation on one or two occasions, but I have not been aware that he ever informed the public of the sort of import restrictions and the type of reductions in consumption which would be necessary. In 1955, we have seen a difficult situation. In January, in the course of this winter, it was clear that the position of the reserves must give rise to some concern because the normal seasonal uplift at the end of the year and at the beginning of the year did not take place, and in January we did not get an increase in the reserves of the type which one would normally expect.

In February, there was, for the first time, a loss in the reserves. In February, my right hon. Friend took some action, and he took action which was hardly the sort of action which would be designed to assist electoral considerations. I think the right hon. Gentleman referred to a "mangy cat" yesterday. Does he really think that my right hon. Friend, by his action on 24th February, was trying to assist the electoral position of the Conservative Party? If so, many of his speeches about the effects of these measures make very little sense indeed. The fact is that the action taken in February to control and restrict credit must take some time to have effect on the internal economy, and even more so on the external position.

Here I want to take up a further point that the right hon. Gentleman made yesterday. I think it is true that the trade figures normally follow about two or three months behind the payments figures, and, therefore, the figures for imports in March, to which he rightly referred as being disturbing figures, reflect the position so far as payments are concerned in, roughly, January. The import level in March is determined by decisions taken and orders and contracts placed some time before my right hon. Friend's action on 24th February. Therefore, it is impossible to judge the effect of these measures by the position in March. What is a significant indicator of the effect of these measures is the position of sterling, and the sterling appreciation and strength both in the official and unofficial markets.

That shows itself some way ahead of the actual movement of trade in the Board of Trade's Trade and Navigation accounts.

I thought that the right hon. Gentleman, throughout his speech, was inviting a comparison of economic records of the two Governments, which he did with much gusto. I should like to make my comparison. We inherited from the right hon. Gentleman the third and last serious financial crisis since the war. For the third time since the war the reserves were running down at a rapid and accelerating rate which would have meant complete exhaustion within 1952. The sterling was weak, and on the transferable markets there was a yawning gap between the official and the unofficial rates through which poured commodities and dollar earnings which should have come to our reserves. That was the position which my right hon. Friend faced in 1951.

Since then we have reversed the process. We have restored the position of sterling, and we have restored the position of the reserves. Also, in contradistinction to the right hon. Gentleman, we acted quickly and definitely when it appeared that the process of internal expansion was likely to threaten the position of the reserves and the strength of sterling. That is the contrast in the field of overseas payments.

Let us look at the position of production. It is true that in the 1945–51 period production was increasing and increased greatly. I agree that the achievement of this country in those years in restoring production after the war bears proud comparison with any other country in the world.

What was happening in 1951? In that year we saw the beginnings of the textile recession. For the first time since the war the consumption of textiles and household goods was falling, and inevitably that fall, under the right hon. Gentleman's Administration, resulted in a reduced rate of employment and production. At the same time, there was a considerable degree of inventory accumulation at the expense of the gold reserves. The country was, in fact, in 1951, paying out vital gold reserves to expand and inflate inventories. It really is not very useful if one goes bankrupt to say, "We have a lot of stock in hand."

At present, production is at all-time record levels and, in 1954, increased by 6 per cent. over the previous year.

I was very interested to hear the remarks of the right hon. Member in reference to the recent move of the Index of Production, in which he said that for the last five months there had been no increase at all and asked, was not this really rather serious? The right hon. Member, with his experience of statistics, should not have fallen into an error of that kind. If he had looked at the period between October, 1953, and February, 1954—the same period a year ago—he would have found precisely the same phenomenon. There was no increase at all between October, 1953, and February, 1954, and yet in 1954 we had the 6 per cent. increase in the total production index. It is a great mistake to try to base too far-reaching arguments on partial statistics.

Let us look at the position of employment. As I said, when my right hon. Friend became Chancellor of the Exchequer we were faced with a situation in which consumption demands on a number of industries, particularly textiles, were falling and there was a definite threat of recession. Hon. Members opposite were at times rather lavish in their prophecies of the level of unemployment which there would be under a Conservative Government. I hear very few references to employment and unemployment now, at a time when we are experiencing record levels of unemployment—

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Mr Harold Wilson (Huyton)

Obviously, the right hon. Gentleman has not been to Lancashire recently. In view of the absence of the President of the Board of Trade through indisposition—which we all regret—would the right hon. Gentleman tell us, since he has now mentioned employment, whether he is to make the statement on the cotton industry which, we understood, the President of the Board of Trade was to make?

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Mr Reginald Maudling (Barnet)

If the right hon. Member will allow me to develop my argument, he will find that I will make a reference to the matter he has in mind.

I should like to refer next to the question of investment, on which the right hon. Member for Leeds, South had much to say. He seemed to believe that there had been practically no increase in industrial investment in the course of the last year. What has happened to investment, particularly in private manufacturing industry in recent years? It is true that in 1952 and 1953 there was a definite check to private investment in manufacturing industry. That was the policy of the Budget of the right hon. Member in 1951 when—I think quite rightly at that time—he deliberately set out, by abolishing initial allowances, to restrain investment in private manufacturing industry. In 1953, my right hon. Friend restored those initial allowances and in 1954 he went further and introduced the investment allowance. We are now seeing the results of this policy, and very encouraging results they are.

In 1954, the amount of new industrial building approved was 708 million square feet, which is easily a record in this country. Completions of new factory buildings and extensions in 1954 were a post-war record and the figures for the first quarter of 1955 show that this process is increasing and gathering speed. Here is quite definite and positive evidence of the influences of the policy of my right hon. Friend in the matter of investment. I hope that the right hon. Member will not continue to argue that no such expansion is taking place.

The right hon. Member also talked about exports, which I quite agree, are very important. He produced some interesting statistics culled from the publication of the Economic Commission for Europe. There are, of course, considerable differences from the point of view of export trade between the post-war markets starved of goods where the problem was not to sell but to produce, and the present position in which we are facing a buyers' market to which the Germans and Japanese have returned in full force to compete with us. The figures quoted by the right hon. Member showed how strong and vigorous have been the efforts we have had to make recently to meet our main competitors.

Of course, in the years after 1949, at any rate, considerable benefit was gained from the devaluation which the Labour Government thought it right should take place at that time. The right hon. Member should also remember when he talks of the benefit we have gained from the terms of trade—which is true—that it is equally true that in conditions in which the prices for raw materials are falling the purchasing power of some of our main customers abroad is also falling and it is very much more difficult to maintain exports in those circumstances. I think that the figures which are interesting are those of our share of the world's manufactured goods, which can be produced from the same statistics used by the right hon. Member. Between 1951 and 1954 our share of the world market has fallen from 22 per cent. to 20 per cent., but in the one year 1950–51 it fell from 25 7 per cent. to 22 per cent., a far greater drop than in the last three years. It is not unreasonable to point out that in that same year of 1950–51, of which we heard a certain amount from the right hon. Member, while United Kingdom exports rose by 1 per cent., the exports of the rest of Western Europe rose by 20 per cent. It is an interesting comparison of the export record under the two Administrations.

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Mr Reginald Maudling (Barnet)

The year referred to by the right hon. Member for Leeds, South. It is a great pity that anything should be said to write down, or underrate, the really remarkable achievement of British industry in exporting in the last year.

Finally, in this comparison, I come to the position of the consumer. The right hon. Member for Leeds, South appeared to think that we have been allowing too much of the increase in production in recent years to go to the consumer. Would he have reduced the amount available for consumption; if so, I wonder how? Perhaps he would not like to answer that particular question. Perhaps, on the other hand, he would say that it has gone to the wrong people. How much is there in this argument, which is used so often by hon. and right hon. Members opposite?

We were told by the right hon. Member that the main increase in production has been in motor cars. Why not? I am delighted to see the increase taking place in production by the British motor industry, which really is a magnificent achievement. It is already selling abroad as much as British ingenuity and enterprise can enable it to sell. Why should the manufacturers not use enterprise to produce more motor cars for the home market? What about those employed in making those motor cars?

The other main increases were in household goods, which were up by 10 per cent. in the last year, clothing and footwear, which were up 5 per cent. and food, 4 per cent. It is a complete phantasm of the imagination of the right hon. Member to think that all these vast increases in consumption have gone to a few chosen friends of the Tory Party. Surely the evidence is in the retail shops, the multiples, the co-operatives, wherever one goes. The evidence shows that consumption by the whole mass of our people is rising rapidly.

The reasons are quite clear. They can be seen in the statistics dealing with what has been happening to the national income in these years. Comparing 1954 with 1953—the figures have been used before, and they may well be used again—rates of dividend and interest have gone up by 4 per cent. and wages and salaries by 7 per cent. The increase in the social services under the new scales will be two to four times the increase in the cost of living.

There is more genuine purchasing power. What about the position of the wage earner? How much can he now buy compared with what he could buy previously? Since October, 1951, real wages—representing what people can buy with their wages—have gone up by 6 per cent.

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Mr Reginald Maudling (Barnet)

I am referring to real wages, which take account of prices.

Between 1947 and 1951 the level had fallen by 7 per cent. Those seem to be the main points on which comparison should be made between the two Administrations. The right hon. Gentleman and his Administration left behind them a record exchange crisis effectively untouched by policy, production threatened, unemployment beginning, and a decline in the consumption of household goods. They left investment checked deliberately by the 1951 Budget. They left us with a share in the world's export markets which had fallen drastically between 1950 and 1951. Above all, they left us with a fall in real wages and social services the value of which had been reduced by a rapid increase in the prices of goods and services. Those are the things which they left my right hon. Friend.

In the course of our administration we have restored the position of sterling and tackled difficulties in respect of the balance of payments in advance of a General Election. We have record figures of production and employment, we have record figures of new factory building and expansion, we have an excellent export record in the face of competition, and we have rising real wages and rising social benefits. On that comparison, we are very glad to stand.

What is the problem on the economic front which must be faced now by any Government? Clearly, the main problem, as the right hon. Gentleman recognises, is to hold the balance between the demands of expansion at home and the demands of the balance of payments abroad. Since 1952 our policy has been one of cautious re-expansion of the home economy. I am sure that both sides agree that we must not allow an excess rate of expansion once again to become a state of inflation.

How are we to deal with that? In dealing with that danger there is a considerable difference in approach between the two parties. My right hon. Friend by his measures of 24th February has made it clear that he realises the need to restore the internal monetary situation and to take action to restrict the rates of borrowing. The right hon. Gentleman's alternative—I hope he will not think I am being unfair—is, clearly, a return to controls, rationing and higher taxation. I can draw no other conclusion from the speech which he made yesterday. Indeed, anyone who studied the record of previous Labour Governments would expect nothing else.

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Mr Hugh Gaitskell (Leeds South)

The right hon. Gentleman is departing from his usual standards of fairness when he makes that allegation. I have repeatedly made our attitude plain. It is that the Government are wrong in relying solely on monetary policy, and that it is necessary and desirable to retain the machinery of control over imports and foreign exchange in order to deal with balance of payments troubles.

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Mr Reginald Maudling (Barnet)

That is exactly the point that I am about to develop. My argument is that that inevitably leads to rationing, controls, and higher taxation.

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Mr Hugh Gaitskell (Leeds South)

I must again make it quite plain that it is not our intention to reintroduce food rationing. How can the right hon. Gentleman seriously argue that import controls mean rationing when the Government are still retaining import controls over half the dollar imports?

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Mr Reginald Maudling (Barnet)

That is exactly the point that I want to develop.

Where imports are reduced below the natural demand, there must be a system of licensing, allocation and control; and licensing and allocation seem to me to be very similar to rationing. When the things that the consumers want, particularly foodstuffs, are cut, a reduction in imports below the demand of the market must mean some form of control.

If we reduce the amount of food which we bring in, people will want to buy more food than is available, and it will either disappear under the counter and there will be black markets and queues, or there will be rationing, and probably, in addition, the Government will have to reduce the excess demand that they have created by deliberately raising prices or increasing taxation, or may be by a combination of the two.

I say, in all seriousness, that that seems to me to be the inevitable economic consequence of events: if by our action we reduce supplies below demand, we must then have rationing, or reduce the amount of money that people have, or have a combination of both. I say quite seriously that the policy of the right hon. Gentleman, whether he intends it or not, would inevitably lead to rationing, controls and higher taxation. Moreover, it would inevitably lead to retaliation against our exports in other markets.

One of the most extraordinary developments in the economic world in recent years has been seen in Europe in O.E.E.C, to which the right hon. Gentleman made a great contribution when it was first formed. The liberalisation of trade within Europe has benefited enormously all the European peoples. If we start going back to controls, licensing and rationing, to deliberalisation, the same thing will be done by other people. It would be fatal to our export trade if we went back to the system which the right hon. Gentleman has in mind.

We believe in pursuing an entirely different policy. We do not believe that the strength of sterling depends on control. The right hon. Gentleman appears to think that by allowing more freedom in the use of sterling we should be weakening its position. We do not believe that that is so. We cannot force people to hold sterling if they do not want to do so. They will hold it if it is usable currency in which they have confidence. We shall not persuade them to hold it if we limit the use which they can make of it. There is a fundamental difference between the two sides here in our attitude to trade.

The Chancellor and the President of the Board of Trade have consistently pursued a policy of expanding the volume of world trade because we believe that that is essential to this country. Surely it is true that, on the whole, we need the raw materials and foodstuffs that we import rather more than our customers need a number of the things that we sell them. They can postpone their purchases of our machinery and consumer goods, but we must have our food and raw materials. Therefore, we must have the maximum volume of world trade if the country is to prosper.

In the Commonwealth, in O.E.E.C, in dealing with the United States and in the revision of G.A.T.T., the policy of the Chancellor of the Exchequer has been to expand the opportunities for trade and give British industry opportunities in competitive conditions, as they must be, of earning the overseas currencies that we must have. They must be competitive conditions. We have the great and, I hope, enduring benefit of our Commonwealth connections in many markets, but nowadays we have no guarantee against competition anywhere in the world. We cannot sell our goods to friendly countries, however closely they are connected with us, unless our goods are saleable on a competitive basis. Fundamentally, our policy must be based on that. This also means that if we ask others for an opportunity to compete with them we must be prepared to accord to others the opportunity to compete with us.

The right hon. Gentleman the Member for Huyton (Mr. H. Wilson) referred earlier to Lancashire. I should like to say a word or two on that subject. He was in error in supposing that any undertaking had been given that my right hon. Friend would make a statement this afternoon on that subject. The Government are not at the moment in a position to give to the Committee any comprehensive statement. We intend to make our statement at the time which will be of the most benefit to Lancashire. [HON. MEMBERS: "Oh."] The problems of this industry, particularly on the import side, involve important issues of international trade policy, some of them affecting other Governments. These call for, and are receiving, very close examination and thought, and it would not be right for me—it would not be fair to the industry—to attempt to anticipate today the considered statement which my right hon. Friend the President of the Board of Trade will make as soon as possible.

In the meantime, however, I should like to refer to three statements made by the Government which are very relevant to the problems of this industry. The first is the Purchase Tax concession, which was referred by my right hon. Friend the Chancellor of the Exchequer in the Budget statement and by my hon. Friend the Financial Secretary subsequently. There is no doubt that that concession will aid the industry, both in the matter of quality goods and in exports generally.

In the current situation in the newspaper industry, the second point has not, perhaps, received all the publicity that it might otherwise have had. I refer to our attitude to the question of Japan's accession to the G.A.T.T. This is a matter which has considerably affected Lancashire and has created concern. Of course, the attitude which we adopt to the G.A.T.T. affects the quantity of Japanese textiles and other imports to be admitted into this country.

From the White Paper which we have published, it will be seen that those imports will continue to be subject to quota arrangements settled in the trade and payments negotiations with Japan which take place from time to time. They are not, of course, the only imports of textiles. I hope that this statement of Government policy, which has not been given much prominence generally but is an extremely important statement from many points of view, will be received with interest in those parts of the country and of industry which are particularly concerned.

In so far as the cotton textile industry—or, indeed, any other industry—may suffer from dumping or from subsidised competition—I am not in any way implying that imports from the Commonwealth would fall into that category—we have made it clear that we intend to take legislative action giving us power to impose countervailing and anti-dumping duties. This is a part of our statute law which we should enact and which would be of considerable benefit to industry, protecting it against competition of a dumping or subsidised character, which it should not be asked to face. That is most certainly our intention.

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Mr Harold Wilson (Huyton)

The right hon. Gentleman and the Lancashire Members behind him must realise that none of those three statements touches the central problem of Lancashire today. Will the right hon. Gentleman explain why, since the Cotton Board complained to the Board of Trade as a matter of urgency in July, 1954, the Board of Trade has been studying the question ever since? Then there was that piece of window-dressing at 10, Downing Street just before the right hon. Member for Woodford (Sir W. Churchill) retired as Prime Minister. Why is it that even today, after all these months, all that the Government can do is to say that they are studying the position?

Hon. Members:

No.

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Mr Reginald Maudling (Barnet)

I think I have explained the position. That is all I have to say.

To sum up, what is the economic position that we face? Between 1951 and 1952, we dealt with an inflationary situation at home and a balance of payments crisis abroad. Since then, we have been allowing and encouraging the economy to expand and have assisted the expansion of production, employment and consumption to record levels; but we have been determined not to allow that rate of expansion to grow to a point where it would once again threaten our balance of payments position. That is why my right hon. Friend the Chancellor of the Exchequer took his action of 24th February, the sort of action which was not taken by his predecessor, the right hon. Member for Leeds, South.

Whatever Government are in power, we have obviously, for many years to come, to try constantly to obtain a balance, both in the demands of expansion at home, in more production and more consumption, and in the demands, on the other hand, of the balance of payments. That is a balance that all Chancellors of the Exchequer must try to hold for many years to come.

If the Chancellors of the Exchequer, over those years, come from different parties, they will adopt very different tactics. My right hon. Friend will concentrate on a policy of expansion, freedom and incentives, which has throughout been his policy and has throughout been a successful policy. The right hon. Member for Leeds, South, on the basis of his own speech, would entirely overthrow that policy and would return to controls, restrictions and higher taxation. That is the choice of economic policies that lies before us, and I am confident which choice the country will make.

3.55 p.m.

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Mr Hugh Dalton (Bishop Auckland)

We are all very sorry that the President of the Board of Trade is ill. I suspect that there may have been many contributory causes to lowering his morale, not least the most ignominious and deplorable statement made by the Minister of Supply regarding the cotton industry. We were certainly led to believe that, had the President been able to be here today, his principal contribution to the debate would have touched this industry, which is, after all, one of the principal preoccupations of any President of the Board of Trade, as all holders of that office well know.

The story of the Government's dealings with Lancashire is a most sorry tale indeed. It is one of confusion, indecision and dissension, the latter ill-concealed. It is remarkable that this present Cabinet of all the talents contains not one member who represents a Lancashire constituency. It is not surprising, therefore, that the Government are out of touch and out of sympathy with this great community. I think that a grin on the face of any Lancashire Member opposite at this moment might be ill-timed.

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Sir Robert Cary (Manchester, Withington)

The right hon. Member must mean his hon. Friend the Member for Nelson and Colne (Mr. S. Silverman).

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Mr Hugh Dalton (Bishop Auckland)

It was well before Easter that a very authoritative and representative deputation from Lancashire, led by Sir Raymond Streat, Chairman of the Cotton Board, supported by many leading and expert personalities, drawn both from the employers, the trade unions and from other sections of the industry, attended with pomp and ceremony at No. 10 Downing Street, and the right hon. Gentleman the Member for Woodford (Sir W. Churchill), who was then Prime Minister, took the chair.

The right hon. Member for Woodford has not so far been mentioned in these debates on the Budget Resolutions, and I therefore think it not inappropriate to say that on these financial questions he has an approach, as was shown when he was Chancellor of the Exchequer for five years, which is often imaginative. We argued with the right hon. Gentleman on the merits of this and that proposition, but his approach to these financial matters was often imaginative. He has a tenacious memory and a wide sympathy. He has represented in the House two Lancashire constituencies; first Oldham, and then a constituency which at the time was known as North-West Manchester. I cannot believe that the right hon. Gentleman would be very content, were he still Prime Minister, with the performance of the Minister of Supply on cotton this afternoon.

Since that meeting was held with leading personalities from the cotton industry, with the then Prime Minister and certain other Ministers, the Tory Party has dropped the old pilot and has not even picked up a new policy. The Government will be judged in Lancashire at a date which they have themselves deliberately chosen to accelerate. I say no more about that. I dare say that my right hon. Friend the Member for Huyton (Mr. H. Wilson) will have more comments to make. I merely say that it is a poor beginning to the Government's latest essay in the maintenance of full employment and the promotion of British trade and industry that Lancashire should thus be let down.

If nothing more is to be done to deal with the threat of which we have so often heard in debate from Lancashire Members in particular, including Lancashire Members on the Government side, of imports of cheap Indian cloth and all the rest, I doubt whether that which is contained in the Budget proposals—the derisory offer of 2 million this year and 3 million in a full year on a very limited range of textile fabrics, and even at that a reduction in tax of only from 50 to 25 per cent.—will gather many votes of thanks in the County Palatine.

I turn for a moment to a matter which has been raised today by the right hon. Gentleman. He could not have done better on Lancashire for he is not a member of the Cabinet and had to take what was handed out to him to say about Lancashire. Therefore I do not blame him for that, but he excels in smooth plausibilities—[Laughter.] What is wrong with that?—smooth plausibilities and easy generalities—and I must answer one or two of the arguments he used which otherwise might mislead the outer public less instructed than those in this Committee. He gave a little preview of Tory tactics at the Election. The Tories are going to say that we of the Labour Party are in favour of restoring rationing. Lord Woolton I think hinted at that the other day. He is a master of that kind of hint.

It is surely not necessary to draw the attention of the right hon. Gentleman to many illustrations of how control of imports is very rightly and properly practised but does not involve consumer rationing. Let me give him a very simple illustration from outside this country in the Commonwealth of Australia. The Commonwealth of Australia from time to time has balance of payments problems, as other countries do, and it generally deals with them quite fearlessly by imposing often severe, though I am glad to say often quite temporary, import restrictions. All these are facts, and as to the facts there is nothing to argue about.

All these are facts known to anybody who knows anything. Australia again recently imposed very heavy import restrictions, including restrictions on imports entering Australia from this country, on motor cars and so on; but there is no rationing in the Commonwealth of Australia. Of course there is not. So what is the good of the right hon. Gentleman trying to slip an easy one over like that and to pretend that, just because import restrictions are still and will continue to be vitally necessary to run our economy in this country, they involve a return to rationing?

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Mr Hugh Dalton (Bishop Auckland)

Yes. It was an election preview.

We all know the history of rationing. It was introduced at the beginning of the war. We could not have won the war without it. The person who did most to gain a reputation for administering it, in the relatively easy conditions in which he got all the food for nothing, was the present Chancellor of the Duchy of Lancaster. Easy money under Marshall Aid, and before that under Lend-Lease. Easy money. The Minister of Supply need not pucker his brow. Under Lend-Lease Lord Woolton got the food for nothing, and yet not so much that we could afford not to have rationing for consumers here.

All this is familiar, but I make the point again so as to warn the public that the Tory Party intends to misrepresent the position at the General Election in a few weeks' time by alleging everywhere that, if the Labour Party is returned, there will be a return to rationing. We are very grateful for the warning, and we shall take all necessary steps to puncture any such falsehood should it emerge.

May I ask a question of the Chancellor which is intended merely to elicit information? I am coming here to the question whether the broad shape of these Budget proposals is justifiable in the national interest. I do not mean that I am inviting him to answer at this moment, unless he wishes to do so. But will he tell us, when he replies to this Debate, what it was that so substantially changed between the date of 24th February, when he gave us a very gloomy view—I am not saying it was not correct—a very gloomy view of the prospects, and 19th April, when the sunshine had broken through the clouds and he was in a very happy mood?

Yesterday my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), in that very remarkable speech which received an ovation, which has already been referred to today, and was aptly greeted by a renewal of Press reports of our proceedings—indeed, in the newspapers also considerable tributes are paid to my right hon. Friend—put this question to the Chancellor. We attach great importance to knowing whether the Chancellor stands by the pessimism of February, and, if not, what it is that has happened since to change his general approach. We assume it has nothing to do with the Election, and we should like to know therefore what it may be.

My right hon. Friend's remarkable speech yesterday was brilliantly supported by my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) in a speech which was made at a time of the day when not unnaturally the Chamber was less full and the Chancellor himself was not present. But I am sure that the Chancellor will have read the report of it. My hon. Friend also put some points in this same context which are well worthy of reply. Therefore, I merely repeat the question. We do attach great importance to having an answer to it, and we count upon the Chancellor's giving it to us on Friday.

The Chancellor spoke in February of the balance of payments, and again in his Budget speech said there was much that was dangerous in the present trend of the balance of payments. He spoke in particular of coal and of food, and I shall say one word on each of those. In regard to coal, I am afraid we are again in one of those phases in which we are not getting the full requisite manpower at the face, for a variety of reasons which I shall not now develop.

The figures for the early months of this year, taking the weekly averages, indicate that there are 1,200 fewer workers at the face in our coal mines than there were last year. This is bound to have an adverse effect on production even although, again on the average of these weeks in this calendar year so far as compared with the previous year, the output per man-shift at the face has continued to rise from 3 261 to 3 283 tons. On the other hand, imports of coal, much of which is costing dollars, is still on the upward trend, and we should very much like to know what further action, if any, the Government propose in order to deal with this serious handicap to our balance of payments.

Turning from coal to food, we should like a little more information than has been given in this debate as to what is happening to home food production. The Chancellor told us in his Budget speech: We are … eating more and importing more food."—[OFFICIAL REPORT, 19th April, 1955; Vol. 540, c. 37.] But he did not say we are growing more. The farmers and the farm workers are very much discouraged in any new production campaign by the way in which the guarantees under the Agriculture Act, 1947, have been whittled away, and in many cases actually undermined by the new arrangements.

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Mr R.A. Butler (Saffron Walden)

Could the right hon. Gentleman explain how an increase in the guarantees results in their being whittled away?

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Mr Hugh Dalton (Bishop Auckland)

That is the Government's intention. I am glad the Chancellor has risen at this point, because I hope that it means that he will, when he gives us his considered reply, deal with the question I am asking about food production.

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Mr R.A. Butler (Saffron Walden)

The right hon. Gentleman made the statement that the guarantees were being whittled away. As there has been an increase in the amount allotted, both in the Special Review and the Annual Review, how does he substantiate the statement he has just made?

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Mr Hugh Dalton (Bishop Auckland)

It can very easily be substantiated. In the Act of 1947 there were definite price guarantees on which the farmers could rely. Indeed, it was not the aim of the 1947 Act to limit the amount of home production in the interests of the total of the subsidies, and I shall come to that point in a moment. That was a very sound policy.

Under the present Government's administration, the fixity of the guarantees has been very much undermined, as all the farmers are well aware, and if the right hon. Gentleman wishes to find out he has only to ask a few farmers up and down the country and they will readily tell him. They do not now know with anything like the degree of assurance they had under the Labour Administration what prices they will get for their crops and livestock, and they are conscious of a new uncertainty entering into their lives and calculations regarding their prices and costs. The result of all this has undoubtedly been very discouraging to agricultural production in this country.

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Mr R.A. Butler (Saffron Walden)

Will the right hon. Gentleman explain how it is that agricultural production is increasing, despite the bad weather?

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Mr Hugh Dalton (Bishop Auckland)

If it has increased, why did not the right hon. Gentleman say so in his Budget speech? Is it not the case that the area under tillage has considerably shrunk? The Chancellor, in his one specific reference to agriculture, took credit for reducing the total pig population. He referred to the Gadarene swine and said the price would be much lower with fewer pigs to enjoy it. I am asking for information. It is no good the Chancellor trying to put questions to me on a very limited sector.

We want the Chancellor to tell us whether the Government, in view of the danger to the balance of payments, are doing all they can to increase agricultural production at home, in view of what is now taking place, when we are incurring considerable expenditure on importing food from overseas, much of which could with great advantage be produced in this country. My information is that the total volume of production is not increasing. If that is contrary to the figures the Chancellor has received, the Committee and the country ought to know, but my information is that there has been a reduction in the total agricultural production, and in the area under tillage, and a continued drift from the land of workers who ought to remain there in order to help to produce food. Both these points—coal and food—admittedly have a significant bearing on the balance of payments position, and we should hear rather more about them when the Government's reply is made.

I wish now to turn to the Income Tax reliefs, but before I do so I should like to clear up one point on which the Minister of Supply did not seem to have understood the arguments put from this side of the Committee. The question I put to the Chancellor just now was whether he would give us in his reply an answer to the two speeches from this side to which I referred which queried the general shape of the Budget proposals, and whether it was wise, in view of the pessimism the Chancellor expressed in February, to reduce taxation by 152 million in a full year.

On that question we are anxious to be further informed, but assuming that it is right to reduce taxation by some such figure as that, we have certain very definite views on how that operation should be performed, and there is no inconsistency or difficulty here such as the Minister of Supply seems to imagine. It is certainly the view of my hon. and right hon. Friends on this side that the way in which this 152 million is to be transferred to our pockets by way of Income Tax reduction is not the best way in which tax relief should have been given, and we certainly hold the view that a number of indirect taxes should have had some part of the total. I am not going to go over this in detail—[Laughter.] Hon. Gentlemen opposite are amused, but if I did so, some hon. Members who are now cackling would not be able to speak in the debate.

There is a serious argument to be put in regard to petrol and diesel oil, a reduction in the duty on which would have had beneficial results in many directions, such as public service transport. There are many other services that might have benefited very much from such reductions. I leave it to the Chancellor's advisers to help him to work that out, but it would have been very well worth while to give some relief in that form.

Something has been said about beer, and at one stage in his speech I thought the Chancellor was leading up to a proposal to reduce the very heavy duty on beer, because he drew attention to the fact that the revenue was falling year by year. The late Sir Stafford Cripps has been the only post-war Chancellor to reduce the beer duty, and I was hoping that the right hon. Gentleman might wish to qualify as the second. It may well be that, when there are forces making for a downward movement in the revenue from beer—and the spread of television may be one of them—a reduction in the beer duty would not necessarily mean much loss of revenue. The Chancellor might stimulate falling consumption and not lose much revenue in doing so. At any rate, this is a candidate which should be carefully considered.

There are many other candidates, and the Chancellor has received many representations, on behalf of the cinema, sport, football, the living theatre and others, and I should have thought that when we are dealing with 152 million, which is a large sum of money, some small concessions might have been made in some of these cases.

There is one other matter before I come to Income Tax which should be mentioned, and that is post-war credits. There were still at the end of last March, 540 million outstanding on post-war credits, and I should have thought that the moment had come—and perhaps I might be allowed to say that I, like the Chancellor, have spent a good deal of time looking at the administrative possibilities in regard to this—when he might have been able to do for post-war credits what he has done regarding equal pay; that is to say, lay down a programme of gradual reduction over, say, 10 years, during which 'they would all be discharged. The programme could be quite simple and straightforward year by year.

What the Chancellor could do would be to lay down that in the first year so much of the first year's post-war credits would be paid off, so much more in the second, and so on, taking each post-war credit year in succession. This would be administratively very simple and could be announced in advance. It would give great satisfaction and very great help to large numbers of needy people living under difficult conditions. I am very sorry that no such scheme as a first stage has been introduced this year.

Now I come to the Income Tax reliefs. As has been said several times already, we welcome without hesitation the increases in the personal allowances and the increase in the child allowance. These are welcome because they apply equally to all in each of the classes of person named in the Chancellor's financial statement. Regardless of the size of their income, they all receive the same Income Tax relief from this kind of relief, except those on the margin who are barely paying Income Tax at all. Therefore these reliefs are valuable, and they are just and right, but they amount only to 35 million, a relatively small figure, out of a total of 152 million. Equal benefits are right, but I think it was Euclid who said—though it is some time since I heard it— that, if we add equals to unequals, the results are still unequal. We cannot therefore allow the Chancellor to get away with very much moral merit for having put in a few admittedly fair and equal benefits, absorbing only this very small part of the total revenue to be disposed of. I will not say more about how much the companies get, as that has been emphasised already.

Let us come back to the standard rate on individual incomes. My right hon. Friend the Member for Leeds, South said yesterday, and I warmly agreed, that it is very mean to rearrange the standard rate in such a way that one takes 6d. off a man who has a big income and only 3d. off the little chap who pays only the reduced rates. It is very mean, and I do not see the point of it. If one were to differentiate at all I should have thought that the Chancellor should have done it the other way, taking 6d. off the reduced rates for the small man and taking 3d. off for the big man, whilst he is getting his second wind. It would not have been outside the scope of this scheme of reliefs to have done it in that way if the Chancellor wanted to depart from what he did two years ago, namely treating all the same.

The question was addressed to us generally on this side of the Committee, and I am prepared to answer it, as to whether our approach to this question of tax reduction precluded ever reducing the standard rate. I invite the Minister of Supply to read my first Budget statement in 1945 when I reduced the standard rate by 1s., or double what the present Chancellor has ever managed in one Budget. But I did two other things as well, and this is the answer to the question.

If one merely reduces the standard rate, it simply means the richer a man the bigger the relief he obtains. I prevented this operating in the 1945 Budget, partly by introducing some new reduced rates. Those reduced rates had not then reached the degree of development which they have reached since. I introduced two new reduced rates at which the Income Tax was applied well below the standard rate, and I also introduced a new Surtax scale so that very wealthy people should have to surrender to the Treasury, in the form of a higher Surtax, a substantial part of what otherwise would have been an excessive Income Tax relief. I think that that was a pretty good arrangement on the whole.

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Mr Frederic Bennett (Reading North)

The right hon. Gentleman made his name known outside the House. It is true that I was not then a Member. It is interesting to note that, despite the precautions the right hon. Gentleman says he took, the man with 10,000 a year, of whom we have heard so much in these debates, received 318 benefit from the right hon. Gentleman's Budget compared with 226 from the present Budget.

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Mr Hugh Dalton (Bishop Auckland)

That is an illustration of how under my Budget everybody benefited. It was a much better Budget than the one we are now discussing, and I am grateful for the hon. Member's illustration.

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Mr Hugh Dalton (Bishop Auckland)

Yes. I have already said that once. If hon. Members opposite do not understand it when I say it once, they will not understand it when I repeat it.

If the standard rate is reduced and no other step is taken, great injustice will be created. Whether one reduces the standard rate by 1s., as in the more spacious days of 1945, or by 6d., as is the case now, if one is to maintain justice within the community, one must accompany that with certain other adjustments of Income Tax, partly for the benefit of the smaller people and partly for the moral good of the richer people who would not wish to get away with an unreasonable gain.

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Mr R.A. Butler (Saffron Walden)

Does the right hon. Gentleman deny that I went out of my way to accept the proposals of the Royal Commission on the Taxation of Profits and Income and meet its suggestions in order to help the people with smaller incomes?

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Mr Hugh Dalton (Bishop Auckland)

I do not think the Commission will have recognised the Chancellor in this Budget as having gone very far towards accepting their proposals.

I have already welcomed the right hon. Gentleman's proposal with regard to the child allowance. That is in continuance of what was done by Labour Chancellors. I myself increased the child allowance in one of my Budgets. That is welcome and just, but we are talking about whether the reduction in the standard rate of Income Tax is right without other steps being taken to prevent the rich men getting away with too much. I will quote shortly from the very interesting columns of figures which the Chancellor has furnished this year, and I will show in a moment what I have in mind.

One of the things which happen when one reduces the standard rate and does nothing else under a system of income taxation such as ours, with differential taxation on earned and unearned incomes, is that one arrives at the extraordinary state of affairs in which at every level of income one gives more relief to the person who does not work for his income than to the person who does. That is one of the points with regard to which one of my hon. Friends commented yesterday on the fact that, when my right hon. Friend the Member for Leeds, South was speaking, the Prime Minister seemed very surprised at some of the things he said. He turned to the Chancellor and asked, we thought, "Is this really so?"

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Mr R.A. Butler (Saffron Walden)

If the right hon. Gentleman really wants to know what my right hon. Friend the Prime Minister said, it was that he had never heard such class-war stuff in his life.

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Mr Hugh Dalton (Bishop Auckland)

The new Prime Minister's political experience has been only to a very small extent on the home front. He will, of course, soon get used to some of the exchanges which we have here. No doubt they do not occur with the same frequency at the ambassadorial cocktail parties where, quite properly and I am sure with great benefit to the nation, he has hitherto spent a great deal of his spare time.

It appears that the Chancellor has devised a scheme of Income Tax reliefs under which, at every level of income, it is better not to work. Under the Tories it pays better not to work. The Financial Secretary to the Treasury, in an outburst of eloquence yesterday, declared of some statement which I forget, by someone whom I forget, that it was "boloney." In spite of appeals by some of my more linguistically sensitive colleagues, he was not ruled out of order and therefore I repeat that all this talk about incentive in relation to these Income Tax reliefs is "boloney." Large numbers of people at various levels, particularly wealthy people at the high levels of income, will get a lot more money. The greater part of it will be undoubtedly spent. The suggestion that most of it will be put into industry or saved is exactly described by the word the Financial Secretary used yesterday.

I am sure that there is one point with which the Chancellor would like to deal when he comes to reply. This endowment of idleness under the Tory Government is illustrated on page 22 of the Chancellor's own arithmetic in the "Financial Statement (1955–56)." Particulars of income are there given in the case of married couples with two children. That, as we all know, is a very common status. These columns on page 22 show the effective rate of tax paid by various taxpayers before and after the changes in the Budget. The effective rate is the average rate of tax paid over the whole of the income.

At what level of income does one really get up to the 6d. relief in the effective rate? One begins with relatively poor people only just inside the tax liability. They receive effective rate reliefs of 3d., 4d. and so on. But one only comes up to an effective rate relief of 6d. for married couples with two children in the case of an investment income of 1,250 a year. If one get 1,250 a year for doing nothing one gets the 6d. relief off the effective rate. But if one is engaged in productive activity of any kind, such as will enable one to get 9,000, then at that point, but only at that point and not below it, does one get the 6d. relief. A worker has to work a lot of overtime to make 9,000 a year to get the benefit of the 6d. relief, while the little chap, living quietly in the country, not troubling anybody, getting up late in the morning and neglecting his garden, gets it at 1,250 a year.

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Mr James Hutchison (Glasgow Scotstoun)

How can the right hon. Gentleman say that the man who is not working is better off, although he may now get a better effective rate? Take his example of a man with 1,250 a year.

He is left paying 284 against 166 by the man who has wholly earned his income.

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Mr Hugh Dalton (Bishop Auckland)

That may be. Of course I have already made the point the hon. Member is to a certain extent remaking. I have pointed out that the richer one is the more one gets out of the Chancellor, not only in the absolute sense but in the sense that increases mount rapidly as one goes up the scale.

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Mr James Hutchison (Glasgow Scotstoun)

But the right hon. Gentleman also said that it was obviously clearly better not to work. How can that be so if a non-worker is left with a higher net rate of tax to pay?

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Mr Hugh Dalton (Bishop Auckland)

I was drawing the Committee's attention to the relative treatment by the Chancellor of two persons, one of whom worked and the other of whom did not work. I was pointing out that the reliefs that had been given this year are so arranged that they only reach the person who does work at a much later stage and at a much higher level in the income scales than they reach the people who do not work.

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Mr Hugh Dalton (Bishop Auckland)

The noble Lord wants to say something and I dare say he is about half and half when one analyses him.

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Viscount Hinchingbrooke (South Dorset)

And I expect the right hon. Gentleman is, too, but can he tell us how he can possibly avoid that situation, bearing in mind that the man with an investment income is always the most highly taxed?

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Mr Hugh Dalton (Bishop Auckland)

I was coming to that. I am most anxious not to shirk any question from a sincere enquirer after truth. I was going on to say that surely this state of affairs cannot be defended, and the question is how it can be avoided. The Chancellor has not done it. Very broadly, the answer is that if we are going to prevent this injustice—and hon. and right hon. Gentlemen on both sides of the Committee agree that it is an injustice—it can be avoided only by combining with the reduction in the standard rate an improvement in the earned income relief. If that is sufficiently increased, then we do not penalise the people who work as compared with the people who do not work.

This was another criticism I wanted to make, and I am very grateful for having been led thus logically and smoothly to it by the noble Lord and to the Chancellor's selection of the means of reducing the taxation total by 152 million. I say that he should certainly have included a provision for increased earned income relief, even if it meant that he could not give as much as a 6d. relief on the standard rate.

Last year I urged the right hon. Gentleman—I think I actually moved an Amendment during the Committee stage of the Finance Bill—to increase the earned income relief. Labour Chancellors of the Exchequer after the war paid great attention to this aspect of taxation. In fact, we doubled the relief. I myself improved it in two of my Budgets, and Sir Stafford Cripps did the same in one of his. When we came to power in 1945 the earned income relief stood at one-tenth, and when we went out in 1951 it was one-fifth. All that has happened during the last three and a half years when the right hon. Gentleman has been at the Treasury is that it has been increased by a forty-fifth. I think it will be found that two-ninths minus one-fifth equals one-forty-fifth. I have tried to do the calculation very quickly, but I think that is how it works. That is not a very proud record, and I venture to suggest that the right hon. Gentleman would have avoided many of his most shockingly unjust proposals if he had followed our lead in this matter.

So much for the Income Tax reliefs. They have not been well compounded, and it would have been very much better to have dealt with the problem in quite a different way, particularly when the poorest people of all will get nothing out of it but will have to pay an additional 1s. a week in insurance contributions, and also when we take into account the continuing rise in the cost of living from which we have all been suffering ever since this Government came into office, especially after they had solicited the people's votes by saying that they were going to put value back into the . I think this is a slogan that might well be introduced into our forthcoming exchange of ideas, that after three and a half years of Tory rule the was never worth less. All this must be taken into account when judging the rate of taxation on the poorer sections of our people.

We have reached the sad state of affairs about which the Chancellor of the Exchequer told us in February, and this Budget does not approach them in any just or satisfactory way. In 1945 we issued a programme called "Let us face the future." We won the Election on it by a large majority, and we then did face the future. We carried this country through six hard years of unprecedented severity in which we were faced with overwhelming post-war difficulties of every kind, while the Opposition of that day, the Tory Party, sat over on this side in a state of mental disarray and thanked their lucky stars that they were the Opposition and not the Government. We had to take the right and unpopular decisions, and they contented themselves by chucking pebbles from the sidelines.

That was the position for six years following the war when we had the responsibility of power. Not only did we bring this country out of what the right hon. Gentleman the Member for Woodford referred to once as inevitable bankruptcy, when he was talking to President Roosevelt at a critical moment in the war, but we laid the foundations of full employment, and of a more equal, a more Socialist and a more prosperous society. Since then the Tories have had power for three and a half years, and now we are in the mess that we are in. [Interruption.] The noble Lord is getting very excited. I am not going to touch on his Income Tax assessment any more.

This Government after three and a half years of power are going to the country on a programme, not of "Let us face the future," but "Let us run away from the future." They are going to have a quick Election, a vote-catching Election. They are hoping to scramble back to power before their sins find them out. But we shall declare their sins to the electors, and we shall make righteous and constructive proposals of our own. I have no doubt that the verdict of the jury will be. "High time for a change."

4.40 p.m.

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Mr Ralph Assheton (Blackburn West)

The right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) has been very lighthearted this afternoon and we all enjoyed it. I was not surprised that he was light-hearted, because it would have been difficult for him to have made a serious speech on this occasion. Yesterday, I listened with the greatest interest to the speech of the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) and I feel extremely sympathetic with both right hon. Gentlemen. The Chancellor of the Exchequer has brought in a very good Budget and they have found difficulty in criticising it.

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Mr Ralph Assheton (Blackburn West)

I will come to that. The Opposition are in a great difficulty. If hon. Members opposite say, as the right hon. Gentleman said yesterday, that the Chancellor was bribing the voters with Income Tax concessions, that entirely spikes their guns when they come to say that only the rich are benefiting by the reduction of the taxes. They are in a hopeless dilemma and, therefore, they have to think up as many debating points as they can. There is nobody better at it than the right hon. Gentleman the Member for Bishop Auckland, who has enlivened us this afternoon but who has talked a lot of nonsense in the course of the debate.

I want to take up a point which the right hon. Gentleman made about farming. I have been farming for some time and I know quite a lot about it. I must tell the right hon. Gentleman that the farmers are not dissatisfied with the present guaranteed prices.

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Mr Ralph Assheton (Blackburn West)

I can tell the right hon. Gentleman that, on the whole, they are not dissatisfied.

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Mr Ralph Assheton (Blackburn West)

The right hon. Gentleman grumbled, for example, that there was a reduction in the number of acres under tillage. I live in Lancashire, and in that north-western county as well as in a great deal of the west of England, there is land which is much better growing grass than being ploughed for crops. Wartime circumstances, shipping, and so on, forced us to plough up that land, but it was an expensive job and it was not in the interests of the general economy of the country to continue that. Now a great deal of that land is producing good grass and is feeding our cattle.

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Mr Victor Collins (Shoreditch and Finsbury)

In view of that, can the right hon. Gentleman say why the Government continue the ploughing-up subsidy?

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Mr Ralph Assheton (Blackburn West)

The hon. Gentleman does not understand. We have to plough up land even when it is grassland. The criticism is that too much land has gone from under the plough, which is nonsense. The right hon. Member for Leeds, South, said in a dramatic moment: … nothing off tobacco, nothing off beer … nothing off the petrol tax."—[OFFICIAL REPORT, 20th April, 1955, Vol. 540, c. 202.] I thought, what a change from his Budget when he put something on Income Tax and something on the petrol tax and nothing was taken off.

I want the Committee to remember that in all the speeches which hon. Members opposite have made there has been an underlying fallacy. They keep on talking about the Chancellor giving away 140 million of his surplus. That is a complete misunderstanding. The truth is that none of the surplus has been given away. It has all gone into the Treasury. What the Chancellor has done is to reach the wise decision that it is not necessary for him to impose quite such heavy taxation this year as he did last year. The Income Tax payers, of whom there are 17 million, will be asked to find less this year, and 2 million of them will be exempted from tax altogether. To my mind that is satisfactory, and I think that the people concerned will also find it satisfactory. Not only does it benefit every Income Tax payer, but a lower rate of tax encourages people to try to earn more.

Now I come to the charge made by the hon. Member for Gloucestershire, South (Mr. Crosland) that the Chancellor has been inconsistent. The hon. Gentleman made an entertaining speech on the subject and it would have been a fair criticism of a Socialist Chancellor. He forgot, however, that the present Chancellor is a Conservative and not a Socialist Chancellor, and this Budget blows up the idea, which has been propagated in certain parts of the Press that there is such a thing as Butskellism. I am sure that both right hon. Gentlemen will be glad that it has been blown up.

Both the measures taken by the Chancellor, first, on 24th February—I remember the date because it was my birthday— and, secondly, in the Budget are sound Conservative policy and they both fit in together. The dearer money policy does two things. In the first place, it damps down excessive consumption and, secondly, it encourages more saving because the rate of interest is higher. Under present circumstances—not always, but under present circumstances—both these are desirable things to do. The reduction of Income Tax gives encouragement to people to produce more and it also encourages saving. We know what Socialist Chancellors would have done under the same circumstances. We have seen them at it. They would have clamped down on imports and they would have increased taxation in the classical Socialist style.

Some hon. Gentlemen opposite have suggested that this reduction of Income Tax is inflationary. I dispute that argument and I suggest that under these circumstances it is not inflationary. If the Chancellor takes more of the public's money for the Treasury than is needed for Government expenditure, which is what the Socialists always do, it makes every individual in the country poorer because less money is pocketed and wage earners and salary earners and dividend drawers want to increase their incomes to make up for it.

As a result, immediate pressures arise. The unions put pressures upon the employers, the shareholders put pressures upon the directors of companies, the manufacturers, very likely, have to increase their prices. All that leads to more inflation, so that excessive taxation is one of the things which causes inflation and reducing it therefore reduces inflation.

Another point is that an increase in Income Tax makes all business people less careful of their expenditure. It is quite natural. The feeling that a Chancellor will pay for a large part of what the business spends tends to make people extravagant, tends to make them buy things which, otherwise, they would not have bought. All that adds to the inflationary pressure. If, however, the money is left in the pockets of the taxpayers, which is the plan of the Chancellor and which is Conservative policy and which is the policy of the Liberal Party—if there are any of them here to listen— a lot of it will be saved and it is out of savings that new capital is provided.

This point is proved by the White Paper on National Income and Expenditure, which was published recently. In the last three years of the Socialist Administration savings were 147 million, 132 million, and 273 million. Under the present Administration, savings have amounted to 690 million, 910 million, 909 million. Those are substantial savings.

Labour Members grumble that 40 million of this remission of taxation will go to industry, but surely they understand that this money will enable industry to undertake more re-equipment and that it will reduce the necessity for going to the capital market by making it possible to do more out of their own resources. That, again, tends to make less demand on the capital market and also counteracts inflation.

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Mr Moss Turner-Samuels (Gloucester)

Does not the right hon. Gentleman agree that it also enables the companies to pay higher dividends and that some Tory newspapers have already referred to the Budget in that respect?

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Mr Ralph Assheton (Blackburn West)

I quite agree that it enables the companies to pay higher dividends, but it also enables them to put in new machinery and new plant and many other desirable things.

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Mr Ralph Assheton (Blackburn West)

The figures in the Economic Survey prove that what the hon. and learned Gentleman has said is not true.

I think that excessive taxation leads to excessive Government expenditure. Whenever there is a large Budget surplus, the Departments, not unnaturally, are tempted to ask the Treasury for more money. Governments are notorious spenders, and it was excessive expenditure more than anything else which reduced the value of the and drove us to devaluation in the time of the Socialist Administration. If possible, we want to see the value of the maintained, if for no other reason than that it is not honest to borrow money and then repay it later when it is worth less. That may sound very simple but it is a test of the nation's honesty, and nothing deters savers more, quite naturally, than to think that their money is losing its value and that when they get it back it will be worth less than when they saved it.

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Mr Ivor Thomas (The Wrekin)

Would the right hon. Gentleman explain, if that is the purpose and has been the consistent aim of the Government, why it has been the consistent result of Government policy over the last 3 years that the value of the has steadily dropped?

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Mr Ralph Assheton (Blackburn West)

I think the hon. Member knows the answer to that. It has never been the consistent policy of this Government that the value of the should drop, and I do not believe that it was the policy of right hon. Gentlemen opposite that the value of the should drop. What happened was that the value of the went down and down and down in their time, and the present Chancellor of the Exchequer has checked that. [HON. MEMBERS: "No."] Yes, he has.

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Mr Hugh Dalton (Bishop Auckland)

Speaking as one elder statesman to another and delighting in the debut of the young, may I remind the right hon. Gentleman that the first answer which the new junior Minister at the Treasury gave in the House shed a flood of light upon the realities in that he informed one of my hon. Friends that the , which was worth 20s. when the present Administration came into office, has now shrunken to 18s. 6d.?

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Sir Edward Boyle (Birmingham Handsworth)

The right hon. Gentleman will also remember that I said, not once but twice or three times, that the standard of living of the average wage-earner has risen under this Administration.

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Mr Ralph Assheton (Blackburn West)

I entirely agree that the value of the has not yet been stabilised. I said that the Chancellor and this Government had checked the fall.

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Mr Moss Turner-Samuels (Gloucester)

Was it not a definite election promise in 1951 that, if returned to power, the Tory Party would make the worth more? In fact, it is worth less.

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Mr Ralph Assheton (Blackburn West)

I can only assure the hon. and learned Gentleman that I for one made no such promise.

Let us look at what happened when the right hon. Member for Bishop Auckland was Chancellor of the Exchequer and when Sir Stafford Cripps was Chancellor of the Exchequer. When they were in power, the party opposite budgeted for enormous surpluses, which meant that they were trying to impose forced savings on the people of this country. That is what it meant. That brought about the almost total disappearance of personal savings, which was a remarkable phenomenon in a thrifty community. That is what happened then.

Under the present regime, incomes have greatly increased but so, too, have savings. In the last two or three years private individuals have not spent all their income, and if my right hon. Friend pursues his policy and reduces taxation still further next year, as I hope he will, then there will again be further increases in savings and a further steadying in the value of the .

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Mr Ralph Assheton (Blackburn West)

I am coming to that. All these arguments from the opposite side of the Committee are not very relevant, in my view, to a country which lives under a capitalist system and to a community which relies largely on personal incentive. Taxation can be much too high—and much too high it has been and still is, as the Chancellor told us. For goodness' sake let us be realistic and appreciate that we are living under a capitalist system and not under the kind of system which the Socialist Party would like to have. Let us be realistic and cut our coat according to our cloth and act according to the circumstances in which we find ourselves.

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Mr Ralph Assheton (Blackburn West)

The right hon. Member for Leeds, South said yesterday that he accepted the challenge of the forthcoming Election—eagerlv, gladly."—[OFFICIAL REPORT, 20th April, 1955; Vol. 540, c. 204.] So do we—

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Mr Ralph Assheton (Blackburn West)

—but we are much more confident than the right hon. Gentleman, because we know that the people of this country do not want a return to restrictions and to rationing. Right hon. Gentlemen opposite complain very much when we on this side of the Committee say that under a Socialist Government there will be a return to rationing. I know quite well that they do not want a return to rationing. All we are saying on this side of the Committee is that if their kind of economics are followed and their policy is pursued, rationing is an inevitable consequence.

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Mr Ralph Assheton (Blackburn West)

Hon. Members opposite say that that is not so, but my view is that it is so, and that is the case which we are putting forward from this side of the Committee.

I was very glad of the concessions made to people with small incomes and to married people and I was also very glad that the Chancellor followed the advice of my hon. Friend the Member for Tynemouth (Miss Ward), who has battled so hard and so long for those who are living on small fixed incomes, particularly when they are over 65 years of age. I think that the whole Committee will have been glad to see that concession, which is a very proper and human concession.

I want to say a word about textiles.

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Mr Ralph Assheton (Blackburn West)

I shall say enough, and if the hon. Member wants to know anything more he can ask me questions.

I want to say straight away that the concession which the Chancellor has made will be of some help to the industry—of some help. There is no doubt whatever about that. I have made careful inquiries during the last 24 hours and I have found that many people in certain sections of the industry will be helped by the concession; and I am, therefore, grateful to the Chancellor of the Exchequer for it. But I very much wish that it could have been greater.

The Financial Secretary to the Treasury yesterday explained the technical difficulties of trying to abolish completely the tax on cloth without making a corresponding abolition of the tax on clothing. The case which the Government made was that they could not afford the whole 40 million which would have been necessary if the whole tax had been removed from textiles and were, therefore, unable to reduce the tax on these cloths and furnishing fabrics below 25 per cent.

That is, perhaps, a strong technical case, but none the less we cannot overlook the fact that Purchase Tax is a bad tax and that is affects Lancashire's industry particularly harshly. It was a tax introduced in the war for the purpose of restricting consumption and it is now carried on, and has to be carried on, generally as a means of raising revenue. As hon. Members know, I have campaigned for a long time against this tax on textiles because of the particular effect which it is liable to have on our export trade. It is very important that we should produce the best quality goods, because those are the only goods which we can successfully sell nowadays in the world markets. We can no longer compete in the world markets in the cheaper end of the trade.

I am very glad that in the last few weeks of my sojourn in the House of Commons, which has been a long one, yet another reduction has been made in Purchase Tax, and I beg those hon. Members who will be in the next Parliament to continue this struggle for something which I am quite certain is in the interests of our export trade and of the great textile industry of the county of Lancashire.

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Mr Moss Turner-Samuels (Gloucester)

Would not the right hon. Gentleman agree that this reduction in Purchase Tax affects the very high quality goods, which bear a correspondingly high price, and, therefore, will not affect the public to a very large extent?

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Mr Ralph Assheton (Blackburn West)

That is not so. The point about the Purchase Tax is that goods below the D-level are free of tax, so that the very cheapest goods will not be reduced in price, but what we want is a greater encouragement for the production of good quality goods, which are so important to the export trade. There- fore, if we can reduce the Purchase Tax on the higher quality goods, there will be a better chance in the export markets.

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Mr Moss Turner-Samuels (Gloucester)

I was referring to a statement made by a Gloucester trader in the Gloucester paper yesterday. He said that this change would affect merely high quality goods which carried a correspondingly high price and would not very much affect the ordinary people.

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Mr Ralph Assheton (Blackburn West)

I do not suppose that the people in Gloucester know as much about the textile trade as we do in Lancashire. I can only suggest that the hon. and learned Member for Gloucester (Mr. Turner-Samuels) consult his hon. Friend the Member for Nelson and Colne (Mr. S. Silverman), who is sitting near him, when he will learn a great deal more about the cotton trade than he knows at present.

It want to come to another aspect of the problem, and that is the question of imports from overseas. In Lancashire, we are increasingly anxious to hear the decision of the Government. I know what an extraordinarily difficult problem it is for the Government to solve. It is no good pretending that it is an easy problem, because it affects not only our trading interests all over the world, but agreements which we have made from the Ottawa Agreement onwards.

No one can suggest that this problem can be easily or rapidly solved. Every hon. Member of the Committee is under an obligation to contribute what he can to a solution of the problem and not carp and criticise the whole time. The people in Lancashire, who are understanding, know that is a difficult problem and that the Government are trying to solve it and they are not likely to take the same sort of attitude displayed by the right hon. Member for Bishop Auckland.

I want to end—

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Mr Samuel Silverman (Nelson and Colne)

Has the right hon. Gentleman no other word to say on this occasion about the state of the cotton trade in Lancashire and what help the Chancellor's proposal will give? He knows, as I know, that, quite apart from party, there is very great anxiety in Lancashire. The trends are not promising. Does the right hon. Gentleman have nothing else to say to the Government on that subject?

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Mr Ralph Assheton (Blackburn West)

I have said a great deal on the subject before and this debate is not the appropriate opportunity for making a long speech on the textile industry. I have said what I wanted to say. The Government are at present engaged in most active and important negotiations and it would be very unwise to say more at this stage; and I do not propose to do so.

Perhaps I may be allowed to end on a non-controversial point. It is that I have made many speeches in the House and in Committee over the last 20 years and I should like to take the opportunity of paying tribute to the civil servants who help us so much in these financial matters, the civil servants in the Treasury, the Board of Inland Revenue and the Board of Customs and Excise, to whom we give considerable trouble in these Budget and Finance Bill debates. They treat us with a great deal of courtesy and carry out their duties as well as they possibly can. I should like to thank them for the help they have given us during the many years that I have taken part in these debates.

5.3 p.m.

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Mr Archibald Manuel (Central Ayrshire)

The right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) will forgive me if I do not follow too closely the points with which he has been dealing. I disagree almost completely with the whole trend of his speech, and I think that that will become apparent as my own speech develops.

It appears to me that when the Chancellor of the Exchequer was introducing his Budget proposals he tried to create the impression that he was doing the best thing that could be done for the country and the people at this particular time with the surplus at his disposal. However, we must remember that he has used only approximately half of the surplus he had, 155 million, still leaving him 148 million. We must recognise that when he introduced the Budget it was fairly obvious to any keen student of facial expressions and human nature that, while he tried to create the impression that he was doing the correct thing, at the same time he seemed to be most anxious and worried about the future.

We can understand the cause of his anxiety. It is quite apparent to all of us who take a political interest in the levels of exports and imports that the Government are in a sticky position. It is no secret to the Committee or the country that the Government have no great expectations of clearing up the economic difficulties during the course of the coming summer and that they believe that there is a distinct possibility that by the autumn things will be economically very difficult for the Government, no matter which party is in power.

In trying to justify his proposals, the Chancellor said that he wanted to give encouragement to employers and workers a like—I imagine a very difficult job, but that is what he said. He met that position by a reduction in the standard rate of Income Tax of 6d. in the . My right hon. Friend the Member for Bishop Auckland (Mr. Dalton) today completely exposed that hollow claim by showing that the vast majority of decent working-class people earning a weekly wage will not be getting Income Tax relief at the rate of 6d. in the but will be getting any relief they receive at the 3d. rate. The first thing we have to get known is that this is not a 6d. relief for the people who are producing the goods. The people who produce the wealth of the country are to get only 3d. in the relief while those who draw unearned incomes will get 6d. in the .

To me the position is much worse than that, because there is a large sector of the working class which will get no relief at all from this Budget, nothing whatever. The actual position is that the wages of 9 million workers are far too low for them to pay any Income Tax. It has always been part of our philosophy on this side that the under-dog should be helped when we have money to help, that if the Government have a surplus at Budget time their first concern should be for the weakest sections in the community. On this side of the Committee we can make no compromise with poverty. That is what the Chancellor is doing. He is making a compromise with poverty conditions which are being experienced by many of those 9 million families.

These workers and their families do not get anything from the Budget. Their position is becoming steadily more difficult because of rising costs, especially the rising cost of food. The Chancellor has increased their difficulties by the steps he has already taken in the restriction of hire purchase, his dearer money policy and with the Public Works Loan Board's rate of interest to local authorities which is now being increased. This means dearer building costs, dearer schools and hospital extensions.

Consequently, and inevitably, this will involve higher local rates. That is inevitable. I am told by local authorities in my area that if their housing programmes are to proceed at the same tempo as they have in the past, inevitably local rates will have to be increased. Also rents will have to go up. I know that the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) is not as concerned as I am. Possibly the Tory local authorities which he represents are not building the number of houses that those in my area are building, and possibly they are fixing higher rents and therefore will not need to put up the local rates.

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Viscount Hinchingbrooke (South Dorset)

I am just as concerned as the hon. Gentleman. That was why I wished to interrupt. The hon. Gentleman has neglected altogether the fact that the housing subsidy levels are fixed in June and that until we get to June we shall not know what those levels are. They may well go up—we cannot say for sure—so as to liquidate the untoward situation which the hon. Gentleman is discussing.

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Mr Archibald Manuel (Central Ayrshire)

I should like to think that that was possible, but the pronouncements of the Government, especially with regard to Scotland and Scottish housing, give me no hope at all that Government subsidies will be increased. Any Minister will tell the noble Lord that if he asks. The Government do not intend to increase housing subsidies.

I ask myself, what could the Chancellor have done? What steps could he have taken to do something to help these 9 million wage earners who do not pay any Income Tax and who have not been considered in the Budget? He could have given more help to local authorities for for their building programmes, especially their housing programmes. If we analysed the position we should find that most of these 9 million people live in the worst and most congested housing conditions.

An analysis would show that the illness rate among that section of the community is higher than that of any other section. We should remember that the Government are retaining the charges under the Health Service. That is another direction in which the Chancellor could have helped these people. We still have the Health Service charges, and we have a sure indication of what they are doing to the Service. There has been a falling off in the dental and optical services. Possibly that was the reason why the charges were introduced; whether it was or not, we have now got the position confirmed that dental work is not being done to the extent that it was under the Labour Government.

We are concerned that the people for whom we introduced the Health Service—we wanted it to cover every man, woman and child—should get its full benefit. I am most keen on this subject. For long years I have devoted myself to public health work in a local authority. I argued for a free health service for 20 years before coming to the House, often when it was unpopular to do that. Eventually, the Service was accepted by the people as a tremendous step forward.

The Chancellor could have given relief from some of the charges. Can any of us be proud that we still have a system of charges for surgical boots for cripples? Is not that something which the Chancellor could have considered? Are not we all aware that cripples, because of their infirmity, are already denied the chance to earn reasonable wages? Their infirmity already has a crippling effect on their economic standards; yet the Government introduced charges so that they must pay for the surgical boots which they must wear in order to get about. The Government are retaining those charges in their entirety. I am pleased that when the Labour Government come back we shall sweep all those charges away.

The Government still retain the charges for other appliances such as those used by disabled miners and sufferers from varicose veins. There are charges for the bandages which we used to provide on a doctor's certificate. There were many gibes thrown out that many working-class people were getting far too much from the Health Service. I never accepted that gibe. It was not at all carefully thought out. What the Tories were saying was that the medical profession was issuing certificates which ought not to have been issued.

Nobody can get one farthing's worth out of the Health Service until a certificate is issued by an optician, a dentist or a doctor. If the doctors were treating the Service loosely, that was no justification for the Chancellor not considering whether he could ease the position of the people whom I have mentioned. The same remarks apply to the 1s. charge on a prescription.

The Chancellor claimed that there should be more incentives to production. The same matter was dealt with by the Minister of Supply today in an excellent speech. I did not agree with most of it and I want to deal with one point about incentives to industry, because he was quite wrong. He appeared to take pride in the amount of capital investment by industry. The tenor of his remarks was that there must be investment. The Chancellor claimed that there had been a satisfactory increase in investment in the manufacturing industries during the past year.

We know from the Economic Survey that the figure was 125 million, but when we analyse that figure some revealing light is thrown on the position. How was the 125 million divided as between nationalised industry and private industry? Nationalised industry—or publicly-owned industry, to put it in a way which makes it more clear—invested 78 million and private industry invested 47 million.

I have heard criticisms of the nationalised industries on many occasions, but I do not think that any hon. Gentleman opposite—I am sure that the noble Lord the Member for Dorset, South would not attempt to do so—would suggest that 78 million would have been spent in the proportion in which it was spent, either in the coal industry or the transport industry, had they still been in private hands; and the investment which the Chancellor was proudly proclaiming would not have been so high had we not these nationalised industries.

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Mr William Shepherd (Cheadle)

The hon. Gentleman seems to be putting forward the point of view that an unappre-ciable volume of investment went into private industry—

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Mr William Shepherd (Cheadle)

Would the hon. Gentleman be good enough to tell the Committee which major British industry in private hands he believes ought to be spending more money on investment than it is now doing?

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Mr Archibald Manuel (Central Ayrshire)

Well, many of them. Possibly I.C.I. would be an outstanding example; at any rate it has the ability. If one looks at the dividend returns, one could mention a whole list of industries where the dividend returns—in fact I can hardly find words to express what I feel about returns of that kind when I consider that 9 million people do not even pay Income Tax. However, I wish to develop the point I was making.

My point is thrown into clearer relief if we remember that the nationalised industries, having a capital development amounting to 78 million, control approximately only 20 per cent. of our economy.

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Mr Archibald Manuel (Central Ayrshire)

I will give way to the hon. Gentleman in just a moment.

The nationalised industries control only 20 per cent. of our economy and have spent 78 million. Private industry, the manufacturing industries, representing 80 per cent. of our economy, spent only 47 million. I have worked out the figures a little further. That 47 million represents four-fifths of the economy of this country, and those figures broken down represent 12 million to each fifth of the economy in the private sector. If we refer again to the other fifth of the economy—that is 20 per cent.—controlled by the nationalised industries which spent 78 million, it is six and a half times more—12 into 78—than the private sector spent. I consider that a revealing fact.

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Mr James Hutchison (Glasgow Scotstoun)

Would the hon. Member tell me where he finds this dissection of the 125 million of new investment in 1954 in industry as a whole? I cannot find this breakdown of 79 million for the nationalised industries in the White Paper.

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Mr Archibald Manuel (Central Ayrshire)

I can assure the hon. Gentleman that it is there. I will obtain the figures for him. I was supplied with them yesterday. I do not wish to detain the Committee, but I can assure the hon. Gentleman that is where they come from.

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Mr James Hutchison (Glasgow Scotstoun)

After all, it is rather an important point in the hon. Gentleman's speech.

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Mr Archibald Manuel (Central Ayrshire)

It is in the Economic Survey. Would the hon. Member look at page 23 of the Economic Survey?

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Mr James Hutchison (Glasgow Scotstoun)

It is not there. I apologise for interrupting the hon. Gentleman further, but it is very material to fix that figure. I have searched page 23 and I find, of course, that fixed investment in industry is 125 million. In Table 12 it is split up between the nationalised industries and private industry. But I wish to follow the argument of the hon. Member—I am not trying to catch him out—and I should like to know where is his figure.

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Mr Archibald Manuel (Central Ayrshire)

I am sure that the hon. Member is not trying to catch me out, and I want him to believe that I am giving a perfectly genuine figure which has been checked and which was indicated by the Chancellor when he introduced his Budget. I am quite sure that the hon. Member can obtain confirmation of the figure from the Minister if he desires it. The figure was not mine originally; it was the Chancellor's.

However, I wish to refer to another figure. The Chancellor dealt with the rise in incomes and he indicated that property incomes had risen. I was intrigued with the way in which he designated it. He said that rent, interest and dividends had risen. He did not say just how they had risen, but that they had risen by 60 million—I hope that the hon. Member for Scotstoun has obtained a satisfactory answer.

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Mr Archibald Manuel (Central Ayrshire)

The figure had risen by 60 million. The Chancellor followed that up by indicating that there had been a substantial rise in wages and salaries during 1954 amounting to 645 million. There is no comparison between these two figures at all. I do not think we can relate them.

How many people shared the 60 million? I suppose it was the people with unearned incomes. That would be the only figure which comes anywhere near that figure of 60 million. When we are talking about wages and salaries and the figure of 645 million, we have to relate that to a figure of 24 million people in this country. If we divide the 645 million by 24 million, we get a breakdown figure of 10s. per week.

An ordinary family with three children would receive 2s. per head. Is this the great incentive which is supposed to give us all the added and necessary production in the future? No. We shall have to have something better than that from the Chancellor. This Budget does not help those families most in need of help. Substantial Income Tax concessions are given to people already comfortable and well off, and I wish to quote only two figures in this connection.

A married couple with three children, with an income of 600 a year, will obtain tax relief of 4s. 2d. per year—which is barely 1d. a week. A married couple with three children and an income of 10,000 a year will get relief amounting to 242 a year—nearly 5 a week. There is not much incentive for the family receiving 1d. a week. There are kiddies in our streets who go out with 1d. to buy sweets and get one sweet if they are lucky. Sometimes they do not even get one sweet, because some sweets cost more than a penny.

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Mr Cyril Bence (Dunbartonshire East)

And the man has to pay 1s. extra National Health contribution.

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Mr Archibald Manuel (Central Ayrshire)

As my right hon. Friend the Member for Bishop Auckland explained, when we are considering the relief afforded to them by this Budget, we must always remember that the Chancellor has already taken 1s. a week from them to help to pay for the increased old-age pensions. So they are paying both ways.

The example I have quoted is the one which I shall be using in Central Ayrshire. A working man earning approximately 12 a week will get 4s. 2d. a year Income Tax relief, which does not amount to 1d. a week. But a family of a similar size with an income of 10,000 a year will get 242 tax relief a year—approximately 5 a week. That will be quite a good thing for the miners, steelworkers, railwaymen and shipyard employees in Central Ayrshire to chew over.

I am sure that, after inspection, it will be recognised that this Budget is a most weak and inefficient attempt to meet the present position. I am sure that the workers of Central Ayrshire and the rest of the country will recognise it as a flimsy piece of window dressing. If it is intended to be a challenge for the Election on 26th May, we gladly and willingly accept it. I am convinced that the broken pledges and the attempt at bribery which is contained in the Budget will cause our people to turn out this reactionary Government and get back upon the road to progress by returning a live and progressive Labour Government once more.

5.31 p.m.

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Viscount Hinchingbrooke (South Dorset)

The speech of the right hon. Member for Bishop Auckland (Mr. Dalton) covered very much the same ground as that of his right hon. Friend the Member for Leeds, South (Mr. Gaitskell) yesterday, but he went rather further than his right hon. Friend, in regard to the Parliamentary position. He instanced a very large number of indirect taxes which he thought the Chancellor should have remitted, but he neglected to say that each of them would occupy a Clause in the Finance Bill.

That would lengthen the proceedings, give the Labour Opposition every chance to amend the Bill and to spin out the Parliamentary activity upon it, with the clearly designed objective of putting further away the time at which the General Election is to be held—which, to the party opposite, is extremely inconvenient. The right hon. Member for Leeds, South said that his party was ready and eager for an Election, but it is obvious that the effect of the demands of the right hon. Member for Bishop Auckland would be to put off the Election.

The right hon. Member for Leeds, South made a number of very elaborate debating points against my right hon. Friend, and there was a good deal of sharp electioneering in his speech. I thought that for once he deserted his normal style of accurate reflection of the facts—his habitual official ex-Chancellor attitude—and really got busy. He roused a great deal of enthusiasm among the party opposite, which did not surprise me, and, in a sense, confirmed my profound feeling that those cheers foreshadow the castastrophe which will befall the Labour Party when polling days comes. I will give the reason before I conclude.

The right hon. Member for Leeds, South, who spoke yesterday, started by criticising production under this Government, and said that under the Socialist Government it had risen at about twice as fast a rate as it has under the Conservatives. Of course, that may be so; starting with almost no production at all—which was the situation which existed at the end of the war, if one switches over from war to peace production—even the adding of one to one makes two, which is a 100 per cent. increase.

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Mr Lynn Ungoed-Thomas (Leicester North East)

The hon. Member surely recognises that the figures which my right hon. Friend gave were for the years from 1948 to 1951. He did not use those for the years immediately after the war for the very reason to which the hon. Gentleman has referred.

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Viscount Hinchingbrooke (South Dorset)

No. I have a quotation of the right hon. Gentleman's speech which refers to the years from 1946 to 1951, when the increase was 35 per cent. Those were the years he gave, and 1946 was clearly the basic datum line which he took, when there was very little civilian production, due to war conditions. In those circumstances it is an amazing fact that, so long after the end of the war, we have been able to add, year by year, a 6 per cent. or 7 per cent. increase in production.

The right hon. Gentleman went on to deal with the nationalised industries, as did the hon. Member for Central Ayrshire (Mr. Manuel), and claimed credit for the fact that the nationalised industries had received a great deal of capital, whereas the private section of industry had been starved. My right hon. Friend the Minister of Supply gave the present figures for the private section. I must confess that, at times, this situation has caused some anxiety to back bench Members on this side of the Committee. I remember mentioning at one time, in connection with expenditure upon the roads, that enormous sums of money had been put into the nationalised electricity industry, the gas industry, and into coal. In the case of electricity and gas there have been fortunate results, but in the case of coal, with its long and bitter history, connected with the party opposite, the results have been less fortunate.

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Mr David Pryde (Midlothian and Peeblesshire)

May I remind the noble Lord that his party was also connected with its history?

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Viscount Hinchingbrooke (South Dorset)

If the hon. Member wants to interrupt, I shall give way—if he has a specific question.

The point is that the Treasury guarantee—which is automatically given to the nationalised industries—coupled with the facilities which post-war Governments of both types have given for capital to be made available out of the Consolidated Fund, Exchequer grants and so on, has made the necessary resources readily available to those industries. It has had good results with some and less good results with others, but on balance, when one considers how successful we are in exporting aeroplanes, motor cars, textile goods and all other types of material, it has not had a very serious effect upon non-nationalised civilian industries.

The right hon. Gentleman went on to deal with the balance of payments position, and painted a very gloomy picture of the downward trend this year. I have been looking up the figures in this connection since the end of the war, and I find that they are extremely satisfactory for the years from 1952 to 1954 and pretty miserable for the period from 1946 to 1951. In 1952, from January to December, the balance of payments surplus was 259 million; in 1953 it was 217 million and in 1954—to the end of December—it was 160 million. Those are all pluses, and if there has been a slight drop in the last months we hope that it will be overcome by the measures which my right hon. Friend took in February, when he raised the Bank Rate.

That is a satisfactory record of a continuous yearly surplus in our balance of payments, compared with the years of the Socialist regime.

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Viscount Hinchingbrooke (South Dorset)

In 1946 it was minus 298 million; in 1947, it was minus 443 million; in 1948, it was minus 1 million; in 1949, it was plus 31 million, and then came the drastic slump in 1951, when the Socialists ran away from office and left us to clear up the mess; in that year it was minus 453 million.

These are comprehensive, over-all, guaranteed and endorsed figures from official sources, and anything which the right hon. Gentleman sought to discover from his documents yesterday does not seem to me to stand up against them. He talked with great pride about the austerity under his predecessor, Sir Stafford Cripps, which was forced upon the country after the war, and claimed that that austerity enabled us to reach the situation which we have today. But that sort of statement can never be proved.

The fact was that the people of this country suffered a great deal under the kind of shock tactics of previous Chancellors of the Exchequer opposite. They saw the delectable goods of this country, which they could have bought and enjoyed, being sent out of the country by all sorts of techniques and controls, when other policies of a more liberal trading aspect might have filled the shops at home much sooner than they did, leading the industries of this country to a higher standard of productivity, which would have promoted our export trade. In other words, our own policy today.

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Mr Cyril Bence (Dunbartonshire East)

The hon. Gentleman seems to be suggesting that if during the period 1946–51 the Labour Chancellors of the day had not encouraged the export of vast quantities of goods and had kept them at home we would have been in a much better position. If we had done that the huge trading deficits which he has mentioned, instead of being 400 million, might have been 1,000 million.

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Viscount Hinchingbrooke (South Dorset)

I think that the hon. Member was in the House at the time, and he obviously remembers the vast American loans, all the receipts under Marshall Aid that the Americans sent us—hundreds and perhaps thousands of millions of pounds. A lot of that was canalised out of this country and was not allowed to be used to recreate our internal resources.

In spite of the enormous amount of money coming in, the Socialist Government deliberately planned a kind of austerity world in which the industries and homes of this country could not recover in time. They kept on rationing, controls and limitations long after the need had gone.

I come now to another aspect of the speech of the right hon. Member for Leeds, South—the question of taxation reduction; and the right hon. Member for Bishop Auckland dealt with exactly the same point. They both gloried in the fact of being able to impose taxation when they were in office. But when the situation improves and there are concessions to be made they do everything they can to see that these concessions are not returned to the people from whom the tax was extracted.

That is the fundamental, philosophical difference between the party opposite and the party on this side of the House. We say that when times are hard and the country is facing a great war, when it is endeavouring to frame large-scale taxation to suppress inflation or whatever it may be, we tax on a differential scale, and the man who can pay more is obliged to pay more, while those who cannot afford to do so and who are near the borderline do not pay so much, or nothing at all. When we get to a situation in which it is possible to relax taxation we return it to the people from whom it was originally extracted. [Interruption.] I glory in that fact. I have no fears about an issue of that sort at an election. I do not believe that my right hon. Friends on these benches have any fears either. It does not disturb or worry me in the very least.

The philosophy of the party opposite is to tax higher when times are bad, and when times are good to go on retaining the same pattern of taxation with the object of establishing a completely equalitarian society. I do not believe that the people of this country want that. There is nothing to be gained from it.

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Mr William Shepherd (Cheadle)

Is it not the case that, despite this change of a relatively minor character, taxation of the higher incomes of this country as a whole is still at a punitively high level?

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Viscount Hinchingbrooke (South Dorset)

I agree, and there is nothing in this Budget to correct that situation. We have not asked for it.

The same argument applies to dividends. Hon. Gentlemen opposite yesterday and today have expressed resentment on this question of dividend increases. Capital is rising in value all the time, and companies have been making a good profit. The people who subscribe the money to these firms deserve some increased contribution, otherwise we shall not attract further capital into those businesses.

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Mr Charles Pannell (Leeds West)

Does the hon. Gentleman never draw any distinction between the people who work in industry and who do not subscribe and the promoters of companies and those who subscribe by means of the profits produced for them by others?

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Viscount Hinchingbrooke (South Dorset)

The hon. Gentleman has only to look at the graph showing the differentiation between weekly earnings and the cost of living, which I can give to him after this debate, to see the enormously widening margin which has been created by the four Budgets and the four years' policy of this Government, and which goes to increase the standard of living of the wage earner. I was talking entirely about dividends at the present time and the ordinary shareholders who subscribe the money to the firms.

I now come to the last part of my remarks. The right hon. Gentleman the Member for Leeds, South yesterday pulled out the stops and allowed the full organ of his emotions to flood the House. He got his cheers from right hon. and hon. Gentlemen beside him and behind him. He said: The war brought to all of us a greater sense of social unity and cohesion, a determination to do away with out-of-date injustices and inequalities."—[OFFICIAL REPORT, 20th April, 1955; Vol. 540, c. 204.] It did. We all voluntarily allowed our liberties of every sort and kind to be limited for the purposes of the war. There was, not through Socialism, because it was not a Socialist Government, but through the circumstances of the war, greater social cohesion. That still obtains today. There is nothing whatever in this Budget which undermines that.

The right hon. Gentleman the Member for Bishop Auckland used almost the same phrase today: "We did it in the war." Is there some kind of link between Socialism and war? I wonder whether the people of this country will not begin to think that the techniques of Socialism and the techniques of war are the same—enforced restrictions, an attitude that the central Government know what is best for the people, legislation and taxation which implant equality in austerity. I hope that hon. Gentlemen opposite are not going to go to the country and begin talking that kind of stuff, because it will remind people of the war and the circumstances of the war.

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Mr Emanuel Shinwell (Easington)

The noble Lord was in the House, as I was, during that period, and he will recall that when the nation was in grave danger, the Government did not hesitate to institute controls of all kinds.

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Viscount Hinchingbrooke (South Dorset)

We have had this altercation before. My answer then was that that was to meet an external enemy. That is a very different thing. Now we have the threat of the internal enemy of Socialism coming back.

I do not think that at this distance from the war, and with memories of the war fast fading, the people of this country want to see established on them by taxation a new society of equal shares and of equalitarian outlook. I believe that they are leaving that era behind, and that families do not want to be treated exactly alike by a civil servant in Whitehall who sends them all certain types of margarine or builds them certain types of houses. They want to secure an advantage for themselves over their neighbours, and to rise in the social and financial scale by their own efforts and ability, in and into a society where there can be competition in an atmosphere of freedom.

If right hon. and hon. Gentlemen are going to the country with policies and proposals of that old kind they will be turned down at the polls. They might be turned down sharply, in circumstances which reduced them to the position they were in in 1931. That would be a profound pity, because I believe most firmly in the two-party system in this country.

Both the right hon. Member for Leeds, South yesterday and the right hon. Member for Bishop Auckland today raised the bogey that the economic situation of the country would get worse in a few months. I am not saying that the situation is wonderful. My right hon. Friend the Chancellor of the Exchequer showed us in February that it was not. His speech on the Budget, showed that he did not expect a very rosy situation to arise immediately.

What does that mean? It means that the people of the country will tend to put their trust in the party which, by tradition, has always been placed in power when the future was hazardous or uncertain. They did it in 1951, to save the country from an economic crisis created by hon. Gentlemen opposite. If hon. Gentlemen opposite now go to the country saying, "The situation is rather dangerous, the outlook is dark, and we are not too happy about the fortunes of our country," the people will instinctively react by returning us on 26th May by an overwhelming majority.

5.53 p.m

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Mr William Ross (Kilmarnock)

It is rather strange, but all I can gather from the speech made by the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) is that he believes in the two-party system provided that his party is always in power, and that he believes in social unity provided that there are no fair shares. How he can attain social unity without fair shares is beyond my comprehension. He believes in prosperity but not in sharing out that prosperity.

He talked about his theories of taxation. They are more or less traditional to his party: it was right that the rich should get a larger share of any benefits that were going at a time when the Chancellor decided that money could be given away. His idea is that the money should go to the people who originally had it. We have had a Budget in which we know, from the tables, that those whose money is unearned will get greater benefits. It would not be a bad idea if the money of that unearned income went back to the people to whom it originally belonged and who earned it. Has the noble Lord earned his own unearned income? Does he agree that it should go back to the people to whom it originally belonged? The noble Lord may talk about social unity, but he really thinks that we on this side of the House should not be here at all.

We remember the war. We also took part in it and helped to win it. When the end of the war came, the Labour Government started, the noble Lord told us, from nothing. It is nice to get that agreement from someone on the Government side of the House that we started from nothing. If the country can boast today about its prosperity, a little praise should be given to the men who were outstanding, despite the sneers of people like the noble Lord, in building up and planning the prosperity of this country, and who turned aside from easy days and easy ways that we were asked to provide.

We will remember the noble Lord himself going round the country telling people not to invest their money in National Savings. That was the extent of his patriotism, his contribution to national unity.

An Hon. Member:

He ought to be ashamed of himself.

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Viscount Hinchingbrooke (South Dorset)

I never attacked the Savings Movement. I attacked the use to which the Socialist Government put the savings. Curiously enough, the people of this country thought the same thing, and about that time the savings of this country struck an all-time low.

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Mr William Ross (Kilmarnock)

In other words, the noble Lord told the people not to invest in their own country. He talked about the reason for the cheers given to my right hon. Friend the Member for Leeds, South (Mr. Gaitskell). I wondered what was the reason for the silence and the glumness on the Government side of the House. Was it that once again they were facing realism and economic facts?

I well remember the first Budget of the present Chancellor of the Exchequer. Strangely enough it was in the same kind of situation. The Chancellor told us then that balance of payments problems had been with us for 50 years, and had been accentuated by the war. Let Government supporters face the stark realism of what is now before them. The trade gap in the balance of payments in the past quarter, without considering the invisibles, reached 233 million. Nothing that the noble Lord or any other hon. Gentleman opposite says can get away from that unpleasant fact.

Should we not tell the people about it? Should we not tell the people about the gold and dollar reserves which, in the last six months of last year and in the first quarter of this year have been going down? Let the noble Lord remember that in 1950 he and the Chancellor and his friends were pointing to the mounting gold and dollar reserves that had been built up by the sacrifices of our people and by the austerity that the Labour Government had insisted upon.

The present Chancellor of the Exchequer made a speech at the Tory Conference in Blackpool telling us to dip into those reserves to buy timber. Another hon. Gentleman wanted foodstuffs from the Argentine, and someone else wanted newsprint from Canada in order to use up our gold and dollar reserves. What would have happened if we had taken that advice at that time? The gold and dollar reserves which had been built up, and which the present Chancellor wants built up in case we run up against the difficulty of not being able to export sufficient to pay for our imports, would not have been there as a cushion to carry us over the difficult time we had with the Korean War and with the rise in import prices, which upset everything.

It was the Labour Government's austerity in building up reserves that carried us through. It was because we had planned the industrial future of the country and had put more into investment instead of frittering the money away. For instance, among our biggest dollar savers today are the great new oil refineries at Fawley and Grangemouth, which we built out of the American loan and that we were told was frittered away—and told by the noble Lord himself.

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Mr William Ross (Kilmarnock)

Oh, yes.

The fact is that, compared with 1945, when the Labour Government started with nothing, the Conservative Government in 1951 had a very much easier time. After three or four years we now get this double voice. One month it tells us "things are difficult and serious; we must take such and such a restricting measure." It will take more than a few weeks of dearer money to get us out of this situation. Now we are told that we are in a position to give away 140 million.

One thing that the Tory slogans told us at the last General Election was that Government expenditure would be cut down. Has it been cut down? The noble Lord himself spoke of it. Has he seen the figures of Government expenditure in the last four Budgets? We are now spending more than was ever spent in peace-time. The Tory Government, who were going to cut down Government expenditure, are spending 440 million more this year than was spent in the last year of the Labour Government. They are spending over l million per day more than in the last year of the Labour Government.

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Mr Frederic Bennett (Reading North)

I am sure the hon. Member would wish to be fair. If he is to quote the increase in those figures he will quote also the increase in national revenue and income because, proportionately, the figures have fallen.

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Mr William Ross (Kilmarnock)

I am coming to that.

The Tories have many new records to their credit. The first is that Government expenditure is greater than ever. The same applies to local government. We have heard nothing here of increases in rates and of local authorities staggering under the burdens placed on them by the Conservative Government. Another new record is the amount levied in taxation. We are told that taxation is going down, but actually it is going up. This year we are to levy 4,738 million. The figure never was higher.

I know all about the argument about the buoyancy of the economy, that we are producing more, and that more people are working and being taxed, and all the rest of it, but the fact remains that the amount raised in taxation is greater than ever it was under the Labour Government. The National Debt is higher than ever. It has now reached the staggering figure of 27,000 million. The interest on that is another record; 636 million this year—to pay the moneylenders. No wonder the Government cut the food subsidies and raised the amount paid to the moneylenders. Those are records that I do not think we shall see on the Tory posters.

Analysed, this record expenditure by the Government is a measure of their failure to redeem their most important pledge, which was to reduce the cost of living. I am Vice-Chairman of the Select Committee on Estimates, and on the other side of the Chamber I see another member of that Committee. When we go into the expenditure of Government Departments we often find that they have cut down the number of civil servants but that the actual cost of the reduced number is almost exactly the same because salaries have increased. Salaries have increased because the Government have failed in their major promise to the country to reduce the cost of living.

I am talking about the and the cost of living. As compared with its value in October, 1951, the today is worth only 18s. 6d. If we take such essential things as food, coal, and rent, the is worth only 16s. compared with 1951. The hole in the purse is still there, and a few others also. In fact the purse looks like a string bag. The one outstanding political fact of the past years is that the Government, who won their way to power on the promise to reduce the cost of living, to cut Government spending, and to give value for money, have, by deliberate acts of policy, done the very opposite.

They slashed consumer subsidies—and up went prices. By a deliberate act of policy prices went up—and then up went wages. It is perfectly true that, at a time when world prices were falling, when we could have had the benefit of stability in the industrial field, the Government deliberately threw away the opportunity in order to change the whole policy of consumer subsidies.

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Mr William Ross (Kilmarnock)

They did. Does the hon. Gentleman deny that in his first two Budgets the Chancellor slashed the subsidies?

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Sir Edward Boyle (Birmingham Handsworth)

World prices of many foodstuffs were not falling at the time. The prices that were falling were principally those of commodities like tungsten, which one does not eat. I have not the figures here, but that is perfectly true.

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Mr William Ross (Kilmarnock)

The fact is that when we could have made a great impression in the export field by reduced costs, we increased them by increasing the price of food.

I am not talking about imports but about the food subsidies. Increased prices caused a run of increased wages which has not ended yet. More has been granted in increases in the few months of this year than was granted in the whole of last year. We shall see the result of that at the end of the year, when the cost of living will go up many more points. The hon. Gentleman knows it, and that is why we are to have a General Election in May and not in October.

Since January, 1952, therefore, the value of the spent in the grocer's shop has constantly diminished. As compared with that date the is now worth only 16s. in terms of food. The spent on meat in January, 1952, can now purchase only 16s. worth; and on butter and margarine only 14s. 7d. worth. In the purchase of tea and sugar the of January, 1952, is worth only 11s. 11d. We still have the hole in the purse all right.

Conservative freedom may work, but the housewife wants to know for whom it does work. It is certainly not for her. If the Tories want such freedom they must give the same freedom to the men in the field and the factory to ask for increased wages to meet the cost of Tory freedom. Nothing that the Chancellor said held out any hope that he has found the needle in the Tory haystack to mend the hole in the purse. I doubt whether he would have the thread for the needle if he found it.

All this leads me to the conclusion that the worst is yet to come. A Government which failed to reduce the cost of food and other articles when world prices were falling can offer no protection to the housewife today, when import prices are rising. Import prices rose last year by about 7 per cent. It means a much more difficult time for us at home in relation to the balance of payments. In view of what we have been told from that Box today, I am completely mystified as to how the present Government are to deal with that. The only way they are going to damp down consumer demand is by their monetary policy, and the only effective way they can do it is by making prices even more difficult for the housewife, whether for consumer goods or anything else.

The Government do not believe in control. What else is left to them but to increase prices? They know it, but they dare not tell the country. They force up prices by a deliberate policy, and no one knows better than the Chancellor that this has led to increased industrial costs which at once threaten our whole economy, weaken our position in the export drive, and force up Government expenditure. The cost of the Civil Service is one of the biggest costs in Governmental expenditure.

The Government have forced up Governmental expenditure in that way, and have also brought local finance almost to breaking point. Little wonder that it is difficult to get candidates at local elections. It is all very well for us here in London, but a local councillor living in a small town has to face his people every day. With rising rates and the complexity of his task, it becomes increasingly difficult for him to meet the new tasks before him.

Tory policy has brought vexation, hardship and daily worry to millions of lower paid workers, widows, retirement pensioners and men and women striving to retain their pride and independence on small fixed incomes. I have said before what I think of this Government's shameful treatment of the aged. They have given too little and too late.

The Government talk as if the retirement pensioners have got something. But these pensioners do not get it until next week. Even then, some of them will get only half-a-crown, and they have to wait another week for it, if they can. For many, as their pension goes up by 7s. 6d., their supplementary pension will come down by 5s., leaving 2s. 6d. to meet all the increases deliberately brought about by this Government.

The Chancellor has made great play about putting the Budget into its proper economic setting. I wonder whether hon. Members opposite ever try to put the workers or the housewives into their proper settings. The hon. Member for Glasgow, Scotstoun (Mr. J. R. H. Hutchison) should appreciate this point, because he will have to face it. In Scotland the postman is delivering daily demands from landlords for increased rents. No complicated calculation was necessary to ascertain the consequence of the Housing (Repairs and Rents) (Scotland) Act, namely, a straightforward increase in rent of 40 per cent., or 8s. in the . It is having its effect now.

People did not have to wait until the last week in April for that effect, as the old folks are having to wait for their increase in pension. It has already started—and this rent increase is going to apply also to widows and pensioners. Three weeks ago the tenants in Barleith, which is a small community outside Hurl-ford, in my area, and the people in Bonnyton Square in Kilmarnock, received one of these demands for an increase in rent ranging from 2s. to 4s. a week. There is no guarantee that these people will get any benefit from this Budget, but every one of them has got to pay the extra 1s. National Insurance contribution in June, as well as this increase in rent. They have got to face up to the increase in the cost of living.

Let us take the average increase as 3s. a week. Including the extra 1s. for National Insurance, this will represent an extra 4s. a week for the average working family—10 8s. a year more as a direct consequence of Tory policies. How does the Budget fit into those circumstances? How does the 6d. off the Income Tax fit into those circumstances? To get a benefit of 10 8s. a year, a married couple without children would need to have 1,200 a year. Not many of the railway workers in my constituency get that kind of wage. A married couple with one child would require to have 1,000 a year, and a married couple with two children would need to have 800 a year.

That does not fit in at all realistically with the social background into which the Government are trying to fit this Budget—increased rents and increased National Insurance demands. To talk of social unity in such circumstances is sheer nonsense and hypocrisy. Even with all their wage demands, engineers, railwaymen and weavers in my area have not attained 16, 20, and 25 a week.

This Budget fails to remedy the economic dangers that threaten our prosperity and social inequalities which undermine that social unity of which we have heard. The rich become richer by this Budget and the poor are ignored. The wealthy companies, after a glorious year of profit-taking—and we only have to read the newly issued "Financial Times" today to see how well they have done—are to be given another 40 million, while the most poorly paid people are merely told to work harder to pull the country through and to increase exports.

I cannot close without adding my voice to the appeal which was made by my hon. Friend the Member for Edinburgh, Central (Mr. Oswald) last night about the meanest of all cuts—the cut in the parents' pension which was granted as a token of national recognition of the sacrifices of their sons in the cause of Britain and freedom not so long ago. The noble Lord the Member for Dorset, South said that we are trying to get away from the war. But there are some people in this country who will never be able to get away from the war because they lost so much. They were granted by the Labour Government a token pension based on what was reckoned would have been the son's contribution, taking into account their circumstances.

At a time when the free nations require above all moral strength and an abiding spiritual purpose upon which to draw, that action of cutting that pension can only lead to the spreading of cynicism which is the greatest danger I know to democracy. Two days ago I sent to the Minister of Pensions and National Insurance details of two cases, one relating to an old lady of 73 and one concerning a man of 80. The Government have informed them that when their retirement pension goes up, in one case the parent's pension will be reduced from 13s. 6d. to 6s. and in the other case it will be reduced to 5s. These pensions were granted eight or nine years ago, and it was reckoned that they might give some help to the ageing parents. With these cuts, and taking into account the changing value of money, these pensions are equivalent to a 1947 pension grant of about 4s.

Would any Scottish son insult his parents by giving them 5s.? When his own wage packet is getting bigger and things are becoming more difficult for his parents, would he reduce his contribution to them? But that is the attitude of the Tory Government, the people who decorate their platforms with the Union Jack. If it was correct to grant a pension of say 1 in 1947, the Government, instead of reducing the pension, should now be increasing it, because of the change in the value of money, to 30s. Or do they reckon that the purpose of this pension was merely to keep these people at subsistence level?

We hear talk about social unity, but this kind of thing rots social unity. If for nothing else, the Government stand condemned for this act of meanness, and should be got rid of at the earliest possible moment. I welcome the forthcoming Election. I do not know whether the hon. Member for Scotstoun welcomes it, but he will at least know where he is after the Election, and I am sure that, like many other hon. Members on the benches opposite, the result will not entitle him to come back to this House.

6.20 p.m.

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Mr James Hutchison (Glasgow Scotstoun)

Let me straight away answer the hon. Member for Kilmarnock (Mr. Ross). I, too, welcome the Election. I have listened to a series of speeches today and yesterday, including two from ex-Chancellors of the Exchequer and one from the hon. Member for Kilmarnock, which were pure electioneering propaganda. If anything is needed for the benefit of this country, it is that grave problems such as those we are considering at present should be considered in a dispassionate frame of mind with things like Elections far away in the background. We do not get a proper, fair analysis of the situation until we have an Election out of the way.

Before I come to what I hope will be constructive remarks of my own, I should like to deal with three of the speeches which have been made. I should like to comment on one or two points made by the hon. Member for Kilmarnock. He will, I hope, excuse me if I do not go into the difficulties of the Housing (Repairs and Rents) (Scotland) Act, because that is a long and complicated story, but there are answers to the problems which he put forward. I should like to comment for a moment on his remarks about the gold and dollar reserves, in which he seemed to suggest that whereas our predecessors had built up those reserves we had frittered them away.

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Mr James Hutchison (Glasgow Scotstoun)

I am glad the hon. Member has put that right. I did not realise that was what he said. In fact, they were rushing down rapidly at the time when we took over from our predecessors.

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Mr William Ross (Kilmarnock)

What I said was that in the last six months of last year and the first quarter of this year, for which we have figures, they were falling. I drew attention to that because we are talking about the present situation and what the country faces.

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Mr James Hutchison (Glasgow Scotstoun)

I quite agree that they are falling slightly, but that should be compared with the situation which obtained in 1951 when we took over and when they were rushing like Gadarene swine down to extinction. We turned them about March, 1952. It is not fair to put the relatively tiny drift which is going on now in that light.

May I comment, next, on his remarks about cutting Government expenditure? If he will look at page 35 of the Economic Survey he will find the expenditure for the last two years set out. I should be glad to know from him what Government expenditure he would like to see cut. He will find that the expenditure on defence has, in fact, been cut between 1953 and 1954.

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Mr William Ross (Kilmarnock)

I drew attention to one figure which I found quite staggering—that the funding of the National Debt was costing 636 million.

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Mr James Hutchison (Glasgow Scotstoun)

I should like to put a question to the hon. Gentleman. I should like to know what he and his hon. Friends would cut if they were lucky enough to be returned to power after the Election. If he says that they would cut defence expenditure, my answer is that defence expenditure has been cut. Perhaps the hon. Gentleman will look at the expenditure on the health services. Does he suggest that the increase in the health services, which we have brought about, should not have taken place? Expenditure on other services has fallen from 349 million to 340 million. Does he suggest that subsidies, which have risen from 345 million to 403 million, should be cut?

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Mr James Hutchison (Glasgow Scotstoun)

Let me finish my list and then the hon. Gentleman can give me his proposed cuts.

Would he cut National Insurance benefits, which have risen from 524 million to 531 million? Or National Debt interest? Or current grants to local authorities? Because when he comes to the next two items—transfers to capital accounts and current grants paid abroad—he will find that they have been reduced.

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Mr William Ross (Kilmarnock)

I do not know whether the hon. Gentleman was listening to me properly. This is the second time I have corrected him. I was drawing attention to the fact that his party fought the last Election using as one of their slogans, "We must cut down Government expenditure," and I was pointing out that over the four years Government expenditure has risen. Comparing expenditure this year with that of the last year of the Labour Government, it is up by 440 million. I was facing the hon. Member with his own promise and his own performance.

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Mr James Hutchison (Glasgow Scotstoun)

It was not my promise. Leaving that aside, I should like to know what expenditure the hon. Member proposes should be cut. He is now saying that we were wrong in not carrying out the cuts. Which cuts would he carry out?

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Mr William Ross (Kilmarnock)

What I said was that the Conservatives were wrong in making a promise to the people and then failing to keep it.

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Mr James Hutchison (Glasgow Scotstoun)

May I pass to the speech of the right hon. Member for Bishop Auckland (Mr. Dalton)? He said a most curious thing and introduced a most extraordinary doctrine. I am not unaccustomed to hearing extraordinary doctrines from the right hon. Gentleman, but on this occasion he said that the situation in Lancashire arose in part from the fact that there was no Lancashire Member in the Cabinet. Where does this doctrine lead us? Does it mean that members of the Cabinet cannot take a broad view about the welfare of the country? Are they to consider all these questions in a parochial light?

This is an extremely dangerous doctrine which the right hon. Gentleman has put forward, and it is as well that the country should know what they may expect from hon. Members opposite and their Cabinet if they are to judge whether the Labour Party should be returned to power. Are Cabinet Ministers to fight in the Cabinet for a section of an industry or a section of the country, ignoring the welfare of the country in general? It seems to me that that is a very curious and a very dangerous doctrine.

The right hon. Gentleman then went on to argue the case about rationing. My right hon. Friend the Minister of Supply had made—and I have heard others make it—what seems to me to be a completely logical case on the consequences which must flow from controls. He said that if controls were introduced, there must automatically follow one of two things: either we must again resort to rationing or else we must have under-the-counter dealings, which means rationing by the purse, as we had before.

The right hon. Member for Bishop Auckland tried to show that this was nonsense, although I thoroughly agree with my right hon. Friend that it is inevitable that if we introduce permanently and on any extended scale a form of control of imports, we shall inevitably end by having rationing. But the right hon. Gentleman pleaded in aid of his argument the fact that Australia had temporarily succeeded in doing this in the case of motor cars and that it had not led to rationing at all. To use that as an illustration of what would happen if we started to clamp down restrictions and controls on the import of foodstuffs is, I think, the most childish form of argument. In any case, I have no doubt that if these controls last in Australia for any length of time, they will have all the disadvantages and the tiresomenesses which we experienced at one time in trying to get a motor car—under-the-counter dealing and trying to jump the queue in order to get a car.

It seems to me that my right hon. Friend's case is indestructible and that if we introduce, as hon. Members opposite propose in "Challenge to Britain," measures of restrictions and control, we inevitably lead either to rationing by the straightforward rationing system or to rationing by the purse. There must be one or the other.

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Mr Cyril Bence (Dunbartonshire East)

The hon. Member suggests that we must have rationing if we impose controls and cut down imports because in the economy in which the imports would be cut we should have under-the-counter dealings. Does he suggest that we should curb the purchasing power of the people and cut down imports in that way? Reducing purchasing power in the country would mean that the people would consume less, and that in itself would cut imports. Is he suggesting that? If he is, I would point out that the Chancellor has done the very opposite.

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Mr James Hutchison (Glasgow Scotstoun)

I am coming later in my speech to an answer to that point, although I would not agree at this stage that the Chancellor has done the reverse.

I come to the speech made yesterday, the electoral extravaganza of the right hon. Member for Leeds, South (Mr. Gaitskell). He was electioneering, no doubt in good form from the point of view of the rest of his party. Among his electioneering slogans he wrapped up certain noble phrases. As was said of a politician in times gone by, he always finds such noble reasons for doing himself a good turn; and he seemed to be doing that in excelsis yesterday.

The right hon. Gentleman said that production between 1946 and 1951 had gone up by 35 per cent. whereas now it was going up very little and very slowly. It is so easy to produce staggering figures of increases in production when one starts from a very low figure. One may produce astronomical results in that way. The right hon. Member should remember that in that period we were in a strong sellers' market when it was easy to produce and sell and, in spite of the difficulties under which this country was suffering at that time, so tough is the fibre of our people and our industrialists that we were able to overcome those difficulties and increase production in the way he indicated.

The right hon. Member went on to say that now our average increase was only 3 per cent. If the Committee looks at the Chart No. 4 on page 25 of the Economic Survey, a very satisfactory, or at any rate a very consistent, result will be found. Comparing 1952 with 1953 and 1954, hon. Members will find exactly the same seasonal fluctuations of the graph following the same contours, each year higher than the other, in each of those three years. I contend that that is quite an achievement. It is one thing to rise from a parlous condition of mere nothing and get an increase in production under those circumstances, but it is a very much more difficult thing, having got that increase, in subsequent years to be able to maintain it and, particularly, to go on increasing it slightly.

The right hon. Member criticised us for our failure on exports, stating that in three years exports had gone up by only 3 per cent., but it must be remembered that that increase took place at a time when we had to deal with the repercussions of the recent strike at the docks, at a time when Germany and Japan were building up their economies and entering the markets in competition with ourselves in ever-increasing strength, and when we were dealing in a buyers' market and not a sellers' market.

I do not think the picture is nearly as gloomy as the right hon. Member tried to paint it. He went on to criticise the decrease in invisible exports, including interest payments abroad and dividends, and he seemed to think that that was a bad situation. Surely if we are trying to re-establish foreign confidence in this country and in our currency, one of the most potent factors to bring about and restore that confidence is to show that our industry is doing well and is able suitably and generously to reward those who invest in it and live abroad. No single factor I can think of is more likely to restore confidence in the than that sort of thing.

The right hon. Member went on to criticise the Stock Exchange boom which has taken place during the last three years or so. I thought it might be interesting to find out exactly what that boom represented, so I looked up the ordinary stock and share index in the "Financial Times" to discover what has been happening. I found this curious set of circumstances. Over the period October, 1951, to April, 1955, ordinary stocks and shares have gone up by 55 points, which represents a rise of 10 57 per cent. each year over those years. That certainly is a considerable rise, but let us see what happened at the time when the right hon. Member for Bishop Auckland was Chancellor of the Exchequer. Between the period 17th January, 1946, and 17th January, 1947, the same index had risen by 16 37 per cent. in one year. When the right hon. Member's successor, the late Sir Stafford Cripps, was Chancellor between 10th October, 1949, and 10th October, 1950, that index went up by 17 53 per cent.—a very much steeper and faster rise than had taken place in the three and a half years which the right hon. Member for Leeds, South was criticising.

Finally, let us see what happened when the right hon. Member for Leeds, South was Chancellor of the Exchequer. In the period between 13th June, 1950, to June, 1951, the rise was no less than 21 98 per cent. It falls very curiously from the mouth of the right hon. Member to criticise this Government because Stock Exchange values have gone up, whereas in fact they went up far faster when he was Chancellor of the Exchequer.

The right hon. Member for Leeds, South said that the Chancellor could take to himself the plaudits of the Stock Exchange and that no doubt the boom would continue, but what has happened? On Budget day the same index stood at 188 7, yesterday it stood at 189 3, and I understand that today it has probably gone down. So the result of the Budget has been to put up the "Financial Times" index of ordinary share values by less than 1 per cent., whereas in the week that straddled the Budget of 1947 the market rise was 23 points. That particular shot at that particular target seems to have misfired.

I agree that the question of our export trade is all-important. I have tried to show that the total of our exports is not as unsatisfactory as was suggested in the sombre and black picture which the right hon. Member was painting yesterday. I think it is true to admit—we must face the situation—that recently there has tended to be a switch in our total exports situation from the dollar and non-sterling area into the sterling area. It is certainly important that that trend should be reversed by any process we can evolve.

Turning to the question of imports, I come to the point raised by the hon. Member for Dunbartonshire, East (Mr. Bence) who, after interrupting me, has left the Chamber. He asked what the Chancellor is to do to curb the import situation because imports have shown an excessive tendency to expand in value, largely due to the terms of trade, as we have all recognised. That situation could not be allowed to continue indefinitely. The hon. Member stated that the Chancellor had done nothing to try to change that import situation; but that is exactly what the Chancellor tried to do a short time ago when he raised the Bank Rate and tightened restrictions on hire purchase, thereby encouraging saving and discouraging spending which would have a reflected result on the imports to this country.

It is too early to say whether these steps will have that result. For example, the imports coming in now were almost certainly ordered in January or, perhaps, in December last year. It is too early to be able to see reflected in the figures published by Government statisticians whether the desired effect is coming about. If it does not, we shall have to think again and see what further action is necessary.

The question of exports to the sterling and non-sterling areas and the exports of the sterling area to dollar and non-sterling countries emphasises how intertwined are all these economic problems today between ourselves and the whole of the Commonwealth. It underlines the necessity to discuss from time to time with the appropriate Ministers and representatives from the Commonwealth what joint action we will be able to take. It is quite useless for any one member of the sterling area nations to try to put the situation right itself when so many leakages can take place in a roundabout way unless similar or compensating action is being taken by other members of the Commonwealth, which is largely, though not entirely, the sterling area.

How are we to encourage the expansion of the exports, which, I have agreed, is necessary? I had the advantage not many years ago of taking a team of textile industrialists to the United States of America. Although I am no expert in textiles, what I am about to say has a bearing on the whole Lancashire situation.

With those gentlemen, who were all experts and who advised me, we went all round the U.S.A. trying to see in what direction we could expand the sales of British textiles. We found a very interesting situation. We found that there was a market, though only a limited one, for certain specialised lines—for example, the sort of thing for which Britain had been well known in the past, very high quality goods, although not in immense quantities. But it became increasingly clear as we travelled round that we would never be able to sell our products in the U.S.A. unless we did three things.

First, we would have to study fashion trends and we would have to supply that market with the quality and widths which it needed. Until then, Lancashire had been able to sell its goods comparatively easily in less difficult markets. I am not casting stones at Lancashire, because these remarks apply in wide measure to industralists throughout the whole country.

It really is asking a lot of human nature to say to an industrialist, "Ignore the home market. Ignore the sterling area. Ignore the Commonwealth, where you can sell your goods easily and where there is an insatiable demand for what you produce, and try to invade those difficult markets in the dollar area." Many industrialists have brought about a certain measure of success in that direction, but it is asking a great deal of them to send an expert over there or to engage an expert in the U.S.A. who will anticipate fashion trends—those brilliant colours that some of our American friends wear in their ties, and the different types of cloth that they rejoice to have, including alpaca suits and mixtures of nylon and cotton and of nylon and wool. Finally, the goods must be supplied by Lancashire, or wherever they are woven in this country, in the widths which America is accustomed to handling.

In the past, Britain has not used those widths. The American widths are much broader than the average machine in Lancashire has been set up to manufacture. In effect, not only are we telling the industrialists to invade the difficult and tough United States market, where, if they are successful, Customs duties may be clamped down upon them, but this means telling industrialists also that they must scrap all their existing machinery and buy new looms to handle different types of cloth, and that they must have a fashion expert to tell them what sort of fashions to put on their machines. They must spend their capital to be able to invade that market. That is asking a great deal of industrialists.

I went round Lancashire to tell industrialists what we had discovered in America. I do not know how far our advice has been followed, how far the required machine plant has been set up or how far they have managed to find fashion experts in the United States to advise them, before the fashion comes in. what the fashion is likely to be. Unless the Government can in some way or other make it attractive to the industrialists to put in that plant, that is a tall request to make.

I wonder whether my right hon. Friend the Chancellor of the Exchequer could not see whether something on these lines cannot be done. It is true that the Government have introduced the initial allowances, known later as investment allowances, which over the whole of industrial production make it attractive to renovate plant. But that is plant to supply the sterling area and the needs of the Commonwealth, and those allowances do not provide any real attraction for putting in the new plant which is designed only to supply dollar markets.

If it can be shown satisfactorily that certain plant, if installed in a works, will capture a reasonable slice of a dollar market, I ask my right hon. Friend to see whether he cannot in some way make it attractive to the industrialist to spend the money and put in the plant. My right hon. Friend the Chancellor of the Exchequer has a certain kind of precedent—it is not, perhaps, a clear-cut comparison—with what has been happening in defence.

The Government have been spending quite a lot of money on plant for producers of ships, tanks and so on, to enable them to put plant into their works. The same sort of thing is well worth examining in relation to the plant which is needed for industrialists to be able to invade the dollar markets.

I want to refer to only two other points. In connection, once again, with the capturing of dollar trade, I ask my right hon. Friend to persuade the Treasury to be a little less niggardly in the business allowance which is paid to bona fide business men going to America. At present, the allowances are cut to a point where there is virtually no opportunity to entertain.

When I was out there, I had the galling and belittling experience of never being able to offer even a cocktail to those who were entertaining us the whole time. The amount that we were allowed to spend was cut so low that we had to watch every cent of what we had. That does not do. During the period of Marshall Aid, the American people realised very generously that we were extremely hard put to it, but that cannot continue permanently. If we are to send people over to America to examine fashion trends and to try to capture markets, and if we expect them to accept all the hospitality which the Americans so generously give and yet never put their hands in their pockets because they are prevented from doing a little entertaining in return, we prejudice their chances of getting that trade.

My third and last point is the need of scientists. It is only at this late moment that this country is becoming fully alive to the dangerous situation which is developing. In the U.S.S.R. it has been recognised for a long time and tremendous drives are being made. Not only did Russia capture a lot of Germans and manage to wean away from their previous loyalties certain scientists in other countries, but it has been expending every effort to build up an immense team of scientists in Russia itself. Second only to Russia comes the U.S.A. We come a long way behind.

If there is any doubt about this, I will draw attention to three different authorities who have said the same thing this last month. First, there is Sir Edward Appleton, who produced a report on technology and scientists, and this went so far as to advocate that to make this work attractive the men should be exempted or deferred from military service. That was a very drastic recommendation to make. Only the other day Lord Chandos, formerly our colleague in the House, at the annual general meeting of Associated Electrical Industries said: We need an increasing supply of physicists, chemists, metallurgists. The Clyde Bank Review said we are …using scientists on a very much greater scale. All three authorities were united in saying that there was a great shortage of these people and that a serious situation was looming up.

I hope I have not been too electioneering in this speech. I tried in the earlier part of my speech to answer the electioneering propaganda, and in the second part I have tried to be constructive, which is a very difficult thing to be when one has an Election ahead. I think this is a good Budget, but I am not going to ask the Committee to accept that from my prejudiced lips. I would draw attention to what "The Times," says. It has delighted us all to see it appearing again in our households, and it is by no means an ardent supporter of or thirled to the Conservative Party—if I may use a Scottish term. In its leader on the Budget it says: To abstain from any large changes in indirect taxation was right from every point of view. It gives three very good, sound reasons why what has been advocated for electioneering purposes by hon. and right hon. Gentlemen opposite about tobacco, beer and petrol would have been unwise at the present time. Then almost at the end of the leader it says: In all, this Budget is both politically and economically well-judged. It is a natural extension of the fiscal policy which the Government have followed since they assumed office, and no deliberate vote-catching is contained in it or can easily be imputed to it. With that I profoundly agree, and I end by saying with "The Times" that it is a good Budget.

6.53 p.m.

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Mr Michael Maitland Stewart (Fulham East)

The hon. Member for Scotstoun (Mr. J. R. H. Hutchison), coming to the rescue of the Chancellor by quoting from "The Times," said it was not a solid supporter of the Conservative Party. Experience shows, however, that whatever deviation "The Times," in the interests of truth, may be guilty of when an Election is far away, it can always be relied upon to come down solidly behind the Conservative Party line when an Election is close at hand. Therefore, we cannot feel that the hon. Gentleman has quoted an impartial witness.

No doubt "The Times" takes the view that any concessions through indirect taxation would have been unadvisable, but I am sure it takes the view, which has by implication been put forward by several speakers from the benches opposite, that if in the process of tax concessions we give away money to poor people, that is inflationary, but that if in the process of tax concessions we give away money to rich people, that is an incentive.

That, broadly, is the argument which hon. Members opposite have been trying to put before us, and, indeed, if they are going to attempt to defend this Budget, that is the line of argument they must follow. Among all the welter of figures in this debate there are, I think, certain results and certain facts which cannot be denied, among which are that this Budget gives nothing at all to the poorer sections of the population who are not now paying Income Tax at all, despite the fact that some of those sections of the population have been severely hit by the continuing rise in the cost of living and by the increase in social insurance contributions. The Budget does not even give anything to the old-age pensioners.

The family man of moderate means, for whom, it is claimed, this Budget is specially devised, gets remarkably little, scarcely anything more than has already been taken from him by the rise in the cost of living or in social insurance contributions. That is the more regrettable as equal pay is now approaching. I welcome the approach of equal pay, but I believe that with the approach of equal pay the Government should have paid particular attention to the problems of the people, whether they are married couples or widowed persons, who have family responsibilities. A considerable range of those people with moderate incomes will get very little, if anything, from this Budget.

As one moves to the higher ranges of income the amount of advantage given by this Budget gets bigger and bigger. As was pointed out very forcibly by my right hon. Friend the Member for Bishop Auckland (Mr. Dalton), if one's income arises not from work but from the ownership of property, the advantage one gets out of this Budget is greater still. In effect, therefore, this Budget tends to widen the gap between the richest and the poorest in the community, and tends to add to the advantage which those who get their incomes without working get over those who obtain their incomes from any kind of work, whether by hand or by brain.

We are told that this kind of thing is necessary in order to give incentives. We were told that when we had the same kind of Budget in 1952, the first Budget of this Government. Then also there was generosity to the people with large unearned incomes, and the line of argument then was that by giving these gifts to the comparatively wealthy we should provide such an incentive to production that in time we should all be better off. What has in fact happened? There has been much throwing to and fro of figures, but these results will not be denied. As a result of the incentive policy which was put forward in the first Budget of this Government, we have had an increase of production. The most that can be claimed for it is that the best figure, which is now reached, is somewhat below the average increase during the years of the Labour Government.

The hon. Gentleman the Member for Scotstoun admitted those figures, but advanced this argument in reply. He said it was easy, of course, if one started from nothing, as he put it, to have a rapid increase of production. He implied that it was easy, during the years of the Labour Government, to obtain an increase of production.

However, when one comes into office at the end of a war one finds that plant and machinery are very gravely out of date because there has been no replacement of them during the war years, and that a considerable section of the labour force consists either of men whose skill has been unused and become somewhat rusty because they were in the Armed Forces for years, or of young men who, owing to the impact of the war, have very little experience of industrial work. One has, in those circumstances, to do the job of production with instruments, human and material, some of which are out of date and some of which are untried.

That was the situation which we faced when we became the Government immediately after the war, and it was in those circumstances that the Labour Government built up production at a faster rate of increase than has ever been achieved since. So the record of production does not suggest that the incentive policy advocated as an excuse for the 1952 Budget, and advocated again now, has really justified itself.

As to investment, it is not in dispute that the rate of investment, the proportion of the national resources devoted to the needs of the future, is not as satisfactory now as it was during the years of the Labour Government.

If we look at the problem of the balance of payments, there is one figure which the hon. Member for Scotstoun was very careful not to mention, and that is the figure of the gold reserves at the time when the Government took office and the figure at the present time. When all is said and done, no amount of argument can alter the fact that the figure is now about 600 million dollars less than it was when the Government took over.

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Sir Edward Boyle (Birmingham Handsworth)

Equally, no figures can get away from the fact that we lost 300 million dollars in the last month in which the Labour Government were in office, and that, if we had gone on at that rate, we should soon have been bankrupt.

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Mr Michael Maitland Stewart (Fulham East)

That point has been met, in an intervention, by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), who pointed out the measures that we had already taken and the measures which, despite the allegations from the benches opposite, he had informed the country were to be taken. When we look at the facts, the record of production and investment is less satisfactory and the gold reserves are lower than when this Government took office.

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Sir Edward Boyle (Birmingham Handsworth)

On the point which the hon. Gentleman has made about investment, it is only fair to remember that the right hon. Member for Leeds, South took steps, such as the suspension of the initial allowances, which were bound to have the effect of depressing investment. I am not necessarily criticising that decision, but, in view of what the right hon. Gentleman did, I do not see how investment could have done other than fall.

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Mr Michael Maitland Stewart (Fulham East)

With great respect, 1951 is now four years ago, and we have had since then a series of Tory Budgets which have increased social injustices. The excuse which was offered for each of them was that it was an incentive which would result in increased investment and productivity.

The sole excuse for Tory policy is that we have to put up with growing injustice and inequality because that is the only way in which we can get more production and more investment. What I am saying is that, when we put the pudding to the proof, the record of production and investment does not justify these claims.

The one thing about which hon. Gentlemen opposite are able to take some comfort—we do not deny it, and my right hon. Friend the Member for Leeds, South did not attempt to dispute it—is that there has been an increase in consumption, and in many ways life is easier now than it was four years ago. Nobody who knows the facts would seriously dispute that, but there are two important reasons for it. One is the more advantageous terms of trade which this Government have enjoyed, which are simply a piece of good fortune. The other is that the foundations for it were laid by some of the very unpopular measures that had to be taken by the Labour Government.

We see that in almost every field of national life the present Government have been reaping where their predecessor sowed. To cite the field in which I am particularly interested, that of education, one notices the rise in the number of school places provided in the first two years after the Government took office, two years being about the time which is taken from the inception of a school building to its completion, whereas since then there has been a decline in the number of places provided.

We have seen that happen in every field of national life, and the fact is brought out that such advantages as have accrued during this period of a Conservative Government are due either to the terms of trade or to their reaping the harvest which their predecessors sowed to an accompaniment of abuse, and, in the case of the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), attempted sabotage.

I do not believe, therefore, that we can justify Conservative policy in the way in which an attempt has been made to justify it. Each of this series of Budgets has had the same effect of widening the gap between the richest and the poorest and between those who work and those who do not work. That policy has not been justified by events.

Its real objective was candidly stated by the noble Lord the Member for Dorset, South, and we are very grateful to him for it. The noble Lord believes in an unequal, unjust society, in which those who do not work have an advantage over those who do. The great delight which we all derive from having the noble Lord in the House is that he does so often candidly state what so many hon. Members opposite really believe, but who, not having such large majorities as South Dorset provides, do not state that belief with equal candour. This kind of policy of increasing injustice and inequality may please the noble Lord, but our objection to it is not only based on morality and justice; we say that it is profoundly inappropriate to this country in the middle of the 20th century.

The Minister of Supply put his finger on a vital problem when he mentioned the fact that whatever Government may be in power, and whoever stands at that Box, faces a very grave economic problem in that this country in future will be constantly trying to avoid either a balance of payments crisis, on the one hand, or a domestic unemployment crisis, on the other. In one year or another, the economic weather may be a little better or worse, but the fundamental situation is that, probably for a decade or more to come, this country will have very grave economic problems to face, and it can face them only if it can call on the united energies of all its people.

That is why a policy of increasing inequality and injustice, and a policy which favours those who do not work rather than those who do, is not only morally but practically objectionable. Since in the Budget debate we refer to the general economic situation and policy, I think it is right to say that it is not only in respect of a series of Budgets that the present Government have been travelling on this unjust and unwise road, but in respect of almost every other aspect of their policy. For example, what have been the injunctions and pieces of advice which the Government—not in explicit words, but by their actions and policies—have been giving to various classes of the community?

To the people who have been complaining of the rising cost of living, the Government have simply said: "If prices go up, they go up. Do not talk to us about controls. If you cannot afford things, do not buy them. Leave them for those who can afford them." If, on the other hand, they were addressing shareholders, Government policy would be to say: "By all means, both demand and expect higher dividends. Never mind whether the money ought to be reinvested in industry, or whether it ought to be used to meet wage claims. The Government are not worrying about that sort of thing, so why should you?"

If, again, those addressed were persons with good-sized unearned incomes, what the Government, by their policy, have been saying to them in the last three and a half years is: "Please accept a large gift in the first Tory Budget, and lesser but still substantial gifts in subsequent Tory Budgets." Of the other people, the old-age pensioners, the schools, the hospitals and all the rest, they say: "They can wait until just before the General Election."

To the kind of person to whom enterprise means not creative activity but purely acquisitive activity, what the Government, by their policy, have said is this: "If you would like to get hold of a valuable piece of public property, have it sold to you on the cheap and below its true value, form a pressure group and make enough noise, and the Government can be relied upon to hand it over."

In effect, this is the sort of injunction and advice which the Government have been giving to the community. Is it surprising, therefore—and let me now quote a figure which I do not think has been mentioned in the debate so far—that 1954 should show a post-war record number of days lost in industrial disputes? We have just had a strike which has silenced a large part of the Press, and there is another on the horizon affecting the railways. The public are uneasily aware that something is wrong and are beginning to ask the question whether the strikers' demands are fair. It sounds a reasonable question, but in the atmosphere created by 3 years of Tory policy it cannot be answered.

In view of the series of pieces of advice which the Government have been giving, no conception of fairness remains. The Government's motto has not been, "To each according to his need" or "To each according to his usefulness," but "To each what he can grab." In those circumstances it is quite idle to preach reason, restraint and patience to wage earners, or to try to settle anything by an appeal to what is fair. The Government, by their own actions, and the noble Lord the Member for Dorset, South explicitly, have said that any appeal to fairness, reason and justice is nonsense, and that they believe in a society based on people being able, not by creative ability but by pure acquisitiveness, to get as large a share of the national cake as they can.

I do not believe that a policy of which this Budget is simply one example can really serve the needs of a country which, for the first time in its history, is both a great importer of food and a debtor country. That will be our position for a long time and must inevitably be our position, through nobody's fault but through the march of history. The kind of policy of which this Budget is an example is not the sort of policy for a country in that position. We must have, rather, a policy which encourages and promotes public services instead of mutilating them, which provides real incentive by saying that if people work they will be helping to create a society in which people are rewarded according to the usefulness of their work.

We want a policy which will reward incomes from work rather than incomes from ownership and which, by extension of the social services, will make it possible to tap the still very large reservoir of inadequately trained talent which is to be found in the country. That is the kind of policy we want, but the whole record of the Government shows that we shall not get it while they are in power.

7.12 p.m.

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Mr Frederic Bennett (Reading North)

If I were to spend my available time in trying to refute every proposition put forward by the hon. Member for Fulham, East (Mr. M. Stewart), I fear that few other hon. Members would be able to participate in our debate today. In general, however, throughout his speech ran the theme which has been noticeable in nearly all the speeches from the benches opposite since the Budget was introduced, and the first feature of that theme was the constant allusion to any reliefs which a Chancellor may give in his Budget as gifts to the taxpayer.

I stress again the point made earlier today by my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke), who said that, whether it is a Labour or a Conservative Chancellor who gives the reliefs, it is not a matter of gifts to the taxpayer. All that it amounts to is that the Chancellor is taking away slightly less in any year of something which belongs to the individual concerned. It is as well that we should remember that point.

The other generalisation which was so obvious in all the speeches from the benches opposite was the apparent failure to appreciate that, if one cuts a tax, then he who pays most tax is bound to benefit more than he who pays none or hardly any. Earlier today I had the opportunity to intervene briefly during the speech of the right hon. Member for Bishop Auckland (Mr. Dalton) when he was talking on this very point.

The right hon. Gentleman was talking about the alleged tendency under the present Government, by the reduction in the flat rate of Income Tax, to help the 10,000 a year man and not the poor man, thus making wider the gap between rich and poor. I pointed out perfectly fairly from the figures on record that when the right hon. Gentleman produced his own Budget in 1945–46 and made his flat rate cut precisely the same thing occurred, and must have occurred, in that the 10,000 a year man, of whom we have heard so much, saved by his Budget proposals no less than 318 a year compared with 226 a year under the present Budget.

In 1945–46 the man at the other end of the scale, too, earning 120 a year, saved only 7 10s. a year as a result of the right hon. Gentleman's Budget. There could surely not be a much bigger difference than that between what the wealthy man saved under a Socialist Budget and what a poor man saved. Therefore that argument against our Budget is a bogus one. It is true, of course, that under our proposals the man of 120 a year who saved 7 10s. under the Socialists does not save any tax at all, simply because he has long since ceased paying any Income Tax under the Conservative regime and does not start paying until he is earning 200 a year. So one can hardly say that, because our Budget does not save Income Tax for a man who does not pay any, it represents worse discrimination between the wealthy and the poor than did the Budget which was presented by the right hon. Member for Bishop Auckland.

In the course, of my intervention, the hon. and learned Member for Gloucester (Mr. Turner-Samuels) interrupted to say in excuse that the right hon. Member for Bishop Auckland took 1s. off the standard rate compared with the 6d. taken off this year. It really is fantastic to suggest that that was, therefore, quite a different matter. Apparently, if so, it is all right for a Socialist Chancellor to make the rich richer by taking 1s. off the stan- dard rate of Income Tax but it is not all right for a Tory Chancellor to do it by taking off 6d. So that, too, is quite worthless as a contradiction of my present argument.

The hon. Member for Fulham, East also reiterated that the right hon. Member for Leeds, South (Mr. Gaitskell) a former Chancellor, and his party gave abundant warnings before the last Election that real economic troubles were on the way. Frankly, I was a little surprised at that. I clearly remember my own campaign in a marginal constituency, which I fortunately managed to wrest from its then Socialist holder. I never heard a word of warning of a crisis or of fears of a crisis mentioned at that time. Thinking that perhaps I was only an individual case, I went to the trouble today to obtain a copy of the election address of the right hon. Member for Leeds, South.

I have read with great care every word of that address. I have found a number of very interesting sentences in it, but the only remark that could possibly be taken to be dealing with the economic situation which faced the country was the following, which in fairness I quote in full: I do not promise easy times. These are not possible for the next year or two. That is the only warning, the only sign throughout that document that all was not perfect in the Socialist garden.

Yet the right hon. Gentleman did also make another point about high prices, which he did not make yesterday and which Socialist speakers nowadays never make. His words, alluding to rising prices, were: And by the way people are apt to forget, when they talk about prices, that wages have gone up too! We do not hear very much of that sentiment from the benches opposite nowadays.

There is not a word in this document to substantiate the former Chancellor's statement yesterday that he and his party gave any substantial warning to the country of the really desperate state into which our balance of payments and our international economic position had fallen.

Before passing on to another matter, there is another sentence in the document which I think is well worth quoting, although it is not strictly relevant to this debate. The right hon. Gentleman said: As for housing, Tory promises are just dishonest. The plain truth is that you cannot build more houses than we are now doing and rearm at the same time. That was the only real forecast the right hon. Gentleman troubled to make in that document.

Turning now to the wider context of the present economic position in this country, I should like to ask what steps we ought to take and which of possible alternative Governments is the best equipped to deal with it. A number of suggestions have been made, notably by the right hon. Gentleman the Member for Leeds, South in his admittedly brilliant oratorical speech yesterday, to the effect that bad balance of payments difficulties are on the way. We all admit that in the last few months, for a variety of reasons of which we are all aware, including the trend in the terms of trade which hits or helps all Governments at various times in their lives, the balance of payments position has recently not been as satisfactory as formerly. I think that is a perfectly fair admission to make.

But what, then, is to be the cure if there are such difficulties? I would add, in passing, that I do not think they are nearly as serious as hon. Members opposite naturally are making them, but if there are such difficulties then the question which arises consequently is which Government is the better equipped to face up to them and cure them? To a very large extent we all know in our hearts, even if we do not say it on the platform, that confidence in Britain's financial position and in sterling, which alone makes the balancing of our international economic position possible, is not based on what we think of ourselves, whether we are Conservatives or Socialists, but what the outside world thinks of the Government and of the party in power. Surely right hon. and hon. Gentlemen opposite would not for a moment deny—

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Mr Frederic Bennett (Reading North)

No doubt an opportunity will be given to the hon. Member to point out to the Committee why it is nonsense, but at the moment I am putting my point of view. There is plenty of evidence now, unfortunately, from what might be called the reaction of foreign speculators, financiers or traders as to what they think. Where there is a free market in currency, if they anticipate the Socialists being returned at the next Election, then their confidence in the strength of sterling will automatically fall.

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Mr Frederic Bennett (Reading North)

I will give way now to the hon. Gentleman, although I was going on to finish this part of my argument.

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Mr Cyril Bence (Dunbartonshire East)

Is the hon. Gentleman saying that we in this country should aspire to return a Government that will inspire confidence in international financial speculators?

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Mr Frederic Bennett (Reading North)

I am not saying whether we should or should not, but I did say that it was not a matter of what we thought of ourselves, whether we be Conservatives or Socialists, but of what those in the outside world, be they traders, financiers or anybody else, and particularly those connected with international trade and finance, thought about our economic policies and outlook upon which our strength in sterling very largely depends. That has been clearly shown in the past, and whether we like it or not is not material.

There have been plenty of Socialist warnings in this debate as to what will happen if we are returned to power, and it is only right that we on this side of the Committee should give fair warning as to what will happen in the international field in the matter of confidence in sterling if the party opposite is elected to power.

Without any doubt at all, the rate of sterling would fall almost overnight if the Socialists came back into office. [HON. MEMBERS: "Oh."] It most certainly would, and in those circumstances the Exchange Equalisation Fund, which is currently supporting sterling, would find it quite impossible to maintain transferable sterling at anything approaching its present face value. Free sterling, too, limited though it is in amount, whether it be in New York, Berne, Amsterdam or anywhere else, would fall correspondingly, and it would be found that the differential between the value of transferable sterling and the fixed rate of sterling vis--vis the dollar would create commodity shunting and bring profit to those who indulge in it; and again whether we like it or not there are people who indulge in it whenever there is sufficient profit.

The position is doubtless going to continue difficult whatever Government comes to power, but it is going to be ten times more difficult if the Socialists take over the government of the country, because there is not the slightest doubt but that the return of a Socialist Government will lead to a lessening of international confidence in this country's economic and financial future.

There is one more aspect of this matter to which I should like to draw attention. Once confidence has slackened off in sterling and in this country's economic future, our debtors overseas would immediately start to hold off payments in anticipation of another Socialist devaluation, and if that happened, after a time, another Socialist devaluation would become inevitable.

I notice with considerable interest that at least one hon. Member opposite does not believe what I am saying. So I am going to quote from a recent article in a well-known magazine in no way favourable to the party on this side of the Committee. I will not quote it in full, though I have the document here, because it would take up too much time, but I can give the reference and afterwards—

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Mr Douglas Houghton (Sowerby)

On a point of order. Are we not discussing the Budget of the present Government? We are certainly not discussing a Government not yet in office. Will you give us your Ruling, Wing Commander Hulbert, whether the hon. Member is in order in what he is now saying?

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Sir Norman Hulbert (Stockport North)

The hon. Member is discussing the economic position of the country.

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Mr Frederic Bennett (Reading North)

I am much obliged for that Ruling, because I am simply replying to warnings which have been amply strewn about this Chamber during the last few days on the subject of the consequences that will follow the continuance of the present Conservative Government. It is only right that I should take the other point of view and deal with that.

I just want to quote one sentence from this article and it is: Unless quite fantastically lucky … the next Labour Government will come into office in a situation in which the national reserves of gold dollars and foreign exchange will pour out of the country in a torrent. The gentleman who wrote that article, which was published in the "New Statesman and Nation" on Saturday, 6th February, 1954, is certainly not a Conservative. He is the right hon. Member for Dundee, West (Mr. Strachey). Therefore, I have ample Opposition support for the contention I have been putting forward tonight.

As a result of this Budget, we have a very good opportunity of continuing the recovery which has been going on during the last three and a half years, and to step up the pace in the next term of office, which I am confident we will get. Many hon. Members opposite have said that they welcome the Election. We on these benches welcome it profoundly because it is we who have chosen the date and we are proud, ready and eager to go to the country for another mandate.

7.28 p.m.

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Mr David Pryde (Midlothian and Peeblesshire)

At this time of the year the main interest of the people is in the Budget. No speech is anticipated with so much expectancy as the Chancellor's, and, in common with others, I listened very carefully to the proposals which he made on Tuesday. I was disappointed as, of course, were millions throughout the country. On previous occasions I have urged the Chancellor to afford some measure of relief to certain athletic organisations. I found that the Scottish Tory Members had this year stolen my thunder and had made representations to the Chancellor. I had hoped for some relaxation at least in the Entertainments Duty on athletic meetings, particularly in Scotland, because they are part of our national life. But the sporting fraternity in Scotland are bound to be disappointed with the Chancellor's Budget proposals, which are very strange and very puzzling.

Before the date of the General Election was announced, we found the Chancellor indicating that in future there was no room for optimism about the country's financial position. The right hon Gentleman mentioned that there might be a certain danger of inflation in the home market—too much money chasing too few goods—yet he proposes to put into the pockets of the people of this country more money to chase the goods, and thus heighten the trend towards inflation. Indeed, I think he said it rather boastfully. That was a curious situation.

I do not under-estimate the Chancellor of the Exchequer. I believe that if there is one man who knows what looms ahead, it is the right hon Member for Saffron Walden (Mr. R. A. Butler), but I believe also that he has given us a General Election in the very season of the year which, historically speaking, has been shown to be most propitious for us. I remember 1929. I wonder how many hon. Members remember 29th May, 1929? I was happy to put my finger on the date weeks ahead, and in the constituency where I was the election agent we trebled our majority.

I believe that we are re-living the days of 1929, because a summer Election is a good one for us. It allows us to get into the open air. We are not a rich political party, and it helps if we can put forward our propaganda from the street. It also allows our people, who are not always well clothed, to walk to the polling booths to record their votes.

I believe that those facts are not unknown to the Chancellor of the Exchequer, but I believe also that he is fleeing from the wrath that is to come. The right hon. Gentleman is like Johnny Cope, who fled from the stricken field of Preston Pans and, when he reached Berwick, was asked, "Where are your soldiers, Johnny?" That will be the position on 7th June, when I shall ask the Chancellor, "Where are all your troops?"

Indeed, the Chancellor is like the trapper in the Arctic Circle who was pursued by a hungry pack of wolves. When his cap flew off, he discovered that it held up the pace of the wolf pack, so he proceeded to divest himself of all his clothing. When his dogs took him home, it was discovered that, because the temperature was 40 below, the trapper had frozen to death. That will be the fate of the Tory Chancellor of the Exchequer.

Let me say to the party opposite that they will not find anyone to deviate on our Front Bench, and if the country faces an economic crisis, the Labour Party will boldly and courageously take over the reins of Government and will again take this country along the road to prosperity, as we did from 1945 until three and a half years ago.

I expect that the Financial Secretary will reply to the debate, and I ask him if the answer to the Lancashire problem is that the British worker has to accept the standard of living of his foreign competitor because, brought down to brass tacks, that is what is happening today in Lancashire. To the hon. Gentleman the Member for Scotstoun (Mr. J. R. H. Hutchison) I say that, so far as the application of machinery is concerned, he does not require to go far in his own country to see how Scottish manufacturers take the initiative.

If he goes down to Hawick in the South-East of Scotland, he will see how, in the textile industry and in the knitwear industry, our people are taking the lead. But what does it matter if we in Scotland take the lead? Does it mean that the Yankee, or the German, or the Japanese, or the Frenchman, or the Russian, will lag behind? Certainly not. In a few years they will all be equipped with up-to-date machinery and we shall be faced with the same set of conditions.

In the speech of the Chancellor we heard the piteous cry which has been uttered so often in this House, the cry for coal, and one hon. Member made some scathing remarks. Nobody on this side of the Committee directed the coal industry under private enterprise, but hon. Gentlemen opposite have done so. Even today there are on the Coal Board people who directed the industry under private enterprise. I have no fault to find with that. In those days, however, the private owners sunk small holes in the ground; they put down small rails between three feet and six feet long and they put down small tubs; they put small ponies to haul the small tubs on the small rails; they put down small boys to drive the small ponies which drew the small tubs on the small rails. Last week, at the invitation of the Scottish Division of the Coal Board, Members of both parties had an opportunity of seeing just what had been accomplished since vesting date. It was a revelation. All credit to the Coal Board for what it has been doing. Yet, since vesting date, 59 collieries in Scotland have been required to close because they are uneconomic. That is not the fault of the Coal Board. Let us put the blame where it belongs. In 40 years colliery manpower in Scotland has been halved from 150,000 men to approximately 70,000. I fear that it will take many more millions of pounds, as I forecast in 1945, to re-equip the collieries of this country.

The Coal Board has performed a remarkable operation and should be given full credit for it, but the Board cannot be expected to get modern output out of antiquated collieries. Today we have streamlined the man at the coal face. Let any hon. Gentleman opposite try to tackle, on the floor of Westminster Hall, the task of the miner. Let him take a shovel and try to turn over 20 tons of stone in seven and a half hours. If he does that, he will realise what the miner has to do. And all that output has to be transported by the antiquated arteries provided under private enterprise.

I have said enough about the Coal Board to allow hon. Members opposite to realise that we cannot get coal unless we put the men into the industry, and time is needed to train them. We cannot get the coal unless we open up coal faces and put modern machinery into the mines to extract the coal. So the Chancellor should not bank on an increase of coal production.

Today the Chancellor questioned my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) on his statements about the coal industry. I shall not speak for England or Wales because the English and Welsh Members can speak for themselves, but I have with me the Report of the Department of Agriculture for Scotland and the recent White Paper on the state of this country. I notice that Estimates for next year for agriculture, fisheries and forestry will be 2⅓ million less than those of a year ago. On reference to the Report of the Department for Agriculture for Scotland, I find that the total tillage acreage has dropped. The total arable acreage has also dropped, but the acreage of permanent grass has risen.

Turning to another page, I find that the Government will have spent, by 31st December this year, about 4 million in endeavouring to rescue about 6,000 acres of land. Again, there has been a decrease in tillage and arable land. The Government are spending money in that direction for absolutely nothing. Is it not apparent that the farmers are ploughing up the grass, taking the grants and then allowing the arable land to go back to grass?

The Chancellor challenged my right hon. Friend the Member for Bishop Auckland to tell him where subsidies had been whittled away. He will find the answer in the Department of Agriculture's, Report. The hill sheep subsidy is abolished this year. I have here a letter on this subject which I received this morning from a hill farmer in Peebles-shire.

Peebles-shire is still in my constituency, although it will not be at the General Election. I shall be fighting in Gladstone's old constituency. I challenge any occupant of the Government Front Bench to come up to Gladstone's old constituency and dispute what I am saying. I have already trained two Government Front Benchers in Midlothian and Peebles. The Tory Party has been very mean about it; it has not given me a donation towards my Election expenses although two of its members served their apprenticeship under me. I am getting a little tired of it; I do not have the use of the radio or television, but my opponents always do. Now that I have Gladstone's constituency at my disposal, it would be nice to test out the optimism of some of the Government Front Benchers.

We have already heard of the "great benefits" which are to be conferred upon the people of Midlothian as the result of the Budget proposals. The hill farmer in Peebles-shire from whom I received the letter this morning tells me that the subsidy was whittled away in the last Price Review and that the hill sheep farmers of Scotland are now getting no subsidy. Also the drop in the guaranteed price for their stock from 6d. to 4 d. per pound is a considerable one. Even the Chancellor can be taught something about agriculture.

I will not go into detailed figures because figures are always boring, but history repeats itself, once as a tragedy and once as a farce. In 1929 it was a tragedy but now it is farcical for the Tories to believe that they can put the Labour Party in for a short time and then fling it out again. The Tories have not now got Liberal allies, as they had in 1929.

Australian imports were cut in 1952. I am going to put to the Government a question to which I want an answer. At Easter, 1952, I was compelled to forgo any holiday because I had to bring deputations to London to the Australian High Commissioner and the Parliamentary Secretary to the Board of Trade, and had myself to go to the President of the Board of Trade to explain what was happening in my constituency.

Midlothian has three factories manufacturing tapestry, the firm being the only one in Scotland engaged in that work, and the product plays a very important part in our export trade, especially to Australia. When Australia cut her imports our people were put in a bad position. This tapestry is the cheapest form of carpeting; it is called "the working man's carpet." For weeks our people have been on short time, and the firm has now decided that, because of the uncertainty of the export market, it must cease the manufacture of tapestry. That means that the manufacture will go to Kidderminster, where it will be a monopoly because Kidderminster will be the only place in the United Kingdom producing the tapestry.

I want to know whether the Government propose to allow the industry to cease. The Purchase Tax concession which has been made will not affect the industry. I want Purchase Tax to be removed from the product altogether in order to give our people an opportunity of competing in world markets at competitive prices. If that is not done, our people will require, as was said by a Scottish industrialist in the early twenties, to accept the standard of living of their foreign competitors. I have no intention of allowing my people to accept the standard of living of the coolie. I know perfectly well that British effort, whether in combination with private enterprise or by public corporation, can more than hold its own in world markets.

In my constituency, the county council and the National Coal Board have built large numbers of houses for the purpose of transferring redundant miners from the West of Scotland in order to increase our coal output. For years I have pleaded for alternative industries to employ the womenfolk of transferred redundant miners. Yet here we see an industry being taken away from Midlothian, which will further increase the economic distress there.

In Scotland we have 60,000 unemployed. The Chancellor has a surplus, which shows that his last Budget estimates were bad. He could have built the Forth Bridge and the Tay Bridge with the surplus. For months past the Government have been pursuing a policy of political window-dressing, promising roads, this, that and the other. I want to know now from the Government what is their policy for Scotland. Are the 60,000 to remain as a hard core of unemployed, and is our tapestry industry to be allowed to close down merely because the Government refuse to abolish Purchase Tax?

7.49 p.m.

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Sir Ian Fraser (Morecambe and Lonsdale)

Labour Party speakers in the debate today have made much of two points, one being that the poor people who are below the Income Tax level get no benefit from the reduction in Income Tax rates, and the other being that the Chancellor's proposals discriminate in favour of taxpayers whose incomes are unearned rather than taxpayers who earn their incomes by salaries, wages or fees. I wish to deal briefly with those two points.

Clearly one cannot let a man off tax if he is not paying it. Secondly, the Budget is not the only instrument, nor indeed the traditional instrument, to deal with the needs of poor people. Traditionally the Budget is an instrument whereby taxes are collected and then distributed among the services of the Crown and the various functions of Government. Therefore, the first task in the Budget is to decide what taxes shall be levied and how they shall be levied. It seems to me too obvious to require repetition, but nevertheless we shall have to repeat many times in the next few weeks that one does not do an iniquity to someone if one does not let him off tax which he is not paying.

I want next to discuss earned and unearned incomes. Some hon. Members who have made this point know very well that there is a well recognised division in our Income Tax law whereby earned incomes receive special favour from the tax authority—the earned income allowance. That is well understood. It is no party matter, and has been sustained and even increased by Governments of both parties. It is a good thing, because its purpose is to encourage men who earn by giving them part of their incomes free of tax because their income is earned. The presence of that element in an earned income means that the person who is paying a certain amount in tax inevitably benefits more, when 6d. or 1s. is taken off Income Tax, than the person who is not enjoying an earned income allowance. There is nothing particular in this about which the Labour Party can wax wrath. Exactly the same anomalies arose in one or two of the Labour Party's Budgets.

I listened with great interest yesterday to the speech of the right hon. Member for Leeds, South (Mr. Gaitskell), who was Chancellor of the Exchequer in the Labour Government. What I am about to say is said more in sorrow than in anger, because I am sorry that a man who is so knowledgeable should allow himself to talk such claptrap as he brought to the Committee in some parts of his speech. I refer especially to the remarks he made about companies. He said that companies were to get 40 million or 45 million, or, adding this and that, perhaps 50 million or 60 million out of the 100 million that was being remitted in Income Tax.

The right hon. Gentleman said that companies were the Chancellor's favoured children, and he used his skilful invective to pour scorn upon the companies, to make us think that the Labour Party's policy is to denigrate companies, to hold them down and to hold them to ridicule and contempt, as if companies were really octopuses battening upon the people, withdrawing from the poor the things which, if the companies were not there, the poor might have had. Are we really to believe that it is the policy of a Labour Government to try to destroy the company system, all companies great or small? Are we to believe that, or is it just the right hon. Gentleman's claptrap to attract attention at the time of a General Election?

Is not the truth that these companies, great and small, far from being voracious consumers of the nation's wealth, are the very producers of it? Is it not true that without these companies and the men who work in them there would be very little employment, no wealth, no taxation, no pay for civil servants or Members of Parliament, no pay for anybody? I have not heard that any nationalised industry has earned any money for us.

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Sir Ian Fraser (Morecambe and Lonsdale)

They do not export. The nationalised industries render services. I am not denigrating them. They render valuable services, but they do not earn our living for us.

It is the great body of our companies and firms that make the goods that help us to carry on and enable us to earn a surplus in the world markets, or at any rate to import the raw materials we need. The wealth of this nation is earned by companies of men, be they limited companies, private companies, or small firms. Let us praise the companies rather than curse them, as the Labour Party appears to do, and recognise that they bring us our bread and butter, provide us with our employment.

Anything that is done to help and relieve them is a relief to all the people who work in them as well as to all the people in the country. Let me emphasise that when the Government help a company those who work in the company are also helped. Therefore, the remissions of taxation which go to this earning system of ours are indeed a contribution to our very lifeblood, and must be encouraged in order to sustain us.

Another point made is that by taking 6d. off Income Tax the Chancellor has given the man who has a higher income more of a benefit than he has given to the man with the smaller income. If one pays 18s. in Income Tax out of a earned, the Chancellor proposes to cut the tax by 6d. If my arithmetic is correct, that would be one-thirty-sixth of one's tax. If one pays 9s., it becomes one-eighteenth part which is to be remitted, and if one pays 2s. 6d. then one-tenth of one's tax is remitted. It appears that the proposals of the Chancellor are graded to give proportionately more to the taxpayer as he goes down the Income Tax scale.

It may well be said that the Chancellor, to be strictly fair, should have taken 6d. off Surtax as well as off Income Tax, so that the discrepancy which I have mentioned would not arise whereby the well-to-do person gets a very small fraction, the middle-income group person gets a medium fraction and the small person a big fraction. I welcome the Chancellor's proposal, and I do not think that it merits the criticisms we have heard so much from the benches opposite. While listening to the Budget, and with the General Election in mind, I naturally thought about my own constituents. I thought of the many landladies in Morecambe and the other seaside towns in the Lake District, and of what they would think.

They will be glad that a little more of their moderate earnings from their valuable work will remain with them than previously, that is to say, a larger part of what they earn during their summer season will stay with them instead of being taken by a voracious State to be used for the alleged benefit of all. They will keep a little more of what they make, because their Income Tax has been reduced. I know of many of the hundreds of farmers, not all big men—the great majority are small men—in the fells and mountains of the Lake District and the rich valleys there. They will be glad that some remission of taxation is being made for them.

As far as they share a sentiment for Lancashire, they will be glad, although there is not much cotton or cotton interest in my constituency, that something is being done especially to help the cotton industry. Hotel and boarding-house keepers will undoubtedly be glad that many of the goods which they buy for their business will be less expensive because of the reduction in Purchase Tax.

I also think of the very large number of retired persons in my constituency. They are not rich people but middle-class people who have saved a little and have retired on a few hundred pounds a year. They will feel that this Government, for the first time for many years, have thought about them. Hitherto, in the last 15 years all the consideration has been given, first, to winning the war, which was inevitable and necessary, and then for members of the trade unions who sustain and support the Labour Party and whom the Labour Party is compelled to serve.

I am not blaming the workers for wanting more or organising to seek to get more. I am merely pointing out that the Labour Party came in to serve them, and it concentrated upon doing so. In doing that it sacrificed all the retired people of the middle and lower middle classes, and all the retired artisans and others, who had put aside a little for their old age. They were all sacrificed in a continuing and vigorous inflation.

Now we have had a Government who have thought of them two or three times during the last three and a half years. In this Budget they have again been thought of. The small people, with their small savings or earnings, have been given some relief by the proposals of the Chancellor. Among them those with families have been given the most relief. It is a most equitable and fair Budget. I earnestly hope and believe that the country will think so too, and that, taking it in conjunction with all the other beneficial activities of the Government in the last three and a half years, the people will decide that they would like to have another four or five years of a Government like this one.

8.2 p.m.

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Mr Douglas Houghton (Sowerby)

The hon. Member for Morecambe and Lonsdale (Sir I. Fraser) began his speech by accusing my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) of talking claptrap when in his speech yesterday he referred to companies as being the Chancellor's favoured children. That was not claptrap; it was a figure of speech, and it happens to be true.

The hon. Member evidently came to this Committee to speak in praise of companies. We all recognise that companies are very important units in our economic and industrial system, but that does not mean that we have to fall down and worship them; nor does it mean that we should necessarily give them a disproportionate share of remissions in taxation. There is no doubt that without the activities of companies our economy would collapse so long as we are trying to run, with all its difficulties, a mixed economy composed partly of socialised industries and capitalist concerns.

Then the hon. Member referred to seaside landladies. We are not a hardhearted people, but it takes a lot to move us to compassion for seaside landladies.

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Sir Ian Fraser (Morecambe and Lonsdale)

I will tell them that; they will be delighted to hear it.

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Mr Douglas Houghton (Sowerby)

Many workers remember their experiences with seaside landladies when accommodation was short and prices were high, service was low and food was bad.

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Mr William Rees-Davies (Isle of Thanet)

Is the hon. Gentleman aware that most seaside boarding houses are kept by married people who have been workers in industrial areas and who, in their old age, have retired and come down to the coast to take on a decent job of work looking after the very people with whom they worked during their working life?

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Mr Douglas Houghton (Sowerby)

I have no intention of starting a quarrel about seaside landladies, but when the hon. Member for Morecambe and Lonsdale so played on our feelings I thought that it was proper to say a word in comment. The hon. Gentleman referred to the voracious tax gatherer, or the voracious country, taking more of their hard-earned profits in previous years than will be the case under the present Budget. He ought to recall that, on the whole, the hand of the tax gatherer rests rather lightly on seaside landladies, because they are in business and people in business are the favoured children of the tax gatherer. It is only the "pay-as-you-earner" who really feels the ruthless grab of the tax machine.

I say no more about that, but I have one further comment before the hon. Member leaves the Committee. I hate to make any criticism of an hon. Gentleman opposite, but he came down to the Committee rather late in the day and he should stay to hear my final point about his speech. The hon. Member has made most moving pleas for disabled ex-Service men. He has charged successive Governments with not being generous enough to those disabled and crippled in the service of the country. He has asked that more should be given unto them.

The British Legion, of which the hon. Member has the honour to be president, has demanded a very large increase even upon the concessions given by the present Government. Where does that money come from if it does not come from taxation? It does not come from an insurance scheme. It must come out of taxation, and the voracious hand of the tax gatherer, who is asking people to make their contribution, takes money for that worthy purpose as well as for many others.

The hon. Gentleman made an unhappy remark when he said that this money was being collected for the alleged good of all. I am sure that he would not apply that to benefits to disabled ex-Service men.

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Sir Ian Fraser (Morecambe and Lonsdale)

If the companies which were the particular point of my observations in this connection are not sustained and encouraged, where will the money come from to pay for anything?

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Mr Douglas Houghton (Sowerby)

I have acknowledged that in our present economic system companies are an essential unit in industrial production. All that is in question is not that companies should not exist or that we should run them down or underrate their contribution to the economy. The sole point of my right hon. Friend's comment was whether in this context the Chancellor was being more liberal to companies than was justifiable having regard to the shape of the Budget as a whole. That was the only point involved there.

Judging by the sparse attendance in the Committee all day, one would think that the General Election had already begun, and judging by the speeches that we have listened to, there seems to be little doubt that it has. I am beginning to feel sorry for the electors. Probably it will come fresher to them than it does to us, but I think that they will be bored to death by 26th May if they have to listen to much of what we have heard from the benches opposite in the last three days.

I was interested in the speech of the hon. Member for Reading, North (Mr. F. M. Bennett). It will be a dangerous doctrine if we are to be told that Britain can never again have a Labour Government because the rest of the world will not let us. Is that the doctrine? Have we now to cancel the Election in Britain and hold a ballot in the chancelleries of the world? Is that the proposition? When my right hon. Friend the Member for Dundee, West (Mr. Strachey) wrote the article in "The New Statesman," to which the hon. Member for Reading, North made reference, he was posing the possible economic consequences of the return of the Labour Government and saying that steps might have to be taken to deal with them.

We cannot have the decision of the electors sabotaged either by industry or financiers at home or abroad. We know, of course, that it matters a great deal what the rest of the world thinks of us; to a trading nation like ourselves where stability of production and of currency is a vital concern to our well being and our international relations, obviously it matters a great deal what the rest of the world thinks of us. But the world will have to judge us according to the decision of the electors in Britain, and it will have to have regard to the wider context of our social, economic and political policy.

If France had had a Labour Government of the pattern of the British Labour Government, there would have been greater economic arid political stability in that country today. The weakness in the French political and economic affairs is the fact that they have not got a system of direct taxation such as we have which works and which can effect the redistribution of income without which there will be no peace in France and there would be none in Britain.

I refute the doctrine that the machinery of taxation is solely for the purpose of collecting revenue to supply the essential services of the country. The Budget in modern times is an instrument of economic and social policy, and we employ it for the redistribution of the national income, just as we employ it for the purpose of giving us the financial provision for supply services and defence. That was the foundation of the policy of the Labour Government much of which the present Government simply dare not undo.

If the doctrine of the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) is to be accepted by hon. Members opposite, they should forthwith scrap the National Health Service, they should do away with a large part of our social provisions and they should scrap free education, because all those services are financed out of taxation. They are features of our social and educational life which the country has freely accepted.

The dilemma about this Budget has been referred to in the leading article in the "Manchester Guardian" this morning. The serious criticism of this Budget is one which it is unlikely that people will widely heed, because they have already been heavily indoctrinated by Tory propaganda. They are being told that Conservative freedom works, without being reminded that it worked for years between the wars in a most disastrous fashion, and without being reminded also that Conservative freedom works only so long as terms of trade and other world conditions are favourable But thinking people will still be looking for an explanation from the right hon. Gentleman of the events between 24th February and Budget day. We can refresh our minds about what the right hon. Gentleman said about the measures of 24th February. Re-reading in the OFFICIAL REPORT what the right hon. Gentleman said, I must say that it read almost like a sermon from a political Billy Graham. He said: It is only by looking forward and outward, by expansion, by liberating the human spirit to give and do of its best, that our island people can survive. He went on: It was in this faith that in February credit control was applied."—[OFFICIAL REPORT, 19th April, 1955; Vol. 540, c. 39 and 40.] Those are strangely vague and emotional words from the Chancellor of the Exchequer. I have listened to the debate throughout, and we have not yet had any explanation of why the Chancellor felt it necessary to curb spending in February and why in April he has been able to distribute considerable additional purchasing power by remissions in taxation.

My immediate concern tonight is not the effect of the Budget on the electorate, although of course that is obviously important to all of us, but what the trade unions are going to think. We have very little discussion in this House about the trade union movement, what it is doing, what it stands for and what it is going to do. But I think there will be no doubt that we all agree that it is a most highly organised and powerful economic force in the country today.

What the trade unions think about the financial and economic policy of the Government is very important indeed. They will be wondering whether the Chancellor has taken a chance on production, whether he is relying on production rising sufficiently to meet his forward commitments. They are probably wondering also whether there will be the services and goods to match further wage increases which have been granted and which are in course of being put into operation.

Another thing which is perhaps lost sight of in our economic discussions is that wage claims are no longer related to the cost of living. There are now demands for a greater share in the national income. Wage earners are not content merely to keep abreast of the cost of living. When hon. Members make comparisons between the percentage rise in wages and the percentage rise in dividends, and the percentage rise in anything else, they fail to realise that the Trade Union movement is staking a different claim for itself now, and that claim is not one of relativity but of positive advance. The Trade Union movement is hoping to leave the cost-of-living index well behind the upward movement of wages. That, of course, will depend on higher production and our ability to buy a larger quantity of imports.

The Chancellor will appreciate that the organised Trade Union movement can now make claims upon the national product in total far beyond anything conceded in this Budget. The Trade Union movement does not have to wait for the Chancellor to make incentives amounting to a few pence a week, which is what the sum of these remissions in taxation will mean. They can demand much greater concessions from the employers, and get them, even when there are not the profits to meet them. As we have seen in the case of the railway industry, the power of the Trade Union movement now is so great that it is possible for an inflationary movement in wages to begin unless there is a very careful check kept upon the balance between growing consumer demand and our capacity to meet it in domestic production and in imports.

What I deplore is that the few economic defences which the Chancellor had left against inflationary wage increases have been weakened by the Budget. I think that the Chancellor over-rates the value of taxation incentives among trade unionists and workers generally. It is astonishing how the trade unionist separates a tax remission from a wage increase. I say it is astonishing, but he has long been accustomed to keeping things in their proper compartments and he does so in this connection.

The trade unions get the reward they want by demands upon the employer—the rate for the job, the new rate for the job, and a better rate for the job. In my experience, which has been considerable in the trade union movement, I have never found that tax remissions are regarded by the workers as a substitute for wage increases. They do not regard the dispensations of the Chancellor as anything to do with settling their account with the employers. Tax reliefs may be welcomed by them as a matter of social benefit, or more perhaps as a matter of social justice, but scarcely as an incentive; and I do not know where the Chancellor is going to get his incentives out of the Budget.

In his speech, as reported in column 54, after a little earlier explanation the Chancellor said: I do not, therefore, expect personal spending and consumption to rise as rapidly this year as last."—[OFFICIAL REPORT, 19th April, 1954; Vol. 540, c. 54.] I hope the Chancellor is keeping track of the substantial wage increases which have already taken place this year. One estimate made is that wages have already gone up as much this year as they went up during the whole of last year.

The next movement of wages, I suggest, will get mixed up with the battle of differentials. There are unmistakable signs of that already in all sorts of quarters and, if it is realised, many of the demands will increase the total of wages and salaries very greatly indeed. We have signs of the battle of the differentials on the railways at present. What is this threat of a strike on 1st May except a battle of the differentials arising out of an award given to the footplate men, followed by an increase given to the other railway workers, and followed by a demand for a restoration of the differentials previously existing?

We see the bank clerks in revolt and mass meetings being held. Never before have these sedate and respectable gentlemen walked in such large numbers to a meeting hall to protest against the reduction in the real standard of their salaries. We have civil servants waiting patiently for the Report of the Priestley Commission on the pay of the Civil Service, which constantly lags behind the general movement of wages and salaries because of the principle adopted as a result of the Tomlin Commission in 1931 for the fixing of pay in the public service.

According to the Tomlin Commission, it must reflect the long-term trend of the movement of wages and salaries outside, so that the pay of civil servants is always lagging behind that of other people. A fresh stocktaking is now to be undertaken by the Priestley Commission. I believe that its Report may well confront the Chancellor with fresh demands, especially in the middle and higher ranges of the public service.

Then we have teachers and skilled workers in industry—and all this is about differentials; not a claim for the restoration of pre-war relativities but a demand that those who are not so highly-organised politically and industrially shall not fall behind in the relative scales of values and rewards for services rendered to the community. I wonder whether the Chancellor has taken all this into account in deciding upon his tax remissions.

In his speech the Chancellor referred to a commitment undertaken in connection with the application of the principle of equal pay, and, as this is the first opportunity which I have had, I want frankly to acknowledge the action taken by the right hon. Gentleman to applaud it. He said that this Government had fulfilled the wishes of the House. It is true that many Governments have had the wishes of the House clearly expressed to them on this matter but have failed to implement the decision of the House, and I think that, all politics apart, one must say, "Thank you" to the Chancellor for having taken this step now. Civil servants and teachers, and many others whose pay in the women's grades will be adjusted as a result, must be grateful to him.

How is the Chancellor to meet all these demands upon the national economy and upon his Budgetary resources? Does he hope that the cost of living will rise sufficiently to absorb the extra purchasing power without making heavy demands on consumer goods and on imports? That is a feasible hope which he may have, although I am sure that it is not one which we on these benches would support. We do not want inflationary wage improvements. We want wage increases to be improvements in real wages, and any Budget which creates an inflationary mood is a bad thing from that point of view.

I would say, in passing, that from the point of view of social justice, from the point of view of industrial peace, from the point of view of economic prosperity, before long somebody has to find the answer to the supremely important problem of how workers in industry are to be given their rising share in the rising national production without industrial strife and economic disruption. That problem confronts us in its gravest form. Already references have been made to the growing disturbance in industrial production and in our economy by disputes of one kind or another. But the Trade Union movement is so highly organised, so united and so strong at present that it is sometimes almost frightening to contemplate the power which rests in its hands.

When those of us who are responsible for influencing and leading trade union opinion go to our members, consult their wishes and advise them on what we think best to do, we discover, not surprisingly, of course, that our members are not economists but are men and women moved by what they see and hear in their daily lives. They respond to emotional as well as to economic facts. Profits, dividends, bonus shares, displays of commercial extravagance, all influence their attitude towards their own place in society and industry. They are, of course, concerned with prices and they have desires for a fuller life and wish to secure some of the amenities of modern domestic life. What impression will this Budget have upon them?

I say straight away that this Government have destroyed any possibility of the Trade Union movement responding to a call for wage restraint. I saw a comment in the "Manchester Guardian" the other day about the conference of one of our important and big trade unions. It said that the words "wage restraint" were no longer mentioned; no one bothered any more to attack it. That is significant, especially at a conference at which a substantial wage demand was formulated.

I cannot speak for the Trades Union Congress in the House, although I am a member of its General Council and its economic committee. The Chancellor knows as well as anyone else what representations have been made to him by the T.U.C. in recent weeks about this Budget. He must realise more than anyone else that he has taken little notice of the views expressed to him by the T.U.C. about the shape and structure of this Budget and the general trend of his financial policy.

The Trades Union Congress is fully seized, with the power that lies behind it, of the way in which factors, which perhaps to economists and politicians are not of great importance, influence the minds of those who are going to make demands, instruct their leaders to table wage claims and make additional demands on the national product. Most of those demands are proper and must be met by a society which is going to respond to the toil and sweat, the ingenuity and skill of the British worker because, after all, we have only two natural resources in Britain—skill and coal. They must be rewarded fairly for the part they have to play in building up national prosperity and in consolidating the stability of our economic life.

Yet at this moment, when urged by the T.U.C. to have caution in his actions, the Chancellor has left the wages front wide open for further advance with no assurance that the goods and services will be there to match it. That is my criticism of this Budget. If later in the year there is something of a crisis which has to be met by more than monetary measures—it may arise, and we know it will have no influence on the Election—words spoken in this debate may be remembered.

The Chancellor has decided his course, and nothing we can do in this Committee or on the Finance Bill will alter it. He has decided to relieve the taxpayer of roughly 155 million in a full financial year. He had the choice between remissions in direct and indirect taxation. He may have been wise in present circumstances not to give relief to indirect taxation, although indirect taxation in my belief is bad. It is regressive, it is the opposite of a progressive system of taxation adjusted according to the ability of the taxpayer to pay, and it is a bad thing in my opinion. But we realise that with the present level of taxation it is impossible to escape using the mechanism of indirect taxation—

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Sir William Darling (Edinburgh South)

Would the hon. Member agree that indirect taxation has at least the merit of being self-selective and leaves the taxpayer to tax himself if he so desires?

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Mr Douglas Houghton (Sowerby)

I once heard a politician say that the wonderful thing about indirect taxation is that it is purely voluntary. One need not smoke, one need not drink, one need not go to the pictures, need not have a wireless set, need not have a television set, need not buy expensive clothes, or shoes, or blankets—in fact one could wrap oneself in a sheet of newspaper and die. When one cannot move anywhere or do anything in these days without paying some form of indirect taxation, to suggest that it is purely voluntary is, as the hon. Member for Morecambe and Lonsdale said in another connection, clap-trap.

I conclude with a reference to the statement of the Minister of Supply this afternoon in defending the remissions of direct taxation when he said that experience had shown that to relieve taxpayers of Income Tax would enable them to save, whereas remissions of indirect taxation would be a temptation to spend. Are we now to accept the doctrine that only the tax payer is to be allowed to save, or encouraged to save, by remissions of direct taxation and the poorer folk, the family people, who are not tax payers are not to be allowed to save or encouraged to save by lowering the prices of the things they buy? People can save by spending less on things just as they can save by having more money left in their pay packets after the tax gatherer has finished with them. It is an unwelcome suggestion that the poorer folk must not have remissions of indirect taxation because they will not save anyhow but will go on spending. I do not think we can accept that.

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Sir William Darling (Edinburgh South)

Surely the hon. Member will agree that indirect taxation is not only paid by the poor? If I understand him rightly, he said everyone pays indirect taxation, rich and poor—we all dress, all smoke and all drink—

Hon. Members:

No.

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Mr Douglas Houghton (Sowerby)

What I was saying was that if the taxes that we pay as we spend were reduced we could buy the same goods and services for a lower cost than now. Therefore if we spent less on the things we still bought we could save more. That seems fairly clear to me. Anyhow, we cannot brush aside the possible effect of reductions in indirect taxation on the nation's savings because we can get them from that source as well as from the direct taxpayer.

When talking of indirect taxation in relation to the Purchase Tax on textiles, the aim of asking the Chancellor of the Exchequer to abolish the Purchase Tax on textiles was to get people to spend more on textiles. That was one of the main purposes from the point of view of the industry of Lancashire—and cotton is spun and woven not only in Lancashire; some of it is done in Yorkshire and elsewhere.

Had the Chancellor of the Exchequer been able to. abolish altogether the Purchase Tax on textiles, he would have had, at not very much cost to the revenue, a complete answer to the constant grumblings on both sides of the cotton industry that Purchase Tax was an obstacle to the production of higher quality goods for export and an impediment to sales in the home market.

I will not take any longer in analysing the tax changes which the Chancellor has proposed—

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Sir Raymond Gower (Barry)

Before the hon. Member leaves this interesting part of his speech, would he agree, with regard to indirect taxation, that it was the policy of most Chancellors of the Exchequer on his side of the House to increase indirect taxes substantially in practically every Budget since the war?

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Mr Douglas Houghton (Sowerby)

Yes. Those increases in indirect taxation were imposed deliberately to curb consumption of certain commodities for which we had to pay either in dollars or in the exchange of goods which at that time were an embarrassment to our balance of trade; we clearly understood that. It was the use of the weapon of taxation for economic purposes, which is perfectly legitimate when necessary.

The Budget will mean an enormous load of work for the Inland Revenue

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Mr William Rees-Davies (Isle of Thanet)

Surely, the hon. Member would agree that it must mean an enormous reduction later in the work of the Inland Revenue. To have 2,400,000 people now totally exempt from tax will involve a much smaller volume of work. We hope that the federation which the hon. Member so ably represents will now be reduced in its membership.

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Mr Douglas Houghton (Sowerby)

I am glad of that intervention, because it enables me to remove a popular misconception. Under the system of Pay-as-you-earn, every worker, whether exempt or otherwise, has to be coded, and his employer must know the code number. It does not mean that tax deductions are made in every case. I admit that an experiment has been conducted recently with a kind of exemption card so that if an employee is far enough below the level of liability to tax, because, for instance, he has a large family, he can have the exemption card to take around with him, which would save a great deal of bother in changes of employment. One is given, as it were, a ticket to move about freely in the intricacies of the taxation system without let or hindrance.

But the number of people who are so far below the taxable level is comparatively small. It is amazing how small the number can be without risk that the first wage increase or the passing of a child out of the range of child allowance will bring an employee over the taxation limit. So there is very little relief of work to be obtained in that way. I do assure the hon. Gentlemen that this is so. It is a popular fallacy that millions of taxpayers go out of the taxation system of P.A.Y.E. under a Budget like this. They do not. They stay in, unfortunately, and they move about, and they have to be kept track of, and it means an enormous amount of work.

The Budget means that 9 million taxpayers will have to be re-coded for tax purposes before July to get the new rates and allowances into operation. All this work has to be done for amounts in some cases so trivial as to be quite surprising. For instance, a single person has to be earning up to 800 a year before he gets more than 3 of tax relief. I am not sure that the re-coding of many of these people will not cost a great deal more than the tax remissions. I suppose that within these margins of tax relief that is almost bound to be so.

Something has to be done to put the machinery of the Inland Revenue in the sort of shape that it can cope with this burden of work and of others like it which rest heavily upon it at the present time. I hope that the Committee and the Chancellor will bear in mind that this heavy work has to be done—I am afraid, on overtime—between now and July, and that it will be very hard indeed for the 35,000 staff employed on this job. I ask the Committee's forgiveness for mentioning their difficulties, and I ask for the Committee's understanding of their position.

My main criticism of the Budget is that the Chancellor has taken insufficient notice of the views of the trade union movement and has exposed the economy to dangers which a more prudent fiscal policy would have averted.

8.42 p.m.

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Commander Charles Donaldson (Roxburghshire and Selkirkshire)

It pleases me to follow the hon. Gentleman the Member for Sowerby (Mr. Houghton), particularly on some of these matters regarding coding for Income Tax. He said that comparatively few people, if any, did not come within the coding system. I happen to be one of those, single though I am, who attract the mystic two letters "N.T."—no tax, and so—

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Commander Charles Donaldson (Roxburghshire and Selkirkshire)

I will give the hon. Gentleman some lessons at some other time and in some other place than this, which is not the place for a display of one's private affairs. Naturally, I have taken a personal interest in what the hon. Member for Sowerby has said about the difference of coding which will follow my right hon. Friend's Budget.

I do not intend to follow in any detail the hon. Gentleman's speech, because he spoke of many things, and I wish to be more particular in the few remarks which I have to make. I must say, though, that as he referred as he did to landladies, in seaside resorts in particular, he must either be contemplating never going back there again, or at least contemplating going to the Continent, and in that event I would invite him to visit the borders of Scotland, where he can enjoy the beauties of nature in reasonable surroundings at reasonable prices. Moreover, were he to go there he might add to his knowledge.

Joking aside, the hon. Gentleman always holds the attention of the Committee with his great and detailed knowledge and experience of the union of which he has spoken. I have every possible respect for the trade unions and their proper purposes and pursuits. I do not wish to follow him in some of the arguments he used, but I would make one observation. A good deal of my life has been spent in Canada, where the trade unions are strong and effective and, I think, do fulfil the functions for which, as I understand it, trade unions were formed, and for which they should be fostered and supported. The only difference really between the trade unions here and in Canada is that in Canada they have very little political association with any political party. I am not sure that it would not be a good thing for trade unions in this country to have less political association with political parties.

I do not want the hon. Gentleman to think I am pursuing him in this connection, for I know that he has an interest in this matter, but I think that there are many trade union leaders in this country who are pondering increasingly whether it would not be better for the trade unions to pursue their purposes through the T.U.C. and not by political association with one political party or another. It is true to say that many of the trade unions are not necessarily affiliated to the Labour Party, and that an increasing number of trade unionists incline to the Conservative and Unionist way of thinking. Be that as it may, I think it would work to the benefit of the trade unions if there were perhaps a lessening of any too close association with any political party.

I wish now to revert to what was said by the hon. Member for Midlothian and Peebles (Mr. Pryde). I rather enjoy following the hon. Member, and I have done so before. It may well be that I may follow him in another sense before too long, for he is to lose the County of Peebles, which is to be associated with my own counties of Roxburgh and Selkirk.

There was very little in what the hon. Member for Midlothian and Peebles said with which I would differ. On many matters, I agree with him, but I differ with him in that I support this Budget. I believe it is a good Budget, and, convinced of that, I am prepared, should I be be asked to do so, to fight my election campaign on the borders of Scotland on the forthcoming occasion with the back- ground of this Budget behind me. I do believe, however, and I think many hon. Members of the Committee will agree, that election speeches are better made in the country, and that in this Committee we should probably do better to stick more closely to the real point of the Budget.

I should like to draw the attention of my right hon. Friends on the Front Bench to one or two things which have been omitted from the Budget. If my understanding is correct, the Financial Secretary to the Treasury yesterday inferred that later in the year there may be opportunities for the consideration of some other aspects of taxation which are not considered in this Budget and are not included in the forthcoming short Finance Bill.

I should like to join with the hon. Member for Midlothian and Peebles who, in his opening remarks, referred to the tax on sport. I have particularly in mind the Border games and the Highland gatherings. The Financial Secretary will remember that a deputation waited upon him some weeks ago to put forward a special plea regarding the harmful tax on the Highland gatherings and the Border games in South-East Scotland, and many things associated with them. Little finance is gained by the Treasury from the tax as it is now applied. I think that the figures in respect of these Border games come to about 7,000 a year. On the other hand, there is a great reward for this country in attracting dollar earnings from visitors from Canada and America as well as the taxation on the goods they buy while over here.

The taxation which these gatherings are forced to pay is having a very serious effect in the Highlands and in the Border counties of Scotland on such events as riding the marches, which take place every year, as they have done for well over 300 years, and, in the case of Selkirk, for 460 years. Every year, people come to this country for these events; they will spend money while they are here and will go to the Border games and Highland gatherings.

The Chancellor might well, if he so wishes, get his money in a better way if he takes steps to see that these games are not taxed out of existence. Certainly, in the Border counties of Scotland there is great concern about a small tax doing so much harm to some of these great historic events, so interesting to the people of the country as well as to those who return in order to witness them. That is the main plea that I wish to make to the Chancellor.

There is a further plea which I wish to make as the representative of a very large rural area in Scotland, a plea which applies to all rural areas in Britain. It concerns the tax applied to small cinemas in the remote parts of the country. I know that other hon. Members on both sides of the Committee have referred to this matter in this debate, but I wish to add my plea to what they have said.

I believe that, whatever party points may be made at the General Election, it is important that we in the House of Commons should see that the agricultural production of our vast rural areas is increased to the greatest possible degree. It is not sufficient to have subsidies and incentives for farming, such as hill cattle subsidies and winter-feed grants. It is important that the workers, the people whom we ask to devote their lives to the production of food in this country, should have every possible amenity which it is possible to grant them. I will not go into other matters, but certainly in the remote areas the smaller cinema operators are having difficulty in maintaining their provision of entertainment, and I believe that the Government should consider their difficulty.

Finally, in the South-East of Scotland a great deal of money is spent in the vast industry of wool cleaning. I should like to draw the attention of the Chancellor to the tax on white spirit, or hydrocarbon oil, as used in the woollen trade in Scotland and in other parts of the country. In my constituency there is a very large firm which cleans wool. It also does ordinary cleaning and has about 100,000 customers throughout Britain. I believe that the tax on the hydro-carbon oil which is used for that purpose shows about a 246 per cent. increase over the period immediately after the end of the war in 1945.

I do not want to make a point against whatever Government were in office when the tax was imposed, but if the Chancellor considers a reduction of taxes later this year, I appeal to him to keep in mind this and the other points which I have mentioned as of importance to the South-East of Scotland. I hope that due consideration will be given to them at that time.

8.52 p.m.

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Mr John McKay (Wallsend)

I have listened with great interest to the debate which has taken place since the Budget proposals were announced. It has been a political education to me. I should like to deal in particular with the implications of some of the things which were said by the hon. Member for Morecambe and Lonsdale (Sir I. Fraser). I do not want to speak of landladies and of how the Budget will affect them, but I believe that the hon. Member expressed the general attitude of the Conservative Party towards industry. When he was speaking of reductions in taxation he emphasised the effect of incentive upon industry and the people engaged in it. He emphasised that people who are connected directly with companies are carrying on the industrial work of the nation.

One of the implications of his remarks was that these people are an absolute necessity, that industry cannot be carried on without them and that therefore the Government must try to retain their good opinion. That is one of the amazing things which the Tories constantly and continuously emphasise. It is not true that these people are absolutely essential. The history of our country indicates that it is not true. If it were absolutely necessary that the main sectors of industry must be controlled, governed and worked by private enterprise, the logic of it would be that no industry of any importance could be carried on without that ownership and direction. Our own history, particularly since 1945, shows us that that is not correct.

One thing which we can do without and which, as a nation, we shall do without as time goes on is this class of citizens. In so far as the people become more educated—and that is gradually taking place—and they take more interest in politics, there is no doubt that slowly but surely the country will become more and more socialised economically. Since 1945 we have taken over many big industries and worked them successfully, so that the point so laboured by the hon. Member for Morecambe and Lonsdale has no real soundness in reality when we are considering future development.

There are three large problems with which any Government has to deal. First there is the question of preserving the gold reserves if there is any indication that international trade is about to go against us. The second big problem is the question of inflation, and because that will tend to increase prices in the country still further the Government must tackle it seriously. The third problem is the issue of an Election.

Any Government must use all its strength and power to deal with all these problems. In the case of the present Government, only a short time ago there were proposals which indicated that they thought a dangerous situation was arising in the balance of trade position, and the Chancellor of the Exchequer took steps to curb hire-purchase agreements and raised interest rates. But since then the question of a General Election has arisen, and the Government have now decided on a policy to deal with the economic situation as if there were no question at all of inflation, and they believe that this policy, as it is gradually developed, will get them over the crises arising from our balance of payments.

The Government seem also to have come to the conclusion that inflation is not dangerous at the moment and there is no need to put any brake upon the situation. So they have decided that in all conscience they are entitled to give something away to the community.

Let us start from that position, assuming for one moment that it is correct. Having decided that they can give something to the community, the next problem that posed itself to them was, how could that bounty be distributed? The Chancellor of the Exchequer in his Budget speech emphasised that it was a particular desire of his to give encouragement to the family man from any amount which was at his disposal. If he is a conscientious Chancellor, he must have asked himself, "Which family man do I want to help?" If this question were put casually to anyone, I should think that the answer would be that the family men who should be helped are those who are the poorest. That is one of the points in dispute at the moment, and it has been referred to by several speakers. We can reduce the Income Tax, but we cannot help the family man who is not paying anything. The Chancellor knew perfectly well that he could not help the family man by way of reduced taxation. Therefore he must find some other means of meeting that situation.

The question then arises, is there any past policy, or any policy which we can think out for the future, which will meet a situation of that character? My conclusion is that if a Government have sufficient confidence in themselves to know that the people will be guided by their collective wisdom—which should be greater than the thought of any individual—the Chancellor must have known the key to the problem but did not desire to use it.

There is a simple way by which the Chancellor could guarantee to the poorest family man direct benefit from his Budget. It would not be by a new method, as it is already being used. The Chancellor could have dealt with the situation and helped all family men simply by dealing with the problem through family allowances.

The Budget proposals mean that the family man who earns 600 a year and has two children gets a benefit of only 6d. a week. All family men getting 500 per year or less get practically nothing from the Income Tax relief. I expected the Labour Party to deal with this problem more than it has done. The family allowances enable us to help people in relation to their need more socialistically than any financial legislation that has ever been passed. Giving families something according to their needs in order to meet their special liabilities is fundamentally a Socialist policy.

In wage problems we constantly have the irritant factor of differentials. In the trade union world if we attempt to help under-paid men or men in lowly paid grades we always come up against the problem of the differentials. If we deal with the problem through family allowances we get away entirely from that problem because then all family men having equal numbers of children get the same allowance whether they are in highly paid jobs or lowly paid jobs.

That is the way in which I should have dealt with the problem if I had been Chancellor of the Exchequer and if I had believed that I should have the confidence of the people if I attempted to do something in particular for the family men and the lowest paid workers in the country. There are about 5 million people earning between 155 and 250 per year and another 9 million earning up to 500 a year. Many of those people have less than 8 or 9 a week, and that is a very small wage at the present time. Whatever the wages workers are now receiving, they include overtime during the week and at the weekend when they receive higher rates. That has tended to swell their wages.

I want to come to another topic which has been debated many times. There has been a general tendency to say that, compared with dividends and profits, wages have risen tremendously. I have taken the trouble to get the figures from Government statistics. One can always take a particular year to suit one's argument and compare it with another year. However, it would be justifiable to make a comparison with 1938, the last complete year before the war. During the war, as in the First World War, workers expected to find themselves finally satisfied and their position considerably improved.

I want to compare wages with dividends and undistributed profits. Some financiers and others who want to build a case against increasing wages may say that I should not include undistributed profits, because capitalists do not get them, but receive only dividends. That is not true, as those people know perfectly well. It is becoming an almost universal practice for profits to be split into undistributed profits and dividends. In 1938 dividends were greater than undistributed profits, but since the war the reverse has been the case. Undistributed profits increase the value of the shares so that when the shareholders want to sell the shares they get a much greater price. The situation has changed since before the war so much that undistributed profits are now about two and a half times greater than dividends.

When we are comparing wages with profits and studying the returns gained by the owners of private industry, we are justified in comparing the wages with that amount of profit which is free of all liability. The return to industry, to the owners, must be greater than ever it was before, but to try to hide the situation they separate dividends and undistributed profits.

Undistributed profits have risen since 1938 by 500 per cent., and dividends have increased by about 50 per cent. When we make comparisons we find that between 1938 and 1954 the rise in wages has been 296 per cent. In the same period the rise in profits and dividends combined has been 312 per cent. In 1946, compared with 1954, there was a rise in wages of 169 per cent., and the combined profits had risen by 205 per cent. In both periods the rise in profits is seen to be greater than the rise in wages, but the situation is, I admit, gradually changing for the better for the wage earner.

In 1954, compared with 1948, wages had risen by about 148 per cent. and profits combined had risen by 141 per cent. There is a better result for the wage earners than for those who receive profits. When considering wages we must, in justice, take into account how the wages have been obtained. There can be two comparisons. The first is the total wages obtained throughout the country compared with the total profit. I submit that that is no analogy whatever from the point of view of the worker. The true analogy for the individual is, "What was the wage I got in 1938 and what is the wage I get now?" That is the comparison that I have taken for wages.

Statistics tell us that 69s. was the average weekly wage in 1938, 120s. 9d. in 1946, 137s. 11d. in 1948, and in 1954 the average weekly wage was 10 4s. 5d. It may be said that all these figures are exaggerated, that they are put forward by an advocate of one particular point of view and that the results of the comparison are open to question. I saw a report recently that a Professor N. Kaldor had given a lecture on this subject in January of this year. He was speaking to a selected audience. He was speaking to the Royal Statistical Society. He is a well-known professor—

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Sir Edward Boyle (Birmingham Handsworth)

He is very well known for being wrong. If the hon. Gentleman does not believe me, I can lend him a copy of Sir Hubert Henderson's Reith Lecture.

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Mr John McKay (Wallsend)

I have seen them both. I can understand the hon. Gentleman saying that the professor is wrong—

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Mr John McKay (Wallsend)

—because he is wrong from the hon. Gentleman's political angle. He said that the savings of companies in that same period have risen 8 times, and he added that if one takes into account depreciation it is reduced to five times. There we have a recognised university professor giving to a most critical audience the same sort of figures as I have given.

I was glad that my hon. Friend the Member for Sowerby (Mr. Houghton) mentioned the new outlook of the Trade Union movement. He said that the trade union leaders are becoming more in line with new thought and that they will not be satisfied if the workers' incomes merely keep in step with the cost of living. The idea is held by many people that if the workers can manage to purchase what they used to purchase in 1938, they have attained the millenium.

The hon. Member for Sowerby has given hon. Members opposite something to think about, and he has warned them that they must bear in mind the changed outlook of the Trade Union movement. The Trade Union movement takes the sensible view that while profits are rising tremendously and the capital assets of private people are increasing, the workers who supply the nation with those increased profits and assets should in the future demand a greater share in the results of combined effort.

I also wish to emphasise that if there is an increase in the prices of the commodities which the workers require, they must of necessity receive from their efforts to produce the wealth of the country adequate wages to enable them to maintain their standard of living. It is a well-known fact that the Tory Party represents the capitalists of this country, and what I am trying to emphasise to them is that as the cost of living rises, so the workers must have more pounds in their pay packets in order to maintain their previous standard of living. Another economic argument [Laughter]—let us have a laugh. When we get a laugh it enlivens the proceedings. I am pleased to think that hon. Members are getting a laugh out of my little, peculiar speech.

Nevertheless, that does not put me off the point I am making, which is that as wages rise in accordance with the cost of living, so the workman must have at least 2 10s. to obtain the purchasing power which he had before the war with 1. The argument advanced from the financial organs of the Tory Party is that because wages have risen with the cost of living, there must be a comparable increase in dividends. In other words, because the cost of goods has risen and because wages have risen accordingly, the dead pound note, the dead invested money which brings in the dividends, must rise in value to the same extent.

Another argument which hon. Members opposite advance is based on the cost of acquiring new plant. They use this as an argument for dividend increases. But anyone who knows the subject knows perfectly well that if a man buys machinery at the beginning of a period during which prices rise, then during the four or five years before the plant is obsolete he has the use of cheaper machinery. He is getting the full advantage of increased prices at the same time. The result is that at the end of that period he has to pay three times the value of the replacement plant and—[Laughter.]—I am glad to hear another laugh. It is pleasant to find that I am relieving the monotony in this way. When hon. Members opposite laugh so much it indicates that I am telling the truth. But let those laugh who can. As a capitalist I get pound notes much more cheaply than I used to get them, and with no more effort than the workman has to put in to get his wages. The cost of plant has gone up three times—[Laughter.] Still hon. Members are laughing.

If 1,000 was paid for plant before and now 3,000 is paid, and if one got a 5 per cent. dividend before and now one gets 5 per cent., is it not true that, with the same physical effort on plant and human capital, having invested and paid three times the amount of money, with the same rate of dividend return one gets three times the dividend one used to get? There is no reasonable, logical, financial reason why financiers should have a claim to greater dividends because of the increased cost of plant. If they get the same dividend they get three times the same return, but financial journals, corporations and great capital concerns build up a psychology throughout the country that this is an absolute necessity and they get away with it. But this cannot go on—[Laughter.] I am glad to find that I am helping you so much.

We have been told that Professor Kaldor is not to be relied upon, but take the words of the Chairman of the Asquith Company. He says that in 10 years the assets increased three and a quarter times. The increase was 964,000, and there was 731,000 from company assets to make up the 964,000 needed. In other words—[Laughter.] Another laugh. It is a pleasure to know that I am making hon. Members laugh so much. They will not laugh when the workers hear about it. If the workers knew of these things we might have a different psychology in the Trade Union movement; perhaps it would be more vindictive than was suggested by my hon. Friend the Member for Sowerby. During the 10 years this company was making big dividends, in addition to building up a great amount of capital and increasing the value of the shares.

Take the case of Midland Counties Motor Company Limited. Its profits doubled this year. The rate of profit in dividend and undistributed profits was 83 per cent. The undistributed money was 28 times more than the dividend paid. That is the kind of situation we have to meet. It is wonderful to see how the capitalist world is always crying out for incentives. It is admitted that in the industrial world the work is carried on by directors, not shareholders. What incentive will the 6d. off Income Tax be to directors of big companies in industry? We know perfectly well that directors of big concerns would laugh if we told them that it would be a great incentive to them as directors. Are you aware of what you are implying? You are implying—

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Mr John McKay (Wallsend)

I can understand some of the Members opposite laughing, but there are some I cannot understand. I thought they were rather serious people. I am prepared to listen to a reasoned argument from any hon. Member. No doubt, you will have cause to laugh again before I finish. I put it to you, who are in close touch with directors of industry. Some of you have half a dozen or twelve directorships and attend meetings and take reports from industry.

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Mr Graham Page (Crosby)

On a point of order. Is it in order for the hon. Member to suggest that the Chairman is associated with a great number of companies?

The Chairman:

He also said that I was laughing, but neither is the case.

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Mr John McKay (Wallsend)

I said that many on the benches opposite were connected with big industry and were directors, but I was dealing not with personalities, but with principle. When somebody twists something on a point of order, that shows his psychology and attitude of mind. I have been here 10 years and have never interrupted frivolously. I should have expected a similar attitude from the hon. Member's side.

The Government are playing with the question of incentives. Imagine a board meeting a month hence. The directors will report that there is 6d. off the Income Tax. They have a new incentive and will do something that they have not done before because they did not regard it as worth while. If directors in industry need 6d. off the Income Tax to get them to work thoroughly and honestly for the benefit of the country and are not prepared to do it otherwise, they are not worth 2d., and it is time that they were removed from their directorships.

The industrialists have never been as prosperous as during recent years. All returns emphatically point to that. Directors cannot conceal it. They even have to tell it openly so that the world can know what has happened generally in industry. The question we must consider is, is there any other means of trying to help the country than that of merely taking 6d. off the Income Tax regardless of the amount of profits that may be made?

Does it never cross the minds of the directors and shareholders of the great, prosperous companies that when they are doing so well they should reduce the prices of their goods, even if that should mean their taking less profit? The time has arrived when the nation needs a reduction in prices. But no, that course seems never to suggest itself to their minds. Will the 6d. incentive or would a 1s. incentive be used to reduce the prices of commodities? I doubt it very much.

The psychology of the moment is, "Get more and more." The shareholder gets his dividends. He is increasing his capital assets. He can leave those valuable assets to his relatives and friends when he passes away. The ordinary man, however, has not much chance of accumulating property, accumulating so many valuable assets, to leave to his dependants and friends, for he gets only his wage. To earn it he has to spend the only capital he has, his personal, human energy and strength. He has to struggle all his life. The people who control the country seem to think that the workers have a reward when they can go through life without going to National Assistance, and that that is all that they should expect. My hon. Friend the Member for Sowerby has predicted that there will be a change in the attitude of the workers, and some attempt must be made to meet it.

To illustrate what I mean about company profits and shareholders' growing assets, I would quote some figures relative to some companies in or near my constituency. The 1 shares of Clarke Chapman are now at 49s. 4 d., and the company has paid a dividend of 13⅓ per cent. Hawthorn Leslie's 10s. shares are now at 22s. and the company has paid a dividend of 15 per cent. Swan Hunter. one of the great companies on Tyneside, has paid a dividend of 10 per cent. on its 1 shares, which stand at 67s. 3d. Wallsend Slipway 10s. shares are now at 62s. and the dividend paid is 40 per cent.

Hon. Members opposite have had a good laugh during my speech. Apparently, they have enjoyed my speech, but the workers of the country ought to have some of this information. It is up to the Labour Party to see they get it, and it is up to the Labour Party to draw up a programme for the forthcoming General Election, a programme in which the party believes and which will implement the theory and philosophy propounded to the Committee by my hon. Friend the Member for Sowerby. The Labour Party is supposed to represent the working people more truly and emphatically than the Tory Party, and to the extent that it does represent them, and plans a programme to implement the philosophy propounded by my hon. Friend the Member for Sowerby—[Laughter.] Hon. Members opposite are laughing again. The time may soon come when they will no longer laugh.

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Mr John McKay (Wallsend)

Nye is all right. Nye will attempt to help forward the philo- sophy of my hon. Friend the Member for Sowerby, to implement the philosophy which my hon. Friend has propounded to the Committee. If the Labour Party gives the people this information and prepares a programme implementing the philosophy and policy of which I have spoken in part of my speech, implementing all that my hon. Friend the Member for Sowerby has said, then there will be no question how the people will vote in the forthcoming General Election.

9.45 p.m.

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Mr Graham Page (Crosby)

I should have been pleased to follow the hon. Member for Wallsend (Mr. McKay) if I could have followed him.

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Mr John McKay (Wallsend)

One expects any intelligent hon. Member to have the ability and mentality to be able to follow almost any hon. Member of the Committee.

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Mr Graham Page (Crosby)

At this time of the evening, I think it would be wrong to endeavour to make an election speech in answer to some of the points which have been made during the debate today from the other side of the Committee, particularly because I wish to make one point which is not in any way an electioneering point, as many which have been made from the other side of the Committee have been.

I wish to refer to something which is lacking in my right hon. Friend's Budget, and to ask him if he will perhaps reconsider this particular matter, if not now, when he returns after the General Election. It is in connection with the 20 per cent. investment allowance which was granted in the previous Budget, and which, to a great extent, has proved a success. When it was introduced in the 1954 Budget, some of us felt a little doubtful whether this experiment would work, particularly in regard to shipping, which was mentioned at that time as being one of those industries in which investment was specially needed.

Some of us thought that perhaps the experiment might not prove itself, and I am here referring particularly to shipping. In 1953, the orders had been frighteningly low, far lower than the annual rate necessary to replace ships on a 25-year basis. During the early part of 1954, the same trend occurred, and again some of us who were rather doubtful whether the 20 per cent. allowance would work shook our heads.

During the latter part of 1954, orders began to come back to the shipyards. Of course, it takes time for orders to materialise, and, during the last quarter of 1954, some 300,000 tons of new orders came on the order books of the shipyards, showing that the shipowners had realised that it was worth while owning ships and modernising their fleets.

There were two interesting points about these new orders which came in during the latter part of 1954 and are still coming in during the first part of this year. One is that the majority have been for dry cargo vessels. This helps towards making a balanced fleet, and also helps in dealing with the balance of payments problem of the country.

The second point was that the great proportion of these new orders were for small ships, the class built in the yards which particularly needed the orders. These were cheering points. Among the melancholy points was the fact that the output of the yards during the last year was 1 million gross tons, which exceeded the previous year by 250,000 gross tons. It may seem rather silly to say that that was a melancholy point, but at the end of 1953 there were 5 million gross tons building in the British shipyards whereas at the end of 1954 there were 4 million gross tons, representing a very serious shortening of the order books.

A high rate of output plus a certain amount of cancellation of orders had caused the shortening in the order books of the shipyards. The cancellations were another melancholy point in the picture. There had been 600,000 gross tons of orders during 1954, but there were 300,000 gross tons of cancellations during the year, and therefore the new orders represented only one-fifth of the capacity of the shipyards for turning out new ships. We had the cheering points of increased orders of the right kind against the melancholy point of only one-fifth in new orders of what our yards could undertake. But it had been shown during the latter part of 1954 and again during the early part of 1955 that the fiscal policy of the Chancellor in the last Budget had had its success in a small way.

My right hon. Friend's policy had persuaded many owners to place new orders for ships, and I beg the Chancellor, when he has found a fiscal policy which has had a success in this limited way, to press it home, intensify it, and make it a success in a much bigger way. Ships are costing now four times as much as they cost before the war. That means that the depreciation allowance is merely the allowance of tax on 25 per cent. of the replacement value of the ship. With the investment allowance, another 20 per cent., it still leaves over 50 per cent. to be found out of taxed income for the replacement of a ship. I know that other concerns are in the same position in the matter of replacements of their plant and factories, but I make a special plea for shipping and shipbuilding in this respect.

The building of a ship is a matter of national pride and prestige which the building of a power station or factory can never be. I do not think that it is an exaggeration to say that this country came into being by shipping, that we exist by shipping, that the financial future of the country depends upon the success of our shipping, and that if the present trend of shortening order books goes on it will spell disaster not just to one industry but to the country.

I beg the Chancellor to try to close that gap between depreciation allowance plus 20 per cent. investment allowance on the one hand and replacement value on the other. I do not think that it would be a great concession if the investment allowance for shipping was doubled. It would not be a concession but an investment by the country, for the country has a tremendous return from shipping. In 1952, the first year for which definite figures are available, 221 million was earned by shipping in invisible exports, to the credit of our balance of payments. I think it is safe to say that for 1954 the figure is nearer 250 million.'

Another justification for special consideration is that more than one-third of that 1 million gross tons built in 1954 was for export, again a great credit to our balance of payments position. That rising output will attract orders to the shipyards in the same way as the present Government policy in international trade will attract orders to shipping and shipbuilding. The freedom in purchasing commodities such as wheat, rubber and cotton affords tremendous opportunities to shipping, of which it has not been slow to take advantage.

But shipowners face this great difficulty, in modernising their fleet, that the cost of the vessels is four times more than it was 25 years ago. I think it is not unreasonable to say that it is the ship which has depreciated over that period of 25 years and not just the sum of money. If the ship is to be translated into a sum of money for the purpose of depreciation, then surely it is the present replacement value which should be the sum of money and not the original cost of the vessel. Last year's Budget did show some recognition of that fact and some owners felt the value of it and placed new orders.

However, it was not enough, and I beg for a greater recognition so that more orders can come from more owners, otherwise the long-term effects of the dwindling order books in the shipyards will have very serious repercussions, repercussions far beyond the shipping industry and repercussions first upon some of those households in my constituency, which I know so well, of the dockers and of the merchant seamen.

The dockers individually are the most hard working and conscientious workers. They have their troubles now in trying to free themselves of restrictive practices in their work. The Liverpool dockers want freedom to get down to the work, and there is tremendous work to be done, but if there is the smell of a recession in shipping then the dockers will hold on to their restrictive practices, and who can blame them for so doing? The Chancellor can prevent any such recession by continuing and enlarging on the good work which he started in the 1953 Budget by the institution of that investment allowance. It has done good, and if one could extend that good a little further it could save what looks like a very dangerous situation in the shipping and shipbuilding industries.

Whereupon Motion made, and Question, That the Chairman do report Progress and ask leave to sit again—[Mr. R. Thompson]—put and agreed to.

Committee report Progress; to sit again Tomorrow.

10.0 p.m.

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Mr Ivor Thomas (The Wrekin)

On a point of order. I was on my feet before 10 o'clock struck, but it was too late to take an effective part in the debate. I think I am entitled to call attention to the fact that I was on my feet before 10 o'clock expecting to be called before the proceed- ings were ended by the clock. Therefore I lay my objection to the procedure that has been adopted.

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Sir Charles MacAndrew (Bute and North Ayrshire)

A Motion to report Progress, which as Chairman I accepted, was moved half a minute ago. I did not think the hon. Gentleman could make much of a speech in that short time.

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Mr Ivor Thomas (The Wrekin)

But may I call attention to the fact that as I was on my feet I should have had the right to continue the proceedings tomorrow?

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Sir Charles MacAndrew (Bute and North Ayrshire)

I had the right then to accept the Motion when it was moved.