Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 12 April 1962.

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Photo of Mr Gilbert Mitchison Mr Gilbert Mitchison , Kettering 12:00, 12 April 1962

I earnestly hope that I have not been responsible for any undue shortening of what my hon. Friend the Member for Gower (Mr. I. Davies) was saying so eloquently, for I agreed with every word of it. I have been listening for most of the four days we have been talking and I have read the rest of what has been said, and I think that we have had a more man usually interesting debate on what I shall suggest was a rather dull Budget. Hon. Members have gone some way beyond it, very rightly, for at this time of year, ever since the late Sir Stafford Cripps introduced the practice, we discuss the country's economic situation as well as the actual terms of the Budget, afterwards to be incorporated in the Finance Bill.

There is one matter on which I agree very cordially with my hon. Friend the Member for Sowerby (Mr. Houghton). I should like to congratulate the Government on a quite remarkable feat of conjuring. They have succeeded in getting through four Government speeches and reviewing the country's economic situation and the Budget proposals without once mentioning the £80 million concession to Surtax payers which comes into this year's finances and for which the figures are in the Financial Statement and so on.

This is getting a little too skilful. There is a limit to political] tactics, perhaps especially for the Chancellor of the Exchequer, and there comes a time when he ought to tell the country that this, too, should be taken into account. We can all see his reasons for not wishing to do so. It would fit very ill indeed with some of the proposals which he has been putting before the country and some of the proposals in this very Budget.

For the rest of the Budget—and I say the rest of the Budget because I count the Surtax in it—we may at first sight be tempted to say that it would not really have made any difference if he had said, "No change, boys. Carry on as before". That is not quite so. That is, of course, the final balancing effect of the Budget. There is a very small change one way or the other. No one pretends that there is anything else, but there are some matters of some importance in it, and I am going to mention one or two of them.

The right hon. and learned Gentleman has very properly met, I think, the first two Amendments of the Opposition in last year's Finance Bill—I think that we have had them there for some time now—and given small income relief and dealt favourably with age exemption limits. These are very small beer. There is little money in these two concessions, but they are quite right and I am glad that we persuaded the right hon. and learned Gentleman.

I am not going to say very much about sweets. I see the dental case, if I may so put it, but I do not think that that is the real reason for the tax. It is unfortunate that the tax has been put on at the moment when we have had the report of the Royal College of Physicians about tobacco, because many people who are trying to give up smoking eat a lot of sweets in the process, and I think that this is a wrong moment to put on the tax. But lately the Government have been hunting for new things on which to put Purchase Tax. and some of their efforts are really quaint. The last couple that I had to deal with were taking tax off garden mowers and putting it on to fireworks. We had quite a lively debate about it. This is the same sort of thing. The Government go hunting round for something on which to put Purchase Tax, and I agree with the comments that have been made, in the same way as I did with the comments about fireworks. It is rather unfortunate that every time they choose things that children want. The Government say that it is only a little one. The sort of pickpockety noise that we had from the Government—"We are just filching a little out of their pockets; they really will not notice "—falls a little flat when one finds that the total is £50 million in a full year and £30 million this year. It is really quite a substantial tax.

The other thing is the Purchase Tax arrangement. In 1955—that was, if I have kept count correctly, the last financial crisis but one; but it may have been another; one loses count of them a little but they all run absolutely true to form—we had the present Home Secretary bringing in for the first time, after the General Election—that was rather a quick one, because it came directly after the General Election and this has been just a little bit slower—Purchase Tax on pots and pans, brushes and household goods, and all kinds of things. These things had been taxed during the war, but directly after the war Mr. Hugh Dalton, as he then was, took the tax off household necessities, things like furniture, and so on. They were then introduced in that financial crisis at the 5 per cent. rate.

We objected to it strongly at the time We said that it was—as indeed it was —a regressive tax, a mean tax, and from every point of view thoroughly unsatisfactory. We have never liked it. We have been in the difficulty time and time again of not being able to deal with individual cases of Purchase Tax. I do not complain of that. It was actually Sir Stafford Cripps who introduced the Resolution and I see the reason for it. But what is happening now? That tax is being doubled, and it is part of the financial arrangement that the Chancellor is bringing forward. What is more, it is not only those things. It includes clothing, and the staple trade in my constituency, boots and shoes.

It is a fantastic sort of civilisation which, in the same Budget—and apparently for a reason which satisfies the Chancellor—lightens the tax on motor cars and doubles the tax on boots and shoes. Some people still have to walk; not everybody has a motor car. But it is part of good, sound Tory policy to lighten the tax on motor cars—the Press comment on this concession was that all the agents and dealers in the motor-trade would be drinking champagne that night—and at the same time to double the tax on boots and shoes. I am only taking boots and shoes as an example. Somebody was talking about the number of people who used various articles. Almost everybody has one pair of boots and shoes. Some have two. The number involved is, therefore, quite considerable.

In fact, the boot and shoe trade is in some difficulty at the moment. Its members have written to the Chancellor, and have sent to other hon. Members and myself a copy of the letter, in which they point out, rightly, that there is some short-working in the trade and some redundancy. They do not say, as they might, "It is enough for us to have to deal with Mr. Clore, without having to deal with the Chancellor, too."

I cannot see the reason for these changes. The whole business of bringing the two ends of Purchase Tax together is, in essence, regressive, because of the effect it has on those articles which ought never to have been taxed in the first place, and in respect of which the tax certainly ought not to have been doubled. I cannot understand what it is all about. The Chancellor told us that he was not heading towards a sales tax. Is this, therefore, a sort of preliminary step before we know what the conditions of entry into the Common Market will be? If that were the case, the Government would not be acting quite straight, in face of what has been said about our not going into the Common Market unless the conditions were satisfactory. But one's ideas of what is straight are so odd.

I come now to the famous speculative gains tax. My hon. Friend the Member for Sowerby and I had a look at the Evening Standard. I shall not quote it all again, but my view is that people who commit crimes should be dealt with by due process of law. I wonder whether hon. Members opposite will tell me whether they think it right or wrong, or criminal, to incite people to defraud the Inland Revenue, and whether they do not regard what the Evening Standard said as just exactly that. I shall read it out slowly and carefully. The newspaper says: The eager speculator will probably want even more freedom of movement. That is quaint language, but there is nothing very wrong so far, by Evening Standard standards. It then goes on to say this: Two courses which are not strictly legal but which, because of the great difficulty of checking on them, will undoubtedly be used, are so and so, and so and so; I do not see why I should advertise these things by reading them out again. I do not know whether they are good or bad courses, but I regard that passage as a direct incitement to the readers of that newspaper to defraud the Inland Revenue. The newspaper says, "These courses are not legal, but you are unlikely to be found out."

What does the Chancellor say about that, and what does he say about a tax that immediately provokes such a statement? Also it tells people that they need not bother too much, because they need only wait for six months and a day and everything will be all right, and then goes on to point out a legal way out and says that the accountants are busily engaged in concocting other ways out. Have not we had enough trouble with dividend strippers and the rest without introducing a new tax which is greeted by everybody as being the leak of all leaks, and as having more holes in it than anyone has ever been able to devise before?

What is the Government's defence? The Chancellor says, "Revenue is not my main purpose. What I intend to achieve is a greater sense of fair treatment between taxpayers." I suppose that some taxpayers read the Evening Standard. If they happen to be engaged in a Schedule E P.A.Y.E. occupation, without the opportunity for playing any of these games, I wonder whether they will be impressed by the fair treatment between taxpayers which is arrived at by the introduction this tax, or by the fact that it was apparently introduced to achieve fair treatment. I should have thought that the party opposite might have thought up something a bit better than that. This is too thin. It will not wash. Nobody will believe that the Chancellor really thought that he would get away with that one.

I say to him that I think it a very great pity that hon. Members opposite who tell us, as the hon. Member for Taunton (Mr. du Cann) did just now with perfect sincerity, that the one thing that they object to is materialism, will be faced with having to defend, as the right hon. and learned Member conspicuously refused to do, this really rather shameful tax, introduced to produce a greater sense of fair treatment between taxpayers. It is a most discreditable performance to bring in that sort of tax and to defend it in those sort of terms.

I am sorry to say this to the right hon. and learned Member. He knows perfectly well that I am talking only about his political activities and that I would not dream for a moment of saying anything of the sort about his personal character, but I do say that I regard this as a semi-fraudulent attempt from a political point of view to persuade the public that the Government are really doing something about capital gains at last.

Of course they are not doing anything about capital gains. This is about the silliest measure one could think of, and it will not have the effect that the right hon. and learned Member intends it to have. He has brought it in—and this is significant—because capital gains both in stocks and shares and in land now run against the public conscience. People are really disturbed at this sort of thing. They are disturbed at the kind of cases of profiting in land to which my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) called attention on Tuesday. They are disturbed not at any particular set of transactions about stocks and shares, but that sometimes some individual makes an enormous amount for doing nothing in a very short space of time, but, and more generally, by the knowledge that these particular gains are not taxed and that for some reason or another a responsible political party appears to think that they ought not to be taxed.

I have never understood the objection in principle. What is the difference between a man who gets an income of, say, £100 a year and a man who gets that amount by what I believe is known in the worst circles as "capital Apt.", and, having got it by capital Apt., sells off one share or two shares, or whatever is required year by year, and gets exactly the same amount to spend, and who, moreover, carries on his business for that purpose?

I cannot see what the difference is and I agree with what was said about this by my hon. Friend the Member for Gloucester (Mr. Diamond). It is perfectly true that at present the line between what is sometimes called the badge of trade in these matters and cases which are not treated as constituting trade is a very shadowy and unnecessarily difficult one. Surely it is right, and must be right, to treat what is in fact responsible for so much of the spending power of this country at present as good sound taxable capacity, and the taxing of it as raising no question of principle which I can see under modern conditions. I say, therefore, apart from the machinery of the thing—I am talking about what is here at the moment—that I see no reason whatever why a proper capital gains tax should not have been introduced. I do not regard this as any substitute for it or as anything but a derisory makeshift intended, apparently, to deceive the public into thinking that something effective has been done. I repeat, and the right hon. and learned Gentleman will understand, that these words are not meant personally.

I go on from that to deal with one other matter which is, as I see it, the background of the Budget which we are being asked to consider today. We have had it clearly pointed out, and it has not been denied, that the pay pause, in one sense, has failed completely; that is to say, between the time when it was introduced and the beginning of this year, there has been a fall in production of 9 per cent. per annum which constituted a record, and the rise in exports, if there has been some rise, was slower than the rise which occurred in previous years before there was a pay pause. We can say, therefore, that if the object of the pay pause was to improve production or exports, in both respects it has had the opposite effect to what was intended—it has made the position rather worse instead of rather better.

I am not sure that this is the last word about it, but it is the last word about it. if we are to regard it as a direct instrument for the purpose. I do not think that is the right way to look at it. I wish to point out that it is an instrument which has led the British Government to repudiate and to break contracts that they have made with their own employees. It has led classes of the community—public servants, like the nurses who appeared in the Lobbies of this House recently, like many of the groups in the Civil Service, and others we can all think of who are not as a rule in a position to take strike action about their claims—to become furious, frustrated, angry and indignant with the Government for breaking arrangements about negotiations, and so on, which have existed in this country for years, which have worked well and which constitute a really notable part of the national heritage to which we can pay tribute. That is a very heavy price to have to pay for an economic measure.

I turn now to the O.E.C.D. economic surveys which seem to me to be excellent. As members of the Government have already indicated, there are parts in them where they get support and others where they do not. But there is one outstanding matter in the conclusion. It is that the pay pause and all that goes with it are temporary measures intended as a sort of clamp-down for the moment. I am leaving out whether these temporary measures work. But they are only temporary, and, of course, the longer they are imposed the worse they will be and the less effective for their purpose. I wish to quote from paragraph 48 in the conclusions of the surveys where reference is made to the difficulty—one which I need not elaborate again—about the effect on the foreign exchange position of an excessive domestic demand. The paragraph reads: Escape from this impasse lies in the achievement of a steady and significant export rise as the major dynamic element in new economic growth. It is with reference to that that the report says: it equally is important that full advantage should be taken of the breathing-space thus provided …"— that is the way in which it refers to the pay pause— to set on foot the more fundamental adjustments which the economy requires. This Budget does nothing of the sort. The survey of the economic position promised nothing of the sort. There is a very great deal indeed in the comment which was made, I think it was by The Times, about "Neddy". When we look at what the Chancellor said we find language used about the Advisory Council which seems to pass to that Advisory Council some of the powers and responsibilities which can be properly exercised and borne only by the Government of the day.

I read this sort of thing which was said by the Chancellor about "Neddy": The collective target agreed in Paris by the O.E.C.D. for this decade is one of just over 4 per cent. a year. It will be for the Council to decide whether its study should be based on that figure, or a larger one, and what period of years should be taken for this. My comment on that is that in a Parliamentary democracy as we understand it it is the duty and the responsibility of the right hon. and learned Gentleman to tell that to the Council and then certainly to collect its advice on it—I say this, of course, without any derogation of the weight and value of the advice he may receive—and, having received the advice, to consider and decide himself what action he will take. I do not like this language. These speeches are usually written. I do not think it was a slip of the tongue or anything of that sort. It is not for the Council to decide that sort of question as I understand the constitutional position in this country. The Chancellor also said: What the Council must do "— the Council, mark you— is to set an ambitious but realistic target figure. Both sides of industry, the Government "— we have got to the Government at last— and, indeed, all sections of the community, must be prepared to face up to the practical consequences involved in its achievement."—[OFFICIAL REPORT. 9th April, 1962; Vol. 657. c. 968–9.] It seems that this is putting the Council in the place of the Government. What is the reason for it? It is perfectly obvious that the Government have been more conspicuous than any Government of recent years for consistent failure by comparison with every other country. It cannot go on for ever like this. What they want to do with "Neddy" is to put it up and say, "Here are the boys, a distinguished lot, representing both sides of the table in industry. They will make the decision. You shoot them if it does not go right. If it does, we shall come in and take the praise for it".

This has happened before in other fields with this Government. The Chief Secretary to the Treasury had a long and happy time as Minister of Housing and Local Government. I used to tell him time after time—I am sure I was right—that many of the measures he introduced were with the object of pushing the local authorities, like women and children, in front of the Government in the firing line, so that they could get shot down, if there were any trouble, before anyone could get at the Government. This is being done for the same reason. These birds will not face the music. They have had so much of it in the last few years and it is a terrible record.

Look at the pamphlet—I am not now talking of the pay pause or what it recommends. From beginning to end it is a record of failure to keep up with our competitors. Successful contribution is heaven in the eyes of the Tory Party, but hon. Members cannot do it, and they cannot get the country to do it. What is the matter? They had some suggestions from my hon. Friend the Member for Cardiff, South-East. I advise hon. Members opposite to have a look at them. There is a great deal of sense in them. They had some more from my right hon. Friend now the Member for Middlesbrough, East (Mr. Bottomley) and they were very good suggestions. He used to be Secretary for Overseas Trade and he has some experience of this kind of thing—[HON. MEMBERS: "Where is he now?"]—I am not his keeper.

I want to end my speech my asking the Government about one point which my right hon. Friend mentioned particularly, namely, the growth of scientific invention and new technique, to put it as broadly as possible, in industry. He felt, as I feel, that the Government are not taking this seriously enough. When I say not taking it seriously enough I do not mean that they have not appointed a Minister for Science. They have put him in another place, but that is as may be. The difficulty is that we fall behind not in actual inventions—we are very good at those—but in their practical application and, above all, at the stage of development.

The reason is that this Government take a thoroughly Tory view of the matter. If industry will not pick up the inventions, that is the end of it. The Government do very little—they do a little—to try to develop the inventions themselves. A very great deal more ought to be done on these lines. At the end of the day this country has not very many natural resources. It has coal. It has harbours. It has a few other things, but it is not particularly rich in them. We are a great industrial country. We depend not merely on the old-fashioned, excellent manual skill of some of our workers—technical skill, too—but also on the fact that we have some highly intelligent scientists and thinkers. We do not make enough use of them. We do not ensure that what they do is properly translated into what can make us successful in world competition, because that is undoubtedly what we have to do.

When one makes a speech like this one always sits down—at least, I do—regretting hundreds of things that one wanted to say but did not and the things one has forgotten to say. I suppose I shall do that again tonight, but I do say this to the Committee. I believe that if the Government get away with this Budget and with the things which were said about the speculative gains tax, and if that is regarded as sufficient at the moment, it will in itself be a step backward.

The country needs Governments and people who will for the time being look beyond their immediate advantage and be prepared to look to the interests of the community as a whole. I have the feeling that the Chancellor's attitude at the moment is lacking in that respect. Until we can get that attitude restored, we are not likely to go far and we shall continue to welter in the troubles which intermittently have afflicted us since we have had Tory Governments in the past few years. I honestly think that a change of Government is not only the best chance for this country but, as matters stand at present, a necessity for its survival.