Orders of the Day — Budget Proposals – in the House of Commons at 12:00 am on 17th April 1956.

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Amendment of law

Motion made, and Question proposed, That it is expedient to amend the law with respect to the National Debt and the Public Revenue, and to make further provision in connection with Finance, so, however, that this Resolution shall not extend to amending the enactments relating to purchase tax otherwise than by reducing any of the several rates of tax generally for all goods to which that rate applies.—[Mr. H. Macmillan.]

5.34 p.m.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

In accordance with the usual convention, I rise to make a few preliminary observations on behalf of the Opposition on the Budget statement to which we have just listened. Tomorrow afternoon my right hon. Friend the Member for Huyton (Mr. H. Wilson) will develop our criticisms and comments upon the Budget and, indeed, upon the whole economic situation which lies behind this not very inspiring Budget.

As one of the four ex-Chancellors in the House of Commons, I cannot help feeling considerable sympathy with any Chancellor of the Exchequer when he opens his Budget statement. I was glad that the right hon. Gentleman paid a tribute to the right hon. Gentleman the Member for Woodford (Sir W. Churchill). It is, of course, the thirty-first anniversary of the first Budget statement of the right hon. Member for Woodford. Although I do not think any of us would regard his period at the Treasury as quite the most glorious in that right hon. Gentleman's career, nevertheless our affection for him is such that we are glad that that act of recognition took place.

As regards the manner of the right hon. Gentleman the Chancellor of the Exchequer in presenting his Budget statement, while some might be disposed to say that the speech was on the long side for the amount of new proposals which it contained, this impression was relieved for us by many witty passages, by elegant and flowery language, and at moments when we were perhaps becoming rather worn out by some of the detail he happily allowed us to drift off into calmer waters for the time being. We are grateful to him for that.

It was not much of a surprise to us that the right hon. Gentleman avoided any review of 1955. My right hon. Friend the Member for Huyton will remedy that omission tomorrow afternoon. Of course, the facts are not in dispute. Indeed, even the Chancellor of the Exchequer used the phrase about that year that it was a period of severe inflation. Everything, such as it was, which has been said this afternoon about it, and everything which has been written in the Economic Survey, proves abundantly all the criticisms put forward by the Opposition in recent months.

The right hon. Gentleman was not really very much more forthcoming about the prospects for 1956. He gave a certain number of instances of what might happen on the one side or the other, but he certainly was determined not to be caught himself as an "Old Moore". We are therefore left in some doubt as to how he really feels about the economic prospect which lies ahead for the country.

Turning to the proposals which he put forward, I would first note the contrast between the right hon. Gentleman's approach to the problem which we now face and his insistence that we must be on the safe side, that we must build up the surplus, with what the right hon. Gentleman the Lord Privy Seal had to say by way of background when he was introducing his Budget last April. As regards the particular measures, we do not see any objection to what he is going to do in the financing of nationalised industries. I must confess that I did not feel very impressed with the argument which led to the decision that the Treasury should in future take over the raising of money for the nationalised industries, presumably making arrangements for repayment and so on as is already done with the National Coal Board. But, as it stands, it seems to us to be a harmless and possibly an advantageous step. Certainly, if it gives the Government a greater assurance that the level of investment in the nationalised industries can be exactly what the Government wish it to be, I do not think that we would raise any objection to that.

The other measure to which he referred very early in his statement was something which we certainly cannot let pass without comment. That was the announcement, made very casually, that the bread subsidy was to come off in September. I do not know whether the right hon. Gentleman really feels that his activities in January, when he announced the initial cut in the bread and milk subsidies, have had a happy effect on the wage-price spiral, or whether he really feels sufficiently complacent about this present measure not once again driving up the cost of living still further. That is something to which we shall certainly wish to return during the debate.

As to the proposals to encourage saving, I think we would all agree that it is desirable to have a higher level of saving, though I think the Chancellor was being rather unkind to his hon. Friend the Economic Secretary in the very astringent comments he made about public saving. Only a few days ago the Economic Secretary made a speech in which he warned everybody that it was very necessary to have a high degree of public saving and that we must get used to the idea of large Budget surpluses.

With one or two exceptions, the measures which the right hon. Gentleman has announced do not amount to a great deal. It surely was in the normal course of events to be expected that there would be a new issue of National Savings Certificates at a higher rate of interest, because, of course, the rate of interest has gone up. The same applies to Defence Bonds.

The proposal which will certainly attract most public attention is the announcement that there are to be premium bonds on which prizes are to be awarded. I thought that the right hon. Gentleman was a little disingenuous in his defence of that particular measure. I do not think that it is quite convincing to say that a prize is not a lottery or quite convincing to say that those who invest in these bonds after all sustain no loss, when they are not to receive any interest upon them. Whatever our views may be, I think that it is better to argue this thing out without trying to pretend that the premium bonds are something which they plainly are not.

As regards the other proposals, we shall have to study in detail what the Chancellor said about the recommendations of the Millard Tucker Report. In passing, I would say that I entirely agree with one proposal that the right hon. Gentleman has made, and that is that there should be exemption for, I think it was, the capital part of the life annuity which has been purchased. That is a matter which we on this side of the Committee wish to see remedied. We put a new Clause on the Order Paper to deal with it, not in last year's Finance Bill, because we were not allowed to do so then, but in the Finance Bill of 1954.

As to owner-occupiers, it may certainly be an advantage to have a lower rate of Stamp Duty but, frankly, it goes a very little way indeed towards relieving these admirable people of the very heavy burdens which the Government have already imposed upon them.

As to public expenditure, the right hon. Gentleman will forgive me if I feel a little cynical about his remarks upon that subject. We used to hear a great deal from hon. and right hon. Gentlemen opposite not merely about the need for cutting public expenditure but about the possibility of doing it. They went into the 1951 General Election with that as their main slogan, but after the present Lord Privy Seal had been at the Treasury for some years he was forced to admit that the figures showed only too clearly that the possibilities of substantial savings in public expenditure without touching upon policy were remote, and the Prime Minister committed himself in his recent speech to that point of view.

I am a little surprised that the Chancellor, in referring to this matter, could only give us, first, in respect of defence, the announcement that there was to be a vague kind of inquiry: what exactly it was, we were not able to follow, but the Prime Minister was going to take it in hand personally. I hope that the Prime Minister succeeds in getting his colleagues to take notice of him in this matter.

In respect of civil expenditure, we were given a rather extraordinary hope—I think that this was definitely a bit of "Old Moore"—that there was going to be a 100 million saving, but no indication whatever as to how it was to be saved and what changes in policy would be necessary in order to achieve it.

On the question of the Tobacco Duty, I speak with diffidence, because after the 1947 Budget I gave up smoking altogether. Therefore, it would be very unreasonable for me to speak at any length on the subject, but I think that one must make two comments. To those who do smoke, this tax is already a very heavy one indeed, and I think that it was really rather a mean and unnecessary step that the Chancellor should have denied to the pensioners the exemption from this increase of duty which they have had from previous increases of duty.

The Budget is certainly not a very significant one. Nobody would say that these measures, taken as a whole, amount to very much. Our main criticism is, first, that the economic situation has been allowed to drift into this position where the Chancellor no doubt is compelled to impose at best a standstill Budget and, at worst, as we are led to suppose—we have not seen the figures in detail—one which involves a net increase in taxation. Secondly, our criticism is that the Chancellor has missed an opportunity for putting right a great deal that was wrong with our taxation system. He has refrained from making the big changes. The introduction of a capital gains tax might have been considered. There are changes which are badly needed so that the tax burdens can be made to fall where they ought to fall—upon those who can bear them most easily instead of, as at present, upon those people who can bear them the least easily.

These are the first reactions of the Opposition which we on these benches would like to put forward. We certainly cannot be inspired by the Budget to greater efforts, and nothing that has been said has led us to doubt our conviction when the Chancellor got up to speak that so long as the present Government are in power we shall continue to have economic and financial difficulties of the present kind.

5.45 p.m.

Photo of Mr Eric Johnson Mr Eric Johnson , Manchester, Blackley

I count myself very fortunate to be the first hon. Member on this side of the Committee to have the opportunity of congratulating my right hon. Friend the Chancellor of the Exchequer not only upon the lucid way in which he delivered his Budget message, but upon its contents. Indeed, the Leader of the Opposition did not seem to find a very great deal in it to criticise. I am sure that my right hon. Friend will know that I mean it as a compliment to him when I say that the lucidity of his speech was well up to the standard of his predecessor.

I have suggested before that the only way in which we can break the vicious circle of wages and prices out-pacing each other is for private industry to take the lead by holding down prices. I am glad to say that in some instances, greatly to industry's credit, that has been done, but it is not an example which has been followed as widely as we might have hoped. Indeed, I cannot feel that any great contribution to the fight against inflation has been made by the decision announced in the last few days by two companies to increase dividends and, in one case, to make an issue of bonus shares. That is all the more true in the case of one firm which is engaged in the engineering industry. It seems unwise to increase dividends when demands are being made for increased wages in the same industry.

It is equally true that not much help has been forthcoming to the Chancellor from the other side of industry. The index of weekly wage rates rose by 4 points between October last and the end of February, although the Index of Retail Prices rose by only one during that period. I do not suggest for one moment that increased wages are the only cause of the rise in the cost of living, as the Economic Survey points out, the main cause of the general rise in prices in 1954–55 was that incomes rose about twice as fast as output.

The tragedy of this state of affairs is that it is those who are not able to protect themselves by increasing their incomes through successful wage claims, or in other ways, who are hit the hardest. I have in mind the old-age pensioners, people who are living on small fixed incomes, retired people, many professional people and small businessmen, self-employed people and the disabled. I should have been glad, therefore, if we had had in the Budget some wider concessions to help those people than my right hon. Friend has found himself able to make, though in the case of the larger families the increase in family allowances will be very helpful. However, my right hon. Friend has not gone as far as I had hoped he would be able to do, although I recognise his difficulties.

I had hoped to hear something about speeding up the repayment of post-war credits. I can never accept what we are told about it being impossible to do this even in cases of hardship, because it is altogether too difficult to define. I suggest to my right hon. Friend that if his officials in the Treasury are unable to do that he should ask them to consult the officials of the National Assistance Board, who are doing that very thing every day.

I had also hoped that we might have heard of some concession to the disabled, particularly to the limbless ex-Service man. Perhaps we shall hear something in that respect later in the year. On the other hand, I was glad that my right hon. Friend referred to closing the loophole in respect of shooting brakes. He also made some observations about the investment allowance, and I thought he might have said that he would stop the initial allowance on motor cars bought for business purposes. I believe that an unnecessarily large number of motor cars are bought for that purpose, and that some sections of industry might realise that it is not only the Government who are supposed to effect economies.

As to the tax changes, it is difficult to grasp them all and to make any comment upon them so soon after my right hon. Friend has sat down. It is a task beyond my powers, at all events. However, I certainly would not disagree with his proposal to increase the tax on distributed profits, though I cannot think that it is a wise step to tax undistributed profits.

I had hoped that my right hon. Friend would seize the chance to adopt a more painless method of extracting revenue from the public, and that he would introduce further duties on betting. It will be recalled that on 9th March the House debated the Report of the Royal Commission on Betting, Lotteries and Gaming and, as a result, the Government undertook to introduce legislation as soon as practicable to rectify the chaotic state of our betting laws. I do not think it necessary to await that legislation before introducing new duties on betting. Indeed, if that were done, I believe it would be a powerful, and yet a relatively painless, method by which my right hon. Friend might fortify the Revenue. It might be less painful perhaps than the increased tax on tobacco, for instance.

Last year, the Treasury took £21 million out of the £71 million staked on football pools. It is hard to say how much was taken out of the £350 million which, it is estimated, was staked on other forms of betting such as horse and dog racing. I do not think that it could have been more than £20 million, even taking into consideration the Income Tax paid by bookmakers on their profits. At present, the Exchequer levies a duty on betting, both on the tote and through bookmaking on dog tracks. It does not do so on horse racing. I believe that that should be remedied.

Undoubtedly, the largest amount of money is staked with the off-the-course bookmaker, who pays no duty. It is estimated that the amount of money staked in that way is between £140 million and £170 million. I shall not go into details as to the possible method of obtaining revenue out of that large sum, but I would recommend my right hon. Friend to look again at the most ingenious Question put to him on 27th March by the hon. Gentleman the Member for West Ham, North (Mr. Lewis), which seemed to suggest a valuable way of getting revenue from that source.

I was glad to note what my right hon. Friend said about personal savings. Although today there are probably more people in a position to save than there were twenty years ago, because many more people have something left over after providing for the bare necessities of life, I believe that there is less inclination to save than there used to be. There are three main reasons for that. The first is that people have naturally come to expect a much higher standard of living. Today, there are attractive things to buy which people could not afford to buy years ago, so there is much more inducement to buy things one likes.

Secondly, I believe that the great advance made in schemes for essential services has, unfortunately, created a tendency in people to leave the State to take care of them in sickness or old age. Thirdly, there is little or no inducement to save when the value of money is falling, as my right hon. Friend said. To put it mildly, it is extremely irritating to buy a Savings certificate for 15s., and to receive 20s. in ten years' time, only to find that much more could have been brought with the 15s. ten years earlier. That is undoubtedly the reason why the large investor turns away from Savings bonds and from fixed interest bearing securities, and puts his money into ordinary shares, where there is some hope of increased dividends, of bonus issues and of capital appreciation. Whereas, the small potential saver goes in for the football pools.

The proposals made by my right hon. Friend will go a long way towards remedying that state of affairs. I was glad to hear what he said about Premium Bonds. I have long been an advocate of going even further, of introducing a straightforward State lottery. I know that this suggestion has not been favourably received so far. It had been my intention to draw the attention of my right hon. Friend to the fact that a recent visitor to the Soviet Union told me that, surprisingly enough, there is a system of savings there whereby the fortunate saver has the value of his savings greatly increased as the result of a draw. I am not aware whether in the Soviet Union people are able to draw out their increased savings after they have benefited in that way. However, I am glad that my right hon. Friend has introduced Premium Bonds. It is the kind of bold and imaginative suggestion such as I had hoped we would get from him.

In the past I have put forward another suggestion for savings which has not yet received a favourable reception, although it has nothing to do with gambling. The suggestion is for an Empire savings certificate. The answers that I have been given on more than one occasion was that the existing facilities were adequate, but now it appears that this is not altogether the case. I believe, therefore, that there should be some form of certificates which would be earmarked for colonial development, and that investors might be offered a choice of the various countries in which they would like their investments used. The Government frequently make loans or grants to various parts of the Colonial Empire, and it might be attractive to investors to interest themselves financially in a specific part of the Empire.

Another attractive method would be to try to make an arrangement with the Commonwealth Governments whereby the modest investor would be given opportunities to invest in small units in the development projects now going on in different parts of the Commonwealth. I have in mind particularly Canada, which is very worried about the amount of capital from the United States by comparison with that coming from this country. I think that if such a scheme was introduced and it was taken up by the Canadian Government, it would have a very wide appeal.

I have one other suggestion in regard to savings which I believe would be attractive, and that would take the form of a road loan. We are all painfully aware at the present time of the shocking state of our overcrowded roads and of the growing need for modern motorways between our great cities and the curtailment of the appalling loss of life which is taking place on the roads almost every day. It is generally admitted that if help could be given in providing these great motorways, the result would be a considerable saving in the cost of transport and in the lowering of prices.

Of course, when we suggest these things we are invariably told that they are too expensive and that we cannot afford to build roads at the present time on the scale we would wish. The truth is that we cannot afford not to build them. I do not believe that it would be difficult to devise some scheme to finance the building of roads by borrowing from the public on reasonably attractive terms. I believe that that would be effective because I think that people are more likely to save money and invest it if they are investing it for some objective which they personally approve, such as the building of roads.

I believe that many motorists, and indeed everyone concerned about the loss of life on the roads, would readily invest their money in a road loan if they knew that something definite would be achieved. That seems a more attractive way of investing one's money than putting it in Savings certificates, or whatever we may call them, when we do not know what the Government will do with the money after they have borrowed it. I think that that may be a useful suggestion.

As my right hon. Friend said, although not in so many words, this year's Economic Survey began with the words: In 1955 the world's economic conditions were highly favourable. For Britain, unhappily, I believe that 1955 was a year of wasted opportunities.

Photo of Mr Marcus Lipton Mr Marcus Lipton , Lambeth Brixton

That was the Government's fault, too.

Photo of Mr Eric Johnson Mr Eric Johnson , Manchester, Blackley

I believe that one of the reasons for that—as the hon. and gallant Gentleman is so interested in it—was high costs, which were largely inflated by high and increasing wages. I do not for one moment minimise the great difficulties we are facing at the present time. Yet I think that we should be encouraged by views which I saw expressed recently in the American Journal of Commerce, which said that we were winning our battle against inflation. I think it is true to say that those who stand on the outside often see best what is going on. In his economic message to Congress this year, President Eisenhower said that the lasting prosperity of the nation depends more on what individuals do for themselves than what the Federal Government do or can do for them.

It is my belief that too many people in this country, in all walks of life, and in every kind of business have forgotten the truth of that statement. I believe that the sooner we get back to that point of view the better it will be for the country.

6.5 p.m.

Photo of Mr Joseph Slater Mr Joseph Slater , Sedgefield

The Chancellor has told us today that it is not expected that we shall have to import as much coal this year as we did last year. I hope that that will be so. I hope that we shall not have to import as much coal as we have had to import on previous occasions, because the liability of having to meet the cost of imported coal is reflected within the accounts of the National Coal Board.

I was not at all clear about the meaning of the statement which the right hon. Gentleman made on the financing of the nationalised industries. Moreover, it must be remembered that those engaged in the coal mining industry today are now considering whether or not they should continue working the Saturday shift. Hon. Members on both sides of the Committee know full well that the working of the Saturday shift in the mining industry brings in approximately 12½ million tons of coal, which is vital to this country. Therefore, I say, at the commencement of my remarks, that people inside that industry who are burdened with high indirect taxation, such as the taxation on tobacco and cigarettes, will not take too kindly to the Chancellor's action in further increasing the duty on tobacco and cigarettes.

I remember the Chancellor's predecessor making an announcement to the House of Commons that it was the taxation on tobacco and on drink which were the two major instruments in providing the accommodation necessary to our education system and the greater part of our social services. We are reaching a serious state of affairs when we have to depend on these two things to provide money for our social services.

Hon. Members will agree, I am sure, that we have had from the right hon. Gentleman today another reiteration of a hard luck story. We seem to be getting this now from the Government in power. We have known for some time that the measures that have been taken by the Government during the last few years have fallen on that section of the community least able to bear them. It appears to me, from the announcements made today, that such will continue to be the case. There is no easement for the ordinary member of society in the proposals submitted by the Chancellor in his Budget, especially when we find that the bread subsidy is to be eliminated by September of this year.

I know that hon. Members opposite may say, "Look at what the Chancellor is seeking to do. He is to give further increases in family allowances by bringing the third member of the family into the ambit of family allowances." But any policy of retrenchment by a Conservative Government falls most severely on those least able to bear the burden.

It appears to me, from the views expressed by many people in my constituency within the last few months about the policy that is being pursued by the Government, that they are finding it most difficult to meet the demands which they are being called upon to meet. We have found that the Government, ever since they came into power, and when faced with difficulties, have always resorted to methods which can have only one effect—the imposing of greater hardship on the ordinary people. I say to the Chancellor that it is no use his thinking that he can fob off people at this time because of the serious economic position in which the Government now find themselves. He must give consideration to the people most in need of it.

There is now, in my constituency, great dissatisfaction about the Government's attitude. I know that some people will say that we have heard this before, but I want to tell it again in connection with the present position. It is their attitude towards the high interest rates which is affecting the position, particularly in regard to the new town at Newton Aycliffe. Protest meetings are being held within the new town. That is unfortunate, but it is, nevertheless, the case. Petitions are being organised against the increasing rents caused by the high interest rates being imposed upon the Corporation.

The local Press have publicised most objectively reports of what has been taking place within these meetings. It is unfortunate that the Corporation has now been brought to a position similar to that of local authorities—having to stonewall against its tenants because of the actions of the central Government in increasing interest rates. It means that rents are now being charged, in some cases 4s. 6d. more than were being paid until recently.

Like many hon. Members, I am tired of people, especially Government supporters, seeking to draw comparisons between increases in wages and the cost of living. It seems to me that many items today are looked upon as luxuries, available only to those who are more fortunate in this world's goods than are their fellow men. But the ordinary member of society is most anxious to receive the same treatment as those who are in a better position; the ordinary people say that they, too, have a right to these so-called luxuries.

The war created certain conditions which we have not yet overcome. One of them is the fact that so often both husband and wife have to go out to work. The hon. Member for Sheffield, Hallam (Sir R. Jennings) will agree that this was never the position in our county before the war. Possibly a few went out to work, but it was not the general principle.

Young couples today who wish to set up house in the new town in my constituency are both compelled, in the majority of cases, to go out to work to pay the rent and to set up house. This is bringing great hardship upon these people.

The Government still have time to give further consideration to this matter. They may think that time is on their side. They may feel that they have a few more years to run before this Parliament comes to an end, and that people will forget about the harsh treatment they have had. Personally, I do not think that the people will forget, nor do I believe that the electorate have forgotten the slogan by which the Conservatives, at the last Election, said that they would mend the hole in the purse. It appears to us that the hole in the purse is getting larger and larger.

I hope that the Government will give further consideration to the problems of the less fortunate of our people. In time of crisis certain actions have to be taken. Local authorities and ordinary people are being restricted in their activities, and this has been brought to pass because of the Government's lop-sided attitude. The Conservative Party has had power vested in it since 1951, but it has been unable to carry us into a position in which we can say that we are travelling along the road to prosperity.

6.15 p.m.

Photo of Commander Sir Douglas Marshall Commander Sir Douglas Marshall , Bodmin

I believe that I can agree with the hon. Member for Sedgefield (Mr. Slater) in one point with which he opened his speech: we sincerely hope that there will be no necessity this year to import the same amount of coal as we have imported in the past year. I hope that the hon. Member will forgive me if I do not follow him any further in the points which he made, but I want to address my mind particularly to a subject which in its way, perhaps, has a specialised interest in connection with the creation of new wealth.

Listening to the Leader of the Opposition today, it appeared to me that his chief theme is likely to be the causes of the present climate of our economic position more than an actual attack on the Budget. In listening to my right hon. Friend the Chancellor of the Exchequer, the feelings which I had were rather deep. Everything which he has done since he became Chancellor has had a theme running through it, and without reading, understanding and appreciating the three White Papers which have been before us lately, it would not be easy to understand the exact position which he took up at the Box today.

I do not wish tonight to develop the points which he made, first, because I want to read them more thoroughly and, secondly, because I could not help thinking that the different attitude which he is to take towards the financing of the nationalised industries, as well as the savings part of his Budget and similar measures, will of themselves result in a squeeze action in the monetary market and thereby again set the theme which he wants to produce—that of reducing consumer demand for the moment. If we are to take action in those circumstances, the action we are likely to take can never be popular. The consumer never sees any particular reason why someone should stop him consuming what he wants to consume.

Underlying the whole of this theme, it appeared to me that the Chancellor had grappled with the point and wished ultimately to come to a point of expansion which alone could deal with our difficulties. For that reason, I wish to talk tonight upon one particular aspect of taxation. A most important point in our economic life, whereby we can not only help maintain our standard of living but raise it, concerns a method whereby we can create new wealth. Possibly no measure would be more profitable to the people of this country than the creation of new wealth by winning raw material from our land—raw material from our own land is wealth to and profit to our people.

It is my belief, which is shared by many who are much more technically expert than myself, that millions of pounds worth of raw materials lie hid in the hills of Cornwall and Devon and elsewhere in the United Kingdom. The necessary information about this mineral wealth is already available, and the amount of information which has been gathered over the years is indeed considerable.

If hon. Members will forgive me for one moment I should like to refer to a book which has just been published on the question of mining. It is a view given by one of our leading mineral engineers about part of Cornwall. His estimate of the value of potential reserves of tin in this one area alone was no less than £50 million. His report was debated by the Institution of Mining and Metallurgy and was not seriously challenged. In fact, there is no dispute in technical circles in the United Kingdom that the minerals are there.

What, then, is preventing us from winning this wealth? How are we preventing people from winning it? It is the present method of taxation. Suggestions which I shall put to the House tonight could be embodied in the Finance Bill this year and would make a considerable difference to the possibility of producing new wealth. It would not be sensible for the Government to project themselves into this business. That is not because it is not the Government's business. However, a committee set up under the chairmanship of the late Sir Lionel Phillips, a leading mining engineer, many years ago reported in this way: In most industrial enterprises, and certainly in mines, there is an element of hazard which fortune seekers are willing and are bound to take, but which the Government ought not to, and permanent officials never would take. It is the duty of the Government to promote a climate in which mines could be developed and worked. That climate could be promoted in the Finance Bill by introducing a system of taxation as applied to wasting assets in Canada.

I have tried to make what I am about to say as simple as possible. Taxation is generally a wearisome subject, generally a complicated subject and sometimes rather difficult to explain. When a mine has reached the profit stage, the profits are not merely profits, but are, in fact, part of a return of capital, for when the mine is exhausted little is left but a large hole. I can illustrate my point by referring to the Canadian system of taxation. When a British company opens a mine, say, in Africa—no new mines are open here now, because of the reasons I am about to put—and adjoining it is a Canadian company, the British company, in making a profit, is subjected to the high rate of Income Tax, but the Canadian company, on the other hand, is much better off, because it receives exemption from tax during the initial period of full production.

The Canadian system more or less follows that fashion. I should like to give the points of the Canadian system. Metalliferous and non-bedded mineral mines are not subject to Income Tax on income derived from the operation of the mine during a period of 36 months commencing on the date at which the mine came into production. There is a special depletion allowance made as a deduction from income of 33⅓ per cent. of the net aggregate profits. There are capital cost allowances with special accelerated rates for the purposes of amortisation of mining machinery, equipment and certain underground works. There are special preproduction expenditure allowances and many other points of a rather similar nature.

This has made Canada able to operate not only in Canada, but in many parts of the world in the creation of new wealth for Canada. Lately, the Canadians have approached Eire and there is a Bill which I believe has passed through both Houses of the Eire Parliament, but which has not yet become law, which is to embody the Canadian system so that Canada will be able to promote, exploit and discover new wealth in Eire.

In Australia, legislation has just been passed—and there was previous legislation—for exactly similar purposes. This is because the Australians themselves wish to develop, or to get someone else to develop, the new wealth that may be lying hidden in the hills and elsewhere in Australia. That provision is contained in Section 23 of the Commonwealth Income Tax and Social Services Contribution Assessment Act.

At home, we are neglecting our chance of obtaining this new wealth. However violently hon. Members may disagree—and rightly so—over certain principles, all hon. Members desire that our standard of living should be maintained and increased. We all know the real economic difficulties which face us. No hon. Member who has studied the subject can think that the objective will be easy to reach. On the other hand, it is the will of our nation, which, generally, has the ability to see its will implemented. That should make it all the more possible, and possibly the more easy, to take advantage of every opportunity in the land.

The suggestion which I have put to the Financial Secretary and to the Chancellor has been agreed by Canada, Eire, Australia, and possibly by many other countries. I am heartened by the fact that on 6th July, 1949, I moved a Clause similar in intent to these suggestions and that the present Lord Privy Seal then supported me. I hope that the House will forgive me for quoting what my right hon. Friend said. It was: I appeal to the Government, therefore, to pay attention to the arguments which have been put forward and to the needs of the mining industry in Cornwall which, perhaps, is the most historic and most important of our counties. I say that with the full realisation that my forebears sat for Cornish rotten boroughs for many centuries. In the interests of the tradition which I have the honour still to represent in the House,"— My right hon. Friend always declares his interest— I should like to feel that Cornwall was properly looked after by the Government."—[OFFICIAL REPORT, 6th July, 1949; Vol. 466, c. 2293.] So should I. But over and above that fact of Cornwall there stirs within me this question of gaining new wealth for our country, and I sincerely trust that my right hon. Friend will consider this matter before the introduction of the Finance Bill.

I hope that all hon. Members realise that what I am suggesting will not rob the Treasury of one penny. At present, no-one is exploiting or looking for mineral wealth—not been done for a great many years—because of our taxation position. Therefore, if the Treasury accept what I have suggested, if nothing is won, there is no change in the present position. But if anything should ultimately be won in the form of mineral wealth, then, ultimately, nobody stands to gain more than the Treasury itself. The Treasury is the representative of the nation and, therefore, the nation stands to gain. That is the new wealth for which I look.

6.32 p.m.

Photo of Miss Elaine Burton Miss Elaine Burton , Coventry South

Like the hon. Member for Bodmin (Mr. D. Marshall) I wish to deal with a specific matter. I hope that the hon. Member will not think me discourteous if I do not follow his argument. To be quite honest, I should be unable to do so because I have no knowledge of that particular subject.

I am glad to see the Financial Secretary present tonight, because I wish to make some suggestions to him, two of which would not cost him any money at all, so I think he may be disposed to look upon them favourably. I regret very much that in his Budget speech the Chancellor of the Exchequer made no mention at all about what I would call the recreation or the leisure of the people of this country. It is with that subject I wish specifically to deal.

I am, of course, aware that one can divide the subject into two sections. The first I should call the recreation, or the leisure or the sport of all our young people. Separately from that, in view of my own interest in the matter, I should take the attainment of championship standard in sport, and I hope tonight to be able to show that what I have to say deals with both those aspects. I think also it would have been fitting had the Chancellor felt able to examine this matter this year, because this is Olympics year, which comes round only once in every four years.

Those of us interested in sport know that during the last two or three years a great change in the attitude of the ordinary people to sport has taken place in the whole world. I should say that that change of outlook was quite inevitable. It has taken place throughout the world in connection with the social changes in our society. Whatever Government we have in power in this country, the British people are notoriously opposed to sudden change. We do not mind change when we have become used to it, but it has to be brought about gradually, which I think it a very Fabian expression.

In the world of sport the resistance to change in this country has had the effect that we have been left far behind in comparison with other countries. We have been left far behind because we have not faced the inevitable change. I am making no attack on the Government in this connection, because what I am saying applies to us all. But I believe that unless we do something about this matter, we shall not only lose touch, but we shall be left so far behind that it will be quite impossible to catch up.

I have been interested in sport since my youth. Going back a good many years, the basic attitude towards sport, particularly in this country, has been, "Sport is only a game. It does not matter if you lose." I know that we do not want our goalkeepers crying against the goal-posts when the ball has gone into the net and a goal has been scored against them; but I submit that the idea I have been speaking about is now old-fashioned and out of date.

Everyone would agree that the world has changed considerably since the Olympic Games were revived in the 1890s. At that time there were few professional athletes of any description. All of us who read the sporting columns of our newspapers will agree that probably every month or every week there appear some arguments about what I would call "amateurism" and "shamateurism", and about "professionalism" "and "semi-professionalism".

I do not think that any hon. Member interested in sport would fail to agree with me that whether we consider county cricket, Soccer or lawn tennis, in most cases it costs a great deal more for clubs to maintain an amateur than a professional. The laws are entirely archaic and out of date. It is very unusual for me to go to the military for my quotations, and I do not know whether it will do my case any good; but I think the two following quotations are interesting.

I find that it is almost exactly four years ago that Field Marshal Lord Montgomery said: Whether or not the Olympic games should or should not be amateur is a question of opinion. That they have ceased to be amateur is a question of fact. Now I am coming right up to date, to last month, and I wish to quote a comment from no less august a person than the President of the M.C.C., Field Marshal Lord Alexander. He said: The Olympic games were set up, I am sure, as a means of testing the best athletes in the world … let everybody compete, then there can be no arguments afterwards. Any of us who have played games or taken part in sport at all will agree that we cannot have different sets of rules, or different interpretations of rules, applying to one competition. I do not know whether the Financial Secretary is keen on sport but I can assure him that at the moment the interpretation that we in the United Kingdom are applying is hopelessly unfair to our reputation in the athletic world and also to our athletes. We are trying to cling to a rigidly amateur system which, if I may be colloquial, I would describe as being as dead as the men who first framed it. It belongs to the past.

Whether that is a good or a bad thing may be a matter of opinion but it certainly is a fact. I can also assure the Financial Secretary that we are almost the only country in the world today which attempts to cling to that interpretation. The right hon. Gentleman may be wondering where he comes into all this, but he will realise in a few minutes. I am trying to build up such a strong case that he will be bound to give me some grains of comfort.

In the changed aspect of society I believe that big-time world sport is no longer the privilege of the favoured few. It is the right of every healthy youngster in this and every country. Let us take the question of national prestige. I do not know whether the Financial Secretary knows the name of John Disley, one of our competitors at the Games at Helsinki four years ago. John Disley said something the other day which meant a great deal. He said: Once you step across the water with your passport in your hand and the Union Jack fluttering on your breast, for 'sport' you can read national prestige'. That is important. Whether it is a good or a bad thing may be a matter of opinion, but it is undoubtedly a fact. I am sure that I need not emphasise that a British team abroad is a team of ambassadors today.

That fact is gradually being realised. Two years ago, when Roger Bannister broke the four-minute mile, I can remember the Foreign Office rushing him off to America. His appearance did a great deal of good to British interests there—and not only to British sporting interests. I know that many of us had criticisms to make of the methods of the Foreign Office on that occasion. It got into rather a mess in what it did, but its heart was in the right place, and it was obvious that the fact that prestige in these matters was important had seeped through to officials.

I am sure that those of us who have been fortunate enough to go to other countries have been told by our representatives there—whether they be trade representatives, consuls or others—that there is no doubt that British victories in the world of sport in the country in which they are living make their job of selling Britain and British goods just that much easier. That is really and truly a fact.

With all the evidence which is available, and which has not just suddenly come to light, I find it very difficult to understand why Governments—I do not say this Government alone—have failed to take advantage of this medium. It cannot be that they are not interested in promoting the British way of life or in keeping the British flag flying abroad, because we have the British Council and its artistic efforts, to which we give a great deal of money. Why cannot we do something in this new direction? I would ask the Financial Secretary whether we can afford to ignore this form of international good will, because that is what we are doing.

I would ask him that question in any year, but in this year there are two further relevant questions to be considered, both connected with the job of selling Britain, which is also the job of the Treasury. First, can we afford to be outclassed at a world gathering such as the Olympic Games simply in order to hang on to an obsolete Victorian principle? Secondly, can we afford to leave the field of sports success to all the other countries? Many people as well as myself are asking those two questions, which have additional weight when it is realised that they were posed by Dr. Meisl, writing in World Sports recently. World Sports is the official magazine of the British Olympic Association, and he is the foreign editor.

We must make a choice, realising that sport is one of the most effective and most peaceful methods of propaganda which is open to us today. Either we can continue to compete internationally, not under impossible handicaps but upon equal terms, or we can cease to do so, withdraw, and regard sport merely as a healthy means of recreation and leisure.

I now come to the part to be played by the Treasury. Whichever course we adopt, the Government must come into the matter. The British Olympic Association Appeals Committee has set itself a minimum target of £75,000 this year in order to send our team to Australia. It hopes to obtain as much as £100,000. I am not a pools fan, and I do not know if the Financial Secretary is—although I am sure that he gets the same literature through his letter box as I do—but I am assured that £75,000 is one top dividend on the treble chance pool.

Photo of Miss Elaine Burton Miss Elaine Burton , Coventry South

For 6d. I take my hon. Friend's word for that.

The Committee is struggling to get £75,000 in order to send our team to Australia, and yet we had £25 million poured into the Treasury last year from the tax on football pools and from entertainment tax on professional sport. This afternoon the Chancellor of the Exchequer had something to say about the morality of lotteries. I do not know whether or not he was on dubious ground there, and I am not dealing with lotteries—but the question of morality may come into what I am going to deal with now. From what the Chancellor said this afternoon, what I am now going to say should not meet with any moral opposition from him.

Is the Financial Secretary aware that the Italian Olympic Committee has an income of £2 million per annum from football pools; that athletes from Western Germany at the Games this year will be backed by football pools which, by the beginning of this year, had handed over £63,000 to help the team, and that Sweden's pools made an immediate contribution of £12,000 towards the cost of sending its team to the last Winter Olympics? Yet we still go round, cap in hand, begging for money to send our teams to every international event that comes about. That is defeatist, out of date and out of touch with public opinion.

As I said at the beginning, I am concerned not solely with the attaining of championship standard in sport but with physical training, recreation and the leisure of all young people. The last Annual Report of the Amateur Athletic Association stated that in England and Wales there are now 136 cinder tracks, of which 75 are private, leaving only 61 for the public. The Report also mentioned the question of coaching, which is of considerable concern to instructors of young people. It also said: There is a danger that boys after leaving school particularly those with aptitudes for field events will be lost to the sport and regular outdoor recreation unless clubs cater for them not only in providing competition but expert coaching. If we compare this situation with that in Scandinavia we can see how far behind we are. I do not suppose that the Financial Secretary is aware of the figures, but I am sure that he will examine them afterwards. Sweden has 7 million inhabitants and 800 public cinder tracks. With our population of 50 million, we have 61 cinder tracks. Finland has a track in every town and in nearly every country district, built and maintained by local councils. Their use is free.

There is no doubt that we have fallen far behind other countries, for three reasons: first because we have not given enough money to provide facilities for physical recreation; secondly, because we have imposed a heavy tax upon sport—and I was very distressed at the fact that the Chancellor of the Exchequer, this afternoon, did not withdraw the tax upon professional sport—and, thirdly, because of our attitude towards amateurism. It is only right that I should pay my tribute to the British Olympic Association and all the sporting bodies which have been struggling with this every-growing task, but I believe that we have now reached a period when they should be given some help.

I would inform the Financial Secretary that if the Appeals Committee of the British Olympic Association succeeds in raising this £75,000 we should be able to send a team of about 150 athletes to Australia. The maximum number which we could send would be 450, but I will be honest with the Minister and tell him that even if we had enough money I do not think that we should be able to send 450. But we should be able to send more than 150. I believe that the U.S.S.R. and the U.S.A. are each sending teams of about 300 members. I ought to make plain here that the Association is being caused some distress because it knows that if it succeeds in raising this £75,000, or even £100,000, not one penny can go towards training our young people or improving the standards of our top athletes. Every single farthing must go towards the cost of sending our people to Australia.

If the Financial Secretary were a high diver—although I do not imagine that he is—he would be in a much worse position than he is now, sitting upon the Government Front Bench. I wonder if he knows that there is no indoor 10-metre diving board south of Blackpool. How does one practise in the South? A high diver has to go to Blackpool to practise. That is ridiculous. As for our gymnasts, it is not a question of whether we have any good enough to compete against the rest of the world. They cannot get the equipment in this country to enable them to train to Olympic standard, because they have not the money. So I could go on right along the line.

Governments in this country have never helped. The Labour Government in 1948 did not give a penny towards the Olympic Games in this country, neither did the present Government in 1952. That is not the case in the Commonwealth. Australia is contributing towards the Games in that country, and when Canada sends teams abroad she makes a contribution.

I have three suggestions to make to the Financial Secretary. I hope that he will look with favour on at least one of them. First—and this concerns the Olympics only—the Government should consider sponsoring an issue of special stamps during Olympics year. The millions of people who watch sport week after week would welcome a chance of contributing towards the cost of sending a decent team to the Games. This is not a new idea. Scores of special postage stamps have been issued either for propaganda purposes or in aid of national Olympic Games funds during the past fifty years. I can assure the Financial Secretary that I can even give him some of the stamps, if that would help to bolster up my case. Most of those stamps had a small surtax, the net revenue of which went towards financing the national Olympic team. If other countries can do that, why cannot we?

My other two suggestions deal with the whole question of youth, leisure and recreation, to which I would add the Games because the two points cover the whole. First, I come to the question of football pools. I have already given examples of cases in which pools help national athletes. I would only add this rather formidable list of countries. In Germany, Italy and Switzerland, money is paid into a fund administered by a Government-appointed committee or trustees. Norway, Denmark, Sweden and Finland all operate similar schemes, except that in Norway the fund is for sport and scientific research. If all those countries do that, I should have thought that we could do something.

Secondly, I suggest that there should be a Government grant. Every hon. Member and people outside the Committee will recognise that many sportsmen have misgivings whenever this is mentioned, because they wonder if it will mean Government interference in sport. I can assure the Financial Secretary that I for one am no believer in the necessity for a Ministry of Sport. I do not believe in Government interference in sport, and I do not think the sporting organisations would stand for it.

However, I do believe that in those countries which I have mentioned, where help is obtained from the State, there is no question of State interference. People are apt to say that in the Iron Curtain countries there is State interference but I have never heard that said of the Scandinavian countries. I think that there are two sides to this question. I believe that the sporting organisations in this country are coming round to the viewpoint that something has got to be done, if only the best way of doing it can be found.

It is not for me tonight to suggest a scheme in detail, having made financial suggestions, but I would say that it seems to some of us that it might be useful to consider the formation of a British sports council. That would be for the sporting organisations themselves to decide, and not for this House. If there were a British sports council, or some other overall body, such an organisation would be able to administer a grant which was given by the Government, as in other countries.

We want more playing fields, more running tracks and flood-lighting so that these can be used at night. Also—of great importance—we want more and better changing accommodation so that people can go straight from work and have a shower afterwards. We want more training coaches and instructors. These are not luxuries. They are essential today as much for fitness and leisure as they are for the Olympic Games, and I hope that the Financial Secretary will consider this idea.

6.55 p.m.

Photo of Mr Ronald Russell Mr Ronald Russell , Wembley South

I am very glad to have the opportunity of following the hon. Lady the Member for Coventry, South (Miss Burton) because I have a great deal of sympathy for everything she has said, and perhaps it is appropriate that I should follow her because I represent the constituency where most of the Olympic Games were held in 1948.

One of the two points that I want to raise has a great deal of bearing on what the hon. Lady said. I believe that our attitude to sport is as much out of date as is some of our propaganda today, particularly in the Middle East. Sport has become a business, whether we like it or not. Foreign countries treat it in that way, and if we are to compete against them we must adopt the same attitude.

The main point that I want to make tonight, which has already been touched upon by my hon. Friend the Member for Blackley (Mr. E. Johnson) concerns the injustice of the 10 per cent. Tote tax on greyhound racing. This is particularly important to my constituency, as it affects Wembley Stadium. The retention of this tax without a corresponding tax on the horseracing Tote is an unfair and unjust discrimination against greyhound racing. I believe that is admitted on all sides, and I only hope that possibly before we dispose of the Finance Bill the Chancellor will be able to consider remedying this injustice, because it is having a harmful effect on all greyhound racing stadiums, of which Wembley is only one.

Another tax which affects greyhound racing is the bookmakers' licence duty. This applies to greyhound racing but not to off-course bookmakers nor to those operating on horserace courses. That tax has reduced the number of bookmakers who attend greyhound race meetings, and that, coupled with the Tote tax, has succeeded in diverting much greyhound racing betting from tracks to off-course sources which are untaxed.

There is also the effect of Entertainments Duty on sport, which seems to be directed against professionals only. Wimbledon pays no Entertainments Duty at all, but if a professional tennis match is staged at the Empire Pool in Wembley it is subject to Entertainments Duty of more than 30 per cent. While amateur tennis players play more or less throughout the year, I am told that most professional tennis players have other jobs and usually play in their spare time. Therefore, there is not the distinction between them that the words "amateur" and "professional" suggest.

Since the abolition of the duty on cricket two or three years ago by the present Lord Privy Seal, a Test Match at Lords pays no tax at all. Yet most of the players who take part are professionals. On the other hand, the Cup Final, which, no doubt, will be visited by many hon. Members in three weeks' time, raises tax amounting to about 15,000. There is no logic in such a distinction.

It is greyhound racing which has made it possible for Wembley Stadium and the Empire Pool to be equipped as a sports centre which, I think, is almost unique in the world. The Olympic Games were held there in 1948 free of any rental charges, and, altogether, £200,000 was spent by Wembley Stadium on improving dressing room accommodation and on other improvements as well as on constructing the road that is known as Olympic Way, which makes a magnificent approach to Wembley Stadium. Since the tote tax came in in 1948, the Stadium and the Pool together have paid in national taxation and local rates no less than £4,644,000, yet their net profits for the same period were only £241,000, out of which the shareholders have received £197,000. In other words, the share of the shareholders is about 4 per cent. of the amount paid in taxation.

Many other centres of entertainment and of art are charges on public funds, instead of providing sources of revenue. There are, for example, the Royal Festival Hall, Covent Garden Opera House, and the Arts Council. This year, the Arts Council is receiving a subsidy of £885,000, and I am not complaining of that in any way whatever; I think it is thoroughly justified. What I do complain of, however, is that when the arts side of entertainment receives a subsidy of that kind the greyhound racing side of it should be taxed to the extent which it is, and in the indiscriminate way in which it is taxed.

Therefore, I am asking that greyhound racing should be relieved of the unjust discrimination from which it has suffered ever since the tote tax was introduced in 1948. I am not going to suggest whether or not it should be abolished or whether it should be applied to off-the-course betting on horse racing. It would be too unpopular, I think, but I do suggest that this discrimination ought to be removed, because it is damaging greyhound racing at the present time.

I want now to turn to something quite different, and deal with the economic policy of this country since the end of the war. I caught one phrase in the speech of my right hon. Friend the Chancellor which, unfortunately, I cannot remember exactly, but in which he made some reference to the Commonwealth. I hope it means that he is to take a new look at the attitude of this country towards the Commonwealth as far as our overseas trade is concerned, because if one thing is quite certain it is that the policy of this country, pursued not only by the present Government but by the Government of the party opposite, has not succeeded in its purpose. Although we have increased steadily, I think I am right in saying, the total value of our exports—and nobody will deny the need for increasing our exports—it is quite clear that our share of the export markets of the world is gradually decreasing.

I do not look for evidence of that to any anti-Government source. I look to the Government's own Bulletin for Industry, produced by the Treasury itself. In the March issue of that publication, there are two very revealing tables comparing our export trade in the first nine months of 1955, against the first nine months of 1954, with the exports of some of our major competitors. In the first nine months of 1955, the increase in the value of our exports to the rest of the world as a whole was 6 per cent., but the increase of those of Western Germany was 17 per cent., of the United States 12 per cent., and of Japan 24 per cent.

If I may give one or two more figures to break these figures down into areas, they reveal an even more alarming state of affairs. Whereas the value of the increase in our exports to O.E.E.C. countries in Europe was only 2 per cent., that of the United States was 25 per cent., that of Western Germany 18 per cent., and that of Japan 44 per cent. About half the total increase in the exports of these four countries to all the world was to these O.E.E.C. countries, so we have a very small share of that total increase. Even to the rest of the sterling area, which I think I am right in saying means the whole of the Commonwealth, less Canada plus a few other countries which form part of the sterling area, the corresponding figures are: United Kingdom, 4 per cent.; Western Germany, 28 per cent.; United States, 18 per cent.; Japan, 48 per cent.

These are very alarming figures, and, surely, all go to show that the policy of this Government under the General Agreement on Tariffs and Trade of not taking advantage of discrimination in international trade—the latter policy we pursued before the war, dating from the introduction of our own tariffs in 1932 and the extension of Imperial Preference under the Ottawa Agreement of the same year—has been a failure. We are not succeeding in capturing the share of the increase in exports of the whole world that we ought to have, and, therefore, I hope that the Chancellor will look at this problem most seriously and consider whether there should not be a revision of our whole policy, so that we can take advantage of the Commonwealth markets which do exist and which are protected for us to a certain extent by the tariff preferences set up before the war, but which require investigating to see whether these preferences are still adequate and up to date in the light of post-war conditions.

I know full well that we have no say in what advantages the self-governing countries of the Commonwealth can give us. We can only make representations and approach them. We cannot in any way, and I am not suggesting that we should, compel them to do what we want, but what we could do ourselves, if we were freed from the international obligations which we assumed under G.A.T.T. is to give them additional advantages for their products, mostly primary products, which Australia in particular would appreciate, because the value of many of the preferences in existence now is hopelessly inadequate in the light of the increase in prices. We could give a lead to these countries, which, when they realise its value, they would be only too willing to follow.

After all, the Imperial Preference system which now exists was not originally set up by this country, but by Canada, in 1898, when Canada gave a unilateral grant of Imperial Preference which was eventually taken up by Australia, New Zealand and South Africa, but which was not followed up by this country to anything like the same extent as the Dominions until we introduced our protective system in 1932. We cannot expect Canada to follow again the wonderful example which she gave us 50 years ago, because Canada is now in a rather exceptional position, being somewhat tied to the American economy.

I do not think that Canada would be able or willing to consider this until a substantial change had taken place in the attitude of the rest of the Commonwealth first. It is up to us to give that lead. The present conditions show that the policy so far pursued by this country has not succeeded. It is, therefore, right to change it. I hope that the Chancellor will be able to give serious consideration to this whole policy with a view to remedying the position.

I am sure that most hon. Members, certainly those on this side of the Committee, are delighted with the innovations which my right hon. Friend has introduced in the Budget. The Leader of the Opposition, who, understandably, is not now in his place, spoke of the Budget as being "Not inspiring". I thought it was the exact opposite. I regard it as a most inspiring and imaginative Budget, such as we were given to expect from my right hon. Friend. His innovations to encourage savings are what are wanted and what we on this side of the Committee believed would come. I am sure that they will do an immense amount of good. I regard them as inspiring and believe they will do this country a great deal of good.

That apart, I hope my right hon. Friend will look into the vital question of our whole attitude, first, to Commonwealth trade and, secondly, to the unjust taxation still operating against greyhound racing, which affects many greyhound racing stadia in different parts of the country.

7.12 p.m.

Photo of Mr Fred Blackburn Mr Fred Blackburn , Stalybridge and Hyde

I am sure that the hon. Member for Wembley, South (Mr. Russell) will forgive me if I do not follow his observations on the question of greyhound racing. Possibly later, in our consideration of the Finance Bill, we shall have an opportunity to debate that subject. I shall have something to say later about exports and foreign trade, but I would rather do so in my own way.

I was particularly interested in the hon. Member's last few remarks, in which he described this as an inspiring Budget. If there is one adjective which could not be applied to the Budget it is the word "inspiring". Had it not been for his last remarks, I had intended to say that we had heard three speeches from the Government side with scarcely a single word in praise of the Budget. That would have been true up to the last few words of the hon. Member for Wembley, South.

First, we had a speech from the hon. Member for Blackley (Mr. E. Johnson), who is usually very good at finding something to praise in Government Front Bench speeches. I have never been able to decide whether that was through innocence or political loyalty. On this occasion he had very little to say in praise of the Chancellor's speech, and he complained bitterly that there was nothing in it to deal with the cost of living, nothing for old-age pensioners or the disabled, and nothing for those on fixed incomes.

Photo of Mr Fred Blackburn Mr Fred Blackburn , Stalybridge and Hyde

I knew I should have the full support of the hon. Lady.

The hon. Member for Bodmin (Mr. D. Marshall) took us into the Cornish tin mines. It is indeed difficult to get back to the subject of the Budget after having been taken to the Cornish tin mines and to the Olympic Games. The hon. Member for Bodmin said there was a theme running through all the Chancellor's pronouncements at various times. That seems very difficult to find, because the Chancellor puts things in so many words. I am sure there was never an occasion when so many words were used to say so little. We heard him speak for about 110 minutes today in order to tell us that there was to be a new edition of National Savings and that we were to have a State lottery. There was little else in what the Chancellor said to us.

The Chancellor did not, during his long speech, go into the history of the economic position, and I am certain that my right hon. Friend the Leader of the Opposition was right when he said he could understand why the Chancellor had not dealt with the economic position of 1955. After all, the Chancellor himself said that 1955 should have been a good year. Later he said, "Everything seemed in our favour." I suppose that everything was in our favour, except for the fact that we had a Conservative Government.

The Government's record is condemned in the very first sentence of the Economic Survey: In 1955 world economic conditions were highly favourable. The Economic Survey goes on: Output was growing rapidly in all the major manufacturing countries, and trade between them was increasing at an exceptional rate. Later on the same page, the Economic Survey explains how well the countries of Western Europe have done, whereby industrial output has risen by about 11 per cent. above the 1954 level. In Germany the rise was 16 per cent. and in no country was it less than 7 per cent. Later it explains how well the Americans have done, increasing their output by 11 per cent.

It is not until we reach page 7 that we find how Britain has done, and we find that home output is up by 3½ per cent. If we look at what happened to the reserves and to imports and exports, to production, to the effort to keep down the cost of living and to capital investment, the Government are to be condemned on all sides. They would have taken the credit if the country had been leading in such matters. Since we are at the bottom of the league in most of them, the Government must take their share of the blame.

Our reserves are at about the same level as they were in 1945. This Government came into office in 1951 to save the country when reserves were running out; but reserves are far lower today than they were when the Government came in in 1951. We have to measure the Government's success against these factors, and we must measure the Budget against the effect it will have upon them.

Imports have increased considerably during the past year, because the Government are not prepared to take action in order to restrain imports. They say, "We will not introduce import control because that will mean rationing". It is strange that it has not meant rationing in Australia, where the Government have imposed import control, and it is strange that it has not meant rationing in this country, despite the fact that 50 per cent. of our dollar imports are already under control. We are importing into the country things which are not necessary. Freedom is all very well when the country is not in difficulties, but in an economic crisis we cannot afford to have imports which are not essential for the country.

Consider the industry of my constituency—cotton. The Government are not prepared to do anything about the enormous increase in the imports of grey cloth from India and Hong Kong. Because, by an accident of history, as the President of the Board of Trade said, when the Ottawa Agreements were made there were no exports of cloth from either India or Hong Kong, the Government are not prepared to do anything whatever. Nor are they prepared to do anything about the increase in the import of yarn. Consequently, the cotton industry finds itself in great difficulty.

I am not one who says that the Government should make the position such that the home cotton industry can have a clear field in the home market—it must fight for the export markets like anyone else; but the Government are making it easy for India and Hong Hong by saving, in effect, "Come along here. There is no tariff. This is the easiest market in the world for you to get into."

In exports also we have failed badly. We are at the bottom of the list of nations who have increased their exports. Practically every other major country has done better than we have. The same is true of production. Under the Labour Government, we were leading in building up our gold and dollar reserves and our production and in increasing our exports. Today, the exact reverse is the case, and we have one of the worst records for our increases in exports and in production and in the matter of our gold and dollar reserves.

The Government were brought in to solve the question of the cost of living. Is there anything in the Budget that will help to bring down the cost of living?

Photo of Mr Fred Blackburn Mr Fred Blackburn , Stalybridge and Hyde

We must look also to the future prosperity of the country and its capital investment. When speaking at Geneva, the Financial Secretary to the Treasury used some of the same arguments as were used in the Budget debate a year ago and also in the autumn Budget discussions, when the former Chancellor of the Exchequer said that they had been too successful in persuading private industry to increase its capital investment. Capital investment, however, is so important to our future prosperity that we ought to be prepared to take a risk. It is no use lagging behind the other major countries, as we are doing. Whatever has to be cut down, it should not be capital investment.

The Chancellor of the Exchequer referred to the subject this afternoon when he said that everybody would agree that we need a high level of investment, but, he added, the rise was too sharp and too sudden. That is the same thing as was said twelve months ago and also in October and November, when the Economic Secretary said: The policy of the Government is directed to slowing down the tempo of investment which is not of the greatest national urgency."—[OFFICIAL REPORT, 10th November, 1955; Vol. 545, c. 1988.] We could agree with those concluding words, but who was left to decide what was of the greatest national urgency? It was not the Government, but the banks. The Bank Rate was put up, and it was left to the banks to decide in which directions the capital investment should be made.

We have to judge the Chancellor's speech today against the problems of the balance of payments, of imports, exports, production, the cost of living and capital investment. What was there in his speech which gave any answer to those questions? We all agree that a high level of saving is important. I do not know what trouble the right hon. Gentleman will meet with his lottery. It is rather naive to say that because one cannot lose, it is not a lottery.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

One can lose, all right.

An Hon. Member:

And lose the interest.

Photo of Mr Fred Blackburn Mr Fred Blackburn , Stalybridge and Hyde

One can lose the interest, as I am reminded.

We must be realistic about this. If anybody opposes the lottery, I hope that he will oppose the whole principle of the Government making money from betting. It is not very sensible to say that although we are prepared to take great sums from the football pools and from betting on the racecourse, we are at the same time opposed entirely to any new form of lottery. Let us be honest about it. If we oppose the one, we should oppose the whole lot.

What did the Chancellor mean by his reference to Government expenditure? He is to cut down to the extent of £100 million, but he gave no indication of where the cuts are to be made. Hon. Members behind him came to life when the Chancellor said he would cut Government expenditure, and they applauded loudly when he said he would cut it by £100 million. I should very much like to know where the economies will be made. If it is possible now to economise to this extent in Government expenditure, what have the Government been doing over the past few years that they have not managed to achieve those economies before?

I shall not say much about the increased duty on tobacco—as I am a smoker, I shall not argue against it—but it is rather mean that the old-age pensioners must bear the additional 2d. on a packet of twenty cigarettes. What is there in the Budget to help the old-age pensioner?

Photo of Mr Fred Blackburn Mr Fred Blackburn , Stalybridge and Hyde

What is there to help the disabled or those on fixed incomes? Nothing.

As I said earlier, the Budget must be judged against the problems which face the country. Not even the most enthusiastic supporter of the Chancellor of the Exchequer is likely to say that the right hon. Gentleman has today produced anything that can in any way measure up to the problems now confronting us.

7.28 p.m.

Photo of Mr John Howard Mr John Howard , Southampton, Test

Two of the last three hon. Members who have spoken have referred to tax relief on sport of one kind or another. I had intended to enter a plea for the smaller professional football clubs and also for the live theatre. Possibly the Committee has already heard sufficient about tax relief, and therefore I shall content myself by referring to these two matters in a few sentences.

So far as the professional football clubs are concerned, we are, as the hon. Lady the Member for Coventry, South (Miss Burton) underlined, taking a great deal out of sport and putting nothing back into it. There are opportunities for art and culture to receive subsidies through the British Council, and I wonder whether it is possible to divert some of the funds at the command of the British Council to support our Olympic team.

Many of the smaller professional clubs are financed by their directors, supporters' clubs and so on, and notwithstanding that the clubs operate at a considerable loss, it is still necessary to pay over to the Exchequer a considerable sum in Entertainments Duty, which comes directly from the pockets of those who have interested themselves in the clubs. I hope that my right hon. Friend the Chancellor of the Exchequer can look at that matter again.

Many theatres have closed during the past year, and it is felt that if the tax continues at the present rate many more theatres in the provinces will have to close. It may be, of course, that even the alleviation of entertainments tax will not save these theatres. Today we have rather more exacting standards; we expect a high quality of entertainment and performance in the provinces, and we therefore would expect a theatre to stand on its own merits and standard of performance rather than on any form of subsidy or assistance by the lifting of any existing taxes. It would, however, be a step in the right direction if theatres could be encouraged to develop a higher standard through being allowed to retain a higher proportion of the takings at the box-office.

Photo of Mr Marcus Lipton Mr Marcus Lipton , Lambeth Brixton

If all hon. Members who put down their names in favour of the abolition of entertainments tax will record their vote during the Committee stage of the Finance Bill, we shall be able to compel the Government to do something about it.

Photo of Mr John Howard Mr John Howard , Southampton, Test

The hon. and gallant Member has stated a truism.

I turn from entertainments taxes of one sort or another to other aspects of the Budget. The hon. Member for Stalybridge and Hyde (Mr. Blackburn)—who is no longer in his place—asked what the Chancellor has achieved in his Budget. My right hon. Friend has set out to solve a number of problems. A number of questions are being asked both inside and outside the House. What steps are being taken to maintain full employment? That, I think, is one of our priorities. What are we to do to narrow the gap between exports and imports? How shall we encourage investment and increase our ability to compete for overseas markets? How are prices to be stabilised? Finally, how are we going to ensure that the value of our currency is maintained?

All those matters are of vital importance to our economy and to the standard of life enjoyed by everyone in this country, by old-age pensioners and by all the various sections of the community which have been mentioned today.

The Chancellor has concentrated his reply in one word—savings. He has pinned his faith to an increase in savings, so that we can reinvest in industry, so that we can expand our production by ploughing back and withdrawing from circulation some of the excess earnings in our internal economy.

Where has he looked for the savings? If we are to try to encourage savings, we must look to the different sectors of the community for them. First, let us look at limited companies. There is not a great scope in that sector for savings. In the limited company sector, we find that in 1955 savings out of profits amounted to some 43 per cent. already ploughed back by limited companies, only 21 per cent. being paid out in dividends. That compares favourably with pre-war figures, those for 1938, when only 29 per cent. was saved and 47 per cent. paid out in dividends.

There is thus not a great deal of scope there for additional savings. The Chancellor has, however, added a little incentive by stepping up the rate of distributed profits tax by 2½ per cent., so that any company which might toy with the idea of increasing its dividend and thus decrease its savings will at least know that there will be a further impost payable to the Chancellor if it does so.

When the Chancellor moves to the private sector, he has two classes of the community to whom to look—the professional classes, the self-employed, and those comprised within the expression "other incomes," as I think it is put in the White Paper. He has to look to those two sectors for his savings.

If he looks to the self-employed, he will find that their incomes have risen proportionately less than have the incomes of any other sector of the community since the war. In fact, while weekly wage earners have increased their incomes by 3½ times between 1938 and 1955, the middle range of self-employed people have found their incomes rise only by some two and a half times during the same period.

The self-employed section of the community has passed on less of the rising prices than any other section. The profits of the self-employed have not risen in anything like the same proportion, either as incomes or as the profits of companies; so that the self-employed man, the professional man, has not been able to pass on to his consumers that which other sections of industry and the community have not hesitated to pass on.

If the Chancellor is to appeal to the self-employed, he must give them some margin out of which to save. I was delighted to hear this afternoon that he is proposing to extend to the selfemployed—that is to say, everybody from the professional man to the greengrocer—the same opportunities to pay for a pension which at present belong to the civil servant and the employee in industry. That is a particularly valuable step forward for professional people.

In this country, the professional man enjoys a very high reputation for both integrity and competence. If we are to continue to recruit into the professions the right type of individual, we must be able to offer the same opportunities for pension on retirement as would be received by those entering commerce, the Civil Service, or local government. The proposal announced this afternoon goes all the way to meet the demand for a pension on retirement.

The next sector to which we must look for investment savings includes those who look upon an investment as the postal order which accompanies their fooball pool coupon which they send off on a Wednesday or Thursday in the hope of gaining a prize. They look upon an investment as the amount which they pay to the football pool promoter each week in the hope of securing a quite enormous dividend in the form of a prize.

The proposal of the Chancellor is to introduce bonds which attract no interest but which will be drawn in some way—I do not know whether a hat or drum will be used—and the lucky holder of a particular bond will receive a prize of some sort. That is a type of saving which I think will appeal to a very wide section of the community. There is an opportunity to put aside £1 at the end of the week—that was a minimum subscription mentioned this afternoon, and there will be opportunity to accumulate one's savings for a special occasion, admittedly without interest, and at the same time cherish the hope that one of these days one's bond might be drawn and be the means of securing a substantial increment to one's savings. I assume there will be no tax payable on drawings from the bonds.

The hon. Member for Stalybridge and Hyde was rather challenging in his remarks about betting. These bonds are surely somewhat comparable, though the amount is greater, with any issue at less than par. When a bond is issued at, say, 97 and is ultimately repaid at 100 or 101, the same principle of premium applies as would apply to the bonds which the Chancellor proposes to issue as part of the savings scheme. As no Income Tax is applied to the premium on the redemption of bonds issued at a small discount, I presume that precisely the same principle will apply in this case and that no tax will be payable.

Photo of Mr Henry Brooke Mr Henry Brooke , Hampstead

I can assure my hon. Friend that the prize, if he wins it, will be tax-free.

Photo of Mr John Howard Mr John Howard , Southampton, Test

I am sure that we are all relieved to hear that. It will fortify our desire to subscribe to these bonds, in the hope that we may be fortunate prize winners.

Photo of Mr Robert Mellish Mr Robert Mellish , Bermondsey

After considering this matter since the Chancellor spoke, may I ask whether the hon. hon. Member does not think that there may be great danger here? Since the gambling instinct is rather prevalent, will there not be a tendency to draw money from Post Office savings to buy the bonds in the hope of getting extra cash by way of prize money?

Photo of Mr John Howard Mr John Howard , Southampton, Test

I do not think that it makes any great difference if we transfer savings from under one heading to another. They are still savings, and purchasing power is being drawn off. I think that my right hon. Friend was right to take a gamble. The proposal opens a wider opportunity to save, and also provides the chance of a substantial gain, if one happens to be lucky in the draw.

It is important to concentrate upon increasing our savings. The Chancellor has made a gesture to the self-employed who, until the weight of taxation became completely intolerable, made the greatest contribution to savings. It has only been in recent years that the weight of taxation has prevented them from playing a full part in adding to our national savings. The present concession, which is partly a tax relief and partly a contribution to savings, will restore the balance and give the self-employed classes a fair deal.

The emphasis in the Budget has been on concessions and not on new taxes, but the tobacco duty proposal has surprised quite a number of people. It has also dismayed a number of those who appeal for the old-age pensioners, though until we have the figures before us we should be most unwise to express any opinion on how much per week the new imposition is likely to mean to old-age pensioners. It is bound to make some difference, but until we have the figures I think that we should hold our criticism.

Photo of Mr Thomas Brown Mr Thomas Brown , Ince

It is very easy to calculate. Old-age pensioners are allowed only one voucher on one ounce of tobacco a week.

Photo of Mr John Howard Mr John Howard , Southampton, Test

The hon. Member's arithmetic is probably better than mine and I will not attempt to follow his example by performing the calculation. Usually at this time of the year, in my practice as an accountant, I have to perform a number of calculations after the Budget, but for the first time I have been spared the usual cogitations on the effect of new rates of tax. Private incomes are not affected this time, and the only effect upon the income of companies is the additional ½ per cent., making 3 per cent. on profits—quite a small impost—and a deterrent of 2½ per cent. on distributed profits, which I view as another shot in the locker designed to encourage savings.

I should like to commend the Budget to the Committee. As a member of the professional classes who has benefited quite considerably from the Budget, I believe that it will be a great source of encouragement to youngsters who are thinking of entering the professions. It will be an encouragement to them to know that they can enter the professions with a reasonable chance of getting to the top and providing for their old age as well without being overburdened by the need to raise capital to buy their way into a practice.

7.46 p.m.

Photo of Mr Reginald Moss Mr Reginald Moss , Meriden

There can be no dispute that the immediate aims of the Government should be, first, to close the adverse gap in our balance of payments, and, if possible, achieve a surplus, secondly, to check inflation so that the wage-price competition can be ended and savings encouraged and, thirdly, to do both these on the basis of full employment—a fact which the Chancellor omitted to mention in his Budget statement.

Full employment is of very great importance to the country now. In the Midlands much anxiety has been caused by the pockets of short-time working and unemployment in the motor car trades. The three objectives I have mentioned should be the objectives of any Government in the present situation, but the context in which these objectives have to be achieved is also important.

In 1955, conditions were extremely favourable to Britain, but let us consider one or two of the manifold aspects of failure last year. First, there was an adverse balance of payment: of £103 million, and between 1954 and 1955 there was a deterioration in that respect of £308 million. I am glad that my own calculations are the same as those of the Chancellor of the Exchequer. Secondly, there was a vast deficit with the non-sterling world of over £300 million, which represented a deterioration of £250 million between 1954 and 1955.

Thirdly, Britain's share of world trade has been falling, though the hon. Member opposite who made that point ought also to have said that it is easier to improve exports on a narrow base than it is to achieve a similar percentage of exports on a broad base. That should be borne in mind when one compares the performance of this country with the performances of countries overseas.

Fourthly, particular industries have met with difficulties in 1955, and hon. Members on both sides of the Committee feel concern about the pockets of short-time working and unemployment in various parts of the country. In my own constituency, it is the motor industry in particular which is suffering in this respect. Fifthly, our gold and dollar reserves have declined by over one-fifth last year or, as the Chancellor put it, by nearly one-quarter. That is a very serious decline in a country situated like ours, a country which, though an island, is based on an international economy, part of which is beyond the control of any British Government.

Sixthly, the general price level inside the country has been rising. Out of 50 countries which submit statistics to the United Nations only eight have fared worse than has Britain in this respect. Lord Aldenham said in February that the cost of living had risen in 1951 by 2·1 per cent. in Western Germany, by 2·8 per cent. in Canada, by 3 per cent. in the United States, by 7 per cent. in Holland and by 20 per cent. in Britain. I believe in what the present Prime Minister said in his broadcast of 1951, that statistics do not matter; people know whether prices are rising or not.

Lastly, I think that we shall have to continue to import vast quantities of oil and some coal and steel during 1956. That will throw a burden on our balance of payments this year. All this is happening at a time when world trade has been expanding, when other countries have ben accumulating gold and dollar reserves, and when the terms of trade have not moved markedly against us.

The Government have a poor record in this respect. That is my honest opinion—I am a student before I am a politician. As far as imports are concerned the Government had to find £547 million less in 1952 than in 1951, £604 million less in 1953 than in 1951, £482 million less in 1954 than in 1951. On the other hand, exports in 1952 were up by £79 million, they were down by £78 million in 1953 and up by £69 million in 1954. In this, I am supported by an article in the current edition of the Westminster Bank Review, which states: It appears then from the balance-of-payments point of view external conditions in the last few years have been uniquely favourable to this country and, to the extent that difficulties have occurred nevertheless, the nation has only itself to blame for them. It is internal causes which have been responsible for the inflation of the last few years. The Government, therefore, have been rather like the grasshopper which sang in the summer—they had an Election when the weather forecast became doubtful. A cloud no bigger than a man's hand has upset the party opposite. Hon. Gentlemen and right hon. Gentlemen opposite should have read their Shakespeare better, particularly his words— It is the bright day that brings forth the adder and craves wary walking. More recently, of course, the right hon. Gentleman has had some encouragement. The gold and dollar reserves have been rising again and the gap in our trade balance has been narrowed. However, these developments do not go far enough, as the Chancellor of the Exchequer said this afternoon. For the first quarter of 1955 the trade gap averaged £77 million a month. For the first quarter of 1956 the monthly average has been £57 million a month. Yet in the first quarter of 1954 it was only £40 million a month. Therefore, we have a long way to go. It is in the light of these difficulties and problems that the Budget statement made today has to be considered.

I want also to mention certain long-term considerations which seem to me to be extremely important. The first is to ask whether the Government still hold to the belief in an expanding economy, and if so, to what extent? In the current issue of Lloyds Bank Review it has been shown that over the period between 1950 and 1965 the industrial output of the Soviet Union will have increased by 300 per cent. By 1963, Russia will have the present output of the United States of America, and by 1965 Russia will have 77 per cent. of the American output for that year.

To take one or two instances, Russian output of coal and lignite will have increased by 127 per cent., oil by 255 per cent., and crude steel by 155 per cent. It is in the light of this expansion in Russia, and the fact that over the same period between 1960 and 1965 the industrial output of the United States of America will have increased by 91 per cent., that we must judge our own performance.

If competitive co-existence is to be the governance of the future, this country must do likewise. We must have plans for expansion, even if not as big as those which exist in Russia and the United States. At any rate, we must bend every nerve and sinew to expand our own economy if we are to exercise any influence in the world of the future. The rate of expansion is, therefore, important, and the Government would do well to clarify their plans in this respect to the Committee during the Budget debate.

The second long-term question which arises is whether the Government believe that full employment can be maintained and economic expansion continued, on the basis of devotion to Keynesian techniques, adumbrated in times of mass unemployment and applied now to a very different economic system. Mr. D. J. Robarts, of the National Provincial Bank, and Sir Oliver Franks, of Lloyds Bank, are both doubtful about this. One of the reasons is the growth of the self-financing company, which is mentioned in paragraph 71 of the Economic Survey for 1956. The reasons why these two bankers think that the policy which the Govern- ment have pursued hitherto is doubtful of success are as follows, taking the two together.

First, they point out that this country is no longer a creditor nation. Secondly, they say that the Bank Rate would have to be raised to a point at which unemployment is created, if it is to be effective. Thirdly, they say that Government expenditure is five times what it was before the war, yet it cannot be cut without a major change of policy. Fourthly, they say that higher taxation blunts the effect of higher interest rates. Fifthly, they point out that this country is exposed to greater external vulnerability in these times than in the past. Lastly, they indicate that companies must finance themselves more out of profits today than they have done in the past.

Therefore, this raises the serious question as to what techniques are the best in the circumstances of today. In my opinion, no Government should be a slave to principles simply because they have operated in the past, but should always be willing to try out new techniques in an attempt to achieve the long-term objectives which this country must reach.

The third question is whether inflation can be checked and Tory promises redeemed, without reference to defence expenditure. This is running at £1,500 million a year or, say, £30 per head per year in this country or 12s. per head per week. I can understand an intelligent argument about defence expenditure and its impact upon our economy. What I do not support is the continual ignoring of defence expenditure as though it did not exist.

In the most recent debate we had upon the economic situation the right hon. Gentleman the Chancellor of the Exchequer did not, so far as I remember, even mention defence expenditure in his analysis of inflation. My right hon. Friend the Member for Huyton (Mr. H. Wilson) gave four reasons lying at the base of inflation, including defence, and proceeded to ignore it in the rest of his speech. It does not seem to me to be intellectually honest to try to deal with the question of inflation without dealing also with the impact of Defence expenditure upon it.

The right hon. Gentleman is reported to have said, on inflation, "It is a simple thing, so simple that I sometimes wonder why everybody does not see it." I must confess that I did not find it a simple thing, particularly after reading the article by R. F. Harrod in the Economist, where he makes out a case to show that wage increases have only been of trivial importance in this inflationary period and the major factor in the causation of it was the vast increase in industrial investment, amounting to 80 per cent. increase over the average of the period 1949 to 1952 or 1953. As a matter of fact, the analysis of inflation is very difficult for the expert, let alone for the layman. I could appreciate a reasoned argument; in fact, I should enjoy listening to one from the Government, upon the impact of defence expenditure upon the economy so far as inflation is concerned, but I cannot believe that it should be continually ignored because it is bound to have some effect.

The fourth consideration is that no Government can succeed in any of these tasks unless they are understood and supported by the people. The party opposite, in this respect, is a victim of its own propaganda. I should like to know whether the Government really believe in the economies of the kitchen at "Grey Gables," which is described in the following terms; It was a scene of turmoil from early morning until late at night—swarming with people who shoved and pushed and obtained what they wanted by reaching over the bent bodies of others. If that is Tory economics it is out of date. The party opposite should be intelligent enough to adapt itself to changing circumstances.

Perhaps the Government believe in the words of a former Anthony, who said: Mischief, thou are afootTake thou what course thou wilt. Even the Chancellor is reported to have said, in a previous speech, that all sections of the community were greedy. He accused all sections of the community of greed. It is true, as the Bible says, that He that is greedy of gain troubleth his own house. That may yet be the greatest indictment of this Government. If it is true that all sections of the community have become greedy, we have removed ourselves even further from the idea of mutual service. If we have, it represents a moral deterioration. The Government must not behave as though the people were economic scarecrows. I do not believe for a moment that the working-class will allow themselves to be pinched in the Tory nutcrackers unless they are persuaded that any sacrifices which have to be borne in a situation of this kind are fairly shared.

Insofar as any Government convinces the people that the sacrifice is to be a national one, and that those sections of the community which are worse off are to be cushioned to some extent against this sacrifice, I have always believed, and believe now, that the people will do their best to support the Government in their attitude to achieve economic viability.

I support those parts of the Budget which encourage savings because I believe that there is a very close connection between savings and the satisfaction of the need for investment. I believe that there is a close connection between savings and rising prices, and I agree with those parts of the Budget, but I cannot for the life of me see how, in a Budget which has been built up as this has been, the Chancellor of the Exchequer, who has been said to be intelligent, courageous, imaginative and strong, can come to the House of the Commons today and, in a long speech, put forward so small a Budget. I cannot see how this Budget measures up to the enormous problem we have to face, and I myself would have supported even a Tory Government which had brought forth measures which were capable of meeting the situation.

8.7 p.m.

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

I hope that the hon. Member for Meriden (Mr. Moss) will not think me too presumptious if I congratulate him very sincerely on what I think was a close and well-reasoned speech. I can only hope that the right hon. Member for Huyton (Mr. H. Wilson), when he speaks tomorrow, will reach the same high standard of objectivity and impartiality that we have heard within the last twenty minutes.

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

Perhaps my hon. Friend would allow me to associate myself with those remarks.

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

The annual Budget to which we are subjected really makes this House of Commons into almost a Council of State, because the Budget, which, in olden days, was simply a means whereby the Government provided themselves with sufficient revenue to pay for their expenditure, is now something far more important. It controls the whole prosperity of the country. Therefore, because it is now so important a part of our lives, we must examine it very carefully.

The first observation that I have to make concerns the accuracy of Treasury Estimates. For years, since the war especially, Treasury Estimates have been very much in error, both in the time of the Labour Government and in the six years that this Government has been in office. Figures have been put to the House showing what was the estimate of expenditure in a year and at the end of that financial year they have been shown to be hopelessly wrong. In the present year, the error is more than 5 per cent. We may think that that is not a very big error to make in any circumstances, but when we are dealing with figures which reach the astronomical proportion of £5,000 million, then 5 per cent. is a very serious error to make. I think that in consequence of these continuous errors over the years, one is at least entitled to question the infallibility of the Chancellor's economic and financial advisers.

This Budget is a continuation of a series of Budgets which go back to the days of Sir Stafford Cripps, and I think that we must look back to those days for a few moments and relate them to the situation in which we find ourselves today. The hon. Gentleman the Member for Stalybridge and Hyde (Mr. Blackburn) made a few party points and tried to show how much worse off we are than in the days when he and his right hon. Friends supported the Government of the day.

It is fair to point out, however—and I think that hon. Members opposite would admit this—that in the first five years they were the Government of the country they had, on average, £350 million annually of American money—Marshall Aid—which cushioned them against the very serious balance of payments problem. Notwithstanding the fact that that money was available, in one year they were forced to devalue the £. Since we have been in office we have not had the benefit of any aid from the United States, other than small sums in defence aid—small, that is, in relation to the sums which the Labour Government had. For all those years we have stood on our own feet.

I ask hon. Members to consider the argument objectively. The position is that the people of this country are very much better off than they were six years ago. Our present difficulties are the result of our trying to do too much with too few resources in our hands. I entirely agree with the hon. Member for Meriden that we have to consider the whole of the techniques of financing our affairs, without any regard to past principles.

I should like to return to an argument which I have put to the House on a number of occasions. I sincerely and honestly believe—and I know that the Economic Secretary believes this, too, because he made a similar statement in the House some years ago—that the present weight of our Budget is in itself inflationary and that unless and until we can make very serious inroads into the level of Government expenditure and the level of taxation, we shall continue to be faced with these crises on balance of payments account. Not only shall we be faced with them directly as a result of high taxation, but, in their turn, they will bring continuing demands for higher wages which, in the end, will price us out of foreign markets.

It must be borne in mind that at this time when, as the hon. Member for Meriden said, we must be thinking in terms of greater productivity, high taxation means that there is no incentive either for the industrialist to produce more or to the man at the bench to work harder. There is no incentive if his pay packet at the end of the week shows no increase commensurate with the extra effort.

I want to interpose a comment here about the value of the £ in relation to foreign currency. I confess that I am not competent to talk technically on such matters, but I am advised by some merchant bankers that they firmly believe that the present pegging of the £ is bad from this country's point of view. I do not suggest that we should have free convertibility, but I am advised that to peg the £ at 2·80 dollars means that, because of pressures from European countries, the £ will always be fixed at the lower level.

If the £ were permitted to find its own level it would probably fall 20 or 30 cents in relation to the dollar, but it would have rather a different effect from that of the devaluation of the £ when the Labour Government were in power. That is not meant as any criticism, but in those days there was a very rigid system of import licences, we had little in the way of free exchange convertibility and there was a small amount of goods in the pipeline.

Today, there is a considerable quantity of raw materials, already paid for, on the way to this country, and large stocks are already in existence here. The result of such a policy would be this: although for the moment there would be very little extra cost to us on such imports, the value to exporters at present would be considerable. I am advised by some merchant banking houses in the City of London that in about six months' time, as a result of such a policy, they would expect the £ to have reached parity at about 3 dollars. I am not competent to talk technically on the subject or to say whether that argument is correct, but I put it forward for consideration by the Economic Secretary as he sees fit.

May I return to the speech of the hon. Member for Meriden? The Budget must be judged by its effect upon three things—the fight against inflation, increased productivity, and greater exports. I think the whole Committee will commend my right hon. Friend for the steps which he has taken to encourage savings. I do not pretend that 100 per cent. of the people in the country will like the idea of a premium bond, but, nevertheless, we must recognise that this is an imaginative step forward in the sense that it attempts to catch the public imagination on a vital problem. Indeed, it might be the only way in which public imagination can be so caught. That is all I will say on that subject.

I should like the Economic Secretary to consider another aspect of savings. My right hon. Friend this afternoon drew attention to the rise in the National Debt and the enormous cost to the country in servicing that debt year by year. We must not forget that although we must have increased savings to a considerable extent, as they are made those savings will increase the National Debt and that automatically will increase the annual charge which has to be met.

Much as I respect my right hon. Friend and the Conservative Government, of which I am a supporter, I dislike Governments spending money, because they never spend it wisely, and I would much prefer some arrangement to be made—this will be quite heretical to hon. Members opposite—through the Stock Exchange whereby the ordinary man in the street could subscribe his 2s. 6d. or 5s. or £1 in small units of productive industry. The money obtained out of industry could thus go back into industry to help industry finance itself for the further steps which we must take in redeveloping our industrial machinery. It should not be impossible to work out some means whereby the individual could co-operate and help in that way.

I turn next to the question of productivity and exports. First, I was very disappointed that my right hon. Friend made no reference whatever to the coal industry and to the part which it has to play. I am not a coal miner and, frankly, I should not like to be one. However, I should not like hon. or right hon. Gentlemen opposite to imagine that because it is an unpleasant job, it is necessarily the most dangerous in the country. The most dangerous job in the country is the simple task of walking across the road, and we have to accept that fact. [HON. MEMBERS: "Oh."] I do not intend to be mealy-mouched about this, whatever reaction I get from hon. Gentlemen opposite.

The plain fact is that the coal industry has let us down. It is the one industry which has shown no increase in productivity since the end of the war, notwithstanding the fact that vast sums of money have been poured into it for re-equipment.

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

I was particularly careful to refer to the coal industry and not to the coal miner, because the difficulties there are probably due to a combination of all parts of the industry, from the top management downwards.

We can as a Parliament, not necessarily as a Government, set as one of our targets for this financial year the task of seeing how we can get an additional 40 million tons of coal. One or two hon. Gentlemen opposite ask how we can get the miners. I should like to point out that when the opportunity to get more men to go into the mines came—I am speaking of Italians—the National Union of Mineworkers would not have them. [An HON. MEMBER: "Why should they?"] Hon. Gentlemen opposite really cannot have it all ways.

Photo of Mr Thomas Brown Mr Thomas Brown , Ince

The hon. Member is making a rather scathing condemnation of the British miner. I warn him not to do it, because it does no good. Is he aware that since 1948 the British miner has worked 400 extra shifts to help the nation in its economic difficulty? Our miners volunteered to do Saturday work and have worked on Saturdays without a break for eight years. If that is letting the nation down, I do not understand what the hon. Member means.

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

The plain truth is that the nation is not getting anything like the amount of coal it wants, nowithstanding the extra shift. Every other industry in the country has made enormous increases in productivity and that has not happened in the coal industry.

Photo of Mr Thomas Brown Mr Thomas Brown , Ince

There is a reason.

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

Now the hon. Member says that there is a reason for it. In other words, he gives me my argument. We have to remember that because we are not getting the coal from our own country, we are having to spend £80 million in foreign currency to bring it from abroad. As a Parliament we ought to see how we can get this extra coal. That should be our great task. If we can succeed in doing that, our future prosperity is assured.

In ordinary exports British industry has a task to perform which is well within its power. During the financial year we should set industry a target of increasing exports by about £300 million. I believe that that can be done. Last year I went to Austria, Italy, Switzerland and France on business; the year before I went to Portugal, Spain and Italy, and the year before that to the Scandinavian countries and Holland. I claim to have some knowledge of the conditions which exist in those markets. About a year ago they used to think that it would be a good thing for the Chancellor to offer some tax concessions to industry to assist in developing export markets, but on further consideration I do not think that that is the way in which we should set about this problem. We are told that both the Germans and the Dutch have now withdrawn their trade subsidies and I believe that we shall now find ourselves better placed than we were.

One or two hon. Gentlemen opposite have made the point that we have not increased exports last year as fast as have other nations and that we are finding our prices rather high. To both those points there are good answers. It must not be forgotten that we have been exporting solidly since 1945 and that our percentage increase is based on a much higher figure—which we have already attained as a result of about 10 years of trading—than is the figure of, say, Germany, or Holland, which did not start exporting until a few years ago. The next point—and this is very important, especially where German competition is concerned—is that the Germans had no trade unions of any real consequence until two or three years ago. They also had an enormous unemployment problem arising from the influx of refugees from Eastern Germany, all of which they had to absorb.

We must admit that they have made prodigious efforts in Germany and have built up an enormously powerful State. The trade unions are now beginning to assert themselves and, as a result, wages in various industries in Germany are beginning to increase. I believe that in due course they will reach parity with wages paid in our own industries. I am, therefore, not worried about our ability to increase our exports. I believe that that can be done and that the figure of £300 million in extra exports during this financial year is something which is well within the capacity of British industry.

I should like my hon. Friend the Economic Secretary to see how the Government can help industry further. It should be in the best interests of the Government to see that industry gets its goods at the lowest possible prices and that every handicap to getting goods at the lowest prices is removed, or at least partially removed, because our prosperity depends upon our ability to export. Unless we can export at reasonable prices, we shall have difficulties, notwithstanding what I have said already.

The petrol duty is very exorbitant at present and its effect upon raw material costs in industry and in the cost of distribution of foodstuffs and things of that nature is very considerable. It is very difficult to make an exact calculation of the effect of the petrol duty upon raw materials, but with the chemical industry the best information I can get shows that no less than £3 a ton is added to costs and that is often the difference between getting and losing an order in a foreign market.

There is then the question of the white oil duty. We return to this subject year after year, whether on the Government side of the House, or on the Opposition side. The duty was originally imposed by error and has remained on the Statute Book ever since. It is a direct tax on a vital raw material of many industries and although machinery exists for drawbacks and rebates for certain purposes, nevertheless considerable machinery has to be operated at considerable cost to the nation.

To repeal this tax would certainly not be inflationary. The gross cost to the Exchequer would be about £30 million, but the Chancellor would get back in increased taxation from companies not less than £15 million or £16 million of that; and there would be consequent saving in administration. I ask the Economic Secretary to bear in mind that when we raise this question year by year we do not do so because we like to, but because we think that it would make a very real contribution. The whole system of drawback on raw materials on which Customs duty has been paid should be extended to enable manufacturers to compete more favourably in foreign markets.

Now I come to my final point on Purchase Tax. I do not think that any hon. Member likes this tax. Indeed, many were appalled when they heard the Chancellor say this afternoon just how much is now brought in by Purchase Tax. It can only have a distorting effect on industry and it may be shown clearly that the tax is one of the factors limiting the possibilities of increased exports at the present time.

Let us consider the motor car industry. A motor car manufacturer knows that he has a certain market in this country for a car costing, shall we say, £1,000. That is the amount which a purchaser is prepared to pay, but it includes about £300 of tax; so that the manufacturer has to consider the car he is to construct not in terms of £1,000 but of £700, or even less, because there are distributors' profits to be considered. In consequence, the buyer gets just about what he pays for from that point of view and he does not get a car so well designed or efficient as a car of a similar price manufactured in a foreign country.

No other country saddles itself with this vast tax obligation and the effect is felt not only in the motor car industry but in many other industries. The time has come when Purchase Tax should be abolished and replaced by a general sales tax. I am sure that in the not too distant future that is a step which will have to be taken.

One of my hon. Friends described this as an inspired Budget. Hon. Gentlemen opposite consider that "inspired" is the last adjective which should be applied to it. One of my hon. Friends said that this Budget is like the Venus de Milo—what there is is good.

Photo of Mr Marcus Lipton Mr Marcus Lipton , Lambeth Brixton

What does the hon. and gallant Member think?

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

I think that what there is is good. The incentives to saving are vital to our prosperity and the small imposts which have been made will, not hurt anybody. In the months to come, if the country can see that this Budget is having the effect which the Chancellor believes that it will have, everyone will be very happy.

8.34 p.m.

Photo of Mr George Chetwynd Mr George Chetwynd , Stockton-on-Tees

In opening his Budget statement, the Chancellor indulged in some nostalgic reminiscences about the 1925 Budget, the time when he first came to this House. The interesting thing to me is that at that time the right hon. Gentleman was representing the constituency which I now represent. When we met in 1945 it was my good fortune to replace the right hon. Gentleman and to send him to seek a fresh constituency. Therefore I have followed his activities since with considerable interest.

We were led to believe that today the right hon. Gentleman would don the mantle of the "Iron Chancellor" and give the country the medicine that it really needed. More in sorrow than in anger I must say that his speech was a complete disappointment to those who expected him to take that line. In fact, it was an extremely lengthy speech, but there was very little in it.

At one stage the Chancellor said that the eyes of the world were focussed on this House. From my reading of the popular Press I think that they are focussed on a little Principality somewhere else; and indeed there was a Monte Carlo atmosphere about the Chancellor's speech. Admittedly he made his speech with some grace, and with his reference to savings he was inviting us to save for a rainier day—[HON. MEMBERS: "Oh."] But when he came to his reference to a lottery I thought he was qualifying for the position of head croupier at the Monte Carlo Casino.

In his speech today the right hon. Gentleman conducted an inquest on Tory party policy over the past four years, with particular reference to its failure to meet the situation in the last year. The ample documentation in the popular edition of the Economic Survey is the most damning indictment we could have of the Conservative Party in office.

My complaint about the Budget statement is that it left out altogether the main problem of the cost of living; and until we have dealt successfully with that and achieved a reduction in the cost of living, I do not believe that this Government can hope to grapple with the other problems which beset them. There were no proposals in the statement today to bring down the cost of living. The only proposals which is contained; the removing of the bread subsidy, etc., are designed to have the opposite effect.

We are now facing a position in which we are supposed to exercise restraint in our demands for wage increases, etc., but at the same time those demands are aggravated by Government action. In spite of rising dividends and rising profits, there was no appeal from the Chancellor for restraint on that side. It is my belief that no Tory Chancellor of the Exchequer can successfully appeal for restraint unless his measures appear to be fair to all sections of the community. There should be fairness between all sections. It is precisely because the Budget does nothing upon those lines that it must be condemned.

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

That is really very unfair, because one of the main proposals of the Budget is to increase the Profits Tax.

Photo of Mr George Chetwynd Mr George Chetwynd , Stockton-on-Tees

A few moments ago one hon. Member opposite said that that will have only a small effect; in fact, it was the hon. and gallant Member himself who said it—so he can hardly plead that now. I said that the Chancellor had made no appeal for dividend restraint, and I think that that fact will be borne out by the record tomorrow.

Let us examine the Chancellor's plea in regard to savings. He is appealing for extra savings, and the only source of those extra savings is the very small saver. The proposal which he advances will not improve the position very much. Either the small saver will save enough to invest in this lottery, or premium, as it is called, thereby foregoing the interest that he would normally get, or he will withdraw what savings he has and reinvest them in something which will later give him a higher rate of interest. The net accumulation of new savings in that respect will be very small indeed.

That position will arise because the Chancellor has not asked himself who in our community today has surplus cash which he can save. From where is this extra saving to come? It will certainly not come from the workpeople in my constituency, or from the people living upon fixed incomes, who are finding that with the ever-rising cost of living their incomes are scarcely enough to meet week-by-week costs. We must look to some other section of the community for that saving. The Chancellor has had the very bold idea of the Premium bond, which is as near to a lottery as makes no difference. Whether or not it will succeed I do not know, but it will run into severe criticism in the country. I should have thought a better proposal would have been to offer a far higher rate of interest upon ordinary National Savings Certificates. That would have been a much more sensible way of tackling the problem.

Another matter which frightens me, and will cause my hon. Friends great concern, is the Chancellor's statement that somehow, by some means unstated and unspecified, he will save £100 million in Government expenditure this year. Where is that saving to come from? In every Budget debate that we have had so far, every Chancellor of the Exchequer has said that every day, throughout the year, every Government Department is doing its best to save money. We know that we cannot get a saving of that magnitude unless some change in Government policy takes place.

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

I wonder whether the Chancellor has taken account of the possibility that the Germans will not be making any contribution to the four divisions which we still have in Germany.

Photo of Mr George Chetwynd Mr George Chetwynd , Stockton-on-Tees

That is another of his headaches.

My gravest fear is that this £100 million will come out of the education programme. We all know that the school building programme has fallen behind in respect of plans and schedule. I am convinced that it is one of the easiest things for the Government indefinitely to postpone the building of new schools. That is one direction from which they can derive a considerable amount towards the £100 million which they hope to save. We are absolutely right to press them for more details of this proposed saving, so that the country can see whether it amounts to a change in Government policy or whether the Government hope to achieve the saving by means of blind cuts in staff.

I now come to the imposition of 2d. upon the price of a packet of cigarettes. I have no direct interest in this matter, because I do not smoke, but I have some interest to the extent that all the people who smoke provide services which I need. It is surely the meanest possible action to add this 2d. to the price, and to let it apply to everybody, including the old-age pensioner who, at the moment, receives concessionary tobacco. If he were excluded I think that the amount of money involved would be quite insignificant, and the ill will which this action will arouse among that section of the community will surely offset any gain to the Treasury by the inclusion of old-age pensioners.

When one considers the complete removal of the bread subsidy and the addition of 2d. to the price of a packet of cigarettes, one asks oneself what kind of encouragement is being given to men in productive industry to increase their production. That is a most important matter which concerns us all it is probably the one thing which can save us. There again, the Chancellor has shown a complete lack of imagination. Under the heading of family allowances he has tried to give some easement to those with large families, but I am not at all sure that he could not have achieved the same purpose either by including the first child in the allowance or by increasing Income Tax allowances in respect of children. To give it only to the third child will once again set family against family. It will cause intense disquiet among different families, and I think the Chancellor will lose on the transaction.

One other question which emerges on the occasion of every Budget is that of post-war credits. Something was done in that matter a year ago, but since then we have all been inundated with letters from constituents in circumstances of hardship, who have perhaps £20 or £30 of post-war credits to their entitlement. We are told year in and year out that the Treasury cannot devise a scheme whereby the need of these people can be assessed and the credits paid out to them.

The National Assistance Board or the Treasury could surely undertake that job once the Treasury had decided that the policy was right. Every day the National Assistance Board is assessing need and exceptional hardship, and I should have thought that compared with the working of the lottery which the Chancellor has proposed, it would have been a simple matter to organise the repayment of post-war credits in cases of hardship.

On the question of benefits, or lack of benefits, I am convinced that the time has now come when we ought to lump together the National Assistance allowance and the retirement pension and do away with the National Assistance allowance so far as possible by increasing the basic rate of the retirement pension. More than one-third of the old-age pensioners and retirement pensioners are, I believe, drawing National Assistance grants, and I should have thought that we should either tie the pension to the cost-of-living index or add the pension and National Assistance grant together so as to provide a consolidated sum for all retirement pensioners.

We were promised that this would be a revolutionary Chancellor who would do something bold and imaginative which would force people to realise the difficulties with which this country is faced. I do not think he has done that. I should like the Economic Secretary to the Treasury to consider a proposal which I have tried to work out in detail during the last few days. It concerns our exports. We all know that during the past year our exports have been lagging. According to the official figures, they have increased in volume by about only 4½ per cent. over the previous year, whereas world conditions have been favourable for an expansion of our overseas trade; and whereas our 1955 export performance was unsatisfactory and our share of world trade has been declining, our competitors on the Continent and overseas have been increasing their share.

Our aim must be to give an incentive to producers to export rather than to sell on the home market. Why have we failed so far? Why have we slipped back? The main reason is the attractiveness of the home market. It is much too easy to sell on the home market. Therefore, manufacturers have taken the easier course instead of going all out for the export drive. The Government will not consider physical controls and allocate materials, and although I should prefer that policy to be adopted, I can appreciate that they are not likely to do so.

I therefore ask the Government to consider an unconventional means of stimulating exports, which is this. Why not link export performance with the incidence of Purchase Tax at home? By that, I mean that where there are two manufacturers making precisely the same kind of goods, one doing his best to export and the other not pulling his weight, some inducement should be given to the former to give him an advantage over the other. It could be done in this fashion. The manufacturer of motor cars, for instance, could be told, "For every motor car you export overseas, you shall be allowed to sell one motor car on the home market free of Purchase Tax." In the case of chemicals, pottery, textiles and so forth, for every £1,000 worth of goods exported overseas, the manufacturers should be allowed to sell the equivalent value on the home market free of Purchase Tax. If it could not be done in that way, perhaps it could be done by a return of tax to the manufacturer when he certifies at the end of the year that he has exported goods to a certain value overseas or when he has improved on his previous performance.

I know it sounds a little difficult to work such a scheme, but I believe it could be applied over a sufficiently wide field to make it a worthwhile proposition. Obviously it cannot apply to a manufacturer who is producing solely for the home market, but then, of course, the position would not arise.

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

How would my hon. Friend apply his scheme to the coal industry? If it were free to export, it could export 50 million tons of coal, but if it did, it would have serious economic repercussions on home industry.

Photo of Mr George Chetwynd Mr George Chetwynd , Stockton-on-Tees

That would not apply, because the coal industry is not competing with the coal industry at home. It is where we get competing manufacturers producing the same kind of goods at home, one of whom is doing his export job while the other is not.

Photo of Mr Richard Winterbottom Mr Richard Winterbottom , Sheffield, Brightside

In the event of two manufacturers supplying the market with precisely the same goods, one of whom, as I understand my hon. Friend, would be free from Purchase Tax, while the goods of the other would be charged the Purchase Tax, does not my hon. Friend see what confusion there would be, and what is his solution to that problem?

Photo of Mr George Chetwynd Mr George Chetwynd , Stockton-on-Tees

The argument is that if the consumer can buy the article cheaper, he will do so, and that will naturally encourage the other manufacturer to go into the export market. That is the whole purpose of the suggestion.

I think it is worth considering, and I do not think it would be beyond the capabilities of Customs and Excise officers, who could work out the D scheme, or the Treasury officials who can work out the details of the lottery scheme. If they were agreed on the principle of giving this incentive to exporters, I am sure that they would not find it completely beyond them. It is the sort of thing that may not meet with Treasury approval, but I think that it merits careful consideration, and I hope that something will be done about it.

I am sorry, for the sake of the country, that the Chancellor has not measured up to the task which he had before him today, and I hope we shall be spared an interim Budget during the coming year.

8.53 p.m.

Photo of Brigadier Sir Otho Prior-Palmer Brigadier Sir Otho Prior-Palmer , Worthing

I should like to follow the hon. Member for Stockton-on-Tees (Mr. Chetwynd) very briefly on some of the points he made. I think that his last suggestion needs a very cold towel and very careful thought. I was myself a little surprised to find that there was no incentive given to industry to export, but I gather that other countries have tried the idea and have abandoned it, so that it may well he that it is impossible. It may be that that is not the best way of doing it, and that a rebate of the Purchase Tax or something like that is not capable of being operated. Therefore, I cannot say any more about that suggestion, except that I do not think that the hon. Gentleman's scheme would really be very practicable.

The hon. Gentleman also said that nothing had been done in the Budget to reduce the cost of living. Let us remember that this Budget has to be considered in relation to two other Budgets which we have only just had, and that many things were done there. After all, another term for the cost of living is inflation—wages or costs chasing each other, whichever it is and it is that vicious circle which every Chancellor since the war has failed to break, so that there is nothing new about it.

The former Chancellor, my right hon. Friend the Lord Privy Seal, in the autumn and in the recent Budget, attempted to do as much as he possibly could at that time to stop these rises in prices, as well as restrict the home demand for goods. In other words, it was an attempt to curb inflation, and as the Chancellor said today, it is early yet to see how far those measures have had effect. One must wait and see what is their effect before passing judgment upon them.

Photo of Mr Richard Winterbottom Mr Richard Winterbottom , Sheffield, Brightside

The hon. and gallant Gentleman is a Member of a party which has advocated free competition as a means for bringing down prices. Is he aware that, in spite of the fact that world prices have been falling for a considerable time, our prices have been rising? We have freed the markets and have gone in for free competition. In the face of that, can the hon. and gallant Gentleman still argue about rising prices?

Photo of Brigadier Sir Otho Prior-Palmer Brigadier Sir Otho Prior-Palmer , Worthing

Most certainly. The standard of living in this country is very much higher than in those countries of which the hon. Member has been speaking. None of us wishes to see that standard of living cut in any way, but if some action is not taken it will automatically be cut, prices will fall drastically, and we shall have large-scale unemployment.

Photo of Brigadier Sir Otho Prior-Palmer Brigadier Sir Otho Prior-Palmer , Worthing

The hon. Member for Stockton-on-Tees also said that nothing had been done to curb distributed profits, but 2½ per cent. has been added to the tax on them, and I should have thought that that was a fairly reasonable curb. He said that nothing had been done about National Savings, or the lottery, as he called it, but if he had listened carefully to the Budget he would have heard that interest rates on National Savings certificates have been increased. As for his comment on the suggestion that we should cut £100 million in the expenditure of Government Departments, the hon. Member said exactly the same sort of thing about the present Chancellor when he was Minister of Housing and Local Government and said he would build 300,000 houses. I have every confidence that when my right hon. Friend says he intends to do it, he will do it; but at least there is no harm in setting up a committee to look into the matter, and I shall have certain comments to make about that.

One parrot cry of hon. Members opposite for a long time has been that we are cutting education. In fact, the expenditure on education this year will rise from £342 million to £500 million—an increase, not a cut, in the coming year.

I was very pleased to hear the suggestions in the Budget about savings. We all know that certain classes of the community are unable to save, such as those living on small, fixed incomes and the wage earner, with a family, earning £8 or £9 a week. He is living literally from hand to mouth, as we all know.

We equally realise, if we are honest, that there are an enormous number of wage earners and professional people earning very much larger salaries than that. In the steel industry some are taking home £18 and £20 a week. Good luck to them. I do not grudge them it for one single moment, because they are producing the finest steel in the world at the cheapest possible price. If two or three people in the family are earning, and they are living in a council house, they are fairly well off.

A commercial traveller in my constituency, who has friends in the area of the steel industry, told me of one house into which £48 was going each week. The occupants had bought their television and radiogram and they were trying to get rid rid of the money. This is because there has not been a tradition to save in many of those families. If we can encourage such people to save one-tenth of the amount of money which goes into the house every week, we shall be nearly out of the wood. A vast number of people are earning very good wages today, and deserving every penny of them, but they have not been brought up in the tradition to save. How could they have been, when wages were at the level which existed in the old days? This is something new for them to learn.

Photo of Mr Frank Hayman Mr Frank Hayman , Falmouth and Camborne

Is the hon. and gallant Member not aware that nearly every shopkeeper in an industrial area runs a small savings club, through which the working-class family is able, by savings, to buy bigger and costlier items and better clothing?

Photo of Brigadier Sir Otho Prior-Palmer Brigadier Sir Otho Prior-Palmer , Worthing

That is only an infinitesimal proportion of what it is necessary to save to get the economics of the country right.

Photo of Mr Frank Hayman Mr Frank Hayman , Falmouth and Camborne

The hon. and gallant Member is speaking as though the working-class has never saved. I suggest to him that the savings in the way I have outlined are enormous.

Photo of Brigadier Sir Otho Prior-Palmer Brigadier Sir Otho Prior-Palmer , Worthing

The hon. Member has mistaken what I said. I do not want to define a particular area, But I have lived in it and I know perfectly well that in that area, and certain other areas of the country, there has never been a tradition of saving. There are other areas where there is such a tradition. The Scots are very thrifty people, as are the Welsh. I hope that in those sections of the community in which the very much higher wages are earned the Chancellor's savings scheme will have the right effect.

I wrote a letter to The Times a little while ago—hon. Members may have noticed it. I believe that a great deal of the pressure for higher wages comes from the married man, and rightly so. I am glad, therefore, that family allowances are being raised for the third child and subsequent children in a family. At one time I put forward a strong case for an allowance to be paid in respect of the first child, who is usually the most expensive. Perhaps my right hon. Friend will be able to consider this suggestion at a later stage of his proposals. It would be a good thing if he could put it into effect at this stage.

We have in some way to bridge the gap between the present day and the arrival of the atomic age in fifteen or twenty years' time. That is a problem which would face any Government in office today.

One of the two major factors of the moment is exports and the other is the economy within the country, both individual, Government and local authority. It was at one time stated that there would need to be a major change of policy before any economies could be effected. I am glad that the Chancellor has discarded this theory—temporarily, at least—and believes that it can be done in other ways than by a major change of policy. No one, on either side of the Committee, would tolerate an attack on the social services by a cut in the Health Service or in education.

Anybody with experience of administration in Government Departments knows the extravagance which goes on. Examples have been published in various books, but on a day like this there is not time to enumerate all of them.

Photo of Mr Fred Blackburn Mr Fred Blackburn , Stalybridge and Hyde

Is the hon. and gallant Member now discarding entirely the statement of his right hon. Friend the former Chancellor of the Exchequer that no great economies could be made without a change of policy?

Photo of Brigadier Sir Otho Prior-Palmer Brigadier Sir Otho Prior-Palmer , Worthing

I was suggesting precisely that the Chancellor has apparently discarded that theory and has decided that there is scope for saving £100 million—at least, he has set up a committee to consider it. I do not believe that a major change of policy is necessary to effect these economies. I am saying precisely that. The main trouble is that we are at present spending £4,717 million as against £919 million in 1937–38, which, in my view, is a completely disproportionate increase for what we are getting.

The cost of the National Health Service and of education, without being cut in the slightest, needs looking into. Anybody who has served on a local authority or hospital board knows this only too well. I do not believe that anyone is satisfied with the Report on the National Health Service. People in the Service have said that the Guillebaud Committee did not have the correct terms of reference and was not capable of discovering the real trouble. There have been vast increases in staff, in motor cars and many other things, as anybody who serves on a local authority and remembers how things were run formerly is well aware. Unless these matters are investigated much more closely than was done by the last committee of inquiry we shall not achieve the desired result.

Do hon. Members realise that it costs £5 a head for everybody who is looked after by the National Health Service? Many insurance companies who charge much smaller premiums can give better benefits than are obtainable from the Health Service. I have taken advantage of both systems and I know which pays the best. I do not have to pay so much, although, of course, I still subscribe to the National Health Service through taxation. If that is true, there must be something wrong somewhere which should be inquired into.

No one, on either side of the Committee, would agree to a cut in the number of school places or teachers—in fact, we want them to be greatly increased. But is it really sensible to have 26,000 children denied school places and then to build great palaces for those who have them? I invite any hon. Member to come to my constituency and look at the new Worthing Technical College which has been built. Of all the gross extravagances I have ever seen, that really is the greatest. Of course there must be adequate air. Of course there must be cheerful surroundings. But there is no need to have enormous murals, and fish ponds, metal staircases, and all the rest. Those things may be very desirable, but we cannot afford them in these days.

As a comparison, take the situation of Worthing High School. I do not commend the circumstances in which the High School exists; it is high time that such a state of affairs ceased. It carries on its work in Nissen huts, but in the realm of education it has the highest university scholarship rate of any high school in Britain.

It is not necessary to house schools and colleges in marble palaces in order to achieve a good standard of education. One must strike a mean between the two as a standard which the country can afford, which at the same time is a practical one, in order that money will be available to build more schools and provide more school places. I suggest that great extravagance has been shown by the Ministry of Education in its building plans, and the specifications ought to be gone through with a fine-tooth comb. Otherwise, we shall not be able to build any more.

The export trade is a subject on which much can be said. We are in process of passing through the House the Restrictive Trade Practices Bill. That Bill refers to industry. Is it really too much to ask the trade unions to look at their own affairs also in this matter? It is no use denying that there are restrictive practices on the trade union side of industry.

The Government have given a lead in this matter, and are very unpopular in the country for having done so. They have incurred great unpopularity but have taken their courage in both hands in order to do what they believe to be right. Is it too much to ask the trade unions to do likewise, for their own sake as well as for the sake of the country? It is only intelligent self-interest; unless we can compete with Germany and Japan at the right sort of prices, and offer the right delivery dates—they are even more important—we shall go down. We shall have unemployment; our standard of living will be lowered. The very people who are practising these out-of-date methods will be the first to suffer. They are, I am afraid, prisoners of their own old-fashioned doctrines, and the sooner they break them down the better.

We all know the difficulties that the trade unions have in these days as a result of infiltration by Communists, who are doing everything in their power to try and prevent that sort of reform taking place. Good luck to those who are fighting them tooth and nail. I am not a trade unionist, although I was in one of the greatest trade unions there ever was—the British Army; and I know that no member of the trade union movement will take it amiss from me when I say that their situation is very much like that which we sometimes find today in politics. Those who went about speaking in the last Election know it only too well.

There is apathy. Trade unionists will not attend their branch meetings, and then they wake up the next morning to find a Communist chairman or Communist treasurer, who will tear up the book of rules and write new ones to suit his schemes. That is the danger. We wish the trade union movement luck in its efforts to try to stamp out the work of people who are endeavouring to ruin this country.

Everybody on both sides of industry has to realise that the cold wind of competition is blowing through the world, and we cannot afford not to deliver goods on the day promised. We are losing markets now because goods are not delivered on the delivery date, as well as because their price is too great.

I am very grateful to hon. Members opposite for taking from me, one who is not an industrialist, what I have said about the trade union side. I am now going to hit at the other side, because they are to blame as well. I dislike intensely the expression, "the two sides of industry". It makes me sick, because for thirty years I served in a concern where it was heaven help the man who mentioned the phrase. It was one team working together towards one objective—the saving of the country.

Photo of Brigadier Sir Otho Prior-Palmer Brigadier Sir Otho Prior-Palmer , Worthing

Does the hon. Member like having two sides in industry and having people fight one another instead of going forward together? Surely, working together is a far higher ideal. But it needs a great deal better leadership than we are getting today.

Photo of Mr Richard Winterbottom Mr Richard Winterbottom , Sheffield, Brightside

If the hon. and gallant Gentleman is talking about the two sides, he should apply it to the Army as well.

Photo of Brigadier Sir Otho Prior-Palmer Brigadier Sir Otho Prior-Palmer , Worthing

If the hon. Member wants to talk about the Army I should be grateful if he would do it on another occasion when we are discussing the Army Estimates, and not today.

If the employers in industry were slightly more enlightened in their attitude towards their employees—though some are very good indeed—perhaps we should not have some of the troubles which we are experiencing today.

I am quite sure that due to the fact that we have had high taxation, the incentive has been lacking to do more work or to increase one's salary beyond a certain point. People in the management side of industry are not working in the way in which similar people are working in Germany. Our people go to the office too late and leave too early for lunch and go back to their offices after lunch too late. Some, not all by any means, indulge in far too large a meal during the luncheon break. They drink their gin-and-bitters and glass of brandy whereas in Germany similar people are out for lunch for half an hour at the most.

An American told me that he arrives at the office usually at the same time as his employees, and the first thing he says is, "What can we do to improve on what we did yesterday?" The Englishman very often says, "Everything all right, boys?", and if the answer is, "Yes" he says, "I am going to lunch at 12".

All this arises from swingeing taxation, which means that at the £1,500 or £2,000 a year level it does not pay to work any harder or to earn any more. The sooner we get rid of this inflation and get the country on a stable basis so that taxes can be reduced and the old incentives reintroduced the better for all concerned.

I should like the Economic Secretary to the Treasury to take note of a different point. It relates to State scholarships. It is entirely wrong that the means test should be applied to the gross incomes and not to the taxed incomes. We are now reaching a stage, taxation being what it is, when a large number of extremely able young men are unable to go to the university because the means test is applied to the gross income and not to the taxed income of their parents. I hope that the Economic Secretary will have a word with the Minister of Education on the point. If we are to have the technicians we need we require all who can go to a university to do so and to secure a scholarship for the purpose.

There is a point concerning married women's income. The lumping together of the incomes of a married man and his wife for Surtax purposes is a relic of the past. It originated in Peel's Act of 1842, based on an earlier Act of 1797, under which married women were not allowed to have property or incomes of their own. It has persisted ever since, and it is acting as a great deterrent to women going into business or industry once they are married. If they marry men earning £2,000 a year as executives, and then they take on jobs, the first penny they earn is immediately taxed—

Photo of Brigadier Sir Otho Prior-Palmer Brigadier Sir Otho Prior-Palmer , Worthing

I was talking of Surtax, of course.

I know of the case of a woman who tried to become a teacher for five months after she married. She found that she could not afford to pay anyone to look after her children or to help in the home when she was out, so she had to give it up. Something ought to be done about this matter. A resolution on the matter was passed by the Conservative Party before the last Election, and the view it expressed was inserted into the Conservative Party manifesto at the Election, but nothing has been done.

Finally, I make another plea for those living on small fixed incomes who are not old enough to qualify for the old-age pension, who have just enough money to put them above the National Assistance level, and who have no other income. They are not affected by any reliefs in Income Tax because they are outside the Income Tax range. They are above the National Assistance group and below the old-age pension group. Living on £150 or £120 or year, some are nearly starving.

It is difficult to see what can be done for those people. Obviously, the long-term policy is to reduce the rising cost of living by abolishing inflation. One thing which must never be done, as I think my hon. Friend the Economic Secretary will agree, is to increase Purchase Tax on the necessities which these people have to buy. It is no use the Minister saying, as he once did, that if we do that it prevents the spending of money on other things. These people have no money to spend on other things. Already some of them are giving up one meal a day, and something should be done to help them.

Is it not justice that an increased scale of National Assistance should be given to somebody who can make out a case on those lines? There are not many of those people. I do not suggest that the entire range of National Assistance should be increased, because that was done only recently. Some of these people, however, are living in houses too large for them, which were bought in the old days when it was the fashion to save by buying house property, and they must continue to live in their houses. I am afraid that the Minister of Housing and Local Government missed a great opportunity recently when he did not do something to assist local authorities to build old people's homes for this section of the community.

My final word is about the Service in which I have been for thirty years. Will my hon. Friend please see if he cannot remove the tax on education allowances given to families serving in this country, as is done in the case of those serving abroad?

Photo of Mr Tom O'Brien Mr Tom O'Brien , Nottingham West

Will the hon. and gallant Gentleman not agree that he exaggerated a little in his remarks about trade union restrictive practices, and also about the extravagances of some of the employers and representatives of trade associations in this country? Would he not agree with me that much of the two hours or two and a half hours' lunch time are devoted to talks not only with trade union leaders but with other people, and that the time spent on the Continent and in the United States in that way is more extravagant in hours than in this country?

Photo of Brigadier Sir Otho Prior-Palmer Brigadier Sir Otho Prior-Palmer , Worthing

I am grateful to the hon. Gentleman. I agree that that is what they say to their wives and, in a large number of cases, that is probably true, but there are exceptions, and I was referring to them.

9.20 p.m.

Photo of Mr James Jones Mr James Jones , Wrexham

I have followed the speech of the hon. and gallant Member for Worthing (Brigadier Prior-Palmer) from the beginning. There are some points in his speech with which I agree. I am very pleased indeed that the party opposite was not in power in 1945 because, according to the argument of the hon. and gallant Member, we would not have had an Education Act in operation in 1945 because the country could not afford it. I have been in the teaching profession for over 35 years, and I am only too well aware of the frustration there has been all along the years because the Governments have been afraid to spend money on education on the ground of economy.

There were sufficient grounds for economy in 1945 and the axe of economy would have been wielded then had there not been a Labour Government. I sympathise very much with the hon. and gallant Member on the question of the means test on students going to universities. When my son was at the university he had a State scholarship, and I was submitted to a means test, but I feel that had the party opposite been more sympathetic about the means test in the days of depression we would have been more sympathetic towards the means test on State scholarships. It is a case of the chickens coming home to roost.

We came here this afternoon expecting to hear Budget proposals which were new, bold, original and courageous, and we have been disappointed. I quite agree with the proposals for saving, and I have been surprised that the Government have not introduced such a measure during the last five years. The only new proposal that was put forward was the Pre- mium Bond proposal. The Chancellor tried to prove that it was not a lottery and not a gamble. The fact that he tried to prove that it was neither a lottery nor a gamble was to me a sufficient proof that in his heart he was convinced that it was both. He said that the subscriber did not lose anything. What he does lose, of course, is the interest on his money; and so we have come to the day when we see gambling receiving constitutional sanction by the Government.

I want to go on to something else which I think is very serious. Every Chancellor of the Exchequer, during the past few years, has been very preoccupied with the question of sterling. This problem has existed for many years. Unless something is done methodically and a long-term policy adopted, I am afraid that we shall continue in this position. In the financial columns of the daily Press we are invariably told how sterling has strengthened. When it has strengthened there is great joy in the City and when it has weakened we are informed that we are heading for a crisis and that the nation is overspending.

When the £ strengthens the Chancellor is congratulated on the success of his policy. When the £ weakens people are rebuked for overspending. All this is doing harm. It is reminiscent of the weather reports which we get every day. I am afraid that it is true that the Chancellor and previous Chancellors as a whole have been over-anxious about the changes of the economic weather. Weather changes, climate, does not change. Whereas the Chancellor has been over-anxious about the economic changes of weather, he has not succeeded in acclimatising the country to a sound economic order.

I will explain what I mean. Last summer, the then Chancellor was believed to have said some words in private conference in Paris. There was an immediate run on sterling. In February last year the then Chancellor raised the Bank Rate, and a few days later he was able to report that the £ had strengthened. In December, it was rumoured that the Chancellor was leaving the Treasury and the £ weakened.

The News Chronicle, on 11th April this year said: The lodestar of the market yesterday was a new upward thrust of the £ sterling, which reached a level which it had only reached once this year. … The reason? If there was any specific event of the past 24 hours which was responsible for the movement, it was, of course, President Eisenhower's new statement on America's attitude towards the Middle East. The Manchester Guardian, the same day, stated: Americans are again buying sterling in London. This is temporarily very encouraging, but, clearly, there is something seriously wrong when we are so much at the mercy of a chance remark or a rumour or even an expression of policy by the head of a foreign State.

Hot money is not reliable, and it behoves us not to congratulate ourselves unduly when hot money flows into our coffers. Hot money is the so-called friend who deserts us in our hour of need. Our economy should be a ship majestically ploughing the oceans and not a barque which can be toppled over by a shark always on the look out for its prey.

Consequently, I am of the opinion that we must obtain an economic order and an economic stability which will render us independent of fluctuations in hot money. If we cannot obtain that I am afraid that the land to which we belong and of which we are so proud, will have lost its greatness and its glory. It is because I feel that the Budget does not meet this situation and does not offer a long-term solution to the present situation that I should like to crave the indulgence of the Committee for a further short period.

I think it will be fair to say that the Budget is complementary to the White Paper on the economic implications of full employment, recently published by the Government. The mind and outlook behind the White Paper are the mind and outlook behind the Budget, and, as we had reason to suspect, the one is as prosaic and as unimaginative as the other.

The White Paper, like the Budget, focused our attention on the continued rise in prices, a phenomenon well known to every household throughout the length and breadth of the land. The White Paper attempted to analyse the cause of rising prices. The Budget is an attempt to solve the problem of rising prices.

My hon. Friends and I are not convinced that the Government have a correct diagnosis of the situation. We are not convinced that the methods which they propose will bring about a radical solution of our problems. We are not convinced for the simple reason that there is far too much emphasis on the wages side of the problem. I know that wages are a factor in the situation, but it is wrong to suggest that the country's present economic and inflationary position is due to wages reaching their present high level. Wage increases are the result of the situation and, unless the Government settle the situation, there is no solution to the problem of high wages, if we want a solution to that problem.

It is the over-concentration on wages and the opinion that our woes and economic difficulties are traceable to over-spending on the part of the people that I wish to call in question. I do so because I believe that the policies followed by the Government since 1951 have been wrong and have not been conducive to national economic recovery. I admit that there has been a tendency for wages to rise, but that is not peculiar to this country and there is nothing fundamentally wrong in wages rising. In fact, that can be the measure of an improvement in the standard of living. We are continually being told that increases in wages in this country are outstripping increases in production. We are told that that is the main difficulty.

The popular version of the White Paper states quite definitely: Earnings have risen much more than output-per-man. So labour costs per article have risen by about 30 per cent. We are told that in Germany earnings and output per man have risen together, so that labour costs have risen hardly at all. That is not the complete picture. There is a very important part of the picture which is still obscured. Increases in wages do not precede rising costs. People demand higher wages, because costs are already rising and it is usually the case that by the time the wage claims have been granted the cost of living has already risen, and we are exactly where we were before.

Hon. Members opposite call this the wage-price spiral. I do not object to the Government calling it the wage-price spiral, provided that hon. Members opposite will allow us to call it the price-wage spiral. Both terms are equally correct. It is the case of the dog chasing its tail and while we are arguing whether it is the head chasing the tail, or the tail leading the head, that takes us nowhere. We have to decide why earnings are outstripping output. That is the fundamental question. Why have they not outstripped output in Germany?

If we can answer that question, we have the answer to why we lost our markets last year when world conditions were so favourable. The answer is in inflation. The Government say that if the problem of inflation is solved, we can get out of our difficulties. My opinion is that the Government have gone astray since 1951, because they have over-emphasised the monetary side of the problem, rather than the production side. That is the dilemma in which we now find ourselves. It is the dilemma of the credit squeeze and the Bank Rate policy which the Government have consistently followed since 1951.

If they persist in this policy, they will succeed in reducing wages and in reducing the pressure of wages, and in that sense, of course, they will achieve their purpose. The cost will be a lowering of the nation's productive investment. When productive capital investment is reduced, productive capacity is also reduced. That is the crux of the problem. If capital production is restricted it follows that the situation will be aggravated, because it results in a decline in the productive capacity of our country. It is equally obvious that if Britain's productive capacity lags behind that of other countries, the cost to this country will be higher than in other countries and we shall price ourselves out of the markets. Moreover, if our productive capacity lags behind that of our customers obviously the cost will be higher to this country than to our customers and we shall have an adverse balance of trade.

The whole situation revolves round the problem of increasing our productive capacity. We should concentrate on bringing it to the maximum and in a period of full employment that can be done only by capital investment. That is why the credit squeeze policy and that of indiscriminate investment restriction has been disastrous to this country. The policy which the Government have pursued is diametrically opposed to the policy which they should have pursued.

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

I have listened with interest to the hon. Gentleman. I agree with him that the capacity of the country to compete in the world markets depends in large measure on the level of investment. But in that case surely he should not oppose us if we try to curb excess demands, to some extent at any rate, by curbing consumption, that is to say, by such things as increasing Purchase Tax and cutting the bread subsidy.

Photo of Mr James Jones Mr James Jones , Wrexham

I will come to that point in a moment.

The error of the Government is comparable in magnitude only with the policy pursued by the Government between the two wars, when they followed a policy of economy at a time when they should have followed a policy of prolific spending. The Government know this quite well, because the White Paper states: Management must strive to ensure maximum expansion of output by progressive investment in the most effective capital assets by the introduction of the most modern industrial techniques. … No truer words ever came from a Government.

But example is better than precept and those words ill become a Government which has pursued a policy of investment restriction and credit squeeze. One cannot put a man in a strait-jacket and expect him to put on flesh; and that is exactly what has been happening.

In the Economic Survey of Europe for 1955 we read that … the ratio of new investment to national income in Britain is the lowest in Europe. In page 35 of the same publication we read: In most European countries the ratio of gross fixed investment to gross national product has been higher since the war than it was before … the only country for which it has fallen is the United Kingdom … In page 46, we find the following revealing figures with reference to investments in the manufacturing and distribution industry at 1948 prices: 1950, £267 million; 1951, £249 million; 1952, £193 million; 1953, £191 million; 1954, a slight increase, £204 million. In other words, there has been a steady decline in the productive capacity of this country. We have reached a record in the restriction of capital investment. That is why we have priced ourselves out of the market, and increased the gap in our balance of trade. Our productive capacity has lagged behind that of our competitors and customers. Consequently, we have lost our fair share in world markets in a period when everything around us was favourable, as the Chancellor said this afternoon.

The Chancellor also said that the strain was heavier upon the building and engineering industries, and that the most important factors in producing inflation was the upsurge of industrial investment. That, of course, is true, but that was the direct result of the restriction upon capital investment which occurred after 1951, so that when the orders came in in 1955 our economy was not able to meet them. We failed to deliver the orders. That was the biggest single factor in producing the inflationary situation which now exists.

I want to make a brief reference to the comparison between Britain and Western Germany. Here again, the explanation is given in the Economic Survey of Europe, which says: In the early part of the period per capita volume of gross fixed investment was greater in Britain than in Western Germany, but the rapid investment in Western Germany meant that already by 1953 the absolute volume was higher than in the United Kingdom, and by 1955 considerably higher. At the same time the Western German volume of private consumption per capita which in 1950 was less than two-thirds that of the United Kingdom improved so much that by 1954 it was only one quarter below that of the United Kingdom and in 1955 the gap narrowed further. Germany has recovered because she has concentrated upon capital investment. We have gone down because we have cut it. So, today, we find ourselves in a position which is practically beyond solution. That is why I was surprised to find, this afternoon, that the Chancellor put forward no new idea other than the one to which I have already referred, namely, the Premium Bond proposal.

Since 1951 the Government have sown the wind and today they are reaping the whirlwind. The surprising thing about the situation is that they do not appreciate or realise the folly of their ways.

9.43 p.m.

Photo of Hon. Grenville Howard Hon. Grenville Howard , St Ives

I hope that the hon. Member for Wrexham (Mr. Idwal Jones) will forgive me if I do not follow his arguments, as there is not very much time left before ten o'clock. I want to stress two aspects of the financial situation as it strikes me at the moment. Whatever their political views may be, most hon. Members would probably agree that one of the good things about the debate is that it has been fair and constructive, with Members taking a broad view of the problem. Most would also agree that the country is really looking for a lead. It is not much good exhorting people to save, and do this, that and the other thing, if the Government do not appear to be doing the same thing.

That is why I welcomed the words of the Chancellor when he said that the Government should have to justify the expenditure and not just a reduction in it. That may be a change in policy, but it is a very good one. Too often, lately, Ministers have said, as the Postmaster-General did a day or two ago, "Now then, up go the charges." I want to see a different attitude on the part of Ministers and Government Departments in these matters, and I hope that Ministers will send for their Principal Secretaries and others and say, "I want this increase to be justified, and I am going to take a lot of convincing as to just why this extra cost has to be passed on straight away to the public without any possibility of Departmental economies".

What sort of savings can we look for? Consider the cost of the Treasury. I understand that in 1938 the Treasury cost us £389,629. Today it costs us £3,402,509 which represents an increase in costs to this country of 800 per cent. If anyone tells me that there is no room for reduction there, I am afraid that I cannot agree.

No doubt, many hon. Members will have seen the Report, issued today, of the Committee appointed to review the provincial and local organisation and procedures of the Ministry of Agriculture, Fisheries and Food. Paragraph 552 of the Report says: Our proposals also point the way to considerable economies. We are satisfied that their implementation over a period could result in savings approaching 1,000 staff costing up to £1 million per annum. That is in one section of the Ministry of Agriculture and Food. Am I right in saying that there are still 5,606 civil servants still employed in the Ministry of Food? What are they doing?

Photo of Mr William Williams Mr William Williams , Manchester Openshaw

Would the hon. Gentleman go further and say that if we were to reduce National Service we should save several million pounds?

Photo of Hon. Grenville Howard Hon. Grenville Howard , St Ives

We have to consider the enormous commitments in which we are involved all over the world. After all, it is the peace of the world that is involved.

I should also like to know how much of the £28,145,000 that is devoted to the B.B.C. is going to train young men in this country to go out to Egypt and preach hate propaganda against us. I should like to see that side of the B.B.C. expenditure reduced. I hope that the Committee will examine the sort of conditions, which I know to be true because I was told by somebody who broadcasts, in which half the time spent in broadcasting to Greece is taken up with music. That does not seem to me to be the right way to combat Greek propaganda against this country.

Then there is the duplication of functions. Take, for instance, the duplication of functions as it applies to the Ministry of Fuel and Power and the National Coal Board. Is it necessary to have these two bodies working alongside with so much duplication? Can we not have a certain amount of reorganisation and streamlining so as to cut down the expenditure?

Let us consider the expenditure of the Coal Board. The administrative and non-industrial staff employed by the Coal Board numbered about 30,000 at the end of 1946; 34,500 at the end of 1947; 38,270 at the end of 1948; 39,000 at the end of 1950; 40,000 at the end of 1955. That represents an increase in staff of over 38 per cent. since 1946. On the other hand, the number of wage earners on the colliery books has increased from 696,746 to 710,000, an increase of little over 1 per cent. That seems to be quite out of balance. There must be something wrong there. I want to know from the Government how far they can probe into that sort of thing under the new arrangements which the Chancellor announced in connection with financing the nationalised industries.

Whatever any of us thinks, I am sure that none of us who really believes in the health and welfare of our people would ever wish to see any cuts in the National Health Service. There is no reason, however, why we should not examine whether or not the money is well spent. I know of a case which was brought to my notice last week which was not fault of the man concerned. It is entirely due to the organisation of the service.

A patient in hospital found that a bell would not work, and a car came from some miles away, bringing the man who was to do the job to put it right. All that was needed was a piece of wire, but the man could not go five minutes' walk down the road to an electrical shop where he could have bought the wire. Not at all; that is not done. He had to go some miles back in the car to the place where all the equipment is stored in order to get a piece of wire. Surely we can do something to cut out that sort of thing, which is only one small example.

I wonder how many people are employed under the regional hospital boards. I am told by people who are working and giving wonderful service in these voluntary organisations, the management committees, etc., that they seriously wonder whether we could not find some economies in the regional hospital boards, and thereby allow more money to be spent where it is needed—at the bedside in the hospital. If a hospital does not spend the amount of its full budget in one year, it finds that the amount is cut down in the next. There is no question in all this of cutting down the amount of the money spent on the service; it is simply a question of seeing where that money goes and how it is spent.

Then, there is the effect on the cost of living of the increasing cost of coal and transport, which, after all, forms a very vital part of the cost of living, because everything else depends on it. I hope that some further inquiry will be made and some action taken that will help remedy the present situation.

My last problem is very difficult to speak about, but I have talked to several hon. Members on both sides of the House, and they agree with me. It seems to me that, when we are facing an extremely difficult situation, when both sides of the House, in their different ways, wish to see full employment maintained, when our economy is balanced on a very narrow margin, it really does not do much good for people in industry to be blaming each other all the time, workers blaming management and management blaming workers.

I think there is a great need for industrial leadership. There must be something extremely wrong when we get these cases of men being "sent to Coventry." Those of us who have been in the Services and have served with these men know what fine men they are. We could not get any finer anywhere. Most of them, in many cases amateurs, were able to face up to anything that came before them, and I suggest that the reason why they did their job so magnificently throughout the war was because the Services lay great stress on leadership.

I am reminded of a story I was told the other day. The managing director of a factory was taking a friend of mine, a retired naval officer, round his works. They spent three hours going round, and not once did the managing director introduce this friend of mine to any of the men in the factory. That shows that there is something badly wrong in that factory, and it was indicated again by the fact that when the managing director at last got back to his office he seemed to be relieved to get there. I wonder what sort of job that factory turns out, because it seems to me that the question of human relations in industry is so vitally important.

I say this in all sincerity: many of us have been worried by the appalling lack of moral standards in so many people in this country towards their jobs—be it the men we heard about just now who are "fiddling" their expense accounts and spending hours over lunch on the excuse that they are talking business when they are doing nothing of the sort, or the men who are "fiddling" the firm's time. In a country which calls itself Christian, it would be a fine thing if many of us who criticise other people started to look at our own side of the picture to see whether we are doing our best to serve our country.

An hon. Member said to me this afternoon, "This moment is rather like the 'phoney' war period in 1940, because everybody is waiting for something to happen and expecting something to happen; they are longing to be given a lead." At no time would that lead be more appropriate than at this moment. Tomorrow, two men are to visit these shores whose ideology is very different from ours. To some people they seem to have achieved a materialistic success which they say is lacking in this part of the world. Surely it is for us to prove that our way of life, our ideas and Christian beliefs, can produce a better answer than that of materialistic atheism.

The country realises the danger. It has not been lulled into a sense of false security. The people know, just as they knew in 1940, that the situation is serious. They may not say much about it, but I am sure that they are waiting for that lead, and I am equally sure that, as hon. Members on both sides of the Committee have said, that we can never achieve that kind of success and co-operation which we had during the war unless we do it together.

I hope that, rather than criticising each other and the shortcomings of others in industry and in our national life, we shall try, with the help of God, to see how we can get together and earn our living and get our country back into a sound condition again.

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

Resolutions to be reported Tomorrow.

Committee also report Progress; to sit again Tomorrow.