On Tuesday last the Chancellor of the Exchequer presented the Committee with an expansionist Budget. No one on these benches will quarrel with that. Indeed, we have been pressing for an expansionist policy ever since it was clear that the policy of the Government was leading to stagnation in industry and to a substantial rise in unemployment.
My right hon. Friend the Leader of the Opposition was pressing hard for a Budget in the autumn to give the stimulus to industry which it at that time required. There is no quarrel here with the fact that this is an expansionist Budget, but we are entitled to look at the Budget and consider whether, in point of fact, it will provide what the Chancellor himself set out to achieve. He summarised it under three broad headings. They were: first, an improvement in our competitive position by lowering the unit costs of production; secondly, an expansion of exports; and, thirdly, keeping the cost of living steady. Therefore, if we examine this Budget to see whether or not, in our view, these three aims can be secured by it, we shall be, on this last day of the Budget debate, serving a useful purpose.
I do not believe that any of those aims can be fully achieved, despite any economic shots in the arm, unless there is peace in industry and men and managements are co-operating for increased productivity and an overall increase in production. Equally, there must be confidence that the the national cake is being fairly and equitably shared. If the impression is allowed to gain ground that the larger slices of the national cake are going to those who are already very well provided for, and that the onward thrust of the economy is a free-for-all and the devil take the hindmost, then it must not be wondered at if, on the wage front, the reaction of the workers in industry is today precisely the same.
This Budget, therefore, should have a social aspect and a social as well as an economic aim. Indeed, it is Government policy and action in these modern days, and in an industrial country like ours, that decides the climate and the pattern of industrial relations. If unemployment is high, the tempo of production will inevitably slacken. A workman will not work himself out of a job if there is no prospect of another when that is over. If employment is insecure, the resistance to new machines, new methods, time and motion studies and all the other ways of increasing productivity are resisted very considerably, and the resistance becomes quite real to the point of dispute.
Increasing the investment allowance may provide machines, but only the men in industry can make the best use of those machines when these are ordered. A Budget that has for its aim an expansionist policy can only be 100 per cent. successful if it stimulates industrial production in the right places, points the way to fuller employment, ensures job security and, finally, provides social justice in the reliefs and concessions that it offers. To me, and I think to my hon. Friends, this Budget appears to have no social purpose whatever. In my view, the £360 million of concessions and reliefs could have been used to greater effect towards the three aims that the Chancellor laid down.
Let me right away refer to what I regard as the most glaring omission from the Budget and, indeed, from references by any Minister on the Treasury Bench. I refer, of course, to old-age pensioners. It is nothing short of a disgrace that the old-age pensioners should not have received any benefits from this Budget despite the fact that nearly two-thirds of those who are in receipt of National Assistance are old-age pensioners. More than I million old-age pensioners are drawing National Assistance, but there was no word for them from the Chancellor, who had nearly £400 million to give away.
The poorest of the old-age pensioners are, of course, the fathers and mothers of those workers who are in the lowest income groups, and who themselves get little or no benefit from the Income Tax concessions. I do not believe that there is one beer drinker who would not have preferred that his beer concession went to help the old folk. We feel—I say this to make our position perfectly clear on this side of the Committee—that a rise to £3 per week immediately is the minimum that should be done for the old-age pensioners. Thereafter, steps should be taken to ensure that the £3 remains as three pounds' worth, despite any rise in the cost of living that may follow.
The leading article in The Times, to which one of my hon. Friend's referred last week, about old-age pensioners was as cruel and as heartless as anything I have seen in the paper that is taken by the "top" people. It was a justification of the Chancellor's action in doing nothing for the old-age pensioners. Briefly put, it said, "The old-age pension has been raised on a number of occasions and today it is worth far more than the increase in the cost of living, and so, of course, nothing need be done." The man who wrote that leading article does not live on £2 10s. per week.
The old-age pensioner does live on £2 10s. per week, unless he gets supplementary assistance from the National Assistance Board. Many people have more pride than to seek public assistance. The hon. Member for Lewisham, West (Mr. H. A. Price) should not think that every old-age pensioner who requires more money goes to the National Assistance Board. Men and women born in that generation have a very different view of National Assistance from the modern generation. In their minds it is associated with the old Poor Law, of which they have very vivid memories. That was a very poor argument by The Times leader writer in justification of the Chancellor of the Exchequer.
It must have been forgotten, when making this comparison, that food in the Budget of the old-age pensioners takes a very much higher proportion than in most people's spending. Equally, it should be remembered that since the last increase in pension there has been some rise in the standard of living. The old-age pensioner is entitled to some share in it. I repeat that this was a cruel and heartless thing to say.
If the Chancellor or the Financial Secretary is to say that it is not necessary for this matter of old-age pensions to be dealt with in the Budget, he ought to take advantage of this debate to state clearly what the Government intend to do about the old-age pensioners. The Chancellor had no need to do anything special in the way of making an announcement about an increase in pensions—with which we agree—for policemen, firemen, and others. Nevertheless, he felt that his Budget speech was the right place in which to mention that group of pensioners. We are expecting that today he, or his hon. and learned Friend, will say what the intentions of the Government are about old-age pensions.
I turn for a moment to the taxes themselves. I have been reading and rereading the reports in HANSARD of the debates on the Budget, trying to understand the relationship between 2d. off a pint of beer and the stimulation of industry, particularly the stimulation of exports. Quite frankly, I cannot see it. The reason that the Chancellor gave must be the correct one, for I do not suppose for a moment that it could be that he was trying to buy votes. He said that it would be
a useful contribution in keeping down the cost of living."—[OFFICIAL REPORT, 7th April, 1959; Vol. 603, c. 57.]
It would help to reduce the Retail Price Index.
As a matter of curiosity, I looked at the way in which the Index was compiled. I saw that milk was weighted 19 points, bread 29 points and beer 51 points. What I think is wrong here is that the Chancellor of the Exchequer is confusing the cost-of-living index with the actual cost of living. Presumably, if milk or bread had been weighted as high as beer, we should have had a concession for milk or bread, which would have been worth while. If the Chancellor is to "fiddle" the cost-of-living index in this way and expect that a reduction in the cost-of-living index will have any effect on wage negotiations, he has another think coming.
Perhaps this reduction in beer duty was intended to help the old-age pensioners. I had a copy of the Conservative Weekly News Letter—
I propose to read what Mr. George Christ, the editor—[HON. MEMBERS: "Order."] Well, it is spelled Christ. I thought it a very unchristian remark to make about the old-age pensioners when Mr. Christ wrote:
The 2d. a pint off beer will be a real boon to a lot of people, among whom there are many old-age pensioners. They have waited ten years for this, the biggest single reduction in the beer duty since the tax started 300 years ago.
I have not noticed enthusiastic gatherings of old-age pensioners paying a paean of praise to the Chancellor for 2d. a pint off beer. Of course, this is nonsense; it is quite untrue. No one would deny that every beer drinker appreciates a reduction in the price of his favourite beverage. No one denies that a reduction in general taxation, Purchase Tax, or anything of that kind, is welcomed by those people who like that sort of thing, but I am certain that, had it been possible to have taken a poll of beer drinkers before the Budget, it would have been found that they would gladly have forgone their 2d. a pint off beer to give half-a-crown a week extra to old-age pensioners.
There were a number of other things the Chancellor might have done if he had not been so concerned about reducing the cost-of-living index, presumably with a view about what arbitrators might do in relation to wage arbitration. Last year, he increased the National Health Service contributions by £32 million. Every worker pays a National Health Service contribution. Why did the Chancellor not remit that instead of taking 2d. off the beer duty? That would have made a substantial improvement in the situation of every worker, whether he was a beer drinker or a teetotaller.
Why did the Chancellor not do something for the school children? A year before, the right hon. Member for Monmouth (Mr. P. Thorneycroft), when he was Chancellor, increased the price of school meals by £3½ and cut the welfare milk subsidy by £14 million. It would have taken only half the remission on beer to make that contribution to the children's milk and school meals. The year before, the Prime Minister, when he was Chancellor of the Exchequer, cut the bread subsidy by £18 million and the milk subsidy by £20 million. That too, could have been remitted instead of the remission in beer duty. If these two subsidies had been retained there would have been a real reduction in the cost-of-living which would have helped every old-age pensioner. Drinkers everywhere who were glad of their 2d. a pint off beer would, nevertheless, rather have seen some of these things done and to have paid the old price for their liquor.
Although, with the addition of the Purchase Tax reductions, this remission will mean a reduction of about four-fifths in the cost-of-living index, it will not have the slightest effect on wage negotiations, because it is only juggling with the cost-of-living index. It will not add to employment. It will not add to industrial production. Desirable in itself though it might have been, there are many more vital things waiting in the queue to which £40 million could have been applied and that beer drinkers everywhere would have applauded.
There is the question of Purchase Tax. In a Budget designed to stimulate trade and expand production one would have thought that the £80 million remission, in a full year, would have been very selectively used but, no, it is a straight sixth off all Purchase Tax rates over 5 per cent., so that the motor car industry, which is doing perfectly well, gets an added boost, while textiles, in which there is a serious slump, get no boost at all. The increased boost to the motor car industry will not help the export trade very much. It is much more likely to turn manufactured cars on to the home market than to give some encouragement to manufacturers to look for markets abroad.
We had some very interesting experiences in relation to the export of motor cars immediately after the war. If the Government had not taken the opportunity then of preventing a large proportion of cars coming on to the home market, our export trade in motor cars in those years would have been negligible. What I suggest the Chancellor has done here, instead of selectively using his Purchase Tax remissions to boost those industries which really need help and in which, as the Economic Survey shows, there has been a very large fall in production, is unselectively to help industries which do not require a boost. I regard that as a great mistake.
It is not as though the Chancellor had anything in principle against selective cuts in Purchase Tax because, for the reasons that he gave, he decided to take it off commercial vehicle chassis and television tubes. He did that for very good reasons, but, equally, there were very good reasons for selecting other items for a cut in Purchase Tax, some more than others. Unless the Chancellor is moving towards a general 5 per cent. sales tax, I do not understand why he retains the 5 per cent. Purchase Tax on things used in the household, particularly textiles.
I can only conclude that what the Government have in mind, long-term, is to move towards a 5 per cent. sales tax.
The Economic Secretary to the Treasury, speaking on Thursday, said:
The Purchase Tax fulfils this function"—
that is, raises the sum of £470 million this year—
and must continue to occupy an important place in our fiscal armoury."—[OFFICIAL REPORT, 9th April, 1959; Vol. 603, c. 496.]
I accept that. Why does the right hon. Gentleman continue to refer to any flat rate of tax as a sales tax? There could be a flat-rate Purchase Tax.
Because I believe that it is in the mind of the Government that ultimately, when Purchase Tax gradually moves away, it will be replaced by an overall sales tax of 5 per cent. That is, in fact, what a good many people in industry and trade have been asking for. It enables indirect taxation to be levied on everybody and reduces the direct taxation on a large number of those with higher incomes. It is part and parcel of Tory policy. All I am doing at this stage is exposing it in good time, so that the Government may understand that we are well aware of what is taking place in their mind. This is the way in which the Government, throughout their whole period of office, have made increases in the National Health Service charges and, by the reduction of subsidies, have put a greater burden on the lower income groups while relieving considerably the burden on the higher income groups. That is the reason why I mentioned a sales tax, which has not been mentioned to date in this debate.
I want now to have a look at the Income Tax remissions. I am sure that it was right to reduce Income Tax. I do not quarrel with that myself at all, but I am asking whether the relief of £166 million to the personal Income Tax payer—I am leaving out the £63 million for industry—was to the best advantage. Was it a fair and equitable allocation? Would it have helped to ease the burden by leaving more money in the pockets of the lower income groups?
Let us have a look at the figures. There are 18,800,000 taxpayers, and of these 12,200,000 have incomes of under £750 a year, or a little under £15 a week. This group of taxpayers includes all those workers upon whom the Chancellor of the Exchequer and the Ministry of Labour will rely for increased efficiency and increased productivity in industry. These 12,200,000 receive between them £50 million out of £166 million, and 6,600,000 taxpayers whose incomes are over £750 a year collect between them £116 million. In other words, two-thirds of the taxpayers on the lowest incomes get one-third of the total reliefs. The Tory Party is certainly living up to its claim that it is opposed to drab equality. It has made sure of that.
I have said that I do not disagree with reductions in Income Tax. It is inevitable, of course, that when Income Tax is reduced those who pay the most will get the lion's share, but the Chancellor, in designing a Budget essentially to increase production and produce a climate in which wage restraint is possible, must have known that the tax remissions to the man earning less than £15 a week would mean very little or nothing. He has done little or nothing for the bulk of the wage-earners by way of tax remissions, but I believe that he could have done.
What the right hon. Gentleman could have done was to have given a much higher earned income allowance and a higher child allowance, and this would have taken a good many more workers out of he scope of Income Tax and would have encouraged considerably the overtime working and extra effort bonuses which will be required to be paid if industry gets back to its old tempo. There is not a single industrialist who could not have told the Chancellor that, owing to the incidence of P.A.Y.E. and the very manner in which it is collected, overtime payments and extra effort bonuses appear to workers to have a penalising taxation effect upon them.
Therefore, for the sake of the comparatively few pounds that are derived from the lower income groups it would have been advantageous for the Chancellor, in pursuit of his aim, to increase production, to have increased the earned income allowance and to have moved many of these workers out of the range of Income Tax altogether.
Secondly, an increase in the child allowance would have been of tremendous advantage in those places where I believe it is needed most—in the home where there are growing children, where the requirement is far more urgent than the bachelor with £1,200 a year who gets £2 10s. more a week in his packet. Both these things could have been done. It would have meant rather less to give away to the rest of the Income Tax ranges—people earning over £750—but it would have been directed towards the objective which the Chancellor himself said he wishes to pursue. After all, this Budget, as I understand from what the Chancellor said, was not intended to be kind to the natives. It had this objective in mind. If we take what the Chancellor himself has said, every single thing he did was to expand the economy and increase production, to expand exports and keep the cost of living stable. Therefore, we are entitled to judge what he did in the Budget not on the basis of a more generous gesture to overburden taxpayers, but as a deliberate piece of administrative machinery designed to reach the end which he said he had in view. I believe that the other measures which I have indicated would have given rather less away to those better off and would have given rather more away to those in the lower income groups, and would have helped the Chancellor much better than the distribution which he himself has announced.
One of the main problems which the Government have to face is the best use of the nation's manpower. When the Minister of Labour announced the March figures they were figures produced in advance of the usual time. We were grateful to him for letting us have them at the time he did, and he did so with rather a flourish of triumph. Indeed, it was a great day for the right hon. Gentleman. He was cheered to the echo by his supporters for the drop in the unemployment figures. The Government, having first put up the unemployed figures to 621,000 in January and then brought them down to 550,000 in March, find that they are still 100,000 more than in March of last year, and twice as many as under the Labour Government in March, 1951.
The right hon. Gentleman announced the March figures something like an acrobat who has done a very difficult trick, and he received the applause which he expected and, indeed, deserved. 1 wonder whether it really was an acrobatic trick or a conjuring trick, because I see from a letter in The Times today, from Mr. Turner, that he is suggesting that it would have been as well if the right hon. Gentleman, at the same time as he announced the fall in unemployment figures, could have announced the fall in the numbers in civil employment, which, I think, was about 25,000, from the later information which we got.
I have been trying to reach these figures, with my own calculations, and not with very great success. Checking them against others, I suspect that there are about 223,000 people who used to be on the right hon. Gentleman's books and who are not on his books now because their jobs have disappeared. We have a big reservoir of skilled manpower still to be used if we are to do this big task of producing efficiently and in such quantities that we can have sufficient surplus for many of the desirable things which the Government and ourselves have in mind, such as the development of underdeveloped countries.
I believe that unemployment will be a problem for the right hon. Gentleman even though the figures will continue to fall. I do not know whether he has had a quick count and can tell us what the latest figures are. Perhaps in another few days that might be possible. I expect another dramatic fall, but I do not expect the fall eventually to be much below 400,000.
The Committee will see the reason why. When new methods or new machinery are introduced into industry, the tendency of the industrialist is to keep the workers that he has. In other words, he does not introduce the machine and immediately fire 20 workers; he keeps the workers. That is what we call a little hit of hidden unemployment. When the recession starts, generally the employer tends to hang on to as many workers as he can, even though they may not be fully employed. When the recession continues and redundancies have to take place on a rather massive scale, as has happened, the picture is different.
It is very interesting to see that although production rises after the recession, the recruitment back into industry is very much slower than would be expected from the rise in production. I was interested to see the American figures, because I think that we are following the American pattern. In April, 1956, before the recession, the number of unemployed in the United States was 2½ million and the index of production was 143, taking 100 as the 1947–48 level. In June, 1958, they were at the peak of their unemployment, with 5½ million people unemployed. The index of industrial production had fallen from 143 to 132.
The United States made a very rapid recovery and in December, 1958, unemployment had fallen from 5½ million to 4 million and the index of production was 142. In other words, their index of production was only 1 point below that of April, 1956, when they had 2½ million people unemployed. This shows that in the great shaking-up process after massive redundancies there are not jobs to which a large number of workers can go back.
I think that that will happen here and that there may well be a hard core of about 400,000 unemployed, which will be a headache not only to the right hon Gentleman and his hon. Friends but also to us, because the only way in which we shall increase production and, at the same time, break down this hard core of unemployment and bring back those people who have disappeared off the right hon. Gentleman's books is by a much greater increase in production than I think the Chancellor was banking upon when he opened his Budget on Tuesday.
We must have a substantial increase in productivity if we are to get the orders from countries abroad. That means that we must have first-class relations in industry. Unless we have good relations in industry we shall certainly not get the increased productivity which will bring those lower prices.
The great mistake which the Chancellor made was when he suggested in his Budget speech that as a result of deflationary policies we now have a good, level start from which we could begin the upward trend. As has been said from these benches before, when we are running the industry below capacity, as the Government have been doing for several years, our labour costs per unit—and the right hon. Gentleman is concerned about the unit of cost—are much higher than the increase in wages. I was interested to read what Andrew Shonfield said in an article in the Observer on 15th February. He puts this so well that I should like to read it to the Committee. He wrote:
The stock defence of the Government is that it could not apply the stimulus until it had dealt with inflation. But this simply will not wash. According to Mr. Heathcoat Amory's own admission, labour costs per unit of output were up by no less than 6 per cent. during the period of extreme deflation in the first nine months of last year. This is a bigger rise than in any year since the Tories came to power, with the exception of 1956. And it was caused by the deliberate policy of forcing industry to run below capacity, with the result that it used its labour wastefully. Even though wages rose less in 1958, labour costs, which ultimately determine prices, rose faster than in previous years.
Thus, the policy of deflation has not paid off at all. All it has done is to handicap us by the years in which we have had stagnation in industry. Now we have a good deal of leeway to make up.
The right hon. Gentleman and his hon. Friends refer to the world recession as though the world were some abstract object nothing to do with this country or with him. The truth is that Britain is as much responsible for the world recession as the United States—perhaps more responsible—because this country buys 28 per cent. of the primary products of the world, and when we begin to cause industry to stagnate we affect the prices of those primary products. We take from the countries which are producing primary products the only commodities which they can sell. If we force down or help to force down the prices of those commodities, where are our export customers to get the money for the capital equipment which they need?
When the right hon. Gentleman and his hon. Friends blame the world recession they must blame themselves, because they aided the world recession. I do not say that it was entirely due to the United Kingdom, but it was very largely due to us because of the tremendous quantity of primary products which we need.
If hon. Members care to look at Sir Roy Harrod's writings on this subject—I do not propose to quote them, but he is certainly not marked down in my book as a friend of the Socialist Party—they will see that he makes the point very clear in an article which he wrote for the Institute of Directors, which, no doubt, the Chancellor has read. This world recession is as much due to us as to anybody else, and before we can begin to stimulate production again we have to play our part in either long-term credits or increased loans to the countries producing primary products to enable them to get going, because they are our customers. The Government must accept some responsibility for the world recession which they blame for having brought this stagnation to industry in this country.
We not only want expansion in terms of the Tory Party's philosophy, but we want continual expansion. We do not want an expansion stimulated by this Budget which means that in a very short time the right hon. Gentleman gets cold feet again and runs back to another deflationary system. That kind of organisation of the economy will give confidence neither to the workers nor to the employers in industry. We want not only expansion, but continual expansion.
We want expansion without inflation, we want expansion with industrial peace and we want expansion with the rewards of such expansion being fairly and equitably shared. If we have our industrial relations right we can do that. If we are to get our industrial relations right the right hon. Gentleman will have to talk to a number of supporters of the Conservative Party, both personal supporters and very good financial supporters. I speak of bodies like the engineering employers.
I agree that the Minister of Labour has certainly condemned the use of the language in the booklet "Looking at Industrial Relations", issued by the Engineering and Allied Employers' National Federation. I am glad that the right hon. Gentleman has condemned it but he is bound to face the fact that the book has been published and that the words that it contains have certainly not improved relations with the more than 40 different unions with which die Federation is in contact.
I want to quote only one classic paragraph from the booklet. On page 40 it says:
Twice in four years the Federation had been prepared to 'fight it out' with the unions. Clearly, the unions' capacity to pay strike benefit was limited. Such a course, involving, as it would have done, the virtual closing down of the industry, might have been a worthwhile calculated risk. It was no occasion for the kind of compromise which would inevitably emerge from a Court of Inquiry.
This Federation comprises about 4,400 employers in the engineering industry, which is the most vital manufacturing industry in the country. Those 4,400 employers are responsible for the employment of about 2 million workers. Is it the view of the right hon. Gentleman and of the Government that the people who wrote those words have the right to have the economic welfare of 2 million workers in their hands?
I hope that the Government will endorse all that the Minister of Labour has said in condemnation of that statement. I hope that the 4,400 firms who supply money to the Federation might themselves consider, because there are some first-class employers among them, whether the principals who run the Federation are the right kind of people to do their job for them. With the right kind of industrial relations and a Government which care about social justice and greater equality, we can achieve the aims of the Chancellor of the Exchequer; Britain can deliver the goods and be right on top.
The Budget was intended by the Chancellor to be expansionist, but not inflationary. It may fall short of the mark, for while the size of the concessions may be right I very much doubt if its distribution does not leave much to be desired.
It is always a privilege to follow the right hon. Member for Blyth (Mr. Robens) in a debate, if only because, as I hope he knows, we on these benches have a high personal regard for him. I hope that the right hon. Member will not take it amiss if I say that that regard stops short of admiration for his political and economic judgments.
I do not think that the right hon. Gentleman's speech today, able and forceful as it was, has caused us to think otherwise, because in the end, when right hon. and hon. Gentlemen opposite lecture us on how to run an economy, we cannot help remembering that they had the opportunity of doing it, and that in the last year the ripe fruit of Socialist government was worse than any. It is like a bald man selling a hair restorer. However forceful and persuasive the argument—the right hon. Gentleman has been forceful and persuasive today—one cannot help comparing precept with performance.
My right hon. Friend the Chancellor of the Exchequer will reply at the end of the debate and will deal with many of the points made by the right hon. Gentleman. I hope to take up others later in my speech, if there is time. I know that the right hon. Gentleman will acquit me of any discourtesy if I deal, first, with certain questions on direct taxation which have arisen in the debate.
However, I will say this on indirect taxation, which I had not intended to deal with. The right hon. Gentleman spent a great deal of time tilting at the windmill of the sales tax. if the right hon. Gentleman will re-read my right hon. Friend's Budget speech of last year, he will see that it is certainly not in the mind of my right hon. Friend to introduce a retail sales tax. Indeed, my right hon. Friend gave what I think the whole House of Commons felt to be convincing reasons against it.
I turn to certain matters that fall more particularly within my sphere. The first is investment allowances. I know that some of my hon. Friends have shown some hesitancy about this provision, on two grounds: first, that an increase in the initial allowance or the depreciation allowance would have been preferable; and, secondly, that investment allowances should have been introduced only if they were to be a permanent feature of our fiscal system.
Initial allowances were introduced, as the Committee knows, by Sir John Anderson, in 1945, as part of new taxation arrangements designed to encourage the post-war re-equipment and modernisation of industry. They write off a larger than normal amount in the first year and are deducted from the cost of the asset in determining the annual depreciation allowances to be given over its life. The effect is that the total allowances remain limited to the net cost of the asset.
It is sometimes said—I think with substantial accuracy—that what is happening is that the Revenue, representing the general body of taxpayers, is making an interest-free loan to the individual taxpayer of the tax on the initial allowance which is repaid by instalments over the life of the asset. The advantage to the taxpayer is that it makes the additional finance, namely, the tax on the initial allowance, available to him on acquiring the asset. It is, therefore, inherently likely to influence marginal investment decisions, particularly at a time of shortage of capital.
The investment allowance is like the initial allowance in that it writes off a larger than normal amount in the first year. Indeed, the investment allowance has the same effect as an initial allowance of the same rate in the provision of finance at the moment of acquisition, but it differs from the initial allowance in that there is no diminution in the subsequent annual allowances. The Committee will see that in this case the taxpayer receives relief from tax on an amount greater than his capital outlay on the asset. It therefore amounts to a tax remission, which, in the nature of things, must be at the expense of the general body of taxpayers.
A number of conflicting considerations have to be weighed in determining the desirability of these two sorts of allowances. First, there is the consideration of fiscal equity—that one class of taxpayer should not ordinarily be given a special remission at the expense of another. Secondly, there is room for argument as to the actual effect which these allowances have on the pattern of investment, and there is reason to think that other factors, especially the assessment of likely demand, are more important. Thirdly, on the other hand, both types of allowance are useful to industry in times of shortage of finance.
Fourthly, although there is little statistical evidence, personal inquiries suggest that in some cases the existence of the allowances has had the marginal influence in the investment decision. This is, indeed, inherently likely; and it is further likely that the investment allowance—because it involves an outright remission of tax—will exert a more powerful influence. Fifthly, however, since investment decisions will only be marginally affected and the large bulk of investment would be made in any event, because the enterprisers see a demand which they can satisfy at a profit, the tax remission is to some extent unnecessary and, therefore, wasteful.
What has determined my right hon. Friend is his belief that a large number of concerns had investment plans as to the timing of which they were still uncertain. The concerns were, so to speak, taking the investment plans out of their pigeon holes, discussing them, and then, in some cases, deciding still to postpone them. It is a mistake to think that the timing of investment decisions is invariably a matter of icy commercial calculation. The psychological element—business sentiment, if one may use that term—also enters into it.
It was because my right hon. Friend wished to hasten those pending investment decisions that he has restored the investment allowances—
This is a very fair argument, if I may say so, but assuming that it is all true—as it probably is—would the hon. and learned Gentleman tell the Committee why he, the Chancellor and his hon. Friends, who must have seen some slack developing in many sectors of industry, voted down our Amendment last summer to restore investment allowances then?
I intended to deal with that when I dealt with the question why the decisions taken in this year's Budget proposals were not taken last year, so perhaps the right hon. Gentleman will allow me to postpone my remarks on that subject until then.
My hon. Friend the Member for Preston, South (Mr. Green), in his very interesting speech last Wednesday, said that he would have preferred a stimulus to investment to have been provided by increasing the rate at which capital expenditure may be written off, for taxation purposes, by the annual depreciation allowances. I think that that was in the mind also of my hon. Friend the Member for Eastleigh (Mr. D. Price) and others of my hon. Friends, and also in the mind of the Leader of the Liberal Party.
The argument against that is that it would be very costly. For example, if the existing annual allowances were increased by a half the cost would be £110 million this year, and £130 million next year. Obviously, that could not be contemplated in the general context of this year's Budget proposals. Any increase that involved only a relatively small cost to the Exchequer would be most unlikely to have any significant effect, seeing that the total amount allowed to the taxpayer for the life of the asset would be the same as now. Moreover, this method of stimulating investment would be particularly wasteful, because the revised rate would have to run for assets already in use as well as for new or newly-acquired assets.
My right hon. Friend, therefore, preferred the method of investment allowances. He believes that they may prove a useful short-term regulator. On the other hand, he has not committed himself to them as a long-term measure. In fact, if he did so, they would cease to be a useful instrument for evening out the volume of private investment. It is the fluctuations in this that really form the problem. In the present state of the economy, my right hon. Friend believes that these investment allowances are not only fully justified but, indeed, precisely the measure that is called for—
That is so.
I had one thing more to say about investment allowances before I left them, and that was to refer to what was said, on Thursday, by my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) about the ship-repairing industry. I am able to assure him that the allowances for dry dock construction do, in fact, benefit from my right hon. Friend's proposals. He has restored the 10 per cent. investment allowance for expenditure on the construction of industrial buildings, and a dry dock ranks as an industrial building for this purpose.
Moreover, since 1956, expenditure on the excavation, as well as on the concreting and construction, of a dry dock has had the industrial building allowance. Therefore, under my right hon. Friend's proposals, capital expenditure on the construction of a dry dock will get the 10 per cent. investment allowance and the 5 per cent. initial allowance, while any plant and machinery installed in connection with the dock—including the dock gates—will get the 20 per cent. investment allowance and the 10 per cent. initial allowance.
I now turn to the Income Tax proposals. I think that these have been heartily welcomed by the overwhelming mass of informed and expert opinion, as well as by the. Income Tax payers—and, from my experience in my constituency over the weekend, I can assure the right hon. Gentleman that that includes very many wage earners. The right hon. Gentleman complains that the remissions benefit most of all the higher incomes. The Committee may remember those two spendid comedians, the "Black Crows". Moran used to say to Mose—I think that those were their names—"We have black horses and white horses on our farm, and I notice that the white horses eat more than the black horses." At that, Mose would ask, "Why's that?" And Moran would reply: I don't know rightly—unless it is that there are more white horses."
Of course, if one taxpayer is paying much more tax on much more income than is another, he is bound to have a larger reduction in his total tax, but under my right hon. Friend's proposals the proportion of tax remitted on the smaller incomes is higher than that on the larger ones. In any case, are we never to have a reduction in the standard rate of tax? Is it to remain at 8s. 6d.—or 7s. 9d.—for the rest of our lives? That is the logical conclusion of the right hon. Gentleman's argument.
In connection with that, may 1 also say that those earning over £750 a year also help with exports and production—
This is a question of arithmetic, is it not'? The Treasury is clever enough, if so instructed by Treasury Ministers, to work out a plan for reducing the standard rate, but not creating anything like the tremendous disparity shown in the White Paper. What I did in the Budget that has been referred to was to put up Surtax on the larger incomes, which counteracted, to a large extent, what they got off the standard rate. And I did increase the allowances. And, in the same Budget. I made provision for the financing of much larger old-age pensions.
It was precisely to the increase in Surtax that I was referring. It must not be forgotten that the higher rates of income still pay a penal rate of tax. I cannot believe for a moment that it is for the good of the country, for the good of enterprise, for the good of our export trade, or for any other good of industry at all that there should be a penal rate of tax, at the top, of 18s. 6d. in the £.
I turn now to the figures given by the right hon. Member for Huyton (Mr. H. Wilson) on Wednesday last. The figures he gave were erroneous and ought to be corrected before they get into that splendid example of English romantic fiction, the Labour Party's Talking Points. All the figures that the right hon. Gentleman gave were wrong. They did not, as he stated. refer to a married man with two children under 11. They refer to a married ruin with two children over 16.
The difference is extremely important, because such a man had his allowances greatly improved by Tory Chancellors, and particularly by my right hon. Friend the Member for Monmouth (Mr. P. Thorneycroft), so it is not surprising that the wage earner earning £700 a year paid only 10s, a year tax in 1958–59 as against £57 in 1951–52.
The hon. and learned Gentleman is right. In the interests of speed and compression, I gave the figures for over 16 instead of under 11. The hon. and learned Gentleman must recognise that his present comparison is quite fallacious because of the increase in inflation since 1952. The figures taken from the Sunday Times show that a man earning the figure that the hon. and learned Gentleman is talking about pays more today than in 1951, taking income for income, because inflation has pushed him into a higher belt of Income Tax.
As the hon. and learned Gentleman has corrected me on the words I was using, will he now tell us how strong his case is by giving us the actual figures? I think that the figures will bear out everything said from this side of the Committee about the vast disparity in the concessions made by the Chancellor.
I think that the right hon. Gentleman's children are over 16, whereas mine are under 11. Not only is there a great deal of difference in the amount of trouble they cause, but also in the amount of tax concessions which one gets according to the age of the child.
Before I come to the point made by the right hon. Gentleman about the figures in the Sunday Times, a man earning £700 a year, in 1958–59, would have paid 10s. in tax. This year he will pay 2s. 3d. less, which is the figure the right hon. Gentleman mentioned.
I did not hear the right hon. Gentleman's television broadcast myself, but may I correct a misstatement of the right hon. Gentleman. I am told that he said that in the case of a married man earning £14 a week, with a wife and two children, the Income Tax saving was only ½d. a week. The correct figure is 1s. 2½d.
Is my right hon. and learned Friend really meaning to suggest that the right hon. Member for Huyton (Mr. H. Wilson) made a mistake of 2,800 per cent. in what he said? This is a very important margin of error. Is that a measure of the accuracy to be expected from the Labour Party?
Since I have been accused of this error by the hon. Member for Kidderminster (Mr. Nabarro)—whose passion for accuracy we all know—may I say that the figure I quoted on television was the figure I quoted in the Committee? My error was to refer to two children under 11. I did say on television that it referred to two children under 11.
I certainly have not got the speed of mental arithmetic that my hon. Friend the Member for Kidderminster (Mr. Nabarro) has, so I can neither confirm nor deny his figure. It is very serious that these mis-statements should go out to such a wide audience over the television network. Errors in the House of Commons can be corrected, as they have now been corrected, but on television the damage is done.
The figures which the right hon. Gentleman quoted from the Sunday Times are misleading. The consumer price index gives the truest picture for this purpose, because it is the only one with continuity. It shows a rise of 18·1 per cent. between 1952 and 1958. By February, 1959, the rise was under 20 per cent. Taking a rise in prices of 18 per cent. in 1958–59, and 20 per cent. for 1959–60, a married man with two children, one under 11 and one between 11 and 16, earning £750 paid 5·8 per cent. of his income in tax in 1952–53; in 1958–59, he paid 5·3 percent. of his equivalent income; and in 1959–60 he will pay 5 per cent. of his equivalent income.
The figures for a man earning £1,000 a year are respectively 11·2 per cent., 11·2 per cent., and 10·5 per cent. These figures show that the lower and middle income groups have received their full share of the reduction in the burden of direct taxation in a succession of Tory Budgets.
Not without notice. If the right hon. Gentleman puts a Question down I will endeavour to answer it.
The right hon. Member for Huyton criticised the Budget for its omissions and its timing. Thirdly he said that this Budget was an assignment with the General Election.
With regard to the so-called omissions, the Opposition again want to have the best of two quite irreconcilable worlds. No right hon. or hon. Gentleman, except the right hon. Gentleman the Member for Bishop Auckland who is, after all, the greatest inflation-monger since Montgolfier first went up in his balloon, has suggested that the total amount which my right hon. Friend thinks it safe to borrow should be substantially exceeded. Indeed, some right hon. and hon. Gentlemen have rightly drawn attention to the call that the total will make on savings and to the implications for our balance of payments. These are matters which my right hon. Friend has had continuously and anxiously in mind.
Neither the Leader of the Opposition nor any of his followers has opposed the tax concessions which have been made. On the contrary, the right hon. Gentleman purported to welcome them. What hon. Members opposite have done is to suggest a whole series of further concessions which are quite irreconcilable with the remissions which my right hon. Friend has made if the total amount to be borrowed is not to be exceeded.
It is instructive to cost them to see what sort of Budget the right hon. Gentleman would have produced this year. I am taking only those suggestions which have been put forward either by the Leader of the Opposition or the right hon. Gentleman the Member for Huyton, and in relation only to this year's Budget. There is, first, an increase in the retirement pension—a minimum of 10s. a week, the right hon. Gentleman said. My right hon. Friend the Chancellor will be dealing later with the merits of that proposal. As the Committee will understand, I am concerned only with its financial implications. If the Opposition and, indeed, the Liberal Party mean, as I assume they must, that such an increase should extend to all National Insurance beneficiaries, including widows, the sick and the unemployed, it would cost about £200 million for existing beneficiaries alone.
I presume that the Opposition and the Liberal Party mean that they would increase the benefits without increasing the contributions, otherwise it would be quite irrelevant to raise this matter in connection with the Budget. That makes nonsense of everything that the Labour Party said when in office about the National Insurance Scheme, but that is by the way. The cost would have to be met from general taxation. It would cost more than the cost of all my right hon. Friend's Income Tax remissions, every one of which would have to be forgone.
I find that particularly difficult in the case of the Liberal Party, since the hon. Member for Orkney and Shetland (Mr. Grimond) expressly wanted both an increase in the retirement pension and a cut in the Income Tax, not of 9d., but of 1s., which would cost an extra £40 million over and above my right hon. Friend's proposals.
No. On the contrary, past experience shows that there is no saving on these transactions. I am not taking into account any consequential effect on National Assistance, but the consequential effects on war pensions might cost an extra £15 million a year. I might mention, for the benefit of the Liberal Party, that it would also mean raising additional revenue in future years as those at present in employment reach pensionable age without having paid contributions for their increased pension. Again, I find it difficult to reconcile that with what the Leader of the Liberal Party said about the need to contain Government expenditure.
Secondly, the right hon. Gentleman—
I am sorry. I have given way so much that I must get on.
Secondly, the right hon. Member for Huyton would abolish the Entertainments Duty on cinemas. That would cost £9 million. Thirdly, he would sharply reduce the tax on diesel oils for road passenger transport. He said in his speech last week:
I think that the effect on fares and the cost of living generally would have been far more striking than the effect of some of the things which he did do."—[OFFICIAL REPORT, 8th April, 1959; Vol. 603, c. 220.]
The Leader of the Liberal Party, I believe, agreed with that. Bus fares, of course, enter into the Cost-of-Living Index. The effect on fares of the whole hydrocarbon oil duty of 2s. 6d. a gallon is estimated at about one-third of a point. That is less than half of the effect of my right hon. Friend's proposals for indirect taxation. The cost of remitting the fuel tax on buses would be about £30 million. On the other hand, successive Governments, including that of the party opposite, have made it quite clear that we cannot discriminate fiscally between different users and that it would be quite unfeasible to remit the duty on buses only.
Nevertheless, let us take the right hon. Gentleman literally. Let us ignore the administrative realities and the reduced effect on the Cost-of-Living Index and concede the whole of the duty on bus fuel at £30 million. We have now arrived at a total of £254 million. In addition, the Leader of the Opposition would have my right hon. Friend repay a further three years of post-war credits at a cost of £52½ million. This brings the total above the cost of my right hon. Friend's proposals.
Not content with that, the right hon. Member for Huyton would have greatly stepped up the rate of social expenditure. My right hon. Friend has sanctioned additional expenditure on social investment—including investment by the Board of Trade in the Development Areas and investment for police, fire services, prisons and children's homes—amounting to about £22 million for this year, of which roughly one-half falls on the Exchequer above the line. The right hon. Gentleman says that he wants more than that.
If the party opposite, or, indeed, the Liberal Party, really wants to be taken seriously as an alternative Government, it must face with more responsibility the fiscal consequences of what it proposes. If Members opposite really think that the general balance of the Budget is right, and if they give the measures which they have put forward a higher priority than the proposals put forward by my right hon. Friend, let them say frankly that my right hon. Friend's proposals are irreconcilable with theirs.
Let hon. Members opposite be honest and vote against the reduction in Income Tax, recognising that they cannot have both that and a 10s. increase in retirement pensions financed from the Exchequer. Let them vote honestly against any remission in the Purchase Tax, recognising that they cannot have both that and the further three years' post-war credits. Let them vote honestly against the reduction in beer duty, recognising that they cannot have both that and the remission of Entertainments Duty and the fuel tax on buses. Even that, however, would leave the extra public sector investment to be paid for by inflationary finance.
I am only sorry that the hon. and learned Gentleman did not listen to my speech—perhaps he was not here when I made it last week—because he would have found this antithesis which he is posing is completely false. If he were to deduct from the Chancellor's benefactions the very large hand-out to companies, which we have not supported, on business profits, if he had listened to our proposals for a real drive against tax avoidance, which is running into very large figures indeed. and had he balanced, as I suggested in my speech, the Entertainments Duty against the very fat profits earned by commercial television companies—if he were to do that and recast Purchase Tax on the lines we suggested, he would find that it adds up to a perfectly feasible figure.
That will not work for a moment. The recasting of Purchase Tax costs the same as my right hon. Friend's proposals. The television companies already pay Income Tax and Profits Tax. As for the other matters, if the right hon. Gentleman really thinks that the drive against the tax avoider would bring in £300 million a year, I am very sorry for the day if ever he should be Chancellor of the Exchequer.
Unless the Opposition are prepared to face in that way the budgetary consequences of their proposals, they must forgive the people if they shrug their shoulders and say, "Of course, it would be 1951 all over again"—or, perhaps, I ought to add for the benefit of the Liberal Party, which, also, has tried to have the best of both these possible worlds, 1929.
The second main theme is that the measures taken in this year's Budget should have been taken last year. My right hon. Friend will be dealing more fully with this matter. I wish only to say that we did what the right hon. Member for Huyton himself implied that we should do in his Budget speech last year: that is, to attach priority to the rebuilding of our reserves.
The right hon. Member for Huyton asked me during the earlier part of my speech why we had voted against investment allowances last year. Both he, and the hon. Gentleman the Member for Birmingham, Stechford (Mr. Roy Jenkins), in, if I may say so, a very interesting and agreeable speech, made the point that the reserves today stand at roughly the same sort of figure as the reserves at that time.
However, that does not take account of two factors. The first is that although our reserves stand at roughly the same figure as they did in June last year we have since then repaid an instalment on the dollar loan and also our debt to the International Monetary Fund. In other words, we have substantially increased the strength of our reserves position by decreasing our liabilities.
The second thing is this. In June last year there were two great uncertainties ahead. The first was how soon the Americans would pull out of their recession; and, secondly, the great mass of wage negotiations still lay ahead. It was not until those two uncertainties were resolved that it was in any way safe to resume the advance and to expand the economy.
The truth is that conduct which is fitting, indeed, called for, in a strong, healthy man is by no means equally appropriate in a man who has just recovered from a fever which has shaken his frame for twelve years. My right hon. Friend's predecessors effected the cure. My right hon. Friend has since then nursed back our reserves of strength, and we are ready to resume the advance.
That is not to say that reflationary and expansionary measures were not taken last year. They were. They are all set out in the Economic Survey and are within the mind of the Committee and I need not recapitulate them. [Interruption.] The right hon. Gentleman said that they were only to help consumption. That is not true. If he thinks of the budgetary measures alone, there was the increase of initial allowance by 50 per cent., which was a measure to increase investment.
The hon. Member for Loughborough (Mr. Cronin) very entertainingly compared my right hon. Friend with Jupiter transforming himself into a bull, trying to make out that there has been a rapid metamorphosis, but if the hon. Gentleman wanted a true image from the Metamorphoses to apply to my right hon. Friend, last year as well as this, surely it would have been Jupiter descending on Danae in a shower of gold.
Taking the whole period involved, from September, 1957, to April, 1959, I submit to the Committee that the record is a remarkable one and that we are in every way entitled to be proud of it. I know it is the favourite gibe of the right hon. Gentleman the Member for Huyton that we start our economic history in September, 1957. It is true that the measures then taken marked, we trust, the end of the post-war inflation, but it is not the date when we start the economic and financial history of the Conservative Government. That is in 1951.
The right hon. Gentleman the Leader of the Opposition said last Tuesday that
one can produce a popular Budget when things are bad far more easily than when things are good."—[OFFICIAL REPORT. 7th April, 1959; Vol. 603, c. 76.]
He certainly managed to produce an unpopular Budget, in which he raised taxation in a full year by no less than £388 million. But if he meant to imply that things were good then, as he must
have, he must have credited the country with very short memories.
The year 1951: that is when our economic history starts, the economic history of this Government. We took over at a time when prices had risen by 12 per cent. in the previous twelve months alone—
—supervening, of course, on a long period of steadily rising prices. They outstripped wage rates in their rising by no less than 7 per cent. since 1947. The right hon. Gentleman the Member for Blyth was Minister of Labour. It cannot have given him very much satisfaction—
—to see wages lagging behind prices. What is more, the right hon. Gentleman spoke about social justice. The sharpest rise in prices took place in food prices, which enter disproportionately into the cost of living of the aged and those with large families.
That was the year when the meat ration was reduced to a lower figure even than during the war. There was an 8d. meat ration with a 2d. corned beef component. The right hon. Gentleman spoke approvingly of controls. We had a bellyfull of controls that year, but it was about the only bellyful] anybody had. That was, again, the year when housing queues were longer than ever; and their misery was increased by the frigid assurance, happily falsified by events, that it was impossible to build at a higher rate.
But most serious of all, that was the year in which our reserves were running out at a rate which, if unchecked—and the party opposite took no remedial action—would have led to their complete exhaustion by the following summer. All that, and the right hon. Gentleman's Budget, too! Nor, as the right hon. Gentleman the Member for Huyton himself suggested, was that a couple of years after the war. This was, as I said earlier, the ripe fruit of five years of Socialist principles and practices and control.
Perhaps the hon. and and learned Gentleman will allow me to intervene now. Since he refers to the gold reserves will he say how they stood then compared with how they stand now after seven or eight years of this Conservative Government? Secondly, since the hon. and learned Gentleman, in the quotation which has inspired this very moving speech, was referring to employment and production, will he now give us the comparative figures of the rate of increase of production at that time and the present time, and also of the level of employment at that time compared with what it is at present?
What is the use of increasing production if it leads into that sort of difficulty, if it leads to a rise in prices of 12 per cent. which bears in that way on the retirement pensions, and leads to a balance of payments crisis of that nature?
The right hon. Gentleman says, "What about world prices?" That is just his fallacy. We cannot insulate ourselves from the world. The fault of the thinking of the right hon. Gentleman is to imagine that we can operate in a closed economy in which we can control everything.
I turn, finally, to the Opposition's last charge, that this is an electioneering Budget. I find that difficult to reconcile with another put forward, almost in the same breath, that the remissions are going "mostly to the very rich". Those are the words of the hon. Member for Salford, East (Mr. Frank Allaun), but they have been echoed in almost every other speech from that side of the Committee. However, this Budget does not stand alone It is the eighth out of nine Conservative Budgets in which taxation has been reduced, whereas in three out of the seven Budgets of the party opposite taxation was increased, and in the fourth it was at a standstill.
Our own Budgets have reduced the share of the gross national product taken in taxation from 31 per cent. in 1951 to what is likely, after this budget, to he under 25 per cent., a reduction of over one-fifth. This is a reflection of a fundamental article of Conservative faith. We believe that high taxation is a menace. We believe that it leads to waste and extravagance. We believe that it saps initiative and endeavour. We believe that it impairs private and commercial morality. And, most of all, we believe it to be an invasion by the State of the individual's right to spend his own money and thus is a diminution of his liberty. We believe that it should be a principal political aim to reduce the burden of taxation on our people.
This is not the first Conservative Budget to reduce taxation—nor, I trust and believe, will it be the last.
I am very pleased indeed to be speaking immediately after the Financial Secretary. From his speech, one would think that all the people in this country had never had it so good as they are having it at the present time. There is no doubt that the Financial Secretary dealt with those things for which he thought the Government could take the greatest credit. This afternoon, I wish to examine the Budget in the light of the greatest needs of Scotland, as I see them.
The hon. Member for Lanark (Mr. Patrick Maitland) said at the end of his speech:
I conclude by saying that, with others, I salute the Budget and recognise its immediate aim."—[OFFICIAL REPORT, 9th April, 1959; Vol. 603, c. 467.]
I am the Member for Lanarkshire, North and I certainly do not salute this Budget. I certainly do not welcome it, since it will not meet the very great needs with which we are faced in Scotland. The Financial Secretary said that he liked to compare precept with performance. I propose to examine the position in the light of the records of the Tory Government since 1951.
The Financial Secretary spoke about the great advances that had been made in housing under his Government. Scotland is about the worst housed country in the whole of Western Europe. I want to examine the record of the Government in housing during these years. The Government's own figures of houses under construction in December, 1951, which was the last year of the Labour Government—I am talking of houses that were under construction by the local authorities and the Scottish Special Housing Association—show that the number was 34,934.
One of the great election promises of the Tories at that time was that they would build 300,000 houses a year. Many people in Scotland believed that the housing position would improve greatly under the Tory Government. I find, however, from the latest housing returns that have been given by the Government that—I hope that I shall not weary the Committee with figures but they are important—the number of houses under construction by those two bodies in December, 1952 was 34,877, a smaller number than was under construction in 1951. In 1953, the figure had gone up to 35,330, and that was the only year under Tory Government when we had under construction at the end of the year more houses than were under construction in the last year of the Labour Government.
When we come to 1958, at the end of December—and that is not so far away—the number of houses under construction had fallen to 24,038, which means that in 1958 we had under construction in Scotland almost 30 per cent. fewer houses than were under construction during the last year of the Labour Government. If we compare 1957 and 1958, we find that the number of houses on which construction had begun was almost 18 per cent. less in 1958 than in 1957 and those under construction almost 19 per cent. less. We in Scotland need at the present time 500,000 new houses. In our villages and cities our housing conditions are still shocking.
If we consider the number of people who are living in one apartment houses in Glasgow alone, we find that the Government, with all their claims far housing, have really not done for Scotland what the Labour Government did for it in their last year of office. There are a number of reasons for this fall-off in the building of houses. First, we have the crippling interest rate. Today it is still 5¾ per cent. on interest charges made by the Public Works Loan Board and every local authority in Scotland is finding that interest rate crippling.
Then the Government cut subsidies for houses considerably. This meant that local authorities have been faced with an intolerable burden and some of them are finding that, although their housing needs are so very great, they are unable to build the houses that ought to be built. I say to the Financial Secretary that the Chancellor of the Exchequer, when he decided 0-at he had £366 million to give away, ought to have used some of that money for this very great social need in Scotland.
The infant mortality rate in Scotland is higher than in any other part of tile United Kingdom and that can be tied up sometimes with the shocking housing conditions under which many women are living. One of the things that would help immensely in Scotland would be to allow the local authorities to have the money which they must borrow for housing at a much lower rate than 5¾ per cent. Another way in which the Government could help would be by increasing the subsidies to local authorities and to the Scottish Special Housing Association.
I, as a woman, place nothing higher in this world than that children should be reared in good homes. The home life of a child is of the very greatest importance. I know that a beautiful home does not mean of necessity that a child has a very good home life, but I know also that when the physical conditions are there it is much more easy to provide the kind of home in which I should like to see every child being reared. The steps that have been taken by the Government have militated greatly against our achieving the kind of housing which we so desperately need in Scotland.
Even at this late date, I would say to the Financial Secretary that there ought to be the most serious consideration at Cabinet level about this high rate of interest which local authorities are charged for housing and also talks about the need for higher subsidies for local authorities.
There is a very important by-product from the building of a great number of houses. In Scotland there are many unemployed building trade workers, and if we could have a great increase in the building of houses—even if the Government would increase it only to what it was in 1951—many of those workers would have the full employment which they have not got today.
I now turn to another matter. After listening to the speech of the Financial Secretary and to the speeches of hon. Members opposite, I begin to wonder if in Scotland we really have 100,000 un-employed men and women or if in Great Britain we have over half a million un-employed. Many of the things for which the Financial Secretary and the Chancellor of the Exchequer have been taking credit in these debates have been achieved only at the expense of the misery and tragedy which unemployment has brought to thousands of men and women in the country.
The figures for March are not yet published in the Ministry of Labour Gazette, but on 9th February the figure for the total of those registered as unemployed in Scotland was 116,520. That figure has dropped somewhat but not a great deal since that time. When we turn to the long-term unemployed, the figures for Scotland are frightening. We see that the figure for men unemployed for more than eight weeks is 45,321 and that for women unemployed for more than eight weeks is 17,848. In other words, 54 per cent. of all the unemployed in Scotland have been unemployed for more than eight weeks.
I examined the Budget to see if we were really going to encourage a great expansion of industry, because, unless we get a very great expansion of industry in the United Kingdom as a whole there is very little hope for the unemployed in Scotland. From reading the Chancellor's speech, from listening to the debate and from reading those parts of it which I was unable to hear, I have come to the conclusion that the Chancellor has said that we are to have some expansion but we are not to expand too rapidly. That is my impression from the right hon. Gentleman's Budget speech and from listening to the debate.
The March figures showed that in North Lanarkshire, which represents seven-eighths of the whole industrial County of Lanarkshire, 8·4 per cent. of the working population were unemployed. Unless there is a very rapid expansion of industry there is very little hope for our people. I feel that the Chancellor ought to have given the President of the Board of Trade much more help than he has done in the Budget. It seems to me that some of the £366 million which the Chancellor has distributed ought to have been used for building Government-financed factories. Under the present Government there has been a great retraction in the building of such factories.
Because of the problems with which I am faced in my constituency owing to the closing of pits and to steel works running down, I have been urging the Government, as has almost every Scottish hon. Member on this side of the Committee, to build advance factories. The Government have decided to build one advance factory in Scotland. We are glad to have even one, but, as we say in Scotland, it is only a fleabite when compared with the very great problem facing us. I am also glad that the decision was taken to build the factory in Coatbridge, because many of my constituents from the surrounding villages are registered as unemployed at the Coatbridge employment exchange.
If the Government really wanted to bring industry to Scotland, the Chancellor, in conjunction with the President of the Board of Trade, would have decided to use same of the money which was found to be available for distribution in other directions for building more of those factories. In the election manifesto which the Tory Party issued in Scotland in 1955 for the purpose of attracting votes, it said:
Each year since the Unionists took office the number of people at work in Scotland has grown, and, indeed, stands at a record level.
It is true that we have a record level in Scotland today, but it is a record level of unemployment. The Budget will have brought very little hope to those 100,000 unemployed men and women in Scotland.
I am always interested to compare the rate of unemployment in other regions. I find from the latest available figures that we in Scotland have three times the rate of unemployment as in London and the surrounding area, yet at that time only half the factory space that was being built in London and the surrounding area was being built in Scotland. Not only have the present Government cut back on the building of Government-financed factories, but the distribution of industrial building generally has been very bad.
I now turn to some other matters. I was delighted that my right hon. Friend the Member for Blyth (Mr. Robens), who opened this debate for the Opposition today, dealt with the distribution of the Income Tax rebates which have been given in the Budget. The question has been thrown at us on this side of the Committee, "Would you, then, not have cut Income Tax?". I think that it is a good thing to cut Income Tax, but that it should be cut in a way that benefits the people who need the relief most. Had there been an increase in the earned income allowance that would have particularly helped the man with the family. Had there been an increase in dependants' allowances, both in children's allowances and in allowances for those who, perhaps, have aged parents dependent on them, that would have represented a much better distribution of the money which the Government found that they were able to give away.
I say quite frankly to the Financial Secretary and to the Treasury that I would have been content to see a smaller sum given in Income Tax relief provided that it had been distributed more fairly than is the case. The Financial Secretary says that this great burden of taxation saps initiative and energy. We on this side believe that we need the initiative and the energy of everybody in the country. Those on low wages and who have children but who pay no Income Tax have received no relief at all. The lower wage earners who are paying Income Tax have received small relief under the Chancellor's proposals. They would have received greater relief had there been an increase in the earned income allowance or in the allowances for children or dependants of all kinds.
We on this side believe that whatever a man's job, whether he is an executive in the works or the man from whom the executive wants to get the greatest production, he should be considered by the Government. I feel very strongly that such people have not been considered.
The Financial Secretary had a great deal to say about the cast of living and, for purposes of comparison, he took the last year of office of the Labour Government. But during that time there was a war in Korea, for which a British Government were not responsible, quite unlike the war over Suez. The Financial Secretary knows very well that the Korean war pushed up the cost of living. He should have made his comparison with prices during previous years of the Labour Government and—
I did not mean to interrupt the hon. Lady in mid-sentence and I apologise, but in fact I quoted the period from 1948 to 1951 in which prices had outran wages by no less than 7 per cent. Another factor which the hon. Lady should not minimise was the effect on import prices of devaluation in 1949.
That may be true, but in making a comparison with the years 1948–51 the hon. and learned Gentleman should remember that the biggest increase in prices took place as a result of the war in Korea. During the whole of that period, under the Labour Government, import prices were rising. The Tory Party, before it took office, told the women of Britain that if they wanted to stabilise the cost of living and even reduce it, all they needed to do was to vote Tory at the General Election. The Tories had a wonderful opportunity to bring down the cost of living and to put our economic position on a level keel. because prices were falling on world markets. Far from falling, however, prices rose in this country, and they have risen until the £ today is worth 15s. 4d., compared with the £ of October, 1951. These are the kind of figures which housewives ought to know.
When he winds up the debate this evening, the Chancellor will probably give us statistics about old people which we are tired of hearing from the Minister of Pensions and National Insurance. Old people in my constituency—and I am sure that the Financial Secretary knows it to he true of his constituency—find conditions very difficult today. Earlier in the debate, an hon. Member opposite interjected a remark about National Assistance. Over a million old people receive National Assistance. There are many more who could be in receipt of assistance but who do not apply for it. Some of them come to my home and to my interview room to tell me of their difficulties.
Time and again I have asked them about a supplementary pension and they have repeatedly said, "I and my family have never applied for public assistance at any time." I do my best for them and try to explain what we have done to get rid of the old Poor Law, but they have bitter memories of the Poor Law during the years of Tory Government. After explaining the situation to them, I frequently write on their behalf and some of them are then willing to accept National Assistance, but many men still feel that it is a loss of their dignity to apply for it.
The Lord Privy Seal has told us that we should double our standard of living in twenty-five years. Are our old people never to look forward to a time when their standard of living will be raised, or must they always listen to statistics quoted to show that they are at least no worse off than they were a few years after a world war which left this country bankrupt? We on this side of the Committee made a statement two years ago that we should increase old-age pensions by a minimum of 10s. and that, whatever the amount of the pension, it would he made inflation-proof.
The hon. Member for Ilford, North (Mr. Iremonger), when he was talking about old-age pensions in the debate the other day, said of the suggestion that retirement benefits should be tied to the cost of living:
It is a pity that that note has been introduced. It is not only unsuited to our Parliamentary procedure, but it is rather undignified and unbecoming to Parliament in general."— [OFFICIAL, REPORT, 9th April, 1959; Vol. 603, c. 444.]
I am concerned about the comfort and the dignity of our old people. I wish to ensure that when they retire they have a life of comfort and dignity, because dignity is just as important to them as to other people.
We on this side of the Committee would like to take old-age pensions out of politics. At 10.30 tomorrow morning I shall be attending a Standing Committee which is dealing with the Government's National Insurance Bill. I should like to point out that, had the Government accepted our Amendments in that Committee, pensions would have been taken out of politics altogether for the first time. Our old people want that. I am sure that a Chancellor who thinks that the country's prospects have improved so greatly ought to have taken the old people into account in his Budget. In Scotland, the Budget will not help where the need is greatest. I hope that it is a pre-election Budget, because an election could not come too soon for us on this side of the Committee.
The hon. Lady the Member for Lanarkshire, North (Miss Herbison) concentrated on three main matters, the last of which I should like to deal with later in my speech. The first two were the provision of homes and the state of unemployment in Scotland and I should like to follow up her remarks on those points.
We share the hon. Lady's belief that homes should come first. Indeed, the Prime Minister, as Minister of Housing and Local Government, gave practical effect to our belief, a practical effect which the hon. Lady's right hon. Friends were unable to implement or refused to implement between 1945 and 1951. I have no knowledge of the exact figures which the hon. Lady quoted, but I hope that she will not confuse houses under construction with houses which are completed. The important thing is to complete the houses, and one of the great benefits which the Tory Government of 1951 quickly gave to the process of completing houses was to reduce the time between a house being under construction and a house being completed.
The Budget, of course, is very relevant to the hon. Lady's second point about unemployment in Scotland. I am glad that the Chancellor said that he wanted a steady expansion or, to use the hon. Lady's expression, "a not too rapid expansion". I cannot believe that the hon. Lady wants a too rapid expansion. because ex hvpothesi it is too rapid. I expect that her constituents, and those living in other constituencies in Scotland, will gain, as the whole country will gain, from the stimulus to industrial activity which the Budget will surely give. I believe that the hon. Lady has forgotten, or has left out of account, measures already taken by the Government in the past year to help in especially difficult areas. I know how these measures have affected Blackpool where unemployment is seasonally very high in winter. It is not as high now as it was in the last two years of the Socialist Government, but, despite that, the Conservative Government have taken special steps to help my constituents.
Before the hon. Lady the Member for Lanarkshire, North spoke, we heard my hon. and learned Friend the Financial Secretary at his most brilliant best, if I may say that to him, and his most brilliant best is very good indeed. He had massive arguments and he deployed them, as he always does, with a great lucidity which I envy, and he was concise. I hope that I shall not be detaining the Committee for too long this afternoon with the points I want to put, but I am slightly handicapped by the speech of the right hon. Gentleman the Member for Blyth (Mr. Robens), who said so many things which provoked me that I may be diverted into taking rather longer than I meant.
I share the fondness of the Financial Secretary for the right hon. Gentleman. I also share his views about the economic judgments of the right hon. Gentleman. The right hon. Gentleman has the advantage of being able to form a view before he has heard the judgments, but I will now let him know what I think about these things. Curiously enough, I think he will agree with me on one point I shall make, but before, I reach it, I must deal with one most remarkable statement made by the right hon. Gentleman.
In talking of the policies of the last eighteen months, he said that the deflation, as he called it, has handicapped us in dealing with countries overseas with whom we are in competition. What has happened in the last eighteen months? A strong £, higher reserves, stable prices and the highest overseas investment rate we have ever had. How can that conceivably have handicapped us?
If I may complete the argument, when we look at the levels of unemployment in those other countries and compare our 2·5 per cent.—which, of course, we would all like to see reduced—with their percentages, I wonder what he means about this handicap.
Our exports are down because world trade is down. As the right hon. Gentleman would know, if he would kindly study the matter, in the areas to which the majority of our exports have gone traditionally there has been a bigger recession than in other areas. Will he please look at the most competitive area in the world? If so, he will see that we have done relatively better there than in any other country. I mean the United States of America. The right hon. Gentleman interrupted me as I was about to give the percentages of unemployed in those other countries. I know they have been given before—
They ought to be given frequently and kept constantly in mind by hon. and right hon. Gentlemen opposite. In Italy it is 8·5 per cent., in Denmark 8·3 per cent., in Belgium. 7·2 per cent., in Germany 5·6 per cent., in Sweden 4·3 per cent., in Norway 4 per cent. and only in the Netherlands is it under 4 per cent. Our figure of 2½ per cent. compares with those, and if the right hon. Gentleman really thinks that those figures, and the other matters I have mentioned, support his argument that the policies of the last eighteen months have handicapped us, I am surprised.
No, I think the right hon. Gentleman has taken up enough of the Committee's time this afternoon. He reminded us that the first of the tests applied by the Chancellor himself to his Budget was whether the Budget would improve the competitiveness of our economy. No one has challenged that test. No one has thought that was not the right first aim for a Chancellor to have in his mind this year. Yet sometimes people seem to have made criticisms of the Budget quite regardless of that test. I think hon. and right hon. Gentlemen opposite know me well enough, as indeed they know all my hon. and right hon. Friends, to be aware of our views about what we would like to see done for old-age pensioners. There are places and times when we shall be debating and dealing with old-age pensioners. For instance, the National Insurance Bill is now in Committee.
In the context of a Budget, whose primary aim is to improve the competitiveness of our economy, I do not see how serious-minded hon. and right hon. Gentlemen opposite can advance the proposition that old-age pensions should have been increased by 10s. a week at a cost of £200 million or more. How does that help in the competitiveness of our economy? The rest of the measures are mainly designed to that end.
Beer, which the right hon. Gentleman has just mentioned in his interjection, is related to this matter in the way the Chancellor told us, because it affects so strongly the cost-of-living index. [HON. MEMBERS: "Oh"] The cost-of-living index is related to the competitiveness of the economy through the wage structure. Surely the right hon. Gentleman can see that? He criticised the leading article on the old-age pension in The Times last week.
I have not heard any criticisms of the truth of the figures there given. It is a fact that the old-age pension today is worth in real terms 11s. 0d. or 27 per cent. more than it was in 1951. That is a fact, and I wonder whether it is cruel to mention it.
Taking it, for the moment that the figures are right, that the value of money is greater now and that the old-age pension is worth more than it used to be, would it not follow equally that the value of the money of the Surtax payer is worth more than it was, and if it is not necessary to increase it at one end of the scale, why is it necessary to increase it at the other?
That is not the argument, but if the hon. Gentleman had read the whole of the leading article in The Tunes, he would know that the writer also tackled the problem of whether the old-age pensioners had, or had not, received a share of the increasing prosperity of the country, and he came to the conclusion that they had done so. We heard from the Financial Secretary that the Chancellor will refer to this matter further. None of us on this side of the Committee is opposed, or has at any time been opposed, to the proper increase of the old-age pension as and when that can be afforded. The worst thing we could do to the old people, whose care commands just as much of my attention as it does that of the hon. Lady the Member for Lanarkshire, North, would be to bribe them with pensions which we could not afford; and the Committee knows that as well as I do.
In this Budget the Chancellor has been dealing with the question of reducing taxes. I think there was a little confusion at one moment in what the right hon. Member for Blyth said between reduction in taxes and the introduction of subsidies. As an alternative to taking some of the tax off beer he talked about reducing the prices of milk and bread. That can be done only by a subsidy. Is he really in favour of reintroducing the milk and bread subsidies? That seems to me to be going far outside what his party has ever said.
Tax relief does not mean giving away the Government's money—the hon. Lady used that expression. It means taking less of other people's money and leaving more of their own to them so that they can decide how to use it. That, we believe, is good economics. We also believe it is good socially because it increases the individual's responsibility and sense of responsibility, on the one hand for work and effort, and on the other for the decisions as to how his earnings shall be spent or invested.
Despite the most welcome reduction in Income Tax, the Committee would be right to remember that our middle income group and our higher income group are still more highly taxed than in the United States, Canada, France and most of our other main overseas competitors.
When the hon. Lady and other hon. Members suggest that more should have been done on this occasion through the child allowance or earned income relief, they forget that since 1931 there has been a massive increase—more than a doubling—in the child allowance and a great increase in the earned income relief. If ever, this is now surely the time to have a straight reduction in the standard rate.
One is tempted to make a comment on a number of the reliefs which the Chancellor has been able to give. One is also tempted to mention one's special favourites. I realise that in a Budget like the present one it is much wiser to concentrate the reliefs in a few places rather than spread the butter thinly. I have some favourites which I hope may be in next year's Budget if they cannot be in the present one, and I hope that my hon. and learned Friend will give further consideration to them—the cost would not be very great—between now and the introduction of the Finance Bill.
I have never been in favour of the abolition of the Schedule A tax, but I am in favour of an increase in the statutory allowances so that householders, particularly the smaller ones, may, without having to make a claim for it, have less of their money taken away and thus have more to spend on maintenance.
I would rather not be interrupted at the moment. There is another point that I have in mind which will appeal, I think, to my hon. and learned Friend and certainly to my hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman). I had looked forward to the possibility of depreciation allowances being allowed for commercial property and hotels. That would assist the costs of administration and distribution generally, and it would also help our tourist trade, which is a most valuable earner of foreign currency.
Finally, I have been attracted by the case of the cinematograph industry. One has to remember that it is specially taxed, and when one has an industry which is specially taxed and gets into difficulties, it has perhaps a claim for special examination.
A point that I wish to impress upon my hon. and learned Friend, and which I hope he will pass on to the Chancellor, is with regard to savings. We hear a great deal about the importance of investment. I hear just as much about the importance of investment in the industrial concerns with which I am connected as I do on the Floor of the House, and it is right that I should. However, I think one hears too seldom, particularly from the Opposition benches, that investment has to be financed by savings. Without savings we cannot hope to finance the massive and essential industrial investment that we all want.
There is a table on page 22 of the Economic Survey which shows the main areas in which savings were secured last year and the extent to which those earnings were expended on investment or transferred to other areas. Recent years have seen a remarkable rise in personal savings. I will not go back to 1951, for they were rather small then, but in 1953 they were £812 million and they had risen to £1,443 million by 1958, which was 9 per cent. of disposable income.
In the same years there has also been a great rise in company savings, and it was the surplus which was available after providing for investment in the company and personal sectors which was transferred to nationalised industries and local authorities. Capital investment by local authorities and nationalised industries is essential. One would like to see the nationalised industries pay for more of their own investment out of retained profits arising from greater efficiency. If one looks at their record, it is one of a fall from £176 million to £149 million from 1953 to 1958. In other words, their retained profits have fallen in those years by £27 million, but their gross capital formation has increased by 40 per cent. in that period.
Whatever one may say of that, there is no doubt that the nationalised industries must have external finance, and so must the local authorities. The measure of the external finance required by the nationalised industries is sometimes forgotten, but this year it amounts to £688 million, almost the whole of the deficit which has to be financed by the Exchequer borrowing from the public. In comparing the Government's total expenditure below and above the line with earlier years, one must take account of this great increased capital spending by the nationalised industries.
When one thinks of the tremendous demand that the nationalised industries are making on the private sector of the economy, one wonders how it is that some people advocate more nationalisation because they are frightened that the private sector of industry may not have the money available. Of all the arguments for nationalisation, that seems to me to be the most absurd.
Let us look at the future. If we are to have this great increase in Government borrowing for the nationalised industries, and if we are to have greater investment to be financed in the economy as a whole in the future, we must see whether savings are likely to match demand. Companies havings in total in recent years have been higher than their total investment expenditure, but I wonder whether that will continue. Although their tax has been reduced, I wonder whether that will go on at a time when profit margins are narrowing as competition increases—I welcome that, and I also welcome the effect of the Restrictive Trade Practices Act and the general increase in competition—and I also wonder whether the increased investment which we all want to see in the company and private sector will not soak up all the savings which are available there. At any rate, I think a larger proportion of them will be used.
Looking at the table again, one can see what a great burden will fall on the personal sector. If we are to finance this great investment, we must ensure that we get higher personal savings. I have great confidence that we shall have some increase without taking any more steps. Now that taxation has been reduced, now that confidence in the £ has been improved and now that the traditional sense of thrift has returned, I think that there will be an increase in personal savings this year in any case.
Not only the National Savings Movement but the life assurance offices, the building societies and, very welcome, too, the unit trusts are all active in encouraging the investment of small and large savings. But if we want to secure the highest level of personal savings, the time has come to re-examine the facilities available to the small saver. Anyone making that examination will find that taxation incentives are given to savings which are invested through the National Savings Movement, the life assurance offices, and the building societies, but not to savings which go into commercial and industrial securities.
At a time when we want to associate every man more closely with the success of industry, it is a mistake not to tackle this problem. The more the problem is examined, the more difficulties appear. I am not complaining that my right hon. Friend has not provided for this in this Budget, but I ask him and all hon. Members to waste no time in tackling this most important problem as quickly as possible. If in the future the economic indicators show that investment is held back because too much is being spent on consumption, I hope that my right hon. Friend will be ready with proposals to increase savings rather than to increase taxes.
My hon. and learned Friend dealt with investment allowances. Although I have always thought that the arguments against investment allowances outweighed their advantages, with the way they have been introduced, the practical arguments this year and in the immediate future outweigh the theoretical arguments, and so I support them. However, they do not solve the long-term problem of proper taxation allowances for a country like ours which must encourage quick modernisation.
I heard my hon. and learned Friend explain how costly the alternative approach, advocated by my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) and others, would be. The fact is that over the life of the plant investment allowances give 20 per cent. more than is spent, and I cannot see how there will be any increase charged on the Exchequer in the long run; and I cannot see how, in the short run, if the Government are successful with investment allowances in encouraging a quicker turnover of plant, there will be quite so much difference as the £110 million which my hon. and learned Friend suggested.
I want to refer to my old love, the export trade, which the Budget will do a great deal to help. Incidentally, if there are more savings, that, too, will help the export trade, because overseas investment both inside and outside the Commonwealth is essential to our expanding trade overseas. There are two minor matters which we discussed last year and which I regard as of importance to those who earn money overseas. As I am connected with companies which do that, I should declare a personal interest. Last year we asked for overseas trade corporation status to be given to British companies which had foreign companies as subsidiaries. Have the negotiations and discussions on that matter been successful? There were also discussions about the granting of overseas trade corporation status to overseas profits made by British banks. Both concessions—and I cannot believe that either would be very costly—would greatly help to improve the competitiveness of British traders and bankers overseas.
It is on that note that I end. I welcome the Budget because it has the object of improving the competitiveness of our economy and because its proposals, taken together, will go a great way to enabling the country to improve its economic strength and competitiveness overseas.
At any rate, for a fair proportion of opinion in the City of London. That being so, we shall read the latter portions of his speech with some attention. I was inclined to agree with one of his observations, namely, that he was not entirely in favour of the abolition of Schedule A. There are other things that should take priority over the repeal of that tax.
It was somewhat unfair of the right hon. Gentleman to suggest that if the Chancellor had done anything for the old-age pensioners now it would have been regarded as a bribe to them. I am sure that not many old-age pensioners would mind being bribed in that fashion, any more than hon. Members and others mind being bribed with a reduction in the standard rate of Income Tax. We are dealing with a Budget whose ostensible purpose is to alter taxation and, if the national economy will allow, to give tax reliefs where they should be given. If it can be shown that old-age pensioners need an increase, their pensions should be increased, even if it means less reduction in other taxation.
I was not in the least surprised that the Chancellor did not refer to old-age pensions in his Budget speech. Perhaps, when he replies this evening, the Chancellor will confirm or deny what I am about to say. It seems to me to be beyond dispute that the policy of the Conservative Government and of the Conservative Party now is that any increase in old-age pensions should be accompanied by an increase in the contributions which those who work have to pay. That seems to have been implicit in much which has been said by hon. Members opposite and in pamphlets issued by the Conservative Party.
The Financial Secretary no doubt enjoyed his speech to the full. Most of us enjoyed it, even if we did not take some of it too seriously. He made great play with the fact that some figures given from this side of the Committee were not as accurate as they might have been. I am not sure that all the figures he gave were as correct as they should have been. As he is at the Treasury and able to check and to have assistance in checking, I remind him that at least one figure which he gave was incorrect. He spoke of Income Tax and Surtax rising to 18s. 6d. in the £. So far as I know, the highest rate for a person receiving an unearned income of £100,000 is 17s. 11d., and for most people the rate is very much below that.
I accept that. I was going by the only thing I could go by on the spur of the moment—the tables issued under the hon. and learned Member's name in the Financial Statement. At any rate, it is a comparatively minor matter, and I am glad that we have cleared it up.
By ten o'clock tonight we shall have had four full days' debate on the Budget proposals. The field of argument has already been so widely covered that there is not much that I can say which is new. I shall, therefore, confine my remarks to one change which the Chancellor has made, because there are features about it which need clearing up but which have not been touched upon so far, by any speaker on either side of the Committee though much has been said about the reduction of 2d. in the pint of beer. As the Committee knows, the brewing industry will gain about £40 million in a full year as a result of that change. I do not myself believe that the Chancellor made this alteration with an eye upon a General Election; I do not think that he is the type of man who would let that kind of consideration weigh with him one way or the other. Nevertheless, it is strange that at this time the Chancellor should make this alteration.
The right hon. Gentleman gave two main reasons for it. The first was that the revenue from this source was falling. In other words, not enough beer was being drunk. The Chancellor seemed to believe that beer drinkers should be encouraged to drink more. This advice is being given at a time when drunkenness, especially among adolescents, is on the increase, and I for one could hope that Government policy would be directed towards trying to make the nation a little more sober.
The second reason given by the Chancellor was that a reduction in the duty would have an appreciable effect upon the cost of living. As my right hon. Friend the Member for Blyth (Mr. Robens) pointed out, the Chancellor, not unnaturally—although, as Chancellor, he should not have done it—was confusing the cost-of-living index with the cost of living. I am sure that no one in this Committee believes that 2d. off the price of a pint of beer will make any difference to the cost of living of an old-age pensioner, or to the father of a family, or a mother going shopping. They do not drink enough beer to make that difference.
I do not criticise the decision of the Chancellor to simplify the basis upon which liquor licences have been granted, but there are a few questions on this matter which should be put to him and which he should, if possible, answer before we part with the Budget debate tonight. If, as the Chancellor asserts, the change reduces the cost of collection and the number of civil servants employed, so much the better. We would all probably agree that that was a good thing. But the institution of a flat registration fee instead of a graduated licence duty will cost the Exchequer about £4,800,000 in a full year.
I take it that this will not include an allowance for the saving to the Government from the simplified method of collection. Could we be told tonight what the saving in collection will be? If we are parting permanently, and not merely for one year, with nearly £5 million of revenue, the saving in collection will have to be considerable to make the operation worth while. We should be told what the saving is.
The Committee was surprised to hear the Chancellor say that he had decided to relieve the brewing industry of monopoly value payments. It is possible that the brewers themselves were surprised; I do not know. All I can say is that so far as I know no public pressure of any kind has been brought by them for this concession, whatever may have happened behind the scenes. These payments were not the unjust imposition of a Liberal or Labour Government; they were imposed by a Conservative Government, in the Licensing Act, 1904, when Mr. A. J. Balfour was Prime Minister. They have thus been levied, year by year, for nearly fifty-five years, and have brought many millions of pounds to the Exchequer—rightly so, for they represent recognition of the fact that considerable financial value attaches to premises which have been granted a licence.
So far as I can discover from looking up the reports of the debates of that period in the Library, compensation was paid when a licence was not renewed at the brewster sessions. We are told that the compensation will remain, and we must wait to see what the scale will be. The revenue from monopoly value for last year is provisionally estimated at £721,000. But this is not the full extent of the loss to the Revenue. If it were £700,000 in respect of one year, and no more, there might not be much to offer in the way of criticism, but this loss of hundreds of thousands of pounds is a permanent loss, which will continue so long as payments in respect of monopoly value, would have remained on the Statute Book.
The Chancellor should have reduced the tax on beer by a straightforward lowering of the duty, and not as he has, by doing away with this impost. When we hear the figures it may be that we shall conclude that to change the scales of licensing duty was also the wrong way of proceeding. For the right hon. Gentleman is making changes which are permanent and he is doing so simply to lower the cost-of-living index, when he could do the same thing in a more straightforward way by altering the duty on beer, which, in any fiscal year, can be raised again if necessary.
It may be said that £700,000 is not a great sum of money when considered against the background of the total revenue raised each year. But it is a fairly considerable sum. I could suggest other reductions which I consider more necessary than this one. The right hon. Gentleman might, for example, have removed the Purchase Tax on musical instruments. It is true that that tax has been reduced by 5 per cent., which represents about £80,000 on last year's revenue from that source. But musical instruments are still to be taxed to the extent of £320,000 a year and I, for one, think that that tax might have been removed rather than the monopoly value payments.
I said earlier that most things have already been said about the Chancellor's proposals. Other hon. Members wish to speak, and I have deliberately confined my speech to one or two particular issues. If the Financial Secretary, who has, I see, been taking notes, will tell his right hon. Friend that answers to these questions would be welcome, I am sure that other hon. Members besides myself would be very pleased.
The right hon. Member for Colne Valley (Mr. Glenvil Hall) has rightly pointed out that it is difficult to say anything new or original at this stage of the debate. But there is one subject upon which I should like to say a few words. Only the hon. Member for Southampton, Itchen (Dr. King) has referred to it, and he was kind enough to say something about my connection with the matter. It is the question of public service pensions, which my right hon. Friend the Chancellor of the Exchequer mentioned during his Budget speech. Whatever else we may differ about in this debate, I believe that I speak with the agreement of the Committee when I thank my right hon. Friend for his recognition of the need to take a fresh look at that matter. I hope, therefore, that at any rate the great part of what I have to say will be non-controversial.
On previous occasions this matter has been dealt with by a Pensions (Increase) Act which is essentially a temporary Measure. Some of my hon. Friends and I were asked to look into the question in 1955, before the introduction of the 1956 Pensions (Increase) Act. We found that at that time there were three main grievances among public service pensioners. The first was the complete omission of certain quite large categories of public service pensioners from any increase at all in the previous legislation, including Royal Irish Constabulary pensioners and certain Indian civil servants. They had received no compensation at all under the previous Acts. That was rectified when the 1956 Act was brought in.
The second grievance related to the application of the means test. These people, who had given the best years of their lives to public service, felt that it should not be a disqualification if because of their thrift and foresight they were able to supplement their pensions. That, also, was rectified in the 1956 Act, and so two bad precedents were abandoned.
There was a third grievance which, in the nature of things, could not be rectified by that or indeed by any ad hoc pensions Act. It related to the continuance of inflation, which inevitably has the effect of wiping out the benefit of any increase. In a short time those affected are even worse off than they were when the legislation to increase the pension was introduced. That is a matter of common knowledge. There must be few hon. Members without personal knowledge of particular categories of people who have been seriously affected in this way, and there is no point in saying this time, "We told you so." It is recognised by anyone who has gone into the matter as an inevitable consequence, but I wish to give two examples of the kind of thing which is happening today.
The first concerns what I might call the "old brigade." I refer to those who were too old to qualify for inclusion in the recent insurance scheme. The case I have in mind concerns a lady who has given over 40 years' service in the Post Office. She told me that she had seen the heads of five different sovereigns on the stamps which she had to sell. She receives the princely sum of £2 7s. 6d. a week. It is striking to note that that amount is actually less—although she is a public service pensioner—than is received by her neighbour who has never done any public service at all and who receives the National Insurance pension. There are, of course, a number of old nurses who are in the same position. Surely one has only to mention that figure and consider what these people have done, the service they have given during their lives, to realise that something must be done about it.
Another case in a different category is that of an executive in the Civil Service who retired in 1947. He has had only one-quarter increase since that time, whereas, of course, the National Insurance pensions have been doubled in that period. Quite apart from the effects of inflation itself, there are certain other features which spoil the beneficial effect of a Pensions (Increase) Act. One is that the operation of the Act need not necessarily be immediate. There is a time lag which if it is intensified, as it sometimes is, by not making a great effort to cause it to be effective as soon as possible, has the effect of creating an impression that the increase has been grudged. One can understand that it is difficult to speed up these things, but the old saying about what is given quickly is given twice over is something which we might bear in mind.
There is a tendency at times to wait until pressure builds up before anything is done and then, when the increase does come, people are apt to say that they got it only because they made such a fuss. If some kind of periodical examination or review could be considered, so that the matter was not delayed until a crisis arose, as it were, and there was ill-feeling and a sense of grievance, it would be a good thing.
There are certain detailed items which I will not do more than mention now for fear of wasting the time of the Committee. They are very well known, but it is right to point out that Parliament has done nothing about them and that their consideration is long overdue. One question is that of unestablished service, which has been the subject of discussion for years. There have frequently been expressions of agreement from both sides of the Committee that something should be done. Another question is the position of those who return to work after they have once. retired. Their case, also, is worthy of consideration.
I feel confident, now that we have two ex-Service men—my right hon. Friend the Chancellor of the Exchequer and my hon. and learned Friend the Financial Secretary to the Treasury—in charge of these matters, both former public servants, that they will consider these cases according to the different categories. The expression "public service pensioner" covers firemen, policemen, nurses, teachers and others. We hope sincerely that the inflation bogy has for the moment lost its power to bedevil the whole of this subject, but vigilance will still be required in that direction. There could now be a more systematic method of reviewing the cases of public service pensioners than there has been hitherto.
I come back to what I have called the "old brigade". They are the salt of the earth, but they are unvocal about these matters. They have very little to say and are prepared to suffer in silence. We ought also to remember the importance of future recruitment to the public service. Nowadays the pension is a very important factor in the choice of future career. If we do not see that our public servants have good pension rights we shall find a tendency for people not to go into the service. The categories of public servant I have mentioned have been the admiration of the world for their integrity and character. We are very proud of our public servants, and we ought to see that they are given no cause to feel that they are not appreciated.
We cannot ask the Chancellor for a detailed answer this evening. It was a wise step for him to announce that he would consult local authorities, who are affected very much by anything he may do and are, therefore, very interested in the subject. We can ask that a statesmanlike view shall be taken of the matter, quite apart from mere sympathy. There is a long-term element involved in this question. While I thank my right hon. Friend for giving this matter his attention and for accepting it as serious and important, I would ask him to bear in mind the points which I have mentioned.
I have only one further, and a not so uncontroversial, thing to say. I am sorry that the right hon. Member for Blyth (Mr. Robens) is not here. I understand that he said that no old-age pensioner would be the least interested in the reduction of the price of beer. I can give him direct evidence to the contrary. I recently had the pleasure of having a glass of beer in my constituency with an old-age pensioner who said he was so pleased about the reduction that he insisted on paying.
The right hon. and learned Member for Chertsey (Sir L. Heald) certainly made a non-controversial speech, which will receive the agreement of the whole Committee. I do not think that there is one of us who has not had hard cases of public pensioners brought to his notice, either by individual constituents at our interviews, or by correspondence. I am sure that there is no opposition to the right hon. and learned Gentleman's speech.
It is only regrettable that the belated sympathetic consideration that is now being given to these public service pensioners was not extended also to the old-age pensioners. In spite of the incident which the right hon. and learned Gentleman has just cited, I think most of us will be of the opinion that there is far more sympathy for the old-age pensioner than there is gratitude for the reduction in the price of beer.
I wish to deal with some aspects of the nationalised industries and their financing, particularly with part of the transport industry. The Chancellor touched on this subject during his Budget speech, but it has not been taken up to any extent during the debate of the last few days. I welcome the right hon. Gentleman's decision that the financing of the nationalised industries was to remain directly with the Treasury. Responsibility for providing capital funds for the nationalised industries is to remain with the Treasury for at least another year.
The Chancellor said that the circumstances which had led the Prime Minister, when Chancellor of the Exchequer, to change the procedure in 1956 still remained. I do not quite understand why this system cannot be made a permanent aspect of the financing of the nationalised industries. When we nationalised the coal industry its financing became a direct responsibility of the Treasury. Other industries resorted to the money market, although they enjoyed a Treasury guarantee. A few years ago a change was made. Now it has been decided to continue it for a year.
I do not see why it should not be made permanent. I am glad that the Chancellor has not given in to the pressure that some of his back benchers have been exerting for the nationalised industries to resort to the money market without a Treasury guarantee. They now have a cheap way of financing which is least likely to disturb the investment market. In the Economic Survey, the total amount of capital investment assigned to the British Transport Commission is given as £211 million, of which £178 million is for the railways and the balance for the Commission's other undertakings, during the current year. The Chancellor has not told us, nor are the figures broken down in the Economic Survey or in the Financial Statement, the extent to which there is to be financing by the Treasury and self-financing by the Transport Commission.
In an earlier speech today the right hon. Member for Blackpool, North (Sir T. Low) advocated an increase in the self-financing of the nationalised industries and suggested that if the industries increased their efficiency that would be possible. The efficiency of these industries has been shown by all published statistics to have very substantially increased over the years, but there is also the question of increasing their revenues. It is impossible for them to increase their own allocation to investment unless their revenue is increased, but hon. Members opposite—in using their political propaganda against nationalisation—are the first to resist any increase in the charges made by those industries. If it is desired that there should be more self-financing of nationalised industries, it is essential that they should be permitted to put up their charges. I am not suggesting that that is necessarily desirable, but they cannot increase the money they put aside for their own capital investment unless their surpluses increase.
In his Budget speech the Chancellor said:
long-term investment programmes in the public sector, of the nationalised industries and others, can be rapidly varied up and down in accordance with the state of trade and the need to raise or lower the general level of demand from time to time. Something effective can be and is being done in this way, but for large parts of the public sector programme the possibilities are limited if we are to have sensible plans made and carried through with confidence and efficiency."—[OFFCIAL, REPORT, 7th April, 1959; Vol. 603, c. 43.]
I am glad that the Chancellor has come to that view, but it is regrettable that his predecessor, the right hon. Member for Monmouth (Mr. P. Thorneycroft), did not take the same view, because the Transport Commission is now suffering from the fact that its capital investment programme was cut back in 1957 and that delayed the modernisation which is so essential to the eventual financial success of the Commission. Evidence of that
was produced in its 1957 Report, in which time after time reference was made to the fact that this or that proposed item of capital expenditure had to be cut down or eliminated to meet the demand for a cut-back in capital investment.
An interesting aspect of the capital investment programmes of the nationalised industries is that the Government are now allowing them to be increased so that they can contribute to the expansion of the economy, which it is now Government policy to seek. It is somewhat ironical that the Transport Commission, which has been the greatest sufferer from the policy of economic stagnation and the holding down of production because of the consequent fall in its traffics, is now used to bring greater benefit to the economy in expanding its capital investment programme. That is quite evident because the increased expenditure by the Commission covers a wide variety of industries and particularly calls upon increased steel production. The fall in steel production and coal production, in particular, has affected the traffics of the Commission and led to a very substantial decline in them and, as a consequence, in its takings. Unfortunately, stagnation has affected the Commission seriously and has put it into a very difficult financial position.
Figures have already been given in the debate that we had on the Transport (Borrowing Powers) Bill earlier this year. In 1958, freight traffics were down by no less than £30 million, of which half was the result of decline in coal and steel production. Unfortunately, this trend is continuing and the traffics of British Railways have not yet started to recover. During the first twelve weeks of this year, freight traffics fell by a further £6½million over 1958, which itself was a very had year in which there was a substantial decline in traffics. There is no increase in production and no expansion there to which the Chancellor so optimistically referred.
In his Budget speech the Chancellor said that he would reduce by only £6 million the sum allocated for financing the Commission's deficit during the current year; that is to say, he has reduced the amount put below the line to meet the deficit of the Commission by that amount only. That was a serious statement on which the right hon. Gentleman did not expound. The Committee will recall the manner in which this deficit is being financed. At present it is by borrowing from the Treasury on loan, on which interest is to be paid, but the interest is also borrowed until 1962 or 1963. The deficit financing last year cost the Treasury £94 million, which, presumably, meant a deficit of about £90 million with about £4 million accrued interest, and in 1959 the amount allocated below the line is £88 million, which again includes deferred interest. I assume that it is reasonable to expect that the Chancellor has estimated a deficit of about £85 million on British Railways during the current year.
If that is so, he is not looking forward to a substantial increase in production and a rise in traffics on British Railways. If he were so confident that there was to be this recovery in the economy in the current year, surely he would have allowed for a greater increase in the takings of the Commission. The outlook for the Commission is very grim. The Government will be called upon to come to its assistance in greater degree within the foreseeable future if further action is not taken and there is not a substantial recovery in the economy.
Half the money which this House has voted to meet the deficit of up to £400 million, plus accrued interest, by 1962 was drawn upon in the first two years. It was voted for five to seven years. There was a first instalment of £250 million, which was increased to £400 million earlier this year and now only £232 million is left for the five years ending in 1962. In 1958, the deficit allowed for in the accounts was £90 million and for 1959 it is £85 million, which makes £175 million. If that is deducted from the balance of £232 million, there is only £57 million left for the three years 1960, 1961 and 1962.
When we were discussing this, and the Minister of Transport expressed full confidence that this amount would be adequate to meet the deficit of the Commission up to 1962, we challenged him on this side. The figures given in the Financial Statement and in the Budget speech of the Chancellor confirm our pessimism. It will be impossible for the Commission to reduce its deficits in the years 1960 to 1962 inclusive, to such an extent so that the £57 million, which is all that will be left, is adequate to cover it. It cannot possibly be enough, so that next year it would appear that whatever Government is in power will have to come to the House and ask for further assistance for the Commission.
As I have said, the outlook is grim. Whichever way one looks at the position of the Commission today, whether at the revenue side or at the capital position, the outlook is frightening. The responsibility for the position of the Commission rests, unfortunately, on the Government's economic policy, as well as on the policies pursued towards the nationalised transport industry. This economic policy was admitted as being responsible in the letters which were exchanged between the Minister of Transport and the Chairman of the Commission. It was indicated in them that the fall in traffics was entirely due to the fall in production.
I now turn from the Commission itself to the road passenger industry, which is also in a state of crisis. The Chancellor recognised this in his Budget Speech, when he said that something should be done to assist the industry. Unfortunately, he has not gone nearly far enough. The relief which he has given by a reduction of the vehicle Excise Duty amounts, in a full year, to only £3½ million, which is an insignificant sum when compared with the amount which is spent on travelling by bus and coach annually.
The Chancellor has given more relief to the road haulage industry—the goods transport industry—than to the road passenger industry, though it is the road passenger industry which is in greater need today. I think that the whole Committee accepts the desirability of the abolition of the Purchase Tax on commercial vehicle chassis, which helps the road haulage industry substantially, but, at the same time, equal relief, if not more relief, should have been given to the road passenger industry, because it is suffering from a number of factors which are quite outside its own responsibility.
There is the change in social habits which has reduced the amount of travelling. Television and other matters have changed the habits of the people, and social surveys have shown this and confirmed it. More important is the great increase in personally-owned transport; that is to say, public transport is affected because of the great increase in the number of private cars, which we all welcome. Another factor, and one with which it is more in our power to cope, is the increasing congestion on the roads. which causes the deterioration in the public transport services and which leads to their being used less and to further resort to private transport.
The tragic result of this is that road passenger services are being cut down, their frequencies and routes curtailed, and unremunerative services eliminated, in such a way that the operators are ceasing to provide a public service to the community. I am not concerned with the profits of the operators, though, actually, in spite of the great difficulties they are meeting, they are not doing so badly, from the point of view of the payment of dividends. They are able to maintain their profitable position by cutting out their unremunerative services and by diminishing the extent to which they are providing a public service.
The change in the vehicle licence tax which the Chancellor has introduced is a reasonable change, but it does not go nearly far enough. I will give some figures to the Committee showing the insignificant extent to which it helps the industry. For instance, a 12-seater bus, a small vehicle the use of which the Minister of Transport encouraged to help rural services, which previously paid a duty of £20, will now pay £12. A 44-seater bus, which previously paid £72, will now pay £24, and, the duty for a 65-seater bus goes down from £97 4s. to £34 10s. These figures appear significant, and for a large fleet would amount to a considerable sum, but what is more important is to consider to what extent this affects the earning ability of the industry; and in that respect the results are not nearly so significant.
For instance, if one takes a 12-seater bus operating on rural transport and doing 10,000 miles a year, the annual saving of £8 per bus is equivalent to only ·16d. per mile. The saving on a much larger bus, the 65-seater double-decker on city services, which is doing 40,000 miles a year, is ·376d. per mile—about one-third of 1d. per mile. As the losses already incurred on unremunerative services come to very much more than one-third of 1d. per mile, this cannot make any important difference between profit and loss. It cannot turn an unremunerative service into a remunerative one.
In fact, the working expenses of the bus companies amount to about 2s. per mile. The actual figure which I have for 1957 of the working expenses per mile in the Tilling group was 24·87d., and in the Scottish Omnibus group 24·24d.—about 2s. per mile. Against these there is a saving of only one-third of 1d., and it can have no effect on whether the service can continue to operate or not.
No wonder, therefore, that the technical journals of the industry have been very critical indeed of this relief, saying that it is not adequate enough to have any real effect on the services of motor transport operators. Motor Transport says:
It does not seem that the savings can help much with the fares problem or with that of rural services for which the Chancellor primarily intended the concession.
I think that the only effective palliative that could be provided for the road passenger services, which would enable them to continue to operate a number of the unremunerative services which are today threatened with elimination, is to have a tax reduction, or a tax exemption, as far as public service vehicles using diesel oil are concerned. That is to say. if the duty on diesel oil were removed from public service vehicles, the saving to the industry would be such that it would be able to continue to operate a great number of the services which are now threatened with reduction.
This afternoon the Financial Secretary stated that this was not administratively practicable. I cannot understand that argument, because already a considerable amount of diesel oil is not taxed and even in the Budget the Chancellor has made certain proposals which remove liability for duty from certain vehicles. There are four categories, one being engines which are used on a vehicle but not for propelling it, and that is not relevant to my argument.
The three other classes of vehicles concerned are, first, vehicles which are not used on public roads and are not licensed for such use, which consume diesel oil but not while running along the roads—for example, vehicles in factories; secondly, vehicles exempt from vehicle licence duty as road construction vehicles; and, thirdly, vehicles exempt from vehicle licence duty because they are used on roads only to a limited extent in passing from one part of a holding to another. If it is considered administratively possible by the Chancellor to exempt these three groups of vehicles from tax, why is it not administratively possible also to exempt public service vehicles from the tax on diesel oil?
The Financial Secretary stated that it would cost £30 million a year. That is less than the cost of the remission of tax on beer, which I believe is about £36 million. I think that this £30 million devoted to reducing costs of services in the rural areas would bring greater benefit to the community than a reduction of 2d. a pint in the tax on beer.
I regret that the Chancellor is only tinkering with this problem. It seems to me that the combination of the Government's economic policy and their transport policy has caused so great a deterioration in the transport industry that it is ceasing to operate as a public service. We have seen this not only in the rural areas, but also in the urban areas. In London, economies have been forced upon London Transport's bus services which have reduced the efficiency and effectiveness of London Transport's operations. It is no longer providing to the full extent the services which the public demand and require. This is not the fault of London Transport. It is due to the economies forced upon the authority by Government policy, to which it has to submit.
I suggest that the survival of the public transport industry as a social service is threatened and that at this time, when the Chancellor had an opportunity to make concessions, he could have made concessions to the industry to enable it to continue to operate as a public service. Even so, I consider any concessions which he makes as only a palliative, because the ultimate solution lies in the nationalisation of the industry. As long as transport is operating as an unplanned industry, it cannot, in the long run, provide the public services quite rightly demanded by the public. I suggest that this is another instance of how in this Budget, in the distribution of his largesse, the Chancellor has his priorities wrong.
Tempted as I am to follow the long speech of the hon. Member for Enfield, East (Mr. Ernest Davies) on transport, I feel that it was more suited to a transport debate than to a Budget debate. I am confident that I should be able to deal with some of the points which he raised. I hope that the Committee will agree, however, if I forbear giving it that pleasure on this occasion except to say that the hon. Member gave a few glimpses of the obvious in pointing to the grim situation of British Railways. If it encourages him at all it is worth while pointing out that this year the Chancellor has granted £50 million more to the British Transport Commission for capital expenditure than was granted last year. That is a very satisfactory position.
I want to recall the Committee for a moment to the subject of the debate—the Budget. I want the Committee to recognise—as the Chancellor has recognised—that the success of this Budget would not have been possible but for the stern and, at the time somewhat unpopular measures taken by his predecessor in office in September, 1957, because the raising of the Bank Rate to 7 per cent., the holding of the credit base and the tightening of hire purchase restrictions all had very salutary effects. They restored foreign confidence in the £, prevented the runaway inflation which might have taken place, stopped dangerous rises in imports, checked overwhelming wage demands and gave us for the first time a favourable visible balance of trade.
One need not be a gardener to point out that the manuring of the soil in 1957 has given us this generous flowering in 1959. What a glamorous selection of spring flowers the Chancellor has brought to flourish ! First, we have the largest tax reduction at any time in the history of the Budget and the lowest level of Income Tax for nineteen years. For the first time since the war company taxation has dropped below 50 per cent.—to 48½ per cent. against 52½ per cent. The largest amount in total has been taken off Purchase Tax since it was introduced. We have had the biggest single reduction in beer duty since it was introduced 300 years ago.
I cannot imagine that hon. Members opposite want to pull up those flowers by the roots. Of course not. In fact, they would rather do as much, if not more. During the discussions on the Finance Bill in the summer, I pointed out that although Purchase Tax on commercial vehicle chassis raised £14 million, when depreciation and initial allowances were taken into account its removal would cost only about £7 million. As the Committee knows, I have a direct interest in this matter. It is worth pointing out that the Chancellor's concession in respect of commercial vehicles will be widely welcomed in many places, not least in Lancashire, where many commercial vehicles are made. It should help to improve the employment situation in that county.
While on the subject of Purchase Tax, I want the Chancellor to consider in the corning year making small Purchase Tax changes at times outside the Budget. From the point of view of the ordinary shopkeeper the best time is just after Christmas. when stocks are low. For example, an industry which might well qualify for assistance this summer is the bicycle industry. It is producing 16 per cent. below its rate of last year and many factories are on a four-day week. It is the kind of industry which would benefit from a Purchase Tax reduction made outside the Budget period.
I am not one of those who wish to see a wholesale change in Purchase Tax to make it into a turnover tax. If we did that, we should run into the danger of spreading the tax over raw materials, electricity and a number of other things which enter into costs. In my view the Chancellor is taking the right course by keeping the structure but by progressively lowering the rates.
Before I come to my main theme, I want to make three detailed points. I am glad that the Chancellor is considering the case of the public service pensioners, a deserving class, as my right hon. and learned Friend the Member for Chertsey (Sir L. Heald) said, but I hope that at the same time the claims of the railway superannuitants will be taken into account.
That is a different matter.
The payment of interest on post-war credits from next October will give a great deal of pleasure, but even more pleasure would be given if the opportunity were given to holders of post-war credits to forgo the interest which they will have and instead to put the money into Premium Bonds and to qualify for a prize.
While we are on these small points, I think that we must consider the wider ownership of industrial shares. To encourage the growth of the unit trust concept, I should like to see 1 per cent. taken off the Stamp Duty on share transactions and consideration given to the freeing from tax of, say, the first £15 of dividend from unit trusts, in the same way as interest on Post Office savings is freed.
This is, frankly, an expansionist Budget, as has been said. It is all the more so because, on top of the £360 million remission in taxation, the Treasury will have to find another £100 million or more in the next few years in the form of investment allowances and repayment therefor. Also, there is the additional below the line capital expenditure of £193 million more than last year.
Everybody agrees that there should be an expansionist Budget this year. I was surprised to hear the right hon. Member for Blyth (Mr. Robens) say at the beginning of his speech that there was no social purpose in the Budget, because, to my mind, the social purpose is to expand the economy, relieve unemployment and bring about prosperity. That is a good purpose.
The question I ask myself is how expansionist is the Budget and whether it will encourage a rise in costs and, hence, inflation. The margin between cost of living stability and inflation is very narrow indeed. It will be recalled that the movement of increases in basic wage rates, apart from earnings, over the last three years, has been as follows—1956, 7½ per cent.; 1957, 5¼ per cent. 1958, due, I think, to the measures taken in September 1957, only 3½ per cent.
Recently we have been going in the right direction from the point of view of holding inflation and keeping down export prices. Even so, the index of wage rates in the last three years is six points ahead of the index of retail prices.
To pinpoint how the habit of annual increases in wage rates has grown in recent years, I may mention that before the war an average of 6 million people a year had an increase in wage rates, but at the present time 12 million people a year have an increase in wage rates, although the working population has increased by only one-third.
I should like to give an example from my own experience of how necessary it is for us to keep down costs. In a recent speech the President of the Board of Trade congratulated the motor industry on its success in the export market, especially in America. I should like to reciprocate by congratulating the Government on making that export success possible in two ways. First, the Government have prevented a serious recession in this country. With unemployment at only 2·5 per cent. the position has been very much better than in America or Canada, where it has been 6 to 8 per cent., with many millions of unemployed. Secondly, in the last eighteen months the Government have kept the cost of living stationary, which has helped to stabilise costs.
For instance, it is not generally recognised that in America at present the British motor industry is selling its motor cars, not for any snobbish reason but on prime cost, on relative cheapness. A few years ago the popular British car was selling in America at about 1,800 dollars. It has now risen to 2,200 dollars. At the time when the British car was 1,800 dollars the American car was 2,200 dollars; there was a gap of 400 dollars between the two. In the meantime, the American car has risen to about 3,000 dollars and there is now a gap of about 800 dollars between the two, which, in my view, is responsible for the successful sales of British cars. If we are to be successful we must maintain that gap.
It may be asked why American car prices have risen so substantially. First, their unit costs have risen because of the depression and the low volume of production. Secondly, the United Automobile Workers, under the leadership of Mr. Reuther, have been so successful in foisting wage demands on the American automobile industry and clamping on it in their annual contracts things like annual productivity bonuses when there is not any annual productivity increase that they have brought about a tragedy for the American automobile industry, because they have priced the American automobile out of the world export markets.
While the position of British cars is good in America—and we hope to see 180,000 cars there in the coming year as opposed to 150,000 cars last year—the position is absolutely different in Europe, where wages, costs and production have been much more stable.
I will, if I may, quote The Times leading article on the subject this morning which is headed, "Selling British". and which says:
Viewed in isolation, Britain's export record is a good one. But, while her exports of manufactures have grown, those of her cornpetitors—including Germany, and more recently, Japan—have grown much faster, and she has made relatively little headway in certain markets, notably in Europe and South America, in which other exporting countries have been highly successful. Though United States' exporters have been losing ground in the recession, the range of competitors whom British exporters meet has been growing wider, with the low wage competition from the Far East and the state exporting of the Soviet bloc added increasingly to the formidable exporting strength of Western Europe.
That is a true description. I, as somebody interested in industry, think that if we are to keep our competitive position vis-à-vis Western Europe this year wage rate increases in 1959 ought not to be more than 2 per cent.
The right hon. Member for Blyth asked how it can do so. He represents a constituency in the North of England. He knows very well that his constituents drink a great amount of beer and that the cost of that beer goes into the cost of living.
The greatest service right hon. Gentlemen on the Front Bench opposite could render the nation would be to say publicly, that it would be in the national interest this year that wage increases should not exceed 2 per cent.
Apart from the assurance which the hon. Member for Twickenham (Mr. Gresham Cooke) gave us just now that this is the right percentage, will the hon. Member tell my right hon. Friends, so that they may consider his proposal, what other authority, apart from his say-so, they have for thinking that it will be to the advantage of the nation if they stipulate that wage increases should not exceed 2 per cent.?
Because I have been trying to calculate our costs vis-à-vis those of Germany and Western Europe in particular, where costs have been held fairly stable in the last year. On that, and carrying that graph forward, one sees that about 2 per cent. would be the maximum that we ought to give.
Finally, I could not help reflecting how lucky the nation is to have in 1959 a Chancellor from this side of the Committee rather than one from the opposite side of the Committee. If we were still paying tax at 1951 rates, we would be paying £1,200 million a year more than we are at present, which would be equivalent to 26s. a week—over £65 a year—for every family in the land.
My hon. and learned Friend the Financial Secretary has given us one or two figures that would have to appear in any Labour Budget, and I should like to add a few more. If the right hon. Member for Huyton (Mr. H. Wilson) were Chancellor, he would have to implement what is set out in the little black book entitled "The Future Labour Offers You". That implementation would be rather a black day for this country. Not only does it undertake to increase pensions, war pensions and industrial injuries by 10s. a week at a cost of over £200 million, but to abolish Health Service charges and to increase hospital services by, say 50 per cent.—items that would come to probably another £200 million a year.
The party opposite has also undertaken certain steps in education, including reducing primary and secondary school classes very substantially. The cost of that. so I am told, is well over another £200 million a year. In addition, the interest in relation to the municipalisation of houses would cost another £250 million a year. That being so, a Labour Chancellor would have to find from the nation about £900 million a year more than we are raising.
How would he do it? I suppose that it would be quite simple. To begin with, he would add 1s. 6d. on to the standard rate. That would bring in about £390 million. An extra 6d. a gallon on petrol would provide another £60 million. By putting on another 6d. on every packet of 20 cigarettes he would get about £90 million, and £60 million would come from 3d. on the pint of beer. I suppose that he would put up Purchase Tax by 25 per cent.—another £115 million.
That would bring in only £715 million, but it is still a very substantial sum, and the right hon. Gentleman for Huyton would probably be called the "right hon. Gentleman for high taxation." To meet this heavy extra expense a Labour Chancellor would have so to inflate the economy—and, indeed, the Opposition in their programme have promised to do so by £1,700 million a year—that he would run into a balance of payments crisis, just as the party opposite did in 1947, 1949 and 1951.
This Budget is irrelevant to Scotland's urgent needs. It is unsatisfactory, incomplete and unpractical, because it does not make adequate provision for her special needs. It was the duty of the Chancellor to do so, as I shall prove by quotation from a distinguished Tory economist.
The Budget is invidious and unjust to Scotland in its selection of beneficiaries. It is a class Budget. It benefits the well to do at the expense of the poor; and the higher income groups at the expense of the old-age pensioners. It is nationalistic, in that it deals with the problems of England but treats the Scots as foreigners and aliens, unworthy of notice.
It ignores Scottish problems because, apparently, the Chancellor does not know what they are. He makes no mention of them at all, and therefore makes no contribution to their solution—or even to their mitigation. In this respect, the Government and the Chancellor seem to be uninstructed in Scottish affairs, lacking in vision, out of date, and unfit to goven Britain—which includes Scotland.
I shall give the authority of a Tory economist to show how outmoded the Chancellor is and how unsound are his doctrines. I shall prove the case against the Government out of the mouth of one of their own witnesses. Sir Roy Harrod, whom no one would call a Socialist—indeed, he was knighted by the present Government—is a distinguished economist, editor of the Economic Journal, and Nuffield Reader in Economic Science.
In a recent learned article, Sir Roy defined the duty of the Government in relation to the national economy, and made three points. The first was that before the Second World War no Government would have been prepared to accept responsibility for the national economy. His second point was that this obligation was thrust on the State by the war and by wartime need to control entirely the means to achieve victory. His third point was that since the Second World War no Government, irrespective of party, thought it reasonable to question this doctrine, even in peacetime.
In my submission, it should not be questioned now, but the present Chancellor and the present Government have repudiated it. In this Budget, they have gone back a hundred years to the doctrine of the Victorian era. It is a mark of respect to this House to rely upon undoubted authority, and as Sir Roy is an undoubted authority in his own sphere I venture to quote a paragraph from his article. Following the line of thought I have just adumbrated, he said:
By its very definition Government is there to protect life and property, to provide police and defence. One or two other things, like a good coinage, fall naturally to it. But Governments have by no means been regularly confined to this narrow sphere.
In relation to this Budget he might have added specifically that there is a duty to the poor and to the old-age pensioners as well as to the rich; and a duty to Scotland as to the rest of this island. That this was obviously his meaning was evident when he pointed out that in this twentieth century the duty of the Government is to regard the nation not as a set of classes but as a body of citizens occupying the whole of the island—not only England and Wales, but Scotland, also.
Having reviewed earlier times, Sir Roy said:
Now all is changed. It is held to be the responsibility of the authorities—the politicians and the Civil Service to bring about certain results, which lie outside the traditional fields of foreign policy and policing and which are
not precisely specified in particular laws. The authorities are expected to implicate themselves in the task of promoting social and economic welfare. If their activities in this direction require legal sanction, it is considered to be their responsibility to initiate appropriate legislation.
In my submission, that responsibility has not been discharged by the Government in this Budget in relation to Scotland topographically, or in relation to the poor and the old-age pensioners as citizens. The Chancellor has flouted the doctrines of this distinguished modern economist who, as I say, cannot be described as a Socialist. I beg the Chancellor and the Government to go back, not to the Victorian era in which, by this Budget, they are now wallowing, but to the authoritative doctrines I have just adumbrated. The Chancellor should realise not only the needs of all the citizens, but of all the places in this island. I beg the right hon. Gentleman and the Government to heed and to follow this doctrine. I beg the Chancellor to study the needs of Scotland in particular.
The Chancellor boasts in his Budget about the opulence of Britain, but he forgets that Scotland is part of Britain. The Chancellor boasts about the financial strength of Britain, but invidiously throws out his benefits to the southern part of this island.
We on this side of the Committee rejoice in the opulence and financial strength of Britain, and I make two observations on it. First, it was not achieved by the present Government. They allowed unemployment to grow. Indeed, they may have fostered it in view of the imminence of a General Election with a view to spectacularly reducing it on the eve of an Election. Who knows?
Lord Chief Justice Bryan in the Thorogood case 300 years ago said:
This court doth not try the thoughts of a man because the devil himself knoweth not what really are the thoughts of a man.
Far be it from me to try to diagnose the thoughts of the present Government. It may well be that on the eve of a General Election they have deliberately allowed unemployment to grow in this island. They may deliberately have promoted it in order spectacularly to reduce it on the eve of a General Election. Who knows?
I am speaking of the opulence and financial strength of this island and its result. Out of that opulence the Chancellor had a great opportunity; to spread that opulence fairly throughout the whole of this island and to all classes in this island should have been his aim. I draw the Chancellor's attention to the fact that Scotland presents a special and specific problem owing to its peculiar geography and the spread of its industries. In the South there are plenty of industries and large populations. In the North there is a sparse population and few industries. The North of Scotland is always clamouring for more industries and the Chancellor could have done a lot by his Budget, and can still do it by his Finance Bill, to foster industry in the North of Scotland.
The Scottish Trades Union Congress said only the other day:
The existence of 116,000 persons unemployed in Scotland, or one-fifth of the total of Great Britain, is not only an industrial scandal but a human problem disturbing the conscience of every socially minded Scotsman. Jobs need to be provided for them and the amount and direction of the Chancellor's expenditure can help immeasurably.
That statement comes from experienced industrialists of the Scottish Trades Union Congress who know the conditions in that country and what the Chancellor could do to ameliorate them.
I may be asked what the Chancellor can do. A good example of this is the practical way in which Northern Ireland has tackled the problem. Grants and loans have been provided to build advance factories, extend existing factories, let factories at cheap attractive rents, buy machinery, assist research, build special toads, power stations, workers houses and to buy fuel to warm the houses and operate factories there. These things have been done in Northern Ireland. Why can they not be done in the North of Scotland? We have been begging the Government to do something for Scotland, and they have not done it. They have had plenty of statutory power and now is the crucial moment when the Chancellor of the Exchequer has an opportunity of fostering industry in the North of Scotland.
The Scottish Trade Union Congress also said this:
Public investment in such projects as power stations, hydro-electric schemes, railways modernisation, road development, industrial estate, and the £50 million loan to Colville's Ltd. to build a strip mill is invaluable to Scotland. Much more of this kind of
investment is needed and provision should be made for it in the Budget.
I ask the Chancellor to seize the opportunity now of making those provisions in the Budget. If the Government cannot govern Scotland fairly and evenly, if they cannot bring in a Budget and a Finance Bill which is fair to Scotland, let them get out and make way for a Socialist Government that will do these things.
When I was Parliamentary Secretary to the Ministry of Labour and National Service I had the pleasure of visiting Scotland, and, I think, the constituency of the hon. and learned Member for Aberdeen, North (Mr. Hector Hughes). No one who has visited Scotland and studied the country can deny that there are serious problems there, but any fair-minded person must realise that the difficulties cannot be swept away by passionate speeches. however sincerely made. A great deal has been done, and is being done, to assist development in Scotland in spite of the difficulties of remoteness. When I visited Scotland eighteen months ago I saw many examples of entirely new factories and industries springing up in difficult areas, due entirely to the help and encouragement given by the present Government.
I was delighted when my right hon. Friend the Chancellor felt able to introduce a Budget that was undeniably an expansionist one. I was still more glad at the fact that the Chancellor did not make expansion, as such, the main theme of his Budget. There is a danger—particularly, if I may say so, among right hon. and hon. Gentlemen opposite—of becoming too obsessed with expansion as expansion. Expansion may or may not go hand in hand with increased efficiency and competitive power. In the long run, full employment and rising standards of living for all our people, and more help for the elderly—which is the point the Opposition are making much of—can be based only on increased efficiency and competitive power for British industries. These objectives cannot be brought about on a long-term basis by any feverish expansion regardless of the strength of sterling and the avoidance of inflation in this country.
When the right hon. Gentleman the Member for Blyth (Mr. Robens) was speaking from the Opposition Front Bench at the opening of the debate, he
spoke as if the Chancellor's main, and indeed only, object was expansion. When the Chancellor spoke about the theme of his Budget he said:
I have no doubt whatever what the first requirement is today. It is an improvement in the competitiveness of our economy. All our hopes for the future depend on this."—OFFICIAL REPORT, 7th April, 1959; Vol. 603, c. 47.]
That was his theme and I was delighted to hear it. I am sure he is right and it is a theme which ought to be impressed on everybody. While competitiveness and expansion may walk hand in hand at this moment, they do not necessarily always do so. It is often difficult to realise that fact. I would like to judge this Budget by the extent to which it has served the C. hancellor's first declared purpose of increasing the competitiveness of our economy. At another stage in his speech on Tuesday, my right hon. Friend the Chancellor said that
it is impossible to exaggerate the importance of our maintaining and, indeed, improving our competitive position through efficient investment and lower costs. This is, to my mind, the key to success in the future."—[OFFICIAL REPORT, 7th April, 1959; Vol. 603, c. 40.]
I am sure that nearly everybody would agree about that, particularly when we look, as we ought to do, both to the east and to the west of us in the world and when we see the tremendous schemes of capital investment which have been running in the United States, in Russia and in countries of Central Europe, notably, perhaps, in Western Germany.
While we very much welcome the improvement which my right hon. Friend announced had taken place in recent years so that we now have 20 per cent. of our national product being invested compared with only 16 per cent. eight years ago, an increase which hardly seems to tally with the Opposition cries about stagnation, we also feel that still more is needed. We therefore welcome my right hon. Friend's action this year in reintroducing investment allowances.
I know that there are arguments against investment allowances, and some of them are strong arguments. In spite of that, however, I am convinced that my right hon. Friend was right to reintroduce these investment allowances this year. At the same time, I cannot help expressing concern at the Chancellor's warning that these investment allowances are some- thing which may have to be put on and put off. I understand my right hon. Friend's reason for giving that warning, but equally, as he himself recognised elsewhere in his Budget speech, the repeated hotting-up and cooling-off does not lead to efficiency in investment programmes.
That is why, while recognising that this is a good measure this year, while recognising that for the reasons given by my right hon. Friend it is an allowance which may have to be taken off at some time in the future, I consider it extremely important to set afoot at the same time some longer flowing tide of encouragement to a high investment economy. I would have thought that the best direction in which to look for that long-term steady encouragement to a high investment economy was towards an increase in the depreciation rates allowed for taxation.
My hon. and learned Friend the Financial Secretary to the Treasury dealt with that aspect today. I found the figures he mentioned rather difficult to understand. They were much larger than I expected, although I accept that if they come from him, they are correct. Nevertheless, in spite of that cost, I hope that my right hon. Friend the Chancellor will seriously consider such a measure for the future. If he were to seek the advice of the larger firms in British industry, he might not find much enthusiasm for this idea. In the case of a very large firm with big capital investment programmes year in and year out, although I am not an accountant I believe that the rate of depreciation is largely a bookkeeping entry and does not have much practical effect.
Most of British industry, however, is still comprised of medium and small firms which do not have large, regular investment programmes. The effect of the depreciation rate on that type of firm is much greater than on the larger firms, not only because it is of more assistance to them than to the very large firm, but because psychology becomes more important in that type of undertaking. I suspect—and I speak as chairman of a medium-sized company—that when the people concerned come to the chairman and ask for a capital programme for the replacement of older plant by new plant and can tell him that it is written off in the books as worth nothing, as a matter of psychology those claims have a more favourable hearing. If there is any doubt about this, I would like my right hon. and hon. Friends to examine what the effect of quick depreciation rates has been in other countries such as Holland, Canada and many others.
If we are to have high investment, we must have high savings as a necessary corollary. They are excellent figures which my right hon. Friend the Chancellor has been able to give us again this year, and this is at least the third year running when personal savings have run at about £1,500 million a year. I would have thought that this figure was one of the best proofs of the efficacy of the Government's policy over the last few years. While I welcome those figures and believe that my right hon. Friend's policy in leaving the interest rates on various national savings investments at their present level will persist in keeping them up. I cannot help expressing disappointment, which, I sensed, was shared to some extent by my right hon. Friend the Member for Blackpool, North (Sir T. Low), that the Chancellor has not been able this year to consider measures to encourage investment in industry, especially by the small investor.
I feel that the present pattern of tax encouragements for savings is distinctly illogical. Although there is a strict limit to what the Chancellor can do in one year, and while I am glad that he concentrated the reliefs which he could make upon a smaller number of large measures and. therefore, I make no complaint about this year, I would like to think that this encouragement to industrial savings is something to which my right hon. Friend will turn his mind for future Budgets.
Turning from investment, I think we would all recognise that, just as a competitive economy demands a high rate of capital investment, it also demands efficient and progressive management. In my experience, the greatest need, perhaps, in this sphere is to give help and encouragement to the younger, up and coming managers and technologists. I am referring to those managers and specialists in industry who come in the salary group of between £1,000 and £3,000 a year. I believe that from among these men will come the top leaders of the future. At the moment, they have a more direct influence on productive practices almost than anybody else. These are the people who need help and I am sure that a substantial relief in the standard rate of Income Tax is the most effective step that my right hon. Friend the Chancellor could have taken to encourage efficiency on a managerial level.
We must not underestimate the effect of that incentive on that group of people. Some of us have been worried about them because it is they who have tended to go overseas. Even though that may be a good thing in itself, we can spare them only with difficulty. When young people of that type look overseas and see the tremendously lower rates of taxation which they suffer in almost any other country, it is most important that we should make ourselves a little less unfavourable in this respect.
Just as we need good management, we need plenty of skilled manpower at all levels. Expansion in the universities and technical education is well under way, but there is one point about which I am extremely concerned. We are still short of an adequate supply of skilled workers. In the next few years, we shall have an unparalleled opportunity because of the great increase in the number of young people who will be leaving schools and looking for jobs.
As some hon. Members may know, I was Chairman of a Committee appointed by both sides of industry and the Government to inquire into the problems of apprenticeship training in relation to the bulge in the number of young people. While, as the person who chaired that Committee, I am delighted to see some if its main recommendations so quickly accepted by the Government, and while I am encouraged by the amount of discussion and consideration that is taking place throughout industry on this subject. I am still alarmed lest industry should not act quickly enough to take this opportunity which now presents itself. It is an opportunity for the country and a duty—of course, a very important social duty—to the young people concerned.
While maintaining the main theme of my Committee's Report, which was that the responsibility for apprentice training must rest with industry, I had hoped that the Chancellor would have been able to consider some measures to stimulate industry in undertaking this work. I hope that he will think about it in the coming months, because I believe that this is going to become urgent within the next twelve months.
There are various possible ways in which this help could have been given. One could, for example, make some contribution to the capital cost of training centres erected by industry on a cooperative basis. I have seen such training centres in Western Germany, and there, I understand, the Federal Government give some capital grants towards the cost of erecting such centres. Then I think that if we are to absorb this large number of potential trainees it will be necessary for many medium and smaller firms to act on a co-operative basis with group training schemes and the like. I would have hoped that some way might have been found to offer help to industry or localities in paying the salaries of training supervisors on an area or local basis.
Another possibility to help smaller firms might have been some tax allowance to compensate for loss of work which a firm suffers when it releases apprentices for day release at a training college. Another possibility might be to increase the scale and scope of training allowances for apprentices who have to leave their local areas to get residential training. I would commend to my right hon. and hon. Friends in the coming months the consideration whether one or another or a combination of some of these methods could not be applied to help in this very important task.
The final specific point I should like to make is about this vexed, difficult question of wages. Let me say straight away that I personally am and always have been in favour of a high wage, high profit economy, provided that both wages and profits are earned against the challenge of competition which enforces proper cost discipline. However, there is a problem, and we ought to face it, and we ought to face it seriously and impartially on both sides of this Committee.
I think all of us ought to be extremely careful in this period not to feel that hon. Members on this side should always defend employers and attack the trade union movement and that hon. Members on the Opposition side should always defend the trade unions and attack employers, because anybody who has been mixed up in this business at all can see plenty of faults on both sides, and it is extremely important for the future of this country that we should find some solution of these difficulties.
What sort of action could be taken? I think it has got to come from industry itself. At any rate, it is better that it should come from industry than from the Government. There are many fields in which employers can take the initiative. If they take the initiative they will need patience and perseverance, and in the end they will deserve the right to demand co-operation from the trade unions, but employers must take the initiative.
In some industries, I think, the wage structures are out of date, complicated and frustrating, and ought to be changed, and everybody in industry knows they ought to be changed, and yet nothing is done about it year after year. In other industries I feel from what I have seen of it that there would be a greater chance of a more sensible and more peaceful settlement of wage negotiations if the field of negotiation affected smaller and more distinct sections of industry. The great, amorphous engineering industry is, perhaps, the prime example of what I have in mind. I think the question of longer-term agreements is worthy of consideration. Lord Chandos, among others, made a suggestion about a year or so ago in that direction which, I believe, could be followed up.
Then I think that employers should develop a habit of consulting together much more regularly than some of them do with the trade unions at what one may call the "close seasons" and not only when a wage dispute is in process. I think that those industries where this goes on find it more easy to settle their wage claims in a sensible, intelligent manner.
When it comes to the individual employer in his individual factory I am sure that wider use of properly, scientifically calculated—I underline, scientifically calculated—individual incentives would help to provide workers with the earnings which they naturally feel they want and need while at the same time not putting up labour costs of production. In factories where that has been done—and, of course, there are many of them—the results are outstanding.
What can the trade unions do? I would suggest that there are two main headings of action in which the trade unions could take a lead. First, in some industries today it must be accepted that there is an outdated union structure and a rigid demarcation both in and between crafts which cause stoppages and make wage negotiations difficult, and prevent—this is the paradox of it from the trade unionists' point of view—the individual worker from having the best chance to earn a high wage and to adapt himself to technological changes. Only the trade unions can set about solving these problems. They are nothing to be ashamed of. They have grown out of age and out of the technological changes in industry.
Secondly, if we are not to have a State wages policy I believe that the T.U.C. has got to be given very real, though voluntary, powers of co-ordination over wage claims in the next year or two.
If these things are done, I think we can hope for fewer disputes and for wage settlements more in tune with our economic needs, and with greater satisfaction to the individual workers.
As I say, I think that these probings towards change ought to be led by industry itself; but, if industry for one reason or another either cannot or will not take the lead, then I would suggest that before long the Government should init ate an inquiry into the whole of our wage negotiating system. When the Whitley Council made its inquiry a generation ago it stimulated new thought and, what is more important, new action. It might be that a very similar inquiry is needed now to act as a catalyst to the changes which ought to take place.
In conclusion, I would say this about the general strategy of the Budget as opposed to its economic tactics. What sort of economy are we trying to build, a market economy or a planned economy? These seem to me to be the two choices before us. The Opposition claim to prefer the latter. The right hon. Gentleman the Member for Huyton (Mr. H. Wilson) last Tuesday, in a presentation of "Clown Jewels" which was very enjoyable but perhaps more fitted to the Palace at the other end of Victoria Street, spoke of controls in a caressing, soothing voice which sounded like that of a television advertiser, suggesting that if only the British economy would take a dose of controls with every meal and, of course, another one on retiring at night, we should never again suffer from economic bad breath or lose our economic girl friends in world markets.
When the right hon. Gentleman speaks, as he often does, of league tables and puts, as he often does, Britain at the bottom and Western Germany, for example, at the top or very near the top, it seems to me a fascinating paradox; because what is the sort of economy Western Germany has? It is a market economy. It is a Tory freedom economy, only more so. If there is any moral to be learned from the performance of Western Germany compared with this country's, it is not that we should have the Labour Party's version of a planned economy. It is that we ought to have, as we are getting, more of the freedom of a market economy, in which we on this side believe.
It seems to me indubitable that there are emerging in the world two forms of successful economy, the market economy as in the United States and in Western Germany, and the planned economy as in Russia. I have no doubt at all that the planned economy can be effective. I do not doubt the claims for future progress which the Russian leaders make. But, if it is to work, a planned economy must have effective compulsion behind its plans and that is where it seems to me the party opposite fails in its economic doctrine and practice, because it falls short of providing effective compulsions behind its plans, notably the compulsions for the movement of labour and the wages which labour will be paid.
Without those compulsions I do not believe that a planned economy can work effectively. I believe that in fact it gives us the worst evils of both types of economy, and that is why I am sure that the policy of the party opposite cannot bring long-term full employment in this country and prosperity to the old as well as to working people. That is why I give such warm support to my right hon. Friend's Budget this year which carries one stage further the movement towards a competitive market economy in this country and will I am sure be a cause of prosperity for young and old alike.
I am sure that the Committee will agree—and I hope that the hon. Member for Mitcham (Mr. Carr) will not mind my saying it—that, apart from the last five minutes of his speech, he certainly made a very agreeable, very interesting and very fair contribution. His remarks during the last five minutes I hope to take up in my speech as I go along.
I thought that the suggestions which the hon. Member made about relations between workers and management were excellent, and I am sure that in his own concern that is the sort of objective that he follows. It is very difficult, however, to reconcile his approach with the quotations from the employers' booklet which my right hon. Friend the Member for Blyth (Mr. Robens) read out to the Committee this afternoon. It must be very clear that that attitude will also have to go if one is to get the approach which I am sure is there from those who represent the workers.
The debate today is particularly concerned with our economic situation and the relevance of the Budget proposals to that. It is quite clear that we have to relate what has been done in the Budget to the real facts of our economy, as far as we can understand them and as far as we can dig them out; that is not always quite so easy as it seems in the very complicated society in which we live and with the wealth of statistics with which we are provided. We have to do that and we also have to distinguish the real economic facts, which are not really challengeable, with the fairy story of prosperity which has been put about by the propagandists of the party opposite.
It is pretty clear that during the last six months the myth has been circulated that, owing to the tough and unpopular measures of the Conservative Party, we are now hurtling towards a booming prosperity and the Conservative Government have at long last rescued the lady from the dragon of Socialism and the country from the financial ruin which they say was created by the Labour Government. I hope to show that a good deal of that story is quite untrue. Indeed, one got from such a precise Government spokesman as the Financial Secretary usually is a kind of Ethel M. Dell version of history, which I hope to take up.
I think that it is of some interest to trace how this myth of the financial peril caused by the Labour Government arose,
and how it has been assiduously circulated ever since. An interesting early example of the story appears in a letter written by the right hon. Member for Woodford (Sir W. Churchill) which appeared recently in extracts from the memoirs of Lord Woolton, published in a Sunday newspaper. Some time after the 1951 Election Lord Woolton offered his resignation because during a party broadcast in October, 1951, he said:
Rumours are being designed to frighten you.
For example, one of them was that the Tories
would cut the food subsidies.
He then went on to say that
there was not a word of truth in any of those charges.
That was said over the B.B.C. radio service of 13th October, 1951.
The Committee will remember that in the 1953–54 Budget of the Lord Privy Seal the first thing it did was to cut subsidies from £410 million to £220 million. In view of the protests which were made by my hon. and right hon. Friends, Lord Woolton thought that he ought to approach the then Prime Minister and offer his resignation. The Prime Minister's letter is interesting from two points. One is how to get out of election undertakings and the other is how this story about bankruptcy was put around. The letter which the right hon. Member for Woodford sent to Lord Woolton said:
My dear Fred"—
a rather unaristocratic beginning—
What you said in the Election must be read in conjunction with many other things that were being said at that time… No Government called upon to face the disastrous situation with which we were and are still confronted could, in any case, be denied the right to make the best solution of our difficulties which the public interest demands. We should indeed fail in our duty if we did not act up to this principle. Pray dismiss from your mind any idea of resigning from the Government because of malicious debating points made by those who have brought the British community into deadly economic and financial peril.
That is a remarkable letter. If there had been more time I should have liked to comment at greater length about how a failure to honour an election undertaking given by a senior Minister of the Crown could be dismissed as a mere malicious debating point.
The formula that a Government must "make the best solution of our difficulties which the public interest demands," would enable an Administration to get away with any election pledge. I am, however, quite satisfied that my right hon. Friends will not have any need to make use of a formula of that kind after the next election. The phrase
those who have brought the British community into deadly economic and financial peril
was the burden of the last part of the speech of the Financial Secretary this afternoon. On that basis of history I want to look at some of the figures to see whether, if we were then in deadly financial peril, we are not in even more financial peril today.
I want to take the gold and dollar reserves as the first point. When my right hon. Friend the Member for Huyton (Mr. H. Wilson) asked the Financial Secretary if he would give the gold and dollar figures, with more adroitness than candour on this occasion he did not give the comparison. The fact is that in September, 1951, the last figures before the Election, the gold and dollar reserves were £1,167 million. In March, 1959, despite £600 million of borrowing and the fact that there were £350 million of lending by the United States and the International Bank last year, £950 million altogether, the reserves in March, 1959, were £1,121 million which is less than they were in the last figure given before the election.
It flatters me when the hon. Gentleman says it was adroitness which caused me to fail to give the figures. It was merely that I did not happen to carry them in my mind. I think that I should point out that when one comes to power with the reserves running out as fast as they were in October, 1951, that situation cannot be redressed overnight, and it was not until the following May that our remedial measures finally took effect and the trend was reversed. It must not be charged against the Conservative Government that there was a continued fall between October, 1951, and May, 1952. The hon. Gentleman ought also to take account of the repayments of loan which have taken place since 1951.
I am much obliged to the hon. and learned Gentleman. I was not denying that the reserves continued to fall for some time. I was not even dealing with the fact that in 1957 they reached a much lower level still. I am merely saying that if the Tory story is true, that we were in grim peril at the time of the General Election because the reserves were £1,167 million, and if after seven years of Conservative Government they are still only £1,121 million, that is the sort of standard by which we should judge, the economic progress achieved by the Government.
That is indeed so. I do not wish to pour too many coals of fire on the Government's head.
We must look at the situation in relation to unemployment. Immediately before the General Election there were 240,649 unemployed in the United Kingdom. In March, 1959, the figure was 591,349. On that test the achievement of the present Government is a great deal worse than that of the Labour Government.
The most important element of all is that since 1955 there has been virtually no increase in industrial production. On 19th March my right hon. Friend the Member for Huyton asked the Economic Secretary what was the unadjusted index of industrial production for December, 1958, and for May, 1955. The figures were identical. If one takes the adjusted index which make it very much more difficult for the ordinary person to understand, there is but a 2 per cent. increase. That is the sort of factor against which the Budget proposals must be considered and against which the success or otherwise of the Government's policy must be considered.
If we take into account that from 1946 to 1951 industrial production under the Labour Government increased by 34 per cent., and that during the whole period since the Conservative Government came into power it has increased by only 18 per cent., one must concede that the Labour Government did very much better than the Conservative Government has done. The idea that we are at long last struggling to a booming economy is far from the truth. It must also be remembered that during the immediately post-war years there was all the dislocation of industry, and there was also Korea, and there were rising import prices the whole time, whereas the Tory Government have been faced with falling import prices with last year's £350 million. All this makes the achievement of the Labour Government very much more impressive. It is a very different picture from that given by the Financial Secretary.
I want to give two other series of figures to complete the contrast. Let us look at house building. After the election the Tories concentrated on building 300,000 houses a year. My hon. Friends and I said it was possible to build that number of houses in a year if one stopped practically all other forms of building, curtailed factory building, schools and hospital extensions and built smaller houses. The houses in which most of the ordinary people are interested are local authority houses.
Look at the contrast here. In 1951, the last year of the Labour Government, the number of completed local authority houses was 141,000, whereas in 1958 the figure was 113,000, 28,000 fewer. Indeed, so successful has been the Conservative Government's policy for local authority house building with high interest rates and the withdrawal of subsidies that, according to the last returns, 424 local authorities in England and Wales have stopped house building altogether. This is a totally different picture from that presented by the Financial Secretary.
Let us take one other item from the social side of our activities—large classes in secondary schools. The total number of children has of course risen since 1951, but it has not gone up in proportion to the number of large classes. In 1951 there were 29,055 classes with thirty children, whereas in 1958 there were 43,500. The number of children in the secondary schools has not doubled, but the number of large classes has. That is the result of the failure of the Government to get teachers and to incur expenditure which we ought to incur if we are as prosperous as the Financial Secretary suggested, and which many hon. Members on this side of the Committee believe we ought to incur if we are to have any prosperous future.
On all those counts the Labour Government did very much better than the Conservative Government has done. It is time the phoney story of prosperity which has been so constantly circulated by hon. and right hon. Gentlemen opposite was ended. The real fact—I know that right hon. Gentlemen opposite do not like this—is that for the last four years our production machine has remained virtually stagnant and has done worse than any other comparable industrial nation. It is against that background that the Budget proposals must be considered.
How will the Budget proposals help? I cannot see that bringing in the surplus capacity of the brewing industry will cause a very large revival in our industrial fortunes. As has been pointed out, the Purchase Tax reductions affect most beneficially the industries which, on the whole, are doing better than others. There is nothing for clothing, furniture, bedding, cutlery and kitchenware. If I may here make my only constituency point, I am sorry that gramophone records, certainly classical records, will still be subject to the 50 per cent. rate. If one reads books or goes to the cultural productions of the Arts Council and the Old Vic there is rightly no Purchase Tax, yet classical records will still be subject to Purchase Tax at double the rate for mink coats. That is unfair, and I hope something can be done about it during the proceedings on the Finance Bill.
It is difficult to see how the Purchase Tax reductions, at any rate in a short period, can have very much effect on the unemployment situation. I think we all welcome the investment allowances. As my right hon. and hon. Friends have said, it is a great pity that these concessions were not made last year instead of waiting until this year. In this connection, I wonder to what degree the theorists and realists opposite—the tough men in the Cabinet and in industry —think unemployment is tolerable. I should like to know the answer. We heard an answer from the Financial Secretary in reply to an intervention. I do not want to misquote the hon. and learned Gentleman. It was an intervention about sagging production, and the hon. and learned Gentleman asked, "What is the good of having an increase in production if one cannot control prices?" At all events, the hon. and learned Gentleman said something to that effect. A concomitant of that seems to be that one has to tolerate a degree of unemployment. I should be glad to know whether that is so, and what the degree is.
The hon. Gentleman is always completely fair, and I know that, as he has indicated, he would not want to misrepresent me. I have not in mind precisely what I said in reply to the intervention, but it was to the effect that it is no use expanding production if the concomitants are a balance of payments crisis abroad and very rapidly rising prices at home.
I want to be quite fair to the hon. and learned Gentleman. I wonder what degree of unemployment ought to be tolerable in a market or free home trade area according to hon. Gentlemen opposite who are responsible for theory.
There is a school which takes the view that a degree of unemployment is quite a good thing because it makes people keen to keep their jobs and keener not to lose them. We have had various quotations with which I would not bore the Committee. There are even some people who think that the electoral consequences of unemployment are not significant so long as the unemployment is not too great.
There was an article to that effect in the Evening Standard last Wednesday. It said:
One of the outstanding facts is that unemployment tends to occur in areas which always vote Socialist anyhow. It is therefore easy to exaggerate its electoral importance—when on the present scale, at least.
Looked at strictly from the point of view of votes, it makes no difference whether unemployment at Ebbw Vale is nil or the highest in the country. This is one of those constituencies committed to returning a Socialist whatever happens.
There are people who take the view that so long as it does not get too great and spill into marginal constituencies, there is a lot to be said for having unemployment.
I do not ascribe that view to the hon. and learned Gentleman, but, having regard to the half-hearted measures in relation to unemployment, there may be those in the Government who think that it is not an unfair way of dealing with the situation. To ordinary people in my constituency the measures to deal with unemployment seem to be half-hearted. There is no relief in the Budget for old-age pensioners, yet that would have stimulated consumption very quickly. There is little or nothing for anybody earning less than £14 a week. The Income Tax concessions do not amount to as much as was taken from us last year in increased National Insurance contributions—£200 million.
Against the background of what has happened in the last four years—admittedly wages have risen by about 20 per cent., but not as much as dividends, which have risen by 26 per cent., and with the increased rent which has increased 36 per cent.—the ordinary people are not particularly happy or satisfied with the relevance of the Budget. As people analyse the Budget and see its effectiveness or otherwise in relation to unemployment, as they realise that on the whole it does nothing to alter the old relationships in society—the rich getting relatively more and the poor relatively less of what is being given—it will be found that the Budget will not add to the popularity of the Government, and I hope that we shall soon have a chance of testing what the nation thinks about the Government's economic policy.
I am very glad of the opportunity to speak in the debate, because this is one of the few opportunities open to back benchers to cast an eye on the wide survey of our economic position before being confined to the discipline of the Finance Bill which will be before us for the coming months. I have not before had the pleasure of following the hon. Member for Hayes and Harlington (Mr. Skeffington), and I value that opportunity now. In the course of my speech, I shall return to some of his remarks about the reserves.
For the moment, I will say only that I suppose that it is technically true that if one man is falling from a skyscraper while another is going up in the lift, there is a moment when the man falling is higher than the man going up in the lift—and that is the only validity I give to the hon. Gentleman's comparison of the reserve position in 1951 and its position today.
Before dealing with the wider issues, I want to take up one or two points from the Budget in which I am especially interested. We must all rejoice that at last a start has been made on dealing with the problem of post-war credits. My right hon. Friend the Chancellor deserves very great credit and congratulation not only for making a modest start by advancing the age at which post-war credits are payable, but also for breaking down the administrative difficulties which are caused by the hardship cases, of which we are all aware.
In this connection, I have a constituent who has always said that he will never draw National Assistance until he is paid his post-war credit. Unfortunately, he is a man who no longer has any prospect of employment. I have urged him to take National Assistance, as I hope that he will do as a way of earning and receiving his post-war credit
As the Committee will remember, these credits were instituted by the late Lord Keynes when it was thought that after the war the country might be short of purchasing power and that they were a useful way of supplying a reservoir of purchasing power for the time it might be needed. To some extent, they also concealed the dimensions of taxation. That position clearly no longer exists, and I am very glad that a start has been made. I am also glad that it has been decided to pay interest as from October. The next step is that they should be made negotiable. I throw out that suggestion, although it obviously has some inflationary connotations, but I have no doubt that my right hon. Friend will consider it if and when he feels that the economy needs a further stimulus.
I rejoice at the decision to review public service pensions, to which my right hon. and learned Friend the Member for Chertsey (Sir L. Heald) has drawn attention. That is further evidence of the humanity with which, despite their preoccupations, the Government are fully charged. I am certain that in its turn that review will lead to a review of retirement pensions when the appropriate moment arrives.
There is one minor point, the case of Hodge, which has now found a place in the Finance Bill. I think that I was instrumental in bringing this matter before the House of Commons about two years ago. My hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), then Financial Secretary, described the legal position in this case as
a position in the law which it is impossible to defend."—[OFFICIAL REPORT, 3rd July, 1957; Vol. 572, c. 1163.]
However impossible it was to defend, the law has defended it for a further two years. The effective date righting this anomaly has been made the date of the Budget, but it would have been more appropriately dated to the time when the official spokesman of the Treasury described it as impossible to defend.
I am most grateful to my hon. and learned Friend for that.
Throughout the debate, to which I have listened with great interest, I have felt that the complaint that not everybody was getting the same out of the Budget was a little old fashioned. The Financial Secretary referred to the black horse and the white horse. I give hon. Members a quotation from a very important textbook which a much more learned friend than I has passed my way:
Equalising tendencies are a reflection of the petty bourgeois concept which sees socialism as a universal equalising of consumption, living conditions, tastes and need. It inflicts great harm on production.
That is from page 570 of a very important text book on political economy, of which the English translation from the Russian was published in 1957.
I leave the hon. Member to form his own conclusion.
If our purpose in a Budget is to increase competitiveness and to give a stimulus to our economy, the Chancellor always has two weapons, the budgetary and the monetary weapon. In this connection, my right hon. Friend the Member for Monmouth (Mr. P. Thorneycroft) made a rather pregnant remark when, on Thursday, 8th April, he referred to the position of the market for long-dated Government securities as indicating that confidence in our economy was not fully restored.
The Chancellor made a rather ambiguous statement. He said:
I shall continue to see that our monetary policy, and, in particular, our funding operations keep in step with the development of our economic policy generally."—[OFFICIAL REPORT, 7th April, 1959; Vol. 603. c. 44.]
That sentence can be read in any way, but: I suggest that the time has come when we should look at the monetary side of our policy, because bank deposits have been greatly restricted. Whereas, as compared with 1951, the national income rose by 55 per cent., from £11,700 million to £18,900 million, bank deposits and note circulation rose by only 15 per cent., which means that the amount of money in circulation has been greatly reduced.
The effect is that whereas, in the last three months, there has been an increase in advances by the banks, the only way in which they have been able to meet the demand for advances has been by sales of gilt-edged securities. As a result, the long-term gilt-edged rate is too high. If we want to stimulate industry and industrial activity, much the easiest way is riot to fund all the debt which is to be issued in respect of the advances to the nationalised industries, and which is foreshadowed in the Budget, but to increase the Treasury Bill issue.
The great advantages of a lower rate of interest is that it increases the willingness of businesses to build up their stocks, and we know how important that would be in the iron and steel industry today. Further, the fact that it makes it easier for firms to borrow is one more argument for increasing expansion. The influence of interest rates on house building is well known to us all, and for all these reasons it is desirable that the monetary side as well as the budgetary side of the question should play its part.
My right hon. Friend the Member for Monmouth said that,
the economy depends upon our confidence and our faith in ourselves."—[OFFICIAL REPORT, 9th April, 1959; Vol. 603, c. 413.]
Curiously enough, I find an interesting parallel to that statement in a book called, "The Imperial Idea and its Enemies", which referred to England and her Empire and power in the world being
valued at the rate she set upon it herself. I am sure that that is true today. If we are behaving sensibly, the value that we set upon ourselves is the value which the rest of the world sets upon us.
At this moment our published reserves are adequate, and our unpublished reserves are more than adequate. For the first time since the war we can look around and take stock of the position. We can feel that we do not need to improvise. We do not need, in the words of my right hon. Friend the Paymaster-General, to drive with
one foot jammed on the accelerator, one foot on the brake and no care for the steering, which always results in a nasty smell of burning rubber …"—[OFFICIAL REPORT, 8th April, 1959; Vol. 603, c. 242.]
We have all been conscious of this smell of burning rubber over the years, and it is satisfactory to feel that there is no need for hon. Members on this side of the Committee ever to smell it again. Foreign confidence in our currency is equivalent to our own confidence in it. The famous Zurich banker who is always referred to in our debates and discussions does not keep any money here, anyway. He reads the Economist and meets business people from the United Kingdom. We have something to be confident about now.
The right hon. Member for Huyton (Mr. H. Wilson) said:
We have in this country the brains, the machines and the men; properly mobilised, they are without equal in the world, as we have shown in our finest hours in war and in post-war economic recovery."—[OFFICIAL REPORT, 8th April, 1959; Vol. 603, c. 229-30.]
We would all endorse those remarks; the point is not open to argument. We are now secure in the knowledge that we can go forward invigorated by these welcome reliefs and braced for our task by the awareness that, at the cost of much hard work and some very real sacrifice, we have succeeded in re-establishing this country and the sterling area as a great international market of the world.
Overshadowed as we must feel ourselves to be by the monolithic giants of the totalitarian States, we should be proud that in re-establishing the sterling area upon a firm basis we have made the greatest possible contribution in our power to the building up and strengthening of the free world. It is on this and no lesser or more narrowly selfish foundation that we should pass our vote of confidence, and I therefore welcome the Budget proposals.
The hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) made a very interesting speech. I have the greatest pleasure in following him, because, if I may be a little facetious, at one time he did me an injustice. There was an occasion when he was doing the B.B.C. report on the "Week in Westminster," and my wife was unfortunate enough to be listening to it. The hon. Gentleman said that he was impressed with a speech I made and he went on to describe me to his public. He said, "Mr. Mahon looks like Mr. Jimmy Edwards". My wife said to me, "The next time you speak to that gentleman, you tell him that when we married you looked like Clark Gable. You have only looked like Jimmy Edwards since the Conservative Government came in."
I am not an economist, nor am I a member of a board, nor do I have much knowledge of the City, but I am aware of the dangers of inflation and I know the value of money. I know, also, that any system which has to devaluate man to evaluate money is a wrong system. Irrespective of what hon. Members opposite may say, though such a system may have stabilised the £ and our economy it has also been responsible for creating on Merseyside, and in other parts of the country, large numbers of unemployed people. We cannot claim credit for this system without looking at the other side and observing what it has done to so many people.
The Government have given the impression that our economic position is strong enough to allow the easing of restrictions which they imposed on the country. I welcome that. I welcome any improvement in the standard of living of our people. I welcome the reliefs in taxation. There is no virtue in high taxation, and anyone who thinks that there is does not know what he is talking about. Therefore, I welcome those reliefs to the extent that they will help our economy to expand.
With a great deal of knowledge of the working classes, I can honestly say that the reduction of 2d. in the price of a pint of beer has been regarded as an insult by the working classes. Considering their difficulties, one can understand why the offer of 2d. off a pint of beer has been regarded in Liverpool docks as an insult to the intelligence of the workers. I shall make no other comment about that matter I have said all that is worth saying about it.
I agree that something should be done about Purchase Tax, but what has been done could have been accomplished in a tidier manner. We all welcome the start in the repayment of post-war credits, but people in receipt of National Assistance need to be reassured that the payment to them of post-war credits will not affect their National Assistance payments.
I think that my right hon. Friend did give an assurance—if he did not, perhaps I may do so—that the postwar credits repaid to anybody in receipt of National Assistance will be a disregard.
I am grateful for that statement. I am sure that many people in the country will be glad to hear that assurance.
In the main, the Budget proposals are very welcome. They will provide an impetus to our economy to some degree. I hope that they will enable the reabsorption into employment of a great number of unemployed to be effected. But of themselves the proposals are inadequate. I have spent a great deal of time trying to work out social problems which beset local authorities and these proposals would have been more welcome had the Government not been unloading their responsibilities over the past two years. It appears to me that the Government are unloading their responsibilities on to local government and on to the ratepayers to ease the position of the taxpayers. That is wrong and I hope to prove that the position of some local authorities is not quite as healthy as some hon. Members opposite might assume. Ratepayers are carrying a burden which is disproportionate compared with that assumed by the national Exchequer.
As probably no other hon. Member representing a Merseyside constituency will have an opportunity to speak this evening, I wish to say that our problems on Merseyside are very real. The unemployment figure is extremely high and short-time working is prevalent. There are great numbers of young people leaving school and facing the insecurity of unemployment. Something will have to be done to enable them to be absorbed into remunerative and worthwhile employment.
I wish to quote figures to show the extent of the unemployment problem. Hon. Members representing Merseyside constituencies have been asked to meet a deputation from the Merseyside unemployed. The right hon. Member for Blackpool, North (Sir T. Low) was most cynical about the position of unemployed people and equally cynical about the position of our old-aged pensioners. It will not do for people to be quite so cynical, particularly if they represent a place like Blackpool, which depends a great deal upon Lancashire's employment for its own living during the summer. I say no more than that.
The great Port of Liverpool has, at present, 26,961 adult people and 2,281 juveniles unemployed. The shipbuilding and engineering industry has 2,193 and the engineering and electrical goods industries 1,177 unemployed. I could go on to describe other industries, but I must mention the Liverpool building trade, which has 4,500 people unemployed. Does that position give Government supporters any satisfaction? Do they get any satisfaction from knowing, as I know, that people in my constituency, in the great Merseyside, will, inside a couple of weeks, be leaving the big ships which are now being dealt with, and will have to join the dole queue?
Liverpool is a port that kept this country going in its most dark and difficult days. We were promised that we would never return to the 1930s in any shape or form. This is the position with which we have to contend on Merseyside. Our unemployment figure is not 2·1 per cent., or 2·5 per cent., but 4·5 per cent. We have always had a hard core of unemployment in Merseyside. Only since the advent of a Labour Government have we known anything about regular work and full employment.
I say this to a Tory Government: I have listened many times to Government supporters speaking about the dignity and the rights of the individual. The first right of any man is the right to work. That does not belong to a Labour Government or a Conservative Government, but to the individual himself.
It is the duty of any Government to maintain the dignity of the individual throughout his lifetime. The first thing that we must not subordinate is the worker to money. If anything has to be subordinated it is the value of money, and not the individual. I am not an economist, but I learned that in my early days on the Liverpool dockside. I take a very great deal of pleasure in paying tribute to Governments who extricated us from the difficulties of the 1930s. We were left, in Liverpool and the Merseyside, with the highest T.B. rate in the country, the highest maternal mortality rate and the highest infantile mortality rate. They were symbols of our insecurity. With Government assistance we brought those rates down below the national average. That was a very great credit indeed to everybody concerned.
Today, everything has stopped. No progress is being made in housing in Liverpool, compared with what it should be with what has been going on. I had a letter today from one of my constituents, and it deals with things that the Chancellor should be considering. It is all right to give financial injections, but we should balance them with social injections. We want the sort of thing my constituent talks about taken out of our society. I will not reveal any intimate personal details about this letter, which is well written by a responsible mother. She says:
I am writing to you from Oxford Street Hospital, where I have recently had my third child. I dread the prospect of returning to the revolting conditions in which we live. … These conditions are even worse than when I last saw you.
My constituent tells me that she and the children, with her husband, live in a single room. There are eight families in one house sharing one toilet. This family lives in a single room. The Conservative Government have their priorities all wrong. They made an effort and built 300,000 houses a year, but they did so for electoral and not social purposes. They stopped doing so and now only 100,000 houses a year are being built by local authorities. That is not good enough.
I appeal to everyone who can help to look at this problem. Nothing is being done about this in the Budget. My hon. Friend the Member for Liverpool, Exchange (Mrs. Braddock) has provided me with the national figures, which are: 1st January, 1959, 1 million slums, ¾ million near-slums, 4 million mainly structurally sound houses but with no bathroom, and 8¼ million good houses with baths. In the total of 14 million dwellings we have that number living in slums. An encouraging start was made on slum clearance, but I speak from experience when I say that local authorities have had to stop such work by virtue of the fact that they cannot get money at reasonable rates.
It is no use saying that the slum clearance subsidy helps to any great degree. People are still relying on corporation waiting lists. If the Government want to help local authorities to get rid of slums, they must give them money at more reasonable rates of interest. In Liverpool, we have 27,000 slums and 62,000 houses which are near-slums. There is no reference in the Budget to this social problem. The Conservative Government have often spoken about personal dignity.
The hon. Member for Walsall, South spoke about freedom and a democratic society. We say that full employment is synonymous with human dignity. I say to the Government that it is not sufficient to pay lip service to the principles of full employment. I have heard whispers in industry to the effect that we need a controlled amount of unemployment to stabilise the economy. These things must not be said if we really want peace in industry. Insufficient action is taken to make the principle of full employment a permanent, practical reality.
I have deplored the loss of ascendancy over the great social problems on Merseyside. I have my list of priorities. The Chancellor has his. My priorities have always been these. Work is the first. I came from a family in which there were ten children and I know that without work, and hard work, there is no progress at all. Secondly, after work we want good industrial relationships. The greatest enemy of good industrial relationships is unemployment.
It is hard enough in Liverpool already to maintain excellent relationship in industry. What are the impediments to these good relationships? The Chancellor said that good relations in industry are essential to a sound economy, and we are all very well aware of that, but I want to say a word or two about impediments to good relations in the port of Liverpool. One of the biggest impediments in that port is Communist infiltration into the trade unions. There is no question at all about this, and no honest man on this side of the Committee can get away from saying so.
In my own constituency, there have been industrial disputes which should never have happened, and which have come about only because of the vested interests of certain Communists in the Port of Liverpool. Having said that, however, I must add that the effect of these disputes has not been so destructive of good relations as have some of the archaic attitudes of some Liverpool employers. These employers are not even helping the trade union movement in any shape or form, but, to my own knowledge, are making the task of organisation by trade union officials more difficult than it should be.
I know my Liverpool very well indeed I know the excellent employers, and there are some excellent employers, who are an example to the others, but we have more than our fair percentage of people who, in their attitude towards trade unions, are still living in the Victorian age. They, as well as the people on the Communist side, who have a vested interest, are causing a lot of unnecessary upset in the Port of Liverpool.
Returning to the Budget, the release of extra money by tax reliefs and the reintroduction of the investment allowances go a long way, but are not enough. The Government must make up their mind that in Lancashire we shall have to have the redirection of industry into various places, if we are to make any progress at all. Most of our industry is old. We need new skills, and we have to import these new skills into our area. When the English Electric Company came into its new factory, by virtue of the good offices of my right hon. Friend the Member for Huyton (Mr. H. Wilson), the local authority had to provide 400 houses for key workers so that this factory could be staffed with the men with the skills that were required.
It might be as well if the Chancellor would remember that it is not only the factory itself that costs money, but also the fact that the local authority very often has to carry the burden of the subsidy on 400 or 500 houses provided to house the key workers who are necessary to start up a new industry, and to train boys, who otherwise might have gone into blind alley jobs on Liverpool dockside. into technologists, technicians and scientists.
A new attitude is required in industry to get rid of the class bitterness and class hatred that has existed in the past. I have worked for many years to bring the two sides of industry together. There is no virtue in having the two sides of industry further apart than they should be. I am suggesting that the Chancellor himself could do a great deal to help in the social atmosphere and to bring about a better relationship in industry. I also believe that, somehow or other, we must bring individual social responsibility up to a higher level. Again, the Conservative Party and the industrialists believe in the right to own and the right to private property. I, too, believe in the right of private property, but how is it that for so long the workers have never achieved that right in any shape or form? A great responsibility lies on the Conservative Party if it wants us on this side of the Committee to help improve industrial relations. It is no good saying that the right to own exists, or that everybody has that right, unless we do something about it. The British worker is entitled to own his own home and to have a share in industry.
I have spoken long enough, but before sitting down I want to tell the Chancellor and the Conservative Party that the economic greatness and the wealth of the nation should be used to greater purpose and to narrow the too-wide gap which exists between people who comprise our society. Hon. Members opposite complain if a deliberate campaign is waged within industry to widen the difference which exists between the interests of workers and those of management. They are right to do so. We ask why they should complain if we urge that the resources of the nation should be utilised to greater social effort so that we can the sooner achieve a nation devoid of class bitterness and class hatred which, as the right hon. Gentleman said, are the basis of the philosophy of those who are the enemies of a free society. In my opinion, the Chancellor, in the interests of class selfishness, has completely misused his opportunity to serve the nation as a whole.
I feel sure that the hon. Member for Bootle (Mr. Mahon) will forgive me if I do not follow him in his arguments. Although I should very much like to do so, I have only seven minutes left before the right hon. Member for Smethwick (Mr. Gordon Walker) is due to conclude the debate on behalf of the Opposition. That is not very long in which to say a few things about the Budget.
Before I come to the Budget, however, I should like to tell the hon. Member for Bootle that it appears to me that the difference between us is not as great as he suggests. There are certain principles in which he sincerely believes and which, in his view, are not held by hon. Members on this side of the Committee. Those principles are held equally on this side of the Committee. The quarrel between us is how to build the economy of this country into such a position that those principles can be applied and that every man has work to do. That is the quarrel between us. We are not quarrelling over the principles.
During the war, I had the good fortune from time to time to see Liverpool under stress, and I should be the last person to fail to appreciate the courage and bravery of Merseyside.
Much has been said in the Budget debates in the last few days and, even if I had the time, I should not wish to repeat all that has been said. The Leader of the Opposition and the Leader of the Liberal Party more or less agreed that, in selecting nearly £400 million as the amount by which he would reduce the taxpayers' burden, the Chancellor had selected the right amount.
The argument which has arisen since has not been based on the suggestion that any of the remissions of taxation should be altered and that other remissions should be given in their place. In certain instances, the argument has been irresponsible. I apply that comment in particular to the Liberal benches, although at the moment they are empty. As far as I could tell from the speeches of Liberal Members, they would like to see 1s. off Income Tax instead of 9d. and £200 million given to the old-age pensioners. At the same time they want the global sum of the remissions to be no greater than £400 million, although the remissions which they urge would clearly cost far more. Any approach of that fashion to a Budget is one of complete and absolute irresponsibility.
The two points that I want to put to the Chancellor of the Exchequer in the four minutes left to me have not been mentioned in the Budget. In these two points I am not asking for any further relief this year out of the Budget. First, I cannot understand the approach of this Chancellor or previous Chancellors to the metalliferous mining possibility in the United Kingdom. The Chancellor is fully aware that Canada, Australia, South Africa, and even Eire have put legislation on their Statute Books in such a fashion as to promote incentive in the development of what may well lie hidden in their hills.
Their whole policy, which I have not time to go into, is very simple. For the first three or five years after production has started in metalliferous mining the impact of taxation will not fall. After that, the impact of full taxation will fall. In the past ten years nothing startling has qualified for taxation. The only thing which I and other people who see like me are asking for is an incentive to be given by the Chancellor. That incentive is lacking at present. It would not cost the Chancellor any money.
Secondly, with his knowledge that the United Kingdom has always maintained a great mercantile fleet and that its whole prosperity lies from time to time on the sea and everything that goes with it, I still cannot understand why the Chancellor has not seen fit to grant some form of tax relief to help the British shipping industry.
The argument which I believe that the Chancellor might well put forward is that, as a goodly portion, if not all, of the British shipping industry at present is suffering from world recession and depression and therefore the profits have evaporated, one could not possibly in any way hope to extract from that profit some form or reserve in order to make available the capacity for rebuilding the ships which will ultimately be needed.
I should like to say this to the Financial Secretary. A great portion of life is built on hope. Nearly everything, in some form or another, is built on hope. Consequently, had the Chancellor of the Exchequer given that hope to the shipping industry, the shipping industry would have known that in good times it could put away in its reserves the capital for the replacement of the vessels which ultimately are necessary for our mercantile marine. Therefore, the argument that at this given moment it would not be of any assistance to the majority of the mercantile marine does not seem to be the real reason for not putting such legislation on the Statute Book.
I know that the right hon. Member for Smethwick wants to address the Committee at 9 p.m. I promised that he should be able to do so. I thank you, Mr. Hoy, for giving me those few short minutes.
I am grateful to the hon. Member for Bodmin (Mr. D. Marshall) for finishing his speech on or before nine o'clock.
We have had an excellent debate, and it has taken a good deal of the gilt off the gingerbread of the Budget. The prevailing attitude today is very different from the first fine careless rapture that the Budget at first evoked on that side of the House. This has been caused by a series of very effective speeches by my right hon. and hon. Friends, but what is, perhaps, unusual about this debate is the extent to which we have been helped to second and more sober thoughts about the Budget by speeches from the other side of the House.
Today, there has been some briefing up of hon. Members and, of course, Mr. Christ's Weekly Newsletter has come out just in time. Those of us who read it recognised a good deal of it in the speeches to which we have listened today from hon. Members opposite. However, we can understand why this has been done, because in the first two days of the debate the pattern of the speeches from hon. Members opposite was practically uniform. There was, first, a brief tribute to the Chancellor's Budget, then a long and uninterrupted passage of doubts, criticisms, fears and warnings, and then, at the end again, a brief formal word of praise.
The strongest criticism came from the hon. Member for Louth (Mr. Osborne), who said that as a result of the Budget we faced the risk of a wild inflationary movement that would make 1957 look like child's play. But I thought that the most telling of the speeches from the benches opposite against the Budget came from the right hon. Gentleman the President of the Board of Trade. He made a nostalgic defence of restrictive policies as practised in recent years, but wholly neglected to point out in what way the situation today differed from the situation then.
The Paymaster-General, who last year gave us a classic statement of the case for permanent stagnation, certainly tried this year to show that things were different, but I thought that his arguments were demolished in the very well-argued speech of my hon. Friend the Member for Birmingham, Stetchford (Mr. Roy Jenkins).
The striking thing about the Chancellor's Budget statement is that of the eight years in which this Government have been responsible for the country's affairs, in only two of them have Chancellors found it to be in the public interest to take an optimistic view of the economy—and both of those years happen to be, by chance, Election years.
In this respect, I do not equate the Lord Privy Seal whose absence from our debates on this occasion seems to have been almost studied; perhaps he is a little weary of hearing back-handed compliments from his colleagues—I think that he likes to have a monopoly of them for himself—I do not equate the Lord Privy Seal with the Chancellor. In his pre-Election Budget, the Lord Privy Seal risked—and caused—an economic crisis for electoral advantage. The main charge against the Chancellor is that he has postponed to an Election year the policy of expansion that he should have started last year. I hope that he will attempt a somewhat clearer answer to that charge than we have yet received.
The Paymaster-General obscured the issue—no doubt unintentionally—by giving global figures for 1958, but, of course, the real point is the sharp contrast between the first and second halves of 1958. I want to ask the Chancellor precisely how far the prospects in regard to balance of payments, exports and reserves are better now than they were in the first half of 1958 when he was putting through his last Budget. I do not think that he can really prove that there was any substantial difference. Certainly there was a great deal of slack in the economy last year.
The Financial Secretary gave a franker and more forthright explanation than did the Paymaster-General of why there was no expansion last year. He said that one reason was that last year the country had been shaken by fever for twelve years—he used some such phrase as that—but, of course, eight of those years were under a Conservative Government. His main and most important reason—and a new one—was that, last year, wage demands were still pending, and had not been settled.
Behind those words, there is the unspoken and underlying thought that alone gives it meaning—that, in their view, the Government had to wait until they had 100,000 more unemployed. They had to wait until there were 223,000 less in civil employment. That, certainly, is the difference between this year and last and, though I can hardly believe it, I should like to ask the Chancellor—because it seems to be the only way in which the hon. and learned Gentleman's remarks make sense—if the fact that there was not enough unemployment was the only reason why there was no expansion last year.
One thing is certain. We had to pay a very sad price in material waste and human suffering for the Chancellor's delay. As my hon. Friend the Member for Bootle (Mr. Mahon) pointed out in a very impressive speech, the Chancellor has caused unnecessary unemployment. The Chancellor has condemned hundreds of thousands of our countrymen to unnecessary unemployment by his policy of delay, and we have lost immense potential wealth which we as a nation could have had.
The Paymaster-General scoffed, as he has before, at the Labour claim that with a decent rate of expansion we might have had £1,700 million more of national output. I would like to quote from the Economic Review of the National Institute. I do not think the Paymaster-General will easily refute that authority because he quoted from it himself. As the Paymaster-General quoted from the Economic Review, I assume he regards its view as being valuable.
On page 10 of the Economic Review of the National Institute it is argued that there is sufficient idle capacity and labour to increase industrial production by between 10 and 15 per cent. in about two years. It goes on to say that that is the equivalent of an increase in the total national output of between £1,500 million and £2,000 million a year. The Review gives a higher rate than the Labour Party.
Our claim is that by steady expansion we could do this. I will come back to this very important point of whether the Government with their present policy can achieve steady expansion without inflation. I am going to argue that the Government cannot. This loss of £1,500 million to £2,000 million a year is a colossal loss of wealth which we could have had. In comparison with that, the £250 million that was thrown away at Suez appears almost modest. One thing that has gone up under this Government is the standard by which we have to measure waste.
One criterion which the most obstinate Conservative will have to accept by which to judge the Government is the Lord Privy Seal's statement about doubling our standard of living in twenty-five years. As always with his remarks, there has been doubt about what he meant, but we have had a recent authoritative and unambiguous interpretation in "Glossed Over," the latest official publication of the Conservative Party. On page 33 it states:
The target set by Mr. R. A. Butler of doubling the standard of living in twenty-five years
an overall increase of production of 2–3 per cent.
Thus, when the Lord Privy Seal said on 24th March that we were running a bit ahead of schedule, what he must have meant, according to that interpretation, was that we were achieving an annual
overall increase in industrial production of at least 3 per cent. If that is not the correct interpretation, the statement was meaningless, and I cannot believe that the Lord Privy Seal makes meaningless remarks.
What are the facts? The Lord Privy Seal gave his pledge in October, 1954. In the three years since then, our industrial production went up by 0·9 per cent. That is an annual average, not of 3 per cent. as the Lord Privy Seal wanted, but 0·3 per cent. I calculate that at the rate we have achieved since the Lord Privy Seal gave his pledge, it would take between 200 and 225 years to double our standard of living.
One of the major themes of our debate naturally has been the question of the distribution by the Chancellor of the reliefs that he felt it proper to give. The general inequity of these reliefs within themselves has been shown by my right hon. Friends the Members for Huyton (Mr. H. Wilson) and Battersea, North (Mr. Jay) and by my hon. Friends the Members for Fulham (Mr. M. Stewart), Gloucester (Mr. Diamond), Sowerby (Mr. Houghton) and others. I do not want to go over the ground which they so admirably covered, but I want to sum up what they said in two points which seem to me to clarify this issue and the question of whether the Chancellor has chosen to distribute his reliefs with equity.
The first point is that of the Income Tax reliefs £166 million goes to persons as distinct from companies. That is the sum that must be measured against the increase by £111 million a year ago of the National Insurance contributions on employees. That was a charge put upon employees, not upon employers, and we have to measure the personal reliefs of £166 million against the £111 million raised by a regressive poll tax which inevitably falls heaviest on the poorest people. The personal reliefs were, therefore, largely paid for by this poll tax.
Let me try to put these rather impersonal and large figures into more human terms. In the last 18th months, the weekly stamp deduction has gone up by 3s. 2d. Under the Budget, it is not until we reach the £1,000-a-year man that this increase of 3s. 2d. a week is offset by the reliefs in Income Tax. All those earning below £1,000 a year are paying more in increased poll tax than they are getting in relief in Income Tax, and, of course, enormous numbers are getting no relief whatever in Income Tax against this increase in the poll tax.
The second point is that as a result of the Budget, 12,200,000 Income Tax payers earning up to £750 a year get an increase of an average of £4 a head per annum. The 200,000 Income Tax payers earning over £3,000 a year—I have not chosen a very high figure—get £165 a head a year, as against the £4 that is got by the 12,200,000.
Whilst the Chancellor was making these disproportionate reliefs to the rich, he was saying in his Budget speech that this year there could not be a wage increase as large as there was last year of 3½ per cent. It seems to me extraordinary that in one and the same Budget the Chancellor can say that the workers must not have a wage increase of 3½ per cent. when he himself takes deliberate steps to increase the spending money of the £4,000-a-year man by 4½ per cent. This is almost a deliberate affront and undermines the appeal that the Chancellor is making for wage restraint.
There is an important relationship, which we all realise, between wages and prices, although Conservatives have made too much of a fetish of it and it is not as important as they say. None the less, it is important. As my right hon. Friend the Member for Blyth (Mr. Robens) said, however, if an appeal is made to the trade unions for restraint, this must be part of a policy of social justice. There must be some equality of restraint. This the Chancellor has wholly failed to achieve, but he could have achieved it within the scope of his Income Tax reliefs.
The Chancellor could have done four things. He could have made larger reductions in the lower levels of Income Tax by raising allowances. The hon. Member for Lewisham, West (Mr. H. A. Price) made a wise remark about this on Wednesday. He said that a greater reduction in the lower levels
would exercise an incentive effect far greater than similar amounts of money devoted to concessions higher up in the Income Tax level."—[OFFICIAL REPORT, 8th April, 1959; Vol. 603, c. 282.]
That is the answer from their own side to hon. Members opposite who seek to justify inequitable tax reliefs on the ground that they give incentive. There
is no doubt that if we want to give incentive we give the biggest incentive by raising the allowances and concentrating the reductions on the lower levels.
Secondly, I do not think the Chancellor should have given £63 million Income Tax to companies. There was a letter in The Times on 11th April which pointed out that the United Kingdom has one of the lowest company taxation levels in the world, and I do not think there is any case now for making this rate lower still. Indeed, I think the time has come when we really should consider separating personal and corporate Income Tax. It is a hindrance to a sensible fiscal policy that they have to go up or down together all the time. Thirdly, the Chancellor should have imposed a capital gains tax to offset the effect of his own Budget in further favouring the rich by their increased capital projects.
Fourthly, he really should stop the scandal of tax avoidance by expenses and other devices. The Finance Bill will contain two anti-avoidance measures. We welcome these, though I must point out that this is the second time we have had to stop dividend stripping since we were told by the Minister of Housing and Local Government that the loopholes had been stopped for all time. What does it mean, that we have these two anti-avoidance Clauses in the Finance Bill? What it means is that the tax dodgers have once again had a run for their money, that once again they have had fat pickings before the Chancellor has been able to catch up with them. I am absolutely certain that they have got fresh and clever tricks waiting after these loopholes are blocked.
There is only one way, I think, of dealing with these gentry, and that is to block these various avoidance devices before they become profitable. We should take statutory powers to stop this sort of avoidance device by Order to be confirmed later by Parliament in the Finance Bill or otherwise.
The supreme test of this Budget, as the Paymaster-General was saying, is whether or not it can achieve steady expansion without a balance of payments crisis, without inflation. I must say to the Chancellor that his own justification for his policy fills me with doubt. What did he say? He said that we can expand because there is slack. What, I ask him, happens when the slack is taken up? Do we have to check growth again? Do we have a return to stagnation? That is the logic of what he says, if he says that we can expand now because there is a lot of slack in the economy and that we could not expand before. This is saying we cannot go on expanding when the slack has been taken up. It looks to me as though the logic of the Chancellor's case is, as he would put it, I suppose, that the national undistorted state of the economy is really one of general stagnation interspersed with short bursts of picking up the slack, which by chance happen to coincide with elections.
There are already disturbing signs. The balance of payments was down in the second half of 1958. It looks as though it is going to be less favourable. Both the volume and the prices of our imports are going up. The worst aspect of this state of affairs is our exports. The Times said in a leading article today:
The prospect for exports is the least satisfactory aspect of Britain's present economic situation.
They fell by 3½ per cent. in 1958, and it looks as though there is now a further decline.
It seems to me that the Chancellor is frighteningly complacent about our exports position. The most disturbing and humiliating fact of 1958 is that we fell in that year to the third place as an exporting Power. West Germany passed us last year for the first time as an exporting Power. What a comment that is on the Conservative stewardship of our national economy for eight years. By their deliberate policy of stagnation they have allowed us to fall behind in this most vital of all races. Instead of complacently preening themselves they ought to be hanging their heads in shame. [Laughter.] It is not a laughable matter to be passed by Germany. It is an extraordinarily ill and humiliating record for the Government.
But the major and immediate issue before us in this Budget is the crying injustice of the shabby treatment of the old-age pensioners. The right hon. Gentleman is a Pharoah of a Chancellor. He finds it very easy to harden his heart. He must have a heart of stone not to give anything to the old-age pensioners in a year when he is distributing £360 million worth of reliefs.
The Financial Secretary said that the Chancellor was going to deal with this question when winding up the debate. I hope that he will not seek support from the callous leading article in The Times which clearly does not regard old-age pensioners as top people. That article is full of fallacies. As the hon. Member for Sheffield, Park (Mr. Mulley) pointed out, we cannot measure the need of old-age pensioners by the general cost of living index. The movement of prices can affect them quite differently from the rest of the population. Indeed, that happened during this last year. The Economic Survey, paragraph 55, shows that prices went up by two points in 1958, and nine-tenths of that was due to the rise in the cost of food and housing. These are two factors which hit old-age pensioners particularly hard. As my hon. Friend the Member for Glasgow, Kelvingrove (Mrs. McAlister) pointed out so well, the Rent Act particularly adversely affects old-age pensioners.
To argue, as The Times does, in that leading article that because the position of old-age pensioners is relatively the same, or even a little bit better, nothing should be done about them is to condone and defend the persistence of the last element in our society of real grinding poverty. —poverty in old age.
The Paymaster-General tauntingly asked us how we would find the money and what reliefs we would introduce, as did the Financial Secretary. This is a cheap attempt to set the beneficiaries of the Chancellor's reliefs against the old-age pension. Otherwise it has no meaning at all. I would answer them by saying that if there were the slightest will to do this, a way could be found. Most beer drinkers, as has been said on both sides of the Committee, would be willing to forgo part of their remission if they felt that the old-age pensioners would benefit. The hon. Member for Louth very courageously said that he would not only have been in favour of taking only 1d. off beer but of 3d. less off the Income Tax to help the old-age pensioners and widows. If only ld. were taken off beer that would yield £20 million, but even if that were not done, much could be done. If the Chancellor had not extended Income Tax reliefs to companies, that would have given us £63 million that we could use, and if he had imposed a capital gains tax, as he should have done, the two together would have given enough for a very favourable rise in the old-age pension.
We are going to fight this issue by all the means at our command. We are going to do the utmost we can to force the Government's hand. We have tonight put down a Motion of Censure on the Government for their cold-hearted refusal to do anything for the old-age pensioners in a year when it would have been easy to do so and when no one would have grudged it except this Chancellor and this Government.
I should, first, like to thank the Leader of the Opposition and one or two other hon. Members for the considerate references they have made to the temporary tiredness which overtook me towards the end of my statement on Tuesday. It may be that any slight faintness that I experienced was due to the self-imposed prospect of losing my grip on nearly £300 million worth of revenue.
We have now listened to five speeches from right hon. Gentlemen on the Opposition Front Bench. What have they amounted to? They remind me of a story which I heard of the early days of the League of Nations. A delegate made a long speech, and at the end it was interpreted. Then another delegate made a still longer speech attacking the first with complicated and involved arguments. It came to the time for the interpretation. Sensing the impatience of the conference, the interpreter confined himself to the one sentence: "He say dat it is not so." That is about as far as we have got after listening to the speeches of right hon. Gentlemen opposite.
The first question that arises in connection with any Budget is whether, taken as a whole, it is about right for the economic situation of the country, whether it makes the sort of contribution needed to keep us on the right road between inflation and deflation. As my predecessors in my present post know very well, this is a most difficult problem of judgment and causes every Chancellor more anxiety than all his other problems put together. It is, therefore, a considerable reassurance to me to find that there seems to be fairly general agreement that the total is about right. Most commentators, whether in the Committee or in the Press, tend to agree with The Times that differences of view will be, at most, rather marginal.
Indeed, if I were a superstitious man, I might feel slightly alarmed to find that no fewer than three distinguished economists of such divergent views as Professor Paish, Sir Roy Harrod and Mr. Reddaway seem more or less in agreement that it is a sound Budget.
Several hon. Members have rightly asked whether in encouraging a steady rate of expansion we are incurring any risks to balance of payments. It is, of course, impossible to insulate our economy entirely from such risks, but, bearing in mind our general external position and our responsibility and, indeed, our interest in contributing to an expansion in world trade, I think the Committee as a whole is with me in believing that the degree of encouragement given by the Budget is one that should be safely within our capacity and resources to carry.
Exceptionally, I gather that the Council of the Trades Union Congress does not think that I have done enough, and, though I was not altogether clear on this, I thought the hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) shared this view. At any rate, the hon. Member said that the Budget was only a faltering step in the direction of expansion. My view is that it is a significant step, though one safely within our capacity to take.
The amount to be met by borrowing—£721 million—is large, but by far the greater part of it consists of the borrowings through the Exchequer of various bodies undertaking capital investment, in particular the nationalised industries which between them account for a net figure of £533 million. It is perfectly normal that capital expenditure of this kind should be financed by long-term borrowing, and in present circumstances it is more convenient that the Government should do it rather than the various bodies themselves direct with the market but the effect on the economy is much the same whichever way it is done.
A figure as high as this is not unprecedented. Direct comparison is impossible since the nationalised industries have been financed in this way through the Exchequer only since 1956. If their requirements in earlier years are taken together with those of the Exchequer itself, the corresponding figure in 1952–53 was almost exactly the same, and the figure for 1953–54 was not much lower.
As I said in my Budget speech, some part of the concessions in this year's Budget will come back to the Exchequer in the form of increased tax revenue. This will reduce the amount to be borrowed. As my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) pointed out, next year we are not expecting to have to finance a substantial increase in the reserves as we had to last year. My hon. Friend also mentioned, correctly, that next year's maturities will be materially lighter than last year's. Last year's figure was £1,268 million and this year's figure is £950 million.
While it would be rash to expect National Savings to do as well as they did last year, there is no reason to suppose that they will not produce another very good figure. At the same time, there will no doubt be some increase in the floating debt held in the market, including the banking system, but that is no more than a corollary, to put it that way, of the Government's policy in seeking to stimulate the economy somewhat through the Budget. If the expansion of credit were to go too far, the Government have remedies to hand. For all those reasons, I expect this problem to be one well within our resources to meet without damage to the economy.
A charge made by several right hon. and hon. Gentlemen opposite has been that the Government deliberately brought about a recession and unemployment in order to be able to have a good Budget this year. As my hon. and learned Friend the Financial Secretary said earlier, that is rather unworthy of right hon. Gentlemen themselves and I do not think that they would expect me to take it seriously. Anyone who can believe that can believe anything. I have noted with appreciation that the right hon. Gentleman the Member for Colne Valley (Mr. Glenvil Hall) in his speech this afternoon dissociated himself from that view.
Hon. Members opposite have further alleged that if it was safe to expand now it would have been safer to do so twelve months ago, and that the approach of an election has brought about a sudden conversion from restrictionist to expansionist policies. Both allegations are demonstrably wrong. Expansion and full employment are very good things, but so are stable prices and sound money. Indeed, the preservation of expansion and employment themselves basically depend on internal and external stability.
It was because of those considerations that the Government adopted the measures which my right hon. Friend the Member for Monmouth (Mr. P. Thorneycroft) so courageously initiated in 1957, and the improvement in our affairs which has resulted since then is the clearest demonstration of their rightness. [HON. MEMBERS: "Why did he resign?"] At the time of the 1958 Budget the measures were already working, but I did not feel that there was then yet positive enough evidence of sufficient stability, and most economists then agreed with me. The price level was still rising. The whole of the next round of wage increases was still to come, and the relation between our reserves and our liabilities was less satisfactory than it has since become.
It is very convenient for right hon. and hon. Gentlemen opposite to forget about all those things. I made my position perfectly clear at the time, as the hon. Member for Stechford recognised. The short answer to the first charge is that the situation a year ago and the problems with which we were then faced were less favourable than the situation and the problems today. Lt would have been a grievous error indeed to have started re-expansion too soon. The position of sterling has been strengthened by the favourable balance of payments that we earned last year.
The right hon. Gentleman has just said that most economists agree that it would have been unwise to expand a year ago. Since, a short time ago, he quoted Professor Paish, Mr. Reddaway and Sir Roy Harrod as a representative cross-section of economists, would he say which of those three agreed with him a year ago?
I would say without any question that the majority of economists supported the balance of my Budget last year. I would never expect to reach a situation in which all economists found themselves in agreement. If we had started positive re-expansion at that time, do hon. Members opposite think that our reserves and liabilities would have been better today than they are?
Right hon. Gentlemen opposite have alleged that damage and waste have been caused to the economy by the surplus capacity we now have. I say without any hesitation whatever that the damage and waste to the economy would have been infinitely greater if we had had a premature re-expansion, leading to returned inflation. These questions have only to be posed in order to show the fallacies of the arguments we have heard from the benches opposite this afternoon.
Finally, it is a misreading of events to allege that the Government have had a sudden and abrupt change of heart and policy. In my Budget speech last year I said that expansion was our long-term objective, and that we would not keep the brakes on one day longer than was necessary. This is just the policy that we have been following. The Committee is well aware of the series of expansionist measures that have been taken gradually throughout the past twelve months, and this Budget fits logically and reasonably into this consistent policy—a policy which has been understood everywhere except, apparently, on the benches opposite.
The burden of some speeches from hon. Members opposite has been that if I were in a position to dispose of a large part of my surplus I should have encouraged my colleagues to increase Government expenditure further, particularly on the social services, rather than reduced taxation. In other words, they argue that the total of the reductions I have made is much too large—or the amount which I shall have to borrow should have been much larger. As my hon. and learned Friend the Financial Secretary pointed out, if the proposals made by right hon. Gentlemen opposite in the last few days had been carried out the amount that I would have had to borrow would have been at least £200 million more. I know that the Opposition believe in high taxation; indeed, they glory in it—but we do not. We believe that taxation is too high, and that it should be an object of policy to reduce it. We believe that more of the total national income should remain in the hands of individuals, and that less should be at the disposal of the Government. I am delighted to find myself in a position to be able to offer a substantial reduction in taxation this year.
I feel something of what Samuel Pepys no doubt felt when he wrote in his Diary:
Emptied a £50 bag, and it was a joy to me to see I was able to part with such a sum without much inconvenience, at least without any trouble of mind.
Before long we shall have an opportunity of seeing which approach—that of right hon. Gentlemen opposite or that of ourselves—commends itself most to the people of this country. Let hon. Members not forget that the reductions made this year have been made after allowing for an increase in the social service expenditure this year of no less a sum than £86 million.
The Liberal Party spokesman, as usual—I think it is becoming a perfectly regular habit or complex of the Liberal Party—advocated higher Government expenditure, to the tune of something like £200 million for pensions and National Insurance benefits, and at the same time called for still larger tax reductions. How the members of the Liberal Party can reconcile such conflicting policies with their consciences I am unable to comprehend.
My choice in tax reliefs has been dictated by my aims. The reduction in Income Tax will both increase the incentive to earn and the capacity to save, and in the case of industry it will leave in the hands of firms additional resources for investment.
I understood the right hon. Member for Huyton (Mr. H. Wilson) to say that he favoured no relief in Income Tax for industry. I cannot understand that view. The right hon. Gentleman says he wants industry to invest more, yet he denies it the resources to do so. It is exactly the same with savings. Right hon. Gentlemen opposite are always saying that they want more savings, yet they do their utmost to penalise the income on savings when people make them. The reduction in indirect taxation will help with the cost of living and also leave people with more money for saving or spending. The investment allowances will provide industry with an extra incentive to put in hand sound plans for modernisation or re-equipment now.
Lastly, regarding perhaps the most important sector of the economy, exports, there are, I think, five directions in which my Budget proposals will help. First, by encouraging stability in the cost of living and so stability in wage and salary costs; secondly, by encouraging a high rate of industrial investment for greater efficiency and lower costs of production; thirdly, by encouraging a moderate increase in home demand, thereby providing a broader basis for production; fourthly, by continuing our provisions for Commonwealth assistance loans to the benefit of our exports, and lastly, by permitting a moderate increase in our exports and so raising the earnings of our customers abroad and giving a lead in the expansion of world trade.
The main general criticism made by hon. Gentlemen opposite has been that the Budget did not include any proposals for an increase of retirement pensions and other National Insurance benefits. It is right that the welfare of old people and others drawing National Assistance and other benefits should always be in our minds.
In the White Paper setting out our new proposals the Government have made it plain that we regard the standard rates of National Insurance benefit as a matter of prime importance which we shall keep under review. That this is not an idle promise is shown by the record of the Government in these matters. In fact, it astounds me that hon. Gentlemen opposite dare to raise this question. During our tenure of office the real value of these benefits has been steadily improved. The last improvement, a 25 per cent. increase, was just over a year ago and brought the purchasing power of the benefits to a level substantially higher than ever before; and the real value of the single rate of pension is 27 per cent. higher today than it was in October, 1951. The Times said in the leading article on the 9th April to which reference has been made:
Pensions have in fact shared in the growing prosperity since 1948.
That is exactly what we intended they should do.
The Budget and the Finance Bill are not the occasion for dealing with these matters. Changes in National Insurance require separate major legislation. Indeed, the last two increases in benefit rates, in 1955 and last year, were carried through at different times of the year from the Budget. I was asked why, if that were so, I mentioned a Pensions (Increase) Bill. I will tell the Committee. I mentioned that because it concerns retired Government employees who are rather directly the responsibility of the Chancellor of the Exchequer.
If we are to accept the Chancellor's argument that the Budget of itself is not the place in which to announce an increase in retirement pensions, will the right hon. Gentleman take advantage of the fact that a National Insurance Bill is going through the House at this present time and, on Report, get the necessary measures through to raise the retirement pension, and not do as happened in 1954 and 1955, announce the retirement pensions for an important by-election, or to take effect on the eve of a General Election?
I am dealing with the Budget at the present time and with the Budget debate. I am saying that changes in National Insurance are not a matter for the Budget. The truth is that it is very difficult to do much directly, through the Budget, for elderly people living on small fixed incomes, because they do not pay much in taxation. The best of all helps that we can render in the Budget to the elderly is to concentrate our efforts on stabilising the cost of living. That is one of the main aims of this Budget.
Several hon. Members have criticised my choice of reduction of the beer duty. I explained in my Budget statement my two reasons, both of which are sound. This is the only large revenue earner among our taxes and duties which has been showing a declining tendency. Last year the actual yield fell below my estimate by about £12 million and this year the fall in the yield looked like not only continuing but perhaps becoming steeper. Looking back to the reduction of 1d. per pint made by Sir Stafford Cripps in 1948, I found it was not enough to make much impact on the yield, so I decided upon a 2d. reduction. It enabled me at the same time to carry out a much needed reform in licensing duties. My other reason was that in no other way at anything like so small a cost could I bring about a reduction in the standard of living. [HON. MEMBERS: "0h."]
Some hon. Members have said that I have confused the cost of living with the index. [An HON. MEMBER: "Hear, hear."] In fact, the latter is a reflection of the former. Some critics seem to regard the index as either an index covering their necessities only or as a sort of moral judgment on what people ought to buy. Both these courses are, of course, wrong. The index is a measure, and we believe it the most accurate of its sort in the world, of what people actually do spend their money on. That is why, for example, second-hand cars, television sets, nylons and anything else which might be put down as non-necessities are included.
The index was constructed as the result of a very careful survey of expenditure, and the Trades Union Congress was represented on the committee. No fewer than 120,000 different price calculations are 'taken each month to check its accuracy. The importance given to such items as beer or potatoes in the index is a simple mirror reflecting the fact that the average household does spend a good deal of money on them. About 20 million people drink beer.
Hon. Members may say that beer is not a necessary element in everyone's cost of living, but that applies to most of the other items in the index, too. The number of items on which everyone incurs expenditure is a minority, and in fact is small. Judging from the numbers who do drink beer, the proportion of households into whose cost beer enters must be relatively far higher than with many other items that have to be taken into consideration. The reduction, therefore, in the price of beer is a real and not a fictitious reduction in the actual cost of living.
The reduction I have been able to make in the level of the Purchase Tax has been much welcomed, but there has been criticism from the benches opposite of the way in which the reductions have been distributed over the various taxable goods. The right hon. Gentleman the Member for Huyton said I ought to have concentrated on reducing or removing the tax on essentials, especially clothing, furniture and other household goods. There is clearly a great difference of view between hon. Members opposite and myself on the pattern of this tax. They think it should be a narrowly-based tax on luxuries. I, on the other hand, think it should be a tax at relatively low rates spread over as wide a field as practicable on goods for general consumption. What an impossible task it is anyhow to draw a line where luxuries start and non-luxuries end. I decided on a fairly general reduction in rates and in doing so provided substantial and welcome relief for consumers over a wide range of household and personal articles whilst avoiding any weakening of the foundations of this important tax.
Some hon. Members have asked why, instead of proposing a separate reduction in the standard rate of Income Tax. I did not increase the marriage and children's allowances. I should very much like to have been able to do both. I may be a bachelor, but I am not a heartless one, and I do not take the view that because my married friends enjoy connubial bliss they are not entitled to other reliefs as well. I had to consider what I had available for tax relief and I could not attempt all the things I should like to have done. In considering the social balance of the tax system one ought not to take each year's proposals in isolation.
To achieve a fair balance I had to remember that over the past few years substantial increases have been made in the marriage and children's allowances by my distinguished predecessors, the Home Secretary and my right hon. Friend the Member for Monmouth. Special reliefs have also been given for the elderly. After weighing all these considerations, I came to the conclusion that this year, in the context of the aims of my Budget, it was the turn for reductions in standard rate with a bigger proportion for the standard rate as a whole. I think that choice was right.
The main difficulty in which hon. and right hon. Members opposite have found themselves in this debate is that they have not been able to find anything in this Budget very seriously to attack. I have never known a Budget like it. I have never known a Budget debate like it. The clarion call to arms petered out in a few desultory discordant notes and little martial ardour has been aroused.
If the trumpet give an uncertain sound, who shall prepare himself to the battle?
As so often is the case, opposition criticism has been levelled, not at what we are doing now, but at what in quite different circumstances we were doing at some other time. Hon. Members opposite remind me of a recruit I remember watching being taught to shoot at a moving target. Whenever the instructor reprimanded him for inaccuracy, he denied it vigorously, protesting, "I shoot accurately enough, but when I shoot the target is not any longer where I have shot".
One of the results of the policies of hon. Members opposite would be absolutely certain to be a return to inflation. Right hon. Gentlemen opposite say that they would prevent that by controls, but they tried that for six and a half years and signally and dismally failed, and they would fail again. Some of them say that there would be fewer controls next time, but no one who knows the mind of a Socialist will believe that for a minute. The whole gospel of Socialism and the enthusiasms and propensities of its exponents rejoice in the proliferation of mainly negative directions and controls entering into the smallest compartments of people's lives. Hon. and right hon. Gentlemen opposite know that, while this is the breath of life to them, the effect on the vitality and dynamism of industry today of directions from Whitehall would be catastrophic. They remind me of the business man who liked central control and who bought a farm. When the price of wool went up, he wired his bailiff, "Shear sheep". The answer came back, "Can't; lambing." The reply went back to him. "Stop lambing, start shearing."
During the debate a number of hon. Members have made a number of proposals as to what other things I might have done, some of which have been good and sound proposals, while others were less good. I want to emphasise at the end of the debate what I stressed at the beginning. Every Budget should have its main aim and all the actual proposals must be directed to that aim. If such reliefs as can be given are dissipated, the main aim will not be advanced.
Every proposal I have made in this Budget is directed to the objectives which I laid down in my statement—an improvement in the competitiveness of our economy. Because we live by our exports, that must be the overriding need for the future. A steady but not excessive expansion in production, leaving sufficient room for exports, high investment and high saving, and stability in the cost of living. These are the aims. If we can achieve them, we shall have a balanced and progressive economy and a sound balance of payments. The test of this Budget will be whether it will help us to attain these ends, and it is because I am convinced that it will that I ask the Committee's approval for it with confidence.