In his penultimate remarks, the hon. Member for Kidderminster (Mr. Nabarro) raised the subject of beer, and I shall therefore say a few words about the same subject. I thought that the Financial Secretary opened the debate with his customary clarity, but I must say that it seemed to me that the earlier part of his speech could have been summarised in that one well known line, "Beer, beer, glorious beer." If I may say so, it was not quite in keeping with the moderation of the remainder of his speech.
After the Chancellor's Budget speech I did not attempt any personal public opinion poll but, as is usual on these occasions, I heard the views of many different people, constituents and others. I came across two points of view which were directly opposite on this subject of beer and which I think are fairly representative. One was the view of a man and the other the view of a young lady. They live in the same city and they work in the same office.
On the morning after the Budget the man said, "It seems to be a jolly good Budget. This 2d. off beer is a good idea. All the chaps going home in my bus seemed to think so, too." The young lady also offered her views quite spontaneously and she said, "I do not think much of this 2d. off beer. It is all very well for people who like drinking beer but what about those who do not like beer? It will not help their cost of living." I have some sympathy with the young lady, but of course both those commentators were very much oversimplifying the issue.
This is largely a question of priorities, and I think that the Chancellor has some of his priorities wrong. I am aware of the argument about the law of diminishing returns which might apply to the beer duty. It may well be that television is keeping people at home and that not so many are going to public houses, which reduces the consumption of beer, but it seems to me that precisely the same kind of argument could be used on behalf of the cinemas. For the time being, television is keeping people at home and away from the cinemas, but I have been very impressed by the figures given to me which seem to indicate that the Entertainments Duty on cinemas just makes the difference for many of the small cinemas between running at a small profit or running at a loss and having to close down. If a cinema has to close down the Chancellor loses the Entertainments Duty from it and any possible tax on the profits which might otherwise have been made. There seems to me to be a very strong case for abolishing the Entertainments Duty on cinemas. Certainly in arranging my priorities I should have endeavoured to bring the abolition of that duty within this year's finance Bill.
I realise that the Chancellor cannot please everyone, but in considering to what extent he can try to do so it is fair to take into account the total level of Government expenditure. If there had been some reduction in that total level it would have been possible to increase the number and the amount of tax reductions, and it is with that in mind that I look at the question of Purchase Tax. I should have preferred to see the 5 per cent. rate abolished altogether. If the Chancellor could not afford to do that in one year, he could have pruned some of the items in the category of goods subject to the 5 per cent. tax. I should have thought that in a number of cases the tax was scarcely worth the cost of collection. In addition, one has to consider the trouble and expense to which retailers and manufacturers are put. I certainly think that there are many items subject to Purchase Tax which are of greater importance and usefulness than alcohol. In saying that I do not wish to show a bias against those who drink beer, but I feel that the Chancellor has some of his priorities wrong.
Turning to Clause 25, which deals with Profits Tax, I approve of the changes which the Bill introduces but, in dealing with Profits Tax, I think that it would have been as well to introduce a tidying up operation. The introduction of the flat rate last year brought to light a number of anomalies. For example, there are certain clubs and societies which, for administrative reasons, function as limited liability companies but their main purpose is to raise funds for charitable objects, and the effect of the 10 per cent. tax is merely to reduce by 10 per cent. the amount of money available to charity.
There is also the case of the building societies, which seems to have become a hardy annual, at any rate for me. The effect of a 10 per cent. Profits Tax on surpluses is to reduce the margin available for reserves. It has the effect of making it more difficult for building societies to build up reserves and to maintain an adequate reserve ratio. In the Housing and Housing Purchase Bill the Government have recognised the importance of a reasonable reserve ratio for building societies, and it seems illogical to lay down a rule recognising the need for an adequate reserve ratio and at the same time to impose a 10 per cent. tax on surpluses which makes it more difficult for the building societies to maintain their proper margin of reserve. As the Financial Secretary knows, representations have been made to him on this subject, and I should like to know whether there is to be any promising outcome of those representations.
Another item on my list which I think is relevant to home ownership is the Stamp Duty on mortgages. Part IV of the Bill deals with the Stamp Duty, but there is no reference to the Stamp Duty on mortgages, and I should like to know what is the prospect of that duty being abolished.
Returning to Part III, which deals with Income Tax. I welcome the Income Tax reduction. I will reserve my comments until the Committee stage, but I want to say a word about investment allowances. I take the view that they are not suited as a measure to be used as a short-term device in budgetary policy. I find myself in agreement with the statement in the Economist on 11th April:
… to suppose that it is prudent policy to switch investment subsidies on and off like a tap is to suppose that private industrialists can do what the Chancellor himself said the nationalised industries and Government Departments cannot be expected to—that is, to vary their investment programmes 'rapidly up and down in accordance with the state of trade' and still carry through 'sensible plans'.
I find myself in agreement with that view and in disagreement with the hon. Member for Scarborough and Whitby (Sir A. Spearman), but very careful consideration should be given to the measures which are appropriate to deal at short notice with the dangers of inflation and reflation. Neither investment allowances for the private sector of industry nor investment programmes for the nationalised industries should be included in the list of short-term policies which can be switched on and off. We have had too much chopping and changing about.
This leads me to a more fundamental question. Is this Finance Bill one stage in a series of relaxations which will not be interrupted by another crisis, or is this just a lucky year? Is this a gleam of sunshine before another storm? That seems to me the great point. If the first, more hopeful, view is correct, then those claimants who have been missed out this year may not have to wait very long, but if the other view is correct they have missed the bus. I am sorry to mix my metaphors. It is a very different matter if in a short while there is another crisis and new restrictions are applied and additional taxes are imposed. That is the 64,000-dollar question.
It is not enough to say that it all depends on the amount of restraint exercised by wage and salary earners. It is not enough to state the problem. Referring to the steadying of the cost of living, the Chancellor said in his Budget speeech:
But if this progress is to continue, almost everything depends on the degree of restraint shown in wage negotiations this year."—[OFFICIAL REPORT, 7th April, 1959; Vol 603, c. 46.]
The Chancellor posed the problem, but it seems to me that it has not been adequately answered and that our task is to find the answer.
Last year, when the flat-rate Profits Tax was being discussed, I suggested that some of the criticisms which were put forward against the unevenness in the distribution of dividend income were misplaced, that it was maldistribution of ownership about which we ought to be more concerned. That is very true. All the evidence available indicates that the distribution of ownership of industry is very uneven. The majority of people are dependent upon salaries and wages and have no direct share in the ownership of industry. They may have a nominal share in the nationalised industries but that is far too remote to have any real meaning. Therefore, if they want a higher standard of living or wish to offset the high cost of living, their only way is to ask for more wages and salaries, and that seems to be a perfectly natural thing to do. I think that will continue so long as the gulf remains between capital and labour—although I prefer to use the more up-to-date phrase "between owners and non-owners".
It may be that the Chancellor agrees with this but considers that he can do nothing about it in the Finance Bill or that it is no concern of the Treasury. I do not agree with that view. I think it is very much the concern of the Treasury and that there is much that can be done. I should like to see a whole section of a Finance Bill devoted to this subject of the wider distribution of individually-owned capital wealth.
I will give one or two precise examples of what I would include in such a section. First, it is still easier and more advantageous from a tax point of view for a firm to make a cash bonus rather than introduce an employee shareholding scheme. Secondly, it seems to have been the policy, certainly ever since the war, for every Government to encourage those who save to lend their money to the Government rather than put it directly into industry. This policy should be questioned. For political and economic reasons, there is much to be said for bringing about a very much more widespread distribution of ownership. By "ownership" I include the ownership of equities.
I know that it has been argued in the past that there is a risk in ordinary people putting their money into industry and that they should lend it to the Government, but in recent years a great deal of thought has been given to risk spreading. After all, there is a good deal of risk in gilt edged securities; they have been some of the riskiest of investments since the war.
Therefore, it seems unreasonable that the Treasury should penalise those who invest directly in industry by the Stamp Duty on transfers. I support the suggestion already made by an hon. Member opposite that the Stamp Duty on transfers should be abolished or that the exemptions should be brought into line with the Stamp Duty on conveyances on property. That should, of course, be only a part of a very much more comprehensive policy for dealing with distribution of ownership. I do not support the view of giving any special favours to unit trusts. I do not think one should pick out one particular kind of investment.
I would much rather see something of a more revolutionary nature on the lines of proposals put forward by my colleagues and myself last year on the Finance Bill, which were a development of proposals for extending co-ownership and saving generally, which we put forward year after year. I think the Chancellor may recollect a debate on 2nd July last year to which he replied. The plan we put forward incorporated the idea of the deferred tax liability for a certain portion of earnings which could be put into a special savings account and invested. In this way there would be widespread encouragement of saving. The Chancellor had certain objections, but I do not think any of them are insuperable.
Since then there has been much discussion on this subject and various proposals have been put forward. There have been inspired statements in the Press which have given the impression that the Government were really going to do something about it. I understand that some Members of the party opposite have supported the general idea, but it all seems to have come to naught. The striving seems to have been in vain. I am sorry that is so, because I am always glad to see Liberal clothes stolen so long as the Government that steals them puts them to good use. But there it is, so far the efforts seem to have been in vain.
I sum up by saying that there is much in this Bill which commends it, but there are many omissions which I regret. The best case which can be made for the Bill is that it will be part of a process for general relaxation of taxation and expansion of industry. I hope it will work out that way. For the sake of the country I hope it will work out that way, but unfortunately it may not do so. It may well be that we shall have another balance of payments crisis or another upsurge of inflation. In other words, there may be another storm after the sunshine.
I think it will depend partly on the extent to which three conditions are satisfied. One is that there is great restraint by the Government in holding down the total and level of Government expenditure; secondly, that a considerable part of the additional spending money put into people's pockets will be saved; thirdly, that this gulf between owners and non-owners will be bridged, thereby making possible a change in the climate of opinion from which most important results might follow.
This is all relevant to a Finance Bill. I think something could be done in the Finance Bill, there is a real need that it should be done, and I hope that before we conclude our deliberations the Chancellor will be able to show in some positive way that he recognises the need.