Clause 26. — (Surcharges on Employers.)

Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 13th June 1961.

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4.12 p.m.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

I beg to move, in page 20, line 42, after "Kingdom" to insert: and having regard to the need to maintain full employment in all parts of the United Kingdom". I understand that it is permissible in this debate to refer also to the Amendment in page 20, line 40, after "Treasury" to insert: after consultation with the Board of Trade and the Secretary of State for Scotland". It touches similar issues.

We reach the Chancellor's proposals for a payroll tax. I imaigne that the Chancellor must sincerely regret by now that he ever introduced this idea of a payroll tax into the Budget because the opposition to it has been almost unanimous from all sections of opinion, and it is our intention to oppose the principle of the tax on the Question, That the Clause stand part of the Bill. At the moment, on these Amendments, we are concerned only with the foolishness of applying this payroll tax, on the assumption for the moment that there will be such a tax, in areas where there is considerable unemployment. We do not want the tax at all, but if it is to be applied the minimum condition of applying it should be that it should be applied only in areas of labour shortage where at least some sort of case might be made out for inducing or forcing employers to dismiss labour.

4.15 p.m.

I must, first, protest against the Government's action in so framing the Money Resolution that it is not even in order to put down Amendments for the exclusion of definite areas, such as Scotland, Wales or the development districts as listed in the Local Employment Act, from the operation of the tax. Surely the minimum the Government should have done is to allow the House of Commons and the Committee to propose and debate that areas of that kind should be omitted from the effect of the tax. It is sharp practice so to draft a Money Resolution that that is ruled out of order in advance. But for this we should have sought to move that the development districts listed in the Local Employment Act and Northern Ireland—and by a queer trick of the Money Resolution and the drafting of the Bill it is permissible to move the omission of Northern Ireland—should be omitted from the tax.

It is no good the Chancellor trying to argue that the purpose of this payroll tax is not to induce employers to economise with labour and to discharge allegedly surplus labour but is simply a form of tax designed to mop up purchasing power. Since his Budget speech he and his supporting Ministers have been inclined to argue that he was misunderstood and that this payroll tax is not in the least intended to force dismissals of labour but is another regulator designed to reduce incomes and spending power in the hands of the public. But, as reported in column 808 of 17th April, the Chancellor said in his Budget speech, referring to the payroll tax: The use of such a measure as an economic regulator would have the added advantage that when we are faced with a situation of chronic shortage of labour it would act as an incentive to economy in the use of manpower and to investment in labour-saving equipment."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 808.] The Chancellor, therefore, cannot argue that that was not one of his intentions. Indeed, if it were not, and if the object of the regulator is simply to mop up purchasing power, why is it applied in this extraordinary fashion, which I suspect the Minister of Pensions, whom I see here, does not like very much—by addition to the insurance stamp? If the Chancellor is seeking to mop up purchasing power, why should he not have a regulator which enables him to increase Income Tax or Surtax or Profits Tax in the short-circuit manner in which he proposes to increase this tax? As he has said that this is one of his objectives, we must make that assumption for the purposes of debate.

If this is intended to induce employers to economise with manpower, then it seems to me to be incredible folly to propose to apply such a tax to areas such as Northern Ireland, Scotland, many parts of Wales and North-East England, for instance, where there is a surplus and not a shortage of labour at present? It may be said that the Chancellor would not make such a suggestion, but if not he ought to be sympathetic to the Amendment and to our general case that the tax should not be applied in those areas. To suggest, to use his own words, that there is now "a situation of chronic shortage of labour" in Northern Ireland and most parts of Scotland, for example, is a complete travesty of the facts, as a number of hon. Members know very well. If this tax were applied with geographical discrimination, that is to say, applied to areas such as London and the Midlands, and some other areas where there might be a shortage of labour, he might make some case for it, but I put it to the Chancellor that it is a ridiculous economic policy to apply a tax designed to reduce employment to areas where there is too little employment already.

This tax is typical of much of the Government's muddled thinking on economic policy. Last winter it was alleged by many people, I do not know with how much truth, that the motor industry in Birmingham, Luton and Oxford was hanging on to manpower which apparently the Government thought it ought to discharge—and which, in the light of subsequent history, it may have been quite wise not to discharge. Because that was alleged, we now have this indiscriminate weapon which, as it stands and if it is to be used at all, will have to be applied without any discrimination to the whole of the United Kingdom.

I think that the Chancellor has been misled by the phrase "mobility of labour", which is thrown about very loosely by some people when they discuss this problem. This is a phrase which always seems to me to cause the utmost confusion. There is a great deal of mobility of labour in this country in the sense that people change their jobs without leaving the area in which they live. In that sense there is no lack of mobility of labour. As the Chancellor will find if he consults the figures of the Ministry of Labour, about 5 million people change their jobs in this country every year. In a town the size of Luton, with a population of 100,000, about 10,000 people change their jobs every year. It is completely false to suppose that there is not a great deal of mobility of labour in that sense.

It follows from that that the way to get employment of surplus labour and the way to get people into the jobs the Government want them in is to steer industrial expansion and additional work to areas where the labour exists and where people are already moving. If this is done, there will be no lack of movement between jobs. The present mobility of labour—it exists, and can exist, only on a very small scale—consists of people moving from one area to another. We all know why this is so small. It is because moving home and finding somewhere to live imposes an almost impossible burden on anybody of small means who wishes to move his home and family from one area to another.

If the Chancellor of the Exchequer had seriously examined the problem and believed that there is surplus labour in some areas, as there is in Northern Ireland and Scotland, he would not have decided to impose a tax which will shake out people into unemployment everywhere. He would have tried to intensify the effort to restrain expansion of employment in areas where there is a shortage of labour and increase it in areas where there is a labour surplus. If the Chancellor had looked at the way the labour market works and the way labour moves, that is the conclusion at which he would have arrived. That reinforces the argument the Opposition are now advancing that, if we are to have this payroll tax, to which we are entirely opposed, the very minimum condition for its application is that it should be applied only to areas of labour shortage.

As the Chancellor has so framed the Bill—I suppose he takes responsibility for it—that it is not even possible for the Committee to table an Amendment to exclude specific areas, apart from the case of Northern Ireland, we are bound to press the point in the form of the Amendment now before us that at any rate the Government in making a decision should have regard to the needs of full employment. I do not see how the Government could do that in practice other than by deliberately excluding the areas of labour surplus and/or unemployment from the operation of the payroll tax. I hope that the Chancellor, even if he does not accept the Amendment, will take my arguments seriously.

Photo of Lord Robert Grosvenor Lord Robert Grosvenor , Fermanagh and South Tyrone

The right hon. Member for Battersea, North (Mr. Jay) mentioned Northern Ireland several times. That is an area which has approximately 7½ per cent. unemployed. If the payroll tax were at any time implemented, it would affect us probably more than any other part of the United Kingdom. We were very grateful for the Chancellor of the Exchequer's statement on Second Reading that the Minister of Finance in Northern Ireland could do what he liked with the money, should it ever be collected. I understand from the statements which the Minister of Finance has made in the Stormont Parliament that in all probability this money, if ever collected, will be returned to those from whom it is taken. If that is so, it appears that we are concerned purely with points of administration. If they could be removed, it would he simpler to exclude Northern Ireland altogether. The points of administration are separate legislation, money paid into a separate fund, a different card, and a special stamp. This is purely administration, and I ask my right hon. and learned Friend to bear this in mind and exclude Northern Ireland altogether.

Photo of Mr Stanley McMaster Mr Stanley McMaster , Belfast East

On a point of order. I am in some doubt. Are we now discussing the Amendment in the names of my hon. Friends and myself in page 21, which seeks to leave out lines 10 to 12, or is that to be discussed later?

Photo of Sir Harry Hylton-Foster Sir Harry Hylton-Foster , Cities of London and Westminster

The hon. and gallant Member for Fermanagh and South Tyrone (Lieut.-Colonel Grosvenor) trespassed on that Amendment. It may be for the convenience of the Committee to discuss the two Amendments together.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

Further to that point of order. Subject to your Ruling, Sir Gordon, it will be more convenient to keep the two Amendments separate. On occasions it is impossible to avoid referring to Northern Ireland on this Amendment, but that area has a very special problem of its own.

Photo of Sir Harry Hylton-Foster Sir Harry Hylton-Foster , Cities of London and Westminster

It is a matter for the Committee to decide.

Photo of Mr Eustace Willis Mr Eustace Willis , Edinburgh East

Probably none of the Budget proposals received such a bad reception in Scotland as this proposal. On the whole, the Budget had a not very welcome reception. That was demonstrated in no uncertain fashion by the result at Paisley a few days after the Budget. This proposal was condemned by practically every source in Scotland—including responsible industrial and local authority opinion. Practically everyone of note in Scotland questioned or condemned the proposal. They did so precisely because by no stretch of the imagination could they see how it would benefit Scotland. Instead of a payroll tax, we should be paying people to employ people in Scotland, not inflicting a penalty upon them if they provide employment.

For sixteen years Scotland has had double the rate of unemployment suffered by the rest of the country. We have been losing population at a fairly substantial rate. According to the Secretary of State, last year the net migration from Scotland was 27,000. According to the Registrar-General, it was more. Figures published in the Interim Census Report show that depopulation is going on throughout the whole of the North and in the Border areas in Scotland. In other words, Scotland is becoming depopulated to a very great extent, with the exception of the industrial belt across the lowlands.

The Chancellor of the Exchequer proposes that he should be allowed, if he thinks the economic situation calls for it, to levy a payroll tax. If this tax is used, it must be a blow to employment in Scotland. I do not know whether the right hon. and learned Gentleman intends to use it, because when the Prime Minister was in Scotland he spoke about it in terms which suggested that it never would be used. Perhaps he did so because he was in Scotland and because of the protests he had heard from his own party members at the Scottish Tory Party Conference. If it is not to be used, there does not seem to be much purpose in having it in the Bill. Even if the Prime Minister was trying to placate his own followers, it seems to suggest that there is a very good case for at least excluding Scotland from the operation of the tax if it is used.

I could go from the North of Scotland to the South and pick out industry after industry. Instead of inflicting a payroll tax, industrialists operating in some of these areas should be given an inducement. We have been arguing for weeks in the Scottish Standing Committee along lines that have been put forward by eminent industrialists in Scotland who say that rather than put a tax of this sort on Scottish industries there should be special tax incentives for companies going to Scotland.

4.30 p.m.

How will industries be persuaded to go into the Highland areas if they are to be treated in this way? Someone trying to start a small industry in Ross and Cromarty or in Inverness-shire, employing thirty or forty people, will all the time have the threat of this payroll tax hanging over his head. Employers in the Highlands are already faced with great difficulties, such as increased freight charges. They are a long way from their markets and, on top of all that, they are now to be faced with the proposition that at any time they might have to pay a tax on the number of people they employ.

This to us in Scotland is sheer economic lunacy. There seems neither rhyme nor reason for the proposal. My remarks are not confined to the Highlands. One could go to the Border districts, where the same feelings about this tax are held. One could even go to the industrial areas, where no one would suggest that even in Lancashire—the centre of the industrial belt—that this tax is going to do any good.

The President of the Board of Trade and the Secretary of State for Scotland are fond of telling hon. Members that a certain number of jobs are in the pipeline. I think that 25,000 such jobs were recently said to be in view. But the trouble with the pipeline is that it is very leaky and we shall lose half of the jobs before the time arrives when they are supposed to start pouring out of the pipeline. [Laughter.] Hon. Gentlemen may laugh about this, but it is true. We are always getting these promises of jobs, but the outstanding fact from which no one can escape is that in Scotland we have an unemployment rate which is double that for the rest of Great Britain. If it were not for the fact that 27,000 people leave the country each year we should have a fantastic rate of unemployment. It is only because men are leaving Scotland to seek employment in the Midlands, in London and overseas that we manage to keep down the unemployment figure to what it is today.

This tax will probably result in driving even more men out of Scotland at an even faster rate. Surely there is no possible test, on social or economic grounds, to suggest that the proposed tax is wise or that it could make things better in Scotland. I defy anyone to suggest one criterion by which it could be shown that the proposed tax will be beneficial to Scotland.

I am an ardent reader of the Scottish Press and of speeches that are made on this subject, but I have not yet heard one suggestion which convinces me that the proposal will benefit Scotland. The Chancellor's speech did not reassure me, especially since the right hon. Gentleman did not seem to have a very great reason for it. He wants something to play about with, to make his name as a Chancellor, but, as far as this proposal is concerned, he is backing the wrong horse in Scotland.

Even if the Clause is passed, it should, at least, be possible for the Chancellor, or whoever will administer the payroll tax, to exclude Scotland from its operation. That is the only possible way it will benefit Scotland—if it is levied against England but not against Scotland.

I plead with the Chancellor, therefore, to accept the Amendment. Failing that, we shall oppose this with all the vigour at our command, particularly Scottish hon. Members.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Willesden East

I have listened with great care to a certain amount of fire and fury that has come from Scotland. Of course, hon. Members generally can appreciate their point of view, since they have an unemployment rate of about 5 per cent.—

Photo of Mr Eustace Willis Mr Eustace Willis , Edinburgh East

Three point one per cent.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Willesden East

Yes, that is so—and in the case of Northern Ireland it is even higher. I believe that in March the Irish unemployment figure was 7 per cent. But I do not think that the Chancellor is at variance with these matters, because if one studies the National Insurance Act of 1946 one will see in Part I of Section 3: Where is appears to the Treasury expedient so to do with a view to maintaining a stable level of employment, they may by order direct that contributions, instead of being paid at the rates set out in the First Schedule to this Act, shall…be paid art such higher or lower rates…as may be so specified or determined. Certainly the Chancellor is taking certain powers under this Bill, a powerful second weapon, which he may or may not use. The whole point is that the Chancellor needs certain weapons of this character in order to preserve the security of employment and to maintain a stable level of employment.

I believe that the Chancellor has indicated—and my information is based on the various utterances of members of the Government Front Bench—that this is a temporary expedient to be used only if necessary. It will be imposed as a regulator, and only as such. In the coming years, if it is found to be a useful instrument, he may reshape the basis of the tax in order to overcome any anomalies.

Hon. Members should not get the impression that the United Kingdom is the only country with a payroll tax. There may be differences in what the tax is called, but it is a question of type 2 machinery of operation. In Britain, it has been attached to the National Insurance contributions, while in Western Germany and elsewhere it is a percentage of the monthly or quarterly payroll.

In Western Germany many of the employers must add about 40 per cent. over and above their wage bills—which is much higher than that proposed for Britain—and elsewhere the figure is even higher. Nevertheless, in Western Germany the rate of unemployment is well under 1 per cent.—even with this payroll tax. I believe that much the same argument could be applied to certain other countries of the E.E.C.

Photo of Mr Eustace Willis Mr Eustace Willis , Edinburgh East

The hon. Gentleman is speaking about circumstances in an expanding economy. Apart from this year, no one would suggest that Scotland has had an expanding economy.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Willesden East

I get the hon. Gentleman's point, but I would advise him that we are at present considering the possibility of associating with the E.E.C. on suitable terms. Is there any reason why Britain, including Scotland, should not have an expanding economy in the future?

Is it wrong for the Chancellor to take powers and to use them, as regulators, to remove distortions in full employment and to see that industry makes the best use of its available labour? One must study the impact of the proposed tax on industry and how, financially, it will affect it. It has been made clear that in the Civil Service the imposition on the Ministry of Housing and Local Government aspect will work out as about £16 million a year, Ministry of Health about £5 million a year, Ministry of Education about £1·2 million a year, agriculture about £7 million a year and the motor car industry about £4·5 million. Some of the leading industries, such as I.C.I. and A.E.I., will have to pay about £1 million apiece.

Are hon. Gentlemen opposite prepared to say that this is going to lead to further unemployment in Britain? Or might it not be said—in the South anyway—that this additional expenditure will be absorbed? The proposed tax will, after all, work out at only about 1 per cent. or 2 per cent. of the payroll, or, in terms of pay packets, about 1d. per hour per worker.

If there is a tendency on the part of some industries and firms to hold on to labour, the proposed tax would involve an extra imposition on such industries and on the amount of labour they carry. It is a matter of machinery. If it has to be in a permanent form, it may well have to be reshaped. We have the examples already in operation in Western Europe to enable us to find out how a payroll tax may be applied in various forms and be operated in a period of full employment.

I regard this as an important move by the Chancellor. I hope that he will recognise that reshaping may be necessary so as to take account of the need to have a tax compatible with conditions in Northern Ireland and Scotland.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

If the hon. Gentleman thinks that it ought to be reshaped in the coming years to fit conditions in Scotland and Northern Ireland, why not reshape it now, since those conditions already exist, in accordance with our Amendment?

Photo of Mr Trevor Skeet Mr Trevor Skeet , Willesden East

The Chancellor's purpose in introducing it at this stage is that it shall be a regulator which he may or may not use. He is not attempting this year to put it on a permanent footing. If he puts it on a permanent footing, it will be necessary, in my view, to reshape it to take account of these other factors. If he uses it this year he must bear in mind the provisions of the enactments, to which I have referred so as to take account of the need to maintain a stable level of employment within the United Kingdom, which includes Scotland and Northern Ireland.

Photo of Mr Cledwyn Hughes Mr Cledwyn Hughes , Anglesey

I have not the confidence in the Chancellor of the Exchequer which the hon. Member for Willesden, East (Mr. Skeet) has, and I do not wish to confer this dangerous power upon the right hon. and learned Gentleman. In my view, this is one of the most ill-conceived proposals which even this Government have produced. It has been received with varying degrees of hostility in various parts of the country, but it has shocked those areas which have suffered for years from chronic unemployment. What my hon. Friends have said about Scotland and what hon. Members have said about Northern Ireland is true of large areas of Wales. For many years, the position has remained fairly static in my constituency of Anglesey. For the last eight or ten years, unemployment has fluctuated between 8 and 10 per cent. of the insured population, the highest of any county in the United Kingdom. The consequences of this unemployment are well know to all hon. Members and I need not dwell upon them.

Recently, there has been an improvement. The efforts of local authorities and the inducements of the Local Employment Act are beginning to bear fruit. New industries are beginning to come in. The point which the Committee should bear in mind is that these industries are in the early stages of growth. Obviously, they are having and will have for some time teething troubles. It is not for me to tell the Government that it is not easy to induce new industry to come into these areas. We have been told that by Government spokesmen since 1951.

In Anglesey, we have five fairly new industries. They are doing well and are now on the threshhold of expansion. Things are beginning to look promising, but considerable problems remain. In its last report, the Anglesey Employment Committee said: In the last twelve months, the Employment Exchanges and the Youth Employment Office in Anglesey have placed some 2,000 people in work, yet at no time were there more than 100 vacancies available in the county. These figures give a broad indication of the surplus of the supply of labour over demand in Anglesey. That will give the Chancellor some idea of the problems with which we still have to contend.

Many of the industrialists who are building new industries in Anglesey and elsewhere have been greatly upset by the Chancellor's proposal. Quite naturally, their confidence has been shaken. On the one hand, we are told by the Government that they are doing everything they possibly can to induce industrialists to go into areas with high unemployment, while, on the other hand, the industries which are there are threatened with arbitrary taxation at the very moment when they are trying to establish themselves and build up. Many of these industries have not yet started to make a profit. Obviously, a new industry must expect to run for some time at a loss. They can go through a very trying time unless they have vast resources. In my opinion, this tax would have the effect of neutralising all the efforts which have been made.

The Chancellor says that he would use the tax only in times of economic crisis. It is precisely at times of economic difficulty that industries on the periphery need bolstering and encouraging. Shortly after the Chancellor's Budget statement, I received a letter from an industrialist in North-West Wales. He was extremely disturbed by what he had read. He said to me, "If this tax is imposed, I shall have no alternative but to close my three plants in Caernarvonshire and Anglesey" Although his industries do not employ a large number of people they make a vital contribution in the life of the area.

I want the Chancellor to say now whether it is his intention to apply this tax in areas such as Anglesey and the other unemployment areas in the United Kingdom. If he says that such is not his intention, that will reassure industry in these areas. On the other hand, if he does not give such a categorical assurance, he will shake the confidence of everyone concerned and nullify all the work which has been done by local authorities and others to deal with the twin evils of unemployment and depopulation. As it stands, the present proposal is monstrous, and I hope that even now the Government may decide to withdraw it. I warmly support the Amendment.

4.45 p.m.

Photo of Sir John Hall Sir John Hall , Wycombe

Rather regretfully, I must oppose these Amendments, not because I am in favour of the payroll tax provided for in Clause 26—I think it is a very bad tax and I should like to see the Clause removed—but because I think that the Amendments are likely to be rather more unfortunate and unfair in their effect than, perhaps, hon. Members supporting them intend.

I do not believe that the proposal to impose a payroll tax is really designed to reduce over-employment and to save labour. Any company employing a marginal additional amount of labour which is prepared to pay quite a considerable weekly sum at times when it does not require it will not be deterred by an extra 4s. per employee per week, a total of £13 a year. After being set against Income Tax and the increased Profits Tax, the figure will be about £6 17s. per employee per year.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

If that argument, with which we are very familiar, be valid, why did the Chancellor say in his Budget speech that the tax would act as an incentive to economy in the use of manpower?

Photo of Sir John Hall Sir John Hall , Wycombe

I am giving my own personal opinion. In my view, it will not have the effect which the Chancellor said it would have, and, moreover, I cannot think that it could ever have been intended primarily to have the effect of reducing over-employment.

If the Amendments were adopted, however, they could have a very unfortunate effect upon those industries in which we are particularly interested today, that is to say, industries working in the export market. Many of our major exporting industries are in areas of high unemployment. They would not benefit from any concession of the kind suggested in the Amendment because it is designed to help areas of high unemployment.

My constituency, for example, is an area of very high employment. I think that there is under 1 per cent. unemployment. The number of vacancies far exceeds the number on the unemployment register. Several of our industries, for example, furniture, have been trying very hard for some years to export with no little success. But furniture is not an easy thing to export. Developing new markets is a costly business, and the percentage of profit that is made initially is very small. One makes very little in the first few years. An industry of that kind will not be helped in any way by a proposal such as that contained in the Amendment, but it will still be penalised by the imposition of a payroll tax of the kind suggested by my right hon. and learned Friend.

My hon. Friend the Member for Willesden, East (Mr. Skeet), in his interesting contribution, pointed out that the percentage of tax likely to be imposed was a very small percentage of the weekly or annual wage cost. But as a percentage of the profit of a company it can be very high. Let me give the example of a medium-sized company employing about 650 employees. I was looking into the accounts of such a company the other day. Suppose that it has been trying hard for a number of years, with some success, to develop an export market but is only now beginning to make profits as a result of its efforts. Suppose that its profits are about £50,000 a year. I calculate that this tax would impose a further cost of £6,700 on that company. After allowing for the offset of the additional 2½ per cent. Profits Tax, it works out that there is a further tax of 12½ per cent. on its profits. That seems to be a very penal form of tax to impose.

My hon. Friend mentioned that a payroll tax is in existence in Western Germany. He said that it has had no retarding effect on the economy of that country and that, on the contrary, it is going through a period of considerable industrial expansion. It is true that there is a quite high payroll tax in Western Germany, but industry there does not bear some of the taxes which industry in this country has to bear.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Willesden East

My hon. Friend will appreciate that the employer in Western Germany has a very much higher welfare burden to bear than his counterpart in the United Kingdom. There an employer pays over 40 per cent whereas the United Kingdom employer pays about 13 per cent. or slightly more.

Photo of Sir John Hall Sir John Hall , Wycombe

I do not deny that the welfare tax paid by the German industrialist is very high. I was thinking of the total taxation burden on firms and individuals in this country.

I wish to be brief because I have a good deal more to say on the Question "That the Clause stand part of the Bill". I conclude by saying that, although I sympathise with the idea behind these Amendments, I could not accept an Amendment designed to give special concessions to certain areas leaving many industries which are vital to our economic life penalised. I would much prefer to see the tax as a whole removed.

Photo of Mr Joseph Mallalieu Mr Joseph Mallalieu , Huddersfield East

I have some reservations about the general principle of this tax. It may be that I shall have a chance of expressing those reservations on the Question "That the Clause stand part of the Bill." However, I wholeheartedly support the Amendment.

The hon. Member for Wycombe (Mr. John Hall) feels that the Amendment will not have much effect on employment and that a tax of £13 per man per year will not induce firms to lay off men. On the other hand, he says that it will have a serious effect on profits and that it will reduce profits to a discouraging level. I do not think that those two horses can run together.

Photo of Sir John Hall Sir John Hall , Wycombe

The hon. Gentleman must remember that the amount of labour which may be surplus to requirements is, generally speaking, fairly marginal as a percentage of the total labour force. The amount likely to be saved by laying off men is not very great, but the total cost of the payroll tax spread over the entire labour force can be very considerable.

Photo of Mr Joseph Mallalieu Mr Joseph Mallalieu , Huddersfield East

Yes, it can. The cost on the labour force could be significant in special areas, such as Scotland and Wales, because firms which go to those areas start at a serious disadvantage. They are a long way from their markets and suppliers and costs are higher to them than they are in areas of full employment because of increased transport and so on. Something in addition to this may seriously discourage not only people who are there but others who might contemplate going there.

For the past sixteen years I have listened to a series of debates about the problems of the special areas. I have studied the various Bills which successive Governments have introduced to try to repair the damage which our economic system has done to the special areas. This afternoon I have heard speeches similiar to those which I first heard in this Committee in 1945. In spite of all that has been done in the special areas, representatives from Northern Ireland, Scotland and Wales are still saying, 16 years later, "We are in trouble. We still have a high level of unemployment".

The application of this tax, which, in principle, is a very good one, will make it more difficult still for the old story of the special areas to be made more happy. I very much hope that the Chancellor will put a bit of flexibility into the Clause in order to allow adjustments and regulators to work, not indiscriminately, but properly.

Photo of Mr James Scott-Hopkins Mr James Scott-Hopkins , North Cornwall

Like the right hon. Member for Battersea, North (Mr. Jay) and my hon. Friend the Member for Torrington (Mr. P. Browne), I found myself in difficulty in trying to draft an Amendment which would exclude areas of high unemployment. Indeed, it is impossible to draft one, as the right hon. Gentleman said, having regard to the Money Resolution. It is difficult to find an argument which will support the Chancellor of the Exchequer's wish to apply this payroll tax universally throughout the country. It is very easy to exaggerate the effect which this tax could have if applied on industry in general.

My hon. Friend the Member for Wycombe (Mr. John Hall) put forward some cogent arguments, many of which I agree with, as to the effect that this tax will have. It will be a marginal effect in many cases. I disagree fundamentally with the main argument which my hon. Friend put forward in rejecting the Clause, namely, that, because the export industry could not be included in the Amendment, it was therefore a bad Amendment and therefore areas of high unemployment, like those in the West Country, should not be included either. The hon. Member for Huddersfield, East (Mr. J. P. W. Mallalieu) said that we had areas of high unemployment 16 years ago and that we have them now. There are other areas, such as the West Country, which could be included in his "round Britain tour".

But because we cannot help the exporting industries, surely that is no reason why something should not be done to help areas of high unemployment. As I have said, it is very easy to exaggerate the danger of this tax. I am prepared to accept what my right hon. and learned Friend said in his Budget speech, namely, that the imposition of this tax is necessary for his purposes. I am prepared to accept, if and when my right hon. Friend decides that it is necessary to use the regulator, that he should do so. Indeed, I have not the expert knowledge to disagree on that. All I would say is that, as the Finance Bill has been drafted, it is quite impossible to exclude areas of high unemployment.

5.0 p.m.

Will my right hon. and learned Friend look again at the matter to see if there is not some method whereby these areas can be given help if they need help? When I first read the last paragraph of subsection (2) of the Clause, it seemed to me that perhaps that paragraph could be used to help areas of high unemployment which had been designated under the Local Employment Act. But, on closer examination of that paragraph, it obviously cannot be used, as it applies only to persons and not to areas.

I ask my right hon. and learned Friend, between now and Report, to study whether some method cannot be found whereby industries which are struggling—indeed there are some in my own area and others elsewhere in England and Wales—can be helped particularly and specially if and when he should ever decide to impose this tax. I trust that he will not have to impose it, but, if he does, will he try to find some method whereby exceptions can be made?

On the overall question, I am quite prepared to accept the fact that my right hon. and learned Friend needs this regulator at his disposal so as to regulate the economy if and when that time should come. However, I hope that he will look at the point which I am making.

Photo of Mr William Small Mr William Small , Glasgow Scotstoun

On this question of the payroll tax, I have consulted many representatives of the shipbuilding industry in my constituency and the item of cost is the one which they all take into consideration. Redundancy is taking place in the industry and the shipbuilders tell me that contraction in their labour force means that they have to keep a balanced labour force in order to compete for the building of a ship. When they compete they have to say that they have the requisite labour force available. In general, the imposition of a payroll tax is something which they all reject.

How will such a tax work in practice? In 1954 I discovered the arguments about the economic use of manpower. A big firm, namely, Imperial Chemical Industries, brought out a production of employment code on working conditions. In effect, if a payroll tax is imposed it will not make for the mobility of labour. The first thing that will happen is that the retiring age will be reduced from 65 to 62. Then firms will look at the married women which they employ and will discharge as many of them as they possibly can because, as far as manufacturers are concerned, they will represent an equal cost.

There must be stable costs in the market. If there are not, the extra cost is passed on to the consumer. In practice, the worker will tend to believe that the boss will pay the tax, but the employer's reaction to the tax will be that it is an extra cost on his production and so he will make arrangements to remove certain labour. Therefore, in practice, instead of making labour mobile, such a tax will mean that a man will retire at the age of 62, married women will be declared redundant and firms will refuse to take on apprentices. Therefore, such a tax will become a restrictive imposition on the distribution of the facilities at an employer's disposal.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

Like others who have spoken so far in the debate, I appreciate the motives of those who have put down this Amendment, but if my right hon. and learned Friend decides to accept it I shall not be at all happy. I do not know what my right hon. and learned Friend intends to do, but, as I say, if he accepts the Amendment I shall not be at all happy.

The purpose of this regulator which has been mentioned by some of my hon. Friends is obviously an inter-budgetary measure to meet a particular difficulty which may arise between two Budgets and when the danger would appear to my right hon. and learned Friend to be of such a nature that he cannot wait to deal with it until the next Budget.

In some respects, it seems to me that the sponsors of the Amendment will be defeating the object which they have in mind if they persuade my right hon. and learned Friend to insert the Amendment in the Bill, and for this reason. To be effective the regulator must apply at its maximum all over the country. Obviously, my right hon. and learned Friend has devised the regulator to meet a maladjustment—in the words of the Bill—in the balance between demand and resources. It is pretty obvious to everyone that if demand and resources are out of balance it is those areas to which reference has been made which are certain to suffer most. In other words, if the maladjustment of the economy proceeds further and is not remedied by my right hon. and learned Friend's regulator the position will deteriorate most in the very areas to which reference has been made by those participating in the debate.

For that reason, I suggest to the right hon. Member for Battersea, North (Mr. Jay) and to those who supported the Amendment that they will be defeating the object which they have in mind if the Amendment is inserted in the Bill. The objective which they should have is the early removal of any maladjustment in the economy or the slowing down of any deterioration which has taken place.

There is a second point upon which I wish to comment. It seems to me that those who are supporting the Amendment are trying to build into the Bill what might be termed a second line of defence for areas of high unemployment.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

The hon. Gentleman asks "Why not?" For that purpose there are the special measures already embodied in such legislation as the Local Employment Act and the refusal of development certificates in certain parts of the country, such as London and the Midlands.

I can understand the motives which inspire those who try to build in additional safeguards but I should have thought it far more desirable that we should know the nature of this special assistance which we are giving to those areas, assistance which has had such magnificent results. [HON. MEMBERS: "Where?"] In the part of the country which I represent—South Wales. The assistance has had magnificent results in South Wales. It has turned the area from a development area into a prosperous area and, potentially, into one of the biggest boom areas in the British Isles. It may be that to effect the same results in Scotland and Northern Ireland we should have to contemplate the strengthening of the Local Employment Act. But let us do it in that way. This regulator is not intended for that purpose. It is intended to cure a sudden maladjustment in our economy which will work to the prejudice of the whole country, prosperous or not prosperous.

Photo of Miss Peggy Herbison Miss Peggy Herbison , Lanarkshire North

I am grateful to the hon. Gentleman for giving way. He is telling a very wonderful success story. Does he ascribe this great boom in South Wales to only one year's working of the Local Employment Act?

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

I ascribe it to the Local Employment Act and to other legislation which preceded it, and to the confidence which the Welsh people have in the country in which they live and which, apparently, is lacking in some other parts of the country.

Photo of Mr Eustace Willis Mr Eustace Willis , Edinburgh East

I have been following the hon. Gentleman's speech with great care. He says that we are trying to protect Scotland and other areas against conditions which this Amendment endeavours to remedy. But surely what we are really trying to do is to protect areas from the overall effects of blanket legislation which damages our economy enormously and from which we take longer to recover than do other areas.

Photo of Sir Raymond Gower Sir Raymond Gower , Barry

My reply is that the maladjustment referred to in the Bill will work infinitely greater havoc in those areas than the mere imposition of a tax of this nature.

We cannot easily stop at the point suggested by hon. Members who support the Amendment. One might argue just as easily, why not have differential Purchase Tax rates in different parts of the country because the rates might result in more damage in Ulster than in England and Scotland? Why not have different rates of National Assistance and unemployment benefit in Ulster and in Scotland or England, because in some places they are needed more than in others? One could apply that argument to different forms of taxation and in respect of all forms of Excise and revenue. I suggest that it is the wrong approach to a matter of this kind.

If it be necessary we could strengthen special benefits and the sanctions in the Local Employment Act, and have stronger sanctions against the development of industry in prosperous parts of the country. But I suggest that when framing a Measure to deal with a financial crisis it is not desirable to adopt this backdoor method of supplementing the provisions in the Local Employment Act? I hope that hon. Members will not interpret my remarks as a wish to see these particular areas suffer, or that nothing should be done to help them. I believe that they need every possible help, but let it be given by legislation designed for the purpose.

Photo of Mr George Lawson Mr George Lawson , Motherwell

The hon. Member for Barry (Mr. Gower) appears very happy about developments in his own area. I remember that recently he boasted to me about those developments. It would seem that what has been provided in that part of the country is similar to what we are asking for elsewhere, namely, a measure of discrimination. It is for that we are asking in the Amendments.

A characteristic of the Clause is that it is non-discriminatory. It is designed to treat all kinds of industries, workers and employers on the same flat-rate basis. It appears to me that unless a considerable measure of discrimination is injected into the Clause it will not serve the purposes which I think that the Chancellor has in mind. I am prepared to agree that the right hon. and learned Gentleman wishes to bring into being a regulator which would enable the Government, by its operation, to lessen an excessive demand for labour; to prise out workers from those firms and industries where there are too many workers and transport labour to where it may be better used. It is designed to liberate the workers; to enable them to go where their skill may be more effectively used in the interests of the national economy.

The very fact that this is a flat-rate, non-discriminatory general regulator will defeat that purpose. My hon. Friend the Member for Glasgow, Scotstoun (Mr. Small) asked about the practicalities of the idea. As he said, when any employer finds himself having to carry the payroll tax, he will look round to see what kind of labour he is able to dispense with. I submit to the Chancellor that those workers whom employer A could dispense with most advantageously are not necessarily the workers who could be profitably employed by employer B. It may well be the other way round. Those whom employer A would wish to dispense with are the same as those whom employer B would get rid of were he in the same position.

5.15 p.m.

To my mind, the term "special area" does not mean only an area of relatively high unemployment. It includes areas where there may be an excessively high demand for labour. That is the case, for example, in the Midlands. My hon. Friends and I have asked Questions designed to bring out the relative demand for labour or, as we put it, job opportunity, in the Midlands as compared with Scotland. Both areas are the same in size.

The Answers to those Questions revealed a startling difference in the job opportunity or demand for labour. There is a scarcity of labour in the Midlands and an abundance of labour in Scotland. Out of every 100 boys wholly unemployed in Scotland there might, for example, be 30, 40 or 50 unfilled vacancies. On one occasion there were 23 unfilled vacancies in the Midlands for every boy who signed the unemployment register. At the same time, in Scotland there were two or three boys for every vacancy. The contrast is so great. The position with which the right hon. and learnd Gentleman is seeking to deal is more or less permanent, in the sense that there are excessive demands in some parts of the country, and in certain industries and skills, and a considerable lack of demand in other parts.

What is likely to happen if the right hon. and learned Gentleman does not apply his regulator in a discriminatory fashion is that in areas of high labour demand employers who have the labour will hold on to their workers. In areas like the Midlands, such a regulator would not prise out the workers. If employers have found it difficult to obtain workers, they will be all the more likely to want to keep them. In that sense the regulator would work the wrong way round and would lead to a tighter rather than a looser grip on the workers.

This must apply more especially in the case of the scarcer types of labour, the skilled workers. In any area where there is a great demand we know that there is a great scarcity of skilled workers. So it must mean that the discrimination will operate in that direction, in the sense that those workers will be retained and others dispensed with. In terms of skill if the purpose is to release labour it must mean that the purpose is to get skilled people especially out of jobs where their skill is not being utilised to the full.

I should like to see some kind of payroll tax which would operate heavily in some areas, where it would make certain skills expensive, and less heavily in other areas where the same skills would be less expensive. This would have to apply to special industries. My hon. Friend the Member for Scotstoun referred to the shipbuilding industry. It might be argued by such people who write for papers like the Economist that if an industry cannot pay its way, it is time that it went out. But we must appreciate that we shall need the shipbuilding industry for a long time to come. Our shipbuilding industry finds difficulty in competing with the industries of other countries and it is not for us to make those difficulties greater.

Just as this payroll tax, operated on a flat-rate basis, favours skilled workers and certain districts, so it does in respect of certain trades or industries. It is discriminatory to industries like the automobile industry which can afford to pay substantially higher for some skills. Such industries as the automobile industry and the shipbuilding industry are competing for the same kind of skills.

Often, the automobile industry draws away skill from shipbuilding and uses it at a much lower level of operative ability than would be the case in shipbuilding. Unless the discrimination for which we ask is applied, or unless there is even much finer discrimination than is proposed, an industry like shipbuilding would in these circumstances find itself even more readily and rapidly drained of the skills that are essential for it.

When there was a reference to unemployment in Scotland, the hon. Member for Ayr (Sir T. Moore), who is no longer in his place, said, in a rather offhand fashion, that is was only 3·1 per cent. The suggestion in his voice was that it was very little. The important factor, however, is not the absolute total of unemployment, but the relative position. It would be fantastic if we in Scotland had the kind of unemployment that we had in the interwar years. What we have in Scotland is a great lack of job opportunity as compared with other parts of the country. We resent this, because it is quite unnecessary.

There is not a night when I go to Motherwell station on my way to London—I travel every Sunday night—when there are not some young fellows on the platform who are coming down here "on spec." When I ask where they are going, they reply that they are coming down here to see if they can get a job. When I ask whether they have a job to go to, they reply that they have not, but that they are coming down "on spec" to stay with a sister or brother, who has told them that there are good opportunities. That sort of thing goes on day after day

Figures have just been issued showing that in the past ten years we have had a net loss by migration of over a quarter of a million people. That is not to say that only a quarter of a million have emigrated. It is the net loss bearing in mind that we have a higher birthrate than is characteristic of England and Wales, although not, perhaps, as high as is characteristic of Northern Ireland. Nevertheless, our population growth remains practically static.

This is where we make our special plea. We must have deliberate Government action to rectify the wrong balance that has grown up in our economy. A great centre of population like Birmingham or London draws more and more people to it nagnetwise. The bigger it becomes, the more powerful the draw. The further one is away from the centre, the less job opportunity there is in the more peripheral areas. There is always this draw to the centre. As a result, more and more of our population moves into this quite small pant of the country.

We must have Government action to rectify that type of development. If the Chancellor's measures are to work effectively, they must be discriminatory. We ask him at least to accept our Amendments.

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

The great trouble with the Amendment is that it selects one part of the country and, presumably, certain industries for special treatment. The difficulty is that a powerful argument can be founded for the exemption of practically every section of our industrial and civic life.

If one accepts the principle of the payroll tax, which I do not, presumably its omnibus effect must be accepted. [HON. MEMBERS: "Why?"] Because the arguments put forward by my hon. Friend the Member for Barry (Mr. Gower) show that if we want to give special consideration for assistance to particular industries there are other and better ways of giving that help than by discriminating in the way proposed in the Amendment.

For example, if we are to be discriminatory in this way, let us consider the effects of the tax on local authorities. The money for the tax will come only out of increased rates. I do not have the figure that it will cost in a full year, but it is obviously a substantial figure.

Photo of Sir John Hall Sir John Hall , Wycombe

It will cost the local authorities in England and Wales an additional £16 million in a full year.

Photo of Mr Albert Cooper Mr Albert Cooper , Ilford South

Secondly, what about the excess cost to the hospital service and the Civil Service, which are paid for by the taxpayer, or to the nationalised industries? The overall cost of this tax to the railways in a full year would be approximately £6 million. The Coal Board will be saddled with a similar cost. Where will they get this extra money? It will come only from higher charges or, if there is a substantial deficit in those two nationalised undertakings, by further subventions from the taxpayer through the Budget. The whole principle behind the Clause is a typical piece of Treasury nonsense, which cannot possibly be supported on any economic grounds.

The Amendment relates to lines 40 and 42 in page 20, part of which states that it is expedient so to do with a view to regulating the balance between demand and resources in the United Kingdom. One of the Amendments uses the words: and having regard to the need to maintain full employment in all parts of the United Kingdom. It seems to me that within those two broad statements, we could discuss the full effects of the payroll tax.

The hon. Member for Motherwell (Mr. Lawson) talked about what he called this small measure. If fully implemented, it will be £200 million a year. I was tempted to ask the hon. Member just how small is small. This is a substantial sum of money, and we are entitled to ask whether it will have the effect that the Chancellor hopes. By its very nature, it cannot possibly be immediate in effect. At the most it will bring in approximately £4 million a week once it is implemented. I cannot believe that we could have a financial crisis whch could be so marginally adjusted from bad to good by the simple transfer of £4 million in any one week.

Since the war, the Treasury has learned nothing whatever. Year after year, it has been proved beyond doubt that increases in taxation are highly inflationary. We must have regard to the ultimate effect when we consider what the Chancellor is seeking to do by the Clause. Will it maintain the balance between demand and resources? Will it have the effect of maintaining full employment? We have already seen that certain small imposts have had an inflationary effect, and the effect of the payroll tax inevitably must be inflationary.

It must increase production costs. It must put up distribution costs and it must lessen our ability to compete in the export markets. The Clause must be considered against the overall picture and not from the narrow viewpoint of the £4 million a week. I regard the whole principle as ill-conceived, ill-thought-out, highly dangerous and ineffective in its intent, and for these reasons I regret that I shall not be able to support my right hon. and learned Friend in the Lobby.

5.30 p.m.

Photo of Mr Willie Hamilton Mr Willie Hamilton , Fife West

Whatever the fate of the Amendments, if every hon. Member opposite who has spoken votes in accordance with what he has said there can be no doubt about the fate of the Clause as a whole. Enthusiasm for the Clause inside and outside the House of Commons has been less than tepid. I do not view with any great enthusiasm any Amendment which seeks to consult the Secretary of State for Scotland, but we must make the best of a bad job and we have to put down Amendments simply to present the very special point of view of the Scottish economy both from the trade union and the manufacturers' side.

My hon. Friend the Member for Edinburgh, East (Mr. Willis) was absolutely right. The payroll tax has been universally condemned by both sides of industry in Scotland. Indeed, there was no excessive enthusiasm for it even on the part of the Prime Minister when he spoke at the Unionist Conference in Ayr on 24th April, shortly after the Budget was Produced. He said, according to The Times:This tax would be used only to stop a boom going too far. He was speaking in Scotland, and talking about a boom going too high.

Photo of Mr William Ross Mr William Ross , Kilmarnock

The Prime Minister was talking about his own voice.

Photo of Mr Willie Hamilton Mr Willie Hamilton , Fife West

The reason why we oppose this proposal in Scotland is precisely that we never enjoy a boom as understood in the South-East, in London and in the Midlands.

I want to ask the Chancellor a pertinent question about this problem. When and how does the right hon. and learned Gentleman assess whether or not there is a boom? What yardstick does he take? I suppose that one of the most important measures by which one assesses whether there is inflation in the economy is the total unemployment figure related to unfilled vacancies. I have the Ministry of Labour figures for May. These figures show quite clearly evidence that there is an element of inflation. The Treasury knows and admits that. Presumably, it is one of the reasons why the Treasury wants these regulators.

The May figures show that in Great Britain the number of unemployed was 299,272 and the number of unfilled vacancies 353,519. In other words, there were many more unfilled vacancies than there were unemployed, but if we compare the Scottish figure with the overall figure for Great Britain we find a very different picture. My hon. Friend the Member for Motherwell (Mr. Lawson) has said that Scotland and the Midlands are strictly comparable regions. Let us therefore compare the figures for Scotland and for the Midlands and for London and the South-East.

The total unemployed in Scotland in May numbered 64,884, or 3 per cent. The Midland figure was 20,786, a percentage rate of ·9 of 1 per cent. The figure for London and the south-east area was 48,021 unemployed, again a percentage rate of ·9 of 1 per cent., but the vacancies unfilled in Scotland for nearly 65,000 unemployed are 18,560 and the unfilled vacancies in the Midland area for 21,000 in round figures are 35,465. For London and the south-east area, for 48,000 unemployed the unfilled vacancies are 102,000.

In other words, for every seven unemployed in Scotland there are only two unfilled vacancies, whereas in the Midland region there are almost two jobs for every one person out of a job and in London there are more than two jobs for every one out of work. The same kind of pattern is seen in the figures for youths. I will not weary the Committee with many more figures, but they are important. The number of boys under 18 unemployed in the Midlands is 342. In Scotland the number is 1,685. Unemployed girls in the Midlands number 242 and in Scotland 1,056.

These quite clearly are examples of the great difference in the economic atmosphere and situation in Scotland compared with the Midlands and London and the more prosperous South. When we were debating earlier the other regulator, the Economic Secretary said that, of course, selective steps could be taken to help Scotland. We have the Local Employment Act. The Government take these steps and there are countless jobs in this wonderful magic pipeline that we hear so much about. But since the Local Employment Act became effective, whilst it may be true that the overall figure of unemployment in Scotland has come down, the gap between the percentage rate in Scotland and the percentage rate in the more prosperous area in the South has increased. Therefore, whatever might be said in favour of the Local Employment Act, it is simply not solving the problem in Scotland vis-à-vis the rest of the United Kingdom.

All we ask for in this narrow Amendment is that the Chancellor should turn his mind towards an attempt to get a more selective approach to this problem. It seems to us that special problems demand special, selective controls. When we come to the Question, "That the Clause stand part of the Bill" we shall have a great deal more to say on the subject, because, as my right hon. Friend the Member for Battersea, North (Mr. Jay) has said, we are opposed to the Clause and I think that the majority of hon. Members are opposed to it. Certainly the majority of people in the country on the employers' and employees' sides are opposed to it. If democracy is to mean anything, that can only mean that the Chancellor ought to take the Clause out of the Bill altogether.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I intervene at this stage with not the least idea of curtailing the debate, though I think that there will be an opportunity again, on the Question "That the Clause stand part of the Bill", for further discussion. I acknowledge that this proposal in my Budget has not precisely received unqualified approval either inside or outside the House of Commons. Its primary purpose was as a regulator and I emphasise that again. Its primary purpose was to give me an additional means of restricting the economy, and a means which would be fairly widespread in its impact. I maintain that success in that, if it is necessary, is of direct interest to all parts of the country.

The hon. Member for Fife, West (Mr. Hamilton) asked for a definition of the term "a boom going too far". He said that Scotland had never had a boom, but if there is an excessive boom in England that is bad for Scotland, too. It is bad for the economy as a whole. [HON. MEMBERS: "Why?"] Because if there is an excessive pressure of demand on resources in certain industrial areas, costs go up there, our competitive capacity in those industries is affected, and that affects the economy as a whole. We want all industry throughout the country to remain competitive. Overpressure of demand on resources in one area has a bad effect on the economy of the whole.

As I made clear in my Budget speech, this regulator will have the additional advantage of encouraging economy in the use of manpower.

Photo of Mr Jon Rankin Mr Jon Rankin , Glasgow Govan

Mr. John Rankin (Glasgow, Govan) rose

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I have listened to many speeches, and I hope that the hon. Gentleman will allow me to make mine.

There is nothing new in the idea of varying these contributions. As my hon. Friend the Member for Willesden, East (Mr. Skeet) mentioned, there was a provision to that effect in the National Insurance Act, 1946, and I think that the criticism has been very much exaggerated about the effect of this 4s. a week. The Scottish Trades Union Council passed a resolution on 18th April saying: This tax, if indiscriminately applied, will drive employers in Scotland to cut their personnel to the barest minimum. Dismissals in those industries facing difficulties will be widespread. Will that really be the effect of an increase of 4s. a week in the employers' contribution?

Photo of Mr Jon Rankin Mr Jon Rankin , Glasgow Govan

It is happening every week now.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

If that is the effect of an increase of 4s. a week per person on the employers' wage bill, I think that note should be taken of that in accordance both with the putting forward of wage demands and the yielding of wage demands. If 4s. a week per person will make all the difference to the success or failure of industry in Scotland, it brings a new light to bear on the appeals for restraint in putting forward wage claims.

Photo of Mr Jon Rankin Mr Jon Rankin , Glasgow Govan

I hope that the right hon. and learned Gentleman appreciates the situation in which he is imposing this payroll tax. Three weeks ago I was told by a shipyard employer in Govan that men were being paid off every week. On top of present difficulties, they will have to face this pressure of the payroll tax.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

It is not a payroll tax. I am asking for this only as an additional weapon. I come now to that part of my argument.

I know that there are disadvantages in this proposal. I am in considerable sympathy with a lot of what has been said by hon. Members on both sides about its disadvantages. But there are disadvantages in every proposal. If one talks about dealing with the Bank Rate, or hire-purchase restrictions, or restricting credit from the special deposits scheme, or about the surcharge regulator, everybody says that there are disadvantages to doing that. There are disadvantages in any attempt to restrict the growth of the economy or to restrict demand and equate it to resources. Whatever one does, somebody will be hurt. That cannot be avoided.

Photo of Mr William Baxter Mr William Baxter , West Stirlingshire

Is this to be a financial regulator, or a manpower regulator? If it is to be a financial regulator, I can appreciate the right hon. and learned Gentleman's attitude, but if it is to be a manpower regulator, it is not necessary in areas of high unemployment, such as are found in Scotland.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I was about to deal with that point. All regulators have their disadvantages. I have already admitted that I think that this one has disadvantages, that it applies to all parts of Scotland, England and Wales necessarily and that it cannot, by the nature of it, differentiate between areas and industries. I face the difficulty of that. I have said that it has disadvantages.

When considering, if one does, a more permanent payroll tax, one wants to think carefully about how to deal with the thoughtful remarks of the hon. Member for Motherwell (Mr. Lawson), when he suggested the way in which one might have to try to deal with skilled labour. There is a great deal of scope for thought on the part of us all about the idea of a permanent payroll tax, whether it is practical to differentiate between skills, between areas, and between industries.

I have never suggested that this should be a permanent measure. I have asked for this power this year to strengthen my hand in dealing with a situation, which may develop, of excessive demand; when the need, in the interests of the economy, is to curtail purchasing power. In my Budget speech I spoke of the need for more regulators to stimulate or restrict the economy, and I said that this one would have the additional advantage of being an incentive to economy in the use of labour.

5.45 p.m.

The primary purpose of this proposal is to curtail purchasing power, if the need is to do that. My hon. Friend the Member for Ilford, South (Mr. Cooper) says that it is only £4 million a week; it is such a small amount that it will not achieve its purpose. If it is such a small amount for one argument, why is it such a great disadvantage from another point of view? This cuts both ways. I am not suggesting that the imposition of this tax, should it be necessary, will solve all the problems. If it were used, it might have to be used with other measures, but the primary purpose is to regulate the economy by means of an additional weapon in my hand, and I thought that it was common ground between both sides of the Committee, in an earlier debate, that there was a need for the Government of the day to have added powers to deal with a difficult situation.

The Amendment is unnecessary because both sides of the Committee are in agreement about the policy of full employment. It was stated specifically in the last Economic Survey: It is Government policy to encourage this growth. The commitment to maintain full employment is an important contribution to this aim.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

One does not put in every Act of Parliament every statement of Government policy. It is not necessary to write everything into each Clause.

Photo of Mr Douglas Jay Mr Douglas Jay , Battersea North

Would not the Chancellor agree that this is the point on which there is great anxiety, as is obvious from the debate today, and that that is a special reason for putting it in the Bill?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I do not accept that. I have quoted the Economic Survey. I have stated categorically that it is the policy of the Government, and I do not think it necessary to write it into the Bill. I do not think that there is any difference between the two sides of the Committee about the desirability of this, and I take note of the points made by my hon. Friend the Member for Cornwall, North (Mr. Scott-Hopkins) and other hon. Members.

If one were to use a regulator of this sort, one would need to have regard at the time to the possible impact on areas where employment was not as high as in other areas. Obviously, one is not ruled out from taking action of that sort, and in coming to a decision whether to use this kind of regulator one would have very much in mind the possible effect on areas of comparatively high unemployment.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock

Before the right hon. and learned Gentleman neutralises the Amendment by saying that it is already covered in the White Paper, issued just before the Budget, may I ask him whether it is not true that the difference is in the three words "in all parts" of the United Kingdom? This is the nub of the argument. The White Paper does not say "in all parts". It refers simply to the policy of full employment in the United Kingdom, for which the Chancellor can take credit, but that is not what the Amendment seeks to do. Surely that is the point he ought to answer before he pretends that the Amendment says nothing.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I do not suggest that it says nothing. I think that this declaration of policy about full employment is very important and significant. I am not certain whether we can have full employment in every part of the United Kingdom at the same time. I do not think that that is possible, but if one is introducing a measure which one thinks will benefit the economy as a whole, at the time of doing that one would have special regard to areas which might be particularly hurt.

Photo of Mr Gilbert Mitchison Mr Gilbert Mitchison , Kettering

Is not one point of the Amendment that the Order, when made, has to be approved by Parliament? If the Treasury has to have regard not only to the balance between demand and resources, but to the question of full employment in all parts of the country, that second matter will be one which can and should be raised and discussed on the Motion to approve the Order.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I would not have thought that it would be out of order in such a debate. I should have thought that it would be a very relevant and important consideration. But I do not think it necessary to write into an Act of Parliament a statement of policy to which we are already committed. I take the point of the hon. Member for Greenock (Dr. Dickson Mabon) about "in all parts" of the United Kingdom, but I doubt whether he thinks that we can have absolutely full employment in all parts of the country at the same time. There is bound to be a certain degree of fluctuation, with employment in some industries rising and in others declining.

The other Amendment concerns consultations with the President of the Board of Trade and the Secretary of State for Scotland. This question will have to be decided by the Government as a whole, which means that the views of the President of the Board of Trade and the Secretary of State for Scotland will be taken into account. It is quite unnecessary to put it into the Bill.

The question of Northern Ireland has been referred to in more speeches than one—particularly by my hon. and gallant Friend the Member for Fermanagh and South Tyrone (Lieut.-Col. Grosvenor). There is separate legislation, a separate fund, a different card and a specially overprinted stamp in respect of Northern Ireland, and, in any case, I have already stated that I will hand the money received back to the Northern Ireland Government. That is a different case, and the question is purely one of administrative convenience.

During the Second Reading debate I said that the money would be handed back to the Government of Northern Ireland. I had a conversation only yesterday with the Finance Minister of the Northern Ireland Government, who told me that it is the intention of his Government to refund the money to those who have paid it. That being so, we have to consider the question of administrative convenience.

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

On a point of order. Is it not the case that the Chair has ruled that the Amendment relating to Northern Ireland is to be called, and that we shall be able to have a discussion on this issue when we debate that Amendment?

Photo of Sir William Anstruther-Gray Sir William Anstruther-Gray , Berwickshire and East Lothian

That is so. My predecessor in the Chair did so rule, and it would be better if that Ruling were adhered to.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Yes, Sir William. I was merely referring to matters of administrative convenience. I know that we shall have an opportunity later of discussing the situation in Northern Ireland.

I have no doubt that we shall discuss further points when we debate the Question, "That the Clause stand part of the Bill", but the basic reason for our asking for this power is to strengthen the hand of the Government in dealing with a situation which might be adverse to the country. I ask the Committee to reject the Amendment.

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

The right hon. and learned Gentleman said that he was not intervening at this point in order to close the debate. I venture to suggest that his intervention has probably lengthened it by a few hours. Hon, Members on this side of the Committee were hopeful that, after the near unanimity which we had reached on the proposition that a payroll tax will not be helpful in our present economic and industrial situation, the right hon. and learned Gentleman would have reconsidered the question, if not because of the arguments put forward by hon. Members on this side of the Committee then at any rate because of those put forward by hon. Members opposite, who have gone even further than my hon. Friends in that they have said that they were utterly and completely opposed to the whole Clause. The hon. Member for Wycombe (Mr. John Hall) and the hon. Member for Ilford, South (Mr. Cooper) both said that, and I share their view.

The Chancellor told us that his suggestions have not received unqualified approval. We could almost say that they have received unqualified disapproval, both from employers and employees in industry. The Minister is very unlucky in that, having had the courage to relax reliance on the monetary policy which for ten years has been the only one the Government have had, he now finds that one of the regulators which he proposes to use in this connection is as unpopular as was the monetary policy itself. He has said that a permanent payroll tax may have to be considered. That itself is an admission that the Government must go much further in industrial planning. They are now drifting into an absurd position because they have never taken seriously the necessity for industrial planning.

Some of my hon. Friends have mentioned the drift to the South. This is a fantastic situation. Both in the areas from which the workers are drifting and in the areas to which they are going there is a terrible problem for industry. In the South, to which the men are drifting, there is sheer chaos, with an enormous number of vacancies. One of the Amendments lays stress on the need for full employment in all parts of the United Kingdom, and that is the nub of the matter. The Chancellor has put forward different reasons for introducing a payroll tax from those which he mentioned during his Budget statement. He then said:

"The use of such a measure as an economic regulator would have the added advantage that when we are faced with a situation of chronic shortage of labour it would act as an incentive to economy in the use of manpower and to investment in labour-saving equipment"—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 808.]

I believe that the Government panicked because of the position in the motor car industry. When there was a great slump in that industry they believed that a great deal of the skilled labour would go to other industries which required such labour. Because that did not happen the Government panicked, and we then had talk of a pay-roll tax. In the light of the Chancellor's arguments in his Budget statement it does not seem to make any sense to apply this kind of tax in areas in respect of which we are already worried because of the difficulty of persuading industries to go there to provide employment. It will be the negation of everything that the Chancellor has argued for if we impose any type of restriction upon an employer who has gone into a special area under the terms of the Local Employment Act, which we are using in order to try to encourage further employment.

If the right hon. and learned Gentleman says that this tax is now applicable to all areas, it follows that no area should be scheduled under the Local Employment Act. We are spending a considerable amount of public money in trying to induce employers to go into the special areas, and now it seems that we are to spend even more public money in setting up an agency under which we can draw in a payroll tax as a disincentive to employers to go to those areas. We believe that there is a case for increasing the number of areas scheduled under the Local Employment Act, but, in effect, the Chancellor has told us that there is no longer the slightest reason for operating the provisions of that Act. That is what it means if he seeks to impose a payroll tax of this type.

6.0 p.m.

I do not believe, however, that the only disadvantages will come in areas which are special areas under the Local Employment Act. Some of my hon. Friends argued cogently, and I should have thought conclusively, the effect which such a tax will have in these areas. Will it be of any benefit to areas where there is full employment and where there are more vacancies at present than the Minister of Labour can find people to take up? What advantage will it be to them? If we take the South-East, there is a very great number of vacancies, far and away more than the people applying for them. If we impose an overall 4s. on every employer in that area, what is likely to be the result? Can it be that by doing that we are giving any incentive to any one set of employers to get rid of labour which they do not need?

The fact is that all we do is to increase the industrial overall costs of every single employer in the area and all of them will remain in precisely the same position so far as labour is concerned. If we are to make this effective, we shall have to be discriminating, first on geographical grounds and, secondly, on industrial grounds; that is to say, against one industry as distinct from another. This payroll tax is neither the one nor the other. I think the hon. Member for Ilford, South made the point that it merely increases industrial costs by some £200 million. I think that the hon. Member for Wycombe put it another way. He spoke in terms of increasing costs by 1d. an hour to employers.

What would be the cry of the right hon. and learned Gentleman if the trade unions immediately demanded an increase of 1d. an hour in pay? He would say that this was anti-social in every way, that it was inflationary and that it would have the worst of all possible effects. I challenge him to show me one iota of difference between the employees' demand for 1d. an hour more and what he is doing by introducing this payroll tax.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

After all, the purpose of this is to reduce consumption and to reduce spending. In the one case, the money goes to the Exchequer and, in the other, into private pockets. That is the difference.

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

Now the right hon. and learned Gentleman has changed his ground again. This is an impost on industry; it has nothing to do with the shortage of labour, but is merely a question of providing something which raises more revenue for the Exchequer. In doing that, the right hon. and learned Gentleman is knowingly increasing industrial costs of production at a time when he is asking us to go into the export markets with a better chance of competing with our competitors. Whichever way he takes it, I suggest to him that he has not made out the slightest case how he is to get a better distribution of labour, especially skilled labour, in the areas where there is already unemployment and where we are trying, by the use of the Local Employment Act, to induce employers to go and to provide decent employment for people there. There is no case for the payroll tax there.

I have tried to argue that in the areas outside, in the reception areas of the sort to which, as we know from the recent Report, the drift from the North is coming and will become greater probably every year, this will not enable any employer to change his position with regard to filling vacancies. Every employer will be in precisely the same position in which he was before the tax was introduced, the only difference being increased costs in consequence of what the right hon. and learned Gentleman was doing.

Therefore, I ask the right hon. and learned Gentleman now to realise that while the Minister of Labour can quote a figure of 300,000 unemployed, the Chancellor cannot say that because there is a global figure of 300,000 unemployed in the United Kingdom we need not bother about the unemployment in those areas. That is not the case at all. Hon. Friends of mine have said, and more will say it in this debate, that in their areas it is fantastic to talk in terms of there being a chronic shortage of labour. I do not want to touch on an Amendment which we shall be discussing later, but there are areas in which there are thousands of young people who have not got a cat in hell's chance of getting a decent job in the next few weeks. There is chronic unemployment in several areas.

How can the Chancellor argue that because he can point to a percentage in the overall figures there is no need to consider the situation in each of these areas? I submit to him that by the wording of our Amendments we give him a chance to say that, on reconsideration, he will agree that there are such areas, and that, by accepting the words we are suggesting, he will show the people in those areas that he is not unmindful of the fact that the words in all parts of the United Kingdom include those areas where there is unemployment.

In the general sense of the Clause, we are at one with the hon. Member for Wycombe and some of his hon. Friends who have said that they do not like the payroll tax. We shall give them an opportunity of joining us in order to ensure that it never goes on the Statute Book. If we have to wait until the Question "That the Clause stand part of the Bill" is put, and if they can contain themselves with what patience they can find, we shall try to give them the chance of supporting us on the Amendment. Let them give an earnest of their own feelings and come into the Lobby with my hon. Friends to ensure that an Amendment of this type, limited as it is but which shows good faith with the people in areas where there is unemployment, should become part of this Clause.

I ask the right hon. and learned Gentleman to reconsider it. More speeches will be made from this side of the Committee, because the right hon. and learned Gentleman has not satisfied those of my hon. Friends who have already spoken or those who still wish to take part, and I ask him to look at the Amendment again. We feel that there is nothing wrong in accepting the fact that he misjudged the temper of the Committee or the real issue of the Amendment, because he had not had it explained to him. If he will do that, he will go some way towards repairing the damage which has already been done. Whether he means to use the regulator or not, the fact that he wishes to put it on the Statute Book is doing no service to industry. I ask him to reconsider what he said, and, if he will not, I invite hon. Members opposite to join us in the Lobby.

Photo of Sir John Hall Sir John Hall , Wycombe

Perhaps the hon. Gentleman could persuade his hon. Friends to hasten the end of the debate on the Amendment so that we can get on to the debate on the Question "That the Clause stand part of the Bill."

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

If the hon. Gentleman can persuade the Chancellor to accept the sense of what we are saying, we shall get to it immediately.

Photo of Miss Peggy Herbison Miss Peggy Herbison , Lanarkshire North

I listened very carefully to the Chancellor of the Exchequer, and I must say that his reply fills me with dismay. He showed very clearly why he wished to have his regulator. The time may come, he said, when there would be a need to curtail purchasing power. In other words, it is not so much a regulator to get workers from one area to another, though that, in effect, is what it will do, as to bring about a measure of unemployment, because that is the only way in which this regulator could work, to bring about a curtailment in purchasing power.

The Chancellor's great supporter, and supporter of all Ministers, the hon. Member for Barry (Mr. Gower), made much the same case. He said that to be effective the regulator must apply at the maximum all over the country. The Chancellor said that to restrict the economy the regulator must be widespread in its impact. These two statements amount to the same thing.

The hon. Member for Barry urged us on this side of the Committee, rather than to press our Amendments, which we still have every intention of pressing, to work for an early removal of the maladjustments in our economy that might lead to the use of the regulator. I am sorry that the hon. Member for Barry is not present now. If he and his hon. Friends would use all the power they have to inject into the Government some integrity, some honesty of purpose, they would be going far to get rid of the maladjustments in our economy.

My hon. Friend the Member for Fife, West (Mr. W. Hamilton) asked what the Chancellor would consider to be a boom. I have been examining the words of the Chancellor and other hon. Members opposite. It seems that we have slumps under a Tory Government in the middle years between General Elections and booms usually in the year before a General Election. It is that utter disregard for the general well-being of the country which makes it impossible for the Government to solve the economic difficulties which so often face us. That is my answer to the hon. Member for Barry. If he should get the Government he supports to face the difficulties which we are undoubtedly having in the country rather than to bring in stop-gap measures immediately before an election to make it look as if we had a boom and then, between elections, to ask for power to bring in a regulator such as that for which the Chancellor is asking.

Mention has been made of the Local Employment Act. From the speech of the hon. Member for Barry, one would have thought that that Act had brought great prosperity. When pushed, he had to agree that that prosperity started before under an Act which was the child of the last Labour Government. In Scotland, we have still a long way to go before we can approach the situation there seems to be in South Wales. The Local Employment Act is supposed to help areas such as ours.

Scotland has at present a high rate of unemployment compared with the rest of the United Kingdom. In scheduled areas such as Greenock and Port Glasgow the rate is 7 per cent. In the scheduled areas of the largest industrial county in Scotland there is more than 4 per cent. unemployment. As my hon. Friend the Member for Motherwell (Mr. Lawson) said, at the moment when the Chancellor is asking power to introduce this regulator, in Scotland seven people are chasing after every two jobs.

There was a great song and dance during the last General Election—the announcement, I understand, was made in Scotland—about the Bill that the Government were to introduce to deal with areas of high unemployment, the Local Employment Act, which is now on the Statute Book. In Scotland, we are still waiting for results from that Act. The Act gives the Government power to build factories and to use public money to build them. We had that power before the Act was passed. It gives the Government power to make loans to industrialists at a lower rate of interest than that at which they could obtain the money in the open market. Public money is to be used for that kind of work. Suppose that when the advance factory not yet filled in Coatbridge and that which is about to be started in my constituency are built, and they are in operation, the Chancellor decides that he needs this regulator. Then those advance factories will remain empty and the public money put into them will have been lost. What a topsy-turvy way to try to deal with the problems of our country.

6.15 p.m.

I am delighted that, although we are not getting support for our Amendments from hon. Members opposite, it seems probable that we are to have some support from them in complete opposition to the Clause. I hope that when we vote on it those who have shown themselves so opposed to it will have the guts to go into the Division Lobby against the Clause. This is an indiscriminate instrument. In Scotland, and in England we have had previous experience of indiscriminate weapons, which are all that this Government can think of. The high Bank Rate hit Scotland during a time of restriction far worse than it hit any other part of the United Kingdom. It brought about a far greater rate of unemployment there than in any other part of the United Kingdom and we still have not got over it. The Chancellor must know that that is true.

That came about because we had a Government who, rather than facing the need for certain economic and financial controls which would be discriminate, preferred to depend on the indiscriminate method of the high Bank Rate. This regulator, which the Chancellor is asking for power to introduce if he needs it, is just as indiscriminate a weapon as a high Bank Rate. We know that it would do very great damage to our people.

Is this not nonsense when we see the great exodus from our country every year? Those people are going to the Midlands and particularly to London and the surrounding area. That does not make things easier in London. They are a headache for every local authority in London.

These people come from Scotland and have no house to go to. Some are fortunate in having relatives to whom they can go. They either leave their families at home and live as lodgers with their relatives—which, of course, is very expensive for them if they do so for a long time—or they bring their families and cause grave overcrowding in the homes of their relatives in London. The local authority has some time to find housing accommodation for them. Does it not seem mad when we consider that they could be housed perfectly well in their own communities?

Then there are all the problems of transport caused in London and its surroundings, the problems of getting people to and from work. Those problems are very great indeed and the Government have not been able to solve them. Do they not realise that if they bring in this indiscriminate regulator they will add greatly to those problems?

Turning to another matter, which, I hope, will never concern us, there is the question of defence. In view of all the industries which are extending and the rapid increase in population, if it ever came to a question of evacuating these people, how difficult that would be. There has been no planning and no foresight shown by the Government, yet they are willing to go ahead with this sort of proposal.

The Chancellor said that there was no need for this Amendment because in the Economic Survey reference has been made to full employment. I have said enough to show that we do not pay much attention to those few words in the Economic Survey. He said that in introducing his regulator he would have regard to its effect on all areas. I wonder what he means by that. If hon. Members from Scottish constituencies and our hon. Friends from North Wales are able to show him today, in the rest of this debate, that the regulator will impose a great hardship on thousands of people, will he then decide that he does not want even to ask for this power?

My hon. Friend the Member for Motherwell spoke vividly about those industries in areas where there is a shortage of labour which would prefer to pay this imposition rather than lose their workers. That would not obtain in Scotland or in any other area of high unemployment, because in those areas employers would realise that they could dispense with their workers and would have a chance easily to pick them up again if the Tories were near an election and there were a boom.

This seems to me one of the most vicious powers for which any Chancellor has asked. I ask the right hon. and learned Gentleman to take into account the strong arguments which have been made both from this Front Bench and the back benches against it and to realise that we in the areas of high unemployment will oppose it whenever we can.

Photo of Mr Jon Rankin Mr Jon Rankin , Glasgow Govan

Before the Chancellor left the House I asked him to try to appreciate the situation in Glasgow in particular and in Scotland in general in which this regulator would work. I think that the Economic Secretary to the Treasury is familiar with it because he has heard a good deal about shipbuilding in Scotland in other debates. He has taken part in some of them and he knows that the proposed aid to the industry is unique and is not a matter of policy—as we were told last Wednesday.

The Chancellor is imposing this regulator on a source of wide employment in my constituency and on an industry which, according to the Press today, shows a decline in its launchings of 50,000 tons. If that decline continues throughout the year, the total diminution in output in shipbuilding for the year will be 25 per cent. of the launchings which we had in 1960.

That emphasises that the position is grave, and it indicates what we all know to be true and what has been amply demonstrated in the debate by my hon. Friends—that already in Scotland there is a shortage of employment. We know from the remark made on Second Reading by the Chancellor, quoted today, that the purpose of this tax is to deal with a chronic shortage of labour. But it is to be applied in a country in which there is a chronic surplus of labour. It is proposed in the Bill that in order to equate demand to existing resources, this tax should be used in an area where already there is a chronic shortage of labour.

In his speech the Chancellor tried to face the problem. As far as I was able to take down his words he said, "Of course, I will pay special regard to areas of unemployment". Immediately, then, his regulator is not indiscriminate; this afternoon he has introduced an element of discrimination in its application. This is the point which I want to pursue.

If he is to have particular regard to areas of unemployment, how will he use the regulator? Will he squeeze off surplus labour in Scotland? If so, what will he do with that labour? The theory behind his tax is that in order to help to modernise he will squeeze off surplus labour so that it will go to some other employment. If he uses that policy in Scotland, to what end will he apply the labour which he squeezes off? Will he put it on National Assistance? We deserve a clearer answer to that question than we have had so far. We think that it is impossible for him to use the regulator in this way for the simple reason that it would add confusion to that which already exists and would continue the depopulation of Scotland and the move of population towards the South.

We know that it will not mean moving the population in Scotland farther north because our problem already is to keep people in the north—and it is no very easy problem, as we are discovering from morning to morning, latterly from afternoon to afternoon, and perhaps very shortly from evening to evening. It is a difficult and complicated problem to solve. We cannot get the people to move northwards. They move southwards, with all the difficulties which have been pointed out by my hon. Friend the Member for Lanarkshire, North (Miss Herbison).

There is another alternative if the Chancellor is to have special regard for areas of unemployment when his regulator operates, if it operates at all. Will he show his special regard by creating special schemes to deal with those who will be squeezed out of their jobs? As that seems to be rather a foolish proceeding, will he take what appears to me to be the alternative method of applying this tax—to exempt Scottish employers altogether from its application? Does he propose to do that if he is to have special regard to those areas of unemployment? He can do so by saying that Scotland is a special area—which he has said already he has in mind—and by saying, "We will keep Scotland out altogether of the scope of this tax." Does he propose to do that?

6.30 p.m.

Or, if the right hon. and learned Gentleman is going to have special regard to areas of unemployment, as he seemed to indicate when he was making reference to Northern Ireland, will it manifest itself by his still collecting the tax from Scottish employers and then saying to them through the Secretary of State, "Here is money given back to you in order that you may be able to go ahead and carry out schemes of employment for those who will be unemployed as a result of the policy of my regulator"?

It seems absolutely daft to adopt a policy of that nature, but the right hon. and learned Gentleman himself has committed himself to the use of the phrase that he "will have special regard to areas of unemployment", and, of course, if he is going to have special regard, then we are entitled to know what that special regard will be, and we are also entitled to know how it will manifest itself. He suggested that in Northern Ireland the tax should be collected and then paid back to Northern Ireland. Is that what is going to happen in Scotland? It would be paid back to Northern Ireland, say, and the money would be used for the purposes of creating employment in that part of the United Kingdom. Is that what is going to happen in Scotland?

The Chancellor has committed himself to that view, and in my opinion it is his duty to the Committee now to tell us more clearly than so far we have been told how exactly he will utilise this regulator so that it will not impinge on the Scottish economy to its still further detriment.

Photo of Mr William Ross Mr William Ross , Kilmarnock

The Chancellor of the Exchequer unburdened himself about his concern that he had been misunderstood on all this, that he had got a bad Press, that Members of Parliament as well as people outside had picked him up wrongly, that he did not really mean that the application of this regulator was to cause unemployment. If so, he has got only himself to blame. I think that it was no accident that with every day which passed during our debates on the Budget and, in particular, on this regulator we had a different interpretation of its purposes and emphasis. I doubt, indeed, whether we have got the last one yet.

It is quite clear to me now, from what the Chancellor of the Exchequer has said and from the reactions on the other side of the Committee, that the presence of this regulator as it stands is not so much to save the nation from economic crisis as to save the face of the Chancellor, because of his insistence that it is required only for a short time and that he will think again about the permanent means, and that this is the last we shall ever see of this one.

We, however, have to accept its workings in relation to the purposes as expressed by the Chancellor of the Exchequer, and our concern at the moment is not with the principle of the thing—I think that, when we get the opportunity we shall express our dis- approval of that principle—but with the effect of it if it were applied.

The Economic Secretary—I think that it was upon the second or third version of the explanation of regulator No. 2—said that it was for the purpose of raising revenue, but raising revenue at such a time and in such a way that it would not have a discriminatory effect upon industries. He instanced—if I could have his attention occasionally—the effect of changes in hire purchase. He thought it rather sad to have this effect on particular industries. The implication, I thought, was that, rather than use that type of regulator, be is prepared to use this one, which has a more widespread effect.

We go back to what the Chancellor said when he was seeking our sympathy in his choice of the weapon. He said that whichever one he used he must hurt somebody. What we are concerned about is that, if he chooses this one, he will hurt areas where employment is already badly neglected and which, in the past, in the choice of economic weapons, have been hurt. That is the position. My hon. Friend has instanced that in relation to municipal credit, industrial expansion in Scotland, unemployment in Scotland, and the negative working of the Local Employment Act.

But this will do exactly the same, and what we are entitled to ask is why it is that he is prepared to hurt Scotland—or the North-East, or Northern Ireland, or anywhere else? He presumes, when he places before us for consideration his problem, that there is a boom in England, in the Midlands and elsewhere, which is likely to get out of hand and that if he does not take action Scotland as well as the rest of the country will be hurt. He presumes that in what he is now suggesting, and we ask how he can reconcile that with the fact that when this regulator is applied it will still further hurt and impede the development of industry and employment in Scotland, and why, therefore, it is the only one that he can apply to the problem.

That is why we suggest to him that whatever instrument he uses he should not use this one. He must always bear in mind an area which is already badly hurt industrially and where employment is adversely affected. The figures have been given and I will not repeat them. I want him to appreciate them. The former Chancellor, now Lord Amory, said, in Inverness, that he would not rest while the unemployment figures in Scotland were as bad as they were compared with the rest of the United Kingdom. We know what has happened to him. He is resting elsewhere. First, he was found noble pastures; now he is going to find wide open spaces in one of our Dominions.

What I want to know is what the present Chancellor will do. I do not know who advised him about this. I have a feeling that it may have been the Patronage Secretary. However, when we examine the principle of this regulator in relation to the purposes which the Chancellor declared, it can be seen to be the most illogical piece of financial planning—anyway, that ever I came across.

Let us consider it in relation to areas with a chronic labour shortage. First, labour, say, in Scotland. All that the Chancellor spoke about was the chronic shortage of labour. So he applies an impost of 4s. per person per job. Where there is a chronic labour shortage is exactly the place where there are the highest earnings. Compare that with Scotland, where there is a shortage of employment and where earnings are very much lower. There the addition of the 4s. would have a greater effect than it would have in an area of chronic labour shortage.

If the regulator were to lead to the disgorging of labour, it would not in areas of chronic labour shortage, but only in quite other areas altogether. The very fact that there is chronic labour shortage will mean that to add 4s. will not make all that difference, and the Economic Secretary should know that. Goodness gracious, he was one of the Ministers who said at that Box, in July, that there was to be an extra 1s. per person, quite apart from this 4s., and he did not seem to think that it would have an effect on chronic labour shortage. In the very same areas in April an extra 4s. to 5s. was put on, and if we consider the employer plus the employee it amounts to an extra 10s. Will that have any effect on the chronic labour shortage?

The Chancellor says that he wants to curb consumption and reduce purchasing power. I should have thought this would be done by applying some restriction to the purchasers. But the person who is to pay this tax is the employer. What effect will this have on goods that are not for purchase in the home market? It will drive up the price. We are told, and have been told all along, that one of the troubles about Scottish industry is that we have got more than our share of heavy industries—heavy engineering, shipbuilding, coal mining, and the rest—all of which are industries of high labour content and many of which are tied to capital goods production for export. Why should the Government go out of their way deliberately to hit that type of industry when the Chancellor really wants to get at the consumer goods industries?

The Chancellor should think again. It is not good enough just to put in these provisions. They will not help. The Chancellor is honest. He refuses to accept this Amendment because he would never be able to apply it if he took into account what we ask him to take into account, namely, to have regard for full employment in all parts of the country. If he were to do that, the Amendment would never be used. I hope that hon. Members opposite will agree with us. I am sure that they agree with us in their hearts, and I hope that they will join us in the Lobby.

Incidentally, I should like to know where all the Scottish Tories are today. [An HON. MEMBER: "At Ascot."] An hon. Friend of mine suggests that they are at Ascot. I am sure that they are not. We must keep this debate going, because I am sure they are all in the Library polishing up rebellious speeches on this point. The understatement of the afternoon was made by the Chancellor of the Exchequer when he said that this proposal was not an unqualified success. It did not even start to be a success. As a matter of fact, at the Scottish Unionist Conference, in Ayr, a resolution attacking the Government on this matter and their industrial policy in Scotland was carried.

Where are the Scottish Tories? They should be carrying out their mandates from the Tory conference. But we hay., not heard one of them today attacking the Government on their record or referring to the beneficial effect that this Amendment would have on the proposal relating to regulators. I hope that the Chancellor will have second thoughts about this Amendment and, if not, that hon. Members opposite will join us in the Lobby.

Photo of Mr William Baxter Mr William Baxter , West Stirlingshire

I hope the Committee will forgive me for intervening at this late hour. I know that most of the arguments have been adduced to prove conclusively that this tax should not be imposed upon Scottish industry. I appreciate that we are coming near to the end of the road and that the Chancellor has indicated that he does not propose to accept the Amendment. But I cannot understand why he should have intervened to say so without first hearing all the arguments which have been put forward very clearly and concisely by my colleagues.

6.45 p.m.

I should like to direct attention to one aspect of this question on which the Chancellor himself commented after my intervention. He said that the main purpose of this tax was to curb inflation. If that is so, that seems to be a reasonable point of view if the end were to justify the means. But the right hon. and learned Gentleman then says that, while that is the purpose, he is excluding the whole of Northern Ireland from the ambit of this tax. That presupposes that it is reasonable to exclude certain parts of the United Kingdom from the application of the tax. It does not seem logical, on the one hand, to argue that it is necessary to apply this tax throughout the length and breadth of the British Isles in order to curb inflation, and then to exclude part of the British Isles from the application of that tax. If he feels able to impose the tax on Northern Ireland industries and then to hand it back—which is the same as not taking it at all—it seems unreasonable not to extend that concession to Scotland.

Is it not the fact that the shipbuilding industry of Northern Ireland competes with the shipbuilding industry of Scotland? Do not other industries of Northern Ireland compete with industries of Scotland? I read the other day that Scotland had lost two very important industries to Northern Ireland only a week or two ago. That means that we in Scotland will be placed in a very unfortunate position as compared with Northern Ireland.

I do not object to the Chancellor excluding Northern Ireland if in principle he is doing it because he thinks there is a high incidence of unemployment there, but if that argument is good for Northern Ireland it should be equally good for Scotland. That is the purport of this Amendment, and that has been the point of view expressed by my numerous colleagues this afternoon.

It would be wrong of the Chancellor not to accept this Amendment, on the basis of equity. It does not necessarily follow that I agree with the principle of the 4s. payroll tax. It is one of the most foolish taxes that have been imposed in the history of the British Parliament. There are ample methods in the possession of the Chancellor for curbing inflation. In my speech in the Budget debate I referred to some simple methods which could be adopted for this purpose. It is fundamentally wrong to introduce new methods of taxation when new methods are not necessary.

How can a 4s. payroll tax curb inflation? Can the Chancellor or any of his colleagues explain simply how this can be done? It adds to the cost of the end product. The employers and the companies will pass on the cost of the payroll tax to the consumer. They cannot pass it on to the employees by higher pay-as-you-earn deductions or anything like that. They must add it to the cost of the end product. They means that in the competitive world of today we are helping to price our products out of the world markets, and it seems illogical to me that we should be doing that when we are at the same time trying to persuade our business people to place greater emphasis on the export of the goods that they produce. It is obvious that, if this tax is imposed, it will not in any way curb inflation but will end by adding to the price of goods we export.

It cannot curb inflation, because grocery businesses and hardware stores, to take only two examples, have exceedingly high stocks. In some instances their stocks would last them for six months or a year. They do not need to buy more stocks. They only need to keep going until the payroll tax is taken off again. Instead of curbing inflation, the Government will only add to the cost of the goods which we must export. Small businesses will stop buying for the time being and work upon their stocks for at least six months or a year.

This is a most dangerous tax and a foolish method by which to try to work our fiscal policy. It is fundamentally wrong to introduce new methods of taxation when there are ample means at the Government's disposal to curb inflation, an objective which is so much desired—not that I personally desire to see inflation curbed to a great extent, because an inflationary position in a country is a happy and a good condition for a country. In no condition in the history of Scotland or Britain has the purchasing power of the working classes been increased to a greater extent than it has in an inflationary condition. I challenge any hon. Member to tell me a period in our history when controlled inflation was not a good thing for the working classes. It is dangerous to be dogmatic about curbing inflation in this way or that.

I will mention one small item which is of some interest to Scotland. We pay a great deal of lip service to the need to encourage the tourist industry in Scotland. The Scottish Grand Committee has been arguing for weeks on end about the Highlands. The Highlands are gradually being depopulated. They are very dependent at present upon the tourist industry. Many Scottish hotels employ people in the areas of the Highlands. Those hotels will have a very grave burden to bear if the tax is imposed. They will be unable to carry the burden. I have received many communications from those responsible for hotels and hydros expressing their grave concern about the effect the imposition of this tax will have upon their undertakings.

The Chancellor of the Exchequer should undoubtedly think again about imposing this tax. If he is not prepared to abandon it altogether, he should certainly exclude Scotland from the effect of its operation, because the many arguments which have been advanced today prove conclusively that it is not in the best interests of our country. It appals and amazes me that men of Cabinet rank apparently have not the ability to recognise the simple methods by which they will ultimately bring ruination to our country. They should look at what happened about the payroll tax in Australia. They should realise how anxious even that country is that it should be wholly abandoned. This is a stupid tax. It should not be imposed. The Chancellor will be condemned in the years ahead if he goes on with this foolish blunder, which is so evident to everyone but himself and the few colleagues he has around him.

Photo of Mr Gilbert Mitchison Mr Gilbert Mitchison , Kettering

I do not propose to take up much of the time of the Committee or to touch on the wider points which will be open on the Question "That the Clause stand part of the Bill". This is a limited Amendment and my point is, I hope, a genuinely British one. It relates to the whole country. The present test of whether one of these Orders can be made is that the Treasury must think that it is expedient so to do with a view to regulating the balance between demand and resources in the United Kingdom". I do not pause to discuss what that means or how the balance between demand and resources in the United Kingdom as a whole can be regulated when the balance in different parts of it seems likely to be so different.

The test posed is a test of the sort of character which the Chancellor indicated. It is a measure intended to combat inflation. It is intended to take a considerable sum of money out of circulation and to limit the purchasing power of the community accordingly. That is the type of test indicated.

The object of the Amendment, which the right hon. and learned Gentleman was pleased to consider unnecessary, is to add to that test, which is really a banker's test, a Treasury test, a financial test, one other test which seems to us on this side of the Committee to be at least equally important. When attacking inflation and taking Treasury or bankers' methods of this kind, when using another blunt instrument of a purely financial character, it is possible to overdo it and to find, when the Order has been imposed, that unemployment has been created as a whole, or at any rate in some parts of the country, or that, if it is there already, it has been increased.

The Chancellor assures us that it is part of the Government's policy to preserve full employment. We have heard several stinging comments on the Government's policy in that respect. Even if that is the Government's policy, that is no reason for not putting in a reference to the considerations which are to be borne in mind if an Order of this sort is to be made. If it is left out, the Order will be made on financial considerations of the narrowest kind and the blunt instrument will be applied for the purpose of regulating a balance. It may well have the effect of putting a number of men out of work or causing those who have been looking for jobs to give up all hope of finding them.

It is ridiculous that the Chancellor, when introducing a Measure of this sort and when professing at any rate to have regard to the necessity of maintaining full employment, should object to the inclusion in the Clause of any reference to it. The Order will have to be approved by Parliament, and it may be in order to refer to full employment. I was not considering narrow questions of that sort. The question will be whether the Order was rightly made or not. All that the right hon. and learned Gentleman or his successor in office will have to show is simply that the Order is made because the Treasury thinks it expedient so to do with a view to regulating the balance between demand and resources in the United Kingdom". Parts of the country, including Scotland and elsewhere, where there has been heavy unemployment will have to suffer because the Chancellor thinks this is the right way of regulating the balance and does not consider it necessary, as indeed it is not in the terms of the Clause as it stands, to pay any regard whatever to the need to maintain full employment.

7.0 p.m.

It is unlikely that this power will ever be used, but, if it is to be used, it will be a very powerful weapon indeed, not merely for the purpose for which the Chancellor intends it but for a host of other purposes for which he does not intend it. In those circumstances it is altogether wrong to look to striking a balance on some point or other without regard to the effect that it is going to have on full employment.

We have had this in the history of this country for decades past—Chancellors moved by financial considerations or moved by the difficulties of some foreign exchange crisis, trying to deal with inflation, trying to strike some vague general monetary balance, carrying it much too far and producing unemployment in this country which, in the long run, will do the exact opposite of what they intend to do by the Order they are making.

This reference is absolutely necessary. We shall not be able to argue on this point on the Question "That the Clause stand part of the Bill", and, therefore. I have confined myself to it now.

Photo of Mr Eustace Willis Mr Eustace Willis , Edinburgh East

Surely we are to have a reply from the Chancellor to the speeches that have been made. [HON. MEMBERS: "Reply."] Two hours ago the Chancellor intervened and said, "I am intervening now but do not wish to stop the course of the debate."

But there is no debate if there is no reply. My hon. Friends have been adducing some extremely important arguments, especially after hon. Members had learned, as a result of the Chancellor's speech, that Ireland is to be handed back the money paid by the firms concerned. What about Scotland? The reply we got to that question was that we in Scotland do not have the same insurance card. But the object of this Amendment is to make this possible and, if the Chancellor does not think that the Amendments makes such a move possible, surely it is not beyond the wit of the Members who are lolling about on the Government Front Bench to devise words to make it possible.

Since it is recognised that Northern Ireland is in a position where it should receive special treatment, the claim of my hon. Friends—and almost every Scottish hon. Member—is that Scotland is in an equally vulnerable position. During the course of his speech, the Chancellor said, "We must accept criticism. I have accepted it and I have had a lot of it." He said that all economic regulators gave rise to criticism. But one of the general lines of criticism against economic regulators is that they are too blanketing in their effect. That criticism is levelled against every financial regulator the Chancellor uses, no matter whether it is the Bank Rate, hire purchase or any other method.

Opposition hon. Members are now attempting to provide the Chancellor with the opportunity, for which he should be thankful—and are fulfilling their customary rôle of assisting the Government—to insert words into the Clause which will enable him to meet one of the most important lines of criticism made against economic regulators: that they are blanketing in their effect.

That was the first leg of the Chancellor's argument. I had intended to relate just what was his second leg but, on reflection, I rather think that he stood on only one leg. Perhaps the second leg of his argument was the sentence he used: "I want to act quickly and effectively." May I inform the Chancellor that it is no good being so effective that he will kill the patient? He may want to act quickly, but I do not think that he wants to flake him out.

This Measure, however, will do exactly that in Scotland. It is all very well to say that Scotland cannot be in such a parlous position that 4s. per employee will make all the difference. The point is that it will. Some Scottish industries are in a very parlous state. My hon. Friend the Member for West Stirlingshire (Mr. W. Baxter), spoke of the position of the hotel industry. We are trying to build up an ever-increasing period during which time the season is effective for tourism. We have had considerable success in this and whereas many hotels previously employed one or two people during the winter, some of them are now employing ten or twelve people.

This proposed measure will deal a hard blow on them. They just cannot afford it. It might be right for London, Birmingham and elsewhere it will do nothing but harm for Scotland.

Why has almost every speaker been a Scottish hon. Member?

Photo of Mr Eustace Willis Mr Eustace Willis , Edinburgh East

Precisely. It is because Scottish hon. Members know from past experience that every time we have economic regulators to prevent inflation by an adjustment of the Bank Rate or something else, Scotland is more seriously hit than is any other part of the country, and takes far longer to recover. That has been our experience in Scotland over the past 15 years and that is why Scottish hon. Members feel so strongly about it.

The Chancellor might at least have the courtesy to reply to some of the arguments advanced during this debate, after having told us that we could go on talking. The point is that we do not want to go on talking. We want a reply to our arguments. No wonder the Tories have been losing thousands of votes in Scotland. The Tory Party is condemning itself in Scotland and I would have thought that, in view of this, that the Chancellor—or one of his Front Bench colleagues—would have done hon. Members the courtesy of endeavouring to reply to some of the important and effective points that have been made.

It makes a farce of the proceedings of the House of Commons for a Chancellor to say that hon. Members should go on talking—and then he does not reply. The Chancellor is virtually saying: "We have made up our minds, no matter what are the arguments". That is a contemptuous manner in which to treat the House of Commons and it reduces our debates to a farce. I am sure that the right hon. Gentleman does not wish to do that. I am sure that he wants to be fair and I hope, therefore, that he will take this opportunity to reply.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I do not think the suggestion that I have been guilty of lack of courtesy to the Committee is worthy of the hon. Gentleman the Member for Edinburgh, East (Mr. Willis). I have listened to a great deal of the debate, both before I spoke and afterwards, and I tried to answer the arguments that were put forward.

The main point made by the hon. Member for Edinburgh, East is that Scotland will be more severely hit than any other part of the country. Has the hon. Gentleman stopped to think that Scotland may be hit harder if the economy there and in other parts of the country gets out of balance?

I agree that certain parts of the country may suffer the most if our economy goes wrong, and that has been very much in my mind. This Amendment deals with consultation with the President of the Board of Trade and the Secretary of State for Scotland.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I have already indicated that this would be a Government decision, and it follows, therefore, that the President of the Board of Trade and the Secretary of State would obviously have to take part in the decision before this regulator was used.

On the second point, I have said clearly that the Government are committed to full employment, and the decision whether or not to use this regulator and whether or not to accompany it with other measures to deal with special areas will, obviously, be very closely considered by those who have to decide. But I adhere to my original position. I think that it is necessary to give the Government this year, subject to certain safeguards, these powers of economic regulation. I believe it to be in the national interest. I should not have proposed it if I had not believed that. I believe it to be in the interests of the nation as a whole and in the interests of Scotland.

Photo of Mr William Baxter Mr William Baxter , West Stirlingshire

Will the Chancellor explain why there should be fish made of one and flesh of another? He proposes to give back any tax to the industrialists of Northern Ireland. I have no objection to that, of course, but if that is good for Northern Ireland it is good also for Scotland. The Chancellor must have regard to that before going very much further. We shall not stand this treatment of Scotland. We are entitled to see that our people have a fair deal and are given an opportunity to work.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I am quite prepared to deal with that point now if I am in order. The position in Ulster is that there is special legislation and a special fund, it being a different power—

Photo of Sir Samuel Storey Sir Samuel Storey , Stretford

There is another Amendment on the Notice Paper. I think that matter must be discussed when we reach it.

Photo of Mr George Thomson Mr George Thomson , Dundee East

Will the Chancellor tell the Committee where all his colleagues from the Scottish Office are? There is a fairly full Committee present for this very important stage of the Finance Bill. I cannot see a single Scottish Member, with the honourable exception of the hon. Member for Aberdeenshire, East (Mr. Wolrige-Gordon), who is there, I assume, because he is still tied to the Minister who is sitting on the Front Bench. It is disgraceful that Scottish Members and Scottish Ministers should be absent from the debate. One wonders whether all the Scottish Ministers have gone on strike and, because of the concession made to Northern Ireland, have deserted the Scottish Unionist Party in order to set up a secessionist movement on the Northern Ireland model.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

The reason is probably that my right hon. and hon. Friends from Scotland have complete confidence in me because I was educated in Scotland.

Question put, That those words be there inserted:—

The Committee divided: Ayes 181, Noes 247.

Division No. 196.]AYES[7.12 p.m.
Alnsley, WilliamCrossman, R. H. S.Galphern, Sir Myer
Albu, AustenCullen, Mrs. AliceGeorge, LadyMeganLloyd (Crmrthn)
Allaun, Frank (Salford, E.)Darling, GeorgeGinsburg, David
Awbery, StanDavies, G. Elfed (Rhondda, E.)Gooch, E. G.
Bacon, Miss AliceDavies, Harold (Leek)Gordon Walker, Rt. Hon. P. C.
Baxter, William (Stirlingshire, W.)Davies, S. O. (Merthyr)Gourlay, Harry
Benson, Sir GeorgeDeer, GeorgeGrey, Charles
Blyton, Williamde Freltas, GeoffreyGriffiths, Rt. Hon. James (Llanelly)
Bowden, Herbert W. (Leics, S. W.)Delargy, HughGriffiths, W. (Exchange)
Boyden, JamesDiamond, JohnGunter, Ray
Braddock, Mrs. E. M.Dodds, NormanHale, Leslie (Oldham, W.)
Brockway, A. FennerDriberg, TomHall, Rt. Hn. Glenvil (Come Valley)
Broughton, Dr. A. D. D.Ede, Rt. Hon. C.Hamilton, William (West Fife)
Brown, Rt. Hon. George (Belper)Edelman, MauriceHannan, William
Butler, Herbert (Hackney, C.)Edwards, Rt. Hon. Nees (Caerphilly)Hart, Mrs. Judith
Butler, Mrs. Joyce (Wood Green)Edwards, Walter (Stepney)Hayman, F. H.
Callaghan, JamesFernyhough, E.Henderson, Rt. Hn. Arthur (Rwly Regis)
Castle, Mrs. BarbaraFinch, HaroldHerbison, Miss Margaret
Chapman, DonaldFitch, AlanHewitson, Capt. M.
Corbet, Mrs. FredaFletcher, EricHill, J. (Midlothian)
Craddock, George (Bradford, S.)Foot, Michael (Ebbw Vale)Holman, Percy
Cronin, JohnForman, J. C.Howell, Charles A. (Perry Barr)
Crosland, AnthonyFraser, Thomas (Hamilton)Hoy, James H.
Hughes, Cledwyn (Anglesey)Marsh, RichardSkeffington, Arthur
Hunter, A. E.Mason, RoySlater, Mrs. Harriet (Stoke, N.)
Hynd, H. (Accrington)Mendelson, J. J.Slater, Joseph (Sedgefield)
Hynd, John (Attercliffe)Millan, BruceSmall, William
Irving, Sydney (Dartford)Milne, Edward J.Smith, Ellis (Stoke, S.)
Janner, Sir BarnettMitchison, G. R.Snow, Julian
Jay, Rt. Hon. DouglasMonslow, WalterSoskice, Rt. Hon. Sir Frank
Jeger, GeorgeMoody, A. S.Spriggs, Leslie
Jenkins, Roy (Stechford)Mort, D. L.Steele, Thomas
Johnson, Carol (Lewisham, S.)Moyle, ArthurStewart, Michael (Fulham)
Jones, Rt. Hn. A. Creech (Wakefield)Neal, HaroldStonehouse, John
Jones, Dan (Burnley)Noel-Baker, Francis (Swindon)Stross, Dr. Barnett (Stoke-on-Trent, C.)
Jones, Elwyn (West Ham, S.)Oswald, ThomasSwingler, Stephen
Jones, J. Idwal (Wrexham)Padley, W. E.Sylvester, George
Jones, T. W. (Merioneth)Paget, R. T.Symonds, J. B.
Kenyon, CliffordPannell, Charles (Leeds, W.)Taylor, Bernard (Mansfield)
Key, Rt. Hon. C. W.Parkin, B. T.Taylor, John (West Lothian)
King, Dr. HoracePavitt, LaurenceThomas, Iorwerth (Rhondda, W.)
Ledger, RonPearson, Arthur (Pontypridd)Thompson, Dr. Alan (Dunfermline)
Lee, Frederick (Newton)Peart, FrederickThomson, G. M. (Dundee, E.)
Lever, Harold (Cheetham)Popplewell, ErnestThornton, Ernest
Lever, L. M. (Ardwick)Prentice, R. E.Timmons, John
Lewis, Arthur (West Ham, N.)Price, J. T. (Westhoughton)Tomney, Frank
Logan, DavidProbert, ArthurWade, Donald
Loughlin, CharlesProctor, W. T.Wainwright, Edwin
Mabon, Dr. J. DicksonPursey, Cmdr. HarryWarbey, William
McCann, JohnRandall, HarryWells, William (Walsall, N.)
McInnes, JamesRankin, JohnWilkins, W. A.
McKay, John (Wallsend)Reid, WilliamWilley, Frederick
Mackie, John (Enfield, East)Roberts, Albert (Normanton)Williams, D. J. (Neath)
McLeavy, FrankRoberts, Gororvwy (Caernarvon)Williams, Ll. (Abertillery)
MacMillan, Malcolm (Western Isles)Robertson, John (Paisley)Willis, E. G. (Edinburgh, E.)
MacPherson, Malcolm (Stirling)Robinson, Kenneth (St. Pancras, N.)Wilson, Rt. Hon. Harold (Huyton)
Mahon, SimonRogers, G. H. R. (Kensington, N.)Winterbottom, R. E.
Mallalieu, J. P. W. (Huddersfield, E.)Ross, WilliamWoodburn, Rt. Hon. A.
Manuel, A. C.Royle, Charles (Salford, West)Woof, Robert
Mapp, CharlesShinwell, Rt. Hon. E.
Marquand, Rt. Hon. H. A.Short, EdwardTELLERS FOR THE AYES:
Mr. Ifor Davies and Mr. Lawson.
NOES
Agnew, Sir PeterCole, NormanGrimston, Sir Robert
Aitken, W. T.Cooke, RobertGrosvenor, Lt.-Col. R. G.
Allan, Robert (Paddington, S.)Cooper, A. E.Gurden, Harold
Allason, JamesCooper-Key, Sir NeillHall, John (Wycombe)
Arbuthnot, JohnCordeaux, Lt.-Col. J. K.Hamilton, Michael (Wellingborough)
Ashton, Sir HubertCorfield, F. V.Hare, Rt. Hon. John
Atkins, HumphreyCoulson, J. M.Harris, Frederic (Croydon, N. W.)
Barber, AnthonyCourtney, Cdr. AnthonyHarris, Reader (Heston)
Barlow, Sir JohnCraddock, Sir BeresfordHarrison, Brian (Malden)
Barter, JohnCrosthwaite-Eyre, Col. Sir OliverHarrison, Col. Sir Harwood (Eye)
Baxter, Sir Beverley (Southgate)Cunningham, KnoxHarvle Anderson, Miss
Bell, RonaldCurran, CharlesHay, John
Bennett, F. M. (Torquay)Currie, G. B. H.Heald, Rt. Hon. Sir Lionel
Bennett, Dr. Reginald (Gos & Fhm)d'Avigdor-Goldsmid, Sir HenryHenderson, John (Cathcart)
Berkeley, HumphryDeedes, W. F.Henderson-Stewart, Sir James
Bidgood, John C.de Ferranti, BasilHendry, Forbes
Biggs-Davison, JohnDigby, Simon WingfieldHiley, Joseph
Birch, Rt. Hon. Nigeldu Cann, EdwardHill, Dr. Rt. Hon. Charles (Luton)
Bishop, F. P.Duncan, Sir JamesHill, Mrs. Eveline (Wythenshawe)
Bossom, CliveDuthie, Sir WilliamHill, J. E. B. (S. Norfolk)
Bourne-Arlon, A.Eden, JohnHinchingbrooke, Viscount
Boyd Carpenter, Rt. Hon. JohnElliot, Capt. Walter (Carshalton)Hocking, Philip N
Boyle, Sir EdwardElliott, R. W. (Nwcstle-upon-Tyne, H.)Hollingworth, John
Brains, BernardEmery, PeterHopkins, Alan
Brewis, JohnErrington, Sir ErieHornby, R. P.
Bromley-Davenport, Lt.-Col. Sir WalterFarr, JohnHoward, John (Southampton, Test)
Brown, Alan (Tottenham)Fell, AnthonyHughes-Young, Michael
Browne, Percy (Torrington)Finlay, GraemeHulbert, Sir Norman
Buck, AntonyFisher, NigelHurd, Sir Anthony
Bullard, DenysFraser, Ian (Plymouth, Sutton)Hutchison, Michael Clark
Bullus, Wing Commander EricFreeth, DenzilIremonger, T. L.
Burden, F. A.Gammans, LadyJackson, John
Butcher, Sir HerbertGardner, EdwardJames, David
Butler, Rt. Hn. R. A. (Saffron Walden)George, J. C. (Pollok)Jenkins, Robert (Dulwich)
Campbell, Sir David (Belfast, S.)Gibson-Watt, DavidJohnson, Dr. Donald (Carlisle)
Campbell, Gordon (Moray & Nairn)Glover, Sir DouglasJohnson, Eric (Blackley)
Carr, Compton (Barons Court)Goodhart, PhilipJohnson Smith, Geoffrey
Carr, Robert (Mitcham)Goodhew, VictorKerans, Cdr. J. S.
Channon, H. P. G.Gough, FrederickKerby, Capt. Henry
Chataway, ChristopherGower, RaymondKerr, Sir Hamilton
Chichester-Clark, R.Grant, Rt. Hon. WilliamKershaw, Anthony
Clark, William (Nottingham, S.)Green, AlanKitson, Timothy
Cleaver, LeonardGresham Cooke, R.Lagden, Godfrey
Lancaster, Col. C. G.Osborn, John (Hallam)Stevens, Geoffrey
Langford-Holt, J.Page, John (Harrow, West)Steward, Harold (Stockport, S.)
Leather, E. H. C.Page, Graham (Crosby)Stodart, J. A.
Leavey, J. A.Pannell, Norman (Kirkdale)Stoddart-Scott, Col. Sir Malcolm
Lewis, Kenneth (Rutland)Partridge, E.Studholme, Sir Henry
Lilley, F. J. P.Pearson, Frank (Clitheroe)Sumner, Donald (Orpington)
Linstead, Sir HughPeyton, JohnTapsell, Peter
Litchfield, Capt. JohnPickthorn, Sir KennethTaylor, Sir Charles (Eastbourne)
Lloyd, Rt. Hon. Selwyn (Wirral)Pike, Miss MervynTaylor, Edwin (Bolton, E.)
Longbottom, CharlesPilkington, Sir RichardTaylor, W. J. (Bradford, N.)
Longden, GilbertPitman, Sir JamesThatcher, Mrs. Margaret
Loveys, Walter H.Pott, PercivallThomas, Leslie (Canterbury)
Lucas, Sir JocelynPrice, David (Eastleigh)Thompson, Kenneth (Walton)
McAdden, StephenPrior, J. M. L.Thornton-Kemsley, Sir Colin
MacArthur, IanPrior-Palmer, Brig. Sir OthoTiley, Arthur (Bradford, W.)
McLaren, MartinProfumo, Rt. Hon. JohnTurner, Colin
Maclay, Rt. Hon. JohnProudfoot, WilfredTurton, Rt. Hon. R. H.
McLean, Neil (Inverness)Pym, Francisvan Straubenzee, W. R.
MacLeod, John (Ross & Cromarty)Quennell, Miss J. M.Vaughan-Morgan, Sir John
Macmillan, Maurice (Halifax)Ramsden, JamesWakefield, Sir Wavell (St. M'lebone)
Macpherson, Niall (Dumfries)Rawlinson, PeterWalder, David
Maddan, MartinRedmayne, Rt. Hon. MartinWalker, Peter
Maginnis, John E.Rees, HughWalker-Smith, Rt. Hon. Sir Derek
Maitland, Sir JohnRenton, DavidWall, Patrick
Manningham-Buller, Rt. Hn. Sir R.Ridley, Hon. NicholasWebster, David
Markham, Major Sir FrankRoberts, Sir Peter (Heeley)Wells, John (Maidstone)
Marshall, DouglasRobinson, Sir Roland (Blackpool S.)Whitelaw, William
Marten, NeilRoots, WilliamWilliams, Dudley (Exeter)
Matthews, Gordan (Meriden)Ropner, Col. Sir LeonardWilliams, Paul (Sunderland, S.)
Mawby, RayRussell, RonaldWills, Sir Gerald (Bridgwater)
Maxwell-Hyslop, R. J.Scott-Hopkins, JamesWilson, Geoffrey (Truro)
Mills, StrattonSharples, RichardWise, A. R.
More, Jasper (Ludlow)Shaw, M.Wolrige-Gordon, Patrick
Morgan, WilliamShepherd, WilliamWoodhouse, C. M.
Nabarro, GeraldSkeet, T. H. H.Woodnutt, Mark
Nicholls, Sir HamarSmith, Dudley (Br'ntf'rd & Chiswick)Woollam, John
Nicholson, Sir GodfreySmithers, PeterWorsley, Marcus
Nugent, Sir RichardSmyth, Brig, Sir John (Norwood)Yates, William (The Wrekin)
Oakshott, Sir HendrieSpearman, Sir Alexander
Orr, Capt. L. P. S.Speir, RupertTELLERS FOR THE NOES:
Mr. Noble and Mr. Peel.

Photo of Mr Reginald Prentice Mr Reginald Prentice , East Ham North

I beg to move, in page 21, line 6, after "person" to insert: of eighteen years of age or more".

Photo of Sir Samuel Storey Sir Samuel Storey , Stretford

I think that it would be convenient to discuss with this Amendment that in page 21, line 18, at the end to insert: and in any case surcharges shall not be payable in respect of boys under eighteen years of age or girls under eighteen years of age".

Photo of Mr Reginald Prentice Mr Reginald Prentice , East Ham North

Like the previous Amendment, this one is based on our objection to the fact that the tax proposed in the Clause is a blunt instrument and takes no account of the damage that it might do in certain respects. Instead of talking about areas of the country, we are here talking about age groups, and particularly the age group which will leave school this year, next year and the following year. We are very worried about the background to the bulge in school leavers which will be spilling on to the labour market in these three years.

We should have liked to table an Amendment which exempted all young workers—we think that 21 would have been a better age to put in the Amendment than 18, but we had to insert 18 because of the rules of order—and another dealing with apprentices or those receiving some systematic form of training. This was the nearest we could get to the two ideas, and I think that it covers our point.

This matter was debated fully a fortnight ago, on a Supply day, when we talked about the problems of training in industry with special reference to the bulge. I feel that the Financial Secretary to the Treasury, who is to reply to this Amendment, ought to have done his homework on that day. We could make our case on this Amendment simply by throwing the book at him. I mean that figuratively, not literally.

Photo of Mr Reginald Prentice Mr Reginald Prentice , East Ham North

My right hon. Friend says, "Why not both?". I think that we should wait for the reply before doing that.

Our case has been made for us over and over again. It is made for us every week by the Minister of Labour in the speeches which he makes in various parts of the country to conferences of employers and trade unionists, asking them to expand their training facilities in the next three years. If the Financial Secretary wants further information on the point, he should look up the Press releases of the Ministry of Labour to see what language his right hon. Friend is employing in urging industry to expand training facilities. Our case was made in Commonwealth Technical Training Week the week before last, by the Duke of Edinburgh, and others, who spoke about the urgency of expanding training facilities.

We have made the basic point under consideration here over and over again. I do not think that it is necessary for me to make it at length again, but let me remind hon. Members opposite that in about six weeks' time nearly 25 per cent. more school leavers will be leaving school than last year. About 110,000 more boys and girls will leave school. Next year, there will be an increase of nearly one-third, and about 170,000 more boys and girls will be leaving school compared with last year. In 1962, the figure will be about the same as this year.

In other words, we are faced with the problem of about 400,000 extra school leavers in a period of three years. We put forward this Amendment because we feel that this tax might damage the prospects of young people, first, in finding jobs, and, secondly, in getting jobs in which there is appenticeship or some other form of systematic training.

We base our case, first, on the needs of the young people as individuals. Every one of them is entitled to the same chance in starting his working life as those who left school in the last few years. If we deny the young people that chance, or do anything to damage it, we are being unfair to them as individuals and perhaps storing up a social cost in terms of the frustration of young people for which the whole of our society will have to pay a price.

As has often been said, this extra number of school leavers presents a tremendous economic opportunity for this country. It has been said over and over again that we are short of skilled workers. We have in a short time a once-for-all and never-to-be-repeated opportunity to train an extra large number of skilled people in the categories in which this country is short. I had hoped that we might hear from the hon. Member for Mitcham (Mr. R. Carr) on this matter. I saw him in the building quite recently. As hon. Members know, he was Chairman of the Carr Committee which produced a Report On this subject three years ago. It was a disappointing Report in many ways, but it at least stated clearly the economic opportunity presented to this country by the bulge generation. This is, therefore, a matter of tremendous importance both socially and economically.

The Governments of other countries facing difficulties similar to those which we are facing have found it necessary to do something to encourage firms to take on more young people and particularly to offer them training facilities. For example, Holland has found it necessary and advantageous to excuse young people and their employers from national insurance contributions. This was an incentive for employers to take on more young trainees.

France has for many years had a differential training levy which has worked very well. There is a special tax on every firm employing skilled labour and there is a rebate to firms according to the amount of training which they carry out. The firm which does more than its share gets a rebate, the firm which does less than its share is taxed, and the firm that merely does its share breaks even.

In a debate a fortnight ago the Minister of Labour said that some officials of his Department and of the Ministry of Education have recently been to France to study this problem and to see whether a system of the kind applied there should be applied in this country. We are still waiting to hear about the report which the right hon. Gentleman received and the conclusions that he reached from it. Is it not absurd that at the time when the Government are considering whether to introduce something of that kind they come forward with this Measure which is likely to make things worse? I do not think there is any doubt that if this tax goes on the Statute Book without the Amendment that we propose it will make the situation worse.

Informed opinion in all quarters has come to this conclusion. There was a leader in The Times on the subject. The Institution of Youth Employment Officers unanimously passed a resolution asking that the payroll tax be amended. Everyone who has applied his mind to this tax and considered it in the light of the bulge and the training opportunities of the bulge has come to the conclusion that it may do harm.

It would do harm, not only if it were applied, but merely because of its presence on the Statute Book. An employer, in looking five years ahead and wondering whether to take on more apprentices, will be faced with the fact that at some time during those five years this payroll tax may be applied. He will not know when, for how long or for what amount, but he will know that the possibility of its application exists. That would discourage the employer. It would make all the difference in marginal cases. It would encourage firms that do no training themselves but "poach" their workers from other firms. It would discourage firms thinking of expanding their training facilities during the period when this bulge of young workers is coming on to the labour market.

7.30 p.m.

We have become accustomed over a long period to speaking from this side of the Committee about social and economic problems and condemning the Government for doing nothing about them. In this instance, we condemn the Government for making the problem worse. It is absurd, when some members of the Government are aware of this problem—the Minister of Labour particularly is asking people to do more to help to solve it—that the Chancellor of the Exchequer should cut the ground from under their feet.

The Financial Secretary, at least, is aware of the problem that is presented by the bulge. He was formerly at the Ministry of Education and knows that great efforts have had to be made in the educational world to accommodate the large number of extra school children during their primary and secondary school stages. Anyone who has had anything to do with education will be aware of the problems. This is the type of problem which will face our economy, with all the social and economic consequences if we fail to deal with it properly.

It is scandalous that at this moment, six weeks before those young people comprising this bulge school population start to come on to the labour market, we should be debating whether to impose this extra tax, which would discourage employers from doing what has to be done. I appeal to the Government to accept this Amendment, or to say that at the very least they will never consider imposing this tax on the younger workers, except in very exceptional circumstances. If the Government cannot accept the Amendment, I appeal to hon. Members opposite who have shown an interest in this matter to support us by speeches and votes.

Photo of Mr Henry Hynd Mr Henry Hynd , Accrington

In debates on the Finance Bill it is usual for the Government to have something up their sleeve—to give some concession. I am hoping that this is the sort of thing over which the Government will give way. It is a fairly obvious concession which could be made along the lines indicated by my hon. Friend the Member for East Ham, North (Mr. Prentice).

In previous discussions on this subject it has been stated that the payroll tax would not make very much difference to a firm in respect of employees to whom they are paying £10 or £12 a week. But if a firm has to pay an extra 4s. for apprentices who receive a lot less, I suggest that it will make a big difference. Employers will begin to calculate and to consider whether they should take on boys for training, if they are to be faced with this extra surcharge.

I hope the Financial Secretary will keep that point well in mind when considering whether he should make a concession in this matter. The point has been so well put by my hon. Friend that it is not necessary for me to elaborate it. If the Minister has been allowed a little elasticity by the Chancellor, I appeal to him to consider that this is the sort of thing over which he could give way. I appeal to him to say, because of the large number who are about to leave school and come into industry and because of the necessity for training apprentices in industry, that he will not insist on the right to make this surcharge in the case of such people.

Photo of Mr George Darling Mr George Darling , Sheffield, Hillsborough

I agree that there is not much which can be added in support of the very well presented and reasoned case advanced by my hon. Friend the Member for East Ham, North (Mr. Prentice). But my hon. Friend presented a general agreement. I should like to apply the argument to a particular case relating to a large group of companies in this country.

I must admit at once that if these Amendments were accepted they would not improve the Clause to any great extent. There would be a slight improvement, but what is really needed is a completely new approach to this question. If we are to have a payroll tax, we must have a discriminating tax so that those firms paying a great deal of attention to the education and training of young workers would derive a financial relief and firms which do nothing for the training of their apprentices and young workers would suffer from the tax. But, for the reasons my hon. Friend has given, we have had to present these Amendments in the way in which they appear on the Notice Paper. Although, as I have said, if these Amendments were carried, they would not make a great deal of difference to the Bill, their acceptance would be a step in the right direction. We need some inducement in a Finance Bill such as this—which, if the regulator is put into effect, will impose a financial burden on industry—to firms to retain and train young workers and to spend a great deal more money on the sort of education and training which we have been discussing.

I should like to give a few figures showing how this tax would work in the case of the United Steel Companies. I have no sanction to speak for this group. I have not asked permission to do so and mention its case only because it operates in and around my constituency and is one of the few concerns in the country which supply both the work-people and the shareholders with a great deal of information about its activities. I am relying on the report, the very full report, of the operations of this group. I am working on the 1960 figures, but I think that the situation is very much the same today.

The United Steel Companies employ, in, round figures, 38,000 workers. Their annual payroll amounts to about £30 mil- lion, including National Insurance contributions, which works out at an average wage of about £15 a week. From these figures I am convinced that if the purpose of a payroll tax is to make such a group do even more than it is now doing in the way of installing new plant and machinery and saving labour, the imposition of a 4s. tax per worker on the top of the figures which I have mentioned would make no difference whatsoever.

Already the group retains about £11 million a year for investment in new plant, machinery and so on. So that an addition of about £400,000—that is what the 4s. payroll tax would amount to—would not be sufficient to make a great deal of difference. But on top of the wages bill about which I have been talking—this is where we come back to the education and training—the United Steel Companies pay out a tremendous amount of money in the form of fringe benefits, including education and training. So far as I can work out from the figures, the total sum spent on fringe benefits works out on an average at about 7s. a week for each employee. I think my estimate is correct, and I reckon that it spends about 3s. a week on education and training. That is spread over the whole of the employees, it is the average figure, and so the amount spent on the young workers must be very considerable to give an average of 3s. a week for the whole of the 38,000 employees.

It seems to me very unfair that a firm spending money in this way for training and education of its young employees should then be faced with an additional 4s. tax if this so-called economic regulator is put into effect, which would have a bad effect generally over the whole of industry but may have a serious effect in regard to education and training.

If a firm faced with this financial imposition of the payroll tax is not in a position to get rid of labour or quickly to invest in labour-saving machinery and has to find a way of economising in its operations to pay the payroll tax it might look at the money that it spends on education and training as a means of economising. I do not think that reputable firms would make that choice willingly or would put education and training at the top of the list if they had to make economies. I have, however, been looking through the fringe benefits paid out by the United Steel Companies, and some of them must be contractual payments.

For instance, the companies pay 6s. per week per employee into their own pension scheme. That is a contractual obligation and no economy in that direction is possible. I imagine, too, that sums like 1s. 6d. per head per week for subsidising the works canteen are almost a contractual obligation, because there would be trouble, I should think, if this service was cut off. It is part of the conditions of employment. The companies spend money on safety services, which are tremendously important in the steel industry, and they have overheads for general welfare services, such as rent for sports grounds, and so on. Economies are not likely to be made in this direction, but they might be made in education and training.

Our complaint is not that the firms concerned might go ahead and make these economies, but that under this provision the Government are inducing them to consider making economies in education and training when, as my hon. Friend the Member for East Ham, North has said so forthrightly, everybody who is interested in making our industries more efficient and in getting greater production and prosperity for our country wants more education and training throughout our industrial system.

It is particularly unfair even to consider putting an additional levy, on top of all these voluntary levies, on firms with records of that nature. Of course, the United Steel Companies are not alone in this. Many other reputable firms spend immense sums on education and training—for example, Imperial Chemical Industries, the Coal Board, co-operative societies, and so on—but if they are faced with a problem of making economies to pay this payroll tax, there is an inducement for them at least to consider not expanding their education and training, but making economies in it.

Therefore, weak and ineffective as our Amendments are, to eliminate young workers under the age of 18 from this tax would at least be a step in the right direction. It would not greatly improve the Clause, but at least those firms who are taking in young workers should be encouraged, particularly having regard to the bulge, to take in more and more young workers and to train them to be skilled workers in our industrial system.

To put up this levy in these circumstances is so utterly stupid that if hon. Members opposite want the record of their Government to stand higher than it is—it is fairly low at the moment—they should agree with us to get rid of this payroll tax altogether. We shall discuss that when we reach the Question "That the Clause stand part of the Bill." At least hon. Members opposite should register their objection to a payroll tax that will have the effect of preventing firms from expanding their expenditure on education and training of young workers at a time in our history when that training and education should be expanded on a very great scale indeed.

7.45 p.m.

Photo of Mr James Ede Mr James Ede , South Shields

The speeches by my hon. Friend the Member for East Ham, North (Mr. Prentice) and my hon. Friend the Member for Sheffield, Hillsborough (Mr. Darling) have brought before the Committee one of the greatest problems of our time and also the greatest opportunity that the country has ever had of being the home of skilled industry spread over a far larger number of people than has ever been the case in the past. The bulge, as it is called, in the schools represents the biggest recruitment to our industries that we have ever had. We should do nothing that would assist a high proportion of these young people, of both sexes, being recruits into blind-alley industries.

Nobody knows the truth of this better than the Financial Secretary, whose service at the Ministry of Education was very distinguished and excited the admiration of both sides among those who look for a wide extension of practical education suitable to the aptitudes of the young people who are in the schools. They are the best-fed generation we have ever had. They have had better opportunities than any previous generation, although their very numbers have militated against their getting the full benefits that those of us who were responsible for the Education Act, 1944, hoped to secure for them. If we do anything that appears to lessen the responsibility that this generation carries with respect to them, we shall be committing a great sin against succeeding generations.

Those of us who have been interested in the education of youth over a period of years have longed to be able to give these youths the opportunity of getting into occupations in which they can take a pride and in which they will be an essential part of what, we hope, will be be a great industrial future for the country.

The impact of this proposal may be fairly indirect, but, none the less, we ought to make quite certain that we do nothing which will perpetuate some of the problems that confronted us between the two wars and before the First World War in periods of depression when recruitment to skilled industry was often neglected and numbers of youths, of both sexes, of considerable ability, drifted off into occupations in which they never secured full intellectual and social satisfaction to themselves and who, to that extent, lowered the general standard of the country.

I hope that the Government will do nothing that will indicate that they are unaware, not so much of the problem, but of the opportunity that awaits them today and which, in five years' time, may very well have gone if these youths drift into occupations in which no great skill is required, in which no training is given and where, although in these days they may even be able to earn considerable sums of money, they will get no lasting satisfaction from taking part in the industrial life of the country.

I appeal to the Financial Secretary. I know that he is entitled to say to me, "Who are you to preach to me? I do not need to be converted to this kind of thing. I can put the case better than you can." I know that the hon. Gentleman can, but this is one of the tests whether the beliefs which we have fostered during the past twenty years are to dominate the development of industrial life during the next twenty years.

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

I hope that when the Financial Secretary replies he will tell us what are the Government's intentions lying behind the proviso in subsection (2), which reads: Provided that different rates of surcharge may be prescribed for different descriptions of persons… Can we assume from that not only that there may be different rates, but, also, that certain categories of persons may be exempted? After the speeches which have been made already on the Amendment, it is abundantly clear that there is a strong case for exempting young persons and particularly those who are being trained for skilled work.

I do not care very much for this payroll tax, but if it is to be introduced it is essential that the Government should bear in mind the importance of training skilled workers. As boys and girls leave school—and a great many of them will be leaving very soon—the problem is twofold. The first is that of finding employment, and I commend the work of the Ministry of Labour in helping in that respect. The second is that of choosing training and the kind of work which, in the long run, will produce a technician and a skilled worker with a really worthwhile job. There is the temptation to go where the money is best.

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

Yes, at first, but not in the long run and it is very important that everything should be done to encourage apprenticeship schemes and to encourage employers to take apprentices. It would be most unfortunate if any step were taken which would tend to cause employers to reduce the number of their apprentices or to be reluctant to take young people and train them for a skilled job as an indirect consequence of a payroll tax. I hope, therefore, that we shall have some enlightenment on the Government's intentions in this respect.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

I do not intend to intervene for long in the debate, but I want to ask the Financial Secretary, in the light of the very important and distinguished debate that we have had on this subject, to recognise that there is a special problem here which must be dealt with tonight. We all have our views on the payroll tax and we shall be debating that on the Question "That the Clause stand part of the Bill" before very long and, therefore, it will be out of order to express any views now.

To apply a payroll tax, if that idea were accepted, to young workers, is something which offends the whole Committee. I am sure that the hon. Member for Mitcham (Mr. R. Carr), whom we are glad to see here because of his previous experience in this matter, could not possibly go into the Lobby to support the Government's proposal. I shall look forward to seeing the hon. Member in rather more unusual company on this side of the Committee, because he has produced some distinguished work on this subject.

The payroll tax as a whole is a piece of honest-to-goodness lunacy which we shall be arguing about later, but to apply it to young workers is a piece of inspired lunacy. Figures have been given in this debate and in previous debates, including one a fortnight ago and also a debate in which Alfred Robens opened an important discussion two years ago. Many of us on both sides of the Committee were recently opening exhibitions in our constituencies during the Commonwealth Technical Training Week. If we accept the Clause we shall be hypocrites after all we said when we opened those exhibitions.

I opened an exhibition in a new part of my constituency which has special apprenticeship and training problems, because the birthrate on Merseyside and the number of school leavers have expanded even more than perhaps in any other part of the country. I was speaking in a new town where, I am proud to say, we have nothing but comprehensive schools in which children are encouraged to stay until they are 16 and where there is the special and almost peculiar problem of the 16-year old school leaver which is even more difficult than that of the 15-year old school leaver.

It is an area which, traditionally, has had a bigger problem in the matter of skilled training than the rest of the country. I think that my hon. Friend the Member for East Ham, North (Mr. Prentice), who has studied this subject, will agree that in the country as a whole for every 65 boys and girls who go for jobs with no training or skill 35 receive some skilled training. On Merseyside, the figures are 74 and 26. Only 26 per cent. actually receive training in any skill.

We all recognise that the whole problem is to get industry training-minded and apprenticeship-minded. I agree with those of my hon. Friends who say that "problem" is the wrong word to use, because this is a gigantic opportunity and one which, as my right hon. Friend the Member for South Shields (Mr. Ede) has said, is a once-and-for-all opportunity. It is certainly a human problem of the lives of millions of people, but it is also a question of our national survival. My right hon. Friend the Member for South Shields said that this is our chance to increase the volume of skill available to the country for the future. We shall never again be the workshop of the world. I do not think that we want to be. We can be the pilot plant of the world, but we shall not be on the kind of proposal which is before us tonight.

I remember debating this matter on a rather "phoney" new Clause which we proposed on a previous Finance Bill. We wanted the problem of apprenticeship to be aired and we put forward a few years ago what I admit was a "phoney" Clause for the purpose of securing special tax concessions for apprenticeship and training. I calculated then that if we had an output of 20 per cent. more skilled men—and no one would say that that was an underestimate compared with what we need at present—it would cost us between £15 million and £20 million.

Against that, what are the Government giving? As a result of the Carr Report on Training for Skill they are giving £75,000 over five years, and even then only on a £ for £ basis, and what the Clause which we are seeking to amend does is to take back in respect of the employment of young workers many times more than the £75,000 which the Government, in their niggardly generosity, had offered to meet this important problem.

Photo of Mr Robert Carr Mr Robert Carr , Mitcham

As for this niggardly sum which the right hon. Gentleman says the Government are giving, the important part of the re-commendations and the opinions expressed in the Report of the Committee of which I had the honour to be chairman was that the main part of the Government's job was to provide technical education to reinforce the recruitment to industry of young workers. If the right hon. Gentleman talks about the money that the Government are spending he should take into account the extra that they are spending on technical education.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

Time has moved on since that Report was issued.

One of my hon. Friends referred to the work of the Institute of Youth Employment Officers. Many of us who have considered this problem since the Carr Report was published would say that that Report did not go far enough. We have had the rather measly and belated offer of training facilities in Government training centres for first-year training and all that kind of thing, but I would be out of order if I pursued that and I do not want to incur your wrath, Sir Gordon, so early in the evening.

8.0 p.m.

The plain fact, as we all recognise, is that some firms are doing a good job. My hon. Friend gave one or two examples. The nationalised industries as a whole are doing a remarkably good job. I do not think that that has been questioned, and some local authorities are working in with them extremely well. The Co-operative movement is also doing a good job in this connection, but there are many firms which are not doing a job at all, and many firms who consider that they do not have to do a job.

Without becoming too argumentative or ideological, I put this point to the hon. Gentleman, because I am sure that he will take this as a fair intellectual point. This is a problem of contemporary capitalism. This is one of the points on which contemporary capitalism is breaking down. If one looks at any firm from the point of view of the actual profit motive, one finds that it has no incentive to train skilled workers, because it says that it will cost money—and it does cost a lot of money to train skilled workers—and at the age of 21 the trained man may be lost to some other firm which has perhaps made no contribution to the problem of training skilled workers; and when every firm has pursued a training programme in accordance with its own concept of its own private profit the sum total of apprentices trained by those firms comes out to a figure a great deal less than the industry as a whole needs.

Capitalism as such cannot solve the problem. Profit-seeking capitalism cannot solve this problem. It can be solved only when some firms depart from the doctrines of capitalism, as in the instances mentioned by my hon. Friend. Therefore, when all the motives of individual firms tend to push in the opposite direction, because their narrow profit does not push them in the right direction, when many firms are being pushed in the wrong direction except in so far as they are moved by humanitarian or broad national considerations, or considerations of the industry as a whole rather than their own firms, when all the tides are pushing them in the wrong direction, we get the Government, who ought to be asserting some national responsibility, coming along and taxing young workers, juvenile workers, apprentices, and so on.

I do not think that any hon. Member can deny that at the moment this is a marked disincentive. This is a disincentive to the training of apprentices that we were all proclaiming a fortnight ago was so necessary. Ministers at that Box, many of us opening the exhibitions to which I have referred in our constituencies, the whole nation, the whole Commonwealth, were supposed to be mobilised on this important duty, and yet here we have to spend an hour of Parliamentary time trying to persuade the Financial Secretary, who has enough ministerial experience in all the right Departments to teach him what the position should be—and now the Chancellor who has come in—of the necessity to remove this tax, at any rate on young workers.

There will be arguments later showing why the payroll tax idea should be dropped altogether, but it would be out of order to do that now. I wish that the Chancellor had heard the speech of my right hon. Friend the Member for South Shields, the speech of my hon. Friend the Member for East Ham, North, and the speeches of other hon. Members. Had he done so, there would have been no doubt about his reaction to the proposals we have made. I hope that the hon. Gentleman, reinforced by the presence of the Chancellor of the Exchequer, will say, "Yes, this was a mistake. We will drop it, and we will get on with the other parts of the Bill".

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

This has been an exceptionally good debate, and I am sure that I am speaking for the Committee when I say how much we welcomed the contribution of the right hon. Member for South Shields (Mr. Ede). I return the compliment that he was kind enough to pay me by saying that if I happen to be a Member of the House when I reach his age, I hope that in speaking on this kind of subject I will do so with half the vigour and clarity which he showed this evening.

It fell to me to wind up the debate which Alfred Robens opened rather more than two and a half years ago, and perhaps I shall escape having that book thrown at me if I tell the hon. Member for East Ham, North (Mr. Prentice), whose speech I greatly enjoyed, that I did not read the whole of the debate the other week, but I read most of it.

I understand that the hon. Member for East Ham would have preferred to move an Amendment, had it been possible within the rules of order and the terms of the Budget Resolutions, which covered a wider ambit than this. He would have liked to exempt apprentices as such from the employers' surcharge, and, as he said, he would have liked to have been able to exempt all those under 21. But, considering the speeches which have been made, I do not know whether I would wish to go quite as far as some hon. Members have.

I think that one can exaggerate the disincentive effect which the presence of this Clause in the Statute Book might have on employers taking on apprentices, and I was a little surprised by what the right hon. Member for Huyton (Mr. H. Wilson) said about companies giving fringe benefits going wrong on the principles of capitalism, because not only in this country, but on the other side of the Atlantic, too, there has been a great change in recent decades. As our society has become more and more managerial there has been a greatly increased tendency for companies to give fringe benefits of this kind. I thought that I detected a whiff of "Clause 4 and all that" about that part of the night hon. Gentleman's speech.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

The hon. Gentleman is wrong. I made it quite plain that many firms are doing this, but for national considerations, not for considerations of profit-seeking capitalism. This is one of the classic cases where the interests of the individual and industry are still in conflict. Not many are doing it for the sake of the individual, or for the sake of the nation, or for managerial reasons. Basically, if one applies a profit test, the interests of the firm and of industry tend to be in conflict.

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

I will not pursue that point, but I could not resist saying what I did.

I agree with hon. Gentlemen opposite who have said that in the years ahead we shall have not only a problem, but an opportunity such as we are not likely to have again. I agree, and my right hon. and learned Friend fully accepts this, that if this surcharge comes to be imposed there will be a strong case for special treatment for boys and girls under 18. My right hon. and learned Friend and I cannot tonight enter into a firm commitment to provide total or partial relief for boys and girls under 18, but what I can say to the Committee is that if my right hon. and learned Friend decides that this surcharge is to be imposed he will keep in mind the arguments which have been advanced tonight by hon. Members, and by many other people outside, for some relief in respect of young people.

I cannot go further than that now except to say again that my right hon. and learned Friend fully realises the very important economic and human implications of this whole subject, and that he hopes that the Committee will derive some comfort, at any rate, from what I have said.

Photo of Mr Reginald Prentice Mr Reginald Prentice , East Ham North

The Financial Secretary's reply is very disappointing. It is not satisfactory for him to say that the Chancellor will take these matters into account. Nothing is good enough at this stage except a clear pronouncement by the Government that this will not be imposed on workers under 18 at least during the period when the bulge is leaving school and during the years ahead when some of that generation will be serving their apprenticeships, and so on.

The Financial Secretary's speech was in keeping with the speeches we heard from that bench during the debate a fortnight ago, when the whole subject was approached much too casually. There is no sense of urgency on this matter by the Government, and this is an urgent matter. This extra large generation will start leaving school in about six weeks. Employers throughout the country have been asked by the Industrial Training Council to expand their training facilities by at least a fifth to meet this situation. There is no evidence that the majority of employers are meeting that request. A few have done so but, generally, the few that have are those who have already demonstrated that they are good employers, with better training facilities than the average.

I do not want to be alarmist about this, but all the evidence tends to show that industry will fail to meet the challenge and opportunity of the bulge. If we had had something more definite from the Government tonight, even on this comparatively narrow point, it would have been a sign that they took this matter seriously and meant business. As it is, the speeches that the Minister of Labour is making throughout the country—and, as they stand, they are good speeches—will not be backed up by any kind of action.

Will the Financial Secretary or the Chancellor rise even now and make a more definite pronouncement? If not, we shall go into the Division Lobby, and we hope to be able to take with us those hon. Members opposite who feel strongly about this matter.

Photo of Mr Henry Hynd Mr Henry Hynd , Accrington

I must press the Chancellor a little further on this. The Financial Secretary has admitted that the Amendment is justified, in principle. The Clause says: Provided that different rates of surcharge may be prescribed for different descriptions of persons, and if it is so prescribed surcharges shall not be payable in respect of a prescribed description of persons. Having admitted the principle, will not the Financial Secretary or the Chancellor go just that little bit further and agree that the people we have been talking about—boys and girls under 18 years of age—will be just the people in respect of whom surcharges shall not be payable, as provided in the Clause?

If either of them will say that, without accepting the Amendment, it will meet our case, and it will be in line with what the Financial Secretary has already said.

8.15 p.m.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

Are we not to have a reply from the Government Front Bench? The Financial Secretary's brief speech left the situation worse than before. He talked as if he were giving a concession. If we did not know both he and the Chancellor to be estimable characters we would say that this was a piece of cool cheek on the part of the hon. Gentleman. It is the House of Commons which decides taxation matters, and it is impertinent for the Financial Secretary to say that this has been a good debate, that he has listened to it, and that his right hon. and learned Friend, at the end of the day, will consider the points that have been raised and decide how much tax to apply. The House of Commons has the responsibility in taxation matters, and must determine the conditions on which the tax should operate.

My right hon. Friend the Member for South Shields (Mr. Ede) and other hon. Members have put forward powerful reasons why, without leaving anything to cancellarian discretion, there should be no taxation of young workers, whatever is done about other workers. It is not good enough for the hon. Gentleman merely to say that the Chancellor will give due consideration to the point. On constitutional grounds, apart from the other arguments put forward by my right hon. and hon. Friends and myself, the Financial Secretary or the Chancellor should say, "We accept the argument that has been put forward," either by incorporating the Amendment in the Bill or by giving a clear pledge that if the payroll tax is introduced no tax will be imposed in respect of young workers.

If either of them will do that we will be satisfied; if not, we must challenge, in the Division Lobby, the sincerity of hon. Members opposite who have spoken on the matter, including the Minister of Labour, who is lurking in the place normally occupied by the Home Secretary in late night sittings, when he is not here, or when he comes along and says that he is not here.

The Minister of Labour made some speeches about this subject a fortnight ago. We shall test his sincerity in the Lobby. It is up to the Financial Secretary. He should not leave it to the Chancellor's discretion. That is not good enough in this case.

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

I cannot go beyond my previous remarks. So that there shall not be any question of bad faith, I can say frankly that the Government do not feel able to accept the Amendment. The Clause as now drawn—and hon. Members, including the hon. Member for Huddersfield, West (Mr. Wade), have drawn attention to this—enables the Chancellor, if a surcharge is imposed, to grant either total or partial relief.

Photo of Mr Henry Hynd Mr Henry Hynd , Accrington

I represent Accrington.

Photo of Sir Edward Boyle Sir Edward Boyle , Birmingham Handsworth

The hon. Member for Huddersfield, West and the hon. Member for Accrington (Mr. H. Hynd), more recently, made the same point. If a surcharge were to be imposed my right hon. and learned Friend could give total or partial relief for particular categories of people in respect of whom contributions are paid. I have said that he will bear in mind the arguments put forward this evening. I cannot go beyond that. I recognise the strong feeling of hon. Members and, as I have said, their arguments will be very much in my right hon. and learned Friend's mind. Nevertheless, I cannot advise the Committee to accept the Amendment.

Photo of Mr Donald Wade Mr Donald Wade , Huddersfield West

I understand that the Financial Secretary is not able to give the Committee any assurance. He is merely indicating that the power is there. We have no assurance that it will be used in this way.

Photo of Mr William Hall Mr William Hall , Colne Valley

My right hon. Friend the Member for Huyton (Mr. H. Wilson) made a very strong case for the Committee's dealing with this and not leaving it to the Government. The Financial Secretary talked as though the Chancellor would hold his present office for all time.

If this power is to be implemented within the next few weeks or months

there may be something to be said for the implicit promise given by the Financial Secretary on behalf of the Chancellor—I will not enlarge upon the fact that the Chancellor is sitting on the Front Bench, and could have given the promise himself if he had been so minded—but the promise extended only to the present Chancellor. Debates here have a habit of being forgotten, and even promises made by some Governments and Ministers are completely forgotten almost as soon as they are uttered.

The fact is that what the Financial Secretary has said is worth absolutely nothing. Therefore, my hon. and right hon. Friends—and, I hope some hon. Friends opposite who regard this as a most important matter—will vote against the Government. A fortnight or so ago we had a long, detailed and interesting discussion on the need for technical education and the training of apprentices. Both sides of the House came together in a most remarkable way. All that has apparently gone for nothing. All that we have got is an airy statement by the Financial Secretary—who, according to newspaper accounts, may himself not be in his present post for very much longer—to the effect that his right hon. and learned Friend will take all these points into account. He will not make any promises.

That statement is not worth anything to the Committee, and hon. Members on this side—if hon. Members opposite who share our view have not the guts to do so—will, at any rate, demonstrate what we feel by voting in the Lobby.

Question put, That those words be there inserted:—

The Committee divided: Ayes 183, Noes 240.

Division No. 197.]AYES[8.18 p.m.
Alnsley, WilliamChapman, DonaldDiamond, John
Albu, AustenCliffe, MichaelDodds, Norman
Allaun, Frank (Salford, E.)Corbet, Mrs. FredaDonnelly, Desmond
Awbery, StanCraddock, George (Bradford, S.)Driberg, Tom
Bacon, Miss AliceCronin, JohnEde, Rt. Hon. C.
Baxter, William (Stirlingshire, W.)Crosland, AnthonyEdelman, Maurice
Benson, Sir GeorgeCrossman, R. H. S.Edwards, Rt. Hon. Ness (Caerphilly)
Blyton, WilliamCullen, Mrs. AliceEdwards, Walter (Stepney)
Bowden, Herbert W. (Leics, S. W.)Darling, GeorgeFernyhough, E.
Boyden, JamesDavies, C. Elfed (Rhondda, E.)Finch, Harold
Braddock, Mrs. E. M.Davies, Harold (Leek)Fitch, Alan
Brockway, A. FennerDavies, S. O. (Merthyr)Foot, Michael (Ebbw Vale)
Brown, Rt. Hon. George (Belper)Deer, GeorgeForman, J. C.
Butler, Herbert (Hackney, C.)de Freltas, GeoffreyFraser, Thomas (Hamilton)
Callaghan, JamesDelargy, HughGalpern, Sir Myer
George, Lady Megan Lloyd (Crmrthn)Loughlin, CharlesShort, Edward
Ginsburg, DavidMabon, Dr. J. DicksonSilverman, Julius (Aston)
Gooch, E. G.McCann, JohnSkeffington, Arthur
Gordon Walker, Rt. Hon. P. C.McInnes, JamesSlater, Mrs. Harriet (Stoke, N.)
Gourlay, HarryMcKay, John (Wallsend)Slater, Joseph (Sedgefield)
Grey, CharlesMackie, John (Enfield, East)Small, William
Griffiths, Rt. Hon. James (Llanelly)McLeavy, FrankSmith, Ellis (Stoke. S.)
Griffiths, W. (Exchange)MacMillan, Malcolm (Western Isles)Snow, Julian
Gunter, RayMacPherson, Malcolm (Stirling)Sorensen, R. W.
Hale, Leslie (Oldham, W.)Mahon, SimonSoskice, Rt. Hon. Sir Frank
Hall, Rt. Hn. Glenvil (Colna Valley)Mallalieu, J. P. W. (Huddersfield, E.)Spriggs, Leslie
Hamilton, William (West Fife)Manuel, A. C.Steele, Thomas
Hannan, WilliamMapp, CharlesStewart, Michael (Fulham)
Hart, Mrs. JudithMarquand, Rt. Hon. H. A.Stonehouse, John
Hayman, F. H.Marsh, RichardStones, William
Henderson, Rt. Hn. Arthur (Rwly Regis)Mason, RoyStross, Dr. Barnett (Stoke-on-Trervt, C.)
Herbison, Miss MargaretMendelson, J. J.Swingler, Stephen
Hill, J. (Midlothian)Millan, BruceSylvester, George
Holman, PercyMilne, Edward J.Symonds, J. B.
Howell, Charles A. (Perry Barr)Mitchison, G. R.Taylor, Bernard (Mansfield)
Hoy, James H.Monslow, WalterTaylor, John (West Lothian)
Hughes, Cledwyn (Anglesey)Moody, A. S.Thomas, Iorwerth (Rhondda, W.)
Hughes, Emrys (S. Ayrshire)Mort, D. L.Thompson, Dr. Alan (Dunfermline)
Hunter, A. E.Moyle, ArthurThomson, G. M. (Dundee, E.)
Hynd, H. (Accrington)Neal, HaroldThornton, Ernest
Hynd, John (Attercilffe)Noel-Baker, Francis (Swindon)Timmons, John
Irving, Sydney (Dartford)Oswald, ThomasTommy, Frank
Janner, Sir BarnettPadley, W. E.Wade, Donald
Jay, Rt. Hon. DouglasPannell, Charles (Leeds, W.)Wainwright, Edwin
Jager, GeorgeParkin, B. T.Warbey, William
Johnson, Carol (Lewisham, S.)Pavitt, LaurenceWatkins, Tudor
Jones, Rt. Hn. A. Creech (Wakefield)Pearson, Arthur (Pontypridd)Wells, William (Walsall, N.)
Jones, Dan (Burnley)Peart, FrederickWhitlook, William
Jones, Elwyn (West Ham, S.)Popplewell, ErnestWilkins, W. A.
Jones, J. Idwal (Wrexham)Prentice, R. E.Willey, Frederick
Jones, T. W. (Merioneth)Price, J. T. (Westhoughton)Williams, D. J. (Neath)
Kenyon, CliffordProbert, ArthurWilliams, Ll. (Abertillery)
Key, Rt. Hon. C. W.Proctor, W. T.Willis, E. G. (Edinburgh, E.)
King, Dr. HoracePursey, Cmdr. HarryWilson, Rt. Hon. Harold (Huyton)
Lawson, GeorgeRandall, HarryWinterbottom, R. E.
Ledger, RonReid, WilliamWoodburn, Rt. Hon. A.
Lee, Frederick (Newton)Roberts, Albert (Normanton)Woof, Robert
Lee, Miss Jennie (Cannock)Roberts, Goronwy (Caernarvon)Yates, Victor (Ladywood)
Lever, Harold (Cheetham)Robertson, John (Paisley)
Lever, L. M. (Ardwick)Rogers, G. H. R. (Kensington, N.)TELLERS FOR THE AYES:
Lewis, Arthur (West Ham, N.)Ross, WilliamDr. Broughton and Mr. Ifor Davies.
Lipton, MarcusRoyle, Charles (Salford, West)
Logan, David
NOES
Agnew, Sir PeterChannon, H. P. G.Gibson-Watt, David
Aitken, W. T.Chataway, ChristopherGlover, Sir Douglas
Allason, JamesChichester-Clark, R.Glyn, Dr. Alan (Clapham)
Arbuthnot, JohnClark, William (Nottingham, S.)Goodhart, Philip
Ashton, Sir HubertCleaver, LeonardGoodhew, Victor
Barber, AnthonyCole, NormanGower, Raymond
Barlow, Sir JohnCooke, RobertGrant, Rt. Hon. William
Barter, JohnCooper-Key, Sir NeillGrant-Ferris, Wg Cdr. R.
Baxter, Sir Beverley (Southgate)Cordeaux, Lt.-Col. J. K.Green, Alan
Bell, RonaldCorfield, F. V.Gresham Cooke, R.
Bennett, F. M. (Torquay)Coulson, J. M.Grimsten, Sir Robert
Bennett, Dr. Reginald (Gos & Fhm)Courtney, Cdr. AnthonyGrosvenor, Lt.-Col. R. G.
Berkeley, HumphryCraddock, Sir BeresfordGurden, Harold
Bidgood, John C.Crosthwaite-Eyre, Col. Sir OliverHamilton, Michael, (Wellingborough)
Biggs-Davison, JohnCunningham, KnoxHare, Rt. Hon. John
Birch, Rt. Hon. NigelCurran, CharlesHarris, Frederic (Croydon, N. W.)
Bishop, F. P.Currie, G. B. H.Harrison, Brian (Malden)
Bourne-Arton, A.d'Avigdor-Goldsmid, Sir HenryHarrison, Col. Sir Harwood (Eye)
Box, DonaldDeedes, W. F.Harvie Anderson, Miss
Boyle, Sir Edwardde Ferranti, BasilHeald, Rt. Hon. Sir Lionel
Braine, BernardDigby, Simon WingfieldHenderson, John (Cathcart)
Brewis, JohnDuncan, Sir JamesHenderson-Stewart, Sir James
Bromley-Davenport, Lt-Col. Sir WalterDuthie, Sir WilliamHendry, Forbes
Brown, Alan (Tottenham)Eden, JohnHiley, Joseph
Browne, Percy (Torrington)Elliot, Capt. Walter (Carshalton)Hill, Dr. At. Hon. Charles (Luton)
Buck, AntonyElliott, R. W. (Nwastle-upon-Trne, N.)Hill, Mrs. Eveline (Wythenshawe)
Bullard, DenysEmery, PeterHill, J. E. B. (S. Norfolk)
Bullus, Wing Commander EricErrington, Sir EricHirst, Geoffrey
Burden, F. A.Farr, JohnHocking, Philip N.
Butcher, Sir HerbertFinlay, GraemeHollingworth, John
Butler, Rt. Hn. R. A. (Saffron Walden)Fraser, Hn. Hugh (Stafford & Stone)Hopkins, Alan
Campbell, Sir David (Belfast, S.)Fraser, Ian (Plymouth, Sutton)Hornby, R. P.
Carr, Compton (Barons Court)Gammans, LadyHoward, John (Southampton, Test)
Carr, Robert (Mitcham)Gardner, EdwardHughes-Young, Michael
Hulbert, Sir Norman
Hurd, Sir AnthonyMontgomery, FergusSpearman, Sir Alexander
Hutchison, Michael ClarkMoro, Jasper (Ludlow)Speir, Rupert
Iremonger, T. L.Morgan, WilliamStevens, Geoffrey
James, DavidNabarro, GeraldSteward, Harold (Stockport, S.)
Jenkins, Robert (Dulwich)Nicholls, Sir HarmerStodart, J. A.
Johnson, Dr. Donald (Carlisle)Nicholson, Sir GodfreyStoddart-Scott, Col. Sir Malcolm
Johnson, Eric (Blackley)Noble, MichaelStudholme, Sir Henry
Johnson Smith, GeoffreyNugent, Sir RichardSumner, Donald (Orpington)
Jones, Rt. Hn. Aubrey (Hall Green)Oakshott, Sir HendrieTalbot, John E.
Kerans, Cdr. J. S.Orr, Capt. L. P. S.Tapsell, Peter
Kerby, Capt. HenryOsborn, John (Hallam)Taylor, Sir Charles (Eastbourne)
Kerr, Sir HamiltonOsborne, Sir Cyril (Louth)Taylor, Edwin (Bolton, E.)
Kitson, TimothyPage, John (Harrow, West)Taylor, W. J. (Bradford, N.)
Lagden, GodfreyPage, Graham (Crosby)Temple, John M.
Lambton, ViscountPannell, Norman (Kirkdale)Thatcher, Mrs. Margaret
Langford-Holt, J.Partridge, E.Thomas, Leslie (Canterbury)
Leather, E. H. C.Pearson, Frank (Clitheroe)Thompson, Kenneth (Walton)
Leavey, J. A.Peel, JohnThornton-Kemsley, Sir Colin
Lewis, Kenneth (Rutland)Peyton, JohnTiley, Arthur (Bradford, W.)
Linatead, Sir HughPickthorn, Sir KennethTurner, Colin
Litchfield, Capt. JohnPike, Miss MervynTurton, Rt. Hon. R. H.
Lloyd, Rt. Hon. Selwyn (Wirral)Pilkington, Sir Richardvan Straubenzee, W. R.
Longbottom, CharlesPitman, Sir JamesVosper, Rt. Hon. Dennis
Longden, GilbertPott, PercivallWakefield, Sir Wavell (St. M'lebone)
Loveys, Walter H.Price, David (Eastleigh)Walder, David
Lucas, Sir JocelynPrior, J. M. L.Walker, Peter
McAdden, StephenPrior-Palmer, Brig Sir OthoWalker-Smith, Rt. Hon. Sir Derek
MacArthur, IanProudfoot, WilfredWall, Patrick
McLaren, MartinPym, FrancisWard, Dame Irene
Maclay, Rt. Hon. JohnQuennell, Miss J. M.Webster, David
McLean, Neil (Inverness)Ramsden, JamesWells, John (Maidstone)
MacLeod, John (Ross & Cromarty)Redmayne, Rt. Hon. MartinWhitelaw, William
Macmillan, R. Hn. Harold (Bromley)Rees, HughWilliams, Dudley (Exeter)
Macmillan, Maurice (Halifax)Rees-Davies, W. R.Wills, Sir Gerald (Bridgwater)
Macpherson, Niall (Dumfries)Renton, DavidWilson, Geoffrey (Truro)
Maddan, MartinRidley, Hon. NicholasWise, A. R.
Maginnis, John E.Roberts, Sir Peter (Heeley)Wolrige-Gordon, Patrick
Maitland, Sir JohnRobinson, Sir Roland (Blackpool, S.)Woodhouse, C. M.
Manningham-Buller, Rt. Hn. Sir R.Roots, WilliamWoodnutt, Mark
Markham, Major Sir FrankRopner, Col. Sir LeonardWoollam, John
Marlowe, AnthonyRussell, RonaldWorsley, Marcus
Marples, Rt. Hon. ErnestScott-Hopkins, JamesYates, William (The Wrekin)
Marshall, DouglasShaw, M.
Marten, NeilShepherd, WilliamTELLERS FOR THE NOES:
Matthews, Gordon (Meriden)Skeet, T. H. H.Mr. Edward Wakefield and
Mawby, RaySmith, Dudley (Br'ntf'rd & Chiswick)Mr. Gordon Campbell.
Maxwell-Hyslop, R. J.Smithers, Peter
Mills, Stratton

8.30 p.m.

Photo of Mr Stanley McMaster Mr Stanley McMaster , Belfast East

I beg to move, in page 21, to leave out lines 10 to 12.

This Amendment in the names of my hon. Friends the Members for Belfast, West (Mrs. McLaughlin), Mid-Ulster (Mr. Forrest) and myself is on a matter which has given a great deal of concern to those of us who represent Northern Ireland in this Parliament.

Clause 26 of the Finance Bill states: If, during the period beginning with the passing of this Act and ending with the thirty-first day of March, nineteen hundred and sixty-two it appears to the Treasury that it is expedient so to do with a view to regulating the balance between demand and resources in the United Kingdom, the Treasury may by order direct that the following subsection shall have effect… As stated in the Clause, its purpose is to regulate the balance "between demand and resources in the United Kingdom." This has been described during the debate on the Budget, and later during the Second Reading of the Finance Bill, as a payroll tax.

The first point I made is that it is not actually a tax; it is a surcharge, and it is so described in the Bill. It is something which is meant to regulate the economy. It has been suggested that this regulator may never be applied. That suggestion is not supported by the leading financial columnists and writers in our newspapers today. Within the past fortnight in a leading article in The Times, another article in the Financial Times and an article by the financal editor in The Times, it was suggested that the regulators are necessary and should be used.

It has also been suggested that because of the balance of payments crisis which may well develop in the autumn with the present trend of the growth in the economy of this country, these regulators should be used, and used promptly, by the Chancellor. I stress that the purpose of this Amendment is not in any way to kill Clause 26. I think the regulators are probably necessary in order to preserve the balance of payments and to preserve sterling.

However, we have put down this Amendment because we are afraid that through causes beyond the control of the Chancellor he may well be faced with a situation in which he has to use these regulators. I am taking the situation at its worst. If the worst comes to the worst the payroll regulator will be invoked. The Chancellor made it quite clear during the Budget debate and put it on record in his speech on the first day of the Budget debate, 17th April, from which I shall quote two brief passages. The first was: My second proposal relates to a special surcharge on employers, analogous to a payroll tax. The use of such a measure as an economic regulator would have the added advantage that when we are faced with a situation of chronic shortage of labour it would act as an incentive to economy in the use of manpower and to investment in labour-saving equipment. I propose to ask for power this year as a temporary expedient to collect such a surcharge, should it be needed, by attaching it to the employers' share of the National Insurance stamp. I draw attention, as was drawn in discussion of the other Amendments, to these purposes. I pick out as the key words, "chronic shortage of labour". The situation of a chronic shortage of labour does not apply in Northern Ireland. The Chancellor said: These two new fiscal powers, which could, of course, be used either together or separately will, in my view, greatly improve the Government's ability to regulate the economy; we shall be much better able to act by quick and flexible fiscal means, in the interval between this and the next Budget."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 808–9.] In the Chancellor's own words during the Budget debate, it appears that if a chronic situation arises he intends to use the payroll tax. As I have said, he has been urged to do so by the leader writer of the Financial Times. I also quote from the speech of my right hon. Friend the President of the Board of Trade on the second day of the Budget debate. On 18th April, he said with respect to the payroll regulator: The right hon. Gentleman keeps asking for more investment. Surely he would agree that to regulate demand in the economy my right hon. and learned Friend was right to take two measures. The first, that concerning indirect taxation, will bear directly on consumption, and the second, the payroll tax, is designed to encourage investment in laboursaving machinery. I should have thought that that was entirely in accordance with the arguments which have been pressed on us by hon. Members opposite. It was stated clearly that the payroll tax is meant to economise in labour.

Later in the debate the President of the Board of Trade said: The argument for the payroll tax, which I think is a very good one, is that we in this country must recognise that labour is our scarcest commodity. We must encourage industry to develop in such a way that the maximum output comes from every man, and that means that we must have the maximum capital equipment behind every man."—[OFFICIAL REPORT, 18th April, 1961; Vol. 638, c. 1006–7.] This is something with which the Ulster Unionist Members in general principle do not quarrel, but I ask the Chancellor very seriously to think of the special conditions in Northern Ireland. Do we in Northern Ireland want to encourage industrialists, where they have art equal choice, to invest in expensive labour-saving equipment and to cut down their labour force when we already have 7½ per cent. unemployed? I should like to quote briefly from a speech by my hon. Friend the Economic Secretary to the Treasury who said, on 19th April: My right hon and teamed Friend has therefore proposed two changes to improve this situation. He had referred to the Radcliffe Committee's proposals with respect to regulating the economy. He continued: The Committee already knows the details of these proposals, and my right hon. Friend the President of the Board of Trade spent some time examining them yesterday. I want to make only four brief points about them.First, whatever views hon. Members may have on the merits of these two proposals it is undeniable that they will go a long way to remedy the difficulties which I have mentioned and to make possible a more rapid and flexible adjustment of economic policy to deal with varying economic conditions.The second point concerns the application of the employer surcharge to Northern Ireland. As hon. Members will have observed from the Financial Statement, the surcharge, if imposed, would apply to Northern Ireland employers. In Northern Ireland, the National Insurance scheme is operated on exactly the same basis as in Great Britain. This is essential if the free mobility of labour between the two parts of the United Kingdom is to be preserved, and my right hon. and learned Friend has been concerned to see that his new proposals do nothing to upset this. But hon. Members will also have seen from the Financial Statement that the proceeds of any surcharge deriving from employers in Northern Ireland will be paid not into the United Kingdom Exchequer, but directly to the Northern Ireland Exchequer."—[OFFICIAL REPORT, 19th April, 1961; Vol. 638, c. 1184.] It appears from this statement that the main objection to exempting Northern Ireland from the payroll tax is one of administrative difficulty. I suggest most seriously, in support of my Amendment, that the Chancellor should consider whether the administrative difficulty is greater than the difficulty which would be faced by those of us who live in Northern Ireland if this charge were applied.

My right hon. and learned Friend has hinted tonight that if this charge were applied in Northern Ireland it would be repaid to those firms concerned. I ask him whether it would not be much wiser administratively, rather than waste the taxpayers' money in collecting money to be returned, to exempt Northern Ireland. Would he consider whether it is possible to use differently coloured stamps or something like that? This surcharge, which is to be applied for this year through the National Insurance Scheme, does not form part of that scheme. Is it not possible to devise a scheme whereby differently coloured stamps were used in Northern Ireland? The basic National Insurance payment is now over £1 per man. Could these stamps be attached to the National Insurance cards of those working in Northern Ireland?

Photo of Mr Ellis Smith Mr Ellis Smith , Stoke-on-Trent South

I have listened to the hon. Member with great sympathy because I know conditions in Northern Ireland. Will he accept my interpretation of his speech when I say that he is asking for preferential treatment for Northern Ireland because of the economic conditions which exist? I have sympathy with him, but if it were extended to Northern Ireland at this stage, then, if similar conditions occurred in other parts of Britain, it would have to be applied there, too.

Photo of Mrs Patricia McLaughlin Mrs Patricia McLaughlin , Belfast West

It is being made into a guinea pig.

Photo of Mr Stanley McMaster Mr Stanley McMaster , Belfast East

The hon. Gentleman opposite has anticipated part of my argument. If he will forgive me, I should like to continue this part of my argument and deal with that point in a few minutes.

I should like to quote again very briefly, for I think that this is most relevant, though I apologise to the Committee for the time I am taking. [An HON. MEMBER: "There is no need to apologise."] On 20th April my hon. Friend the Financial Secretary to the Treasury stated in response to an intervention of mine: My hon. Friend has precisely anticipated my very next sentence. I was about to mention Northern Ireland. I know that, because a surcharge of this kind has to apply equally to all areas of Great Britain and Northern Ireland, certain hon. Members, including some of my hon. Friends, have expressed fears that it might have an adverse effect on places with local employment problems. But when one considers that the surcharge at its maximum rate would add to the cost of employing each man only £10 a year, I simply do not believe that a surcharge at that level could materially affect problems of local employment or—and this is the point—nullify the positive measures which the Government are taking to solve local employment problems."—[OFFICIAL REPORT, 20th April, 1961; Vol. 638, c. 1417.] I have very great respect for the judgment of my hon. Friend the Financial Secretary, but here I would like to take issue with him. I think, from my knowledge and experience in Northern Ireland, that a payroll tax of even just 4s. a head and approximately £10 per annum would have a very serious effect on employment in Ulster. There is much marginal industry in Ulster. Many industries have high transport costs, which Dr. Beeching announced only last night may have to be further increased. They can barely compete with other industries in the United Kingdom as in the export trade unless they are exempted from this tax. I think of industries in my own constituency, the shipbuilding yards, the aircraft industry, the rope works.

It may well be argued that this money will be returned to certain manufacturing industries, but I ask my hon. Friend to consider whether that is sufficient, if the money is to be collected this year. For Harland and Wolff with their shipyards it would cost approximately £250,000 for one year. If it were collected this year, to be returned next year, without any interest paid on it, and probably with administrative costs of collecting or returning it, those costs would have to be borne by the Exchequer, have to be borne by the tax-payers of this country. I submit that that is totally unnecessary.

I quote now a passage from a speech of the Chancellor of the Exchequer at the end of the debate on the Budget, when he said:

"Hon. Members on both sides of the Committee have referred particularly to the second regulator and have stressed its disadvantages. They have spoken about its effect in areas of local unemployment. One hon. Member spoke of the damage it will do in a time of recession. There can be no question of using any regulator at a time of recession. If it were used at all it would be used at a time of high boom in Britain, when there was such a pressure of demand at home that imports were being sucked in and resources taken away from exports. I want these weapons to deal with that sort of situation."—[OFFICIAL REPORT, 20th April, 1961; Vol. 638, c. 1514–5.]

I should like to ask my right hon. and learned Friend what he means by a recession. He has already been asked in this debate today what he means by a boom. Would he count twice the level of unemployment we have in Great Britain today as a recession? Twice the level would be about 3 per cent. We in Northern Ireland, in any event, have double even that, 7½ per cent. Is that recession or boom? If it is not to be applied in time of recession in Britain, why should it be applied in a time of acute recession in Northern Ireland? Because that is the situation from which we are suffering today in Northern Ireland.

8.45 p.m.

I speak of a constituency which I know very well. I have gone round this constituency and I have been in many of the houses and homes. They are poor houses and poor homes. The workmen bring in wages of £7 or £8 a week, and they are lucky to get work to enable them to take that money home. It is different from the situation in the Midlands and in the south of England where the wages are a great deal higher. There is in the south of England—I say this with respect to hon. Members and without any intention of being offensive—an air of prosperity. There is no air of prosperity in Belfast. There is heavy unemployment which has risen in the past year to 10 per cent. One man in every ten is now out of work.

A friend in my constituency told me that he put an advertisement in the local paper for a young man to come into his factory as an apprentice to learn the job at a low wage. He was surprised when he got fifty or sixty replies to that small advertisement. Men were queuing up to see him in the morning. Would that be the effect of such an advertisement in this country? An employer would be lucky to get one person at the wages my friend was offering.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

In view of the hon. Gentleman's reference to apprentices, will he say how he voted on the Amendment to exempt apprentices from this tax?

Photo of Mr Stanley McMaster Mr Stanley McMaster , Belfast East

I abstained from voting on that Amendment.

I should also like to quote some remarks of my right hon. and learned Friend the Chancellor of the Exchequer on the Second Reading of the Finance Bill. Referring to the payroll tax, he said: The second instrument, the employer surcharge, has caused more controversy than any other of my proposals. There are considerable disadvantages and advantages about this surcharge. I have tried to be frank with the House about both. Lt will be possible to deal with the position of different categories of contributors in different ways. I refer to juveniles, women, or retired people. It will not be possible—I say this quite openly to the House—under the method proposed to differentiate between areas. In the special case of Northern Ireland, there is, of course, a difference there in that there is a separate Insurance Fund into which insurance contributions are paid and a separate Exchequer which will receive the proceeds of the surcharge. So the surcharge, if imposed, will be collected and retained by the Northern Ireland Government, and there is no limit upon their discretion to use the proceeds as they think fit."—[OFFICIAL REPORT, 4th May, 1961; Vol. 639, c. 1632–3.] I should like to make it quite clear that we in Northern Ireland are most grateful for the concessions which have been granted by my right hon. and learned Friend and to which reference was made by the Financial Secretary at the end of the Second Reading debate. We do not want to appear in any way churlish or ungrateful. However, after serious consideration I have put down this Amendment to see whether it would be possible for my right hon. and learned Friend to go further, to go the whole hog and to exempt Northern Ireland completely from the effects of this payroll tax. I do so not only because of the lower level of wages in Northern Ireland but because of the heavy unemployment there. The percentage of unemployment, according to the most recent figures, is still rising, while the level in the rest of the United Kingdom is falling. I ask for this concession this year and not next year.

We have a very peculiar situation in Ulster. I have in my constituency an industry which until the end of last year employed over 20,000 men. I refer to the shipbuilding industry. Within the first six months of this year more than 7,000 men will be declared redundant in that industry. That is 7,000 on top of the existing 7½ per cent. unemployed.

I do not want to weary the Committee by going into great detail about our textile industry, because we went into those details at great length in a debate on 12th May, initiated by my hon. Friend the Member for Belfast, North (Mr. Stratton Mills). I should like to summarise the facts. In my constituency there is a big and well established old mill—York Street Linen Mill, known throughout the world. At the end of the war its export earnings were greater than the exports of any other industry in the United Kingdom. The linen industry has not received £30 million to reorganise, close down or consolidate. It has had to consolidate on its own. Recently the mill has unfortunately had to state that it will close its gates and release 1,500 more men and women on to the already inflated unemployment list in Northern Ireland.

I move the Amendment because of that fact, because of the situation in the shipyards, and because of the situation in the rope works, where they can barely manage to compete and do so only by cutting their costs and prices to the very minimum so that they cannot afford even the risk of a surcharge such as this.

How could a firm such as Sirocco afford this surcharge? The firm manufactures extractor fans which compete with West German and other similar heavy industries throughout the world. The manufacturers of the equipment can be numbered on one's fingers. The firm's costs and prices are well known. The firm was faced recently with a rise in freight rates. The imposition of the surcharge might very well drive the firm out out of business. The United Kingdom would then lose valuable contracts.

In any event, even if the surcharge is not applied, how can prudent business- men in the shipyards, the rope works, the linen industry and heavy engineering quote firm prices over the next year or eighteen months? We are continually being exhorted by the Chancellor of the Exchequer and the President of the Board of Trade to put every effort into our export drive. How can we do this when German, Swedish and Japanese firms are ready to quote fixed prices and firm delivery dates whilst we ourselves might be faced with an uncertain imposition of a tax which may add a quarter of a million pounds in one year to the payroll of one firm? How can we quote firm prices and win contracts?

I am not asking for any special relief or assistance for Northern Ireland. I am not asking for any charity. If the Government helped Northern Ireland by excluding her from the effects of the payroll tax, even though it was only a temporary and provisional measure in this year's Finance Bill, they would help the whole of the United Kingdom. We should help to ease the pressure, to which I referred in the speeches from which I have quoted, in the Midlands and the south-east of England, by encouraging the expanding firms in those regions which need labour so badly to go to Northern Ireland, where they would be free from fears both of shortage of labour and the imposition of the payroll tax.

It would help our export drive, because it would bring into production many of the people who are anxious and eager to find work in Northern Ireland but cannot do so. I am net pressing that Northern Ireland should be relieved of her fair share of ordinary taxes. This payroll regulator is, as has been stressed, not a tax but simply a regulator. It is meant to cream off at the maximum in this year £200 million of purchasing power from an over-strained economy in the south of England. The economy in the north of Ireland is not over-strained. We do not need to cream off this purchasing power. We are not forcing up prices by refraining from creaming it off.

I ask my right hon. and learned Friend to consider this concession again. I would rather for the rest of my Parliamentary career be dissociated from persons who refuse to support this Amendment. My right hon. Friend as Patronage Secretary is not here. I know that an Amendment of this kind is embarrassing, but I would rather withdraw completely from the House of Commons than think that one man in my constituency who became unemployed as a result of the operation of the payroll tax was unable to earn his living. This particular tax would not affect just one man in Northern Ireland, but hundreds, perhaps thousands, of men.

I admit that my drafting of the Amendment may not be acceptable to the Chancellor, but I urge him, if he cannot accept the Amendment as I have drafted it, to consider it between now and the Report stage.

Photo of Mr William Ross Mr William Ross , Kilmarnock

Do not give it way.

Photo of Mr Stanley McMaster Mr Stanley McMaster , Belfast East

I am merely asking that if the Chancellor has listened to the arguments that I have been adducing—on behalf of agriculture and other industries in Northern Ireland, on which, I hope, other of my hon. Friends will speak—he should consider this matter seriously between now and the Report stage when, perhaps, the Treasury may be able to draw up a more suitably worded Amendment to exclude Northern Ireland from the application of the tax.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

On two previous occasions this evening, I have come fairly close to this topic. My hon. and gallant Friend the Member for Fermanagh and South Tyrone (Lieut-Colonel Grosvenor) raised this point on the first Amendment. It was raised again later on. On each occasion I got as far as I dared within the rules of order and it was suggested that I go no further. Now, it being in order, may I say what I would have said then.

We are fully aware of the employment situation in Northern Ireland and of the deep feelings of Northern Ireland hon. Members with regard to it. We all admire the work they are doing to promote measures to alleviate it. But, so far as this proposal affects Northern Ireland, I clearly stated in my speech on the Second Reading—and the hon. Member for Belfast, East (Mr. McMaster) quoted from that speech: In the special case of Northern Ireland, there is, of course, a difference there in that there is a separate insurance fund into which insurance contributions are paid and a separate Exchequer which will receive the proceeds of the surcharge. So the surcharge, if imposed, will be collected and retained by the Northern Ireland Government, and there is no limit upon their discretion to use the proceeds as they think fit."—[OFFICIAL REPORT, 4th May, 1961; Vol. 639, c. 1632–3.] So there was never at any moment from that time of the Second Reading speech any question that the Exchequer in London would keep the benefit of the surcharge.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

The reason for that was, I think, perfectly logical. The reason for that differentiation was that in Northern Ireland the responsibility for distribution of industry policy and decisions to attract employment and to deal with unemployment is the responsibility of the Northern Ireland Government and not of the Government in Westminster.

It is, therefore, perfectly logical from the beginning to have said that the proceeds of this surcharge derived from Northern Ireland should remain within the discretion of the Northern Ireland Government to disburse.

Photo of Mrs Patricia McLaughlin Mrs Patricia McLaughlin , Belfast West

My right hon. Friend will surely agree that he has insisted, in fact, that the Northern Ireland Government must put on this charge if it should be levied throughout the United Kingdom. This is the whole crux of the argument. Northern Ireland should not have to put on this charge, but, if it is put on, how will the Northern Ireland Government repay it? This is the point on which we seem to be at loggerheads and on which we require further information.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

If my hon. Friend had allowed me to proceed she would have got an answer to her question. It was not just lack of gallantry on my part that I did not give way to her earlier; it was because I thought I might have anticipated her question. From the point of view of logic, it seemed absolutely sound, because of the different responsibilities, that I should say from the beginning that it would be for the Northern Ireland Government to have complete discretion to deal with the proceeds of the tax as they think fit.

9.0 p.m.

I come now to the point of administration which my hon. Friend the Member for Belfast, West (Mrs. McLaughlin) has just raised. I had a discussion yesterday morning with the Minister of Finance of Northern Ireland. He told me that it is the intention of that Government to use the discretion to which I referred on Second Reading in order to refund the payments which had been made. That is an important statement of intention of the Northern Ireland Government.

I have to face also the fact that there is separate legislation, a separate fund and a separate or different card, and there is a special overprinted stamp used in Northern Ireland. Therefore, from my point of view—I am being perfectly frank with the Committee—I think it comes down quite simply not to a question of principle but to a question of administration. Which is the simpler thing to do? Is it simpler for me to insist that the tax be collected and then refunded by the Northern Ireland Government, or is it simpler for me to say that we will exclude them from the compass of the regulator?

I shall not emphasise them too much, but there are difficulties in exempting Ulster which affect a little the inter-changeability of cards in respect of employment and so on. What I am prepared to say to my hon. Friends is that I certainly will consider the matter between now and Report. [HON. MEMBERS: "Oh."] It is not unreasonable. I shall have discussions with the Government of Northern Ireland because they are very much involved on the administration side. I am not at all unsympathetic to the case put and, from my point of view, there is no matter of principle.

I said at the beginning that the Exchequer here in London would not receive the benefit of this particular surcharge in Northern Ireland. Therefore, from my point of view it is a question of administration. I have no bias towards the view which I originally propounded, that Northern Ireland should be within the proposal and it should be for the Government of Northern Ireland to deal with the matters involved. I shall look at it. I am not at all unsympathetic to the case put earlier by by my hon. and gallant Friend the Member for Fermanagh and South Tyrone and now by my hon. Friend the Member for Belfast, East. I shall consider it again between now and Report.

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

With apologies to the hon. Lady—

Photo of Mr William Williams Mr William Williams , Manchester Openshaw

I am sufficiently human not to have overlooked the fact that the hon. Lady is present. Mr. Lee.

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

With apologies to the hon. Lady the Member for Belfast, West (Mrs. McLaughlin) for daring to speak in a Committee of the British House of Commons, I wish to consider for a moment the point at which we now stand following the Chancellor's speech. The right hon. and learned Gentleman has said that he is making no concession which he did not make when introducing his Budget.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

That is a complete travesty of what I have been trying to say. I have said from the very beginning that the Exchequer in Westminster would not receive the benefit of this surcharge in Northern Ireland. I said that I would look at the matter again between now and Report and consider whether we could deal with the matter in some way along the lines suggested or whether we should adhere to the original proposal under which Ulster would have been kept within it. I have not said at all that I shall stick to my original proposal.

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

The right hon. and learned Gentleman's speech tonight did no more than paraphrase what he said in introducing his Budget. He said that moneys collected in Northern Ireland would not go into the British Exchequer but would remain there. We knew that from his Budget speech. I suggested, therefore, that the position is in no way different from what we all knew it to be when hon. Members opposite put down their Amendment. No concession has been made.

As the hon. Member for Belfast, East (Mr. McMaster) said, this issue was discussed fairly extensively during the debate on Northern Ireland which we had some weeks ago. I recall that I mentioned the rather absurd position in which we find ourselves. First, we set up, at public expense, machinery to collect this tax in Northern Ireland and then go to further expense to ensure that we give it back to the people from whom it has been collected. I pointed out that the Minister of Finance in Northern Ireland had said that while he was very keen to ensure that all firms which paid this tax got it back again, it was a rather complicated manoeuvre to give it back to them. He said that it would tax the ingenuity of his financial experts to find out how to give it back.

In my own simple way I ask whether it would not be better if we did not tax Northern Ireland firms at all. Surely this is precisely the issue that we are arguing. Why the right hon. and learned Gentleman believes that he is making a concession merely by reiterating that the money will remain in Northern Ireland when we know from Captain O'Neill that it will be a most complicated job—[Interruption.] The hon. Gentleman can get up at the Box if he wishes to interrupt instead of sitting there chuntering at me.

Photo of Mr Anthony Barber Mr Anthony Barber , Doncaster

I heard what my right hon. and learned Friend said. It went considerably further than what he said on a previous occasion. Today he said that he would consider with his opposite numbers in the Northern Ireland Government whether he can go further and do what my hon. Friends representing Northern Ireland constituencies want him to do. That is something entirely new. I am sorry to intervene since my right hon. and learned Friend has spoken, but I was invited to do so by the hon. Gentleman.

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

I am glad that I invited the hon. Gentleman to interrupt. Will he therefore say why he will not accept the Amendment? The difference between what he said, namely, that he will consider the matter and accepting the Amendment is the nub of the matter that we are discussing. We are all agreed that, while the imposition of the payroll tax is nonsense anywhere in Great Britain, it is even greater nonsense in Northern Ireland because of its 7½ per cent. unemployment.

I repeat—I am sorry if the Economic Secretary does not like this—that we are no further advanced now than we were when the Amendment was tabled.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I am sorry to interrupt the hon. Gentleman, but what he has said is a reflection on me personally. I have said that I will consider carefully between now and the Report stage whether I can exclude Northern Ireland from this tax altogether. Is the hon. Gentleman suggesting that I did not make that statement in good faith?

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

Not in the least. I am saying that we have known for many weeks that what the right hon. and learned Gentleman said tonight was the cast, namely, that the money would not come here but would stay in Northern Ireland. That being so, there is no reason why he should not accept the Amendment.

We all know the difficulties involved. I have mentioned them. The Finance Minister in Northern Ireland has openly stated what those difficulties are, but surely between presenting his Budget and this late stage the right hon. and learned Gentleman has had ample time to find out how he can enable this tax not to be gathered in Northern Ireland instead of merely gathering it and then giving it back again to the people from whom he collects it. This is a source of surprise to us. When the right hon. and learned Gentleman said earlier in the debate and it was suggested that it was out of order, he said it as though it was something entirely new. I do not doubt the right hon. Gentleman's bona fides. I am sure he realises that it is nonsense to introduce this tax in Northern Ireland.

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

The hon. Lady is very excited tonight. I do not know what has been going on over that side of the Committee. The hon. Lady and I do not often find ourselves on the same side. I am glad she is so enthusiastic about what I am saying. During the debate on Northern Ireland I was the first to, suggest that this procedure was nonsense and that the right hon. and learned Gentleman should reconsider it. Therefore, if it is nonsense when there is 7½ per cent. unemployment, at what stage does it fail to be nonsense? Does it fail to be a nonsense in Scotland where there is an unemployment figure of 3½ per cent.? I know that these are the problems facing the right hon. and learned Gentleman, and I do not wish to embarrass him too much. But we on this side of the Committee are convinced that this Amendment is well worthy of our support. We shall support the hon. Gentleman and his friends in the Lobby at the end of this debate. Many of us have been across to Northern Ireland—

Photo of Mrs Patricia McLaughlin Mrs Patricia McLaughlin , Belfast West

Has the hon. Member a sufficient number?

Photo of Mr Frederick Lee Mr Frederick Lee , Newton

If I may dare to hold up the hon. Lady's speech for just a minute longer, may I say that many of us on this side of the Committee take a very great interest in the welfare of the people of Northern Ireland. For ten years they have had a very bad break from this Government in that while they have had consistently a heavy rate of unemployment, the whole economic and financial policy of this Government has for ten years excluded the facts regarding Northern Ireland merely because there was a high rate of employment in Britain.

The problem of Northern Ireland must not be shelved. The Government have never tried to meet the fact that consistently there has been a high rate of unemployment in Northern Ireland. From this side of the Committee we have tried to help, and we know that the Northern Ireland Labour Party has for years advocated policies some of which are now becoming acceptable to the Tories of Northern Ireland. It has taken a long time for them to reach this point but now they are beginning to see the wisdom of much of the constructive work of our friends in Northern Ireland. We congratulate them on catching up. We hope that they will continue to study what we say.

I do not wish to delay the hon. Member from making her speech. We believe that it is of interest to hon. Members representing constituencies in Northern Ireland that we should support them in this critical moment in the affairs of Northern Ireland. They can rely on it that we shall march solidly into the Division Lobbies with them. We reiterate that there has not been enough said by the Chancellor tonight which has improved their position above that which they knew it to be before putting down this Amendment. We invite them to come with us into the Division Lobbies against the Government.

Photo of Mrs Patricia McLaughlin Mrs Patricia McLaughlin , Belfast West

I claim the right to speak without being either on one side or the other on this important occasion—

Photo of Mr William Williams Mr William Williams , Manchester Openshaw

Order. I shall have to ask the hon. Lady—

Photo of Mrs Patricia McLaughlin Mrs Patricia McLaughlin , Belfast West

If I must, I will stand within the Bar, but I have already made it clear—

Photo of Mr William Williams Mr William Williams , Manchester Openshaw

Order. I hope that the hon. Lady will leave her position outside the Bar of the House and resume her seat in the Chamber, and that she will try to work within the rules of the House, as every other hon. Member is expected to do.

Photo of Mrs Patricia McLaughlin Mrs Patricia McLaughlin , Belfast West

I think it important that I speak for this Amendment, but I hope that I have already made clear that I speak on behalf of Northern Ireland without it having any let or lien on any part or side or party within this Committee.

Tonight, we have listened to hon. Members who have spoken on behalf of the payroll tax and against the payroll tax. We have listened to hon. Members who have put the point of view of certain areas which require special attention, and we have listened with great attention to the Chancellor, and his promise that on the Report stage of this very important Bill he will give particular attention to the needs of Northern Ireland.

I am here, then, despite what has been said by the hon. Member for Newton (Mr. Lee), who always shows such great attention to Northern Ireland when we come to discuss the Finance Bill or other important matters, but who, I am sad to say, does not pay such great attention to Northern Ireland's urgent day-to-day needs. I wish that we could have the same attention paid to the day-to-day needs that we get only very occasionally. On the other hand, Her Majesty's Government have achieved practical results by their work and determination to see that Northern Ireland is looked after. I must say this honestly, and I would say it beyond the Bar of the House, if I had the opportunity.

This payroll tax, as it is called—this regulator—has been designed to do something for the country in times of national emergency, when it is necessary to ensure that the economy of the country is stabilised. It is said that what is good for one part of the United Kingdom is good for the lot. In this case, I cannot believe it, nor can my hon. Friends who have supported the Amendment.

9.15 p.m.

We in Northern Ireland know very well that when prosperity reigns it reaches us much more slowly than any other part of the United Kingdom. We know that when prosperity dwindles, we dwindle much more quickly than any other part of the United Kingdom. [Laughter.] It is all very well to laugh, to sneer, or to be casual about it, but we in Northern Ireland know that we have a difficulty which is much greater and is much slower to resolve than in any other part of the United Kingdom.

That is why I support the Amendment, to get the Chancellor of the Ex-chequer not only to consider this matter on Report, but to take a definite decision in the critical situation in which we find ourselves. [HON. MEMBERS: "Hear, hear."] Hon. Members may say, "Hear, hear," and support us, and we are, no doubt, grateful for that, but that is not the crux of the matter. The crux of the matter is that we have six counties in the northern part of Ireland which are part of the United Kingdom integrally, economically and in every way.

We in the six counties know that we were not put in that position of being part of the United Kingdom by any choice of ours. We would have preferred to be a larger part of the United Kingdom. But because we are a small number of counties—six—separated by water from the rest of the United Kingdom, we feel all the economic difficulties more seriously and more quickly.

When we come to the question of the payroll tax, this economic regulator, we know that we are already accepting the first regulator and that the second one cannot he for us. We ask the Chancellor seriously to consider this issue. I know that he has passed it off to the Northern Ireland Government and said, "You will administer this, you will impose it and draw in the money." That means that every employer in Northern Ireland, whether employing 100, 200, or 300 people, will be involved in this proposal should an economic crisis arise in Britain.

That means that the small industries, the rural industries, industries which I know so well, working on a small economic margin, will be the hardest hit. This tax could not be satisfactory for the whole of the United Kingdom. That is why I venture to take the time of the Committee and ask for reconsideration of this urgent matter.

We can think of it in, perhaps, Gilbert and Sullivan terms. The Northern Ireland Government are to be forced by the Government at Westminster to impose a tax which they will pay back. To whom and how much will they pay back? Who will pay the cost of administering it? Will it be paid back to those employing merely a few workers, or simply to the large employers? Are we to consider only the aircraft and shipbuilding industries, or will we consider everyone?

If the Chancellor had decided tonight to use Northern Ireland as a guinea-pig area in this new idea, Northern Ireland could be exempted permanently from this tax and used as an area in which he could study the repercussions of exempting such an area from the tax. We in Northern Ireland have sympathy with hon. Members who represent Scottish development districts. We have heard their propositions put forward, but we know that they differ from us in one respect. They differ particularly in the fact that they are all, except Northern Ireland, on the mainland.

We in Northern Ireland have the extra freight charges and the extra cost of getting the raw materials which are essential to our economic development there and getting them back again into the United Kingdom in the form of finished products. We know perfectly well that we have a bigger unskilled labour force however hard we try to train them, because we have a greatly increasing birthrate. This is part of the problem when it comes to any, question of a payroll tax. The Chancellor has said that he will look at this-matter again on Report, but tonight I want him to say more and to give us a very favourable idea of what he will say on Report.

The Chancellor tells us that the Minister of Finance for Northern Ireland has said that he will repay the payroll tax to those who have to pay it if it is imposed in the next twelve months, but if a tax is suggested it is surely not done in jest. It is done with some genuine intention that it may have to be imposed. If it has to be imposed we must accept that in Northern Ireland it cannot and must not be imposed in its present form.

It must be remembered that Ministers in Northern Ireland are limited in what they can say because they are only working within the framework in which they are allowed to work. Despite what the Minister of Finance for Northern Ireland has said, I ask my right hon. and learned Friend to give us greater assurance here tonight. I wish that the Minister of Finance far Northern Ireland had told me and the public that he would repay this payroll tax. Problems in Northern Ireland arise entirely of the nature of the Opposition in the Parliament there. If there were a stronger and better Opposition there we might have a clearer indication of what is going on, but the House of Commons here is the only place where efforts can be made to clear up this problem.

We believe that the Northern Ireland Government are given power to charge this tax to individual industries if and when the tax is applied and that they are given power also to pay it back, but we are not told—and this is the important issue—whether or not the Government there will impose it. This is the crux of the whole matter. Time and again we from Northern Ireland have suggested in the House and in Committee that Northern Ireland is a small economic entity in the United Kingdom which should be used for many experiments. This is a first and vital experiment. Let Northern Ireland be exempted from the payroll tax and let us see how that works.

Northern Ireland is a part of the United Kingdom with many industries, among them shipbuilding, which have been hit by the present serious world situation. I do not want to weary the Committee now with the problem of shipbuilding, but we all know that in the United Kingdom today it is extremely difficult to obtain a contract for shipbuilding. It is usually swiped by Germany, Japan, or some other country. We have many ship repairers in the industry who will not see the age of 50 again. They are among the great number of ardent workers in Northern Ireland who are without the skill of full training; and the demand for ship repairing is decreasing.

There is also the problem of aircraft building. Hon. Members have sat through innumerable debates on the subject and they know perfectly well that when it comes to aircraft building we are told that Ulster is either too far in front or too far behind. We in Northern Ireland have never hit the right moment for a number of years. When it comes to vertical take-off aircraft and similar ideas we are far in advance of other countries, but we have found it extremely hard to persuade Her Majesty's Government and the countries of the Western world from which we hope to obtain commercial contracts that that is a fact.

Here again, we know that we are—

Photo of Mr William Williams Mr William Williams , Manchester Openshaw

Order. I am finding it extremely difficult to hear what the hon. Lady is saying. As I may have to try to rule her out of order later if she does not change, I hope to hear everything that she is saying.

Photo of Mrs Patricia McLaughlin Mrs Patricia McLaughlin , Belfast West

I am sorry, Mr. Williams. I shall do my best, first, to keep within the terms of the Amendment, and, secondly, to make myself heard.

We must see that every man in Northern Ireland has his job maintained for him, if it is possible to do that, not because he is a man who wants a job without any effort, but because he is a man in a part of the United Kingdom which never catches up with the growth and development which takes place in the rest of the United Kingdom.

We Ulster Members listen patiently to many people talking about Scotland and about the development districts in other parts of England and Wales. We listen with sympathy and enthusiasm. In turn, we expect an equal amount of sympathy and enthusiastic support from those hon. Members—

Photo of Mr William Ross Mr William Ross , Kilmarnock

The hon. Lady says that she hopes we will listen to her speech with sympathy and support her. Did she go into the Lobby with Scottish Members when we were fighting the Government on this issue? Was she with us?

Photo of Mrs Patricia McLaughlin Mrs Patricia McLaughlin , Belfast West

It may interest the hon. Member for Kilmarnock (Mr. Ross) to know that I was not in either Lobby. I wished to stand beyond the Bar, but I was not given the opportunity. To do so was out of order.

Photo of Mr William Ross Mr William Ross , Kilmarnock

Would not the hon. Lady's case be worse if we took the same way out? We hope to go into the Lobby with Northern Ireland Members. Why does she not do the same for Scotland?

Photo of Mr William Williams Mr William Williams , Manchester Openshaw

Order. The hon. Lady must not overstep the mark. Like everybody else she must speak from the proper place, and I ask her again to speak to the Amendment before the Committee.

Photo of Mrs Patricia McLaughlin Mrs Patricia McLaughlin , Belfast West

Thank you, Mr. Williams.

The hon. Member for Kilmarnock reminds me of the fact that for many weeks I supported and followed a number of matters in the Scottish Grand Committee. I would have been saved a great deal of trouble if I had not been involved in that.

Tonight, I hope that we can concentrate on Northern Ireland to which, by the Amendment, I have tried to draw attention in my humble, simple and possibly incapable way. We have waited for many weeks for an answer and for guidance from the Government on this matter. We know that the original desire was to help the country. We know that the original necessity for this pay-roll tax was to control the economy, and nobody from Northern Ireland will ever desire to argue about the necessity for keeping a strong economy in Great Britain. However, there are times when it is not possible to support items in a Finance Bill which hurt certain parts of the United Kingdom.

This payroll tax is hurtful in its present form to Ulster, the six counties which are very important to the well-being of the United Kingdom and which do so much for the export trade. I am not talking in terms of big industries. I am not talking in terms of thousands of employees. I am not talking even in terms of those small rural industries which employ 20 or 30 people. I am talking in terms of the textile industry, which is having an extremely hard time at present. It is coping with imports from Hong Kong and other parts of our Commonwealth. At the same time, it is matching the unfair competition from Iron Curtain countries. None of this can be forgotten when we think of a payroll tax being imposed in certain areas which cannot afford it.

I am assured of the desire of the Government to do the right thing by Northern Ireland. [Laughter.] Hon. Gentlemen may laugh, but during the years when a Labour Government were in power, despite the high employment rate everywhere else, we never reduced our level of unemployment. If we had done, perhaps today I should not be speaking from this side of the Committee—and I say that sincerely.

9.30 p.m.

I am asking the Chancellor whether, before the Report stage, he cannot think again. I know that he will say that all this is being done through the National Insurance Scheme, and that we cannot have a different figure on the stamp. With respect, that is absolute nonsense. The figure on the stamp is what counts for National Insurance benefit, unemployment benefit and sick benefit, and these stamps could be overprinted in respect of the payroll tax. The Chancellor could get round it. We wish to pay our way, but we ask that the payroll tax should not be imposed in any circumstances in Northern Ireland.

All this will cause an argument. My right hon. and learned Friend will tell me that the Minister of Finance in Northern Ireland is happy; that he will do it in his own time, and will get a certain amount of money, which he will use in certain ways. I am thinking not of the shipbuilding industry or the aircraft industry; I am thinking of the small man, employing 20, 30, or perhaps 40 workers, who has done a great deal in the past to keep employment going, and who looks to the Government to see that his firm is kept going.

We will go along with the Chancellor in all the other regulators and forms of taxation, but we will not go along with him in this one. I ask him to think again about it and, before Report, to assure us that in this case Northern Ireland can lead the way. I hope that he will be able to assure us that, in the special circumstances, this area, which has industrial difficulties and which is not so wealthy as the rest of the United Kingdom, can be the guinea pig and proving ground to show that the rest of this very good and sensible regulation can be applied in other parts of the United Kingdom.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

After that speech I want to make a suggestion to the Committee. The issues are quite clear as between the Government and the rest of us. They were stated by my hon. Friend earlier; they have been stated again by speakers from Northern Ireland, and the Chancellor has put his point of view. I suggest that we now take this matter to the test of a Division. After what has been said we still have to reach the major debate on the payroll tax. I suggest that we do this now. The hon. Lady has said that those in Northern Ireland look to the Government. They may look to the Government, but they must also look to the Opposition if they want to press their case in the Division Lobby. The Chancellor must now realise that the almost unswerving, dog-like devotion of the Ulster Unionist Party to this Government, which has often amazed us—we could not understand why they went on supporting the Government, in view of the way they had been treated—has been taken too far by this payroll tax. We intend to support the Amendment in the Lobby, and I appeal to all my hon. Friends to go into the Lobby now.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I have done my best to meet the point of view put forward by my hon. Friend the Member for Belfast, West (Mrs. McLaughlin). I am not unsympathetic to the Amendment, and I have said so quite clearly. I also referred to the question whether It was worth while collecting the tax in order to hand it back again. It reminds me of what a certain Duke of York used to do. I am cognisant of the point. My hon. Friend is wrong in saying that the Minister of Finance of Northern Ireland is happy to have the money refunded and to deal with the matter in this way. I am not unsympathetic, but there are certain administrative problems about which I want to talk to the Northern Ireland Government. I promise to do that between now and Report. The drafting of the Amendment needs to be looked at. As I have said, I am not unsympathetic to my hon. Friend's point of view, and I will, in good faith, consider the matter again.

Photo of Mr Stratton Mills Mr Stratton Mills , Belfast North

Will my right hon. and learned Friend confirm that he accepts in principle the idea behind my hon. Friend's Amendment?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I accepted from the beginning that the Exchequer should derive no benefit from the Northern Ireland surcharge. If there is no great administrative difficulty involved, I think that I can meet my hon. Friend's point of view.

Photo of Mrs Patricia McLaughlin Mrs Patricia McLaughlin , Belfast West

May I ask the Chancellor, before he sits down, on this very important point, can we be assured that if he finds a way to exempt Northern Ireland, or to exempt the Northern Ireland Government from the responsibility of imposing this tax in the next twelve months, he will do so? If so, I shall not find it necessary to go into the Lobby in support of the Amendment.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I am not getting up because I am sitting down on a very uncomfortable point. I think that I have met my hon. Friend in what I have said.

Photo of Mr Stanley McMaster Mr Stanley McMaster , Belfast East

In view of the under taking—[HON. MEMBERS: "Oh."] I put down this Amendment without fear or favour. Many things were said and pressure was brought to bear on which it is best not to dwell, but I should like to stress that I put this Amendment down clearly and indicated to my hon. Friends, with the agreement of those who put their names to it, that I would not withdraw it unless I got a concession with which I was satisfied.

On Thursday, 4th May, at the end of the debate on the Second Reading of the Finance Bill, my hon. Friend the Financial Secretary said: Many points were raised in the debate which we can discuss further in Committee. A number of my hon. Friends from Northern Ireland are concerned, for example, about the payroll regulator, and I am authorised by my right hon. and learned Friend to say that in formulating any more permanent proposals, should he decide to do so, he will give serious consideration to the special circumstances affecting Northern Ireland."—[OFFICIAL REPORT, 4th May, 1961; Vol. 639, c. 1738.] That was the only concession made to us during the Second Reading debate, and it is my honest and considered opinion that the right hon. and learned Member has been most fair to us and has gone a great way to meet us. [HON. MEMBERS: "Oh."] For that reason, I beg to ask leave to withdraw the Amendment.

Hon. Members:

No.

Question put, That the words proposed to be left out stand part of the Clause:—

The Committee divided: Ayes 245. Noes 189.

Division No. 198.]AYES[9.37 p.m.
Agnew, Sir PeterGlyn, Dr. Alan (Clapham)Maitland, Sir John
Allan, Robert (Paddington, S.)Goodhart, PhilipManningham-Buller, Rt. Hn. Sir R.
Allason, JamesGoodhew, VictorMarkham, Major Sir Frank
Arbuthnot, JohnGower, RaymondMarlowe, Anthony
Ashton, Sir HubertGrant, Rt. Hon. WilliamMorales, Rt. Hon. Ernest
Atkins, HumphreyGrant-Ferris, Wg Cdr. R.Marshall, Douglas
Barber, AnthonyGreen, AlanMarten, Neil
Barlow, Sir JohnGresham Cooke, R.Matthews, Gordon (Meriden)
Barter, JohnGrimston, Sir RobertMawby, Ray
Botsford, BrianGrosvenor, Lt.-Col. R. G.Maxwell-Hyslop, R. J.
Baxter, Sir Beverley (Southgate)Gurden, HaroldMills, Stratton
Bell, RonaldHamilton, Michael (Wellingborough)Montgomery, Fergus
Bennett, F. M. (Torquay)Harris, Frederic (Croydon, N. W.)More, Jasper (Ludlow)
Bennett, Dr. Reginald (Gos & Fhm)Harris, Reader (Heston)Morgan, William
Berkeley, HumphryHarrison, Brian (Maldon)Naharro, Gerald
Bldgood, John C.Harrison, Col. Sir Harwood (Eye)Nicholls, Sir Harmer
Biggs-Davison, JohnHay, JohnNicholson, Sir Godfrey
Birch, Rt. Hon. NigelHeald, Rt. Hon. Sir LionelNoble, Michael
Bishop, F. P.Henderson, John (Cathcart)Nugent, Sir Richard
Bourne-Arton, A.Hendry, ForbesOrr, Capt. L. P. S
Box, DonaldHiley, JosephOsborn, John (Hallam)
Boyle, Sir EdwardHill, Dr. Rt. Hon. Charles (Luton)Osborne, Sir Cyril (Louth)
Brain, BernardHill, Mrs. Eveline (Wythenshawe)Page, John (Harrow, West)
Brewis, JohnHill, J. E. B. (S. Norfolk)Page, Graham (Crosby)
Bromley-Davenport, Lt.-Col. Sir WalterHinchingbrooke, ViscountPannell, Norman (Kirkdale)
Brown, Alan (Tottenham)Hirst, GeoffreyPartridge, E.
Browne, Percy (Torrington)Hocking, Philip N.Pearson, Frank (Clitheroe)
Buck, AntonyHollingworth, JohnPeyton, John
Bullard, DenysHopkins, AlanPickthorn, Sir Kenneth
Bullus, Wing Commander EricHornby, R. P.Pike, Miss Mervyn
Burden, F. A.Howard, John (Southampton, Test)Pilkington, Sir Richard
Butcher, Sir HerbertHughes-Young, MichaelPitman, Sir James
Butler, Rt. Hn. R. A. (Saffron Walden)Hulbert, Sir NormanPott, Percivall
Campbell, Sir David (Belfast, S.)Hurd, Sir AnthonyPrice, David (Eastleigh)
Campbell, Gordon (Moray & Nairn)Hutchison, Michael ClarkPrior, J. M. L.
Carr, Compton (Barons Court)Iremonger, T. L.Prior-Palmer, Brig. Sir Otho
Carr, Robert (Mitcham)Jackson, JohnProudfoot, Wilfred
Chanson, H. P. G.James, DavidPym, Francis
Chataway, ChristopherJenkins, Robert (Dulwich)Quennell, Miss J. M.
Clark, Witham (Nottingham, S.)Johnson, Dr. Donald (Carlisle)Ramsden, James
Cleaver, LeonardJohnson, Eric (Blackley)Rawlinson, Peter
Cole, NormanJohnson Smith GeoffreyRedmayne, Rt. Hon. Martin
Cooke, RobertJones, Rt. Hn. Aubrey (Hall Green)Rees, Hugh
Cordeaux, Lt.-Col. J. K.Kerans, Cdr. J. S.Rees-Davies, W. R.
Corfield, F. V.Kerby, Capt. HenryRenton, David
Coulson, J. M.Kerr, Sir HamiltonRidley, Hon. Nicholas
Courtney, Cdr. AnthonyKitson, TimothyRoberts, Sir Peter (Heeley)
Craddock, Sir BeresfordLagden, GodfreyRobinson, Sir Roland (Blackpool, S.)
Critchley, JulianLambton, ViscountRoots, William
Crosthvraite-Eyre, Col. Sir OliverLangford-Holt, J.Ropner, Col. Sir Leonard
Cunningham, KnoxLeavey, J. A.Royle, Anthony (Richmond, Surrey)
Curran, CharlesLeburn, GilmourRussell, Ronald
Currie, G. B. H.Lewis, Kenneth (Rutland)Scott-Hopkins, James
d'Avigdor-Goldsmid, Sir HenryLilley, F. J. P.Seymour, Leslie
Deedes, W. F.Linstead, Sir HughShaw, M.
de Ferranti, BasilLitchfield, Capt. JohnShepherd, William
Digby, Simon WingfieldLloyd, Rt. Hon. Selwyn (Wirral)Simon, Rt. Hon. Sir Jooelyn
Doughty, CharlesLongbottom, CharlesSkeet, T. H. H.
Duncan, Sir JamesLongden, GilbertSmith, Dudley (Br'ntf'rd & Chiswick)
Duthie, Sir WilliamLoveys, Walter H.Smithers, Peter
Elliot, Capt. Walter (Carshalton)Lucas-Tooth, Sir HughSpearman, Sir Alexander
Elliott, R. W. (Nwcstle-upon-Tyne, N.)McAdden, StephenSpear, Rupert
Emery, PeterMacArthur, IanStevens, Geoffrey
Errington, Sir EricMcLaren, MartinSteward, Harold (Stockport, S.)
Farr, JohnMoclay, Rt. Hon. JohnStodart, J. A.
Fell, AnthonyMaclean, Sir Fitzroy (Bute & N-Ayrs.)Stoddart-Scott, Col. Sir Malcolm
Finlay, GraemeMacLeod, John (Ross & Cromarty)Studholme, Sir Henry
Fraser, Ian (Plymouth, Sutton)Macmillon, Rt. Hn. Harold (Bromley)Sumner, Donald (Orpington)
Gardner, EdwardMacmillan, Maurice (Halifax)Talbot, John E.
Gibson-Watt, DavidMacpherson, Niall (Dumfries)Tapsell, Peter
Glover, Sir DouglasMaddan, MartinTaylor, Sir Charles (Eastbourne)
Taylor, Edwin (Bolton, E.)Wakefield, Sir Wavell (St. M'lebone)Wilson, Geoffrey (Truro)
Taylor, W. J. (Bradford, N.)Warder, DavidWise, A. R.
Temple, John M.Walker, PeterWolrige-Gordon, Patrick
Thatcher, Mrs. MargaretWalker-Smith, Rt. Hon. Sir DerekWoodhouse, C. M.
Thomas, Leslie (Canterbury)Wall, PatrickWoodnutt, Mark
Thompson, Kenneth (Walton)Ward, Dame IreneWoollam, John
Thornton-Kemsley, Sir ColinWebster, DavidWorsley, Marcus
Tiley, Arthur (Bradford, W.)Wells, John (Maidstone)Yates, William (The Wrekin)
Turner, ColinWhitelaw, William
Turton, Rt. Hon. R. H.Williams, Dudley (Exeter)TELLERS FOR THE AYES:
Vosper, Rt. Hon. DennisWilliams, Paul (Sunderland, S.)Mr. Chichester-Clark and Mr. Peel
Wakefield, Edward (Derbyshire, W.)Wills, Sir Gerald (Bridgwater)
NOES
Alnsley, WilliamHart, Mrs. JudithPavitt, Laurence
Albu, AustenHayman, F. H.Pearson, Arthur (Pontypridd)
Allaun, Frank (Salford, E.)Henderson, Rt. Hn. Arthur (Rwly Regis)Pearl, Frederick
Allen, Scholefield (Crewe)Herbison, Miss MargaretPopplewell, Ernest
Awbery, StanHill, J. (Midlothian)Prentice, R. E.
Bacon, Miss AliceHolman, PercyPrice, J. T. (Westhoughton)
Baxter, William (Stirlingshire, W.)Hoy, James H.Probert, Arthur
Benson, Sir GeorgeHughes, Cledwyn (Anglesey)Proctor, W. T.
Blyton, WilliamHughes, Emrys (S. Ayrshire)Pureey, Cmdr. Harry
Bowden, Herbert W. (Leics, S. W.)Hunter, A. E.Randall, Harry
Boyden, JamesHynd, John (Aftercllife)Rankin, John
Braddock, Mrs. E. M.Irving, Sydney (Dartford)Reid, William
Brockway, A. FennerJanner, Sir BarnettRoberts, Albert (Normanton)
Broughton, Dr. A. D. D.Jay, Rt. Hon. DouglasRoberts, Goronwy (Caernarvon)
Brown, Rt. Hon. George (Belper)Jeger, GeorgeRobertson, John (Paisley)
Butler, Herbert (Hackney. C.)Johnson, Carol (Lewisham, S.)Rogers, G. H. R. (Kensington, N.)
Callaghan, JamesJones, Rt. Hn. A. Creech (Wakefield)Ross, William
Chapman, DonaldJones, Dan (Burnley)Royle, Charles (Salford, West)
Cliffs, MichaelJones, Elwyn (West Ham, S.)Short, Edward
Corbet, Mrs. FredaJones, J. Idwal (Wrexham)Silverman, Julius (Aston)
Craddock, George (Bradford, S.)Jones, T. W. (Merioneth)Skeffington, Arthur
Cronin, JohnKelley, RichardSlater, Mrs. Harriet (Stoke, N.)
Crosland, AnthonyKenyon, CliffordSlater, Joseph (Sedgefield)
Crossman, R. H. S.Key, Rt. Hon. C. W.Small, William
Cullen, Mrs. AliceKing, Dr. HoraceSmith, Ellis (Stoke, S.)
Darling, GeorgeLawson, GeorgeSnow, Julian
Davies, G. Elfed (Rhondda, E.)Ledger, RonSorensen, R. W.
Davies, Harold (Leek)Lee, Frederick (Newton)Soskice, Rt. Hon. Sir Frank
Davies, Ifor (Gower)Lee, Miss Jennie (Cannock)Spriggs, Leslie
Davies, S. O. (Merthyr)Lever, L. M. (Ardwick)Steele, Thomas
Deer, GeorgeLewis, Arthur (West Ham, N.)Stewart, Michael (Fulham)
de Freitas, GeoffreyLogan, DavidStones, William
Delargy, HughLoughlin, CharlesStross, Dr. Barnett (Stoke-on-Trent, C.)
Diamond, JohnMabon, Dr. J. DicksonSwain, Thomas
Dodds, NormanMcInnes, JamesSylvester, George
Donnelly, DesmondMcKay, John (Wallsend)Symonds, J. B.
Driberg, TomMackie, John (Enfield, E.)Taylor, Bernard (Mansfield)
Ede, Rt. Hon. C.McLaughlin, Mrs. PatriciaTaylor, John (West Lothian)
Edelman, MauriceMcLeavy, FrankThomas, Iorwerth (Rhondda, W.)
Edwards (Rt. Hon. Ness (Caerphilly)McMaster, Stanley R.Thompson, Dr. Alan (Dunfermline)
Edwards, Walter (Stepney)MacMillan, Malcolm (Western Isles)Thomson, G. M. (Dundee, E.)
Evans, AlbertMacPherson, Malcolm (Stirling)Thornton, Ernest
Fernyhough, E.Mallalieu, E. L. (Brigg)Timmons, John
Finch, HaroldMalialieu, J. P. W. (Huddersfield, E)Ungoed-Thomas, Sir Lynn
Fitch, AlanManuel, A. C.Wade, Donald
Foot, Dingle (Ipswich)Mapp, CharlesWainwright, Edwin
Foot, Michael (Ebbw Yale)Marquand, Rt. Hon. H. A.Warbey, William
Forrest, GeorgeMarsh, RichardWatkins, Tudor
Fraser, Thomas (Hamilton)Mason, RoyWeitzman, David
Galpern, Sir MyerMendelson, J. J.Wells, William (Walsall, N.)
George, Lady Megan Lloyd (Crmrthn)Millan, BruceWhitlock, William
Ginsburg, DavidMilne, Edward J.Wilkins, W. A.
Gooch, E. G.Mitohison, G. R.Willey, Frederick
Gordon Walker, Rt. Hon. P. C.Monslow, WalterWilliams, D. J. (Neath)
Gourlay, HarryMoody, A. S.Williams, Ll. (Abertillery)
Greenwood, AnthonyMort, D. L.Willis, E. G. (Edinburgh, E.)
Grey, CharlesMoyle, ArthurWilson, Rt. Hon. Harold (Huyton)
Griffiths, Rt. Hon. James (Llanelly)Neal, HaroldWinterbottom, R. E.
Griffiths, W. (Exchange)Noel-Baker, Francis (Swindon)Woodburn, Rt. Hon. A.
Gunter, RayOswald, ThomasWoof, Robert
Hale, Leslie (Oldham, W.)Padley, W. E.Yates, Victor (Ladywood)
Hall, Rt. Hn. Glenvil (Cohn Valley)Paget, R. T.
Hamilton, William (West Fife)Pannell, Charles (Leeds, W.)TELLERS FOR THE NOES:
Hannan, WilliamParkin, B. T.Mr. Charles A. Howell and
Mr. McCann.

Motion made, and Question proposed, That the Clause stand part of the Bill.

9.45 p.m.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

Although the hour is late, I am sure that the Committee does not wish this Question to go through without reasonable debate, because although we have spent all day on important Amendments, all of them have been on relatively narrow, however important, points. The first, in effect, was on the exemption of certain areas of the country. The second was on the vital point of young workers. The third was on Northern Ireland. We have still to consider the case for or against the payroll tax, the Chancellor's second regulator. I wish to say right away that we are opposed to the regulator. We felt it right to vote as we did on various Amendments, but we are against the proposal as a whole and we intend to vote against it.

The proposal for a payroll tax was first made last winter by a number of people outside Government circles and for reasons quite different from those now professed by the Chancellor. When is was first proposed, the idea was to discourage the hoarding of labour. It is utterly useless from that point of view. If one recalls the motor-car recession of last winter, when many motor-car firms held on to their labour during a period of short-time working, even though men were on only two or three days a week, one recognises that a tax of 4s. a week would have made no difference whatever to their willingness to hang on to their labour, even if it were thought desirable that they should have got rid of the labour. If an employer hangs on to labour when he has to pay wages, he will not be deterred or influenced one way or the other by having to pay another 4s. That is not the issue. The motor-car manufacturers held on to their labour confident that the market would return, and the market did return. It is a question of expectation and confidence much more than the minimal deterrent of 4s. a week from that point of view.

So what is the motive? In fact, the Chancellor has made it plain today, and so have his hon. Friends, that the motive is to syphon off spending power as a means of fighting inflation. It is the old argument, the old agony all over again. [An HON. MEMBER: "Boyle's Law."] It is, in fact, as one of my hon. Friends says, a form of Boyle's Law. From the moment the Prime Minister became Chancellor of the Exchequer, now five years ago, the theory has been that whenever inflation threatens we must damp down demand and hold production down. That is the only answer the Tories have had all along to the problem of inflation, holding production down.

It is, of course, true that there may be times when there is so much excessive demand in the system that it becomes necessary by Budget surpluses or by any other means to syphon off excessive purchasing power, and, of course, as we said on Clause 8, we welcome the fact that the Chancellor is now converted from the over-dependence on monetary weapons. The fact that he realises that there is a need for other regulators shows he is throwing away the old monetary argument of his predecessors. What we object to here is not that he is converted to fiscal regulators from monetary regulators. We object to the particular fiscal regulator he is proposing in this payroll tax.

Most of the time for the past few years, despite Tory policies, the problem has not been excessive demand in this country. The problem has been much more the other way round. The problem has been the failure of this country to expand, because every time the Government get into a panic they put restrictions on investment, and that means that when the next crisis comes we have not the production, we have not the investment to meet it, and so once again restrictions are put on. The problem is the failure of this country to expand precisely because of the Government's policy of holding production and investment down.

What is the position today? Why does the Chancellor come along and ask for this power? Production is not rising. Apart from the enormous spurt which occurred in election year production has not risen. It has been static now for nearly 15 months. But costs are rising. That is a thing which the Tories have not yet learned, that it is when production is stagnant that costs rise. We found it in 1959. When production is rising costs are pretty stationary. That is precisely what we have argued year after year in our now almost classical debates with one Chancellor after another.

Production has not risen, costs are rising, and it is because production has not risen that costs are rising at the present time. If we were expanding our production, if our productivity were increased, labour costs per unit would be falling and there would be no increase in prices. It has been recognised by many authorities who disagreed with us at the time that the stagnation of 1957 and 1958 forced up prices because productivity was not rising. It is obvious to anyone with knowledge of industry that if we hold production down in the individual factory below the economic level, then the result is that we increase costs, and increased costs mean increased prices.

The payroll tax is one stage and a worse further form of holding production down, I have argued that the policy of holding production down increases costs and prices. That is what this is designed to do. Labour costs are increased in this case by 4s. per head per week. We are always hearing speeches from the Chancellor—he spends his Bank holidays doing this—making powerful appeals against further wage increases. He considers that this country cannot afford increased wage costs, but, of course, he is increasing labour costs by this proposed payroll tax. If any trade union were to say, "We want a wage increase of 4s. a week", the Chancellor would say, "We cannot afford it. It would increase our wage costs. It would price us out of our export markets." Yet he proposes to impose this tax.

I know what his answer will be. His answer will be that if a trade union gets a 4s. a week increase that is extra spending power in the community, whereas if the payroll tax is put into effect the money will go to the Treasury. That is one argument. But I do not think the Chancellor realises what happens when the payroll tax is remitted. We are already on a higher structure of costs and prices. We are already seeing all over the country all sorts of people putting up prices for one reason or excuse or another. Recently we heard of big increases in laundry prices because of the increased tax on oil. Similarly, the payroll tax will lead to all kinds of unscrupulous people putting up prices a good deal more than would be justified by the tax, and they would never come down again.

What would be the Chancellor's reply to a trade union which, after perhaps six months of the operation of the payroll tax, when the Chancellor felt able to remove it, went to the employers and said, "You have been able to afford 4s. a week on wage costs all this time. Why cannot we have it now?" I do not think the Chancellor would then say, "That is perfectly all right."

What the Chancellor does not realise—and this is an argument which was made by my hon. and learned Friend the Member for Kettering (Mr. Mitchison) on one of the Amendments today—is that this payroll tax is also a very blunt instrument. For a great part of today we have been debating its bluntness in relation to individual areas of the country. If the Chancellor feels that he has got to syphon off purchasing power, he is imposing an instrument which will immediately lead to increased unemployment in Scotland, Merseyside, the North-East coast and, of course, Northern Ireland.

But if it is a blunt instrument as between areas it is equally a blunt instrument as between industries. As we argued from the first time that this was mentioned in the Budget debate, there are some industries which employ a lot of labour in relation to the selling value of the product and there are others which employ a relatively little labour. This is a penal tax which will have its effect on those who employ more labour. One thinks of coal mining and the railways as compared with other industries like chemicals and electricity generation, which, as the Economist says, is capital intensive, and employ little labour per £1 million worth of ultimate sale.

As I said earlier when debating the question of training and apprenticeship, this tax is bureaucracy run mad. Did the Chancellor, when he decided to impose this tax, think of its effect on the essential services? What about the Government themselves? We have to consider even the present Government as an essential service. All of the Government employees, whether manual employees in the Government's own factories—right up, I suppose, to the Chancellor himself and even the Prime Minister—will be assessed at 4s. a week on the payroll tax, and that means that the taxpayer will have to pay it.

What gain does the Chancellor think there will be from that kind of transfer from one pocket to another? He will spend half the evening transferring money from his United Kingdom pocket to his Northern Ireland pocket—and not altogether to the satisfaction of the Northern Ireland people. Now he is going to do it more widely. It is a wonderful way of finding jobs for the people. What about local government? Some local authorities are going to be very hard hit by this, especially the small ones where the product of a penny rate is so small. What about things like the hospital services? This is the first thing which occurred to some of us. We mentioned it in the Budget debate.

The real truth is that this was a half-baked proposition from the beginning. It is pretty clear that the Chancellor has no intention of introducing it. That is why he is throwing about these vague half promises about what he is going to do between now and the Report stage. It gets him over a Division, or something. He has not intention of introducing the tax.

10.0 p.m.

What about the reaction not only in his own party but in industry, his party's paymasters? The paymasters of the Tory Party have reacted very badly to this proposal, worse than to any other proposal I remember for many years. Obviously the Chancellor will not be allowed to introduce it. This measure was not thought out. The right hon. and learned Gentleman did not think it out in terms of hospital services, local government services, national government services, export industries and other industries where the consequences will be quite unpredictable.

Before I sit down I want to make two last points about the tax. The first is the method of collection. I want to say once again, as I did in the Budget debate, that there is something abhorrent to my right hon. and hon. Friends in the National Insurance system being used as a means to collect tax revenue. I do not think that view is confined entirely to this side of the Committee. It was quite clear from the Press, even before the Budget, that the Minister of Pensions and National Insurance felt just as strongly about this as we did. This was a most unusual Press statement. It was quite clear from the Press the day before the Budget that the Minister of Pensions and National Insurance had offered his resignation that weekend because he was being forced to use his machinery, which is designed if not used for the purpose of social service and relieving hardship, for raising revenue for the Chancellor, turning himself into one of the most despised characters in history, namely the Publican, the man who collects taxes out on hire for the ultimate tax authority. I mean the Publican in the biblical sense. I am not attempting to trespass on the Licensing Bill. I am sure that you, Sir William, would quickly rule me out of order if I tried to do so.

We heard that the Parliamentary Secretary to the Ministry of Pensions and National Insurance was also going to resign. We heard that the Chancellor had come along with his half-baked proposal and faced such a storm that in the end he had to say, "We will just do it for this year and after this year we will try to find some other means of doing it". He could not climb down, though it must have been clear even then, before it was announced to the House of Commons, that it would not be put into operation.

The Chancellor would have saved us a great deal of trouble and we could all have gone home a good deal earlier if he had withdrawn the Clause altogether, Nobody likes it. I do not think that he likes it very much now. He has been attacked from all sides. In so far as hon. Members opposite have been allowed by the Patronage Secretary to make speeches at all, they have all made it plain that they do not like the measure. As I have said, industry does not like it. It has had a very bad Press. Why does not the right hon. and learned Gentleman withdraw it?

It is becoming a question of face. We all remember the last big question of face in the House of Commons. It concerned Blue Streak and the face of the then Minister of Aviation, who is now the Secretary of State for Commonwealth Relations. It is quite clear that the Chancellor should now bow to the storms, particularly because of the feeling we all have that a social service Ministry should not be an instrument of tax collection.

Secondly, we are very worried about the question of Parliamentary control. It is rather surprising that anyone should think it possible to hand over this vast taxing power to the Chancellor without much fuller consideration than we have given it so far today. On a previous Amendment concerning younger workers we were a little shocked when the Financial Secretary, who has some very ancient and historic responsibilities to the House of Commons for the control of taxation, said that he thought he could offer a concession. He said that the Chancellor had heard the debate and when he came to impose a payroll tax he would take due account of what had been said and act accordingly. We had to remind him that it is the House which decides taxation and gives authority for it and not the Chancellor or any other Member of the Government.

Here we are giving the Chancellor some £200 million of taxation power to be applied at any time he thinks right without any further check whatever. He can do it at any time which, together with the other regulator—which has already gone through in Clause 8—gives him £400 million of taxation power to be applied at the stroke of the pen. One must recognise that this amount is equal to half the revenue of an entire pre-war Budget. It is being discussed in two Clauses and, as I have said, it can be applied with the stroke of the pen. The House is being asked to go a long way in delegating its responsibilities.

After certain proposals, and with certain warnings, my hon. Friends allowed the other regulator to go through without a Division. We tried to amend it in certain ways, but this regulator we cannot let go through because we consider it to be wrong. Even if we considered it to be right, to be appropriate, even if we welcomed it in place of monetary regulators of the past, I am bound to say that it is not satisfactory that a Government should have the right to impose this substantial regressive tax and then not to require Parliamentary ratification until after 28 Parliamentary sitting days, for that is the present position.

The situation now is that if this Clause goes through the Chancellor could, for example, at the beginning of August—as soon as the Finance Bill becomes law —perhaps 24 hours after the House has adjourned, sign an order imposing the payroll tax and this House would have no power to debate it or to reverse that decision until the middle or end of November—28 days after we return.

This is an intolerable delegation of responsibility, and it is, of course, a point which we shall press when we come to Schedule 3, which, I understand, will follow this particular Clause in our debate.

For all the reasons I have given, for the phoney economic analysis that lies behind this proposal and the additional power it gives to the Chancellor to hold production down, a means of fighting inflation, because it is a blunt instrument which will affect particular areas, industries and services, and because of the feelings about the method of collection through a social service Ministry and the lack of Parliamentary control, we intend to oppose this Clause resolutely and to vote against it in the Division Lobbies.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I wish to speak on only one point, that which the right hon. Gentleman the Member for Huyton (Mr. Wilson) dealt with towards the end of his speech. It is the question of parliamentary control.

I think that there is force in the right hon. Gentleman's point that I am asking the House for a really important delegated power. I said originally that I could not conceive of circumstances in which, just after the House had risen, this power would be used with, perhaps, no chance of its being debated until November or some time like that.

I may be prepared, at a later stage, to translate the period of time into a calendar period and not one of sitting days, so that, within a fixed time, the Government would have to come to the House to approve the Order—not in terms of sitting days, but in a period of time.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

Does the Chancellor mean that he is accepting our Amendment to the Schedule, which is a reasonable one, and which is designed to substitute seven days for 28 days, because such an acceptance would enormously shorten the debate on Schedule 3 as a whole? If the Chancellor is accepting our suggestion on this point, then he will be meeting one of about ten objections we have to this Clause. But the other nine remain.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I do not think that I can go as far as seven days, but we will come to that later.

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

The right hon. Gentleman the Member for Huyton (Mr. H. Wilson), with the touch of exaggeration to which he is occasionally addicted, said that no one liked this tax. Nothing that he said in any way shakes my conviction in supporting is very strongly.

I do not support the proposed tax because I think that it will be a particularly effective redistributor of labour. In any case, that is not the point of it. The Clause states that its purpose is to regulate the balance between demand and resources. I do not support it because it is the best conceivable means of withdrawing purchasing power. I have always thought that some form of tax on retailer's turnover would do that more powerfully. I believe that, of the limited instruments which the Chancellor has, the proposed tax is the best available, and I think that he is to be very much congratulated on bringing in these entirely new regulators of which we have not heard hitherto.

Anyone wishing to support this proposal must do two things. He must show that the tax will be an efficient, even if not the most efficient, drawer-off of purchasing power, and he must show that circumstances might well arise when it would be required.

In my view, the effect of the tax will be to put up prices, which must be deflationary, to check rises in divdends, which must be deflationary, or to check rises in wages in excess of increases in production, which must be deflationary. Only in the fourth possibility, if it is to be taken out of undistributed profits, will the effect be far less deflationary. My guess is that its effect will not be all on prices, all on wages, or all on dividends, or undistributed profits. It will be a mixture of the four. Therefore, the Chancellor will probably not succeed in drawing off the full £200 million, but he will succeed in drawing off a very big proportion of it.

The most effective result, I think, would be in the effect on prices. I have never understood why those of my hon. Friends who favour a sales tax should oppose this proposal. As I see it, the tax is a rather crude but simple form of sales tax which avoids many of the administrative difficulties of a sales tax. It is sometimes said that any taxation is inflationary. I doubt that the right hon. Member for Huyton will accept that, and I am quite sure that the Leader of the Opposition would not. If prices go up because of increases in income, whether they be due to higher wages or higher dividends, then, of course, there are continual rises in prices so long as the income goes on increasing; but if there is a rise in prices due to taxation there is no further rise after that has occurred.

I have tried to show that this tax will be effective in drawing off a large proportion of the £200 million of purchasing power. I turn, next, to the need for it.

At present, spending is rising quite sharply. We know that Government spending is up this year by about £100 million. Expenditure on industrial investment is up by £300 million or £400 million. The Chancellor predicted that expenditure on consumption might be up by 3½ per cent. He said that in his Budget speech, and what has occurred since shows that that may well be an under-estimate. That would amount to £500 million. Therefore, it seems that spending is going up this year by about £1,000 million.

10.15 p.m.

I am sure that production is going up, too. There is no question of the Government wanting to hold down production. But, with no reserves of labour, with under 300,000 unemployed and over 350,000 vacancies, how can production go up by anything like £1,000 million? It can only go up by an abnormal increase in growth due to technological improvements. It therefore seems to me that there will be a considerable gap between the amount of money people spend and the amount of goods that they buy.

If any hon. Member can show that my figures are without foundation, I will listen to him with interest, but if not, what is the alternative to the use of these regulators? Either we import much more—and how can we do that at present?—or have very severe inflation. Fourteen years ago we ran into balance of payment difficulties. They were very severe and we had devaluation. On the 4th February this year them was a letter in The Times which stated that The disastrous cost of the Cripps's devaluation can no longer be disputed: That was said, not by a staunch Tory commentator, but by that well-known Socialist adviser, Dr. Ballogh.

Since I have hardly ever agreed with anything that Dr. Ballogh has said in public before, I should like to read an extract from what he said in his letter. He stated that devaluation would represent the acceptance of a cut in real income, especially in real wages when other countries are steadily improving theirs. If the trade unions press for an increase in wages (as they are bound to do) a repetition of the devaluation would become inevitable. Confidence here and abroad would be undermined. I think that every hon. Member agrees with that. What we do not seem to agree about is the extent of the action which might have to be taken to prevent it.

Ten years ago we again ran into a balance of payments crisis. On that occasion hon. Members opposite thought that discretion was the better part of valour. Perhaps they were wise. Four years ago we ran into another balance of payments difficulty which was put right by the drastic and heroic action of my right hon. Friend the Minister of Aviation. I do not think that enough credit has been given to him for that but the price was great. It meant industrial stagnation for a time. I am now asking the Chancellor to take measures in time, not to stop growth, but to regulate the pace of the growth so that stagnation does not occur.

I realise that the consequences of this tax may be disagreeable to some, but I do not think that in twenty years I have ever heard so much fantastic exaggeration as I have heard tonight about the possible consequences of this tax. I agree that there might be some inconvenience, but the consequences of not taking action in time could be disastrous. It is vital that the Chancellor should not wait until it is obvious that action should be taken because then the measures which he proposes would not be enough. That is what has happened before. It is vital that he should take action before it becomes obvious.

Hon. Members who have spoken today in favour of this tax have not, perhaps, been in the majority, but I have no doubt that a majority in favour of it will be shown in the Division Lobby. I hope that a message will go to the Chancellor from this Committee that we very much hope that the need for using this regulator will not arise, but that if it does arise he will have no hesitation about using it in time.

Photo of Dr Horace King Dr Horace King , Southampton, Itchen

I believe that if the Whips were not on tonight the Government could count on the support of only a handful of their usual supporters. I doubt whether they could even command the support of all of the Front Bench. I am certain that the Chancellor must be grateful for having discovered one enthusiastic supporter of what I regard as a very dangerous tax. I had hoped that after the weeks in which the public, the Press and the House of Commons have been talking about this Clause, the Chancellor would have bowed to the weight of public opinion and withdrawn what I consider to be a dangerous proposal.

If the right hon. and learned Gentleman wishes to have a regulator such as has been referred to by the hon. Member for Scarborough and Whitby (Sir A. Spearman) he should find a much fairer one than is suggested in the Clause. The proposal is an innovation. On the surface, it contains something which would commend it to the Committee. It seeks to use fiscal methods to compel employers to make the best use of the labour force available. It provides an incentive for employers to reduce their staff if possible.

I take it that the idea of the Government is that the men thus released may be used somewhere else to the better advantage of the country and that industrialists should become more efficient in the use of their most expensive commodity—human labour. But the trade union movement and the workers of the country see great danger in this new tax. They believe that the arguments for it are most specious. Already, it has been pointed out, in debates on the various Amendments which have been moved unsuccessfully by hon. Members on both sides of the Committee, that the proposals contained in this Clause may induce employers to get rid of workers without any guarantee that they will be reemployed in other parts of British industry. Therefore, this represents a financial inducement to create unemployment.

I do not wish to deal in detail with the general arguments against the Clause which have been ably deployed by my right hon. and hon. Friends. I wish to deal with two points to illustrate the indiscriminatory nature of the proposals. My hon. Friend the Member for Goole (Mr. Jeger), who is unable to take pant in this debate, has given me two Press cuttings. One is the report of a meeting of the Goole Conservative and National Liberal Association—a lovely title. It met in a village in his constituency called Womersley. A report appeared in the local Press on 22nd April of this year that a farmer named Mr. Blee pointed out to the Conservative and National Liberal meeting the special labour problems of the farmer compared with the big industrialist. He said: Nor could labour be laid off in hard times."— by the farmer— for the loss of a good man could mean disaster to a small farm. Efficiency in any business pay dividends…but the farming industry had more unpredictable factors than, say, in the production of a motor car. But this tax is meant to drive the farmer to lay off labour in hard times. It gives him a financial inducement to do so.

The other cutting which was given to me by my hon. Friend is from the Hull Mail of 12th May, which reports the suicide of a farm labourer who had been out of work longer than usual this winter…. This indiscriminatory new tax will hurt the farmer who tries to keep on the farm worker in slack times, either because of his ability or because of the good personal relationship that all hon. Members of the Committee will know exists between a good farmer and his farm hands. It may be argued that a tax which might be good for a colossal factory certainly cannot be good for the agricultural labourer or the farmer.

My second example is much closer to my own heart and experience. I am worried about the effect of this new tax on the disabled. Some of us try from time to time, from both sides, to put to the House the claims of B.L.E.S.M.A., the British Limbless Ex-Servicemen's Association. At its recent conference at Margate in April, B.L.E.S.M.A. expressed great anxiety about this tax in an emergency resolution which was put to conference and unanimously carried.

I wish to quote from a letter which B.LE.S.M.A. sent to the Chancellor of the Exchequer on 27th April. It was as follows: Our members recall the bitter experiences of limbless and other disabled workers in the years between the two wars when very few of them had the opportunity to secure or retain employment. The disabled in industry have since rendered a very valuable contribution to the nation's stability and there is no doubt that many employers are favourably disposed towards employing the limbless and disabled, but this is by no means a universal favour.Our delegates fear that in the event of the introduction of a payroll tax, employers would tend to seek out what they consider their least productive units and dispose of them. If they had to choose between dismissing men, the kind of man that the pressure would be upon them to dismiss would be the disabled.

I continue the quotation: There are also real difficulties about mobility for the disabled in industry, since it is really impracticable for them to move from one area to another as presumably will be the intention if such a tax is introduced. B.L.E.S.M.A. asked the Chancellor of the Exchequer for special consideration to be given to the anxieties which it expressed on behalf of all the disabled ex-Service men in industry. There is nothing in the Clause to relieve that anxiety.

Britain owes a debt to the men who sacrificed their limbs to make this or any other debate in the House of Commons possible, and this new tax, which provides an incentive to employers to get rid of the weakest links in their chain—the disabled—is a tax which, I hope, the Committee and the Chancellor, on reconsideration, will reject.

Similarly, the Clause is dangerous to Remploy. I remember when we had to attack a Committee of the House which investigated Remploy for applying to Remploy the standards of efficiency that would be applied to an industry consisting of able-bodied men. We cannot judge the magnificent work of Remploy by the standards that would be applied to ordinary, able-bodied men. Remploy, too, however, will have to pay a tax on every person who is working there. Obviously, if it applies the principle of the tax, the tendency will be for Remploy to get rid of its most disabled workers.

Everybody—the halt, the sick, the lame and the blind—comes under the umbrella of this non-discriminatory new Clause. It can hurt the little man in industry. It can hurt the farmer. It can prove a nightmare to the disabled, who never know when the axe will fall, and but for whom we should not be debating.

I hope that the Chancellor will never use the Clause. I even hope that the Committee tonight will throw it out. I am certain that the bulk of hon. Members on the Government side are no more enthusiastic about the Clause than we are. Whatever its specious attractions, whatever its attractions even from the mopping-up point of view expressed by the hon. Member for Scarborough and Whitby, I believe that it can do more harm than any good it can possibly achieve.

10.30 p.m.

I usually do not pray in aid the assistance of the National Union of Manufacturers. N.U.M. means something much different to hon. Members on this side of the Committee, but even that union, a traditional supporter of Tory Chancellors of the Exchequer, heartily dislikes this Clause. It does not believe that this provision can act as an economic regulator at all. In a memorandum which I am certain every hon. Member has seen and read, the union even suggests that it may have a contrary effect to that which the Chancellor proposes. The memorandum concludes with this passage: Finally, the tax will bear upon all regions and industries alike, even though labour conditions vary greatly as between areas and industries. The National Union is, for all these reasons, firmly opposed to this possible tax and urges the Chancellor not to introduce it. Manufacturers do not want this Clause; the trade union movement is bitterly opposed to it; disabled men and farmers fear it. There must be nobody who likes this new venture, except the hon. Member for Scarborough and Whitby and the Treasury.

My advice to the Chancellor is to be courageous and admit that his first impressions of the specious advantages of this proposal have given way to the opposition which it has aroused in all sections of the community, that he should not even take the powers that he asks for in the Clause, and that, if he does, he should never use them.

Photo of Mr Basil De Ferranti Mr Basil De Ferranti , Morecambe and Lonsdale

As I am afraid that there will not be too many hon. Members opposite left to hear my words of wisdom in a few minutes, I will endeavour to make my points as rapidly as possible. I do not understand how hon. Members opposite seem to be gauging the mood of this side of the Committee as being against this proposal. I wish to support it enthusiastically. It is a great pity that hon. Members opposite do not also support this tax. It is one of the few innovations by the Treasury which really could do something to increase the rate at which we are increasing productivity. It is a fresh, imaginative measure, and I should like to support it enthusiastically tonight.

This is the first time in 150 years that a Chancellor of the Exchequer has appreciated how fiscal policy should be adapted to the machine age. I should like to give my right hon. and learned Friend credit for what he is doing if I thought that he really understood why he was being clever. He said that this measure should be introduced as an economic regulator which might have the additional advantage of encouraging investment in labour-saving equipment. With respect, I think that my right hon. and learned Friend has this the wrong way round. Surely, the general consideration in favour of this tax is that we have been able, particularly in the last hundred years, to improve immeasurably, thank heavens, our standard of living.

It is not the politicians who have done this but the engineers and the scientists by the introduction of laboursaving machinery. Anything which accelerates that process should be a permanent feature of our taxation system, provided that it is within the bounds set by the limits of what is socially acceptable and desirable. The rôle of this tax as a regulator must be somewhat dubious. It could indeed, as hon. Members have pointed out, have the immediate effect of reducing the rate of investment by industry by reducing its profit levels. However, it seems clear to me that if this tax were to operate not as a net source of investment from industry but in conjunction with a pro rata reduction in Profits Tax, a great deal of the opposition to it would disappear.

Incidentally, I think it is a pity that the words— with a view to regulating the balance between demand and resources in the United Kingdom. are included in the phrasing of the Clause. It seems that at best this is a matter of opinion and at worst it is purely sales talk. It is not necessary to write this sort of phraseology into the Clause.

It is understandable that my right hon. and learned Friend should have been a bit coy about the introduction of this tax. Obviously there are many things which have to be looked into, in particular the question whether it should be organised with a pro rata reduction in Profits Tax. But now that the tax has been proposed, and now that it has been looked into carefully, I believe that the time has come, as my hon. Friend said, for it to be introduced. If my right hon. and learned Friend is still hesitant about it, I perhaps I can give him three more reasons for introducing it.

On the simple principle of good cost accounting, we ought to think in terms of raising the whole of the £1,400 million required for health and education with a tax of this kind. This is because in general the cost of health and the cost of education arises as a result of the employment of people, and it is important that manufacturers employing people should realise what is the cost of doing so.

The effect of a tax of £1 per head per week would enable the Chancellor to eliminate the tax on company incomes altogether. I venture to say that if the Chancellor were to do this and shift company tax on to the payroll and away from profits we might soon have, rather than the 13 per cent. rise in gross national product per man hour since 1955, something more like Germany's 35 per cent. increase. I think that one can be confirmed in this view when one sees that the German employer pays 44 per cent. of the payroll in taxation compared with the United Kingdom's 14 per cent.

As a first step, I think that what could reasonably be done would be to raise £330 million a year by means of a payroll tax of 6s. 6d. a week, which would enable the Chancellor to eliminate Profits Tax altogether. Perhaps I can illustrate the way in which this would work, and at the same time fulfil my obligations to the Committee. I see the hon. Member for Nelson and Colne (Mr. S. Silverman) in his seat, and I know that he will be hot on this point.

I am engaged as a manufacturer of what is vulgarly called automation equipment. I know that this tax will be good for my business. It is automation equipment which is enabling us to raise our standards of living, so any tax which is good for my business must be good for the nation as a whole. This unique combination of circumstances should not be allowed to pass unnoticed.

My second reason for supporting the Clause is the quite considerable prospect which is looming in front of us of the Common Market and the consequent reduction in tariffs which we will have to face in British industry. If it is to survive tariff reductions, industry must achieve considerable increases in efficiency, and the best way of achieving those increases is to take greater advantage of economies of scale. We need only look at the two Reports so far produced by the Department of Scientific and Industrial Research to realise that there are considerable areas in British industry where rationalisation could have enormous benefits.

This tax as I see it is a tax on the inefficient. I believe that it could do much to accelerate the process of rationalisation. Perhaps this would result in more and more mergers and takeovers, of more amalgamations, but that is exactly what we must have if we are to survive the increased competition from the Common Market countries.

May I illustrate this by describing typically what happens in British industry at the present time? A large industrial company produces a range of products. On some of them the company loses money. Of course, the company should give up making this part of the range of its products and enable its more efficient competitors to gain still further in efficiency by increased volume. The sad fact is that in very few cases does this happen. The products continue to be made, scarce skilled labour continues to be inefficiently employed, the losses continue to be allowed for tax and, especially if the customer is one of the nationalised industries, the company continues to get orders on the time-hallowed and essentially British principle of Buggins' turn. I believe that this tax would go a long way to end this misuse of resources by making uneconomic business more uneconomic. In relation to the Common Market this is a matter of some urgency.

My third reason is this. As I see it, my right hon. and learned Friend the Chancellor of the Exchequer would have added interest in maintaining full employment because he would secure a tax from employment. Increases in unemployment would mean a reduction in revenue. This would give my right hon. and learned Friend an incentive to maintain the pledges given about maintaining full employment and would make him the more ready to find the money, which he will have to find in the coming years, for really effective retraining schemes in industry and for really effective measures to deal with the resettlement of labour that has to move.

For these reasons, namely, the acceleration of the rate of increase in the standard of living, increased rationalisation in industry and the protection of full employment rather than his own, I would urge my right hon. and learned Friend not to be deterred by the narrow-mindedness of some of the opponents of this tax but to accept this Amendment, with a reduction in the Profits Tax, and to introduce it as soon as he possibly can.

Photo of Mr Julian Snow Mr Julian Snow , Lichfield and Tamworth

All that I can say about the speech of the hon. Member for Morecambe and Lonsdale (Mr. de Ferranti) is that although I do not think that I have had the privilege of listening to him before, had he been making a maiden speech I should have used the conventional phrase and said that I hoped to hear many more speeches like that because I think that it exposed so completely the Tory principle of utterly ignoring social accountancy. The hon. Gentleman seemed to deploy a complete argument on behalf of business.

What perturbs me, although it does not surprise me, is that a Tory Member should so consistently ignore the interests of small business in the country. Some months ago I asked the President of the Board of Trade a Question regarding the export capacity of small firms in my constituency, firms which employed 100 people or less. I put that Question deliberately because I was practically convinced at that time—I am absolutely convinced now—that the Government as a whole do not take into account either the productive capacity or the exporting capacity of small business in this country.

The President of the Board of Trade said that he did not think that the effort and the cost involved in finding out what was the capacity of small business were worth while. So far as I have been able to ascertain, if we took into account the companies in this country which employ less than 300 people on production as opposed to distribution we should find that their contribution to the economy of the nation is as much if not more than that of the major productive companies in this country. When I remember the claptrap preached by hon. Members opposite about the control of labour in the past five General Elections, I feel that this is a pretty cynical sort of measure to bring forward. What does it do other than control the way in which labour will be used and where it will be used?

10.45 p.m.

I make no apology for producing an example from my own constituency to show how this provision might affect one small element of the employment potential in a small business. I did not think this point merited my tabling an Amendment, but I think I am justified in producing it on the Question "That the Clause stand part of the Bill." I refer to the employment of women—chiefly married women—either as part-time or half-time employees in a small factory in my constituency. I have no interest in the firm concerned and, so far as I am aware, with two exceptions the board of the company and its senior managers are politically hostile to me. It is a small firm, with some historical significance in my part of the country, called William Tolson. It produces what are technically known as woven smallwares. [Laughter.] I am interested to hear the laughter of hon. Members opposite, because it indicates that they have not much consideration for the small, rather obscure business.

This company manufactures material which is used for upholstery, for the boot trade, and for haberdashery—in short, tape. It employs a substantial number of married women on part-time work, and a typical housewives' shift, as it is called locally, would be from 6 p.m. to 10 p.m. or, in the daytime, from 8 a.m. to 4 p.m. A whole day in the factory would be from 7.30 a.m. to 5 p.m.—quite long enough as a day shift. The firm advises me that if this tax is imposed it will have to give serious consideration to the question whether it should continue to employ part-time people.

This may not be a matter of very great importance when we are considering an area with a large-scale, highly flexible local employment potential, but it means a lot in a small area, such as the little parish of Fazeley, where there is not much else to do, especially for women on part-time work. The Chancellor ought to consider a possible exemption in the case of these women, because their capacity and usefulness do not seem to have been given sufficient attention by the Government.

I have in my hand an expression of view by the managing director of the company, in which he says that he may be faced with a serious situation in which he has to terminate the employment of these people. This case is typical of what could well happen to small industry if this sort of tax were imposed.

Photo of Viscount  Hinchingbrooke Viscount Hinchingbrooke , South Dorset

The Treasury team look to me as if they want to go home. Before doing so I imagine that the Chancellor wants to get the Clause. If he wants to get my vote on it I shall be very grateful if I can have two assurances. [An HON. MEMBER: "I should go home"] The Chancellor can do better than that if he gives me the replies I want. In the first place, how are the proceeds from this regulator to be used? We should surely like an assurance that the proceeds of £400 million from both the regulators are to be used immediately and permanently for the reduction of debt if a full consequential deflation is to be secured.

I notice that the Civil Estimates are rising considerably and that the ratio they bear to the national income is higher today than it was just after the Conservative Party came to power in 1951. We have had steadily rising Civil Estimates. I should be very grateful if my right hon. and learned Friend could say that the proceeds of the regulator will not be allowed to slide into the Estimates so that in the following year we are found to have higher Civil Estimates than ever before.

That is the first assurance. The second is consequential upon it. I made a little calculation and found that £400 million on a gross national product in the private sector of £1,600 million is 2½ per cent. If the Chancellor is to use this regulator to estop aggregate private saving by 2½ per cent., he must make a contribution for the Government equivalent to that, if he will be so good. The Minister of Aviation was very careful to do that in 1957. He drew a line above which Government expenditure was not allowed to rise. We do not want these taxes to be used step by step as a means of increasing the collectivist element in our society. I think my right hon. and learned Friend agrees with that.

Quite briefly, because the hour is so late, I ask my right hon. and learned Friend to give a general undertaking that about the same ratio of 2·5 per cent. will be given from the public sector of £6,000 million per year, yielding the sum of £210 million, to be set alongside the £400 million he is to exact from the private sector. With these two assurances, I shall be very happy to vote for the Clause.

Photo of Mr Anthony Crosland Mr Anthony Crosland , Grimsby

We have had two unusually obscure and exceptionally benign points made by the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) in an appeal to the Chancellor. He should be rewarded with some assurance because of the almost excessive benignity with which he put the points in a way which differed from the touch of the jungle with which one associates his speeches. His speech was different in content from that of the hon. Member for Morecambe and Lonsdale (Mr. de Ferranti). During his rather patronising lecture one became more and more doubtful about the principle he enun- ciated, that what was good for Ferranti is good for the country.

The hon. Member defended the payroll tax for reasons largely disowned by the Chancellor and totally disowned by the hon. Member for Scarborough and Whitby (Sir A. Spearman). A very curious thing about this debate has been that all hon. Members opposite who have spoken in it have been defending this tax on completely different grounds. The hon. Member for Morecambe and Lonsdale went back to the original idea of the payroll tax when it was discussed in the Press long before the Budget, namely that it was justified as a means of forcing employers to disgorge labour and providing them with an incentive to introduce new labour-saving machinery. This always seemed to me to be a view without any evidence of any kind whatever to support it.

I am not concerned with the fact that this payroll tax is in fact quite different from that which was envisaged by those who thought this would be a great incentive to introducing labour-saving machinery. Those who took that view certainly did not envisage a variable tax and they did envisage a tax which was balanced, as the hon. Member wanted, by at least an equivalent reduction in Profits Tax. I grant that the tax has in fact come out differently from the way in which it was envisaged by those who took this view, but even if it came out differently I have never been able to see why that view should have been held.

Certainly with a payroll tax such as we have proposed to us in this Clause, only adding a few shillings on to wages bills, it is hard to imagine that it will have any great effect on employers' decisions as to how much labour to employ. It could only add from 1 to 2 per cent. on to the wages bill of a large firm, and that is simply going to have no practical effect on the firm's decision whether to invest in new machinery. The logic of the idea is in any case very vulnerable, because it is often forgotten when people talk about persuading employers to economise on labour in favour of machinery that machinery is also made out of labour and that the labour cost and hence the price of the machinery is bound to go up also as a result of the payroll tax.

Moreover, if it is the case that by putting up the price of labour by a payroll tax one is going to have this wonderful improvement in efficiency and increase in labour-saving investment, why does not this follow from annual wage increases? People who are most in favour of the payroll tax as an incentive in this direction are also the people who are most in favour of wage restraint and who say that even a 3 per cent. increase in wages will plunge us into the most terrible economic difficulties. One cannot have it both ways. If one thinks, as I do not, that a payroll tax has this great effect, at any rate wage increases must have one excellent effect, namely in the direction of encouraging labour saving investment. I personally do not think that either wage increases or a payroll tax have any significant effect in persuading employers to substitute capital for labour.

However, that has not been in practice the main ground on which this Clause has been defended. The hon. Member for Morecambe and Lonsdale was an exception. The main ground used for it this afternoon by the Chancellor and by the hon. Member for Scarborough and Whitby was that this regulator was a wonderful method of cutting down excess demand when this turns out to be necessary. With great respect to the hon. Member for Scarborough and Whitby, it is hard to understand how this can be defended as an efficient regulator of demand. He himself conceded—which is a very strong argument against any regulator—that it would largely fall on undistributed profits and to that extent would have none of the effect that he wants. And to the extent that it does not fall on undistributed profits, as he also partly conceded, it would be largely reflected in increased prices.

One characteristic which we do not want in a regulator for coping with a situation of inflationary demand is the characteristic of increasing prices and particularly increasing export prices. Consider the situation in which the hon. Member and the Chancellor are envisaging using such a regulator. The hon. Member for Scarborough and Whitby, and the hon. Member for Morecambe and Lansdale, I think, assumed that this situation is already with us—I do not think that it is—a situation in which demand, in their view, is rapidly becoming excessive and that in consequence of this we shall run into a balance of payments crisis in the autumn, or at least that sterling will come under increasing pressure. If that is the situation we are faced with—a balance of payments crisis and loss of foreign confidence abroad and so on—the worst way of dealing with that situation is to use a regulator which has the positive effect of increasing export costs and export prices. It is a very ironic type of regulator to use—

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

Is the hon. Gentleman acquainted with the extent to which it would increase export prices? In the unlikely event of the whole amount being put on, he will find that it would put up export prices by 1d. on a £ article. That is very small compared with the rate of increase if we got excess demand.

Photo of Mr Anthony Crosland Mr Anthony Crosland , Grimsby

Granted that fact, nevertheless there is the further danger of this rise in prices aggravating a tendency to wage increases, and I wish to reiterate that although the total amounts may not be enormous over a certain range of articles, there is nevertheless a grave danger in using a regulator to correct a situation of excess demand which has the effect of exerting an upward tendency on costs and prices. I do not say that in no circumstances should one employ a regulator like that, but I do say that there are dangers in using it.

11.0 p.m.

On the question whether the regulator should be used in the next few months, I believe that the hon. Member for Scarborough and Whitby has made no case whatsoever for saying that we are moving into a situation when the Chancellor should use it, even if there were not the objections to it which have been made from this side. I feel very strongly about this. The hon. Member for Scarborough and Whitby tried to give the impression that we are moving rapidly into a situation of very inflationary demand. There is no evidence whatsoever of this. Of course, the hon. Member can project different kinds of demands and say that in six months' or a year's time these added up may exceed any possible increase in capacity. This is a projection which many people have done. The Chancellor did it before he produced his Budget.

But it is inadmissible to say that there is any clear sign that this is already happening. It still remains purely a projection into the future. It is a guess about the future. What we know about the present situation gives an absolutely different impression, because what we know about the present position is mainly the fact that production is still roughly where it was a year ago. It may have started to rise now. Government figures inevitably come out a little late. I daresay it has started to rise now, but on the last available Government figures production is no higher than it was a year ago. Unless it is thought that we have had no increase in capacity or efficiency in the last twelve months, this must suggest that there is still some reserve in the system and that we are far from being pushed right up against our ceiling.

The Chancellor must take this view because he produced his Budget when production was roughly the same as it is today, and he was then obviously assuming an increase of from 3 per cent. to 4 per cent. in output over the following twelve months. We have scarcely yet started on that increase which he assumed in his Budget speech. This must suggest that we are very far from the position of excess demand. This does not mean that we may not have serious difficulties with sterling and the balance of payments in the autumn. It looks very likely that we shall. It means that those difficulties will have nothing whatsoever to do with excess demand. They will be due to some basic long-term un-competitiveness of British goods exaggerated, perhaps by a loss of confidence.

If we reach that situation in the autumn—I strongly hope that we shall not—I implore the right hon. and learned Gentleman to resist the temptation and advice which is being and will be given to him to deal with it by a regulator which is adapted to an utterly different situation. He will have to take measures—they may be disagreeable—to deal with the situation, but using this regulator to curb excess demand will be completely irrelevant.

Despite the surprisingly enthusiastic screeches of two of his hon. Friends tonight, perhaps the Chancellor has been influenced by the very hostile reception which this regulator has received. It has received a much more hostile reception than that accorded to the first of his two regulators. The hostility has come not only from this side of the Committee, but from the unions, from many manufacturers, and from most of the outside commentators, even those who at one stage positively wanted a payroll tax. On the whole, amongst informed circles this regulator has had an extremely bad reception, on the ground that there are far too many different motives for it, so that no single objective will be achieved.

I hope very much that the Chancellor will be influenced by these criticisms, and that, whatever he does about his other regulator, will in practice firmly drop this one.

Photo of Mr Anthony Barber Mr Anthony Barber , Doncaster

Sir Samuel, would it be for the convenience of the Committee if I said something?

Photo of Mr Frederic Bennett Mr Frederic Bennett , Torquay

I can reassure the Economic Secretary. I shall not prevent him for more than two minutes from saying whatever he wanted to say. My forbearance in this respect is entirely due to my consideration for my colleagues. [An HON. MEMBER: "And the Chief Whip."] Not for the Patronage Secretary, who would have wished me not even to speak for the two minutes I intend to speak. I am trying very hard to be forbearing. I was going to say that my strictly limited remarks are due to my forbearance for my colleagues and not for hon. Gentlemen opposite, who have spent days jeering at my hon. Friends for not saying anything at all.

I confess that I have always been in favour of the idea of a payroll tax in theory. But I must also say, lest there be any misunderstanding, that I am not an enthusiastic supporter of this interpretation of a payroll tax. Perhaps I should declare an interest in that in not one of the companies with which I am associated have I found one enthusiastic voice in favour of this particular type or scale of payroll tax. That is not because I or those whose confidence I share dislike the idea of a payroll tax in theory, but because if the proposed type is introduced it will not be big enough to be effective for the purpose of the redistribution of labour. On this point alone it would be endless repetition for me to go into all the details. But to think that, with earnings of between £12 and £20 a week for 4s. a week extra, an employer will be caused to change his whole labour policy is simply not true.

Not only is it not large enough to be effective but, if it is applied, it will not be selective. Hon. Members have heard a variety of reasons why this tax may have to be imposed, the first being for the economic redistribution of labour. Another aim is that it should curtail a certain amount of purchasing power. I suppose that that may be the case, since it will raise a certain amount of money for the Exchequer which otherwise might be spent.

But in the form in which the tax is at present proposed, I cannot see that it will be effective even in that sphere because I feel that it may well result in raising prices and may lead to one of the precise evils which we are trying to cure.

I wish I could be an enthusiastic supporter of this tax in its present form, but although I like the idea in theory, I hope that the Chancellor will find some method of overcoming some of the difficulties I have mentioned and, if he cannot overcome them, not find it necessary to introduce it between now and his next Budget.

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

I would not have intervened in this debate had it not been for the speeches of the hon. Member for Scarborough and Whitby (Sir A. Spearman) and the hon. Member for Morecambe and Lonsdale (Mr. de Ferranti).

The hon. Member for Scarborough and Whitby spoke of the history of the 40's. We all remember, as I hope the Chancellor does, those years. I hope the Chancellor will appreciate and understand just how wise and sensible and tolerant the Opposition are towards him these days, compared with the treatment Sir Stafford Cripps had meted out to him when he was the Chancellor.

There are rumours abroad—and I refer to them because of what was said by the hon. Member for Scarborough and Whitby—that Britain may be considering devaluation. [HON. MEMBERS: "Rubbish."] The hon. Member for Scarborough and Whitby should remember the days when hon. Gentlemen opposite were sitting on these benches and when they were asking the then Chancellor when he was going to devalue.

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

What else could he do? If we put the same questions to the Chancellor today as were put to Sir Stafford Cripps on the point raised by the hon. Member for Scarborough and Whitby we know that the present Chancellor would give precisely the same reply as that given by Sir Stafford Cripps. The only difference is that we have a little more regard for the financial wellbeing of our country abroad, and we are not prepared to embarrass the Chancellor when his difficulties are heavy enough without our adding to them.

The hon. Member for Morecambe and Lonsdale was quite honest about it. He said that what was good for Ferranti was good for Britain. Many people do not agree with that idea. Ferranti produces machinery which dispenses with labour. The hon. Member has no social regard for what happens to the labour. Some of us, while prepared to allow Ferranti to go ahead, are very anxious about what happens to those men. Ferranti may dismiss men, and that may be all right in the company's view, but we are concerned to ensure that the men displaced have jobs to go to and are not thrown on the scrap heap.

Photo of Mr Basil De Ferranti Mr Basil De Ferranti , Morecambe and Lonsdale

The hon. Member has missed the point. We have all been getting richer because of this process during the past 150 years. This is why the standard of living is going up.

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

This is wonderful. I should not have referred to the hon. Member at all if he had not chided us on these benches about our attendance here. There may be some people in the House who are entitled to chastise us on this side of the Committee about our attendance, but the hon. Member for Morecambe and Lonsdale is not one of them. It is not for him to talk of thin attendances. We see him as frequently as we see Good Fridays—not very often. [Interruption.] When the hon. Member for Kidderminster (Mr. Nabarro) has finished muttering, I shall proceed. [An HON. MEMBER: "He is ill."] I know he is, and he has our sympathy, but I wish he would not interrupt.

I oppose this tax because it is completely undiscriminating. The average output per manshift in the coal industry is now about 26 or 27 cwt. If this tax goes on, there will probably be a 3s. rise in the average price of coal per ton. That is inevitable. It is a simple calculation. The National Coal Board is having the utmost difficulty in keeping out of the red. Does the Chancellor think that it is decent or helpful if the Government, who are responsible for the industry, now make matters more difficult for the Coal Board in its efforts to strike even?

The difference between the impact of the tax on the coal industry and its impact on the steel industry is obvious. For the steel industry, it would not matter if it were £4 a week per man. The wages cost per ton of steel is insignificant. In the coal industry, wages costs represent a considerable percentage.

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

Yes, 62 per cent. Anything which adds to that 62 per cent. makes the problem of the National Coal Board more difficult.

Photo of Sir Gerald Nabarro Sir Gerald Nabarro , Kidderminster

The hon. Gentleman's arithmetic is wrong.

11.15 p.m.

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

The Chancellor has no right to introduce an indiscriminate tax of this kind which will make more difficult the future progress of very desirable industries.

Did the Chancellor consider, before deciding to introduce this tax, what its impact was going to be on taxation and the need to increase allocations to local authorities? It is obvious that the 4s. will have to be charged for every Civil Servant, every member of the Armed Forces, every teacher, and every local authority employee. That is a bill which the Chancellor will have to meet. He creates it and he will have to meet it.

What is so funny is that everyone gets very agitated about the pay demands of the workers. If there is, as my hon. Friend the Member for Grimsby (Mr. Crosland) said, a demand for a wage increase, everyone holds up his hands in horror and says it will mean inflation and economic difficulties. But what is the difference, as far as our export trade and our internal trade are concerned, between this tax and an increase in wages?

The noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) wanted an assurance that the Chancellor would not spend the increase in revenue on increased Civil Estimates. Indeed, the noble Lord wanted something more: he wanted the Chancellor to reduce the Estimates by the £210 million he was going to collect. But he did not say which of the Estimates he would decrease. We would be glad to know. Would the noble Lord take it out of agricultural subsidies? If he is asking for this reduction we are entitled to know from where he would take it. I do not think the noble Lord will get an answer from the Chancellor, and I shall not get an answer from the noble Lord.

This tax shows that the Chancellor does not know where he is going. He is treading a road which is not signposted, and he is not sure what the end is going to be. I know what we would like to think the end is going to be. This tax is being introduced in order, if necessary, to get men sacked. Make no mistake about it, when there is talk of transferring labour, the purpose is to get men sacked. I am not against certain people being out of work. I say quite frankly that I pray for the day when everyone sitting opposite is out of work as far as membership of the House is concerned.

Photo of Mr Anthony Barber Mr Anthony Barber , Doncaster

We have had, I think the Committee will agree—

Photo of Mr Geoffrey Hirst Mr Geoffrey Hirst , Shipley

On a point of order, Sir Samuel. Can we assume that this premature call of the Economic Secretary is not going to curtail the debate?

Photo of Mr William Williams Mr William Williams , Manchester Openshaw

That is not a point of order.

Photo of Mr John Eden Mr John Eden , Bournemouth West

Further to that point of order, Sir Samuel

Photo of Mr William Williams Mr William Williams , Manchester Openshaw

The hon. Member cannot pursue what is not a point of order.

Photo of Mr John Eden Mr John Eden , Bournemouth West

On another point of order. May I ask whether it is intended to conclude the debate on this Clause after my hon. Friend has spoken, or will it continue if other hon. Members rise to speak?

Photo of Mr William Williams Mr William Williams , Manchester Openshaw

That is not a point of order.

Photo of Mr Anthony Barber Mr Anthony Barber , Doncaster

As we have debated this Clause for more than seven hours, I thought it would be useful if I intervened and said a few words about the general principles and answered some of the points which have been raised. We have had a full debate on a series of Amendments which the right hon. Member for Huyton (Mr. H. Wilson) rightly said dealt with somewhat narrow points; but which I think I can say without disrespect to the Chair were treated by hon. Members on a somewhat wider basis.

Since then we have spent a fair time on this Motion. I should like first to refer to a point on which I think the Committee will be in general agreement. As was pointed out by my hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman), one of the fundamental problems which has repeatedly confronted successive Governments since the end of the war has been the lack of balance in the economy between demand and resources. Labour Governments and Conservative Governments alike have grappled with this problem with varying degrees of success and by different means. The right hon. Member for Huyton said that there may be times when it is necessary to siphon off excessive purchasing power. So, whatever difference there may be in approach, I think the responsibility of the Government to intervene in the general interests of the economy is accepted by all.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

Will the hon. Gentleman quote me fairly? In the next sentence I said that this is not such a time.

Photo of Mr Anthony Barber Mr Anthony Barber , Doncaster

I went on, after quoting what the right hon. Gentleman had said, to say—as he would know, had he done me the courtesy of listening to what I was saying—that there is no disagree- ment, I hope, that it is the responsibility of the Government to intervene if the circumstances demand it. After all, my right hon. and learned Friend is not seeking to impose the employers' surcharge now. But he is seeking power to impose it if it becomes necessary, as the right hon. Member for Huyton said, to siphon off excessive purchasing power. So what it boils down to is that though there are differences of opinion within the Committee as to how this should be done—under a Labour Government there was a greater reliance placed on fiscal controls than under Conservative Governments, and some hon. Members opposite still favour some form of fiscal controls, import controls for example, and others do not—since 1951 we have placed greater reliance on monetary controls. But my right hon. and learned Friend has never concealed from the Committee the fact that these controls have serious disadvantages. Indeed, he alluded to those disadvantages this afternoon.

I will not weary the Committee by going over the disadvantages of the Bank Rate and hire-purchase controls which have been referred to, except to recall that the right hon. Member for Huyton castigated this proposal as being a blunt instrument. But I think that he would also agree that in so far as hire purchase bears on certain industries that also has an element of bluntness about it. Of course, the Budget suffers from the disadvantage that normally it is an annual affair.

My right hon. and learned Friend has searched for new means of influencing the balance of the economy which may in certain circumstances involve less reliance on the more traditional methods, and also, in some respects, so far as timing is concerned for example, be more flexible than other methods. This surcharge which the Committee is now considering is one of those methods.

Whether one agrees with the particular method or not the basic principle involved is not so novel, as hon. Members will see if they care to remind themselves of the contents of the 1944 White Paper on employment policy. The first thing to appreciate is that although, as my right hon. and learned Friend said when making his Budget statement, this surcharge is analogous to a payroll tax, it is not a payroll tax as that term is normally understood. A payroll tax certainly is a tax which is imposed primarily for purposes other than regulating the level of demand, whereas the regulation of the level of demand is the primary purpose of this proposal.

A good deal has been said about a payroll tax proper, in particular in what, I am sure, all my hon. Friends will agree, was the very thoughtful speech of my hon. Friend the Member for Morecambe and Lonsdale (Mr. de Ferranti). He was right in suggesting that a surcharge of a maximum of 4s. a week in respect of each employee would have little more than an incidental effect on the economic use of manpower and investment in labour-saving equipment. The hon. Member for Newton (Mr. Lee) based almost the whole of his speech earlier this afternoon on the assumption that the main purpose of this employers' Stir-charge was to encourage economy in the use of labour, but his right hon. Friend the Member for Huyton said a short time ago that he did not think that this would discourage the hoarding of labour.

I should like to make it plain once again, in view of what was said by the hon. Member for Jarrow (Mr. Fernyhough) that certainly it is not the primary purpose of this employers' surcharge to encourage the economic use of labour. That is an incidental effect.

A permanent payroll tax, however, of the nature mentioned by my hon. Friend the Member for Morecambe and Lonsdale would need a good deal more thinking about. One would have to consider whether the tax should be varied as between industries or between types of employees, such as, for example, the disabled, who are referred to by the hon. Member for Southampton, lichen (Dr. King). As my hon. Friend the Member for Morecambe and Lonsdale rightly said, a permanent payroll tax would have to be considered in relation to other forms of taxation, such as Profits Tax.

My noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) asked about the use of the proceeds of this employers' surcharge. I hope that I may answer him in this way. The effect of imposing the surcharge would be to increase the Budget surplus above the line and, consequently, to reduce or, in certain cases, to eliminate the borrowing requirement. For example, the borrowing requirement this year is £69 million. Consequently, if the employers' surcharge were imposed for a period of six months, that would more than eliminate the borrowing requirement altogether. In other words, the effect of imposing the surcharge would be either to make the increase in the National Debt less than it would otherwise have been, or to enable the Government to reduce the National Debt by more than otherwise would have been possible.

Concerning the question of Government expenditure, to which my noble Friend referred, the receipts from the employers' surcharge will come in to the Exchequer in the same way as any other taxation receipts, but there will be this significant difference. As the whole purpose of imposing the employers' surcharge would be to withdraw money from the economy, I assure my noble Friend that it follows that it would be quite inconsistent, and certainly not the intention of my right hon. and learned Friend, to use these additional receipts for additional Government expenditure.

I was going to say something about the temporary nature of this tax and about the machinery and the disadvantages of the machinery which we have adopted, but there is, perhaps, only one other point on which I should say a brief word. The Committee is now fully aware of the implications of using the National Insurance machinery and I need not go over that ground again.

11.30 p.m.

The hon. Member for Itchen and one or two others, including the hon. Member for Jarrow, have referred to the possible effect of this employers' surcharge on employment. The hon. Member for Itchen said the Clause might induce employers to get rid of workers. I cannot conceive of this regulator being used in circumstances other than those which included a severe shortage of labour and in those circumstances I agree with my hon. Friend the Member for Torquay (Mr. F. M. Bennett) that a maximum charge of 4s. per week in respect of each employee simply would not have the dire consequences on employment that have been suggested. I say in all sincerity that if it would have the dire consequences suggested then presumably those hon. Members opposite who represent Scottish constituencies and who have taken part in the debate would be equally opposed to a 4s. increase in earnings. It seems to me that the same principles apply.

This employers' surcharge is not meant as a substitute for a payroll tax. Secondly, the Chancellor has never concealed from the Committee that the method which he has adopted has disadvantages. For that reason he has said right at the outset that this is only a temporary expedient, that he is seeking powers only for one year, and that he is considering possible alternative procedures for the future.

Lastly, none of the existing methods of obtaining a balance in the economy are without defects and disadvantages and no economic regulator, either this or any future one that may be conceived, is likely to be painless in its operation. But this power for which my right hon. and learned Friend is asking for one year will add to his ability to maintain the balance between demands and resources, which must be to the advantage of the economy and therefore to the prosperity of the country, and I commend the Clause to the Committee.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

It is quite clear that whatever argument will be deployed the Government will not budge on this Clause. It is clear that, however, unpopular it is and however impracticable, as shown by speeches in all parts of the Committee, the Chancellor feels committed to the Clause, rightly or wrongly. In the famous words of Lord Attlee, he has nailed his trousers to the mast and he cannot climb down. I therefore suggest, particularly since we have a very important related Schedule to come to, on which many of these arguments can be continued, especially the argument on Parliamentary control, that we might now reach a conclusion on the Clause. We on this side of the Committee propose to take the matter to the Division Lobby.

Photo of Mr John Eden Mr John Eden , Bournemouth West

I am sorry further to delay the opportunity of the right hon. Member for Huyton (Mr. H. Wilson) to march with his faithful few to the Division Lobby tonight before they disperse to their various bus stops on their homeward journey, but I should like to say a few words and I am grateful to you, Sir Gordon, for having called me.

Photo of Sir Elwyn Jones Sir Elwyn Jones , West Ham South

Did the hon. Member say "bus stops"? Is that regarded as a term of abuse or not?

Photo of Mr John Eden Mr John Eden , Bournemouth West

In view of the fact that the hon. and learned Member no doubt supported my right hon. and learned Friend in making it impossible for a larger number of people to occupy themselves in driving round the town in Rolls-Royces, I suppose that hon. Members opposite must find other means.

Photo of Mr Gordon Touche Mr Gordon Touche , Dorking

Order. I would remind the hon. Member that the Question is "That the Clause stand part of the Bill."

Photo of Mr Willie Hamilton Mr Willie Hamilton , Fife West

It is time that the hon. Member for Bournemouth, West (Mr. Eden) was in bed.

Photo of Mr John Eden Mr John Eden , Bournemouth West

The right hon. Member for Smethwick (Mr. Gordon Walker) appears to be saying something. Did he wish to speak?

Photo of Mr Patrick Gordon Walker Mr Patrick Gordon Walker , Smethwick

I said that the remark make by the hon. Member for Bournemouth, West (Mr. Eden) was a beastly, snobbish remark.

Photo of Mr John Eden Mr John Eden , Bournemouth West

It may be snobbish to anybody who comes from the Hampstead set.

If one takes this tax by itself and examines the application of it to selected industries and businesses, I think that one may be forgiven for regarding it as serious. [Interruption.] Time and again hon. Gentleman opposite have kept the Committee sitting until far into the night to suit their own purposes.

Photo of Mr Gordon Touche Mr Gordon Touche , Dorking

The hon. Member must confine his remarks to the Question "That the Clause stand part of the Bill."

Photo of Mr John Eden Mr John Eden , Bournemouth West

If I may be permitted to make—[Interruption.] I am not going to be stampeded into anything, and I am content that hon. Gentlemen opposite should stay here for as long as I am prepared to make them do so. It is entirely up to hon. Gentlemen opposite.

The right hon. Member for Huyton, who has already made two speeches on this Question, should extend a little courtesy to hon. Members who are trying to speak for the first time in this debate. If hon. Gentlemen do not wish to listen to what I have to say, they can leave the Chamber.

If one takes this tax by itself and applies it to individual industries and businesses, such as has been done by a number of hon. Members, I think one may be forgiven for regarding its effect as likely to be serious. Certainly if one examines the consequences to teachers, to schools, to farmers, and to local authorities, as individuals, it could be regarded as a serious imposition.

I am thinking of my local authority which might find itself having to face an increase of £50,000 on its employment bill, which would be the product of a 3d. rate. That is not something which can be lightly passed by. If one regards it in that light, it is something which should cause one a certain amount of concern.

Equally, I accept what my hon. Friend said, that this is not designed to try to produce greater efficiency in the use of labour. I think that in his Budget speech my right hon. and learned Friend indicated that this was one of the possible by-products of the imposition of a tax of this kind, but nobody in industry will be worried by an increase of 4s. per head on his employment bill.

I do not accept what the hon. Member for Jarrow (Mr. Fernyhough) said, This will not result in unemployment being deliberately created. This is not designed to try to create unemployment. No employer of labour will want to disband a labour force which has cost him a lot to bring together, as any hon. Members who were associated with the motor car industry during its recent difficult stage well know to be the case.

It is important to look at this tax in the context of the other provisions in the Budget, particularly of the other surcharge provision in Clause 8. If the provision in Clause 8 is implemented—this, I believe, is certainly the intention of my right hon. and learned Friend—and if he imposes the increased Excise Duties which he will have the power to do under the Bill, and which I think he should certainly do before the House rises for the Summer Recess, we shall see the possible consequence of that on the wages of employed people. Were my right hon. and learned Friend to implement the powers which he has under Clause 8 then I believe that it might give a fresh impetus to wage demands.

There are already sufficient wage demands in train for later this year. If under Clause 8 increased charges are imposed on a whole range of Excise Duties and Purchase Tax they may well result, as I say, in giving a fresh impetus to wage demands. I think that Clause 26 provides an essential weapon with which my right hon. and learned Friend must equip himself in order to ensure that employers are made fully aware that they cannot go on, year after year, acceding to the demands of labour for increased wages, thereby adding to the inflationary effect on the economy of the country.

I hope, therefore, that my right hon. and learned Friend will not be dismayed by any criticisms which may have been directed to the application of this tax to individual industries but that he will bear in mind the relationship of the tax to his bringing into effect the surcharge on the Excise Duties and thus enable the hands of those who negotiate on behalf of employers in industry to be strengthened in resisting a further inflationary round of demands for wage increases.

Photo of Mr Geoffrey Hirst Mr Geoffrey Hirst , Shipley

In all the circumstances, I do not propose to keep the Committee for more than a few minutes, although I rather deprecate the circumstances themselves. After all, this is an extremely important matter. We have had a very short discussion indeed on the Question "That the Clause stand part of the Bill," and I do not think that on a Clause of such importance as this one we should always be at the mercy of the whims and fancies of those who arrange our affairs. This is a Clause about which many of us feel very keenly indeed.

I rise to support my right hon. and learned Friend, though in my experience I do not remember an occasion when that desire has been made more difficult than it is tonight. I deprecate very much indeed that it should be so. That is my main reason for saying a word or two on the Clause. I have listened to a great deal of this debate and many important subjects have been discussed, though not actually on the Question "That the Clause stand part of the Bill," which is the important thing.

What are the major considerations? I think that my hon. Friend the Economic Secretary to the Treasury made a very fair speech indeed when he pointed first to the very marked difference between what is being called the payroll tax and what is, in fact, the classic understanding of a payroll tax. My hon. Friend also referred—and quite rightly, I think—rather strongly to the arguments put forward by hon. Members opposite to the effect that this tax was a blunt instrument. I join absolutely with my hon. Friend the Economic Secretary and other of my hon. Friends in saying that we prefer the economic regulators in this Budget to those which we have previously had. We think that they are an improvement on the earlier ones.

I join, of course, with all hon. Members in hoping that the payroll tax will not have to be imposed. I do so, firstly, because the very circumstances which would make its imposition necessary would be such that we should all deprecate, and, secondly, because I do not think that such an instrument as the payroll tax should be used unless there

is great need to do so. I do not like it, but my right hon. and learned Friend, in his Budget and in the general economic circumstances, has shown great courage all round and he deserves the support of the House and the country.

It is vitally important that those of us who travel abroad a good deal—as I do, in a humble capacity—and meet those in influential positions, should always take care to divide our criticism between domestic issues, on certain of which I am not backward in criticising the Government, and those issues which are of national import, when we must be very sure of our facts before we damage the reputation of this country—and we are damaging it if we undermine confidence. If we feel justified in doing so we should do so, but we must be very sure and not play a political game. I am not sure of the facts; far more sure am I in saying that my right hon. and learned Friend has judged rightly in reserving for his use this instrument, which he feels it may be necessary to use in order to maintain that confidence.

Question put, That the Clause stand part of the Bill:—

The Committee divided: Ayes 195, Noes 131.

Division No. 199.]AYES[11.45 p.m.
Agnew, Sir PeterCordeaux, Lt.-Col. J. K.Green, Alan
Aitken, W. T.Cordle, JohnGresham Cooke, R.
Allan, Robert (Paddington, S.)Corfield, F. V.Grosvenor, Lt.-Col. R. G.
Allason, JamesCourtney, Cdr. AnthonyGurden, Harold
Ashton, Sir HubertCritchley, JulianHamilton, Michael (Wellingborough)
Barber, AnthonyCurran, CharlesHarris, Frederic (Croydon, N. W.)
Barter, JohnCurrie, G. B. H.Harris, Reader (Heston)
Bennett, F. M. (Torquay)d'Avigdor-Goldsmid, Sir HenryHarrison, Brian (Maldon)
Berkeley, HumphryDeedes, W. F.Hay, John
Bldgood, John C.de Ferranti, BasilHeald, Rt. Hon. Sir Lionel
Biggs-Davison, JohnDigby, Simon WingfieldHendry, Forbes
Bishop, F. P.Doughty, CharlesHiley, Joseph
Bourne-Arton, A.Duncan, Sir JamesHill, Dr. Rt. Hon. Charles (Luton)
Box, DonaldEden, JohnHill, Mrs. Eveline (Wythenshawe)
Boyle, Sir EdwardElliot, Capt. Walter (Carshalton)Hill, J. E. B. (S. Norfolk)
Braine, BernardElliott, R. W. (Nwcstle-upon-Tyne, N.)Hinchingbrooke, Viscount
Brawis, JohnEmery, PeterHirst, Geoffrey
Bromley-Davenport, Lt.-Col. Sir WalterErrington, Sir EricHocking, Philip N.
Brown, Alan (Tottenham)Farr, JohnHollingworth, John
Buck, AnthonyFinlay, GraemeHopkins, Alan
Bullard, DenysFraser, Ian (Plymouth, Sutton)Hornby, R. P.
Butcher, Sir HerbertGardner, EdwardHoward, John (Southampton, Test)
Campbell, Gordon (Moray & Nairn)Gibson- Watt, DavidHughes-Young, Michael
Carr, Compton (Barons Court)Glover, Sir DouglasHutchison, Michael Clark
Carr, Robert (Mitcham)Glyn, Dr. Alan (Clapham)Jackson, John
Channon, H. P. G.Goodhart, PhilipJames, David
Chataway, ChristopherGoodhew, VictorJohnson, Dr. Donald (Carlisle)
Clark, William (Nottingham, S.)Gower, RaymondJohnson, Eric (Blackleg)
Cleaver, LeonardGrant, Rt. Hon. WilliamJohnson Smith, Geoffrey
Cooke, RobertGrant-Ferris, Wg Cdr. R.Jones, Rt. Hn. Aubrey (Hall Green)
Kerans, Cdr. J. S.Pannell, Norman (Kirkdale)Steward, Harold (Stockport, S.)
Kerby, Capt. HenryPartridge, E.Stodart, J. A.
Kerr, Sir HamiltonPearson, Frank (Clitheroe)Stoddart-Scott, Col. Sir Malcolm
Kershaw, AnthonyPeel JohnStudholme, Sir Henry
Langford-Holt, J.Pickthorn, Sir KennethSumner, Donald (Orpington)
Leavey, J. A.Pilkington, Sir RichardTalbot, John E.
Lewis, Kenneth (Rutland)Pitman, Sir JamesTaylor, Edwin (Bolton, E.)
Lilley, F. J. P.Pott, PercivallTemple, John M.
Litchfield, Capt. JohnPrice, David (Eastleigh)Thomas, Leslie (Canterbury)
Lloyd, Rt. Hon. Selwyn (Wirral)Prior, J. M. L.Thornton-Kemsley, Sir Colin
Longbottom, CharlesPrior-Palmer, Brig. Sir OthoTiley, Arthur (Bradford, W.)
Longden, GilbertProudfoot, WilfredTurner, Colin
Loveys, Walter H.Pym, FrancisTurton, Rt. Hon. R. H.
Lucas-Tooth, Sir HughQuennell, Miss J. M.Vaughan-Morgan, Rt. Hon. Sir John
MacArthur, IanRamsden, JamesWakefield, Edward (Derbyshire, W.)
McLaren, MartinRawlinson, PeterWakefield, Sir Wavell (St. M'lebone)
Maclean, Sir Fitzroy (Bute & N. Ayrs.)Redmayne, Rt. Hon. MartinWalder, David
Maddan, MartinRees, HughWalker, Peter
Maginnis, John E.Rees-Davies, W. R.Wall, Patrick
Markham, Major Sir FrankRenton, DavidWard, Dame Irene
Marten, NeilRidley, Hon. NicholasWebster, David
Matthews, Gordon (Meriden)Ridsdale, JulianWells, John (Maidstone)
Mawby, RayRoberts, Sir Peter (Heeley)Whitelaw, William
Maxwell-Hyslop, R. J.Robinson, Sir Roland (Blackpool, S.)Williams, Dudley (Exeter)
Mills, StrattonRoots, WilliamWilliams, Paul (Sunderland, S.)
Montgomery, FergusRopner, Col. Sir LeonardWilson, Geoffrey (Truro)
More, Jasper (Ludlow)Scott-Hopkins, JamesWise, A. R.
Morgan, WilliamSeymour, LeslieWolrige-Gordon, Patrick
Nabarro, GeraldSharples, RichardWoodhouse, C. M.
Noble, MichaelShaw, M.Woodnutt, Mark
Nugent, Sir RichardShepherd, WilliamWoollam, John
Orr, Capt. L. P. S.Simon, Rt. Hon. Sir JocelynWorsley, Marcus
Osborn, John (Hallam)Skeet, T. H. H.
Osborne, Sir Cyril (Louth)Smith, Dudley (Br'ntf'rd & Chiswick)TELLERS FOR THE AYES:
Page, John (Harrow, West)Smithers, PeterColonel Sir Harwood Harrison and
Page, Graham (Crosby)Spearman, Sir AlexanderMr. Chichester Clark.
NOES
Ainsley, WilliamHamilton, William (West Fife)Parkin, B. T.
Albu, AustenHannan, WilliamPavitt, Laurence
Allen, Scholefield (Crewe)Hart, Mrs. JudithPopplewell, Ernest
Awbery, StanHayman, F. H.Prentice, R. E.
Bacon, Miss AliceHenderson, Rt. Hn. Arthur (Rwly Regis)Price, J. T. (Westhoughton)
Baxter, William (Stirlingshire, W.)Herbison, Miss MargaretProbert, Arthur
Blyton, WilliamHill, J. (Midlothian)Roberts, Albert (Normanton)
Bowden, Herbert W. (Leics, S. W.)Holman, PercyRobertson, John (Paisley)
Bowen, Roderic (Cardigan)Houghton, DouglasRogers, G. H. R. (Kensington, N.)
Braddock, Mrs. E. M.Hoy, James H.Ross, William
Broughton, Dr. A. D. D.Hughes, Cledwyn (Anglesey)Silverman, Julius (Aston)
Brown, Rt. Hon. George (Belper)Hynd, John (Attercliffe)Silverman, Sydney (Nelson)
Callaghan, JamesJay, Rt. Hon. DouglasSlater, Mrs. Harriet (Stoke, N.)
Cliffe, MichaelJeger, GeorgeSlater, Joseph (Sedgefield)
Corbet, Mrs. FredaJenkins, Roy (Stechford)Small, William
Craddock, George (Bradford, S.)Johnson, Carol (Lewisham, S.)Smith, Ellis (Stoke, S.)
Cronin, JohnJones, Rt. Hn. A. Creech (Wakefield)Snow, Julian
Crosland, AnthonyJones, Dan (Burnley)Spriggs, Leslie
Cullen, Mrs. AliceJones, Elwyn (West Ham, S.)Steele, Thomas
Darling, GeorgeKelley, RichardStewart, Michael (Fulham)
Davies, G. Elfed (Rhondda, E.)King, Dr. HoraceStonehouse, John
Davies, Ifor (Gower)Lawson, GeorgeStones, William
Delargy, HughLee, Frederick (Newton)Sylvester, George
Diamond, JohnLee, Miss Jennie (Cannock)Symonds, J. B.
Dodds, NormanLewis, Arthur (West Ham, N.)Taylor, Bernard (Mansfield)
Donnelly, DesmondLogan, DavidThompson, Dr. Alan (Dunfermline)
Driberg, TomLoughlin, CharlesThornton, Ernest
Edelman, MauriceMahon, Dr. J. DicksonUngoed-Thomas, Sir Lynn
Evans, AlbertMcCann, JohnWainwright, Edwin
Fernyhough, E.McInnes, JamesWarbey, William
Fitch, AlanMackie, John (Enfield, East)Weitzman, David
Fletcher, EricMacPherson, Malcolm (Stirling)Whitlock, William
Foot, Dingle (Ipswich)Mallalieu, E. L. (Brigg)Wigg, George
Foot, Michael (Ebbw Vale)Manuel, A. C.Wilkins, W. A.
Forman, J. C.Mapp, CharlesWilley, Frederick
Fraser, Thomas (Hamilton)Marquand, Rt. Hon. H. A.Williams, Ll. (Abertillery)
Galpern, Sir MyerMendelson, J. J.Willis, E. G. (Edinburgh, E.)
George, Lady Megan Lloyd (Crmrthn)Millan, BruceWilson, Rt. Hon. Harold (Huyton)
Ginsburg, DavidMilne, Edward J.Winterbottom, R. E.
Gordon Walker, Rt. Hon. P. C.Mitchison, G. R.Woof, Robert
Gourlay, HarryMonslow, WalterYates, Victor (Ladywood)
Grey, CharlesNeal, Harold
Griffiths, Rt. Hon. James (Llanelly)Noel-Baker, Francis (Swindon)TELLERS FOR THE NOES:
Hale, Leslie (Oldham, W.)Oram, A. E.Mr. Charles A. Howell and
Hall, Rt. Hn. Glenvil (Colne Valley)Oswald, ThomasMr. Irving.