Orders of the Day — 5. Tax Rebates for Exports

– in the House of Commons at 12:00 am on 11th November 1964.

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Motion made, and Question proposed,That prevision shall be made for authorising the Commissioners of Customs and Excise to make payments out of the sums received by them on account of duties of customs and excise and purchase tax for the purpose of affording relief in respect of duties of customs and excise chargeable on hydrocarbon oils, vehicle excise duty and purchase tax incurred in connection with the production, manufacture or carriage of goods exported from the United Kingdom on or after 26th October 1964, for prescribing the conditions for, and the amounts of, such payments, and for supplementary purposes.—[Mr. Callaghan.]

5.7 p.m.

Photo of Sir Alec Douglas-Home Sir Alec Douglas-Home , Kinross and West Perthshire

It falls to the Leader of the Opposition, whatever the content of the Budget, to offer congratulations to the Chancellor of the Exchequer on the conduct of his Budget speech, which is always a great Parliamentary occasion for any Chancellor.

Although this is an autumn Budget, there is little difference, I think, in the ordeal, and I gladly acknowledge the personal achievement of the Chancellor and his success today. Indeed, I envy his facility in presenting rather dubious propositions in the most agreeable possible way. So zealous was he in his theme of taxation as the road to Socialist paradise that there flowed into my mind the response of the prisoner in the condemned cell to the parson, who said, "Doubtless I shall inherit eternal bliss, but do not let us talk about anything so depressing". The right hon. Gentleman fulfilled his task very well and I hope that the First Secretary, who is seeded No. 1 in this contest between the Economic Ministers, agrees with me as well.

If I must talk on the context of the Socialist Budget, there are a few preliminary reflections I might make before my right hon. Friend the Member for Barnet (Mr. Maudling) replies to the right hon. Gentleman in full tomorrow. First, I cannot really accept the right hon. Gentleman's proposition that this Budget was necessary because of the balance of payments position. I cannot agree that the revenue proposals which he put forward to operate now, and those which he forecasts for another Budget next spring, have anything to do with that at all. The surcharge—yes. The exports incentive proposals—yes. The Govern- ment have chosen their own methods to deal with the balance of payments problem, but they have very little to do with the Budget which the right hon. Gentleman produced today.

Nor do I think that this Budget was necessary because of pressures on the internal economy. In fact, the Government themselves said exactly the opposite, only a very few weeks ago. Paragraph 7, if I remember aright, of their White Paper on the Economic Situation said, in effect, that there were no undue pressures on the internal economy and that they had no proposals to make in this respect. Today, the Chancellor admitted that there was a problem here which had been brought about by the import surcharges themselves—that these, in turn, would lead to increased pressures on home supplies. There I am inclined to agree with him, and, therefore, I was glad to hear from him once more that these would be only temporary and of as short a duration as he could make them.

The truth is that this is a Budget to raise revenue for social purposes and to raise it by increased taxation. I dare say that this may be justified, but this is the fact; this is why the Budget has been introduced. Let the right hon. Gentleman face it and give the natural and proper explanation.

This is not, if I may say so to the Prime Minister and the Chancellor, what was forecast to the country only a very few weeks ago. I recall that we in the Conservative Party said that if a Socialist Government were to be in power this would mean heavy increased taxation. I recall my right hon. Friend the Member for Barnet making a particular forecast of what might or might not be necessary to pay for their schemes, and I remember the protests which were immediately made by the Chancellor of the Exchequer and his right hon. Friend the Prime Minister.

Perhaps he will not take it amiss if I remind him of what he said. At Cardiff, in reply to my right hon. Friend, he said: The whole basis of our case is that increased social expenditure will he financed out of the growing expansion of British industry". Nor did the Prime Minister correct him. The Prime Minister said: Over the period of a Parliament, in our home programme for expansion we can do all this out of the increment of current production. On television he repeated himself, and said: Over the period of a Parliament I believe we can do it without any general increase in taxation. [HON. MEMBERS: "Hear, hear."] Right hon. Gentlemen opposite cheer, but if this is not a general increase in taxation to which we have listened today, I do not know what is.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

Would the right hon. Gentleman say that, in view of the situation which we have inherited, the pensioners should wait?

Photo of Sir Alec Douglas-Home Sir Alec Douglas-Home , Kinross and West Perthshire

If the right hon. Gentleman has a little patience I will come to that. I am simply saying that he made this statement that their programmes could be fulfilled without resort to a general increase in taxation. If the petrol tax and the Income Tax are not a general increase in taxation, I do not know what is. I do not know how the electors, particularly those who have had no experience of Socialism in the past, could reckon that within weeks a Budget would be introduced into the House for the express purpose of applying new and general taxation.

We are told—and this is true—that this is to finance certain social services. One is pensions and the other is the abolition of the prescription charge. Like hon. Members opposite, we were pledged to raise the basic pension, and, what is more, we were pledged to give a supplement for the older pensioners. It has been admitted by the right hon. Gentleman—I hoped that he was getting somewhere near it in suggestions which he made—that there might be allowances for pensioners probably over the age of 65, or something of that kind.

We ourselves are certainly pledged to this, and we welcome the fact that the old-age pensioners and war pensioners are to get more. But I remind hon. Members and right hon. Members opposite of the promises which they themselves made about pensions, and particularly one which was mentioned yesterday by my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter). This is one of the promises which no doubt the Prime Minister will recognise: That is why I pledge the Labour Government to urgent action to deal with this problem with the humanity which has been lacking, to ensure each a guaranteed and adequate income below which they will not be allowed to fall and to have it without recourse to National Assistance. This is an advance for the old-age pensioners, but I think that they will feel that the result has fallen far below the promise.

Photo of Sir Alec Douglas-Home Sir Alec Douglas-Home , Kinross and West Perthshire

We are, I take it, to have a general debate, and I do not want to take up too much time this afternoon.

I am saying that as we have seen it now—and I believe that the country will note this—we have seen only the tip of the iceberg of Socialist taxation, and it is a rather cold and uninviting prospect.

I think that the right hon. Gentleman said that the relief from the prescription charges is included in his £130 million. I believe that those who go to a doctor or chemist for this purpose, if they considered the choice which has been given, of this concession and of crippling the British aircraft industry, would conclude that the Government have their priorities wrong.

The real test of the Socialist Government will be to see the effect of these Socialist actions on prices. The First Secretary emphasised the other day the importance which they attach to holding prices. The right hon. Gentleman mentioned it again today. I remind him that when the Socialist Government were last in office the proportion of the nation's wealth which was taken in taxation was one-third. We were able in 12 years to reduce it to a quarter. Now the process is being started again, and we are returning—[HON. MEMBERS: "No."] If hon. Members check these figures they will find that they are right.

We are returning again to a state of affairs in which a higher and higher proportion of the national wealth looks like being taken by the Socialist Government in taxation. I believe that these two charges—the Income Tax, against which we have voted, and the petrol tax, which comes in the cost of every business and every industry—are not taxes which should have been applied at this moment for these purposes.

Both the First Secretary and the Chancellor set store by the body which will be asked to hold rising prices. That is all very well. So far, we are told only that they will "discover and examine the facts", but examining the facts will not get us very far towards holding prices steady when in one manufacturing industry after another, or one retailing industry or shop after another, the need for higher prices will be justified in future by the forces of inflation which a Socialist Government have unleashed.

My final reflection is this. The Chancellor today talked almost more about a future Budget than he did about the Budget which he was presenting to us. He talked about an element of social justice in the economic and financial proposals and outlook of the Government. I marked this down in particular, because the same thing was said by the Lord President of the Council within the recollection of hon. and right hon. Members yesterday when, talking about an incomes policy in particular, he said that it has to be seen to be fair, and seen to be fair by both sides.

The Chancellor of the Exchequer, I was glad to hear, confirmed this afternoon that this was his intention. I was, therefore, very glad that, before he embarks on a capital gains tax or anything of that kind, and before he begins to consider the details of his corporation tax, he has rejected the advice which he must have had from many in his party that he should take a swipe at the profits of industry and the capital which is necessary for expansion, because to tax profits before it was proved that wages and salaries were being held within the rate of growth of productivity could not be described as social justice.

I was glad to hear that the Chancellor intended to take his time, and perhaps we shall know a little more about the chances of the Government getting an incomes policy which will really work before ha comes back with proposals for a capital gains tax or anything in the nature of a corporation tax. The right hon. Gentleman mentioned distributed profits. Again, I hope that before he decides to take any action in this respect he will reacquaint himself with the findings of the Royal Commission on the Taxation of Profits and Income in this respect, from which I should like to read a short passage.

The Commission said: The mere retention of profits cannot be rated as an economic advantage. On the contrary, it would better serve the public interest that a company should be encouraged to distribute those profits which it cannot put to fruitful use in order that there may be a chance that they may be invested effectively elsewhere. I hope that the right hon. Gentleman will take note of that finding. What is needed in this respect is that the Socialist Party should modernise its attitude towards capital and profit.

We will, of course, give the right hon. Gentleman's proposals, and particularly those in his forecast, the most careful attention, but this is just the latest in a series of Government actions over the last few weeks which, I am bound to say, I find almost incredible. Whatever the merits may be in the imports surcharge—and I am not at the moment debating that—the Government have managed, through this operation, to create a crisis in E.F.T.A., to alienate our European partners, and to create a loss of confidence in Europe which was quite unnecessary even if they decided to take this action.

They have threatened the British aviation industry with their open hostility to the Concord enterprise. Our European partners are in dismay at this. It has involved threatening to cancel, if not, in fact, cancelling—and I suspect that they will do so—a contract solemnly entered into by the British Government. They have halted the modernisation of British Railways and have today initiated policies on taxation which they indicated to the electors they need never apply.

I do not think that the Chancellor of the Exchequer can escape from a degree of responsibility for the pledges which he and his right hon. and hon. Friends gave to the country during the election campaign. Although they knew that our proposals and programmes fully took up the resources of the nation, nevertheless they added to them one by one time after time. Again, they indicated that they could pay for these without increased taxation, and here we are with a Budget applying heavy taxation to a wide section of the people. They have only themselves to blame, therefore, if the earlier enthusiasm for a Socialist Government is very quickly dissipated in disillusion.

Photo of Mr Harold Wilson Mr Harold Wilson , Huyton

The right hon. Gentleman would not give way earlier. Will he now answer this question? Having heard the Chancellor's figures, does he now still feel that the economy of the country has seldom, if ever, been stronger? If the right hon. Gentleman admits to having misled the country on this, will he say whether it was deliberate or because he did not know any better?

Photo of Sir Alec Douglas-Home Sir Alec Douglas-Home , Kinross and West Perthshire

I saw the right hon. Gentleman fidgeting during my speech, but I did not know that he wanted to interrupt. I find it very easy to answer that question. The economy of the country is basically strong. The right hon. Gentleman himself has said so. I could almost quote the words to him, although my memory of his speeches is not quite as good as his memory of his own speeches.

As I say, the economy of the country is basically strong, and, if the right hon. Gentleman wants my honest opinion, right hon. and hon Members opposite need never have created the atmosphere of crisis which they have created in recent weeks.

5.26 p.m.

Photo of Mr John Horner Mr John Horner , Oldbury and Halesowen

I would not have risen after the main speeches in this debate if I had not felt obliged to add one or two points to what my right hon. Friend the Chancellor of the Exchequer said about the need for an incomes policy. Before I come to those points, I should tell the Committee that I am here representing the constituency of Oldbury and Hales owen which for so many years sent Arthur Moyle to the House of Commons.

I first met Arthur Moyle many years ago when I was a very young trade union official. He gave me unstintingly of his advice and much wider experience, and we have been friends for a quarter of a century. I am sure that hon. Members on both sides of the Committee will agree that Arthur Moyle is one of the kindest and warmest-hearted of men. The example which he has set me in serving his constituency is one which I shall find it difficult to equal but which I shall seek to follow.

My constituency is a Black Country constituency, and it seems to me that it contains in microcosm most of the problems to which the Government have set their hands. The old traditional crafts of the iron trade are followed in it, and hon. Members may be interested to know that it was but a few years ago that the last woman chainmaker of Cradley gave up her work on her own domestic hearth. Nine-tenths of my constituents earn their living from using iron and steel, and I am sure that our earlier debate will be of profound interest to those men and women who are concerned with making available cheaply a constant and expanding supply of good-quality iron and steel from this country's own resources.

It is a constituency where one can see the Industrial Revolution on the ground. It is also a constituency which is becoming a commuter area, to Birmingham and to the enormous industrial establishment of the British Motor Corporation at Longbridge. We see here new industries—plastics and chemicals, Tube Investments. We have the firm of Accles and Pollock there making all kinds of tubes. Very proudly, in rivalry with an American firm which recently sent Accles and Pollock the smallest tube in the world, that firm sent back that smallest tube with another threaded through the bore of it.

In Oldbury and Halesowen we see the new Britain emerging from the old. The scars of the Industrial Revolution, the slag heaps and the old disused pit areas, still remain. I think it worth noting that one of the problems which confronts us there is the nuisance of industrial noise, Men and women, to whom 30 or 40 years ago the same noise was welcomed for the work which it produced, are no longer willing to put up with the nuisance and inconvenience of having to live in old houses next door to forges and foundries—I think that this is a good sign—but work remains hard in my constituency. In those same foundries and forges men graft for their living at wages which compared to modern rates are comparatively low. There is no aspect of the economic policies which we have had adumbrated in the House during the last two weeks but which has an immediate and direct effect on my constituents who look forward eagerly to the practical unfolding of these policies.

It is with considerable temerity that I follow my right hon. Friend the Chancellor in his Budget speech, in the course of which he touched upon incomes, and also the speech of the right hon. Member for Perth and Kinross (Sir A. Douglas-Home). At last in this matter we are getting our definitions clear. We no longer talk about a wages policy. As far as I can remember, there has always been a wages policy in this society. The job of the trade unions has been to get as much as they could for their members in all circumstances and on every possible occasion. That is why workpeople pay their contributions to the trade unions.

The boss would always freeze their wages. They have no need to await a wages policy of that kind. The rôle of the employer, it seems to me, was to pay as little as he could possibly get away with. This has been the traditional wages policy in our society for as long as anyone in the Committee can remember. Twenty years ago, Comrade Donaldson—[Laughter.] As an ex-matelot, Commander Donaldson, let me declare my close affinity. As I was saying, 20 years ago the T.U.C. gave some consideration to the sort of society that was emerging from the war, and it stated its position very plainly. It said that it would be prepared to co-operate with a Government which was sympathetic to the social objectives of the trade union movement. I will not read to the Committee the somewhat wordy pronouncement of the Trades Union Congress at the time.

I think the Committee realises that, whatever our decisions, we cannot legislate for wages in this country. We cannot, with legislation, cut across the whole fabric of the collective bargaining machinery that has been built up over the last half century. We can, of course, disrupt it, but we disrupt it at our peril, as I hope to show in a moment. We live in a democratic society and we must accept that any incomes policy, if it is to survive, must stem from and must develop within the framework of the collective processes of present-day industrial relationships.

I congratulate my right hon. Friend the Chancellor of the Exchequer and the Government for tackling what is clearly going to be the biggest job which faces them. I say to my right hon. Friend and to the Government that I think that in this case it is wise to make haste slowly. What are we after if, in fact, we cannot legislate on wages? I heard a reference to the climate of opinion in this country. We are seeking to create a climate of opinion in which trade unions and trade unionists will evolve a general understanding between themselves and the Government and one in which wage claims in total shall bear some relationship to the anticipated growth of the economy. With a Government whose social aims are akin to those of the mass of trade unions and trade unionists, in this mental climate the trade unions and trade unionists will agree that they will exert less than their full bargaining power in conditions of full employment. That is the sort of mental climate we are seeking to establish, and the question is whether it is, in fact, possible to bring about such a climate. It might be so.

What I think is clear is that if it is just possible now to begin to work towards that objective, hitherto it has been quite impossible to do so. I think that hon. Members opposite must have some difficulty in fully appreciating the enormous damage that was done to industrial relations in 1961 and 1962 by the pay pause, and the deep and bitter feeling which was created over wide masses of workpeople, not only in the Civil Service and public services generally, but outside and those not directly affected by Government employment.

At that time I was at the receiving end. I witnessed the rupture of negotiated agreements, the brutal brushing aside of collective bargaining, of machinery which had taken so many years to build up, until we began to witness the threat of a combined revolt of the teachers, nurses, firemen and civil servants. In those bitter months I just could not tell the firemen that the balance of payments in Britain was so precarious and that our economy was on such a razor edge that the wage agreement and settlement at which they had arrived with their employers, the local authorities, had to be put in cold storage, that they had to forgo any wage increase, and that, moreover, if the local authorities, in seeking to honour their undertaking to the firemen, dared to pay the increased wages under the agreement, those local authorities would be in danger of financial sanctions imposed by the Government by way of the withdrawal of Exchequer grants.

People have long memories. When in the bloody winter of 1940 and the terrible spring of 1941, night after night friends of mine in the London Fire Service saw the city destroyed and tens of thousands of acres of London ruined, I think we are entitled to ask ourselves whether those same men, after going back to their fire stations every morning, would have come back night after night throughout those months with the same morale and the same determination to do their duty if they had felt that out of the ruins which Hitler was leaving behind 20 years ago there would be rich harvestings and pickings for land speculators and property dealers. Indeed, I think that this Chamber, which I saw, as many did, the morning after its destruction, must have been one of the few buildings in London to be rebuilt without giving any excess gain to the speculator.

The men who remember these things were the same men who witnessed the scandal of tax-free gains for the land speculator at a time when they were being asked to forgo their own wage increase. One could not possibly hope for anything but the most violent opposition from trade unions when they saw wage and salary earners being treated, as they were three years ago, as the one factor adversely affecting Britain's economy, on their shoulders being put the burden of economic disarray.

It seems to me, from what we have heard from the Chancellor today, that we are beginning to take the right steps, we are beginning to move along the way which may produce the sort of mental climate and general relationship between trade unions and Government which we earnestly hope to see established. Of course, trade unionists want to be sure that, when they get a wage increase, they get an income increase, but, as the Chancellor reminded us, they know equally that a wage increase surrendered is an increase gone for good, while a dividend restraint can prove to be a future capital gain. By his statement this afternoon, my right hon. Friend has shown that it is possible to follow a course to create the sort of conditions in which, I believe, it might be possible for the trade union movement to accept an incomes policy.

What are the conditions? First, demands must not be made upon salary and wage earners alone. No longer must they be regarded as the sacrificial lamb. Tax evaders, land speculators and capital gainers must all come within what I call the general circumference of action. Second, advantages which accrue from economic expansion must be channelled into social benefits. I welcome, as we all do, my right hon. Friend's statement on pensions. As regards health, I do not know what old-age pensioners in my constituency will think about the Concord project, but I know that a man who falls ill and comes off his basic earnings on to National Insurance benefit will welcome the Government's decision to relieve him of the additional burden of prescription charges. I doubt that, when he goes to the chemist, he will even have in his mind the thought that he would rather have a piece of the Concord than free drugs. Therefore, I emphasise this second condition, that advantages which accrue from industrial and economic expansion must be channelled into social benefits, so that the real living standards of trade unionists, not only individually but collectively, are seen to rise. In the Chancellor's speech today, I feel that we may have the beginning of such a policy.

I conclude by making, within the ambit of what I call the general circumference of action, a special plea for public servants, the people who have had the sticky end of things these last few years. I believe that there is a general consensus of opinion now that people like nurses and teachers, people whose productivity cannot be correlated on a bonus or piecework system and who have not shared in the general expanding prosperity of recent years, deserve special attention.

All of us who have thought about an incomes policy know that, within the general circumference, there are many detailed and complex problems to be settled. I shall not bore the Committee with them today. They can be dealt with. The job is to create the necessary climate of opinion. When this subject was last discussed at the Trades Union Congress, about 18 months ago, the general secretary of the Transport and General Workers' Union, as he then was—he is now charged with other duties—said: When we have achieved a measure of planning and a Socialist Government, if I have to say to my members, We must now exercise restraint', I will say it and, when I say it, I will mean it". The Government know that among the trade union movement, among the millions of trade unionists, there is an enormous fund of good will towards them. The Chancellor's statement today will strengthen that good will. All of us wish him well in his task of formulating an incomes policy which will work.

I am grateful to the Committee for listening to me. I felt that these were points which I was bound to make.

5.47 p.m.

Photo of Sir Robert Cary Sir Robert Cary , Manchester, Withington

It falls to me, on behalf of hon. Members on both sides of the Committee, to congratulate the hon. Member for Oldbury and Halesowen (Mr. Horner) on the excellent and informative maiden speech which he has just delivered. When he comes to know Parliament a little better, he will discover that one of the most likeable characteristics of the House of Commons is that it has a short memory for a bad speech but a long memory for a good one. The hon. Gentleman falls effortlessly into the long memory category, and we shall look forward to the contributions which he may make to our discussions in the future.

I have a personal interest in the hon. Gentleman because he succeeds an old friend, Arthur Moyle, who for so many years represented his constituency. Arthur Moyle was a good House of Commons man. He served it well, and he devoted his energies here at one time, as Parliamentary Private Secretary, to the interests of a distinguished Prime Minister. He made countless friends on both sides of the House, In retirement, he happens to be a close neighbour of mine in Kent, and I shall, therefore, be able to give him an eye-witness account of how well his successor at Oldbury and Halesowen discharged his task this afternoon.

Although he is absent from the Chamber at the moment, I offer my congratulations also to the Chancellor of the Exchequer on succeeding to his great office. Over the years, I have become so used to thinking of him as the "shadow" Chancellor that it will take me a little time to become accustomed to the knowledge that he has achieved the substance of that office. Now, as the occupant of No. 11, Downing Street, he will discover the truth of the old adage that it is better to travel hopefully than to arrive.

I welcome the Chancellor's proposals on pensions. For some years I have been the Parliamentary chairman of the British Limbless Ex-Servicemen's Association. No part of the pension plan put forward by the Chancellor did I welcome more than the additional benefit that he will give to the 100 per cent. disablement pensioners. Some hon. Members may recall the Motion I had on the Order Paper earlier in the year in which I asked the Ministry of Pensions to set up a comprehensive inquiry into all the circumstances of the pensions and benefits of the members of B.L.E.S.M.A. No doubt this benefit would have come from that inquiry. If when the inquiry is completed the Chancellor could add to the benefits that he has now given to the 100 per cent. disablement pensioner, nobody would welcome it more than me.

I also welcome what the Chancellor has given to old-age pensioners. All candidates at the General Election received exactly the same questionnaire from the Old Age Pensioners' Association. The first question had to be answered by us all. It was whether we thought that £3 7s. 6d. was an adequate pension for a single person. The answer is "No". I said that I would like to put it up to £5, but that—this is essential—if I took such a step I would ensure that the £5 had the same purchasing power as the £3 7s. 6d. which it replaced. In the concessions which he has given to the elderly, the Chancellor has to fight again the same old battle with inflation.

As to the general aspects of the Chancellor's speech, I would say that the first outcome of the "100 days" is to place a substantial amount to increasing the cost of living. In my opinion, a substantial increase in the cost of living is inevitable. I cannot in the limited time available cover the whole range, but perhaps I might cite one example, and that is the surprising action of the Chancellor, in trying to find the wherewithal to meet some of the new obligations that he has entered into, in imposing an additional 6d. taxation on a gallon of diesel oil, when the Labour Party is pledged to reduce that aspect of taxation. I take the right hon. Gentleman's mind back to the cost of living Budget in April, 1958, when the then Government gave a concession of 2d. off beer, and the bus fare, which was also in the cost of living index, was given no benefit. Hon. Members opposite complained bitterly and pledged that if they ever enjoyed a period of office, one of their first duties would be to examine and reduce the tax on dery, by means of which most of our vehicles operate on the roads.

The net result of the 6d. addition to the cost of fuel will inevitably mean a rise in fares. I will give two examples. Manchester Corporation is paying no less than £700,000 to £800,000 a year in fuel tax, and this imposition will certainly put that payment up to nearly £1 million. A very large company which I operate pays nearly £200,000 a year in fuel tax. One benefit that I thought we should get from the Government was a reduction. But I shall now find myself paying not £200,000 but £250,000 in fuel tax as a result of this proposal. This is only one aspect. Take the 12s. 6d. given to the person who is now drawing £3 7s. 6d. The extra fuel tax will tend to increase the fares which the individual will have to pay in spending the extra 12s. 6d. What is the advantage? This is really the same stop-go policy again. One could elaborate on this unendingly.

Has the Chancellor brought to the Committee anything basically new, refreshing or dynamic? He never once mentioned inflation, which will be the most important thing that he has to fight. He opened his statement by saying that his duty was to maintain the autumn Budget and to battle with the balance of payments situation. The balance of payments situation is not a novelty created by my right hon. Friends when they governed for 13 years. It is a problem and a battle which always has to he fought by the country. It goes on unendingly. Throughout all my time in political life the battle over the balance of payments has continued. Our actual trading balance has always been in deficit, but our invisible exports have generally brought us safely into harbour.

I have figures from right over the years beginning with 1919 and ending with 1963, and the pattern is exactly the same. In 1920, the year of the coal strike; in 1931, when we had to borrow £40 million in gold from the Prime Minister of France to help us with our balance of payments problems; in 1947, when there was devaluation by Sir Stafford Cripps—let us always remember that the greatest wound ever conferred on the £ sterling was the devaluation by Sir Stafford Cripps—the pattern has been exactly the same. Right hon. and hon. Gentleman opposite, in trying to create prejudice against their political opponents, keep on talking about this desperate problem as though we had been betraying the nation. In their campaign they constantly denigrated the then existing Government, talking about the most frightful crisis and betrayal, and all this on the basis of something conventional which we have lived with all our lives—the balance of payments problem.

I have had friends ask me—I do not know whether it is because my surname, an ancient Devon surname, brings something into their imaginative embroidery and reminds them of a street not far from this building—whether things are really all right with Great Britain and whether the country will go down the hill. If one thinks of Great Britain as an individual going to that street and appearing before the Registrar in Bankruptcy, I think one would give a very fine, very splendid, account of the individual. I deplore the action of hon. Members opposite in trying to create political prejudice against the previous Government, suggesting that Britain's credit is steadily going downhill. Right hon. and hon. Gentlemen opposite did the country a grave disservice in the campaign they conducted leading up to the General Election.

What are the facts? Perhaps I might give a quotation from The Times of 9th March this year: Most people, if asked whether Britain was not a debtor or creditor in the world, would have little hesitation, with memories of regular sterling crises and loans from the United States and the International Monetary Fund, in putting her firmly in the red. They would be wrong. For too long attention has been rivetted month after month on the fluctuations in the gold reserves and on the fact that Britain's short-term liabilties (generally known as the sterling balances) are far bigger than her immediate means of payment. Yet behind the gold reserves stand an impressive array of securities as well as massive investments in property, factories and natural resources all round the world. When all the assets and liabilties are put together, as the Bank of England has now done for the first time … Britain appears as a net creditor to the tune of at least £1,600 million. That is the position that the Chancellor of the Exchequer inherited from his predecessor. I deplore the constant nagging, by right hon. Gentlemen and hon. Gentlemen opposite, of the economy and of political opponents—implying that some frightful betrayal was carried out during our innings in office, particularly during the last few years.

The Chief Secretary to the Treasury knows full well that the Government have had to pay a big price to get even the limited majority they hold and I hope that they may cease to taunt my right hon. Friends, who had their own plans to meet this situation and would have met it in their own way. Certainly I do not think that my right hon. Friend would have gone about it in the clumsy way proposed by the Chancellor of the Exchequer today.

A point concerning the import surcharge arises in my own constituency in Manchester. The Chief Secretary to the Treasury was himself a distinguished Member for that city, representing a Manchester seat, and I ask him personally whether immediate steps cannot be taken in this case. Hexachlorophane, which is imported, has had the 15 per cent. surcharge imposed on it. It is used in hospital products by Atlas Laboratories in Levenshulme, Manchester. The firm writes bitterly to me to complain that, while the Government claim that the surcharge applies to nonessentials this product is essential for daily use in hospitals and may, in terms of cross-infection, mean the difference between life and death.

Yesterday the hon. Member for Stockport, South (Mr. Orbach) made his second maiden speech and I enjoyed it. He referred eloquently, and in terms not overdrawn, to the Stockport Hospital where, in a ward designed to accommodate about 30 patients, no less than 72 are now crammed. If products needed for cleanliness in hospitals are so essential under normal conditions, how much more vital are they in the terrible conditions the hon. Member described?

Photo of Mr Maurice Orbach Mr Maurice Orbach , Stockport South

Has the hon. Gentleman made any inquiries as to whether this chemical can be made in this country?

Photo of Sir Robert Cary Sir Robert Cary , Manchester, Withington

I do not want to elaborate on the letter but it makes it clear that this chemical can only be obtained abroad and therefore must be imported. After our discussion today, I shall take this letter to the Chief Secretary to the Treasury. I hope that he will put it in the right place for reasonably prompt attention and I trust that I shall have the privilege and pleasure of writing to the firm to say that I have succeeded in getting the surcharge removed from this product, even by a Socialist Government.

6.4 p.m.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

Like most new Members, in composing my maiden speech I naturally gave great consideration to the subjects I felt to be concerning my constituents most. While they want to improve their standard of living, or at least maintain it, the people of Heywood and Royton, like Lancashire folk generally, are, above all, sensible people who realise that, in this context, the most important need of all is the achievement of a sound economy. The achievement of a sound economy is clearly impossible without an incomes policy and that itself is a non starter without a very different and very much fairer tax system. I am therefore very pleased indeed with my right hon. Friend's Budget statement.

Like most right hon. and hon. Gentlemen, I welcome the increases in pensions and I was particularly interested in the comments of the Leader of the Opposition and his hon. Friends. I wondered, if they wish to have the pensions increased, how they would propose to pay for them. I also wondered whether an increase brought in by them, had they remained the Government, would have been met by a regressive form of taxation, as in the past—by increasing, for example, Purchase Tax—in preference to the way decided upon by my right hon. Friend—a progressive form of taxation through an increase in Income Tax.

I want to address the Committee from my own experience as an accountant in practice. One of the worst results of our present tax system is the shocking waste of human resources. We have men spending a great deal of their time and early professional careers in excellent training but who go on to waste time on negative aspects of their work—this applies particularly to those in practice—in dealing with taxation problems instead of being engaged on the more fruitful task of helping companies to increase their productivity and efficiency.

Perhaps my right hon. Friend the Chancellor of the Exchequer will consider ways of encouraging companies to engage accountants, whether full time or on a consultancy basis, to give companies the sort of information which is too frequently lacking, particularly in the case of smaller companies which, I understand, most fall behind with exports. This encouragement might be given by a form of investment allowance for the use of accountants in the ways I have suggested, as is done now for new plant. I know that there have been many objections to the granting of capital allowances for human beings, but my suggestion is rather different as there would be no question of considering wastage, as happens with capital allowances, by way of initial and annual allowances.

That, however, is only one side of the coin. We must see that more men are available to do something about the time wasted in taxation affairs. There is a constant battle with inspectors of taxes. Incidentally, in referring to that, I cannot help thinking that, at an earlier period in my career, and given Parliamentary privilege, I might have been very much tempted to say some things about tax inspectors that I might perhaps have regretted. But now I am glad to pay tribute to these men and women, who uphold standards which many countries would be highly delighted if we could export to them.

That is not to say that the inspectors cannot sometimes be very difficult. They can. They can also be somewhat callous. As an example, I quote the case of an inspector who wrote to me a little while ago saying that he regretted to hear of the death of a client of mine but added, "Would you please have his widow complete the attached Income Tax return?"

A great deal of the trouble is not that accountants do not get on with inspectors, but that, particularly those in practice, spent far too much time dealing with the problems of tax avoidance and tax evasion. I am sure that the difference will be well known to hon. Members, although especially on expense accounts it is sometimes very thin. It has been described very aptly as the thickness of a prison wall. Accountants can submit accounts with many millions of £s turnover and have them agreed with the inspectors overnight, only to go on for months arguing over a comparatively small amount of what is termed "private benefit."

On this question of expenses and the proper taxation of what is termed the "private benefit element"; I am sure that most hon. Members would agree that there is much abuse, but at the same time I know taxpayers who would rather pay extra tax than be subjected to the sort of "third degree" which it is sometimes necessary to inflict under the present system. For example, the Committee can perhaps imagine what a client says when a member of my staff asks him where he went at the weekend and how many miles he did in the company car. The inspector asks, as he is perfectly entitled to ask, about the entertainment expenses, the names of the persons entertained, with the dates. Apart from the time taken by my office and the director concerned, when this first happened I had visions of some clerk in some Revenue office somewhere doing a great deal of research and crosschecking to come up with the vital information that Miss A of XYZ Limited was entertained by 26 different people all at the same time. I can put the minds of hon. Members at rest, for I understand that no such cross-checking takes place. However, it must be obvious to most people that we need a new tax system.

That is why I was delighted to hear my right hon. Friend the Chancellor of the Exchequer. We need a tax system fairer and clearly seen to be fairer to those millions on "Pay As You Earn" who are taxed on every hour of overtime and who feel with some justification that they are getting the worst of the present tax system.

On this subject of the need for a new and much simpler tax system, I should like to refer to the 1955 Report of the Royal Commission on the Taxation of Profits and Income and in particular to the minority dissenting Report which was signed by three members of the Commission including George Woodcock and a Mr. Kaldor. In passing, I should like to say how repugnant have been some of the comments about Mr. Kaldor and the other distinguished economist, Mr. Balogh, who are at present advising the Government. This is petty criticism. Of course we have many fine British economists, but is it seriously suggested that we should select on a nationality basis, as happens in the United Nations, for example? My own brother-in-law, a very fine young British economist, is at present with U.N.E.S.C.O. in Pakistan, but he has been turned down for other excellent positions inside the United Nations for no reason other than that the British quota is full. I hope that we can steer clear of the sort of comments we have heard if for no other reason than that they have somewhat distasteful undertones.

Paragraphs 117 and 118 of that Minority Report recommend a much broader base for assessing profits. This would make for a tax system very much simpler to administer. It would eliminate a great deal of the waste I have mentioned, but carried out unilaterally it would be difficult for our own companies, particularly those engaged in exports. We must have international co-operation. The Minority Report asked for the United Kingdom to press in the United Nations and other international bodies for just such a new system. Now that one-third of the signatories of that Minority Report is a Government adviser, I hope that he will press the Government for a start to be made in this direction.

With a fairer and simpler tax system, we could make a great start towards achieving an incomes policy, which is basic to our whole economic structure. If we could eliminate the need for so many tax experts and could use accountants where they are most needed, we could improve the efficiency of our industry. For in this way only can we increase our productivity and obtain the resources which all hon. Members want us to have to help us to increase pensions and to pay for the hospitals, health services, schools and so on which the people of my constituency and the country as a whole so much need.

6.16 p.m.

Photo of Major Sir Henry D'Avigdor-Goldsmid Major Sir Henry D'Avigdor-Goldsmid , Walsall South

The hon. Member for Heywood and Royton (Mr. Barnett) has made a very attractive maiden speech. I think that all maiden speeches are attractive, but this was particularly endearing in that the hon. Gentleman spoke a great deal about the issues being debated today, and I am bound to say that many maiden speeches do not have that advantage. I shall revert to some of the things he said because they tie up with something I have in mind. I should first say that although we are pleased to see the hon. Gentleman here, the pleasure is modified by the loss of our former colleague, Mr. Tony Leavey, who had many friends on both sides of the House and who spent some eight or nine valuable years here. I wish no ill to the hon. Member in saying that we hope that we shall shortly see Mr. Leavey here again.

I should like to disabuse the hon. Member on one matter. He talked about the simplification of our tax system. The Chief Secretary to the Treasury belongs to the same eminent profession as the hon. Gentleman. He has been in the House a good many years and perhaps he can take his hon. Friend aside and tell him that this Utopia of a simplified tax system does not yet even come into the dreams of those now conducting affairs.

I pay my tribute to the Chancellor of the Exchequer who made his Budget statement today in his usual forthright, honourable and direct style. We on this side of the House have had the pleasure of sitting opposite him for a number of years. Personally, I have sat not exactly opposite but vis-à-vis him in more financial debates than I care to remember. He has always performed well. He says what he means and although he does not always quite understand what he means, he says it in a way which gets it on the record for keeps, and that is a great advantage, as we know in this place.

We have had an interim measure put before us today. A good deal of attention has been directed to plans for future taxation, but I shall not dive into those because they are matters about which one is liable to be misled unless one has the printed script before one. I cannot believe that a capital gains tax of the importance foreshadowed by the right hon. Gentleman can be adequately explained in a speech of one sentence. I will leave that aside, because we will have the opportunity to revert to it at a later date. Leaving aside all suggestions for future taxation, what do we have?

We have first the fulfilment of a number of election pledges, pledges given with great vigour on many platforms from both sides of the Committee. Most honourably, the Government have decided at the first opportunity to implement what they said, but what they have done is not what they promised to do. The right hon. Gentleman the Chancellor of the Duchy of Lancaster told us yesterday: … there has been no time to mount our income guarantee scheme … it will be necessary to give effect to improved social benefits along traditional lines, which means that National Assistance would be retained for the present…"—[OFFICIAL REPORT, 10th November. 1964; Vol. 701, c. 869–70.] I should like to go into that a little.

During the last election hon. Members on both sides accepted that there were about 6 million people of pensionable age in this country of whom about 1½ million had their pensions supplemented by National Assistance. There was also an unstated number of people entitled to National Assistance who did not make use of it. This is obviously not something about which one can argue. Those 1½ million, who clearly by definition are the neediest proportion of our population, will not benefit by one penny piece from the pension provisions about which we have heard today. As the Chief Secretary very well knows, not until we hear the revised National Assistance Board scales, which, I understand, are to come out at the end of March, will we know whether the 1½ million neediest people will benefit at all from the rise in the basic pension.

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

Did not the hon. Gentleman get the impression that my right hon. Friend the Chancellor of the Exchequer conveyed the idea that the ambulance form of National Assistance would be increased at the same date simul- taneously? There will, therefore, be an increase for those people.

Photo of Major Sir Henry D'Avigdor-Goldsmid Major Sir Henry D'Avigdor-Goldsmid , Walsall South

That bears out what I have said, that until the National Assistance Board scales are published those people will not benefit. This is a real point and it should not be overlooked.

Another very important point is this. We were absolutely clear that the pension had to be increased. However, our opponents said that they would insist on what the Chancellor of the Duchy of Lancaster referred to in his speech, namely, that an income guarantee scheme was on the way which would have no reference to the Assistance Board. Now we see that this has been postponed—for how long we do not know—but it suggests to me that until such time as the income guarantee scheme is mounted these matters will have to be dealt with in the usual way, which is through the National Assistance Board, to which we are prepared to pay tribute but which always arouses from hon. Members opposite cries about a means test. Until this income guarantee scheme is mounted, some element of means test is bound to come into the pension. Therefore, I do not think that the first bite at fulfilling election pledges will, on consideration, prove to be of so much value to the recipients as to warrant the great outburst of cheering which we heard and a vast swing of votes to the Socialist Party.

No one doubts the excellent and honourable intentions of hon. Members opposite. What we call attention to is the possibility of implementing some of the pledges which they gave during the election. I have pointed to one of them. The whole basis of our society and of our social services is that we should have some stability in the value of our money. Great expectations have been raised by the victory of hon. Members opposite at the election—I will not dwell on them; they have dwelt on them sufficiently themselves—that the pensioner will be materially better off in real terms than ever before. Now the responsibility rests fairly and squarely on hon. Members opposite to ensure that the currency in which those payments are made is not a weakened currency—in other words, that they will meet not only their verbal obligation but their moral obligation to satisfy the feelings which their propaganda has generally stimulated.

I want to look at that a little seriously—this is a Budget debate and not a Second Reading debate—to see how likely our currency is to keep its purchasing power in present conditions. [Interruption.] The hon. Member for Dunbartonshire, East (Mr. Bence) has listened to me before; he must do it again.

Photo of Mr Cyril Bence Mr Cyril Bence , Dunbartonshire East

We have heard this before.

Sir H. d'Avidgor-Goldsmid:

Let me make my speech. The hon. Gentleman can interrupt later.

We had in the Chancellor of the Exchequer's speech today indications of a rise of half a point in the cost of living through the increase of the petrol duty, and, of course, there will be consequential changes. But all this is small beer compared with the 15 per cent. surcharge. None of us knows the effect of that, and I very much doubt whether the export bonus will affect the cost of living to any extent, and I do not believe that the Chief Secretary would claim that it will. But there is something much more serious. We are suffering from balance of payments troubles, and the Government are trying to solve them by introducing this 15 per cent. surcharge.

I should like to give hon. Members an analogy which they may understand. If a stout lady wishes to get her weight down, it does not do her much good to put on a tight corset. If she does, the bulk is transferred below the corset. This 15 per cent. surcharge will have the immediate result of reducing imports, but there will be a pent-up demand to be met when the 15 per cent. surcharge is taken off. It is clear that people rely, as they have every reason to rely, on the promise of the Chancellor of the Exchequer that this surcharge will be reviewed in the spring, and re-reviewed in November and, I understand, may then be prolonged for another year. Hon. Members opposite know perfectly well that we cannot go on for ever imposing this 15 per cent. surcharge, which is said to be a temporary measure, and keep face with the nations of the world with which we intend to do business.

Therefore, the surcharge may have an immediate effect, but the cumulative effect will be even greater when it is taken off because of the pent-up demand to which I have referred and because there is no comparable stimulus to exports to carry the weight. I hope that the Chief Secretary will bear this in mind. What the Chancellor of the Exchequer has done by applying this "corset" is to take the weight off the waist and put it round the bottom. Instead of solving the problem in November, it has been postponed until May. But the problem is there just the same.

Photo of Mr Robert Maxwell Mr Robert Maxwell , Buckingham

What is the alternative? Surely the result of the 15 per cent. surcharge will be that some imports will be produced in factories in this country and therefore will not be required. In any case, the hon. Gentleman has admitted that we have a balance of payments problem. That being so, how are we to solve it? What is the hon. Gentleman's solution?

Photo of Major Sir Henry D'Avigdor-Goldsmid Major Sir Henry D'Avigdor-Goldsmid , Walsall South

The hon. Gentleman has not been in the House very long. I do not know whether he has even made his maiden speech. When he has been here a little longer he will know that he has the chance of catching your eye later, Commander Donaldson, and of making these points then. I do not propose to deal with them now. We have postponed dealing with this problem of import surpluses; we have not dealt with it.

I come now to a very much more important question. We have to borrow in order to deal with the current problem. However, as far as I can see, we are having some difficulty in borrowing, or the plan is not going as smoothly as was originally expected. I think that I can tell hon. Members opposite why that is the case. From whom are we borrowing? We are borrowing from other nations of the world who have more funds at their disposal internationally than we have. Are we offering them specific security? We are not. We are promising to repay them when we can. That is the point to which I wish to draw attention. The hon. Member for Heywood and Royton referred to the presence of Professor Kaldor in the Treasury buildings as having attracted adverse comment. I should like to place it on record that I know Professor Kaldor very well. I have a fiduciary connection with him, and I regard him as a man of complete financial integrity and also as a very skilled economist. I do not, however, regard him as a politician. I think the proof of that is in the unfortunate effect that his advice has had on the politicians to whom he has given it. I should like to go a little further. What, in fact, was the advice that he was giving to the people of this country before he got this appointment?

Photo of Mr Jack Diamond Mr Jack Diamond , Gloucester

Before the hon. Gentleman goes further into detailed comment about one of my civil servants who is unable to answer any criticism that is made against him, I hope he will be good enough to bear in mind the usual courtesies we extend in this House to those who cannot speak for themselves.

Photo of Major Sir Henry D'Avigdor-Goldsmid Major Sir Henry D'Avigdor-Goldsmid , Walsall South

There is absolutely nothing damaging to Professor Kaldor that I wish to say. If the hon. Gentleman wishes to comment on it afterwards, I shall be very pleased to hear the comments. On 19th February, 1963, Professor Kaldor wrote in The Times, and it was published for all to see: The British economy is incapable of maintaining high rates of economic growth or continued full employment without either severe import restrictions or devaluation. The introduction of severe import restrictions would run counter to the spirit of the age, to our long-run interest as a trading nation and to our proclaimed international aim to make trade free and less discriminatory all over the world. Sooner or later, therefore, the choice has to be faced between the maintenance of a fixed value of the £ and mass unemployment. These are honourable, straightforward words. I have great respect for Professor Kaldor's acumen and integrity. So, too, I think, have the people who are being asked to lend this money today to bail us out of the present financial difficulties. I feel rather as if I had gone to deposit money in the bank and found a masked bandit behind the bars. This is not the sort of bank in which I might wish to deposit money. I think that having taken him on as principal adviser, the Government must face the fact that this is bound to have an adverse effect on their own credit as far as potential lenders are concerned. That seems to me to be axiomatic.

There is no imputation of sinister behaviour by Professor Kaldor. These are his views as expressed to the public and, as is frequently said in this House, why peer into the crystal when one can read the book? We need not delay to read the book. The book is on record. Hon. Members opposite have to face this. If they follow the behaviour which Professor Kaldor appears to recommend, they are going to do injustice, first, to people abroad who may be induced to lend us money and, secondly—this, I think, is very much more to the point—they are going to let down the people who relied on them to maintain the purchasing power of the increase in pensions which they have granted. This seems to me to be the inescapable dilemma, and it is about time that this position was made clear.

If finally we obtain our loan at the cost of guaranteeing to repay in gold to the people who lend it, I must remind the First Secretary that we still have sterling liabilities of £3,800 million against a gold reserve of some £900 million. If we take a very large chunk of that and earmark it against our last borrowing, it seems that the sterling area as a whole has no cover at all for the facilities that have been given. If there is devaluation, it is at the expense of Australia, New Zealand and a great many countries poorer than ourselves. I ask the hon. Gentleman to bear in mind that devaluation might be a dirty word, but it is one that has to be faced. If we are to maintain our position as a trading nation, we have to say quite clearly that we are not considering anything of that sort, because otherwise the whole promise of a new society will go down the drain in a lot of broken promises.

The Times today, rather unkindly, I thought, abandoned its friend to whom it has been staunch for more than a year and had a leading article headed, "In the Debtors' Court". The first sentence began: Are there any further humiliations in store for Britain?". It commented on the argument with the group of 10 nations in Paris and said, I think rather sharply but not inappropriately: It is easy to break promises and international rules when no further help is needed from other nations. Further help is needed from other nations, and the breaking of international rules does not make sense in these circumstances.

We have had a further humiliation. The President of the Board of Trade indicated that we would make a special concession to the E.F.T.A. countries, but this had to be taken back straight away when he got to Paris and there was a row there. This is the sort of mess that one gets into when one does not think of the normal consequences of the action one takes. I commend that strongly to the Government.

This is not a very fruitful time for debate, but I leave the Government with one last thought. This comes from the concluding speech of the Minister of Power on 9th November. The Minister finished his peroration with these words: It is, therefore, within the power of the people to determine the kind of society in which they wish to live."—[OFFICIAL REPORT, 9th November, 1964; Vol. 701, c. 689.] This is very good stuff from the hustings. In fact, it is no more within the power of the people to determine the society in which they live than it is to determine the weather in which they live. It is not within their power to do either. We can achieve our power of choice within our economic circumstances, but we do not in this country have full control of our economic circumstances. We have to pay attention to the views of other people, and over the last four weeks we have paid extremely little attention to the views of other people. I am honestly, firmly and sincerely convinced that this is not a policy which we can live with, and that this country will, despite its strong position, be humbled, in the words of The Times, if we do not improve the general administration of our financial affairs. We are ordering them very poorly indeed at the moment and it is about time that an improvement was seen. I leave that thought with the Government.

6.40 p.m.

Photo of Mr Derek Page Mr Derek Page , King's Lynn

It is a very great honour to make a maiden speech here for any constituency, but it is doubly gratifying to speak as representative of one of the great historic constituencies of this country. King's Lynn can certainly claim to be that, for this constituency has sent to the House hon. Members of outstanding calibre throughout the centuries. It will be recalled that the first Prime Minister was Member for Lynn—Sir Robert Walpole. While we may envy his personal prowess, we cannot approve his methods of obtaining election, and those have gone by the board long ago.

Coming to more recent times, many hon. Members will recall, among outstanding representatives from Lynn, Fred Wise, who served from 1945 to 1951, who has been of most invaluable assistance to me personally, and certainly to the constituency, and who continued to serve his country with another title in another place. I must also mention the hon. Member who preceded me, Denys Bullard. He certainly set an amazing standard in his care for constituency problems, and if I can live up to, and if possible surpass, the care which he gave to individual constituents, I shall be very well satisfied.

Lynn is a very beautiful town and the countryside around it is one of the most outstanding beauty spots in the country. I remember a few days ago that my hon. Friend the Member for Norfolk, North (Mr. Hazell) spoke at length on the beauties of his constituency—and he has every reason to do so, because it is second only to Lynn.

But we have some very serious problems. We have the ancient Borough of Lynn, with a port and certain industries, and it is undergoing a period of great change. There is an agreement with London to accept overspill over the next two years, but we have run into great difficulties because of the lack of coordination in the planning concerned with this. We have a serious need for more effective planning of industrial expansion in the area. The Lynn Council is constantly bedevilled with the question of whether it can go ahead with the most expensive expansion of public buildings and housing in the belief that industry will follow or whether it should wait for industry to come first and then proceed with the public buildings. This is a very difficult problem. The hospital is grievously overcrowded but the proposal for a new hospital was, a few months ago, put back certainly for five years and probably for longer. This is a grievous burden on the sick and their relatives.

Many of the railway services in the area are under review—and we all know what to expect from that. This seems deplorable when we are expecting the overspill which will certainly need the services. The redevelopment of the town centre will cost millions of pounds, and, here again, the council has a thorny problem to handle. How soon can it expect the burden of interest rates to fall? Can it afford to wait? Should it go ahead now? These are the problems which must be faced. Above all, there is a lack of co-ordination in solving these problems.

The Borough of Lynn itself represents about one-third of the constituency, and two-thirds of the electorate live in the area around the town. The biggest industry is agriculture, and here the biggest problem is in marketing. Agricultural marketing was a question raised again and again during the election. We have a small fishing fleet. It used to be a very large fishing fleet. At one time there were 200 vessels, but the number has fallen to 12, and these are working only two days a week. This is an urgent problem which I commend to the Government's attention.

We all know how grievously underpaid farm workers are, and I trust that this will receive considerate attention. We are very pleased that the Government are pledged to consider the position of tied cottages and the need for sickness benefit schemes for farm workers. Bearing in mind how poorly paid they are when they are working. it is a serious necessity for farm workers to have a sickness benefit scheme.

I am pleased to see various references in the Queen's Speech which should be most welcome in Lynn and which should help to solve these problems. One is the recognition of the need for regional planning. I point out to the Government that the south-east region, within which Lynn comes, is not all booming and super-prosperous. There are patches within the South-East which deserve treatment every bit as considerate as that given to the North-East and Merseyside, and Lynn is one of those areas. We need industry. We need every bit of help in favourable finance which we can get in solving the problems which I have outlined. The railway services from Lynn to Hunstanton are under consideration. The Wells to Dereham line, which ran into the neighbouring constituency of north Norfolk, and which also provided considerable facilities for people in my constituency, has been closed. That is a great burden on the people there. I am pleased to note reference to forthcoming action on agricultural marketing. As I have said, this is by far the greatest problem in agriculture. I sincerely hope that action on the horticultural section will also be forthcoming without delay.

May I turn for a few minutes to some economic questions which have been raised, particularly with reference to the 15 per cent. surcharge. I wish to raise four points. The hon. Member for Walsall, South (Sir H. d'Avigdor Goldsmid) said that Britain was like an overweight lady, and he likened these measures to a corset. That is not a permanent solution, but if a lady finds herself in a tight squeeze, it can help considerably.

The first rule in economics must be to be pragmatic, and the criticisms which I am about to make are made, I emphasise, in a constructive spirit. They are constructive criticisms. I wholeheartedly support the approach adopted by the Government in putting on the 15 per cent. surcharge as a means of easing us through this crisis. I support it, in particular, because I am convinced that the basic cause of our problems is low investment in British industry. If hon. Members look at the figures of investment and compare them with the figures of other countries, they will see the truth of that statement. The surcharge method of tackling our deficit does not cut our investment, and I therefore welcome it wholeheartedly.

But there are one or two little corners which need smoothing, and I ask the Chancellor of the Exchequer to consider some of these points. The first concerns chemicals as raw materials. This is my own industry. I have been in it for 20 years. Without question, many chemicals are raw materials. Hundreds of chemicals are not made in this country but are imported. I feel that there is a very strong case for the removal at the earliest possible moment of the 15 per cent. surcharge on such chemicals as are not manufactured in this country.

I understand that there will be a drawback on chemicals which are imported and then re-exported but I want to ask a question about this drawback. As I understand the rules, the drawback is not permissible if the chemical nature of the material has been changed. Let us take the case of ethylene diamine, which is brought into this country in Hundreds of tons and is not manufactured here. It is re-exported, and there should be a drawback. But a great deal is changed in its chemical nature. A great deal is converted into ethylene diamine tetracetic acid, which is a very important constituent of detergents and which is exported in detergents. Will drawback be possible under these conditions? I think this merits serious consideration, and that in the whole question of the surcharge on chemicals which are raw materials, chemicals should be divided into two categories, those which are genuine raw materials and those which are not.

Secondly, there are development projects. I would draw an example from a company with which I have business connections though the same principle applies to a great many other projects; but this is one which I know particularly well. This is Nylon 11. Nylon 11 is different from Nylon 6 and Nylon 66 to which we have heard references in recent debates. This was developed in France, and a company in this country has the right to develop the manufacture of this plastic in this country. It has been importing this material until the scale of the market is sufficient to support a factory.

The plant will need a minimum output of about 1,000 tons a year before it is economic. The build-up of the market has been as follows: 605 tons last year, and next year the estimated level of demand is 760 tons. So the company is rapidly approaching the point of building the factory, and it has approved plans for putting up a plant in Widnes, which is an area which really needs this employment. If the levy is left on this nylon which is being brought in to build up the market we are not likely to see this plant come in an area which needs it, and I feel that there is a case for reconsideration for this type of project.

My third example is taken from Cambridge University where work is going on on new computers, and in connection with this orders have been or are about to be placed for American electronics equipment amounting to £130,000. These components are not made in this country, but when we have experience of them then very likely they will be made here, and if we do not get them the research work which depends on them cannot go ahead. Either the grant to the university must be increased to allow for the 15 per cent. or it should not be charged. I think it makes sense that it should not be charged.

My last point is on a local industry in Lynn, which is the shell-fish industry. I am rather puzzled by the fact that the white fish subsidy is not applied to shellfish. That was because they were considered to be non-essentials. One would consider, therefore, that shell-fish would be considered non-essentials as imports, and therefore liable to the 15 per cent. surcharge. In fact they have been exempt from this surcharge, which seems to me to be contradictory, and I would urge the Ministers concerned to consider this point.

I thank hon. Members of the Committee for their tolerance, and in closing I would trust that my right hon. Friend the Chancellor will bear these points in mind and will take them in the spirit in which they have been offered, as constructive criticisms, and, by doing so, make what I consider to be a good economic measure even better.

6.54 p.m.

Photo of Mr Eldon Griffiths Mr Eldon Griffiths , Bury St Edmunds

It is a great pleasure to follow a fellow East Anglian Member in this debate, and in his maiden speech. The making of a maiden speech was an experience of my own only recently in the last Parliament, and I remember it very well indeed. I join the hon. Member for King's Lynn (Mr. Derek Page) in regretting the departure from this place of Mr. Denys Bullard, a man who, as the hon. Member said, worked intensely hard for his constituency and certainly understood its principal industry, agriculture. While welcoming the hon. Member here, and congratulating him on a speech which dealt specifically with many subjects with which he is so obviously familiar, I think it fair to say that we on this side of the Committee expect to see Mr. Denys Bullard back in his place here, and perhaps before not too long.

This is a debate on the Budget which the Chancellor of the Exchequer has presented to us this afternoon. I have been casting around for some sort of definition of this collection of proposals which have been made to us, and the best label I can give to it is that it is in a sense a Budget of frankincense and myrrh. I think that there is no doubt that there is some frankincense in it. A great part of it smelled very sweetly and no doubt its electoral possibilities will be debated at some stage in the future. There is, on the other hand, the myrrh. If I may put it this way, I think the frankincense in the Budget is to be mainly enjoyed by elderly people, and certainly we on this side of the Committee will support that, but one does have the feeling that the bitter myrrh in the Budget is to be mainly paid by the young. I should like to develop that a little bit later.

I welcome very sincerely the improvements which have been made this afternoon in the pensions payable to older people. This is a much bigger thing than party politics, and, indeed, anyone who has campaigned in recent weeks has seen the expectations which both parties, I think rightly, aroused in the minds of elderly people. I for one am glad to see the Chancellor beginning to fulfil them this afternoon. I say that with great sincerity.

Photo of Mr Robert Maxwell Mr Robert Maxwell , Buckingham

How does the hon. Member explain, then, his vote in the Lobby this afternoon against the increases in taxation so necessary to provide for these increased pensions?

Photo of Mr Eldon Griffiths Mr Eldon Griffiths , Bury St Edmunds

I hope to deal with that a little later in my speech.

I think it fair, in welcoming these things, to say that I particularly welcome the improvements which are being made for the 10s. widow. This, I think, is something which needed to be done. I say, quite frankly, that I am glad to see the earnings rule removed, though it may well be that there will be difficulties in the practical application of this.

I welcome these things and I think it is true of many, if not the great majority, of hon. Members on this side of the Committee, but I am bound to say that a false picture has been presented to the country in the suggestion that it was the other side which solely wanted to see these improvements. It is simply not true to suggest that. There was no resistance from this side to improving the pensions which are payable to older people. Indeed, as my right hon. Friend the Leader of the Opposition said this afternoon, this was pledged by the Conservative Party, and I am quite certain that if a Conservative Chancellor had been here this afternoon he would have been introducing improvements in the old-age pension.

Hon. Members:

Oh.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

Is it not the case that it was the Leader of the Opposition who, on the television, went out of his way to explain that the Tories would give a donation to the old-age pensioners, but at no time said what the donation would be?

Photo of Mr Eldon Griffiths Mr Eldon Griffiths , Bury St Edmunds

The hon. Member ought to be able to do better than that. That is rather stale stuff.

Photo of Mr Eldon Griffiths Mr Eldon Griffiths , Bury St Edmunds

We hear the Socialists take all the credit for the improvements which may come, but I would remind the Committee that the Conservative Government improved the old-age pension on no fewer than five occasions, and, what is more, if we look back to the old-age pension which was offered by the party opposite when it was last in power in 1951 it was not 67s. 6d., as it has been until today, nor 57s. 6d., nor 47s. 6d.: it was a miserable 26s., which was increased to 30s. three weeks before the election. It is really preposterous for the party opposite to think that it alone is doing something for the old-age pensioners. It is not true, and it knows it.

I think that we ought to recognise also why it is that these improvements in old-age pensions, which command the general support of both sides of the Committee, became necessary. There can be no doubt that the principal reason is that the large increases in other incomes, and particularly in wages, which have sometimes not been justified by corresponding increases in production, have worked their way through the economy into the shops and have frequently raised the prices against those living on fixed income. Hon. Gentlemen opposite know that that is true. Old-age pensioners and those living on fixed incomes have had to pay the price and carry the burden of a number of wage increases which were not justified by increased production. I think that we ought to recognise that that is the principal reason why these improvements, which I am glad to see, were necessary.

This problem of increased wages which are not justified by increased production will not leave us just because we now have a Socialist Government. Indeed, the measures introduced by the Chancellor this afternoon will go a long way towards making the position worse, because, if anything, this is an inflationery Budget. In recent weeks hon. Gentlemen opposite travelled round the country saying that they were going to hold down prices. What have they done? The Chancellor has introduced a Budget which will undoubtedly mean higher industrial costs. It cannot have any other effect. If the price of fuel, which is basic to all industries, is increased, it means that ordinary people must pay higher fares. How else can the increase in the tax on petrol be accommodated? Hon. Gentlemen opposite must face the fact—and this is not a party matter—that if additional imposts are brought into industry, the result is higher prices.

This is a problem which the new Government will have to face, just as the old Government had to face it. This increase will adversely affect the prospect of increasing our exports in the markets of the world. This is a national problem, and this increase represents some of the myrrh in the Budget, because it is very much the younger families who will bear the brunt of these increased costs.

The 15 per cent. increase in tariffs is bound to increase the costs of our industries and, beyond that, the cost of goods in the shops. Perhaps I might give the Committee an example of what I mean. In my constituency a manufacturer of large concrete blocks has ordered a new German machine which is capable of increasing his production fivefold. This machine is necessary because East Anglia is building up rapidly but now he cannot afford it because of the new duty. He has to use the old machines and they are more expensive. I am sorry that the hon. Member for King's Lynn has left the Chamber, against what I understood to be the normal practice after an hon. Member has made his maiden speech.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

The hon. Gentleman knows that my hon. Friend is a new Member, and has probably not been acquainted with that custom. Perhaps I might remind the hon. Gentleman that one of his hon. Friends left the Chamber immediately after making his speech, even though he has been here long enough to know the custom.

Photo of Mr Eldon Griffiths Mr Eldon Griffiths , Bury St Edmunds

I recognise that the hon. Member for King's Lynn is a new Member, but from my brief experience of the House I know that one of the duties of the Whips is to inform new Members of the customs of the House.

Photo of Mr Malcolm Macmillan Mr Malcolm Macmillan , Na h-Eileanan an Iar

My hon. Friend the Member for King's Lynn (Mr. Derek Page) came into the Chamber after a meeting with one of the Ministers, at which I accompanied him. My hon. Friend had an appointment to see another Minister after making his speech. He asked me whether it was in order for him to leave after making his speech, and after listening to the hon. Member who followed him referring to his having made his maiden speech, I told him that from my experience it was in order, having listened to the ordinary courteous references in the following speech, to leave the Chamber.

Photo of Mr Eldon Griffiths Mr Eldon Griffiths , Bury St Edmunds

I thank the hon. Gentleman for giving me that explanation. I can only say that I understood my statement of the practice to be correct.

Photo of Mr Malcolm Macmillan Mr Malcolm Macmillan , Na h-Eileanan an Iar

The hon. Gentleman should withdraw his remarks.

Photo of Mr Eldon Griffiths Mr Eldon Griffiths , Bury St Edmunds

The inevitable effect of the 15 per cent. increase will be to send up costs, and therefore prices in our shops.

I propose now to deal with some specific issues which affect my part of the country, and which were not dealt with by the Chancellor. I refer here to the expansion which we all hope to see in our country and in East Anglia as much as anywhere else. During the nineteenth century East Anglia was an economic backwater, but in recent years a number of important changes have taken place there. One such change is the rapid increase in the volume of imports and exports through the East Coast ports. Perhaps the hon. Gentleman will now understand why I regretted the absence of the hon. Member for King's Lynn. I propose to refer to King's Lynn, among other places, and it would have been better if the hon. Gentleman had been here to hear what I have to say about his port.

Photo of Mr Malcolm Macmillan Mr Malcolm Macmillan , Na h-Eileanan an Iar

Did the hon. Gentleman give my hon. Friend notice that he proposed to refer to his port? That is the normal courtesy. The hon. Gentleman must not make special rules of courtesy for himself.

Photo of Mr Eldon Griffiths Mr Eldon Griffiths , Bury St Edmunds

I think that it would be better if we did not bandy these Parliamentary niceties back and forth. I wrote to the hon. Gentleman, but I have no means of knowing whether he received my letter. If he did not, his absence is understandable.

During the last five years we have seen an explosion in the volume of trade through these East Coast ports. In King's Lynn, for example, there has been a several-fold increase in imports and exports; in Yarmouth a four-fold increase; and in Ipswich and Felixstowe a similar increase. As the Port of London becomes more and more congested, and as exporters find that their goods are often delayed there for long periods, they are beginning to prefer to send their goods through these East Coast ports to the European market.

When the Chancellor looks at his whole economic policy, I ask him to consider in particular the effect which the 15 per cent. increase in tariffs will have on the trade of these East Coast ports which have reached the point of beginning to invest in new equipment, in new wharves and in new ways of handling ships, which will benefit not only East Anglia but the country as a whole. I ask the Chancellor to appreciate the effect which this increase will have on the development potential of this area.

Along with the growth of the ports in East Anglia, many new modern industries have been introduced there in the last few years. I shall not weary the House by listing them, but as hon. Members who represent East Anglian constituencies know, a great deal of new and modern industry has come into this region. We in East Anglia have some advantages, because if we wish to build new towns we do not first have to clear away the slums and the debris of the nineteenth century. As a farming area, we can start from scratch.

Equally, if we want to bring in modern industries, we do not first have to get away from the methods of yesterday. We can start in the age of electronics and modern methods. We do not have the problem of getting rid of the old methods of yesterday. Therefore, we are apt to get a bigger return on investment because we do not have to dispose of the debris of yesterday.

East Anglia's third advantage is more a prospect than a fact. It is possible that at some stage in the not too distant future we shall find oil or natural gas in the North Sea. I am sure that it is far too early for anyone to buy shares in this venture, but the mere possibility of discovering those products has brought new technicians, new experts and new investment into our area.

These three things—the growth of the ports, the introduction of modern industry and the possibility of oil being discovered—have given to East Anglia recently quite a new zip; that is the best word to describe it. The area is progressing. I think this is important to our whole country and not simply to any one region. I want to ask the Chancellor and the Secretary of State for Economic Affairs to give consideration to designating East Anglia as one of the new regions that the Government have spoken about all this year.

I am worried, as many of my constituents are worried, by some of the remarks made by the Secretary of State for Economic Affairs during the election campaign. He is reported to have said, and I believe I am quoting exactly here, that the Labour Government would scrap the South-East Survey. I hope that he did not say that, but I wish that I could get from the Chief Secretary this evening some understanding of this. Does the Labour Government intend to scrap the South-East Survey? We want to know. The reason we want to know is that the economic investment policies in our particular area of the country are conditional upon a number of assumptions that were made in that South-East Survey. The town plans of Bury St. Edmunds, of Newmarket and of these ports I have been speaking about are conditional upon the expectation that the survey aroused among our people.

For our future planning purposes, I think we are entitled, when the Government has had the time which it must have to consider all these things in detail, to know what their intentions are about East Anglia. I would like to commend to the Government the thought that if there are to be regional councils and regional planning boards for certain areas we in East Anglia are entitled as a natural region of this country to have some clarity of the Government's intentions there. I would like to ask the Chief Secretary to give thought to this problem and perhaps answer it when he comes to speak.

I want—very briefly because I have taken up the time of the House—to return to the Budget proposals themselves. With the greatest respect, the one thing that struck me more than anything else is that the Chancellor like other Government spokesmen, began with what I am bound to describe as their alibi. They first of all produce this story about the £800 million balance of payments deficit which may be £700 million, and in any case includes several hundred million pounds on capital account being loaned overseas. I have certainly not heard from hon. Gentlemen opposite that they want to discourage this country's investments abroad. They seem to preface every new proposal in this House with the alibi that we have this problem of balance of payments. But with the greatest respect, the measures which the right hon. Gentleman produced this afternoon, with the exception, I admit, of the 15 per cent. tariff, were measures of a social character. They did not arise out of the balance of payments problem and yet hon. Gentlemen maintained that they did.

It is perfectly clear—and I give hon. Gentlemen opposite credit for this—that they gave certain undertakings in their election campaigns, as did hon. Members on this side, that there was to be an increase in pensions. I am glad to see that this increase in pensions has been brought before the House. But let us not pretend that this is something to do with the balance of payments problem. It sprang out of the fag-end of a speech that started off with the balance of payments problem.

Hon. Gentlemen must realise that this sort of thing will not wash. The social improvements that have been brought in by the Chancellor this afternoon are fine and we all welcome them, but it is not necessary to tag them on to some argument about balance of payments. This is an entirely different subject.

Photo of Mr Samuel Silverman Mr Samuel Silverman , Nelson and Colne

If the hon. Gentleman will forgive me. I am sure he would concede that to get an equitable incomes policy has a direct bearing on repairing our economic difficulties. Does he consider that we could get an equitable incomes policy without beginning first where my right hon. Friend began in his speech by dealing with those who are worse off? Does not that have a direct bearing upon getting an equitable incomes policy?

Photo of Mr Eldon Griffiths Mr Eldon Griffiths , Bury St Edmunds

The hon. Gentleman frequently intervenes in the House and seldom without interest on all sides, but, with respect, I would say that all economic questions have a bearing one on the other and economic and social matters in the long term are inseparable. But I am simply trying to draw this distinction—that the Government Ministers, again and again, have dragged out the balance of payments problem and tried to tie it up with almost every single thing they have said. Quite honestly, that is politics; it is not administration. They bellow, "£800 million," as though they have found some wonderful new slogan, but it has nothing to do with the nature of the measures they brought in today.

My objection to the whole attitude of the Government in the last few days of debate on the economic situation is that they seem to have this basic thought—that the State shall give and the State shall take away and blessed be the name of the State. It is there more than anywhere that we on this side of the Committee differ from hon. Gentlemen opposite. The important thing is simply that we all want expansion and we all want the modernisation of our country. I do not believe that hon. Gentlemen would disagree with that. This is common ground. The difference is, what is the best way of going about it?

I would say to hon. Gentlemen, particularly to those sitting on the Front Bench, that the expansion of Britain is not something that takes place between the in-tray and the out-tray of Government Departments. It is a much more complex matter. I would have said to hon. Gentlemen that the way in which the country grows is by the individual decisions of hundreds of thousands of builders and contractors and engineers and firms all over the country. It is simply not possible, as we have seen in the Soviet Union and elsewhere, for all decisions to be made at the top and to be handed out on a plate. It is to me very dismaying that for the few weeks this Government have been in office, this conviction that they have all the answers and that they know best and are going to solve everybody's problems has led them to wear the character—I am sorry to use the word—of arrogance.

What have they done? They have broken the pledged word of this country to the European Free Trade Area; they are on the point of breaking the pledged word of this country to the French on the Concord project. These are two cases where this country, which has a long reputation for keeping its word, has been cheapened by this Government within three weeks, and I am ashamed of it.

I want to end as I started, by welcoming the improvements that have been made in the old-age pensions in this Budget and to say again that I am convinced that if a Conservative Government had been returned these improvements would have come, too. So we are on common ground.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

Why did not your party say so?

Photo of Mr Eldon Griffiths Mr Eldon Griffiths , Bury St Edmunds

We said so. I would ask the Government to recognise that in giving with the one hand it is taking away with the other. It is taking away, particularly from young families, that opportunity to have a margin between their income and their expenditure which allows them to save perhaps for a new house or the goods they want in it. After they are confronted with higher taxes, higher costs—because inevitably these measures must mean higher prices, and higher bus fares—they are going to carry a heavier burden. No one grudges the improvements for older people—we welcome them—but I ask the Government to recognise that there are many young people in this country on whom we must depend very much for the enterprise and expansion which we need and they are being driven into the ground. To that extent, while I welcome part of the proposals this afternoon, I very much regret the rest.

7.20 p.m.

Photo of Mr Robert Maxwell Mr Robert Maxwell , Buckingham

On a point of order, Sir Samuel. I wonder whether you would guide a new Member. The hon. Member promised me that he would explain to me why he voted against the money to pay for old-age pensions and he has not kept his promise—

Photo of Sir Samuel Storey Sir Samuel Storey , Stretford

Order. There is no point of order arising on that.

Photo of Sir Samuel Storey Sir Samuel Storey , Stretford

Order. The hon. Member cannot pursue it now, I have already called another hon. Member. Mr. Idwal Jones.

Photo of Mr James Jones Mr James Jones , Wrexham

I think it would be correct to say that the hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths) differs from me fundamentally in his outlook.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

Thank heaven for that.

Photo of Mr James Jones Mr James Jones , Wrexham

It may be of interest to know that although I have never visited King's Lynn I have an historical interest in the place because, though it may be surprising to hon. Members to learn this, the first Welsh-English Dictionary was brought out in King's Lynn by a very famous Welshman who was known in Wales as Dr. William Richards of Lynn. With that brief introduction, I should like to say—

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

It shows how miserable he was in King's Lynn.

Photo of Mr James Jones Mr James Jones , Wrexham

—about this autumn Budget that it is not a new thing. In the story of post-war Governments we have had several autumn Budgets after a General Election. We had one after the 1955 election and after the 1959 election. There is nothing exceptional in the procedure. Had the election been won by the party opposite, no doubt there would have been a Budget introduced this afternoon by a Tory Chancellor.

There was a fundamental difference in the approach of the Chancellor this afternoon compared with previous Chancellors we have had during the last 13 years. There was a new approach and a new purpose. We on these benches are very proud of the new approach and the new purpose behind it. The present situation is understood generally by all, although the hon. Member for Bury St. Edmunds hardly accepted it. Fundamentally, the problem is one of balance of payments, and we cannot avoid that situation. We have a deficit of between £700 million and £800 million. We need about £400 million to £500 million credit in order to feel that our economy is safe. That is the problem facing the present Government, and it has faced successive Governments for the last 13 years. But at last we have had a new approach, different in method and purpose. It is an approach long overdue for the welfare of this country.

Had the party opposite been returned to Government at the General Election, there would this afternoon have been a Tory Chancellor introducing his Budget and applying the same traditional remedies and relying on the same monetary controls, Bank Rate, credit squeeze, Purchase Tax, regulators and so on. For the last 13 years we have seen an undue reliance placed on monetary control based on an unlimited faith in the efficiency of the Bank Rate. Such a policy Las been adhered to too tightly and too rigidly during the last 13 years. When in Opposition, we protested against that policy because it was too similar to the policy pursued after the First World War when Chancellors clung to the gold standard. They clung to a theory which did not meet the requirements.

In the inter-war period the ordinary man in the street knew that there was something radically wrong in the theory of a gold standard which was meant to strengthen the £ but which sent him to the unemployment queue. That is the same sort of position which we have been experiencing during the last 13 years. Successive Chancellors have clung rigidly to the idea that what was necessary and essential was to strengthen the £. In order to do so they adopted monetary techniques. But with the strengthening of the £, in each case we experienced a stagnated economy. No hon. Member present can challenge that statement—[Laughter.] Hon. Members may laugh, but this country is last in the queue for economic expansion simply because Tory Chancellors have stuck too rigidly to the monetary controls in our economic affairs.

Photo of Mr James Jones Mr James Jones , Wrexham

No, I cannot give way. The hon. Member had his time and now I want mine.

As the Bank Rate rose so did the financial burden of the Treasury and the burden of local government expenditure. So did the burden on the ordinary household. Each decision to raise the Bank Rate, to apply the credit squeeze and monetary techniques, distilled itself through the entire economy, and successive Chancellors in the last 13 years were faced with the dilemma that as the £ was strengthened the economy was weakened. No hon. Member opposite can challenge that statement. The strength of the £ was inimical to the strength of the economy and it did not make sense. Nor did it strike successive Chancellors that a new and alternative approach was possible in order to bring together the economic policy and the monetary policy to work in co-operation with each other and so create a sound economy.

We on these benches know—we are not ignorant of economics either—that there is no real foundation, no lasting foundation, for a strong £ except a strong economy. That is where we stand, and that is what we found this afternoon. We have had a new approach, and that is the significance of this Budget. It seeks to strengthen the economy and to expand it; to close the gap between exports and imports; to strengthen sterling by strengthening the economy. We should not be in our present condition regarding imports today had we had a more effective Government policy to balance and expand the economy during the last 13 years. Today we are importing manufactured goods which we could manufacture in this country had we planned our economy on more reasonable and rational lines during the last 13 years. As a short-term measure, we believe that the 15 per cent. surcharge will help. It is to be imposed on all imports other than foodstuffs and raw materials. It is not a form of protection, as the Chancellor made quite clear—[HON. MEMBERS: "What is it?"] I will tell hon. Members.

The Chancellor said this afternoon that there would be control if there is any increase in prices. Protection is a guarantee for increases in prices; that is the very basis of protection and of tariffs. We are buying from abroad on a scale we cannot afford. Whether other countries approve of our policy or not, we cannot keep on sinking deeper and deeper into debt. Nor can we carry the prosperity of other countries on our own backs. The time has arrived for us to look after our own prosperity and the welfare of our own people.

There is the proposal to increase incentives for exports. For 13 years we have seen attempts made, by Purchase Tax and other regulators, to reduce home demand on goods in the hope that that would release more goods for export. That was the theory. Events have not proved that the theory was sound. We need an export drive, an incentive to export. Provided that the right incentives are given, increased exports and sales on the home market need not be inimical. Indeed, with the right incentives we can expand the markets at home and abroad and in that way increase our national income. That, I say again, is a new approach, an approach to strengthen our economy.

The Guardian of 27th October had some interesting things to say: City reaction favourable. Good day for sterling. We were assured that there were signs of confidence in the Government's intentions to maintain the existing rates and this was reflected in substantial foreign buying of Government securities. Hon. Members opposite may laugh, but people who are interested in our economy recognise that the Chancellor is moving along the right lines.

There is another characteristic in the Budget. The Leader of the Opposition, speaking on the Gracious Speech, said this: I called the Socialist election manifesto a menu without prices. The Queen's Speech is neither a menu without prices nor even a menu. It is a sort of half-hearted advertisement for the restaurant and that is about all. It is our object to see that our people are not choked by the fare." —[OFFICIAL REPORT, 3rd November, 1964; Vol. 701, c. 62.] That observation merits examination in the light of the Budget proposals. We know about Tory autumn Budgets since 1951. They were without a single exception not menus without prices but prices imposed without a menu and without a meal. In 1953 prescription charges were imposed. In 1956 they were increased to a shilling per item. In 1959 they were further increased to 2s. per item. The prices were imposed. The meal did not follow. Purchase Taxes were imposed. Higher prices were imposed for the same goods. The Bank Rate was increased.

Hon. Members:

Sit down. The hon. Gentleman has only just come in.

Photo of Mr James Jones Mr James Jones , Wrexham

The Bank Rate was raised, which increased the cost of living. Prices were increased with nothing in return. Health charges were increased, which meant a charge of £63 million more on people who could not afford it because they were ill. It meant at the same time £82 million as a gift to Surtax payers. Those were the prices. The post-election Budgets were prices without a meal. They were comparable to a restaurant which took the price but did not provide the meal at the end of it.

The Leader of the Opposition admitted, I am sorry to say, that his job, as he saw it, was to see that the people were not choked by the fare. The ordinary people of this country have not yet had the experience of being choked by the fare of social services. That may be the experience of other classes represented by hon. Members opposite. If there is any fatness in the land, we on these benches will see to it that that fatness is fairly distributed so that no one will be choked.

The Leader of the Opposition stated that the manifesto was a menu without prices. The Budget statement this afternoon is clear—there is a meal. True, it will not come into effect until 29th March next. Many of us would like to see it implemented immediately, but we are informed that administrative difficulties are insurmountable. We know that, had there been a Tory Administration this afternoon, we would not have had a promise of better pensions for the old people.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

We would have had a better promise but no pensions.

Photo of Mr James Jones Mr James Jones , Wrexham

The economic situation would have been made use of by a Tory Administration to increase charges of some kind or another. [HON. MEMBERS: "How does the hon. Gentleman know?"] The present Chancellor has remembered these people in the days of drab inheritance. The drab inheritance is due to the Government who went out of office at the General Election. It is time to remember these people who have been forgotten for far too long, for who are they? Those over 65 are those who went through the First World War. It was they who suffered the depression of the inter-war period. It was they who walked miles looking for work—everybody knew that there was no work—so as to qualify for the dole. It was these people who suffered and endured the Second World War. We pass through life but once. These people over 65 have had a thorny and stony path to walk along. If we are increasing the taxes of the so-called young people, who are doing well at present, they should consider it a privilege and a pleasure to contribute, thus doing something to help the people who have had a far more difficult time than they are having.

We can say other things. I am very pleased indeed that the Chancellor this afternoon referred to a capital gains tax. It is long overdue. When the present Chancellor introduces it, it will be a substantial thing and not what we had from the previous Chancellor in 1962.

There is to be a corporation tax as well. There are certain factors making climate, and there are certain factors making a social climate. The social climate cannot be healthy when people who earn their living through their labour are taxed, but people who make their earnings through capital gains, without any effort or labour, are not taxed. Social justice demands that this thing should be done. The Leader of the Opposition accused us of imposing taxes to secure the welfare of our people. We are going to increase the national productivity. We are going to increase the national dividend. We will reach the 4 per cent., and even higher, in the course of time. It cannot be done in a fortnight's time, as was suggested by the Leader of the Opposition this afternoon. We have not arrived yet. We are moving in the right direction. In due course we shall arrive. In the course of arriving we shall ensure that social justice is established in this country firmly, as it has never been established before.

7.40 p.m.

Photo of Mr Tom Iremonger Mr Tom Iremonger , Ilford North

It gives me very great pleasure to congratulate the hon. Member for Wrexham (Mr. J. Idwal Jones) on his excellent speech. He spoke with the eloquence that one would expect from his native Wales, and I am sure that the House will look forward to hearing him again. Seriously, I was genuinely moved by the hon. Member's reference to the war disabled and especially to those who were disabled as a result of the First World War, of whom there are still a number among us. I single that out as the item in the Chancellor's proposals and announcements that gave me the most satisfaction. I have always said that I felt that the highest priority of all in social benefits should go to the widows, and I welcome the announcement made this afternoon by the Chancellor of the Exchequer. I am sure that it will be universally welcomed.

It is, however, only fair to ask the House to recognise that the Chancellor is merely doing what both sides of the House were pledged to do if they were returned to office and I do not in any sense accept that this is some peculiar munificence of the Labour Administration or that the country should be particularly grateful to the Labour Party. I hope that those who have been on National Assistance will not miss the point that they are still on National Assistance and will continue to be on National Assistance and that after the complaints that were thrown at us about the fact that it was National Assistance that kept the benefits up to the minimum subsistence level, those people will recognise that the Labour Government have not increased the retirement pension to a level which enables pensioners to live on it. I hope that in future elections we shall hear no more of this.

However that may be, the main fact sticks out that here is the first Socialist Budget and it has put taxes up, as we said it would, and that it will cause an increase in the cost of living when the increase in the price of petrol works through all commodities, as it will. One looks, therefore, with critical interest at the justification and the excuse put forward by the Chancellor of the Exchequer. It seemed to me that he was putting forward two complementary or alternative excuses. The first was that the money was required to pay for the social benefits. If that is so, what the Prime Minister said during the course of the General Election was grossly misleading. He ought frankly to say now that when he told the country that he would not impose extra taxation to give the benefits that he promised, he knew that that was not his intention. His reputation for fair dealing will have been gravely damaged by this breach of faith with the country.

When the hon. Member for King's Lynn (Mr. Derek Page) said in his maiden speech that his predecessor Walpole campaigned in general elections in a rather different way from ours, I could not help thinking that the Prime Minister had kept up the tradition of bribes and misleadingness fairly worthily in the last election.

Photo of Mr Jack Diamond Mr Jack Diamond , Gloucester

On a point of order, Sir Samuel. I do not know whether you heard the statement by the hon. Member for Ilford, North (Mr. Iremonger) in which he accused my right hon. Friend, during the course of his election campaign, of keeping up the practice of bribes, as I understood him to say. [HON. MEMBERS: "Political."] I do not know about political. I do not know whether you would care to comment on that, Sir Samuel.

Photo of Sir Samuel Storey Sir Samuel Storey , Stretford

I do not think that the hon. Member was referring to individual bribes. I think that the choice of words should be carefully considered.

Photo of Mr Tom Iremonger Mr Tom Iremonger , Ilford North

I am obliged to you, Sir Samuel. Any emendation that the Chief Secretary to the Treasury would like to my words to make it quite clear that I am talking about the political and electoral wholesale bribery—I am glad to see the hon. Gentleman does not jib at that—I should be willing to make. Of course, I would not suggest that the Prime Minister would be so unsubtle in his processes as to apply the kind of bribes that Walpole did.

Photo of Mr Tom Iremonger Mr Tom Iremonger , Ilford North

The hon. Gentleman, who is so very bumptious in his new office, should try to contain himself and recollect that it was his hon. Friend who intervened and delayed me, and not the other way round.

My right hon. Friend the Leader of the Opposition said that the Labour Party's prospectus was a menu without prices. The first comment on the Budget is that we have now seen the prices. So the first justification simply does not wash. The second justification, however, is a little bit less crude. It is that these impositions of taxes were required in order in some way to help with the problem of the balance of payments. On that I would make two comments.

First, I believe that the action that was taken to apply the import duties to try to help the balance of payments deficit was totally unnecessary. I believe that the arrangements that were made by my right hon. Friend the Member for Barnet (Mr. Maudling), expressly with the contingency in mind that we might have a serious balance of payments deficit while expanding the economy—those arrangements which allowed us to take advantage of the international liquidity which he engineered—would have been quite sufficient to have tided us over the exceptional period of demand on imports, which, as he explained the other day, was caused largely by exceptional factors which we need not expect to be repeated next year.

Therefore, I do not think that these measures were necessary. They were profoundly undesirable and they have bred great mistrust of this country abroad, not only in E.F.T.A. and in the European Community, but also in the International Monetary Fund, as we very soon found out. As for the surcharges being temporary, all I can say is that I should like to hear what the Chancellor of the Exchequer says next April. These temporary things have a way of being very temporary when they start, but after a while the vested interests get entrenched, the balance of payments does not get any better, as it certainly will not under right hon. Gentlemen opposite, and we shall find that these impositions are permanently with us and that we have retaliation against us all over the world.

Let us, however, suppose for the sake of argument that this is a valid excuse and that the balance of payments is in some way connected with this imposition of taxes. Let us follow for the sake of the exercise what the argument would be. It would be that the 15 per cent. impost on imports will limit imports and that the benefit to exporters will increase exports. That will mean, therefore, that there will be an increased demand at home, because there will be limited resources upon which purchasing power can be expended. Therefore, we shall have a situation of inflation.

I do not agree with my hon. Friend the Member for Bury St. Edmunds (Mr. Eldon Griffiths). If one analyses it, this is not an inflationary Budget. It is intended to be, if anything, a deflationary Budget, otherwise the words "inflationary" and "deflationary" in the context of these policies have no meaning. Although inflation results in the raising of the cost of living and in increased prices, that is not a definition of inflation. It is a more subtle process.

But if the argument is valid that it is necessary now because of the inflationary situation to decrease demand and purchasing power and that the way to do that is to increase taxation by Income Tax and the tax on petrol, I hope that when the situation is reversed and hon. Members opposite are sitting on this side of the Committee, and it is necessary for my party as the responsible Government to take deflationary measures, we shall have no more sneers about "Boyle's Law" and "stop-go". The fundamental economic philosophy which is being applied by hon. Members opposite is one which was consistently applied by us when we were responsible, and then it was impossible for us to obtain from hon. Members opposite any acceptance whatsoever of the economic necessity for these measures. I hope, therefore, that we shall have at least some sympathetic regard retrospectively from hon. Members opposite for comparable measures which we may in future times have to adopt.

I was interested in the Chancellor's reference to cuts in capital investment which he rather ruefully admitted might have to be forthcoming. I wondered whether he was going to slash—I think that is the word—education or hospitals or roads or housing. I wondered which he would choose. I hope that he will have a rather more sympathetic response from this side of the Committee if he finds it necessary to cut down on the public sector than we had from his hon. and right hon. Friends.

The right hon. Gentleman will realise that if he cannot maintain the rate of growth which the National Economic Development Council has described as desirable he will indeed have to curb public expenditure, and then he will have to make a choice and answer to the country for it. No doubt there will be a number of ingenuous excuses designed to convey that when we had to do it it was very wicked but that when right hon. Members opposite had to do it it was singularly virtuous.

I was surprised after all the bombast that we have had over the years that we did not hear a good deal about expense accounts today. After all the wonderful promises that we had about how he was going to clean up the corrupt practices of directors and managers in industry I should have thought that this would have been the very time when the right hon. Gentleman would have applied his rigorous cleansing operation. The fact is that when the right hon. Gentleman went to his advisers in the Revenue Department, whom he rightly praised in his speech, they said that what he had been saying in the past was all bunkum.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

How does the hon. Member know that?

Photo of Mr Tom Iremonger Mr Tom Iremonger , Ilford North

The hon. Member is shrewd and quite right. I do not know it. I guess it. We did not hear anything about this from the Chancellor, though we had praise for the near-miracle workers. It was no doubt the near-miracle workers who told the right hon. Gentleman that there never had been anything in what he had said.

My objection to the Budget is the whole defensive background to the thought of the right hon. and hon. Members opposite. If there is some merit in a capital gains tax, I should have thought that it was a price well worth paying if the psychology is right that one cannot get incomes restraint and an incomes policy unless there is some form of vindictive fair shares for all. If so, it is strange that the Chancellor did not say a word about the necessity for an incomes policy. He skates very lightly over the subject. He gives the quo but he does not ask for the quid.

The Chancellor or his right hon. Friend is going to reverse the decision in Rookes v. Barnard but he does not say anything about restrictive practices. He is going to impose a capital gains tax, but he does not say anything about its necessity and purpose, which is to get an incomes policy. He knows perfectly well that he will not get an incomes policy from the trade unions, because they think that he is a soft touch.

I was glad to hear the right hon. Gentleman say something about savings, but I thought it curious to go about encouraging savings by decreasing the purchasing power of the people at this time. He said in his elaborate analysis that the increase in Income Tax would touch only the comparatively well-off, but he did not point out that it is not only the well-off who have to pay the increased National Insurance charge and that they are being taxed more directly and immediately than the higher income groups who pay Income Tax.

This Budget is fully in accord with the attitude which we have seen unfolded in the first few days of this Administration. It was a fortunate and happy coincidence that before we heard the Chancellor we had an hour at the Dispatch Box from the Minister of Transport. When I listened to the passionate defence made of every derelict branch line by the Minister of Transport, I could not help reflecting that the Government are prepared to tax this country to pay for the maintenance of derelict railways every year more than the total cost of the Concord project which would have been a really constructive attempt to get the economy of the country into gear and moving forward in the way which it must do to solve the balance of payments problem in a way that has some real meaning. I see that the hon. Member for Buckingham (Mr. Maxwell) is about to make one of his very unmaiden interruptions. He has made more interruptions in this Chamber in three days than most people make in three years.

Photo of Mr Robert Maxwell Mr Robert Maxwell , Buckingham

I thank the hon. Member very much. The point about the Concord is that it employs at present in this country only 1,000 people. How on earth could the continued waste of several hundred million £s of public expenditure on an aircraft for which there is no economic or social need help the country's balance of payments or the economy?

Photo of Mr Tom Iremonger Mr Tom Iremonger , Ilford North

I am surprised at the hon. Member, who is rapidly becoming the Gerald Nabarro on the Government side. I am surprised that one of the most intelligent and forward-looking of the party opposite should not have considered the fundamental beginnings of this argument, which was that the Concord project was the way in for the most sophisticated kind of technological advance, in which Britain is ahead of the United States and can hope to lead the world for a generation, thereby making a really constructive contribution to solving the balance of payments problem. It is not a matter of 1,000 people employed here and there or a matter of £1 million or even £100 million. It is a matter of the way in which British industry can make a constructive effort to solve the eternal problem of a small island which has nothing but its skill to export. Here in the Concord, at comparatively trivial price, was the opportunity of putting ourselves on a sound industrial, expanding basis.

Photo of Mr Tom Iremonger Mr Tom Iremonger , Ilford North

If the sum is x it is a much better bargain than half that money spent on Dr. Beeching's closures. This is the position which we on this side of the Committee take. It is because the Government have no conception of a constructive approach to the economic problems of the country that I regard this Budget as a futile exercise, and in so far as it is trying to ingratiate itself with the electorate it will soon, and rightly, peter out and the bitter fruits of it will be eaten in the years to come.

8.0 p.m.

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

This Budget cannot be described as futile. It will not be so described by the old-age pensioners who know that, in March of next year, they will have an increase in their pension of 21s. for a married couple and 12s. 6d. for a single person. In passing, I can tell my hon. Friend the Member for Buckingham (Mr. Maxwell), who was likened by the hon. Member for Ilford, North (Mr. Iremonger) to Sir Gerald Nabarro, that he has reached distinction in the first fortnight of this Government. If my hon. Friend is in this party anything like the live wire Sir Gerald Nabarro was in the Conservative Party, we shall welcome him with open arms. In the Conservative Party Sir Gerald was someone to take notice of, and it is no gibe to liken my hon. Friend to Sir Gerald Nabarro.

Photo of Mr Tom Iremonger Mr Tom Iremonger , Ilford North

I am much obliged to the hon. Gentleman for clarifying the point. I have great affection and admiration for Gerald Nabarro, and I regard it as a compliment to draw the comparison.

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

I turn now to some of the points which have been made by hon. Members opposite. The hon. Member for Walsall, South (Sir H. d'Avigdor Goldsmid), who advertised corsets and who, apparently, lives in the Victorian age of economics and has never heard about rollers and slimming diets, was very puzzled by the Chancellor's proposals because he could not understand how there could be a Chancellor of the Exchequer in this country who actually carried out his pledges to the electorate. This is something unknown among Conservatives. They make pledges and promises which are never honoured by a Conservative Party or Government. I could take countless examples from my long experience in political life, from Stanley Baldwin right up to the right hon. Gentleman who ceased to be Prime Minister a few weeks ago.

Photo of Mr William Clark Mr William Clark , Nottingham South

The hon. Gentleman says that the Chancellor has kept his pledges about pensions, the welfare services and so on. Another of his pledges was that there would be no general increase in taxation. Why has he not fulfilled that pledge?

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

People have to wait to come to a bridge before they can cross it. My right hon. Friend the Chancellor was in the unfortunate position of not knowing precisely what our economic situation was at the time of the election campaign. He received full knowledge of it only recently as the information in his Department was revealed to him.

One hon. Member talked about an increase in prices as a result of what the Chancellor proposes to do. There will be no increase in prices caused by action of the Chancellor or his supporters on this side of the Committee. Any increase in prices has been due to the neglect, inefficiency and dilatoriness of the previous Government. Let there be no mistake about that. If ever there was a Government who deliberately shed their responsibility as regards the country's economic situation while knowing full well about it, it was the last Tory Government.

Let us consider the course of events over the past 12 months. Even before the last autumn Budget, the papers were full of reports and comment about the seriousness of our economic situation. It was constantly reported that the cost of imports was exceeding our export earnings. These matters were analysed very closely, showing that in many cases, under the free enterprise system we had, many of those imports need not have been imported at all. When the autumn Budget came last year, with a serious economic situation facing us, what did the Chancellor do? He temporised, concentrating on beer, tobacco and bingo.

Photo of Mr William Clark Mr William Clark , Nottingham South

The hon. Gentleman keeps talking about an autumn Budget last year. There was no autumn Budget last year.

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

I am reminding the Committee of the seriousness of our economic situation at that time to justify my accusation of indifference, apathy and neglect, almost criminal neglect, on the part of the last Tory Government.

Any person viewing that situation objectively, even without any political bias at all, with knowledge of a deficit of between £700 million and £800 million, cannot but conclude that the full impact of it must have been brought home to the Government of the day before the election came. I believe that it will be writ large in history that, whatever were the failures of the last Government, and they were manifold, the greatest failure of all was in not revealing to the country the real economic position of Britain during the past 12 months.

It ill behoves hon. Members opposite to criticise the Chancellor now for facing the real economic situation and, at the same time, facing the promises, as far as we can, that we have made to the electorate. The Chancellor has done this fairly and frankly. From my point of view, this was the situation. I will put the position as I see it, in a way which, I hope, will not be misunderstood and I preface what I am about to say by affirming that I am a loyal supporter of the Government.

I believe that what they have done is right and the only thing that could be done to meet the present economic situation, but I have questioned in my own mind whether the Prime Minister might have taken another course, whether, on the revelation of all that has come to his notice in the past fortnight, he might have gone immediately to the country and given the people the true facts. I am sure that if he had the next election would have depleted the ranks on the benches opposite almost to oblivion. [Laughter.] That is as I see it and I make no apology for saying it, nor do I apologise for saying that what has been proposed by the Chancellor, as the only alternative to that course, is the only logical thing to be done and the only thing that can really be understood by the British people.

The Government are facing up to their responsibilities honestly and squarely and at the same time honouring the promises that they made. It ill behoves hon. Gentlemen opposite to jibe because a Chancellor has honoured his promises. I was taught in my Methodist upbringing that anyone who made a promise, particularly to a child or old person, and ratted on it was condemned to eternal perdition. That is putting it in the extreme, but it expresses what I believe over the Chancellor's action in facing the facts and at the same time, while knowing the economic situation, honouring the promises that we have made.

The Chancellor made clear the relationship between the increase in pensions and the new scales of the National Assistance Board. A question was put to the Chancellor in a very fair and frank way, and the Chancellor replied clearly and emphatically. There can be no ambiguity about it. The National Assistance Board scales will be raised to the same extent and at the same time as the increase in pensions. That may be only a minor matter, but it is an important reform. During my experience as a Member of Parliament, having different dates for increasing pensions and National Assistance scales has merely added to the confusion in people's minds. The fact that the two things are now to be done simultaneously is a long overdue reform.

That is not the end of the story. I believe that when the full economic possibilities have been thoroughly examined and the matter has been related to the graduated scheme which will have to be introduced, what has happened today will be surpassed by what will be done then. I am proud of this, because, although Britain is up against it and we have these economic problems, it remains true that any Government who neglect the old people or the young are undermining their own power and defeating their own economic objects. So I am proud that despite our difficulties, we are facing up to the problem.

One problem that I want to mention has caused me great worry all my life. I was brought up in a Lancashire home. I commenced work at 12 years of age as a half-timer in a cotton mill. Most of the cotton concerns in those days were based upon a certain share capital—mostly at 5s. per share, and most of them with half-a-crown paid up—and the rest was secured by loan money from the people of the district. Huge lists of loans required were to be found in the newspapers. I remember a period of the war when there was an excess profits tax and there were legal restrictions on the sale of those shares on the market. I remember the boom which took many of those 5s. shares to prices of £10, £15 and £20. The boom in the Lancashire cotton industry was equivalent to the gambling which has taken place in the last few years by the Cottons and Clores.

Then followed the result of that overcapitalisation, which was the start of the ruin of the Lancashire cotton industry as we knew it. One thing which I believe the Chancellor will do when he proposes a capital gains tax is to deal with the type of inflation mentioned by the hon. Member for Ilford, North—demand inflation, the pursuit of goods by too much money. One of the failures of this country for a long time which has helped to price us out of the market has been that many of our industries have suffered from this type of inflation, with costs pushing inflation and a demand for more and more production for the same dividends. When this is related to wages, one can say that those on the bottom rungs of the ladder have suffered accordingly.

I look forward to the time when the Chancellor and his right hon. and hon. Friends table a proposal for a capital gains tax, even though it has to take into consideration the problem of capital losses as well, for I believe that that will be one of the most fundamental checks against the type of inflation which has helped to ruin Britain and bring us to the economic situation from which we suffer today.

8.17 p.m.

Photo of Mr Roger Cooke Mr Roger Cooke , Twickenham

We cannot let the hon. Member for Sheffield, Brightside (Mr. Winter-bottom) get away with one of his statements. He gave the impression that the Chancellor in the Conservative Government had been hiding things before the General Election. Month by month the Trade and Navigation Returns came out, and month by month the balance of payments figures were published on the day on which they normally appear. I was asked questions about these things during the election campaign. I think it is quite untrue to say that the former Chancellor was hiding these figures in any way.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

Perhaps the hon. Gentleman will look at the centre page of today's Daily Mirror, where he will find an almost day-by-day account of statements by the ex-Chancellor and the ex-Prime Minister saying that there was no balance of payments problem and no crisis and that there would not be a crisis.

Photo of Mr Roger Cooke Mr Roger Cooke , Twickenham

I have not seen the Daily Mirror. What I was saying was that the figures were fully revealed to the public.

What has to be said over and over again today is that three-quarters of the Budget has nothing to do with the balance of payments problem. The sum of £460 million has been brought forward by the Chancellor as new expenditure on pensions, prescription schemes and so on. This is purely a straightforward transfer of income. I would describe the Budget as a perfectly normal social democratic one.

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

Does the hon. Gentleman mean that he approves of the Budget?

Photo of Mr Roger Cooke Mr Roger Cooke , Twickenham

I was about to say that only a small part of it is connected with the balance of payments.

Photo of Mr Roger Cooke Mr Roger Cooke , Twickenham

I shall not give way.

It is perfectly obvious, whatever one's definition of inflation, that the Budget will put up costs, both through the increased tax on petrol and through the increased cost of National Insurance stamps. There will be demands for increased wages to cover the extra cost, while a large number of young married couples, living to the limit of their income, will tell their employers that the increase of 6d. on the Income Tax means that their income is not quite big enough. These are the facts of life.

One aspect has been rather hidden from us and I would like the Financial Secretary to deal with it. This concerns Resolution No. 2 which says: … income tax for the year 1965–66 shall be charged at the standard rate of 8s. 3d. in the pound, and, in the case of an individual whose total income exceeds £2,000, at such higher rates in respect of the excess as Parliament may hereafter determine. Does that refer to an increase in Surtax in the forthcoming Budget?

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

I will put the hon. Gentleman out of his agony. The effect of that formula is merely to keep the position open.

Photo of Mr Roger Cooke Mr Roger Cooke , Twickenham

It mentions: … such higher rates in respect of the excess as Parliament may hereafter determine. As I read it, Surtax may go up as a result. That is one very good reason to have voted against the Resolution, particularly as the Chancellor did not explain it.

We should also look with great care at the question of the corporation tax, which has many attractive features but also one big difficulty—that tax will now be levied on corporations at a different rate of Income Tax from the rate at which Income Tax is levied on individuals. Therefore, when a dividend is transferred from a company to an individual and as, I believe, tax will not be deducted at source as it is at the moment, in effect there will be double taxation of dividends—paid first by the company and then by the recipient.

I want to re-examine the economic position underlying the Budget. The whole excuse for the Budget is the balance of payments. Last week I was at Strasbourg for the meeting of the E.F.T.A. Parliamentarians and the Council of Europe, to which I am a delegate. On the very first day I felt the full anger of seven nations, and I felt it the next day from 17 nations, against the tariff surcharge. Rightly or wrongly—my colleagues may think I did wrongly—I thought that, for the prestige of the country, in view of the cries of "perfidious Albion" and other pejoratives against us, I had better come to the rescue of the British Government.

I felt rather like the admiral in Washington at the end of the war who, when he heard that the Labour Government had been elected in Britain, said, "Well, never mind. My country Right or Left". I therefore carried out the somewhat unenviable task of putting to the nations of Europe the case for the tariff surcharge. I explained that the country had been greatly preoccupied with the General Election and that this no doubt had aggravated the position. I admitted that there was a temporary import problem.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

I have a quotation here for the hon. Gentleman. His right hon. Friend the Leader of the Opposition said that there was no problem.

Photo of Mr Roger Cooke Mr Roger Cooke , Twickenham

The facts and figures were produced in the Trade and Navigation Returns. These show that while our exports to E.F.T.A. countries went up 12 per cent.—quite a respectable figure—imports from them had gone up 37 per cent. Again, while exports to the Common Market had risen by 3 per cent. imports had gone up by 22 per cent.

I asked what, if there were a serious temporary position, as was claimed, the remedies were. One remedy could be devaluation of the £, but I claimed that that would be disastrous for Britain, E.F.T.A. and the sterling area. Another remedy would be to put up the Bank Rate and to bring in hire-purchase restrictions. But I pointed out that the Labour Party was committed against that. The new Government were committed to continuous full employment and continuous expansion. [HON. MEMBERS: "Hear, hear."] We shall see in a few months' time.

I explained that the policy of bringing in import controls and reintroducing the machinery of import controls would take a long time to bring about and, therefore, might take a long time to take off. That would not be an easy remedy. I finished by saying that possibly the surcharge was at least quick—quick to put on, and quick to take off by a stroke of the pen.

Finally, I said—and I expect the Government to reinforce this tomorrow—that the surcharge would be strictly temporary and that we should get back to a normal pattern of trade in a few months' time—I hope by the spring. I think that what I said helped to assuage the anger of some of the delegates.

Two days later the Economic Secretary to the Treasury came out to Strasbourg and made exactly the same speech. I think that Labour Ministers nowadays are very quick to learn and should be congratulated. Perhaps the Financial Secretary will pass that compliment on. As I faithfully supported the Government on that occasion I shall faithfully report what our E.F.T.A. and other European friends said about the surcharge.

They said that there had been no consultation, and thought that a breach of faith. They said that it was a breach of agreement for there is no provision in the Treaty of Stockholm for surcharges. They said that Britain is the spine of E.F.T.A. round which smaller countries revolve and that many small firms had been led into making trading agreements with us on the strength of the Stockholm Treaty and had now been seriously let down.

The Europeans said as a whole that this was a breach of the spirit of Europe—"perfidious Albion"—and would be aggravated if the agreement on the Concord were broken as well. Certainly, we are not very popular in France. I heard that in some public houses in France bartenders were chalking on their boards at the back "whisky à gogo" and then crossing it out and putting "vinrouge" underneath, following that with a surcharge against whisky.

Apart from the polemics of this matter, we must put before the public our export-import position in all its nakedness. I have been studying the Trade and Navigation Returns for the first nine months of the year. It is not true to say, as the Chancellor of the Exchequer did, that our exports have been drifting downwards. Our exports made a respectable increase, 4·8 per cent. in the first nine months of the year compared with the corresponding period of last year.

Of course, we all know that N.E.D.C. has said that exports should be increased by at least 6 per cent. to permit a 4 per cent. increase in trade every year. Imports have risen by 16 per cent. But let us consider that figure. Food imports have increased by 10 per cent., or £100 million, which means better living, which has to be paid for. Raw material imports increased by 15 per cent., at £106 million, a stocking up before the General Election, and so on. Fuel imports were up by 7 per cent. and chemicals, strangely enough, by 37 per cent. Imports of machinery also went up by the large amount of 34 per cent.

Our largest section of exports, machinery and transport equipment, including ships, aircraft and machine tools, and so on, bringing in £1,370 million, a third of our exports, increased by £26 million, only 2 per cent. Taking into account the export of motor vehicles, which increased by £37 million, the exports of the engineering section of British industry as a whole actually went down. Imports of manufactured goods classified by materials, steel, and so on, increased by 8 per cent.; chemicals, 12 per cent.; miscellaneous, 13 per cent.; but mineral fuels and coal and oil, have actually gone down £2l million. The net result of the picture is that while imports have increased by £500 million, exports have increased by only £117 million.

What are the remedies for this position? Assuming that the tariff surcharge is removed by the April Budget—and I suggest that that is the very latest date if we are not to continue to offend our E.F.T.A. friends and our friends in the Commonwealth and if we are not to run into objections under the G.A.T.T. and the Kennedy Round—the Government must take further remedies.

The last Government took severe action against the employers over restrictive practices. They brought in resale prices legislation which caused a great deal of anxiety among employers and was one of the items which led to the downfall of this party, making a difference of 200 or 300 votes in many constituencies. With that legislation, the then Government tore up many agreements in British industry, including, for instance, the heavy steel agreement.

We are, therefore, entitled to ask the present Government to ask the Trades Union Congress to look into restrictive practices on the trade union side. For instance, let there be an examination of the over-manning of fork lift trucks on the docks and so on, and demarcation disputes. Only the other day I heard that in the Manchester railway yards the National Union of Railwaymen was recently insisting that the driver of a four-ton lorry should have a mate, a practice not heard of in the rest of the transport industry. I ask hon. Members opposite who are interested in union affairs to take up these matters with their unions to see what can be done in the national interest.

Last July, the Conservative Government set up the British National Export Council with five councils affiliated to it. Obviously a great deal of use can be made of these bodies. The result of the 1½ per cent. tax rebate on items such as notepaper for exporting firms has resulted in importers in other countries asking our exporters for a discount of 2 per cent. to make up the tax rebate.

I come now to the incomes policy. The First Secretary has asked the T.U.C. by next spring to co-operate in agreeing to an incomes policy. I gather that he said in much more detail what we have been trying to say for the last three or four years, that he spelled it out to the T.U.C. I understand that he also asked the T.U.C. to adopt a guiding light of a 3 to 3½ per cent. annual wage increase, exactly the figure we have always put forward as the guiding light. Good luck to him! In return, the T.U.C. wants to know what is to happen about prices. It had the first answer yesterday with postal rates and another answer today with petrol—both going up.

What will happen to Government-controlled prices, things like railway season tickets and electricity? Are they to be subjected to the price review body which the Government are to set up? In all fairness, this body must examine not only the prices of private enterprise but those of Government-controlled bodies such as electricity and gas boards.

If the incomes policy were not successful by next spring, the next Budget would have to be a deflationary one. It would have to bring in either a higher bank rate or more restrictions, or there would have to be massive taxation. It is, therefore, all the more important that the First Secretary should succeed with his trade union friends in his search for an incomes policy.

I want to make two constructive suggestions which I hope will help. We should intensify the search for our own raw materials. Two or three weeks ago I was in the South of France and I had the opportunity of seeing the natural gas establishment at Lacq, near the Pyrenees. I had never seen it before and I was immensely impressed by it. The French have dug down 9,000 or 12,000 feet and have found enough natural gas to supply 7 per cent. of their energy requirements in the next 20 years. They are supplying 50 per cent. of their industrial gas. In addition, they have obtained from the gas 250,000 tons of chemical by-products which they are exporting.

We have the search going on in the North Sea, but this interesting point was made to me by one of the technicians. The Dutch came across their supply of natural gas by looking for salt. There are salt mines near Lacq in France. I wonder whether we have made sufficient and exhaustive researches in Cheshire and the Pennines for our own natural gas supply. Have we drilled low enough? I have written to the Minister of Power on this point—I do not know whether he should pass the inquiry on to the Minister of Land and Natural Resources—because if we can increase our supply of home raw materials our burden will be very greatly lessened. The growth in the French economy in the last few years is practically entirely due to the discovery of natural gas.

My last suggestion is directed to the Chancellor of the Exchequer and the next Budget when the right hon. Gentleman may have to drain off demand by making savings more popular. We should look at the idea of a unit trust run by the National Savings Movement. If the Financial Secretary will look into the pigeonholes at the Treasury he will find some Conservative ideas. There was a pamphlet on industrial investment certificates and a paper called "Every man a Capitalist" which was published a few years ago. [Laughter.] Yes. Some quite good ideas have been put forward. This would not be backdoor nationalisation or a political move. There could be a national unit trust carefully controlled by an independent body of trustees, say, with a limit of investment by those trustees in any particular company.

As I am deputy chairman of the Wider Share Ownership Committee, in company with Lord Shawcross I went two or three months ago to see Lord Mackintosh, the Chairman of the National Savings Movement, to put proposals to him. I think that they were sympathetically received and they might be introduced in connection with contractual savings, because if the National Savings Movement ran a unit trust it would provide capital for British industry, would be a hedge against inflation and would be a modern and attractive new savings scheme well worth consideration for adoption, possibly, in the next Budget.

What will the next Budget be? I hope that it will not be a mere redistribution of income, because the Chancellor of the Exchequer must find a great deal of money. As he said, there is an overall deficit of £450 million. The new taxes which he has introduced will bring in £213 million, so that a great deal more money must be found in the next Budget.

Unless the Chancellor of the Exchequer can solve the problem of an incomes policy and the other matters which I have raised, he will be in serious difficulty. I hope that he will adopt one or two of the ideas which I have put forward, particularly the one about a national unit trust.

8.40 p.m.

Photo of Mr David Ginsburg Mr David Ginsburg , Dewsbury

I listened to the constructive speech of the hon. Member for Twickenham (Mr. Gresham Cooke), as I always do, with very great interest. I listened particularly to his earlier comments about the import situation, with which I fully agree. I only regret that some of his hon. and right hon. Friends did not listen to his advice which, no doubt, he was proffering earlier about the situation, because I think that the national position today would have been a lot easier if people had hearkened to what he said.

I should like to begin by complimenting my right hon. Friend the Chancellor on his Budget, in particular with regard to its humanity. Speaking on behalf of my own constituents, I feel that there will be many thousands of people, having regard to what is proposed, who will bless the day that the Labour Government were returned to Westminster. Secondly, I should like to compliment him on his economic judgment. I do that a little more tentatively, because I am always rather more of an expansionist than the Treasury sometimes is. I was glad to notice that he struck a very fine balance in his Budget. He said that for the financial year 1964–65 he was going to take away £32 million.

Allowing for the fact that there will be improvements in certain social services before the end of the financial year, he is not affecting the level of demand in this country very seriously. I mention this because I think that it is right that the Committee should know, and the Government should notice, that the production figures are still rather static. The index of industrial production, inherited from the preceding Government, has not shown any improvement for a number of months. That is another thing which has not been discussed so far. I think that it would be rather dangerous to withdraw too much purchasing power from the economy until the Treasury Ministers are satisfied that the index of industrial production, that is, the demand for goods and services produced at home, is showing the lift that we should all like to see.

Thirdly, I should like to congratulate the Chancellor on the vision which he showed in his forthcoming tax proposals as a move towards incomes policy. It would be premature to debate this this evening. It is common ground, I hope, on both sides of the Committee that until this problem is solved it will be very difficult to move the British economy forward in the way we wish to move. The proposals which have been outlined this afternoon should make a constructive contribution in that direction.

Before I make some constructive comments, I want to say something about the responsibility of the last Government. When the former Chancellor, the right hon. Member for Barnet (Mr. Maudling), spoke during the debate on the Address in reply to the Queen's Speech, he suggested that his honour had been attacked. The honour of the last Chancellor is not in question. What I think is in question in this Committee are two things: first, his prudence, and secondly, his toughness. With regard to his prudence, I seriously submit that he played down the question of an economic crisis, certainly during the last week of the General Election campaign. There was talk a few minutes ago about newspaper headlines. I have a cutting from The Times, headed, "Troubles not crisis, says Chancellor". This was from The Times for Monday, 12th October. It said: Mr. Maudling said at Sheffield, Bedfordshire, on Saturday: 'I have said that this country is suffering from economic problems, but not a crisis'". He said this on the Saturday. It should also be noted that on the Friday, the day before, there were published in The Times some very interesting figures from the Institute of Export. I saw them in my constituency, and I am sure that the Chancellor had them brought to his notice, too. These figures showed that manufacturing imports were up on the eight months by £312 million and that manufacturing imports, the lifeblood of this country, were up by only £137 million.

There was a very serious situation—a crisis, let us not mince words—on the eve of the General Election. The incoming Government had no option but to take the measures which they took in respect of the surcharge. If hon. Members really criticise the surcharge—and I am not happy about some of the details—they should back their criticism with their vote, and the Opposition did not.

My other quarrel with the former Chancellor of the Exchequer is about his toughness. I do not question his intellect. I respect it. I am sure that he knew the rough trends in the balance of payments statistics—the rough trends in imports. It is common knowledge, judging by the Press, that the former Chancellor of the Exchequer wanted a General Election last June. If he had had his way it would have given the incoming Government of the day, whatever political complexion produced by the election, the necessary breathing space and elbow room which were required in the national interest.

It is a fact for the record that the previous Chancellor was overruled by the Prime Minister of the day on political grounds. I would only add that a Chancellor of the Exchequer—and I respect the former Chancellor—is the custodian of the economy. He is more than a party politician. Chancellors of the Exchequer sometimes have to put their country before their party. My own private feeling is that if the Chancellor felt as he did about the economy, it was his duty to offer his resignation rather than to allow the Government to go on for several months with a policy which in my submission has done very serious damage to the British economy.

I turn to some more constructive remarks. Of course I support the Government's action over the surcharges. That is not to say that, like my hon. Friend the Member for King's Lynn (Mr. Derek Page), who made a very interesting maiden speech, and some hon. Members opposite, I have not certain detailed misgivings about the surcharge. But obviously something had to be done, and it was the least of all the evils.

But I return to a theme which I elaborated in the previous Parliament and which I wish to repeat: by no means the worst problems of our balance of payments are on the visible account. It should not be imagined that measures to stem the influx of manufactured imports will alone get Britain over her balance of payments problems. What the experts call the invisible account is in serious trouble. The fact that it is invisible is one reason why it never seems to be properly debated here and does not attract as much attention from the Government of the day as it ought to attract.

Anyone who has studied the balance of payments account of the United States in recent years will notice that the American balance of payments has been very seriously affected by Government spending abroad and by capital movements away from the United States. These factors in the American visible account are also very powerful factors in the present British economic situation.

I mention one figure which I hope that the Financial Secretary will notice. Net Government spending abroad—and I hope that he will correct me if I am wrong—is up by £200 million in the last five years. We have to provide this £200 million by greater exports before Britain can afford further imports of manufactured goods, raw materials or foodstuffs. This figure is made up of defence expenditure and of Government grants overseas. I hope that there will be a very searching examination by the new Government of both these items. I was very interested yesterday in the House to notice that this point had apparently been taken by the new Minister of Overseas Development. She seemed to be aware of the shortage, the increasing shortage, of financial resources there will be for overseas development because of the factors which I have mentioned.

Although I know this will not be easy, and that perhaps the present moment may not be an easy one, nevertheless I would suggest to the Government that they should consider initiating talks with some of the European countries about aid for underdeveloped areas, because unless one can get a co-ordinated international European approach to underdeveloped countries, unless one can get some of the other wealthier countries to contribute rather more, I suspect the strain on the British economy and the strain on the invisible balance will be increasingly hard, because it is not just Government grants which are involved. Government loans overseas in the last five years have gone up appreciably, I think by about £50 million, and private investment overseas is going up, too. It is not necessarily a bad thing, but we have to be frank and recognise the burdens which all this represents. I know it is a very tricky area for the Government to operate in, but, nevertheless, I think some action is necessary.

I want to mention just one other figure. Today one-fifth of all our exports are going to pay for these invisible exports overseas. Five years ago it was only about one-sixth. So we have a very serious problem to tackle. I think I can speak candidly on this topic because in the last Parliament I used to talk on this subject, pressing the former Prime Minister, Mr. Harold Macmillan, for some further information, which was resisted at the time. I notice that the new Government have an economic adviser charged with overseas financial affairs in the Cabinet Office, and I hope he will look at some of the topics I have mentioned.

I hope in particular that there will be a searching look and attempt at producing a realistic balance sheet of the net income received from abroad through the oil industry. It will be necessary—this is, again, a very complex exercise—to take into account the earnings of the oil industry for the balance of payments, but it will also be necessary to take into account some of the outgoings from this country and also some of the ancillary cost of Governmental operations, aid and defence, and it may well be felt that certain aspects of the oil industry's operation—I do not say all, but certain of them—do represent a less profitable form of economic activity than this country has hitherto realised.

Let me mention just one other item on the invisible account which, I hope, will receive attention from the new Government. Many years ago when my right hon. Friend the Prime Minister was president of the Board of Trade we operated in relative balance on the tourist account. Quite a lot was spent overseas by British subjects, but a lot was spent in this country by tourists and visitors from abroad. No one is suggesting that there should be restrictions on overseas spending, but I am suggesting that there should again be a searching examination by the Government of the problems of the domestic tourist industry. There are many steps which could be taken by administrative and legislative action to make this a more attractive country for tourists, and if that were done the balance of payments account would benefit very greatly indeed.

My other constructive comment is on the subject of Governmental planning. I hope to say a few words about the new Ministry of Economic Affairs, some of them a little critical. This is not a party issue, despite the comments yesterday of the right hon. Member for Bexley (Mr. Heath), because divergent views on the future of the Treasury have been held by many Labour and Conservative politicians. For example, Winston Churchill, when he was Prime Minister in 1951, felt that it was necessary to have a counter-weight to the comparatively restrictionist attitude of the Treasury, in the form of the then Paymaster-General, Lord Cherwell, backed up by the advice of Sir Donald MacDougall.

Furthermore, Mr. Harold Macmillan, a former Prime Minister, has long been on record on this subject. He was in favour of a Ministry of Economic Affairs before the war. He felt it necessary to intervene against the Treasury and Treasury Ministers twice during his period as Prime Minister, first when the Chancellor and his two aides resigned in 1957, and, secondly, when the right hon. and learned Member for Wirrall (Mr. Selwyn Lloyd) resigned, and important structural changes were undertaken at the Treasury at the same time. I feel, therefore, that in comment on this position the Opposition cannot really feel that they speak with a united voice at all.

During one of the economic debates, I think in 1961, I urged changes in the structure of the Treasury. My suggestion was resisted by the right hon. Member for Birmingham, Handsworth (Sir E. Boyle) who, I think, was Economic Secretary at the time. He apparently had the support of our Front Bench spokesman, my right hon. Friend the Member for Battersea, North (Mr. Jay), so we are in very good company. I hope that at some time we shall have an opportunity to debate the machinery of government and the machinery of economic planning in considerable detail.

Although I respect the people who work in the Treasury as individuals, I accept the criticism that the Treasury tends to be restrictionist in outlook. It is therefore necessary to create an inflence in the Governmental machine which is pro-growth, dynamic, and expansionist. But, having said that, I still have certain reservations about whether the split between the Treasury and the Ministry of Economic Affairs is at the right point. It may be that we shall find that more radical measures are needed.

I note that the Treasury still retains responsibility for monetary policy, the balance of payments, short-term economic policy, and budgetary policy. Despite the new Ministry, those responsibilities are the prerogative of the Treasury, and these are vital responsibilities for the implementation of the economic plan. I incline to the view that the Treasury as we know it today should eventually be restricted to the control of the Governmental machine, to the control of establishments and to the control of expenditure within the Government orbit. But I have a personal inclination to confess. I think that, in the long term, it may be necessary to transfer the more vital economic functions to the new Ministry.

I suspect, too, because we are living in a dynamic and changing world, that the Government and the House will have to look very very carefully at the sort of dividing line we should have between the Board of Trade and the Ministry of Economic Affairs. As I understand it, we have sponsoring Ministries in this country. The system has grown up whereby industries are sponsored by particular Departments. Now that economic planning has become so complex and extends to individual industries I feel that it may be necessary to review the way the borderline between the Ministry of Economic Affairs and the Board of Trade is drawn.

I do not apologise in any way for raising these last problems with regard to economic planning. This country faces a tremendous challenge in the years to come. I remember, as a new Member, listening to the last great speech of Aneurin Bevan here. He said that the solution of the problem of dynamic planning in a democratic society had eluded both major parties. I think that what he said was true. I think that my right hon. and hon. Friends have made a brave beginning in fashioning the policies and the institutions that are necessary to solve this vital problem, and I wish them Godspeed on their way.

8.56 p.m.

Photo of Mr William Clark Mr William Clark , Nottingham South

We have listened with great interest to the speech of the hon. Member for Dewsbury (Mr. Ginsburg). If I may, I should like to deal later on with some of the points he has raised. During this debate and in the Budget the whole emphasis has been on our balance of payments deficit. I may say, in parenthesis, that very few of the suggestions in the Budget are going to help us to solve our balance of payments deficit. The thing that astounded me is that everybody accepts that exports are vital, but nowhere—either in the Government's White Paper or in the Queen's Speech, or in the Budget speech—was the question of international liquidity mentioned at all.

I would have thought that one of the reasons why exports are being held back—I am speaking on an international basis—is simply because the amount of liquidity is insufficient for world trade at the moment. Presumably the Chancellor of the Exchequer will in time get round to this. Eventually the Government will get round to the basic fact of life and realise that international liquidity and competitiveness regarding exports is the basis for any sound economy, irrespective of which party happens to be running the Government at the time.

What worries me is the blunt instrument which the Chancellor has used in an endeavour to reduce imports. This 15 per cent. surcharge applies, roughly, across the board, with the exception of raw materials, tobacco and a few other things. It is a blunt instrument. If the Government say that we are to modernise and get some up-to-date machinery, why should we penalise industry by imposing a 15 per cent. surcharge on some machines from abroad simply because they are not manufactured in this country? Hon. Members opposite may say that the machines should have been made in this country, and we accept that, but if we want a piece of machinery in order to modernise, can we wait?

I noticed that a few hon. Gentlemen opposite nodded their heads when I spoke of the increase in international liquidity. I think it deplorable that this blanket charge of 15 per cent. has caused such a stir, particularly in respect of the International Monetary Fund. One should pay tribute, in my opinion, to my right hon. Friend the Member for Barnet (Mr. Maudling) and his predecessors as Chancellors who were largely responsible for increasing international liquidity through the I.M.F. drawings and the Basle Agreement. It came as a shock to me that the I.M.F. should argue whether we had the drawing rights which we thought we had simply because the Government had imposed a 15 per cent. blanket charge.

Another criticism I have of the surcharge is that as an international trading nation we must always fulfil the pledges we give in any agreements we may sign. I am not proposing to mention all our trading partners or the countries with whom we trade. Let us take the case of our E.F.T.A. partners. Here we have a clear-cut agreement. I would not have thought it beyond the wit of the Chancellor of the Exchequer to have had some consultation with our E.F.T.A. partners. I would much rather the right hon. Gentleman had been a little more discriminatory in the imposition of the 15 per cent. charge. As I am sure hon. Members will agree, we must always avoid any action which may lead to reciprocal action on the part of our trading partners.

I think the Government have overplayed this crisis. The White Paper which was published with the announcement of the 15 per cent. surcharge referred to a deficit figure of £700 million to £800 million as being likely. We should remember that the balance of payment deficit goes on the calendar year and that we have already had ten-twelfths of that year. The last figure which I was able to obtain applied to the end of the second quarter and showed that our deficit was running at around £340 million. This included some of our overseas aid through exports for which we do not necessarily get paid. With our razor-edge economy we have to remember that we can at any time talk ourselves into a financial crisis. My greatest criticism of the Government is that they have exacerbated and exaggerated the balance of payments deficit. It was a difficulty but there was no need to exaggerate and to say that the deficit was something like £700 million or £800 million. My guess is that the amount will be very much less. It does not do very much good to the economy of the country to overstate the deficit.

Photo of Mr Cyril Bence Mr Cyril Bence , Dunbartonshire East

The point made by the hon. Member was that the instrument used by the Chancellor was blunt and that he might have been more discriminatory. Would the hon. Member advise us of any way in which it is possible to discriminate between one commodity and another?

Photo of Mr William Clark Mr William Clark , Nottingham South

If it is necessary—and I have not accepted that it is—to impose a 15 per cent. surcharge, it should not be imposed on all imports. I have given one example, that of machinery, which provides a clear-cut case of imports necessary to activate the modernisation programme, and someone could be penalised by the surcharge for importing such machinery. This is what I mean by saying that the Government should have been a little more discriminatory. It was not a question of being discriminatory between one country and another. It was a question of discriminating over a whole range of goods.

I do not think anyone in the Committee will deny that over the past 12 or 13 months we have been expanding our economy. Everybody in the Committee knows that before one can start exporting the raw materials must be bought to manufacture the goods to send abroad. Stockpiling has been going on. No one can deny that. Coupled with that fact, it was known that there was to be a General Election in October. There was no manoeuvrability about that. We knew that it had to be in October. [Laughter.] Hon. Members may laugh, but it is terribly serious to our economy. The result of it will be far more serious. With many of our industrialists fearing a change of Government and fearing that some sort of restriction would be put on imports, not only was there normal stockpiling, but there was additional stockpiling as a hedge against any sort of restriction on imports. Consequently, we have a balance of payments deficit, which I do not deny. Nobody knows whether it is in fact £700 or £800 million. I should have thought that it was much less than that. These two factors—normal stockpiling and extra stockpiling—would obviously enlarge the figure.

I should not have thought in the circumstances that this is necessarily a crisis. I am sure hon. Members on both sides will agree that it is quite all right to get an overdraft from one's bank provided one does not spend the money. If I get an overdraft of £100 from my bank and then invest the £100 in stock, I am not any worse off than I was before getting the overdraft. The fact that I owe £100 does not mean that I am bankrupt. That is the position in this country. Too much emphasis has been placed on the fact that there has been a crisis. [Laughter.] Hon. Members may laugh, but I draw the comparison between borrowing from the I.M.F. to pay for stockpiling and borrowing from the Americans and spending the money. We have not in fact spent our stocks. I am convinced that in the succeeding months our stockpiling will show results and exports will rise. I believe that this will become clear when this month's figures, next month's figures, the figures for January, February and March, and so on, are known.

Photo of Mr William Clark Mr William Clark , Nottingham South

The hon. Gentleman has had an awful lot of time. Since I have been sitting here he has interrupted an awful lot. I should like to finish this part of my speech.

Another reason why I think we may be running into trouble is that this is such a blanket surcharge. I emphasise that it is a terribly blunt instrument, in that there has been no discriminatory action between various types of goods. It has been said that the surcharge is temporary. If one says to a trading nation and an importing nation such as we are that this is temporary, what are we doing? If, for example, somebody is thinking of importing a piece of machi- nery worth £100,000, he knows that it will cost £115,000 from now on. If he thinks that the surcharge is temporary, all he will do is postpone the importation of that piece of machinery.

Photo of Mr Cyril Bence Mr Cyril Bence , Dunbartonshire East

That is what we want him to do.

Photo of Mr William Clark Mr William Clark , Nottingham South

Listen to the punch line. When the surcharge is lifted, obviously there will be people who have refrained from importing. There will of necessity be an upsurge in imports. This is another reason why I do not think that the surcharge has been thought out sufficiently.

Photo of Mr Robert Maxwell Mr Robert Maxwell , Buckingham

The hon. Member suggests that the 15 per cent. surcharge is wrong and harmful. He would have liked to see greater discrimination. He suggested, for example, that the Government should have exempted automated equipment from the surcharge. Does he realise, however, how complicated it is to define automated equipment? It would take two or three years to issue a list. The hon. Member also makes the point that if he borrows £100 from his bank and buys stock with it this would not cause him difficulty. How would he like to try to offer to repay his bank manager in goods when he asks for repayment of the overdraft?

Photo of Mr William Clark Mr William Clark , Nottingham South

I am grateful to the hon. Member for allowing me to carry on. I am sorry that I have interrupted him, but I thought that his intervention would be germane to the argument.

Nobody disagrees that it is difficult or complicated to differentiate, but are we to accept that simply because it is difficult we must therefore use a blunt instrument and chop everything? I am sure that the hon. Member, whom we are delighted to see here, has enough industrial acumen to realise that simply because something is difficult is no reason for not attempting it. I am sure that the hon. Member is not trying to prove that he is as naive as that.

Throughout the accusations underlying this debate is the fact over the past thirteen years that the Conservative Administration has, to use the words of one hon. Member, been disastrous. I am not going into the merits or demerits. Suffice it to say that after thirteen years of Tory Administration the standard of living has gone up by 40 per cent., the quickest and highest rate of increase in history. [Interruption.] I am sure that hon. Members opposite will eventually be able to differentiate between the cost of living and the standard of living.

The underlying theme has been that we have had a stop-go policy. We must not get a fixation about the words "stop" and "go". Nobody wants to stop-go, but it can also be described as accelerating and then braking. Any hon. Member who has had anything to do with business, whether manufacturing or distributing, knows full well that a business can never be run on an even keel with a steady rate of expansion. Of course it goes up and down. It goes forward quickly and then more slowly, and it then accelerates again. We should not fall into the trap of having a fixation about stop-go.

Presumably, the Budget is directed towards exports. I do not think that it is, but the suggestion is that it is. We have been given a kind of preview of the next Budget that the Chancellor of the Exchequer thinks that he may be introducing sometime next year. When we consider that private industry is responsible for, I think I am right in saying, 98·5 per cent. of our exports, we must be certain not to overtax these companies, thus adding to their costs and in so doing pricing ourselves out of the overseas market.

The Chancellor of the Exchequer has suggested that he will bring in an export incentive. I have always thought that there is a case for an export incentive. I appreciate that we have not had details, but my criticism of the way of doing it is as follows. To give an export incentive of 1½ per cent., or whatever the figure may be, means that even if our exports remain at their present level, the cost to the Exchequer will be £70 million to £80 million a year.

I would have much preferred to have seen a more sophisticated formula so that increases in exports received a much higher degree of rebate, whichever way one worked the rebate. I do not think that the method of 1 per cent. to 3 per cent.—and no doubt there will be a differential between types of goods—will necessarily increase our exports. All that it will do is immediately to add on to the Exchequer another £70 million to £80 million, and we may not receive any benefit from it.

This autumn Budget, to my mind, is a very political Budget. There are, of course, many things in it which everybody wants to do. The accusation has always been that successive Conservative Budgets have been vote-catching. I hope that we shall hear no more such accusations, for the simple reason that no fair-minded person could say that this was not a vote-catching Budget. Indeed, we on this side of the Committee think that this Parliament will not last too long.

One hon. Member made great play of the fact that the increases in social benefits, pensions and the like, were the result of a pledge given by the present Government during the election campaign, but what hon. Members opposite will not accept is that, in addition to that pledge, both the Prime Minister and the Chancellor gave similar pledges that there would be no general increases in taxation. One cannot have it both ways. The pledge that old-age pensions would be increased has been kept, but the other pledge that there would be no general increases in taxation has not. As my right hon. Friend the Leader of the Opposition said today, a 6d. charge on petrol and 6d. on the standard rate of Income Tax is by anybody's assessment a general increase in taxation.

On both sides of the Committee we all wish the economy of the country to be run as well as possible, but my one fear is that the measures taken by the Chancellor will not achieve the object which each of us desires, and that is to see the economy strengthened. We must remember the basic economic fact of life that we cannot possibly continue to thrive unless we are competitive, and we can be competitive only if we keep our costs down. Increasing taxation is not the way to go about it. We are not keeping our costs down. In that sense the Budget has measured up to the promises which we had from the present Government when they were in opposition, and particularly during the election campaign.

9.15 p.m.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

I am pleased to follow in the debate the hon. Member for Nottingham, South (Mr. W. Clark) because I have heard the whole of the debate. I have heard hon. Members make their speeches and—I must add with respect—seen most of them walk out of the Chamber immediately afterwards. I have listened particularly to hon. Members opposite in the hope of ascertaining from them whether or not there is a balance of payments crisis.

I have heard the former Chancellor of the Exchequer say that he knew that there would be these difficulties and a balance of payments problem and that he himself had looked at the same sort of remedies. He had hit upon the same sort of proposals that the Government are now introducing.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

I thought that I might get out more than two or three sentences before I was subject to the usual barracking.

Photo of Mr William Clark Mr William Clark , Nottingham South

In introducing his Budget earlier this year, my right hon. Friend the Member for Barnet (Mr. Maudling) said that, because of stockpiling, there would be pressure on our balance of payments. He said it long before the General Election, and the hon. Gentleman should make that clear.

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

I am coming to that. When the hon. Gentleman spoke, he unwittingly hit the nail on the head when he said that we had to have the election this October. We did not. We could have had it last October, last February or last June. But there were reasons why there was no election last October or earlier this year, and I shall remind the Committee of them.

Before doing so, however, I wish to congratulate my right hon. Friend the Chancellor on his Budget proposals. I am sure that he will remember this as a great day in his personal career, and we shall remember it as a great political occasion. I pay a sincere tribute, a birthday tribute, also to the right hon. Gentleman the Leader of the Opposition. I am sorry that he is not here to receive it. It may be forgotten that this is his birthday, the day on which he was wangled into leadership of the Opposition. That was why we never had the election last October, of course. Today is the right hon. Gentle- man's day, and I wish him a happy birthday. May he have many more happy years in occupation of that seat as Leader of the Opposition. He is the best Leader of the Opposition we have.

Photo of Mr John Wells Mr John Wells , Maidstone

What has this to do with the Budget?

Photo of Mr Arthur Lewis Mr Arthur Lewis , West Ham North

It has a lot to do with the Budget. I am about to remind the hon. Member for Nottingham, South and other hon. Members of why we could not have an election last October. I shall explain how the balance of payments problem has been directly attributable to the actions of the last Government, particularly the former Prime Minister. After the right hon. Gentleman was appointed, manoeuvred or jockeyed into leadership of his party, however it happened, he said: From this moment on, the fact that there is a General Election ahead of us must never be out of our minds. Every act that we take, every attitude that we strike, every speech that we make in Parliament or elsewhere, must have that fact in mind. I quote from the centre pages of today's Daily Mirror. I advise hon. Members opposite to read it. I ask hon. Members on both sides of the Committee to read it. If I could afford to pay for it, I would circulate it to the public generally.

I come now to a quotation from the former Chancellor of the Exchequer, the right hon. Member for Barnet (Mr. Maudling). It is true that, before the election, he said that there might be balance of payments problems, but he did not say it during the election campaign. This is one of the quotations from the right hon. Gentleman's words: I think our economic prospects in the short-term are certainly good … I think that the use of the word 'crisis' is quite wrong. Just before the election, the former Prime Minister said: Everyone seems to be agreed that short-term measures are not now necessary". That was from a speech on 3rd October last.

I am not arguing about it, he may or may not have been right, but I am reminding the Committee that we have had the former Chancellor here saying that he believes that there is a need for short-term measures.

The hon. Member for Nottingham, South cannot make up his mind whether the deficit is £700 million, £800 million, £300 million or £400 million. Apparently, he believes that it may be nearer £300 million or £400 million.

But we cannot get the agreement of the Opposition on whether there is or is not a balance of payments crisis. I rather accept the word of the former Chancellor who, now that the General Election is over, admits that there is a balance of payments crisis. I only wish he had said it during the election campaign. I wish the former Prime Minister had said it on 3rd October. I wish he had said on 3rd October that there might be a need for short-term measures, that his right hon. Friend the former Chancellor had some ideas and proposals pigeonholed and that when they got back to office, if they got back, they would have an autumn Budget. But he did not.

My accusation against the former Government is that either they knew and did nothing about it or did not know but ought to have known. They cannot have it both ways. Either they knew that the situation was getting crucial or they did not. I do not know which way it was, but I believe that they knew, and I believe that for electoral purposes they kept mum and hoped against hope that, as on previous occasions, they could get back to power and then start introducing their retrogressive legislation.. I believe that they would have done that if they had got back to power. Just as they started to dismember the National Health Service, so they could have continued. Just as they imposed taxation on kiddies' sweets and on ice cream, they could have done the same thing.

What has happened? We have heard about it this evening. It is amazing. The Tories had 13 consecutive years in power. Over the last 50 years, with the exception of two short periods, they have had undisputed control over the affairs of the country. Yet they suddenly decided when they heard the Budget and realised that my right hon. Friend was to increase the pensions for the old people, widows and so on, that if they had got back they also would have done it. If I may use some non-Parliamentary language, why the heck did they not do it? The Labour Party would not have opposed them. In fact, time after time we asked that this should be done, but it was the votes of the Conservative Party which stopped it.

A little earlier an hon. Member opposite said how terrible it was that the young people had to contribute towards the old-age pensioners. The hon. Gentleman does not know working-class men and women. They are only too pleased to look after Mum and Dad, and "Mum and Dad" are every old-age pensioner and retired person. All the working men and women in my constituency have said they are disgusted at the way the old people have been treated and neglected by the Tory Government over the last 13 years. I am not a bit worried about telling my constituents that they must pay a few bob a week to help give £1 a week to the old-age pensioners. Indeed, they are very pleased to do it. They know that the old people will get not only that but further advances which will come. Our ultimate policy is half pay on retirement.

I want to be a bit critical about the payment of the increases. With all respect to my right hon. Friend the Chancellor of the Exchequer, I do not accept the advice given him by the Treasury, the Post Office or the Ministry of Pensions and National Insurance that the increase cannot be paid until March. That is wrong.

I will tell the Government how the increase could be paid tomorrow. Every pensioner in receipt of a State pension collects it from the Post Office. A receipt is torn out from his book when he gets the money. All that is needed is to issue the Post Office with rubber stamps which would stamp the increased amount on each slip. The money would be paid by the Post Office and debited to the Treasury. I think that it takes about 24 hours to have a rubber stamp made.

I urge the Government not to listen to the arguments about this that we heard during the 13 years of the Conservative Government. We were always told that the increase could not be paid so quickly. But when the judges wanted their increase, they got it overnight, and, with all respect to Ministers, when the necessary Bill passes the House they will also get their increases overnight, although they are not in so serious a need as are pensioners.

Do not let this increase be delayed until March. Let us show that we can find a way. Even on the basis of using an I.O.U. from the Treasury to the Post Office, I would still prefer to show our determination to get the money paid as soon as possible—and as soon as possible is certainly not next March.

I agree that it is silly to have a general impost because there are new machines, new inventions in plant and equipment, which either we have not made ourselves or which we should see in order to study the possibility of making them here. It might well be that some machines from abroad are necessary to improve our exports. It should be possible to issue exemption certificates for the importation of proved plant and equipment necessary for the export trade. This also could be done simply. It is only a question of the Board of Trade issuing the necessary certificates.

My right hon. Friend the Minister of Public Building and Works wants a machine that will make more bricks. If I could find such a machine abroad, surely that would be a case for exemption from the new impost. The Board of Trade and its experts could examine it, and if it could be proved that the machine was able to do the job, it should be allowed in without the impost. Equally, if a machine could help us get a big export order, then it, too, should be exempted.

The impost is a short-term measure. We must get down to the job of directly encouraging exports. Far too many industrialists and workers are very happy to make a lot of stuff neither useful nor necessary because they are able to sell it quickly and cheaply on the home market, making a big profit. They are not interested in exports. Why should they be? Under the profit motive so much admired by hon. Members opposite their job is to make the biggest profit as quickly as possible, and if they can do that by making stuff only for the home market, why blame them?

A simple way of giving that incentive would be to allow everyone, not only manufacturers but British people going abroad on holidays, a cash discount in sterling on any foreign currency which they paid into the Bank of England. The discount could be altered according to whether the currency concerned became harder or softer. There are many people who, when about to return to this country from a holiday or a business trip, finding that they have a few francs or lira left, spend the money on some cheap souvenir which they do not really want rather than take the trouble to exchanging it here. If they knew that they could get a tax-free return on their money, I am sure that they would take the opportunity. [Laughter.] The hon. and gallant Member for Winchester (Rear-Admiral Morgan Giles) laughs, but I assure him that there are plenty of business people who would take advantage of a subsidy like that. Australia has such a system and is operating it with great success. The hon. Member for Worcester (Mr. Walker) has just returned from Australia and he would be able to confirm that.

If the Government introduce an incomes policy, as is their desire, if they want the support and active co-operation of the trade unions, as they do, I hope that they will quickly tackle those problems which confront ordinary people, and I refer especially to rents and the Rent Act. I am very pleased that my right hon. Frined the Minister of Housing and Local Government has already laid a Bill in that connection today. I hope that he gets on with the job quickly. These are the things which prevent an incomes policy. If a chap finds that his rent is going up by 25s. or 30s. a week, or if, as is the case in my constituency, two unfurnished rooms having no toilet or bathroom are advertised at a rent of five guineas a week, how can the ordinary man be expected to carry on without asking for a wage increase?

Let the Government deal with these problems and with the social services, the health charges and so on, and, as a trade unionist, I believe that if trade unionists see that the Government really intend to tackle the rackets which have been going on for so long under the party opposite, they will give their support to a fair incomes policy.

9.44 p.m.

Photo of Mr Daniel Awdry Mr Daniel Awdry , Chippenham

It is getting very late and I will say only a few words about the effect of the surcharge on our E.F.T.A. partners. I attended the Ministerial meeting of E.F.T.A. at Edinburgh in the summer. I then had the opportunity to meet the foreign Trade Ministers and to hear their views. I was immensely impressed by the very great fund of understanding and good will which existed among the Ministers of E.F.T.A.

That good will did not happen by accident. It was built up steadily and patiently over the last five years. Two things struck me about that conference. First, all the discussions were in English, and that is in itself a mark of the respect felt towards this country. Secondly, all the talk was on a very intimate and friendly basis. So often at these international meetings all the talk is of a formal kind with prepared speeches and no attempt at debate.

But E.F.T.A. is entirely different. I noticed the very ready feeling on behalf of all the Ministers at that conference to understand the points of view of the other nations. There is no doubt that enormous credit is due to my right hon. Friend the Member for Bexley (Mr. Heath) for building up this good will in E.F.T.A. over the years. At that meeting all the Foreign Ministers paid the most handsome and generous tributes to my right hon. Friend for all that he had done. He is very widely respected. I am profoundly disturbed at the great damage done in the last few days to that good will. It takes many years to build up international good will in foreign affairs and it can take only a matter of hours to wreck it.

The recent action of the Government has made me ashamed of our country—[Laughter.] Wait for it—

Photo of Mr Daniel Awdry Mr Daniel Awdry , Chippenham

Mr. Lange, the Swedish Minister of Trade, who greatly impressed me at Edinburgh, said yesterday that the breach of the E.F.T.A. Convention by our Government was a grave matter and: It is understandable that the British measures have given rise to a widespread feeling of anxiety and distaste. It is hardly surprising that Volvo, the largest Swedish car group, has already taken reprisals against this country. Its representative said only yesterday how bitterly disappointed Volvo was with the British Government. In view of the fact that last year Sweden was our biggest overseas customer for motor vehicle components, we can see how much damage may have been done already by the Government.

It does not stop at Sweden. Only yesterday, the Danish Foreign Minister said that E.F.T.A. was passing through a very severe crisis. I am not surprised that in his winding-up speech last night, and in all the turmoil, the Lord President of the Council did not say a single word in reply to my right hon. Friend the Member for Bexley on this subject. I can only express the hope that at the next Ministerial meeting next week at Geneva the Government will take most urgent steps to try to repair some of the damage which they have done. It will take many years to build up good will again, and by that time this Government will, happily, have passed into oblivion.

Photo of Mr Tam Dalyell Mr Tam Dalyell , West Lothian

Would the hon. Gentleman explain how we can overcome a deficit running at £800 million without hurting somebody?

Photo of Mr Daniel Awdry Mr Daniel Awdry , Chippenham

If the Government thought it necessary to take these steps, it was only right that they should go through the usual consultative procedure. There was no rush and there was nothing to prevent the Government from consulting our colleagues and friends, which would have avoided the damage which undoubtedly has been done.

I have said a few words on the external effects of the levy. I should now like to say something about the internal effects. Recently I received correspondence from a very small engineering company just starting in business. It has very little capital behind it. It intends to go into the export field. It is a precision engineering firm. Very shortly it will be able to export. Several months ago, in the summer, it ordered from Germany a special automatic lathe which it could not get in this country. The terms of the contract meant that it had to pay for the goods in full at the time of the order. The cost was £2,400, and this was paid in July. This small company is now suddenly faced with an additional bill for £300. It is far too late for it to be able to cancel this machine.

I mention that case because it is typical. The Government's decision is harsh and retrospective and will have a very serious effect on British technical development and British exports. I am sure that if this levy is maintained for any length of time it will seriously discourage small export firms just at the time when everyone on both sides of the Committee realises that the maximum encouragement must be given exporters. This point was raised by my right hon. Friend the Member for Bexley last night, and again the Lord President of the Council entirely ignored it when he replied.

I made about 40 speeches in the election, and in them I said that the return of a Socialist Government would mean higher taxes. I was heckled, and the Socialists said that this was entirely wrong. They have not had long to wait. We are already back to the same old medicine as before. We did not put up Income Tax over 13 years, but the Labour Government have put it up within a matter of weeks. The country has made its choice. It has chosen its bed and it has to lie on it until it has the good sense to wake up and bring us back to put things right.

9.51 p.m.

Photo of Mr Cyril Bence Mr Cyril Bence , Dunbartonshire East

We have had some extraordinary speeches during the debate. We have had diagnoses of the sick patient who has been fed for the last 13 years by the Opposition. From most of the speeches one would imagine that we had been the Government for the last 13 years and had not been the Opposition. Hon. Members opposite have been in Government and are responsible for the patient's condition. When the hon. Member for Chippenham (Mr. Awdry) says that he is ashamed of his country—

Photo of Mr Daniel Awdry Mr Daniel Awdry , Chippenham

I said that I am ashamed of the Government.

Photo of Mr Cyril Bence Mr Cyril Bence , Dunbartonshire East

I am ashamed of the Government of this great international trading nation which went on governing for 12 months and during that period allowed the position gradually to deteriorate from a rate of international indebtnedness of £150 million a year to a rate of nearly £800 million a year. The hon. Member should be ashamed of the Government of a country which allowed that situation to occur. He is right. I, too, am ashamed of that Government, which is now, quite rightly, in opposition.

Photo of Sir John Hall Sir John Hall , Wycombe

Let us get the figure right. Even in the Govern- ment's own White Paper the figure is given as between £700 million and £800 million. Moreover, hon. Members must remember that about £350 million of this figure represents investment overseas and repayment of the U.S.A. loan.

Photo of Mr Cyril Bence Mr Cyril Bence , Dunbartonshire East

But £700 million to £800 million is the rate at which our balance of payments deficit is running. We were spending more abroad than we were earning—and that is the rate at which we were doing it.

May I put it simply? Let us assume that I have been earning a certain income for a number of years and then my income falls in real terms under a Tory Government. I have to cut down my wife's housekeeping allowance. I say to her, "We have been spending £5 a week with the grocer but in future we can spend only £3 a week." That will hurt the grocer. This is what we have had to do. No matter what we did we should have had to hurt those people who import into this country. We could not avoid it. It is all very well saying that the surcharge affects our E.F.T.A. partners and upsets them. I know that it does. No trader in business likes his customer's income to be reduced so that the trade which he does with the customer falls.

Of course they are upset. But what else could we do if we have been living beyond our means? One either cuts down one's imports or by some miracle suddenly drives up one's exports to reach the level of the imports. We have been in power for only a fortnight, and the balance of payments deficit was running at £800 million a year. We cannot get exports up to that level in a fortnight. It will take time. Hon. Members opposite say that the 15 per cent. surcharge will be ineffective, for one reason in particular: that people will regard it as only a temporary measure and will stop importing. If they stop importing and we keep exporting, the balance of payments problem will be solved and the 15 per cent. surcharge can be taken off—and, hon. Members opposite say, these people will start importing again. I hope that by the time they start importing again our exporters, with the encouragement of the export rebate, will have been geared up to our export figures so that we shall be able by our exports to carry the resulting increase in imports.

Hon. Gentlemen opposite cannot have it both ways. It is really absurd to come into this Chamber and talk about this 15 per cent. being a frightful instrument, a blunt instrument, and then to argue that in the last 12 months manufacturers have been stocking up imports and that imports would, therefore, automatically have fallen. That is what we want to happen, and if they fall automatically then the 15 per cent. surcharge will not be used. It will not be imposed if they stop importing. This is logical.

Therefore, it is nonsense to talk about this instrument being a particularly blunt instrument compared with any other, because in this situation, where we have to act quickly and immediately, any instrument must, in the very nature of the thing, be rather blunt. There is no sharp instrument one can use to solve this situation quickly.

We had a proposition made by one hon. Gentleman opposite about discrimination. Discrimination is one of the most unfornate things any trading nation can resort to. To discriminate between commodities is bad enough, but to discriminate between nations is worse than ever. To show some preference for one trading group, whether it is E.F.T.A. or the Common Market or the United States, is very dangerous indeed, and I myself would never advocate it. As a great trading nation we want to avoid discrimination between different groups of countries and between individual nations as much as we possibly can.

This instrument must be blunt, and I do not see any way out of it. The hon. Gentleman the Member for Chippenham said that our friends on the Continent are very disappointed and feel very bitter about it. Of course they are disappointed at this situation. We do not like it, either. We do not like to have to do this. We want to free world trade. We want to increase world trade. We do not want to do anything to restrict it, but we have been living beyond our means. As a nation we have been spending more and importing more and consuming more than we have been earning by our exports, and something had to be done to put that situation right, and to bring home to the people of this country that, after 13 years of Tory rule, the country has been allowed to drift into this serious state of affairs.

Hon. Members opposite have been talking about this terrible imposition. We had a General Election in 1955 when the Tory Party got back. I remember playing a minor part soon afterwards with my right hon. Friend the Secretary of State for Scotland in a by-election in Greenock in October. We woke up one morning to find that the Conservative Chancellor had found the situation so bad that he had to bring in a series of Purchase Tax impositions—on pots and pans, scrubbing brushes, buckets, and many domestic items of that kind. My right hon. Friend will remember this very well. The situation was so bad he had to do something about it—

Photo of Mr Cyril Bence Mr Cyril Bence , Dunbartonshire East

No, not my right hon. Friend. I meant that the Tory Chancellor had to do something about it. The situation was so bad, he said. And that was the instrument he used.

The right hon. Gentleman the Member for Barnet (Mr. Maudling) has said about the 15 per cent. surcharge that he was considering some such remedy as that. He admitted that he was considering using an instrument of this kind. Obviously, now, in opposition, he can say he was considering it and that he might not have used it, but I have no doubt that, if the party opposite had got in, a Conservative Chancellor would have used some similar instrument to redress the situation of an excess of imports over exports of something between £700 million and £800 million. The former Conservative Chancellor admits that he would have had to have taken some action. The matchbox attitude to our economy is out. The situation is far too serious to work with matchboxes. I am shocked at the lighthearted way in which hon. Gentlemen opposite are treating this serious situation.

One hon. Gentleman opposite said that the difficulty—

It being Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.

Report of Resolutions to be received Tomorrow.

Committee also report Progress; to sit again Tomorrow.