Let us look at the record before the right hon. Gentleman congratulates himself too much. The facts are that on previous occasions when we have had balance of trade problems, they have been followed by a crisis of confidence in the £. If the right hon. Gentleman takes his mind back to 1961 he will remember that there was a Conservative Government in power and that we had precisely the same sort of run on the £ as we had last autumn, despite the fact that the balance of payments problem was nothing dike as serious as it was last autumn.
Another point which he made was to refer to increases in wages. I was not sure, from that part of his speech whether he thought it wrong that postmen should have had the increase in wages which they have had. I know that it is the duty of Oppositions to oppose and criticise without necessarily saying what they think should be done. I am sure that the House and the nation would have been interested to find out from the right hon. Gentleman whether he thought that this was a wage award which should have been stopped by Her Majesty's Government. May I remind him again of 1961, and the award to Government industrial workers, which was suspended by Her Majesty's Government despite the fact that there had been an arbitration award. I am sure that the nation is entitled to know whether the pay pause of 1961 reflects the incomes policy of the Conservative Party of 1965. We have not heard that this afternoon.
The right hon. Member for Orkney and Shetlands (Mr. Grimond), the Leader of the Liberal Party, referred to Government expenditure. I am sorry that he is no longer in the House and that no other Member of the Liberal Party is here. It would have been quite interesting to find out from the Liberals what Government expenditure they think should have been cut. They certainly voted for the increase in Income Tax last autumn. That was an increase in Government expenditure. Admittedly, it was related to the payment of pensions. They also voted again Government decisions to look very closely at Government commitments in the aircraft industry, which was part of the Budget Statement made by the Chancellor of the Exchequer. It is very easy for people to make general statements that Government expenditure should be cut. Hon. and right hon. Gentlemen opposite were always doing that between 1945 and 1950. They did not do much about it when they were in power. This is simply part of the stock in trade of Conservative and Liberal Oppositions.
My right hon. Friend presented this Finance Bill against a background of long discussions about the need to reform our taxation. I would congratulate him, particularly, on introducing into the Bill the Capital Gains Tax and the Corporation Tax. Again, if I may refer to the comments of the right hon. Member for Bexley on this, I hope that I have not got his words wrong, but he said that talk of modernising our tax system is illusory, that it is becoming a myth. I should have thought, judging from the conduct of his own party when in power, that they set out to modernise the tax system and to reform it, but did very little about it. I refer, of course, to the Royal Commission, 1952 to 1955. Very little was done by the previous Government in implementing the recommendations of that Royal Commission and very little was done about looking at alternative means of taxation.
It seems that they have adopted the attitude in Opposition, as they adopted it in Government, that the present system seems to work, so why bother to change it. We have had examples of inaction on this. We have had, for example, the refusal to do anything about the very serious disfigurement of our fiscal system in the last fifteen years in the shape of the tremendous increase in fortunes made out of capital gains. Professor Titmuss, in that section of his book where he refers to this, quotes the Daily Express City Editor as saying that nine men had made capital gains of £40 million since the war. That was, of course, in property. There have been many cases in the last five years of immense fortunes being made out of speculation in pro- perty, out of capital gains. It is no use any Government appealing to wage earners or salary earners for restraint when those people see vast fortunes being made which not only do not have a very moral connotation in themselves but which are not taxed.
No action was taken, either, in respect of the recommendation of the Royal Commission to limit the use of covenants for tax avoidance. I know that my right hon. Friend has not put this into this Finance Bill, but I am sure that it is very much in his mind. In looking at taxation policy, one is entitled to draw into question the policies of previous Administrations. The last Government were in power for a long period and, although they may not have implemented taxation reforms they gave certain twists to the tax system. The abolition of subsidies, way back in 1952, was an example of that. This made the taxation system slightly more regressive. The diminution in the value of Income Tax allowance due to the fall in the value of money had exactly the same result. The Royal Commission on the Taxation of Profits and Income, especially the minority Report, drew attention to this.
As I have said earlier, we had the effect of capital gains. One of the troubles with the statistics of the national income and expenditure is that there is no evidence whatever there of the effect on personal consumption of capital gains. Another very important twist to fiscal policy was given in the years 1951 to 1964. That is that the previous Government repeatedly introduced taxation proposals outside the Finance Bill and outside the Budget.
I refer to changes in the social insurance contributions and charges. These were changes in the tax system. Everyone knows that contributions were increased and that this was a grossly unfair method of taxation because contributions are a poll tax not related to one's ability to pay. In 1951 the Exchequer paid 27 per cent. of the cost of social security and in 1960 it paid 20 per cent. It was estimated in 1961 that by 1964–65 it would be 16·4 per cent. I looked this morning at the Blue Book on National Income and Expenditure and found that in 1962 the Exchequer contribution was only 15·8 per cent. That was a change in taxation policy of a most regressive character initiated by the last Government. I am not surprised that they do not want to discuss taxation policy very much today.
National Health Insurance contributions rose from £26 million in 1957 to £165 million in 1963. This was a form of taxation to finance the Health Service imposed on National Health Service contributions. When the Leader of the Opposition talked about Socialist Budgets being taxing Budgets, he might have mentioned the fact that in 1963, although the Conservatives reduced Income Tax, they also increased the contributions so that the £1,000-a-year man, who got an Income Tax relief of £4 9s., paid an increase of £2 16s. in his social insurance contributions. These are examples of a regressive twist to taxation which was introduced by the Conservative Party when they were in power. I need not refer to the charges for the National Health Service which were in themselves a form of tax.
The present Government intend to reform the tax system and they have made a brave start. I wish them well. It is most remarkable that in this business of taxation, as indeed in so many other fields, the tasks which were not accepted by the Conservative Party when in power for 13 years have had, after these long years, to be undertaken by my right hon. Friend.