There was certainly little limit to the number of imperfections which the hon. Gentleman saw in the Bill.
When the Chancellor of the Exchequer outlined his Budget proposals, more than three months ago, they were not taken too badly in the country. Even those whose pockets were adversely affected felt that, though they might not lead to much progress, they would not do much harm. Since then, two things have happened: first, the right hon. Gentleman's intentions have been spelled out in the Bill; and, secondly, the Bill has been torn to pieces by my right hon. Friend the Member for Bexley (Mr. Heath) and the brilliant team on the Opposition Front Bench. I have taken a very modest part in 28 Finance Bills and I have never known such an effective attack by the Opposition on a Finance Bill, or an attack which has been so effective in the country.
It is clear that the fiscal measures in the Bill are not sufficient to damp down the inflationary pressures. Therefore, the Government, to a very large extent, are depending on their monetary measures. This is a very extraordinary policy for a Labour Government who never, in all their years in opposition, ceased to criticise the Conservative Government for very much milder doses of the monetary weapon. It would be out of order, during the Third Reading of a Finance Bill, to expand on the monetary measures, but perhaps I might say, in one short sentence, that the objection which I have to excessive dependence upon a credit squeeze is that it affects industrial investment rather than consumption and takes dangerously long to act.
This year this Bill, plus the credit squeeze, clearly has not damped down excessive demand. Opinions differ about what will happen next year. There are those who believe that demand will go on rising and, therefore, that wages will go up much more than production with a disastrous effect on the balance of payments. My own guess, for what it is worth, is that we shall have a recession in spending next year and that it will be sparked off by a sharp decline in industrial investment due partly to the credit squeeze and partly to this Bill, but not in the way which the authors of the Bill intended but because of the uncertainties which the Bill creates.
The Government are in a very great dilemma. If there is no recession in spending, inevitably they face an acute balance of payments crisis. If there is a recession in spending, they face severe unemployment. When the application of the brakes is delayed a long time, as has happened in this case, then they have to be applied far more severely. Consequently, there will be a much greater degree of unemployment than would otherwise be necessary, and that is a direct responsibility of the Government. The only consoling thing that I can say is that experience shows that after a recession there is a lag in the rise in unemployment of several months. It may be that the Government will have time to run away. It will not be the first time that a Labour Government have done that.
On Third Reading, it is relevant to examine the Bill as a whole and the methods proposed for raising revenue. The National Institute, in its May issue, contained an article by Mr. Hopkins of the Treasury and Mr. Godly of the National Institute, which said:
When a Government changes tax rates, their main purpose is usually to alter the general level of demand.
The Government appear to have rejected this advice. Night after night, as I listened to Treasury Ministers, it seemed clear to me that they had lost sight of the prime need to regulate the economy because they were obsessed by the problem of how to raise revenue and how to catch tax avoiders. All Chancellors of the Exchequer pay much too much attention to how much revenue they can get and much too little attention to how they get it.
Table 9 in the same issue of the National Institute's publication shows that if insurance benefits of £300 million were paid out and contributions of £300 million were levied so that the Treasury were unaffected, the effect on demand in the second year would be an increase of £223 million. If, as may be the case, some of the taxes proposed in this Bill would raise a revenue of £50 million and deter spending by £10 million, they would be very bad taxes. But if, as other taxes might do, they raise only £20 million and detered spending by nearly that amount, they would, in present circumstances, clearly be far better taxes. I cannot expect the Chief Secretary to accept this Keynesian view, because only last week he told us that what Mr. Gladstone said in 1884 was good enough for him in 1965.
I understand that before the election the Prime Minister wrote an article supporting a Corporation Tax on the basis that it would transfer the tax burden from the consumer to the shareholder. That is virtually impossible. If there is excess demand, inevitably either the spender is deterred by higher taxes or prices go up, and it is a very much more painful process for the consumer if it is done by prices going up. Taxes which come out of savings serve no economic purpose whatsoever. It would make—it might be the political purpose to do so—the rich poorer but it would not take the country richer, except perhaps accountants and lawyers, who will certainly be enriched by this Bill.
I believe that the Bill has two main themes. The first is to catch every tax avoider. Of course, it is a good thing to stop all avoidance of tax within reason, but not regardless of cost to the collector of taxes or of cost to the innocent taxpayer. As my right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd) said, institutions all over the country are having to spend time unproductively and money in taking on new clerks to deal with their accounts because of these new taxes. They have no intention whatsoever of avoiding tax.
If the Government go on with these sorts of measures, they may achieve the exact opposite of that at which they are aiming. We as a country have a very good reputation in tax avoidance. Our record is a great deal better than that of many other European countries. If, however, we go on with these sorts of measures, we may well find that they make the country into a nation of tax avoiders. I remind the Chancellor of what a great Roman said 2,000 years ago. "When I was very young", he said, "there were very few laws and there was very little crime. Now, there are a great many laws and a great deal of crime."
The other main theme is the determination to make startling tax changes for what appear to be purely party political purposes without due regard to the economic consequences. These are causing an immense dissipation of energy in Government circles, in the Civil Service and in industry and commerce. Surely, 1965 is the last year when we can afford that waste of energy.
I know that the Prime Minister has a fine memory. I wonder whether he can remember, as I can, Lord Attlee saying in this House on 6th August, 1947:
I would agree that it might have been better if we had had a greater concentration of effort. It may be we have tried to do too much in a short time."—[OFFICIAL REPORT, 6th August, 1947; Vol. 441, c. 1489.]
I wish that the Chancellor could have remembered and listened to those words.
In 1931, there was, I suppose, less confidence abroad in the Government of the day than there had been in any Government in modern history. Today, however, the Government have broken that record. The loss of confidence in the Government overseas is something which they have achieved to a far greater extent than in 1931 and much more quickly. The Chancellor of the Exchequer has been a personal friend for as long as he has been a political opponent. I find it hard to think that he is personally responsible for this unhappy Finance Bill. If I may misquote, the voice is the voice of Callaghan, but the hand is the hand of Wilson.