It was not a mess. The hon. Gentleman should read any of my election speeches or any other election speeches made by hon. Members on this side of the Committee and he will see clearly stated the explanation of how that situation arose. The matter was under the control of my right hon. Friend the Member for Barnet (Mr. Maudling), whom I believe to be one of the most outstanding Chancellors of the Exchequer that this country has had for a long time. During his period of office he was trying to do something that many Chancellors have tried to do, namely, to get out of this permanent "stop-go" policy, a very difficult thing to do. Difficult though it was, I believe my right hon. Friend had a fair chance of success with his policies. Alas, due to our failure to get back into power we shall never know whether he would have succeeded, but I certainly believe that we stood a better chance of progress with his policies than we do with the policies that succeeded him.
I should like to pay tribute to my predecessor, Sir Alexander Spearman, who served as Member for Scarborough and Whitby for nearly 25 years and who during that time earned not only the affection and regard of everyone in that constituency but also the greatest respect in this Chamber. It gives me added pleasure that I should be allowed to intervene in this debate in which I know, had he been here, he would have wanted to take part, for he always took the greatest possible interest in financial debates.
During my absence from the House I have been, as it were, on the receiving end of its deliberations. Frankly, the reactions that I found at that end were neither entirely flattering to the House nor encouraging for the country's future. There was an overriding feeling of uncertainty as to what lay ahead. There was, in fact, only one common feeling held by everyone, I believe, during those 18 months, and that was a feeling that in view of the Government's narrow majority and as a General Election could not be long-delayed, nothing drastic would be done to curb demand; and whatever actions the Government took to stop the economy overheating were viewed against that background. As a result, I believe that demand kept up, that wage claims were made and won on the basis of a continuing scarcity of labour and that they were accepted often too easily by industry because the demand was such that costs were not of the first importance.
As a practising accountant, may I say that quite apart from their merits or otherwise, it was a mistake to push through in one Finance Act two such complicated measures as the Corporation Tax and the Capital Gains Tax at one and the same time. I hope that there is no tendency to underestimate the tremendous difficulties and uncertainties that exist both in the Inland Revenue and among the staffs of practising accountants throughout the country. Take personal Income Tax, for example. The forms have now come out and most of them have been pretty hastily forwarded to the accountants' offices. These will present a tremendous headache to all professional advisers as well as to Inland Revenue staff.
I hope that we shall be able to do a considerable amount during the passage of the next Finance Bill to alleviate some of the anomalies and difficulties that are presented to us. But it is not only the difficulties and doubts that are the problem. The problem also is the size of the task that is involved in working out all these computations. The size of this task means more skilled labour, and the problem is where to get it. There will be great difficulties both in accountants' offices and in the Inland Revenue in having the work done competently and fairly so that justice is done.
Whilst on the Capital Gains Tax, no one can now believe that any layman has the slightest hope of making an accurate return of his transactions in any year. While declaring an interest in this matter, as, obviously, I do, I submit that from now on professional fees for establishing profits and losses are as necessary an expense in the acquisition or disposal of property as are the charges of stock-brokers or auctioneers. Believe me, I can give fair warning that these charges will not be light. From the few returns I have seen already, and the attempts made in them to provide all the answers, it is clear that the costs involved for people as a charge on their income must be considerable if it is to be discovered whether there is any claim or liability. I am sure that these costs are absolutely essential, and it is in the interests of Inland Revenue officers themselves that they should be met and, indeed, encouraged to be met so that proper returns can be made and the work at the other end be kept to a minimum.
Next, I make a point not from the accountancy point of view but from the businessman's point of view. For well over a year now, there has continued to be a high level of demand and at the same time there has been a continued credit squeeze of varying degrees of intensity, at times a degree tougher than I can recollect on any other occasion. Yet I believe that the credit squeeze has had far less effect than was expected. I do not pretend that there has been no effect at all—obviously, that is not true, it has had an effect—but I consider that it has had less effect than expected. The reason is that it is the job of industry to satisfy demand and, if demand exists, as it did throughout this period, industry will do everything in its power to meet it. Not only was industry willing to pay higher rates of interest for capital—and why should it not, because cost was not paramount and sales were easy?—but in large sections of industry another means of financing operations came into being and people stopped paying each other for a month or more. In many sections of industry, everyone took longer to pay and took greater credit.
It would be a very interesting exercise for the record to find out by how much the objects of the credit squeeze were vitiated by the size of the additional credit created by this extension of credit throughout whole industries. I can think of one example. A factory working flat out for a month at the beginning of this year did not get in enough to pay the wages in that month. Of course, it was an exceptional month because taxes had to be paid and so on, but my guess is that this went on in many instances in various parts of industry.
A continued credit squeeze, in so far as it is successful, is damaging if applied too long because it falsifies the normal conditions of credit upon which industry relies. What is more, established firms which, generally speaking, have their credit facilities well organised and, usually, well in excess of their normal requirements, are all right, but the people who are hardest hit are the most vigorous, the growing enterprises. The growing firms are the ones which, as they take each step forward, rely, possibly quite temporarily, on banks and such institutions for the additional capital to get them over the hump of each advance. If for a long period of time we stifle the growth of these new and energetic firms, we stifle the very people who put competition into industry, who get after the heels of the established firms and see that they are not too comfortable and do not have too many overheads comfortably on their shoulders. There is a very real danger if we continue the system of credit squeeze too long.
The lesson we have learnt during the past 12 months is that, if we are to take, as take we must, the heat out of the economy, then we must reduce demand both by the public in its consumer spending and by the Government in their requirements for material projects and for manpower. In other words, we cannot isolate too finely the different sections of demand. As soon as we start to do that, we get into trouble. Certainly, we cannot isolate Government expenditure because it is such a major burden upon resources.
We have now had the election, and, though I cannot say that I am very pleased about the result, it was a good thing to have it because of the uncertainty to which I have referred and the belief that no one would really grapple with the nation's problems until it was out of the way. The Government can now concentrate on governing, putting first things first. First of all must come the putting of our economy on a sound basis. We can fairly say that, from now on, right hon. Gentlemen opposite have no excuse and they will be judged by their actions, not by their words.
In my opinion this is a holding Budget. The level of taxation is too high. I can see that, because of our present situation, which is in large measure due to what has happened during the past 18 months, there is no alternative to this type of Budget, but undoubtedly the level of taxation which we are suffering now and will suffer next year is at crisis level.
Obviously, the most interesting feature of the Budget is the selective employment tax. Making notes before I heard the Chancellor this afternoon, I noted my belief that there should be some form of payroll tax if additional taxes were needed, and, therefore, without approving this particular form—one has not had a chance to study it in all its aspects—I welcome the approach that, if a tax is necessary, this type of tax has been looked at and accepted. But, if I have to accept this tax, I accept it on the condition that, when the period of crisis has been overcome and we can, as I hope, begin to reduce taxation, this type of tax will be left in force and the emphasis in reduction of taxation will be on the reduction of direct taxation, both Income Tax and Surtax.