I will deal with that point later. There is certainly the point about the people living on pensions and the large families. There is a case for doing away with the earned income allowance altogether. I find it difficult to know how two-ninths will be translated into decimal currency. Perhaps it will be approximated to 22½ per cent. I had hoped that the Chancellor might have rounded up to 25 per cent. on this occasion, but no doubt it is a reform which will come later.
There is a general myth abroad that we in this country are somehow over-taxed as compared with other countries. To quote an hon. Gentleman, people are driven abroad. I can only say that the country with the highest taxation in Europe, a country with 21 per cent. direct taxation on households, is Sweden, the richest country in Europe. It is usually the richest countries which have very high rates of taxation to pay for the many social benefits available.
It is not merely because they have less tax on expenditure, because there is a 15·6 per cent. tax on expenditure. The United Kingdom compares very well with other countries. The Netherlands is more highly taxed and, in spite of the quotation from the United States, if their system is looked at carefully it will be seen that there is little difference in direct taxation. Where our taxation system is inequitable and regressive is not in tax but in the amount of contribution that is paid for social security.
I hope that the earnings-related benefits and payments will help here. In France, the employer pays a social security contribution of 12·7 per cent. as against 2·4 per cent. for the employee. Some people who talk about food prices in the Common Market might note that point and some of us might note that there is room for increasing the employers' contributions in this sphere.
To deal with the point raised by the hon. Member for Kensington, South (Sir B. Rhys Williams), the point that I was making is that in dealing with those people who are in receipt of wages we have attacked the problem where it matters most. There is a sliding scale which is socially just. Those outside the tax limits altogether, such as large families and old people, those about whom the various fringe organisations are concerned, have suddenly become a matter of interest to the Opposition.
I never noticed this interest before. It seems that the Child Poverty Action Group, even if it has been at issue with the Government in recent years, has certainly stimulated something entirely new on the Opposition benches. I remember, and it comes to me as I speak, an incident when two right hon. Members of the Opposition Front Bench were hounded out of a meeting of the Bow Group at the Conservative Party conference shouting, "Are not we Conservatives concerned about social welfare?" One was a former spokesman on education and the other a current Front Bench spokesman for an aspect of economic affairs.
It seems that we have a late conversion among hon. Members opposite and there is a sudden interest in the poor, in the large families, family allowances and pensions, an interest never displayed by them during the many years when they had the opportunity to do something. This is not a problem for the Chancellor but my right hon. Friend in charge of social security. It is both unfair and unprincipled of hon. Gentlemen to throw at the Chancellor, who has produced a socially just Budget, the fact that he has not dealt with this sphere, which is not within his area of influence.
I hope that we will continue the policy we have embarked upon whereby we increased family allowances. This was by no means popular. We met with opposition both from this party and on the doorsteps. It did not win votes, but it was a correct and socially just policy, to increase family allowances using the claw-back to see that they went in the right direction. Those who talk of this are talking about something which will be dealt with in non-budgetary measures.
A certain amount of caution injected into the Budget speech and the Budget allows for this, and I welcome it. We have the use of the regulator and the possibility of increased credit and other measures in months to come if our expectations are exceeded, if the Chancellor's naturally careful forecasts are as careful as they were last year—in other words, if things go better than we fear but as well as we hope.
Haste in injecting too much into the economy now could lead to measzures later which, apart from their unpopularity, would be retrograde. The Chancellor has just about got it right. There may well be room later, particularly in view of the co-operative attitude of Mr. Victor Feather today, for a shot in the arm later in the year. The trend in the balance of payments the very day of the Budget indicates that this may be possible. The fact that we are able to reduce Bank Rate by 1 percent. Over a short period and yet sterling is doing so well is another encouraging factor. I do not believe that we should rush into expansion well above 3½ per cent., as some of my hon. Friends suggest. We are wise to be cautious, particularly after previous examples of an inflationary spiral followed by a balance of payments crisis.
Because we have trodden the road to success carefully, by treading carefully in a socially just Budget, there will be further opportunities in the year for further injections in the new economy. Unlike one of my hon. Friends, I do not believe that a Budget, in the complex situation of any highly industrialised nation, is the be-all and end-all in some mystical way for a year. The Government have been right to assess and reassess the situation. There is much to be said for taking away the mystique and some of the antiquated traditions of the Budget, not least the top hat.
I have something to say which might be regarded as a criticism of what I would otherwise think of as a lily-white Budget. I do not regard S.E.T. as an infamous tax; I think that it is an excellent tax. I think it might have been raised in certain respects to provide for higher tax concessions at the other end of the scale. While the Budget is absolutely sound from a social point of view and absolutely just, there is another matter which must come next in our lists of priorities after dealing with the very poor and that is the question of incentive. I am sure that time and again my hon. Friends will have heard skilled and unskilled manual workers in their constituencies say, "I have worked many hours overtime this week, but 8s. 3d. in the £ has been taken out of my wage packet", although they are wrong about the 8s. 3d. because of the two-ninths allowance. It is not what is true which counts so much as what is thought to be true. There is a psychological aspect to this matter.
Having tackled these priorities and the problem of poverty, the next problem is that of incentive. Some people have been disappointed that there was not a cut in the standard rate of income tax. The only way in which that could have been done would have been by increasing selective employment tax, although exempting certain sectors. My criticism of S.E.T. concerns not the form of taxation but the lack of selectivity. I am delighted that theatre productions have been exempted. But why only theatre productions?
As a former Chairman of the North West Sports Council, I must declare an interest. I am concerned about the effect of selective employment tax on a number of voluntary sporting clubs which have suffered as a result of a gaming tax on machines which bring in a large amount of their income. [Interruption.] If the hon. Member would get on his feet to intervene instead of sitting down with his feet in the air I might be able to hear him.