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Finance (No 2) Bill

Volume 411: debated on Monday 4 June 1945

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Order for Second Reading read.

2.22 p.m.

I beg to move, "That the Bill be now read a Second time."

I do not think that it would be in accordance with the wishes of the House, nor indeed is it necessary, for me to make a lengthy speech in moving the Second Reading of the Bill now before us. The House has seen in the Bill that was withdrawn last week the full provisions which would have been submitted to them for their approval had the circumstances of the Session been normal. We should have had a Finance Bill of ordinary dimensions, covering not only the whole of the proposals which I outlined in my Budget speech but a variety of minor and miscellaneous provisions which it was not necessary to describe in that statement. In view of the early Dissolution, we have thought that it would only be right, and indeed would only be practicable, to ask the present Parliament to pass, in these closing weeks, those few provisions which are absolutely essential to the ordinary management of our financial affairs through the summer months.

This does not mean, of course, that we attach little importance to those provisions of the earlier Bill which have now disappeared for the time being. Some of them, such as the tax exemption for Service gratuities, to which the Government and all parties are pledged, will in due course become essential, and all of them are, in the opinion of this Government, desirable. Perhaps by way of further illustration I may refer to the six Clauses which appeared in the previous Bill to give the necessary legislative sanction to the agreement on double taxation which we have concluded with the United States of America, and which we hope to conclude with the Dominions and other foreign Governments. The agreement with the United States received a very general welcome, and I am sure that it would be the wish of Parliament to pass the necessary legislation at an early date. I have proceeded on the assumption that a further Finance Bill will be necessary in the Autumn in any event.

As regards the actual provisions included in the present Bill, we have, in the first place, to reimpose the tax which forms the main prop of our fiscal system, the Income Tax, together with the Surtax, which is properly to be regarded as part of the Income Tax. This is done in standard form in Clauses 3 and 4. Since, under the Provisional Collection of Taxes Act, the Resolution imposing these taxes ceases to be valid if a Dissolution takes place before they have been confirmed by legislation, it is absolutely essential that these Clauses should be passed into law before the Dissolution. We have also to reimpose one other tax, the hops duty, which is the subject of Clause 1. It will be remembered that I mentioned this matter in my Budget speech. A Customs duty of £4 per cwt. on imported hops was first imposed for a period of four years in1925, in order to give some protection to the market for English hops. It has since then been renewed each time when it expired. There is a preferential rate of two-thirds of the full rate on Empire hops. The duty involves consequential duties on hop oil and other preparations made from hops. The Customs Duty on imported beer and the Customs and Excise drawbacks on beer exported, include an additional amount in consequence of the duty on imported hops. The necessary consequential provisions on these matters are included in the Clause.

Here again, because the present authority lapses in the middle of August, immediate legislation is necessary. During the war the imports affected by this duty have been very small indeed. It is uncertain to what extent they may return to a more normal level in the next four years. The matter has been the subject of discussion with my right hon. Friend the Minister of Agriculture, and with the interests concerned, and all are agreed in recommending that it would be undesirable at the present time to introduce any change in a policy which has shown beneficial results. I therefore recommend that the duty should be continued, as provided in the Clause.

There is one provision which involves a relief to the taxpayer, that which is included in Clause 5. In my Budget statement I made a proposal, which I explained at some length, for a further extension of the measures which we took last year to lighten the burden of Excess Profits Tax on small businesses. I will not weary the House by repetition of what I said in my Budget statement, but it will be remember that what I proposed was a general relief for all businesses whose profit standard falls short of £12,000. The relief is modelled on one which was applied to National Defence Contribution, and involves an addition to all standards below £12,000 of one-tenth of the amount by which the particular standard falls short of that figure. This gives a relief which is highest, of course, in the case of very small businesses, and which dwindles to nothing as the existing standard approaches £12,000. It does not affect in any way any business where the existing standard already amounts to £12,000 or more. This is, of course, a comparatively small matter but it has been recognised in all quarters of the House that the Excess Profits Tax continuing year to year must have a harmful effect on the growth of small and young enterprises. The proposal which I made in the Budget was generally welcomed, and it seemed to me desirable, that, in a matter of this kind, there should be no uncertainty in the minds of those affected. I have no doubt that the House will be ready to enact these provisions as one of the urgent measures to be included in this Emergency Bill. As this is an entirely new departure there could be no feeling of certainty, notwithstanding what I said in my Budget Speech, until the proposals had actually taken shape in legislation.

Clause 2 concerns questions of procedure in connection with Purchase Tax on utility goods, which I mentioned in the Budget. It amends Section 19 of the Finance Act, 1942, which empowered the Treasury, by Order, to give relief in respect of Purchase Tax on utility goods. The Board of Trade are already using other statutory marks which do not come within the definition of a utility mark, and they may find it necessary to introduce further such marks in the future. In order to bring the operation of the Purchase Tax provisions into line with this development—an excellent development, I think—of the system of statutory marks, it is desirable to substitute for the legislation of 1942 a general provision to include any marks the use of which the Board of Trade have power to regulate. It is, of course, still the case that any Treasury Order relating to Purchase Tax which might be made in this connection would, under general provisions already on the Statute Book, have to be approved by Resolution of the House of Commons.

Finally, the Bill includes, in Clause 6, provisions in standard form fixing the National Debt charge for the present year at the figure of £465,000,000, which I mentioned in my Budget speech. This Clause also includes powers which have been given in every year since 1933 to borrow to meet certain contractual sinking funds. This completes my explanation of the provisions contained in this Bill. It only remains for me to commend the Bill to the House, and to repeat the hope, expressed last week by the Leader of the House, that Parliament would be willing, in present circumstances, to give it a speedy passage into law.

2.31 p.m.

I do not anticipate that the wish expressed in the last few words of the Chancellor of the Exchequer's statement will be frustrated. It is in no one's interest to hold up the Finance Bill of the year, and in view of the early Dissolution I feel sure we shall all be willing to carry the Bill through all its stages in this House, and I have no doubt that in another place the Bill will receive equally speedy treatment. The Chancellor divided his remarks into two parts, one dealing with the omissions from the larger Bill and the other with the provisions of this Bill itself. With regard to the omissions, I feel quite sure that whatever Parliament is elected after the Dissolution will be glad to ratify the remission of taxation on the war gratuities, and also to ratify the arrangements with regard to double taxation that have formed part of an agreement between this country and the United States.

There is, however, another omission from the Bill to which I do not think the Chancellor made any reference. That is the change in motor taxation. When I spoke on the day following the Budget Statement I said that, provided the announcement which the Chancellor had made was an agreed solution, I, for my part, would support it, and I thought that it would be supported by the House. Since that Debate, I have learned that the proposals of the Chancellor in that respect are by no means agreed upon by the interested parties as a whole. In fact, as I understand it, the trade itself is divided, and it is very doubtful whether the main object of changing the form of motor taxation, namely, the desire to promote the British export trade, would be very much aided if the proposals which the Chancellor of the Exchequer laid before us in his Budget speech were, in fact, to become law. I am a child in these matters, and I do not profess to be able to form a complete judgment, but it has been represented to me that there are other forms of change, involving perhaps an increased duty on petrol and removing at any rate some part of the duty from the capacity of the engine, whether it be measured as at present or by cubic capacity, as in the Chancellor's proposal, which might have a better effect in promoting the export trade than the changes contained in the Chancellor's proposals.

Obviously we cannot decide that on the present occasion. The Chancellor will, I presume, continue to look at this matter, and if it should prove to be the case, that he is in the same office after the Election, he will then consider whether he can make a somewhat larger change that might have the effect of stimulating the British export trade. As it is at present, the British export market has certainly been adversely affected by the precise form of motor taxation. Motor exports may in the future be a considerable source of revenue, and if there be a way of pro- viding the same amount of revenue from motorists to the Exchequer and yet giving the means by which the export of motors will bring in a substantial export surplus, then an investigation of any proposal of that kind ought not to be neglected. I hope that the Chancellor of the Exchequer will keep his eye on that, and that his officials will look into various methods of improving the situation.

That concludes my remarks with regard to the omissions. With regard to the parts that are still in the Bill, not very much need be said. Clause 2, as I understood it from the Chancellor, is a fairly simple one, though it deals with a rather technical matter, and I do not suppose that the House will take any exception to that. I dealt, on the last occasion, with the question of Excess Profits Tax. I said, and repeat, that I do not think there will be any opposition in my Party to the slight remission of burdens on the small people affected by the Chancellor's proposals. The tax in its existing form has pressed very heavily on small businesses, and the alleviations which Clause 5 will effect will be welcome to a very large number of small people. I think that none of my hon. friends will take any exception to the Chancellor's proposals.

In Clause 6 we have the amount fixed for the servicing of the National Debt. It is a heavily mounting figure, and I am afraid it will be a long time before it comes down again. But we must needs foot the bill. No one in any part of the House stands for repudiation of any kind, certainly no one on this side of the House, and I imagine no one on the Government Benches. Therefore; unfortunate as it may be, the money has got to be found. We shall certainly offer no opposition to finding it. That concludes my remarks on this Measure and I hope, with the Chancellor, that it will not be necessary to take a very long time over its discussion.

2.40 p.m.

Like my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence)—if I may still call him my right hon. Friend—I welcome the abridged version of the Finance Bill which has been introduced by the Chancellor this afternoon. I want to speak upon it, however, from a rather special angle. I happen to have been for many years a Member of the Public Accounts Committee, and for the last three years I have been in the chair of that Committee. I am not now speaking on behalf of the Committee, but I am speaking with a fairly wide experience of its work in these last years. We have, of course, the head of every Department in the State before the Committee from time to time, and I want to pay a very warm tribute to the Treasury for the help they have given, not only to the Committee but to the nation as a whole, in regard to the very difficult problems that have confronted us.

There arises from time to time need for urgent decisions by the Treasury. If they are matters which concern the Public Accounts Committee, that Committee is always consulted and is asked its views before any changes are made in the existing Treasury practice. That is a very considerable Parliamentary safeguard on the Service Departments.

The Treasury also set up, at the beginning of the war, an Inter-Services Committee, with a Treasury officer as chairman, and this has done a great deal to co-ordinate our great Service Departments. Otherwise you might easily have Departments clamouring for, say, an area of land for an aerodrome or for manoeuvres—many possibilities leap to the eye—or competing for man-power, or for essential armaments of war. The Inter-Services Department has been of the greatest value. These things are not generally known to the public: if they were, there would be fewer complaints about Treasury control. Broadly, I should say, contract prices have been kept at a reasonable level. There has been an occasional slip-up, and those slips very often get into the Press; but, broadly, the Treasury control and the Departmental control have been reasonably exercised throughout the war. Some firms are rather liable to take the line, "It does not matter how much we charge; it will be taken off us in the form of Excess Profits Tax." The Committee have set their faces firmly against any such procedure, because it would lead to gross waste. We regard the Public Accounts Committee, not as a wicket-keeper but as a long stop, in cases where excessive profits have been taken.

Another thing about which the Treasury have been most helpful, is the question of inflation. Those of us who were in the House immediately after the last war remember how prices rocketed when the war ended. The cost-of-living figure went up not by one-third, as it has done in this war, but nearly three times. Subsidies, though not to the same extent as at present, were in existence after the last war. But this time keeping prices fairly stable has been of the greatest value in stopping inflation. I am often asked what is to happen in connection with the immense war debt accumulated in the last six years. The answer is much simpler than most people realise. I have turned up the Budget of 1919. The debt charge then, outside the fixed debt, was £330,000,000, and inside the fixed debt my recollection is that it was £30,000,000 in interest and sinking fund on the "pre-last war" debt. That is a total of £360,000,000. The House has heard that the interest charge on debt now is £465,000,000 as against £360,000,000 then. Our national income, as shown by the very interesting figures circulated with the Budget each year, is roughly double what it was after the last war. The figure then was roughly £4,000,000,000 and it is now £8,000,000,000. The percentage charge after the last war—and the percentage is the fairest way to calculate—was roughly nine per cent. of the national income; now it is six per cent. It is one-third less, although we borrowed these very large sums. The reason is quite simple. The Chancellor mentioned in his last speech that the charge was something over two per cent. I remember, in 1919,sums being borrowed at five per cent. Our borrowing rate has been about a third of what it was then, and it is that which has enabled us to treble our National Debt and, at the same time, to have an interest charge appreciably less in proportion than that of many years ago. That gives us hope for the future.

I have been talking in millions, but now I will give a simple illustration; because, unless one gives simple illustrations, people find it hard to realise the extent of the problems of finance. A man of great wealth, who has some £2,500 to invest, if he puts it out at 3 per cent. will find the annual interest not enough to pay for his daily copy of the "Daily Telegraph." If any man of great wealth among my hon. Friends opposite wants to invest money, he will have to invest more than £1,600 in order to have a penny a day to buy the "Daily Herald." That gives some idea of the very severe taxation which this country has gladly taken upon itself to win the war and the measure of taxation, which we hope before very long will be appreciably lightened. I hope that if a fresh Budget is introduced later, we shall find that the man of good will who introduced the Budget a few weeks ago, will be the person to introduce it.

2.48 p.m.

I am sorry to be in disagreement with my hon. and gallant Friend the Member for East Lewisham (Sir A. Pownall), but I think he is much too optimistic about the burden of National Debt. The national income in 1918 was not £4,000,000,000, but about £5,500,000,000. The debt charge in this Bill does not show the true debt charge, because the Chancellor in this year is paying interest on only half the borrowings for the year. If he ceases borrowing at the end of this year, his debt charge next year will be up about £25,000,000 on this year. Also, Chancellors pay virtually no interest at all on Savings Certificates, so a great deal of the National Debt is being concealed, and is becoming a new capital charge. We shall find that we have ahead of us a much bigger burden; even worse, we have the immense burden of £3,000,000,000 of sterling indebtedness to India, to Egypt, I think, to all sorts of countries, as my hon. Friend here reminds me. That will involve, in due course, capital payments to people abroad, the money for which we shall have to raise in this country either by taxation or by further borrowing.

I hope we shall not run away with the idea that this burden is going to be easy. It is going to be an oppressive burden that will hamper our lives in a great many respects for many years to come. I would ask the Chancellor also to remember the immense floating debt. I agree that the Treasury have been exceedingly skilful in borrowing cheaply, despite the destructive efforts of the hon. Member for Ipswich (Mr. Stokes), but I am quite satisfied that there is a good deal of floating debt, at very low rates of interest, which the Chancellor may find himself compelled, later on, to convert to higher rates.

If my hon. Friend will allow me, may I say that the position as regards the floating debt was also very serious after the last war? I happened then to be serving on a Committee which was dealing with the possibility of a capital levy on war taxes and the then Chancellor, Mr. Austen Chamberlain, told us how very anxious he was about the very large amount of floating debt in 1920.

I quite agree; and it is about twice as, much now as it was in 1920. That is what is worrying me. It is not going to be easy, and I think it is a great mistake to let the people think otherwise. They will have to carry, in debt charges, heavier burdens than were borne after the last war, and nobody will be in favour of repudiation, because the owning of the debt is now so widespread. Every person in this Chamber is about £20,000,000,000 richer than the State, because all the State has is the power to tax us—and it will be just as well to bear this in mind at the General Election.

Will the hon. gentleman not agree that that may be considerably altered by the result of the Election?

I agree that, if the other side win, it will be about £40,000,000,000, and it is one of the arguments in favour of keeping them out. Not many hon. Members will remember the occasion when the present First Lord of the Treasury introduced this hops tax. The present Prime Minister, in those days, was not so devoted to the principle of Imperial Preference as he now is, and, in introducing the hops tax, he expressed the hope that there would be no undue controversy, because those who thought that hops were food were in favour of food taxes, and those who did not think so did not believe in taxes on food, and, therefore, both would be satisfied. It is as well to remember the ingenuity with which the present Prime Minister commended this tax to the House 20 years ago.

The next Clause in the Bill provides that inferior goods should be exempt from Purchase Tax. I do not like this very much. I think the Chancellor has inherited it from the right hon. Gentleman who was the President of the Board of Trade and who designed what are called "utility" goods. If you make utility goods, they do not pay Purchase Tax. If they are designed by any of the innumerable professors at the Board of Trade—unless, in the meantime, these return to the London School of Economics—they are exempt from Purchase Tax. I had a suit made some little time ago, which was of the utility variety, so I suppose—I do not like the suit—that, as a result of the Bill passed some time ago, it was not taxable. I have another suit in process of construction, and, as it was not designed by the Board of Trade, I have to pay twice as much for it. I do not see why we should encourage the purchase of inferior goods by discriminatory taxation, and I ask the Chancellor to look into the principle involved.

I think we are all agreed on the merits of Clause 5. Excess Profits Tax has been exceptionally burdensome. All the businesses started in a small way just before the war were growing, as was reasonably to be expected, but those people will find nearly the whole of their profits swept away by the Excess Profits Tax. The result will be that they will be unable to make even a very small provision for the expenses which they will have to incur as soon as the demand for munitions diminishes to a substantial extent, and they have to start peace-time production. I am quite satisfied that this is a real headache to many small firms. This concession will do a great deal to promote employment at a time when the provision of employment will not be so easy. I am certain that this Bill ought to go through. In the autumn, when the Chancellor brings forward a much more pretentious Bill, those hon. Members who are sitting opposite will be more chastened than they are at present, and, as a result of the lessons learned from the General Election, will be able to devote more consideration to these problems than they can give at present.

2.56 p.m.

While I appreciate the importance of getting this Bill through as urgently as possible, I would ask the House to take note of one or two points in connection with it. Clause 6 provides for the annual charge for the National Debt. I think it is as well to bear in mind that this charge is just about half the amount of the Budget total of 1938. It is an indication of the kind of burdensome taxation which we shall have to face when this war is over. I cannot but ask whether this country will be in a position to meet these charges without having to suffer very great hardship. I go back, for the purpose of a zero line, to 1938. At that time, the amount of national and local taxation represented 24 percent. of the national income. Taxation is now reasonably high, and I have seen nothing suggested by the Chancellor—in fact, I am disappointed in the Chancellor's statement—which offers any prospect of decreased taxation. Unless we can maintain the national income at between £8,000,000,000 and £9,000,000,000 a year, I cannot see any prospect of the period of reconstruction being kept within a reasonably short time.

Therefore, I ask the House to consider very carefully the request of the Government for perpetual Votes of Credit, because these mean, every time, an increase of taxation. I raised this matter the other day in a Question. I asked the Chancellor what was the explanation of the Treasury Bill rate being 100 per cent. to-day in excess of what it was in 1936. The Chancellor, probably, was not free to give an explanation, but the fact remains that it is this kind of charge which is responsible for adding considerably to the permanent annual charge for the National Debt. I ask the Chancellor whether it is possible for the charge in respect of the Treasury Bill rate to be reduced.

The right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) referred to motor taxation. I feel that the proposal put before this House a few weeks ago is not a solution of this problem. I gather from the information I receive that there never will be agreement within the industry on the basis of motor taxation. I am informed that the reason is that there are two or three very large industries manufacturing cars, and the formula which we have used for motor taxation has suited their purpose, and these great concerns have now become such a powerful vested interest that the Chancellor's hands are tied. Having regard to the position within the trade, it is the responsibility of this House to decide what is to be the method of taxation. We must decide on a formula that will enable that industry to expand, on a basis which will give us an increased home trade, as well as a motor car which will be serviceable and useful in any world market. If we wait for the trade to arrive at an agreement, I am afraid we shall lose our trade as far as export is concerned.

Finally, my hon. Friend the Member for South Croydon (Sir H. Williams) referred to the overseas debt of £3,000,000,000. I do not take the gloomy view he has taken of that matter because, as long as we are not forced to accept the Bretton Woods proposal, that overseas debt can be converted into short term loans of 1½ per cent. to 2½ per cent. and can be used within the sterling area for the purposes of expanding export trade. That amount of money which is now owing to India and other countries represents generally what the Ottawa Agreement set out to do, and that was to provide a volume of international money. The amount of international money which the £3,000,000,000 or £4,000,000,000 represents is something very considerably higher than it was ever expected could be carried, at the time of the Ottawa Agreement.

Supposing a gentleman in India wants £50,000,000 worth of goods from this country and is going to finance it out of credit, somebody has to find the £50,000,000.

I agree, but the £50,000,000 to which my hon. Friend refers would come from the profits arising out of the turnover in industry which it is possible for this £3,000,000,000 to bring about. At the present time, to take the course to which my hon. Friend has referred, the £3,000,000,000 becomes an absolute dead weight, and if we are forced to accept the Bretton Woods proposal, the position will be that this country will have to create very heavy loans in the United States of America. That would be disastrous not only to British trade, but to world trade. On that point I ask the House to be very careful in deciding what we do with regard to the Bretton Woods proposal when it comes forward. I strongly advise that we should remain on the sterling standard. It is the only basis on which we can carry out our international trade, and hope to make the liability into an asset to our country and to the sterling area.

3.4 p.m.

I want to express my regret that the question of motor taxation has been dropped. Any Government that may be elected must face the problem of this very important trade in the reconstruction period, and I agree with the hon. Member for Southampton (Mr. Craven-Ellis), that this matter has been prejudiced by the very favoured position of one or two groups in the motor-car industry. I ask the House why we should perpetuate the misery of any artisan or member of the lower-paid middle class having to ride in a car with his knees in his mouth. If he were my weight, he could not get under some of the cars. When I entered the Government, I happened to come in as Minister of Labour, and I found that the Treasury had all motor cars graded, and I was allowed a Morris 10. I said to the then Chancellor that if I could not get a bigger car, I would ask him to purchase a shoe-horn to enable me to get into it. The business of this miserably-designed car, which has enabled certain of the groups to contribute millions to charity, has prejudiced British industry. I carefully estimated that if this thing were revised and put on a proper basis, as I have submitted to the Chancellor over and over again, nearly another 500,000 people would be permanently employed in the motor-car industry of this country. My suggestions have always included a block tax.

I admit that, with the revenue as it is—and I make a present of this point to the Chancellor, as I have always done—and with the war debt and the cost of the war, the right hon. Gentleman cannot in totality reduce the revenue. But it is a question of adjusting or revising, in order to achieve the greatest object. Therefore, I have taken the view that the one thing to aim at is a greater measure of standardisation. In the United States of America you can roll sheets 12 months on end without changing the roll. In this country you cannot roll more than a week because of the idiosyncrasies of the motor-car manufacturers. The result is that the cost of a motor car in the United States of America, per pound weight—at three times the wages—is 9d. a lb. on 1938 prices. In this country it is 1s. 4d. That is private enterprise in Britain.

It is restricted by the State in this country. It has been designed in order to meet certain types of motor-car manufacture. We have given the McKenna Duties of 33⅓ per cent. which, in my opinion, is all they need. If anyone cannot manufacture within the 33⅓ per cent. duty, then he is inefficient. But to that we add a motor-car tax which has been far worse than the 33⅓ per cent. It has resulted in the manufacture of a car that we cannot export, and they have openly said to me when I have discussed it with them, "If we go in for the export trade, we endanger the home market." I claim that the motor-car industry has to make its contribution to the 50 per cent. increase in exports like every other industry in this country. That will not be disputed by anybody.

My suggestion to them has been, over and over again, that they should agree to one tax up to 14.9 horse power. Whether it is measured in cubic feet capacity or in some other way, it would produce the same result. The result would be that, in this country, you would still have the home market but you would get a family car. Why do we make a car in this country in which only two people of normal size can ride on the back seat? [An Hon. Member: "Normal."] I was very careful to say normal. I think I am a man with a big future, but in any case I want a good family car in which the family can drive comfortably, and which would be better for driving, better for safety, and better for manipulation. Secondly, why have we always laid down that in working men's houses, such as Ministry of Health housing estates, you must not have a garage? Why should this class distinction be drawn, that I can have a garage at my house, but, if I live on a housing estate, I must not have a garage unless I put it up surreptitiously?

Yes, but it was laid down by this House under the last Government by the party opposite, when they passed the Housing Acts which restricted the municipalities from doing the decent thing.

When you get beyond the 14.9 you reach the bigger car of the export trade, and I would jump straight to the 26 h.p. or the 30 h.p. I do not believe that going up one horse power at a time is advantageous to the British motor car industry, and I do not think that one millionaire is sufficient compensation for the loss of the export trade. May I put another side? When we entered the war we found that the management of the motor-car trade was one of the most disastrous in the country. Will my friends from Birmingham admit to me that the pressure of cut prices drove the drop-forging trade almost to disaster? When this war broke out, the motor-car manufacturers, by playing off one little drop-forging maker against the other, in spite of the profits they were making, made it almost impossible for us to find the drop-forgings for the aircraft industry.

There is nothing that is a more natural concomitant of defence than the motor-car industry. It is almost bound up with the need that arises if we get into trouble, yet I suggest that that industry never once considered what I call real national service, and its contribution to the State. All they were concerned about was this enormous profit over small cars. If the matter cannot be dealt with in this Bill, then I quite agree with my hon. Friend the Member for Southampton that it ought not to be left to them any longer. We ought to take the whole motor-car industry right from the component, the drop-forging, through to the car itself, and lay down a system of taxation and organisation so that not only have you a profitable export trade, a decent home market but, in addition, you have, as a result of your commercial enterprise, a good line of defence if you get into trouble.

One last word about Bretton Woods. I have never been finally convinced about Bretton Woods. I take the line, and my Party takes the line, that, neither directly nor indirectly, will we again be anchored to gold in any circumstances. The export trade of this country carried about 1,750,000people. There are over 14,000,000 people employed in the home trade. I shall never be a party to any international agreement which, either as a result of the fluctuation of exchange, speculation, or international action of that kind—which is not always of the highest moral standard—would prevent me from insulating the home market from the violent repercussions which will break down the home price level when these wide fluctuations take place on the international price level. However, I will join with anyone in finding a rational basis for an international price level, properly organised, provided it does not reflect itself in depressing the standard of life on the home market. As yet, neither the Chancellor nor Lord Keynes has ever been able to persuade me that there are sufficient safeguards in the Bretton Woods proposals to achieve that object.

3.17 p.m.

I do not want to follow the right hon. Gentleman the Member for Central Wands worth (Mr. E. Bevin) into a discussion on Bretton Woods. I have never been able to see that the Bretton Woods proposals in themselves would do very much to increase the volume of international trade; to me they seem rather like taking a man who is on his way to the bankruptcy court into a "pub" and giving him a drink and a "pep" talk, instead of taking him straight to the court.

I would like to deal with a point raised by one or two speakers in this Debate in regard to motor-car duties. I do not know that I altogether agree with my right hon. Friend that a country must necessarily have a motor-car trade before it can build up a munitions industry.

That was certainly not the case with regard to Germany. Also, I do not go all the way with him in his denunciation of the motor car manufacturers, because I know for certain that at least two of them are bitterly opposed to the amended proposals which the Chancellor of the Exchequer brought forward a little time ago. However, the point I want to make is this. I am very glad that in this Finance Bill the Chancellor of the Exchequer has omitted the original proposals to substitute a cubic capacity tax for the old horse-power tax because, in fact, it was the horse-power tax under another name.

I do not think anybody could have been quite happy about the motor car trade even before the war. We were producing a car which was inferior, in many ways, to the American car, and for what we were getting for our money it was immeasurably more expensive. As the right hon. Gentleman pointed out, one of the great points of difference between this country and the United States was that, over there, many more of the artisan section of the community were able to afford a motor car than was possible in this country, and one only had to see them outside the big works in Pittsburg, or Detroit, or elsewhere, to realise what a very large percentage of the American working men went to work in a motor car instead of, as over here, in a public vehicle. I, for one, do not want to accept a standard of inferiority in that respect as compared with the United States. I sincerely hope that after this war a motor car will not be regarded as a luxury to a small section of the community to be used on Saturday afternoons, but will be available to the community as a whole. Even before the war that was not possible, and after the war, if we keep the horse-power tax in any shape or form, I am sure that that end will not be attained.

For 25 years the British motor industry has suffered two handicaps under the horse-power tax. First, it has meant a multiplicity of models. Many of the bigger manufacturers, before the war, turned out seven or eight models, and only two or three days ago, I saw that they proposed to continue in that way. That is absolutely fantastic. [An HON. MEMBER: "Why?"] There is no mystery about it. What they were trying to do was to make a motor car which was not based on sound principles of engineering, but was designed to dodge the Chancellor of the Exchequer. In other words, we allowed a purely arbitrary thing like taxation to determine our engineering policy, which is as unsound and illogical as the old window tax. The second handicap from which the trade has suffered is that it was necessary for us to make a special model for export.

When I was in the West Indies, about this time last year, I asked, in every island I visited, what were the prospects of an increase in the number of motor cars after the war from this country, even with the Imperial preference which the West Indies give us. One of their importers took me along to his garage and showed me two cars, one of 12 horse- power, a British car, and the other of 30 horse-power, of American make. He said, "Both are the same price, so which would you have?" If you had to choose, there was no question about which you would have. One was a proper motor car, designed to meet conditions which prevail in that part of the world, with hills and not particularly good roads; the other a little bucket affair designed merely to dodge the Chancellor of the Exchequer in this country. That is the condition which prevailed before the war, and if we perpetuate the horse-power tax after the war in any shape or form that condition will continue. I thought the Chancellor made a fair offer to the motor industry. He said, "I have to get a certain amount of money from you, and I do not much mind how I get it." But he also said, "If we are to change our basis of taxation I hope it will be in a way which will increase our export trade in motor cars." I want to tell my right hon. Friend that he will not attain that end if he perpetuates the horse-power tax in any shape or form. What are the alternatives? I believe—

I am afraid I did not realise in the early part of this discussion what implications would be involved, but I must now point out that it is out of Order to discuss motor taxation in full detail because it is a matter which is not dealt with by the Bill and therefore not relevant in detail.

Then may I conclude by saying that I am glad that my right hon. Friend has excluded his original proposals from this Bill. I hope that between now and the time when the new Bill comes along in the autumn he will reconsider the whole question of devising a car tax, which will assist the export trade.

3.25 p.m.

I think I should reply briefly to one or two points which have been raised in this Debate although I understand, Mr. Speaker, that the Ruling you have just given prevents me from replying to the major part of this afternoon's discussion. First, I should like to thank my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) for his speech, and for his statement that the Government's pledges in regard to war gratuities being exempted from tax will, in his view, undoubtedly be honoured by any Government which is returned at the General Election. I should also like to thank him for accepting the Clause in regard to the alteration in the Excess Profits Tax standard for small traders. I am sure that my right hon. Friend is right in saying that E.P.T. does bear very hardly upon the small and growing businesses which we need so badly in this country at the present time. I should also like to thank my hon. and gallant Friend the Member for East Lewisham (Sir A. Pownall)—no, I will not thank him because he is no longer in his place, but he did pay a tribute to the Treasury. My hon. Friend the Member for South Croydon (Sir H. Williams) has also gone, I see, and I think I had better leave him out of the picture, too.

Why should we be denied the nice things which the right hon. Gentleman intended to say about him?

Very well then, I will make my observations. My hon. Friend fell into an error in assuming that the sterling debts overseas, commonly described as sterling balances, were an addition to the gross figure of the National Debt. They are, of course, largely included in the National Debt, and do not then form an additional liability. My hon. Friend then went on to take some exception to the Clause in the Bill which deals with the extension of utility marks by the Board of Trade. I would only point out that this Clause does not in any way weaken the control of this House over changes in the rates of Purchase Tax. In the course of the last few weeks quite a number of Motions for affirmative Resolutions have appeared on the Order Paper in my name, relating to such things as mattresses containing steel springs and aluminium hollowware, and I can assure my hon. Friend that similar Motions will continue to appear on the Order Paper, whoever the next Financial Secretary to the Treasury may be.

My right hon. Friend who spoke from the Front Opposition Bench and who is, I think, the Member for Central Wandsworth (Mr. Bevin)—I am not sure because I have rarely heard him described by reference to his constituency—touched on the Bretton Woods Agreement. We have been careful on all sides of the House, hitherto, to avoid a full-dress Debate upon Bretton Woods. No doubt that is a subject which will be raised early in the new Parliament. However, we have taken note of what he has said and my only word would be one of advice to hon. Members generally to keep off this topic on the public platform during the Election, because it is one which lends itself to a good deal of misunderstanding. There is, as my right hon. Friend the Chancellor said, very little in the Bill; there is nothing which is controversial, as I think is shown by the fact that all the speeches which have been made upon it have been devoted to a subject to which you, Mr. Speaker, have forbidden me to reply.

Question put, and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the Whole House, for To-morrow.—[ Mr. Cary.]