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Orders Of The Day

Volume 436: debated on Tuesday 15 April 1947

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Ways And Means

Considered in Committee.

[Major MILNER in the Chair]

Financial Statement

3.30 p.m.

The Budget deficit in 1944–45, the last full year of war, was £2,825 million, and in 1945–46, the year when peace broke out, it was £2,200 million. Twelve months ago, I forecast a sharp fall in the deficit to £726 million for 1946–47, the first year of peace; and this, I said last year, would be a pretty quick recoil towards a balanced Budget. In fact, the recoil has been even quicker. The deficit last year was only £569 million, £157 million less than I had anticipated. This is not, I think, a bad starting point for today's excursion.

Review Of Past Year

Looking back over the Revenue for the past year, the Budget estimate of £1,187 million for Customs and Excise was reduced to £1,184 million by concessions which I gave, following most persuasive representations, in Committee. during the passage of the Finance Bill. The receipts were, exactly, £1,184 million, to the nearest million. We hit the target exactly, in spite of the fact that I lost £52 million on beer, owing to the fact that there was less barley for brewing. That was not my fault. But this loss of revenue on beer was almost exactly balanced by a series of surpluses from tobacco, entertainments, Purchase Tax and other import duties. Tobacco brought in £446 million, £21 million more than the estimate. Entertainments Duty, in spite of remissions which I gave in my last Budget on a wide range of sports, none the less yielded £53 million, or £3 million more than the 'estimate. Purchase Tax yielded £181 million, £23 million more than the estimate. The duties under the Import Duties Act yielded £29 million, or £7 million more than the estimate.

Turning to the other great branch, the Inland Revenue, these duties, last year, yielded £1,777 million, a surplus of £9r million over the estimate. Income Tax at £1,156 million beat the estimate by £45 million. Excess Profits Tax and Profits Tax together, at £358 million, beat the estimate by £33 million. Stamps, at £38 million, beat the estimate by £9 million. On the Stock Exchange, there was a high, and sometimes even hectic, level of activity during the year. Stockbrokers have done very well under this Government. They have almost the least cause of all to complain. Death Duties at £148 million beat the estimate by £8 million. Surtax at £76 million, alone of the Inland Revenue duties, fell short of the estimate by £4 million, but, even so, it brought in £7 million more than in the previous year, although the rates of tax were still the same—[ Interruption.] No, the right hon. Gentleman must not assume that. The higher rates—I was about to emphasise this to the Committee—which were imposed in my Budget of October, 1945, in partial compensation for reliefs in Income Tax, only come into effect for the first time this year. They will normally be paid in January next by those happy persons entitled to pay them. This increase in Surtax is therefore all the more satisfactory, from the revenue point of view. I have made inquiries regarding Surtax collection, and I find that there are consider. able arrears of Surtax still to be gathered in. I have given instructions to the officers concerned that these overdue contributions from well-to-do people, shall be energetically collected.

Miscellaneous Revenue, 1946–47

Miscellaneous Revenue in 1946–47 brought in £380 million, £92 million more than the estimate. This substantial surplus was made up of £4 million more than the estimate for motor vehicle duties, £6 million more from the sale of war stores, £9 million more from the trading surpluses of Government Departments—for which I have to thank, principally, my right hon. and learned Friend the President of the Board of Trade. £5 million more from wireless licences, £12 million more from repayment of the so-called "Sundry Loans" and £56 million more from Miscellaneous Receipts—a number of small items. Therefore, last year's total revenue from all sources was £3,341 million, or £180 million more than the estimate. The revenue was indeed buoyant, and we have nothing to regret in this state of affairs. We collected £180 million more than the estimate for the revenue last year.

Expenditure 1946–47

Turning to expenditure last year, the total was £3,910 million, which was £23 million more than last April's estimate of £3,887 million. Defence expenditure, which I estimated at £1,667 million, amounted in fact to £1,653 million, a saving of £14 million on the Estimate. Supplementary Estimates for the Army and Navy were offset by meritorious savings of £60 million by my right hon. Friend the Minister of Supply. Civil expenditure I put at £1,652 million last April. The actual expenditure was £1,679 million, or £27 million more than the Estimate.

Social Services

Let us halt at this point and see what we have done. During this last year we have made history in the Social Services We have mounted, without halt or hesitation, the great social programme which the electors voted for, when our majority was returned. The National Insurance Act, the National. Health Services Act and the Industrial Injuries Act have been placed upon the Statute Book. Family allowances have been paid as from 1st August, 1946, and the higher old age pension has been paid as from the beginning of last October. We are entitled to say that the new Britain, represented by this House of Commons, has taken the cost of social security proudly in its stride; the money has been found, the Measures have been passed, and the benefits are being enjoyed by those entitled to them.

Including Supplementary Estimates, we provided last year no less than £441 million for Social Services, or £117 million more than in 1945–46. For education, we provided £139 million, or £31 million more than in the previous year. For training and resettlement, we provided £22 million, or £9 million more than the previous year For housing subsidies, we provided £27 million, or £10 million more. [ Interruption.] The houses were built, or the subsidies would, not have been paid—the right hon. Gentleman must not be in error about

that. For a variety of health services, we provided £7 million, or £6 million more than the year before. For health and unemployment insurance we provided £50 million, or £9 million more. For old age and widows' pensions we provided £156 million, or £14 million more; and, for the first year of payments of Family Allowances, we found £38 million. All that is, I think, very pleasing to all hon. Members of the Committee, because we feel that those who are deriving benefits from this expenditure fully deserve them.

Other Supplementary Estimates

Less pleasing to me are some of the other Supplementary Estimates which we have had to vote—£39 million for the Control Office, in addition to the original estimate of £80 million, to feed and administer the Germans in our zone. Our military costs are, of course, extra to these. And £19 million more than we bargained for in Greece. I would emphasise that, unhappily for us, food prices have gone on rising all over the world, and we have, therefore, had to vote a supplementary sum of £50 million for purchases by the Ministry of Food. We are glad to have the food, but are sorry that it costs so much. Consolidated Fund services at £578 million, were £10 million above the estimate. Thus, if I may sum up in a sentence, with the expenditure £23 million more, and the revenue £180 million more than the estimate, the deficit, at £569 million, was £157 million less than I had foretold.

National Land Fund

Before I leave 1946–47, I think that I should report briefly to the Committee on the first year's working of the National Land Fund, which we established last year. None of the principal of this Fund, which amounts to £50 million and is safely and properly invested in Government securities—it is a proper Fund, not just a bookkeeping entry—and a large part of which, as I told the Committee last year, I regard as a nest egg for national parks and similar projects in the future, has yet been spent; and our commitments up to date will be well covered by the interest on the capital—which is sound finance. But these commitments already cover payments to the Inland Revenue from the Fund in respect of five properties which have been accepted in satisfaction of Death Duties. The first of these five properties consists of 33,000 acres—a large acreage—nearly half the county of Merioneth, including Lake Bala and some adjacent mountain slopes, an area of great beauty in the heart of Wales, and in the heart of Welsh culture. I contemplate that this estate will be most sympathetically owned and administered, I hope, as a whole and as a unit, with a special care for increased food production, for the welfare of the present tenants of the estate, and also for improved facilities, hitherto rather neglected in this area, for visitors and holiday-makers.

The second and third properties are both in the Lake District, 1,800 acres including Lake Brotherswater, a beautiful lake, and a smaller area of 800 acres, not far away at Troutbeck, including a picturesque 17th century farmhouse among the fells. Both these properties, it seems to me, could best be handled by the National Trust, which has an ever-growing holding of land, of course, in the Lake District. The two remaining properties are in the West Country. One is Cotehele, the medieval mansion of the Mount Edgcumbe family, 12 miles up the River Tamar from Plymouth. This is one of the oldest inhabitated houses in Britain, and is a very fine example, both in its exterior and its furnishings, of one of the great periods of English architecture. It would have been a great pity if it had been lost. It will be held, together with 1,300 acres, on behalf of the nation by the National Trust. Finally, I am handing over to the Youth Hostels Association a modern seaside house, with three acres of land, on the North Cornish cliff, near Padstow. This house is specially suited to be used as a hostel, for the enjoyment of young people with not much money to spend, and it completes the chain of hostels held by the Association in this part of the country. I hope and believe that this is only the first of a series of such arrangements which we shall be able to make for the benefit, not only of these bodies I have named, but for other non-profit-making bodies of the same kind. England and Wales have made a good start in this first year. Scotland, I hope, is going to give us something in the second year.

Prospects For 1947–48

I turn from these retrospects to the prospects for 1947–48. I estimate expen- diture this year—that is, of course, the year which began on 1st April, a fortnight ago—at £3,181 million. That is a reduction of £729 million, or 19 per cent. on the actual expenditure of last year—not on the estimates, but on the actual expenditure. As the Committee knows, this expenditure falls into three parts. First, there is Defence; second, the Civil and Revenue Departments; and, third the Consolidated Fund Services, mainly the interest on the National Debt. Defence expenditure—including the military element of the Ministry of Supply, which has a civil element also—will be £899 million. Last year, it was £1,653 million and we have, therefore, made a reduction of no less than £754 million, or 46 per cent. on last year. If we exclude terminal charges—gratuities to soldiers, sailors and airmen on discharge, release leave and clothing, the termination of contracts, and so on—the reduction is, indeed, less, from £1,091 million, to £780 million, or a reduction of 28 per cent. As we all are, I am counting on a further substantial reduction next year.

Civil and Revenue Departments, including the civil element of the Ministry of Supply, will cost this year £1,726 million, or £47 million more than last year's actual expenditure. That is, of course, a final figure, after many pluses and minuses, and many changes, some up and some down, in the Estimates of Civil Departments. We are getting big savings in the wartime services, which are now fast fading out of the picture. We shall be providing £40 million less this year than last for the hire and operation of ships on behalf of the Ministry of Transport. We shall be saving million on the provision for Civil Defence and the emergency services of the Home Office, and—a very substantial economy—we shall need to find this year, as a final contribution, only million for U.N.R.R.A., which last year cost £90 million, a saving of £89 million. On the other hand, we shall be providing more in various other directions.


We shall be providing £29 million more for education this year, including such things as school dinners, further education of demobilised men and women, more scholarships, and the raising of the school-leaving age. The raising of the school-leaving age, which is an educational re- form long promised and, with a variety of excuses, too long withheld, represents, in the view of the Government, a fresh social investment in the minds, the bodies and the characters of our young generation. I am quite sure that we shall reap rich rewards, and soon, from this new educational adventure. Looking back, it is interesting to recall that this would have come about in 1932, but that Sir Charles Trevelyan's Bill to raise the school leaving age, having passed through this House, was thrown out in another place. Those who did that have kept the children waiting 15 years, and, in our view, it is time to put an end to this folly. Included in the educational increase is an additional £3 million for the universities. The total estimate for the universities of £12 million of public money this year is more than five times the prewar figure. It includes £8 million for current grants and £3½ million for capital grants. The universities must be enabled to play a fuller part than ever before in our national life, and to double the prewar total of their students within a period of ten years. We have set that as the target, and we believe that money spent on a planned expansion of this kind will be money very well spent in the national interest.

Other Services

We are providing this year £25 million more for housing and for the preliminary expenses of the National Health Service. We have provided £23 million more for the Ministry of National Insurance, for a full year's provision, this year, of Family Allowances. The Committee will be glad to know, in regard to these allowances, that they are costing us this year £4 million more than we had expected. And I am told that there are some 200,000 more eligible babies than were allowed for by the actuaries. The actuaries thought, however, that the, school-leaving age would have been raised sooner. So they were doubly wrong. Even actuaries may err. We may sum it up by saying that we have done worse than they expected in education, but better in procreation. And, of course, there is an extra pay day for mother in leap year, next year being a leap year. So much for family allowances at this stage.

We shall also provide £4½ million more this year for the Development Areas, in regard to which, and only in regard to which, I used the phrase about what the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) so originally called my "cardiac murmurs." It is in regard to expenditure here, and only here, that I said that I would find all the money, with a song in my heart, to build factories and to employ the men and women in these areas. We shall provide £4½ million more this year for the Development Areas, for the acquisition of land and for building new factories. My right hon. and learned Friend the President of the Board of Trade and I have been in consultation on the matter, and we both agree that this factory proposal has been marching too slowly. Those responsible are now being prodded by my right hon. Friend, and we hope soon to have a rather quicker rate of advance. In these days of widely advertised labour shortage, we cannot tolerate the continuance of local unemployment in these areas. Therefore, we are doing our best to speed things up, and we are very willing to be stimulated and criticised in this regard, as it will only urge us on to do even more than we are seeking to do at the present time.

We are providing £10 million more this year for roads, of which I am glad to say million are going to be spent in the Development Areas; and we are providing million more for State forestry which I warmly commended to the Committee last year as a very good Socialist investment in land and young trees. I am also pledged—and I am happy to be pledged, though "happy" is not quite the word; am very content to be pledged—to provide a sum, the total of which I cannot yet determine, to carry out the Government's promise to help to make good, as soon and as completely as possible, the loss and damage to agriculture and to other interests caused by the recent snow and frosts. We shall not be niggardly about this. We shall find whatever money is reasonably required.

Cost-Of-Living Subsidies

The Ministry of Food estimate shows a large increase of 5c) million over last year's expenditure. This is due to the increase in the cost-of-living subsidies, on which, perhaps, I might conveniently interpolate some observations at this stage.

No, only cost-of-living subsidies. I am anxious to speak frankly to the Committee about these subsidies. I have estimated their total cost this year at £425 million, of which £392 million are for subsidies to food prices, as against £348 million last year, and £33 million are for subsidies to utility clothing and footwear prices as against £19 million last year. This is a most formidable total, which has grown very rapidly in the last few years. Last year in my Budget Speech I said that we could not go on holding the cost of living steady regardless of the cost. I added:

"We shall have to reconsider this matter next year. We might even have to do so earlier, if prices of our necessary imports, or home supplies, rose steeply."—[OFFICIAL REPORT, 9th April, 1946; Vol. 421, c. 1811.]
We have now reached a point where, in any case, it would be necessary to consider very carefully whether we could face any further increases in the total cost of these subsidies. Otherwise, this element, alone in all the total of our public expenditure, might seem to be passing out of our own control, and we might seem to be dragged along by rises in prices all over the world, independently of our own decisions, and hitched to a most out of date and generally discredited index of the cost of living. This would be a very unfortunate and ignominious situation.

The wisdom of any policy, including this one, is relative both to its practical effect on the one hand, and to the practical possibilities of continuing it unchanged. I have no doubt at all that, up to this point, the policy of stabilising the old cost-of-living index, as we have hitherto known it, has been wise, and has been abundantly justified. It has helped to stop inflationary pressure from becoming an inflationary break-through. It has carried us through the first chapter of this very difficult transition from war to peace with an added sense of social security to the general body of consumers. It has helped the housewife, and it has helped the farmer. It has prevented many automatic wage and price increases from taking place, in cases where wages under collective agreements are linked with the cost of living. Up to now it has, in my submission, paid good dividends.

New Cost-Of-Living Index

So far, though the pursuit of this policy of stabilisation has become more and more costly, it has remained practical. But now I have no doubt that we must pause and review it afresh—particularly since, now, the scene changes, in the light of the announcement by my right hon. Friend the Minister of Labour on 10th March, in this House, that the present index number, which has been a natural target for so much criticism, is to be revised. The present index—it is extraordinary that this should be so and while I have no doubt most hon. Members of the Committee are aware of it, I will re-state the present position—relates to prices paid by an average working class family in 1914, for a selection of articles of ordinary working-class consumption in the year 1904, nearly half a century ago. This selection of articles included flannelette—then a favoured costume material for ladies' dresses—and candles, by which, in 1904, people lit their rooms. But it did not include either rayon or electric light. We have moved forward since then. This is a fantastic basis for a definition of the cost of living in this year, 1947, and it is now intended by my right hon. Friend to bring the index a generation nearer to the present time, and to base it, as an interim measure, until things have settled down in the postwar period, on the household expenditure of the average working-class family, not in 1904, but in 1938, 34 years nearer today.

This new index will take account of a much wider range of prices than the old one did; many more articles will be included. For this reason, the new index will give considerably less prominence than the old to food items, because considerably smaller proportion of the average working class income was spent on food in 1938 than in 1904. I read in the report that has been published by the committee which has advised my right hon. Friend, that only 40 per cent. was spent on food out of an average working class family's expenditure in 1938 as against 6o per cent. in 1904. It follows that any given change in food prices, either up or down, will have a good deal less effect upon the new index than it had upon the old. It follows, also, that the policy of holding the index steady, as we have done, principally by variations in food prices, has ceased to be practical in view of the smaller relative weight of food items in the new index. The new index, covering so much wider a range of commodities, will, by reason of its changed composition, be much less subject than the old index to our present controls, which have, therefore, to be revised and looked at again.

The old policy, of using food subsidies to keep the old index stable, cannot be applied to the new, for the reasons I have given. This means we shall have to devise, in due course, a modified policy, which will no longer aim at an absolute stability, and will, I hope, cost the taxpayer less money, but will still continue, at a lower cost, to exercise a stabilising influence upon the index. In particular, I suggest to the Committee—I make no commitments on this point; it is a matter for consideration in due course—that there is much to be said for carrying further a practice which we have begun in the last year, of concentrating food subsidies— having determined what is a reasonable sum to pay on them—on a smaller number of commodities which will be of greater importance to the housewife, instead of scattering them over a wide range of articles, many of them not of first importance in a household budget. That, I think, is a policy which should be examined.

It is the intention of my right hon. Friend the Minister of Labour to bring this new index into operation in the near future. He is now holding consultations with the two sides of industry on various matters—wage arrangements, and so on. After these discussions, my right hon. Friend hopes to bring the new index into operation within the next few months. Meanwhile, we shall continue the old index. It is my purpose to keep this old index steady and stable, as we have kept it until now, until it passes out of use in a few months' time, and, thereafter, to continue to exercise a stabilising influence upon the new index along the lines which I have been indicating. There will, I imagine, be a suitable occasion on which to discuss this a little later, when we are nearer to the point of change over.

The estimated expenditure on all these cost-of-living subsidies for this year, £425 million, was based on certain assumptions—the estimate was drawn up a little while ago, and things have moved since then—which are no longer real. It was based on the assumptions that the old cost of living index would be kept in operation—the estimate was drawn up before we had the report, that it would be held stable throughout the year, and that prices would rise no further. These assumptions must now be revised, and new arrangements must be made in due course. But I shall hope, in any case, to keep the cost to the taxpayer this year within the estimate, even though the assumptions have, in fact, changed. What would suit us best—but paradise is not so easily attained in this postwar world—and what for several years I have been hoping for, would be that prices, especially of imported foods, should begin to fall, instead of going on rising, so that the cost-of-living index, whether the old or the new, could be kept stable, in a period of gradually falling prices, with a diminishing cost to the taxpayer. That is what would suit us best; but it does not look as though we could yet confidently count upon that happy state of affairs coming to pass.

Consolidated Fund Services

I turn to the Consolidated Fund Services for this year. These I put at £556 million, £22 million less than last year. Last year, I provided million under this head for the National Land Fund. This year, the Debt Charge will require £525 million, an increase of £26 million over last year. But, of this £26 million, £8 million represents interest on borrowing to repay Local Loans Stock, which the Committee will remember we converted. This sum is offset on the revenue side of the account by a corresponding item in Miscellaneous Revenue paid into the Exchequer from the Local Loans Fund. The other Consolidated Fund Charges, apart from the Debt Charge, will cost us £31 million. So much for the expenditure this year.

Revenue For 1947–48

I now turn to revenue for 1947–48 on the existing basis of taxation. I shall lose some revenue, of course—as a result of the snow, frost and floods of February and March. I cannot yet say how much, and it would be absurd to give a firm estimate; but there will be some losses there. That is one of the uncertainties which must be borne in mind in looking forward 12 months. I have not heard even a single plausible speech which blamed the snow, frost and floods upon His Majesty's present Government. None the less, we shall lose some revenue by reason of those events. But in view of much that has been written in the Press, the Committee may be surprised to learn that my advisers do not expect any appreciable loss of revenue this year—I emphasise "this year"—as a consequence of the three weeks' stoppage of industry over part of England, through the cutting off of electric current last February. This unhappy event raised the total of the unemployed for one week to over 2 million, the figure which used to be regarded as normal, year after year, in the deflationary 'thirties. Unemployment on this scale, even for only a short time, might have been expected to make serious inroads on the revenue. But here P.A.Y.E. came to the rescue, acting as a most helpful stabilising factor.

I must say a word in defence of P.A.Y.E.; so many people attack it, while not offering any suitable substitute. P.A.Y.E. provides a welcome cushion of purchasing power, in times of short-term unemployment. If wages are not paid as a result of unemployment, the tax that would have been payable On these wages is, of course, not collected; but over and above this, the tax already paid is partially refunded to unemployed workers, over and above any unemployment benefit to which they are entitled. Working-class purchasing power is thus kept relatively steady, and this prevents any serious fall in revenue from Customs and Excise. A man can still afford a drink, even in these conditions. The loss to the Inland Revenue, on the other hand, of Income Tax on wages, was probably about £5 million during the last two months of the last financial year, February and March. The three weeks' partial stoppage of electric power, together with the continuation of certain restrictions on fuel consumption, did not, of course, affect the yield, last year, of Income Tax and Profits Tax on business profits, because those profits had been made long before these events happened. Nor will these fuel shortages much affect the yield of these taxes this year, since, this year, the tax will be based mainly upon profits attributable to accounting periods of past years. But—and I am anxious to be quite frank with the Committee about this—there will be a loss of revenue, which cannot yet be estimated, but may be large, from Income Tax and Profits Tax in the financial year 1948–9. That is when we shall feel it. It is too early yet be give an estimate.

I hope not anything of that order. But that is when we shall feel it, not this year but the year after. That has a bearing on something I shall say to the Committee later on.

Customs And Excise

I turn to Customs and Excise on the existing basis of taxation this year. I count on £26o million from the Purchase Tax, £450 million from tobacco, £350 million from beer, spirits and wine, and £240 million from other Customs and Excise Duties. That makes a total of £1,300 million, £116 million above the yield last year, or roughly a 10 per cent. increase, which I think is very satisfactory.

Inland Revenue

If we take the Inland Revenue this year, on the existing basis of taxation, the yield of the Income Tax will be less by about £48 million than it would have been but for the Income Tax concessions made in my last two Budgets. The main part of the effect of these concessions has been felt already, but I must now allow for their effect in a full year, and, therefore, for a decline of the Income Tax yield, which I put at £48 million this year. On the other hand, I count upon a growth—or my advisers count, and I accept their judgment in these matters—of £42 million over last year due to a further growth of taxable incomes—we are not all broke yet—and particularly of trading profits. Therefore, balancing the £48 million loss against the £42 million gain, I assume a total yield from Income Tax this year of £1,150 million—quite a comfortable sum. From Surtax I count on an increase over last year of £4 million, making a total of £80 million; and from Death Duties an increase of £7 million, making a total of £155 million. I count on an increase of £2 million from Stamps, making a total of £40 million, and I count on a small item of £r million from miscellaneous Inland Revenue duties.

Excess Profits Tax and Profits Tax together yielded, last year, £358 million; this year, I expect only £200 million from those two duties together. The Committee will, of course, recall that the rate of Excess Profits Tax was reduced as from 1st January, 1946, to 6o per cent., and that, as from 1st January this year. this wartime duty was finally dropped. We shall get a bit more for a number of years, but it will not be much better than a trickle, from E.P.T.; but in this coming year I still expect a substantial figure, namely, £200 million from E.P.T. and Profits Tax together. Therefore, the grand total for the Inland Revenue Duties adds up to £1,626 million, a drop of £151 million, or just on 9 per cent., on last year's yield.

The Committee will, I think, be interested to know that the payment of E.P.T. refunds is now nearly completed. We spent much time last year discussing the details and the conditions of those repayments. £184 million was paid last year under this head, and I hope to pay a further £60 million this year. Allowing for a small residue of cases that will take longer to settle, we shall, this year, reach the end of this refunding operation—so beneficial, it will generally be agreed, to British industry. The Committee will remember that it is a condition of these refunds that they shall be used for the re-equipment and development of industry, and shall not he dispersed in dividends.

Other Revenues

Now, after Customs and Excise and Inland Revenue, I turn to other revenue. I count on £50 million this year from the motor vehicle duties, the same as last year. I count on million from wireless licences, an increase of £1 million. The sale of surplus stores should yield £95 million this year, as against £156 million last year. The main work of our disposal machine has now been done, and it is, very naturally, running down; the bulk of the stores have been disposed of very efficiently. I expect £55 million, as against £59 million last year, from the trading activities of State Departments—mostly from the Raw Materials Department of the Board of Trade. The total of these items of other revenue is therefore £211 million.

Miscellaneous Receipts

So far so good, we may say, within the bounds of reasonable expectation; but I now have a further and, I think, an unexpected, revelation to make to the Committee, and to the writers in the financial Press. I feel I must apologise to them; I always try to keep my relations with them very bright and good, but I must now apologise to them for not being able to give them private notice, for the purpose of their expert prophecies, of what I might call the litter of rabbits which I am now about to produce out of my Departmental hat, or, if you will, out of Mr. Gladstone's old box.

I am advised, and I am sure the Committee will be very delighted with what I am now going to say, that I shall receive this year, over and above the Other Revenue to which I have already alluded, no less a sum than £292 million—quite a windfall—of Miscellaneous Receipts. This will help us on our way. These represent, in large part, repayments to the Treasury of advances made under various heads of Budget expenditure in past years. In achieving this remarkable total of recaptures, the officers of the Treasury, never wholly inactive—not even on the Riviera, lately—have displayed most conspicuous qualities of enterprise, endurance, and ardour in the chase. This year will be a record year for these recaptures by the Treasury. I remember that the present Leader of the Opposition, in one of his dramatic Budget speeches which it was my honour to listen to, sitting on the other side of the House, once used the phrase "We are clawing back large sums of money." I always remember that phrase—it is most apt. This year we are clawing back, from paymasters and quartermasters all over the world, no less a sum than £112 million of unspent Votes of Credit, voted in previous years. In addition, we are recovering £23 million from the U.K.C.C., which is being wound up. We are recovering £18 million from surplus Appropriations-in-Aid; and we are recovering £10,500,000 from N.A.A.F.I., not to speak of many smaller recoveries. The full total will be published, but I will not go right through the items now; we shall be very happy to furnish the Committee with the full total of these recaptures. They also include the £8 million—this is less dramatic—from interest on Local Loans to which I have already referred, a balancing item associated with the repayment of Local Loans stock.

Prospective Surplus

The £292 million of Miscellaneous Receipts, added to the million of Other Revenue which I mentioned just now, gives us a total of £503 million for revenue other than Customs and Excise and Inland Revenue. I, therefore, estimate the total revenue for 1947–48, on the existing basis of taxation, at £3,429 million as against an expenditure of £3,181 million. This gives me a prospective surplus of £248 million. The Committee will, I think, be surprised and gratified at this result, which is so much better than even the most wishful of our friends would have expected. Last year, I prophesied that we should find ourselves, this year, "within striking distance" of a balanced Budget. Those words of mine now seem, in retrospect, to be a characteristically cautious understatement. "Within striking distance," I said, Major Milner. We have already struck. We have already taken this objective of a balanced Budget, and we are now advancing into open country, well beyond it. This year, we shall not only balance the Budget; we shall have a good balance in hand. I trust this surplus will act as smelling salts under the noses of those who, both in this country and outside it, have lately been showing signs of despondency, if not of fainting fits, at the thought of our financial future. We have, and I make no concealment of this, a very tough external problem to face, of which I shall speak later; but as far as our domestic affairs are concerned, this Budget surplus, of close on £250 million, is a clear sign of our internal financial strength, which all the world should note.

Putting it another way, I pointed out, 12 months ago, that in 1944–45, the last full year of war, for every pound of Budget expenditure we paid 10s. 8d. from revenue, and thought that was a good show. In 1945–46 for every pound of expenditure we paid 12s. from revenue. In 1946–47, the last year, which has just closed, a fortnight ago, we paid 17s. id. from revenue. This year, on the existing basis of taxation, we shall collect no less than 21s. 7d. of revenue for every pound of Budget expenditure. That, I think, is not too had.

I must, however, at once warn the Committee that this prospective surplus cannot be regarded as available for wholesale tax reduction this year, and this for two reasons. In the first place, many of the receipts are non-recurrent; many of them will come in once for all. It is not yet clear whether, on the existing basis of taxation, we should have another surplus next year. We cannot yet see sufficiently clearly the pattern of next year's financial yield. This year the surplus is real; it is as real as last year's deficit, but it might, like some of the elements which have gone to create it, be non-recurrent

Uncertain Factors Next Year

There are many uncertain factors on both sides of next year's Budget. I haw already referred to a possible heavy loss of Income Tax next year. There will be much less E.P.T. revenue next year. Certainly we cannot hope next year to come anywhere near this year's high record for Miscellaneous Receipts. Much depends upon next year's expenditure. There are many terminal elements on the expenditure side, as well as on the revenue side, of the national balance sheet. What further savings shall we be able to make upon defence, upon oversea expenditure generally—partly military, partly humanitarian—such as feeding the fallen foe, which must end some time? What further savings can we make, perhaps, on the general total of subsidies? We do not know, and no one can tell yet. Furthermore, next year we shall certainly have a further increase in the expenditure on the Social Services. In particular, there will be an increase in the national expenditure on health next year, following on the transfer of the hospitals from local to national ownership.

Next year, my right hon. Friends the Minister of Health and the Secretary of State for Scotland and I will have to rearrange—we are pledged to this—the relationship of national to local finance, at a cost to the Treasury perhaps of a little money, because local authorities can be exigent and greedy sometimes. In any case, we are all agreed that we need to have a new block grant, better arranged and costing less to the Treasury, and, so far as its distribution among local authorities is concerned, acting to a greater extent than heretofore as a rate equaliser, giving more to the poorer authorities, and much less, in many cases nothing at all, to the richer, having regard to the rating relief which they will gain from the transfer of hospitals. That is one reason why we cannot regard this surplus as being available for wholesale tax reduction.

There is a second reason. This is a year when we ought, in any case, to have a Budget surplus. I have already stated several times, inside this House and outside that the aim of His Majesty's Government is not, as used to be thought the right rule, to balance the Budget each year, regardless of circumstances. Not at all. Our purpose should be to balance the Budget over a series of years. Each year we should consider, in the light of the financial and economic situation, the movement of prices, the level of employment, the relative dangers of inflation or deflation, whether, in that particular year, there should be a Budget surplus or a Budget deficit. I submit to the Committee that there can be no doubt that, on this test, this is a good year for a good surplus. There is a high level of employment. Prices are still rising—faster than we like. Unemployment, such unemployment as there is today, is due not, as in the old days, to a general shortage of purchasing power, but to shortages of particular things of factories in the development areas, of coal, of electric power, of spun yarn, whether cotton or wool, or of particular kinds of skilled labour.

No Inflationary Break-Through

Today there is plenty of purchasing power. That has been our aim. We have sought to lubricate the economic system with a sufficiency of purchasing power, much more evenly spread than before the war. That has been our aim, and we have achieved it. Therefore, deflation is no longer the immediate danger today. The immediate danger is of an inflation going beyond bounds, and breaking through the various controls that we have set up. So far, our price controls, our financial and physical controls, our production and our savings have held the inflation reasonably well in check. There has been inflationary pressure, as some of the writers in the Press say; but there has been no inflationary break-through the dams. Indeed, there is much more inflation in many other countries than there is here. Let that not be forgotten. We have managed our affairs with relative wisdom and competence, compared with some other parts of the world.

That is the position now. But another year, particularly if a trade depression started somewhere else in the world outside this island, deflation rather than inflation might be our pressing danger. In that case, if I were still Chancellor of the Exchequer, I should not hesitate to ask Parliament and the country to approve a Budget deficit, if need be, a large one, in order to redress that deflationary lack of balance. That is not the position now. If we are to balance the Budget over a series of years, we must earn the right to a Budget deficit in another year by recording a Budget surplus this year. Therefore, though I shall later propose to the Committee certain changes in taxation, some up, some down, the net effect must be to fortify rather than to weaken the revenue, both for this year and even more for the future years to which we must look forward. The Committee will recall that in my first two Budgets, within six months of each other, I made net reductions of taxation, which the Committee approved, of more than £500 million a year. The possibility of any further net reduction must now wait till next year.

National Savings

Next after the Budget surplus, in the line of our defences against inflation, I put National Savings. This great Savings Movement of ours, solid, undramatic, typically British, has been a tremendous source of material and moral strength to this country for more than 30 years, under all Governments, in war and in peace, in all political situations. The National Savings Movement has achieved, under an all-party leadership—my right hon. Friend opposite and I spoke together, only last year, in the Albert Hall in support of it—a truly national character. The critics and the carpers have been few; here and there a stray political dingo has barked in the dusk; but the national caravan has moved on. Last year, the National Savings Movement—

Rather a graceless way of replying to the aid which was given to the right hon. Gentleman.

I am paying a tribute to the movement. Last year the movement accepted my challenge to raise £520 million of new money before 31st March last. I took them at their word, and wrote that figure into my Budget esti- mate. My confidence was not misplaced. They passed their target; indeed they raised substantially more than they had undertaken. In the last lap of the race, Scotland took the lead. They reached their target on 14th February. England and Wales followed oil 13th March. Finally, Northern Ireland, who, with great pluck, had set themselves a target of exceptional severity, got home in the last week of the financial year. The final total was more than £560 million. It was the result of hard and sustained effort by the Savings Movement. I wish today to pay my tribute, not for the first time, to the leaders and all the voluntary workers in the Movement, who have so patriotically devoted their time, energy, and enthusiasm to this work.

I am coming to the point which the hon. Gentleman has in mind. I must call upon the Savings Movement again in the coming year. We shall depend upon them, to a very considerable extent, to meet the Exchequer's need for new money. In particular, I would like to commend to them and to their voluntary workers, as a national object, the full support of the local authorities' housing programmes which seems to me to be a very good object, hardly to be surpassed in, importance for our people all over the country. So, once more I ask the National Savings Movement for another effort of continuous saving right through the financial year. I am glad to say that the leaders of the Movement have promised me that this effort will be forthcoming. They have pledged themselves—now I come to the point which the hon. Member for Orpington (Sir W. Smithers) has in mind—to find for the Exchequer a net increase in small savings of £366 million by 31st March next year, an average of £1 million a day net. I emphasise that this increase will be net. Hitherto, the figures for National Savings, as the hon. Member for Orpington knows, because he has asked Questions about them, have been published in a total which has been gross for Savings Certificates and Defence Bonds, but net for deposits in the Post Office and Trustee Saving Banks. This form of mixed presentation is of long standing. I inherited it from my predecessor, who used to authorise publication of statistics in this form. It was very reasonable in itself. But although most people have clearly understood it, nevertheless it has puzzled others. Some hon. Members have asked Questions about it from time to time, and some writers in the Press have not always clearly understood it. Therefore, to remove all grounds of misapprehension, we shall henceforth publish the net subscriptions. The target of net savings which I have mentioned, £366 million, compares with a net saving of 330 million last year. We had a gross saving last year of just over 560 million; but it was a net saving of £330 million when withdrawals are offset. As against that £330 million, we are aiming at £366 million this year. So we are aiming to do even better this year than we did last year.

I shall also propose—this is a small technical point—a Resolution to put the backing of the Consolidated Fund behind the deposits of the Savings Banks. That is a technical matter, which I shall explain in Committee. The effect will be to tidy up our accounts, and to give depositors even better security than they have at the present time. The more we can attract into National Savings money which might otherwise join in the chase for still scarcer goods, and so increase the inflationary pressure, the steadier will be our passage through this difficult transition. If you put money aside now, Major Milner—if you personally, and any others do so—there will be more to buy a few years hence.

War Damage Payments

I am also anxious to make big inroads this year into the outstanding claims for war damage. Many of the victims of the German bombs have been waiting a long time for their money. And so, at the request of my right hon. and learned Friend the President of the Board of Trade, I am finding £60 million this year for war damage payments under the Business and Chattels Scheme. Further, following the Debate the other day, the House approved the payment, as soon as may be—I hope it will be substantially all within this year, administrative provisions permitting—of the war damage value payments. In addition, as the work is done, the war damage Cost of Works payments will, of course, continue to be met. The Value payments now stand at about £100 million, and they will cost us nearly £150 million when increased by the percentage additions to which the House agreed when this matter was discussed a few weeks ago. To this sum must be added a further £20 million interest on these Value payments as from the date of damage to the date of payment. The Cost of Works payments last year amounted to £94 million. This year they will run at about the same level, say, £100 million. Therefore, the Value payments and the Cost of Works payments as a whole, taken together, will cost some £270 million this financial year.

I appeal to all those who receive lump sums, whether for damage to business and chattels or as value payments, to save as much as they can during these next years. This will help savings and hinder inflation, and there will be better opportunities later on than now for spending much of this money to good purpose. I must apologise to the Committee if I have been going into too much detail, but I thought it was my duty to deploy the position fully.

Government Borrowing

I would now like to say a word or two about the programme of Government borrowing for 1947–48 and to emphasise in the first place, that this year's Budget surplus, together with the supporting weight of the National Savings that have been promised, will much more than cover—and this is important—that part of what is called by some of the experts "expenditure below the line," which does not directly create new capital assets. Therefore, thoughtful and instructed persons should be reassured to know that all further internal Government borrowing this year will be either for replacement of maturing debt, which is always occurring, of course, or for definitely new capital development. None of it will be merely to bridge a gap between current income and expenditure. That phase is finished.

Under the heading of new capital development we expect to borrow some £50 million for the capital requirements of the National Coal Board. All our future depends upon coal, and nothing must be allowed to stand in front of the re-equipment of the now publicly owned mining industry. The other public boards, the Air Transport Corporations, the Electricity Authority and the Transport Commission, when set up, will finance their development by the issue of stock bearing their own name, not part of the National Debt but under Treasury guarantee. On the other hand, the Treasury will advance to the local authorities this year from the Local Loans Fund at least £200 million for housing and for other capital schemes. We shall also borrow a further £90 million for temporary houses, and other charges of a capital character, for which the Ministry of Works are primarily responsible, which are not financed through the Local Loans Fund.

There will also be large financial operations, which consist, when stripped down to their essentials, only of the exchange of one piece of paper for another, in connection with compensation to private shareholders in the industries and services which are now being taken into public ownership—coal, electricity, transport and cable and wireless. These are very large financial transactions in the total, but they do not involve either new borrowing in the market or any addition to the net capital liabilities of the nation which is becoming possessed, as the result of our Socialist measures, of an impressive range of properties which were previously under private ownership. These are assets which, whatever may be thought about the policy—I am not now speaking of policy—can properly be set off against the debt created.

Further, we must deal with such existing debt as may mature this year. As regards small savings, maturing Certificates should be more than covered by new purchases. The first issue of the 3 per cent. Defence Bonds began to mature in November, 1946, and, by the end of this month, £32 million of these will have been paid off and £27 million converted into the 2½ per cent. series, with a saving of interest. A further £160 million will mature this year. But—and this is important to me as Chancellor of the Exchequer—apart from the maturity of these Defence Bonds and the recurrent maturities of the Floating Debt from week to week, we have a good clear run, with no large maturity to be met until 1st March, 1948, when £300 million of 3 per cent. Conversion Loan 1948–53 become redeemable. Now, therefore, is a favourable opportunity for consolidating the great advance which we have made in the last 18 months in reducing the rates of interest on Government borrowing. I have undertaken to speak of this in a little detail, and I would like to pursue the topic for a few moments.

The Government's Credit

If I may briefly pass in review the successive stages in the campaign which His Majesty's Government have waged, and of which I have been the instrument, since we took office, for cheaper money and lower rates of interest, the following features stand out. In my first Budget speech, in October, 1945, I announced a cut in short-term interest rates, a half of one per cent. in the case of Treasury Bills—from about one per cent. to about a half of one per cent.—and, in the case of Treasury Deposit Receipts, from one and one-eighth per cent. to five-eighths per cent. These rates have not be changed since that time. Shortly after this, in November, 1945, I gave notice of the repayment of £206 million of the 2½ per cent. Conversion Loan 1944–49, and £444 million of 2½ per cent. National War Bonds 1945–47. No less than £176 million of the former and £284 million of the latter were exchanged into 1¾ per cent. Exchequer Bonds, 195o, with a saving of interest. The balance of these loans was paid off, on the due dates, the Conversion Loan on 1st April, 1946, and the National War Bonds on 1st July of the same year.

I took the next step in the cheap money campaign last May, when I replaced the current issue of 3 per cent. Defence Bonds by a new issue of Defence Bonds at 2½ per cent., raising the maximum holding from £2,000 to £2,500. £112 million of these new 2½ per cent. Bonds had been taken up by 31st March last. Last May, I also reopened the tap, and kept it open till July, with an issue of 2½ per cent. Savings Bonds 1964–67. £419 million were subscribed in cash—a very good total—and £334 million were issued in conversion of maturing 2½ per cent. National War Bonds 1946–48. The importance of this operation was that it established the Government's credit at 2½ per cent. on a long-term security with a final redemption date.

In September, I gave notice of a new Savings Certificate to replace the old at the beginning of this month, April. It bore a lower rate of interest, more in line with the higher level which national credit had then reached. [An HON. MEMBER: "Question."] It is not a question, it is a fact. In October last, I announced the redemption of the 3 per cent. Local Loans Stock, which was undated, and the issue, at par, of 2½ per cent. Treasury Stock, 1975, or after. This tap was closed on 14th January, 1947, by which time £305 million had been taken up by holders of Local Loans in exchange for their maturing stock, and £117 million had been issued for cash. I said then, and I repeat now, that for the first time in the long history of our National Debt a British Government commanded such credit as enabled it to raise money at par on an irredeemable 2½ per cent. security. Whatever happens in the future, that is a significant historical event, and I think that should have been a proud day for patriots.

In the past three months, since this operation concluded, there have been some fluctuations in the national credit. The fuel shortage, the freeze, the snow, the gales, the floods, uncertain news from all over the world, uncertainties about the Budget and organised gloom in certain sections of the Press, all these factors combined to cause a noticeable fall in gilt-edged prices, a noticeable but, I am glad to say, a short-lived fall. There followed a substantial recovery, then a slight relapse, followed, in the last few days; by a good rally up to Budget eve. Today I read that, on the whole, the Stock Exchange is not unduly apprehensive about what I may say before I sit down. During these fluctuations, which are very natural, there was never any heavy selling. It is important that this should be understood. There was not a vast volume of transactions. There was never any heavy selling, but there was, it seems, a momentary loss of nerve in the gilt-edged market and particularly among the jobbers, who were unwilling to take more stock on their books until they knew what was going to happen next. I hope that all these gentlemen will feel stronger tomorrow.

Cheap Money Policy

I have heard some criticism from time to time of my cheap money policy, in defence of which therefore, I now ask leave to say a few words. The steady and progressive reduction in the rates of Government borrowing over the last 18 months has brought great and solid benefit, not to one section only, but to the nation as a whole. I am convinced of that. Let me give reasons for that opinion. First and foremost comes the relief to the taxpayer, on whom falls the burden of servicing the National Debt, now grown to gigantic proportions as a consequence of two great wars. Since His Majesty's present Government took office we have issued more than £1,300 million of 2½ per cent. long dated and irredeemable securities—some long-dated and some irredeemable. Before our cheap money drive began, these issues would have had to be raised at 3 per cent. or higher. If we assume only 3 per cent. the long-term interest burden on the taxpayer has been lightened by at least £6,500,000 a year in respect of these long-term issues. In addition, the Floating Debt now carries interest at only one half of I per cent. If this Debt had had to be raised on the terms current before my first Budget, the taxpayer would have had to pay £31 million a year more in interest on the Floating Debt alone. Adding these two figures together, it is clear that, on direct Government borrowing alone, the taxpayer has been saved nearly £40 million a year since October, 1945.

So much for the central Government. But cheap money benefits not only the central Government. It benefits the local authorities; it benefits the great public boards; it benefits private industry at large; and indeed it benefits other members of the British Commonwealth of Nations. Let me take the last point first. The Government of Australia—who are very good friends of ours; none better in the world—in June, 1946, converted £16 million of 3 per cent. stock into a new issue carrying interest at 2i per cent. Last January they converted to a 2½ per cent. basis another £18 million of stock—of which million was 4 per cent. and million 3½ per cent. These operations were carried out by the Australian Government in their full sovereignty, and in the light of the advice of their financial advisers in the City of London. But they were made possible by the financial policy of His Majesty's Government in the United Kingdom. We can claim that that policy has saved His Majesty's Government in Australia, on these two operations, more than £300,000 a year in interest charges. That is a striking example of Mutual Aid in the Commonwealth, and, of how one British Labour Government can help another.

Local Authorities' Borrowing

Let us turn to the local authorities. The capital needs of the local authorities are met in two ways. They borrow either on the credit of the State through the Local Loans Fund, or on their own credit in the stock market or by mortgage. Since the present Government took office, the amount drawn by local authorities from the Local Loans Fund is £117 million. Of this, £100 million has been drawn since June, 1946, when, on my instructions, the rate of interest was reduced from 3½ to 2½ per cent., a lower level than it had ever stood at before.

Therefore, on this £100 million drawn since that time, the local authorities enjoy an annual saving of over £500,000 a year. To this must be added the further saving to the ratepayers of more than £1,000,000 a year if this year's drawings on the Fund run as I estimate. Further, on their own credit the local authorities have converted £29 million of stocks in the market since our cheap money drive began, to rates of 2¾ per cent. in the early stages, improving later to 2½ per cent. The saving so far on these conversions has been £600,000 a year. The local authorities have been helped to make these welcome savings for their ratepayers because they have had behind them the strong arm of the National Debt Office, which has underwritten all these conversions, without charging any commission, but has made a useful profit for the taxpayer by well-timed unloading of stocks which some of the previous holders were too slow-witted to take the offer to convert. These add up to a considerable total. The interest savings to private industry have also been large—let this not be omitted—both on the conversion of debentures and on new issues. Indeed, many industrialists admit that cheap money has enabled them to put their house in order, by reducing the interest rate on their prior charges.

These are not only substantial gains; they are enduring gains. They are gains which stand high out of reach of the tides that ebb and flow from week to week on the Stock Exchange. Apart from the Floating Debt, all these are long-term issues, and the lower rates of interest will, therefore, apply throughout the whole long lifetime of these loans, no matter what may happen between now and their terminal dates. Finally, I repeat these are gains which benefit the whole community, section by section, right throughout the national life. But I

would add that these are only a beginning. The volume of borrowing which has taken place so far, during the period of the cheap money drive, is small compared with that which we have in prospect during the next few years. It is in the years ahead that the nation will derive still more substantial and lasting benefits from a resolute adherence to the cheap money policy. It is our intention resolutely to adhere to it. So long as the National Debt endures—and that may be for a long time yet—the Chancellor of the Exchequer must be on the side of the borrowers of money as against the money lenders, on the side of the active producer as against the passive rentier.

Cheap Money

There has been a long Debate about cheap money. The late Lord Keynes, to whom I personally, and the country as a whole, owe a great debt for his public work, was very definitely in favour of cheap money. Now that he is dead, I can say that his advice to me was to persevere with it. I have done so. He was most decidedly on one side in this controversy, though some of the smaller pundits who have survived him take another view. Lord Keynes wrote a famous Tract on Monetary Reform, in which he said:

"The active and working elements in no community, ancient or modern, will consent to hand over to the rentier or bond holder class more than a certain proportion of the fruits of their work. When the piled up debt demands more than a tolerable proportion, relief has usually been sought"

either in straight-out Repudiation of the Debt or in devaluation of the Currency. I believe that to be an accurate summary of history, politics apart. But there is another way of partial relief from these tremendous debt burdens, and that is by the pursuit of cheap money and low interest rates. If rates of interest now were what they were at the end of the first World War, where should we be? What would be the annual cost of the National Debt? What would the Income Tax be? What would the other taxes be? I am sure we are pursuing the national interest in seeking gradually to condition public opinion to the idea of 2½ per cent. as the maximum rate of interest on long-term loans to the British Government, and I expect to have public opinion increasingly behind me when it is realised that on the continuance of this maximum rate of 2i per cent. long-term—and lower rates for shorter terms—depends all hope of serious tax relief in the future. There is no other way in which the circle can be squared and the Budget balanced.

There has been much talk—not so much in this House but in some of the columns of the financial Press—of deflation as a sovereign remedy, for the ills from which it is thought we are suffering. I have a very poor intellectual opinion of those who take that view. They seem to me to be baleful Bourbons, who have learned nothing and forgotten nothing from the financial follies and economic crimes, as they seem to us now, committed between the wars. Let us be clear. If we were to follow through this policy of deflation, preached by some who sit in office chairs in the city of London, we would bring back dear money; we-would bring back depressed trade; we would bring back mass unemployment; and we would bring back a clamour for cuts in wages and social services and for indiscriminate short-sighted economy campaigns of every sort. In my view, this must be resisted. It is intellectually wrong and morally reprehensible. This faction of whom I speak would enthrone the usurer over all, trample the common man in the dust, and consolidate catastrophe in our national life.

So far I have assumed that these opinions are not held in this House. I have assumed that these are the more irresponsible babblings of persons not of a representative quality. But if it should so be that in this House these views are put forward, we will most gladly Debate them and join issue, quite confident that the national interest is on our side. Therefore, if these be any deflationists in this House, we say to them, "If that be your view, come out and let us have Debate and political battle in the open." The division is not entirely according to political opinions. I am greatly heartened by a remarkable letter which I have received from a very distinguished historian, who will be well known in all parts of the House, Mr. Arthur Bryant. He wrote to me—and I quote his words—

"an historian who—his Tory background notwithstanding—is deeply grateful to you for your stand against the attempt to force this country into the same deflationary course that proved so fatal after both the last war and the Napoleonic wars."

He is an expert historian, quoting from the records. He says:

"Working as I am on the tragic aftermath of the Napoleonic wars, I have reached the conclusion that. had the Government at that time corrected deflation when deflation set in, most of the social disasters from whose consequences we are still suffering could have been avoided."

He ends by saying:

"I feel this strongly, and the horror of see mg thinking men, despite the appalling lessons of the last 3o years, resorting to the same fundamental fallacy, has impelled me to write to you in gratitude."

[ Interruption.]—He has a Tory background and I think it is only reasonable that I should quote that passage. I too am very grateful to Mr. Arthur Bryant—many of whose writings I have read with great appreciation, for he is a great master of English and of his subjects—for this very powerful and expert testimony on the side of truth.

Let us look at the thing directly. Is there really a British citizen who is either too avaricious or too frightened of the future to lend money to his country at 2½ per cent. on long-term? It is more attractive on long-term, a term which would exceed the life of this Government, and the next, and the Government after that. If there be any such persons in this House—I cannot believe it, but if there be—I hope they will stand up in the course of our Debates and confess frankly their lack of faith in the future of our native land and theirs.

Overseas Deficit

I turn for a moment or two to the question of our overseas deficit. I have promised to speak of this most tough, external problem, and I will speak of it quite frankly, and seek to deploy the facts before the House without concealment. Our internal finance presents many difficult problems, but they are all easy, relatively speaking, compared to the external problem of our balance of payments on overseas trading account. That is much the biggest headache which must beset any thoughtful person, no matter what his politics or what his economic circumstances may be. No other country in he world, without exception, faces so tough an external problem as we do. It is the result—I have remarked on this before, and I repeat—it is the strange and ironical result of our tremendous effort over six long years of war, an effort in which we in this little island, who were in it from the start, distorted the whole of our economy, without any thought either of the cost or of the consequences, to save many others who, without us, would never have been delivered from defeat and from a slavery worse than death—

Even the Tories took part in this national effort, of course. We all did. It was a common, national effort. What did we do? We ruthlessly cut down our exports, we sacrificed the great part of our overseas investments, and we incurred vast expenditure, all over the world, for the import of munitions into various areas in order to defend the inhabitants, who often took a minor part in the operation, and for the provision of services for our own troops—expenditure which now, as part of the accountancy of victory, is hung round our necks as "war debts." These large and swollen sterling balances—I do not speak of the smaller sterling balances, which arise in the ordinary course of trading—would never have arisen had Lend-Lease been the common rule among all the Allies. These great balances can never be discharged, or even diminished, except by unrequited exports, exports unbalanced by imports. And these unrequited exports are—and I speak bluntly, looking at the facts as they present themselves to me—a luxury of which we can afford very little for many years to come.

That is the background. In 1946 we had an overseas deficit of £400 million—a total overseas deficit; I will distinguish in a moment the hard currency deficit within it. In 1946, £400 million was the total overseas deficit on trading account. I am talking now not about the Budget deficit, but about the overseas deficit on trading account, on exports and imports. This was £400 million, which has to be compared with the 750 million which I forecast a year ago. So far that is a good result. The actual total overseas deficit was little more than half what we forecast. But out total overseas deficit for 1947 may, I fear, be a good deal higher unless we take vigorous action to reduce it. Occasion for debate on such action will occur later.

So much for the total overseas deficit. But, as everybody knows and realises there is the much more acute problem of the hard currency deficit, and that is, substantially speaking, the deficit on our balance of payments with North and South America, Sweden, Switzerland and Portugal. A hard currency is currency which it is hard to come by; that is as good a definition as any other. It is hard to come by because it is the currency of a country which buys so little and wishes to sell so much. In 1946, our hard currency deficit on current trading accounts was about £400 million, that is to say, about equal to the total overseas deficit. From this follows the interesting fact that our overseas account with the rest of the world, outside the hard currency area, just about balanced last year. If more of what we wanted was being produced outside the hard currency area this would go a long way to solving our difficulties.

In 1947, the hard currency deficit is likely to be substantially higher than last year owing to the steep and continuous rise in prices, particularly dollar prices, and particularly the prices of goods which we may most wish to import. Our demand tends to raise the price—

Dollar prices have been rising, and even tending to some extent to outrun the increase in the prices of our exports. And we are thus placed in this exceptionally disadvantageous position which I have been describing—we are drawing much faster than we intended and than we wished on the United States and Canadian lines of credit. In the United States, dollar prices, after a temporary decline last September, have since risen more steeply than ever, and the United States wholesale price index is now some 40 per cent. higher than it was when the Anglo-American Loan Agreement was approved by this House. They are not the same dollars today; their purchasing power has to that extent diminished.

The slow recovery of the non-dollar world, to which I referred to just now, is a very great misfortune for us all. We had hoped for a much quicker recovery, but we under-estimated the wicked destruction done by Germans and Japanese and their satellites all over the world. There have also been many acts of God and natural disasters since the war came to an end, out of all proportion to man's average fate in these matters. Droughts, floods and bad harvests have been widespread. Therefore, because the nondollar world recovers so slowly, we are most uncomfortably dependent still upon the dollar world. This is the essence of the problem—we have to buy too much for dollars because too little comes forward from the rest of the world; and we are selling too little for dollars up to now, although we hope that the results of the International Trade Organisation conference, which my right hon. and learned Friend the President of the Board of Trade has been attending, will help here by increasing the flow of international trade including the trade between ourselves and the rest of the non-dollar world.

Moreover, I regret to state that the two new international institutions—the International Bank and the International Monetary Fund—from which much was hoped, have made a very slow start and have not yet effectively—formally perhaps, but not effectively—begun operations.

May I be permited, to summarise our situation, to quote a few words which used just a month ago in a speech at Swansea? I said then:
"We must either export more or import less, or both. Our imports include large quantities of food, tobacco"—
I will say a word on that later
"and raw materials—such as cotton, wool, hides and timber. If, therefore, we must reduce our imports, it will simply mean"—
and I emphasise these words—
"that we shall have less to eat and less to smoke and fewer clothes and boots and shoes to wear, and fewer houses, and less furniture, and less employment in many industries. In other words, we shall all have a lower standard of living and more unemployment. That is the danger we have to defeat."
I sought to portray it as clearly and as concisely as I could. I desire to conceal nothing and to diminish nothing in the telling of what threatens us all. Cromwell once said to his Ironsides—and his words have been quoted again the other day in the Press:
"Well; your danger is as you have seen. And truly I am sorry it is so great. But I wish it to cause no despondency; as truly, I think. it will not; for we are Englishmen."
And Scots as well. And, after heavy battle, the Ironsides won through, and so shall we. But our need to increase exports is more urgent than ever, and no one but a scatter-brained fool decries the export drive. [An HON. MEMBER: "You did."] We now face more extreme necessities than in the prewar days. This little over-burdened over-crowded island must export, or expire. I cannot put it more simply. In the months ahead, our exports and our imports must be much more nearly brought into balance. Our import programme also, therefore, must be severely limited and much of this will be disagreeable. Later on His Majesty's Government will inform the House of the conclusions they have reached on this issue. But in this dual effort to encourage exports and to discourage needless imports, taxation can play a most important part, and in the proposals for tax changes which I shall now make to the Committee, I shall have in mind, along with other considerations, the need to operate thus on both sides of our overseas trading account.

Reductions In Taxation>

I have already given reasons why the prospective surplus of £248 million on the existing basis of taxation, cannot be regarded as large enough. The changes in taxation which I now propose have been framed accordingly. I will begin with a series of proposed reductions, leaving increases until later.

Artificial Silk

I propose to repeal the Excise Duty on artificial silk as from the 1st May next. This, I have always thought, was a stupid and inappropriate tax in modern conditions. It dates back to a time—I remember Debates in the 'twenties about it—when artificial silk was something of an exotic luxury, and had not then become a normal part of the garments of so many of our fellow citizens. Nowadays the tax places an unfair burden on one of the liveliest and most hopeful of our industries, a particularly hopeful industry for export. And here I reach what I said just now This industry is widely dispersed over the country, it does not suffer from undue localisation. It is also setting about the construction of new factories, and new projects of factories, many of them set in the development areas.

Therefore, I propose to repeal the Excise Duty. There is a complicated system of Customs Duties on imported artificial silk products which gives some advantage to home-produced material. I propose to adjust those Customs Duties, corresponding to the repeal of the Excise Duty, but leaving the advantage to the home produced material undiminished. I shall withdraw the allowance, which was granted last year in the Finance Bill, but is no longer necessary, on duty-paid artificial silk used in the manufacture of tyres. I estimate the cost of these changes in Customs and Excise on artificial silk, which the Board of Trade will take into account in considering future rayon prices, at £2,250,000 in a full year, and about £2 million this year.

Heavy Hydrocarbon Oils

Next I take heavy hydrocarbon oils. Last August I announced that, to encourage the conversion of coal-burning plant to oil-burning plant, I proposed to repeal, in this year's Finance Bill, the duty of id. a gallon on fuel oil and gas oil and that pending the repeal, a subsidy of id. a gallon would be paid to consumers of such oils whether imported or home-produced. I shall carry out that undertaking now. I estimate the loss of revenue to be about £4,250,000 in a full year, and £4 million this year. I shall continue for the present, and with no immediate intention of extinguishing it, the existing subsidy on home-produced fuel and gas oils, and creosote pitch mixture, which will cost about £250,000 a year. It is not a joyful thing, but it is a national necessity, to import more oil to make good the shortage in our own supplies of coal. This ought not to be, and let us hope that when new habits have taken root, it will not be any more. But for the time being, it is necessary to do this. These imports are a further burden on our balance of payments, and they can only be justified—as they must be justified—if they increase, to an even greater extent, our own production of other goods for export.

Purchase Tax Reductions

I turn to the Purchase Tax, In both my previous Budgets, I have lightened the burden of the Purchase Tax. But I cannot go much further along this road today. The Purchase Tax falls only on goods sold in the home market; it does not fall on exports. Therefore, any reductions or remissions in the Purchase Tax discourage exports proportionately, and we cannot afford such discouragement just now. There are many things which we would like to keep for ourselves, but which we must send abroad, to pay for our own food, raw cotton and the like. But, I can do just a little. I have recently agreed with the President of the Board of Trade that silk stockings—I am told they are very good silk stockings—should be added to the very wide range of tax-free utility clothing. This will not require new legislation and will not, therefore, be included in the Budget Resolutions. I am told that these stockings will be in the shops before very long, and that they will give every satisfaction. I propose to reduce the Purchase Tax of 33⅓ per cent. to the minimum rate of 16⅔ per cent. on linoleum, and similar floor coverings which are much needed just now. This reduction should help the housewife, and all holders of priority dockets issued by the Board of Trade.

I should like to do something more this year for the young and active members of the community, and those not yet too old to take vigorous exercise I propose, therefore, to reduce the tax from 33⅓ per cent. to 16? per cent. on sports requisites for football, cricket, hockey, boxing and rowing. I was much impressed by the keenness with which Members pressed the case for reduction for sports gear last year. I regret that I cannot go further than the list I have mentioned today, because I must maintain the present rate of tax on many sports articles which are very good export lines. This applies particularly to golf, and tennis. I am told that many sports requisites are very good export lines indeed, and we must not stand in the way of the export trade. I hope and believe that the reductions I have proposed will be welcomed by those who play these games, and just as my last Budget contained a reduction of Entertainments Duty for the benefit of British sport, I am happy that this year's Budget should contain a second concession on behalf of the young and active.

Finally, the Budget Resolutions will provide for a number of small miscellaneous reductions in Purchase Tax. Dental sticks, razor strops and sharpeners will be reduced from 100 per cent. to 33⅓ hot water bottles—[ Laughter]—we want to look after the old as well—and certain other articles of domestic chinaware, will be reduced from 33⅓ per cent. to 16⅔ per cent.; and water filters, now taxed at 33⅓ per cent., will be completely exempt. I am also making an order to exempt from Purchase Tax certain special kinds of heavy cloth used in mechanical plant.

Full particulars of these changes, including precise definitions of the articles concerned, of which I have only mentioned some, will be found in the White Paper. The new rates provided for in the Budget Resolutions will apply to goods delivered by registered manufacturers and wholesalers to retailers from tomorrow, and as soon as retailers' existing stocks have been cleared, the price of new supplies should reflect the tax reductions. The exemption of utility silk stockings has been taken into account in my calculation of the yield of Purchase Tax on the existing basis. It will cost £1,250,000 in a full year, and £1 million this year. The cost of the other Purchase Tax concessions is £2,500,000 in a full year, and £2 million this year. Therefore, summing up on Customs and Excise as a whole, I propose tax reductions to cost £9 million in a full year, and £8 million this year.

Income Tax

I turn to the Income Tax, and I am sure that I shall interpret the decided preference of the vast majority of taxpayers in selecting this as the principal field for such modest reliefs—and they must be modest—as I can give this year. Most people dislike the Income Tax more than any other tax they pay. Such is the evidence we everywhere meet. First, let me remind the Committee of a relief which, though I introduced it last year, only takes effect for the first time this year—namely the allowance as deductions for Income Tax of the National Insurance contributions. When old age pensions were increased last October, insurance contributions were increased as well. This year, therefore, the tax free allowance for these increased contributions will be £5 a year, as compared with only £t last year. And next year, when the full contributions become payable, this tax-free allowance will rise to £12 a year. The effect of this is just the same as that of an increase in the personal allowances for Income Tax.

Earned Income Relief

I have considered carefully which, among the various alternative forms of Income Tax relief, should be my first choice. I have decided in favour of an increase in the earned income relief, which I increased last year from one-tenth to one-eighth, maintaining the maximum at £150. I now propose further to increase it from one-eighth to one-sixth, lifting the maximum from £150 to £250, and thus, bringing this relief back to where it stood in 1940, before the introduction of the postwar credit arrangements. This will give every worker an additional incentive. I estimate the cost of this relief at £62 million in a full year, and £55 million this year.

Child Allowance

In the second place, I propose to increase the child allowance from £50 to £6o a year, and thus restore this allowance to the pre-war figure, not merely the 1940 figure. This will cost £15 million in a full year, and £13 million this year. These last two increases together, will relieve 750,000 people who now pay Income Tax, from all payment in the future; and will, of course, noticeably reduce the tax paid by millions of others.

Following these reliefs, I would like to give the Committee some figures, because I am not sure that it is always understood what is the tax free income of various sections of the community, and what is the income above which standard rate at 9s. in the £first becomes chargeable. There is a bit of loose, defeatist, talk about incentives sometimes. People talk about there being no incentive to work if they have to pay anything in Income Tax. And it is especially for this reason that I want to give the facts and figures to the Committee.

Following the reliefs I have indicated, a single man will pay no Income Tax until he is earning £2 12s. a week, and he will not begin to pay tax at full standard rate, which is now only 9s. in the £, until his earnings exceed £5 10s. a week. Even then, of course, he only pays at the standard rate on the excess over this amount. The corresponding figures of other types of taxpayers are as follows: a married man with no children will pay no tax if he earns below £4 5s. a week, and no tax at standard rate below £7 2S. a week; for a married man with one child, the figures are, £5 12s. and £8 los.; a married man with two children £7 and £9 18s.; with three children £8 8s. and £11 5s.; and with four children £9 15s. and £12 13s. a week. Finally, that paragon of good citizenship, the married man with five children, pays no Income Tax unless he earns more than £11 3s. a week, and he only pays the full standard rate on the excess of earnings over £14 IS.

Dependent Relative Allowance

I have another Income Tax relief to offer, which, I hope, the Committee will think well to accept. This is in regard to the Dependent Relative Allowance, on which I have had a lot of correspondence, and on which I know there is considerable feeling of possible injustice. This allowance depends on the income of the relative. It is an allowance of £50 a year—that is the maximum—and, according to the income of the relative, the allowance tapers off. At present, if the income is less than £30 a year, the allowance is £50, and it gradually tapers off, and ceases altogether when the relative's income exceeds £80 a year. I propose that, in future, if the relative's only income is an old age pension, the maximum allowance of £50 shall still be given. If the relative has other income, giving more than £70 altogether, the allowance will taper off as before, but will not disappear until the income of the dependent relative is over £120 a year. This change is in recognition of the increase in the old age pension last year. It will cost £10 million in a full year, and £8 million this year and I am glad to, think that it will benefit one million taxpayers, with dependent relatives.

Pa Y E Tax Tables

The increases in the earned income relief and in the allowances for children and dependent relatives will mean a recasting of the P.A.Y.E. tax tables, and a recoding of the taxpayers affected. People are always asking me to set up Commissions and Committees to inquire into P.A.Y.E., but I much prefer to do the job myself. We have made continuous improvements in the administration of this scheme. To recast tax tables of the old type for P.A.Y.E. used to take five or six months, but as the Committee will know, the new Single Table as it is called, which has been in use since the beginning of this year, means a great saving in every respect—a saving in paper, in printing labour and in time. This new Table can now be recalculated, printed and distributed within 10 weeks from Budget day. I hope, therefore, that the re-coding, in accordance with the changes I have indicated, will be finished, and the new tables be in the hands of all employers in time to give effect to the changes which I have just proposed, in the pay packet for the week beginning 7th July.

The relief then given will date from 6th April, the beginning of the current income tax year, and there will, therefore, be not only a smaller deduction of the tax, week by week, from the second week of July onwards, but also a repayment, in the week beginning 7th July, of the tax deducted during the previous three months in excess of the new rate. It will be another of those wonderful weeks, like the first week of last October, which many people still remember, when "P.A.Y.E." becomes "re-P.A.Y.E.", and when the Chancellor of the Exchequer meets smiling faces everywhere.

Post-War Credits

I next turn to the Income Tax Post-War Credits. Last year, we repaid the first three years, out of a total of five years, of these Credits to old people, men over the age of 65, and women over the age of 60. I thought that this would cost about £26 million. We have, in fact, paid out more than twice as much, just £58 million, to no less than 1,750,000 old people. We had, of course, no reliable information last year to show the distribution of the Post-War Credits between the different age groups. There is no age evidence upon the Post-War Credit. It is evident that the old people, and we were very glad that it was so, had accumulated more than twice as much in Post-War Credits as we had supposed. This year, I propose to go a step further, and to complete the payments to the old people. I propose to arrange to pay the last two years of their Credits, and, in the light of last year's experience, that should cost another £70 million. There is more credit in the fourth and fifth years than in the first three.

Actually, repayment cannot start until the autumn, but it will, I hope, be finished before Christmas. Any man reaching the age of 65, and any woman reaching the age of 6o, will thenceforward be able to claim, in one single payment, all his, or her, Post-War Credits for the five years. I cannot go further this year, and I hope the Committee will not press me to do so, in the repayment of Post-War Credits These are a great reserve of' purchasing power, which we must only release slowly, while inflationary pressure continues. If deflation were to threaten, this reserve might be one of the first to be called up to counter it. Last year, the old people, when they drew their Post-War Credits, reinvested a considerable proportion in the Post Office Savings Bank—and in other forms of savings. I appeal to them, as I appeal to other citizens, to do the same this year and put the money by, so far as their personal circumstances permit.

Cotton Amalgamations

I have two further quite small reliefs to announce. In order to assist Approved Amalgamations in Cotton Spinning, to which my right hon. and learned Friend the President of the Board of Trade attaches great importance, I propose to reduce to half the standard rate the Income Tax charged when, as a result of such amalgamations, machinery or plant is sold for more than its written-down value. My right hon. and learned Friend hopes that these amalgamations will be substantially complete in three years, and I estimate the cost of this concession over this period to be £2,500,000. None of it will accrue this year. It will, I hope, help to get the cotton industry on its feet.

Probate Fees

Finally, in this section, I have an announcement to make in respect of Probate Fees, following up the exemption last year of small estates from Estate Duty. Probate fees are prescribed not by legislation, but by Order of the Supreme Court. Following discussions which the Lord Chancellor has had with His Majesty's Judges, I am glad to have been able to agree to a new scale of Probate fees as from 1st May. The minimum grant fee of 15s., now applying to estates up to £200, will, in future, apply to all estates up to £2,000. There will also be some reduction in the fee on estates up to £6,000. The new scale is to be calculated on the net value of the estate, including realty, and there will be some adjustment of the scale for estates above £6,000. The charge for services in the Personal Application Department on estates up to £2,000, and the jurisdiction of the Customs and Excise officers, are unaffected by this arrangement. It is not a big matter, but I am glad to think that the new scale of fees will mean a small saving in legal expenses to poor people, and the total loss of revenue from the new arrangement is only about £20,000 a year.

Total Cost Of Tax Reductions

I have come to the end of tax reductions. The total cost of those I have proposed will be £96 million in a full year, and £84 million this year. The Income Tax reliefs will cost £87 million in a full year, and £76 million this year. This does not include the cost of the repayment to old people of their postwar credits, which, being repayment of credits, will, as before, be borrowed.

Increases In Taxation

I turn to increases in taxation. My task now is to recover all, and more than all, the revenue I have lost. I have carefully studied, as I promised last year I would, the possibility of a tax on betting. At first sight this is an attractive proposition, though it would unite against it strong and varied resistance ranging from bookmakers to bishops. But I would advise the Committee to face even this powerful combination if it seemed likely that I could get substantial revenue from this new tax. But I am convinced that I could not. It would, indeed, be possible, and not very difficult, to tax the "totes," both horse and dog, and the football pools. But we stand, and most of all the Labour Party stands, for justice; and to tax "totes" and pools alone, and let the bookmakers go free, would be wrong, it would be unjust, it would be repudiated by all right-thinking men and women. On the other hand, to tax all forms of betting would present the most formidable administrative difficulties. In 1929, when the present Leader of the Opposition repealed the Betting Duty, which had been imposed in 1926, he told us that:

"In practice the duty has failed. The volatile and elusive character of the betting population, and the precarious conditions in which they disport themselves, have proved incapable of bearing the weight even of the repeatedly reduced burdens which we have tried to place upon them."—[OFFICIAL REPORT, 15th April, 1929; Vol. 227, C. 49.]

These gentlemen have become no less volatile, elusive and precarious today. I have no hope that where the right hon. Gentleman failed, I should succeed. In order to cope with the very serious difficulties of collecting a tax on bets placed with bookmakers I should need to divert a number of trained Excise Officers from

the collection of other existing taxes, and so should lose revenue. I am against adding to the Civil Service what are sometimes called "hordes of officials," even in the high mission of tax collectors. It is a defect of every new tax that it requires new officials to collect it. Therefore, I have regretfully decided to reject a tax on betting, and, in the best conservative spirit, to look for my increase of revenue this year from well-tried, existing taxes, to which we have become accustomed.

Motor Taxation

I turn to motor taxation. In my first Budget, adopting a provisional decision of my predecessor, and following, according to the best evidence then available, the wishes of the great majority of the motor manufacturers, I changed the basis of taxation of private cars, by substituting, for the cylinder bore, the cubic capacity of the cylinder. I made it clear that the change must be so arranged that I lost no revenue, though I asked for no more than I was then getting. This new tax came into effect for new cars less than four months ago, but many of the manufacturers, to whom some of the epithets applied to the betting population could be applied, now seem to have changed their minds once more. Many of them—although even now they are not unanimous; they never are—urge me to base the tax not on the cylinder bore at all, but on a combination of a flat rate licence fee and an increased petrol tax. That is a debatable and discussable proposition. But they also ask for a reduction in the total weight of taxation. That, for me, is not a discussable matter. I can hold out no hope of a reduction in the total weight of taxation for the present.

Whatever form motor taxation may take, the present revenue must at least be maintained, for the time being. As to the basis of the tax, I am very anxious to do all I can to help the motor industry, and most of all to help their exports to reach the highest possible figure. There are serious difficulties—I have looked at this question several times—in the way of adopting these latest proposals, which I cannot enlarge upon today. I make no commitment at all one way or the other, except to say that I am prepared to examine the whole question, in consultation with competent people who know the problem, between now and the Committee stage of the Finance Bill, subject to losing no revenue.

Death Duties

I turn to Death Duties. Last year I made some changes in the Estate Duty which brings in more than 90 per cent. of the total Death Duty revenue. By raising the exemption limit from £10o to £2,000 I exempted last year three quarters of the estates annually liable, and by regrading the duty on the other quarter I brought in £22 million more revenue in a full year. I have already referred to the adjustment of the Probate Fees to be made this year. To follow up this lightening of the burden on small estates, I now propose to make an excursion, with the same ideas in mind as I had last year, among what I may call the minor Death Duties. I propose to increase the rate of the Legacy and Succession Duties, while increasing the exemptions and reliefs for small inheritances. The Legacy and Succession Duties, fall, not, as the Estate Duty does on the total property passing at death, but on the portions of such property inherited by particular persons or by charities. To use legal jargon, for which I apologise, personalty pays Legacy Duty, realty pays Succession Duty, and both duties are based on consanguinity, which means the relationship of the deceased person to the beneficiary. The rate of duty now is one per cent. for widows and children; five per cent. for brothers, sisters, nephews and nieces; and 10 per cent. in other cases.

I propose to double all those rates, making them two, 10 and 20 per cent. respectively, but, at the same time, to give the following reliefs. Now when the total estate is less than £1,000, no Legacy or Succession Duty is charged on its distribution. I propose to raise this figure to 2,000, the same figure as the new exemption limit for Estate Duty which I introduced last year. At present, in the second place, if the total estate is less than £15,000 no Legacy or Succession Duty is payable on bequests to widows and children. That will remain unchanged. Thirdly, at present, no Legacy or Succession Duty is payable on bequests or benefits of less than £2,000 to a widow, £2,000 to an infant child, or £1,000 to a child of full age. I propose to retain these reliefs but, in the case of a child of full age, to raise the limit from £1,000 to £2,000. Fourthly, I intend to provide that benefits of no more than £100, no matter to whom accruing by inheritance, shall be exempt. Finally, I propose no increase in the rate on charitable bequests; this will remain at 10 per cent. I propose that these changes shall apply to deaths occurring after today. I estimate the increased yield at £9,000,000 in a full year. The yield this year will be very small, since these duties are normally collected a year or more after the date of death.

Stamp Duties

I turn next to the Stamp Duties, in which there has been no important change since the late Mr. Austen Chamberlain, as he then was, doubled most of the rates in his Budget of 1920, two years after the end of the first World War. I now propose, following his example, at this corresponding point after the second World War, to double a number of the Stamp Duties, which I shall specify in a moment, though over a less wide field. than Mr. Austen Chamberlain did. Mr. Austen Chamberlain doubled the duty on cheques and receipts; I think that is a futile proceeding, and I do not propose to repeat it. I start with Stock Exchange transactions. I propose to double all the Stamp Duties relating to stocks and shares, namely the Contract Note Duties, the Transfer Duty, and the duties on bearer securities, debentures and Letters of Allotment. Most of these duties are payable on graduated scales. Full details of the changes will be found in the White Paper.

I propose also, subject to relief for small transactions, to double the Stamp Duty on transfer of property. This duty was not doubled by Mr. Austen Chamberlain in 1920, because it had been doubled in 1909 by Mr. Lloyd George, who then increased it from 10s. per cent. to £1 per cent. On small transfers, of £500 or less, the Stamp Duty has stood for nearly a century at 10s. per cent., and I propose to leave it there, and also to leave the present duty on transfers of between £500 and £1,500 unchanged at the existing rate of per cent. Above £1,500, the rate will rise gradually up to £2,000 when the new full rate of £2 per cent. as against £1 per cent. will become payable. I propose likewise to double the present Stamp Duty on leases and mortgages, except on ordinary tenancy agreements at a rental of less than £100 a year on which the existing rate of duty will be continued. I estimate that these various increases in Stamp Duties which I have so far mentioned—I have another to come—will produce another £20 million in a full year, and about £12 million this year. These increases cannot come into force until the passage of the Finance Bill into law, and I propose that they shall operate from 1st August next, by which time, I hope, the Bill will have become law.

Bonus Issues

I have given further special thought to one type of transaction which has attracted much attention, some of it uncomplimentary, namely, the bonus issue. These issues may sometimes be a defensible method of capitalising reserves or genuine profits. They may be. But often they are nothing more than a watering of capital, a method of concealing profits, and so misleading customers, employees, and the general public, and heading off demands for lower prices or better conditions of employment. My two predecessors at the Treasury forbade bonus issues altogether during the war, save in very exceptional cases; and there is something to be said for maintaining this prohibition. I have heard much argument about this question; I have taken much advice; I have consulted many experts. In a quiet way, I have been looking round to see how I might, at the same time, both give a little pleasure and collect a little revenue. It seemed to me that there was a case for my being a little more forthcoming in permitting bonus issues, on condition that the public also participated in a reasonable rake-off from these somewhat debatable operations.

I intend, therefore, to impose an additional Stamp Duty of 10 per cent. on the value of all bonus issues passed by the Capital Issues Committee, to which well-trusted body I propose to give an extended discretion in regard to these issues.

I should, perhaps, remind the Committee that a bonus issue may take either of two forms. First, there is the bonus issue proper, which is a gratuitous issue of new shares to existing shareholders in proportion to their holdings. The characteristic of this type of issue. is that no new money whatsoever is subscribed. This, if one may use a colloquialism, is sheer "money for jam." The second type is an issue of new shares, containing a "bonus element," to existing shareholders; that is to say, an issue of new shares, for which, indeed, the shareholders pay something, but less—and, sometimes, very much less—than their market value. Here, indeed, some new money is put up by the shareholder, but, often, relatively speaking, not very much. Last year I gave the Capital Issues Committee discretion to recommend to the Treasury that consent should be given to bonus element cases—that is, to the second of the two types which I have described—when having regard to all the circumstances, the issue price appears to them to be fair and reasonable. I now propose to give the Capital Issues Committee a similar discretion to recommend consent or refusal, as the case may be, in the case of bonus issues proper.

I am prepared to give the bonus issue this degree of benefit of the doubt. But I should make it clear that this concession is not meant unduly to encourage these transactions, even though I can expect revenue from them; and I ask all promoters of such issues to think carefully before making up their minds that a bonus issue is really essential to the proper management of their business.

The new Stamp Duty will, in the case of public companies, be at the rate of 10 per cent. on the excess of the market value of the bonus share over the sum, if any, which the shareholder pays for it. The market value will be taken as the Stock Exchange valuation of the shares after the issue. In the case of private companies, whose shares are not quoted on the Stock Exchange, the charge of 10 per cent. will fall on the excess of the par value of the share over the sum, if any, paid for it. This duty will be payable by the company making the issue, and will be levied on any bonus issue made from today. It is estimated to yield £5,000,000 in a full year and the same amount this year. Therefore, from Stamp Duties as a whole, I expect to get a further £25 million in a full year, and £17 million this year.

Profits Tax

I pass to another topic. Last year I announced in my Budget speech that the Excess Profits Tax would be finally repealed on 31st December, 1946, but that the National Defence Contribution, which was then rechristened the Profits Tax, would go on. I said then, a year ago, that I had been carefully considering whether, when repealing Excess Profits Tax, I should either increase the Profits Tax or introduce some new form of tax on profits or excess dividends. I added that I should be guided in my decision, this year, by a number of considerations, by the general budgetary and financial situation to a large extent, and, to some extent, by the conduct of private enterprise in the meantime. I cannot pretend to be satisfied with the large increases in distributed profits and the higher dividends which have been paid out in so very many cases in the last 12 months. Too much, in my judgment, has been distributed, and too little ploughed back into the business. These increased dividends are the clearest case, anywhere in our national economy, of an inflationary element.

I am very doubtful of the wisdom of affording, in this inflationary atmosphere, to any section of our population, an increase of money income, without a proportionate increase in output or in services rendered in return. I make exception here for increased incomes through tax reductions or improved social services: that is part of public policy. But, generally speaking, we are entitled to think twice, in our present situation, before paying people more money even for the same work. And these increased dividends are a case of paying more money for no work at all—and that is very hard to justify, and, in my view, clearly calls for some fiscal correction. Therefore, I propose to leave the Profits Tax at its present level of 5 per cent., or one shilling in the pound, on undistributed profits which are added to companies' reserves or otherwise re-invested in the business. But I propose to increase the tax to 12½ per cent., or from one shilling to 2s. 6d. in the pound, on distributed profits.

The case for this increase of Profits Tax is threefold. In the first place, I must collect, as I indicated last year, some additional revenue to replace, at least in part, the loss of Excess Profits Tax. The second argument I have already given. Distributed profits have been too high and too inflationary. In the third place, this increase of Profits Tax does rough justice within the broad field of investment income. The cheap money policy has reduced, though with great advantage to the nation as a whole, the income of many rentiers or other persons living on redeemable fixed-interest-bearing securities. The equity stockholder has suffered no such disadvantage, and in some cases, may have actually gained through capital reconstructions which have improved his relative position. There has also been, I am told, much switching from gilt-edged into equities in search of yield. An increased Profits Tax, therefore, whatever may be said about it generally, has a special justification in these days of cheap money, in order to do justice as between one section and another of those who receive income from investments.

I propose to exclude from the Profits Tax individuals and partnerships which are now liable to pay at the rate of 4 per cent. This is fair, I consider, because the profits of individuals and partnerships are liable to Surtax as well as Income Tax, but Surtax does not fall on the undistributed profits of a company. The cost of the concession is small, since individuals and firms provide less than 5 per cent. of the total yield of the tax.

This increase in Profits Tax will give me an additional £36 million in a full year. But, since Profits Tax, like E.P.T. is a deduction for Income Tax, the increase of the Profits Tax means a loss of Income Tax which I put at £16 million at the present rate; so that I get a net gain, from the increased Profits Tax on distributed profits, of £20 million in a full year. The additional yield this year will only be about £1 million net since the tax is Collected a year after the profits are made.

These three sets of changes in the Inland Revenue field—the increases in the Legacy and Succession duties, Stamp Duties and Profits Tax—all taken together, will provide a net gain to the Exchequer of £54 million in a full year and £18 million this year.

Purchase Tax (Gas And Electrical Appliances)

I have two more unpleasant topics to touch upon in the field of taxation. In my first Budget, a few months after the end of the war, I took the Purchase Tax off a number of domestic cooking and heating appliances. At that time, everybody welcomed it. No one opposed it, in any part of this House. Indeed, I was pressed to extend the exemptions more and more widely, to include, among other things, electric irons and electric washing machines. [An HON. MEMBER; "Electric chairs?"] I am sure the Committee would wish me to admit them, along with the other articles, in order to yield a little revenue with an accompaniment of justice. At that time, everyone welcomed the concession; everyone pressed for more. The gift of foresight is sometimes denied, not only to Ministers of the Crown and Members of Parliament, but to the whole community. Lord Baldwin once said, in another connection, that "We were all wrong." So we were. It is quite clear we were all wrong—all of us—about these electrical appliances.

In present circumstances, the exemptions can no longer be justified. Most of these appliances make heavy demands on the public gas and electricity services, where the effect of the fuel shortage is most acute and the need for economy most urgent. I propose, therefore, to bring them all back under the tax at the rate of 66?, per cent.—on new articles, of course; anybody who has got an electric iron is all right. The tax will be 66? per cent. of the wholesale value. This is a new rate of duty intermediate between the maximum rate of 100 per cent., which now operates in some cases, and the 33⅓ per cent. rate, which is the rate most widely imposed. I propose also to tax at the same rate of 66⁔ per cent. a further group of gas and electrical appliances. some of which are at present exempt and others taxed at 33⅓ per cent. I will not weary the Committee with the full definition of the articles, which will be found in the White Paper; but among the appliances which will not be affected will be lighting appliances, wireless sets. and electric clocks.

These increases will apply to goods delivered by registered manufacturers and wholesalers to retailers from tomorrow. This is an unpleasant, but a necessary, method of fuel economy. I hope it will also lead to a considerable increase in the export of these articles, which, I am sure, will be much appreciated by persons resident in other parts of the world. The additional revenue from these increases of Purchase Tax will be about £18 million in a full year, and about £13 million this year. The Purchase Tax concession which I mentioned earlier will cost about £2,500,000 in a full year and £2 million this year. On Purchase Tax as a whole, therefore, there will be a net gain to the Exchequer of about £15,500,000 in a full year and £1t million this year.


Finally, in this field, I have something to say about tobacco. We are now smoking one-third more than before the war. Current consumption exceed, 250,000,000 pounds weight a year—an enormous amount—or more than 100,000 tons of tobacco a year. This represents, though it is hard to credit it, about 100,000 million cigarettes, and about 700 million ounces of pipe tobacco, to say nothing of cigars and snuff. About 80 per cent. of our tobacco is imported from the United States; and, to satisfy this insatiable demand, we are drawing heavily and improvidently on the dollars which we earn with our exports, as well as on the proceeds of the American line of credit. It is hardly to be believed, but the whole total of our exports to the United States at this time barely exceeds, in value, our own consumption of American tobacco. The thing has become fantastic, and must be stopped. It is quite clear that we are smoking much more, as a nation, than we can afford, and I have been pressed, from many quarters for some time, to cut down this much too heavy bill. I now, therefore, propose, and I believe that both the Committee and the country as a whole will back me up in this, to make a very steep increase in the tobacco duty.

Most of our tobacco imports come in as unmanufactured leaf, on which I propose to raise the Customs Duty from tomorrow by about 50 per cent.—from 35s. 6d. a pound to 54s. 10d. a pound, with corresponding increases in the rates for other kinds of tobacco. The existing preferential margins will remain unchanged. The effect of this increase will be that the price of a packet of 20 cigarettes will be raised from 2s. 4d. to 3s. 4d., or from 1s. 9d. to 2s. 6d.

The price of most kinds of pipe tobacco will go up by about 1s. 2d. an ounce.

When the Tobacco Duty was last raised, in 1942 and in 1943, Members of the Armed Forces were allowed to buy' limited quantities of cigarettes and tobacco in their canteens at pre-Budget prices. In present circumstances, I regret that this special arrangement can no longer be justified, and I propose that it should now be discontinued from the 27th of this month.

It is not easy to estimate how much of a drop in smoking might be expected to result from this deliberate and very heavy increase in the duty. [Interruption.] I mince no words; I tell the hon. Member the truth. It does him good to hear it for once. In the jargon of the professional economist, the demand for tobacco is highly inelastic, which means nothing more than that men and women will give up quite a lot to get a smoke. They would spend more money on tobacco, if the price went up, even if it meant spending less on other things. This is a time when we must seek to influence, in the national interest, the individual inclinations of tobacco smokers. I regard the saving of dollars as much more important than an increase in the revenue in this connection, and I suggest to any smoker who may feel a grudge against the Treasury, or against myself personally, that the best way to satisfy it is to knock off smoking altogether, thus depriving me of one of my principal sources of revenue. If that seems too stringent, he might cut down his smoking—

No, I cannot give way; I have been on my feet too long. He might cut down his smoking by one-third. He will then be spending about the same amount of money as now, and I shall only be getting very little extra revenue. Even this, however, might seem too great a sacrifice to some smokers. So I set my target, at a reduction of 25 per cent., or one quarter, in the total national consumption of tobacco. I hope that it will be regarded as a national duty to reach this target, especially in view of our most difficult overseas deficit. Nothing less will be much good. I appeal, and I hope others who have pressed me on this subject will support my appeal, to all our fellow-citizens to regard this particular economy as a minimum and 4s a patriotic duty at this time. When this appeal has been made before, it has not failed. I do not think that anyone need suffer seriously, even in morale, if he should smoke this year three cigarettes, or three pipes, instead of every four last year. All we need to do is to smoke a little slower. We must throw away our stubs a little shorter, and knock out our pipes a little later. All this might even be quite good for our health and might steady our nerves.

On the basis of the 25 per cent reduction, for which I ask, I estimate that I shall get £77 millions more revenue in a full year, and £75 millions more this year, but—and this is far more important—I estimate that we should save some 30 million dollars this year, and a bit more if, as a consequence of slower sales, we could run down our stocks. I do not hesitate to emphasise once more that I would much sooner get a large saving of dollars and less revenue, but I cannot exclude the possibility that things might go the other way, though I hope they will not.

Final Result Of Tax Changes

I come now to sum up the results of the various tax changes which I am proposing. The tax reductions will cost me £84 million this year, and £96 million in a full year, of which the Income Tax reliefs will cost £76 million this year and £87 million in a full year. On the other hand, tax increases will bring in £106 million this year and £149 million in a full year. Therefore, on balance, I gain £22 million this year and £53 million in a full year, and my prospective surplus for this year will rise from £248 million to 270 million.

The final picture which I would wish to leave with the Committee is one of sharp contrast. Our internal financial position is much better, and our external trading deficit is a good deal worse than it would have been reasonable to anticipate two years ago. In this Budget, I have proposed measures which, I hope, will strengthen both the internal and the external position. If these measures prove not sufficient, stronger and more drastic measures will have to follow, and His Majesty's Government will take the responsibility for proposing these in due course.

These are serious times. But I recall some words, which were written about halfway through the last century, I think, by one who, though not a native of our country, knew us and wished us well. He said that the saw Britain

"not dispirited, not weak, but well remembering that she has seen dark days before; indeed, with a kind of instinct, that she sees a little better on a cloudy day, and that, in storm of battle and calamity she has a secret vigour and a pulse like cannon. I see her, in old age, not decrepit, but young, and still daring to believe in her powers of endurance and expansion, with strength still equal to the time."

Let us, then, be of good courage; let us go forward, with obstinate will and clear purpose, to conquer the hard tasks which lie ahead.

6.32 p.m.

In accordance with the usual procedure, it is now my duty to propose the Budget Resolutions to the Committee. I have arranged for copies of the Resolutions to be passed round to hon. Members in their places, and I will pause for a moment to enable that to be done. I assume that it will meet with the Committee's general approval if I put them in summary form.

Customs And Excise

1. Hydrocarbon Oils (Customs)


"That as from six o'clock in the evening on the fifteenth day of April, nineteen hundred and forty-seven—
  • (a) the rate of any rebate allowed under Section two of the Finance Act, 1928, on the delivery for home consumption of—
  • (i) any oils which contain in solution an amount of hard asphalt of not less than one half of one per cent.; or
  • (ii) any oils of which not more than fifty per cent. by volume distils at a temperature not exceeding 24o degrees centigrade, and of which more than fifty per cent. by volume distils at a temperature not exceeding 34o degrees centigrade, shall be increased from eightpence per gallon to ninepence per gallon; and
  • (b) the duty chargeable by virtue of subsection (2) of Section eight of the Finance (No. 2) Act, 1945, on oils used in a refinery for generating heat, light or power, or for producing gas, shall cease to be chargeable.
  • And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

    2. Tobacco (Customs)


    "That, as from the sixteenth day of April, nineteen hundred and forty-seven, in lieu of the full and preferential duties of customs theretofore chargeable on tobacco imported into the United Kingdom, there shall be charged on tobacco so imported of the descriptions set out in the first column of the following Table—
  • (a) in the case of tobacco not being an Empire product, duties of customs at the rates respectively specified in the second column of that Table; and
  • (b) in the case of tobacco being an Empire product, duties of customs at the rates respectively specified in the third column of that Table
    Description of Tobacco.Rates of duty per pound
    Full rates.Preferential rates
    Tobacco unmanufactured:
    containing to lbs. or more of moisture in every 100 lbs. weight thereof:
    containing less than 10 lbs of moisture in every 100 lbs. weight thereof:
    un stripped21510214
    Tobacco manufactured, namely:
    Cavendish or Negrohead21942171
    Cavendish or Negrohead manufactured in bond.2174215
    Other manufactured tobacco.2177215
    containing more than 13 lbs. of moisture in every too lbs. weight thereof.2161021411⅞
    containing not more than 13 lbs. of moisture in every too lbs. weight thereof.21942171
    and so in proportion for any less quantity.

    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

    3 Tobacco (Excise)


    "That, as from the sixteenth day of April, nineteen hundred and forty-seven, in lieu of the duties of excise theretofore chargeable on tobacco grown in the United Kingdom, there shall be charged on tobacco so grown of the descriptions set out in the first column of the following Table duties of excise at the rates respectively specified in the second column of that Table.

    Description of Tobacco. Rates of duty per pound.
    Tobacco un manufactured:
    containing more than 10 lbs. of moisture in every 100 lbs. weight thereof.213
    containing more than 10 lbs. of moisture in every 100 lbs. weight thereof.21311½
    Tobacco manufactured namely:
    Cavendish or Negrohead manufactured in bond215
    and so in proportion for any less quantity

    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

    4 Tobacco (Drawback)


    "That, as respects tobacco on which there have been paid duties of customs or excise at the increased rates for which provision is made by any Resolution of the Committee of Ways and Means together with this Resolution, draw. back shall be allowed at the rates set out in the following Table instead of at the rates set out in Part III of the Fourth Schedule to the Finance Act, 1943.

    Description of Tobacco.Rates of per pound.
    In respect of tobacco on which full customs duty has been paid. In respect of tobacco on which customs duty at a preferential rate or excise duty has been paid.
    Cut, roll, cake or other manufactured tobacco21510214
    Snuff (not being offal snuff)2157213
    Stalks, shorts or other refuse of tobacco, including snuff2151213

    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

    5 Artificial Silk (Customs And Excise)


    "That, as from the first day of May, nineteen hundred and forty-seven—
  • (a) the duties of excise on artificial silk singles yarn or straw and on a licence to be taken out annually by a manufacturer of artificial silk yarn shall cease to be chargeable; and
  • (b) the rates of duties of customs chargeable under Section four of the Finance Act, 1925, in respect of artificial silk yarn and tissues shall be reduced by sixpence and shall be as follows, that is to say:—
  • artificial silk yarnthe lb.9d.
    artificial silk tissuesthe lb.11d.,

    and the Silk Duties (No. 1) Order, 1934, shall have effect subject to the following Amendments of Part II of the First Schedule to that Order (which sets out the rates of duties of customs on certain articles made wholly or partly of artificial silk), that is to say:—

    in the second column—

  • (i) for the words "An amount equal to 43⅓ per cent. of the value of the article or an amount calculated at the rate of 5s. the pound on the weight of the article, whichever is the greater." there shall be supstituted the words "An amount equal to 42 per cent. of the value of the article or an amount calculated at the rate of 4s. 8d. the pound on the weight of the article, whichever is the greater."; and
  • (ii) for the words "An amount equal to 43⅓ per cent. of the value of the article." where they last occur in that column there shall be substituted the words "Where any component is silk, an amount equal to 43 per cent. of the value of the article and, where no component is silk, an amount equal to 42 per cent. of the value of the article.",
  • and Section nine of the Finance Act, 1933, shall have effect as if the preceding provisions of this paragraph of this Resolution were contained in an order made under that Section: Provided that nothing in this Resolution shall affect any drawback of duty allowable in respect of artificial silk or any article made wholly or in part of artificial silk where - the duty became chargeable on the artificial silk whether before or after the passing of this Resolution and before the said first day of May, nineteen hundred and forty-seven. And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913".

    6. Allowance for Artificial Silk used in
    Tyres (Customs)


    "That no allowance shall be paid under Section eleven of the Finance Act, 1946, in respect of any artificial silk on which a duty of customs has been paid contained in yarn or tissue used in the manufacture of tyres if that duty becomes chargeable on or after the first day of May, nineteen hundred and forty-seven."

    Purchase Tax

    7. Purchase Tax (Intermediate and
    Higher Rates)



  • (a) as from the sixteenth day of April, nineteen hundred and forty-seven, purchase tax shall be charged in respect of goods of the classes specified in the following Table—
  • (i) where they are not goods of the classes specified in the Seventh Schedule to the Finance Act, 1942, at an intermediate rate equal to two-thirds of the value of the goods; and
  • (ii) where they are goods of the classes specified in the said Seventh Schedule, at the higher rate; and
  • (b) the Treasury shall have power under Section twenty of the Finance (No. 2) Act, 1940, subject to approval by this House, by order to render chargeable at the intermediate rate goods not previously chargeable or chargeable at any other rate and to render goods previously chargeable at the intermediate rate chargeable at any other rate or not chargeable and the provisions of paragraph (a) of this Resolution shall have effect subject to any order under that section."
  • Table

    Domestic appliances and domestic apparatus, being appliances and apparatus of a kind suitable for operation from electric or gas mains, but not including—

    lighting and wireless appliances and apparatus;

    gramophones or player pianos;

    clocks and parts of clocks;

    warming pads and blankets;

    hair drying machines;

    infra-red and ultra-violet ray lamps and radiant heat lamps.

    Lawn mowers of a kind suitable for operation from electric mains.

    8. Purchase Tax (Exemptions and
    Reductions of Rates)


    That as from the sixteenth day of April, nineteen hundred and forty-seven, subject to any subsequent order under section twenty of the Finance (No. 2) Act, 1940,—
  • (a) purchase tax shall cease to be chargeable in respect of goods of the class specified in Part I of the following Table; and
  • (b) purchase tax shall become chargeable at the reduced rate and at the basic rate in respect of goods of the classes specified respectively in Parts II and III of the said Table.
  • Table

    Part I

    Class of goods becoming exempt

    Domestic water filters designed to remove bacteria and other suspended impurities from drinking water by mechanical means, but not including filters also employing chemical reaction.

    Part Ii

    Classes of goods becoming chargeable at reduced rate

    Floor coverings, including linoleum, but not including carpets, carpeting, rugs, mats, matting and wooden floor coverings.

    Chambers not supplied as part of a toilet service, and chair pans and commode pans and lids for such chambers and pans as aforesaid.

    Hot water bottles of a kind designed for use as bed warmers or foot warmers.

    Requisites for cricket of the following descriptions—bats, balls, stumps and bails and wicket keepers' and batsmen's pads and gloves.

    Footballs, and parts of footballs, and footballers' shinguards.

    Requisites for hockey, but not for ice hockey, of the following descriptions—sticks, balls and shinguards.

    Boxing gloves.

    Rowing boats specially designed as racing boats.

    Part Iii

    Classes of goods becoming chargeable at basic rate

    Razor strops and razor sharpeners, but not including strops and sharpeners supplied as part of a toilet set.

    Dental sticks and toothpicks.

    Income Tax

    9. Charge of Tax


  • (a) income tax for the year 1947–48 shall be charged at the standard rate of nine shillings in the pound, and, in the case of an individual whose total income exceeds two thousand pounds, at such higher rates in respect of the excess over two thousand pounds as Parliament may hereafter determine;
  • (b) Subject to the provisions of any Act of the present Session relating to transport or electricity, all such enactments as had effect with respect to the income tax charged for the year 1946–47, other than such enactments as by their terms relate only to tax for that year, shall have effect with respect to the income tax charged for the year 1947–48.
  • And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

    10 Personal Reliefs


  • (a) subsection (1);of section fifteen of the Finance Act, 1925 (which, as amended by subsequent enactments, provides for a deduction of tax on an amount equal to one-eighth of the amount of earned income, but not exceeding one hundred and fifty pounds) and subsection (2) of the said section fifteen (which, as amended by subsequent enactments, provides, in a case where an individual or his wife has attained the age of sixty-five years and his total income does not exceed five hundred pounds, for a deduction of tax on an amount equal to one-eighth of his income) shall have effect as if the words 'one-sixth' were substituted for the words 'one-eighth' and the words 'two hundred and fifty pounds' were substituted for the words 'one hundred and fifty pounds';
  • (b) Section eighteen of the Finance Act, 1920 (which, as amended by subsequent enactments, provides, amongst other things, that the deduction of tax allowable in the case of married persons shall in certain cases be increased by an amount not exceeding seven-eighths of the earned income of the claimant's wife) shall have effect as if the words 'five-sixths' were substituted for the words 'seven-eighths';
  • (c) Section twenty-one of the Finance Act, 1920 (which, as amended by subsequent enactments, provides for a deduction of tax on fifty pounds in respect of each child with an income of fifty pounds or less) shall have effect as if the words 'sixty pounds' were substituted for the words 'fifty pounds' in Subsections (1) and (3) thereof; and
  • (d) Subsection (1) of Section sixteen of the Finance Act, 1943 (which provides, amongst other things, that the deduction of tax allowable in certain cases in respect of a relative of the claimant or of his or her wife or husband who is maintained by the claimant is limited to cases where the total income of the person maintained does not exceed eighty pounds a year and that the allowance is reduced if the total income of that person exceeds thirty pounds a year) shall have effect as if the words 'one hundred and twenty pounds' were substituted for the words 'eighty pounds' and the words 'seventy pounds' were substituted for the words 'thirty pounds':
  • Provided that the additional relief afforded by this Resolution for the year 1947–48 shall not affect the amount of tax deductible or repayable before the seventh day of July, nineteen hundred and forty-seven.
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection. of Taxes Act, 1913."

    11. Farm animals


    "That, save in so far as may be otherwise provided by any Act of the present Session relating to Finance, animals and other living creatures kept for the purposes of farming or for the purposes of any trade whatsoever shall be treated for income tax purposes as trading stock or, in so far as an option conferred by the said Act to have them treated on an alternative basis has been duly exercised as respects them, on that alternative basis; and that where such an option is availed of or is or has been or may become available, such other consequences shall ensue for income tax purposes to all persons then or thereafter concerned as may be provided by the said Act."

    12. Double Taxation Relief


    "That the extent and incidence of income tax, for the year 1946–47 and subsequent years of assessment, shall be varied so as to give effect to amendments of the law relating to the effects of provisions in arrangements with the governments of territories outside the United Kingdom for the crediting, against United Kingdom tax, of tax payable under the laws of those territories."

    13. Transfers of assets under Coal
    Industry Nationalisation Act


    "That, as respects past, present and future years of assessment, the law applicable to the income tax of the National Coal Board and the other persons concerned shall be amended in relation to cases where, whether before or after the passing of this Resolution, assets vest in that Board by virtue of any of the provisions of the Coal Industry Nationalisation Act, 1946."

    14. Exceptional Depreciation Allowances


    "That any exceptional depreciation allowance in respect of a building or structure for the year of assessment in which the appointed day (within the meaning of the Income Tax Act, 1945) falls shall, for the purposes of section four of that Act, be written off as at the end of the immediately preceding year of assessment, and this Resolution shall apply to all years of assessment, including the year 1946–47."

    15. Benefits procured for directors and employees


    "That it is expedient to impose liability to income tax where benefits (including benefits which are to be enjoyed only on the happening of particular contingencies) are or are to be procured or provided by bodies for persons who, as directors or otherwise, are taking part or are to take part or have taken part in the management of their affairs, or by employers of any kind for persons who are or are to be or have been their employees."

    Profits Tax And Excess Profits Tax

    16. Profits Tax


    "That the extent and incidence of the profits tax (for past and future chargeable accounting periods) be varied so as to give effect to amendments as to the rate of the tax, the scope of the tax, the computation of profits and losses for the purposes of the tax, the relief to be given for double taxation and the other conditions subject to which the tax is charged."

    17. Excess Profits Tax


    "That the extent and incidence of excess profits tax (for all chargeable accounting periods) be varied so as to give effect to amendments as to the meaning of the expression 'remuneration' in reference to directors and to provisions operating where there has been a direction under Section twenty-four of the Finance Act, 1943."

    Legacy And Succession Duties

    18. Charge of Additional Duty


    "That there shall be charged on legacies derived from a testator or intestate dying on or after the sixteenth day of April, nineteen hundred and forty-seven, and successions arising on or after that day, on which legacy or succession duty is payable or has before that day been paid under the enactments now in force, a further legacy or succession duty at a rate equal to the rate or aggregate rate of the duty thereon under those enactments; and this Resolution shall apply also to other legacies and successions so as to authorise charging the further legacy or succession duty thereon on deaths and other events happening on or after the said sixteenth day of April."


    19. Conveyances, Transfers and Leases


    "That the stamp duties charged under or by reference to the headings 'Conveyance or Transfer, whether on sale or otherwise', 'Conveyance or Transfer on sale of any property' and 'Lease or Tack' in the First Schedule to the Stamp Act, 1891, shall be double those now chargeable, but this Resolution—
  • (a) shall not affect the operation of any enactment limiting an ad valorem duty to ten shillings in certain cases;
  • (b) shall not apply to the duty chargeable on any conveyance or transfer on sale, other than of any stocks (including units under a unit trust scheme) or marketable securities, or to the duty chargeable in respect of any consideration other than rent for a lease at a rent not exceeding twenty pounds a year where the conveyance or transfer or the lease is not a transaction, and does not form part of a larger transaction, or of a series of transactions, in respect of which the amount or value or the aggregate amount or value of the consideration exceeds fifteen hundred pounds; and
  • (c) shall not apply to the duty chargeable on a lease (other than a lease operating as a volutary disposition inter vivos) for an indefinite term or a term not exceeding thirty-five years where the sole consideration is a rent not exceedings one hundred pounds a year."
  • 20. Stocks, Marketable Securities and
    Letters of Allotment, etc.


  • (a) the stamp duties charged on marketable securities, share warrants and stock certificates to bearer, and on other instruments to bearer, shall be double those now chargeable;
  • (b) the stamp duties charged under section one hundred and fourteen of the Stamp Act, 1891, as amended by subsequent enactments, and under section thirty-seven of the Finance Act, 1939, by way of composition for the stamp duty chargeable on transfers of certain stocks and the stamp duty charged under section one hundred and fifteen of the Stamp Act, 1891, as amended by subsequent enactments, by way of composition in respect of the transfer of certain stocks (including units under unit trust schemes) and otherwise shall be double those now chargeable;
  • (c) the stamp duties charged on contract notes in respect of stocks (including units under unit trust schemes) and marketable securities shall be double those now chargeable; and
  • (d) the stamp duties charged on letters of allotment, letters of renunciation and other documents having the effect of a letter of allotment, and on scrip certificates and similar documents shall be double those now chargeable "
  • 21. Loan Capital, Bonds, Mortgages, etc.


  • the stamp duty charged on loan capital under section eight of the Finance Act, 1899, shall be double that now chargeable;
  • (b) the stamp duties charged under or by reference to the headings "Bond, Covenant or Instrument" and "Mortgage, Bond, Debenture, Covenant and Warrant of Attorney" in the First Schedule to the Stamp Act, 1891, shall be double those now chargeable; and
  • (c) the reference in the heading "Bond given pursuant to the directions of any Act," etc., in the said Schedule to duties of excise or customs shall include a reference to purchase tax."
  • 22. Bonus Issues of Securities


    "That where on or after the sixteenth day of April, nineteen hundred and forty-seven, a company issues any shares or other securities or increases the rights or reduces the liabilities attached to any shares or other securities and does so by way of bonus to members or debenture holders of itself or of another company, a statement shall be made of the value of the bonus, and that statement shall be charged with an ad valorem stamp duty of ten pounds for every hundred pounds or part of a hundred pounds of the value of the bonus, and any Act of the present Session relating to Finance may contain provision—
  • (a) for determining how far any matter is to be treated as being by way of bonus to any persons, and in particular for so treating an issue if the offer is limited to those persons or if in connection with the issue those persons receive preferential treatment; and
  • (b) for determining the value of the bonus."
  • Miscellaneous

    23. Essential Commodities Reserves Fund


    "That the sum of nine hundred and seventy-three thousand and forty-one pounds fourteen shillings and sixpence be paid out of the Essential Commodities Reserves Fund into the Exchequer."


    Motion made, and Question proposed,

    "That it is expedient to amend the law with respect to the National Debt and the public revenue, and to make further provision in connection with finance."—[ Mr. Dalton.]

    6.36 p.m.

    It is traditional that on this, the first day of the Committee's discussion of the financial proposals for the year, we should offer congratulations to the Chancellor of the Exchequer on the accomplishment of what is always a formidable Parliamentary task, and which must today have been a formidable physical task also. I can certainly do that, and can also congratulate the right hon. Gentleman on the clarity of his exposition, not infrequently, may I add, barbed with shafts aimed at hon. Members on this side of the Committee. The fact that the targets at which he was aiming were not the views held by anyone on this side, of course, in no way discouraged the right hon. Gentleman from aiming his shafts. In fact, when he began to exhort us on the question of the export trade, I really felt that he should be looking up and down the Treasury Bench. I would commend some of the literature of those days to some of his colleagues, now wisely absent. Nor would any one in this House challenge the Chancellor's ability to state a case. If there is a criticism which we on this side wish to make about him in this respect today, it is not that he fails to take credit for what he has achieved, but that he also quite cheerfully takes all the credit for what others have achieved.

    For instance, there was his description of the monetary policy. That is not in any way an invention of the present Chancellor of the' Exchequer. The cheap money policy dates back to the days of Mr. Neville Chamberlain and to the first big financial conversion operation which, I think I am right in saying, took place in 1932. But anyone listening to the right hon. Gentleman today would have thought that he was the first person who had ever heard of the cheap money policy. He spoke about the new social legislation, and invited us to look round at this world and at what we are going to enjoy. But most of it was based on legislation worked out by a previous Coalition Government. He forgot to mention that that ever existed at all. [Interruption.] That is a matter of degree, and not a matter of principle. In fact, proposals like the family allowance were all worked out in the days of the Coalition Government, and nobody knows that better than the right hon. Gentleman. It seemed to me that he went so far as to claim credit for the error of the actuary in respect of the number of babies. I would warn the right hon. Gentleman to be rather careful about that. He had better wait until the babies grow up, and see what they say about it.

    I now wish to say a word or two about the proposals. First of all, I must say, and I am sure that the right hon. Gentleman will realise it, that the account which he has given us—I make no complaint of its length—of the increase of taxes here and the reduction of taxes there, presents a very formidable study for this Committee. I am certainly not prepared, and I do not think that anybody would expect at the end of a three-hour speech, to enter into these matters on merit at all. I think it would be unwise to do so, because one must study these matters before speaking on them at any length.

    I want to refer to one particular matter because I do not want any misunderstanding about the announcement made by the Chancellor. He referred to the unexpected surplus which he could fore- see on the basis of present taxation. He said that, for this year, he could foresee a surplus of £248 million. That is quite true, and there seemed to be some criticism that hon. Members on this side of the Committee were not cheering. I will tell the right hon. Gentleman why I was not cheering. I wanted, first, to see of what this surplus consisted. I say at once that we on this side of the Committee are just as pleased as hon. Members opposite that there should be a financial surplus in the present state of national affairs. There is no division among us on that. But we must see what that surplus is. When the right hon. Gentleman went on to explain the nature of the surplus I think we all felt that we were right to be a little silent until we had examined the matter. It may be, perhaps, that some of his hon. Friends behind him were unwise to be so exuberant in their enthusiasm, because the right hon. Gentleman himself was rightly conservative in his handling of this surplus. It was not a revenue surplus at all; it was a windfall of a number of items, such as the sale of war stores, and so on. They are very welcome, but they cannot be included in revenue. They are non-recurring items, and, therefore, though they are welcome, they are not matters which can give us great confidence or cause for jubilation, or are any particular evidence of the immediate financial strength of the country at all. They are evidence, however, that there has been some pretty slack accounting here and there, and that people have at last been pulled up who should have been pulled up some time ago.

    I have some observations of a general character to make. The first is about the figures of last year's revenue and expenditure. The right hon. Gentleman took great credit for the fact that the deficit was less than he estimated a year ago. There, again, I must point out that the expansion of receipts was influenced by a number of windfalls. For instance, if I am right, the Budget estimate of about £22 million from miscellaneous receipts, has been more than trebled. The sum of £15 million expected from sundry loans is about doubled. The right hon. Gentleman will not dispute that the question of Income Tax yield was influenced, to some extent, by the volume of money in circulation, and that, when an increased volume of money is accompanied by higher prices, rather than by higher production, that is not a state of affairs which we can be called upon to applaud.

    I will give another example which will appeal to the right hon. Gentleman. Despite the cut in the beer supplies which, I think, he said would cost him £50 million, the Excise receipts have fallen only by £28 million. That, surely, reflects a growing volume of spending power, and is another example also, of too much money chasing too few goods—a problem of which the right hon. Gentleman must assuredly be conscious. So much for the revenue side of the account.

    As regards the expenditure side, I must put one or two questions. Have there really been any economies at all on the expenditure side, or are these reductions in the Estimates to which the right hon. Gentleman referred merely deferments of expenditure because, for one reason or another, it was not possible to carry out the work in the financial year? We would like some further information about this in the course of the Debate. There is another aspect to which I wish to refer, concerning revenue and expenditure, which is of greater significance than anything I have so far said. If the right hon. Gentleman were to take into account all the items of Government expenditure, and not merely those which appear in the revenue returns, the gap between Government receipts and outgoings would not be the £569 million which he talked about, but somewhere about double that figure.

    I arrive at that figure by including the so-called capital expenditure, or the "below the line" expenditure, which amounts to nearly £600 million. That, as the right hon. Gentleman explained, includes E.P.T. refund, housing, war damage payments, Civil Contingency Fund, and so forth. If the right hon. Gentleman replies, as he is entitled to do, that much of this expenditure is truly on capital account and, therefore, ought not to be included in the year's expenditure, I merely comment that these moneys have had to be paid out in this year. More than that, if they are not included on the expenditure side of the account, neither should transitory revenue items like the special receipts which have been referred to this afternoon—sales of war stores and so on—be included on the credit side. I think the total deficit is really larger than the right hon. Gentleman anticipated at the time of his Budget last April.

    With regard to savings certificates, one of the reasons why the Chancellor has had to borrow some money in this last year, though he said he would not have to borrow it, has been the disparity between the net small savings, which totalled about £300 million, and the gross small savings, which totalled about £560 million. I cannot altogether acquit the right hon. Gentleman of some share in the public misunderstanding about the savings campaign. Some of my right hon. Friends and I have supported that campaign. In his last Budget speech the right hon. Gentleman gave £520 million as his target. He was, in fact, giving a gross figure, and not taking account of the certificates which would be cashed, yet he described this gross figure as new money. Of course, as far as savings certificates were concerned, it was not really new money at all. The only new money was the excess of the certificates bought over the encashment of old certificates. I am glad the new return will give a truer picture. But, apart from the shortfall of the savings, there is no doubt that such borrowings as the right hon. Gentleman has had to make from the City have been made necessary by greater outgoings than he anticipated a year ago.

    I wish to say a word about the overseas balance position, because that is the most important question of all which confronts us at this moment. It is true, of course, that the deficit there is smaller than that which the Chancellor anticipated a year ago—it is £400 million instead of £700 million—but the factors which account for that are not at all comforting. First of all, there is the fact that our exports at the early part of the last financial year went ahead fairly well, rather ahead of expectations, but after that the figure began to fall progressively in the autumn and has been falling ever since. Moreover, this year we have got to take account of the effect of the fuel and power cuts on our export figures. I ask the right hon. Gentleman to tell us what the effect is estimated to be. because it is vital to any appreciation of the balance of payments position.

    I fear something else has happened. In 1946, I fear, we have exported in many lines, particularly capital goods, to soft currency countries which have little or nothing to offer in exchange, and to sterling countries which, as a result of our exports to them, merely struck off a proportion of the big debt to them. I offer a striking example which contains a lesson of enduring importance to the right hon. Gentleman and to his Government. I take railway wagons as an example. There is no dispute about our need for railway wagons in this country, nor is there any dispute as to the cry from other lands all over the world for railway wagons. When, in a Debate on this matter just before Easter, I referred to the need for more wagons and equipment for our own railways, the Minister of Fuel and Power replied by a reference to South Africa. He explained, quite rightly, that in South Africa, which was a possible source of supply of coal for us, the limiting factor was transport. He told us that if only we could supply the wagons South Africa might be able to help us with coal. The right hon. Gentleman appeared to think that that was sufficient answer to my suggestion.

    What are the facts? In January and February, 1938, before the war, we exported to South Africa 2,994 wagons, and to India 464. This year we exported in those two months to South Africa, 145 wagons and to India 4,301—infinitely more than before the war. In other words, we sent to South Africa one-thirtieth of the numbers we sent to India, which can offer no contribution towards the solution of this particular problem. That is what we on this side of the House mean when we say that Government planning has not been adequate. I suggest the right hon. Gentleman should look into that. It is an example of where the Government have allowed a situation to develop which is clearly not in our national interest, and will have its effect on the balance of payments which must be the right hon. Gentleman's chief anxiety now.

    Another reason why I think the balance of payments figures look comparatively encouraging at present is because the level of our imports has been so low—7o per cent. of 1938. That is not by any means satisfactory. It means that many industries are short of essential raw materials, that all are working on very narrow margins, that the much abused word "bottleneck" becomes only too true, and, therefore, the reduction of the present deficit in the balance of payments has only been obtained at the expense of results later this year and, I tear in other years. More important is the question, what is to be the rate of expenditure of the American and Canadian Loans this year and next? On that subject we must have some information during this Debate. What will be the effect of the fuel and power shortage on the Government's estimate of the balance of payments? Are we wise in running such considerable favourable balances with these soft currency countries? What is the Government's estimate on making sterling freely convertible in July? That is a matter upon which there are many great anxieties, and I hope the right hon. Gentleman will let us have his views in the course of the Debate.

    There is one other subject to which I must refer because the right hon. Gentleman dealt with it at such length, and I do not wish there to be any doubt as to where my right hon. Friends and l stand in regard to it. That is the question of cheap money. As I said earlier, the right hon. Gentleman spoke as if he were the first who attempted to practise the policy of cheap money. That is not true. His predecessors began it, and the late Mr. Neville Chamberlain began the conversion operation to which I referred. There is no dispute about the desirability of capital being available at relatively cheap rates during a reconstruction period such as that in which we are now living. Any criticism on these benches is that the right hon. Gentleman has pushed too far and too fast with his cheap money policy, and he has been able to sustain it only by the creation of credit on a scale which has done harm to our economy greater than the gain which he has achieved by the saving on the interest rates themselves. That raises the question, is there inflationary pressure, and how bad? The most accurate record, so far as I know, is the Board of Trade wholesale price index, and that stands at 8o per cent. above 1938. That is the measure of the degree of our inflation. I know the right hon. Gentleman will agree that that is sufficiently serious. Its effects are known only too well; they affect our spending power and the balance of our economy. My right hon. Friend the Member for Aldershot (Mr. Lyttelton) dealt with this matter at some length the other day; I shall not repeat his argument, but the right hon. Gentleman did say in reply to my right hon. Friend that the rise in the note circulation had flattened out and that the bank deposits declined. But the decline of bank deposits in February is an annual occurrence, largely in order to meet the tax requirements of the right hon. Gentleman, and they have risen again, I think, by £32,500,000 in this last month. So the right hon. Gentleman's reply did not meet my right hon. Friend's point.

    I do not wish to detain the Committee longer. I conclude with this summing-up of the situation. Despite the changes which the right hon. Gentleman has made in taxation, some of which we welcome, and despite the new impositions, to some of which we shall have to lodge grave objections, the broad position remains that our national expenditure is still far too high. I know perfectly well that a case can be made out for every single item in our national expenditure—it always can—but it is the Chancellor's duty to reduce that burden of expenditure. Today it handicaps us in every way. It handicaps us in our attempts to compete abroad. The first fine careless rapture of the sellers' market is over. We now face stiff competition in foreign markets. Even now the iron and steel industry has not got 100 per cent. of its coal allocation. However great the ingenuity of the right hon. Gentleman, it remains profoundly true that only by a reduction of expenditure can he restore the balance to our economy and prosperity to our industry. It is by that test that, in the long run, this Budget will be judged and it is by its influence on our life that the nation will pronounce on the work which he has done today.

    Ordered: "That the Chairman do report Progress, and ask leave to sit again."—[Mr. Joseph Henderson.]

    Resolutions to be reported Tomorrow; Committee also report Progress; to sit again Tomorrow.

    Regulation Of Payments (General) Order, 1947

    6.59 p.m.

    ; I beg to move,

    "That the Regulation of Payments (General) Order, 1947 (S.R. & O.,1947,No.343),dated 26th February, 1947, a copy of which was presented on 3rd March, be annulled."
    In moving to annul Order No. 343, I should make it clear that I am not in any way attacking the merits of the Order. I do not propose to make any criticism whatsoever of the merits. However, I desire to take this opportunity of objecting to the use, at the commencement of the Order, of the words "all other powers enabling." These words appear in a large proportion of similar orders, and, I believe, have been in use for some time past. But it will be my contention that their use should cease, and I hope to be able to explain my reasons to the House as I proceed. With regard to this particular Order, on 27th March, I asked the Financial Secretary to the Treasury this Question:
    "If he will identify the powers included in the expression all other powers enabling, contained in the Regulation of Payments (General) Order, S.R. amp; 0., 1947, No. 343; why these powers were not specified in the Order; and if he will instruct Departments in future to specify such powers in the explanatory memorandum."
    The Financial Secretary replied:
    "No, Sir. I regret that I have nothing to add to the general explanations which I gave on 18th March last."
    I then asked the Financial Secretary this supplementary question:
    "If the right hon. Gentleman is unable to identify the powers, does it mean that there are no powers, and that the expression referred to in the Question is completely meaningless?"
    The right hon. Gentleman replied:
    "Not necessarily; it may well be, or, on the other hand, it may not. As I tried to explain to the hon. baronet the other day, this is common form, and is put into Orders in order to attract any subordinate powers which may be there, and at some time might be necessary."—[OFFICIAL REPORT, 27th March, 1947; Vol. 435, c. 1404–5.]
    I think this calls for a good deal of comment, because the Financial Secretary used the expression "at some time might be necessary." Surely, if these subordinate powers were required at all, if they were required at any time, they were necessary at the time the Order was made? I think his refusal to identify the powers is rather remarkable. I asked him a perfectly straight forward question. I asked him to identify the powers comprised in the expression "all other powers enabling." I will now read the paragraph in Order 343 in which this expression appears:
    "Now, therefore, the Treasury, in pursuance of their powers under the said Regulations 3c and 5B as having effect by virtue of the Supplies and Services (Transitional Powers) Act, 1945(a), and of all other powers enabling them in that behalf, hereby make the following Order:—"
    Surely, if there are any powers they should be specified? If there are no powers that expression is singularly misleading. For the Financial Secretary to refuse to explain, and not even to explain whether it was an admission of inability or whether it was a refusal, was rather curious. Indeed, when we refer back to his statement on 18th March, which he mentioned in his answer, it is not all clear whether he and his officials know what these powers are and merely decline to specify them, or whether they do not really know at all on what powers they are purporting to rely. On 18th March, in reply to a Question which I asked, the Financial Secretary said:
    "The use of these words is a harmless device, and they are necessary to catch up any other powers which may be there. They do no harm; they have been in use since 1862, I think, and I am sure that will appeal to the hon. Baronet."
    I then asked:
    "Without wishing to discourage the right hon. Gentleman's respect for precedent, is not the present situation entirely unprecedented in that we are now virtually being governed by Statutory Orders and, therefore, we ought to be far more fastidious as to their form?"
    The Financial Secretary replied:
    "No, Sir, that is not the position at all. In so far as these Orders refer to Statutes, the Statutes are definitely specified. This is simply a device to catch up any other enabling points or measures which might necessarily be brought in."
    Again, I cannot understand what he means by "which might necessarily be brought in." Surely, they were necessary when the Order was made, otherwise they would never have been necessary at all. I then asked him:
    "Is it not the duty of the Ministers and the draftsmen to know what powers they are intending to exercise and to give the necessary information in the Order?"
    He replied:
    "That is the case. They know very well …"
    Surely, if that is so, and they know what these powers are, when I ask for identification I am entitled to have it. It is a very curious position that when a Member of this House asks a relevant Question about an order which has been made by the Treasury, and asks the Financial Secretary to state the powers upon which he relies, which he says are well known to the draftsmen, the Member cannot get a clear-cut answer. The Financial Secretary went on:
    "Ninety-nine times out of 100 there are no other supporting Regulations or powers within the parent Act which need be included.''—[OFFICIAL REPORT, 18th March, 5947; Vol. 435, c. 196–8.]
    If that is correct, apparently these words "all other powers enabling" are inserted unnecessarily 99 times in order to save the trouble of specifying the powers in the hundredth case. Surely, any draftsman proceeding to draft an order must first of all consider what powers are at his disposal. Surely, he can be in no doubt. If that is so, if the draftsman knows the powers he is proposing to exercise, I cannot see how there can be any difficulty whatsoever in giving that information in the order. If anyone affected by the order, or his legal advisers, wishes to consider whether or not the order is within the scope of the Minister's powers, and wishes to consider whether he has a defence of ultra vires, then his task in deciding whether or not the order is within the powers should not be made more difficult. He is entitled to have the powers set forth clearly in the order so that he or his advisers can more easily come to a conclusion. It is not fair to expect them to wait until perhaps they get before the court to find that there is some remote and unexpected power on which the Minister has relied, and of which they were unaware.

    With regard to Order 343, I again wish to ask the right hon. Gentleman if he will now, notwithstanding his previous refusal, tell me whether the words "all other powers enabling" have any meaning, because if there are no other powers the presence of these words is misleading. If, on the other hand, these words have meaning, are the powers statutory powers, or are they prerogative powers? Will he give that information? If they are statutory powers, will he give a perfectly clear statement of their origin? I know that he will rely, as he has relied before, on precedent, and point out that the use of those words has been customary for quite a long time in the past. I do not dispute that, nor do I dispute that their use is quite common. But at this time, when the use of statutory orders is not only much more frequent than in the past, but also affects the lives of the people of this country in far greater detail and in far more important direc- Lions than in the past, it is, I submit, the duty of this House to have much closer regard to the drafting of the orders than has been considered necessary before.

    I would also remind the House that the Select Committee on Statutory Rules and Orders has to consider these powers, and in particular it is the obligation of that Committee to report to the House any unusual or unexpected use of a statutory power. That Committee cannot possibly determine whether the use of a statutory power is unusual or unexpected unless they are clearly able to identify the power. Unless the Minister is prepared to state clearly in the order upon what powers he relies, the work of the Select Committee is being made unnecessarily difficult. I feel that this is a matter which perhaps is more important than might appear at first sight. It may be quite easy for people to say, "This is common form, it is in common usage and has been in use for a long time past, therefore why not let it go on?" But I would say again that the present use which is being made of statutory instruments by the Government is quite unusual. The Statutes which are being enacted are really in skeleton form; the real powers are being exercised through statutory instruments. In my submission, therefore, it is the duty of the House to have the most meticulous regard to the drafting of these statutory instruments.

    7.13 p.m.

    I beg to second the Motion.

    It is because of my own experience in a type of business which is governed in many of its phases by these statutory rules and orders, which are now coming more and more into use in the regulation of our lives, that I feel it is necessary to have a clear expression of the statutory powers tinder which these orders become law. One is rather reminded of a man who has caught two or three fish on a line at the same time, and sweeps the whole lot into a landing net. These wide words, "all other powers enabling," are put there just to fill up any possible loop-hole, but we have got to the stage in legislation and in the use of statutory rules and orders when we must be more particular to set out the actual authority from where the orders derive. I hope that as a result of this Debate we shall receive an assurance from the Financial Secretary that this matter will be gone into, because it should not involve any hardship: After all, if an order is tabled, the first question that should be gone into is, what is the authority for the order? Surely, therefore, something could be inserted to give that detail, and there should be no need for anything further.

    As my hon. Friend has said, reference has been made to the fact that this is common form. It may be common form, but I submit that it is bad form. It is not quite fair to those who are governed by them to put out orders including that phrase. It is our duty to guide the people and govern them wisely, and not to produce orders that may in fact incriminate. It is therefore terribly important that the phrasing of orders shall be such that any one who wishes to look up the authority for them shall find a reference to that authority in the title. For these reasons, and from my own experience in dealing with statutory rules and orders, I have pleasure in seconding the Motion.

    7.17 p.m.

    I do not want to take up very much of the time of the House on this matter, but I have heard this identical argument put before, so far as it is a general argument applied to all these statutory rules and orders. I have always refrained from seeking to intervene because these Debates are apt to take place late at night, and I have not wanted to keep the House long at such a time. If the hon. Gentleman who has put this forward will forgive me for saying so, it really is nonsense. The position as I understand it is this. Government Departments often have to make orders, but I do not suppose that any Department will ever make an order without knowing that it has at least one definite statutory authority to cover what it wants to do. Normally, in every preamble—if that is the right word—it states one, and sometimes two or three definite statutory authorities on which it is acting, and then adds words more or less to the effect, "all other powers there unto enabling." That, of course, is a general sweep-up clause in case there is some other authority which supports the rule-making body.

    The same thing is seen in conveyancing. If the hon. Baronet were dealing in land and employed a solicitor, and if the solicitor left out words something like those and it was found afterwards that if he had put them in it would have saved a bit of an estate or possibly a sum of money, the hon. Baronet would complain bitterly to his solicitor for having left them out. Ordinarily speaking, when you come to look for the authority, it is the authority expressly given, and the safeguarding words are never actually needed, but suppose you get some particularly ingenious person challenging the authority of a Government Department. That has almost become one of our major public popular sports, and people hire lawyers to challenge this, that and the other. We have a very complex system of law in this country. I wish we had not; although I make money out of it, I still wish we had not, because it would be better if we had a simpler system. If these words were left out, and it were suggested that an order had gone a little beyond this, that or the other authority, a couple of good lawyers could find a way through almost anything. So naturally and inevitably any Government Department or its lawyers would be guilty of a dereliction of their public duty if they did not put in these extra words to safeguard themselves in the one case out of 100.

    Would the hon. and learned Gentleman agree that there is this distinction between the solicitor who is drafting a conveyance and the Minister and his draftsmen who are drafting a statutory order—the solicitor has not made the law, but the Minister and his draftsmen are making the law? They are making a statutory order, and there is no reason at all why they should not make it perfectly clear and explain the powers from which it derives.

    The hon. Baronet has said most of that five times already this afternoon, but on the point as to whether there is a parallel or not, the Minister does not make the law any more than the solicitor. The Minister is making a bit of law which he has to base on existing law, and, as I say, he would be very foolish, he would be neglecting, not the private duty of a solicitor but the public duty of a Minister, if he did not put in words like that to safeguard himself. When you get an ingenious person who goes to a solicitor and says he can make himself or keep himself richer, or make the country or keep it poorer if he chal- lenges a particular order, the solicitor says, "Here are the saving words; you will have to look at the prerogative and at other Statutes to see if you can really get round it." The solicitor will say that this country is not so badly governed that a person can go into court and say that if these words had been put in he would have been defeated, but because they have not been put in he can go right through the order and defeat the public. To suggest that the Government should withdraw these words is like suggesting to one's enemies on the battlefield that they should first withdraw their bullets before starting to fight.

    I do not need to urge the Government not to withdraw the words; I am quite sure they would not do anything so foolish. Of course, I sympathise with those people who want to defeat the operation of Government and who want to be told where the authority lies, and I am perfectly certain that no Department, drafting one of these orders, would leave out or fail to mention any specific Statute which gave them the power. Any grievance on that point is therefore beside the point. I do not want to say anything exacerbating, but as far as the general argument is concerned it has now been put three times in the House—which is twice, and possibly three times, too often.

    7.22 p.m.

    The hon. Baronet has raised this matter, as my hon. and learned Friend the Member for North Hammersmith (Mr. Pritt) has said, on more than one occasion, though I think that up to now the occasions on which he has raised it have been at Question time and it has not been as easy as it will now be to put to him the other point of view. The Order to which he takes exception is, as he and the House know, a regulation to make changes in the Payments (General) Order, 1947, which deals with exchange control. This Order is a loosening of the regulations. If we take the words to which the hon. Gentleman has referred, I should say that he has no ground for complaint. Suppose we are increasing, as he asserts we are, the powers at our disposal. This would in fact mean that instead of tightening the orders that exist or increasing the burdens on the individual, we are loosening up. I under- stand that the ground of his objection to the words

    "all other powers enabling"
    is that if there are no other powers the words become meaningless, and that if additional powers are there they should be caught up and embodied in the Order.

    I said that if no other powers were involved the words are not only meaningless but actually misleading.

    I accept the correction. Nevertheless, I think I am right in saying that the hon. Member's main contention is that if there are no other powers the words are meaningless. He now says that they are in addition misleading, and that if there are additional powers they should be embodied in the Order so that people would know what the powers were. I hope I have now got the hon. Gentleman's argument correctly.

    It may surprise the hon. Gentleman to learn that we need not use the phrase "all other powers enabling" at We need not put in the other part of the sentence of which this phrase forms a part. The Order would be quite valid, I am advised, if we simply said:
    "Now, therefore, the Treasury hereby make the following Order:"
    We believe it is customary and necessary to give the reader of these orders some idea of the Act or regulation under which the order is made, because the public have a. right to know to what enactment the Treasury, in this case, went in order to get its authority to make the order.

    Might I answer that point? I entirely agree that the public should know. I say that they should not only know the principal Act but the other Acts upon which the Treasury rely.

    I will come to that point, if the hon. Baronet will allow me to do so. He may recollect that I stated only a few moments ago that that was one of his objections. I will try to answer it as well as the other points which he made. The point I am making now is that the words to which I have referred are not essential. The main enactment is put into this Order so that the public should know the main authority to which the Department making the Order has gone. The hon. Gentleman now says that they should also add any other enactment which they desire to call in aid.

    If we did that it would often mean giving a long list of the enactments which might possibly have a bearing on the Order. As he himself has said, this practice goes back to 1862, or probably much farther back than that, as a way of referring to enactments to which a Department has gone. By adding these omnibus words in order to catch up any other enabling enactment which might be essential to validate the Order, the public are informed and not mystified, and the Department are covered in every eventuality. In answer to a query the other day I indicated that sometimes there is no other enactment to which these words would apply, although they are put in. I now have to tell the hon. Gentleman that very often there is another enactment—and sometimes more than one—which it is desired to include. There is, for example, the Interpretation Act, 1889, which it is very often essential to include.

    This particular Order is based on powers given to the Treasury under Regulations 3C and 5B of the Defence (Finance) Regulations, 1939. It revokes, as the hon. Member will see from Article 4, the Regulation of Payments (General) Order, 1946, but that power to revoke is not in any way included in Regulations 3C and 5B. The power to revoke an Order is found in Regulation 98 of the Defence (General) Regulations as applied for the purposes of the Defence (Finance) Regulations by Regulation 9 (1) of the Defence (Finance) Regulations. As far as this Order is concerned it is desirable therefore to include the words to which the hon. Gentleman takes exception.

    I ought to add that there is another reason why it is desirable to include these words. The power to make this Order is a continuing one—that is, once used, the poser does not lapse. In other words, we include the words to which the hon. Gentleman objects, in order to show that the order, like many of these orders, attracts the provisions of Subsection (I) of Section 32 of the Interpretation Act, 1889, as applied by Regulation 99B of the Defence (General) Regulations, 1939. If we began to put all these references into these Orders, the general public would be no wiser. On the contrary, they would become very muddled. A great deal of fun would be made of the orders—even more fun than is now made of the legal tangled phraseology of many of them.

    Surely the general public or their legal advisers would have the advantage that they would know that no powers were relied upon which were outside the list. The right hon. Gentleman said that it would be necessary, perhaps, to have a long list of powers which might have some bearing on the Order. That is not the point at all. All I am asking is that the powers should be cited on which the Order is made. I am not asking for something which might have some bearing on the Order. I am merely asking that those powers should be cited under which the Order was made.

    That is exactly what we do. If the hon. Baronet turns to page 1 of the Order he will see that we refer specifically to Regulations 3C and 5B of the Defence (Finance) Regulations, 1939. Those two Regulations are the meat of the Order, and the others are subsidiary. That is what I am trying to point out to the hon. Baronet. These others could be included, but there is no point in including them because they are quite subsidiary. At one time draftsmen were not sure whether Berwick-upon-Tweed was in England or not. If we included the words "all powers enabling," so far as the courts and the purists are concerned that would solve the difficulty. It would catch up an enactment which was passed years ago which put it beyond any doubt, whether Berwick-upon-Tweed was to be considered for the purpose of certain Acts of Parliament to be in England or in Scotland.

    I assure the hon. Baronet that these words are essential and that in very many cases there are subsidiary powers, very often minor in character, which ought to be included and which help the lawyer to construe the Order. If there are no other powers it does not mean that the mere inclusion of the words creates them. As my hon. and learned Friend the Member for North Hammersmith pointed out, we cannot make new law by an order of this kind. All that we can do under powers conferred by Act of Parliament is to make certain regulations under powers which have already been given. Whether or not those words are there, additional power is not given. I am rather surprised that this matter should be raised. The hon. Baronet has been in this House for more than 12 years and, so far as I know, and he will correct me if I am wrong, it is only quite recently that he has begun to raise this matter in the House, first at Question time and now by this Prayer.

    I think the words are rather nice. They are sonorous. I cannot see how anybody could object to them particularly as, at the worst, they are harmless and, at the best, they avoid a lot of technical language in statutory rules and orders. After all, that is the real reason for putting them there.

    Would the right hon. Gentleman not agree that, rather than have a nice-sounding rounded phrase, it is far better to have the exact authority from which an Order derives its power? That is what we want instead of a woolly sort of language that does not define from what the power is derived.

    I will repeat what I said a few moments ago in reply to the hon. Baronet. This Order as drafted gives the main regulations under an enactment to which attention should be directed. The words about which complaint has been made are there in order to catch up subsidiary enactments which really have nothing whatever to do with the ordinary public but simply put the thing completely beyond doubt. As I indicated, it is to put it within one of the Sections of the Interpretation Act of 1889 and certain other enactments which might apply. For example, under Article 4, which revokes an earlier Regulation, it carries us back to Regulation 98 of the Defence (General) Regulations. Therefore, there is every reason why it should be there and why normally it should be in all enactments.

    The right hon. Gentleman says that the words are there to put the matter beyond doubt. It does not put the individual who has to study the Order beyond doubt, because he does not know what is comprised in the expression "all other powers enabling." He does not know whether anything or everything is comprised in that expression.

    I am afraid that I have not yet got my point over to the hon. Baronet. All he is concerned with is what is in this Statutory Rule and Order. The whole of the words about which he is complaining are words which relate to authority for what is in the Order. Therefore, if an individual comes to this Order to see whether he is within or without the law, to find whether there is something which he ought to do or ought not to do, it will be in the Order. The hon. Baronet is not complaining that the words are obscure, though often I am afraid that they are in these orders. His contention is that the powers under which the Order is made should be set out at length. I have said, and I repeat, that the main powers under which the Order is made are set out, and it is in order to catch up any subsidiary powers that there may be, and which should have been included, that it is phrased in this way. Sometimes when these orders are drafted the officials concerned have not the time to go back over years and years of enactments to make sure that, perhaps in some obscure Act, there was something which might be included. It does not alter the fact or put the individual who comes under an order under a greater or lesser degree of duress—if that is the correct word to use—if these words are or are not included. That is the point which I am trying to get over to the hon. Baronet I do not know that I can say any more.

    I think I have shown quite definitely that, so far as this Order is concerned, the words are necessary. The alternative would be to put in a long-winded phrase Instead of the paragraph which says:
    "Now, therefore, the Treasury, in pursuance of their powers under the said Regulations 3C and 5B as having effect by virtue of the Supplies and Services (Transitional Powers) Act, 1945(a), and of all other powers enabling them in that behalf, hereby make the following Order: —"
    if we did what the hon. Baronet wants us to do, we should have to make that sentence run something like this;
    "Now, therefore, the Treasury, in pursuance of their powers under the said Regulations 3C and 5B as having effect by virtue of the Supplies and Services (Transitional Powers) Act, 1945, of Regulation 98 of the Defence (General) Regulations, 2939, as applied by Regulation 9 of the Defence (Finance) Regulations, 2939, and as having effect as aforesaid, and of subsection (1) of Section 32 of the Interpretation Act of 1889, as applied by Regulation 99B of the Defence (General) Regulations, 1939, as having effect as aforesaid, hereby make the following Order: —"
    I think that on reflection hon. Members will see that what I am saying is correct. My contention is that these words which have been in use for many years and mention the chief enactment under which the new powers are taken are better than that long rigmarole of subsidiary Sections in obscure Acts, many of which deal with interpretations of words and areas and are of no use to anybody. The purpose is just as well performed by what I think are rather beautiful words:
    "…all other powers enabling."

    7·41 p.m.

    My apology for prolonging this discussion is that I really think that the subject is a bit deeper than the Financial Secretary has given the House to understand. This Prayer was not put down lightly merely to provoke a little talk at the conclusion of the Debate on the Budget. It was put down because for a long time some of us have felt that the use of this expression—not only in an order of this nature but in other publications and orders issued by the Crown, into which I will not go because it would be irrelevant to the present discussion—is a mere cloak, as the Financial Secretary has practically admitted, for a civil servant who has not the time to look up what his powers are, to enable him to construct an order which, on the face of it, looks genuine, but which leaves serious doubt as to what is intended by that expression.

    Take the case of a subject who complains that an order is ultra vires. He goes to his lawyer and brings an action in the High Court to declare one of these orders ultra vires. All the order has stated is that it purports to be an order made by His Majesty or by the Executive under a certain Statute. The subject may be perfectly satisfied and his legal advisers may be satisfied, that in fact with regard to that Statute the order is ultra vires, and the court may come to that conclusion. At the conclusion of the argument the court would turn to the Attorney-General or whoever may be appearing for the Crown, and say, "Mr. So-and-so, I cannot see under what powers this order has been issued." Then the Crown would have to produce the various statutes or odd little bits of power which the Financial Secretary says they are endeavouring to catch up. These bits of power reposing in the Crown would have to be produced as a justification for an order which vis-à-vis the Statute itself was ultra vires. How much better it would be, instead of leading the subject up the garden path, as one might say, into the law courts, to have an order declared ultra vires which on the face of it was ultra vires

    May I he permitted to ask one question of my hon. Friend? Does he not think that instead of flogging this particular issue, if I may use a vulgarism, his duty is to find out, as an hon. Member of the House, whether the order complies with the powers that are vested in the House, and then to complain if that is wrong, and not to leave it to the public, whoever they may be, to consider the long phraseology which has been suggested? Surely that is the duty of the House?

    We are not considering any power vested in the House but the powers that are vested in the Executive. That brings me to the constitutional point I had in mind. The fact that the Financial Secretary says that the use of this expression dates from 1862 does not very greatly impress me. If he had said 1066 or from King Alfred, then as a constitutionalist and a believer in tradition, I should hesitate very much in seeking to upset or criticise a time-honoured expression that had stood the test for a thousand years. But if it dates from 1862, that is not very convincing, because 1862 was not precisely in the best age of jurisprudence in relation to statutory enactments. In 1862 the Government draftsmen hardly visualised the spate of orders that would be produced in a century's time by virtue of the powers reposing in the executive, nor did they exactly appreciate perhaps that the time would come, as it has come, when the powers of the Executive are almost, if not entirely, controlled by statute.

    We are not in the days of Hampden and Ship Money when the King or the Executive could impose taxation and when it required an action taken before the Lord Chief Justice to establish that the King had no power to impose such taxation. The fact that the King had such power does not alter the fact that we are now in the days when the Executive must derive its powers from the statute. When I say the Executive, we know perfectly well that I mean a Government Department. The officials in a Government Department cannot make an order of this nature by invoking or catching up, as the Financial Secretary says, from a misty atmosphere some vague powers that may exist in the Executive. To make an order such as this, these powers must be derived from an enabling Measure, and if it is necessary to state the various enabling Measures and if there are half a dozen or 10 or 12 of them, why not say so and state them and let the subject and his lawyer understand in advance on exactly what powers the Executive seeks to act.

    The Financial Secretary first of all indicated that this expression is used for the benefit of the public. I cannot see how it benefits the public to use a vague expression that requires the employment of a lawyer at vast expense to delve into all the Statutes and discover what kind of other powers may exist, apart from those mentioned. In these modern days of statutory powers, a Government Department must either know its powers or declare itself incompetent. It is not sufficient to say that they are taken up with other things and have not got the time to find out what their powers are and that therefore some vague generality about catching up powers that may exist in the atmosphere, as it were, is enough to justify the publication of an order.

    As the Financial Secretary says, it is not in fact necessary to state what his powers are. The order might be completely valid without stating from what statute it was derived, but in these modern days it is the practice to define one's powers, and the fact that he states one statute only makes it more abundantly clear that he should go out of his way to state the various authorities, powers and legislation that enabled him to make an order which will bind the subject in a variety of fashions, small or great, that interfere with his private life, and put him in the position of having to consider whether it is possible to contest the validity of such orders in the courts or not. I do not want to flog this. [HON. MEMBERS: "Oh."] We are on a constitutional point. This little precedent dating from 1862 is thought to be justified in the masses of orders which are being turned out and submitted to the public—

    I know I have said it before but I want to rub in the point, just as the point is very often rubbed in, in order to make people appreciate that it is not an idle or a small point. I invite the Financial Secretary and the Government to consider again the importance of this apparently little point, and not only to take the advice of their Law Officers, but possibly have an inquiry into the use of an expression of this nature, because it offends a constitutional lawyer. It is very easy to say that lawyers understand it, but the point that my hon. Friend and I are putting comes from our legal hearts. It is offensive, it offends any constitutional lawyer who likes to see—

    I am sorry to interrupt, but it would help us considerably if the hon. Gentleman could name one constitutional lawyer that this Order, or orders like it, apparently affronts.

    The question has not been raised. The right hon. Gentleman says that this phrase is being used bit by bit in order after order and, as so often happens, we are now confronted with its becoming a stock phrase to justify the production of Orders in Council, ministerial orders, and so forth in cases where those who devise the order have either not had the time or taken the trouble to ascertain precisely what are their powers. Either the expression is useless and unnecessary; if so, leave it out; but, if it is necessary to state your powers, then constitutionally the powers should be stated. I do not want to be repetitive but we have reached the day when the powers of the Executive are derived almost if not entirely, from statute, and when we are giving vast powers to the Executive to produce orders day by day and in the way we know. It is surely important, therefore, from the constitutional point of view, that they should know from whence they derive their powers.

    I must remind non Members of the Rule against wearisome repetition. Mr. Smith.

    7·53 P.m.

    I suspect that my hon. Friend the Member for Sutton Coldfield (Sir J. Mellor) is not wholly popular with hon. Gentlemen and right hon. Gentlemen opposite because of his persistence in praying against these statutory rules and orders; and he may not, for all I know to the contrary—and of course you appreciate, Mr. Speaker, that I have no inside information on the subject—even enthuse the Chair. But as one who is condemned to study, and to study very closely, every statutory rule and order which is issued, I can say that the standard of draftsmanship is steadily improving in the various Government Departments. The Departments realise today that they have not only to run the gauntlet of the scrutiny of the Select Committee on Statutory Rules and Orders, which can only, of course, deal with the form and presentation of an order, but they also have to run the gauntlet of the informed criticism of what I might call the inveterate prayers, whose privilege it is to deal with the merits. The result is that fewer orders are being reported to the House, and fewer orders are being prayed against. We are slowly but inexorably educating our masters. In this particular Order the offending phrase is:

    "And of all other powers enabling them"—
    That is to say, the Treasury—
    "in that behalf.…"
    The objection to it is that it is one of those slovenly, all-embracing phrases slipped in by the draftsman in case, like the White Knight in "Alice Through the Looking Glass," he may need it—a preparation for some eventuality which might have been foreseen, but, in fact, was not. How can any one administering this Statutory Rule and Order know what other powers the Treasury possess enabling them in this behalf?" Because the powers are not specified in the Compensation of Displaced Officers (War Service) Act, 1945. The offending phrase itself does not appear in that Act; I have hunted through it. Where should one turn for enlightenment? I do not think the answer which the right hon. Gentleman the Financial Secretary gave to my hon. Friend the Member for Sutton Coldfield on 27th March was particularly enlightening, and when he was pressed as to this particular point he said, "It may be; it may not be." That reminds me of the delightful game we all played as children, "He loves me; he loves me not," but, Sir, that is not a pastime for adults, and I demand to know what are these mysterious powers which the Treasury has called to its aid.

    If we turn to the Supplies and Services (Transitional Powers) Act, 1945, which is the grandfather of the Act I have previously quoted and the remote ancestor pf this little Statutory Order, we find that the offending phrase does not appear in that Act either. This Act of 1945 superseded the Defence Finance Regulation Act of 1939, and, as it was a complete supercession, and stated to be so, I have not extended my researches so far as the 1939 Act. It is quite obvious, however, that the disease which has manifested itself in this baby Statutory Order 343 of 1947 is not truly hereditary. The phrase has been inserted as a sort of ministerial umbrella in regard to this particular Statutory Rule and Order. Now I contend that that is peculiarly inappropriate in a statutory rule and order, because, if you have omitted some power from one order which you may find you need, you can always and easily amend your position by issuing another order inserting it, and so reinforcing it. And, while omnibus phrases of this kind are all very well in the legitimate legislation which has to be passed by both Houses of Parliament, and must therefore naturally be as ambiguous as possible, I contend that it is extremely undesirable that they should find their way into this sort of bastard legislation by statutory rule and order, which, if it is to be tolerated at all, must be definite, simple and precise.

    I contend that legislation by statutory rule and order should never be a Garden of Eden for the serpentine legal mind which always has an arrière-pensée or a conceivable eventuality in every coil. The reason why this phrase falls to be used, so I am told, is because it has been used intermittently elsewhere since 1862. Tory though I am, that reason seems inadequate to me. I take no particular pride in wearing, in these austere days, clothes which were made for me in 1936, when my figure had not suffered from the ministrations of successive Ministers of Food. And to be told that a thing must be because it has been since 1862, seems to me an example of the perfect non sequitur.

    I remember, as a boy, being shown a giant tortoise which I was told had been a contemporary of my ancestor King Charles the Second. When I saw it, I was told that it was well over 30o years old, and I was exhorted to consider the mercy of the Creator in allowing this cumbrous creature to have a life span five times the length of that allotted to me. Now, I am an inveterate lover of animals, but I have never felt more inclined to destroy any living thing than that hoary and venerable reptile. That is exactly how I feel about the foolish phrase in this Order, and I hope the House will join with us in chopping off its nasty head.

    8.1 p.m.

    I came into the House this evening to listen and learn, and I have learned. I heard the Financial Secretary make a speech in which he repeated himself three times. Three times he gave us the words which would have to be used if he had not used the omnibus clause that is put down here. I suggest that it would be an excellent thing to use the words which he quoted to us. I have not the advantage of being a lawyer, but I think it would be possible by diligence to go through the statutes and find out what is meant by these words. All of us in this House have gone through various Acts to find out to what this or that refers. It would be very much easier for some of the Financial Secretary's staff to do that work, when they make such an Order, and to put down the number and Sections of Acts to which they refer. They have the whole Library at their command, and it has been suggested that civil servants have the time also. Then such a matter would be made clear to the laymen and people who have to obey these Orders. After all, the British subject wants to obey Orders—

    What I would like the hon. Member to do is to answer this—I failed to get an answer out of the hon. Baronet the Member for Sutton Coldfield (Sir J. Mellor). Why is it that, although both of them have been in the House a great many years, and have seen these words in Statutory Rules and Orders, they have not until this Government came into office, and then only recently, begun to raise questions of this kind?

    I certainly could not answer for the hon. Baronet; I can only answer for myself. I am not perfect and do not pretend to have understood every Bill which has become an Act since I became a Member of Parliament. But I listened to the Financial Secretary, whose statement I treat with the greatest respect, and I think the words he mentioned would be very much better than those in the omnibus clause in the order. It reminds me of "A Child's Guide to Knowledge." I can remember when I was learning at a kindergarten school we were told about exports to various countries, and in each case, whether it was the Argentine, India or anywhere, the paragraph ended "and very many other useful things." The omnibus clause is one of the other useful things. I ask the Financial Secretary in future to cite exactly what is referred to in each such order, and then it will be very much easier for us to obey the orders which he makes.

    Question put, and negatived.

    Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Collindridge.]

    Most-Favoured-Nation Clause

    8.7 p.m.

    I rise to make what is in effect a postscript to the recent Debate on the International Trade Conference at Geneva. If I had had the good fortune to catch the eye of Mr. Speaker on that occasion, I would have found some other subject for tonight's Adjournment. I want to raise the question of the most-favoured-nation clause in commercial treaties in connection with the attempts of the conference to find ways of breaking down and lowering obstacles to international trade. In doing so I am in fact reviving a project which was much discussed last time these subjects were tackled at Geneva. For it should not be forgotten that after the first world war very determined efforts were made, culminating in the London Monetary and Economic Conference in 1933, and passing via the Geneva Economic Conference in 1927, to find answers to the many problems with which the present conference at Geneva is now wrestling.

    I think it is perhaps appropriate that I should invoke the experience of the last attempt to solve these problems at Geneva and to ask my hon. and right hon. Friends to bear that experience in mind when facing those problems today. The League of Nations Economic Committee, a very authoritative body which is quoted, I note, several times in the preparatory report of the Geneva Conference, came to the conclusion that the greatest single formal obstacle to the reduction of international trade barriers was the most-favoured-nation clause in commercial treaties in its present form, because it leaves only two ways open to a reduction of trade barriers. One is that the whole community of States that have commercial treaties with each other, including the most-favoured-nation clause, agree on certain specific measures of reduction. In practice this procedure was found to be impossibly cumbrous and complicated, and it did not prove possible to achieve universal agreement even on modest measures of reduction. The other is that a group of States decide to go at one bound all the way to a customs union and Free Trade. In that case, the most-favoured-nation clause does not apply as an obstacle. But that proved too radical. States were not prepared to travel as far and fast as that.

    The most practical method was barred under the existing form of the most-favoured-nation clause. The most practical method was for groups of States to accord each other mutual preferences without going all the way to Free Trade, and without attempting to achieve agreement with the rest of the international community. For instance, before the war, there were two attempts. One was the attempt of the three Baltic States, and the other the better known case of the Lowlands, Belgium and Holland, and the three Scandinavian countries, to accord each other mutual tariff preferences. But, although these States are low tariff countries, the United States which had a very high tariff, and still has, stepped in and said, "Oh, no, you have undertaken commercial treaties with us according us most-favoured-nation treatment, and, therefore, you cannot discriminate against us by according each other special low rates. You must give us the same rates as you give each other," because, in effect, the United States position was that the American tariff did not discriminate against anybody. All it did was to exclude everybody. In view of these circumstances, the League Economic Committee, after giving careful and prolonged study to this problem, advocated the revision of the most-favoured-nationclause, and I do not think it is any secret in this House that the chief author of that proposal was my right hon. Friend the senior Burgess for Oxford University (Sir A. Salter), who was at that time my senior colleague in the Secretariat of the League of Nations.

    The proposal of the League Economic Committee was that the right of States should be recognised, under the revised most-favoured-nation clause, to accord each other mutual tariff preferences. A group of States would have the right to agree to grant each other special cut rates, provided that in the process of arriving at these mutual preferences, they did not raise their existing tariffs against the rest of the world; provided that any outside State could benefit by these preferential rates on the basis of full reciprocity; and provided, finally, that any outside State, the tariffs of which were already as low as the cut rates within the group, could unconditionally benefit by those cut rates. My proposal is that the Government should consider the advisability of reviving this idea and injecting it into the Geneva discussions, if not now, at the present preliminary conference, then at any rate when the full conference meets later to discuss the Charter, as adopted at this meeting—not to shut their minds to, or the door on, this proposal, but to keep it in mind. I believe it has some solid advantages.

    I would go a little further, and propose that we might get in touch with the Dominions, and try to seek agreement with them to make the proposal jointly to the United States, that provided the United States of America would recognise our right to the revised most-favourednation clause in our commercial treaties in the sense indicated, and provided that the United States would accept this revised form of most-favourednation clause in commercial treaties generally, we would, in return, be prepared to recast Imperial Preferences in the form of commercial treaties between the Mother country and the Dominions, based on this revised form of most-favoured-nation clause. From the point of view of the United States and other countries that would have a double benefit. First, we would admit the applicability of the terms of international treaties to the mutual relations of the Dominions and the Mother Country. Secondly, henceforward Imperial Preferences would be open to outside States on the basis of reciprocity. Any State that was prepared to cut its tariffs o correspond to the preferential rates within the Commonwealth and Empire would automatically benefit by those preferential rates.

    How would the Colonies come into this, apart from the Dominions?

    The Colonies would be governed from the Mother Country in this. their status would remain the same as today. They would count in international affairs as an entity with the Mother Country, whereas the Dominions are separate entities in international affairs, at least for most purposes. I will develop that point in a moment. The advantage to ourselves is that we would get rid of the unpopularity and the unhandiness of bargaining on the static basis of Imperial Preferences in their present form. In their present form Imperial Preferences are very unpopular with other countries, for a double reason. In the first place, other countries regard them as a rather clever and successful method of having it both ways. Other countries, felt at the time of the Statute of Westminster, that on the one hand the Dominions became recognised as independent States in international affairs, with independent membership of the League of Nations—today the United Nations—with the right to their own trade treaties, foreign representatives, foreign policies, currencies, flags, and the rest of it.

    But, on the other hand, according to the Statute of Westminster, because the Dominions and the Mother Country acknowledge a common Sovereign, the relations between them are not subject to the terms of international treaties. That is the constitutional reason why we can accord each other mutual preferences without getting into trouble under the most-favoured-nation clause in commercial treaties. The other reason why this arrangement is not very popular in other countries is because it is frankly discriminatory and one sided. No one else, however low their tariffs, can qualify to be included in this preference group.

    These objections fall to the ground the moment we are prepared to recast Imperial Preferences in the form of commercial treaties based on the revised most-favoured-nation clause, and, therefore, open to any outside State that chooses to qualify by reducing its own tariffs to the same degree, with regard to the tariff rates within the Commonwealth and Empire. Moreover, from our point of view, the more preferences we give each other under the revised most-favoured-nation clause, and the more States we include in our system of preferences, the greater lead we are giving to the rest of the world in breaking down tariff barriers and freeing the currents of trade. Whereas Imperial Preferences are regarded as an obstruction, as a form of discrimination, preferences granted on the basis of reciprocity, and, therefore, not open to the charge of discrimination, are in themselves an advance towards Free Trade, and away from existing levels of tariffs. That means that, at a bound, instead of bringing up the rear of the procession as the great obstacle to the lowering of tariff barriers and increasing the flow of international trade, we pass to the head of the procession, and the real obstacle to the opening of the doors to international trade becomes the high tariff system of the United States, which loses the position of the knight-errant of international non-discrimination, and becomes the obstruction.

    That, I think, is a solid moral advantage. It is also a political advantage. It puts us in a strong bargaining position. It means that we can bargain, not only with each other within the Commonwealth, but with outside States. We might, for instance, work for the establishment of a mutual preference group including the countries of Western Europe as well as the members of the Commonwealth. Such a group would include most of the Colonies of the world. As an illustration, looking a little further into the future, if we developed that kind of policy this group could further bargain with the United States, and say that they would be prepared, over a period of years, and by a series of stages, to bring their Colonies under the trusteeship system, and under some form of the open door, with only such measures of discrimination as were recognised by the Trusteeship Council as being in the interests of the native inhabitants.

    In exchange for that, the desire of the United States, a very legitimate desire, to trade with such territories and invest in those territories, could be satisfied to a large degree. The United States could, in return, legitimately be asked to accept further international economic measures of development and control, for instance, as regards oil resources in the Middle East, as regards the Euphrates and Jordan Valley schemes and other similar development and irrigation schemes, under the United Nations Social and Economic Council and a Middle East Reconstruction Commission. These are illustrations of how, if we boldly decide to give a lead away from Imperialism towards organised internationalism, based on equality of status, and within the framework of the United Nations organisation, we can bargain vigorously and effectively for our own legitimate interests, which are not different from the interests of other countries, including not only the Dominions but the countries of Europe and the Middle East. In general, I believe that, by taking this idea into the general complex of ideas for discussion at Geneva, we shall add an element to the situation that will strengthen our position, and will put us in better shape for meeting the trials that are ahead. Those trials are very considerable.

    The matter was touched upon during the Debate on the International Trade Conference, but I should like to underline it. a little further—that the United States is going in for a great export drive. At the end of the war there was a severe tussle within the United States between the advocates of the New Deal, the advocates of measures of planning American economy with a view to raising the standards of consumption and of welfare at home, and those other more anarchic elements, represented by the National Association of Manufacturers, who argued that it was not practical to raise the standards of consumption at home, thereby providing the 6o million jobs that had to be provided unless the United States was to have further unemployment. They said that the way out was to treble American exports as compared with exports before the war. It is that drive that we are already feeling in world affairs—the drive of American big business and capitalism seeking foreign markets, and seeking them by the traditional methods of imperialism.

    There is nothing inherently bad, any more than there is anything that is necessarily good, in this fact that the United States has outgrown isolation, just as the hermit crab outgrows its shell, and is now blundering about the world, backing into China and the Middle East and other parts, and bruising and getting bruised in the process. But it is highly desirable that the fertilising stream of American capital and American trade should be caught up and canalised in some form of international financial and economic irrigation system through the United Nations organisation and its economic and financial and trade and transport machinery. To make that fully effective it is necessary to introduce some form of sluice system. That is one of the directions in which the revised most-favoured-nation clause can play a valuable part, because it would provide a constitutional basis, the legal possibility, so to speak, of establishing, within the general multilateral trading system that we are trying to erect at Geneva, regional multilateral sub-systems which would co-ordinate the planned economies of the States concerned, and direct their trading activities and their economic activities, harnessing them to the attainment of social objectives of which the securing of full employment would be the chief.

    Such policies would be much easier to pursue if we could win international recognition for a revised form of the most-favoured-nation clause, because it would tend to introduce precisely that element of elasticity that we require. We require it in other respects, too, such as through the recognition of the rights of State trading organisations and establishing a connection between securing full employment at home and freeing the channels of international trade. On those two aspects, I believe, the Government are fully aware of the situation and are taking care to keep their end up. But I feel that something more should be done to introduce this third element—of dynamic self-defence, if you like—of the revised mostfavoured-nation clause in commercial treaties.

    I would beg the Government to keep an open mind on this matter, to realise that we have to make positive proposals, that we have to be hospitable to new ideas, that we have to be very active, and not be afraid of giving a lead, if we are to keep our end up in the very hard times that are ahead; and that we must not despise the possibility of gaining many friends by putting forward a proposal which is not only in our own interest and in the interests of the Dominions, but would be emphatically welcomed by many of the States meeting at Geneva, who are worried, as I am, about what is to happen to them when the full flood of American trade breaks on them, unless they have some kind of sluice system to break up that flood, temper its flow, and help to direct it into channels where it will not merely swamp and drown the countryside, but where it will fertilise and revive a parched world.

    8.26 p.m.

    I have very much pleasure in supporting the proposal so eloquently expressed by my hon. Friend the Member for Gateshead (Mr. Zilliacus), with whom I am very rarely in agreement. On this occasion I am glad to be beside him. There is no object in overseas trade unless it subserves the purpose of getting into one's country raw materials and food, or diversifying consumption, thereby raising the standard of living. It seems to me that the essence of my hon. Friend's case consists in this—that overseas trade is nothing whatever, unless it is an exchange of goods for goods as opposed to an exchange of goods for money or gold-based currencies. I am a very strong supporter of Imperial Preference, but I have always felt that it was open to the objection from some countries, which do not happen to be British, that, as my hon. Friend said, it was a way of keeping something good in the family. I believe that if we can get the whole idea of the most-favoured-nation clause modified in the way that my hon. Friend has suggested we should be able to do a very important thing. We should be able—and I commend this to the Minister who is to reply—to raise at Geneva in the forthcoming weeks this essential issue, that unless overseas trade is an exchange of goods far goods, it is nothing whatever. That wants ventilating and making clear, and if we can enlarge the number of nations prepared to exchange goods and services for goods and services we shall be doing good.

    As I understand it, the American export drive, to which my hon. Friend has referred, is nothing more than a device on the part of those responsible for American capitalism to export their own unemployment. That is what they want 'to do. That is a thing in which I am not interested. That does not commend itself to me. I am not interested in extending the area of free trade in the world merely to enable the Americans to get rid of unemployment which exists simply because they will not allow the American working men to have consuming power more commensurate with the productive power of their country. I am not interested in that in the least. I sug- gest that my hon. Friend's proposal is entirely good. There is nothing objectionable in it. I hope that the Minister will see his way to accept the proposal, and will take the necessary steps to get this idea ventilated at Geneva.

    8.29 p.m.

    The hon. Member for Gateshead (Mr. Zilliacus) knows that I always listen with very great interest to anything he says, because of the cordial relations that exist between us, and that on most occasions we find ourselves in agreement in regard to international matters. But I should like to look very carefully at this proposal. I see it as an ideal proposal in an ideal world, and I have no doubt that it is the proper thing to do if the other nations in the world, who are members of the United Nations organisation, are in a position like that of Great Britain. But I want to put some inquiries to know exactly where I am. As I understand the hon. Member's policy, he wants us, in the discussions now taking place at Geneva, to try to get the most-favoured-nation clause inserted in the Agreement. It is suggested that its purpose should be extended by agreement between one nation and another and between our Dominions and ourselves. Here is the United States giving preference to Cuban sugar, and here is Great Britain giving Imperial Preference to West Indian sugar.

    Is it proposed, by means of this clause, that the United States, with its different social system, its different policy with regard to workers, its different democratic system, is to be asked to sign an agreement with us under the United Nations organisation giving the most-favoured-nation treatment to the Caribbean sugar which it is now taking as a surplus after giving the Cuban sugar a special preference over and above everything else? If they did that, its effect would be to handicap the sugar trade and the relations between the British Caribbean area, Great Britain and the rest of the world, as compared with the Cuban sugar vis-a-vis the United States. The problem is not so easy, but that is what I understand my hon. Friend the Member for Gateshead to be suggesting.

    If my hon. Friend will permit me, may I say that acceptance of the most-favoured-nation clause does not mean that, if one State is prepared to grant a low tariff on one subject it thereby automatically qualifies for receiving the same preferential tariff from a group of States. If we are to benefit by a system of preferences within a group of States, we shall have a whole range of preferential tariffs on which to qualify to benefit by those preferential rates.

    The hon. Gentleman seems to be making another speech.

    I do not think it is a practicable proposition at the moment in the present state of the world, and I think one has to be careful in arguing about the most-favoured-nation clause being put into agreements with other countries and the Dominions which might be suitable in regard to one particular article but not to all. Some of the islands in the British Colonies are one-crop islands, and they have nothing else. Take the case of St. Kitt's, which lives on sugar and has nothing else. This proposal would affect that particular island, as it would affect all those places which have only one or two crops, unlike Malaya, where they have rubber, sugar, tin and other things. To produce an arrangement under this clause by which they could get their goods accepted elsewhere would be a most difficult proposition.

    Surely, they would be better off than they are going to be under the existing negotiations, when Imperial Preference is about to be eliminated in return for an unspecified reduction in American tariffs?

    My hon. Friend has now made an entirely different statement. We know what is the policy of the British Government. They have made it clear that Imperial Preference is to stand. Whatever agreements are made with America, Imperial Preference is to stand, and the Colonies are to continue to get their specially favoured treatment under the system of Imperial Preference. After all, they are our Colonies, some of them are fairly large, and some are in process of being changed, and some of them are in a period of transition, like Jamaica, which now has self-government. I am a little concerned about this, and, while I would like U.N.O. to try to find some policy, I ask the British Government, in the present state of the world, not to agree to this proposal between different nations with entirely different political and economic systems without very careful consideration, especially in the case of those Colonies which are dependent upon one or two crops. It seems to me to be placing too great a task on the Colonies, and I hope the hon. Gentleman who replies will give us an assurance that this matter would be very carefully considered, not only with the Dominions, but particularly with the Colonies which I have mentioned.

    8.37 p.m.

    The subject which my hon. Friends have raised tonight is, of course, an extremely topical one, since the Geneva Conference is now in full swing, and, in fact, I only returned from Geneva myself last night. I think one interesting thing has already emerged from this Debate. This is probably the first time in the history of this House that we have had the first half of a Debate on Imperial Preference with the Benches opposite entirely denuded, and, but for the arrival of one hon. Gentleman, they would have continued so. I have no doubt that the "Daily Express" will be suitably encouraged by this fact to which I have drawn attention.

    The point raised by the hon. Member for Gateshead (Mr. Zilliacus) is not a new one of course, but I think we have to admit that, if we were able to agree with this proposal on its merits, it would be very difficult to go very far with it. As the hon. Member for Rochdale (Dr. Morgan) has said, it would certainly require very considerable discussion with the Commonwealth countries, and not only the Dominions, with whom we have been in very close consultation throughout, but also with the representatives of the Colonial Governments who are at Geneva and who form part of the United Kingdom delegation. I can assure my hon. Friend that these Governments are being fully consulted in the discussion of all points as they arise and as we go along, from day to day at Geneva.

    So far as the objective which my hon. Friends have set out, I do not think there is anything that divides them from the Government on this question. It is really a question of the best way in which to achieve this objective. The hon. Member for Gateshead suggested that we should be in a strong moral position if we came to an agreement in this way. I am not sure, having discussed this matter now for a number of years, under a different form of economic relationships, that, if we were now to go back upon it, after all the work that has been put in to it and in view of all the hopes which we have had of reaching something suitable, it would not be putting us into the very worst moral position, not only with the United States, but with the Empire countries as well.

    I should like, for a few moments, to deal with the merits of my hon. Friend's proposal, quite apart from that issue. What his plan appears to involve is that we should start off with our present system of Imperial Preference, or something like it, and gradually introduce the foreign countries. Those countries coming in would, on granting similar preferences in their own territories, enjoy the existing preferences. He referred to the fact that, before the war, the League of Nations Economic Committee put forward a proposal on these lines, which dealt particularly with a change in the form of the most-favoured-nation clause. I do not wish to go into the full extent of the report of the League of Nation's Economic Committee, with which my hon. Friend was very familiar long before I was, but I believe that I could quote sections from it which would weaken his argument.

    We have to approach this problem on its merits, rather than on the mere invocation of the support of the League of Nation's Economic Committee. In the past, as my hon. Friend said, a number of schemes have been outlined, similar to the one he has outlined. In so far as they have ever been called upon to define their attitude, the British Government have, in the past, always been hesitant to join this low tariff "club" and to waive their rights in regard to concessions granted by the "club". I think that the real reason is that previous Governments could not agree, any more than could the present Government, to sign what would virtually be a blank cheque, by joining such a low tariff "club". If we adhered to a very limited convention of this type, it would cause trouble in relation to the countries who remained outside, and we should have to terminate the most-favoured-nation treaties with those countries who did not adhere to it. We should have to discontinue taking their goods during the time that they were considering whether to join in the Convention and to carry out its provision. Adherence to a "club" of this kind means discrimination against non-members, which might have far greater disadvantages than advantages.

    Is not the whole point that one would properly desire a discrimination between, on the one hand, those countries which are not prepared to conduct foreign trade on the basis of the exchange of goods for goods, and, on the other, the countries which are so prepared, the United States being one of the former?

    I do not think so. My hon. Friend is very sympathetic about the position between one country and another. What my hon. Friend is now saying is that adherence to the principle enunciated by my hon. Friend the Member for Gateshead is the sole virtue in economic relations. Of course, if we had nothing to put in the place of the suggestion made by my hon. Friend the Member for Gateshead, I would agree that we ought to be giving a lot of active thought to what he is suggesting. But we are, in fact, at the present moment, very far advanced in discussions which aim at introducing a positive system of international economic relationship. One thing already emerging, even at this early stage, from those discussions is the very great difficulty of individual countries, which was touched upon to some extent by my hon. Friend the Member for Rochdale.

    The economic and social conditions of the countries concerned are so different that it would be very difficult indeed to lay down a simple set of rules. It may well be, for instance, that if we were to set down a generalised set of rules suitable for Imperial Preference, they would not be suitable for many of the countries which we should wish to attract into the circle. We are expecting to find that very lengthy discussions will be necessary on the International Trade Organisation at Geneva. At the present time we are initiating discussions, many of them bilateral, between some 17 countries. We hope that, as soon as possible, it will not be 17 countries, but 18, which will be taking part. I am sure that no one will agree with me more on that than my hon. Friend the Member for Gateshead, because' I know that he is as keen as I am that Soviet Russia should join as quickly as possible in the international economic discussions at present going on in Geneva.

    There is also a very serious practical difficulty which we might get into in this connection. This lies in the idea of the reciprocity of benefit, if I may use that phrase, which is an essential feature to adherence to such a clause. My hon. Friend seems to think that adherents to a preferential group would be obliged to reduce their tariffs. Experience has shown that there are very great practical difficulties about any attempt to equate tariff levels for a whole group of countries in this way. One cannot apply general principles to it and measure the average height of a tariff for a whole host of countries. Even if one could, the measurement of a height is not the proper measurement of the protective value of a particular tariff.

    What we are now proposing as a fundamental part of the I.T.O. negotiations is that the participating countries should institute among themselves the kind of system that my hon. Friend is contemplating, a system involving mutual advantageous tariff reductions in relation to specific commodities, and not in a general sense. Having done that on the basis of the 17 countries who, between them, are responsible for about 6o per cent. of the trade of the world, it would apply to any other trading nation who wished to join in. The fact that we are having to do this on a bilateral basis between the countries makes it possible to take into account the countries referred to by my hon. Friend, which would cause most of the difficulty if we went into it on the basis suggested by my hon. Friend the Member for Gateshead. The matter is very similar in the end. We are going to get a group of countries accepting principles for the regulation and expansion of international trade, and the increase in the amount of goods and services traded. Therefore, I think we can claim that there is some justification in saying that the Government are aiming to achieve those results which my hon. Friend has in mind, but the Government are doing it in the only realistic way open to them—by bilateral discussions, and by discussions relating to each individual commodity and to the social and economic condition of the countries taking part.

    As my hon. Friend knows, we are not proposing to give up or substantially to reduce Imperial Preference without, in every case, getting a really worth while quid pro quo. The House will remember what my right hon. and learned Friend said a few days ago in reply to a question about this. He stated that, even if the United States were to reduce their tariff by the full 5o per cent. which they are allowed to do under existing regulations, he would not consider that a sufficient quid pro quo to justify discriminating against the system of Imperial Preference. In what we are doing, we see a possible general reduction of tariffs. It is not so much a question of tariffs as a question of the development of new methods and new rules for the conduct of international trade. I think it would be wrong to look at these proposals purely in terms of tariff reductions, or reductions or eliminations in preferential systems. The important parts of the Charter relate to such matters as the abolition of quantitative restrictions, and the abolition of discrimination which might have very serious effects on the countries concerned. If international trade relations were conducted on the basis of a free-for-all, this country might come out of it very badly.

    I now come to a point which my hon. Friend will consider very important, in view of what he said about canalising the economic power of the United States into the most desirable channels, and that is that the international trade discussions in Geneva are part only of a much wider international economic system which is being worked out stage by stage, very disappointingly slowly in many cases, but it is part of a system including international monetary arrangements, the international fund, and the development of the agricultural and food proposals which have been previously debated in this House. I want to assure my hon. Friends that while we are going on working within the Charter which is now being discussed at Geneva, and, while we hope it is going to lead to a wider and more substantial system than the limited one proposed, should that prove unattainable, our minds, of course, are not closed to any conceivable alternative which would best serve the interests of this country and of the world as a whole.

    Territorial Army Premises (Tenancies)

    8.52 p.m.

    May I ask the House for a few moments to turn its attention from this interesting question of Imperial Preference and international trade to more a human problem, which is attracting a great deal of attention and concern in Islington at the present moment as a result of what is regarded as the heartless attitude of the War Office? I am much indebted to the Financial Secretary to the War Office for having arranged at relatively short notice to be in his place this evening to enable me to raise the matter.

    I refer to the case of some 12 families of tenants of some blocks of flats at Barnsbury Park, in Islington. The landlords of these flats are the Territorial and Auxiliary Forces Association of the County of London. Some few weeks ago the tenants were given notice to quit, and the reason which was given was that the premises were required as married quarters for Service personnel on the reconstitution of the Territorial Army. There is no need for me to remind the House that the housing shortage in Islington, as in all parts of London, is particularly acute at present, and it needs no imagination to picture the plight of the 12 families in these blocks of flats faced with the necessity for finding some alternative accommodation. The War Office made no attempt to provide any alternative facilities. The tenants applied to the Islington borough council as the local housing authority, who told them — and one knows it from one's own experience — that in Islington today there are 15,000 applicants already waiting for housing accommodation, and, as the chairman of the committee told them, there is not, nor is there likely to be, a house suitable or available for a very long time to come. Obviously, persons placed in the position of these 12 families could not be given priority over the large numbers of people who have been waiting for a very long time, and who are existing today in seriously inadequate and overcrowded accommodation.

    At the request of these tenants, I intervened with my right hon. Friend the Secretary of State for War. I had a letter from him, in which he told me that he sympathised very much with these tenants, but he had to house his own people, many of whom are in desperate straits. I was proposing to raise this matter in the House in any event, but it has now become a matter of considerable urgency because yesterday writs were issued in the King's Bench Division of the High Court of Justice against all of these 12 tenants, demanding possession of the premises. I want the House to consider the position which arises. These are families, where in most cases the male members have served in His Majesty's Forces either in the recent war or in the previous war; in almost every case there are young children in the family, and in some cases the mother is expecting another child at an early date. It is literally impossible at the present time for these people to find anywhere to go, and they are faced with being turned out into the street. If the War Office persists in its present attitude, the only hope they will have is to be put in some communal centre, and it is very doubtful whether that will be available. One can imagine the plight of these 12 families if they are evicted and sent into a communal centre, deprived of all the ordinary amenities of life. Three of the male members of these families are night workers and, therefore, have to sleep in the day time which is very difficult, if not impossible, in a communal centre.

    This attitude of the War Office is apparently based on the belief that the Crown are free from the ordinary obligations of the Rent Restriction Acts. In the case of any ordinary landlord, it would be quite impossible to attempt to turn out these tenants. They would be protected. If any other landlord were to say: "We are sorry; we sympathise with these tenants but we want the premises for our own people, their needs come first", the tenants, thank Heaven, would have the protection of the Rent Restriction Acts. I hope that as a result of this matter being raised tonight, the War Office will reflect further on the justice and propriety of the course of conduct indicated by the fact that these 12 writs were issued yesterday. I feel I ought, in fairness, also to warn my right hon. Friend that if nevertheless the War Office think fit to pursue these legal proceedings, this attempt to evict the tenants by legal machinery will be fought in the law courts. It may be that the Crown is exempt from the provisions of the Rent Restriction Acts, but it does not follow that a body suing as the territorial and Auxiliary Forces Association has the same privileges as wound apply if this action were brought by the Secretary of State for War himself. Be that as it may, my right hon. Friend is clearly responsible for the administrative action which has been taken by issuing these writs

    I want to make this appeal to him, on three grounds. First, I ask him to consider the misery and plight of these tenants, for whom it will be quite impossible to find any accommodation elsewhere. Secondly, I would urge on him the duty of His Majesty's Government to act with at least the same decency and responsibility as any other landlord would act, apart from the legal obligations that exist. Finally, I would like to point this out to the Financial Secretary. In many ways the War Office, as a Department of State, are in a much better position than any private landlord would be if they seriously wished to find alternative accommodation for these tenants. After all, it is open to them to requisition premises, perhaps premises that are war damaged; it is open to them to make arrangements to repair empty property, and in that way to provide alternative accommodation for these unfortunate families. They have opportunities that would not be open to an ordinary landlord. Having raised the matter in the House, and bearing in mind the human issues involved, I very much hope I shall have the support of all hon. Members in this appeal to the Minister to reflect on the course of action which has been taken, and to reconsider his policy.

    9.2 p.m.

    I should like to back up the appeal that has been made by my hon. Friend the Member for East Islington (Mr. E. Fletcher). Both he and I represent constituencies adjacent to the constituency in which this proposed eviction will take place, the Member for which has been away from the House seriously ill. It is in the borough of Islington, and we both know the housing conditions in that borough, which are among the worst in London. I attend my own Division of West Islington—the case in question is in South Islington—once a week to deal with constituents' cases, as do the majority of hon. Members when they go to their constituencies. I can assure the House that with hardly an exception—and there are queues of constituents—the cases have to do with the housing question in Islington. When the figure of 14,000 or 15,000 on a housing list is mentioned, it does not indicate the kind of problem which exists there. There was a tremendous amount of bombing, and even when people are housed in that borough there are hundreds upon hundreds of cases of families living in circumstances which would not be allowed under normal conditions; there are flats of which only one or two rooms can be occupied; in some cases there are large families with as many as seven people to a room; there is fearful overcrowding and dilapidation.

    Under these circumstances the Financial Secretary to the War Office would do well to reconsider the question, or to take some sympathetic attitude towards this matter. As my hon. Friend has pointed out, the War Office, or the military in general, are in a much better position than anyone else in regard to such matters as requisitioning. When I see my constituents I hear of cases of threatened eviction by private landlords. I have told them night after night that they need not fear being turned out, because they have the protection of the courts.

    However, it appears that these people are to be evicted and have to find alternative accommodation. Thousands of people have for years been unable to do that anywhere even on the outskirts of London. London County Council and borough council estates have long waiting lists. Where can these people go? The military authorities have power of requisition and the advantage of being able to house people some distance away, unlike people who have to come to town every day for work. The Department have a wider area than is usual. I hope the authorities concerned will look at this question again as a matter of extreme urgency. I assure the Minister that there is strong feeling about it in Islington. The Members who represent Islington Divisions have had great difficulty already about housing, without having a new matter of this kind to deal with, especially as it reflects against the Government. It behoves the Minister to give his closest consideration to find a solution to this problem.

    9·7 P.m.

    I am not a London Member, but I have spent a great deal of my life in trying to prevent hon. Members opposite who represent Islington Divisions from getting into this House. I have been interested in the present case and have had correspondence with the Minister of Health, to whom I turned as a last resort to obtain alternative accommodation for the unfortunate individuals concerned. I was able to secure for those individuals the desolate consolation that they might be accommodated, as the result of the goodness of the Minister of Health and the local authorities, in some convenient rest centre.

    It seems a most unsatisfactory state of affairs. It is impossible for these 12 families, with the complications which exist, to be accommodated in rest centres. It is obviously wrong for a Department so powerful as the War Office to use its power and its secure position before the law to treat people with a harshness which would not be permitted in a private landlord. I am surprised that the Secretary of State for War and his Financial Secretary should take so violent an attitude in this matter. I am convinced that some kind of compromise can be arrived at, possibly by finding alternative accommodation for the people whom it is sought to bring to the flats or for the people who are in the flats. I hope that the Minister will be reasonable with us.

    I have said to the people concerned, "If you are brought before a court and are refused right of sanctuary in these premises, you should not get out." I should be in favour of these people refusing to get out of the premises. I should support their action in resisting the law. It is intolerable that the power of a big State Department should be used harshly and unreasonably against individuals who have no security and no capacity to fight back. I hope that hon. Members who are interested in this case will see that these people do not move and that the efforts of the War Office to employ its position of extreme privilege are thwarted. We should not allow these people to be driven from houses to which they went because they were bombed out. That would he a grave injustice. I hope that the Financial Secretary will be able to tell us that he will reconsider the case and will adopt a much more humanitarian attitude than the writs which have been mentioned seem to indicate.

    9.11 p.m.

    I am sure that the House will appreciate the simple, straightforward and moving terms in which my two hon. Friends have raised this matter. I am afraid the House will appreciate rather less what must necessarily be an unsatisfactory reply on my part. The hon. Member for East Islington (Mr. E. Fletcher) was good enough to give me a certain amount of notice that he would raise this matter, but unfortunately not sufficient to enable me to consult my advisers. I make no complaint, but he must understand that the reflections I offer to the House are impromptu and without expert consultation or even the facts, other than as he has put them before us.

    Speaking as best I can from memory, let me look at the facts of the case. The War Department and agents of the War Department, of which the Territorial Army Association is one, own a certain amount of property throughout the country, including lands and buildings. During the war the property was not on all occasions fully used. When the housing stringency became acute in various centres of population where bombing had been heavy, the War Department, or, as in this case, the Territorial Army Association, made available some of those properties for civilian tenants on limited tenancies, and on the understanding that such tenancies should be only temporary. It was always realised that the time would come after the war when it would be necessary to restore them to their proper use. The particular case of the 12 families has been raised. I will give an undertaking to do what I have not been able to do this evening, to look at the matter very carefully in the morning, and if necessary to consult my right hon. Friend about it. I must make it perfectly plain, in all fairness to the House, that in giving that undertaking I cannot at the moment imply any more than that. We have heard one side of the case, very eloquently put by my two hon. Friends, but there is another side. It is, in fact, an interesting example of where two aspects of Government policy come, if not into conflict, at any rate very closely converging together, and where a situation arises which is not very comfortable.

    It has been laid down by the Government, with the approval of all parts of this House, that the reformation of the Territorial Army is to be a matter of very high priority. I hope that hon. Members will realise that there is no question of any Blimp at work in the War Office over this. This matter of the Territorial Army is of the greatest possible national importance. In fact, it is held by many hon. Members on both sides of the House to be one of the keys of our present manpower situation. The Territorial Army can only be run by taking it to the people, that is to say by organising it in cells, if I may use a political term, in centres of population. That involves the provision of a certain minimum staff in order to enable the organisation to work.

    We have been criticised on several occasions in this House and it has been alleged even by some of my hon. Friends that we are trying to run the Territorial Army with too small a staff. As a matter of fact, I am not certain that there is not some substance in that criticism. My hon. Friend the Member for West Islington (Mr. Montague) suggested that in the case of soldiers it was possible to establish their families, and indeed even themselves very often, at a point distant from their work. In certain circumstances, that may be true. This case is one where they are almost exactly on a par with civilians. These premises owned by the Territorial Army Association are the premises in which these very small permanent staffs of the Territorial Army have to settle down and live and work. They must be on the spot where the job is to be done, among the people with whom they are to work and they are responsible for looking after a certain number of stores, etc., in addition to turning up to do their job of instruction.

    Moreover, there is another problem. It is that at the same time as there is an acute shortage of houses for the civilian population here at home, so, with the changes which are now taking place in the Army as a result of long-service men coming home from overseas, we are getting soldiers and their families, after long service in foreign countries, returning to this country; and we are under an obligation to house them. Not only are we under a moral obligation but we are literally under a contractual obligation to house them. We have always said that part of the perquisites which the Regular soldier would get for his work, is the opportunity to live in War Department property with his family. I should like the House to realise that at this moment we have a certain number of Regular soldiers with their families who have returned from long and arduous duties overseas and who are living in the most primitive kind of community centres near the ports of this country while we are trying to provide some accommodation in which to establish them.

    None of that refutes in any way the conditions which have been described by my two hon. Friends and of which, indeed, I am very well aware. I am exceedingly anxious that We House should realise that in this matter there is hardship on both sides. It is by no means a straightforward issue of right against wrong as perhaps, all-unconsciously I am sure, has been suggested. Those are our two problems in the War Office. We have to reform the Territorial Army and we have to do it quickly. That is a matter of urgent national policy. Also we must house our own people who have returned with their families from long overseas service and who are at present queuing up in transit camps on the coasts. Somehow, those two jobs must be done. The only way we can see of doing it successfully is to take back the property which belongs to us.

    Both my hon. Friends suggested that the War Department was in a far more favourable position than the ordinary landlord or employer in regard to requisitioning, repairing, and so on. I cannot accept that. Again I emphasise that I am speaking without expert advice, but the two Defence Regulations, as far as I remember 51 and 52, under which we do most of our requisitioning are, I think I am right in saying, held by my legal experts not to cover requisitioning for purposes of this kind. Therefore, I cannot accept, at any rate without more chance to look into it, the suggestion that we are in a favourable position with regard to powers of requisitioning. As regards the facility for repairing, we are in no better position than the local authorities. We go to market with the local authorities and take part in the regional schemes with the Ministry of Works and the Ministry of Health. Our building programmes in fact are on a par with the others. I must say with the greatest possible emphasis that we have no hidden reserve of treasure on which we can draw to get the work done.

    Those are our problems. I hope that against that background my two hon. Friends will at any rate realise that the decision before us is a rather more difficult one than perhaps they or their constituents have thought before. I am perfectly prepared to look again at the question of these 12 families, but I have spoken at some length about the background to the problem because, I say frankly to the House, it is not confined to Islington. There is not an enormous number of these cases, but there is a certain number in other parts of the country besides Islington, and the policy of the Government must be that we have to place the staffs for reforming the Territorial Army where they can get work and we have to fulfil our obligations towards our own long-service men returning from fighting in foreign parts.

    Within the framework of these two main decisions we will do everything we can to do the job as humanely as it can possibly be done, and if there is any way in which alternatives can be found for these 12 families, nothing would give me greater delight than to be able to find them. But I cannot help pointing out that it is not my responsibility—I am sure my hon. Friends realise this—to house the people of Islington. I recognise that in Islington, as indeed in Watford, my own constituency, great hardship exists, but there are other great national priorities which are hindering the building of houses in Islington. The fact that more houses are to be erected in the coalmining areas will probably have some repercussions on the people of Islington. The fact that factories are to be built in the development areas will probably have some repercussions on the people of Islington. In the same way, the fact that the Territorial Army has to be reformed must have some repercussions on the people of Islington.

    I cannot usefully say anything more tonight but I would give my two hon. Friends an assurance that I will look at the case of these 12 families tomorrow morning and see whether there is anything I can do to help them, though I am bound to say in honesty that I think it is doubtful.

    Before the hon. Gentleman sits down, may I say I am sure the House will welcome his assurance that he will look into the matter personally tomorrow morning? May I add that on the question of facts to which the Minister referred, my information is that none of these tenants, at the time that they first went into occupation of any of these places, signed any document, or were asked to sign any document, indicating that they would be—

    The hon. Gentleman is now making another speech. He is not entitled to do so.

    German Prisoners Of War

    9.24 p.m.

    As we have a representative of the War Office here tonight—I shall only detain the House a moment, and I do not want to frighten my hon. Friend, and, of course, I do not want an answer to this tonight—I give notice that my hon. Friend the Member for Bedford (Mr. Skeffington-Lodge) and I, and some other hon. Members, intend to raise on the Adjournment at the earliest possible opportunity the question of those German prisoners of war who wish to remain in this country as free, paid workers. I mention this now because I raised it this afternoon at Question time, and the Secretary of State for War gave me an answer which I am afraid was not altogether in accordance with the facts. He said that the number of prisoners of war who would wish to take advantage of any such scheme as that adumbrated recently by the Minister of Agriculture, is not yet known: no definite steps have been taken about it. My information is different. My information is that a number of prisoners have already been canvassed, and that already something approaching 1,000 have definitely indicated their wish to stay in this country as free, paid workers if and when such a scheme becomes possible.

    I merely wish to put that on record at the earliest possible moment, in order to draw the attention of the House to what is a very important subject, and to say that the hon. Member for Bedford and I intend to raise it, probably next Tuesday, on the Adjournment.

    Question put, and agreed to.

    Adjourned accordingly at Twenty-five Minutes past Nine o'Clock.