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Orders Of The Day

Volume 486: debated on Tuesday 10 April 1951

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Ways And Means

Considered in Committee.

[Major MILNER in the Chair]

Budget Proposals And Economic Survey

3.35 p.m.

The debate on which we shall be engaged for the next few days is about the Economic Survey as well as the Budget; and if I were to follow recent precedents I should have to deal in this speech not only with the traditional fiscal and financial issues, but also with the whole of our economic prospect, with exports and imports, sterling balances and dollar reserves, productivity and manpower, prices and wages and lots of other things besides. But there is a real difficulty, especially this year, to find the time to say it all.

Having no desire to introduce into our proceedings this afternoon an element of physical endurance—which may become very prominent in the next few weeks—I have come to the conclusion that in this respect I must depart from the example of my predecessor and say little myself in detail about the Economic Survey or the other recent Treasury White Papers. I plead in excuse not only that even so I am afraid my speech will be rather long, because the purely financial issues will take up much more time this year than in the last year or two, but also that I did cover a good deal of what must be omitted today during the defence debate last February.

Economic Background

I must, however, give the Committee some sketch of the economic background, so that we can appreciate the framework in which the Budget has to be considered, and the objectives at which it must aim. In this background it will be generally agreed that three features stand out. First, the massive defence programme with the new call it makes on our resources. Second, there is the way in which the prices we have to pay for our imports have gone up so much more than the prices we get for our exports. This is just as real a burden upon us as the defence programme itself, for it means that to buy the same volume of imports we have to send out more exports and so keep less for ourselves at home. Third, shortages of materials, with the check they impose on higher production which could otherwise do so much to help us carry both burdens.

Our objectives in this situation have been stated several times—most recently in the Economic Survey. They are to carry through the defence programme as swiftly and smoothly as possible, and to maintain a level of exports sufficient, with the expected surplus on invisibles, to pay for our current import needs, excluding strategic stockpiles. Because the direct impact of the defence programme falls mainly on the engineering industries, we must I fear accept some check to home investment and also some interference with the exports of these industries. But we must keep the former within bounds so as to shield future productivity, and we must try to balance the latter by greater exports of consumer goods; to make this possible, we have to limit consumption at home.

The prospect that faces us may, I suggest, in the main, be summarised as follows. To meet these two new burdens, defence and the adverse terms of trade, we can count on some increase in our production. But given the physical difficulties of obtaining enough raw materials, the probable increase in production will certainly not be enough to meet these extra burdens. Last year our exports were sufficient, with our invisible earnings, not only to pay for our imports but to provide a surplus to build up our reserves and to help in the development of other countries.

This year we have come reluctantly to the conclusion that we shall not be able to manufacture and sell a bigger volume of exports than will, after allowing for our invisible earnings, just pay for our current imports. To this extent our burden is lightened, and what would otherwise have been a severe curtailment in living standards is modified. But even after taking this alleviation into account as well as that provided by some fall in civil investment, we have to recognise that there must be some reduction in our standard of living.

The task of the Budget in this situation is to ensure as far as possible that the necessary transfer of resources from producing for consumption to producing for defence and exports takes place swiftly and smoothly. As I pointed out in my speech during the defence debate, fiscal and monetary policy alone is not sufficient to achieve this transfer, and physical controls are also needed. But these physical controls will not be nearly so effective if they are working against the tide, and they must therefore be accompanied by a strict fiscal and monetary policy to restrain civilian expenditure.

In more precise terms the Budget must ensure, after taking into account any rise in money incomes, including that automatically generated by the rise in production, that what is spent at home is enough, but no more than enough, to buy, at prices which cover their costs, the goods and services we can afford to consume at home. What we can afford for public and private consumption is, of course, what is left over from our total production after adding what is to be imported, and taking away what is required for exports, home investment and defence.

If the Budget fails to limit expenditure accordingly, it will be a case of too much money chasing too few goods; excessive demand will either just lead to higher prices or it will pull more goods into the home market, but at the expense of exports or of defence or of investment. In either case we would have an inflationary Budget. But it is possible to go too far the other way. If home spending is deflated too much, the effect may be not just to speed up defence output, or get more investment or a higher level of exports.

In the case of exports at least, we must have regard, and this is particularly true of consumer goods, not only to our ability to supply, but also to the capacity of overseas markets to absorb—a difficulty which was in part responsible for our decision not to attempt to maintain a surplus in our overseas balance. Thus a too severe Budget might give us losses, unemployment and austerity at home without any substantial benefit to our external position. We do not want deflation of this kind any more than we want inflation.

This leads me to emphasise that while a sufficiently tough Budget, by its effect on total expenditure, will prevent prices being pushed up by excessive demand, it cannot, by being even tougher, do much to prevent a rise in prices when these are caused by a higher level of costs. In this respect the limitations of the Budget are much the same as those of price control.

Now at the moment it is a costs inflation which is affecting us. Higher prices for imported raw materials, and to some extent foodstuffs as well, are pushing up our cost of living more and more. A tough Budget can only give limited help here. It can exercise some check; it can, and should, ensure that excessive demand does not add its influence to that of high costs. But it cannot directly reduce a generally high level of costs to any material extent—except through a policy which deliberately creates losses and unemployment.

I have already pointed out that the rise in import prices beyond the rise in export prices imposes a very real burden upon us. As a nation we cannot evade this burden, but we have a choice as to how it is borne within the community. If the higher prices of imported raw materials and food are passed on to consumers, the burden is then spread on everyone according to the extra they have to pay; and sacrifice in consumption comes about through higher prices.

On the other hand, the Government could try to protect consumers from these higher prices by increasing the subsidies on food still further and introducing them again for clothing and many other things. But it would then be essential to raise more money in taxation to pay for these extra subsidies, and the burden would be shifted and have to be paid through higher taxes rather than higher prices.

A decision on this important matter should clearly not be taken on its own. It must be looked at in the light of the Budget as a whole and of any other measures that may be necessary or burdens that may have to be imposed. Equally, whatever decision is reached on the question of increasing subsidies or not doing so, must be taken into account in settling the other details of the Budget.

There is another feature of the situation which is not to be overlooked, though I readily admit that its exact significance to some extent depends on the decision taken on subsidies. The way in which the burden falls on different groups is also affected by changes in money incomes; in recent months the incomes of some groups and individuals have been going up, in some cases without any special action or efforts on their part, in others because not unnaturally they have used their bargaining power to try and protect their standard of living.

Such increases in incomes push up costs and therefore lead to still higher prices. To some extent higher export prices may bring us some benefit by checking the worsening of the terms of trade. But there are certainly limits to the rise in export prices which can take place without serious danger to our competitive power. Moreover, in so far as particular groups do improve their position in this way—and the improvement often tends to be only temporary or partial—it is primarily at the expense of those whose incomes are relatively stable or completely fixed—and who have now to pay still higher prices with no extra income to help them. We shall have to consider later how far we should, and can, take this development also into account. But can we, and should we, try to interfere with the process itself?

I shall return to the subject of profits later, but what of wages and salaries? During the past few years of labour scarcity and the sellers' market the workers have been in a position of unexampled strength and bargaining power; had they considered only their own immediate interest, they could have pressed their advantage home. On the other hand, there was little compulsion on employers to resist claims for improvement in wages and conditions when they knew that they could recoup themselves out of prices. Between these pressures and the menace of runaway inflation stood only the joint bargaining machinery—voluntary for the most part, statutory in certain trades—which has been built up and developed into part of the industrial relations system of this country.

It is not surprising that there should have been proposals from many quarters for minimising the potential dangers; that, for example, wages should be controlled by some central, independent authority: or that wages should only be allowed to vary in accordance with movements in the cost of living or by reference to some index of production or productivity. Some of these ideas have their attractions; and some their merits. We have spent a good deal of time and thought upon them. But I am bound to tell the Committee that, in my view, they involve far-reaching risks and difficulties—some economic, some psychological. They would imply greater changes than either side of industry is at present willing to contemplate. The Government therefore decided to trust the established system of industrial wage regulating machinery, and to have faith in that sense of responsibility—

I only venture to assure the right hon. Gentleman that, if he wants more time, it will be gladly accorded by the House, but if he would speak a little slower it would be for the convenience of everybody in understanding these complicated matters.

I am much obliged to the right hon. Gentleman, and I will proceed accordingly.

I was saying that the Government decided to trust the established system of industrial wage regulating machinery, and to have faith in the sense of responsibility which we believe has been engendered in both sides of industry as the result of the free development during a century or more of voluntary collective bargaining. No one can say that our faith has been misplaced or that guidance which the Government were able to give from time to time was not heeded.

What kind of guidance does the present situation demand? It is assuredly not a moment when we can afford to cast aside the restraints of the last few years. On the other hand, I do not think we should advocate a return to a complete wages freeze. For one thing, most of us would not wish to see the wages of the low paid workers held down rigidly while prices were going up. But we must beware of going too far. A large proportion of wage earners has recently secured advances. Moreover, increases in wages and salaries beyond what is justified by the growth of productivity are not usually at the expense of profits but push up prices still further and the real losers from general increases are those with fixed incomes, some of them, like old age pensioners, with very low fixed incomes.

Finally and more generally, I must draw the attention of the Committee and of the country to a real danger which, because we in this country have in the past successfully avoided it, is often ignored; the danger that, if incomes and prices rise swiftly and continuously, there may be a progressive loss of confidence in the value of money. Were such confidence to be lost we should be plunged into inflation of the most violent kind, which in other countries has on more than one occasion brought the whole fabric of their social and political life to the edge of disaster.

All these risks and dangers must therefore be borne in mind by those concerned in industry. We have, nevertheless, decided that we can continue to trust the established system of wage negotiation to avoid a rapid and damaging upward spiral of incomes, costs and prices. I am convinced that there is today a far wider understanding, by the leaders of both sides of industry and by the nation as a whole, of the part they must play in preserving a healthy economy, than at any time in our history.

Now let me summarise, for the Budget itself, the implications of this brief survey of the economic background.

First, it must clearly be our object, even if, as I have argued, we cannot prevent a cost-inflation by a strict budget, to make sure that there is no aggravation on the demand side, no further impetus to higher prices.

Secondly, the Budget must help to direct production towards defence and exports, which are the physical tasks before us. It must discourage the use, for consumption at home and for less essential investment, of those resources of labour and materials required for defence and exports.

Finally, we should take account—so far as budgetary policy can—of the facts that the rise in prices bears most hardly on all lower income groups and that those with fixed incomes will tend to be more severely hit than those whose money incomes are rising.

Out-Turn For 1950–51

After that introduction, I now propose to turn, following the traditional pattern of the Budget Speech, to last year's results. I will, for the moment, deal with them in terms of the "above the line," as we call it, out-turn on the conventional basis.

The results of 1950–51 are, at first sight, somewhat remarkable. My predecessor budgeted for a surplus of £443 million; in fact the surplus was £720 million. This surplus, after meeting "below the line" items amounting to £473 million, has been used in redemption of debt. We must be careful not to conclude from this apparently cheerful out-turn of last year that the prospect for this year is correspondingly brighter. We must examine the reasons for it first. The difference of £277 million between the estimate and out-turn is explained by an excess of revenue of £80 million and lower net expenditure of £197 million.

The £80 million increase in revenue as between an estimate of £3,898 million and a yield of £3,978 million, is largely accounted for by an excess of receipts from Customs and Excise duties of £46 million. Most of this was due to increased clearances towards the end of the financial year, in anticipation, whether rightly or wrongly, of higher duties to be imposed today. For the rest, there was an excess of £16 million on Income Tax, due to a better rate of collection than had been expected, an excess of £10 million from sales of surplus stores and a further excess of £11 million on miscellaneous receipts. Not much encouragement here, the Committee will agree, for the current year.

The net saving of £197 million on expenditure is entirely in the field of Supply services, since Consolidated Fund services actually exceeded the estimate by £8 million. The gross saving on Supply was even greater. During the year, there were, as the Committee will recall, Supplementary Estimates of £67 million, largely for defence, which, when added to the original Estimates, gives a figure of £2,985 million in comparison with an out-turn of £2,713 million, so that the saving was £272 million.

How is this to be explained? How far is it a genuine saving and how far merely fortuitous and temporary or even a postponement which actually increases expenditure in the future? Savings of this kind cannot, of course, be itemised with final precision until Departments' Appropriation Accounts are available some time hence; but of the total figure of £272 million, there is no doubt that the largest single item, probably about £115 million on the Ministry of Food Vote, was due mainly to a shortfall in the purchases of various food and feedingstuffs, with a consequent fall, instead of an increase, in trading stocks. This does not mean that the actual expenditure on food subsidies was less than the £410 million which was provided for last year, but simply that it was financed differently out of the lower level of stocks.

Continuing with the explanation of this shortfall in expenditure, a saving of £19 million on the Ministry of Supply Vote resulted principally from the fact that some payments in respect of production orders happened not to fall due as soon as was originally expected. The payments will, of course, have to be made good this year. The same is true of a good deal of a saving of about £14 million on Colonial services generally, together with about £5 million on Foreign Office grants and services. Yet another fortuitous saving of £13 million occurred on educational services, partly because the balance of the grant due to local education authorities for the previous year was less than had been estimated.

Some of the smaller Votes, too, show savings which are non-recurrent. For example, about £4 million on civil aviation due, in the main, to the delay of works services resulting from the bad weather, and about £3 million on the Vote of the Ministry of Fuel and Power attributable, in part, to a smaller expenditure this year than was expected in connection with coal compensation. The balance of savings is spread over a very large number of other Votes. Some of it undoubtedly represents the results of the economies of 1949 which realised, in the event, more than was expected at the time, and are, of course, reflected also in the Estimates for the current year; but some of it was also either non-recurrent, or merely a postponement of expenditure into the current year. I think the Committee will agree, if they have followed this brief analysis I have given, that, taking the divergence from Estimates on both revenue and expenditure, it would be decidedly imprudent to assume that what happened last year should give us much encouragement for the future.

Prospects For 1951–52

Having thus, I trust, dispersed any vague optimism which these last year's figures may possibly have engendered about the future, I must now ask the Committee to study this prospect more closely—again, for the moment, on the basis of the "above the line" figures in the conventional form of accounts. On the expenditure side, at any rate for a Chancellor, it is indeed a chilling prospect. Against Exchequer issues for the year 1950–51 of £3,258 million, I estimate total expenditure for 1951–52 at no less than £4,197 million, an increase of £939 million.

How is this to be explained? First, there is an increase of £40 million in the Consolidated Fund services, representing the first payments of interest in December next on the United States and Canadian post-war loans. There is an obligation on us to make these payments unless we request, and the request is granted, the waiver of interest payments which is possible under the loan agreements in certain circumstances. Since we cannot obviously say at the moment whether circumstances later in the year would justify us in requesting the waiver, I think the Committee will agree it is clearly necessary for us to make provision now for the payment.

Next comes defence. The published Estimates, which provide £1,114 million, show an increase of £337 million over last year's out-turn. Civil Estimates also provide for other defence preparations outside the strictly military sphere—nearly £20 million for Civil Defence against only a few millions spent last year; about £50 million as against £5 million or so last year for capital expenditure on industrial capacity for defence production; and £143 million as against £13 million last year on the stockpiling of food, raw materials and strategic supplies. I must also allow for the additional cost in 1951 of the accelerated defence programme announced in January. I put this additional cost at about £160 million. The details, of course, will emerge later in the year, as and when Supplementary Estimates for the services concerned come forward.

The result is that the estimated cost in 1951 of defence and Civil Defence is about £1,295 million, which accords, of course, with the preliminary figure of £1,300 million given to the House by my right hon. Friend the Prime Minister last February. Adding the other items that I have mentioned—£50 million for capital expenditure for defence production, and £143 million for stockpiling, I arrive at a total estimate for defence preparations of about £1,490 million, an increase of about £690 million over last year's expenditure in the same field. Since the total excess of this year's Estimates over last year's out-turn is £939 million, and about £690 million is due to defence and another £40 million for Consolidated Fund services, there remains about £210 million as the increase in the remainder of the so-called Civil Estimates.

This increase over last year's out-turn is, of course, due largely to the special factors of 1950–51, including the change in stocks to which I have already referred. It is interesting to note that the Estimate for this year in respect of the items which make up this residue of expenditure, that is, after taking out defence and the Consolidated Fund services, is no greater than the figure for the corresponding services in last year's original Estimate. Moreover, in making this comparison between a group of what are broadly called Civil Estimates and another similar group, we must remember that even this residue includes items which are certainly quasi-military in character, and that some of these show increases this year; for example, an additional £10 million for relief and rehabilitation in Korea, our contribution to the United Nations' Fund. I shall have more to say later about the level of civil expenditure this year—especially that portion of it which is in no way related to defence.

But, for the moment, what is the prospect on the revenue side on the existing basis of taxation, that is, what we have to set against the expected expenditure on the other side? I estimate the total tax revenue for this year as £3,877 million, an increase of £147 million over the actual tax revenue received last year. In some cases we face a reduction. For example, I put Customs and Excise at £1,590 million, compared with £1,630 million, because, as I have already explained, the yield last year was, to some extent, inflated by abnormal clearances before the Budget. Beer, and other alcoholic drinks in particular, are expected to bring in £368 million only, as against £398 million last year, a drop of £30 million.

While Customs and Excise are down by £40 million, Inland Revenue duties are estimated to be up by £187 million—£2,225 million in comparison with £2,038 million last year. This big increase is a reflection both of higher profits made in 1950 coming under charge to tax this year, and of a higher total wage and salary bill in the current year. Motor licences I expect to yield £62 million, approximately the same amount as last year. On the other hand, we have to allow for some decline in non-tax revenue, which I expect to bring in £221 million as against £248 million last year.

When we include this, the total estimate of revenue for 1951–52 on the existing basis of taxation amounts to £4,098 million as against last year's out-turn of £3,978 million—an increase of £120 million to be set against the increased expenditure of £939 million. The result, when estimated revenue of £4,098 million is subtracted from estimated expenditure of £4,197 million, is a Budget deficit, "above the line" on the conventional basis, of £99 million. This deficit of £99 million may be compared with a surplus of £720 million last year of revenue over expenditure, so that we are faced in total with a deterioration of £819 million.

Required Budget Surplus

The question is, should we seek this year to make up the whole of this £819 million and so earn as big a surplus as last year? If not, what surplus should we aim at?

The answer to these questions cannot be given from a study of the Government Revenue and Expenditure accounts alone. It depends, after all, on how far we judge, after taking all other economic developments into account, that the net extra Government spending will be inflationary. I apologise to the Committee for bringing in economics again but it is, after all fundamental to this whole study. It depends, that is, upon how far the extra expenditure which is not balanced by extra revenue—that is £819 million—will bring the nation's total expenditure at home above the value of the output we can afford to consume at home. Or, to put the same thing in another somewhat technical and, in a sense, more familiar way, it depends upon how large a Budget surplus we need this year to bring the level of the nation's total savings—personal and private, public and corporate—up to what is required to finance the total investment by the Government and industry in buildings and plant and machinery and higher stocks.

In applying these general principles—now pretty familiar to the Committee—to our present problem, the first step must be to separate the Government's capital expenditure from its current expenditure. Apart from strategic stockpiling, which I will deal with in a moment, the capital expenditure of the Government is included in the estimates of total national investment which I will bring into the picture later. As the Committee are aware, this distinction between current and capital expenditure cannot easily be made on the basis of the Exchequer accounts in their conventional form. These, after all, are drawn up, as we all know, to meet Parliamentary and statutory requirements, and do not distinguish satisfactorily between capital and current items.

In order to arrive at a truer measure of the Government's current expenditure, obviously we must first take out expenditure on strategic stockpiling, which shows an increase of £130 million. Since it is proposed to pay for these purchases by accepting a deficit in our balance of overseas payments, which we announced some time ago, in other words by a deterioration in the external capital account, they will have no further repercussions on our economy and need not be taken into account any more this afternoon. Secondly, we must take out other items of capital expenditure, partly of a defence nature—to which I referred a little while ago—where the increase is £40 million. This expenditure, as I have implied, is included in the estimate of total national investment. Thirdly, we must exclude net expenditure on trading departments stocks and other assets, on which the increase is £111 million, and which is also reckoned in the estimates of total investment.

There are few other details of less importance. We must take out payments to sinking funds since these are only an internal transfer; these rise by £1 million. Finally, we must take out certain receipts—from the sale of surplus stores and so forth—which are of a capital nature. Here again the Government disinvestment from which they arise is included in the estimate of total national investment. They are expected to fall by £62 million this year and I have allowed for this in the total investment.

The total of these changes in capital items is £344 million, so that the result of excluding them is to reduce the excess of additional expenditure over additional revenue from the very high figure of £819 million, but still to leave it at a figure of £475 million. This is the decline in the so-called "above the line" surplus on the alternative classification which my predecessor introduced three years ago. I have repeated this alternative classification in the Financial Statement which will shortly be available to hon. Members, and those who are interested in these rather technical questions will no doubt study it in detail at leisure.

There is one other thing of a more general character I should like to say at this stage. In the last two years, it so happened that the net effect of all the inflationary and deflationary factors in our economy was such that the aim of the Budget could rightly be expressed as to achieve an overall balance—that is to produce a surplus on current account sufficient to cover the net cost of that part of investment which was financed through Government channels. This need not of course be the case, because that part of total investment—which incidentally is purely dependent on Parliamentary and statutory factors I mentioned earlier—is only one of the factors to be taken into account in determining what the size of the current surplus should be.

What matters is the current surplus, because this is the Government's contribution to the level of savings required to finance total investment, including Government investment. This is shown in the alternative classification and, as I have said, the change from last year to this, on the basis of existing taxation, is a decline of £475 million. In other words, the contribution made by the Government to the finance of national investment, its own as well as everyone else's, both at home and overseas, would decline, if we took no further steps, by £475 million.

Can we possibly afford such a decline? And if not, by how much must the Government's contribution be increased? As I think the Committee appreciate, the answer turns on what other changes are likely in investment at home and overseas and what amounts are likely to be saved by the community, apart from the Government, in order to meet them.

At this point—and I apologise again for the rather technical character of this exposition, but it is almost unavoidable these days—I pass from what is known or can be more or less precisely estimated to a field in which it is more difficult to foresee the course of events. In this year particularly, in which we are more than usually subject to the play of external forces, every factor in our economy is more or less disturbed. Most are not within our own control, and none is predictable in any exact sense. But it is not possible to reach any rational conclusion about the appropriate Budget surplus or deficit without taking all these matters into account. I must therefore make the best estimate I can of the trend in the coming year of investment at home, of the balance of payments and the probable level of savings.

On these matters, of course, I have had to consider the information available and after weighing all the various factors reach my own conclusion. This is in a sense the heart of the Budget problem nowadays. Upon how the Chancellor of the Exchequer of the day makes up his mind on this, which is in the last resort a matter of judgment, very important consequences to the nation will always depend. It is, therefore, enormously important that he should do so honestly and objectively and with a very strict sense of responsibility. It is no less important that, having made up his mind, he should stick to it and not be moved by pressure of any kind, however insidious or well-intentioned, into changing it. I have no doubt at all—and I am sure the Committee will agree with me—that the decisions of my predecessor were made in this spirit, and I have not the slightest doubt that because of that they were able to play a vital part in protecting us from inflation and cherishing our economic recovery. I can only say that I have tried to follow the same course this year.

Turning, then, to home investment, there is still a heavy pressure of demand for what the experts call investment goods—plant, machinery, buildings and so on. In general, of course, this is to be welcomed as it shows that British industry is alive to the need for modernisation and improvement. But during the next three years the defence programme will make increasing demands both for arms manufacture and for capital plant on the engineering group of industries—to some extent on building as well—which must at the same time—that is, the engineering group—keep up their total volume of exports to the highest practicable level. Faced as we are with shortages of many kinds, especially of materials, we cannot reasonably expect that during the next few years the output of these industries—that is, the engineering groups—magnificent as their record has been in recent years, will increase on a scale large enough to cope as well as everything else with the extra requirements of defence.

I have come to the conclusion, therefore, after a good deal of thought, that we must take steps to reduce the pressure of home demand on the engineering industry for plant and equipment for civilian purposes. It has been suggested that this might be done by administrative means—for example, by requiring that no single piece of plant and machinery shall be installed by industry without a licence. In war this may be inevitable, but in peace I would not myself impose such restrictions, with the enormous administrative complications involved both for industry and for the Government, until all other methods had failed. Those who had experience of the machinery licensing job in the last war will agree that it was one of the most difficult operations we had to undertake.

The policy followed by the banks in granting credit is, of course, closely associated with the whole problem of investment; it has an important bearing upon it and I must, therefore, say a few words about it. Advances in the past year have increased. This is inevitable, particularly in view of the rise in the cost of raw materials and imports and the resultant increase in the cost of financing stocks. I am certain that the banks fully appreciate the renewed importance, in the present circumstances of the Government's disinflationary policy, and I am confident that I can continue to rely on them to maintain a restraint in their credit policy, and in particular to ensure that advances are not made for any speculative purposes or for capital expenditure or investment which would conflict with the intentions of the revised principles of guidance, which I propose to issue in the next day or two to the Capital Issues Committee. The recent rise in interest rates may also exercise some check on investment. But I am satisfied that other measures are also necessary.

Since the planning and execution of most investment takes a considerable time, the scope for restriction in this year, 1951, is obviously limited. But I suggest to the Committee that it is for us to take action now so as to restrain investment in 1952 and later years. I have, therefore, reluctantly decided—and I now come to the first decision, which is not exactly a Budget decision but which will perhaps break the monotony of such a long exposition—that the initial allowances of 40 per cent. given for Income Tax and Profits Tax purposes on plant and machinery, and 10 per cent. on industrial buildings and mines and oil wells, must be suspended as from 6th April, 1952. I am giving a year's notice. Any expenditure incurred on or after that date will, of course, continue to qualify for the ordinary annual depreciation allowances but it will receive no initial allowance.

The initial allowances, after all, were introduced at the end of the war as a means of stimulating re-equipment and modernisation. That is, of course, a very desirable aim, but in our present circumstances to stimulate capital expenditure in this way would, I am satisfied, positively endanger the defence and export programmes too much. When the period of re-armament is over and we can increase home investment again, it will no doubt be desirable to reintroduce allowances of this kind. I would certainly hope so.

The production departments will, of course, take whatever measures are necessary to ensure that the suspension of these allowances does not result, in the case of undertakings engaged on the rearmament programme, in difficulty in providing any necessary additions to their equipment.

As I have already implied, because of the proposed date of operation there will be no yield this year from the suspension of the initial allowances. In a full year the yield will be £170 million, but it will be precisely offset by a corresponding reduction in corporate, in company, saving. The importance of this proposal lies therefore, as I hope the Committee appreciate, not in the yield to the Exchequer but in the effect which I judge it will have on the placing of orders for capital equipment.

Taking account of this, I feel justified in allowing only for a very small increase in the total expenditure, civil and defence, on investment at home—a small increase of £30 million. Having regard to the rise in prices of investment goods—capital equipment and so on—this implies no increase in total real investment and, indeed, a significant fall in investment for civil purposes.

Turning to overseas investment, I estimate very provisionally that last financial year we had a current surplus on the balance of payments of some £200 million. This means, in effect, that the nation refrained from spending this amount out of the income generated and earned from total production, thus leaving the goods and services available to be bought by our customers abroad. This year, as I have already made plain, it will be difficult even to achieve enough exports to keep an overall balance. It follows, however, that we shall not have to provide savings to finance an overseas surplus, so that by comparison with last year, this requirement is reduced by £200 million.

This decline of £200 million in overseas investment, taken with the increase of £30 million in home investment, means that we have a net decline of £170 million in total investment, to set against the decline of £475 million in the Government's contribution to savings. We thus have £305 million to find. Against this, we must now consider what is the probable trend of savings from sources other than the Central Government's current surplus. We must first take account of changes there may be in the net saving of local authorities and the National Insurance Funds. I expect a small decline in the surplus of these other public authorities of, I would say, £15 million.

There will, on the other hand, certainly be a substantial increase in the amounts put to reserve by companies, to cover depreciation of capital, to provide for future payment of taxes on the profits they are earning this year, or as free reserves. But a considerable proportion of this increase will be used to finance replacements of their stocks at higher prices, and this is not taken into account in the estimates of investment that I have just made. Moreover, there has been a clear tendency in recent months to increase dividend distributions, which reduce company saving, and, therefore, add to inflationary pressure. At the same time, it is difficult, I think, to count on any increase in personal savings, in view of the rise in the cost of living.

This is perhaps an appropriate point—when the relation of savings to the Budget is most clearly to be seen, as is the enormous importance it has for the decision as to what is the final gap to be covered—for me to express my gratitude, as Chancellor of the Exchequer, to all the workers in the National Savings Movement for the sustained efforts they have made to secure those savings which, though popularly called "small," are in the aggregate, I can assure them, of great importance to the Chancellor of the Exchequer. I should like to appeal—and I know I have the whole Committee with me in this—with confidence to the National Savings Movement to redouble their efforts, despite difficulties, and, with the help of the more attractive terms now offered, to challenge even their own past achievements.

After considering the possibilities here, and in the light of the trends indicated in the Economic Survey, I estimate that the total of private savings, both company and personal, will increase by about £170 million. Having regard to the fall of £15 million in the surplus of other public authorities, the total savings from sources other than the Central Government increase by £155 million. We have to deduct this from the £305 million which we have arrived at, and we get about £150 million as the short-fall in savings necessary which must be made good by the Government.

This is, as far as I can estimate it, the extent of the net inflationary effect of the change in the Government's current surplus after taking account of all other inflationary or deflationary factors in the economy, including the suspension of the initial allowances. This, therefore, I take as the measure of the extra sums which must be withheld from consumption at home, if we are to speed the defence programme, maintain an even balance of overseas payments and restrain the inflationary pressure of excess demand. I realise that the Committee may be finding this rather tough going. I can give them, however, this degree of comfort, that the technical and less controversial parts of the speech are now concluded.

Survey Of Government Expenditure

We have then a gap of some £150 million in the current year. There are obviously two ways we can set about closing it—either by cutting down Government expenditure or by increasing taxation. I propose to look now at our prospective expenditure more closely. But first I should like to make two general observations. We are in a period where incomes and costs are rising, and this is bound to affect the Government as it affects private institutions. This makes the task of reducing or even stabilising expenditure all the more difficult.

Secondly, it is no use supposing that Government expenditure is something remote and separate from people's lives, which can easily be cut without affecting them in any way. Much expenditure, such as that on defence, is, of course, incurred in providing services for the benefit of the community as a whole, but we must not forget that there are also quite substantial sums spent for or given to certain sections of the community whose standard of living is directly dependent on them. Nothing, therefore, can be more misleading than to suggest that large cuts in Government expenditure can be made without hurting people. They usually hurt just as taxation hurts, though it is not always the same people who are affected. To get 5 per cent. off pension expenditure, for example, the reality is that we either have to cut pension rates by 5 per cent. or find some way of getting rid of 5 per cent. of our pensioners.

The prospective expenditure for this year, I would remind the Committee, I have put at £4,197 million. Let us proceed to analyse it. Of this, £584 million is for Consolidated Fund services, very largely interest on the National Debt both internal and external. I do not imagine that anyone in the Committee is likely to propose seriously that we should default on these obligations. Just under £1,500 million is, as I explained earlier, due to be spent on defence, including Civil Defence, stockpiling, and capital expenditure associated with defence. It is, without doubt, the duty of the Chancellor of the Exchequer and his officials to scrutinise, with the utmost care, every item in this vast programme. That we intend to do to the best of our ability. But obviously I cannot cut down the provision for defence here and now.

Taking the provision for the Consolidated Fund Services and Defence together, we reach a figure just under half of the total estimated expenditure of £4,197 million, and the whole of this amount must be excluded altogether from the economy field—I do not think the Committee will disagree. The remainder—about £2,125 million—is, broadly, expenditure of the Civil Departments and falls into two categories. Over three-quarters of it is accounted for by social services and food subsidies. Of these I will speak a little later.

Meantime, there remains some £510 million of expenditure out of our original total of £4,197 million. This covers a very wide range of services which I have not the time to discuss in any detail. But it has all been scrutinised with the greatest care in the preparation of the Estimates. By no means all of it is domestic civil expenditure. There is, for example, £97 million for foreign and colonial services, including colonial development and welfare—incidentally showing an increase of £15 million above last year. Then, even that part of the Ministry of Supply Vote not in the technical sense attributable to defence—some £50 million in 1951–52—is, in the main, related to defence expenditure, as I think the Committee realise, and cannot be regarded as an ordinary Civil Vote.

If we exclude these two items, the rest is well below £400 million. There is, for example, £51 million for agriculture and food production, £10 million less than last year's total of £61 million. Works at £42 million is £9 million less than last

year, civil aviation at £18 million is £3 million less. Police at £30 million and roads at £30 million are both slightly up on last year. Home information, apt at times to be a controversial item, has been reduced by nearly 20 per cent., to less than £3½ million. I cannot agree that this is excessive, when one remembers that apart from ordinary Departmental information services, it also covers important publicity campaigns, such as recruitment to the Forces and industry National Savings and so on.

I shall not go into further detail. The total estimated expenditure in this field—that is apart from Defence, Consolidated Fund, Social Service and Food Subsidies is £510 million compared with £540 million estimated last year. It seems to me that at a time of rising costs this is a good result. I hope, however, that those with practical suggestions to make, on other than trivial points, will make them in the debates to come, thus departing from the usual practice of combining vociferous general demands for economy with powerful arguments for action involving an increased outlay by the Exchequer.

Social Services

I come now to the social services, which with the food subsidies amount in this year's estimates to £1,615 million as compared with £1,589 million in the 1950–51 estimates—an increase of £26 million. This is divided broadly speaking, as follows: £250 million for Education, £400 million on Food Subsidies, £400 million on National Insurance and Assistance and War Pensions, £400 million on Health and £150 million on Housing, Local Grants and the Ministry of Labour.

Expenditure on education is rising. The estimate for 1951–52 is £251 million, including universities, compared with £243 million last year. But there are now nearly a million more children in schools than five years ago. More children means more buildings, more teachers, more books and more school meals—more, in fact, of everything. The rise in teachers' salaries has to be added. We considered, my right hon. Friend and I, what economies could be made. We decided to increase the cost of school meals by 1d. as has already been announced—in view of the growing cost of the service. We made some other small economies. But I must tell the Committee that the only measures through which we could have achieved substantial savings would be either to raise the school entry age or reduce the school-leaving age. We did, in fact, discuss these but, I think-rightly, turned them down.

Social Insurance And Assistance

Next, I come to the social insurance and assistance group. As far as I know, nobody has proposed any cut in these payments. The question is whether there should or should not be an increase. In view of the very high level of expenditure on defence, it is difficult to contemplate this. But I must remind the Committee again that those dependent on small fixed incomes which they have difficulty in increasing suffer most from the price increases imposed upon us from outside and aggravated by a rise in costs internally. It must be understood, of course, that any increase in National Insurance payments, though falling on the National Insurance Fund, would affect the Budget in the same way as if it were a direct charge, for it would increase total expenditure and reduce the available supply of savings, thus making necessary a corresponding increase in the Budget surplus.

There is, however, another feature of the present situation which cannot be ignored. It is well known that in the next 20 years there will be a larger and larger number of elderly persons, who, if they retire from work, will have to be supported by the efforts of a group of workers more or less constant in number. For every man over 65 and woman over 60, there were, in 1950, very nearly five people of working age. In 25 years' time, the probability is that the proportion will not be one in five but very little more than one in three.

We have reached a point where we can no longer afford merely to state these facts—and these have, of course, been stated before—and leave it at that. We need a totally new outlook on the question of the age of retirement.

I am not sure whether the right hon. Gentleman is referring to his present status of retirement or not.

In the past, the public attitude on this question has been greatly influenced by the fact of heavy unemployment. We have got away from all that now. We must encourage the wish—already widespread among older workers—to remain in employment after the retirement ages current today. After all, in recent years hours of work have been reduced, holidays have been increased, the age of entry into employment has gone up and, above all, our general health and expectation of life as a people have markedly improved. It is a natural corollary of these changes that we should work longer and retire later. The subject has already been discussed by the Minister of Labour with his National Joint Advisory Council. Discussion of it as regards Government employment is about to begin on the Civil Service National Whitley Council.

The Government now ask employers and workers generally to give the most serious consideration to the possibility of postponing retirements and to removing any obstacles which prevent those who are physically capable of continuing at work from doing so. In due course, some formal alteration of pension age in pension schemes, both national and occupational, may well be necessary. It would be premature to alter the age in the national scheme on this occasion; but any changes we make must be framed in a way which will encourage those reaching present pension ages to remain at work without pension.

The Minister of National Insurance has considered most carefully the best method of giving effect to those principles within the limits set by our present financial position. She has worked out proposals which have been accepted by the Government, which I will now outline.

Pensions

As from 1st October, 1951, the standard rate of contributory pension, that is, 26s. for a single person and 42s. for a married couple, will be increased to 30s. and 50s. respectively for men over 70 and women over 65. For men between 65 and 70 and women between 60 and 65, who postpone retirement, the increments to their pension which they gain thereby will be increased from 2s. to 3s. a week for each extra year they stay at work.

For men between 65 and 70 and women between 60 and 65 who retire, pensions will remain at the present figure up to 70 or 65 as the case may be, plus, of course, any increments they may earn for staying on for part of this period, but the amount per week which they are allowed to earn without reduction of the pension will be increased from 20s. to 40s. a week. There will also be certain increases in the benefits payable to widows with children and to persons on other benefits in respect of children.

Tomorrow evening the Minister of National Insurance will present a White Paper giving further details of these proposals, and in the next few days will introduce a Bill to give effect to them. Their cost will be £39 million in the first full year and £19 million in 1951–52. That is all that we can afford. I must make it plain that we are not able to raise any other social insurance benefits at the moment. We believe that the line we have drawn is a reasonable one, because, in the main, benefits are raised to those most completely and continuously dependent upon them.

I must add a few words about war pensions. The considerations which have led the Government to increase certain classes of old age pensions do not apply to the general run of war pensions. The great majority of war disablement pensioners are, in fact, at work and earning. We do not, therefore, intend to increase the basic rate of war pensions. However, it is intended to make some improvements amounting to over £600,000 a year in certain supplementary allowances. The details will be given to the House by the Minister of Pensions at an early date.

I also propose, as a corollary of the increase in the old age pension, to adjust the income limit of the Income Tax dependent relative allowance to ensure that the allowance continues to be given in full where the ordinary old age pension is the dependant's only source of income.

Food Subsidies

Now I turn to food subsidies. Here, I am faced with conflicting advice. Some argue that, in order to hold the cost of living, it would be right to increase the food subsidies; others say that £410 million is already much too high a figure, and should be reduced or cut out altogether. We are now in a position to consider this question against the background of the whole budgetary problem. The increases in National Insurance benefits mean that we have to find additional taxation not of £150 million but £170 million this year. I cannot contemplate the still further increases that would be necessary if we increased the subsidies. On the other hand, I do not think it would be right to add to the consumers' burden by cutting subsidies and so deliberately putting up prices further. This decision means that any increased costs which the Ministry of Food have to pay to farmers here and for imports will be passed on to consumers. As hon. Members are already aware, some increases in this field are bound to occur. The Minister of Food will announce them as necessary.

National Health Service

I come, finally, to the National Health Service. The gross estimate for the Service, in England and Wales and Scotland, is nearly £470 million which is brought down by receipts primarily from the Insurance Fund and from staff pension contributions to a net figure of £398 million. I must tell the Committee that this figure of £398 million in the estimate is some £25 million less than the original figure submitted to me, which was £30 million above last year's estimate, the increase being due, in the main, to higher prospective expenditure on hospital services. The Committee will appreciate that, with the improvements in pensions and other benefits I have just announced, the increase in total social services expenditure over last year already amounts to nearly £50 million. We did not feel that, in present circumstances, and with all the other burdens which have to be carried, it was reasonable to put upon the Exchequer, and, therefore, on the taxpayer, another £30 million. We decided that the Health Service estimates must be brought within a total of £400 million, which, for the time being, would have to be a ceiling.

My right hon. Friends will make all practicable economies in the course of their administration, but it is plain that the only way to keep within this limit without reducing the standards of the hospital, family doctor and consultant services below what is really essential is to find some other source of revenue. The Government have, therefore, decided to introduce a modest charge in respect of some dental work and optical services. We shall leave all extractions and conservation free as at present, but we propose to charge about half the scale fee for all denture work in future, and about half the cost of each pair of glasses. There will be no charge for children's spectacles. Expectant and nursing mothers will continue to receive free dental treatment, including dentures, from the local authority services, and children will, of course, receive free treatment in schools as now. Those for whom the charge involves hardship will receive reimbursement, in whole or in part, from the National Assistance Board in the ordinary way. Legislation will be introduced shortly and the details of these proposals will then be further explained by the Secretary of State for Scotland and the Minister of Health. The yield of these charges is put at about £25 million in a full year and £13 million in 1951–52. The intention to make all practicable economies in administration and to impose these charges was allowed for in the Estimates already presented to the House.

The Government naturally regret having to make these charges, but I believe the vast majority of our fellow countrymen will agree that, while it was reasonable to allow a slight increase in expenditure on health—some £7 million above last year—it was also necessary, against the background of our general financial position, the increase in pensions that we are nevertheless providing, and the higher expenditure on the hospital service, to impose a limit and accept that some charges should be made. We think that in this we have struck a fair balance between one item of social service and another. The charges will not normally fall on those who are seriously ill, such as hospital patients. They apply where there is least danger of hardship and perhaps more danger of abuse than anywhere else in the Health Service.

National Insurance Fund

Before I leave the subject of expenditure there is one other matter to which I must refer. It is complicated and technical and has no bearing on the main budgetary problem, so that hon. Members who are feeling exhausted can relax and go to sleep for a bit. I refer to the National Insurance Fund. The Government Actuary's Report on the Fund shows that because it is financed on an assumed average rate of unemployment of 8½ per cent.—far above anything we have had since pre-war days, and also above anything we are likely to have in the near future—it would, under present conditions, go on increasing by about £140 million a year. This surplus of income in the Fund is, of course, a very necessary addition to the nation's savings, and is always taken into account in calculating the size of the Budget surplus required, and therefore the amount of taxation to be levied. Nevertheless, as I am sure the Committee will I am sure agree, it is not satisfactory that a separate Fund intended to remain roughly constant, should be increasing at this rate.

The increased pensions and other benefits which I have just announced will reduce the surplus income by £39 million in a full year and £19 million in the first year. This would still leave a surplus income to the Fund each year of about £100 million. It is desirable, in my view, to eliminate this. I therefore propose to reduce the Exchequer contribution to an amount which will leave the Fund at about its present level. The precise basis of this arrangement, which is somewhat technical, will be explained in detail when my right hon. Friend has introduced the Bill dealing with pensions.

I must at once remind the Committee that this reduction in the Exchequer contribution to the Fund will not, of course, in any way ease the budgetary problem, for as I have explained already, the disappearance of the remaining surplus means a corresponding drop in savings. It will have to be balanced by a larger Budget surplus, which in this case is automatically achieved by the lower Exchequer contribution. It is really no more than a bookkeeping matter and makes no difference one way or the other to the gap which has to be covered by taxation.

Tax Changes

We have therefore to reckon with another £20 million or so to be added to the £150 million at which I previously estimated the gap. How are we to find this £170 million? Before dealing with this. I wish to refer to the report which I have recently received from the Committee under the chairmanship of Mr. Millard Tucker, K.C., which was set up by Sir Stafford Cripps to consider the taxation of trading profits. The Report, which was published last week, is a most careful document, representing the result of a great deal of hard work and thought, and I must express my warm thanks to the Chairman and members of the Committee for the valuable service they have rendered. I have not yet been able to study the recommendations in detail, and in any event I must await the reactions of industry and commerce before coming to final conclusions. Any question of legislation on the Committee's Report will therefore have to wait till next year.

Profits Tax

I now turn back to the problem of filling the gap, and I will refer first to a proposal which will not bring in much revenue this year, but which will, nevertheless, as I shall show, materially reduce the extent of this year's problem. It concerns the Profits Tax. There is no doubt that the level of company profits has recently been increasing rapidly. After a period of relative stability in 1948 and 1949, they are estimated to have increased in 1950 by nearly 14 per cent.—as against a rise in money incomes generally of nearly 7 per cent. A further substantial increase in 1951 is, I think, certain.

There are some who disapprove of profits in principle. I do not share their view. In an economy three-quarters of which is run by private enterprise, it is foolish to ignore the function of profit as an incentive. But it is one thing to recognise the justification for profit in the case of the individual firm as a reward for efficiency—perhaps with an element of luck thrown in; it is quite another to ignore a situation where, by reason of the general economic climate and not through the aptitude of individual managements, the whole level of profits, and the share of the national income taken by it, is rising. Unfortunately, in recent months not only have profits gone up, but dividends have risen too, and I have little doubt that unless some action is taken this process will continue and may even gain momentum.

A good deal less.

The figures published in the "Financial Times" show that ordinary dividends increased by 2 per cent. in the first half of 1950 compared with the corresponding period of the previous year; in the second half of 1950 the increase was 6.7 per cent., while in the first two months of 1951 the increase was 10 per cent. and in March it has been more than 14 per cent.

Over the previous year.

In present circumstances we simply cannot afford such substantial increases in dividends. Whereas a high level of corporate savings is essential, a big increase in dividends not only adds directly to inflationary pressure but also leads to claims for higher wages. I have considered very carefully whether in the circumstances we should not introduce some form of statutory control of dividends. While this is not, in my view, wholly impracticable, it would involve additional administrative work for which the manpower can ill be spared at present. Moreover, it is bound to give rise to all those difficulties associated with the fixing of a base period which were met with in the administration of the Excess Profits Tax and would be encountered again if any tax of this kind had to be reintroduced.

I have therefore come to the conclusion that, though there are arguments both ways, it is better to deal with this problem through the existing Profits Tax. I therefore propose to increase the rate of Profits Tax on distributed profits from 30 per cent. to 50 per cent., with effect from 1st January of this year, while leaving unchanged at 10 per cent. the tax on undistributed profits. If increased dividends are declared on or after today for a period before 1st January, the increase will, as on previous occasions, be subject to the increased rate of tax. The net effect of the increase in the rate of Profits Tax is, of course, only about half as big as appears at first sight because the Profits Tax is allowed as a deduction in arriving at Income Tax assessments.

In this way, we shall provide a powerful incentive to companies to put profits to reserve rather than to increase dividends. This will be supported by the new instruction to the Capital Issues Committee, to which I referred earlier, and which will involve some changes in the conditions under which bonus issues will be permitted.

As I hinted earlier, the yield from this change will be very little in the current financial year—about £5 million net: in a full year, after allowing for the loss of Income Tax at current rates, it will be £68 million. But this does not mean that it will not assist us substantially this year. Since firms will be liable to the high tax on profits earned now, in so far as they are to be distributed later, we can, I think, safely assume that from now onwards more will be set aside for tax reserve and less paid out in ordinary dividends. I put the net increase in corporate savings resulting from this change at some £30 million in the current year. This means we can make a corresponding reduction in the size of the Budget surplus which is required.

Before I leave the Profits Tax, I must mention a few more technical points. The first concerns the deduction made in respect of directors' remuneration in computing profits for Profits Tax purposes. At present, in the case of a director-controlled company, Profits Tax at the higher rate is payable—as well as Income Tax and Surtax—on the amount by which the total fees or salaries payable to the directors, other than the whole-time service directors owning less than 5 per cent. of the shares, exceed £2,500. In view of the increase in the Profits Tax, I do not think this is altogether fair on small businesses, in cases where there are a number of such directors working full time. As from 1st January, 1951, therefore, the limit of £2,500 per annum will be increased, subject to certain conditions, to £3,500 where there are two full-time directors to whom it applies—it is the total salary, of course—and to £4,500 where there are three or more directors. The net cost of this concession, after allowing for the consequential change in Income Tax, will be about £4 million in a full year and £300,000 this year.

Secondly, certain public utility undertakings, mainly bus and water undertakings, which at present enjoy complete exemption from Profits Tax, will from 1st January, 1951, be treated in the same way as nationalised undertakings, and be charged to Profits Tax at the lower rate of 10 per cent. The net yield from this change, after allowing for the consequential loss of Income Tax, will be about £1 million in a full year and £90,000 this year.

Finally, I propose to provide against avoidance of Profits Tax, in particular against arrangements for reducing Profits Tax liability by the issue of bonus shares coupled with redemption of capital, and also against avoidance of Profits Tax and Income Tax by switching profits from one associated concern to another.

Minor Taxation Proposals

Before I come to my other major taxation proposals, I can at this point in the traditional way conveniently refer to a number of minor and, I believe, uncontroversial or relatively uncontroversial matters on which Resolutions will be tabled.

Following my predecessor's announcement of last July, I propose to give statutory effect to the special Income Tax arrangement with building societies. There will also be Resolutions dealing with the taxation of investment income from new sources, and to prevent claims to re-payment of Estate Duty paid in accordance with the view of the law taken at the time payment was made. Other Resolutions will provide for validation of long-standing practice, which is found to be at variance with the law, in regard to three matters: the exemption from Estate Duty of certain Government securities held by persons domiciled and ordinarily resident abroad, the deduction of tax by paying agents from dividends paid by certain companies outside this country, and the taxation of persons employed in this country by Commonwealth Governments in trading or business undertakings.

I propose to continue for a further three years the key industry duty which would otherwise come to an end next August; to implement the recent trade agreement with Pakistan and to provide, in accordance with the Convention on the Valuation of Goods for Customs purposes, which was signed on behalf of His Majesty's Government on 21st February last, a new definition of value for Customs purposes. We shall also put an end to some tax evasion by extending as from tomorrow the Excise duty on mechanical lighters to include the principal parts of certain gas lighters and thus prevent people avoiding duty by offering for sale complete sets of these parts, which are ostensibly for replacement purposes, but which can easily be assembled into a complete lighter.

Purchase Tax

I now come to the difficult and thorny subject of the Purchase Tax, and will begin by referring to one small change concerning photographers. At present the larger portrait photographers are registered for Purchase Tax purposes solely to enable them to buy their materials free of tax. This is not only a waste of revenue and manpower but is unfair to their smaller competitors, who are not eligible for this advantage. I propose, therefore, to impose, from the date of the passing of the Finance Bill, a tax of 66f per cent. on photographs of this kind, if made from materials which have not borne tax. It will thus no longer be in the interest of the photographers concerned to obtain tax free materials and in future they will all, large and small, be treated alike. The saving from this will be about £1 million in a full year, and about £500,000 this year.

I now come to my major Purchase Tax proposals, and will preface them with three comments of a general nature. First, the aim of Purchase Tax is nowadays to a large extent the raising of revenue and the withdrawing of spending power to check inflationary tendencies, in very much the same way as the Excise duties and the non-protective Customs duties. On the face of it, there is no overwhelming reason why we should not raise revenue by taxing certain types of expensive clothing, household equipment and other things subject to Purchase Tax today just as we raise revenue by taxing beer and tobacco. Indeed, the proportion of the price paid in the case of Purchase Tax is, of course, only a fraction of what it is in the case of beer and tobacco. There is no doubt that many people would regard the latter as just as essential to them as many goods bearing Purchase Tax.

But for most of the time the tax has been in existence, there has also been another motive behind it—the discouragement of home consumption. This is of great importance at present when we not only need more revenue but also, as I have several times explained, must export an increasing quantity of consumer goods; and, in so far as it is feasible, must divert to defence production labour, materials and capacity now making consumer goods.

Thirdly, the Purchase Tax is often criticised because it is untidy, because it is not always easy to decide into which category an article falls, or why it should be subject to one rate of tax rather than another, and because, by and large, many people think it falls too heavily upon articles which nowadays are not regarded as luxuries.

In the proposals that I put forward, I have taken into account all three considerations. We need more revenue; that means taxing some articles at higher rates; in choosing the articles we must turn to those whose production for the home market we want to discourage because their production and sale at home is likely to conflict most seriously with the needs of export and defence. Increased taxation for this range of articles is clearly indicated, for so long as these other claims continue. Accordingly, I propose to increase from 33⅓ cent. to 66⅔ the Purchase Tax on motor cars. This will bring in £12 million this year, and £17 million in a full year.

This is a useful addition to the revenue, and in this field there is no danger of any adverse effect on the industry beyond that which must be faced in any case, because of the needs of defence. Home demand vastly exceeds the supplies available for the home market, and the prices paid for secondhand cars show that those who buy are prepared to pay considerably more than the present selling prices of new cars. In the high-class section of the industry, where this is not so much the case, there is at present particular justification for discouraging production for the home market, since the highly skilled technicians employed are urgently required for the re-armament programme. Generally speaking, then, the tax will bring in revenue and will relieve the pressure of home demand, thus making easier the smooth transition to defence.

For the same reason I propose to increase the Purchase Tax from 33⅓ per cent. to 66⅔ per cent. on wireless and television sets and valves and on gas or electrically operated domestic appliances. This increase does not, of course, apply to those appliances now exempt from tax and it will not apply to wireless batteries and a number of other articles, specified in the White Paper. The new rate will apply to goods delivered by registered wholesalers and manufacturers from tomorrow and will yield in a full year about £14½ million and in 1951–52 about £10 million.

I need hardly say that I much regret having to increase the tax on many appliances which can do so much to make the life of women at home less exacting. But we cannot carry through our defence programme without giving up something, and as I have repeatedly warned the House and country, it is in this field especially—the consumer goods produced by the engineering industry—that the sacrifice must be made. We want to discourage people from buying these things and if they insist on doing so then I think we can reasonably ask them to make a financial contribution to defence. When the period of re-armament is over, it will be possible to look again at the height of the taxes on all these articles.

I hope, too, that what I am now going to propose will be a small compensation. We have often been pressed to grant further exemptions from Purchase Tax for various necessary household articles which are in no sense luxuries. I must confess that having studied the Schedules pretty carefully, I have come to the conclusion that there is no clear-cut distinction between articles which may properly be taxed and those which should not. It is in the last resort a matter of opinion, and, wherever we choose to draw the line, we can be sure that there will be many who will claim that we should have freed still more articles from tax. In any case the need for revenue this year is such that I cannot contemplate going very far.

What I have done, however, is to go through the list and to propose for exemption from tax a fairly large number of the more necessary articles used in every household. These include various kitchen utensils such as pastry boards, rolling pins and pot scourers; a range of dusters and cleaning cloths; wash tubs, ironing boards, and hand-operated wringers; sewing needles, knitting needles, pins, thimbles, and paper patterns; hot water bottles, air cushions and overbed tables; school satchels and shoe laces. Full details of these reliefs will be found in the White Paper. The cost will be £3½ million in a full year and £½ million this year.

Towards the £170 million we have now found £35 million from the Profits Tax and £20 million from these changes in Purchase Tax.

I am sure the hon. Member will have plenty of opportunity before long to discuss these things.

We are left still with £115 million to find. I think we should raise this money in a manner which as far as possible spreads the burden pretty widely and therefore thinly so that the actual increase in particular rates of taxation is not too heavy.

Entertainmlnts Duty

Let me begin with entertainments. I do not think it unreasonable to look to expenditure on entertainment for some modest contribution to the heavy cost of defence. The duty, which brings in some £44 million a year, has not been altered for some time. Indeed, the tax on cinema receipts, which accounts for over four-fifths of the whole Entertainments Duty, has not been raised for eight years. There is, to be sure, much criticism of this tax, even at its present level, in the trade. But then it is usual for the trades concerned to criticise any tax which they collect for the Exchequer.

Moreover, much of this criticism is directed not to the level of the duty, which is paid by the customers, but to the share of the box office receipts which the industry retains; the criticism, in other words, is not that the public are paying too much, but that the industry is getting too little. Last year we made some changes in the tax as a result of which we lost a small amount of revenue, but some £2½ million extra was secured by the industry, shared about equally between the exhibitors and producers. This seems to me to point the way we should go, with this modification—that whereas last year more than the whole of the increased prices which consumers paid went to the industry, this year the need for revenue being what it is, the Exchequer must have its fair share.

I do not think there is any very great danger that a small increase in the tax will affect attendances at cinemas. Total gross box office receipts for 1950 were somewhat above 1949 and attendances and receipts are running this year at about the same level as last.

I propose therefore slightly to raise the rate of duty on cinema seats, from 5th August. The increase will be 1d. on seats from 6d. to 9d., 2d. on the main prices, that is, from 10d. to 2s. 10d., and above 2s. 10d. the duty will increase in appropriate steps up to 5d. on the top price of 11s. 7d., which will then become 12s. These proposals will bring in about £10 million in a full year, and £6 million in 1951–52.

I am prepared, however, to safeguard the position of the industry by forgoing for their benefit the proceeds of ½d. per admission, which will amount to about £1½ million in the first year and £2½ million in a full year. This will mean that in two years £5 million will have been added to the net revenue of the industry through adjustments of duty in their favour. This will be made effective by an arrangement of the same kind as was made last year, provided that on this occasion the larger part of the Exchequer remission goes to the producers. Negotiations will therefore be undertaken by the Treasury and the Board of Trade with the industry as soon as possible, and if an agreement satisfying the condition I have laid down is made, the necessary adjustments in the Schedule will then follow.

The increases in the duty will apply to the other entertainments now charged under the full scale, such as horseracing, greyhounds and speedways, but I do not propose to alter the taxes on entertainments paying at the lower rates, such as theatres, football and cricket.

Ten million in a full year and £6 million this year, less what we give back to the industry.

Hydrocarbon Oils

In the last Budget, the duty on petrol and other light hydrocarbon oils was raised from 9d. to 1s. 6d. a gallon. This was the first increase in the tax since

before the war, and in my opinion was overdue. Although there was, of course, much argument about its merits during the Budget and Finance Bill Debates, I have seen little sign of the damage which it was alleged at the time the tax would cause to British industry and transport. I am satisfied that in our present circumstances there is a good case for a further contribution from this source to provide additional revenue. I propose, therefore, to raise by 4½d. a gallon—half the increase made last year—the Customs Duty on petrol and other light oils and on heavy oils used as road fuel. The increase will apply to any oils of this kind which become chargeable with duty, from 6 o'clock this evening. [ Laughter.] I hope that there will be no sudden exodus from the Chamber.

The new maximum prices, including the extra duty, will become effective at the garages after midnight tonight. As a result of this change, the basic retail price of petrol will be raised to 3s. 6d. a gallon. Even so, it will still be lower, in some cases substantially lower, than in most European countries.

It was estimated during the debates last year that the effect of the increase then imposed on the operating costs of commercial and passenger transport was about 4 per cent. The present increase, therefore, of 4½d. a gallon will raise operating costs by no more than 2 per cent. This is a very slight increase, and would not on its own justify any increase in fares or freight charges.

As the Committee will be aware there is at present a preference for indigenous oils of 9d. a gallon. I see no reason to change the extent of this margin, and the duty on indigenous oils will therefore also be increased by 4½d. a gallon from today. There will be corresponding adjustments in the rates on petrol substitutes and power methylated spirits which come into the same group. The extra yield of these changes I estimate at £35 million in 1951–52 and £36 million in a full year.

That leaves us with some £75 million still to be found. I do not propose to increase any other indirect tax. It would not, in my view, be wise to raise the duty on tobacco, or beer or other alcoholic drinks, which are already at very high levels.

Income Tax

In the circumstances, I must turn to Income Tax. Since 1945, Income Tax reliefs have been given by my predecessors which amount in all to more than £650 million. This figure represents the cost at the time the reliefs were given, but with the steady rise in national income which has occurred since then, they are today, on current income levels, worth about £1,000 million a year. With great regret I now feel bound to take back some small part of this relief. I want to do this, however, in a manner which favours those with greater family responsibilities and who might otherwise suffer most hardship.

I propose to increase the three rates of Income Tax by 6d. in the £, but to combine this with an increase of £10 each in the married persons' allowance and in the child allowance. The 2s. 6d. rate chargeable on the first £50 of taxable income will thus become 3s., the 5s. rate chargeable on the next £200 will become 5s. 6d., and the standard rate of 9s. will become 9s. 6d., while the married persons' allowance goes up from £180 to £190 and the child allowance from £60 to £70. The married allowance will thus be higher than immediately before the war, and the child allowance higher than it ever has been.

As a corollary of the increase in the standard rate I propose to reduce the top rate of surtax chargeable for 1951–52 on incomes over £20,000 to 10s. in the £, to prevent the combined top rate exceeding 19s. 6d. in the £. The net yield of these changes will be £73 million this year and £81 million in a full year.

Tables will be included in the Financial Statement showing the effect of the proposed changes on specimen incomes, but the Committee will be interested to know that, with these concessions, a married couple without children will pay no increase until the man's earnings exceed £7 2s. a week; in the case of the married couple with one child there is no increase until earnings exceed £11 4s. a week, and in the case of the married couple with two children the tax payable is not increased until earnings exceed £21 1s. a week. There are in fact some very slight reductions in tax liability for those with children at lower levels of income.

These changes will necessitate new P.A.Y.E. tables, and some recoding will also be necessary. The new tables will be in the hands of employers, and the recoding will be completed in time for deductions on the new scale to begin in the week commencing 25th May. In the first week in which the new tables are used, the under or over-deductions of tax in the previous seven weeks will be made good. In some cases this may mean a fairly substantial deduction of tax in that week, but it will not be unduly heavy in relation to the income involved.

Summary

I must now summarise these proposals to see whether they represent an adequate contribution to the solution of the problem with which we started. The gap to be filled was, as the Committee will remember, £150 million. This was increased, by the changes in pensions which we propose, to £170 million, but I have estimated also that the additional corporate savings which should result from the increase in the Profits Tax will amount to £30 million, and therefore reduce the gap to £140 million. [ Interruption.] As some hon. Members appear to be leaving the Chamber, I would say that I fully appreciate the ordeal through which the audience has had to go.

The tax changes which I have proposed should yield, in 1951–52, an additional £61 million from Customs and Excise duties, and an extra £77 million in the field of Inland Revenue—a total of £138 million in all. In terms of the conventional Budget, they will turn an above-the-line deficit of £99 million into a modest surplus of £39 million. In terms of the alternative classification which, as I have explained, gives us a much truer picture of the current expenditure and revenue, they produce a surplus on current account of £224 million which in my judgment is about what we require.

The Committee has accompanied me very patiently on this long journey through such a maze of facts and figures and explanations and arguments. I will not detain hon. Members for more than a few minutes longer.

In the circumstances in which we have been placed this year it was impossible for the Budget to be both honest and popular. I know that this Budget will not be popular, but I claim that it is honest. It is honest because so far as fiscal policy can do so, it will protect us from inflation. It provides on the best judgment I can make at least sufficient, though no more than sufficient, of a Budget surplus on current account to bring our national savings up to the level required to avoid inflation. It is also, I would argue, a sound Budget, in so far as it deliberately assists, both by its general anti-inflationary character and by some more specific measures, the transfer of resources to defence.

I claim, too, that it is a fair Budget. It does something to help those who are most hard hit by rising prices—those with low fixed incomes. The proposed increases in taxation are admittedly severe, but they are not crippling, as they would, I fear, have had to be if we had also substantially increased the subsidies. Moreover, the incidence of the new taxes which fall admittedly most heavily on the better off, must be judged in the light of the decision not to increase the subsidies—a decision which, of course, affects all consumers, but presses more hardly on those who are not so well off.

This Budget will be the subject of prolonged argument here in this place, on the platform, in the Press, in the country. That is as it should be. That is the way in which we in this island go about our democratic business. But let the arguments be frank and fair; let the real alternatives be posed against each other so that people may judge more easily and clearly between them. If anyone thinks that the right way to meet the cost of defence is to lift the burdens I am proposing to lay on some shoulders, and impose them instead upon others, let him say so and say why. That is fair and honest. What is not honest is to pretend that you can do the lifting without the re-imposition.

Again, if anyone thinks that even in this time of rising costs Government expenditure should be cut substantially, let him say so, and say particularly where and how it should be done. That is fair and honest. But it is unfair and dishonest to base a self-righteous demand for cuts on rhetorical generalities, supported by a few flimsy and trivial illustrations. It is worse still, of course, if the evasion is openly justified by the brazen plea that to say what you really mean would cost votes.

And let us not altogether forget in the forthcoming debates the setting of this Budget. It is a setting physically remote from this Parliament of ours, but spiritually it is very close, for the setting is the clash and conflict between the two great forces in the world today—between Soviet imperialism on the one side and the Parliamentary democracies on the other.

It is this clash and the particular episode in it—Korea—which has imposed upon us here in Britain the need to turn our industries to defence and to call up our young men from their jobs and their homes. It is this clash, which, working through the huge demands of re-armament everywhere, has forced up the prices of materials and food throughout the world, and has also led to shortages of materials which hold back our rising production.

In all this, of course, we are not alone. In Europe and in the United States itself the same economic difficulties are to be found, springing from the same political forces. That is the plain and simple truth. Re-armament in peace-time does not come easily to democratic peoples, especially so soon after a major war. The popular urge to relax, the pressure for higher and higher living standards, the absorption with domestic issues, are all powerful influences which weaken the will to re-arm. And we must face it; the very process of democratic government to some extent encourages all this—often, in the past, with fatal or near fatal results. It has happened many times in history that democracies have played, while dictatorships have prepared. It is our responsibility and our opportunity, all of us, to see that this does not happen again.

Let us in our debates have some regard for the vital importance of keeping all sections of our people united on the necessity of doing what has to be done. Let us keep them satisfied that their political leaders—all of us here are in that sense political leaders—think too gravely of the issues at stake to use them as occasions for merely playing politics. Heavy as our new burdens may seem at times, how small even they are when set against the greater issues which lies behind them. If by these measures we can save the peace—as we believe we can; if we can protect ourselves from the nightmare of the police state, so utterly destructive of all that we value most in human relationships, there is not one of us here that would not cheerfully accept the burden, and far more too.

In all our debates and discussions, heated and prolonged though they will be, let us remember the great moral issues which lie in the background and let us shape our conduct accordingly so as to inspire our friends and confound our enemies.

It is now my duty to put the appropriate Ways and Means Resolutions to the Committee. I assume that, in accordance with recent practice, hon. Members have now received a copy of the Resolutions and that the Committee will be agreeable to my putting them in a shortened version.

Customs And Excise

1. Hydrocarbon oils ( Customs and Excise)

Resolved:

That as from six o'clock in the evening of the tenth day of April, nineteen hundred and fifty-one, there shall be an increase of four-pence halfpenny a gallon—
  • (a) in the rate of the duty of customs on hydrocarbon oils; and
  • (b) in each of the rates of the rebate allowed on the delivery for home consumption of hydrocarbon oils other than light oils;
  • and the provisions of section two of the Finance Act, 1950, as to the rates of the excise duty and rebate on hydrocarbon oils (under which those rates depend on that of the customs duty on hydrocarbon oils) shall have effect accordingly.
    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. Petrol substitutes ( Rate of excise duty)

    Resolved:

    That as from six o'clock in the evening of the tenth day of April, nineteen hundred and fifty-one, there shall be an increase of four-pence halfpenny a gallon in the rate of the duty of excise imposed by section three of the Finance Act, 1950, on petrol substitutes.
    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. Power methylated spirits ( Excise)

    Resolved:

    That as from the eleventh day of April, nineteen hundred and fifty-one, the rate of the duty of excise on spirits used for making power methylated spirits shall be the same as that at which the duty of customs on hydrocarbon oils is for the time being 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.

    4. Entertainments ( Excise)

    Resolved:

    That, as respects payments for admission to entertainments held on or after the fifth day of August, nineteen hundred and fifty-one, other than payments made before the eleventh day of April in that year, entertainments duty shall be charged according to the scale set out in the Table below, except in the case of entertainments chargeable at reduced rates by virtue of subsection (3) of section one of the Finance Act, 1935, or at intermediate rates by virtue of section fifteen of the Finance Act, 1950; and references in the last mentioned section to the full rate of the duty shall be construed accordingly.

    TABLE

    Amount of Payment

    Rate of Duty

    Where the amount of the payment, excluding the amount of duty—
    exceeds:s.d.
    5d. and does not exceed 7d.1
    7d. and does not exceed 8d.2
    8d. and does not exceed 8½d.
    8½d. and does not exceed 9d.5
    9d. and does not exceed 10½d.
    10½d. and does not exceed 11½d.
    11½d. and does not exceed 1s. 0½d.10½
    1s. 0½d. and does not exceed 1s. 1d.11
    1s. 1d. and does not exceed 1s. 4½d.1
    1s. 4½d. and does not exceed 1s. 5d.11
    1s. 5d. and does not exceed 1s. 8d.13
    1s. 8d. and does not exceed 1s. 8½d.1
    1s. 8½d. and does not exceed 1s. 9d.16
    1s. 9d. and does not exceed 1s. 9½d.1
    1s. 9½d. and does not exceed 2s. 0d.19
    2s. 0d. and does not exceed 2s. 0½d.1
    2s. 0½d. and does not exceed 2s. 2d.110
    2s. 2d. and does not exceed 2s. 2½d.110½
    2s. 2½d. and does not exceed 2s. 6d.23
    2s. 6d. and does not exceed 2s. 6½d.2
    2s. 6½d. and does not exceed 3s. 0d.29
    3s. 0d. and does not exceed 3s. 0½d.2
    3s. 0½d. and does not exceed 3s. 5d.211
    3s. 5d. and does not exceed 3s. 5½d.211½
    3s. 5½d. and does not exceed 4s. 2d.38
    4s. 2d. and does not exceed 4s. 2½d.3
    4s. 2½d. and does not exceed 4s. 11.47
    4s. 11 d. and does not exceed 5s. 6d.50
    5s. 6d. and does not exceed 5s. 11d.55
    5s. 11d. and does not exceed 6s. 5d.57
    6s. 5d. and does not exceed 6s. 11 d.61
    6s. 11d. … 6s. 1d. for the first 6s. 11d. and 3d. for every 3d. or part of 3d. over 6s. 11d.

    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. Key industry duty ( Continuation)

    Resolved:

    That the duties of customs chargeable under Part I of the Safeguarding of Industries Act, 1921, for a period expiring on the nineteenth day of August, nineteen hundred and fifty-one, shall continue to be chargeable for a further period of three years from the said day.

    6. Mechanical lighters ( Extension of excise duty)

    Resolved:

    That as from the eleventh day of April, nineteen hundred and fifty-one, for all purposes of section six of the Finance Act, 1928, relating to the excise duty on mechanical lighters,—
  • (a) any prescribed component of a mechanical lighter, or assembly which includes such a component (other than an assembly forming a complete mechanical lighter or a mechanical lighter which could be made complete by the addition of a flint) shall be deemed to be a mechanical lighter, but incomplete; and
  • (b) any reference to a manufacturer of mechanical lighters shall include a person by whom any such component or assembly has been manufactured in the course of a business carried on by him, notwithstanding that he has not carried on the manufacture at a time when such a component or assembly is deemed to be a mechanical lighter.
  • For this purpose the expression prescribed component means, in relation to any class or description of mechanical lighters, such one of the component parts of a lighter of that class or description as the Treasury may by order designate except that, until otherwise provided by such an order, the prescribed component of a lighter appearing to the Commissioners of Customs and Excise to be constructed solely for the purpose of igniting gas for domestic use shall, in the case of electrical lighters and flint lighters, be the stem (of the electrical lighter) and the frame (of the flint lighter), whether a rigid frame or a spring frame.
    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.

    7. Valuation of goods for customs duties

    Resolved:

    That it is expedient to make further provision for the valuation of imported goods for the purpose of any enactment for the time being in force under which a duty of customs is chargeable on the goods by reference to their value (but not so as to affect the law relating to purchase tax), and to make consequential provision as respects any drawback of a duty of customs so chargeable.

    Purchase Tax

    8. Purchase Tax ( Reliefs)

    Resolved:

    That the enactments relating to purchase tax shall be amended (with effect from the eleventh day of April, nineteen hundred and fifty-one) as follows, but subject to the power of the Treasury to make orders under section twenty-one of the Finance Act, 1948:—

    1. Goods comprised in Group 4 (Haberdashery, including patterns for making apparel):—

    The following shall be exempt—laces of kind used for fastening garments or footwear, sewing and darning needles, knitting needles, bodkins, crochet hooks, pins of base metal except hairpins, thimbles, finger shields for needlework, tape measures and paper patterns.

    2. Goods comprised in Group 5 (Textile articles of a kind used for domestic purposes and articles made of any material which are of a kind used as domestic soft furnishings or as domestic bedding):—

    The following shall be exempt—

  • (a) scourers, dish cloths, floor cloths and similar cleaning cloths, being woven articles, unbleached, of cotton or of cotton and jute, with weft of cotton waste and not exceeding 30 inches in length or width;
  • (b) woven cotton polishing cloths, piece dyed in a single colour, whether impregnated or not, with warp or weft of cotton waste, not exceeding 30 inches in length or width;
  • (c) cotton dusters, woven in a single piece and having, except for a border on each of the four sides, an over-all check pattern of coloured yarns, and not exceeding 24 inches in length or width;
  • (d) knitted cleaning cloths of unbleached cotton waste, not exceeding 30 inches in length or width;
  • (e) air pillows and air cushions;
  • (f) water beds, water pillows and water cushions.
  • 3. Goods comprised in Group 6 (Tissues and fabrics):—

    The following shall be exempt—knitted unbleached cotton cloth made with at least one needle omitted in every fifty needles.

    4. Goods comprised in Group 11 (Furniture, hardware, ironmongery, turnery, table-ware, kitchen-ware and toilet-ware, being articles of a kind used for domestic or office purposes):—

    The following shall be exempt—steel wool, metal pot scourers, pastry boards, rolling pins, coal or cinder sieves and sifters, coal hods and coal scuttles, pedal-operated sanitary bins, chambers and lids therefor, urinals and lids therefor, commode pans and lids therefor, commode chairs, commode stools, over-bed tables, hot-water bottles and stoppers therefor, baths, wash tubs, wash boards, ironing boards, shields and stands for smoothing irons or pressing irons, clothes line posts, clothes pegs, clothes props and clothes airers (other than heated airers);
    The following shall cease to be chargeable under Group 11—serving trays, bread boards, bowls, jugs and ewers (other than articles of cut glass, or of nickel, Britannia metal, nickel silver, pewter or similar metals, or which are made wholly or partly of stainless steel or are coated or plated with silver).

    5. Goods comprised in Group 12 (Appliances and apparatus, whether mechanically operated or not, of a kind used for domestic purposes, including cooking, heating and refrigerating appliances and apparatus of a kind so used, but not including mechanical lighters):—

    The following shall be exempt—kitchen scales and kitchen weighing machines, vaporisers (not being toilet requisites), fumigating lamps, hand operated wringers and hand operated mangles.

    6. Goods comprised in Group 23 (Trunks, bags, wallets, jewel cases, pouches, purses, suit cases, attaché cases, baskets and similar receptacles of a kind used for personal or domestic purposes (whether fitted or not):—

    The following shall be exempt—shoulder satchels of a kind designed for use by school children.

    7. Goods comprised in Group 31 (Toilet requisites except face cloths and towels):—

    The following shall be exempt—toilet paper.

    9. Purchase Tax ( Increases)

    Resolved:

    That the enactments relating to purchase tax shall be amended (with effect from the eleventh day of April, nineteen hundred and fifty-one) so that, subject to the power of the Treasury to make orders under section twenty-one of the Finance Act, 1948, such of the goods comprised in the following Table as are now chargeable with the first rate of purchase tax shall be chargeable instead with the second rate, and bicycle sidecars and bicycle and sidecar combinations shall be treated as bicycles.

    Table

    Wireless receiving sets of the domestic, portable or road vehicle types (including kits of parts, whether or not assembled and whether or not complete, of a kind used in the assembly of such sets), and valves suitable for use therewith.

    Mechanically propelled road vehicles constructed or adapted solely or mainly for the carriage of passengers (except bicycles).

    Mechanically propelled road vehicles having to the rear of the driver's seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows.

    Appliances and apparatus of a kind used for domestic purposes, being appliances and apparatus designed for operation by electricity or gas, except clocks and clock movements, sewing machines and motors therefor, hair drying machines, lighting appliances, electric blankets, electric warming pads, electric bed warmers and gas pokers.

    10. Purchase Tax ( Photographs)

    Resolved:

    That the enactments relating to purchase tax shall be amended so that, subject to the power of the Treasury to make orders under section twenty-one of the Finance Act, 1948, photographs of a kind not produced in quantity for general sale (other than cinematograph films, film-strips and lantern slides), being photographs in the making of which there have been used any chargeable goods in respect of which tax has not become chargeable, shall be included among the goods which are chargeable goods, and shall be chargeable with tax at the second rate.

    Income Tax

    11. Charge of Income Tax for 1951–52

    Resolved:

    That—

    (1) income tax for the year 1951–52 shall be charged at the standard rate of nine shillings and sixpence in the pound and, in the case of an individual whose total income exceeds two thousand pounds, shall be charged in respect of the excess at rates in the pound which respectively exceed the standard rate by the amounts specified in the second column of the following Table:—

    TABLE
    For every pound ofsd.
    the first five hundred pounds of the excess20
    the next five hundred pounds of the excess26
    the next one thousand pounds of the excess36
    the next one thousand pounds of the excess46
    the next one thousand pounds of the excess56
    the next two thousand pounds of the excess66
    the next two thousand pounds of the excess76
    the next two thousand pounds of the excess86
    the next three thousand pounds of the excess96
    the remainder of the excess100

    (2) All such enactments as had effect with respect to the income tax charged for the year 1950–51 shall have effect with respect to the income tax charged for the year 1951–52;

    (3) the amounts of tax which under section two of the Income Tax (Employments) Act, 1943, fall to be deducted or repaid before the twenty-fifth day of May, nineteen hundred and fifty-one, shall be computed by reference to the standard rate of tax for the year 1950–51, but nothing in this paragraph shall prevent the resulting under-deductions and over-repayments of tax from being adjusted subsequently by means of increased deductions or diminished repayments under the said section two, or, if need be, by an assessment.

    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.

    12. Higher Rates of Income Tax for 1950–51

    Resolved:

    That income tax for the year 1950–51 shall be charged, in the case of an individual whose total income exceeded two thousand pounds, at the same higher rates in respect of the excess over two thousand pounds as were charged for the year 1949–50.
    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.

    13. Personal Reliefs, etc.

    Resolved:

    That—
  • (1) in subsection (2) of section forty of the Finance Act, 1927 (which, as amended by section seventeen of the Finance (No. 2) Act, 1945, section twenty-eight of the Finance Act, 1948, and section twenty-four of the Finance Act, 1950, provides for the relief from income tax commonly known as the reduced rate relief), the words "thirteen-nineteenths" shall throughout be substituted for the words "thirteen-eighteenths" and the words "eight-nineteenths" shall throughout be substituted for the words "four-ninths";
  • (2) in section eighteen of the Finance Act, 1920 (which, as amended by subsequent enactments, provides, amongst other things, for a deduction, in the case of married persons, of tax on one hundred and eighty pounds), the words "one hundred and ninety pounds" shall be substituted for the words "one hundred and eighty pounds";
  • (3) in subsections (1) and (3) of section twenty-one of the Finance Act, 1920 (which, as amended by subsequent enactments, provides for a deduction of tax on sixty pounds in respect of each child with an income of sixty pounds or less), the words "seventy pounds" shall be substituted for the words "sixty pounds";
  • (4) in subsection (1) of section sixteen of the Finance Act, 1943 (which, as amended by subsection (4) of section fifteen of the Finance Act, 1947, 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 one hundred and twenty pounds a year and that the allowance is reduced if the total income of that person exceeds seventy pounds a year) the words "one hundred and thirty pounds" shall be substituted for the words "one hundred and twenty pounds" and the words "eighty pounds" shall be substituted for the words "seventy pounds";
  • (5) in subsection (2) of section nineteen of the Finance Act, 1935 (which, as amended by subsequent enactments, limits the tax on incomes exceeding one hundred and thirty-five pounds but less than one hundred and sixty pounds to one quarter of the excess) the words "three-tenths" shall be substituted for the words "one-quarter";
  • Provided that the changes effected by this Resolution shall not affect the amounts of tax deductible or repayable under section two of the Income Tax (Employments) Act, 1943, before the twenty-fifth day of May, nineteen hundred and fifty-one, but nothing in this proviso shall prevent the resulting under-deductions, over-deductions, under-repayments and over-repayments of tax from being adjusted subsequently by means of increased or diminished deductions and repayments under the said section two, or, if need be, by an assessment.
    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.

    14. Treatment for income tax purposes of new sources of investment income, etc.

    Resolved:

    That it is expedient to authorise such additional charges to income tax as may result from the substitution of a new provision for that contained in proviso (ii) to section thirty of the Finance Act, 1926 (which relates to cases where a person acquires, or is treated as having acquired, a new source of profits or income or an addition to an existing source).

    15. Income Tax on Foreign dividends, etc.

    Resolved:

    That—
  • (1) in paragraph (1) of Rule 7 of the Miscellaneous Rules applicable to Schedule D (which provides for the taxation by deduction of, amongst other things, interest, dividends, or other annual payments payable out of or in respect of the stocks, funds, shares or securities of any foreign or colonial company, society, adventure or concern) for the words "any foreign or colonial company, society, adventure or concern" there shall be substituted the words "any body of persons not resident in the United Kingdom";
  • (2) neither sub-paragraph (a) nor sub-paragraph (b) of the said paragraph (1) shall extend to any payment to which Rule 19 or Rule 21 of the General Rules applies;
  • (3) any reference in any provision of the Income Tax Acts to the said Rule 7 shall be construed as a reference to the said Rule 7 as amended by the preceding provisions of this Resolution;
  • (4) this Resolution shall have effect as from the tenth day of April, nineteen hundred and fifty-one, and shall also have effect and be deemed always to have had effect in relation to any payment made before that date from which a deduction of tax has been made which would, if this Resolution had been in force, have been a legal deduction.
  • 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.

    16. Building Societies

    Resolved:

    That—
  • (1) if, as respects the year 1951–52 or any previous year of assessment, any arrangements are made (whether before or after the passing of this Resolution) between the Commissioners of Inland Revenue and a building society as respects the tax which is to be charged in the case of that society, being arrangements which purport to provide that no repayment of tax shall be made in respect of any income derived from investments with the society—
  • (a) tax shall not be deducted from any dividends or interest payable in that year in respect of shares in or deposits with or loans to that society and no assessment to tax or repayment of tax shall be made in respect of any such dividends or interest on or to the person receiving or entitled to the dividends or interest; and
  • (b) the amounts actually paid or credited in respect of any such dividends or interest (and no more) shall be treated as income for that year of the person entitled thereto; and
  • (c) the said amounts shall, in applying Rules 19 and 21 of the General Rules to other payments, be treated as profits or gains which have been brought into charge to tax,
  • so, however, that any such dividends or interest shall be taken into account for the purposes of assessment to surtax;
  • (2) any such arrangements made as respects any year of assessment shall, if made after the beginning of the year, be deemed to have come into force at the beginning thereof, and any necessary adjustments shall be made in relation to any sums paid or credited before the date of the making of the arrangements:
  • (3) in this Resolution—

    building society means a society incorporated under the Building Societies Act, 1874, or such an unincorporated society as is mentioned in section seven of that Act; and

    dividend includes any distribution, whether described as a dividend or other, which, apart from this Resolution, would fall to be treated as a dividend for the purposes of Rule 20 of the General Rules;

    (4) this Resolution shall apply in relation to a company within the meaning of the Companies Act, 1948, or the corresponding enactments in force in Northern Ireland, which carries on a business which, in the opinion of the Commissioners of Inland Revenue, is similar to that carried on by a building society as it applies in relation to a building society, except that the references to dividends and shares shall be deemed to be omitted.

    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.

    17. Income Tax: sales and other transactions between associated persons

    Resolved:

    That it is expedient to authorise such increases in the income tax payable by any person as result from provisions as to sales and other transactions of any kind where one of the parties has control over the other or some other person has control over them both.

    18. Staffs of High Commissioners, etc.—Income Tax

    Resolved:

    That the exemption from income tax conferred by section twenty-six of the Finance Act, 1925, on persons having or exercising employments to which section nineteen of the Finance Act, 1923, applies shall not extend and shall be deemed never to have extended to any person employed in any trade, business or other undertaking carried on for the purposes of profit.
    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.

    Profits Tax

    19. Profits Tax

    Resolved:

    That it is expedient to authorise such charges to the profits tax, whether for past, current or future chargeable accounting periods, as may result from—
  • (a) the substitution, as respects chargeable accounting periods ending after the end of the year nineteen hundred and fifty, of fifty per cent. for thirty per cent. as the rate of any tax not being a distribution charge and of forty per cent. for twenty per cent. as the rate of any relief for non-distribution and as that of any distribution charge; and
  • (b) the charging of the tax on trades or businesses of statutory undertakers (as defined in subsection (5) of section nineteen of the Finance Act, 1937); and
  • (c) the division, either generally or for particular purposes, of accounting periods falling partly before and partly after the end of the year nineteen hundred and fifty; and
  • (d) the attributing of dividends wholly or partly to chargeable accounting periods other than those to which they would otherwise be attributable for the purposes of the tax; and
  • (e) amendments of the law as to what is to be treted as a distribution for the purposes of section thirty-five of the Finance Act, 1947, in cases where sums are capitalised; and
  • (f) provisions as to transactions designed or likely to result in avoidance or reduction of liability to the tax and as to sales and other transactions of any kind where one of the parties has control over the other or some other person has control over them both; and
  • (g) provisions consequential on or incidental to any of the preceding provisions of this Resolution.
  • Death Duties

    20. Death Duties ( Government securities)

    Resolved:

    That it is expedient to provide (with respect to deaths occurring before as well as after the passing of this Resolution) that, where the Treasury issue or have issued securities subject to any condition authorised by section forty-seven of the Finance (No. 2) Act, 1915, or section twenty-two of the Finance (No. 2) Act, 1931, for an exemption from taxation so long as the securities are in the beneficial ownership of persons neither domiciled nor ordinarily resident in the United Kingdom, the condition so far as relates to duties leviable on or with reference to a death shall be or be taken to have been such as to operate by reference to the persons in whose beneficial ownership the securities are or were immediately before the death.

    21. Estate Duty ( Overpayments and underpayments)

    Resolved:

    That it is expedient to provide, as from the eleventh day of April, nineteen hundred and fifty-one, for claims in respect of overpayments or underpayments of estate duty to be determined on the view of the law adopted when the duty was paid and accepted.

    Miscellaneous

    22. Staffs of High Commissioners, etc.—Land Tax

    Resolved:

    That the exemption from land tax conferred by section twenty-six of the Finance Act, 1925, on persons having or exercising employments to which section nineteen of the Finance Act, 1923, applies shall not extend and shall be deemed never to have extended to any person employed in any trade, business or other undertaking carried on for the purposes of profit.

    23. Pakistan Trade Agreement

    Resolved:

    That with a view to the fulfilment of the agreement made on the second day of April, nineteen hundred and fifty-one, between His Majesty's Governments in the United Kingdom and in Pakistan, the Ottawa Agreements Act, 1932, and any other enactment relating to customs which amends or relates to that Act shall have effect as from that day as if the said agreement were included among the agreements scheduled to the said Act of 1932, and as if accordingly any reference to a country the Government of which is a party to one of the scheduled agreements, or a country between the Government of which and His Majesty's Government in the United Kingdom any of the scheduled agreements was made, applied to Pakistan by virtue of the said agreement and not by virtue of the agreement made in the year nineteen hundred and thirty-nine between His Majesty's Government in the United Kingdom and the Government of India.
    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.

    24. Amendment of law

    Motion made, and Question proposed,

    That it is expedient to amend the law with respect to the National Debt (including the sinking funds therefor), Customs and Inland Revenue (including Excise), with or without amendments of the law relating to purchase tax of the following descriptions:—
  • (a) amendments to exempt from tax, or charge with tax at the first or second rate (instead of a higher rate), goods comprised in Group 4, 11, 12 or 31 and now chargeable at the first rate, or goods comprised in Group 5 or 6 and now chargeable at the first or second rate, or goods comprised in Group 23 and now chargeable at the first, second or third rate, but so as not to prejudice the power of the Treasury to make orders under section twenty-one of the Finance Act, 1948;
  • (b) amendments to make provision for the giving to the Treasury of advice and assistance in the exercise of the said power by a body to be constituted for the purpose, and for the powers and duties in that behalf of that body and other subordinate matters.
  • 5.55 p.m.

    I think I shall be expressing the opinion of the whole House if I pay our compliments to the Chancellor of the Exchequer upon the lucid, comprehensive statement which he has made to us this afternoon, and upon the evident lack of hatred or malice which I felt was apparent while he was unfolding his proposals: We have had what is, upon the whole, an objective statement, and the proposals which have been made, for all the difficulty which attaches to many of them, have been designed as he himself claimed, as an honest attempt to solve the problems which lie before him. I have listened to many Budgets in this House, and have even contributed five myself. I am bound to say that I feel the right hon. Gentleman has placed himself, by his opening statement this afternoon, in a good position to conduct the long and severe debates we shall no doubt have on many aspects of the policy.

    I would not like to turn to criticisms without saying that again I feel sure that the whole House would wish to send a message of goodwill and encouragement to Sir Stafford Cripps. [HON. MEMBERS: "Hear, hear."] If he is heavily burdened by affliction at the present time, it is largely because of the devoted manner in which he has endeavoured to serve the public. As one who has differed from him fundamentally in many ways, and worked with him as a trusted comrade in many others, I feel that the few words I have spoken might well carry the message of the House across the seas to him.

    The speech to which we have just listened can, of course, only be considered in relation to the sombre background against which it stands. Here I cannot expect any longer to carry with me approving glances from those who sit opposite. After all, this is the seventh Budget which has been opened since the Socialist Party have become masters of our affairs.

    I was quoting the Attorney-General. We dwell in the aftermath of devaluation. I cannot help feeling that that dark shadow hangs over us now. It has increased by nearly a third the working and productive effort needed from Britain to make the exports out of which our vital supplies and raw materials have to be bought. The Chancellor referred to this. I have not his actual words, but they certainly stressed the fact that this 30 per cent. devaluation of our national products, relative to what we get in return, was a very heavy burden, and that weighs upon us all the time. There are, no doubt, other causes at work, but it is this hard, dominant fact of the aftermath of devaluation which impinges upon us at the present time. Much of the life energy of our island, already over-strained when the war ended, drained away from this cause, and also from unrequited exports and from lavish expenditure.

    Those who hold that taxation is an evil must recognise that it falls upon this country in a most grievous manner at the present time, continually burdening the mass of the nation and continually clogging—I do not know why that word came into my mind—or, at any rate, hampering our efforts. There is to be an increase of taxation. I am not at all concerned today to examine even cursorily the detailed proposals which the Chancellor has made, but taxation is to be increased; it is to be heavier still. Naturally, many people will feel that the issue should be argued out very tensely as to whether other economies in Government expenditure might not have relieved us from the need of applying new burdens and new taxation.

    Of course, we know the times are difficult. The Prime Minister told us the other day that the price rises were due to world causes, but almost in the same breath he claimed the whole credit for full employment for his own party. Everything that is bad is due to world events; everything that is good is due to the Socialist Party. That may be a very comforting theory, but I feel bound to warn the Chancellor of the Exchequer that it is not one which we can adopt as the basis upon which our debates on the Budget and the Finance Bill will be conducted.

    If we take the whole period of the rule of the Socialist Party, I think it is fair to say that the mismanagement of our finances over the whole period tells the same tale, or almost the same tale in different terms, as the mismanagement of our defences. We must not be led by the agreeable presentation which the right hon. Gentleman has given us of these proposals into any weakening in our conviction of the grave financial position in which this country stands and of the very heavy drains which have been made, not only upon its accumulated wealth made since the war, but also upon the incentives and resourcefulness by which our future daily bread can be earned.

    Of course, it is quite true to say that there has been a great increase in production, a steady annual increase, but compared to capitalist, free enterprise United States, the increase has not been on anything like the same level. If we take the whole period of Socialist rule, we must see that during this costly period we have fallen from the position which we held at the end of the war in almost every sphere of our activities and reputation at home and abroad. The Chancellor of the Exchequer is not primarily responsible for this; he bears his share of collective responsibility.

    We shall, of course, study and consider with great attention the proposals which are now put before us. I should not attempt—I would not try even cursorily—to examine in these few remarks the proposals in detail or to judge them on the spur of the moment. It is our duty, however, to subject, not only the Budget, but the whole of our financial and economic position, to severe and searching examination, and we shall not fail to do it in the weeks and months which lie ahead. One thing, however, is clear, and that is that the necessary money for rearmament has got to be provided and that the House of Commons is the sole authority which should do its best to find it in the least harmful manner.

    I shall certainly conclude, as I began, by thanking the Chancellor for what I think everyone will recognise was a remarkable Parliamentary performance which will, I trust, make the foundation upon which a high reputation as a Chancellor of the Exchequer—we are all in the club together—may be expected to rest.

    6.5 p.m.

    It would not be amiss for at least one back bencher on this side to add his word of congratulation and gratitude to the Chancellor of the Exchequer for the quite brilliant speech to which we have listened this afternoon. All of us will agree with the right hon. Member for Woodford (Mr. Churchill) in what he said about the lucid and comprehensive qualities of that speech, and I am very glad to voice the opinion of, I am sure, every Member on this side that my right hon. Friend has acquitted himself, not only admirably, but in such a way as to put himself at once into the front line of Chancellors of the Exchequer in the history of the country. That ought to be said, and I am very glad to have the opportunity of saying it.

    I had originally intended making a very different speech but, fortunately, the nature of the Chancellor's statements today has made it quite unnecessary for me to make that particular speech. I welcome especially the speedy and generous way in which my right hon. Friend has on the whole met the very serious problems, which have been troubling so many of us, facing people who are living on retirement and widows' pensions. I am very glad that my right hon. Friend has at once conceded the case that was impressed upon him and his colleagues in the Government who deal with these matters.

    One of my regrets upon this point is that the proposal is a little tardy in execution. I wanted to see this change made considerably earlier than 1st October next and at an earlier age than 70 years. I understand that it must be the subject of legislation in the House, and so, therefore, it will be possible for those of us who take a very special and deep interest in this matter on behalf of old and retired people to go into these questions very much more fully on another occasion. I will not, therefore, detain the House with this subject tonight, but I ask my hon. Friend the Financial Secretary, who now occupies the Front Bench, to press upon his right hon. Friend that there is a very strong case for bringing forward this welcome improvement in the conditions of retirement pensioners to the earlier age and to a much earlier date than 1st October next. These are the main points I wanted to put tonight.

    I welcome very much indeed all the other proposals that are to be dealt with regarding retirement pensions. The incentives to remain in work over the age of 65 are also something for which we have been pressing. The increased increments are very good and valuable and on behalf of the Members on this side I give to the Chancellor a very hearty welcome for his proposals in this connection.

    One other point which occurs to me on the general question of the taxation which has been proposed is with regard to the increase in the taxation on new cars from 33⅓ to 66⅔ per cent. The effect of this inevitably will be to bring a very large unearned increment in value to every possessor now of a motor car. It means that the second-hand car market again will boom, and I ask the Chancellor if it would not be possible in some way, perhaps by means of some kind of sales tax—I am throwing out this suggestion without, of course, having had time to consider it deeply—on such transactions to reap some benefit to the Exchequer from the inflated values which secondhand cars will now acquire as a result of the further increase in the Purchase Tax on new cars. It ought not to involve great administrative difficulties since every car is a licensed vehicle and, therefore, such transactions could quite easily be traced as between the buyer and the seller. I ask my hon. Friend on the Front Bench to give that suggestion some consideration. Here I think is something which is extremely good and justifiable upon which to impose a tax.

    I conclude by expressing the gratitude and pride that we on the back benches feel in the performance of our Chancellor of the Exchequer. I happen to be one of the elder members of this movement which I represent in this House. In another year or so I shall have been half a century in the service of the Socialist movement of this country. I feel that it is particularly gratifying that I am able on this occasion to say these words of appreciation to a relatively young member of our movement, but one who already has achieved such high distinction.

    6.12 p.m.

    I should like to join with the leader of our party in paying tribute to the admirable speech to which we have listened with so much pleasure. It was delivered in a way we could follow and understand, the diction was perfect and the articulation was extremely clear.

    I am probably the only hon. Member of this House who heard the famous Budget introduced by the late Sir William Harcourt when he first brought up the question of Death Duties on landed estates. I was only a boy at the time, but since then I have made it my business, as far as possible, to listen to every Budget speech delivered in this House. If listening to some scores of Budget speeches would make me a financier, I could say that I am on the high road to acquiring that education. I feel there are certain points that it is necessary to raise. I am sorry to detain the Committee this evening, but I know by bitter experience that it will be very difficult to get in on a subsequent day and catch the Chairman's eye. Therefore, I ask your indulgence, Sir if I say tonight what has been on my mind for a long time.

    Speaking as a representative of Northern Ireland I would point out that we view with great alarm the rapid growth of inflation. Its effect on all business concerns is readily seen in the widespread need for additional working capital, to meet rising prices and increasing costs of plant replacement and modernisation. With taxation at its present high level, no business can build up a favourable reserve to meet the increased capital requirements. This applies equally to all companies, private and public, but in the case of the private companies, of which we have so many in Northern Ireland, the situation is aggravated by the effect of Estate Duty legislation which became especially onerous from the year 1940 onwards.

    The result has been that where a deceased person has made a transfer of any property to a company during the last five years of his life and he has received benefits, including dividends and interest, the company is liable for assessment of Estate Duty in respect of a large proportion of the assets. It does not matter of what the property transferred consists, whether it is business assets, whether it is cash payment on allotment of shares, nor does it matter how long ago this transfer took place.

    The disquieting feature of all these Finance Acts is that through their provisions practically every private company may be brought within their operation. It may apply to a trading company formed 50 years ago equally with an investment company formed six years ago. The rates of duty on certain levels are now 50 per cent. higher than they were when the Act was passed. Where a person has had control of a company at any time within five years of his death the Act requires that the shares of the company should be valued on a net assets basis.

    If one has regard to the disparity between the inflationary value of fixed assets and their going concern value, it is clear that the computed value of the shares is out of all proportion to their intrinsic value. The Act of 1940 is undoubtedly harsh in its application to the family company; and we have many family companies in Northern Ireland which have built up the prosperity of Ulster. I could mention a dozen straight away, but I do not wish to take up the time of the Committee. This type of private company has been built up in Northern Ireland by the frugality, by the thrift of its founders and the abstinence of its members in regard to dividends. The private company now forms an integral part of the commercial life of Northern Ireland. The continual ploughing back of profits which these private firms employ is a feature of the family company.

    This ploughing back of the profits has precluded the members from building up outside reserves with which to pay Death Duties, with the result that we are beginning to see in our country the gradual elimination of the family company. This position is extremely serious. Every member of a private company is now being made fully aware of the implications of these Acts. We have been gravely perturbed at the incidence of Death Duties as they affect private companies. If the Estate Duty provisions of the 1940 Act remain unaltered and unmitigated in enforcement, the consequence to the private companies in Northern Ireland and to the economy of our country will be absolutely disastrous.

    These statements and these figures have been put forth by a very eminent chartered accountant, Mr. John Bacon, who laid the case recently before the annual meeting in Northern Ireland of the Society of Chartered Accountants. I cannot help feeling that the time has come when it is no longer possible to keep on dipping, as was said by me on a previous occasion, into the so-called pool, the pool of the rich. There is no longer an unlimited pool of wealth in the hands of the rich from which the Chancellor can draw. The Government have already killed the goose which laid the golden egg—[HON. MEMBERS: "No."]—and have not used these stupendous Death Duties for paying off debt, because those duties consist really of capital, but have spent them and frittered them away as income.

    I remember the time when it was possible for a private individual or a company to insure against Death Duties. Now, as a former Chancellor of the Exchequer, Sir John Anderson, fully admitted, that is no longer possible because the amount insured against Death Duties is added to the aggregated sum upon which Estate Duty is charged. Therefore, insurance against Death Duties has practically ceased. The result is that many beautiful estates, many of our most superb country houses throughout Great Britain, and also in Northern Ireland, are gradually disappearing. They are becoming country clubs or something of that kind. They were useful because they were educational. These country gentlemen threw open their picture galleries and opened their houses as public museums—

    One could go over Chatsworth House every day of the week. One drove from Buxton by coach; it was one of the attractions of that delightful watering place. Now, if one goes round the country, one finds that these places are gradually being closed down. They were part of the amenities of this country, and they are all gradually disappearing.

    Not very long ago I was being taken round his garden by a country gentleman who has always been the very best of landlords, who has always maintained his farms in the best possible condition, and has spent his rents on improving outhouses and buildings. He said to me, "I am still supposed by all the people in the country around to have the same income as my father—£50,000 a year—but after I have paid Income Tax and Surtax at 19s. 6d. in the £ my income is reduced to £4,500.

    I thought he was exaggerating, but when I examined the table published by the Chancellor of the Exchequer I saw that he was perfectly correct. He is a landlord who generously pensioned off his gardeners and coachmen, and gave their widows houses free on the estate—that was the way his wealth was distributed. These things are now no longer possible. One estate after another has to be parted with; and when the so-called "once-for-all" capital levy had to be paid, there was no income during three years.

    I had the honour of speaking on the first Budget introduced by the Labour Government that came into power in 1945. That was in October, 1945. I spoke on the Third Reading, and although I do not like quoting what I have said on previous occasions, I would refer to what I said about the peroration of the then Chancellor of the Exchequer in opening his Budget. He described the enormous amount of expenditure on all sorts of things, good or bad, that he was proposing to undertake, and he concluded with these eloquent words:
    "To do all these things and to do them well, as part of a coherent plan, steadily accomplished stage by stage during the lifetime of this Parliament—such shall be our aim, such shall be our pledge and our pride."—[OFFICIAL REPORT, 23rd October, 1945; Vol. 414, c. 1885.]
    I replied in these words:
    "they will not do these things because before they attempt half of them they will be brought up by the threat of national bankruptcy. They are living in a fools' paradise. This rake's progress will bring them to a catastrophe even worse than that to which they brought the country in 1931, when a blow was struck at British credit from which it has never recovered."
    I said:
    "I implore the Chancellor in the interests of the country to draw back before it is too late and save this country from the financial abyss into which he is going to plunge her."—[OFFICIAL REPORT, 11th December, 1945; Vol. 417, c. 235–6.]
    I agree with the Leader of the Opposition in denouncing the devaluation policy of last year, because I believe it was almost worse than the catastrophe of 1931. By it the Government have no doubt given a temporary stimulus to our export trade but now its effects are coming home to roost. We have to pay enormously increased sums for all our raw materials and we are beginning now in every industry—I know this to be the case in those with which I am familiar—to feel the pinch desperately. A financial situation can never be remedied by depreciating the currency. Dean Swift said that when the English Government introduced into Dublin the so-called Wood's halfpence, a debased coinage. That is what the Government have done by their devaluation.

    Now we see the result. This increased taxation, this increased Income Tax, is not due merely to the needs of defence. It is due—

    Re-armament should have begun long before, when it could have been done infinitely less expensively, when raw materials were very much cheaper. The Government have now to pay an enormously increased cost. They have to compensate for the neglect of those past years, when our defences were altogether insufficient for the crisis—and many a time, in addressing this House, I warned the Government of the crisis that was coming from the Far East, and was laughed at by hon. Gentlemen opposite. I can only say today that he "who laughs last laughs loudest."

    6.29 p.m.

    The hon. Member for Antrim, South (Professor Savory) must be easily the gloomiest of those six or seven Conservative Members at present in the House. When the Chancellor of the Exchequer sat down, I seemed to detect relief on the benches opposite. I am quite sure that they were expecting a financial pronouncement very much worse and more drastic than the one which the House has heard today. It will take them some time to recover their warlike approach towards the Budget proposals which, had those proposals been more drastic, they would have manifested much more vocally tonight instead of waiting until tomorrow or the next day.

    The Chancellor did not, of course, go into the whole of the economic background which has been the subject of previous debates. It is true to say that the effects of the re-armament programme have not yet been felt, and will not be felt for a little time to come, but it is bound to have an increasingly undesirable effect, both on the cost of living and on the raw material situation generally. That means that in order to cushion the lower income groups and old age pensioners against the effects of the re-armament programme we must devise a comprehensive plan based, in the view of hon. Members on this side of the Committee at any rate, on Socialist principles.

    The international situation and the rearmament programme are indissolubly linked with the problems associated with the cost of living in this country. I can safely prophesy that hon. Members opposite will exploit to the utmost possible extent, on every possible occasion, the disgruntlement which is bound to arise over the cost of living while, at the same time, supporting the re-armament programme which is the main cause of rising prices. We know only too well that the two are intermingled and that they constitute a single problem. It will, however, serve the tactics of some hon. Members opposite to put these two problems into separate water-tight compartments for the purpose of pursuing their own partisan propaganda in the next few months.

    It is clear that self-sacrifice and some degree of dislocation are inevitable, and it would be dishonest on the part of anyone claiming to fulfil his public responsibility to minimise the prospects that lie ahead. The basic requirements are fairly simple to analyse. One is that by increased production it will be possible to maintain living standards. This increased production and the needs of the defence programme may entail the re-imposition of the Control of Engagement Order. If that situation does arise the re-imposition of that order must be accompanied or, if necessary, preceded by all the physical controls, some of which were referred to by the Chancellor this afternoon. I would quote one or two examples of physical controls which have already become necessary. One is that labour and materials should not be frittered away on non-essential building, and this includes Government offices. There should be—and a start has been made—a ruthless limitation of profits. I am inclined to think that hon. Members opposite expected something much more drastic in that field than was announced this afternoon.

    There must be a pruning of expenditure. The only difficulty with which we on this side of the Committee always find ourselves confronted, when trying to discover the views of hon. Members opposite in that connection, is that they will not specify the direction in which they want such economies to be introduced. I can think of one example where expenditure could for the time being be reduced, namely, in the field of increased television facilities. The Post Office has developed a technique which will enable sound and television programmes to be relayed over the ordinary telephone wires without interference with telephone conversations. That would be a much better way of effecting the economies required in this direction and would be a useful supplement to the steps being taken by the Chancellor to increase the tax on wireless sets. To a considerable extent wireless sets would be less necessary in the home market, and so would the present expensive television sets, if only the Post Office would relay these broadcasts over the ordinary telephone system. I point that out as an example; I have no time to develop the argument.

    From the point of view of the consumer the Chancellor of the Exchequer has gone some way towards reducing the impact of the re-armament programme on the lower income ranges, and the increased scale of old age pensions will be gratefully received as the first instalment of what we on this side of the Committee always believe to be a very necessary process, namely, the redistribution of the wealth of the country. I am sorry that there was no reference by the Chancellor to the clothing and footwear position. In this field there is every justification, it seems to me, for pegging prices of utility ranges by a subsidy, and at the same time rationing utility goods; because, otherwise, in the case of clothing and footwear we shall find that rationing by price, and inflated price, will impose very considerable hardships. I am quite sure that people generally would prefer to have limited supplies at reasonable prices than unlimited supplies at prices they cannot afford.

    I should have appreciated a reference by the Chancellor to the possibility of using the nationalised industries to a much greater extent than at present to help the consumer. In order to keep down the cost of living the Government should, if necessary, subsidise coal and transport. It might easily be cheaper to do that than to allow an inflationary rise of wages to chase after rising prices, which would result from a rise in the cost of such essential goods and services as coal and transport.

    I have no doubt that economies could be introduced in many Government Departments. That is a matter to which from the points of view of administration, the Treasury should direct their attention in a more vigorous manner than in the past. I am not in a position to suggest specific directions in which economies of that kind can be made, but there is a general feeling, which is not without substance, that there is room for economy in this sector of our public expenditure. I hope that the Treasury will look more actively into this matter than they have done. Today, there are sufficient jobs to absorb any people who may be found to be redundant in the Civil Service. They could be taken into the ordinary industrial life of the community where some of them, at any rate, could perhaps do more useful work.

    The decision of the Chancellor to recommend an increased tax on distributed profits will be welcomed on this side of the Committee. I should have liked a new tax on excess profits—that is to say, on dividends increased after a specified date. I deplore the absence of any reference to a tax on capital gains. Notwithstanding the very considerable redistribution of incomes in this country as a result of the administration of the Labour Government since 1945, the fact still remains that there is an inordinate gap between the very small minority who own most of the wealth of the community and the rest of the people.

    Figures given in a useful pamphlet written by my hon. Friend the Member for Stechford (Mr. Jenkins), show this very clearly. One per cent. of the community own 50 per cent. of the capital wealth of the country. Five per cent. of the population own 75 per cent. of the whole of the property of the country, and that notwithstanding five or six years of Labour rule. That matter will have to be looked into. I ask the hon. Member for Galloway (Mr. McKie), who seems to be following this part of my argument with some interest, for reasons about which it would be unwise for me to speculate, to prepare himself for the day when the Labour Government looks into this problem. It has not been considered with the vigour which it deserves.

    Is my hon. and gallant Friend aware that no one has given more attention to this aspect of our finances than the Chancellor himself? He is recognised as a great authority on it.

    That makes it all the more regrettable that there was no reference to it in his speech this afternoon. In my view, and I think I shall probably carry a few hon. Members with me, it is incompatible with a democratic society that this gross inequality should continue.

    That may be worth consideration, and I shall welcome the hon. Member's co-operation and support if I decide to do so.

    The Chancellor's decision to impose an increase in the Purchase Tax on cars will go a little way towards absorbing the under-valuation which the catalogue price of new cars today represents. Even after the two-year convenant has expired, it is still possible for the owner of a new car to sell it at a price very much greater than what will be the new price after the small increase in the Purchase Tax of new cars which it is proposed to impose. While I am on this point, I also regret that there was no reference to a matter which I hoped would be included in the Budget, namely, the abolition of the distinction in tax between pre-1948 cars and post-1948 cars. Every year since the Budget of 1948, I have continued to refer to this anomaly and, in accordance with my tradition, I refer to my own position on this matter once again, and I express regret that no concession has been made to the owners of old cars.

    The increase in Income Tax will not be objected to by the mass of the people who were expecting something in the nature of an increase to 10s. in the pound. The extra 6d. on the Income Tax which the Chancellor has recommended will provide about £75 million. If the tax had gone up to 10s., the further increase would have provided another £75 million, with which a great deal could have been done to relieve the hardship of old age pensioners and people in the lower income ranges, many of whom will not benefit at all from the concessions in the allowances for children and wives.

    I hope that the spirit in which these proposals will be considered will be as non-partisan as possible. The people generally are prepared to put up with the restrictions and burdens which are inevitable during the next year or two to ensure what they believe is at stake—the safety of the country. I was pleased to note the words used by the chairman of the Lambeth Chamber of Trade in his annual report, when he gave expression to an admirable sentiment which, I regret to say, is not always echoed by officers of chambers of trade throughout the country. He said:
    "I am confident that all traders will meet the future with grim determination and do everything possible to assist the preservation of peace by accepting these restrictions and burdens."
    I hope that those words will penetrate into the minds of some hon. Members opposite. It is inevitable that sacrifices will have to be made. We must not put—and the Chancellor's statement shows that we do not intend to put—the old age pensioner, the widow and the child into the front line. In other words, the social services and social security must not bear the main brunt of the impact of the defence programme.

    The Economic Survey for 1951 said that the Government had set the nation two objectives: first, to push through with the Defence programme; second, and at the same time, to preserve our economic strength and independence. I should have been inclined to reverse the order for practical as well as psychological reasons. Without a strong economic base, to which reference was made by the Minister of Labour in a recent speech, there is no future for this country. It is inevitable that the crisis must be met and overcome and it can only be met and overcome by the continuous and developing application of the Socialist principle of fair shares, ensuring that the heaviest burdens are borne by those who are best able to bear them

    6.50 p.m.

    I shall not be long on an occasion like this. We have had a very interesting Budget speech, delivered in a pleasant voice and in a pleasant manner, but I have one criticism. I wish the Chancellor would not be quite so pompous when he says, "I have something rather technical to say, and hon. Members need not listen, because they would not understand." That is virtually what he says. [HON. MEMBERS: "No."] Well, he says, "I am going to talk about something technical, and hon. Members can relax." That was the implication of what he said. Yet it was not technical at all, but the kind of thing one gets when one has the first examination at school at the age of nine. It is rather irritating when somebody lectures us on a rather low-grade subject. I heard one interjection that the Economic Survey was a bit of Old Moore's Almanack, and that was a fairly accurate description. At any rate, many of the statistics in it are pure and unadulterated guesswork.

    The Chancellor referred to the desirability of people continuing to work when they are over 65, because he pointed out that, in 25 years from now—

    I do not think it is proper to tell you, Sir Charles, that you have done no work, because that is what the hon. Gentleman said. I have always regarded you as a most industrious person. Anyhow, I do not see what the point of that observation was, because the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith), knows that I served my time in the same trade as he did, and that he abandoned it much earlier than I did.

    To return to the people over 65, I remember that, in a debate on the Beveridge Plan in which I took part when we were sheltering in Church House, I drew attention to some of the dangers involved in that plan. I pointed out that, in 30 years, there will be only two workers to sustain each old age pensioner. We had the same thing from the Chancellor today, many years later, and it is a very important consideration. If anybody studied the actuarial report which was published in connection with the Beveridge Plan he would see the forecast made there. Therefore, it has always been vitally important that people should continue to work for longer than they have done in the past; otherwise, the nation will crash in ruins. We shall have to do as the robins do when the youngsters kill off the old ones, which is a very unpleasant prospect for those who are my age.

    Who are the biggest sinners in this respect? The Government themselves. [HON. MEMBERS: "No."] Yes. The number of people whom they force to retire at 65 is very high indeed. When the Financial Secretary to the Treasury reaches his office tomorrow morning, he will find a letter, almost verging on impertinence, on this very subject from me. I was taking up the case of a constituent of mine who does not want to retire. Unfortunately, he is unestablished, and he will be forced to be unemployed. He now has a job in the Home Office, and, so far as I know, he is quite competent to carry on for another few years. Why should he not do so when we are short of manpower?

    When I was a member of the London County Council, during the war, I was often horrified when we were told that a man had to retire because he reached the age of 65, or that he could in some cases retire at 60. We cannot carry on the nation on that basis. I was delighted with what the Chancellor said about firms and private persons, but the Chancellor ought to address his remarks more particularly to the Treasury, because the Treasury is virtually the employer of all our civil servants and controls the rules and regulations about employment in the Civil Service. I have made numerous representations on this subject, and I understand that, on Friday of this week, a Private Member's Motion will be introduced on this very question, when many hon. Members who have studied the matter more exhaustively than I have done will have some strong things to say about the policy of the Government.

    Private persons virtually cannot save any more today, whether they are professional men or employees of companies, and that also is true of the great range of employers. Today, nearly every company is building up a pensions scheme to provide its staff, when they retire, with the amount of income which, in the past, they used to provide by their own savings. Because of these pensions schemes, I find that firms, Government Departments and the rest are relucant to employ people unless they are very young, and so we have the appalling spectacle of able and competent men walking the streets of London because the door of employment is closed to them.

    I am delighted with what the Chancellor said, though I think that he must do even more than he said he would do. He must bear in mind that the State and the nationalised industries between them employ nearly four million people. Therefore, I suggest that he might take the opportunity of addressing his remarks in those directions. I am delighted, also, to find that the Chancellor has pinched my brains. We are now discussing an important proposal, and hon. Gentlemen may perhaps vote for it on Monday night, if there is a Division. If he will look at the 24th Resolution (Amendment of law), he will find in paragraph (b) these words:
    "amendments to make provision for the giving to the Treasury of advice and assistance in the exercise of the said power by a body to be constituted for the purpose, and for the powers and duties in that behalf of that body and other subordinate matters."
    I think it was last year, in the discussion on an Amendment, that I urged that a body should be set up similar in character to the Import Duties Advisory Committee, which was set up under the Import Duties Act, 1932, so that, when a body of traders was satisfied that the Purchase Tax was operating in an undesirable way, they had a body to which they could present their case, and which could act in a judicial manner and present its report to Parliament. If that was done, the same procedure would apply as applies under the Import Duties Advisory Committee, and the necessary order would have immediate effect, subject to an affirmative Resolution for an increase of Purchase Tax, or to a negative Resolution if the Purchase Tax was diminished. [An HON. MEMBER: "Does the hon. Member want to pray again?"] I do not pray against reductions in taxation; I am much too wise for that.

    I now want to say a few words on the Profits Tax. From some points of view, the most evil thing in this Budget, particularly from the point of view of the stability of British industry and the future employment of the people, is the Profits Tax, and the Chancellor's interpretation of its present effects was quite wrong. Profits Tax is not borne by the shareholders, but by the company, and it is paid out of that part of its profits which are not distributed.

    If the Profits Tax is 50 per cent. and the firm desires to continue its existing dividend, which would not be unreasonable, the amount deducted, instead of being 30 per cent., will now be 50 per cent., and, after that is deducted, there is 9s. 6d. in the pound, and that is the part which the shareholder bears. From the sums that are not distributed in dividends 10 per cent. is deducted, but the whole of the Profits Tax diminishes the amount of reserve, assuming that the payment to the shareholders remains unaltered, which is what most people desire.

    The idea of shareholders being wealthy people is not correct. I am a director of a company which employs 400 people, and which has always been careful and prudent and has never chucked its money about. In the last year for which I worked out the figures, the tax free income of the shareholders as compared with the employees worked out in the ratio of one to 15. Payments in wages and salaries were 15 times as great as the amount distributed in dividends, tax free in both cases. The shareholders are four times as numerous as the employees, so that the average income of the shareholders was one 64th part of the average income of the employees. That is the kind of proportion which may exist in companies of quite moderate size and in public companies with widespread shareholders. That company used to distribute 10 per cent. It now distributes 15 per cent. When it first came into being 17 years ago Income Tax was, I believe, 4s. 6d. in the pound. Now the shareholders are getting 15 per cent. but the rate of taxation is double. In cash, therefore, they are now receiving roughly the same as they did in 1934, and in purchasing power they are receiving about a third. The suggestion that the increase which has taken place is improper is untrue.

    Why should they? It is only incompetent people who get National Assistance. [HON. MEMBERS: "Oh!"] Well, perhaps that is wrong. [HON. MEMBERS: "Withdraw."] I agree that I was wrong; I was provoked. The interruption had no relevance, because a company is not qualified to apply for National Assistance, and I am talking about a company. [An HON. MEMBER: "What about the shareholders?"] Some shareholders may be applying for National Assistance. I do not know; I do not inquire. My duty is to act as a trustee for them, for which they pay me a moderate fee. They ought to pay me more.

    Let me cite the case of another company with which I am familiar. For many years they had a reasonably prosperous business and regularly paid 10 per cent. The war came, and for the time being completely destroyed their ordinary business, but their plant and equipment was such that they could switch over to what they called war work, which, in their case, was far less profitable than their normal work. Then came the end of the war, after which they went through a difficult period trying to get back to their old work. At one time they paid no dividend at all. One year they paid 2 per cent. and the most recent declaration is 5 per cent. It would be reasonable for the shareholders to try and get back to the 10 per cent., which was their normal pre-war rate. Incidentally, that would represent to the shareholders much less purchasing power than they had before the war. For that they are to be penalised in two ways, first because of an Act of Parliament which may make it illegal to do that without Treasury consent, apparently—I was not clear about that part of the Chancellor's speech—and they are also penalised by a heavy addition to the Profits Tax.

    What relation taxation bears to the total profits of a company depends naturally on what proportion they seek to put to reserve and what proportion they seek to distribute, and the calculation will vary. In one company for which I have worked out the figures, at the present time 12s. 6d. out of every pound which they make goes to the State and 7s. 6d. out of every pound defrays the whole of the dividends and the whole of the sums placed to reserve. Under the change proposed by the Chancellor the increase in the Profits Tax means an extra 2s. in the pound, and on top there is an increase of 6d. in Income Tax: that is an extra 2s. 6d.

    In future, this company will be taxed to the tune of 15s. in the pound on all it makes. That is an unduly high proportion. It will trespass on the reserves which the company used to buy new plant and improve its buildings, and unless that process of buying new plant and so forth goes on continuously the company is bound ultimately to go out of business because it will not be able to compete effectively in the market. If I were an employee of the company the one thing I should want to see done would be the placing of adequate sums to reserve. Employees are as vitally concerned in the reserve as the shareholders, because, to a large extent, therein lies their security of future employment.

    The Chancellor indulged in the usual complete misapprehension about bonus shares. Bonus shares do not mean that shareholders get anything which they did not get before. Let me take, for example, a company which issues bonus shares to ordinary shareholders, because they own what is left of the company after everybody else is paid out. Take a company with a paid up capital in ordinary shares of £100,000. As a result of careful administration and building up reserves they have reserves of £100,000. Other things being equal, the shares which were originally worth £1 are now worth £2, but their legal capital is half their actual capital. I think there is a lot to be said for getting the two level. It has the supreme advantage that directors can legally distribute in dividends any surplus of assets over liabilities and they can distribute the whole of the reserve fund if they like. If they decide to capitalise the reserve fund by a bonus issue they deprive themselves of the power to distribute those reserves in dividend. In other words, what is ploughed back has to stay ploughed in.

    It is in the interests of the employees that when the reserve builds up there should be a bonus issue. One does not get cash with a bonus issue. One gets a piece of paper which says that a share which was once one is now two. In the ordinary way the market value drops by half, unless with a moderate bonus issue—not one at 100 per cent.—the directors having been careful in the past, every shareholder is entitled to a little more in cash and they seek to maintain the same rate of dividend when the capitalisation has gone up from, say, 100 to 120. That is not unreasonable, but if they do that it attracts taxation and if it goes to people who are rich it attracts surtax.

    No. It has been paid on £2 before, in effect. What the hon. Gentleman is mixing up is the amount distributed in dividend and the rate of dividend in the past. There are a few people who like to do it because they like to conceal the rate of dividend. I have only heard one man say that. He said it to me in Victoria Street in 1920. He was a very prosperous gentleman at the head of a big business and his son is a Cabinet Minister today. I will not mention names because it might be a bit unfair. The story is true, however.

    It is very desirable that bonus shares should be issued and there is nothing evil about it. But by stupid propaganda on the part of people who have not understood it, the idea has got around that there is some improper transaction involved. It is not improper. It is merely the recognition of a fact, and directors in future are to be prevented from doing something which would be in the interests of the shareholders and their workpeople.

    There was a period in the Chancellor's life when he had the privilege of trying to instruct other people, and he must know that a bonus share is not the evil thing which he represented it to be today. How the Capital Issues Committee come into the picture at all I do not know. This means no movement of money. It only means a book entry and the casting of a burden upon the directors of signing a lot of new certificates; that is all. I hope we shall not have any more nonsense of that kind from the Chancellor or from any of his subordinates.

    In some respects the Budget attracts me. I am delighted that Purchase Tax has been removed from dishcloths. I shall now be deprived of one of the things which I take with me on the platform. I very often take a dishcloth which I bought in Croydon to clean the windscreen of my car when it gets muddy. The man in the shop said, "I am sorry it is so dear, but it has to bear Purchase Tax at the rate of 66⅔ per cent." I used to take one of these dishcloths from my pocket when I spoke on Purchase Tax, and display it as a luxury article. I think the changes made at that end of the scale are very good, because it is absurd that the daily necessities of life should be subject to tax when the original purpose was to get revenue and to get it from luxuries.

    I had not meant to speak so long. I would have spoken at less length if the interruptions had been a little more relevant, but at least some hon. Members have been induced to listen from time to time. There are certain aspects of the Budget which we shall have to denounce at the right time, and I have not the slightest doubt that there will be a number of Amendments to the Finance Bill when it comes along. I can certainly think of a few. I am sorry that the Financial Secretary to the Treasury has walked out, but I hope he will read my speech tomorrow on the subject of the employment of those over 65—I repeat myself to that extent. I hope we shall have a pleasant time for the rest of the night, because it looks as if we are to be kept much busier this Budget night than is customary.

    7.10 p.m.

    I was very interested when the hon. Member for Croydon, East (Sir H. Williams) let the cat out of the bag by saying that anyone who found himself receiving National Assistance was incompetent. He is not a hard-hearted man and I do not think he really wants to be unkind to the unfortunate but—

    The hon. Member might really play fair. There was an interjection. I made a casual remark. I subsequently realised that my casual remark in reply to the interjection was not quite warranted and I withdrew it. I do not think that in fairness he should pursue it.

    I did not catch the hon. Member's withdrawal. I think he is a very fly bird and that he began to catch up with what he had said and realised there were dangers in his statement. But I do not have to rely upon him for an interpretation of Tory economic and social theory. There is plenty of other evidence.

    There was an occasion in the proceedings on the Iron and Steel Act, right at the end of the debate when my hon. Friend the Parliamentary Secretary to the Ministry of Supply was talking about the effect of the Act on the nation and on the steel shareholders. An hon. Gentleman opposite interjected and made it quite clear that in his judgment—and there were no objections from his side—the shareholders were in fact the nation. Perhaps the hon. Member for Croydon, East, will forgive me but there is not such a tremendous amount of difference between what he allowed to slip out and what slipped out that night at the end of the steel debate. It was perfectly clear from the whole of the speech of the hon. Member for Croydon, East, after he got going that the concern of the Tory Party is profits.

    After I had been speaking for three minutes I did at least say something about the Budget.

    I should be quite prepared to come down to the hon. Member's constituency and discuss all of his speech, including the part that has been withdrawn. I shall come back to his profit thesis in a moment. The first point to which I want to refer is a point which was raised by the hon. Member for Antrim, South (Professor Savory). He made a point often made on the Conservative platform up and down the country and which I am quite sure will be made up and down the country in the months that lie ahead. It is that if only the Conservative Party had won the last election and been in office they would have carried the re-armament programme through much quicker and sooner and, of course, much cheaper than we shall do. They say they would have got off the mark much quicker.

    My hon. Friends should get a copy of "The Right Road for Britain" and read it. This was trotted out before the last General Election. It was produced way back in 1949. If my hon. Friends will read it they will not find in it any suggestions at all that the Conservative Party were thinking about defence even in 1949.

    May I draw the attention of the hon. Member to the cost of living which the Socialists in their posters said they were going to bring down?

    I am quite willing to come to what was said at the last General Election. At the present moment what I am saying is that at the last election the Conservatives said nothing about defence. It is quite clear, of course, that when they are talking to an exclusively Conservative audience, and that often means that the I.Q. is not very high, they read their own publications and get away with it. Only the most innocent hon. Members opposite, like the hon. Member for Antrim, South, will come down to this Committee and repeat the story that on this side of the House we bear the major burden of responsibility for the kind of Budget we have today because we ought to have introduced the defence programme a long time ago and before costs began to rise. I hope very much we are not going to get any more of that particular nonsense, because it is poisonous nonsense.

    If one lets the Army run down for four years, surely it is going to cost more in the fifth year to build it up again.

    If the hon. and gallant Member really thinks that, why did he not persuade the Leader of his party at the last election to come to the country and say, "What we are going to do if we get returned is to launch a great re-armament programme." If the Conservative Party really thought that and did not say so they are cheats, liars and humbugs and I am prepared to accept that interpretation. On the other hand, if they did not think that, they should not come down to the House of Commons and say, "Of course if we had got in we would have launched the re-armament programme earlier." Their re-armament record is pretty dirty, because in 1935 that is similar to what they did. Nobody has produced more evidence on that than the Leader of the Opposition. He pointed out in his books, which I quote so often, that in the 1935 election, Mr. Baldwin, as he then was, thought we should rearm but he had not the courage to tell the country. Here we are now in the same situation.

    This is terribly important because to my mind if we are to get the people of this country to accept the burden of rearmament, what we have to do is to tell the truth, tell them what is the purpose of re-armament and what the consequences are going to be and ask them to face those burdens. The ordinary humble folk, after all, produce the arms and bear the burden not only of re-armament but also of war if that unfortunately, should come. In a democracy the only possible way is to tell them the truth, and if we have to tell them that truth we might as well start telling them tonight.

    While very much of what he said attracted me, I am not at all sure that the Chancellor told us all the truth about profits. In Table 26 of the Economic Survey there are items in relation to undistributed profits. In 1948 the figure was £524 million. In 1951 that figure will jump to £780 million. I have no objections to profits as such. I am entirely at one with the hon. Member for Croydon, East in that, provided that the profits are honestly earned by service to the community. But when one gets an expanding range of profits to that extent it seems to me that the margin of profit in this country is far too high. Clearly one cannot ask the people of this country to bear the very great burden of re-armament in the first year—and we have to remember that the burden in the coming year is going to be very much greater in the second and third years—unless there is some guarantee that nobody is making any profit from re-armament.

    I am not saying any profit at all, but what is a reasonable profit. I do not consider some of the profits that are being made reasonable, and I think the Chancellor ought to have done more than he has done by the taxation of profits to take the profit out of re-armament.

    I am grateful to the hon. Member for giving way, because he occupies the constituency next door to mine. He has made a statement about profits earned from re-armament. He will, of course, know that it is the standard practice of Government Departments on all armament contracts and sub-contracts to hold post-costings and that the rate of profit allowed has for the last 15 years been stabilised at 7½ per cent. of the average capital employed. That applies today, as it has applied since 1938.

    I have a much greater belief in the ingenuity of the employing classes in the hon. Member's constituency and in parts of mine than he has and in their ability to get round that arrangement. I am constantly being told that profits are no longer high enough, that no longer are there great pools of wealth. But it is astonishing how long people can live on their losses. In view of their standard of life, it is astonishing how long that can be done. I wish I could change places with them.

    I have spoken in my constituency and supported the re-armament programme because I believe it is essential that this programme should be carried out. In return, my first demand is that there shall be no excessive profits.

    The second demand is that we shall look after the old, the very young, the sick and the helpless. What my right hon. Friend has done this evening for the old age pensioners is a step in the right direction, but I wish he had gone further and done something about family allowances. If prices continue to rise I hope he will do something about family allowances. In my view the cost of living will press very hardly upon mothers with large families, so I hope something will also be done about subsidising the utility range of children's clothes.

    If those things are done we can find a way out of our difficulties—and that way is through greater efficiency and greater production. Provided there is a reasonable and fair method of distribution of wealth then, although the financial and economic task which the Chancellor has set the country seems very great—particularly when we remember that the task will be very much worse in the second and third years—we can reasonably expect our people to face the consequences.

    I do not believe all the party opposite have turned their backs upon the past. Some no doubt have and some, I think, are ashamed of the kind of things they have said and the kind of things which were done by them between the wars. But if anybody opposite wants to get me out of my seat in my constituency one of the things he has to do is to eradicate in Dudley and the surrounding district the memory of unemployment and its consequences between the two wars. From time to time plenty of ammunition on unemployment is supplied to us not only by Members of Parliament but by other members of the Tory Party.

    I return to this point because I believe that the greatest single obstacle to the throwing overboard of restrictive practices so that we may obtain the all-out production we need if we are to carry through the re-armament programme and still maintain our standard of life is, in fact, the memory of unemployment and the fear that if we have a Tory Government unemployment will return.

    Will the hon. Gentleman admit that the Socialists have brought us as near to unemployment as is possible today in peace-time through lack of coal? They have had to advertise to state that if we continue to use so much coal there will be unemployment. I have seen that stated in advertisements produced by the Socialist Party—and that is a wonderful admission after five years of peace.

    If the hon. and gallant Gentleman examines everything which has ever been said by any hon. Member on this side of the House now or in the past, what he will not find is this: he will never find anybody on this side of the Committee stating that he believes we must have unemployment in order to solve our economic difficulties. On the other hand, we can find dozens of quotations to that end from the party opposite. Let me deal with a very recent speech made by Sir Graham Cunningham, speaking to the Putney Young Conservatives. He is reported in the "Richmond Herald" as saying:

    "It has been said many times that the answer in this country to the spread of Communism is full employment. I believe that that policy is doing the exact opposite. I believe Communism is spreading faster through full employment than if people were out busy looking for jobs. Full employment is bound to end in catastrophe. Any workman can get another job if he decides to leave his old one."

    That is only one quotation, but I could weary the Committee by reading dozens of quotations from Conservative Members and members of the F.B.I. on that subject.

    I should be grateful to the hon. Member if he would tell me why the Socialist Government selected that particular gentleman to go to America to re-organise the whole of our export arrangements for dollar earnings, because it seemed to me that that was a very odd selection to make. I do not agree with Sir Graham Cunningham in the views which he expressed and which the hon. Member has just read.

    I entirely agree with the hon. Lady; I have been asking myself for a long time the question which she just asked. I do not know why that gentleman was selected and I wish I could find out. Nevertheless, I have quoted a statement which he made to a Conservative audience and—

    After all, it was a Conservative audience, and in any case it was not the first time that Sir Graham Cunningham had made this statement. The statement I have quoted was made just two months ago, in January, 1951, but on 30th July, 1946, Sir Graham said:

    "In saying that full employment is not practical politics, what is meant is that industry must have a pool or a reserve of labour on which to draw. The only effective sanction to procure discipline, stabilise wages and improve efficiency is the fear of unemployment."
    The most recent acquisition of strength to the party opposite, the right hon. Member for Ormskirk (Sir A. Salter), had something to say on this subject. He said:
    "There must, as a first step be the compulsion of unemployment in the existing industries."
    I am not complaining about this; I know that hon. Members opposite believe it. What I do complain is that they have not the guts to say so.

    We do not believe in it. I have listened to the hon. Gentleman talking about dishonesty, but he is making a completely dishonest statement.

    I did not hear all that the hon. Lady the Member for Tynemouth (Miss Ward) said, but I heard part of it and she must not make remarks of that kind.

    On a point of order. I am not quite certain whether you were in the Chair at the time or not, Sir Charles, but the hon. Member for Dudley (Mr. Wigg) said the Conservative Party were dishonest and that Mr. Stanley Baldwin cheated. I take exception to that, and, if I may say so with very great respect, if it is not in order for me to use the word "dishonest" and to object to a statement of that kind being made about my leader, then it is not in order for the hon. Member for Dudley to use that term, either.

    Mr. Stanley Baldwin is not now a Member of this House. We do not talk about hon. Members in the way the hon. Lady was talking just now.

    If the hon. Lady is not upset, then I hope I shall never have the opportunity of seeing her when she is upset.

    May I ask one question about the connection between restrictive practices and unemployment, because one of the things which worries me in an attempt to understand restrictive practices is that they are least in industries which suffered from unemployment as badly as or worse than others. As an example I would indicate the industry represented by the hon. Member for Rotherham (Mr. Jack Jones), which suffered from unemployment and which now has an absence of restrictive practices.

    A very powerful trade union has grown up in the steel industry in which the workers in the industry have confidence. Therefore, they are prepared, if the union comes to an agreement with the employers, to work out schemes which will do away with restrictive practices. On the other hand, in industries such as the pottery industry, about which my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) knows a great deal, or in the coalmining industry, it is perfectly clear that the memory of unemployment is burned so deeply that it cannot be eradicated in a short time.

    The hon. and gallant Member complains that it is not allowed to die. That is not my fault, but the fault of the Tory Party for using speakers like Sir Graham Cunningham.

    If we are to carry through the rearmament programme and still maintain our standard of life in this country with all the shortages that exist, then, quite clearly, we must keep with us the industrial workers. That means that the Tories, particularly if they think there is a possibility of their becoming the Government of the country, a belief which I do not share, must turn their backs on the past. It would be good morals and sound policy if the Leader of the Opposition would say, "We know all the statements that have been made. We make a clean breast of it. We know that our past has been pretty terrible, but we ask the people of the country to forgive us. We will give a guarantee that never again will a Tory Government fall back on the policy of deliberately organising unemployment in order to keep down wages and to assure the mobility of labour."

    On a point of order. Am I not right, Sir Charles, in protesting against a statement of that kind? With great respect, I cannot see any difference between making a statement of that kind, which is inaccurate, and my saying that such a statement is dishonest.

    I am very sorry that the hon. Lady cannot see the difference, but I can assure her that there is a very considerable difference.

    Even if the hon. Lady happened to be describing the situation accurately, the fact remains that millions of people in this country, particularly those in the industrial areas, believe what I am saying to be true. I suggest, therefore, that it is very important that this belief if untrue, and as the hon. Lady thinks, unfair, should be nailed down.

    As I say, I would like the Leader of the Opposition, on behalf of his party, to turn his back on the kind of statement which I have quoted and which was made in the last two months. I realise their dilemma. It is not so much that they would have to admit that they put through these policies in the past, but it would at once call into question the financial support which the Tory Party are getting. They have collected hundreds of thousands of pounds from industrialists. They did not do it for the good of the country or because of the old age pensioners, but for what the hon. Member for Croydon, East (Sir H. Williams), is so concerned about, as an insurance policy to protect their profits.

    What about the tens of thousands of old age pensioners who subscribe to Lord Woolton's Fund?

    I much prefer the hon. Gentleman when he is on his feet saying what he is thinking than when he is sitting there muttering. That is a very bad habit.

    I am quite sure that there are tens of thousands of old age pensioners who subscribed to the funds of the Conservative Party. After all, during the Festival of Britain the confidence tricksters will sell the same old stories and the same gold bricks. The problem of the Tory Party is how to get the people of this country to commit economic suicide, because there never would be a Tory Government here unless they got them to subscribe their half crowns. What I am quite certain about is that Lord Woolton's Fund did not all come from old-age pensioners.

    I will even give the hon. Gentleman a hundred thousand at £1 a time, but that still leaves £900,000. If the hon. Gentleman likes, I will send him a copy of the circular sent out by Sir Hugh Chance and other close friends of his in the Midlands asking the industrialists there to subscribe to Lord Woolton's Fund as an insurance. He suggested that the basis of their contribution should be a half-penny in the pound of the wages bill.

    Can the hon. Gentleman tell me the fundamental difference between an industrialist subscribing to the Tory Party funds, if he so wishes, and the Co-operative Societies subscribing to the Socialist Party funds? It is the same thing in principle. Therefore, what is the hon. Gentleman grumbling about?

    I assure the hon. Gentleman that I am not grumbling, and if he thinks I am he is quite wrong. Of course the Co-operative Societies have every right to subscribe to the Labour Party funds, as have the trade unions. The reason why they do it is because they are seeking to protect their members. The great industrialists subscribe to the Tory Party funds for the same reason.

    All I want to do is to make clear, not only to my constituents, but to the great mass of the people in this country, the fundamental difference between the two parties. We on this side were brought into being by the people, and we have sought to maintain the standard of life of the working-classes and to look after the old age pensioners. That is what we are still trying to do. We are trying, not only to maintain, but to improve the standard of life of all those who work with hand or brain. On the other hand the Tory Party is a political conspiracy. It has managed by blackmail or near blackmail to get money from industrialists for the sole purpose of protecting their profits.

    7.39 p.m.

    The Committee knows the hon. Member for Dudley (Mr. Wigg) well enough not to take what he says very seriously. I do not wish to refer to much of what he has said, although there are one or two points which, I think, should be taken up with some seriousness. First of all, he said that we could only get out of our difficulties if we increased our efficiency and our productivity. That is quite true. But he and other hon. Members opposite must recognise that if we are to maintain and increase efficiency and productivity it is essential that the capital equipment of industry should become increasingly better and more efficient. We cannot escape that fact. I think it regrettable that today the Chancellor of the Exchequer had to do two things which will have exactly the opposite effect, two things which will discourage rather than encourage the improvement of our capital equipment. The first is to withdraw the special allowance for new equipment, and the second is to increase the Profits Tax.

    My hon. Friend the Member for Croydon, East (Sir H. Williams) dealt with the Profits Tax very fairly, and pointed out that when this extra tax is imposed there will be relatively little left over to use for any purposes to increase the productivity of industry. I remember, and the hon. Member will perhaps recall too, how during the war we had a 100 per cent. tax. That would have appeared to meet the wishes of the most ardent Socialist. But what was the result? There is no one in the Treasury today who will suggest a 100 per cent. tax now, for the reason that it proved to be the most wasteful and uneconomic tax imposed on industry. It led to sheer unadulterated waste of tens of millions of pounds of the national resources. Therefore, it will never be repeated.

    We are not being asked for that now, but we are getting on the way to it in a 50 per cent. tax. I do not feel that, in the long run, this substantial increase of the Profits Tax will be to the advantage of the productivity of British industry. That is a view I express tonight, and I have no doubt at all that in a year's time, or in two years, the House will be saying the same thing and regretting that this has been done.

    How is it possible for a 50 per cent. tax on distributed profits to affect the productivity of industry?

    Do not let us get mixed up about this. A company can do two things with its profits. It can either distribute them in dividends, or it can put them to reserve. If they are not allowed to put them to reserve and if they are taxed on keeping them in reserve, or if they are taxed on making any profits at all, then their reserves automatically decline. There is no escape from that, and there is no use Members shaking their heads because that is the truth.

    The hon. Member is quite wrong. The point is that if a company puts them to reserve they pay only 10 per cent., but that if they distribute them they pay 50 per cent. It is as simple as that.

    I agree that it is as simple as that, I am not arguing anything different from what I just said. I am giving the broad facts. [Laughter.] It is no use Members laughing. I am saying what I said before, that if we take from a company a larger part of its profits, then the company is being left with far fewer profits. [HON. MEMBERS: "No."] That is so simple that it is not worth arguing. If more of the profits are being taken in tax, a company is left with fewer profits and has less to put into the expansion and development of its capital equipment. All I am saying is that it may well be, and I am sure it will be, that this increased tax will end by being regarded as by no means so excellent a device as some people think it is today.

    Another thing that the hon. Member for Dudley said needs examination. I understand, of course, that Members opposite have to use their normal means of propaganda—no one objects to that. I know that in the past they have used unemployment as one of their strong points—and no one can object to that. But the hon. Member today, in our present situation and faced with this great re-armament programme, is wasting the time of the Committee in suggesting there is any possibility of unemployment in the years ahead. It is asking for too much forbearance to suggest that.

    The fact is that whatever Government is in power, and everyone knows it to be the case, we are now facing, and shall be for many years to come, what is a wartime economy and to refer to unemployment is, therefore, completely irrelevant. The question of controls is equally irrelevant, because every Government will be committed to that policy—it will be an inescapable policy we shall all have to follow. I hope we shall not go on raising that in this debate as it is quite irrelevant to the future we see before us.

    I do not know why the hon. Member deprecates this being brought up. He will remember, for example, that a member of another place, Lord Balfour, laid it down there that the Government were failing badly because there was not a great deal more unemployment in the country to discipline the workers in the factories.

    The hon. Member knows very well that that speech was made a considerable time ago and before this rearmament programme. I do not deny what anyone has said. I am merely putting before the Committee something which is inescapable, that in the circumstances of the time, and presented with this great new re-armament drive, the problem of re-armament is quite irrelevant. I say now that no Government will be faced with any such problem for a great many years to come.

    The speech of the noble Lord was made in another place in January, 1950, so it is only just over a year ago.

    That is exactly what I said—before this great re-armament programme was introduced by the Prime Minister. Therefore, it is quite irrelevant, and I hope I may leave it and not hear it again.

    I think that the Chancellor deserves to be complimented for his suggestion about old age pensions. I heard his suggestion with great interest because my colleagues from Fife and I attended a conference of old age pensioners a few weeks ago, when they made their contributions and I made mine. My contribution was that urgent steps should be taken to encourage people to stay longer in industry. I am very glad that the Chancellor has accepted that principle, and I hope that we shall all support him in carrying it through.

    I am glad also, and one offers tribute where one can, that he has decided against increasing the food subsidies. I thought that wise for the reason that while food subsidies may be good in principle, in the sense that they steady the rise in prices in times of war or crisis, there must quite clearly be some limit to them. The limit reached during the time of the right hon. Gentleman the Member for Colne Valley (Mr. Glenvil Hall) is probably the right one to which we should now stick. If we were to allow the figure of £400 million to rise to £800 million or £900 million, the burden of taxation would become so great that we should directly discourage output.

    I make this further comment. I represent a division where a great many miners are now living, and I must report to the Committee, what I am sure will be agreed by every representative here of the miners, that the present rate of taxation is a deterrent to their work. There is no doubt about it. They complain bitterly; P.A.Y.E. is at such a level that they are very often discouraged from doing some extra job or task, because they realise that so large a part of the extra income will be taken in taxation. I regret that we have to face the prospect of increased taxation, coupled, as it is, with the increase in prices on so many goods. Therefore I am glad that we have not asked for a further increase in taxation to raise the amount of the food subsidies.

    I heard with some interest and not a little surprise that to meet the great gap which exists between income and expenditure the Government—not only the Chancellor—have decided, at long last, that those who benefit from some branches of the National Health Service will have to make some direct contribution. I am referring to those who obtain new dentures and who will now have to pay about half the price, and to those who obtain new spectacles, who will also have to pay a substantial amount of the cost. That strikes me as a reasonable and sensible thing to do, and some of us have been asking it for a long time.

    But it is not a little interesting that last week a distinguished member of the Government, no less than the Minister of Labour, was declaring publicly that he would not remain a member of a Government which levied precisely such a charge as this. [HON. MEMBERS: "No."] Oh. yes, he did, and all—

    At Bermondsey, a week ago. The hon. Member knows all about it. The question I am going to ask is: Was it a real threat or was it an idle threat? If it was a real threat, then, of course, the Minister of Labour must be expected to retire from the Government. If, of course, he does not resign from the Government, it means that the threat was quite idle, and that, of course, the rather terrifying picture which the right hon. Gentleman has created for himself, that he is a fearsome fellow in the Government, vanishes overnight, and we shall know that the right hon. Gentleman is not really worth worrying a great deal about.

    Having made that threat, and having failed to stand by his undertaking, he then relapses into the position which, of course, he should all along have occupied. But it is an interesting reflection that upon this rather important and vital matter of making ends meet so prominent a member of the Government should apparently be at such sharp variance with other prominent members of the Government.

    The hon. Gentleman is being completely unfair in talking about a speech which he has not been able to quote, and at the making of which he was not present. He has obviously not got accurate information, as I have. The statement was completely qualified by the Minister of Labour, lately Minister of Health. What he said was that he would not remain a member of the Government if treatment during illness was charged for. He was not referring to accessories like denture treatment or spectacles. He was referring to personal treatment at a time when a person was actually ill and in bed.

    The hon. Member has made a very gallant defence of his right hon. Friend, but there is no doubt about it—

    Let me finish the sentence. The whole country read at the week-end, in every paper, precisely what was intended, and will draw the conclusions, and so I pass from the topic.

    The hon. Gentleman is not being fair in passing from that topic without making things crystal clear by quoting the exact words of the Minister of Labour.

    I have not the exact words with me, but it does not make the slightest difference whether I have the precise words or not. I have said all that I wanted to say, and I will merely repeat that I shall be very interested to know what happens next.

    Having said that, I have only one other word to say, and that is that, like everyone else in the Committee, I listened to the Budget speech and recognised that it was a very remarkable personal performance. In this Committee we may have what views we like about policies, but I hope that we shall always be able to pay a personal tribute to any Member when he performs a very fine job, as I think the Chancellor did today.

    7.55 p.m.

    With the concluding words of the hon. Member for Fife, East (Mr. Henderson Stewart), I quite agree. I think the Chancellor performed his task in a very fine manner today. He discharged his duties well, and I would say that, in the main, the Budget is a very creditable Budget to come from a Labour Chancellor at a time of such tremendous difficulty as that we are now passing through.

    Whether or not the hon. Member for Fife, East, is accurate in the statement he attributed to the present Minister of Labour, I do not know. I did read in the Press some allusion to the Health Service, and about charges; and, of course, I could not explain any more than he could, what the detail of that pronouncement was. No doubt, in due course, the Minister of Labour can give to us the proper explanation of what was intended at that time. I think that what the hon. Member said about the charges of 50 per cent. for dentures and spectacles was a mistake.

    I think it is a great mistake that, for the small amount that is involved, the Health Service should be disturbed to the extent of making any charge at all. One of the things that we took tremendous credit for was that people were able to get their dentures and spectacles free. There is a considerable section of the community who are in poor circumstances, and this charge will bear very heavily upon them. In spite of all the difficulties, I regret that this should be carried out, and that it should have been introduced in what I regard as one of the best Budgets I have heard introduced for a number of years.

    On the other hand, I welcome the changes foreshadowed in the old age pensions, and the increase from 26s. to 30s. for a single person and from 42s. to 50s. for a married couple. However, I deprecate the fact that there is a postponement to October, because that is a very considerable time to ask old age pensioners to wait for that increase. I would say, further, that I have always had—and I have expressed it time and again—the greatest sympathy in the present difficult circumstances, with increased prices and the higher cost of living, with those people at the very bottom of the social ladder, who are unable to exert pressure through a trade union organisation to lower prices or to maintain prices or to raise wages and salaries. Old age pensioners, especially widows, have always had my greatest sympathy and have been a source of great anxiety to me, because of the heavy pressure exerted against their maintaining themselves and their standard of life—or of raising their standard of life.

    There, again, is another weakness to which I should like to allude. The Chancellor said he thought there should be greater laxity in relation to those between 65 and 70, and that they should be able to continue in employment for a longer period if they so desired. I think that that is quite correct. Many men come to me and say that they have had compulsorily to retire—either from the service of a local authority or from some form of Government service. They have had to retire at 65 and they believe that they are quite capable of carrying on their job. It is all very well to say that they should go to some other form of employment. Surely the form of employment we should expect them to continue in is that employment to which they are used, for which they are trained, and in which they have worked for many years.

    The Chancellor made a very wise change when deciding that old age pensioners shall now be allowed to earn 40s. instead of 20s. That is a genuine gain to old age pensioners in employment, which I am sure they will regard as a great boon. But we have not heard of any change being made for those between 65 and 70 who are either unable to get other employment or not able to take employment. It may be the intention to make some changes in the assistance given to them, but if not, if they are to exist on the pittance of 26s., what is otherwise a very good Budget will have done an act of injustice to that section of the community. I plead for reconsideration to be given to those between 65 and 70 who are not in employment, to whom an increase should be given consistent with the increase that is being given to those who are 70 years of age. The penalty at present imposed on those who at 65 are in employment should be removed.

    The greatest injustice is the postponement of this addition to the old age pension to 1st October. Why 1st October? Other changes made in previous Budgets have been effective from the same night or the following day. Why not make it even 14 days after the passing of the Finance Bill? There would be no difficulty in paying these people back money even if it were decided to make the change from today. I cannot understand it, and I hope that there will be an alteration of the date from which this concession is effected. I also hope that consideration will be given to widows who, owing to the present high prices of goods, are on a very miserable standard of living.

    Apart from those criticisms, I say this Budget performs acts of justice to those in industry. Reference has been made to the great hardship caused to those who would distribute their profits. The hon. Member for Fife, East (Mr. Stewart), who generalised, as he always does, failed to answer two points put to him in an interjection, because they completely knocked the feet from under the case he attempted to establish. It is not fair that the hon. Gentleman should raise points of that kind and then, when the sword is crossed with him in the cut and thrust of debate, not answer an interruption and admit that the "dolly" he put up had been knocked down and his case destroyed at its very inception.

    At the moment everybody makes some contribution to the great re-armament effort. My hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) is against the re-armament programme, and we understand that. From the Opposition we hear clamourings for the rearmament programme; they complain that it was not started early enough and that it was not large enough. The Opposition are not playing fair when they question the contribution to be made by industrialists. Who should bear the burden of re-armament? Surely it should be those who are best able to bear it. Many people in industry are making substantial profits, and I am certain, as the Chancellor said today, that because of the re-armament programme these profits will be increased. These people should, therefore, make a very substantial contribution. I do not say that no profits should be made out the work carried out because of the re-armament programme, but I do say that no undue profits should be made out of the need of the nation because of our re-armament policy.

    Hon. Members opposite have already said that the Government did not begin to build up the Army early enough; that they allowed the Army to run down. I remember that in 1945 a great clamour came from the Leader of the Opposition, and all members of the Conservative Party, that men were not being released quickly enough from the Forces. They wanted the soldiers brought back from every part of the world and sent to their homes and back into industry; they would have disbanded the Army almost entirely.

    That is quite wrong. There was what is now called a "floor" to the limit of disarmament advocated by my right hon. Friend the Leader of the Opposition. The Socialist Government took very much longer to demobilise than we were advocating, and they ran the Forces down very much below the "floor" we advocated.

    My mind is quite clear on this. I was here at the time, and I remember the Leader of the Opposition attacking the Prime Minister because the Army was not disbanded speedily enough. That clamour went on day after day. The Government were put in the dock as the militarists who were holding on to these men, while the Opposition wanted them disbanded and sent home.

    I was accused of being unfair. The hon. Gentleman is now doing the same thing. If he wants ninepins to knock down, let us have them. The Leader of the Opposition did ask for a more speedy demobilisation, but he asked also for the retention of a much larger Army, Navy and Air Force than Ministers wanted and eventually gave us. That is the point.

    That came at a much later stage, following afterthoughts on the international situation and the Fulton Speech of the right hon. Gentleman, when he began to face up to the realities of the international situation.

    I do not want to go over the whole field on this, because the Committee is almost unanimously of opinion that the great re-armament programme is essential. We may regret its necessity, but undoubtedly we believe that it must be carried out, and that our Forces should be maintained to meet the growing international dangers which are evident to every man and woman in the country today. In that situation, if that is the mind of the nation, hon. Members opposite cannot plead that industry is being called on to pay too great a price in any sacrifices they are being asked to make to meet a Budget of this kind.

    Finally, I think that all the additional burden on motor cars and Profits Tax and other things could have been substantially increased, because I do not agree that the limit of taxation has been reached. The Chancellor of the Exchequer, in his wisdom, has carried out what I would regard as an essential duty. He has brought in a moderate Budget which can be defended from any angle. In carrying out that policy, industrialists must play their part and make their contribution to this great re-armament programme from which many of them will gain tremendous benefit.

    My main objection is on behalf of the old age pensioners, and my plea tonight is for a revision of the Chancellor's proposals with regard to them. Apart from that, I pay my tribute to the Chancellor, and say that I think the taxation proposals outlined by him will go down as one of the best contributions we have had from any Chancellor since the end of the war.

    8.12 p.m.

    Before attempting to follow the speech made by the hon. Member for Shettleston (Mr. McGovern), I would like to add my mite of congratulations to those of other hon. Members upon the speech delivered by the Chancellor of the Exchequer, which was a feat of endurance and an outstanding achievement of clear and lucid thinking.

    If I may now turn to the point made by a number of hon. Members opposite in connection with industrial profits arising from the re-armament programme, I would, at the outset, re-echo the opinion expressed by the hon. Member for Dudley (Mr. Wigg) and the hon. Member for Shettleston, that we all desire to see no undue profit earned by the engineering industry as a result of Government contracts or sub-contracts placed in pursuance of the re-armament programme. It is almost a taunt by Socialist Members that hon. Members on this side of the Committee desire to make large profits from the Government's re-armament programme.

    My reply is a very simple and factual one. Government Departments conduct post-costings on all contracts which have been placed, and the margin of profit before taxation which is allowed upon such contracts has been agreed by industry, and even by the trades unions over many years. It amounts to 1½ per cent. of the average capital employed in the business carrying out the contract, and that provision in itself is sufficient safeguard that no excessive profits can be made.

    In this connection, I am sorry to see-that the right hon. Member for Colne Valley (Mr. Glenvil Hall) has left his; place, because in the last Parliament he was the Financial Secretary to the Treasury, and he would well know that "The Standard Conditions of Government Contracts" make that express provision. It is impossible to evade investigations by the Government auditors in that matter.

    The hon. Gentleman agrees that there is a 7½ per cent. margin of profit. He will also agree that there will be a vast expansion of certain industrial concerns in the country, and that if their turnover is doubled obviously their profits will be doubled.

    The hon. Member possibly has not been connected with engineering production. I have had the advantage of working from the shop floor level up to the position of managing director in engineering concerns, and, therefore, I know from long experience what I am talking about. He has referred to turnover. Certainly, turnover will expand, but turnover can expand in a business without the average capital employed expanding, and the rate of profit is calculated on the average capital employed.

    I wish to pass from that point, because in making it I am only responding to various aspects of the matter which have been referred to by hon. Members opposite. My main criticism of the Budget proposals is that they do not provide any outstanding incentive for increasing the rate of industrial production. In fact, with the one minor exception of the raising of the earned income allowance for old age pensioners, there is no other specific example of an incentive being provided to any section of workers in the country or to the managements or employers to raise their respective and collective outputs.

    I think that I may be guilty of an oversimplification, when I say that to maintain our existing standard of living, or that to which we have been accustomed in the last 12 to 18 months, and still to maintain an overall balance of overseas payments, which means avoiding any overseas help in the shape of extensions of the American Loan or of Marshall Aid and being able to finance our re-armament programme, it is necessary to raise British industrial production by approximately 8 per cent. That is the figure which economists have quoted in the last three months, since the scope of the re-armament programme was made known in January last.

    Last year the rate of increase of industrial production amounted to 4½ per cent. and, therefore, if we are not to suffer any drop in the standard of living during the currency of the re-armament programme it is necessary to double, approximately, the rate of increase of industrial production that we enjoyed during the period 1950–51. I should have thought that the Chancellor would have made special provision in the Budget for securing a re-doubled rate of increase of industrial production, but that is not the case.

    Provision could be made by fiscal means, notably through direct taxation. I belong to the school of thought which says, and I wrote this as the hon. Member may know, in a leading article in the "Birmingham Post" last January—

    I am sorry about that; I will send the hon. Gentleman a copy. I suggest that an 8 per cent. increase in overall industrial production during the period 1951–52 and the increased revenue derived by the Chancellor therefrom, in direct and indirect taxation revenue, would itself be sufficient to pay for the increased burden of armaments during the first year of the re-armament programme. That is not an unreasonable argument. [HON. MEMBERS: "What about materials."] Hon. Members on this side of the Committee ask where the materials will come from. The only raw material which would cause me great anxiety if the rate of production increased by 8 per cent., which is the desirable optimum, would be coal. Coal is the yardstick by which all our industrial production must be measured, and if I am permitted to do so, Sir Charles, I will talk about coal mining for the next few minutes, without, as hon. Members opposite will be pleased to know, specific reference to opencast mining.

    During 1950–51—that is in the coal year—we produced 204 million tons of deep-mined coal, to which must be added 12 million tons of coal derived from opencast workings, a total of 216 million tons. The Economic Survey for 1951 provides, on pages 12 and 13, paragraph 38, for an increase in coal production to 210 million tons of deep-mined coal and approximately 12 million tons of opencast coal, a total of 222 million tons of coal, compared with 216 million tons in the last completed coal year.

    Thus there is provided in the Economic Survey only an increase of six million tons of coal or 2¾ per cent. of the coal production last year. If our rate of industrial production increases in 1951–52 at the same rate as it increased in 1950–51, that is 4½ per cent., the increase in coal production will only meet approximately one-half of the needs of that expansion of industrial production. Therefore, the danger is, that we may well have in the next year or two a shortage of coal output. It is to this problem that I wish to address myself for a few moments.

    Hon. Members opposite—and I think it would not be an exaggeration to say that every predominantly mining constituency in the country is represented by an hon. Member opposite—devote a great deal of their time during fuel and power debates to talking about the mining of coal and particularly how to increase coal production. I believe that it is equally important to study the utilisation of coal as it is to talk about the raising of more coal. I tried to catch the eye of Mr. Speaker during the last coal debate on 1st February, as I hoped to make a speech upon the utilisation of coal. I am now going to touch on one aspect, which is fiscal, because it affects an important omission of which the Chancellor of the Exchequer was guilty this afternoon.

    Out of the coal produced in this country last year 105 million tons were used for industrial production purposes, and that figure excludes coal consumed by the power houses. We know that in industrial establishments up and down the country there is in use in many instances, old, out-worn and dilapidated boilers, grates and firing equipment, much of which wastes coal on a prodigious scale. For 100 years we have grown up to the view that coal is cheap and an easily won commodity in Britain. The right hon. Gentleman the Secretary of State for the Colonies has said that on many occasions. He came to my constituency of Kidderminster and said it before I was elected. It did not stop me being elected. The problem is how to induce industrialists to instal equipment in their factories which would economise in the use of coal, and the Chancellor should do that by using the fiscal weapon.

    If I had been Chancellor this is what I would have done. I would have said to British industry as a whole, "Any equipment that you install during the next three years which is demonstrably for the purpose of economising in coal consumption, I will allow you to charge against your revenue account, for profit and loss purposes and will admit the charge for the purpose of computing Income Tax and Profits Tax. I will not capitalise that equipment." The loss in revenue to the Treasury would be negligible, about half a million pounds every year, but what would that save in terms of coal? In my opinion it would save up to five million tons of coal a year. I do not say this on my own authority. Professor Simon, Professor of Thermodynamics at the University of Oxford, wrote as long ago as 1948 that it was possible to save 20 million tons of coal each year through scientific application of industrial usage of coal, and tackling rigorously and vigorously the plant which uses coal in British industry. I commend this point to the Chancellor, because on the Committee stage of the Finance Bill, I propose to return to it.

    There is one further point upon which I may be allowed to touch in the few remaining minutes. A curious development of the Budget speech—and I beg leave to say that it was totally unexpected in all parts of the Committee—was the abrogation or withdrawal of the initial allowances for plant and machinery in industry running at the rate of 40 per cent.; and the abrogation and withdrawal of the initial and annual allowances on industrial buildings which were each running at the rate of 10 per cent. Hon. Members will remember that the Chancellor said he was going to find £170 million from this source, and I saw several hon. Members scratch their heads at that moment, wondering how it was possible that such a large sum of money could be whisked into the breach he was trying to close in finding the money necessary for the re-armament programme.

    There has been considerable misapprehension in this Committee as to the nature of the industrial initial allowances for plant and machinery. I had an argument with the Financial Secretary to the Treasury on the Committee stage of the Finance Bill last year on the usefulness of these allowances, and I said on that occasion that they were only interest-free loans. Sir Stafford Cripps, the then Chancellor, agreed with me last year that that was so. The Chancellor today, by putting back this £170 million into his current year revenue account, is, in effect, mortgaging the future. He has to pay out every year, over the remaining life of the plant from which he is withdrawing the initial allowances, approximately one-tenth more in depreciation and wear and tear allowances.

    So what the Chancellor is doing today is taking the £170 million by the abrogation or withdrawal of these initial allowances, and then paying in each of the next 10 years an additional £17 million in wear and tear and depreciation. That is a dubious move. I deplore the fact that the Chancellor has found it necessary to do this. The average age of a machine tool in Britain is reputed to be 22 years.

    I know we have an identity and affinity of view on this point, so the hon. Member will also know that the average age of a machine tool in America is reputed to be nine years. Industrial production depends upon the efficiency, the modernity and the constant replacement and improvement of machine tools.

    By withdrawing initial allowances the Chancellor is creating a disincentive to put in more often and more regularly improved types of machine tools and similar mechanical equipment. It is putting Britain at an even greater disadvantage against the United States of America than we have suffered during the last three or four years. That is a retrograde step, and I hope that when the Committee stage of the Finance Bill is reached there will be an opportunity to discuss, and perhaps to reverse, this drastic departure from a policy which hon. Members opposite will remember they subscribed to whole-heartedly, when Sir John Anderson, the then Chancellor of the Exchequer, in his Finance Bill of 1945, introduced for the first time the principle of initial allowances for industrial plant equipment and buildings.

    We all heaved a sigh of relief on hearing that the Chancellor has found the money for the first year of the essential re-armament programme. I am not sure how tightly the shoe will pinch any section of the community for I have not yet had a chance to read his proposals in cold print or to go into each of them in detail. I hope the burden will be spread evenly over the whole community and, as an hon. Member opposite said, that those who can best afford to pay will make a larger contribution than those who can least afford to pay.

    8.32 p.m.

    I do not intend to follow closely what the hon. Member for Kidderminster (Mr. Nabarro) has said. He commented rightly upon the waste of coal as it has been used for generations, but he did not blame the Labour Government for that. The hon. Gentleman said it would cost half a million to bring in improvements which would save—

    Would the hon. Member allow me to interrupt? I am sure he does not wish to misrepresent me. The cost of the improvement would not be half a million pounds, it would be much more. I said that the loss in revenue to the Treasury would not be more than half a million by giving this concession.

    I think it would cost considerably more. However, my purpose in getting up was not to reply to the hon. Member for Kidderminster so much as to do what everybody else is doing, to make one or two observations on the Budget and to complain about the absence of some of the things which it might have contained.

    I, like many other hon. Members, feel pleased, if not amazed, that we have got off so lightly. I expected that much more drastic measures would have been taken, and the steps that have been taken have not altogether pleased me. I cannot help remarking, for instance, upon the extraordinarily poverty-stricken condition which the employers of this country must be in. To listen to some of them complaining about their bonus shares and dividends one would think that in the near future they were likely to apply to the Assistance Board for help.

    Certainly, from the way in which bonus shares have been talked about this afternoon, it seemed that there was no sleight of hand in connection with them. The hon. Member for Croydon, East (Sir H. Williams) suggested that the giving of a bonus share did not mean anything, but to me, if one share is given for every share held, it simply means that when the next dividend is paid, the shareholders are paid on two shares instead of one. That is a convenient way of hiding the profit. If, for instance, a dividend is paid on £200,000 as against £100,000 previously, the dividend is halved and it does not look so good a proposition.

    I hope the hon. Member will realise that the same amount of dividend will be paid. The result is that if a bonus share is issued, the dividend has to be paid on two shares and must therefore be paid at half rate.

    That was what I was attempting to say. Without the issue of bonus shares, the paying out of profits would be called, say, 5 per cent., but when one share is made into two the same amount of dividend is paid and is called 2½ per cent. I am wondering why there has been so much effort this evening to hide this fact and to confuse the issue.

    I want to express concern that food subsidies are being tied to the figure of, I think, £410 million. In the position in which we find ourselves today, all kinds of costs are going up and the increased cost of living is making itself apparent almost day by day. I am somewhat concerned because the incomes of neither the lower paid workers nor the pensioners are to be substantially increased. Unless something more is done with subsidies than has been done, the increased costs will fall on to these people, and if they do not have an increased income they will, obviously, be worse off.

    Much has been said about the old age pensioners. I, with others, have long been concerned about this problem and with the Pensioners Association have made representations to the Departments concerned. Some of the suggestions which have been put forward are now embodied in what the Chancellor has said today. Provision for the basic increase which he has announced will, I understand, eventually be embodied in a Measure to be introduced by the Minister of National Insurance, but I am afraid that it will not go far enough on the question of the pensions. My hon. Friend the hon. Member for Shettleston (Mr. McGovern) has already said that pensioners between 65 and 70 years of age will not be affected, which means that the increase to be given next October will affect only pensioners, either contributory or non-contributory, over the age of 70. I very much fear that this will give rise to difficulties.

    The real purpose of the change in pension rates by increasing the ages at which they are payable is due to the development which has gone on in this country as elsewhere. There is no doubt whatever that people's lives have been extended and that the past five or six years have shown them to be more healthy, physically as well as mentally, than ever before. The Chancellor said today, although it is nothing new, that unless something is done in the course of another generation, the day will come when one in five of the population will be of retirement age. We must face the need for something to be done to encourage the older people to remain in industry as long as they are able to do so. Whilst this is essential, it takes courage to initiate something of this kind, because it will not be possible for everybody to continue at work. We want rather to cushion the change by ensuring that the age group between 65 and 70 will not be penalised because of the changes we are making in anticipation for the future.

    Another matter to which I did not hear the Chancellor refer, but about which I think something should be said, is the payment of allowances in addition to salaries. From what I am told and able to observe, it appears that a principal of a company, in addition to his salary, may have an allowance on which he escapes taxation altogether. So far as I can see there are large numbers of concerns in which directors are getting salaries of between £2,000 and £5,000 a year but that is not all the remuneration they receive for their services. It may be that some are drawing allowances as great or even greater, than their salaries and those allowances are paid out of the profits which the concerns make.

    The hon. Member is making a statement which will not bear investigation. I suggest that he should try to get past a surveyor of taxes with that sort of thing and he would soon find that he was not able to do so.

    We all know of someone in business and we know that people escape the net. I suggest to the Chancellor that the time has arrived when allowances should be limited to about 10 per cent. of the salary. It may be that that is too little and that it should be made 20 per cent., but some attention should be given to this matter.

    I am also a little concerned about what the Chancellor said with reference to the capital programme. I am not at all happy about it, but am very much afraid that if we do not watch the position very carefully the re-armament programme may have the effect of interfering with the housing programme. The rearmament programme may call for a great deal of work from the building trades, and may interfere with housing in some measure. Like many hon. Members, I am rather concerned about this and suggest that the Government should study the matter very carefully.

    I have a young man living with me who spent seven years with the Services, mostly in Egypt, and he cannot get a house. He is only a young man and there must be thousands similarly placed. He has been home since 1947. How can we expect a chap like that to fight for his country when he has not the slightest chance of getting a house unless he wins a football pool with which to buy a house? Because of the desperate position of many such people, I urge the Chancellor to keep his eye on the question of housing. I do not want to see the programme interfered with because, if so, our people will continue to live under the bad conditions in which they are and they will not have any incentive.

    An hon. Member opposite spoke about the re-armament programme and the defence of the country, and he said something about the contribution from income being demanded. If there are people who have no cause to complain about taxation it is those who own businesses or are in business. Never in the history of this country was there so much security for business of every kind as there is today under the Labour Government. There is no need to worry, there are not many bankruptcies and when there are they are very often brought about by arrangement. I understand that bankruptcy is a business in some lines of business.

    There is no justification for the man of substance or the man in business, who has wealth and something to protect, to complain in comparison with the man who has literally nothing to protect but his freedom and liberty. When such people talk about taxation or in particular about increased taxation on profits and the effect on incentive, as the hon. Member for Kidderminster did, I am inclined to ask whether they want the Government to provide the incentive, and whether industry itself should not do it. There is much more justification for the man who works for wages to talk about the need for incentives. If industry took less profits and paid higher wages, as could be done in most industries, there would be greater productivity as a consequence.

    I am rather pleased that the Government have not in this Budget done some of the things we were rather afraid they might be called upon to do. I would recall, however, that on the occasion of the last Budget I suggested that we might do something about family allowances, that instead of altering the incidence of Income Tax we might have paid a family allowance on the first child. That would have been a better approach. This Budget does nothing for the pensioner, although it is suggested that something is to be done a little later. It does nothing for the lower paid worker, because it is only those earning between £6 and £7 who will benefit slightly by the increased allowance of £10, which is intended to operate as an allowance for the first child. But the adoption of that method means that the lower paid worker, the man earning £5 or who still receives less than £5. will not benefit from this concession. That state of affairs must eventually be remedied.

    Those facts explain why I am concerned about the increasing cost of living and why I consider that subsidies should be maintained to cushion the effect of that increase. I am satisfied that the profits made in industry could easily provide greater revenue than is taken. I am satisfied that the lower paid worker must be protected in greater measure than is the case at present. We must give him an incentive. If we do not do so we cannot expect him to respond in the way we hope. We must keep a close watch on that aspect and on our social services because a great deal depends on what is done about our elderly people, who can make a contribution to the country and its economy As I said earlier, I am very glad that an effort is to be made to encourage those who can do so to stay in industry. We must try to do something in that respect.

    8.50 p.m.

    I am glad to have the opportunity of following the hon. Member for Kirkdale (Mr. Keenan), who raised three points with which I should like to deal. He spoke about the increase in the standard rate of pensions. I am sure that hon. Members on both sides of the Committee are extremely glad to know that at last something is to be done for the old age pensioners. We on this side of the Committee have been trying for a long time to better the lot of the old age pensioners. We have pressed for fuel allowances, coal allowances and an increase in the standard rate. Like the hon. Member for Kirkdale and the hon. Member for Shettleston (Mr. McGovern) I am worried as to why this increase should start in October. There may be some good reason for it, but I feel that the harsh attitude of the Ministry of National Insurance is carried even into their concessions.

    There seems to be a tendency to say to those between 65 and 70 years of age, "You must stay at work. We will give you £2 instead of £1 permitted earnings, but you must stay at work; and we do not really believe it is the necessity of higher prices that calls for an increase in pension." I cannot see why this increase should not start from 65. I believe that this decision will cause a great deal of hardship to those who have retired and who cannot come back to work, but who have not yet reached the age of 70.

    The hon. Gentleman also referred to the question of allowances against Income Tax. I should be glad of his advice if he can tell me how to do what he was maintaining that some directors did about their allowances. The Income Tax authorities are, quite rightly, keen about this matter, because everybody who avoids paying their just dues puts a heavier burden on someone else. Income Tax authorities need chapter and verse for every allowance, and there no such conditions exist as the hon. Member suggests. If he knows something which I do not know I hope he will tell me.

    He also referred to housing. The other day in my constituency I visited a young couple living in one room six feet by 13 feet, which was sub-let to them for 7s. a week. Next door was the kitchen in which a man and his wife were living. In this room, six feet by 13 feet, there was one window, high up, and no fire. In it lived this young man and his wife and two children. They were expecting another child. The hon. Member for Dudley (Mr. Wigg) was congratulating himself and his party on the fact that they had got rid of the evil of unemployment, but under their rule we have been building up another evil just as bad and that is the evil which follows from the lack of housing accommodation. We dare not ignore the fact that in our midst we have housing conditions just as much a disgrace in this day and age as was unemployment between the wars. What did the Chancellor say about housing? He said that the defence programme would make increased demands on the capital invested in industry, and to some extent, on building. That was the only reference he made to housing that I can remember.

    I would draw the attention of the Committee to a report which appeared in the New York "Herald Tribune" economic Review. That report states that a special report by the United Nations Economic Commission for Europe warns that housing needs should not be sacrificed because of the current international situation. Another report in the same publication says that the quarterly timber bulletin published by the United Nations Economic Commission to Europe says that the decision to cut the United States housing programme—which they have cut for 1951—would seem to indicate that the amount of timber available for overseas may be considerably larger than has been the case during previous years.

    I believe that we shall find, as time goes on, that we dare not give housing any second priority. As we go ahead with re-armament, will not the housing programme be affected in some measure? But are not the housing conditions of the workers a part of re-armament? In face of this United Nations report, and in view of the terrible housing conditions which we in Glasgow know only too well, are we right to say that there should be any second priority for housing?

    Is the hon. Gentleman aware that the Prime Minister has given the country an assurance that the minimum of 200,000 houses per year to be built will not be affected?

    Yes, I am aware of that the point is that that is just the number of houses which are falling down. Housing conditions in some of our great cities are such as to constitute an evil every bit as bad as that of unemployment.

    Would the hon. Gentleman agree with me when I say that housing should have priority over re-armament?

    No. I should not be prepared to agree with that; but to say that it should have equal priority is as far as I think we can go, bearing in mind the safety of the nation.

    When the hon. Gentleman speaks of equal priority with rearmament, does he mean that housing should have the same urgency, the same opportunity for conscripting and directing workers into the industry, the same opportunity of getting money by taxation, and doing all that is now being done for rearmament?

    I should not like to be pinned down to that. I am speaking in general terms, and I say that housing is an evil which is not adequately dealt with by this Budget or by the House of Commons, nor is the position fully realised by the country.

    I am sorry that the hon. Member for Shettleston (Mr. McGovern) is not in his place. He was rather doubtful about the effect of the new cost of dentures and spectacles on the lower income groups. I am sure that the National Assistance Board will ensure that there is no undue hardship. I think that it is proper to put the charge on spectacles.

    There is one point which we should all realise. Every one is praising the Chancellor for having made an excellent speech. I wonder how many hon. Gentlemen really believe that the spiral of inflation has come to a stop. I wonder how many hon. Gentlemen realise that the Chancellor glossed over the effects of devaluation, and that he has made the best of the bad job which the Socialist Party have done. That is the best that can be said of this Budget. The Chancellor did not mention the terrible effect on industry of the mistake of having stockpiled money instead of goods. In relation to old age pensions, he has adopted the policy which we on this side of the Committee have advocated.

    The Chancellor proposes to increase the Entertainments Duty. Last year we in Glasgow put forward a serious plea for the reduction of the Entertainments Duty on the lower priced seats. I am not sure that this will not cause great hardship. I should like to give a warning that I believe that unless the speedway business is given a reduction in taxation, we shall see in this Budget the beginning of the end of this form of sport.

    I have been much concerned with the question of wireless sets for bedridden people. In 1945 the then Chancellor of the Exchequer gave a concession which provided that wireless sets for the blind should be free from Purchase Tax. That concession was accepted by the late Mr. Oliver Stanley on behalf of the Conservative Party as not being the thin end of the wedge. Now that the Purchase Tax has been increased, I hope that hon. Gentlemen on both sides of the Committee will support the plea that will be raised by some of my right hon. Friends and myself for freeing from Purchase Tax wireless sets which are given to bedridden people through properly organised societies, because otherwise a very deserving section of the public will be denied this concession.

    My last point is a technical one, although I hope it will be noted and some answer to it given later on by a Government spokesman. It concerns the suspension of initial allowances as at 1st April, 1952. The point is that many firms order such large items of equipment as ships or large machines, which take far more than a year to instal. The only reason why they have been able to place these orders is that they have been able to say to the suppliers, "We can get 40 per cent. off, and that means that, instead of paying the Government, we can pay you"; otherwise, these orders would not have been placed.

    I should like some clarification concerning this date, because I can conceive many ships being built and many installations taking place in factories which will not be completed by April, 1952. As I understand it, the allowance is given only when the job is completed, and it would have been wiser for the Chancellor to have said that this 40 per cent. allowance ceased with orders placed as from this moment. That would have been fair to industry, but, unless some clarification is given, there are many big jobs in progress today that will not be completed by April, 1952, and firms will be severely hampered and, possibly, will not be able to pay for the goods. I am sure that this is a point that will be dealt with, for it is already causing great concern throughout the country even though the Budget is but a few hours old. I therefore hope that some Government spokesman may answer me on that point.

    9.3 p.m.

    It has become a custom for hon. Members on both sides of the Committee, following upon the Chancellor's Budget speech, to compliment him on his speech and proceed immediately to pick holes in it. It may be said that I want to do precisely the same thing tonight, but I would like to say that, having regard to the ordering of armaments now proceeding throughout the world, this is, on the whole, probably not a bad Budget.

    I would like particularly to reinforce the plea made by my hon. Friend the Member for Shettleston (Mr. McGovern) to the Chancellor to look again into the question of the old age pensioners. I feel very strongly on this, because I see no reason for raising the figure to 30s. for a single person and 50s. for a married couple, for a man over 70 and a woman over 65, and doing precisely nothing for the man of 65 and the woman of 60. Earlier this year. I asked the Chancellor what was the current value of the 26s. and the 42s. compared with the value of those amounts in October, 1946, when the pensions rates were increased. The figures he gave me up to January, 1951, were to the effect that the 26s. was then worth 22s. 2d. and that the 42s. was worth 35s. 10d.

    Despite all the difficulties facing us, I feel that it is incumbent upon the Government to see that the old age pensioners today are at least as well off as the Government intended they should be in October, 1946. I personally feel that I cannot go before a meeting of old age pensioners and tell them that we cannot meet their demands or give them an increase merely on financial grounds, because the burden will be too great, and, in the same breath, tell them that we propose to spend £3,700 million or more on armaments.

    I also want the Chancellor to look again at the amount he is prepared to let the pensioner earn. I wonder why it was put at £2 a week? It makes me feel that it would have been as well if the Chancellor had contacted the Minister of Labour to find out what is the position of these people who are 65 years of age. I am sure that all hon. Members are receiving letters from constituents complaining that in many cases employers are telling them, despite full employment, that they are too old at 50. At any rate, it is becoming increasingly difficult for a man turned 55 years of age to get a job. If one were to go into the coalfields and see the men who have finished in the pits at 65 years of age, one would realise that there was not a cat's chance in hell of such men being employed again. Yet in the odd case where it is possible for such a man to get a job, we are limiting him to £1 a week on what he is already getting. We are penalising him by saying he cannot expect to get his pension increased.

    I now want to say something about the proposed charges under the Health Service. I should like to make my position clear about this because, as soon as it became known that it was proposed to levy a charge of 1s. on prescriptions, I took up the matter with my right hon. Friend the Prime Minister. I cited the case of a woman with a big family—and it very often happens that the women with the biggest families live in the poorest houses—one of whose children comes home from school with a childish ailment, an ailment which, because of bad housing conditions, goes through the family like a prairie fire. I said that to charge such a woman 1s. for each prescription for her family was monstrous.

    Having made my view quite clear to my right hon. Friend, I then abstained from voting on the matter, because I would not give my support to that prescription charge. The point is that if we accept the charge either for dentures or for spectacles, it strikes at the very basic principle of the Health Service. I have defended the scheme on no other ground than that it allowed people to get that which their health demanded and which they would not otherwise be able to afford.

    It is already assumed that the old-age pensioner can go to the Assistance Board and get the amount demanded by the dentist or the optician. But we all know that today there are a lot of men who are not old age pensioners, men who are earning £5, £6, £7, £8 or £9 a week and who find it very difficult indeed to make ends meet. I can quite well see what will happen. Many of these men who really need treatment by the dentist or the optician will do what they did in the past, that is, go without it.

    I think that is something at which my right hon. Friend the Chancellor ought to look again. I have never known a man have his teeth out when it was not necessary, although I have known people who went to the optician when it was not necessary. Some friends of mine even boasted that they had not only got one pair of glasses which they did not need, but two pairs. If we were going to levy a charge, I think it should have been done at the time the abuse was at its height, but not at the present time.

    On the question of raising the Purchase Tax from 33⅓ to 66⅔ per cent., I do not think that even the Chancellor would claim that a radio set today is a luxury. Many radio sets, of course, are luxuries, but, after all, the radio set is a good channel of news. It was during the war, and it may well be so again. I think there is a case for my right hon. Friend considering exempting, say, a small radio set from Purchase Tax, a set which at any rate is capable of relaying the Home services.

    Yes, below a certain price, or, if necessary, to allow manufacturers to make a special set, as they did during the war. However one looks at radio, whether as a source of entertainment or as a channel for news I should have thought that the Leader of the Opposition and the Prime Minister are very glad there is such a thing as radio when they want to appeal to the country.

    Young people setting up home for the first time are already finding it crippling even to furnish two rooms; to do so the vast majority of young people are putting a millstone round their necks for a long time to come. To ask them to to add to the weight of that millstone not because the cost of producing radio sets has gone up but because we want to discourage the purchase of radio sets, makes me feel, when I hear stuff like that, that Whitehall is getting a long way from Wigan. I wish the Chancellor would take note of these points because they are points that really matter in working-class homes. If he will do that I think we can all afford to say that, on the whole, this is not a bad Budget.

    9.11 p.m.

    There are, perhaps, endless aspects and facets of the Budget and the problems it brings in its trail that we can follow and examine in the days that we have at our disposal to consider it. I want to tackle for a moment or two one aspect I have never heard mentioned in this Committee in the years I have had the privilege of sitting here. That is the question of collecting all the tax to which the Government is entitled under its existing tax regulations. I think the Financial Secretary to the Treasury will recognise at once what I mean. It is the illegal avoidance of tax which is going on at the present time.

    There must be many people, perhaps several Members of this Committee, who at some time or another have come across someone who, if they had seen him clearly, would have been recognised as doing what he could to avoid paying his liability in taxation. This avoidance generally takes the form of trading in notes. I do not mean to imply that everybody who deals in currency notes is trying to avoid tax, but a very high proportion of those who deal in important sums in notes, have that idea in their minds.

    It is of the utmost importance that the public should realise that whenever they can pay by cheque they should do so, not only in the interest of the country but in their own interest because every time they help somebody to avoid paying the taxation which is due they are, in fact, helping to raise their own rate of tax. I have no idea to what figure the total of tax might have risen if we had collected all the tax to which we are entitled at present. I am quite certain it is a very important figure. It might have avoided the 3d. or even the 6d. in the pound by which the tax has been raised today.

    As the Financial Secretary well knows, the problem is very prominent in the minds of officials at the present time. A short time ago a committee of inquiry was set up by the Commissioners of Inland Revenue. I believe they decided to make test cases in three districts and become "tough," if I may use the expression, in those districts. The result of that toughness is not yet known. It will be a great enlightenment to hon. Members if these results are published and they know what they have yielded. The results might be very startling. Everybody knows that since the war, trained tax inspectors have been at a premium. With the P.A.Y.E. system and other complications of legislation they have not been able to tackle the jobs which ought to have been tackled.

    At the same time—and I recommend the Financial Secretary to look into this question—there have been removed some people who were extremely important in the tax collecting system; they were called collectors of taxes, they were underpaid and I believe their office has now been abolished. They were static in an area and they knew what was going on in that area, whereas the tax inspectors are moved from area to area and when they move to a new district they have to start to learn all over again. The tax collector, on the other hand, was in the area all the time and could advise the inspector where he should look. I suggest that the Treasury should look again into the desirability of re-appointing tax collectors and paying them properly. I should be the last to advocate an increase in the number of Government officials, but if these officials are to recoup in tax collection many times their own cost, then their re-appointment would be well worth considering.

    I ask the Financial Secretary to pursue this line of thought. Before we increase our rates of tax let us be sure that all those who ought to pay tax are, in fact, doing so. The remainder of us who are meeting our obligations are not only meeting 100 per cent. of our own obligations but some percentage of what somebody else ought to be paying. Let the public realise that every time they can pay some reasonable sum of money by cheque, and they do not do so, they are making it easier for someone at the other end to avoid his liability to taxation.

    9.17 p.m.

    The hon. Member for Antrim, South (Professor Savory) said earlier in the debate that he had heard the first of the Labour Budgets and was, therefore, able to compare it with this Budget. In fact, the Budget which he heard in 1935 was not the first Labour Budget; there were Labour Budgets before that famous occasion—and I have heard all of them, back to 1924. I think I can say that my right hon. Friend has played his part very well, when one recalls the many Labour Budgets which have been introduced to that Box. I shall not use any unnecessary superlatives. In craftsmanship, as a speaker at the Treasury Box my right hon. Friend has not yet reached the heights reached by Philip Snowden or the present Minister of Local Government and Planning or Sir Stafford Cripps, but in the probity of his approach and the sincerity of his statements about the problems with which he has had to deal, I think he has acquitted himself nobly.

    This is a bad time and most of us expected the Budget to be very much worse than, in fact, it is. Indeed, as far as I can ascertain from hon. Members with whom I have discussed the matter, they already regard it as a great Budget because it is so much better than they had expected. I do not want to put it at too low a point, because I think it is a thoroughly capable Budget in view of the financial difficulties which we face.

    I do not say that all the methods which have been adopted are methods to which I would give full approval. My hon. Friends have already expressed their point of view about the old age pensioners, for not quite as much has been given to the old age pensioner as should have been given to him. Those who are 65 and who have left their jobs will not easily persuade themselves to return to their jobs because they will receive a better pension if they remain at work until they are 70. I do not think they will be very satisfied with the provisions in the Budget in that connection. I am sorry that all the things we should like to have done, and which, I have no doubt, would have been done in a better time, cannot be done. Let us be frank about it. They cannot be done. Among the sufferers are the old folk, for whom, in particular, I think we are all sorry, in that they are left with something less than what we think ought to have been provided for them.

    However, the Chancellor has faced up to the fact that, if we are to continue persuading the people, in a disciplined effort, to accept wages much lower than they have a right to expect in a time of great travail and difficulty, it is necessary to do something more than has been done previously about those taking profits. I observed, before the Chancellor's speech, an admission in the "Financial Times" that 664 industrial companies had made profits of £252 million this past year—an increase of £30 million on the profits made in the previous year, and an increase of 13 per cent.—and that at a time when every company was appealed to, with all the strength that the former Chancellor had in making such an appeal, not to increase its dividends and not to increase its profit taking.

    I entirely agree with one of my hon. Friends who, talking about incentives, said that all these companies would have a much better opportunity to offer incentives to the workers by hand and by brain, if they would see that more of their profits found their way into the pockets of the people who actually helped to produce the goods on which the profits were made. The Chancellor has agreed that this issue about high profit level has to be faced. I am quite sure the Tory Party will find all sorts of excuses for the Amendments they will bring in, and for the efforts they will make to undo what the Chancellor is proposing.

    I think the same thing applies to the insistence the Chancellor has laid on the necessity to stand by his capital programme. Some doubts have been expressed by my hon. Friends, for example, about housing, and whether the housing programme will be adhered to at the full rate that has been promised. Well, that depends, I think, as much upon us as upon the Chancellor. If we continue to insist, as I am sure we shall, from these benches—whatever the Tory Party do about their 300,000 houses—that the programme promised shall be proceeded with, we shall manage to keep to the programme of 200,000 houses that we intend to have built; and it will depend upon us, I do not think that any blame attaches to the Chancellor in that he has not found it possible to go beyond the capital programme.

    There is one item in the Budget—not one I usually speak about in these debates—to which I must make some special reference, and that is the Purchase Tax. I listened to the Chancellor making out his case about all sorts of things like children's school bags—important in themselves, particularly to the children—and other articles of a similar kind that ought to be freed from this onerous tax; but at the end of the list which he gave the gift he was making amounted, I think, to about £3 million. What are we raising through Purchase Tax? I agree that Purchase Tax is collected from a large number of articles upon which it is quite valid to collect it—articles of a luxury and semi-luxury kind; but that is not the case with regard to the majority of articles upon which Purchase Tax is now levied.

    Purchase Tax is levied on articles such as pedal cycles, sewing machines, electric lamps, linoleum, carpets, and floor coverings. The amount raised from articles of this sort—useful articles; articles which are in general demand by the ordinary people of the community-runs into hundreds of millions of pounds. The Purchase Tax raises about £300 million, so I was not exactly fired with enthusiasm when I heard that the Chancellor was making provision for lightening the Purchase Tax burden to the extent of a £3 million gift. We are thankful for small mercies, but he ought to have done better, and a good deal better, than that.

    In our secondary schools and many of the elementary schools, built in the suburbs of towns like Manchester, Glasgow and outer London, it is the common thing for the schoolboy or schoolgirl to have a pedal bicycle. In a school not very far from the boundaries of my division, out of 700 children 300 go to school on their bicycles every day. What is the sense in having a 33⅓ per cent. tax on pedal cycles when they are so much of a necessity?

    What is the sense in putting a 33⅓ per cent. on sewing machines? The woman who is trying to make ends meet, who, to clothe her children, buys a length of cloth instead of paying a high price for made-up clothing—particularly non-utility clothing, because very often the utility clothing is not available—pays 33⅓ per cent. Purchase Tax on the cloth and then pays 33⅓ per cent Purchase Tax on her sewing machine. Those who talk about incentives will appreciate it when I say that every disincentive is put in the way of the frugal, industrious woman, who wants to help her family out of these difficulties, by putting a tax of this sort on sewing machines and the length of cloth she buys.

    The hon. and gallant Member supports what I am saying. I am sorry that on so many articles of this sort the Chancellor has not been able to concede to what some of us have been pressing for, for a very long time.

    As I admitted at the beginning of my speech, today is a particularly difficult time for this matter to be put straight. Nobody has put the case about Purchase Tax better than the authority I shall now quote who, when it was first introduced into the House, said:
    "It is a complicated tax. Prima facie it does not seem to fulfil any of the conditions which I should lay down for taxation … it … is only a kind of handy way of getting a certain amount of money into the Exchequer. It will not assist the finances of the country."
    Of course, he was wrong about that, because, clearly, if it raises £300 million it assists to a very considerable degree.

    No, it was not intended for that. He went on:

    "It will not assist the finances of the country, and I do not think it will meet the Chancellor's aim, that is, to suppress luxuries."—[OFFICIAL REPORT, 23rd April, 1940; Vol. 360, c. 92.]
    Certainly, that part of the statement was correct. That statement was made by the present Prime Minister when opposing Purchase Tax at the time it was introduced. I remember a number of other statements made by right hon. Gentlemen who now occupy the Front Bench who were equally doubtful about the effectiveness of this tax. Although we have this assistance to the extent of a £3 million remission, I am sorry that something more than that is not possible at the present time.

    One other matter to which I wish to refer was raised in the "Manchester Guardian" this morning. It suggested that the debates on this Budget would have to justify what it calls an "arms budget," and would have to show that the measures introduced were equitable from the point of view of all the claims of all citizens in the community. To the extent to which I have mentioned, I think that the Chancellor has aimed at an equitable arrangement.

    The hon. Member for Shettleston (Mr. McGovern) referred to the fact that this is an arms budget, but he did not justify the expenditure provided for arms in this Budget. I think that we have to make out a better case for the way in which the money provided for these arms, already costing very heavy sums, is to be used. It is all very well talking about providing arms against an eventuality in in the future which we fear. We are providing arms for carrying out a policy which is now being pursued, and what is taking place in Korea at this moment is a measure of the justification or otherwise of the great sums of money which we are providing, and for which we are calling upon our people to make sacrifices.

    The actions which are now taking place in Korea, the threat of a war in China, and the breakaway by powerful military forces, over which we have no real control, in following policies which are not our policies, will make us more and more consider, as it ought to make us consider, whether we are justified in spending enormous sums on armaments, thereby drawing away from our people what could be so well spent in many other directions. Quite frankly, one result of this Budget ought to be to make us, on whatever side of the Committee we sit, find out, if we can, more and better methods of settling disputes and quarrels and the difficulties of the future, whatever they may be, than we are doing at present. Our reliance on the United Nations, our belief in collective security and the overpowering Forces of the Navy, Army and Air Force may be leading us, stage by stage, not to the security for which we hope, but to things which will make it harder for our people to live the freer and better life that we would like them all to have.

    I am quite certain that if we want to justify this Budget we must take a great deal more care that there shall be pursued throughout the world peaceful methods for the settlement of disputes. If the line suggested by the new Foreign Secretary, by which he hopes to make his office truly a peace office, really becomes the line which this country is pursuing, that is the only way in which we shall find justification for this Budget.

    9.35 p.m.

    I follow with pleasure the hon. Member for Ealing, North (Mr. J. Hudson), who speaks with such conviction and vigour. He always starts off with a diatribe against the Tory Party which he does very nicely. He does not believe it in the slightest, but he does it very nicely. He did it the other day, and he did not believe it then any more than he does today He knows that the Tory Party is out just as much for the good of this country, as the Labour Party.

    He talked about the reasons for spending all this money mentioned particularly by the Chancellor of the Exchequer in his most admirable Budget speech. This money is spent on armaments. What is it for? asks the hon. Member for Ealing, North. This is because there is no policy, and that it what makes it so dreadful in people's minds. There is no policy in Korea, and that is a point which can be laid to the discredit of the present Government perhaps more than any other in recent times.

    I want a policy so that the commander-in-chief and the troops will know what they are driving at and what is their objective.

    The hon. and gallant Member must know that he cannot debate that policy in the Budget debate.

    I was led astray by the hon. Member for South Ayrshire (Mr. Emrys Hughes), not for the first time. I shall revert to the question of profits. There is a sort of "hoodoo" over this word "profit" in the minds of Members opposite as though it were some wicked thing. It has to be borne in mind that the Chancellor of the Exchequer, whatever his political views may be, is entirely dependent for his revenue on profits of some kind or another. There is no other source of income for any Chancellor of the Exchequer in this country.

    Why is it assumed that profits are wicked? If one wants to rouse the party opposite one has only to mention one of two words. The first is "landlord"; and the other "profits" and they go up like a rocket. It is an extraordinary state of affairs and very unfortunate. The hon. Member for Ealing, North, who was talking about profits, must know that that is the only source of income for the Chancellor, and if he wishes the Chancellor to have more money to do good things for this country, then the right hon. Gentleman will find it out of the profits of the country. Logically, if there are more profits, there is more money, and, therefore, the Chancellor has more to draw upon.

    Less profits mean that the Chancellor has less money. Is that what the hon. Member wants? Surely we must be sensible about the matter of profits. No one wishes to see profiteering; it is a vile thing, but ordinary profits should be the object of everyone. What is a wage increase but a wish for profit? That is an honourable thing. Why should businesses not make more profit so that the country may have better services? There is nothing wicked about profits.

    Three years ago the Chancellor made an appeal to wage earners not to increase their demands for more wages. There was nothing wicked about getting wages, but in view of our national situation we were asked to forego a just demand for more wages. I was saying that it was equally incumbent upon the private receiver that he too should forego any effort to increase his profit. I gave the figures to show what the increase of profits had been.

    But is it not a fact that out of profits come wages? [HON. MEMBERS: "No."] Then would hon. Members opposite tell me where wages come from?

    Is it not a fact that wages come out of the profits from industry, and that if there are no profits in industry, there cannot be wages?

    Wages are a first charge. Profits are what is left over.

    I go back to my original point from which I will not be diverted: that there is nothing fundamentally wrong in profits. If there are no profits the Chancellor will not have the income required for the health services, and all the other things which were founded by the Tory Party and adapted by the Socialist Party, as they will honestly admit. It is a fact that in 1944 we produced a plan for the health service—

    In that case where will the Chancellor get the money for the health service? I ask the hon. Gentleman to give me the reason. He does not.

    The hon. Member for Ealing, North, and other hon. Members opposite—I admit with sincerity—seem to think there is something fundamentally wrong in making profits. Nothing of the kind. I emphasise once again that it is a grave disservice to the country to put it out from this House of Commons that there is anything wicked in the making of profits. The workers in industry who contribute so valuably towards the making of those profits know or should be told that it is right that their work will make profits in order that the country may profit thereby. I hope we shall not have this constant denigration of the making of profit as something evil, instead of making it obvious that the making of honest profits is a sound thing, whereas profiteering is a vile thing. I hope the hon. Member for Ealing, North will back me up in that.

    9.42 p.m.

    I had no intention of speaking this evening, but the hon. and gallant Member for Perth and East Perthshire (Colonel Gomme-Duncan) raised the question of profits. Is the hon. and gallant Gentleman not aware of the fact that vast undertakings in this country have been running for many years without profit, and running very efficiently in the interests of the people. Our present Civil Service, to which we all pay tribute, is not run as a profit-making concern but to give service to the people. Our local borough councils and local authorities are run for the service of the people, and some sections of those services are run at a loss because it is necessary to give that service to the people in most urgent need.

    The work of the Civil Service and of the borough councils is invaluable, and I agree that they do not make profits, but would the hon. Gentleman say where the money comes from to pay the Civil Service?

    Yes, certainly. I interrupted the hon. and gallant Gentleman when he was speaking by saying that it is by the labour of the people. It is the profit coming from the labour and the material which enables the services I have mentioned to be carried on. Equally, our great military machine, of which the hon. and gallant Gentleman is a retired officer, is run without any question of profit.

    Having dealt with that point, I want to deal with the Budget speech of the Chancellor. I say first, in all sincerity, and I think both sides of the Committee will agree with me 100 per cent. in this, that our only regret is that Sir Stafford Cripps could not have been present to hear that speech. He would have been proud, as we here are proud, that much of the good which will come from the Budget was due to his hard work when he held the most difficult office of Chancellor of the Exchequer.

    We have said generally that the Budget is a good Budget, but we have, of course, complaints and points of criticism. One of the greatest of these which we have heard this evening from all sides, and from every speech which I have heard, has been about old age pensioners. We are all thankful for small mercies, but I believe that the old age pensioner could, and should, receive better treatment than is envisaged under the Chancellor's proposals. I believe that it is possible to give them more, and that they are worthy of it.

    I may be asked where the additional money is to be found. I believe that nine out of ten honest and sincere people would not mind paying a little more Income Tax if they knew it would be given to those in most urgent need—namely, the old age pensioners. There would be no objection from any quarter of the Committee if the Chancellor were to introduce a new tax or to increase an existing tax for improving the lot of the old age pensioner, making the increase applicable on retirement at the age of 65 instead of 70, and doing so immediately instead of waiting until October.

    I believe that this extra money could be got without a new tax and could be obtained by means of more efficient administration. The Opposition have consistently said that the Government should make savings, but they conveniently fail to make any suggestions or to say how the administration could be more efficient. My suggestion is to review the whole National Insurance scheme and to adopt a procedure whereby he who receives the most pays the most, and that from a certain date, a percentage of income should be paid, graduated if desired, which could be deducted from income and which would be the contribution for National Insurance. If the contribution was 1 or 2 per cent. of income, the person receiving £4 or £5 a week would during the year pay, say, 1 per cent., whereas the man receiving £5,000 a year would be in the happy position of paying a like percentage to help the lower income group.

    This proposal has a double advantage in that through P.A.Y.E., the Inland Revenue Department and the existing Income Tax machine, the means are already in existence for collecting the contributions. Immediately, we could dispense with the system of contributions stamps, stop the useless and superfluous waste of paper and machines in printing the stamps, and do away with the present system of cards. The staff who are now uselessly employed on maintaining the cards and records could then be employed productively. That is in reference to old age pensions, but it could also apply to the National Health Service and the whole system of National Insurance. Equally, I believe it can apply to road and rail transport.

    I think it would be a mistake to let that pass without pointing out that the Beveridge Committee investigated this matter. Evidence was given by the Trades Union Congress and similar organisations and the main principle was laid down of equal benefit for equal contribution. That eliminates the necessity for a means test and puts everyone on the same basis.

    I am not suggesting that there should be any alteration in the general scheme of benefit, but I am suggesting that there should be a graduated scale of contribution. I see nothing wrong with a man who is receiving £1,000 a year paying a few pounds extra to help the poor chap who is in need. This scheme has worked well in New Zealand and Australia. They have had it in operation longer than our service has been operated and we might learn from their scheme.

    I was developing the same sort of argument in regard to road and rail transport. We heard from the Chancellor that there is to be an increase in duty on petrol. I hope that the Press will emphasise the point he made that there will be no necessity to increase road transport fares, but there may be a danger of that happening. I therefore feel it quite possible now to consider an all-in transport tax on civilians and private persons, what one can term a passenger tax on an annual basis followed by an industrial freight tax based on the capital overall turnover, or whatever may be decided upon. We could then do away with the need for the payment of people collecting tickets, of having machines for the production of tickets and the necessity of people collecting fares. All that is superfluous and they could be employed on production if we had an overall tax which could be budgeted for and dealt with on an annual basis. It would be a similar system to that which provides for the supply of water, local authorities' services and the health services.

    An hon. Member opposite put forward a very reasoned argument for a reduction in the Entertainments Duty paid by speedways. I represent an area in which there is a speedway and at the moment it is charged a higher rate of tax because it is considered a "dead" sport and cognisance is not taken of the skill of the rider of the motor-cycle. As this is a sport which is followed by the family, who invariably do not gamble, I should like to support the hon. Member's argument that there should be a decrease to the lower tax for speedway entertainment.

    My last point concerns housing. I represent the worst blitzed borough in the country. We lost more than a third of all our buildings and we have a formidable housing problem in West Ham. I believe that we should make it quite clear that whatever may or may not happen about armaments, whatever may or may not be necessary so far as munitions generally are concerned, there will be no interference with the programme of 200,000 houses per annum which the Government have been responsible for over the last five years. If we can get that assurance, and the assurance of the Government that there will be no cutting down of capital investment on houses, I believe that we can go to our people and say, "Here is a good Budget. The Government really feel for the ordinary people," and that we can count upon the support of those people for our efforts in the years to come.

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

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

    Bishops (Retirement) Measure

    Order read for resuming Adjourned Debate on Question—[ 13th March]:

    "That the Bishops (Retirement) Measure, 1950, passed by the National Assembly of the Church of England, be presented to His Majesty for His Royal Assent in the form in which the said Measure was laid before Parliament."

    Question again proposed.