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Commons Chamber
06 April 1954
Volume 526

House Of Commons

Tuesday, 6th April, 1954

The House met at Half past Two o'Clock

Prayers

[Mr. SPEAKER in the Chair]

Private Business

Ashridge (Bonar Law Memorial) Trust Bill

As amended, considered; to be read the Third time.

Oral Answers To Questions

Scotland

Wind-Blown Timber

1.

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asked the Secretary of State for Scotland if he will make a further statement on the progress made in dealing with the gale-blown timber in the North-East of Scotland; and whether he expects it all to be dealt with by January, 1955.

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Extraction is still proceeding at the rate of about 2 million cubic feet per month. As the statement of progress is rather lengthy, I shall, with permission, circulate it in the OFFICIAL REPORT.

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Will my hon. Friend answer the last part of the Question and say whether the timber will be dealt with in the time originally anticipated?

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My right hon. Friend cannot give a specific date because certain of the timber is in inaccessible places, but if my hon. and gallant Friend will read the OFFICIAL REPORT tomorrow morning, he will find a full report of the progress.

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Does the hon. Gentleman think that his Government will still be in power at January, 1955?

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In view of the present situation, is it the policy now to authorise the Forestry Commission, where possible, to issue felling licences in respect of standing timber?

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That is a separate question which should be put on the Order Paper.

Following is the statement:

Arrangements have been made for working all but approximately half a million cubic feet of the 47¾ million cubic feet of gale-blown timber in the North-East of Scotland. The rate of felling and extraction has been maintained at 2 million cubic feet per month and the volume extracted to roadside is now estimated at 26 million cubic feet. Approximately 3 million cubic feet of round logs have been transported to mills outside the affected area under the transport assistance arrangements. Further increases in the rates of assistance took effect as from 1st March and it is hoped that this will result in the increased movement of the remaining blown timber. Transport to England and Wales of mining timber surplus to the requirements of the Scottish coalfields continues, also under freight assistance arrangements made by the Government, and to date orders have been placed for about 2½ million cubic feet.
If the present rate of progress is maintained, it is estimated that the vast bulk of the windblown timber will have been cleared by the end of January, 1955. Although there will probably be some exceptions, as work on some blown areas is still behindhand, broadly the situation is that the material then remaining on the ground will consist largely of larch and hardwoods which have been deliberately left until last as they are less liable to deterioration, and small lots which are inaccessible or of indifferent or poor quality. Work will, of course, go on to clear the saleable timber as quickly as possible.

Atomic Energy Research (Industrial Development)

2.

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asked the Secretary of State for Scotland for a detailed statement as to his plans for industrial development in Scotland flowing from the projected atomic energy reactor station at Dounreay, Caithness.

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The Dounreay reactor will be experimental, and it would be premature to try to forecast at this stage what other industrial developments may take place in Scotland as a result of the presence of this station.

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Does not the hon. Member realise that this may be a great opportunity to bring industry and population to the North of Scotland? Is it not astounding that he is not in a position to give some details about the plans which will flow from this expensive work?

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As the hon. and learned Gentleman will know, it will be several years before there is sufficient development to enable us to take action, but we are fully aware of the potentialities.

National Records And Archives (Indexing)

3.

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asked the Secretary of State for Scotland what steps he is taking to have the national records and archives of Scotland indexed and made readily accessible to the poets, historians, biographers, economists and other scholars in Scotland.

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The responsibility for indexing the national records and archives of Scotland is placed by statute on the Keeper of the Records of Scotland, and my right hon. Friend is informed that this work is progressing steadily. A considerable proportion of the records is already indexed, and all, whether indexed or not, are readily accessible to lawyers, scholars, and students in the General Register House.

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I referred in my Question to "archives." There are a great many archives and records in the Record office in Chancery Lane, London, which are badly needed by the scholars of Scotland. Will he take steps to have them properly indexed and made available to Scotland?

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I am obliged to the hon. and learned Member for his correction of my pronunciation of the word "archives," which I accept.

Fishmeal And Oil Factory, Peterhead

4.

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asked the Secretary of State for Scotland whether he is aware that no further progress has been made with the construction of the fishmeal and oil factory at Peterhead; and what is the cause of the delay.

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The Herring Industry Board are in process of obtaining the necessary local consents and will commence work on the factory as soon as these are forthcoming.

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How soon will these be forthcoming?

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Very soon. There is a certain amount of plan drawing to be done, and the local council has to give its final consent. Apart from that, it will not take long.

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I am glad to see that the hon. Member for East Aberdeenshire has now come back to the House again.

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The local council gave its consent long ago. It is very urgent that this factory should be set up in time for the summer fishing. Cannot my hon. Friend give a better assurance about it?

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My hon. Friend is wrong. Consent is required from three parties, the third of which is the town council. That consent cannot be given until the detailed plans have been prepared. That is now being done.

Damages Awards (Interest)

5.

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asked the Secretary of State for Scotland if he is aware that under Scottish law relating to actions for damages for negligence interest at 5 per cent, on the amount of damages awarded runs only from the date of the decree awarding damages; that it would be in accord with both justice and expedition that such interest should instead run from the date of either the accident or the summons; and if he will introduce legislation to enact this change in Scottish law.

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I am aware that in Scotland interest on damages awarded in actions for negligence runs only from the date of decree. Amendment of this long-standing rule of Scots law would require very careful consideration, and my right hon. Friend can hold out no hope of early legislation.

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Is not the Minister aware that this has for long been carefully considered and recommended by the Muir Society, a body representative of lawyers in Scotland, and will he consult them on the advisability of adopting their recommendation in the matter?

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We are aware of that, but the hon. and learned Gentleman will know even better than I that this is really too complicated a question for discussion at Question time.

Raemore Grazings, Lairg (Use)

6.

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asked the Secretary of State for Scotland if he is aware that Raemore grazings on Gruids Farm, Lairg, Sutherland, are to be used by the Forestry Commission for growing trees; and, in view of the scarcity of agricultural land in Sutherland and the abundance of non-agricultural land suitable for growing timber, if he will take steps to ensure that these pastures should be used by the crofting community to produce food.

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The Raemore grazings are to be used for forestry in accordance with the Strathoykell plan which was approved by the Highlands Panel. My right hon. Friend cannot see his way to alter the arrangements made for the planting of this area. I have today written to my hon. Friend about this matter.

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Is it not wholly wrong that grazings which have provided food for over two centuries should be used for growing timber, when we have so much land in Sutherland which is not suitable for food production but is suitable for timber production?

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I have written to my hon. Friend fully on this matter, but I would remind him that the land was originally secured for forestry, and we have to take into account the fact that afforestation will provide work for crofters not fully employed. The general effect in the area has also to be taken into account, as well as grazings.

Potato Harvesting (Mechanical Aids)

7.

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asked the Secretary of State for Scotland what research is now being carried on for the purpose of producing an efficient mechanical potato harvester.

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In addition to research and experimental work being carried out by commercial firms, research is being undertaken by the National Institute of Agricultural Engineering and its substation in Scotland to find efficient methods of digging potatoes out of the ground and of separating potatoes from extraneous matter.

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Is the Minister aware of the dissatisfaction expressed recently by farmers in Scotland about the lack of an efficient potato harvester, and also of the suggestion that the big potato merchants should be levied in order to get money for this research?

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This is a very complicated question of the separation of earth and stones from the potatoes. One machine has been produced, but it was found to be faulty in one respect, and the National Institute of Agricultural Engineering has devised a different principle. At this moment, consideration is being given to putting it into production.

River Forth (Pollution)

9.

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asked the Secretary of State for Scotland what progress has been made in the prevention of pollution of the River Forth; whether he is aware that oil and tar discharges are threatening to destroy all life in the river; and whether, as a first step, this particularly destructive effluent can be prevented.

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The prevention of pollution will be primarily a matter for the River Forth Purification Board, which was established last October and will shortly be functioning. If the right hon. Member will supply particulars of the oil and tar discharges to which he refers, I shall make inquiry.

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Is the right hon. and gallant Gentleman aware that hundreds, if not thousands, of fish have been destroyed by this pollution, and that it would be much more efficient to deal with the pollution quickly than to prosecute fishermen for taking a few fish from the Forth?

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I am not aware of that; no recent complaint has been received.

Monkland Canal (Report)

10.

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asked the Secretary of State for Scotland what progress has been made towards meeting the representations of Coatbridge with regard to the Monkland Canal.

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As my right hon. Friend stated on 30th March in reply to a Question by the hon. Member for Maryhill (Mr. Hannan), a report by technical experts on the Monkland Canal in Glasgow is being considered urgently. With regard to the Coatbridge position, I am sorry that, at the moment, I cannot add to the answers that were given to the hon. Lady on 9th February.

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Does that mean that only the representations of Glasgow have been considered, and that only the Glasgow part of the Canal will be filled in and not the Coatbridge part?

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I do not think that would be quite right. We are well aware of the hon. Lady's case, but we think it is better to settle the Glasgow problem first, because that will enable us to reach a proper decision with regard to the other.

Anti-Haemoglobin Serum

12.

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asked the Secretary of State for Scotland if he is satisfied that surgeons operating on haemophiliacs in Scotland are fully informed on, and have accessible supplies of, anti-haemoglobin serum for the treatment of patients during emergencies.

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Yes, Sir; I am, however, informed that fresh blood would usually be preferable to the serum in such circumstances.

New Hospital, Peebles

13.

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asked the Secretary of State for Scotland when it is intended to replace the present War Memorial Hospital in Peebles.

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A site was obtained two years ago at Hay Lodge, where the existing premises are used for out-patient purposes. My right hon. Friend regrets that, in present circumstances, he cannot say when it will be possible to start building the new hospital.

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Is the right hon. Gentleman aware that this hospital is very badly sited beside the River Tweed, and that, when the river is in flood, the whole hospital has to be cleared out?

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I am aware of that fact, but there are other serious and priority matters to be dealt with by the Regional Board.

Legal Aid (Old-Age Pensioners)

14.

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asked the Secretary of State for Scotland if he will introduce legislation to amend the Legal Aid Act so that old-age pensioners in receipt of National Assistance can be defended in cases where they are sued by landlords for increased rents.

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Unless they have considerable capital, old-age pensioners in receipt of National Assistance already come within an income range which would make them eligible to apply for legal aid in defending any action brought against them in the Sheriff Court.

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Is the hon. Gentleman aware that there are quite likely to be a large number of cases coming before the courts, and does he think that the legal aid system will be able to cope with them?

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If the hon. Lady will give us examples, we shall very carefully and sympathetically look into them.

Old People's Homes, Glasgow

18.

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asked the Secretary of State for Scotland how many elderly people are presently resident in homes provided by Glasgow Corporation with his financial assistance; and what additional accommodation is scheduled for the immediate future.

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About 240 elderly persons are resident in 10 homes provided by the Corporation with Exchequer assistance under the National Assistance Act, 1948. The Corporation are in course of providing two additional homes, one of which will be opened soon.

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Is the Minister satisfied that, in view of the large number awaiting admission to homes such as these, two more homes will be satisfactory to meet the situation?

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My hon. Friend will remember that the Corporation provides homes for a great many other people at Foresthall and elsewhere.

Approved Schools (Costs)

19.

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asked the Secretary of State for Scotland the main reasons for the increase from 54s. to 66s. in the weekly contribution payable by education authorities in respect of a child or young person sent to an approved school.

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The cost of the schools is shared equally between the education authorities and the Exchequer. After the rate of the authority contribution for 1953–54 had been fixed, the numbers in the schools fell, but expenditure on staff and overheads did not fall correspondingly, and the contributions from education authorities, which are based on the numbers of pupils, were not sufficient to meet half the cost. The rate of contribution for 1954–55 has been fixed to recoup the Exchequer in part for the larger share it had to bear in 1953–54 and to take account of the higher cost per head which results from the smaller numbers in the schools and from increases in salaries and wages.

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That means, of course that between the Government and the local authorities it is costing £6 12s. a week to keep one child in an approved school. If the number of pupils has fallen, why are the Government not taking steps to reorganise the schools and to reduce the number?

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I think the figure which the hon. Gentleman gives is about right, although I should like to check it.

20.

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asked the Secretary of State for Scotland the estimated weekly cost of maintaining a child hi an approved school for the year 1954–55; and what percentage increase this shows over 1954–53.

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The estimated weekly cost for 1954–55 is £6 10s. 5d., which represents an increase of 23·6 per cent, over the figure for 1952–53.

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Is not this a shocking example of how the Government fail to control expenditure, and to stop this rise in costs?

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It is easily explained. There are two reasons: (1) the number of children attending the schools has fallen, and (2) there has been a rise in salaries. To neither of them, I think, can the hon. Gentleman raise objections.

Civil Defence (Hydrogen Bomb)

21.

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asked the Secretary of State for Scotland, in view of the fact that the new hydrogen bomb is 600 times more powerful than the atom bomb, what new instructions he proposes to issue to Civil Defence authorities, especially in regard to air-raid shelters.

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As my right hon. and learned Friend the Secretary of State for the Home Department said on 1st April, in reply to the hon. Member for South Ayrshire (Mr. Emrys Hughes), instructions to Civil Defence authorities are being reviewed in the light of the development of atomic weapons of all types.

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Is the hon. Gentleman aware that the Civil Defence authorities in Glasgow have pointed out that in the event of a bomb attack every hospital in Glasgow could be destroyed? What steps is he taking in the matter?

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This is too big a question for me to answer across the Floor of the House at Question time.

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Would the hon. Gentleman consider sending a delegation to Dublin to see why Dublin is not in so much danger as Glasgow?

Mental Hospital Patients (Financial Assets)

23.

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asked the Secretary of State for Scotland how far his regulations permit the superintendent of a mental hospital in Scotland to assume responsibility for the financial assets of one of his patients and to disburse such assets without court warrant.

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It is an established practice for medical superintendents to undertake the disbursement of small sums placed in the custody of hospital authorities, for the benefit of individual mental patients. This is done without formal authority where the medical superintendent is satisfied about the capacity of the individual patient to instruct or consent to the disbursement. My right hon. Friend sees no reason to forbid this practice.

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Does the Minister consider £75 a small sum?

Air Survey

24.

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asked the Secretary of State for Scotland whether he will arrange for a comprehensive aerial survey of Scotland with modern micro-magnetic instruments as well as photographs in order more fully to investigate raw material resources above and below ground, to determine accurately cultivable and grazing areas with easiest access to them, to see with greater certainty the extent of bracken growth, and to investigate any other items which aerial surveys have shown elsewhere to be capable of development for economic benefit of the country

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I understand that the possibility of an aero-magnetic survey for geological purposes is receiving consideration. A photographic survey for the other purposes suggested by my noble Friend would not be likely to add to the information already available.

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Does not the Joint Under-Secretary of State think that if an aerial survey is to take place it might just as well be comprehensive? Does he not think that the results of what we would learn from a photographic survey might be surprising?

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We think we have all the information that could be got from such a survey, but I have no doubt that the suggestion will be borne in mind.

Slaughtering Facilities

31.

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asked the Secretary of State for Scotland if he is satisfied that there will be adequate slaughtering facilities in the North of Scotland when the new system of meat marketing begins.

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The Slaughterhouses Bill at present in another place requires local authorities to satisfy themselves that slaughterhouse facilities are adequate. They may provide and operate slaughterhouses themselves and may register others who propose to do so. A circular has been sent to local authorities explaining the proposals in the Bill, and I have no doubt that, as they have been advised to do, they will consider, in consultation with the interests concerned, the slaughterhouse accommodation required to meet the situation resulting from the decontrol of meat.

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I thank the right hon. Gentleman for his reply. May I impress upon him how important it is, especially in the North of Scotland—and time marches on—that these slaughterhouses should be ready when the new system comes into force?

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I appreciate the point made by the hon. Gentleman.

"Galloway Mazer" (Export)

32.

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asked the Secretary of State for Scotland what submissions have been made to the Waverley Committee on the future of the "Galloway Mazer."

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Representations have been submitted to the reviewing committee on the export of works of art by the Keeper of the National Museum of Antiquities of Scotland with regard to the proposed export of the "Galloway Mazer."

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Is it in the power of that committee to make representations? For the benefit of the House, may I ask the Minister to make it clear that this is a most valuable and unique piece of Scottish silver and that it would be a disaster for it to leave Scotland.

Crofting Commission (Report)

33.

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asked the Secretary of State for Scotland when the Report of the Crofting Commission will be published.

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My right hon. Friend hopes to be in a position to publish the Report after the Easter Recess.

Norwegian Factory Ships

34.

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asked the Secretary of State for Scotland if he has any information to give the House regarding the use of factory ships in Scottish waters for converting surplus herring into oil and meal.

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The Herring Industry Board is endeavouring to secure the use of two factory ships. I cannot say more at present.

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Can the Minister assure the House that the use of these factory ships will not be to the detriment of the establishment of shore-based factories of an economic size? Can he tell the House who owns these factory ships?

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They are Norwegian ships. I do not think that there is any likelihood of the one prejudicing the other kind of production.

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Can my hon. Friend assure me that these factory ships are not the real cause of the unwarrantable delay in erecting the factory at Peterhead?

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Yes, Sir.

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Can the Minister assure the House that the taxpayer's money is not toeing used for the benefit of a foreign country and to the detriment of our own people?

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The House knows that the processing of herring is an urgent matter. It needs expansion. The Herring Industry Board is considering the best and most economical ways of achieving that purpose.

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Why cannot this work be undertaken under British auspices instead of being given to the foreigner?

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All these matters are considered, but here is a proposition—and we have gone no further than this—which the Herring Industry Board is examining.

Education, Scotland

Technical College Grants (Apprentices)

8.

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asked the Secretary of State for Scotland what financial considerations he applies which prevent an apprentice in the county of Peebles from qualifying for a grant to attend the Heriot Watt or any other technical college for the purpose of improving his trade knowledge.

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Education authorities are empowered to give grants towards fees, travelling expenses and incidental costs of attendance at technical colleges, but an apprentice may not qualify for grant if he, or a relative on whom he is dependent, is able to meet the whole cost.

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Are we to take it that there are stringent rules or a means test applicable to these regulations?

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The hon. Member will know that the bursary regulations previously applied and now applied, necessarily take account of the parents' means; that is an old-established custom.

Nursery Schools, Glasgow

16.

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asked the Secretary of State for Scotland the annual cost of nursery schools in Glasgow; and what is the amount recovered in charges.

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It is estimated that the total cost for the year ending on 15th May, 1954, will be about £123,000; of this sum, about £7,700 will be recovered in charges for meals.

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Is the hon. Gentleman quite satisfied that this is a satisfactory sum to be contributed by the parents?

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Education in these schools is like education in other schools; it is a free service, and we have no means of recovering the cost, except for meals.

17.

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asked the Secretary of State for Scotland the average daily attendance of children at nursery schools in Glasgow during March; what is the number of nursery schools; and what is the total staff employed in this service.

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The average daily attendance during March was 1,175; the number of schools is 41; and the total staff employed 243.

Teachers (Status)

22.

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asked the Secretary of State for Scotland whether, in view of the increasing anxiety among parents and teachers concerning overcrowded classes, the lowering of teaching standards, and the decline in the status of the teaching profession, he will seek to make an early broadcast explaining present and future prospects in the educational field.

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As my right hon. Friend has already shown in a statement to the Press and in answer to Parliamentary Questions, he does not accept the allegations contained in this Question. No doubt opportunities will present themselves in the future for broadcasts or other statements relating to educational progress in Scotland.

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How can the Minister possibly be so much out of touch with Scottish opinion? Does he not realise that, if the personality of the Secretary of State for Scotland were allowed to ooze over the ether, the effect upon the morale of the teachers would be absolutely devastating?

Housing, Scotland

Overspill Populations

11.

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asked the Secretary of State for Scotland if he has given consideration to the application to Scotland of a Town Development Act; or what similar assistance he proposes for Scotland.

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My right hon. Friend hopes to receive recommendations on this matter from the Clyde Valley Planning Advisory Committee, whose report on the machinery for dealing with overspill he expects very shortly.

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Is not the right hon. and gallant Gentleman aware that it is more than a year since I put down a similar Question and got a similar answer, and that already the English Act has been two years in operation and the position in Scotland is really worse?

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Yes, but the hon. Lady will understand that there is an Advisory Committee working very hard on this matter. It would be much better to await their report.

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Does my right hon. and gallant Friend not agree that in Scotland there are many areas which would greatly benefit by the infusion of new life from the cities by some such arrangement as the New Town Development Act provides for England?

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That may be so, but I would rather await the report.

Rents (Old-Age Pensioners)

15.

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asked the Secretary of State for Scotland if he will set up a working party to investigate what effect the proposals for increasing rents will have upon the cost of living for old-age pensioners and persons in receipt of National Assistance in the Gorbals division of Glasgow.

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The effect of a repairs increase will vary according to the rent of the house, but persons solely dependent on assistance for their rent will normally receive increased assistance to meet the repairs incrase. In these circumstances, my right hon. Friend does not think that a working party is necessary.

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Is the right hon. and gallant Gentleman aware that the supplementary assistance which this particular class of old age pensioner receives, or will receive when the Bill becomes an Act, will ultimately be passed on to the landlords? Does he think it right that public money should be used in this way?

Special Housing Association (Direct Labour)

25.

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asked the Secretary of State for Scotland if he has considered representations from the Scottish National Building Trades' Federation and the Federation of Civil Engineering Contractors (Scottish Section) that the amount of work undertaken by the Direct Labour Organisation of the Scottish Special Housing Association should be reduced; and what reply has been given.

26.

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asked the Secretary of State for Scotland why instructions have been given to the Scottish Special Housing Association to reduce the number of houses to be built by direct labour.

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My right hon. Friend has considered various representations from the two federations that the amount of work done by the Direct Labour Organisation of the Association should be reduced. The federations have been told that my right hon. Friend, being satisfied that the Direct Labour Organisation was of sufficient strength to serve its present purpose, did not intend it to expand any further.

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Why does the Minister say that his right hon. Friend has assured these federations of employers that the Direct Labour Organisation will not be increased? Has he not in fact told them that the amount of work to be done by the Direct Labour Organisation will be reduced?

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The answer to the second part of tine question is "No, Sir." The answer to the first part is that we consider that, as the Direct Labour Organisation is already servicing practically all the sites for the Association houses and building about one-fifth, that is sufficient for the present.

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Is it not a fact that the Minister gave an assurance to these particular organisations that, as a result of the action taken by the right hon. and gallant Gentleman and his right hon. Friend, the number of houses to be completed by the Direct Labour Organisation will be less this year than it was last year?

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No, Sir.

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Has not the Minister said that the number of houses to be completed by the Direct Labour Organisation will be reduced from 1,366 to 1,185?

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The hon. Gentleman will get a reply in the next Question.

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What authority have these organisations to call the Government to account for what the Special Housing Association should do?

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None, so far as I am aware.

27.

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asked the Secretary of State for Scotland how many houses were completed in 1952–53 by the Direct Labour Organisation of the Scottish Special Housing Association; and how many he estimates will be completed in 1953–54.

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In the years ended 31st March, 1953, and 31st March, 1954, the Association's Direct Labour Organisation completed 1,366 and 1,185 houses, respectively.

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Is it not a fact that as a result of representations that were made to him about the Scottish Special Housing Association, he said that there would be fewer houses built by direct labour than in the previous year?

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The hon. Gentleman should be aware that the programme varies up and down. I think he will find that the number of houses built next year will be above the number completed last year.

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Will the right hon. and gallant Gentleman either deny or confirm that he gave an assurance to these two organisations that, as the result of his directive, the number of houses would be less than in any previous year, as he had told the Association to curtail its activities in the direct labour department?

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I have stated the facts.

28.

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asked the Secretary of State for Scotland how many building trades apprentices who were unable to continue their apprenticeship with private contractors have been taken over by the Scottish Special Housing Association during the past two years.

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Nineteen, Sir.

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Can the right hon. and gallant Gentleman indicate whether the apprentices employed by the Association are registered with the National Building Apprentices Training Council? Will he also publicly acknowledge the satisfaction that the Association has given by being able to employ apprentices for whom private contractors had no employment.

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I think that is so.

29.

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asked the Secretary of State for Scotland if he has considered a request from the Scottish National Building Trades' Federation and the Federation of Civil Engineering Con tractors (Scottish Section) for permission to examine the accounts of the Scottish Special Housing Association, with a view to satisfying themselves about the association's claims in respect of the economies effected in site servicing by the Direct Labour Organisation; and what reply has been given.

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The federations have been told that the Association's Direct Labour Organisation competes against rates agreed by my right hon. Friend's Department which, he is satisfied, reflect current market rates. My right hon. Friend could not, of course, permit the federations to examine the Association's records to ascertain the detailed basis of the Direct Labour Organisation's estimates and the results.

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Is the right hon. and gallant Gentleman aware that the Association's prices are compared by the Department of Health with competitive tenders? Does not the Controller and Auditor-General also examine the Association's books, and should that not satisfy the contractors that the Association operates on a competitive basis?

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Do these people assume that because they are Conservatives they can order the Government to bow to them? How will this decision apply to all the other people?

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The right hon. Gentleman evidently knows them better than I do. I do not know what their political colour is.

30.

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asked the Secretary of State for Scotland what reply he has sent to the representatives of the Scottish National Building Trades' Federation and the Federation of Civil Engineering Contractors (Scottish Section) that the Direct Labour Organisation of the Scottish Special Housing Association is depriving the civil engineering contracting industry of the work of site servicing and of profits.

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The federations have been told that the Direct Labour Organisation's activities do not, in the Government's view, materially affect the volume of work available to private contractors in the building and civil engineering industry.

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How on earth could the Joint Under-Secretary inform those federations of employers that the fact that the Direct Labour Organisation could do the site servicing for nearly all the houses does not affect the work of those organisations? Is it not an impertinence on the part of those organisations to seek to influence the Government to curtail the activities of the Direct Labour Organisation?

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The hon. Gentleman will know that of about 40,000 houses which we are building in Scotland only 5,000 are being built by the Association. In addition, there is all the other civil engineering work to be contracted for. In those circumstances, the Government do not consider that this Organisation has interfered.

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In view of the very unsatisfactory nature of the replies, I beg to give notice that I shall raise the matter on the Adjournment

Ministry Of Defence

Sea Cadet's Death, Essex

35.

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asked the Parliamentary Secretary to tie Ministry of Defence if his attention has been called to the recent death of a sea cadet in Essex, accidentally shot during rifle practice, and to the expert evidence and comments by the foreman of the jury at the inquest; to what extent pre-Service cadet units are equipped with obsolete United States firearms obtained, as in this case, under wartime lend-lease; why this particular rifle was issued to the Sea Cadet Corps without any adequate proof that it could be safely handled; and, in general, what technical tests are made, and how often, of the reliability and safety of weapons in use in pre-Service cadet units.

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From the reports I have received, it is clear that the primary cause of this unfortunate accident was a breach of range discipline. Pre-Service cadet units are equipped with various types of 22 rifle, including a number obtained from the United States under wartime lease-lend. The United States types are not any less safe than other types. In the case of the Combined Cadet Force, the Army Cadet Force and Air Training Corps Units, rifles are examined about twice a year by armament experts. In the case of the Sea Cadet Corps, maintenance of the rifles is the responsibility of the local units, and they will in future be required to hold an annual certificate of serviceability.

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Does the hon. Gentleman say that the expert evidence given at the inquest was not accurate? His reply just now does not seem to agree at all points with that evidence.

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The reply I have given is in accordance with the expert advice I have received.

New Rifle

36.

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asked the Parliamentary Secretary to the Ministry of Defence what progress is being made with the manufacture and issue of the new rifle.

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Five thousand rifles have been ordered from Belgium for troop trials. It is hoped that five hundred will be delivered in July and the rest before the end of the year. Production has not yet started in this country.

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Are the factories here tooling up for manufacture?

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Pre-production planning is going on, but we do not want to go into production until the troop trials are completed.

Educational Attainments

37.

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asked the Parliamentary Secretary to the Ministry of Defence what educational attainments qualify entrants to the Services to be classified in standard six.

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Standard six in the grading of educational attainments used by the Services means that a man has attended school up to age 15 and has achieved the normal educational level at that age.

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Is the Minister aware that that reply is almost as incomprehensible as that which he gave me last week? Will he explain why the number entering the Army who fail to reach standard six is so much greater than among those entering the other Services?

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I apologise for my written answer last week. I do not think that it was clear. I ought to have defined what standard six is. The reason for the standard being lower in the Army is that the Navy takes very few National Service men, and the Air Force can get all it wants. The men choose the Navy and Air Force and these Services, therefore, do not accept the lower standard.

British Army

Trooper's Funeral, Germany (Notification To Parents)

38.

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asked the Secretary of State for War if he will now make a statement on the circumstances in which the body of Trooper B. A. Brown was buried in Germany, without proper notification to his parents of the funeral arrangements; and why they were not given the opportunity of attending the funeral.

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My hon. Friend has already written to the hon. Member about this case. I would myself say how sorry I am that this failure occurred.

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May I ask whether the right hon. Gentleman has seen the letter which I have sent in reply to his hon. Friend's letter to me? It makes one or two new points, I think. Can the right hon. Gentleman say whether, in comparable circumstances, parents have ever been flown to their son's funeral? If so why it was not done in this case, in view of the error which has been admitted?

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I think that the letter explained the reasons for this error. The flying over of parents for funerals is not a thing which is done, and indeed, in this case it would have been too late to do it

National Service Men (Middle East Postings)

39.

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asked the Secretary of State for War the minimum age and the period of training which must previously have been served before a soldier can be sent to the Middle East.

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Before embarking for the Middle East, a soldier must be 18 years, 3 months old and have had at least 12 weeks' service, including 10 weeks' training.

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In view of the fact that, when in Opposition, none was more hostile than the right hon. Gentleman to the idea of sending inexperienced lads to active areas, why does he now permit inexperienced youths to be sent to the Middle East with but a minimum of training, when there are already 80,000 browned-off troops there?

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The regulation about the age at which National Service men go to the Middle East has been the same since the introduction of National Service.

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Can the right hon. Gentleman say whether any of his hon. Friends who, during the last Government's period of office, were so anxious to get these conditions altered, have exercised any pressure on him recently?

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I am not aware, without reference to HANSARD, of any pressure in this respect.

Courts-Martial (Committee Recommendations)

40.

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asked the Secretary of State for War how many of the recommendations of the Lewis Committee on Courts-Martial have not yet been implemented in the Army, and why they have not been implemented.

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Apart from the recommendations which were not accepted by the Government of the day, nine. The Select Committee on the Army Act and Air Force Act is now considering these nine recommendations.

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As it is five years since the Lewis Committee reported, should not the Secretary of State proceed to implement the recommendations that have been accepted without waiting for the report of the Select Committee, which has a very much wider task to complete?

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Those recommendations which were accepted by the then Government have been put into effect. The ones now outstanding are being considered by the Select Committee, in accordance with the opinion of the House at the time the Select Committee was appointed.

British Troops, Colonial Territories (Costs)

41 and 42.

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asked the Secretary of State for War (1) to what extent the cost of maintaining British troops in Colonial Territories falls on the British, and on the colonial, taxpayer, respectively;

(2) to what extent the cost of transporting British troops between the United Kingdom and Colonial Territories falls on the British, and on the colonial, taxpayer, respectively.

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It depends on the circumstances. Where United Kingdom troops are stationed in Colonial Territories for reasons of Commonwealth defence, the cost of transporting and maintaining them there is met from United Kingdom funds, but the Colonies are encouraged to make contributions towards the general costs of Commonwealth defence. Where the troops are sent to help to preserve or restore order, the Colonies are expected to pay, so far as they can afford to do so, the extra costs, including transport.

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Can the Minister tell us what say the citizens of the Colonial Territories have in the employment of such troops, what is the total amount of money which they contribute annually towards this military expenditure, and why they should pay so heavily for the blunders of the Colonial Secretary?

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Those are different and much more detailed questions, which do not arise out of this one.

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Is my right hon. Friend aware that all those who are concerned with the welfare, good government and security of the colonial peoples consider this as money well spent?

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Can the Minister tell us who is going to pay for the 19 new colonial battalions, about which he was so coy last week?

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I am far from coy about these battalions, but without notice I could not give the hon. Member a detailed answer.

Youth Employment Service

43.

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asked the Secretary of State for War what liaison he maintains with the Youth Employment Service.

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The Army's school liaison officers and chief recruiting officers at command headquarters and recruiting officers locally keep in touch with the Youth Employment Service.

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Does not the right hon. Gentleman agree that because of the large number of young men he gets into the Army, both for National Service and as Regulars, the closer liaison he maintains with the Youth Employment Service the better?

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Yes, Sir.

Coal (Whitewashing)

44.

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asked the Secretary of State for War whether the practice of whitewashing coal, which has been brought to his attention by the hon. Member for Harrow, East, has now been expressly forbidden as a military duty by his Department.

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Coal may sometimes be whitewashed to mark the edge of a coal dump for safety hi the dark or as a check against pilfering. I think this has led to the old Army legend that it is sometimes done to please inspecting officers, an instance of which has yet to be proved.

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Is my right hon. Friend aware that a pail of whitewash would soon overcome this device against the pilfering of coal? As this is, in any case, a very silly practice, can it be stopped?

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May I take it that this method is not going to be adopted in this House?

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Yes, Sir. I think there are a lot of things that might be whitewashed, but not that.

Infantry Training

51.

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asked the Secretary of State for War to what extent officers and non-commissioned officers returning from Korea, Malaya or Kenya, are being used to train the Regular Army in modern battle tactics.

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The fullest possible. For instance, on the staff of one school, which is not exceptional, there are three majors, six captains, two warrant officers, 12 sergeants and seven corporals who have experience of operations in Korea.

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Has the right hon. Gentleman taken the opportunity of reading the three articles in the "Manchester Guardian" written by a platoon officer who saw active service in Korea? They are very restrained articles. Do they not tend to show that there is not sufficient intensive battle training before our young troops are sent into action?

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I have read those articles, which were written by a young subaltern. I have already been into this and seen reports of General Erskine and also of General West and others. It is a question of taking the word of a young subaltern against many others. They are very damaging articles. I am satisfied, from the inquiries I have made, that they are not grounded on fact or justified.

52.

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asked the Secretary of State for War if he will make immediate inquiry into the standards of infantry field training in the Army.

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The standards of field training are continually watched and studied by the military training staffs in and outside the War Office.

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Is it not the case that, the Secretary of State having been trained in the cavalry, he has grown up with the idea that in dire circumstances his horse will always look after him? This is certainly not so in the infantry. Do not the articles to which reference has already been made bear the hallmarks of authenticity and bear out the experience of many people who are concerned with the training of the Territorial Army, and in particular point not only to shortcomings in Korea but shortcomings in the training of the troops in Germany?

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It was not my experience during my training that my horse always looked after me. So far as the training in Germany is concerned, it is my belief that the infantry training in Germany is of the highest standard ever reached by the Army in peace. I should be only too glad to enable the hon. Gentleman to go to look at it if he would like me to arrange it.

55.

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asked the Secretary of State for War to state the infantry and guard battalions which proceeded from Germany to Korea between 25th June, 1950, and the Korean armistice; and if he will indicate those battalions that underwent three weeks training in East Anglia between the date of leaving Germany and embarking for Korea.

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The following infantry battalions went from Germany to Korea during the period: 1 Royal Norfolk. 1 Black Watch, 1 Royal Fusiliers, 1 Durham Light Infantry, 1 Duke of Wellington's Regiment and 1 Royal Scots. Of these, only 1 Royal Fusiliers carried out training in East Anglia before embarkation.

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Is the right hon. Gentleman aware that it seems that the officer who wrote in the "Manchester Guardian" about the system of training in Germany was serving in the Royal Fusiliers? Will he look at the system of training not only in the first battalion of that regiment but of the 5th Infantry Brigade, because if anything is wrong with training in Germany it must be in that brigade? Will he look into that and make a statement to the House?

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I have already done that both in Germany and East Anglia, and have seen reports of the generals concerned.

"Empire Windrush" (Loss)

52.

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asked the Secretary of State for War if he will give an undertaking that all persons travelling on thess. "Empire Windrush" who suffered loss because of the fire on that vessel, and whose possessions were not insured, will receive full compensation.

54.

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asked the Secretary of State for War whether he will give an assurance that those who have lost personal clothing and possessions as a result of the loss of the ss. "Empire Windrush" are to be completely compensated, in view of the exceptional character of the disaster and their own exemplary conduct\ which contributed towards minimising it.

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This question is still under discussion, but I hope to make an announcement before the Easter Recess.

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If it should be brought to light that this vessel was not in the state that it should have been and that there were failures in the mechanism, and so on, will my right hon. Friend bear that in mind when he is negotiating with the Chancellor of the Exchequer for the moneys to be paid out on the loss of goods and chattels?

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I should not like to anticipate my statement.

Church Parades

56.

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asked the Secretary of State for War why Queen's Regulations relating to church parades have been consistently contravened in Southern Command; and why, upon this being brought to his attention, he took no action.

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If the hon. Member has any complaint about a specific church parade I will look into it.

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The Secretary of State himself told me that 101 church parades had taken place illegally. Why, in view of the information he himself has given about more than 100 illegal parades in Southern Command, is he not prepared to take action? Is it not a fact that Queen's Regulations say that church parades may take place only on days of local or national significance, and that a regimental week-end is not a day of local significance?

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I wrote to the hon. Member explaining that the parades that have taken place in Southern Command came within the category specified in Queen's Regulations.

Ministry Of Food (Future)

45.

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asked the Prime Minister if he is satisfied that the recent rate of progress in derationing foodstuffs and winding up the trading affairs of the Ministry of Food will make it possible to close this Department of State by the end of this year.

48.

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asked the Prime Minister to what Departments it is intended to allot the remaining functions of the Ministry of Food after the forthcoming abolition of rationing.

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The end of rationing this summer will make possible further large staff reductions but will still leave important duties of Government to be performed. It is not yet possible to forecast the arrangements for carrying out these long term functions.

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Will the Prime Minister tell us whether the Government have decided that the Ministry of Food shall be closed down at the earliest possible time, having regard to its remaining duties?

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Yes, Sir. I think that general statements of that character have been made for some time past, but the actual details must be precisely stated when they are all settled.

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Will the right hon. Gentleman tell us who will bear the cost of the distribution of welfare foods when the Ministry of Food is closed down, and whether this burden will be laid upon local authorities?

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I certainly think that I ought to have notice of that Question.

Hydrogen Bomb

46.

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asked the Prime Minister what British observers were present at the recent hydrogen bomb experiments in the Pacific.

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No British technical observers watched the explosions. But the United States authorities had agreed that we should have certain facilities for collecting scientific data bearing on their effects. Similar facilities had been granted to the Americans on the occasion of our own nuclear test in Australia. Therefore an aircraft of the Royal Air Force made a flight in the vicinity of the explosion of 1st March, some hours after it occurred; a similar flight was also made on 27th March. No injury or damage was suffered by this aircraft or its crew, on either occasion.

I think, however, that the House should know that two Canberra aircraft which had been assigned to this duty were lost in transit to the American base in the Pacific. Of these, one is believed to have fallen into the sea and the relatives of its crew of three have, of course, been told. The second made a forced landing on an island with the loss of the aircraft but without injury to the crew. Her Majesty's Government greatly regret the loss of life, and I feel sure that the House will join with me in expressing our sympathy with the relatives. The House will understand that the loss of these two aircraft was in no way due to the risks of the special mission which they were to have undertaken.

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On behalf of all Members on this side of the House, I should like to express our regret at these losses. May I also ask the Prime Minister, in view of the importance of this House and the Government having full information on this matter, whether we are to have observers present at future tests?

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I have not any knowledge of new arrangements having been made from those which existed at the beginning of these tests.

47.

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asked the Prime Minister if he is aware that the uncontrolled destructive power indicated in the recent hydrogen bomb test is creating a feeling of insecurity in the minds of people who are becoming convinced that it is more likely to destroy than to save civilisation; and whether he will take steps to bring about an early meeting of the United Nations in order to direct the attention of the nations away from a negative and mutually destructive policy to one of mutual aid by using more effectively the. machinery of the United Nations.

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My right hon. Friend the Foreign Secretary dealt fully with this aspect yesterday. I also said something about it.

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Is the Prime Minister aware that there is a general feeling in this country that the only organisation which can deal efficiently and effectively with the "hell bomb" is the United Nations organisation? Is he further aware that the League of Nations was destroyed because it was not used, and will he see that the United Nations organisation is not destroyed in the same way? Will he use it effectively now, at this critical moment in our history, so that it will not be destroyed in the way that the League of Nations was?

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I thought we were all agreed yesterday that something much more intimate, swift and precise should be put into operation than the procedure of the United Nations organisation.

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Can the right hon. Gentleman give us an assurance that, pending the meeting of the Assembly or appropriate committee of the United Nations, he will keep in close touch not only with the President of the United States but also with the Governments of the British Commonwealth, since the deep concern which is felt by the peoples of this country is, I believe, shared by the peoples of the Commonwealth, particularly in Australia and New Zealand?

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Yes. The Secretary of State for Commonwealth Relations is in continual touch and correspondence with Australia and New Zealand.

President Eisenhower

49.

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asked the Prime Minister whether he will extend an invitation to President Eisenhower to visit this country for the purpose of discussing with him present international difficulties and, in particular, matters connected with the hydrogen bomb, and of resolving any differences of opinion that may stand in the way of a subsequent approach to President Malenkov for the calling of Big Four talks on the present international situation.

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It goes without saying that we should be delighted to welcome President Eisenhower in this country, where we knew him so well during the war. I have more than once expressed my hopes that such a visit would be possible. I do not, however, think it likely that he would feel that he could leave his heavy duties at the present time. The visit of a head of State, I must remind the House, is a matter of the highest consequence.

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While thanking the Prime Minister for that reply, the sentiment of which we all share, may I ask him whether he will, as soon as he feels that a convenient opportunity presents itself, extend an invitation to President Eisenhower?

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We shall certainly take whatever measures we think best, but I am not sure that, with the question in the controversial position it is now, it would be the best thing to extend an invitation at this moment. I have already more than once expressed to President Eisenhower the great satisfaction which it would give the whole of this country if he could pay us a visit, but he has been in office only for a year and the opportunity has not occurred.

East-West Trade

50.

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asked the Prime Minister whether he will request the resignation of the President of the Board of Trade for failure to implement Her Majesty's Government policy of expanding East-West trade.

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No, Sir.

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Does not the Prime Minister remember that on 25th February he forecast the immediate expansion of East-West trade, and that ever since the President of the Board of Trade has been saying it will take two or three months before even some of the most important restrictions can be removed from strategic goods which are sent to and fro between ourselves and Russia? Unless something more urgent is done about it, the Prime Minister's own policy will be frustrated.

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No one has worked harder, more persistently and strenuously every day at the details which are involved in bringing about a greater expansion of East-West trade than my right hon. Friend. I can assure the House that he has been a fanatic in the matter.

Orders Of The Day

Ways And Means

Considered in Committee.

[Sir CHARLES MACANDREW in the Chair]

Budget Proposals

3.31 p.m.

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A year ago I laid before this Committee a series of proposals which were designed, as I then said, to get us

"out of the slack water, lighten the ship, and give her way."—[OFFICIAL REPORT, 14th April, 1953; Vol. 514, c. 50.]
My first duty today must be briefly to review the marked progress we have made since then.

Review Of 1953–54

The objective of my first Budget was to rectify and strengthen our balance of payments. This was done. The tasks for the 1953 Budget were to continue to fortify our overseas account and to seize every opportunity for expanding production at home. In the last Budget we restored initial allowances, to encourage investment. We reduced taxes, to increase economic incentives and to stimulate demand and production.

But since our balance of payments, though it had improved, was still insecure, and since we could not risk any renewal of inflation, I decided that there must be limits to the extent to which we could deliberately expand the economy. We had to steer a middle course. Looking back over 1953, I think we can fairly say that our policy has been justified by events. In that year industrial production reached heights never before recorded in our country's history.

Balance Of Payments

A year ago I told the Committee that the sterling area must as a whole be at least in balance with the rest of the world. As the Committee already knows, the sterling area converted a huge deficit in the year ending 30th June, 1952, into a surplus of over £400 million in the following year. This was a remarkable achievement, of which we members of the sterling area, who gathered together recently at Sydney, felt justly proud.

This recovery was due mainly to the adoption of sound internal measures. But it was also, in part, due to the drastic import restrictions imposed by all sterling area countries following the crisis of 1951. As these emergency restrictions are, rightly, being removed, we must expect the surplus to fall from this high rate, especially in the second half of the year, which for seasonal reasons is usually less favourable to the sterling area's earnings, and also contains the capital and interest payment on our debts to Canada and the U.S.A. The surplus in the second half of 1953 has now been provisionally estimated at about £100 million, and for the year as a whole at some £320 million.

Gold And Dollar Reserves

As a result of the sterling area's achievement, the gold and dollar reserves rose during 1953 by £240 million, to a total of £899 million. The Committee should know that in the first quarter of this year the reserves rose by another £60 million. The result was that at the end of March they stood at £959 million. Here, too, we may feel modestly satisfied—but not complacent. The level of £959 million is a little more than half as much again as the lowest figure to which the reserves fell in 1952; so that there is a long way to go before they reach an adequate level.

The United Kingdom's own balance of payments with the rest of the world yielded a surplus of about £225 million on current account in 1953, after receiving about £100 million of aid from the United States. In the second half of the year, our total current surplus had risen to an annual rate of £300 million, after taking account of U.S. aid.

Exports

One of the most significant developments affecting our own balance of payments has been the further movement of the terms of trade in our favour. One result of this has been—and the Committee should have all the facts placed before them—that during 1953 the United Kingdom was able to buy a volume of imports 9 per cent, higher than in the previous year at 4 per cent, lower cost. This has been a considerable help to us. But we must also remember—and this is sometimes forgotten—that a movement of this kind also tends to reduce the purchases of some of our best overseas customers from us.

I shall have more to say later about our export performance, but I would simply note here that we cannot expect to enjoy both favourable terms of trade and easy export markets at the same time. It is, therefore, encouraging to record that we increased our exports to those areas, particularly North America and Western Europe, where economic activity remained high and trade was not beset by import restrictions. Some countries in the sterling area found it possible to relax their restrictions during the year, and have made progress in this direction since our talks at Sydney. Our exports have responded to this treatment.

Meanwhile we have to note the manifest increase in the confidence which the world has placed in sterling. This is shown by the strengthening of the reserves, the marked strength of the sterling-dollar rate, and the small gap, over a long period, between the official sterling rate and the unofficial rates for transferable sterling. This confidence has enabled us to make two important moves forward towards a freer system of trade and payments. One is the unification of what is called non-resident sterling and the other is the re-opening of the London gold market. We hope and expect that this will increase still further the strength of sterling and the world's use of it. Certainly the first reactions to these moves have been cheering.

The Home Front

What is more encouraging is that we have been able to combine this external progress with a considerable expansion in production and improvement of living standards at home. Over 1953 as a whole industrial production was 6 per cent, higher than in 1952. This increase has continued into 1954. This welcome surge forward is partly due to a natural reaction from the period in 1952 when consumers' expenditure was abnormally low and investment in stocks had been cut back. The resumption of investment in stocks accounts for some of the increase in production.

But the recovery has also been due to some more fundamental influences. Nearly half the increase in industrial production was brought about by higher investment and higher defence expendi- ture. Personal consumption, assisted by the tax concessions which we made last year, also rose in volume, by about 4 per cent, over the previous year. It has sometimes been said that this increase of personal consumption is a sign that we did, after all, overdo things last year; even that we brought back inflation.

For my part, I take pride in the increased freedom of choice which the citizen now feels that he can enjoy in his or her daily life. The truth is that we must not be frightened of a little more ease and happiness or feel that what is pleasant must necessarily be evil. We must realise that we shall be able to increase our standard of living through an expansion of production only if that expansion is a balanced expansion, benefiting each sector of the economy, including personal consumption, in its proper degree.

In the earlier part of the year exports contributed little to the growth of production; but in the later months they increased more rapidly than production, and outstripped the increase of home demand, so that by the end of 1953 the volume of exports was 10 per cent, higher than it had been a year earlier.

Employment

The expansion in output has been accompanied by a high and stable level of employment. The total of unemployed in Great Britain fell from 453,000 in January, 1953, to 373,000 in January, 1954. At the same time, unfilled vacancies rose from about 230,000 to 270,000. So it can be said that, broadly speaking, there are, at the moment, neither too many workers for the jobs, nor too many jobs for the workers. Moreover, output rose a good deal, and rose more than employment. This recovery in productivity marked a return, in most industries, to the 1951 level.

The resources at our disposal were, of course, enlarged not only by this rise in productivity but also by the improvement in the terms of trade, whose support to our external balance of payments I have already mentioned. We have been asked what advantage we have to show at home from the improvement in the terms of trade. This is the answer to that question. In brief, these improved terms have enabled us to increase our imports of food and raw materials, without impos- ing a corresponding extra strain on our balance of payments or our reserves, in spite of the fact that exports were, unfortunately, slow to increase. This made it easier for our economy to carry its heavy burdens, including the defence programme; and it also contributed, together with our sound financial policy, to the welcome stability of prices throughout the year.

The developments which I have described are encouraging, but it will be our duty today and during these debates to search out the less satisfactory features of 1953. That is what I did over the last year and then diagnosed as a result. In my last Budget Statement, I pointed out the decline in production in 1952 and recommended means of dealing with it. This year I point to productivity. We cannot be complacent about its increase, when we remember that output per man in manufacturing industry in 1953 was, on the average, little above the 1951 level and that our rate of increase is far too often below that of our overseas competitors. I point also to exports. These have expanded over the year, as I have shown, but we need to obtain a substantially larger volume of exports if our balance of payments is to be secure.

Moreover, taking the year as a whole, there has been an insufficient increase in investment in private manufacturing industry. It is true that the volume of fixed investment increased in 1953 by about £200 million. But most of this was accounted for by the larger number of new houses built, and virtually all the rest by higher investment by the basic industries. The level of our industrial investment is still too low; it is still too far below the corresponding achievement in the United States, and the trend compares unfavourably with the effort of some other countries, who are becoming our keen rivals in world markets. The moral for ourselves is serious; and I shall have more to say on this subject at a later stage of my speech.

In framing plans for next year we must therefore start from this simple truth. Our objective is expansion without inflation. If we are to achieve this, we must continue to raise productivity, to expand exports, and to increase productive investment. So much for the Revenue and how we got along last year.

Exchequer Out-Turn

I will now summarise the main items of the Exchequer Accounts in traditional manner for the past year. Total revenue amounted to £4,368 million. This, I may point out, is, in total, exactly the figure I forecast, though a suitable sense of modesty compels me to admit that it is not composed exactly as I thought it would be.

Revenue

Inland Revenue duties amounted to £2,340 million against the estimate of £2,436 million, that is £96 million less. The shortfall occurred in Income Tax, Profits Tax and Excess Profits Levy, and was primarily due to the fact that company profits in the textile and allied trades declined as a result of the 1952 recession rather more than we could foresee. In addition, the suspension of initial allowances from April, 1952, produced a somewhat smaller increase in revenue than we had hoped. On the other hand, the general buoyancy of the economy in 1953 was reflected in an increase in the value of Stock Exchange securities and other property, with the result that the yield of both Death Duties and Stamp Duties was larger than the estimate. The yield of Surtax was also slightly greater that was expected.

But if Inland Revenue fell short of expectations, Customs and Excise Duties exceeded them. The total yield of these duties was £1,764 million, or £39 million more than the estimate. Tobacco yielded £627 million, or £12 million more than the estimate. Beer, wines and spirits, as usual, returned a score second only to tobacco, providing £383 million or £11 million more than the estimate. Import Duties yielded £54 million or £16 million less than the estimate. Purchase Tax produced a total of £299 million, no less than £39 million over the estimate.

Non-tax revenue yielded more than the estimate. For example, receipts from Sundry Loans amounted to £38 million, compared with the forecast of £25 million, practically the whole of the difference being accounted for by an advance repayment of part of our wartime loans to the Netherlands Government. Miscellaneous Revenue has produced £136 million, or £41 million more than the Budget estimate, an increase largely due to the trading surplus of the Ministry of Materials.

Expenditure

Now for expenditure. Consolidated Fund Services, at £674 million, were £1 million more than I estimated in the Budget. Expenditure on Supply Services was forecast at £3,586 million, and amounted, in fact, to £3,600 million. This was only £14 million wide of the estimate. But, considered separately, the elements of this total, defence expenditure and expenditure on civil supply, took different courses.

I estimated defence expenditure at £1,497 million, after allowing for £140 million of appropriations in aid from the sterling counterpart of economic aid from the United States. In fact, expenditure on defence amounted to £1,365 million, or £132 million less than the estimate, in spite of the fact that the appropriations in aid from sterling counterpart were £125 million, or £15 million less than the forecast. There are many reasons for this shortfall, but perhaps the most important is the slower rate of deliveries of certain items of defence equipment, slower than we had allowed, or, indeed, hoped for, in the past year.

Civil expenditure, on the other hand, at £2,235 million, was £146 million more than the Budget estimate. The Committee have already seen details of the supplementary provisions which cause this excess; it consisted mainly of the additional requirements of the Ministry of Food and of the Ministry of Agriculture and Fisheries for the support of home agriculture, for the financing of sugar stocks, and for flood relief.

The total expenditure under all heads amounted, therefore, to £4,274 million, against my estimate of £4,259 million, an excess of £15 million.

Summary Of Out-Turn

My Budget estimate, the Committee will remember, was a surplus above the line of £109 million. The actual result was a surplus of £94 million, within £15 million of the estimate. Below the line, we have done better than the estimate as regards both receipts and payments. On the receipts side, we have had £42 million in repayment of advances from the Raw Cotton Commission, compared with the estimate of £10 million; and on the payments side, we have issued £299 million by way of loans to local authorities, compared with the forecast of £400 million.

As the Committee know, this does not mean that the local authorities have reduced their capital expenditure. On the contrary, they have energetically maintained their investment in houses and other capital assets. It does mean that they have also shown energy and skill in raising their capital from outside sources. It is now 15 months since they were given their freedom to raise loans in the stock and mortgage markets, and from other non-Government sources. The figures show that many of them have made good use of their opportunities; and their action has assisted the Exchequer. This is a movement that I expect to continue, as the Committee will see when I come to my estimates for the year ahead.

In all, therefore, as compared with the estimate of £549 million for total net outgoings below the line, the actual figure was £391 million, or a saving of £158 million. Thanks to the fall in payments below the line combined with the surplus above the line, the net overall outgoings have been reduced to £297 million.

National Debt

This sum has, of course, had to be met by Exchequer borrowing. The National Debt at 31st March last stood at a total of £26,583 million, an increase of £531 million over the year. The main factors contributing to the increase are, first, the net Exchequer outgoings, which I have already mentioned, and, second, the transfer to the Treasury, under the Iron and Steel Act, 1953, of liability for £244 million of British Iron and Steel 3½ per cent. Guaranteed Stock. The Committee will, of course, also remember that the Act transferred the securities of the nationalised companies to the Holding and Realisation Agency. The Debt was also increased by the issue of £47 million of Coal Compensation Stock, which is likewise balanced by the corresponding liability of the National Coal Board to the Exchequer.

The state of the Debt reflects also, of course, our satisfactory progress in dealing with our obligations which matured during the year. We converted no less than …552 million of 1¾ per cent, serial Funding Stock, 1953, and £738 million of 2½per cent. National War Bonds, 1952–54, into securities maturing in later years. No more than £96 million of the £1,386 million of the two original loans remained to be paid off on maturity. New issues in the year consisted of a second tranche of £100 million of 3 per cent. Exchequer Stock, 1960, and £341 million of a new 3 per cent. Exchequer Stock, 1962–63. I will not detain the Committee further with details of the Debt. The other changes in its composition will be seen in the Financial Statement.

National Savings

It is right, however, that I should at this point acknowledge the valuable support which the Exchequer received in 1953 from the National Savings Movement. I assure their leaders and voluntary workers that the Exchequer has benefited greatly from their support, and that they have made a notable contribution to our economic stability. They have brought us good tidings. The National Savings record shows that in the last three months new sayings exceeded withdrawals by £40 million; that is £30 million better than in the same period last year. The savers must not relax in the coming year. A Budget cannot succeed by fiscal measures only; and I rely on the skill and enthusiasm of the Savings Movement to continue to encourage personal savings, guiding the money into National Savings securities to the advantage of the State and of the savers themselves.

Summary Of 1953–54

That, I think, is sufficient of figures for 1953–54. But in bidding farewell to that year, I think I may claim that its results, as I have tried to summarise them, provide ample justification of the policy on which last year's Budget was based. The success of a Budget should be judged, not by the narrow arithmetic of the Exchequer accounts, but by its wider effects on the economy. What were these effects?

Production has expanded; we have reduced taxes and enjoyed an increase in consumption, the benefits of which have been very widely spread; our external balance of payments and our gold and dollar reserves have been strengthened; the economy has been able to respond rapidly to the revival of export demand as it occurred in the later part of the year; we have enjoyed greater stability of prices; and we have been able to free from control many commodity and agri- cultural markets. Indeed, the fact that we have been able to foster expansion and go ahead with decontrol without a general rise in prices shows that we have held a fair balance between inflation and deflation. That, I suggest, is not a bad record of a year's voyage. It is a fair indication that, after the measures which we took 12 months ago, the ship really did make good progress and get out of slack water. But I have not shirked the problems which 1953 has still left us to face, and we had better now examine, first, the arithmetic, and then the wider prospects of the year ahead.

Prospects For 1954–55

In looking at the prospects for 1954–55, let me begin with the conventional above the line Budget, in ordinary Exchequer terms.

Revenue For 1954–55

I estimate that revenue on the basis of existing taxation will amount to £4,537 million, an increase of £169 million over the out-turn in 1953–54. Inland Revenue duties in 1954–55 are expected to yield £2,385 million, an increase of £45 million compared with the out-turn for 1953–54. This increase is wholly attributable to Income Tax, from which I expect to collect £1,800 million, or £69 million more than last year. This is partly due to the recovery in profits during 1953 and partly to increases in wages and salaries. The increase is after allowing for the cost— about £50 million—of the restoration of initial allowances, which I announced at this time last year.

Profits Tax, on the other hand, is expected to yield only £172 million this year, a reduction of £16 million compared with 1953–54. This is because part of last year's collection consisted of arrears of tax at the higher gross rates applicable up to the end of 1951. I put the yield of Excess Profits Levy in 1954–55 at £60 million—a fall of £6 million on the previous year; and the yield of Surtax at £132 million, or approximately the same as the 1953–54 out-turn. Death Duties at £165 million, Stamp Duties at £55 million and Miscellaneous Inland Revenue duties at £1 million are also expected to bring in about the same amount as last year.

I put the revenue from Customs and Excise duties on the existing basis of taxation at £1,785 million in 1954–55, compared with £1,764 million last year. The principal items in this total are: tobacco, £633 million; beer and other alcoholic drinks, £381 million; oil, £300 million; Purchase Tax, £295 million; Import Duties, £56 million; entertainments, £44 million; and betting £30 million.

Allowing for a small increase of £4 million in the yield of motor duties, I estimate, therefore, that total tax revenue will amount to £4,247 million, an increase of £70 million over the corresponding yield last year. From non-tax revenue I also expect a considerable increase—£4 million more from broadcast licences, a result mainly of the higher charges which were announced a month ago; and £109 million more from Miscellaneous Revenue, which reflects, among other things, the proceeds of the expected liquidation of trading stocks by the Ministry of Food, and brings the total of Miscellaneous Revenue up to £245 million.

Expenditure For 1954–55

I put total expenditure above the line for 1954–55 at £4,523 million, an increase of £264 million on the original estimate for 1953–54. This, of course, allows for the reduction in the Ministry of Food Estimate as a result of the Annual Review of agriculture and the consequent price settlement. Consolidated Fund Services amount to £667 million, or £6 million less than last year's estimate. They need, I think, no detailed comment.

There is no change in the amount provided for the service of the Debt, but I do propose to alter the form in which that provision is made. Ever since the Finance Act of 1928, this has been the Permanent Debt Charge, which was a sum fixed in advance to cover the service and reduction of Debt over a period of years. But every year Parliament has authorised, instead of the sum prescribed in 1928, the actual amount required to service the Debt in the coming year. The fact is that the growth of the Debt, particularly during the last war, has made the existing provisions for the Permanent Debt Charge ineffective. I propose, therefore, to repeal them, and so bring the law into accord with the established practice.

The increase of total expenditure over last year is more than accounted for by Supply Services. Defence expenditure at £1,555 million, as compared with the £1,497 million estimated a year ago, rises by £58 million. Civil expenditure at £2,301 million shows an increase of £212 million over last year's original estimate of £2,089 million. In sum, therefore, the above-the-line account shows a surplus of £14 million.

To complete the picture in broad outline, I need only mention that the below-the-line estimate shows an increase of £16 million in the provision of capital for the National Coal Board; a reduction of £52 million in the provision for War Damage, partly due to the clearing up last year of the Business Scheme; and, in the light of last year's experience, a reduction of £100 million in the provision for loans to local authorities. We may also have to finance certain compensation payments under the Town and Country Planning Bill now before Parliament; but it is too early to name a figure for them. After allowing for the offsetting receipts, I put the net payments below the line at £388 million.

Such, then, in outline, is the Budget picture for 1954–55 on the existing basis of taxation. Its essential features are revenue of £4,537 million, expenditure of £4,523 million, and a small surplus of £14 million above the line.

The Committee will see that we have before us, therefore, the picture of a Budget broadly in balance—the picture of a Budget which showed a moderate surplus on last year's out-turn and seems likely to show a virtual equilibrium in the year which lies ahead. This is not a bad record for a country which has been carrying a defence load double that of five years ago and an ever-enlarging system of social services.

What then, shall be the pattern of this year's Budget? Are we to leave things as they are, or are we to make changes this way or that? The measures proposed in last year's Budget seem still to be working themselves out broadly according to plan, and to be providing the right sort of general climate in the economy. So far as I can judge, they are likely to continue to do so, and they ought, therefore, to be given more time to produce further beneficial effects.

But I must remind the Committee of some powerful forces of wind and weather which may well blow us off course. Three of them are very much in my mind—the more so since they are by no means wholly under our own control. The first is the formidable mass of Government expenditure. The second is the level of world trade, and of our own share of that trade. The third is the possible effect on the sterling area and ourselves of the current decline in American production. I will examine these in turn.

Government Expenditure

I will take Government expenditure first. The continuing rise in Government expenditure is serious enough in itself. On the income side we must recall that by next year most of the revenue from the Excess Profits Levy will have ceased, and we shall no longer be able to count on a large receipt from the sale of food stocks. We must also face a considerable reduction in U.S. aid which we have got used to appropriating in aid of our defence expenditure—and exceedingly grateful we are for it. The hard truth is that, much as we all want greater relief from taxation, even our present high rates will not save us from a serious threat to the balance of future Budgets if the growth of expenditure is not controlled. Of course, that balance may be disturbed by causes other than a rise in expenditure and an ending of particular receipts. If, for example, trade slackens, owing to a recession either here or overseas, the effects will be reflected in the revenue figures, mainly in the following year. Thus a slackening in economic activity may also lead us to a Budget deficit.

The aim of the Budget must always be to maintain the balance of the economy as a whole, whatever the mathematics above or below the line. Its aim, in short, must be to maintain employment, as indeed we have done, to encourage production, which we have done, while avoiding inflation, which we have done, and ensuring a healthy balance of payments, which we have succeeded in doing. The realities of our situation may therefore call either for a surplus or a deficit on the conventional Budget.

But these general considerations provide no excuse for not adopting a strict and sober attitude towards Government expenditure. The claims of the Government on the national resources leave us far too little freedom of movement for economic health. In the past year we have secured substantial administrative economies, particularly as a result of staff reductions made possible by decontrol. We shall continue to make these economies wherever we can. But they do not, in themselves, suffice to offset the increases hi expenditure which are dictated by considerations of policy. This is strikingly true of the three major heads of expenditure—defence, food and agriculture and the social services.

Defence Expenditure

Defence expenditure, before crediting United States aid, is estimated at £1,640 million, or roughly the same as the corresponding figure in the original Estimates for last year. But the budgetary support from American aid is expected, this year, to be only £85 million, as compared with £140 million for which last year's Budget could take credit. The net cost of defence to the Budget this year will, therefore, be £1,555 million, as compared with £1,497 million 12 months ago —the increase of £58 million which I have already mentioned. Moreover, our defence commitments impose a considerable strain on our balance of payments. The overseas element in defence expenditure is probably at least £350 millions a year.

The general policy governing our Defence expenditure this year has already been explained in the White Paper "Statement on Defence, 1954." I shall not go into it in detail again but, as that White Paper said,

"It will be the Government's aim to take advantage of all new developments which appear likely to increase fighting strength and to promote economy of effort."

We must be up to date; but we must have economy too. During the coming year we must see to it that we obtain some definite relief from the Defence burden.

Food And Agriculture

Now for the outlook in food and agriculture. On food there is expenditure of £229 million and, as I have already indicated, revenue which amounts to £110 million. This year consumer subsidies will apply to milk and bread only, at a cost of about £87 million. This is, as the Committee will have noted, very broadly the expense to the Exchequer resulting from the fixing of consumer prices insufficient to cover costs. The reduction of the scope of the consumer subsidies has, of course, widened the area over which assistance to our agricultural policy is given in the form of direct undertakings to producers.

Agricultural guarantees in this year's Estimate amount to just over £150 million. The total provision which corresponds to what we have hitherto called food subsidies—that is, it includes the welfare subsidies and such of the production grants as have hitherto been included in the total of food subsidies—is £325 million. We intend to carry out our undertakings to the farming community to maintain a system of guaranteed prices settled at the Annual Review.

Last year's experience has given both the farmers and the Government a good deal to think about—notably the fall in market prices abroad and at home, the return of plenty, and the curious effect of abnormally warm weather at seasons when the wit of men had fixed a price to suit a cold climate. In fact, the hens simply would not graduate in any of our schools of political economy. The Government and the farmers have therefore been conferring together on a variety of schemes designed to reconcile two needs —the need to secure a greater measure of financial control and the need to preserve the broad stability of the farming industry. The introduction of Deficiency Payments Schemes is an improvement, but our arrangements will have to vary from commodity to commodity.

We may, for example, quantify or limit the extent of Exchequer help to a particular commodity. Thus the guaranteed price may be related, in the words of the recent Annual Review White Paper,

"to levels of output of particular commodities, as in the case of the new financial arrangement for milk ";

or there may be an arrangement for sharing some part of the effect of changes in market prices. But I am sure that in one way or another we must establish, in consultation with the farmers' representatives, some limit to the open-ended Exchequer liability. Of this we shall hear more during the year.

Social Services

The next large group is that if the social services. The provision here amounts to no less than £1,327 million— an increase of £63 million over the corresponding provision in the original Estimates for last year. It takes the whole of the taxes from tobacco, beer, spirits and Purchase Tax to cover this total.

Of this increase of £63 million, the Education Departments, which rise from £259 million to £279 million, account for £20 million. This is largely due to the increase in the school population and in teachers' salaries. Housing subsidies account for £10 million, increasing from £70 million to £80 million. This illustrates the cost to the Exchequer of the success of the Government's housing policy. The National Health Service has gone up by £19 million, from £411 million to £430 million. National Assistance accounts for another £5 million by a rise from £128 million to £133 million; and Exchequer contributions to local revenues for a further £9 million, with an increase from £68 million to £77 million.

I think even hon. and right hon. Members opposite will agree with what I am about to say now. It is quite clear that progress in social reform, far from being neglected by this Government, has been well maintained. It is equally clear that this progress carries heavy obligations with it and that there is no miraculous and painless escape from these obligations. We cannot, in good conscience, put the clock back; but we must make sure that in the administration of this vast outlay humanity goes hand in hand with economy.

I am not unmindful of the many other claims on the Exchequer, which the Government would wish, in equity, to satisfy. Some of these—for instance, the problems of the old people—are very much in the minds of every Member of this Committee, not least myself. But I have described the already heavy and growing burdens on the Exchequer and I must say this to the Committee: that I cannot bring my conscience to sanction further advances in social reform, involving increases in public expenditure, until we have the growth of our existing commitments well in hand. Only then can we make further progress in meeting some of the claims which are pressing upon us.

My right hon. Friend the Minister of National Insurance, and indeed the whole Government and all Members of this Committee, have continually in mind the needs of the old people. But no one who reflects for a moment on the immense burden which the working population, and particularly the younger generation, will have to carry in the interests of elderly retired people, could think it right to reach a decision about the future welfare of the old without the fullest consideration of the effect on the cost which future generations will have to meet. This is the year in which a review of the National Insurance Fund is taking place —the first comprehensive review under the new legislation. Moreover, the Phillips Committee is investigating the problems of an ageing population. It will be useful to have the results of those reviews. But our urgent task, in the interests of the old, is to ensure that the outlook for public expenditure as a whole is less menacing than it is at present.

Another reform which is also very much in our minds is that of equal pay for equal work. In fact I was serenaded here this afternoon with the familiar tune of "Equal Pay." There has been a development. Leading staff organisations in the public services have now circulated a statement to right hon. and hon. Members in which they ask me to authorise "talks which will result in agreed steps for introducing equal pay." I certainly think that a gradual solution of this problem will prove to be the right one; and so far as the Civil Service is concerned— for which alone I can speak as an employer—I should like shortly to meet the National Staff Side representatives myself and discuss with them the manner in which we are most likely to make progress and the basis upon which further Whitley talks should rest. But here, too, of course, I cannot ignore the prospects for the Exchequer as I have described them.

I have said enough to illustrate the magnitude of the burdens which will fall upon the Exchequer in the current financial year and in the years ahead. It is an essential part of my Budget statement this year that I should make this warning clear. If—but only if—we control expen- diture, and increase the national product at a faster rate than the growth of our commitments, can we afford the benefits which that expenditure confers on us.

External Prospects

Our first task, then, is to control our expenditure at home. But I come now to the other purpose which I mentioned and which I now examine. The aims of the Budget must take account also of our liabilities overseas. The internal expansion which the Budget fosters must be one which reinforces our external balance of payments as well.

There is no need for me today to dwell at length on the vital need to maintain confidence in sterling, of increasing our gold and dollar reserves without accumulating corresponding short-term debts, and of winning a surplus which will enable us to make a worthy contribution to overseas development. I was most deeply impressed, during my recent visit to Australia, by the extent to which the members of the Commonwealth look to us for a lead in developing their and our vast resources. This is the true and up-to-date conception of Commonwealth unity in the economic sphere. These purposes compel us to do all we can both to increase our earnings, particularly from exports, and to enlarge the volume of world trade and the freedom of currencies, especially sterling.

I said just now that we had to increase the national product. There is one particular aspect of our policy which I must mention today, namely, finance for exports. There have been complaints from time to time that British manufacturers are being unduly handicapped in many cases by having to finance, either from their own resources or from such credit as they can raise, any credit which they themselves have to give in order to secure export orders for capital goods.

We have decided, therefore, that henceforward, the Export Credits Guarantee Department will make rather freer use of guarantees to the banks for major capital goods exports—for those goods which are one of the most valuable types of our traditional exports and which I found on my tour are of particular importance for overseas development. To the extent to which such a guarantee is given the City will find the finance, from the stage of accept- ance of the goods, without recourse to the manufacturer himself. For the time being a limit of up to 85 per cent, of the credit given to the overseas buyer, instead of the 90 per cent, usually available under an ordinary Export Credits Guarantee Department policy, will be set in those cases where this procedure is used. We shall review this in the light of developments, and meanwhile I hope the arrangement will help our exporters at an important point.

But any initiative of this kind which the Government can take can only support and reinforce the efforts which industry itself must make to increase output and to capture foreign markets. And here industry must combine enterprise with restraint. It must be enterprising in the vigour and imagination with which it meets the challenge of sharpening competition; it must be restrained in the extent to which it loads the final price by its demands for wages and profits. We are near the point—and in some cases we may have passed it—where further increases in wages and profit margins will price us out of our export markets. All-round increases in wages have clearly played a large part in the upward movement of prices since 1945. Both stability at home and competitive power abroad require that wage increases should not outrun productivity; any improvement in productivity should show itself also in the form of lower prices.

But, for the reasons which I have often given, industry must also beware of excessive distribution of profits. In all these questions we do better to rely on voluntary moderation than on any form of compulsory limitation. But at no level of the industrial process can we afford either denial of personal effort or indulgence of personal motives, if, in the sharply competitive world which we now face, our exports are to maintain and to expand their share of world trade.

Us External Economic Policy

Our task will be all the easier if world trade itself expands. Since the meeting of Prime Ministers on economic policy at the end of 1952, the Commonwealth as a whole has been working steadily to enlarge the volume of international trade and commerce. We have sought to do this in company both with the U.S.A. and with Europe.

My right hon. Friend the Foreign Secretary and I explained our policies both in Washington and in Paris early in 1953. We now have good reason to be glad that we took this initiative, because since then, we can look back on steady progress and on a general move towards more liberal trade and financial policies in the major trading countries of the world. Moreover, the Committee will, no doubt, have read the Randall Commission Report in the United States and the Message which President Eisenhower has recently sent to Congress.

It is not for me to prejudge or predict the action which the Congress may see fit to take. But I am encouraged, and I think that the Committee will be encouraged by the spirit of the President's message, and by his clear recognition that the United States has a vital interest in working towards the removal of restrictions on trade and towards the convertibility of currencies. This declaration of the Administration's attitude towards its long-term external economic policy is particularly heartening at a time when the current state of the United States economy is one of temporary decline— a decline on which the Committee will expect me to comment for a moment if we are to have a clear idea of what weather we are moving into this year.

So far production in the U.S.A. has fallen about as far as it did during the recession of 19487ndash;49; and we do not know whether it will fall further before it recovers. The sterling area could be affected in two ways. It might suffer some direct loss of dollar income; or, if a fall in activity in the United States were to lead to a reduction in commodity prices, a decline in prices and in comes might result in a general fall in trade and activity.

At Sydney, in January, the Commonwealth Finance Ministers were unanimous that we should try to ride the inevitable fluctuations of world trade without a return to restrictions on trade and payments. We also agreed that if all played their part in endeavouring to maintain a high level of trade, activity and employment—and it seemed reasonable to assume that they would—a moderate decline of activity in the United States could be prevented from having serious repercussions elsewhere. The implications of the present decline in United States activity for the rest of the world must, however, be closely watched. A Chancellor of the Exchequer is liable to have held against him any views which he may voice, however carefully he may qualify them. But I think it my duty to the Committee to give my impressions on this subject.

My own opinion, then, is that business confidence, both in the United States and elsewhere, has been remarkably robust, and that the decline which has taken place has been so orderly and gradual as to support the view that the recession is predominantly due to stock—or as the Americans call them, "inventory "— adjustments. A decline so caused should be self-correcting if there are no secondary effects, of which as yet there is little sign. If, however, secondary effects should begin to show themselves, then I believe that the United States Government would take steps to check any serious decline, just as I would expect any Government in this country, faced with similar internal developments, to take such steps. In short, while I believe that we should be prepared for any changes, I think that neither the facts up to now, nor the balance of probabilities, should lead us to expect the worst.

The world-wide damage caused by some previous recessions has been due mainly to the cumulative effects which a contraction of economic activity in any one sector exerts, with multiplying force, as its centre of infection spreads. But the effects of the current decline on the rest of the world have so far been much less severe than previous experience would have led us to expect. There are two reasons for this. The effects have undoubtedly been softened by the continued flow of U.S. military and other expenditure, and by the remarkable stability of commodity prices generally. But a good share of the credit is due to the policies adopted by the Sterling Area as a whole, following our various Finance Ministers' meetings, to check inflation and to promote sound development. In the event, progress in the sterling area has so far been slowed down rather than halted or reversed. Exports to the dollar area have shown some reduction; but our central reserves, along with those of many other countries, are still rising.

The Committee will no doubt have been heartened, as I was, by the increase in the gold and dollar reserves in March, the largest increase that we have had for a year. But this does not justify our discounting the various forces which, as I have explained to the Committee, may develop to the damage of our external account. It may be only in the second half of the calendar year that their effect will be felt; and it is then, in any event, that we normally have to face seasonal pressure against the balance of payments, of both the United Kingdom and the whole sterling area, with the rest of the world. Our best insurance against any such risk is to be prepared to take action, if necessary, both internationally and at home. Overseas, we must act, together with our friends and the great organs of international economic co-operation, to maintain our mutual credit and trade. At home we accept the responsibilities, defined in the White Paper of 1944, to keep up employment and, with due regard to the needs of our balance of payments, to use our resources to the full. Nor should I hesitate to reconsider my budgetary policies if I thought that this was required. We should therefore view the future with resolution rather than despondency.

Budget Objectives

I must now make my judgment of the prospects for 1954 as a whole. Although what happens in other countries may affect us vitally, it is the level of our internal demand which exerts the major influence on the course of production in this country. Speaking now in the broadest terms, it is my view that the general level of demand should be well maintained.

Home Prospects

Let us look at the main elements of demand at home. In real terms, Government expenditure on goods and services in 1954 will be rather higher than in 1953. The volume of consumers' expenditure also is likely to be higher in 1954 than during 1953 as a whole. As for fixed investment, work on new housing is expected to be about the same as in 1953, while the investment of the nationalised industries, both in buildings and in plant, should show some rise. These increases in demand will give considerable support to the course of production this year. Exports will depend, in part, on the level of world trade: and I hope that over the year as a whole they will be maintained.

If so, the most uncertain element in demand is investment in stocks. The level of stocks at present does not appear to be excessive in relation to the level of activity. If, as I hope, there is reasonable stability in other sectors, we can hope for stability here also. Thus, while conditions at the end of 1954 are necessarily uncertain, there are good prospects that, over the year as a whole, production should be higher than in 1953.

Monetary Policy

Now for a word on monetary policy. In considering the measures which we need to take, I have made my dispositions this year, as I made them last year, in the knowledge that my Budget will have the support of monetary policy. A year ago I said that conditions in 1953 were likely to require broadly a continuation of the monetary measures then in operation.

That, in the main, is how it turned out. Interest rates generally fell during the year. But few have made the mistake of interpreting those movements as a change of direction in monetary policy; they have been generally and correctly viewed as evidence of the continuous adjustment that must go on if the monetary mechanism is to be kept in effective operation. I shall not offer any predictions on the role that monetary measures are likely to play in the coming year. Bank rates and the rates that depend on it will be kept flexible and free for use in either direction as circumstances may require.

Final Appreciation

My judgment is, therefore, that we shall continue to maintain a very reasonable balance in the economy. But I think also that we should not commit ourselves too far in advance. The economy should be well able to respond to any increases in demand, in particular of overseas demand, which may occur. Thus, there is no cause for making this Budget especially tough or more disinflationary. We need not impose harsh new taxes, since an increase in the level of taxation on initiative and enterprise would hold down and impede, rather than stimulate and spur on, our drive for productivity and exports.

On the other hand, as my analysis has shown, production is likely to be higher this year than last, and I judge that it would be unwise at present to stimulate purchasing power by remissions of taxation designed to increase personal consumption. Although each of us may have personal reasons for regretting this conclusion, a sober appreciation of our economy must conclude that it would be premature to adopt policies which might prejudice our future liberty of action. This is the more true while we are necessarily uncertain about developments in the United States of America and about our own ability to take the full measure of our competitors in external trade.

Moreover, the man in the street knows well that the real value of a Budget lies in its contribution to those things which are really important to him—full employment, stable prices, a steady growth of production. By all these tests, last year's Budget was successful. It must be the task of this Budget of 1954 to carry on this good work, and as far as I can tell, at this moment in time neither tax increases nor major tax remissions are possible or called for.

While, this year, we should avoid a deficit on our final out-turn, we need not strain after any significant surplus. My judgment, therefore, is that this Budgetary policy will secure a continuance of the achievement which characterised the last financial year—a healthy balance in the economy as a whole. I shall make no changes for change's sake. So for the second year in succession I shall raise no new taxes. Such remissions or adjustments as I am now going to describe are necessarily concentrated on granting certain special claims to relief and on increasing the incentive to productive investment.

Post-War Credits

Like every Member of the Committee, I receive constant appeals for a more generous release of post-war credits. Behind many of these letters lie circumstances of personal distress which the payment of the credits, however modest they may be, would do a little to relieve. And even the Chancellor of the Exchequer must be moved by some of the individual cases which come to his notice.

And so I have searched my conscience yet again in this matter; in particular, I have considered once more whether payment of the credits might not be made in cases of hardship. But I have found no means by which genuine and continuing "hardship" could be defined for this purpose, at least without creating as many anomalies as it would remove. The question which really faces me, therefore, is whether some general release of the credits is now possible and advisable, over and above the existing arrangement whereby the credits are paid at the age of 65 for a man and 60 for a woman.

Let me remind the Committee of the circumstances in which post-war credits were originally introduced in 1941. During the debates on that year's Budget Resolutions, my predecessor, the late Sir Kingsley Wood, said in connection with the credits—and I quote his words:

'…one of our principal post-war problems will be to regulate the rate of expenditure under all heads, with a view to maintaining good employment over a prolonged period, without overdoing it, in the sense of facilitating more expenditure than we have physical resources to provide, and thus producing postwar inflation."—[OFFICIAL REPORT, 9th April. 1941; Vol. 370, c. 1662–3.]

The amount of post-war credits outstanding at this moment is about £564 million, very widely distributed among all sections of the people.

In an economy of the kind which I have just described to the Committee— an economy on a pretty even keel, with no immediate prospect of any lack of consumer demand and no immediate need for any large stimulation of individual purchasing power—can I, or can any responsible Member of this Committee, honestly take the view that the time is ripe for the release of the credits on anything approaching this scale? The answer is, I fear, "No, not yet." It is therefore my duty to consider what is practical and realistic.

But although it is not possible for me to propose, as yet, any general release of the credits, even for particular groups of people, there is one type of case with which I can deal—the more gladly since it is a case in which the present law is often represented as producing injustice and anomaly. I wish to remove a deeply felt grievance that a family is often, under the present law, deprived by death of a reasonable expectation of having the benefit of the credits in a short time. This point has been put by the hon. Member for Sparkbrook (Mr. Shurmer) and many other hon. Members in the course of our debates.

At present if an individual dies under the age of 65, or 60 if a woman, the credits can be paid to a beneficiary under his will or intestacy only when the beneficiary becomes 65 or 60, as the case may be. I now propose to give the beneficiary also the right to claim payment of the deceased person's credits when the deceased person would have reached the required age had he or she lived. My proposal will, in addition, allow payment where a man has died over the age of 65 without actually claiming his credits.

It will not, of course, be possible to make payments under my proposal until after the Finance Bill becomes law; details of the arrangements will be announced as soon as they have been worked out. There will, at the start, be a large number of people who will become entitled to claim at the same time, and dealing with all these claims may have to be spread over a period. The claims will be paid in cash; but I ask all who get this money not to spend it unless their need is really urgent, but to put it into National Savings if they can. This proposal will add £19 million in the first year, and £2 million a year thereafter, to the payments of about £17 million a year which are already being made, below the line, under existing arrangements.

I will deal next with the few adjustments I propose to make in the field of indirect taxation.

Entertainments Duty

I am aware of the need for some modification of the Entertainments Duty. Most of the revenue from this duty comes from the cinemas, which account for some £37 million out of a total, of £44 million a year. The maintenance of this revenue depends on the ability of the cinemas to provide the public with the standard of comfort and service which they have come to expect; this is the more important now that they have to compete with television.

Remembering the undertaking which I gave during the debates on the 1953 Finance Bill, I have examined very carefully the statistics showing trends in admissions and takings over the past few years; and I have been impressed by the difficulties which many cinemas have recently been experiencing as a result of increasing costs which are not matched by increasing receipts. Right hon. and hon. Members on both sides of the House have drawn my attention to cases of this kind in their constituencies.

I have accordingly decided to make some reduction in the Entertainments Duty on admissions to cinemas. The cinema exhibitors have represented to me that, in order to maintain their cinemas in good order and to keep pace with technical developments, they need to be relieved of duty to the extent of £7 million a year. I do not think it necessary to go as far as this, and in any case, I could not afford to do so.

The changes which I propose to make will cost the Exchequer about £3½ million in a full year. They will mean reductions in duty ranging from ½d. to 1½ per admission and will result in some improvement in the form of the scale. Full details of the new scale will be given in the White Paper.

There is no reason why cinema proprietors should not use this relief to reduce admission prices, where they can afford to do so. But I recognise that the industry in general will need the money, both to enable exhibitors to maintain the amenities of their cinemas and the attractions of their programmes, and to assist the revenues of producers. It is on these things that the prosperity of both the producing and exhibiting sides of the industry, and of the men and women employed in it, depend.

I have also been keeping a careful watch on other entertainments, particularly sports, as I undertook to do in the debates on the Finance Bill last year. I find that there has been some further deterioration, and I have decided that a measure of relief is called for. These other entertainments, mainly sports and the living theatre, already pay/lower rates of duty than cinemas; but I consider that relief to the extent of ½d. per admission is justified in present circumstances.

I am therefore reducing both the first and second scales of Entertainments Duty at a cost of £450,000 in a full year. This should help to put the finances of the football clubs, particularly the smaller ones, on a sounder footing. The total cost of those changes will therefore amount to about £4 million in a full year. They will operate from 30th May and the cost in the present financial year will be £3½million.

Chicory

I am also raising the Customs duty on imported chicory by 5s. 9d. a cwt. Full details of the change are given in the White Paper. This increase in duty is not concerned with revenue considerations. It is to give support and protection to the chicory growers in this country which have been shown to be necessary. The new rate will operate from 7th April.

Purchase Tax

On this occasion, as I said some time ago, I do not propose making any changes in the rates of Purchase Tax. I gave due notice of this, and I do not regret the action which I took. But one of the Resolutions to be laid before the Committee this afternoon will enable certain defects in the legal machinery of the tax to be remedied.

Key Industry Duty

I also propose to continue for five years the Key. Industry Duty which would otherwise have come to an end next August.

Company Reconstructions

In the field of Inland Revenue there are some details to which I wish to refer. I propose, first, to counter a device whereby company reconstruction has been used to obtain taxation advantages. The essence of the proposal is that, as from today, the provisions of the Income Tax Acts relating to the cessation of one trade and the setting up and commencement of another shall not apply in cases "where three-quarters or more of the interest in the trade belonged to the same persons before and after the change.

Estate Duty

I undertook last year to review anomalies in the Estate Duty, particularly anomalies arising in connection with what is known as the "assets basis" of valuation for controlling interests in private companies. Proposals for dealing with a number of these will appear in the Finance Bill. The Bill will also make provision for cases where part of a controlling shareholding, which has been valued on the assets basis, is sold to an independent purchaser; my proposal here, in broad terms, is that the Estate Duty valuation of the shares actually sold shall be brought into line with the sale price. The general principle of the assets basis, however, must, in my view, be maintained.

Nevertheless, I think that business assets are a type of property on which the Estate Duty can bear with special severity, particularly in the case of family businesses, whose traditional activities mean so much for the stability of our social and industrial life. Accordingly, where industrial premises or plant and machinery are used for the purposes of a trade carried on by the deceased—or, where the assets basis applies, by the deceased's company —the Estate Duty on these assets will be reduced by 45 per cent. This is the rate of relief which is already given in respect of agricultural land. This is a reform which hon. Members have often pressed on me in Finance Bill debates. I estimate the cost of the relief at £½million this year and £1½ million in a full year.

I have also examined a considerable number of anomalies, and alleged anomalies, in other parts of the Estate Duty field, though I have not been able to cover the whole subject this year. For example, the principle of aggregation of free and settled property has come in for a good deal of criticism on the ground of the hardship which it can cause to the deceased's family in certain circumstances. There is already a provision under which, broadly speaking, the deceased's own property is not aggregated with settled property if it is under £2,000. I propose to raise this figure to £10,000. I believe that with this amendment the great bulk of the hardship cases will be eliminated. This concession will cost £125,000 this year and £250,000 in a full year.

Lastly, I propose to deal with the doubts and anomalies which have arisen in regard to the treatment of policies of assurance which do not form part of the deceased's own estate.

Tucker Committees

I propose also to implement some more of the minor reliefs recommended by the first Tucker Committee. The second Committee which was set up under Mr. Millard Tucker's chairman- ship to deal with the taxation treatment of provisions for retirement has also now reported. I should like to thank Mr. Tucker and his colleagues for the difficult and valuable work which they have done on this complicated branch of the tax code.

There has not been sufficient time since the publication of the Report for me to reach any conclusions on the complex issues involved. In any event, the cost of the proposals would make it impossible for me to implement them in present circumstances. I shall not, therefore, propose this year any change in this part of the Income Tax system.

Investment Allowances

I now wish to end, as I began, with our primary need: that is, to improve our competitive power. In my survey of last year I have already commented on the inadequate level of investment by private industry. Our rate of industrial modernisation is strikingly less than that of America, and it seems probable that the Germans are now moving ahead of us. We shall not long continue to compete successfully in the export field with these, our principal rivals, unless our plant and equipment is completely up-to-date.

In accordance with my pledge last year, I have reviewed the whole question of company taxation. I have tried to devise some fresh encouragement to industry to put money into productive investment. This is the more essential since the physical and financial resources at our disposal are now sufficient to allow a substantially higher rate of investment than we are undertaking. Last year I restored the initial allowances to 20 per cent. This was a step in the right direction, but a limited one, since its effect is essentially that of an interest-free loan. As the cash resources of companies increase, this incentive becomes of less importance.

After considerable reflection, therefore, I have decided to take a further step, and to replace, subject to a few exceptions, the present initial allowances by a new system, which I call investment allowances. At present, the cost of investment in plant, machinery, industrial building or mining works may be offset against gross profits during the life of the asset by means of depreciation allowances. The initial allowance merely anticipates a part of the annual allowances, so that tax liability is less in the year in which investment takes place, but may be larger later on.

The new investment allowance will do more. It will give a tax-free allowance equal to a part of the cost of investment in the assets which I shall describe as qualifying for it. It will be given in addition to the full annual depreciation allowances. Thus, the initial allowances gave some extra help in the year in which the investment was undertaken, but at a cost of smaller allowances for that investment in later years. In contrast, the new investment allowance gives similar help in the first year, but with no reduction in subsequent allowances.

In general, the field over which the new investment allowance will operate will be the same as that of the initial allowance, which applies to plant and machinery generally and to new industrial buildings and mining works. But in view of the purpose of the new allowance, which is to encourage fresh investment, and of its nature, which is to give a tax-free allowance over and above the cost of the qualifying assets, there must be both additions to, and deletions from, the initial allowance list.

I propose that agricultural buildings and also plant and buildings used for scientific research, neither of which attracts initial allowances, shall rank for the new investment allowance. Investment in up-to-date buildings can assist farm production no less than industrial production, and the importance of scientific research to our economy can hardly be over-estimated. The new allowance should also help the shipping industry to carry out the big replacements which are necessary in the years ahead, and thus to maintain its vital contribution to our economy.

On the other hand, I do not think that this tax-free benefit should be available either for secondhand plant or machinery which does not represent new investment, or for ordinary motor cars which can and often do serve both business and private purposes. These assets will, however, continue to rank for the existing initial allowance at 20 per cent.

I propose that the new investment allowances shall apply, in the case of qualifying assets, to capital expenditure which is incurred—that is, which becomes due and payable—after today. In respect of expenditure on such assets, the initial allowance will in general cease from today. The rates of investment allowance will be 20 per cent, for expenditure on new plant and machinery and new mining works and new scientific and research work, and 10 per cent, for new industrial and agricultural buildings.

For plant, machinery and industrial buildings, these are the same as the existing rates of initial allowance, but they will be more favourable in the long run. The 20 per cent, investment allowance for mining works is not immediately so favourable as the existing initial allowance of 40 per cent. But since it will be given over and above allowances up to the cost of the works, it will practically always be better in the long run. However, I will allow any mining undertaking to choose between the new investment allowance and initial allowances at the 40 per cent. rate. There will have to be provisions safeguarding the new allowance from abuse. But these and other details must wait for the Finance Bill.

The cost of changing from initial allowances to investment allowances will be negligible in 1954–55, and about £4 million in 1955–56. Thereafter, the cost will increase year by year, and although the actual amount will, of course, depend on the level of new investment, I expect it to reach a considerable figure in the future. But in so far as this new allowance succeeds in its object of creating additional assets, those assets will, of course, be yielding additional revenue for the country, for their owners and for me.

Conclusion

Let me now make the final review of our national accounts. The Committee will already have realised that my proposals, which yield a surplus of £10 million, will still leave the Budget as it should be this year, broadly in balance. The estimate below the line will, it is true, have to take account of the concession on post-war credits.

But, in general, the changes which I have proposed have been much fewer and less spectacular than last year—deliberately so, for the reasons which I have already given. Just as, in 1952, I introduced an emergency Budget, and last year, an incentive Budget, so, this year, I am proposing a carry-on Budget, a Budget conceived as reaffirming our basic policies, rather than as marking any major change of emphasis or direction. That I can, with good conscience, do so is a tribute to the achievement of the measures which I introduced last year. They have brought us a good way along our road; they should be given the chance to carry us still further. Moreover, it would have been the easier and —I say this quite openly to the Committee—perhaps the more agreeable course to make sweeping reductions in taxation. But substantial tax remissions, would, in fact, have been premature, and unjustified in our present circumstances.

It is the duty of the Chancellor of the Exchequer, at such a time as this resolutely to reject temptations of this kind, and not to concede, to either the hopes or the fears of the future, what a dispassionate judgment of our economic prospects does not immediately require. But, although the scope for change was less this year than previously, I have tried to distribute what I can fairly, to ease some anomalies which have been felt to be unjust and undignified, and to enlarge, in a slightly novel way, the incentives to which industry responds. And I repeat that if, later in the year, circumstances should so demand, we shall not hesitate to take more radical measures at a later date.

It must, then, be a vigilant, poised and confident Britain which turns to face the new financial year—with an economy resilient to absorb whatever shocks and setbacks the fluctuations of world trade may inflict on us, but also alert to reach out for each and every opportunity for expansion and enterprise which circumstances may offer, and our own initiative may devise. So resolved, we have nothing to fear, and much to hope.

Customs And Excise

1. Entertainments (Excise)

Motion made,

That as respects payments for admission to entertainments held on or after the thirtieth day of May, nineteen hundred and fifty-four, the three scales of entertainments duty provided for by section two of the Finance Act, 1952, shall be those set out in the Tables at the end of this Resolution.
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.

TABLES
FIRST SCALE

Amount of payment

Rate of duty

Where the amount of the payment, excluding the amount of duty— exceeds 1s. 0d. and does not exceed 1s. 5½d½d.
exceeds 1s. 5½d.½d. for the first 1s. 5½d. and 1d. for every 5d. or part of 5d. over 1s. 5½d.
SECOND SCALE

Amount of payment

Rate of duty

Where the amount of the payment, excluding the amount of duty— exceeds 1s. 0d. and does not exceed 1s. 2d1d.
exceeds 1s. 2d.1d. for the first 1s. 2d. and ½d. for every 1d. or part of 1d. over 1s. 2d.

Third Scale

1. Where the amount of the payment, excluding the amount of duty, is an amount mentioned in the following Table, the rate of duty shall be the amount therein specified in relation to that payment.

Table

Amount of payment, excluding amount of dutyRate of dutyAmount of payment, excluding amount of dutyRate of duty
s.d.s.d.s.d.s.d.
½110¼1
101110¾1
10½111½1
112111¾1
11¼21
11½21
1042115
121
121
11621
121
12318
121
121
12519
121
141026110
110¼2110½
110½2111¼
16112111¾
111½22
111¾22
181022
112922
1122
1121023

Amount of payment, excluding amount of dutyRate of dutyAmount of payment, excluding amount of dutyRate of duty
s.d.s.d.s.d.s.d.
210½241041
21124410½4
211½241142
3025411½4
325043
312654
325144
322754
3254
332854
3254
325446
3254
36295547
3254
3254
3821054
3210½54
392115849
3211¾54
3359410
310¼35410½
310½3510411
31132510½411½
311½351150
4033511½5
436051
413465
436152
4365
4365
436353
443665
4365
453765
436654
463865
4365
436855
4365
4310½65
483116957
4311½65
494065
44

Where the amount of the payment, excluding the amount of duty, is an amount not specified in the foregoing Table, and exceeds ninepence but does not exceed six shillings and ninepence-halfpenny, the rate of duty shall be the same as on a payment of the next higher amount specified in the Table.

3. Where the amount of the payment, excluding the amount of duty, exceeds six shillings and ninepence-halfpenny, the rate of duty shall be five shillings and eightpence-halfpenny, increased by a halfpenny for every halfpenny or part of a halfpenny by which the amount of the payment exceeds six shillings and ninepence-halfpenny.— [Mr. Butler.]

The CHAIRMAN put the Question thereupon forthwith, pursuant to Standing Order No. 86 ( Ways and Means Motions and Resolutions.)

Question agreed to.

The CHAIRMAN then proceeded successively to put forthwith the Question on each further Motion made by a Minister of the Crown, save the last Motion.

2. Chicory (Customs duties and drawbacks)

Resolved,

That, with effect from the seventh day of April, nineteen hundred and fifty-four,—
(a) the full rates of the customs duty on chicory under section three of the Finance Act, 1924, and the preferential rates within the meaning of section eight of the Finance Act. 1919, shall be—
for chicory, raw or kiln-dried—the cwt. 19s. 0d. (full) and 16s. 9½d. (preferential);
for chicory, roasted or ground—the 1b. 3d. (full) and 2⅔d. (preferential);
and mixtures of roasted coffee and roasted chicory shall be chargeable at the like rates as roasted chicory;
(b) the rates provided by subsection (4)of section three of the Finance Act, 1924, for the drawbacks allowable on roasted chicory, and on mixtures of roasted coffee and roasted chicory, shall be—
in the case of roasted chicory, 17s. 0d. per 100 1b. or, if duty on the chicory was paid at the preferential rate, 15s. 0d. per 100 1b.;
in the case of mixtures of roasted coffee and roasted chicory 14s. 0d. per 100 1b.
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. Key industry duty ( Continuation)

Resolved,

That the duties of customs chargeable under Part 1 of the Safeguarding of Industries Act, 1921, for a period expiring on the nineteenth day of August, nineteen hundred and fifty-four shall continue to be chargeable for a further period of five years from the said day.

Purchase Tax

4. Purchase tax (Miscellaneous amendments)

Resolved,

That the law relating 10 purchase tax be amended as respects—
  • (a) goods held by a person who ceases to be required to be registered on or after the first day of May, nineteen hundred and fifty-four.
  • (b)the operations which are to be treated as processes of manufacture,
  • (c)the treatment of unfinished or incomplete goods as if they were finished and complete,
  • (d)the conditions on which persons may hold certificates of registration or enjoy benefits corresponding to those accorded to persons holding certificates of registration,
  • (e) the registration of persons who manufacture goods to be let out on hire,
  • (f) any matters incidental or supplemental to the foregoing amendments,
  • and that the extent and incidence of the tax may be varied so as to give effect to such amendments.

    Income Tax

    5. Charge of income tax for 1954–55

    Resolved,

    That income tax for the year 1954–55 shall be charged at the standard rate of nine shillings in the pound and, in the case of an individual whose total income exceeds two thousand pounds, at such higher rates in respect of the excess over two thousand pounds as Parliament may hereafter determine.
    And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

    6. Income tax ( Initial allowances)

    Resolved,

    That any Act of the present Session relating to finance, in connection with any further provision for income tax allowances in respect of capital expenditure on new assets, may impose restrictions on the making of initial allowances under Part X of the Income Tax Act, 1952, to prevent duplication with the new allowances or otherwise, and may amend that Act to provide for cases where no initial allowance is made, whether or not in consequence of any such restriction.

    7. Income tax ( Company reconstructions)

    Resolved,

    That it is expedient to authorise all such charges to income tax (including charges for past years of assessment) as may arise from any provision as to changes in the persons carrying on a trade which is being or has been carried on by a body corporate, or in the persons carrying on activities comprised in a trade which is being or has been carried on by a body corporate.

    8. Income tax ( Income against which losses and capital allowances may be set)

    Resolved,

    That any Act of the present Session relating to finance, if it enables business losses, and allowances under Parts X and XI of the Income Tax Act, 1952, to be carried back against income of previous years on the cessation of a business and in other cases, or enables such allowances to be set off against general income, may contain provision to prevent duplication of the relief whether in favour of the same or another person.

    9. Income tax ( Treatment for capital allowance purposes of demolition cost)

    Resolved,

    That it is expedient to authorise all such charges to income tax as may arise from any change in the way in which demolition costs are to be treated for the purposes of Parts X and XI of the Income Tax Act, 1952.

    10. Income tax ( Effect of certain sales on capital allowances, etc.)

    Resolved,

    That as respects allowances and charges under Parts X and XI of the Income Tax Act, 1952, for the year 1954–55 and subsequent years of assessment, provision shall be made for securing—
  • (a) that an election may not be made under paragraph 4 of the Fourteenth Schedule to that Act (which relates to sales between companies under common control and other cases) if any of the parties to the sale is not resident in the United Kingdom at the time of sale, but except for that the Schedule shall have effect in relation to a sale notwithstanding that it is not fully applicable by reason of the non-residence of a party to the sale or otherwise;
  • (b)that the operation of paragraphs 3 and4 of the Schedule shall not be restricted to cases where the property is sold at a price other than that which it would have fetched if sold in the open market.
  • Profits Tax

    11. Profits tax ( Charges consequential on income tax amendments)

    Resolved,

    That it is expedient to authorise all such charges to the profits tax (including charges for past chargeable accounting periods) as may result from amendments of the law relating to allowances, deductions or charges for income tax purposes.

    Estate Duty

    12. Estate duty ( Valuation of certain company shares or debentures and assets)

    Resolved,

    That the provision made by section fifty-five of the Finance Act, 1940, for valuing shares or debentures by reference to the value of the company's assets ought to be amended, notwithstanding any resulting charge to estate duty, and section fifty of the Act ought also to be amended so as to provide that in valuing a company's assets (whether for the purposes of section fifty-five or of section forty-six of the Act) an allowance may in certain circumstances be made for taxation falling on the company after the death.

    13. Estate duty ( Aggregation of settled property with other property)

    Resolved,

    That it is expedient to restrict the provision made by subsection (3) of section sixteen of the Finance Act, 1894, as amended, for not aggregating settled property with other property.

    14. Estate duty ( Policies of assurance)

    Resolved,

    That new provision ought to be made for charging estate duty on policies of assurance on the life of the deceased.

    15. Estate duty ( business assets)

    Resolved,

    That, if any Act of the present Session relating to finance provides for charging estate duty at reduced rates in respect of particular types of business assets, it may in connection therewith contain provision as to the manner of apportioning the liabilities of the business between the assets thereof, notwithstanding any resulting increase in the charge on some of the assets.

    General

    16. Amendment of law

    Motion made and Question proposed,

    That it is expedient to amend the law with respect to the National Debt and the public revenue, and to make further provision in connection with finance, so, however, that this resolution shall not extend to giving any relief from purchase tax otherwise than by making the same provision for chargeable goods of whatever description or by reducing any of the several rates of the tax generally for all goods to which that rate applies.—[Mr. Butler.]

    5.10 p.m.

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    The Chancellor of the Exchequer has expounded his Budget with his usual lucidity and clarity, and in a very pleasant manner. I am sure that all the experts were able to follow all the figures. Personally, I want a little time to digest them, so the remarks I propose to make will be very brief.

    I do not think that this Budget can be considered to be a very exciting Budget, but I am sure that there will be plenty of clamorous demands voiced during the next few days. The right hon. Gentleman will certainly have disappointed some newspapers that have been loudly demanding 6d., as if it was the "dockers' tanner," off the Income Tax. He will, I am sure, have disappointed many who hoped for some alleviation of the lot of the old-age pensioners. I am quite sure that he will hear of that from my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) and others.

    The right hon. Gentleman has not made any very startling changes. This has been, as he says, a carry-on Budget, but I think he will be the first to admit that if his ship is to carry on, how it carries on will depend on the weather. I rather gathered from the right hon. Gentleman, despite the tributes that he naturally paid to his own management of our finances, that, on the whole, during the last year he has experienced fairly calm weather, and I think he was right to draw attention to the fact that we may not, in this next year, be experiencing just that kind of condition.

    There is the great unknown factor of a possible big recession in the United States of America. It is, I think, very difficult for any of us to estimate what that will be like. We all hope, with the right hon. Gentleman, in the interests not only of this country but of the whole world, that that recession will not go very far.

    The right hon. Gentleman has made some concessions. They were rather small. I think we should have liked to see something rather more on post-war credits. We welcome the very small Entertainments Duty reliefs, but I think he has not done quite enough to please the sportsmen. We shall have to review these proposals very carefully in the next few days, and when my right hon. Friend the Member for Leeds, South opens the debate tomorrow he will, no doubt, deal with the wider issues of finance in which experienced financiers revel. Far be it from me that I should make any voyage into the financial field. I again thank the right hon. Gentleman, on behalf of the House, for the very clear statement that he has made.

    5.13 p.m

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    When the Chancellor of the Exchequer read the lesson at Greenstead Green Church on Sunday the congregation prayed that if any criticism was made of the right hon. Gentleman it should be tempered with sympathy and understanding. I am sure that all of us wish to proceed in that spirit this afternoon, and I should like to echo the words of my right hon. Friend the Leader of the Opposition and congratulate the Chancellor on the lucidity and the good humour with which he presented this carry-on Budget. Indeed, his good humour was, in the circumstances, quite remarkable.

    The right hon. Gentleman drew upon a number of nautical metaphors in the course of his speech, and I hope that the Committee will not feel that I am departing from that spirit when I say that he himself reminded me of a water creature, Lewis Carrol's crocodile, who had a very cheerful grin
    "And welcomed little fishes in With gently smiling jaws."
    I am sure that many members of the public, because this is a standstill Budget, will feel that they have had a pretty fair crack of the whip because no new impositions have been placed upon them. I hope very much that members of the public will not be taken in in that way. My right hon. Friend the Leader of the Opposition was quite right to stress the indignation which we feel on this side of the Committee that the Chancellor was unable to do something more for the old people, and not only for the old people but also for the disabled and the sick—and I would add to that class the spinsters as well.

    The right hon. Gentleman said that it is because of the situation that we are in that we cannot do more for these classes of people. It seems to me that if the Chancellor is right, he is willing that the country should travel forward to economic stability on the backs of those members of the community who are least able to bear the burden. I think it is wrong that he should neglect these legitimate claims at the present time, but I would add one word of congratulation to the Chancellor on having resisted the temptation to cut Income Tax or to take any other step which would, by contrast, have emphasised the growing hardship of the old people and the other members of the community who are on hard times at the moment.

    That this is a disappointing Budget— and I think the Press will tomorrow echo the views of the Committee that this is a disappointing Budget—arises from the fact that our progress towards economic recovery is itself disappointing. The right hon. Gentleman was right to remind us that we must not be complacent about what has been achieved, and I am glad that the right hon. Gentleman, in the midst of a good deal of optimism this afternoon, from time to time struck a realistic note. It was a note which was struck in the Economic Survey itself, and I should like, in the interests of brevity and for the convenience of the Committee, to quote the summing up of the Economic Survey which appeared in the Board of Trade Journal for 3rd April.

    That paper, published by the Board of Trade, said:
    "… the Sterling area ended the year in a stronger position than 12 months before. But there were some less satisfactory features. The United Kingdom's balance of payment surplus was lower than in the previous year in spite of an improvement in the terms of trade which is estimated to have benefited us to the extent of £200£250 million; and although our exports recovered with the revival of overseas demand towards the end of 1953, there were no signs that we were winning back the ground lost to our overseas competitors in recent years."
    The same number of the Board of Trade Journal quoted a speech made a few days earlier by the Minister of State for Economic Affairs, whom I have referred to upstairs as my second favourite Minister, when the Minister of State was addressing the National Union of Manufacturers. In the course of that speech the Minister of State gave two main warnings to industry. He said that Japan and Germany were still not doing as big a share of the world's trade as they were before the war and that both of them were likely to intensify their efforts in that direction. He added the warning that, in a situation in which the United States' production is two-and-a-half times in volume what it was before the war, even a very slight overspill from the United States would create a serious new source of competition for this country.

    I am afraid that for those reasons, the balance of payments figures of the Chancellor this afternoon may produce an optimism which is not justified by the facts. It is true that the Chancellor did hedge himself by referring to the American situation. I should like, if it is any comfort to the Chancellor, to say that my assessment of the American situation largely coincides with his own. I believe, that any recession there is more likely to be on the 1949 scale than on the scale of the recession in 1929 and 1930.

    But in addition to this very serious shadow which lies over the world economic scene, there is another complicating factor, especially for this country. That is, that there is a world tendency for the terms of trade to run against us in the industrial countries. That is inevitable in a world in which we have had a steadily rising population, going up since 1939 at the rate of 20 million a year, and in which, until 1953, we have had the world production of foodstuffs and raw materials remaining broadly what it was in 1939. Under those circumstances, in which we get greater demand for raw materials and, at the same time, increased production of manufactured goods, I do not see how, in the long run, the terms of trade can fail to run against manufacturing countries like our own.

    It would be a great tragedy if anything that the Chancellor has said today should lead members of the public to what I believe is the quite false conclusion that our balance of payments problem is anything but serious or likely to remain so for the foreseeable future. One of the rather discouraging factors for the people of Great Britain is that our success seems to be entirely disproportionate to the efforts which we make.

    If I may come back once again to Alice I would remind hon. Members of the time when she, having run very hard for a very long time, found herself where she was when she started—
    "'In our country' said Alice, still panting a little, 'you generally get to somewhere else— if you run very fast for a long time as we have been doing.'
    'A slow sort of country' said the Queen. 'Now, here, you see it takes all the running you can do to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that.'"
    That, I am sorry to say, is really the stage in our economic development which we have reached.

    At present, unfortunately, in the markets of the world we are not even holding our own in relation to our new and thriving competitors. The Treasury issue every month their Bulletin for Industry, of which I have a copy in my hand, and which was admirably summarised in the "News Chronicle" yesterday in these words:
    "Among the 18 nations of the Organisation of European Economic Co-operation—all West Europe, Greece and Turkey—German exports have raced past Britain's in spite of a rise in our share. And in places like South America, Egypt, and parts of the world outside the dollar and sterling areas, German exports are ahead of Britain's and are still going up while ours slip back. Even in the dollar area, where our share of trade is still ahead of the West Germans, they are putting up a fierce chase. And in the sterling area—including our own Commonwealth—while British exports are rising again after a fall West Germany's are going ahead quicker."
    That is a most alarming state of affairs. The reason for it is twofold. First, we have failed to make that investment overseas that the state of the world and our own economy called for from us. Secondly, there has been insufficient investment in private industry during the past year, and, indeed, for some years past.

    The Chancellor spoke about the effect of rising wages upon our competitive prices. Far more serious than rising wages is the fact that we are not keeping our industry at the maximum pitch of efficiency and productivity. I hope, whether my hope will prove to be justified or not, that the new investment allowances that the Chancellor announced will go some way to encourage greater investment than we have seen during the past 12 months.

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    The hon. Gentleman is, rightly, complaining that our position in the export market is difficult. He is complaining that we are not spending enough on re-equipment and that our position is precarious. How can he, in those circumstances, also demand that we give more away in the form of social services if we have not got it to give away?

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    We shall not get the money necessary for an expansion of the social services unless we have got industry running at the maximum pitch of efficiency. It is no good taking the purely short-term view and starving industry of the capital it needs in the next year or two. What we have to do is to make the sacrifices so that in five or 10 years' time we may have the efficient industry that we require.

    I am sorry that in the last 12 months the incentives which the Chancellor gave a year ago have not had the effect that everyone hoped they would have. We know that during that time industry has been piling up quite nice reserves which could have been used for new plant and new machinery, as the Chancellor implied during his speech.

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    Will the hon. Gentleman tell us what people do with their reserves?

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    The hon. Gentleman will know better about that than I do. No doubt he can develop that point in his speech. As I understand the position, one of the complaints of the Chancellor is that the money has not been used in productive industry as he would like it to be used.

    I come to three further points to which I wish to draw attention. The first relates to the fuel tax. I was sorry that the Chancellor was not able to announce any concession, even a slight one, in that direction. Before 1950, the tax on diesel oil fuel, which is known as Derv, was 9d. a gallon. In 1950, it rose to 1s. 6d.; in 1951, it increased to Is. 10£½ and, in 1952, it went up to 2s. 6d. Today, the tax is no less than 214 per cent, which I believe to be at a wicked and punitive level. The untaxed cost of Derv is 1s. 2d. a gallon. When tax is paid it is 3s. 8d. a gallon.

    In January, a memorandum was presented to the Chancellor on behalf of four passenger transport associations. I wish that the Chancellor had paid more attention to the representations made to him on that occasion. But we should not assume that this is a question only of passenger transport. It is true that the extra imposition upon our passenger transport is one of the considerations which is making for more wage demands; but we should not blind ourselves to the fact that the tax on fuel is also putting up the price of the goods that we produce and so adding an extra burden to our efforts to compete in export markets.

    The second point refers to Purchase Tax. The Chancellor told us that this year we collected £39 million more than he estimated a year ago and that during the next 12 months he estimates that we shall collect £295 million. I do not want to weary the Committee by going into the arguments about Purchase Tax all over again, but I should like to say. very briefly, that I believe that this is a fradulent tax which was put on during the war in circumstances very different from the circumstances of today. It was never intended to be a permanent tax. It is today an inflationary tax because it puts up the cost of living. It makes the development of our export lines more difficult. And it means, because of the operation of the D scheme, that there is a lowering of the quality of many of the goods that we produce.

    Representations have been made to the Chancellor along those lines in the last few months and I am sorry that he brushed them aside with the same brusqueness that the Government in variably show in dealing with the problems of the textile industry.

    The last point relates to post-war credits. Like other hon. Members, I welcome the slight concession which the Chancellor has made in this direction; but it is a very slight concession. The right hon. Gentleman told us something about the origin of post-war credits. What he did not tell us was that when Lord Keynes originally propounded a scheme of post-war credits the intention was that they should be paid off at the end of the war out of the proceeds of a capital levy.

    We are now nine years after the end of the war, and out of £800 million of post-war credits that accumulated there are still £564 million left to be paid off. As we are paying them off at the rate of £16 million or £17 million a year, it will still take us nearly 40 years before we have wiped out the post-war credits. Yet, in 1946, the Government announced that it was hoped to liquidate credits, between then and, say, the next five, and certainly 10, years. The Financial Secretary of that time added that the bulk of them would have been paid within four or five years.

    That time has passed, and I think it is most unfortunate, from the point of view of both parties, that the House of Commons has not lived up to the expectation which the public had when the post-war credits were collected during the war. It is unfortunate, when the public have handed over money to the Government on a clear understanding that the time during which the Government will retain that money is limited, that we should now face the prospect of the money remaining in the Government's hands for another 25, 30 or 40 years.

    I am not making a party point, because we put this argument over and over again to my right hon. Friends when they were the Government. From the long-term point of view, it is very sad if the confidence of the public in the word of the Government is destroyed in this way. I should have liked to hear the. Chancellor today announcing some scheme not for the minor concession which he has made but for the gradual wiping out of post-war credits, so that we could honour the undertakings which were originally given. I should also have liked, while the Chancellor was making concessions, to hear him make concessions so that people on National Assistance could be allowed to draw their post-war credits rather than rely on assistance.

    In conclusion, the test of a Budget is whether it measures up to the needs of the time. I think the needs today are two-fold. In the first place, there is the need to look after those members of the community who are most in need of help; and the Budget fails to do that. The second requirement of a Budget is that it should make a real contribution to the expansion of our industry and to the solution of our balance of payments problems. In my view, the Budget also makes an inadequate contribution in that direction. On both those grounds I believe that this is a disappointing Budget and I hope that as the Finance Bill passes through the House it may be possible to make at any rate some minor improvements in what otherwise would be a thoroughly bad Budget.

    5.33 p.m.

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    I have never before listened to such concentrated nonsense in a speech as that which was contained in the speech of the hon. Member for Rossendale (Mr. Anthony Greenwood). The hon. Gentleman made the allegation that industry has failed to re-equip itself. He says it has placed money to reserve. I wonder whether he has ever looked at the profit and loss account of a balance sheet. Reserves do not consist of money put into a box to stick under the managing director's table. Reserves are almost invariably found in new assets on the other side of the balance sheet. The hon. Gentleman does not seem to understand that; he has not a clue.

    In addition, the hon. Member deplored the fact that the Chancellor has failed to provide all sorts of benefits involving in creased expenditure. Next, he deplored that the Chancellor has not reduced taxation. I do not know whether he learned any arithmetic. He regretted that various classes of the community who are retired from work have not been given greater benefit from the Budget. He went on to deplore the high level of Purchase Tax —and I agree with him, for it is much too high. He deplored the rate of petrol duty—and I agree with him because that, too, is much too high. But we cannot spend more money and simultaneously reduce taxation. The hon. Gentleman should do a little arithmetic.

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    I said that I recognised that the Chancellor had to produce such a disappointing Budget and could not do many of the things we wanted him to do because our economic progress has been so slow; and I said that our economic progress has been so slow largely because of the lack of investment in new equipment. That is not my view alone; it is also apparently the view of the Chancellor of the Exchequer and certainly the view of the Economic Survey.

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    I think I know as much about the inside of a factory as do both the Chancellor of the Exchequer and the hon. Member—indeed, far more than the hon. Member knows. The engineering businesses with which I am associated are all the time fighting to get the wherewithal with which to pay for new equipment. The hon. Member should look at the published accounts of the company of which I happen to be a director.[An HON. MEMBER: "How much do you get?"] I work fairly hard and I earn what I get. I see that the provision for taxation in respect of the year to which this report and accounts relate was £61,000. The shareholders received £15,000, so the Chancellor of the Exchequer—the sleeping partner in the business—whose representative is on the Front Bench now, draws four times as much as do the shareholders.

    What was left over to carry forward will be used, as far as it will go, to pro- vide the new equipment which is necessary. We are always after new equipment and always finding it exceedingly difficult to get new equipment. I resent the fact that somebody with no experience at all of industrial matters, as far as I know, should accuse those who are engaged in industry of failing to provide new equipment.

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    That is what the Chancellor said.

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    I do not care what the Chancellor said.

    Once upon a time I was interested in the machine tool industry, and that industry provides a very large part of the equipment of other engineering works. The machine tool industry has been working all out ever since the war. Indeed, it was working all out during the war, of necessity. If hon. Members tried to buy large items of equipment from the machine tool industry they would have a long time to wait. How long do we have to wait? It is anything from 18 months to two years, and sometimes even longer for big machines.

    One machine which I have in mind will cost £25,000, which is a lot of money to spend when the capitalisation of the company is only £160,000. That machine was ordered two years ago.

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    It is a small company.

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    It is spending £25,000 for one machine and it will take over two years to get it because the machine producing industry is so far behind with orders. To suggest that industry is not spending money on re-equipment is grossly unfair to those engaged in industry. We are doing our very best to finance re-equipment. I happen to be mixed up with two engineering companies.

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    I bet you are.

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    Did I understand the hon. Member for Croy-don, East (Sir H. Williams) to say that he is mixed up with a lot of industries?

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    What is wrong with that? They are two engineering companies—one in Middlesex and one in Lancashire.

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    rose

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    There is no one more willing than myself to give way, but I think I might be allowed to make my speech.

    On Friday, I am taking a day off and going to Lancashire. I am the only non full-time director of the company, and I always ask my colleagues, "What about the progress of new equipment?" I am always asking them about re-equipment. I am always asking, "What do you need?" It is vital that we should keep up to date.

    This particular branch of industry is not a branch of precision engineering. Our stuff is on the heavy side and high precision is not very much in demand. I am always asking my colleagues, "Are we up to date? Is our equipment satisfactory?"

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    I am not asking this in any controversial mood at all, but the hon. Gentleman says he is connected with a company which is about to buy a machine which will cost the company— in effect, this is what it will cost the customers of the company—£25,000. If he is so efficient, will be tell us the exact number of hours that machine tool will work when he gets it?

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    As far as I am concerned it will work all day and, when necessary, all night. That is the only proper and efficient method. If one has a valuable machine, if one cares to put a night shift on, one does. But one cannot always get men for the night shift, particularly in a district where the demand for engineering labour is high. I do not see that that point is relevant.

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    Certainly it is relevant.

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    We have had comment, too, about extravagant businesses. But what is the ratio of wages and salaries to dividends, tax free, in the case of a large number of companies? Wages and salaries are about 17 times as much as dividends. The hon. Member for Rossendale wants us to make lower profits and, at the same time, wants us to buy a lot of new plant, and then he accuses us of being incompetent because we have not done it. It does not make sense.

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    In a last desperate attempt to make the hon. Gentleman realise what we are saying and what the Chancellor has been saying, may I read to him paragraph 42 of the Economic Survey? It states:

    "Expenditure by industry on new building was slightly higher in real terms than in 1952. The increase was mainly concentrated in the fuel and power industries; there does not appear to have been any corresponding rise in new building work done for private manufacturing industry, but this was running at a higher level at the end of 1953 than at the beginning, following the relaxation of licensing restrictions in the spring. Similarly, with plant and machinery there were increases in 1953 in investment in the basic industries, particularly coal and electricity, but no increase in manufacturing industry."
    That is the point which the Chancellor, other hon. Members and myself have been making.

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    I do not know where the back room boys of the central statistical office get their information. When they used to produce their original Economic Survey, I used to describe it as "Old Moore's Almanac," because their forecasts were invariably wrong. Now, it merely attempts to be a survey of what has happened As anybody with any experience of statistics will find out, if they get one calculation right to the degree of accuracy of one in 10,000, it is remarkable. Everybody knows perfectly well that the original information on which these statistical surveys are based may have an error of 5 per cent, plus or minus.

    I base my calculations and gain my experience from the factories I have visited, and I just do not believe this statistical evidence, whether it comes from the hon. Member for Rossendale or from the Chancellor of the Exchequer. I do not listen to it. All companies are doing all they can, within the limits of the money they have, but even ordinary companies are taxed up to roughly 70 per cent, of their surplus. Out of what is left, they have to provide some reward for their shareholders, to which they are entitled, and the rest goes to reserve, to be invested in new plants and buildings when circumstances call for it. This is what happens in actual fact, and when I hear people talking with no particular experience of industry I get a little upset.

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    What about expenses sheets?

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    Well, what about them? I do not know why a remark like that, which is inclined to be offensive, should not be withdrawn, because the implication is that I am getting something to which I am not entitled. I do not conduct my affairs in that way, and I never have done. I make a complete declaration of all the allowances I get for expenses, and I charge against them the expenses which I am entitled to charge, and I make a full return.

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    We are getting a little remote from the Budget.

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    I sometimes wonder whether everybody who appears on the B.B.C. or on television, or writes articles for publication, makes a full disclosure.

    The situation revealed by the Chancellor is very grim in one respect. His first Budget was a deliberately grim one, designed to save us from inflation, and, a year later, he was able to introduce his second Budget to stimulate efficiency. It had that result, because industrial efficiency, as the Chancellor said today, is now running at a much higher level than ever before, and showed an advance of 6 per cent, on only a year ago. Meanwhile, the volume of employment in the country is higher than ever.

    It is also true, however, that expenditure has increased, and increased top much. There is a vast increase in expenditure of a kind that ought to have been avoided. I am by no means satisfied that we are getting full value for our expenditure on the National Health Service. The Estimates are far in excess of what was anticipated when it was started.

    There has been no diminution in mortality as a result of that expenditure, despite the fact that there has been a vast drop in infantile mortality as a result of measures which have nothing at all to do with the National Health Service, an enormous drop in the mortality from tuberculosis—60 per cent, in the last 16 or 17 years—also due to causes which have nothing to do with the Health Service, but to the discovery of new treatments and mass radiography. There has been a tremendous drop in the mortality of children due to certain infectious diseases, particularly diphtheria, which, again, has nothing to do with the Health Service.

    The reason for all this is quite obvious. The doctors are cluttered up with unnecessary patients, they have not the time to deal with them before sending them for hospital treatment, when, in many cases, they could be dealt with satisfactorily without going to the hospital. As a result of that happening, there are long waiting lists at the hospitals and people get worse treatment than before —

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    The hon. Gentleman chided my hon. Friend the Member for Rossendale (Mr. Anthony Greenwood) for talking about business when, supposedly, he knew nothing about it. May I, as a member of the South-Eastern Regional Hospital Board, say to the hon. Gentleman that he does not know what he is talking about?

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    For nearly 50 years I have studied problems of medicine in various aspects and in a non-expert capacity, and what I have said about infantile mortality is absolutely true. The figures were static until 1900, then they started to drop. They used to average 160 per 1,000 of the population, but, last year, the figure was less than 30, and Croydon has the lowest figures in the United Kingdom.

    When I mentioned diphtheria, the hon. Member for Bermondsey (Mr. Mellish) says that I do not know anything of what happens in regard to tuberculosis. Is it not true that every hospital has a long waiting list? What are the members of the South-Eastern Regional Hospital Board in Portland Place doing about that?

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    I do not think we can go into the details of the National Health Service.

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    The Budget is the result of expenditure, and I was discussing one aspect of expenditure, while hon. Members opposite are very anxious that I should not. However, I will continue with the rest of my speech.

    I have always taken the view that there is a great restriction on our freedom which ought to be abolished. I refer to the General Agreement on Tariffs and Trade. Even in this rather humble Budget, we can see its effects, and, if hon. Gentlemen will look at page 16 of the Financial Statement which has been issued today, they will find that it is proposed to increase the rates of duty on chicory and on chicory and coffee mixtures, and just as much extra duty has to be paid on Empire chicory as is paid on foreign chicory.

    We have lost our economic freedom under G.A.T.T., and I want to restore our economic freedom. I think it is absolutely vital that we should get rid of G.A.T.T. I know it is said that certain parts of the Empire, such as Canada, being under the economic influence of the United States, will not agree, but that is no reason why we should not take unilateral action. If we did so, we should find a great part of the Empire coming in with us. It is true that we cannot now dominate the economic situation quite as we did in the past, but let nobody run away with the idea that we are unimportant. With all our friends joining with us we are, indeed, vastly important.

    Already, we have almost disposed of our balance of payments problem, but we still have the dollar shortage. I am convinced that the £ ought to be allowed to go free, because we cannot have a disturbed balance of trade if we have a free currency. If we have one lot of pieces of paper which we call pounds and another lot which we call dollars, and if we try to fix a relationship between them, which is fixing the value of the £ in terms of the dollar, that is a completely non-sensical economic theory. We can either have paper pounds to exchange with other currencies on a purchasing power of parity, to use one of the technical terms, or we can have gold, but, if we have a paper currency, it is complete nonsense to fix a rate of exchange between two bits of paper.

    We went off the Gold Standard at the beginning of August, 1914, and for the first time in the history of anybody now living we had paper money in the form of £1 and 10s. notes. We went on like that throughout the war till we came to the time when America joined in. Then was established a fixed rate of exchange between the £ and the dollar, and the Americans went on lending us enough money to preserve a fixed rate of exchange.

    On 18th August, 1919, the then Prime Minister, the late Mr. David Lloyd George, gave in the House of Commons a most interesting survey of the economic situation of this country. If anybody wants to read current events in 1919 I advise him to read the speech made by Mr. Lloyd George that day. It is most interesting. He said that from tomorrow morning they would let the £ go free. The result was that the adverse balance of payments was cured in six months. There were other adverse effects due to the fact that, with the assent of all political parties, we decided to pursue a policy of deflation.

    Time went on, and we carried out deflation by reducing the currency so much each year. I think it inflicted great hardship, all for the purpose of restoring the £ to gold parity. It was no good going back to the old parity. If we had restored it at a new parity the result would have been a return to the Gold Standard without deflation.

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    The gold sovereign came back.

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    The late Philip Snowden, who was Chancellor of the Exchequer, appointed a committee to consider by what method the Gold Standard could be restored. When the present Prime Minister found himself at the Exchequer he received the report of that committee. In his first Budget he announced the restoration of the Gold Standard from the following morning. It was the first Budget speech I had ever listened to. All the political leaders said that it was a spendid idea. Certain precautions were taken at the time. Assurances were given by the Bank of France and by other people in the banking world. The trouble was not in our going back to the Gold Standard, but in forcing us back to the old parity by means of deflation. The mutiny of Invergordon in 1931 put us off the Gold Standard again.

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    In 1922, gold sovereigns were in circulation.

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    If the hon. Gentleman —

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    I take it that the hon. Member for Croydon, East (Sir H. Williams) is developing this historical interlude in order to connect his argument with the Motion before the Committee?

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    Certainly, Sir Rhys. I am doing so for the purpose of urging convertibility, which, I understand, has been the subject of discussion in every Budget we have had since 1945. I want to show that on two occasions it came off. We were pushed off the Gold Standard, and the £ had to find its own level when we were face to face with a very heavy adverse balance of payments. It is true that a few months later we introduced a general system of protective tariffs. The two things in combination wiped out the adverse balance of payments.

    The first occasion when we had a free £ was when there was full employment. The second was when we were subjected to a very high degree of unemployment. The same remedy, therefore, produced similar results. The £ is self-defending if allowed to go free, but if, when we allowed it to go free, the exchange value of the £ was low, we would have an increase in commodity prices. I hope that my hon. Friend the Financial Secretary to the Treasury will look up these things. If freeing the £ has done well on two occasions it might be worth while to try it again. So much for my general theme of the restoration of convertibility.

    What was done in 1947 under the American loan was not convertibility at all. We allowed sterling balances in this country to be used to buy dollars at a fixed rate of exchange but that has nothing to do with what I am now discussing. People talk of convertibility in two different senses. What happened in 1947 and what I am now urging are two entirely different things.

    The Chancellor of the Exchequer has made something which should be of very considerable advantage to industry and will help to re-equip it. That is, his new investment allowance. I am not quite clear from his speech, or from what I read in the Financial Statement, how it will work out, and I should like a little clarification. So would one of my hon. Friends who is interested in accountancy and, in due course, will find it his professional duty to explain how it will work out. The Chancellor of the Exchequer said that the initial allowances is a tax-free loan and would have to be paid back later on.

    I take it that it is a grant of 20 per cent, depreciation in the year in which we buy, and that we shall definitely save Income Tax on that 20 per cent. I hope that the Financial Secretary will clear up that point, so that we shall know what the proposal is. Quite a number of us are not clear about it. We should like to have an explanatory note to tell us exactly how it will work.

    I take it that it is an initial depreciation of 20 per cent, in the year of purchase, in addition to the normal depreciation attributable to the class of goods concerned. The rates of depreciation vary very much in accordance with the probable life of various commodities. Everybody knows that there is an arrangement going back to the Finance Act, 1921, by which a trader can get into negotiation with the Board of Inland Revenue and put up his case for an agreed rate of depreciation for this class of machinery and that. I take it that the 20 per cent, is initial depreciation, called the "investment allowance," and that on top of it the normal depreciation allowance will be granted.

    I hope that the Financial Secretary will be able to catch your eye, Sir Rhys, and will benefit hon. Members and a lot of people outside by telling us exactly what is intended. I suppose the Chancellor will broadcast to the nation tonight and will elaborate this point, which will attract a great deal of interest among those who are responsible for the conduct of industry. I hope it will also attract the attention of the hon. Member for Rossendale, who ought to assimilate it.

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    If I have the good fortune to catch your eye in the course of tomorrow's debate, Sir Rhys, I should like to address to the Committee a few remarks on this subject. I prefer not to do so merely as a reply to a question at this stage, because this is a complicated matter.

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    I am most grateful to my right hon. Friend. I hope, Sir Rhys, that he will catch your eye and retain it sufficiently long to deal with this matter. I know that I have taken some time. I do not normally speak at great length unless provoked by unnecessary interruptions. They do not worry me in the least, but I do like occasionally to complete a sentence.

    As I said in a previous financial debate, the present Chancellor is face to face with a problem that does not cease. On the one hand, he has to try to ensure full employment, and, on the other, to avoid inflation. It is quite true that employment can be created by inflation, but an appalling price has to be paid later. The Germans did that in, I think, 1926. They allowed the printing machine to get completely out of control, with disastrous results.

    We were on the verge of getting out of control in the same way, and the Chancellor of the Exchequer's first method was deliberately designed to check inflation. He asked the banks to restrict credit, and he asked the Bank of England to raise the Bank Rate with the object of checking speculation and inflation. He succeeded. He was doing it at a rather difficult time because, for reasons which had nothing to do with him the textile trade was suffering rather badly then.

    It was an indirect sequel to the war in Korea. America ran up raw material prices to absurd levels and then there was a collapse. Then a previous Chancellor of the Exchequer, the right hon. Member for Bishop Auckland (Mr. Dalton) made a silly speech in which he asked people not to buy. That put thousands out of work.[HON. MEMBERS: "No." People's memories are short, but if they go to Leeds and Bradford they will get the most adequate confirmation about conditions there two or three years ago. Some hon. Members have conveniently short memories.

    The Chancellor deliberately sought. first, to check inflation and that had a most marked effect on the adverse balance of payments. I would remind hon. Members that an adverse balance of payments is an unfailing sign of inflation. The Chancellor checked inflation. It is true that he removed certain food subsidies and replaced them in other ways which gave rise to an apparent, though not real, rise in the cost of living. Within a year he was able to achieve stability of prices. I know that we have frequent questions on the subject —

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    The price of tea is going up again.

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