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Orders Of The Day

Volume 526: debated on Wednesday 7 April 1954

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Ways And Means

Considered in Committee. [ Progress, 6th April.]

[Sir CHARLES MACANDREW in the Chair]

Question again proposed,

Amendment Of Law

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.

Budget Proposals

3.32 p.m.

On a point of order. May we have an explanation of why the Chancellor of the Exchequer is not present?

I have no doubt that the Chancellor will be here in a moment or two, and I shall speak very slowly to start with so that he does not miss any of the gems which will be falling from my lips.

In commenting on the Budget yesterday, my right hon. Friend the Leader of the Opposition said,
"I do not think that this Budget can be considered to be a very exciting Budget"— [OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 233.]
My right hon. Friend is a master of understatement, but the Chancellor himself in his broadcast last night described it as a
"less exciting Budget with fewer thrills."
I must say that I am not quite sure whether the word "thrills" should be applied to any Budget or any Budget speech, but certainly thrills were conspicuous by their absence yesterday.

The plain fact, of course, is that the Budget was a very dull one. No change of any significance was made. I am not saying for one moment that this is necessarily a bad thing. Obviously there may be conditions in which it is right and proper to make no changes. Sir Stafford Cripps' Budget of 1950, for example, was one in which, on balance, practically no change was made. There were some increases in certain directions and some reductions in others.

We may perhaps also be thankful for the fact that, possibly because of the dullness of the Budget—I see that the Chancellor has now arrived, and I know that I can rely upon him to read the valuable words which have passed my lips so far—that we missed yesterday some of those similes and metaphors with which the Chancellor usually enlivens his speeches. We were not taken for any mountain rides, there was no question of climbing over humps or clambering up the last steep slope. There were no sea voyages. There was only a reference to last year's Budget and the ship getting under way and we were spared the rather unpleasant business of being on the operating table and going through a serious illness.

But I am bound to say that, for all that it is so dull, the Budget has come as a surprise. Without doubt most people expected something better. They expected something better this year not, in my opinion, because of the wishful thinking in which people naturally indulge, but because they had been led to expect it by Tory propaganda; and nobody has been more assiduous in putting over this propaganda than the Chancellor himself.

Indeed, he went so far as to continue the process during the course of this dull Budget statement. He was at pains to point out how splendidly everything was going, to point out that we were producing at a record level, that we had been able to increase consumption substantially, that the balance of payments had been strengthened, that the sterling area reserves had increased and, in short, that we were in a much stronger position when the financial year closed than when it began. Of course, led up the garden by all these encouraging remarks, the general public naturally expected that there would he something for them at the end of it all. In point of fact, there has been nothing for anybody. Some rather irreverent hon. Members have spoken of the Budget as "chicory feed," and that seems to be a fair description.

What is the explanation of what is, after all, a very curious paradox? Why is it that, despite the excellent way in which our affairs have progressed, according to the Government, there has been such a disappointing Budget? Obviously the Chancellor himself has been worried by this question, because in his broadcast last night he attempted to answer it. He gave one explanation which I thought was curious; he said, in effect, "I have not been able to do anything for you because I am convinced that things are moving pretty well along the right lines." Were they running along the right lines last year when so many concessions were made? What are we to think of the future? Are we to deduce that it is only when things are running on the wrong lines that we may get concessions?

I do not think that explanation is a very convincing one. (Last year the Chancellor made great play with the importance of giving the country incentives, and he described that Budget as an incentives Budget. Has he lost faith in incentives? If they were so effective last year, if he believed in them last year as a method of raising production, why was not the same process pursued this year? These are the questions which the people of this country are asking and to which hon. Members will have to try to find some answer. I propose to help them by giving what I believe is the right answer. I think we may conveniently begin, as the Chancellor did, by looking at what has happened in the past year to our trade balance.

In his speech the Chancellor gave the figure for the United Kingdom balance of payments, including aid, as £225 million. I must once again make a mild protest that, in giving these figures, he has included American aid. In my view, that is totally wrong; it is not something on which we can depend, and if we include it, it is bound to mislead the public and, incidentally, to mislead the Americans as well.

I thought that, in each case when I mentioned these figures I used the expression "taking account of aid." In one case I gave the exact proportion of American aid.

What I would suggest to the Chancellor is that it would be far better, when he is giving the figure of the balance of payments position, that he should give it without American aid. I think that otherwise the figure is swollen by receipts which ought not to be included.

What he also failed to disclose, rather surprisingly, in his speech was that this surplus, with or without aid, was no larger but smaller in 1953 than it was in 1952. It is true that the reduction, apart from aid, was only £11 million—a drop from £134 million to £123 million; but still it was a drop. That, I think, is all the more serious when we bring in to the picture, as, to do him justice, the Chancellor did, the immense benefit we had last year from the improved terms of trade. As the Committee know, import prices fell in 1953 compared with 1952 by 12 per cent, and export prices by only 3 per cent. The Economic Survey estimates a gain of somewhere between £200 million and £250 million. It is a significant thing that not one pound of that gain has been put to strengthening our overseas trade position. On the contrary, it is worse than it was in the previous year.

That is not all. Last year was an exceptionally good year for invisibles. There was an increase of our net invisible exports of £69 million, much of it due apparently to the improved sales or savings, as the case may be, on oil. Here let me say how very much the country owes to the immense progress of oil expansion in the sterling area and the home refineries production programme which was started under the Labour Government.

The figures for the volume of exports is very slightly up on the year, but again, according to the Survey, if we include re-exports, the actual takings from exports and re-exports were down as compared with the previous year. Moreover, this surplus of £123 million is a very long way behind the Chancellor's own target of £300 million to £350 million. Here let me say once again that I think the Chancellor should give us a much clearer idea of what he envisages as the target, apart from any American aid. He seemed to suggest that he included aid in a figure of £300 million, and seemed to put that aid at about £100 million, so what he is aiming at is a figure for the surplus of £200 million. Quite frankly, I do not think that is adequate in the long run.

It is not adequate to do three things: to repay our debts, including the sterling balances; to accumulate gold reserves without an increase in the liabilities; and to contribute our fair share to investment in the Commonwealth and other parts of the world. Let me say, in passing, that I have recently had the benefit of attending a Commonwealth Conference in Pakistan, and one of the things which, I think, impressed all of us immensely was the very great success that has attended the Colombo Plan. My feeling, and I think, irrespective of party, the feeling of all of us there, was how very desirable it was to continue this first Colombo Plan with a second one. If we are to do that, we cannot be content this tune with repayment of balances as our contribution; we should begin to make a positive contribution.

I must say one or two other things about the export position. It is not merely that the increase in the volume of direct exports was very small, but that, as the Survey underlines, a very large part was played last year by the expansion of exports of ammunition, aircraft and petroleum. Again, although for the time being this may continue, I do not think that one can regard these exports of arms, whether through off-shore purchases or in other ways, as something satisfactory from the long-run point of view.

The Chancellor has mentioned one method of stimulating exports by granting in some form or other better and easier credit terms. I welcome that so far as it goes. I must, however, tell him again that in this recent trip I made, and in talking to a good many of our business men in Ceylon, India and Pakistan, I found continued complaints about the handicaps under which they suffered because of credit difficulties; because their competitors, particularly the Germans, seemed to have very much more flexible arrangements and were able, when the customer wanted long credit, to provide it straight away.

I think that hon. Members may have noticed a series of articles in "The Times" in the last few weeks dealing with the problems of export in different countries, and again and again, in one country after another, we come up against this vital problem of insufficient credit. We shall want to know, in due course, a little more about these proposals and how comprehensive they are.

One last thing on exports. I still have the impression that we are suffering from unfair competition in this field; that is to say, that some of our competitors are giving advantages to their exporters which really are Subsidies. I think that is so in the main, particularly in the tax concessions made by Germany, and I should like to ask the Government what representations they have made about this, und whether there is any chance or hope of getting the Germans to stop this kind of thing, and, if not, what kind of corresponding benefit may be given to our own exporters. We cannot afford, in the highly-competitive world in which we are living, to allow our people to be handicapped in this way.

I now come to production. The Chancellor said in his Budget speech in 1953, that industrial production reached heights never before recorded in our country's history—he might have said, island story. Is this something about which he should make a song and dance? Is it not obvious that if we are to have continued industrial expansion, then every year must, of course, be a record year? Is it not well known to all Members of the Committee that, in fact, under the Labour Government, in one year after another—1947 to 1951—our production was running at record level, and it was only in 1952 that production dropped?

The increase of 6 per cent, in industrial production is not unsatisfactory; but, again, it is no better than in most of the years in which the Labour Government were in power.

It is my endeavour this afternoon to try to tear the veils from the hon. Member's vision so as to let him see the reality and not the appearance. The increase of 6 per cent, is not unsatisfactory, but is no better than in most years under the Labour Government. Moreover, in the year 1953, as indeed the Chancellor acknowledged, it owed a great deal to the fact that there was a recovery from the slump and unemployment of 1952. Indeed, one might use the old jingle and say that it is a case of the grand old Duke of York with his 10,000 men marching them—let us transpose it—down the hill and marching them up again. A good deal of that recovery is no more than coming back from the slump of 1952.

The Chancellor drew attention, rightly, to the comparatively unsatisfactory position of productivity. He singled it out. He said that productivity, as apart from production generally, was only just above the 1951 level. I do not know whether hon. Gentlemen opposite really think that is a particularly fine record to show after two and a half years in power—a little better productivity than there was when they came into power.

That brings me to another serious problem: the problem of investment. The Economic Survey has a good deal to say about this subject. Hon. Members will be aware that on page 23 of the Survey there is an elaborate analysis of the changes in investment. What it really amounts to is that total fixed investment, including housing and building, is said to have increased by about £215 million; but of this, £160 million is on building, leaving only £55 million for all other forms of investment. If one examines exactly what has happened in different industries, there is a notable contrast between the achievement of what the Government are now inclined to call the basic industries—which means, of course, the public sector, the largely nationalised sector—and the private sector, where things are left to private enterprise.

In Table 13 on page 23 of the Survey, one sees, for instance, that mining increased by £12 million, electricity, gas and water by £28 million, and transport and communications by £48 million. The whole of private investment—the whole of manufacturing industry and other industry and trade—increased by £14 million, as compared with £88 million for the public sector. I do not believe this is entirely fortuitous. There is the very important point that these basic industries, under public control and ownership, carry out an investment programme which certainly they work out in detail themselves, but it is under the direction of the Minister and they are to that extent under public control. We do not have to wait and see whether they are prepared to make the right kind of judgment or have the right kind of expectation. They do it as part of the general plan which, no doubt, the present Government are carrying out, just as we carried it out.

The striking thing is that private investment certainly did not increase. If one takes private investment in plant and machinery, all the evidence is that last year it actually fell. The total increase in real terms was only £10 million for all plant and machinery. It is perfectly obvious that far more than this must have gone into the basic industries.

Will the right hon. Gentleman connect what he is now saying with what appears on pages 24 and 25 of the Survey—that the coal industry, which received the greatest amount of investment, produced the worst results?

The figures speak for themselves. It is well known that there have been delays in the carrying out of the investment of the coal mining industry, and I will tell the hon. Member the reason. It is due to the shortage of skilled technical personnel, who deserted this industry before the war.

We have to consider this complete failure of investment to expand in the private sector against the background of last year's Budget. It was a main objective of that Budget to stimulate private investment. A very large amount of tax concessions were made precisely with the object of stimulating greater investment. What we find, however, is not only that it produced no result, but that, as the Survey says,

"in total shortage of finance does not appear to have been a factor limiting industrial investment in 1953."
I hope that hon. Members opposite, who year by year have pressed successive Governments to give more away to the companies because they were short of cash and could not do the investment, will take those words to heart. We never thought there was anything in the argument, and now we have been proved right.

The conclusion that one draws, therefore, from this brief survey is that in 1953 we had the unusual combination of rising production from a state of unemployment, together with better terms of trade—a gain of nearly £900 million in the resources available to the country. I think the Chancellor will agree that that was exceptional and that it is unlikely that we shall get such a large gain in another year.

The fact is that this exceptionally favourable circumstance was not used to improve our position at the two most vital points at all: namely, balance of payments and home investment. It is true that we increased our consumption, and we all noted the Chancellor's reference to that in his little moralistic sentence:
"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." —[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 198.]
The Chancellor was not talking in quite those terms at the end of his Budget statement, when it came to various claims that were being made upon him. In the first part he was adopting the gay grasshopper rôle, but towards the end, and notably at the end of his broadcast, it was "Get on with the job, you ants." We know why the Chancellor does this. What he is trying to do is to claim political credit for the rise in consumption without accepting the political liability that it spells.

There is another aspect, however, that we cannot ignore. We must examine who enjoyed the benefits of this higher consumption. Admittedly, it is not easy to do this; there are only little bits of evidence here and there.

I notice, for instance, that the rise in earnings of 6 per cent. was paralleled by a rise in property incomes of 6 per cent. It is interesting to note that that is all property incomes—rent, interest and dividends. Since in the main interest payments, at any rate, will not have gone up, and rent payments, I should have thought, have gone up only a very small extent, it suggests that the rise in dividends must have been considerably larger.

Secondly, I think it will be generally accepted that, in looking at this matter of who got the benefits, obviously those who got the larger tax remissions are almost certainly the people who did particularly well out of it. We know—we have argued the case, we have deployed the figures—that last year in the main the tax concessions unquestionably went predominantly to the better-off half of the community.

Then there is the further bit of evidence that the rise in consumption was to a considerable extent associated with an increased expenditure on private motoring. I make no complaint about that. It is, however, another bit of evidence that the kind of people who got the most out of this were the people who could afford and enjoy the benefit of motor cars. [HON. MEMBERS: "Really."] Hon. Members who say "Really" had better discuss this matter with the National Federation of Old-Age Pensioners' Associations and see how many of the old people in their constituencies living on pensions can afford to buy new cars and go in for expensive motoring.

Then, there is the further point, which nobody can deny, that the increase in consumption must have gone to those whose incomes went up more than prices, and correspondingly that in so far as there were people whose incomes did not rise as much as prices, this class were the losers. Not only did they have no part in the gain, but their consumption actually declined.

Finally, I make the familiar but perfectly valid point that, although we accept the cost-of-living index as a pointer to the average rise in prices, the greater rise in food prices undoubtedly is something that the people on lower incomes feel a great deal more.

Incidentally, on page 21 of the Survey, it is worth noticing the figures for food consumption and how they have changed. We all know that in 1951 and 1952 there was a decline in total consumption and a decline in food consumption. To some extent I think this was the result of the re-armament programme and the movement of world prices, but there has been this recovery in 1953. What to my mind is most remarkable is that with these basic foodstuffs, in only three cases is it found that, for all the talk there has been about it, consumption per head in 1953 is greater than it was in 1950. That applies only in the case of sugar, fruit and tea. In the case of the remaining items in the list, dairy products, meat, poultry, eggs, oils and fats, potatoes, vegetables and grain products. the consumption per head in 1953 is actually lower than in 1950.

I should like to have the Government's observations on it, because it is a remarkable thing. We are told that food consumption on the whole was about 2 per cent, in 1953 above what it was in 1950. How, then, is it possible to reconcile that statement with the figure I have given? Has there been an increase in the supply of non-basic foods? That may well have been the case, and if so, it bears out what I have said, that it is the people who are better off who are coming best out of these tax changes.

When the right hon. Gentleman refers to meat, may I suggest that he look at the figures on page 21? There I see that the amount of meat consumed in 1953 was 93 against 84 in the previous year.

I was comparing 1953 with 1950. I took 1950 as the year before the defence programme got under way, and the right hon. Gentleman will see that the figure for meat consumption was 95·8.

I return, if I may, to the reason for the contrast between expectation and fulfilment in this year's Budget. The second reason, apart from this generally less favourable situation that I have disclosed, is I think associated with the real grounds on which the tax reliefs were given last year. Last year in his Budget statement the Chancellor tried to paint a picture of tax reliefs being given by a wise and beneficent Government, which had been steering the country along the path of recovery as a reward for past efforts and as an incentive to future production. I hope hon. Members will notice the words I have used.

When the public generally are given that impression, can hon. Members really be surprised if, when they are told exactly the same story this year, they are disappointed to find there is no reward on this occasion? Naturally, when the same story is told, they expect concessions. The truth is, as we pointed out at the time and as hon. Members know in their heart of hearts—certainly the Chancellor knows it perfectly well—these tax reliefs which were granted last year were justified simply and solely by unemployment and the slack that existed in the economy.

It was deliberately in order to stimulate additional demands that the Chancellor decided to give this money away, and a very substantial amount it was. We did not oppose that policy in principle, but we differed as to who should get the reliefs. We argued that it had been badly distributed. We said that investment would not be stimulated by the particular methods adopted by the Chancellor, and we were dead right. It has not been stimulated, but, of course, precisely because this unemployment last year was the reason for the tax reliefs, the public cannot expect to have them again this year. The Chancellor quite fairly and rightly said that unemployment has been mopped up. There are fewer people out of work.

Certainly, but what I am saying is that in these circumstances additional tax reliefs cannot be expected and, had the truth been told before, the public would not have been expecting tax reliefs either. The fact is that the pressure of demand is there, and it is only if one gets a rapid rise in revenue from high productivity over and above commitments that there is room to make any substantial concession.

That brings me to the third reason, which is the commitments both on the expenditure and the revenue side. I was very struck by the passage in the Chancellor's speech about expenditure. I could not help recollecting the many speeches which the Prime Minister delivered when we were in power denouncing the vast rate of public expenditure. In 1950, for instance, when the total public expenditure above and below the lines was £4,000 million, he described it as:
"… the most amazing dissipation of national resources on record in any civilised community of our size."—[OFFICIAL REPORT, 24th April, 1950; Vol. 474, c. 809.]
This year the total expenditure above and below the line is not £4,000 million, but over £5,000 million.

I can well imagine the Prime Minister may have given the Chancellor some very nasty moments, which led the right hon. Gentleman to the rather pathetic plea which we had yesterday when he spoke about the need for controlling public expenditure. After two and a half years in office, after all the promises and after all the propaganda that the Tory Party were going to cut it down, the best that the right hon. Gentleman can do is come along to us and say, "Somehow or other I must control it." Has he failed so completely up to now to exercise any effective control?

Let us take the defence side for a moment. This is what the right hon. Gentleman said yesterday:
"We must be up to date; but we must have economy too."
Then there was this very significant sentence:
"During the coming year we must see to it that we obtain some definite relief from the defence burden."—[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 208.]
I want to ask the Chancellor what he meant by that? Is he suggesting that his control was not adequate this year; that there was, after all, as many of my hon. Friends believed, a good deal of waste in the defence programme? Is he not satisfied with the way the Treasury have handled the Service Ministries? Does he still think there is room for economy, or is he determined, irrespective of the need or the damage that it may do, to cut the defence programme right back? I think we are entitled to some explanation.

We have had debates on the Defence Estimates night after night and a full examination of them. Again and again, we have been told by the Government that they cannot save any more, and then the Chancellor comes to this Committee and says, "We must have some more savings." The Committee needs some explanation. I do not know who is going to reply, but if it is the Financial Secretary to the Treasury, I hope he will give an explanation. Of course, it may be that the Chancellor was simply expressing a pious hope. It was not quite in those words, but if he means he is anxious to try and secure all-round disarmament, he has only to refer to the speech of my right hon. Friend the Leader of the Opposition on Monday to see how we feel about that. We all favour that, and we hope very much that it will be achieved. We urge the Chancellor to urge the Foreign Secretary and the Prime Minister to get on with the job.

But the biggest increase in expenditure is not in defence but in civil expenditure, which rose no less than £200 million. We know the main reason for that. It is, of course due to the most gross miscalculation by the Chancellor on the agricultural and food subsidies. The main fact to note is that the whole of this passage of the Chancellor's speech on expenditure is a complete exposure of the pre-election claims of the Tory Party. I hope that some of my hon. Friends will pursue this matter in detail, because it is a very serious thing in view of the Prime Minister's earlier statement, which obviously needs further probing.

I pass to the revenue commitments. Some extra revenue has been obtained this year by what is really a capital item, the sale of Ministry of Food stocks. I draw attention to the fact that this is not a recurring item. Indeed, it is doubtful whether it ought to be brought in on the current revenue side at all. But the even greater significance of the commitments is the loss sustained in a full year by the concessions made by the Chancellor last year and, to some extent, the previous year.

As far as I can make out, this loss is £119 million more than last year without counting in £125 million which will be lost as a result of the repeal of the Excess Profits Levy. I take these figures from "The Times" this morning, where they are conveniently set out in a table. One is bound to ask exactly what we have got in the way of additional investment as a result of the very large concessions made last year, because these concessions are certainly among the major reasons why the Chancellor has not been able to do anything more for anybody this year. I shall return to this in a moment.

Thus we may say that this year's standstill is, in effect, not due to the belief of the Chancellor that things are going pretty well; it is really due to the fact that they are not quite so good as they look, to the fact that we have not got unemployment to any extent from which to start this year, and that he has been over-committed both on the expenditure and on the revenue sides.

But, of course, even granting all that, and even granting the misleading nature of the propaganda put across, the question still remains, was the Budget itself correct? It is extremely difficult for anybody outside to come to a firm and honest and objective judgment about this. It is more difficult now because the Chancellor gives us so little indication of what is really in his mind. The right hon. Gentleman has not told us what he expects production to be this year, he has not told us what he expects the rate of saving to be. I rather thought that, in the light of the improvement of saving, he would have made specific reference to that, which, of course, has important consequences for policy. He has not told us what he thinks the terms of trade may be and it is hard, without knowing, as it were, the rationale of the judgment that he seems to make, to reach a definite conclusion.

Nor do I feel that his references to the future dangers were entirely relevant. It could well be argued that, if the United States slump gets worse and we are involved, there should be not a tighter and a tougher Budget but an easier one. I shall not pronounce, I do not see how one can. I have the impression, frankly, that the Chancellor has been pretty cautious, but without knowing the basis on which he reached this conclusion, it is too difficult for outsiders to judge. I pass, therefore, to the Budget changes themselves, such as they are.

To one of these, at any rate, I give absolutely wholehearted support. It is the proposal to prevent evasion through company reconstruction. I think a tribute is due to my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) for raising this matter and pursuing it so thoroughly last year, and I am sure that he is very glad that something is being done about it.

Then there were the Death Duties proposals Again, we have not seen the details, but I must say to the Chancellor that the proposal to relieve all family businesses, however large and whatever the circumstances, of 45 per cent, of Death Duties seems to me to be going very far indeed. In particular, we shall want to know why no ceiling was put on this concession. My right hon. Friend the Member for Bishop Auckland (Mr. Dalton) will be dealing with this in greater detail. The other point which I should have liked to see was some greater effort made in the case of Death Duties to stop up what we all know to be the serious evasions of tax which take place at present.

On Entertainments Duty, we are inclined to agree that some concession was necessary to the cinemas, but I should like to know how this change is likely to affect the Eady Fund. Can we be assured that it will benefit as a result and that, therefore, British production, which we all have at heart, will get some advantage?

On sport, on the other hand, I am bound to say that I thought the concession pitifully small. The right hon. Gentleman knows very well the absurd anomalies of the present situation, and I repeat what we all feel, that we cannot go on taxing football clubs and crowds and exempting cricket. Sooner or later, and the sooner the better, we shall have to take the tax off all sport. We told the Chancellor to do this last year, we are disappointed that he has not done it, and we assure him that we shall deploy our arguments once again on the Committee stage of the Finance Bill.

Of course we expected that something might be done about post-war credits. The Tory Conference at Margate this year showed its views rather emphatically, and the poor Financial Secretary did not have a very good time. I think this tiny concession—the minimum that could be done—will not go far to satisfy the angry delegates, and it would not surprise me in the least, when the Chancellor goes there, this year, if he is not faced with another resolution demanding something much more substantial.

In this field I think the Chancellor could have chanced his arm a little more, and I will tell him why. In present circumstances, now that the direct postwar period is over, now that world prices are falling and savings are increasing, there is a good chance that if he repaid, not all of them—I am not suggesting that for one moment—but a fair slice of post-war credits, perhaps the first one, in the form of Savings Certificates, a large part of those would not be spent but would be put on one side as a nest-egg. So I think the Chancellor is being unnecessarily cautious there.

On equal pay, I am not clear what the right hon. Gentleman means and I would like him, or his spokesman, to make plain whether he is now saying that he is prepared to discuss with the staff association in the Civil Service ways and means of implementing the principle of equal pay. Is the right hon. Gentleman prepared to discuss the details with them of a scheme, for instance, for its gradual introduction? They are entitled to an answer on that and I hope he will be able to give it.

Finally, we have investment allowances. Of course, we recognise the need for action here. The complete failure of the policy of the Government to stimulate investment by the more orthodox methods of general concessions is obvious to all of us. I must point out, however, that what the Chancellor is now proposing is, frankly, a straight, unconditional subsidy, without any selection. It is to go to virtually all firms in industry whatever they are doing, however valuable their product, whether it is really necessary in the national interest, whether they need it or not. It may well be that this proposal will turn out to be, in a sense, too generous to some firms and not adequate enough for others. I make no final pronouncement until we see the details. Obviously I cannot. We shall examine it with great care and make some criticisms on the lines I have indicated.

Our main criticism of this tiny, insignificant Budget concerns the omissions. The glaring omission—I know the whole Committee agree with this—is that nothing whatever has been done for the old-age pensioners, the war pensioners and the other people receiving social insurance benefits. The general feeling of the House on this matter was expressed recently in a Motion accepted unanimously on a Friday. In the light of that acceptance, I fully supposed the Chancellor would be doing something about it, and it is a surprise to me that nothing is to be done to help them. Everybody agrees that the case is a powerful one and it has been made again and again, and very effectively by my hon. Friend the Member for Southampton, Test (Dr. King) in that particular debate.

I do not propose to elaborate too much. It might be argued that at a time when consumption was falling, when we were faced with grave difficulties and a precipitous increase in defence expenditure, with world prices rocketing up against us, there were difficulties in keeping up with the rise in prices. We put up the pensions in 1951 and I fully admit that even before the necessary Bill, which takes time to pass, had come into force, the rise in prices had gone beyond them, so that they were no longer back at the 1946 value, as they had been put by our original proposals. We know that since then the present Government, when they cut the food subsidies, also put up the pensions.

But the plain fact is that we have now a situation in which consumption is rising very sharply. We were told with pride that this had happened, but I do not believe that any of these old-age pensioners and the like can have had much of the share in the rise of consumption, and we expect that the same thing will happen next year. It is rather intolerable that we should be content, now that consumption is going up and world prices are in our favour and we are evidently over the hump of the re-armament programme, that these people should be kept down still at a lower level than they were eight years ago.

There is inevitably a great contrast between the light-hearted gaiety of last year's Budget and even the bits of light-heartedness at the beginning of the Budget speech this year. I do not think that the old-age pensioners, to use the Chancellor's phrase, would be
"…frightened of a little more ease and happiness…"—[OFFICIAL REPORT, 6th April, 1954; vol. 526, c. 198.]
They are not getting it, and I am afraid that they see other people getting it. We have had this continual rise in dividends, issues of bonus shares, day by day great capital gains being made and very substantial improvements in the standard of living of pretty well-off people, and the Chancellor might have taken a risk here.

I know that the future burden is a heavy one. Nobody is more conscious of that than I am, but can the Chancellor seriously suggest that, in considering this future problem of the increase in the number of pensioners, we can possibly leave the pensions below their real value when they were introduced in 1946? I appeal to him again to reconsider the matter.

If the right hon. Gentleman says, "I am sorry, I cannot do it; I cannot afford it," I must ask him why last year he made these huge concessions to companies and to fairly well-off people, including some 250.000 Surtax payers, concessions which, if one counted the Excess Profits Levy, in a full year amounted to no less than £340 million. I am not saying that none of them should have been made, but I take two of them. When the right hon. Gentleman introduced the Excess Profits Levy, he cut off the Profits Tax, but when he took off the Excess Profits Levy he did not put back the Profits Tax. As a result, as far as I can make out, companies must have gained somewhere between £50 million and £100 million. I make no apology for going back to last year's Budget. We must do that, because it is largely last year's Budget that has determined this year's Budget. It is because the priorities were wrong last year that we are in the difficulties which we are in today.

This is not only a dull Budget, it is a bad Budget. It is a bad Budget because it is an unfair Budget, and it is an unfair Budget because it leaves out in the cold the people who should have had the first attention. It has only one merit, and that is that the Chancellor has debunked himself and in so doing has disillusioned millions of people. What is left now of all the silly talk about Socialist extravagance? All that nonsense which has been talked by hon. Members opposite about public expenditure has been blown away by the Chancellor's own pathetic admissions. The notion that tax concessions which were granted last year sprang from merit and achievement has gone by the board. The idea that all one had to do to secure higher investment was just to make concessions and hand out some money to people who were already well off or to companies has also been very heavily blown upon. The argument that our balance of payments position has been improved by the Government's budgetary policy rather than by favourable terms of trade has been completely exposed. These and other myths so sedulously created and developed by the right hon. Gentleman have now all gone with the wind. Let us hope that it will not be long before the Government follow.

4.28 p.m.

The right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) last night obviously passed what the medical bulletins call a restless night.

The effect of the considerable efforts which the right hon. Gentleman must have directed towards mounting an attack on the Budget produced, as the right hon. Gentleman himself came near to admitting in his concluding words, an attack on last year's Budget proposals. As I understood it, his speech came in two parts. There was the usual analysis of the world economic situation as the right hon. Gentleman sees it. Although the right hon. Gentleman's analysis seems by happy coincidence so often to come down in the same direction as his political tendencies, nevertheless I am sure that all of us enjoyed it. Where some of us find it more difficult to follow him is that it seems to be of the essence of his analysis that all the measures for which my right hon. Friend is responsible must inevitably have disastrous consequences, whereas the converse in the right hon. Gentleman's view is that the measures that he himself adopted were far better conceived.

The difficulty which faces the right hon. Gentleman in that argument is that it did not work out like that. It was the right hon. Gentleman's Budget policy which, as he perfectly well knows, left the economy of this country in the height of a balance of payments crisis, and it is my right hon. Friend's efforts that have gone a long way to restore the position. The right hon. Gentleman may be theoretically right. My right hon. Friend was practically right, and in the conduct of the affairs of this nation I think that the great mass of opinion prefers policies which restore the economy of this nation to policies which, however well conceived in theory, in fact have the opposite effect when applied.

The right hon. Gentleman's comment on my right hon. Friend's Budget proposals was that they were unexciting During the administration of right hon. Gentlemen opposite, the great part of the people of this country would have been only too thankful if their proposals had been unexciting. The excitement was of a singularly disagreeable nature. The Committee will recall perfectly well how, year after year, we filled this Chamber, or the Chamber in what is now again the other place, in apprehension of what new burdens the right hon. Gentleman and his predecessors were going to put on the taxpayer. This year the change is so great that the only surprise that enters people's minds is whether further reliefs can be given or not. That is the indication of the change which has been effected, and which I think it would have been a little more generous of the right hon. Gentleman to have acknowledged.

I think the right hon. Gentleman really answered himself in a considerable part of his speech. In his earlier observations he twitted my right hon. Friends and the Committee in general with the fact that no rewards were being given this year, but, in the concluding stages of his speech, he gave a very considerable answer to that when he pointed out that we were still enjoying and were affected by what he described as the huge concessions—those were his words—made last year.

It is true that the full cost to the Exchequer and the full benefit to the taxpayer of the changes in taxation which my right hon. Friend made last year come into their full effect in the current year. There fore, it is not really quite fair for the right hon. Member to say that the people of this country have received no rewards. He ignores the fact that the concessions made last year come into their full effect in this current financial year. [Interruption.] The hon. Member for Nelson and Colne (Mr. S. Silverman) asks why I referred to last year's Budget. I am trying to answer the right hon. Member, who spent a great part of his speech doing exactly that.

I apologise for interrupting, but I want to point out that the right hon. Gentleman did not hear what I said. In view of his statement that one reason there was little to change this year is that the full benefits of last year's Budget would come into operation and enjoyment only this year, I asked why did he complain that my right hon. Friend attacked last year's Budget? That is surely what he ought to have done.

The hon. Member has only repeated, at five times the length, the intervention I attributed to him. Being consistent, my answer remains the same. I was replying to the right hon. Gentleman.

I thought the right hon. Gentleman was a little less than generous in his reference to the increase in production which took place during the year when he accused my right hon. Friend of making a song and dance about it. This was an increase in production, as the right hon. Member himself admitted, to the highest levels yet reached and, whatever the right hon. Member may say about it, he certainly did not expect it. The right hon. Member may recall that, when he concluded his observations at the same stage of last year's Budget debate, as reported in the OFFICIAL REPORT for 15th April, he said:
"Like last year's Budget…"
he was referring to the Budget of 1952—
"I believe it will fail to produce that rise in production which is long overdue."—[OFFICIAL REPORT, 15th April, 1953; Vol. 514, c. 233.]
If my right hon. Friend made a song and dance about it, perhaps he had some excuse. I thought it a little below the normal level of controversy employed by the right hon. Member to argue that increased consumption had gone in the wrong direction because of increased expenditure on motoring. He must be perfectly well aware of the fact that more cars have been available. Waiting lists of dealers have, therefore, been reduced and the fall in price of second-hand cars has put motor cars within the reach of people of lower means who were not able to purchase them previously. I hope the right hon. Member will recognise that that is a good thing. It seems a most extraordinary argument to use.

The right hon. Member raised the question of the consumption of food. For very obvious reasons to anyone who is interested in the tables of the Economic Survey, in page 21, he made comparison, not with 1952, or 1951, but with 1950. The significance of that selectivity on the part of the right hon. Member becomes apparent when one considers the way in which our food supplies were handled in that year. One recalls that the meat stocks in this country—the right hon. Member referred especially to meat— were run down during the course of that year to the extent of no less than 72 per cent., butter stocks were run down by 23 per cent., cheese by 52 per cent, and bacon and ham by 45 per cent. The stocks were run down with the result that, at the end of the year, that consumption had been supported by, in the case of meat, the eating of nearly 160,000 tons more than we imported. No wonder the right hon. Member selected 1950.

The right hon. Member asked a question about the concessions on Entertainments Duty and what their connection was with the Eady levy. As he knows, there is no direct connection between the Eady levy and Entertainments Duty. They are, and under the previous Government have been, kept quite separate. It remains a fact that the greater resources which this tax change will make available to the cinema industry will enable it to pay contributions under the Eady Plan with greater ease than otherwise would have been the case. But it is very important—I know the right hon. Member knows why—that it should be made clear beyond doubt that there is no direct or necessary connection between the two.

It is not quite correct to say there never was a connection, because the Eady levy was introduced as part of an arrangement adopted during the passage of a Finance Bill some years ago, and there was a direct connection when it was first introduced. The right hon. Gentleman knows that exhibitors have given an undertaking to continue this for a further period, but there have been some alarming statements in the Press that certain exhibitors might go back on the agreement. We understand, also, that there was a proposal as between the exhibitors and producers that if they got a concession in the Budget a certain fixed proportion would go to producers. Would the right hon. Gentleman say whether he understands that these agreements will now be honoured as a result of the Chancellor's proposals?

I understand from the President of the Board of Trade, who heard the right hon. Member for Huyton (Mr. H. Wilson), that in fact there is no connection and he does not accept the accuracy of the reports in the Press. The facts remain as I have stated them. In the beginning, as the right hon. Member has perfectly accurately stated, the Eady Plan was conceived in the circumstances of a reduction of duty, but it has since been made perfectly clear that responsibility for Eady payments is completely separate from whatever level of Entertainments Duty the Chancellor of the Exchequer of the day may impose on the industry.

When he dealt with the Budget proposals, the right hon. Member for Leeds, South was particularly scornful about the provisions in respect of the" family business. Perhaps it might reassure him if I say a word or two on that matter. The right hon. Member must know how heavy can be the burden of Estate Duty upon a family business. He knows very well that that is a burden which does not fall upon the ordinary public company. It is a liability which, falling as it does on the assets of family businesses, can have a crippling effect on the capacity of the business to carry on.

My right hon. Friend has followed the analogy of the agricultural land concession which the right hon. Gentleman evolved and has applied to the industrial buildings, plant and machinery of the family business the same concession as has been accorded for some years to agricultural land—that is, the reduction of Estate Duty by 45 per cent. Not only will that serve the purpose of enabling a great many of these businesses to carry on when otherwise, on the death of the owner, they might find themselves in great difficulties, but it also has the advantage of encouraging proprietors of such businesses to plough back profits, as they know that the total assets of their business will not be subjected to quite such a severe impost when death comes to the owner.

I suggest to the Committee that this is a wise concession, not only in equity to those concerned in small businesses but, what is from the national point of view far more important, as an encouragement to them—in the same way, but in a smaller degree, as is the investment allowance—to modernise and re-equip themselves and enable them to play a proper part in our national economy. I believe that this concession will be a very solid advantage—

The right hon. Gentleman keeps referring to small businesses. I concede that there are some occasions when there are difficulties in such cases. The whole purpose of my criticism, however, was that the concession did not seem to be limited to small businesses.

It is not limited, any more than in the case of agricultural land, a concession which the right hon. Gentleman continued; nor should it be. Indeed, the Committee will appreciate that Estate Duty is a graduated tax, the weight of which will fall more severely on the large than on the small family business. Therefore, the very argument which impelled my right hon. Friend to try to relieve family businesses, for the sake of the efficiency of those businesses, of the load of Estate Duty, must apply with at least equal force in the case of larger firms which are exposed to the higher level of Estate Duty.

The right hon. Gentleman was, I thought, a little slighting about my right hon. Friend's proposal in the sphere of post-war credits. I am bound to remind him that this departure from the policy which was adopted for a good many years of paying these credits to the holders only at the age of 65 and 60, according to sex, is at any rate a move considerably in advance of any which the Administration of which the right hon. Gentleman was a Member found themselves able to take. Indeed, it is a measure of the success of my right hon. Friend in restoring the nation's economy that he has found it possible to make this advance, which I am sure the right hon. Gentleman would have desired, as much as any of us, to have made if he could have done so, but which he found himself unable to make.

It is very easy, when considering the question of post-war credits, for differing views to be taken as to which particular scheme of accelerated repayment would be preferable, and many schemes have been ventilated in the House. As my right hon. Friend indicated yesterday, the one which makes the most human appeal is accelerated repayment in the case of hardship. My right hon. Friend most carefully considered that, but when one comes to consider that possibility as a definite proposition, one conies up against very real difficulties indeed.

Who is to define hardship for this purpose? What sort of hardship is to be taken into account? What administrative machinery is to weigh one hardship against another? On consideration, it is profoundly difficult to produce a system of repayment on hardship grounds which will not create at least as many anomalies and unfairnesses as it will remedy.

The proposal which my right hon. Friend has commended to the Committee has the advantage not only of a substantial acceleration of the repayment of post-war credits, but of dealing with two particularly tiresome anomalies under the present law. First, it deals with the anomaly which exists in the case of what I might term a short-lived family, in which each successive owner of the credit may die at an earlier age than 65, in the case of a man, an anomaly which means that theoretically payment is postponed indefinitely. That anomaly is now to be ended, and the credit will be paid at what would have been the qualifying age—65 or 60—of the original holder.

My right hon. Friend's proposal will have the further advantage of securing that where credits have been left to charities it will be possible to claim payment at the date of what would have been the 65th birthday of the original holder. Under the present law payment is not possible because charities are never 65. Therefore, post-war credits left to charities are, under the existing law, not repayable.

The advantage of the expedient which my right hon. Friend has adopted is not only to clear up a very considerable number of these credits—some half million extra are involved, at a cost of £19 million in the first year—but also to remedy two of these particularly tiresome anomalies with which most hon. Members must be familiar from their constituency correspondence. This is a solid advantage.

The Committee will appreciate that payment obviously cannot be made until the Finance Bill is law. It is hoped, however, that administrative arrangements can be made in advance and that claim forms will, in some months' time, be circulated both to post offices and tax offices. I hope that the public will appreciate that the repayment of this large number of credits will impose a very heavy task on the staff of the Inland Revenue over and above their existing duties, and that they will exercise a certain degree of patience about the speed at which the process goes on. It is a complicated matter to trace credits which, ex hypothesi, are to be claimed by persons to whom they were not originally issued. Claims will have to be put in and a great deal of solid administrative work will have to be done. The public will appreciate that they will be paid as soon as possible after the Finance Bill is law.

Will there be any delay in payment to holders who reach the age of 65? Will the Chancellor's proposal interfere with the good machinery that exists?

I am glad to hear the hon. Member describe it as good machinery. I do not anticipate any interference with it, but the fact that that process is going on will mean that the new system will impose an additional strain.

The right hon. Member for Leeds, South made rather personal comments on the proposal which has most interested the outside public—that relating to the investment allowance. The right hon. Gentleman drew attention, perfectly properly, as the Economic Survey does, to the fact that investment in re-equipment in British industry has not been as high in recent years as we would wish. Whatever may be the reason for that, it is a fact which must cause all of us on both sides of the Committee considerable concern. It is obvious, when the United States has spent great sums on re-equipping its industry, and our competitors in Germany and Japan have spent great sums on modernising their plant, that if our investment is substantially inadequate, we shall be faced with real difficulties in this intensely competitive world.

Whatever may be the reasons which have caused investment to be below both the financial resources and productive capacity available—opinions can differ as to those reasons—that it is so is a fact. It may be that the very high level of industrial taxation in recent years has had a discouraging effect on investment in industry. It is equally clear, from the figures which my right hon. Friend gave yesterday, that large-scale reliefs such as would counter that are not, while the burden of public expenditure remains at its present level, reasonably foreseeable. It is right, therefore, to provide a relief which operates directly on the important point at issue—operates as a direct stimulus and incentive to investment.

My hon. Friend the Member for Croy-don, East (Sir H. Williams) last night asked me to say a word or two about the somewhat complicated details of this system. It is a fact, of course, that this proposal provides a much stronger stimulus than the initial allowance, which is in substance an interest-free loan. This proposal goes a good deal further. Perhaps I can summarise the difference by pointing out that, whereas, with the annual allowances, the initial allowance amounts to relief from taxation on 100 per cent, of the cost of a new asset acquired, the investment allowance carries relief to the extent of 120 per cent. There is an additional 20 per cent, given over and above the total cost of the asset.

That is the feature of this new device which, I think, will attract the most attention, and which does have the effect of giving a direct gain as a result of the installation of new plant, quite apart from the profits which may be earned by that new plant after its installation. It will work something like this, if I may give an example by way of illustration. Let us take the case of new plant and machinery which at present qualifies for a 20 per cent, initial allowance with the remainder of its value written off by annual allowance during the life of the asset. Under the new system, the company or individual installing the plant will get 20 per cent, investment allowance and in addition annual allowances totalling 100 per cent, of the value of the plant.

I will, if I may, put it in another way. Take, as an example, plant where the annual allowance is 10 per cent, on what is called the straight line basis. At present, that plant gets the 20 per cent, initial allowance, plus 10 per cent, first year's annual allowance, leaving 70 per cent, to be written off during the life of the asset. It will now get the 20 per cent, investment allowance plus the 10 per cent, annual allowance for the first year, leaving 90 per cent, to be written off over the rest of the life of the asset. The investment allowance will be as the initial allowance today, 20 per cent, on plant and machinery and 10 per cent, on industrial buildings, but its scope, in view of its somewhat different nature, is different in important respects.

It does not cover secondhand plant and machinery, nor passenger motorcars, except where the latter are used by taxi or car hire firms as their trading stock. Thus goods which get the initial allowance today and which will not get the investment allowance will continue to get the initial allowance.

Will my right hon. Friend explain how far this new investment allowance will apply to adaptations and alterations to buildings as distinct from the erection of new buildings and factories?

The essence of the investment allowance is, of course, that it is in respect of new as opposed to secondhand plant and equipment. At this stage, I would rather not be led into a metaphysical argument as to the extent to which repairs and adaptations result in the creation of a new instead of an old article. As my hon. Friend will appreciate, this is a complicated matter and I would not desire to anticipate before the Finance Bill is published, or to go into the extremely complicated differences.

Will the investment allowance apply to new fishing vessels'? That is an important matter.

As my right hon. Friend knows, it applies to ships and for this purpose "ships" includes ships used for fishing.

The investment allowance applies—and this is an example where the initial allowance does not apply—to new agricultural buildings which do not get the initial allowance at present. It also applies—and this is another example of an instance where the initial allowance does not apply—to plant, machinery and buildings used for scientific and industrial research. To that extent its scope is wider than that of the initial allowance.

It applies with particular benefit to certain industries which it would seem to me are in particular need. It applies with particular value to the shipping industry. That industry had Income Tax depreciation allowances, in the last year for which we have figures, totalling 69 per cent, of the net profit. As a consequence of that very high depreciation allowance it will benefit with peculiar intensity from this proposal and it follows, therefore, that the allowance will be of particular help to the shipping industry.

I ought to add that ships on which work had started, or which had been contracted for before 10th April, 1951— the significance of this date will be recalled by the right hon. Gentleman—and which are, therefore, still entitled to the initial allowance at the old 40 per cent, rate, will be given the option to draw this initial allowance at 40 per cent, or the new investment allowance at 20 per cent, on instalments paid after yesterday. That will enable those concerned to take one option or the other, whichever is, in their judgment, the most beneficial.

Can my right hon. Friend say whether the balancing charge and balancing allowance provisions as in the initial allowance still continue to apply?

The system, of course, is fundamentally different in the case of the investment allowance as opposed to the initial allowance.

It will be necessary—this will appear in the Bill—to have a Clause to prevent abuse or misuse of this concession; an obvious case being where the article in respect of which the investment allowance has been paid is sold after a short time. There will have to be special provisions in that connection with which I do not think it necessary to trouble the Committee at this stage. In another guise this Committee will be hearing only too much about that before the Summer Recess.

I thought it desirable to sketch this allowance because its purpose is so central to the main purpose of the Budget proposals of my right hon. Friend. In our view its purport is to stimulate that investment and re-equipment of British industry which is of such tremendous importance if this country is to be successful in the competitive world of today. It concentrates the relief which it is possible to give on that key point of investment, and I think that the more right hon. and hon. Gentlemen opposite study them the more they will appreciate the service which these proposals can render to the stimulation of investment in this country. They are one of the major changes in the Budget.

The criticism that I have heard today from the right hon. Gentleman is that there are few such changes. I would suggest to him, therefore, that the economic policies of my right hon. Friend and the present Government have, in the opinion of the British public, much in common. They are about right, and nobody wants to change them.

4.57 p.m.

When the right hon. Gentleman the Chancellor of the Exchequer finished his speech yesterday the thought uppermost in my mind was the very close association between the vitally important matters which we debated on the previous day, on the Monday, and the Budget statement.

Here we are, today, again discussing our economic position. There were great hopes of a reduction of taxation; hopes that further benefits could be given in respect of National Assistance, of old-age pensions and matters of that kind. And straight away we find that one of the major expenses—over one-third of the expenditure which the Chancellor has to meet, £1,640 million—is incurred in respect of defence.

I was glad that for the first time within my memory we had in the House, on two successive days, an opportunity to discuss those two matters. It brings home to all of us what a difference it would make for the Chancellor of the Exchequer, and to the general economy of the country, if the great day could come when we could, with real security, feel that the vast sum to be spent on defence might be reduced. In the meantime, of course, we must go on.

I extend my warm congratulations to the Chancellor upon the lucid way in which he opened his Budget and I wish to express my appreciation of the hard work and conscientious thought which had been given to all the matters to be borne in mind in the preparation of a Budget. But my final view of the Budget statement is that it was most depressing. True it is that we are now finding a very different position from that in which we were two years ago.

There is still full employment, production has risen and our reserves are gradually being built up. This year we find that the expenditure just balances the Revenue. The position is not as good as it was even last year when the Chancellor had a surplus of about £100 million. But it is a balance, for, after all, what is £14 million when one is considering a vast sum of roughly £5,000 million? All that one can say is that it is much of a muchness.

I also felt that it was not so much a Budget statement as a banker's balance sheet, with grim warnings to the customers about what might happen to any applications that they might make. It is true that there is a balance this year, but what worries me is that expenditure is rising and is continuing to rise and will rise even more next year.

Next year the Chancellor will have to deal with a claim which he cannot avoid, one in respect of National Health. Warnings have very rightly been given by Lord Beveridge, in another place and publicly, about the future position in respect of National Health Insurance. The Chancellor is now prepared to discuss equal pay. That will also cost money. That burden must be met, if not this year, certainly next year. We are all asking the Chancellor to improve the position to pensioners. The Chancellor cannot avoid that next year.

There will be a rising expenditure continuing from now on and going well into next year. Where shall we obtain increased revenue to meet that expenditure? It cannot be obtained by increasing the rate of taxation, because we have reached saturation point there.

It is astonishing, bearing in mind that the war ended in 1945—I agree that it is largely because of the enormous defence expenditure—that one-third of our personal incomes is taken directly by the Chancellor under the Budget. When we add to that the rates which have to be paid and the various contributions which people have to make in the way of stamp contributions, and so on, 40 per cent, of our personal incomes is taken away and spent by public bodies, by the Government itself or by other authorities. We cannot possibly increase that amount.

That being so, where will the extra revenue come from? Last year the Revenue increased by roughly £250 million, but, as we already see, that has been absorbed by the present expenditure and there is nothing there with which to play about. All we are left with is the possibility of increased productivity.

I should like to hear from the Chancellor or the Financial Secretary what estimate they make now about future expenditure. I know that it is usual to confine oneself to the fiscal year, but I feel that they must now look further ahead because the preparations for obtaining the increased expenditure which must be found must be made here and now. What do they suggest can be done to increase productivity without, at the same time, running the risk of increasing inflation? That is the vital issue which confronts the country and the Government, and I should like more information about it.

Last year the Chancellor came forward with an incentive and boost which he said the country needed, and it was given to a certain number. Can anything be done by the Government to give a further incentive, without increasing the danger of inflation, to the millions of people upon whom we depend for an increase in productivity? I hope that we may hear more about that from one or other of the right hon. Gentlemen opposite.

Management in all businesses would welcome stability of policy. There has been too much of putting taxes on, taking them off and putting them on again. If one is to plan ahead as one has to do in all businesses, whatever they may be, what is required is stability of policy. That in itself would go a long way towards giving us more stable prices, and possibly towards reducing prices.

Undoubtedly, this year is a notable one. It is a landmark since 1939. From 1939 to 1947 investment could not be met by either Government savings or personal savings, and we had to borrow wherever we could or sell our capital. From 1947 until this year investment has been met by Government savings. For the first time since 1939 investment has now been met by personal savings. The Government deserve a tribute for that state of affairs. It is a remarkable change.

I now turn to my second point. A short while ago the Chancellor returned from the Sydney Conference. We all remember the statement that he made on his return. He said that the conference had confirmed conclusions which had been reached in London. He said how wise and prudent the conclusions were, how the great Finance Ministers of the Commonwealth had come together, how there was a dollar representative from Canada and how greatly the conference was helped by the Finance Minister of India. He said that the decision had been reached that what was needed in the world was greater freedom for trading so that there could be multilateral trading and that the more multilateral trading there was, the better would be the standard of living of everybody, and, therefore, what was really needed was that all the barriers restricting trade between one country and another should be removed as early as possible. That decision was commended as being very wise.

The Chancellor referred to the matter again yesterday in glowing terms. He referred to his visit to America and then to the meeting at Sydney. He praised President Eisenhower and also Mr. Randall and his Commission's Report. He said:
"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."—[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c, 214.]
The Chancellor is encouraging the President and the Government of the United States to remove restrictions. The right hon. Gentleman says to them, "Pull down those barriers, and I hope you will succeed." He might even have mentioned France, which country has liberalised, roughly, 25 per cent, of her import trade. The Chancellor having said all that, having declared that this was what was wanted and that this was the wise policy, what did he himself propose to do? Put an increased tax on chicory. Is that the message to the President of the United States? Does the Chancellor say, "Well done, Mr. President; follow my precept, but do not follow my example"? What an absurd position. Therefore, I should like to know more about how it is proposed to deal with it.

Now I want to come, as nearly every hon. Member so far has done, to what is not a party matter but a very human matter in which every hon. Member of this House is concerned, and that is the position of pensioners, especially old-age pensioners. There is not one of us, not even one of the supporters of the right hon. Gentleman opposite, who did not hope that a concession would be made to the pensioners, and especially the old-age pensioners. What is the position?

True, the Government have increased the amount that is given. True, these people can go to the National Assistance Board, but they do not like doing so. Many of them still regard it in the same light as we ourselves remember they regarded it some years ago—as equivalent to the old Poor Law. They regarded it as a kind of disgrace; they would not do it, but preferred to go hungry. We know that there are people throughout the country in that position today, and that the amount which they receive is not a subsistence allowance.

The figures of the National Assistance Board itself show the position in which these people are placed. Only four years ago, the amount paid out by the Board was £78 million or £79 million, and within four years it has risen to £133 million. People do not go to the Board until they feel they must in order to keep body and soul together.

I have always felt, as I have put this case throughout the years, that in truth and in fact we made a bargain with these people as long ago as 1908, and that we have not kept our bargain. We told them then that we would give them a sum which would be not less than was necessary to maintain them properly. We have never carried out that contract to the full; what is worse, we have broken it. When we devalued the £, we then broke our contract with regard to these old people, and we have never implemented it since.

I know the difficulties which confront the Chancellor, and I realise that his Budget is only just balanced, but is there one of us who would not be prepared to ask him to make any sacrifice that may be necessary to be fair and just to these old people? In the name, I think, of every hon. Member of this Committee, I beg the Chancellor to look into this matter again and to undertake the necessary sacrifice—if a sacrifice has to be made—so that we may be just to the old people who contributed so much to the wealth of the country in their day.

5.14 p.m.

The right hon. and learned Member for Montgomery (Mr. C. Davies) has just made a moving plea for the old-age pensioners, and I want to begin by supporting it. I think there is no single feature of this Budget on which there has been more profound disappointment than on this question of providing for the old people. It is a blot on our national honour if we now have to begin to say, in 1954, that we cannot afford to make the reasonable minimum provision for those on social benefits, and especially those who, in their working day, contributed enormously to the wealth of the country, and who now ask very little in return for their labours.

We shall, in fact, be defaulting, and wilfully defaulting, on the accepted principle of the Beveridge Report and the National Insurance Scheme of 1946 to 1948 if we now allow financial considerations to stand in the way of doing bare justice to the old people. If, this year, the Chancellor had special difficulties, we understand them, but, at the same time, he cannot expect old people suffering acute hardship to wait while the actuaries, the economists, the Treasury officials, the quinquennial revision and the Phillips Committee and all the rest of the paraphernalia is complete for the consideration of the future problem of social insurance before making any provision for their present needs.

There is a significant change this year in regard to the National Insurance Scheme which distinguishes the present financial position from that which has been found in years past. Hitherto, when the Chancellor announced in his Budget statement additional benefits to National Insurance beneficiaries, it has not been necessary for him actually to make budgetary provision for the increase, because we have paid the increased benefits out of the pool of contributions and other income going into the National Insurance Fund.

Of course, that has increased the strain on the current income of the fund, and has reduced the additions to the reserve fund, but, at all events, it has relieved the Exchequer of any direct additional contribution towards the increased benefits. In fact, at a time when increased benefits were being given, the Exchequer contribution to the National Insurance Fund was reduced, which shows how separate the two things had been until now.

In the latest Report of the Government Actuary on the condition of the National Insurance Fund, we see a smaller gap between contributions and other income and outgoings than has been the case before, and from current contributions and other income of the fund it would not be possible to finance the additional benefits needed without either an additional Exchequer contribution or a substantial increase in the contributions.

On this question of contributions, the Chancellor referred yesterday to the attitude of the younger working population towards the burden of the old jeople, and said:
"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."—[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 211.]
Perhaps we have been neglecting social education among the workers of today, especially the younger workers, many of whom have not experienced the privations and hardship of unemployment and destitution which their fathers and grandfathers suffered. It is necessary to impress upon all workers the fact that social security is worth its money price which Beveridge said it was and which we endorsed when we adopted the principle of the scheme.

Some people say loosely that contributions cannot go any higher. They can. The proportion which wage earners are paying from their wages today for National Insurance is lower than it was when the scheme started. The proportion of their total earnings which they pay towards social security is lower still than it was in 1946. It would be possible to increase the contribution quite substantially and still have it at no higher level of proportion of total income than the original contribution fixed when the scheme was introduced.

I do not say that that would not be a strain on the resources of many workers. Averages are always dangerous things to use, but this issue must be put fairly and squarely before those who are still productive workers if we are to have a social security scheme which we shall continue to be proud of and which they will wish later to enjoy. I do not know why the Chancellor is waiting. He must face the issue before very long, as the right hon. and learned Member for Montgomery said. It does not matter how the Phillips Committee depresses the nation by the prospective burdens of social provision for old age. The country has got to afford it. Indeed, if the country cannot afford that, what else can it afford?

Just as the country has been surprisingly willing to bear the heavy burden of defence, surely the country will be equally ready, when the issue is put fairly and squarely before it, to bear the additional cost of social provision.

Would my hon. Friend agree that apparently all these imponderables were not taken into account when, last week, we gave an additional £100 a week to the judges?

My hon. Friend has brought the judges into this. I should prefer to leave them out if only because of the astronomical difference between the cost of the judges' increase in remuneration and the cost of the social provisions which we are now discussing. This issue is too serious to admit of any byplay or cross-reference to other matters which are done in much more subordinate and insignificant directions. We are coming to the year of decision on the future of social provision in this country.

It is a great pity that the Chancellor has run away from doing what I am sure he would have wished to do, under the shadow of the activities of the Phillips Committee and the quinquennial review. The Minister of Pensions and National Insurance has gone on record in a public speech outside the House, and, I believe, also in the House, as saying that it is the hope of Her Majesty's Government to restore during the lifetime of this Parliament the purchasing value of social benefits to their original level.

Why, then, does he hesitate to do it now? What is stopping him? Need he be so proud of not levying any additional taxes this year if the price is to be paid by the old people? Would the country deny the Chancellor some modest increase in Revenue to meet the needs of this problem? To restore the purchasing value of existing benefits to 1946 levels would cost—according to information given in the OFFICIAL REPORT on 10th December, 1953—£51 million now for all benefits and £37 million for retirement pension only. There would be some consequential saving in National Assistance.

If contributions were raised, as they could be, the immediate charge on the Exchequer would be reduced. It is manifestly unsatisfactory when we find the standard pension rate falling further and further behind the National Assistance level. In 1946, the married pension standard benefit was 93·3 per cent, of the National Assistance level. Today, it has fallen to 78·3 per cent. That shows how much in retreat standard benefits are from the subsistence principle upon which they were originally based. I will leave that topic there, because I am sure that other hon. Members on both sides feel deeply about the matter and regret that the Chancellor has not been able to do something this time. Of course, there is still time for him to do something if he will.

I turn to the troublesome question of post-war credits. The Chancellor has done the very minimum. In fact, I think that on all the documents that reached him in the course of his consideration of the Budget proposals, the Chancellor must have written the word "minimum" across every one. He must have said, "Show me the very least I can do about the most pressing problems," and as regards old-age pensions the least was nothing. Of course, the least on postwar credits had to be something, because, as my hon. Friend the Member for Leeds, South (Mr. Gaitskell) said, and as I have remarked before, there is a vote of censure on Her Majesty's Government standing on the records of the Conservative Party conference for their failure to do something about post-war credits.

The Chancellor searched his conscience. I wonder what sort of a conscience it is that has to be searched in this way to provide the very minimum of concession on a matter upon which one's own party conference has expressed itself so emphatically. Some time we ought to have a clinical inspection of this conscience, so that we may see what sort of a thing it is. I associate myself completely with what the Financial Secretary said about the difficulty of repaying post-war credits on grounds of hardship. We all sympathies with the difficulty in that respect, especially if it were to be assumed, as I think that it would have to be, that the National Assistance Board should be the judges of hardship.

We do not want to go to the Assistance Board to get our post-war credits. Many people have to go there already to get other things. I am sure that we do not want the Board to be the arbiters in the dispensation of justice on matters of right. I am equally opposed to the idea of repaying post-war credits on a reducing age basis. It is very attractive superficially, but I do not understand why a person of 58 should get post-war credits for 1945 in advance of someone who is 57 who has post-war credits dating from 1944.

There must be some equity in repaying borrowed money and it has no particular reference to one's age. If the right order of repayment were to be followed, it would be much more reasonable to say that the first year shall be dealt with first and the second year second, so that those who suffered the increased taxation first should be the first to benefit. I am not dissenting for a moment about the great convenience from all sorts of points of view of the existing arrangement for payment at pension age, but it will not be lost on the Committee that the Chancellor's proposals do not give to any living owner any repayment of post-war credits beyond the existing arangements.

I fully acknowledge that this tidying up of the problem of the deceased owners of post-war credits ought to be done. I still more agree that in the case, say, of a man who went past the age of 65 and did not trouble to draw his post-war credit, and died before he had done so, there ought to be provision for the repayment of what he left in the hands of the Government interest-free—probably because he did not want to add to the troubles of the Chancellor of the Exchequer. [Laughter.] Yes, there are often noble sentiments in the minds of people who do small things in the hope that they are helping the country.

We shall have to leave the conscience of the Chancellor to the tender mercies of the next Conservative Party conference. I am sure that it will have more to say about post-war credits. The Chancellor could have gone further, as my right hon. Friend the Member for Leeds, South said. The Chancellor has not enough trust in the holders of post-war credits to issue them with Savings Certificates or Post Office accounts, and so turn compulsory savings into voluntary savings, asking them, at the same time, to respect his desire that there should be no rush to convert them into currency. The extent to which he should take that risk is a matter of judgment, but that he can take it I am absolutely convinced.

I would now comment on the remarkable failure of the Financial Secretary to the Treasury to respond to the invitation of my right hon. Friend to say a little more about the intentions of the Chancellor on the subject of equal pay. Yesterday, the Chancellor of the Exchequer said:
"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."—[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 211.]
This morning, the staff side of the National Whitley Council sought to get from the right hon. Gentleman more enlightenment about his intentions. As I understand, a message was sent on behalf of the Chancellor that he could not add to the statement he had made to the Committee of Ways and Means yesterday until he had met the staff side representatives, which meeting, owing to present engagements, was likely to be delayed until the middle of May.

I shall not question the discretion of the Chancellor in making such an announcement in response to the inquiries of the staff side, but I must point out that he has a responsibility to this Committee. After all, there was a Resolution of the House on 15th May, 1952, which asked the Chancellor specifically, and without a Division, to do something about equal pay. Therefore, the right hon. Gentleman cannot now say that this is a matter between himself and the staff side representatives. We are entitled to ask the right hon. Gentleman whether these rather vague terms actually mean some kind of business. We are not pressing him to make a grandiose declaration of what he may have in mind to do, but we want to know whether he really means that he will respect the will of the House and, in discussion with the staff side representatives, say whether a beginning of the application of the principle of equal pay can now be made. We are entitled to a specific assurance on that point.

When I heard of the message this morning, and when I saw the Financial Secretary sit down without even referring to what my right hon. Friend the Member for Leeds, South had said, I began to wonder whether he was unwittingly treating the Committee in a discourteous way. I hope that that was not his intention. I hope that we shall have an authoritative announcement from the Government of their precise intentions, telling us whether this is a business proposition or merely the continuance of a theoretical exercise.

Now I wish to say a few words about the proposed investment allowance. There is no doubt that we want more industrial investment, and that the large-scale reliefs which have been given by this Committee have not produced much result. What we wanted and what we should have had was a higher level of industrial investment. It makes one wonder whether the Chancellor of the Exchequer did too much last year, considering the results that we have got, and whether he wasted some of his substance unnecessarily last year in order to get the improvement in the general economic situation which we all now welcome, but which has left him singularly naked to deal with such simple matters as those to which I have already referred.

The Financial Secretary to the Treasury did not deal fully with the proposed investment allowance, because he failed to point out that it introduces a novel feature into the system of taxation. Nowhere else is an Income Tax relief given for more than the amount of the expense. This is a new and revolutionary change; let us make no mistake about that. For the very first time the agency of taxation is being used for something which it is not the job of taxation to do. The right hon. Gentleman has pointed out, although it may not have occurred fully to hon. Members, that this allowance gives a 120 per cent, depreciation allowance. I am not quarrelling with the purpose of the allowance, but asking whether this is the right way to achieve the purpose which the Chancellor has in mind.

Again, this is another indiscriminate and universal introduction of a new principle, without any assurance that the money will be used in the right direction. There will be a dribble into the sand in many cases where this additional allowance is given for industrial investment, because the product may not be fully used for the purposes intended. The previous initial allowances were a redistribution of the 100 per cent, depreciation, bringing forward into the first year a larger amount of depreciation than was normal. They led to a tapering-off of the depreciation allowance in the subsequent years in the life of the machinery or equipment concerned.

The present proposal is quite new in principle, and we shall have to examine it rather more carefully later to see whether it is not a rather indiscriminate way of utilising a subsidy to encourage industrial investment. We on these benches prefer to go straight to the target in a matter of this kind. If we want to put a shot in the arm for industrial investment and if we have to give a subsidy, we prefer to do it direct, and to have some say in how the money will be spent and the directions in which it will be used.

It may be that some businesses would prefer to have a 40 per cent. initial allowance restored to them rather than this new arrangement. It just depends on the financial condition of the particular company. Some of them have to get over the hump of the initial outlay, and any assistance they can get in doing that is worth more to them than a spread-over benefit later on.

They prefer to get as much help as they can from the initial allowance rather than have to go to the bank for some special accommodation, and it may be that consideration could be given to some choice of method of utilising the special provision for industrial investment. Mr. Roy Harrod made the revolutionary suggestion that everyone should be allowed to choose his own method of depreciation allowance, but he was not revolutionary enough to suggest that everyone should get 120 per cent, when he finished. He was thinking of redistribution of the allowance, and of doing it in any way people liked so that the Revenue would never ultimately give them more than 100 per cent.

Those are a few comments on the details of the Budget provisions. My right hon. Friend the Member for Leeds, South has gone very fully over the wider issues, the background of the Budget, and other of my hon. Friends may wish to follow him in that. I hope that the remarks I have made will assist the Committee in its approach to such practical proposals as the Chancellor has included in his Budget statement.

5.43 p.m.

This is not the first time that I have had the pleasure of following the hon. Member for Sowerby (Mr. Hough-ton) in a debate of this sort. The Committee always listens with great attention and interest to everything he says, because he is particularly well-informed on these topics. In the course of our discussions on the further stages of the Committee there will be many opportunities for dealing in greater detail with some of the problems which he has brought to our notice than I, at any rate, shall be able to deal with them today.

I have listened, I suppose, to a score or more Budgets, and I do not think it is unfair to say that this is not the most exciting Budget to which I have ever listened. That seems to be the general view, but that in itself is by no means a criticism, because excitement and the craving for excitement are, in my view, one of the vices of this age. I think it would also be fair to say that the Chancellor has completely eschewed another very prevalent vice, that of seeking popularity. For this, I believe, he has earned the respect of hon. Members on both sides of the Committee.

Because the Budget is neither exciting nor popular it does not mean that it is not important. There is one very important proposal in it, and I thought that the Chancellor's speech, serious as it was, was also very important. The early part of it was encouraging, but, like the Treasury Economic Survey, which, unfortunately, raised so many hopes which were dashed yesterday, that part of the Chancellor's speech which was encouraging referred to the past rather than to the future.

I notice, incidentally, that the Economic Survey is called "Economic Survey 1954," not "Economic Survey for 1954." That is a small, but a very significant and, I think, salutary change from the past, but I do not think that it was a change which was observed by all those who read it last week and who drew so much comfort from reading it. None except those who actually have the estimates of the yield of taxes can really form very much of a guess as to what balance the Chancellor will have to deal with in his Budget. It is very difficult for the outsider to form an opinion.

We could estimate fairly well, of course, what the expenditure would be. It was quite clear that it would come out at just about £4,500 million. Most of the figures have already been made known to us. But I for one was a little surprised that the estimate for Inland Revenue was not rather higher than that at which the Chancellor has put it. I think that he may very well find that he has made an underestimate here; indeed, I profoundly hope that that may prove to be the case.

Therefore, the question that is really before the Committee today is, has the Chancellor been too cautious? Should he have been bolder? Should he have cast his bread upon the waters rather than have buried his talent in the ground? Let us look at the Chancellor's case and see. He is rightly appalled by the continuing rise in expenditure and by the heavy taxation which this entails. He is unquestionably shocked at finding himself having to raise in taxes from the people of this country a greater sum than ever before, even at the height of the war.

He tells us in his speech that expenditure must be reduced, but it is greatly increased. The increase, it should be noted, is not in the Defence Estimates, although on account of the reduction of American aid there is an increase on the paper. The increase really comes in the Civil Votes, which are up by over £200 million. It is an astonishing thing to realise that since 1947—and this, of course, is largely due to defence expenditure—the total has risen from £3,200 million to £4,500 million for the coming year.

It rather looks to me as if since the war the spending machine has got out of the control of Ministers. Each of us in our own lives is brought into contact with spending by Government Departments in various ways. Apart from being Members of Parliament, many of us know a good deal of what is going on in our other capacities. Some of us are members of local authorities, of education committees, of agricultural executive committees and of hospital boards and committees.

Many people who are in contact with the expenditure of the State feel that the methods by which finance is controlled from Whitehall leads inevitably to extravagance. We all know—and some of us have experienced it—that desperate urge to spend up to what has been allotted, even if it is not necessary, lest next year the allocation, when it may be needed, should be reduced.

Then, again, those of us who are in business know the absolutely devastating effect which a high level of taxation has on the minds of those who spend money when they know that the Chancellor is going to pay for a half of it or more. I think that the Chancellor should make a fundamental re-examination of the operation of the methods of controlling expenditure. Those methods may have served well enough in an earlier period of our history when the sums involved were not so vast as to be beyond the scope of the imagination of ordinary people and particularly of those who handle them. The difference in the sums during the lifetime of those in this Committee has been tremendous.

I am sure that we all sympathise very much with the Chancellor in his anxiety to get this vast machine of expenditure under control. He told us yesterday of his desire to do so. We share his regret that, in spite of most gallant efforts, he has not yet succeeded. I believe that everyone in this Committee would recognise that the Chancellor of the Exchequer has the character for doing that job, but has he the machinery? I very much doubt it. [An HON. MEMBER: "Nor the will."] I think he has the will, but I do not think he has the machinery.

Rising expenditure is the first anxiety that prompted the Chancellor to caution. He referred to other anxieties. First, the uncertainty of the effect of the recession in trade in the United States and all over the world. That was a very natural anxiety. I agree entirely with what he said about it, but it is not a matter which he can himself alter one way or the other.

His other anxieties were the three disappointments which were revealed in the Economic Survey. Those were things which he has tried to tackle by his Budget proposals. The first was the present performance of British exports which he feels, quite rightly, are not, in the long run, good enough to support this country's needs. Secondly, the disappointing figure of increase in productivity. Incidentally, it is one of the lowest increases of any industrial country of the kind in the world. Lastly, the fact that British manufacturers were not spending enough on new plant and equipment.

What measures did the Chancellor take to deal with them? His very last proposal7mdash;which has already been referred to by other speakers today, including the hon. Member for Sowerby—was by far the most important positive part of the Budget. On the whole, I think that it has met with a very favourable reception, although I agree with the hon. Member for Sowerby that it will require careful discussion and clarification in Committee.

Initial allowances, as I have said before, are an unsatisfactory method for a variety of reasons. I have never been very attached to them. For one thing, they are no more than a tax-free loan from the Exchequer. Secondly, we must not forget that industry has already been caught once by their withdrawal, which has an important effect. Thirdly, they are not effective at all in a business which is not short of cash. That is perhaps the most important criticism of the initial allowances. As far as I can see, the investment allowance is a genuine reduction in industrial taxation—not a postponement of demands. I am glad that it is also extended to cover agricultural investment.

The other proposals which the Chancellor makes to deal with industry's difficulties are in respect of some extension of export credit facilities, which will certainly be welcome. I noticed that the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) referred particularly to them this afternoon. They will certainly be welcomed. None the less, in my view they contain some dangers. I hope that there will be another opportunity to discuss in detail the actual financial implication of this plan and its effect on both the Board of Trade finances and those of the banks. It will have to be carefully discussed, but it is essentially something which will be welcomed. Then there is the alleviation of Estate Duty in the case of family businesses. That is both welcome and necessary.

Now, here comes the gravamen of my criticism of our present financial set-up. All these proposals, valuable as they are, are only necessary because of the excessive taxation under which we are groaning. It would be much better were they not necessary at all. The Chancellor's final proposal, to which the hon. Member for Sowerby referred, would not be needed unless there was excessive taxation. Does the Committee appreciate—perhaps it does—that one-quarter of the income of the average manual worker is today taken in direct or indirect taxation? From the more prosperous section of the community more than half is taken, and from the highest incomes more than 90 per cent.

I believe that, when taxation is at this level, two things are bound to follow. One is a steady depreciation of the currency and the other, as a consequence, is a rise in prices. I agree also that employers and wage-earners alike feel that further effort is not quite worth while, and certainly business and professional men become extravagant in incurring expenses. As a consequence of this, productivity is reduced and there is a steady decline in the value of savings, benefits and pensions.

The hardships of pensioners of all sorts—old-age pensioners, ex-Service men, and those living on small fixed incomes—are becoming more severe and apparent every year. I was glad to note that the Chancellor expressed his sympathy with this problem. We have to find something more than sympathy. Apart from the illogicality and the distortions which Purchase Tax causes to business, we cannot overlook the burden it places on such people.

What is the Chancellor to do? Expenditure is rising and there are still many further claims on it. We have heard claims from all sides of the House today. There are many more which have not yet been mentioned but of which we shall hear in the course of the debates. I have two suggestions to make to the Committee and to the Chancellor. One, which I have already mentioned, is the complete and swift re-examination of our system of controlling Government expenditure. I want that looked at again. I think it has to get a new look. I do not think that the old system will do. We must get something better.

The other suggestion is to do what we all have to do in private life when we cannot make ends meet—try to earn more. If only we can earn more by our work and by our wits—do not let us forget the wits—we can perhaps meet the necessary expenditure which we must bear. I must here adjure the Chancellor to believe that this cannot be done unless taxation is reduced. Trade and commerce is a great machine. If one little bit of the machine is at fault, the machine stops or slows down. One jet blocked in a motor car may prevent the power from getting through to drive the engine. There is just such a blockage in our commercial machine today. If investment in manufacturing industry does not, in fact, respond to the promised investment allowances, it will be for that reason only.

I should like to quote from this morning's leading article in the "Manchester Guardian," in which the editor says:
"Final rewards are still restricted and much modern equipment will pay only if it can be used with more shifts than are at present possible."
The machines and the new equipment which the Chancellor wants installed do not produce goods by themselves but, as the "Financial Times" said today,
"They have to be operated by workers; they have to be planned and their products sold by management."
If we are to give the increases in old-age pensions and meet the other demands which are made upon us, this can only be done by an increase in productivity, and this increase in productivity which the Chancellor wants cannot be expected without some benefits to individuals. Income Tax and, for a most valuable section of the community, Surtax are at present the bars to these benefits. Nobody can deny it. That is the jet in the machine which is blocked.

I should have thought that the Chancellor might have taken a bolder line in making some reductions here. After all, he could have done a great deal with £200 million, which is only about 4 per cent, of the total revenue, and I should have thought that such a step would have brought in a vast increase in revenue within a year or two, and he might still quite easily balance this year's Budget. The difference between an estimate of £50 million here or £50 million there in a Budget the size that we have now is something which cannot be taken very seriously.

The right hon. Gentleman a few minutes ago suggested that there should be a tighter control of expenditure. Now he is suggesting giving away £50 million.

No, that is not what I am saying. I am saying that with such a vast expenditure as £4,500 million it is not possible to tell precisely in advance whether it will come out £50 million more or £50 million less, because it is such a small proportion of the total expenditure. That is the point that I was trying to make.

Do not let us forget that we are competing with the United States of America, with Germany, Japan, Switzerland, France, Belgium and other countries, all of whom have vastly lower direct taxes than ourselves on individual incomes. We have got to try to beat them in the world's markets, and yet we have this much greater burden upon us than those countries have.

We can shout for more productivity; we can pray for more exports; we can urge manufacturers to spend more money on equipment, but very little will happen unless there is a reward at the end for the hard work, for the saving which is required and for the risks which have got to be undertaken. Very little will happen unless there is a reward for all that.

I cannot give way now. I am just about to finish. The Chancellor is the man at the helm, and we on this side of the Committee accept his proposals, but I do not believe that the economy of this country can survive much longer under these crushing burdens.

6.3 p.m.

I listened last night to the Chancellor when he was broadcasting to the nation. I turned on the radio wondering what kind of broadcast he could possibly make. I found that it was halting, cold and hesitant; his sentences were very staccato, and altogether it was a disappointing statement.

Then I wondered how many old people going to bed last night would shed some tears over the disappointment that they had had in the Chancellor's Budget. Their hopes had been built up by those newspapers which are quoted so frequently. According to them, this has been the greatest Government ever; this country has never been so prosperous; the output has been the greatest ever. It is like my grandson's height. He is two years and three months old. Every time I go to see him his height is the greatest ever. Naturally, our production, even if it were only 1 per cent., would be bound to go up each year until some time or other it would be the greatest ever.

The balance of payments and the reserves are running into millions. No wonder the old people thought that a Government which can boast, as it is doing, about putting the country on its feet would put them on their feet too. They, poor old souls, thought that they were part of our country and that they would be put on their feet, but instead of that they were thrown on the backs of their necks by the party opposite.

To make matters worse, the Chancellor does not appear to realise what these people are up against or, indeed, what any of the low-income groups are up against. He delivered himself yesterday—and I may say that he has done it again and again—of the same statement that prices are not going up. He has never yet admitted that prices have gone up. This is what he said:
"… the fact that we have been able to foster expansion and go ahead with decontrol without a general rise in prices" —[OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 204.]
The Chancellor and a great many hon. Members opposite have been steeped in high finance. It would do them a world of good if they had just a month of low finance and of living on £5 a week or less. They need that experience. To be a Member of Parliament it is necessary to have some experience of, or at least some regard for, not only high finance but low finance. How could the right hon. Gentleman have made such a statement if he had known that he was responsible for raising the price of butter from 2s. 6d. to 3s. 8d. and that it is going up next month, under decontrol, by 4d.? It is said that this 4d. increase will be followed by another 4d.

When he made that statement could he have known that the same quality of tea, which was 3s. 8d. when it was controlled, is today 5s. 4d., that it is going up next month by 4d., and that we are dreading that that will not be the end of it? Could he have known that butcher's meat has gone up 8d. and that the retail butchers' federations and associations met last week and said that the housewives are not to think for a moment that prices will remain as they are but that there will require to be substantial increases under decontrol? Cheese, which was 1s. 2d., has gone up to 2s. 4d.

What has the Chancellor been doing? He ought to be just as interested in how these people live as in how his industrialists conduct their businesses. Every time we have asked the Chancellor, he has denied that there has been an increase. He points to the cost of living. He does not talk about the cost of food. He talks about the cost of living and, so far as his lights go—it is a pity they are so terribly dim, like a candle in the age of electricity—no doubt he believes what he says. He reduced the cost of living in his last Budget by making Purchase Tax reductions on fur coats, expensive jewellery, and cosmetics. Eye-shadow was reduced in price from 4s. 1d. to 3s. 8d. The old-age pensioners will not require any eye-shadow while this Government are in power; they will have shadows round their eyes to the end of their days.

No doubt the Minister of Food has informed the Chancellor, as he is constantly informing the House, that rations are all taken up. Butter, for instance, is taken up to the extent of 98·8 per cent., and yet 1,500,000 rations are still not taken up. I sat down and worked out that problem, and decided that the answer was to be found in the new recipes which women are giving us in the newspapers. Shortbread can now be made with butter, with "nae bother at all" as we say in Scotland. That is not all. For the four weeks ending 26th December last, 14,500,000 rations of cheese, 1,300,000 rations of meat and six million rations of bacon were not taken up.

I make bold to say that they are not being taken up by people in the lower income groups. The reason hon. Members opposite are able to tell us that consumption is still high is that we have gone back to pre-war Toryism, when milady could lift the telephone and order a sirloin. How different from the days of the Labour Government, when she had to produce six ration books before she could get six rations.

I just love a question like that. The Lord has delivered thee into my hands. Would I bring back the ration book? This is the kind of question we are asked by ill-informed Tories everywhere, fed by an ill-informed and prejudiced Press.

I do not want to have to deliver an address on juvenile delinquency. I have been asked by the hon. Member for Louth (Mr. Osborne)—for whom I have a great respect, not to say regard—if I would bring back the ration book. Certainly not; but I should do what the Labour Government did in 1950, when they took 90 items off the ration. They took off biscuits, jam, tinned fruit and salmon, and all those goods for which points had to be given up. But they pegged the prices. That is the difference. Today, the humble loaf is not on the ration book, but the price is controlled. If it can be done with bread, it can be done with cheese, butchers' meat, tea, and everything else. But the Government do not care to do it.

I have great respect for the point which the hon. Lady is making, but she has not met the point which I was putting. She is complaining that milady can telephone for a sirloin of steak. I say that the only alternative is to bring back the ration book, but she disagrees. She would peg prices, but by doing that she would not prevent milady ordering a sirloin by telephone She must face that fact.

Milady can get preferential treatment in the butcher's shop, because she is prepared to give a good few coppers—not to say shillings—more than poorer persons. If the price were controlled, the butcher would have to be very careful when he was delivering butcher's meat to milady, if she were paying something well above the controlled price. I believe that the butcher has to put a price tag on everything he delivers, and not many butchers would be willing to risk a conviction if a highly-inflated price label were discovered while the meat was being delivered.

I am surprised that the Chancellor should think that there has been no increase in prices. A month ago a Question was put to the Minister of Pensions, asking him if he were aware that since January, 1951, the cost of food had increased by 29 per cent., rent and rates by 14 per cent., fuel and light by 27 per cent., miscellaneous goods by 20 per cent., fares by 27 per cent., and laundry charges by 18 per cent. The latest piece of distortion is contained in a Tory leaflet issued from their headquarters, showing how prices have actually gone down. In a centre block it is said that the Tories have reduced the price of bacon and cheese, besides such things as glace cherries, turkeys and geese—all things which old-age pensioners are using every day, and which miners put into their cases before they go out to the pits in the mornings.

No doubt the Chancellor is an honest man, and he assumes that those with whom he deals are honest people, and that his Tory Central Office has produced an honest leaflet. He therefore tells us that prices have not gone up, in spite of decontrol. But there was a wave of disappointment, a shock of silence, over the nation last night, at the cruel treatment which had been given to the poorer members of our family—because we are a national family, trying to reach the brotherhood of man. What is the Queen doing just now but cementing the human family into a brotherhood? We cannot throw aside those who are helpless, those who cannot go on strike, those who have to sit and weep. We cannot ignore them, or treat them with cruelty or even callous unconcern, and expect the nation to prosper. It is contrary to everything we have been taught. It is contrary to our Christian ideals. There must be many old people who remember having been brought up to read and to repeat the Psalmist who said:
"I have been young, and now am old; yet have I not seen the righteous forsaken, nor his seed begging bread."
Last night they must have felt forsaken after reading or hearing about our great prosperous country. Let no hon. Member opposite go to tell the people how prosperous we are. There is sure to be someone in the audience who will say, "Then show it by giving even a half-a-crown each to the old-age pensioners. The fact that you say you cannot do it is a test whether our prosperity is real or not."

I hope hon. Members opposite will use their influence with the Government, because they have responsibility, too. We on this side of the Committee have found times when we could use our influence with our Front Bench. I beg all hon. and right hon. Gentlemen opposite to reverse the decision about the old-age pensioners when the Finance Bill comes.

6.22 p.m.

I think the old people in the part of Scotland I come from must be much more robust than those who live in the district of the hon. Lady the Member for Coatbridge and Airdrie (Mrs. Mann), because I am quite sure that my old friends last night, whether they support or oppose the Chancellor, did not go to bed in tears after hearing of his speech.

I said I was quite sure because I know my friends fairly well. They are not sentimental and sloppy, and do not like to act in the way the hon. Lady suggested.

I should like warmly to congratulate my right hon. Friend on his Budget. I read somewhere—not that I believe all that I read—that the founder of the House of Rothschild was once asked how it was he had made his great fortune; to which he replied, "By knowing when to act and when to do nothing." I believe that my right hon. Friend, in doing nothing drastic or spectacular yesterday, achieved a very great deal. It has been suggested that he ought to have made concessions, and I know how strongly it can be argued that concessions should be given, and how much they are needed, particularly by the people for whom the hon. Lady was talking, but I cannot see how my right hon. Friend could have made those concessions without either increasing taxes elsewhere or running into a deficit.

I believe that if he further taxed production he would make us all poorer, including those he was trying to benefit. On the other hand, if he ran into a deficit, how would that advantage us now? That seems to me to be a perfectly sensible thing to do at a time when there is severe unemployment, to create purchasing power which would cause full employment, which would bring about greater production, which, in turn, would cure the deficit. If the recession in the United States is more severe than I personally anticipate, the Chancellor may have to use that method. He is very wise to have kept his powder dry until that occasion. To run into a deficit when we have full employment would seem to me to be absolute folly.

Many hon. Gentlemen opposite were heard last night to say that this Budget meant there would be no autumn election. I am in no position to judge whether there will be an autumn election or not, but I should like to say to the Chancellor that if he looks after the economy of the country the election will look after itself. I do not believe that ordinary men and women today are nearly so gullible that they require bribes to give their votes. I believe that how they vote will be determined by what they think is going to give them maximum security. They know that two and a half years ago they were not secure, and I think there is a strong feeling throughout the country that there is a degree of security today that was not present two and a half years ago. I believe this Budget will contribute to that a great deal, and for that reason I believe that when we do have an election this Budget will contribute substantially to the return of the Conservative Party again.

The Economic Survey shows as great an improvement in our position as any of us dared to hope, and I confess that it shows a greater improvement than I personally ventured to guess. It shows what an able Administration adopting a Conservative policy of turning trade back into private hands, of getting rid of restrictions, of opening the commodity markets, of abolishing controls on production and consumption, can do. [Interruption.] An hon. Gentleman says "Nonsense," but that is the Conservative point of view, and one that we are entitled to hold, just as hon. Gentlemen opposite are entitled to hold the view that there should be State control. The difference is this; our method is succeeding, while the method they supported rather failed.

Whereas those who predicted disaster have been proved wrong, as prophets often are, I do think that those who were very concerned, not about the probability of a balance of payments crisis, but at the measure of misfortune that would bring on the country, may still have cause for anxiety. Although 1953 was a year of record activity in the United States, although the improvement in the terms of trade and in production increased our resources by about £800 million, we had a surplus, excluding dollar aid, of only £123 million, which was less than that of the year before. I cannot help wondering whether we did not spend rather more on housing, urgent as that is, than we could really afford.

Our gold reserves went up to £240 million, but our sterling liabilities have increased by very much the same amount. German competition, as is explained in the Economic Survey, is gaining ground. The Board of Trade Journal last week showed that our proportion of trade with 10 sample countries had fallen from 26½ per cent, to 22 per cent, whereas the German proportion had gone up from 7½ per cent to over 12½ per cent. Our reserves are still only equal to about 15 weeks of imports.

So that I should say that the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) might well be gratified with the improvement if he were in a less disinterested position than he holds today, sitting on the Opposition Front Bench, although I can agree with him that we certainly cannot yet be satisfied.

I believe that the Government should have four main objectives in the economic field. The first is to check inflation. The second is to encourage investment and efficiency. The third is to pave the way for convertibility. The fourth is to do what they can to expand world trade.

In dealing with inflation, I believe the Chancellor has a very delicate balance to find. If his Budget is too tough, there is unemployment and production falls. If he creates too much purchasing power, costs will rise, exports will suffer and those who can least bear the burden will be punished most. It seems to me that the balance which he has today is just about right, but it is extraordinarily difficult for any outsider to judge and perhaps not very easy for the Chancellor himself to judge. He may very well have to keep an open mind as to whether, later in the year, he may not have to use the monetary weapon to check an inflationary expansion or, alternatively, to release further purchasing power. Because the Budget happens to fall in the first week of April is no reason why that week should be the moment when the Chancellor can accurately diagnose exactly what to do for the whole year.

I was very glad that my right hon. Friend paid so much attention to the need for increasing productivity, where we have certainly been losing ground to some of our competitors. In 1948 we were spending on plant and equipment over £300 million more than the Germans, whereas in 1952 they were spending considerably more than us. I very much hope that these new proposals will bring about a much more substantial investment in industry, and I must say that the objection of the hon. Member for Sowerby (Mr. Houghton) that this is an unorthodox plan did not seem to me to be a very good argument against it.

Thirdly, I believe that the Government must prepare the way for convertibility as fast as they can. I admit, however, that there are many conditions which must be fulfilled before convertibility can be safe. We must have larger reserves—and that means a more satisfactory balance of payments position. We must wait until other countries are also making their currency convertible and we must wait until trade restrictions have been reduced throughout the world, and particularly in the United States.

As a firm supporter of G.A.T.T., perhaps more enthusiastic than some of my hon. Friends, I believe it to be a very useful machine for reducing trade restrictions. I am quite sure that to plunge precipitately into convertibility would be to risk all we have achieved. On the other hand, to delay it indefinitely, I believe, would be taking just as great a risk. It might even lead to the dissolution of the sterling area. I am quite sure that we cannot make full use of our historic position as a centre of world trade until our currency is freely convertible.

I want, finally, to speak of the need to expand world trade. It is fairly generally agreed in the Committee that only by increasing production can we permanently raise our standard of living, but it is not so generally recognised, although I believe it to be equally true, that in our efforts to raise our standard of living here we are dependent upon an increase in world trade. Except in the very short run, I am quite sure that a poorer world means a poorer Britain. I believe it is quite impracticable for this country to get such a big share of the cake of world trade as would compensate for the cake of world trade becoming much smaller.

If the Government had run for shelter behind tariff barriers, I believe they would have set an example to the world and to the Commonwealth which would have impoverished us all, and I believe that their wise and courageous actions— I am thinking of the Japanese Agreement, of the liberalisation of imports from O.E.E.C. countries and of the opening of commodity markets—have increased the trade of the world and made a powerful contribution towards solving our own trade problems.

6.36 p.m.

I want to refer to the concluding part of the speech of the right hon. Member for Blackburn, West (Mr. Assheton), who spoke of the sympathy of the Chancellor of the Exchequer. Like myself, the right hon. Gentleman is a Lancastrian and no doubt proud of the county in which he was born, and I remind him that in Lancashire we have a saying which runs someting like this: "Sympathy without relief is like mustard without beef—it is very sharp." The Chancellor's sympathy towards our old people and people in the lower income groups is very sharp.

Like right hon. and hon. Members on both sides of the Committee, I want to express my profound disappointment at the attitude of the Chancellor and the Department towards the lot of the old-age pensioners and the lower income groups. This Budget has been designated under many headings since it was announced yesterday. I noticed that in one of the papers this morning it was called "A chicken-feed and chicory Budget." I picked up another paper in which it was called "The bomb Budget," and in another paper it was called "The Let-us-be-happy Budget." I will give it a name which we use in Lancashire; it is, "The skinflint Budget." Perhaps I may tell the Committee what a skinflint is. When an individual is parsimonious and niggardly in his approach to the people who stand in need, he is described as a skinflint. This Budget does nothing at all to relieve the hardships of the many people who stand in the greatest need—the lower income groups and old-age pensioners.

How do the Press coin the description of the "Let-us-be-happy Budget"? My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) referred to a passage in the Chancellor's speech, and perhaps I may quote the same passage. After pointing out that personal consumption, aided by last year's tax concessions had risen in volume by about 4 per cent, over 1952, the Chancellor said:
"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."— [OFFICIAL REPORT, 6th April, 1954; Vol. 526, c. 198.]
The House cheered those words. But I think of the song which we sang in my boyhood days and which runs something like this:
" If your heart should ache awhile, never mind;
If your face should lose its smile, never mind;
There'll be sunshine after rain,
And gladness after pain,
We'll be happy once again,
Never mind."
I thought of those words because of the Chancellor's approach to the problems to which his attention has been drawn many times. He cannot say, nor can the Government say, that over the last 18 months their attention has not been drawn to the dire need of the old people of this country.

On 12th March last year—not the year 1954, but last year—I approached various Government Departments asking that they should give consideration to the increased cost of living which was creating hardship to the old people of this country. We were told that the Government had the matter under active consideration. As late as 4th March, I think it was, when we made representations again to the Chancellor, we were told that the matter was receiving active consideration. Again on 19th March there was a debate in this House upon a Motion put down by my hon. Friend the Member for Southampton, Test (Dr. King), and the Government accepted that Motion. They did not attempt to answer the points which were put, but they wholeheartedly and unreservedly accepted the Motion. This was the Motion:
"That this House, believing that one of the high purposes of a Government ought to be to establish an adequate minimum standard of living for its poorest citizens, expresses concern at the increasing numbers of those living on pensions and other fixed incomes who have to apply for National Assistance in order to avoid grave hardship; and urges Her Majesty's Government to increase the level of such pensions and incomes wherever possible, and, at the same time, to safeguard and enhance their value by making every effort to reduce the cost of living."
That motion was adopted. The debate was a very interesting one. Many points were put from this side and points were put from the Government side, but, at the end of the debate, the Parliamentary Secretary of the Ministry of Pensions and National Insurance accepted the Motion. I want to ask whoever replies to this debate, whether today or on Monday, how far and to what extent have the Government gone to implement the promise made. We do not see any evidence of that in the Budget. We have not heard much evidence from the Financial Secretary to the Treasury.

It was not only that Motion which caused me concern. I have been concerned down the months right away from the commencement of 1953, when we were all brought face to face with extreme hardship. Not only right hon. and hon. Members on this side of the Committee but right hon. and hon. Members on the other side have been repeatedly asked to give an explanation why the hardships experienced by old-age pensioners have not been relieved.

We have not fobbed them off. I know that there has been a degree of honesty in the statements made from time to time by right hon. and hon. Members opposite. I think that they were honest words of the right hon. Gentleman the Minister of Pensions and National Insurance, whom I am glad to see in his place, when he made a statement, according to a Press report, when speaking to a meeting some five or six weeks ago in which he expressed these words—if he was quoted wrongly, then I am reporting what he said wrongly to this House—
"It would be the duty of the Government to raise the pensions to the same spending value as they were in 1946."

It appears that someone has seen the same thing. How far do we see that promise being fulfilled? I cannot find anything in the Budget, and I cannot find any indication that even now or in the near future that promise will be honoured. The Scriptures have been quoted from time to time. I want to remind the right hon. Gentleman, for whom I have a great regard and respect, of the words in the Book of Ecclesiastes:

"Better is it that thou shouldest not vow, than that thou shouldest vow and not pay."
It is better for the right hon. Gentleman to say, "It cannot be done" rather than to fill the breasts of the old-age pensioners with false hopes. I would much prefer him to do that.

What is the evidence? I know that the right hon. Gentleman will pardon me, because he has heard me say this before in his office when I led a deputation to wait upon him. What is the evidence we have to support our contentions and the claims that we are putting forward that the old-age pensioners today are worse off than they were in 1951?

I go to the statistical returns of the right hon. Gentleman's Department. What did we find on 27th March, 1951. There were 1,383,734 people who had to seek relief from the National Assistance Board. I do not propose to give the quarterly returns, but I have examined the latest returns which I have been able to get, and on 23rd February, 1954—that is not very long ago—that figure had gone up to 1,799,639, almost 400,000 more old people now going to the National Assistance Board than hitherto. There is evidence which cannot be challenged, because when one goes to the National Assistance Board one has to prove need or one does not get any brass, as we say in Lancashire.

Everyone here knows the scrutiny which takes place, and I am not complaining about it; that is the administrative machine, and inquiries have to be made into all these things in order to prove to the powers that be that the officials have not exceeded the regulations governing the job which they occupy. But this is a staggering state of affairs, and I know that the right hon. Gentleman, when I met him with a deputation some time ago, said, "I am disturbed." He is disturbed, his Department is disturbed, and naturally we on this side of the Committee are disturbed.

What is the position of the non-contributory old-age pensioners who naturally are the better off of the two? Eight per cent, of them have to make application for National Assistance, and of those on retirement pensions, contributory pensions, 51 per cent, have to seek assistance from the National Assistance Board. The total percentage of people now in receipt of contributory pensions and non-contributory pensions who have to seek assistance from the National Assistance Board is 65 per cent, of an aggregate of 4½ million people.

Therefore, I say that wherever we look and from whatever angle we approach this question we bump up against the undeniable fact that the poor people are poorer today than what they were in 1951. The responsibility for that is upon us— not so much upon this side of the Committee as upon the other side. There is a great human responsibility resting upon every Member of this House, whatever his political philosophy may be. From whatever angle he approaches this question, it comes back to him that "I am as an individual responsible for doing something to help the poor people of this country." I plead with the Economic Secretary, if pleading is of any use—and I think it is—to weaken the heart-string a little bit; just to knock at the Treasury door and to see whether he cannot persuade them to alleviate the sufferings of these people.

We all welcome the Chancellor's statement that there has been increased productivity. Who are the people responsible for this increased productivity? From whence came they? The men and women in industry, whether in mines, mills or steel works, are the sons and daughters, the grandsons and granddaughters, of the people on whose behalf we are pleading. It is they who brought these men and women into the world and trained them. They made huge sacrifices in order that their children would be of benefit to the nation. Having done that, they are entitled to some consideration from the national Exchequer in the form of increased pensions.

I have no desire to speak about the cost of living. When I entered the Chamber this afternoon, I wished to speak about the cost of food, but that has been done admirably by my hon. Friend the Member for Coatbridge and Airdrie (Mrs. Mann) and other hon. Members. What we have to face is a great human issue. I have never under-estimated the problem which confronts the Government regarding the old people, neither would I underestimate it if my own party were in office.

The problem is great, but we ought to have the courage to face it. We have faced many problems in days gone by and we shall have many to face in future, but no greater problem now faces the country than the need of the old folks, who by their devotion, courage and sacrifices have given all that they could to the country, both in service and in £ s, d. Is it too much to ask that, as these people are travelling towards the western shore of life, as they are travelling towards the end of their time, their old age should be made as comfortable as possible?

I repeat, as I said on 19th March, that to me, life is a wonderful thing. It is wonderful to live, to stand on this fair earth beneath the radiant heaven, possessed of the gift of human life, with its great possibilities, lofty ideals and noble aspirations, which are that all men and women who have given of their best to industry and commerce shall have an opportunity to live the highest attainable life in mind, body and spirit, which they cannot do unless their economic conditions are raised to the highest possible standard. We should not be true to ourselves as Britishers if we allowed these present conditions to continue one day longer than they ought.

6.54 p.m.

The hon. Member for Ince (Mr. T. Brown) has put the case for the old people with great charm and sincerity. I listened to him with the greatest possible interest, but I take exception to the fact that he began his speech by calling the Budget a "skinflint" Budget. If a man gives little away because he has nothingg at all to give away, can he be called a skinflint? I do not think so.

The key to the situation, to the cost of living and to the value of the pensions of old people, is to be found in the question of production. The problems of the old people can be solved not by them or by any Government, but only by those of us who are young and active enough to work and who are able to increase the goods and services which the old people must have.

I do not understand why there should be any shaking of heads about that. How the position of the old people, who are too old themselves to produce goods and services, can be improved without the services of the people who can produce them, I do not know, and I do not think anyone else knows.

I think the hon. Member would agree that more of the wealth produced by the young people would be available for the old people if a few of those who perform a very small function did not take so much.

More would be available for everyone if the young people all produced more. I remind the hon. Member that in 20 years' time the situation will be very serious, because there will be a much smaller number of young people available to support a far larger number of old people. The trifling number of friends of the right hon. Member for Leeds, South (Mr. Gaitskell) with an unearned income of £100,000 a year, as quoted in last year's Budget debate, have not the slightest effect on the wealth that is produced for the old people.

There has been some difference of opinion running throughout the debate as to whether the policies adopted last year by my right hon. Friend the Chancellor of the Exchequer were responsible for the increase in production which took place in 1953. The fact is, as my right hon. Friend the Financial Secretary to the Treasury pointed out, that my right hon. Friend, in his Budget speech last year, quite clearly anticipated the rise in production which followed. The right hon. Member for Leeds, South, on the other hand, was entirely wrong on his prophecy; and the Committee may, perhaps, be forgiven in future for placing a little less reliance on the prophecies of the right hon. Member than some people have done in the past.

Not merely has production gone up by 6 per cent., but the gross national product has gone up rather more, by nearly 8 per cent., a figure which can be seen in the White Paper on National Income and Expenditure.

The hon. Member spoke about the young people who must make the productive effort. The young people made that effort last year. Why was not something done for the old people?

The first thing to do with pensions for anyone, whether old people or ex-Service men, is to make sure that the pensions granted to them by the House maintain their purchasing power. And in 1953, for the first time for 15 years, pensions have not lost in purchasing power, as they did during the six or seven years succeeding the war.

Last year I ventured upon a small prophecy, and I wish to quote from something which I said in the Budget debates:
"How are we to foster the growth of risk capital? Two things are necessary "—

Is the hon. Member aware that his right hon. Friend admitted to the National Federation of Old-Age Pensioners' Associations that the cost of food is up by about 65 per cent, since the last increase was granted?

It is within the recollection of the Committee that I said that in 1953, for the first time since the war, the purchasing power of pensions did not decline. The 65 per cent, reduction certainly did not occur last year.

Which index is the hon. Member talking about? I am hoping to catch your eye, Mr. Colegate, and I want to be able to use the right argument in reply to the hon. Member.

The main index is the Interim Index of Retail Prices, which was created by the Government supported by the hon. Member; but every other similar index, such as the Cambridge and the others, shows exactly the same trend. Those who know anything about these things—and I see two experts in the matter sitting opposite—will realise that what I have said is true. The fact is that production did increase last year, and that, I am quite certain, was the result of the policy of my right hon. Friend.

I was interrupted in the middle of my quotation. I said that two things were necessary to increase the growth of risk capital. Then I went on:
"First, it is necessary to offer a chance of an income return in the shape of dividends large enough to cover, over the years and over a variety of enterprises, the very real risk of the entire loss of the capital invested. Secondly, it is necessary to make it possible for that capital to be found at all by reducing direct taxation and thus enabling savings to take place."—[OFFICIAL REPORT, 15th April, 1953; Vol. 514, c. 263.]
Production did increase by 6 per cent., and savings increased very substantially as well, and not least small savings.

In 1953–54 there was a net increase of savings of £25 million; in 1952–53, there was a deficit of £27 million; in 1951–52, there was a small increase of £7 million; and, in 1950–51, there was an increase of £4½ million. So small savings have gone up as well as large savings.

The right hon. Gentleman the Member for Leeds, South said it was true that there had been savings, but they had not been used for the right purpose. I think that is true, and the figures show it. The key to that is to be found in the leading article in "The Times" of last Thursday, which said, among other things:
"The broad rule for promoting desirable capital expenditure is simple. Increase the rewards of success for the efficient; increase the risk of failure for the inefficient."
I believe that myself.

Does not the same apply to the worker? If increased production is wanted there must an increased incentive to the worker.

That is why my right hon. Friend, last year, made substantial Income Tax concessions. [Interruption] Does the right hon. Member for Blyth (Mr. Robens) wish to contradict anything?

The right hon. Member should recognise that what Stephen Potter would call facemanship is not a valid substitute for good argument.

More responsible Members of this Committee will recall the reductions in the rates of Income Tax and the increases in the personal allowances, the benefit of which went to the workers, to whom the hon. Member for Bristol, Central (Mr. Awbery) referred a moment ago.

Incentives are needed, and I believe myself that if more incentives had been given in this Budget, then the savings of the people would have been directed into plant and equipment which we most certainly want today. My right hon. Friend has decided, in his wisdom, that a deficiency Budget in existing circumstances, not least having regard to what is going on in the United States of America, would be unwise, so, by means of the investment allowance, which the hon. Gentleman the Member for Sowerby (Mr. Houghton) treated with some contempt, he hopes to encourage those savings into the right kind of investment.

The right hon. Gentleman the Member for Leeds, South was also rather contemptuous of the investment allowance, which surprised me very much because he wrote an article for yesterday's "Daily Herald" in which he said:
"It is necessary for them, they say,"—
"they" means us—
"to stimulate investment. Higher investment is important. But the right way to do it is by increasing the initial allowance on the purchase of equipment. This is far more likely to produce results than cuts in the Profits Tax or the standard rate."
That, by another name, and with a small mathematical adjustment, is what my right hon. Friend has done, and I am all the more surprised at the criticism of the right hon. Gentleman the Member for Leeds, South.

Some of us noticed what the German Federal Chancellor last week did about taxation. His proposals included one whereby the maximum income taxation on the individual will be reduced from 80 per cent, to 55 per cent, and the maximum income taxation on the company reduced from 60 per cent, to 45 per cent. I wonder why he did that. I do not think there is any doubt that he made those proposals to encourage enterprise, to stimulate capital re-equipment, and to enable German industry to canter round the export markets of the world with their backs lightly burdened with taxation. The lightening of our tax burdens is essential if we are to compete in these same markets, and I am not at all sure that we are helped at present by existing Income Tax regulations.

I should like to mention the tightening up of the taxation allowances on the foreign travel expenses of British sales representatives. It is no encouragement whatsoever to a sales representative, be he an employee or a director, to know that as he fights for exports in the markets of the world to help our balance of payments, the inspector of taxes at home, far from trying to help him, is waiting for his return to screw an extra £1 out of him on what he calls reciprocal entertainment or on the amount of money he is supposed to have saved while abroad through not living at home.

Those of us who have had to go on journeys of that kind have been entertained in these foreign countries in the most lavish fashion, and the hospitality shown to us is very generous indeed. We know very well that the hospitality does not come directly out of the pockets of our hosts, but is paid by the organisations of which they are members. Those organisations charge these expenses for taxation purposes. It does not help our export trade in any shape or form when we try to return that hospitality in similar fashion and are limited by the knowledge that a large part of that entertainment may have to come out of our own pockets and cannot be charged for tax purposes.

Does the hon. Gentleman suggest that to increase the profits to employers the workers should produce an extra £100 million a year, and that if that is done we shall be in exactly the same position as we are now?

Not if the sales representatives do not sell the output of the workers in the foreign markets of the world. It is no use producing goods if they cannot be sold. If the hon. Gentleman had been in trade himself he would know that.

High taxation direct and indirect, has been with us too long, and I wonder sometimes whether we are not losing a sense of values. Thrift used to be rather old-fashioned, but in the last year it has become less so. I hope the trend will go on, but, at the same time, it is true to say that there are many instances of boys just leaving school who prefer an immediate high wage at a unskilled job to qualification for skilled work by apprenticeship.

I read a very interesting article called "Wealth and Education" which I commend to hon. Members. It is by Mr. Colin Clark, who used to be a friend of hon. Members opposite. Judging by the conversations I have had with some of them in the last two or three days, they are now inclined to disown him, but he certainly is a man of very original thought, and I believe that a study of his pamphlet would be well worth while.

He suggests, for example—and this, of course, is very old-fashioned—that it is the primary duty of parents to educate their children if they can afford so to do. He also suggests that it is the primary duty of people, if they can, to provide for sickness, old age and unemployment, and he puts forward methods whereby he thinks the State could make it possible for them to do so.

We may not agree with all the arguments of Colin Clark but I believe that, fundamentally, there is something in what he says. High taxation has taken from many of us in all income groups and in all ranks of society a sense of self-reliance and independence which is a great virtue and which I should like to see return.

Owing to the interruptions from the other side of the Committee, which I welcomed, I have taken longer than I had intended. I shall conclude by saying that there is not the slightest doubt but that the policies of the Chancellor are encouraging savings, without which adequate replacements of plant and machinery would not be possible. The investment allowance will tend to steer those savings into investment in modern plant and machinery—

I have been struck by the emphasis which the hon. Gentleman has placed on thrift. How does he reconcile the tremendous need for saving when his own Government are providing £750,000 a year to set up advertising stations to try to get people to consume more?

I said only a few minutes ago that it is futile to produce goods if there is no one to consume them. I want to see more goods produced and consumed because it would be futile to produce large quantities of goods and then make sure that nobody was able to consume them.

I am grateful for the recognition which my right hon. Friend has given to the need for some amelioration of the hardship of Estate Duty on private companies. It is not only the bosses who have been looking for that. Many workers in private companies have told me that they regretted the fact that, when the boss has died, the family has had to sell the business, because they have suffered from the loss of the personal touch.

I am glad that my right hon. Friend has made a substantial move—£19 million is substantial—in the speeding up of the payment of post-war credits, but I regret that no assistance has been given to the merchant because we are essentially a merchanting country. The merchant has to carry bigger stocks because of his entrepreneur trade, and he will get no benefit from the initial allowance or from the investment allowance although he needs greater assistance in this way.

I regret, too, that no assistance has been given to the professional man—I plead guilty to being one—because occasionally engineers, lawyers and accountants provide useful service to the community. I am sorry that the recommendation of the second Millard Tucker Committee came too late. I should have welcomed an indication from the Chancellor that he looked with a friendly eye at that recommendation, but we have had no such comfort.

This is a carry-on Budget. A period of consolidation is necessary, but the burden of taxation is too high and has been so for too long in peace-time. I hope profoundly that a substantial reduction of Government expediture will enable taxation to be decreased next year because, without a reduction our industrial system will be unable to carry on much longer.

7.14 p.m.

I am glad to have the opportunity of following the hon. Gentleman the Member for Langstone (Mr. Stevens). He has spoken as a good Tory ought to speak, by defending merchants and bankers and by being sorry that the Tucker Committee's Report has not been accepted. But the hon. Gentleman did not mention the people who are really in need and, when asked about the old-age pensioners, he pointed out that the old-age pensioners can only get what the young people produce. Although production has gone up, he found a reason why the old-age pensioners should not get anything, namely, because they did well last year and because the purchasing power of the pound was held.

I should like to be at the meeting in his constituency when he tells these people how well off they are. It should be an interesting meeting.

I shall be content as long as the hon. Gentleman will allow me to make my speech and does not try to make it for me.

I suggest it would be better for the hon. Gentleman if I made it for him. The late Sir Stafford Cripps used to be described as "Austerity Cripps." I think this Chancellor will be described as "Drab Butler." Of all the shocking Budgets, this is it. It is a miserable, mean Budget—very much like the average Tory in my view—miserable, mean, in the sense that it has not done anything for the people of this country. When I say people, I mean the vast masses who had a right to expect something on the Chancellor's own statement.

Yesterday the right hon. Gentleman took us on a wonderful voyage. In fact when he talked about rough waters I was almost seasick. Then he said that the ship of State was in calm waters and said how well we had done in the previous year. The right hon. Gentleman talked about our gold and dollar reserves being so much better than they had been for a long time and went on to make one important remark which I hope all Conservatives heard and will repeat on public platforms. The Chancellor said that the terms of trade last year were considerably in our favour. In other words, this Government had come into calm waters and had enjoyed an extremely prosperous year through circumstances over which they had no control, the like of which the Labour Government throughout its entire term of office had never once enjoyed. For example, the Chancellor said that we had purchased 9 per cent, more for 4 per cent. less.

My right hon. Friend the Member for Bishop Auckland (Mr. Dalton) was accused once of having a song in his heart. At any rate, he put up a much better show than the present Chancellor has done and my right hon. Friend had not the advantage of the figures available to this Chancellor. In view of the fact that this Government had a great deal of luck last year, I should have thought that they would have paid attention to the people who need the most help. In my constituency there is a population of 60,000, 11,500 of them being of pensionable age. My hon. Friend the Member for Coatbridge and Airdrie (Mrs. Mann) said that people went to bed last night crying. I can well believe that. It is a fact that many people in my constituency have to go to the Assistance Board to get a chit in order to have their shoes repaired.

This is a carry-on Budget. Are the Government going to tell the old age pensioners in my constituency that they must carry on? After having told a wonderful story about the great efforts of this Government, admitting on the side that much of the results were not due to their own efforts, the Chancellor ended by saying that there was nothing for such people. This position cannot remain. We do not need a committee to report on these people, because their case has already been advanced to the Treasury. Therefore, the first and most important thing we have to say on this miserable, mean Budget is that nothing has been done for the old-age pensioners and their hardship will grow greater.

What kind of people are they that the Chancellor has ignored? Because they have suffered so much in the past 40 or 50 years, we have a special duty towards them. The Tory Party have inflicted great hardship upon these old-age pensioners and the worst of private enter- prise has been applied to them. Seventy to 80 hours a week were worked in my constituency in their young days and the industries were regarded as sweat shops. Everyone knows what kind of industry the dockers were engaged in until we had men like Ernest Bevin in this Chamber to do so much for them.

Those people made sacrifices in the past and now they are pensioners with no money coming in from their late employers. They are the people whom the Chancellor now treats with contempt. I know that the Economic Secretary to the Treasury will make one of his brainy speeches and confuse the Committee with figures and assure us that everything is all right, including the condition of the old age pensioners, but there is great un-happiness among those people and something must be done for them. They will not take things lying down if we neglect to meet their needs.

I predicted in my constituency, as I am sure other hon. Members did in theirs, that this Tory Government would certainly see that these people received some help because it was inevitable. The Minister of Pensions and National Insurance said the other day that in his opinion pensions ought to be raised to secure a 1948 spending value, but the Government have completely ignored the subject. The annoying feature of the Budget is the manner in which the Government have ignored these claims whilst they can be so ruthless in connection with other Government spending. I am associated with the National Health Service through membership of hospital committees and I find that the Government are very tough about hospital expenditure.

We find that the Treasury is ruthless in many ways. It gave a sum of £ x to the Minister of Health and the Minister has told every regional board in the country that its estimates have been cut by a fixed sum. In. our case our estimate was cut by £650,000. It was a completely arbitrary cut and we had to find ways and means to maintain our service on a very much reduced figure. No doubt the Economic Secretary to the Treasury will prove that the National Health Service has been given more money this year than last year, but the figures submitted were based on the rising costs of last year. Those figures have been cut and it is a fact that in the National Health Service our greatest problem will be to maintain what we already have.

In a constituency like mine, in which a fifth of the population are old-age pensioners, we have the problem of the chronic and aged sick. It was our hope and prayer that we would be given extra money out of this Budget to open up wards which were needed to cater for these people. That work is part of the social service, but we cannot do it. We shall have to fight for our lives for what we already have and we may well have to close down some of the existing wards. The Chancellor ought to have looked at this problem as a whole.

The problem of aged people is a national problem, and I believe that some Chancellor in the not-too-distant future must consider it. One of the best ways of dealing with the problem is to give special grants to local authorities so that they can tackle the difficulties in their own areas. As the hon. Member for Langstone said, this is a recurring social problem which will worsen as the years go by and one on which, in the long term, we can save money if money is wisely spent now. Many of the voluntary services are failing because they have to rely on voluntary effort and moneys. It should be the responsibility of the State to give local authorities money to do a useful job of work. On that score alone this Budget has been a cause of disappointment and unhappiness for many people.

I want to mention one subject which it may be argued would be better dealt with on the Committee stage of the Finance Bill. Indeed, it will be adequately debated then. One of the few concessions that we have received from the Chancellor relates to Entertainments Duty on football matches. I understand that it means that if a football club has a gate of 12,000 the club will benefit by £25, or £575 over a season of 23 matches, at home. That is really an insult to the clubs, many of which are in tremendous difficulties.

If the hon. Member studies the balance sheets of many of the small clubs, he will find that £500 will make all the difference between profit and loss.

I can only speak from experience. I am referring to the professional club and to it £500 represents only a few weeks' wages. That is an insult to people whom I thought had made a fair claim on the sympathy of the Chancellor. Indeed this whole system of discrimination in this matter is deplorable. Why should it be thought that cricket, tennis and rugby should be free of this taxation and not football? I am certain that on the Committee stage this subject will be thoroughly discussed.

I have tried to explain what has happened in relation to the National Health Service, how we have had an arbitrary cut and have been told, "That is all the money that you will get and within that figure you must operate." We shall not be able to open much-needed wards, although we have proved our case to the Ministry and to the regional boards, who have said that they are sorry but that we must work within these limits. Is that done in connection with defence? Hon. Members opposite are always asking how we can save money. I am sure there is no one who has served six years in the Army who does not know of the waste of money that goes on in the Services all the time. I argued during the debate on the Army Estimates for a Geddes Axe on the Army. That was a scandalous remark to make to many of the types opposite. [HON. MEMBERS: "No."] Yes it was. I was so interrupted by the hon. and gallant Member for the Isle of Ely (Major Legge-Bourke) and he was horrified.

I believe that the time has come when this Government should do all that they possibly can to ensure a complete and thorough review of the whole of the Armed Forces. I am happy about my party's policy on defence. When we get back into power we shall most certainly reduce expenditure on defence. Let hon. Members opposite make no mistake about it, we shall slash it considerably. We are committed to a reduction in the period of conscription for a start. There is waste of time in the Territorial Army, with its fortnight in camp. All this rotten nonsense and the way in which money is found for unnecessary things in the Services is deplorable. Yet when it comes to old-age pensioners and people of that kind, the Chancellor can do nothing for them. It is said that this Budget will not be an election Budget. I can well understand that, because if there were to be an election now or in the immediate future, one good thing that would come out of it would be that we should not have the party opposite sitting on that side of the Committee.

7.30 p.m.

The hon. Member for Bermondsey (Mr. Mellish) has certainly put his case with sincerity. I think there is no one, in any part of the Committee, who would not like to help old-age pensioners and many ether deserving sections of the community if the money were there with which to help them. But the difficulty which hon. Members opposite do not seem to face is that if more money is to be found it either means that additional taxes would have to be raised, or my right hon. Friend would have to budget for a deficit.

It is very important that hon. Members opposite should tell us which of those two alternatives they wish to adopt. If they suggest that taxation should have been increased, let them say so. If, on the other hand, they suggest that my right hon. Friend should have budgeted for a deficit, that would have done more damage to the old-age pensioners and the community as a whole than any other suggestion which could have been made.

My hon. Friend the Member for Bermondsey (Mr. Mellish) explained where the money could be obtained. It is not necessary to decrease production to reduce expenditure. The expenditure which he suggested should be reduced is that on armaments. There we could find the money required for health services and the like.

I quite agree that we want to reduce expenditure and I shall refer to that in a few moments, but we have to be extremely careful that any reduction which takes place is not at the expense of the efficiency of the Armed Forces.

I suppose it was the duty of the right hon. Member for Leeds, South (Mr. Gaitskell) to denigrate the proposals of my right hon. Friend the Chancellor of the Exchequer. That was part of the job which fell to him, but it meant that his speech lacked the generosity one is accustomed to associate with him and it was rather foreign to his nature. His speech this afternoon did not have the generosity which was found, for example, in the speech he made, as reported in the "Bournemouth Daily Echo" of 16th February, in which he said,
"Our cost of living has gone down"
and referred to Britain's changed economic situation as having
"brought about a tremendous increase in real income."
That is the genuine and more generous right hon. Member.

Tonight, we must look at the Budget in the background against which it was framed. My right hon. Friend has been Chancellor of the Exchequer for only 30 months—the Government have been in power for only 30 months. My right hon. Friend's first Budget was dominated by the need to restore the credit of the country. We were running into debt at an alarming rate and, if we had gone on at that rate, we would have found ourselves bankrupt by August, 1952. It is all very well for hon. Members opposite to say that we were not running into debt but that it was merely "an adverse balance of payments." If I have an adverse balance of payments with my butcher, he is about as rude to me as if I am running into debt. It is a distinction without a difference.

In that first Budget, my right hon. Friend had to take drastic measures to cut imports, but, at the same time, he showed great humanity by helping those in the lower income groups. National Assistance rates were increased by 17 per cent., widows' pensions, sickness benefits, retirement pensions all went up by 25 per cent., industrial insurance rates were increased by 22 per cent, and family allowances by 60 per cent. In that first Budget £228 million was left in the pockets of the taxpayer by tax concessions, 70 per cent, of which went to families with incomes of under £15 a week. The effectiveness of that first Budget and the measures then taken were reflected in the fact that our gold and dollar reserves, which, in 1951, were draining away rapidly, have risen almost continuously, month by month, since 1952.

The second Budget of my right hon. Friend was dominated by the need to give a fillip to industry and to increase incentives. The three major items in it were (1) The restoration of initial allowances; (2) the removal of the Excess Profits Levy; and (3) 6d. off the Income Tax. The effectiveness of those measures was reflected in the fact that industrial production has broken all records. It is also a fact that today we have more -people at work than ever before in peace-time, and more overtime is being worked than ever in our history. Also — and, I believe, even more important—an American recession now, which is every bit as severe as American recessions which have knocked the finances of this country sideways before, is being weathered with comparative equanimity.

In this, his third, Budget it was most important that my right hon. Friend should not run the risk of sacrificing all the great gains that have been made by undermining the country's economy and giving away more than he has available. It is in everyone's interest—particularly in the interests of those with the least wool on their backs—that we should carry on, and push further the measures which have already proved themselves so successful. These policies should be given time to bear fruit and improve still further our competitive power, which is vital under the more difficult trading conditions we face today in foreign markets.

It takes great courage on the part of a Chancellor of the Exchequer, when there is nothing spectacular to do, to resist the temptation to play to the gallery. I believe that the country has every cause to be thankful indeed that we have a Chancellor who has that courage and that integrity which we have always known he possessed. It is a good thing for this country that our Chancellor has resisted that temptation.

I should like to reinforce the plea which was made by my right hon. Friend the Member for Blackburn, West (Mr. Assheton) for a thorough review of the mechanics of controlling Government expenditure. I believe that the key to the future, and the secret of how to give ourselves more room in which to manoeuvre, lies in a reduction of public spending. We have to employ the months ahead in reviewing public expenditure and seeing whether there is not some way in which waste can be cut out. We must cut the frills without in any way damaging the essentials.

Will the hon. Member tell us now where his party intend to cut expenditure? If it is only where there is waste, we shall agree, but if he will tell us what services are to be cut we shall be very thankful.

If the hon. Member had been here he would have heard my right hon. Friend the Member for Blackburn, West, who was very explicit on the point. I commend to the hon. Member the speech of my right hon. Friend, which he may read in HANSARD.

One of the most valuable new items in the Budget is the investment allowance, which will assist substantially in improving our competitive power. In 1951—and I have no reason to think that the situation has changed very much since—the American workman had two-and-a-half times as much capital equipment, tools, and factory space as the British worker. The investment allowance will help very greatly to right that disparity between the resources behind the American worker and those behind the worker in this country.

When the time comes when the Chancellor has more manoeuvring room, and there is a possibility of a relaxation, I feel that special attention should be paid to the problem of reducing direct taxation, the burden of which is so heavy and has been referred to so frequently by Members on both sides of the Committee. Direct taxation particularly is a deterrent to work in a way that some of the other taxes—

—are not. I remind my right hon. Friend that Purchase Tax has already been reduced by 25 per cent.—in the last Budget—and we look forward to the day when the balance can be evened up, and income tax can also be reduced by a corresponding amount.

I wish to say a few words about Purchase Tax, because its effect on industry has been recognised by my right hon. Friend the Chancellor as creating an ebb and flow in the demand for goods to which it applies. There is a danger of industry being brought to a temporary standstill because of a possible Budget change in the rate of Purchase Tax. That danger was avoided this year by the Chancellor making a statement in good time that there was to be no change in Purchase Tax. One wonders, however, whether, next year, there may possibly be a slowing up of industrial production immediately before the time of year at which my right hon. Friend made his statement this year.

It would be of immense help to the country if an official policy statement could be made that in future Purchase Tax announcements will come "out of the blue," so to speak, and will not be related to any particular period of the year. It is important, of course, that any Purchase Tax changes should be made at a time when industry is at its lowest ebb. That varies from trade to trade, and it may well be that throughout the year announcements of Purchase Tax changes can be made without any relation to specific periods of time. This will prevent that slowing up of industry which is so damaging.

I now turn to post-war credits. I am grateful for the announcement which my right hon. Friend made in his Budget speech that post-war credits are to be repaid to people aged 60 and 65—

—to the estates of people aged 60 and 65. But I should like to ask the Chancellor why, having taken that step, which costs exactly the same as the scheme which I have for some time been urging upon him, he cannot take the further step of endorsing post-war credits with the date at which their owner becomes 60 or 65 years old promising to redeem on that date so that they become negotiable. Then those post-war credits, in the hands of people who are in financial difficulties can be realised. Such a step would go a long way, at no further cost than what has been conceded by the Chancellor, to help people who are in financial difficulties.

I conclude by congratulating my right hon. Friend most warmly on a courageous and far-seeing Budget.

7.44 p.m.

I wish to discuss the Budget in a different way from that which has so far been followed. The whole theme of the Government, in my judgment, is that one vital and, in their opinion, the most fundamental considerations, not only on this occasion, but in the past, is that they must above all else encourage investment. While they are doing that with such emphasis, they are at the same time trying with all their might to discourage the ordinary worker from any idea of making any special effort to improve his economic position.

The chief fact last year, as has been noted by many other hon. Members, so far as the economic improvement of the nations is concerned, has been that importers of goods to this country have been prepared to sell us commodities which cost a pound at the rate of 17s. 6d. That has been a tremendous advantage which, as has already been pointed out, has not been a result of any Government action but has been one of the passing results of the world situation.

When the House was debating our economic position, on 11th February, the Chancellor attempted once again to emphasise the position of the country and the fact that, whatever the workers did, this was a time when they should not in any circumstances press for wage increases unless they could show that they had increased their production. In doing so, he gave statistics which indicated that from 1948 to 1952 the workers had obtained wage improvements to the extent of 30 per cent. When the Chancellor turned to the question of dividends, he said that these had increased not by 30 per cent, but by 23 per cent., and then, once again to impress the working people of the country, he said that if the capital employed in industry were taken into consideration the percentage was not 23 but only 3·1.

It is a remarkable picture to put before the working people that the big business men, upon whom we are dependent to ensure our economic well-being, are so patriotic as to be prepared to invest their capital for a return which is practically only what the ordinary person gets for the money he puts in the Post Office Savings Bank—2½ or 3 per cent. If that is so, it is remarkable to me. As a matter of fact, I do not believe it, and nor does anyone else who has looked into this question.

No, let me have a chance to explain what I mean.

It is ridiculous to think that business men, with all their financial knowledge, invest their money and get a return on their capital of only 3·1 per cent. The right hon. Gentleman quoted other figures which I have examined and I have also examined the statistical records of the Government. Like many other hon. Members in this Committee, I do not know very much about finance, but I have looked at the statistics published by the Government. I found that from 1948 to 1951 profits increased by 39 per cent. Company trading profits went from £1,814 million in 1948 to £2,534 million in 1951. In other words, profits increased by 39 per cent. From 1948 to 1952 trading profits increased by 29·5 per cent., from £1,814 to £2,350 million.

The difficulty of the hon. Member for Wallsend (Mr. McKay) is that he is not now talking about the capital employed, which was what he was discussing originally. Now he has gone off on a different tack. The capital employed has increased considerably in the meanwhile.

Yes, I will deal with that later. The point is that these are the trading profits, but until—

They are trading profits, and whatever we may say about it, the point is that it is comparing like with like. If the trading profits in one given year are a certain figure, and five years after they are 50 per cent, more, it cannot be denied that that is 50 per cent, more trading profit. On the Government's own statistical record, trading profits in 1952 had increased by 39 per cent, compared with 1948.

These facts cannot be obtained from a study of one item. One of the difficulties confronting a layman who attempts to understand finance is that he has not all the details to enable him to analyse the figures. He simply has the items mentioned in the statistical record. I have obtained the details of about 100 industrial concerns which provide me with all the items that matter. According to the details which I have in my possession, the net worth in 1949 was £311 million. In 1953 the figure was £570 million, an increase of 66 per cent.

One cannot take the figure of earnings before extracting the tax, because that tax must be paid and must therefore be allowed for. Before deducting tax the earnings on those same companies, on the issued capital, were £69 million. In 1953 the figure was £126 million, or an increase of 82 per cent. From 1949, after paying tax, it was £29 million, and in 1952 it was £48 million, an increase of 65 per cent. In 1949 earnings were £29 million and in 1953 equalled £45 million, making 55 per cent.

The Chancellor told us that dividends had risen by only 23 per cent, compared with a rise in wages of 30 per cent. The dividend figure for all these companies in 1949 was £8,612 million and in 1953 it was £12,643 million, making 46 per cent, rise in actual money. In other words, the rise in total dividends amounted to 46·5 per cent.

It may be asked, "How can you compare that with wages?" Well, to start with, a man has to live. The cost of living goes up and the 30 per cent, increase in wages meets only his actual needs. When we are comparing that with dividends, surely we have to take a given industry. The dividends may be the same in percentage over the five years, but the total amount of money is not the same. Hon. Members will say that the dividend increase was on increased capital and was needed, but if I am running an industry and in five years I secure a 46 per cent, rise in money, I consider that I am 46 per cent, better off, call it what you like. The worker takes his wages over the five years and finds he gets 46 per cent, more money and he will admit it. The same applies to dividends for a given company.

Where has the increase come from? It appears that a large amount of it has come from profit. It has not come from the businessman's pocket, but has been put aside out of profit, which is quite a different thing. Thus, one is getting from the industry 46 per cent, instead of the amount that one used to get.

The dividend for the five years represents 8 to 9 per cent, on increased capital issue. Earnings on the issued capital averaged 36 per cent. The earnings on net worth averaged 10 per cent., and the dividends on net worth were 2·6 per cent, which corresponds with the Chancellor's figures. Consequently, the divi- dend on the capital employed was 2.6 per cent. But dividend in these 100 companies was only one quarter of the profit.

But the dividend is not what matters in industry. The man who is investing his capital wants to know what his profit is, and over all these industries the profit averages 10 per cent, after taxation has been paid. Over the five years the dividend has averaged one-quarter of the profit. Where does the remaining three-quarters go? It goes to the bank, is distributed privately or is disposed of in some other way; it is largely put to reserve. What is "reserve"? It is another name for part of the profit. The company decides how it will use that portion of the profit, whether it will employ it as capital in its industry or otherwise. Whatever happens, it is profit just the same.

In relation to these figures, it has been impressed upon the people, particularly the workers, that the capital was only 3·1 per cent. On the face of it, one disbelieves that. The instances which I have given from industry prove that the figures are entirely wrong. During the five years the net worth of the industry increased by 66 per cent.; the earnings before tax were 82 per cent.; the three-year earnings after payment of tax were 65 per cent., which was the best result of all; the earnings after payment of tax for four years were 55 per cent.; and for the four years the dividend is not 2·6 per cent, comparing one year with another, but a total of 46 per cent, in money value.

I see the Financial Secretary smiling. He smiles because he knows that this is a difficult subject, and even when he deals with it he is sometimes in doubt as to whether he is right or wrong, and so is the Chancellor. I am giving these figures for a certain purpose. The Government have been trying to restrain the workers from seeking higher wages in order to meet the more difficult economic conditions. The Government are satisfied so long as the workers have wages adequate to maintain them at the same economic level as in the past.

What a different attitude there is on the part of the Tory Government when they are concerned with business. Their attitude since they took office has been to help industry, their view being that to the extent to which they help industry they are helping the country at large, including the ordinary workers. No emphasis is laid upon the need to reduce the prices of commodities because industry is making too much profit. The Conservative Government represent big business and are out for profit; they are never satisfied with the profit that they make but always want more. It is only by applying pressure that the organised workers can get what they are entitled to.

What is the attitude of the Government towards the workers in one of our most vital industries? Everything indicates that the profits of the industry have risen tremendously. Yet when the workers claim an increase, not to lift their standard of living above what it has previously been but merely to enable them to maintain their standard. Industry's attitude is that their claim cannot be considered and that the increase cannot be given. Only after the application of pressure and following investigation do Industry agree that an increase can be given. Pressure is the only thing which industrial companies take note of. If there had not been pressure by the workers, they would never have attained the standard which they have today.

Before the General Election the Tory Party promised to tax excessive profits which were being made during the country's great economic trial. The Government taxed the excess profits for a year and then freed them. My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) said that the Excess Profits Tax would have brought in £340 million per year if it had continued. Why do even some Opposition hon. Members feel that it is not a good tax and that it is just as well that it should be abolished? The argument is that the people concerned have not the incentive which they ought to have and that continuance of the tax was killing incentive.

That was the attitude, and therefore the Government decided to abolish the tax. In other words, they threw away £340 million, and, if we ask them why, they tell us that this tax was stopping incentive. What do we find in reality? In the very year when the Excess Profits Tax was last operating, there was 6 per cent, more production. This tax was abolished at the very time when we produced 6 per cent, more wealth. It is a contradiction of the reason the Government introduced the tax in the first case, and, instead of proving that the tax operated against incentives, the facts show that the industries produced this extra wealth.

Last year's figures indicated that there was not very much investment by private industries, and the question arose of giving industry more encouragement. The Government decided that they would try the investment allowance, but again the implication is that the people who have the wealth and who are now operating industry will not invest their money in industry in order to produce more goods or even to get more modernised machinery.

We have been told that there was any amount of money to invest in capital goods, but the people were not using it for that purpose, and the implication really is that they were not prepared to use it because they were doing all right and needed no more incentive than there was already. We are now to give them an investment allowance, but, as far as I understand the matter, there is no question of giving this allowance only to industries which are badly off.

We used to be told, when we were talking about the food subsidies, that the big difficulty about the subsidies was that a large proportion of the people who gained advantage from them were people who did not really need them. We are now told that, in reality, if a shipowner builds a ship costing £1 million, the advantage to that shipowner by this new system of investment allowance will actually be £100,000 for that one ship, and that is the amount of money which we are to give the shipowner by means of this investment allowance, according to the Press—or at least relieve him of £100,000 in taxation. I cannot say whether it is right or wrong but the reputation of the Press is at stake.

What I want to ask is whether it is correct to say that the argument which used to be applied to the food subsidies —that people who did not require them would derive an advantage from them— will also apply in the case of the investment allowance. Is it correct that there is no condition attaching to this allowance that the only people who will receive the benefit of it are the people who actually need it, and who will not invest in new capital goods unless they receive this help? I understand that no condition of that kind is made, and that means that a company with any amount of money, which is able to invest as much as it wants from its own funds, will get the advantage of this investment allowance. I say that the arguments that were used against the food subsidies can equally well be used with regard to this investment allowance. Is that right or is it wrong? Perhaps the Financial Secretary will answer?

The hon. Member has answered my question, but whether his answer is right or wrong I do not know; I still believe all industries and companies will get this benefit within the industries where it applies.

I believe that the Government are biased in one direction; I am biased in another direction. What they have done is the result of being a biased section of the community, because they are interested in finance and in big business, and in so far as they encourage and help big business, they are satisfied that they are doing the right thing. When it comes to ordinary workers, it is a different matter.

The Government produce plans and figures trying to defend capitalists in industry who are making large profits, while at the same time telling the workers that they must be careful not to ask for any extra wages unless they have produced more wealth. I take things differently. I think there are any amount of ways and means, if the spirit exists, whereby we could help the workers in industry, the aged people, the men who have been disabled in industry and the sick, and do it more quickly than the Government are doing it now, even though they may do it next year, if only for the sake of an election programme.

In the case of the disabled, the aged and the sick people, there is no question at all of their disability and their weakness, and nobody will convince me that at the present time there is not the opportunity, if there were the willingness, to help these people through this year. The Government can abolish a tax which was worth £340 million a year, and yet do nothing for these poor people.

Whatever else may be said, I am watching the interests, not only of the old people, but of the people who are injured in industry and those who are in receipt of war pensions, who are now agitating for a great advance, to which they have a genuine right. I told the British Legion the same thing the other day, and I said that this question of making a difference between pensions for Army service and pensions for those disabled in industry needs to be rectified. They should be put together on the same basis.

My old father used to say that the fat old pig is always greased. I have never seen the point better expressed since I came to the House of Commons. The fat old pig is always greased, always has been and it looks as if it always will be. My desire is to see that the poor old people on pensions, the stricken men and women of industry, should not be second but should be our first consideration.

8.20 p.m.

I hope that the hon. Member for Wallsend (Mr. McKay) will forgive me if I do not follow him in the whole of his argument. I am afraid that my knowledge of statistics would preclude me from giving any satisfactory answer to most of the statements he made. I am sure that nobody doubts the sincerity with which he has emphasised his point of view.

I wish to pay my tribute to the Chancellor for producing, not a spectacular, but a safe Budget. I happen to be in industry in a considerable way, and I am one of the people who are gravely alarmed about the future. I see abroad tremendous steps to deprive us of a large portion of the export trade that we now enjoy. I have seen prices quoted for engineering commodities in the past few months which, if I were to reveal them to the Committee, would stagger many hon. Members when they realised how much this puts in jeopardy the workers and our industry generally.

I am also perturbed that we are relying so much on manufactured commodities and that we have so few of the primary commodities which are in world-wide demand to offer on the markets of the world. This is a very serious factor. This is no party matter; it is one for us all as a Council of State to deliberate on to see how we can secure a greater share of the world's markets to increase the national turnover. I defy any Government, whether Labour, Tory or Liberal, to carry the tremendous social services that we render unless we have an opportunity to increase national turnover on a very considerable scale. We cannot elevate prices. We shall find that we have to reduce export prices over the next year or two to secure the advantages that we want in order to keep our factories busy.

I want to speak about an industry of which I have a certain knowledge and which I think can make a real contribution to further turnover. I refer to the constructional industry. I have had the privilege of being chairman of the export group for the constructional industry of Great Britain for the past two years. It is a large group of industries which is doing great work all over the Commonwealth and the rest of the world.

I want to give one or two examples of our difficulty. The firm of Dorman Long, which is one of our members, tendered for and secured the New Zealand Auckland bridge contract a year ago. It was a £6 million contract. They came to this country to see if they could raise the money to finance this undertaking, and it was not possible to raise the money until this year. All the time—and we owe a great debt to Mr. Holland, the Prime Minister of New Zealand—the pressure of the Americans to do the job was tremendous. Fortunately, this year, because of our better financial condition, it was possible to raise the New Zealand loan, and the firm is on the job now.

This shows some of the difficulties with which we have to contend. We have also had to contend with other countries taking an unfair advantage in the constructional market.

I am especially interested in the products of Dorman Long and those who produce them. Will the hon. Member agree that if the Government put Dorman Long on the market, that will cause a situation in which Dorman Long will have to guarantee an additional 4 per cent, to those who take up the shares in the concern, and will not this increase the price of steel?

I should have to study that question before I gave an answer. I want to discuss the matter on broader lines than the issue of one nationalised firm. I also want to quote other statistics. The French Government allow constructional firms to tender in the British Commonwealth for work. Those firms are exempted from all taxation upon the profits they make in the British Commonwealth.

I did not say that we wanted that. I am trying to express some of the difficulties that British industry is up against.

There is a like situation in Germany, where even the losses on big contracts are guaranteed by the German Government against our own people. This is a very big market of at least £1,000 million a year inside the British Commonwealth. At least 30 per cent of that work has been done by the Americans since the war.

No. I am talking of places like Ceylon, India, Africa, Australia and many other countries.

I want to give some idea of the value of this great constructional work to our home industry. On every one of these big contracts 35 per cent, of the value is in plant made here and shipped to the job. That gives a direct employment value to the workers in this country. If the job is done by another country the plant comes from that country, as do all the replacements that are involved. That applies to a capital project such as the construction of a hydro-electric scheme or a railway system.

The Government should pay more and more attention to this great industry. They should help it in every way they can to secure these great jobs. In last year's Budget debate, I put forward a scheme for the capitalisation of these projects by a 1 per cent, levy on the mineral resources of the Commonwealth. I elaborated that scheme to some extent then, but I do not propose to do so now, because it would take more time than I want to occupy; but I still say that that is the best way to provide a capital investment policy which will be sound and will not burden our whole economy. I hope that my right hon. Friend will reconsider the position on these lines when he meets the other members of the British Commonwealth, and will try to bring them into line in some arrangement of this kind.

This vast capital sum of £1,000 million a year is quite incapable of being raised on the London market, or anywhere else at present, and we have to find some means of devising a financial policy which will enable us to give extended credit. We must give credit to the developing countries over a period of years if we are to secure this work. The Americans are prepared to give them 12 or even 15 years' credit, and if we do not give similar credit it is obvious that we shall not get the work.

During my chairmanship of the constructional industries, I brought about an agreement between the consulting engineers of Great Britain and the contracting industry. This is the first time an agreement have been reached whereby they can work as a team to plan, prepare and power turnkey jobs throughout the British Commonwealth. If, with the help of the Treasury, they can also do something to finance them, it will bring us a great volume of work both in relation to the plant and the staff and personnel we can send from this country to operate these schemes.

I want to see restored a spirit of adventure which will build up these Commonwealth countries which have so much to offer but are at present making a very inadequate contribution to industry. At the present moment I am concerned with work which is going on in India, Australia, Canada and Africa, so I have a fair range of experience over this field. I suggest to the Committee, in no party spirit, that Commonwealth development is the one thing which will eventually save this country, if we can only put it on a better basis.

I want to thank the Chancellor for the new investment allowance for industrial plant. It is very important. Whatever hon. Members opposite may think, industry now finds it very difficult to build up reserves to replace plant at present prices. Owing to the great amount of money that is now taken from companies in taxation, there is very little left to enable them to carry out the substantial plant replacements which are so necessary to keep them going.

I have been to Germany and seen some of the engineering plants against which we have to compete. I hope that many other hon. Members will go there, because they will be staggered to see what the Germans have been able to build up in a few years. The Americans have poured in money like water, and we shall suffer for it unless we put our own house in order. Nobody is keener than I about all forms of social welfare and benefits, but the money required for this can only come out of our industry. Unless that industry is efficient, sound, well-managed and well-run, we shall all suffer, including those people whom we are trying to help, whether they be old-age pensioners, ex-Service men or others.

I want to utter a word of warning. This year, in the industrial field abroad, we shall see startling changes which will affect our exports more than they have ever been affected since the war ended. We are no longer in a sellers' market. We are in a buyers' market, and we shall have to do everything we can to bring our goods up to standards which are higher than those of other countries and, at the same time, keep them at the right prices.

I hope that the Chancellor will look into the position of the industry of which I have particularly spoken, and I hope he will see whether he can do a little bit more to help our trade representation abroad for selling our engineering commodities overseas. In some of the countries to which I go, I find we have far less trade representation than we should have. If our consulates would take more interest in our trade, and a little less interest in the political side, that would be a benefit.

To our businessmen I would say that, in sending representatives abroad, they should send only the top men, the best men they can, to sell our goods. Unless we can sell more of them, we shall have difficulties here at home that many of us would do everything we could to avoid. I hope that every Member of the Committee, no matter what his politics, will join in a still greater effort to make this country sounder and more secure.

8.36 p.m.

With a very great deal of what the hon. Gentleman the Member for Harrow, West (Sir A. Braithwaite) has said I think everybody on this side of the Committee will be in entire agreement, and it is certainly not him I have in mind when I say that the only things which make us on this side of the Committee amiably disposed towards the Chancellor is hearing some of the speeches rather critical of him made by hon. Gentlemen on the back benches behind him. Those speeches demonstrate the fundamental gulf that still exists between my hon. Friends on this side of the Committee and hon. Gentlemen on that.

We heard the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) and the hon. Gentleman the Member for Langstone (Mr. Stevens) taking up the theme that Mr. Colin Clark has recently popularised that we are gradually slipping down the slope to disaster because of the burden of our taxation and urging upon the Chancellor the thesis that anything like the present level of taxation must create a tearing inflation and eventually wreck our production effort. That prevailing attitude towards taxation is still the measure of the difference between the two sides of the Committee.

When we are discussing the question of reducing taxation we must not forget this. Suppose we were to reduce taxation to the level at which it stood before the war, then the inevitable consequence would be that we should restore the inequality of incomes that also existed before the war. There is, therefore, a certain difference in our respective attitudes towards high taxation, because we on this side do not regard taxation merely as a means of raising revenue. We also regard it as a means of equalising incomes, and we realise that a return to the really low level of taxation there was before the war, to reduce direct taxation, Surtax, Death Duty, Income Tax right down to what they were 20 years ago, would inevitably recreate the inequality there was then, and which we do not want.

Surely the hon. Member is not suggesting that there can be no ceiling to taxation, that there is no height of taxation that cannot be exceeded.

Certainly not. I should not be so foolish as to suggest anything like that. Nor are we suggesting that we should increase taxation. Obviously, on general grounds we should all welcome a reduction. All I am pointing out is that the present level of taxation does have a redistributive effect as well as a revenue raising effect, and that is something that must not be forgotten.

The Financial Secretary today gave us some interesting and important explanations of various features of the Budget. They came after his usual 10 minutes of dialectical banter at the beginning of his speech, and which we have year after year, and which was as entertaining this year as usual. He played his usual Tory trick of saying that things were a great deal easier now than they were in 1951. That, as always, won applause from hon. Gentlemen opposite. I suppose the reason for that is that Tory Members are so surprised that things do not get steadily worse under a Tory Government that even the normal annual improvement in production is treated by them as an occasion for an orgy of self-congratulation.

Moreover, when listening to the right hon. Gentleman one was almost inclined to forget that there was ever a Korean war, and that when we came into power in 1945 we had just finished a world war that had lasted six years. The situation now, nine years after the war, was treated by the right hon. Gentleman as a fair subject of comparison with the inevitable crisis years immediately after the war. I suppose that that was good-humoured banter and that the Financial Secretary himself did not take it too seriously.

One advantage which the standstill Budget has had is that it has come as an extremely salutary shock to the country, and particularly to hon. Members opposite, after all the sunshine talk of the last few weeks—sunshine talk begun by the Chancellor and his colleagues on that side of the Committee but, I am bound to say, intensified by the Press, whose treatment of the Economic Survey and other documents was, to say the least, highly selective. The whole country was given the idea that 1953 was a sort of annus mirabilis with everything going up and everything going right. That impression has been dispelled by the Budget, but it should have been dispelled much earlier by a critical reading of the Economic Survey.

We were told last year by the Chancellor—and I think everybody agreed with this—that we had two overriding priorities in this country. One was to increase exports and the other was to increase investment. The Chancellor rightly gave the impression in last year's Budget speech that the success or failure of 1953 would be judged by our success or failure in those two directions.

One has only to look at what happened in those two directions to see that 1953, far from being an annus mirabilis, was, if anything, a setback by the standards of the last few years. The Economic Survey says:
"The main change in the overall balance of payments of the United Kingdom between 1952 and 1953 was a reduction of £151 million in earnings from exports and re-exports."
In a year in which the movement in the terms of trade, as the Economic Survey itself says, was worth £200 million to £250 million to us, we find that we had a smaller surplus on our balance of payments than we had in 1952. As for the dollar position, we also see from the Economic Survey that there was a distinct deterioration in the second half of the year, which certainly ought to have put a stop to any feeling of complacency.

I must say that this is a rather indifferent performance—that at a time when everything in the world was moving in our favour, when import prices were falling much more than export prices, we should find that our external surplus has actually gone down. How anybody can be as self-congratulatory as the Chancellor was yesterday in the light of that performance is quite beyond me. It is not as if world trade as a whole were falling. One could understand it if world trade were failing to increase. But all this happened in a year in which the volume of world trade rose and a year in which German exports, unlike our own, increased by a substantial amount.

If we turn to investment which, after all, is a great deal more under the Government's direct influence, the picture is still more disquieting. Attention has already been drawn to these facts in the debate. We find that there was no increase in fixed investment by private manufacturing industries, and it is fairly clear from the figures that there must have been a certain reduction in real terms because, whereas the money value was the same in 1952, obviously the prices of capital goods had risen in the meantime. If hon. Members look at the table on page 23 of the Economic Survey, giving gross fixed investment by type of asset, a very disturbing picture emerges. If we take the figures for plant and machinery, we find that in 1953 they were still substantially below what they were in 1951.

It is not a creditable performance for a business man's Government which spends so much time prating and preaching about the necessity for higher capital investment that we are still spending less in real terms on plant and machinery in the whole of the private sector than we were spending in 1951. Judging by the Survey, there appears to be no sign of a change in recent months, because I he Survey says, on page 35, that there is no visible sign that this situation is altering or that private industry is markedly increasing its rate of capital expenditure. Again, this might not matter if nothing were happening in the world outside, but 1953 was a year in which Germany, by contrast with this country, greatly increased its capital expenditure, as did the United States. Thus, as the hon. Member for Harrow, West said, we are falling behind in the race.

Why is capital investment so low in the private sector? It is not now because of the defence programme. It is true that in 1951 some forms of private investment had to be cut back to make room for defence orders. But that is not the case at the moment. The Economic Survey says that the defence load on the metal using industry has been steady since the early months of 1953 and it makes it clear that there is some slack in the metal using industries at the moment. Although defence is a heavy burden which we should all like to see reduced it cannot fee said now that defence is a major factor preventing a higher level of capital expenditure.

It is not a shortage of raw materials. Steel is in plentiful supply. It is also not a general shortage of savings due to ex- cessive inflationary pressure. If it were this would manifest itself in a shortage of capacity in the capital goods industries. The Survey points out, in my opinion and from what experience I have quite correctly, that there is still some slack in the capital goods industries and that an increase in investment at this moment would be physically possible.

Lastly, it is not a shortage of finance. The Survey gives figures showing, what we have insisted on again and again from this side, that industry as a whole had a very substantial sum left over after tax payments, disbursements on dividends and interest, and investment in fixed equipment and stocks.

I accept the qualifications in the Survey to this kind of figure of the surplus of company savings over the various calls on these savings, but I think that it undoubtedly justifies the Survey's conclusion that investment is not now held back by the shortage of finance.

Would not the hon. Gentleman agree that this only appeared last year and that to make long-term schemes for capital expansion takes some time?

It did not only occur in 1953. On the contrary, the Survey's figures of surplus company savings is almost the same for 1952 as for 1953. This position has, in fact, existed since the end of 1951.

The conclusion follows that the only reason why investment is as low as it is is because of the reluctance of the business community to spend more on capital investment. The problem is, therefore, a psychological one basically. There is some basic psychological failure on the part of the private enterprise community which prevents investment from being higher than it is. All the physical conditions exist to support a higher volume of capital expenditure than we have now.

In the light of what I should say was, therefore, a very indifferent performance, taking these two crucial sections of exports and investments, what is the right action for the Chancellor of the Exchequer to take this year? So far as exports are concerned, it is true that his influence on the level of British exports is obviously limited. We on this side welcome the concession he has made on export credits because there is a great deal of evidence recently that credits are a most important competitive bargaining weapon in the present export race.

Otherwise, the only thing the Chancellor can do, and I hope he will do it, is to resist the pressure which still comes from the frozen penguins in the Bank of England, and, I suspect, in the Overseas Finance Division of the Treasury also, for making sterling so scarce that we can have a fairly early move towards convertibility. I believe that there is a great deal of evidence that our exports would be substantially higher both in South America and in the Middle East if the policy of making sterling scarce had not been quite so rigidly pursued over the last year.

Other than that, there is not a great deal that the Chancellor can do. The volume of exports depends on factors largely outside his control. But I should like to say, in passing, that the stand which the Government have taken in O.E.E.C. on the question of the future of the European Payments Union is one which, I am sure, all hon. Members on this side would heartily support, and we should like to strengthen the resistance which the Government is offering at O.E.E.C. to the deliberalisation, as it were, of the overseas payments machinery.

So far as investment is concerned, the Chancellor is, clearly, in a better position to influence matters than he is in the sphere of exports. It has been agreed by almost all hon. Members who have spoken that some stimulus to investment ought to be one of the main objects of the Budget this year. Are investment allowances the right stimulus to give? I think all who have spoken today agree that it is difficult to give any kind of final judgment on the investment allowances only 24 hours after their announcement and without seeing the details in the Finance Bill. They have been generally welcomed in the Press and by hon. Members opposite, who say how much preferable they are to the initial allowances.

I do not want to start the long debate which we had last year about the nature of the initial allowances, but I still adhere strongly to my conviction, on which I ventured to write a long, detailed and boring article in "The Banker," that the description of the initial allowances as merely an interest-free loan, giving no permanent benefit to industry, is completely misleading. That is true, of course, in the case of a single machine, but in the case of either a firm or an industry as a whole, it is an altogether misleading description.

Therefore, the welcome accorded to investment allowances—that unlike initial allowances, which are only an interest-free loan, the new investment allowances represent permanent benefits to the finance of industry—is based on a misunderstanding. Probably my slight preference would have been for a doubling of initial allowances rather than the new scheme; but it is unwise as yet to form a final view.

In principle, I am certainly far more in favour of either initial allowances or investment allowances than a general relaxation of profits taxation, either the abolition of, say, the 2½per cent, undistributed Profits Tax, or a further fall in Income Tax. The allowances method is far better than reducing the weight of company taxation as a whole, for the obvious reason that the allowances discriminate in favour of expenditure on new capital equipment.

In other words, companies gain from a system of more generous allowances only to the extent that they spend more on investment; whereas in the case of a reduction in profits taxation, the gain is completely indiscriminate between companies whether they spend more on capital investment or not. The allowances, therefore, do benefit expanding companies relative to the rest in a way that a reduction in profits taxation would not do.

The new allowances have been criticised as discrimination and, of course, to a certain extent they are, but it is a direction of discrimination which, obviously, we ought to welcome. Indeed, the main criticism of the new investment allowances is whether there would not be a case for making them more discriminatory even than they are. It is true, as one hon. Member has pointed out, that they will give financial gain to companies whether they need it or not. We argued last year whether it would be possible to make initial allowances discriminatory between different industries, and I know all the practical difficulties, but, obviously, it is a question that is worth looking at again in this year's Finance Bill debates.

The last point I should like to take up is whether anything should, or could, have been done in the Budget to help certain sections of the community. The case from this side of the Committee has been strongly pressed by my hon. Friend the Member for Ince (Mr. T. Brown) particularly for assistance to the old-age pensioner, and I should like briefly to examine the Chancellor's argument for not making concessions of any kind this year to consumers.

Is this extreme austerity justified? It is hard to say, without knowing what the Chancellor thinks, will happen this year to production: in other words, by how much the national income will go up. Even under a Tory Government, if there is full employment, production is very buoyant. Recent years have proved that with full employment, there is a substantial annual increase in production; and we ought to get a rather larger than normal increase this year because, as the Chancellor himself pointed out, productivity is barely back to its level of two years ago. There should be, therefore, what one might call a reserve of productivity increase in the system.

It is not at all unlikely that we might easily get another £400 million increase this year in the gross national product. We had an increase of £500 million last year. That was probably an abnormally good year, because we were starting from a period of recession. I cannot see why we should not get an increase this year of about £400 million.

Where is this all going? About £80 million will go into the higher net expenditure of the Government which is reflected in the fall in the above-the-line surplus from £94 million last year to about £10 million this year. Thus, £80 million is earmarked for defence expenditure and higher Governmental expenditure generally. A large part of the rise in production inevitably goes straight into consumption, because higher production is associated with higher earnings and a large part of these are spent. Some part of it, we hope, will go into increased investment but, on the other hand, that will not be a great burden since slack already exists in the capital goods industries. Exports are not expected to rise very much.

These various additional claims will certainly take the bulk of the increase in production, but it still seems highly unlikely that, if production should rise by anything like this figure, some small part of the increase might not be available for limited budgetary concessions to consumers, of which, clearly, the first would be to give something to the old-age pensioners.

One has to be cautious when in Opposition about attacking Budgets merely for the purpose of gaining popularity, though I am bound to say that the party opposite consistently did this when in Opposition, attacking all Labour Budgets as too austere when austere Budgets were obviously needed. Nevertheless, it is my own opinion, for what little it is worth, that this Budget errs on the side of excessive severity, and that some limited concessions at any rate, might have been made.

I do not want to go into any individual points about the Budget, but I cannot resist saying that I wish that some budgetary assistance had been given to fuel economy. We had long arguments last year on this subject, but everybody seems to have forgotten about the coal crisis because we have had a mild winter. If we follow the figures, we find that industrial production is consistently rising faster than coal output. We are still living on the verge of a coal crisis and, therefore, I say that some concessions should have been made in the interests of both industrial and domestic fuel economy.

It seems to me that the 1953 Budget failed in the two major objectives of stimulating exports and raising investment. The failure in regard to investment was due to a failure on the part of private industry to react, in the way the Chancellor hoped and expected, to last year's concessions. Therefore, it seems to me that the real problem facing the country is not a little more here or a little less there. The real problem is the fundamental one of stimulating British private enterprise to the same level of initiative as is shown by its counterparts in Germany and the United States. If the Government cannot succeed in doing this—and, after 2½ years of office, judging by the investment programme they have not succeeded in doing it—then it will be a demonstration not simply that we have a very inadequate Budget, but, also, that there exists a fundamental weakness in the whole private enterprise system.

8.58 p.m.

We have been listening to a very interesting speech by the hon. Member for Goucestershire, South (Mr. Crosland). It is always interesting to hear him, and I think that he has made a very fair appreciation of the facts, and that is welcomed on both sides of the Committee. However, I do not think he was fair to my right hon. Friend any more than was his right hon. Friend the Member for Leeds, South (Mr. Gaitskell) earlier this afternoon, in not allowing the Chancellor a fairly full measure of credit for some of the considerable factors about last year's Budget which, taken with the former one, achieved so much for this country.

Nobody can say that there are not a few shades of grey in the sky, but the outlook is not so black as it was two years ago. Indeed, it is very much brighter. On the credit side, it cannot be disputed that there is a relaxation of tension and it cannot be disputed that there is a steady and continuing rise in production. There is general recognition that increased efficiency and higher output is essential, and that is realised at all levels of industry. It is a good thing that it should be so, and I feel we ought to applaud it.

The lightening of the load of taxation in the 1953 Budget brought beneficial results out of all proportion to the extent of the concessions, and I am certain we shall further advance along those lines in the coming current year. The removal of controls which proceeds apace, and the incentives and the stimulus of a freer economy, are welcomed by all.

I think those are factors which are of tremendous account. They stabilise our economy and give increased confidence in our country and permit us to give much greater leadership than this country has ever enjoyed since the war in financial affairs both in the Commonwealth and in the rest of the world. It is less than fair for any hon. Members opposite not to afford praise for a first-class record to my right hon. Friend, however much they may dispute the various features of domestic taxation and such matters.

I heard what my right hon. Friend the Member for Blackburn, West (Mr. Assheton) said today about Government expenditure and quite honestly I must also be a little critical on this subject. We want a few deeds as well as a few words. I feel with my right hon. Friend that the machine of Government has become so vast and the responsibilities of Ministers today in all Departments are so very great that they have not the time that they used to have in less harassed and harrying days to sort out what I call managing director's duties within the Ministries, which one would have automatically in private business. The intention is there, the courage and conviction and desire for the policy are there, but I agree with my right hon. Friend, and I am myself not satisfied that the machine is available to achieve the desired object.

Clearly the only solution is a radical change in the administrative control of Government expenditure and a determination to secure drastic economies. They must be secured. We cannot get away with this high level of Government expenditure year after year. There must come a time when it will be even more of a strain on the economy of the country than it is today. I know the demands of defence, but even within the field of defence, as well as in the administration of other Departments which are provided for by the Civil Estimates, I am sure that there is room for vast economies.

Quite seriously, I regard the rate of expenditure and the present increases as a national tragedy. We must do something about it. We must tackle it in various ways, and I do not know which way the Government would prefer. I think that a Minister of Cabinet rank must be charged with the job, with the assistance of a Cabinet committee, to go into this problem on a full-time basis, or that we must have some form of independent committee to inquire into the administration of the various Departments. Something must happen. It is no longer any use my right hon. Friend the Chancellor sending off letters to the various Departments on the subject of economy. That just does not work. We cannot go on like this. Much as I respect and admire my right hon. Friend the Chancellor, it is no satisfaction to my hon. Friends or to the Government or to anyone else that he should come here and say, "I am appalled by the Government's expenditure." I cannot do anything about it. I am a very humble back bencher, but, by heaven, the Government must, and they must decide what is the best way of achieving that object and achieve it.

Today almost one-third of the national product goes in Government revenue, which is double the pre-war proportion. It is a serious matter in itself. Before the war Government revenue in this country represented a lower proportion of gross national product than did Government revenue even in the United States, Canada, Sweden, Holland or Norway. Today if the proportion of Government revenue to gross national product in this country were brought down to the average percentage for those five countries, it would effect a saving of no less than £820 million—nearly, a sixth of the Budget. It is a vast sum of money, half the money raised by Income Tax, six times the yield from Surtax. Even if that figure is not realistic as a possible saving. as I am the first to admit, it brings home to us what a large proportion we are carrying compared with before the war.

Now with regard to the Budget. I am sure that everybody on this side of the Committee, including my right hon. Friend, shares sincerely the views which we all feel with regard to the difficulties of the old-age pensioners, war pensioners, spinsters and so on. What has been overlooked slightly in some of the speeches is one of the prime causes why my right hon. Friend has felt unable to do anything. It is largely because there is a committee sitting in regard to the National Insurance Fund as well as the Phillips Committee. It is not the right time, therefore, to make a radical change because this matter cannot be dealt with haphazardly.

We are running into a serious position in regard to insurance and, though something has to be done, the solution is not easy to find. Surely there is nothing between us as regards old-age pensioners. I am sure that as soon as it is possible, and as soon as the information is available, my right hon. Friend will be ready to come to this House, even before another Budget if that is necessary— [HON. MEMBERS: "No."] I am sure he will do so if it is necessary on the information and if the strength of the country permits it.

We must have this clear. The hon. Gentleman is arguing that there is nothing between the two sides of the Committee on the issue of old-age pensioners. I agree that there is not in moral terms, but how can the Chancellor make an increase in old-age pensions before the next Budget, assuming that we both agree that an increase in the basic rate is justifiable?

Without meaning to do so, perhaps I was slightly misleading. It is a matter which would have to be considered in the Budget— [HON. MEMBERS: "No."] I thought I was right. Will my hon. Friend correct me if I am wrong?

Certainly. As I understand this matter, it requires legislation but not necessarily in the Budget or Finance Bill.

That is the answer to the question, plus the fact that there is no argument on the moral issue. We will leave it there.

On Purchase Tax I did not expect anything, because my right hon. Friend was clear in his announcement in February. Speaking as a Member for a textile area which is the main industry of the Shipley Division, we are grateful for the decision of the Chancellor to make an earlier announcement, because it helps our trade. However, I ask him to bear in mind that it would be helpful to make this a little earlier because the middle of January is better than the early part of February. Also it is important that as soon as possible we should lose the burden of Purchase Tax we are carrying today. Short of that, I should like the question of uplift to be dealt with, and things like that, which are details in this Committee, but which are tremendously important to the trade, to be considered.

I welcome the investment allowance because it breaks another freeze, and I appreciate anything which breaks a freeze in taxation. I also welcome it because it is valuable. I much prefer something else, which I am always advocating and will go on advocating until I am in my grave, unless I get my way. That is that in the matter of replacement of machinery we should be placed in a position in which we can compete with our greatest competitors. To do that we must accept the principle that plant and machinery should be brought into the balance sheet at current values. Depreciation allowance should be based on that for taxation purposes so that we could get as near as possible to replacement costs instead of historic costs. My right hon. Friend has not done that, but he has been breaking new ice, although I would have preferred him to break the freeze on the lines I have suggested. I am grateful for the extra credit facilities, as this matter was bearing down on industry with the tiresomely long credit given on capital goods by other countries. Any help we can have for industry in that direction is very helpful.

On the question of Death Duties, I pleaded last year for some re-organisation in so far as private companies are concerned. Responsible hon. Members opposite—and in this matter many are responsible—will realise that this is not one of the things about which we should tub-thump at street corners; but that it is the private company which has built up the big business, and many of those which hon. Members opposite have nationalised. They are the only source of wealth, endeavour, risk-taking, effort and incentives which have gone to make this country great industrially. If we were to kill them or distribute their capital as income, we would not ensure the employment and high standard of living which we want to see. It is no good having a dig at private companies because they are private companies, for that is having a dig at ourselves. Anything which prevents private companies from being smashed or undermined financially by a form of taxation which was never intended in that way is right for it ensures that we lift this onerous tax of a capital erosion nature, which has been going on for too long and has already sapped the strength of many family businesses.

I thank my right hon. Friend for that. Although we are disappointed that we cannot have many things, I give him thanks for realising that situation and having the courage and—to use a word which is well understood in my part of the world—the guts, to do the right thing, whether popular or not, in order to ensure the stability of our economy.

9.15 p.m.

I should like at the outset to congratulate the Chancellor of the Exchequer on his presentation of his Budget, and on the able survey which he has made of our whole financial situation. We all realise the difficult problems which he has to face. In 1938, the year before the last war, the then Chancellor of the Exchequer, Sir John Simon, introduced a Budget of £900 million, earmarking £253 million for defence. He then expressed the conviction that the burden would be carried with the dogged determination and dauntless courage of the British race. The Budget now under consideration is five times that of 1938. These facts explain more eloquently than I can the task confronting the present Chancellor.

There are two points with which I should like specially to deal, and I hope that the Chancellor will give both of them some consideration. The first concerns the repayment of post-war credits. Eight years after the war has ceased some 10 million holders have still to receive their credits. Out of a total of £800 million collected, £564 million has still to be repaid. At the present rate of repayment the final repayments will not be made until 1984. Is this the best we can do? I suggest that repayment should be at the rate of £100 million per year. That would clear off all post-war credits in about five to six years' time.

In the second place, I wish to call attention to the impact on bus fares of the duty on diesel oil used in road passenger vehicles, and the inflationary effect of this inescapable tax. The basic price of diesel oil is about 1s. 2d. per gallon. The duty, which remained stable at 9d. per gallon from 1938 to 1950, was doubled in the latter year. In 1951, it was raised to Is. 10½d., and in 1952 it was again increased to 2s. 6d., an imposition of about 214 per cent, on the basic price. Complete exemption from that tax is granted when fuel oil is used for agricultural purposes, for industrial purposes and by diesel railway locomotives. Only the buses pay the duty, which has to be passed on in full to the passenger.

I wish to draw attention to the comparison of this rate of taxation with the highest rate of Purchase Tax now imposed, namely, 75 per cent., which is imposed on luxury goods and not on raw materials. The services to the public provided by the motor buses are essential to the life of the nation. The tax is thus a direct tax on a necessity and the medium of the tax assures that that is borne throughout the land more by the poorer classes than by the richer. We have a 75 per cent, tax on mink coats worn by the rich and 214 per cent, tax on the traveling costs of the poor.

Fuel oil taxation now constitutes 12 per cent, to 16 per cent, of the operating costs of our bus services. The extent of the problem as it affects municipal operators is illustrated when I quote the figure relating to 92 municipal undertakings for the financial year ending last March. Overall there was a deficit of £1 million. Within the last three months the wages of transport workers have been increased by 7s. per week. That is bound to be passed on to the travelling public in the form of increased fares. I therefore appeal to the Chancellor to relieve the transport undertakings of the unfair burden which they have carried for years by remitting in total— or at least to a substantial extent— the taxation on the fuel oil used in public service vehicles, in order that we may again achieve a state of affairs whereby the travelling public will be adequately served at reasonable fare levels.

The bus services in the City of Glasgow are operated by the Corporation. Last year they paid in tax on Diesel oil no less than £400,000. If the Glasgow Corporation were treated in the same way as British Railways and that tax were eliminated, it would mean an immediate reduction of 20 per cent, on bus fares. If the buses operated by the London Transport Executive were treated in the same way as British Railways it would obviate the necessity for the further increase in bus fares which we are informed will come into effect in the next few weeks.

I wish to impress on the Chancellor that the abolition of, or at least a substantial reduction in, the tax on fuel oil would stabilise bus fares and assist materially in stabilising the cost of living. The suggestions that I have made would certainly cost a lot of money, but the Chancellor still has open to him many avenues still untouched.

Is the Chancellor satisfied with the revenue that he is now getting from bet- ting? Last year the 30 per cent, tax on football pool betting alone yielded more than £20 million. I suggest that that tax should be extended to include all bookmakers. In 1932 a Royal Commission recommended that all bookmakers should be registered and licensed annually. In 1949 another Royal Commission made a similar recommendation. Yet up to the moment nothing has been done to exploit this fertile field.

Whether we like it or not, betting is an established fact in this country. Realising that fact, the Chancellor has imposed a 30 per cent, tax upon the total turnover of the football pools. In other words, he has appointed Littlewoods, Vernons and the others to act as his agents to collect for the Treasury the first 30 per cent, of their turnover. The hon. Member for Southgate (Mr. Baxter) said that there is more humbug about gambling in this country than in any other country in the world, and I thoroughly agree with him.

In conclusion, I ask the Chancellor, first, to consider the advisability of doing something more about the repayment of post-war credits; secondly, to consider the reduction in the cost of living which would be brought about if the duty on diesel oil were abolished or substantially reduced; and, thirdly, to pay some attention to the recommendation of two Royal Commissions that bookmakers should be taxed. Sooner or later the problem of betting will have to be tackled, for two Royal Commissions have said so, and, in my opinion, the sooner the better.

9.28 p.m.

I hope that the hon. Member for Camlachie (Mr. W. Reid) will forgive me if I do not follow him in the details which he has put before the Committee.

Many descriptions have been applied to the Budget. The hon. Member for Ince (Mr. T. Brown) called it a "skin flint" Budget, but that is hardly fair to the Chancellor. I consider it to be a "bleak" Budget, and that is because Britain today is "Bleak House," I fear that it will be bleaker in the next 12 months than it has been during the past 12 months.

The hon. Member for Ince said that the Chancellor should do more for the old- age pensioners. We should all like more to be done for them. The point is whether the Chancellor can afford to do it. It has been argued that the cost of living has risen and that, in consesequence, the old-age pensioners and ex-Service pensioners are much worse off. It is no use denying that since the Government came into power the cost of living has risen.

We can only use the index which was instituted by the Labour Government. During the two and a half years that the present Government have been in office, the purchasing power of the £ has fallen from 20s. to 19s. 2d. That is a fall of 4 per cent. In the previous two and a half years, under the previous Administration, the £ fell from 20s. to 16s. lid., or 15 per cent. In the previous two years, from 1946 to the middle of 1948, it fell to 17s. 6d. on the same basis; that is, 13 ½ per cent.

While it is absurd for hon. Members to deny that the cost of living has increased while we have been in power, what the Chancellor can fairly say is that he has arrested the depreciation of money. The fall has been relatively smaller, and I hope that, in the next two-and-a-half years, my right hon. Friend will continue in office and will be able to level out the fall altogether and restore relative stability in money. If a cart horse runs away down the street, one cannot suddenly turn it round the other way at once. One has to stop the runaway before one can turn it back. That is precisely what the Chancellor has done for us.

The other point I should like to make is this. It is vastly more important to the old-age pensioners and ex-Service pensioners that the value of their money shall be stabilised than that we should continue to give them an extra 2s. or 3s. a week only to see it swallowed up in higher prices. I know that the hon. Member for Ince speaks with great authority and with great feeling about the old-age pensioners, but I would put this point to him as President of the National Federation of Old-Age Pensioners' Associations. It is much more important to do what the Chnacellor has done and is doing —to give real value to the money which is given to them — rather than he should do what his predecessor was doing continuously —give them a little more, only to see the whole lot swallowed up by inflation.

He did not give it to them. I think my hon. Friend is being less than fair. The truth is that we saw that the cost of living was going up and it was in the first Budget of my right hon. Friend that the increase was given.

There were other social benefits that were given to poor people. This is too serious a matter to make a narrow party point out of it I am making the point that it is more important to the old-age pensioners and ex-Service pensioners that the money they do receive shall buy more goods, and that they shall not see its value frittered away.

The right hon. Member for Leeds, South (Mr. Gaitskell), when he opened the debate today, twitted my right hon. Friend the Chancellor for not doing something for the consumer, and said that our present payments position was largely due to good fortune. The right hon. Gentleman said that we had been lucky. Well, most people would rather live under a lucky Government than under an unlucky Government, and, if we are lucky, I hope the good fortune will continue, but the right hon. Gentleman cannot have it both ways. If he says that the terms of trade were worth about £250 million to us, he cannot say that that should mean that we should give more away to the old-age pensioners. If our position is as the right hon. Gentleman tried to make out, and if we have only been rescued by good fortune, he is the last man to say that we should give away what we do not possess.

The right hon. Gentleman went on to deal with the subject of gross fixed investment by industry, and this is a point that needs to be stressed, because the hon. Member for Gloucestershire, South (Mr. Crosland), who has now left his place, but who usually speaks with such authority, ease and fairness, also raised the same point. He complained that the Chancellor had not managed to get private industry to invest as much money in new equipment as was desired, and made the point that the greatest amount of capital investment had taken place in the nationalised industries. That is fair and true. But both he and the hon. Member for Gloucestershire, South skated over the most important fact that comes out of an examination of the figures. The greatest increase in investment took place in the coal mining industry. In 1951, it invested £36 million; in 1952, it invested £49 million; and, in 1953, it invested £61 million.

Page 24 of the Economic Survey says:
"On the other hand, the slight fall in coal output, though not interfering with supplies for inland consumption, limited the contribution which the coal industry was able to make to improving the balance of payments."
The right hon. Member for Leeds, South ignored that point, which is the one factor in our domestic position which has baffled us. We have put more and more into the coal mining industry and it has produced less and less results. [HON. MEMBERS: "No."] It is no use hon. Members opposite getting heated about this, because these are the facts.

The hon. Member is hardly fair. He says that we have sunk more and more money into the mining industry and are not getting a cheaper production of coal. He should remember that when the mines were nationalised in 1947 we had to take over a lot of junk, mines which had been starved of capital investment. We had to do a lot of things that ought to have been done by private enterprise in order to raise the industry to the required standards.

It is very easy to escape from one's difficulties by blaming the fellow who was there before. The Economic Survey shows that the mining industry had more capital sunk into it, pro rata, than any other industry. So far, under neither a Socialist nor a Conservative Administration has the nationalisation of the coal mining industry been a success. The results show that it has been a miserable failure.

The hon. Member is a businessman who owns mills and occasionally re-equips them. Is he telling the Committee that during a period of re-equipment and the replacement of plant and obsolete machinery his mills produce as much as they do when they are re-equipped?

I should not expect my mills to take about 10 years to show results.

Page 23 of the Economic Survey shows that £30 million was spent on re-equipment in 1948; £36 million in 1949; £34 million in 1950; £36 million in 1951; £49 million in 1952; and £61 million last year. From those huge investments we are entitled to expect better results, and so far we have not got them. It is no good hon. Members opposite becoming heated about it. The very basis of our wealth is coal. Unless the coalmining industry succeeds, all our other industries will fail. Nationalisation has not yet produced the results that were hoped for by hon. Members opposite.

The Economic Survey also mentions the agricultural industry, which had infinitely less money spent on it for re-equipment and re-investment. On page 25 it says:
"In the case of agriculture… there were bumper crops of wheat, barley, oats, potatoes and sugar beet in 1953."
If half that could have been said of the mining industry our position would be vastly different.

I said earlier that I believed the Chancellor could not have done more for us because he had no more to give to us. Our position will not warrant his doing more for the consumer than he has done. Warning after warning is given in the Economic Survey about the difficulties we face. First, there are the terms of trade. Suppose they had gone against us instead of for us. We should have been £500 million worse off than we are today. There is no guarantee, the Chancellor cannot guarantee, that the terms of trade will continue to run in our favour. If there were a sudden change in the terms of trade not only would my right hon. Friend have nothing to give us, but we should be burdened with a great deal of extra taxation.

The fact both sides of the Committee have to face is that if we are to continue our social services, if we are to maintain the Welfare State, and if we are also to carry a great arms burden, high taxation is inevitable, whichever party is in power. The only way it can be mitigated is by our working as hard as the Germans are working today or by our becoming much more machine minded, like the Americans. [Interruption.] I wish hon. Members opposite would be good enough not to make so much noise.

There is no need for the hon. Member to look so disconsolate.

I was saying that there is no escape from the fact that if we are to maintain the Welfare State and bear a tremendous arms burden we have to pay very high taxation. We must give up one or the other or both if we are to reduce heavy taxation.

Now I am about to say something that may please one or two hon. Members opposite and may not please some of my hon. Friends. I think that perhaps in the long run some of us will come to believe that what is generally called the Bevanite concept of armaments may ultimately prove to have been right, that we are carrying a heavier burden of arms for defence than we can really afford. Sooner or later we may have to cut our defence programme to suit our economic cloth. We cannot continue with all the commitments we have abroad unless we can immensely increase productivity at home.

The Economic Survey was used by the Press to give a false impression of what the Budget would contain. No newspaper was more guilty than the "Sunday Express" in its editorial last Sunday. The Chancellor has warned us time after time that everything in the economic garden is lovely except one factor, everything is favourable and everything bursting with activity except the one factor that really matters, and that is the factor of exports. Unless exports improve all the other phases of our economic life must suffer.

The question the Chancellor had to face was: would our exports be as good this year as even they were last year, not forgetting that they earned for us last year about £150 million less than they had the previous year? It is because the Chancellor, I think, had to say to himself. "I am not sure that our position will be as good in 1954 as it was in 1953" that he was unable to make any extra gifts through the Budget.

The Economic Survey says that competition became keener during 1953 and then made the important point that delivery is now less important than it was and that the decisive factor will be price.

Price and quality. The Economic Survey states that before the war Western Germany had 30 per cent, of the world's engineering exports, that that figure fell to about 7 per cent. and that last year it rose to about 15 per cent. What does the Chancellor believe our chance will be of retaining our present rate of exports of machinery this year if the Germans revert to their prewar figure of a 30 per cent, share of the world market?

I am sorry that, because I have been interrupted, my speech has taken longer than I intended. There are many other things which I wanted to say, but I will leave them to the hon. Member for Edmonton (Mr. Albu). I hope he will get an opportunity to speak tomorrow.

I would say this to my right hon. Friend: whether it be popular or not, the greatest service which he can render to the country is to stop inflation and to prevent a further cut in the value of our money. Unless he can do that, the social services, in which hon. Members opposite are so keenly interested, will not be worth anything, and the side to which we tend to look, the production of wealth, will not go as it should.

I beg him, above all things, to see that money retains its value, no matter what action he has to take to ensure that it does. If he does that, then, even though this be a bleak Budget and even though we may face bleaker times, my right hon. Friend will be doing what I believe Sir Stafford Cripps tried so hard to do in 1949 when faced with a similar problem and when he brought in an austerity Budget and told the nation that our only hope of salvation was to bring down our prices, to improve our quality and to increase our production. If the Chancellor of the Exchequer can make the nation do that, he will serve us all well.

9.48 p.m.

I think it was after the last Budget that I followed the hon. Member for Louth (Mr. Osborne) in speaking in the debate. The hon. Member takes these things very seriously but he also takes rather a gloomy view. I will leave it to some of my hon. Friends from mining constituencies to answer what he said about mining. I thought he was in rather deep water on a matter of which he understands very little. Time is late, and although I could say something about that, I do not intend to do so.

Several times in his speech the Chancellor gave us a somewhat Keynesian lesson, telling us that the Budget must be judged by its effect on the economy as a whole; and many of the speeches which have been made have dealt with the problem of our balance of payments, which is the most serious problem which faces us in this century. The Board of Trade Journal states that in the second half of 1952 and the first half of 1953, in spite of the increase in world industrial activity, there was very little increase in world trade, and this is a very important and significant factor for us. There was some improvement in our exports in the second half of last year but, as has already been pointed out in the debate, they fell again in the first two months of this year.

Unfortunately, the improvement in our exports was very largely, or mostly, in consumer goods—a type of export which I believe is becoming increasingly vulnerable in view of the discriminatory import restrictions which are being imposed, particularly in South America, Egypt and Spain. I believe there is a growing realisation that the future for the exports of this country lies in the export of capital goods. Anyone who has examined the list of goods brought back by the businessmen's delegation to Russia will see what I mean, because I think that list is very typical of the type of goods for which there will be a continuing and increasing market at the expense of consumer goods.

The Russians wanted special types of ships, power stations, plant and equipment, metallurgical plant, rolling mill equipment, machine tools, telephone and radio equipment. It is, therefore, very disturbing for those of us who have been following the export figures to see that the exports of capital goods by the United States and by Germany form a higher proportion of the world trade in capital goods than our own do at the present time.

It is quite easy to get into a panic about German exports, but I agree with the hon. Member for Scarborough and Whitby (Mr. Spearman) when he said that other countries, Germany included, are entitled to their share of world trade, and that in fact the level of our exports in manufactured goods must really be dependent upon the development of world trade as a whole.

Let us get this thing in proportion. German exports today are not much more than one-half the exports of pre-war Germany. Last year their exports were about £1,500 million compared with our own exports of £2,700 million, a very much smaller figure, although they have a population very little less than our own. They are maintaining with them a national income of only about two-thirds of ours, of which imports are only 16 per cent, compared with 25 per cent, in our case. That is a measure of the great difficulty which we have in maintaining our standard of life

There have been references during the debate to the forms of support given to exporters in other countries—subsidies and long-term credits—and it is perfectly true, although I am not sure whether Germany receives actual subsidies because that is something which has been denied, that a good deal of their trade has been in the form of investment abroad, whether by direct investment as in the case of the Indian steel works or by long-term credits, which are a form of investment.

This investment is at the expense of the standard of living of their own people. The hon. Member for Harrow, West (Sir A. Braithwaite) and others have pleaded for some system similar to that for our own exporters, and the Government have made some move in the extension of export credit guarantees to bank loans for exports. We must, however, be careful and not deceive ourselves. We can only do this in so far as in fact we produce a surplus on our balance of payments, because that is exactly what these credits are, or other forms of investment.

They are exports for which we are not paid in the current year and can, therefore, be produced only out of a surplus, whether they are financed by investment, long-term credit or any other means. Part of Germany's trade balance is due to a deflationary policy which has made her a substantial creditor in E.P.U. I hope that in the current negotiations the Government will persuade them to act as good creditors. I hope there will be no question of paying our E.P.U. debts to Germany while they have large outstanding debts to us for post-war aid. If Germany is a danger it is because her exports are capital goods which buyers want, and because we are not making the change-over to capital goods fast enough. We shall judge next year and the year after whether the Chancellor's proposals for encouraging investment are sufficient, and sufficiently discriminatory to make this change-over fast enough for this purpose.

But we must not set ourselves a completely impossible task. I think that some hon. Members may have read the very interesting article by Professor Austin Robinson in the Three Banks Review this year and a similar one last year. After careful calculations he comes to the conclusion that with the most favourable possible level of world trade, and taking into account the likely movements in the terms of trade, we shall be very lucky if we can continue to import 80 per cent. of our pre-war imports; and this has to satisfy a considerably larger population.

Therefore, the need to save imports is still imperative; but it seems that the Government, by their much freer import policy, are encouraging an extravagance in the use of some imports—for instance, timber. I wonder also whether the Government have given up entirely the objective of agricultural production 60 per cent. above pre-war—not that I believe that would be big enough. Certainly it would not be high enough if we are to pay for sufficient raw materials to keep our industries going and to make exports of the type of goods that I have described.

It seems to me that the Government have now decided that the level of agricultural production is so much less important than the prices paid for agricultural products that they are prepared to see the level go. This will land us in complete disaster, because the only way we can make a really substantial reduction in imports in the near future is by a substantial increase in, not so much the volume of agricultural production, as the value. That is to say, what we need is a substantial increase of those agricultural products which are of the highest value or which make the highest conversion of whatever raw material it is that goes into the finished agricultural product.

Are there not also more refining processes which could be carried out in this country—for instance, on non-ferrous metals? I think both the Financial Secretary and the Chancellor of the Exchequer would agree that the Labour Party's policy of building oil refineries in this country has paid handsome dividends to the balance of payments. Are the Government looking sufficiently at other similar forms of investment which would be import-saving? Are we also sure that we are changing over fast enough to the use of import-saving materials in our production—such as, for instance, rayon instead of cotton; and are we certain that we are turning over fast enough in industry to those high conversion ratio industries which use little raw material in their production but a high degree of skilled labour, and also particularly research and development?

In that connection, I welcome the fact that the Chancellor, in making the investment allowance, will grant it also for research building and plant. I am glad that the Chancellor seems to understand the extraordinary importance to this country of increasing the research and development of industry, so that the conversion ratio of our products and of our exports is raised. Quite apart from the fact that these are the only types of exports which we shall be able to sell in the future, for the time being at any rate they will also assist in reducing our needs for imports.

Like my hon. Friend the Member for Gloucestershire, South (Mr. Crosland), I am not at all sure that these changes will come about without some much more positive encouragement than even the measures that the Government are introducing this year. I believe we shall inevitably find that there will have to be some form of Government-sponsored investment and even perhaps—I may be a little in advance of the debate which is to take place in a few minutes' time—the use of Government factories where skilled labour may be available—for instance, in Woolwich Arsenal.

The Chancellor is fond of nautical metaphors in introducing bis Budgets. My own view is that the right hon. Gentleman has been lucky in bringing the ship through the calm water which he found but that he is now drifting into a fog. I believe that he is drifting blindly into a fog on the current of world economic conditions; I believe that the ship lacks a compass, and that it lacks any form of motive power.

9.58 p.m.

Of the various titles that have been given to my right hon. Friend the Chancellor of the Exchequer during this debate, the one that was perhaps most unfair and was in no way in keeping with the facts was the title given to him by the hon. Member for Bermondsey (Mr. Mellish) of "Grab" Butler.

I should have thought it was almost a record to have two consecutive Budgets with no new taxation. We have had not only two consecutive Budgets with no new taxation, but two Budgets with a decrease in the amount of tax. I confess that the decrease on this occasion is not as good as last year, but the fact that we have a decrease and no new taxation to balance it should take us much further away from the charge of "Grab" Butler than was suggested by the hon. Member for Bermondsey.

We all know that it would have been very easy for my right hon. Friend flamboyantly to seek momentary popularity by cutting taxation—

It being Ten o'Clock, The CHAIRMAN left the Chair to report Progress end ask leave to sit again.

Committee report Progress; to sit again Tomorrow.

Woolwich Arsenal (Future)

10.1 p.m.

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

I am very glad to have this opportunity of raising the question of Woolwich Arsenal and of asking the Parliamentary Secretary a number of questions about the new proposals which his Department has put forward for its future. I am sorry that by raising this matter tonight I have deprived the hon. Gentleman of some other engagement of an enjoyable personal nature, that I have compelled him to put guns before butter this evening. But I am sure he agrees with me about the importance of this subject, and I hope very much that he will be able to give some answers to my questions, which will relieve a great deal of the anxiety in Woolwich and neighbouring boroughs.

After all, Woolwich Arsenal is not just another Royal Ordnance Factory. It is Woolwich Arsenal and is part of British history, with a remarkable record of work for the nation throughout the centuries. Indeed, I feel that an Englishman's liberty owes far more to the broad acres of Woolwich Arsenal than to the playing fields of Eton. I hope, therefore, that it is in the light of the great history of Woolwich Arsenal that the Minister will arrive at his decisions about its future.

I want to make it clear to begin with that I am not standing here for the status quo of the Arsenal. I do not believe that my constituents or anyone concerned with this problem wants that. I think all of us feel that in past years there has been a great deal that has been unsatisfactory about the working of the Arsenal in particular. A point that has been brought up over and over again by those who represent the workers in the Arsenal is that there has also been underemployment in it and that has led to a high cost of production, which, in turn, has led to the drying up of orders which have gone elsewhere. This has created a vicious circle which needs to be broken.

I think everyone agrees that the situation is changing. Instead of Woolwich Arsenal being one of three Royal Ordnance Factories in 1947, it is today one of 20 Royal Ordnance Factories which are working in the country. It is wrong not to recognise these facts. Most of us also agree that the proposals of the Minister of Supply contain a number of constructive features. The new role he has laid down for the Arsenal in his statement of 26th February is a sensible and satisfactory one, namely:
"… experimental and development work in connection with armaments and ammunition, batch production, modifications and reconditioning of equipment and the manufacture of tools and gauges." — [OFFICIAL REPORT, 26th February, 1954; Vol. 524, c. 64.]
I think that is a sensible aim for Woolwich Arsenal in the new conditions in which it finds itself, and one for which it it extremely suited. I think, also, that the proposal for making a trading estate out of 100 acres of the site is constructive, provided it is carried out properly.

I think that all of us feel that whatever the decisions of the Minister may be, he and his Parliamentary Secretary have been accessible and courteous in receiving representations from those interested. Hon. Members on both sides of the House will bear witness to that. What really matters, and is the main source of worry, is what is to be the future level of employment at the R.O.F. in its new role? That really is the crux of the matter, and that is what I want the Minister to concentrate on if he will.

There has been talk of a target employment figure of 3,500 in the R.O.F. I hope the Minister will say that there is no question of this figure being aimed at by the Ministry. To bring down the numbers to that level would be a real disaster. It would be to throw away a great national asset which we have in the tradition of experience and skill and loyalty of those who work in Woolwich Arsenal.

A few minutes ago I had a few words with my hon. Friend the Member for Rotherham (Mr. Jack Jones) who, when he was at the Ministry of Supply in the position now held by the Parliamentary Secretary, formed the highest possible opinion of the efficiency and public spirit of the workers in the Arsenal. If we look at the absenteeism or sickness rate or at the record of industrial relations in the R.O.F. Woolwich we shall find that they are probably the best of any in the country.

That is something which does not go out of date, something which cannot be built up quickly and which, if it is not carefully and sensibly preserved, will lose the nation a big national asset, so we would all like a reassurance from the Minister on that point.

It would be particularly foolish to dissipate this great national asset in favour of giving these orders too much to private firms who, in my opinion, have not the same qualifications as to security and efficiency for carrying out the work required in our defence effort. I therefore want the Minister to explain a little more fully the meaning of his statement on 26th February that his proposals will give a more important and distinctive role to the Arsenal in our armament production system. That seems to me an important pledge and to be inconsistent with any idea of running down the labour force in the R.O.F. to 3,500.

I also want the Minister to give us further facts about new types of work which can be and should be given to the R.O.F. One part of the Report of the Select Committee which dealt with this subject recommended that the R.O.F. should get manufacturing and reconditioning of machine tools as an important part of its work. I will quote from one of the able statements put out by the Shop Stewards Committee at the Arsenal, who pointed out that the work of manufacture and reconditioning of machine tools has already been undertaken successfully. They said:
"Large numbers of machine tools, including Lathes, Milling Machines, Grinders. Slotters, etc., have been repaired and rebuilt to the standard of the Schlesinger tests (which is the test used in the trade for the highest quality work.) for the use of the Armament Research Establishments all over the country. We have a number of men, therefore, who have now the necessary technique and 'know how' for this work. The machine tool industry has been unequal to the task of supply meeting demand, and the use of a national factory such as ours would in no way imperil private industry engaged in this work."
Then there is the question of the R.O.F. manufacturing heavy electrical equipment. Again, this Report, which is constructive and sensible, points out that the demand for heavy electrical equipment is still rising and is unlikely to be satisfied for many years.
"Firms engaged in the manufacture of heavy electrical equipment have full order books, and the British and colonial demand for this equipment will also remain unsatisfied for a long time to come. Woolwich Arsenal has undertaken the manufacture of steam turbines in the past for Metropolitan-Vickers, Manchester,… Early in 1952 Metro-Vickers were desirous for the Arsenal to resume work on turbine manufacture. … We are confident that much of this work could be undertaken in State factories in the event of armament orders not being available on the market. The Arsenal has the men, … the machines and the floor capacity. All that is required is good will on the part of the Minister and the Ministry of Supply."
I should be very glad if the Minister would comment on this suggestion, which seems to me constructive and sensible, and if he could give us an assurance that the Ministry will take it seriously.

The Minister said, on 26th February:
"In the course of the consultations to which i have referred," —
that is, with those primarily concerned in Woolwich—
"a number of constructive suggestions were made about the use of particular buildings,.. about additional types of work suitable for Woolwich…. In carrying through the reorganisation, all these suggestions will be most carefully considered." — (OFFICIAL REPORT. 26th February, 1954; Vol. 524, c. 64.]
I should like to know how fax that consideration has gone and what are the Minister's views of the subject at the present time.

It is a little disturbing to those of us who are concerned with Woolwich affairs to notice that the new apprentices intake at the R.O.F. has been cut down very drastically. A few years ago it was about 80 and last year it was 40. This year, it is under 30. That seems a little onerous, and I should like an assurance from the Minister that that is no withdrawal from the pledges that Woolwich would do more important work which was contained in the statement on 26th February.

I should like some information from the Minister about the phasing of these changes. It seems to me that if these proposals are properly carried out they can and should take place without causing any redundancy, leaving a high level of employment in the R.O.F. and over the whole site a higher labour force engaged than was engaged when the proposals began to be carried out. Therefore, a great deal depends on the way in which the proposals are carried out and its timing. Does the Minister intend that the three points which I mentioned should be fulfilled?

I should also like to ask the hon. Gentleman specifically about the L.C.C. trading estate. It is a little disturbing that there has still been no clear decision to buy. It may well be that London County Council is willing to take over the 100 acres as a trading estate, but there is some delay and I understand that it comes from the Ministry of Supply. There may be good reasons for it, but we should like to be reassured that there is no obstacle, that the Ministry is not putting any difficulties in the way about price and conditions and is pursuing this matter with the speed which it deserves.

Will the Minister give an assurance about the type of work that will be carried out on the estate? The Ministry cannot altogether avoid responsibility for the general employment situation in Woolwich as a result of the big changes which it is proposing for the R.O.F. there. I hope that I have listed my questions in a moderate and constructive way and that the Minister will be able to reassure the people of Woolwich. They are genuinely anxious that the R.O.F. should be efficient and should be reorganised in a way that will be in the national interest but, naturally, they are a little anxious about all these very big changes.

10.15 p.m.

I was very interested in what the hon. Member for Woolwich, East (Mr. Mayhew) had to say. He made some very big points and put most constructive questions to the Minister. I am quite confident that my hon. Friend the Parliamentary Secretary to the Ministry of Supply will be able to give the hon. Member the answers that he requires. I shall be very interested in the reply, because I also am very much interested in the welfare of the Arsenal. I should like to pay a tribute to my right hon. Friend the Minister of Supply for the very thorough consultations which he has had with all concerned and to express my pleasure that consultations with the workers will be continuing.

I welcome the fact that the Government have closely examined the problem of the Royal Ordnance Factories in Woolwich and the Arsenal, as it is by no means a new problem, and have proposed a constructive solution which will bring advantages to the Woolwich area, for example a new industrial estate, and better equipment and facilities in the Royal Ordnance Factories. I also welcome the spirit shown by the Minister in his statement in a Written answer on 26th February, in particular when he said:
"every effort will be made to avoid causing hardship to the workpeople of the Arsenal." — [OFFICIAL REPORT, 26th February, 1954; Vol. 524, c. 65.]
The Minister and the Parliamentary Secretary are doing a grand job in trying to find a solution to this difficult problem and I wish them well in the continuance of their efforts, which, I am sure, will end in satisfaction to all concerned.

10.16 p.m.

I do not intend to detain the House, because other hon. Members wish to speak and the Minister is in the same boat as I used to be when I held his position. He can search the records of R.O.F. employees for the last 50 years and he will find that those who have served the State best are the men at Woolwich. They have been good and faithful servants to this country in the times of its greatest need when, bombed, shot about and with plant destroyed, they had to show exceptional skill because they were dealing with some of the oldest plant in the country. Some of the machinery is prehistoric.

They deserve well of the Minister and of the country. Their absentee record and their sick pay and labour relations records put them right at the top of the R.O.F. league. As an ex-Minister who had charge of these problems, I wish to put on record what the State owes to them and to say that they have given of their best.

10.18 p.m.

I am sorry for the hon. Member for Greenwich (Mr. Reeves), who has a close interest in this subject, but I feel that I must answer the questions that have been put to me.

In dealing with Woolwich, one can never really answer questions satisfactorily unless we are all at one as to the background to this very difficult problem. As the hon. Member for Woolwich, East (Mr. Mayhew), who opened the debate, said, and as my right hon. Friend indicated on 26th February, the problem of Woolwich is by no means a new problem of the 1950s. There has been a problem for many years. I suppose that problem was aggravated in the 1930s, by which time the increasing variety of weapons and equipment required for modern war, together with the exceptional vulnerability to air attack of the Greater London area, made it necessary to expand the R.O.F. organisation outside London. The hon. Member had that very clearly in mind, as have other hon. Members who have studied the matter.

It is because of that change and because of the fact that at the end of the war about 20 of the new Royal Ordnance Factories were kept in being with reduced employment compared with war-time—as indeed was the case with Woolwich—each with a clearly defined rôle and equipment and facilities needed for that rôle, that we are faced with this problem today. At that time no clear-cut decision was taken about the part the Woolwich factories would play in the Royal Ordnance Factory organisation in peace-time or in war. In that state of uncertainty expenditure on modernisation could not be justified. So many of the buildings have become dilapidated and much of the line production plant has grown more or less obsolete. The 1951–52 Select Committee on Estimates noted this.

I should add, as I think hon. Members who have studied the matter know well, that it would be quite wrong to think that the whole of Woolwich is in that sorry state. There are important shops there which are well equipped with efficient plant and in which most important defence work has been carried out over the last few years and is still being carried out.

Perhaps more important, and very fortunately, the special skills of Woolwich have never dilapidated or grown obsolete. What I mean by the special skills of Woolwich is the traditional ability of workpeople, working together in Woolwich Arsenal under the experienced and skilled management of successive chief superintendents—their ability to tackle a highly intricate engineering job. We are all agreed about their record. I am glad that the hon. Member for Rotherham (Mr. Jack Jones), a predecessor of mine in my present office, mentioned their sickness record. It is very remarkable compared with what happens in other places.

The plan which my right hon. Friend has approved is a constructive and workable solution to the Woolwich problem, and has been recognised as such. The hon. Member for Woolwich, East and others have accepted it as such. It takes account of all those factors which I have just mentioned. The new role, which the hon. Gentleman mentioned with approval, given to the Royal Ordnance Factory is exactly the role which can make best use of the special skills of Woolwich. That will justify the provision of new plant and better facilities for those engaged in work there.

In addition, a new civilian industrial estate will be brought into being capable of providing substantial employment. In addition to that, over a longer period, other parts of the valuable riverside site are to be progressively freed for more productive uses. The plan is a good one, and we are determined that the method of its implementation shall be as good. In its implementation, every effort will be made to avoid personal hardship.

The hon. Member put certain detailed points to me of which he was kind enough to give me notice; I thank him for that. The first, and possibly most important, was about the level of employment. The hon. Gentleman wants a high level of employment in the reorganised Royal Ordnance Factory. I think he was seeking from me an assurance that my right hon. Friend had not set a low target figure, and, in particular, that we had not a figure of 3,500 in mind. I can give the hon. Gentleman that assurance. My right hon. Friend has no such figure in mind as a target.

It would be a complete misunderstanding of the way in which we have approached this problem to suggest that we have deliberately set out to reduce the strength of the Royal Ordnance Factories at Woolwich to a particular figure. Our object is to organise into an efficient Royal Ordnance Factory with a clear-cut role. The number of men who will be employed at any given time in the new Royal Ordnance Factory will depend entirely upon the level of orders placed upon the Ministry of Supply, as indeed it does in the case of all the Royal Ordnance Factories, including Woolwich, at present. Therefore, although I have given the assurance that we are not aiming at that figure as a target, I cannot give any assurance about any figure at all: it depends upon the level of orders.

I would stress that under our plan, in the experimental, batch and reconditioning work which is the chief part of the new role ascribed to Woolwich, the new Royal Ordnance Factory will be the main R.O.F. for that work in the country. Taking into account all that is done in the Royal Ordnance Factories and the very uncertain role which Woolwich still has until this plan is implemented—and has had for several years—I think I may truthfully say that this is a more important and distinctive rôle.

Then the hon. Member urged upon me the need for careful phasing of the plan. I think I can do no better than repeat what my right hon. Friend said on 26th February:
"Since the reorganisation will necessarily be spread over several years, any necessary reductions will, to an appreciable extent, be brought about by the process of normal wastage. In any case, the plan will be kept flexible and the timing of the various stages will be phased with due regard to the employment position in the locality." — [OFFICIAL REPORT, 26th February, 1954; Vol. 524, c. 65.]
And, as the hon. Gentleman himself said, one of the expected results of the plan is that when the reorganisation is completed, whilst the number of Government employees on the whole of the Arsenal site may be smaller than it is at present, the labour force on the site as a whole, including the trading estate, will in total be larger than it is today.

The hon. Gentleman will be aware that the efficient reorganisation of the factories is a very intricate operation, and the more steps we take in an effort to avoid human hardship the more intricate it becomes. I can assure the House that everyone concerned in the Ministry of Supply is determined to do everything which can be done by administrative action to reduce human hardship to a minimum.

The hon. Gentleman asked me what types of new work we plan for the Royal Ordnance Factories in addition to the arms rôle laid down by my right hon. Friend. That arms rôle, of course, includes experimental work. The answer to his question is that we have at present no plans for any other new work; but we are always ready to consider and examine any suggestions which are consistent with the main rôle of the R.O. Fs. We can discuss the point about machine tools and the other points mentioned by the hon. Gentleman in the consultative committee, and of course we shall do so.

If a specific proposal were put, about heavy electrical equipment, for example, may I ask whether the Minister would give serious and favourable consideration to it?

I cannot answer that "off the cuff" as it were. A contribution to work of that kind has been made at Woolwich from time to time. We must look at the matter on its merits, and that is what we shall do in the discussions with the trade union representatives at the consultative committee. I think it would be better if I left the matter there.

The hon. Member put a question about what progress was being made in the negotiations with the London County Council, about the proposed new trading estate. The situation is that these negotiations have now reached the stage at which we are discussing with them dates by which certain parts of the site are to be freed and certain buildings are to be cleared. The hon. Gentleman will understand that the working out of these dates has not been easy. We are not putting any difficulties in the way of any one. We are doing our best to get a decision as quickly as possible, and once agreement has been reached on the details, the whole question will be submitted to the County Council for decision. I wish to say a word about consultation, and I am grateful for the kind things that have been said about the action of my right hon. Friend and myself, in that matter. We have paid particular attention to it.

The problem in deciding upon the right plan was not simply a problem of organisation, but also a human problem affect- ing a number of men and women working within the Woolwich Royal Ordnance Factories. It was also a problem in which the workpeople, imbued as they are with the well-known traditions of Woolwich, were bound themselves to feel an exceptionally close interest. My right hon. Friend therefore consulted them very fully. He personally took the chair at five meetings. We took special steps to consult local bodies and hon. Members of this House who were interested.

I think I should mention my hon. Friend the Member for Bexley (Mr. Heath) who as deputy Chief Whip is under an enforced silence in this House for the time being. I am grateful to him as well as to other hon. Gentlemen for the help they have given. But there is still need for continuing close consultation with the workpeople on a number of detailed points. My right hon. Friend has invited trade union representatives to form with Ministry of Supply officials a special consultative committee under my chairmanship. The object of this committee is to consider the various problems which may arise during the progress of the reorganisation. In the light of the special nature of the problems involved, it was thought wise to superimpose this special consultative committee on the normal joint consultative machinery. We have had one meeting which we found of great benefit.

It should be made clear that this consultative committee does not take away from or lessen the responsibility for the decisions to be taken by my right hon. Friend and those working under him. There is, however, great value in explaining what we want to do and in making certain that we have all the relative facts and opinions before us. It takes two to make a success of consultations and I must pay a tribute to the combination of sound common sense and suitable firmness of the trade union leaders concerned and to the way in which they have joined in our discussions. We shall try to combine both those qualities and to bring to the discussions a full understanding of the human side of our joint problems.

Question put, and agreed to.

Adjourned accordingly at Twenty-nine Minutes to Eleven o'Clock.