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Orders Of The Day

Volume 530: debated on Monday 12 July 1954

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Federation Of Rhodesia And Nyasaland (Gift Of Mace)

Resolution reported

That an humble Address be presented to Her Majesty, praying that Her Majesty will give directions that there be presented on behalf of this House a Mace to the Federal Assembly of the Federation of Rhodesia and Nyasaland, and assuring Her Majesty that this House will make good the expenses attending the same.

Resolution agreed to.

Address to be presented by Privy Councillors or members of Her Majesty's Household.

Finance Bill

Order for Third Reading read.

4.20 p.m.

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

The lusty infant which I carried in from the Bar of this House just three months ago now reaches its last stage in this House. No doubt that fact will be a source of not inconsiderable consolation to a certain number of hon. Members. In the course of our debates, like other people as they grow older, the Bill has put on a little weight, but I do not think that in the process it has lost any of its initial vigour. A good deal of that bulk is, of course, due to necessary amendment of our tax law.

It is one of the many disadvantages of the present very high levels of both direct and indirect taxation that there is a great inducement and incentive to individuals to find such loopholes as they can in our tax law in order to minimise or avoid the burden of taxation. It then becomes the duty of the Government of the day to stop up those loopholes. The result inevitably is a certain complexity in legislation.

I suppose that all of us share the wish expressed during our debates by the right hon. and learned Member for St. Helens (Sir H. Shawcross) that our tax law could be simpler and clearer to understand. I am afraid that the fact that the tax net has continually to be repaired inevitably gives it a somewhat patchwork effect. It also has the disadvantage of exposing this House to the necessity of considering extremely complicated provisions the practical importance of which is often in inverse ratio to their complexity.

As one who was in the Chamber during the greater part of our debates, I hope that I may, without impertinence, say that discussion of the many technical Clauses of the Bill seemed to me to amount to a very strong vindication of the Parliamentary process. The fact that extremely complicated provisions were subjected from both sides to shrewd and penetrating analysis is a very fine indication of the way in which the House is able to perform its most difficult duties.

The great bulk of the provisions with respect to tax machinery are in that part of the Bill, from Clauses 7 to 13, which deals with the reform of the law relating to Purchase Tax. As I said during Second Reading, our Purchase Tax law was put together during the very difficult circumstances of the summer of 1940. I suppose that it is no understatement to say that most people's minds were directed to other topics at that time. It was largely rebuilt in the almost equally difficult circumstances of 1944, and I think that the only surprising feature is that it has not given trouble before.

In any event, the House can be congratulated on having put this tax on a much more satisfactory legal foundation than it has ever had. Our enactments in that connection have a further advantage. A good deal of the purpose of both Clauses 7 and 9 is to enable us, having cleared up the legal position, to adopt a somewhat freer and perhaps more helpful attitude on the vexed subject of registration for Purchase Tax.

One of the difficulties has been that hitherto the law on the subject has been so imprecise that it has been necessary to adopt a somewhat restrictive attitude, for which we have been criticised by my hon. Friend the Member for Gillingham (Mr. Burden) and others. We hope that this sounder legal foundation will enable us to move towards some degree of relaxation in this direction.

As I told the House during the Committee stage, conversations are going on with outside interests in the trades concerned. Though these conversations are not finished, I can tell the House that they are going well. It very much looks as if the voluntary assistance by trade interests outside, which is a necessary reinforcement of our revenue checks if we are to allow registration to be granted and maintained more freely, will be forthcoming. I hope that the result will be that we shall be able to give a considerable easement in the direction which all hon. and right hon. Gentlemen who have experience in the matter know has given rise to a great deal of ill-feeling and difficulty in the past.

We have also made a good many changes, some substantial and some smaller, in the almost equally difficult subject of the law relating to Estate Duty. Clauses 29 to 31 produce some modification of the rigours of what is called the assets basis of valuation in a number of cases in which it seemed a trifle oppressive that that basis should be applied. I freely admit that a more controversial feature has been the relief given under Clause 28 in respect of certain assets of the family business, the partnership or the individual business.

I do not want to revive the controversies which marked that part of our discussion of the Bill, but it is worth recording that Estate Duty falls with great severity on the assets of a business of this sort in a way quite different from that in which it falls upon the assets of a great public company. If a shareholder in a great public company dies, his shares may well have to be sold, but the company is largely unaffected. When the main proprietor of one of these businesses dies, it is the fact that the duty can fall—and with great severity—upon the assets of the business. Therefore, my right hon. Friend thought, in view of that and of the fact that the assets basis can operate with severity in certain types of case, that it was right to give certain of these businesses some relief such as that which agricultural land has enjoyed for a considerable time.

Another change in our Estate Duty law was effected with the support of both sides of the House during the debate on the Report stage. Then the House decided, if not unanimously at any rate nemine contradicente, to accept a proposal embodied in Amendments put down by the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) and my right hon. Friend the Member for Blackburn, West (Mr. Assheton) in favour of raising the exemption limit from Estate Duty from £2,000 to £3,000 and making a consequential reduction in the levels between £3,000 and £4,000.

May I intervene to point out a misprint in the Bill which has been circulated? The proper word is "exemptions." That appears when the Clause is read, but in the index the reference is to "exceptions."

I am obliged to the right hon. Gentleman. I had read the Clause but not the index, perhaps because after the last few months an index has become almost unnecessary to me. I am obliged to the right hon. Gentleman with his eagle eye. I am sure that those concerned will be very glad to make the necessary correction.

We are all glad that it has been possible to make this adjustment, whatever our views may be on Estate Duty in the higher ranges. I do not want to disturb the calm of the afternoon by reviving controversy on that issue. I think that the House is glad that it has been possible to give relief to the modest fortunes with which this change in the law deals and perhaps to give some psychological encouragement to savings by people of modest income, from the knowledge that their estates will not be subjected to Estate Duty when they are of these levels. It is a healthy thing that, at a time when we have so many difficulties to compete with, and when it is extraordinarly difficult to make concessions involving sacrifice in revenue, we have been able to give, with, as I understand it, the general consent and wish of the House, some relief in this direction and some encouragement of saving to the people concerned.

A number of other parts of the Bill are worth a valedictory mention—for instance, post-war credits. We have already set in operation the machinery by which the further scheme of repayment can operate. The new forms of application have now been in the post offices and tax offices for exactly a week and the machinery, therefore, which can deal with actual payment after the Bill is law has started to work. I think the House will be glad not only that we have been able to step up the repayment of these credits, which I know gave rise to strong feelings in many cases outside this House, but that we have been able also in the process to clear up perhaps the most exasperating of all the anomalies that used to exist, the anomaly of the family none of whose members lived long enough to reach the age of entitlement, with the result that the payment of the credit was postponed indefinitely.

Now that we are providing that the credit shall be repaid on reaching the 65th or 60th anniversary of the original holder, we have given some certainty in the matter and, incidentally, given the added advantage of securing that, where those credits are left to a charity, that charity will also be able to claim them when the original owner would have reached those ages. This is a healthy advance which I know will give considerable satisfaction to the half-million or so people outside who will benefit.

We have taken the opportunity, as the House knows, to deal in Part III of the Bill with some of the useful recommendations in the first Report of Mr. Millard Tucker, whose industry and skill in dealing with these immensely intricate subjects commands the gratitude of his fellow countrymen and of this House.

We can also take a valedictory look at the permanent debt charge. It lived in such a state of suspended animation that I suppose no one will pay much attention to its passing. It is a change of form rather than of substance, a tidying up of a statutory provision which has become obsolete, but it is worth noting at this stage that we shall no longer have in future Finance Bills a Clause to which we became accustomed in recent years.

The House will also be glad that we have been able to clear up the confusion which arose on the subject of the application by local authorities for exemption from Entertainments Duty in respect of entertainments which they provide. For some years, as the House knows, local authorities have been treated for this purpose on the same basis as anybody else; that is to say, if on the facts they were entitled to exemption, they got it; but some doubt has arisen as to whether a local authority came within the definition in Section 8 of the Finance Act, 1946, at all, and as a result it was doubtful whether local authorities could in any circumstances obtain these exemptions. The Clause which we put in at one stage of our debates, and which is now Clause 2 of the Bill, secures that, broadly, they will be treated like anybody else. The House will agree that it is right to discriminate neither in favour of nor against local authorities in this respect, but to treat them, for the purpose of applying for exemption from Entertainments Duty, in the same manner as everybody else is treated.

On the topic of the Entertainments Duty, it is in this sphere that my right hon. Friend has found it possible to make an appreciable concession by way of tax remission. As the House knows, the great weight of the Entertainments Duty falls upon the cinema industry, which yields by far the greater part of the revenue concerned. It is common knowledge that the industry has had difficulties to face, arising from competition both from new forms of entertainment and great technical changes which are taking place within its own sphere. In those circumstances my right hon. Friend thought it right to give them some remission of duty costing about £3 million in the current year and a little over £3½ million in a full year.

Other adjustments have been made both to the living theatre and to sport. No one who has dealt with these matters will ever expect that such adjustments and reductions will fully satisfy the people concerned, but it is a proper reflection of the care with which we try to deal with these matters that it has been thought reasonable to make small reductions at least in the rates of Entertainments Duty on these activities too.

The biggest change in the Bill is the change introduced by my right hon. Friend with respect to taxation allowances in industry and the introduction of the investment allowance. When my right hon. Friend announced this during his Budget speech, it was in the character of an innovation. The introduction into our tax system of a tax allowance in respect of an amount in excess of the total amount of depreciation produced a rather conservative reaction from right hon. Gentlemen opposite but as our debates progressed this proposal was paid the agreeable compliment of being pressed from all quarters of the House to be extended into spheres further than we had desired to extend it. That is a very wholesome compliment to the soundness and good sense of the proposal of my right hon. Friend.

More than that, it enables this proposal to go out not simply as a Government proposal passed through this House by a Government majority, but as a proposal which has commanded a good deal of support and favourable comment from many quarters of the House. That is a Rood thing, because it now goes out to the board-rooms of this country, to the thousands, perhaps tens of thousands, of people who make the decisions as to the degree of investment to be undertaken, or indeed as to whether investment is to be undertaken at all, with the background of the treatment which it has had in this House.

I suppose that in this vital sphere of investment, which this proposal is directly calculated to stimulate, it is impossible completely to isolate the factors which determine the decision whether to invest or not which in the majority of cases, is taken as the result of considering many factors; for instance, the outlook for the business concerned, the outlook for the trade in general to which that business belongs, the general outlook for the country, the atmosphere of confidence that may or may not exist. I imagine that it is fairly rare for any single factor to determine that decision.

On the other hand, it will now be known, when those decisions are being weighed, that a taxation allowance will be given over and above full depreciation in respect of the assets concerned. I have little doubt that this fact will be given weight by those who make the decision whether to invest, and that it will be a favourable factor in encouraging investment, which is a purpose that the whole House wants to see achieved. We all know how fiercely competitive world markets are becoming, and we all appreciate that, unless British industry is equipped with up-to-date plant to enable it to remain strictly competitive, it will not be possible for this country to compete successfully in the markets of the world. That is why, despite the difficulties about tax concessions which face us in this House, my right hon. Friend has taken the bold decision to introduce this innovation in our tax practice, in order to give a direct stimulus to that part of our economy where, perhaps above all, a stimulus is required.

These matters are not settled by one factor alone, nor are they settled immediately and on the spur of the moment. It would be wrong for that reason to assume that investment in the immediate future will necessarily show spectacular increases. I believe, however, that in this way we shall contribute a great deal to producing an intellectual climate in which there will he a far greater willingness and enterprise in investment and that in this way we shall operate to assist British industry in the problems which face it. In view of the very large amount of depreciation which arises in respect of shipping and the fact that the shipping industry in many ways is one of our vital industries and one which has fierce competition to face, it is a matter of great satisfaction that, as leaders of the industry have acknowledged, shipping will receive some real assistance from this provision.

While it embodies a great deal of improvement in our tax law and machinery, while it embodies the new device of the investment allowance and embodies changes in the rates of Entertainments Duty and the revision of postwar credits, the Bill is not one of those Bills that we have seen from time to time in the House which provide for large reductions in taxation. As the House knows, the balance of our income and expenditure, the very high level of expenditure which is necessitated by the defence programme and also the balance of our economy, have inhibited any such step this year. Whilst thinking about this at the weekend, I came across a couplet from Dryden which seemed to hear very happily on the situation. It read:
"Tis easy conduct when exchequers flow,
But hard the task to manage well the low."
It is because, in my judgment, the Bill is a good example of that good management that I commend it to the House and hope that the House will give it a Third Reading.

4.42 p.m.

The right hon. Gentleman the Financial Secretary to the Treasury has moved the Third Reading of the Finance Bill with one of those very amiable and agreeable speeches which those of us who have taken part in debates on the Bill are accustomed to have from him. I should be remiss if I did not say how much we on these benches appreciate the courtesy and competence and painstaking character of the contributions which he makes to our debates. He has a very happy gift of language and we can always rely upon him, unlike some of his colleagues, to read the right brief on the right Amendment and, generally, to give us the impression of understanding what he is saying.

Having said that, I do not think that we can share with the right hon. Gentleman his rather smug satisfaction of the contents of the Bill. We regard it, as we regarded the Budget, as being disappointing, dull and unimaginative. One of our difficulties on these benches in criticising the Bill this year has been its dullness and lack of imagination. In addition, I think that we are entitled to complain of the great reluctance on the part of the Chancellor, contrary to custom, to make any concessions to the numerous suggestions that have been put forward from this side of the House.

In fact—and the Financial Secretary mentioned it—the only notable change that has been made in the Bill since it was introduced is the relief from Estate Duty given to small estates as a result of the Amendment which was placed on the Order Paper by my right hon. Friend the Member for Bishop Auckland (Mr. Dalton). Although the Chancellor has made that single and welcome concession, it was outweighed by his retrograde action in changing, as a result of pressure from his back benches, Clause 33, which deals with aggregation for Estate Duty purposes. The Clause in its original form was a laudable attempt to check evasion, but now, as a result of the changes that have been made, it has been watered down almost out of recognition.

My hon. and right hon. Friends have, as usual, attempted to improve the Bill in various drafting respects. Although none of the substantial suggestions that have been made by my hon. and right hon. Friends have been accepted, I hope that a number of the very constructive suggestions that have been made throughout our debates will bear fruit in future years. Disappointing though we find the Bill, it does contain a few minor concessions which resulted from suggestions we had urged upon the Chancellor in previous years; though in our view those concessions do not go far enough.

The reduction in the Entertainments Duty paid by the cinema industry, with which, as the House knows, I have some association, is long overdue and barely adequate. On the other hand, the trifling reductions made throughout the remainder of the field of Entertainments Duty are most unsatisfactory, and perpetuate the many anomalies to which we have drawn attention. We think that it is impossible to discriminate in taxation between cricket and other games and sports. We think it high time that all Entertainments Duty on games and sports was swept away. The cinemas stand in a class by themselves, and I do not think that there would be any criticism in the cinema industry if Entertainments Duty on all sports were abolished. In these days, with the spread of B.B.C. television and the unhappy introduction of commercial television, surely it is unfair and socially bad to penalise all outdoor games and sports.

We are equally disappointed with the niggardly beginning that has been made in the repayment of post-war credits. As the Chancellor well knows, some 10 million people enjoy—if that is the right word—or are entitled to the benefit of post-war credits. Many of them live in very distressing circumstances. All of them were disappointed with the meagre beginning that the Chancellor has made. The Chancellor has chosen to single out for special discrimination bankrupts and their creditors. We think the least the Chancellor should do is either to reduce the age at which the credits are paid, or else repay all the credits by reference to the earliest year in respect of which tax was actually paid.

I think the hon. Member is speaking about things which are not in the Finance Bill.

I was talking about post-war credits, and there is a Clause in the Finance Bill which relates to post-war credits, I was saying that we are disappointed with that Clause, but I was proceeding to pass from that Clause because, as you say, Mr. Deputy-Speaker, it would be out of order for me to deal with things which are not actually in the Bill.

There is a very great deal in the Bill about Purchase Tax. The Financial Secretary took credit to himself for the changes in the law relating to Purchase Tax. We welcome Clause 13 as far as it goes in dealing with the complicated subject of uplift, but we think it would have been very much better if the Government had gone further and given effect to the recommendations put forward by the two ladies who signed the minority report of the Grant Committee.

I was a little surprised to hear what the Financial Secretary said in regard to the Purchase Tax Clauses. He said they were introducing considerable improvement into the legislation on the subject, which indeed is true but what I thought most notable during our discussions of Part II was the lamentable state into which the whole Purchase Tax law has been allowed to drift. It was more than surprising to find the Financial Secretary, whom we always regarded as the arch-opponent of anything in the nature of retrospective legislation, justifying Clause 9, which is aimed solely at legalising retrospectively the collection by Her Majesty's Customs and Excise of all kinds of payments which have been illegally collected in the last few years. As he blandly told us, these Purchase Tax Clauses give legislative recognition to a number of extra-statutory practices which have been in operation for some time past.

On that subject I would also remind the House that one of the most pathetic episodes in the Committee stage was the desperate justification which the Solicitor-General gave to the astonishingly vague language now contained in Clause 13. which we had occasion to criticise so severely. The Solicitor-General attempted to justify the use of imprecise and vague language in a statute on the ground that it was necessary to have some measure of flexibility. I thought that a most pitiful exhibition for a Law Officer and really a prostitution of the noble art of drawing legislation in precise and intelligible terms.

I pass on to the more substantial features of the Finance Bill, the investment allowance and relief from Estate Duty on businesses affected by Section 55 of the Act of 1940. The Chancellor claimed, as the Financial Secretary claimed today, that they are related and that the object in each case is to stimulate investment and give assistance to the private sector of industry. We agree that probably the most serious single feature of our economic situation today is the neglect of investment in the private sector of industry.

Granted the necessity, as there obviously is, of giving private industry some incentive, we support the investment allowance, but not the relief from Estate Duty. In view of the urgent need to stimulate private industry, we think that the experiment of the investment allowance is certainly one worth trying. We support it because the relief given is coincidental with actual investment. We should have been happier if the rates of investment allowance could have been increased, particularly as regards plant and machinery and industrial building.

We recognise that the investment allowance has its defects. In a number of cases, it will give relief where investment on re-equipment would have been carried out anyhow. It is inevitably a somewhat clumsy method, and for that reason we should have preferred to introduce a greater selectivity or discrimination in the operation of the allowance. We believe that the difficulties of administration in that field could be overcome.

As was recognised by the Government throughout the debates, there are inherent possibilities of abuse in the whole system of investment allowance. We had occasion to criticise in considerable detail the safeguards which the Chancellor had put into the Second Schedule. We hope they are adequate. They have been improved as a result of suggestions we made, but we are still doubtful whether they are sufficient to circumvent the ingenuity of those whose chief preoccupation is to devise methods of exploiting loopholes in our fiscal arrangements.

As the Financial Secretary said, a great part of this Finance Bill contains Clauses which are aimed at checking tax evasion of one kind or another. There are not only Clauses 7, 10, 11 and 12—to which the right hon. Gentleman referred—aimed at stopping loopholes in the Purchase Tax field, but there is also Clause 17, which was inspired by a suggestion made by my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) in our debates last year, which is aimed at stopping the company reconstruction racket. Also, the whole of the complicated machinery in the Second Schedule is designed to check the misuse of the investment allowance.

I do not want to refer at length to these anti-evasion Clauses—although, as they are in the Bill, that would be in order—but I wish to remind the House that, bulky though the anti-evasion Clauses are, we urged the Chancellor to take additional powers to deal with tax avoidance, both in the Income Tax field and as regards Estate Duty. He preferred not to do so, but to rely on his existing administrative powers. Therefore, we shall watch with interest how those powers are used. While no one wishes to interfere with legitimate expenditure by directors and high executives in carrying out essential functions of their business, whether in this country or abroad, as the Chancellor will appreciate, there is a blatant abuse which clearly exists in connection with expenses allowances and other benefits and amenities enjoyed tax-free. This constitutes, to say the least, a very considerable irritant in our economic life and naturally produces a sense of disharmony and resentment.

I think it would be fair to say, viewing the Finance Bill as a whole, that it amounts to an admission by the Government that private enterprise is on trial, both as regards its capacity to respond to the needs of our economic development, and also as regards its conception of social responsibility.

There remains Clause 14, on which I should like to say a word. The Income Tax Clause is most important and is, indeed, central to our whole fiscal system, because some 43 per cent. of our revenue comes from this source. Here again we are disappointed because the Chancellor has not adopted any of the recommendations of the Royal Commission, and we believe that until he does so considerable injustices will be caused to all the smaller Income Tax payers. This results from the distortion of Income Tax liability that has been produced by inflation, and we hope it will not be long before the constructive suggestions made by the Royal Commission, some of which we have urged upon him, will be adopted and put into operation.

Speaking of Income Tax reminds me that the Royal Commission has gone a long way to refute the complaint frequently expressed in various quarters that our high level of taxation has a disincentive effect. That may be discounted as a result of this authoritative pronouncement, and we now have an equally important witness, the Chancellor himself who, on Wednesday last, told us:
" The country is responding with increased production. Things are buoyant in the country. Things are improving."—[OFFICIAL REPORT, 7th July, 1954; Vol. 529, c. 2251.]
We on this side think that, whatever merits the Finance Bill has, and so far as the Chancellor is able to claim credit, as he does, for the buoyancy of our present financial situation, that is fundamentally because he has pursued the basic lines of fiscal policy that were laid down by successive Labour Chancellors of the Exchequer, my right hon. Friend the Member for Bishop Auckland, the late Sir Stafford Cripps—

and my right hon. Friend the Member for Leeds, South (Mr. Gaitskell). While the Finance Bill is an instrument for raising revenue, we believe it is something more. The Chancellor has adopted the thesis which we put into practice and which we had been urging for many years before that, that the Finance Bill should be the recognised instrument for controlling economic and social policy as well as effecting the redistribution of income and social benefits.

We feel that it is because high taxation enables the Treasury to maintain a high level of social welfare that we are now reaping the fruits in the high standard of production for which the Chancellor claims credit.

5.4 p.m.

I had hoped to say a few words in Committee when Clause 25—it has now become Clause 28—was being discussed. It deals with Estate Duty on family businesses. I refrained from entering into the discussion then because there was a general desire to push on to the other important Clauses in the Bill. Nevertheless I am grateful that I have the opportunity of saying a word now, for this Clause has, I know, given a new sense of purpose to many private firms throughout the country. I should also like to say something about the criticism which has been directed against the concession. This criticism appears to have been based mainly on Command Paper 8295, which has been very widely quoted, but the more I think about it the more I feel that the evidence of that White Paper does not point in the direction which has been suggested.

This issue is complicated by the fact that when concessions of this kind are discussed they are always recommended for a great variety of reasons. For example, when the original agricultural concession was made the main reason advanced was the low yield of agricultural land. Similarly today the Chancellor has told us that this concession is introduced for three independent reasons, to mitigate the effects of Section 55 of the Finance Act, 1940; to encourage people to renew their plant, on an analogy with the investment allowances; and, finally, to help family businesses to survive.

I feel that the third is the consideration of most lasting importance, and I think it goes a little deeper than some speakers have suggested, because it seems to me that it affects the whole question of the relationship of the individual to the property to which he is legally entitled. I have always held the view that there is an essential distinction between working capital or the tools of one's trade on the one hand, and, on the other, unattached personal wealth, or, as one might put it, the right to command the services of other people in the future. To put it another way, so long as one admits the rights of private property at all, it seems to me preferable that a man's investment income should be drawn from the business in which he is personally engaged rather than it should be derived from an enterprise with which he has no connection.

I cannot help feeling that this distinction was perhaps better understood in the past than it is today, and I would suggest that, in part at least, it underlay the old distinction between real and personal property and is to be found too in Roman law. But with the great commercial expansion which followed the Revolution of 1688 when the conception of limited liability came to receive a moral sanction and was widely adopted, this distinction tended to be obscured and, in the end, to be regarded almost as an anachronism. It would be foolish to suggest that that limited liability is inherently wrong, for, after all, our commercial greatness was founded upon it; I merely say that where inheritance is concerned there is an essential difference between unattached wealth, whose dispersal will not affect the management or control of the business which provides the revenue, and working capital, which may upset a complex of human relationships which has taken many years to create and may take as many to replace.

Yet the whole tendency of our tax law has been to extend the field of the public company. That is particularly true of Section 55. I contend that, in so far as legislation influences the matter at all, that influence should be in the opposite direction. This brings me to Command Paper 8295. As the House very well knows, that Report investigated a large number of cases and showed that in only 1·6 per cent.—the figure is actually 0·7 if investment companies are excluded, and I am inclined to think that they should be excluded—was it necessary to have recourse to the trading assets. In all others there were sufficient non-trading assets to foot the bill. From that it was argued that no concession was necessary.

I take the opposite view, because it seems to me merely to prove that the proportion of what I have described as the less essential type of wealth to the estate as a whole was greater than had previously been supposed. It simply shows that the tax structure encourages people to hold an inordinately large part of their assets in a liquid and easily marketable form which could more usefully and more appropriately be used in their own businesses, if necessary, right up to the day of their death.

From what I have said, it will be seen that I would have supported an extension of the concession to the distributive trades. I realise, however, that it would not be within the rules of order if I were to dilate upon that subject. I will only say that I appreciate the difficulties of a practical nature which stand in the way. At the same time, it is plain that the more one widens a class of this kind the greater is the risk of abuse. I was grateful, therefore, that the Chancellor undertook to watch this aspect of the matter closely, for large-scale evasion would certainly defeat the object which many of us have in view.

For the same reasons, I cannot go all the way with my hon. Friend the Member for Hall Green (Mr. Aubrey Jones) who so ably expounded the thesis that, as a matter of general principle, we should not discriminate in direct taxation. I feel that some broad distinction upon the lines I have indicated is necessary if we are to avoid drifting steadily into some kind of managerial society, which I believe would be stony ground for those traditional virtues which the Chancellor so rightly wishes to foster.

5.12 p.m.

I listened with interest to what has been said by the hon. Member for Southport (Mr. Fleetwood-Hesketh). I am sure that lie will share the anxiety felt by some of us that such a small proportion of British industry should be owned by the people who work in it. I think that the total number of shareholders in public companies is under 3 million, and of course those who own private or family businesses is not very considerable. I entirely agree with the hon. Member. I think it desirable that more people should have some share in the ownership of the company in which they work. I am also glad that some consideration has been shown by him to the possibility of an unjustifiable avoidance of death duties through the operations of the relaxation for family businesses.

This Finance Bill was always more famous for what is omitted from it than for what is included in it, and therefore when we come to the Third Reading debate and are confined to what is in the Bill we find that the food has been chewed over pretty thoroughly. The atmosphere is even more relaxed than is usual in a Third Reading debate. The Treasury look with a benign eye even on those hon. Members who have been most critical. I think they would even be prepared to be tolerant with boys like the hon. Member for Sowerby (Mr. Houghton) who is frequently able to catch out his masters by knowing more than they do.

I was interested in at least two remarks made by the Financial Secretary. He spoke of the continual need to patch up the taxation nets. It is quite clear that the present rate of taxation is so high that every year the pressure to evade—perhaps "avoid" would be a better term—taxation becomes greater and greater. This Bill is designed to cover the largest expenditure that this country has ever experienced in time of peace. Luckily it has fallen on the country at a time when trade is buoyant. Yet the Chancellor has told us that he has no surplus in hand at all. It is a serious matter, in my opinion, that this country has such a large extra expenditure to meet in the future both on capital account and for old-age pensioners and so on, and yet, in a year of really remarkable prosperity, the Chancellor can only just cover the outgoings which he already has to meet.

In my opinion, the country would be deluding itself were it to suppose that big reductions in taxation were possible. Until the rearmament programme is reduced, I do not see how that can come about. But it is the duty of any Government to try to reduce the administrative costs of central and local government. The Chancellor said something about that in our earlier debates, and it would be interesting to know whether his inquiry as to how that can be done has progressed, and what suggestions he has to offer.

The other remark by the Financial Secretary which struck me particularly was when he praised the Parliamentary process and spoke well of the general review given to this Bill throughout the Committee and Report stages. I think that is true. On the other hand, I think it is also true that there are several important reports and matters of concern to this country which this House has not been able to debate in full. They include the Millard Tucker Committee's Report, the Interim Reports of the Royal Commission on Taxation and reports on Purchase Tax and so on. They were discussed to some extent during the Committee stage of this Bill; but it is becoming more and more difficult to cover both the detailed financial ground and the planning policy, particularly I think, the broad issues of the investment and trade policy of this country.

At the core of this Bill, possibly at the core of our financial position today, is the question of whether we are saving and investing enough. In this Bill there are three provisions which may affect that. The relief which the Chancellor has given to small estates may do something to encourage savings. In passing, as one of the few representatives of the party of which Sir William Harcourt was a member, I would say that I am sure that he would have been delighted to see this. I am not ashamed of the liberal parentage of the death duties. They may be too high today, I do not deny that, but I think they were a justifiable form of taxation. I would compliment the party opposite because the other great form of taxation, Income Tax, was invented by the Tories. The Labour Party nave yet to provide any financial instrument which brings in so much money.

It was Income Tax that the Liberals promised to abolish.

We will draw a veil over that just now but perhaps one day we shall do it.

There may be some relief to savings by this small concession, and there may be some encouragement to save for investment through the reduction in death duties on family businesses. But, of course the great inducement offered by the Chancellor is the investment allowance, and I welcome that as I think does everyone else. But I must say that as a substitute for a general investment policy I do not see that in itself it is enough.

We are still devoting more savings to house building than to manufacturing industries. We are devoting about one-third as much to the electrical supply industry as to the whole of manufacturing industry. Out of some £580 million raised in new issues this year, £440 million is accounted for by Government and local authority issues. That may be right or wrong, but it is a matter of great concern to the country that there should be some principle upon which the Government are acting in their investment policy.

Today a great deal of investment is necessarily done by the Government directly or indirectly. It is all very well to blame the private sector of industry for not investing sufficient, but we have only a limited amount of savings to cover Government and private investment, and the Government agencies will always have the priority because they have a Treasury guarantee. If we were prepared to allow private industry to raise money at 3 per cent: interest without regard for profitability, its position would be greatly eased. Until the Government clarify their policy, I do not believe that we shall get an adequate amount of saving or risk investment.

I still think that the machinery for private savings and for channelling them into productive investment is not entirely adequate. The banks have become too much like saving banks, and, despite the new organisations which have been set up, there is still a need for more machinery to provide small sums of money for really small businesses, small sums of money for risk investment. I should like to correct something which I said on Second Reading. It is not true of course that trust companies invest only in fixed interest stocks. But I think there is need for provision of capital for growing businesses.

In concluding his Budget speech, the Chancellor of the Exchequer said:
" It must, then, he a vigilant, poised and confident Britain which turns to face the new financial year—with an economy resilient to absorb whatever shocks and setbacks the fluctuations of world trade may inflict on us, but also alert to reach out for each and ever opportunity for expansion and enterprise which circumstances may offer, and our own initiative may devise."—[OFFICIAL REPORT, 6th April, 1954: Vol. 526, c. 227.]
They were very fine sentiments.

Are we vigilant, poised, confident and resilient'? I think, without being jingoistic, we are to an astonishing extent confident, poised, vigilant and resilient. Full employment, the country's ability to obtain contracts in the export market in the face of competition all over the world, and the buoyancy of the revenue, are things we can all be proud of. I also think, however, that the Chancellor of the Exchequer should keep his fingers crossed. There was a moment during our debates when I thought he said he had a song in his heart. I hope he has got rid of that.

The present situation is one which we should not be ashamed of but there are certain features in it which must cause disquiet. I would not say that the coal industry, the shipbuilding industry or the transport industry as a whole are entirely confident. We have been getting an advantage from the terms of trade which we cannot expect indefinitely to continue. We have large sterling liabilities which to some extent have to be set against our improved dollar balances. We know that every year Japanese, German and American competition is growing. More countries are building up their own industries.

I do not believe that we yet have enough in hand, that our balances are high enough, or that we are investing enough to make sure that we can compete in world markets. Nor am I sure that it is a good thing for this country, even in a time of great prosperity, to keep taxation up to the very limit. I very much hope that by next year at any rate we shall have some of the changes in the financial structure of the country which have been suggested in this year's debates.

I hope that the Chancellor will make every effort he can to encourage saving, and to encourage saving which will go into productive investment. There is no lack of inventiveness in this country. We beat the world in inventions in a great many fields, but we have not always been able to exploit them in the way we should like. That is partly due, in my view, to lack of capital and perhaps partly to the admittedly disturbed conditions following the war. If we can help to expand world trade and stability on the one hand and provide our industry in this country and throughout the Commonwealth with adequate capital, on the other, we may then live up to the excellent moral maxims which the Chancellor has set before us.

5.23 p.m.

I should like to reinforce from this side of the House what was said by the hon. Member for Islington, East (Mr. E. Fletcher) about the Financial Secretary's lucidity and great capacity for detail. I should not only like to reinforce what the hon. Member said about the prepared briefs, but to refer to those when there could not have been a prepared brief because the Finance Secretary was replying to remarks that had been addressed to him a few moments previously. I have often been greatly satisfied with the lucid and detailed replies which I have received to my own suggestions in the course of our consideration of the Finance Bill.

Having said that, I should like to say that I cannot quite agree with what my right hon. Friend had to say about the Purchase Tax Clauses in the Bill today. I cannot regard them as a great improvement in the machinery of Purchase Tax, because I regard the whole tax as a most unfortunate fiscal weapon. One of these Clauses is designed to amend the valuation of charges on goods because of the dissatisfaction which has arisen from the current practice of the Department, and the remaining Clauses are merely to stop up loopholes or avoid doubt as to the proper method of charging tax.

This is the clearest evidence that Purchase Tax is not a satisfactory fiscal weapon. It is most unsatisfactory because we find in the Bill that the present high rates and the highly selective method of levying the tax on different articles leads to dissatisfaction and also to considerable ingenuity being devoted to fighting out with the Excise Department whether the tax should properly be applied to a specific article. I hope that we may expect to see, in the near future, some substantial reductions in the rate of Purchase Tax, with a greater level of uniformity in its application, so that the present admittedly serious defects can be eliminated.

I should like to join in the general praise of investment allowances, representing as they do not only a novel device but an extremely useful one. I must say, however, that the investment allowance is still inadequate for the British overseas mining industry. As I pointed out in the Committee stage of the Bill, the mining industry gets a poor deal out of the changes in the Bill.

There is one point about investment allowances on which it might be possible to ask for an assurance from the Chancellor, or whoever is to reply to the debate, as to whether, if there are likely to be any changes made in future in the rate of the allowances, the old rate would apply at least in respect of equipment already ordered before the change is brought into effect. A somewhat similar assurance was given in respect of initial allowances, and with that precedent it should be possible to say that, in general, equipment already ordered would attract investment allowances at the current rate and not at the rate applicable at the time of delivery. This is a matter of some concern to those with large-scale capital investment programmes which may be running on for three or four years at a stretch.

A great deal has been said about the importance of the investment allowance to British industry. The allowance applies to the purchase of plant, and the Financial Secretary referred to decisions which will be made in the coming months in hundreds of board rooms throughout the country, which he hoped would be favourably influenced by the introduction of initial allowances. Undoubtedly that will have a favourable effect, but we are all too apt to forget, in discussions in the House, that it is not only new plant which has to be paid for; there is the additional working capital necessary to finance the flow of raw material through the plant itself, which is often as great a problem for companies as finding the money for the plant.

To give an example from my own experience, a year or two ago, when a particular company took a decision to install a new continuous process as a complete changeover from an old reversing process, the cost of the new plant amounted to about £300,000. The board might well have considered the capital expenditure on the basis of that figure, but the raw materials required for the new plant to be operated efficiently cost, at prices then current, no less than £1 million. Only £300,000 of the total investment of £1,300,000 would qualify for investment allowance. While in a case of that sort the investment allowance would be a help, it would be a relatively small factor when a board was reaching a decision whether or not to go ahead with the new plant. Let us remember the importance of working capital when discussing projects of capital equipment and investment in industry.

There is no doubt that a much better stimulus to industry than the investment allowance would be a reduction in the standard rate of Income Tax, which, I am sorry to say, is still to be maintained at the same rate according to Clause 14. A reduction would make it possible for firms to retain more of their profits to provide both additional plant and the necessary working capital which more modern plant requires. A reduction would also have the effect of reducing the benefits of extravagance by industry and encouraging the benefits of economy. As long as a firm is making a profit and very nearly half of it is taken away under Clause 14, there is not the same incentive to be efficient and economical in one's operations as if one is being taxed at a lower rate. What is true in that sphere is particularly true in matters of enterprise. If some companies appear to be sluggish, it is because of the effect of Income Tax levied at the present rate.

I want to quote to the House briefly from the Report of the Mission which visited Middle Eastern countries earlier this year. It was specifically instructed to see how trade in those territories could be developed. The Mission's comments were independent and thoughtful. It said:
"…there is little incentive to incur the expenditure and run the risks "—
by British firms—
"having regard to the fact that any small profit earned is subject to the current heavy taxation."
The Mission also said:
"The Mission must also emphasise that the present heavy burden of taxation in the United Kingdom (indeed the whole structure of taxation) provides a strong disincentive to the taking of risks in these markets and that unless this can he further alleviated "—
it is not alleviated in this Bill—
" the position of British exports in this competitive market may be more gravely affected…"
Those are the opinions of a responsible body of men, and I hope the Chancellor will take heed of what they have said when he is getting ready to prepare the Budget for next year.

If the effects of Clause 14 are serious for companies, they are also serious for individuals. While hon. Members opposite may say that their financial measures in the past have had the effect, for which they take the credit, of bringing about a great redistribution of income, surely the time has now come to consider whether we are perhaps going too far in that direction and losing a great deal of the efficiency of our senior business and industrial executives through the continuation of this levelling-down process.

I put it to the House merely on a basis of efficiency and of getting the best out of all men at all levels. The worker who is paid by the hour is not, for the most part, paying Income Tax at the standard rate as laid down in Clause 14. Therefore, taxation at the present level does not affect him so greatly. Nor, indeed, is he expected to work outside his working hours.

However, the industrial executive is paying tax at the full rate, and he is probably paying a good deal of Surtax as well. He comes home in the evening to a higher standard of living—a little higher, but perhaps it is not really high enough to give him the relaxation to do additional thoughtful work in the evening.

The country can have it either way, whichever way it wants. It can have the senior executive washing up the dishes at night and not doing additional thinking, or it can allow the senior executive to retain enough income in his pocket to hire people to do the chores for him so that he can do his additional thinking in the evening. My view is that it is probably better to allow the better-paid executive to retain more of his income so that he may lead a more relaxed and thoughtful life in the evenings and in his other spare time than is possible at present.

Has it occurred to the hon. Member that charwomen also have something to think about in the evenings?

I quite agree. Fortunately, they are able to do it. They have finished their day's work and so they are free to do as they like. The pressure on the modern industrial executive is such that if he is to spend a lot of time on chores there is less time for him to do the amount of work that his position requires. I am merely putting it to the House on the basis of what is more efficient for the country—whether men who have to work at very high pressure should be able to carry on with their brainwork in the evenings or whether they should not. We can have it either way we like. However, personal taxation at this high level for the men who are doing the thinking and planning more efficiently the work of others is surely not in the best interests of the country.

Earlier speakers have referred to the continuing high rate of Government expenditure, and my hon. Friends and I have rightly on many occasions drawn attention to the great amount of expenditure and the need for considerable economy, but I should like to put it to the Chancellor and the Financial Secretary that some of us realise how very difficult it is to secure the economies which everybody is so anxious to achieve. It is one thing to talk about economies, but it is another thing to bring them about.

The hon. Gentleman is pursuing a valid argument from his own premises, but he and other hon. Members opposite were loudly telling the country at the last General Election that the Conservative Party would "stop up the hole in the purse." The Conservatives have produced no results in that direction up to now, and it seems late to be making speeches on those lines now.

I do not think the hon. Member will feel like that when he has heard me through to the end of my point. Although it is difficult, it is none the less extremely important to bringing about those economies. Also, it is particularly difficult at a time when everything seems to be going so well to insist in Government Departments on economies which perhaps have not been practised so far.

On a point of order, Mr. Deputy-Speaker. I have no desire to interrupt the hon. Member, but is it in order on the Third Reading of the Finance Bill to refer to Government expenditure? Will you please give us your Ruling?

It is only in order to refer to what is in the Bill. Perhaps I have been a little lenient.

I am sorry, Mr. Deputy-Speaker, if I have gone too wide. That means that I shall not be able to answer the point put by the hon. Member for Westhoughton (Mr. Price).

The taxation of business profits is specifically covered in Clauses 17 and 26. In those Clauses we have an interesting study of the basis of assessment of business profits. In Clause 26 our fellow-sufferers in the Scilly Isles are being given a relief by having the option to be charged on the actual profits of 1954–55 or on the profits of the previous year. Perhaps this is to soften the shock of their first close connection with the Income and Profits Tax system of this country.

In Clause 17, it has been found necessary to counteract a device for avoiding Income Tax by reconstructing companies, and the details of the Clause are now well-known to hon. Members, but the remedy applied by Clause 17 is not the proper one. The proper remedy is the taxation of businesses on the profits actually made, neither more nor less, and doing away with pretending that the profits of the year of assessment are anything else than profits actually earned. The absurdity of the present position is nowhere more clearly brought out than it is by comparing Clauses 17 and 26.

For the rest of the Bill, I think we can fairly say that it has provided us with a useful and interesting survey of the country's position today. Some of us would like to have seen more concessions, but, under present circumstances, that hardly seems possible. Let us, nevertheless, wish the Bill well.

5.42 p.m.

I think hon. Members on this side will forgive hon. Members opposite if their speeches are rather long, because we realise that they are making the speeches they were not allowed by their Whips to make during the Committee stage of the Bill. That is especially clear from the fact that they are reading from briefs which have been provided for them.

The hon. Member for Altrincham and Sale (Mr. Erroll) represents, in the same way as many of us on this side represent trade unions, the Institute of Directors, and nobody could have spoken better for those whom he represents than the hon. Member. Those of us with some practical experience of the matter, however, find it a little difficult to recognise the picture he was painting of business executives, but no doubt the hon. Gentleman took it all from "Lloyd's Bank Review," and one fully understands that, to make a Third Reading speech, one must get one's information from somewhere.

What I found very interesting was when the hon. Member veered to the very edge of being in order, because he started off by attacking—what he is perfectly in order in doing—the Purchase Tax, and then went on to attack the levels of Income Tax. I thought the hon. Gentleman was going to follow that by expressing the view, in contradistinction to the hon. Gentleman who is the Chief Liberal Whir, that the present level of taxation is avoidable at the present time, but it appears that after that the hon. Gentleman agreed with the Chief Liberal Whip that the present high level of taxation is inevitable.

I would point out one other thing, which was also pointed out by the hon. Member. In spite of the very high level of taxation in this country since the end of the war, we have had a very prosperous economy, and we still have a very prosperous economy. The hon. Gentleman appeared to be demanding a very great reduction in the level of taxation, particularly on the higher incomes, but he ought to have known that there is some connection between this taxation, with its re-distributive effect, and the levels of employment and production in the country at the present time.

The Financial Secretary dealt at some length in his speech with the Clause concerning the Purchase Tax, and I should like to say that I personally welcome his remark about the Government's intention on Purchase Tax registration, following the passage of what is now Clause 7. I think that will be very welcome indeed to a large number of wholesalers, and I hope it means that in future applications for registration will be dealt with generously, because there is at present a good deal of feeling about the way in which the present registration system operates.

The most revolutionary Clause in the Bill is that providing for the investment allowances, and certainly, with my hon. Friend the Member for Sowerby (Mr. Houghton), I had the shock of discovering that these allowances were actually in excess of the cost of the plant and machinery involved. Nevertheless, realising the importance of increased investment, we have supported this Clause, although we wanted to make it more selective. I do not think I agree with the hon. Member for Altrincham and Sale about the cost of working capital, work in process and so on. What the hon. Gentleman does not seem to understand is that the reason why industry is not investing more today is not a shortage of finance. I am sure that any firm which was able to afford to pay a total cost of £300,000 for plant would have no difficulty in obtaining the necessary finance from the bank in order to finance increases in stocks and work in process.

The hon. Member went on to say that what would really induce industry and business men to invest would be a substantial reduction of the standard rate of Income Tax. There is absolutely no evidence of this at all. Indeed, if one looks at some countries, where the distribution of income between the wealthy and the poorer classes is much more unjust than it is in this country, the rate of investment is very much lower. The hon. Gentleman referred to some Middle Eastern countries, where, of course, there is an extreme mal-distribution of income, where taxation of the wealthy is very low, and where nobody could pretend that the rate of investment from internal sources is anything like high enough. I suggest that, before the hon. Gentleman proceeds to quote this type of case, we ought to have a good deal more factual evidence about it.

Finally, if I may introduce a greater note of controversy into this typically somnolent Third Reading debate, I would refer to the main concession granted in the Bill. It was said when the Budget was introduced that it was not an exciting Budget, but that it was a dull one. I think it certainly points the way to future Budgets of the present Administration, if they were to remain in office, because the only parts of the Finance Bill which have received the support of hon. Members opposite, and on which they turned up in the Committee stage in fair strength, are those in which we have discussed concessions granted to family businesses and the Clause on which we discussed tax evasion by aggregation, which led to a further concession, due to pressure from the back benches opposite.

We welcome the reduction of the Estate Duty at the very lowest level put forward by my right hon. Friend the Member for Bishop Auckland (Mr. Dalton), but we noticed an extremely significant feature during the Committee stage in discussing this matter with hon. Members on the other side of the Committee. Hon. Member after hon. Member demanded a much greater concession on Estate Duty, which they said was the worst form of tax that we could have. It was quite clear that they believed in a reduction of taxation on inherited wealth. Even the Chancellor of the Exchequer himself at one point said that he disliked this form of taxation, and made it quite clear that, if he remained Chancellor, he would reverse the present system of taxation on inherited wealth.

I certainly made some observations on the matter, but I gave no such undertaking.

I would not expect the Chancellor to anticipate his Budget speech of next year, or that of the year after, if he is still in office, but I am perfectly justified in drawing attention to the tone of the speech he made on that occasion. I have not got the record here with me, but I do not think there is any doubt at all that, if hon. Members opposite remain in office, they will reverse the present system of the taxation of inherited wealth. They are in favour of inherited wealth, and no doubt they would prefer to see a reduction in the taxation on inherited wealth almost before they see a reduction of Income Tax or of any other form of taxation. That is the impression I got during the Committee.

Surely the hon. Member is exaggerating very much in saying that the Chancellor of the Exchequer and hon. Members on this side wanted to reverse the present system? My right hon. Friend prefaced his remarks by saying that he did not wish to see any very big gaps between rich and poor.

One hon. Gentleman opposite certainly said that this was the worst of all taxes and made it clear that he and his hon. Friends felt very strongly about it. Many of the arguments about family businesses were complete nonsense. An hon. Member who spoke at the beginning of our proceedings today from the Government benches made what I call a thoroughly theoretical and legalistic speech about family businesses. It seemed to bear no relation whatever to the ordinary, practical way in which the thing works out.

My own view is that, on the whole, a business which has gone on for two or three generations is, in 99 cases out of 100, inefficient and badly subject to nepotism. Family businesses suffer more from nepotism than from anything else, as hon. Members who represent Lancashire constituencies will understand.

In spite of the fact that we made a number of requests to the Chancellor for concessions in the lower ranges of Income Tax, especially for people with large families, we have had no concession at all. I can only repeat what I said in the Committee: I suppose that the Chancellor is holding up his concessions for next year's Budget, which he hopes will take place just before the next General Election.

5.53 p.m.

Many of us on this side of the House listen with great interest to the hon. Member for Edmonton (Mr. Albu) and take careful note of what he says. Nevertheless, in the last few minutes of his speech today he seemed to me to exaggerate to a rather absurd degree. I can only suppose that he was trying to whip up this debate and to make it more controversial.

It is not easy on the Third Reading of the Finance Bill to think of many new points about either the Budget or the Bill. I want to make a few comments on two particularly important Clauses, namely, Clause 16, which introduces the investment allowance, and Clause 14, which deals with Income Tax. I sincerely hope that the investment allowance will be given a good run by successive Chancellors of the Exchequer because that is the only way of ensuring that this new tax device does what it is intended to do.

I remember that when we were discussing the initial allowance last year, the hon. Member for Gloucestershire, South (Mr. Crosland) pointed out, very pertinently as it seemed to me, that a business almost invariably carried out a programme of capital redevelopment by a number of stages, and that while it might be repaying its initial allowance on one item of equipment it was already getting another initial allowance on another item. That seemed a very fair point, and it applies equally to the new investment allowance. We cannot turn these allowances on and off like a tap and expect them to perform their proper function.

I quite understand what caused the right hon. Member for Leeds, South (Mr. Gaitskell) when he was Chancellor of the Exchequer to do away with the initial allowances in his 1951 Budget. There are not many votes which I have given in this House which I have regretted, but I have a feeling that we were rather naughty to vote against that Clause in the 1951 Finance Bill. We had a heavy re-armament programme on our hands and room had to be made for it in the economy somehow. It was necessary at that time to clamp down on investment to some extent. But we must hope that our economy will never again be faced with a problem of the kind that faced it in that year. I hope that we shall never again have anything like a sudden re-armament programme of £4,700 million to disrupt all our economic calculations. I hope that it will be possible for successive Chancellors of the Exchequer to give this investment allowance a good run.

Now I wish to say a word about Clause 14, which is the Income Tax Clause. There are very considerable difficulties in the way of a reduction of Income Tax, although this is obviously greatly needed. In the first place, there is the great weight of Government expenditure on defence and on the social services. I thought that the hon. Member for Gloucestershire, South was a little less fair than he usually is when he twitted us about what we had said in "The Right Road for Britain" and about the Budgets of Sir Stafford Cripps, all of which dated from a period before the re-armament programme. It is only since then that we have had to bear this very heavy extra burden. Furthermore, quite apart from defence expenditure, there is the size of our expenditure on the social services. I remember a speech by my hon. Friend the Member for Ealing, South (Mr. Maude) in which he pointed out that this sort of expenditure was tending always to rise. In general, the size of Government expenditure is the chief difficulty in the way of any considerable reduction of direct taxation.

There are two other points. My right hon. Friend the Chancellor of the Exchequer cannot afford to reduce taxation in present circumstances if it means a budget deficit above the line. He was able to reduce it by 6d. last year only because he abandoned, and I believe quite rightly, the Cripps policy of having a surplus above the line big enough to cover the deficit below the line. It was only by thus altering the form of our Budget that he was able to afford a large reduction last year. As things are at the moment, it would obviously be too big a risk to have a large Budget deficit above the line.

Again, a reduction in Income Tax is bound to have a very sharp effect upon the volume of consumption. Any reduction which my right hon. Friend could afford would be likely to affect consumption to a greater degree than savings. I do not believe that it was coincidence that last year, when 6d. was taken off the Income Tax our expenditure on consumption went up by something like £300 million. That would have been a very serious matter if the terms of trade had not been as favourable as they were.

I have tried to set out some of the difficulties with which my right hon. Friend is faced when considering Income Tax policy. Nonetheless, we ought not to be complacent about a 9s. in the £ level of Income Tax. It is not quite good enough to say that this does not really matter because Income Tax has a redistributive effect. We have heard that argument very often from Opposition Members during our debates.

Hon. Gentlemen opposite sometimes confuse two slightly different points. It is quite true that since 1939 the total volume of wage incomes has risen pretty sharply in proportion to property incomes. I was reading an essay only this morning by Mr. Dudley Sears on this very point, in which he quotes a number of figures; but that is not quite the same thing as a redistribution between rich and poor. There are many people living on smallish fixed incomes who are very severely hit by the present rate of direct taxation and who get little or no benefit from the Welfare State. We should never forget that category of persons when we are considering Income Tax policy.

Furthermore, in the days when hon. Members opposite believed firmly in nationalisation, they often pointed out to us that redistributive taxation defeated its own ends when carried beyond a certain point. One of their favourite arguments for the nationalisation of industry was that we could not have redistributive taxation of incomes beyond a certain point, and that it was therefore necessary to nationalise in order to equalise capital ownership.

Only a day or two ago I was re-reading an essay by Mr. E. F. Schumacher, which I quoted in this House in my maiden speech three years ago. Perhaps I shall not be thought guilty of tedious repetition if I read two or three sentences from it again. Mr. Schumacher says:
" A high income tax, imposed for the purpose of redistribution, is subject to the law of diminishing returns in more senses than one. It leads to a situation in which every item of expenditure that can be booked over 'expense account' is automatically subsidised by the State at the rate of the standard tax…The more progressive' the scales of taxation, the smaller, at the same time, is the reward obtainable by business men for extra effort and risk-taking. In a free society, the limits of taxation ' deserve the closest study."
Those words were written not by a supporter of the Government but by an economist who was—and is, so far as I know—a perfectly orthodox Fabian. It is worth considering whether we have not now got so near the limit of redistributive taxation that it is beginning to defeat its own object. In any case, I cannot believe that this question of redistribution can justify as high a rate of tax as 9s. in the £ in peace-time. Any reduction must be financed by orthodox means, but I very much hope that my right hon. Friend the Chancellor will be able to make sufficient cuts in Government expenditure to justify some reduction in Income Tax next year.

I do not want to end upon a note of complaint, because I think this has been a sound Budget and Finance Bill. The new accretion of reserves since the Budget was announced is itself a tribute to the work of my right hon. Friend. I believe that this Budget and Finance Bill will do a great deal to enable us to meet any economic difficulties which we may encounter during the rest of the year.

6.2 p.m.

In the course of my few remarks, I want to refer to one or two of the points made by the hon. Member for Handsworth (Sir E. Boyle). First, I deny that there is any such thing as an orthodox Fabian. If the hon. Member for Handsworth goes to any Fabian meeting of any kind in these days, he will find a diversity of opinion of such a sharp and almost emotional character that he will not think of referring in such terms to any person present there.

I am sorry that the Economic Secretary is not here; I dare say he is engaged important business elsewhere. The Chancellor of the Exchequer occasionally refers to my hon. Friend the Member for Stechford (Mr. Roy Jenkins) and myself as the "heavenly twins," and it is sad that we cannot see all three devilish triplets on the Front Bench tonight. The Economic Secretary has taken an active part in our debates and has always been extremely courteous in his replies, which have been very full.

I want to refer to the question of investment allowances, which has already been mentioned. The Financial Secretary claimed that this was a revolutionary new device. He rather twitted some of my hon. Friends with being taken aback by the revolutionary nature of this device when it was first mentioned in the Budget speech. It is fair to say that many of my hon. Friends wholly, approved of the idea right from the start—whether it was revolutionary or not—and it is also right to say that it is not quite so revolutionary as it might appear. It is a natural growth from the system of initial allowances, and it would have been perfectly possible to have found a rate of initial allowances which would have produced exactly the same monetary effect as the present proposal. It would have been perfectly possible to have found a rate which would have cost the Treasury the same amount this year as the change-over to investment allowances.

I do not think that such a step would have been a sensible one, however. Although I stick to the view which I have always expressed, that an initial allowance is not just an interest-free loan, the fact that most people in industry consider that it is an interest-free loan is a fact of great psychological importance which itself constitutes a strong objection. I think that the change-over was correct, and I hope that the new system will be extremely successful. Certainly hon. Members on this side of the House think that it is a more desirable approach to the problem of reducing corporate taxation than would be a straight reduction of Income Tax, such as was suggested by the hon. Member for Altrincham and Sale (Mr. Erroll).

I was glad that the hon. Member for Handsworth pointed out the perfectly true fact that a reduction in the standard rate would be bound to have a large influence on consumption. It is frequently argued that it is a measure designed to increase saving and investment, but the experience of last year has supported the view which most people already held, that the main beneficiaries of a reduction in the standard rate are the consuming public, and, although this may be a very good and agreeable thing from various points of view, it is not likely to have much effect in increasing investment.

If the hon. Member for Altrincham and Sale is correct, and the profits of industry, after taxation, are insufficient for various purposes, it is perfectly possible to increase them by raising investment allowances to the desired level. If we find this year—although I do not think it is very likely—that investment is being held back simply because it is not sufficiently profitable, this method provides an alternative to a reduction in the standard rate. If necessary, investment allowances could be put up to 40 per cent., or any desired figure, in order to give industry the profitability which it is held to require.

I was very moved by the hon. Member's picture of the business man and his social habits. He said how necessary it was that business men should spend relaxed and thoughtful evenings, and he conjured up a pathetic picture of a business man longing for an hour off with his Dryden. But I think his picture was a little too colourful. Lots of other people besides business men have to work in the evenings. Professional men, and even Members of Parliament, have to do so, and it is not such an enormous sacrifice for business men that they should occasionally settle down to productive effort even after 5 o'clock in the evening. That does not constitute a special reason for reducing the standard rate of tax.

My last point on the subject of investment allowances links up with that made by the hon. Member for Orkney and Shetland (Mr. Grimond). We all hope that these investment allowances are going to increase investment in plant, machinery and building—but primarily in manufacturing industry. They are not intended mainly to apply to the public sector, or agriculture, or distribution. But does the Chancellor really hope for a large increase in manufacturing investment in the next two or three years, considering the very heavy claims which are being made by other forms of industry? We read that the housing programme has now reached a rate of 400,000 houses a year, and on Friday last hon. Members were discussing the enormous investment programmes of the fuel and power industries. Most hon. Members regard those programmes as being absolutely justified, but are they going to leave sufficient resources available to allow of an increase in manufacturing investment?

The Chancellor tells us—and he claims credit for it, which he is entirely justified in doing—that employment is at a record level and that there is very little spare capacity of any kind, but I am wondering whether these investment allowances will produce the required increase in manufacturing investment, bearing in mind the very heavy investment programmes contemplated in other directions. I hope that the Chancellor will make a brief reference to that question.

The only other point on which I should like to say a word is that on which the hon. Member for Handsworth finished, the general question of redistribution. Personally, I thought that my hon. Friend the Member for Edmonton (Mr. Albu) made a fair and valid point when he drew attention to the enormous increase of interest shown on the other side of the House whenever matters concerning Estate Duty are discussed, and it is true that the concessions the Chancellor has made in amending the Bill have been largely in respect of that duty.

The hon. Member for Handsworth said that, although he was sympathetic to the idea that we have on this side of the House about the redistribution of income, one nevertheless had to be careful about two things. First, were we really redistributing from rich to poor and not from profits to wages? It is a valid question, but there is no doubt that we are redistributing from rich to poor, because the figures that are often published of the proportions of personal incomes, according to the richest group and the second and third richest groups and so on, show that not merely are we redistributing from profits to wages but also redistributing from the people at the top end of the income scale to the people at the bottom end of the income scale.

The hon. Gentleman's other question was whether we accepted Dr. Schumacher's view—although I do not see why we should accept his view on anything except possibly on matters of research in the coal industry—that there are limits to taxation. Of course we accept that view. Nobody supposes that we can go on pushing taxation up and up without a ceiling. The argument is whether we have reached those limits of taxation now or have overstepped them.

It is perfectly consistent for us on this side of the House to agree that there are limits and to say that those limits have not been exceeded. In our view, the present level of taxation on high personal incomes does not overstep those limits we are talking about, and we can achieve this measure of income redistribution without our suffering any loss of production. That is a quite consistent point of view which I hope the Chancellor may be persuaded to bear in mind when framing a future Budget.

6.12 p.m.

I think it was the hon. Member for Orkney and Shetland (Mr. Grimond) who began his speech by saying that this year's Budget and Finance Bill were more notable for what they omitted than for what they contained, and I quite agree that it is impossible this year, as it was last year, to point to a Finance Bill which resulted in everybody's taxation being reduced without anybody's being taxed any more.

Today, one cannot say that, and I accept the point made by hon. Members opposite that a certain amount of disappointment has been occasioned in the country as a result. However, when one looks around and sees the figures for the last few months since the Budget was announced, and how both the economic and the financial figures are buoyant, I am quite satisfied that the Chancellor made no mistake in the line he decided to adopt, and I am glad to find myself complimenting him once again, as I ventured to do last year.

The reduction in the cinema tax, which was referred to by the hon. Member for Islington, East (Mr. E. Fletcher), who spoke for the official Opposition today, has been of considerable benefit to an industry that has been hard hit by new competition. It has benefited to the amount of no less than £3½ million in a full year. I like that particularly because that was included last year among the very high priorities the Chancellor promised to devote his attention to when the opportunity should arise, and anything that savours of the keeping of promises is always very welcome. I hope that some of the words the Chancellor said in his Budget speech about old-age pensions may also be fulfilled in due course.

I welcome the concession on death duty and on family businesses. The hon. Member for Gloucestershire, South (Mr. Crosland) referred with disdain to Government supporters for their interest in death duty. He will not have forgotten that an Amendment was moved by his right hon. Friend on that. I think the provision for family businesses is overdue, and I cannot for a moment accept what the hon. Member for Edmonton (Mr. Albu) suggested, that family businesses are inherently inefficient. I do not think that the facts prove anything of the kind. The concession made to them is, no doubt, a step towards preserving the continuity of middle class life. I wonder, however, whether my right hon. Friend has gone quite far enough in that direction, and I wonder whether his Income Tax policy takes sufficient account of the virtual obliteration of the middle classes which the present level of taxation is bringing about.

I was reading "Lloyds Bank Review" over the weekend, too, as was the hon. Member for Edmonton and my hon. Friend the Member for Altrincham and Sale (Mr. Erroll), and I would commend a passage in this month's issue, that, I think, is entirely relevant:
"It has happened before now, in other countries, for the middle classes to be ruined: by inflation or by revolution. The troubles of the British middle class are mild compared with the disasters which, in the course of the twentieth century, have been heaped on the French, and still more on the German bourgeoisie and professionals, playing a major part in producing moral paralysis in France and collective dementia in Germany. Only in Britain, however, have matters been deliberately so arranged that there shall be no revival; no rebuilding, by the efforts, the thrift and enterprise of a new generation, of private competences, no replacement of the victims of special circumstance by successive starting, perhaps, from quite different origins but winning and retaining the rewards of special ability."
I believe that my right hon. Friend would do right to take account of this general decline in the middle classes today, and I do not see why hon. and right hon. Members opposite should not agree with me in this. After all, the last three Chancellors of the Exchequer of the Labour Party all came from that section of the community, which has made a very full contribution to the public life of the country. It is not only among the politicians that it is and has been found. That section of the community has made a big contribution—and is still capable of so doing, if it is not squeezed out, as I fear it may be—in all the professions and Services, the arts and the law, and to leadership in the management of industry.

We have many men of integrity and initiative and genius from that section it would be very difficult to replace were we to allow that section of the community to fall under and be eclipsed by present trends, and in supporting the Third Reading of the Bill I commend that consideration to my right hon. Friend.

6.20 p.m.

I am glad that the hon. Member for Berwick and East Lothian (Major Anstruther-Gray), in referring to the social origin of previous Chancellors of the Exchequer, firmly put Eton and Winchester in their places as good middle-class schools.

In the course of these debates we mostly hear familiar voices and, to some extent, familiar arguments, but we have seen on the benches opposite on this occasion a few new faces, and we are glad to welcome them to our discussions. Hon. Members opposite who take part in the debates on the Finance Bill can be divided into three categories. First of all, there are those like the hon. Member for Handsworth (Sir E. Boyle) and the hon. Member for Scarborough and Whitby (Mr. Spearman), who, I see, is trying to catch your eye, Mr. Speaker, who are deeply interested in these financial questions but go in fear and trembling of their Whips and make no attempt to intervene during the Committee stage.

Then there are those like the hon. Member for Wimbledon (Mr. Black), who made two appearances in Committee—once to urge the claims of licensed premises to the investment allowance and. on another occasion, to try to see that too much tax avoidance was not knocked out by means of the provisions dealing with life insurance. Such hon. Members make only these brief appearances and then disappear.

Finally, there are those of whom perhaps the hon. Member for Edinburgh. South (Sir W. Darling) is the most distinguished, who go in some fear of the Whips but, nevertheless, cannot keep away from our debates. They would like to take part in them. To some extent the hon. Member for Kidderminster (Mr. Nabarro) is in that category, and I am sorry that he is not in his place. We often see him during these debates, but to an even greater extent we see the hon. Member for Edinburgh, South, sitting in his place on Clause after Clause. We know how much they would like to intervene, but when they do intervene, because their feelings have been bottled up for so many Clauses, they sometimes make speeches which are not perfectly informed. Nevertheless, we are very glad indeed to have their interventions and their humour. We had an intervention from the hon. Member for Edinburgh, South when he misunderstood a point put forward by my hon. Friend the Member for Edmonton (Mr. Albu).

The trouble was lack of clarity by the hon. Member for Edmonton (Mr. Albu) and no defect of mine.

My hon. Friend is not here to answer for himself, so I do not think I should pursue the matter further.

The hon. Member's friend and colleague, the hon. Member for Kidderminster, without my hon. Friend the Member for Edmonton or anyone else to confuse him, became extremely confused at an earlier stage about the way in which buildings were depreciated and showed himself less well-informed on this matter than we should have expected.

I am not sure into what category I should put the hon. Member for Altrincham and Sale (Mr. Erroll). Whether he is outside all those categories or not, we certainly enjoyed his speech this afternoon. As my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) said, he painted a most moving picture of the plight of business executives doing the washing up when they could have been enjoying thoughtful and relaxing evenings. I am not quite sure whether the two words always go together; I thought it was possible to have a relaxing evening which was not a thoughtful evening.

I am sure that applies to the hon. Gentleman and, no doubt, to most of us.

When he was dealing with the effect of the high rate of Income Tax upon individuals, the hon. Member directed our attention to the report of a mission which went to the Middle East. He should have borne in mind a still more important body which considered these questions of the effect of Income Tax upon incentives, particularly in relation to highly-paid executives—the Royal Commission on Taxation, which reached a conclusion almost diametrically opposite to that which he put forward in his speech.

The hon. Member also returned to a subject which is a favourite subject of hon. Members opposite. When concessions are being given to industry they are more welcome to hon. Members opposite if they come in the straightforward, unremitted form of a simple reduction in the standard rate of taxation rather than in the form of initial allowance concessions or even investment allowance concessions. I fully agree with my hon. Friend the Member for Edmonton who commented on the Chancellor's significant hint about his attitude in future Budgets to Estate Duty on big estates. I think the Chancellor will find that he has two competitors put forward from the benches behind him for such relaxations as are made, one being where estates pass at death and the other being for a concession in the standard rate of Income Tax.

But this is not a matter of logic on the part of hon. Members opposite when they apply it to the question of stimulating investment for, however we apply our minds to the matter, it is difficult to believe that a concession based on a cut in the standard rate of Income Tax of a given amount can possibly have an equally stimulating effect upon investment as a concession of the same amount in the form of an investment allowance. After all, with an investment allowance, that amount of money is directly related to the stimulation of investment and accrues to industry only to the extent to which that investment takes place; whereas, whatever assumption we make—whether we make the assumption, with which I rather agree, made by the hon. Member for Handsworth, that a large part of any concession in direct taxation goes into consumption and not into savings; or whether we make the more optimistic assumption—it still remains the case that it can be only a proportion of the money made available by a cut in the standard rate of taxation which goes to investment. With the investment allowance, where we have a given amount to play with, we can be sure that 100 per cent. of it goes to investment, rather than a small proportion.

If the Chancellor intends to claim as much credit for the investment allowances as did the Financial Secretary earlier today, I hope he will bear in mind that, while these allowances have on the whole received a very good reception from these benches—because, if taxation concessions are to be given to industry, we like them to be directly related to investment—they have in some ways received a more mixed reception from the benches behind him. That was shown by the hon. Member for Altrincham and Sale, who said plainly that he would have preferred a cut in direct taxation, presumably of an equivalent amount. I hope that the Chancellor will bear that in mind and will not put this concession forward too much as a great triumph for Conservative financial policy.

We have had a dull Budget and this is a dull Finance Bill. After what the Chancellor told us was a year of great recovery, the Budget did not give very much. We hope that next year's Finance Bill will have more in it and will have more important contributions to make to the national economy. I do not know how the Chancellor will bring that about, because he has told us that this year we had a very good year. We certainly hope that next year he will be able to produce a more exciting, and, from our point of view, more desirable, Budget.

6.29 p.m.

The hon. Member for Stechford (Mr. Roy Jenkins) introduced such a pleasant Sunday afternoon atmosphere in the first part of his speech that he reminded me of what Sir Frank Tribe, the Comptroller and Auditor-General, had to say about these debates, speaking last month, as reported in "The Times." He said that the function of the back bencher and the Treasury have completely changed in the last 50 years. Instead of the back benchers protesting to the Treasury about the heavy taxation which is being imposed, the Treasury are now having to resist the demands of back benchers for greater expenditure.

It seems to me extraordinary that this afternoon we intend to agree to a Finance Bill which will impose greater burdens than this country has ever known in time of peace—and yet some hon. Members regard it as a matter for laughter. I want to protest at the enormous taxes which are being imposed upon the people of this country in time of peace.

May I refer to two points made by the hon. Member for Edmonton (Mr. Albu)? He said, I think quite rightly—and this ought to be recognised on both sides of the House—that the prosperity of this country in the last 20 years has been to a large extent due to the redistribution of wealth that has taken place. If there is to be mass production of wealth, it has to be matched by mass consumption, and there can be mass consumption of that wealth only if the wealth of the nation is more evenly divided. I should like to assure the hon. Member—if he wants an assurance from this side of the House—that we have no intention whatever of trying to alter the policy of the last 25 years, or the last 50 years, whereby the distribution of the national wealth has been made more even and the gap between the very rich and the very poor has been narrowed. There is no intention whatever of reversing that policy.

May I also put another point to the hon. Member? He said that hon. Members on this side of the House were more interested in Estate Duty reductions than in any other item in the Finance Bill. I do not think that is quite true. I myself would like a reduction of both Estate Duty and Income Tax. If I were faced with a choice, I would rather tax the dead than tax the living. By taxing the living I think that it is possible to stop production, and I do not think that is possible by taxing the dead.

This Bill imposes taxation on the people of this country to the extent of £4,533 million, which equals about £12 million a day. No hon. Member has so far said, "I think these burdens are too great." Hon. Members opposite seem to think that taxes are desirable. I hope that the next time we go to the country, they will say. "Put us in power and we will double the taxes on all of you; we think that they are good things."

As the Chancellor of the Exchequer said in the debeate in Committee on what was then Clause 13, taxes are evils; they are necessary evils, but they are evils. I should like to ask my right hon. Friend this question. Will he on another occasion, if he cannot do it now, reduce these evils and make this country a little more virtuous financially, so that we can live a little more comfortably in it? I would remind the House that this Finance Bill is taking about 32 per cent. of our gross national product. In 1928, when the present Prime Minister was Chancellor of the Exchequer, the figure was only 20 per cent., and in 1913 it was only 7 per cent. of the gross national product. How long can that process continue? Hon. Members on both sides of the House have to face that question.

In this week's "Economist" there was an article on the situation in Italy, and there was one phrase which I would pass on to my right hon. Friend. It said that there was a danger of the people of Italy becoming subjects instead of citizens. That is where we shall be led, if we are not careful, by the height of taxation which we are imposing on our people. I believe that this is fundamental, and I am sorry that Liberal speakers have not said so, because this is ancient Liberal gospel. I believe that if taxation is as high as is imposed under this Bill, there can be no real personal liberty.

Perhaps the hon. Gentleman could, on some future occasion, reconcile the two statements which he has made: first, that he wants to continue the process of the last 25 years, which is essential to the setting up of a very expensive Welfare state; and, on the other hand, that he wants to reduce taxation. Short of cutting the armaments programme, how does he think that this country can make a large reduction in taxation without reducing the welfare service?

The hon. Gentleman says that there is no possibility of a reduction of taxation unless the armaments programme is ended. I would ask my right hon. Friend whether there is any hope that the money saved on armaments would ever be used to reduce direct taxation. But that is taking me away from the point which I want to make. The point which I am putting to the House and to my right hon. Friend is that the more earned income the central Government take from the people of this country, the more they reduce the liberty of the people, and if tyranny is to come in this country it will come through the silent operation of Finance Bills. It is because of this that I feel extremely nervous. There have been no real protests in this House at the immense weight of taxation which we so freely, so glibly and in such a laughable and joking way put on to the shoulders of our constituents.

I should like to remind the Chancellor of what he himself said during the Committee stage of the Bill. On 15th June he said:
"In all this controversy as to whether taxation has this or that effect, strange to relate, although I occupy the high post of Chancellor of the Exchequer, I regard taxation as a necessary evil, but an evil."
He went on to say:
"…Had there been more money to spare, I do not think that it would have been immoral to reduce taxation…"—[OFFICIAL REPORT, 15th June, 1954; Vol. 528, c. 1816–7.]
It is on that point that the two sides of the House differ. We on this side agree with the Chancellor that it would not be immoral to reduce taxation, but a very good thing to do so, and the more he could do it the better we would be pleased. There is a cleavage between the two sides of the House on what is included in this Bill. Hon. Members opposite seem to think that taxation is good in itself and the more they can pile it on to private citizens, the better. [HON. MEMBERS: "No."] We take the opposite view. Therefore, I plead with the Chancellor to reduce, in so far as it is possible, not only indirect taxation but also direct taxation, because I still believe, despite what the Royal Commission on Taxation said, that the present rate of taxation does act as a disincentive.

Finally, I should like to make this point. Under the present Bill, Income Tax is 9s. in the £. When the present Prime Minister was Chancellor of the Exchequer, it was 4s. Surtax today is 10s. in the £; then it was 6s., although the limit was not reached until £30,000. whereas today it is reached at £15,000. The total taxation imposed in this Budget is £4,533 million, whereas when the present Prime Minister was Chancellor it was only £753 million. The direct taxation, under Clause 14, amounts to no less than £2,384 million, as against £406 million.

Is the hon. Member aware that he is boring us stiff?

Despite the fact that I am boring the hon. Member stiff, I propose to continue what I have to say. This was once a free House—[An HON. MEMBER: "It is not a tied House."]—and Members were not paid extra to come here. This was where men came to protest against the taxes that were imposed on their constituents. Hon. Members opposite may think it is funny that they are imposing heavy taxes on their constituents; I do not think so, and I am going to say so. I hope that the hon. Member will go back to Lancashire and say that it bored him stiff because some-one was protesting against high taxes.

It is boring the hon. Member stiff because I am protesting against them.

This is what the Prime Minister said when he was Chancellor of the Exchequer, and I commend it to all sides of the House. He was talking about the desirability of reducing taxes, which then were only a quarter of what they are now. Therefore, if what the Prime Minister said then was true, it is much more true today. Talking about the removal of tax burdens, my right hon. Friend said:
"That is a course along which we are entitled to proceed hopefully, endeavouring to lighten the burden of taxation "—
[Interruption.] Hon. Members opposite may laugh at this, but if they think that the possibility of reducing taxation is so ridiculous that in their idea taxation is never to be reduced, I hope that they are never returned to power. The then Chancellor of the Exchequer said—and I hope hon. Members will listen to these words:
"…and reducing the amount of money at the disposal of the Exchequer as much as we can, and using the shortage of money at the disposal of the Exchequer as a greater reason for enforcing economy on all Departments of the State."—[OFFICIAL REPORT, 27th July, 1928; Vol. 220, c. 1707.]
That spirit has been lost, and all that we are doing today is jeeringly and cheerfully putting burdens on to our people as though we were doing them a favour. Against that I wish to make my personal protest.

6.43 p.m.

I do not propose to follow the hon. Member for Louth (Mr. Osborne) into the mass of contradictions and irrelevancies into which he got himself tangled. The trouble with the hon. Member is that he never understands why we react as we do on this side of the House to what he has to say. If he would study the faces of my hon. Friends a little more, he would be clearer as to the reasons that they object to or criticise what he has to say. I was very glad that my hon. Friend the Member for Ealing. North (Mr. J. Hudson) was not in the House when the hon. Member made his astonishing reference to a "free house." I do not know how much longer we should have been kept had my hon. Friend been present. No doubt, however, Mr. Speaker would have intervened.

The Third Reading of a Bill is, as we know, heavily circumscribed by the rules of order, and I suppose it is that which generally makes it a rather quiet debate. Certainly, so far as this Bill is concerned, throughout most of the Committee stage we were endeavouring from this side to introduce new elements into the Bill. Having been foiled in that attempt, we now can only discuss what the Government have chosen to allow to remain in the Bill, which, of course, is a more limited field. However, it may also be that the fact that the Bill was thoroughly discussed in Committee has made it rather harder for us to think of new things to say. I was glad that the Financial Secretary paid a deserved tribute to the shrewd and penetrating analysis which the Bill received in Committee from both sides.

There were moments when we were a little alarmed when the sinister shadow of the Patronage Secretary was seen to be hovering around, when an effort was made to hustle and bustle us along a bit faster. At one point the Chancellor of the Exchequer himself gave up his accustomed calm and became a little irritated, but he regained his temper very quickly and I am glad to say he withstood the pressure coming from the Government Chief Whip, and that we were able to finish the Bill in a reasonable way.

It is a nice custom that in the Third Reading debates we are allowed to pay each other compliments. I am sure that you will be lenient, Mr. Speaker, so far as the rules of order are concerned, so long as they are compliments. My hon. Friend the Member for Stechford (Mr. Roy Jenkins) has already done very well so far as the back benchers on the Government side are concerned. He put them into their various classes and told them exactly what they are and what they have been doing all these weeks. I propose to make a few friendly comments about the Government Front Bench.

I am glad to know that the back benchers on the other side are relieved.

Almost the whole of the burden of the Bill has been carried by the Chancellor of the Exchequer, the Financial Secretary and the Economic Secretary. They will appreciate that it is no complaint of mine when I say that we sometimes think that it would have been nice to have had some other Minister intervening. There was one point at which we nearly got the Minister of State, Board of Trade, on to his feet, but, unhappily, the Chancellor walked in at that moment and, metaphorically speaking, gagged him. We also hoped that the Joint Under-Secretary of State for Foreign Affairs might have joined in, but he also was kept firmly in his place.

However, the Solicitor-General has intervened once or twice; and I want at once to come to his defence. My hon. Friend the Member for Islington, East (Mr. E. Fletcher) was perhaps a little critical of the Solicitor-General's custom of reading out the wrong brief to an Amendment. I want to tell the Chancellor of the Exchequer not to discourage his right hon. and learned Friend. It enlivens the proceedings if every now and then the wrong brief is read out. It is true that we shall, as is our duty, point it out, otherwise there would not be any enlivening feature. But let the right hon. and learned Gentleman continue in that course, and I think it will greatly assist the good feeling in the Committee.

I will say a word or two about those who have borne the burden and heat of the day. I certainly endorse what my hon. Friend the Member for Islington, East said about the Financial Secretary. He was most painstaking, thorough and courteous throughout the proceedings. I am glad to see that he now looks a little better fed than on some occasions during the passage of the Bill. He has relaxed, to use the favourite expression of the hon. Member for Altrincham and Sale (Mr. Erroll). I do not know whether he is thoughtful as well, but probably he is not now because he does not have to speak any more on the Bill.

The Economic Secretary has also given us very good measure at times. He has had to deal with complicated Amendments. Even if I have not followed everything that he said, it looks as though one ought to be able to understand it when reading HANSARD afterwards. We are sorry that the hon. Gentleman is not with us this afternoon. I trust that he is not ill, but is engaged on important Government business. The Chancellor has been his usual bland and friendly self, and although we certainly have no reason to thank him for making concessions—he has made far too few—he has always rejected our proposals in a pleasant and amiable way. I suppose one cannot expect very much more from any Chancellor of the Exchequer.

I thank the right hon. Gentleman for the firm fight he has put up against the Leader of the House, who I am glad to see present. We have not seen much of him, but we know very well that he has been active in the background, egging the Chancellor on to go faster all the time. But the Chancellor has been stubborn and has represented the views of the Committee to the right hon. Gentleman, and I am glad to see that the Leader of the House has obviously been foiled in his desires.

I should like to say a few words about those who have taken part in these proceedings on this side of the House. My hon. Friend the Member for Islington, East and by hon. and learned Friend the Member for Kettering (Mr. Mitchison) have done noble service both in the drafting of many Amendments and in many contributions to our debates. They have a remarkable capacity for speaking with almost no notice at all on any subject, and, at the same time, speaking very much to the point.

Then there are my hon. Friends the Member for Stechford and the Member for Gloucestershire, South (Mr. Crosland), who have been wrongly referred to as the two Balliol boys. I am not quite sure whether they fell within the category of the middle classes as explained to us by the hon. Member, but they have been a tower of strength to the Opposition. I think they were very reasonable in not making more trouble about the insulting remarks thrown out by the hon. Member for Louth, which might have led to serious controversy between them, since only one of them comes from Balliol and the other one is associated with a college which is known for its fierce hostility to Balliol. It is just as well that we had not the scene that that sort of thing would arouse if it were said in Oxford itself.

My hon. Friend the Member for Edmonton (Mr. Albu) and my hon. Friend the Member for Sowerby (Mr. Houghton) have also played a very valiant part in these debates. As the hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond) said, my hon. Friend the Member for Sowerby is in an unusually strong position; but he is a person who tempers his opposition with mercy and is not too offensive to the Government Front Bench, even though be knows quite a lot about Inland Revenue.

As for the Opposition Front Bench, I am sorry that my right hon. Friend the Member for Battersea, North (Mr. Jay) is sweltering in the Brazilian jungle—if that is what he is doing—and is not here to enjoy these proceedings. He is a well-known and successful figure in finance debates. But my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) has graced our proceedings and made most important contributions.

I hope that my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) will not mind me saying that he has been in particularly good form. He made a number of trenchant and well thought out speeches in excellent English and they were dear and penetrating. He is in the fortunate position of being the only Member on these benches who has extracted a concession from the Government, and we envy him for that. I may perhaps now turn to the Bill, for I observe, Mr. Speaker, that you are looking a little anxiously at me.

If the right hon. Gentleman has really finished with his compliments there is still time for him to say a few words about the Bill.

I am much obliged to you, Sir, for not intervening until I had finished, because it would have been a great pity had I to leave anyone out. It might have led to a lot of jealousy on both sides.

Briefly, I will say this about the Bill. There is not a great deal in it to which we take strong exception. In fact, our main criticism is reserved for some of the Estate Duty provisions, and particularly Clause 28, which makes this unnecessary concession to the so-called small businesses. I do not propose to repeat all the arguments, but the answers from the Government side of the House which have been made seem to justify our criticism of their determination to ignore the conclusions of the White Paper on Small Estates. There seems to be no case there at all for what was done.

We know also of the justifiable indignation on this side of the House at the concession which the Government made in the face of back bench pressure on the question of aggregation I hope that after the debates we have had we will hear no more from anyone on the Government side that this concession was for people of limited means. The Government ought to come clean about it. Let them be frank and say that the people who are to get the benefit are the people with large estates, and by that I mean with estates of over £10,000. That is bound to be the case. One has only to look at the Estate Duty scale to see that it will be these people who will get the benefit of that particular concession.

There are wider issues involved here which have been referred to in the course of our debates. I endorse what my hon. Friends have said about the interest hon. Members on the Government side have taken in this Estate Duty business. They turned up in force for consideration of the Clause in question. There were far more Government supporters present when that Clause was under discussion than there were for any other Clause in the Bill. They are very interested in the subject. There is no reason why they should be ashamed of it, but that is a fact.

They protest that they are in favour of the equalitarian tendency, and I dare say that there is not a right hon. or hon. Gentleman on the Government benches who would not say that he was in favour of equality of opportunity. But the plain fact is that so long as wealth is inherited on the scale that it is still inherited today and distributed in such an uneven fashion, then we shall not have genuine equality of opportunity. To cut short my remarks on this, I should just like to commend to hon. Members opposite a book which my right hon. and learned Friend the Member for Bishop Auckland (Mr. Dalton) wrote on this subject many years ago, and which is still the best available book on the subject, "The Inequality of Incomes." I hope they will all read it and understand, as a result of reading it, how hopelessly inconsistent their attitude is on this matter.

That removes the last possible excuse that hon. Members opposite may have. There is no question of the hon. Member for Altrincham and Sale going to the Library to borrow a copy. He can buy one.

I come now to Clause 14, which is concerned with Income Tax. We were all most interested by the reference of the hon. Member for Altrincham and Sale to business executives, and I noticed that several hon. Members were touched by the tear-jerking account of the situation in which those people find themselves. I am bound to say, however, that I felt there was a little element of fantasy in his description of what actually is happening and also what he supposes might happen if there were to be large tax concessions.

A little ludicrous was the idea of business executives with aprons on scrubbing or washing the floors or washing up the plates while longingly thinking of the hours they might be spending sitting in an armchair, not reading Dryden, as was first supposed, but thinking of their businesses. That is what the hon. Member said they otherwise would be doing instead of washing up the plates.

But I am not so sure that one cannot think about business as one washes up. I do not think that that is their real difficulty. If the hon. Member had argued that they had a lot of intellectual work to do in the evenings, like Members of Parliament, then he would have been advancing a much better argument. I must say that the whole picture seemed to me a little unreal. Anyway, I always understood that the tired businessman usually had other interests.

I want to say a word or two about investment allowances. I was glad to hear the hon. Member for Orkney and Shetland say that he did not think that the Government were doing enough to regulate investment. He thought it was not going in the right amount in the right direction and I welcome strongly his good Socialistic planning. If he really believes that investment ought to be directed and planned by the Government, as he clearly implied, there is no reason at all why he should not join us in the Lobby more frequently than he does at present.

The hon. Member for Altrincham and Sale took the view that a straight cut in the standard rate of Income Tax was better than an investment allowance. I think that point has been admirably dealt with already, and I just want to tell the hon. Member that there is no doubt that if stimulation for investment is wanted then it is best done by a direct stimulus.

I can assure the hon. Member for Handsworth about our attitude on the matter. He must be aware that we have, in principle, accepted the investment allowance and given it strong support. I was glad to see him looking in our direction with an anxious eye when he spoke about future Chancellors of the Exchequer, and when he hoped that they would have the same views. It is just as well that he should be thinking now about the change of Government which will doubtless come in the near future. I can assure him that, if this comes about, he need have no serious anxieties. Naturally, one cannot commit oneself because one does not know the full circumstances but, in general, we take a favourable view of the investment allowance and we hope that it will do the trick.

I could not quite follow the Financial Secretary on that point. The right hon. Gentleman seemed to think it surprising that we supported the investment allowance although he was glad that we did so. Surely he will appreciate that we did the same last year. We have been saying that as soon as the immediate pressure for rearmament has eased sufficiently there ought to be special encouragement to investment. Indeed, many hours were spent last year on our part in pleading that the initial allowances should be increased, We are perfectly holiest about this, and when the Government come forward with a proposal of which we approve, we say so. The hon. Gentleman must not think back in terms of the way he used to behave when on the Opposition benches.

We now come to the end of this Bill. For the most part our proceedings have been orderly and have been conducted in a reasonably friendly manner. Of course, there has been hard-hitting argument in our debates, as there should be. I cannot say that we are particularly pleased with this Bill. We are much more concerned with what is not in it, which I must not mention, than with what is in it. So I will leave it there, and if by any mischance the right hon. Gentleman or one of his colleagues—I do not mean him personally—is Chancellor of the Exchequer next year, I hope we shall have a Bill which is more adequate to meet the needs of the country.

7.2 p.m.

As the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) has said, we have come to the end of our discussion. I was interested in his prize-giving manner and would recommend the academies in need of a genial outsider to give away the prizes to make application to the right hon. Gentleman. In fact, from the purring sounds around him, which are still continuing, he may feel that his activities today augur well for his future political career. I think he was quite right to name only one book as a prize and so to keep firmly to his side the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton), but if all the children have the same book, what a very dull prize-giving it will be.

I shall not follow the example of the right hon. Gentleman, Mr. Speaker, for fear of your intervening, but he was quite right to pay a tribute to my right hon. Friend the Financial Secretary and to my hon. Friend the Economic Secretary, who have borne the burden of the day for the Government. I am glad that after the end of rationing my right hon. Friend is looking a little fitter than he was.

I want to pay a tribute to my supporters and thereby to fortify my own position from continuing pressure from the 1922 Committee. I understand that I have several further meetings with them before the end of the Session, so the less I say about my own supporters the better, except that they have taken a very constructive part in our debates, and I only hope that any of them who wished to speak on this occasion may not have been cut out by the exigencies of time.

I also want to pay a tribute to one section of the population and their work, namely, the local commissioners of Income Tax. These are unpaid public servants who perform a task of great importance in the smooth operation of the taxation system by their help in the administration of Income Tax, and especially in the determination of appeals, in which they are of great help to us. It is in the best British tradition that such unpaid residents in a district should help us, and I do not think it is inappropriate for the Chancellor of the Exchequer from time to time, when we are remembering all those around us, to remember this section of the population.

Now I come rather more rapidly than the right hon. Gentleman to the Bill. The arguments of the Opposition have revealed, as they have really acknowledged, that they have nothing to say about it. Indeed, it is a recommendation of the policy of Her Majesty's Government, in introducing a Measure of this kind, that we are able to sustain our case over such a period with such absolute success. As my hon. Friend the Member for Handsworth (Sir E. Boyle) and my hon. and gallant Friend the Member for Berwick and East Lothian (Major Anstruther-Gray) have said, there is nothing, either in the confidence in our financial and economic affairs as seen from the world outside or in the progress of our economy internally which other than justifies the introduction of a Finance Bill of this kind, based on a Budget of the kind we have had to introduce this Session.

If these were dull, they were certainly successful, and they were the right thing to do for our people, because it is the fundamental aspect of our affairs which most interests the working people of this country, namely, their employment, which now stands at a record level of employed persons in our history: their production, which now stands at a record level in our economic history: and the general outlook for confidence and in sterling which I think have seldom stood higher in our island story. These are, therefore, not bad situations, and it is in this atmosphere that we introduced this Budget, it was to this atmosphere that the Budget was attuned, and it is in the hope that this progress will continue that we pass the Third Reading of the Finance Bill today.

I should be out of the order if I entered any further into the economic situation, but in answer to the hon. Member for Gloucestershire, South (Mr. Crosland), who has a special, intimate knowledge of our economic affairs, I will only say this about our resources: that with this high level of employment we are now working more up to our resources than we were a few months ago, that since the index of industrial production has risen we shall have to look for further progress to increased productivity, and that this is of the greatest importance to the country at the present time.

Our exports have risen. In general there are no marked shortages but we are certainly running now up to full load, and therefore it is important for all concerned in passing the Finance Bill today against the background of our economic situation to realise that further productivity, particularly in coal, is of the utmost importance to the future of our economy. In passing this Finance Bill, therefore, we should not sit back with satisfaction. We should be thankful that we are living in a period of comparative prosperity compared with things that we have been through in the past, but we should make further efforts if we are to sustain the advance already made.

I have only one or two observations to make about the Bill. The first is in answer to the hon. Member for Islington, East (Mr. E. Fletcher) who brought to the concluding stages of the Bill as much clarity and ability as he brought to its intervening stages in Committee. However, the hon. Gentleman fell, like most of his companions on the opposite side of the House, into a real difficulty about concessions. He first said that we had made no concessions and then he said that we had paid attention to representations made in previous years by hon. Gentlemen opposite. In fact, two concessions—the concession to the cinemas, which I think so essential, and the concession on company reconstruction—were the result of cogitating upon points put in previous debates.

One was an important concession to the point of view of the right hon. Gentleman the Member for Bishop Auckland, and the acceptance of the Amendment of my right hon. Friend the Member for Blackburn, West (Mr. Assheton) was also valuable in the general picture. So we did attempt to listen; we may not have done very much, but if those examples of concessions made this year as a result of previous discussions are to be followed in the future, hon. Members may have a little more hope than they have had in the course of the debates this year.

I must mention that this Bill does not contain many points referred to in the Report of the Royal Commission, and therefore I have not been able to refer to them in the course of our discussions, but they have all been noted in the debates leading up to this Bill.

My hon. Friend the Member for Southport (Mr. Fleetwood-Hesketh) made a very valuable intervention in our debates and I felt that he very nearly convinced the right hon. Gentleman opposite on the subject of Command 8295, "Estate Duty and Family Businesses." In any case, even if he did not, he made a good speech. I do not accept the arguments of the hon. Member for Edmonton (Mr. Albu) about 99 per cent. of old traditional businesses now not being practical, and he used the word "nepotism" in association with their management. I think that that is a most exaggerated picture. If a family business is a bad one and the family declines and decays and indulges in nepotism, the business goes to ruin, but it is by no means the case with this country that it owes its greatness to novelty in one generation. It owes its great degree of development and prosperity and most of its originality to the fact that we are in the habit of taking what we can from the traditional past, enriching it in the present and handing it on to the future.

That is the object of the concessions which I have made, small though they are, in the Estate Duty field. Hon. Members will remember that I promised last year to study Estate Duty and do what I could in a small way, which is precisely what I have been able to do on this occasion.

My hon. Friend the Member for Altrincham and Sale (Mr. Erroll) dealt with the investment allowances and asked that a warning be given if the rate was going to be altered. My chief answer is that I am certainly not contemplating anything of the sort of alteration that has been done in this field before. I would only remind him that when initial allowances were suspended, warning was given that that would take place and that in the case of ships already ordered or under construction special provisions were made. I cannot do better than say that such a respectable precedent would certainly be considered in the event of any alteration of the rate taking place. But we should look a little further and regard this not as an ephemeral matter but as one which has come to fortify the general system under which we wish to encourage industry.

There was some degree of novelty in this kind of allowance, but as the Financial Secretary clearly put it, the fact that it has been so widely received and accepted in the House will mean, I trust, that industry will take advantage of it because, as I explained in the Budget, the weakness of our economy last year was the non-improvement of investment in the private sector, particularly manufacturing industry. It is in the national interest that Ministers should not only state what is wrong but—and it is an essential feature of my task at any rate—that they should try to put things right and that people should take advantage of their efforts and thereby play their part in the national improvement. I hope that that will he the case with investment allowances. If so, they then may be able to show some such improvement in the figures as the hon. Member for Orkney and Shetland (Mr. Grimond) illustrated has been shown in the public sector, in coal and elsewhere.

There has been a certain controversy about taxation—whether it is good or bad. My hon. Friend the Member for Louth (Mr. Osborne) has made quite clear what views I have on the subject and I will not rehearse again the arguments which I have used before. We, of course, are carrying forward what I said in my Budget Speech was our task, namely, that we must attempt so to control Government expenditure that the outlook in respect of taxation can be better on future occasions. But when hon. Members say that we might have done better than we have done, and the hon. Member for Orkney and Shetland says that we have produced only a small surplus and the national account is only just balanced, hon. Members must remember that we are carrying the biggest load in our history in defence and in the social services, and we have special arrangements for food and agriculture which I think are supported broadly by all parties. If we are to carry these burdens one cannot expect Finance Bills which will give us very much more Agreeable concessions than this one gives. The more the public realises this fact the fairer things will be, but we must certainly attempt to tackle this question of taxation, and we are doing our best to tackle the question of expenditure.

As long as people, both in the House and outside, do not expect wonders, we shall continue to do our best, but there are no miracles in an age when we are carrying a burden of this sort. We should only be thankful that we are seeing to it that we have national security, that we have retained an improved social security, and that we have tried to give a little hope, which I think has been reflected in the atmosphere of our agreeable debate this afternoon.

Question put, and agreed to.

Bill accordingly read the Third time, and passed.

Electricity Reorganisation (Scotland) Bill

As amended, considered.

New Clause—(Rural Electrification Fund)

Each Board in Scotland shall set up a fund to which it will allocate a reasonable proportion of its profits each year for the extension of rural electrification and the lowering of charges.—[ Mr. Woodburn.]

Brought up, and read the First time.

7.17 p.m.

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

I suggest that we also discuss with this Clause the Clause—"Provision for rural areas"—which is also in my name and those of some of my hon. Friends. Both have very much the same purpose. My hon. Friend the Member for Central Ayrshire (Mr. Manuel), who has his name to this Clause, is very concerned about the progress that is being made in rural electrification and regrets very much his absence today. I put it to the Secretary of State for Scotland that this is a matter of very great importance in the re-organisation of electricity supplies in Scotland.

We are all very glad to hear about the progress of the North of Scotland Hydro-Electric Board in connecting farms and isolated areas. It is something to be proud of that in Scotland, with its great extent of isolated countryside, such as in the Highlands, which it is difficult to supply with electricity, the people are having the advantage of modern science and that the building of the new station at Dounreay may make more electricity available in that area. It is also interesting to learn that, although at first it was expected that the Hydro-Electric Board would have to export a great deal of its electricity to the Southern part of Scotland, the continuing and expanding de-demand in the board's own area is using up a very large percentage of the electricity that is being produced. In South-West Scotland probably more progress is being made in the electrification of rural areas than in any other part of the country.

If we are to make the best use of our labour on the farms as well as in the towns throughout Scotland, we must make the best use of power, which is certainly much more easily carried in the form of electricity than in any other form. We hope, therefore, that the Secretary of State will give us some idea of the progress that is now being made and that it is hoped will be made.

One of the most regrettable things about the Bill is that the Secretary of State, in assuming the task of the electrification of Scotland, has not given us any ideas of the progress that will be made and what the result of the Bill will be in relation to the subject matter of the new Clause. If a ticket is put up saying, "Under new management," people expect to see some new ideas. So far the Secretary of State has not produced any ideas to justify the Bill. When putting down this Clause, we certainly thought we would offer one idea and the right hon. Gentleman could give his opinions about it. We want to know whether he has any plans for improving the electrification of agricultural areas of Scotland, when extensions are likely to take place, and when Scotland is to get the benefits of electricity outside the great towns.

We should also like some information about the rationalisation of the charges. I know that some progress has been made about the huge differences between one area and another. In the old days, Edinburgh was supplying electricity for ½d. a unit whilst in Musselburgh, near by, the charge was many times ½d. That kind of distinction between two adjacent areas has been modified to some extent. We are bound to realise that if we make the distribution costs of electricity on the same basis in the country as in the town that constitutes a hidden subsidy, but, nevertheless, it is the same with the Post Office. We must aim at trying to give country areas the benefit of the cheaper rates.

As far as possible we want to encourage our people to keep on the land. If one thing happening throughout the world today is menacing the future more than another it is that people who ought to be producing food are being driven into the towns and more and more town dwellers are building up a civilisation which may collapse for want of food. If we could take electricity into the country areas to give the people there an opportunity of power for the production of food, we should do something, not only to make it more pleasant to live on the land, but more productive to live on the land and, by giving people an opportunity of earning a living on the land, we should make the inducement to live in towns slightly less.

Even to a minor degree, such as by extending the facilities for wireless and television in the country cottage, we might be able to provide that extra inducement—an important one. It would give the country people amenities in the evenings which normally they might have to seek in towns. Even in the towns I am satisfied that many people who used to leave their homes to go to cinemas are now resting quietly at home and getting repose looking at television after a hard day's work. I hope that television will become an educative service and not degenerate into producing pictures which merely amuse and in no way instruct or elevate—

The right hon. Member is certainly getting well away from the new Clause by discussing television.

Actually, television facilities would be one of the results of extending electrification to the rural areas, which at the moment is quite impossible owing to lack of electricity. If the Secretary of State will expound his ideas, I hope that among them will be the amenities which arise from electricity by way of producing power for milking and running the farm, and for what I believe to be of no less importance, the provision of entertainment for a man when he has finished work. All that comes from electrification of rural areas, I think that maintaining manpower in the rural areas will be one of the major contributions which electrification can make. The Secretary of State will be the "new management" which is to show Scotland how much better it will work under this Bill. We should like the right hon. Gentleman to open his mind a little to us and show us what he has in mind in regard to these great plans he has when he takes over this task—

If the Secretary of State attempted to do such a thing I should be compelled to intervene, because the new Clause proposes to

"set up a fund to which it will allocate a reasonable proportion of its profits each year for the extension of rural electrification and the lowering of charges."
Hon. Members cannot enter on the whole question of electrification of the rural areas on the Report stage of the Bill.

I beg your pardon, Mr. Speaker, for expanding the debate at this stage. Perhaps the right hon. Gentleman will be able to say whether he is prepared to consider the suggestion made, or offer some hope he has in mind for extending electricity to the rural areas of Scotland. We await the illuminating speech he will make when he replies.

I hope that my right hon. Friend will not advise the House to accept the new Clause, because I do not think it is a very sensible one.

On a point of order, Mr. Speaker. I understood that this new Clause required to be seconded, and I was under the impression that you had called me.

The new Clause does not require a seconder, as it was moved by the right hon. Member for East Stirling-shire (Mr. Woodburn), who is a Privy Councillor.

My opposition is to the words in the new Clause and not to the words used by the right hon. Member for East Stirlingshire (Mr. Woodburn) in moving the Second Reading of the Clause, which are two entirely different things.

To save the hon. and gallant Member from getting worried, may I say that if the Secretary of State has better words which could be used, we shall not object to their being used.

What the right hon. Member is trying to do in this new Clause is to ask the Government to put into the Bill provision for allocating sums over and above the ordinary charges—and out of the charges now imposed—to a fund for the extension of rural electrification and the lowering of charges. I am speaking for the North of Scotland Hydro-Electric Board, as I do not know anything about the board in the South.

The first words of the new Clause are. "Each board," so presumably one is the North of Scotland Hydro-Electric Board.

The right hon. Member nods his head, showing that he is in agreement with me and in disagreement with his hon. Friend the Member for Central Ayrshire (Mr. Manuel).

This seems the wrong way to finance rural electrification. The Hydro-Electric Board comes to this House from time to time and gets a Bill through authorising a sum of money for capital development. I think that last time the amount was £100 million. As each scheme is brought forward, the Secretary of State certifies that that capital is necessary and it is raised on gilt-edged terms, on the cheapest terms in the market.

That seems the right way of doing it. In that way the board gets the money on the cheapest possible terms, but by this new Clause it is sought to alter the terms. The income of the board comes only from the consumer. If we add to the consumers' charges provision for the allocation of a special fund, we cannot at the same time lower the charges but, ipso facto, we shall be heightening the charge. To that extent this new Clause does not seem to carry out the wishes of the right hon. Member and his hon. Friends.

For those reasons I hope that my right hon. Friend will not accept the new Clause. Although the object of extending rural electrification is one which we all have and we all want the charges to be lowered, this seems the wrong way of achieving that object. What we want is to raise the capital on the most favourable terms, as is done under the original Act and successive Acts. We do not want any extra charges on the town or country dweller in order to set aside a fund to reduce charges and for the extension of rural electrification.

In distribution to the farmer, it seems that the North of Scotland Board has a very sensible arrangement. It asks for a guarantee based on the capital expenditure involved in connecting farms to the mains supply. If I have any criticism to make of the Hydro-Electric Board, it is its failure from time to time to explain the capital costs of making these extensions. There have been complaints from time to time, but when they have been explained—it is the public relations aspect which is weak—it has been perfectly obvious that there was an explanation of cases in which charges were apparently high.

7.30 p.m.

Let me take, as an example, the case of a 33,000-volt line crossing a farm. The farmer says, "It is absurd that I should have to pay a guarantee of, say, £100 to bring lighting to my farm when the electricity line is going across it." He does not understand that a 33,000-volt current cannot be brought into his farmhouse; it has to be stepped down to 240 volts. To do that requires at least one transformer, probably two. The cost of this, plus the cost of the high-tension cable, is very heavy.

In undertaking schemes of development, as it is doing, the North of Scotland Hydro-Electric Board is doing so extremely economically, both to the taxpayers, who have to guarantee the capital, and to individual consumers. These development schemes connecting farm cottages seem to be very reasonable. That is the way in which to extend rural electrification, rather than to embark on what is proposed in this attractive new Clause—attractive in words but totally impracticable in practice.

The hon. and gallant Member for South Angus (Captain Duncan) has founded his case against this new Clause largely on the performance of the North of Scotland Hydro-Electric Board. I have no complaint to make about that. Time and again, to the considerable mortification of Members opposite, I have cited the things which have been done by that board in extending electricity supplies in Scotland, and in lowering charges. They did not show any particular enthusiasm for the things I said about the work that was done by that board.

Indeed, as we know, Members sitting on the Front Bench opposite opposed, on one particular occasion very vigorously indeed, a very vital scheme when it was introduced in the House, and to which the hon. and gallant Gentleman referred. However, I do not want to go into those matters—

It is one of my earliest recollections in this House, and one of the greatest opponents was the hon. Member who is now Joint Under-Secretary—

The hon. Member really must direct his remarks to the new Clause which is before the House.

I have departed from that other matter, but I must draw your attention, Mr. Speaker, to the fact that I was provoked. I am sorry that I succumbed to the temptation which came from the benches opposite.

Leaving all that aside, I turn to the foundation on which the hon. and gallant Member built his case. In the context of the Bill, this new Clause, to which I subscribe and to which my name is attached, has only one reference so far as interpretation is concerned, namely, to the amalgamation of the South-East and South-West Electricity Boards. In the Second Reading debate I pointed out that the North of Scotland Hydro-Electric Board is not affected by this Measure. Appreciating what that board is doing, and will continue to do, our fear was about the two former boards that are now to become one board. We wanted to try to ensure that the new South of Scotland Board would carry on in the South of Scotland work analogous to that which has been carried on in the North of Scotland.

We are faced with the fact—and this is really the fear that promotes this new Clause—that one of the areas which is now to be taken over is a deficit area. How are we to finance further electrification and lower charges when the area of one of the boards which is now to constitute the new South of Scotland Board is a deficit area? Last year, the accounts showed that the South-West Scotland Electricity Board had a deficit of more than £100,000. We put forward a new Clause of this character so that the Secretary of State for Scotland will be able to tell us how he proposes to carry on the necessary work which we hope will be carried on when the new board enters on its job.

I am certain that every one of us wants to see the new board doing well, but if part of its area is a deficit area, how is the board to do well? How is it to promote further schemes of electrification and lower charges when it already has a deficit, and when it is being removed altogether from the scope of the overall aid which would have come naturally from the British Electricity Authority had that area remained a constituent part of the great nationalised scheme which covers the whole of the United Kingdom. The Government are removing the new board from this source of help.

I am surprised to hear such a narrow nationalist outcry from the hon. and gallant Member for South Angus. If he imports a nationalist attitude into the discussion, the debate will probably become somewhat bitter. That is the last thing that I, for one, would seek to raise on this occasion. We are asking, by means of this new Clause, how the Secretary of State for Scotland will ensure electrical extensions.

The hon. and gallant Member for South Angus has stated that he does not think that the words are the proper ones to use. We shall not quarrel about the words. All we want is that the idea should be accepted. Is the hon. and gallant Gentleman or any Member on the benches opposite opposed to the idea of extending electrification throughout the South-West and South-East of Scotland? Are they objecting to the lowering of charges to the consumers? I take it that they agree with these things. That being so, I assume that, subject to proper wording, they will support the Clause.

Why did the hon. and gallant Gentleman go to the trouble of speaking? All he needed to do was to say that he supported us. When he spoke he opposed us. Now he sits nodding his head in agreement with what I am saying. Does he oppose what I am saying? Apparently he cannot make up his mind now. He is in a worse state than ever; he does not know where he is. First, he gets up and opposes the new Clause. He sits down and listens to me for five minutes and then he supports the Clause. Now he does not even know where he is; he does not know whether he is for or against.

Let me just finish my point. What a terrible pass Toryism in the East of Scotland has come to. It does not know where it is.

It knows exactly where it is. The point of the speeches of the right hon. Member for East Stirlingshire (Mr. Woodburn) and the hon. Member for Tradeston (Mr. Rankin) is that they want to extend rural electrification and to lower charges. Both sides agree on that, but what I do not agree with is the wording of the Clause, and I said so.

The hon. and gallant Gentleman is easier meat than ever. He agrees with everything but the words. All right, We have no objection—

as my right hon. Friend has already indicated, to handing the Clause over to the Secretary of State's technical experts if he will accompany his supporters and say that he accepts the principle in the Clause. I await a sign from him.

I do not want to cause any disruption in the Tory Party—it is unnecessary; there is enough already—but the hon. and gallant Gentleman says that the Secretary of State accepts the Clause. The only trouble the hon. and gallant Gentleman has is with the words. I am prepared to leave that matter with the Secretary of State. Will the Secretary of State accept it? Does he accept the principle contained in the proposed Clause, which has the support of at least one hon. and gallant Gentleman opposite?

However, nobody now knows where the hon. and gallant Gentleman is. First he supports the Clause, then he does not support it, and then he half-supports it. He will have to make up his mind. Perhaps the Secretary of State will accept the principle in the Clause and we can then await the form in which he puts it. What he brings forward will have our support if it embodies the principle in the proposed new Clause.

7.45 p.m.

The hon. Member for Tradeston (Mr. Rankin) invites my right hon. Friend to accept the proposed Clause, and he says that he does not mind whether he accepts the words provided he accepts the idea. The trouble is to know what the idea is.

The Clause calls upon the Secretary of State to impose a duty upon each board to:
"…allocate a reasonable proportion of its profits each year for the extension of rural electrification and the lowering of charges."
The hon. Member asks how this can be done because one of the two districts which will form the new board made a loss last year.

I did not say anything of the kind. I drew attention to the fact that one of the areas to be taken over made a loss last year, and I asked the Secretary of State what he was going to do to overcome that fact so that rural electrification might be extended and charges lowered, which, I presume, is his policy.

As my hon. and gallant Friend the Member for South Angus (Captain Duncan) pointed out, the implication was that it would be much better if electricity were developed in the South-West of Scotland from profits made in England. Apparently, profits are usually a very bad thing, but if they are made in England and used to develop Scotland the hon. Member for Tradeston does not think quite so evilly of them.

The first point is surely that, as my hon. and gallant Friend said, the normal way of carrying out development is for the electricity authorities to borrow in order to do so and not to set aside profits for the purpose. I understand that that is what has been done on the whole so far under the British Electricity Authority.

Surely the hon. Member is not so naïve as he implies when he talks about the setting aside of profits. Obviously, the amount of profits set aside would go towards annual loan charges on a capital sum which would be borrowed. If a certain proportion of profits is being earmarked, we are not saying that is capital expenditure: it could be annual loan charges.

That seems to be stretching the wording of the Clause a long way. If one borrows, one has to service the loan. Presumably one would borrow on the basis that the consumption in the areas concerned would sooner or later supply the necessary revenue to service the loan.

The hon. Member for Tradeston indicated that he did not think all was well in the South-West Scotland area, which made a deficit last year. He asked my right hon. Friend what was happening now. I do so too. My information is that things have not gone too badly in the South-West of Scotland recently. I do not think the hon. Member need worry his head on that score.

The main point is whether what is proposed is the right way to go about it. The Clause refers to the allocation of a proportion of profits for the extension of rural electrification. I should have thought that that was not the right way to go about it. Also, surely criticism is implied on the two areas for not having proceeded fast enough with rural electrification. However, we know that the South-West of Scotland more or less pioneered this work in the free enterprise days when the local authorities made a very good start.

The fact is that, in the South-West of Scotland, according to my information, up to the end of this year the number of farms supplied with electricity in proportion to the total number was higher than was the case in any other part of the country. What is more, the South-East of Scotland area is the fourth highest in the country, and a combination of the two may very well provide almost the highest proportion. It really is not worth while telling this new board to do something which is obviously being done so well. If it were necessary in the first place, why did not the Labour Government put it into the original nationalisation Act? Why do they make this proposal now when the South of Scotland Board is doing the job so well, and better than most?

If the hon. Gentleman thinks that everything in the 1947 Act was so satisfactory, why on earth does he think we ought to have these 19 Clauses in this Bill? The South-West of Scotland was doing very well.

The South-West of Scotland is doing very well already, and that is my argument. I believe that this particular Clause is unnecessary, but it is a very different thing to move from that statement and say that the whole Bill is unnecessary. The better the South of Scotland is doing, the more it should be allowed to go on by itself, and that is what we on this side want to do.

If the hon. Gentleman says that we are doing so well, and that it is not necessary to have this Bill, why does not somebody on the Government Front Bench tell us why it is necessary to have the Bill at all?

We are debating the new Clause not the Bill itself.

Thank you very much, Mr. Deputy-Speaker. It seems to me that the Opposition, at the moment, are putting forward a Clause which is not necessary. If they feel that the Bill itself is not necessary, why do they want to waste time in adding this new Clause?

The second point is that they are asking for profits to be set aside in order to lower charges. I do not know what on earth that can possible mean. Does it mean that the charges have to be increased first of all in order to lower them in the following year, or does it mean that the Opposition are not satisfied with the efficiency of the South-West and South-East of Scotland Boards, and think they can get a good deal more economy? I made inquiries about this, and I am told that, in the South-West of Scotland, the number of people employed in relation to revenue, unit consumption and customers is something of the order of half the number in the case of the South of England. It is not much good setting aside profits to lower charges in that respect, and I submit that it is a waste of time of the House to bring forward a new Clause of this description.

I hope the hon. Member for Dumfries (Mr. N. Macpherson) will forgive me if I do not follow him in the argument he was using against this Clause. It occurred to me that the whole trend of his argument was that, in the past, this work had been done satisfactorily in the area of the South-West of Scotland Electricity Board—and I presume also in the area of the South-Eastern Board—so that he felt that the special provisions for which we are asking in this Clause were unnecessary.

I agree with him whole-heartedly. My fear is that, because of the break-up of the British Electricity Authority, and because we are now to have the South-West of Scotland Area Board standing on its own feet—and the same applies to the other board—there may be a curbing of initiative, a cramping of their style and a lessening of the work which has been proceeding so satisfactorily since the British Electricity Authority came into being. Accordingly, I accept responsibility for having something to do with this new Clause. I felt that, once the principle was being hammered through the House, presumably because it was argued on the benches opposite, as well as up and down Scotland, this was going to be a great thing for Scotland, we ought to try to show that there were some dangers in it and try to take some steps to provide safeguards against those dangers.

I hope the Secretary of State will not dismiss this Clause offhand, because there has been some thought behind it, and, while it may appear to the hon. and gallant Member for South Angus (Captain Duncan) and the hon. Member for Dumfries not to have much substance, I think they will both agree on the principle outlined in it—that rural electrification should proceed apace, and that we should have a lowering of charges wherever that is possible. Any farmer in Scotland who wants electricity on his farm will tell those hon. Members that they want it a bit cheaper than it is now. If we agree about the substance of the new Clause, we disagree particularly about some of the gingerbread that has been placed before Tory audiences at garden fetes up and down Scotland at which, if one rolls a penny on a board, one may possibly get 6d. at the end of it. The Front Bench opposite might know something about the luck at the weekend.

I have made some inquiries, and I have found that the present position is that the South-East of Scotland Board have connected 62 farms in the board's area, and that, since the beginning, 2,615 farms have been connected to the board's supply. That still leaves 3,447 farms without a supply, and I understand that in the future not all of these farmers would be willing to take the supply, though a large number of them would. I am sure that the Secretary of State is keen to see farms operating with the benefit of electricity, and that he will agree that farms today, and especially dairy farms, cannot operate most successfully unless they are provided with the necessary electricity. On the assumption that 85 per cent.—

As I read the new Clause, it deals merely with the duty of setting up a fund.

May I ask you, Mr. Deputy-Speaker, if I would be out of order in trying to argue why that fund is necessary?

I think that would be out of order, particularly on this new Clause, which provides that each board in Scotland shall set up a fund to which it shall allocate profits. That is what it does, and nothing more.

How then am I to speak about the lowering of charges if I am not allowed to talk about farms or rural electrification?

I have nothing to do with the drafting of the Clause. I merely say that this new Clause which has been proposed is limited to the terms set out on the Order Paper. I have had nothing to do with its drafting.

8.0 p.m.

The Clause reads:

Each Board in Scotland shall set up a fund to which it will allocate a reasonable proportion of its profits each year for the extension of rural electrification and the lowering of charges.
Any argument in favour of rural electrification, and any point showing the need for it or for the lowering of charges, would therefore appear to be valid, and would appear to be the only valid argument in support of the setting up of a fund.

That would not be a valid argument at all or come within the terms of the Clause. The necessity for rural electrification may be what it may; the point does not arise here. We are concerned whether a fund should be set up for that purpose.

I listened carefully to the speeches made from the Government Benches, and I submit to you, Mr. Deputy-Speaker, that they were miles wide of the point. The hon. Member for Dumfries (Mr. N. Macpherson) talked about what has happened in South-West Scotland under free enterprise, and the hon. and gallant Member for South Angus (Captain Duncan) made a long speech in which he talked about the borrowing powers of the North of Scotland Board. All of that was miles away from the Clause.

That may very well be. We had better get back to the proposed new Clause.

I am sorry that your Ruling will sadly constrict my argument. I appeal to you Mr. Deputy-Speaker. I have gone to considerable trouble and some difficulty in trying to assess the commitments in the areas of both the boards. I have had communication with them and with the secretaries and chairmen on the work already completed.

The hon. Member must look for a better opportunity. I have nothing to do with the drafting of proposed new Clauses. The one we are discussing is concerned with a fund. It may be that what the hon. Member has to say is very important, but he must find another opportunity.

I am sorry that the Ruling has been tightened when I got up to speak. Previous speeches in the debate went very much wider than mine; the rules are difficult to adhere to when we get that sort of example. Perhaps I can say that a fund is imperative because the commitments for farms alone in the South-East of Scotland will be £4 million in the future and £5½ million if we take in all other properties. Loan charges, in borrowing at 7 per cent., will be £400,000 per annum.

Obviously, this all needs thought. I do not think these farms will get their supply. I do not see how the boards will get the money necessary to connect those farms and to repay the annual loan charges. Both the South-East and the South-West Boards will need to be very careful how they allocate their money. Possibly they can steer off other things. I do not know. They may be considering building suites of offices or other things that they would have the right to do, but if the choice is between those necessary things and the extension of rural electrification and lowering of charges, they will have to consider very carefully what to do.

The record of the South-West Board in rural electrification since it took over is splendid. I agree with the hon. Member for Dumfries that it was a record for Britain, unsurpassed by any other board. The board has covered 75 per cent. of the farms in its area, but there are still other farms to be connected. The total number of farms in the area is 9,720. The board has connected 7,160, leaving 2,560 still without an electricity supply.

It is estimated that of that number only 1,100 would take a supply and that the remaining farmers would not want it. I am certain that their reason lies in the installation charges, which are much too high. We have had the same definite indication in both board areas from members and chairmen that a proportion of farmers will not take the supply, even when it is offered. That is a deplorable situation.

Does the hon. Member understand that a large number of farms have their own plant and that is one reason why some farmers will not take a board's supply?

That may happen in isolated cases and is not as satisfactory as a supply from a board. That is the exception. As a general rule, the 1,100 cases have no supply of any kind. The board in each area has to consider how it can assist. Shall it be by a fund? In what way can it be done? There are 1,100 farms in the South-West area not prepared to take a supply. We all agree with the extension of rural electrification and the lowering of charges, and if a further lowering of charges would bring in a proportion of that 1,100 it is the job of the Secretary of State for Scotland to make some such arrangement.

The words we have put in our proposed new Clause may not be suitable. If hon. and right hon. Gentlemen on the Government Benches agree that it is laudable to extend rural electrification and to reduce charges to within the compass of farmers and farm workers, I hope they will support us. Let us remember that the cot house should have electricity as well as the farm house, and that the ploughman's wife ought to be able to use an electric iron while the cows ought to be milked by electricity. I hope that hon. Gentlemen will give us some hope that steps will be taken to enable us to reach the ultimate agreed target.

It might be helpful if I now say a word on this subject. We have had a fairish debate. It is clear what is in the mind of the Opposition in putting down the two proposed new Clauses, the second of which has been called.

I am much obliged to the hon. Member for Central Ayrshire (Mr. Manuel), because he put in the clearest possible language the reasons which moved him in putting down the Clause that we are discussing. He said that he saw dangers in the new set-up, as he called it, and principally that there might be a curbing of activity and a lessening of the work done by either of the two present boards. I am very much obliged to the hon. Member, because I now understand his point. I had some difficulty in appreciating it at first.

I quite appreciate that these fears may exist in the minds of hon. Members opposite and others, but I should like to say at once that the Clause is really unnecessary, because what it seeks to achieve is already provided for in the various Electricity Acts. I will take the matter step by step. As the House knows, the present Bill takes into account and applies to the south of Scotland, Section 1 (6) of the 1947 Act, which says that:
"In exercising and performing their functions the Electricity Boards shall, subject to and in accordance with any directions given by the Minister or Secretary of State under this part of this Act…(b) secure, so far as practicable, the development, extension to rural areas and cheapening of supplies of electricity."
That is precisely what the proposed new Clause seeks to do.

The only slightly new idea which it mentions is the setting up of a fund. If I may address myself to that question for a moment, I hope that I shall afterwards succeed in persuading the House that the proposed Clause is not necessary. As hon. Members know, these electricity boards have to take many things into account in planning their programmes. It is not a case of making profits out of which they can reduce their charges next year. These boards are not expected to make profits; they are expected to balance outgoings with incomings, so that over the years the two things cancel out. Provisions are laid down to that effect. They are not like private companies, which may aim at making substantial profits in order to establish funds for special jobs. These boards are not constituted in that way they are obliged to meet, so far as they think it wise, the varying requirements of their own areas.

In the South-East and South-West of Scotland many needs are apparent—including the needs of the towns and of the rural districts—and one has clearly to be balanced against the other. If I understand the argument correctly, the only thing hon. Members opposite really seek is an assurance from the Government that the machinery which is to be set up under the Bill will not allow a falling off in the steady advance of electrification, especially in rural areas, in the South-East and South-West of Scotland. I can give the House the assurance that it is the intention of my right hon. Friend to do his utmost to bring about that advance.

I am very pleased with the Minister's reply so far. I merely wish to correct a mistake which I made in my speech. I said that in the South-West area 1,100 people would refuse the supply. That is the number who will take it, leaving 1,460 people who will not take it. I should like to know what steps the Government are taking to bring about conditions in which that 1,460 people will take it.

I was coming to that point later in my speech, but I can reply to it immediately. The hon. Member is referring to the owners or occupiers of farms in South-West Scotland who have intimated to the board that they will not take the supply. As the hon. Member must know, the reason is that some of the people concerned are old people, who are not very worried about a supply of electricity, and financial considerations arise in other cases. We hope that this situation will change, but we cannot force people to accept a supply if they do not want it. I can assure the hon. Member, however, that we shall continue to try to persuade them to do what we all agree is the right thing.

The chances are that the refusal of one person to take a supply will mean that four or five others in the same area will not be able to get it, even if they want it. The question of charges must be kept very well in mind.

8.15 p.m.

That is perfectly right, and I appreciate the point. I think it will help hon. Members on both sides of the House if I refer to the present position in the South-East and South-West of Scotland, and the plans which the boards have in mind and will presumably carry out when they are joined together. I hope that I shall be in order in doing so.

I cannot see how the hon. Member can keep in order if he does so. This is a purely machinery Clause, to set up a fund for a specific purpose. It does not go beyond that.

I am sorry. I should have been very glad to have met the points raised by hon. Members opposite. It may be that we can get over the difficulty in some other way.

If the Minister will turn to page 16 of the Bill, he will see that paragraph 11 of the First Schedule says that one of the duties of the South of Scotland Board will be to

"establish and maintain a general reserve fund."
It also says that:
"The South of Scotland Board shall contribute to the general reserve fund such sums at such time as the Board may determine, and the management of the said fund and the application of the moneys comprised therein shall be as the Board may determine."
It looks as though the Bill provides for the establishment of some fund.

That is quite true. That is one of the reasons I hoped that the Opposition would not feel it necessary to press this matter to a Division. I have already said that the Bill covers the object of the proposed Clause, and the hon. Member has added to the information which I gave the House by pointing out that a reserve fund must be set up. It seems that we are all agreed that the necessary authority is there.

I can give the broad assurance—which is all that I am allowed to do—that we intend to push ahead with rural electrification to the utmost of our ability. With that assurance, I hope that the right hon. Gentleman and his hon. Friends will not press this matter to a Division.

Will the hon. Member say a word about charges? There are schemes in the South-East and South-West of Scotland.

The question of charges does not arise in connection with this proposed new Clause.

On a point of order. If one moves the Second Reading of a new Clause—which, I take it, is equivalent to moving the Second Reading of a Bill—is it not legitimate that one should be able to give reasons why a fund is to be set up, and what is to be the purpose of that fund, especially when it is mentioned in the Clause? The proposed Clause says "for the purpose of," and I submit, with respect, that any purpose mentioned in the Clause would be within the realm of the debate.

I am objecting to something very much wider than that. The reason a fund should or should not be set up is obviously in order. The arguments to which I have been objecting are those concerned with rural electrification and charges in general.

My hon. Friend the Member for Kilmarnock (Mr. Ross) asked the Joint Under-Secretary of State whether he would say a word about the lowering of charges, which is specifically dealt with in the new Clause, and the hon. Gentleman, I think, was anxious to do so, but he understood, as I did, Mr. Deputy-Speaker, that you were ruling that he should not do anything of the kind.

Surely the point is, Mr. Deputy-Speaker, that the Joint Under-Secretary of State is trying to justify himself in refusing this new Clause. One of the purposes of the fund is to lower charges. He has tried to show us that that is already catered for in the Bill. Is he not entitled to justify that?

The new Clause says:

" Each Board in Scotland shall set up a fund to which it wilt allocate a reasonable proportion of its profits…for the extension of rural electrification and the lowering of charges."
Those are the purposes for which it is to be set up, and they include the lowering of charges, but how the charges should be lowered and the subject of the lowering of charges in itself cannot, I think, be discussed. The purpose is to lower charges, but the Clause is not concerned with the charges themselves.

The purpose of setting up the fund is to provide for the extension of rural electrification and for the lowering of charges, and it seems to me, Mr. Deputy-Speaker, that if we are not entitled, on Second Reading of the new Clause, to discuss rural electrification and the lowering of charges, the only thing we can discuss is the setting up of the fund, but then we shall be discussing the setting up of a fund in vacuo, for we shall not be discussing the purposes for which the fund must be used. It would seem to me that if we are not free to discuss the purpose for which the fund is to be set up, the new Clause might as well not have been called at all.

We can discuss the setting up of the fund and its purpose to lower charges, but a general discussion of charges is outside the scope of the new Clause.

I understand that one area board has annual loan charges at 7 per cent. and that another has loan charges at 6 per cent. What about lowering these charges? Should they not be lowered?

I should not have intervened tonight had I not heard the most amazing discussion I ever have heard. I did not suppose, when I became a Member of Parliament, that I should witness such a performance as I have witnessed tonight. The Joint Under-Secretary of State gives reasons why he must oppose the proposals in the new Clause, and then it is pointed out by my hon. Friend the Member for Dunbartonshire, West (Mr. Steele) that what we are proposing in the new Clause is already provided for in the Bill. The Joint-Under Secretary of State argues against the proposals and says they are unnecessary. Yet they are already provided for in the Bill. The Government apparently have not read the Bill, for they did not know that the Bill provides for what we are asking should be included in it, though it seems that so long as the Bill provides for what we propose, then what we propose is all right.

The hon. Gentleman cannot have read the First Schedule, because it sets out what the purposes of the reserve fund are.

My right hon. Friend, when he moved the new Clause, was being quite sincere when he said that he was quite willing to have the wording of the new Clause altered. He was being quite honest when he said he was not satisfied that the wording was altogether right. What he was concerned with was that the authorities should be in a position to create funds to be used for specific purposes, notably for rural electrification.

The hon. and gallant Gentleman the Member for South Angus (Captain Duncan) pointed out, quite rightly—and I hope I shall keep in order in following him—that large-scale industry does not as a rule carry out capital development out of profits. I agree with him wholeheartedly. That is why I have always, in debates on taxation, disagreed with hon. and right hon. Members opposite that taxation should be lowered, because industrialists could not find the capital for capital development, and that is why I have always said that that argument is "phoney." Now the hon. and gallant Gentleman has admitted it. Major capital development is not carried out from profits at all. It is carried out by floating new capital, and the hon. and gallant Gentleman wants the electricity authorities to do so, too. So does the Secretary of State. The right hon. Gentleman, it is worth noting, thinks that private industry should be permitted to save its profits to plough back. Earlier today we were discussing an investment allowance to encourage it to do so.

The hon. Gentleman said that he hoped he would keep in order. I think that now he is going very far beyond the new Clause.

I am thinking in terms of this fund. I like the idea of a business having a fund that it can apply to the promotion of any new invention or any new techniques that may be developed. I never did like the idea of borrowing a lot of money from bankers and insurance companies, because my parents always told me, "Never keep a monkey on the roof if you can help it." I think that to borrow money from bankers or insurance companies is to invite a monkey on the roof. I have an idea that our nationalised industries and State enterprises and local authorities have always had a lot of monkeys on the roof, and have had them for a very long time.

When my right hon. Friend moved this new Clause he was anxious to enable the electricity authorities, by the provision of such a fund as this, to undertake capital developments without keeping any monkeys on the roof. The Joint Under-Secretary of State says, "It is all right for private industry to keep monkeys off the roof but not for the nationalised boards; they can borrow money: they can go to the City of London and get plenty of money at 7 per cent." Hon. Members opposite say that the public corporations, the electricity authorities, should not be allowed to make savings out of profits to create funds for capital development. Instead, they must borrow money under a State guarantee. Hon. Members opposite say, "They can pay 7 per cent. by State guarantee, so make them borrow, but if it is a private industry, let it make its profits while it can and plough them back—and give it an incentive to do so." Why not give an incentive to the Scottish Electricity Boards to collect their resources and carry out capital development with them?

This is a question of carrying out capital development by means of savings accrued from the enterprise rather than by means of the creation of new money. We hear much from hon. Members opposite about inflationary pressure and we all know that the greater part of that pressure arises from the creation of new money. If we are to undertake expensive capital development, surely it is better to undertake it by creating a fund out of current earnings instead of dissipating those earnings through paying dividends or paying 7 per cent. to the moneylenders. It is less inflationary to undertake it out of current charges, because in that way we shall withdraw purchasing power and use it for capital purposes, whereas if we borrow money the whole of that purchasing power, except for 7 per cent. interest, continues to circulate.

My right hon. Friend's suggestion is eminently suitable for present circumstances. As far as possible, we should carry out capital development through a fund created out of current earnings. We do not want all the electricity expansion to be in the big cities before supply is extended to the more remote parts of the rural areas. My hon. Friend the Member for Central Ayrshire (Mr. Manuel) does not want to see increased capital development within the cities while the rural areas are starved of essential supplies.

If electricity were carried to the rural areas at a charge within the capacity of agricultural workers and farmers, I do not think they would refuse it. They refuse it only because they know that the charges to be imposed are beyond their means. They cannot earn in their occupations enough to cover the cost of installation.

I hope the Secretary of State will seriously consider the spirit behind the new Clause and will see whether he can find a form of words to ensure that a reserve fund will be built up and that priority in its use will be given the rural electrification.

8.30 p.m.

I cannot understand the stubborn attitude of the Joint Under-Secretary of State, for no one knows better than he what this Clause is calculated to achieve. He knows perfectly well that the South-East Scotland Electricity Board had handed to it the most difficult electrification problem in Scotland, because the South-East of Scotland was an area into which private enterprise had made no attempt to bring electricity.

I wanted simply to show why we are so insistent on the creation of this fund. We have always had difficulty in getting electrification of the rural areas of the South-East of Scotland. I had to call on the assistance of the National Union of Mineworkers in order to bring pressure to bear—

We suggest that the creation of this fund will solve the Secretary of State's problem under the new set-up, because what we need in South-East Scotland is not new administration but cash. I trust the Secretary of State will accept our view.

This Clause was moved in order to get some ideas from the Secretary of State on rural electrification. Instead of getting anything from the Secretary of State, we had a lot of impromptu assistance from back benchers opposite, who seemed to be able to explain all about this Clause. But they found that the Joint Under-Secretary and my hon. Friends made their arguments look quite foolish.

The Joint Under-Secretary of State, far from refuting the necessity for a fund, pointed out that provision already exists for a fund, and my hon. Friends pointed out to the Joint Under-Secretary, for his edification, that the Bill does provide for a fund. In view of the assurance from the Under-Secretary that a fund is provided—

I do not want to interrupt the right hon. Gentleman, but I understand that he moved this Clause. I take it that he is now speaking without the leave of the House.

The right hon. Gentleman cannot make a second speech without the leave of the House.

With the leave of the House, I should like to say that the Joint Under-Secretary gave us his assurance, and I think that on the whole we are satisfied, that provision exists in the existing Acts and in this Bill for the provision of a fund, even though some of his hon. Friends object to a fund, and, with this assurance, I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

On a point of order, Mr. Deputy-Speaker. I think that you ruled that my right hon. Friend the Member for East Stirlingshire (Mr. Woodburn) could not speak a second time without the leave of the House. I think I am not wrong in submitting that any hon. Member even a back bencher, who moves a Motion on a new Clause is entitled to reply to the debate.

I believe that the position is that only the mover of a substantive Motion has the right to reply.

Clauses 4 And 5

I beg to move, in page 3, line 14, to leave out Clauses 4 and 5.

Considerable discussion took place on this Clause during the Committee stage on 12th May, when a number of hon. Members expressed doubt about the wisdom of setting up these two executives. It was feared that in practice we should have three bodies dealing with electricity generation and supply in Southern Scotland, and hon. Members asked also about the extent to which it was proposed to delegate the functions of the Board to these executives.

At that time, my hon. Friend the Joint Under-Secretary and I endeavoured to reply to these points, and we said that we did not wish to impair the overall responsibility of the board. We pointed out that the Bill expressly provides that the board shall not delegate to the executives functions relating to general financial control or the control of charges. What we thought at that time was that there was something to be said for having two subordinate bodies, one in the east and one in the west, who could, under the general direction of the board, keep the needs of these areas under close review and exercise oversight over local administration.

Since then, and in view of what was said during the Committee stage and also during the Second Reading of the Bill on 3rd February—especially by my hon. Friend the Member for Dumfries (Mr. N. Macpherson)—I have had further discussions with persons widely experienced in electricity organisation, and, as a result, while I attach no less importance than before to having an administration which would take full account of local needs, the Government are prepared to leave it to the board to advise on the structure which will ensure this. In order to achieve this, I am moving to leave out these two Clauses.

The result of this, if this Amendment is accepted by the House, as I hope it will be, will be to leave the board free—like the North of Scotland Board and English area boards to which the hon. Member for Cleveland (Mr. Palmer) drew attention during the Committee stage on 12th May, as reported in the OFFICIAL REPORT, column 1354, and further stressed in an interruption reported in column 1358—to consider the best arrangements for keeping in touch with the needs of all parts of their area and to review and modify their organisation from time to time in the light of experience, without the need for formal approval by the Secretary of State. I think that this is the -best course, and I hope that it will be agreeable to hon. Members on both sides.

I admit that I have to some extent changed my attitude as regards this proposition. That only proves that we have listened to the arguments that were advanced in Committee and have paid attention to them. We have gone into this matter with considerable trouble, and I hope that the House will accept the Amendment and realise that the Government are doing their best to meet the arguments put forward by hon. Members.

The Secretary of State might have saved himself a speech by simply saying that he regretted that when this discussion took place in Committee he had not accepted the commonsense put forward by the Committee in regard to the deletion of Clauses 4 and 5. When we put down our original Amendments to leave out the two Clauses, which the right hon. Gentleman resisted so stubbornly, no one on this side had the slightest idea that there would be such obstinate resistance to common sense. Two hours were taken up and much bad blood was occasioned quite unnecessarily in that debate.

When an Amendment of that kind is put down, the Secretary of State and his advisers have a complete opportunity to consider it before coming to the Committee, Whether the fault is with the draftsmen, the officials or the right hon. Gentleman himself, there seems to be a complete reluctance to make any improvement in a Bill, no matter how well the common sense is argued.

There were quite a number of my colleagues who argued, not for the sake of sabotaging the Bill, but who pressed on the right hon. Gentleman, since nobody knew what the executives were supposed to do, that the best thing was to leave the board to manage its own business in its own way and to set up executives where it thought it necessary to do so. Tonight, therefore, we can hardly object to the Secretary of State accepting the proposals contained in our original Amendments.

We were not sure whether our Amendments would be called and, therefore, we had to table an Amendment that we thought had some chance of being called. The Secretary of State having put down our Amendments for us, they are automatically called and, therefore, we are in a position to discuss them. If anybody wants to know the arguments for the Amendment, I refer him to the speeches made by my hon. Friends and myself in Committee, where can be seen the perfect arguments for the Motion that the Secretary of State has now moved. Therefore, we enthusiastically support the moving of our own Amendments.

My right hon. Friend has spoken of the two hours that were taken up in discussing Clauses 4 and 5 in Committee. Altogether, 22 columns of the OFFICIAL REPORT were taken up by the discussion of these extraordinary Clauses.

We told the Secretary of State that to put into the Bill a hard and fast scheme of administration was the worst thing he could do. The suggestion that regional executives should be established by statute was obviously cumbersome. What is more, it was insulting to the men and women who, presumably, would be appointed to the board if the Bill eventually reaches the Statute Book.

We begged the right hon. Gentleman and his Joint Under-Secretary for an explanation, but they remained stubborn and resistant to all the eloquence of my hon. Friends. The right hon. Gentleman has now recognised in the most practical and forthcoming fashion that we were right, and he cannot do better than we suggested by removing Clauses 4 and 5.

There are two ways of looking at the Amendment. It is either another demonstration of the clumsy way in which the Measures of the present Administration are all too often put before the House, or, alternatively, it is that the right hon. Gentleman agrees that this is the triumph of the processes of Parliamentary democracy which shows that reason from this side of the House sometimes gets a receptive ear on the other side. I think at this late stage we should take the more kindly view and congratulate the right hon. Gentleman on the good sense he has shown in following the advice we have given.

8.45 p.m.

We spent both time and temper over this in Committee, and it is rather strange that at this time of the day the Secretary of State for Scotland should tell us that what he is going to do is to leave the boards free as in England, when we remember what is going to happen in England. It was only on Friday last that it was announced that an inquiry would be set up to go into the whole question of the structure of the supply and administration of electricity in England. It may well be that that will result in the Secretary of State for Scotland being put in a strange position about electricity in Scotland.

The fact that the Secretary of State has changed his mind and was compelled to do so by the logic of the argument put by those of us on this side adequately demonstrates the fact that this whole thing springs more from dogma than from logic, and the Secretary of State would do more justice to the needs of the Scottish electricity supply if he did with the whole Bill what he has done in respect of these two Clauses, namely, change his mind and withdraw it.

Amendment agreed to.

8.48 p.m.

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

The main principles of the Bill are now well understood in the House and in the country. It will transfer to the Secretary of State for Scotland the functions now performed by the Minister of Fuel and Power in relation to electricity in Scotland.

It will establish a small all-purpose Board in the South of Scotland, which will be responsible for both the generation and distribution of electricity in that part of the country. The North of Scotland Board will remain virtually untouched by the reorganisation, though in many respects its contacts will be with the other Scottish Board and not with B.E.A. It is clear that this Bill is not going to affect in the slightest way the broad workings of the grid. There will still be the interflow of power north and south just as there is now and as there has been. Indeed it may well be that there will be more inter-play in the days to come.

Does the hon. Gentleman say that the association between north and south will continue? This is a very important statement to those who oppose the Bill. And can he say in what part of the Bill those assurances are actually to be found, because I well remember the Secretary of State for Scotland resisting very intensely the suggestion put forward from this side of the House that there should be included in the Schedule those Sections of the 1926 Act which make it possible?

The hon. Member can feel perfectly satisfied that there are provisions in the Bill making it the duty of the one board to work in the closest cooperation with the other, which, of course, is the common-sense way of doing things. Nothing else would make any sense at all.

We have had an amicable discussion except for that brief period when we were a little at cross-purposes. We are now more or less agreed on the details of the Bill, and such suggestions as have been made tonight and in the past—tor example, as regards rural electrification—have been directed for the most part to amplifying provisions already in the Bill, and to which, therefore, we shall give the closest attention. There is no difference in principle there.

I hope that the Joint Under-Secretary of State for Scotland is choosing his words carefully because, let me warn him, they are likely to be taken down and used in evidence against him.

I am not afraid of that, I am using my words with the greatest care, and I stand by those words. I am glad that we have been able to meet the House on the two main issues which for a time seemed to divide us. For example, as regards negotiating machinery, by the amended provisions of the Bill the Central Electricity Authority—as it will now be called—the North of Scotland Board and the South of Scotland Board will have a duty jointly to seek consultation with any organisation—that is to say, trade union—appearing to them to be appropriate, with a view to making joint agreements with that organisation. I am glad that we were able so amicably to come to a common view of that point.

I am also glad that we were able to achieve accord on the administrative arrangements of the board. The right hon. Gentleman said that we might have come to wisdom earlier in the proceedings. It is always open to the Opposition to say that, but we listened to the debate, we took account of the doubts in the minds of hon. Members on both sides of the House, and my right hon. Friend took the view that it was proper to meet what appeared to be the general view of hon. Members, and therefore he withdrew Clauses 4 and 5.

In appointing the Members of the new board, my right hon. Friend has already given an assurance that he will bear in mind and act upon the same principles as he has done in the case of the North of Scotland Board. That being so, in the case of this board I am sure that they will set up the right administrative structure for their area.

These changes have not affected the main purpose of the Bill which, as has been explained from the beginning, is to complete the devolution to Scottish authorities of control of the generation and supply of electricity in Scotland. It is a further step in the Government's policy of "Scottish control of Scottish affairs," and therefore I am glad to be able to move the Third Reading of this Bill with that purpose. It is an example of the kind of decentralisation that is possible within a nationalised industry, and by bringing both the generation and distribution of electricity into the same hands, closer attention can be paid to the needs of the South of Scotland area as a whole.

In all these matters this Bill can quote the successful precedent of the North of Scotland scheme in which we were all concerned. We have sought to do no more than bring under the control of the Secretary of State the South of Scotland in the same way as the North of Scotland has been for several years. That being so, I have never been able to understand why any Scotsman should resist this Measure, On the contrary, I am glad that, as a result of our useful debates, it is most likely that this Measure, going so far to meet the broad sentiments of our people, will have the accord of this House.

8.55 p.m.

We have listened to a very interesting speech as a kind of forced justification of this Measure, but I am sure that everybody will agree that, after hearing it, nobody knows the reason for introducing the Bill. This is a piece of window-dressing and a gesture to Scottish nationalism, but even the people who believe in Scottish nationalism are not so unintelligent that they do not want to know the reason why something is done. To put a new label on a thing and say, "Under new management of the Secretary of State," will not convince anybody in Scotland that any great change has taken place. Nothing was done in this field without the approval of the Secretary of State during my term of office, and the French have the saying that the more a thing changes the more it remains the same.

The Joint Under-Secretary of State has not give us one instance of the practical result that will flow from the Bill. I propose to give the hon. Gentleman one which he does not seem to have noticed. It is that under the Bill the South of Scotland Electricity Board will assume the powers now possessed by the Hydro-Electric Board. In the exercise of those powers it will have to take into account a great many activities in connection with the development of the area in which the board works. Many social functions which were exercised by the Hydro-Electric Board are now attributable to the South of Scotland Electricity Board.

When, as I think he did, the Secretary of State agreed that these powers should be given to the South of Scotland Electricity Board he must have had some purpose in mind, but up to now we have had nothing from the Secretary of State to show the great imaginative purpose of the Bill and the great revolution in the supply of electricity in Scotland which is to result from his dynamic presence as head of the board. The Secretary of State seems so modest that we have not been told anything about it. After all, Scotland wants to be inspired by the Bill and have some of the inspiration that moved the right hon. Gentleman to be so passionate in favour of this new administration.

One of the criticisms that I have heard is that the Secretary of State took no technical or other expert advice as to whether the organisation was working well or not in Scotland. I gather from what has been announced that the Minister of Fuel and Power in England has now appointed a Commission whose terms of reference are:
"To inquire into the organisation and efficiency of the electricity supply industry in England and Wales in the light of its working under the Electricity Act, 1947, and to make recommendations."—[OFFICIAL REPORT, 9th July, 1954; Vol. 529, c. 2516.]
I suggested on Second Reading that if the Secretary of State was going to make changes it would have been sensible to have some body to inquire into the question of whether the existing organisation was working well and what changes were desirable. When we on this side of the House were in office we took into account in all our activities the reports of expert committees.

It is obvious that this Bill was introduced simply because of some foolish pledges that were made, without consideration at all, at the General Election, that the party opposite would reorganise and give devolution in the electricity and gas industries and other things. At that time hon. and right hon. Members opposite did not know that Scotland had home rule in the gas industry. They knew so little about these matters that they made many foolish statements. The Bill is one of the results of those statements. This country will be willing to consider practical changes based on commonsense, but no one will suggest that the destruction of road transport and the mere sticking of a new label on Scottish electricity will make any great change in the progress of Scotland.

As I said on Committee stage, I am satisfied that under this Bill at first Scotland may be able to have cheaper electricity than England and Wales, because we are working with a great many old stations producing cheaply and have a certain amount of hydro-electric power. Between the two we can have a certain amount of cheap electricity, but, as the stations have to be replaced by more expensive modern stations, the position may change.

So far as we see in the framing of this Bill, the Secretary of State has not made the slightest inquiry into that question. He has not told us anything about the effect of electricity on the future, how it is to meet Scotland's problems and whether we shall be better off or worse off as a result. I hope that in his final speech he will illumine this question by the researches he has made of what will be the result for Scotland following this Bill.

Under the Bill, Scotland will be in an extremely interesting position. The Secretary of State will be responsible for a great many interesting experimental developments in production of electrical power. Already he is responsible for the production of power by water, coal and steam stations and, under the Bill, he will be responsible for the production by the use of peat. The constituency of the hon. Member for Caithness and Sutherland (Sir D. Robertson) will be the source of a great new power, atomic energy. That is not under the Secretary of State, but under the Ministry of Fuel and Power.

I am sure the right hon. Member would not wish to mislead the House. The atomic energy plants in the North of Scotland have nothing to do with the Ministry of Fuel and Power. They are controlled by the Atomic Energy Authority, Statutory responsibility for which rests with the Lord President of the Council, and the Minister who answers in this House is the Minister of Works.

I quite agree with the hon. Member and apologise, but, when electricity is produced by atomic energy, I understand that it will pass under the control of the Minister of Fuel and Power.

The electricity produced by nuclear processes will be sold to the North of Scotland Board or the South of Scotland Board and then used through the grid for standard purposes.

I thank the hon. Member. In any case, the atomic energy production will not be under the Secretary of State but under the Authority. Production of electricity by wind power will be under the Secretary of State. All these very interesting experimental methods of producing electricity will be the concern of the Secretary of State, and I wish to ask how, under this Bill, he will co-ordinate them and co-ordinate production by atomic energy. If that is to be done under the grid, the position is quite clear—

Is my right hon. Friend aware that the Government resisted an Amendment giving power for an advisory council on atomic energy in Scotland?

We gather that this Bill gives power to extend rural electrification. It was not possible to discuss that in the debate on new Clauses. I hope the right hon. Gentleman will make reference to that in his reply. Although hon. Members opposite do not seem interested in rural electrification tonight, I think they will be in favour of it when they return to their constituencies. The right hon. Gentleman may give us an idea of what is to be the future of these new developments. A fund can be set up for the development of the purposes of the board.

Is there contemplation of a long term plan for Scotland in regard to electricity? The hon. Member for Kidderminster (Mr. Nabarro) takes a great interest in the possible shortage of coal in 10 to 15 years' time. Has that been contemplated when framing this Bill? In his new capacity as leader for electricity in Scotland, has the Secretary of State made plans for the future of Scotland in regard to electricity production by these various methods?

Is the right hon. Gentleman sure that he has in his power under this Bill the capacity to supply the growing industry of Scotland with the necessary electricity to keep the economic life of Scotland flourishing and well? Will he have to import electricity? What, under this Bill, is to be the future of the super-grid? Is that to be developed by stations in these regions or used to import from the coal areas of the North of England? What schemes has the Secretary of State, as the great new designer and planner of electric power in Scotland, to tell us about in regard to the future of Scottish industry and power?

The House is interested, and this is not a party question at all. It is a question of great importance to Scotland as to what will happen to its interests. I think that all of us on this side of the House have mixed feelings about the Bill. All of us are in favour of the maximum administration of Scottish affairs within Scotland, provided that it will not injure the economic life of Scotland. In many cases a break with England and trying to establish artificial frontiers at the border will bring great economic disadvantages to Scotland.

Has the Secretary of State satisfied himself that the creation of this break will not be, in the future, to the economic disadvantage of Scotland? Perhaps he will give us some information about that because while it may be all right to wave the flag no one wants to wave a flag over an economic desert. We want the flag to be flying above a prosperous people, and we are entitled to ask the right hon. Gentleman for information about the economic prosperity of Scotland and the possibilities that arise under the Bill, If the right hon. Gentleman will tell us some of these things, he may provide a justification for the Bill.

As I say, some of my hon. Friends have mixed feelings about this Bill. While we want the general administration of Scotland to be done locally as far as possible, which is common sense, we do not want that to be done foolishly. During the General Election, the Conservative Party made foolish promises. When I was Secretary of State, I asked many of the bodies concerned what more power they could use than they already had. All the bodies I asked said that there was no power that they could get which they had not already got. I could not find people among those who were responsible for excellent administration in these matters who would say that there was any power which they needed that they had not got. Therefore, while theoretically it might have been a great gesture to stick on a new label it seemed to me just humbug for me to have transferred apparent powers when the transfer of any real power was not possible.

This is a practical matter, not a political one—what is practical and efficient, and what will lead to the best results, not what will lead to the best advertisement, which is a very temporary thing for any political party. We are not approaching this matter in a party spirit at all but on a common-sense basis that electricity is a practical proposition from an industrial point of view and should be administered in the most efficient way.

I believe that there may be some advantage in what the Bill is doing in combining generation and distribution. It may be that the inquiry will produce similar results in England. That is a matter of opinion, and there are legitimate differences of opinion on both sides of the House. Like every other Bill, this Bill has good bits in it, and we welcome to some extent the gesture in relation to administration in Scotland, but we have never been quite satisfied that there has been any practical reason for the Bill. We think it may prove to be a disadvantage in future, and we wait for the Secretary of State, even at this late hour, to give us some justification for bringing forward this Bill and breaking up the general electricity organisation of this country.

9.10 p.m.

I find myself agreeing with much of what the right hon. Gentleman the Member for East Stirling-shire (Mr. Woodburn) said. However, I thought that in his general approach he was unduly at pains to pour cold water on the Bill. My own attitude towards it is a good deal more optimistic. I intend to support the Third Reading for the same reason as I supported the Second Reading—because I see grounds to hope that, as a result of the Bill, we shall get more electrification, particularly in the rural areas. As my constituency includes some hill areas where electrification is very much needed, I am obviously only too anxious to support anything that will help in that direction.

I want to ask the Secretary of State whether he can give me some assurances as to how this will come about. I appreciate that I shall no longer be chased off to somebody in England, to the Minister of Fuel and Power, when I am putting a case for electrification in Scotland. I shall have access to the Secretary of State for Scotland, who is at the same time the Minister for agriculture in Scotland. Therefore, if I am basing a case upon the needs of agriculture, it seems to me that I can be confident of receiving more sympathetic treatment and a more sympathetic hearing from the Secretary of State than I should from a Minister not concerned with agriculture.

I should like an assurance from my right hon. Friend as to how direct his contact with the Scottish Board will be. If I put to my right hon. Friend a scheme which I have in mind at Westruther, where there are 35 premises in the village, 15 farms, 57 farm cottages, two mansion houses and three small cottages all in dire need of electricity—the case has been put time and again but always with disappointment—I want to feel confident that under the Bill my right hon. Friend has power to take action.

That brings me to the next point, one of capital expenditure. The answer which those of us who pressed for further rural electrification in the past always came up against was that greater allocation of capital expenditure for rural development was required. I want to cite to my right hon. Friend the case of a farm near Coldstream. The reason electrification was not granted was that
"…in the present financial year we are dealing with applications made during 1945 and with the capital at our disposal we are not able to deal with any application more recent than that."
Will my right hon. Friend find himself with greater powers under the Bill for authorising capital expenditure? When listening to the debate on the Gas and Electricity `Borrowing Powers) Bill on Friday, I wondered where Scotland came in. An increase in borrowing powers to the extent of £700 million for electrical development was authorised. I have no doubt whatever that, if so large an increase is to be authorised for England and Wales. Scotland must come in somewhere. I gather that Scotland does not come in under that Bill, so I am asking my right hon. Friend for an assurance that we are going to receive an extra capital sum for electrification in Scotland. I also ask him for an assurance that he will see to it that a proper proportion of that extra sum is devoted to the rural areas for the benefit of agriculture and the farming community.

9.15 p.m.

The Joint Under-Secretary of State for Scotland made a very short Third Reading speech, and as he spoke I thought what an optimistic fellow we had here; indeed, much more optimistic than Mr. Micawber ever was. He said that he felt that the main principles of this Bill were now accepted, and he went on to say that we were more or less agreed on the details of the Bill. Of course, that is not the case. My right hon. Friend the Member for East Stirlingshire (Mr. Woodburn) has pointed out many details on which we are still in doubt. Indeed, many of us are very much in doubt about the nature of the Bill and what the Government hope it will do for Scotland.

The hon. and gallant Member for Berwick and East Lothian (Major Anstruther-Gray) said that he supported the Bill, and then proceeded to put to the Joint Under-Secretary some very important questions which showed indeed that, although he said he supported the Bill with confidence, he is a very simple fellow indeed, for I hope to show, when I come to the question of capital investment, about which the hon. and gallant Gentleman asked questions concerning the supply of electricity to particular farms and areas, that the Secretary of State has no greater authority than he ever had before.

I am in no doubt whatever that this Bill will do good. My only doubt is how much good it will do.

The hon. and gallant Gentleman now says that he is in no doubt that the Bill will do good, but that what he is not very sure about is the extent of that good. Yet the questions which he has asked concerning his own rural area, which is similar to an area in my own constituency, are the ver), questions that are not answered in this Bill and which have never been answered by any Minister who has taken part in the debates.

During the Second Reading debate, the Secretary of State for Scotland said:
"It will certainly provide a closer contact between the new board, or the supplier of electricity, and the people of Scotland, who are the consumers."—[OFFICIAL REPORT, 3rd February, 1954; Vol. 523, c. 375]
What balderdash there is in that statement. Again, we have never had one sentence either from the Secretary of State or the Joint Under-Secretary in this debate to show us how there will be any closer contact between the Scottish people and the supply of electricity.

I want to ask the Secretary of State a question on this. Does this mean that the Scottish people, the consumers of electricity—Mrs. Brown, or Mrs. Smith, or Mrs. Mack, or the industrialists—[Interruption.]—or Mrs. Stewart, whether it is spelt Stewart or Stuart, will have to be queueing up at St. Andrew's House to complain that electricity is not being supplied as it should be in their homes? Is that what the Secretary of State means by that statement? If it is not—

Will my hon. Friend say whether Mrs. Stewart will be getting electricity from Carlisle or Newcastle? Can she give us a guarantee that it will not be so?

My job in this debate is not to give guarantees about anything. I am trying to get guarantees from the Government. A guarantee from this side is not worth anything in this Bill so long as we are in opposition. We are dealing with the Bill and with the statements of the Secretary of State. I want the Secre tary of State to answer my question: Where in the Bill are the provisions for closer liaison than we have at the present time between the ordinary Scottish people and the supplier of electricity? Is this just another bit of window dressing? Does it mean that Mrs. Stewart—spell it either way—or Mrs. Mack will still go to the consumers' councils that we already have? The Secretary of State, having made that statement as an important contribution to the Second Reading debate, ought, at this late stage, to give us a definite reply.

Listening to the hon. and gallant Member for Berwick and East Lothian both today and on the Second Reading, and to other back benchers on the Government side, one feels that, as a result of the Bill, the Secretary of State will have a marvellous fairy wand, All he will have to do is to wave this fairy wand and huee generating stations will leap up all over Scotland. In their speeches, they have been trying to lead the Scottish people to believe that the Bill will provide much more electricity much more quickly to our Scottish people. Neither the Secretary of State nor the Joint Under-Secretary has made those statements. I hope that the Secretary of State will be quite specific in his answers to his own back benchers and will tell them clearly that there is no provision in the Bill to give a single extra unit of electricity to the Scottish people, or to give them electricity any more quickly or cheaply.

I ask the Secretary of State also to reply not only to this side but to his own back benchers, and say whether, before he produced the Bill, he had any evidence that the British Electricity Authority had at any time hindered any development in Scotland. It is important that we and the Scottish people should know the answer. All that I hear from the Government side is praise for the British Electricity Authority. If the Bill is necessary, hon. Members must have some reason for criticising the British Electricity Authority for hindering proposed developments in Scotland, but no such reason has been given so far.

Another point is important to our Scottish people. The Secretary of State and the Tories have been trying to tell them that the Bill gives autonomy to Scotland in the supply and generation of electricity. That is nonsense. It is not only just nonsense but completely dishonest of the Government to suggest that there is a vestige of autonomy given to Scotland under the Bill. [Interruption.] If the hon. Member for Edinburgh, South (Sir W. Darling) has an interruption to make, I wish he would get up and make it.

I was only reminding the hon. Lady that we had local autonomy in Scotland for electricity, and that it was the Government which she supported which took that autonomy away from Edinburgh, Glasgow, and other cities.

I do not object to that; what I object to Ls the fact that hon. Members opposite say that the Bill gives back power to local authorities to generate and distribute electricity. It does nothing of the sort. It is merely a change of wording, or heading. as my right hon. Friend said.

Will the Secretary of State be good enough to tell us whether the South of Scotland Electricity Board is going to be free to develop capital expenditure as it wishes? That is what the hon. and gallant Member for Berwick and East Lothian wanted to know, but I think we already know the answer. During the Second Reading debate the Joint Under-Secretary of State said:
"The hon. Member for Central Ayrshire (Mr. Manuel) was worried about the limit of £75 million. This is arrived at by taking first the schemes to which the B.E.A. is already committed in the south of Scotland. and secondly, the schemes that are planned for the future.—[OFFICIAL REPORT, 3rd February, 1954; Vol. 523, c. 488.]
The answer to hon. Members opposite who believe that the Bill will mean more capital expenditure and capital development plans is that almost the whole of the £75 million is going to be spent on projects which have already been decided, which means that there will be no change in the amount of development that is to take place.

Scottish people have a right to know that the Bill gives no autonomy to the Secretary of State for Scotland. He will be in the same position as was the Minister of Fuel and Power. If a scheme were put forward by a Scottish electricity board and the Minister of Fuel and Power supported it, he had to make a case to the Treasury. That is exactly what the Secretary of State has to do. Even when the Bill becomes an Act, the power will reside in the same place as it does now—in the Treasury.

Although the area which I represent is not completely rural, I know that much still needs to be done in the was of rural electrification. It is a very expensive job. It would have been much easier to obtain more rural electrification if we had maintained the existing set-up and—

Local authorities had the chance to do something for many, many years, but they failed to electrify these areas. With the best will in the world, they found it impossible to do this job. It is not charity for one great industry, covering the whole of Britain from Land's End to John o'Groats, to help the rural areas, whether they be in Scotland or Wales. It is not charity to expect it to pool its resources and to help. That is what I hoped would happen when electricity was nationalised. This step which the Government are taking will make it impossible. We in Scotland are able in other ways to help our friends in England and Wales. This help is a two-way traffic, for Scotland and Wales can help England when need arises and England can help Scotland and Wales when need arises, and, the word "charity" ought not to be brought into this discussion.

Will the Bill help my people in North Lanarkshire? Will it help all our Scottish people? It is with those questions in mind that I have examined the Bill. I have no hesitation in saying that, for some of the reasons I have given, the Bill even now as amended, will not help the Scottish people in their desire, first, to have a more stable economy and, secondly, to have the better standard of living that a more stable economy ensures.

I criticise the Bill first because it does not give the Scottish people greater control over their electricity but is rather an attempt to hoodwink them into thinking that it does. I hope that this debate will make it clear that there is not greater autonomy. I criticise the Bill on the second score that it does nothing to help the economy of Scotland and to help my people to attain a better standard of living. My third criticism of the Bill is, from my point of view, as the representative of many thousands of miners, most important of all. I am glad that the Parliamentary Secretary to the Ministry of Fuel and Power is in his place now that I come to this criticism. The Secretary of State, on Second Reading, said:
"This is a Bill to make the Secretary of State the Minister responsible for electricity matters in Scotland and to set up in Scotland a new board answerable to him for the generation of electricity in the South of Scotland in the same way as the Hydro-Electric Board is responsible in the North."—[OFFICIAL REPORT. 3rd February, 1954; Vol. 523, c. 369.]
I have attempted to show that those words were mere eyewash, but the Minister of Fuel and Power and the Parliamentary Secretary know that there is a committee, called the Reorganisation Committee, of the British Electricity Authority that is in continual session, I understand. Did that committee recommend to either the Minister of Fuel and Power or to the Secretary of State the measures proposed by this Bill?

That is a question which the Secretary of State ought to answer tonight. The question was put to the Joint Under-Secretary of State and he tried to hide behind the fact that it is a committee of officials of the various boards, and that its work is just to advise the British Electricity Authority. What nonsense for the Joint Under-Secretary of State to hide behind that sort of statement. Of course, it is quite true that it is a committee of officials, but if this were as important a Measure as the Secretary of State would have the people of Scotland think it is he ought to have had upon it the advice of a committee that spends all its time dealing with the problems of the reorganisation of electricity. The Secretary of State must tell us whether this Reorganisation Committee made any suggestion to him on these lines.

Throughout the debate not one reason has been adduced by either Front Bench or back bench speakers opposite to show that this new arrangement for Scotland is being introduced for any technical or economic reasons. There has been no such reason given, no suggestion of cheaper electricity or faster development of electricity supplies—no reason whatever why this proposed reorganisation should be brought about.

In the past, the South-West and South-East Electricity Boards in Scotland were under the Minister of Fuel and Power. I have no hesitation, as a Scottish Member, in saying that I still want those boards to be under the Minister of Fuel and Power and not to be under the Secretary of State for Scotland. I will tell the House why. Coal is a very dearly-won raw material, and the winning of it means broken and wasted bodies. I see them every day in my own communities. It is because I feel that this commodity, used so much in electricity, is such a dearly-won commodity; it is because I see those men with scarcely a breath in their bodies, some of them going about in their wheel-chairs as a result of having won this coal in the past—it is because of these things that I do not want a single ounce of coal to be wasted. That is why I am so completely opposed to the decision to join these boards into one board and to place it under the Secretary of State for Scotland and take it away from the Minister of Fuel and Power.

When we nationalised coal, electricity and gas, I hoped that that would eventually lead to the greatest possible co-ordination of these three industries—a co-ordination which is possible if they are under one Minister. Even then it is no easy job, but how much more difficult, indeed perhaps how impossible, it will be to bring about that close co-ordination, and to make sure that every ton of coal produced is used in the best possible way, if we have this new arrangement. Under the new set-up, such co-ordination will be almost impossible.

I had hoped that the Minister of Fuel and Power had some plans already in being for this close co-ordination and that he realised from the Ridley Report the importance of using our coal to the best advantage. Electricity is one of the biggest consumers of coal in the country. I understand that it uses 35 million tons a year at present—I am told that it is 36 million tons, so I am not far out—and I believe that in 16 years it will be using 63 million tons.

Although in the earlier part of my speech I have given reasons why I oppose the Bill, the main reason is that I realise that the reorganisation and co-ordination of these three important industries can best be carried out if they are under one Ministry. It is almost impossible for it to be carried out when this part of the industry is hived off, giving no real power to the Secretary of State but being hived off for political window-dressing, irrespective of whether it will benefit our nation and our people.

9.40 p.m.

I rise to congratulate my right hon. Friend on bringing this interesting Measure to its Third Reading, having successfully piloted it through the various stages which have lasted since 3rd February when the Bill had its Second Reading.

From a political point of view, this Measure honours an election undertaking which—I beg to differ from the right hon. Gentleman the Member for East Stirling-shire (Mr. Woodburn)—was not a foolish pledge, as he called it. I hope to be able to stress once again, in the course of a short speech, that there are very sound economic and technical reasons why the amalgation of the boards in the Lowland areas of Scotland should have been carried through. First, I should like to say that in the 1950 election the Unionist Party in Scotland was quite unequivocal in what it wished to do in regard to electricity generation and distribution. [An HON. MEMBER: "Gas and coal."] I will talk about that another time. I am now talking about electricity. The election manifesto stated:
"The creation of a single all-purpose authority."
In fact, instead of creating just a single authority it does retain the North of Scotland Hydro-Electric Board, in accordance with the provisions of the 1943 Act, and in addition creates a single board for the Lowland or Southern areas of Scotland. I was impressed when the Joint Under-Secretary of State for Scotland suggested on an earlier stage of this Bill that it might be a progressive step on the "Right Road" to create ultimately a single authority all of which would have many technical and economic advantages.

Before this Bill came to the House there were in the South of Scotland four organisations—the South-Eastern Scotland area of the British Electricity Authority, the South-Western area of the 'British Electricity Authority, the South-Eastern Area Board and the South-Western Area Board—to cover less than four million people, and those four organisations were concerned with generation and distribution. It is interesting to observe that those four organisations put together in the shape of the South of Scotland Board proposed under this Bill are in terms of population, in terms of electricity generated and in terms of electricity sold, less than the average of one area board in England, which was considered by the party opposite to be an economic unit either for generation or for distribution in the terms of the 1947 Act.

The problems of Worcestershire are not so parochial in character that they have no similarity anywhere else in the United Kingdom. In fact, what my hon. Friend behind me had to say about the problems of rural electrification in South-Eastern Scotland are exactly the same problems as we have in Worcestershire, Herefordshire, Gloucestershire, and other more remote rural areas of England.

It is undoubtedly the fact that, for purposes of administration and technical progress, an administrative unit covering four million people and covering installed capacity for electricity purposes of about 1,100 megawatts—as was the case when this Bill was brought to this House—as the combination of two lowland boards is the most convenient and most efficient, both for generation and for distribution purposes.

It was suggested by the hon. Member for Lanarkshire, North (Miss Herbison) that the proposals in this Bill are going to waste coal. If they were going to waste coal, I would have had a great deal to say about them at an earlier stage. In fact, by close integration of water, steam and other forms of generation the probability is that coal will be saved and not wasted.

The unique part about Scotland's electricity arrangements today is their diversity. Nowhere in the world is there a country which has such diversity of facilities for electricity generation as Scotland has today. She has thermal power stations based on coal, water power stations based on hydro-electricity, wind-power stations in the North of Scotland, power stations based on peat supplies, she has an atomic power station in course of construction at Dunreay and numerous oil or diesel driven stations—six methods of generating electricity within one country that has just five millions of population. That diversity is not to be found anywhere else in the world.

The point I make is that the lesser the number of authorities that control that diversity of operations, the more efficient should the operations become and the greater the economy in coal that is achieved. [Interruption.] I am not making the hon. Lady's case, because she said quite clearly that the provisions of the Bill would waste coal. I am saying that they will save coal.

The hon. Member has not proved his contention at all. The important provision against which I spoke through the whole of my speech was the taking away of power from the Minister of Fuel and Power and giving it to the Secretary of State. That was my case, which is the type of case that the hon. Member is making when he says that he would prefer to see everything combined under one authority.

Yes: but I am satisfied that by placing them under two authorities instead of under six organisations we are making progress towards the single multi-purpose authority.

I wish to say a word about the question of capital investment, which has loomed largely during our deliberations upon the Bill, and the allegations which have been made this evening by hon. Members opposite that there may be insufficient capital moneys available to carry out the legitimate desires of Scotland's electricity expansion programme. Under Clause 12 (3), the maximum borrowing powers of the two electricity authorities in Scotland are, respectively, £200 million, as was previously fixed under earlier statute, for the North of Scotland Hydro-Electric Board, and £75 million for the Lowland Board. It is difficult to ascertain how much of that £75 million authorised as the maximum of borrowing powers will have already been expended by the time the Bill came before us this evening for Third Reading.

As far as I am able to tell, approximately £19 million, correct to the nearest million pounds, was expended in respect of the South-West Scotland Board to 31st March, 1953, and £9 million only in respect of the South-East Scotland Electricity Board, a total of £28 million between the two boards, which are merged together to become the South of Scotland Board. I should like my right hon. Friend when he replies to confirm that the total sum borrowed so far by the two area boards is £28 million. If so, it means that £47 million is still available within the borrowing powers under the Clause to which I have referred, before the maximum and upper limit is reached.

The hon. Member says that the difference between £28 and £75 million is available to the board. It is only of value to Scotland if we know when the Treasury will authorise it.

I looked carefully last Friday to see whether the hon. Member would be present during our debate to give me the benefit of his advice. Fortunately, he was not here. Had he been present, he would quickly have learnt that although borrowing powers and their upper limit are settled by this House—and what we did last Friday was to pass the Second Reading of a Bill to increase the borrowing powers for electricity and gas in England and Wales—once those borrowing powers are settled the nearly autonomous nationalised undertakings may then go to the money market as they deem necessary, for their money.

In fact, what will happen under this Bill is that £28 million out of the £75 million will have already been spent by the two lowland area boards. Out of the £48 million which remains, we should be able to cover all the capital development requirements for electricity in the South of Scotland for quite a long period ahead, and the actual process of borrowing that money will, of course, be the customary resort to the money market and public issues. I can see no justification whatever for the allegations of hon. Members opposite that the purpose and effect of this Bill will be to restrict sums of money available to my right hon. Friend for the maximum electricity development both in the Highlands and in the Lowlands.

In conclusion, I regard this measure as an important pointer to what should occur with other branches of the nationalised industries in securing the maximum possible devolution. In the case of Scotland it has a special interest in that the devolutionary movement restores to Edinburgh and to my right hon. Friend full autonomy in electricity generation and distribution in Scotland. In fact, there is only one remaining measure of restriction, which is of a financial character which might be placed on my right hon. Friend, and that measure is applicable to every nationalised industry which raises its money, namely, the Treasury guarantee.

Other than that Treasury guarantee and the sanction for it, there will be complete autonomy in Scotland and the statements made by the hon. Lady were, therefore, completely misconceived and quite ill-informed. I hope this Bill will have an unopposed Third Reading and that it will swiftly pass through another place, for it will demonstrate to the whole of the United Kingdom that it is just one more unionist election promise which has been faithfully fulfilled.

9.52 p.m.

The extraordinary feature about this Bill is the amount of time it has taken. It may have been forgotten by the House that we gave a Second Reading to the Bill in the far-off days of February. It may be that it is so feeble that it has taken nearly six months to crawl from Second Reading to Third Reading. In Committee we on this side laboured very hard in the attempt to put the crooked straight, and we did that in two notable instances. We have thrown out those futile Clauses, 4 and 5, which took up space and added printer's ink to paper without communicating, either good sense or direction to the industry; and we succeeded in amending the Schedule to the Bill in such a way as to preserve the important principle of United Kingdom negotiations for salaries, wages and conditions. [Interruption.] I would say to the hon. Member for Edinburgh that—

Edinburgh. South. My hon. Friend must not include all the Members from Edinburgh with the hon. Member for Edinburgh, South (Sir W. Darling).

I do not wish to do any injustice to my hon. Friends on this side of the House. In answer to the hon. Member for Edinburgh, South (Sir W. Darling), I should like to assure him that the Amendment on collective bargaining machinery was welcomed by the electricity workers of Scotland who did not wish to be divided from the rest of the United Kingdom in the matter of wage and salary negotiations. We did succeed in getting the right hon. Gentleman the Secretary of State to see sense on this point, and the trade unions are grateful that the change was made.

However, there is always a limit to what even a conscientious Opposition, such as the present one, can do to improve a thoroughly bad Bill. In complete contradiction to the hon. Member for Kidderminster (Mr. Nabarro), I am as convinced as ever I was that to divide the responsibility for the administration of the grid and the super-grid between the British Electricity Authority and the new board is a mistake which will not bring any advantage to electricity supply administration in Scotland or to the consumers.

We have had the argument that this is the only country in the world where generation and distribution are separated. The answer is simply that this is the only country in the world where geography and natural conditions enable the advantages of a closely-knit, inter-connected system on a nation-wide scale for the generation and bulk transmission to keep down operating costs.

In any case, if this Bill is so sound from a technical point of view, why is it that the Government at no stage have been able to quote any impartial expert opinion in favour of the change? On the other hand, I have succeeded at varying stages in quoting impartial opinions outside this House against the change. At least the Government might have waited until the new committee of inquiry which they appointed, which we heard all about on Friday, and which is to report on the organisation of the B.E.A. and the electricity boards, had done its work.

There are still outstanding many points of considerable obscurity. No one has explained if the surplus electricity from the North of Scotland hydro scheme, which is exported, will in future be absorbed entirely by the South of Scotland Board or whether the B.E.A. will take some of it from time to time. We have heard nothing about machinery to *** be set up for the working together of the British Electricity Authority, the new South of Scotland Board and the North of Scotland Board. We have to remember that in future, unlike the 1947 Act, neither the chairman of the South of Scotland Board nor the chairman of the new authority will sit on the B.E.A. We have heard nothing at all about arrangements for joint United Kingdom electricity activities which of necessity must be carried on.

As far as the staff of the industry are concerned, it is proposed now to merge in one organisation the two existing area boards and the two existing generating divisions. Will there be staff redundancy? I am sure the staff in the industry are still interested in that point. Is there any preliminary organising committee at work, such as was set up before the B.E.A. was established?

It would be possible if the hour were not so late to speak at length on the faults of this Bill, but I will spare the House. In my view and in the view of my hon. Friends, this is a mistaken Measure in its basic conception but, should it reach the Statute Book, most of us would wish that those who have to carry out its provisions should succeed in what they have to do. This at least can be said, that the technical men, the administrators and the workpeople in the electricity supply industry of this country have a knack of making the best of legislation. However, here tonight we have a right and duty to say that they should not have been placed in the position where they have to make the best of legislation. I am as convinced as ever that this is a thoroughly had Bill and that it should be rejected.

10.0 p.m.

The right hon. Member for East Stirlingshire (Mr. Woodburn) asked me several questions, as did other hon. Members, and I will do my best to answer them in a short time. I was asked the reasons for the introduction of this Bill. The whole scope of the Bill and the reasons which prompted us in introducing it will be found in the OFFICIAL REPORT of the debate on Second Reading, if anybody chooses to study it.

Briefly stated again—and it has been said already by my hon. Friend the Member for Kidderminster (Mr Nabarro)—we believe in the Bill because we believe in decentralisation. Our object in introducing the Bill and in achieving this measure of decentralisation was to obtain closer contact with the consumer, who never seems to be mentioned in these debates, and to see that his needs, which we in Scotland understand best, are attended to as far as possible. [An HON. MEMBER: "How?"] We propose to do that by having an organisation in Scotland, by taking these duties out of the hands of the British Electricity Authority and the Minister of Fuel and Power and having a committee of Scotsmen managing this concern in Scotland. That is the object and that is what we have stated in our policy. That is another reason for introducing and carrying through the Bill, and having promised to do so, it is better than we should carry out our promise.

Will not the right hon. Gentleman agree that the authority with whom the consumer has contact is the distributing authority and not necessarily the generating authority, and that under the existing law the consumer will have contact with the distributing authorities—the area boards—and that the contact will not be changed? Is the Secretary of State hoping that the consumer will not even know that there has been any change?

Are we to take it from that nationalistic promise that all Englishmen who are presently employed in the generating side of electricity in Scotland will have to be sacked?

No, it does not mean that. The organisation operating in Scotland will look after the interests of Scotland and we shall get the best people that we can obtain to do the work. Anybody who did not obtain the best people possible to organise an industry would be very stupid. We undertook to do this work because we believed it to be in the best interests of industry in Scotland and of the consumer in Scotland whose interest we, at any rate, have at heart. The hon. Lady the Member for Lanarkshire, North (Miss Herbison) should read some of the writings of her hon. Friend the Member for Dundee, East (Mr. G. M. Thomson) who said in the June issue of "Scotland":

"…how to prevent the nationally owned industries becoming over-centralised will be one of the principal problems of political organisations during the years ahead…"
This is one of the steps to prevent it from becoming over-centralised.

I have no objection whatever and indeed agree fully with the statement which the right hon. Gentleman has just read from the writings of my hon. Friend the Member for Dundee, East. However, I am still waiting to hear—and the right hon. Gentleman has not answered the point in his previous statement—how this Measure will provide closer contact. The right hon. Gentleman has given us some platitudes but no answer at all.