I think that it would be helpful for the House to discuss with this Amendment the Amendment to Clause 27, in the name of the hon. Member for Huyton (Mr. H. Wilson), in page 21, line 21, to leave out "with" and to insert "three months after".

I think that it would be for the convenience of the House to discuss these two Amendments together, although they relate to different regulators, the one relating to the taxation regulator and the second relating to the payroll tax—but the point at issue is the same in both cases: to delay their use until three months after the Finance Bill has become law.

The Amendment was moved last night formally by my hon. Friend the Member for Sowerby (Mr. Houghton) and its purpose will, I think, be clear to the House. We are seeking to ensure that in respect of both the first economic regulator, relating to surcharges on indirect taxation, and the second in relation to the payroll tax, the Chancellor shall not have power to introduce these measures for a fixed period after the Finance Bill has become law.

I do not know how far it would be in order for me to go into the merits or demerits of the regulators. In any case, I do not propose to do so this afternoon, because my hon. Friends and I made it clear during our debates in committee that we were fundamentally opposed to the payroll tax right along the line and we voted against it. Therefore, our Amendment today, which is designed to provide that the payroll tax, at any rate, cannot be introduced during a period of three months, must not be taken as implying acquiescence for the principle of the payroll tax.

The payroll tax is a bad tax. My hon. Friends and I have drawn attention on several occasions to its unfair incidence as between industries—those which use a good deal of labour and little capital and those which are capital intensive and make less call on the country's labour reserves. We believe that it is particularly invidious, anomalous and unfair as between the essential services. There is an Amendment on the Notice Paper relating to local authorities, but I do not think that it will be selected on the ground that it is out of order. It is precisely because we knew that it would be out of order that we did not table the Amendment.

I am not sure, but I think that the right hon. Gentleman may himself be going out of order now. The question involved in this Amendment is, aye or no, the point of time at which the regulator shall be enforced.

Yes, Mr. Speaker, but I thought that it would be in order for me briefly to refer, on this question of three months, to whether this would have a serious effect on such things as local authorities, hospitals or other essential services, the problems of which we raised as early as the Budget debate on 18th April. It was, in fact, our first reaction to the Chancellor's proposals.

It will be quite clear to the House that hon. Members on this side are utterly opposed to the payroll tax. I know that a number of hon. Gentlemen opposite are equally opposed to it. It is my own private view that it is doubtful whether we shall ever see this tax in operation. I believe that it was introduced in a fit of misguided enthusiasm by the Chancellor at Budget time. Obviously, there was a terrible row between the right hon. Gentleman and the Minister of National Insurance concerning the use of National Insurance as a tax gatherer and I think that the Chancellor will probably bow to the inevitable, but that he will not do so to the extent of taking the provision out of the Bill.

Therefore, we shall have a lot of support from hon. Gentlemen opposite for our proposal that for at least three months after the Finance Bill has become law the Chancellor shall not be free to introduce this taxation. I urge hon. Members to realise that if we carry it as long as October and November and the Chancellor cannot introduce the payroll tax until then—after the period of seasonal pressure on sterling—then, conscious of the fact that he has given the pledge that he will scrap the present arrangement next April, it will hardly be worth his while to introduce it for two or three months

Thus, the second of the two Amendments is obviously one which will be highly acceptable to a number of hon. Gentlemen opposite; those who wish to move on this matter, but who show a reluctance to strike so far as this question is concerned. I propose, therefore, having made it clear that my hon. Friends and I are fundamentally in opposition to the tax, to concentrate most of my remarks on this Amendment on the problems of the surcharge on indirect taxation.

We have already made plain our feelings about this matter. We welcome the fact that the Chancellor has, at any rate in his Budget speech and in the framing of the Bill, come to the conclusion that, in general, the monetary mechanism on which his predecessors showed such dangerous overreliance is too much of a blunt instrument. The present Chancellor is prepared to introduce fiscal regulators to supplement the monetary weapon, though to judge from his answers at Question Time today he still sounds an utterly convinced supporter of high interest rates, despite all the damage that they do.

We have expressed our concern about the surcharge on indirect taxation. While welcoming the Chancellor's decision to rely rather less on the monetary weapon, my hon. Friends and I have expressed concern about the lack of parliamentary control over the operation of an instrument which enables the right hon. and learned Gentleman to introduce £200 million of taxation by the stroke of the pen. I will not pursue this matter further now because there is another Amendment which relates to the period during which the Chancellor must secure parliamentary ratification for any action he takes in respect of either or both regulators.

It cannot have escaped the notice of hon. Members that if the right hon. and learned Gentleman does introduce this surcharge on indirect taxation he will be raising the cost of living. There can be no doubt about that. I hope that the Chancellor will be able to give an authoritative figure this afternoon as to the extent to which the cost of living would be raised if he invoked the regulator. It is widely believed in the City, the financial Press, the trade union movement, industry, commerce finance and distribution that the Chancellor is only waiting to hear of the Royal Assent to the Bill to introduce this regulator within a matter of days and to get Parliamentary ratification before we adjourn for the Summer Recess.

This is widely believed to be the case. If the Chancellor were to do this, after a period in which the cost-of-living index has risen some four points in just over a year, when the Chancellor himself is so deeply concerned about the wage and prices spiral, obviously we must consider the wisdom of giving the Chancellor a power like this, because there would be an immediate increase in the cost of living.

I do not think that the House will be in any doubt that even if the Chancellor does this as a temporary measure, it will find its way into the whole structure of costs and prices; and even if he were to remove the surcharge in six, nine or twelve months' time we should never see prices fall again as a result. Every time that prices have been raised as a result of any fiscal or other measure, they have become ossified permanently so far as the economic situation is concerned. [Interruption.] I see that I have support from both sides of the House.

I am supporting the word "ossified".

It is a nice word. I expect that we shall hear it from the hon. Member on a future occasion.

We are, therefore, facing the danger of the Chancellor taking this action immediately. I want to make it plain that if the Chancellor does not defer the operation of this provision he will not get any acquiescence from us. We shall oppose any action of this kind, not only the payroll regulator but any other regulator.

I have given one reason for our opposition to this provision, namely, that it would of itself impart an additional twist to the inflationary spiral. We know that the Chancellor has about him Ministers who cling to the philosophy of economics which I once dignified with the title of "Boyle's Law." The name, I think, has stuck ever since. It is interesting to recall that the present Chancellor enunciated during the Budget debates something that he called "Lloyd's Law", which has not really caught the popular imagination to the some extent. It seems to have been forgotten. I doubt whether many hon. Members know what "Lloyd's Law" is: "Boyle's Law" we certainly understand.

I remember that when the present Home Secretary was succeeded by the present Prime Minister as Chancellor I went so far—and I have always regretted my choice of words—as to describe the Financial Secretary as Treasury Rasputin who seemed capable of convincing Chancellors, on widely different views, of the merits of the proposal that the right way to bring the cost of living down was to put prices up. That was obvious to us a fundamental tenet of the hon. Gentleman's philosophy as long ago as 1955–56. It is obvious that Rasputin has converted yet another czar. The present Chancellor, in accepting this regulator, shows that he thinks the Financial Secretary is right—

I am bound to say in defence of my hon. Friend the Financial Secretary that the late Sir Stafford Cripps and the present Leader of the Opposition did precisely the same thing and were equally wrong.

I would be prepared to handy words with the hon. Gentleman, but I do not know what particular action of theirs he had in mind. I do not remember either of them saying that the right way to bring the cost of living clown is to put prices up.

Both right hon. Gentlemen to whom I have referred, in times of inflation, severely increased taxation in the hope that it would stem inflation, and it had exactly the reverse effect, as some of us knew it would.

Yes, I remember, particularly in the case of my right hon. Friend the Leader of the Opposition in the Budget of 1951. It was admittedly controversial at the time. I do not think that any of us would disagree, though, that at the time when a war was going on in Korea and costs were rising it would have been dangerous to have failed to have a really marked disinflationary Budget. But that is not the issue under the present Chancellor's Budget. There has not been much debate about the size of the present surplus.

3.45 p.m.

The issue is that in the autumn Budget of 1955, and in successive Budgets, and more particularly In the Chancellor's regulator, he has got this idea that one can cream off inflationary purchasing power by putting prices up, particularly on essentials, and that if that happens people will have less money to spend not only on essentials, but on other things. It is the old argument. We had it night after night in the autumn Budget in 1955, that if we tax clothes pegs, babies' baths and things like that—

The right hon. Gentleman has been so good and helpful that I regret having to interrupt him, but really I think that he is a very long way from the issue which arises on these Amendments. If I were to indulge the right hon. Gentleman, I should blackmail myself into indulging others.

Of course, I accept what you say Mr. Speaker. I should point out that the acceptance of these Amendments will result directly in preventing for three months the Chancellor imposing a tax on babies' baths, clothes pegs, clothes-line posts and other things.

And beer.

And beer, tobacco and other items. We are debating whether the Chancellor should be given a taxing power over all these commodities. Those commodities are within the ambit of this Clause, although, naturally, I do not wish to trespass too far on your generosity, Mr. Speaker.

The right hon. Gentleman is arguing that the Chancellor should not be entrusted with this power immedi- ately. I follow the argument that the power is wide-ranging, but its significance here is only whether he should have the power immediately or after three months.

Yes. Perhaps I can conclude that part of the argument by saying that the Rasputin argument here is one that implies that by taxing essentials people will have less money to spend on other things. That is what lies behind these two Clauses, and we are now considering whether the Chancellor should have this power immediately the Finance Bill becomes law, or at a period three months thereafter.

I have mentioned one danger about this provision. If our Amendment is not accepted, the Chancellor will have the power this summer to give an additional twist to the inflationary spiral. Even the Financial Secretary will agree that the first result will be to push up prices. It will be quite impossible for the Chancellor to go to the trade unions and talk about wage restraint, and so on, when he himself, by his own action, is putting up prices, not temporarily, not for the duration of the period in which the surcharge is in force but permanently because of the ossificatory element in our economic structure, which has been so warmly seized upon by the hon. Member for Kidderminster (Mr. Nabarro). That is one argument.

Now I come to my second argument. Here, there is a very important question of relations between the Executive and the Legislature. This House has always been extremely jealous about giving taxing powers to a Chancellor, however respected the Chancellor might be. I think our predecessors in this House, a hundred or even fifty or twenty years ago, would be shocked at the thought that in a Bill of this kind we could give power to the Chancellor to increase £400 million or £500 million worth of taxation by a stroke of the pen without Parliamentary approval except that which comes afterwards—what I understand, in terms of the General Agreement on Tariffs and Trade, is called approval a posteriori, which means that you can give the Chancellor a kick in the pants afterwards but you cannot do it in advance.

This is a very serious power that we are conferring on the Chancellor and it is right to decide whether he should have it immediately the Bill becomes law. We are ratifying a miscalculation on the part of the Chancellor by giving him this power. If the Chancellor had thought in April, when he introduced this Budget, that the inflationary-deflationary situation—the balance of the economy—was such that he would need another £200 million or £400 million worth of taxation in July, he should have told us so in April. If not, I think that he would be guilty of very bad faith so far as the House is concerned, and I personally acquit him of that charge.

I do not think that in April, when the Chancellor introduced this power, he intended, immediately the Finance Bill became law, to impose this surcharge and this payroll tax. I do not think that he intended to do that. If he had wanted another £400 million of taxation, I think that, difficult though it would be with that kind of Budget, he would have come honestly to the House and said so in his Budget speech. I am sure that the right hon. and learned Gentleman will tell us that when he replies to the debate.

We now have a situation where, if I am right, the Chancellor intends to use at any rate one of the regulators, and already, on 4th July, only two and a half months after the Budget, the Chancellor has miscalculated grievously and he has to come along and say so. Within three months of the Budget —that is about the time that the Finance Bill becomes law—the Chancellor has to put his miscalculations right by introducing what is, in effect, a summer Budget.

There are three differences between this miscalculation and the miscalculation of the Home Secretary. One is that this was not made to influence an election. The second, of course, is that, whereas the Home Secretary's mistake required an autumn Budget, this would be a summer Budget. The third is that whereas an autumn Budget or any other kind of Budget requires full-dress debates in Parliament, right through the night, Ways and Means Resolutions, a Finance Bill, Second Reading, Committee stage, Report stage and Third Reading, the instrument which the Chancellor is here taking power to exercise requires none of that trouble and none of that, if I may say so, relative humiliation for a Chancellor who has miscalculated.

We should be extremely careful about giving a Chancellor power immediately the Finance Bill is passed to put right a miscalculation of the previous April. I hope that the right hon. and learned Gentleman does not misunderstand what I am saying. I do not think that he misled the House in April. I do not think that he then thought that, as early as July, he would be using this power. He thought that he might probbaly want it at some time in the year. We have not voted against giving him the power for future years to use whenever it seems appropriate, subject to Parliamentary approval. But there is a difference about its operation in the first year because, if he uses it immediately, this means either bad faith—of which I am only too ready to acquit him—or complete miscalculation. If he makes a miscalculation of that kind and if he finds, three months after the Budget, that he needs all this additional revenue, he ought to come along with a second Finance Bill. After all, the Home Secretary did not run away from it. He would probably have been Prime Minister today if it had not been for the disaster of his autumn Budget. That, I think, was really what finished the right hon. Gentleman from that point of view.

I trust that the House and the Chancellor will accept the strength of the case I am trying to put. If the Chancellor has miscalculated—there is every sign that he has, and we shall know within a very few weeks, if he imposes the regulator—why should not he, like any other Chancellor, have to face an autumn Budget? The future is another matter. Parliament is, rightly or wrongly, giving him a power for the future—wrongly, in the view of some of my hon. Friends—but I do not think it is right that the power should be given to him immediately.

It is very difficult for us this afternoon to pursue all the arguments which might occur to one on this Amendment, because the Chancellor has not yet announced his intention of imposing the regulators. I do not think that he can. He cannot do it at once because of his inability to carry out his intention until the Bill becomes law and because of the uncertainty which would be caused in trade and industry. But he should know that there is already very great uncertainty in trade and industry. Already, one hears of people talking about speeding up their purchasing because they think that they will have to pay increased Purchase Tax on their purchases in two or three months. This is very harmful and the reverse of disinflationary. The Chancellor is worried about inflationary demand at this time.

What are the powers which the Chancellor has the operation of which we seek to defer for at any rate three months? First, there is the power to increase Purchase Tax. I think that the House will recognise that that power already inheres in the Chancellor's armoury as a result of legislation introduced years ago by the Labour Government. Secondly, there is the Beer Duty. If the Amendment I have moved is rejected, the Chancellor will be able, two or three weeks from now, to increase the Beer Duty by 10 per cent. In other words, he could go a very long way to reverse, without any specific parliamentary approval, the pre-election tax hand-out of his predecessor, now Lord Amory, which, of course, was designed to influence the General Election of 1959. The 2d. was knocked off beer just before the election, and now the Chancellor can put most of it back.

He put it on cigarettes, anyway.

I am coming to that.

The Chancellor can now put it back. I know that he cannot put the whole 2d. back because the brewers themselves have put 1d. back—2d. in some cases. Thus, one result will be that, without any parliamentary approval at all, the price of beer will be above the pre-election figure. No doubt, hon. Members opposite—I do not know whether they made a lot of it in their speeches—were not too sorry to hope for a few votes coming to them as a result of the popularity of the then Chancellor in the public houses.

I come now to cigarettes. There was, of course, no pre-election cut in the tax on cigarettes as there was on beer, but it is a fact that, immediately after the election, the Government increased the tax on cigarettes. If I remember aright, the hon. Member for Kidderminster joined us in the Lobby, or we joined him—there will always be theological argument about who joined whom—against that.

The right hon. Gentleman must put the matter in correct perspective. What I objected to in my speech of 5th April, 1960, was the practice—the fiscal mispractice, I called it—of taking 2d. off beer before an election and putting it back on cigarettes after an election. But, in the context of the right hon. Gentleman's argument now, it is all square.

This discussion becomes out of order unless one postulates a General Election within the three months' deferment.

Under your Ruling, Mr. Speaker, I am bound to say that, because the likelihood is that the tax will go up rather than down, I do not myself expect a General Election within the three months.

If the economic situation were such that it seemed possible that the tax might go down, I should myself be highly suspicious of that possibility. I think that the hon. Member for Kidderminster was trying to lead me further into sin than I was voluntarily going. I was reciting the various items of taxation in respect of which the Chancellor will have power to impose a surcharge, if the Amendment be rejected, immediately the Finance Bill becomes law.

I mentioned beer. I mentioned the Purchase Tax. I mentioned tobacco. There are other items, wines and spirits, the Pool Betting Duty, and a whole range of Customs and Excise duties apart from those import duties which are the subject of international agreements, governed by the G.A.T.T., and so forth.

I do not want to take my right hon. Friend out of order, but he did deal with the possibility of an election. I hope that he is not giving away the high constitutional principle that, if there is any question whatever of any abrogation of sovereignty involved in our joining the Common Market, then a General Election is inevitable before any possibility of that kind comes about.

I think that I should be out of order—

We had better keep the Common Market out of this three months' deferment.

I thought that I should be out of order, Mr. Speaker, if I responded to the question put by my hon. Friend.

I merely say to my hon. Friend and to the House that, as a result of a small Amendment which we got through at an earlier stage, there is no question of changes in this taxation during an election campaign. Therefore, if an election does occur within the three months, it will, I think, be a matter of great satisfaction to hon. Members on both sides of the House to know that the Prime Minister will not be free to remit indirect taxation between the date of dissolution and polling day. If my hon. Friend had any doubts on that issue, he may take it that it is out of the way as a result of an Amendment passed in Committee.

4.0 p.m.

We consider it economically wrong that the Chancellor should have power at this time to introduce either of the regulators, the payroll tax for all the reasons which are known to hon. Members, and the surcharge regulator for the reasons I have explained. First, it would give another twist to the inflationary spiral, defeating all that the Chancellor was trying to do.

Secondly, it is utterly wrong for the Chancellor to have the power, immediately the Finance Bill is passed, to alter the whole basis of his Budget in correcting his Budget mistakes. While it might lead to the suspicion that there had been bad faith at Budget time, that the Chancellor had preferred to do it by a simple regulator because he would not want to do it in Committee, I personally do not believe that the present Chancellor is capable of misleading the House in this way.

At the same time, if the right hon. and learned Gentleman does intend to use the regulator, or if he asks the House for power to use it, within three months of the Bill becoming law, he is obviously asking for power to correct a very great miscalculation, for which any other Chancellor in any other Budget would have been held responsible to the House, and would have been made to suffer the indignity, trouble and loss of sleep that comes with an autumn Budget.

For all these reasons, I trust that the House will accept this very reasonable Amendment. The Chancellor will still have the power which he thought that he would want in the Budget, but he will not have the additional power of correcting the mistakes which he apparently made on Budget day.

The right hon. Member for Huyton (Mr. H. Wilson) has taken a long time to make what is really a short point. I hasten to say that I make no complaint about that, because one of my most enjoyable and least expensive pleasures is listening to the speeches of the right hon. Gentleman in this House. As I can hardly dare to hope that he reciprocates the compliment, I shall make my short point with a good deal more brevity than he has achieved.

As I understand, we are not here concerned with the powers given in the Clause as such. It is, of course, perfectly true that our ancestors would have been very surprised at this Clause, and would have been very surprised at the amount of power given to a Minister in the sphere of taxation. It is certainly true that it is a very far cry from the days of our predecessors, when Mr. Gibson Bowles brought an action against the Bank of England which led to the passing of the Provisional Collection of Taxes Act, 1913. The point is that the power is given by the Clause as it stands, and that power will still be there even if the Amendment were passed. I think that it is a pity, in principle, that this amount of fiscal control of the economy is required. I could not pretend to claim it as a great triumph for Conservative financial and economic policy in the past decade that there has been this measure of retreat for the proclaimed objective of control by monetary measures in the market back in the direction of fiscal measures, which were the main patent and product of the Administration of right hon. and hon. Gentlemen opposite.

We can debate this point at another time, but even the right hon. and learned Gentleman will agree that if we did rely more on fiscal and physical controls than the present Government, we never sought the fiscal controls comparable to those which the Chancellor gets in this Clause, which he will have immediately if the Amendment is rejected.

The right hon. Gentleman has specified two forms of control, but there are three possible ways of guiding the economy—monetary measures, fiscal measures and the actual physical controls. Right hon. Gentlemen opposite had a combination of the last two, but my right hon. and learned Friend is seeking to rely on the first two. My only measure of complaint about that is that the Government are shifting the emphasis away from the first to the second, while, thank heaven, still resisting any temptation to follow the example of right hon. Gentlemen opposite in the third possible sphere of actual physical controls.

There is a possibility.

I think that I would be out of order if I were to pursue that point.

It may help the right hon. and learned Gentleman and the House if I were to say now that physical controls are wholly out of order on this Amendment.

I am very grateful to you, Mr. Speaker, for giving that authoritative endorsement to the proposition which, with due diffidence, I was tentatively putting to the hon. Gentleman opposite.

We are here on the narrower point of the timing. There is a Parliamentary control, as the right hon. Member for Huyton well knows, in respect of the use of this regulator, because under the provisions of the Third Schedule, there must be an affirmative Resolution within 28 days. If the right hon. Gentleman thinks that it is economically wrong, which was his first point, he has his Parliamentary opportunity of making the point in the debate, and if the House accepts his view, the regulator will not come into force at all. He seeks to add this three months' injunction against the making of the Order, but, surely, the whole case for this regulator, and the whole efficacy of its operation, depends upon the pinpoint precision of its timing.

I thought that we were agreed about this—that we can only bring these regulators usefully into force if we were able to time the operation to a nicety, having regard to the current economic state of the nation. If we do not get the timing right, we shall always be in danger of reinforcing a new tendency which is starting, but which has not yet manifested itself above the surface, instead of counteracting the inflationary tendency which is going on. If it be right that the timing is of the essence, surely it would be very foolish to start the use of this regulator with an artificial restriction placed upon the timing of its operation.

The case put forward by the right hon. Gentleman, as I understand it, is that he agrees that there can be no question of bad faith on the part of the Chancellor of the Exchequer, but he says that my right hon. and learned Friend may have miscalculated. If he has miscalculated, the right hon. Gentleman says that he should not be allowed to put the economy of the country right by using this economic regulator within three months, but that he should be forced to bring in a new Finance Bill in the same way as in 1955.

The right hon. and learned Gentleman must not misrepresent what I said. I am saying that for this year only he should not be able to correct the miscalculation. We still have to complete the Report stage of the Bill, and if the right hon. and learned Gentleman had already decided that he had made a miscalculation, it would be perfectly open to him to try to correct that miscalculation with the appropriate Ways and Means Resolution to put it right, when we can still debate it during the Session. If he thinks that the Tobacco Duty or Beer Duty should go up, there is nothing to stop the right hon. and learned Gentleman, on Report, from making that proposition and the House debating it.

The House has the opportunity of debating, in accordance with the Third Schedule, the Resolution which it requires in the context of this economic regulator. If it is defeated, the regulator will not come into effect.

The right hon. and learned Gentleman must understand that the Chancellor imposes a regulator by a stroke of the pen. Perhaps the House will not be sitting at the time; perhaps it will. From the moment that the regulator comes into effect, taxes go up. All that we can do afterwards is to reject what the Chancellor has done. It is quite unthinkable that the Chancellor will come along to the House and give 21 or 28 days' notice to Parliament that he intends to put up the Purchase Tax or Tobacco Duty, when we have given him the power to do it. The shops will be stripped. The Chancellor would have to seek that power, and he would have to have it ratified afterwards. This is quite different from the normal Budget procedure, which I think he ought to use now, if he thinks it is necessary.

This is a procedure specifically designed to produce an effective correction of the trend in the economy. What the right hon. Gentleman was saying, stripped of all the elegant phraseology with which he made his point, is that if the Chancellor has miscalculated he ought to pay the penalty for that miscalculation by having to come back to the House with the full Finance Bill procedure. What I say is that what we have to look at is not the past record of the Chancellor, although I take a much more favourable view of that than the right hon. Gentleman does, but the current economic state of the nation.

It would be quite wrong to deny a speedy power, if that is what the situation demands, merely for the sake of imposing upon the Chancellor, by way of penance and penalty, a more protracted procedure.

The right hon. and learned Gentleman has still not seen the point. If it is the state of the nation about which he is worried, he can meet that by amending the Bill in the normal way. The Chancellor has made up his mind now.

I do not know whether the Chancellor has made up his mind or not. I am looking ahead to the possibility that at some time within the proposed embargo period it might be necessary to take this course, and to take it quickly. That is the situation with which the economic regulator is intended to deal. It would be wrong art the start of its career to cripple it with these artificial restrictions on its operation in the very feature which was put into it to enable it to work with the best advantage—that is, a speedy procedure.

I think that the right hon. Member for Huyton is quite wrong to seek to impose this artificial restriction on the procedure by way of punishing the Chancellor of the Exchequer rather than promoting the well-being of the economy. I therefore hope that my right hon. and learned Friend will resist this attempt to undermine to that extent the value of this economic regulator and that the House will reject the Amendment.

The right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) began by saying that the speech of my right hon. Friend the Member for Huyton (Mr. H. Wilson) had occupied some time. He was concerned with an extremely important point. The right hon. and learned Gentleman repeated his own point four or five times without being nearly as lucid as we normally expect him to be. He is a distinguished member of his profession, and so is the Chancellor of the Exchequer. Both of them have had to study constitutional law. We are here concerned with a matter of highly constitutional importance.

I have neither the Parliamentary right nor the material justification to call myself learned, but I recall that in the days when I had to study constitutional law I was given a book by, I think, Professor Marriott, which particularly defined the things which Parliament could not do. By the time that I received the book Parliament had done most of them. It had prolonged its own life and had passed statutes which, while we had the right to repeal them, we had lost the power to enforce repeal, such as in the case of the Statute of Westminster.

The right hon. and learned Member for Hertfordshire, East referred to Mr. Gibson Bowles. He might well have also referred to Mr. Dunning, whose famous motion was that:

"The power of the Crown has increased, is increasing and ought to be diminished."

The power of the Crown is vested in the Cabinet, but the power of the individual members of the Government Front Bench is increasing, has increased and certainly should, in some respects, be diminished.

On this genuine constitutional issue the right hon. and learned Member frankly did not face whether any Parliament is justified in tying its own hands and the hands of any putative successive Parliament. I appreciate that, every time we pass delegated legislation, to an extent we entrust Parliamentary powers to a statutorily authorised procedure which limits powers of criticism and debate. But, as my right hon. Friend the Member for Huyton said, the power of taxation is the highest and most arbitrary power which Parliament possesses in relation to the great mass of the community. It is not one that we should voluntarily limit if we can help it.

4.15 p.m.

The right hon. and learned Gentleman failed to cover two points. He said that the essence of these two proposed measures, the payroll tax and the fluctuating Purchase Tax, is that one must pinpoint the date. This was the point of the Chancellor of the Exchequer when he introduced the Budget. He said, "The situation may have so materially altered before I am due to introduce my next Budget in April that I feel it desirable that I should have these two measures of control and should be able to apply them at will".

But my right hon. Friend's proposal is directed to a specific point. In many ways the essence of it is directed to the first few days after the Bill is passed while Parliament is sitting. I do not know what procedure the Chancellor would adopt if the House were not sitting. Presumably, it would have to be recalled. Presumably, the 28 days would not run through the Recess. Parliament would have to be summoned. I do not suppose that the Chancellor would be anxious to do that unless there were a new and even more serious financial emergency than that which has developed in the last few weeks.

The result is that, in essence, we are discussing whether the Chancellor has virtually made up his mind now and is to have power to adopt this procedure without further amendment, restriction or detailed discussion, but merely on a general discussion which does not permit amendment and which is terminated by the issue of a three-line Whip. That is the point. Do not let us under-estimate the constitutional importance of it.

I do not intend to refer to the payroll tax in detail, but merely to make a general point about it. It may or it may not be used. A great number of points have been made to the Chancellor of the Exchequer about the necessity of various exemptions, and so on. It was said that this tax could bring the gravest possible hardship to the employees who would have the least opportunity of finding new employment. It might mean the dismissal of disabled persons and of elderly persons. If any reductions in staffs were made, it would almost inevitably apply, in the first instance, to people to whom it was not intended to apply.

I do not wish to misquote the Chancellor of the Exchequer, but I think that he said that he would consider the points seriously and fairly and that he would bear them in mind. But we shall have no chance of raising them again. We have no power of amendment. Ought we really to do this? Have we created a precedent to limit rather than expand our rights? Have we created a precedent so that a less honourable Chancellor of the Exchequer, with a large majority behind him, may introduce what I may call a general Budget? This is not a party matter. Future Budgets may be presented from my side of the House or from the benches opposite.

The right hon. and learned Member for Hertfordshire, East referred to some things in which my right hon. Friend the Member for Huyton and I believe. This would be a very convenient procedure for us to use. While I hope that we should not use it, if these powers are accorded by the Lower House in the Division Lobby it would be a temptation to any Chancellor of the Exchequer to say, "I will introduce a general Budget and will give myself powers under Statutory Instrument to introduce all the controls that I need as I think them necessary." This would abrogate the powers of this House to an extent to which they have not been abrogated in the centuries which have elapsed since Mr. Dunning moved his motion.

It would not be possible to do it for physical control within the ambit—

I do not think that we can have reference to physical controls in this debate. With respect to the hon. Member for Oldham, West (Mr. Hale), the distinction between abrogating power and not doing so in this context is whether we reduce the abrogation by three months.

I am obliged, Mr. Speaker. I am trying to pursue the point about the constitutional importance of that three months' period. The House may well think that, whether it likes this particular measure or not, there may be reason for a Chancellor of the Exchequer to say, in a fluctuating economic system, such as ours is today, "I need power to take some action, whether it be wise or not."

We are not discussing the wisdom of the proposal; we are discussing its execution. A Chancellor might say that, arid the House might agree with him. We are saying that the Chancellor should not present his Budget in April with the intention of altering its provisions. I do not impute to the right hon. and learned Gentleman any such intention in April, but I impute to him the possibility of that intention now, and the intention of saying, "The moment the Budget is passed; the moment another place has passed the Bill and Her Majesty has given it her Royal Assent, I may seek to tell the House that new circumstances have arisen and that I shall, therefore, exercise the power to tax the country under the delegation given to me in the Budget, in great excess of the figures I then gave"—the Chancellor would then have been, intentionally or not at the time, rendering a fraudulent Budget and a dishonest statement—"I shall invalidate the figures that I presented to the House as the basis of the Budget".

That is why the House should think very long before rejecting my right hon. Friend's Amendment and imposing upon the Chancellor a restriction of high constitutional importance.

I want to revert briefly to the more practical arguments put forward by the right hon. Member for Huyton (Mr. H. Wilson). As I understood it, the gist of his speech was that the Chancellor had made a miscalculation. I do not accept that there was any miscalculation. When our economy is being run at the pace it is today, any checking of the pace in July need not necessarily have appeared advisable in April. There are only two alternatives to these checks at short notice—either to revert to the speed of the economy before the war, when we had over 2 million unemployed, when there is no need to use the brakes sharply, any more than when one is driving a car at 20 miles an hour, or to accept inflation.

When one is running at 100 miles an hour, two things can be done. One is to do what was done between 1945 and 1951, namely, to run without quick checks, and with an unregulated economy. At that time we ran into quicker rises in prices than we have ever had in this country, and into devaluation and the disastrous consequences of 1947, leading finally to the retreat in 1951.

The country as a whole is intent in avoiding the two evils of mass unemployment and violent inflation. Inflation was not completely disastrous in the days when the Labour Party was in office, because the whole of the Western world was in a state of inflation. That state of the world does not exist today.

The country would prefer to avoid the evils of unemployment and inflation, and to choose the infinitely lesser evil—and I do not deny that it is an evil—of varying the pace of the economy at short notice in order to obtain the combination of high employment and stability. For that reason, I hope that my right hon. and learned Friend will resist the Amendment.

The point about the three months' period touches directly the constitutional practice of this House, because we are here to agree to give the Government the Powers they need to tax the subjects. This procedure starts off with the Chancellor's coming forward and giving us his views as to the likely outcome of the following twelve months—as to what ought to be received and what ought to be paid out, and what he requires as a balance to keep the economy in check. The whole of our discussion is based upon the fundamental question whether we regard as reasonable his ideas of a correct balance between what is coming in and what is going out.

The House has accepted it as reasonable, and if the Chancellor now has something different in mind he is attempting to ride two opposing horses at the same time, the first being his Budget, which is being clothed by the provisions of the Finance Bill, and the other being something quite different, which would result in a different Budget, and which he has at the back of his mind. In respect of which one is it reasonable for us to give the necessary power to the Chancellor? Surely it is the one which he first thought was right. How do we define which power the Chancellor is exercising? Surely it is by laying down a period which will indicate that he could not have had any alteration in his mind at the time he presented the Budget.

This is the only purpose of putting forward a period of three months. If the Chancellor takes action after three months it shows that there was nothing in his mind at the time, and if he wanted to do it before three months it would surely not be unreasonable to suppose that he was aware of it at the time. I cannot imagine any hon. Member wishing to deny other hon. Members the right of a normal discussion on the annual Budget and Finance Bill.

As the hon. Member for Scarborough and Whitby (Sir A. Spearman) has said, in an economy which moves fast, if, in November, the Chancellor says, "In April, neither I nor my advisers foresaw these developments taking place. They were not sufficiently obvious and they have been caused by acts of other countries over which we have no control," we would accept it as an honest statement, and as being something which was not in his mind in April, when he introduced his Budget.

But we cannot accept that something which was possibly in his mind when he introduced the Budget should have been withheld from the House, because the Budget provides for certain income and the House approves the Finance Bill on the basis of that income, arising out of taxation. We are approving a Budget which specifically excludes any income arising under the two Clauses dealing with the payroll tax and the regulators. We cannot have it both ways, and neither can the Chancellor. If we approve the Budget on the basis that that income is being excluded, it follows that the Chancellor must be quite specific and say, "On Budget day I did not anticipate that we would need the income. Therefore, I put forward a prospectus—the Budget—which I honestly and sincerely believed in, and which I thought right for the country, and which I am now inviting the House to clothe with the various Clauses of the Finance Bill."

I am grateful that this discussion is taking place, because when we were dealing with the Surtax provisions, I raised the possibility of the Chancellor's bringing in a Budget under which £83 million worth of Surtax was reduced, while, at the same time, he had at the back of his mind the idea of increasing all the straightforward taxation that the ordinary person pays when he buys petrol, oil, food or tobacco, and other goods of one kind or another. It seemed to me that if that were the situation the Chancellor would be acting most unfairly, if not dishonourably.

It would be political cowardice of an extreme kind. It would mean that the Chancellor had not the courage to tell the House that, in his view, Surtax payers should receive £83 million worth of relief, but the ordinary men and women ought to pay more for all the things they buy in the shops, and that he was producing a Budget on that basis. That would have been the honest way to do it if that was in the Chancellor's mind.

4.30 p.m.

At that point of time I said to the Chancellor and to the Economic Secretary, looking across the Floor of the Chamber, that it would be intolerable if such a situation arose, and I noticed a most unpleasant and uncomfortable phase pass over the faces of the right hon. and learned Gentleman and his hon. Friend indicating to me that the possibility of using one or other or both of these Clauses was not beyond the contemplation of the Treasury, and that was quite a month ago.

I can only repeat that it is political dishonesty, political lack of courage, and cowardice of the deepest order on the part of the Chancellor to say, "I believe it right to frame a Budget which is based on certain figures although I have other figures in mind. I believe it right to invite you to pass a Clause in the Finance Bill which gives £83 million back to Surtax payers although it is possible, and I shall not disclose this, that others in the poorest section of the community will be called upon to pay additional taxes." I believe this to be quite wrong and that the Chancellor should make it perfectly clear that this possibility was not in his mind.

The only way in which the right hon. and learned Gentleman can make it clear is to deny himself the right to use these regulators for such a period as obviously could not have been in his mind at the time he was addressing the Committee on the Finance Bill. As my right hon. Friend the Member for Huyton (Mr. H. Wilson) has said, this cannot be dated back exclusively to Budget day on 17th April. It is up to the Chancellor, if he has changed his mind between then and now, to go through the procedure now and not deny to hon. Members the opportunity to discuss it in its full context. It is open to the right hon. and learned Gentleman to do that now.

This should date not from Budget day, but from the time that the Bill leaves the House. The Chancellor should make it clear beyond doubt, by accepting the Amendment, that at all times during discussion of the Finance Bill he had it in mind to put forward a Budget in which he believed and was asking for these powers not in variation of that Budget, but in case circumstances arose which he could not foresee when the Budget was being discussed.

It is nearly three months since my right hon. and learned Friend the Chancellor of the Exchequer introduced the Budget. Three months will certainly have elapsed almost entirely before the Finance Bill becomes law. In those circumstances it seems to me that the purpose of the Amendment is to prevent the operation for a further three months after that date, that is, for six months after the Budget, of these proposals which, when they came up in the Budget and subsequently in the Finance Bill, were greeted with a good deal of interest and a good deal of criticism, but, on the Clause containing them, were not voted on in Committee.

It seems to me, therefore—to deal with the constitutional point raised by the hon. Member for Oldham, West (Mr. Hale)—that if it was considered constitutionally inappropriate to have this regulator Clause, the Opposition, in their wisdom, would probably have voted against it. The Opposition did not attack it at that point and it does not seem to me appropriate that right hon. and hon. Members opposite should do so now. We had the greater part of a day's debate on the Clause. It seems to me, therefore, that at this stage it is not right to challenge its constitutional application.

We come to the question of judgment. In the Clause we have given great powers to my right hon. and learned Friend in the hope that his judgment will be exercised at the right time. All human judgment is fallible and there is no criterion for it, but human character is a different matter. Courage and integrity are qualities which we all appreciate here, and in the case of my right hon. and learned Friend they have never been impugned.

I have no doubt whatsoever that if, in his judgment, he thought it right that a regulator should be applied now, my right hon. and learned Friend would say those very words to the House. The right hon. Member for Huyton (Mr. H. Wilson) went out of his way to pay tribute to my right hon. and learned Friend's integrity in this matter and, therefore, this becomes a question of judgment. Having approved the regulator when we passed the Clause in Committee, why should it be thought inappropriate for it to be put in use?

I said that the whole House recognised that the Chancellor would not have come here on Budget day with the intention then of using this regulator as soon as the Finance Bill became law without telling the Committee on Budget day, and that, therefore, if there has been any change in his position it must have been due to miscalculation and not to the withholding of information.

On the other hand, it might well be that the Chancellor is minded today to use these powers in two or three weeks' time. Obviously, it is unrealistic for the Chancellor to tell us today that he will make fundamental tax changes three weeks from now, but if he has in mind today that he wants this power for use immediately after Third Reading, then surely the Chancellor's most honourable course today would be to move to adjourn the debate until tomorrow and take the necessary steps while we are still on Report.

But if my right hon. and learned Friend accepts the Amendment, he is effectively precluded from using his judgment and that seems to me unrealistic. The argument is familiar to us that this very powerful instrument is required because we live in a very sophisticated and difficult world. In its wisdom the House of Commons has given my right hon. and learned Friend the powers. I think that he should use them when he thinks fit to do so. Knowing him, I think that at the moment he thinks fit he will do so, and no fear of all-night sittings and other nuisances that go with Parliamentary life would prevent his putting them into operation on the very day that he thought it fit.

I have listened with growing apprehension to speeches from hon. and right hon. Members opposite. I do not claim to be a great fiscal expert. I have managed with great difficulty to pay 20s. in the £ all my life without the assistance of political economists, and I still believe in the doctrine laid down by Mr. Micawber on how to attain a contented mind. Here we have one ex-Minister of the Crown and two hon. Members who are recognised in the House as political economists of some practical rather than theoretical standing.

Who are they?

The hon. Member for Kidderminster (Mr. Nabarro) was not in the Chamber when I was listening to the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) and, therefore. I was able to listen to him undisturbed.

All I said, sotto voce, was, Who are they?"

It is impossible for the hon. Member for Kidderminster to speak sotto voce according to the standards that apply to ordinary humanity.

Since the beginning of this year I have followed with some apprehension the criticisms made in this country and abroad of the financial trend in out economy—and it is not merely what happens in this country, but the opinions held abroad which give me the most cause for concern. After listening to those three speeches, my apprehensions have been considerably increased, because they were delivered in the tone of voice which indicates that they regard the possession by the Chancellor of the power which he seeks in the Bill as of such immediate application that there will be no need for Parliament to be recalled.

If the right hon. Gentleman is putting any weight on what I said, I would explain that I said that if the economy is run at its present speed, with only just over 1 per cent. unemployment, then, however strong the position, the Chancellor must always be ready to vary his course at short notice.

The hon. Member only confirms my fears and reinforces the line of argument which I am trying to advance.

We are confined to the question of three months. From some date towards the end of this month, or possibly the first week of August, the Bill will become law, and if it is passed in its present form the right hon. and learned Gentleman from that moment will be able to give notice that he will apply one or other of the regulators, or both, and then, within 28 days, the House must confirm his action. There sits the right hon. Gentleman, the Patronage Secretary, who will determine that the Chancellor will get his way when he puts the matter to the House, and I cannot see the Patronage Secretary resigning on this issue because he does not like to enforce on the House a dictum of the Chancellor.

We ask that this power shall not be available until the end of October or November, when one expects that the House will be in session, about to meet or about to be recalled. What the right hon. Gentleman and two hon. Gentlemen opposite said confirms my view that trouble is so close that the Amendment is an intelligent anticipation of probable events. In view of the three speeches which we have heard today, and which will be heard far outside this country as an indication of what responsible opinion is on that side of the House, I think that from a constitutional point of view and to retain the power of the purse it is desirable that the Amendment should be accepted.

Some of us on this side of the House have opposed the Clause all through and for us it is natural to support the Amendment, which postpones the evil day.

If the Chancellor resists the Amendment then he will make it clear that he contemplates using the regulator some time within the next month, because by accepting an Amendment to the Schedule he has effectively debarred himself from using it while the House is in Recess. He can arrange for the House to be recalled and to sit for 21 or 28 days between laying the Order and passing an affirmative Resolution, but I imagine that he does not contemplate going through that procedure and therefore he must wait until the end of October before introducing a regulator or he must do it before the House rises at the beginning of August. Unless he indicates that he will accept the Amendment, that is probably his intention. It is clear from what he said in discussing the regulator and the pay roll tax that this is the regulator which he is most likely to use in view of the considerable opposition to the other.

My right hon. Friend the Member for Huyton (Mr. H. Wilson) was not willing to attribute to the Chancellor the degree of political cowardice which my hon. Friend the Member for Gloucester (Mr. Diamond) attributed to him, but the Chancellor certainly takes his choice: it is one or the other. Either when he introduced the Budget on 17th April, less than three months ago, he grossly miscalculated the probable development of the economy, or else he was then unwilling to disclose to the House and the country his intention to raise considerable additional sums by indirect taxation while at the same time handing out very large rebates as concessions to the Surtax payers.

When the Chancellor says that the purpose of the regulator is to mop up surplus purchasing power, one must ask whose purchasing power it is intended to mop up. This is the vital question which affects the whole issue of the distribution of wealth in this country. When the Chancellor proposes to increase the spending power of 350,000 people by no less than £83 milllion and at the same time to decrease the spending power of the masses of the people by £230 million. it is clear that the Conservative Party are fully directed towards the policy of reversing the redistribution of incomes in favour of the masses which the Labour Government pursued.

That is my main objection to this regulator and why its operation should be postponed as long as possible. If we are to move towards a more just society and not have the kind of social justice which the President of the Board or Trade and other Members of the Tory Party advocate—namely, a separate form of social justice for the rich from than of the poor; and if we are to have a genuine social justice in this country, we must move away from raising revenue by indirect taxation towards the introduction of more progressive forms of taxation bearing on those who can most easily carry the burden. I urge the Chancellor to make clear to the House on this occasion what is his motive in seeking to get this Clause and in seeking—

The hon. Member is addressing his remarks much wider than the Amendment which is now under discussion.

I was about to say at that moment, Mr. Deputy-Speaker—and in seeking to apply that power immediately upon the termination of the discussion of the Finance Bill. If the Chancellor resists this Amendment, as we have every reason to fear he proposes to do, it seems to me an extraordinary state of affairs that we can have a Government which is quite prepared to drop the Weights and Measures (No. 1) Bill and introduce a Weights and Measures (No. 2) Bill.

I hope the hon. Member will pay attention to what I have said. The Weights and Measures Bill has nothing whatever to do with this Amendment.

With great respect, Mr. Deputy-Speaker, I was only introducing an analogy, comparing the behaviour of the Government in respect to this Measure with their behaviour on another Measure. I was about to suggest that if it is the Chancellor's intention to apply these fiscal measures in the very near future, the proper way to do it would be by means of a Finance (No. 2) Bill which could, if necessary, be introduced immediately this Bill is concluded and on which we could have a full discussion—

Why not now?

Certainly the Government might do it now, but unfortunately at the moment, by the rules of order, we are precluded by having to pursue the matter in this form from discussing all the wider implications of what the Chancellor proposes to do. In fact, that is one of our objections. If he were to accept our Amendment and then introduce another Finance Bill, we should have an opportunity of considering this matter in its wider implications in relation to the economy of this country and to the burdens that are imposed on certain taxpayers and other citizens, and we should also have the opportunity of proposing Amendments to it. That is the course that I think the Chancellor ought to take if he has political courage. If he has not, then I can understand that he prefers to follow this method of attacking the standard of living of the ordinary working people of this country, not in one fell swoop, but by this insidious method of stage by stage attack through insurance contributions plus the economic regulators and the like.

I hope that the House will allow me to intervene very briefly, because I share the deep concern which has been expressed by my right hon. and hon. Friends about this matter.

It is not only a matter of great constitutional importance, but, as my hon. Friends have pointed out, it involves the political honesty and integrity of the Chancellor. I am not concerned to examine what may have been the case in April when the Budget was introduced. There may or may not have been a case then that it was wise to look ahead to see whether circumstances might arise within 12 months which might make it necessary for the Chancellor to ask Parliament to give him more constitutional powers. But now, at the beginning of July, we are faced with an entirely different position.

This Amendment suggests that the powers which the Chancellor is seeking in the Finance Bill should not be exercised during the next three months. The case would be exactly the same if instead of three months we substituted two months or one month. What is involved is a matter of constitutional importance and also the question of Parliamentary control. The only ground on which the Chancellor can resist these Amendments is if he has it in mind in the immediate future to give effect to the powers which this Bill will give him under Clause 8.

It has been widely and frequently stated, both in the Financial Press and the popular Press, that owing to the changes in the economic situation which have developed during the last two or three months it is the intention of the Chancellor, as soon as this Bill has been hurried through all its stages in this House, has fulfilled its perfunctory passage in another place, where it cannot be changed, and the Royal Assent has been given, immediately to avail himself of the powers under Clause 8 to impose a 10 per cent. surcharge on purchase tax and everything else, which will have the effect of raising the cost of living. Either that is the Chancellor's intention or it is not. Perhaps he will tell us when he replies, because that is the acid test.

If it is the Chancellor's intention to do that, as is widely prophesied by the financial pundits, we ought to know and have an opportunity of examining the feasibility of it. If there is a case to be made for it, let it be made so that we can at least criticise and examine it to see if it bears any relation to other provisions in the Finance Bill with regard to Surtax and so forth. But what would not be proper, what would be contrary to all constitutional procedure, and what would be the complete abrogation of Parliamentary control, would be for this House to pass this Bill knowing or thinking that the Chancellor intends immediately the Bill has become an Act to take advantage of this provision.

If after the Bill becomes law the Chancellor, as is widely assumed in the City and overseas, intends within a few days or weeks to take advantage of this power to make this vicious, violent and serious attack upon our whole fiscal system and the level of taxation as between various classes, I think, in common with my hon. Friends—I do not want to mince my words—that the right hon. and learned Gentleman will be doing something which is completely contrary to our constitutional position and in defiance of the whole theory of Parliamentary control over taxation.

5.0 p.m.

If the Chancellor has no intention of doing any such thing, it would be quite easy for him to say so and to say that he accepts the Amendment. It would be quite easy for him to say that he would, instead of three months, accept a period of two months or even one month, or any other period. I am not debating the general question that it might be necessary in a changed economy to give the Chancellor some power of this kind to be exercised between the introduction of one Budget and another. My personal opinion is that such a question would be debatable and I should be against such a thing.

I have no confidence in the judgment of the Chancellor. I would not entrust him what that power. I do not think that this or any Parliament ought to delegate that serious responsibility and duty to any Chancellor of the Exchequer, still less to the right hon. and learned Gentleman. What I do say is that here we are considering merely the question of timing, assuming that there may be a case for some exercise of Executive power. The question imposed by this Amendment is whether, on the eve of the passing of a Finance Bill, with all its manifold changes in taxation, and after inquiry during the Committee and Report stages and the various effects and changes of the level of taxation on Surtax and Income Tax payers and the relation between direct and indirect taxation, within a short time after the passage of the Finance Bill after it had been thoroughly debated by Parliament, the Executive should have power to make sweeping changes in the balance of taxation between one class and another.

It can be argued that no Parliament should give a Chancellor the power to do such a thing immediately after the passing of a Finance Bill. Surely there must be some interval of time during which the provisions of a finance Measure as enacted by Parliament are sacrosanct and represent the will of Parliament and the people about the way in which taxation should be raised, and what tax burdens should be imposed on one class and another in the community. There should be some interval of time—I am not arguing how long, two months, three months or four months—within which what Parliament has resolved with regard to taxation should be the law of the land. Surely we are not intending to say that immediately the Finance Bill becomes law that the Chancellor by his own ipse dixit shall be able to change it all.

The right hon. and learned Gentleman looks very gloomy. He is sullen and silent, and I can understand that. But we must know what is his attitude of mind. Is the Chancellor intending to resist this Amendment in order that he may claim the right to override the will of Parliament as soon as that will is expressed in the form of a Finance Act? If not, I do not know on what basis he can resist this Amendment. If that be the intention of the Chancellor, it is flagrantly dishonest for him to ask us to pass a Bill on a certain basis. The Chancellor must know whether that is his intention. The Press is assuming that it is. If it is not, he ought to tell the House so frankly. If it is, I think it dishonest, and not merely that, but a flagrant invasion of the rights of Parliament.

If that be the Chancellor's intention he should tell the House frankly so that now, before we pass the Finance Bill, we can consider whether it is reasonable and whether any consequent changes are required. I am opposed on constitutional grounds to granting this power to the Chancellor at all. If there is a case to be made, I think it absolutely monstrous that such powers should be granted in circumstances in which they may be exercised immediately after the Finance Bill has been enacted without the Chancellor disclosing that to be his intention, and in circumstances in which Parliament would be left with the alternative of accepting or rejecting an affirmative Resolution and without any opportunity of debating the consequences, the implications and the changes which ought to be made.

I do not want to mince my words. I think this one of the most serious and grave Amendments to the Finance Bill that we have debated. I hope that when he replies the Chancellor will give us a clear, frank and honest answer to the questions raised by my right hon. and hon. Friends.

Following the speeches of my right hon. and hon. Friends, I think that the Chancellor of the Exchequer would do himself a great deal of credit, and would do a great deal of good to the country's credit, by accepting the Amendment. It would show that he was not frightened of the truth of the prophecies of such a dismal character which have been made. So I hope that the right hon. and learned Gentleman will accept the Amendment. I notice from the Third Schedule that the Order shall cease to have effect after twenty-eight days after the day on which it is made. That seems to indicate that an Order could be enforced for twenty-seven calendar days, not Parliamentary sitting days, which is better than sometimes happens in the case of Parliamentary Measures. But in those twenty-seven days a lot of things might be done which would have a tremendous effect on the economy.

How long does the Chancellor anticipate that a debate on an Order would take? Usually such debates last from 10 p.m. until 11.30 p.m., and then, if Mr. Speaker thinks that the debate has not been adequate, he can adjourn the House without Question being put. In other words, it would be possible for the House to have debate for an hour and a half and then for Mr. Speaker, because he did not think that the Question had been adequately discussed, to adjourn the debate without the Question being put. May we have an assurance that at least a whole day, or possibly two days, will be given to debating any Order which the right hon. and learned Gentleman may lay before the House in the event of it being necessary to recall Parliament?

In this debate there have been references to the merits of these two regulators. I am conscious of the fact that there are differing opinions about them, and, indeed, between them, as to their merits. When I introduced my Budget, there were some pleasant things said about a new approach and new methods and how good that was. But I knew all the time that any regulator which was introduced would be exceedingly unpopular and I had no illusions about that. If these regulators are used they will be exceedingly unpopular, and I have no doubt that a good deal of "hay" will be made by the hon. Members opposite in their attempts to stir up popular opinion against them. Bat the test of political cowardice or courage is whether one does unpopular things in the national interest if one thinks it right to do so.

I do not attempt to deny in any way the constitutional importance of the point made by the hon. Member for Oldham, West (Mr. Hale). I have never underestimated it. I consider this to be a constitutional innovation of great importance, and because of that I have tried to deal with it in a reasonable manner. That is why I accepted the proposition that it should not be sitting days but calendar days, and later I am putting forward an Amendment to reduce the period from twenty-eight days to twenty-one days. In putting forward this proposition, I said that I thought it was such an exceptional power that each Chancellor should have it renewed year by year. It is something which should not be for him in perpetuity, so to speak, but should be positively renewed each year. I have no illusions about that. I think it is a matter of great constitutional importance, and I have tried to meet that point in the way I have suggested.

With regard to this point put by the hon. Member for Nuneaton (Mr. Bowles), if I may say so, I cannot conceive of this matter being dealt with in one and a half hours at the end of a parliamentary day. Though it is not for me to say how many days would be given to a decision of this magnitude, obviously it would involve a substantial economic debate. I cannot conceive of its being run through at the end of a day.

I am not sure that I fully understand one part of the argument in favour of the Amendment. The Opposition did not vote against Regulator No. 1. Indeed, in dealing with regulators generally and the constitutional aspect of action between Budgets, the right hon. Gentleman the Leader of the Opposition himself said:

"In my opinion, it would be foolish to dismiss this idea out of hand as just another interference. Certainly, we would not oppose in principle giving a power to act between Budgets. There is something slightly absurd about waiting each year for a Budget before one can take action in the fiscal field."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 842.]

The right hon. Gentleman went on to say that any particular action proposed would have to be scrutinised very carefully, but it seemed to me that he approved the principle of taking action between Budgets.

Then again, the right hon. Gentleman the Member for Battersea, North (Mr. Jay), on 1st June, said:

"In general, we on this side are not opposed to using taxation as a planning instrument which, I gather from the Chancellor's pronouncements up to date, is the purpose of this and the other economic regulator. Indeed, in the 1948 Finance Act the Labour Government took a similar power. I suspect that the Chancellor opposed it at that time"—

I do not remember now whether I did or not—

"but we took the power to vary Purchase Tax from time to time by Order in the fashion now suggested."—[OFFICIAL REPORT, 1st June, 1961; Vol. 641, c. 512.]

Of course, that procedure was subject to the rule about sitting days, so, on 1st August, the Government, acting with that power, could technically increase Purchase Tax to the extent of about £900 million and Parliament would not have the right to say anything about it until November.

That power was intended to be used for Purchase Tax, and it has been used only to make minor changes or to correct anomalies. That is very different from the changes envisaged here, which will involve hundreds of millions of pounds.

The right hon. Gentleman himself drew an analogy between what the Labour Government did in 1948 and these regulators which I am proposing. It seemed to me quite clear that he was envisaging what was done in 1948 as being a means of economic regulation. I do not understand why, if it is right to have this power, a time limit should be put upon it. If it is the correct action to take, why is it wrong to do it in four weeks, or eight weeks, or ten weeks, but right to do it in 14 weeks? If it is right for the weapon to be used at a certain time in the national interest, then it should be used.

The right hon. Member for Huyton (Mr. H. Wilson) referred to miscalculations which he said I had made. He did not accuse me of bad faith by being determined already, when I introduced my Budget, to put this thing into operation in July, but he did say that perhaps I had miscalculated. Anyone who thinks that he can correctly calculate in this world what is to happen is thinking too much of himself.

Though he criticised my state of mind, the right hon. Gentleman acquitted me of bad faith in presenting the Budget. He asked what my views were now. My anxieties about the situation are very clear. I stated them at some length in my speech at the Association of British Chambers of Commerce on 22nd June, which was widely reported. Anyone looking at the situation in the world must feel a measure of anxiety. There are possibilities for corrective action in the monetary and other fields, but I have taken no specific decision.

A lot goes on from day to day, and I shall take the decisions which I think to be right in the interests of the country, and shall seek to implement them at the time when I think it is in the country's interests to do so. If this power is the right thing to have, as I believe it is, I ask the House to support me in the view that if it is right to have it, then it is wrong to limit it in the sense suggested inn this Amendment, which I ask the House to reject.

Before the right hon. and learned Gentleman sits down. may I ask him whether, as he has made important pronouncements outside this House, he intends to make an announcement before the Recess? It is very relevant to our attitude towards the Amendment.

I cannot answer that question today. I should be very surprised if the House rose for the Recess without a statement on our economic position. Beyond that I cannot go.

Before the right hon. and learned Gentleman completes the process of sitting down again, may I ask him one other question? He rejects the suggestion that there should be a ban on the use of this power for three months after the Bill becomes law. Would he be prepared, so as to satisfy the whole House about the constitutional aspects, to accept a closed period of one month after the Bill becomes law, so that we are not left with the suspicion that he may take action, perhaps within a few days, of the Report stage? In other words, if we were to offer to withdraw this Amendment, would he then propose a manuscript Amendment to substitute a period of one month, or else give a clear assurance that he would not use the power within one month of the Royal Assent?

I cannot give that assurance, and the right hon. Gentleman would not dream of doing such a thing if he were in my place. If, in the national interest, I have to take certain action, I must have freedom of manœuvre to take it as soon as it is necessary. Such a proposal is contrary to the national interest and it is an unreasonable request to make.

As the right hon. and learned Gentleman has not quite sat down, may I put a further question? We are now on the Report stage of the Bill. Is he saying that he has still not made up his mind about these regulators? If he has not, then it is his duty to bring in amendments. If the right hon. and learned Gentleman has not yet taken a decision, but is confident that he will have to take one in future, why will he not accept a closed period?

I have made no specific decisions. I have said that we are passing through anxious days. There are many possibilities open to me—a whole range of things which I do not think it wise for me to mention. When the Bill receives the Royal Assent there will be other possibilities. I have made no specific decisions about the instruments to use to deal with the situation.

In the interests of Parliamentary decency, would the Chancellor agree that, if he had made up his mind to use these regulators within one month of the passing of the Bill, it would be his duty to inform the House of Commons now?

The hon. Gentleman talks of Parliamentary decency. He has not put all his remarks quite as courteously today as he usually does. If I had made up my mind on the introduction of these regulators at a particular rate, or to introduce them at all, it would be my duty to say so. I have not taken those decisions.

Fishing is great fun, but this is a constitutional question, and an important one. It arises, as I see it, on the terms of the Amendment. The Amendment proposes a period of three months, but I do not think that anyone would insist on a specific period of that kind, and if the right hon. and learned Gentleman were able to give us an assurance about the time I, at any rate, and, I think my right hon. and hon. Friends, would accept that in lieu of pressing the Amendment.

The point is this. The right hon. and learned Gentleman considers it his duty to take courageous action when he thinks it right and in the national interest. That is one side of taxation. There is no doubt that if there was no democratic responsibility for taxation it would in many ways be an easier thing to do. Taxation in a country such as ours is always a compromise between the absolute efficiency to which the Executive is tempted and the requirements of democracy, which cause us to profess at the beginning of a Bill such as this that we

"have freely and voluntarily resolved to give and grant unto Your Majesty the several duties hereinafter mentioned".

It was for that latter aspect of taxation that in the seventeenth century there was civil war in this country and men fought to defend the representative nature of taxation against the efficiency which was no doubt inherrent in ship money. That is the sort of question which arises here. It depends, in the circumstances of this case, on the reasonable length of the Chancellor's foresight. It would be wrong for the Chancellor, having decided that the situation required the use of one of these weapons, to elect to do it by an Order for some minor administrative or, to use a wider expression, minor executive convenience.

A sacrifice ought to be made in that direction. If it is intended to use these powers within a foreseeable period, a reasonably short period, they ought to be put in the Bill. The House is still seized of the Bill. We have not yet parted with it. It is open to us to pass additional Ways and Means Resolutions if they are required. It is open to the Government to introduce Amendments. It would be right to do so, even if it were inconvenient, should it be the case that the right hon. and learned Gentleman intends within the limits of his foresight to use the powers he is taking.

On the other hand, I can see the case when was put by my right hon. Friend the Leader of the Opposition for saying that there is a long period between Budgets and that in the circumstances of the world and of this country as it is today it may be right and proper to provide for action to be taken on emergencies or in circumstances which arise in the not immediately foreseeable future. I understand that. I understand, also, the need for minor administrative changes in such a tax as Purchase Tax and for making provision for them, as was done in 1948. Technically, it is true that those powers could have been more widely used, but they never have been. That is a totally different matter and a different intention from what we have to deal with today.

It used to be said that equity was the length of the Lord Chancellor's foot. What we are considering today is how far the Chancellor of the Exchequer is justified in taking powers, which he may well need, in a form which will enable him to make up his mind not in detail now, or deliberately to refrain from making up his mind, and yet in truth and in substance intend to use the powers and prefer to have them in the shape of an Order-making power rather than in the Finance Bill.

That is a balance between the necessary relation between taxation and representation, on the one hand, and sheer administrative convenience in a rather complicated world, on the other. We come to the old balance between the rights of this House to control taxation and the convenience of the Executive in dealing with taxation. The two things do not always coincide. While the Chancellor is fully entitled to say, if he chooses, "In present circumstances my foresight does not run to three months" he should at least have given an indication that what he is intending to do is to provide for an emergency or a possible emergency between Budgets and not merely take an Order-making power instead of a legislative power, which is a quite different matter which can be much more fully discussed and considered in the House than even the two or three days which the right hon. and learned Gentleman was prepared to contemplate might be allowed for the discussion of an Order would permit. An Order, in the nature of the case, cannot be amended and dealt with in the same detailed way.

This is a question of the right hon. and learned Gentleman's courage in doing the right thing, but he must remember that his courage is to be exercised in two directions. One is what he thinks is right for the nation. We accept the need to do that. The other is the imperative need of this country to maintain the principle of no taxation without representation and the consequent principle that in imposing taxation due regard must be had to the wishes and power of what is, after all for these purposes the only representative assembly in the country.

With the leave of the House, I should like to make a few remarks. Two quite different points are being mixed up here. The first is the constitutional issue. The Opposition say that they do not like monetary controls. Earlier in the year I suggested that we needed additional controls. I put forward two suggestions which I admitted straight away were rather blunt instruments. One was a flat percentage increase over almost the whole range of taxation on personal consumption. It is a blunt instrument, because it is a flat rate. There is not to be any distinction between commodity and commodity. It is to be a flat-rate increase.

Against that proposition the Opposition did not divide. They did not divide against the proposal that the Government should use such a regulator. The important constitutional point is that in using a blunt instrument of this sort one should not ride roughshod over the rights of the House. The Government have shown their intention of not doing that by saying that we will come within 21 days to get the approval of the House. That is the constitutional point.

It is now suggested that, it being conceded that the Chancellor of the Exchequer should have this kind of blunt instrument to use as an economic regulator, he must not use it for a fixed period after the passing of the Act which gives him power to do so. That is illogical and, indeed, foolish. It is quite out of keeping with the general argument about the use of economic regulators. The hon. and learned Member for Kettering (Mr. Mitchison) referred to an emergency. The whole point of an economic regulator is to try to avoid an emergency. If the House chooses to give the Government the power to use an economic regulator of this sort, it is very foolish to try to fetter the discretion of the Government in any way about when the regulator can be used, provided that the Government come back to the House within a reasonable time to get approval for their action.

Will the Chancellor clear up this point? What would be the legal

I am sure that the right hon. Gentleman must have thought that out when he supported the action his own Government took in 1948. I do not know the answer to that question now. I imagine that it will be exactly the same principle as with any form of Revenue tax which is announced at the time the Budget is introduced and which may be rejected by the House.

Is not that an argument for deferring the Chancellor's power to use this for three months? Will he find out what the position is?

I beg to move, in page 7, line 37, at the end to insert:

(10) For the purpose of section two of the Isle of Man Act, 1958 (Isle of Man share of equal duties) the amount of equal duties collected in the Isle of Man and the United Kingdom, or in the Isle of Man, shall be calculated by reference to the amount so collected in respect of such duties after giving effect to any addition or deduction provided for under this section or any corresponding provisions of the law of the Isle of Man.

Under the Isle of Man Act, 1958, the island has virtual autonomy as regards Customs and Excise duties, but has agreed in return to keep its duties on goods generally in line with the United Kingdom tariff and to share the receipts. Under the authority of Section 2 of the Isle of Man Act, 1958, the proceeds of these "equal duties", whether they happen to be collected in the island or in the United Kingdom, are treated as a common fund which is known as the Common Purse, and the share of this fund determined by the Treasury to be appropriate to goods consumed or used in the island is paid to the Government of the Isle of Man.

In accordance with this policy, the Isle of Man authorities will apply any future surcharge or rebate on United Kingdom rates of duty to the smaller duties in the island. An Act of Tynwald is being drafted to this effect. It follows from the Isle of Man's agreement to keep in line as regards surcharges and rebates that the surcharged or rebated amounts of the "equal duties" should also be paid into the common fund. That is the purpose of this Amendment.

I beg to move, in page 8, line 24, after "individual", to insert:

"whichever is the less of the following amounts, that is to say four thousand and five pounds and".

On a point of order, Sir William. I wonder whether I might make a suggestion which would be of help to the House. I do not think that this Amendment makes sense in the place where it is. Might I suggest that instead of debating this Amendment we go back to the earlier Amendment in page 8, line 25, after "to", insert

"whichever is the less of the two following sums, that is to say eight hundred and ninety pounds and".

I think that that would make better sense.

I am in some difficulty. I do not think that it is possible to go back to an earlier Amendment. My understanding is that Mr. Speaker selected this Amendment for debate.

This is entirely my fault. The right figure is £890, which is the tax on £4,005. That is what I intended, as I am sure the House knows. I am sure that the hon. Gentleman knows that what I endeavoured to do by the Amendment was to confine the concession to people who get the two-ninths relief for earned income. I can see a number of kind hon. Gentlemen opposite nodding in understanding of what I meant. I am not sure that there need be a technical Amendment. If we were allowed to discuss the Amendment which has been moved on the principle of what was intended, I think that that would meet the case. I gather that hon. Gentlemen opposite would agree to that course.

I feel that it will be all right to proceed as we are.

Hon. Members on this side of the House would also agree to that course.

I am obliged to my hon. Friend. I have not got eyes in the back of my head.

It takes a big man to admit a mistake of that kind, and to that extent my hon. and learned Friend has my support.

The object of the Amendment and the Amendment to leave out lines 29 to 35 is to reduce considerably the amount of the Surtax concession. The object of the second Amendment is to omit paragraph (b) which amounts to not quite half the total amount—the exact figures are over £46, in one case, and over £37 in the other—and to confine the first concession to what I will call the two-ninths belt, that is to say, to confine it to cases where earned income relief is given to the extent of two-ninths, that is, up to the limit of £4,005, and of course the cases where more earned income relief is given but then only to limit it to that extent. I hope that I have made the meaning and the intention clear.

5.45 p.m.

This raises the general point about the Surtax concession. It raises it, perhaps, not in the same acute form but we on this side of the House object to the Surtax concession as a whole, and this is merely an attempt to reduce it since at this stage we cannot hope to eliminate it. We think that, in principle, it is wrong that a concession, even if it is not to come into operation immediately, should be given at a time when other taxes are being levied, taxes in the Finance Bill itself, and taxes in the form of National Insurance contributions and other matters about which I obviously cannot talk now but which I am sure are present in the minds of all hon. Members.

The Government's defence, as I understand it, has not been to minimise the difficulties of the present position. Indeed recently, and even in the course of the debate we had a few moments ago, they have shown an acute sense of how urgent and serious those difficulties are or may be. They do not defend it by attempting to do that. What they say is that the Surtax concession is not to come in yet. It is something which will operate to some extent in 1962–63 and only fully in the following year, the point in those two cases being the difference between the way in which Surtax is levied on Schedule D earnings, and the way in which it is levied on Schedule E payments.

That is the position, but surely the answer is the simple one which has been given more than once already, that the prudent man—and we have to assume the prudent man for these purposes—sets aside his taxation liability when his earnings come to him. I see an hon. Member opposite shaking his head. I have a great deal of sympathy with him. I hate doing it myself, but I hope he will agree that if one has fluctuating earnings there is a need to be prudent. Therefore, when we are considering the balance which is to be achieved in this Budget we must consider the amount which is to be saved at the end of it and left in the Chancellor's hands. We must consider this Surtax concession even if it does not come into operation now as something which in its effect on the national economy will take place as soon as the law is passed and the earnings in question come to be considered.

Some of them, as we saw in an earlier debate, will already have been earned, but, one way or the other, there is no question that when one is considering the effect desired in the Budget as a whole and the effect of the Budget on the economy it is a false argument to say that the Surtax concession should be treated differently because from the point of view of the Revenue it does not come into effect this year or, indeed, into full effect for one or two years as the case may be.

What is happening is clear. I do not know whether it would be considered just or equitable if the people paying Surtax lived in a community by themselves, but in the community as we know it they are getting a concession on the ground that it is said to be just to them, or an incentive to them—both grounds have been put forward—at the same time as taxes in other respects are being heavily increased; taxes in the form of payments by poor people and people who are sick; taxes in the form of a considerable burden on industry by the payment of the oil tax; and taxes in the form of an increase in Profits Tax on companies. That, too, is a tax on industry.

That is all for the benefit of a limited group of people, some 350,000 of them, who are getting the best of it at present, who are in a position to pay Surtax and as to whom all we ask in the Amendment is that the wealthiest of them should at least not get any more and that if, contrary to our view, an incentive is to be given, at least it should be confined to those who are in the group of the major executives or the minor executives—the important executives, or however one likes to describe them—the people who are earning their money, not at the rate which fortunate people such as Dr. Beeching manage to merit, or are supposed to merit, but who are in the position in which a highly intelligent person aged 30 or 40, with good connections and a lot of luck, might possibly find himself. That is the sort of person we are supposed to encourage.

If that is to be done, clearly the two-ninths belt—that is, up to an income of £4,000 or a little more—is as far as we ought to go. What this tax does is to open very large possibilities to people who are in receipt of very large incomes. They will get not only the two-ninths concession by way of earned income up to £4,000 but the additional one-ninth up to nearly £10,000 and, if the Clause is left as it is, the additional £2,000 which is to come off under subsection (1, b). On any view of what incentive ought to be given, we can only say that that is hopelessly excessive.

Objecting as we do to the Surtax concession as a whole, we might reasonably say that nothing should be given. We have said so already. We cannot enforce that view. We can at least insist that the concession is confined to the extent of, I was about to say, a reasonable income of a wealthy man. I do not want to put it quite like that, but it could be confined to the extent of the reasonable earnings of a competent, pushing, intelligent executive.

We do not admit the Government's case. It is a case which we would not concede when the economy as a whole is in difficulties and when the taxes which I have indicated are being levied on people far less well able to pay them than those concerned with paying Surtax. If we are to have the Government's proposition at all, let us have it confined to the very moderate, rather generous limits that would be left as a result of our Amendments.

I strongly support the words of my hon. and learned Friend the Member for Kettering (Mr. Mitchison) in relation to the two Amendments. I hope that nobody will suggest that it is inopportune or inappropriate in any way for us to discuss this matter at this point of time.

It will be observed that the Government have so framed this legislation that this is the last opportunity we shall have of dealing with Surtax payable on 1st January, 1963. The Government have so framed their legislation that in this very Finance Bill, which we are discussing in July, 1961, we are today having our last opportunity of making any amendment whatever in Surtax which people will be called upon to pay in 1963.

The Government realise that the position by then may have changed and they want to protect their Surtax payers. They want to protect them against any possible reduction which should be made in the light of financial and economic circumstances obtaining in the future. Therefore, the Bill contains provision which, having come in unusually and extraordinarily this year, will not, as in the normal case, come in next year and be available for consideration then. The Opposition are being prevented from any opportunity of putting down Amendments next year to deal with this problem because of the way it is framed this year.

When I say "framed", I mean framed. The Opposition are being "framed" because they cannot exercise their democratic rights in dealing with Surtax next year as they normally could do and, indeed, as they would be doing in the preceding Clause this year. I have no need to do more than to refer to the preceding Clause to show which is the normality and then to come to the Amendment, which relates to the abnormality.

My hon. and learned Friend was, as usual, courtesy in the extreme in dealing with an argument which nobody would attempt to bring against us, namely, that it was, perhaps, not entirely appropriate at this point of time to deal with Surtax which, admittedly, is not payable for some time ahead but the inflationary effect of which is felt now and as to which we can only now make our complaint if we are so minded.

On an earlier occasion, I said that there was no limit to the greed of hon. Members opposite. I retract not one syllable from that statement. Unless the Government are prepared to accept the Amendment, or something like it, they will have demonstrated how right and justifiable that statement was. We have just had an important debate relating to the economy of the country in which the Chancellor of the Exchequer has been unwilling to say whether he would put a most unusual tax, or two most unusual taxes, on the backs of the ordinary people within weeks of this date.

Everybody knows that there is a considerable likelihood of the Chancellor doing so and a considerable likelihood that the ordinary worker, the ordinary taxpayer and citizen, will be called upon shortly to pay more for all his necessities, all the things which he consumes in the ordinary way of life. Now, five minutes later, we are discussing the possibility of the Government having second thoughts and making a contribution to the healthy state of mind of the country and affecting relations between employer and employee and between rich and poor.

We want to see a happy community. We want to see workers and employers working together for the benefit of all of us. We are conscious that unhappy and unharmonious labour relations would do enormous damage to our vitally-needed export trade unless that disharmony is, as far as possible, removed.

One of the things which is at the root of that disharmony is the feeling that there is one law for the rich and one for the poor. We have just dealt with the law of the poor in the previous Amendment, on which the Chancellor said that he would not deny himself the right, within days of the passing of the Bill, to bring forward legislation to put a tax upon the backs of every factory and every office worker.

Everyone.

The hon. Member, quite properly, said "everyone". He knows that, of course, it bears more heavily on the poorer than on the richer. The hon. Member is a good deal taller than I am. If the same weight is put on his shoulders as that put on mine, assuming that our strength is in relation to our height it would be easier for him to carry that weight than for me. When everyone has the same weight put on their shoulders it is much harder for the poorer employee to bear it than for the Surtax payer.

The hon. Member is so much nearer the ground. He has not so far to fall and would not hurt himself so much.

That is a typical attitude for the hon. Member for Wycombe (Mr. John Hall) to adopt.

I am sorry, but I did not follow what the hon. Member for Wycombe said.

Is not the logic of what the hon. Member for Wycombe (Mr. John Hall) said that the poorer a person is, the harder one may hit him and the harder he will fall?

I find it extremely difficult to discover how my remarks could possibly be interpreted in that way.

My hon. Friend the Member for Stoke-on-Trent, North (Mrs. Slater) thought the hon. Member meant something and I thought he meant nothing. I do not know who is right, but I will certainly repeat what I was saying, that the hon. Member rightly drew attention to the fact that the taxes and imposts which the Chancellor is proposing and which he is refusing to deny himself the right to use immediately after the Finance Bill becomes law, are of equal size and will have to be borne by all persons, tall or short, rich or poor.

Secondly, this affects the relationship between employer and employee and bears directly on the likelihood of our being able to pull ourselves out from our position at the bottom of the league compared with every other exporting country, where we have been under this Government now for two years. What is likely to pull us out of that position is an improvement in the relationship between the worker and the employer, a mutual feeling that each has a fair crack of the whip and fair shares in tax reliefs.

This Amendment deals with fairer shares, not completely fair, in tax reliefs. In the light of what the Chancellor said this afternoon, and of the recent debate, in the light of a number of unauthorised strikes taking place, the difficulties we experience in increasing production and increasing exports and in the light of falling invisible exports, the Amendment proposes that Surtax payers should make a contribution to the common welfare.

That contribution to the common welfare should at least say that under the proposals of the Chancellor by which the richer section of the community is to have in one fell swoop one half of its Surtax burden taken away notwithstanding that year after year as ordinary taxpayers it has benefited very considerably under this Government by having the burden of taxation reduced—I hope the hon. Member opposite is nodding in a sleepy way and not in a negative way.

The hon. Member has spoken about a league. He has made a comparison with other countries, but will he remember the league in which this country, in relation to incidence of taxation, is taxed at a higher level on incomes? Even with the rebates which are to he made, that taxation is higher than in some of those countries.

I wish that the hon. Member would be more specific. By the time the Surtax reliefs will have had their effect we shall be nothing like in the same position comparing high rates of taxation as we were. We shall be far behind our American friends, for example. They bear much higher rates.

This Amendment invites the richer section of the community, as represented by many hon. Members opposite, to say, "We recognise the need to make a con- tribution to the common welfare. We have been offered in one fell swoop a cut of one half of Surtax liability, a total of £83 million spread over about a quarter of a million people. We feel that in the present state of the country and the anxiety expressed by the Chancellor, repeated here 20 minutes ago, we ought to make a contribution to the common welfare and to reduce our proposed savings on Surtax in the way outlined in these two Amendments."

I hope that when the Government reply is made we shall be told what amount would be involved. It is obvious that there would still be a very considerable saving to the Surtax payers and still a considerable cost to the Exchequer compared with the position before Budget day. These two Amendments would make a small contribution in money and would mean no hardship whatsoever on any individual. Every Surtax payer year after year since 1951, when this Government came into power, has continued to benefit. He knows for certain that, no matter what happens between now and 1963, he will get the benefit because the Government have circumvented the powers of the House to prevent him getting the benefit. The Surtax payer, therefore, should make a small contribution for the country and towards better relations between employer and employee, which could be improved.

So far as I could follow the speech of the hon. Member for Gloucester (Mr. Diamond), it seemed that his whole line of argument was directed to showing that the present Government, throughout their term of office, had been removing progressive taxation from those better off to those who are worse off. The only thing wrong with that argument is that it does not happen to be true.

As I have said on a number of occasions, and repeat for the benefit of the hon. Member, since 1951 the proportion of our total taxation taken up by progressive direct taxation has, in fact, risen and will rise further during the coming financial year. Perhaps he will recall that in the Budget estimates progressive direct taxation is estimated to yield very nearly £400 million mom during the next year than during the past year.

I shall return later in my remarks to the question of social harmony to which the hon. Member referred. Whatever criticism can be made of this Government, in my view it is absolutely ridiculous and extremely unfair to say that they have not allowed direct taxation to play its full part in our tax system. My hon. and right hon. Friends are perhaps more given to telling me that we have weighted the scales too high on the side of direct taxation. I certainly do not accept the contention that direct taxation has not played its proper part in our tax system in the last ten years.

I suggested an alternative form for these Amendments. I wish to take the opportunity of saying that the hon. and learned Member for Kettering (Mr. Mitchison) may have slipped up once, but I think that the whole House ought to remember how much we owe in these debates to his skill at drafting Amendments, because that is not the easiest thing to do and he has been responsible of a number of good and pointed debates.

These two Amendments fall into two parts. First, I will deal with the question of the two-ninths. As the House will remember, the present Minister of Aviation, in 1957, allowed an earned income allowance to apply right up into the Surtax scale for Income Tax purposes. I make no apology for the fact that under this Budget, from 1963 onwards, the earned income allowance will apply for two ninths up to £4,005 and then one ninth up to nearly £10,000 in respect of Surtax as well as Income Tax. That is a perfectly right and just provision.

Now I come to the second of the proposals, which is the more important. It is the proposal that we should not have the special earnings allowance. I was interested to hear what the hon. and learned Member for Kettering said about wealthy taxpayers. The House ought to recall that if the second Amendment were accepted a single man would begin to pay Surtax on his earning as soon as they exceeded £2,572. Furthermore, a married man with two young children both under 11 years of age would start to pay Surtax as soon as his earned income reached £2,957.

I refuse to believe that a man who has two children under 11, and who is earn- ing less than £3,000 a year, can properly be regarded as a wealthy Surtax payer. I put to hon. Members opposite the point which I have made many times in these debates—that that man, before the war, would have been earning approximately £1,000 a year. Would anybody consider that, before the war, a man who was earning £1,000 a year, and who had two children under 11, could be called a wealthy man and regarded as somebody who ought to be paying Surtax? By exactly the same token, it would be quite wrong for someone earning less than £3,000 a year, and with two young children, to go on paying Surtax today.

Rather than apologise for these proposals, if anything, my right hon. and hon. Friends are to be criticised for not having introduced these proposals earlier in the post-war world. One has to look at this Budget in the context not of only one year, but of twenty years.

I want now to refer to the controversy between the hon. Member for Gloucester (Mr. Diamond) and my hon. Friend the Member for Worcester (Mr. Walker). I quoted a certain number of comparative figures when I spoke in the Budget debate. I pointed out that if a man who was earning £3,000 a year, and who had two young children, gained an extra £1,000 a year, in West Germany he would keep £673 of the extra £1,000 and in the United States he would keep £793. If the Amendment were accepted, in this country he would keep only £613 of the extra £1,000.

I have no wish to see England at the bottom of that particular league table. It is absolutely wrong that we should be so. I cannot believe that it is right that our tax treatment of a family man earning a salary in the region of £3,000 to £4,000 a year should be clearly and substantially less generous than that given by our two principal trade competitors.

Under the Government's plan, a man with two small children who is earning £3,000 a year would keep £699 of that extra £1,000. That is to say, we shall be slightly more generous that West Germany, but considerably less generous than the United States.

And France.

I think that my hon. Friend is right. It is a more satisfactory situation than that which would prevail under the Amendment.

I absolutely agree with the hon. Member for Gloucester about the importance of preserving social harmony. I said in my Budget speech—I am not sure if the hon. Member for Edinburgh, East (Mr. Willis) was here—

I have heard the hon. Gentleman say this so often.

I am not sorry to say it again.

Social justice and social harmony consist of treating everybody fairly and giving everybody his due. I cannot see why it should be supposed that only one section of the community can suffer a feeling of social injustice. Since the war, the tax on incomes which no one before the war would have pretended should be in the Surtax range, but which have been in since the war, has been high; this has created a feeling of injustice and must have blunted the competitive edge of British industry.

For that reason, I have no hesitation in advising the House to reject the Amendment and in saying that the Government intend to stand firm on the scheme which they have announced.

I am sure that the hon. Gentleman will give us the figures and will say to what extent there would be a reduction in the £83 million if the Amendments were accepted.

I will give the figures with pleasure. The cost of the first Amendment would not be very great. In a full year it would be about £4½ million out of the £83 million.

The second Amendment is considerably the more important, which is one of the reasons why I laid stress on it. If there were not a special earnings allowance, the two Amendments would claw back £29½ million in 1962–63 and £42 million in a full year. That is the cost of both Amendments together.

I again remind the House of the provisions about Profits Tax which my right hon. and learned Friend has made this year and that which Lord Amory made last year. Against the reductions in Surtax which my right hon. and learned Friend has announced, we have to con- sider two increases in Profits Tax, bringing up the rate from 10 per cent. to 15 per cent. I cannot see any grounds for saying that the economic and social policies of the Government have been in the interests of one section of the community. The Government have no hesitation in standing firm on their own proposals.

It is only by permission of the House that I can speak again. It was in the very temporary and unavoidable absence of my hon. and learned Friend the Member for Kettering (Mr. Mitchison) that I actually moved the first of the two Amendments, although I did not speak to either. May I have that permission, Mr. Speaker?

The hon. Member must ask the House. I dare say that he will have permission.

We have heard from the Financial Secretary, in his usual gracious way, the two main points about our proposals which we have gone over so much during these debates on the Surtax concessions. They have been, firstly, the purpose of these very drastic reductions in Surtax and, secondly, how the concessions are to be paid for in the present financial and economic situation.

The purpose, and the only justifiable purpose, of the concessions in this Bill this year is that put forward from the outset by the Chancellor, that these concessions were desirable if not absolutely necessary to give a boost to the economy. He seemed to rest his expectations on the conclusions of a book published by the National Union of Manufacturers. It said:

"Any Government with courage to revise Surtax on these lines will find it has touched a spring that will instantly release the flood of energy and enterprise essential for the great advance to prosperity the nation so desires to see."

But throughout the whole of the debate, we have not had any evidence to show that that hope will be fulfilled.

Earlier in the book there was an undeserved slur on the initiative and ambition of executives and businessmen generally within the Surtax range. I quote from page 10:

"When the most promising technicians and executives hold back from accepting higher posts with greater responsibilities because the extra reward is disproportionate to the strain of office, the nation is the loser."

Throughout these debates only one hon. Member, the hon. Member for Spelthorne (Sir B. Craddock), has given any actual case in his own experience where art executive or technician has held back from assuming duties, carrying higher responsibility and higher remuneration, because of the inroad of Surtax upon the extra pay.

The hon. Gentleman is mistaken, because I myself gave an example.

I beg the hon. Gentleman's pardon. So there are two hon. Members and not one. If there were any more, they certainly escape me, and I have been closely attending the debates throughout.

Surely the point is that there is no evidence behind these assertions—none. Responsible researchers have discovered no evidence. It is regrettable that there has been such a lack of evidence of the impressions, expectations and assertions voiced in support of these drastic reductions in Surtax throughout these debates. Let us go back to the beginning and recall what the Chancellor said on 17th July. This was the foundation stone of the proposals costing the Exchequer £83 million in the first operative year. The Chancellor said:

"I have received many representations about the need to reduce the levels of direct taxation, particularly Surtax. Surtax begins at £2,000. This figure was fixed in 1920. I learn from many quarters, sometimes unexpected quarters, that the present scope and level of Surtax is a substantial disincentive to effort and initiativc."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 819.]

But surely if these drastic reductions in taxation are to rest upon a statement of that kind we should have had more tangible evidence in support of it in the course of the long debates on Surtax.

The Chancellor's words alluded to "many quarters". There are at least three right hon. and hon. Gentlemen opposite who are on record in print as advocating drastic reductions in direct taxation—

Give us the names.

—to give additional incentive for export production. The three I name are the right hon. Gentleman the Leader of the Opposition, the hon. Member for Sowerby (Mr. Houghton) writing in Yorkshire newspapers, and none other than that authority on fiscal matters and thorough-going Socialist, the leader of the Leicestershire miners, the hon. Member for Bosworth (Mr. Wyatt). Where is the hon. Member for Bosworth?

The hon. Gentleman should not mislead the House by giving general references to comments which have been made in different contexts by different right hon. and hon. Gentlemen. No one that he has mentioned, as far as I can recall, has proposed a reduction of Surtax in this year's Finance Bill or this year's economic situation for the reasons given by the Chancellor of the Exchequer. As for the hon. Member for Kidderminster (Mr. Nabarro) himself, we missed him greatly in the discussions on this matter during the Committee stage of the Bill.

I was absent, sadly incommoded.

I beg the hon. Gentleman's pardon if he could not be here, but it is worth while recalling that the only two comments that we heard from him throughout the whole of the discussions on the matter were on Budget day when the Chancellor announced these drastic reductions in Surtax. The hon. Gentleman was so flabbergasted at their generosity that he intervened to say:

"Say that again."

Apparently, the hon. Gentleman could not believe his own ears. The Chancellor replied that the hon. Member for Kidderminster could read it. After the Chancellor had spoken for another minute, it had sunk in, and then the hon. Member for Kidderminster said:

"Jolly good."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 820.]

Perhaps I might just give a word of explanation. I said "Say it again" on Budget day because the Chancellor's explanation was extremely technical and difficult to follow. Later, after the Chancellor had said that I could read it in print and had continued for another sentence, I then expressed my note of strong approval and approbation of what he had done by interpolating "Jolly good".

The hon. Gentleman touched his hat.

I fully accept what the hon. Gentleman says, obviously, but I leave the matter on this footing, that we have had no real tangible evidence throughout the whole of the debates on these Clauses in support of the premises upon which these drastic reductions were put forward. That is beyond any denial whatsoever.

During the Committee stage of the Bill, we on these benches did not seek to modify or mutilate the Surtax proposals. We thought it better at that stage to oppose them altogether. There were, however, two respects in which we thought some mistake should be put right.

We tried to exclude from the benefit of the Surtax reductions income already earned by the Schedule D taxpayers. Having regard to the Chancellor's intention to provide a stimulus for the future, we saw no reason to extend benefits to the past. Secondly, we thought it was wrong to allow substantial business expenses to be deducted from Surtax assessments which were to be so heavily reduced. However, both proposals were rejected. Our opposition to the Clauses as a whole was overridden by the majority on the Government benches. That is why, putting forward our Amendments at the present moment, we felt free to suggest cuts in the reductions which the Chancellor has proposed.

The other point that has been raised is about paying for these Surtax reductions. This is a disinflationary Budget; this is a counter-inflationary Bill. We are all agreed on that. We realise that. We understand the seriousness of the economic situation. Therefore, reductions in direct taxation of this magnitude at this time clearly had to be met by additions to taxation elsewhere. The Chancellor has increased taxation in this Bill. There is a net increase in taxation this year of £60 or £70 million. Therefore, the Chancellor proposed that there should be an increase in Profits Tax in order to pay for the Surtax reductions.

I do not think that the House can accept that simple equation. If the Profits Tax can be increased to pay for Surtax reductions, the Purchase Tax could have been increased to pay for other reductions more justifiable in our view. It can be argued, of course, that there is some direct relationship between the Surtax reductions and the increased prosperity of the companies for which the people concerned work. I strongly question any such theory. I do not believe that the cuts in Surtax will of themselves put companies in a better financial position to pay the additional Profits Tax. I think that the House will agree that other measures were taken by the Chancellor of the Exchequer, some in this Bill, and some before this Bill, to accommodate these reductions in Surtax this year.

6.30 p.m.

They will be paid for in part by the people on £1,000 a year and on £500 a year—who are poorer than the poor man on £5,000 a year. They will be paid for in part by larger insurance contributions —larger than needed to pay the graduated benefits under the new scheme. They will be paid for in part by Health Service charges in excess of the estimate of the additional expenditure on the Health Service. They will be paid for in part by rates of interest on mortgages that are far higher than are necessary to pay the additional Profits Tax on the lending bodies.

It is quite a mistaken theory that these reductions are being paid for by increases in Profits Tax, and, in those circumstances, I think that the House, even at this late hour, has to re-examine the basis upon which it is asked to sanction these very important reductions in direct taxation.

We are inclined to talk of Surtax as if it were some additional overload of taxation resting expressly and specifically on a certain class or group of people, but it is, of course, an extension of our system of graduated taxation. That is all it really is, although it is given a different name and is administered separately from Income Tax beyond that point.

There are ways of reducing the burden of graduated tax other than lifting the starting point of that tax. The Chancellor had the alternative of reducing the rates of Surtax. After all, the lowest rate above the Surtax limit of £2,000 is only 2s. in the £. It then goes up by sixpences and shillings to the admittedly very high rate of 10s. in the £ for incomes of £15,000 a year and upwards; but not, of course, on the whole of the £15,000.

A lot of people seem to think that when a person enters that range, Surtax is imposed on all the income, but it is, in fact, a marginal rate of taxation. I do not minimise its importance to those who pay it—

The hon. Gentleman ought to know.

Of course I ought to know, because I pay it—

Hear, hear.

—but I cannot understand why the hon. Member for Kidderminster should think it unbecoming in a Surtax payer to oppose Surtax reductions. I should have thought that there was greater virtue in a Surtax payer opposing such a reduction than in one who does not pay it. For my part, I sincerely and strongly dissent from Surtax relief when other people are having to assume additional burdens in order to make room for these reductions in the financial provisions for this year—

rose—

No, I will not give way. I therefore hope that I have heard the last of that taunt. If I may say so, I do not think that it reflects on me but on the hon. Member for Kidderminster who, apparently, cannot understand anyone in the Surtax range holding such an opinion as I hold, and such as my hon. and right hon. Friends hold about these proposed reductions.

The House will realise that the Chancellor had other means of alleviating the burden—we will use that word if the House likes it—of Surtax. In present circumstances, these reductions go far beyond anything that we could possibly contemplate. As I said before, I think that the Chancellor has chosen the midyear in the present Parliament to undertake a step that would be very unpopular nearer election time, which has not received the approval of the country as a whole and which it is misleading the public to suggest is of some benefit to the country.

That is why we have sought to reduce the excessive relaxations of Surtax that the Chancellor has proposed. Something more modest, as a token of things to come in better times, would surely have been more prudent in present circumstances, but the right hon. and learned Gentleman has gone the whole hog. That, I submit, with great respect to him, is reckless if, indeed, it is not absolutely irresponsible.

I did not intend to speak on this Amendment, but I have a very great respect for the Financial Secretary, especially for the work he did at the Ministry of Education, and I did not enjoy hearing him say that these reliefs in Surtax were on the lines of creating harmony among the people, and particularly among our workers. It is not the sort of thing that he has said on other occasions. I do not believe that these reliefs do anything at all to create harmony and to encourage the ordinary workers.

The hon. Gentleman said that if the first Amendment were accepted it would claw back—that was the phrase he used —£4½ million out of the Surtax relief. During our debates on the National Health Service Contributions Bill, hon. Members on this side, by Amendments relating to welfare foods, relief of old people and of the handicapped, attempted to claw back out of the amount which the Chancellor collected —because it is the Chancellor and not the Minister of Health who really collects the extra money that started to be paid yesterday, and many workers will not realise the extra charge until they receive their pay packets on Friday —£½ million, £1¼ million, £3 million, £4 million. In every case we were resisted by the Government, by these people who are most concerned tonight that not £½ million, or £1 million or £4½ million shall be taken from these poor folk to whom the Chancellor referred—the Surtax payers.

We feel that tax relief on this scale creates disharmony at a time when we have just started to collect an extra £65 million in National Health contributions from the workers, though the Minister of Health said that he would spend only £5 million more on what he said he needed the money for: the provision of hospitals. The added burdens imposed during the last year by taxation, by increased contributions in one form or another, do not lead us to believe that these Surtax reliefs are warranted.

There are those who feel that this step does not create harmony at all. I have had a letter from a war widow who has gone on working until she is now 64 years of age. She has paid all her different pension contributions and so gets a little extra as a war widow and as an old-age pensioner. Out of what she gets she has to pay 10s. in tax. People like that feel that there is injustice, and not justice at the present time—

I am very interested in that, but the evidence that we want from the other side of the House is just those people writing to the hon. Lady complaining about the operation of this Clause.

I can send the noble Lord the letter if he likes, and he can then learn how this woman feels about Surtax relief.

Hon. Gentlemen opposite do not seem to think that anyone has the courage to object to this kind of thing. They said exactly the same about the 2s. prescription charge—that people were not worried and were not protesting about it. But I can assure hon. Gentlemen opposite that they are protesting, although hon. Gentlemen opposite do not understand that the people who are suffering know that it is just of no use writing to Conservative hon. Members. Obviously, people such as the woman I have described are bound to feel that no harmony or justice is being meted out to them.

If we are in difficult economic circumstances—and we are being repeatedly told that we are—the Government should at least do justice to the workers and the labour force who are so necessary, and even the most influential business directors—

Now listen to this!

—are of no value if they have not got the good will of the men and women at the work benches. In the final analysis these are the people on whom the Government must rely, and for that reason the Amendment seeks to at least bring about some measure of justice for the workers, who represent the majority of people in this country.

The action of the Government, an does the speech of the Financial Secretary, makes it clear beyond doubt that the Government are interested only with those in the higher income brackets and not with the majority who are receiving lower incomes, such as the widows, old-age pensioners and those who are having to pay increased contributions and higher prescription charges. While those in this category are reacting and protesting, pressure is brought to bear upon the Government by those who have the power who are in circles suitable for bringing their power to bear on the Government.

rose—

I shall not give way. The hon. Gentleman must wait for his turn to speak.

I was saying that these influential people have brought pressure to bear on the Treasury during the last twelve months and many of the actions of this Government have in many ways proved that they are paying back in full measure those people who supported the Conservative Party at the last election.

I do not intend to make a speech, but it should be made clear to the House what procedure we intend to follow with regard to voting on these Amendments. There is a drafting defect in the first Amendment, for which my hon. and learned Friend the Member for Kettering (Mr. Mitchison) has taken responsibility—and I must say that not only the Opposition but the House generally owes a debt to my hon. and learned Friend for the drafting advice that he has rendered. But since this drafting defect, which is accidental and is so refined a point that hardly anyone spotted it until late, and since the second Amendment raises a question that is far more substantial both in terms of principle and in terms of the sums involved, we would propose, Mr. Speaker, if you call both Amendments, to let the first one be negatived and to vote on the second.