Inland Revenue receipts, at £3,645 million, were £47 million more than the estimate. Customs and Excise duties, including the yield of the surcharge imposed last July, produced £2,595 million. This compares with the Budget estimate of £2,510 million, to which must be added the estimate of £130 million for the surcharge. The actual receipts, therefore, were £45 million less than those combined estimates for Customs and Excise duties.

Motor duties at £141 million fell short of the estimate by £14 million, but other revenue at £264 million produced an extra £19 million. In total, the out-turn of the revenue at £6,645 million was £137 million above the original Budget estimate, or, if the estimated yield of the surcharge is taken into account, £7 million more, which, I think, is a remarkable piece of accurate estimating.

Now we come to the expenditure. Expenditure above the line came out at £6,235 million, or £233 million above the estimate. Within this total, Consolidated Fund services at £867 million showed an increase of £52 million due mainly to the rise in interest rates following the increase in the Bank Rate last July. Supply expenditure at £5,368 million was £181 million above the Budget estimate. Revised and Supplementary Estimates totalling £248 million were partly offset by savings of £67 million.

The result above the line was a surplus of £410 million. This is £96 million less than my original estimate of £506 million, but £263 million more than the out-turn of the previous financial year when the surplus was £147 million.

Below the line, receipts at £517 million were £3 million more than estimated. Total payments at £1,138 million were £49 million more. There were two substantial divergencies from the estimates. Loans to the nationalised industries and the Post Office required £80 million more. Loans for overseas assistance, though up on the previous year, were £29 million less than the estimate. The net deficit below the line was £621 million.

Thus, the overall deficit, or I think that the better description is the net borrowing requirement on Budget account, was £211 million, that is, £142 million more than estimated. This figure of £211 million compares with £394 million in 1960–61. In that year, we were able to meet virtually all our borrowing needs outside the market—this is 1960–61—and since, in the year, we made net sales of nearly £300 million gilt-edged securities, we were able to use practically all the proceeds to pay off market Treasury bills. In 1961–62, with our smaller overall deficit, we have been able to do rather better; our borrowing outside the market, for example, National Savings, exceeded our needs by just over £250 million, so that we were able to reduce correspondingly our total indebtedness to the market.

Since the proceeds of our sales of gilt-edged securities have been just about enough to meet our liabilities on the two maturities which occurred during the year, the bulk of this reduction has taken the form of paying off market Treasury bills. My expectation, that I should not be looking to the gilt-edged market for new money in 1961–62, has been fulfilled; and for the second year running we have been able to reduce our reliance on market Treasury bills.

A notable contribution to last year's result was once again made by National Savings. Given the circumstances, particularly the rise in other interest rates, it would not have been reasonable to expect National Savings to do as well in the past year as in the previous three years. But, despite these difficulties, the amount remaining invested in all forms of National Savings increased by £170 million. Of this, £78 million represents net new receipts to the Exchequer. Once again, and I am sure that the Committee will be with me on this point, I wish to thank Lord Mackintosh and all the other workers in the National Savings Movement for their highly important work.

In the balance of payments there has been a considerable change for the better. I am referring to the balance of payments as a whole; the results of our trading transactions, Government overseas expenditure, invisibles and movements on capital account. Full details appear in the relevant White Paper. Exports were £156 million higher in 1961 than in 1960. Imports were £100 million less than in 1960, mainly because of the lower level of investment in stocks. Foreign investment in United Kingdom securities developed on a considerable scale after July, and there has been a small net inflow of long-term capital in 1961, in contrast with the large net outflow in I960 and previous years.

As the White Paper makes clear, the overall figures show a considerable change in 1961 compared with 1960 and earlier. There was an improvement of about £400 million, taking the current balance and the long-term capital balance together, and, although in 1961 as a whole there was still a small deficit, the second half of the year showed a small credit.

It is true that our interest rates have been high, but it is quite wrong to think that the improvement in our balance of payments was due mainly to hot money. On the other side, it should be remembered that there were certain special capital receipts during the year, such as the Ford transaction and the repayment of debt by Germany and France.

I would sum up the experience of the last financial year as follows. The £ was in danger last summer. That danger has been averted. But we still have a considerable way to go to achieve a satisfactory surplus on our balance of payments, having regard to our heavy and continuing obligations for defence, aid and investment overseas. Nevertheless, the underlying position is now sounder; the movement of our costs is under better control, and the pressure of home demand is not excessive. We should now be able to take full advantage of the export opportunities ahead.

Keeping the way clear for the growth of exports also means continuing and developing the incomes policy. The recent O.E.C.D. report on the United Kingdom contains this passage:

"The problem for the Government and for both sides of industry is to evolve a more permanent system for the determination of money incomes which is accepted as just and reasonable by the community as a whole and which, in conditions of full employment and steady growth, can assure the maintenance of a satisfactory competitive situation in international trade. Such a system will entail that the Government adopts a more positive attitude than in the past to the process of income determination."

Those are admirable words. I have been trying to take a positive action, but I do not think that it was quite so easy as it sounds, nor was it universally approved.

I should have hoped that we could all agree on the basic proposition that increases in incomes must be related to increases in production. If I may, I will quote from the T.U.C.'s reply of 24th January to my letter about incomes policy: It said:

"It is, of course, a condition of reasonable price stability that increases in incomes should keep in step with the growth of real output."

The T.U.C. did not, however, feel able to co-operate at that stage in an attempt to work out how that should be done. I know that this is a controversial and difficult subject. There is plenty of criticism, and not very many constructive suggestions.

But I believe that the incomes policy has proved its worth. Weekly wage rates in the four months from last October to February went up only 0·8 per cent. compared with the rise of 2·7 per cent. in the corresponding period of the previous year. By checking the upward trend it is my conviction that the incomes policy will be found to have improved the position of those who suffer most from inflation.

With regard to export incentives, I am sure the Committee will have read with interest the account of the very full survey carried out recently by a group set up by the F.B.I. under the chairmanship of Sir Archibald Forbes. For a number of cogent reasons the report of that group was against the introduction of Government financed export incentives. I agree with its conclusions on this central issue. The group made a number of other useful recommendations which are being studied and, in some cases, already acted upon. Meanwhile, in recent months, as the Committee knows, the facilities for export finance have been markedly improved, in addition to the thorough overhaul of our export credit guarantee system carried out in the last eighteen months.

If we reject a system of direct incentives, what other help can be given? Obviously, the changes in Bank Rate will assist. The high rate introduced in July played an important part in reversing the outflow of funds from this country and in checking the pressures on the economy. Now that sterling is strong, and the economy is no longer under the same pressure, we have been able to return to lower short-term rates. This will be helpful to exports and investment.

I must take into account the effect on the economy of these reductions and of the other factors which I have described and which point to a rising pressure of demand in the course of the year. Against that background the essential requirement, in my judgment, is that we should not, through the Budget, give such a further stimulus to home demand as would endanger the expansion of exports. On the other hand, we all want to see a growth of economic activity on a sound basis; in other words, of such a nature as not to involve us in renewed balance of payments difficulties.

I believe that such growth is within our power to a greater extent than ever before. The whole purpose of my policies has been to make this possible. The need has been to accept a measure of discipline in order to achieve a major improvement in our position. At the risk of repetition I emphasise again that an expansion at home, generated by the ability to sell an increasing volume of exports and services, will not need to be held down in the interests of the balance of payments. A sound international competitive position is the essence of the problem. This is so whether or not we enter the Common Market.

As promised, I propose to include in the Finance Bill a Clause about Army bounties. Under the scheme announced last July, a special £200 bounty is payable to men in the Regular Army who extend their service and to National Service men who enlist on a Regular engagement. I am asking the Committee to exempt this from Income Tax.

There are two minor reliefs in personal taxation which I propose to make in order to help those whose cases seem to me especially deserving. First, what is called small income relief. I propose to raise the income limit for this relief on the investment income of people under 65. This limit has not been raised since 1955, though the income limit for the age relief, which gives corresponding relief on investment income for people over 65, has since then gone up, by two stages, from £600 to £800.

I propose to put up the limit for people under 65 from £300 to £400. This will mean that, for example, a single woman under 65 with an income of £400, drawn solely from investments, will be £22 better off this year. There will be an appropriate adjustment to the marginal relief provisions. This change will cost about £l½ million in a full year and £½ million this year.

The second proposal concerns the Income Tax age exemption. This gives a special exemption in favour of people of 65 or over living on small incomes not much above the amounts which are freed from tax by personal allowances and reliefs. At present, an elderly single person pays no tax if his income does not exceed £275; and a married couple, where either husband or wife is 65 or over, are exempt if their joint income does not exceed £440. I propose to raise the exemption limit for the elderly single person to £300 and the limit for the elderly married couple to £480. This means that such a couple with £480 a year will not in future pay tax. This makes a difference of £18 this year. This change will cost £2½ million in a full year and £1½ million this year.

I have four changes to propose in Estate Duty. In the first place, I propose to raise the Estate Duty exemption limit from the present figure of £3,000 to £4,000 with an appropriate adjustment in the rates of duty up to £6,000. The figure of £3,000 was fixed in 1954 and I think that the time has come to give this further relief to small estates. The raising of the starting point to £4,000 will exempt from duty about 18,000 estates each year. The new scale up to £6,000 will afford some relief to another 20,000 small estates. This change will take effect in the case of deaths occurring after today. The cost will be £1¾ million in a full year and about £1 million this year.

Secondly, I propose to introduce legislation to deal with a method of avoidance which has received a good deal of publicity in the Press recently. Our Estate Duty charge, in the case of a person domiciled in this country, does not extend to land or other immovable property abroad, although it does extend to movable property abroad. It is, therefore, possible for a person domiciled here to avoid duty by buying land overseas or by investing in mortgages in countries where mortgages are regarded as immovable property.

This gap in the Estate Duty charge is now being exploited on quite a large scale. I propose, therefore, to bring immovable property abroad within the scope of our Estate Duty. This change will take effect as regards deaths occurring after the Finance Bill becomes law. The yield is estimated at £1 million this year and £2 million in a full year.

I want, however, to avoid any possible hardship arising from a double charge of death duties on the same property. Accordingly, I propose that death duties payable in the country where the property is situated shall be credited against the Estate Duty payable in this country. The law already provides for this to be done in many cases under arrangements applying both to Commonwealth countries and to foreign countries with which we have double taxation agreements. There are, however, other cases and I propose that this relief shall now be given in all cases where we charge duty on property abroad which is also charged with duty in the country where it is situated. This new and important relief will apply to property of all kinds, both immovable and movable property. The cost will be ££½ million this year and £1 million in a full year.

The Bill will also include a provision enabling us to enter into comprehensive agreements for the avoidance of double death duties with countries with which, for rather technical reasons, we cannot make such agreements at present. One of the countries is France, with whom we have recently agreed the terms of a draft convention, and this legislation will enable us to ratify that convention.

Certain doubts have been raised about the application of the 1960 legislation on one or two points dealing with dividend stripping and related activities. I think it necessary to resolve these doubts, since otherwise there could be a serious loss of revenue. What I propose will fulfil the intentions of the 1960 legislation. My proposals will not be retrospective.

I propose also to deal with a device which is being used to avoid tax on building operations. Two connected persons divide between them what is in reality a single operation. One of them acquires the freehold of a building site and contracts to grant a lease to the purchaser of a building to be erected on it. The other puts up the building. Any building profit is subject to tax; but any premium paid for the lease, and any receipt on a subsequent sale of the reversion, go free of tax in the hands of the one who bought the land. In this way what are in reality some or all of the profits of the enterprise are converted into non-taxable form. The Bill will impose an appropriate charge on the person owning the land where this or similar devices are employed.

I am also proposing a minor amendment in the Stamp Duty law, namely, the abolition of settlement duty, except in the case of unit trusts. The law governing this duty is complicated and difficult to apply. The yield, apart from the unit trusts, is only about £30,000 a year. It is reasonable to retain the duty for the unit trusts, because it corresponds broadly to the Stamp Duty on a company's capital including that of an investment trust company. But I shall also remove a minor blemish affecting unit trusts. Under the existing law, a unit trust which contracts in size and then expands again has, in effect, to pay duty twice on the same amount of capital. This will no longer be the case. These changes will take effect from 1st August.

I shall do something to speed up the redemption of the annuities payable under the Tithe Act of 1936. The outstanding annuities yield about £2¼ million a year, paid by about 110,000 landowners. It is not surprising, therefore, that the costs of collection are high in relation to the yield. I therefore propose, following what was done in the case of Land Tax in 1949, to introduce legislation making the annuities compulsorily redeemable when the land in respect of which they are payable is sold after 1st October this year. I hope that in cases where land is not being sold the owners will consider whether they cannot undertake redemption voluntarily. The terms are not ungenerous—about fourteen years' purchase.

There is a small, highly technical point arising out of Section 17 of last year's Finance Act on which I propose to make a concession. This Section dealt with double taxation agreements with overseas countries. It enabled credit to be given against United Kingdom tax for overseas tax which has been relieved by the overseas country in the interests of development. Under our general tax law, however, a dividend paid by a United Kingdom company out of income which has enjoyed a tax credit under this provision would have to be grossed up by reference to tax that had never been paid. This would clearly lead to a wrong result. I propose to remedy the position in the Finance Bill.

I also propose a simplification of the rules relating to the calculation of relief when trade losses which are augmented or created by the deduction of capital allowances are set against the trader's general income. The change will be of particular benefit to shipping at this time, though it will also be of general application.

The new rule that I propose will provide, broadly, that in computing a trader's loss for a period, the capital allowances to be taken into account will be those based on the events of the period for which the loss is computed. That does not seem to be an unreasonable proposition. This gives relief earlier than under the present rule. I estimate that the cost will be about £6 million this year and £4 million next year, of which more than half will go to benefit the shipping industry.

There is one other item of direct taxation to which I want to refer, namely, Schedule A. In the Finance Bill debates last year, I said that the proper time for the Committee to decide on the future of Schedule A would be in connection with the 1963 Finance Bill, when the new valuations for rating purposes in England and Wales would take effect. That stands. It is, however, obvious that we could not charge owner-occupiers of residential property with Schedule A Income Tax on the new rating valuations. We should then be suddenly trebling or quadrupling the burden of the tax on many of those who pay it. That would be intolerable.

Indeed, the new situation, which the revised rating valuations will bring about, indicates the unsatisfactory character of this tax in its application to the owner-occupier of residential property. Unless it is charged on current values it is difficult to find a firm basis for the tax which is, in any event, a tax on what has been described as notional income. Many people have to make their plans ahead: there are decisions to be made whether or not to appeal against new assessments.

Therefore, although I intend that this matter shall be dealt with in the 1963 Finance Bill, as I have said before, it is right to say this now. We will not seek to use the new rating valuations for Schedule A purposes so far as these owner-occupiers of residential property are concerned. On the contrary, for the reasons which I have set out, we will make proposals for bringing this tax on them to an end.

I cannot say now whether this will be done in a single operation in one year. It will mean giving up about £50 million a year. Whether we can manage to get to that position in one year will depend on revenue considerations. But Schedule A for owner-occupiers of residential property will go.

The moment has now come, I think, to recruit my energies in the usual manner, by drinking from this glass. Last year I was able to tell your predecessor, Sir William, how much a gallon of this particular commodity would cost him in duty. Alas, the moment has not yet come in my speech this year for me to be able to be so' precise; but, Sir William, do not be too hopeful. Also, because of the next passage in my speech, a little short-term stimulation may be advisable.

I propose that, with certain exceptions to which I shall refer in a moment, gains not now chargeable which result from the acquisition and disposal of stocks, shares, securities, land, including of course buildings, commodities and other property, or interests or rights in such assets, shall be made subject to tax if the disposal happens within a specified period from the date of acquisition.

I propose to exclude from this general charge certain types of property. First, I exclude movable property like pictures, personal belongings and motor cars, because I do not think that to bring these in would be worth the complications involved. A gain on the sale of the house owned and occupied by the seller will not be chargeable. If someone is fortunate enough to have more than one house, or more than one residence, it will be the proceeds of sale of the main residence which will escape charge. The charge will not apply to the sale of the fixed assets of a business, such as factory buildings and plant and machinery, if they are sold by a person who has actually been using them in a business carried on by him.

For interests in land the charge will apply if the period from acquisition to disposal is three years or less. For all other chargeable property including stocks, shares and securities, the charge will apply if the period from acquisition to disposal is six months or less.

In connection with the new Case VII it is necessary to provide for the case where an operator uses a company to buy land and then disposes of the acquisition by selling the shares of the company rather than the land itself. In broad outline, my proposal is that if shares in a closely controlled landowning company are sold by a shareholder owning a substantial interest in the company, any gains outside the six months' period will, nevertheless, be brought into the new charge. But the amount of the charge in these cases will be limited by reference to any appreciation in the value of land which was acquired after today and which, at the time of the sale of the shares, had been held by the company for not more than three years.

In 1962–63, there will be no yield of tax under Case VII, since information about the short-term gains and losses of that year cannot be available for the purpose of making assessments until the summer of 1963. As far as the yield thereafter is concerned, it is quite impractical to estimate it. Inland Revenue have no statistical information on which to base an estimate. I emphasise again that yield is not my main purpose. What I intend to achieve is a greater sense of fair treatment between taxpayers.

I propose to include within Case VI of Schedule D certain transactions in land and property which are cloaked in a form that escapes liability under the present law—for example, the dealer in property who, alone or with associates, escapes tax liability in the following way. He forms a chain of companies with suitably framed articles, through each of which he puts one transaction so as to avoid the implication that he is trading. If, regarding all the activities of these companies as though they were the activities of one person, they amounted to the carrying on of a trade, a gain on a particular sale by one of the companies would be taxable. I propose to make this the law.

With regard to tobacco, I am sure that the Committee will expect me to be cautious about this duty, which yields so large a proportion of the revenue. The Committee is also fully conversant with the current public discussion about smoking and health. It has been suggested, among other things, in the Report of the Royal College of Physicians, that the duty should be recast to discriminate against cigarettes and in favour of pipe tobacco and cigars. It would be possible, though more staff would be needed, to deal specially with cigarettes delivered direct from the factories. The difficulty is that any differential tax could be easily avoided by people making their own cigarettes from tobacco which could not be distinguished for revenue purposes from some kinds of pipe tobacco. Simple devices exist for this purpose—and some of us may have used them already. In fact, manufacture would be shifted from the factory to the home.

I think, therefore, that it is wiser to consider the general level of the duty. The duty is already extremely high: it accounts, with the surcharge, for about 3s. 4d. on a packet of cigarettes selling for 4s. 6d., which is equivalent to a Purchase Tax of nearly 500 per cent. If I were to make a further, penal, increase in the general rate of duty, smoking, even in moderation, would be taken quite out of reach of many people of limited means, and I am not prepared to do this.

I will content myself with consolidating the basic tobacco duty at a level broadly equivalent to What it is now, including the surcharge. In technical language, this means adding to last year's basic rates the average of the surcharges on the most-favoured-nation rate and on the preferential rate. That is the technical language. In non-technical language, it means that a person buying a packet of cigarettes tomorrow will pay the same price as today. In present circumstances it is difficult to estimate the yield of the Tobacco Duty for the coming year. I am putting it at £885 million, which is £15 million more than last year, when the surcharge was operative for eight months only. But in framing my Budget I have taken into account—and that is an element in my Budget statement to which I have referred—the possibility that the yield may be less than this.

The second range of duties on which I propose to maintain taxation at roughly the present levels is that on alcoholic drinks. To do this, I have to take the Excise and Commonwealth preference rates of a year ago, and make the appropriate addition to arrive at the 10 per cent. increase. For spirits, consolidation means an addition of £1 1s. 1d. a proof gallon above the rates of the last Budget; that is, before the surcharge. For beer, it means an addition of 11s. 2½d. for 36 gallons, with corresponding increases for the stronger beers. I repeat, in both cases there should be no changes in today's prices.

Wine is somewhat more complicated, because the preference margins are relatively larger and there are certain additions for bottled and sparkling wines which were bound under G.A.T.T. My proposals ensure that in no case will the duty on wine be more than at present. Consolidation means an addition of 1s. a gallon to last year's basic duties for light wine and Is. 6d. a gallon for heavy wine. There is no duty distinction between light and heavy British wine, and consolidation here means a uniform addition of 1s. a gallon.

Next, light hydrocarbon oils. The present surcharge on light hydrocarbon oils and derv is 3d. a gallon. Consolidation here means an addition to the basic rates of precisely that amount. We are bound by our E.F.T.A. agreement not to increase the excise protective margin of Is. 3d. a gallon. To avoid doing so it is necessary to increase the Excise rate to Is. 6d. from today's level of Is. 4½d. The revenue reason for this course is over-riding: if Is.4½d. was maintained as the Excise rate, which would mean 2s. 7½d. for the Customs duty, the Revenue would lose about £20 million a year.

There are two other duties where I propose consolidation at the present level, inclusive of surcharge: the football pool betting duty, where the basic rate will become 33 per cent. instead of 30 per cent., and the television advertisement duty, where the basic rate will become 11 per cent. instead of 10 per cent.

I have decided to leave the duty on matches, the countervailing duty on mechanical lighters and the duty on betting at dog-race courses at the levels of the last Budget.

I have also decided not to increase the basic duty on heavy hydrocarbon oils of 2d. a gallon introduced in last year's Budget. That means a cut of 9 per cent. in the present duty inclusive of surcharge. At the same time, I propose to improve in a minor way the existing definition of fuel oils. There will be included among the fuel oils chargeable at 2d. a gallon certain oils, which for technical reasons, have hitherto been liable at 3d.

There is another matter of which I have to take account, and about which I must tell the Committee. In the Stockholm Treaty we undertook obligations to other members of the European Free Trade Association to eliminate protective margins against them by 1965. I propose to make a start on this process now, by introducing certain new rates at a cost of about £150,000 this year. For manufactured tobacco, spirits and beer, matches and mechanical lighters imported from E.F.T.A. countries I propose that the Customs duty shall be reduced below the most-favoured-nation rate—I cannot avoid using the phrase "most-favoured-nation rate" although, in this context, it seems the least favoured nation rate—by an amount equal to about one-half of the preference margin: or, where there is no preference margin, by an amount equal to half the difference between the Customs duty and the Excise duty. Hon. Members will see an extra column in the Schedules of duty rates giving the appropriate rates for imports from E.F.T.A. countries for the goods I have mentioned.

Looking at these Customs and Excise revenue duties as a whole, the yield from the surcharge for the whole of the rest of the year would have been £139 million. My changes bring in a little less than this—£132 million this year and £138 million in a full year. All these changes take effect from midnight tonight.

I now come to Purchase Tax. The yield in 1961–62, including surcharge, was £521 million. It is easy to be critical of existing methods of levying indirect taxation. I am not, however, going to deal today with the wide issue whether at some future date it will be desirable to change the whole basis, for example, by the substitution of a turnover tax. I understand that that method is becoming less popular where it operates, and there is a view that a tax such as ours at the wholesale point is to be preferred. However that may be, I consider that there are some changes in our own arrangements which can with advantage be made; indeed, that it is necessary to make.

It is sometimes said that Purchase Tax leads to distortion of the pattern of consumer spending and hence investment, because it is levied on an arbitrary and limited range of commodities. I think that there is great force in this argument.

There is a strong case for broadening the scope of the tax by including some articles which most people would consider just as suitable for taxation as those which are already included.

I propose, therefore, to bring into the tax, at a new rate of 15 per cent. of the wholesale value, confectionery (in other words, sweets, including chocolate biscuits), soft drinks and ice-cream. These changes will operate from 1st May next, in order to allow time for the application of the tax machinery over this new field and for the essential discussion of certain technical questions between Customs and Excise and the trade. Of course, there will be the usual exemption for the small manufacturer, who makes and then sells taxable goods to a value of not more than £500 a year. He will not have to pay tax on his sales, but, of course, he would pay the tax paid price in so far as he buys taxable ingredients.

Lest it be thought that by putting a tax of 15 per cent. on soft drinks, I am prejudicing their position vis-a-vis alcoholic beverages, I would add this. The tax on gin is equivalent to a 400 per cent. rate of Purchase Tax, and that on beer to a 130 per cent. rate. So the 15 per cent. I am putting on tonic water should be compared with the 400 per cent. on gin. Strengthened cider already pays British wine duty equivalent to a Purchase Tax of about 50 per cent. Ordinary cider will now pay the new rate of 15 per cent.

The new tax on confectionery, icecream and soft drinks is expected to yield £30 million this year and £50 million in a full year.

I have, however, one further proposal to make. There are certain revenue duties which are commonly known comprehensively as the breakfast table duties. They have a long history, but have now lost much of their revenue significance, and retain inherited complexities which, I am told, are out of all proportion to the revenue. Some of these are disclosed in the Financial Statement. The revenue element of the duty on tea, as the right hon. Gentleman the Leader of the Opposition will remember, was removed in 1949.

I now propose to do the same for sugar, coffee and cocoa. This means that the surviving duties will apply to foreign commodities at reduced levels and will only exist to preserve preferential and protective margins. In general, preferential rates become nil and the Excise duties on sugar, glucose and saccharin are abolished. When so reduced, the duties are patently protective in character and they will all be transferred, at an appropriate time after the passing of the Finance Act, to the formal status of protective duties under the Import Duties Act. In no way does it disturb the existing arrangements, both national and international, for the marketing of sugar. This change will secure substantial savings in the work of traders, including export traders, no less than in the work of the Customs, and will carry significantly further the process of simplifying the Customs and Excise duties.

These changes, which come into effect from midnight tonight, will reduce my revenue this year by £15½ million compared to the figure it would have been, including the surchage for the whole year. As a result, it will be possible for a reduction of ½d. a lb. to be made in the price of sugar. This will not only be of help to the housewife; it will also go some way to ease the burden on manufacturers of some of the things I am bringing into Purchase Tax for the first time. Apart from sugar, there will be some small benefit for cocoa and coffee

My proposals for changes in indirect taxation will provide revenue of £175 million in 1962–63. almost exactly offsetting the revenue I would have obtained if I had proposed to keep the Customs and Excise surcharge in force for the rest of this financial year. Altogether, taking into account the cost of my concessions on Inland Revenue duties, I expect in 1962–63 to have a surplus above the line of £433 million and an overall deficit, or borrowing requirement on Budget account, of £74 million. This, as I have said, I judge to be about right from the general economic point of view; it is also well within what I expect to be able to borrow from National Savings and other non-market sources.

The objectives of the Budget can be summarised as follows. I have tried to maintain some momentum behind the reform of our tax system and the clarification of our public accounts. I believe that the Purchase Tax proposals are a step towards a more rational and better balanced system of indirect taxation. The new Case VII Income Tax, without affecting growth, will meet a long-felt and widely-held grievance and sense of unfair treatment as between taxpayers. I have given an indication of our intentions on Schedule A for owner-occupiers of residential properties.

My proposals, by their general balance, are designed to maintain the improvement in our affairs clearly to be seen since July last. The theme of the Budget is the maintenance of a firm base for sound expansion. The decreases in Bank Rate have helped industry over costs. Should Parliament again give the power to use the Customs and Excise regulator, I shall have an additional way in the coming year of stimulating home demand, if that is what is needed. Our costs, compared with those of some of our principal competitors, have been moving in a way favourable to us, and I believe that our exporters realise the chances which are open to them.

I understand the natural desire to throw off the disciplines and restraints of the past year, but that must be a steady process timed to fit in with actual achievement, and not wishful thinking. I have great confidence in our capacity to take advantage of our opportunities. It may sound bold to say this, but I believe that events will prove the soundness of our policy and the wisdom of our actions.

Motion made,

That as from the tenth day of April, 1962, the duties of customs chargeable on imported spirits other than perfumed spirits and the duty of excise chargeable on British spirits shall be charged at the rates set out in the following Table; and in relation to spirits on which duty is chargeable at those rates, subsection (1) of section four of the Finance Act, 1918, and section one hundred and twelve of the Customs and Excise Act, 1952 (reduction or allowance of duty in respect of spirits used in medical preparations or for scientific purposes) shall apply as follows:

(a) the said subsection (1) shall apply so that the reduced duties are charged at the rate of 15s. 1d. per proof gallon or, in the case of spirits within paragraph 2 (b) of the Table, at the rate of 20s. 4d. per gallon: and

(b) the said section one hundred and twelve shall apply with the omission of the proviso to subsection (1) (which provides for allowing an additional 1d. per proof gallon on brandy and rum).

In this table "Commonwealth rate" means the rate for goods qualifying for Commonwealth preference, and "Convention rate" means the rate for goods of Convention area origin within the meaning of the European Free Trade Association Act, 1960.—[ Mr. Lloyd.]

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

Question agreed to.

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

In this table "Commonwealth rate" means the rate for goods qualifying for Commonwealth preference, and "Convention rate" means the rate for goods of Convention area

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Motion made, and Question,

That as from the tenth day of April, 1962, the duties of customs and excise in respect of beer, and the drawbacks of those duties, shall be charged or allowed at the rates set out in the following Table as if they were the rates provided for in Part I of the First Schedule to the Finance Act, 1959.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

origin within the meaning of the European Free Trade Association Act, 1960.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That as from the tenth day of April, 1962, the duties of customs chargeable on wine shall be charged at the rates set out in the following Table as if they were the rates provided for in the Third Schedule to the Finance Act, 1958. as amended by the Finance Act, 1960.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

In this table "Commonwealth rate" means the raite for wine qualifying for Commonwealth preference, and "light wine" means wine not exceeding 25 degrees or, in the case of wine qualifying for Commonwealth preference, 27 degrees of proof spirit.—[ Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That as from the tenth day of April, 1962, the duty of excise chargeable on sweets shall be charged at the rate of 1 Is. 6d. per gallon in the case of still sweets, and 17s. 6d. per gallon in the case of sparkling sweets.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That as from the tenth day of April, 1962, the duties of customs and excise in respect of tobacco, and the drawbacks of those duties, shall be charged or allowed at the rates set out in the following Tables ("Commonwealth rate" in those Tables meaning the rate for goods qualifying for Commonwealth preference, and "Convention rate" meaning the rate for goods of Convention area origin within the meaning of the European Free Trade Association Act, 1960).

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

—[ Mr. Llovd.]

put and agreed to.

Motion made, and Question,

That as from the tenth day of April, 1962, there shall be an increase of 3d. a gallon in the rate of the duty of customs on hydrocarbon oils; and the enactments fixing by reference to the rate of that duty the rates of the excise duties on hydrocarbon oils, power methylated spirits and petrol substitutes, and of the rebates of customs or excise duty on heavy oils, shall have effect accordingly.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That for the purposes of the customs and excise Acts the expression "fuel-oils" shall include any heavy oils which contain in solution an amount of hard asphalt of not less than one-tenth of one per cent. and of which the closed flash point is one hundred and fifty degrees centigrade or below (so that in respect of any such oils the rate of the rebate of customs duty shall, in accordance with section two of the Finance Act, 1961, be twopence, instead of threepence, less than the rate of the duty); and this shall have effect from the tenth day of April, 1962.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That the rate of the pool betting duty on any bet made (whether before or after the passing of this Resolution) by reference to an event taking place on or after the tenth day of April, 1962, shall be 33 per cent. of the amount on which the duty is calculated, except in the case of a bet exempted by virtue of section fourteen of the Finance Act, 1948, from the increase under that section as being made by means of a totalisator set up on a dog racecourse.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question.

That the television advertisement duty chargeable in respect of the insertion of an advertisement in a programme broadcast on or after the tenth day of April, 1962, shall be charged at the rate of 11 per cent., instead of one-tenth, of the amount of the payment for the insertion.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act. 1913.—[Mr. Lloyd.]

put and agreed to

Motion made, and Question.

That as from the tenth day of April, 1962, the duties of customs charged on matches by section four of the Finance Act. 1951, shall in the case of matches of Convention area origin (within the meaning of the European Free Trade Association Act, 1960) be charged at the rate of 19s. 7d. (instead of 19s. lid.) per 10,000 matches in containers in which there are not more than 30 matches, and at the rate of 14s. Id. (instead of 14s. 5d.) per 7,200 matches in containers in which there are more than 30 matches.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.—[Mr. Lloyd.]

put and agreed to

Motion made, and Question,

That, as from the tenth day of April, 1962, the duty of customs charged on mechanical lighters by section six of the Finance Act, 1928, shall in the case of mechanical lighters of Convention area origin (within the meaning of the European Free Trade Association Act. 1960) be charged at the rate of 6s. 6d. (instead of 7s. 0d.) or, in the case of a gas lighter, at the rate of 4s. 6d. (instead of 5s. 0d.).

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That as from the tenth day of April, 1962, there shall not be charged any duty of customs or excise previously chargeable on sugar, molasses (including invert sugar), glucose or saccharin, except any duty of customs under the Import Duties Act, 1958 (nor shall any excise licence be required to manufacture in Great Britain sugar, glucose, saccharin or invert sugar), and the following provisions shall apply:—

1. Duties of customs on importation into the United Kingdom shall be charged—

(a) in respect of any sugar, invert sugar, glucose or saccharin not qualifying for Commonwealth preference at a rate equal to the amount of the general preferential reduction heretofore allowed for like goods qualifying for Commonwealth preference, except that—

(i) the rate for sugar of a polarisation exceeding 99° shall be as for sugar of a polarisation exceeding 98° but not exceed-99°; and

(ii) the rate for saccharin shall be 33⅓ per cent. ad valorem;

(b) in respect of sugar qualifying for Commonwealth preference, being sugar of a polarisation exceeding 99°. at the rate of 12·8d. per cwt.

2. Drawback allowable in respect of sugar produced in the United Kingdom from materials on which there has been paid a duty of customs in accordance with paragraph I above shall be as follows:—

(a) where the duty on the materials was paid in accordance with paragraph 1 (a) at a rate less than 6s. 10·8d. per cwt., and the sugar is of a polarisation exceeding 98°, the rate of drawback shall be 4s. 3⅓d. per cwt.:

(b) in any other case the drawback shall be of an amount equal to the duty chargeable on sugar of the like polarisation (the drawback being determined by reference to paragraph 1 (b) above if the duty on the materials was paid in accordance therewith).

3. Drawback shall not be allowable in respect of molasses (other than invert sugar) produced in the United Kingdom from materials on which duty was paid in accordance with paragraph 1 above, and any drawback of duty so paid allowable in respect of invert sugar so produced shall be of an amount equal to the duty paid on the materials

4. No drawback or other relief from duty on sugar, molasses (including invert sugar), glucose or saccharin shall be allowed under section two hundred and sixteen or two hundred and seventeen, or under paragraph (e) or (f) of subsection (1) of section two hundred and eighteen, of the Customs and Excise Act, 1952 (which relate to goods for use in certain manufactures or for the feeding of stock); and this shall apply both to duty paid in accordance with paragraph I above and to the duties previously chargeable.

5. The changes resulting from this Resolution in the duties on sugar or invert sugar, or in the drawbacks and other reliefs from those duties, other than the changes resulting from paragraph 4 above, shall not affect surcharges and surcharge repayments or distribution payments and repayments under the Sugar Act, 1956, and any Act giving effect to this Resolution may (with effect from the said tenth day of April) provide for surcharges under the Sugar Act. 1956, to continue to be made as if the duties on sugar and invert sugar had remained as they were immediately before that day, and apply for purposes of the surcharge any enactment then applicable for purposes of those duties.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That as from the tenth day of April, 1962, in lieu of the duties of customs chargeable under section two of the Finance Act. 1924, on cocoa, cocoa butter and cocoa husks and shells there shall be charged a duty of customs at the rate of 2s. 4d. per cwt. on cocoa or cocoa butter imported into the United Kingdom and not qualifying for Commonwealth preference; and drawback of the duty so charged shall not be allowed under section two hundred and thirty-one of the Customs and Excise Act, 1952, on goods delivered or appropriated for use in the manufacture of theobromine.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That as from the tenth day of April, 1962, the duties of customs chargeable on coffee under section three of the Finance Act, 1924, and on preparations consisting wholly or partly of extracts, essences or other concentrations of coffee or chicory under section two of the Finance Act, 1946, shall be charged at the rates shown in the first of the following Tables ("Commonwealth rate" there meaning the rate for goods qualifying for Commonwealth preference), and for roasted coffee and mixtures of roasted coffee and roasted chicory the rates of drawback of the duties chargeable under the said section three shall be the rates shown for those drawbacks in the second Table.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

—[ Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That as from the tenth day of April, 1962, no liability to any duty or tax, or right to any drawback, rebate, allowance or other payment, shall be subject to any addition under section nine of the Finance Act, 1961, by virtue of any order of the Treasury made before that day.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act. 1913—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question.

That the powers conferred by section nine of the Finance Act, 1961, shall be extended for a further year.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That as from the tenth day of April, 1962, but subject to any new Treasury order under section twenty-one of the Finance Act, 1948, the rates at which purchase tax is chargeable shall be altered as follows:

(a) the 50 per cent. rate, wherever now chargeable, shall become a rate of 45 per cent.; and

(b) the 12½ per cent. rate, wherever now chargeable, and the 5 per cent. rate, wherever now chargeable, shall each become a rate of 10 per cent.:

but this Resolution shall not authorise any alteration of a rate for some only of the goods to which that rate at present applies, except that any Act giving effect to this Resolution may alter the 5 per cent. rate for the whole of Groups 1, 2, 7 and 8 (clothing etc.), without altering it in Groups 6, 11 and 16 (furniture etc.), or vice versa.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question put,

That as from the first day of May, 1962, but subject to any new Treasury order under section twenty-one of the Finance Act, 1948, purchase tax at the rate of 15 per cent. of the value of the goods shall be charged in respect of goods of the classes comprised in the Groups set out in the Annex to this Resolution, as if those Groups were added to Part I of the Second Schedule to the Finance Act, 1958; and any Act giving effect to this Resolution may include provision for securing that, where on or after that day chargeable goods, being beverages or products for the preparation of beverages, are appropriated or applied to the production of beverages which are not purchase tax goods, the appropriation or application shall be treated as if it were a chargeable purchase (" purchase tax goods" meaning for this purpose goods of any description from time to time comprised in Part I of the said Second Schedule).

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

Motion made, and Question,

That purchase tax shall be charged in respect of any chargeable goods made or produced for use in or in connection with a business, where the goods are made or produced by or to the order of the person carrying on the business.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That provision shall be made for enabling any drug or medicine to be temporarily exempted from purchase tax by direction of the Commissioners of Customs and Excise.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That income tax for the year 1962–63 shall be charged at the standard rate of seven shillings and ninepence in the pound, and, in the case of an individual whose total income exceeds two thousand pounds, at such higher rates in respect of the excess as Parliament may hereafter determine.

And it is hereby declared that is is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.—[Mr. Llovd.]

put and agreed to.

Motion made, and Question.

That—

(a) in section fifteen of the Finance Act, 1952 (relief for persons under sixty-five with small incomes) for the references to three-hundred pounds (the income limit for the full relief) there shall be substituted in all places references to four hundred pounds, and (as regards the marginal relief)—

(i) for the reference to four hundred and five pounds (the income limit for the marginal relief) there shall be substituted a reference to five hundred and fifty pounds; and

(ii) for the reference to two-fifths (the fraction governing the marginal relief) there shall be substituted a reference to one-half;

(b) in section thirteen of the Finance Act, 1957 (relief for persons over sixty-five with small incomes)—

(i) for the references to two hundred and seventy-five pounds and four hundred and forty pounds (the income limits for exemption) there shall be substituted references to three hundred pounds and four hundred and eighty pounds respectively; and

(ii) for the reference to fifty-five pounds (the excess over those limits by reference to which relief by reduction of tax is limited) there shall be substitued a reference to seventy-five pounds;

but this Resolution shall not require any change to be made in the amounts deducted or repaid under section one hundred and fifty-seven (pay as you earn) of the Income Tax Act, 1952, before the twenty-second day of June, nineeteen hundred and sixty-two.

And it is hereby declared that is is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That provision shall be made for charging persons disposing of property of any description (including shares, debentures, debts and other incorporeal property) to income tax in respect of gains arising or treated as arising to them from the acquisition and disposal of the property, other than gains which accrue as profits of a trade, profession, vocation, office of employment, and in that connection provision may be made for bringing into the charge as a disposal the receipt or realisation of a debt or security on its repayment or redemption, the appropriation of property for any specified purpose, and other cases, and for bringing into the charge as disposals by a person disposals made by a nominee or trustee for him, and for other incidental matters.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That further provision be made far charging income tax in connection with disposals of land by a company connected with other persons who have or have had dealings in land, or have had an interest in companies having dealings in land, or by a person connected with another person who is in business as a builder (including any business which extends to the erection of securing the erection of buildings).—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That further provision be made in connection with sections twenty-one to twenty-three and twenty-eight of the Finance Act, 1960, with respect to the construction ot references to shares or to securities, and with respect to the amounts to be treated as income by virtue of sections twenty-one to twenty-three.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That further provision be made with respect to the operation in relation to transactions in securities of section twenty-eight of the Finance Act, 1960, in cases where tax advantages are obtained or obtainable by virtue of section twenty (subvention payments) of the Finance Act, 1953, or in connection with a fall in the value of securities, or in connection with the liquidation of a company, and in cases of husband and wife living together.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That provision shall be made for treating as profits chargeable to the profits tax any such amounts as may be made chargeable to income tax by any Act of the present Session relating to Finance, or similar amounts, and in particular gains accruing or treated for purposes of income tax as accruing from the acquisition and disposal of property.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That estate duty shall be charged in respect of immovable property situate out of Great Britain, and further provision shall be made for the recovery of estate duty in respect of property so situate (whether movable or immovable) by means of a charge on any property or otherwise.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question.

That charges of the following descriptions may be imposed in connection with provisions designed in general to afford relief from taxation, that is to say,—

(a) any charge to income tax that may result if section twenty of the Finance Act, 1954 (which enables account to be taken of capital allowances on claims for loss relief), is amended so that the loss claimed for any year is related to the allowances for a later year, and in connection therewith loss claims for the year 1962–63 cannot be made by reference to the allowances for that year, or relief given is made recoverable if afterwards found not to be due;

(b) any charge to income tax that may result from provisions for making effective or extending double taxation relief in relation to dividends and other payments by a company or body of persons;

(c) any charge to estate duty that may result from increasing to £4,000 the value below which estates are not chargeable with duty;

(d) any charge to estate duty that may result if further relief is given from double taxation in relation to estate duty and duty leviable under the law of any territory on or by reference to death, including a charge resulting from the withdrawal, in connection with that further relief, of any other relief from such double taxation;

(e) any charge to stamp duty that may result if the ad valorem stamp duty chargeable on settlements as such is repealed or restricted, and in connection therewith certain settlements become or are made chargeable with duty under some other head.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question,

That new provision shall be made as to the compulsory redemption of annuities under the Tithe Acts, 1936 and 1951, in cases where there is a change of ownership of land in respect of which an annuity is charged.—[Mr. Lloyd.]

put and agreed to.

Motion made, and Question proposed.

That it is expedient to amend the law with respect to the national debt and the public revenue and to make further provision in connection with finance, so, however, that this Resolution shall not extend to making amendments of the enactments relating to purchase tax so as to give relief from tax, other than amendments making the same provision for chargeable goods of whatever description or for all goods to which any of the several rates of tax at present applies.—[Mr. Lloyd.]

5.35 p.m.

5.54 p.m.

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6.52 p.m.

7.14 p.m.

7.35 p.m.