Twelve months ago, in presenting my Budget Statement for 1941, I made a number of departures from precedent, which I think received the general approval of the Committee. In particular, I endeavoured to dispense, as far as possible, with the detailed review of revenue and expenditure which had always played a large part in the traditional Budget speech, and, instead, to substitute a wider and more general survey of the financial and economic front. I intend to follow that course again to-day. First of all, before I make a more exact examination of our present position in the light of the developments of the past year, there are certain wider considerations to which I desire to refer.

International Sphere

In the international sphere of our financial affairs, the most striking fact is that we can now look back upon a full 12 months of Lend-Lease assistance. A year ago I could do no more than pay tribute to the great contribution that was to be made in this way by the United States. It was then still too early to attempt any precise assessment of the actual magnitude of the aid which we should receive. Since then the broadening swell of the American productive effort has meant an ever-increasing flow to us of food, munitions of war and supplies of all kinds. We know from our own experience that substantial changes in productive industry and in the diversion of national resources from peace to war cannot be brought to fruition overnight. Already, however, the scale of Lend-Lease deliveries is a vital factor in our war effort.

President Roosevelt's reports to Congress on Lend-Lease aid indicate that up to February of this year the assistance given in this way to all countries was not far short of £650,000,000—assistance of which the greater part was given to the United Kingdom. More recent returns indicate that Lend-Lease aid is now running at a rate of about £100,000,000 per month, and that the figures for assistance to the United Kingdom alone up to 31st March last are likely to reach £600,000,000. The future trend must obviously depend not only upon the growth of American production, but also upon shipping possibilities and military necessities in different parts of the world. A large proportion of the total henceforward will be transferred to India and the Dominions. But the continuance of the Lend-Lease policy in this flexible form again records the determination of the United States to join with us in putting to the best use the resources of the Allied nations. I know that the Committee will share my sense of the gratitude, which we owe to the American President and people, for this further tangible evidence of their aid and co-operation.

Our overseas purchasing power has also been substantially increased by the fine action of the Canadian Government in providing free of charge to us all the supplies that we need from Canada up to a total of 1,000,000,000 dollars. Here again, voluntary and generous action has ensured that no financial difficulties shall impede the free flow of necessary supplies from overseas.

These provisions mean that our financial problems in North America, which in 1940 were one of my chief preoccupations, have now been greatly reduced. We can certainly feel assured that the movement of munitions and other essential supplies to this country from overseas will be conditioned not by our ability, or inability, to find the means of payment, but, as I have said, by the requirements of military policy and by the availability of shipping or other means of transport. But I must again make it clear that this does not mean that our overseas financial problems in other parts of the world have disappeared. We must still safeguard our exchange resources, so that they may be adequate to meet the many calls upon them not covered by any special form of assistance.

Domestic Front

If we turn now to the domestic front, we see, since the last Budget, a marked development of that economic policy which ensures the subordination of our normal peace-time method of living to the requirements and urgency of the war situation. As Chancellor of the Exchequer, I am concerned not so much with the moral aspect—that is to say, with the desirability on its own merits of that hard living which many consider must be associated with total war—but with the inexorable pressure of economic facts. The supply of goods is much curtailed; the need to conserve shipping space is an essential linch-pin in our war effort. On the other hand, money incomes of the community as a whole are much increased, so that the potentially dangerous situation resulting from the impact of the larger national income upon the much reduced supply of goods is with us, and cannot be ignored.

For this situation, as I have emphasised on more than one occasion, there is no single sovereign remedy. The problem must be attacked, and has been attacked, from many angles. The main necessities of life are rationed, not only in order to reduce their consumption, but also to ensure their fair distribution. In this respect, too, the past year has seen considerable progress. The chief developments have been the application of rationing to clothing and to soap, and the introduction by my Noble Friend the Minister of Food of his points rationing scheme. The extension of rationing to the purchase of clothing was a marked step forward in the application of our war-time economic policy. At one stroke a substantial item of personal expenditure, representing nearly 20 per cent. of total personal expenditure apart from food and drink, was brought under control and the growth of a dangerous excess demand over supply was checked.

The withdrawal of excess purchasing power by the operation of heavy taxation and by the unremitting activities of the National Savings Movement has continued and greatly intensified its effect. But neither savings nor taxation, rationing nor the limitation of supplies, nor any of the measures, like the concentration of industry, promoted for the purpose of harnessing the national economy to the war effort, nor all of these together would solve our economic war-time problems if the price structure were to be allowed to get seriously out of gear. Here again we can point to many correlated acts of policy. The introduction, in numerous instances, of maximum prices controlled by the respective Departments has done much to prevent or limit rises in wholesale or retail prices. The Prices of Goods Act, which has been strengthened and widened in scope since my last Budget speech, has been another potent factor working in the same direction. Finally, the extension of the policy of stabilisation of prices which I announced a year ago has clearly justified itself, both on social and on economic grounds.

It is indeed instructive to observe what has happened in four of the most important items of everyday expenditure—food, clothes, rent and travelling. Though there have been some small increases in a few of the less essential foodstuffs, the price level of the main staple foods has actually been reduced. Last April the food index was 23 per cent. above the level at the outbreak of war; now it is only 18 per cent. above that level. In clothing, the stabilisation of prices is a rather longer process, and there has been some gradual increase, but the Government are taking direct control of prices under the Goods and Services (Price Control) Act, and—a most important adjunct to the control of prices—they are taking active steps to make sure that a supply of good serviceable clothes, at prices to suit all pockets, is available. More and more of the new utility clothes will be coming on to the market, and since their prices are closely controlled, this should also make a substantial contribution to keeping steady the price of clothing for the average citizen. Rents have been kept practically stationary since the beginning of the war by the Rent Restrictions Act. And in travelling, the last of the four big items, railways fares are now stabilised too.

These examples are typical. The fact is that in the main staple items of everyday expenditure, the things which come on the housewife's shopping list week after week or the things for which the ordinary man has to put his hand into his pocket as he goes about his business, have now been fairly steady for something like 12 months. There is a general statistical reflection of this in the Ministry of Labour's Cost-of-Living Index. When I made my Budget speech last April the Cost-of-Living Index was 28 per cent. above pre-war. In the intervening period the figure has remained virtually stationary, and on 1st March the index was 29 per cent. above the pre-war level.

This considerable success in price stabilisation has cost the Exchequer £125,000,000 in the past calendar year. For several reasons, of which the good management of my noble Friend the Minister of Food has been by no means the least, the cost up to date has been less than we feared it might be. On the other hand, we must expect that the requisite sum in 1942 will be materially higher, for we shall have to face higher agricultural wages and also a rising tendency in overseas markets.

A further consequence of the stabilisation policy has been to obviate the necessity of increases in wages where automatic adjustments are linked to the cost-of-living figure. The range of wage increases has thus been circumscribed, and in the result increases in basic wages in the last year have not been of a kind calculated to produce that inflationary spiral which we must avoid at all costs. The over-all increase in wages rates between April, 1941, and March, 1942, the latest date for which figures are available, was approximately 6 per cent., and, while there can be no justification in any of these facts and figures for the relaxation of vigilance, they do show that the whole economic policy of the Government has attained a considerable degree of success.

In the technical financial sphere the policy of control has been steadily pursued. New issues are almost entirely confined to those which are either made by the Government or are regarded as otherwise essential to the war effort. Government borrowing continues to be undertaken at very low rates of interest, and where there have been changes they have resulted in more, and not less, favourable terms for the taxpayer. Our borrowing policy has been marked by the diversity of its appeal. We have issued alternative securities to suit the varying needs and preferences of both small and large investors. This has been rendered possible by the continued use of tap issues—so generally appreciated—for our medium and long-term borrowing. Since National War Bonds were first placed on top and up to 31st March they have raised no less than £1,316,000,000, while Savings Bonds have similarly raised £666,000,000. We have continued to meet the need for short-term money by Treasury Bills and Treasury Deposit Receipts. In addition, the recent introduction of Tax Reserve Certificates has proved very successful. These Certificates are designed to facilitate advance provision for taxation, more especially by companies and corporate bodies. Already Certificates have been issued to the value of over £200,000,000. All these matters together certainly represent a formidable array of weapons in the financial and economic armoury with which we have provided ourselves and, I submit, are unmistakable evidence of the maintenance of our financial front on safe and sound lines.

Waste and Extravagance

The immense figures of our present expenditure immediately raise the question, often in our minds, whether the money so provided is being carefully and wisely spent. It is my duty, so far as lies in my power, to see that waste and extravagance are eliminated, but in the nature of things neither I nor my Department have knowledge which extends throughout the length and breadth of our war effort. I welcome, therefore, the aid of our numerous allies. I welcome in particular the invaluable and painstaking Reports of my hon. Friend the Member for Kidderminster (Sir J. Wardlaw-Milne) and his colleagues of the Select Committee on National Expenditure and the assistance provided by those hon. Members and those members of the public who, instead of confining themselves to generalities, bring to our attention specific instances of what appears to them to be wasteful or uneconomic expenditure. Finally, I welcome the aid of other Government Departments, who can do, and are doing, much useful work in this direction. Many of them have, at the instance of the Treasury, appointed officers of high standing specially charged with this particular duty of preventing and avoiding wasteful spending. It is, indeed, the bounden duty of every Minister of every Government Department, of each concern and business and of every individual citizen to see that, down to the last penny, the vast sums provided by Parliament are wisely and properly spent.

I would like to add a word or two about the position of the Treasury in war-time. It is no function of the Treasury, and no intention of the Treasury as I know it, to impose brakes and checks upon the war effort. At the same time there is often of necessity a real dilemma. On the one hand when, for example, cases of wasteful expenditure are brought to light the view is sometimes taken that the Treasury must have been lax in allowing such things to occur. On the other hand, if the Treasury attempts to examine a proposition involving substantial expenditure, there are those who are ready to say that the "dead hand" of the Treasury is impeding production. With this in mind I invite my hon. Friends to read some of our Parliamentary Questions and Debates. The Treasury is often confronted on the one hand with allegations of slackness and lack of energy in dealing with this particular problem, and on the other hand with suggestions that it is unwarrantably interfering with or checking production. It is my own belief—and I have seen this situation both from inside and outside the Treasury—that the Department walks this particular tight-rope with a substantial measure of care and skill.

In fact, the normal peace-time Treasury machinery has been altered out of all knowledge for the purposes of the war. Departments have been given a really substantial degree of delegated authority. Where recourse to the Treasury is still considered desirable, as it quite properly must still be, correspondence is as far as possible eliminated, and informal consultations, designed to produce rapid decisions, take its place.

Outside advice and experience have been freely drawn upon, not only in the sphere of organisation, where we have the assistance of a number of business experts, but also in the sphere of financial policy. I am glad to have this opportunity to-day to pay tribute to the advice and assistance placed at my disposal by my Financial Adviser, Lord Catto, and by the members of my Consultative Council—Sir Samuel Beale, Mr. Colin Campbell, Sir Walter Citrine, Sir Hubert Henderson, Sir Bertram Hornsby, Mr. Keynes, Sir George Riddle and Lord Riverdale of whom Mr. Keynes and Sir Hubert Henderson devote practically all their time to Treasury affairs. All this help has been of great value to me.

Expenditure, 1941

I would like now to refer briefly to the main Budgetary figures for 1941–42. A year ago I estimated that expenditure, apart from the Vote of Credit, would amount to £707,000,000. It has come out at £691,000,000. I estimated expenditure out of the Vote of Credit, exclusive of expenditure in the United States, at £3,500,000,000. I was not at that time able to estimate expenditure in the United States, but I repaired this omission in the course of my speech on the Vote of Credit on the 16th December, when I indicted that the amount of payments in the United States would be of the order of £300,000,000. Consequently, I take the total Budget estimate for the Vote of Credit at £3,800,000,000. The actual figures come out at £4,085,000,000. Thus, expenditure out of the Vote of Credit for 1941–42 was some £285,000,000 in excess of my estimate, and this represents higher expenditure, partly at home and partly in overseas countries, both countries of the Empire and foreign countries other than the United States.

Revenue, 1941

I will go back to the more important deductions to be drawn from these figures after I have briefly reviewed the revenue side of the account. Revenue, also, has exceeded my expectation. The detailed figures are available to the Committee, and I will do no more than refer to them in broad outline. As regards Inland Revenue Duties, Income Tax, Surtax, Estate Duties and Stamp Duties did not diverge materially from my estimate, but, due mainly to an excess of £60,000,000 in the receipts from National Defence Contribution and Excess Profits Tax, direct taxation receipts as a whole were £76,000,000 above my estimate.

The corresponding figure for Customs and Excise Duties is £127,000,000—£704,000,000 collected as against an estimate of £577,000,000. This collection reflects mainly the ever-growing purchasing power in the hands of our people.

Details of the actual receipts under the various heads for Customs and Excise Duties will be found in the White Paper, but I must refer specifically to the Purchase Tax. The Committee will remember that this new tax was not brought into operation until October, 1940, and had not got into its stride by the time the estimate for 1941–42 had to be made. It looked, on such data as were available, as if the tax might produce something like £100,000,000 a year, but in view of the possible dislocation of trade through air raids and of the limitation of supplies under Board of Trade Orders, I thought it prudent to estimate for only £70,000,000. Actually I have received over £98,000,000. This figure includes approximately £8,000,000 arrears of duty from the previous year, but, owing to an administrative change in the accounting arrangements made to suit the convenience of traders, the yield represents less than a full 12 months' dutiable transactions.

The only other comment which I should like to make on the Revenue side of the Budget relates to War Damage receipts. A year ago I explained that, while I was not including anything in the revenue estimates for War Damage contributions and premiums, it was my intention that an amount equal to expenditure on War Damage during the year should be taken in as miscellaneous revenue, any balance of contribution income being accounted for outside the Budget. On this basis, the total of miscellaneous revenue includes an appreciable amount in respect of War Damage contributions and premiums which did not figure in my original estimate. The balance of the receipts under this head was paid into the Exchequer outside the Budget.

The total of revenue in 1941–42 was £2,074,000,000—£288,000,000 in excess of the estimate—as against total expenditure of £4,776,000,000. So much for the bare summary of affairs.

Analysis of 1941 Finance

A year ago I devoted a considerable part of my Budget Speech to an explanation of the sources of war-time finance in order to indicate that there were many factors to be taken into account which were not immediately apparent from a simple comparison of total expenditure with total revenue. I showed how for this purpose expenditure overseas must be distinguished from expenditure at home, and how even against domestic expenditure there were certain automatic aids, such as the growth of funds, particularly the Unemployment Fund, the War Risk Insurance Fund, and War Damage Act receipts, which swell our available resources for the time being and, therefore, assist in the financing of the war effort. I presented to the Committee the conception, which was I think generally accepted, that what really mattered was the total expenditure requiring domestic finance. I analysed the provision of that domestic finance in an endeavour—successful, I hope—to show that, before attempting to pass an informed judgment, one must look behind the simple figures of expenditure and revenue without being too readily affected by the extent of the apparent gap between these figures. A good deal of the detailed argument and calculation on which I founded my analysis was contained in the special Budget White Paper on Sources of Wartime Finance. The issue of that White Paper was, I know, an innovation that was widely appreciated, and I propose to follow my own precedent by the issue of a similar White Paper to-day. It will be found to be differently arranged, to contain some new material, and to be even fuller in its analysis of public finance and national income and output than last year's White Paper.

Subject to one matter, the new White Paper will enable comparisons to be made between the Budget forecast and the actual outturn of events. The matter to which I refer is this:

A year ago I attempted, with all its obvious uncertainty, to forecast the trend of financial, events for the 12 months ended 31st March, 1942. In looking at the actual results, it will be obvious to the Committee that where I am not dealing with actual Exchequer figures, it is impossible to attempt to give figures of what has happened up to so recent a date as 31st March, 1942—only a fortnight ago. I must, therefore, make my analysis in relation to the calendar year 1941, and the new White Paper is constructed on that basis. This method of approach has the advantage that we are on firmer ground than if we attempted to guess at comparable figures up to the end of the financial year. To compare the estimates which I gave a year ago for the financial year just ended with the actual outcome of the calendar year 1941 may produce a result more favourable to my powers of prophecy last year than would be shown by actual figures relating to the financial year for which both expenditure and revenue, though not the deficit, are appreciably higher. I do not believe, however—and there is nothing in such figures as we have for the financial year to suggest—that the difference is sufficient in any way to disturb the general conclusions.

A year ago I estimated total expenditure for the financial year, excluding supplies from and payments in the United States, at £4,207,000,000. As I have said, this figure must be raised to roughly £4,500,000,000 to include the £300,000,000 for payments in the United States. In my Budget Speech last year, I explained that these payments in the United States would be financed by the sale of capital assets or by other methods not calculated to have any inflationary effect in this country. I explained that this item, together with such part of the expenditure of £4,207,000,000 as would be financed, for example, by the use of the sterling balances accruing here to the credit of overseas countries, must be excluded in arriving at the figure of expenditure requiring domestic finance. That figure I put at £3,700,000,000, as against total revenue receipts, including new taxation, of £1,786,000,000, leaving about £1,900,000,000 to be met from other sources.

Realised Results

How do the realised results compare with this forecast? Let me take, first of all, the calendar year 1941, for which more exact figures are available. The total expenditure was about £4,600,000,000, compared with the forecast of about £4,500,000,000. After allowing for overseas disinvestment, whether in the form of the sale of capital assets or the accumulation of overseas balances, the total of expenditure requiring domestic finance was £3,800,000,000, as against my expectation of £3,700,000,000. As revenue received in the calendar year was more than £1,800,000,000, the sum to be found from other sources was about £2,000,000,000, that is to say, £100,000,000 higher than my last Budget forecast of £1,900,000,000. For the financial year the deficit is actually £87,000,000 less than for the calendar year, and, when we have the precise figures for overseas disinvestment, I do not expect that the amount to be found from other sources will have exceeded my forecast by any larger sum than on the calendar year—that is, by about £100,000,000. I can reasonably, therefore, claim that this forecast was fairly close.

Personal Savings

The crucial question is the extent to which personal savings helped to deal with the problem. I am glad to be able to say that a great deal of further investigation during the year has confirmed the reasonable accuracy of the figures for personal savings in 1940, on which I relied when in my Budget speech a year ago I said that it ought to be possible to raise in this way during the year which has just ended a further sum of between £200,000,000 and £300,000,000. Table D in the Preamble to the new Statistical White Paper sets out a series of comparisons between the estimates of personal savings in 1938, 1940 and 1941. This Table puts gross personal savings at £640,000,000 in 1940, and £909,000,000 in 1941. On that basis, there has been an increase of no less than £269,000,000 in the total of personal savings. Gross personal savings are, however, so defined as to include both Death Duties and provision for the excess of liabilities for direct taxes on personal incomes over payments of taxes during the year. If both of these items are excluded, as they would be by many people in their assessment of personal savings, the corresponding figures are £473,000,000 in 1940 and £665,000,000 in 1941. This latter comparison, which shows an increase in net personal savings during the calendar year 1941 of not quite £200,000,000, is the least favourable of all the comparisons that can be made between the 1940 and 1941 figures in the new White Paper. I consider therefore that the target for savings which I set a year ago has been substantially attained.

I would emphasise that the figures of savings which I have given relate to genuine personal savings made out of personal incomes. No account is taken of investments by companies or of mere transfers from one form of investment to another. I feel, therefore, that we can derive considerable encouragement from these figures, especially as the notes to Table D in the new White Paper indicate there is reason to believe that the estimates there given of personal savings are on the low rather than on the high side.

After taking account of various other known sources which are shown in detail in the White Paper, we are left with a residue of rather less than £500,000,000. This has been largely met out of that part of the depreciation funds and sinking funds of companies and institutions which they have not been able to employ on normal works of renewal and repair, even after making allowance for what has been spent in making good war damage. Some part, which it is difficult to estimate precisely, has also been met by the running-down of private stocks of goods. In so far as these are non-essential goods—and I believe that an important proportion of the reduction in private stocks relates to non-essential goods—this is an inevitable process in war-time and one which need not cause concern, especially when accompanied, as on this occasion, by a substantial increase in stocks of essential goods held by the Government and paid for out of the Budget. I can say, therefore, with some confidence that there has been no dangerous inroad into private stocks, although the supply of non-essential goods which are no longer being currently produced is, naturally and properly, gradually drying up.

For further evidence of these conclusions I commend to Members of the Committee the new White Paper. I believe that close study of its contents will show that an analysis of the sources of war-time finance in 1941 leads to the same general conclusion as the examination of other available statistics, such as those connected with prices and wages—that is, that during the last year we have definitely held our own against the onset of inflation. This enemy is still at our gates. Our vigilance must not be relaxed for a moment, but we can at least claim that as yet he has not established a bridgehead across our financial defences.

At this stage of my speech I propose to make another innovation, which I hope will commend itself to Members of the Committee. For many years it has been the tradition that the Chancellor of the Exchequer after completing his review of the past year, should begin his appreciation of the prospects of the coming year, balance expenditure against existing revenue, and then, having disclosed the nature of the task before him, gently withdraw from its contemplation and interpose in his speech a passage dealing with miscellaneous amendments of the law, and containing any comments of a general character which he feels it is desirable to make. There are, no doubt, justifications in ordinary times for this break in continuity, but I can see no valid reason for it to-day. I propose therefore to deal at once with such miscellaneous amendments in the law as I shall be proposing, and to make certain comments of a general character, more particularly about Excess Profits Tax and Income Tax. Then I shall turn to the prospects for 1942–43 and to the steps which we must take in that regard.

Customs and Excise

In the field of Customs and Excise, I shall propose legislation to continue the present margins of preference on sugar and tobacco for a further period. The margins have been substantially at their present level since 1926 and are due to expire in August next. A Ways and Means Resolution will be required in the case of tobacco, but not in the case of sugar. As regards sugar, the Government are under an obligation to give 18 months' notice of any change, and I shall therefore propose the continuation of the present margins for a further two years. As regards tobacco, the existing preference was guaranteed to certain Empire Governments in 1932 for a period of ten years, and, in view of present conditions, I shall propose to continue it until next year. Meanwhile, the position will be reviewed in the light of the factors now relevant, and particularly of the undertaking given in Schedule 1 to the Trade Agreement with the United States of America that His Majesty's Government would consider the possibility of reducing the margin of preference when the guaranteed term of ten years expired.

I have one minor legislative amendment to propose in relation to the Purchase Tax. Experience has shown the need for clearing up the position of the tax on paper manufactures and stationery. The exemption for account books and plain books, such as note books and drawing books, will be cancelled, and the duty on all chargeable stationery will be at the basic rate of 33⅓ per cent. This will end certain anomalies which exist at the moment and have occasioned a measure of difficulty and inequality.

Inland Revenue

I will now turn to the Inland Revenue. The Committee will remember that last year's Finance Act gave manual wage-earners an income tax allowance in respect of additional travelling expenses not exceeding £10 per annum where it could be established that, owing to the war, their place of work or residence had changed and the cost of travelling between where they live and where they work had increased. I have now decided to extend this allowance for expenses, up to the same maximum of £10, to all persons in employment, that is to say, to taxpayers assessed under Schedule E, as well as to weekly wage-earners. I mention this matter now because the return forms are going out to Schedule E taxpayers, and it is desirable, in order that there may be no interference with the smooth working of the system under which the tax is deductible from the salary or wages of the employee, that any Schedule E taxpayer who may be entitled to claim this new allowance should be in a position to make the claim when sending in his return. I have therefore authorised the Commissioners of Inland Revenue to issue with their return forms a slip on which the taxpayer can provisionally make his claim to this new allowance if it is sanctioned by Parliament. I am sure that this course will meet with the Committee's approval.

Land Tax

Another Inland Revenue matter which I must mention at this stage, inasmuch as it involves a Resolution, is a war amendment of the duty called the Land Tax—a very old, indeed archaic, tax, which in 1798 was made perpetual, but redeemable, and which requires legislation only at rare intervals. My proposals deal with two difficulties which have arisen in certain areas where damage has been suffered through enemy action. The difficulties are that, in the absence of remedial legislation, first the owners of undamaged properties will have to pay more Land Tax by reason of the fact that other properties have been damaged, and, second, the owners of damaged properties will be able, to the detriment of other owners, to redeem their share of the tax on terms unreasonably favourable having regard to the fact that they will normally be entitled to compensation under the War Damage Act. The proposed legislation will provide that for the duration of the war the rate of Land Tax in any parish for the current and future years shall not exceed the rate in force in that parish for the year 1939–40, and that the tax assessed for the year 1939–40 shall be the basis of any future redemptions.

National Defence Contribution

My next proposal is of a more important character, namely, to extend the life of the National Defence Contribution, which was originally imposed in the Finance Act, 1937, for a period of five years. That period has now come to an end. As the Committee is aware, the National Defence Contribution has become in effect complementary to the Excess Profits Tax. The higher of the two taxes is the one which is payable. The National Defence Contribution is, therefore, primarily a tax on profits applying only to those cases in which there has been no growth of profits. It applies where the profits are more or less constant or where profits have fallen. Its yield is, of course, very small in relation to the high yield of the Excess Profits Tax. Nevertheless, it represents a definite contribution from sources which are not liable to Excess Profits Tax, and in the present national circumstances I do not feel that I should be justified in giving up this contribution. I propose, therefore, that the National Defence Contribution should continue from year to year until Parliament otherwise determines.

Farming Profits

As regards farming profits, I propose to extend the area of charge under Schedule D of the Income Tax. Last year all farmers whose land exceeded £300 in annual value were brought tinder charge to Income Tax, Schedule D, like traders generally, by reference to their actual profits, and farmers with land not exceeding £300 in annual value were left on the existing conventional Schedule B basis. It is clear that the current level of farming profits is much higher than the annual value, which is the basis of assessment under Schedule B, and I propose to reduce the dividing line between Schedule B and Schedule D from £300 annual value to £100 annual value. This alteration will bring all except smallholders and quite small farmers under charge by reference to their actual profits. As regards those cases where the annual value does not exceed £100, I propose to increase the Schedule B charge to three times the annual value, but the farmer or smallholder will be entitled to have his charge reduced to the amount of the actual profits for the year if they amount to less than three times the annual value. No one will have to pay on more than his actual profits.

The extension of the charge makes it desirable to consider the method of application of the general Income Tax principle of valuation in such matters as the valuation of livestock bred on the farm and cultivations, tillages, unexhausted manures and growing crops, and the Inland Revenue authorities propose to consult with the Agricultural Departments and the representatives of the farming industry so as to ensure that the methods of valuation are suitable for present farming conditions.

Wage-Earners' Income Tax

I now come to the wage-earners' Income Tax. There has been a good deal of public discussion. I have considered the matter closely for months past and have recently consulted with Members of this House, the British Employers Confederation and the General Council of the Trades Union Congress. I have also, of course, had the benefit of the valued advice and collaboration of my right hon. Friend the Minister of Labour, and I have certain proposals to make.

None of us likes paying taxes, bat for the most part the wage-earner has rightly appraised his tax as an essential contribution to the war effort. In fact, not only have wage-earners made their contribution in this way, but large numbers of them have at the same time continued and in many cases increased their savings for the nation. It is to the method of collection that certain complaints have been directed. Collection by deduction from pay was a great step forward, and it was generally approved by the House as in the best interests of wage-earners. Before the war just under 1,000,000 wage-earners paid about £2,500,000 of tax. For the year 1940–41, the first year of the new system, about 2,500,000 wage-earners paid about £30,000,000. In 1941–42 the personal allowances were reduced, and there was an increase in the rate of tax and a great expansion in industrial employment. For that year 5,500,000 wage-earners pay—and as I have said, for the most part willingly pay—a sum of £125,000,000, of which £60,000,000 is treated as post-war credits.

Under the present system every wage-earner is assessed in the ordinary way with the same right of appeal as for other taxpayers, and the final sum is arrived at between him and the Inland Revenue. The employer is then notified of the definite amount of tax to be deducted from the wages. Though the liability is computed by reference to the total income for the Income Tax year, the wage-earner is assessed for six-monthly periods ending on 5th October and 5th April, and the weekly deduction of the tax for each such assessment period begins three months after the period ends. Where wages are constant or practically so during the year, as they are in the great majority of cases, there is a great deal to be said in favour of that procedure.

The work involved on the employers has been substantial, and I have to thank them for their willing assistance and cooperation, particularly at a time of staff shortage owing to the war.

There have been two points of particular criticism. The first is that the current deduction period did not start punctually in all cases on 1st January last. The result was that in some cases the tax was spread over less than the usual period of 24 weeks, and this produced in some cases a deduction of a greater amount of tax week by week. Secondly, there is the case of seasonal employment, especially where summer earnings are higher than winter earnings. Tax on the higher summer earnings has to be deducted from the winter wage, and the difficulty thus arising was magnified by the higher tax bill imposed last year.

The remedy proposed in the recent discussions and letters in the Press is to abandon the existing method and levy the tax on the basis of current earnings. The current income basis is no new idea. It has always been attractive in theory, but the question remains whether it is feasible and equitable to the taxpayer. This question was examined by the Board of Inland Revenue two years ago, when the present scheme was introduced. They thought that it would be neither practicable nor equitable. I asked them some months ago to look into it again while they were reviewing the existing arrangements. A concrete scheme was drawn up, but judgment upon it was again adverse, as it has also been on various schemes recently canvassed which were in fact variants of the scheme my advisers had drawn.

Schemes to deduct tax on the basis of current earnings can be of two types. In the first type the weekly deduction represents without any adjustment the final tax liability. But these present the fatal flaw that, contrary to all justice, many wage-earners whose incomes fluctuate from week to week would pay substantially more tax than wage-earners whose incomes are constant. In the second type adjustments have to be made at the end of the year, usually by repayment of weekly deductions, which on the average of the year prove excessive. There might well, indeed, be millions of cases of overcharge necessitating these refunds. Nor could this difficulty be met by a deliberate lowering of the rate of deduction. The very large variations of circumstances in different cases would obviously in that event bring a new series of problems in its train. Adjustment at the year's end would be fairer than no adjustment at all, but there would be hardship and, I think, resentment if too large a tax is deducted and the wage-earner is kept waiting for repayment until the full year's income has been ascertained. Thus adoption of this type of scheme might remove existing complaints at the cost of substituting a new and more serious grievance. There is another point. Under the existing scheme the employer is a pure collector. On a current earning basis he would become a kind of assessor. Disputes as to the amount to be deducted would not be, as now, a matter between the wage-earner and the Inland Revenue, but a matter between the wage-earner and his employer. There is also the further point that the additional calculations involved for the employer, which he would not be able to make until the wages and overtime for the week are known, would be such that in present conditions in the case of some employers the system would dislocate or even break down the machinery for the payment of wages.

For these reasons I came to the conclusion that the adoption of any such plan as has so far been formulated was neither desirable nor practicable. I have been fortified in this conclusion by the advice of the Trades Union Congress and the British Employers' Confederation, both of whom agree that, although deduction of tax on the basis of current earnings would have considerable advantages, no scheme has so far been produced which would be both equitable and practicable at the present time. We would all, I think, be prepared at any time to consider any new proposal, but the fact is that, at any rate in the judgment of all those principally concerned, no such plan has yet been forthcoming which could be recommended to replace the existing scheme. Obviously, therefore, the problem must be attacked from another angle. It is not really surprising if, on the introduction of the deduction system into this new and far-reaching field, the machinery here and there should need adjustment. I am confident myself that the improvements on the present system which I am about to announce will go far to remove the difficulties which I have mentioned.

First, there is the matter of the wages minimum below which deductions are not required to be made. At present tax is not deducted if and to the extent that the wages in any week, before other deductions are made, would become less than £1 17s. 6d. in the case of a single man and, at the option of the worker, £2 17s. 6d. in the case of a married man. It has been represented that these limits call for review, particularly for a married man with a family. It is wise to go only a certain way in this direction, otherwise it would mean the carrying forward of a large number of undeducted amounts to be dealt with later on. But it is possible to go far enough to remove hardship, and I propose to authorise the amendment of the Regulations, so that the limits will be £2 for the single taxpayer, £3 for the married taxpayer without children, £4 for the married taxpayer with one child, and £5 for the married taxpayer with two or more children. This should materially help, particularly in the case of the man whose wages are subject to occasional variations in the course of the year.

Secondly, there is the income which fluctuates according to the seasons of the year. I would note, in passing, that there was a very full employment of most classes of workers during the past winter, but I propose, in those industries in which the period of high earnings falls in the summer, that the wages of the five months from the 6th April to the 5th September shall be assessed as the income of the first half-year, and the seven months' wages from September to April as the income of the second half. Against each, the full half-year's allowances will be deducted, and the effect will be to level up the deductions in the two half-years. A similar adjustment will be made, if necessary, where winter is the period of high earnings.

Thirdly, there is the question of punctuality in starting the deduction period. The three months between the end of the half-year and the beginning of the deduction period is too short for the Inland Revenue—who, I may say, have done a great piece of work—to deal with the millions of cases involved. I propose, therefore, after the end of June next to make the deduction periods start one month later. This will give the wage-earner a holiday from tax deduction in July of this year, but not, of course in any succeeding year. This should avoid the delays to which I have referred and give adequate time for the work. I propose to introduce these amendments at the earliest possible date—from midsummer next. By this means we shall be able to adjust the deductions before the next winter period, when the greatest difficulties arise.

Married Women's Earnings

Linked up with the general question of deduction of tax from wages is the particular problem of the taxation of the married woman in employment, which has now become important because of the number of married women who are entering employment as part of the war effort. On this subject there is a good deal of misunderstanding. It has been stated repeatedly that a single woman in industrial employment is in a more favourable position than the married woman, but this is not quite true. Actually, where a married woman is in employment an additional personal allowance of nine-tenths of her wages, subject to a maximum of £45, is given, and for very many incomes the tax payable by a married couple, both of whom are employed, is less than the tax payable by two single persons. This £45, added to the married allowance of £140, gives a total personal allowance of £185, which is more than twice the single allowance, and it is only when we reach the larger incomes, where a considerable part of the income is liable to tax at the standard rate of 10s. in the £ that the married couple pay more than two single persons with the same amount of income. So the suggestion that this problem can be cured by treating husband and wife as separate individuals, so far from remedying the evil, would actually make it worse in a large number of cases.

I propose to deal with this matter by increasing the additional personal allowance in respect of a married woman's earnings from the present maximum of £45 to £80 for the period of the war. Each married couple will continue to get the full married personal allowance of £140. With this increased allowance in respect of the wife's earnings, a married woman in employment will be in a very favourable position, and, from now onwards, a married woman will be able to take up her employment without any misgivings about her Income Tax position. This concession will cost £25,000,000 in a full year and £5,000,000 in the current year.

For the convenience of Members, I am circulating a White Paper which sets out all these proposals with illustrative examples and reviews the working of the present scheme for the taxation of wage-earners and the objections against the basis of current earnings. I have taken this special step because of the importance of the matter and because I am anxious that there should be available a more detailed exposition than it is possible for me to give to-day. I am sure that those who study the White Paper will find it most helpful and informative.

Explanation of Income Tax Provisions

There is another criticism which has much weight and concerning which we must certainly continue to do all we can to find a solution. It accounts, I think, for a great deal of the criticism that has arisen in connection with this matter. Income Tax law is not easily "understanded of the people," and the extension of the tax to such a large number of wage-earners gives added weight to the necessity for explaining it in as simple terms as possible. We have already done much, but we must do more. Many visits by local tax officials to factories to deal with appeals on the spot have been made—a widespread and very successful innovation. There have also been broadcast talks, the issue of posters and leaflets and the publication of a booklet entitled "Income Tax Quiz for Wage-Earners" which explains the whole subject in simple language and which has already had a circulation of nearly 1,000,000 copies. We intend to increase our efforts in this connection. This, of course, would in any event be necessary in view of the alterations which I have just outlined to the Committee.

One further step in this direction is the simplification of the form of return. We all Know how difficult the completion of an Income Tax return may be, but we do not always remember that the various reliefs are governed by statutory conditions and that it is necessary, in the interests of the taxpayer, to frame the form of the return in accordance with those conditions so as to give the appropriate reliefs. A new form of Income Tax return is about to be introduced for use by the wage-earner. It is simpler than the old one, and it is intended to be completed by the wage-earner in the early part of the year, so that he may be able to establish in good time his claim for the reliefs to which he is entitled, and thereby enable the Inland Revenue to notify employers promptly of the correct amount of tax to be deducted.

Post-War Credits

Finally, in this connection, I desire to add a word about post-war credits. They have, as yet, not been sufficiently appreciated, owing, I think, principally to the absence of any tangible document in the hands of the taxpayer showing him how much of his tax bill will be paid to him in the form of a post-war credit. Quite obviously, until the assessments have been made and the tax determined the taxpayer cannot be told what portion of that tax will rank as post-war credit. The assessments for the second half of the year 1941–42, that is, up to the 5th April, 1942, are only about to be made, so that it has not yet been possible to issue any document to weekly wage-earners showing how the post-war credit for 1941–42 has been made up. I may say that I have carefully considered the issue of savings bank books. This would mean the issue of some 10,000,000 books, and with the current shortage of clerical assistance and the necessity of curtailing the demand for paper it is in practice impossible to do this at the present moment. I am, however, arranging for each person concerned to receive as soon as possible an Official Certificate showing not only the amount of the post-war credit but how it is made up. Those concerned will then have a document which they will be able to retain as direct evidence of the sums due to them. For weekly wage-earners assessed on the half-yearly basis, out of a total tax bill of about £125,000,000, as I have said, no less than £60,000,000, that is to say, nearly a half, will be returnable as post-war credits at a date to be fixed after the war.

I do not feel that I can extend the scope of these post-war credits, but they will, of course, be continued in the forthcoming year on the same basis, and I feel sure that when the post-war credit certificates are actually in the hands of tax-payers the real value of these nest-eggs will be much more fully appreciated. There is one particular point about these post-war credits which I ought to mention. It has been suggested that if after the war there are substantial arrears of Income Tax which cannot be deducted at source, because the taxpayers in question are unemployed or in reduced circumstances, the post-war credits might be withheld by the Inland Revenue and set against those arrears. I can undertake that this will not be done. The only condition for the granting of a post-war credit for any year is the reasonable and simple one that the taxpayer has paid the Income Tax due for that year.

Excess Profits Tax

Next, I should like to refer to the Excess Profits Tax. As we know, the 100 per cent. rate was dictated not solely by fiscal considerations. It was concerned also with the aim of taking profit out of war. But the existence of the 100 per cent. rate certainly makes it all the more important to avoid hardship as far as possible. Very considerable changes have in fact been made in that direction since the tax was introduced. The provisions for concerns with low profits standards have been modified and now, in the great majority of cases, allow an alternative standard of 6 per cent. on the capital employed. The provisions for personal standards have been made more generous—far more generous than in the last war. There have been special provisions to encourage traders to embark upon developments required by the war effort. Borrowed capital now ranks as capital employed. A special allowance for increased output has been given to concerns producing metals and oil. Any loss on expenditure now incurred on buildings, plant and machinery will be wholly allowed from profits for both Income Tax and Excess Profits Tax. The rates for wear and tear carry at present an automatic addition of 20 per cent., and if plant and machinery are shown to be subjected by reason of the war to abnormal wear and tear, for example, by the working of double or treble shifts, special additions are made to the wear and tear allowance over and above the normal scale. They have been arranged, for instance, in the important engineering industries.

It has been argued with much force that the 100 per cent. tax prevents industry from making suitable provision out of its current profits for post-war reconstruction. To meet this I made provision last year for a post-war credit of 20 per cent. to be given subject to conditions to be determined by Parliament, and I indicated in my Budget statement last year the sort of conditions I had in mind. It has since been represented that the attachment of conditions not yet clearly defined has robbed the proposal of its virtue in relation to reconstruction, for traders say that, not knowing what the conditions may be, they cannot plan ahead. In these circumstances I have come to the conclusion that it would be a wise course to provide that this post-war credit, like the Income Tax post-war credit of the individual taxpayer, will accrue by statutory right, subject only to its not being used for dividends or for the issue of bonus shares. Clearly there will be more than one way of ensuring when the time comes the effective observance of those conditions.

Post-War Problems

I hope that this clear and unequivocal undertaking embodied in an Act of Parliament will also serve to indicate once more the importance which the Government attach to tackling our post-war problems with foresight and energy. From our experience after the last war we know that the happiness and well-being of our people are largely dependent upon the proper and adequate handling of these problems. So far as business and industrial problems are concerned, my right hon. Friend the President of the Board of Trade and myself, in our respective spheres, in consultation with my right hon. Friend the Paymaster-General, will be prepared to begin discussions with and to receive suggestions from the associations and bodies concerned in relation to their post-war problems with a view to making advance preparations for the difficult postwar period. But there is, I think, no justification in our general financial or economic situation for gloomy forebodings that are sometimes made in relation to our position after the war. I feel great confidence that with a wise and statesmanlike policy we can release the pent-up demands which will exist at the end of the war at the appropriate rate to provide steady employment at a high level for several years to come. We shall need to re-employ our people in peaceful pursuits, reorganise our industry, maintain our agriculture on a sound basis, rebuild our damaged cities and plan the environment of our lives both at work and at leisure on ampler and healthier lines.

Restoration of our exports to a high level is, however, the necessary condition of success in these directions. One of the primary objectives of our post-war policy must be therefore the greatest possible expansion of international trade. No country can have a greater interest than we in such an objective. It follows that we have a vital interest in the prosperity of other nations, which is the first condition of that general prosperity on which the flow of international trade depends.

This also should be said: If we are to overcome the difficulties and dangers of the post-war period, we must regulate the pent-up demand, and not allow it to be dissipated, as it was after the last war, in the wastage of an inflationary boom. The more one studies the likely post-war situation, the more apparent it becomes that, for a variety of reasons, it would be entirely wrong to contemplate that the financial and economic controls which serve our war effort can be swept away by a stroke of the pen at the conclusion of hostilities. This cannot be so. The ordinary reversal of the present concentration of import programmes, domestic man-power and productive activity on the prosecution of the war, the need to improve our post-war balance of trade by a marked expansion of exports, the shipping situation with which the world will be confronted at the end of the war, and the need to finance our post-war reconstruction at the lowest possible rates of interest, are merely examples to show that there should be no sudden abandonment of many of our war-time financial and economic controls. Physical reasons alone will, for a time, cause continuance of the present disequilibrium between the short supply of goods available for civilian consumption and the excess purchasing power seeking outlet. We are on our guard against inflation during the war; even more must we be on our guard after the war, because then there may be a natural psychological reaction against a policy the need for which is easily understood in war-time, but which may not be so readily accepted after the war has ended. We must ensure that the fruits of success in war are not filched from us by any lack of appreciation of this important aspect of our post-war position.

Prospects for 1942–43

Now it is time to turn to the prospects for the new financial year. I estimate that our total expenditure in 1942–3 will be £5,286,000,000, or an increase of £510,000,000 over the actual expenditure in 1941–42. The assistance to be given by the Government of Canada will be treated as a cash receipt and will not be deducted from the estimated expenditure out of the Vote of Credit; on the other hand, the figure for our total Budgetary expenditure naturally includes no provision for goods supplied to us on Lend-Lease terms. It follows that the amount of our Budgetary expenditure for next year no longer gives a useful comparison either of the total resources at the disposal of the Government for the purposes of the war or of the amount met out of our domestic resources. The grand aggregate of the total resources at our disposal under all heads in the coming financial year will probably exceed £6,500,000,000, compared with a total of less than £4,000,000,000 in the financial year 1940–41 and less than £5,500,000,000 in the financial year 1941–42. To the true measure of our own domestic effort I shall be returning in a few minutes. The expenditure total of £5,286,000,000 is arrived at in the following manner. The provision required for Civil Supply Services, shown in the Estimates already presented, is £444,000,000; the Fixed Debt Charge I put at £325,000,000 and, as in previous years. I shall ask for power to borrow any additional sums necessary to cover the contractual Sinking Funds. Other Consolidated Fund Services I estimate will require about £17,250,000.

The main problem relates to the fixing of the appropriate provision for the Votes of Credit. After careful consideration of all possibilities, I consider that the right figure for me to take is £4,500,000,000. This total includes provision for any payments in the United States not covered by Lend-Lease assistance, and is £415,000,000 more than the actual expenditure from 1941–42 Votes of Credit. The Votes of Credit total includes substantial sums for purchases in Canada. Against them we can, however, set the generous arrangements made by the Canadian Government—to which I have already referred—which enable me to take a credit of £225,000,000 on the revenue side of the Budget.

I must remind the Committee once more that, even in the midst of this war, we are maintaining, and in some cases increasing, our extensive social services, and that they have to be paid for. The substantial sum of £234,000,000 is included for this purpose in the total figure for expenditure which I have just given. That is, of course, quite apart from the cost of the stabilisation policy which, as I have said, is expected to exceed the £125,000,000 which it cost last year. There is also included an amount of £32,000,000 in respect of new commitments entered into during the past year, on such matters as improved pay and allowances for the Fighting Services, the improved scheme of War Service Grants and further increases in the pay of whole-time members of the Civil Defence Services. That figure of £32,000,000 does not, of course, include the cost of the post-war credits which are being built up for the Forces and for whole-time Civil Defence workers.

Available Resources

Let us now look at the resources available to meet this expenditure of £5,286,000,000. Foreign disinvestment, including substantial growth in the sterling balances of oversea countries, together with the Canadian Government's contribution, I consider likely to reduce the figure to £4,500,000,000, which I put forward as the true figure of expenditure requiring domestic finance. This compares with £3,800,000,000 in the calendar year 1941, and £2,600,000,000 in 1940, so that I am anticipating in this financial year a further increase in such expenditure of £700,000,000 over the calendar year 1941 and of no less than £1,900,000,000 over 1940. I am proposing to ask the Committee in what follows for new revenue which will raise the total of domestic receipts in this year to £2,400,000,000. Subtracting this sum from the total of £4,500,000,000 for which domestic finance is required, I am left with £2,100,000,000 to be derived from extra-Budgetary funds and the other sources to which I have previously referred, including company depreciation and sinking funds and personal and institutional savings, compared with about £2,000,000,000 in the calendar year 1941.

I am hopeful that this may be realised without an undue draft on the stocks remaining in private hands. Further restrictions on replacements and repairs for private purposes should increase the available surplus from depreciation and sinking funds, and the recent progress of the Savings Campaign leads to a justifiable belief that savings in 1941 were still appreciably below the peak which we can attain. I should like at this point to stress once more the invaluable work which the National Savings Movement has been doing ever since the early days of the war. It has raised no less than £1,400,000,000 in small savings, and to it is due no small part of the credit for the most gratifying increase in savings during 1941. Like the rest of us, the Savings Movement cannot afford to relax its efforts. Not only must it hold the ground it has gained, but it must go forward, with renewed effort, in the determination to take its full share in the financial offensive. I am sure that the Savings Campaign of 1942–43 will be as fruitful and successful as those which have been such a notable feature in the financial history of the last two and a half years.

Inland Revenue Duties

We have now to consider how to raise the revenue total to £2,400,000,000, and to that end we must first ascertain what we can reasonably expect to be produced by our existing taxes. As regards the Inland Revenue duties, I assume that the yield of Income Tax will be £915,000,000, the increase of £145,000,000 over the past year being due mainly to the effect in a full year of the increased taxation imposed by the Finance Act of last year. I expect Surtax to yield £78,000,000, Death Duties £90,000,000, Stamps £15,000,000, and miscellaneous Inland Revenue duties £1,000,000, these figures being substantially the same as for the past year. With the great expansion in war production and with the process of assessing and collecting Excess Profits Tax in full operation, I anticipate a big growth in the yield of that tax, and, looking at the high return of last year and the present trends, I estimate that the yield for the current financial year from this source and from National Defence Contribution will reach £425,000,000. On this basis the figure for Inland Revenue Duties as a whole is £1,524,000,000. This allows for the effect of the deferment by one month of the collection of Income Tax from wage-earners.

Customs and Excise Revenue

In estimating for Customs and Excise revenue, recent experience would seem to show that I can assume a firm demand, and pay regard mainly to the volume of dutiable goods likely to be available for consumption. The Committee will gather from the usual details in the White Paper that in many cases the estimates on the existing basis are put lower than the actual receipts of last year. In general, this is because supplies are expected to be less plentiful, but there are special factors in a few cases to which I should refer to prevent any wrong impression being formed of the actual position. The estimate for tobacco is put at £214,000,000, as against a receipt last year of £221,000,000. This does not signify that there will be less tobacco available to the public; it means that duty-paid stocks were built up a little towards the end of last year. The Import Duties Act estimate shows a fall of £18,000,000, due partly to the removal of duties, on goods and materials predominantly imported for Government use, under the Exemption Orders of last November, and partly to last year's figures including some arrears of duty from previous years. The estimated yield from the Purchase Tax is written down by £18,500,000 on last year's revenue, notwithstanding that the 1941–42 figure, as I have already explained, did not represent a full year's revenue. The smaller revenue is assumed because of limitation of supplies by Board of Trade Orders. The total estimate for Customs and Excise revenue on the existing basis is £645,000,000, which, for the reasons I have just indicated, is £59,000,000 less than what I received last year.

Miscellaneous Revenue

The remaining items of revenue I estimate at £75,000,000. In making this estimate I have included only a nominal sum for receipts from War Damage contributions and premiums. In the same way as last year I propose to bring these to account in the Budget only to the extent required to meet necessary outpayments during the year under this head. The amount of such outpayments cannot, of course, now be forecast.

My total domestic revenue for 1942–43 is therefore £2,244,000,000, or just over £150,000,000 below the revenue target of £2,400,000,000, which I mentioned just now. It will, I think, be apparent to Members of the Committee that whatever I may expect in the way of increased savings in the coming year, I have no course but to look to the taxpayer for further new substantial contributions. This is no academic proposition. The figures which I have given to the Committee are the financial tokens of real events and concrete needs. Apart from any question of revenue there must be further curtailments of civilian consumption, and, in the formulation of the necessary measures, taxation must take its share. In other words, apart from purely financial considerations, the Budget to-day must play its proper part in general Government policy and action.

New Proposals

In the economic sphere the Government will continue, whenever necessary, to extend the controls, the rationing schemes and the various other restrictions upon civilian consumption required to secure the maximum concentration upon the war effort. The policy of stabilisation will also be continued and developed in all possible directions. The Committee will recall that the words which I used a year ago about the Cost-of-Living Index were that we should endeavour to prevent any further rise, apart from minor seasonal changes, above the range of 125 to 130 in terms of the pre-war level. The index at present stands at 29 per cent. above the pre-war figure. With this extremely narrow margin it may happen, therefore, that while new plans are coming into operation there may be some slight increase above the 30 per cent. line. Moreover, it must be remembered that in my announcement a year ago, and in the Government White Paper on Price Stabilisation and Industrial Policy, it was emphasised that persistence of a tendency to rising wage rates would compel an abandonment of the stabilisation policy. The Government, who have from time to time carefully considered it, adhere to the policy set out in the White Paper, and it is my duty today to repeat the warning that increases in wage rates will defeat their own object unless they are regulated in a manner which makes it possible to keep prices and inflationary tendencies under control. Subject to that necessary condition, I mean to continue the stabilisation policy which has been so fruitful of good results and could not lightly be abandoned. Broadly speaking, it will be my object to hold the Cost-of-Living Index in this coming year within the range I spoke of a year ago.

Utility Clothing

This is a convenient moment to describe a new proposal which I have to make. My right hon. Friend the President of the Board of Trade is bringing on the market, progressively, clothing described as "utility" clothing, which is marked and subject to price controls at all stages. This clothing not only gives goods of proper quality at a reasonable price but, not less important, achieves economy in materials and in the processes of manufacture, thereby easing the strain upon labour and factory space. It is our deliberate intention, on grounds of the widest national interest, to encourage the production of this clothing for essential needs. This is such an important part of our whole policy that I believe it to be my duty to support it by such means as are in my power. I propose, therefore, to exempt from the Purchase Tax all such utility cloth and clothing made under the conditions prescribed by the Board of Trade. This will not come into operation immediately, for the clothing is not being produced as yet in sufficient quantity to cater for the irreducible public demand. I have, however, agreed with my right hon. Friend that, subject to the approval of the House of Commons, a Treasury Order will be made in due course for the purpose of exempting such clothing from the Purchase Tax early in September next. A similar concession will be given for boots and shoes at a later date, when supplies of utility types are coming forward in adequate volume. These concessions, which will be of real benefit to many of our people will cost about £15,000,000 a year when in full operation, but for the current financial year I place the loss of revenue at £10,000,000.

Direct Taxation

As I have said, taxation must play its part in this battle against inflation, and from the figures which I gave to the Committee I deduce that I must raise new revenue which, measured in terms of money, will produce something of the order of £150,000,000. I deliberately use the phrase "measured in terms of money" to emphasise that my object is not simply the raising of money to finance the war or any particular percentage of its cost. Important though that is, it is also a paramount duty to use the weapon of taxation as an aid to the other methods of reducing civilian consumption in all but the most essential directions.

I am clear that on this occasion I cannot look to direct taxation. The Committee will have noticed that I expect to receive in the new financial year no less than £993,000,000 from Income and Surtax. This is to be compared with receipts under those same heads of £398,500,000 in the last full financial year before the war, of £460,000,000 in 1939–40, and of £600,000,000 in 1940–41. A year ago I rounded off a series of Budgets which, in the space of less than 20 months, had raised the rate of Income Tax from 5s. 6d. to 10s., had lifted the maximum rate of tax on the highest incomes from 14s. 6d. to 19s. 6d., and by reducing various allowances had brought nearly 4,000,000 new taxpayers within the Income Tax sphere. The last series of imposts and the widening of the area of taxation are too recent for me to contemplate further exactions at the moment. The weight of the last Budget is only now being borne in its full severity.

If there is still in any quarter a belief that the solution of these problems lies in the further taxation of the incomes of the rich, I would invite a study of the Table printed as Table F in the Preamble to the Statistical White Paper. This Table shows, among other things, that after charging Income Tax and Surtax the total of personal incomes of £2,000 and over per annum is now £213,000,000, whereas the total of personal incomes below £500 is £4,125,000,000. If we were to take away every penny of income above £2,000 from those whose incomes at present exceed £2,000 per annum, the gain to the Exchequer and the decrease in current purchasing power would be about £30,000,000. The fact is that to-day personal incomes below £500 represent nearly 85 per cent. of all personal incomes after payment of Income Tax and Surtax. I stress these figures in order to show where the bulk of the national purchasing power now lies, and to deal with any suggestions that the financial—[ Interruption .]

Order. Certain hon. Members are exceeding their allowance of running comment.

I stress these figures to show where the bulk of the national purchasing power now lies, and to deal with any suggestion that the financial claims made by the war can be met from the incomes of the rich.

Direct taxation is, moreover, subject to the disadvantage that it comes only slowly into operation, and that it is not until many months after the Budget that its effect is at all widely felt. I must, therefore, turn to those articles in common consumption which lend themselves to my purpose without in any way requiring me to impinge upon war-time necessities of life. There are a small number of important Customs and Excise taxes which for years have stood up to any strain put upon them, and which are at present proving very lucrative. Moreover, they are largely taxes upon commodities where the present supply is not equal to the demand, and where it would be entirely wrong to provide additional shipping space or to deflect labour from more important war needs to bring the supply up to-the full demand. They are commodities which a very large number of people desire and enjoy, but I must help, through taxation, my colleagues who are trying to keep demand and supply in better equilibrium. As the Committee will have guessed by now, the Customs and Excise taxes to which I propose that additions should now be made include those on beer, spirits, wines, tobacco and entertainments.

Beer, Spirits and Wines

On beer, the consumption of which is increasing, and upon which we spent some £330,000,000 last year, I propose an increase in duty which I anticipate will mean an increase of 2d. a pint on beer of average gravity, with something more on beers of higher gravity. The increase will date as from to-morrow, and I estimate that it will bring me in £48,000,000 in a full year and £42,000,000 this year. On spirits, I propose an addition of £2 per proof gallon, equivalent to 4s. 8d. per bottle of whisky, counting six to the gallon and at a strength of 30 degrees under proof. This increase in duty also dates from to-morrow, and is estimated to yield £15,000,000 in a full year and £14,000,000 this year. I must also deal with wines. Imports are practically prohibited, stocks are daily getting shorter, and prices have rocketed out of all reason. To the existing basic duties of 8s. per gallon on foreign and 6s. per gallon on Empire light wines, I propose to add another 6s. per gallon. The corresponding duties of 16s. per gallon on foreign, and 12s. on Empire, heavy or sweet wines, will be increased by a further 12s. per gallon, with consequential increases on sparkling wines and still wines in bottle. Empire wines will preserve the existing amounts of preference, and corresponding additions will be made to the duties on British wines. The details will be set out in the White Paper. The changes will date from to-morrow, and are estimated to produce £2,000,000 this year and a little more in a full year.

Tobacco

As regards tobacco, I propose to increase the duty by 10s. per 1b., which, I understand, will mean an extra 6½d. to 7½d. an ounce, according to the quality of the tobacco, and an extra 3d. on the ordinary packet of 10 cigarettes now selling at 9d., and 2½d. on the packet now selling at 6½d. There will be a corresponding increase in the duties on cigars, and the full rate of duty on imported cigars will be raised from 28s. 1d. to 38s. 1d. per 1b. The consumption of tobacco is at present higher than it was in the year before the war, and the current level of expenditure is estimated to be of the order of £340,000,000 a year. More people have begun to smoke, and it seems that those who smoked before are now smoking more. The proposed increase of duty will take effect from to-morrow.

As regards members of the Navy, the Army, and the Air Force, and their associated Women's Services in this country, I am arranging that the cigarettes and tobacco sold to them through the N.A.A.F.I. and certain other recognised canteens for the troops shall continue to be sold at the pre-Budget prices. This will have effect to-morrow in respect of the N.A.A.F.I., and at other canteens as soon as arrangements can be made. The Committee will appreciate that I cannot undertake that members of the Forces shall be able to have unlimited quantities at pre-Budget prices, and, therefore, the total amount of cigarettes and tobacco allocated to these canteens will not be increased; but it is intended that the arrangements I have mentioned should aim at a more even distribution among the troops.

The gross gain to the Revenue from the proposed increase in the duty is put at £90,000,000 a year, including this year. The net gain to the Exchequer will be smaller, of course, by the cost of the concession to the Services. In the public interest, I cannot disclose that figure, because of the deductions which may be drawn as to the size of the Forces.

Entertainments

I also propose to increase the duty on admissions to entertainments. The increase will apply to all entertainments at present liable to duty, and will take the form of doubling the existing rates of duty, with one modification which I shall mention. Nearly 90 per cent. of the existing revenue from Entertainments Duty comes from attendances at the cinemas, and at present admissions to cinemas are estimated to be of the order of 1,400,000,000 a year. Over 90 per cent. of admissions to cinemas and other full-duty entertainments are to seats whose present price, inclusive of the existing duty, does not exceed 1s. 6d. I do not profess to understand all the various gradations which determine the price of the seat that a cinema patron prefers, but it is a fact that practically one-quarter of all attendances at cinemas are to seats at a present price of 1s. 2d. What would be regarded as the expensive seats at cinemas give me very little money. The present duty on the popular seat of 1s. 2d. is 3d.; it will now be 6d., and the cinema proprietors will make such adjustments in the price as appear to them appropriate. The 9d. seat, which is the next most popular, at present carries a duty of 1¼d. In future, it will carry a duty of 2½d. At the other end of the scale, a stall at a living theatre, costing 10s. 6d., at present pays a duty of 1s. 8d.; it will pay in future 3s. 4d. A guinea seat in the grandstand at a race meeting pays 5s. 3d.; it will pay 10s. 6d., and a two-guinea ringside seat at a boxing tournament will pay £1 1s. 2d. instead of 10s. 7d.

As I have told the Committee, I propose to apply this increase of doubling the present duty to all dutiable entertainments. The reduced duty paid by the living theatre will be doubled, but this will not affect the proportion it bears to the full duty. I mentioned that there was one modification in the principle of doubling the duty. I propose to leave seats whose present price inclusive of present duty does not exceed 7d., with their existing rate of duty. This means, for example, that the 7d. seat at a cinema will continue at its present rate of duty of ¾d. These changes will take effect as from 10th May and are estimated to yield £14,000,000 in a full year and £12,000,000 this year.

Luxury Expenditure

In addition to the imposition of these increases in the staple Customs and Excise duties, I must take a broader sweep in order to deal, more severely than at present, with expenditure on luxuries and non-essential goods. I propose substantially to increase the existing rates of tax in a range of articles, the purchase of which, however pleasant, cannot be regarded as essential in the conditions under which we live to-day. Full details of my proposals will be set out in the White Paper, but, as illustrations of what I propose, I would say that these increases will apply to silk dresses, silk or brocade fabrics, fur coats, ornaments such as vases and china figures, cut glass, hair-waving and hair-drying appliances, electric shavers, trunks and bags if made of leather or hide, musical instruments and gramophone records but not wireless sets, clocks and watches if made of platinum, gold, silver, or gold plate, jewellery and imitation jewellery, toilet articles, such as flapjacks and vanity cases, perfumery and cosmetics.

The actual machinery for this increase lies ready to hand because the articles in question form a part of those which are at present liable to tax under the Purchase Tax at the rate of 33 1–3rd per cent. of the wholesale value. My proposal involves the doubling of the existing tax, and, therefore, the introduction of tax at the rate of 66 2–3rds of the wholesale value of the articles of the kind which I have enumerated. I know that there are some who object to the Purchase Tax in principle, but I do not think that anyone can object in present circumstances to further taxation on articles such as those which I have mentioned.

In order to prevent forestalling, these increases will apply to all such taxable goods delivered from to-morrow, and registered traders will be liable to pay the increased tax. Their right to adjust contracts accordingly, which is already in the law, will be made retrospective. From these changes I expect an increase in the yield of the Purchase Tax of some £10,000,000. After making allowance for the cumulative effect of the restriction of supplies and the abolition of the tax on utility clothing and boots and shoes, the Purchase Tax should yield during this financial year about £80,000,000.

Summary

This completes my taxation proposals for the year. From the additional taxation, including £3,000,000 from the alteration in farmers' Income Tax, I expect to obtain £173,000,000 this year and £186,000,000 in a lull year. After allowing £15,000,000 for the cost of the removal of tax from utility clothing and boots and shoes and of the increased Income Tax allowance for married women, I can now put my domestic revenue for the new financial year at £2,402,000,000, which means that of the figure of £4,500,000,000 for expenditure requiring domestic finance, I am aiming to obtain no less than 53 per cent. in the form of taxation and other domestic revenue.

The general picture is therefore that towards £4,500,000,000 for expenditure requiring domestic finance, I expect to obtain £2,400,000,000 in revenue and £2,100,000,000 from savings and other sources, the latter figure being no more than £100,000,000 greater than the actual result under these heads for the calendar year 1941. When regard is paid to the higher level of Government expenditure and to the consequent increase in national income, as well as to the unceasing development of restrictions on civilian consumption, I am hopeful that there will be an increased assistance from savings which will reduce the drain on privately-owned stocks well below the figure for 1941.

I feel, therefore, that I can claim with some confidence that my proposals will enable us to continue to maintain our financial stability and social security throughout the coming year. The increases in tax which I have proposed are indeed essential for the prosecution of the war and for that firmly held financial and economic front which is to the benefit of all sections of our people. I am convinced that it is in that spirit that they will be accepted and willingly borne, and I commend them to the Committee as yet another vital contribution to the victory of the United Nations.

Customs and Excise

Beer (Excise)

Resolved,

"That, on and after the fifteenth day of April, nineteen hundred and forty-two, the duty of Excise charged in respect of beer under Section one of the Finance (No. 2) Act, 1939, shall be charged at the following increased rates:—

and so in proportion for any less number of gallons;

and, in the case of beer in respect of which it is shown to the satisfaction of the Commissioners of Customs and Excise that duty at the foregoing increased rates has been paid, the excise drawback allowed under that section shall be allowed at the following increased rates:—

and so in proportion for any less number of gallons:

Provided that, as respect beer the worts whereof were, before fermentation, of a specific gravity of less than 1,027 degrees, the amount of drawback allowable shall not exceed by more than twopence for every 36 gallons the amount of duty which is shown as aforesaid to have been paid.

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

Beer (Customs)

Resolved,

"That, on and after the fifteenth day of April, nineteen hundred and forty-two, the duty of Customs charged in respect of beer under Section one of the Finance (No. 2) Act, 1939, shall be charged at the following increased rates:—

and so in proportion for any less number of gallons;

and in the case of beer in respect of which it is shown to the satisfaction of the Commissioners of Customs and Excise that duty at the foregoing increased rates has been paid, the Customs drawback allowed under that section shall be allowed at the following increased rates:—

and so in proportion for any less number of gallons:

Provided that, as respects beer the worts whereof were, before fermentation, of a specific gravity of less than 1,027 degrees, the amount of drawback allowable shall not exceed the amount of duty which is shown as aforesaid to have been paid, less threepence for every 36 gallons.

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

Spirits (Excise)

Resolved,

"That, as from the fifteenth day of April, nineteen hundred and forty-two, the rate of the duty of Excise charged on spirits by Section three of the Finance Act, 1920, in addition to the duties specified in Part III of the First Schedule to that Act, shall be increased to six pounds, seventeen shillings and sixpence per gallon computed at proof.

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

Spirits (Customs)

Resolved,

"That, as from the fifteenth day of April, nineteen hundred and forty-two, the duties of Customs charged on spirits of the descriptions set out in the first column of the following Table by Section three of the Finance Act, 1020, in addition to the duties specified in Part II of the First Schedule to that Act, shall—

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

In accordance with the usual custom on these occasions, I do not propose to make a long speech, but I think we ought, in the first instance, to congratulate my right hon. Friend the Chancellor of the Exchequer on his physical prowess. One is tempted to say, "Never was so much said by so little." I have listened to many speeches by Chancellors of the Exchequer, but never have I known one more skilfully or artfully introduced than the speech of my right hon. Friend, who has a great capacity for creating a comfortable feeling in one's inside without any real cause for it. He proved however—at least to my satisfaction, and I hope to the satisfaction of the Axis Powers—that we are a long way off financial ruin. That, I think, stands out beyond everything. He is still raising a very substantial proportion of his revenue from taxation, which is right. He is trying to defend those who—as they would say—used to be rich, and he has planted on the consumer a very heavy burden of new indirect taxation. It was at that stage in his speech that one felt a breath of bleak austerity pass through the Committee. We ought in these times to tax luxuries, and, speaking as a consumer of some of the commodities in question, I am perfectly prepared to bear my part of the burden. Some of us on these benches spend a little less and some a little more on cigarettes, but for myself I do not consume or wear some of the fancy goods which have been mentioned.

This, of course, is not the normal time for any elaborate analysis of the Budget, or for an assessment of the implications of the new proposals. That time will come at a later stage. I can say, however, that provided the people really feel that an honest and a ruthless attempt is being made to deal with the black marketeers and kill wasteful spending, and to mobilise our industrial resources to the maximum of efficiency, then I am satisfied the country will carry with cheerfulness and hopefulness the burdens which my right hon. Friend proposes.

I should like to add my words of sincere congratulation to my right hon. Friend on the way in which he faced a task, which, even in ordinary times, is a very great ordeal. In this case, owing to the complex nature of the problem and the intricacies of the figures, it was particularly difficult to make the Budget statement attractive, but for 2¼ hours my right hon. Friend has managed to hold the Committee without any of its members going to sleep, and that is a great achievement. My right hon. Friend gave us a very good picture of the financial position, and I am sure he is right in giving us not merely the figures relating to the Budget of the year, but in painting a picture in broader colours, as he did last year, and giving us the general financial position of the country. These figures are a record. They are a remarkable record, showing the strength, vitality and durability of the country. The people have gone through a very great ordeal during the last few months, and have carried immense financial burdens without undue discomfort. I believe that the nation will carry these big burdens more or less—and I say more or less because there is bound to be criticism—without undue discomfort.

It is remarkable that, although everyone knew that these figures would be a record, there has been very little anticipation or excitement about the Budget. In ordinary times, for days before the Budget there has been speculation in anticipation of new taxes. Those who have studied the daily Press during the last week will have seen practically no reference to the Budget, except the fact that we were to deal with it this week. Even in this morning's papers very little interest was shown in the subject. The fact is that the nation thinks much more about coupons and points and much less in terms of money. That is all to the good. The nation is prepared to sacrifice almost everything in order to secure victory. It is significant that, for the first time, the Chancellor is not a member of the War Cabinet. I do not suppose he objects to that, because his hands are full in carrying on the duties of his important office. It is also significant that his place in the War Cabinet has been taken by the Minister of Production. It shows that we have to think far less about L.S.D. and much more, as my right hon. Friend pointed out, in terms of man-power, material and food. Money has now become very little more than a measuring rod.

I know that my right hon. Friend will have to face the old controversy of the relationship between direct and indirect taxation. I think that he has made his case. I find that in 1913–1914 direct taxation was 47.8, and indirect taxation 52.2. Last year the position was reversed, direct taxation being 61.4 and indirect taxation only 38.6. I do not know what the relationship is now, and perhaps my right hon. Friend will give us the percentages at some later stage. It may be that we are a little upset by the new taxes on beer and tobacco. However, I think they will be generally accepted. The real trouble is to get drink at the present time. One has to be a good "pub crawler" to find it. I see that most licensees are suffering the fate of the tobacconists and are being compelled to put out notices "No beer available." This is due, I suppose, to the fact that the demand is so great. More than ever, the supply will go to the better-paid workers, and that is one of the inevitable criticisms which will be made against the additional duties. Beer and tobacco will really become luxuries, and I am afraid the humble pipe of tobacco will be a very big luxury to the old age pensioner, to the agricultural labourer and the lower-paid worker.

I think however the right hon. Gentleman has made out his case. The great thing I believe is that the proposal will bring in the additional necessary revenue. I am very glad that he has made a valiant attempt—I do not know whether it will be successful—to deal with the problem of the wage earner who is subject to weekly deduction of tax. We shall have to examine the proposals very closely and, if we can improve them, I am sure the right hon. Gentleman will be only too glad to have constructive suggestions. It is a very real problem and he has exercised great ingenuity to try to overcome some of the grievances which exist. The same remark applies to the case of the married women. That is a real problem. It is, undoubtedly, a fact that some women are hesitating—perhaps unpatriotically but, human nature being what it is, inevitably—to go out to work because they feel that, with the extra revenue that they will bring into the household income the family will not be any better off because it will bring them on to a higher level of taxation. I think there is a very strong case for an overhaul of all the machinery of Income Tax. It is a rather difficult thing to suggest in the middle of a war but, with a scale of 10s. in the £1 and so many people being brought within the taxation orbit, I do not think it would be unprofitable during the next twelve months, to see whether some improvement cannot be made in the machinery.

Let me give the right hon. Gentleman support for his proposal to make a further attack on luxuries. It is shocking during war-time to find certain sections of the population rushing to the shops to spend money on articles which are quite unnecessary and which come within the province of luxuries. The proposal is thoroughly sound in principle. Only last Saturday I noticed many shops crowded with people buying articles of luxury. I was a little surprised at the extra duty on razor blades. [ Interruption .] I am glad to be corrected, and to hear that it is limited to electric razors and that we shall not all become like Russians as one result of the war. I think the right hon. Gentleman is to be congratulated. It may be—I think it will be—called a humdrum Budget, but it is a sound Budget and it wanted a certain amount of courage on the part of the right hon. Gentleman in conditions of this kind to do the commonplace when he might have been tempted to embark on some thoroughly unsound experiment. I think the Budget will have an easy passage, provided the right hon. Gentleman is always prepared to meet criticism and to allow us to help him to bring his proposals to fruition.

I should like to add my meed of praise to the Chancellor of the Exchequer on having produced what will be remembered as a historic Budget. It is historic in three senses. In the first place it was no mean physical feat. I have heard twenty Budgets and I do not remember one Chancellor of the Exchequer going through his statement without taking refreshment. It must have been that the taxation he was imposing quenched the right hon. Gentleman's own thirst. In the second place the right hon. Gentleman's stewardship will be remembered for this. Although the total sum of taxation imposed upon the public is approaching three times what it was in the Great War, the actual raising of this huge sum is being done at considerably under half the cost, and the right hon. Gentleman will be remembered for his brilliant stewardship of our national finances. In the third place, I think he has shown that he has adequately sensed the mood of the country. Everyone is anxious to pay taxes until it hurts. In these three respects, I should like to tender the congratulations of myself and my colleagues who share these Benches with me. Moreover, the right hon. Gentleman has shown the world, in his brilliant demonstration, that the whole of our financial strength is harnessed to the war effort.

I want as a back-bencher to express my appreciation of the Chancellor of the Exchequer. In 137 minutes he has given us what I should call a colossal Budget, and I have no doubt that by the good will of the Committee he will get it through with very few alterations. The attitude of the Committee means that the great majority have the dominating will to win the war. This Budget will prove another stepping-stone to victory. The right hon. Gentleman mentioned the increase of 29 per cent. in the cost of living and hoped it would not get much more. I should like the Financial Secretary to the Treasury to note that 29 per cent. increase and realise what it means to old-age pensioners, including the handful who are still getting the old rate of pension notwithstanding that what some people would call a moderate increase in the cost of living has taken place. I was opposed to the Purchase Tax but I accepted it, and I accept it now as a war measure. If I were talking to my own constituents, I should say distinctly that it is there to prevent people from purchasing if they can do without purchasing. I hope that we Members of Parliament will emphasise that side of the question and that the figure of £98,000,000 which the tax is anticipated to yield will be a diminishing quantity. The Chancellor mentioned that £666,000,000 had been received in the financial year 1940–41 from certain classes of savings and that in the last financial year these had gone up to something like £900,000,000. We leave out the odd millions in these days. I noticed that he mentioned Death Duties as part of savings, but I should say that these savings are most involuntary. I do not wish anybody any ill, but I hope that Death Duties will keep up, although I wish that we could get them without people passing out of this vale of tears.

The Chancellor also mentioned the stabilisation of prices, and the Committee can congratulate itself in its almost unanimous agreement on subsidies, especially for articles of food, which have prevented the spiral becoming ultimately vicious. As we Members of Parliament have given the lead to the Chancellor to bring in this Budget it gives us great satisfaction, and I trust it will put the fear of the Lord into the Axis Powers. Its real meaning, which we shall emphasise to our constituents, is that it is not a sign of being unpatriotic if we spend less. Knowing how the Income Tax on Members' salaries has increased, one Member, in viewing beforehand what the Chancellor might say, said he wished the right hon. Gentleman would give him the tax and keep the rest of the salary. I believe some citizens think that we Members of Parliament have, as they put it, got a good thing, but I take this opportunity of saying that while the salary has been static, one cannot say that about the taxes. We pay them gladly, however, and are even ready to swallow more pills if we can be purged properly.

There is a matter which the Chancellor has not mentioned, but which is of great interest to those communities which have been heavily bombed. I would like to ask the Financial Secretary how great communities like Hull and Coventry are to meet the costs of reconstruction. I believe that Coventry has presented to the Government a reconstruction scheme costing £40,000,000. I am afraid to conjecture what the Hull scheme of reconstruction will be when I go round the constituency and see the 100,000 or so houses that have been destroyed or damaged. I suggest that the Chancellor should create a financial pool so that the poorer corporations will be able to feel that they can reconstruct their communities on sound lines. I congratulate the Chancellor on the Budget, although he may not care tuppence about the good wishes of a backbencher; but there are many people who would rather have the good opinion of the office boy than that of the cashier. I also congratulate the Financial Secretary to the Treasury, for I am certain he has done a good deal of devilling in connection with the Budget. We always look upon him as the man who does the picking and shovelling. I shall give him my support in this Budget, in common with the great majority of the community, who are with the Government and whose only concern is that we should alter the name of the Prime Minister from the Minister of Defence to the Minister of Offence.

I think that we can all congratulate the Chancellor upon his Budget with a few reservations. The phenomenal figures which he mentioned—fantastic figures when compared with 1913, when the total Budget was about £280,000,000—bring the Budget to-day to nearly £5,000,000,000. The question is whether we can avoid inflation owing to these fantastic figures. We have begun inflation already, and if it were not for the United States we should have severe inflation at the present time. One thing for which we ought to be grateful to the United States is the way in which they have stabilised our pound in comparison with the dollar. If there were a free market, the pound to-day, instead of being worth 16s. or 18s., would not have been worth more than 8s., and probably not more than 6s.

There are certain exceptions which should be taken to the Budget. I cannot understand why the Chancellor has left the taxation of cider alone. Cider contains just as much alcohol as, in fact more than, ordinary common beer, and yet it goes entirely untaxed. If we have a large apple crop this year, we shall find people going off beer and on to cider, and they will get a greater kick out of it than out of beer. Again, beer is the most highly taxed article in the Budget. With the new increase of taxation it will cost about 14 times what it did in 1913. The taxation was then 7s. 9d. a barrel, and the price was 1½d. to 2d. a pint. There is another aspect to this question. The working man's drink is beer. It is not only his drink, but partly his food, and if he finds that he cannot afford to indulge in his favourite beverage he will demand a higher wage in order that he can continue to consume the moderate quantity he is used to. The increased tax on wines is immaterial for very little wine is being imported or drunk. Prices are high, and there is not the wine to be obtained. I do not drink whisky—I am a beer drinker—but I feel that the taxation falls very hardly on old people with small incomes who in years gone by have been used to having a tot of whisky at night before going to bed. Now it is beyond their means. I do not think the extra tax will bring in much revenue.

I appreciate that the Chancellor has two objects in view. He wants to reduce consumption and at the same time not to lose revenue. One can appreciate that, but one has also to appreciate that there is a certain demand among a large number of the community for refreshments of an alcoholic character, and we have to meet it. The question again comes in, How can we do that without acting contrary to the national interest? I have nothing more to say except that I am confident that what has been done with regard to the Income Tax, as it affects not only the ordinary Income Tax payer but also the worker, will be received with every satisfaction. I think the worker is quite prepared to pay his Income Tax, but it is the case that he frequently cannot pay a high amount in one sum, and if the payment can be arranged in a manner which makes it easier for him to pay, I do not think there will be any dissatisfaction.

It used to be the practice on Budget day for the Committee to adjourn after a few complimentary remarks had been made. I think that was a mistake. This is one of the few occasions when a large number of back bench Members have an opportunity of expressing their views, instead of its being left to the "big wigs" to make speeches, sometimes not too important ones, on the following days. No back bencher has a right to grumble if he does not get an opportunity to speak when he does not seize such opportunities as are available. Therefore, any impatience there may be because the Committee is still sitting will, I hope, be dismissed. This place exists for the purpose of debate, and hon. Members should not throw away their opportunities. I say that because I noticed that my very great Friend the Financial Secretary to the Treasury looked a little distressed when he saw so many hon. Members anxious to take part in the Debate. We can ail congratulate the Chancellor on a very considerable human effort. Personally, I think the human effort ought to be cut. It is a bad practice for the Chancellor—I am not blaming the present Chancellor, because he inherited this custom—to indulge in a long review about the past. Much of that would be very much better printed, and he could devote the bulk of his speech to his new proposals. The present practice is a very heavy burden upon him, and is a considerable burden upon his audience. It is difficult to listen for two and a half hours to a string of statistics. We do not grasp them. As I say, I am not blaming the Chancellor, but I would encourage him to throw over that bad practice, and if there are difficulties about the time at which his new proposals can be announced, they could easily be remedied by our meeting at the appropriate hour on Budget day. We ought to be willing to adapt ourselves to changed circumstances.

The Chancellor has introduced the greatest Budget on record. I think I am right in saying that this Budget far exceeds any Budget of the war of 1914–18, and if my memory is right, the price level in the last year of that war was above the present price level. This war is costing us at this moment far more than the last war was costing in its fourth year, which is a very serious consideration. In relation to the Forces enlisted, we have not yet, in the main, started to use our instruments of war. Broadly speaking, nine-tenths of the Army have not been engaged anywhere. At this stage in the last war the British Army had been engaged in enormous operations. Therefore, we have the extraordinary position that apparently we are spending far more now than in 1918 with very much less in the way of military effort, and I wonder whether we are getting good value for the money. That is one consideration to which I would direct the attention of the Committee. The outstanding achievement of the present Chancellor and his predecessor is cheap borrowing. That is due to the lesson learned from the last war. It will be remembered that in the last war we started raising money by having big loans intermittently, and then, after a good many people—I believe that I was, indirectly, one of them—had urged the desirability of continuous borrowing, the method of continuous borrowing was ultimately adopted. The method of continuous borrowing was adopted in this war practically from the beginning, and we have been borrowing at 3 per cent., whereas at one time in the last war we were up to 6 per cent. The result is that the post-war burden will be much lighter than would otherwise have been the case, and I think that the Chancellor and his advisers, and his predecessor, are entitled to all credit for that.

But, of course, there is one section of the community—in fact, the whole community, so far as they are buyers—for whom the rate of interest is abnormally high. The man who buys a National Savings Certificate gets 3 per cent. free of tax, which means 6 per cent. if he is liable to Income Tax at 10s. in the £, while if he is a Surtax payer he is getting in respect of the small amount which he can invest in Savings Certificates—the limit is 500—a rate of interest which is theoretically astronomical. I wonder whether we are justified in allowing one section of the community to get 3 per cent. free of tax for the money they lend to the Government, whereas money which is lent in any other form gets roughly 3 per cent. subject to tax. If we are to pursue a policy of borrowing cheaply, we ought to apply it to all our borrowing.

I think we were all glad to hear the statement of the Chancellor about postwar credits, both as regards the Income Tax and Excess Profits Tax. There has been an element of doubt whether there was any reality about this offer. I will not comment in detail upon what the Chancellor said until I have had the opportunity of reading it, but it is clear that in both instances people will now have documentary evidence that they possess something. The only limitation is that they cannot turn it into purchasing power during the war, but they will have a title, which will be of very considerable value, and I think that will help greatly. I do not know what will be said later about Excess Profits Tax, but I am satisfied, as I have said before, that it is a cause of great waste. It creates abuses, and it is a restriction upon efficiency. No Member of this House can deny that statement now, because we have the E.P.T. principle applied to another lot of people, at the rate of 50 per cent., and they are the overtime workers. My hon. Friend the Member for Leigh (Mr. Tinker), my hon. Friend the Member for Dumbarton Burghs (Mr. Kirkwood) and my hon. Friend the Member for Stoke-on-Trent (Mr. Ellis Smith), who are a trio on this subject, have denounced the system under which people who earn overtime may be taxed upon it. They do not like them to have to pay E.P.T. at the rate of 50 per cent. on their wages. They are getting some insight into the reactions of E.P.T., upon whomsoever it falls, and that is a very good educative process. They will learn quite a lot in time. [An HON. MEMBER: "You are making a nice schoolmaster."] I am not the schoolmaster; it is Income Tax which is the schoolmaster. It is a splendid tax when other people are paying it. It is like criticising vested interests when they are somebody's else interests and not your own.

Coming back to the question of expenditure, are we getting value for money? I am certain that we are not, and I propose to indicate what I believe is a major cause of waste. In the emotion which was aroused by our obvious peril at the time of Dunkirk, the Government cancelled a bank holiday. I remember remarking to my wife, who differed from me, that it was a great mistake to do so. She said, "Think of the effect on the people of France." I was not thinking of France, but was thinking of the effect upon production in this country. Then we started inducing people to work on Sundays and Saturday afternoons, in defiance of every lesson we learned during the last war. In the reports of the Health of Munition Workers Committee, many extracts from which were incorporated in the Report of the Select Committee on National Expenditure, and from the sub-committee over which I had the honour at that time to preside, it was shown conclusively that long hours produced nothing extra. All that we have been doing has been to pay 20 per cent. more for our munitions without getting any more of them—probably getting less. Of course, our overtime friends, hon. Gentlemen who represent the overtime workers, have been indignant, because their workers have had to pay taxes on six days' pay for about five days' output.

I have had many opportunities of looking into this matter. There are factories, with absenteeism ranging up to 25 per cent., working hours which bring about this situation, and in some cases paying double rates during the extra hours which are worked. I am going to say that we have wasted hundreds of millions of pounds in that way, as a result of the "Go to it" campaign which was started after Dunkirk. I have listened to hon. Members on the Labour benches supporting the Washington Hours Convention, which I resisted because I thought it was too rigid; but I have never believed in long hours of work. The supporters of excessive overtime are to be found to-day in the Labour party. [HON. MEMBERS: "No" and "Nonsense."] All right. Just go round and find out what the reaction is. Some hon. Members seem to think they represent everybody who works for his living, but they represent far fewer than I do. I say it is common knowledge throughout the country that there is now a vested interest in Sunday work and in overtime which is of no national advantage. In a Sunday paper I saw an indignant protest from shipyard workers on the South coast because they had not been allowed to work on Sunday.

The hon. Member is dealing with matters of Supply now, which it is not in Order to do in Committee of Ways and Means discussing the Budget proposals.

I am sorry, Colonel Clifton Brown. I am the last person to desire to be out of Order. I have always taken the view that Budget discussions on the Motion now before the Committee gave us a measure of freedom to review the purpose for which the money was wanted. Naturally, I will not pursue the point any further, except to observe that in many cases ex-Chancellors of the Exchequer have spent a great deal of time reviewing the whole method by which the money was expended. Indeed, this is the only opportunity in the year for us to do so. One of the tragedies of our system here is that we never have a Supply Debate but only a grievances Debate. The theory of Supply Days is that the Commons ventilate their grievances before they vote Supplies to His Majesty. There is no day devoted solely to our Supply expenditure. That is why I am seeking this opportunity of drawing attention to waste.

I cannot let pass the contention that it is allowable to discuss how the money is to be expended. Supply matters should be discussed in connection with Votes of Supply, and not upon Motions in Committee of Ways and Means in relation to the Finance Bill.

This issue affects the Ministry of Supply, the Ministry of Production, the First Lord of the Admiralty, the Air Ministry, the War Office, the Board of Trade and other Departments, but on no occasion in the Parliamentary year is there the possibility of raising questions which arise out of the decisions of seven or eight Departments. That is why I have raised the issue. I will not press the matter any further, but I should be grateful, Colonel Clifton Brown, if you would examine the problem of what opportunity a Member has of raising fundamental questions on matters which impose expenditure which renders necessary, in turn, the gigantic burdens proposed to be imposed on us to-day. I will get away from that subject now.

One interesting matter of detail arises in connection with post-war credits. People are to have a certificate. They are to be relieved of the fear that their postwar credits can be seized to defray arrears of Income Tax in which they may be involved. The Chancellor said that that would be all right, and the moment he said it a Member sitting near to me observed that that was rather dangerous, because we were apparently to freeze one of the assets to which a Collector of Taxes can have recourse for the payment of taxes. Are we to put people in the privileged position that one of their assets cannot be used for the payment of taxation? I am certain that the Chancellor of the Exchequer has not that result in mind, and I should be grateful if the point could be cleared up later in the Debate. Obviously you cannot freeze one item of a person's assets and say that it is not to be used.

Personally, I do not think we have yet properly faced the Income Tax problem as it relates to weekly wages. It is a major issue. We are suddenly taxing people in arrear. In the ordinary way, a man makes out his return round about May and gets an assessment some time in the autumn. He knows that on 1st January he will be called upon to pay a certain sum, and a similar sum on 1st July, and he makes his arrangements accordingly. All that is rather difficult to the weekly wage earner, who, in the main, lives on a weekly basis. When it was decided to extend the Income Tax to weekly wage-earners, immediate steps ought to have been taken for weekly deductions, so that arrears would not arise. Now there are people who are six months or nine months in arrear; that is to say, they are paying in respect of income which they received six or nine months ago. It may be all right now and may not matter very much. There is a certain amount of grievance for those whose incomes go down and less for those whose incomes go up.

When the war comes to an end, no matter what flowery speeches may have been made, there will be people thrown out of their existing jobs who will have difficulty in getting back to other jobs. There will be periods of unemployment, and during those periods such people will have heavy debts of Income Tax. What are we to do? If we switch over now, let us face what it will mean. If people are to pay week by week from now on, in respect of their current income, we shall have to forgive them all their past Income Tax. Are we prepared to face that possibility? What will happen at the end of the war? People will fall out of work and may have arrears of tax. The Chancellor of the Exchequer and his agents will not be able to collect those arrears; in other words, the problem will arise whether to forgive people many tens of millions of pounds in arrears of Income Tax. That concession may be extended to manual workers but not to other workers.

It was done after the last war.

All right, but I am trying to point out that the desire to switch over now to current weekly payments is really a proposal to wipe off six or nine months of existing assessments. What is the justification for doing so? It may have to be done anyhow, when the war comes to an end, and it may be worth while doing something which represents a measure of injustice to other people. Ultimately, it may be cheaper for the Chancellor of the Exchequer to overcome his difficulties in that way. Let us know what you mean.

Why cross the bridge before you come to it?

For this reason. At this moment—I am risking the eye of the Chair—we are experiencing a certain measure of restriction of war production through the assessment of Income Tax as it now operates. So it is not a bridge we have not come to. We are already on the bridge now, and let us face up to what is in fact a real issue.

I have taken rather a lot of time, but I have made out my claim to so doing because I think these hours ought to be used for the legitimate purposes of Debate. I do not think back benchers should throw away their opportunities because of a past practice. Now that the Chancellor is back—I hope he will read the nice things I tried to say about him earlier—I want to draw attention to something to which I have referred on three or four recent occasions. On three occasions there has been a leakage of information from the Board of Trade. The first time coupon rationing was introduced there was clearly a leakage. There was a leakage over something to do with coal rationing the other day, and one in connection with clothes. On all those occasions I have drawn attention to it. Now, there is not a single thing, in principle, which the Chancellor has told us to-day about his Budget which I have not already read in the newspapers on Sunday—in principle, not in detail. Virtually everything was in the Sunday Press. (HON. MEMBERS: "That was guessing.") Yes, but they guessed right, virtually over the whole range, in almost every paper. I have looked at half a dozen.

You did not read the "Daily Worker."

There are two very good reasons for that. One is that a distinguished Member of the hon. Gentleman's party has suppressed it, and the other is that it does not come out on Sunday anyhow. There was a degree of successful guessing which I have never previously seen in connection with the Budget. I do not know whether it was thought wise to prepare people's minds for these things, but, quite frankly—and I say it with great sincerity to the Chancellor of the Exchequer—there was an amount of successful speculation which I think was almost the greatest on record.

In connection with the very steep increases in the taxes on beer, spirits, wines, tobacco and cigarettes—and they are very steep—it may be that the Chancellor will find them almost too steep. You can carry people a certain distance at a time, but it is difficult to carry them too far in one jump. He realises, of course, the position of the soldier whose cash income is small. We must not indulge in the silly statement that the soldier gets half-a-crown a day while the workman gets £5 a week; it is a perfectly absurd statement, for the ordinary soldier is really paid at between £3 and £4 a week if you take into account his housing, food and the rest of it. But his cash income is small and is mainly devoted to the purchase of those small things, beer, tobacco, postage stamps, newspapers and other small amenities and semi-luxuries or necessities of life, and because the Chancellor realises that these charges are going to be oppressive to the soldier, he is quite properly trying to avoid their pressing unduly, which would lead naturally to a further demand for an increase in soldiers' pay and play a part in the vicious spiral about which he is concerned and against which he has worked with great success. But you will build up a new black market, however much you restrict supplies. If a soldier is entitled to draw so many cigarettes a week, the non-smoking soldier will do very well from trafficking in them outside. There is already a measure of trafficking outside. It is perfectly well known that the N.A.A.F.I. prices have had to be fixed so that they are similar to the prices in the shops outside. I think it is a most dangerous principle to introduce; I realise the Chancellor's difficulties, but I hope we shall all face up to the problem.

Has not my hon. Friend forgotten the limitation of supplies? Will that not operate?

Precisely, but I am taking the case of the men who does not smoke, but who is entitled to his ration, and who will traffic in it outside. There are a large number who do not smoke, and they will traffic, and others may think it worth while, in order to have more money to buy beer, to sell their cigarettes if they prefer beer to cigarettes. It is a risk we must face.

I am sorry I have taken up rather a lot of time, Colonel Clifton Brown, by going into something which you thought was possibly outside the range of discussion. But, with great respect, if you take the view that on the Budget a discussion over the full range of expenditure is in fact going beyond the limits of Order, then I think in future this House will have to take steps to ensure that at least once or twice a year we can have Debates of which the subject is solely expenditure and its reactions, otherwise the House will be disabled. The idea that we discuss expenditure on Supply is not true; we discuss administrative policy, but we do not discuss expenditure, and therefore I think the fact that I was called to Order does indicate a gap in our Parliamentary procedure which in some way may have to be filled.

I am rather pleased that the hon. Member for South Croydon (Sir H. Williams) spoke first, because I quite agree with his remarks regarding the opportunities for discussing the Financial Statement. The other days are crowded out by Front Bench speakers, and back benchers do not get a chance, yet a day like to-day has always been recognised as an early closing day. I therefore agree entirely with him in his remarks on that subject, but, apart from that, there is very little on which I do agree with him, and I would like to take up some of his points.

One of the things to which I want to draw attention is what the Chancellor termed wage-earners' Income Tax postwar credit. I am glad he dealt with that, but I do not think he went far enough to give confidence to the people who are paying. I have had a letter suggesting that the Chancellor might consider giving these post-war credits in the form of a kind of Savings Certificate—that is, when a man has paid 15s. he becomes entitled to a Savings Certificate to be kept until after the war. That, I think, is a fair proposition. If I may also suggest it, the Savings Certificate should carry interest, as some kind of recognition by the State. If things go badly after the war, and I hope they will not, that will be a reserve for the worker. In any case it is in the hands of the State and belongs to it until such time as repayment has to take place. I hope the Chancellor will consider this aspect of the matter.

I cannot agree with another remark which the Chancellor made, but perhaps he cannot get out of his difficulty in that he belongs to the moneyed class. He attempted to defend the £2,000-a-year income man. He said that if we took all from them, it would only mean a mere £30,000,000. But it is not a question merely, of the money. What is in the minds of the people is the question of equality in time of war. They cannot understand why they are called upon to give all their resources, and be charged with Income Tax, while there should still be £2,000-a-year income people who are not being dealt with more severely than they are being dealt with now. After all, what use would that money be to them if Hitler came over? Why cannot they give all they have now for the purpose of defeating Hitler?

Then you get figures, which the Chancellor has never mentioned in his statement, of the profits being made by the banks. I have taken a number of them: Midland Bank, Ltd., 8 per cent. return of profits; District Bank, Ltd., 18½ per cent. to "A" and "C" shares and 10 per cent. to "B" shares—I do not know what is the difference between the shares; Bank of Scotland, 11 per cent.; Williams Deacon's Bank, Ltd., 12 per cent. on both "A" and "B" shares; and then, the principal one—and this has been going on now for a long time—Bank of England, 12 per cent. In this borrowing of money that comes through the banks we are paying all this time a tremendous rate of interest in profits to these people who are just doing the book-keeping, passing the money from one side to the other. I ask myself, Has not the time come when the Chancellor ought to take over the banks in their entirety, and not allow these people to have this high percentage of profits for what they are doing? I think it is ridiculous to go on like this, and I hope the Chancellor will deal with this matter.

I listened with interest to the Chancellor's statement on stabilisation and prices, as I listened with interest on the last occasion on which he dealt with this topic. I wish that he would cover all kinds of commodities, everything that has to be used in the ordinary course of life. We find that many articles have risen in price tremendously. Let me give one case. At the miners' conference last time, they asked for 10s. a day increase, a pretty tall order. Some of us protested against asking for this, and pointed out that we were trying to keep down the cost of living, but that if wages went up, it would mean a spiral between wages and prices. After the conference one man took me on one side and asked me to talk to him about the cost of living. I tried to show him how we were trying to keep it down in relation to wages. He said, "What about the miners' tools that have to be bought? The price of picks and staves that we have to buy has gone up four or five times." These are articles not controlled by the Chancellor, so far as I can gather. All articles that have to be used by any class of the community will have to be dealt with by the Chancellor if we are to avoid inflation. I hope he will take such action in this respect. If he will do that, he will be entitled to our thanks. So long as the present state of things goes on there will be difficulties. I have been thinking for some time about what inflation is, and this is my simple definition of what inflation means—when wages and income do not represent the real value of the commodities to be bought. Say it costs 1s. to produce an article and there is a 25 per cent. addition for distribution, making its price 1s. 3d., and that article begins to become scarce through the rigging of the market—caused by many people wanting to get hold of it—which takes that price to 2s. 6d. That, to my mind, would be causing inflation because of the depreciation of the value of real income. When articles become scarce and people are trying to get hold of them we get into the old vicious circle if these articles are not controlled. That is going on regularly now. That is what I call causing inflation.

I am asking for all goods and prices to be controlled by the Government; that is, before any price can be increased for any commodity it ought to have Government consent. If it is an article the price of which has, for a justifiable cause, to be increased and it is an article of necessity, the increase above the pre-war standard ought to be met by subsidy from the State. That would prevent inflation, because whatever it cost the State it means a financial stability the cost of which will be borne by us all later on. If this method is adopted, I cannot see how we can go wrong. If the increase were something which we had to pay outside to another nation, there might be a difficulty in preventing what is called financial instability. But so long as it is inside this circle, in our one family, whatever the debt may be which has to be met by the State, I do not see how it can be called inflation or anything like that, because when it comes to be paid it will have to be paid by every individual.

I hope that the Chancellor will go further than he has done during the war period in controlling everything, whatever it may be, even the price of vegetables. The prices now are out of all reason—6d. for a lettuce, to give one example. Everything like that is an article of food that people must have, and yet the prices go up and cause grave discontent among the population. They say to us, "Why do you not control everything?" and we ought to do so. It is our duty to do so. If you do that, you inspire confidence in the people that Parliament is watching their interests. When you put the burden evenly on all, you get a full war effort. Another point I wish to touch on is one on which I had hoped to hear the Chancellor speak. The Chancellor said that in spite of our tremendous burden of taxation, we are still increasing our outlay on the social services. I wondered, when he came to that point, whether he had made up his mind to give something to the old age pensioners. They of all people are getting no recognition. I read an article on 6th April headed "Closer control of tea; new rules to-day." It said: Yet that meal was only a simple one, and it was only one meal. There is not an old age pensioner who, on the present allowance, can afford to go to a British Restaurant. British Restaurants are for the purpose of equalising conditions and giving something more to the household. What would it mean to the State? The present cost of old age pensions, including supplementary pensions and everything else, is £110,000,000 a year; and to-day we have been speaking of a Budget of thousands of millions. What we ask is that the old age pensioner should have—

On a point of Order. Earlier on I was ruled out of Order because I was illustrating, by examples, the methods by which great expenditure was being incurred. I thought that that was the historic method of illustration. The hon. Member for Leigh (Mr. Tinker) is giving examples of how new expenditure could be incurred; I was dealing with past expenditure. I was ruled out of Order, and I suggest that he also is out of Order.

I was not present during ths speech of the hon. Member for South Croydon (Sir H. Williams). I am listening to the hon. Member for Leigh (Mr. Tinker). At present I see no reason to stop him.

If we doubled the present cost of old age pensions, it would mean only another £110,000,000; and we are dealing with a Budget of thousands of millions. We speak of equality. Everybody is making a wholehearted effort to win the war. My plea is that these old men and women, even in a time of stress such as this, are entitled to a share of what we have. The hon. Member for South Croydon (Sir H. Williams) spoke of the post-war period, when, he suggested, there might be unemployment. I would not like to think that we were fighting this war for that to happen. We are fighting for a better world, in which want and unemployment will be things of the past. That is why we all want to win this war.

The hon. Member for Leigh (Mr. Tinker) need have no apprehensions about the old age pensioners so far as the Chancellor of the Exchequer is concerned. The Chancellor was for about 12 years chairman of the Old Age Pensions Committee for the whole of London; so he is not ignorant of their problems. When the Chancellor was addressing the Committee, he used one or two phrases which pleased me very much. One was that "waste and extravagance would be eliminated." There is a good deal of waste and extravagance, and I hope that I shall be in Order in pointing out where it can be eliminated. Before doing so, might I suggest that, since the Chancellor made reference to the very rich man who was paying, in Income Tax and Surtax, to the extent of 19s. 6d. in the £, he should make inquiry as to whether it is not an indisputable fact that if that income is enjoyed from land, as defined under the War Damage Act, the man does not pay 19s. 6d. in the £. He has no option but is compelled to pay 10 per cent. 2s. more under the War Damage Act, which makes it 21s. 6d. in the £, and it just cannot be done. Perhaps the Chancellor of the Exchequer, before the Budget is through, will correct this position. It is obvious that something is wrong.

I want to suggest two or three directions in which extra taxation might be raised. Cyclists are just as patriotic as motorists, and I do not believe that cyclists would object to pay 30s. a year or 2s. 6d. a month or 1d. a day, if a tax were imposed on cycles. The Chancellor would derive a considerable revenue from the 15,000,000 cyclists. There should be an increase in the taxation of dogs, particularly when one considers how they foul our pavements and the nuisance that some dogs are, although I am a lover of dogs in their place. There is room for an additional tax on crests and armorial bearings. At the present moment the man who uses a crest or armorial bearing pays one guinea a year. Why not make it 10 guineas for the privilege? That is what I regard as a luxury tax which might be greatly increased.

The Chancellor of the Exchequer says that there is no unwarrantable interference by the Treasury and that we must avoid wasteful expenditure. Is there any direction in which we have exhorted people more than that of saving paper? Let me give the Chancellor an example, because we are wasting paper, time and labour. Under the War Damage Act the Commission is appointed by the Treasury. The regulations are made or approved by the Treasury, and the Chancellor of the Exchequer is the ruler of the Treasury. What is the general impression of the ordinary men of the Treasury? Here is one description: "The Treasury runs Whitehall. It controls the spending power of every Department. It has the final word in promotion and dismissal. It is the shining example of bureaucratic omnipotence." Can the Chancellor assure us that there is no waste? Let me give him examples of waste. Everybody knows there has been a fair amount of destruction of property in this country and that claims have been made. I naturally may not give information I have acquired in a professional capacity without the consent of the owner. I have the owner's consent here. To affect temporary repairs cost £1,600. What did the War Damage Commission do? They demanded all the receipts and invoices produced by the builder.

I must remind the hon. Member that discussion of the War Damage Commission is not relevant to this Debate.

I obey your Ruling, of course, Sir Dennis, but I was trying to demonstrate that the exercise of economy and the prevention of waste were akin to the principle that a penny saved is a penny earned. If I had been permitted, I should have shown that enormous economies could have been effected. I asked a Question on this matter on 27th January, when the answer showed that the Treasury controlled this body. If we try to get any information from the Financial Secretary, we are treated with a detached and abstract kind of air—

We are not discussing the salary of the Chancellor of the Exchequer.

Is it not in Order to press the Chancellor to exercise economy? If I am in Order, I would like to pursue my argument; I do not mind switching from the War Damage Commission to the Navy, Army or Air Service. I would like your Ruling, Sir Dennis, as to whether I am in Order in advocating economy?

The hon. Member has done that, but the fringes of his argument have gone beyond the bounds of what is relevant.

May I give an ordinary illustration?

I think not. What the hon. Member is trying to do is irrelevant to the subject of this Debate.

In common with everybody else, I am trying to do what I can for the war effort. Let the Chancellor make no mistake. The people of this country are just as resolute, implacable and determined to get what they consider justice as they are to show the whole world that we are unconquerable.

I want to direct a few remarks to the Chancellor of the Exchequer concerning the post-war period. The Chancellor said that if we faced the post-war period with foresight and energy, there would be no need to fear what might develop. The only thing that is wrong with that remark is that nobody can accept it when it comes from those who are incapable of facing the present with foresight and energy. There is nobody in this country, not even the warmest supporter of the Chancellor and the Government, who would accuse them of foresight and energy at the present time. If they cannot show foresight and energy at present, I do not think we can place any faith in what they are likely to do in the post-war period. For instance, I would like to ask the Chancellor of the Exchequer a question that I have asked time and again, and to which I have not been able to get any answer. I ask the Financial Secretary to the Treasury whether he will kindly write these words after me: Do the Chancellor and the Financial Secretary intend to carry the means test into the post-war period, or will they provide money to eliminate the means test in the post-war period? I want an answer to that question.

The hon. Member may not raise that question. I would remind him of one elementary matter: the Budget provides for taxation for the period of the coming year.

The Budget deals not only with taxation for this year, but with finances that are to be carried over to the post-war period, and when the Chancellor carries over finances to the post-war period, he leaves himself open to all kinds of financial queries regarding the post-war period. That is how I feel about the subject. As a matter of fact, the Chancellor spent the greater part of his time in talking about the post-war period. For an hour and a half from the beginning of the Sitting, the Chancellor had to talk to us, not because he had anything to say, but because he had to kill time.

Apparently the hon. Member is questioning my conduct in the Chair.

Not in any circumstances would I question your conduct in the Chair, Sir Dennis. I have very great respect for your conduct in the Chair, but the Chancellor got up at the beginning of the Sitting—you were quite right to call him, and I do not see how you could have avoided calling him—and he could not give us the guts of the matter until after the Stock Exchange had closed. We are in a war, but we could not get the guts of the matter until the Stock Exchange had closed. They are such a gang of no-goods, robbers and looters, that the Chancellor could not possibly let out what was to happen until they had closed. He has so little power over them that he could not close them before he made his speech. What the Chancellor should have said at the beginning was, "I cannot make a statement until the Stock Exchange has closed," and you, Sir Dennis, acting as a good Chairman, might have called upon some of us for a song in the meantime.

The Chancellor and the Government have to create confidence in the minds of the people now, if the people are to be confident in the post-war period. That can only be done by handling the financial affairs of this country in an entirely different way. The Chancellor of the Exchequer apologises for the rich who have now become poor. They say that all the wealthy fellows on this side of the House now have the advantage over the hosts of Toryism. No one takes that view. There is no one in this country who believes all this twaddle of the Chancellor about the wealthy being very poor. Everyone knows that it is all a fake. If the Chancellor of the Exchequer wants to get money, and if he wants to guarantee the post-war period, he should tax all their money and leave them with a moderate amount upon which to live. What more do they want? What is the use of these big incomes and salaries? The Chancellor of the Exchequer knows the use of them, and so do the Tories and the hon. Member for South Croydon (Sir H. Williams). The big salaries and incomes go into loans and investments of one kind or another as a potential power for buying. I would take the potential power away, because that is the only guarantee for the future.

The Chancellor says that there will be credits for the workers after the war, but there are to be credits also for the employers and industrialists. But who is to produce the goods for them? It is the workers who will be expected to produce the goods for their credits, when it comes to the post-war period. The potential buying power is in the hands of the robber gang on the Tory side of this House. They and the people whom they represent will be buying up everything while others are starving. Therefore, if the Chancellor of the Exchequer wants to guarantee the post-war period, he must take away this potential buying power from them, and leave them with incomes which allow for a moderate existence. Let them go before a hardship committee if they do not feel they are left with enough. Why should there be two types of people? It was because there were two types of people that we lost Malaya and Singapore. The Chancellor says, in connection with the Excess Profits Tax, not only that he is going to allow them this that and the other thing, but that he is going to allow for wastage of machinery as a result of working extra shifts. Yet, time and again, the Chancellor has been asked to make an allowance for overtime and to exclude overtime from Income Tax because of the human wastage which is involved.

There is more consideration for machines than men.

That is correct. The hon. Member for South Croydon talked a lot of nonsense. Certainly it is true that a slump sets in if you drive workers day after day, Sunday included, but, when the hon. Member says that you have less production with overtime, he is only talking nonsense. I have worked systematic overtime on many occasions. Systematic overtime which is properly organised gives big results in production, but it means an enormous expenditure of extra energy on the part of the workers. The Chancellor says that he will consider the wastage of machinery because of the extra hours being worked, but he absolutely refuses to consider the wastage of the human frame when workers have to work these extra hours.

Is there any Member of the House who will support the Chancellor in that view? We should have a definite and clear statement that overtime, which represents not only wastage of machinery but of human energy, will be counted, not only on the employers' side from the point of view of wastage of machinery, but also from the point of view of the interest of the worker in regard to relief from Income Tax. One clear indication that there are, at any rate, good intentions on the part of the Government for the post-war period would be for the Chancellor of the Exchequer to provide the money to eliminate immediately and for ever the operation of the means test against the old folks and the dependants of the soldiers.

The Chancellor of the Exchequer is to be congratulated on his Budget. Although we have always looked upon him as one of the more far-seeing politicians, this Budget has not been framed with a view to the next Election, but simply and solely as an instrument to be used in the winning of the war. The Budget of to-day is quite a different thing from the Budget of pre-war days. Our whole outlook on finance is changed. We do not approach it with awe and bated breath, as we did in former times. The day is gone when the chairmen of big banks could take large quantities of space in the daily papers and put their views before us and have them solemnly considered. The Budget, and finance itself, are directed towards the winning of the war. Though the people on whom the Budget will tall are the same people as those of pre-war days, their relation to the Chancellor of the Exchequer is different. Then, they were freer agents than they are at present—free to change their employment, free to raise their prices, free to vary their consumption. That applies to workers and employers also. I feel that the Chancellor is quite right to adhere in the main to the form of Budget that he has already introduced, and not to make any radical change or introduce any new tax at present. I notice with approval his desire that the scale and range of voluntary savings shall be extended. I believe there is still a wide margin in which the savings movement can play a very vital part. The amounts saved vary enormously. They vary from industry to industry, from factory to factory in the same industry and from group of workers to group of workers in the same factory, and it is largely a question of organisation and development to attract those savings.

Some of the minor changes which the Chancellor has made are welcome. The increased allowance in respect of married women in employment will be a good thing and will make it easier for them to take their share in production. I do not see why the Chancellor has thought fit to exempt utility clothing from taxation. I hope that in the speeches to be made from the Treasury Bench during the Debates we shall have some fuller explanation and I shall await with interest the reasons which my right hon. Friends will bring forward. The Chancellor has made some adjustments and easing of the difficulties of the weekly wage-earner, but whether the system will work better in future than during the last few months remains to be seen. It has been a cause of friction, and no sacrifice by the Treasury can be too great if by easing this burden they make it easier for the wage-earner to put forward his maximum effort in war production. After all, the wage-earner who is liable to an Income Tax that appears to him savage, is made up of much the same kind of flesh and blood as the employer who is subject to an Excess Profits Tax which seems savage to him. Therefore, I hope we will be found prepared to make financial sacrifices if, by so doing, we can increase production.

With regard to the extension of the new methods of assessment under Schedule D to the farming community, it is an anomaly that had to be put right that farmers whose rateable value was in excess of £300 should be assessed on a different rate from those whose rateable value was less. I hope that my right hon. Friends will consider whether it is not possible to ease this burden, partly because we want farmers to produce all they can, but even more from a machinery point of view. We are introducing this new method of assessing farming profits at a time when those to whom the farmer is entitled to look for assistance—the land agent, the surveyor, the accountant and the solicitor—are already short-staffed and overworked. If the method of increasing the amount payable under Schedule D can be kept in force for this year with the right for those whose profits are less to pay on disclosed accounts, I think the burden might be made easier for the farmer and the Chancellor might have less difficulty in securing his money. This question of a tax on farming by taxing profits actually made will stand or fall by the fairness or otherwise of the basis of valuation of farming stocks. I am sure that my right hon. Friend the Financial Secretary is fully seized of this, but one has only to take the value of dairy cows in this war and the value of horses at the close of the last war and a short period afterwards, to realise how dangerous and disastrous an ill-considered system of valuation could be and would be to the whole farming community. I feel that the Chancellor should be congratulated on bringing in a Budget which imposes no burdens which are really substantial on those who, by a curtain amount of abstinence and self-sacrifice, are prepared to avoid them, but which, on the other hand, seeks the money where it is most easily found and diverts into savings money which should not be allowed to impede the war effort; and which also, I hope, although I am inclined to doubt it, will be the last of the war Budgets.

Though, like other Members, I must apologise for transgressing the time-honoured custom on Budget day of adjourning after the Chancellor's Statement, I assure the Committee that I shall not keep them very long with my observations. But I think I ought to say how much we congratulate the Chancellor upon his splendid speech, which was in quite good taste, and to thank him and the Financial Secretary for suffering us, if I may use that term, by sitting through this later discussion, because they must have been extremely busy in preparing for the Budget. I also wish to express gratitude to the Chancellor and to the Financial Secretary on points in the Budget which have met some feeling which existed in industrial constituencies like my own. The attempt which is to be made to arrange that Income Tax shall be levied upon the current wages of the workers is all to the good. Repeated suggestions have been made to me in my industrial division that an effort should be made to bring that about, and questions have been put to the Chancellor and suggestions made to him, and we are very happy to find that he is now attempting to secure this end. The Chancellor's statement about the post-war credit is also all to the good. We know that nothing tangible will accrue until after the war is over, but I feel that the workers will be heartened considerably by the statement which has been made.

The allowance in respect of travelling expenses, which will benefit numbers of people, is also a very good point. I represent a division where large numbers of people have to travel considerable distances to places outside to work and I wish that the tax allowance could be extended to include all the travelling expenses of workers in that position. We are also happy to learn that a more simplified form is to be sent out. I also want to give credit for the response which has been made to a suggestion which I put forward some time ago when complaining that constituents who had to go long distances to work found it difficult to find the time to consult local tax officials. Now the Chancellor of the Exchequer has agreed that tax inspectors shall visit works and go into the various Income Tax difficulties of the workers on the spot. There will also be satisfaction in my division, where numbers of women have taken up war work, with the extra allowance in respect of Income Tax on the earnings of the working wife.

One constructive proposal which I wish to put forward is that I hope that before the Budget discussions are over we shall have regard to a definite infliction which is suffered by many scores of the working class. It concerns the Income Tax allowance in respect of children, which stops when the child passes the age of 16 even though the child is not in a position to go to work. I have a letter from one of my constituents in which he says: They do the cleaning and the necessary housework. Surely some consideration should be given to these Income Tax payers by way of rebate.

I join in the appeal that was made by the hon. Member for West Fife (Mr. Gallacher) to the Chancellor of the Exchequer and the Financial Secretary to the Treasury to consider the matter of Income Tax upon overtime wages. In my district, the regularity with which coal mines are now worked, in endeavouring to meet the fuel needs of the nation, entails a considerable amount of overtime, in order to keep going the mechanised form of production. Surely there should be no exaction in the form of taxation on such overtime wages. We have a legal enactment which states that the hours of work in mines should be limited to a certain number, but miners are working extended hours, against that legislation, in endeavouring to keep the machine system of production up to the full 100 per cent. operation and to help the nation. The overtime wages which are entailed by this system are taxed, and that, I think, is unfair. I hope that the Chancellor of the Exchequer will have regard to that position. Miners feel that their increases of wage were given to meet the increase in the cost of living and that there should not be Income Tax on wages of that kind.

My concluding point—I have no wish to extend this discussion, but I should like to get this point over to the Chancellor of the Exchequer and to the Financial Secretary—is this. I wonder whether the new idea of taxing current wages makes it possible to have the full period of tax, the full 26 weeks, used in assessing the tax. Let me tell hon. Members why I raise this point. The many trade union branches in my Division have asked me to endeavour to point out to the authorities that the lessened number of weeks of' tax, in some cases only 16 weeks, has meant an increase, in those 16 weeks, of about one-third of the tax. The suggestion is that the tax should be spread over the greatest possible number of weeks. I am not unaware of the difficulties, but I hope that the Department will give consideration to this matter. I finish on this note: The Budget may not be all that we desire, but we realise that we are in a time of stress. I think a genuine effort is being made by the Government to obtain the necessary financial weapons of war to deal with the present situation. It is a very vigorous and courageous effort. I hope that the points which I have raised will not be looked upon as destructive criticism but as a constructive effort to rub off some of the rough edges of what is, when all is said and done, a good effort to meet the present situation.

Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.—[ Major Sir James Edmondson .]

Resolutions to be reported upon the next Sitting Day. Committee also report Progress; to sit again upon the next Sitting Day.

The remaining Orders were, read, and postponed .

It being after the hour appointed for the adjournment of the House , Mr. DEPUTY-SPEAKER adjourned the House, without Question put, pursuant to the Standing Order .