I come now to the developments of the last twelve months. In last year's Budget Speech I forecast that in the coming months home demand would, on the whole, remain firm, but that there would be a slackening in export demand and a fall in investment in stocks—not a fall in stocks, but a fall in investment in stocks. As a result, I thought that the declining trend in production which was just beginning to run might continue during the rest of the year. I felt confident, as I said then, that our balance of payments would remain strong, and I emphasised that the fall in import costs gave us an opportunity to halt the trend of rising prices from which we had so long suffered.

Broadly speaking, these forecasts have been borne out by events. Let us look, first, at the components of home demand, allowing in each case for the effect of price changes—say, consider them at constant prices. First, consumption expenditure remained roughly constant in the first three quarters of 1958. It then rose in the last quarter. This was largely, though not entirely, because of increased purchases of what are called consumer durables resulting from the ending of restrictions on hire purchase. Home investment in fixed capital remained steady at the record level reached in 1957. Although investment by manufacturing industry and the building of new houses by local authorities were both declining, other sectors showed a compensating increase. Current expenditure on goods and services by public authorities went down a little, again in real terms.

Coming now to exports, the decline which I foresaw occurred, though there was some recovery towards the end of the year. The rate of stock-building was a good deal lower than in the previous year. The falling-off in these two sectors—exports and stockbuilding—was enough to bring about a decline in the level of industrial investment, and a rather smaller fall in total output. I think that the fall in total output over the year was something like 0.6 per cent. Towards the end of the year, both the index of industrial production and of total output began to rise again.

The level of unemployment rose through the year, as we had feared it might, and reached 2.8 per cent. in January last with, as hon. Members are aware, great unevenness in its incidence. Since then we are all glad that there has been a very welcome decline. I shall be returning to this subject later on.

Over the year, the Index of Retail Prices rose by exactly two points, or rather less than 2 per cent. —I am speaking of the calendar year now. The most important factor here undoubtedly was the benefit which we had received from lower import prices, and the average wage increase, also, was smaller than it has been in recent years. These developments should encourage our hopes for continuing price stability.

Taken altogether then, we have had a year in which much has been achieved. On the debit side, there was the increase in unemployment to which I have referred, and the check to the growth of production. On the other side, we have maintained a record level of investment and reached a new record level of consumption, combined with near price stability and a very satisfactory balance of payments. I am glad to say that the record level of total personal saving reached in 1957 was substantially repeated in 1958. As the year went on, and as it became clear that inflation had been eliminated from the economy, we were able to relax the various restrictions on demand and, indeed, to take positive steps to encourage some expansion of activity. Hence the sequence of measures of which the Committee is aware, beginning with the increase in initial allowances by 50 per cent. made in the Finance Act last year. The Bank Rate has been reduced by stages from 7 to 4 per cent. The request to the joint stock banks to limit their advances has been dispensed with, and they have used their freedom to develop their services in a number of directions with robust initiative—I might almost say with gusto. The ceiling on the public investment programme has been raised and a series of increases in future investment expenditure have been approved and put in hand. The restrictions on hire purchase have been completely removed, and the raising of capital by domestic borrowers has been substantially released from control.

I should like to make clear that these steps have been taken progressively as soon as it became clear in each case that they were safe and desirable. In short, while the Government did not hesitate to apply restraints when these were necessary, they have been equally alert to remove them at the earliest moment when they had done their work, and to resume encouragement to expansion.

On the external side, we have had an exceptionally good year. The surplus on current account in the balance of payments in 1958 is estimated at £455 million, as hon. Members know. This is far higher than in any other year since the war. In fact, it may be the highest for many decades. We were greatly helped by the fall in world prices which enabled us to buy the same volume of imports as in 1957 more cheaply. The volume of exports held up well in the first half of the year, fell away after that, and then recovered somewhat in the last few months of the year. For the year as a whole exports were 3½ per cent. down, and that drop, of course, had a significant effect on our economy, and was partly responsible for the rise in unemployment during 1958; but the drop in exports was somewhat smaller than might have been expected at this time last year. Invisible transactions made their customary large and very welcome contribution to the surplus.

The Committee is well aware that a current surplus of a particular size is not by itself a sufficient criterion of our external financial position. The United Kingdom is a large capital exporting country, and it is only when our surplus is more than big enough to cover the net capital outflow that we are able to strengthen what I may call our monetary position. This external monetary position, that is, the balance between our monetary reserves and our monetary liabilities, is really the key figure. A good current surplus is, of course, a prerequisite of strength—there is no question about that—but our position at any time cannot be judged simply by that any more than it can be by the movement of the reserves.

I said that in these respects 1958 was a very satisfactory year. My reason for saying that is that our current surplus last year was amply sufficient to pay for our investment abroad and a healthy balance was left over to improve our monetary position. On the one hand, the reserves rose by £284 million, and, on the other, the sterling holdings of other countries and international bodies, which are part of our liabilities, of course, rose by £54 million. So we can broadly say that our monetary position last year improved by over £200 million.

This improvement all took place in the first half of the year which is always the seasonally favourable period. Last year the seasonal factors were reinforced to some extent by the fact that our imports were costing less, while our export earnings had not then begun to suffer seriously from the reduced purchasing power of our customers. Many of our customers were still drawing down their reserves. In the second half of the year the surplus on current account fell to £128 million, which was offset by net investment abroad, and by the capital repayments on the North American loans. There was little change in the reserves during the second half of the year, while the sterling holdings of non-sterling countries continued to rise.

This position of approximate stability has, as far as I can judge, continued in the early months of the present year. Exports have been running slightly lower than a year ago while imports are a little higher. As the Committee will remember, I said in my Budget speech last year that I did not expect the extraordinarily favourable relation between the value of imports and exports that obtained then to last very long.

At the end of 1958 we abolished the distinction between American and transferable accounts and, by doing so, unified the transferable and official rates for sterling. At the same time, in concert with a number of other European countries who had taken similar measures, we brought into effect the new arrangements for monetary co-operation in Europe embodied in the European Monetary Agreement. In spite of a succession of disturbing events abroad, external sterling has been strong and the rate has shown a marked improvement since this move was made. That, I think, is tangible evidence that the rest of the world welcomed as healthy and timely this move along the course which all parties have agreed to be the right one, although the party opposite differed from us as to timing.

Revenue last year was £5,480 million, £137 million more than in the preceding year, and £41 million above the Estimate. Inland Revenue duties yielded £3,016 million—that is, £46 million above the estimate—and Customs and Excise duties £2,191 million or £2 million above the estimate, while other revenue produced £7 million less than the estimate.

Expenditure above the line was £5,103 million, £28 million more than the original estimate. Defence expenditure exceeded the estimate of £1,418 million by £50 million. This was the result partly of increased expenditure, mainly for the Navy, and partly of a reduction of £35 million in the German contribution towards local defence costs resulting from the new Agreement. Civil supply expenditure at £2,849 million was only £8 million above the original estimate, extra expenditure on a number of services being offset by substantial savings on agricultural and other Votes.

I must congratulate my right hon. Friend the Minister of Agriculture, Fisheries and Food on having a better record to date in this matter of the cost of agricultural assistance than his immediate predecessor had during his last year. I hope that he will keep this up—his record, not his expenditure—without, of course, raising the cost of food in any way to the consumer. The additional supply expenditure was partly offset by a saving of £30 million in expenditure on Consolidated Fund Services, which had been estimated at £816 million. This was mainly the result of the reduction in short-term interest rates to which I have already referred. To sum up the result above the line, there was a surplus of £377 million, compared with my estimate of £364 million. I must apologise for the discrepancy. I have not holed out, but I have at least got on to the green.

Now I turn to below the line. Below the line receipts, at £326 million. were £3 million more than the estimate. Payments amounted in total to £885 million, £38 million less than the estimate. Advances to the National Coal Board exceeded the estimate by £12 million, those to the British Transport Commission for railway deficits by £33 million, while those to other nationalised industries fell short of the estimate by £18 million. We have debated the finances of these industries at some length in recent months and I will not comment further on them now.

Advances for export credit guarantees also exceeded the estimate by £18 million, mainly as a result of increased assistance to the Commonwealth by means of loans made under the Export Credits Guarantee Act. There was a saving from the fact that Exchequer loans to local authorities were about £65 million less than had been expected. As a result, the Local Loans Fund made no call upon the Exchequer during the year; as the total of borrowing by local authorities has not fallen, this was a further welcome sign that they are relying to an increasing extent on market resources.

The out-turn can, therefore, be summarised as follows. Above the line there was a surplus of £377 million. Below the line the deficit was £559 million. So the overall result, which determines how much Government expenditure has to be met by borrowing, was a deficit of £182 million, as compared with my estimate last year of £236 million.

The need to finance this overall deficit was the main reason why the National Debt increased over the year by £143 million to a total of £27,375 million. This increase does not, of course, represent an additional burden on the taxpayer since it was much less than the total of Exchequer advances for productive investment by the nationalised industries and other borrowers who pay interest to the Exchequer.

I must now try to satisfy the technical appetites of those hon. Members of tae Committee—I trust a majority—who display a laudable interest in the Government's funding activities. Other hon. Members may relax for a few minutes. During the year we have had to deal with two major maturities, £676 million 4 per cent. Conversion Stock, 1957-58, which fell due for repayment last June, and £592 million 2 per cent. Conversion Stock, 1958-59, which matured last January. We were successful in converting the major part of these maturing stocks by the issue of £353 million 41 per cent. Conversion Stock, 1963, £299 million 51 per cent. Conversion Stock, 1974, and £250 million 41 per cent. Conversion Stock, 1964. These are enormous figures and reflect a highly satisfactory outcome of our funding operations last year. The remaining £366 million was paid off in cash and it is chiefly because of this cash payment and of the overall Exchequer deficit to which I have referred that the floating debt has risen during the year by £391 million.

Last year, however, the rise in the floating debt was not associated with a rise in the floating debt held by the banks and by the market generally. The rise was in the holdings of the Departments. This occurred as the Departments sold Government stocks to the market and as maturing stocks which they had acquired were redeemed. On the other hand, holdings of floating debt other than by Departments decreased during the year. The restraint thus exercised over the total of floating debt in the hands of the market considerably strengthens our ability to influence future monetary Developments, but it has not been used to restrict credit at the present time. On the contrary, there has been a considerable expansion. Advances made by the clearing banks to private borrowers have risen in the twelve months ended 18th March by about £500 million, while their net deposits have risen by nearly £250 million.

The floating debt could not have been kept to this level but for the success of the National Savings Movement, which has enjoyed a golden year, if I may describe it like that. During the year net sales of National Savings certificates were £132 million, Defence bonds £108 million and Premium Savings bonds £66 million. The Trustee Savings banks have also had a good year with an increase of about £40 million in the amount invested. The Post Office Savings were not quite so good, but there has been a welcome improvement in recent months. These results have taken the Savings Movement a very long way past the target of £150 million which Lord Mackintosh gave me at this time last year, and which I think I reported then to the Committee.

In fact, we have had an increase of well over £300 million net in the amount invested in the various forms of national savings—the best figure for twelve years. It is very heartening to see such a fine response to a combination of enthusiastic salesmanship and what are rightly regarded as attractive terms for these savings securities. The figures which I have given show once again what an extremely valuable and important part these small savings play in raising the funds for investment for the future wellbeing and development of our country. They are surely an impressive tribute to the unflagging efforts of the devoted groups of voluntary workers up and down the country who give up so much time to this.

I come now to the Exchequer prospects for the year ahead. On the basis of existing taxation, Inland Revenue duties are expected to yield £3,050 million in the coming year, £34 million more than the actual receipts last year. The revenue from Customs and Excise duties is estimated at £2,245 million, an increase of £54 million over last year's receipts. I expect £110 million from the motor vehicles duties, £3 million more than last year. The estimate for other revenue is £215 million, £49 million more than last year, but this increase includes a special receipt of £22 million from an advance repayment of debt by Germany. Total revenue above the line is, therefore, estimated at £5,620 million, or £140 million more than last year.

Coming to expenditure, the Committee will not be surprised to hear that expenditure above the line will also increase. The Consolidated Fund Services are expected to require £728 million, a reduction of £58 million on last year's out-turn, largely resulting from the fall in short-term interest rates and from additional receipts of interest on below-the line advances. Supply expenditure is estimated at £4,495 million, £178 million more than last year's out-turn. Thirty-four million pounds of this increase is in defence expenditure and £144 million in civil expenditure. This latter figure mainly reflects continuing increased expenditure on the social services, both those directly administered by the central Government and also those such as education which are mainly run by local authorities.

I estimate total expenditure above the line this year at £5,223 million, which is £120 million more than last year's actual out-turn. So on the basis of existing rates of taxation, we have total revenue estimated at £5,620 million against expenditure of £5,223 million, giving a surplus above the line of £397 million, or £20 million more than the actual surplus last year.

Payments below the line will show an increase. Before I give the figures it might be convenient if I mention the provision of capital for the nationalised industries. Since 1956, as the Committee knows, the capital needs of the nationalised industries have been met by loans out of the Exchequer. The powers authorising these loans—which originated in the Finance Act, 1956— expire at the end of August of this year and I have to consider how the industries' requirements are to be supplied after that date. The considerations of credit and market management which led to the assumption by my right hon. Friend the Prime Minister of direct Exchequer responsibility are still as strong as ever. I have, therefore, decided again to recommend that the powers should be extended for a further period of one year. The extension of the Exchequer lending power, for which I propose to move a procedure Resolution, will provide for additional lending of £550 million to take account of the enlarged investment programmes which the Government have authorised.

The estimated figures for payments below the line are as follows. Twenty-eight million pounds more than last year will be needed for the operations of the Export Credits Guarantee Department, mainly for loans, and I expect to provide for the first time £20 million for advances to Colonial Governments and £25 million for loans to building societies under recent legislation. The National Coal Board will need £2 million more than last year and £6 million less is being provided for the British Transport Commission for railway deficits during the current year. Other capital advances from the Exchequer to the nationalised industries will be £138 million higher than last year. I am not making any provision for loans to local authorities since, even if the rate of borrowing from the Public Works Loans Board is higher than last year, the volume of repayments should keep an adequate balance in the Local Loans Fund without further advances from the Exchequer. Repayments by the nationalised industries and other borrowers are expected to produce £22 million more than last year. In total, I expect the net total of payments below the line to be £752 million, that is, £193 million higher than it actually was last year.

On the basis of existing taxation the surplus above the line in the coming year is, therefore, estimated at £397 million and the net total of payments below the line at £752 million. This would leave net expenditure of £355 million to be met by borrowing, as compared with £182 million last year.

Turning now to my crystal ball, I must say something about the economic outlook for the coming year, because that is what must largely influence the kind of action I ought to take in this Budget. This, of course, is much the most difficult part of my task. I will begin with the external prospect. This, so far as I can judge, is satisfactory. As I mentioned earlier in my speech, imports are showing a tendency to rise in volume while the growth of exports is still delayed by the difficulties in foreign markets, especially in the sterling area. Consequently, our current surplus on the balance of payments will certainly be a good deal smaller this year than the exceptional level of last year. However, I expect it to be a respectable surplus which should be sufficient to cover our investment abroad.

In this connection, I should tell the Committee that I expect, in 1959, a larger outflow of capital on Government account than in recent years. This results partly from the decision we took at the Montreal Conference to help still further the less developed countries of the Commonwealth. We have undertaken commitments to other countries as well. The needs of the primary producing countries will, of course, vary with the prospect for their exports, which, in turn, will vary with the level of activity in the more highly developed industrial countries.

There are one or two special features about 1959 which will have a close bearing on the state of the reserves. First, there is the repayment of £71 million to the International Monetary Fund which was reflected in the reserve figures last month. I am sure that the Committee will agree that it was satisfactory that, taking this large figure into account, the reserves fell by as little as £6 million over the month. Over the first three months of the present year the reserves have risen about £25 million after allowing for the repayment of £71 million to the International Monetary Fund.

Secondly, we expect to pay later in the year a gold payment to the International Monetary Fund amounting to £58 million in connection with the increase in quotas, a subject which we debated recently. Other countries in the sterling area will be increasing their quotas, too, and in so far as they make their payments from their balances in London there will be some draft on the gold reserves on that account, also. In view of these and other factors I expect, on balance, the gold reserves to show some fall in 1959.

As far, however, as the fall may be due to the special payments I have mentioned, the ultimate effect is to maintain or more than maintain the strength of our position, because in exchange for these payments we are acquiring second line reserves of a far greater value. Thus. the repayment last month increased our International Monetary Fund drawing rights by an equivalent amount. The gold payment we make to increase our quota will further increase our right to draw in times of need, by up to five times the amount of the payment.

To sum up, even though the reserves may well show a net decline for these special reasons, 1959 should be a satisfactory year both for the balance of payments and for the external economic position generally. Economic expansion will be bound to bring in its train a higher import bill. And this tendency for our imports to increase is likely to precede a recovery in our exports. It is, in fact, to some extent a precondition of such a recovery that we and other industrial countries should buy more from primary producers. But in the longer run we must match this higher import bill by at least an equivalent increase in our export earnings if we are to keep a sound balance of payments and to continue to play our part in international economic development.

The conclusion I reach is that it is impossible to exaggerate the importance of our maintaining and, indeed, improving our competitive position through efficient investment and lower costs. This is, to my mind, the key to success in the future.

So much for the external outlook. Our consideration of the economic prospects at home for the next twelve months starts from the position that we have at present some unused resources of capital equipment and manpower which could now be employed productively if the demand were there. Although the current level of unemployment is low in comparison with most other industrial countries, it is still too high. It must be our unceasing endeavour to get every person we can into productive employment without putting at risk the stability of the foundations of our economy on which the prospects for full and steady employment must rest.

There is no greater waste than the human waste and misery of unnecessary unemployment. And the reserves of manpower on which we could draw extend beyond the numbers of those registered for unemployment benefit; there are the possibilities of drawing back into the labour force some of those who have left it in the last year or so, while some of those who have continued in employment are underemployed and will be able to produce more when opportunity offers.

The reserves of physical capital are, no doubt, at least as great as those of manpower. But this unused capacity is very unevenly spread throughout industry. We have not yet reaped the full benefit in higher output which we should, and shall derive from the massive industrial investment of the last four years. Some of this has replaced—not necessarily increased—existing capacity with more modern and efficient equipment, and in some industries changes in the pattern of demand will have made it unlikely that all the capacity will be wanted. For these and other reasons, the concept of unused capacity cannot be precisely defined, and still less can it be measured exactly.

Praiseworthy attempts have been made at a quantitative assessment by using sample inquiries and in other ways. These have helped us to get our orders of magnitude straight, and that is useful. But I do not think that anyone is in a position to say that there is at this time 8 per cent., or 12 per cent., or any other precise percentage of unused capacity over the economy as a whole. What can be said is that the physical possibilities both of capital equipment and manpower now exist for an appreciable increase in production above its present level. This is one of the basic assumptions of my Budget.

I turn next to the question how far such an increase in production may be expected to take place in the next twelve months under the influence of the forces already at work. I will start with home demand. The biggest element there is expenditure by ordinary consumers. Expressed in real terms, consumption expenditure has risen significantly since the autumn of last year. A large part of this increase has been the rise in expenditure on consumer durable goods such as cars, refrigerators and washing machines, resulting from the reductions in Purchase Tax made in the Finance Bill last year and the subsequent removal of restrictions on hire purchase.

The removal of restrictions on hire purchase has proved a useful and effective method of providing a quick stimulus to this sector of the economy. But the effects are greatest in the early months and I expect them gradually to fall off as the months go by. For this reason, though consumption expenditure should continue at a high level, I would not expect it to go on increasing at the same rate as it has been over the past six months throughout the rest of the year.

Next, there is fixed investment, which for some years has been running at a very high level indeed, judged by our own standards in the past. On the private side, there is one element, capital expenditure by manufacturing industry, which has been declining during the last twelve months. This is expected to go on declining during the rest of this year, judging by the sample of firms whose forecasts are collected and aggregated by the Board of Trade. The Board of Trade figures forecast a decline of about one-tenth in this part of capital expenditure between 1958 and 1959. This is a trend which has caused me some concern. Nevertheless, to get the picture right we must remember that investment by manufacturing industry is only 45 per cent. of the total of private investment, and that the other elements of the total—private investment by distributive and other industries, and private housebuilding—are both expected to increase. Taking it all together I expect a small rise in the total of private investment, in spite of the fall in the manufacturing sector.

Coming now to the investment programme of the public sector, I forecast a strong rising trend over the coming year. All the programmes in this sector have been carefully examined during the last nine months, after the lifting of the ceiling imposed by my predecessor in September, 1957. A number of substantial increases have been approved. A full analysis of the present programmes has been given in the Appendix to the Economic Survey, and I will not go into any details about them today.

I will confine myself to two points. The first is the scale of the upward trend. The increase from 1957–58 to 1959–60, that is, over the two years which, in my statement last November, I put at £125 to £150 million, will, because of further increases in short-term capital expenditure approved since then, in fact amount to nearly £200 million. Secondly, I must repeat the warning I gave last year, that it is not realistic to suppose that the large long-term investment programmes in the public sector, of the nationalised industries and others can be rapidly varied up and down in accordance with the state of trade and the need to raise or lower the general level of demand from time to time. Something effective can be and is being done in this way, but for large parts of the public sector programme the possibilities are limited if we are to have sensible plans made and carried through with confidence and efficiency.

From the capital programme of the public sector I turn to current expenditure by public authorities on goods and services. In pursuance of our policy of securing economy in the public service, Ministers have taken care to restrain their Departments' expenditure to what is essential for the efficient discharge of public services. In terms of the volume of goods and services I am expecting that this expenditure will be roughly constant.

The last, and most uncertain, element of home demand is expenditure on industrial and Commercial stocks. During 1958, the volume of stocks continued to increase, though at a lower rate than in previous years. Prediction of such a volatile item is a hazardous business, but I should not be surprised to see a further increase in the volume of stocks in the year to come.

Exports, of course, contribute a most important element in total demand absorbing not far short of 20 per cent. of our resources. We have made good progress in the dollar markets, but generally, as the Committee is well aware, our exports have been hampered for some time past by the reduced incomes of the primary producing countries and the slowing down of economic activity in many industrial countries.

I think that we must expect this reduced purchasing power in some of our most important markets to continue for some little time yet. However, I would hope that by the second half of this year the position of the primary producing countries will be improving, and they should be able to buy more. We may also hope that expansion will be resumed in the industrial parts of the world. My expectation, therefore, is that our total exports will continue to run at about the present level for a few months to come and then, if our salesmen and businessmen continue to exploit their opportunities with energy, they should increase somewhat.

Taking all the elements of demand together, and allowing for the proportion of our supplies we are likely to draw from imports, my conclusion is that the trend of total production of goods and services is likely to be upwards in the coming months. It has, indeed, been rising since about the end of the third quarter of last year. But this rise is not likely to be at all rapid—indeed, if nothing more were done, it might slow down in the second half of the year, since the biggest factor in the rise, consumption expenditure would be increasing less fast as the effect of the decontrol of hire purchase wore off.

The rise in the index of industrial production might be a little greater than the rise in total production. The rise in output might turn out to be proportionately greater than the rise in employment. The increase in productivity which this would imply would be a natural consequence of the high rate of investment in recent years.

There can be no doubt that the measures which we have taken already, and which I mentioned briefly just now, are taking effect. The increase in hire-purchase sales, the increase in private house-building and the big growth in public sector investment, are three convincing examples. Moreover, in the coming year I shall continue to see that our monetary policy, and, in particular, our funding operations keep in step with the development of our economic policy generally. Nevertheless, the prospect for home production as I have set it out does not represent a full enough use of the capital resources which have been created in recent years. Nor can we be content with the possibility that unemployment might continue at around the present levels allowing for seasonal changes. I have, therefore, felt it right to consider most seriously whether a further stimulus should be given to the economy through the Budget.

The Committee will agree that no economic expansion is secure unless it is founded on a strong and stable currency. That is an article of faith and a basis for policy which we in the United Kingdom must always keep steadfastly before us. Before recommending measures which would exercise a stimulating effect I have to ask myself, on the one hand, whether they can be justified in terms of our balance of payments and the international position of sterling; and, on the other, whether they would be likely to jeopardise the degree of price stability to which we have with much difficulty attained in the last twelve months.

I will deal, first, with the external conditions to which our policy must be adapted. The measures of September, 1957, have led to very satisfactory progress in our external economic affairs. Confidence in sterling has been very strong, and the reserves have been built up to a more adequate level. I conclude that we can now afford a moderate increase in imports, which is the natural accompaniment of recovery in demand and production at home. We must not forget, too, that we in the United Kingdom have our own contribution to make to the re-expansion of the world economy after the mild recession of the last year.

If each nation were to pursue too cautious a policy in regard to its balance of payments, international trade would stagnate. But if renewed growth of production and trade goes forward satisfactorily in the world as a whole, we shall benefit from it in a stronger demand for our exports and other services, provided we can give delivery at the right time and at the right price. I am confident that British industry is now in a condition to take the fullest advantage of such opportunities. My conclusion, then, is that external considerations coincide with domestic ones in making it possible as well as desirable to accelerate somewhat the already slightly rising trend of product ion.

As regards stability of prices, the immediate prospects are reasonably encouraging. There may be small seasonal increases in some food prices in the late spring, but, if so, these should come down again in the summer. I derive much comfort from the consideration that the law of averages should ensure a good potato crop this year. I must ask my right hon. Friend the Postmaster-General whether " Ernie" could comfort me further by telling me exactly how good the chances are. Further ahead, the uncertainties increase. As world recovery proceeds, import prices may rise and reduce the benefits which we have so far enjoyed from very favourable terms of trade. Another serious possibility more within our own direct control is a new round of wage and salary increases on a scale which would push up costs and prices.

The main factor making for stable prices in 1958 was the fall in import prices. It is true that the wage increases last year at an average of 3½ per cent. were distinctly smaller than in recent years, and this undoubtedly helped towards steadying the cost of living. But if this progress is to continue, almost everything depends on the degree of restraint shown in wage negotiations this year. For only by stabilising or reducing our costs can we secure the additional exports which we must have if expansion is not to be checked by too heavy calls on our balance of payments. We must not be misled by our recent experience into thinking that further increases this coming year on the scale of last year would be either justified by the economic facts or consistent with stable prices.

The cost of living has been virtually stable for almost a year. I hope that all concerned will realise what an exceptional opportunity we now have to keep it so. If we do so, we shall secure two priceless advantages of the utmost importance for our future: first, our export prices will remain competitive in the markets of the world; and, secondly, the social hardship and injustice inevitably resulting from rising prices, which fall most heavily on those least able to protect themselves, will be avoided for the future.

The possibility of securing these two advantages—indeed, the overwhelming need to secure them—have dominated my approach to the framing of this Budget. Every Budget should have a main aim or theme running through it, related to the current needs of the economy. I have no doubt whatever what the first requirement is today. It is an improvement in the competitiveness of our economy. All our hopes for the future depend on this. If we are to expand our internal economy and, at the same time, to continue to play a leading part in the development of the Commonwealth we must have, year in year out, a strong balance of payments.

To seek that by restricting imports would be, perhaps, the easy way, but the wrong way. The right way is through an expansion of trade. I am absolutely certain that a steady increase year by year in our export trade is the first and essential prerequisite of a sound and expanding home economy and must be our paramount aim, but if our exports are to grow they must be competitive. We are going to have to earn our living in a very competitive world, and that means that we must keep our costs and prices stable. So the aim of this Budget is to help in keeping the cost of living steady and in lowering unit costs of production by encouraging a steady but not excessive expansion in production and a continuing high rate of industrial investment. These are the essentials for future prosperity.

Although we have made some progress we cannot claim that, as a nation, we have yet found the solution to the problem of the interaction of rising money incomes and rising prices. The fact that it is still unsolved must influence our judgment on the rate of expansion which it is safe to permit in the economy. We must at all costs make it our business not to return to an over-load on the economy, which would make a resumption of inflation inevitable. At the present time, however, this is clearly not an immediate danger, though we must continue to watch the trend of incomes and prices carefully.

There can now be some definite expansion of demand without re-creating pressure on supplies of goods and labour, on one proviso, which is that such expansion in demand takes place in ways which do not raise our costs of production, distribution and transport. Having weighed all these considerations, I have come to the conclusion that it would be right for me to seek, through the Budget, to give a further limited but effective impetus to the expansion of our economic activity.

Before I turn to my taxation proposals I should like to mention one matter which is not technically a budgetary issue, but is still highly relevant in human and economic terms to the way I use the surplus. There is one group of people whom I have felt it my special responsibility to consider. They are the public service pensioners: the retired teacher, civil servant, local government officer, National Health Service officer, policeman, fireman and others, and also the Service pensioners of Her Majesty's Forces and their widows.

Very many of them were helped by the Pensions (Increase) Act of 1956, and the corresponding Royal Warrants, but, now that there are signs of easement in the economy, I am sure that the Committee would feel it right that we should take another look at their position and see what additional help can be given. I am inviting representatives of local authorities to enter into consultation at once and I hope that it may then be possible to put proposals for legislation before the House within a few weeks.

I come to certain minor proposals. Coming now to my proposals on taxation, and getting my priorities right, I will deal, first, with two provisions for the protection of the Revenue. I regret to say that cunning people have devised yet another form of dividend stripping at the expense of the Revenue, through companies set up and resident in the Irish Republic which take advantage of a provision in our Double Taxation Agreement with that country. This device must be countered, and we have reached an agreement with the Government of the Republic of Ireland for an amendment of our Double Taxation Agreement that will bar such dividend stripping in the future in both countries. This agreement must be validated by a Clause in the Finance Bill.

I propose, also, to deal with a new form of the device technically known to the initiated as "bond washing", under which certain dealers in securities and exempt institutions are making a quick and illegitimate profit at the expense of the Revenue by purchases of securities cum-dividend and their sale ex-dividend. There will be full safeguards for normal legitimate business. The details will appear in the Finance Bill.

I come now to tax reductions, and shall start with a number of comparatively small proposals which together will be of benefit to quite a lot of people.

First, road passenger transport. During the last few years, mainly as a result of the increase in the number of private cars and motor cycles, which, in turn, is a reflection of our higher standard of living, bus operators have faced increasing difficulty in maintaining their services, particularly in rural areas. With my right hon. Friend the Minister of Transport and Civil Aviation, I have been considering this difficult problem, and I am satisfied that the bus operators should be given some tax relief to help them to maintain the rural services. Rural and urban services are very commonly operated by the same concerns, and I have, therefore, come to the conclusion that I must find some way of helping the industry generally.

The most practical step seems to me to be a reduction in the annual Excise duty payable on passenger vehicles with more than eight seats. I propose, therefore, to reduce the Excise duty payable on buses and coaches to about one-third of the present rate, subject to the present minimum of £12. I intend to make this reduction effective from immediately, and for that purpose to provide for refunds of duty on licences which have been taken out at the old rate. Because of this provision for refund on current licences, this concession will cost the Exchequer about £6 million in the present financial year, though the cost will fall to £3½million in subsequent years.

Also in the field of vehicle Excise duty, I am proposing that vehicles left standing on the highway should have to be licensed. I do not know whether hon. Members frequently leave their vehicles unlicensed on the highway. It never occurred to me, but it appears that some people have developed the bad habit of doing so, and we think that it ought to be stopped.

I propose, also, to make certain very minor changes in the scope of the duty on heavy oils used in road vehicles so that in future oil used in a subsidiary engine mounted on a vehicle will not be chargeable with duty, and, also, that only those vehicles which use the roads to an extent which makes them licensable as road vehicles will have to use dutiable oils. Details will be found in the White Paper. The effect on the Revenue will be negligible.

I come now to four minor measures for relief from Inland Revenue taxes. The first concerns the treatment of life assurance policies for Estate Duty purposes. As my hon. and learned Friend the Financial Secretary promised last year, we have been engaged in a close review of this matter which arose out of a Court decision in the case in re Hodge. The Finance Bill will include a Clause the broad effect of which will be that gifted policies of insurance will be treated just like gifts of other kinds of property for

Estate Duty purposes. This will apply both to life assurance policies and to policies providing annuities. I must ask the Committee to await the Finance Bill for details.

For my second relaxation I have been stimulated by the example of Mr. Khrushchev. I have read in the Press that he has announced the impending abolition of Income Tax. I felt that I must not be outdone. I hasten to prevent inordinate expectations being too quickly raised—it is not Income Tax of which I am proposing the total abolition. It is Corporation Duty. This tax was introduced in 1885 with the object of compensating the Exchequer for the loss of the death duties on property held by certain corporate and unincorporated bodies. There are wide exemptions, including bodies engaged in trade and all limited companies, and the yield of the tax is only about £150,000 a year.

The tax is arbitrary in its incidence and many of the amounts payable do not repay the trouble of collection. The Inland Revenue would be involved in a great deal of unremunerative work if it were to hunt out every case of possible liability. It is not sensible to maintain this troublesome duty for such a small yield to the Exchequer, and I have come to the conclusion that we ought to get rid of it. To abolish a tax entirely should surely qualify a Chancellor of the Exchequer for a monument, of sorts.

I have been impressed with the case made against the present system of stamp duties on sea insurance policies. These policies are subject to ad valorem duty, the rate depending on several complicated factors. The duty is, in effect, largely a tax on exports. A large part of the marine insurance business of the British market is overseas business and I do not want to retain a tax which may represent an obstacle to this business. I therefore propose to get rid of the special duty on sea policies and to make them subject only to a fixed duty of 6d. like other kinds of accident policies. This change will also bring some benefit

to the shipping industry and to shippers. The cost will be about £2 million this year and £3 million in a full year.

Fourthly, I can now announce another small relief which was urged upon me last year. For Profits Tax purposes there has always been a restriction on the amounts that might be deducted for the remuneration of the directors of director-controlled companies. This is necessary, so that the directors may not take out in the form of remuneration what was really the return on the capital invested in the business and ought to bear Profits Tax.

The maximum amounts at present allowable are fixed by a rather complicated scale with alternative limits. The first limits which apply to the larger companies are 15 per cent. of the companies' profits, subject to a maximum of £15,000. That is the total for all the controlling directors. The other scale, which, in effect, applies to the smaller companies, depends upon the number of full time working directors and runs from £2,500 for one such director to a maximum of £7,000 for four or more such directors.

I have come to the conclusion that there is now a good case for a modest increase in this scale, which I propose to vary so that it becomes £3,000 for one full-time working director, £5,000 for two, £7,000 for three and £9,000 for four or more such directors. The alternative limit of 15 per cent. of the profits, subject to a ceiling of £15,000, will remain unchanged. This relief will cost nothing this year and about £3 million in a full year.

I shall begin with the Purchase Tax. I should like to remind the Committee of the background. In my last Budget I simplified the structure of the tax, reducing the rates from seven to four. In consequence, the tax on some important classes of goods was then sharply reduced. I said then, and I must repeat now, that we must continue to look to this tax for an important contribution to the revenue. I recognised that because of the problem of retail stocks violent and abrupt change—or the anticipation of such change—has a disturbing effect on trade, but I reminded the Committee that anything approaching a major reform of the tax was bound to involve substantial changes in the rates on some goods. That being so, my aim was to get the tax into a form which would not only be fairer and simpler to administer, but would also enable any future changes to be made with the minimum disturbance to trade.

I think that it is fair to say that my objective in making the tax a more effective instrument was to a large extent achieved. Certainly, a year's experience has revealed no basic defect in the new structure. It is significant that my hon. Friend the Member for Kidderminster (Mr. Nabarro) only found scope this year for 199 Questions on this tax. I propose, therefore, to leave that general structure unchanged this year.

There are, however, two cases which I regard as special ones and exceptions from that. First, I propose to abolish the Purchase Tax on commercial vehicle chassis. When the tax was imposed on commercial vehicles, in 1950, the intention was to damp down investment in this particular form of capital equipment. When, later, the need for restricting the purchase of commercial vehicles disappeared, the substantial revenue yielded by the Purchase Tax on them was an obstacle to its abolition. I now think that I can accept this loss and I am glad to be able to remove this tax on commercial vehicles altogether.

Secondly, I propose to free replacement television tubes from tax. This tax has been represented to me as being unduly burdensome, and technical developments in the reconditioning of tubes have made it difficult to administer the tax with equity. I must, of course, take care that this concession does not give an opportunity for tax avoidance on the sets themselves, and a Treasury Order to safeguard this point will be laid before the House tonight.

Apart from these two exceptional cases, I propose to lighten the weight of Purchase Tax in general by reducing the three higher rates, by one-sixth each. The 60 per cent. rate will accordingly be reduced to 50 per cent., the 30 per cent. rate to 25 per cent., and the 15 per cent. rate to 12½ per cent. I do not propose any change in the 5 per cent. rate, which is already as low as is consistent with the concept of a tax raised at moderate rates on a wide range of goods in general use.

While these reductions will give a material measure of relief to the consumer, they should not give rise to any serious difficulty in regard to tax-paid stocks held by retailers, who will in any case benefit from the improved trade due to the tax reductions proposed in this and other parts of my Budget.

The total cost of these Purchase Tax reliefs, which will operate from tomorrow, is £59 million this year and £81£ million in a full year.

These changes in Purchase Tax will make a small contribution towards reducing the cost of living. The total incidence of Purchase Tax on the cost of living, however, is not heavy—the whole £490 million yield of it amounting to not more than 1·5 points on the Retail Price Index. So I had to look elsewhere to find some relaxation which would help more with the cost of living. Few indirect taxes directly affect the cost of living significantly though most may do so indirectly in the long run. One tax which does have a marked effect is the Beer Duty. Because a very large number of people drink beer regularly in moderation, changes in its price have a marked effect on the cost of living.

There were other reasons too why a reduction in the duty on beer called for consideration. For a number of years after the war, consumption of beer showed a downward trend, and, although for a short time it seemed that a more stable situation had been reached, there was a further and appreciable fall in the year just ended. I depend on this duty for a large contribution towards the revenue and I must do what I can to safeguard the foundations of this contribution for the future.

The level of the duty is at present a high one. Apart from an adjustment in 1950 to provide for an improvement in the strength of beer, it has remained unchanged since the reduction made by Sir Stafford Cripps in his Budget of 1949. A reduction now would, therefore, be appropriate, not only on its merits, but because it helps to prevent a further decline in the Revenue—a fitting celebration perhaps of the achievements of an exhausting decade.

A change in the duty on beer also gives me the opportunity to introduce a reform in the system of liquor licence duties. The present system is complicated and costly to administer, and I propose to replace it by a simple system of fiat rates of duty which will give a very useful administrative saving. The licence duties will in future be treated as registration fees rather than as a source of revenue, and the proposed rates have been fixed at low levels with this in view. For example, the rate for the ordinary publican's "full" on-licence, and for the off-licence selling the full range of alcoholic drinks, will be £5 a year. There will be a comparable change in the club duty, and a consequential change in the basis for assessing compensation levy. I propose also to abolish the provisions requiring monopoly value to be charged when a new on-licence is taken out. Full details of these changes will be found in the White Paper.

Since the proposed rates of licence duty are very much lower than the existing rates, there will be a reduction in the yield of revenue which, together with the cost of abolishing monopoly value, I estimate at £5½ million in a full year. I intend that the benefit of this concession shall be wholly passed on to the consumer. On the basis of current consumption of beer, the £51 million of licence duty revenue which I shall be losing in a full year is equivalent to 4s. 5d. on a barrel of 36 gallons. I propose now to reduce the duty by 43s. 7d. a barrel which, together with the 4s. 5d. for the licence duty change, adds up to a total reduction of 48s. Od. a barrel.

This means a reduction in the retail price of 2d. a pint. I recognise that this will involve some problems of adjustment in the trade, but I am satisfied that the difficulties can be overcome and that the prices to the public will, in fact, be reduced by the full 2d. a pint. So the equivalent of the whole of the reduction in duty will be passed on in lower prices.

So, at a cost which I estimate at £36 million this year and £40 million in a full year, we shall obtain a reduction in the price of beer to the consumer by 2d. a pint and a considerable simplification of the present system and a useful administrative saving.

The reduction in the beer duty will operate from tomorrow. The changes in licence duties will apply in respect of excise licences issued or renewed after today. For licences already current the duly position will not be affected: the new rates will apply when the licences are renewed later this year. Club duty, which is paid annually in arrear at the beginning of the calendar year, will similarly remain unchanged for this year, and the new club licence duty which will replace it will come into force on 1stJanuary, 1960. Monopoly value will cease to he chargeable after today. I should emphasise that these changes in the Excise licence duties in no way affect the control over the sale of alcoholic drink exercised by the licensing justices.

As a minor adjustment, I also propose to reduce the duty on a rather special product known as "black beer ", which I understand may be of interest to some hon. Members from the North of England. I propose to reduce this duty also by 2d. a pint and to modernise its form. The cost of this change, which operates from tomorrow, is trifling, and has been taken into account in the estimate I have just given.

These reductions in the Purchase Tax and the Beer Duty will spread widely part of the benefits of the reduction in the burden of taxation which I am able to make in this Budget, and they will make a useful contribution in keeping down the cost of living. The combined effect of the two measures will, in fact, be to reduce the Retail Price Index by about four-fifths of a point. With the usual seasonal reduction in the price of milk which my right hon. Friend the Minister of Agriculture, Fisheries and Food has approved from the beginning of May, the result will be a reduction of the index by a full point.

The remissions in indirect taxation 1 have just described will give a valuable stimulus to the economy. But nothing has so great or widespread an effect as the levels of direct taxation. Our present rates of Income Tax and Surtax are high. The standard rate rose from 5s. 6d. in 1938–39 to a maximum of 10s. in the war years and, even after two reductions made by my right hon. Friend the Home Secretary, still stands at 8s. 6d. The combined top rate of Income Tax and Surtax, which was 15s. in the £ in 1938–39, rose to a maximum of 19s. 6d. in the £ and even now stands at 18s. 6d. in the £ I have no doubt that these high rates are bad for industry because they cut unduly into profits that can be put to reserve for development and expansion. They also tend to discourage effort and initiative on the part of individuals, and so doubly harm the national interest.

I am glad this year to be able to do something to lessen those effects. I think it right this year to give a more than proportionate reduction in the reduced rates of tax, taken as a whole, particularly the lowest band which now pays 2s. 3d. in the £. I have, therefore, decided to propose a reduction of 9d. in the standard rate of Income Tax and 6d. in each of the reduced rates. This change will cost £192 million this year and £229 million in a full year. Of these amounts, £57 million this year and £63 million in 1960–61 will be in respect of the profits of companies put to reserve.

These changes will involve a complete recasting and reprinting of the P.A.Y.E. tables. This will mean that for P.A.Y.E. purposes the tax changes cannot become effective until the first pay day after 7th June.

In my review of the economic outlook, I said that I was concerned about the prospective decline in private investment in the manufacturing sector. Our economic future, and especially the strengthening of our competitive position in world markets, demands that we should continue the progress we have made towards higher levels of investment.

This progress should not only continue, it should also be as steady as possible. There is a tendency, which is easy to understand but none the less unfortunate, for private investment to fall away when the economy tends to be slack for other reasons and to be strongest when other demands are strongest.

The general effect of my other proposals in this Budget will be to stimulate the economy and in the process to stimulate investment. But I think that present circumstances demand that I should do more, and this has led me to consider the question of investment allowances. These are inherently more attractive to the recipients than initial allowances of the same amount because, unlike the initial allowances, they are not deducted from depreciation claims in later years. There are a number of arguments both for and against them. But after careful consideration I think that in present circumstances I must give priority to the need to encourage those who are hesitating about the timing of their investment plans. I have, therefore, decided upon a general restoration of investment allowances in respect of capital expenditure becoming due and payable after today.

The rates of investment allowance for the main classes of assets will be 20 per cent. for new plant and machinery and 10 per cent. for expenditure on the construction of industrial buildings. These were the rates in force under the 1954 Finance Act. In addition, I propose that expenditure on new plant and machinery shall be eligible for a 10 per cent. initial allowance and expenditure on the construction of industrial buildings for a 5 per cent. initial allowance. These two allowances together will take the place of the present initial allowances of 30 per cent. on plant and machinery and 15 per cent. on industrial building.

Capital expenditure on new mining works, which at present qualifies for a 40 per cent. initial allowance, will become entitled to a 20 per cent. investment allowance plus a 20 per cent. initial allowance. I propose no change this year in the present special treatment of capital expenditure on ships and on scientific research. Capital expenditure on new agricultural and forestry buildings and works will become entitled to an investment allowance of 10 per cent. as it was under the 1954 Finance Act. The general provisions that were applicable to investment allowances when they were formerly in operation will again apply.

I want to emphasise that my main object in taking this step is to encourage firms, who are planning either extension or modernisation schemes, to put them in hand now. The new investment allowance will fortify the effects of the increase in initial allowances made last year. The kind of investment expenditure that I want to encourage is that which has as its object higher efficiency even more than expanded capacity. There is a certain amount of spare capacity available now in industries making capital goods which may be no longer available later on when we hope exports will have risen. This step is, therefore, an incentive to bring forward some expenditure which would otherwise take place later on. It is not, therefore, a fiscal provision which it would be right to expect to continue regardless of the state of our industrial economy. The special stimulus to investment which these allowances will provide is desirable in present economic circumstances. In different conditions such a special stimulus may be no longer justified, and then it would be equally appropriate to reverse the action I am taking now.

This partial replacement of initial allowances by investment allowances will cost the Exchequer nothing this year and £91 million in 1960-61. The tax proposals I have described will cost altogether £295 million this year, and this is as far as I can go in taxation reliefs. I must not only look to the cost of any reductions this year, but also to the problems which they may pose in future years.

I think, however, that this year I can allow some further stimulus beyond that which will be given by the tax concessions I have described, with safety and indeed with benefit to the economy. This gives me an opportunity, which I very much welcome, to do something for the holders of post-war credits.

These credits, as the Committee knows, were created in the war years and represented the extra tax payable by reason of certain reductions in the personal allowances and in the earned income relief that were made to raise revenue for the war. Repayments of these credits are being made currently to men becoming 65 and women becoming 60 and to the beneficiaries of deceased persons who would have reached those ages, at the rate of about £17½ million a year.

Of the original total of about £765 million of credits, about £25 million has been set off against tax arrears and £310 million has been repaid, leaving some £430 million outstanding. While inflation persisted no Government has felt able to accelerate the rate of repayment. But one of the benefits of the stability which has been attained is that it is now possible to do something more. I propose this year to start a comprehensive attack on this problem.

First, I propose now to reduce by two years the ages at which owners of credits become entitled to repayment of their credits. The qualifying ages will become 63 for men and 58 for women. This will mean that this year I shall pay off three years instead of one, at an additional cost of £35 million. This is as far in this direction as I feel justified in going now. I propose, however, to seek enabling powers to permit the repayment of credits by statutory order, so that if, later in the year, financial and economical circumstances were such as to justify going further I should be able to make a proposal to this effect.

Secondly, I propose that all credits now belonging to the beneficiaries of holders who have died shall be paid forthwith, and that, for the future, credits still outstanding shall be repaid on the death of the holder. These repayments will amount to £34 million this year.

Thirdly, I have carefully reviewed the question of payment in cases of hardship. The provision I have already mentioned for payment at death will cover the case of widows who are entitled to credits left by their former husbands, and that deals with one very deserving class. I have, however, decided to go further. I realise that, in so doing, I have embarked—perhaps rashly—on a course which all my predecessors, and I hitherto have thought to raise such problems of discrimination as to be inexpedient. I have done so because hon. Members have urged on me on so many occasions not to refuse to deal with certain clearly defined cases of hardship because a concession could not be extended to other, perhaps equally hard, cases. So I have selected three categories which, on the top of the other administrative work caused by these proposals, are as much as we can deal with this year.

I would ask hon. Members to bear in mind that we can deal only with categories of hardship that can be defined readily and precisely. In practice, this means that normally we must use classifications already employed by Departments in connection with social services. Further, I must ask hon. Members not to press me to extend these hardship concessions further this year. I am aware there are many other people who on grounds of degree of hardship may have claims as strong as those I have chosen.

The classes I have selected are: First, persons who, for a continuous period of 'twelve weeks ending after today, have been receiving National Assistance. Secondly, persons who, after today, are persons named in a register of blind persons, required under Statute to be kept by a local authority. This will not include persons registered as partially blind. Thirdly, persons who, after today, are receiving constant attendance allowance or unemployability supplement under the War Pensions Instruments, the Industrial Injuries Acts or the Industrial Diseases (Benefit) Acts or who would have been in receipt of unemployability supplement if they had not claimed an alternative benefit, or would have been in receipt of constant attendance allowance but for being a hospital in-patient.

This is a start anyway, of which I hope hon. Members will approve, and we must see how it goes. Though information is scanty, I estimate that repayments in these hardship cases will total about £2 million a year.

Finally, as further evidence of my desire to clear up this long-standing problem, I propose that post-war credits that have not become eligible for repayment by 1st October, shall carry interest from that date until the beginning of the month in which repayment is made. or to a date three months after the beginning of the month in which the credit became eligible for repayment. The accrued interest will be paid at the time that the relative credit is itself repaid. The rate will be 2½ per cent. compounded with annual rests. This is the same as the rate now paid on Post Office Savings Bank accounts. As the amounts involved for any one person will be relatively small, I propose that this interest shall not be liable to tax. The cost of interest will be negligible this year and will rise, on the assumption that there is no further acceleration of repayments—and I should hope there would be in fact—to a maximum of £7 million a year in 1980–81 and will reduce slowly thereafter.

I estimate that with these additional repayments we shall pay off this year a total of £89 million out of the £430 million outstanding. I hope that part of this will help to swell the total of National Savings in the coming year.

I should mention one other matter affecting post-war credits. The reduction of tax allowances that gave rise to individual post-war credits had the effect of increasing the compounded rate of tax paid by building societies in respect of interest to their depositors and shareholders above what it would otherwise have been. The extra tax paid by the societies on this account was calculated and recorded and one of my predecessors —the late Sir Kingsley Wood—gave the societies an assurance that it should be repaid to them at a later date. The total amount outstanding is about £31 million. I do not feel able to repay any of this amount this year but I propose to make statutory the societies' title and to provide that the amount outstanding may be repaid, partly or wholly, as and when the Treasury by Statutory Order may prescribe.

I propose that the amounts due to building societies, like other credits, shall carry interest from 1st October at 2½per cent. free of tax. Interest will be paid only when the relative amounts of credit are repaid.

To enable me to make these repayments I propose, as I have said, to seek powers in a special Bill, which will be published in a day or so, to vary by Statutory Order the conditions under which post-war credits may be repaid. I hope we shall get that Bill passed with the minimum delay and make the necessary Statutory Order giving effect to the proposals I have outlined immediately thereafter.

I must warn the Committee that this operation involves a lot of detailed planning and a very great effort on the part of the Inland Revenue. It would jeopardise the success of the operation and involve delays in payment if the plan were to be changed. So I hope that the Committee will accept the proposals in the Bill when it comes forward as the best way I can find of taking quick action in a direction which, I am convinced, everyone will approve.

I have authorised the Inland Revenue and the other Departments concerned to start immediately on the task of printing and distributing the millions of application forms that will be needed for this operation. The forms will describe the precise categories of persons who may make claims as I have outlined them, and will indicate any evidence that will have to be supplied. It is hoped that these forms will be available in Post Offices in about a month's time and that the Inland Revenue may begin to make repayments early in June. I hope that, apart from difficult cases, the bulk of the repayments can be made by the end of August. I urge all concerned, once they have sent in their application forms, not to pester the Inland Revenue, which will work with the utmost speed, since a mass of reminding letters may merely delay the operation. I feel justified in describing this as a comprehensive attack on the post-war credits problem.

To sum up, the tax changes I propose will cost £295 million this year and leave an estimated surplus above the line of £102 million. In addition, the proposals for additional repayment of post-war credits will cost £71 million extra below the line. These changes will leave the sum to be met by borrowing at £721 million. This is a large figure, but I am satisfied that, in our present economic circumstances, it represents the right balance between taxation and borrowing and the right figure from the point of view of the balance of the economy, too. Behind us is a year of solid achievement. Our economy is stronger and more firmly based than at any time since the end of the war. We have the opportunity now to resume a steady rate of advance—not full steam ahead but steady ahead with confidence.

This is no spending spree Budget. During the last two years, we have had the highest level of personal savings in our history. There is now room in the economy for more production. This should give us room for rather more personal spending. But, even more, I want to encourage the continuance of a high level of saving because on that the growth of investment and our whole future welfare depends.

I believe that the measures I have proposed in this Budget will bring benefits. directly or indirectly, to every section of the community, and will give an invigorating stimulus to the economy which will encourage us as a nation to make the most of the opportunities that lie before us.

1. Beer (Excise and Customs)

Motion made,

That—

(a) as from the eighth day of April, nineteen hundred and fifty-nine the duties of excise and customs, and the excise and customs drawbacks, in respect of beer shall be as shown in Part I of the following Table;

Provisions as to Part I

1. Columns 4 and 6 relate only to beer qualifying for Commonwealth preference, and columns 5 and 7 do not relate to such beer.

2. As respect beer the worts whereof before fermentation were of a specific gravity of less than 1030 degrees,—

(a) the excise drawback shall not exceed by more than twopence for every 36 gallons

( b)paragraph ( a) of this Resolution shall not apply to black beer, the worts whereof before fermentation were of a specific gravity of 1200 degrees or more, but in respect of such beer duties of excise and customs shall, as from the eighth day of April, nineteen hundred and fifty-nine be charged, and drawbacks allowed, as shown in Part II of the following Table;

( c)the said duties and drawbacks shall be in addition to those charged and allowed under section two of the Finance Act, 1933 and section three of the Finance Act, 1957 but in lieu of any other duty or drawback in respect of beer;

( d)subsection (6) of section one hundred and thirty-three (relief from duty on beer prepared by mixing) of the Customs and Excise Act, 1952, shall apply to all beer so prepared after the seventh day of April, nineteen hundred and fifty-nine, except beer which is not black beer the worts whereof before fermentation were of a specific gravity of 1200 degrees or more but is beer of which one of the constituents was such black beer;

( e)no rebate shall be allowed after the said seventh day of April in respect of black beer;

( f)this Resolution does not affect drawback in respect of beer as to which it is shown to the satisfaction of the Commissioners that duty was paid under the law replaced by this Resolution.

the amount of duty which is shown to the satisfaction of the Commissioners to have been paid;

( b) the amount of customs drawback allowable shall not exceed the amount of duty which is shown to the satisfaction of the Commissioners to have been paid, less threepence for every 36 gallons.

General

1. The excise duties are in respect of beer brewed in the United Kingdom and the customs duties in respect of beer imported into the United Kingdom, and the drawbacks are on the exportation from the United Kingdom as merchandise, or for use as ships' stores, of beer on which it is shown to the satisfaction of the Commissioners that the excise duty or customs duty, as the case may be, has been paid.

2. Any rate of duty in this Table is for thirty-six gallons of beer the worts whereof before fermentation were of the gravity specified in the Table in relation to that rate, and duty or drawback on any less number of gallons shall be charged or allowed proportionately.

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

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

Question agreed to.

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

2. Liquor Licences ( Excise)

Motion made, and Question,