Speeches, etc.

Margaret Thatcher

HC PQ [National Finance]

Document type: Speeches, interviews, etc.
Venue: House of Commons
Source: Hansard HC [737/181-204]
Editorial comments:
Importance ranking: Minor
Word count: 8593
Themes: Public spending & borrowing, Family, Social security & welfare
[column 181]

NATIONAL FINANCE

Overseas Expenditure

1. Mr. Stratton Mills

asked the Chancellor of the Exchequer if he will give a detailed breakdown of the proposed £100 million reduction in Government overseas expenditure announced on 20th July; and if he is satisfied that this will be possible for 1967–68.

The Chancellor of the Exchequer (Mr. James Callaghan)

The reductions involve consultations with other Governments and it would be prejudicial to disclose our proposals. On progress in securing the reductions I have nothing to add to the reply given to the hon. Member on 31st October.—[Vol. 735, c. 32.]

Mr. Stratton Mills

Surely the Chancellor ought to be able to give more details to the House. Does he recall that in July the Prime Minister said that the proposals for the reduction of £100 million had been carefully formulated? Cannot the right hon. Gentleman go a little further in defining the percentages between defence, aid and diplomatic services?

Mr. Callaghan

I should like to give the House as much information on this [column 182]matter as possible, but, as I have said, it involves negotiations with other Governments and where defence expenditure is involved we have to be very careful to ensure that relations with other Governments are not disturbed by premature disclosure of what is taking place.

Mr. Hooley

Approximately what amount of this £100 million is represented by cuts in aid to developing countries?

Mr. Callaghan

I could not say without notice. I should be glad if my hon. Friend would put down a Question.

Mrs. Thatcher

When will James Callaghanthe right hon. Gentleman be in a position to give firm information to the House, bearing in mind that Harold Wilsonthe Prime Minister said that the programmes then were quite firm and were to take effect next year?

Mr. Callaghan

The programmes are quite firm. I would hope to be able to give information, or my right hon. Friends will, when discussions with other Governments are completed, and I think that that is when——

Mrs. Thatcher

When?

Mr. Callaghan

That depends on the progress of the negotiations. I will certainly give the information as soon as possible. I can promise the hon. Lady that I am very much in earnest about this.

Dividend Distribution

2. Mr. Allason

asked the Chancellor of the Exchequer why the Treasury wrote in August and September to firms who had not increased their dividend distribution in terms accusing them of a breach of duty.

The Financial Secretary to the Treasury (Mr. Niall MacDermot)

As I have already told the hon. Member, no such accusations were intended and any contrary impression is regretted.

Mr. Allason

Surely the Treasury might have made some elementary inquiries before making these fairly serious reproaches against the firms concerned. I have in my hand a letter, with a long diatribe about the iniquity of increasing dividends, which is addressed to a firm which in fact reduced its dividends.

[column 183]

Mr. MacDermot

I, too, have a copy of a letter, but it does not bear any comparison with the description which the hon. Gentleman has given. I do not know whether we are talking about the same letter.

Rhodesia (Blocked Funds)

3. Mr. Wall

asked the Chancellor of the Exchequer if he will authorise the transference of blocked funds for the Rhodesia Freedom from Hunger Campaign, earmarked for African agricultural schemes.

Mr. Callaghan

Each case must be considered on its merits. Sterling payments are allowed for charitable and humanitarian purposes, and to relieve severe hardship, but not payments for long-term projects which could be deferred until constitutional Government is restored.

Mr. Wall

Is the right hon. Gentleman aware that the case mentioned in the Question concerns two sums of £10,000 for African agricultural development? Is he aware that similar allowances have been made for other schemes? Will he look into the matter?

Mr. Callaghan

I have personally reviewed this case, because it is difficult in this instance to draw the balance. The application was for dollars and, although that in itself would not be a determining factor, nevertheless it was one which weighed with me. I can say to the House, to show the basis on which we proceed, that grants have been made in response to urgent appeals for help to combat the situation arising from the drought in Matabeleland, and grants have been made to the asociations dealing with crippled children, the blind and the disabled. But there must come some division and I have tried to draw the line as fairly as possible.

Decimal Currency

4. Mr. Cant

asked the Chancellor of the Exchequer when he proposes to publish the promised White Paper on decimal currency.

53. Mr. Lubbock

asked the Chancellor of the Exchequer if he will now make a statement on his plans for converting to decimal currency.

[column 184]

Mr. Callaghan

I hope to publish a White Paper on 12th December.

Mr. Cant

Has my right hon. Friend read the great volume of support for the 10s. cent system coming from industry, commerce and finance? Is the White Paper likely to recommend this system and give us a system of coinage not so weighty as our present system?

Mr. Callaghan

I have read the evidence, but I have also read the Report of the Halsbury Committee, the majority of which came down in favour of the £ system, and I hope that the White Paper will once again argue the case in favour of the £ system. As for the nature of the currency, perhaps my hon. Friend will wait until 12th December.

Mr. Lubbock

I welcome the Chancellor's announcement that the White Paper is due on 12th December. However, is he aware that the vast majority of expert opinion is against the £ cent system and in favour of the 10s. cent system?

Sir G. Nabarro

indicated dissent.

Mr. Lubbock

Will the right hon. Gentleman also take account of the fact that during this time coin-operated machines are continuing to be manufactured using existing coin sizes, which is a waste of resources?

Mr. Callaghan

Whether there has been a waste of resources will depend on what the size of the new coins is. There is a division of opinion about using the 10s. or £ system. I would have been astonished if there had been unanimity. The Government have reached a conclusion based on the majority Report of the Halsbury Committee and in due course we shall ask the House to uphold it.

12. Mr. John Smith

asked the Chancellor of the Exchequer whether he will hasten the introduction of decimal currency.

Mr. Callaghan

The most convenient date is February, 1971.

Mr. Smith

Could not the right hon. Gentleman speed this up a bit if only because it would help us in Europe? At this rate, inflation will decimalise the currency before he does.

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Mr. Callaghan

I think that it is important to give trade and industry and commerce as well as those manufacturing machines a reasonable time in which to change over. Australia took three years. New Zealand is taking four years. I think that the problems of neither of those countries were as complex as those of Great Britain in this regard. I think that 1971 is a sensible date. It gives another four years from now in which to get it done.

Mr. Lipton

Does this mean that we shall be loaded until 1971 with the inconvenience of halfpennies which have become quite useless from every point of view?

Mr. Callaghan

If my hon. Friend cares to make a collection on my behalf, I shall be glad to accept any halfpennies which he gets.

Wealth Distribution

7. Mr. Gwilym Roberts

asked the Chancellor of the Exchequer if he will give an estimate of the numbers of people in Great Britain whose net wealth was not over £3,000, not over £200,000, and over £200,000, respectively, for the years 1956, 1960, and 1964, respectively; and what steps he will take to accelerate wealth redistribution.

Mr. MacDermot

As the Answer contains a number of figures I will, with permission, circulate it in the Official Report. As to the second part of the Question, I cannot anticipate my right hon. Friend's Budget proposals.

Mr. Roberts

I thank my hon. and learned Friend for the steps already taken in wealth distribution, but would not he agree with me that there is a considerable feeling on this side of the House that wealth redistribution plays a vital part in any successful prices and incomes policy? Is he aware that many of us expect to be proposed in the next Budget increases in the Capital Gains Tax and in other forms of taxation on vast accumulated wealth?

Mr. MacDermot

I cannot anticipate the Budget proposals, but when my hon. Friend sees the figures he will observe that they show that the number of people with assets worth more than £3,000 increased by 2½ million—that is to say, they [column 186]more than doubled—between 1956 and 1964.

Mr. Robert Cooke

If all the millionaires had all their money taken away and it was shared out among the whole population, how much would each of us get?

Mr. MacDermot

I should require notice of that question.

Following are the figures:

The estimates, which are subject to wide margins of error, are as follows:

NUMBER OF PEOPLE IN GREAT BRITAIN AGED 21 AND OVER WITH WEALTH

Motor Car Industry (Hire Purchase)

6. Mr. Christopher Price

asked the Chancellor of the Exchequer if, in the light of further redundancies within the motor industry, he will now make the necessary adjustments in the hire-purchase regulations to reduce the minimum deposit from 40 per cent. to 20 per cent.

Mr. Callaghan

No, Sir. I believe the motor car industry understands that its major task for the immediate future is to complete the reorganisation that is taking place and to pursue sales in overseas countries.

Mr. Price

Would not my right hon. Friend agree that 40 per cent. of a very high-priced product like a motor car is of a completely different order from 40 per cent. of a lower-priced article costing, say, less than £100?

Since we have heard that car sales for September are 23 per cent. down on sales for September, 1965, would not he agree that now is the time to do something about it, since he himself admitted last month that the unit cost of a motor car was a very important factor in its price?

Mr. Callaghan

No, I would not think that this would be the moment to do anything about it. Since the month of September there has been the month of October and the month of November, and it will be very interesting to see how motor car sales have proceeded during[column 187]the last two months. I think it is quite possible that we shall find that there was a substantial deterioration in September and an improvement later.

Selective Employment Tax

8. Mr. Gwilym Roberts

asked the Chancellor of the Exchequer if, in view of the information supplied to him by the hon. Member for South Bedfordshire, he will now seek to make special arrangements for bigger exporters affected by the Selective Employment Tax.

Mr. MacDermot

My hon. Friend's information relates to a company which exports services and therefore does not qualify for premium.

Mr. Roberts

Would my hon. and learned Friend agree that it is high time to make the Selective Employment Tax more selective on the penalty and premium sides? Would he further agree——

Mr. Speaker

Order. The hon. Gentleman must learn to put supplementary questions concisely. We want a fair distribution of time as well as of wealth.

Mr. Roberts

Would my hon. and learned Friend further agree that this type of firm plays a vital part in our export drive and in our technical and scientific advance?

Mr. MacDermot

I have already paid tribute to the work of this firm in the export field. All aspects of this tax have been kept under review, but I think that this suggestion might raise international difficulties.

Sir C. Osborne

In view of the previous question, would the hon. and learned Gentleman be careful not to give help to exporters who are already wealthy through exporting?

9. Mr. Boyd-Carpenter

asked the Chancellor of the Exchequer what are the results of his study so far of the effect of the Selective Employment Tax on the employment of disabled persons; and whether he will now bring forward remedial measures.

63. Mr. Cronin

asked the Chancellor of the Exchequer what information he has as to the employment prospects of disabled persons since the introduction of the Selective Employment Tax; and what [column 188]measures he will take to assist disabled persons.

Mr. MacDermot

We are keeping a close watch on the effects of the Selective Employment Tax on the employment of disabled persons. As was anticipated there is little evidence so far of any adverse effects.

Mr. Boyd-Carpenter

But is it not a fact that the general employment situation makes much more difficult the employment of disabled people? Is it not essential to be absolutely certain that no artificial handicap is put in their way?

Mr. MacDermot

I do not think that there is any handicap here. But the statistics of unemployment in those industries which do not get the premium or refund show that there has been proportionately less effect on the disabled than on those who are not handicapped.

Mr. Iain Macleod

Does the hon. and learned Gentleman recognise that this was the very first matter which caused concern on both sides of the House when his right hon. Friend's proposals were brought forward? He has received deputations from the British Legion and other people who have expressed their anxiety about the effect of this tax on the disabled.

Mr. MacDermot

I personally have not received deputations. The right hon. Gentleman is quite right in saying that this was a matter which was discussed at great length during our debates. All that I am pointing out is that the results bear out what we said in reply to the suggestions in those debates.

22. Mr. Palmer

asked the Chancellor of the Exchequer what estimates he has made of the total amount of selective employment tax which will be collected from retail Co-operative societies in a full year and of the total amount of premium and refunds likely to be paid to the tobacco and brewing industries in a full year.

Mr. MacDermot

Very broadly, about £11 million in a full year. I cannot at this stage make reliable estimates of premium and refund payments to particular industries.

Mr. Palmer

But is my hon. and learned Friend happy about the distortion of true social values brought about [column 189]as a result of the working out of the Selective Employment Tax? When he gets the figures and is amazed by them, will he think again?

Mr. MacDermot

I do not know whether my hon. Friend is referring to the contrast which he draws in his Questions as being a distortion of true social values. Both tobacco and beer are already subject to a heavy Excise Duty. This tax was designed to bear on services, and the retail outlets for tobacco and beer, like those for other manufactured goods, are subject to the tax.

Mr. W. T. Williams

Is my hon. and learned Friend aware that about 80 per cent. of all the distribution turnover of the co-operative societies is in essential goods like food and fuel? Will he now—after all, he has had seven months to look at this—look at the way in which rebates are made and premiums given back, to restore what seems to many of us on this side a proper respect for proper priorities?

Mr. MacDermot

Yes, Sir. My right hon. Friend has undertaken to keep this tax under review and this is being done.

Mrs. Thatcher

As Niall MacDermotthe hon. and learned Gentleman says that he cannot yet make an estimate, can he at least say when the premiums in the Question will be paid?

Mr. MacDermot

The premiums will begin to be paid in January.

Mr. Biggs-Davison

Is not this Government becoming the despair of the Co-operative movement? Is not this movement one which should not be attached to any political party and is it not a fact that many co-operators are turning to the Tory Party?

Hon. Members

Hear, hear.

Mr. MacDermot

I am very glad to see the new-found interest of the hon. Member and other hon. Members opposite in the Co-operative movement. I can assure him that the movement is not despairing of the Government.

32. Dr. John Dunwoody

asked the Chancellor of the Exchequer if he will seek to introduce an additional element of selectivity into the Selective Employment Tax in order to assist the development areas.

[column 190]

Mr. MacDermot

We have the problem of the development areas very much in mind, but I cannot anticipate what changes may be made in this scheme.

Dr. Dunwoody

Would not my hon. and learned Friend agree that many of the development areas are facing a very serious situation indeed? In view of his right hon. Friend's Answer to an earlier Question—to the effect that consideration is being given to shielding these areas—will he give very serious consideration to the suggestion that S.E.T. should be used to differentiate between the development areas and the rest of the country?

Mr. MacDermot

Yes, Sir. My right hon. Friend made it clear in the Finance Bill debates last summer that this is a matter which he would study, and that is being done.

Land Commission Bill (Levy)

10. Mr. Boyd-Carpenter

asked the Chancellor of the Exchequer what are his estimates of the annual loss of revenue in respect of Income Tax, Surtax, Corporation Tax, Capital Gains Tax, and Stamp Duty, respectively, consequent upon the bringing into operation of the levy to be imposed under the Land Commission Bill.

Mr. MacDermot

I would refer the right hon. Member to the Answer given to him by my right hon. Friend the Minister of Land and Natural Resources on 13th June last. [Vol. 729, c. 1005.]

Mr. Boyd-Carpenter

As that Answer contained no information whatever, does it follow that the Government are imposing the elaborate apparatus for the collection of this levy without any evidence that they will collect any substantial amount of revenue net at all?

Mr. MacDermot

No, Sir; we will collect a substantial amount. The reason why the right hon. Gentleman cannot be given the figure for which he has asked was explained in the previous Answer. The fact is that Capital Gains Tax applies only to gains as from 5th April, 1965. It follows, therefore, that any loss of tax due to elimination of the development value will have very little effect in the initial years.

[column 191]

Exchange Control (Statutory Instruments)

11. Mr. John Smith

asked the Chancellor of the Exchequer whether he will now consolidate the Statutory Instruments relating to exchange control.

Mr. MacDermot

Separate Statutory Instruments are made for separate subjects and these are consolidated with their amendments from time to time.

Mr. Smith

Is the hon. and learned Gentleman aware that the Conservative Party, when it was in office, issued only nine of these Orders, but that now there are 49, and that this unco-ordinated mass of very complicated instructions hampers the earning of foreign exchange?

Mr. MacDermot

I am well aware that when the Conservative Party left office it left us a situation which required the issuing of a considerable number of additional Orders.

Australia (Private Portfolio Investment)

13. Mr. Ridley

asked the Chancellor of the Exchequer by what authority he imposes restrictions on private portfolio investment in Australia by United Kingdom residents.

Mr. Callaghan

Under the voluntary programme announced in my Budget Speech, I asked institutions not to increase over a period their holdings of securities denominated in the currencies of Australia and the other developed sterling area countries. The Control of Borrowing Order, 1958, regulates some borrowing in this country by those residents outside the United Kingdom.

Mr. Ridley

Is the right hon. Gentleman aware that the Control of Borrowing Order simply applies to borrowers in Australia and has no legal force on investors here? Therefore, by what authority did the Bank of England write and tell investors that they were not to take up rights in various issues by Australian companies? Surely it had no authority whatsoever for making that suggestion.

Mr. Callaghan

The legal position is quite clear: there is authority for this. But I am aware that it is causing some difficulty. Now that it has been brought [column 192]to my attention, I am having the matter examined to see what easement can be made.

Industry (Investment)

14. Mr. Ridley

asked the Chancellor of the Exchequer what consultations he has had with industry and what steps he now intends to take to stimulate investment.

Mr. Callaghan

The Government continue to be in close touch with representatives of industry through formal and informal channels. A statement about bank credit was made on 1st November advising industry that credit is available for export requirements and productive investment. As for the last part of the Question I would refer the hon. Gentleman to my answer on 25th October to the hon. Member for Worcestershire, South (Sir G. Nabarro).—[Vol. 734, c. 815–17.]

Mr. Ridley

Is the right hon. Gentleman aware that investment will drop very seriously next year unless he takes action? Is he further aware that the running attacks on profits, dividends, and unearned income, which the Government have made have caused this situation, and that it is necessary for the Government completely to change their policy so that they once more encourage people to save and to invest?

Mr. Callaghan

That seems to be a preamble to a speech which the hon. Gentleman will no doubt hope to make tomorrow or the next day. I can only say that if he takes the total level of investment, private and public, I very much doubt whether there will be a decline next year. Public investment is of great importance in this regard, certainly in its economic aspects, but I am continuing to examine this matter, and I hope to have more to say about it in the course of the debate if I catch your eye, Mr. Speaker.

Sir G. Nabarro

Has the right hon. Gentleman perceived that the Prime Minister last night at Grosvenor House issued a series of exhortations to industry for further private investment? Will he point out to the Prime Minister that it is of little value for private investors to buy equities if they are to be sequestrated shortly afterwards by iron and steel [column 193]arrangements, or other nationalisation Statutes? Is not this an invitation to private investors to lose their money?

Mr. Callaghan

My reading of the situation recently has been that a great many investors seem to have been wanting to get out of equities into gilt-edged, so I doubt whether the steel stock will have any adverse effect on them.

As regards the general position, my right hon. Friend the Prime Minister relied not only on exhortations. Yesterday the President of the Board of Trade issued detailed information about the way in which manufacturers can get cash grants, money in the pocket, 20 per cent. or 40 per cent. of their expenditure.

Mr. Ridley

In view of the unsatisfactory nature of that reply, I beg leave to raise the matter on the Adjournment at the earliest possible opportunity.

Hotel Staff, London (Trade Unions)

15. Mr. Winnick

asked the Chancellor of the Exchequer whether he will give instructions that major London hotels which refuse to recognise trade unions for their staff shall not be used for Government functions.

Mr. MacDermot

Any such action in advance of the Report of the Royal Commission on Trade Unions and Employers Associations would be premature.

Mr. Winnick

In the meantime, should not the Government express their strong disapproval of these major London hotels which, in this day and age, refuse to give their staff the elementary right of belonging to a trade union?

Mr. MacDermot

Yes, Sir. I endorse what my hon. Friend has said. We expect every employer to recognise trade unions in this day and age.

Mr. John Smith

Should not the hon. and learned Gentleman encourage the Government to reduce the number and cost of Government functions?

Mr. MacDermot

That is a separate question, and I would not accept it in the form in which the hon. Gentleman has put it.

[column 194]

Prices and Incomes Policy (Holiday Entitlements)

16. Mr. Allason

asked the Chancellor of the Exchequer when improvements in holiday entitlements, held up under the prices and incomes policy, may be implemented.

Mr. MacDermot

The only commitment of this kind held up by the stand-still applied to a Post Office grade of three persons. It will be implemented on 1st January, 1967.

Mr. Allason

There is a firm in my constituency which has been forced to hold up an agreed holiday benefit scheme because of the Government's policy. The White Paper which has been introduced says that this will apply to holidays until 30th June next year. May we have some further guidance as to what sort of holidays can be had by people before and after 30th June next year?

Mr. MacDermot

Any general questions about the application of the prices and incomes policy in the private sector is a matter for my right hon. Friend the First Secretary of State, but there are a number of cases of this type outstanding in the public sector and they, like the one to which the hon. Gentleman referred, will be subject to the criteria for the period of severe restraint.

European Economic Community

17. Mrs. Renée Short

asked the Chancellor of the Exchequer what assessment he has made of the rise in the cost of living which would follow Great Britain's entry into the Common Market.

Mr. Callaghan

Apart from the effect of higher food prices, which would increase the cost of living, I do not find it possible at this stage to make a meaningful forecast of the effect on the Retail Price Index.

Mrs. Short

Is my right hon. Friend aware that even the conservative estimate of the rise in the cost of food, which is not the only effect of Britain going into the Common Market, will have a very serious effect on the standards of living of all the lower-paid people in this country, not least the 15 per cent. who are below the poverty line? Does my right hon. Friend intend to see that all wages [column 195]and salaries are raised to keep pace with the rise in the cost of living?

Mr. Callaghan

The effect on food prices is quite clear. Spread over a period, it will be equivalent to 2½ per cent. to 3½ per cent. My hon. Friend asked what would be the effect on the index. This will be affected under entry by the removal of duties on a wide range of non-agricultural goods. Over any transitional period, increased duties on these items for which the E.E.C. common external tariff is higher than that of the United Kingdom will relieve the Exchequer of the major part of the burden of supporting agriculture. I do not think that it is possible to give a reasonable forecast where we will end up at the end of the day in terms of an increase.

Sir H. Harrison

Is the right hon. Gentleman aware that his colleague the Minister of Agriculture is making many speeches, reported in the Press, about the great increase in the cost of food? It might, therefore, be reassuring if he could get out a statement if there was a decrease in other articles.

Mr. Callaghan

I hope that my answer will show that there are minuses as well as pluses in this forecast. My right hon. Friend the Minister of Agriculture is making a great many speeches to the satisfaction of his audiences, and especially the farming community.

Bank of England Governor and Director (Speeches)

18. Mr. Michael Foot

asked the Chancellor of the Exchequer whether he will issue a direction to the Bank of England, in the public interest, that no Governor, Deputy Governor or Director of the Bank shall make speeches on public policy until such speeches have been approved by him.

49. Earl of Dalkeith

asked the Chancellor of the Exchequer what is his current practice in issuing instructions to top executives of the Bank of England to the effect that public speeches made by them should in the public interest secure his approval in advance.

72. Mr. Dickens

asked the Chancellor of the Exchequer if he will ensure that statements on public policy made by the [column 196]Governor, Deputy Governor or Directors of the Bank of England are submitted to him for prior approval.

Mr. Callaghan

No, Sir. I have issued no instructions in this matter.

Mr. Foot

There may be excellent grounds for permitting these gentlemen to say what they think, but does not my right hon. Friend think that steps should be taken to impress on the Bank of England and on the Governors that they are not a completely irresponsible organisation, and does not my right hon. Friend think, in particular, that it would be a courtesy to the public if the Governors and Deputy Governors of the Bank of England, when they are talking about wages—such as in a recent speech from one of them—would tell us their wages, when they had their last increase, and whether it remotely conformed to the norm which applies to the rest of the community?

Mr. Callaghan

I think that the speeches made by the Governor, Deputy Governor and Directors of the Bank are made responsibly. They are made because they think that they have advice to give, and it should be accepted in the spirit in which it is offered, or rejected if it is not thought to be appropriate.

Earl of Dalkeith

Will the right hon. Gentleman assure the House in the most categoric terms that he will never yield to pressure to gag or censor these gentlemen in view of the catastrophic effects which that would have on overseas confidence in sterling?

Mr. Callaghan

Whatever my inclination, and like my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) I am not one of those who rush to censor speeches, I have the feeling that it would avail me very little if I were to try to censor the speeches of people like Sir Maurice Laing, Mr. Cecil King, Sir William Carron, Lord Robens, or Lord Nelson.

Mr. Dickens

Is my right hon. Friend aware that many of us on these benches take strong exception to the archaic pre-Keynsian advice being given to the Government from higher quarters in the Bank of England? Is he further aware that these feelings are the more deeply held because we are becoming more rapidly [column 197]aware that the Bank of England is not publicly accountable to this House?

Mr. Callaghan

No, Sir. I am not aware of the opinion expressed in the last part of the question. As to the first part, I obtain a great deal of advice and help from the Bank of England, and much of it is very useful and very valuable.

Mr. Biffen

Is the right hon. Gentleman aware that when Lord Cromer was Governor he used to make most welcome statements about prestigious public expenditure east of Suez, which might well have come from the hon. Member for Ebbw Vale (Mr. Michael Foot)? Will he, therefore, be very careful before accepting any of the advice proffered to him on this subject from below the Gangway?

Mr. Callaghan

This only shows that I receive varying advice, much of it good, some of which I do not find acceptable.

Children (Family Allowances)

20. Mr. McNamara

asked the Chancellor of the Exchequer what representations he has received for the abolition of child allowances permitted for Income and Surtax purposes and their replacement by more adequate family allowance benefits; and what reply he has sent.

64. Mr. Cronin

asked the Chancellor of the Exchequer what is his policy with regard to abolishing child allowances for tax purposes and increasing family allowances.

Mr. Callaghan

I have not received direct representations on this matter, and I cannot add to what has been said on this subject by my right hon. Friend the Minister of Social Security.

Mr. McNamara

Can my right hon. Friend then say what consideration he is giving to this problem in his Department?

Mr. Callaghan

As I think has been stated, an examination of this problem is going on in the Government at the moment.

Mr. William Hamilton

Can my right hon. Friend give an assurance that the Inland Revenue itself is not creating obstacles and objections to being used [column 198]for social purposes, as suggested in the Question?

Mr. Callaghan

I am responsible for the Inland Revenue and would therefore take full responsibility for any of its actions. It would, of course, be appropriate for it to advise me on the effects of changes of this sort on the taxable capacity of individual taxpayers.

Mrs. Thatcher

In the consideration of this matter which is going on, will James Callaghanthe right hon. Gentleman take into account the fact that child allowances exist to ensure that the Revenue takes less from the man with family commitments than from the man with identical income and that any change in that situation would be bound to redound very badly on the family man?

Mr. Callaghan

The first part of the proposition is clearly true. As to the second, I suppose that it would depend on what compensation was given in the shape of family allowances

21. Mr. McNamara

asked the Chancellor of the Exchequer if he will make an estimate of the cost to the Exchequer of the abolition of Income and Surtax allowances for children, together with other welfare benefits such as school meals, and their replacement by a standard family allowance of 25s. for the first child and £1 each for other children in the family.

Mr. Callaghan

Assuming that parents bore the full cost of school meals and milk, this proposal would yield a substantial net saving to the Exchequer.

Mr. McNamara

In view of that fact, would my right hon. Friend consider introducing such a scheme in his next Budget?

Mr. Callaghan

I think that my hon. Friend will expect only the traditional reply to that over-optimistic question.

Mr. Iain Macleod

But could the right hon. Gentleman tell us—this is such an important matter, as regards both this Question and the last—whether his Answers mean that what is being studied is part of the Government's long-term plans, or is it linked in any way to what was said about lower-paid workers in the recent White Paper?

[column 199]

Mr. Callaghan

No, Sir. It is related to long-term plans. It will obviously have an impact on any statements in the White Paper, but it does not spring directly from that.

Nationalised Industries (Manpower)

23. Sir E. Errington

asked the Chancellor of the Exchequer whether, in view of the Government's policy of reducing hoarding of labour and over-manning in industry, he will appoint a committee to examine and report on the manning of the nationalised industries.

Mr. MacDermot

The efficiency of the nationalised industries is a continuing object of Government policy, and we are considering whether any further measures are needed to stimulate increased productivity, including of course the efficient use of manpower by these industries.

Sir E. Errington

Does the hon. and learned Gentleman claim, then, that the nationalised industries are free from the faults of private industry, or is he just plainly complacent?

Mr. MacDermot

I do not think that there was anything complacent in my Answer. I hope that the hon. Gentleman will study what I said.

Building Societies (Mortgage Interest Rates)

24. Mr. St. John-Stevas

asked the Chancellor of the Exchequer whether he will make a statement of Government policy on mortgage interest rates chargeable by building societies.

59. Mr. Winnick

asked the Chancellor of the Exchequer what action he intends to take on the National Board for Prices and Incomes Report on the Building Societies.

Mr. Callaghan

I conveyed to the Building Societies Association on 14th November the Government's view that, in present circumstances, the 6¾ per cent. mortgage rate should be maintained, and I am proposing to them a study of the real requirements of reserves and liquidity.

Mr. St. John-Stevas

But is not that quite unrealistic advice to offer the building [column 200]societies, in view of the high level of interest rates created by the Government? Would not the best contribution which the Chancellor can make in the present situation be to honour his election pledge and revive the mortgage option scheme, which seems to have gone into permanent deep freeze?

Mr. Callaghan

The hon. Gentleman will be glad to hear that the mortgage option scheme legislation will be appearing before very long. On the first part of his question, interest rates are, of course, not a purely domestic matter; they have international repercussions. I am not able to say at the moment in what way world interest rates will be moving, but there is a general expectation, I think, that, over the next few months, they are more likely in the world as a whole to turn downwards than to move upwards.

Mr. Winnick

Is my right hon. Friend aware that owner-occupiers consider that there would be no justification for any increase in the mortgage interest rate? Would he not agree that the report shows that the reserves of the societies are large enough for no increase to be necessary for some considerable time?

Mr. Callaghan

The last part of that question refers to exactly what I should like to study with the building societies. This proposition was put to them many months ago. As a result of the discussion, I then referred it to the Prices and Incomes Board and so far, I think, the Board has accepted and reinforced my view that there is a real and serious subject for discussion here about what the proper level of reserves should be.

Mr. Lubbock

Is the right hon. Gentleman aware that, although the Building Societies Association may be considering the matter further in the light of the Report of the Prices and Incomes Board, some members of the Association are disregarding his advice and that the Lambeth Building Society, for example, has increased its rates to 7¾ per cent.?

Mr. Callaghan

There has never been, especially among some building societies, agreement to maintain a fixed rate, but the recommended rate is what we are talking about here. It is that rate on which I have commented.

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Capital Gains Tax

25. Mr. Stratton Mills

asked the Chancellor of the Exchequer why he is unable to give a figure for the total losses for Capital Gains Tax.

Mr. MacDermot

Because these statistics are not collected.

Mr. Stratton Mills

Surely this is most curious. Will this information not be required by the Chancellor in formulating his forward Budget estimates? Would not the hon. and learned Gentleman agree with me that, having regard to the very heavy falls in the Stock Exchange, the agreed forward losses are likely to exceed many scores of times the very small amount collected by this miserable tax?

Mr. MacDermot

No, Sir. The information is not required. I thought that hon. Members opposite were anxious that we should restrain the growth in the Civil Service and not increase it by collecting statistics which we do not need.

Unemployment

28. Sir C. Osborne

asked the Chancellor of the Exchequer what assurances he gave to the Trades Union Congress Economic Committee on 7th November about unemployment and the figure at which he will take special action; what plans he is now making on the action to be taken; and why this assurance was not given first to the House of Commons.

Mr. Callaghan

I had a useful exchange of views with the Trades Union Congress Economic Committee at their request, but as the meeting was private, and no official account of the proceedings was issued, the hon. Gentleman should regard with some scepticism some of the accounts that later appeared.

Sir C. Osborne

Does the right hon. Gentleman remember that the leader in The Times said that the T.U.C. leaders were disappointed with what he said to them? Can he now tell the House to what height unemployment will rise before he reflates? Second, how can he reflate without encouraging inflation again?

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Mr. Callaghan

As regards The Times leader writer, I am not aware that he was present at the meeting of the T.U.C. Economic Committee and I do not know how he knows what was said there. As to the substance of the question, this is not the moment to reflate. The present moment and for some time to come is a period for encouraging productive investment and the diversion of the interests of firms into the export market. It is along these lines that the Government intend to pursue their policy.

Mr. Orme

Is my right hon. Friend aware that the unemployment figures have now already exceeded by 70,000—the total is up to 560,000—the figure which his right hon. Friend the Prime Minister forecast as a high figure? Does he not agree, as do many on this side of the House, that the time is now ripe for reinflation as well as added reinvestment?

Mr. Callaghan

I am sure that my hon. Friend does not want to take us back to the same situation that over-inflation got us into last summer. This would be the wrong moment at which to start to reinflate consumer demand, and the Government have no intention of recommending that course to the House.

Mr. Edward M. Taylor

Whatever assurances may have been given the T.U.C. or anyone else, will the right hon. Gentleman assure us that he is aware that in Scotland it takes six times as long for a recovery programme to work through the economy compared with the rest of the country, and will he, therefore, consider having a recovery programme on a regional basis?

Mr. Callaghan

Yes, Sir. The care of the development areas is a very important matter, especially in a period when we have taken heat out of the economy. A lot of the measures which have been taken—indeed, many of them taken by the previous Administration as well as by the present one—are having the effect of shielding the development areas more than they would otherwise have been shielded. I am not satisfied with the extent to which this has gone and I assure the hon. Gentleman that the Government will certainly consider all possible ways of shielding these areas. Nevertheless, it [column 203]would be wrong to indulge in a general consumer reflation at this time.

Mr. Iain Macleod

Can the right hon. Gentleman tell us, at the same time as making that categorical statement about reflation, whether it is not to some extent at variance with what he said earlier about investment? Is he limiting what he said to consumer reflation in the narrower sense, or is he speaking more generally?

Mr. Callaghan

I think that the right hon. Gentleman will find that I was careful to use the phrase “consumer reflation” in this regard.

Mr. Michael Foot

Reverting to my right hon. Friend's original Answer, does he believe that those who are being made unemployed in Wales at the present time are moving into productive employment, and, if so, would he say in what numbers?

Mr. Callaghan

This is partly true. It is certainly true, for example, that in the coal mining industry of South Wales, there are now more recruits than there have been for a long time and that much of the wastage has fallen away. To that extent it is a net gain. There is also a substantial improvement in a number of essential services in South Wales, for example such services as the transport service. To that extent it must be regarded as a net gain, too. However, I say to my hon. Friend and the House that no one should be satisfied until this process is completed, that we are now going through an interim stage and that the last thing I would recommend is that we should return, by means of the old methods, to a situation from which we have just emerged.

Manufacturing Industry (Investment)

29. Mr. Barnett

asked the Chancellor of the Exchequer if he will give an estimate of the prospects for manufacturing investment; and if he will make a statement.

30. Mr. Bruce-Gardyne

asked the Chancellor of the Exchequer what progress he has made to date with his review of the implications of the forthcoming investment slump in manufacturing industry.

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Mr. Callaghan

The forecasts of manufacturing investment are that it will be lower in 1967 than in 1966. I am keeping the situation under close review.

Mr. Barnett

If my right hon. Friend cannot bring forward the date for paying the investment cash grants, will he consider the possibility of issuing investment grant vouchers which could be discounted with banks, so utilising the money which the banks now have to the ends he desires?

Mr. Callaghan

This is one of the matters to which I have given consideration, in conjunction with my right hon. Friend the President of the Board of Trade. I do not think it would be possible to give this additional work to the new offices which are now being established. However, I hope to have more to say on the subject of investment, if I catch your eye, Mr. Speaker, when we debate this topic later in the week.

Mr. Bruce-Gardyne

Would the right hon. Gentleman say when the prolonged review on which he has been engaged will be finished? Would he not agree that it is not much encouragement to manufacturers to invest when their prices, dividends and markets are frozen by the Government? Will he do something about this?

Mr. Callaghan

Not in the short term. I believe that very many people, especially in private manufacturing, recognise with the Government—and, I hope, with the Opposition and the hon. Gentleman—that unless we are to avoid a constant collision when we have economic growth with capacity, it is vital that they should encourage any productive investment now, irrespective of the immediate return.

Diabetic Confectionery and Soft Drinks (Taxation)

31. Dr. John Dunwoody

asked the Chancellor of the Exchequer if he will end the taxation of diabetic confectionery and soft drinks.

Mr. MacDermot

This proposal has been considered sympathetically on a number of occasion, but I regret that it would create too many anomalies and trade distortions to be acceptable.