Mr.Speaker, I move—

The Republic of South Africa has a proud tradition of financial integrity and stability, a tradition which was created by a series of Ministers of Finance of exceptional calibre. In this, my first Budget Speech, it is fitting that I should pay tribute to my immediate predecessor, Dr. Eben Dönges. He not only maintained this tradition but also imparted new Iustre to his office. In the eight years in which he held the portfolio of Finance he managed the country’s monetary affairs with his characteristic combination of integrity and humanity, and he commanded the highest respect also in foreign financial circles. During his term of office he sometimes had to bat on a sticky financial wicket, but with imperturbable determination and skill he kept his wicket intact. Now that he has been called to the highest office in our Republic, I wish, with great respect, to express my esteem and gratitude for the outstanding service he has rendered in connection with our country’s finances.

It is now my task to continue our financial tradition, and in this endeavour I shall not spare myself. In the modern world the management of the finances of a State is sometimes a difficult and complicated matter. Yet I believe that the old-fashioned virtues of industry and thrift still remain the key to our financial welfare. Work and save—if we make this our motto, we can look forward to lasting prosperity and growth as well as to the solution to our immediate economic problems.

The maintenance of old and tested financial virtues does not, however, mean that we should not adopt new methods to deal with the problems of the modern world. Indeed, it will be one of my aims to modernize our financial system and to adapt it to changed circumstances. Here we cannot move too rapidly, as the financial world is conservative and changes should preferably be brought about gradually. Nevertheless, I shall try, in this Budget already, to make the fiscal system a more useful instrument in the battle to reconcile economic growth with financial stability.

In the first place, it is necessary to present a review of the current state of the South African economy.

THE INTERNAL ECONOMIC SITUATION

The year 1966 was another exceptionally good year for the South African economy. The continuing inflation was admittedly an undesirable phenomenon. But it was only one feature of the economic situation during this period. Against this must be recorded the fact that in 1966. as in 1965, the real gross domestic product increased by no less than about 5½ per cent and that prosperity, full employment and buoyant business conditions continued to exist in virtually every sector of the economy. In addition, as I shall indicate in more detail later, there was also a substantial surplus on the balance of payments.

Gross domestic product maintained a fairly constant growth rate throughout the year. On the other hand, gross domestic expenditure, i.e. total capital expenditure or investment, private consumption and current expenditure by public authorities increased in an irregular fashion. After declining noticeably during the last quarter of 1965 and rising only moderately during the first half of 1966, it increased much more rapidly during the second half of 1966.

This fluctuation in total expenditure was a reflection of a clearly perceptible turn in the course of the business cycle from about the second quarter of 1966. Honourable members will remember that from about the middle of 1965, after a sharp upward movement which lasted about four years, a definite levelling-off tendency in the total monetary demand for goods and services became noticeable. This tendency was welcomed by the authorities at the time because total expenditure had increased too rapidly during the two preceding years and had promoted inflation. But after this levelling-off had lasted scarcely three quarters, a strong new upward movement in total monetary demand developed, accompanied by a new upswing in a wide variety of economic activities and transactions.

This course of events was clearly illustrated, for example, by the movements of the main components of total expenditure. Fixed capital expenditure in the private sector did not rise much in 1966 above the exceptionally high level of 1965; in the case of public corporations it even declined moderately, and only in the case of public authorities did it increase noticeably, namely by about 9 per cent. But in both the private and public sectors it moved downwards during the first half of 1966 and then showed a new upward tendency during the second halt. Investment in inventories also fluctuated considerably. After declining sharply in the last quarter of 1965 and the first quarter of 1966, it again began to rise rapidly and by the fourth quarter of 1966 was already exceptionally high.

Current expenditure by public authorities and private consumption, on the other hand, increased more steadily during the course of 1966. But over the year as a whole the former increased by R103 million or about 11 per cent and the latter by R426 million or about per cent. Gross domestic saving increased by only about 8 per cent in 1966, compared with 17 per cent in 1965.

Virtually all other economic indicators, including exports, imports, bank debits, motor cat sales and real estate transactions, also clearly showed the new upswing in the economy from about the second quarter of 1966.

As during the previous year, manufacturing again made a substantial contribution to the high growth rate. Thus the seasonally adjusted index of the physical volume of manufacturing production was 6.2 per cent higher during the first ten months of 1966 than during the corresponding period of 1965, which more or less represented the same rate of increase as during the previous year.

In the building and construction industry there were also signs of a new upswing during the second half of 1966, after activity had declined earlier in the year beneath the record level of 1965. The value of “building plans passed”, for example, after reaching a low point in the first quarter of 1966, moved up rapidly again during the rest of the year, while the downward tendency in the value of “buildings completed” was transformed into a strong new increase from about the middle of the year.

Owing to improved farming practices and the extensive and comprehensive assistance afforded by the State, agriculture remained in a healthier condition than expected, despite the protracted and widespread drought during the past year. The volume of production was maintained. Indeed, owing to the firm demand for food products arising from the high level of economic prosperity in the country, the gross value showed a rising tendency. In addition, the subsidies on forage and on the transport thereof helped considerably to reduce livestock losses to a minimum. As regards agronomy, provision of sufficient credit enabled producers to make full use of the widespread rains which were experienced this summer. The prospects for the coming season are accordingly very promising and it can be expected that the industry will again assume its place as an important exporter and therefore also as an earner of foreign exchange. The other sectors of the economy should also benefit considerably from this.

Gold production showed a relatively small further increase during the past year, namely from R767 million in 1965 to R776 million in 1966. There was, however, a welcome increase of roughly 20 per cent in the value of other mining production, mainly owing to increases in the value of copper and diamond production.

The new upswing in the economy in 1966 was not a welcome phenomenon, since it took the form mainly of a more rapid increase in capital and consumption spending and not of an accelerated growth of physical production or real income. As the situation was still one of full, even over-full, employment of productive factors, the growth rate of production could not be increased to match the accelerated increase in expenditure. This accordingly created the danger that the inflation might be considerably aggravated.

As I shall show later, this threat was averted by prompt action by the authorities and the internal inflationary pressure did not, in fact, increase significantly. On the other hand, in the existing circumstances it also did not decline, and the price level continued to rise at a rate which, although relatively low in comparison with that of most other countries, was nevertheless disturbingly high for our economy. The seasonally adjusted consumer price index, for example, increased by 3.7 per cent between December 1965 and December 1966, compared with 3.2 per cent during the previous year, while the wholesale price index increased by 4.4 per cent as against 2.4 per cent the previous year. During the last quarter of 1966 there was a tendency for these two indices to level off, but in January, 1967, they both showed a fairly strong increase again.

As usual, the internal economic situation during 1966 was influenced by and itself exerted a strong influence on—

THE BALANCE OF PAYMENTS

Honourable members will remember well that our balance of payments on current account showed large deficits during the second half of 1964 and the first three quarters of 1965, mainly as a result of the excessive rise in total capital and consumption expenditure and the abnormal increase in imports which accompanied it. As there was furthermore a moderate net outflow of private capital during most of this period, our total gold and foreign exchange reserves declined sharply until they reached a low point of R340 million at the end of September, 1965. By that time, however, the authorities had already applied several monetary measures to reduce the overspending and from August, 1965, import control was also tightened to ensure that the reserves did not decline too far.

What happened after that was a surprise to everybody. The downward tendency in the reserves was not only halted but transformed into the most rapid reserve increase in any period of ten months in our history, namely from R340 million at the end of September 1965 to R604 million at the end of July 1966, an increase of R264 million.

For this there were two main reasons. In the first place, the deficit on the current account of the balance of payments, which had amounted to R271 million in 1965, was changed into a surplus of R36 million dining the first half of 1966, mainly owing to a very sharp decline in imports. Secondly, after six years of net outflow, there was suddenly a large net inflow of private capital from abroad, namely R128 million during the second half of 1965 and R70 million during the first half of 1966, of which more than half represented long-term capital. During the first half of 1966 we therefore had the abnormal situation that our balance of payments showed a large surplus on both current and capital account.

Considered purely from the point of view of the gold and foreign exchange reserves, this transformation of the balance of payments position was a desirable development. But from the viewpoint of combating inflation it was definitely a complicating factor, for the very reason that it was such a rapid and dramatic about-face. Indeed, it was clearly one of the main reasons why a new upswing in total spending developed so quickly—too quickly. The large inflow of capital and the tightening of import control, and from the second quarter of 1966 also a sharp increase in exports, combined not only to create an inflationary monetary climate but also to stimulate spending directly. At the same time, the rapid rise in the reserves was itself a factor which promoted business optimism. In other words, owing to unexpected circumstances, we succeeded so well and so rapidly in attaining one of our objectives, namely high reserves, that the attainment of another major aim of economic policy, namely relative price stability, was made much more difficult.

When, however, it became clear in which directions matters were developing, the Government acted promptly and adjusted its policy to the new conditions. As far back as the 8th July a variety of new anti-inflationary measures were announced, to which I shall refer again. One of these measures was the relaxation of import control, which was aimed at preventing any further accumulation of money and near-money in the internal economy and at increasing both the availability of goods and the degree of competition in the economy, with the express purpose of curbing the increase in private capital expenditure.

This relaxation, together with the new upswing in the economy, caused imports to increase so rapidly that a small deficit arose on the current account of the balance of payments during the second half of 1966, namely of about R13 million. Although there still continued to be a net inflow of private capital —about R54 million during the second half of 1966—this change, in conjunction with the repayment of certain foreign loans by the official and banking sector, was sufficient to let the total reserves decline from the peak of R604 million at the end of July 1966 to R589 million at the end of December. During the first two months of 1967 there was a further decline of about R60 million, so that the total reserves at the end of February amounted to about R529 million.

I am not perturbed by this declining tendency in the reserves, which will probably continue for some time. It forms part and parcel of our anti-inflationary policy and can to a large extent be looked upon as an exchange of reserves of foreign currency for reserves of goods. On balance, therefore, it strengthens our present and future economic position. In the meantime, we are proceeding with our other measures to keep the increase in total spending within sound limits and, in doing so, to ensure that our balance of payments will also remain in equilibrium in the long run and that our reserves do not decline too far.

Further light is shed on the inflationary conditions of the past year by an analysis of the—

MONETARY, BANKING AND FINANCIAL SITUATION

The total amount of money and near money in the hands of the private sector increased during 1966 by a further R155 million or more than 6 per cent. One reason for this, of course, was the balance of payments surplus, to which I have already referred. The other two main reasons were a considerable increase in credit extended by the banking sector to the private sector and a further, although noticeably slower, expansion of net bank credit to the government sector.

The result of this was that the ratio of money and near-money to gross national product showed only a slight decline during the course of the year and during the fourth quarter still stood at the abnormally high level of nearly 30 per cent. This excessive liquidity was definitely a factor which contributed to the continued inflation because it not only meant that considerable purchasing power still remained in the hands of private enterprises and individuals, but also left substantial scope for loans between business enterprises, the so-called “grey market transactions”. It therefore remains one of the main objectives of present monetary and fiscal policy to make money and near-money less abundant in relation to gross national products.

During the first half of 1966 the rapidly rising gold and foreign exchange reserves also tended to ease the money market, and the Treasury bill tender rate accordingly declined to below 4 per cent at the end of June. This tendency was, however, deliberately countered, as part of the anti-inflationary policy, by the issuing of more Treasury bills and the sterilization of the proceeds with the Reserve Bank, particularly after Bank Rate was raised in July from 5 to 6 per cent. The Treasury bill rate thereupon increased gradually during the second half of the year and, towards the end of the year and during the first two months of 1967, after the Reserve Bank’s gold and foreign exchange reserves had begun to fall more rapidly, this upward tendency became more pronounced. Last Friday the Treasury bill tender rate reached a level of 4.92 per cent.

As during the previous year, conditions in the capital market remained tight, mainly as a result of the abnormally strong demand for investment funds, and long-term interest rates showed a further upward tendency. The rate of interest on long-term government stock, for example, was raised in July from 6 to 6½ per cent.

Against this background, I would now like to turn to a brief discussion of—

MONETARY AND FISCAL POLICY

During the last quarter of 1966 it became evident that, in view of the persistent increase in spending to which I have already referred, the existing measures against inflation needed to be intensified and supplemented. My predecessor and I therefore announced certain additional measures on the 7th December. These measures included the following:

1. (1) Restrictions on expenditures by public authorities.
2. (2) The sterilization of excessive short-term funds through issuing more Treasury bills and withdrawing the proceeds from the money stream.
3. C3) The extension and tightening of the restrictions on bank credit.
4. (4) Earlier repayment of foreign loans in order to reduce the excessive amount of money in circulation.
5. (5) The relaxation of import control in order to increase competition, to keep prices more in check and to reduce money in circulation.
6. (6) The selective extension of price control where necessary.
7. (7) The combating of unsound trade practices which tend to keep prices high.

It is still too early to determine the full effect of these measures, but some of the steps have already shown definite results. As I have indicated, our imports have increased further and our foreign reserves have declined, while the excessive funds in the money market have to a large extent been absorbed, so that the interest rate on Treasury bills has increased.

According to reports which I have received from many sectors of the economy, however, there have to date been no indications of any strong disinflationary tendencies in the economy. On the contrary, nearly all branches of industry still have to cope with problems of labour shortages and rising wages and costs —i.e. problems which arise from an excessive demand for labour, goods and services.

Moreover, I must point out that there may be certain stimulating factors in 1967 which, if not countered, may intensify the inflationary pressure. The Government rejoices at, and is thankful for the beneficent rains which have fallen in so many parts of our country and for the relief which this will bring to the hard-pressed agricultural industry. The additional income for the farmers is welcome, but it is bound to aggravate the problem of inflation by inducing private consumption expenditure to rise still faster. This expenditure is already growing at a high rate and, if it were to rise even more rapidly, it could also stimulate private fixed capital expenditure still further. The high level of liquidity makes such an expansion of private expenditure possible despite the restrictions on the extension of bank credit.

Another factor which could aggravate the inflation is the expected rise in exports during 1967, not only of agricultural products, but also of minerals and perhaps manufactured goods. It is expected, however, that the effect of this increase, together with that of any further capital inflow, will be more than offset by higher imports.

Nevertheless, it is clear that we cannot take it for granted that the inflation will be curbed solely by the measures which have already been applied. Our fiscal policy must consciously aim at halting inflation—better still, at reversing it.

The first requirement is that Government expenditure must be kept as low as possible. In practise it is exceptionally difficult to curb the rise in Government spending. A very large part of the Government’s expenditure consists of interest on the Public Debt, civil and social pensions, subsidies to the Provinces, and other statutory or contractual payments which simply cannot be reduced. Another important part is in respect of defence and internal security, which for good reasons cannot be pruned much. A further large part is for salaries and wages, and here too, despite serious attempts to restrict the expansion of State personnel, an increase cannot be avoided.

Finally, there is capital expenditure on essential and urgent works which is unavoidable if the economy is not to be disrupted. Even such works are postponed or spread over a longer period where possible. Often, however, contracts were entered into long ago and little can be done to reduce the expenditure.

The second requirement is that Government expenditure should be financed in a non-inflationary manner, i.e. that this expenditure should be financed out of current revenue and genuine savings. For purposes of this aspect of fiscal policy the present form of our Budget is not very suitable. We can, for instance, show a surplus on Revenue Account and yet finance the Loan Account in such a way (for example, by means of credit from the Reserve Bank) that the total influence of the Budget will be extremely inflationary. A more useful instrument for fiscal policy is the so-called Cash Budget, which shows the actual inflow and outflow of money in the combined Government accounts (in this case the Revenue and Loan Accounts). It is not my intention at present to depart from the traditional form in which the Estimates are presented to the House, but in the course of this Budget Speech I shall make use of the new concept to indicate what the expected influence of the Budget on the economy will be.

I have already mentioned that net bank credit to the government sector increased moderately over the calendar year 1966. The net increase during the second half of 1966 was R20 million, but this figure includes the entire government sector, including the provincial administrations and the Administration of South-West Africa. The net indebtness of the Central Government’s Exchequer to the monetary banking sector actually declined by R21 million during the second half of 1966. Over this same period the Exchequer repaid a net amount of R15 million on foreign loans, while its net internal borrowing from the non-bank sector, including the Public Debt Commissioners, increased by R134 million. Since the middle of 1966 the Government has therefore succeeded in financing the Exchequer from non-inflationary sources, and it will be my task to continue with this policy during the coming financial year. Indeed, it is desirable that the Government should go even further and, if possible, reduce its net indebtedness to the banking sector; in this way fiscal policy will make a positive contribution towards combating inflation.

The third requirement of fiscal policy under present economic conditions is that it should promote saving and productivity, because greater saving and higher production constitute not only the best lasting measure against inflation but also the essential basis for our future prosperity and growth. This is a matter for our general economic and financial policy and not only for the Budget, but “Work and Save” will nevertheless be the slogan of this Budget.

In our statement of the 7th December, 1966, my predecessor and I emphasized the Government’s determination to win the battle against inflation. We are dealing with a cunning and stubborn enemy and it is essential that the measures of the 7th December be followed up and reinforced in this Budget by fiscal measures to reduce the excessive demand and to ensure the stability of the economy.

I now turn to the Government’s accounts for—

THE FINANCIAL YEAR 1966-’67

Hon. members will remember that Government departments were expected to reduce their expenditure on Revenue Account during the financial year 1966-’67 to approximately 1 per cent below the figure in the printed Estimates. I am pleased to be able to say that it is expected that this target will be reached— mainly however as a result of a considerable saving on the Defence Vote. It is very difficult to determine in advance the delivery and payment dates for large items on this Vote and the position may still change before the end of the financial year. I expect, however, that the total expenditure on Revenue Account (i.e. after deduction of estimated surrenders of R12 million) will amount to R1,245 million. Receipts will, it is estimated, amount to R1,282.5 million or 1 per cent more than the original estimate, mainly as a result of small increases in Inland Revenue and in the receipts of the Department of Posts and Telegraphs. After allowance for the transfer of R6 million to Loan Account, a surplus of R31.5 million is therefore expected.

On Loan Account, expenditure will probably amount to R510 million, after deduction of estimated surrenders of R2 million. This is considerably higher than the original estimate, mainly owing to the payment of R30 million to the External Procurements Fund for which provision was made in the Additional Estimates. The Government succeeded, however, in selling more Government stock locally than was originally expected, to such an extent that the Loan Account for the financial year will probably close with a credit balance of round about R34.4 million, despite the fact that the Government deliberately borrowed considerably less abroad than was originally intended.

If the accounts are drawn up on a cash basis, total expenditure on Revenue and Loan Accounts is expected to exceed total receipts by about R345.4 million; together with loan repayments of R309.3 million, a total amount of about R654.7 million for the year 1966-’67 must therefore be borrowed. Considerably more has in fact been borrowed (of which only R6 million abroad) and I expect that over the year the Exchequer balance will rise by R30.4 million. It cannot, of course, be deduced from this that Exchequer finance had a disinflationary effect over the financial year as a whole, as a part of the borrowed funds came from the monetary banking sector, i.e. from an inflationary source. The banks’ largest contribution was, however, made during the second quarter of 1966 and, as I have already indicated, Exchequer expenditures have in fact been financed in a disinflationary manner since then.

To use the surpluses which have been built up in the current financial year for expenditure in the next financial year would be inflationary under present conditions. For the present, it is therefore my intention to sterilize these surpluses by keeping them in the Reserve Bank or investing them temporarily and interest-free in the External Procurements Fund in order to reduce the interest burden on the latter.

I come now to—

THE REVENUE ACCOUNT FOR THE FINANCIAL YEAR 1967-’68

The printed Estimates make provision for expenditure of R1,384.2 million on Revenue Account. This amount is undoubtedly higher than I would have liked to see, but I can give Honourable Members the assurance that it would be exceedingly difficult to reduce this amount without eliminating highly important and urgent services. Indeed, with the cooperation of my colleagues the original amount requested was reduced by no less than R29 million.

The increases which remained, are spread over a large number of Departments. Mention must be made of the increase of R24 million in the Public Debt Vote above the revised figure for 1966-’67, the result of the current high interest rates as well as of the increase in the total debt. The provision on the Defence Vote is virtually the same as the original Estimate for the year 1966-’67, but R40 million above the revised figure for this year. Subsidies to Provinces show an increase of R10.5 million above the revised figure for the current year, Posts and Telegraphs R5.8 million (largely in respect of salaries), Social Welfare and Pensions R4.2 million, food subsidies R9.5 million and Education, Arts and Science R2½ million.

The ordinary man does not always realize what huge amounts the State spends on social services—services which, although perhaps not essential in the ordinary sense of the word, are probably supported by all Honourable Members. Social pensions—i.e. old age pensions, pensions for the blind, disability grants, maintenance grants and war veterans’ pensions are paid to 139,000 White and 427,000 non-White beneficiaries, and the total provision amounts to R91.9 million compared with R51.2 million only ten years ago. Provincial subsidies, which are mainly used for education and hospitals, require R189.0 million for 1967-’68, compared with R100.4 million in 1957-’58, while the direct provisions for the State departments of Health and of Education, Arts and Science for the next financial year amounts to R45.6 million and R48.0 million respectively, as against R21.2 million and R18.6 million ten years ago. Subsidies on maize, butter and bread require the large amount of R59.6 million, compared with R28.0 million in 1957-’58.

To the total provision of R1,384.2 million must be added a further R0.8 million in respect of a special subsidy to Natal which was not included in the printed Estimates.

SOCIAL PENSIONS

Hon. Members will understand that this Budget does not offer scope for concessions in regard to expenditure. I feel, however, that an exception is justified in the case of social pensions and beneficiaries. In the spirit of this Budget I want to provide not only a measure of relief to pensioners but also some recognition and encouragement to those who during their productive years saved for their retirement and whose pensions are for that reason being reduced at present. I therefore propose the following concessions:—

1. (1) The bonus which is payable in addition to the basic pension or allowance will be increased by R1 per month to R3 per month, and the children’s and settlers’ allowances adjusted accordingly. The additional allowance payable to war veterans will be increased by R1 per month.
2. (2) In the application of the means test, assets, both fixed and movable, to an amount of R2,400 are at present left out of account. This amount will be raised to R3,600 in respect of persons below the age of 70 years and to R4,800 in the case of those who have already reached the age of 70 years. Concessions similar to those which I have mentioned are envisaged in respect of the non-White races, in the customary relationship.
3. (3) A concession is also proposed in the case of the working wife whose husband has no earnings owing to age or physical disability, namely that in future only one third of the wife’s personal earnings will be taken into account when the means test is applied.
4. (4) In addition to the concession in respect of children’s allowances which has already been mentioned, it is also proposed that the income limit for family and maintenance allowances be raised by R24 per year per child.
5. (5) The proposed increase of R1 per month in the case of social pensions also involves an improvement in respect of the supplementary allowances payable to civil pensioners, as well as those supplementary allowances payable to railway pensioners for which the Central Government is responsible. The improvement means an increase of R1 per month per person, i.e. R2 per month in the case of a married person or someone with a dependant.

The total cost of the above-mentioned proposals is estimated at R4.6 million per year. The proposals will, however, only come into operation from the 1st October, 1967, and for the financial year 1967-’68 the cost will be R2.3 million.

PRODUCTIVITY

The promotion of productivity is one of the most important weapons in the battle against inflation, and the State already does a great deal, through the financing of technical education and in other ways, to achieve this objective. The main responsibility in this regard, however, rests with the private sector, although the Government will help where it can. The Productivity Advisory Committee which was created last year by the Bureau of Standards can play an important role in this campaign, and I feel that, as evidence of the Government’s interest, a direct contribution to this Committee is justified. An amount of R50,000 will be included in the Supplementary Estimates.

Total expenditure on Revenue Account for the year 1967-’68 is therefore estimated at R1,387.3 million.

ESTIMATES OF REVENUE, 1967-’68

The Government’s action against inflation will probably entail a somewhat slower rise in revenue than during the past few years, but at this juncture it is not easy to make an accurate estimate for 1967-’68. The income tax on gold mines will possibly yield substantially less than in 1966-’67, mainly owing to the large capital outlays planned by the gold mines, which will naturally be deducted from their taxable income. I have assumed that the taxable income of individuals will rise by approximately 8 per cent and that of companies (except mining companies) by about 5 per cent. The proceeds of other taxation have been estimated on the basis of the best information at our disposal. The total revenue for 1967-’68 at existing rates of taxation is then estimated at R1,380.6 million—R98.1 million or 7.6 per cent more than the expected revenue for 1966-’67, but R6.7 million less than the estimated expenditure for 1967-’68.

Before seeking methods to cover this deficit I shall first give a presentation of—

THE LOAN ACCOUNT, 1967-’68

Departments have requested the huge amount of R602 million on Loan Account— all in respect of essential services. Under present conditions, however, it is not enough that a service should be essential; it must also be so urgently necessary that it simply cannot be postponed without serious harm to the country. By strictly applying this criterion I have succeeded in reducing the total provision by R68 million to R533.8 million which is only R23.8 million or 4.7 per cent more than the revised figure for 1966-’67.

For the Department of Water Affairs an additional R19.9 million is requested, of which R10.8 million is intended for the Orange River project. Hon. members will agree with me that, while we are thankful that the drought has been broken in so many areas, we must now exert ourselves to make provision for any recurrence of these conditions in the future. The Railways request an additional R11 million for urgent and essential capital works. The only other large increase is in respect of the Provincial Administrations: loan funds of R55 million are requested for them—R14 million more than the revised figure for 1966-’67. These loans are urgently required, mainly for school and hospital buildings. There is a substantial reduction under the Vote Commerce and Industries owing to a decline in the requirements of the Industrial Development Corporation and because the amount required for the External Procurements Fund is considerably less than in the current year. The other Votes show relatively small changes.

In addition to the amount of R533.8 million in the Estimates, provision must also be made for repayments of local stock (R253.4 million), of foreign loans (R52.3 million) and sundry items (Rll.2 million)—altogether R850.7 million.

Recoveries on Loan Account (including the taxes which are credited to this Account) will, it is expected, amount to R120.2 million. The remainder which has to be met from loans (including conversions) or other sources is therefore R730.5 million.

CASH BUDGET, 1967-’68

At this stage it will be useful to return to the Cash Budget to which I referred earlier. The total expenditure on Revenue and Loan Account for the next financial year is estimated at R1,921.1 million. On the other hand, the expected receipts, excluding loans but including recoveries on Loan Account, are R1,500.8 million; in other words, expenditure exceeds receipts by R420.3 million. If the repayments of local and foreign loans and sundry items are added, a total amount of R737.2 million must be found from loans or other sources.

As far as loans are concerned, it is not desirable to place too much emphasis upon foreign loans, as such loans could have an inflationary effect, particularly if spent within the Republic. I feel, however, that we can set as our target the renewal of existing and the conclusion of new foreign loan agreements to amounts of R64.4 million and R16 million, respectively; after deduction of repayments (R52.3 million) our net use of foreign loans will then be R28.1 million.

Saving is one of the pillars upon which this Budget rests. We have achieved considerable success with the new forms of investment which we created recently, namely Savings Bonds and Tax Bonds. The latter offer a very attractive short-term investment at 6 per cent per year for provisional taxpayers, both companies and individuals, and I expect that their popularity will increase. Indeed, the terms which the State is offering to all classes of savers are so favourable at present that, in my opinion, we shall be able to attract considerably more money from the public if the facilities become better known. I think we can do more in this regard and I intend to give my personal attention to this matter. With the necessary publicity I believe we can collect R60 million in respect of Savings Bonds, Tax Bonds and Treasury Bonds during 1967-’68.

The existing loan levies in respect of persons and companies are expected to yield R27.2 million.

We can hardly expect to achieve the same degree of success with local issues of Government stock as in the year 1966-’67. Firstly, many financial institutions which were required by legislation last year to invest a certain percentage of their assets in Government stock have already fully complied with the requirements and will invest a smaller amount in Government stock during 1967-’68. Secondly, the capital requirements of the municipalities and public corporations have increased substantially and the share of the State in the local capital market must necessarily decline. In addition to the conversion of local loans which expire during the year (R253.4 million), I feel therefore that we cannot count on drawing more than R60 million of net new money from the local market (i.e. the private non-bank sector).

From the Public Debt Commissioners a net investment of R160 million is expected. This is conservative in comparison with the figure of R235 million for 1966-’67, but there is reason to believe that the Commissioners’ investments on behalf of official bodies and particularly their sales of Government stock to the private sector will be lower than in the current financial year.

An amount of altogether R641 million will therefore, it is estimated, be available from loans. The remainder of R96.2 million (i.e. R737.2 million less R641 million), plus any additional amount which the State considers necessary in order to reduce its net indebtedness to the banking sector, must accordingly be obtained from other sources.

Before searching for these other sources, however, I first want to announce a few tax concessions.

It must already be clear to hon. members that there can be no question of any general tax relief in this Budget, but, within the limited means at my disposal, I wish to grant a few concessions, where they can promote productivity or saving, or where they are justified on other grounds.

UNIVERSITY STUDENTS

The first is intended to give relief to parents of University students, especially those taking advanced courses. At present the children’s rebate can be claimed in respect of a taxpayer’s children who are full-time University students, but only up to the age of 24 years. Since certain University courses are so long that the average student cannot complete them before his 24th birthday, I propose that the concession be extended to the age of 26. The loss of revenue will be about R150,000.

CONFINEMENT ALLOWANCE

In order to give a measure of relief to parents in respect of the expenses connected with the birth of a child, I propose—

1. (a) that an additional rebate of R8 be allowed in the year in which a child is born, and
2. (b) that the maximum deduction for medical expenses in that year be increased from R200 to R300.

The cost of this concession will be about R550,000.

EXPORTERS’ ALLOWANCE

Exporters are at present entitled to an additional deduction of 25 per cent of allowable expenditure on the development of export markets. If the sales value of their exports increases during the relative year of assessment by between 10 and 25 per cent as compared with the preceding year, the additional deduction is 37½ per cent, and if exports increase by more than 25 per cent the extra deduction is 50 per cent. It is extremely important—especially as large increases in gold production can no longer be expected—that our exporters should spare no effort to capture overseas markets. I propose, therefore, that the above-mentioned percentage deductions should each be increased by 12½ per cent, so that all exporters qualifying for the deduction will be entitled to an additional deduction of 37½ per cent of market development expenditure (instead of the present 25 per cent); those whose exports increase by between 10 and 25 per cent, will be entitled to an extra deduction of 50 per cent (instead of the present 37½ per cent), and those who raise their exports by more than 25 per cent, to an additional deduction of 62½ per cent instead of the present 50 per cent. The loss of revenue will be about R2 million.

SMOOTHING OF FLUCTUATIONS IN FARMING INCOME

As hon. members all know, the vicissitudes of the elements, stock diseases and the like have an adverse effect on the income of a farmer. He may perhaps enjoy an unusually high income in one year, which is then followed by years of adversity. Briefly, as a result of the progressive rates of tax on individuals, those fluctuations may cause a farmer to pay a much greater amount in taxation over a period of years than another person whose total income over the same period is the same amount but is more evenly spread.

Representations were received for the introduction of a system of equalizing income. A system of this nature was carefully considered but, on account of the problems and anomalies which it involves, it was not found to be practicable. It was realized, however, that something had to be done to assist the farmer and, after discussions with representatives of the farming community, it was decided to change to a system of equalizing tax rates rather than income.

In broad outline this means that the average of the taxable income for the year of assessment and the preceding four years will be used as a standard to determine the rate at which the tax for the relative year of assessment will be calculated. If, for example, the taxable income for that year is R20,000 and the average for the five years is R7.000, the R20,000 will be taxed at the rate applicable to an income of R7,000.

Since the system may in some cases have an adverse effect if it is applied immediately to all farmers, it has been decided to allow every farmer to decide whether or not he will accept the system. He may exercise his option at any time, but if he decides to accept the equalization of tax rates he cannot later revoke his decision.

It is impossible to estimate what revenue the State will sacrifice, since this depends upon the number of farmers who decide to take advantage of the concession. If all farmers accept the system, the annual loss of revenue may be estimated at R2 million. Since any refunds in respect of the 1968 tax year will only be made after 31st March, 1968, there will be no loss of revenue in the 1967-’68 financial year.

DONATIONS TO UNIVERSITIES AND TO THE NATIONAL LOANS AND BURSARY FUND

Companies are at present allowed to deduct from their taxable incomes the amount of their donations to universities for technological training up to a maximum of 1 per cent of such incomes. A similar concession exists in respect of donations to the National Loans and Bursary Fund. I propose that these concessions be combined so that donations by companies for one or both of these objects may be deducted up to a maximum of 2 per cent of their taxable incomes. The loss of revenue is estimated at R200.000.

The National Loans and Bursary Fund has thus far received meagre support and I would like to appeal to commerce and industry to contribute to this Fund. The donor company can arrange, if it so desires, for any bursaries established with its donation to bear its name.

ESTATE DUTY

For purposes of estate duty the value of life assurance policies, Government securities and Land Bank debentures up to a maximum of R15,000 is deducted from the value of an estate. To encourage saving I propose that the maximum be increased to R25,000. This deduction will come into force to-morrow and the loss of revenue in a full year will be about R75,000; on account of the delay in settling estates, however, the loss during the financial year 1967-’68 will be negligible.

KAFFIRCORN-MALT AND BANTU BEER

The excise duty on kaffircorn-malt introduced last year has given rise to certain administrative difficulties, and I propose that this duty be repealed. It will be replaced by a duty of 2c. per gallon on Bantu beer brewed for sale or for free supply to employees by employers in urban areas who have more than 25 employees in their service.

These changes will be gazetted to-morrow and will then come into force immediately. The duty on Bantu beer is applicable only to such beer which has not yet been cleared for domestic consumption, i.e. to stocks which have not yet been removed from the brewers’ premises.

Manufacturers of kaffircorn-malt and of Bantu beer are requested to take stock of all supplies of kaffircorn-malt and Bantu beer in their possession and to record particulars of these stocks for the use of the Department of Customs and Excise.

Provision will be made for a refund of the excise duty on kaffircorn-malt on which the duty has already been paid and which will be used for the brewing of Bantu beer for sale, or which has been so used and the Bantu beer brewed there from is still held in stock by the brewers.

The duty on Bantu beer will be recovered from the brewers and I do not expect that the price to consumers will be increased.

It is expected that the duty on Bantu beer will yield the same revenue as that on kaffircorn-malt, namely R2.6 million, so that the change will have no effect on revenue.

NATURAL OIL

The proposals which I shall table at the conclusion of my speech include, inter alia, rates of tax which are intended to apply to taxable income which may be obtained from the exploitation of natural oil. The proposal is connected with the search for oil in the Republic and the continental shelf. Although at present only prospecting work for oil is being undertaken and it is not envisaged that the exploitation of natural oil will become a reality within the next year or two, it is nevertheless necessary to make provision in the Income Tax Act, already at this stage, for the manner in which profits from natural oil will be taxed. I shall deal with this matter in greater detail when the taxation proposals are considered.

All the concessions and changes which I have mentioned will cause a loss of R2.9 million to the Exchequer during 1967-’68. On the cash basis, the total amount still required to finance the State’s expenditure during the following financial year is thus R99.1 million.

In selecting taxes to raise additional revenue, account must be taken of the prevailing economic conditions and of the economic objective which we wish to achieve. It is essential that total spending, both consumer spending and capital investment, be kept in check and if possible even reduced. On the other hand, it would be unfair to place too much of the burden on the shoulders of the lower income group, where this group is already struggling with the problem of the high cost of living; such a step would in all probability lead to renewed demands for higher wages. Lastly, it must be borne in mind that certain tax increases must in present circumstances be regarded as a temporary measure to meet a temporary situation, and not as a permanent increase in our tax structure.

INDIRECT TAXATION

Last year several customs and excise duties were raised and I feel that a further increase is not desirable at this stage, since it might in some cases raise the general cost structure and in other cases impose a heavy burden on the industry concerned. An exception is, however, justified in the case of—

MOTOR CARS

Sales of new motor cars are still increasing and the demand remains strong. Motor cars can no longer be regarded as luxury items in all cases, but nevertheless I feel that they can bear an additional tax. I propose, therefore, an increase of 2c. per lb. in excise duty and 5 per cent ad valorem in the customs duty. The existing rebates of excise duty in respect of motor cars manufactured in the Republic and containing components approved as having been manufactured in the Republic, will not apply to the increase in duty. The increase amounts to about R40 for a light car and R60 for a medium car, and should yield R6 million during the financial year. Commercial vehicles, lorries, etc. are not affected.

The increased customs and excise duties on motor cars take effect immediately and will apply to the relative vehicles which at this moment have not yet been cleared for local consumption, i.e. to such vehicles which have not yet been delivered from the stocks of manufacturers and assemblers.

Mr. Speaker, in terms of section 58 (1) of the Customs and Excise Act, 1964, I now lay upon the Table, for consideration by the House in Committee of Ways and Means, the formal taxation proposals in respect of the increase in customs and excise duties on motor cars.

Clearly, the additional revenue must be sought principally in an increase in—

DIRECT TAXATION

I shall begin with an increase in the—

LICENCE FEE FOR COMPANIES

In terms of the Companies Act all companies must obtain a licence annually against payment of a fee of at least R2. This amount can well be increased and I propose that it be raised to R10 as from 1st January, 1968. The additional revenue is estimated at R700,000.

NON-RESIDENT SHAREHOLDERS TAX

After standing at 7½ per cent for many years, the Non-Resident Shareholders Tax was raised to 10 per cent last year. I believe that a further increase up to 15 per cent is justified. This rate is nearer to the average rate levied by other countries. As my predecessor explained last year, the increase will in most cases not be borne by the shareholder himself, but will be deducted from the tax which he pays in his own country. The increase takes effect immediately and will yield an additional R8.6 million to the Exchequer.

TAX ON INTEREST PAID TO FOREIGNERS

Interest on loans concluded outside the Republic is regarded as being derived from a source outside the Republic and therefore not subject to South African income tax. On the other hand such interest may be deducted from his taxable income as a cost by the South African borrower. I consider that this is not just and that foreigners drawing interest from loans employed in South Africa should also make their contribution to the Exchequer. In many cases this contribution will in any case be deductible from the tax which they pay in their own country. I propose, therefore, that a tax of 10 per cent on interest paid to non-residents be introduced immediately. I estimate the revenue at R1.9 million.

INCOME TAX ON COMPANIES

It is clear that companies will have to bear the main burden of this Budget. Their shoulders are broad, for many of them have derived advantage from the inflationary conditions and have been making large profits. Furthermore, the rate of company tax is very moderate in comparison with that in other countries.

A technical difficulty has arisen here. In the 1966 Budget the rates of income tax on companies were fixed for the tax year 1967, i.e. for the companies’ financial year ending in the calendar year 1967. If I now propose an increase on the same basis for the tax year 1968,a relatively small part of the additional revenue will be received during the State’s financial year 1967-’68. To remove this difficulty the increased rates which I shall propose, will apply to income accruing to companies during a financial year ending between 1st January, 1967 and 31st March, 1968. From 1968 the rates of company tax will be fixed annually in respect of the company’s financial year ending between 1st April and 31st March.

Companies (except gold and diamond mining companies) now pay at a rate of 33⅓ per cent plus a loan levy of 5 per cent of the tax—altogether 35 per cent of taxable income. I propose that, for the period which I have mentioned, a surcharge of 10 per cent on the basic tax should be paid and that the loan levy be increased to 10 per cent of the basic tax. Altogether, therefore, a company will pay 40 per cent of taxable income, of which 36 1/3 per cent will be tax and 3 1/3 per cent loan levy. The additional receipts for 1967-’68 are estimated at R43.2 million for the surcharge and R21.6 million for the additional loan levy.

GOLD AND DIAMOND MINING COMPANIES

The tax on gold and diamond mining companies is, generally speaking, higher than that on ordinary companies and I think that in their case a further loan levy of 5 per cent on tax will be sufficient. This levy will also apply to the companies’ financial years ending between 1st January, 1967, and 31st March, 1968. For the 1967-’68 financial year, the loan levy on gold mining companies is expected to yield R4.8 million and the additional levy on diamond mining companies R300,000.

INCOME TAX ON INDIVIDUALS

Since private consumption expenditure continues at a high level and is playing an important part in our inflationary conditions, the individual taxpayer cannot escape altogether. I consider, however, that taxpayers in the lower income group should not be called upon to bear an extra burden, and further, that the increase should take the form of a loan levy which the taxpayer can recover in more normal times. I propose, therefore, that the loan levy on individuals who are liable for central government income tax of R100 or more, should be increased from 5 per cent to 15 per cent. During the financial year 1967-’68 this increase will yield R19.1 million.

SUMMARY

The tax increases and loan levies which I have proposed, will bring in an additional R106.2 million altogether during the financial year 1967-’68. On the cash basis we required R99.1 million, so on this basis we arrive at a surplus of just over R7 million which can be applied to the reduction of the State’s net indebtedness to the banking sector.

On the conventional basis, but leaving out of account the opening balances, the State’s accounts for the financial year 1967-’68 appear as follows:

For the record, I include here in the printed version of the Budget Speech a summary of the accounts on the cash basis for the current and the following financial year:

It is not easy, Mr. Speaker, especially in my first Budget speech, to impose additional taxation to the extent that I have done here. I make no apology for this, however, for I regard it not only as my duty, but also as for the ultimate benefit of the whole community, including the taxpayers themselves.

Moreover, I must point out that the tax increases which I propose will not affect the lower income groups. Even the middle salary groups, who in many cases have received a substantial salary increase during the past few years, will have to make only a moderate additional contribution in the form of a loan levy. On the other hand I have done my best, with the limited means at my disposal, to encourage saving and productivity and to give relief where it is really needed, namely to the pensioners.

The experience of the past few years has taught us that inflation is a stubborn and dangerous enemy. Worse still, if people once begin to expect that inflation will not be arrested, then their actions will tend to intensify the inflation still further. The longer the inflation continues, the more difficult it becomes to break it

I am convinced, therefore, that the House will understand why it has become necessary to apply fiscal policy with renewed determination in our struggle against inflation. If fiscal policy now plays a more important part in this struggle, it will also perhaps be possible eventually to lay less emphasis upon monetary and credit policy.

In this connection I should like to refer briefly to the recent increase in interest rates by certain financial institutions. This increase is the natural outcome of keener competition among financial institutions for a limited amount of funds. As a result of the declining foreign reserves and the transfer of funds from the private sector to the Government sector, the quantity of money and near-money in circulation and the total supply of loanable funds are probably shrinking, which is of course in line with the Government’s anti-inflationary policy. But the keen competition for these funds is a reflection of the expansionist pressure which still exists in the economy. To the extent that we succeed, by means of fiscal policy or otherwise, in reducing the inflationary forces, the demand for loans and consequently the upward trend of interest rates will be checked.

It must now be clear that the Government is absolutely resolved to curb inflation. In these circumstances financial institutions should ask themselves whether it is wise to commit themselves to the payment of high rates of interest on fixed deposits for a year or longer. If lending rates should decline later, this might affect them adversely. In any event, I am glad to learn that the building societies have decided not to increase their bond rates for the present, and I hope that, with the measures which are taken here and which may in the future be taken, any such increase will be avoided or will, at most, be of short duration.

Mr. Speaker, if the steps we have taken against inflation do not prove to be adequate, the Government will take further measures. On the other hand, in accordance with our success in curbing inflation, it will be possible to relax the existing measures. In this connection the question arises whether it is not desirable to introduce a measure of flexibility into our fiscal system, by empowering the Government to raise or lower certain tax rates or loan levies within prescribed limits, subject to confirmation by Parliament at the first opportunity thereafter. I am thinking particularly of the income tax and loan levy on individuals and perhaps of certain indirect taxes. Such a power exists or is at present being proposed in certain other countries, and in South Africa with our long parliamentary recess there may be a need for a system of this nature. I make no proposal here but the matter will receive further consideration.

The battle against inflation continues, but with the watchword “Work and Save” we shall achieve victory. For this, however, the Government needs the co-operation of all sections of the community. In this connection I have been greatly encouraged by the responsible attitude adopted by organized commerce and industry as well as by the labour organizations. Each one of us has a responsibility towards the community and the broad national interest, and I am glad to see that this responsibility is increasingly accepted by leaders of our economy. With this co-operation we can look forward with confidence to a period of greater price stability, which is the essential foundation for healthy prosperity and growth.

I now lay upon the Table—

1. (1) Estimates of Expenditure to be de frayed from Revenue, Bantu Education and Loan Accounts during the year ending 31st March, 1968 (R.P. 1-1967, R.P. 9-1967 and R.P. 8-1967);
2. (2) Estimates of the revenue to be received during the year ending 31st March, 1968 (R.P. 35-1967);
3. (3) White Paper in connection with the Budget Statement, 1967-’68;
4. (4) Taxation Proposals;
5. (5) Comparative figures of Revenue for 1966-’67 and 1967-’68.

REVENUE 1966/67 R1,000,000

REVENUE 1967/68 (On existing basis of taxation)

R1,000,000

Mr. Speaker, I think that this is an occasion on which the hon. the Minister can be congratulated on his Budget Speech, it being his first Budget Speech. I want to congratulate him on the occasion. But my congratulations end there. I am afraid that I cannot congratulate him on the Budget. The Minister has shown quite clearly that he is battling round the Cape Horn of inflation and we are not certain that he has passed all the storms or that he is going to get to smooth waters. This Budget will want some studying. It is interesting to note that quite recently the Minister indicated to this House that the inflation battle was not lost. Well, he has yet to prove that it has been won. More than half of his Budget Speech was taken up by a discussion of the dangers of inflation. I hope that during the recess the Minister will have the opportunity of meeting the housewives of South Africa and telling them that his policy is “work and save”. They will tell him how little they have to save out of their earnings. Because, Sir, that is the danger of inflation: Inflation means that your money can buy less, and it has bought less and less as the years have gone past. One of the principal contributors to inflation has been the Government itself. One or two crumbs have fallen from the Minister’s table. There are the crumbs for the old age pensioners and here the pleadings from our side for many years have at last made some impression. I am reminded that over 15 years ago the Leader of the Opposition moved that there should be an averaging out of farmers’ incomes. That has taken fifteen years to soak in. A heavy load is being imposed upon the country. We will have an opportunity of discussing this at a later stage. I therefore move—

That the debate be now adjourned.

Agreed to.

In my absence yesterday use was made of the opportunity to agree that Parliament would adjourn to-day instead of to-morrow. I therefore move formally and as an unopposed motion—

Agreed to.

Mr. Speaker, I find it difficult to reply to this debate, and the reason for that is that the criticism expressed here by one Opposition speaker after the other and the objections raised by them to this Bill, were replied to so efficiently by speakers on this side of the House that virtually nothing was left for me to add. I want to go as far as to say that it has been a very long time since I last saw such a contrast in this House between Opposition speakers and members on the Government side, as I have seen in this debate. There was a great difference, both in the quality of the speeches and in the approach to this Bill, one of the most delicate topics which one can discuss, and I want to congratulate hon. members on this side of the House in particular on the fact that they presented their case with so much earnest, with such a large measure of sympathy and with so much control, notwithstanding the fact that they had been provoked by hon. members on the other side by the use of adjectives which almost forced one to go beyond the bounds, but in spite of that nobody on this side of the House was guilty of that.

In the course of this debate it became very clear to all of us what a substantial difference there is between the official Opposition and the Government in respect of racial policy in South Africa.

Where are all the Government members?

They probably think that I am man enough for the Opposition.

Order! Hon. members must please refrain from making interjections.

Virtually everything that was said here by hon. members of the Opposition, virtually all the speeches they made, virtually all the objections they raised, clustered around the actual statements made against this Bill by the hon. the Leader of the Opposition, and these statements were merely elaborated further. Mention was made of more examples of hardship, but virtually nothing new was born out of this debate. Therefore I want to start with what the hon. the Leader of the Opposition himself said in his speech. There are many people in this country who have of late started to believe that as far as matters of principle are concerned, there is no difference any more between the Opposition and the Government. In this debate it has become clear that as regards the basic principles on which we are planning our entire future, namely the principle of developing race groups along their own lines, the principle of separate development of the various race groups, the Opposition is not nearly in harmony with us, and I expect that as a result of the clear statements made here by members of the Opposition and also the hon. the Leader of the Opposition, the Opposition is still going to learn many lessons and suffer many heavy defeats in the future. The Opposition has in fact cut their own whipping rods.

What are the chief objections the hon. the Leader of the Opposition raised against this Bill? In the first instance, he said that in principle his Party was opposed to race classification, just as they were in 1950, and one of the reasons he advanced, was the following: “You cannot classify the unclassifiable.” That was one of his reasons, but in addition to that he said that there was no need for it whatsoever and that he did not know why we wanted to do it. In other words, at the moment the Opposition is precisely where it stood in 1950. The unclassifiable cases to which the Leader of the Opposition referred, are, of course, the so-called border-line cases. As regards the vast majority of the population who fall under the three main groups, the classification has already been completed. For the sake of interest I may just mention that up to the end of last year as many as 2,698,556 white persons had already been classified. The number of Coloureds who had been classified—excluding Griquas, Malays, Indians and Chinese— amounted to just under a million. If these groups are included, the figure is 1,107,283. The number of Bantu who had been classified up to the end of last year, amounted to 8,890,626, a joint total of 11,696,474. Among all of these classified persons, there is a number of persons who were classified after investigations; they have been included in this number. These are persons whose classifications were open to a measure of doubt.

Allow me to furnish the House with certain figures in this regard: Whites, 48,000;Coloureds, almost 179,000; Malays, 14,000; Indians, 27; Chinese, 14; and Bantu, 26,500. The statement I want to make by mentioning these figures, is that race classification is practicable in South Africa, and it can also be used for the purposes of applying and implementing our policy on more than one level, and on virtually every possible level of our policy of separate development. I simply fail to understand how it is possible for one to manage without race classification legislation in a multi-racial country such as ours. [Interjection.] Yes, I may ask the hon. member how long he remains small, because when he was very small he did not have to have his measurements taken to get a suit. He could simply wear a smock or a nappy, but as he grew up and circumstances changed, his needs changed accordingly, and then it was necessary to take other steps because he could no longer simply wear a nappy or a smock so as to look presentable. In order to mix socially with other people it was necessary to have clothes made which were more or less made to measure, and the same applies to the development of a nation, and especially in a young country such as South Africa, whose development has been phenomenal in every sphere. One has to adapt oneself to changed circumstances, and things which do not seem necessary at present, become extremely necessary and indispensable owing to changed circumstances which involve changed needs. [Interjections.]

Now we come to the consequences. To my mind the basic statement of policy which was made by the hon. the Leader of the Opposition, is totally inacceptable in a country such as South Africa. If, in a country such as America which is actually the country of integration, they are going so far as to classify Negroes as Negroes, even though they are as white or whiter than the average white American … [Interjections.]

Order! A ruling was given from the Chair that any hon. member who makes an interjection, would be sent out of the House.

No.

*The DEPUTY-SPEAKER: Then I give it now. The hon. the Minister may continue.

If it can be proved that only one of his eight great-grandparents was a Negro, he may be whiter than the average American but he is nevertheless classified as a Negro; and what is more, they have a name for such a person. They refer to him as an octoroon. If one of his four grandparents is a Negro, he also remains a Negro and they refer to him as a quadroon. I do not even want to say that it follows as a matter of course that, if one of his parents is a Negro, he cannot be a white American. But here in South Africa the Opposition says that we have unclassifiable people. Who are these unclassifiable people? They are people who, before we had this Registration Act, had mixed blood —also white blood—in their veins and who were not all of the same colour as a result of our history and things that happened. Even pure-bred, full-blooded Bantu do not all have the same colour of skin; they do not all have an equally dark skin. Various ethnic groups are lighter in colour than others, but they do not necessarily have mixed blood. When we introduced this Race Classification legislation, classification had to take place, and according to the needs of that time such classification had to be based, in the first place, on acceptability or acceptance by public opinion. That would actually have been the test. In that way one found people who could only be classified with great difficulty and we called them borderline cases. The hon. the Leader said that they were unclassifiable.

I want to suggest that that group which we and also the hon. the Leader of the Opposition regard as unclassifiable, has already been classified years ago. But at present there are still people who, owing to the provision which was made in that Act—in spite of the intensification of the race tests which had to be adhered to and which were added in 1962, namely those of personal appearance—in the process which continued from that time up to the present—which was not a natural process of miscegenation, but a process by which non-Whites infiltrated into the ranks of the more highly civilized group in order to get away from their own non-white group—were subsequently accepted by certain white persons as White by association, while as far as their appearance was concerned, they were doubtful, and while as far as acceptance was concerned, they are now in a position to furnish proof that they are in fact accepted. But does one call that acceptance by the community? Surely, one cannot do that. How can the Leader of the Opposition make the statement that there had been a tradition for 300 years and that as a result of that tradition and the entire pattern of living over the past 300 years, there are people who are traditionally White and that we are now going to throw those people back into the ranks of the Coloureds? Since when has a man, born of non-white parents, traditionally been regarded as a White because he has been associating and mixing socially with Whites and has perhaps been accepted as such by a small group of Whites? He is not and has never been a traditional white person. In terms of the Act and in terms of the third-party objections and applications for their own reclassification, which were lodged as a result of various circumstances which had to be taken into account, such a person could be assimilated and classified as a White, but not because he was traditionally a white person.

In our ever-increasing population and in the steadily increasing population concentration in our urban and industrial areas, everybody who succeeds in getting away from the area In which he was born and bred and in moving to other parts where people do not know his background so well, may be assimilated there because he is a respectable human being— because, surely, he need not necessarily be unrespectable if he is a Coloured—but he is still not traditionally White. I cannot endorse the statement that such a person is traditionally White, and I want to raise the strongest objection to that. The hon. the Leader is going so far as to say that what I am doing at present, is to prohibit the movement of one race to another, and worst of all is that he says that this Bill is aimed at the Coloureds; but, since he used the following sentence, he might as well have said that this Act was aimed at the Whites, because he says I am using descent as a test—not in the sense of blood, but as a result of existing classifications which have already been made over a period of 17 years and to which most people have not objected and which they have accepted as correct— that I am now using that classification and that descent, according to the classification of the parents, as a test; it is for that reason that he says that we are depriving the Coloureds of that right—the Coloureds who have in the past actually been the greatest reinforcement of the white group.

Now I want to say that I refuse, that the Government refuses, that the National Party refuses and that the people refuse to accept that the absorption, the integration of non-Whites with the white groups by means of miscegenation, is the strongest reinforcing factor.

But I did not say that.

That is the only deduction which can be made. I wrote down the words you used. They are recorded in Hansard. You said that they were the greatest factor in the reinforcement of the white population group.

No. I did not say that.

I wrote down your words immediately after you had used them; afterwards I looked them up in Hansard in order to make sure. Whether or not that was what the hon. the Leader of the Opposition intended by using those words; the fact remains that he made that statement. While he was making that statement, I said to myself that that was the most unambiguous statement a Leader of the Opposition has ever made in respect of race classification and views held on racial matters. Here I have the hon. member’s words. He said—

That is not what you said I had said.

If this creeping integration is a “very fine form of reinforcement” of the white nation, then the hon. member’s words cannot have any other meaning. Then they cannot be interpreted differently. But I want to connect this with my further argument. One has to view that in its connection with the whole attitude and argumentation of the United Party throughout this debate. It was said that we were committing an injustice, because we are now introducing descent in this sense, that we would cause further hardships by those means, and so forth. I want to make it clear that the impression which was created was that we made provision in this legislation and that we made it our aim to delve into the history of a person, perhaps for generations back, to scrutinize his past so as to see whether there is not perhaps some non-white blood in his veins. But there is no such provision anywhere in this legislation. This legislation provides that in cases where the parents of children have already been classified and found to belong to a certain race group, those children—i.e., if those parents are the natural parents of such children and if the opposite cannot be proved, then it has to be accepted as such—will be classified as members of that group to which their parents belong according to classification.

He also said that this was a very strong test. What should one deduce from that? All that can be deduced from that, is that we should leave the door wide open so that the infiltration and integration of people by way of association—infiltration in the process of “trying for White” and as a result of other reasons—may not be curbed by this method, a method which, viewed from the biological and any other angle, is probably the most just method of classification there is. But we must not do that; we must simply allow these people to reinforce the white nation of South Africa.

Another matter in regard to which the Opposition says that we are committing an injustice, is that third parties have been deprived of their right to object. I want to state very clearly why third parties are being deprived of the right to object. I have given very serious thought to this matter with a view to determining whether an injustice was not perhaps being committed in this respect, whether the door was not perhaps being closed altogether, thus preventing people, who may perhaps have been entitled to reclassification, from being reclassified.

But I have come to the conclusion, to the conviction, that the crux of all these difficulties does in fact lie in the objections raised by third parties. The position is that a person —irrespective of whether he is a white person, a Coloured person, a Bantu or an Indian— may be classified as such for life. The person himself could have accepted that classification and could have married a member of his own race in the meantime. Children may have been conceived, but as soon as circumstances arise under which that person feels that for some reason or other he wants to be classified in another race group, a third party comes along —a person who is in no way concerned with the matter—not a year or 30 days after the classification in question, but within 30 days or one year from the date on which that third party had become aware of that particular classification, and he may lodge an application with the court. That person could therefore have been classified as a member of a population group for as long as 30 or 40 years, but then any Tom, Dick or Harry may come forward and say that he has only recently found out what the classification of that person is. He may say that he has never been aware of it before, but that he has only recently come to hear of it. It is, of course, impossible for one to prove the contrary. Now he comes along and lodges his objection.

Who included this provision in the Act—this Government or another Government?

We included it in the Act. Apparently the hon. member wants to reproach me for the fact that this Government included this particular provision in the Act. But if it has created this loophole, why does the hon. member not help us to put it right? Why does the hon. member not help us to put it right if it has created opportunities for people who are not kindly disposed towards our country and the future of its population?

This was abused to the utmost. Now it is argued by the other side of the House that we are doing something further through this legislation in that we are abolishing third party objections and allotting a more important part to descent. We are creating more hardships for countless people. Is that true? One of the hon. members said—I think it was the hon. member for Peninsula—that this legislation drew a line through families, between parents and brothers, and brothers and sisters. It is not this Act and this amendment which does that. By abolishing these third party objections and bringing the matter back to descent we are in fact eliminating the cruelty and the sorrow which were suffered, by eliminating these reclassifications, and if we can do so, by eliminating them for good. In terms of the existing Act a person need not appeal in the same year or for two years after being classified, because a third party objection may be lodged even ten or 15 years after a person has been classified. If the Act had retained its present form, such a person would merely have had to prove to the court that he was accepted as a White—“he is not obviously not a White”. He may therefore be accepted as such. All that he had to be able to submit was some affidavits of people who declared under oath that they accepted him as White. I then tell you that as the Act reads at present that was wrong in most cases. I am not disparaging the courts, nor am I criticizing their judgments, because they interpreted the Act as they read it. If we did not want them to interpret it in that way, we should have defined it more clearly. That is what we are doing.

The point raised by the hon. member for Durban (North) last night is absolute nonsense, namely to allege that we are curtailing the rights of the courts by providing better definitions and by not allowing them so much scope to have regard in their decisions to matters which we as a government may perhaps consider need not be had regard to. Surely this is not the first time legislation has been placed on the Statute Book. Who governs this country? Who lays down the policy of this country? Is it the State, the Government or the courts? The courts are there to interpret the laws which are passed by this Parliament and which are the laws of the country. Because the provisions in this Act do not suit him, he wants to raise a string of juridical issues. I do not want to be insulting, but to me yesterday’s arguments smacked of a demonstration by an attorney or a lawyer who is not quite sure of himself. With a view to the future we are now in fact stopping up as far as possible these loopholes which are the cause of families being broken up at the arbitrary wish of people who have nothing to do with the families, or perhaps the arbitrary wishes of members of the family who for other personal advantage or gain want to join the White group or some other group. This is a fact. Of all these applications for reclassification we received, to my knowledge not even .01 per cent came from the higher and more civilized race groups, for reclassification to a lower rank. That simply does not happen. Hon. members say that through this legislation we are going to change traditional Whites into Blacks. That is utter nonsense. I want to tell you what did in fact happen. We had the case of an immigrant who came to this country and who had a somewhat dark complexion, but not so dark that one would doubt his descent or his acceptability to the public as a White. He fell in love with a Coloured girl. He asked to be reclassified, because he was classified as a White. He joined the Coloureds. He was already living among them. He had had quite a few children by that woman and he then wanted to marry her. But then he bagan to feel—whatever his reasons may have been— that things were no longer going very well with them. He no longer liked the community very much. He began to feel that as a white he could perhaps do better. He then divorced the woman. He was granted a divorce. Then he wanted to be reclassified as a White through a third party objection. In such a case a person will easily pass on the grounds of appearance. He merely waits until he has been divorced for some time. He then associates himself completely with the white group in some other place. In terms of the existing Act the courts would have reclassified him as a White. In such a case a terrible thing would have been done in respect of father and mother and children. Chaos would have been created in family life in South Africa.

This is the first time since we started dealing with race classification legislation that the United Party praised and commended third party objections. This is the first time they have pleaded that we should retain that. They are the people who in the past said: It will result in a witch-hunt. It will afford people who have nothing to do with the matter an opportunity to poke their noses into other people’s affairs and actually to spy, and to do this or to do that. But that did not happen. At the time they said that terrible things would happen. Every time we introduce amending legislation in respect of race classification, they have new vicious words and expressions and misrepresentations in opposition to the legislation, not only for domestic consumption but also for the outside world.

They cannot read your Bills in the ‘“buiteland”.

If the outside world cannot read the legislation, I would advise the outside world rather not to ask the hon. member who has made the interjection or the hon. members for Bezuidenhout or Houghton to explain it to them, because they will not get the truth as to the contents of the legislation or its intention.

I am consequently of the opinion that there is nothing left of this principal argument that race classification is primarily an abomination or wrong. There is nothing left of the argument regarding these traditional Whites whom we are now supposed to be changing into non-Whites. There is nothing left of the hardships we shall supposedly cause anew as a result of this legislation. The only hardships we shall now encounter—I would admit this—will be to the people who have already made a considerable deal of progress in that direction because the Act read like that, and in recent times in particular it became clear, from experience and from the findings of the courts (but not incorrect findings, in terms of the Act as it stood and as it could be interpreted) that it was easier than even they had thought to cross the colour bar to the white side. For such people it will be very difficult. I admit that. But I would nevertheless repeat, and I am not saying this in hate but in all sympathy and in all seriousness: What moral right has a person who knows who his parents, his brothers and his sisters are, and who knows that they are Coloured, and who consequently knows that he is a Coloured, or a White, or a Chinese, or an Indian, or a Bantu, by birth and by descent, to claim national ties other than those inherited by him? Surely he does not have that.

I regret that there are going to be some victims. I regret that. But I just want to say that our attitude in respect of white and nonwhite, or Black and Coloured, is not the attitude of a master to a servant; a superior to an inferior; of human to animal. That is why we refuse to use them as an “appendix”. We may have an appendix in the field of stock, but we cannot have an appendix in our race world, in our human world. Therefore, when the hon. the Leader of the Opposition alleges that I am now seeking to close the appendix, that I want to establish a closed stud book, he reveals in my view the wide difference between his attitude and ours, his attitude and relationship in respect of races and ours. I am proud of my descent and I am proud of the fact that I belong to the white race. But nonetheless I do not disparage those people because they are Coloureds or Bantu, or in any event do not belong to the same race group as I do. I do not disparage them; nor do I want to treat them as inferiors. But now hon. members on the opposite side say that there are so many privileges enjoyed by the Whites, privileges in which the non-Whites cannot share. This statement was made by the hon. members for Houghton and Bezuidenhout, inter alia. The hon. member for Sea Point also laid particular emphasis on this. They emphasized that the reason why they submitted that it was unfair to keep those people Coloureds, was the fact that being a non-white rather than a white man involved so many fewer privileges. Well, I ask hon. members on that side to name me one multi-racial country in the world where non-Whites enjoy the same privileges as Whites. Let hon. members name me one country.

America.

That is the very last country that should be mentioned. I have also been there. I shall tell you why they do not enjoy the same privileges as the Whites there. It is not because people oppress them and because we oppress them. That is not the reason. The reason is that those people are inherently, by the nature of matters and in themselves, unable to enjoy and to take what we have.

What about Brazil?

I think it is time the hon. member also visited Brazil. He may encounter people there who are much darker than our Coloureds and who do not want to be any different from what they are. Those people differ from us and we differ from them. And for my part—I want to remain different. Mr. Speaker, I have received many requests from leaders among the Coloureds who asked for this legislation because this legislation would provide protection for them as well.

Against whom?

I shall tell you against whom. This legislation also protects the different character of the Coloured. If any race or national community has suffered under white domination, or under White Government, here in South Africa, it is our South African Coloured. Sir, so many past governments made the mistake of not paying enough attention to the upliftment of the Coloured and to the inculcation of national pride in the Coloureds. They are the products of that era in the past. They thank heaven that there is now a Government in power which in the past years, since we came into power, has applied a separation and development policy which fosters in the Coloured a renewed and new pride and which makes of him a national being instead of an imitator. The tendency of some Coloureds to be imitators of the Whites is the result of neglect by the White. They were not neglected by the National Party, however, because they admit that they have never received so much attention; they admit that they have never had so many opportunities.

They have never been able to realize themselves as is the case under the National Party Government at present. But now hon. members on the opposite side want to destroy that.

The Minister said that they wanted to protect the Coloured. Is it the Government’s intention to prohibit immorality between Bantu and Coloured?

That is not at issue in this legislation. But I want to tell the hon. member this. He talks about protection. I agree with the hon. member that if it is possible, if it is practicable, it should be applied. In fact, I would be the first to support it in principle. The Coloured should be protected against the Bantu, against encroachment by the Bantu and miscegenation of Bantu and Coloured, if it is possible and practicable. I want to go further. We protect the Coloured in this respect as well. The National Party refuses to entice these people away from the Coloured group and to integrate them with the white group merely because they have a lighter complexion than the other Coloureds and are consequently more easily acceptable in White society, people who are nevertheless essentially Coloureds. Because in that way the Coloured community is perhaps to a very large extent robbed of their best future leaders. There has been talk of education. The question was put to me by the hon. the Leader of the Opposition with regard to the use of the word “education” in the measure. It was asked whether a Coloured with a B.A. degree should now become white because education has to be taken into consideration. My reply is: “No.” If both his parents were registered or classified as Coloureds, then in terms of this measure it will not be possible for him to become a White, even though he has an M.A. degree, or even a doctorate, because we consider it an injustice to absorb into the white section those men of leadership potential, men who are intellectually gifted to play a great role in their Coloured community. We are already accused by Coloured leaders of skimming off the cream of the Coloured community and of keeping them poor in order to keep them where they are. They actually regard it as a process—and it may justly be regarded as such if we allow it—to oppress the Coloured forever and never to afford him an opportunity for advancement in life. The National Party Government will not do that. It will not do that for the sake of perhaps a few “hard cases”, cases which have made a good deal of progress, and which had virtually got through before this legislation was introduced. We are not spiteful towards the non-Whites. That is not the reason. But we are just as jealous of our different character as we want them to be of their different character.

We do not want to cause disruption and insecurity through this legislation, as hon. members on the opposite side alleged. Because the Secretary will still have the right in respect of classification and reclassification, if it comes to his notice that there are cases—and I think there will still be isolated cases—where he has to apply reclassification, where he has to investigate and to see whether it is necessary, subsequent to which he may exercise his discretion in terms of the Bill and may effect reclassification. But hon. members want to exaggerate everything, because they are now alleging that there will be uncertainty for all time. They say a person will never know where he stands, because in terms of this measure the Secretary will have the unrestricted power to check and to reclassify 11½ million people. Surely that is a nonsensical argument. The Secretary had these powers. We had third party objections, and what did the Secretary do? It surpasses my understanding that people should use such arguments. On the one hand they said that they are afraid that the Secretary will abuse these powers of his, but in the same breath hon. members on that side had nothing but praise and gratitude for the humane, sympathetic way in which the Department and the Secretary—both the present and the previous—exercised their powers.

These are powers which one cannot exercise and keep secret—apart from your conscience which may call you to account. On the contrary. These steps will come under the spotlight and will have to be able to withstand the scrutiny of public opinion and criticism. Even if the Secretary has that right, the Minister is nevertheless still concerned in the matter. The Minister remains responsible for the misdeeds, if any, of the Secretary. Of course, it is inconceivable that a thing like that will happen. Nevertheless I want to make the matter very clear. I have said that reclassifications which have been effected either by the courts or by the classification board, will not be tampered with—whether we agree with them or not, whether we think they were a good thing or not. But in respect of those cases which may come to the knowledge of the Secretary, he will have the right to reclassify them. In many cases these reclassifications will take place at the instance of the persons in question themselves. Let me give the House an example of a person whom, I am certain, will apply for reclassification. A case of a person who acquired White classification on the grounds of the information supplied in the census form of 1951 recently came to my attention. I will of course be the first person to admit that a person’s indication on that form of the race group to which he belongs is not always reliable. Be that as it may, this person in question was consequently classified as a White without anybody else knowing it—only he was aware of it. He has been working with a certain firm for quite a number of years now and already occupies a high position there. In addition he serves on the executive of the Coloured trade union of the industry in which he is employed; he lives in a non-White area; he is married to a Coloured woman; his children attend Coloured schools—in fact he has accepted himself as a Coloured for years. One day he came to his chief with a request that his chief should write down on a piece of paper what salary he was earning and append his signature to it. When his chief asked him why he wanted that, he told him that a new sub-economic housing scheme was under construction in a certain residential area. When his chief told him that he could not live in that residential area because it was a White residential area he told him that he did in fact have a White identity card. It is cases like these which the Secretary will be able to rectify. There is no question here of his ever having wanted to be anything else. All that he did was to retain his White identity card over the years without of course making any objection in the hope and expectation that he might need it one day. Well, that opportunity did in fact present itself.

The hon. member for Peninsula referred yesterday to a certain case, in terms which almost put one in a mournful mood, of a white man who was married to a non-White woman, who had children, and who was now living in London because some of his children had apparently been classified as White, while the others would not be able to obtain such a classification. For that reason, it was stated that he was obliged to leave his homeland because, so it is being said, there were so many hardships here in South Africa that he, his wife and his children could not remain in this fine country of ours, where they could make a good living, but had to emigrate to Britain. Now I want to tell the hon. member for Peninsula that this legislation will put an end to such a state of affairs because this legislation provides that they may remain here and that they may be sure that their children will be classified as Coloureds.

Is that your reply?

Yes. Apparently the hon. member wants something else. Mr. Speaker. I do not want to draw an unpleasant conclusion by saying that the Opposition launched their official opposition against this Bill because they, to use the same word as the one they have so often used, have sinister motives which suit their purpose politically, or otherwise. I say that because I do not want to accuse them and say that their patriotism is not great enough to prevent them from doing so. But I must honestly ask myself what the true reason for their opposition is. I know there are people amongst them who in their heart of hearts are such firm integrationists that they want to make everything equal which the dear Lord in his wisdom created separate. But we cannot allow them to succeed in doing so.

Just before I conclude I want to refer to one minor matter which the hon. member for Durban (North) raised here yesterday evening, a point which, in my opinion, made quite a considerable impression in the Gallery if it did not actually do so in this House itself. It was nevertheless received with satisfaction by hon. members on the opposite side. This is an example of a poisonous and vicious attack, an attack which is totally unfounded. Here it stands in the Cape Times of 22nd March: “Use of census ‘a trick’—the Government had no right to use census forms to get information for the purposes of race classification, Mr. M. L. Mitchell said in Parliament yesterday”.

Order! In terms of Standing Order No. 120 the hon. Minister may not quote the comments of the Cape Times.

Very well, Mr. Speaker. That, however, was the argument raised by the hon. member. The fact of the matter, however, is that Parliament decided as far back as 1950, when the principal Act in regard to race classification was introduced by the then Minister of the Interior, what information or data would be contained in the Population Register. Section 3 of that Act provides that the details which are necessary for the compilation of the Register in respect of the population of our country by the Secretary should be drawn from the forms and returns received in terms of the Census Act of 1910, as well as from other documents which the Secretary may have at his disposal. That means that as far back as 1950—i.e. one year before the Census—people in our country had already been informed of the fact that some of the particulars which they had to indicate in the census forms may have been necessary for the compilation of a population register. But the hon. member implied last night that this was a “breach of faith”, that it was a “trick”, and the Lord knows what else. Surely that is the most arrant nonsense one could ever hope to hear.

You cannot use that information in evidence, can you?

We are now providing in this Bill that those particulars will also be accepted as evidence in a court when such a case is on appeal.

In the last place I want to rectify the misconception created here by the Opposition, i.e. that we are going to deprive a person of the right of appealing against his classification through this legislation. That is not so. A person who is classified in terms of this measure will have the same rights he had in the past to apply for reclassification. He can apply to the Secretary. If the Secretary refuses then he can appeal to the board. If the board refuses to reclassify him then he is at liberty to go to the supreme court, and if he is not satisfied with the finding of the supreme court then he can go to the appeal court. There is nothing to prevent him from doing so. But the impression was created here that this Bill deprives a person of the right to lodge an appeal against his classification. It is an impression which has been created here for overseas consumption. It must have been for overseas consumption because the Bill is quite clear on that point, and any person trying to create that impression must be doing so deliberately and with ulterior motives. But it was not only in this connection that a false interpretation was attached to the Bill. Whenever the Opposition is cornered or when they are obliged, as a result of wrong decisions taken in the past, to adopt another attitude in respect of difficult questions such as this one, they grab at misrepresentations and suspicion-mongering to present a distorted image of South Africa, and that is what I find reprehensible.

What is the position in regard to existing appeals? In terms of what Act will they be finalized?

Pending appeals, i.e. appeals which have already reached the Secretary and which have to be referred to the board or which still have to be heard by the courts and which will be finalized before the promulgation of this measure, will not be finalized in terms of the provisions of the existing Act, but the provisions of this Bill will only take effect after the promulgation of this Bill. In conclusion I just want to say the following. I hope and trust that the application of the provisions of this measure will have the same result which the amendment Act of 1962 had. What happened in practice with the application of the provisions of the 1962 Act? We proved that the Act was being applied with discretion, that it was being applied honestly and justly, with the result that we were praised for the sympathetic way in which the Act was being applied, and I hope and trust that this measure will be as generally accepted as the amendment Act of 1962, which the Opposition opposed as rigorously as they have opposed this one, whereas they have been pleading and begging in this debate that the 1962 Act should remain unchanged. I hope that if we have to amend this Act in future—I hope it will not be necessary, but if it does become necessary then we will have to do so—it will then become clear to the nation and their representatives in this House that this measure is a good one, so good that the Opposition will then once more plead with us and state that we should rather leave it unchanged.

Question put: That the word “now” stand part of the motion.

Upon which the House divided:

Ayes—92:Bekker, M. J. H.; Bezuidenhout, G. P. C.; Bodenstein, P.; Botha, M. C.; Botha, M. W.; Botha, P. W.; Botha, S. P.; Brandt, J. W.; Carr, D. M.; Coetzee, B.; Coetzee, J. A.; Cruywagen, W. A.; De Jager, P. R.; Delport, W. H.; De Wet, J. M.; De Wet, M. W.; Diederichs, N.; Du Plessis, H. R. H.; Du Toil, J. P.; Erasmus, A. S. D.; Erasmus, J. J. P.; Fouché, J. J.; Greyling, J. C.; Grobler, M. S. F.; Grobler, W. S. J.; Henning, J. M.; Hertzog, A.; Heystek, J.; Janson, T. N. H.; Jurgens, J.C.; Knobel, G. J.; Koornhof, P. G. J.; Kotzé, S. F.; Kruger, J. T.; Langley, T.; Le Grange, L.; Le Roux, F. J.; Le Roux, P. M. K.; Loots, J. J.; Malan, G. F.; Malan, J. J.; Malan, W. C.; Maree, G. de K.; Maree, W. A.; Martins, H. E.; McLachlan, R.; Meyer, P. H.; Morrison, G. de V.; Muller, H.; Muller, S. L.; Otto, J. C. Pansegrouw, J. S.; Pelser, P. C.; Reyneke, J. P. A.; Rossouw. W. J. C.; Pienaar, B.; Rail, M. J.; Reinecke, C. J.; Roux, P. C.; Schlebusch, A. L.; Schlebusch, J. A.; Schoeman, B. J.; Smit, H. G.; Smith, J. D.; Steyn, A. N.; Treurnicht, N. F.; Uys, D. C. H.; Van Breda, A.; Van den Berg, G. P.; Van der Merwe, C.V.; Van der Merwe, H. D. K.; Van der Merwe, S. W.; Van der Merwe, W. L.; Van Niekerk, M. C.; Van Staden, J. W.; Van Tonder, J. A.; Van Vuuren, P. Z. J.; Van Zyl, J. J. B.; Venter, M. J. de la R.; Viljoen, M.; Visse, J. H.; Visser, A. J.; Volker, V. A.; Vorster, B. J.; Vorster, L. P. J.; Vosloo, A. H.; Vosloo, W. L.; Waring, F. W.; Wentzel, J. J.; Wentzel, J. J. G.

Tellers: B. J. van der Walt and H. J. van Wyk.

Noes—34: Barnett, C.; Basson, J. A. L.; Basson, J. D. du P.; Bloomberg, A.; Connan, J. M.; Emdin, S.; Fisher, E. L.; Graaff, De V.; Higgerty, J. W.; Hour-quebie, R. G. L.; Jacobs, G. F.; Lewis, H.; Lindsay, J. E.; Malan, E. G.; Mitchell, D.E.; Mitchell, M. L.; Moore, P. A.; Murray, L. G.; Raw, W. V.; Smith, W. J. B.; Steyn, S. J. M.; Streicher, D. M.;Sutton, W. M.; Suzman, H.; Taylor, C.D.; Thompson, J. O. N.; Timoney, H. M.;Wainwright, C. J. S.; Webber, W. T.;Wiley, J. W. E.; Winchester, L. E. D.;Wood, L. F.

Tellers: H. J. Bronkhorst and A. Hopewell.

Question affirmed and the amendment dropped.

Motion accordingly agreed to and Bill read a Second Time.

I move—

That the Bill be now read a Second Time. This is a non-contentious measure. It is merely introduced to safeguard certain privileges presently enjoyed by a very small number of teachers—as far as the Department of Indian Affairs is concerned, probably not more than five teachers. This statutory provision is now being sought to ensure the retention of certain privileges hitherto enjoyed by these few teachers. Arrangements have been made for the transfer from the Transvaal Provincial Administration of all primary and secondary education for Indians in the Transvaal as from 1st April, 1967, and the necessary proclamation of the transfer has already been published in the Government Gazette.

As far as Natal is concerned, the existing provisions of Act No. 61 of 1965, which protect the pension rights and the retirement benefits of teachers transferred to the service of the Department, were found to be adequate. This has been brought about because section 13 of the Indians Education Act, 1965, provides for the payment of benefits to teachers who had previously contributed to and retained their membership of a pension fund. That is in Natal. It was, however, recently brought to my notice by the Transvaal provincial authorities that among the teachers who will probably be transferred from the service of that province to the Department of Indian Affairs there are a few permanent teachers who do not contribute towards the Transvaal Teachers’ Pension Fund, and consequently they are not members of the said fund.

Although they are not members of the Transvaal Teachers’ Pension Fund, such permanent teachers with continuous service are, in terms of section 14 (1) of the Transvaal Teachers’ Pension Fund Ordinance, 1959, entitled under certain conditions to gratuities from provincial revenue on retirement on attaining the prescribed age or on retirement upon the grounds of continued ill-health. We were confronted with the problem that the Indians Education Act of 1965 made no provision for the payment of benefits to persons who are not members of a pension fund. Should these specific teachers, after their transfer, retire from the service of the Department of Indian Affairs on the grounds which I have mentioned, there would be no provision whereby any benefits could be paid to them in respect of their service with the Transvaal Education Department.

It is at the request of the Transvaal education authorities that these steps are now being taken to provide statutory sanction for the payment by the Transvaal Education Department of gratuities, in terms of the Transvaal Teachers’ Pension Fund Ordinance, in respect of their service with the Transvaal Education Department, to these specific teachers who did not contribute towards the fund and who would normally have been entitled to such benefits on retirement had education for Indians not been taken over by the Department of Indian Affairs. It is simply to put that position right and to protect the rights of these five Indian teachers.

Mr. Speaker, we on this side of the House have no objection to this Bill. We support its provisions and agree that it is only fair that this small group of teachers who enjoyed protection under the Transvaal Ordinance should continue to enjoy that same protection now that they have been transferred to the service of the Department of Indian Education. We are also agreed that the benefits should be paid by the Transvaal Revenue Fund, as is provided for in the Bill. We on this side of the House therefore support this Bill.

Motion put and agreed to.

Bill read a Second Time.

Committee Stage.

Bill read a Third Time.

Mr. Speaker, I move, as an unopposed motion—

Agreed to.

Before proceeding with the debate, I think I should refer to the hon. member for Constantia, who unfortunately is not here to-day because he has had an urgent eye operation, but he is recovering and should be with us soon, and I am quite sure that all sides of the House wish him a speedy recovery.

Hear, hear!

When the debate was adjourned I reminded the Minister that he was still weathering the storms of inflation, and I wish to move the following amendment—-

1. (i) that greater efficiency is being achieved in the administration of the country’s affairs;
2. (ii) that it will relieve the main burden of combating inflation, imposed on the people, by restricting public expenditure wherever practicable and financing it by non-inflationary measures;
3. (iii) that its taxation proposals are devised to promote the interests of the nation as a whole, with special regard to the problems of the average breadwinner;
4. (iv) that productivity is being increased by all means, including incentives to South African workers and management; and
5. (v) that taxes will not be increased without the prior consent of Parliament”.

I was reminding the Minister that he was still weathering the storms of inflation, and the Minister left us with the impression that he intended by this Budget to contain inflation; he said that that was the object of his Budget. Little did I expect that 24 hours later the Minister would be embarrassed by the hon. the Prime Minister, who warned the country that strong inflationary forces were at work in the economy. The Prime Minister’s statement went on to say that there was no decline as yet in the demand for labour, goods and services. I hope that the Prime Minister, in addition to giving a written statement, will join in this debate and give us the benefit of his views on the inflationary position, because whatever the attempts may be of the Minister of Finance to control inflation, there is no doubt that the Government is primarily responsible for inflation. On 19th March, 1964, I warned the Government about inflation. I warned the Government again in 1965 and in 1966. In 1964 the then Minister of Finance ridiculed us, but we gave the warnings and the inflation is here, and according to the Prime Minister it still continues to be a danger. Even the Minister himself says that the continuing inflation was admittedly an undesirable phenomenon.

Sir, one of the most important factors in the fight against inflation was the extent and method of financing the total expenditure on public account, on current as well as on loan account. That is only part of the problem. It is not only the financing of the public sector but the expenditure in the public sector itself. In the main, the expenditure in the public sector is nonproductive. The Minister will know that from his long experience in the Department of Economic Affairs. Therefore it tends to be inflationary. This year the Minister, in the proposals he put before us, has shown that Government expenditure on Loan Account amounted to an increase of R55,545,000 and that on the Revenue Account there was an increase of R118 million. These two figures together make a total of R173 million increase for this year, but the Minister talks about controlling inflation. In his budget speech the hon. the Minister said there was a new upswing in the economy in 1966, and he said that the new upswing was not a welcome phenomenon. We agree with him there, but he said that it took the form mainly of a more rapid increase in capital and consumption spending, and not of an accelerated growth of physical production or real income. But here again the main contributor to capital spending was the Government itself. The Minister appears powerless to stand up against the demands of his colleagues for capital works and services. Year after year we see an erosion of the value of the rand. The general public does not understand the word “inflation”, but any housewife will tell you that the rand buys less to-day than it did five years ago and certainly considerably less that it did when this Government came into power. The hon. the Minister will tell us that there is inflation all over the world, but we are not concerned with the outside world; we are concerned with South Africa and we are concerned with the problem as it affects South Africa. When we face the position that the Government is not only taxing the people but is insisting upon compulsory saving, the public has a decided interest in the matter, since they are eventually repaid in debased currency. The rand that they are compelled to save to-day will be worth less when and if it is eventually returned to them unless the Minister contains the fires of inflation. The Minister has analysed the position and shown us that he is aware of the position but there is nothing in his Budget to convince us that we can be assured that the creeping erosion of the inflationary process will be completely contained by his Budget. The Minister has not convinced us of that. At best this Budget is a neutral one, but the Minister’s Budget statement has shown that the fires of inflation are still burning, and they consume the life’s savings of the people.

At this point I think we should emphasize the line of demarcation between the public and the private sector. I think the Minister will agree with me that the line between the public and the private sectors has a tendency to become blurred. This Minister was formerly Minister of Economic Affairs and he knows the extent to which the Industrial Development Corporation has changed its policy. Originally it was to assist industry but more and more the I.D.C. is taking a larger share in the private sector. The I.D.C. has become a partner in many businesses and I believe in the case of some businesses they have been taken over altogether. It means that members of the H.D.C., following the practice of that organization, takes seats on the boards of private companies, quite rightly, to look after the interests of the I.D.C. but these private companies in turn, by reason of their special contacts with the I.D.C., are in a position to know Government requirements. Senior Government officials, when they retire on pension, are appointed to the boards of these companies and they too know the Government’s spending programme. I think this is a factor which warrants very careful consideration and examination. We have seen what has taken place overseas. We had a report in the press during the recess about questions being asked in the British House of Commons concerning excess profits made on Government contracts, and if the position is not watched the inflationary fires could be encouraged as a result of the policy of the I.D.C. and private enterprise getting together particularly when it comes to contracts with Government departments. I think the hon. the Prime Minister and the Minister of Finance should say to all members of the Cabinet, “Is your project really necessary?” Has the time not come for all Departments to consider priorities in the Departments themselves, the Cabinet thereafter to consider the long-term priorities of the long-term capital ventures? Sir, there is a tendency in all Departments towards Empire-building, and the question that one must ask is whether we are getting the highest standard of efficiency. Have we got enough engineers to provide for the various departments building up their own engineering departments? We have a comparatively small population of trained people and we are building up organizations within organizations where each man wants his own status symbol, backed up by a car, carpets in offices, a trip overseas, secretarial staff, a departmental magazine, a public relations department, and all the froth which contributes to inflation. We have seen this over the past 19 years. As soon as you have a department, you have to have a magazine; you have to have photographs …

And a Cadillac.

The question is whether all these things are essential and to what extent one department is vying with the next to produce a better “house magazine” for the following year? And who reads them all?

And why Deputy Ministers?

Are we not reaching the stage where we have a mutual admiration society where each department admires the other department’s magazine and congratulatory messages are written from one department to the other? Sir, the Minister must ask himself whether he is big enough or whether his Government is big enough to regard inflation as a danger to South Africa, as an enemy which is not defeated by Budget speeches or by Budget programmes or by taxing the public but by discipline at all levels? This Minister has delivered his first Budget speech. If he is going to be a good Minister of Finance—and I hope he will be of course. It will be a poor outlook for the country if he is not—I hope he will exert discipline. [Interjections.] It is quite clear from the attitude of the Deputy Minister of Bantu Administration and Education that he cannot even exercise discipline over members sitting in his immediate vicinity in this House. Sir, discipline must permeate all Government Departments as well as the private sector itself. I think the Minister will agree with me that if we are to have more effective control we must have more up-to-date statistics. Part of the Minister’s difficulty is that he has not got up-to-date statistics. It is not our fault, Sir. Over 20 years ago the United Party Economic Social and Planning Council recommended that there should be up-to-date statistics. For many years this Government neglected this matter. Recently there has been some improvement but that improvement is not sufficient. The Minister is having difficulties because he lacks up-to-date statistics and that is why his guesses are so often wrong. Surely if the Minister wishes to combat inflation he needs up-to-date statistics. A doctor cannot give an effective cure unless he first makes an effective diagnosis. We have changed doctors, Sir; there is a tendency for some doctors to give a stimulant and then a tranquilizer. Just recently this Minister talked about working and spending and now he is talking about working and saving. At one time he gave a stimulant and now he wants to give a tranquilizer. I wish he would make up his mind.

I come now to the next section of the Minister’s speech in which he dealt with the monetary, banking and financial situation. The Minister, in analysing the monetary, banking and financial situation, told us that the total money or near-money in the hands of the private sector increased in 1966 by a further R155 million. He told us that one of the reasons for this was the balance of payments surplus, and that the other two main reasons were an increase in credit extended by the banking sector to the private sector and a further expansion of bank net credit to the Government sector. Sir, I will deal with the private sector first. The Minister has the power, through Treasury control, to introduce a credit squeeze n the private sector, but I would ask the Minister why no reference was made to the question of credit for consumer durables, which plays an important part in the near money in the private sector. Why did the Minister make no reference to this whole question of financing consumer durables in his speech? Does he regard it as a matter which is not of sufficient importance to be mentioned? Is he satisfied with the growth of this credit over the last few years? Does he regard it as a factor which contributes in any way to the inflationary position? I think the hon. the Minister should give the House his opinion in this regard in the interests of the country and the public because it is essential that there should be adequate control of credit in a situation such as the present. Does the Minister regard the position as satisfactory and has he information available to show the extent to which consumer credit is or is not contributing to the inflationary process? Unfortunately, Sir, we are the heirs to the policy of the Government in the past when far too many long-term projects were financed by short-term money, and it is the financing of long-term projects by short-term money, from the Government’s point of view, which has caused some of the difficulties. The Minister seems to rely so heavily on compulsory loans that one is entitled to ask him whether he sees any prospect of substantial long-term Government loans in the foreseeable future without the compulsory element. Sir, I wish to emphasize here that by “long-term loans” I do not mean tax bonds; I am talking about loans for periods of 15 to 20 years. Does the Minister see any prospect of getting these loans at reasonable rates of interest, or does he intend to rely on the compulsory factor?

When he dealt with the question of monetary and fiscal policy, the Minister summarized the measures he and his predecessor took in December last year in order to contain if possible some of the flames of inflation. He said that all branches of industry, and no doubt he included Government services, faced the problem of labour shortages and rising costs. He said that they would continue to be a phenomenon until such time as the rate of spending is reduced. The Minister admits that Government expenditure must be kept as low as possible but he said that in practice it is exceptionally difficult to curb the rise in Government spending. Has the time not arrived when the Government must examine the whole question of the retraining of personnel and give the civil servant the opportunity of training and a higher salary because of higher efficiency. Does the Minister not think that the senior civil servants would be more productive if they would have the opportunity of retraining? I am not suggesting that there should be any changes in personnel. Before the staff is increased should the question not be asked: “Is the addition essential?” That is one of our principal difficulties. Every time we have legislation introduced into this House it might be a good idea if the Minister had to table what the cost would be when the legislation is put on the Statute Book. What additional personnel would be necessary and what additional equipment would then be necessary? We could then consider whether the journey was really necessary. The Government has come forward with Bills year after year with no estimate as to what it is going to cost and parliamentary practice has not demanded that such estimates be put forward. I think that one or two Ministers might get a surprise if they realized what the costs would be. All this discipline is essential on the part of the Minister of Finance if he is going to be the custodian of the people’s money.

I want to deal particularly with one department, namely the Department of Defence. I said earlier on that some expenditure is inflationary because it is non-productive. I do not think that anyone will disagree with me when I say that defence expenditure is nonproductive. I do not want to be misinterpreted that it should be thought that I am opposed to expenditure by the Department of Defence. I had first hand knowledge of the wastefulness of defence expenditure when it is handled without strict discipline. Defence equipment purchases are determined quite often by the time factor and there is a tendency on the part of far too many people to make the excuse that it is a defence matter and that therefore time is of primary importance and cost does not matter. One must expect a certain amount of defence expenditure to be kept secret but might I suggest that we are perhaps becoming too secretive. Is the Minister satisfied that there is adequate control when it comes to buying defence equipment? During this recess we have seen Press reports of large profits being made by firms supplying defence requirements to the British Government. I think that the figure of R20 million was mentioned as excess profits. Can our Minister in South Africa give us the assurance that he is satisfied beyond doubt that the prices charged for defence equipment made in South Africa are reasonable and in no way excessive? Is he satisfied that in all cases we are getting the best value for money? The Minister of Defence has a difficult job—I admit that—but is he absolutely satisfied and can he assure the Minister of Finance that adequate control is being maintained? Can he give us the assurance that when repeat orders are given every effort is made to reduce the costs and that greater efficiency is introduced? I had first hand experience concerning the control of defence expenditure during the last war. I know how we reduced the costs of land mines, grenades, armoured cars, army boots, and uniforms by persistent investigation and control of excess profits. We had that experience in the last war. By recommendations made, more efficient methods of production were introduced. We were able to control wasteful expenditure. We all agree that war is wasteful. We all agree that it is essential that South Africa be strong. No one will deny that. But is it strong at a price, or strong at any price? I would go so far as to say that a person who makes an unjust profit on defence equipment is a traitor to his country. How often do we hear the glib phrase: “This order is for defence, it must be got through in a hurry, the price is no object.” The minute that signal goes out everyone takes advantage, from the firm concerned to the employee and everybody else along the line. Anybody who knows anything about this will confirm this. I know that every country in the world is faced with this problem where private enterprise provides the sinews of war to the government.

In other words, you are generalizing.

I am not generalizing. I know this from first-hand experience. We cannot control the price of goods bought overseas and in fact for some of our essential equipment we may have to pay what we regard as an unjust price. But within our own borders we should be able to control the position. Control would serve two purposes. It would reduce some of the inflation and ensure that we were getting our money’s worth for expenditure on defence. Army, Navy and Air Force discipline should ensure that both officers and other ranks appreciate that they are trustees of public money and waste and carelessness only contribute to increasing the burden of the taxpayer. I think that that message should be passed right through the lines. We would not see so much waste in defence camps and defence institutions, if it was brought to the knowledge of all concerned that the taxpayer’s money is being used and could be wasted.

Still under the Minister’s heading of monetary and fiscal policy, he said that all branches of industry stiff have to cope with problems of labour shortages and rising costs and wages, that is to say, problems which arise from excessive demands for goods, labour and services. But I do not agree. Is it so much an excessive demand for labour as excessive and artificial shortages of labour due to Government policies? Is that not the reason? Here in the Cape there are many Coloured youths wishing to qualify as motor mechanics and in Natal we find an equal demand by the Indians. For how long can we allow coloured people to own and drive cars and yet deny them the privilege or even the right to become motor mechanics? There was another requirement of fiscal policy to which the Minister referred, namely that it should promote saving and productivity. He goes on to say that greater saving and higher production constitute not only the best lasting measures against inflation but also the essential basis for our future prosperity and growth. Have we not been telling the Government for years that it should increase the productivity in the reserves by taking industry to the reserves? Capital will not go where there is no title and there is no part of the world where there are greater opportunities for development than in South Africa itself. The poverty of the reserves could be changed to productivity if we had the courage to allow industrialists to invest in the reserves on a healthier basis. I think that we will all agree that industrialists will soon be establishing their branches and investing their capital in ventures in Botswana, Lesotho and Swaziland. How much longer do we have to wait until the Government will change its mind and accept our policy and allow investment in the reserves? How long will the Government delay? This will help the lower income groups to ward off the erosion of inflation and give our Bantu people practical evidence that they too can have a share in the prosperity of South Africa. The Minister has assured us that the provision of R1,384 million is the estimated expenditure for the current year. The Minister tells us that it is a conservative estimate. I should like to refer the Minister to the speech of the late Mr. Havenga in 1950. Mr. Havenga was reviewing the position and he was concerned about expenditure. I am quite sure that the Minister would much have preferred to have Mr. Havenga’s Budget to I the one he has now. Mr. Havenga said:

The expenditure for the current year, according to the estimates which the Minister has given, shows a net increase of over R118 million, due largely to Government policy. The Prime Minister’s economic experts and the Minister of Planning told us that the Government was aiming at a growth of 5½ per cent. As this figure of R118 million is in excess of 5½ per cent, it is evident that further difficulties must be expected. How can the Minister come along with an increase in excess of 5½ per cent when the Prime Minister’s Department of Economic Planning tells us that 5½ per cent annual growth is sufficient? Here the Minister is offering us a Budget which is in excess of a 5½ per cent increase. If our expenditure rises higher than the national growth rate, it either means that the demands are too high or that we are going to run into further difficulties in the foreseeable future. The Minister tells us that the figure in respect of the Defence Fund for the 1966-’67 year is R40 million and that it is being revised this year. I should like to ask the Minister whether the R40 million represents the amount which should have been spent last year and was not spent because of the delivery factor. I should like to remind the Minister that in the previous year an amount of R48 million was not spent. If this is the case, it will mean that, had the R40 million been spent, instead of there being a surplus last year of R31 million, we would have shown a deficit of R9 million. Will the Minister tell us whether that R40 million which was not spent last year is to be spent in the current year, or will the amount not be spent at all because the persons responsible for delivering to us are no longer prepared to do so. or because the equipment is not available. What I should like to know from the Minister is where in this Budget so far he had promoted savings and productivity. He goes on to give us excellent advice, but there is nothing new in this Budget so far as encouraging productivity is concerned. There is compulsory extraction, but there is no encouragement to save. There is no encouragement for higher productivity at all. In South Africa there is in effect too wide a gap between the rich and the poor, too wide a gap between the haves and the have-nots, and a Budget should give us some indication that it approved of a social policy which recognizes that one is one’s brother’s keeper. It was Mr. Anton Rupert who said recently “if they don’t eat, we don’t sleep”. History has shown down the ages that poverty cannot be ignored. There is too much poverty in South Africa. Unless there is greater productivity and unless the standard of living of all peoples is raised, trouble lies ahead. With the growing cost of the necessities of life, poverty and hunger in the poorer sections will increase. Surely the Minister will agree with that.

I want to digress for a moment and deal briefly with the question of sugar since the recent increased price does effect all sections of the community. Sugar, I think the Minister will admit, particularly amongst the Bantu people, is an essential item of diet. Let me say at the outset that assistance for the sugar industry under the present conditions was essential and I believe that the 1 cent per lb. increase was necessary, but I ask the Minister, when he condemns inflation, whether he must not accept a considerable measure of responsibility for the increase of cane quotas. It was the Minister as Minister of Economic Affairs who encouraged the expansion of the industry. Many years ago it was generally recognized that the local market accounted for between 60 and 65 per cent, and the balance was for the export market. There is a considerable difference in the ratio to-day. The Minister was hoping that by increasing the export market, he would have a bigger allocation of the overseas quota. But they have miscalculated. Must he not accept responsibility for the Government departments who encouraged thousands of rand to be invested in sugar lands, many of which to-day are proving uneconomic? I have seen land growing citrus and timber being ploughed up to grow sugar and to-day there are sugar farmers, both old and young, who find financial embarrassment staring them in the face Large fortunes have been won and lost in the sugar industry and this is not the time to examine this in detail. Surely the Minister must realize that it was the Government that encouraged the development of the sugar industry, and encouraged the increased quotas, and—shall we say—the over-development of the industry and the bringing of new land under cultivation. I should like to ask the Minister whether he does not regard that increase as contributing to inflation. The industry needs this assistance, but did the Minister consider whether an export subsidy might not have been a better way of dealing with the position?

I now come to the revenue account for the financial year 1967-’68. It is barely six months ago that we were told that the Government expected to reduce their expenditure on Revenue Account for the financial year 1966-’67 by approximately 1 per cent of the Estimates. That this target has been reached is mainly due to the fact that the Defence Department did not spend all that was anticipated would be spent. Because of the delay in the delivery of defence equipment, there was a saving on expenditure. The Minister did not tell us whether this equipment would be coming forward later. Following the example of his predecessor, the Minister has over-estimated expenditure and under-estimated revenue. He therefore finds himself in the happy position of having a surplus. He has just followed what has been done by previous Ministers of Finance on that side. We cannot allow the Minister’s remarks with regard to revenue to pass without comment. He said that they would total approximately 1 per cent more than the original Estimates, mainly as a result of small increases in revenue from the Revenue Department and from the Department of Posts and Telegraphs. We had no say in the increase in the case of the Department of Posts and Telegraphs. Parliament was not in session when the Minister of Posts and Telegraphs decided to increase telephone charges. We had no chance to debate that matter, but I am quite sure that the other members on this side will have something to say to the Minister of Posts and Telegraphs about the increase in the cost of telephone services. He has increased the cost of telephone services, but we are getting no better services. The substantial increase in telephone charges has added to the cost structure but there is no evidence that we are getting any better results.

I come now to the Minister’s remarks on the Loan Account. Here too the Minister expects a surplus. I must comment on the continuing bad habit of Government Departments over-estimating their loan programmes. There is always a tendency towards waste when a department has an over-generous loan programme. The tendency is for civil servants, when they know that they have a certain amount to spend during the year, to go along casually. When they have a tight programme they have to exert a certain amount of discipline. But year after year we find them asking for an over-generous allocation on the Capital Loan Account, and then not utilizing the amount. This bad habit is embarrassing to the Treasury, because the Treasury must earmark funds for a purpose, and it certainly is not good financial management. When we go into committee we shall have an opportunity of examining that in detail. When speaking of capital expenditure, and expenditure in general, I am disturbed to find that one person or organization did not cover himself with distinction either in his contractual arrangements or in the manner in which he carried out a certain contract in one of our leading cities. I see that person’s name mentioned in connection with possible Government expenditure for the storage of oil. Oil may be essential, but I hope the Minister is going to look very carefully into the question of the allocation of contracts to people who are going to be charged with the responsibility of providing the Government with the necessary facilities for the storage of oil.

In view of the recent experience that we have had in connection with a certain municipality involving one particular individual whose name has been mentioned in the Press in connection with this oil contract, this side of the House will look at this matter very carefully indeed, having regard to remarks that were made concerning this particular contract. I hope that the Minister will see to it in future that when he borrows on Loan Account it will come from a non-inflationary source, as the Minister has admitted that part of the borrowed funds come from the banking sector, and is this a non-inflationary source? Part of our difficulties in the past has been concerned with the fact that the Minister has borrowed from the banking sector. He has admitted in his Budget that he intends to look for long-term loans, and he regards it as essential that long-term money should be used for long-term projects. Many of the difficulties of the past have been due to the fact that the Government have borrowed short-term money for long-term purposes, which has helped along inflationary conditions. Therefore, Sir, I think it essential that as this method of financing contributed in the past to the troubles which the Minister has inherited, he should set his face against this method of borrowing in future.

I now come to what the Minister calls his “concessions”. They are small concessions which he mentioned during his Budget Speech. I think that all social pensioners will welcome the few crumbs offered to them. A rand per month does not buy very much these days, and it certainly will not be inflationary. I do not think there are too many old-age pensioners who will receive the extra rand. Incidentally, this extra rand will not be paid to them until October. They have six months to wait. In addition to that the Minister has raised the means test. I leave the hon. member for Umbilo to deal with this matter in detail. The hon. member has made far more pleas than that side of the House, and it is quite clear to me that the pleas of the hon. member are being granted by the Minister on the installment system. Even the hon. the Minister of Posts and Telegraphs has had a change of heart in regard to radio licences after the hon. member had pleaded for several years. It is obvious to us that the hon. member must carry on pleading with the department and the Minister. We hope that he gets his results a little more promptly than what he did from the previous one.

I spoke earlier about productivity. Might I suggest to the Minister that when considering productivity some consideration should be given to the old folk who wish to supplement their income by giving some recognition to them for such efforts as they may make in a part-time capacity to supplement their old-age pensions. At the present moment they are penalized. Their pension is insufficient and sometimes they can earn a little casual income, and I suggest to the Minister that the time has arrived for some recognition to be given to the old folk who want to eke out a few more pence to try and make ends meet.

When he made his Budget concessions the Minister spoke of productivity. He suggested that he was going to allow an amount of R50,000 in regard to productivity. It is not a very big amount. However, it is a recognition of the principle that an increase in productivity is essential. I am reminded that the hon. the Leader of the Opposition has for several years now impressed upon the Government the importance of productivity. He said that there is an urgent need for re-training our workers in the light of modern development, and while the Minister may make a special plea for productivity he must look to his own colleagues to see the waste which goes on from year to year as a result of government policy. Treating our Bantu people as movable labour units means that thousands of man hours are wasted when Bantu are sent back to the homelands. Their training and aptitude are lost when this happens. Having been trained for a job, they are then sent back, and the employer has to start again with someone new. Anyone who knows anything about commerce and industry knows how much it takes to train a man. I would give a lot for a computer which could calculate the cost to the country for the man hours wasted travelling to and from work, waiting in queues for permits, and being sent back to the homelands because a document had been lost. The hours of frustration being wasted through an unsympathetic bureaucrat concerned more with ideology than with economic good sense. [Interjections.] I thought that there would be a little chorus from the two Deputy Ministers of Bantu Affairs.

Do you want influx control or don’t you want it?

The time wasted standing in queues waiting for documents certainly affects productivity, and I want to suggest that the R50,000 might very well have been spent on investigating productivity in Government departments.

The Minister anticipates that as a result of his action against inflation there will be a slower rise in revenue, and he anticipates that the revenue from gold mines will be substantially less than it was the previous year. Yet he calls upon the mines to bear heavy taxation. About 15 years ago the Minister and I sat on a select committee dealing with income tax, and we dealt with all matters except gold mines. Even then the view was expressed that the whole question of mining taxation should be brought under review.

Where is the heavier taxation?

No, there is no heavier taxation this year, but I say that the whole question of taxation of mines should be brought under review, having regard to the fact that the lower-grade mines may go out of production. The Chairman of the Gold Producers’ Committee pointed out only last year that several hundred millions of rand were left in the gold mines because they could not be profitably exploited. Years ago the suggestion was made that the whole question of the mining taxation formula should be revised. I suggest that the Minister should give some consideration to the importance of continuing the life of the gold mines, having regard to the whole question of the mining taxation formula.

The Minister admits that the departments have asked for the huge amount of R602 million on loan account, and says that he has cut down their requirements by R68 million. He gives a revised figure for 1966-’67 and suggests that there is a further reduction. He supports this by referring to the demands of the Minister of Water Affairs. The Minister of Water Affairs will have our attention later in the course of this debate. I want to suggest that the Minister of Water Affairs must also have regard to the fact that some of the expenditure of his department is in connection with dams which are not yet full and which, some suggest, may never be full.

Which dams?

May I suggest that the hon. the Deputy Minister might tell us later in the debate of all the Government plans to show that the Pongola dam is going to be a success.

But you said some of the dams will never be full. That is quite a different story.

The Minister has given us a new cash flow report, a new cash budget summary of the Budget proposals, and has suggested that this new method gives us a better interpretation of the handling of Government funds. May I suggest that this information was available in previous reports, in previous budgets, and while this new method is welcome, it does not tell us anything new. The Minister has chosen to submit this Budget in this new form in an attempt to show what cash he requires and also to show the amount of loan funds he requires. But the Minister in suggesting the amount of loan funds he requires chose as his slogan, “Work and Save’’. “Work and Save” is his slogan for this Budget. Might I suggest to the Minister that some of the Press reports were right that it was “Work—and Slave”. The Minister said in the course of his speech that he had provided an export incentive. He wants to give us an incentive for exports. But is this not contradictory when he suggests that there should be an export incentive when in his earlier remarks he referred to exports being inflationary? I wonder whether the Minister will explain to us why on the one hand he gives an export incentive and in the earlier part of his address he suggests that exports have an inflationary tendency and effect. I do not see that; I do not know why the Minister said so.

The Minister referred to his tax proposals and to the smoothing effects on the fluctuations in farming incomes. We will have an opportunity during the Committee on Ways and Means of examining these proposals in greater detail. I need only say that over 15 years ago the Leader of the Opposition recommended that there should be an averaging out of farmers’ incomes over good years and bad years, and in the 1953 and the 1958 elections this side of the House advocated that. It has taken a long time before the Government has agreed to accept our recommendations. [Interjections.] In his indirect taxation the Minister has given no assistance in so far as liquor taxes are concerned, in so far as it affects one section of the industry. Last year we referred to the discriminatory tax which affected one particular firm which was singled out for special penalties, and during the course of the debate in Committee of Ways and Means a hint was given that the matter would be reviewed, but no consideration has been given to that.

Then we come to the question of company tax. The Minister admits that companies will have to bear the main burden, but I wonder how many companies appreciate what the Minister has done to them. He has not introduced a retrospective burden on companies. He calls it a “technical” difficulty, but he proposes that it will apply to all companies whose financial year ends on 31st December, so that many companies whose years end between 31st December, 1967, and 31st March, and who have made financial arrangements accordingly, will find themselves caught both by the surcharges and the increased loan levy. This is a new departure and one which will not be accepted by companies lightly, once they realize the implications of this proposal.

When it comes to direct taxation, we will have an opportunity to go into this in greater detail in the Committee of Ways and Means. But when the Minister talks about greater savings, he has introduced a compulsory saving which is an impost on companies and on individuals, where we are forced to hand the money over to the Government for an undetermined period. I can give a very good guess as to when the public will get that money back. It will be just before the next general election.

This Budget gives no encouragement to us to work or to save. The Minister is even asking us to give him the power to raise taxes during the recess, while Parliament is not sitting. I would hesitate to give any Government power to tax first and explain afterwards, and least of all this Government. Of course in practice the Government can do what it likes because it has the numbers, but if parliamentary control means anything then there should be an opportunity for discussion and I feel it is better for discussion to take place before rather than after taxation. I know that many economists will not agree with me, but they do not sit in Parliament. If one were to ask the outside voter whether he would like to give the Minister the power to increase taxes without discussion, I know what the answer would be. I want to quote the late

Mr. Havenga again when he said that in the last analysis the taxes have to be earned by the people; it is true that we have to tax our mines or tax our companies, etc., but let it not be forgotten that these taxes finally fall on the people themselves. Sir, the Minister has said that we should work and save. There is nothing in this Budget to encourage people to work harder. This Budget solves no problem and this Minister will not adequately discharge his duty until he stops the rotting of the rand.

It is my privilege, on behalf of this side of the House, to congratulate the hon. the Minister on the special occasion of his first Budget which he has laid before the House and the country. We have every confidence in him and I think I can say that after 22nd March the country also has every confidence that the hon. the Minister will take his place with distinction in the ranks of outstanding men who have, over the years, looked after the finances of South Africa. We also want to congratulate him on the Estimates which he laid before the House and the country, and through him also the Cabinet and the officials who helped him to compile it. [Interjections.] I want to say that it is a good Budget. I am even inclined, after having listened to the hon. member for Pinetown, to say that it is a very good Budget. In any case, this is a Budget which I feel myself quite at liberty to defend both within and outside this House. It is a Budget which I can defend before economists and my voters. After having listened this afternoon to the hon. member for Pinetown I got the firm impression that the Opposition is also of the opinion that it is a good Budget. The hon. member merely, for the sake of saying something, uttered a few vague commonplaces. In the financial sphere the Opposition is inclined to be a little embittered; they are frustrated and their frustration has its roots in the past. It all began in 1948 when they experienced the greatest economic disappointment of their lives when they thought that this Government would fall on the grounds of the economic collapse of South Africa. In 1960 and in 1961 they again thought that they would get that chance. After Sharpeville and after South Africa became a Republic they thought there would be a second 1948.

You thought so, but we did not.

[Interjection.] When capital flowed out of South Africa they had a political smile in their hearts when they uttered, with long, gloomy faces, prophecies of doom in regard to South Africa and helped to send even more capital out of the country. It is to the lasting credit of this National Government that it has succeeded, after those years, in restoring confidence in the integrity, in the stability, and in the future of South Africa and in having as a result of that, brought about a revival such as South Africa has never known before. There is work for everybody; work for every worker in this country who wants to work; there are opportunities for promotion if he is prepared to work and do his best. He has been afforded the opportunity of earning a good income. Opportunities have been afforded us of giving our children an education, and there is a future for our children in South Africa. With this fine economy which we have built up here in South Africa over the past six years, we have obtained the funds to make South Africa strong. In those years which have just elapsed we have fared through the stormy seas of the international life and have arrived safely thanks to the strong economy which we built up in South Africa. The Opposition has never had a word of praise for any of these wonderful, these fine things; they have always looked on the gloomy side just as they did once again to-day when they said that there was only one thing they could see clearly and that was inflation. Inflation is merely one aspect of this great revival which we have been experiencing. Inflation may perhaps be described as the price we have to pay for this tremendous prosperity, for the safety of South Africa in the time in which we are living, and if that is the only price South Africa has had to pay and must continue to pay then it is not a price which we cannot pay.

That is a shocking thing to say.

After all these things had taken place, after there had been this fantastic revival in South Africa with all its concomitant benefits for the ordinary citizen and for our country, both nationally and internationally, there remains just this one matter which we must rectify, and that is the problem of inflation. Let me tell you, Mr. Speaker, let me say this to the House as well as to the country—and I have it from the mouth of the Minister of Finance himself— that this National Government has always done what it wanted to do. We will do everything possible to safeguard our existence in this country, to safeguard our future. We shall see to it that the economy of South Africa does not collapse as a result of inflation, which will mean that in the long run we will lose everything.

These Estimates are only one of the steps which we are taking in this direction. A Budget is always the child of its time, and this Budget is also a child of its time. This Budget does not stand alone. This Budget has a task which it has to perform in conjunction with and in supplementation of the monetary measures which have already been taken. One cannot state in advance what turns the economy is going to take; it is not a tap which one can turn on and say that so many gallons of water will run out per day or per hour; it is not an exact science. It is a question of certain things which one has to do and then consider in retrospect how they turned out, but I state to-day that I have great expectations that this Budget, together with the monetary measures which have already been taken, will succeed in slowing down the pace of our economy and bringing about a more stable growth in our country. This inflation which we are experiencing to-day entered our economy slowly and I think its demise will be a slow and difficult one. But the country must realize fully that inflation will have to be eliminated from our economy.

I have looked at the amendment moved by the Opposition and I have listened to the speech made by the hon. member for Pine-town. I hope the hon. member for Pinetown will not say that I am being unfriendly if I say that his speech put me in mind of a very old horse, prancing through the pastures, pulling and tugging away without actually biting anything off. The hon. member did not really say anything substantial against the Budget. He touched ever so slightly on the Budget and then dealt with defence and other Government expenditure; he also had a few words to say about taxation proposals. I that want to deal with the question of Government expenditure. The hon. member for Pinetown did not make a major issue of it to-day, but the hon. the Leader of the Opposition will concede that I am correct when I tell him that he has often stated in this House that the Government is prepared to fight inflation to the last cent of the private individual. He has said it often and the newspapers supporting him are continually stating that we want the private sector to combat inflation but that the Government is not prepared to cut down on its own expenditure. Sir, it must be borne in mind that the Central Government’s share of Government spending is only approximately 47 per cent; the provinces, the public corporations and the local authorities in the country are responsible for the remainder, and I have never yet heard the hon. member for Yeoville or any member of the Opposition take that matter up with the provinces. I have never get heard them take the matter up with the town councils of Durban, Johannesburg and Cape Town.

We introduced a motion on the matter as far as the Transvaal is concerned.

The hon. member for Yeoville says that they introduced a motion in respect of the Transvaal, but I nevertheless want to point out that the major part of Government spending in South Africa takes place outside the Government sector, and it is estimated that 70 per cent of the expenditure of the Government sector is diverted to basic services. I am asking the Opposition to tell me whether there are any basic services on which we are spending money, services in regard to which they are prepared to propose that the expenditure be reduced? Mr. Speaker, let us take the question of spending by the Central Government. The Opposition is making wild accusations in this regard, and I want to tell you that the percentage increase in spending this year was very low. The percentage increase in spending on revenue and Loan Account for the past six years, from 1960-’61 to 1966-’67, was 7.4 per cent, 11.4 per cent, 12.4 per cent, 22 per cent, 9.1 per cent and 15.3 per cent, and this year it was precisely 9 per cent.

It is still more than the growth in the national income.

Not this year. Last year the growth in the national income was more than 9 per cent; it was 9.4 per cent, and the increase which we have had this year under this Budget as far as expenditure of the Central Government is concerned, is 9 per cent. That is why I maintain that, judged by that criterion, this Budget meets all the demands which could be made of it. In addition I want to point out that the expenditure on Revenue and Loan Account, calculated as a percentage of the gross domestic product, has remained relatively constant since 1956-’57. Over all these years it has increased by approximately only 3 per cent.

Mr. Speaker, what expenditure has the Opposition opposed in the past? I can remember only too well that the hon. member for Constantia opposed the establishment of a Department of Sport; I can recall that he asked us whether we could not postpone the Orange River project for a while; I can remember that the hon. member for Parktown asked whether we could not put a stop to drilling for oil. But apart from these three specific examples the Opposition has never, to the best of my knowledge, made specific proposals in any Budget debate in this House to the effect that this or that expenditure should not be incurred. On the contrary, I can think of quite a number of examples where the Opposition advocated increased expenditure. There sits the hon. member for Durban (Point). Only the other day the hon. member was pleading here for major additional expenditure for housing and for elderly people. The hon. member for Umlazi got up here the other day and pleaded for tremendous expenditure on our harbours. He urged that the works in the Cape Town harbour be commenced immediately and completed. The hon. member for Orange Grove advocated greater expenditure in regard to the Jan Smuts Airport; he said that we could not put it off any longer.

And what about television?

Yes, not even to mention television. There sits the hon. member for Hillbrow. The hon. member pleaded this year that the Government should subsidize the gold mines. Sir, I can continue in this vein and mention one Opposition member after another who has pleaded for increased Government expenditure. But what did the hon. Leader of the Opposition himself do in January, 1966, just before the election? In his speech which he made here in this House he did not breathe a word about finances; according to him there was at that time nothing wrong with the finances of South Africa. But he did say that there was no free hospitalization. He said that there was a shocking shortage of hospital accommodation. He said that there was no provision for family allowances. The hon. member has also stated that Great Britain spends more than 10 per cent of its national income on education, and that we spend only 4.6 per cent. In that year our national income was R8.500 million. If we were to have spent the equivalent of Great Britain’s 10 per cent on education, we would have had to spend an additional R450 million on education alone. Hon. members can work it out for themselves. The hon. member for Gardens has on more than one occasion in this House said, “You must pay the farmers more”. When we say, “What about the consumer”? he says, “No, the consumer must not be paid more. Rectify the matter with food subsidies”. That means additional expenditure. Hon. members on the opposite side have pleaded for increased Government expenditure on a large scale, and they are probably the last people who can plead for a reduction of State expenditure. While the hon. the Leader of the Opposition is present, I want to tell him that there is an old saying which goes, “As the old cock crows, the young cock learns”. That “hand-picked” candidate which he put against me in Queenstown probably came and promised the people things as a result of the speech made by his hon. Leader. He advocated the abolition of Divisional Council tax, but that Divisional Councils, which had to be financed from the surpluses of the Central Government, should be retained. He advocated the abolition of estate duties. This is another of the things he promised: A guaranteed old-age pension. He did not call it, as the hon. the Leader of the Opposition does, a national contributory pension scheme. That has also been advocated here. The remaining portion must be contributed by the State of course; one portion by the worker and the other by the State, which will also result in additional expenditure. He merely mentioned a guaranteed old-age pension. He went on to add: “Free university or higher technical training for children.” Whether they are my children, or the hon. the Leader of the Opposition’s children, or Harry Oppenheimer’s children, makes no difference. South Africa should of course also have television. He then added: “A generous children’s allowance to all parents, and free maternity facilities, an efficient Public Service with better conditions of service, and a larger and better paid police force.” And so it went on. [Interjections.] Since the hon. member for Durban (Point), is waxing so eloquent, let us talk in general terms no longer. It is not necessary to convince this Government and this Minister that the total spending of the State should be more or less equivalent to the total production. That we know. Our difficulties stem from the fact that since 1954 total spending has overtaken production of goods and services, and that is why costs have increased more rapidly than they should have. That we know. Now I want to say that somewhere or other we must spend less. Either the Government sector or the private sector must spend less. We admit, and I think the hon. the Minister made it clear enough in his Budget speech, that he admits that we are going to have to reduce it. In fact, he said that it was no longer being asked whether something was necessary. It was being asked whether something was essential. That is the criterion now. We can go further if the Opposition insists upon it persistently enough. We could, for example, tell the provinces that they are not to spend a penny more than they spent in a certain year and then peg them at that notch for three years. We will not do that, but it is something which could be done in South Africa. Measures could be forced upon the Government sector. The point I want to make is that it is not necessary· to convince the Government of the necessity for this.

But let us get down to facts. Here are the Loan Estimates and let us see whether hon. members want to be constructive, particularly the hon. member for Parktown who will probably speak after me. There are 16 Votes here. On eight of them less is being spent this year than was spent last year. They are actually quite small amounts. On eight of them more is being spent than was spent last year. The hon. member can check up on various loans and services. The South African Railways takes by far the greatest amount and the provinces take the rest. Does he want to cut down on expenditure here? Then we can proceed to the expenditure on Agricultural Credit and Land Tenure, and Assistance to Farmers, R14,600,000, as well as the Purchase of Land, R14,700,000. These two items together make up almost the entire estimates. The hon. member must tell us where we have to cut down on expenditure. Here we have State Water Schemes, i.e. R61 million; and Equipment, i.e. almost R5 million. That almost comprises the entire amount. Where must we cut down? Here is the expenditure on Community Development and the addition to the capital of the National Housing Funds, namely R41 million. That also comprises almost the entire amount. Here is another one totalling R4,500,000 and all the details are furnished. They are all residential units. Where must we cut down? If the hon. members of the Opposition cannot tell us where we must cut down they must not travel about the country creating these wrong impressions. The hon. member for Yeoville is looking at me. The other night he spoke at Worcester and said that the Government expenditure of this Government, the words can be found in the Cane Argus, “simply soared”. Surely that is a terrible thing to say? He creates the impression that it is the Central Government. I am telling the hon. member for South Coast that he must listen carefully because he has created the impression that it is the Central Government. The Central Government spends only 47 per cent of the total Government sector spending, and of that 47 per cent, 70 per cent is spent on basic services. There is only 50 per cent remaining with which we are being so terribly lavish. That hon. member who wanted to give the people of Worcester that impression is being afforded a golden opportunity now. Here are the revenue estimates. [Interjections.] I am coming to the figures in a moment. Those figures mentioned by the hon. member for Yeoville, are not figures which he looked up himself. They are figures which he took from the speech made by the hon. the Leader of the Opposition. I challenge him to deny it. [Interjections.] I shall tell the hon. member how I know that that is so. It is because the hon. the Leader was wrong. Hon. members will have more than enough time in this debate to tell us where expenditure must be cut down and what should not be included here. Let us hear from them. The financing of this expenditure is taking place in an absolutely non-inflationary way this year. The surpluses of the previous year are being frozen. Are we not all able to push out our chests and say that we are living in South Africa which is so strong—give me the name of another country in the world which has been able to do this in its latest estimates, i.e. which is not going to touch the surpluses of the previous year, but freeze them and store them away—because our country’s economy is strong enough to carry the new year on its own. This is the economy which, according to some of those hon. members, this side of the House has made such a hash of. This is the boom which has been so mismanaged.

I want to say that we on this side of the House like this Budget because it really imposes no direct additional burden on the lower income groups. I find it significant that the hon. members on the opposite side remain silent now. I really thought the hon. member for Pinetown would react to what I have just said because he spoke with much more facility here this afternoon than he did that afternoon after the Budget was introduced. After the way in which the hon. member started off that afternoon, the Star wrote: “It will be a tremendous battle.” The hon. members started off very well, because the following morning their financial group issued a statement. This is what they said in their statement:

Now I want to know from the hon. member for Pinetown: Was that done deliberately or was it simply political stupidity? Why does he tell people a thing like that? Surely it is not true. The hon. member for Parktown will speak after me. He will correct me if I am wrong. When does a man with two children pay? They say he pays R100.This point now deals with the increase in the savings levy which has been increased from 5 to 15 per cent. One pays absolutely nothing as a savings levy before one has paid R100 in tax. Now they say that a married man with two children qualifies for this savings levy shortly after he begins earning R200 a month. They do not say how soon. A married man with two children has to earn R3,070 before he pays R100 in normal tax. I just want to emphasize this point. We can settle this matter in Committee of Ways and Means, but I would just like to tell the House that no person who had a certain income last year and did not pay taxes will pay taxes this year, no person who did not pay a loan levy on a certain income last year will have to pay a loan levy this year. The tax liability of somebody with two children only begins when he exceeds R1,830 per year. That is in respect of normal taxation. With three children, the figure is R2,314, and with four children it is R2,802. These scales have remained absolutely unchanged. All that has been increased is the loan levy.

A person who qualified paid 5 per cent last year, and now he will pay 15 per cent. I do not want to go into the question of productivity, which hon. members had quite a lot to say about. I just want to point out that there is a Productivity Advisory Committee. There was the concession for students. There was the allowance for companies to give 2 per cent of their income to productivity institutions. The entire Estimates are full of donations and allowances and bursaries to education, institutions, technical schools, etc. I just want to say that I think the hon. member for Park-town must reply to this. In 1965 he said that this Government was completely trapped and that it could do nothing about productivity because it was trapped within the narrow confines of apartheid.

Yes.

The hon. member admits that he said it. That is precisely what hon. members on the opposite side mean when they talk about increasing productivity. They want us to leave the narrow confines of apartheid. Then we shall be able to collaborate with them in working out plans to increase productivity.

In regard to saving, the hon. member who is now going to speak, is aware that when we increased the Post Office Savings Bank Certificates and interests last year, and introduced the increase in respect of pension fund schemes, he stood up here and said that it signified nothing. That it was without any doubt a rich man’s budget. He spoke as if these matters were not separate. There is a scheme which will enable every person to save. If these schemes were all linked up, as he worked it cut, it would have been only a rich man who would have qualified for that. But what we actually did was to begin with the Post Office, which is the poor man’s bank., and we encouraged saving quite adequately.

In regard to rates of interest, I just want to tell the House that on 22nd March deposit rates in South Africa were pegged. On 29th March, the hon. member for Pinetown spoke and he did not mention a word of criticism It took him 17 months, up to August of last year, to criticize it for the first time in this House. I hope the Opposition is not going to criticize this measure in regard to the releasing of rates of interest in this debate. I hope the Opposition will leave this matter alone in this debate.

I now want to conclude. This Budget is a good step in the direction of bringing our economy back to its proper course. I am glad that the Opposition agrees with us to-day that this is the right kind of Budget. I think that our people in the country at large are now amenable to helping us do something to curb and eliminate this inflationary tendency in our economy. I am certain that we can discuss the matter with our people in South Africa today, and that we will get their full co-operation. We appreciate all the co-operation there has already been, as the hon. the Minister stated in his Budget speech. If we all bear this message from this House, we will overcome this problem and we will guide our economy into safe, normal channels to the benefit of all the people in South Africa.

Mr. Speaker, may I offer my personal congratulations to the hon. the Minister for having delivered his first Budget speech. The hon. member for Queenstown said that this was a good Budget. I hope to be able to change his mind within the next 30 minutes. He also said that inflation was the price we have to pay for all the good things we have, and if necessary, we would pay it. It is this attitude of the Government which is hindering the fight against inflation and not getting over to the public that inflation has to be fought. But the poor man knows what inflation means and he wants it fought. Then the hon. member contradicts himself immediately by saying that the Government will fight inflation with every weapon it has. I do not understand what the hon. member wants.

Then we have the hardy annual which is thrown across the floor of this House every year. We must tell the Government where they must curtail their spending. I want to ask the hon. the Minister of Finance whether he goes to the public sector and asks them where they can afford to stop spending, or does he say to them: By means of increased taxation, loan levies and credit squeezes, you will stop spending. He does not ask the public where they can stop spending. He does not ask them whether they can do with less clothes, less food, less light, less this or less that. He says: In the interests of the country, you must stop it. They must not ask us where the Government must stop spending. Let the hon. the Minister of Finance treat his Cabinet in the same way as he treats the public, and say to them: This is all you are going to spend this year, full stop. This is the answer to the question that we have every year. Whichever way we look at this Budget, it is an indictment against the Government. If we look at the Budget purely as an instrument of the Government to raise the necessary funds to raise its revenue and loan expenditure for 1967-’68, then of course it is a dismal Budget.

The hon. the Minister has frozen and has not carried forward for the benefit of the taxpayer of 1967-’68 the estimated revenue surplus of R31.5 million on Revenue Account and the R34.4 million on Loan Account. He has budgeted for a surplus for 1967-’68 of R50.8 million, of which he proposes to transfer R43 million to Loan Account and carry over a surplus of R7.8 million to 1968-’69. We must also remember that last year, the Minister transferred from Revenue Account to Loan Account the total income from transfer duties. For 1966-’67 this is estimated to be R16.6 million, whilst for this year it is estimated to be R18 million. All in all, therefore, on a comparable basis with 1965-’66, the Minister has either frozen, or utilized Revenue Income for Loan Account, and taken out of the pockets of the public an additional amount of no less than approximately R150 million. If we take the Budget as the yardstick of the success or otherwise of the Government’s fight against inflation, then the indictment is still more serious—Oscars notwithstanding.

Under present conditions it may well be true that the Budget has much to commend it. In fact it has drawn a fair measure of praise from certain sections of the community.

Like the Rand Daily Mail.

From the Financial Mail. But the point in issue is this. The conditions which made this Budget necessary, this Budget which is taking from the public an additional amount of R106 million by way of increased taxes and loan levies, are conditions that should never have been allowed to develop. They are a direct result of the hopeless ineptitude of this Government to control the finances of this country over the last three years. The additional burden that the taxpayer has to pay now is due solely to the blundering of the Government—to one mistake after another made by the Government.

Inflationary trends became noticeable in 1964. and the Government was well aware of this fact. But the trouble was that its reading of all the available evidence was hopelessly wrong. It looked at the scene through rose-coloured glasses. It talked about applying the brake gently. It spoke of the green light at the end of the tunnel. It patted itself on the back and loudly declared that South Africa had done more to combat inflation than any other country. Only a year ago we were told that the turning point was ahead. When we add to all this the Government policies that were hopelessly wrong, namely over-spending by the State; financing capital expenditure in the most inflationary way possible; tightening import control instead of easing it; and freezing interest rates instead of letting them find their own level, then there is no doubt whatsoever that the sacrifices the public of this country are once again being called upon to make are plainly the result of the incompetence of the Government. That is why, after three years of rising inflation, not only has the battle not been won, but the enemy has not even been halted. And we cannot even be sure now that the Minister means to come to grips with the problem.

The hon. the Minister is well known to us as the Minister of Economic Affairs. In that capacity I think it is fair to say that he established something of a reputation of an expansionist. He was apt to look at the future with somewhat starry eyes and to predict a picture of 25 years of splendour and prosperity. Now, what is his vision likely to be in his new role? We can perhaps find the answer in the Minister’s own Economic Review for 1966. This is what he said—

This is how the Minister saw the picture in 1966. Others saw it differently. They might have seen it somewhat as follows. 1966 saw an excessive growth in our economy. Inflation reached dangerous proportions and unless curbed threatens our entire economic stability. In 1966, as in 1965. the real gross domestic product again showed an increase of about 5½per cent. Excessive prosperity, over-employment and far too buoyant business conditions continued to exist in virtually every sector of the economy. That is the other point of view, and it seems to us that the Minister continues to view the picture with more optimism than with realism. And that is perhaps why, as the hon. member for Pinetown has said, this budget is regarded by most economists in this country as a neutral budget and not a deflationary budget. In time of war—and we are at war with inflation—the Minister knows as well as I do that neutrality gets one nowhere.

The Minister has told us how we stand in this battle against inflation. He said this—

It is against this background that we have to view this budget. There are two cardinal issues involved in this budget. The first is Government expenditure and the second is productivity. If we look at page 34 of the White Paper we find that the total Government expenditure in 1964-’65 was R1,402 million. In 1965-’66 it had risen to R1,530 million. In 1966-’67 it took a jump to R1,755 million. This year it is expected to be R1,921 million. So in four years Government expenditure has increased by R519 million per annum or by 37 per cent. In 1966-’67 Government expenditure increased by approximately 14 per cent. For this year, 1967-’68, the increase will be 11 per cent or R196 million, if we eliminate the R30 million provided in the revised Estimates for the External Procurement Fund, which is, of course, a miscellaneous and non-recurring item.

Now, the hon. the Minister told us that—

We agree with that. He also said—

The hon. member for Pinetown has mentioned the remarks of the hon. the Prime Minister speaking on behalf of the Economic Council in regard to this matter. He said that the Government, provincial authorities and local authorities must limit their expenditure to help in the fight against inflation. According to The Star of the 8th March, the Federated Chamber of Industries said that the level of Government expenditure could not be increased indefinitely without harming the stable economic development of the country. Dr. Hupkes, chief economist of the Bureau for Economic Research, University of Stellenbosch, said in an article in The Cape Argus of March 18th—

But despite all these warnings, for 1967-’68 we get an increase in Government spending of 11 per cent and the hon. the Minister makes the following statement which was mentioned by the hon. member for Pinetown—

This is obviously the case. But the Government takes steps to try to curb the private sector. Who curbs the Government? This is the 64 dollar question. This is the task of the hon. the Minister of Finance because it is quite clear that up to now the Government has been quite immune to the warnings of our leading economists that unless we stop inflation we are heading for trouble on a grand scale.

The other factor is this, that the Government has to realize that both the Government sector and the private sector each have to play their part. They have to complement each other. If Government spending is excessive and as the result spending in the private sector is too severely curtailed, we will find what the previous Minister of Finance called “the golden mean of stability between economic progress” becomes quite unachievable and we may well find that perhaps the tide of prosperity may one day turn. The job of the Minister of Finance is to balance expenditure between the Government sector and the private sector, and not to curtail the one and let the other one run wild. I want to quote from a speech made by Mr. J. J. Cloete, the senior lecturer in economics at the University of Natal, reported in the Argus 31st March. It is an illuminating speech. This is what he said—

I think that puts the question in a nutshell.

I now want to turn to the question of productivity. The hon. the Minister acknowledged in his speech, and quite rightly, that commercial productivity is one of the main weapons with which to fight inflation. Then he went on to say that the main responsibility in the promotion of productivity rests with the private sector. Now, surely the hon. the Minister is not serious? Surely the Government cannot place the responsibility for achieving greater productivity on the private sector, if it continues to maintain its racial policies and to interfere with and to impede the private sector at every turn? How can the private sector become productive if it is hindered constantly by the policies of the Government? We have said ad nauseum, and we will continue to say so, because it is the truth, that the greatest obstacles to increased productivity are border industries, job reservation, restrictions on the use of Bantu labour and a migratory labour force. If the Minister of Finance wants to really deal inflation a death blow, I think he should suggest to the hon. the Prime Minister that he should jettison the hon. the Deputy Minister of Bantu Administration and Education. This will do more to combat inflation than any other thing I can think of, because if the hon. the Minister would look at the E.D.P. for 1966-’71 he will know that while the demand for European labour is expected to increase from about 1,300,000 in 1967 to 1,455,900 in 1971, an increase of 148,600,-he will know that nonwhite labour is expected to increase from about 5,100,000 to 5,645,000, an increase of over 537,200. These are the inescapable facts of life and we have to face up to them, and this is the heart of the matter, that the vast bulk of our labour resources are non-Whites, who must make the major contribution towards increased productivity. The Cape Chamber of Industries put it this way—

At this particular time when capital-intensive enterprises are being curtailed to some extent by taxation, this becomes still more important. I would also have thought that even if the Minister is opposed to the investment allowance on the ground that it might be considered inflationary, he would have given thought to a modernization allowance for existing plant, to make the existing capacity more productive.

Now I want to deal with some other features of the budget. First of all, I am glad to note that the hon. the Minister is not perturbed at the declining figure of our reserves and that he realizes the importance of continued relaxation of import control in combating inflation. Pressures are certain to develop for import control once again to be tightened. There are many organizations which are obviously adversely affected to some degree by better quality goods or cheaper goods coming in from overseas. I hope the Minister will turn a deaf ear to any sectional interest and maintain the view that continued inflation in South Africa will do us far more damage than a temporary drop in our reserves. The Minister mentioned briefly the question of interest rates and said that recent increases were attributed to the limited amount of funds available. Well, this is true, but I want to suggest to the Minister that one of the vital factors in the increase in interest rates is the change that has taken place in the investment pattern of the public. Traditionally South Africans always have saved to a greater or lesser degree, and they are continuing to do so, but their savings are moving from the normally strict fields of cash investments, such as in building societies, where cash is invested and cash is returned, to investments which have a growth potential as a hedge against inflation. The reason for this is very apparent. The public has lost complete faith in the ability of the Government to maintain the value of the rand. The reason for this is that they see Government spending continuing unabatedly. They see potential profits outweighing the cost of credit, so that high interest rates are small deterrents to expansion. They see the cost of living rising year by year, 3.2 per cent in 1965 and 3.7 per cent in 1966. They see Stock Exchange prices continuing to rise, with dividends yielding as little as 2 per cent, and the reverse yield gap, the difference between dividends from investments on the Stock Exchange and Government stock, a record high of some 2 per cent. Sir, high interest rates are not the disease; they are only the symptoms of the disease. The way to beat high interest rates is to defeat inflation and to restore the value of the rand. When you do that you will find that interest rates will find their own level, and the public will return to its normal pattern of investment. I hope the Minister will tell this House that he is not going to be persuaded again that interest rates should be checked. I hope he will tell this House before we conclude this debate.

Now I want to talk about some of the other items of taxation. The first is company tax. The Minister is quite wrong in a number of his assertions. He said that company tax at 40 per cent, which includes the loan levy, is very modest in comparison with other countries. But corporation tax in England is only 40 per cent, and England is a social state which provides all sorts of facilities for its citizens. Then he went on to say that the shoulders of all companies are broad. Nothing could be further from the truth. The bulk of the companies in South Africa are associations of little people trying to make a living, and not the giant organizations which constitute but a few of the companies. They are formed to limit personal liability, which is the purpose of the Companies Act, so as to allow a number of people to get together and to predetermine the extent of their investment and their liability. There are hundreds of small companies which only earn a few thousand rands a year, but they are now required to pay over 40 per cent of their income to the Minister, and they are placed at a complete disadvantage with individuals on a similar basis. I know that a certain proportion of a company’s profits can be siphoned off by way of directors’ fees and salaries, but this is very often not possible, and if company tax is going to be increased I hope we shall have some differentiation between small companies and large companies, or between public companies and private companies. The hon. the Minister will know that in Australia there is such differentiation. There, on the first 10,000 dollars, a public company pays 37½ per cent, and thereafter 42½ per cent. Private companies pay 27½ per cent and 37½ per cent. Sir, let us start looking after our little man. But a far worse feature is that raised by the hon. member for Pinetown and that is that this tax is retrospective. It is more than retrospective. This tax changes the rate that Parliament itself fixed for the year ending February, 1967. This is a shocking state of affairs. First of all, Parliament fixes the rate for all companies for the tax year 1966-’67 and now, because of what the Minister calls a technical difficulty, the companies find that their tax for that year is to be at a higher rate. The hon. the Minister cannot get away from it by saying that this is being done to overcome a technical difficulty. What he is doing is not only to fix the tax rate for companies for 1967-’68 but he is at the same time increasing the rate for most companies for last year, a year that has already ended. Sir, there is also discrimination between companies because companies can attract this retrospective tax, this tax for last year, at different rates. If a company’s tax year ends on the 28th February it will pay the new tax for ten months of its 1966-’67 calendar year income, that is to say, on its income from the 1st March to the 31st December; but where the tax year of the company ends on the 30th June, it will pay this tax only for six months, from the 1st July to the 31st December, and a company which is fortunate enough to have the 31st December as the end of its tax year, will not attract this new tax at all in respect of income derived during its 1966-’67 calendar year income. Here you have a retrospective tax, a tax which changes a tax which Parliament has already passed and a tax which discriminates between companies. We are wholly opposed to this type of taxation which does away with our accepted principles of taxation.

The hon. the Minister said that he had smoothed out, as he put it, the fluctuation in farming income by equalizing rates over a period of five years. We welcome this change; we have been asking for it for a long time, but I want to ask the hon. the Minister whether he will not consider the question of extending this principle to other types of taxpayers whose incomes similarly fluctuate? I refer to people such as novelists, artists, barristers and the like. These taxpayers are also subject to vicissitudes of one kind or another, and I think the hon. the Minister might find that they too merit some relief.

In regard to this question of giving the Minister power to change taxation without the consent of Parliament, although within certain levels, I want to say that we are dead against it. Take away the financial control of Parliament and Parliament ceases to mean anything. To sum up then, this Budget is the price that the people are having to pay for the doubtful privilege of having had this present Government over the last few years. It is the price they are paying for the Government’s ineptitude and inefficiency; it is the price they are paying for a Government which is as vacillating as its slogans of “spend for prosperity”, “save for prosperity” and now “work and save”. We on this side of the House have taken as the axiom of our criticism, which has been right and which has been constant, “too little and too late”. Sir, this has been our charge over the years and it is still our charge and we hope that the Government will take cognisance of it.

On behalf of this side of the House I should like to express our regret that the hon. member for Constantia is not here this afternoon to introduce this debate on behalf of the Opposition. Ever since I became a member of this House in 1958, the hon. member for Constantia has been introducing the Budget Debate on behalf of the Opposition. We on this side are sorry that he is indisposed, and we want to wish him a speedy recovery. Unfortunately his substitute experienced a most unfortunate afternoon here, but I shall return to that later. First of all I want to congratulate the hon. the Minister of Finance cordially on this, his first Budget. I want to congratulate him because in this first Budget speech of his it is evident to us that he intends to place the entire preparation of our Estimates on a strictly scientific basis. We are looking forward to the continuation of this very good work which the hon. the Minister of Finance has started with these first Estimates of his.

Mr. Speaker, I really sympathize with the Opposition in their attempt at attacking these Estimates, because these are such well-balanced Estimates that they have been received very, very favourably by all sectors of our society. Both businessmen and the public in general, the Government as well as the Opposition Press, have greeted these Estimates with great acclaim. I listened attentively to the two Opposition speakers who have spoken so far this afternoon, and once again I was struck by the large measure of frustration from which the Opposition is suffering. This morning a columnist in a daily paper pointed out very strikingly that at present South Africa was taking the lead and was very far ahead of other countries of the world in quite a number of fields. He pointed out that there were also many fields in which we had not taken the lead as yet, but in which we were very close to doing so. He said that unfortunately there was one field in which South Africa was so far ahead of the other countries of the world that it was hardly possible for them to catch up with us, and, according to this columnist, that is the mentality of so many of our South Africans to complain about everything. I do not agree with everything this columnist says, because I think that in making this remark, he actually thought of the Opposition only. Then there is the influence of this mentality of complaining on the general public. No nation whose chief hobby it is to lament everything, can become great, and the influence this Opposition has on the nation is that the latter bemoans its fate more and more. Recently a very interesting letter, written by a farmer, appeared in one of our agricultural magazines, a letter in which that farmer spoke out against farmers who complained so much. He reprimanded his fellow-farmers very earnestly (translation)—

This comes from a person who is a farmer himself. Well, they say that it is a farmer’s privilege to complain, but nowadays it seems to me as though it is the particular privilege of the Opposition to complain about everything under the sun.

With good cause.

If the Opposition looks at its decline in the political life of this country, I want to grant that it has cause for complaint. I am referring to the latest example of that, namely Mr. Gordon Rudman of Uitenhage who was the United Party candidate in the latest election and who has now joined the National Party. I say that if the Opposition looks at its own decline, it does in fact have cause for complaint.

Look at the way they are switching round in Worcester.

The Opposition will never improve their position until they find a positive task for themselves. I say “positive”, because negative criticism may very easily be expressed but is very unproductive. That is why I want to recommend to my parliamentary colleagues on the other side of the House —I call them colleagues because they form a very definite part of this Parliament—to ask themselves this serious question: Quo Vadis? Where do they want to go? I am sincere in saying that I am convinced that there are amongst them people who are well-equipped for rendering a positive contribution, people who have sufficient financial and economic insight for rendering a fine contribution— people such as the hon. member for Park-town, who spoke before me. I hold this hon. member in high esteem, but then they must stop trying to create a spirit of discontent amongst the people by means of their songs of lamentation. The truth is that South Africa is doing very well at present and it is for that very reason that their songs of lamentation are so boring in a time such as this. But it simply remains a law of human nature. Think of 2,000 years ago when the Roman Empire was doing very well and the Romans of that time were being governed very well. But even at that stage there were mischief-makers and dissatisfied people who kept on trying to make the people believe that they were in fact not being governed well, something which subsequently resulted in a great emperor being treacherously stabbed in the heart.

This unrest which is being stirred up by the Opposition and this injustice psychosis which is being created amongst our people, may in fact be compared with our nation being stabbed in the heart. We are doing well, Mr. Speaker; we are doing very well. That becomes very clear from the introduction to the Estimates in which the hon. the Minister gave us such a striking picture of our economic prosperity. The serious ailment of inflation does exist, an ailment connected inseparably with prosperity—almost like rheumatism which is mockingly described as a rich man’s ailment.

I like the Estimates submitted by the hon. the Minister of Finance and especially the slogan: “Work and Save!” The hon. member for Parktown mockingly remarked that the Government was being blown hither and thither between contradictory slogans. A few years ago, for example, there was the slogan of the then Minister of Finance: “Spend for Prosperity!” Subsequent to that we had the slogan: “Save for Prosperity!” But, surely, there is nothing inconsistent between these two slogans? After all, the economic cycle runs an undulating course and when there is an economic slump, surely, it is right for the Minister to say: “Spend for Prosperity!” For how else shall we succeed in getting the economy going again? If, on the other hand, the curve reaches a climax again, surely, it is logical to say: “Save for Prosperity! ”, because if we keep on spending irrespective of the already high curve, where are we going to end? For that reason it is, after all, logical under the circumstances to say: “Work and Save!” I like this very much especially because it was my privilege during the Second Reading Debate on the Appropriation Bill last year to appeal to the Opposition to join us in making an appeal to the people to work a little harder and to save a little more.

One of the most significant stimulants for this inflation, which we have been experiencing ever since 1964, is the excessive increase in gross domestic expenditure. I have here a very interesting index, an index showing the annual increase in the gross domestic product as against the gross domestic expenditure for the years 1960 to 1965. In this index the latter is being given as a percentage of the former. According to this it is clear that from 1960 to 1963 the gross domestic product increased at a faster rate than the gross domestic expenditure, whereas in the years 1964 and 1965 the gross domestic expenditure exceeded the gross domestic product—to such an extent that whereas in the year 1962 the gross domestic expenditure amounted to 95 per cent of the gross domestic product, expenditure increased to 101.3 per cent of the gross domestic product in 1964 and to 104.1 per cent in 1965. It is clear, therefore, that since 1963 the gross domestic expenditure, or the demand, has increased at a faster rate than the gross domestic product. If this excessive demand had not been satisfied to a certain extent by means of imports, we would have had much worse increases in price, or inflation.

Now one asks oneself the question: what causes this excessive demand? I want to point out two important factors in particular: Firstly, the will to spend and, secondly, the ability to spend even beyond one’s means or income— in other words, on credit. To a large extent the ability to spend was helped on by full employment, something which is the result of a flourishing economy, something which is, in turn, the result of confidence in a strong Government. But this is where the process of inflation starts—the demand exceeds the supply; prices increase and that is followed by wage demands accompanied by greater purchasing power. This process was, of course, deliberately helped along by the then Minister of Finance when, from 1960 to 1963, he applied various fiscal measures aimed at stimulating the economy, because those were the years in which we experienced a period of economic depression. In such a period it is, as I have already tried to indicate, the task of a Minister of Finance to take steps to stimulate the economy by taking the necessary fiscal and monetary measures. But he has to be very careful so that he may again take his foot off the accelerator in good time. He did that in 1964, when he saw the first signs of inflation, by levying higher taxes. But at that stage the Opposition also failed miserably as a responsible Opposition, because instead of supporting the Minister in his attempts at applying the brake, they attacked him viciously, maintaining that he was robbing the taxpayer. In this respect I want to refer to what the hon. member for Parktown said in 1964, at the very time when the then Minister of Finance wanted to apply the brake by levying higher taxes. According to Hansard, volume 10, column 3331, the hon. member for Parktown quoted as follows from the speech made by the Chairman of the Union Acceptances Limited:

Further on the hon. member asked—

In the same column the hon. member said—

Further on the hon. member said—

A responsible Opposition will have supported the Minister of Finance in 1964 in his attempt at curbing inflation when it reared its head. But what do we find instead? We find that people are insisting on a tax reduction instead. The hon. member for Parktown referred to an additional R106 million which had to be taken from the pockets of taxpayers now and which was not right. Under such circumstances a responsible opposition would rather have helped a Minister of Finance to put a damper on excessive expansion of the economy. It is in a period such as this that the public should be persuaded again to save, preferably voluntarily, but if not, by force, because at the moment the State requires a great deal of capital for creating the necessary infra-structure for a rapidly developing economy. It is also at a time such as the present that all psychological factors are working against saving. While prices are rising, we are inclined to buy sooner so as to forestall price increases. My statement is being substantiated beautifully by the official figures. I am quoting from a White Paper recently Tabled in this House (translation)—

In other words, personal consumption expenditure increased more rapidly than spendable income. In that very same period saving increased by 6.8 per cent only. The public says: Let us rather buy to-day, because to-morrow our money will be worth less. This position of a low rate of savings causes high pressure on available capital funds with a resulting upward pressure on interest rates. At this stage the State unfortunately made a mistake by pegging interest rates, but, as the hon. member for Queenstown pointed out very clearly, it was only 17 months later—when all of us had already discovered that there was a mistake—that the Opposition pointed that out for the first time. At that stage none of them spotted it as a mistake. It did, of course, have a subduing effect on saving. This, in turn, had the result that the State could not obtain all its capital requirements from savings and was consequently obliged to obtain the necessary capital for its works in an inflationary manner. This immediately caused an increase in the amount of money and quasi-money, entailed more credit and thus enabled an already extravagant public to buy. Let us look at the figures as released by the Reserve Bank as from the 2nd quarter of 1965. Before that time we did not have these figures in respect of money in circulation. For the last three quarters of 1965 this money and quasi-money increased by R381 million. Of this amount of R381 million, R267 million or 70 per cent constituted net claims against the government sector, short-term credit created by the State. Then I am once again hearing people asking for interest rates to be pegged. Fortunately we have a Government that does not stumble over the same obstacle twice. For the first three quarters of 1966, money and quasi money increased at a much lower rate, namely at R108 million only, as against the R381 million of the previous three quarters. Of this amount only R39 million constituted claims against the government sector, as against the R267 million of the previous three quarters. If it had not been for an increase of R114 million in our net gold and foreign exchange reserves, the amount of money and quasi-money would in actual fact have shown a drop of R6 million. This increase of R114 million is, in turn, largely attributable to a net capital inflow, a sign of the confidence foreign countries have in this Government and in the future of this country. You see, therefore, how the two factors I mentioned earlier contributed to stimulate inflation: firstly, the will to spend more and, secondly, the ability to spend more. With the anti-inflationary measures the Government took on 8th July, 1966, a great deal of success was achieved, such as the abolition of interest rate control and the increase of the bank rate from 5 per cent to 6 per cent. If it had not been for the inflow of foreign capital—an amount of R399 million within the period of 21 months ended on 30th September, 1966—we would already have broken the back of the inflation camel altogether. However, it is of no use to say “if”, because we did in fact have this inflow of capital; for that reason the Government was obliged to take further monetary measures on 7th December, 1966, and further fiscal measures on 22nd March, 1967, namely these Estimates. Higher rates of interest and increased taxes are drastic medicines which certainly are not pleasant to take, but they are for a very serious ailment, namely inflation which may very easily develop into serious inflation or, as it is also being called, galloping inflation. There are definitely indications that excessive demand may again develop in 1967.

The loan programmes of public corporations and local authorities for 1967, amount to the gigantic amount of R232 million, as against the R184 million for 1966. We are still struggling to overcome the evil consequences of the old cycle of inflation. If, as a result of a new wave of excessive demand, a new dispensation of inflationary forces were to be unleashed, it would definitely have serious consequences. It may even be disasterous; that is why drastic action was very, very necessary. We dare not finance this loan programme of the public corporations, of local authorities, of the Central Government and of the provinces with short-term credit. It must be financed from savings only.

Is that a quotation?

It should only be financed from actual savings, and that is why we can expect that the upward pressure on interest rates will continue for a reasonable length of time. That is why it was also very wise of the Minister of Finance to have levied these increased taxes. But this cannot be done by increased taxes only, since the hon. member for Durban (Point) must also contribute his share. If I look at his figures it seems to me as though he can contribute a great deal. Therefore I want to say that we should be realistic. We simply must be realistic. Unfortunately the position is such that owing to the Opposition’s continuous attempts at creating a spirit of discontent amongst our people, all of our people are not sufficiently altruistic to save of their own accord. Unfortunately all of them are not sufficiently altruistic to work harder for the same pay. That is why the Minister of Finance has to take these measures.

But I am grateful this afternoon that I am able to pay homage to the workers of this country. They are realistic enough to realize that they cannot expect higher wages without higher productivity. I am referring to the speech the Chairman of the Trade Union Council recently made here in Cape Town, namely the speech made by Mr. Murray— I am not referring to the hon. member for Green Point. Mr. Murray said that as workers they were realistic enough to realize that higher wages could only follow on higher productivity. That is why they are prepared to support the Government in its attempt at stamping out inflation by not insisting on higher wages or salaries without higher productivity. All of us are only too well aware of what has been happening in a very big Western country in the past few years. In that country the former Opposition also deluded the people, the workers, into believing that they were not getting their rightful share of the economy. They did that to such an extent that the Government of that country came to a fall. Then it was the task of the new Prime Minister—the person who had formerly been the leader of an opposition which had been telling the workers that they had not been getting their rightful share—to tell those people that he was pegging wages and salaries. Then there was no longer talk of striking for higher wages, because the Government—the former opposition—had pegged wages and salaries.

Under this Government it will never become necessary in South Africa to peg wages and salaries. But then we expect everybody’s co-operation. Not only do we expect the cooperation of all levels of the population, but also that of the Opposition. Then we expect them to stop acting in this irresponsible manner of theirs and to become more responsible in their actions so that all of us may conquer this inflation and may then proceed to new heights of economic prosperity in the Republic of South Africa.

Mr. Speaker, the hon. member for Paarl commenced his speech by saying that we on the Opposition benches suffered from a certain frustration. Well, in considering this Budget, I certainly do. I hope that in the course of my remarks this afternoon I shall be able to tell you, Mr. Speaker, how I am frustrated by this Budget, and, if I may say so, how certain sections of the people of South Africa are also frustrated by the Budget. Then the hon. member for Paarl left the subject of the Opposition for the moment —for the moment only—and asked. “Quo Vadis?”—where are we going. He went as far back as the times of the Roman Empire, and then he enunciated this proposition, which was enunciated in a similar manner by the hon. member for Queenstown, namely that inflation and prosperity go hand in hand, that they necessarily go together. They said that if we have prosperity and rapid growth we shall therefore also have inflation. The hon. the Minister of Finance is an economist and he does not agree with that. He knows that throughout the whole of the nineteenth century, during the great expansion of Britain in the nineteenth century there was no inflation, but there was great expansion. But here in this modern time we are inclined to link the two together. The hon. member for Paarl has done so, and I think that it is an easy way out.

The next point that he came to is this latest motto we have, which is now “Work and Save”. The Minister gave us an ealier one which was “Spend for Prosperity”. I think that he is now combining the two, because he says to the tax-payer, “Work and Save” and the Government will “Spend for Prosperity”. Now, I have a third motto to guide myself, and that is, “Watch and Pray—observe the financing of this Government and what goes with that financing, and pray that worse things than this Budget do not befall us”. That is my present attitude.

The hon. member for Paarl also said that with defence budgeting it was necessary to have this inflation and that was an excuse. Well, if one wishes to read of magnificent budgeting—the older members remember this, of course, but younger members perhaps do not—for defence, and not only for defence but also in time of war, one should study the record of the hon. the Minister of Finance of other days, the late Jan Hendrik Hofmeyr, and his magnificent financing during the war. It was a classic for all countries who were engaged in that war—victorious countries as well. The Americans have never ceased to admire it. It is a classic in financing. So the fact that we are raising money for defence is no reason why we should talk about necessary inflation.

The hon. member says we cannot expect reductions in taxation at this time. I do not agree with that. I think we can, provided those reductions are not necessarily inflationary. One does not always have inflationary results if one reduces taxation. I hope to show in the course of my remarks where this can be done. Finally, the hon. member spoke of the “begrotingswese”, the nature of the Budget, and I should like to commence my remarks by referring to that.

This is a modern Budget. In the good old days we had the conservative regular Budgets of all democratic countries, including our own. If we go back to the days of Mr. Havenga we find that his Budgets were a matter of balancing expenditure and revenue, and in addition to that, balancing his loan account. That was the system Mr. Havenga gave us in this country, a system which he had taken over from other democratic countries in the world. But the modern Budget is not a Budget of that kind. In this modern Budget we have a Government not only balancing the accounts, doing the bookkeeping, giving us expenditure and revenue and giving us, in addition, our loan account balance, but they also have to have an economic policy. That is true of all countries. All democratic countries today that are faced with this question of inflation find that it is creating great problems. This is particularly true in the U.S.A., in Britain, and also in Western Germany.

If that is the nature of our Budget one would expect the Government would have a definite policy to give us. But we have several polices. We have a Department of Planning, and that department tells us what they plan to do. I suppose if the Department of Planning tells us what they plan to do that can be regarded as a policy. Now, I want to make two quotations from this excellent production by the Economic Development Programme. This is Part 3. The other two parts are very good, and this one comes up to the standard. I refer to Chapter II and to Table A. They say this—

Then they say this—

They they add this—

There was the planning. So we had a plan from the Department of Planning. We had the Budget of the hon. the Minister of Finance where he gives his policy, and then, cutting right across it, we have the policy of the Department of Bantu Administration, which had a policy of its own. They say: We will take your labour from you because we have an apartheid policy; we want the separate development of the races in this country. But the Minister of Finance is budgeting for the whole country. That is the first point. The Budget which the Minister has presented, therefore, is a Budget which reminds me of what we used to discuss in English history, Morton’s fork. The Minister says he is going to impose taxes because that is necessary to prevent inflation, but if you say to him that here is a tax which should be reduced, he says no, he cannot do that because then inflation will flare up again.

Now I want to take a look at the Budget. The Minister gives us the current cash position. He says his expenditure was R1,755 million this year that has just come to an end, and for 1967-’68 it will be R1,921 million. Now I am prepared to admit that of the R1,755 million R30 million was for the procurement fund, and of that R30 million R5 million was for virement, and therefore we should say it is not R30 million but R25 million. Does that R25 million belong to the year which has just gone past—we put it through only a couple of weeks ago—or does it belong to next year? I have decided to leave it out. Therefore we have this increase of R191 million, and that is over 11 per cent; it is double the 5.5 per cent that he is supposed to be budgeting for. The Minister tells us he has tried hard to reduce expenditure and his Estimates, but finds he cannot do so. But as the hon. member for Parktown has told us, he tells the companies to reduce; they must be prepared to go without.

Now I want to go on to this point of what concessions he has made, how he has arranged his Budget. I will deal with the accounting side particularly, because the hon. members for Pinetown and Parktown have dealt with the general situation. What are these concessions? Take, first of all, the concessions to social pensioners. Everybody is pleased with those. Everybody murmured approval when we heard the Budget Speech, because we may not applaud in this House, Sir. There were enthusiastic “Hoor, hoor’s”. Now I want to have a look at it. I take the concessions he makes —not tax concessions—to our pensioners and beneficiaries. The first one is a bonus which is raised from R1 to R3. That is good. The next is the means test. Instead of R2,400, it will become 50 per cent higher; it will be R3,600, and for a man over 70 it will be R4,800. I think that is all to the good, too. The next one is to the working wife. She will have only one-third of her earnings thrown into income when her husband is unable to earn. That is good. Then we come to the family and maintenance allowances. They are now going to be raised by R24 per annum. That is good, too. We come now to the civil and Railway pensions. Those will also be raised. No wonder there were “Hoor, hoors”, but what does it cost? It costs R2.3 million for everything, and the tax on motor-cars alone is R6 million. It appeared to be generous to the hon. members, but it is not generous at all. The hon. the Minister appears as a parsimonious skinflint. How much has he given? Does the Minister think that if he gives a little more to the pensioner of over 70 he will spend it in riotous living, and that he will go haywire on his extra rand? Instead of making it R2.3 million, why not make it RIO million? We can afford it, and it will not create inflation. The old man and his wife will get something better, but will it create inflation because they spend another rand or two a month? But that is what the Minister tells us. Well, well. The tax on motorcars is R6 million, and he gives the pensioners R2.3 million, because they do not get anything until October. He says it is R4.6 million in a full year, but it is only R2.3 million from October until the end of March. We do not think much of that.

I go further and come to the tax concessions. That is important. Let us look at it. People will not have to pay so much because the Minister is most generous! I would like to say that when the hon. the Minister decided to give something to the social pensioners, he said—

But he felt, however, that exception should be made in the case of certain social pensions. In other words, he warned us not to expect too much. When it comes to taxation concessions, he issues another warning. He says that it must already be clear to hon. members that there can be no question of any general tax relief in this Budget, but within the limited means at his disposal he gives us these concessions, certain tax reductions. For a university student there will now be this reduction until he is 26. I am not objecting to that, because I am thinking of the new compulsory training for our young men. Before they go to the university they will have to spend a year doing their compulsory training, and I am all for that. I am in favour of that concession. The next one is the confinement allowance. Let us see how much that costs. The one for the university students costs R150,000, and this concession in regard to confinement allowances is R550,000. Together it makes R700,000. We come to the third one, the concession to companies for donations. At present they may take 1 per cent off their taxable income, and now he makes it 2 per cent. That will be R200.000. That makes it altogether R900,000 in concessions; we have not reached R1 million yet. But let us go on. The farmers will now be allowed to spread their income over a period of five years. I know that in some countries three years is advocated, but if five years is the right period, by all means let us do that. We have advocated that for many years. When I first came to this House, that was being advocated by this side of the House. How much will that cost? This year, nil; there are no concessions this year. The next one is the estate duty. Certain allowances will be made for insurance policies, Government investments, etc. How much will that be? It is negligible; it is nothing. So we get nothing from the last two, and all the tax concessions amount to .9 of R1 million. That is the whole story. I can see the Minister looking at me; he thinks I have forgotten about the exporters’ allowance, which will be R2 million. I should like to spend some time on that. What are the companies which have been exporting for two generations, the gold mining companies, getting? They form the backbone of our economy and have done so for two generations. He does not give them any allowance, and the Minister understands gold mining; he understands what gold mining taxation means.

But there is little competition for their product.

Let me quote what the Minister said about the gold mines, to show that he has a soft heart when he thinks of the gold mines. He said—

Only R9 million increase in a year; that is unusual, but it is levelling out. The curve will soon be coming down. The production for the first two months this year is lower than for the first two months of last year. You see, Sir, he thinks about the gold mines, but unfortunately most of his thinking is done in his sleep. Then he passed another remark about the gold mines. He said the income tax on gold mines will possibly yield substantially less than in 1966-’67. Why? Naturally because their profits are down.

Owing to a great deal of development.

Then I come to the next one—

Yes, they should. But that is not what we are doing to the gold mines. We go a bit further—

Whose shoulders—the gold mining industry? They are not broad, and the hon. the Minister knows that—

Have the gold mines derived advantage from inflationary conditions? On the contrary. Furthermore—

They have not. [Laughter.] I am quoting from the hon. the Minister’s own speech; hon. members opposite must not ridicule the hon. the Minister. Furthermore—

Our rate of company tax is not moderate compared with that in other countries. I have told the hon. the Minister’s predecessor over and over again that in other countries, when income tax is paid by a company, a deduction is given to the shareholder. Companies are not individuals: they are under the law. but they are an association of individual persons who pay income tax. The hon. the Minister’s predecessor told me that that was not the case. When I was overseas last year I obtained a specimen assessment and I brought it back. If the hon. the Minister is interested I can quote it to him. After a company has paid the company income tax, the shareholder is given a credit note which he presents to the Receiver of Revenue. Well, that is the story that the hon. the Minister has to tell us about the gold mines and he finishes up with this one—

Sufficient for what? Sir, in the finance market in London. South African gold mining investments are referred to as the Kaffir market. [Interjections.] No, no it has nothing to do with the Bantu. The hon. the Minister came back and told us that South Africa had got an Oscar for its financing last year. Let me tell him what the finance reporters in London said in their financial columns, on the Sunday after his Budget. They said that his loan levy for sold mines was the knock-out punch; they described it as the last nail in the Kaffir coffin. In other words, there is no sympathy from the hon. the Minister for the gold mining industry: there was none from his predecessor. His predecessor last year taxed the gold mines 5 per cent. He said that they were not taxed the previous year so they could be taxed last year. An addition, saying that the gold mines could pay this tax levy, he laid down a new formula for the gold mines. Instead of y = 60—360/x, as it is for the old mines, he said that for the new mines it would be y = 60—480/x; in other words,

he is making it 8 per cent for the new mines. He had the old mines in his clutches and he would not let them go. I think the hon. the Minister must start a new way. He knows that the old gold mines are faced with amortization; he knows what their problems are. He knows that the gold mining industry to-day is not paying what it should pay; he knows that the big mining interests are getting into industry instead of gold mining and that the development is not there.

Those are a few remarks that I wanted to make on the Budget and now I want to make some suggestions; I want to deal with omissions from the Budget. Sir, I wish to raise a subject on which I have spoken in this House for over 12 years, the subject of Bantu education. In 1955 we pegged our grant from general revenue to Bantu education at R13 million. It is still the same. We have had inflation and we have not increased it. Sir, I am ashamed of that. We have made many concessions to education for Whites, Coloureds and Indians but not for the Bantu. Sir, the Bantu represents 70 per cent of our population. The parents are often paying their own teachers. We were not doing our duty. I agree with the attitude of the white man in this country: We are the protectors of these people. But we are not doing our duty. Sir, you know what the Book says: “Inasmuch as ye did it not to one of the least of these, ye did it not to Me.” That is how I feel about it.

Why not tell the whole story?

I know the whole story. The Government says to the Bantu, “You must pay for your own education.” Does the Government say that to the Coloured man, the Indian or the white man? No. I think the time has come for us in this House to shoulder our responsibility. Every year we come here and discuss this matter. We have had two private members’ motions to discuss it this year; it is a most important subject.

My next point is the loan levy for individuals. The taxpayer whose income tax does not exceed R100 is not called upon to pay the loan levy. What about the man over 70? Why not make it R500 for him? He is not going to travel round the world; he is not going to run riot; he is not going to spend his substance on riotous living. Make it R500 for him. I am very glad the hon. the Minister has made a distinction. I think he should exploit it.

Then I want to touch upon one other matter which should be dealt with more fully in this debate. I have often advocated that a man and his wife should have the right to be taxed separately, but we should make the same provision as we have in the case of farmers. They must accept that arrangement permanently; they cannot accept if for one year and not for the next year. Finally, Sir, I want to make my annual appeal. It is just 12 years since the then Minister of Finance, Mr. Eric Louw, decided to give the war veterans of the Anglo-Boer War what they deserved, that is to say, a pension without a means test. I ask for that now for the soldiers of World War I. That is my final appeal. If the Minister agrees to this he will go down in history as Mr. Eric Louw did —the man who was toasted for having done away with the means test in the case of war veterans of the Anglo-Boer War.

The hon. member for Kensington has come along this afternoon and has undone everything achieved by the speeches made by previous speakers on his side, because if they said that the Government was spending too much and causing inflation, the hon. member for Kensington asked that more money be spent. Such an opposition beats me. The hon. member’s speech put me in mind of the old days when Mr. J. H. Hofmeyr was Minister of Finance, the days when we had to stand in queues for bread, the days when one had to drive from Johannesburg to Krugersdorp to go and buy a pound of butter, those meatless days and the days when we had to pay between 13s. 4d. to 15s. in the pound in excess profits tax. Those were the good old days when those hon. members were in power. It did not astonish me at all that the hon. member for Kensington should read with such satisfaction from the Budget speech. I think they envy us as a Government because we have this year had “a splendid Budget by a splendid Government, presented by a splendid Minister”. They probably share in our joy at being able to draw up such a Budget.

Mr. Speaker, there is one statement which is very true and that is that the hand that rocks the cradle will govern the nation. A statement which is equally true is that the party which looks after the welfare and the economic needs of the nation will always remain in power, and that is the case with this National Party. I want to tell the Opposition that as long as we have a Government which can introduce a Budget such as this one, nothing will ever go wrong with South Africa. They may as well have confidence in us. The conduct of the Opposition in this debate has put me very much in mind of a man seeing a pineapple for the first time. He will inform you that it is a nasty-looking, prickly thing, but he discovers, when he peels it, that it is a delicious fruit. Let us analyse this Budget. Let us put our minds to it and ask ourselves what this Budget implies for the various groups in our country—the businessman, the dealer, the industrialist, the investor, the brewers, the farmer, the financier, the mine manager, the company director, the householder, the housewife and the ordinary man in the street. All of them are quite satisfied with this Budget. Consistently in the past the Opposition has read to us in the Budget debates from the Financial Mail and the Sunday Times. But how did those same newspapers receive this Budget? They all praised the Budget. The Argus published on its front page a picture of students applauding the tax concessions to their parents. We know what a panegyric on this Budget appeared in the Financial Mail, but unfortunately we do not have the time to quote from newspapers here this afternoon.

What have the housewives written about the Budget?

The Opposition is attacking the Government on inflation, but what has been one of the principle causes of inflation? One of the principle causes of inflation is optimism. It is certainly not this Government’s fault that there is so much optimism in South Africa to-day that the public is spending on such a large scale and that there is so much confidence in the future of the country. Unfortunately this Government cannot stifle that optimism. There is another point which the Opposition have lost sight of, and that is that inflation has been imported. If we look at the imports from various countries, expressed as a percentage of the gross national product, then we find that in the U.S.A. it was 3 per cent, in France 11.4 per cent, in Australia 14 per cent, in the United Kingdom 17.4 per cent, whereas in South Africa it was 20.7 per cent. Where high prices are prevailing throughout the world, where there is such a large measure of inflation, one has to take all that into account. The blame for inflation cannot merely be laid at the door of the Government. There are of course various methods of combating inflation. One method is higher taxation, and a second method is a reduction of Government spending.

Let us analyse for a moment the Opposition’s suggestions on combating inflation. The hon. member for Parktown said that the Government had done too little, and that what it had done, it had done too late. But let us look at what hon. members of the Opposition recommended in the past. In 1963 the hon. member for Constantia (Hansard, Col. 6725) proposed that the savings levy of R13.3. million be abolished. He also proposed that the companies’ tax surcharge, which amounted to R16 million should be abolished. In other words, he wanted that money to be brought into circulation. What would the position have been to-day if the Government had conceded to his requests? How much greater would our inflation problem not have been to-day? The hon. member for Pinetown proposed at the time that the rebate be increased from 5 to 10 per cent. In other words, he also advocated that more money should be left in the hands of the public. The hon. member for Kensington advocated at that time that the gold-mining companies should pay less tax. Mr. Speaker, what is the function of the State and what services does it render to the public? The hon. member for Queenstown pointed out very effectively how the State is rendering more and more services to the public. Take Social Welfare and Pensions, for example. This year R107 million is being spent by the State, almost R3 million more than last year. Do hon. members of the Opposition want the Government to spend less on social welfare and pensions?

Provision is being made in these Estimates for R189 million to the Provincial Administration, in other words, almost R13 million more than last year. Will hon. members of the Opposition come forward and propose that we abolish the Provincial Councils because they are taking too great a slice out of the Estimates? Just think of all the subsidies which are being paid by the Central Government: Livestock, dairy products, wheat, fertilizer and maize, R77 million. That is R16 million more than last year. These subsidies are being paid to lower the cost of living of the poor man. Does the Opposition want to propose that these subsidies be reduced by R16 million? Will the hon. member for Kensington, for example, tell us to do so? Would he be happy to make such a proposal, i.e. that we should not spend more money? Mr. Speaker, it is the duty of this Government to see to it that South Africa prospers and that our country’s economy flourishes.

Let me mention a few figures to indicate how the economy of our country has expanded and developed over the past number of years. The rate of growth of our economy is the second highest in the world—we are surpassed only by Japan. If we look at the real rate of growth of our gross national product we will notice that the rate was 4 per cent in 1961, 7 per cent in 1962, 7.5 per cent in 1963, 6.5 per cent in 1964, 5.6 per cent in 1965 and 5.5 per cent in 1966—an average over those five years of 6.9 per cent. That is an indication of how this National Party Government has seen to the needs of the country. When we look at the real gross domestic product per capita we see that it increased by 3.2 per cent in 1966. as against 2.9 per cent in 1965. That is why the Government must incur expenditure, i.e. in order to cause the countrys economy to prosper.

If we consider what this Government is responsible for, we find that it has three main tasks: In the first place, it has to see to the safety of the State—in other words, the development of our army and the brainpower which the Government has to utilize in the defence of the country. In this regard I can refer to the court case on South-West Africa. In the second place it is the Government’s task to see to the safety of the country’s inhabitants. For that purpose the Police Force has to be expanded and strengthened. In the third place it is the Government’s task to create the basic factors necessary for a growing economy. The State is not stifling private initiative, as is being alleged. We are not a socialist state, because once we become a socialist state we will ultimately become a communist state. Our State must see to its infrastructure. to things such as power, water, soil conservation, communications and labour. As far as the latter is concerned, we think in particularly of education, and also in particular of our immigrants.

The complaint is often made that the Government is spending too much and does not keep its expenditure in check. But how much did the State in fact spend, and to what extent is it participating in our economic life? South Africa is a capitalistic state which does not interfere much in the sphere of economics—just enough to cause the economy to prosper. In South Africa the State participates in the economic life to the extent of 12.7 per cent in comparison with 88.8 per cent in Switzerland, 13.1 per cent in Canada, 14.6 per cent in West Germany, 15.7 per cent in the U.S.A., 19.4 per cent in Belgium, 22.4 per cent in France and 31.2 per cent in England, a country which is still being held up to us by the Opposition as the country. You can see, therefore, that the State in South Africa only participates in the economy of the country to the extent of 12.7 per cent.

To keep that infra-structure in order requires certain expenditure. Let us now glance at a few of the basic factors which are necessary for the creation of a sound infra-structure. Let us look, in the first place, at power. According to the annual report of Escom for the year 1965, the total sales were 23,143 million units—in other words, an increase of 8.92 per cent. If the State had not taken the necessary steps to make this power available, our industries would not have been able to expand and the private sector would not have been able to flourish to such an extent. The private sector would not have been able to make so much money. If this growth on the part of Escom can continue, Escom will double its income over the next nine years. In that way we will see to it that there will never be a shortage of power in South Africa.

I now want to ask the hon. member for Durban (Point) whether he wants the Government to put a stop to this tremendous expansion by Escom? Does he want the State to cut down on its expenditure in this regard, yes or no? The hon. member will of course say neither yes, nor will he say no. South Africa is the industrial colossus in Africa and is still growing. We must have electric power available. We know that the Republic comprises only 5 per cent of the surface area of Africa, but that at the same time it produces twice as much electricity as the other 95 per cent put together. We have this lead and we will maintain it. We will not allow this Government to be forced off its course by an Opposition which does not know itself what course it wants to take with our economy. But what is more: Our coal mines are, as a result of the policy of this Government, able to supply 80 per cent of the total coal production in Africa. We know that our coal resources are sufficient for another 2,000 years.

As far as this is concerned, this Government will continue to produce the necessary coal.

In the annual report of Escom which has already been mentioned the tremendous growth of our economy has been sketched. It is stated there (translation)—

Here we can see how industries in South Africa have expanded and how they have flourished and how this Government cannot do otherwise than incur that expenditure, expenditure about which the Opposition is complaining to-day, in order to keep our private sector on the go.

Let us consider the position in regard to water, one of the most important resources. We know that water is important for our industries, not only as far as the generation of power is concerned, but also for production. It is extremely important for our agriculture, for the production of our foodstuffs. Do hon. members on the opposite side want the Government to cut down in its Estimates in regard to soil conservation and the supply of water? Surely the Opposition cannot say that we must do a thing like that. We know that agricultural land in South Africa is in extremely limited supply. In the white as well as the non-white areas there are, roughly speaking, only 121 million morgen available, of which 15 per cent, i.e. 18 million morgen, are arable. Of this amount 16 million morgen are already being cultivated. That leaves only two million morgen for the expansion of our crop production. We cannot, we dare not cut down on our water supply programme. In the past 21 years the population of South Africa has increased from 11.4 million to 18.3 million, and its food consumption from 5.5 million tons to 9.5 million tons. The 103 million morgen which is not arable because it is too mountainous, stony or shallow and has an inadequate rainfall, is only suitable for natural grazing, for extensive stock-farming therefore. We must have more water to be able to produce more food. It we are unable in future to produce more food and we subsequently have a famine as a result of a shortage of food, what would the Opposition say then? Would they criticize us by saying that we did not plan or think ahead? Or would they say that we were right in not having spent the extra money at that time? Mr. Speaker, this amount of R67 million in the Estimates this year, which is almost R12 million more, is really still too little. It ought to be even higher if we want to ensure proper care for our country’s water and food in future. Must the Government leave aside these things now? Is that what the Opposition wants? In South Africa we have an average rainfall of only 18.7 inches. In contrast to that an average of 20 inches is necessary to ensure successful crop production. It is, in fact, only one-third of the country which gets this quantity or more of water, while 90 per cent of the surface area of our country needs more water to produce the crops which are being cultivated. It is true that, theoretically speaking, we get a tremendous amount of rain. We get an average of 240 million morgen feet per year, or 138,000 million gallons but of that amount only 8.5 per cent reaches our rivers and dams, out of which irrigation can take place, and that in contrast to 70 per cent in Wales, 56 per cent in the Netherlands and 31.5 per cent in the Thames valley. You can see, therefore, that with our 8.5 per cent South Africa will have to try to conserve its water as much as possible.

[Inaudible.]

Yes. that is why we need a lot of money in South Africa; to conserve our water. We must conserve the water of our country, because that water which flows away to the sea is not the only great loss; one of our greatest losses is that topsoil of ours which is washed away. Do you realize that in South Africa approximately 300 million tons of soil is washed away? It is fertile soil, the humus on which we must produce our foodstuffs, which washes away every year. Expressed in other terms, it is a six-inch-deep layer over a surface area of 125,000 morgen. Now you can realize why our hon. Agricultural Ministers have such a tremendous task and why this Government is prepared to vote that money. We shall adhere to that. We can assure you of that.

One of the other points which we must consider is labour. There were so many complaints here this afternoon about productivity in South Africa and about spending too much money. But let us tell this hon. Opposition that in South Africa we will spend money and even more money on labour and on training our labour.

All labour?

All labour must be trained. There cannot be higher productivity if the labourers have not been trained. That hon. member must agree with me. I do not believe we shall differ in that respect. In these Estimates R37 million has been requested for university and vocational education. And now the hon. Opposition is complaining that the Government spends too much. Since when do you want to hold South Africa back by your unwillingness to have those people educated? This year it is only R4 million more. Under this National Party Government we have succeeded in achieving a university attendance of one out of every 74 Whites. With all its wealth, the figure in the U.S.A. is only one out of 52,whereas this Government has seen to it that one out of every 74 in South Africa attends university. Compare the following West European countries:

Out of the total population?

The white population. Our white population compares with their total population because almost all of them are Whites. Apart from that, this National Party Government has seen to it that there are 11 universities for our Whites and five for the non-Whites. The hon. Opposition knows how it fought against these universities for the non-Whites. You did not want to have them educated. [Interjection.] You fought against it. I think there were night sittings here on that legislation. The Opposition wanted mixed universities.

Let us consider the matter further. What is this State responsible for? This State is also responsible for communications. In this country we must see to it that there are proper communications. And then the hon. member for Pinetown alleged here this afternoon that the hon. the Minister of Posts and Telegraphs had increased tariffs and that this Parliament had never been afforded an opportunity of discussing them. Recently we had the small Budget. In that debate not one of their speakers spoke about finance. All of us on this side wanted to talk about finance, but not a word was spoken by them. Why not? They knew that they could not criticize it. It was good, sound and correct. The public outside did not utter a word of complaint about it. They knew that it had to come, and they were satisfied. I now want to give the Opposition the facts—we are not afraid of that. This Government has never yet run away from things which are its responsibility. From 1951-’52 to 1965-’66 the Post Office needed R330.5 million for its capital expansion, but only R294.5 million was placed at its disposal. There was a deficit therefore of R36 million or almost 11 per cent on what it needed to carry out its work.

As far as that great backlog in the Post Office is concerned, there was a shortage of 11,000 telephones in 1962, which increased to 38,000 in December, 1966. Does the Opposition now want—we know that they want it to be able to criticize this Government, but is it in the interests of the country—these people to be forced to do without their telephones? Not one of those hon. members is without a telephone.

We had yet another situation. Out of 93 automatic exchanges, i.e. on the Witwatersrand, in Pretoria, Durban and Cape Town, 31 were closed for new telephones. Does not the Opposition want there to be any expansions? Surely we cannot be blind to the truth. Without more money a further 27 of these telephone exchanges would have had to close down during the next 12 months. If we do not supply those telephones it would increase inflation even further. It would cause low productivity. This Government will do everything in its power to bring about higher productivity. We just want to glance for a moment at these tariffs. There have been complaints now about our tariffs. As regards the tariff in South Africa in respect of central line rentals on automatic exchanges, the rental is only R18 per year for businesses and dwellings. In England it is R32 per year for businesses and R28 per year for dwellings. In Australia it is R35.75 per year for businesses and R29.25 for dwellings. In New Zealand it is R48 to R70 per year for businesses and R30 to R34 per year for dwellings. There is also a further maintenance cost of RIO per year. How does that compare with R18 in South Africa? In the United States of America it is R49.29 to R132.86 per year for businesses, as against R31.79 to R75 per year for dwellings. Then the hon. Opposition tells us that we were not in a position to have increased our tariffs. What is the situation as far as installation costs are concerned? In Britain the installation costs vary from RIO to R20, whereas in South Africa it costs nothing if one applies for a telephone. In New Zealand it is R10 and in America R5 to R10.71. Unfortunately I do not have the figure for Canada at my disposal.

Let us look at the situation in regard to main-line calls. I shall mention only one example, i.e. a call of plus/minus 100 miles. In South Africa it costs 20c, in England 35c, in Australia 48c and in New Zealand it is 374c, as compared with our 20c. Are our telephone tariffs in South Africa too high? Was this Government not justified in increasing the tariffs? I shall give you the tariffs for local telephone calls. After we have paid 34c here in South Africa per conversation through tariff exchanges and intermediate exchanges within the same zone, there is no time limit. Any member can speak for an hour on his telephone for only 34c. In Australia the tariff is 8c per 3-call units and in the U.S.A. 7c per call. In Canada the rental covers …

Seven South African cents?

Seven. Not American cents. That demonstrates to us that the hon. Opposition has complaints which are unfounded.

The last but one point I want to make is in regard to our companies’ tax. Our hon. Opposition said here this afternoon that the taxes our companies are paying are too high. I want to tell you that our companies in South Africa are very fortunate in this respect that they pay an extremely low tariff when compared with that in other countries, in any other country, which is at least an average of anything from 40 to 50 per cent. If we draw a comparison with any other country which is an average of anything between 40 to 50 per cent then our tariffs in South Africa are definitely not high. Hon. members objected to the fact that companies’ tax is retrospective. It is true that the tax is retrospective, but the Opposition has never told us what great profits the companies have made over the past years. If we glance at the companies’ income, as furnished in the Financial Mail, then we see that the profits of the average company are normally between 10 and 30 per cent in the shareholder’s interests, that is to say on capital as well as reserves. In the years those companies made those profits they never gave the public anything back. That is why I think it is high time that these companies contribute their rightful share. I want to say that if these companies had borne the consumer in mind and had given the consumer some return because they had made such tremendous profits then the cost of living would not have been as high and things would also have gone better in South Africa.

In conclusion I want to ask the hon. the Minister of Finance something. I want to ask him to consider revising, during this year in this Session, the Usury Act. We know that there are many of these companies who make tremendous profits on the discounting of hire-purchase contracts. For example, they say to the public that they are only paying 6 per cent interest on such an agreement, but sometimes, apart from the 12 installments, the public also has to pay the 6 per cent interest in advance. What it amounts to in effect is that they actually pay 12 per cent interest. Then the companies still add administration fees, commission, registration, bookkeeping, and entry fees, as well as various minor expenses to that, which sometimes pushes the effective rate of interest far past the 20 per cent mark. That means that the public are being exploited, and I therefore want to request the hon. the Minister to attend to this matter as quickly as possible and to come forward with legislation during the present year.

Mr. Speaker, I was interested in the description which the hon. member for Sunnyside gave to this Budget when he suggested that we have to remove the prickly outer cover as from a pineapple before we find anything sweet. I want to agree with the hon. member that the benefits which there are in this Budget are indeed very deeply wrapped.

I want to deal with one or two matters of principle which arise from the speech of the hon. the Minister of Finance delivered when he introduced his Budget. The first one is the promotion of productivity which, in the words of the Minister, is one of the most important weapons in the battle against inflation. I will be the first to accept that in South Africa we have many unique problems, unique because of our population set-up, unique because of the productivity not of the individual so much as of the groups which comprise the population. We have many walks of life, in which for many years, for many decades, 30 per cent of the population have in fact been responsible to provide for 100 per cent in many avenues for their well-being and for their daily requirements. I was interested to hear during the Minister’s speech the reference to external trade, to exports. The Minister made it quite clear that exports in themselves could be an inflationary factor but that they are usually met and balanced by increased imports in the one sector or the other. In the result one has a growing economy which is balanced by an increase in imports as well as an increase of exports. In that regard I am sure that there is nobody in this House, indeed nobody in the country, who does not welcome the fact that since the last Budget was presented it has been possible for the Government to conclude a trade agreement with one of the states to the north. Obviously that agreement is something which can not be discussed in detail at this stage, but it is a move in the right direction that this trade agreement has been concluded, an agreement which, I believe, is for the benefit of both countries. With that having been accomplished and recalling the discussions which took place some six or eight months ago, there is general disappointment, I think, amongst industrialists and those involved in the economic development of this country that there is no indication in this Budget of any planned expansion of our trade on the African continent. One or two small concessions are included in the Budget, we still find, for instance, that we are limited to three trade missions—one in Angola, one in Rhodesia and the third one in Lourenço Marques. There is no indication that there is any plan to increase this contact, this breakthrough which has been made for the benefit of our country. One wonders why there is not this planning because, as the Minister quite correctly said, we want these exports, they are necessary for the build-up of our country’s economy and they must be stimulated. The Minister’s whole approach and that of the Treasury must be that South Africa’s economy cannot be static but it must grow, it must move. It must either go forward or else stagnate and deteriorate.

In the field of economics and economic expansion I do hope that the Minister will take the House and the country into his confidence about what is happening, because there has been an extraordinary series of incidents leading up to the Malawi agreement. If I may, Mr. Sneaker, I should like to refer you to the remarks that I made during the Budget debate on the 25th August, 1966. I wish to repeat them to-day. I quote from Hansard, column 1426—

That was in August of 1966. What reply did I receive from the then Minister of Finance, from the Treasury across the floor? The Minister replied—

My Leader then interjected and said, “Get a new Minister.” We have got a new Minister now. I continued and said—

The Minister of Finance then replied:

“I did not say it was impossible.” I then said to the Minister—

The Minister of Finance then replied to me and said. “Officially you cannot.” This was the position in August of last year. What has happened since then? Is the Government working in water-tight compartments? The Minister of Finance indicated to us six months ago that he could see no hope of trading with the Black states, yet we now have an agreement with a Black state, an agreement which we welcome. This is a break-through which we welcome. Are the public not entitled to say that this is another instance of this country progressing not because of the Government but in Spite of the Government? I think that the Minister must tell us how this came about. I think the Minister might tell us how this came about. Were we approached by Malawi? The Minister should indicate to us how it is that we can have such conflicting statements in a period of six months.

Then I want to deal with another matter. I mentioned earlier the question of productivity. I mentioned the productivity of the population groups, rather than looking at it from the angle of individuals. I hope the Minister in his reply will tell us what the policy of the Government is now in regard to the industrial development of the Bantu areas. We find—and I am sure the Minister agrees—that the progress which is being made to enable the Bantu areas to house and to sustain the maximum number of Bantu people is inadequate; the development is moving at a snail’s pace. We on both sides are agreed that these areas must be developed so as to be able to sustain the maximum number. But I wonder whether the development at present is even sufficient to sustain the natural increase of the population there. The Minister shakes his head; I hope he will enlighten me. In this Budget in regard to the development, there is an amount of R50 million on Loan Account, which is an increase of R7.5 million over last year. We find under Vote 45 on the Revenue Account that there is an amount of R48 million, an increase of R2 million over last year. Then there is an item under Bantu Education of R15 million, making a total of R103 million which is now being made available for Bantu development. I have not analysed what proportion of that money is actually being used in the Bantu areas themselves but I wonder to what extent we are making the progress among these people, for whom we accept the responsibility for development. I wonder to what extent we are getting the development in those areas. If there is a change of direction on the part of the Government, the House and the country should know it, because what the Government has been doing in the years since the Tomlinson Report has not achieved any results. [Interjection.] The hon. member knows very well that what I am saying is correct. If the Minister and his Deputies are satisfied that the Reserves are developing as rapidly as they should develop, let them say so.

That is not quite the point.

That is my whole point, that they are not developing sufficiently to sustain their own natural increase, let alone any Bantu going back there.

Why are you against border development?

I want to read the recommendations of the Tomlinson Report. Paragraph 16 reads as follows—

Those were the recommendations of the Commission, and I think we should get on record what the Government White Paper said in reply to it—

The White Paper then stated that it rejected the recommendation of the Tomlinson Report, and it went on to say—

In other words, whereas the Tomlinson Commission made a categorical recommendation that there should be white capital, white “know-how” and white entrepreneurs to develop the industrial capacity of the Reserves, that was categorically rejected by this Government. Now I want to know what the correct position is, because a couple of nights ago in my constituency a gentleman who was a member of this House, Advocate Nel, addressed a National Party meeting at Green Point, and this is what he told them about Government policy. I read from articles in The Cape Argus, and it has not been denied by Mr. Nel, who was a member of the Bantu Affairs Commission—

I think he had half-a-dozen people there—

Now I think we are entitled to know whether this is the policy of the Government now, or is it another attempt to hoodwink the public by making these statements at public meetings, statements which are not the policy of that party? I hope all three Ministers will at some stage tell us about it. Then we are going to have confusion more confounded.

You will get an evasion, not a reply.

I think what is worrying the public, if it is not worrying the hon. trio in this House, is that Lesotho realizes that the best way it can progress is by using white South African advice and initiative. We have seen it happening in other countries where one of the greatest industrialists in South Africa has set up industries in partnership with the local people, not with a view to acquiring political control over those countries, but in the interests of the leadership which is our responsibility in South Africa in the whole of the African continent. Now that we see that without a very heavy programme of taxation in this country the reserves cannot be developed under the policy which has been adopted up to the present time, has the time not come for the Government to say, “We have been wrong” and to allow industrialists into the reserves and to stop this fancy idea that if you establish an industry five miles outside Pretoria you are in a border area? Sir, what I am concerned about is that the public is being told at National Party meetings that this is National Party policy. I do not think hon. members opposite would like to sail under false colours and say that Mr. Nel is correct. If Mr. Nel feels like this, he is only supporting what this Party has been telling the Government for many, many years.

He found that he could not win a seat under the Nationalist policy.

Tell us something about Mr. Rudman.

Sir, it is quite clear that there is confused thinking on the part of hon. members opposite and I ask the hon. the Minister to be good enough to clarify the position and to tell us whether there is any change of direction or not.

What is your policy?

Sir, hon. members opposite know as well as I do that our policy has always been that full use must be made of the white man’s capital and knowledge.

Uncontrolled?

The hon. the Deputy Minister knows perfectly well that he and Mr. Nel must either agree or disagree for all time as to what is National Party policy.

In the remaining time at my disposal I want to deal with the position of the middle income group. The hon. the Minister, in dealing with the proposed direct taxation, said: “I consider, however, that taxpayers in the lower income group should not be called upon to bear an extra tax burden”. I think he was very realistic and the country realizes that he was being very realistic. These people cannot bear an extra burden. They are weighted under with the burden of the increasing cost of living; the pensioner and the wage-earner are staggering under this burden. But who are the people whom the Minister has excluded; who are the people whom he feels are able to bear an extra burden, the people who are now being called upon to pay a loan levy which has been increased from 5 per cent to 15 per cent, the people who pay R100 or more in income tax?

It is all very well to impose a Government tax but that is only one portion of the picture. In addition to the Government tax there are all the other taxes—the provincial tax and the other burdens which that man is called upon to carry. This burden will fall heavily on the married man who earns R3,000 a year with two children. Let us look at his position in relation to his ability to carry this additional burden. Sir, we are indebted to the Deputy Minister of Economic Affairs who indicated to us, when he recently discussed the value of money in this House in relation to the Iscor Bill, that in his view and no doubt in the view of the Government an amount of R52 million in 1967 was the equivalent of R24 million in 1942; in other words, that there had been a depreciation of some 118 per cent in the value of money. Sir, I mention this because the people with an income of R3,000 a year are the people who, because of the bulge in the curve of taxation, are the people who are carrying the heaviest burden of taxation.

When the scale of taxation was introduced, it was introduced at a time when money had an entirely different value to what it has today, and with the depreciation in the value of the rand that burden is falling on people of a much lower income group that was originally intended. I want to indicate to the hon. the Minister what this burden is in terms of present-day costs. One assumes that a man with an income of R3,000 a year and with two children is entitled to a three-bedroomed house in a reasonable suburb in one of our cities. I have taken an instance just to show what burden this man has to bear simply to provide a home for himself and his family in a normal, average residential suburb, not an exclusive suburb. A three-bedroomed house costs R15,000 at the present moment. Before this man can purchase he and his wife must find R4,000 out of savings to pay a deposit and to pay transfer costs. The maximum bond that he can get from a building society is one for R11,250. The repayment for that family man with two children is at present R94 per month spread over the maximum building society period. That amounts to almost R1,100 per annum and that goes solely to provide a roof over his head. He is the man in the R3,000 tax group whom the Minister says can well afford to put away more money. In addition to that commitment of R94 per month he is obliged to pay his rates, maintenance, water, electricity and other general living requirements. The problem is not getting any easier. The hon. the Minister of Community Development knows that there is a shortage of some 78,000 homes for Whites in this country at present, and that is a conservative estimate. The estimate for the Cape Province is that there is a minimum of 33,000 homes required, that is homes whether they be flats or houses. Even if the actual figure is only half of that, there is certainly not going to be any reduction in the cost of homes to the man in the R3,000 per year income group, who wants to buy a home and who wants to live in a reasonably select residential area. I would have thought that for this man and people in a slightly higher income group an attempt would have been made in this Budget to try to help them in some way, especially in view of the words of the Minister of Finance as recently as October last year when the hon. the Minister of Finance replied to the hon. member for Pinetown. He said:

That bulge is hitting a class that it was never intended to hit when it was originally brought into effect. The people who were hit at that stage when the money was worth something, could afford to pay that higher rate of taxation. We find no sign of an attempt in this Budget to try to ease the burden of that group. One has the group with income up to R6.000. The rate rise is fairly reasonable. But on incomes from R6,000 to R8,500 a very heavy burden is placed on that particular group. The rate rises gradually again beyond that figure. [Time expired.]

Mr. Speaker, the hon. member for Green Point gives the impression that he did not try very hard to cut the pineapple presented by the hon. member for Sunnyside in order to discover the sweetness it contains. Either he did not have a knife or that knife was very blunt. That is why he fled so quickly to the field of Bantu homelands development, an argument to which I do not want to reply in detail. I presume the hon. the Minister and the hon. the Deputy Minister will deal with that in detail. I just want to say that in my view the more rapid development of the Bantu homelands can be founded only on the capacity for greater self-activity of the inhabitants of those areas. I also want to say that this Government will develop the Bantu areas within its borders at a rate which will offer the greatest long term advantages to the inhabitants of those areas. This Government will certainly not allow a Congo or a Nigeria to come into being or to be created in the Bantu areas within the borders of the Republic. Another point raised by the hon. member for Green Point was the surcharge of 10 per cent on the loan levy. The hon. member could not have read very well. It is not taxation; it is interest-carrying saving.

It is still money.

Yes, it is still money, but it is money which remains yours. Before proceeding with my speech, I should like to come back to a matter which has been raised several times this afternoon and which in my view has not been replied to clearly enough. The hon. members for Pinetown and Park-town made the statement—and other hon. members on that side of the House have made this statement before—that inflation was created and maintained in this country by State spending. They are misinterpreting this matter altogether, as I hope will be clear if they listen closely to some figures I want to quote. In 1966-’67 spending by private consumers amounted to R5,412 million. Gross domestic fixed expenditure by the private sector amounted to R1,064 million. Therefore spending in the private sector totalled R6,476 million. On the assumption that the growth-rate of spending by private consumers will remain the same in the year 1967-’68, i.e. 84 per cent, spending by private consumers will increase by R460 million in the current year, which makes a total of R5,872 million in spending by private consumers. On the assumption that the gross domestic fixed investment by the private sector will remain on the same level, i.e. R1,064 million, spending by the private sector will total R6,936 million for 1967-’68. In comparison, Government spending for the year under discussion, i.e. 1967-’68, totals R1,921 million, according to the Estimates before us. The increase in spending in the Government or public sector amounts to R166 million. Taken as a percentage of the total expenditure, i.e. the expenditure in both the private sector and in the public sector, which amounted to approximately R8,900 million, this represents less than 2 per cent. I repeat: The increase in the expenditure in the Government sphere in respect of the year 1967-’68, as against the year 1966-’67, amounts to R166 million. Taken as a percentage of the total expenditure, this represents less than 2 per cent. Now hon. members on that side of the House want to tell the country and us that increased expenditure of less than 2 per cent is responsible for inflation. There is even more to this. In the year 1966-’67, which has just passed, the total increase in spending on the part of the private sector amounted to R426 million, compared with the previous year. The increase in spending by the public sector totalled R154 million. The increase on the spending of the previous year totalled R580 million. Expressed once again as a percentage, 74 per cent of this increase is attributable to the private sector and only 26 per cent to the public sector. On the assumption that the increase in spending by private consumers in the private sector will remain constant for the year under discussion, the increase in private consumers’ expenditure for this year will amount to R460 million. The increase in Government spending, as hon. members saw in the Budget speech, totals R166 million. That means a total increase of R626 million. Here again the increase of the part of the private sector is 74 per cent of the total increase, and the increase on the part of the authorities only 26 per cent.

Hon. members who follow me may dispute this point. I want to say that the increase on the part of the private sector compels an increase on the part of the Government sector every year. If the private sector persists in spending on a higher level every year they should expect, and hon. members on that side of the House should accept, that Government spending will increase every year, because the private sector is asking for that. They ask for the services and they ask for the infrastructure and they ask for the facilities. Then they must pay, and hon. members on the opposite side should not persist in telling us that it is spending on the part of the authorities which creates these inflationary conditions and aggravates the inflationary pressure. In pursuance of this point I want to quote from a document which reached me this morning. I am referring to the latest quarterly bulletin of the South African Reserve Bank, which hon. members on the opposite side of the House have apparently not had time to read. In this issue it is stated—

This is the crucial point, and I want hon. members to listen to this—

If the private sector wants to spend more every year then this, barring anything else, will remain a reason for sustained inflationary pressure.

But it is not in view of this that I want to take part in this debate. I have risen to make the statement that the hon. Opposition, as befits a political party and as may be expected of them by this House and by the people, should have a policy, not only as regards non-White problems but also as regards State finance. This policy may be to achieve a balance of revenue and expenditure. It may be directed towards economic stability or towards full employment, or towards the welfare of the individual, or towards other objectives— such as the security of the State. Thus it is in fact the duty of a political party to present its policy to the people, not to hide its light under a bushel but to take the people into its confidence. It is also the duty of a political party to bear itself with a sense of responsibility and not to discredit or harm its country and its people through its statements. Measured by these requirements, the hon. Opposition cuts a deplorable figure. I do not want to express an opinion on the attitude of the Opposition to other national problems, but with regard to the aspect of State finance I want to say that since I have been in this House I have not beard one policy statement from hon. members on the opposite side of the House. What I did hear, and heard in every debate on economic and financial matters, was irresponsible and unfounded criticism. It is of course the right and the duty of the Opposition to scrutinize the activities of the Government and to criticize where criticism is called for. But at the same time it is the right and the duty of the Opposition to present an alternative policy here. But what do we find? We find no opposition of policy to policy; all that we find is irresponsible and unfounded and even ignorant criticism—but no statement of policy. Why this shortcoming on the part of the hon. the Opposition? Either they have no policy or they are following the course suggested by Bishop Hurley on 18th January, 1965, in his presidential address at the annual meeting of the South African Institute of Race Relations. According to the Natal Mercury he said the following on that occasion—

Is that what the hon. the Opposition is trying to do? Are they making a subtle attempt to sow suspicion among the people by means of irresponsible and unfounded criticism, by distorting certain aspects of the policies of the Government? Are they trying to make the people lose their confidence in the Government’s ability to combat inflation, through their statements, statements such as those made here to-day by the hon. member for Park-town? Are they trying to create distrust in the Government’s ability to grapple with and solve the current problems? Are they trying to destroy the confidence of the public by those means? Are they trying by those means to stimulate inflation in order to get rid of the Government by way of complete erosion of the monetary unit of our country? Is that the subtle approach they are adopting to compensate for their inability to formulate and present a policy of their own? Or are they trying to employ the subtle strategy employed by Robert Kennedy when he wrote personally to American companies with interests in South Africa, encouraging them to provide better working conditions for their non-White employees in order that they may insist on more privileges? Are they trying to apply this strategy? Is this their subtle approach in this situation, in the face of which they lack a policy? I am asking this question because it is quite clear that the Opposition is running away from economic matters. In any event, they are not trying to confront economic matters on a realistic or professional basis. On 26th January this year the hon. member for Pinetown said the following in this House (see Hansard, col. 179)—

Here the hon. member was most pertinent in his statements on this matter. But as he was speaking, the December issue of the American publication Fortune appeared in this country. That publication contained an article on South Africa which was written in glowing terms. It dealt with virtually all aspects of our country’s economy—our mines, our industries, our cities, our taxation system, our potentialities, Bantu housing, Soweto, our pass laws and Bantu homelands. It dealt with virtually everything except inflation, whereas the Opposition sees only inflation and nothing else. They see nothing else in our fatherland, and that despite the fact that in an American publication such as Fortune John Davenport wrote about the vast potentialities of our country. He saw no inflation here. This afternoon the vitality of our economy was outlined strikingly, and I shall therefore not go into that any further. I shall, however, refer to certain statements regarding inflation which were made from time to time by hon. members on that side of the House. This afternoon we heard once again how the hon. member for Parktown elevated the words “too little, too late” to the war cry of the Opposition. Apparently the hon. member does not read his old speeches frequently enough. I am now quoting from Hansard of 24th January, 1967, column 58, in which it is recorded quite clearly that the hon. member said the following—

This afternoon hon. members on the opposite side pretended that they discovered inflation in this country in 1964. Well, even in November, 1963, the then Minister of Finance cautioned, cautioned gently, as befitted him at that stage, and subsequently he announced measures from time to time to combat inflation. He did so in July, 1964, December, 1964, March, 1965, October, 1965, July, 1966, and again in December, 1966. What he did was correct in the light of prevailing circumstances. What did the hon. Opposition want the Minister to do?

Take effective measures.

“Take effective measures”, the hon. member for Transkei says. Effective measures of what nature? Did he want measures which would have been so effective that they would have jerked the country’s prosperity and economy to a standstill immediately? Did he want steps to be taken which would have forced this country into a state of recession? Have hon. members on the opposite side forgotten the depression of 1929-1933? Have hon. members forgotten that in January this year we only just began to shake off the strangle-hold of a terrible drought? Are hon. members on the opposite side telling me that they are unaware of the unemployment which has prevailed among our farming population in recent years? Are they telling me that they are unaware of the fact that thousands of farmers who could not make a living on their farms had to be absorbed by commerce and industry? Are they telling me that it would have been realistic if the hon. the Minister of Finance had announced measures as early as November, 1963, fiscal and monetary measures, which would have jerked the economy to a standstill and which would have added bad conditions and unemployment in the field of agriculture to unemployment in commerce and industry? Do the Opposition want our country to experience a depression this year? Is this a subtle way in which that side of the House is seeking political power, namely by manipulating the economic forces? They should reply to that, because the people and this House are entitled to a reply. Surely the Opposition knows that in a capitalistic country such as South Africa the economic position at any given moment is equal to the aggregate of the business prospects and the profit expectations of the entrepreneur sector. They know that. Create unemployment in commerce, industry and in the service industries by excessive deflationary or disinflationary measures, couple that to unemployment in agriculture as a result of drought, and we have the basic prerequisites for a recession. Add to that pessimistic profit expectations in the domestic private sector, pressure from abroad, loss of confidence among overseas capital investors, and we find ourselves in the midst of a depression. Is that what the Opposition wants? Is that why they repeat from time to time, and have done so again this afternoon, that this Government is doing “too little, too late”?

I come to the conclusion that in spite of all their pious talk of patriotism this Opposition is not in the least concerned about the people of the Republic of South Africa. Through their irresponsible criticism they seek to advocate measures which may force our country into a depression, a depression with its unemployment, its social problems, its misery, its loss of human dignity, loss of pride, loss of confidence in its government. Is that what the Opposition wanted? Notwithstanding all this supposedly economic talk I have to assume that this talk is political in tenor. The hon. members on the opposite side should answer my allegation.

Another point of criticism which is frequently raised by hon. members on the opposite side on measures taken by the Government, is that we are trying to do too much with our restricted means and within too short a space of time. That was said by the hon. member for Parktown. On a previous occasion the hon. member said that the Government tried to do too much too quickly. I have already replied partly to that in demonstrating that Government spending represented only a small percentage of the total spending in this country. Let us just see the matter in its correct perspective. What is this Government trying to do? We are trying to maintain the highest possible standard of readiness in our police and our military forces. We apply ourselves to the production of strategic products, including military equipment. We are prospecting for natural oil. We are spending money on water conservation. In addition to these we provide in a responsible fashion for the needs of the domestic economy and the necessary infra-structure in our country, for which the private sector asks. Hon. members on the opposite side have been asked a question in this regard, but they refuse to reply because they are unable to do so. That was strikingly demonstrated this afternoon by hon. members on this side of the House. I want to ask the Opposition just one question: Do they want this country to be left defenceless, in the military sense, before its enemies? According to an old Roman saying the security of the state is the supreme law. In India, where thousands of people are dying through famine every year, one-third of the country’s total budget is spent on defence. In our country, a country of abundance, a country which is among the twelve best-fed countries in the world, we are spending only R256 million out of a total of R1,387 million, on current account. That represents only 18.4 per cent. Taken as a percentage of the total State expenditure, the R256 million we are going to spend this year is much smaller.

I have already indicated partly what I regard as a solution to our inflation problem. That is that private consumption expenditure should decrease. In pursuance of that I just want to indicate what we should in fact do, and here the hon. the Opposition should accept joint responsibility if they are truly sincere with the people of South Africa, with the lower income groups and also the middle income groups, about whom the hon. member for Green Point is so concerned. We should ask the people cordially, urgently and at all times to propagate and seek to practice the curtailment of private consumption. I concede that there are thousands of families and probably also many undertakings which are unable to curb consumption spending. All I ask them is that wherever possible they should apply better planning of family and working expenditure. That may result in saving. There are also thousands of families and undertakings who may justifiably be asked whether their consumption is judicious or whether there is in fact wastage. An appeal should be made to these to restrict consumption, and that only to the extent that the standard of living will not be lowered and the efficiency of the undertaking not be reduced. Undue wastage, however, should be eliminated. The surplus which is saved by these means may serve as a foundation for future personal wealth and security. Every individual in the nation should be appealed to not to increase his standard of living at this juncture. From the statistics I quoted earlier from the quarterly bulletin of the Reserve Bank, it is apparent that we are in fact increasing our standard of living. If we endeavoured to increase that standard at this stage we would do our country a disservice, because by doing so we would prejudice the purchasing power of the rand and would extend the period of recovery and consolidation. The battle against inflation is not restricted to the State or to commerce and industry or to hon. members of this House. It is a battle which will be waged and won by every member of our nation. That was stated most pointedly by the hon. the Minister, and also by the previous Minister of Finance. Combating wastage actively is the bounden duty of every citizen of the country. I should like to give some examples of wastage which are at present found in our country. In the course of a lecture given earlier this year at the University of Stellenbosch, during the conference of the Road Transportation Executive, an expert estimated that 43 million gallons of fuel were wasted in South Africa every year, not as a result of unnecessary driving, but due to the poor functioning of the vehicles using the fuel. The value of this wasted fuel probably amounts to R20 to R30 million a year. Here is another example. Recently Professor Deo Botha, member of the Drug Control Board and the Poisons Committee, asserted in Pretoria that in general people in this country consumed far too many drugs. In other words, we are wasting them. Drugs are often consumed more regularly than food. [Time expired.]

Mr. Speaker, I cannot say that I was particularly impressed with the efforts of the hon. member for Wonderboom to justify this Government’s budget presentation or its efforts to combat inflation, but he did make one or two statements which I think we must immediately refute. I want to tell the hon. member that I think it is an impertinence on his part to accuse this side of the House of being unpatriotic because we criticize this Government. I want to tell him that we have the right to criticize and I am sure that the Minister welcomes that criticism. For a member to allege that this side of the House would welcome a depression is, I think, a downright cheek on his part. It is time that these new hon. members know that we on this side are just as patriotic and just as South African as they are. The hon. member must divorce himself from the trend of thought that goes along Nationalist lines, namely that anybody who is not a Nationalist is not a South African, and that anybody who criticizes the National Party is anti-South African. He must forget about that. I am sure that if the man in the street had listened to the hon. member’s speech he would not have been particularly impressed either.

You see, Mr. Speaker, the way the man in the street awaits a Budget, the way he reads about it and hears about it is related to one thing only, namely: “Am I going to be taxed higher than I am now?”. That is his outlook. He wonders what is going to happen to him. He is curious to know whether he will be expected to pay more than he is at the moment.

He has become used to the fact that over the year he has been paying so much—he is accustomed to his normal payment. But he fears that he might be taxed more than that. And when he hears from the Minister that he is not going to be taxed more, for the time being at any rate, he is relieved, and he says, “Thank God for that.” But it seems to me that the hon. the Minister is ready to take two bites at the cherry. I suspect that when this House goes into recess after this session is over the Minister could quite easily come along and tax us a little higher than he intended to do now. He might not have any intention of taxing us now, but when we are not here that possibility might be a little more tempting and he might tax us a little bit higher—because he will not have anybody to fight him on the taxation proposals, We may quite easily find that we are faced with a burden which we did not expect. Therefore, when the Minister replies he must give us the assurance, he must give us the guarantee that he is not going to do that. I was hoping that the hon. member for Queenstown was going to give us that assurance; he started off along that trend, but he stopped short. I put a question across the floor and asked him, “Is that going to be for the whole of this financial year or only for the immediate present that we are not going to get extra taxation?” Well, we will a wait with interest what the Minister is going to say about that. But the man in the street is already feeling somewhat uncertain about the future.

The Minister has told us that we must work and save a lot more than we are at the moment. Well, this question of saving is very important. I want to tell the House, and the Minister knows, that every normal person wishes to save. We all want to save—it is no new phenomenon. What we like to do is put money away so that it may earn something while it is put away. We do it for a specific reason. We save to provide education for our children; we save so as to have enough to put down as a deposit for a home; we save so that we can buy furniture; we save so that we can go away for a holiday; we save for a rainy day; we save for illness. That is the sort of saving all normal people want to go in for. And if we do that now we will find that we are saving too much, because on what is left after we have put something away, we will find it very difficult to make ends meet. The Minister need not have figures. He can go down the street and see what an apple costs to-day; he can see how much it costs to have his shoes repaired; he can see what it costs to have a suit cleaned. These are the things which the man in the street wants to do, and he finds now that it is taking more and more out of his pay-packet. It is taking out more and more as each month goes by. We can see when we pass the butcher-shop that meat at apparently bargain prices is offered to the public just before the week-end, but on Monday morning or Tuesday the prices revert to normal and one finds that some cuts are five cents, or even ten cents, dearer. And that increase on the Monday or the Tuesday becomes the normal price.

If one goes into a supermarket one finds temptations put in the way of the purchaser. The catch-lines are there, but if one looks at the prices of the other articles, one finds that the prices have gone up.

I do not know what steps the Minister intends taking to combat this tendency. But if one asks the ordinary, normal individual to save, say an extra R100 or R200 per year, he will have very great difficulty in doing so. The man in the street is going to feel the effects of this when it is taken off his pay-packet. At the moment he is faced also with the uncertainty that he may be taxed over and above the amount that he is being forced to put away now in the form of the savings levy.

Another aspect to which I want to refer is the fact that when a man saves money he knows for how long he is putting it away. He knows that on a certain date he can get it back and use it for the purpose for which he invested it. But the Minister is taking money and he has not yet said when he is going to give it back. When he does give back the money, it will be our own money that he is giving back. We will be getting money back which will have lost its value. Moreover, he can repay the money at a rate which he fixes. We will just have to take what he gives because we have no say in it. We have no say over how long the money shall lie in his coffers. We have no say regarding the interest we will receive on our money. What happens to the aged man, the man of 65 or 70 years, who puts away this money? If he is going to wait seven or eight years before it is refunded, who is going to get it? His estate will get it. The savings which a normal ordinary individual puts away is put away because he himself wants to use it for a specific purpose. And he is entitled to know what that purpose is. We who are going to give the Minister the money are entitled to know for how long he is going to keep the money, what rates of interest will be paid to us, and whether it is possible for us to get it back for an emergency.

It is quite easy for some people to put away money, but I am talking about the ordinary man in the street, the man whom the Minister says must “work harder and save more”. Let us deal with the question of working harder. Of course it is possible to work harder and longer in some occupations. It is being done now to make ends meet. To-day the ordinary man has to work overtime, and the Minister knows it. But how many hours a day does he expect the working man to work? Are 16 hours enough for any man to work? They are doing that on the Railways, and the Minister knows it. The Minister knows quite well that the eight-hour day to-day does not mean eight hours because people want to work 12 hours a day if they possibly can. But, Mr. Speaker, what about the white-collar worker who does not have the chance to work over-time? What is happening there? How is he going to work longer and earn more? The offices close at a certain time —what does the clerical worker then do? What about the shop assistant who has to work according to shop hours—can she work overtime?

Are you against the Minister’s plea for harder work?

No, I am not, but I say this to the Minister: He must provide ways and means for these people to earn a reasonable living. That is what he has to do. And there is no ordinary person who is afraid to do a good day’s work. We have all been doing it over the years. But we want to earn sufficient to make life worth living. That is what we want. We have a normal way of living; we have a normal life; we have a normal standard of living. Those are the people who want to know where their savings are going to go to. They want to know why they cannot control their own money. They are prepared to pay their taxes. Indeed, we are all prepared to pay taxes as long as the Minister justifies the reason for taxing us. But when he takes money out of our pockets and says that it is a forced savings levy, we want to know what he is going to do with it. The normal man who has difficulty in making ends meet to-day must be given that assurance.

The Government has admitted that the cost of living is going up. There has been no question about it. What is the Minister going to do to try and stop this cost of living going up? How is he trying to combat it? The methods which he has expressed himself in favour of will not do it. We see in the newspapers that there are demands for higher wages. Negotiations are going on between employer and employee for higher wages here in Cape Town at the very moment. It is happening on the coal mines, on the gold mines. We read to-day that the bus worker is not going to work overtime unless he has to. He wants to do no overtime because he wants to show that he wants his basic wage increased in order to cope with the present cost of living. He wants to know why he should supplement his salary so as to maintain his present standard of living. He does not earn sufficient to do so unless he works overtime. People want that standard of living. It is a reasonable way of wanting to live. Trade unions over the years battled year after year to have the number of hours of workers reduced. Now we see the tendency going the other way—we must work longer hours to earn sufficient to be able to carry on a normal standard of living. It is not a standard of luxury. The Minister knows that there are hundreds of people to-day who cannot possibly continue to pay their bonds on their properties. As a result they are going to building societies to try and make arrangements for paying interest only and holding over capital repayments until things get a bit better. Wives also have to go out to work to-day. They do not grumble about these things. But I ask the Minister not to make it more difficult for them. They also like to have a little leisure time. They also want a little money extra to spend on luxuries. These are the normal little things that the normal person wants, and the man in the street says he must be given a chance to live like that.

Hon. members on that side of the House have tried to justify the present efforts of the Minister. They say, “Leave it, the Minister will fix everything, everything will be all right. Just follow our example and all will be well again”. Well, I wonder. I wonder how much this Government is wasting on ideologies, expenditure which is one of the basis in this country of the present inflationary tendencies.