Mr. Speaker, I said the other day when this debate was started that this appeared to be a rich man’s budget, and I think that is largely true. It is certainly true that under the Budget the well-to-do will benefit substantially and the less well-to-do will have to pay more than they are paying at the present time, in order to live as they are now doing. Sir, apart from what one might call conventional adjustments, the hon. the Minister in his Budget speech proposed two major changes dealing with the tax structure. We have had time to examine them and our conclusion is that in principle they have merit but when it comes to the ways proposed by the hon. the Minister to implement them, it is obvious that they are open to very serious criticism, criticism which has already been widely voiced throughout the country since the hon. the Minister spoke. It seems to us that in some respects these proposals are based on quite inadequate information, without full and proper consideration of the burden to be placed upon the great majority of the population, both White and non-White, and without any well-based accurate estimate of the revenue which he expects to derive from them. Furthermore, it seems to us that the Budget, as it was presented, gives no indication as a whole that the Government is applying itself urgently to some of the major problems facing the economy of the country, particularly the growing shortage of skilled manpower and the future of the farming industry. I want therefore to move the following amendment—

1. (a) shift an unreasonable burden of taxation onto the working men and women of South Africa, typifying the Government’s growing indifference to the great body of citizens who deserve more consideration; and
2. (b) fail to grapple with many of South Africa’s urgent problems including the shortage of manpower and the plight of the agricultural industry”.

The Minister’s speech falls, I think, into three parts. First of all he gave us a review of the economic position. Secondly he gave figures of the past year’s revenue and expenditure and his estimates for the coming year. Thirdly he made proposals for tax reforms. I propose to apply myself particularly to the third part of his speech. The review he gave, of course, is very important because quite obviously it must cover the Minister’s approach in framing his Budget and also the approach of a responsible Opposition. The Minister tells us that the economy is buoyant and that he expects it to remain so. He said the balance of payments is satisfactory and he can deal with it. He also said he expected a surplus of R58 million on revenue and a credit balance of R28 million on his Loan Account. On the whole the hon. gentleman gave the House from a fiscal point of view a bright and a promising picture. One might say that he expressed the opinion that from his point of view the climate was set fair. He admitted there are clouds in the sky, the first cloud being, of course, the question of inflation. The Minister said he felt bound to continue the Government’s anti-inflationary policy for the present. Provided that is kept flexible we agree that under present circumstances it is unfortunately necessary, especially as the Budget which the hon. the Minister has introduced undoubtedly contains serious inflationary seeds. He is going to put a great deal more money into the hands of income-tax payers which they may or may not spend, and he is imposing new taxes which must affect the cost of living to an unknown degree.

The second cloud is what the Minister called the persistent shortage of skilled labour. There is no indication in this Budget that the Government has any idea of how to cope with this problem. Apart from immigration, the obvious urgent need is for the education and training of the available white manpower. If we look at the Estimates of Expenditure, we find that we are being asked to vote R51 million for Higher Education. That is an increase of R12 million, which seems a lot. But it is not so significant when we compare it with some of the other votes. If we look at the Police Vote, for instance, we find that we are asked to spend not R51 million, but R85½ million, an increase of R13 million. Under the Prisons Vote we are asked to spend R25 million, an increase of R3.3 million. In other words, we are being asked to spend R110 million under the Police and Prisons Votes, as against R51 million on Higher Education during the coming year. I suggest that that is not a very encouraging comparison. It gives one food for serious thought as to how seriously the Government is viewing this very urgent problem.

One aspect of the manpower question is the Public Service. The hon. the Minister has made certain proposals in the Budget with regard to the Public Service, but this is really only patchwork dealing with certain aspects of the Public Service and proposing certain steps. But there is no sign whatever of the radical reform that is obviously necessary if the efficiency of the Public Service is to be restored and maintained.

The position is similar in regard to the farming industry. There are certain ad hoc proposals dealing with devaluation and the drought, but there is no indication of longterm planning to restore stability to this vital industry. We will deal with these matters in the course of this debate.

In regard to the Estimates of Expenditure, the Minister is asking to be allowed to spend a total, after the various adjustments in connection with expenditure, of R1,665 million and R1,046 million from Loan Fund, a grand total of R2,711 million for the coming year. We shall discuss the details of that in the course of this debate. When we come to the revenue, the hon. the Minister breaks new ground altogether. He proposes important changes in the tax structure. He points out that direct tax on individuals is only paid by 8 per cent of the total population. Of that 8 per cent, 6 per cent pay two-thirds of the total income tax and 94 per cent pay one-third. Of the total of R356 million which is yielded by individual income tax two-thirds is paid by 6 per cent or 8 per cent of the population. The Minister proposes changes which will reduce his revenue from that source by a total, after various calculations, of R115 million. That includes compensation of the provinces for their loss in income tax. The hon. the Minister thinks that that is too much for the Exchequer to bear and he therefore proposes a 5 per cent surcharge on income tax for this year to reduce the loss. The hon. the Minister’s aim is to alter the existing balance which is now about 58 per cent to 42 per cent between direct and indirect taxation. We agree that a reasonable shift of the burden of taxation from direct to indirect, especially in view of the figures which I have quoted, is desirable. The hon. the Minister proposes to bring it about firstly by a reduction in the rate and the progression of direct taxes on individuals, and secondly, by broadening the basis of indirect taxation by what he calls, a selective sales duty. Some people might prefer to call it a purchase duty, but that is a matter for discussion. For the purpose of this discussion since the hon. the Minister calls it a sales duty, I shall continue to do so, but that does not mean that I think it is the best term. The hon. the Minister has acted very largely on the first report of the Franzsen Commission. The Franzsen Commission, in making their recommendations, made this point—they made it more than once—that any change should be made as painless as possible and that the burden on the lower income groups should be as light as possible. I am quite sure that the hon. the Minister will agree with that. When it comes to the selective sales tax the hon. the Minister told us that he proposes to get a R100 million from that source. How the hon. the Minister arrived at that figure, is quite obscure. I doubt very much whether the hon. the Minister will be able to lighten that obscurity in his reply to this debate. The Franzsen Commission, in dealing with this point, say that private consumption expenditure in 1967, excluding food, clothing and services which are excluded in the hon. the Minister’s proposals as well, amounted to R3,300 million at retail prices presumably. If one makes allowance for the profit margins between manufacturer and consumer, one can take the figure at R2,200 million. Five per cent Overall, tax on that will give the hon. the Minister R110 million. One can go on making estimates throughout this debate and I do not know who will be right when we have finished. I must say that the hon. the Minister has been commendably frank on this subject particularly in an interview he gave when he attended the Rand Show. He gave his views to the Press and I want to quote from what he said during that interview. He said that he cannot say at this stage whether the taxation imposed is too much or too little. He said that if the departments encounter problems which they cannot solve, they will have to come back to his department and they will decide.

That is a nice way to tax.

He said that there will be many problems which will be solved in due course. He also said there was some guesswork involved in formulating the new taxation. The Government did not know how it could affect taxation. Lastly he said that they could be out by a certain percentage—I must say it would be much better if he said that they would be out by an uncertain percentage —and that they would have to see what this percentage was during the course of the year. He did not offer any comment as to how the taxpayer is going to suffer while he is carrying out his experiments. The hon. the Minister will forgive me if I say that this is a very airy-fairy way to approach a major change in the tax structure of the country. One can almost call it a shot in the dark. The hon. the Minister might quote not Ecclesiastes, but Longfellow who said, “I shot an arrow in the air, it came to earth I know not where”.

Mr. Speaker, it is quite clear from what the Minister has said, and I think he will concede the point, that these proposals are sketchy and that they are superficially thought out. We on this side of the House are prepared to approve in principle of a selective sales tax as part of the Minister’s proposals, but it must be very selective. The imposition and the incidence of such a tax should be carefully worked out, particularly in order to spare as far as possible that section of the population to whom it will simply mean additional taxation and an increase in the cost of living without any benefit from reduced direct taxation because they pay no income tax; this section consists of 92 per cent of the whole population. The White Paper which was laid on the Table says that this tax is to be levied on luxury, semi-luxury and durable goods. Well, Mr. Speaker, we shall deal with that in greater detail in the course of this debate. But for the moment I should like to say that the actual list of duties and taxable goods with which we have been supplied bears little relation to the definition of luxury, semi-luxury and durable goods. Another matter which has been raised by the Franzsen Commission is that when we talk of a taxation rate of 10 or 20 per cent, one has to remember that by the time it gets to the consumer, to the taxpayer, the tax is likely to be 10 instead of 5 per cent, 15 instead of 10 per cent, and 25 instead of 20 per cent. It is quite clear that while these proposals in essence may have merit, they have not been fully worked out. We believe that we should not be expected to accept, and the country should not be expected to accept, them as they have been put before us.

On the other hand, Mr. Speaker, this is a serious matter affecting the whole population. I agree that it is not sufficient simply to be destructive especially since we do not oppose the principle. We should therefore like to suggest what we think should be done. We wish to be constructive and helpful, and we would like to suggest that, pending the final adjustment of the income tax scales—the hon. the Minister gave us reasons why he was unable to fully implement the Commission’s report at this stage—and pending a thorough examination of how and to what extent the sales tax will be applied, the House and the country should be asked to accept his proposals in principle and that we should regard this year as a year of experiment and research. The hon. the Minister, in his interview at the Rand Show, said that this year would give all the information and experience required.

If we accept that, then the question arises how the Minister is to deal with his present Budget. If I may, I shall deal separately with his Budget and the sales tax proposals. Sir, the Minister requires R1,665 million. Without the sales tax he expects to receive R1,567 million. That leaves him with a deficit of R98 million. To finance this deficit the Minister has at his disposal a surplus of at least R53 million. Then he has a credit balance of R28 million on his Loan Account and a Stabilization Fund of R341 million—a total of R422 million, plus the surplus which it has become customary for us to expect. We suggest that during this year of experiment the Minister should apply the surplus of R53 million, then take R10 million from the surplus in his Loan Account and borrow R35 million from the Stabilization Fund as a temporary loan. To us this seems to be a perfectly reasonable proposal, one which is quite safe. The Minister has tremendous reserves at his disposal. As regards the temporary loan from the Stabilization Fund, surely this fund is there for exactly this purpose, i.e. to cusion any sudden change in our taxation system. Consequently, it is in our view quite proper to draw on that fund temporarily when we are dealing with a massive change-over in our tax structure. Such as the Minister now proposes to do. As I say, this would give him a balanced budget and time for a calm, thorough and methodical examination of the sales tax proposals, an examination which certainly has not yet been done up to now.

As far as this sales tax, or purchase tax is concerned, we suggest that the Minister should institute this system by, in the first place, imposing a luxury tax—a tax on luxury goods of 15 to 20 per cent—plus a minimal tax of, say, 2½ per cent on other things, things on a restricted list, very much more carefully selected than the one the Minister has put before us. This should yield enough to enable the Minister to reimburse his Stabilization Fund at the end of the current year. Furthermore, this procedure will give his department, commerce and industries and the consumer public time to solve the many problems to which the hon. the Minister has referred, problems which are cropping up from day to day all over the country, as painlessly as possible. At the present moment everybody are tearing their hair in an endeavour to make head or tail out of the proposals which have been thrown at their heads. It is difficult to imagine anything more painful than the way in which the Minister is going about it. As far as the 2½ per cent is concerned, the idea is to enable the system to be put into operation painlessly, because I believe the 2½ per cent will almost certainly be absorbed between the manufacturer and the distributor and therefore would be no burden at all to the consumer. I think competition would certainly see to that. The hon. the Minister referred to competition keeping prices down, but when it comes to 15 per cent or 20 per cent or 25 per cent competition cannot be expected to cover the whole of that. But a minimum tax could be imposed without any burden at all on the consumer in the current year while we are making this experiment.

Our proposal, therefore, would give the hon. the Minister a balanced budget without any headaches in regard to taxes at all. It will establish the principle of the sales tax and it will put it into practice as painlessly as possible. It will give him the necessary revenue to reimburse his Stabilization Fund if he wishes to do so. It will give the country time to adjust itself to the new system properly and with much less pain than what the hon. the Minister proposes to do. Lastly, it will put the Minister in a position to frame his budget for next year with far more hope of being reasonably accurate than he has at the present time with this budget.

The only counter argument which I can see being advanced is that the Minister might say that our proposals might lead to inflation. My answer to that would be. first of all, that it is a case of the pot calling the kettle black, because the budget he has introduced is certainly inflationary at both ends, inflationary from the point of view of the large sums he is putting into the hands of the well-to-do and inflationary because it will increase the cost of living to an unknown degree for the great bulk of the consumers in the country. Secondly, the hon. the Minister must remember that quite apart from the sales tax, he is taking R45 million in extra taxation from the people in his budget while the sales tax we propose should bring in at least R50 million. Therefore my reply to the question of inflation is that the risks under our proposal are probably much less than they are under the Minister’s budget. In fact, I think that under our proposals the risk is negligible. I believe our proposals would achieve the Minister’s purpose and I believe they would be acceptable to the country and I hope very much that he will be prepared to accept them and that he will not hesitate to do the right thing even if it is “the devil who is prompting him”!

To-day we heard, through the mouth of the hon. member for Constantia, what objections the Opposition have against this Budget. I must say at once that the hon. member for Constantia adopted a responsible attitude. He put forward certain positive suggestions; he was not sharp, but unfortunately I cannot compliment him on having made a tremendous contribution on behalf of the Opposition as far as this Budget is concerned. I also think that his criticism as a whole was, as I shall prove presently, very weak. Sir, the hon. member mentioned the question of a manpower shortage on previous occasions. To-day he himself quoted figures indicating that in respect of higher education alone the Government would be spending over R12.5 million more than had been spent in the previous year. This is almost 30 per cent more than the amount that was spent in 1968 as compared to an average increase of 9 per cent in the 1969-’70 expenditure. Can the hon. member mention to me any other Vote in the Estimates which reflects such a major increase?

He did. You did not listen.

Does the hon. member want to suggest that the Government should have spent much more? Whereas the immediate rise is only 9 per cent, the increase is more than three times as much. Can the hon. member still say under these circumstances that the State is not paying enough attention to the question of the manpower shortage? Surely, that is not logical.

The hon. member also referred to the agricultural industry. On ever so many occasions we have stated in this House what this Government has done for the agricultural industry, and I am not going to repeat it to-day; I shall leave that to my colleagues, but let me ask the hon. member for Constantia how the agricultural industry did when they were in power. I have before me the information in respect of the average annual rates of growth of the real contribution of the industrial sectors to the gross domestic product for the years 1941-’45. Do you know, Sir, what happened to the agricultural industry in those years? The contribution of the agricultural industry did not increase; it decreased at an average rate of 1.1 per cent per year. However, under National Party regime there has been an average increase of 3.1 per cent in the real contribution to the gross domestic product, not a decrease. Under National Party regime the contribution of the agricultural industry to the total national income showed an increase of almost 25 per cent in 1967, and in 1968, despite the fact that in certain years there was a decrease owing to droughts, over which the Government does of course have no control, a high level of production was nevertheless maintained. Does that side of the House therefore have the right to say that the Government is neglecting the agricultural industry?

They hate the farmers.

The hon. member said that the Government was not tackling the problem of a manpower shortage, in the Public Service. Surely, the hon. member knows better than that. The hon. the Minister calculated that the concessions he had made would cost the country R100 million per year over the next few years. The Government has also made provision for cheaper housing. Has the hon. member taken the trouble to calculate what a decrease of 2 per cent or 2½ per cent in the interest charges would mean in the case of a house which costs R10,000? If the hon. member worked that out, he would see what a tremendous concession the Government is making to public servants. Provision has also been made for better conditions relating to pensions. I want to ask the hon. member whether the past few years were the only years during which the Public Service has experienced staff problems? I could quote to him what was said in 1945 and also what was said in 1950 before the relevant select committee on the Public Service (translation)—

Suitable temporary officials could not be found either. As far back as 1950 they were also talking about this serious staff problem in the Public Service in general. We know that the problem is a serious one, but this Government is definitely paying attention to it. As time goes by more and more attention will be paid to making the Public Service as a career more attractive to its people.

I should like to say this in connection with the Budget. It is significant that in its 21st year of being in power it is possible for the National Party to present such a structurally changed budget. Basically the whole country accepts the structure of the Budget, including the hon. member for Constantia and the whole Opposition. Is this not telling proof of a virile Party? Does this have no significance? Is this not a sign of refreshing, original thinking? The National Party, after being in power for 21 years, is not out of date. A party which has governed for such a long time and is still new in its thinking, will continue to govern. This is the reason why we have already been in power for 21 years and will still be in power for at least 21 years.

This Budget can be described as a renaissance in the history of budgets in South Africa. In assessing a budget such as this one, one can approach it from several angles, especially from the functional angle, and I should like to refer to that. I want to refer to the expenditure, to the extent of the expenditure and to the priorities of expenditure. Secondly, I want to refer to the revenue and also the extent thereof, as well as the priorities. Thirdly, I want to refer to the most important aspect, and that is where the Opposition fails. They think we are still living in the times of 21 years ago; they are still living in the olden times as far as economic life is concerned, not in modern times. To-day the primary function of a budget is to give direction to the economic and financial life of a country, and that is the basis of this Budget. That is what the Opposition fail to appreciate; that is where they are making a mistake. This accusation of theirs, i.e. that this is allegedly a rich man’s budget, proves to us to what extent they are making a mistake, as I shall indicate later on. This Budget represents a major structural change and we accept it, but it is necessary because we must have regard to the structural change which has taken place in the economic life of South Africa, a change which has principally been brought about by the National Party. It was said here that this Budget was a rich man’s budget and figures in respect of inflation were quoted here, but I shall prove later that this is not a rich man’s budget. I do not understand the hon. member for Constantia. He maintains that the Budget is inflationary on both sides, but I can point out many things which the Government has done and which are anti-inflationary. There is the purchase tax on durable goods and on luxury class articles which is an anti-inflationary measure, especially because there has been a substantial increase of more than 12 per cent in the consumption of durable consumer goods over the past year.

Would you say that soap is a luxury? [Interjections.]

A tax has been levied on the spending of money, which will bring about a saving. Large amounts have been withdrawn from the liquid market, so that R341 million has been frozen. The Opposition itself said that all these steps were anti-inflationary. The Opposition itself said the Government collected an additional R30.6 million in taxes from the public. This is anti-inflationary. In the past six consecutive quarters the Government conducted its financing in a disinflationary manner, according to the Reserve Bank report. This system of taxation will bring about increased productivity, and that is what hon. members opposite debated at such length. They asked for a system which would bring about increased productivity. The hon. member for Constantia himself said that higher taxation hampered productivity. This is one of the reasons which they advanced for their wanting a reduction in taxation for the higher and middle income groups. This was their plea, because, as they said, it did not stimulate initiative and productivity sufficiently. Now they are opposed to it in their speeches. The hon. member says that the Government should use the 1968-’69 surplus of R58 million instead of levying additional taxes. Is that not inflationary at this stage? Why do hon. members contradict themselves to such an extent? No, Sir, this Government will not do that, because the poor man and the worker will be prejudiced. It would increase the cost of living.

Let us take a closer look at the story of a “rich man’s budget”. It has already been said that 90 per cent of the population pays 41 per cent of the taxes; 9.2 per cent pays 35 per cent, and 0.8 per cent pays 24 per cent. According to the Franzsen Commission the tax concessions affect all groups: those under R5,000 between R5,000 and R14,000, and above R14,000. To what extent are they being affected? Those under R5,000 receive 29 per cent of the tax concessions, the middle group 42 per cent and the topmost group 29 per cent. Is this not proof of a reasonable, proportionate distribution of concessions, especially if regard is had to the fact that that side of the House has so often said that the rich man and the middle man were being taxed too heavily? But the Government has gone further than that. If hon. members were to analyze the recommendations of the Franzsen Commission, they would see that the Government’s concessions are even more favourable to the lower income groups than was recommended by the Franzsen Commission, because the Government is duly taking that into account.

The other point is that the taxation still remains progressive as far as the higher income groups are concerned. Only the undesirable and excessively high progression has been removed. There has also been a higher incidence of tax avoidance, as the Franzsen Commission also found, particularly amongst those groups, bodies and persons who pay a higher marginal scale of taxation. They sought all kinds of methods for avoiding taxation. Those loopholes have now been plugged through the tax on undistributed profits, which has also been made applicable to public companies whose income consists largely of dividends received of other companies. Do hon. members know what the effects of this are? The majority of the larger companies are owned by well-off people. In the first instance, that company pays 40 per cent of the taxation. The remaining 60 per cent is distributed between dividends and the ploughback of profits. Those dividends are paid out to the other companies, which are often bent on avoiding taxation. They are now being forced to distribute at least 75 per cent of those dividends. If they do not do so, they will pay tax on them. If they are distributed, those dividends, in the hands of the persons who receive them, can be taxed to a maximum of 60 per cent. Therefore the production company pays 40 per cent of the taxation whereas a marginal maximum of 60 per cent is payable on 75 per cent of the dividends. Therefore you can see, Sir, that it may eventually mean that 80 per cent would be paid as a result of the measure the Government is taking now. Does that look like a rich man’s budget to you, Sir? In addition I want to point out that the purchase tax is mainly, although not exclusively, applicable to luxuries and durable consumer commodities. If you analyze the position, Sir, you will find that this tax is mainly applicable to goods falling in this category. I expect that in the days that lie ahead hon. members opposite will come forward with smaller and less important items day after day and hour after hour, but they will not tell us by what these goods should be replaced.

But we did say.

I have already said that the suggestions you put forward would have an inflationary effect and are therefore unacceptable to us. It would prejudice the value of the rand further, and this while hon. members opposite are the very persons who have recently had a great deal to say about inflation and its adverse effects. In spite of that they come forward here with proposals which would have the effect of stimulating inflation.

Under this Government employees have been much better off, particularly over the last few years. Salaries and wages, as a percentage of our national income, have risen considerably. In 1960 this was 60.6 per cent of the total national income, and in 1968 it was 63.4 per cent. As against that the profits of companies have shown a downward trend. Over the past five years there has been a decline of 11 per cent in the net profits of industrial enterprises, expressed as a percentage of the total share-holders’ funds. As regards gold mines there was a decline of 6 per cent, and in the case of coal mines it was 32 per cent. Does this look like a rich man’s government to you, Sir? Is this a rich man’s government if salaries and wages as a percentage of the national income have risen and profits have declined, as I have now indicated here? Sir, to level an accusation such as this one at this Government, cannot be considered reasonable, surely. We claim that this Budget is bringing major benefits to the average person. After all, this is what the United Party also asked for, not so? To-day there is no longer any mention of the “tax bulge”. And was this tax bulge not to the detriment of the average person in particular? And what about those in the lower income groups? It is in regard to this group that the United Party has objections against the Budget. As the Minister said, a Budget such as this one cannot be painless. Such a structural change cannot be painless. Therefore there will be problems. Hon. members opposite laughed when the Minister said that, but where does one find such a major change without pains? Even the United Party’s own newspapers sang the praises of this Budget. The Rand Daily Mail, for instance, called it a “bold” budget. They say that this is a good Budget and that the Minister was brave to dare to undertake such a change.

This is a give and take budget.

This Budget has raised the starting-point for normal taxation. The starting-point for a married person with two children used to be R1,851; now it is R2,143. The revenue value of rebates on the lowest levels for a second child was R438; now it is R559. The additional tax on an income of R2,500 is only R2, purchase tax having been taken into account. And then the other side of the House refers to a “rich man’s budget”. Do they know that on an income of R2,000 a concession of 53 per cent has been made, the biggest concession? That is higher than the concessions in the case of any other income group. Does this look like a rich man’s budget?

Apart from these there are better social services to the lower income groups—subsidies, pension benefits, and so forth. In order to keep the cost of living down, subsidies will amount to almost R60 million this year. In addition further benefits have been granted to working wives, especially to those in the lower income groups, to those wives who have to work as a result of the meagre income of the breadwinner. Is this a rich man’s budget? Eighty-five per cent of a family’s budget is exempt from purchase tax. But the most significant benefits which this Budget brings to those in the lower income groups, are not direct benefits, but indirect benefits. They will, for instance, stimulate greater savings as well as increased productivity. They will also create more lucrative opportunities for work—all of this to the benefit of those in the lower income groups. In addition these benefits will lead to have the effect that less use will have to be made of excessive—I emphasize “excessive” —monetary measures such as excessive credit restriction and high rates of interest. In future the Government will be able to make more extensive use of the purchase tax as an instrument for bringing about economic stabilization. Who benefits by this?—it is mainly those who are in the lower income groups who will benefit by this. Before I proceed to my next point, I should just like to give the House an indication of the purchase tax which exists in other countries. I am doing this so that hon. members may see how fair the taxation is here in South Africa. In Britain, for instance, there is a tax of 12½ per cent on household requirements; 20 per cent on ice-cream, soft drinks and pastry; 33⅓ per cent on motor cars, motor cycles, refrigerators, washing machines, and so forth. On luxuries and less essential goods, such as furs, jewels, gold and silver watches, the tax is 50 per cent. In France there is a tax on basic products, such as milk, food and agricultural products. The tax on these is 6 per cent. On wines, gas, electricity, passenger transport, and so forth, the tax is 13 per cent, and on the rest it is 16.6 per cent. On radios, motor cars and tobacco there is a tax of 20 per cent. In Canada there is a basic tax of 12 per cent plus a retail sales tax of 12 per cent in the provinces. That brings the total tax to 24 per cent. In most countries a purchase tax is levied on the basic necessities of the average family. In South Africa, on the other hand, 85 per cent of the average family budget is being excluded. Is that not fair? Where does the story of a rich man’s budget come in now?

Reference was also made to the Bantu community. It was calculated that the total effect of this purchase tax on a Bantu person would be R9 per year. One of the greatest problems of this country is that such a small percentage of its population has to contribute towards the funds of the State for the purpose of maintaining the machinery of State and providing essential services to the community. This is one of our greatest problems. In 1929-’30 only R6.5 million was collected in taxes from the Bantu. As against that the total amount spent was R4.3 million—in other words, the percentage of taxes collected in relation to the expenditure was 151 per cent. Less was spent than was collected in taxes. In 1964-’65, according to the Africa Institute, the total amount of taxes collected was R38.7 million. The total amount spent came to R215 million. In other words, the taxes represented only 17.7 per cent of what was spent. If there has ever been proof which could invalidate any argument advanced by the Opposition in respect of this small sales tax on a large percentage of the non-White population, then it is these figures. In some way or other the whole country has to make a contribution towards keeping the machinery of state going and providing and maintaining basic services. If we cannot accept the Opposition’s recommendation, i.e. to finance in an inflationary manner by making use of that surplus and by confining the purchase tax to a limited number of commodities, it would mean that the Government would have had to impose a very heavy tax on a number of commodities. The Minister will also point out that, for obvious reasons, he cannot do that. Instead of an income-tax bulge, we would then have had a purchase tax bulge. We would then merely have exchanged one bulge for another. But if we do not do this, we would have to incur debts in order to meet the expenditure. Then we would have another bulge, namely a debt bulge.

Sir, I want to point out to the Opposition how considerable their debts were while they were in power. In 1938 the public debt amounted to 70.4 per cent of the net national income. In 1948 it had increased to 71.6 per cent. Last year, in 1968, in 20 years’ time, it had dropped to 46.2 per cent. When that side of the House was in power they did not only impose heavy taxes, but also taxed all future generations very heavily. This Government lightened that burden considerably. Sir, this Budget is not a rich man’s budget. It is a budget for all layers of the population. The direct effect of this Budget, particularly as far as those in the lower income groups are concerned, is worth much more than is the purchase tax on certain goods.

Nor is this Government a rich man’s government. It has proved over the years that it is a government for the workers. It is also a government for those in the lower income groups, because those people form the foundations of our whole economic life. But the Government also believes that, after Caesar has been rendered his due, it should not tax the enterprising type of person too heavily. It should also create opportunities for increased productivity, because the entrepreneur is to a very large extent the person who has to take the initiative in developing the country economically. That is the basis of our system of private initiative, which lays the foundation for our whole economic life. We must not kill the goose that lays the golden eggs. We must see to it that she also gets her just share. But we must also see to it that the rest i.e. the workers, get their share directly and especially indirectly. This Budget, which is a mirror of the country’s finances, reflects a very favourable sign of the recent past. It reflects the virile economic strength of our country. It also reflects, as far as the near future is concerned, an even more glorious epoch than the one this country has experienced under 21 years of National Party regime.

The hon. member for Florida was at a disadvantage this afternoon because he spent his time answering a speech the hon. member for Constantia did not make. The direction taken by the hon. member for Constantia was not anticipated by him and so he made his speech criticizing a line which was never taken during the course of that speech. I must remind the House that it is that hon. member for Florida who a year ago, when we criticized the bulge and advised the Minister to smooth out the taxation curve, criticized us severely, but now that the Minister has done so, he has changed his line. Only a month or so ago in the debate on the Part Appropriation Bill further criticism came from that hon. member. Now he has gone back to 1945, but what we are concerned with to-day is the young man who is about to get married and who has to face the future. It is no good talking to him about the 1945 budget. What he wants to know is what he must now pay for his furniture and his stove and all his household necessities. Those are the root matters of this budget which the hon. member for Florida has failed to answer.

He has failed to answer the criticism of the hon. member for Constantia in regard to the sales tax. We supported the reduction of direct taxation and we agree with the principle of the sales tax, or rather the purchase tax, which is probably a better name. The Minister has made a revolutionary change in his policy by changing the incidence of taxation. He has lowered direct taxation and he has increased indirect taxation. We will have an opportunity later of discussing these items in detail and I am quite sure that other hon. members will go through this list of articles item by item and show how unfair the burden of this taxation is on certain members of the community. We recognize that the budget is the Minister’s weapon for shaping economic policy and thus influencing all sections of the community. The hon. member for Florida has said that. The budget has an influence on the growth of the national economy by altering the distribution of income among the taxpayers.

For several years now we have advocated taxation reform and we are indebted to the Franzsen Commission for its report. I think both sides can join in congratulating the Franzsen Commission on a report which was well done and thoroughly done, but we will hear from the Minister later to what extent he proposes to follow the advice given by the Franzsen Commission in regard to matters with which he has not dealt in his Budget speech. As I said, the Minister’s change of policy is based on the first report of this commission of inquiry, and while in general terms the Minister has followed the advice given in the report, there is much with which we can disagree. I should like to know from the Minister whether, following the advice of the Franzsen Commission, he intends to take away from the provinces the right of taxation, as was recommended in that report. That is an important matter and the Minister was silent on these matters during the course of his Budget speech. We are interested to hear from the Minister what his policy is in regard to that recommendation. The Franzsen Commission said on page 7 of its report that if the bulge were removed its removal would result in a loss of approximately R60 million and it went on to say that although this concession would partially benefit those with incomes falling within this bulge, it would also provide some measure of relief to taxpayers with an income above R14,000. Those were the tax payers to whom the hon. member for Florida was probably referring.

The hon. member for Florida has not yet satisfied this House that this budget does not help to make the rich man richer and the poor man poorer. That point he has not yet answered. This view was expressed by the Franzsen Commission and it further confirms our attitude last year particularly when we asked for the removal of the bulge. Had the Minister accepted our advice last year, he would have sacrificed revenue to the tune of R60 million but he would not have had a R58 million surplus because he would have had a balanced budget, roughly speaking. The R58 million which is the surplus for this year as announced in his Budget speech, would almost have balanced the R60 million he would have lost by removing the bulge. So the public has been overtaxed during the last 12 months to the tune of R60 million, which could have been avoided had the Minister foreseen the Franzsen Commission’s report. We foresaw it. We recommended it last year, and in now accepting the advice of the Franzsen Commission the Minister is actually accepting our advice.

Who created the bulge?

Dr. Dönges.

It is clear that not only were we right in giving the Minister that advice, but the Minister should have given this concession last year. [Interjections.] The budget showed the largest surplus for many years and apart from transferring the surplus to Loan Account, he has built up, at the expense of the ratepayers, a substantial stabilization fund. We have had many years of overtaxation by this Minister and his predecessor. In the light of the report of the Franzsen Commission, in so far as it affects last year, there is no doubt about it that the Minister should have removed the bulge last year.

But the recommendations of the Franzsen Commission go further. The report says that private domestic consumption, with the exception of food, clothing, footwear, the cost of housing and certain health expenditure and certain excisable goods, should be the basis of the sales tax. It is obvious that in making a change of policy the Minister has had to give consideration to the question of secrecy. That is his difficulty. He has had to give consideration to the question of secrecy and so he has had to keep this information within a very small circle. That is why we have a list which was hurriedly compiled and with which the public finds difficulty, and not only the public but the Department itself is finding itself in difficulty. There is no doubt that the items on the list have been hurriedly compiled and that there is an incidence of taxation which goes beyond the recommendations of the Franzsen Commission.

In the short term, despite what the hon. member for Florida said, this budget is inflationary, and for the hon. member to suggest that it is anti-inflationary is ludicrous. In my view any item which has the effect of increasing the cost of living is inflationary and it needs very little imagination after examining the list of items covered by the sales tax to see that the cost of living will be increased. I have with me a document showing goods cleared since the tax was inflicted. If the Minister will refer to page 10 of his explanatory memorandum, he will find that the value for sales duty purposes of such goods imported into the Republic will be the free on board price or the domestic value, whichever yields a higher amount of sales duty, plus 15 per cent of such price.

This is the way the Customs are dealing with the matter. They take the value for duty purposes of a particular item of goods which comes within the framework of the definition at R248 plus customs duty of R37.20. That is the ordinary customs duty to which this item is subject, and then to calculate the sales levy they take R248 plus 15 per cent, namely R37.20 plus the customs duty of R37.20. So it is not 10 per cent on the home consumption value. It is 10 per cent on the home consumption value, plus 15 per cent. So the price of this item, which had a value of R248 for duty purposes, when it gets to the importer’s warehouse, is not increased by 10 per cent but by 13 per cent. And this is a document stamped by the customs and cleared on 28th March. This is the tax to the importer; we have not got to the consumer yet. That has still to come. That is why I say that any item which increases the cost of living is inflationary. On the other hand the effect of the budget on the middle and other income groups will be to encourage productivity, since there is now an incentive which had been virtually killed by the incidence of the previous rates of taxation. As the Franszen Report says, the rates of tax were so high that the incentive was not there and schemes for tax avoidance were increasing every year to the embarrassment of the Minister.

It is well to remember that some eight years ago when Sweden revised her system of taxation and spread the taxation so that the burden of direct taxation was eased and that of indirect taxation was increased, a meticulous and careful study was made of the effect of taxation at all levels. Consideration was given to the effect on rents, wages and salaries so that as far as possible the change in direction had the effect of spreading the burden equitably over all sections of the community. There was not the opportunity to do this here, or the Minister did not do it, and if the Minister will accept the advice of the hon. member for Constantia he will have a year in which to try out the system. The hon. member for Constantia has made a good case and we could possibly learn from what has been done in Sweden. The Minister can also learn from the hon. member for Constantia, as he has learned from advice that we have given him in the past.

I am informed that a new tax in Madagascar has produced a sudden rise in prices which the Government has so far been unable to control. On 1st January of this year wholesalers were ordered to pay a 12 per cent tax on all sales. The result, which nobody seems to have foreseen, has been a sharp rise in the price of luxury goods, cars, clothes, imported foods, petrol and gas. The Government has declared the rise illegal and an army of tax officials has been despatched to try to trap people who have tried to use the new tax as an excuse to put up the prices.

Under the Minister’s present proposals he is giving with the one hand and taking with the other, and in the taking process he asks the public to contribute an additional R30 million for the current year. In my opinion, the estimate for sales tax is a gross underestimate and next year will prove whether my opinion is right or wrong. I was right last year when I predicted a surplus of R50 million for this past year; I was only out by eight million and I did not have the Minister’s facilities for estimating revenue. I am sure that the rate of taxation and the wide choice of items is such that the public will have to bear a substantial burden of over-taxation during the coming year, a burden which they would not be called upon to bear if the Minister had made less onerous impositions of indirect taxes. One presumes that the object of the taxation proposals was to assist the Minister in his fight against inflation. Long-term the sales tax may be deflationary but short-term it is inflationary. The tax will be added to the importers’ costs or to the manufacturers’ costs.

For example, an article which had a “markup” of 33⅓ per cent prior to the sales tax would be charged out by the importer or manufacturer at 100 cents. The retailer would add 33⅓ per cent and would sell the article at 133⅓ cents or more likely, in round figures, 135 cents. Now, after the sales tax, the article would be costed at 100 cents; the sales tax of 20 per cent will be added and the retailer would be charged 120 cents; to this he will add the same mark-up of 331 per cent, i.e. 40 cents, and the public will be charged 160 cents. Thus, on this simple example the public will face an increase of not 20 cents but 261 cents.

It appears that in his choice of change of direction the Minister is tending to abandon fiscal control for monetary control. If that is his policy, then we would have expected him to have had a tighter monetary control than was demonstrated in the past year.

The Minister in his Budget speech said that, excluding agriculture, the gross national product, after adjustment for price changes, increased at the rate of approximately 6 per cent. If one examines the statistics for the past year, one sees that the amount of money and near-money has increased substantially more than 6 per cent—I think the Minister said in his Budget speech that it had increased by 21 per cent. One is entitled to ask the Minister whether he has abandoned former methods of control and intends to rely entirely on monetary control. The Minister has referred to the activity in the share market and the property market in the course of his Budget speech. One cannot help but gain the impression that some people in the market have not only discounted the future but I think they have discounted the hereafter as well. The increase in liquidity and the effect of taxation on the lower income groups provide the necessary ingredients, short-term, for projecting a new inflationary move in the economy. We have already had evidence of this, Sir. If you go to various factories in some of our cities in South Africa you already find that the lower income groups are demanding increased wages. I have in mind one particular factory where there has been a request for increased wages. This company has a committee system under which it keeps in touch with the leaders amongst its wage earners to ascertain the views of the workers. They were told only recently that it would be essential within the next month or two to give all their Bantu workers an additional R1 per week. As far as this company is concerned, it will cost them something like R331,000. The Bantu people who are making these representations have indicated which items in their daily budget have gone up in price. The increased sales tax will result in demands by labour for increases in wages. In view of the demand for labour and the buoyancy of the economy, despite hard bargaining, despite labour negotiations, and despite the fact that the non-European has no bargaining power as he has no organization with which to bargain, the pressure will be maintained and the request for an improvement in wages and salaries will probably be met, because most employers in commerce and industry recognize that stability of labour is essential for economic growth. If they think that the demand is reasonable, they will meet the demand rather than run the risk of strikes. Talking about strikes, we know that only last week there was a strike of Bantu dock workers in Durban. We do not want an increase in strikes, particularly amongst the Bantu workers, because those strikes are generally put down by the police.

We will thus find that the cost structure will rise, and the increase in the cost structure will encourage still further demands in the higher income brackets until such time as there is a resistance to price rises, first on the export market and later in the internal market. There is a possibility that a resistance to price rises may come earlier if the sales tax plus the added mark-up reaches a figure which the public is not prepared to pay. The market may be saturated to such an extent that it will start first in the export market, and people importing from South Africa will find that the cost structure rises so severely that there will be resistance, but that will be transferred later to the internal market. The result of the announcement of the sales tax so far has been mixed in consequence. In some quarters there has been confusion; in others the opportunity has been taken to push sales at pre-taxed prices—we have seen advertisements in the Press announcing that goods will be sold in particular shops at pre-taxed prices—and in other cases the opportunity has been taken to exploit the public, not in the leading shops but in some of the smaller shops. The Minister counters this by saying—

Our comment is this: Will he and how will he do it? Sir, I hope the hon. the Minister of Economic Affairs will listen now because this concerns him. I do not question the good intentions of the Minister, but he knows to where good intentions pave the way! The Minister of Finance has an inadequate staff to collect direct taxation and I submit that the Minister of Economic Affairs is in a still worse position to administer price control. I wonder how many members the Minister of Economic Affairs has on his price control staff?

I will reply to you on Friday.

I have a question on the Order Paper and the Minister has conveniently postponed his answer. A few days ago I put a question to the Minister of Finance asking how many posts there were for assessors in the Department of Inland Revenue, how many were filled by permanent staff, how many by temporary staff and how many were vacant. The reply showed that barely 60 per cent of the posts of assessors were filled by permanent staff and that nearly 20 per cent of the posts were vacant. Either taxes which should be collected are not being collected or the collection is being delayed or the staff in the Minister’s Department are being grossly overworked. If this is the state of affairs in the Department of Inland Revenue, which is primarily responsible for collecting direct taxation, what is going to be the position with price control? There will be thousands of investigations. Many people will submit complaints, and the further you get away from Pretoria the more complaints there will be. It will not be so difficult to exercise control in Pretoria and Cape Town, but how is the Minister going to ensure that fair prices are charged after the introduction of the sales tax? I am afraid he will be a watchdog without teeth. He can growl and not bite and the public will soon find out. The hon. the Minister knows that price control, even with a substantial staff, is very difficult to administer. During the war years price control was administered to a certain extent, but even then we had the assistance of many hundreds of voluntary workers in commerce and industry. These men were prepared to give their time to help the Government in administering that very important task. The hon. the Minister’s staff is very small. I have asked a question, and I have a very shrewd idea as to what the answer will be. How the hon. the Minister is going to administer price control to take care of the sales tax increases is difficult to understand.

I have in the time available dealt with some aspects of the tax proposals and their effect on inflation. I now come to the problem of inflation which we have inherited from the past as a direct result of Government policy. For several years we have criticized the Government severely for the inflation and the effect it has had in reducing the value of the rand. This is the real test. The general public does not understand the word inflation, but they do know that the rand buys less to-day than it did last year or the year before. After this year one will be able to buy even less with a rand. This year our arguments have been confirmed by the First Report of the Franzsen Commission. On page 4, paragraph 18, of the Report the Commission reports as follows—

I am sure the hon. the Minister has read this paragraph of the Franzsen Commission’s report. It confirms completely what we have said on the Government’s tax policy over the past few years and the effect it has had on inflation. So here we face the fact that the Government is directly responsible for the inflation which is consuming the earnings of the people. To the inflation caused by the Government policy, we also have to add the problem of the large inflow of capital—which also promotes inflation—due to the world-wide uncertainty in currencies. The hon. the Minister said it was also a testament of foreign confidence in South Africa. If this is so and the hon. the Minister is satisfied that it is so, why is he hesitant about relaxing exchange control? If he has some doubts as to the wisdom of relaxing exchange control, then surely he must concede that the net capital inflow may not be due to foreign confidence in the country, long term, but due to overseas finance wishing to get the temporary benefit from movement of funds to this country so as to avoid pressures in their own country. Is this not the real reason? If this is not the real reason there is no case for not easing exchange control. I do not doubt that there is considerable overseas confidence in South Africa, but the hon. the Minister cannot have it both ways. He cannot claim a testament of foreign confidence in the country when he feels that a relaxation of exchange control will result in the flight of funds. I know that it is very difficult to measure what funds come into the country as a result of world-wide uncertainty in, currencies and that it is purely guess work, like the hon. the Minister’s guess as far as tax is concerned. It is also very difficult to measure what funds have come in on the basis of long-term investment, but I think a case can be made for allowing South African industrialists to invest on a selective basis outside South Africa, particularly in neighbouring African countries to the mutual benefit of both. When we see from the Reserve Bank figures that money and near-money have increased by 21 per cent, then there is ample evidence that inflation has not been contained, and we must recognize the excess liquidity which is noticeable in the financial sector.

The hon. the Minister says that there are warning signs of renewed inflation. What is he going to do about it? On his own spending programme he shows a 10 per cent increase. The printed estimates provide for R1,602 million on Revenue which is R147 million more than the revised figures for 1968 and 1969. This is an increase of more than 10 per cent on national expenditure for the current year, when the gross national product has only increased by six per cent. How can the hon. the Minister justify an increase of 10 per cent on national expenditure when the gross national product has only increased by six per cent? He still calls upon us to contain inflation. If the Prime Minister addresses the people over the radio and asks the people to save and this is the example he gives, namely to increase national expenditure by 10 per cent when the gross national product has only increased by six per cent and the man in the street has to follow in the same pattern in the climate of his spending, there is only disaster at the end of the road. If the Minister advocates caution—and he does so in his Budget speech—it is time that he should set the example. I submit that an example is better than precept and the onus is upon the hon. the Minister to set the example for the country. While the hon. the Minister may be congratulated on making an attempt to reform taxation procedure, his Budget has failed to contain the fires of inflation about which we are so concerned. We have made constructive proposals which will give the hon. the Minister an opportunity to reconsider his whole programme with regard to the sales tax. While he has given an incentive to the White worker to work harder, he has done little for the Bantu whose earnings are in general far too low compared with the White worker. He has imposed a sales tax which indicates a hurried random selection of items which gives an unfair distribution of the tax burden. It is a patchwork budget and we feel that the constructive proposals made by the hon. member for Constantia should be given very serious consideration by the hon. the Minister. We will give the hon. the Minister time to tidy up his Budget, to get over the experimentation period and to do something constructive. He has introduced a revolutionary method and is trying to do everything at once. We feel that in his own interests and in those of the country, this is a matter over which time should be taken.

Mr. Speaker, I have listened to a great many speeches made by the hon. member for Pinetown and the hon. member for Constantia in the course of Budget debates. I have seldom found so many examples of contradiction as I found this afternoon.

The hon. member for Constantia and the hon. member for Pinetown are very concerned that the public will be exploited with the introduction of sales tax. They are of the opinion that dealers will add more to the price of goods than the 5, 10 or 20 per cent sales tax being levied. In the same breath, however, the hon. member for Constantia stated that if the sales tax had been only 2½ per cent, trade and industry would have absorbed it and the public would not have paid more for goods. In other words, the traders would not have added more to the price of goods than the amount of the tax. If this tax were 5 per cent, however, according to the member, the traders and the industrialists would suddenly not bear the percentage themselves, but would add the 5 per cent tax to the price of the goods which would then have to be borne by the public. Have hon. members on the opposite side lost all faith in the power of the market mechanism? Are they quite socialistically orientated to-day? Do they no longer believe in the powerful operation of the market mechanism in keeping prices low? Do they no longer believe that competition will result in the public not being exploited? The hon. the Minister of Economic Affairs will not need a plethora of officials to apply price control. I believe that the power of the market mechanism of free competition will fulfil this function and will make sure that no more than the required tax percentage will be added. The hon. member for Pinetown came forward here and read out paragraph 18 of the Franzsen Commission report to us, and tried to imply that it was the Government’s fault that this country had experienced so much inflation. Because, as he said, if we had ironed out the tax bulge in the past we would not have had this measure of inflation. But this Budget does iron out that tax bulge, and yet the hon. member still states that this Budget is inflationistic. Do hon. members opposite not realize that this sales tax, together with an increase of 5, 10 or 20 per cent, as the case may be, will also have a curbing effect on the demand and will therefore work in the opposite direction to inflation?

I listened attentively to what the two hon. members have just had to say. On the analogy of the Minister who quoted several times from Ecclesiastes, I also thought of a proverb of the Preacher—“Answer not a fool according to his folly lest he be wise in his own conceit”. But because I do not want to insult the hon. member for Pinetown and the hon. member for Constantia in this way, I looked for another suitable proverb. Then the following proverb from another Preacher came to my mind: “How long halt ye between two opinions? Choose to-day whom you would serve.” The same applies to the hon. Opposition. How long are they going to halt between two opinions? On the one hand they would so much like to champion the cause of the working man and woman, and they would so much like to look after the interests of the poor man. On the other hand, however, they plead for the accommodation of the middle and higher income groups. Of course, I have no fault to find with that. I have no fault to find with their advocating that the bulge be ironed out. In fact, I advocated that myself. As recently as 26th February, I referred to the professional man who was no longer working to full capacity. It no longer paid him to do so because he had to pay too much tax. That is why I have no fault to find with the fact that the hon. the Opposition put in a plea for these middle and higher income groups. After all, a large percentage of these people within the R5,000 per year and higher income group are in a position to choose whether they want to work harder or not, whether or not they want to work harder in order to earn more. That is why I also advocated that this bulge be ironed out. I want the Opposition to adopt a clear standpoint to-day and state whom they would serve. They must no longer halt between two opinions. There are things we want clarified. Perhaps their attitude is attributable to the fact that they have been in opposition for so long that they have for that reason completely lost or allowed to deteriorate the positive approach of a governing party. That is why they are always on the lookout for a few miserable votes for their party. However, the Opposition must take care that they do not, for the sake of the votes of a few aggrieved people, or for the sake of a little political gain, destroy the prosperity of our Republic. It is our economic prosperity and our ability to buy and to pay in the world markets that guarantees our safety. The Afro-Asian countries make no secret of it at the U.N. that they do not think they will be able to get at us, because the Western countries will not take steps against us, and the Western countries will not take steps against us, because we are good trading partners. Our prosperity is our strength and our guarantee against irresponsible attacks on us, and that is why I want, once again, to make the following appeal to the Opposition: Do not endanger our prosperity for some meagre political gain. All factors indicate that the Opposition should now be making progress. After 21 years in opposition that side of the House, according to all political laws, ought to be making great progress now. If they are not making that progress they have only themselves to blame. In my opinion one of the most important reasons as to why the Opposition cannot make any progress is in fact their irresponsible behaviour. The poor man, the man for whom the Opposition ostensibly wants to take up the cudgels now, has always trusted this Government. The poor man knows that he can trust this Government for, after all, his own survival is more important to the poor man than these financial promises of the Opposition. The poor man, the less well-to-do South African, will not exchange his safety and his continued existence for the mess of pottage of political promises of the United Party. This Government has always been the friend of the less well-to-do; this Government has always had the interests of the less well-to-do at heart. But at the same time this Government has always had sufficient courage to do the unpopular thing if it was in the interests of the nation of South Africa as a whole. We on this side of the House are probably a very representative cross-section of the South African nation. We are not a party of wealthy men. We know what it is to be poor; we were also poor. We know only too well that all our people are not equally gifted. But I want to state very clearly that I, and I believe also my colleagues on this side of the House, have very little sympathy with that man who has not made use of his one talent, who has not developed it, but who has hidden it under a bushel. It is that man who is too lazy to work. The Opposition must take care that it does not become the intercessory for that type of man. I am speaking of the man who does not want to develop his talent, but who is continually standing with cupped hands and evinces dissatisfaction when other people, specifically the Government, do not put enough into them. I maintain that the hon. Opposition must be very careful that they do not encourage this type of disposition among our people, because we would then be heading for disaster. It would be disastrous for the growth of a spiritually strong and economically prosperous nation. The motto which the hon. the Minister of Finance gave us last year is to my mind a striking one, namely “Work and Save”. With this Budget he gives effect to that motto; he implements that motto—“Work and Save”. I maintain that with this Budget he is encouraging those two objectives. With generous income tax concessions he is saying to every man and woman in our country: “You can work harder and earn more; I will not tax away the bulk of those increased earnings. I also want to encourage you to save a greater part of your increased earnings.” This the Minister is doing by means of various measures as announced during the Jubilee Savings Campaign. “Work and Save”—what a wonderful motto for a nation that wants to grow and develop.

I also foresee this Budget having a great influence on our immigration attempts. Not only is the citizen of this country now free to display greater industry, but the enterprising young potential immigrant will feel more attracted to South Africa because it has been his experience in his own country that the welfare state draws off so much of the cream of his income that he in fact has very little left. In contrast to that he can work as hard as he wants to here, he can earn as much as he likes, and the State will not draw off the cream of his earnings in the form of excessively high taxes. There are welfare states where the thrift and industry of the diligent is being taxed to such an extent that they are losing their thrift and industry. Now citizens as well as enterprising young immigrants will find that they can work just as hard as they please, that they can give free rein to their spirit of enterprise, that they can earn just as much as they want to, and the State will not tax away the cream of their earnings. In this way we will grow; in this way our economy will prosper and offer opportunities for employment to all those who want to work. In this way we will attract the diligent and find a solution to the shortage of trained manpower.

I asked the hon. Opposition, “How long halt ye between two opinions? Choose to-day whom you would serve”. This side made its choice a long time ago. This side does not take the part of the poor man.

There you have it.

The hon. member is saying “There you have it”. I repeat: This side of the House does not take the part of the poor man, but it does not take the part of the rich man either. This side puts the interests of South Africa first. We made this choice many years ago: fifty years ago this party made a choice—“South Africa first”. But the predecessors of that side said “The Empire first”.

I just want to repeat the following: The hon. Opposition must not, for the sake of obtaining the votes of a few aggrieved persons, endanger our security and our prosperity.

Now I want to come to the Franzsen report. In my opinion the work of this commission will be known in history as a very searching and thorough piece of work. I want to join with the commission and the hon. the Minister of Finance in admitting that the radical changes of this Budget are not painless. Nor can that be. But this report will still become a standard work. I think it is an outstanding piece of work. Now the hon. member for Pinetown has said that when Sweden wanted to impose a sales tax it first made a very thorough study of the matter. Did we not also have a very thorough study made of the matter by means of the Franzsen Commission? Is it not this very report we now have before us which forms the result of that thorough study and which, as far as it is humanly possible, predicts what is going to happen in terms of this Budget and how it is going to affect the nation and its economy? The Government’s acceptance of this report gives the go ahead to all who want to work and make progress. I am convinced that this Budget is going to usher in a new era of industry and prosperity in the Republic.

Of course this Budget is not without fault. After all, who of us in this world are without fault? Who is perfect? One thing is certain; this is a radical Budget which creates an entirely new pattern of taxation. During the course of the years further changes and improvements will be made. After all, nobody stands still.

I can also point out to the Opposition a few anomalies which we still find in our Budget system, if they cannot spot them themselves. But it does not detract from the amazing value of this Budget as the inception, the creation of a new era in our system of taxation. I concede that there are faults, not so much in this Budget as in our system as it still exists. I just want to mention one, namely our system of bonuses on old age pensions. In this connection I would be pleased if I could have the attention of the hon. the Minister of Social Welfare and Pensions. In my opinion our system of bonuses over and above old age pensions is obsolete, because we find this anomaly that whereas this Budget encourages us to work and to save, this system works in the opposite direction. A man who has R530 of his own income after retiring, or a married couple who have twice as much, namely R1,060 of their own income, are worse off now than the man or the couple who saved far less While they were still working. For example a man who has while he was working saved so little that after retiring he only has an income of R192, will after 1st October have a total income of this R192 of his own plus his R336 basic pension, plus a bonus of R60, which is a total of R588; whereas the man who saved more while he was working, so that he now has his own income of R530, must be satisfied with that R530. This is obviously an anomaly. It cannot be reconciled with the spirit of this Budget which encourages us to work and to save. But I have every confidence in our very active and brilliant young Minister of Social Welfare and Pensions, and trust that he will devote his attention to the matter and that he will eliminate this anomaly. The solution is quite obvious. Instead of allocating an additional bonus of R12 per annum to a pensioner, the means and pension limit must be increased by that R12. In other words, the means and pension limit must always remain the same as the total pension, bonus included, received by a pensioner. The means and pension limit must never be less than the pension received by a person from his basic pension plus bonuses. In other words, the bonus system must be abolished and instead of allocating additional bonuses, the means and pension limit must be adjusted each time a change is made in the pension.

And if there is no means?

If there is no means, he must still receive the maximum pension as determined from time to time by the hon. the Minister of Finance. He will never receive less than the maximum.

I want to refer with very great appreciation to the concession made by the hon. the Minister of Finance in respect of post-graduate study courses, since he is making a concession to engineers and natural scientists in regard to their post-graduate study costs. But I should like to see this principle being extended much further afield. In fact, as long ago as 1963 I put in a very strong plea that all post-school study costs, up to a specific maximum amount, should be dealt with in this way. I still feel that that should be done. The American Department of Commerce made a study a few years ago of the earning capacity of three categories of workers, and their findings were as follows: Men with primary school training only earned an average of 4,800 dollars a year; men with high school training earned an average of 6,300 dollars per year; and men with university or college training earned an average of 9,300 dollars per year. Of course there were exceptions to this rule but on an average the man with higher educational qualifications earns much more than the person with lower educational qualifications. Consequently, seen from an investment point of view, it pays the State to make an investment in the form of these educational costs. It would pay the State to accommodate many more students and/or their parents in respect of study costs, because the State can subsequently recover those costs twice over when those people begin working, earn much more and are consequently able to pay much more in the form of taxes.

In addition I want to avail myself of this opportunity of expressing my gratitude to the hon. the Minister and his Department. Hon. members know of course that a parent can even make a deduction for children over the age of 18, if they are full-time students and are fully dependent upon the parent. Now, over the years the Department has interpreted this concept of “fully dependent upon the parent” in such a way that such a student could not receive bursaries and/or loans in excess of R250. I now understand from the Department that this figure has been increased to R450. I want to thank the hon. the Minister very sincerely for this, because it also has this result that we will be able to afford our children a better education and will in this way enable them to earn more so that they can become greater taxpayers. In other words, it is simply good fiscal policy on the part of the State to enable parents and students, by means of financial accommodation, to prepare themselves better for life and to study further, because in this way they become greater earners and better taxpayers.

With these few words I should like to express my sincere gratitude and appreciation to our hon. the Minister for this brave attempt to give us an entirely new system of taxation, a system which I believe will usher in a new era of industry and prosperity for the Republic of South Africa.

Mr. Speaker, the hon. member for Paarl expressed the opinion that competition would keep prices down. I hope to deal with that point a little later. He also said that it was time the United Party should choose whom they were going to serve. The United Party chose a long time ago, in fact, they chose in 1910 whom they were going to serve. They chose to serve the public of South Africa, not sectionally, but everybody in South Africa. I think the hon. member should know that.

I doubt whether any budget presented by any Minister of Finance has been the subject of such general acceptance as this Budget. But it was, in the opening words of the Book of Genesis, only in the beginning, because when sufficient time elapsed to enable a proper study of the Budget to be made and for all its implications to be understood, then a crescendo of criticism seldom heard in South Africa burst upon the Minister of Finance. It was criticism from all sources; from the housewife, the working man, the trade unions, commerce and industry, the Coloureds, the Bantu, the Indians and those who spoke for them. There was one sector from whom no criticism came: the bulls and the barons.

To evaluate this Budget and its effect on the individual it is essential that we appraise the broad spectrum of our economic position. An assessment of the national economy for the whole of 1968 can be misleading, for the results of the last quarter of that year were in many respects very different from the first three quarters. A real growth rate of 6 per cent was achieved during the year if we exclude agriculture, but an acceleration in growth took place in the second portion of the year. Although the total value of merchandise exports reached a record figure for 1968, the figure for the fourth quarter dropped sharply. Merchandise imports, which had risen moderately during the first three quarters of the year, grew sharply in the fourth quarter of the year. During the first three quarters of the year private fixed investments declined. The decline, however, was arrested in the fourth quarter of the year. Inventories which had fallen in the second and third quarters of the year showed an increase in the fourth quarter. 1968 saw an increase in employment with an overall increase in salaries. This was particularly so in the second half of the year. During 1968 reserves increased by R536 million, despite a deficit of R44 million on Current Account during the fourth quarter of the year. During 1968 the consumer price index increased by 2.7 per cent. But what is important is that the increase for the second half of the year was 3.4 per cent. We know that a 2 per cent annual increase in the consumer price index has come to be considered safe, and that a rise of 4 per cent is regarded as the critical point. If we take into account all these factors, the position revealed in the fourth quarter of 1968, particularly the high level of domestic liquidity, the scarcity of skilled labour and the steady rise in the consumer price index, would indicate that it is not unlikely that we are once again reaching the inflationary critical point and that perhaps we are again poised for a further measure of inflation. These factors. to a certain extent, govern the Budget itself.

The overall impression of the Budget is that it is half-baked, hastily thrown together and not considered in any depth. For example, the hon. the Minister has provided an additional R15 million for improvement in conditions of service in certain categories of the Civil Service. But how these improvements are to be applied and to whom the benefit is to accrue, the hon. the Minister does not yet know. He tells us that the matter is complex and that it may take a little while before the Government can announce its decisions. A further grant of R3.5 million has been provided for housing for public servants. Again the hon. the Minister does not know how these funds will be allocated. The hon. the Minister tells us that further study is necessary before he can announce details of the scheme. Details of the new sales tax were announced by the hon. the Minister in his budget speech of 26th March. Last Monday, six days later, according to a report in the Cape Times to which the hon. member for Constantia has already referred, the hon. the Minister was constrained to say that he could not say at this stage whether the tax was too much or too little, and that there was some guesswork in formulating the new taxation. That there was some guesswork is abundantly clear. But the unfortunate thing for the public is that the guesswork is always in favour of the fiscus and never in favour of the taxpayer. The hon. the Minister told us that he needs R2,073 million on the 1969-’70 Revenue and Loan Account, but because of the inflationary pressure which is building up again, and I quote the Minister, he is going to make as little use as possible of bank credit and accumulated balances on the State Accounts. I am not arguing this point, but I think it should be made clear what these accumulated balances are. They amount to R457 million. The balance on Revenue Account for the year ended 31st March, 1968, was R35 million, and the surplus for this year is R58.5 million. This is quite a difference from the original surplus of R5.1 million which the hon. the Minister expected. That gives us R93 million. The balance on the Stabilization Account was R83 million. This year we transferred to the Stabilization Account R258 million and we had the balance on Loan Account of R27.7 million. This gives us a total of R462 million. Of course, we have to transfer R5 million to the Economic Co-operation Account. That leaves the balance unspent on the 31st March, 1969, at R457.9 million.

Now, Mr. Speaker, for the present fiscal year the hon. the Minister has budgeted for a surplus of R2.8 million after having transferred, quite unnecessarily, R10 million from Revenue to Capital Account. If past experience is a guide, as the hon. member for Pinetown has pointed out, we can anticipate a revenue surplus of say R50 million for the year, so that on 31st March, 1970 the accumulated surplusses should be of the order of R500 million. Of this amount R140 million would be on Revenue Account. The hon. the Minister counters any deflationary effect by proposing to increase his spending on Revenue Account by R147 million and by increasing his expenditure on Loan Account by R91 million. The hon. the Minister has conceded that he is spending large sums and that the increases are greater than he would have liked them to be. But he assures us that all the proposed expenditure is urgently necessary for the basic services of the country. I am going to surprise the hon. the Minister by agreeing with him. I am going to agree with him that the expenditure he proposes is urgently necessary because services are deteriorating to an alarming degree in many of the Government Departments. Something has to be done urgently to put them right. But I must bring these important factors to the attention of the hon. the Minister. Firstly, much of the expenditure should have been incurred in previous years with costs anything up to 100 per cent less than they are to-day. Secondly, if there had been proper long-term planning instead of ad hoc planning on an emergency basis, much of the money now asked for would not have been required. If there had been proper planning vast sums of money spent at random on, for example, agriculture and water affairs for temporary alleviations of urgent problems, could well have been spent as a permanent solution to these problems. In this way, we could have saved considerable amounts, which are now being asked for.

This year the hon. the Minister is asking for R6 million more for public works, but for years the condition of many of our public buildings was and still is appalling. I wonder how much money has been wasted on patchwork improvements and additions which have no permanent value. Thirdly, we are not at all satisfied that we are going to get full value for the money it is intended to spend. Again it is a question of proper planning and full co-operation between Departments. In the past there have been far too many cases where the accommodation provided has been hopelessly inadequate, and in many cases quite unusable for the purpose for which it was required and eventually the expenditure has come to be regarded as fruitless. Fourthly, capital and revenue expenditure on Indian, Coloured and Bantu Affairs is nearly R200 million. Now let me make this quite clear. We have no objection to this amount of money being spent on the non-white section of our community. It is its purpose that we question. The Prime Minister has told us that the Government has no solution for the Coloured problem; he is leaving it to our children. The Bantu policy has been clearly demonstrated to be an illusion and has failed completely. There is no blueprint whatsoever for the Indian problem. It seems that the Government’s fiscal non-white policy is spend and pray instead of plan and spend. The time has come for this Government to shed the vistas of theory and to accept the confinements of reality. I do not propose dealing with the tax relief measures introduced by the Minister—they have already been covered in some measure—but I do want to deal with the tax proposals.

I want to commend the hon. the Minister for his courage in breaking the shackles of the past and radically changing the whole basis and incidence of our tax structure. I would also like to add my word of praise for the work of the Franzsen Commission, which I believe produced an outstanding report in a very short time. You know, Sir, it is said that a genius is a man who plans his work and then works his plans. Nothing would have given me greater pleasure than to be able to stand up in this House and tell the hon. the Minister, for whom I have the greatest regard, that he is a genius. But unfortunately I am not able to do so. Because although he plans his work well, he fails in working his plans. The Minister has not realized that planning is a process of formulating goals and developing the correct commitments to attain them and that many of the conscious objectives and unintended consequences as well as many of the means required for goal formation, implementation and evaluation are not only economic but also social, cultural and political. Now I know that the hon. the Minister was in a difficult position.

The Franzsen Report on which the Budget was based, I understand, was only received by the hon. the Minister some four months ago. It was a comparatively short period of time in which to prepare an evolutionary budget. But we will help the hon. the Minister. We are always keen to help him. He has already had some expert guidance from the hon. member for Constantia and also from the hon. member for Pinetown. If he takes note of what we say, he may still be able to alter his budget and to produce the perfect plan.

What was this plan designed to achieve? Firstly, to remove the tax bulge which was bearing onerously on the income group earning over R5,000 a year; secondly, generally to abate the high rate of tax which was stultifying energy and initiative, discouraging married women from working and encouraging every tax avoidance imaginable; thirdly, to shift the incidence of tax from direct to indirect taxation and to ease, if not the burden, at least the pain, of the tax payments; fourthly, to create a tax climate which would encourage a high rate of economic growth.

Now let me reiterate. We are well satisfied with the proposals to eliminate the tax bulge, to encourage the working women and to reduce the incidence of direct taxation, but we are not at all satisfied with the scope or incidence of the new sales tax; nor are we satisfied with the extent to which it has been imposed; nor are we satisfied that in our own particular circumstances the change of a large part of the tax burden from direct to indirect taxation will achieve greater national production or encourage economic growth.

The hon. member for Constantia and the hon. member for Pinetown have already dealt with the impact of the sales tax on that section of the population earning under R5,000 per annum, and the hon. member for Constantia has already suggested in his guidance to the hon. the Minister how the tax might be better imposed. I want to support the hon. member for Constantia wholeheartedly. You see, Sir, this new system of taxation will deprive the Government of R115 million per annum in taxation. But there is an additional tax on companies which will produce R34 million and there is the additional tax and duty on marketable securities, which will yield another R12 million. But this is not the whole picture. There is much more to it. The Minister has budgeted for an additional R100,000 from the tax on undistributed profits. It may well be that because of the time lag only R100,000 will be received this year from the application of this new tax to public companies, but the Minister has acknowledged that it will broaden the basis of his individual income tax, and this will improve his position very considerably.

Also, I believe, and it is mentioned in the Commission’s report, that in a full year this tax could bring him in something between R10 million and R15 million. Another factor is that because of the lowering of the tax rate the necessity for tax avoidance has ceased to be significant and this could also provide the hon. the Minister with a great deal of additional income. Nor was it essential, with R369 million in the Stabilization and Loan Accounts, for the Minister to provide for the transfer of R10 million from Revenue to Capital Account. In any case, the Minister has no shortage of funds. Even if the Minister only achieves his budgeted surplus of R2.8 million this year, which of course is most unlikely, he will have a credit balance on Revenue Account of R93.75 million to cover any possible contingencies that even the Minister can possibly think of. It is clear, therefore, that the Minister can without any prejudice to the basic form of his budget, accept the proposals which were made to him by the hon. member for Constantia.

If we look at the Minister’s proposals objectively, we can come to only one conclusion, namely that the change in our tax structure will benefit only those in the upper income groups. Their taxes have been drastically reduced and their share and land dealing profits remain untouched, and for them this is really a champagne budget. The Minister has said time and time again in this House that the market is overheated and that speculators will burn their fingers, but now by his own action he sparks off another share market boom. He wants investments in fixed interest-bearing securities, but as a result of this budget there is more and more investment in equities. The rich are getting richer, free of tax. [Interjections.] The worshippers of Mammon make obeisance to the hon. the Minister. But it is the lower income groups, including the non-Whites, who, hedged in by the web of sterile ideologies and suffering the clutch of poverty, will absorb the full impact of this budget. There will be no champagne for most people. The Minister has completely ignored the class composition of South Africa. The Bantu gets no tax alleviation until March, 1970, so the poorer section of the community, whose income is low, whose income is irregular, whose income is undependable, is being double-taxed this year, and I say this is a sorrowful thing. We can only hope that the hon. the Minister, in the light of the remarks he made in Johannesburg and the power he tells us he hopes to take to reduce the incidence of the tax, will move quickly to right this obvious wrong. The population of South Africa is approximately 18 million or 19 million, of whom some 1.5 million are tax-paying units. Take three people to a unit and you have 4.5 million people. Therefore if you eliminate all the taxpayers and their families from a total of 18 or 19 million, some 14 million to 15 million people are adversely affected by this budget because they get no tax relief, because they pay no tax. This Government may well be daunted by uncertainty, as the Minister says, but they should certainly be daunted by the magnitude of the burden they are now imposing on the least privileged sections of our community.

We also have to examine the budget from the economic point of view. It has already been said that by levying the sales tax at source a chain reaction must be expected and that by the time the ultimate retail price is fixed the increase will not be 5 per cent, 10 per cent or 15 per cent, but a great deal higher. The hon. member for Paarl said that in his belief competition would keep prices down.

But he did not believe that there was a bulge in income tax.

Now, it is true that in some cases competition may keep prices down, but I doubt it. On some items that the discount stores are at present selling, the markup is as low as 10 per cent. So when the prices to the discount stores rise by the 10 per cent to 20 per cent in tax, they are forced to put up their prices, or to sell at a loss. No businessman sells at a loss, and therefore a rise in prices is inevitable. The hon. the Minister of the Interior shakes his head, but I will give him some examples if he likes. The Minister is correct when he talks about uncertainty, he may well be initiating a chain of events which will aid inflation. With our increase in money and near money which are up this year by 21 per cent, and with full employment and with fuller pay-packets the demand for products must increase and the seller’s market must remain. Prices have been rising despite competition and the inevitable rise in the price of those articles which are now subject to tax could quite well start off a general rise in prices.

But there are also socio-economic problems peculiar to South Africa. It is generally accepted that the incentive by way of tax reduction can lead to a higher rate of economic growth through increased production, and this in turn can lead to better living standards for the people. This is a productivity budget, but it is one which is obstructed by our inability to satisfy the labour demand. The normal criteria do not apply to South Africa. Here we have the situation where the advancement of the non-White is circumscribed not by opportunity but by legislation, even though he has the ability to work harder and a deep desire to better himself. The realities of our life are a higher private sector demand generated by the white sector, which will harm the non-Whites who as an unorganized labour group are unable to keep up with the rise in prices. In his position the non-White must adopt a passive attitude to change. He is subject to decision and environment.

It is also interesting to consider where the economy can grow, particularly without inflationary side effects. If our economy does grow, does the hon. the Minister think it will grow in the border areas; does he think it will grow in the homelands, or does he think it is more likely to grow in our present growth areas? I think these areas will show the major expansion as a result of the new incentives. The hon. the Minister rightly says that economics is not an exact science and nobody can say with certainty what the effect of the new system of taxation will be on the national economy. I agree with him. But it is also true that we cannot be tied to the past; we have to progress or we will retrogress. Nevertheless, Mr. Speaker, with our problems of excess liquidity and with the ultimate fate of our gold still undetermined, with our inability to use our labour to maximum potential and with all our major problems still unsolved, we have embarked on a very hazardous course. I still believe, however, that the course set is the right one. If its implementation is adjusted to take cognizance of our own special circumstances, I believe that it can succeed. However, if it is not adjusted to the particular needs of South Africa, it may well fail. It was Albert Hirschman who said: “When economists build models of growth, they, typically, do not give explicit independent roles to the ability or motivation to solve the problem of public policies.” Our basic problem, Sir, is that although the hon. the Minister gave this Budget a Biblical theme, he forgot to give it a moral content.

There still is just one important technical point that I must raise with the hon. the Minister. As he no doubt knows, many shop leases provide for an increase in rental if there is an increase in sales. There are other leases which provide for an increase in rental if the cost-of-living index rises. The hon. the Minister will realize that the imposition of a sales tax must push up the cost-of-living index and that it must also push up turnover. Tenants are therefore going to be burdened with increased rentals as the result of these two factors over which they have no control, and I hope that when the hon. the Minister replies next Monday he will be able to tell us what provision he is making to protect these two classes of tenants.

Although South-West Africa is in a somewhat different position to that of the provinces of the Republic of South Africa, I should not like to create the impression here that a representative from South-West Africa is not prepared to or not capable of looking further than the borders of South-West Africa. However, Mr. Speaker, I think you will accept that at a moment such as the one in which I now find myself, one is inclined to want to venture upon familiar terrain, and therefore I have thought fit to make this speech about the economic position of South-West Africa, of which I am at least supposed to have a reasonable knowledge. Sir, it is disturbing for any person to have a name or a reputation which he realizes he is not worthy of or realizes he cannot measure up to, and when I as a South-Wester listen to public opinion in South Africa, I come to the conclusion that South-West Africa, as far as its economic position is concerned, to a very large extent has a reputation in the Republic which it will only be able to live up to with difficulty. In some circles here South-West Africa has the reputation of being a wealthy territory; that it is a territory of diamonds, the karakul sheep and large surpluses as far as its annual budgets are concerned. It is a reputation which may perhaps be flattering to South-West Africa and to me as a South-West African representative, but I think it is a reputation which does not reflect a true image of its position. If we look at South-West Africa’s sources of revenue, the sources from which it must earn new money, we find that South-West Africa is to a very large extent in the position of the man who put all his eggs or most of them into one basket, and in my opinion this is a disquieting fact. When we look at the list of sources from which South-West Africa must earn new money, we find it to be a very short list. In the first place we think of mining, a good payer, but if we take stock of mining in South-West Africa, we immediately make the discovery that the profitable mines in South-West Africa, which are the great taxpayers, are mines which were discovered and opened as far back as the time of the German occupation of South-West Africa. These are the mines which are still carrying South-West Africa to-day. We also know that their end as profitable, productive mines is in sight. We know that if those mines have to close down one day, the position of South-West Africa will be a disquieting one unless new discoveries are made in the field of mining or other new developments take place in the meantime. If these new developments do not take place, and we make certain calculations on that basis, we find a somewhat disturbing picture as far as the future economy of South-West Africa is concerned. At a later stage I shall briefly refer to South-West Africa’s relations with the Republic. We find that South-West Africa cannot afford to argue as a certain body at the United Nations did; this body would solve South-West Africa’s financial problems simply by opening a new gold mine. We are optimistic in South-West Africa to-day that new discoveries may follow, but we cannot speculate on that, because it is mere optimism which exists there, optimism which is perhaps reasonably well founded.

If one looks away from mining, the next important source of revenue in South-West Africa is the fishing industry. Mr. Speaker, I do not think I need tell you how uncertain, vulnerable and uncontrollable that source is for all practical purposes. As far as industrial development is concerned, we have for all practical purposes come to the end, except as far as farming is concerned. A great deal of thought can in the future be given to an industry which is to-day in the process of developing in South-West Africa, i.e. tourism. A great deal of money is being spent to-day in developing that industry. If we try to look further, we find that South-West Africa’s potential for creating new sources of revenue is very meagre. When we think of development of secondary industries, we have to try to look far into the future to be able to establish something substantial. We are faced with the inexorable fact that all the factors which must contribute to the successful development of South-West Africa as an industrial territory, in the way that South Africa, for example, has developed as an industrial country to-day, are absent in South-West Africa. All those factors are against South-West Africa. We find that its distances are great; we find that its population is sparse. For all practical purposes South-West Africa has a white and non-white population of half a million, spread over an area equal to approximately two-thirds of the area of the Republic. We find that the scarcity of water is South-West Africa’s greatest single economic problem. Water is consequently very expensive. We find that power is very expensive. In other words, we come to the conclusion that for the near future South-West Africa does not have very much to fall back on as far as other directions of development are concerned. This, then, brings me to a further consideration, while I am busy mentioning the factors which are against South-West Africa in respect of the development of secondary industries, for example, and that is South-West Africa’s uncertain position in the world. In this connection I feel that I must express my appreciation here for the very clear voices which have been raised in the past years in South Africa in respect of the position of South-West Africa. Those voices have to a very large extent restored confidence in South-West Africa. Even six, seven, eight years ago there were still many people in South-West Africa who had very serious doubts about the future of the territory. It was the steps subsequently taken by the Government of South Africa, steps of which you are aware, Mr. Speaker, which created new confidence in South-West Africa. In other words, the doubt which existed about the future of South-West Africa has always been a factor which has retarded its development, and I think that the bodies throughout the world which have been responsible for the creation of that doubt have in no way served the people of South-West Africa, whites and non-whites, because they have been retarding the development of South-West Africa over half a century, especially in the past two decades, when this doubt about South-West Africa’s future became a strong actuality.

Mr. Speaker, I referred to farming, and here I immediately want to make a statement which may perhaps sound fantastic. As far as farming is concerned, South-West Africa is today in the position in which South Africa was quite a number of years ago, when it could still rightly be said that farming was the backbone of the country’s economy. In South-West Africa this is still the position. We find strange contradictions there, which I should like to put to the House. Farming in South-West Africa is not really a tax-paying industry, since the authorities there have always had to put a larger amount of money into it than was obtained from it in taxation, in order to keep it on a reasonably sound basis. While the mining and fishing industries in South-West Africa are large taxpayers their contribution to the actual national revenue of South-West Africa is not so fantastic, because the shareholders in those undertakings are mostly foreign shareholders. For example, one now finds the position that about R24 million a year—a relatively large amount in respect of South-West Africa—leaves this area and is paid to foreign shareholders. I make no reproaches in saying this, because I know the position that brought this about. South-West Africa greatly needed these capital investments at the time they were made. However, this results in the position that the stable element in the economy of South-West Africa and the actual money-earner there is the farming industry. When we draw a comparison with the Republic we also find in respect of the farming industry that particularly the farmer in South-West Africa has, to all intents and purposes, all his eggs in one basket. In the Republic there is a wide range of agricultural activities. If one sector of agriculture in South Africa were to be hit, the other sector could still hold its own. For all practical purposes there are only two kinds of farmers in South-West Africa, i.e. cattle farmers and karakul farmers. Both are greatly dependent upon a very short rainfall season which must cover the whole of South-West Africa at the same time. There is no winter season, summer season or widely spread rainfall season. In 1961-’62 the South-West Africa Administration was in the fortunate position of having millions of rands in reserves at its disposal which it could plough in for the purpose of maintaining the economy of South-West Africa. According to all the concepts one could apply, South-West Africa ought to have collapsed then were it not for this fact.

I have now perhaps contributed somewhat to breaking down the reputation South-West Africa had in the Republic, but with the relations which have been established, I think it is necessary that there be mutual clarity. South-West Africa is not the rich prize which many people make it out to be. The facts simply reveal a different state of affairs. South-West Africa has a different fiscal structure to that of the Republic. This fact is reflected in the documents which have been tabled here. Apart from this, South-West Africa has a much younger economic structure than that of the Republic. This economic structure has only really begun to take shape during the past two decades. Really planned economic development in South-West Africa does not really date back more than 20 years. The preceding periods may be regarded as the pioneering years. This development was very seriously disrupted by two world wars. In this respect, too, the position is different to that in the Republic. This is repeatedly emphasized in documents which have been tabled in this hon. House. This fact also results, for example, in the people of South-West Africa being affected differently to those of the Republic by taxation proposals made here by the hon. the Minister of Finance. I therefore found it gratifying that the hon. the Minister remarked in his Budget speech that he realized that difficulties could arise, but that these could be ironed out with the mutual goodwill that exists. I sincerely trust that this will in fact be the case. I also want to give the House the assurance that the people of South-West Africa have no parasitic designs on its greater and much more prosperous brother, i.e. South Africa. On the contrary, I think the people of South-West Africa insist upon wanting to pay for what they receive. At the same time, however, the people of South-West Africa will insist upon being able to receive what they are capable of paying for.

South-West Africa realizes its dependence upon the Republic of South Africa. By way of example I refer to its dependence in the economic sphere. I do not think there can be any other body in the world except the Republic of South Africa which can have a clearer idea than the people of South-West Africa of how dependent South-West Africa is upon South Africa for the maintenance of its economic structure. Just think of what would happen if the wheels of the South African Railways did not run further than Nakob. Tremendous disruption would ensue. This disruption could not be avoided, no matter what body in the world might be prepared to finance the transport system. We realize our dependence. We in South-West Africa also have one consolation, i.e.—and authoritative persons have said this—that South Africa needs South-West Africa, and that South-West Africa needs South Africa even more. We in South-West Africa realize that the Republic of South Africa can do without South-West Africa and that this would not have disastrous economic consequences for South Africa. It can merely cause a little inconvenience. We also realize that South-West Africa cannot forfeit its economic ties with South Africa without entailing for itself tremendous disruption and chaotic conditions. Since the Budget in respect of South-West Africa bears the stamp of the new dispensation, i.e. the readjustment of administrative and legislative functions, I should like to conclude with the thought that South-West Africa realizes where its ties and its anchors lie. South-West Africa will cling to these anchors to the utmost.

Mr. Speaker, it is my privilege and pleasure this evening to welcome to the House the hon. member for Windhoek and to congratulate him on his maiden speech. We all look forward to that occasion and look back to the occasion of one’s maiden speech. The hon. member represents an important seat in a very important part of South Africa, and great responsibility devolves upon him. The best that I can wish him is this: That he will be a worthy successor to his able and distinguished predecessor who had a reputation here for all that we look for as being the best in this House. He will find that in Parliament we are a community of optimists—we never look on the dark side. I can assure him that when he joins this happy band of pilgrims he will feel a very happy man here. I wish him good luck—he will find that in this House he will need it!

I should now like to have a word, if I may, through you, Mr. Speaker, with the hon. the Minister of Finance. I am afraid I cannot extend the same congratulations and good wishes to him, but I will do my best.

The Minister has given us in this Budget a new approach to financing. I think that is the theme of the Budget debate. They have told us it is a give and take budget. He gives, but he also takes away. But the important thing I think is this, that when he gives and takes he should not give to one person and take away from another. That, I think, is the main criticism. The Minister has to tax, it is his job to tax, and as Edmund Burke said, “To tax and to please, no more than to love and be wise, is not given to man”. We cannot have it both ways. You cannot tax and still please people. What the Minister tries to do is to create as little displeasure as possible in imposing new taxation. Our criticism is that perhaps he could have adjusted his new system to the old system rather more intelligently.

The hon. member for Florida has said there has been a good deal of research into this new system of taxation and that the Minister has broken new ground. I do not think that is quite true because the system that has been introduced has been known in modern countries, in capitalist countries, for a very long time, for generations almost, as a purchase tax. I do not like the words “sales tax”, because it is not a sales tax; it is a purchase tax. It is a tax on the consumer, not on the man who sells. It is very important that when you have a purchase tax, as in countries overseas, you give the price of the article, and underneath the purchase tax. Then you add the two together. As a matter of fact, in America they give on their petrol pumps the contributing taxes to the price of your gallon of petrol. They give you the railage and the state tax and the federal tax. I wish they would do that here so that in Johannesburg the man who buys a gallon of petrol would know that he is paying 700 per cent to the hon. the Minister of Transport for transporting a gallon of petrol from Durban to Johannesburg. It costs the Minister less than a cent and we pay him more than seven cents. That is what I mean by a purchase tax.

The Minister feels he had to introduce this new system and the hon. member for Constantia has indicated that it could be done in a better manner. It occurred to me when the Minister was making his Budget Speech that had he decided “I will extend this new system over a period of three years” he could have commenced with the most expensive articles, the luxury articles, and perhaps he could have adjusted his income tax slightly at the same time. Then, in the light of experience, he could have gone a little further. That is the feeling I had about it. I felt it was too much too soon, and because of that I think there has been this well-founded criticism. Assuming that the Minister would have started with the 20 per cent tax first, the tax on the luxury items, then perhaps next year, or the year after, he could have extended the system in the light of experience.

I want to ask this question: if the taxes are to be imposed on imported goods at the city where they are cleared, would that mean, the price being higher in Johannesburg than in Cape Town or Durban, that we would have to pay more in Johannesburg? Because, Sir, the price there will be higher, seeing railage is included in the price of the imported article. I should like to know whether we are going to pay more, although we are used to paying more in Johannesburg. I should like to know whether the Witwatersrand or the Transvaal generally will have to pay more.

Having said that, I think we should be grateful for where there has been tax relief. The higher income groups of course have tax relief. I need not say much about that. They are friends of the Minister; they have the ear of the Minister: he looks after them. I am thinking of some of the others. I am thinking of the war veterans. When the Minister decided to do something about the war veterans I think he was applying a system I should have liked him to have applied to the taxation system. He did so little, but nevertheless we are grateful for what he has done. I assume next year he will do a bit more until perhaps after another two or three years he will treat the veterans of the First World War in the same way as the veterans of the Anglo-Boer War. That is what we are looking forward to.

Now I come to this question of pensions. We are, of course, grateful for the adjustments the Minister has made to pensions. It is always necessary to pay bonuses to pensioners and change the payments because the whole pension system is not founded on a sound basis. That is the difficulty. We had a Pensions Bill this Session, the Territorial and Provincial Pensions Bill, and we discovered that most of these funds were insolvent. This old-fashioned system, the colonial system, that we have for our pensions in establishing funds, is out of date in all modern countries. I should like to ask the Minister whether he would consider having an investigation into the possibility of a non-contributory pension scheme for the Civil Service. I am speaking of the Civil Service only. He should start with the fighting forces. Why say to a man serving on the border, “You are getting your pay, but an amount is being paid to a fund and we are going to add an amount to the fund from the Government”? Do not tell him that. Say to him, “You will serve 20 years or 25 years and this is how your pension will be paid. It will be paid every year out of Revenue”. That is the modern method.

Old soldiers live too long.

Perhaps that is true.

Now there is another matter I should like to raise with the hon. the Minister, and that is the question of these non-resident bonds. I had a question on the Order Paper earlier this Session and I was told that the total amount for the whole of the last year was only R3 million. I see the Minister has budgeted this year for another R3 million’s worth of non-resident bonds. Is it worth it? Money is flowing into this country at such a rate that it is an embarrassment to the Minister, and still he says, “If you want to take anything out of the country you have to go through this process of the non-resident bonds”. I think it is quite unnecessary. I think the Minister could use a system of non-resident bonds in order to raise loans, short-term loans, fiveyear loans. I think he could do that. He could make it attractive and I think these people would be very glad to take up these bonds knowing the money will be paid out in their own country. I make that suggestion to him.

The next point I want to raise is this: I cannot go into the basic system. We have had three financial experts on that matter already. I hope the Minister has listened to what they have said. I want to talk about the loan levy. Why does the Minister say to a man of 70 or 80 years of age, “You must lend money to the Government”? I have had a letter from a constituent of mine who is 82 years old, and he writes, “They are asking me to lend money to the Government; they say I will get it back after seven years—but I do not expect to be here in seven years’ time!” He says the chances are he will no longer be here. He asks, “Why should I have to save now?” The hon. member for Paarl has told us we must save. Why must this old man save for his estate? I quite see the Minister’s difficulties. He is thinking of the rich taxpayer. I would say that he should allow him R1,000 of his income tax free for loan calculation. Do not touch it. Let him have it. If he is paying income tax up to R1,000, do not say to him that he has to give the Government an extra 5 per cent loan. Leave him out of that if he is over 70 years of age. I am not asking that for them all.

Now I want to devote the time I have at my disposal to what I regard as an exceedingly important appeal to the Minister. I have touched on one or two things in the Budget, hut this I have had on my mind for years, as hon. members will know. I have raised it on several occasions in the House. The Minister has introduced a new system of taxation and accounting. I refer to one of the accounts. I want to refer to an anomaly in our whole system of budgeting and accounting in South Africa. Hon. members will guess what I mean. It is the Bantu Education Account. I have appealed on many occasions to the Department of Bantu Administration and Development and of Bantu Education with no response. I have come to the conclusion that they just do not know what I am talking about. I have now decided to come to the fons et origo, to the Minister himself.

But they do not know what they are talking about themselves.

That makes it still more difficult. What is this Bantu Education Account? It was established in 1956. It is laid down in the Act (Act No. 23 of 1956) that Bantu education will be financed by R13 million per annum. It was a fixed amount. It would not be changed. Subsequently, in 1963, because we established the university colleges, it was laid down that there would be another contribution from Revenue Account not exceeding R1,500,000, and nothing more than that excepting what the Native paid through his own head tax. That was the financing of this account. In the meantime the number of pupils in the schools has increased from 1 million to over 2 million. The costs have become greater, but the R13 million has remained pegged. It has never changed. What I propose to do this afternoon, is to try to show what that R13 million should be today and what it should have been in the years between 1957 and 1969, which is 12 years. That is the purpose of my speech here this afternoon. I have tried to ascertain a reliable figure for the annual depreciation of money. I have consulted financial experts and they gave me a figure of about 2.5 per cent, compounded annually. Does the hon. the Minister accept that figure?

Since when?

I am taking it for the 12 years from 1957 to 1969 at 2½ per cent per annum I was told that 2.25 per cent was too low, so I am taking it at 2.5 per cent. But if there is any difficulty about whether it is 2.5, 2.3 or 2.25 per cent, that we can adjust, but I am working on the basis of 2.5 per cent. Now, in that year the amount was R13 million. The following year 2½ per cent should have been added to the R13 million. I think we all agree on that. It was added to all the other accounts, and even more was added in the years following 1957. I am just giving the figure for the first year. The amount to be added at 2½ per cent would be R325,000, so that the contribution in 1958 would be R13 million plus R325,000. I think the hon. the Minister knows what I have in mind. I have compounded it every year up to 1969. I am not asking for more money; I am asking that the equivalent value of R13 million in 1957 should be the value paid to-day. Now what is the position? What should the amount be today if we say that 2½ per cent is a fair figure? I have calculated that the amount should be R17½ million. In the 1969-’70 accounts I have here the figure we get again is R13 million. It should be R17½ million this year. Hon. members may feel that 2½ per cent is too high. There may be a quibble about that. I will now make it too low, namely 2 1/4 per cent; then it should be not R17½ million this year, but R17 million. I think that is accepted by everybody. That is the amount. When we go back, say to 1963, we find that the amount should have been R2 million more than R13 million. It should then have been R15 million. I have gone to the trouble to find out how much money over the years the Bantu Education Account has been deprived of. I will not say defrauded; I may not say that. They have been deprived of increasing amounts of money every year. Over the years they have been deprived of these sums which amount to R27.8 million. That is the total, taking all the years. Now what do we do with this Bantu Education Account? If the hon. the Minister feels that 2½ per cent is too high and would rather have 2 1/4 per cent, the amount would be R25 million. Over the last 12 years they should have had that R25 million. Of course, they have not had it.

There has been a discussion in Johannesburg recently on the future of Bantu Education. All the discussions came back to this: “There is not enough money being voted.” I am not asking for more money; I am simply saying: Pay the money that is their due. Give them what is their due. We have tried year after year but we have never received it.

Now I come back to the Budget. The hon. the Minister told us of the R5 million he is going to give to the development of the friendly nations to the north. It is coming out of Revenue. He quoted from the Preacher, “Cast thy bread upon the waters, for thou shall find it after many days”. I hope he does. That is out of Revenue Account, but what does the hon. the Minister do in his Budget for the Bantu Education Account? He said that he will lend the account R13.4 million. Well, he had to lend them something, because they cannot come out on their money. He will lend them R13.4 million. Now, how are they going to pay it back?

Are they paying interest?

With interest. How are they going to pay it back over the years? Out of the little money available they have to give more and more to the Government. One only has to look at the Bantu Education Account to see the shocking state it is in today. We have it here. Expenditure is reckoned at R39 million for this year. And the revenue? All revenue that can be collected, Native tax and everything else, comes to only R26 million. They cannot possibly balance these accounts. The hon. the Minister says that he will lend them R13.4 million. That is how we treat our own people. I do not want so much of the outward look. I am appealing now for a little of the inward look. Charity begins at home. It begins with our own Africans first, the Bantu in South Africa. Quite recently, the hon. the Deputy Minister who is smiling across the floor and the hon. the Minister of Bantu Administration and Development and of Bantu Education have been introducing Bills to create universities. How are they to pay for these universities? Out of this same Bantu Education Account, which was created in 1956? But they said in 1963 that Parliament will give money for that. We will give an extra R1½ million. That is not sufficient if one looks at the Bantu Education Account. University colleges, now to be universities, receive R2 3/4 million this year. The limit of the other amount is R1½ million. They may not get more. I think it is a very serious situation. My appeal to the hon. the Minister is to give his attention, or as the lawyers say, to apply his mind to this problem. Why should the Bantu Education Account not be quoted as part of Bantu administration and development as it is with Coloured Affairs, as it is for Indian Affairs, as it is for all our education? Why should that not be done? Why do we have to have a separate account? Why should these poor children be in this position? I know that hon. members do not wish to do this. They say there is not a sufficient number of pupils for the different colleges. Well, there will be sufficient numbers of students if the money is available.

What I should like to do is to ask the hon. the Minister to discuss this with the Department, because the formula in all our Bills is that the Minister in consultation with the Minister of Finance will do certain things. The next time when the hon. the Minister of Bantu Administration consults with the hon. the Minister of Finance I should like the hon. the Minister of Finance to ask whether it is not time that the Bantu Education Account should become part of the accounts of Bantu Administration and Development. Look at it this year. What is being given to Bantu Administration and Development this year? The amount is increased from R48 million to R56 million. It is R8 million up on R48 million, which is 17 per cent. The Bantu children receive nothing extra from Revenue for their education. They are given a loan on which they will have to pay. That is the position.

They want to hold them back.

No, I would not say that. I do not think it is born out of malice. I think it is born out of ignorance. That is my feeling and that is my appeal to the hon. the Minister. I hope that he will be able to do something about it. I hope I have made out a case. Maybe the hon. the Minister would like to take a lower figure than mine. The other day the hon. the Minister of Railways said that when a Railway man goes on pension he will raise the amount of pension by 2 per cent every year. If the hon. the Minister of Railways is prepared to say 2 per cent, you can be sure that it should be 2½ to 3 per cent. If the hon. the Minister of Railways is prepared to go as far as that, I think the hon. the Minister of Finance can really do something big. He has come along with a new system of taxation; let us have a new system of accounting for this poor account that is left out in the cold. My final word to the hon. the Minister is: When are you going to let these children come in out of the cold?

Mr. Speaker, before coming to the hon. member for Kensington I should like to thank the hon. the Minister of Finance for the Budget which he presented to South Africa on 26th March. The English-language Press are having a problem with that Minister, because they are running out of adjectives. His first Budget was announced in these terms: “Diederichs, the determined.” The second was announced as “the prudent budget”. Now they are talking about “the bold budget”.

It is always striking to watch the reaction of the English-language Press to each Budget, whether the Railways Budget or the Central Government’s Budget. If one looks at the reports which appeared in the English-language Press during the past week, one can well understand the dilemma in which hon. members on that side of the House find themselves. The Rand Daily Mail of 27th March headed its leading article with the following caption: “Bold Budget”. The Natal Mercury of 27th March reported as follows—

The newspaper which came closest to criticism was the Cape Argus of 27th March. Among other things they talked about a “reform Budget”. That is what the hon. the Minister said. They tried to criticize here and there, but they could not let the opportunity pass of at least speaking well of someone or something. They said the following—

They go on to say—

They do not want to praise the Budget; therefor they praise the Minister. That is why I say, Mr. Speaker, that the English-language Press will encounter problems in the future. They will exhaust the available adjectives. One can indeed echo the Preacher in saying of this Budget and of the hon. the Minister, Dr. Diederichs, “Wisdom is better than weapons of war”, but I am afraid that one can only say to that side of the House that “One sinner destroyeth much good”. I am afraid that we not only listened to one sinner to-day, but to many sinners, because if one sums up this Budget or the criticism on it then one comes to the conclusion that basically only two points of criticism were raised on that side of the House. The first was that it was a rich man’s budget and the second was that it would stimulate inflation. Apart from that we have only had words, words, words, from that side of the House. Again one can join the Preacher in saying, “For a dream cometh through the multitude of business; and a fool’s voice is known by multitude of words”.

Mr. Speaker, I want to deal briefly with the main points of criticism raised by that side of the House, the first being that this is a rich man’s budget. I believe that implies that it is a budget which benefits the rich man. The hon. member for Florida dealt with that briefly. I should like to deal with that accusation in more detail. The Opposition has already been trying for years to be accepted as the mouthpiece of the poor man, the less privileged, the have-nots. When they make the kind of demands that are embodied in the amendment of the hon. member for Constantia, one has to examine them a little. The impression is created that this Budget will bring no relief to the poor man. Now one has to be realistic and ask what would in fact be a definition of a poor man. We have talked about it a great deal, but I have not yet heard to-day what the definition of a poor man is. I assume that a person who lives in Transvaal, earns R2,000 per year, is married and has two children, could qualify for the concept of “poor man”. I found that that person benefits, by way of direct tax concessions, to the amount of R16 as against the payment last year of R30. This means a decrease of 53⅓ per cent in his tax. In fact, he only pays R14 or .7 per cent of his total income. Similarly one can assume that a person who earns R3,000 and lives in the Transvaal, is married and has two children could qualify for that concept. In this case, we find that that person gets R42 by way of direct tax concessions, or 31 per cent of what he paid last year. He now only pays 3.1 per cent of his total income in tax. But let us take a wider view of the matter, since hon. members on that side of the House say that this is a rich man’s budget.

In other words, the poor man is being penalized. Let us see what the position is in the rest of the world. I have just told you that a married man with two children pays .7 per cent of his total income in the Transvaal. In Canada he would pay 4.9 per cent, in Australia 9.8 per cent, and in New Zealand 3.3 per cent. I do not want to compare it with the position in the United States of America. I only want to compare it with countries which are on a more or less comparable basis with South Africa. Let us go back to the man earning R3,000. He pays 3.1 per cent. His counterpart in Canada pays 14.5 per cent, in Australia 21.4 per cent, and in New Zealand 16.8 per cent. I can continue in this way, but I think I have proved that the poor man, the person who, according to the Opposition, has been prejudiced in this Budget, has in fact benefited by this Budget and is far better off than his counterpart in three comparable countries in the rest of the world.

The taxation proposals envisage among other things to iron out the tax bulge. Now the Opposition have been telling us all day that they are in fact the people who have been asking for this all these years. But are they not also the people who left this side of the House, the National Party, and this Government, with that inheritance? I have here in front of me statistics comparing the tax rates of 1947, normal plus super, with those of 1968. It appears from these that this Government has gradually ironed out this bulge over the years. In this way a man earning R5,000 in 1947 paid an effective tax of 12.2 per cent, as against 5.5 in 1968. A person earning R12,000 in 1947 paid an effective tax of 25.7 per cent at the time, as against 21.6 in 1968. A person earning R20,000 paid 34.9 per cent in effective tax in 1947, as against 31 per cent in 1968. The figures in respect of the comparisons for the years 1947 and 1968 exclude provincial tax. It is a fact that the tax bulge was an unwelcome phenomenon. That is why this Government has removed it. But it is not this Government which caused it. That side of the House is to blame for it. They are still left sitting with a few bulges. The hon. member for Durban (Point) is a living manifestation of that. They left that bulge to us. It is this Government which has now finally eliminated and ironed out that bulge.

It has taken 21 years to do so.

It has not taken us 21 years. This bulge has been ironed out over the years. While I have now proved that the poor man, about whom the United Party were so concerned to-day, has been well and truly provided for in this Budget by way of direct tax concessions, allow me to point out how the rich man is going to be affected by the taxation proposals contained in the Budget before us.

When I talk about the rich man, then I am talking about the people who control probably one of the largest companies in South Africa, the Anglo-American Corporation, and I am talking about the people who are rich enough to own shares in Anglo-American, shares which were sold for R85 on the market recently. I am talking about rich people, now, Sir. This tax of 25 per cent on undistributed profits after less than 75 per cent has been paid out in dividends, is only leviable on income from investments and the earnings of foreign branches, with the exclusion of earnings at source. I have here in front of me a publication of the latest financial results of the Anglo-American Corporation. From this it appears that after having paid out R18.5 million in dividends taxable in the hands of the receivers, people who must, as I have said, be rich people in view of the cost price of those shares, this company would have had to pay a further R1.2 million after already having paid R2.5 million in income-tax, if this measure had already been in force this year. It is nearly a 50 per cent increase in the income-tax which would have been paid in the year in question under this specific policy in regard to dividends. But now the United Party say that in this Budget we have prejudiced the poor man and benefited the rich man. They say it is a rich man’s budget.

The second point of criticism which we have often heard this afternoon, is that this Budget would not combat inflation but would encourage it. Several speakers have said so, but then we find this strange thing. The hon. member for Constantia asked for the financing of Government expenditure out of the Stabilization Fund. This Government has done its utmost in recent years to drain off this surplus liquidity and then to sterilize it in order to lessen the danger of surplus liquidity and thereby to reduce the possibility of inflation. Now the hon. member says: No, we should take more of that money, that money which is lying unproductive, and we must inject it into the spending stream again. Surely that would be inflationary. The hon. member for Kensington said, on the strength of his appraisal of the depreciation of money since 1957, that we should spend R17.5 million on Bantu education. In other words, he asked for additional expenditure of money. The hon. member for Parktown criticized the Government because Government expenditure was increasing, but the hon. member for Constantia said we should spend more. In the midst of this confusion of tongues the hon. member for Pinetown came along and said it was the Government’s policy that was responsible for inflation; this Government was responsible for inflation. Let us look at the White Paper. There we see that over the ten years from 1958 to 1968 the rate of inflation, with 100 as the basis in 1958, came to 124.3 in 1968. That means an increase of 2.43 per cent per year. Let us compare that with the rest of the world, which is not saddled with this Government, unfortunately for them. In England the rate of inflation from 1957 to 1967 was 2.8 per cent; it was 3 per cent in New Zealand, 3.1 per cent in the Netherlands, 3.2 per cent in Norway, 3.7 per cent in Sweden, 4.1 per cent in Japan, 4.7 per cent in France, 24.8 per cent in the Argentine, and 31.6 per cent in Brazil. How the people of Brazil would have yearned for a Government like this one, which maintained a rate of inflation of 2.4 per cent in ten years!

The hon. member for Parktown criticized the building up of the Stabilization Fund as a policy of this Government. He said that to have R369 million in the Stabilization Fund was completely unnecessary; we could get by on much less and we could finance from those sources. But if we were to do that, and if we were to reinject that money into the spending stream, we would only increase the problem of liquidity. It is a problem which arises out of the confidence of the outside world, which, according to the March quarterly report of the Reserve Bank, invested R453 million in South Africa during the past year, of which the private sector invested R381 million. In fact, it has become characteristic of the South African economy for the last four years that each year substantial amounts were invested in this country by the outside world. For the past four years a total of R1,029 million was invested, an average of R257 million per year. Over against that there was a net outflow during the six years from 1959 to 1964 of R549 million, or an average of R91 million per year, and in 1958 there was a net capital inflow of R161 million. It speaks volumes for this Government and for the National Party that with this fluctuating pattern of capital flow, a heavy outflow over six years and a heavy inflow over four years, inflation has been held in check to the extent it has been.

I say the problem of liquidity in South Africa arises out of the confidence which the outside world has in South Africa, and it arises, inter alia, from the confidence which the world has in gold. If we only look at the fact that in the two years 1967 and 1968, a net capital inflow of R614 million was brought to South Africa by the private sector alone, of which more than 50 per cent was long-term capital in the last year, then it proves what confidence the private sector in the outside world has not only in South Africa’s economy, not only in the stability of its Government and of its economy, but also in that precious metal, gold, which is experiencing certain marketing problems at this juncture. To a certain extent this Budget has to be judged against this background of almost excessive foreign confidence and the problems of marketing gold. Several hon. members opposite asked why foreign exchange control was not relaxed further. The reason is obvious. If we were to do that, we would be weakening our bargaining position in the world, and that is not advisable at this stage. In fact, we should gird up ourselves and make ourselves as strong economically as circumstances allow.

The taxation reforms contained in this Budget also had to arise out of various problems revealed, inter alia, by the Report of the Franzsen Commission. I briefly want to deal with a few. Tax evasion means of the form of the undertaking is one. Another is canalization of time and energy into unproductive industries or into directions not bearing income-tax. I refer to speculation on the Stock Exchange. To a certain extent it also had to come as a result of the existence of the bulge. In the light of these fundamental problems the Minister of Finance attempted in a bold way to solve the problems, and to let the Budget influence productivity to the extent that we can manage with our manpower shortage. I think it is the first time the history of this country that the total number of unemployed Whites, Coloureds and Indians fell below 10,000 as was the case on 31st December last year.

There are therefore no more people who can be drawn into the labour market, except perhaps married women, and that is why the concession of R500 on the income of married women is so important. But the concession to pensioners to earn up to R72 per month if married and still be able to draw the full pension is another attempt to combat the manpower shortage. The danger of inflation was not underestimated by the Minister, and on various occasions in his Budget speech he pointed out that we could not relax the anti-inflationary measures. That is why it is also important that consumer spending should also be discouraged to a certain extent, and the sales duty can do much to bring about precisely this, to reduce the demand and in doing so to bring the competing powers of a free economy into full play. The rising cash requirements of an ever-expanding economy had as its basis the necessity for an expansion of the basis of our taxation system. That is why the number of contributors to our economy had to be spread out substantially, and that is why we have the sales duty. But the hon. the Minister also considered the profitability of the various sectors of our economy. For example, he probably considered the fact that over the four years from 1963-’64 to 1967-’68, manufacturing industry, on a basis of 100 in 1963-’64, showed an increase of 20 per cent in its profits, equal to 5 per cent per year. Trade showed an increase of 54 per cent, or 13.5 per cent per year. The higher companies tax of 3⅓ per cent more was therefore fully justified.

There may be further measures to which the Minister or his colleague the Minister of Economic Affairs will have to give attention. There is perhaps the compulsory disclosure of the sales duty. This will give the public the opportunity, probably for the first time in history, to calculate the profit of the distribution sector in trade. If one knows that one has to pay 10 per cent on a certain product and that one has to pay, say, R150 for that product and the sales duty is specified as R10, then you know that the production price or the import price is R100 and that the profit taken is 40 per cent. This would give the public the opportunity to calculate the production price or the import price. The hon. the Minister or his colleague will perhaps have to look at this and give us some guidance. A further problem we shall have to face is not to disrupt the capital market in South Africa completely via flight capital or via a swallowing up of foreign capital. The question arises whether specific conditions will not have to be coupled to capital influx via the private sector in course of time. The coupling of technical knowledge is one possibility; another is perhaps the opportunity for local prospective investors to obtain an interest in foreign companies which come to invest money here.

Mr. Speaker, it is fitting that this House should every year consider whether the Budget satisfies the basic requirements which can be laid down for a Budget. There are various requirements; my colleague the hon. member for Florida mentioned one. But there are others too. There is for example the test of full employment. I have proved that this Government is succeeding brilliantly in achieving the objective of full employment. Economic stability is another requirement. Since the consumer price rose by only 2.4 per cent per year in ten years according to the White Paper, we can state without any doubt that economic stability is in fact being maintained by this Government and by this Budget. The welfare of the individual is another test. If we look for a moment at the position of the pensioner, then we see that the maximum amount payable in 1947 was R10. Over against that the amount in 1969 is R33, i.e. an increase of 23 per cent over 22 years, in other words, 10½ per cent per year. [Laughter.] Hon. members on the other side are laughing, but this increase of 10 per cent per year was substantially higher than the increase in the consumer price index. I know that hon. members will ask me whether it is enough. But was R10 in 1947 enough?

There is another criterion and that is the balancing of the Income and Expenditure Account. This Budget satisfies this requirement too. We are therefore fully entitled to declare that this Budget, “a bold Budget”, as the English-language Press called it, satisfies the requirements which can be laid down for a budget in these times, although it is not a painless one; no budget can be painless. It is painful to pay tax, but under these circumstances, with the future which South Africa is heading for, it can be rightly declared that this Budget satisfies all the requirements which can be set for a budget in this country at this juncture.

Mr. Speaker, it is appropriate that I should enter the debate in this calm and quiet atmosphere to follow the speaker who has just sat down, the hon. member for Wonderboom, at this non-contentious level. He is, of course, well-known as the financial adviser to the hon. member for Innesdal and he can therefore speak with authority on this Budget.

Sir, I noticed that the hon. member started off by quoting from various newspapers to show what the initial reaction was to the Budget, but I also noticed two significant things. He did not quote what Veg had to say about the Budget—he has not got that yet—otherwise there might have been some divergence of opinion. The other thing which he did not do—and which not one member on that side has done—is to defend this so-called sales tax. What he did reveals a significant symptom of the malady from which the Government is suffering. Sir, it is a sorry state of affairs when a Government, even where it tries to do something right, makes a mess of it. When the hon. member for Constantia and other speakers on this side said that this was a rich man’s Budget, we had a howl of protest from Government members. We have had member after member trying to show that this is not a rich man’s Budget. Now the hon. member for Wonderboom has indicated what he considers to be a poor man. He got up to prove that this was a poor man’s Budget. I do him no injustice when I say that he quoted as an example of a poor man who would gain from this Budget, the man with two children in the Transvaal earning R2,000 a year. Am I correct? The hon. member indicates that I am. In other words, to the Government, to the Nationalist Party, a poor man is a man earning R2,000 a year. A man earning R2,000 a year is an income taxpayer. He is part of the 8 per cent. Sir, when we talk of the poor man, we talk of the 92 per cent who pay no tax at all; we talk of the pensioner, who does not earn R2,000 but R396 a year. That is the amount that the pensioner will be receiving as a pension from this Government as from next October after the next increase in pensions. The Government is going to give the old-age pensioner the magnificent increase of three cents a day. Then that hon. member talks of the poor man as a man earning R2,000 and R3,000 a year. He quoted the example of a man earning R3,000. Does he know that the Minister of Transport has some twenty thousand odd people in the employ of the Railway Administration earning less than R100 a month, less than a basic pay of R1,200 a year?

White people.

Does he know that some 90,000 workers on the Railway earn less than R200 a month? These are white people working for his Government, and then he talks of a poor man earning R2,000! He was very careful not to indicate the effect of this Budget on the man who is really poor, the man who has to live on the pension that the Government gives him, a pension which as from October, will be R33 per month but which at this stage is R32 per month; the pensioner who is living on the interest that he receives on his investments and who sees the value of his investment decreasing year by year. When we talk of this Budget being a rich man’s Budget and then listen to the speeches of hon. members opposite, I think it is a case of the lady protesting too much. When they talk of a rich man, they may talk of the Oppenheimers and the Haakenheimers. Sir, we are not interested in the Haakenheimers and the Oppenheimers; we are interested in the mass of South Africans, the 92 per cent of the people who are going to be hit by this Budget, not the 8 per cent who will benefit by it. If I had to describe this Budget I would say that it is the help-ten-hit-ninety Budget. It helps 10 per cent or less of the people and it hits 90 per cent of the people where it is going to hurt them most. Sir, what are the concessions in this Budget? The concessions are to the income taxpayers, not to the man who does not pay tax. Look at the magnificent concessions! I refer to page 13 of the Minister’s Budget speech: Post-graduate study courses; annuities for dependants; uniforms; proto-teams. The loss of revenue as a result of all these minor concessions, as they are described, will be R100,000. What a magnificent, generous concession! What does the pensioner get? He gets R5.4 million. Then there is a slight increase in the free earning rate of married and unmarried pensioners before they start paying tax. There is a slight improvement in the position of World War 1 veterans. These are all concessions involving small amounts and helping a small group of people. But not a single member on the other side has spoken of the estimated R100 million, which is more likely to be R200 million or R300 million which those self-same people are going to have to pay! When we look at the White Paper we find this statement on page 24—

“Food prices by 3.5 per cent”. The social pensioner with a fixed income of R32 per month from the State is going to get an increase of R1 per month as from the 1st October.

What is the percentage?

Three per cent, but food alone is going to cost 3.5 per cent more, and food and housing are the major items in the Budget of old-age pensioners. A white pensioner is going to get an increase of R1 or 3 per cent of his pension and even before he gets it in six months’ time, he will lose it as a result of the increase in the price of food alone. And what about last year’s increase; what about the increase between now and October? Above all, what about the increase which will flow from the sales tax? I am going to come back to this sales tax in a moment, but I want to deal with one or two other so-called concessions, the concessions which the hon. member for Wonderboom held up as being concessions to the poor man to make this a poor man’s Budget. Take beer, for instance, an item which is shamefully taxed. [Interjections.] Here we have a drink, with a lower alcoholic content than any other drink, carrying an unreasonably high excise duty, a duty which places it beyond the reach of the average young person. I am not talking of beer as such; I am talking of the sociological effect that this excise duty is having on out youth. The hon. the Minister, in his Budget, has now given a concession, which amounts to what? It amounts to R300,000. This concession is given through the application of a different sliding formula. Sir, this is a tax which is repulsive to all the concepts of free enterprise; it is a tax which punishes efficiency and growth; it is a tax which punishes productivity; it is a tax designed as a punitive tax against one company. Instead of removing this iniquity, instead of encouraging the young people to drink a healthy drink, the hon. the Minister tempts them to switch to a drink with a higher alcoholic content. I warn the hon. the Minister that he and his Government will be held responsible for this tragic switch on the part of our youth from beer to drink with a higher alcoholic content.

The Minister gave a small increase in the free margin for elderly people. Sir. why does he not make a decent job of it? We have asked time and again that pensions up to R1,500 should be tax-free. The Minister is now increasing the tax-free limit for people over 60 years of age to R1,350, counting the medical bonus. Why does he not make a job of it? Why fiddle around: why not make a proper job of this while he is about it? To the working pensioners the hon. the Minister has given an increased margin for earnings by a pensioner. But what chance has a pensioner to get a job to-day? Day after day, week after week. I come into contact with people who are willing and eager to work. But where can they get the sort of work they are able to do? Why, instead of giving merely this margin for employment, did the hon. the Minister not reconsider the iniquitous level of the means test on old-age pensioners? R42 per month! It is a shame in a country like ours, a country that can salt away a R58 million surplus in this year, R58 million just put away for an election fund some time in the future. Yet our pensioners have to survive and exist under this miserable level of the means test. Why can the hon. the Minister not do something for those people? Another disappointment to a large group is that the hon. the Minister has failed to give relief to divorcees who are taxed as single persons. The widow who is left to bring up her children and who has to work and raise her family after her husband dies, gets the benefit, correctly so, of being taxed on a married basis. But the woman whose husband deserts her or who is a drunkard or leaves her for some reason, and she is left with the same children having to bring them up in the same way at the same cost, is treated as a single person for tax purposes. I feel that this was another of the groups which could have been helped in this Budget. A person who has the same responsibilities, who has made the same contributions to South Africa, should, I believe, be treated the same as any other mother, whether she be a widow or a deserted divorcee.

Let me come back to the sales tax, the purchase tax as it should be correctly called, as my colleagues have pointed out, the tax which nobody on that side of the House has been prepared to defend. I challenge them now to get up, whoever is going to follow me and the speakers after him and to say in this House, to the people of South Africa: We support this purchase tax which you will have to pay. [Interjections.] The hon. the Minister has calculated that this will bring in R100 million. If you accept this figure, and I do not, because everyone you talk to says that it is more likely to be R300 million, it comes to R6 per person per annum which, for a family, comes to R30. That means that it is R2.50 per month for a family of five people.

Irrespective of income.

Irrespective of income; that is if every person, Black and White, spent the same on this tax. [Interjections.] Of course there will be some who will not contribute to the same extent. This means that a smaller number will be paying it. It will bring in more of the Whites and the upper income non-Whites, but more will be paid by the lower income Whites.

How?

My hon. friend wants to know how. Is he misled by this nonsense that this is a tax on luxuries? Let him tell me. [Interjections.] Let us look at some of these luxuries. Before I do that, I want to support the hon. member for Pinetown and take it a little further. He quoted the basis on which taxation is being applied. I wonder who has advised the hon. the Minister on this issue. I have here a bill of entry dated the 3rd April. It sounds like the 1st of April when one looks at it. It is a bill for 90 domestic radio receiving sets which cost at the f.o.b. price paid by the importer, R1,734. On that amount a customs duty is levied of R260. By the time the hon. the Minister’s fantastic formula is applied, this consignment for which the man has paid R1,734, is taxed for sales duty on a value of R2,254. In other words, over R500 more. This is a photostatic copy from which I have only cut off the name of the firm. It is a photostatic copy of what is going to happen. Here we have a value gone up from R1,734 to R2,254. Where the duty is R260, the sales tax on this item is R450,80, a sales tax on a fictitious value which does not exist and which is nearly double the excise duty on this particular item.

How many radios were there?

There were ten radios. That means that those radios originally cost R173 each. [Interjections.] I am not saying it is not a luxury item. I am dealing with the basis of the application of this tax, because this basis will apply to everything else. Let us take another item, for instance linen. Here we have a consignment of linen imported from Communist China. [Interjections.] Linen is a luxury item according to the hon. member for Florida. According to him we must not sleep between sheets. [Interjections.] These were not red sheets I know. They were white sheets. They will probably not be sold to black men either, because they come from Red China. These sheets cost R1,000. The customs authorities however, maintain that this is a dumped price. Although the customers have paid that price for it, they placed a 25 per cent dumping mark-up on to it. They say that for import duty purposes they will tax that consignment of R1,000 on a value of R1,250. In other words, they increased the value for import duty purposes.

That is a dumping duty.

The only dumping that hon. member knows about is dumping Black people into areas where they cannot exist. [Interjections.] The position is that the sales tax is not based on what is paid plus the duty, plus the 15 per cent, but on the fictitious value. I do not have the time to deal with this, but I have the calculations for anyone that may be interested. The position is that that consignment which, with duty paid, with landing costs, with clearance, and everything else, costs the importer R1,363, is taxed for sales tax purposes at R1,687. In other words, a fictitious additional R300 is added to the value of these goods before the sales tax is applied. Therefore, the sales tax then becomes R85, i.e. 5 per cent, which means an extra R85 on that consignment. What I want to say is that a Minister who can introduce a sales tax or purchase tax on a fictitious basis like this, has not done his homework. Even the forms have no provision for it. In this particular case, they had to write on top of the form with a ring around it, “Sales tax value”, because there is no provision for it on the form. All imports are based on f.o.b. or on current domestic value. Yet here we have fictitious values being created and an artificial price being established.

You ignore the dumping duty.

No, let them pay the dumping duty, but do not put a fictitious value on the item. This happens to be from Red China, but it can happen with any other item from any other country.

Let us now look at these luxuries. I have tried to picture the sort of people whom the hon. the Minister and the hon. member for Florida envisage as being people who can exist without using the items which are included in the list for sales tax. [Interjections.] Mr. Speaker, if a thing is a luxury, you do not have to use it.

It is mostly a luxury.

The hon. member says “it is mostly a luxury”. If it is mostly a luxury, most of these things can be done without. In other words, you only have to have them if you want to spend the money on luxury goods. Now, Mr. Speaker, let us look at the sort of person you are going to have. First of all, you are going to have people who must not wash, shave or clean their teeth, because these are apparently luxury items. [Interjections.] I know that soap may be a foreign thing to some people, but to most South Africans cleanliness is something they value. But, Mr. Speaker, this is now a luxury! Therefore, if you want to avoid taxation, you must not wash, you must not shave, you must not clean your teeth and women must remain as nature made them. [Laughter.]

Not that!

Mr. Speaker, I echo the words of the hon. member for Houghton.

What does the hon. member mean by that? [Laughter.]

Mr. Speaker, there are certain artifices which help to beautify the scenery—the surroundings—when you are in female company. Therefore, it would be tragic if those artifices were to be denied them. But this is a luxury and ladies will have to go around without the benefit of the odd little bit of powder and paint.

We shall have houses without paint, without insecticides, without lights, without crockery, without cutlery, without kitchenware. But it will be possible to have a fridge of over 13 cubic feet, because such fridges are free of import duty. But the ordinary family, the family of the poor man who earns R3,000 a year who can only afford a 12 cubic foot fridge, will not be able to have a fridge. The Haakenheimers and the Oppenheimers, how ever, will have 15 cubic foot fridges. There will be offices without typewriters or paper. There will be babies without bottles, and without baby powder. There will be children without toys and without sweets. All this will be necessary if they do not want to pay the sales tax on so-called luxuries. There will be food without spices or condiments. Imagine, Mr. Speaker, a pale, a dirty, a smelly, a bearded, a lousy, a longhaired people … [Laughter] … living in unpainted, unfurnished, uncarpeted, unheated, sheetless homes with nothing to kill the cockroaches and the rats! Mr. Speaker, I should like to see some rat poison being made free use of without duty.

What will these people be wearing, Mr. Speaker? They will have to wear hand sewn clothes, because domestic sewing machines are taxed. They will be eating unseasoned food and they will toe eating it with their fingers off the floor because the knives and forks and everything else are luxuries which have to be taxed. Is this the sort of people the Government wants to inhabit South Africa? Is this the sort of people who must live without luxuries, who must live without all these everyday commodities? Sweets are being taxed. The only thing which has been left out is niggerballs! Vanilla is taxed, but not raspberry! So one can go on. Disinfectants and insecticides only have a 10 per cent tax, but there is a 20 per cent tax upon glues and adhesives. So you can glue the cockroaches to the wall. Only it would be more expensive.

Mr. Speaker, this tax is an iniquitous imposition on the poor people of South Africa! It is a tax on them but in the words of the hon. member for Florida, in the words of the hon. the Minister himself, mainly on luxuries. I quote the Minister’s words, “If the income tax on the lower income groups is reduced and if the sales duty is applied in a selective manner, namely not on basic necessities, the case for it is even stronger”. These items I have named here, are therefore apparently not basic necessities! I believe that they are basic necessities to most decent South Africans; people who want to be clean, who want to look decent, who want to be able to have a neatly painted house, who want to have food which they can enjoy and eat, people who want to give their baby a new bottle and who want to be able to powder it. But no, Mr. Speaker, this Government believes that these things which I have named are luxuries or mainly luxuries. I promise that we shall remind the people of South Africa that when this tax was imposed it was this side of the House that told the hon. the Minister that it was unnecessary. He could remove the bulge, without this—with that we agree, even if he cannot get rid of my bulge … [Laughter.] But, Mr. Speaker, he does hot need to impose this sales duty. We shall tell the people that hon. members on that side refused to support us when we were pleading with the Minister not to go ahead with this duty on essentials of living.

Mr. Speaker, when luxury articles such as those which the hon. member for Durban (Point) has just mentioned, appear to him to be necessities of life, it speaks volumes for the high standard of living in South Africa under the National Party Government. The hon. member for Durban (Point) had a great deal to say here about things which the hon. member for Wonderboom was supposed to have said but did not say. I want to tell him that the hon. member for Wonderboom gave an excellent economic exposition of this Budget and I may just add that the hon. member for Wonderboom has probably forgotten more about economics than the hon. member for Durban (Point) will ever learn. That hon. member complained because the hon. member for Wonderboom did not quote from Veg. Mr. Speaker, I have the latest issue of Veg here, but the Budget is not even mentioned. I do not know whether that newspaper’s sources are sufficiently authoritative to write about such a complicated matter.

Do you read Veg?

Yes.

But the Prime Minister has said that you should not read it.

I may just tell the hon. member that it is not necessary to quote from Veg, because you know, Mr. Speaker, Veg is merely a monthly supplement to the Sunday Times, the Argus, the Star and all their cronies. All those newspapers simply get their news from Veg. What would they do without Veg? The hon. member then simply quoted from these newspapers, because what is the difference? They are all comrades in arms! They are all hand in glove with the Opposition. They are all ranged against the National Party Government. I want to say to the hon. member for Durban Point that, as usual, he was not listening. The hon. member for Wonderboom very clearly asked the Opposition to give him a definition of a poor man. In addition he said that since there was no definition he would draw the dividing line at the R2,000 a year income group for the Sake of argument. Then the hon. member asked the Opposition to tell him whether they accepted this. The hon. member for Durban (Point), fat as he is, then rolled helter-skelter into this. The hon. member for Durban (Point) accepted the hon. member for Wonderboom’s statement that an income of R2,000 a year was that of a poor man.

In a roly-poly way.

In a Rawly-pawly way he tumbled into it.

Mr. Speaker, I said in a previous debate that the economic armour of the National Party Government was absolutely impregnable. I have listened to the speeches which hon. members of the Opposition have thus far made and I have come to the conclusion that it is still as impregnable. They reminded me of a lot of hens ferreting and scratching under a tree in search of a little food and eventually finding one small worm. A terrible cackling then rose into the skies about this one small worm. That small worm represents, in their case, R100 million out of a cash budget of more than R2,000 million. It represents about one-twentieth or 5 per cent of the Budget. They have now seized upon this and are running to the public with it in the hope of picking up a few votes.

Are you defending it?

Yes, I am defending it to the hilt. As the Official Opposition they now want to catch a few votes with that, but they have fallen altogether flat with it. They do not look at the Budget in its broader aspects at all; they do not look at the 100 per cent; no, they have taken the 5 per cent and they have run away with that.

I want to take a look at this Budget in its broad aspects; I want to see how this Budget fits in with the entire economic constellation of this country. I want to congratulate the hon. the Minister sincerely on an outstanding and an excellent Budget—and let me tell the Opposition that I am proud to do so. It is clear that this Budget was not prepared overhastily, but was prepared with great circumspection and wisdom. I want to describe this Budget as an extension, a continuation of the previous two Budgets, with this difference: There is now a difference in the emphasis of the tax collection structure. This is all that has changed. As I have said, this Budget is a continuation of the previous budgets, but it is necessary that they be continued in this way as a result of the prevailing interna] as well as foreign economic conditions, as well as the high state of liquidity within the country. The previous budgets were purposely aimed at curbing inflation. Hon. members will remember that with the previous Budget a seven-point plan was drawn up against inflation, and that plan is still in operation. The plan is still being maintained, and this Budget is further maintaining it. That previous budgets have succeeded in combating inflation and keeping it under control—and that this was done effectively—has nowhere been gainsaid by economic authorities. It is common cause that South Africa compares very favourably with the rest of the world to-day. In particular I want to mention here the industrially developed countries of the world. South Africa compares very favourably with, and has combated inflation far more successfully than, those countries. South Africa has been kept basically sound, especially through the combating of inflation. I do not want to bore the House with figures. Other hon. members to-day repeatedly mentioned the figures here again. The figures speak for themselves and I do not think there is any dispute about them. Therefore I say that this Budget is just as anti-inflationary as the previous ones were, because it is cast in exactly the same mould. That is so. I now want to tell hon. members opposite, especially the hon. member for Parktown, that every time they express opinions about financial measures, subsequent events prove to be altogether different to what they envisaged. I want to refer the hon. members for Pinetown and Parktown to certain speeches they made here in 1967. If I were they I should certainly not be so quick to express opinions about the future again. For example, on the 3rd of April, 1967, according to column 3425 of Hansard, the hon. member for Pinetown said that at best the then Budget was a neutral one. I am not wrenching his words out of context; this is the entire gist of his argument. On the same day the hon. member for Parktown said—column 3450—that it would be wrong to think that the Budget of 1967 would reduce inflation. In the course of his speech he quoted someone else, I think it was a certain Mr. Cloete. The hon. member for Parktown added to that, “I think that puts the question in a nutshell.”

I do not want to repeat the relevant figures, but I say that if we look at what the previous inflation figures were, we see that those budgets definitely curbed and reduced inflation. The hon. the Opposition even went as far as corroborating this statement here. I do not think the hon. the Minister of Finance ought to be at all concerned about opinions aired by the Opposition to-day. This Budget is as deflationary as those budgets were, but now a cry goes up that this Budget is inflationary. The Sunday Times of the past week-end proclaimed this and so did the hon. member for Constantia. According to them this Budget is inflationary, so that the cost of living will increase. This is what the hon. member said to-day. They are also saying that this is a rich man’s budget. But I say that in terms of previous budgets it is clear that this is a deflationary budget. Under inflationary conditions, who is hit hardest, the rich or the poor man? When the Government takes deflationary steps it is protecting the poor man, and this is a deflationary budget. How can it then be a rich man’s budget? I reject the statement made here to-day that this Budget is inflationary. I say that this Budget is just as deflationary as the previous ones; it is a continuation of what those budgets envisaged. Surely it is dear that the hon. the Minister is not putting more money into circulation. He is giving relief in one respect, but he is withdrawing the same amount of money again. If we listen to the Opposition’s attempts at guessing about how wrong the Minister is, and to their predictions about how much more money will be taken out of circulation, this Budget is surely even more deflationary. With this Budget the money is being taken from other sources, while the entrepreneur source is being afforded relief. Those people are doing a great deal for the growth of our country. I remember how the hon. member for Pinetown carried on here last year about those people. I agree with him that those people ensure that we have a growing economy in our country. They ensure that it is maintained. Those people have certain talents and they ensure that there is development in the country. It is quite right that relief should have been afforded them, but it seems to me as if there is a confusion of tongues among the Opposition about the term “rising cost of living as a result of inflation”. Surely there is a great difference between rising cost of living “as a result of inflation” and rising cost of living “as a result of fiscal measures”. There is a very great difference. But the Opposition is confusing the two terms and wants to broadcast the misconception to the world that this Budget will fan the flames of inflation and will thereby push up the cost of living. That is what the hon. member opposite said, not so? Surely this is quite wrong economically; it is not right.

Will the cost of living now decrease or not?

I shall come to that in a moment. We agreed that there will be an increase in prices now, but not on basic, essential provisions and goods. It will take place on certain semi-luxury and luxury goods. It does not represent a general increase in the cost of living. It represents, shall I say, a discriminating increase in the cost of living as a result of the fiscal measures. But an increase in the cost of living as a result of inflationary conditions brings about an altogether different position. There are other economic factors influencing that. I am not going to elaborate on it, but, as everyone knows, this is the dangerous point. As the hon. member has said, when we exceed the inflation figure of 4 per cent, inflation becomes dangerous and we have general increases. That is where the danger lies. But surely the present situation is not the same. This is a basic misrepresentation, and it is now being broadcast to the world.

I want to concede that because of certain problems administrative difficulties will develop in connection with the initial collection of this tax, but I believe the problems will be ironed out in due course. They will be a merely temporary phenomenon. These administrative problems are half held up by the Press as a form of inflation, which they surely are not. The budgets of the past brought stability and caused no disruption. This Budget will do precisely the same. If the Government were to listen to the recommendations of the Opposition, we would find ourselves in a financial morass. They blow hot and cold at the same time. They make inflationary as well as anti-inflationary proposals which the hon. the Minister is supposed to follow. They maintain that the hon. the Minister does not know what this whole system of taxation comprises. They say that he does not know where it will end. Well, I say that that is the biggest lot of nonsense. I agree that our experience of this system of taxation is not such that we can at this stage budget to the nearest R1 million or R2 million. We cannot yet determine quite accurately how much we shall collect. However, we shall still gain that experience. I am very sure that it will not be as caitastropihic as the Opposition wants to make out. The Opposition nevertheless agrees about the principle. I do not know whether the hon. members opposite all attended the same caucus meeting to-day. If one compares the speech of the hon. member for Point with that of the hon. member for Pinetown it appears to me as if each of them made a speech according to his personal feelings about the matter. I do not know wether they represent a party. I do not know whether they even care about what they are saying.

Business interrupted in accordance with Standing Order No. 23 and debate adjourned.