When the debate on the Minister’s Budget speech was adjourned on 31st March, I was referring to this Budget as being a sorry one. I did so for the following reasons: Instead of the usual huge surplus on Revenue Account we had ended the year 1970-’71 with a deficit of R35 600 000; because we had to take from our Stabilization Account an amount of R180 000 000 in order to balance our Loan Account; because this Budget contained the final instalments of the R400 000 000 of additional burdens imposed upon the people; because the Budget was inflationary; because it made no attempts to encourage the optimum use of labour; because it increased spending in the public sector and reduced the availability of investment in the private sector; and, lastly, because it had no objective and is completely lacking in direction.

But it is a sorry Budget for other reasons as well. For some six years now this hon. Minister and his predecessor have been trying to cure the ills of our economy but have failed. In this Budget we can see the basic reason for that failure. This Budget shows that the Government has no broad horizon. Instead of using this Budget as a major instrument for economic correction by the Government on long term and far-sighted planning, it uses it to make a number of tax changes, changes which in their overall effect on the economy do not add up to a row of beans; a change from source income to worldwide income, the use of income abatements instead of tax rebates, the tightening up on taxation on such fringe benefits as assisted housing loans, entertainment allowances and the use of business motorcars for private purposes.

This is not the type of Budget that is going to restore to our economy the much needed confidence that it deserves. It is like a lot of old ladies playing bridge with a fire raging in the cellar below. Therefore I move the following amendment—

To omit all the words after “That” and to substitute “this House declines to pass the Second Reading of the Appropriation Bill, because the Government in this Budget, inter alia—

1. (1) shows complete disregard for the basic needs of the people of South Africa;
2. (2) reveals blatant mismanagement of the country’s economic resources;
3. (3) provides no long-term attainable objectives for the healthy expansion of South Africa’s economy; and
4. (4) further erodes the autonomy of the provinces”.

Sir, before dealing with the broad aspects of the Budget I want to deal first with some of the suggested taxation proposals. Many of these arise out of the numerous reports and White Papers for which we have waited for many years and which the hon. the Minister has at long last tabled. We do not propose to deal with these reports in any detail in this debate except in so far as they directly affect the Budget. We will have further opportunities of considering them under the respective Votes and when we come to deal with any enabling legislation.

The hon. the Minister in his Budget speech could well have left Solomon and Confucius severely alone and simply adopted the role of Mandrake the Magician—not as a wizard but as a conjuror— because there is no magic in this Budget but there is enough sleight of hand, enough said and left unsaid and enough red herrings to completely mystify and utterly confuse the public.

Firstly, we have the premium bond with the seven year term, with the varying rates of interest and bonus. But what is its tax status going to be? Is it going to be tax-free? Will it qualify for exemption from tax according to the same scale as is applicable to dividend receipts, as recommended by the Franzsen Commission, or will it attract normal tax in the ordinary way? The hon. the Minister does not tell us. What he says is this—

The tax status of these bonds should be in accordance with the Government’s decision in connection with the relevant recommendations of the Franzsen Commission.

What does it mean?

Read the next paragraph.

I have not got it here. The next paragraph does not explain what the tax on these bonds is going to be, and I hope the hon. the Minister will show me where the next paragraph explains it. We want to know what the Governments’ decision is.

Then we have this headline in the hon. the Minister’s speech—

Comprehensive scale of income tax on individuals.

I am afraid I have been completely unable to puzzle out what this one means. I know it does deal with the fact that rebates covering married persons, children, dependants and insurance are going to be abolished and a system of income abatements is going to be substituted instead. These changes from tax rebates to income abatements have very far-reaching consequences. At the moment, for example, every taxpayer, irrespective of his income or tax liability, can deduct a primary rebate from the tax payable by him—R50 if he is a married man and R40 if he is single. The proposal now is that instead of primary tax rebates there should be income abatements—R1 000 in the case of a married man and R600 in the case of a single man. These amounts are to be deducted from the taxpayer’s income in determining his income that is subject to tax. In the same way the child tax rebate of R35—incidentally, the hon. the Minister’s multigraphed speech says R45; it must be a typing error—for each of the first two children and R45 for each additional child, is done away with and instead income abatements of R450 each for the first two children plus an additional R100 for the third and each successive child are substituted. Similarly the tax rebate for dependants of R6, plus in some cases an additional RIO, and the insurance tax rebate of a maximum of R30 are done away with and income abatements are substituted. We do not know the quantum of the abatement for the dependants’ allowance or the insurance allowance, because the hon. the Minister did not tell us. But the sting of this whole new scheme is in the tail, because the total abatements are to be reduced by R2 for every R10 by which the taxable income exceeds R5 000. This simply means that while under the present rebate system a married man always enjoyed a rebate of R50 against the tax payable plus his other rebates, his abatements now start diminishing if his income is over R5 000 and disappear completely as soon as his income reaches R10 000. Similarly the abatement for the first child disappears when the income reaches R12 250; for the second child at R14 500, for the third child at R17 250, and so on. This is instead of a firm deduction from tax of R35 for each child for the first two children and R45 for every child thereafter. This in the higher income brackets can now disappear. We do not know how the dependant and insurance rebates will be affected until, as I say, we get further information from the hon. the Minister, but what we do know is that at an income level of R17 250 a man with three children could now pay as the result of the new method of change from rebate to abatement an additional R201 a year, plus the surcharge of 10 per cent plus the loan levy of 20 per cent.

But there is even worse, Mr. Speaker, and no mention of this was made by the hon. the Minister in his Budget speech. It seems from the tables that have been published by the Secretary for Inland Revenue that the medical allowance, although the hon. the Minister has increased it from R150 to R250 for those over 60, will also be diminished as one’s income increases, so when you reach a certain level of income the medical allowance also disappears. So in terms of the new basis, your primary rebate, your rebate for children, your rebate for your dependants, your rebate for insurance and your rebate for medical expenses can all disappear. We cannot accept the principle of reducing income rebates which can remove entirely the present rebates that are enjoyed by some taxpayers.

We then come to the surcharge and the loan levy applicable to individuals. Here the hon. the Minister tells us that the surcharge and loan levy will be increased from 5 per cent to 10 per cent, and from 10 per cent to a maximum of 20 per cent respectively on “the broadened base, that is the comprehensive scale, which includes the provincial scales”. What the hon. the Minister means, of course, is that as a result of merging provincial tax with normal tax, normal tax will now be increased by approximately one-third, and it is on the increased normal tax that the surcharge and the loan levy will have to be paid. What does this mean? The present surcharge of R5 per R100 of tax will become R13. The present loan levy of R10 per R100 of tax will at maximum rates become R26 and overall, where previously you paid R1, you can now pay R2-60 in surcharge and loan levy.

Following the recommendations of the Franzsen Commission, the hon. the Minister also seeks to impose a new type of loan levy. This is a loan levy of 7½ per cent of the dividend receipts of companies. This suggested measure has caused quite a lot of uncertainty and concern among the public and we have been bomarded with telephone calls, letters and telegrams asking us for clarification of the position. It seems that somebody has not done his homework properly, and nobody quite knows what the Minister’s intentions are. But one thing is certain. The hon. the Minister is committed to raising R20 000 000 with a loan levy at the rate of 7½ per cent. These are the figures he gave us and the question is how does the hon. the Minister arrive at these figures. We want the hon. the Minister please to clarify his intentions, particularly after the report from Johannesburg that the Minister had said that if it was found that the expected revenue was grossly over-estimated, the rate of tax would be adjusted downwards. I do not know whether the hon. the Minister said so or not, but that is as it was reported. Now, does he propose to tax the first company receipt of a dividend only, and if so, will he get his R20 000 000 that way; or does he propose to tax dividends on each occasion that they flow from one company to another? In other words, is the incidence of the tax to be progressive? If this is his intention, has the Minister taken into account the velocity of the dividends, and has he calculated his figure on the new total involved? What is important is this. The hon. the Minister must please give us a clear statement of his intentions in his reply to this debate, because it is affecting the commercial world, which is very perturbed at the uncertainty of the matter.

Generally, we believe that the sharp increases in the surcharge and in the loan levy are ill-advised. In so far as the individual taxpayer is concerned, they operate most harshly against the middle and upper income groups, which have the highest potential for saving. In so far as companies are concerned, they operate against their retained profits and minimize their potential for expansion. So we cannot support these increases.

I would like to read to the hon. the Minister the second paragraph he asked about—

We do not know what these recommendations are. The paragraph continues—

which the hon. the Minister stresses “have no element Of gambling”. The paragraph also states—

I am asking the hon. the Minister to make that announcement. There is nothing here to tell us how he is going to tax these premium bonds. [Interjections.]

Now I come to the question of fringe benefits, which is the vital question the Budget deals with, while the economy is going backwards. I have a great deal of sympathy with the concern of the commission over the increasing tendency of using fringe benefits to avoid the paying of tax. I think we can all accept that the principle undoubtedly should be that benefits, whichever form they take, should be subject to tax. But there are some aspects of the suggested changes that do concern us. Firstly, benefits, for example, by way of low rental housing or low interest rate· bonds enjoy a very wide usage both in the Government, quasi-Government and private sectors. There are millions of rands, involved in providing housing loans by the: Central Government, the provincial councils, local government, the Defence Force, the South African Railways and Harbours, the Post Office, Iscor, Escom, the mining-houses, insurance companies, banks and so on. In fact, practically everyone except members of Parliament gets assisted housing loans. There is also the problem of assisted housing located in the border areas and in the homelands. The sudden effect of taxing these fringe benefits could almost be disastrous. I do not believe that we can differentiate between the private and the public sectors, that is between the private individuals and those who work for the Government. Once one differentiates, one destroys principles. We have had such a problem in the past with the destruction of principles. There is also the problem of benefits under economic and sub-economic schemes which are looked after by my friend the hon. the Minister of Community Development. How will he deal with these benefits?

There is another question which poses itself, namely what will the position be in regard to the R45 per month, which I think is the figure, of low rental houses for hon. Ministers? Will the real rental value be taxed as fringe benefits? This will also have to be considered.

You tell us who decided on the R45 per month.

I am talking about the difference, not the amount of R45. There is another problem. Many people have undertaken commitments on the basis, which is quite understandable, that low interest housing loans have never attracted additional fringe benefit taxation. Any such taxation, coming suddenly, could embarrass a great number of people who have predicated their financial position on what the situation is as they have known it. Although I believe that the principle is correct, I would suggest to the hon. the Minister that he leaves the whole matter in abeyance for the moment and that it be given quite a lot more thought.

There are other principles we cannot support. Firstly, there is the suggested change from a source basis to a worldwide basis, whereby one’s income, whether derived from a source within the Republic or outside of the Republic, will be subject to taxation. We know that the world-wide basis is one that is generally accepted among most countries of the world. However, I personally and, I am sure, other hon. members, too, have already had representations from some of our immigrants and new South Africans. They are complaining that when they came to South Africa they left a small amount of income in their country of origin and they believed that when they came to South Africa, this would not be taxed in South Africa. However, now they find that not only is income from abroad going to be taxed in South Africa, but it will be taxed at the marginal rate, i.e. at a rate higher than they are paying at the moment. This will not encourage immigrants unless the hon. the Minister will provide exemptions.

We may find it not only desirable, but absolutely essential that the private sector will have to invest considerable funds in other countries, particularly to the north. I know there is reference to this in the report. But I think this factor should be very carefully weighed before we go on to a world-wide basis.

Then we have another suggestion. This is in regard to the question of the withholding tax, where it is proposed to impose a withholding tax of 25 per cent on dividends, interest payments to foreign associated companies and foreign grants, profits, royalties, know-how etc. When I read some of these proposals, it seems to me that we sometimes forget that we are still a young, developing country. We are not one of the old, established countries of the West. I think we have to be very careful about imposing any taxation on risk capital and on know-how. I know the story of the double tax agreement, but I think the hon. the Minister knows as well as I do that tax haven countries are being used very extensively today and any withholding tax in this country could in effect be a new tax in so far as the investor or the person with know-how is concerned. I think, for the moment, this tax could also be well left alone.

Other aspects of taxation we are not convinced of the advisability of are the changes in the undistributed profit tax and of the further taxation of insurance companies. We are particularly unhappy about the double barrel incidence of tax and loan levy that can arise from the change in undistributed profits tax. The hon. the Minister now, under his undistributed profits tax, is going to force companies to distribute dividends. But in doing so, he is holding out his hand to get his per cent on those dividends. It does not seem to be right to take a gun and force a person to do something and then collect the proceeds on the other side. This is exactly what the hon. the Minister is attempting to do. We will give these matters some further consideration, because we can deal with them more fully when we get the actual details in the Income Tax Amendment Bill.

I want to refer only briefly to the Schumann and Borckenhagen reports and the Government White Papers which we received two weeks ago out of antiquity. I should like to indicate the main impressions at first flush of this side of the House. While the Government has accepted some of the recommendations of the commissions, it has rejected a great number of them. Although the Government has had the reports of the commissions in their hands for many years, the report of the Schumann Commission since 1964, there are still a great number of issues upon which it has still to make its final decisions. I can only say that our Government is somewhat slow-moving. Furthermore, the decisions of the Government as set out in the White Paper, will in the main be rejected by the provinces and the local authorities in regard to the main issues involved. The White Paper shows scant respect for the autonomy of the provinces. The financial proposals as between Central Government and provinces are completely unacceptable to us, because they undermine the very existence of the provinces. The principles involved are based on three factors, namely needs of the provinces, capacity to pay, i.e. through their own revenue, and deficit. None of these factors are easily determined and all are arguable. It seems to us that we are back to the old practice of Administrators going cap in hand to the Central Government asking for subsidies. It is not a very happy result of a very, very long investigation.

Now, I want to deal with what I regard as the most disturbing aspect of the taxation side of the Budget. In 1969 the hon. the Minister, following the recommendation of the Franzsen Commission’s report, took the decision that the rates of direct taxation were too high and that the best interests of the country would be served by moving away from high direct taxation and by increasing the scope of indirect taxation. In outlining this philosophy, this is what the hon. the Minister said. I am sorry I have to remind him of it. I quote from Hansard, Volume 26 of 1969, column 3241:

This was what the hon. the Minister said in 1969. Now, two years later, the hon. the Minister not only throws out the recommendations of the Franzsen Commission, but he jettisons his own philosophy and takes a complete step backwards to exactly the same state of affairs against which the hon. the Minister so eloquently warned us in 1969, as I have just quoted. The impact of the upward changes in taxation and the increases in the loan levy fall most heavily upon those whom the hon. the Minister quite rightly sought to help in 1969, namely those whose income exceeds the amount of R5 000 per year. These new measures which have been proposed by the hon. the Minister will increase disproportionately the tax and the loan levy incidence on the middle- and upper-income groups and will do the very things against which the hon. the Minister set his face in 1969. Of course, we must not forget that, although we are back to where we started, there is a little sales tax in addition. What has happened to the marginal rate? Last year on a taxable income of R8 000 the marginal rate was 22,20 per cent and it has now risen to 25,20 per cent, which is an increase of 13 per cent. On R12 000 it increased from 31 to 35,8 per cent, an increase of 15,9 per cent in the marginal rate. Upon R15 000 it has risen from 37,7 to 43,52 per cent, again a rise of 15 per cent. On a taxable income of R28 000—I know it is high—the marginal rate is now 78 per cent of tax and loan levy against the marginal rate in 1969 of 74 per cent. So, the hon. the Minister has not only gone back to 1969, but he has gone back and has made the position worse. This is not the wisdom of a Solomon or a Confucius.

It is Confusion!

I have spent some time considering some of the details of the Budget, because of the major changes which are involved. There are also a number of benefits, mainly for the lower-income groups. These we welcome. However, these changes are cold comfort to the family that pays more sales tax on essential goods, which pays more for its petrol and cigarettes, more for its beer and more for its wine. The taxpayer also has to pay more for his railway ticket and has to pay 4 cents instead of 2½ cents if he wants to send a letter. He has to pay more for his telegrams and he has to pay as much as 8 rents for a local call. This is what is happening in some areas. The public will not forget these imposts for a long time.

It is the total concept of the Budget that invokes in us the greatest concern. This Budget is indecisive and is a contradiction of the philosophy of the Government’s stated aims. What are the Government’s aims? They are to curb inflation, to alleviate the strains in the capital market, to rectify the imbalance in fixed investment, to encourage investment in private manufacturing industry, to encourage exports and to correct the balance of payments position. The Budget does not accomplish a single one of these things. It is a Budget with no horizon and one without vision. Without vision you perish. The Budget lacks direction, it is inflationary, and it has no growth component. It is a purely bookkeeping budget and is designed only to provide the hon. the Minister with the funds that he needs to see him through the fiscal year. It is a Budget which gives no encouragement to the industrialist, the businessman, the financier and certainly not to the working man. The hon. the Minister and other hon. Ministers keep on telling the working man that he must save and work harder and that he must do this and that, but where is the incentive in this Budget to get the working man to do what hon. Ministers want? Nowhere at all. The Budget is utterly lacking in objectives and it solves no problems. It is the Budget of old tired men who cannot cope with the exciting demands of a dynamic, technical and challenging era. It is a dead Budget.

The hon. the Minister tells us that the Budget has been designed to combat inflation by curbing excessive consumption expenditure. The hon. the Minister curbs excessive consumption expenditure by transferring through the Budget funds from the private sector to the public sector and then proceeds to spend the funds in the public sector. He is not freezing what he is taking from the public but is spending it because he cannot help himself. What is the net effect of this? Any curbing of inflation in the private sector is merely counterbalanced by additional spending in the public sector. In addition the hon. the Minister takes R32 million from his balance on Revenue Account and adds R150 million which he is going to get from abroad. Both these actions are highly inflationary. The means of financing any up-turn in the manufacturing sector is halted, because by reducing demand profits are reduced and as a result of additional taxation the life-blood of industrial expansion, retained earnings, is lowered, with consequential lower incentives for production and growth.

The tragedy of the situation is that the hon. the Minister is now following policies that the United Kingdom and the United States of America tried, found that they failed and then abandoned. The hon. the Minister is following a typical policy of stagflation by restricting the private sector with the result that there is a reduction in growth and he is at the same time using the money that he takes from the private sector for spending in the public sector, thus increasing inflation. It is time this Government saw what happened in other countries and realized that these measures do not work. What are the facts of the present economic situation? The financial sector of the economy, always sensitive and anticipatory, shows all the signs of having reached the top of the cycle with high interest rates, distortions in the spread of borrowing. namely as regards short-term issues and on the service side. Financial conditions are extremely tight because of the adverse balance of payments and a sharply contracted money supply …

You are contradicting yourself.

No. We had an increase of 5,1 per cent last year when the economy expanded at the rate of 9,5 per cent in monetary terms. I know this is the hon. the Minister’s policy. We have credit restrictions; banks’ liquid assets were 0,1 per cent against 0,5 per cent or 0,6 per cent some five or six months ago. The velocity of circulation is beginning to fall as it always does when there is uncertainty and lack of confidence in the business community. We have a high grey market and this can be very dangerous. If the grey market pulls in, as it is showing signs that it is going to do except in what one might call the prime grey market—that is, a grey market which is guaranteed by banks or insurance companies or where the money is in building societies—this market will be pulled in in the secondary range of the grey market because people are getting nervous about the economy. They are beginning to wonder whether their grey market investments across the board are going to be dangerous or not. If they pull them in, we can run into very serious trouble, which will be followed by a number of insolvencies, particularly in the cyclical industries, such as the building and the engineering industries.

Imports continue at far too high a level. It is an interesting fact that consumer imports only account for some 22 to 23 per cent of the total imports. I want the hon. the Minister to tell us what percentage of the remaining 77 per cent of our imports are accounted for by the Government, the Railways, the Post Office, Iscor, Escom and other Government or quasi-Government institutions. I wonder if we are going to find, as we well might find, that the biggest importer in South Africa is the Government and its institutions, in exactly the same way as the biggest spender in South Africa is the Government and its institutions. I hope the hon. the Minister will give us the figures.

Our export performance is unbelievably bad. We believe it is going to remain so until the Government realizes that it is our own actions that are hindering exports. In this Budget not only are there no export incentives; on the contrary, there is much that will harm exports. You see, Sir, the lesson the Government will not learn, is a very simple one. When you fight inflation, you have to have a drive for exports at the same time if you want to do the job properly. If you have an adequate superstructure, a maximum utilization of labour, capital availability to the private sector, minimum spending and importation by the public sector, a climate of certainty and of optimism, with less interference by the hon. the Minister and the hon. the Deputy Minister of Bantu Administration and Education, as well as other Government sectors, you will help curb inflation and develop the export market, because these two factors go hand in hand, but the hon. the Minister sees them as two different problems. He wants to curb productivity, demand and inflation, and at the same time he expects our exports to grow. It is just not possible. They are not compatible. But by following the same road for the two, we can resolve our balance of payment problems. We can move away from the road to socialism we are beginning to travel, with Government interference and Government investment in every sector of the community. We can stop the credo which this Government has accepted of “more taxes in good times” and another one which they added, namely “more taxes in bad times”. If we will do these things, then South Africa can move forward with confidence.

Mr. Speaker, the temptation to dismiss the speech made by the hon. member for Parktown is very great. However, I will not be so unkind and will in fact return subsequently to a few points he raised.

How one assesses a Budget depends to a great extent on the angle from which one approaches such a Budget. The farmer, for example, considers the Budget from a certain angle, and is grateful. The businessman, on the other hand, approaches the Budget from an entirely different angle and assesses it in a different way. The wool farmer also considers the Budget from a certain angle, and is grateful. In the same way the wine farmer considers the Budget from a particular angle, but his reaction is one of anger. Compare the positions of the wine farmer and the sugar cane farmer however and one finds that the wine farmer is grateful because his product is not being taxed as heavily as that of the sugar cane farmer. I, as a representative of a wine farming constituency, must of course say that I do not feel very happy about the considerable increase in the excise duty on spirits. This increased excise duty affects not only the person who uses the product, but also the farmer who produces it. In considering, on the other hand, the reaction of the sugar cane farmer, one finds that he has reason to be dissatisfied owing to the fact that the new excise duty on cane spirits is R13-13, in comparison with the new excise duty of R11-13 on brandy. The cane spirit farmer therefore has reason to believe that the wine farmer is still getting off too lightly—everything depends on the angle from which one considers this Budget. This, Mr. Speaker, you will be able to appreciate on the basis of the examples I mentioned, because you are known as a person who is not an enthusiastic supporter of the product of the wine farmer. You will not agree with me.

Who does agree with you?

The hon. member who made that interjection is to be seen fairly regularly in the bar next door, and therefore you will not agree with him either. Nevertheless I want to state here that the excise duty on brandy has become so high now that we are running the risk of defeating our object, particularly if we take note of the fact that the highest sales duty on luxury items is 40 per cent in comparison with an excise duty on brandy of almost 400 per cent. We are therefore very close to the stage where the goose which lays the golden egg is going to have its head lopped off.

As I have said, however, everything depends on the angle from which one considers this Budget. That explains the great difference between the approach to this Budget by the Opposition and by this side of the House. A Government must bear two basic principles in mind when it draws up a Budget. In the first place it must cause the State accounts to balance, in spite of the contempt with which the hon. member for Parktown spoke about this Budget by describing it as a bookkeeping budget. Of course a Government must cause the State’s accounts to balance. In the second place it must determine the pattern of the country’s economic development by means of its tax proposals. Then, of course, there will always be the added consideration of what the effect of the Budget will be on the voting public. This is so because we cannot get away from the fact that we are dealing with a democratic parliamentary system. It goes without saying that the Opposition, which does not have the responsibility of causing the accounts to balance, will be inclined to act with less responsibility than the Government. This is consequently what we have had up to now from the Opposition.

Here I want to come at once to what the hon. the Leader of the Opposition said. It has been a long time since I last saw such irresponsibility as I did in the reaction of the hon. the Leader of the Opposition to this Budget. I am referring specifically to a press statement he issued to a Cape afternoon newspaper in which he said, inter alia—

Hear, hear!

He went on to say—

Hear, hear!

Mr. Speaker, I had hoped that it was only the hon. the Leader of the Opposition who was so irresponsible, but now that I have heard the “hear, hears” from the opposite side, it seems to me that the entire Opposition is irresponsible. Let me refer them to what the same newspaper, a newspaper which does not support the Government, said in an article immediately adjoining the report about the hon. the Leader of the Opposition, i.e. “Taxpayer is lucky, say experts; it might have been worse”, and it went on to say—

The hon. the Leader of the Opposition was also talking about this “man in the street” when he said this: “… particularly the younger urban dwellers who saw prospects of receiving greater comfort for themselves and their families receding further as their pay-packets were eroded by the new taxation proposals”. These young citizens of the Republic are those people who have grown up during the past two decades of the greatest prosperity. That is why it is natural that they have not yet learnt to be thrifty. I do not blame them for this, because they grew up under conditions of great prosperity, prosperity which this Government has made possible during the past 23 years.

Do you regard them as being irresponsible?

It is these citizens, those who grew up under conditions of the greatest prosperity, who must continually be urged to greater responsibility and particularly to greater thrift. That is why it is the height of irresponsibility to lead these people to believe that it is in fact they who are now being hit so hard by this Budget.

The Opposition considers this Budget from one angle, while eminent economists consider it from another angle, and then find that the tax proposals of the hon. the Minister were by far not drastic enough. The fact remains that the entire Western world today is struggling with tremendous inflationary pressure, and when I say this, I am not sucking it out of my thumb. I have here before me the Economic and Financial Review of Union Acceptances Limited, which is most certainly not well-disposed to this Government, and listen to what this writer has to say—

He then goes on to indicate how this inflation has increased hand over fist in the 22 Western countries which are members of the Organization for Economic Cooperation and Development. He then furnishes these figures to indicate the tremendous rate of inflation in these countries during the past year, 1969-’70. In Japan it was 8,7 per cent, in Sweden 7,9 per cent, in Denmark 7,6 per cent, in Norway 6,6 per cent, in the United Kingdom 7,4 per cent, in the United States 5,8 per cent, in France 5,4 per cent, in Italy 5 per cent, in Switzerland 4,8 per cent in Western Germany 4 per cent, etc. Sir, if the hon. the Leader of the Opposition and the hon. members in his immediate vicinity wanted to do something responsible they should have helped the Government to help discipline a nation that has grown soft because of great prosperity to greater responsibility and greater thrift.

But you yourselves do not do so.

Unfortunately we find just the opposite happening, and the so-called man in the street, the new young citizen, is being led to believe that they are being hit too hard by the tax proposals. Mr. Speaker, it is so bad that I would have liked to use a word for this which you would probably not allow me to use. I would not have used the phrase “led to believe”!

I want to leave the hon. the Leader of the Opposition at that and come to the hon. member for Parktown. To my deep regret he is guilty of doing the same kind of thing. No wonder then that an English-language Sunday newspaper had the following to say about the Opposition—

And this is the important aspect I want to emphasize—

The Press wrote a speech for him today.

Mr. Speaker, I come to the hon. member for Parktown. The hon. member for Parktown said in his introductory remarks the other day—

The hon. member himself indicated that included in this R400 million of additional taxation, was the amount of R58 500 000 for increased railway tariffs. Is that taxation?

What is it then?

It also includes the R48 890 000 for the increased postal tariffs. Is that taxation, or service charges? If the Cape Town bus company increases its tariffs, it is an increase in service charges, not so, but if the State increases its train tariffs, it is taxation. What nonsense! But what the hon. member for Park-town conveniently forgets, of course, is— and this is the most important aspect—-that although these taxes, which now include service charges, have increased by R400 million, the personal income of the population has increased by R756 million.

And then you took everything. [Interjections.]

If the hon. member does not know where I got this from, I can mention that it is in this White Paper which he probably also had at his disposal. It states that over the past year the personal income of the population has increased by R756 million, which is an increase above that of the previous year of 12,8 per cent, whereas in the previous year it only increased by 9,5 per cent.

I then come to the hon. member for Parktown, and he launched a tremendous attack on the Government because the Government which is, after all exhorting the people to spend less, is itself spending such a great deal. If I consider the same figures, I see that in the same year, when the personal income of the citizens increased by R756 million—and this they spent—the expenditure of the State increased by only R155 million, which is by no means such a terribly unfavourable figure. But if I now look at all the things which led to that increase, I see. inter alia, a figure of more than R6 million which was paid over to Lesotho, Botswana and Swaziland in terms of the customs and excise agreement with those countries. In actual fact this is not Government expenditure and this is only a payment to them of excise and customs duty levied on products which are being used in their countries. Because of a resolution adopted by the Select Committee on Public Accounts in 1954 it is, however, being treated in such a way that it is not deducted from our customs and excise in order to give us then a net figure for customs and excise, but it is indicated in our books as an expenditure against the Department of Customs and Excise. I do not expect the man in the street to know these things, but a senior member of the Opposition in the Select Committee really ought to know these things, and should not be so ignorant.

Let us look at a few other figures of that State expenditure. There is a R1 million increase in interest subsidies in respect of farm mortgage bonds, and there is a R4 million increase in interest subsidies in respect of housing loans. Is this Opposition objecting to the fact that this expenditure is being incurred? There is a R30 million increase in Bantu education. Does the Opposition object to that, or are they again going to use this fact outside and say that this Government is spending such a great deal on the education of the Bantu? There was a R15 100 000 increase in the expenditure for national education. Does the Opposition have any objection to that? I can continue in this way to quote additional amounts which are being spent and which are very definitely to the benefit of this Republic.

During the past six years, during the term of office of this hon. Minister of Finance, South Africa has had a capital inflow of not less than R1 700 000 000. During the past year, 1970, there was an inflow of R501 000 000. In the fourth quarter of the past year the net inflow of capital from overseas countries was not less than R186 00o000. In the first two months of this year there was an inflow of foreign capital of between R25 and R30 million to the Johannesburg Stock Exchange. When I look at these figures, it is abundantly clear to me that the entire financial world has confidence in South Africa. Only the Opposition does not have confidence in South Africa. The Opposition keens on sowing distrust, and that for a few fickle votes. Of course there are people who allow themselves to be taken in by this distrust-sowing and creation of dissatisfaction by the Opposition, for, after all, it is human nature—and not only a man’s nature—to believe that the grass is always greener on the other side of the fence. But it is also mere human nature always to want the other man to pay more tax than you are yourself paying. It is mere human nature always to regard the other person as having been favoured above yourself. Perhaps it is the French blood in our viens which has led to this, but the saying goes that a nation gets the government it deserves. [Interjections.] Yes, Mr. Speaker, that is true. Now it is a fact that, if this nation of ours were in the long run to lend its ears to this creation of dissatisfaction by the Opposition, it will also get the government it deserves. The tragedy is simply that the decent section of the population, which does not deserve to get such a bad government as we are possibly going to get if those people should be successful, will also have to suffer under that tragedy.

That is why I am certain that the people will not allow themselves to be misled, but that the people will also see this Budget for what it is. In the first instance, as I have said, this Budget is an attempt to cause the State expenditure and revenue to balance. But in the second instance it is an attempt to create the economic climate in South Africa for continued growth and continued progress. Not only in South Africa, but throughout the entire world, the greatest danger which threatens the Western world today is the continued, very high rate of inflation, as I tried to indicate with the excerpt I quoted from that publication. If we cannot deal successfully with that tremendous rate of inflation, we will be on a perilous downgrade which will lead to our destruction. That is why it was necessary for this Government to take drastic steps to combat that inflation. When, in a year’s time, South Africa is in a much more favourable position, I hope, although I am afraid that my hope is not a very well-founded one, that the Opposition, which is now criticizing so harshly, will also give this Government credit for its measures having been so successful. I want to predict with a great measure of certainty, that within a period of two years at the most we will again see a growth in our economy such as we have seldom seen in the past. But before we can continue to grow, we must first eliminate and make impossible the evils of that growth. That is what we are doing with this Budget. We shall succeed in doing so in spite of the fact that we have an Opposition which has most definitely not shown great signs of responsibility this year.

Mr. Speaker, the hon. member for Paarl has a hard-earned reputation in this House for being one of the financial experts on the side of the Government. To this extent I am disappointed in the analysis which he has made of the slashing attack which the hon. member for Parktown who led the debate on this side of the House, has made on the Government today. He has looked at the Budget through wine-coloured glasses, understandably, and failed to find in it any success as far as the Government is concerned.

The Budget debate introduced by the hon. the Minister of Finance and presented to this House last week must surely rank as one of the most disappointing speeches ever addressed to Parliament by the hon. the Minister. It was with anticipation that the electorate awaited the result of this Budget because of their extreme anxiety about the state of inflation which is punishing South Africa today. The hon. the Minister has had before him the expert advice of a number of commissions and, in his own words, the hon. the Minister had all the wisdom of Solomon available to him in the multitude of counsellors who were his advisers.

One report, however, which the hon. the Minister did not refer to is the report of the commission on the Companies Act which was tabled a short while ago. I make special mention of this report, because the speech of the hon. the Minister which was one of the longest he has yet presented, was also one of the most confused. Had he taken cognizance of the recommendations of the commission on the Companies Act, he might well have made a more concise, clearer and detailed presentation to Parliament and to the people of South Africa about our present financial predicament.

During the Easter recess the responsible Opposition has been ably to study the Budget proposals in depth and also the White Papers and the reports which are now available to the House. It has also been possible to assess the reaction of the responsible banking sector, the commercial sector, the industrial sector and the financial Press. It has become abundantly clear that this Budget has not been received favourably by those who have South Africa’s economic welfare at heart.

The reaction of members on this side of the House to the main proposals of the Budget is understandably one that holds the Government collectively, the Cabinet and the hon. the Minister himself individually, responsible for our financial situation. It is a responsibility which the hon. the Minister of Finance cannot avoid. The hon. the Minister has been in office long enough to have presented a series of budgets which should have taken South Africa along the well worn paths of economic soundness which should have assured our future. We have had inflationary threats in the past; we will have them again in the future. But at the moment we have an inflation which the Government has proved itself to be quite incapable of handling. For years the responsible Opposition has been criticizing the Government, the hon. the Minister and the hon. the Prime Minister for their failure to heed the storm warnings with which South Africa is now confronted. It was only recently that the hon. the Prime Minister made the comment that the economy of this country is strong and sound and that there are no crisis signals whatsoever. It would appear that the hon. the Prime Minister is in a minority of one in this instance. One has only to take account of the public outcry against the frightening increase in prices during the last three months, an outcry which has become more manifest than at any other time in our history, to realize that the faith of the people of South Africa in this Government, has waned.

The hon. the Minister has pinpointed the fundamental problems which are facing South Africa. They are the problems of inflation and the problems of the balance of payments. His analysis of the underlying imbalances which have given us cause for concern is known to all of us. They are our excessive consumption expenditure, wage and salary increases, too easy credit facilities, falling consumer savings, excessive imports resulting in high inventories, a worsening balance of payments, and labour shortages in both the fields of skilled and semi-skilled labour. The hon. the Minister of Finance has made a stand on the fundamental differences in philosophy between those of us on this side of the House who believe in productivity, and the growth of our country’s economy and those whom he represents who believe that we must restrain the economy, that we must be conservative in our outlook and that we must hold back the country, those who are in favour of contraction of demand through restrictions on consumer patterns, additional taxation and loan levies and a lower standard of living.

The hon. the Minister and his Government have indulged in a political sleight of hand by using their taxation by instalments during the last three months to be imposed on the country in a series of increasingly hurtful financial measures. These can only be regarded as the actions of a government which is in despair. I want to refer briefly to the hire purchase controls which have been introduced by the hon. the Minister of Economic Affairs, to the sales tax introduced in the Part Appropriation Bill by the Minister of Finance, the increase of postal rates, the rail surcharges, the petrol levies and, now, the restrictions which are presented by this main Budget.

I want to refer briefly to two statements which have been made by the hon. the Minister in his Budget speech, and which call for comment. They exposed two economic fallacies. Firstly, he was pinpointing the reasons for the rapid increase in consumer expenditure, when he criticized the influence of sales media as being detrimental to our economy. In the second place he was speaking about an exaggerated preference for imported goods when he said, inter alia, that these goods which are often considerably more expensive than the local articles are displayed on a grand scale in the shops and are apparently bought by an undiscriminating public on account of their prestige and their snob value. The hon. the Minister appealed to the consumer to break away from this immature preference and to cultivate a just pride in our own South African products. Each of these is an economic fallacy which one does not expect from the hon. the Minister. Only recently, in the Part Appropriation Bill debate, the hon. member for Carletonville listed high pressure salesmen as being unproductive parasites on the economy. Now again the hon. the Minister attacks the concept of sales media as being reprehensible.

I need only make reference to the fact that today most industrial nations in this world are making outstanding efforts to out-produce and to out-sell their competitors in world markets. It is generally realized that in this competition for higher living standards amongst the nations, the rewards go only to the winners. Competition for export markets has never been keener. It was America who first showed the world how sales media could make possible new outlets for increased productivity in this machine age. To make my point beyond doubt, I would like to quote briefly from a commentary on the American philosophy regarding economic prosperity. This was handed to me recently by an American visitor. I quote:

Are we to infer from the hon. the Minister that our whole selling effort should become less aggressive in South Africa’s efforts to capture world markets in steel, diamonds, precious metals and agricultural products? No, I think we must stop regarding sales promotion as an evil and that we must look upon it rather as a fundamental part of our whole distributive machine.

The hon. the Minister also accused South Africans of having developed an exaggerated demand for luxury products. If I recall correctly a similar official statement was made by an early Dutch governor of the Cape, Ryk Tulbagh, when he introduced his sumptuary laws. I trust that the hon. the Minister does not have any act as detrimental as this in mind. Let me remind him that it is the Government’s economic policies which have led to the non-availability of our traditional labour source to our housewives which have now resulted in so-called status symbols making their appearance in South African homes. I refer briefly to symbols such as washing machines, floor polishers, vacuum cleaners, refrigerators and the like.

And dishwashers.

Yes. It should be a source of pride to this Government that some South Africans, and I say again “some” South Africans although not the mass, are today enjoying living standards which are becoming comparable with those in countries such as America, Britain and the Continent. When the hon. the Minister criticizes the undiscriminating public for their immature preferences for imported goods let me remind him of two economic facts. In the first place, I want to remind him that the sovereignty of the consumer is still alive in a country such as ours where we have the right of economic freedom. Secondly, the hon. the Minister himself has relied upon the availability of imported goods to keep down the tendency of South African manufacturers to raise their prices inordinately in the face of not having overseas competition. The hon. the Minister has also been inconsistent in his theorizing by first listing increasing imports as a weapon for the control of inflation and then criticizing the public for showing a preference for such imports. The public is far from immature when making its purchases in today’s markets. Faced with increasing prices and a fall in the value of real earnings the public is today more than discriminatory in its choice between an article which has quality and is pricey and that which is inferior and is not pricey. This applies whether the article is manufactured overseas or in this country.

Just as there is no section of the public today which is escaping the harsh punishment of inflation there is also no section of the public today which is escaping the harshness of the indirect taxation methods which are being imposed under the present Budget. It is recognized that the incidence of indirect taxation unfortunately falls most harshly on the poor. For these people the prospects of having “coarse rice to eat, water to drink and folded arms for a pillow” are real indeed. In his efforts to cure our inflationary malaise through shock treatment in the short period the hon. the Minister has given us no guarantees whatsoever that these cures will be effective. This is a cause for major concern. It is tragic that the Government resolutely refuses to recognize that the only sound way, as economists have been saying for years, is to increase our national productivity. There have been warnings from both the industrial and commercial sectors that increased taxation through sales taxes is going to raise the cost of living and that this in turn will result in wage demands which will be almost impossible to resist. Our present condition of hopeless over-employment merely adds fuel to the fire.

The public have looked in vain for some gesture from the hon. the Minister that he will reconcile his appeals to the public to show restraint with restraint in the Government sector. They have looked in vain. To this extent the hon. the Minister has failed utterly. In fact, State spending both this year and in the years which lie ahead of us shows signs of reaching record levels. It is all sectors of the economy that will continue to feel the crunch until current inflationary trends are halted. Our gold mines, upon which we rely so heavily, are faced with rising costs, while the official price of gold remains static. Our exports are rapidly being priced out of the world markets. Under this category I refer particularly to our farmers and the agricultural sector, who to a large extent are amongst our largest exporters. The life of the farmer has not been easy, and the Government in the past has done little to make it any better for him. Affected as the farmer is by high interest rates, rising costs of machinery and equipment and the worsening labour position, the farmer in South Africa is faced with a future which is far from rosy. This country can ill afford the drift into the towns which we are now experiencing as far as the agricultural sector is concerned.

The industrialist has lost confidence and is burdened by scarcities of labour. The salaried man and the wage earner see the value of their earnings being rapidly eroded at an alarming pace. To the learned, the academic, there is little joy or relief in store. But of all these categories, although they suffer to a greater or lesser degree, it is the pensioner and the aged amongst all the sections of the population who are most harmed by the present inflationary trend. We welcome the social concessions that have been made by the hon. the Minister in his Budget, the civil concessions and the housing concessions. We welcome the concessions to the wool industry. The R7 million will be well received by the Stabilization Fund.

But it is when we come to the direct tax proposals that we have much greater cause for concern. I refer to the new comprehensive scale of income tax on individuals., Normally, provision for abatements is made in order to effect a fair and equitable treatment of taxpayers in all categories, in both the lower and the higher income groups, as opposed to the system of rebates, which gives the same tax deduction, regardless of the rate of tax being paid. There is a built-in factor in the present proposals for reducing abatements for taxable incomes above R5 000, which ensures that the abatement disappears in the case of unmarried individuals at approximately R8 300 and for married individuals with no children at R10 700, scaled to married individuals with five children at R23 500, and so on. This means that above these levels of taxable income there appears to be no distinction made between a taxpayer with no children and a taxpayer with five children.

As regards the proposals covering income tax and loan levies, it should be noticed that the new loan levy is not imposed on the block scales as was done with normal taxation. This means that at each point where we have a change-over to a higher levy rate, the additional percentage is charged on the whole amount of tax payable. It follows that at these cut-off points, a levy in excess of R1 is payable for the additional amount of R1 earned. This is particularly bad at the point where one’s tax passes the R5 000 mark, because here the additional levy will amount to R100. In other words, by earning an additional marginal R1, an additional R100 levy becomes payable.

My hon. friend, the member for Park-town, has referred to the loan levy on dividend receipts. It has been criticized, and I do hope that the hon. the Minister will respond to the comments made against this tax, which could be so unpopular and could possibly yield so much more than is called for.

Again I refer to income tax being based on world sources. I feel that following the hon. the Minister’s announcement of his intention to base income tax on income from world sources as against the present system of income from local sources, a number of problems may well arise which he may or may not have foreseen. For instance, Sir, non-residents will now pay a consolidated tax which equals the old tax plus the provincial tax. This may well represent a one-third increase in taxation. Referring to the withholding tax, there may be countries which are allowing South Africa know-how under patent arrangements, giving us the use of both these patent arrangements and the know-how. This will then result in the overseas companies being taxed by one-third to their great displeasure. This could be overcome if the knowhow that is linked to the use of the patents could be deemed to be income from a South African source. This would then mean that it would only attract South African income tax.

It is certainly clear that whilst the Government’s recently introduced indirect sales taxes may have been designed to flatten out the bulge incidence which resulted in so much unfavourable comment in the past, today under the present tax proposals, persons in the higher income groups at any rate are going to have the highest marginal taxes ever. This in fact is a hard budget. It is a budget of despair, a budget which acknowledges the failure of the Nationalist Government to rule South Africa in such a manner as to provide a viable economic future for all our people. It is a negative budget which fails to recognize the true nature of our South African economic ills. It fails to give hope to all our people. It fails to break the psychological log-jam which is inhibiting the growth of so many of our industries which in the last instance must create that wealth in which we will all share.

What is worse, this Budget discourages immigration. It is a budget which does nothing to encourage immigration of skilled workers into South Africa. It should be recognized that the whole success of our economic development programme within the Republic of South Africa depends fundamentally on no less than 30 000 immigrants coming into this country annually. This Budget may well see the drying up of available material.

The Budget does nothing to encourage economic productivity.

No less a speaker than Mr. Harry Oppenheimer, who has been referred to overseas as our finest public relations officer, has stated that he sees the people of South Africa as being gloomy and depressed. In fact, he has described the reason for the Stock Exchange slump—a slump which has been ignored in two Budget speeches by the hon. the Minister of Finance—to the fact that investors are worried about the possibility of long term economic stagnation, stagnation which could result from the Government’s policy of attempting to carry on the development of South Africa with only 20 per cent of its people doing the work for the entire nation. People in South Africa see the impossibility of dealing satisfactorily with our race relations under the present financial trends engendered by this Government. Stagflation has been the choice of the hon. the Minister of Finance and not any cure for inflation. We are witnessing an unparalleled movement on the part of the Government to the centralization of local authority and provincial power in the hands of the Ministries.

I want to make brief reference to the fact that the hon. the Minister has in the past accused us on this side of the House of making no counter proposals. I wonder whether the hon. the Minister will not take cognizance of some of the following proposals, proposals for which I claim no copyright since they come basically from no less a person than President Nixon of the United States. We have been told in this House that inflation is not a local phenomenon but that it is worldwide. The approaches of President Nixon to the problems of combating inflation are almost diametrically opposed to those expressed in the policies of the hon. the Minister of Finance. Where the hon. the Minister speaks of the need of dampening the economy, for less spending and more saving, and for conservatism in our view of the future, President Nixon speaks of a vision of a new American revolution fuelled by basic re-organization of the Government to engender a new spirit filled with vigour and freshness. Sir, the President has called upon Congress to set free the full genius of the American people through the realization of six great goals of government. At a time when it would appear that the Nationalist Government is concentrating far too much power in the hands of the Executive, by far the most dramatic of Mr. Nixon’s plan calls for a merger of the functions of seven departments of the Executive branch into four main groups. He has asked Congress to co-operate in incorporating the Departments of Transportation, Interior, Health, Education, Housing, Agriculture, Labour and Commerce into four new departments of Natural Resources, Human Resources, Economic Development and Community Development. Mr. Speaker, in the face of discussions which have taken place in this House, it is interesting to note the President’s plans for Congress to take new initiatives on the subject of environmental protection, and he has also repeated his call for the sharing of federal tax receipts with the individual states and local authorities. He has spoken of a full employment Budget which will help to stimulate the economy and so open new job opportunities for millions of Americans. Mr. Speaker, at a time when our Government is using the recommendations of the Schumann Commission to deprive the Provinces of much of their autonomy. Mr. Nixon has said that his revenue sharing plan was designed to reverse the flow of power and resources, from Washington to the states and local authorities. He hoped that this would be the beginning of a new partnership in which the Central Government would entrust the states and local authorities with a larger share of the nation’s responsibilities. He noted, Sir, that without change there can be no progress and he said that it was in his power to give power to people, not to take away power.

Finally, Sir, if the hon. the Minister is really sincere in his desire to combat the evil forces of inflation, may I commend to him certain new initiatives put forward by Mr. Donald S. McNaughton, President of the Prudential Insurance Company of America, when he proposed to President Nixon that Congress create a national commission on the cause and prevention of inflation; that it should be a continuing commission —a permanent National Conscience on Inflation; that its members should represent a cross-section of economic viewpoints, and that there should be men and women with the breadth of vision to enable them to place the overall national interest above that of their immediate political constituencies, and that such a commission be charged with the principal task of studying the relative importance of a proper balance between monetary and fiscal approaches to controlling inflation. Sir, these are some thoughts which the hon. the Minister might wish to ponder. They are being considered by countries larger than ours. South Africa is a great country, but our problems of administration are not big in the sense that administrative problems are big overseas.

I have great pleasure, Sir, in supporting the amendment moved by the hon. member for Parktown.

It is very clear, if one has listened to those hon. members opposite who have spoken up to now, that it is undeniably true that in their speeches the emphasis was actually laid on the fiscal measures and that they did not view the Estimates as an instrument of economic policy and the implementation thereof. It is not my intention to reply specifically to the hon. member for Gardens, except that I shall refer to him in the course of my speech.

Mr. Speaker, it seems to me that I find myself in the peculiar position of having to agree with the hon. member for Park-town on one particular statement he made, namely that this Budget is a disappointing one. Unfortunately it is disappointing in a sense quite different from what he had in mind. I think it is disappointing to the hon. member and his colleagues because they found something different from what they expected. I think that prior to the Budget speech they actually incited the public to expect shocks. In contrast to their expectations they found something different …

A U.P. shock.

What they found in the process, was actually a U.P. shock. After all, in the past hon. members opposite suggested with great prolixity that this Government was not one which was interested in the man in the street, that the Government did not look after his interests and did not take his circumstances into account. I think the hon. the Minister succeeded in a masterly manner in refuting an argument, and I want to concede at once that that argument is an academic one. But I think he did much more than that, i.e. in his Budget he took into account not only the interest of every sector and every group, but also the interests of South Africa, and to my mind that is in the final analysis the most important test which one should actually set to find out to what extent a budget is in fact effective and adequate. Furthermore, my charge against the hon. members opposite is that in their premise and in their assessment of these Budget proposals—-in fact, of every step taken by the Government—they do not make the interests of South Africa a decisive factor. That is a pity, for it is true that also the bottlenecks which exist in our economic life cannot be eliminated by the Government only, but that this is actually a process in which we should share collective responsibility with every citizen. I believe that hon. members opposite should, instead of speaking in disparaging terms and of adopting a pessimistic and defeatist attitude, join this side of the House in making an appeal in order that we may make a joint effort to eliminate the existing bottlenecks. I think the time has arrived for us to stop taking a personal and a selfish and a petty party-political view of everything. When a country is faced with a military or physical threat, it is easy to call up the people to avert the dangers, but it is very difficult to be able to do this in the economic sphere.

Although the Budget proposals mainly comprise taxation proposals, they have a much wider effect and extend over the entire national economy, and therefore they affect every sector of our community. I think the basic mistake made by hon. members opposite, is that they do not realize, or do not want to realize, that disciplined economic development, sustained and planned economic development, must not only ensure us a higher standard of living in our country, but is also fundamental to our country’s defensibility and preparedness in every sphere of life, be it in the military or the educational or the spiritual sphere; and that is why, in this specific regard, one would expect them to participate in this appeal for disciplined action on the part of our community outside as well. During the past decade, and especially during the past number of months, we have all been treated to, and on many occasions we were also glutted with, a dialogue between a damping school and a growth school. Hon. members opposite lustily participated in this dialogue and quoted people in support of their particular standpoint in this regard. I want to make this statement without qualifying it in any way, namely that when it is implied that this Government wants to put a damper on the growth of our country, it is a statement devoid of all truth. I want to make the statement that to my mind no Government in South Africa has ever been more keenly aware of the necessity for, in fact, a high growth rate in the general interest of our country, but unlike hon. members opposite, it is the responsibility of this Government not only to advocate an idealistic, high growth rate, but also to correlate the growth rate of the country with the growth potential of our economy. That is the aspect which is often overlooked by the hon. members opposite, be it calculatedly or intentionally. A country’s growth potential depends on its natural assets, its raw materials, its available capital and its available manpower. To speak of a growth rate in a vacuum, as was done by the hon. member for Gardens, is actually meaningless. It makes no concrete contribution to the debate. For that reason it is important that we should take into consideration not only our natural resources and our labour, but also the quality thereof. I now want to sound this general warning: Nothing can be more dangerous to our economic development than in fact to exceed the growth potential of our economy. That is the general experience of all countries of the world, and for that reason the consequences of exceeding the growth potential can be perceived in a visible form. This must lead to the development of bottlenecks in respect of the balance of payments, the labour market and also the capital market. Moreover, to exceed our economic growth potential will at the same time create problems in regard to the provision and the replacement or renewal of infrastructure services. In this process one must warn against the specific danger that the pursuit of an excessively high growth rate, which does not relate to the growth potential of the economy, may in actual fact become self-destructive.

I want to make the statement that the bottlenecks which exist in our economic life, may to a large extent actually be attributed to an excessively high growth rate. Is it not as a very result of excessive growth in the South African economy, especially between the years 1959 and 1970, and the concomitant rise in the rate of our gross domestic spending that this increasing number of bottlenecks has originated and developed? There is, for instance, our balance of payments, which showed a deficit of R788 million last year. Then there is the oppressive shortage of manpower, for which hon. members opposite have a panacea as a solution. I shall come to that in a moment. In addition there are the concomitant salary and wage increases, which amounted to approximately 13 per cent last year, the downward trend in our tendency to save, and the resultant shortage of development capital, as well as the upward trend in our interest rates, and inflation.

Sir, rapid growth is not something which one gets for nothing. There is, in actual fact, a choice between higher consumer spending and economic growth. All of us are called upon to make this choice. Are hon. members opposite prepared to join this Government in making an appeal for private consumer spending to be curbed? Are they prepared to join this side of the House in making an appeal for increased productivity, or do they expect the Government to be the alpha and the omega for increased productivity in all its forms? The reply to this is in the negative. They are the people who are raising the battle-cry that the State is wasting money and that the spending in the public sector is increasing at an excessively high rate, but, on the other hand, they are the people who are advocating better and more housing, better provision for civil pensioners and social pensioners, and for the agricultural sector. And when the Government looks after the interests of all of these sectors as was in fact done in this Budget, those hon. members level the accusation that this Government has been wasting the money of the public and therefore it is unnecessary for them to save.

What are the true facts, Sir? The sharp increase in the private consumer spending in 1969 was responsible for the fact that there was less capital available for development purposes, so much so that the net capital formation in fact showed a downward trend. As I have said, in 1970 salaries increased by approximately 13 per cent, which was a good thing. But, in the absence of a significant increase in the personal savings, this contributed to the inflationary overspending in our economy.

There is no point in keeping quiet about these matters. Nor is there any point in hon. members opposite pleading, for temporary gain, for all these services to be improved and, on the other hand, for all taxes to be reduced. To my mind they have a responsibility to co-operate in order that these bottlenecks may not only be identified, but also minimized and eliminated. An accelerated rate of inflation and balance of payments deficits are indications of the growth potential of our economy being exceeded. Whenever a country exceed its growth potential all the time or for a long time, it is obvious that structural inflation is the result of that process; in other words, a low rate of growth and a high rate of inflation.

With a rapidly developing country and a rapid growth rate in the economy this is an elementary fact which is being acknowledged by the world but which is apparently not being appreciated by hon. members opposite, namely that efforts will be made to slow down or restrict the rate of the increase in consumer spending. If this is the case, why are hon. members opposite opposing the Government’s efforts to curb consumer spending? Why are they suggesting that the orthodox monetary and fiscal measures are no longer effective for curbing it? But, what is more, what do the hon. members opposite want to put in the place of these measures? There is an old Scottish proverb which says, “Talk is cheap, but it is money that buys the whisky”. There is no point in hon. members doing nothing but talk. Hon. members ought to come forward and make suggestions by saying, by way of an amendment, what they want to do to help. What are their objectives for the economic life in South Africa. Instead of responsibly supporting the Government in its work in the interests of the country and, in the final analysis, also in the interests of every individual in our country, these hon. members are only prepared to make an appeal to what is basically selfish in our national life. That will remain the charge against them in this specific regard.

The hon. members opposite have discovered a new magic word, which is going to solve all our problems, our economic problems as well. Do hon. members know what those magic words are? They are “increased employment of non-White labour”. To them these words offer the solution to all our economic problems. This is an Opposition which can lay no substantial claim to the role of an alternative Government, which does not or does not want to realize that, if a country exceeds its growth potential and does not correlate it with its labour capacity, these problems will in fact result. The economic development programme lays down for us a specific growth rate for the next five years. By whom was it drawn up? In the first instance, it was drawn up by experts. They fixed it at 5,5 per cent. What is more, this growth rate correlated with the country’s potential has also been accepted by the Economic Advisory Council, which consists of the top businessmen and policy-makers in South Africa. What grounds does the United Party have for claiming that the growth potential of this country is 10 per cent? This is what they claimed last year. In the meantime they have admitted to the absurdity of this claim. Now they are claiming that it should be more or less 7 or 8 per cent. This is what they claim, whilst nobody who is actively concerned with these matters, agrees with them. No, I want to suggest that this is just another example of their opportunistic superficiality, of their lack of realism and of their irresponsibility. But let us examine this higher growth rate, to which the hon. member for Gardens also referred. I do not know what percentage he had in mind. I do not know whether it was the 10 per cent of the hon. the Leader of the Opposition or whether it was the 7 or 8 per cent of the new method. But let us consider this higher growth rate in relation to the potential of our country. What is the position now? Should the agricultural sector make a greater contribution to our economic growth? Should the agricultural sector make a greater contribution to our gross domestic product? Is it possible for the gold industry to make a substantial contribution in this regard? I certainly believe that hon. members on that side of the House do not expect the service industries, such as the public administration, to be virtually doubled. That is what will happen, if we have to do that. I do not think they expect the professions to do that.

The industries.

The hon. member says the industries. I am coming to that matter. I am pleased that he has mentioned it, for he always gives me an opportunity to answer.

In other words, the industrial sector and the rest of the mining sector, excluding gold, and the service industries, such as transport services and commerce, will then have to be held responsible for this target which hon. members opposite are laying down, i.e. a growth rate of 8 or 10 per cent, according to their choice. But what does it mean? If this target is to be pursued as an ideal, it means that proportionately not only the employment, but also investments in these sectors, will have to increase more than the growth rate set as a target by these hon. members, for certain sectors cannot make any contribution. In actual fact it means that with such a growth rate of 10 per cent per year, the growth rate in our manufacturing industry, the mining production, excluding gold, and certain service industries will on an average have to increase by 14 per cent per year and by 11 per cent if the growth rate is to be 8 per cent. What do hon. members opposite advocate in this particular regard? It is very easy to speak in vague terms of a higher growth rate. But why are hon. members on the other side of the House not prepared to reduce it relatively to the facts and the potential?

How is this growth rate going to be achieved without the existing bottlenecks— and they do exist—in our economy assuming critical proportions? Or is that precisely what hon. members opposite want? How can this higher growth rate be achieved without the rate of inflation assuming the same proportions which we find in the South American countries, which the hon. member for Gardens has so lustily quoted in respect of the economy of their states?

Let us consider the labour question, for this is, after all, one of the components determining the growth potential. For the purposes of my argument I am prepared to forget about that absuridy of last year, and I shall concentrate on their growth rate of 8 per cent per year. With a growth rate of 8 per cent per year it will mean that the total employment will be 67 000 per year more than the number required by the economic development programme for a growth rate of 5½ per cent. Where are these workers to come from? I wish hon. members opposite would tell me. Let us be realistic about these matters. At present the Republic’s number of workers is increasing, on an average, by 183 000 per year.

All of them?

Yes, White, Brown and Black. That does not include the hon. member for Maitland, for he does not work very hard.

To maintain a growth rate of 5y per cent, a number of workers of 188 000 per year is required. In other words, at a growth rate of 5 per cent per year the total that can be provided per year is already inadequate. I grant that labour is an extremely important production factor, not only because of the important role it plays in the development process, but also because it represents people, people who react in an organized manner to changed man factors, to changed political circumstances, to political events and to social circumstances within the framework of which they have to live and work. I want to sound a warning against one thing which is being done by hon. members opposite. They are taking a hand in a trend which is becoming more and more visible, i.e. that of regarding the labour force in our country as nothing more than a mass production machine and ignoring the other factors. I must warn hon. members against this. It stands to reason that economic prosperity is the objective of any country and any government, because apart from any other consideration, any culture also has its material side. However, in looking at the mass unrest throughout the world, I am beginning to doubt whether the prosperity which we are actually enjoying, serves the purpose for which it was created.

Furthermore, it is essential to note that the White labour force—and they represent roughly 19 per cent of the total labour force—will increase at a rate of 36 000 per year over the next five years. In this respect the economic development programme once again assumes that 39 000 Whites are required for ensuring the rate of 5,5 per cent per year. I must add that these figures to which I am referring, include 30 000 immigrants as well. Taking everything into account, I think that the improvement of the quality of our labour and of our available manpower is essential. It is essential for the enhancement of labour productivity, and it is necessary for ensuring an economic growth rate, for it will enable us to grow without inflationary trends, which we are experiencing at the moment. For that reason the training and utilization of manpower are an important element in the economic progress of any country. The Government has been taking this fact into account, also in this particular Budget.

That is why the Government took in 1969 a specific step, which is fundamental to economic progress, namely to devise and provide a system of development programming, in the first place, so that a survey may be made of the manpower needs of the country, and, in the second place, so that these surveys made in turn be correlated with the training which has to take place on the basis of these investigations. That is fundamental to growth. Furthermore, the fact has to be accepted that as regards the White labour force, they will have full employment for the time that lies ahead. What we should also take into account, is the fact that the White labour force is responsible for the creation of opportunities for work for the rest of the labour force of 81 per cent. That is why a training programme is essential. That is why this is a long-term task, the results of which are not visible immediately, a task which this Government undertook long before hon. members opposite ever gave any thought to it.

The hon. members are saying that this Government is doing nothing to ensure production and nothing to stimulate industrial development. They are now the champions of industrial development, but consider what their political history and their political record look like! I would be ashamed if at this stage I were to become the champion of industrial development in this country, whilst I had a record such as that of the hon. members opposite. [Interjections.] I have now been asked how many Nationalist industrialists there are. I just want to say that this Government does not create opportunities for development on the basis of people’s political convictions, but that it does so for all people in South Africa who want to work. What Government saw the possibilities for industrial development for South Africa on the import replacement basis? Who took steps in spite of the opposition of commerce at that stage? Who negotiated for tariff protection for local industrial development purposes? Who proclaimed it gradually? Who intends to do the same in the future, when negotiations are being conducted on the terms of the G.A.T.T.? In order to encourage the import replacement development in South Africa, studies were undertaken by this Government in specific sectors and industries, such as the textile and the chemical industries. These possibilities were investigated, studied and made available and also distributed abroad. In 1958 the Viljoen Report was published, a report which dealt with industrial protection, whilst the Industrial Development Corporation was developed and established and forms a key not only for industrial development, but also for industrial decentralization in our country. This Government, which is now being accused of not taking an interest in industrial development, established Sasol. It has also encouraged the fertilizer industry. Moreover, it initiated a shipbuilding and an aircraft industry in South Africa. It also took the initiative in respect of the local manufacture of motor cars. It also launched an armaments industry of our own. In going back into the history, one sees that this Government has a record of stimulating industrial development in South Africa, a record to which hon. members opposite can lay no claim, for this took place in spite of them and not with their aid. Extensions to the steel industry are being envisaged at present. Last August, in the Budget proposals, the hon. the Minister announced the new incentive measures for stimulating new industrial development. In this Budget he did so again. However, hon. members opposite can only see the negative aspects, for none of them have as yet seen anything positive in the Government’s proposals.

It is true that at the end of 1970 industrial development levelled off, but in analysing the facts, this does not astonish me. What are the facts? The gross domestic savings in that particular year amounted to R2 854 000 000, whereas the gross domestic investment was no less than R3 642 000 000. That also explains in part the overspending in our economy. [Time expired.]

Mr. Speaker, I am not surprized that the hon. member for False Bay has put the cart before the horse and blamed overspending and a too high rate of growth for our economic problems when they are really due to our failure to use our resources, particularly our labour resources, to our best advantage. We have listened to a sermon on misguided economics from the hon. member which was an attempt, I think, to take the limelight off such a bad Budget. What does surprize me is that so many members on the other side are imbued with this kind of economics.

However, I would now like to return to the Budget. I believe that when one takes into account the trend of Government expenditure over the past few years and the consequent trend of taxation to finance that Government expenditure and puts both of these into the framework of the restrictive practices of the Government with its policy of separate development, there is nothing surprizing and nothing unusual about this Budget. Given the assumption that the restrictive Government practices would continue, it would have been possible two years, three years or even longer ago to have foreseen the type of Budget with which we are faced today. We can now even foresee the type of Budget that we are likely to have next year, or even the year after, unless there is a radical change of policy and our labour forces are developed and employed to better advantage. The picture we foresee for the next year or the year after is not a very encouraging one. I say this because all the available statistics of Government expenditure in relation to the income which is produced by the resources of the country point consistently to the same conclusion, namely that the Government is spending a larger and larger proportion of the income produced by the resources of South Africa.

To illustrate my point, I will quote a few statistics comparing the years 1966 and 1970, which is the latest year for which statistics are available. I have chosen the year 1966 completely at random. Had I chosen a year or two previous to it, or any year subsequent to it, the conclusions would have been exactly the same. When I speak of Government expenditure, I speak of the expenditure of the Government as such and I do not include the expenditure of the Government’s associates, the Railways and the Post Office. Over the period from 1966 to 1970, Government expenditure has increased by 54 per cent, whereas expenditure by the private sector has risen by only 45 per cent, and the gross domestic product of the country has risen by the same percentage. In other words, private expenditure is keeping pace with production; it is Government expenditure that is rising at a considerably higher rate than production.

Taxation, as a percentage of the gross domestic product, has risen from 16,8 per cent in 1966 to 19,2 per cent in 1970, while direct personal taxation plus indirect taxation has risen from 15,2 per cent of personal disposable income before taxation to 17,1 per cent in 1970. The implications and consequences of this picture on the economy and every inhabitant of the country, are so far-reaching that they require to be known and understood by all. I shall mention one or two of them. The process of the State taking a larger and larger slice of the national cake, may have some justification in a young country where the infrastructure has to be built up to provide a platform from which economic development can take place. But for the State to take a larger and larger slice of the cake is not healthy, unless the money is being spent wisely and in accordance with a predetermined set of priorities, and unless the size of the cake is allowed and encouraged to grow, so that the total size of the cake is large enough to provide for the larger and larger slice which the State takes. This, I am afraid, is not happening in South Africa, as is shown by the Budget for 1971-’72 which we are now discussing. Whereas last year revenue was sufficient to provide a surplus over expenditure, as was the case in preceding years as well, this year, merely in order to balance the books —no more and no less—taxation has had to be increased substantially, and it is only because the national product has not grown sufficiently fast to finance expenditure at the former rate of taxation. Unless the national product is allowed and encouraged to grow and is not tied to a problematical and theoretical 5½ per cent growth rate, it is inevitable that next year taxation must be even higher. That would be the position unless, of course, the rate of growth of State expenditure is cut. I believe this to be a poor prospect for a country such as ours with such a potentially strong economy. It is certainly one which is completely unnecessary if an imaginative programme for the development of our available indigenous labour resources, as is envisaged by this side of the House, were to replace the restrictive policies of the Government.

I think that Dr. Jan Marais put the position very aptly in Sake-Rapport of 31st January. He said—

My point is that we can do much more.

A second consequence of the progressively larger proportion of people’s personal disposable income which is being taken in taxation is that the ability of the public, and for that matter, corporations as well, to save is being seriously curtailed. I repeat that the percentage of personal disposable income taken by personal direct taxation plus indirect taxation has progressively increased from 15,2 per cent in 1966 to 17,1 per cent in 1970. I have no doubt that with this Budget that we are now debating that percentage is going to rise very considerably in 1971. You cannot impose maximum marginal rates of taxation, including loan levies, of as high a rate as 78 per cent—which is the case in this Budget —on individuals without severely limiting the saving ability of the people who are most able to save. I think that the effects of the rates of taxation announced in this Budget are even more clearly demonstrated if one takes the example of what can happen to company profits before they finally become spendable income. Taking the profit of a company before tax as being 100, the tax on that, including the loan levy, is 42,5, which leaves 57,5 available for distribution. If the company retains 25, which is a low percentage according to normal practice, there would be left 32,5 for distribution. If the company is a subsidiary of a holding company, it will pay that amount to the holding company, who will then pay at the 7½ per cent loan levy rate, 2,4 of the dividend received, leaving 30,1 for disposal. If the holding company’s shares are owned by, say, a closed-end trust company and the dividend is then paid to the closed-end trust, it will pay on that dividend, at the rate of 7½ per cent, 2,3, leaving 27,8. If that is now paid out to a taxpayer who pays at the maximum marginal income tax rate, which on dividends is 52 per cent, he would pay out 13,5, and of the original 100 profit 14,3 would be available for spending or for saving. To summarize, what has happened to that 100 profit is this: The State has taken 60,7, 25 has been retained and 14,3 is available for spending or saving.

It is no coincidence, Sir, that during the period that I have been quoting, 1966-70, the percentage of personal disposable income which has been saved has fallen from 11,1 to 8,6 and, in the light of this Budget, is obviously going to fall to a lower percentage this year. I have no doubt that this decline in savings has been reinforced by a disinclination to save during times of inflation when prices are going up and it is better to spend than to save and when the value of savings is depreciating. But I also have no doubt whatsoever that the main element that is causing a lower level of saving is the higher rate of taxation which people who are in a position to save are having to pay. Mr. Speaker, the savings position is a serious one because it is primarily from savings that capital is created. While the importation of other countries’ savings in the form of capital may be justified, it must not be allowed to replace or to camouflage any deficiency in our own savings performance. After the shortage of labour and the deficiencies in the infrastructure such as prevail in transport, telecommunications, housing and so forth, it is the shortage of capital from savings for long-term development that is the main bottleneck facing the economy today.

Sir, the pool of capital is a limited pool, and both the State and private enterprise are competing for it, but the State has the advantage in that it can take the first helping by way of loan levies and, in the past, by way of taxation surpluses. I believe that this is an advantage which the State should use very sparingly and only in respect of capital expenditure of the most essential nature, such as defence and housing, and that the Government should subject itself to the rigours of the discipline of the capital market to a very much larger extent than it does at present because then it would become more aware of the rival requirements of the private sector. Borrowing in the market-place in the place of enforced savings will not necessarily lead to an increase in interest rates, because the capital pool will be all that much larger and there is also likely to be stricter discipline by State departments on their capital expenditure if that expenditure has to pay its way. The possibility of the Government having to raise its borrowing rates, which I foresaw when I spoke in the Part Appropriation debate, has in fact already been realized when those borrowing rates were increased just prior to the Budget. I do not think that if the Government were to change from a policy of enforced borrowing through loan levies to one of going into the market-place, it will necessarily cause a further increase in interest rates.

I welcome the premium bond scheme which the Minister has announced, but only as a means of raising capital in the open market. But on the assumption that these bonds will carry taxation at the same rate as dividends, which I interpret as being the recommendation of the Franzsen Commission, I regard the premium bond scheme merely as another borrowing scheme which will compete for the savings pool and not as an instrument which will induce the public to save more. In its present form the premium bond scheme is yet another avenue for the investment of savings which does not offer any pronounced advantages over other avenues already open to investors. If the premium bond scheme is to be a real stimulant for savings, I think it must carry much more definite and imaginative conditions than it does at present. I know that the element of gambling is not likely to be accepted, but it would be a very great inducement to making the premium bond scheme a success. Other features to make the premium bond scheme more attractive would be to make it negotiable on the Stock Exchange so that there would be the possibility of capital appreciation and also so that investment in these bonds would be a liquid investment, and for investment in premium bonds to enjoy some additional relief from taxation compared with other forms of investment. It would be a great advantage and an incentive to invest in these premium bonds if, for instance, a R100 investment in a premium bond were to relieve the investor of some of the obligation to pay the loan levy; say if an investment of R100 in a premium bond would save the taxpayer up to R50 in loan levy.

I also suggest that particularly under the present conditions of inflation the policy recommended by the Franzsen Commission and already being implemented by the Post Office, of financing capital expenditure out of revenue, is at this juncture an unwise one. In the first place it is cost inflationary because taxes, tariffs and rates have to be set at a higher level than would otherwise be necessary in order to provide for capital expenditure. In the second place, it relieves the State and State enterprises of the discipline of the capital market, and provides them with no measure of whether the capital they are spending is in fact being spent in the most desirable or productive manner. In the third place, it means that the consumer of today is being made to pay for the capital which the consumer of tomorrow is going to enjoy.

I have dwelt on the question of capital at some length, because it all comes back to the question of savings. It is absolutely vital that we increase the level of savings in this country in order to increase the capital pool, not only to provide for State capital expenditure, but also to provide the means for private enterprise and producers to expand their capacities to cater for the increased requirements of the country in the future. I regard it as shortsighted and dangerous to rely on a curtailment of consumption to stimulate savings, as the Minister appears to be doing. This is only likely to reduce the size of the cake from which the savings slice can be cut. What is needed is a larger cake so that the savings slice can be larger. This can only be brought about if our resources of labour are developed and employed.

I should now like to turn to the Budget. I regard this Budget as one which does absolutely nothing to tackle the real economic problems facing this country. In fact, if anything, it only makes them worse. This is a Budget which does nothing to tackle the labour problem, and after the vague promises made by the hon. the Minister in his previous Budget Speech, when he said that it was not impossible that he would find a solution to the labour problem, I do not expect much in the way of results from the equally vague promises made in this Budget Speech. The steps announced to encourage investment are negligible. They are more than offset by the increase in company loan levies. Nothing is being done to reduce overall consumption. Spending power is merely being transferred from the private sector to the Government. Inflation is likely to be accelerated rather than dampened as a result of the cost increases which will come from this Budget and from the increases announced in February, together with the increase in railway tariffs and Post Office rates. The Budget is also inflationary because the capital expenditure of the Government is being financed in an inflationary manner. It can certainly be expected that workers will press for higher wages.

Savings are not being stimulated, but rather discouraged by the higher rates of taxation and by continuing inflation, so that the problems affecting capital and investment will remain. What is probably the most serious aspect of this Budget is its failure to tackle basic economic problems, and the effect that that will have on business confidence. For a businessman to plan and invest for the future requires confidence: confidence that labour is going to be available, confidence that capital will be supplied on a reasonable basis, confidence that markets will expand, and confidence that taxation will be at a level where it will provide a just reward for the effort made. I find nothing, absolutely nothing, in this Budget to inspire such confidence.

Mr. Speaker, I have a very difficult task. I want to be fair to the hon. member, even though he puts me in mind of a hen that scratches here a little, pecks there a little, scratches here and pecks there again. I have found it terribly difficult to find a theme in the hon. member’s speech and to discover what he actually wanted to say. In the first place he made a remark about the hon. member for False Bay’s “misguided economics”. If I have ever heard anything about “misguided economics”, I think the hon. member could write a text book about it. I made notes of certain points he raised.

The hon. member made a statement here that I noted down. If I have written it down incorrectly I want to apologize to him. However, I understood him to say in connection with “Government expenditure”—

On what grounds can he say that? There is our Budget. All monetary sources came from the country itself, except for a small amount being loaned from overseas. I shall deal with that at a later stage.

Only R500 million. Is that a small amount?

That poor old friend has confused the capital that entered the country with the amount loaned. That amount entered the country freely. Countries abroad wanted to invest it here. What the hon. member for Constantia said is surely not true or correct. In certain respects he contradicted himself. He also spoke for a very long time about saving. He said—

Why did the Government then introduce a savings levy? Was that not to encourage saving? People can no longer be induced to save. Apparently the hon. member is opposed to any form of savings levy. But a few paragraphs further the hon. member said that the Government should enter the market to allow saving. He said that there should be greater saving. That is once again an example of his “misguided economics”.

The hon. member also quoted something which Dr. Jan Marais had said. I do not have the whole story now, but it concerns the growth rate and the fact that we are ridiculously not able to say whether this is high, low or average. The hon. member endorsed that. I should like him to take our economic development programme and tell us that it is something different from the Budget plan of this country for the next five years. As a business man he ought to know. He worked out a budget for his own business. He planned how the business would develop according to sales, etc. If the Opposition wants another growth-rate, as the hon. member for False Bay also explained, they must come along and tell us that our economic programme is at fault in this or that respect. They must argue the point, telling us where we are wrong. But the hon. member for Constantia comes along and states—

The State is taking an increasingly larger share of the cake. It is dangerous, unless this money is spent wisely …

Then he says—

… but not in the case of this Budget.

However, he does not mention a single case where the money is not spent wisely. He just makes a wild statement. In addition he comes along with the appalling statement, which is truly “misguided economics”—

The financing of capital expenditure out of revenue is inflationary.

Then he says that our “capital expenditure” is inflationary.

Do you deny that?

Ah no, that hon. member must listen for a moment. Supposing we have a very small capital programme and it can be financed from current revenue. If it is financed from current revenue it is surely not inflationistic. But if we have a tremendously large capital programme that cannot be financed from ordinary tax revenue, because it would place too heavy a burden on the electorate, then it is financed from the Loan Account. There is no difference in the cash flow that takes place. How can that be inflationary? It can only be inflationary when much more is spent than is taken by way of taxation from the flow of money.

I do not want to spend any more time on the hon. member. But I do want to say to his credit that he is virtually the only speaker on that side of the House who tried to get to the core of the Budget. At least he tried, whether rightly or wrongly, to give us an example of what should be done. I also want to say that I appreciate his standpoint when he said that he agreed with the hon. the Minister as regards the premium bonds the Government wants to issue.

I must say that all the hon. speakers on the Opposition side have thus far, as the hon. member for False Bay said, confined themselves to trivialities, to smaller details of the Budget. The hon. member for Park-town now sits there smiling. He devoted 45 minutes of his one hour speech to tax proposals. He could surely have raised that when the tax legislation comes under discussion. He did not get to the fundamentals of the country’s economy or of the consequences of this Budget. The hon. the Minister of Finance can feel very satisfied, because I think that the speeches by hon. members of the Opposition serve as a wonderful testimonial for the Budget that he introduced. Has the hon. Opposition come along with any alternative? The only alternative they could propose, was what would bring about a totally integrated social structure in this country, i.e. their new labour policy. On purely economic grounds the hon. Opposition made no acceptable, fundamental, scientific recommendations. They came along with several statements and many words, but they could not furnish scientific proof for those statements. On a previous occasion I have told the hon. member for Hillbrow that he suffers from political stagflation. It now seems to me as if the hon. Opposition’s condition is beginning to worsen. The verbal content of their speeches is progressively increasing while the political content is decreasing.

But I should like to associate myself with the hon. member for Paarl who accused the hon. member for Parktown and other hon. members of the Opposition of one of the grossest misrepresentations we have ever witnessed in our politics. I want to accuse them of political trickery. What has the hon. member for Parktown just said? In his speech he very clearly said that the additional taxes would yield R400 million. He said—

Where is there a greater untruth than this? R183 million of that amount represents direct taxation. R106 million involves loan levies that will be repaid to the public. The service levies of the Railways and the Post Office amount to R121 million. Today I want to appeal to the hon. member for Parktown. This is not how we know him; we know him as a man of integrity. I do not want to argue with him now; it would be childish to argue with him about whether he is right or wrong, because he surely knows that taxes are not the cause. The hon. member for Paarl stated the matter very clearly. Why are there no complaints about the fact that the price of clothes is being increased? After all, this is being done without any tax increase being involved. Prior to this Budget there was a hoard of advisers giving the hon. the Minister advice, or let us say many “pre-Budget speeches”, as they are termed. The hon. member for Parktown made his usual speech, the hon. member for Hill-brow made his usual statement, and in speaking of the Opposition I want to include the English language integrationist, progressive Press. I include them because, as I heard today, they furnish the ideas and write the speeches, because the poor hon. Opposition apparently cannot make the grade. All of them came along with the old saddle-backed donkey, i.e. that the labour policy must be changed and abolished.

Do you not what any change?

Not as far as the labour policy is concerned. That would lead us along a road to integration as surely as the hon. member is sitting on that side. As the hon. member said here, the Opposition then waited for this Budget, thinking and hoping that it would be a terribly ominous one involving fearsome measures. Then it came. How disappointed the United Party was! They sat, one could say, slobbering and foaming at the mouth, waiting for the Budget, and the Budget that came was not the one they wanted. Hence the agonized cry from the hon. the Leader of the Opposition when he spoke of “the Budget we did not want”. However. when one reads his speech further it would appear as if he gave his speech or his statement to the Press before the Budget was introduced, because he expected it to be a terrible burden on the poor young people who are now planning to get married. However, this is not the case at all. He has missed the boat completely. No, this Budget was definitely very bad for the United Party and very good for the National Party and for the entire country. This Budget is a fine piece of work in view of the circumstances behind its development. It is truly a fine piece of work. It is well-planned, well-considered and absolutely aimed at correcting the imbalances prevailing in our economy today. It must correct and combat those imbalances and it must maintain price stability. In order to retrieve their image and to glean arguments, the United Party looked everywhere to economists in order to make extracts of what they said. Looking thus at the situation, we must nevertheless realize that today, as I see it, there are four kinds of economists in the world. The first group comprises the purely academic and theoretical economists. Without wanting to be disparaging and to lay claim to superior knowledge, I contend that they are the people who are always unbiased but who want to lay claim to superior knowledge in their criticism of the Budget. Then one has one’s other economists, but these are all people in the business world. They are in commerce or industry, and each of them will approach the Budget from their particular point of view. They will approach the Budget from the point of view of their own business, always keeping their eye on bigger profits for their own businesses and their own interests. The other two groups of economists are the political economists. There are two species here, i.e. those sitting in the Opposition benches and those sitting on the Government side. The economists on the Opposition side are people who will grasp at any argument, whether economically sound or not, to have their own ideology prevail and to have the Government’s ideology fail. Then there is the political economist on the Government’s side of the House. He is the economist who must take a macro-economic view of the economic situation. He is the man who carries the responsibility and must care for the prosperity of the people. He must take care of the standard of living of the people and he is the man who returns to them at regular intervals to give an account of his stewardship in order to be returned again. The National Party has not done badly here in the 23 years of its rule. On the contrary, it has done very well. The present position is such that the National Party can no longer even measure its achievements against those of the United Party, because theirs are so far off in the past. Today the National Party must measure its achievements against its own endeavours and against those of comparable countries around South Africa where people have the same standard of living. I do not want to go into this, because the hon. member for Paarl gave a very good explanation of what the position in other countries is. We do not have to be ashamed. I am only mentioning this so that we may see the situation in perspective. We must not so easily be misled by economists’ statements. The National Party does not have their support and neither is it impressed by them. The United Party is man enough to promote its own cause. It is also man enough to govern this country and it knows how to handle the country’s economy.

I now want to come to the United Party’s actual attack. The United Party’s attack on the Budget is based on two grounds. They have repeated the same words ad nauseum. They say the Government’s labour policy is the cause of inflation and of the labour shortage. They say that unless the Government changes its labour policy inflation cannot ever be combatted, and productivity will never be increased. The other aspect of their attack is that this Budget is inflationary in every respect. I shall come back to this second claim at a later stage. I want to repudiate both these statements with all the force and power at my command. They are not true. This story about the labour policy being the cause of inflation really borders on the ridiculous. This side of the House has proved over and over again that that is not the case. However, let us look at what happened to the United Party through the years. About two years ago the United Party launched a big attack on the Government, claiming that apartheid had failed. They pointed to the tremendous numbers of Bantu in White areas. They said that apartheid had failed, because just look at the large numbers of Bantu in White areas. Somewhere in the United Party’s “brains trust”, however, someone discovered that the United Party should rather advocate the presence of more non-Whites in White South Africa because it would be beneficial to their policy. Suddenly we no longer heard that apartheid had failed, but that apartheid had been successful. The United Party then argued that there should be increasingly more workers. That is not an economic argument. It is merely a psychosis they are trying to create in order to break down the Government’s apartheid laws. They are now trying to hinge their attack on any economic situation whatever that may develop in the country. I just want to ask the United Party one question. They speak about the labour shortage here in South Africa. Rhodesia does not have the same labour laws as we do. There is a tremendously large reservoir of Black labour. Now they must explain to me why there is also a labour shortage in Rhodesia. In the manufacturing industry in Rhodesia there is a shortage of 4,6 per cent; in South Africa it is 4,4 per cent. In Rhodesia there is a 4,1 per cent shortage of skilled labour; in South Africa it is more, i.e. 4,8 per cent. In Rhodesia there is a 4,3 per cent shortage in services; in South Africa it is 4,2 per cent. They must now please explain this to me—there is no job reservation, yet there is a shortage of labour. As far as I am concerned that argument of theirs consequently collapses. It is worth nothing.

Their second argument is that the labour situation is the cause of inflation. That is also a lot of nonsense.

You do not know what you are talking about.

Does that hon. member perhaps know? Why does he not get up and tell us? Why does he not tell us what happened in 1964? Sir, at least the hon. member should pay a little attention. He will remember that in 1965 the rate of inflation in South Africa was more than 4 per cent. That rate of inflation decreased in this way—in 1965 it was 4 per cent, in 1966 3,7 per cent, in 1967 3,4 per cent and in 1968 2 per cent. In other words, the inflation existing at the time was demand inflation, precisely the same as at present, and was combated in precisely the same way it is now being combated, by the same measures, and it was controlled successfully. But the same labour laws as those of today were surely not in force in 1964 and 1963 either. Why would the present inflation now be the result of the labour situation? That is surely nonsense. They have advanced no proof whatsoever in support of that.

Inflation is an international phenomenon. Hon. members have heard that from the hon. member for Paarl today. It is inherent in our economy. I fling it in their teeth that they do not have the answers. They do not know how to handle the matter. I want to tell you, Sir, that if those people were to govern this country, inflation would really soar because they do not have the manly courage to act the way this hon. Minister has done; he acts when he has to and does not seek popularity by the introduction of popular measures. They would not have the courage to act and to take those steps that must be taken.

The Opposition’s second argument is that this Budget is inflationary. They say that it is inflationary for two reasons. The one reason is the financing of it, and the second the State expenditure involved. I also repudiate this altogether. Then they also say that this Budget cannot combat inflation. What one must do is to see this Budget in conjunction with the credit restrictions introduced in October, the monetary measures taken at the time and the introduction of the sales duty a month or so ago. Then one would see that this Budget was submitted after those measures had already taken effect and the economy had already cooled down. This Budget only rounds off the whole situation. It scoops off more liquidity in certain sectors, particularly with regard to consumer spending, but it also stimulates productivity and the infrastructure to a very large extent. In other words, in that respect we find expansion and we find that productivity will be increased. I now ask hon. members: Where is there a greater means against inflation than specifically the encouragement of greater productivity on the correct basis?

Sir, I should like, for a moment, to analyse the concept of cash flow, about which hon. members on that side have complained so bitterly, labelling it as inflationistic. The hon. member for Park-town also mentioned it here today. The total cash flow this Government handles is as follows. The net amount of all taxes is R2 496 million. The net amount of all internal loans is R493 million. Foreign loans total a net amount of R145 million. Sir, if that R145 million is pumped directly into the monetary stream it would be inflationistic. But do you think, Sir, that the economic authorities, the Government, the Minister, would allow this? But if goods and services are purchased for it overseas and imported, it can surely not be inflationistic. In other words, an amount of more than R3 000 million is being taken out of the monetary stream and then being placed back, but it is surely not being placed back in the same sectors from which it was taken; it is being placed in other sectors. In other words, consumer spending is here being limited or damped and the infrastructure or productive factors are being stimulated to greater growth in all respects; that is the basis of it. Our infrastructure embraces an extension of our transport facilities, our water provision, our telecommunications and our training facilities, on which tremendous amounts are spent. All these things are long term measures and methods to damp inflation, encourage growth and maintain the growth rate. But it seems to me as if hon. members opposite want State expenditure to be altogether cut and reduced. At the same time they want the economy to grow. One surely cannot cut State expenditure right down to the bone. One’s State expenditure must increase if one wants the country’s economy to grow, but one must control this properly. Sir, this story about State expenditure is rubbish; all that is happening here is that one withdraws money and rechannels it in other directions.

We had a dialogue in South Africa about growth and damping. In my opinion quite ordinary, simple economic techniques are here being blown up to crisis proportions. In passing the United Party accused us of being “dampers” and said that they were “growers”. They suddenly all began chasing this new political hare. But, Sir, this Budget is specifically a demonstration of the use of the techniques of growth and damping. This Budget promotes the infrastructure with a view to greater productivity; it is simply scooping off liquidity and damping consumer spending; that is all it is doing. Any economist in his right mind will agree that this is the correct method; there is no other method. There are no “growers” and no “dampers” in the economy. This Government is not a “damper” and neither is it a “grower”; it uses the correct techniques and the correct method. The Opposition says that these measures will not reduce the rate of inflation, but as soon as the price adjustments take place they will be the first to shout “depression”. But I want to tell them that they do not have to be concerned about that. This Budget has done a good piece of work; it deals with this matter very delicately and has not been introduced to cause disruption. The downward price adjustments will definitely take place slowly, without causing disruption.

But, Sir, I should like to make an appeal to the Minister. I want to recommend that because of this tremendously difficult situation he should adopt wider fiscal powers to be able to make adjustments during the recess, because in this modern economy today one cannot administer the country efficiently and correctly if one cannot make these changes when necessary. The Minister does have the power as far as the sales duty is concerned, but he does not have it as far as other taxes are concerned, and it is essential that he should have this power. I want to congratulate the hon. the Minister on the manly courage he displayed in taking these measures. They are not painless; he has not tried to seek popularity among the people, but to do the correct thing that must first be done to protect the country for the future, because therein lies our salvation; therein lies our safety and our future. [Time expired.]

Mr. Speaker, the hon. member for Pietersburg has given us a long explanation of his inability to understand the economics of the hon. member for Constantia or indeed any kind of economics. I believe it would be reasonable to say that the hon. member for Constantia is quite easily the most eminent economist in this House, and I would suggest to the hon. member for Pietersburg that year by year as he finds himself understanding the hon. member for Constantia better and better, so will he be able to measure his progress as an economist.

He may even be able to become a good United Party man.

Sir, the hon. member for Pietersburg made very serious accusations. He accused the hon. member for Parktown of nothing less than a political fraud in speaking of additional taxation or burdens to a total of just on R400 million. Sir. the hon. member for Parktown made it perfectly clear that he was not speaking only of taxes; he was speaking of the total of burdens …

But he mentioned taxes.

Very well, let me put it more clearly. We on this side of the House allege that since July of last year, progressively and increasingly, the Government has imposed taxes, levies, surcharges and increases of various kinds, and that if you do a piece of straight arithmetic they add up to just under R400 million, which has been taken out of the taxpayers’ pockets.

I spelt them out.

He cannot even add.

Sir, speaking of arithmetic I would like to make the point that a Budget is essentially not simply a piece of arithmetic. It is not merely an instrument designed to balance the income and the expenditure of the Government; it is not there merely to create a surplus or a deficit, by arithmetic or by design. The purpose of a Budget is also to serve as an economic instrument to govern the speed of growth, and the nature of the economy of the country. A Budget must be looked at as a deliberate economic instrument which must be skilfully employed by a Government not merely to balance its Budget, in the sense in which the housewife balances her budget, but it is something which must be used as a deliberate instrument to guide and control the economy of the country. Obviously the various constituent parts of a Budget must be used in different ways. One has less flexibility possibly in the use of the expenditure from revenue account than one has in the way in which one can alter, increase or decrease a revenue or loan account, but each of these must be used within the limits imposed by its nature in order to impose a certain economic philosophy, a certain economic pattern on a country. The arithmetic of a Budget is a purely tactical matter; the economic purpose is the strategy; this is the broad strategy which the hon. the Minister of Finance is able to impose on the country. I was therefore in strong agreement with the hon. the Minister when he said in his Budget speech—

It is on this basis that I feel we should judge the hon. the Minister and his Budget.

Now if one looks at the Budget as an instrument of policy determination, one looks, I think, for three main effects. The first of these effects is organizational; that is to say, to what extent can the Budget by its nature help to organize or to re-organize the structure of the country more rationally and more effectively. The second feature of the Budget should be capital formation; that is to say, to what extent does a budget assist the economy to create or form capital; and when I speak of capital I obviously mean not simply capital in the money sense but capital in the full sense of the means of production. The third feature which I believe a good budget should present is that it should be stabilizational; it should add stability to the economy, and one thinks at this juncture obviously of its effect as a means of combating inflation. Let us examine each of these three aspects in turn.

As far as the organizational effect is concerned, a budget should obviously create a degree of responsibility and responsiveness in respect of the taxpayers, and I think it is time in this country that the Budget should be designed also to create a greater responsibility and responsiveness in terms of local government. We have a growing tendency in this country towards over-centralization and bureaucratization and, indeed, in some cases authoritarianism. Good budgeting can relieve the pressure by delegating non-essentials to local government. It can use local talents to better avail and it can bring into the economic pattern the private sector and private initiative. In this way you take away the constricting hand of central bureaucracy and bring in new life from outside sources into the local area. This is the trend in most modern countries. In 1969 the Redcliffe-Maude Commission reported in Britain a series of proposals designed to create stronger local authorities and in fact to give the local authorities a far greater share in the revenues of the country for local use and local application. The chairman of the Maude Commission which made these recommendations, which were largely accepted according to a White Paper issued last year, said—

Sir, it was not only in Britain, but in the U.S.A. President Nixon, in his State of the Union speech in January this year, made exactly the same point. He referred to the fact that everything grows bigger and more complex and the forces of control more distant and impersonal. The further government grows from the people, the stronger government becomes and the weaker the people. This is what President Nixon said—

Now, we have just received, after a delay of some 10 years or more, the Borckenhagen and Schumann reports—both, alas, obsolete. These two reports have grown dusty on the shelves. As far as we are concerned, they may be put back on the shelves to gather dust for another 10 years, because they show no awareness of the trends or the needs of modern government. These reports of the commissions are less to blame than the White Papers upon them which are much more recent. In any event, the commissions were confined by the directives given to them at a time in the distant past, and with such problems as overlapping between the central and the local services, the relative sources of income and new subsidy formulae. Now these were no doubt relevant questions at the time and one cannot take it amiss that the commissions sat for many years and reported at great length, but the point remains that the reports of the Borckenhagen and the Schumann Commissions are irrelevant to the needs of our times. I say that the response of the Government is also irrelevant to the needs of our times. It is necessary for the Government to recognize that the great contributions, the great talents which are available in local government, the great resources of our big cities, can all be called upon to make a contribution to our national economy, and that these things can be inspired by this policy instrument which we call the Budget. By making resources available to provinces and local authorities in more enlightened and imaginative ways we can in fact call into being these new forces and these new inspirations which can make so great a contribution to the government of South Africa.

We find in this Budget, therefore, the paradox that it is not prepared to inspire and to assist local authorities in ways which could be helpful to the Government and to the country. We find a further paradox in the administrative field. It is a strange trend in our political thinking in South Africa that the Government is prepared to give autonomy, to give authority to decentralize, to those people of this country who are least in need of such powers, who are demanding them the least and whose lives are least complex; that they should be prepared to decentralize and to give authority and power to these people who do not need it or require it and yet refuse it to those who lead the most complex lives in the greatest urban areas and who really need a greater decentralization of authority in order to carry out good government.

We do that, in some respects.

Let us look at the economic field. In this country we are making elaborate grants and giving subsidies and tax concessions in the border areas and the homelands. These are areas which are the least amenable to high productivity. These are the areas which are least capable of making a quick and major contribution to the South African economy in a time of need, but which are getting the subsidies and tax concessions. But the truly productive areas, the great industrial areas where we could justifiably look for major contributions to our economy, these suffer from restraints, disabilities, shortages, uncertainties and a growing lack of confidence. That is the portion of those to whom we must look for the revitalization of our economy at this stage.

We have discussed the question of labour ad infinitum and my time is too limited to go into it in any great detail now, but nowhere is the Government’s back-to-front policy more obvious and more apparent than in the field of labour. Nowhere do restrictions and uncertainties have a more destructive effect on the country’s ability to produce the wealth and the goods needed to satisfy a rapidly growing population with ever-increasing standards and ever-rising expectations. How can you avoid inflation and a balance of payments deficit when the political and economic organization of this country is such that one to two million productive people are compulsorily restricted to the productive side and are obliged, within these limits, to feed and to supply the needs of 18 million to 20 million people? Let us take the case of an economy outside South Africa in order to examine such a situation. If one were to look at country X and one were to say: “This country has decided that only 10 per cent of its population shall have any productive role in the economy and it will be their job to ensure that the needs of the other 90 per cent are met”, we would look at such an economy and say: “This is economics gone absolutely mad”. Yet, Sir, we are surprised when we suffer from inflation caused by too much demand in search of too few goods; and when we suffer from a balance of payments problem which means that if you cannot get the goods inside your country you have to go outside to buy them. These are the consequences of our own policies.

On the labour question we had some illuminating remarks from the hon. member for Pietersburg. The hon. the Minister is, I believe, coming round to our point of view. He said, during his Budget speech: “Many people regard the Government’s labour policy as the key to the problem of promoting production. I regard this statement as an oversimplification of the problem”. Well, I shall go along partly with that. The problem is not just labour. There are certain other aspects associated with labour, which must be taken into account, but the Minister continues: “I would by no means maintain that labour policy is not of the utmost importance, not only for our economy, but also—and this I want to emphasize—for our whole society.” Now, Sir, we all agree with the hon. the Minister in this respect, except for the hon. member for Pietersburg, who has stated that he believes that the whole labour argument is irrelevant. [Interjections.1 The hon. the Minister went on to say: “As I have already said on another occasion my colleagues and I are prepared, after receipt of the Committee’s report, to continue the dialogue with organized industry on this subject. In the meantime I wish to emphasize once more that industry itself can do much by more efficient organization and methods to relieve the manpower problem.” Now, Sir, we are promised a committee and we are promised more dialogue. We have heard this before. One would agree, of course, that industry itself can contribute towards solving its own manpower problems by greater efficiency. It is a little insulting, I think, to suggest to industry that it has not already attempted to do so and that it is not continuing to attempt to do so. But when we speak of solving these problems by more efficient organization, how is industry to set about this? By how much must they change their techniques? At what expense and how and when can they do these things if they remain in the dark as to what the Government’s ultimate policy is going to be?

I come now to the second criterion, that of capital formation, to which I referred in connection with the assessment of a Budget. I refer here, Sir, to the duality of our economy. In a dual society which is on the one hand highly developed industrially, with a dwindling agricultural community and has on the other side primitive rural areas, it is far from immaterial where public money is spent or how it is withdrawn in the form of taxation. What I am saying is that in a dual society of this nature one should take care, when applying measures to change the economic situation in one part of the society, that those measures do not indeed have a destructive or harmful effect on the other side of such a dual economy.

It is possible, for example, in our more developed economy, in our more sophisticated areas, to apply certain measures which would be very similar to those being applied in countries in Europe or in America. However, these same measures designed purely to restrict or cool down the economy could, in fact, cause complete destruction and degradation in another society, whole income is low. Such a society would be deeply injured and damaged by indirect taxation and other restraints. There is little evidence in this Budget that the Government is fully aware of the dual structure of our society or takes full account of it. We have 4 million reasonably developed people in this country and, broadly speaking. 16 million underdeveloped people. What is the effect of indirect taxation on the 16 million people who live on or near the breadline? I have mentioned previously in this House the effect of hire purchase.

The hon. the Minister at one stage thought it necessary to impose new restrictions on hire purchase. These, no doubt, might have had the effect of cutting down the expenditure on certain luxury articles by a small section of the community. Was thought given, however, to the devastating effect these hire-purchase restrictions, or the increase in hire-purchase terms, could have on communities such as our industrial Bantu areas? I personally spoke to people in Soweto. They told me that their whole stock-in-trade, all their capital and all their preciously acquired possessions, which they had very carefully budgeted for, and which they could only acquire by means of hire purchase, were wiped out by the stroke of a pen. These people cannot accumulate capital and the whole situation suddenly fell outside the grip or grasp of their personal little economies. I believe that we must at all times remember that, if we want economic progress and contentment in this country, we are working in a dual economy and not a single economy.

My time is limited. I would like to refer briefly to the third of the criteria, namely economic stabilization. I believe that this is one of the main tasks of a Budget. It is a continuous task of a Budget at all times. It is a special and particular task of the Budget at a time like the present, when we are indeed faced with some economic recession accompanied by a continuing inflation. Development within a stable price structure encourages progress. We can include mild inflation within the concept of a “stable price structure”. A strong development programme can become an engine for forced saving, and higher capital formation is the result. It would almost appear that the hon. the Minister has forgotten this basic truth. At the first sign of a growing inflation the hon. the Minister, I believe, introduced measures so severe that they had the effect less of reducing inflation than indeed of cutting down or restricting those factors which, like productivity and growth, are the best weapons against inflation. I believe that in doing this we are paralysing our productive sources. The hon. the Minister said:

A series of measures were taken which clearly discouraged growth in companies, which clearly imposed heavier burdens on companies, which, in fact, destroyed to some extent the confidence of such companies. These companies have produced lower profits. These companies are therefore paying lower taxes. The hon. the Minister is disappointed and says that he cannot understand what has happened. He says that the reasons for this decline are not clear. This is something we have predicted month by month in this House. It is something which every economist has predicted. You cannot pick up an economic journal without finding this prediction. Yet the hon. the Minister says he is surprised.

I should like to refer to the hon. the Minister’s arithmetic. His reaction to this news that the companies are making lesser profits and therefore are paying smaller taxes which disappoints and surprises him, is to add to their taxes. He has added, for example, a five per cent loan levy on company taxes which, he says, will bring him R36 million. This means taking R36 million out of the hands of the companies. He has also added a per cent loan levy on company dividends which he says, will bring him R20 million. This again is money taken out of the hands of the companies. Then there is the undistributed profits tax as well. If you do these things to companies and they suffer and their profits drop and they pay smaller taxes, why be surprised? You have done this to them.

I believe the question of how the yield on the 7½ per cent loan levy is calculated to come to R20 million, has already been dealt with by the hon. member for Park-town. I do not want to go into this again, but we would be grateful if the hon. the Minister would explain how he calculates this, especially in relation to his other expectations from personal tax and surcharge on personal tax which are expected to yield approximately the same amounts.

We have been challenged to say what we would do about this Budget. We have looked at these three criteria. We have seen that the Government is very largely responsible by its spending for the new inflationary wave which is hitting the country. The Government has taken money from the ordinary public. The hon. the Minister has accused the ordinary housewife, the ordinary member of the public of being a spend-thrift, of being extravagant. He has said: “You do not know how to spend your money. Give it to me, I will spend it for you.” Well, if you take that kind of money from the taxpayer, you can only get at his extravagance money by also taking from him his thrift money, because according to the hon. the Minister’s definition, he first spends his money on essentials, then on extravagances and then, in the last resort, on thrift. Therefore, if you want to get at the extravagance money, you have to take his thrift money as well. If the hon. the Minister knew better methods of thrift than these people and was, in fact, prepared to use this money in a thrifty way, we would be happier about this procedure than we are. Let us see how the hon. the Minister does spend the money. If we look at the estimates of expenditure on Loan Account, we find for example, that the hon. the Minister has agreed that something like R40 million, that is, if we include Revenue Account, should be spent on the building of prisons and the running of prison cells. This is an essential part of an administration which is, in fact, imprisoning in this country something over 500 000 prisoners per year. [Time expired.]

Mr. Speaker, to my mind the hon. member for Von Brandis did say a few things this afternoon for which I have to give him credit, i.e. his references to the requirements which the Budget ought to meet. Towards the end of his speech, however, he said that we had challenged them to say what they would have done had they drawn up the Budget. On that very point he remained silent. Why did the hon. member not give us an idea of what they would have done? How would the hon. members have drawn up the Budget? In what respect has this Budget failed? The hon. member said the last requirement in regard to the Budget, was that there should be economic stabilization. I must say this Budget of the hon. the Minister succeeds brilliantly in that. This Budget is definitely anti-inflationary in the first place. Later in my speech I shall make further reference to that.

When the hon. member for Parktown made his speech on 31st March of this year, he said, inter alia—

I just want to say to him that the first part of what he said is perhaps true. Perhaps the public feels that way, but not in respect of this Budget. They probably feel that way about an Opposition that cannot criticize a Budget. There is a feeling of frustration among the public because this Opposition does not know its function. I shall much sooner be able to teach my old goat on the farm to speak than to teach them finance. The hon. member for Parktown also said, inter alia, that it was years since we last had to face a deficit in a Budget. However, in recent years this hon. member and many hon. members on that side criticized the hon. the Minister because the Budget reflected a surplus year after year. Now they come along and complain about the fact that the Budget reflects a deficit. Will the hon. members please tell us what they want.

A new Government.

There is only one Government for South Africa and that is this National Party Government. It will govern for another 50 years. The hon. member for Parktown also objected to the R180 million which is to be taken from the Stabilization Fund. Now I want to ask the hon. member for Durban Point this: If that R180 million were not to be used, from where should the money have come for financing this Budget? Should it have been done with foreign loans or by what means should it have been done? No, he will not reply, because he cannot reply. Over the years this R180 million has been set aside and, as the hon. the Minister said, it is now being used very positively. The hon. member for Parktown knows that any company places money on reserve so that it may be used at a later stage. This small amount, which has been placed on reserve over the years, has now been used. This is sound planning in the economy and in the Budget. It is brilliantly done!

This hon. member complained and said that certain basic problems in the economy were not being met. Off-hand, I am able to mention seven requirements which this Budget meets. Firstly, I want to associate myself with the hon. members on this side of this House who said that it was anti-inflationary. Later I shall point this out more fully to hon. members. It restricts private expenditure, and that is what this Budget is going to do. Hon. members know it is true that the Budget makes provision for extending the infrastructure. Furthermore, it prevents demands for higher wages. This Budget was drawn up in such a way that it will not give rise to demands for higher wages. In addition it complies with the recommendations of these various commissions. Throughout the years the hon. members have been criticizing the Government for not having tabled the reports of the Borckenhagen and Schumann Commissions. To be sure, now that this has been done, they are still dissatisfied. Now this is not what they want and now it is wrong that the hon. the Minister has accepted certain recommendations. What does this Opposition want in South Africa? The hon. the Opposition must tell us now. Furthermore, this Budget promotes growth, and also brings great relief to certain sectors. I am very grateful to the hon. member for Parktown for at least having expressed his thanks for that the other day, because I was afraid he would not even do that.

There is one small amount which may perhaps be said to be inflationary. This is the loan of R150 million which was negotiated abroad. However, this is not inflationary either.

Is it not?

No, not in the least.

Ask the hon. the Minister of Finance.

I shall tell the hon. member in what respect it is not inflationary. It is not inflationary in that this amount will be wiped out again. If one looks only at the R150 million loan, it seems as though it may be inflationary. This, however, is where those hon. members stop. The hon. members must think further than that. The Defence Budget is R316 500 000 and a large proportion of these purchases are made overseas. Such purchases come to much more than R150 million. That amount of R150 million does not enter the country as cash, but as goods. Surely it is not inflationary in that case. That material and those goods enter the country. It is not extra money spent here in South Africa. If it is done in this way, it is not inflationary. If nothing were bought abroad with this money, I agree it would have been inflationary, but the other things associated with this loan prevent this from being the case. Similarly, we have the Department of Foreign Affairs with its R9 250 000, as well as a lot of other money which is to be spent overseas. The money to be spent overseas amounts to much more than R150 million. Hon. members opposite also said that the Government’s expenditure was inflationary, that there was no growth and that attention was not being given to the necessary infrastructure. What about the loan to the South African Railways, an increase of R28 million on the previous year? What about the R3 million of the Post Office? Surely all this was intended for the infrastructure. The total Railway loan is R168 million, that of the Post Office is R50 million and that of Transport is R9 500 000. These items total R227 million. These are merely three items which affect our infrastructure. On what do hon. members opposite think this money is being spent? Certainly not on nothing. At this stage I think I, too, must express my thanks and appreciation to the Department of Finance. It is the smallest department of the Public Service and consists of only nine persons. Over the years and in the thick of all their other work, such as the annual Budget and everything associated with it, they have also had to study reports and in addition they have made an independent study on their own in order to lay this White Paper on the Table. On behalf of this side of the House and I think also on behalf of that side of this House—and if this does not meet with their approval, they must say so—I want to thank these few men in this small department very much indeed for the outstanding job of work they are doing.

The hon. member for Parktown complained that we were being taxed too heavily. England had a budget very recently. Let us see what people in England are paying in taxation. A married person with two children who earns a salary of R4 500, pays R287 in taxation in South Africa, but R807 in England. In South Africa a man earning a salary of R5 500 pays R429 in taxation, which includes a loan levy of R43. In England such a person would pay R1 066 in taxation. A person earning R6 500 annually, and this is incidentally our salary as well, pays R607 in South Africa, including a loan levy of R68, but in England such a person would pay R1 584 in taxation.

This afternoon I want to test the Opposition in their approach towards the economy of South Africa and in the approach which a responsible Opposition should display in order to provide leadership to South Africa. In this regard I shall touch on a few matters.

The hon. member for Parktown said private expenditure in this country was too high. If I remember correctly, he also said this Budget would not combat it either. Like the hon. member for Von Brandis, I also want to state a few requirements which a Budget should meet. In the first place I want to say to hon. members opposite that this Budget must not be seen as being merely what we have before us on the Table. We must see it in conjunction with the Little Budget, the Railway Budget and the Post Office Budget. The sum total of these three must then be seen as the fiscal policy of this Government. However, the fiscal policy alone cannot realize the objectives of the authorities. There are two other factors. They are the monetary measures and the non-monetary measures. These three categories, depending on the mixture being used, i.e. either more fiscal or more monetary, are at the disposal oi the authorities for combating inflation. Therefore they can be used as anti-inflationary measures. The Government has very definitely succeeded in this. In this respect the Government has succeeded with all its Budgets, because it has not been afraid to take unpopular measures. Where the protection of the bread and butter of the country’s citizens has been concerned, this National Party has never sought popularity. Even less have instant solutions been sought, as the Opposition always want to do. They, of course, want to combat the inflation problem in one way only, namely by means of the employment of more Bantu. I simply cannot see how the Opposition will be able to combat inflation by means of increasing the gross national product, which they are going to do, and by relaxing influx control and the Physical Planning Act. I should like the hon. member who is going to speak after me, to tell me this. It is absolute nonsense. I maintain it is impossible to put Bantu labour in the place of every other scarce production factor. Every addition in fact means an increased demand for complementary material and services, which will only increase the demand pressure in the process of inflation again. This is a fact. These are economic facts and laws which hon. members may not overlook. Or is it the idea that the business world should obtain Bantu labour at a cheap rate? Surely the labour must be cheap if one wants to combat inflation. While the United Party is prepared to suppress the social aspirations of the Bantu, something which will necessarily accompany the labour integration policy of this Opposition, the National Party is not prepared to do this, nor will it commit such an immoral deed. It will let its economic policy go hand in hand with the socio-political aspirations of the non-Whites. The United Party merely wants to increase the gross national product and do away with inflation by means of using more Bantu labour, but they are not prepared to say how they would cope with these socio-economic consequences of their action. More labour, and especially unskilled labour, has never been a solution to inflation.

Now I want to ask the Opposition: If more labour is the solution, why is there inflation in other countries, for example, in England and in the United States of America, while unemployment is being experienced? Not only unskilled labourers, but also skilled labourers in those countries are unemployed. This being so, surely they ought not to be experiencing inflation. How does the Opposition explain this? Thanks to the good policy of this Government and the correct recipe of this hon. Minister, we have it as good in South Africa today as we do.

Furthermore, I want to state that the National Party supports the marketing economy, private enterprise capital and the profit motive. But this must take place within a defined socio-political framework. Then things will go well for the country, as the case is at present.

In regard to the monetary policy of the authorities, this Government has a record of which it may be proud. In all modern countries of the world, the monetary policy has, inter alia, four objectives. The first of these is full employment, the second is optimal growth rate, the third is a balance of payments equilibrium and the fourth price stability.

Let us examine each of these independently. What is the position in South Africa in regard to full employment? Whereas there is an increasing rate of unemployment in the large industrial countries, we have no unemployment in South Africa. On the contrary, in some sectors there is over-employment. [Interjection.] That hon. member is probably thinking of last week-end’s Rapport in which the head-line “Goeie manne werkloos” (Good men unemployed) appears. They stated that a few chartered accountants were included here. The hon. member for Parktown is also one; he must give a better reply to the Budget, otherwise he will be unemployed in five years’ time. Surely it is nonsense to say that such people are unemployed! Hon. members who are chartered accountants, know what a shortage there is in South Africa and what sought-after men these people are. These are cheap newspaper headlines, but that is simply not how things are.

Let us look at the question of the optimal growth rate in this country. In the past decade South Africa has experienced a growth rate which has been almost unprecedented in world history. In the 10 years from 1960 to 1970, the gross domestic product at market price grew by 8,9 per cent, whereas the real gross domestic product grew by 5,9 per cent in the same period, as opposed to the 5½ per cent which the economic development programme lays down as the optimal growth rate.

What is the present growth rate?

I shall come to that. The growth of the real gross domestic product per capita of the population, is 3,3 per cent. This is very high. Who will say that this is not high? Let us take the year 1969-’70. At that time the gross domestic product at market price was 9,4 per cent. This is tremendously high. As against that, the real gross domestic product was 5,2 per cent. This is only .3 per cent under what was called for by the economic development programme. It dropped in the one year in order to obtain the average for the period. In 1969-’70, the real gross domestic product per capita of the population was 2,8 per cent. This is perfectly good. It is brilliant. The increase in the population was not 2,8 per cent. As against this, the economic prosperity grew at a rate of 2,8 per cent, which means that the population is much better off.

Then there is the balance of payments equilibrium. In this respect as well, the economic big ones could maintain themselves without intervention by the authorities. For example, it has not been necessary for South Africa to devaluate. In recent times, however, some prophets of doom in South Africa have been saying that we have to devaluate again. This just proves how ignorant people can be about the economy of the country. The domestic demand is strong and effective. It would be sheer foolishness to devaluate. For what, for whom and why should devaluation take place. This is done only when problems exist. We have no problem which demands devaluation.

Let us examine the question of price stability. Whereas the consumer indices in other countries rose in the past year, South Africa can boast that its consumer price index rose by only 4,2 per cent. This is in fact high for South Africa, but it remains low in comparison with other countries of the world. According to statistics released by the U.N. in regard to the average price index figures for 1968, 1969 and 1970, the price index of South Africa rose by 3,4 per cent, in comparison with a rise of 5 per cent in France, 5,5 per cent in the U.S.A., 5,8 in the United Kingdom, 5,9 in Japan and 19,3 in Brazil. This shows how brilliantly South Africa is being governed. I think it is very clear that the Government has served South Africa best with its monetary policy. We thank the hon. the Minister of Finance for that.

I am convinced that all the members of this House are probably concerned about consumer expenditure which continued at a reasonably high rate in the past year. As the hon. the Minister said, I also think that the increase in prices has been more than we should have liked to see in South Africa. The high rate of consumer expenditure as well as the resultant low level of savings, is the most important factor involved in price inflation. For that reason I want to plead for the interests of the consumer. This National Party and this Government have always looked after the consumer in South Africa. A price level which continues rising and consumers who order increasingly more, are of the most important features in a condition of inflation. A psychosis is prevailing in South Africa today, in terms of which people are of the opinion that they should order now because the exchange value of their money may drop tomorrow. They must try to entrench themselves against money erosion. They must satisfy their needs now with the money at their disposal, because in real terms they will be worse off tomorrow. This outlook of the consumer receives further stimulation if there is a lack of alternative possibilities for utilizing the money. In this respect I want to appeal today to the Opposition and to every person who may appear on a platform at any time, to assist the National Party in doing educational work in South Africa and in informing our people correctly. The Opposition must accept that if things were to go badly in South Africa in the economic field, they would not be able to save the country. Only the National Party can keep it there and they must help us. The Opposition must help this party to keep the economy strong and sound as it is at present; otherwise they will be first to suffer the consequences, because their people have more money than our people have.

What this means in essence is that there is no consumer resistance in this situation or, alternatively, that inflation actually channels money to investment in sources where the growth possibilities are big, for example, in the share market and in land. This movement away from fixed interest-bearing debentures towards other investment possibilities, is a problem for us in South Africa. Our task should therefore be an attempt at entrenching ourselves against money erosion. The fact should not be overlooked that inflation lowers the real rate of interest, and we should all guard against this happening in South Africa. Especially in the past two years this lack of consumer resistance has been a feature of the South African national economy on the one hand, and on the other hand a large group of economic subjects, in other words, companies and individuals, have made a sustained attempt to invest in land. Perhaps it can be stated that consumer resistance is a characteristic which is not very strongly developed among South Africans. We have reached a situation where it is beneath our dignity to bargain for a price when we do shopping. As a result of the liberal provision of credit, we are not at all able any longer to bargain for a price when we do our shopping. Today it is very easy to use credit facilities in advance for three, four and even as much as nine months’ into the future at these various buyers’ associations and other places. Therefore it is not surprising that savings are continuing to show a declining tendency in South Africa.

Sir, I think it has become high time for us to take stock of the present situation and that we, both the Opposition and the Government, should examine just two aspects without fear, namely the question of consumer resistance and the provision of credit to the consumer. The time has arrived for every consumer, and especially for this Opposition that complains, moans and cries about the sales duty, to stop complaining about it. It is unfortunate that it had to be introduced, but under the circumstances it is the most effective and the best method of combating inflation, and although one inflicts pain in doing something good, one must nevertheless do it. When I go to a doctor for an injection, the needle hurts me when it passes through my skin, but I know that the injection is going to cure me and I think we should bear this in mind in this regard as well.

Sir, with the present consumer function of the South African national economy, there is hardly any room left for savings, and for this reason our savings have decreased so much in recent years. This brilliant White Paper which was tabled here, provides us with all the facts and it is unnecessary for me to repeat them here. Mr. Speaker, let us ascertain who is responsible for this situation. Particular attention must be paid to two aspects, namely the consumer resistance and the bargaining power of the consumer. I have already made the observation that consumer resistance is very low among South Africans. A variety of factors are responsible for this. On close examination it is evident that one of the most important factors is the very fact that the consumer is organized into groups which break down consumer resistance in that associations create the necessary facilities for the consumer to spend credit over the future. I think the time has arrived for us to give attention to this. Another important factor is that the consumer accepts the cult of credit by habit, because he grows up with it. This acceptance that this must be so, leads to the position that the system of the provision of credit is not challenged. The end result is a spirit of defeatism, a spirit of “I can do nothing about it, and besides, it suits me; I maintain a high standard of living in the eyes of those in my vicinity”. Sir, I know of neighbourhoods where the people definitely cannot afford to do so, but do maintain a standard of living above their means; these are people who pass through life frustrated; these are people who have problems. Essentially, the consumer is being forced into a position of accepting the market price. We all know the idiom, “beggars cannot be choosers”. If one has to look into a man’s eyes and beg him for an article one wants, he will charge one what he likes for it. We shall have to come more on to a cash basis.

Therefore, by way of summary, Sir, the consumer who is the most powerful unit within the national economy, is being misled to incur debts for the future, and in the process his resistance and bargaining power are being reduced to factors which have no power any longer. To put it differently, we can say that the consumer is becoming addicted to credit. We already have people who are addicted to liquor and drugs and we must ensure that we do not get a third group of addicts, namely credit addicts. We as well as the Opposition must guard against that. Sir, it is not regarded as strange if a credit ceiling is placed on the banking sector. It is the attitude that it is the duty of the monetary authorities to do this if credit expansion assumes too large proportions. The question may in fact also be posed what is wrong with imposing restrictions on the provision of credit by the dealer on open account. The argument here is just as valid that if the provision of credit by the dealer is excessive, it should be the duty of the authorities to impose restrictions in this regard as well. It is true that the results of excessive provision of consumer credit, do in fact spill over to the banking sector and in that case discrimination takes place against this sector. Sir, what is even more important, is that the dealer who is guilty of this, still has a further right of resorting to the courts of law in order to enforce payment, thus causing further expense to the consumer and a further weakening of the consumer’s ability to consume. In the case of open accounts, we see that the number of sentences increased by 7 per cent from 1964 to 1969, while the amount increased by 43,25 per cent. This shows us that credit which cannot be justified, is being allowed.

The endeavour should be to introduce discipline into the system of providing credit. The applicant for and the supplier of consumers credit should both make their contributions in order to achieve this end, just as the Opposition and we all should do. Not one of these two parties must be deprived of their rights and at the same time their position must be strengthened. This should be the aim and the objective in regard to restrictions on consumer credit. In order to achieve this objective, it is necessary to take another look at the Prescription Act. It does not appear strange that a prescription period of three months exists in regard to liquor sales on credit. What is being achieved here, is simply that the applicant for and the supplier of credit are being forced by legislation to display the necessary discipline in the conclusion of the transaction. Consequently, it is not a strange feature that most transactions which the consumer concludes in the liquor trade, takes place on a cash basis and that the consumer therefore also has a bargaining power in respect of this specific item, because he is buying on a cash basis. Because of this very system, the liquor trade has the least bad debts in South Africa.

The monetary instruments at the disposal of the authorities for restricting consumer credit, are sometimes applied too late in practise or are not applied strongly enough, and unfortunately the Minister of Finance does not always have the necessary power. To this may be added that the monetary instrument is not always effective enough. With this Budget, the hon. the Minister tried to do two things for us, firstly to combat inflation, and secondly to restrict consumer expenditure. If this measure does not succeed, the question will arise whether it is not high time to get at those who provide the credit. The question may be posed what objections there are in principle to a prescription period which is much more realistic than the existing one of three years. Theoretically speaking, the situation in South Africa at present is that the creditor has a period of 36 years before debt becomes prescribed on an open account. Will a period of three months, for example, not force the applicant for and the provider of consumer credit to exercise more discipline? If this were to happen, it would be to the advantage of both the applicant for and the provider of credit. The advantages will be legion. This does not apply only in respect of the two parties, but also in respect of the national economy as a whole. As I said initially, the consumer who is the most powerful factor in the national economy, has actually become powerless. If we were to introduce this system, we would find that the consumer would get a cheaper price in the future. The person providing credit, would have less documentation and far fewer overhead expenses. In addition, he would have a better cash inflow, his business would be more profitable and the result would undoubtedly be a saving of labour. [Time expired.]

The hon. member who spoke last has covered a very wide field and has suggested all sorts of remedies to control credit. If the hon. the Minister of Finance is going to carry out his recommendations, he is going to find himself needing an army of officials to enforce those restrictions. If he refers to the hon. the Minister sitting in front of him, the Minister of Economic Affairs, he will find that at present that Minister has great difficulty in implementing price control due to lack of staff, let alone applying the other regulations issued by his department. It is all very well to come forward with such recommendations to impose restrictions on credit, but where is he going to get the staff from and how effective is it going to be when these inspectors are appointed? You see, Sir, this hon. member says that devaluation is being mentioned. Nobody on this side has mentioned devaluation and nobody on the Government side has mentioned it, so I do not know why he wanted to drag it into this debate.

Not in this House, but outside.

Nobody on this side has advocated devaluation.

Not today.

Nor outside. I think it is most irresponsible for a responsible person speaking on finances to raise the question of devaluation, and I hope we will hear no more about it. The hon. member spoke about inflation, and inflation being under control, but I would remind him that the Minister or his predecessor in 1966 told us about the dangers of inflation. In 1967 we were told about the dangers of inflation, and also in 1968 and 1969 and 1970. Now we have the Budget which will help to control inflation in 1971. This Budget is probably the most important that the Minister has ever introduced and it is also the most disappointing. It is important because it shows fundamental changes of policy in determining taxation, and it is disappointing because it shows vacillation on the part of the Minister and a confession of failure after all these years in office, because he is still unable to control inflation. Two years ago he said he was going to provide for a greater amount of revenue from an indirect sales tax which he proposed to introduce, and at the same time he would give an incentive to the income taxpayer. Now he changes his mind again. He has increased substantially the direct taxation on the individual income taxpayer and companies, and so he damps down incentive. The hon. member for Parktown has gone into that in some detail. We want an explanation from the Minister as to why he has changed his mind. If he was right in 1969, how can he be right today? He indicated that it was necessary to provide a greater incentive by reducing the incidence of direct taxation and increasing the incidence of indirect taxation. He persuaded us at that time, and he supported his arguments with the tabling of the Franzsen Commission’s report. But if the Minister was right then, how can he be right today? I hope the Minister will explain that when he comes to reply to the debate.

We have had a record number of documents tabled after the Minister’s speech. The Minister has had many months to study those documents, but we have had only 10 days, which necessitated much burning of the midnight oil. We have had handed to us the eighth interim report, the main report of the Borckenhagen Commission, the report of the commission of enquiry into the financial relations between the Central Government and the provinces, two reports of the Franzsen commission of enquiry into the fiscal and monetary policy and on taxation, together with the Budget White Paper, the Estimates and the White Paper on the report of the commission of enquiry into financial relations. It was impossible to cover everything in the time available, with adequate comments on the whole field dealt with in these various documents. It is significant that the Schumann Commission, which was appointed in 1960, completed its work and its report was presented to the Minister in February, 1964. It took four years to do its work, and the Borckenhagen Commission took much longer to do its work. The Minister has had this report for seven years. It was seven years before the House saw it. On reading this report it is obvious that the Government did not like some of the recommendations in the report and so it has withheld it from the country and from Parliament for seven years. We get the impression, after reading the report of the Schumann Commission and reading the White Paper on the report of that commission, and on reading the subsequent report by the Franzsen Commission, that the Government was to a certain extent displeased with the Schumann Commission’s report and therefore submitted it to further examination. We do not know whether the Franzsen Commission had an opportunity of considering it, but we presume so, and now we have the Minister’s White Paper indicating that portions of the Schumann Commission’s report were not approved by the Government. Year after year we have tabled questions in the House asking when the commission’s report would be tabled. For many years we waited for the report of the Borckenhagen Commission. Now, having received the report of the Franzsen Commission we can come to no other conclusion but that the Government is looking to find those sections of the report which suit its policy best and is prepared to reject the rest of the report.

Do we always accept reports in full?

No, but it is so very obvious, looking at this White Paper, that the Schumann Commission’s report runs contrary to Government policy and therefore the Government decided to have another look at it. We are entitled to ask the hon. the Minister of Finance whether the policy of his Government supports the system of private enterprise and the provincial council system, because both of these seem to be in danger, depending on the extent to which the Government adheres to the White Paper on the Schumann Commission’s report and the recommendations of the Franzsen Commission.

I propose to deal firstly with the dangers to private enterprise flowing from the report of the Franzsen Commission. The Minister last year suggested that the further report on monetary and fiscal policy would involve a new approach. The Franzsen Commission has recommended the unscrambling of conglomerates in banking and insurance. At a time when there are dark clouds on the business horizon, I question whether it is wise in a young and developing country to try to put the whole business world in a bureaucratic strait-jacket. The commission has recommended against foreigners holding more than 50 per cent of the shares in South African banks. I would like to know from the Minister whether he intends accepting that recommendation.

Do you want us to accept the report in full?

No, I do not ask the Minister to accept the report in full, or to accept any report in full. When we come to examine the Schumann Commission’s report in respect of the provinces, the Minister will see what I am driving at. But I would like the Minister to answer this question, apart from his interjection now, when he comes to reply to the debate. Will he indicate to the House and to the banks whether he is prepared to accept those recommendations? I am sure most banking institutions all over the world will be very interested to know whether it is the policy of the South African Government that banks should be restricted to 50 per cent. Is the message which the Government gives to the outside world as part of its outward policy, that it does not want foreigners or foreign investments in this country unless the foreigners are prepared to take a 50 per cent shareholding or less? Is that the policy? If a start is made in the banking world and insurance companies, is this not the thin end of the wedge, and who comes next? Is it the motor companies? Are we going to demand that Ford and General Motors can only have 50 per cent of the shares and that the rest must go to South African shareholders? Does that apply to the big chemical industries who have spent millions on research, far more than South Africa can ever afford to pay, to bring the know-how to this country and to develop the plastics and chemical industries? Do we demand that they have only 50 per cent of the shares? Sir, these are questions which arise out of the Franzsen Commission’s report. I am not saying that the Government will apply these recommendations, but these are questions which we are entitled to put to the Minister. [Interjections.] The Minister must not jump to conclusions. I said that if it is the banks first, and the insurance companies, do the industrial companies come next, and if not, why not? It indicates a trend in policy. It is no use the Minister getting impatient on this matter. I did not say at any time that this was the Government’s policy in regard to motor companies, oil companies and chemical companies. I did, however, infer that, if the Government intended to follow this line with regard to banking and insurance companies, there is no reason why one should not assume that the other companies will follow. The warning signs are there. There are other countries in the world where there is a restriction of this nature, particularly some of the recently emancipated African states. Restriction is the first stage towards confiscation. The African states started with 50 per cent, but later on wanted the lot. Would one be surprised if, when the outside world sees the map of Africa and hears that in South Africa the banks are to have only 50 per cent control and that the rest must be controlled locally, they raise the query of “whose turn next”? Those are questions to which we want answers. I have asked if the next would be the motor and oil companies, and the chemical and plastic industries. What cheer can an overseas embassy give to prospective investors coming to South Africa if they hand out as a brochure to entice them to South Africa a bound copy of the Franzsen Commission’s report? I believe that the hon. the Minister of Information is going overseas soon. I wonder if he is going to add in addition to his other brochures, a bound copy of the Franzsen Commission’s report, because sooner or later someone will be asking for this. If overseas concerns were to ask me a professional question as to what the position is with regard to South Africa’s present and future foreign taxation policy, I would indicate its present taxation policy, but I would say that, as far as future policies are concerned, the indications are given in the Franzsen Commission’s report, a commission which has been appointed by the Government, and that at the present stage one does not know to what extent the Government is prepared to accept these recommendations or whether they will not accept them. I think that that would be a fair comment. That is a question the hon. the Minister will have to answer for us. Overseas investors will require to know to what extent they can rely on the Franzsen Commission’s report as an indication of Government policy in so far as the foreign investor is concerned. These companies will be told that they will be under surveillance from the Government Inspectorate.

The Commission’s report goes further and suggests that no individual or company—I am referring to banking and insurance companies now—may hold more than 10 per cent of the ordinary shares of any one bank, except that no limitations should be placed on the shareholding of one bank in another or of the bank holding companies in banks. The whole of the recommendations of this report hang as the sword of Damocles over the head of many financial institutions in this country until such time as the Minister indicates whether he is prepared to accept the recommendations either in whole or in part. How does he expect business to develop in a straitjacket of bureaucratic control? Is the Minister trying to scare away foreign capital? I know that he is not. However, until such time as he indicates the decision with regard to this report, it will have that effect.

Not satisfied with the banking and insurance world, the Commission wants a committee to investigate the desirability of reporting large credits of R500 000 or more. Does the hon. the Minister intend to accept that recommendation? The Commission goes further and suggests that the Minister of Finance be given authority to adjust taxes and levies between budgets, within limitations. The hon. the Minister has not suggested in his Budget speech that he intends asking for this authority, but when one remembers that it is less than a year ago that he introduced his last Budget and has been proved so wrong in his estimates, one hesitates to give him power to act when Parliament is not sitting, because once a tax has been imposed there seems very little chance of its being lifted again.

What a contrast there is between the South African Budget and the Budget in the United Kingdom! There is nothing of comfort in this Budget for the South African businessman. No Government member who has spoken in this debate so far has indicated that there is much comfort for the South African taxpayer. And this we have in a year when one is asked to celebrate ten years of Republican Government! What is there to celebrate in this Budget? This Budget is before us ten years after the founding of the Republic and it is the celebration Budget.

No, surely not!

There is nothing to celebrate.

[Interjections.] This is a Wilsonian Budget. I am hoping that this Minister will make a speech in this House. So far he has only made interjections.

I have made quite a few; you have not been here.

We are hanging onto his words.

The Minister of Finance exhorts the public to save and cut down costs. On the other hand, the Government, which should set the example, provides for further increases in expenditure in this year’s Budget. The Minister’s White Paper on page 4 states that the gross domestic product is provisionally estimated at R12 404 million which is 9.4 per cent higher than 1969. It goes on to say that the average annual growth of the real domestic product, after allowing for a rise in the general price level, amounted to some 5,9 per cent over the ten years from 1960 to 1970 in comparison with the 5,5 per cent selected by the Economic Advisory Council. On the other hand, the Government’s increase in expenditure expressed as a percentage of the previous year amounts for 1963, 1964 and 1965, respectively, to 12 per cent, 7 per cent and 17 per cent, whereas the percentages for 1970 and 1971, respectively, are 18 per cent and 13 per cent. The current year shows that Revenue Account expenditure, excluding provincial subsidies, has increased from R1 529 million to R1 785 700 000. The amount on Loan Account is expected to rise from R703 700 000 million in 1970-71 to R855 400 000 in 1971-72, a rise of 21,6 per cent. When the Government embarks on a spending spree of these proportions, it makes it very difficult to believe that the Minister is really serious when he suggests that inflation is the biggest danger, and that the private sector must show self-discipline. How can he demand that the private sector must show self-discipline, when the Government is increasing its expenditure in this way every year? One hon. member indicated that the amount spent on prisons is R40 million. One is entitled to ask the Minister, when considering Government capital expenditure for the ensuing year, how many of the buildings are really necessary? How many of the buildings can be ferred until the country catches up with the backlog of housing? One cannot examine in detail the items under the Defence Vote or the Public Works Vote, but when one sees prestige buildings going up all over the country, one is entitled to ask to what extent the Government is setting an example. Of course, we do not have any details as regards individual buildings in the estimates laid before us. I know the Minister will this year, as he did in previous years, explain the items of expenditure. I ask the hon. the Minister, to give us greater detail as to the amount that is to be spent on Government buildings in particular areas. We only see globular amounts of expenditure, but if we knew how much is going to be spent on buildings, it would give us an opportunity of saying that this or that item should be deferred. The Minister calls on the private sector for self-discipline. I submit that he must also call upon the public sector for self-discipline, and greater self-discipline that has been shown up to now.

I turn now to the provincial council system. It is quite clear from the reading of the Schumann Commission report and the White Paper on this report that there are many facets of the report which do not suit Government thinking. There is no doubt that the whole approach of the Government is to rule from Pretoria and to maintain rigid control of the whole country. Financial, physical and administrative control is the obvious goal of this Government and lip-service is to be given to the provincial system in future. The Schumann Commission report on page 7, par. 29, in dealing with the autonomy of the provinces, says—

The Minister has opted for the subsidy system and taken away the taxation rights of the provinces, despite the fact that the commission in its report said that “the evidence pointed overwhelmingly to the dangers of over-centralization”. It is obvious that it is the object of the Government to undermine the financial independence of the provinces. It does not want to do it by way of altering the Constitution; it does it by cutting off or reducing funds to all the provinces by means of the subsidy basis. In clause 1121 the report says—

Yet, if one examines the White Paper and the Schumann Commission’s report, one finds various formulae laid down for standard revenue and standard expenditure. There is nothing in that report or White Paper which I have been able to see so far which indicates how we are to get our capital funds. As far as I can see it is not mentioned. I hope that the Minister in the course of his reply will indicate to the country the method by which the provinces will get their capital funds and whether the provinces will be left a certain amount of freedom of choice. The Schumann Commission’s report states—

The autonomy of the Provinces, so far as it affects their financial position, contains three aspects, namely—

1. (i) their right to spend the money which they receive, either from their own taxation resources or from subsidies, as they see fit;
2. (ii) their right to vary the tariff or scale of their own sources of taxation independently;
3. (iii) the size of the subsidies in relation to their “own revenue”, which may entail, to a greater or lesser degree, a measure of control of their expenditure by the Central Government.

The extent to which the Central Government has withdrawn the right to raise taxes from their own resources is the extent to which they have undermined the autonomy of the provinces. I submit that it is the Government’s intention to limit the powers of the provinces by limiting their funds.

You are quite wrong. [Interjections.]

I hope the hon. the Minister who pleaded eloquently for the provincial system while Administrator of Natal will take part in this debate and I hope he will tell us what they intend to do. [Interjections.]

Order!

I now come to the taxation proposals. Individual taxpayers were given some encouragement in the 1969 Budget, when the Minister talked encouragingly about incentive and the desirability of limiting the amount taken from the individual taxpayer. This year the Minister has done a complete somersault. He has taxed the individual in the higher brackets harder than ever. Not only will their dividends be lower because of additional loan levies on companies, but the purchasing power of what is left buys less. The Minister in his Budget speech said—

Surely he should not be surprised. Where is the encouragement to save today, when there is not so much taxation but confiscation? The structure of the tax has been altered and now the higher bracket taxpayer pays as much as 78 per cent. That is a point which has already been dealt with. The Minister agrees with the Franzsen Commission’s remarks on fringe benefits and indicates a crack-down on the fringe benefits of business executives. Is he supporting a similar crack-down on Ministers’ fringe benefits? We have the question of the undistributed provinces tax to which we have already referred and we are left with the future as far as the Minister is concerned. He is left with the future of this country’s demands and he thinks that there will be a long-term solution as far as future planning is concerned.

There is no long-term solution in this Budget. The budgets of recent years have been a series of patchwork budgets with lip service given to theoretical aspects of economics. If there is no long-term plan, the short-term patchwork will become a chronic state in our economic life. I submit that that is the position we have reached today. Short-term patchwork has become chronic. We have had patchwork every year since 1966. Today we still see no solution with this Government. Not only are prices and labour and other costs rising but we see the price of money rising too. There are too many making money out of money, instead of making money from industrial enterprise. We have been telling the hon. the Minister for years now that the solution lies in the better use of labour. Despite our warnings the Minister still regards the question of the Government’s labour problem as an over-simplification of the problem. We have reached the position today that we have added cost inflation to demand inflation, but we can bring about an early improvement if we train and use our labour resources to the highest level of productivity. By better trained labour we will increase productivity and reduce costs and make our industries and infrastructure services more efficient. Only this week we read that no less an organization than the Amalgamated Engineering Union will support the view that more could be done by training and at the same time recognizing the principle of the rate for the job. We are not making the best use of our potential labour force. The average member of the National Party owes his seat in this House to persuading the electorate that a skilled non-White worker is a danger to the White worker. To continue with this policy keeps the White worker in a state of permanent fear. This argument is fallacious as we have shown so many times in this House. The greater the speed of technical training, the greater the rate of economic productivity and output.

In this Budget incentives are being offered for border development when what we need are incentives for industrial development generally in the way of encouragement for improvements in automization and mechanization. We are sacrificing economic progress to National Party ideology. We have heard nothing in this Budget of immigration, yet when so many people are unsettled with continuous strikes in Europe is it not now the time to offer incentives to qualified artisans and technicians to come to South Africa and help accelerate economic growth and reduce the cost inflation? With immigration capital should follow if its investment is not discouraged. There should be a concerted drive to increase productivity by training our own people of all races and for an imaginative immigration scheme so that we can face the future with a bold campaign of productive growth instead of a negative programme of defensive patch-work. It is time that the Minister changed his ideas, and I would remind him that Confucius also said: “They must often change who would be constant in happiness or wisdom.” I hope the hon. the Minister will show some wisdom when he replies.

Mr. Speaker, I found it quite impossible to follow what the hon. member for Pine-town was saying, but I did discover that he asked quite a few questions. I do not want to be derogatory now, but I wonder whether the hon. member would not prefer to lay the questions upon the Table, because no person can understand what he is saying, particularly when he stutters in places. However I followed what the hon. member was saying at one stage when he alleged that every member of the National Party in this House owed his seat to the fear the White worker has for the non-White worker. I really find that to be a very fine admission the hon. member made here. He admitted by implication that the White worker does not trust them and that that is the reason why we on this side are in power.

That is not what he said.

We shall read his Hansard. The hon. member for Parktown said: “This Budget is one of old tired men.” I honestly think the hon. member for Parktown should be the last person to use those words. People will laugh at him if he talks about “tired old men.”

The hon. Opposition accused us time and again of over-spending, and mention was made of a spending spree. Tremendous criticism is being levelled at us in regard to the Government spending which is contained in this Budget. In this connection I should like to go back a little way into the past and read a report which appeared in the Sunday Times of 13th December, 1970. In this report it was stated—

The man who said that is the hon. member for Hillbrow, who is sitting on the opposite side there. Last year we heard repeatedly of the “breakdown in infrastructure”. We heard repeatedly the argument in regard to long-term growth, namely that there should be an adequate basic infrastructure in South Africa. This year we have come along and are making very generous provision for basic services in this Budget. But now the hon. the Opposition is criticizing us again and accusing us of being on a spending spree.

No, they are not right on that score. You must remember that as well.

Yes, that hon. member is quite right. If we were now to go a little further, we would see that about half the Budget dealing with the expenditure from Revenue Account is linked to formulae. We see that there is a far greater estimate for expenditure out of revenue than last year. One item I should very much like to refer to, is salaries. We see that in this connection there is an additional appropriation of R56 million. This amounts to an increase of 15,2 per cent. Now the Government is being accused of its expenditure becoming too high. But who is responsible for the Government’s expenditure having become higher?

The Government.

That hon. member is saying the Government. We were forced to increase wages and salaries in this country.

Why?

Yes, that hon. member may well ask why. It is because the private sector was continually increasing salaries and wages and was in that way enticing away our teachers, agricultural experts and so on. In order to fill the vacancies in the Public Service, we were forced, inter alia, to increase salaries. Now hon. members opposite must just tell me whether we were responsible for the private sector enticing the existing trained men away from the Public Service. Hon. members on the opposite side of the House became very excited here last year about the question of teachers, and said that there were not enough. They said that we should see to it that the officials were better paid. We did. But this year they are complaining about Government spending. How can one reconcile those two points? Hon. members opposite rose to their feet time and again and pleaded for that. Now they are criticizing the fact that we are paying those people more.

Mr. Speaker, the hon. member for Von Brandis made an allegation here and said “the Government take money away from the public, preventing them to spend it and then spend it themselves.” Is that correct? That hon. member is one of those hon. members in this House who are continually advocating a higher growth rate, sustained economic growth. Now the hon. member must tell me whether the funds we are now taking from the voter and which are now in fact being used to establish the basic services, should not be spent? Is it inflationistic if we invest those funds in infrastructure, water, power and so on, with a view to long-term growth? After all, we are not buying luxury consumer goods with the money. We are establishing the structure for future growth in South Africa. The Government which is taking that money, is spending it in a responsible and not in an irresponsible way. [Interjections.] No, we cannot get away from that point. We can argue about it. But is it irresponsible if revenue which is to a large extent being spent on luxury articles, is being taken and spent on the establishment of basic services?

On toilet paper.

Surely that is anti-inflationary. That hon. member is talking about toilet paper, but to me he looks like a rolled out roll.

The hon. member for Von Brandis advanced arguments here and said that the Budget was not anti-inflationary. In other words, the hon. member wanted to allege by implication that the spending on consumer goods is not being effectively counteracted. But in the same breath the hon. member pleaded for a relaxation of the hire purchase measures. The hon. member criticized stricter hire purchase measures. But on the other hand the hon. member says that this Budget is not anti-inflationary. What precisely is the hon. member envisaging now? What is the hon. member actually trying to say now?

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