BUDGET PROPOSALS AND ECONOMIC SURVEY

§ Mr. Oliver Lyttelton (Aldershot)

Yesterday my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler), my hon. Friend the Member for Chippenham (Mr. Eccles) and other hon. Friends on this side of the House confined their contributions chiefly to the Budget as such. Today I want to discuss more particularly the Economic Survey for 1950, and the national setting in which the Budget must be viewed. Let me say at the outset that the Economic Survey does nothing to relieve my anxiety about the course of our national affairs. I shall try to explain as objectively as I can the cause of my anxieties.

Before I do so I should hasten to add that there are some features in our national economy which ought to be of great satisfaction to all of us. Three or four of these features are as follow. First, the rise in productivity, however suspect the figures may be; which shows a favourable trend. The figures are subject to a very wide margin of error. Both the Financial Secretary and the President of the Board of Trade have given them such a definiteness that it might be thought that they are readily ascertainable. They are not; they are subject to a very wide margin of error. I notice that in a newspaper article the President of the Board of Trade used a definite figure, and he appeared to be losing his statistical background and undertaking a journalistic one.

336 Secondly—and this is outside the scope of the Economic Survey itself—there are the increased figures of our gold and currency reserves and of a dollar surplus for the quarter ending 31st March, 1950. We have to be careful not to regard this surplus as one that is likely to recur for long without new measures. Lastly, there is, of course, the high level of our exports. I believe it is a record expressed in pounds sterling, and that is a matter of great satisfaction, but it must be tempered to some extent by the fact that the volume appears to be little more than getting us back and perhaps a little over the point from which we started before devaluation. Be that as it may, the Chancellor's statement on the dollar surplus set out all the qualifications with conspicuous fairness.

Certain features are good, but it is the sum of all the features set out in the Survey that increases my pressing sense of anxiety. Let me turn to that document first of all. At the beginning the writer of the document was faced with the difficulty of explaining away devaluation, and it cannot be explained away. There is still a sort of hint that devaluation was an enlightened act of policy and not what it was—just a bowing to, and acceptance of, the inevitable. The Chancellor of the Exchequer also was at some pains not to explain what part devaluation had in what he calls democratic planning. Of course, those Members who accuse the Government of having planned devaluation do them the greatest injustice. They planned nothing of the kind. In fact, it was economic events which governed the Government, and not the Government which governed events. As I said, in the Economic Survey devaluation is dismissed almost in silence, and where it is mentioned in passing it is delicately suggested, as in the fuel crisis, that it was not the Government but the bad economic weather that was to blame.

To speak more generally, it has proved impossible in the Economic Survey to write a White Paper to support any prediction that prosperity is round the corner, and for those who like to dig beneath the surface, it is quite clear that what is waiting for us round the corner are deadly economic perils. I must explain why I reach this stark conclusion. The subject is very complicated, the terminology with which applied economics has clothed itself 337 is particularly repulsive, and the figures have so many noughts after them that the imagination boggles at the attempt to relate them to ordinary everyday experience. I ask for the indulgence of the Committee in attempting the task.

Before I do so I should like to say there is no solid suggestion of any improvement in the internal position, or very little. In fact, if all the assumptions come right and if all the Government's geese prove to be swans, the citizen will have a couple of per cent. to play about with. There are, of course, to be the same restraints upon personal consumption and upon wages and dividends, and everybody is to behave themselves, except the Government.

It is upon a very precarious foundation of shifting sands that the Government seek to build their economic edifice. I say that it is precarious chiefly because I am anxious at the absence of safety margins wherever we look; or, changing the terms to a military metaphor, I feel that all the reserves have already been thrown into the battle. Though at the time of devaluation the line was swept back, it has since been restored and some local improvements have been made; but if the enemy should launch another attack there are no reserves, no mass of manoeuvre in the hands of the commander-in-chief to throw into the battle, and to restore the line if it is penetrated. Where is this lack of margin of safety to be seen? I will give three instances which I think are of sufficient importance to warrant the attention of the Committee.

First of all, there is no margin of taxable capacity in the country. Secondly, there is no margin in our balance of payments. Thirdly, there is no margin in the so-called personal incomes policy. The first matter, that of taxable resources, is one of the weakest parts of the foundation. It is generally agreed in all quarters of the Committee, I believe, that any further rise in taxation could only be a further deterrent to production and to hard work, and would be at the expense of savings. I believe, and there is much evidence to show, that we have already passed the limit at which taxation is disinflationary—if I have to follow that phraseology and that it is even becoming inflationary by obliging people to live on their capital and to sell their Govern- 338 ment securities of whatever kind in order to meet the rising cost of living.

Now I turn to the balance of payments. I thought that, in a speech which from its length was obviously intended to be comprehensive, the Chancellor devoted far too little time to the subject of sterling balances and other exports of capital. Surely the size of the decrease in our sterling balances, or of the increase in our overseas investments, has a very significant bearing on disinflationary or deflationary pressure. Many economists think that a sober handling of sterling balances over the last four years would notably have reinforced our economic structure and reduced inflationary pressure. I found in the Economic Survey that the paragraph dealing with sterling balances was easily the most interesting in the whole document. I trust that the Government, now that they have made a beginning, will continue the good work and will give us the figures more fully and more frequently than once a year.

The Survey shows that between 1948 and 1949 the amounts of blocked sterling declined from £1,600 million to £1,350 million, a decline of £250 million, while the comparatively free, unrestricted kind rose from £1,750 million to about £2,000 million. Let me first deal with capital investments abroad. For the purposes of this part of my argument it would seem to me that reduction in sterling balances and capital investment abroad both represent, in different shape, the export of capital.

Let me go back a little and follow the course of our export of capital overseas, as well as of the movements in our sterling balances over the last two and a half years. In the two and a half years ended 30th June, 1949, we paid off a total of £467 million in sterling debts owed overseas, and in addition we made just under £500 million of capital investment overseas, making a total of £966 million of.export of capital overseas; that is, just under £400 million a year. In the second half of 1949 there was an abrupt change. Our net overseas investment increased very rapidly to £197 million, at the rate of nearly £400 million a year, nearly twice its previous rate. What we owed abroad, our foreign sterling debts, instead of decreasing as they had been doing, actually increased by £110 million. Therefore, we invested 339 £197 million abroad and increased our debts by £110 million. Thus the net export of capital in the last half of 1949 was reduced to £97 million.

It would appear from the rather cryptic or Sibylline footnote at the bottom of Table 7, that £60 million of that increase was due to writing up of sterling obligations, due to devaluation. If we had guaranteed any country its debt at four dollars to the £ under a so-called gold clause, it is clear that, after devaluation, the figures of our sterling indebtedness have to be adjusted upwards. If we look at the overall figure of sterling balances, the debts owned by this country overseas, we find that in 1949 they hardly changed at all. They stood at £3,359 million at the end of 1948. By the end of 1949 they had fallen to £3,344 millions, which is a difference of a mere £15 million.

Much of the increase in the unrestricted balances is due to the action of countries such as Australia, which is popularly supposed to have over £400 million at its disposal in London. One thing is certain—and this is why I say that this balance of payments situation is so precarious; it is that the accumulation of sterling on this scale must stop one day. Those who have accumulated it will want to be paid either in cash or in goods.

It is very pertinent to our national position to ask how long sterling area countries will be willing to pile up sterling balances on this scale. Speaking in banking terms, these sterling debts and obligations are now quicker than they were. What has happened is that the more or lass restricted sterling balances that we have under notice have gradually come down and that those which are much quicker liabilities have gone up. This underlines the insecurity of our balance of-payments position.

It is now necessary also to underline the true significance of these figures as they relate to exports, to show to what point our exports have to expand in order, first of all, to pay for our necessary imports, and secondly to pay for the export of capital. I think that the export of capital is unlikely to sink below £250 million. I do not know whether that is the right figure. I need 340 hardly remind the committee that the export of capital takes a number of forms, such as unrequited exports to run down sterling balances, overseas investments in the Colonies such as in the groundnuts scheme or the financing of the Orange Free State goldmines. It will very soon take another form, and that is paying the service and the interest on the American and Canadian loans, which become payable in December, 1951. I do not think—I would be glad to be corrected—that it is likely that we shall get on with a lower export of capital than £250 million.

The figure which exports must attain on that assumption and premise is indeed formidable. In 1938—I apologise to the Committee for plunging into figures again —our retained imports cost us £774 million, of which £466 million was covered by visible British exports. By 1949, we were only importing 87 per cent. of the 1938 figures. Accordingly, that ought to have cost us £673 million, which is 87 per cent. of £774 million. They actually cost us £1,910 million. That was a rise in our imports to 283 per cent. of the 1938 level. At the same time the volume of British exports was 151 per cent. of the 1938 level, and their value was £1,730 million, a rise in price of only 248 per cent. compared with 1938.

I calculate that at present prices the sterling value of imports in 1950 seems likely to be at about 310 per cent. of 1938, whereas exports might possibly reach 255 per cent. It means that to cover the imports alone we should have to export a little over 160 per cent. of our 1938 volume but, unfortunately, we have much more than our necessary imports to cover. We have to turn our 1949 deficit on current account of £70 million into a surplus of £50 million. That is the aim of the Economic Survey, and supposing that our invisible exports remain at their 1949 figure of £110 million, we should have to increase our exports to 170 per cent. of the 1938 volume.

These goals appear to be very high and the road to them very, very steep. For example, can we spare this volume of exports from our own needs? Can we sell them to countries which will pay us in money with which we can buy what we want? Above all, are we likely to be 341 able to do this in a world in which supply is already overtaking demand and where, for example, there are coal surpluses in a number of countries, and where German and Japanese competition, which has been absolutely negligible during the whole of this period, is now beginning to make itself felt? I have news of a contract in Turkey taken by German manufacturers at about 42 per cent. of the lowest international price and there are evidences in Pakistan that Japanese machinery is being offered at 30 per cent. or 40 per cent. below current British prices.

The second dangerous part of the foundation—the first was that we have no taxable margin—is that to maintain our balance of payments and to reach the goal we have in mind, an enormous volume of exports will be necessary. The third precarious part of the foundation relates to the wage freeze and to dividend limitation. I do not think that the keenest advocates of these two measures would describe them as other than highly artificial.

The wage freeze is maintained under an ever-increasing pressure of the rising cost of living, and the extent of this rise in the cost of living, which we shall one day have to face, has not been fully felt because there are large stocks in the country on which we are living. When we have to buy for current consumption out of current supplies at the exchange of 2.80 dollars to the £ in the Western hemisphere, the cushion will by then have been removed and we must expect to see steeper and quicker rises in the cost of living. If the wage freeze is a highly artificial measure, so also is dividend limitation.

If the Committee will remember the export figures I have given, I should say that one thing stands out clearly: that it is imperative that British industry and production should be expanded as rapidly as possible if these targets are ever to be hit. The slowest way to do this—although it is a sure way—is to plough back profits into industry. What is really required is a combination of conservative finance and adequate retention of profits in the business, plus conservatively increased dividends in order to attract new capital into these enterprises, and foreign capital if need be, in order that British industry 342 may expand as rapidly as possible and not as slowly as possible.

It is no answer to a critic of the wage freeze or of dividend limitation to say that without them the Government economic policy would collapse. I agree profoundly with my right hon. Friend the Member for Warwick and Leamington (Mr. Eden) when he said that we must support dividend limitation and the wage freeze at this moment, because the house of cards would collapse without them. However, that is no answer. There should not be an economic system which depends for its stability upon two such impermanent, ephemeral and insubstantial barriers as wage freeze and dividend limitation. No economic policy ought to be erected on that foundation. We can all make calculations and engage in economic exercises if we are allowed to introduce those abnormal features. That is the third reason why I say that we are building up on the shakiest of foundations.

I have given three major instances—no margin of taxable capacity, the extremely insecure position regarding the balance of payments, and the artificial and insecure foundations regarding the so-called personal income profits—and my right hon. Friend the Member for Woodford (Mr. Churchill) reminds me that the "infrastructure" is defective. [Laughter.] In this precarious position, our expectations of holding even our present level are based upon a number of major assumptions—continued American prosperity, a continued demand for British exports and the ability of the exporter to supply them at competitive prices, an increase in productivity, an increase in profits—for all that hon. Members opposite may say, that is what the Government are budgeting for, and profits arc now falling—continued restraint in private spending and in private claims.

May I weary the Committee for a few moments by discussing these matters? First, the continuation of American prosperity. I need look no further for my argument on this point than to the second report of O.E.E.C. on the European Recovery Programme. This is what it says: A decisive condition for the solution of the dollar problem is the maintenance of a high level of business activity in the United States and in all countries.… 343 This paragraph ends with pretty strong words— The sort of expansion of dollar earnings which the O.E.E.C. countries contemplate is inconceivable in conditions of declining business activity in the United States. Secondly, we have to assume that foreign countries will continue their demand for British exports, and that British exporters will be able to produce at figures which compare favourably with the severe competition that will be seen more and more from Germany and Japan. There, again, the continuance of competitive costs will depend largely upon the success of the wage freeze. I quite agree with what the President of the Board of Trade said some time ago, that there is a field for British exports in the United States hitherto untapped. However, I do not share the almost astronomical views expressed sometimes about the total size we may reach. It was significant to read in one American document that the total British exports to the United States are scarcely more than the turnover of one large New York department store.

The next assumption is that there is to be an increase in productivity. I find all the figures for 1949 on this subject extremely doubtful, and I think the Financial Secretary was the first occupant of the Government Front Bench to give out these figures with any qualifications at all. Of course they have to be qualified greatly. They are analysed with great perspicuity and penetration in an article in "Lloyds Bank Review" this week written by Professor Ely Devons. I believe it to be true that the undoubted increase in productivity is due—and the Chancellor said so himself—mainly because we are now beginning to reap the results of the vast capital investment made in our industries since the war ended. It must be due to that, because the working population is not working the same hours—I am not saying anything about the effort put in—as they were, and this increase is largely due to better tools.

The Financial Secretary committed himself last night, in a moment of inadvertence, to a statement that the increase of production which has taken place in the last five years was unprecedented.

§ The Financial Secretary to the Treasury (Mr. Douglas Jay)

I did not actually 344 use the word "unprecedented." I said that production now was higher than ever before.

§ Mr. Lyttelton

The Financial Secretary has a mind which would be more suitable to a Venetian cardinal in the Middle Ages. He is always weighing these things, but "unprecedented" is a very fair synonym for what he said. He said that it was higher than ever before. I wish to quote Professor Devons on this matter: In the eleven years from 1924 to 1935, during the inter-war period, which we are now led to believe was one of stagnation, the best estimates that can be made suggest that the increase in production was actually 34 per cent. Later he said: If 1949 is compared with 1937 production, according to the index and weighting system used, on the most favourable basis the increase was 24 per cent., and, on the least favourable basis, no more than 5 per cent.

§ The Chancellor of the Exchequer (Sir Stafford Cripps)

Does he know there has been a war?

§ Mr. Lyttelton

I would like to address that question more to the Financial Secretary as he put in no such qualifications as the Chancellor is now trying to assert, but came out with the flat statement that never had the increase in production been so steep.

§ Mr. Harold Macmillan (Bromley)

There had been a war before.

§ Mr. Lyttelton

I only wish to bring the light of realism to bear on these figures, which are extremely suspect and which we should accept with great reserve. From my own observation of industry I am sure there is an increasing trend in production, and when I say that is mainly due to the provision of new tools I am not seeking in any way to detract from the effort the working men and women of this country are making in the drive for production.

I believe there will be a further increase in productivity in 1950. I think it will be above the figures on which the Chancellor has based his calculations. The reason is that I do not think the number and efficiency of our machine tools of all kinds have yet reached their peak and we have still to remember that we have a long way to go before we can put industrial power at the bench at the command of the workers of this country on a scale 345 comparable to that in the United States o! America. I think it not unreasonable to suppose that there will be an increase in productivity, but the time is not very far off when this aid will cease to have an effect on the picture and then we shall have to rely upon decreases in restrictive practices on the labour side and, if hon. Members like, on the employers' side as well.

§ The Minister of State for Economic Affairs (Mr. Gaitskell)

We do.

§ Mr. Lyttelton

The right hon. Gentleman says, "We do." I am not trying to make a smart point, but there has been no incentive whatever to the employing side to restrict the output of their works in the last five years, and the worst restrictive practices at the moment are entirely on the labour side. [An HON. MEMBER: "0h."] If the hon. Member is interested in that matter, he should look at the figures in the building industry and compare the output as well as methods now available with those before the war.

§ Mr. Pannell (Leeds, West)

What about engineering? Can the right hon. Gentleman address himself mainly to engineering?

§ Mr. Lyttelton

I was addressing myself to engineering and said that the output of engineering has gone up a great deal and that is due largely to better tools. I say that if he wishes to have a view of the reverse picture, he should look at the figures relating to the building industry. I have yet to hear it contradicted that the low output is largely due to restrictive practices on the labour side.

We shall very soon have to realise that true industrial prosperity comes not from wage freezes and dividend limitation and production per man hour which does not compare favourably with the American level, but that prosperity lies in a high wage and high production country. I want to see wages here rise, but they cannot do so as long as our affairs are managed as they are, and unless we get on the other side of the account something comparable in output.

The fourth assumption is an increase in profits sufficient to make private savings 25 per cent. higher than in 1949. The difference between personal savings and 346 private savings is, I suppose, that private savings are almost entirely retained profits and reserves created in joint stock companies. We need no reminder that the policy pursued by the Government makes an increase in personal savings most unlikely. I think the figure of 25 per cent. is a slight understatement. I get it from paragraph 13 of the Economic Survey which supposes an increase of private savings from £637 million in 1949 to £805 million in 1950. I know the figure is the residual figure put in in order to balance the accounts. I think very few business leaders, whether in industry or commerce, would think private savings could possibly rise by 25 per cent. in 1950 at a time when international competition is becoming so much more intense.

There appears also to be a rather curious Left-wing idea that the way to keep up the revenue and to secure the safety of our social services, is to carry on a drive against profits. I hope some of these figures will convince those who support that idea that it is a very erroneous line of argument. Amongst many economic perplexities, one thing is quite certain; if profits of joint stock companies continue the trend they began last year—to decline—the revenue will fall and the gap between what we have to spend on the social services and what we are able to raise will grow wider and one day will grow into a chasm.

The fifth assumption is a continued restraint in any form of private claims and private spending. Alone the Government are to continue unchecked vast and ever mounting public expenditure. If austerity begins anywhere, in the Chan cellor's mind, it does not begin at home. Dividends are to be limited, private consumption is to be reduced and wages frozen, and the ordinary observer would say that the counterpart must be drastic cuts in Government expenditure.

§ Mr. Harold Davies (Leek)

Where?

§ Mr. Lyttelton

I will come to that.

§ Mr. Davies

In defence? In health?

§ Mr. Lyttelton

I will come to that. We were told a year ago that no administrative cuts whatever were possible in the Government structure, but since then the Government have announced cuts of £140 million, so that when they start 347 trying they find they can do better than they say.

I have tried, I think fairly, to show some of the background under which we approach the economic affairs of 1950 and to set out what I think to be the major assumptions which have to be taken for granted if the Survey is not to be a mere essay on what might be. In grammatical terms the Survey is never written in the present or the future tenses, but in the subjunctive or optative—" it may be "or" it might be." I go as far as to say that nearly all the major assumptions which I have mentioned will have to be fulfilled if our position is not to decline very drastically. If any single assumption is not fulfilled, we shall be faced with another crisis which we shall be much less able to sustain than the last because our resources have become correspondingly more strained.

I wish to conclude by pointing out some of the anomalies of the Government's economic policy. First of all, there was the revealing passage in the Chancellor's speech concerning the need for a Budget surplus in order to counteract and reduce inflationary pressure. The Chancellor tried to show that private savings—I agreed with him— were insufficient to keep back inflation and that the Government had, therefore, to make the savings themselves, which is a sort of modern Socialist conception. In order to make these savings they have either to maintain the present crushing burden of taxation or to increase it, thereby making impossible the very savings on which they say they cannot rely. It is a sort of vicious circle.

I confess quite openly that I am not without apprehension that some of our fiscal policy is designed to further purely political ends. If company profits are taxed at the present rate, tax is levied upon the population at the present rate and the price of capital equipment continues to rise, the day will come—for which I think the Socialists hope—when it will no longer be possible to finance private industry out of private savings. I believe that at that moment the Government intend to move in on the private sector and say, "Because we have removed all the means, you yourselves cannot save the necessary money to finance industry, and therefore we are 348 going to do it for you." This is one of the most serious inroads which the Socialist State could make on private enterprise.

The Government's present policy, whatever it may be-it is merely a thing of shreds and patches-cannot possibly last for long. On the private sector we have on one hand this crushing taxation P.A.Y.E., Income Tax, Surtax, Purchase Tax and the swingeing duties on tobacco and beer. It is an extraordinary thing that an average family of four people earning under £10 a week pays not less than 31s. a week in duty on beer and tobacco. To these taxes which are paid while people are alive must be added the confiscatory Death Duties, whose effect was not, of course, so electorally important because they are confined to a comparatively small but nevertheless important class of people. Death Duties remove another incentive to save. All these taxes remove at one and the same time the means of saving and the impulse to save.

Not content with this, the Government proceed to threaten further measures of nationalisation, or, rather, they did before the General Election, and I do not suppose that in their heart of hearts they have dropped these schemes. They deter savings by threats of nationalisation. The most significant industry threatened in this connection is insurance. An American correspondent passing through London asked me on the telephone to what I attributed the "dis-saving," which is the new word. I replied "A Government which taxes at this rate and which threatens to nationalise the few industries where private capital can find an outlet is of course, the cause. Next time you come back ask me something hard."

Again I wish to drive home the point that the Government's economic policy is only posible, first of all, if a series of unlikely assumptions are predicated and if a number of artificial barriers, which cannot possibly be maintained over a long period, are set up over such things as the rewards of labour and capital. In all these circumstances I say that it is only too clear that the welfare State will become the fare-ill State in the next year or two. The Budget and what we can glean of economic policy from reading the Survey show a complete disregard of the dangers and ignore the fact that an 349 entirely new start is necessary. A start must be made on Government expenditure. We have to get away from many of the physical controls and restore proper financial control. We have to wind up some Ministries and see the last of some Ministers. We must reduce the whole cost of administration and allow the people to look after themselves a little bit more without always having somebody from the Ministry looking over their shoulders. We have to reach a higher state of defence at a lower cost by concentrating on the long-service men, which is the cheapest form of defence, and perhaps reducing the number of short-service men, which is the most expensive form of defence. I will not reiterate our attitude towards the food subsidies. The argument was very fully put by my right hon. Friend the Member for Warwick and Leamington (Mr. Eden).

Anybody who goes about the country knows that waste is rife, and it must be hunted down wherever it is found. One of the first places to look for it is in the ever-increasing staffs and ever-mounting tide of paper with which the nationalised industries, the commissions, the boards and all the rest of it are cluttered. No one is worse than the National Coal Board. One thing which is certain is that no country situated as ours is could weather even the slightest economic shower in its present strained position, and least of all a country whose Government ended the Economic Survey for 1950 with these words—and had the effrontery to put them in italics: "The Government, therefore, regard it as of vital importance that we should continue the major economic and financial policies by which we have been guided over the last three years." I assure hon. Members opposite that this is the part of the Survey where I detect the ministerial rather than the official hand. May I be so bold, in conclusion, as to re-write that paragraph as it should be re-written? It would then run like this, "The Government, therefore, regard it as of vital importance that, we should continue the economic and financial policies by which we have proceeded from expedient to expedient and from crisis to crisis, which produced the convertibility crisis of 1947 and the economic defeat of devaluation in 1949, and which may be relied upon to continue to produce other crises of no less severity."

§ The President of the Board of Trade (Mr. Harold Wilson)

The right hon. Member for Aldershot (Mr. Lyttelton) protested because an American journalist did not ask him something hard. A number of my hon. Friends asked him something hard a few minutes ago and he said that he would come to it, but he sat down without coming to it. It was the question which has been put to right hon. Gentlemen opposite so often—which cuts are they going to make in Government expenditure? For one wild moment I thought the right hon. Gentleman was going to answer that question.

§ Mr. Churchill (Woodford)

The right hon. Gentleman only wants it for electioneering.

§ Mr. Wilson

We know the promises on that subject which the right hon. Gentleman uses for electioneering, but we have not yet had the answer from his right hon. Friend who said, a few minutes ago, that he was coming to it. I was interested to hear, in his concluding words, before he started re-writing the Economic Survey, a reiteration of what appears to be Conservative Party policy on one item of expenditure, namely, the food subsidies. As I understand it—he will correct me if I am wrong—he reiterated the statement made by his right hon. Friend the Member for Warwick and Leamington (Mr. Eden) last October that these would be cut.

§ Mr. Lyttelton

Would it not be far better to let hon. Members read HANSARD and see what my right hon. Friend said, rather than that they should have to listen to a distorted paraphrase?

§ Mr. Wilson

I was putting this point for elucidation. I was very ready that the right hon. Gentleman should say 'what he meant by it. The whole Committee knows that since the right hon. Member for Warwick and Leamington made his statement, which I have read and studied very carefully before, during and since the General Election, the Conservative Party suddenly discovered that this might be a little unpopular, and therefore we had a promise from the Conservative Party during the General Election that any additional hardship caused by dearer food arising from cuts in the food subsidies would be made up by increased social security benefits. At that 351 time, I think the right hon. Gentleman expressed some concern because the food subsidies made food cheaper, not only for those with lower incomes, but for the rich as well, and one was interested to see—

§ Mr. Churchill

Could the right hon. Gentleman not address himself constructively to that point if he is looking for economies? Is it necessary to give a food subsidy for people who can perfectly well afford to pay the market price?

§ Mr. Wilson

I do not know whether the right hon. Gentleman has considered the administrative difficulties of having two prices, one for the rich and one for the poor, but if he is concerned, as I understand he is—

§ Mr. Churchill

I think you ought to be.

§ Mr. Wilson

—that the rich are "getting away with it," then, of course, it is always possible for the Conservative Party to come forward with proposals for higher rates of Surtax.

I noticed in the speeches of both the right hon. Member for Saffron Walden (Mr. R. A. Butler) and the right hon. Member for Aldershot a quotation from Gilbert and Sullivan. They both described the speech of my right hon. and learned Friend as "a thing of shreds and patches," but I noticed that the right hon. Member for Aldershot did not go on to complete the quotation. He might have gone on to say My catalogue is long, Through every passion ranging And to your humours changing I tune my supple song. I can understand the embarrassment of the right hon. Member for Aldershot, after tuning the song of the Tory Party to any changing humours which they thought would catch votes in the recent election, having to come down to this Committee and make all their promises add up—or, at least, to conceal the fact that their promises never will add up.

I was glad to hear the right hon. Member for Aldershot join with my right hon. and learned Friend in expressing satisfaction at the continuing buoyancy of our export trade. As he said, expressed in terms of pounds sterling, we have in recent months seen record figures - of exports; and in terms of volume, also. As the right hon. Gentleman will know. 352 the figures for the first quarter of this year were some 10 per cent. above the first quarter of last year. I know that both sides of the Committee would pay tribute to the export trades, industries and merchants, and I think would also in fairness attribute to the effectiveness of Government controls the fact that these export targets were reached.

All this has been in the face of continued pressure and opposition from the party opposite in the matter of increased exports. Throughout the last four or five years we have had opposition to this policy of austerity and to the policy of diverting goods from the home market. In October, 1947, the right hon. Member for Woodford (Mr. Churchill) himself criticised the export drive. He said that a fertile and healthy export trade could be maintained only on the overspill of a much larger internal and domestic trade. He said: …exports are only the steam over the boiling water in the kettle. They are only that part of the iceberg that glitters above the surface of the Ocean."—[OFFICIAL REPORT. 28th October, 1947; Vol. 443, c. 701.] This same philosophy underlay those motor manufacturers who howled down my right hon. and learned Friend some four years ago when he proposed that 50 per cent. of the motor cars made in this country should be exported. Yet in the first quarter of this year, 80 per cent. of the motor cars manufactured are being exported, many of them to hard currency areas, and the industry is doing very well.

§ Mr. Lyttelton

May I ask the President, in this very interesting part of his speech, also to discuss the reasons why the Purchase Tax is being reduced on the higher-priced cars? They cannot be exported unless they have a home market.

§ Mr. Wilson

That is perfectly simple. We are exporting, among the lower-priced vehicles, up to 80 or 90 per cent. of the bulk without a large home market. As my right hon. and learned Friend explained on Monday, with some of these high-priced cars it is necessary to have a higher rate of production and to bring the price down a little in order to sell them in the American market. That is what is being done. At the same time, an assurance has been given by the manufacturers that the greater part of the increased production will go to export. But the Opposition—

§ Mr. David Eccles (Chippenham)

rose—

§ Mr. Wilson

I have given way several times already. The Opposition will remember opposing increased exports of almost everything we have sent abroad —electrical equipment, textile machinery, transport, civil engineering and agricultural equipment, commercial vehicles—to use a phrase which has been used a little this week—and mining machinery; and in the consumer field, almost everything from nylons to shirts. But this has been done, and this is one reason why our exports are now at so high a level.

The Committee have rightly expressed concern about the position of our dollar exports. Certainly, following devaluation we have halted the decline in dollar exports which occurred in the few months before devaluation. As far as Canada is concerned, we are seeing now a steady upward trend which, I think, is the result of all the efforts which have been put in by British industry and by the Government to develop trade with Canada over the past two or three years. The engineering industry particularly is making a great effort in Canada, but, of course, we cannot expect to get results overnight. As Sir Harry Gilpin has said, we cannot neglect a market for 30 years and then expect to conquer it in a few weeks. But following the Gilpin Report, following the extraordinary and special assistance being given by the Export Credit Guarantees Department, we are now seeing new developments in engineering exports to Canada. At the Toronto Trade Fair we expect to see the biggest exhibition of certain engineering products we have ever staged in any part of the world.

While the dollar drive must continue to occupy a central place in our export effort, the Committee will be in no danger of forgetting our trade with the Commonwealth. Our exports to the Commonwealth in the five immediate pre-war years amounted to about 43 per cent. of our total exports; in 1949 they increased to 51 per cent. of our total exports. Our trade with the Commonwealth has enabled us not only to pay for a considerable proportion of our imported food and raw materials, but also to, make a tremendous contribution to capital development, especially in the colonies. The value of our exports of capital equipment to the Commonwealth 354 as a whole has, despite our shortages, increased nearly five-fold as compared with pre-war, and to the colonies, nearly six-fold as compared with pre-war.

The development of imports from the Commonwealth has, obviously, been one of the most important economic events of the last four or five years. Hon. and right hon. Gentlemen opposite have talked many times since the war, as well as before it, about the need to develop trade with the Commonwealth and to develop our imports from the Commonwealth. The difference has been that they have talked about it whereas we have done it. [An HON. MEMBER: "Nothing of the sort."] I do not want to bother the Committee with too many figures, but if I take our total imports in the five pre-war years, 36 per cent. came from the Commonwealth; in 1947, that figure was 42 per cent.; in 1949, 45 per cent.

§ Mr. Lyttelton

We have no dollars.

§ Mr. Wilson

If we take food alone—I am excluding Canada because, as I hear the right hon. Gentleman murmur, we have no dollars—in 1938 the figure was 36 per cent. Because of the devastation of certain Commonwealth areas, the figure fell to 29 per cent. immediately after the war; it has now recovered to 37 per cent. In the case of raw materials of which, before the war, we were getting 34 per cent. of our imports from the Commonwealth, excluding Canada, that figure was 37 per cent. in 1947; today, it is 46 per cent., and is still rising.

I will give one or two illustrations—[HON. MEMBERS: "Groundnuts."] Hon. Gentlemen cannot dissociate their minds from groundnuts when we discuss colonial development or imports from the Commonwealth. They seem to be totally unaware of the tremendous schemes of development going on throughout the Commonwealth as a result of the activities of His Majesty's Government and long-term contracts. Their attitude on this subject proves that they really are the spiritual descendants of those Whigs and Tories who once successfully carried in this House a Motion to abolish the Board of Trade on account of its waste of public money because it had proposed to establish a plantation in Nova Scotia.

If I might give one or two illustrations—

§ Mr. Lyttelton

Will the right hon. Gentleman deal with the shortage of dollars?

§ Mr. Wilson

Of course. I should have thought that the development of supplies from the Commonwealth is one of the most important ways of solving the dollar problem.

§ Mr. Lyttelton

I had hoped that the right hon. Gentleman would deal with the fact that our increase in purchases from the Empire, which is very useful in helping to close the dollar gap, is also due to the fact that we cannot buy the commodities anywhere else.

§ Mr. Wilson

A good deal of this is done by Government bulk purchasing agencies, which right hon. and hon. Gentlemen opposite do not like, and is done as a deliberate policy on the part of the Government. Let us take hardwood, which, until recently, was bought on public account. In 1938, 42 per cent. of our imports came from dollar areas, whereas in 1949 the percentage was 13. We have, meanwhile, increased our hardwood imports from the Commonwealth, excluding Canada, from 4.8 million cubic feet in 1938 to 12.6 million cubic feet in 1949; and from our African colonies from 1.6 million cubic feet in 1938 to 9.7 million cubic feet in 1949. These are real achievements. To take tobacco, imports from Southern Rhodesia have increased from 19 million lb. in 1938 to 46 million lb. in 1949. We intend to see this development go still further, the only limit being the extent to which Southern Rhodesia can stand increased production without destroying her food production and wrecking her economy.

Even in the case of raw cotton, which it is not easy or quick to develop in many of the Commonwealth colonies, we received 6 per cent. of our imports from the colonies in 1949 compared with 3 per cent. before the war. I should stress the importance of centralised buying in this development because without the Raw Cotton Commission we could not have developed cotton within the Empire, as we could not have offered the producers of non-dollar cotton in certain colonies inducements of long-term contracts which no private firm or the Liverpool Cotton Association could have offered.

356 I profoundly believe that the fullest development of trade within the Commonwealth must be the corner stone of any economic recovery for this country. That is the policy we have followed, and we shall continue to follow it. I equally believe that the developments that we have achieved there would not have been possible without the bulk buying and long-term contracts which right hon. and hon. Gentlemen opposite have opposed.

A number of hon. Gentlemen yesterday attacked bulk buying as one of the causes of our difficulties. The right hon. Gentleman did not do so today. The Opposition approach to the question of bulk buying is, of course, entirely doctrinaire. Our approach is not. My right hon. Friend the Lord President of the Council made this clear some time ago, and our actions have confirmed what he said. Over the past year or two, for example, the Board of Trade has reverted to private purchase wool, rubber, hardwood, flax, hides, molasses and industrial alcohol and paper making material. Raw cotton is, of course, permanently on the basis of centralised bulk purchase, and I am sure that the Opposition realise—if they do not I think the people in Liverpool do—that there could never have been a freely functioning cotton market of the kind advocated by the party opposite in conditions of dollar shortage and close currency control.

A few weeks ago the hoardings and house ends of this country were disfigured by exhortations about voting for the party opposite and fighting the rising cost of living. We have not heard from the party opposite a single proposal devoted to reducing the rising cost of living, not a single constructive suggestion. The kind of thing they suggest is that abolishing bulk buying will do it. I would remind them, as the Economic Commission for Europe stated in their Report for 1948, that: The explanation of the relatively low prices paid by the United Kingdom for its imports of food and raw materials appears to lie largely in the extensive use which it has made of long-term contracts and bulk purchase agreements covering a large proportion of its purchases. It is suggested that one aspect of the rise in the cost of living is due to the centralised buying of cotton. I would remind hon. Gentlemen opposite that wool, which has reverted to private purchase, has increased in price by at least 357 as much as cotton, and has done so in, on the whole, vastly easier circumstances. If we take food as another example, I notice that the hon. Member for Thirsk and Malton (Mr. Turton) recently wrote in the "News of the World" an article which I have no doubt had a great appeal for the discriminating clientele of that newspaper. He said that reversion to private purchase would lead to more and cheaper food. But the hon. Member for Aberdeenshire, East (Mr. Boothby), not long ago stated in the "Daily Mail "even the Opposition cannot claim that he was misreported: The Argentine Government are in a position to squeeze us because … we are … dependent on supplies from overseas. if we were to confine the purchase of meat to competing private traders, in present circumstances, the price could and would be forced up to calamitous heights. That is the view of the hon. Member for East Aberdeenshire, who speaks with great authority on food questions. Yet the Conservative Party can go to the country and suggest that they would reduce the cost of living by abolishing bulk purchase. The hon. Member says, on the contrary, that the cost would rise to "calamitous heights."

§ Mr. Blackburn (Birmingham, Northfield)

Is it not the case that the hon. Member has also very honestly written that this country has been saved hundreds of millions of pounds by bulk purchase of foodstuffs, mainly from Canada, which reinforces my right hon. Friend's point?

§ Mr. Wilson

I hope that my hon. Friend will be successful in being called upon to take part in the Debate.

I turn from that topic to a point which has been made on a number of occasions by Opposition spokesmen. It has been made in this Debate. We also had it from the right hon. Gentleman the Member for Warwick and Leamington. They relaxed for one moment the Iron Curtain. When they were challenged at the time of the Election they told us one control they would remove. The right hon. Gentleman attacked the- system of allocating materials to manufacturers on the basis of fixed quotas. He said: It would be healthy to feel a fresh wind of competition in British industry. unnecessary controls over industry, like the timber control, for example, we will abolish because they merely make materials scarcer.and stop prices coming down. 358 He said he would like to see coming into British industry the "vigorous newcomer "who was now squeezed out.

When the right hon. Gentleman told us that the party opposite would abolish timber control I suppose he meant that they would abolish the system of licensing for the consumption of timber—he did not make that clear. So far as practically all the hardwood is concerned, that control was abolished about a year ago. If he was referring to the control over the consumption of softwood, that would mean the end of the housing programme of this country. It is possible that he was referring to the reversion of timber buying to private trade. Again, so far as hardwood is concerned, this was in force some weeks before his broadcast.

In view of the right hon. Gentleman's remarks about the efficiency and enterprise of the vigorous newcomer, perhaps I should remind the Committee of what happened when hardwood was handed over to private purchase. I am sure that the right hon. Member for Aldershot would like to hear this because of his fanciful picture of a country free from restrictive practices except on the labour side. It is true that there are no longer the same temptations to private manufacturers to enter into restrictive agreements as there were before the war. On the whole, the industry is doing a lot better than before the war. But to suggest that there are no restrictive practices except on the side of labour is presenting an entirely distorted picture.

The right hon. Member for Warwick and Leamington did not tell the country in his broadcast that when the Board of Trade negotiated with the timber trade the merchants asked that, on reversion to private purchase, they should be allowed not only to keep the market to themselves—to cut out that vigorous newcomer for whom the right hon. Gentleman was so solicitous--but also that they should be allowed to operate a ring dividing the market up among themselves under quotas which were privately fixed. We could not, of course, possibly accept any such arrangement. When we told the industry so they accepted that decision under protest, but they still asked to be protected against the right hon. Gentleman's vigorous newcomer by assurances that for an indefinite time no new entrants should be allowed in the trade. This, also, we had to refuse. In fact, I can assure 359 the right hon Gentleman that in this case, as in so many more, it took a Socialist Minister to make free enterprise both free and enterprising.

As for softwood, it is totally wrong to suggest that the timber control is keeping prices up. If it is true that private purchasers of timber could do the job much more cheaply, I would like to ask why it was that in recent discussions about the possible reversion of softwood buying to private purchase my insistence that any such reversion must be accompanied by a ceiling price control, to protect the cost of the housing programme and the consumer, was rejected by representatives of the trade as being impracticable? These are points which the Opposition really should deal with when they attempt to put forward suggestions that the cost of living would be cheaper under the kind of administration which they suggest.

I wish to say something about the position of the consumer in this country, because a good deal of the Debate so far has dealt with the position of the consumer and particularly with the rising cost of living. I think that the whole Committee would express concern at the continued high cost of clothing and household textiles. Prices are now more than double pre-war. The causes for this will be clear to the Committee. In the first place there is the high cost of raw materials, to which I have already drawn the attention of the Committee, both for the bulk purchased and privately purchased materials.

§ Mr. Lyttelton

Due to devaluation.

§ Mr. Wilson

Certainly, partly due to devaluation, which I seem to remember the right hon. Gentleman saying, some months ago, was an inevitable event. in- is partly due, also—largely due—to n- creases in wages in the textile and clothing industry. In the textile industry wages are something like 170 per cent. above pre-war. If they had not risen we would not have had any hope of getting the workers back into the cotton mills. Thirdly, distribution charges are higher, mainly through increases in distribution costs whch would have been a good deal higher if they had not been controlled by our policy of price control.

Therefore, when the Opposition talk about fighting the rising cost of living we 360 should be interested to know which of these three items they think they could reduce. They could not reduce the price of imported material. They could not—I am sure they would not—decrease the cost of distribution, because when, last year, I reduced the margin on the utility price by 5 per cent. there was an outcry in many parts of the country. It was stimulated principally by that group of non-political traders surrounding Sir Walter Womersley, the former Member for Grimsby, and the National Chamber of Trade, which, I think, has one or two Conservative vice-presidents. The hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) attended a mass protest meeting at the Central Hall and fanned the smouldering embers of revolt. Members of the Conservative Party tabled a Prayer against the price reductions but. typically, had not the courage to vote against them when it came to the point.

I do not think the Conservative Party would achieve their election pledges and poster hoarding promises by reducing distribution costs. It is plain to me and to my hon. Friends on this side of the Committee—and perhaps to some hon. Members on the other side—that the only way in which they could honour their promise to fight the rising cost of living would be by the traditional and time-honoured Tory method of slashing wages—[HON. MEMBERS: "No."]—because that is the only way open to them to do it.

If there is another way we still have to hear about it from them. We have never yet heard a single proposal for reducing the cost of living; except that they told us they would reduce the Purchase Tax. But during the General Election I do not think there was a single tax in this country which, at some point or other, they did not promise to reduce immediately they came into power.

I would say a word about utility production, because this is a matter of considerable concern in relation to the cost of living and the many questions being debated by this Committee. There has been pressure on us from some trade quarters, supported by at least one leading member of the Tory Party, to bring the utility clothing programme to an end. I want to make it quite clear that it is the intention of the Government that the utility scheme—one of our greatest 361 national assets today and a great safeguard to the housewife in guaranteeing both quality and fair prices—should be maintained.

I am quite certain that it is the view of all of us on this side of the Committee that the benefits of the utility production scheme in ensuring good quality standards should be carried forward, by some means or other, as a permanent feature of our economy. It is a matter of great concern that utility production, in cotton at any rate, has fallen so far short of our needs. In trade circles, and, I think, in some political circles—one or two hon. Gentlemen opposite have said so—this is being blamed on what is being regarded as the unduly niggardly attitude on the part of the Board of Trade in fixing prices.

Prices have been increased, and in the case of certain utility supplies which are very scarce—including nursery squares, and so on—they have been increased on a generous scale. But should supplies of utility cotton cloth not be forthcoming now on an adequate scale, I am sure that the House, and certainly the housewife, will insist that further steps should be taken—not excluding the reimposition of certain controls now taken off—to ensure adequate supplies. For one thing, non-utility prices in general are not controlled; and if there is evidence that these, even with the deterent of Purchase Tax, are exercising an undue pull on production away from utility, there is a very simple remedy available in the reimposition of price control on non-utility materials.

We simply cannot go on putting up prices of goods in short supply—which would certainly be happening in a free market without any control—in order to resist the pull of the most profitable lines. When some of the more detailed controls were removed last summer from cotton production, under strong pressure from the trade, to enable the industry to adjust its production to that of changing requirements both at home and abroad, the most specific assurances were given that utility production as well as production for export would be fully maintained. But we have to see whether these assurances have been fully honoured. When, also, we took the price control from the early stages of cotton production we had assurances that restraint would be observed, 362 and that there would be no attempt to cash in on the greater freedom

In the pre-devaluation situation it was a sound thing to take off price control in cotton production as much as we could. But devaluation has led to a great increase in the price of raw cotton, and there has since been evidence that spinners and weavers, and the highly organised finishing trades, have been increasing their prices to the final buyer. the merchant converter, far more than was necessitated by the increases in the price of raw cotton. The merchant converter has been squeezed against the price ceiling fixed by the Department and this, of course, is a temptation to him to increase the proportion of non-utility production.

The Committee is already aware—and the right hon. Gentleman who commented on restrictive practices will be interested in this—of the establishment of a highly organised minimum price fixing arrangement among the cotton spinners who were once regarded as the quintessence of competitive industry. We have heard hon. Members opposite advocate, as an argument for removing controls, that it would release hoards of bureaucrats and officials from Government service for more productive work. The hon. Member for Wimbledon (Mr. Black) argued that last night. There were about 25 specialists previously occupied on price control in Government service. I do not know whether hon. Gentlemen opposite would call them bureaucrats. They were occupied on what hon. Gentlemen opposite would regard as unproductive work, protecting the consumer against excessive prices.

With the end of this form of control. these 25 specialists left Government service and were free for productive work. as the Opposition always recommends. Now I am told that at the Yarn Spinners' Association there are some very familiar faces to be seen. These gentleman, instead of being employed in keeping prices down, are now engaged on what I suppose hon. Gentlemen opposite regard as the more productive work of fixing floor prices for the trade.

My hon. Friend the Parliamentary Secretary, who has himself great practical experience of textile production and marketing, is looking into all these questions with the cotton trade. Until his 363 discussions are complete there is no more that I can say to the Committee, though I am sure that hon. Gentlemen will agree, as, I am sure, Lancashire will agree, that the present degree of freedom from control which the cotton industry enjoys carries with it obligations of restraint in the interests of the consumer, and that in the matter both of supplies and prices the interests of the consumer must be protected.

The only way in which the rising cost of living can be fought by weapons within our own control is by increasing productivity and the rate of production in a whole range of British industry. On many occasions the Committee has expressed its concern at the slow rate of improvement in productivity, especially in cotton and certain other textile industries. I am sure the Committee will be glad to have seen the very considerable strides forward in output and the increase in the numbers employed in the cotton industry over the past year. On the weaving side. which has experienced great difficulties in this campaign because of its long history and post-war problems, redeployment had really begun to move forward. In what has been achieved here, every tribute is due to my hon. and learned Friend the Member for Islington, North (Mr. Moelwyn Hughes) who, with great patience and skill, has presided over the work of redeploying the wages structure of the industry to meet modern needs.

Where, a year ago, the emphasis was on these new methods in order to increase production, today, this has become a vital necessity for Lancashire, both in the maintenance and in the increase of her export markets and in her contribution to a higher standard of living for the British consumer. The ideas underlying redeployment are, of course, capable of extension to many other industries. In many industries individual units have recorded great successes, but I know that the Committee will agree that there are many industries today where much greater energy needs to be shown to bring up the level of productivity of the less efficient units to those of the best, because in many cases the level of our best is second to none in the world. It is to provide the leadership and co-operation in individual industries, as well as for the provision of much needed common services, 364 that development councils have been established in a number of industries.

I hope that we shall have the support of hon. Members opposite on this point, because this need not be a party question at all. I hope that they will agree that development councils need to be established in a very considerable range of industries where they do not at present exist. It is certainly the policy of the Government that these should be set up wherever they can contribute to the greater efficiency and productivity of the industry and wherever they can enable the industry to play its full part in the nation's recovery.

Another field where improvements can be made in the interests both of producer and consumer is in distribution. Hon. Members on both sides of the Committee have expressed their concern about the high cost of distribution of fruit and vegetables and about those unduly high charges which a week-end speaker referred to as, "A third man interposed between producer and consumer." It is not within my province, this afternoon, to discuss the marketing of fruit and vegetables, though this is a matter bristling with problems. It is one which, in the view of the Government, must be tackled, and we are accordingly considering what can be done. My hon. Friend the Parliamentary Secretary is at present considering the question of the merchanting of textiles, on which the Cotton Working Party Report, some three or four years ago, made it clear that reforms were necessary; but little or nothing has been done.

The existence of a large number of individual merchant converters—though many of these are playing a great and effective part in the dollar export drive —means that in far too many cases cloth is being ordered in quantities far too small to permit efficient production and the economies of long run productions. One of the original ideas of the utility scheme was that efficient production would result from standardisation. I am convinced that much more can be done to reap these advantages and to lower the cost of distribution and production. I am sure that hon. Gentlemen opposite will agree that there are few matters more important in the country than the cost of living, and. that the high charge of distribution on the nation's resources—

§ Lieut.-Commander Gurney Braithwaite (Bristol, North-West)

That is why the Petrol Duty has been raised.

§ Mr. Wilson

If the hon. and gallant Gentleman studies this matter, he will agree that there is a far greater increase in the cost of distribution to the consumer than has been added by the increase in the cost of petrol. I have just been dealing with certain points which are necessary for the reduction of the costs to the consumer.

§ Lieut.-Commander Braithwaite

Is it, then, Socialist policy to deal with the increased cost of distribution by raising the Petrol Duty and adding to the cost of distribution?

§ Mr. Wilson

I have not yet heard from any hon. Member opposite any suggestion of an alternative method of helping my right hon. and learned Friend with his Budget. Not a single suggestion has come, either on the side of taxation or on the side of expenditure. It is no good hon. Gentlemen opposite bewailing particular increases in taxation when they have not suggested any alternative.

§ Mr. Lyftelton

Is it suggested that we should introduce the Budget?.

§ Mr. Churchill

The alternative is a reduction of expenditure.

§ Mr. Wilson

It would have been extremely interesting to have seen, if only as an exercise, a picture of a Tory Budget after their election promises. The right hon. Gentleman the Member for Woodford who, I am sorry to say, was out for a few minutes when we were having a discussion on the reduction of expenditure, has now said that there must be big reductions in expenditure. He alone can tell us which are to be the reductions in expenditure which are necessary. But every time we ask he says that if he told us what was in his mind, we would use it for electioneering purposes. I am ready to give way to the right hon. Gentleman if he will tell us what the cuts in expenditure should have been.

§ Mr. Churchill

Should the opportunity come when we shall have the chance of presenting our design and policy to the nation, we shall not hesitate to propose definite reductions in expenditure coupled with definite remissions of taxation.

§ Mr. Wilson

The right hon. Gentleman had every opportunity of presenting his grand design to the nation before the election. He had every chance to tell the country what he would do before the election. If he now tells us that he will not tell the country before the next election, but only after the election, then he must realise that it will be a very, very long time before he has a chance to tell' the country.

If I may come back to the subject of distribution—and I know it is a difficult one for hon. Gentlemen opposite, because it is not possible for us to mention distribution without certain ill-intentioned persons suggesting that we are about to propose the nationalisation of retail trade —I do not think I need to repeat the statement of my right hon. and learned Friend that this suggestion is utter nonsense. I am sure that hon. Gentlemen opposite will agree with us that distribution margins must be kept to the lowest possible levels which are compatible with efficient distribution, with a reasonable standard of service and a reasonable standard of living for those connected with distribution.

My Department is continuously reviewing the margins of retail distributors; we are at present reviewing them to see whether any further reductions are possible. We are doing that in consultation with the trade, as I have already informed the House. Many margins are fixed on the basis of a percentage of the selling price, so that, when the selling price increases, there is often a windfall gain to the distributor, and these are at present being reviewed by my Department in consultation with the trade and against the background of any increases in the cost of distribution itself.

The last thing I want to say relates to the question of quality, because I am sure that the Committee will agree that quality is becoming increasingly important for the consumer, and especially the quality of clothing and household goods. Value for money involves reasonable quality as well as reasonable price, and every possible means of securing the highest possible quality is essential. That is one reason why we lay such stress on the maintenance of the utility scheme, and that is why work is now proceeding in the Board of Trade on the proposal to establish a Consumers' Advice Centre, which was the subject of 367 a Question the other day by my hon. Friend the Member for Coventry, South (Miss Burton). We are examining other suggestions which have been made for ensuring the highest possible quality of goods reaching the public. Apart from what can be achieved by increased efficiency in production and distribution, there is a strong feeling in the country that it is the Government's duty to protect the consumer to the full against any abuse of monopoly power, whether by single combines or by price-fixing or other restrictive associations.

The House passed unanimously the Monopolies and Restrictive Practices (Inquiry and Control) Act some two years ago and we are still awaiting the first report of the Monopolies Commission. A good deal of concern has been expressed about the time required by the Commission for dealing with the cases referred to it, but I can assure the Committee, and I hope hon. Members opposite will agree, that when inquiries of such importance have to be conducted with a judicial form of approach, the Commission has been well advised to tackle these problems with the utmost thoroughness and to work out the best possible procedures and methods for a type of inquiry which is new in this country. I propose, when I receive the reports of the first investigations of the Commission, to review the existing machinery for dealing with inquiries to ensure that the considerable number of cases which it will be my duty to refer to the Commission, as the result of representations received both by hon. Members as well as by persons and organisations outside this House, can be expeditiously dealt with.

§ Lieut.-Colonel Lipton (Brixton)

Can my right hon. Friend tell me whether he envisages the possibility of having a number of chairmen investigating different things simultaneously in order to get an opportunity of their reports being dealt with?

§ Mr. Churchill

A bit more about bootlaces.

§ Mr. Wilson

We will look at that and any other particular suggestions when we have the first reports of the Monopolies Commission. I did not know that bootlaces were produced under monopolistic conditions, but I am prepared to consider 368 referring them to the Monopolies Commission if the right hon. Gentleman wants me to do so.

There is also the question of re-sale price maintenance, on which I have already made a statement to the House following the report of the Lloyd Jacob Committee. I have had discussions with the various re-sale price maintenance interests, the last of them with the associations represented on the newly-formed and so-called Fair Prices Defence Committee, and I am bound to tell the Committee that I see no prospect, from what these associations have said to me, of their ever agreeing to bring their schemes to an end. The Government are considering what proposals it will be necessary to bring forward in these circumstances for the protection of the consumer. I trust that hon. Members opposite, who, in "The Right Road for Britain," declared their intention to encourage competition in the shops, will be only too glad to co-operate with the Government in whatever steps are necessary to deal with re-sale price maintenance. However, time will show.

§ Mr. Lyttelton

Will they include the national monopolies?

§ Mr. Wilson

I do not know whether the national monopolies are operating resale price maintenance or are members of any retail price cartels.

§ Mr. Lyttelton

If a monopoly like that in coal is set up, it does not have to concert its actions with the consumer, because it has all the power in its own hands.

§ Mr. Wilson

It would be inappropriate for me to discuss certain private monopolies which have never been the subject of Debate in this House, because the matter is sub judice, having been referred to the Monopolies Commission.

I do not think there is any doubt on either side of the Committee, whether we are considering the overseas balance of payments or the problem of the cost of living at home, that, despite the great progress we have made, we are facing difficult and critical years ahead. Overseas, we have the sellers' market moving more and more into buyers' market conditions, and we have the powerful growth of German and Japanese competition making itself felt. In these 369 conditions, British industry will need all its resilience, all its efficiency and all its inventiveness and skill—and we will not get it by making price-fixing associations when Government controls come off, as in the cases which I have just illustrated —particularly in production for the consumer at home, if we are to succeed in the fight to reduce prices and provide the best possible quality for the consumer.

I have still to hear anyone suggesting from the opposite benches any alternative to the policy put forward for taking us through these difficult years. The policy outlined by my right hon. and learned Friend is the only hope of bringing the country through, and, to coin a phrase which is not unfamiliar to hon. Gentlemen opposite, this is, in fact, the road.

§ Mr. Vosper (Runcorn)

In addressing this House for the first time, may I claim, in a conventional but none the less sincere manner, the indulgence of the Committee, and express the hope that hon. Members will grant to me the courtesy which I have already witnessed being accorded so many times in the last few weeks. In accepting the advice which hon. Members have offered me concerning the subject-matter and time of delivery of a maiden speech, one is at a great disadvantage on this occasion in following in the wake of the very high standard which we have experienced recently. The right hon. Gentleman the President of the Board of Trade will excuse me if, on this occasion, I do not follow him in his argument, because I wish to deal with a different 'aspect of the matter, though I should like on a future occasion, to be able to do so, more especially as the right hon. Gentleman spoke in my own constituency a few weeks ago.

We were told on Tuesday that the Budget is now not merely a means of determining taxation levels for the next 12 months, but a major economic force that must affect us in the years ahead. Therefore, it is doubly important that its diagnosis should be accurate and that the remedies it proposes should be to our national well-being in the distant future, and not only in the immediate present.

That being so, I suggest that the problem which faced the Chancellor before he made his proposals was not merely the balancing of the Budget, or the providing 370 of a surplus, but how to stimulate the further efforts of our people and increase the national income, thereby maintaining the buoyancy of his own revenue. I agree that in the last few years we have experienced increased productivity in industry, but those responsible believe that it could have been much greater—and can still be much greater—if further and correct stimulants are applied. Therefore, I welcome the proposals concerning the tax on overtime which will help in that direction. At the same time, I do not think that they go far enough, nor, as hon. Members opposite believe, low enough.

The second task which the Chancellor should have had in mind was the removal from our system of every remaining ounce of inflationary tendency. I cannot share the view of the hon. Member for Gloucestershire, South (Mr. Crosland), who thinks that we should take a risk and ignore any inflationary tendency. I believe that a small inflationary tendency now would be much more serious than would have been a large inflationary tendency two years ago, when we had a sellers' market. Therefore, I believe that we should continue our policy of disinflation. In these circumstances, I propose to direct my few remarks to the question of whether we are certain that we are achieving the disinflation needed, and whether we are doing it in the right manner.

We are told in the Economic Survey that we are to set aside from our national income in the coming year a sum of £2,435 million for investment. I have no quarrel with the size of that sum, but it is vital that every penny of it should be covered by savings of one kind or another. The question is, are we certain to achieve that saving, and will the balance of that saving show the correct disposition? We must fully equate our savings to our investments. In the first place, our saving will be done for us in the form of the Budget surplus, together with saving by local authorities, and will account for one-quarter of the total saving necessary. Secondly, £900 million will be provided for us in the form of depreciation allowances.

Although depreciation allowances are quite inadequate for the industrial purposes for which they are designed, they are a gilt-edged essential of our saving system. Those two items—the Budget surplus and depreciation allowances—go 371 a long way towards providing our savings. But it is in the third group that the importance lies, because we are asked to find £905 million in the coming year from other private savings. Important, surely, because whether or not we achieve that, depends on the efforts and the thrift of our people. That being so, I would have expected to hear about some inducements being given to individuals and industry to save instead of relying on the usual exhortations and a certain amount of wishful thinking.

Half of this other private saving is to come in the form of company reserves or undistributed profits—those sums on which so many predatory glances are cast. In view of their importance to the disinflationary and financial policy, I would ask that responsible bodies should refrain from making what can only be termed irresponsible demands on undistributed profits, and that they should not be further decimated by taxation or as additions to wages. Otherwise, the success will be shortlived, and the inflation which will follow will destroy any advantage which the workers may get. We cannot stress too strongly the importance of undistributed profits in our Savings Movement.

With regard to the other part of our private saving, the most important contribution is the saving by individuals. Even if it is the tail end of our Savings Movement, I believe that, in this case, it is the tail that wags the dog. These are the savings in the form of building societies, insurance, and, most important of all, the National Savings Movement. I do not think that any Member of this Committee can feel really complacent about the present state of the Savings Movement. We are well aware of the figure, and we were told last year by the Financial Secretary that it was not really so bad. It was only that we were withdrawing savings, and not that we were not putting in new savings. I do not think that anyone can feel that is all right, for surely, it is the tendency to stop saving which should worry us.

We are asked in the Economic Survey—and this in rather an uncertain manner—to find an additional £170 million from other private saving in undistributed profits and personal savings. The Economic Survey says: 372 The figure for other private saving shown in the table is not a forecast, but simply the sum which it is estimated will be required. If we are to achieve this sum, we shall need more in the way of encouragement and, possibly, something in the way of positive fiscal policy from this Committee.

If we study the trend of saving over the last few years, we find that it has been away from private saving and towards public saving of one kind or another. We are told in the White Paper on the National Income that the percentage of disposable income of the people saved in the form of private savings was the same in 1949 as in 1938-4.8 per cent. I suggest that is a most unrealistic comparison because, in 1938, we were not in an inflationary condition, and saving was not expected to be as great as it is today. In this figure of personal saving we find the items of Death Duties and special contributions included. We all know that that proportion has vastly increased over the last 10 years.

If we make a truer comparison of personal voluntary saving between the years 1946 and 1949 we find that, whereas in 1946, 50 per cent. of the total saving of this country was saved voluntarily by individuals, in 1949 only 7 per cent. was so saved. In fact there has been a drop of 700 per cent. I should have thought that that would have caused some alarm to the right hon. and learned Gentleman because in 1949, in his Budget statement, the Chancellor speaking of the Savings Movement, said: I very, much hope that in this financial year we shall realise a substantial net surplus of savings."—-[OFFICIAL REPORT, 6th April, 1949 Vol. 463, c. 2079.] Instead, of course we had a deficit of £68 million. Therefore, this year, I was interested to see what observation would be made and I find just this: …I look confidently to … the Savings Movement to continue their good work."—[