§ Amendment of Law
Motion made, and Question proposed,
That it is expedient to amend the law with respect to the National Debt and the public revenue, and to make further provision in connection with finance, so, however, that this resolution shall not extend to the making of amendments, of the law relating to purchase tax except amendments, if any,—
§ 5.13 p.m.
§ Mr. Herbert Morrison (Lewisham, South)
It is not my purpose to open the debate for the Opposition. We shall continue the debate until Monday, and, naturally, it will be our wish that we should have time to think about what the Chancellor has said. My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) will open the debate tomorrow with—at least, I imagine that will be the case—an analysis of, and comment on, the Chancellor's Budget statement.
However, I am sure that it would be the wish of all sides of the Committee that I should express to the Chancellor our congratulations on the clearness of the exposition of the finances of the past year and the financial arrangements for the coming period which he has given. We all followed and understood its presentation and that is, after all, perhaps, the highest compliment that can be paid to any Chancellor of the Exchequer. Moreover, the Chancellor has beaten the record of averages in that his speech was somewhat shorter than is customary. 72 Whether that means that it was safer to be shorter in title light of taxes to be imposed or not, I do not know, but his speech was somewhat shorter than usual. [HON. MEMBERS: "Taxation is reduced."] Perhaps it was because tax was to be taken off; I do not know, but the speech was somewhat shorter than usual and that is an achievement.
The Chancellor indicated some limited reductions in taxation. Looking behind the Budget, its purpose is largely to increase demand in various ways, and, running behind the Chancellor's remarks as to the economic tendencies of last year, it would appear that there were many things to worry about in reductions in the volume of exports, production and home demand and some tendency to unemployment, and I think that the Chancellor's proposals probably have some relationship to that anxious and, in some respects, worsening situation. However, the debate will continue and it will be the duty of the Committee to examine the proposals in detail when we have had a chance to consider them more fully, and the Finance Bill will follow. In the meantime, it is my duty, which I discharge with great pleasure, to congratulate the Chancellor on the clarity of his exposition. Let us hope that the forthcoming debates will throw further light upon our problems.
I have only one other thing to do. The Chancellor referred to the absence and illness of his colleague, the Foreign Secretary. I should like to say for this side of the Committee as well that we were very sorry to hear of the right hon. Gentleman's serious operation and hope that he will soon be completely restored to health.
Again, I congratulate the Chancellor on the clarity of his exposition and say that we look forward to the lengthy debates which will follow.
§ 5.17 p.m.
§ Sir Herbert Williams (Croydon, East)
I join with the right hon. Gentleman the Member for Lewisham, South (Mr. H. Morrison) in congratulating my right hon. Friend the Chancellor of the Exchequer upon the clarity of his exposition. With regard to some of the minor changes which my right hon. Friend has announced, naturally, we shall have to read his speech and, in due course, the Finance Bill, before we fully appreciate them. However, so far as the bigger items 73 are concerned, the situation is very clear. The cheers which greeted the Chancellor when he sat down were a clear indication that we thought his Budget was a good Budget.
§ Mrs. E. M. Braddock (Liverpool, Exchange)
It was a one-sided Budget. There were no cheers on this side of the Committee.
§ Sir H. Williams
The announcement about sugar will no doubt have a sweetening effect. Perhaps the hon. Lady will take that to heart. We must consider the thoughts behind the lack of cheers. I know what will generally be the thoughts about the 6d. cut in Income Tax. There is not a single hon. Member opposite who does not really rejoice in it, but will not say so.
§ Sir H. Williams
Everything in the Budget is designed to reduce prices, so that intervention is no better than was the previous one.
On general issues—this is in order, but it is hardly the occasion—I was one of those who were sorry when, at the Commonwealth Conference, we did not take the initiative. There is not the slightest reason for the General Agreement on Tariffs and Trade to have to be got rid of by all of us together. There is not the slightest reason why we should not do it on our own, and if we did so, there would be many people following us in the queue in a short time. If we are to have flexibility we must be free to make any arrangements we like with any country we like. At present, we are not free. In due course we must get free.
I was delighted that the Chancellor made reference to convertibility. That was not, of course, the disastrous kind of convertibility of 1947 when we allowed all the other parts of the world which had a bit of sterling in London to take our dollars, for that was folly; I am talking about real convertibility in which we allow the £ to find its own level in terms of other countries. This is a little doctrine in which I am not alone; many 74 other people strongly hold my view. I do not regard that as an objective; it is a method.
The truth is that if there were a free £ there would not be adverse balance of payments, because the rate of exchange is bound to move to the level to which the balance of payments is forced, taking, of course, one or two precautions. There is a nasty thing called sterling credits. One of the tragedies of the war for this nation is that we owe a lot of people a lot of money for defending them. It is one of the real scandals in which all parties have had a part, and I do not know how we are to get out of it. If there were a free £ we could speak differently to these people. I think, however, that the amount is diminishing. There are the Egyptians, for instance, who are rude to us and we hand them over sterling credits. I would not give them any credit if they were rude to us. That is crude diplomacy, but I think it is the sort of diplomacy that they would understand better.
I want to raise one or two matters to which the Chancellor did not refer. First of all, I want to speak of post-war credits. They were the invention of the late Lord Keynes. They are part of the legacy of trouble which he has left to us. They amount to £481 million, I think, and it is quite obvious that the Chancellor of the Exchequer could not repay them all at once. At present, they are being repaid at the rate of £16 or £7 million a year. It will be many years before many people are paid off unless changes are made.
Post-war credits are one of the greatest frauds that the State ever inflicted on its citizens. Many people think that my right hon. Friend is still sitting on it and keeping it. It should be realised that the money has been spent, and that, therefore, repayment can only take place out of new taxation or new borrowing. It is terrible when a man dies at the age of 64 and has not had his post-war credit. Perhaps the credit is inherited by his son who is 30, and if he, too, dies at 64 the credit will not be paid. In some cases the credits will never be paid off.
There has never been a fraud on the citizen quite like that. True, my right hon. Friend is not responsible for it; he has inherited it. I wrote him the other 75 day on the question of people who have left savings certificates to a well-known charity. If they leave their post-war credits to the charity it may never get the money. The gift is no use to them. They can only put it in a safe, and lock it up in the hope that one day a Chancellor of the Exchequer will change the position. I did not expect anything to be done about it this year, but I hope that something will be done in the future. I might add that I am speaking for other people in this matter and not for myself. I have had mine.
The reduction in taxation, good as it is, is not enough. It is not enough, because the economies are not enough. I know how easy it is to urge the introduction of economies. The great mass of the public do not associate taxation with expenditure. They think that the Government should pay, but the Government have nothing but debts and the power to tax. There have been a series of agitations going on by various pressure groups, which are trying to press Members of Parliament to support their claims. I am resisting all of them, because I think that the greatest social and economic benefit that can accrue to this country is a reduction in taxation. We in this Committee are the buffers between the pressure groups and the passive majority. It is our duty robustly to take up that point of view. It is not always a popular line to follow, but if people know that we are doing it on the basis of conscience then, in the long run, they will support us.
Sugar derationing is not part of the Budget. It is an interesting statement made in the course of it, and it brought some jeers from the other side of the Committee. I see their point of view, because we have vigorously denounced bulk purchase and we still do. It is not quite so easy to get out of all the troubles of that system in five minutes. We have, however, brought to an end a good deal of bulk buying. There are now many commodities which are completely free of State control, and we can say that the Government have been steadily carrying out the principles which they advocated when in Opposition.
I would have preferred that the one million tons of sugar could have been bought outside the Ministry of Food. 76 However, I am glad that it has been bought and that we held back sufficiently long to enable the Cubans to come to their senses on the matter of high prices. That is why the Chancellor is able now to announce the abolition of the small sugar subsidy, and it may not produce any increase in price because this purchase from the Cubans has been made on satisfactory terms. We rejoice in that.
I wish that my right hon. and gallant Friend the Minister of Food were here so that I could congratulate him on the rapidity with which he is working himself towards unemployment. He has only meat and fats left on the ration now. They will last him a considerable time, but the Ministry has so reduced its activities that it will probably be absorbed in another Ministry, and then there will be a show of indignation from the other side of the Committee comparable to the protests which were made about the very desirable change in connection with the Ministry of Pensions and the Ministry of National Insurance. That amalgamation will give the ex-Service man greater facilities for airing his claim, because the new Department has 30 times as many offices than the old. Further, it is an economy.
I am glad that another fraud has come to an end, the war chattels fraud. My right hon. Friend the President of the Board of Trade inherited that, and he is not responsible for it. If any insurance company committed that kind of fraud the directors would have been in gaol long ago, for they would have been collecting the premiums and not paying out. It really was monstrous, and I am delighted that at last my right hon. Friend can look on the world as an honest man. He was honest before he became President of the Board of Trade, but he then inherited dishonesty. The Chancellor of the Exchequer has now relieved him of that dreadful burden.
The restoration of the initial allowances will certainly give considerable satisfaction to industry, but, on the other hand, we must realise that it is, in fact, the postponement of an obligation, not a relief from an obligation. It may be a good thing, at a time when industry is really overburdened with taxation, to postpone part of this burden into the future, because in the long run the burden will have to be met. However, I think it is a good thing that it has been restored 77 and I should like to ask a question about that. Although I am not in the industry I happen to be president of the Ballast Sand and Gravel Trade Association. It is the largest extractive industry in this country after coal mining.
§ Sir H. Williams
There is one disreputable contractor in the hon. and gallant Gentleman's constituency whom nobody ever heard about, but who tried a trick on the Camberwell Borough Council. He did not belong to any particular trade association.
§ Lieut.-Colonel Lipton
He was a member of the Association of which the hon. Member is the President. What he tried to do was to save public money by quoting a lower price than the price rate operated by the Association.
§ Sir H. Williams
The hon. and gallant Member is inaccurate in what he says. If he likes he can come along at any time to the offices of this Association.
The Deputy-Chairman (Mr. Hopkin Morris)
I think this debate is going a little astray of the subject.
§ Sir H. Williams
There is no monopoly and there is no price ring. The hon. and gallant Member can consult the Ministry of Works, which knows all about the industry and which will confirm my statement. The hon. and gallant Gentleman is talking a lot of unadulterated nonsense.
I should be grateful if my right hon. Friend would look at the amendment proposed last year in respect of the curious position of the ballast and sand industry. They buy land and spend a good deal on it, but they cannot claim any depreciation. They are called upon repeatedly to increase output. They use vast quantities of sand and gravel for the purposes of constructing aerodromes and things like that. I rather gathered from the Chancellor that probably a repayment would be made, but as that point was not very clear I should be grateful if a further statement could be made.
Purchase Tax I have always disliked. It is on record that when it was introduced in 1940 by the war-time Government I was an opponent of it. I predicted that it would have evil effects and would prejudice our export trade, which it has done. I know that it is impossible 78 for the Chancellor of the Exchequer to write off all of the £300 million involved, but he has made a great advance in that direction. I am glad that he reacted to the debate which took place upon a recent Friday, initiated by my hon. Friend the Member for Handsworth (Sir E. Boyle), urging that aid should be given to the jewellery trade and certain ancillary industries. We were told that because of the effect of Purchase Tax it was impossible to have any real home market, and without a home market the chance of exports is very limited indeed. The Chancellor's cuts will be of the greatest possible help.
I must declare another interest. I was present last night at a very interesting performance of an amateur operatic and dramatic society in Croydon, of which I am the president. There is no remuneration paid, so we shall qualify for the full remission of Entertainments Duty. I have had many communications from other societies, and I know that very great satisfaction will be expressed at this Budget proposal. The hon. Member for Ashton-under-Lyne (Mr. Rhodes) will agree with me. He is looking so happy at the moment because he has taken a foremost part in defending the claims of amateur theatricals in this respect.
The same applies to amateur sport, but I was just a little worried when my right hon. Friend said that nothing must be paid at all. There must be many amateur sporting clubs who pay a moderate sum to a secretary. [An HON. MEMBER: "He may not be a player."] I know, but the words used by the Chancellor seemed to exclude all payments in connection with sporting institutions. I am not sure whether I am right in my interpretation, but it would be unfortunate if amateur associations who happened to employ somebody in a secretarial capacity in his spare time should thus be debarred from the relief. I hope that the point will be looked into.
The abolition as from 1st January next year of the Excess Profits Levy will meet with approval on both sides of the Committee. My impression last year was that on neither side did we like this levy, which operates inequitably. I remember the case of a company which, by chance, was able not to make but to show large profits in the two particular significant years which are the basis of the levy. 79 Because the completion of contracts takes a long time it was quite impossible for the company to say that they had made a profit until the plant had been taken over and paid for, but they had to pay the Excess Profits Levy.
I know of another company whose normal business was completely wiped out by the war and who undertook various war-time jobs far less profitable to them than their pre-war occupation. Only in the last three years have they been able to get back into their pre-war business, because of the variety of restrictions, rules and regulations. Owing to circumstances over which they have no control the company have been forced to pay a very high proportion of their surplus in Excess Profit Levy, substantially greater than the net sum received by the shareholders. Of their total surplus, 70 per cent. goes in taxation. I am delighted that the levy, the greatest penalty on progress which was ever conceived, is to go on 1st January next.
As an ordinary, consuming citizen who manages to earn a little income, I am now to have 6d. off the standard rate of Income Tax. I am not a man who can retire and get a tax-free income. I do not understand all that. It is not so easy as people think. When I ceased to be in business and became a junior Minister, in 1928, I had a taxation problem, but I was assisted to solve it by the Inland Revenue people, who are most helpful if approached kindly. They sometimes make mistakes, but if you go in a straightforward way and ask them to help you they will do all they can. I received considerable assistance. If I had known a little more in advance what was to happen I might have done a bit better. That was the effect of not having had a legal training and of being brought up as an honest kind of engineer.
The real truth is that for years past the average, ordinary, decent, middle-class professional or salaried men or small employers have been unable to save anything. Their savings have gradually diminished. Week by week we hear that the total of new National Savings is less than the money drawn out, and even now the figures are faked because the accrued interest is included. People just have not been able to save. That is deplorable. We can say today that no young man 80 starting in business now would ever be able to retire on the income from his savings. That is absolutely wrong. Unless we can cut the rate of Income Tax there is no hope for the future.
We know that many workmen object to overtime. They say that it is not worth doing because they are only working for the Government. A leading employer in a very great business said to me some time ago, "I am absolutely at my wit's end to know in what way I can adequately reward my senior executives to keep them in this country so that they shall not be tempted to go abroad." Nobody in this Committee believes in the egalitarian State, or that some people should not be paid better than others. A person is entitled to be paid better and is entitled to spend what he gets. It is the system of taxation which drags everybody down to a dead level and is destructive of enterprise and ambition.
I am delighted with what the Chancellor has done, and I would ask the Financial Secretary to the Treasury to say "Thank you very much" to the Chancellor for having introduced such a Budget.
§ 5.39 p.m.
§ Mr. Anthony Greenwood (Rossendale)
It is not often that I find myself cooperating with the hon. Member for Croydon, East (Sir H. Williams), as I do tonight, in trying to keep the debate going. I am in this position for two reasons. The first is that I have certain views which I want to express, and the second is that unless we take advantage of today's debate we shall not be doing full justice to the gravity of the subject that we are discussing. Unless we discuss it today at some length it means that we shall have only three further days in which to try to do justice to the gravity of the situation and the magnitude of what I believe to be the failure of the right hon. Gentleman.
I say that because there must have been few occasions in the history of Parliament when the economic prophecies of the Chancellor have been falsified on so monumental a scale as those of the Chancellor have been during the last 12 months. However much some hon. Gentlemen opposite may question the conservatism of the Chancellor, at least they must do him credit for having proved the truth of what Mr. Disraeli once said, that 81 what we anticipate seldom occurs and what we least expect generally happens.
The right hon. Gentleman, very naturally from his point of view, put the best possible gloss upon the outcome of the prophecies he made last year. The Committee will hardly expect me to go to the same trouble that the Chancellor did to put a favourable complexion upon what has been happening. I want tonight to do what the Chancellor expressed himself as reluctant to do, to go through the Economic Survey. If we go through the Economic Survey, together with the statement made by the Chancellor today and the two other White Papers published during the last fortnight, we find a series of prophecies which have not been achieved during the past 12 months.
The Chancellor himself has told us this afternoon that during the past year he has had to find £200 million more than were budgeted for a year ago. He told us that, on the other hand, revenue was £222 million less than he had estimated in his last Budget speech. His revenue surplus—that is, his surplus above the line—was only £88 million. The Chancellor, with due modesty, did not tell us, that this is the smallest surplus that any Chancellor has had during the past six years. It seems even less impressive when one puts it against the expected surplus of £510 million which the Chancellor estimated a year ago.
A year ago, too, the Chancellor anticipated a rise in industrial production of 2 per cent. but if we turn to page 17 of the Economic Survey we find that it says that during the middle six months of the year industrial production was 5 or 6 per cent. lower than the year before, but by the end of 1952 it had almost recovered to the level of the previous year. That is a curious form of progress. The survey continues:Over 1952 as a whole industrial production was about 3 per cent. less than in 1951, but the fall in the domestic product was proportionately smaller—perhaps no more than about 1 per cent.…If we look at table 28 on page 39 we see the changes in production in a number of specified industries. Industry is divided in that table into seven groups, of which only two showed an increase in production during the past 12 months. One was metal manufacture, which increased by 2.4 per cent., and the other 82 was food, drink and tobacco, which increased by 2.8 per cent. If we look at the metal using industries, to which the Chancellor referred as being so important, we find that the fall was 0.4 per cent. Chemicals and allied trades dropped 1.6 per cent., textiles and clothing dropped 14.6 per cent., paper and printing dropped 15.6 per cent. and the other manufacturing industries put together dropped 9.2 per cent. The total overall reduction in industrial production during the year, instead of being the increase of 2 per cent. forecast by the Chancellor, turned out to be a reduction of 3 per cent.
How different are those figures from the glittering prospects which were opened up to the public by Tory literature during the last General Election. We were told by the Chancellor a year ago that exports were to rise. Today, the Chancellor has had to come to the Committee to tell us that exports have fallen and that the fall in exports last year was in the neighbourhood of 6 per cent. Hon. Gentlemen who wish to pursue that further will find the details on page 13 of the Economic Survey.
Indeed, the more we work through the survey the more we find that the only thing which has not fallen is the cost of living, for the general price level during the past year increased by 7 per cent. To put it in rather different language, as a people we spent £525 million more on personal consumption and, in return, we go £100 million less of commodities. The consumption of food, measured in terms of calories, was slightly less than at any time during the previous three years.
That is the progress the Chancellor has been making to which, as I said earlier, with his usual modesty, he did not call the attention of the Committee on this occasion. It reminds me of another remark of Mr. Disraeli's—"This shows how much easier it is to be critical than correct"—because, in the days of the Labour Government, nobody was more patronisingly critical of the Government than the right hon. Gentleman, and now nobody is more pathetically inaccurate in the forecasts he ventures from time to time to place before the House of Commons.
Lest it should be thought that I am putting an unfavourable interpretation upon what has been happening, let me refer the Committee to a leading article 83 in "The Times" on 30th March, which discussed the United Nations World Economic Report, covering very much the same ground as the Economic Survey. It said:The United Nations estimates suggest that production in the United Kingdom dropped more in 1952 than in any other country, except Denmark, compared with the previous two years. It dropped back to the 1950 level, whereas in the group as a whole"—that is, the group of industrialised countries—it increased by 9.6 per cent. compared with 1950.…British wages…rose by less than in any other country except the United States and Belgium. Only in this country did the cost of living increase more in 1952 than in 1951. The movement in British real wages was the least favourable, and the United Kingdom and Australia were the only countries in which ordinary consumption was not higher in 1952.That is after the first whole year of Conservative administration under the economic guidance of the right hon. Gentleman the Chancellor of the Exchequer.
The right hon. Gentleman pleads in his own defence what he calls the improvement in our balance of trade position. He told us in the course of his speech that his Budget last year had been designed to rectify an adverse balance of payments position. The overall improvement is in the neighbourhood of £689 million, but the Chancellor was very fair about that and admitted that £117 million of that amount was accounted for by defence aid from the United States. Therefore, we are agreed that the general overall improvement is £572 million.
I do not think that the Chancellor emphasised as much as he might have done the reasons why that happy state of affairs has been achieved. It is quite apparent, from reading the Economic Survey, the balance of payments White Paper and other Government publications, that the overwhelming factor in producing this improvement in our balance of trade position has been the improvement in the terms of trade which are now much more in our favour. There is no doubt, when reading the documents to which I have referred, that this factor alone accounts for more than half the improvement of £572 million.
Unfortunately, in the last few months the rate of improvement in the terms of 84 trade has been tending to slow down. It may possibly gain speed because of the possibility of peace breaking out throughout the world, but if we get a reduction in commodity prices it may well be that it will be followed by a general slump. In any event, the position which this country has to face is that over the long-term future there is little likelihood of any substantial reduction in the price of raw materials and of foodstuffs, while there is every likelihood that we shall be forced to reduce the prices of our exports because of the severe competition which is already being felt, particularly from Germany and Japan.
Nor did the Chancellor emphasise as fully as he might have done the next main item which was responsible for the improvement in our balance of payments problem. That, of course, was the fall in the volume of imports. When the Chancellor referred to it, there was one thing that he might have said or emphasised in his favour more than he did. He is to be congratulated on the fact that the saving which took place was almost entirely in the case of imports from the non-sterling area. That is something upon which the right hon. Gentleman is to be congratulated, but taking it over the whole range of our imports the substantial reduction was only possible because of lower production here at home.
Had we not had a recession in the textile industries during the past year, the Chancellor would not have been able to cut imports as much as he did without seriously reducing the country's stocks; and I agree with the right hon. Gentleman that the amount of stocks has not seriously been reduced. But the amount of stocks in the pipeline has been reduced, and we must contrast 1951, during which the Labour Government increased stocks by £465 million, with last year, when the Government were responsible for a decline of about £100 million in the value of stocks.
The third reason which accounts for the improvement in our balance of payments is a somewhat technical one, which I do not propose to go into and which relates to the timing of the payments which have been made. I must emphasise, however, that that is peculiar to this year and cannot be repeated year 85 after year. The net result of the improvement in our balance of payments position has been, as the Chancellor said, that we have stopped the drain on our reserve of gold and dollars, but it would be a great pity if this Committee, and, as a result, the country, got a wrong impression of the comparative stability that has been achieved.
At the end of March our gold and dollar reserves were 2,166 million dollars. That is slightly less than the figure in December, 1951, but when we remember that in June, 1951, our reserves stood at 3,867 million dollars and were reduced during the next six months by 1,500 million dollars, we begin to see how slight our gold and dollar reserves are. I hope that from the optimistic remarks made today by the Chancellor the country will not get the impression that the situation can justify complacency or relaxing our efforts in any way.
The Chancellor said—I thought it was an under-statement—that we had left room for expanding exports. Every Member would agree that the only real solution to our balance of payments problem is a material expansion of exports from this country. One of the tragedies of the situation, however, is that during the past year we have not done as much as we ought to have done to increase the efficiency of our manufacturing industries. I intend later to congratulate the Chancellor on some of the things he has done, but it is regrettable that in this key year, when Japan and Germany have been redoubling their efforts, we should be in a position where capital outlay on plant and machinery between 1951 and 1952 fell by 2½ per cent. and on vehicles, ships and aircraft by 12½ per cent. It has been lamentable that in the face of increasing competition from abroad, we should have denied to industry the capital expansion upon which it ought to have been embarking.
In the last quarterly Statistical Review of the Cotton Board, I am shocked to find that whereas last year we had already sunk to the second place in the list of the major cotton exporting countries, this year we have sunk further and have become only third on the list. In 1952 the United States of America became the world's leading exporter of cotton piece goods, with Japan second, the United 86 Kingdom third, and India fourth. In 1951 the order was Japan, the United Kingdom, the United States and India. Let it not be forgotten that the United States had a negligible quantity of exports in the world markets before the war.
I was a little alarmed when the Chancellor said that higher wages must not be allowed to price us out of the export markets. I hope that we shall not get a fixation about the importance of wage rates in these matters. Wages are only one of the factors that go to make up the price of the finished article, and if the United States, with infinitely higher wage rates than we have, is able to compete successfully with us in the markets of the world, it is apparent that there must be something more than wage rates which is wrong with the cotton industry.
I congratulate the Chancellor on his decision to restore the initial allowances. Looking back, I think it was a mistake that they were ever dropped. My pleasure at this, however, was somewhat mitigated by the fact that a few moments later the right hon. Gentleman talked about the importance of monetary measures, which seemed to imply some further change in the Bank rate and, consequently, the rate at which industry may borrow money. I am glad that the Chancellor has decided to abandon the Excess Profits Levy, but I wish that he had listened to the advice tendered so generously from these benches a year ago and that the levy had never been embarked upon.
I come now to the Chancellor's proposal to reduce Income Tax by 6d. I confess that I am not very happy about this. The Chancellor told us how a £45 million benefit would go to corporate industry. I wish there was some reason for sharing the Chancellor's confidence that industry would use that benefit of £45 million for re-equipping itself, but there is not very much evidence that that is likely to take place.
When we remember that a man with a wife and two children has to earn an income of £500 a year before he pays Income Tax of 30s. a year, there has been no substantial case, from the point of view of the public as a whole, for reducing Income Tax on this occasion. I would much sooner have seen some benefits going to people who need them, 87 and particularly to the old-age pensioners, instead of giving money to industry in this way, especially when we remember that old-age pensioners are today living on a diet which gives them a calory intake of only 1,500 calories a day and that when they have paid their rent and other necessities, they have, on the average, a good deal less than 2s. 6d. a day with which to pay for food. It is a psychological mistake, and an action of very doubtful economic value, for the Chancellor to have reduced Income Tax under these circumstances.
There are two other things upon which I congratulate the Chancellor. I am glad he has decided to make some alleviation of the burden of the Purchase Tax. The right hon. Gentleman would be the first to admit that I tried very hard a year ago, in co-operation with my hon. Friends, to persuade him to make rather greater concessions in that direction. It is a good move that the rate of the tax is to be reduced. I agree with a great deal of what the hon. Member for Croydon, East (Sir H. Williams) said on this subject. I think that the Purchase Tax is a bad tax. It was justified by the exigencies of the economic situation of the war and of the immediate post-war years, but I cannot think that it is a good tax in comparatively ordinary times like the present.
Far from being a weapon against inflation, I believe that the Purchase Tax has become inflationary in its effect. I only wish that the Chancellor of the Exchequer had warmed the cockles of our hearts a little more by saying that this reduction of 25 per cent. was only the first step in a four-year plan to get rid of the Purchase Tax altogether. I do not believe that we are likely to get a healthy economy so long as this grossly inflationary factor is at work.
I should like to remind the Committee of what Sydney Smith said well over 100 years ago on this question of indirect taxation. He said:The school boy whips his taxed top, the beardless youth manages his taxed horse, with a taxed bridle, on a taxed road, and the dying Englishman, pouring his medicine, which has paid 7 per cent., into a spoon that has paid 15 per cent., flings himself back upon his chintz bed, which has paid 22 per cent., and expires in the arms of an apothecary who has paid a licence of £100 for the privilege of putting him to death.88 That is not a grossly exaggerated description of the taxation position which we have reached in this country.
I am sorry that the Chancellor has not taken a more courageous stand in regard to the fuel tax. My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) and the present Chancellor both increased the fuel tax in the Budgets of last year and the year before. I think it is true to say that today the tax on petrol is higher than the tax upon any other commodity. I believe it is something like twice the amount of Purchase Tax payable last year on what my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) called the millionaire's mistress's mink.
If we tax petrol at this rate we are not only increasing the cost of living of workers in industry, but also the cost of production. It increases the cost of production, because 70 per cent. of the goods of this country are carried by road transport and that means we are placing an additional burden on export industries. If, instead of reducing Income Tax, the Chancellor had reduced the fuel tax by one-third—which would have cost only £60 million—that would have conduced even more to the encouragement of the export industries.
Representing a Lancashire constituency, I welcome, of course, the decision of the Chancellor that cricket shall be put in a specially privileged position. If I understand it correctly, amateur cricket will be wholly exempted from the effects of Entertainments Duty—[HON. MEMBERS: "All cricket."] All cricket will be wholly exempted from the effects of Entertainments Duty. That is something which will make Lancashire and Yorkshire Members much more warmly disposed to the Chancellor than many of us were before.
I have tried to face the Budget as fairly as I can. I have pointed out the extent to which the prophecies of the Chancellor last year were falsified by events and I hope I have given the impression that I have not a great deal of confidence in the accuracy with which he has prophesied on this occasion. I would sum up by saying that this is an unimaginative Budget, that it makes no substantial contribution to the real problems of the time, and that in my view the proposals do not merit the confidence of this Committee.
§ 6.4 p.m.
§ Mr. Eric Johnson (Manchester, Blackley)
I hope that the hon. Member for Rossendale (Mr. Anthony Greenwood) will not mind if I do not follow him in his very interesting speech, but I do not want to take up much of the time of the Committee. I have three matters to which I should like to draw attention, points which, I think, essentially affect the individual rather than the wider national problems.
First, I should like to give a general welcome to what the Chancellor has very rightly described as an incentive Budget. To my mind it seems to give not only a considerable amount of encouragement to industry, but does give something to the individual as well. Here, I very much agree with what has been said about the reduction of the Purchase Tax. I think that a tremendous step forward, which will do a great deal to bring down the cost of living.
Of the three points to which I want to draw attention the first is in connection with handicapped children. The Committee will be fully aware that at present regulations provide that family allowances are payable in the case of children between the ages of 15 and 16 where those children are receiving full-time instruction in school, or are apprentices. I want to refer to the handicapped children whose instruction is provided at home, as is done in Manchester by the local authority. This is done by the local authority because of the obvious difficulty of sending these children to school and fitting them into suitable classes. They need a very specialised form of instruction; indeed, they need almost individual attention.
I believe that the spirit of the Act which covers family allowances was probably meant to cover children such as these, but unfortunately, the letter of the Act does not do so. Family allowances cannot be paid on their behalf, because it is not considered that they are receiving full-time instruction at school. The school, so to speak, is brought to the child instead of the child being brought to the school. The number is very small. In Manchester, in the first term this year there were only 14 children receiving this instruction and only one of them was between the ages of 15 and 16.
90 I think it would mean a very small amendment of the present regulations to ease what undoubtedly is a hardship and the cost would be quite insignificant. I hope that the Financial Secretary will pass this on to the Chancellor so that perhaps he will consult the Minister of National Insurance to see whether this small concession can be made. I am sure it is something which would appeal to his warm heart. I do not think that his hard head, as Chancellor of the Exchequer, will tell him that this is something the nation cannot afford.
My second point is an old one and concerns the earnings of widows and old-age pensioners. I do not think I need make any apology for returning to this subject, because I believe the case for allowing old people to earn more without any deduction being made from their pensions remains a good one and that the arguments in its favour apply with equal force to widows, particularly widows over 50. It is sometimes said that if these people can go on working they do not need a pension, but that is a very hard-hearted argument. In effect, they are told that 72s. 6d. a week, made up of 32s. 6d. pension and 40s. they are allowed to earn by part-time earnings, is enough and that if they feel 72s. 6d. is not enough they can try to get National Assistance, or virtually forget about their pension and try to get a full-time job.
It is undoubtedly the case that many old people cannot undertake full-time work and it is certainly not easy for the widow over 50, who has probably spent her working life looking after her home and bringing up a family, to get a full-time job. Even if the old people get regular work it is not likely to carry a wage which makes it particularly attractive. A widow whose husband died and left a house and little else to her undoubtedly finds it very hard to make both ends meet. Rates have gone up, electricity charges are higher and many other things are more expensive.
I have a case of that kind in mind of a widow who managed to get a job at £4 16s. a week as a shop assistant. The result is that her pension is reduced to 10s. and she pays Income Tax as a single person. Her net income is, therefore, about £4 17s. a week and the amount she gets for working a five and a half day week at a relatively low-paid job is only 91 £1 4s. 6d. more than she could get in a part-time job while drawing her pension.
It might be said that there is no evidence of hardship, but I think we ought to be able to do a little more for someone in that position. If the amount which could be earned without deduction from the pension could be raised to 60s. that would enable elderly people to earn nearly as much by doing a suitable part-time job as they could get now by doing a low paid full-time job.
I am convinced that this limit of 40s. is too low. I ask, once again, that the Chancellor might consider whether it can be raised to 60s. If that cannot be done, I should like to make another modest suggestion: would my right hon. Friend consider deducting 6d. instead of Is. for every Is. earned between 40s. and 70s., with the full deduction, if need be, in respect of larger amounts? I hope that sympathetic consideration can be given to this problem, because it would help a group of people who are finding things very difficult and who have deserved well of the nation.
My third point is entirely different from the two I have just mentioned: it concerns Empire savings. On 16th December last, in answer to a Written Question I put to him, the Chancellor said that he recognised the need for a high level of internal savings if we were to make our full contribution to Commonwealth development. He added:I am satisfied that there are at present adequate facilities for National Savings and I commend these to all small investors who may rightly wish to play their part in Commonwealth development."—[OFFICIAL REPORT, 16th December, 1952; Vol. 509, c. 163.]Since then I have had a number of letters from a variety of different people and organisations expressing interest in that very tentative suggestion. I do not believe—I may be wrong—that the ordinary small investor sees much connection between the National Savings certificates and savings bonds which are available today and Empire development. He is not well-informed on these matters.
Frankly, small savings have not been a particularly attractive proposition to many people for a considerable number of years. The money value of the interest 92 received remains the same while people see the real value of their savings become less and less as the purchasing power of money falls. I hope, indeed I believe, that my right hon. Friend's Budget may have done something to remedy that position and to make saving a paying proposition. At the moment, however, many potential savers of say 5s. per week feel that they might just as well "give it a run" on a football pool. That may be a very reprehensible point of view, but I am bound to say that I find it natural.
I believe that the word "Empire," which I have used quite deliberately, still means a good deal to many people who are proud of what I am not ashamed to describe as our great Imperial heritage. They would like to do something more than they feel they can now do towards Empire development. If there were an issue of what I might call an Empire Savings certificate, and if its launching were accompanied by a broadcast appeal by the Chancellor of the Exchequer, or perhaps by the Prime Minister himself—I think it is something which we would all agree he would do supremely well—asking people to invest for Empire development it might make a great emotional appeal to the small investor. I am not qualified to make suggestions as to the technical aspects of a scheme of that kind, but I ask whether the matter can be looked into. I believe that it would be well worth while, and I think it might prove to be a considerable success.
§ 6.14 p.m.
§ Mr. Norman Smith (Nottingham, South)
Before I proceed to focus the attention of the Committee on the major weaknesses of a Conservative Chancellor's capitalist Budget, I should like to refer to what the hon. Member for Blackley (Mr. E. Johnson) has just said about small savings. I agree with him that the need for small savings is very great in this age in which we find ourselves. I agree with him—he may be surprised at this—that one reason why there is a great need for small savings is that this country has much to do in the years ahead to develop what the hon. Member calls the British Empire and what I prefer to call the British Commonwealth. I regard that as a most important issue.
93 His idea that we should get small savers to put up their money in response to a broadcast appeal by the Chancellor of the Exchequer or even the Prime Minister is, in my view, just a little naive. I am quite sure that it would not happen. I have always refused to take any part in the savings movement in my constituency; it would be hypocrisy if I were to do so. I am not saying that those who take part in the savings movement are hypocrites. On the contrary, I think that most of them—all of them, for aught I know—are good citizens, striving to do their best for their country according to their somewhat limited lights.
The promoters of the savings campaign in my constituency include some of the ablest and most successful capitalist industrialists of Nottingham. I know some of them personally, and I am privileged to enjoy their friendship. They are not hypocrites, but for the life of me I cannot understand how they can reconcile their action in asking other people to buy Government securities which, in the nature of things, must deteriorate and depreciate as time goes on, with devoting at all events most of their own savings not to Government securities but to industrial equities.
I would not dream of putting my exiguous savings into Government securities or any other form of rentier investment. I tell the hon. Member for Blackley, whom I credit with great sincerity in this matter, that to the small saver the obstacle is quite simply the knowledge which he has, born of bitter experience, that the £s he lends today by way of Government stock will be worth less when he comes to draw them out, and that the interest he will be paid will be of less value than the money he paid in. While we have this constant process of depreciating money, which has gone on, almost uninterrupted, since the time of the first Elizabeth, we shall not have wholehearted support of the savings movement by even the more thrifty working class in this country.
The way to get small savings—I advocate this here and now—would be to tie the redemption and the interest payments to a price index, so that those who subscribe to Government bonds or any form of Government saving would have an assurance that the money which they later drew out either as interest or as repay- 94 ment of their savings would be worth at least as much as the money which they put in. That is a very simple thing to ask, but I know it is revolutionary. It cuts right across the orthodox conception of money. The best definition of money I know is that if one has money one has the right to draw cheques on a bank; and bankers do not want to be bothered with the sort of money that would have to be revalued in terms of commodities as time went on.
Nevertheless the Committee is indebted to the hon. Member for Blackley for raising what is a most important issue. It is one of those issues which the Chancellor today completely neglected. His Budget is a capitalist Budget; it is a pessimists' Budget. His is one of the worst Budget speeches to which I have ever listened. I can forgive the right hon. Gentleman for being wrong in all his estimates, in all his forecasts. The "Economist" the other day published an article headed "What went right?" When things go wrong people ask "What went wrong?" Something went right. Nothing that the Chancellor arranged, contrived or proceeded to organise worked out as per programme, but the sum total of the result, the resultant, to use an engineering term, was not far from what he wanted. Something therefore went right, and of course, as my hon. Friend the Member for Rossendale (Mr. Anthony Greenwood) said, it was the terms of trade which, during the last 12 months, turned substantially in favour of this country.
I can forgive the Chancellor for being wrong in his estimates, but I cannot forgive him for having no fire in his belly. The academic speech he delivered this afternoon was in some ways a competent performance. But we want something more than a competent performance in this Committee at this time. We want encouragement to believe in the future. The only future the right hon. Gentleman could offer us was a future of unrestricted world-wide capitalist competition. Not a word did he say about the present economic problems besetting this country. What can he offer us in the future? Co-operation and collaboration with other sterling nations in order to render us independent of the dollar area? Not at all. All he could say was that he hoped in the future there will be freer world trade and a convertible £. In other 95 words, he hopes we will get back to the middle of the 19th century, to the reign of Queen Victoria, with freedom of movement of money, freedom of movement of goods and—he did not say so, but I suppose he implied it—freedom of capital movement and freedom of migration. That is a mid-Victorian policy; undiluted capitalism; capitalism with the lid off; cut-throat competition. That is all the party opposite has to offer. There is no hope whatever for the people in anything which the Chancellor has said.
The bulk of the concessions in his Budget will go to firms. That is to say the greatest benefit will be derived by firms owned by absentee shareholders who go in and out through the Stock Exchange. We shall not improve British out-look by holding out a bait for people who get into the textile industry today, transport tomorrow and into some other industry the day after. Absentee shareholders are not the people to whom the Chancellor should offer encouragement. They are not the people in whose hands lies the future of British industry.
This Budget is a bankers' Budget. I resent very much the taunt which the Chancellor had the audacity to throw across to these benches, that the consequences of dear money had not been on anything like the scale which some of us had forecast. What had we on this side of the Committee ever said about the consequences of dear money? My right hon. Friend the Member for Battersea, North (Mr. Jay) and I myself estimated that the effect on the Budget would be £100 million a year. Actually, as we have learned this afternoon, the effect of dear money on the Budget is £77 million a year.
That is the additional charge for National Debt interest. The Economic Survey for 1953 said that in 1952 the additional National Debt charge was £60 million. In the last three months £17 million have come up and, as one would naturally expect among Treasury Bills of three months' currency, there is a further three months' time-lag in the effect of the increased Bank rate. Working this out, it will be another three or four months before the whole thing gets fully into its stride. If the first quarter of this year saw an increase of £17 million, it is not fantastic to suppose that the second quarter will also, and then the 96 £77 million becomes £94 million, which is not so far from the £100 million which some of us estimated.
The last Budget was a bankers' Budget and this is a bankers' Budget. The money market in the City of London was the chief beneficiary under the 1952 Budget, and the policy of dear money is to be continued. I am saying nothing whatever about the effect on local authorities, though goodness knows they are beginning to feel the pinch. In my own constituency there is an immense new suburb going up across the River Trent. Unfortunately it is three miles to the west of the only bridge in that neighbourhood, Trent Bridge. The result already is that 2,000 workers on this new Clifton Estate have to cycle or bus two miles east, cross the crowded Trent Bridge, and then cycle or bus two miles west to where the factories are.
We in Nottingham approached the Ministry of Transport and the Parliamentary Secretary has been most helpful. He says, "Yes, you ought to have your bridge, and if I can get it for you I will." But the obstacle is the restrictions on the capital investment programme. So far it has not been authorised, and there is no steel—
§ Mr. Ellis Smith (Stoke-on-Trent, South)
I hope my hon. Friend is more fortunate than we are in the Manchester area, where at Trafford Park we have been waiting for 50 years.
§ Mr. Smith
We have not waited for 50 years. This estate is only just starting, but already 2,000 or 3,000 people are living there. It is not a case of steel, it is a concrete bridge. But the restriction on capital investment is the obstacle to our obtaining it. Here is the dilemma of the Tory Party in Nottingham. Goodness knows, my majority is very small. They thought they would get me out last time, and they hope to get me out next time.
§ Mr. Smith
No. The hon. Member for Kidderminster (Mr. Nabarro) is too fond of interrupting without knowing in the least what the person speaking is going to say. I will give way, but not until I have made my case.
The restrictions on the capital investment programme have postponed the construction of this bridge. The Chancellor said this afternoon that no difficulties would be placed in the way of firms who wished to extend their plant and premises. Does that apply to local authorities who wish to carry out work of social value? The absence of a bridge at Clifton is causing an enormous waste of money which is spent on dollar oil, the wear and tear of motor vehicles and the waste of time of workers going to work, as well as increasing the congestion on Trent Bridge. I would like the Economic Secretary to the Treasury to give the Committee a clear lead on this matter.
When the Chancellor said that he will place no obstacle in the way of firms who desire to undertake building programmes to extend their plant, does that mean the relaxing of the restrictions on the capital investment programme so far as local authorities are concerned? We have converted the Parliamentary Secretary to the Ministry of Transport most completely. He admits the cogency of our case, and the saving of dollar oil, and wear and tear on transport, time and tempers which would result. Have we also converted the Treasury?
Even if we get the bridge, that will not help the Tory Party electorally, because Nottingham will have to pay, not 3 per cent. for the loan of £300,000, but 4¼ per cent. if they are lucky. When they go into the market they may have to pay A½ per cent. After all, when we have Anglo-Iranian putting out 5 per cent. debentures at 98½, it is not easy for Nottingham City Council to raise money at 4¼ per cent. Even if we get the bridge, under the dear money policy the cost will be £4,500 a year more than it would have been but for that policy. The Tory dear money policy will put a ½d. rate on Nottingham for that bridge. That is an example of how that policy is working out.
Nothing was said this afternoon by the Chancellor which would lead any local authority to expect that there will be a 98 lessening of the restrictions on the capital investment programme. What a preposterous thing this business is. The Chancellor's Budget says £77 million a year is the cost of the dear money programme in financing the National Debt, and all that £77 million is the cost of short-term borrowing. It is entirely and exclusively the added cost of Treasury Bills. I am putting up to the Committee the idea that the Treasury Bill system is an imposition on the public, and that it really is time it was brought to an end. I have no objection to the money market so far as it concerns commercial bills; let them go on. This alleged favourable influence upon the overseas balance of trade is vastly exaggerated.
Indeed, I would point out that the Economic Survey for 1953, in paragraph 27, stated that one of the main reasons for the fall in the United Kingdom's net income from invisible transactions was:increased interest payments on sterling balances, reflecting the general rise in interest rates in this country.The Economic Survey admitted that the overseas balance of trade was affected adversely by dearer money in this country, and, if dearer money did not help the overseas balance of trade, what in heaven's name is the justification for dearer money? We have now £77 million a year, and by the time the thing really gets going, it will not be so far short of £100 million on Treasury Bills alone.
A Treasury Bill is not a good bill. Anybody who has had any financial transactions at all in that world knows that the only good bill is a bill drawn on produce actually going into consumption. A Treasury Bill is not that at all, and, for a large part of it, this money market business is merely the Treasury going into the City of London and borrowing, from people who have balances to lend, in anticipation of revenue, most of which flows in after Christmas. Why should the Treasury have to incur interest burdens for the taxpayer in order to borrow money in anticipation of revenue from people who, if they paid their taxes punctually, would not have the money to lend? [Interruption.] Yes, that is what it adds up to. It is very convenient for these firms to lend their balances for two or three months, but it is a burden to the Treasury.
It ought to be a simple book-keeping transaction between the Treasury and the 99 Bank of England, which keeps the Government's account, and there is no reason at all why the Treasury should borrow in anticipation of revenue. Let the Treasury issue its own Treasury cheques, which the Bank of England would accept and which would form the basis for the Bank of England to meet any demands subsequently made by the other banks. This business of the short-term money market, so far as it involves Government borrowing, is an imposition on the public and should be brought to an end.
§ Mr. Nabarro
Is the hon. Gentleman really trying to convince the Committee that there is something immoral in firms keeping in their till moneys set on one side for future payments of taxation? For instance, in the case of Income Tax, money assessed for tax for 1952–53 is not due for payment until some 12 months later. Why should not that money be put to productive use by lending it to the Treasury on a short-term basis?
§ Mr. Smith
That is not putting it to productive benefit by lending it to the Treasury. Let them not invest it in three months' bills, but in other ways. What I am complaining about is that the taxpayer is burdened because the Treasury, happening to be, on a week-to-week basis, short of money, does not create its own, instead of borrowing from people who happen to have these balances.
Let us bring this matter into a much bigger field. Under the Labour Government, interest on short-term loans and Treasury Bills was one-half of one per cent. per annum, and the market managed on that right from 1945 until 18 months ago. Why, when they managed on one-half of one per cent. on these balances, must we be burdened with a rate of 2⅜ per cent.? One is driven to the conclusion that the Conservative Pary looks after its friends in the many financial interests in the City of London, and that the taxpayer is mulcted in this Budget statement of £77 million a year, quite unnecessarily in this regard.
I advocate, first, that the money market should be reviewed as it affects Treasury short-term borrowing, and, consequently, in that part of the money market con- 100 cerned with this week to week borrowing, the interest should be reduced from 2⅜ per cent. to one-half of one per cent., with a substantial saving to the taxpayer. The amount is already £77 million in respect of nine months of the financial year, and it will eventually be very close to the £100 million.
But that is not the main complaint that I have against this Budget. Here is the Chancellor using phrases like these. He said, "The menace of inflation was lifted in 1952." He said inflation had been checked in 1952, and yet what happened in 1952? We have been told that the danger of inflation is the danger of an excess of money—far too much money knocking about. The Chancellor said—and he reiterated it several times this afternoon—that in the last 12 months that danger has been checked; indeed, he used the word "lifted." Anybody would therefore think that in 1952 the amount of money in the country had decreased, but it had not decreased. On the contrary, the amount of money actually circulating in the country, so far from having decreased, had substantially increased, and the extent of the increase was given in the Economic Survey for 1953 as £119 million, that being the increase in the aggregate of bank deposits during the year.
This sum of £119 million was brought into existence out of the void, out of nothing; it was merely the consequence of a book transaction. The bankers dipped their pens into their inkwells and made entries in their books, and, lo and behold, there was £119 million more at the end of the year than there was at the beginning. Now, the "Economist," last Saturday week, gave the figure not as £119 million; that paper said that, by mid-March, bank deposits were up by nearly £160 million, which is a good deal more.
This business of the banking machine bringing money into existence out of nothing was in full swing during the year 1952, when the total of bank deposits increased by £119 million, on the Government's own admission, and yet, in spite of that fact, the Chancellor can repeat today that inflation has been abated. Inevitably, therefore, the Committee is driven to the conclusion that the amount of money in the country represented by bank deposits can be substantially increased without there being inflation, and that, of course, is only common sense.
101 If I may use a reductio ad absurdum, if half-a-dozen Englishmen were wrecked on a desert island, they could proceed to operate a simple economy and could manage with a certain quantity of money, but if we have 50 million people living in these islands, they will want more money than the six men on the desert island. It follows from that, therefore, and it is pure and simple reasoning, that if in 12 months we have an increase in the population and increased productivity, the probability is that we shall want more money. Indeed, the total amount of money in this country has been increasing at a steady rate ever since I was born 63 years ago. In 1914, bank deposits were £1,000 million; in 1919, £2,000 million; and in 1945, £4,400 million. They are now £6,000 million, and all this extra money has been brought into existence out of nothing by bankers dipping their pens into inkwells and creating money.
Lest the Committee should not be able to understand this, let me remind them that in this country nearly all business is done, not with the notes in our wallets or the coins in our trousers pockets, but with cheques met by bankers after creating money, and, in that way, making it possible to circulate more cheque money. Most business transactions in this country are conducted by cheque money, but, listening to the Chancellor today, nobody would dream that the quantity of money in this country was regulated by the bankers. That is a fact about which the right hon. Gentleman said nothing, but it is true.
The Chancellor made the valuable admission that notwithstanding a substantial increase, namely, £119 million, in the quantity of cheque money in the country, there is still an abatement of inflation which happily puts an end to the nonsense talked about inflation being the simple reply to the argument of people like myself who say that just as it is right, and has been recognised as right for centuries, that coins should be minted only by the State and that private enterprisers who try to mint their own coins should be punished as criminals, so it is right that new money brought into existence in order to circulate as cheque currency, in the way that bank deposits do, should be brought into being not by the commercial banks, but by the Treasury.
102 I suggest that this £119 million should have come into existence in the form of Treasury cheques supplied to the Bank of England. It would be a mistake if money created out of nothing were year by year to be used merely to pay off the floating debt, or any other debt. If it were used for that purpose, all that would happen would be that the taxpayer would be relieved of £119 million of floating debt costing him 2⅜ per cent. and that the banks would have an extra £119 million to lend by way of advances to industry at something like 5 per cent. Above all things, it is desirable and indeed necessary, if this country is to have any future, that credit should be socialised.
In the four years to the end of 1952, the total increase in bank deposits amounted to £335 million, which is an average of £82 million a year. That, I believe, is something like 1½ per cent. of the total bank deposits. It used to be reckoned as orthodox between the wars that there should be a yearly increase of 3 per cent. in bank deposits, and there was, in fact, such an increase except during the depression of 1931–32.
We are on the threshold of the atomic age and live in an age when the technological plant becomes ever more massive in industry. We live in an age when more and more of human effort has got to be put into the business, not of making the goods which people want to consume, but of making the machines to make the goods, and, indeed, of making the machines to make the machines to make the goods.
Hon. Members who serve as I do on the Select Committee on Estimates, and who have been investigating, as I have in the last two or three years, the cost of re-armament, will be aware of the substantial increase in what I call the burden of technology. I sometimes cherish the futile wish that when I was born in 1890 all efforts by scientists and inventors could have come to an end, in which case there would, of course, have been no cinemas, motor cars, aeroplanes or broadcasting. But I know that it is quite impossible to restrain the inventors and the scientists.
We on the Select Committee of Estimates have had it brought home to us that it takes roughly seven years for an aeroplane to get from the drawing board 103 into mass production, and that long before it gets into mass production it becomes obsolete. Up and down the country there are machines in use which, before they have been in use for two or three years, become obsolescent. We live in an age when the advance of technology is such that the increase in the quantity of money needed by the country year after year has to increase at an ever substantially accelerating rate.
It is only common sense and common decency that this annual increment of money which circulates as cheque currency should be created by the Treasury and used by the Government not merely in order to repay debt, but to get for the country an active equity interest in modern up-to-date factories and so gradually build up a non-tax revenue for the country. That is what has got to be done. From what I can see of it, poor old John Bull owns nothing except debt.
So far as I am aware, no one in this Committee has ever put forward any suggestion for decreasing the national debt. I do not particularly want to decrease it, but, as the years go on, I want to build up a national credit account represented by Government holdings of equity stock in the best and most modern industrial concerns, and to build up as the years go by on an ever increasing non-tax revenue in order to counteract the debt interest which this country has to meet.
I do not believe in the capital levy. I do not think it is any good, and I object to it for three reasons. The first reason is because Sir Stafford Cripps had a capital levy on the clear understanding that it was once for all, which means that it cannot be repeated for 10 to 15 years. The second reason is because it achieves the maximum amount of friction with the minimum amount of good. The third reason is because it is a formidable instrument of deflation which was calculated to bring about unemployment.
The Committee should not believe that just because bank deposits amount to £6,000 million, that represents the amount of cheque money at the disposal of the citizens of this country. Believe it or not, that money is turned over roughly every three weeks. Last year the clearing banks put through £110,000 million, and 104 if we divide £6,000 million into £110,000 million we find that the money is turned over roughly every 18 days. That money is bound to go on increasing, so let it be socialised.
I condemn the Chancellor because he has done nothing whatever about small savings. He should have arranged that from now on Post Office savings should be tied to a price index so that even if prices rise during the next few years the people who put their money into the Post Office will not find their savings eroded by a rising cost of living. I urge that that should be done, and I would urge something else too.
The hon. Member for Croydon, East (Sir H. Williams) pointed out quite rightly that one of the omissions from the Chancellor's speech was any reference whatsoever to post-war credits. Nothing would create greater confidence among working class people regarding small savings than if the Chancellor were to fund post-war credits. I suggest that he should fund them at 2½ per cent. the same rate as Post Office interest, and that we should then have a savings campaign when the Chancellor and the Prime Minister could explain to the people over the radio that they could safely put up their small savings because they could be sure that the interest on them and their eventual repayment value would be as high as when they deposited their money.
The psychological effect of the funding of post-war credits would be electrical. Some hon. Members may not believe that, but I know. I have mixed with my constituents in pubs and clubs, in the street and everywhere, and I know what their reaction would be. One blot on the Budget is that the Chancellor has done nothing whatever about small savings.
It is not enough to socialise the annual increment of cheque money, because I do not believe there will be any effective planning of industry in this country until the commercial banks are nationalised. The biggest blot on the Budget is that the right hon. Gentleman has done nothing whatever to meet the most pressing need of the country today, the redeployment of labour and capital. Both men and factory capacity must be taken away from the less essential industries to the more essential industries. 105 The more essential industries I would describe as those on export trade and on capital renovation and capital expansion.
Nothing in the Chancellor's Budget does that. He gives certain tax concessions mainly for firms, and leaves to them the choice of what they do with the money that they save. That, indeed, is not even capitalist planning. It is capitalist anarchy. It does nothing whatever by way of diverting workers and factory capacity from less essential to more essential industries which must be expanded and developed if this country is to survive. That is the worst blot on the Budget.
Yet it would be possible for a Socialist Chancellor, if he carried out a Socialist monetary policy, to discriminate most effectively in favour of the essential against the inessential. I have spent a week on a farm in Wiltshire. When my brother-in-law wants to obtain a loan from the Agricultural Mortgage Corporation he has to pay 6 per cent. That is really preposterous. There should be discrimination by banks in favour of industries like farming. The bank managers should know the farmers best. I had a long discussion with the manager of one of the local banks at Malmesbury about this. A Socialist Chancellor will not be able to exercise adequate control over the industries of the country, and he will not be able to carry out what he fondly imagines is Socialist planning unless and until he nationalises the commercial banks.
The commercial banks need to be nationalised. They did extremely well last year, naturally, with dear money. The discretion lies with the banks as to whom they give advances and what they charge. The Chancellor does nothing to direct them. It is true that under the Bank of England Act, 1946, he has theoretical power to issue directions to the Bank, but so far as I know no directions have ever been issued. And the beauty of it is that the commercial banks could be nationalised for nothing at all, at no cost whatsoever to the taxpayer.
The explanation of that is perfectly simple. It may surprise my hon. and right hon. Friends that these commercial banks are not run for the benefit of the shareholders. Some of the shareholders wish that they were. These banks are a focus of capitalist power, that is all. The 106 shareholders do not count with these banks; they have had a pretty raw deal over the last 30 years.
In 1929 the profits of the big seven London clearing banks touched a maximum of £13.2 million. It has never approached that figure since. In 1937, when there was a re-armament boomlet, the profits were £11.5 million. They have never approached that figure since. Last year they were £10.4 million, an increase from £9.8 million in 1951. The banks enjoyed £600,000 more profit, thanks to the dear money policy, but it is still a good deal less than it was in 1935 or in 1929. The banks are not run for profit; they are run for the accumulation of hidden reserves.
It may surprise some hon. Members to know that the Companies Act, 1948, expressly exonerates banks from any duty to declare what are their real profits, how much they put to depreciation, how much they pay in profits tax and many other things. The late Walter Leaf, who was for a long time chairman of the Westminster Bank, gave the impression to readers of his very delightful books and speeches that commercial banks, so far from being run for the benefit of shareholders, were run for the purpose of seeing how much they could accumulate in hidden reserves. The figures of profit which I have given of £13.2 million in 1929, £11.5 million in 1937, £9.8 million in 1951 and £10.4 million in 1952 were after payment of all charges and taxation, and all transfers to hidden reserve. Goodness knows what profit they really made.
If these banks were nationalised, as I advocate, the Government would be giving the shareholders a most generous deal if they said, "It is true that you had less than £6 million last year and you have had no more than £5½ million most years since 1932, but we will give you in compensation in perpetuity your 1929 figure, namely, £9.7 million." The Government would be treating them very generously indeed. The Government could then take over the banks and, having done so, would become possessed of the banks' assets. That is pretty obvious.
Among the assets of the banks are their investments, which consist pretty well exclusively of Government securities. The Government would become possessed not only of the declared investments but also 107 of the banks' share of the floating debt, which is in Treasury bills. If one adds together the banks' investments plus their share of the floating debt then in 1951 the figure was, I believe, £2,736 million. Last year it went up, mainly because of the housing finance, to £3,285 million.
However one works it out, the interest on £3,285 million less tax is a good deal more than the £9.7 million which I propose should be paid to the shareholders by way of annual compensation in perpetuity. So, having nationalised the banks and having become possessed of their assets including investments, there would be no sense in the Government paying interest to themselves. What the Government would do would be simply to substitute for these investments and Treasury bills non-interest bearing currency certificates or, in plain English, currency notes not carrying interest; so there would be still the deposits to meet the obligations. The Government would get rid of the investments and there would be actually a saving, because they would save more net interest than they would pay out to the shareholders.
One finds from one end of the country to the other at nearly every inter-section of thoroughfares—in other words, at street corners—three, four or even five branches of these banks. I do not know how many are redundant, but I know that there are far more than are needed to meet the business needs of those who use them. I am told that all of them have been written off the books long ago. They are the hidden reserves about which the late Mr. Leaf wrote so entertainingly. Having nationalised the banks, the Government should sell these redundant branches and use the proceeds for the amortisation of debt.
That is the kind of financial policy which a crisis-ridden country like ours should be following at a time like this. The nationalisation of the banks would not only relieve the taxpayer of the burden of interest, but it would enable the Socialist Chancellor of the Exchequer of 1954 or 1955 to discriminate between industries. It would enable him to say to the farmers, "You shall have a loan cheaply, at 3 per cent. or 4 per cent.," and to the promoters of greyhound racecourses, "You shall pay 6 per cent. or 7 per cent., if you get a loan at all." 108 One cannot have Socialist planning when it is left to the banks and business men to say at what rates money shall be borrowed and to what use that money shall be put.
I come finally to one important consequence of this policy, and I refer to the local authorities. I would discriminate in this financial way, not only between essential and inessential industries, but also between publicly and privately owned enterprises. I referred to the bridge which we want in Nottingham and on which we shall have to pay 4¼ per cent. Local authorities have housing programmes and other services. I would say that the local authorities shall have their money for social purposes at 3 per cent., and business people shall have their money for private purposes at some other figure to be arranged. I would discriminate between family concerns in which the principals take a real risk and in fact participate, and the joint stock companies owned by absentee shareholders.
What the Chancellor has done has been to budget for what I call a gamblers' surplus above the line, with no surplus at all below the line. That means that he is putting an end altogether to the system whereby the Local Loans Fund is fed with money out of the Consolidated Fund, that is to say money raised by direct taxation. So far as I understood what he said this afternoon, if he is not doing that he is certainly budgeting for no surplus below the line.
That being so, there will be no taxpayers' contribution to the Local Loans Fund. The Government will have to go on borrowing from the banks for what it lends to local authorities, and will have to pay the banks two and three-eighths per cent. for mere creations of credit, which the banks will have brought into existence out of nothing by bookkeeping entries. Really, the whole thing is absolutely monstrous. It is time that this House became the sovereign authority of finance in the country.
I have thought in terms of revolutionary construction for the last 46 years. I still think in those terms. I still look upon the age in which we live as an age of tremendous opportunity, if only we will grasp it. We have got to put behind us these mid-Victorian ideas which the Chancellor of the Exchequer, 109 speaking like a university don, enunciated so cold bloodedly this afternoon. We have got to think in terms of the nation's credit being used for the nation's industry. We have to think in terms of Socialist control and Socialist development of this country, and not of the fantastic attempt to bolster up a decaying capitalism, which is the real motive for the Chancellor's Budget.
§ 7.2 p.m.
§ Mr. Robert Crouch (Dorset, North)
I know that the hon. Member for Nottingham, South (Mr. Norman Smith) will forgive me if I do not follow every line of argument that he has put forward, but there is one point on which he touched and to which I should like to refer. He mentioned that he had been to the delightful county of Wiltshire during the weekend and that his brother-in-law had told him that he was paying 6 per cent. interest on the money that he had borrowed from the Agricultural Mortgage Corporation. He should have said that that 6 per cent. was not only the interest but was also the repayment of the capital over a period of years, whether it be 20, 40 or 60 years.
I should first of all like to congratulate my right hon. Friend the Chancellor on his Budget. It is the type of Budget which my friends and I who have worked for six or seven years to bring a Conservative Government into office expected a Conservative Chancellor to introduce. In my opinion, this is the first occasion since the war when any serious attempt has been made to stabilise the cost of living. I feel that that is what this Budget will do. Some of the reliefs which my right hon. Friend has announced may not appear in the price indices, but what ordinary people are interested in is how much further their money will go in a few months' time. I feel sure that as the result of this Budget the people's money will go further than it has done for a considerable time.
§ Mr. Crouch
The hon. and gallant Gentleman says "No," but tax concessions amounting to something like £160 million are bound to bring benefits to the ordinary people. In the last few years, by Questions and in interviews, I have tried to impress upon successive Chancellors the hardship that has been caused in the rural areas by the tax upon the 110 wireless dry battery, and I can assure my right hon. Friend that this concession will be highly appreciated.
The Chancellor's announcement on sugar means that the country people will be able to preserve a great deal of fruit which they have been unable to do for several years. With all respect to the canners of fruit, both English and that which we import, there is nothing more delicious and acceptable to the country people than home preserved fruit, whether it be in the form of jam or put into a bottle. I am sure that the people who really love the fruit which is produced in this country will very much appreciate this concession.
§ Mr. Crouch
The hon. and gallant Gentleman says "Nonsense"; if he likes, one day I will bring him a jar of homemade jam.
Another concession which I have been advocating and which will be appreciated is the substantial allowance for the purchase of new plant and machinery, as a result of which the farming community will be able to check their ever increasing costs of production. I am sorry, however, that the Chancellor has not heeded the other suggestion which I have made in this connection, and that is to give an initial allowance for the reclamation of marginal land.
We have something like 17 million acres of rough grazing in this country. If a similar form of allowance were given to those men who have the pluck to reclaim land for the production mainly of livestock, we should in a matter of 10 years double the amount of livestock that we have at the moment. I hope the Chancellor in the next 12 months will seriously consider extending this allowance to the reclamation of land which at the moment is only rough grazing, bearing in mind that meat is in short supply and is so important.
The country will be not only pleased but interested in the very ingenious way in which the Chancellor has reduced Purchase Tax on so many commodities. I know that traders up and down the country have been concerned about what steps should be taken when Purchase Tax was removed, and by this gradual reduction my right hon. Friend has not left the traders with an undue burden to carry. 111 Probably as time goes on we shall find that Purchase Tax will be reduced in this gradual fashion when successive Budgets are introduced by our party.
I am sure that the taxi drivers will appreciate the Chancellor's announcement of the method by which he is going to give them some relief, which will enable them to earn a better living than they have been able to earn for some months past. [Interruption.] The hon. and gallant Member for Brixton (Lieut.-Colonel Lipton) seems very dissatisfied, but he has no real ground for complaint.
The concession which has been given to those people with small incomes by raising the income limit from £500 to £600 a year will bring relief and assistance to a great number of people. In making the concession of 6d. in the £ in respect of Income Tax at the various levels, the Chancellor has seen that relief will be given to those in the lower income groups as well as those in the medium and higher income groups.
§ 7.10 p.m.
§ Mr. Ellis Smith (Stoke-on-Trent, South)
There is a growing appreciation of the very fine work which is being done by the Central Statistical Office, and it is time that that fact was placed on record in the House of Commons. It is generally recognised that we are in a very serious economic position, and if we are to understand that position clearly it is necessary that we should have more statistical information of the character which is now being published in increasing amounts and which may be obtained at the Vote Office and examined by hon. Members.
I also want to place on record my regret that the Government have not changed the procedure in respect of this Budget debate. When the Labour Government introduced this procedure I was against it and, as the years roll by, I have become convinced that what we are doing is fundamentally wrong. In effect, the Chancellor said that he did not intend to go through that voluminous document—the Economic Survey. I quite appreciate his point of view. If I were to devote the attention he devoted to the many issues with which he dealt—ranging over the many changes which have taken place and the differences of opinion about what should have been done—I would need a whole week.
112 In my view another week should be given, at the most opportune time, to a debate on the Economic Survey. So that the House could make its contribution to the development of public opinion a week should be allocated to focusing attention directly on the issues which have been raised by the Chancellor this afternoon, and another week to focusing attention on the economic situation. I hope that consideration will be given to that point between now and the end of the next financial year.
The Chancellor said that it was his desire to launch a drive to let the world see that we mean to increase our exports. Later, he said that exports are our paramount need and that we must give a fillip to production. He also said that he proposed to give Income Tax relief, and that the main purpose of this was to encourage expenditure on capital equipment. I wish this Chamber was packed at the moment. If it were I would ask whether there were any hon. or right hon. Members who considered that this limited change would encourage industry to put more into capital equipment. If any hon. Member thinks that it will I can very quickly produce statistical evidence to show what has taken place in the past.
Doctor Meier, of the United States of America, recently made the following statement:Basic research carried out by Britain constitutes a free gift to the rest of the industrialised world.During the war we led the world in the development of scientific ideas. Why are we not doing it now? Why are we not manufacturing Terylene? There is a huge world market for it. Why are we not seizing this opportunity, in view of the fact that the Chancellor says that our paramount need is for more exports? Why is Terylene, under another name, being made in huge quantities in the United States of America? Is it correct that in 1951 there was a fall of 3 per cent. in the number of full-time students of technology in our universities? Is it correct that in the United States of America the proportion of applied scientists to fundamental scientists is eight to one while in this country it is only three to one?
If these are the facts—and I appeal to anyone to check these statements if he has any doubts about them—what is the 113 use of talking about exports being paramount? There are many reasons why these are the facts, but there are three main ones. The first is that in Britain, the further one gets from productive industry the better off one is. Secondly, we are indulging in economic madness by economising at the expense of the development of scientific research and, thirdly, we are starving industry of risk capital.
During the war it was my privilege to go to the War Office on two occasions. The first time I went the interview was arranged by Lord Margesson, who was then Secretary of State for War. I went there to appeal to the General Staff to consider the use of a secret weapon. When I arrived I found, seated round a table, generals with rows and rows of ribbons on their chests and spurs on their boots. I came away from that interview broken-hearted, because I felt that if those men were to be left in charge we should lose the war.
Time rolled on. This weapon was improved by one of our largest industrial establishments and, as a result of the action of the Foreign Secretary—whom we all regret to see in his present state; especially those of us who know so well that he has not just rolled with the stream—I went to the War Office a second time. The right hon. Gentleman was then Secretary of State for War. I went to the same room and the same table, but there were new men round it. It was a treat to talk to them. As soon as the conversation began I could see that they grasped what was at stake. I came away full of hope because General Weeks and General King—the new men in charge of mechanisation—had understood what had been put before them.
Those generals had a twentieth century outlook, whereas the men I met on the first occasion had an eighteenth or nineteenth century outlook. That experience applies equally to our present economic situation. Too many people in high places are still approaching our economic problems with an eighteenth or nineteenth century outlook, whereas the world is moving at a quicker rate than it has ever done in history, and we are now in the mid-twentieth century, which demands twentieth century ideals.
I believe that, just as during the first 12 months of the war we drifted, so 114 we are now drifting in our economic situation. Our people are fighting an economic rearguard action leading to a losing war unless a fundamental change is brought about. We are spending millions of pounds on military plans, but hardly a penny on economic plans. Thousands are engaged in working out military strategy, but very few are engaged in working out our economic strategy. There is a huge general military staff in London and Paris, but we have little, if any, economic staff in our own country.
Almost every country in the world, except Conservative Britain, has introduced some form of economic planning and state organisation, and that applies in more quarters than one. If the hon. Member for Kidderminster (Mr. Nabarro) differs from me, let him say so openly. I believe in cut-and-thrust; that is the way we bring things up.
§ Mr. Nabarro
The hon. Gentleman omitted the world's greatest industrial power. The United States of America has not introduced centralised planning on the best Socialist model. The reason for the greater rate of production of the United States is that they believe in the very antithesis of centralised direction.
§ Mr. Smith
I have no time to go into that this evening. The hon. Member for Kidderminster should not swing his arms; let us keep to the point. The more up-to-date of us know that we are living in the twentieth century, and we ought not to adopt ideas which were prevalent in the House in the seventeenth and eighteenth centuries, of which we saw concrete evidence this afternoon.
The Economic Survey states, on page 51:The driving force behind our export expansion can come only from industry….I understand that that is what the hon. Member for Kidderminster believes. Did he get that? Let me repeat it:The driving force behind our export expansion can come only from industry….I differ fundamentally from that. It represents the outlook of the War Office with generals wearing medals and spurs. We need generals of the twentieth century to deal with our economic plans.
The driving force to win the war came from the Government, supported by this House, and the enlightened opinion of 115 most of our fellow countrymen. The same policy needs to be applied to our economic problems. Since 1938 our industries have had a great record. Since 1945 our output has been the admiration of the world. Yet newspapers like the "Manchester Guardian" write articles such as that to which I am about to refer, and they are justified in doing so. On 20th March the Chancellor of the Exchequer came back from America and addressed a large conference in, if I remember correctly, the Friends Meeting House. He appealed for increased productivity and increased exports. The "Manchester Guardian" headed its article "Action or Talk." We have had speeches and speeches galore since 1945 by people in high places in all quarters.
The time has come when we need not speeches but action based upon concrete proposals to deal with our problems. The country is getting cynical and saying, "More talk, more talk, yah, yah, yah, but no action." We require action of the same kind which gave our country a fillip and brought about a great change when our people responded to our warnings after 12 months of war. This country now urgently requires a twentieth century technological revolution.
I suggest, first of all, the abolition of the Ministry of Materials. I suggest, secondly, the setting up in its place of a Ministry of Production—let hon. Gentlemen "Hear, hear" that—with a national plan and a planning commission. I know we shall have difficulties with certain high places in the Civil Service about a planning commission, but if this country is to deal with its problems, people who stand in the way of the national interest should be dealt with as they are in workshops and other places.
I plead for a constructive economic policy based upon the principles which I have outlined, together with a programme of action based on a wealth production policy. This will rally our country and create an interest such as has not been seen for a few years. There should be a condition that any increase in output will be used not to benefit individuals but in the nation's interest. This policy should be applied at home, and at the next Commonwealth Conference similar proposals should be put before the whole 116 Commonwealth. We need a commonwealth economic development loan. We need a special compulsory savings scheme applied to all who are receiving above £500 a year. If there are people who are against that, I ask them how they will deal with the problems which confront us and how they propose to raise special risk capital, with which I shall deal later.
I believe that this country urgently requires more horse-power per head. There is a great tendency still in this country to take it out of the energy of the people instead of out of the machines and instead of applying twentieth century ideals and organisation. We need more manpower in productive industry. There are too many in this country watching too few do the work. We require modernisation of fixed capital and organisation. We need more incentive priorities for all those engaged in productive effort.
I ask the Government to consider the next constructive proposal which I shall make. During the consideration which the Macmillan Commission gave to our problems of finance and industry, it was my privilege to be friendly with one or two of its members. I refer in particular to Ernest Bevin, who made a very great contribution, as the rest of the Commission will admit, and he and another member signed a minority Report which is well worth reading to this day.
We need a similar Royal Commission to consider similar problems, for, measured by twentieth century standards, our industry is being starved of capital, and of risk capital in particular. The Conservatives and all those who acquiesced in the situation were responsible for starving many of our people, particularly those in the industrial areas, between the two wars. Miners were then receiving an average of 28s. for a full week's work in some areas, and their wives and children went short and suffered from malnutrition.
Those people saw their children and other people's children going short of necessities and suffering from malnutrition. In just the same way this Government are now responsible for a policy of malnutrition in industry, which is being starved of capital. Just as our people felt the economic lash for years, so industry will feel the effects of this lash in years to come. We shall never hold our own unless we have a fundamental 117 change in economic policy. I plead, therefore, for a Royal Commission to be set up to consider this matter.
This country has given recognition in Honours Lists and in many other ways in the past to too many speculators, financiers and sycophants of all kinds. I plead that credit should be given where credit is due. I will mention two who deserve it. A friend of mine, whose name is John Ellis, and Mr. Richard Taylor worked for years practically day and night. Their wives hardly saw them. I said that they were working too hard and would never stick to it, but, inspired by others whose confidence they won, they developed at Trafford Park, Manchester, at Taylor Brothers, the finest plant of its kind in the world which, in five minutes, can change raw steel blocks to finished locomotive wheels.
I am sorry that certain hon. Members who speak so much about another country have gone out. It owes us much for the part we played in two world wars. It is not in that country but at Trafford Park, Manchester, that the world is led in this particular form of engineering. That machine, which cost £1 million, is operated by 11 men wearing white coats. How many concerns can afford to lay out £1 million risk capital?
We have in this country some of the finest engineers and scientists in the world. Some of the finest men in the world are prepared to work night and day to experiment with new ideas and seek new advances in technology, but they are not being given the incentives and the encouragement they ought to be given, and unless there is a fundamental change of policy the country will suffer. The Comet was not built with talk. It was not built by certain people in high places in London who wield too much influence behind the scenes. The Comet was built because men worked for years, night and day, to give practical expression to scientific ideas, to translate plans on the drawing board into constructional achievement.
What was done in the case of the Comet is being done with the Delta in A. V. Roe's works. Instead of capturing the world's markets, we hand it over to the Americans. We are doing that with radar and new forms of traction. Our engineers and scientists, who are among the finest 118 in the world, are being starved of risk capital. They are not being given the chances they ought to have. The Chancellor says that exports are paramount, yet he cuts expenditure on the development of scientific research. Does not the Economic Secretary understand that?
§ The Economic Secretary to the Treasury (Mr. R. Maudling)
I did not quite understand the point of the hon. Gentleman's last sentence.
§ Mr. Smith
I said that the Government have reduced expenditure on the Department of Scientific and Industrial Research. I think that is a tragedy. It is not only directly harmful, but indirectly also, because it has a discouraging effect on people supporting industrial research. There ought to be an enormous increase of expenditure on industrial research and more encouragement given to engineers to work out new forms of engineering.
Having spent 18 years in this House I know what it means to try to get ideas accepted. I shall never forget the late Miss Rathbone, a great old soul, who said that in this country one had to put forward an idea for 25 years if one hoped to have it accepted. Such leisurely consideration of new ideas may have been good enough in the old days; it may have been good enough in the days of the Zulu wars and the Boer War; but it will not do in these times. We are living in a new scientific age. Man can nearly control nature. This country has led the world in the development of some ideas. Our scientists and engineers are admired throughout the world. Similar men in Russia and America and China and elsewhere in Asia all look to this country to give them a lead; but we ourselves are. not getting the best out of our own successes in technology for the benefit of our own economy.
I hope that the Economic Secretary will raise this matter with his colleagues so that this Government, even within their limits, will follow a constructive policy. We bless our forefathers for the legacy of democratic rights they handed down to us, and for our standard of living. We also must take action to achieve-results that we can hand down as a legacy to those yet to come and for which they will have cause to bless us. We must do that, and not go on drifting as we are.
§ 7.38 p.m.
§ Professor Sir Douglas Savory (Antrim, South)
I have listened with the greatest possible interest to the speech of the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith), and I certainly agree with him very strongly—I should not be an ex-university Member if I did not—on the necessity for scientific research. I agree with him that that is very important, and that very great attention should be paid to it.
I must apologise for detaining the Committee, but I have found from experience that unless I catch the eye of the Chair on the first night of the Budget debate I do not get a chance to take part in the discussion. I therefore take this opportunity of saying what I have very much on my mind. First, I should like to congratulate very heartily the Chancellor of the Exchequer on a very brilliant speech. It has been my lot to hear a good many Budget speeches. I am sure that because of its logic, its lucidity, its persuasiveness and comprehension, and also for its beautiful English and the delightful pronunciation with which it was delivered, we all listened to it with the utmost pleasure.
It was a very agreeable surprise to me, after addressing the large annual meeting of my constituents in South Antrim last Saturday afternoon at which I refused to hold out any hope of a remission of taxation. I looked at these terrific figures, of £581 million for the Army Estimates, £364 million for the Navy Estimates, and £548 million for the Air Estimates, and I pointed out to my constituents that the necessities of defence are absorbing one-third of our total revenue, and I did not hold out any hope of any tax remission. Therefore, when I heard today that very gratifying changes were being made, first in Purchase Tax and then the remission of 6d. in Income Tax, I frankly admit that it came as a very agreeable surprise.
If there is to be a remission of taxations, I feel very strongly that we should consider a small but deserving class, which perhaps does not carry with it many votes at elections. It is a class which, to my mind, is bearing a very unfair burden of taxation, and that is the Surtax payers. Even with this remission of 6d. the Surtax payer will be paying up to 19s. in the £. The result is often disastrous.
120 We are now doing everything we can to attract American guests, who bring dollars into the country. When they come here for the Coronation they will afterwards visit our cathedrals and country houses. These country houses are perhaps one of our greatest possible assets and it is heartbreaking to see that, on account of this stupendous taxation, it is becoming less and less possible to maintain them.
It is very sad, when one of these country houses has to close down, to see the effect on the surrounding villages. The benevolent householder is forced to depart and there is unemployment. Only the other day I was going over an estate which, in the old days, had 15 gardeners for the maintenance of a very beautiful tropical garden which was an attraction for the whole country. On account of the Death Duties and of very high taxation they had to reduce the staff to a man and a boy, with the consequence that those gardens could no longer be maintained with their marvellous collection of tropical plants, which one could scarcely believe it possible could be grown in Ireland, but where, owing to the mildness and beauty of the climate, they had been preserved.
When the enormous sum of £131 million obtained from Surtax is combined with the £151 million obtained from Death Duties, the figure is astronomical. It is one which would not have been thought credible a few years ago, at a time when our whole Budget was no more than £100 million. I remember my father telling me that in 1874, when Income Tax was 2d. in the £, at the General Election, Mr. Gladstone promised that if he were returned to power that 2d. in the £ Income Tax would be abolished.
I do not know how many other hon. Members recollect the famous Budget introduced by Sir William Harcourt, in 1894, when I was sitting under the clock in the old House of Commons, and, for the first time, heard of the application of Death Duties to landed estates. That was the beginning of this taxation. But "facilis descensus Averno." Curiously enough, shortly after Sir William Harcourt had introduced these Death Duties and applied them to landed estates, he succeeded to a beautiful property near Oxford, and was hoist with his own petard by having to pay the Death Duties 121 which he had for the first time applied to landed estates.
Those Death Duties have now increased to such an amazing extent that it is impossible to keep up these beautiful country houses. Everyone knows that they are being closed down or are falling into ruin. I remember raising this question with the Chancellor and asking whether it was still possible, as it used to be in the old days, to insure against Death Duties, and he replied that in view of OUT enormous Income Tax and Surtax, insurance against Death Duties was now out of the question. Now, that is a very, very serious thing, that these Death Duties should be imposed on estates and that one cannot insure against them for the sake of one's family. Further, it is a disastrous policy that the sons and daughters, the nearest heirs, should pay the same Death Duties as distant relatives. I do not think there is any other country in the world where that applies. In France, a very great distinction is made between the nearest heir and the distant relative who inherits the property. At present, we do not make any distinction between the two, and it is a very great hardship if the children are handicapped to the same extent as some very distant heir.
When Philip Kerr inherited the title of Marquess of Lothian, together with that beautiful property in Norfolk, he wrote a letter to "The Times," in which he said that he was asked to pay Death Duties on that Norfolk estate to the amount of £200,000, but there were absolutely no assets. He asked the Exchequer to take over some of the land, but they were not able to do so at that time, so that there was nothing left but to sell those pictures and that marvellous, almost unique library which is now to be found in America.
Today, I looked up to the gallery and missed a very familiar face during the Budget speech—the face of our very distinguished Minister of Finance for Northern Ireland, Major Sinclair. He was always in the Distinguished Strangers' Gallery, listening to the Budget statement. Unhappily, like our beloved colleague, Sir Walter Smiles, he was a victim of that terrible disaster of the "Princess Victoria," which foundered a few weeks ago off the Irish coast. He was a very great financier, and no matter what party was in power here on this side 122 of the water, he always co-operated with great cordiality with the Chancellor of the Exchequer. My right hon. Friend, in a very fine tribute which he wrote in "The Times," pointed out that Major Sinclair had given him a great deal of assistance, that he had an extensive knowledge of finance and had a very great brain.
As poor Major Sinclair is no more, I should like to point out one of the matters on which he laid great stress when introducing his last Budget into the House of Commons of Northern Ireland, namely, the effect that Death Duties are having at present on family businesses. Many of these small businesses in Northern Ireland have been built up by individuals, by families who have shown the necessary enterprise and founded various branches of the linen industry, built up a large rope manufacture and a very important tobacco factory.
These families find that when the senior partner dies the effect on the business is very serious because they have to part with a great part of the capital. This makes it impossible for them to extend their manufactures as they would like to do and even to maintain them. In fact, they find that the Death Duties are crippling. Nobody developed this point with greater eloquence than the late Major Sinclair. I would very strongly urge on the representative of the Treasury that some thought should be given, if not in this Budget—because I am sure that all the concessions have been made that can now be made—then in future Budgets to this matter of Death Duties affecting family businesses.
To sum up my brief points, I would say that some consideration should be given to the very deserving class which is now undergoing not merely taxation but confiscation; and that we should consider the effect which Death Duties are having on the value of the assets of the country, such as those beautiful, country houses which are not found anywhere else in the world.
§ 7.51 p.m.
§ Mr. Hector Hughes (Aberdeen, North)
The hon. Member for Antrim, South (Sir D. Savory) praised the Chancellor's charming diction, his choice of language and his eloquent manner, but he said little about the Budget. He also 123 spoke about English country houses and about the lamentable wreck of the "Princess Victoria," but still he said very little about the Budget. He reminded me of the distinguished critic who was asked to look at a modern picture, and who said "The frame is indeed very elegant"—nothing about the picture itself. His silence was sufficient condemnation of the picture, just as the inadequate words used by the previous speaker are sufficient condemnation of the Chancellor's Budget.
The speech to which we have just listened contained some general expressions of opinion. It contained some uncritical adulation of the Chancellor, but it contained no analytical examination of the Chancellor's proposals. I invite the House to consider those proposals in the perspective of the economic environment in which we find ourselves. The Chancellor of the Exchequer dealt with the Economic Survey of 1953 and his Budget proposals together. In doing this he followed the example of previous Labour Chancellors of the Exchequer but not with equal success.
There was not in the present Chancellor's speech any initiative, courage or leadership such as we found in the speeches of such Chancellors as the late Sir Stafford Cripps. The reasons for the failure of the present Chancellor arise from his lack of vision in his former Budget, his unsound estimates last year, the mistakes in his forecasts, which indeed he admitted today, the removal of food subsidies during the last year and generally to the bad administration of the present Government.
This has resulted in what the Chancellor of the Exchequer today euphemistically called the "lull in our production." What a euphemistic expression for the lack of production which has characterised the last year. He talked about our "export difficulties." The real descriptions of these things are national deterioration; diminished employment by 96,000, meaning that nearly 100,000 families are without their pay packet; increased short-time working, pushing countless families beneath the line of normality; falling productivity by 4½ per cent., which means national impoverishment; higher cost of living by 23 per cent., which means penury and hardship for hundreds of thousands of people in 124 this country; diminished imports, which are down by £35 million; and diminished exports which are down by £3½ million.
The stark fact is that under the Labour Government from 1945 to 1951 there was a steady rise in production and in exports and imports, while under this Tory Government, in one year, there has been a fall in each of these. The Chancellor's failure is due, therefore, not only to the manner of his presentation, which has been so praised by the previous speaker, and which, I concede, was mild and gentle and eloquent and elegant but by no means persuasive, but to the unhappy situation which has been created by the present Government's ineptitude and class bias. These grave matters are relevant to the fact that we are discussing not only the Budget proposals but the Economic Survey and its background.
This makes it possible to point to the terrible contrast between three periods—the inter-war years of decadence and deterioration, the six post-war years of construction, reconstruction and renaissance, and the last bad year of relapse which has reversed our upward trend. The present Chancellor's melancholy speech today gives the impression of his having reversed the engine and the national chariot is rushing down-hill towards the dreadful inter-war conditions.
I fear that this downward tendency is a fact and is due to the principles of Government which are now being applied and which are converting our national fortunes into national misfortunes. During the inter-war years, as now, there were cuts in the social services, penalties on education, heavy taxation of the lower income groups, deterioration in national health, high infant and maternal mortality and other evils, while from 1945 onwards all this was reversed, full employment became the order of the day, social services were expanded, education was fostered, lower incomes were freed from Income Tax, national health improved, infant and maternal mortality fell by 9 per cent. and old age pensions were increased.
From 1945 to 1950 this spectacular and beneficial development went on. It is indeed relevant to remind the House that as early as October, 1948, Mr. Paul G. Hoffman, the Administrator of the European Recovery Programme said that he had been impressed with the remark- 125 able progress made by Britain in making good her pledge of self-help. I quote him as saying:When I took this job in April, 1948, it seemed to me that the goals which Britain had set herself in the first year were quite unattainable.…I must admit that the progress that has been made dispels all my doubts. The very gallant and successful fight which Great Britain has put up to build up her exports and hold down imports, and thus achieve financial stability, is one which commands the admiration of the world. I am also impressed by the determination, which is very evident, that the progress made so far is just the beginning.He was right. It was just the beginning and it continued as long as the Labour Government continued. It continued until the present Government got its chance to divert the national fortunes into less prosperous directions.
During this period, the Labour Government, with great sincerity, skill and courage, mastered the transition from war to peace, reached the period of national recovery and simultaneously developed the Welfare State. In 1950 Sir Stafford Cripps, as Chancellor of the Exchequer, achieved the miracle of balancing our economy, not only as far as our foreign account was concerned but also in our internal finances. Further, in 1950 Sir Stafford Cripps achieved an approximate balance between supply and demand, escaped from the threat of serious inflation in our system and achieved a valuable degree of disinflation. By 1950 our economic system had got beyond the disturbance of temporary post-war factors and had settled down to favourable conditions of full employment, record productivity and record exports.
Four authoritative tests were applied to all European countries, including Britain, affected by World War II. It was then found that, compared with other such countries, Britain, first, had travelled furthest on the road towards economic recovery; secondly, had done most to reduce imports and increased exports; thirdly, was least dependent on American aid; and fourthly, had the highest rate of production per man.
It will be remembered that the right hon. Member for Woodford (Mr. Churchill), as he then was, now the Prime Minister, about that time called the workers of this country "workshies" and in 1944, before the General Election of 1945, at a time when he thought he would have the responsibility of administering 126 the post-war fortunes of this country, he said, "The day the war ends Britain will be bankrupt." That was in 1944, but, happily, in 1945 Labour came into office and this country was not bankrupt but became resurgent.
Then came the General Election of 1951 which brought disaster to this nation, brought a new Chancellor of the Exchequer—the present Chancellor—with his reactionary ideas, who reversed the engines of national progress, who whittled down the Welfare State and reduced its benefits. Last year, he introduced a class Budget which hurt most those whose incomes were under £500 a year; hurt married people more than single and thereby tended to penalise marriage; favoured the people with higher incomes; and favoured most of all those with incomes of £2,500 a year upwards.
In addition to that, he penalised the poorer families in another way—he raised the bank rate of interest on loans. This had a deadening effect on our whole economc system. It increased costs to local authorities, it increased the cost of housing, transport, light, heat and education. It increased costs to shopkeepers and in that way to consumers also and it raised mortgage rates and thereby made the setting up of a home more difficult.
The results of this policy have been very bad. They show how the Government broke their election promises. They promised to reduce the cost of living, but, as I have said, they increased it by 23 per cent. They promised better conditions for the poor but they presented a rich man's Budget. They promised national economies, but, as the Chancellor admitted today, expenditure has increased by millions of pounds. They promised cheaper food, but food is now dearer by 23 per cent. That which cost £1 17s. 11d. in January, 1952, now costs £2 6s. 1d.
They promised more meat and in getting it they sacrificed this country to the Argentine and prejudiced our friends in New Zealand and in Australia. This surrender over meat is a good illustration of how the Government has muddled the national finances, has surrendered our national interests, has sacrificed our Commonwealth friends. It was condemned even by the Conservative Press. The "Sunday Times," a Conservative organ, on 4th January published a feature article by Scrutator entitled "Surrenders to Peron" accusing the Tory Government 127 of sacrificing the national interest to its own popularity. I should like to quote what Scrutator said about this. Here are his words:On all the points that matter most we have capitulated to Argentina. Not only are the agreed prices high (much higher than we are paying to New Zealand and Australia) but the forms in which Argentina will accept payment are disadvantageous to us. New Zealand and Australia are great purchasers of our manufactures, and we balance our accounts with them in that way. Argentina under the new agreement will take payment chiefly in primary products—coal and oil. Precious coal which is everywhere in scarce supply, and oil, which means practically dollars, since, even if we do not pay dollars for it, we could buy dollars with it. The Argentines will also take from us some tinplate, but apart from that their import of our manufactures is to be limited to £3 million. Nor are the minor features of the Agreement any better.Scrutator asks:Why have we made these surrenders? Argentina was scarcely negotiating from strength. She has been and is in grave economic difficulties, and, if we could do with her meat she no less could do with our custom. There is not another purchaser in the world ready to buy her meat on the scale we will; the very magnitude of our demand should secure good terms for us. Why did it not?Scrutator, the Tory writer, asks in vain for some explanation of this Tory surrender to the disadvantage of our national finances and the disadvantage of our national friendships with our Dominions beyond the seas. He cannot find an explanation and he continues his castigation of his own Tory Government in this way:What is the remedy? Not to set up a Peronist dictatorship in Great Britain but to see that on topics of this sort the voter is put wise, and not left to throw his weight blindly. If a reasoned appeal had been made to the British people to stand firm against Argentine pressure, who doubts that it would have been heard? But none was made, and no guidance has been given. How many of us, for example, have been led to realise the extraordinary services which the two million New Zealanders have rendered to the food supply of 50 million Britons? It is to Australia and New Zealand that we must look in the future for our main supplies; and the sooner our policy conforms to that outlook the better. We have less than nothing to gain by heaping concessions on Peronist Argentina. The regime's policy towards Britain and British subjects has been a succession of pinpricks varied by gross and serious injustices. The return we now make for such treatment is (to say the least) not calculated to deter other countries from treating us likewise.The fact is that this Tory Government has made Britain the whipping boy of 128 the world, has tended to alienate our colleagues in the British Commonwealth of Nations, has mismanaged our Colonies, has undermined our national sovereignty; and this Budget will make these misfortunes worse. It is no wonder that there is a vast gap between the promises of the Government and their performance. Last year the Chancellor planned for a Budget surplus of £510 million, but today it turns out that the Budget surplus is only £88 million—£422 million short. When Labour were in power the five surpluses were, £625 million, £831 million, £543 million, £720 million, and £366 million. Here was no miserable miscalculations, no shameful shortage, no dreadful deficit, but surplus according to plan.
I will draw the attention of the Committee to two other financial mistakes, or whatever we may call them, during the last year which have greatly affected our national economy and the national budget. One was that the Government promised cheaper clothes. They have not kept that promise. What does the Chancellor say about that? The other was one very prejudicial to my constituency of Aberdeen. There we not only catch and sell fish with great success, but we also make ships and agricultural implements with equal success. For those purposes we need steel.
The Prime Minister went to America to arrange for supplies of steel, but the results were not productive of steel. They were more productive of postprandial promises. The results for these industries depending on steel have been very poor. They have restricted our production at home, they have increased unemployment, they have diminished our national export and income and cut down our shipbuilding.
I cannot put this better than it was put by Mr. Charles Connell, the President of the Shipbuilding Conference, as reported in Lloyd's List and Shipping Gazette of 1st January, 1953. He said:British shipyards have just finished a year which has been full of difficulty and frustration despite an all-time record order book. The unsatisfactory position is solely attributable to the steel shortage which has seriously hampered the efforts of shipbuilders to overtake the huge order book expeditiously and in consequence economically. Putting statistical refinements on one side, the striking fact which emerges is that with orders, the facilities and the manpower to achieve an annual output 129 of 1¾ million tons gross, the steel shortage has geared down the industries activity in 1952 to an output which falls short of that figure by half a million tons.An adequate supply of steel would bring the much desired increased tempo of production and would go a long way to reduce costs and speed deliveries, bearing in mind that the shipyards in the United Kingdom are thoroughly up to date having been modernised since the end of the war at a cost of many millions of pound?.I can tell the Government that the industrious and skilful workers of Aberdeen, and the employers of Aberdeen also, condemn this disgraceful ineptitude which has allowed these wasteful conditions to develop, especially after a period of five years full employment.
This state of affairs has pressed hardly on all citizens. Those with variable incomes have sought increases and got them in many cases. Those with fixed incomes have been unable to get this relief and all kinds of pensioners are now suffering, notably old age pensioners, Forces pensioners, Civil Service pensioners, yet the Chancellor today provides them with no relief. We have only to read "The Times" newspaper to see the authoritative letter signed by many distinguished persons pleading for better conditions for those who have fixed salaries and have no relief, namely, civil servants.
When considering the Budget proposals it should be remembered that these classes of people were the wealth producers of yesterday and the heroes who fought in our wars. The increased cost of living eats like a canker into their fixed incomes and diminishes their access to the good things of life, to which they are as much entitled as the richer citizens of this island. Does the Chancellor realise this? What is he doing about it? His answer is to produce a rich man's budget. This is his unrelenting answer, but I can tell him that the workers of this country will not stand that kind of thing.
This time last year the Chancellor of the Exchequer told the Committee that he expected to achieve a general balance of revenue and expenditure; he has failed in this. He estimated that expenditure Would fall; he was wrong in that. He estimated that revenue would rise; he was wrong in that. His estimates have proved utterly wrong in all these important matters. Also, his forecast of receipts and expenditure proved wrong. Receipts from Excise, receipts from Income Tax, 130 from Profits Tax and death duties are all less than he expected. Expenditure is more than he bargained for.
The final results of the year compare most unfavourably with a year ago, or with any years of the Labour Government. The outstanding features are that a year ago the surplus of ordinary revenue and expenditure was £380 million; today it is only £88 million. The second point is that revenue is £230 million less than was forecast and supplementary estimates have added £200 million to expenditure. This is astonishing in view of the savings which the Chancellor promised to effect by cutting subsidies during the year.
The Chancellor, in struggling with his adversity, gives the impression that he does not expect to remain long in office; he does not choose to take a long view. It may well be that he expects a General Election in the autumn. It may well be that he will get what is coming to him at that General Election and this uneconomic Government will then go out of office to the advantage of the country. It may be because last year his view was so myopic that he could not see far, it may be that because last year his view was so astigmatic that he could not see correctly.
Certainly he admits he did not see correctly and his estimates were wrong. This year he has done no better. Whether it is defective vision, or courage, or perception, he has not solved the problems which it is his duty to solve. He has not eased the burden on the old, or the poor, or the pensioners. He has not provided full employment, or full productivity, or expanding exports. He has not done any of these things.
The office of Chancellor is a great and powerful office. He can affect the lives of millions of people for good or ill. He can bring happiness to families or deprive them of it and can wreck their lives. This time millions of people hoped that he would use his power benevolently, as the Labour Government did, to encourage employment, productivity and exports and to maintain, develop the Welfare State and keep down prices and the cost of living. The poor pensioners, the old age pensioners, Forces pensioners and people with fixed incomes have looked to him for bread and he gave them a stone. He has spurned their legitimate hopes and 131 coldly passed by on the other side, turning away his head from them in their undeserved distress. I hope the Committee will agree with me that this is a thoroughly bad Budget and bad for the national economy.
§ 8.20 p.m.
§ Mr. Ronald Russell (Wembley, South)
When I decided to try to catch your eye tonight, Sir Charles, I intended to be exceedingly brief. I still hope that I shall be very brief, judged by the general standard of the length of speeches in this Committee, but as I sat listening to speeches made by hon. Members opposite I heard so many statements with which I disagreed most violently that I must take up a little time in answering some of them.
The hon. and learned Member for Aberdeen, North (Mr. Hector Hughes) complained that my right hon. Friend had been guilty of a mistake a year ago in his forecast of the surplus, which had not turned out so great as he had thought. That is a very minor mistake compared with the one made by his predecessor two years ago, which ended in this country nearly being bankrupt as a result of the fall in the gold and dollar reserves which took place in the latter half of 1951, and which the late Government did nothing to try to prevent or, if they did try, were wholely unsuccessful in preventing. It is thanks to the policy which has been pursued by the Chancellor that we have rescued the country from that situation. The mistake which my right hon. Friend has today been accused of having made a year ago in his forecast of the surplus this year is far outweighed by the appalling mistakes made by the Labour Government before they left office.
Then the hon. and learned Gentleman indulged in a story of the inter-war years with which I would not weary the Committee at this moment if it was not to correct a misstatement. I wish I had come here armed with all kinds of text books to enable me to find the accurate answers to some of the statements which the hon. and learned Member has made. He said that there had been cuts in the social services in the inter-war years. That in itself is quite correct, but most of the cuts which had to be made by the National Government of 1931–39 were eventually restored long before the war, 132 the coming of which altered the whole position.
As for the high infantile mortality rate to which the hon. and learned Member referred, I am sure he will agree that, looking back over the years there has been, whatever Government has been in power, a steady fall in both the infantile mortality rate and the maternal mortality rate which has had nothing to do with the politics of the Government in power, but which has been due to the advances made throughout the years by medical science, to which all parties have contributed. These points really have nothing much to do with this Budget, but I felt that I could not let them go unchallenged.
In fact, over the whole period of the inter-war years, the real value of wages rose, I think I am right in saying, by about 9 per cent—between 1924 and 1939. In other words, there was a steady improvement in the conditions of living of the people. Tributes to that have been paid from time to time by many friends of the hon. and learned Member in the past in quoting the value of the increase in the social services, which have been built up by all parties throughout the years.
The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith), complained of a lack of economic planning. He quoted, from page 51 of the Economic Survey:The driving force behind our export expansion can come only from industry,…Unfortunately, he forgot to finish the sentence, which goes on to say:but it is the Government's duty to create and maintain economic conditions favourable to such an expansion.That summarises the difference between the two sides of the Committee on this issue. The hon. Member and his hon. Friends want to plan the whole of our industry and the whole of our economic life. We want to create the conditions under which industry can plan for itself.
§ Mr. Ellis Smith
The hon. Member is very fair, and is stating his case in a very reasoned way. I hope he is correct, and that, whenever we get the opportunity, we use our power to plan this country in the way we want it.
§ Mr. Russell
I was not complaining of what the hon. Member said. I was making the point that I am very glad that there is less economic planning at present. 133 I feel that one of the reasons why we nearly reached national bankruptcy only 18 months ago was because there had been too much economic planning, which had got out of control and failed altogether. I am very glad to see the policy which my right hon. Friend is pursuing of having less economic planning from the centre and of creating the conditions under which industry can plan for itself.
Passing to the details of the Budget, I particularly welcome the reductions in Purchase Tax and the changes of Income Tax, which benefit pretty well the whole mass of our people. I know that there are many people nowadays who do not pay Income Tax, but they will benefit from the reductions in Purchase Tax. Incidentally, I met a constituent of mine last night who complained of the high taxation on overtime earnings. The figures he quoted to me were astonishing. He said that out of 33s. extra which he earned on overtime last week he paid about 32s. in taxation. I do not categorically accept those figures as they stand as—
§ Mr. Russell
—they may be an exaggeration and my constituent may have made a miscalculation. I think the hon. Member will agree, however, that there is a great deal of high taxation on overtime earnings, which it is my right hon. Friend's desire to reduce.
§ Mr. Russell
He is not a Surtax payer. I merely make the point that there has been a high rate of taxation on overtime earnings and that it is in the interests of this country, if we are to increase our production, to have that high taxation reduced.
There is only one thing I regret about this Budget, and it is perhaps rather churlish to regret it. I refer to the petrol tax. I have been very sorry to have heard announced, in each of the three previous Budgets to which I have listened as a Member of the House, an increase in the petrol tax. This process was begun by Sir Stafford Cripps, continued by the right hon. Member fox Leeds, South (Mr. Gaitskell) in the Budget two years ago, 134 and was continued by my right hon. Friend last year. There was more excuse for my right hon. Friend increasing the duty last year than for his predecessors, because the main reason why it was done last year was to assist in solving the balance of payments problem and to try to cut down imports of petrol from dollar sources.
The motoring community and industry, through its transport, pay enormous sums of money in taxation. I would not mind that so much if the money were used to improve the country's road system, which is very poor in relation to the traffic it has to bear. A great saving to industry could be effected were transport speeded up by the provision of a better road system. If London buses could increase their speed by an average of a mile an hour a great financial saving would be effected. Any improvement to the road system in the centre of London would be a most difficult matter, but there is wide scope for improvement in other parts of the country.
I hope, therefore, that as soon as economic conditions allow more money will be allocated to such improvement. In the last 20 years the motoring community and industry have been mulcted of a great deal of money which has not been devoted to the purpose for which it was originally intended.
§ Mr. Russell
It does not matter who started it. I do not like it and I hope that before long it will be brought to an end.
The Chancellor expressed anxiety about our export trade. We all hope he will give his attention to the question, argued out at the Commonwealth Conference, of the no new preference clause in the General Agreement on Tariffs and Trade. The best way to maintain our export trade, and increase it, is by developing the Commonwealth and Empire and in finding more new markets in those countries.
I wish to see the ending of the no new preference clause in the General Agreement on Tariffs and Trade. I appreciate the difficulties with which the Government were faced at the Commonwealth Conference last autumn, when certain Commonwealth countries resisted their proposal to seek release from this clause 135 by an approach to the body which controls the Agreement. I hope my right hon. Friend will consider seeking that release unilaterally if we cannot achieve Commonwealth agreement about it. I would remind him that when the present system of Imperial preference was re-introduced into this country 60 years ago it was not done by Commonwealth agreement but by the unilateral action of the Canadians, who themselves introduced preference on goods coming from this country.
Unfortunately, it happens to be the Canadians who are mainly responsible for the difficulty today, but that is just an accident. I hope we shall consider repeating their action of 60 years ago, if we cannot get Commonwealth agreement, and provide an example to the Commonwealth by seeking release ourselves. I would couple that with a plea that we should consider seeking an amendment to the most favoured nation clause which compels us to treat foreign countries on a basis of absolute equality no matter whether they give us reciprocity or not. The relaxation of that clause would help our export trade.
I consider that this is a very fine Budget. It provides an incentive which will help to keep this country on the road on which it started when this Government came into power, and I hope the proposals of my right hon. Friend will be supported by the whole Committee.
§ 8.35 p.m.
§ Mr. Frederick Lee (Newton)
I agree with the hon. Member for Wembley, South (Mr. Russell) about the importance of an adequate road system. An inefficient road system can have the most adverse effect on industry, which is one of the reasons why I joined with my colleagues in rejecting the Government's proposals to de-nationalise road transport. I believe it will have a most injurious effect upon British industry, because it will tend to impede the travel facilities which, at the moment, are improving, despite the obsolete nature of much of our road system.
My hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) touched on a point which I should like to hear debated when he asked why it was that 136 such a purely British invention as Terylene was not developed in this country. I know that my hon. Friend has a mind which likes to delve into these things, and I suggest to him that, if he analyses the effect on the £11 million which has been sunk in nylon production in Britain, if Terylene had been developed too speedily here, he would probably find the answer to his question.
I feel that the Chancellor today missed a great chance. He has produced a Budget which seemed to me, at any rate, more attuned to a party politician with his eye on a General Election in six months' time rather than a statement upon whose decisions at this time the economic future of the nation may well depend. One could perhaps best summarise one's own reactions to the set of principles which guided the right hon. Gentleman in framing his Budget by quoting Burke, who said that the English people should be entitled to equal rights, but to equal rights to unequal things.
I think that when we look at those who will benefit most from the reductions in both Income Tax and Purchase Tax, we shall find that once again it is not those who are in the lower income groups or those 8½ million who already are not paying Income Tax, but that it is again a question of making the rich richer and the poor poorer, no matter how one looks upon it.
The Chancellor spent an hour and a half telling us that this is to be a great incentive Budget, and that he appreciates the need for an increase in exports. Surely it must be common knowledge that the way to do it is not to encourage those who are already living comfortably, but to encourage those who are badly needing encouragement. Many of them were induced to vote for a Government which pledged itself unconditionally to reduce the cost of living, but which, in the Economic Survey for 1953, admitted that it had increased in the previous year by 6 or 7 per cent., while the cost of food had risen by 9 per cent.? I cannot find where any colleagues of mine in the workshops are going to feel any great incentive to produce more as a result of anything that I have heard the Chancellor say today, and for people like myself, coming from industry, one would be really lacking in one's duty if one did not say so. It is all right for 137 us in this House to try to theorise on these matters, but, if we look at it from the point of view of the man who feels that he is not getting a square deal in industry, and who sees that, when there is money available to make possible remissions of taxation, people other than himself receive the benefit, while he is expected to give increased production on the strength of what others are getting, we can see that it is sheer nonsense.
The Chancellor was trying to tell us in the beginning of his speech how much the economy of Britain had improved in consequence of his own policy. One does not blame any man for trying to crack up his policy as a great success, but an hon. Gentleman opposite has told us that this Government had saved the nation from bankruptcy. Anybody who says that cannot have read the Economic Survey issued by the present Government. I would ask hon. Gentlemen opposite what are the things which this Government have done which have saved this nation from bankruptcy. There is not one thing which they can give as an example.
If we read the Economic Survey for 1953 from cover to cover, we find that it repeats time after time in different sets of words the statement that the only things that have happened are that the terms of trade have moved fortuitously in our favour and that the volume of imports has been slashed. In saying that I challenge contradiction, and will give way to anyone who will tell me otherwise. That being so, how can the Chancellor expect Members of Parliament to believe the story about the financial and economic policies pursued by the Government being responsible for any betterment in the economic standards of the country?
The facts against which we should review this Budget are briefly these. In 1952, the volume of our imports was 8 or 9 per cent. lower than in 1951 and the price paid for them was 2 per cent. less. In spite of the fact that the prices which we obtained for our exports were 5 per cent. higher than in 1951, the volume of goods exported fell by 6 per cent. Therefore, we had only £88 million more on our visible account.
Industrial production was down by 3 per cent. whereas the Chancellor expected, and indeed budgeted for, an increase of some 3 per cent. in our production level. 138 The cost of living was up by 6 per cent. and food prices by 9 per cent. Those are the facts against which we must review this Budget, and I suggest that no survey of the year's work would be complete unless we looked at the stock position.
In 1951, the Labour Government added to our stocks to the extent of some £450 million. During 1952, not only did we not invest anything at all in stocks, but we suffered a reduction in stocks held overseas and in the pipeline to the extent of some £100 million. I suggest that at a time when the terms of trade were favouring us, as they were in 1952, it was a major political blunder to cease from stocking up. Stock was worth far more to us at that time than even gold and dollars.
Stock held by tradesmen, and so on, in 1951 appreciated by some £900 million, and I repeat that to refrain from stocking up at a time when the stock which we were holding was appreciating at such a pace was indeed a major political blunder. It is estimated that the present annual increase in the world population is 1.25 per cent. while the annual increase in world agricultural production from 1937 to 1950 was only.3 per cent. In such circumstances, can we really hope that food prices will either remain at their present level or be reduced in any conceivable period of time? I should have thought the logic of that was that food prices would tend to rise, and that, therefore, it was wrong to refrain from stocking up, at any rate so far as food is concerned.
Raw materials and food are our two main imports. If we take 1913 as representing 100, the index for manufacturing production in 1950 equalled 247 while the index for primary production was only 155. In other words, the speed at which we are using the world's raw materials has increased by one and a half times while the speed at which we produce them has increased by only one half.
Despite periods in which it will not happen, I should think that the tendency of raw material prices will be to continue to rise. When the Government took office in 1951 they decided—if I may descend to the vernacular—to plug a line about empty cupboards. The country has now the right to demand an explanation as to how it has been possible to continue our industrial activities with empty cup- 139 boards, which are now at least £100 million emptier than they were when the Government came into power.
I agree that we are living in an age in which industry is substituting new synthetics for old types of raw materials, but I do not believe that even the Leader of the House of Commons would try to convince the nation that British industry is so far ahead of its competitors in this field that it can produce goods from the skeletons hanging from the candelabra which the right hon. Gentleman once told the House was all that the Government inherited. I suggest that he will go down to history as "Cold Comfort," but we can congratulate him on being more successful in conjuring up finished products than the Ministers in charge of economic affairs.
The fall in productive levels in 1952 is a serious matter for all of us on all sides of the Committee. It is no good the Chancellor or any of the Ministers in charge of economic affairs to attempt to dismiss this fall as being typical of what has happened in other countries. The Chancellor's own estimates of March last year have been shown to be wildly inaccurate and, as has been pointed out from this side of the Committee, that has been reflected in the fact that we have only £88 million surplus against the £510 million for which he budgeted.
The world economic reports of the United Nations reveal that production in the United Kingdom, as distinct from that of other countries which they group together, dropped more in 1952 than did production in any other comparable country, except Denmark. The reports also show that whilst we dropped back to approximately the 1950 level of production the group of countries named improved their productive level by 9.6 per cent. over 1950. The reports make other interesting analyses, which include the fact that wages increased by a smaller amount in Britain than in any of these countries, except the United States of America and Belgium.
I often wonder what would have happened if the Chancellor had had his own way and he had introduced the wage freeze. As it was we had a 7 per cent. increase in wages, as against 11½ per cent. in 1951, not because he decided that the -workers should have that, but despite 140 everything that he could do to stop them receiving it.
§ Mr. Cyril Osborne (Louth)
Surely the hon. Member is not accusing the present Chancellor of introducing the wage freeze. Surely my right hon. Friend inherited that from Sir Stafford Cripps.
§ Mr. Lee
The hon. Member will not get away with that one. He may remember that last year the Minister of Labour was told that he must not sign certain agreements on wage increases which the wage councils had sent to him because the Chancellor said that they must not have it even though food subsidies had been slashed and the cost of living was higher. The hon. Member, who knows industry as well as I do, knows that the Chancellor was not concerned about the 1,500,000 lower-paid workers, but the employers in engineering, mining and the railways, when there were already applications before them—
§ Mr. Osborne
I know that the hon. Member would not wish to misrepresent the position. He was saying that my right hon. Friend introduced a wage freeze. He did not introduce it.
§ Mr. Lee
I did not say anything of the sort. I pointed out that during last year the Chancellor of the Exchequer slashed the food subsidies; then when certain lower paid workers asked for an increase in their pay their employers agreed to the increase, and this agreement had to go to the Minister of Labour for signature, but the Minister of Labour dared not sign that agreement because of the attitude of the Chancellor of the Exchequer who said that they must not have wage increases, solely on account of the food subsidies being slashed. That was the point I was making.
I want to come to a point which perhaps has more bearing on the future than on the present. We are, of course, reviewing not only our finances for next year but also our economy, and it is important that at this stage we should analyse the direction in which we may be travelling. We are all very happy that there seem to be more favourable prospects of peace in Korea. We are very glad to know that there may be a general lessening of the tension between East and West, which may mean the end of the cold war. But what is to be the future of British industry 141 in the new conditions which that situation would bring about? This issue is the most serious which the country and, indeed, the Western world have to face, and it would be wrong of us to ignore this issue.
The Financial Secretary to the Treasury will, no doubt, agree about the vital nature of our engineering exports during the next year or so. We all agree that if we cannot export our engineering products, capital equipment and so on, this country cannot live as a first-class Power. If the possibilities of peace improve, what will happen to our rearmament programme? We should all like to feel that there will be a lessening of the need for arms and a tailing off of the vast expenditure to which the Chancellor referred this afternoon. He told us the actual figure which we are to spend this year on armaments, and we should all like to feel that that amount could be reduced as the result of a better understanding between ourselves and Moscow.
I am very much afraid, however, that if that state of affairs does arise, it may well be that peace doves and unemployment queues will become synonomous terms. For my part, I do not believe there is any reason why that should be. I was very happy to see what I regarded as a first-class letter in this morning's "Manchester Guardian" from the hon. Member for Louth (Mr. Osborne) who discussed this question, and I associate myself with his sentiments. I believe that this Government, with the United States and French Governments, and indeed the Governments of all the Atlantic Pact Powers, should now be actively engaged in deciding how they are going to swing over to peace economies without creating unemployment in the Western world.
§ Mr. Lee
Having emerged from the cold war, which was intended to help encompass the economic disintegration of the West, we may see the greatest paradox, the greatest irony of all time, in that peace may bring about that which preparation for war failed to achieve, namely, the disintegration of the economies of the Western nations. The Government should now be putting that possibility squarely to their colleagues in 142 the United States and telling them that it must not be allowed to happen.
We know the methods which could be adopted to prevent that horrible thing from happening again, but if this Government or, more particularly, the Govment of the United States, allow themselves to be jockeyed along by power groups whose only interest lies in getting vast reductions in taxation—in other words, slowing down the economies of their countries—nothing on earth can prevent mass unemployment in the Western world.
I have been concerned with this issue ever since the Prime Minister announced that the Government were lengthening the period of the rearmament programme. I have put down Questions to the Prime Minister, but I have not had any answers. I do not believe that we have reached a period in man's development when huge capital developments are not needed in many of the continents. I refuse to believe that we must depend upon the production of arms for prosperity.
Both parties agree on the necessity for the implementation of the Colombo Plan, for example. In the United States there is that great conception of President Truman—the Point Four programme. Now is the time—with the possibility of a reduction in armament production—for the governments of the Western nations to get down to the job of planning a colossal international effort to bring mechanised equipment to the Far and Middle East, in order that they can vastly improve their agricultural production, for that, in the last analysis, is the way to avoid a third world war.
I know that we differ in our interpretations of the objectives of Communism in regard to this matter, but I do not believe that there is any difference between us in our understanding of the squalor, misery and degradation which is now the lot of the peoples of the Far East and which implants in men's minds the feeling that "anything is better than this." How can one possibly expect these people to want to retain the status quo and to realise that there is a way in which they can be given a higher standard of living, if they have to live for ever among conditions of squalor?
We are in grave danger. The E.C.A. once calculated—with data from the 1929 slump and the recessions of 1938 and 1949 143 —that a fall of 4 per cent. in United States consumption induced a fall of about 25 per cent. in their overall imports and 33 per cent. in their imports from the sterling area. That is what faces us now. Any move to lessen the virility and pace of the American economy may well bring about that situation.
I am not the type of person who wants to go cap in hand to Washington, Moscow or any other capital. I believe that the British nation is a first-class nation, to whom the world owes many things. But we must be objective. I do not think that any hon. Member would deny that if a slump came in the United States at the present time nothing could stop it from coming across the Atlantic to Britain.
If that is the case I suggest to the Chancellor that it is quite wrong to give the impression—as he gave this afternoon—that our economy is now stable, buoyant and so much improved, as distinct from 1951. If I were an American citizen, heavily taxed in order, as I should put it, to provide £120 million out of the £300 million which the Chancellor swanks about as his surplus, I should feel that if the British economy were as strong as the Chancellor says it is, then it was time I stopped paying anything towards either Marshall Aid or rearmament aid or, indeed, towards any other sort of aid for Britain.
During the last two or three years, the original basis of the Marshall Plan has changed completely. Instead of it being a plan to ensure that Europe could recover from the ravages of war and could bring its capital equipment up to standard again, it has become almost exclusively aid for rearmament. Naturally, if we enter a period during which there is no need for rearmament, the average American will argue that there is no further need for aid to Europe. I do not believe that that position has yet been reached. Very much depends on the United States still helping the recovery of Western Europe.
In short, I believe that we may well be at a turning point in world history. Whether the hon. Member for Louth (Mr. Osborne) believes that under normal conditions we should plan or whether he believes we should not plan, I hope he 144 will agree with this: at a time when such a vast changeover must take place in the nature of productivity in the whole Western world, it is absolutely essential that there should be planning from now on so as to ensure that as we take the great rearmament programme out of the economies of the Western nations, there is not a great void in their place but a great drive such as I have suggested, taking the form of mechanised agricultural implements which could be given to the Far Eastern and Middle Eastern nations. That alone can help us to prevent a great industrial and economic slump coming to Britain.
I do not blame the Chancellor in any way in this part of my speech when I suggest that nothing has been provided in his Budget against such a contingency. These things have not yet developed. On the other hand, it would be quite wrong for the Government from this day onwards not to devote a high proportion of their time and thinking to this great problem, which I hope the Committee will think is the greatest problem now facing us. Upon it I believe may well depend whether the West can advance to a higher standard of living, maybe not at a great pace but nevertheless going in the right direction.
Most of all, in this way, we can show the people of the Far and Middle East that we desire to help them and to use our science, our skill, those things which we have developed over the centuries, not in a selfish way on our own behalf but in order that those people can achieve higher standards and in order that the basic causes of war may be dissipated for ever. That, I believe, should be the objective of the Government.
In the months which lie ahead the House should judge the Government by the way they approach this problem. At the moment we see no signs of that sort of plan. I regret it, though as yet I cannot blame the Government because they have had no chance of developing it. But I hope the Financial Secretary will agree that this is one of the jobs to which the Government must now bend their energies, because it may well be that our chances not only of a decent life in the future but of preventing a third world war will depend on the success or failure of their efforts in this field.
§ 9.4 p.m.
§ Mr. William Wellwood (Londonderry)
I merely wish to correct what I am afraid may have been a mistaken impression which arose from the speech of my hon. Friend the Member for Antrim, South (Sir D. Savory), who referred to the absence from the Gallery of Major Sinclair—I confess a very regrettable absence. Major Sinclair's successor and acting Chancellor for Northern Ireland was in the Gallery all afternoon, throughout the speech of the Chancellor of the Exchequer, and I am quite sure that he paid very great attention to it. In case that mistaken impression may get abroad, I want to correct it.
§ 9.5 p.m.
§ Lieut.-Colonel Marcus Lipton (Brixton)
I want to say how impressed I was by the speech of my hon. Friend the Member for Newton (Mr. Lee). It is fantastic that one of the factors which causes fear when we survey the economic scene is the prospect of peace breaking out in the not too distant future—a peace which, should it come, will knock sideways the whole of the economic fabric constructed on both sides of the Atlantic during the last year or two.
I am afraid that my hon. Friend was beating the air when he pleaded with the present Government to consider this fundamental problem. It will never be tackled until there is not a change of heart in present Ministers but a change of Government. Without a change of Government there is no hope of our adjusting our economic life to the new circumstances that will arise if and when the cold war becomes a dream.
I consider that the Budget statement is on a par with the statement the Chancellor made last year. I will put it no higher than that. I remember his saying last year:To prevent consumption increasing I must keep the Budget surplus substantially unchanged."—[OFFICIAL REPORT, 11th March. 1952; Vol. 497, c. 1288.]When he said that he had in mind a Budget surplus of over £500 million. We know what has happened. That estimated Budget surplus has worked out to the very much reduced figure of £88 million, the smallest surplus we have had since the war, with the largest overall deficit we have had since the war. If the Chancellor can be so far out in his estimates 146 as these figures show I have little confidence in his judgment of what is to happen in the next 12 months.
The most serious menace from the economic point of view is the fall in production that has taken place. We are the only nation in the world now producing less than we were a year or two ago. I so well remember the cheers with which last year's Budget was greeted by hon. Members opposite. That was the first of the so-called incentive Budgets to which we were to be treated. This year we have another "incentive Budget." If the incentives that are offered in this year's Budget achieve the same meagre results as last year's Budget then the statement which has been so warmly welcomed by hon. Members opposite today will, in 12 months' time, be bound to be just as much a flop—[Interruption.]—as last year's Budget.
The hon. Gentleman the Member for Farnham (Mr. Nicholson) has just come in and does not know what we are talking about. He has a vague recollection that the Chancellor made a Budget statement today, but he has to wait until he reads tomorrow's papers before he knows what has happened. I propose to ignore the rather stupid and irrelevant interruptions of the hon. Member because I think that with the dawn wisdom will come, and he will have an opportunity of reading what he ought to be thinking when he sees the Conservative editorials in the national Press tomorrow morning.
What has happened in the past year? We are the only nation of any importance whose production has fallen, which leads me to make the perfectly justifiable statement that the so-called incentive Budget last year failed to increase production. So far from increasing production, it has produced more unemployment and more short-time working. Today, the Chancellor boasted of his export surplus of £300 million this year. It includes £120 million of American aid and something like £100 million depletion of stocks, so this £300 million so-called surplus does not stand up to analysis. When it is analysed we find it includes these two purely adventitious items, which account for almost the whole of the so-called surplus.
There have been some boasts about the position of our gold and dollar reserves. 147 but with all the boasting of the Chancellor and his hon. Friends our gold and dollar reserves are still below what they were in October, 1951, when the country was supposed to be on the verge of complete economic collapse. I hope that the party opposite will not expect the public or hon. Members on this side to swallow some of what I must describe as sheer claptrap that we have had today from both the Chancellor and hon. Members opposite who are so pleased with this "incentive Budget."
The Chancellor prides himself on the success with which the balance of payments problem has been tackled during the past year, yet our exports have been 6 per cent. lower than in the previous year. This is the first occasion since the war on which British exports have fallen. Our imports have been reduced, but that is due largely to the lower consumption of imported raw materials without which it is not possible to maintain production at a reasonable level. It is true that during the past financial year there has been some increase in the exports of engineering products, but the volume of those exports is more or less the same, the increased revenue derived from those engineering exports is the result of higher prices.
We still want to know what was decided at the last Commonwealth Economic Conference, and what was the result of the recent economic talks in Washington. I have the feeling that the understandings arrived at during these two conferences have probably gone a long way to vitiate any attempt made in this Budget to improve our economic situation.
The Chancellor was very vague on the subject of convertibility. He has every reason to be vague about it. Although many hon. Members opposite strongly advocate the earliest possible convertibility of the £ with the dollar, the Chancellor is a little more coy than some of his more vociferous supporters.
I should now like to refer briefly to the problem of National Savings. In his Budget speech last year the Chancellor said—and I summarise it, leaving out one or two words that are not essential, quoting only the words which give the effect of what he said: 148I should like to stress the importance of National Savings…I believe in savings…I believe what I am doing will give the movement a great new opportunity of which I hope it…will take advantage."—[OFFICIAL REPORT, 11th March, 1953; Vol. 497, c. 1288.]That is what the Chancellor of the Exchequer said in last year's Budget speech on the subject of National Savings. What is the result? What do those fine words boil down to? A drop of £73 million in the aggregate National Savings, an excess of repayments over receipts, and withdrawals of £66 million more than in the previous year. That is one of the result of last year's "incentive Budget." as a result of which this country has supposedly re-established itself and rehabilitated its economy. The National Savings movement has never had such a hard blow dealt to it as it has received at the hands of the present Chancellor during the past 12 months.
So, when the Chancellor talks about the need for stimulating savings, we have to examine his professions with great care, because our experience in the past does not lead us to accept, with any very great degree of confidence, his prognostications for the future. With the £ buying less and less each week, the housewife finds that the domestic budget cannot be balanced. Hon. Members know that the £ does buy less and less. The value of the £ now compared with what it was in October, 1951, is about 18s. 5d. The words I have quoted were included in the Conservative statement of policy, "Britain Strong and Free." The Conservatives were then blaming the Labour Government for something which has become only too true after nearly two years of Conservative rule.
I shall not refer to the harmful effect of the increased interest rates which have added a very substantial burden to the debt charges. I shall not refer to some other very serious omissions in this year's Budget—nothing done for the holders of post-war credits, nothing done for war pensioners, nothing done to help the old-age pensioners, nothing done to name the day on which equal pay is to be introduced, a resolution on which was accepted by the Government not so long ago; not a word about these important topics.
They are topics which, of course, affect very closely the lives of ordinary people to whom these Income Tax concessions announced today do not mean a thing. 149 Let us examine the value of the Income Tax concessions announced today. A reduction of 6d. in the £ will be hailed as a marvellous thing by hon. Members opposite. But if they will take the trouble to examine the Financial Statement for 1953–54, which has been issued today as a White Paper, they will find this very interesting example. I shall quote only one example to show the value of what is going to be a very loudly-trumpeted feather in the cap of the Chancellor of the Exchequer.
§ Lieut.-Colonel Lipton
I am sorry that the hon. Member is not in full possession of his faculties, otherwise he would be able to follow what I am trying to say. I am afraid that I must give up the hopeless task of trying to impress the hon. Member for Farnham with any understanding of what the Committee are trying to do at the present time in discussing the Chancellor's Budget statement.
I was referring to the White Paper on the Financial Statement for 1953–54. The effect of the marvellous Income Tax concession announced today on a married man with two children, earning £800 a year, is to give him something like £6 a year or 2s. 6d. a week. A man has to earn £800 a year to save 2s. 6d. a week as a result of the Income Tax concession. If a man does not earn £800 a year, the amount he saves by reason of the concession is all the less. During the past 12 months the cost of the necessities of life has increased for the individual earning £800 to a far greater extent than the 2s. 6d. a week which he is now given as a kind of recompense for the inflation which has brought down his standard of life and that of everyone else in the country.
The Chancellor of the Exchequer is, cautiously, not altering the food subsidies very much, although I believe he will save another £20 million or £30 million during the next 12 months as a result of various adjustments, on top of the £160 million which he has already achieved by way of cuts. It may be true that the Government have saved about £160 million by cutting food subsidies, but as a result of forcing up the cost of necessities they have set in train a series of wage demands and have made inevitable a series of wage increases as a 150 result of which the total national productive effort is saddled with a far greater burden. I estimate that the £160 million saved in food subsidies has cost the country twice as much in increased wages which the present Government has had to concede during the past 12 months.
Reference has been made from the Government benches to the great discontent which will be felt by all in the transport industry at the refusal of the Government to lift the burden of motor fuel taxation which has multiplied nearly five times during the past few years. It has a highly inflationary effect; it enters into the cost of distribution and the cost of every article that ordinary people have to buy. The 2s. 6d. per gallon tax on diesel oil is equivalent to a tax of £25 a ton on coal. That is a measure of the additional burden which has been imposed by the present Government on our transport industry. Ours is the only country in Europe which has not a preferential rate of duty for diesel oil used for road vehicles.
When we examine the other figures which have been announced today we realise that the Chancellor has been unable to justify charges of waste in the public service. Instead of being cut, expenditure has gone up. The revenue has fallen below what he thought he would get. That is not surprising in a year during which the Government's general policy has led to shrinking production, shrinking trade, shrinking employment, less output, smaller wage packets and reduction in exports. That is what we have achieved as the result of last year's incentive Budget, and I am afraid that is what may well happen as a result of the second dose of incentive to which we have been treated today.
In their 1951 Election manifesto it was pointed out by the Conservative Party that it was the Conservative aim to increase our national output. The manifesto said:Here is the surest way to keep our people fully employed, to halt the rising cost of living and to preserve our social services.All the matters in respect of which the Chancellor of the Exchequer and the present Government are claiming credit are, on examination, found to be really debits. They have failed to increase our national output as a result of which they have failed to keep our people in work; 151 they have failed to halt the rise in the cost of living and failed to preserve our social services. On all these counts, remembering what they have done during the past 12 months, I must put on record my own profound disbelief in the judgment of the Chancellor and my belief that this year's Budget will lead to the same disastrous results as last year's "incentive Budget" has led us.
§ 9.26 p.m.
§ Mr. Nigel Fisher (Hitchin)
I know that the hon. and gallant Member for Brixton (Lieut.-Colonel Lipton), with his usual courtesy, will acquit me of discourtesy in not following his interesting argument, because I wish to detain the Committee for only a few minutes to say what a splendid Budget the Chancellor of the Exchequer has introduced. I am sure that it will get an extremely good Press and will deserve to do so. It will be received with enthusiasm by almost every section of the community and I do not believe that the woeful attitude of the hon. and gallant Member will be reflected in the general public reaction tomorrow morning.
I am delighted at the reduction in the standard rate of Income Tax and the very real assistance given to industry by the initial allowances for factory building, plant and machinery, and the encouraging prospect of the termination of E.P.L. which many on both sides of the Committee always thought a thoroughly bad tax. The all round reduction of Purchase Tax will be of great benefit to everyone; and in the smaller concessions there will be good will for the exemption of amateur sport from Entertainments Duty. I think it an imaginative and graceful gesture in the year of the visit of the Australian cricket team to this country to make an exemption for cricket from the Entertainments Duty.
As Parliamentary Private Secretary to the Ministry of Food I should perhaps be careful about making any comment on sugar derationing, but one can at least say that we all realise with what immense enthusiasm this will be hailed by the hitherto hard pressed British housewife who in the past six months has at last seen a Government doing something to ease her difficulties.
It is quite true that the Chancellor is, in a sense, taking a 152 chance by budgeting for a deficit, but the majority of this is below the line expenditure, much of it to local authorities for housing. One hopes that local authorities will in future go to the market instead of the Treasury for financial assistance. I am sure that my right hon. Friend is right to take a chance and that, despite what was said by the hon. and gallant Member, I think it is certain that this will be an incentive Budget. It is, moreover, designed to keep costs and prices down and the cost of living stable. It may be criticised by our opponents as a rich man's Budget, but the spread is very wide. There is some jam in it for almost everyone. I do not believe that the British people are a vindictive people. So long as they get a little help for themselves, I do not think they begrudge the same help to others.
I should like, with respect, sincerely to congratulate my right hon. Friend on an able and imaginative Budget which will further enhance the high estimation in which he is already held by the vast majority of his fellow countrymen.
§ 9.30 p.m.
§ Mr. William Keenan (Liverpool, Kirkdale)
I do not wish to follow in detail what the hon. Member for Hitchin (Mr. Fisher) has been speaking about other than the fact that he referred to what we are likely to see in the newspapers tomorrow. What he said was very true; I suppose that with few exceptions the national newspapers will eulogise to the full everything that the Chancellor has suggested and will hail this as a great Budget.
I wish to make one comment on the quoting of newspapers, which seems to me to be a little overdone. I do not know why so many Members of the House of Commons—on both sides—should be so anxious always to quote the "Observer," the "Manchester Guardian" and "The Times" as though they were the be all and end all of all knowledge. Generally speaking, some well-paid journalist is no better and no more capable than someone who is a responsible person of expressing an opinion on an important matter. I repeat that the quoting of different newspapers on important national and international matters is overdone and that too much credit is accorded to journalists for their opinions, judging by the general tone of their 153 papers. I do not think their opinion has the value that is apparently placed on it from time to time.
I turn to the Budget, and I have at times wondered whether we have been listening to a debate on the Budget. From time to time I have thought that we were dealing with defence and many other problems outside even the scope of the Economic Survey. Things have been said by one or two Members which I feel like saying a few words about. I was almost in tears when the hon. Member for Antrim, South (Sir D. Savory) was himself shedding tears about the poor Surtax payer and about how he was worried and harassed; and how some of those who owned the great country houses of our time were today compelled to let the public see them. What worried me was that the hon. Member seemed to think that the public should not see them. He seemed to think it was a good thing that their owners should be able to charge for admission.
The fact remains that this Budget will do something even for the Surtax payers. I am a little concerned about one or two things which I think the Chancellor might have done and which he has not done. I was very much concerned four or five years ago about post-war credits. We ought at that time to have begun to repay them by progressively lowering the age of repayment by a year each year—from 60 and 65 to 59 and 64 the following year and so on. Unfortunately no Chancellor has agreed that that should be done. I suppose that successive Chancellors have acted on the advice of those magicians at the Treasury. In this respect the Chancellor has, like his predecessors, missed a great opportunity.
There is one other thing he might have done, and I say this because of some of the things which the Chancellor has not done. This is an "incentive Budget." What incentive has the Chancellor provided and to whom has he given it? Are the individuals who earn £600, £700 and £800, or £6,000, £7,000 and £8,000, the individuals who produce the wealth and do the hard work of this country?
Only those who earn over £500 a year will benefit from this Budget. But what about the 7 or 8 million who will not receive any benefit, those who have to live on about £6 a week or even less and who pay no Income Tax at all? This Budget provides no incentive for them. 154 They have not all got their mother-in-law or their own mother living with them, and so far as they are concerned I maintain that the Chancellor has indeed missed the boat, and I hope that next year we shall have a different Chancellor.
§ Mr. Keenan
I suggest again, as I did a few years ago, that we should pay a family allowance for the first child. If the Chancellor did that he would provide some benefit for a great many of the 7 or 8 million for whom his present proposals provide nothing.
What has the Chancellor done for low wage earners and those who live on fixed incomes, especially old age pensioners? Last year in anticipation of an increase in the cost of living arrangements were made prior to the presentation of the Budget for increasing National Assistance. It was then asserted, wrongly in my opinion, that the increases given in National Assistance and in contributory pensions covered the expected increase in the cost of living. But any of us who are aware of the effect of that increase in the cost of living will know that is not the case. Before any change was effected as a result of the Budget proposals the cost of living had gone up to a greater extent than could be covered by the increases.
The cost of living has continued to increase. Although the figures quoted last year may cover rationed commodities they do not cover unrationed commodities, and no provision has been made for those with fixed incomes and low wages who will not benefit from a reduction of 6d. in the Income Tax. Whom does it touch? We can truthfully say today what we said 12 months ago, when the last Budget was introduced, which was then described on this side of the Committee as a rich man's Budget, because there was a similar slight reduction in the Income Tax rate.
If I remember rightly, the easement secured as a result of changes in the income Tax made last year, which were similar to those which have been made this year, ranged from about £30 to £70 a year. It ranged from those in receipt of £600 a year, and, again this year, we find that none of these individuals were really in need of any easement of Income Tax. At any rate, they were considerably less in need of some easement of the 155 burden of living than all these other classes whom I have indicated as getting nothing from this Budget. The only thing they will get will be the increase in the cost of living, which will continue.
I admit quite frankly that I am rather surprised that the Chancellor did not slash the food subsidies. I want to see, not a further reduction in the food subsidies, but rather their restoration, so that there will be a balance of income which the last Government very successfully effected. There is to be a reduction of £30 million in the food subsidies, according to what the Chancellor said today. I am very glad that he has not done any-think like he did last year, because of the effect which such action must and would have on the different classes whom this kind of thing particularly affects.
From my own personal observation, I can say that the pensioners today are worse off than they were 12 months ago. [HON. MEMBERS: "NO."] Hon. Gentlemen opposite should tell the old age pensioners in their constituencies that they are as well off or better off than before and they will find that the pensioners will not agree with them. In any case, I am very satisfied that, at least, the position is no worse. The indication is quite clearly that the Chancellor and those who advised him have realised the effects which the slashing of the subsidies last year had upon those people who were adversely affected by the increase in the cost of living and I believe that they realised that it was not a wise thing to repeat.
I suggest to the Committee, as I did some three or four years ago, that something should be done about post-war credits. I am hoping that one day what I suggest will soak in, and that we shall get a Chancellor who will deal with the problem. I have heard the whole idea of post-war credits described as a racket. I was one of those who when post-war credits were first introduced during the war was of the opinion that we should be darned lucky if we ever received payment for them, and I was very thankful when the Labour Government accepted responsibility for them.
§ Mr. Keenan
The fact is that 25 per cent. have been paid. I admit that is not 156 enough, and I am hopeful that sooner or later some Chancellor of the Exchequer will attempt to liquidate this debt to postwar credit holders by reducing each year the age at which they are to be repaid.
§ Mr. Keenan
The hon. and gallant Member talks about six years of Socialism merely because his mind cannot think of anything else.
§ Mr. Keenan
I am reminded by my hon. Friend that the hon. and gallant Gentleman is a brigadier, and I am not surprised that such an interjection should come from a brigadier.
§ Mr. Keenan
We have only had 18 months of Tory Government and this is the second Budget which the present Chancellor has presented. As in last year's Budget, he has provided for those least in need and has neglected to do anything for those most in need. Had he wanted to provide an incentive Budget he would have done something for the lowest paid workers; he would have given something to stimulate their activity, were that necessary, rather than have given some easement of tax to people who do not need it.
For all these reasons, I think this is a bad Budget. I know that with the exception of two newspapers it will get a good Press reception and that the right hon. Gentleman's speech today will be referred to as the finest speech he has ever made. In my opinion, it is nothing of the kind. He has failed to do something which might have stood the workers of the country in good stead—
§ Mr. Keenan
—instead of which he has given his friends something to the detriment of everybody else.
§ 9.49 p.m.
§ Mr. W. G. Bennett (Glasgow, Woodside)
There is obviously some misunderstanding among hon. Members opposite about the actual benefit that will result from the reduction of 6d. in Income Tax. We have heard it said that it is a sop to the rich and is being given to people 157 who do not need it. Do hon. Members opposite realise that any man would rather work for an employer who has something in the bank than for one who is bankrupt? The reduction of 6d. in the Income Tax will encourage many working in industry to ask for something if they require it.
The 6d. is going to industry and not to the employers. The railwaymen might have had a rise if there had been money in the kitty, but there was no money in the nationalised industry so they could not have it. One would imagine from listening to one speech after another from the other side of the Committee that this country was bankrupt, but not so long ago we were in such a flourishing condition that many Members of Parliament thought that they ought to have a rise.
§ Mr. Keenan
Will not the hon. Member agree that those who pay Surtax will benefit by this easement in taxation?
§ Mr. Bennett
If one wants to secure something one must go to the source where that something is available, and it is much easier to get it from an individual than from a Government.
The hon. Member for Kirkdale (Mr. Keenan) has told us that it is impossible to recover post-war credits from the Government. I wonder whether he remembers that about 18 months ago his own Chancellor of the Exchequer could not find the money to buy a million tons of sugar. That is the answer which indicates the position in which we are in today. Today, we are in such a better position that we can afford to buy the sugar. Tea is off the ration. Hon. Members opposite say that people cannot afford to pay for these things. Any housewife would rather have the opportunity to buy 10 oz. of sugar if she can afford to pay for it than 6 oz. at an infinitesimal difference in price. We are told that there is a possibility of our having unlimited sugar, and it is likely that there will be no increase in the price.
I have listened to previous Budget day promises to reduce Purchase Tax "next time," but today we have had a reduction in the tax on almost everything. Is not that a big improvement on last year? 158 Is it not a direct incentive to everyone? [Interruption.] Perhaps the hon. Lady the Member for Liverpool, Exchange (Mrs. Braddock) will listen to this. She claims to have the support of old-age pensioners. I represent a Glasgow constituency and I have the support of my old-age pensioners. They are quite convinced that they are at least as well off this year as they were under Socialism. [Laughter.] That is a matter of opinion, but they are quite convinced that they are better off. After listening to the speeches from hon. Members on the other side of the Committee I have no doubt at all that theirs is a case of sour grapes. This is a wonderful Budget and hon. Members opposite are only very sorry that it has not been introduced by a Socialist Chancellor.
§ 9.54 p.m.
§ Mr. John McKay (Wallsend)
I am sorry that I should be rising to speak at nearly five minutes to ten o'clock.
§ Mr. McKay
I understand that this debate ends at 10 o'clock. I am reminded of the tactics that even trade unionists used to adopt years ago when they did not want a question voted upon. They said that they would make "roly-poly" speeches and talk the subject out. I have sat in this Chamber since 2.30 p.m. in the hope of being called and, under the procedure of the Committee, I do not intend to develop the speech which I intended to make.
The hon. Member for Glasgow, Wood-side (Mr. W. G. Bennett) was well satisfied with the Budget. He said that sugar would not be rationed in the future while, at the same time, he almost admitted that the price might go up a little. The experience of the ordinary housewife is that when the price of sugar goes up a little, day after day the prices of many other things go up a little. One little bit on top of another amounts to a very big bit in the end. Today, the housewife's job is exceedingly hard, and from the point of view of the mass of the people there is nothing particularly good or noteworthy in this Budget.
The newspapers have a financial interest in industry. Their views on finance are influenced by the people who are vitally interested in trade, Profits Tax and Excess Profits Tax; they are the 159 men who are getting the best out of the country, the small minority who are well-to-do and who have made tremendous profits during the past five years. They are living comfortably and are getting bigger profits year by year.
§ Mr. McKay
Those men have a greater interest in the Budget than any other section of the community. They are all using these influences to create an atmosphere. Their tactics are very much like those of the Communists—to repeat a thing day in and day out until people begin to believe that it is correct—
§ It being Ten o'clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.
§ Resolutions to be reported Tomorrow; Committee also report Progress; to sit again Tomorrow.