The right hon. Gentleman is right when he speaks of all these capital movements, up and down, but you have to bear in mind that the nominal capital in the iron and steel trade has been written down during the past decade to the extent approximately of one-third of the total capital originally subscribed; that is to say by over £40,000,000. No one pretends that there has been a slump in the iron and steel trade during the last two years, but we must be fair in these matters. It is estimated, as far as the heavy steel makers are concerned, that until quite recently rearmament accounted for only about 10 per cent. of their total activity. The right hon. Gentleman tried to make out that the whole of this boom that took place in 1936–37 was due to rearmament. That is not true. If it were true it would be a very great argument in favour of public works. But we are only now coming to the peak of this gigantic rearmament programme, arid this is the moment when, according to all authorities, trade is slowing down. We are in a recession, and the great anxiety of everybody is to avoid a slump. During one period we were going right ahead and having a time of great prosperity, almost a boom period, when rearmament was very much less than it is at the present time. That goes to prove what some of us have always maintained, that the efficacy of Government spending on public works to cure a depression has been very much exaggerated. That argument can be greatly overdone. It may be possible to mitigate certain hardships by spending public money in times of depression and strictly regulating such expenditure in times of boom, but to say that public expenditure can stop a slump is not true. Hon. Members on both sides of the House, whether Socialists or capitalists, would do well to learn by experience and not to put too much faith in public expenditure as a method of controlling a trade cycle.
Nevertheless, I should like to say that I share the views of the right hon. Gentleman in regard to the rearmament business, up to a point. I believe that, in the long run, a ministry of supply in this country will be found to be absolutely inevitable. The Government will be obliged, sooner or later, to set up such a ministry, and to arm it with the necessary powers by legislation, if the present pressure is kept up. If the pressure is relieved, if some agreement can be come to with Germany, it will of course be different, but if the present pressure is continued, and we have to go on expanding, particularly in the Air Force, to the extent which seems probable, I believe a ministry of supply, armed with great powers, and involving a great deal of industrial dislocation and interference with labour, is absolutely inevitable. I believe that the House as a whole is gradually reaching that conclusion.
I should like to say a few words on the subject of the very heavy taxation that is being imposed in this Finance Bill. Hon. Members on both sides agree on this point. An Income Tax of 5s. 6d. in the £, plus National Defence Contribution, is an extremely heavy burden of direct taxation. And I think hon. Members on both sides will admit that the limits of indirect taxation have very nearly been reached. When we see the Supplementary Estimates which the Government have to produce for rearmament, I think we shall come to the conclusion that our expenditure is bound to run for many years at something in the neighborhood of £1,000,000,000, as the hon. Member for Hastings (Mr. Hely-Hutchinson) has said. Therefore, we are up against the absolute necessity of keeping up the national revenue, if we are to avoid a very serious financial crisis at some time or other. How are we to do that?
We cannot cut down expenditure on armaments and we cannot cut expenditure down substantially on the social services. Everybody admits that. The only way that we can hope, in the long run, to meet our obligations and pay our way, is to maintain the national income and, if possible, to increase it. Otherwise some form of crisis is inevitable. At the present time the situation gives cause for a certain amount of anxiety, and I am sure the Chancellor of the Exchequer will admit that. For a long time we tried to pretend that there was no recession. Now we know that there has been a recession, and that at this moment there is still a considerable recession. This applies to all sections of industry, even to the iron and steel industry, and particularly to the textile industry. It applies pretty well over the whole field of export industry. Even the motor car industry is feeling it. It is not yet very serious or grave, but it is there, and we have to face it.
An even more disquieting symptom of the present economic situation is the fall in world commodity prices. They have always been a barometer. I am not talking now of retail prices or the cost of living, but basic commodity prices for wheat, metals, and so on. If commodity prices fall below a certain point, primary producers can no longer make a living; therefore we lose our markets. [An HON. MEMBER: "Why are they falling?"] Because of the general world depression and the deflation which is in operation at the present time. I hope that very soon we shall be able to check this fall; everybody is trying to do so. During recent weeks the fall has unfortunately not been checked, but on the whole it has continued, and has caused considerable anxiety to those of us who study economic trends. At the same time our adverse balance of trade is increasing.
All these things give cause for anxiety, and one asks oneself why they are happening. The day before yesterday the President of the Board of Trade gave an absolutely brilliant and most lucid survey of the economic situation in this country and in the world. It was fearless and clear, and fair, as the right hon. Gentleman always is on these economic subjects, and hon. Members on all sides would do well to study that statement, which is based on the very good information that we get from our trade officers throughout the world.