Amendment of Law.

Part of Orders of the Day — Ways and Means. – in the House of Commons on 1st May 1939.

Alert me about debates like this

Photo of Mr Hugh Dalton Mr Hugh Dalton , Bishop Auckland

No, Sir, and the very fact that the hon. Member puts such a proposition shows his ignorance of the facts. At the time that the right hon. Gentleman, in his previous incarnation, was mismanaging the disarmament negotiations, democratic Germany was very lightly armed indeed, and at the time when the Labour Government left office we had an overwhelming preponderance of arms which the National Government by their short-sighted diplomacy and by their incompetence in arms production, threw away. While the National Government has been in power the German Air Force has grown from small dimensions to a figure far greater than our own, from which growth to-day the chief menace to this country comes. I was asking in what circle Dante would have placed the right hon. Gentleman; perhaps some future Dante will give him his rightful place, and perhaps the right hon. Gentleman's White Papers might help to feed the flames down there.

In consequence of the policy pursued by the right hon. Gentleman and his colleagues, we are facing to-day no longer the happy-go-lucky peace-time economy of laissez faire and profits as usual, but we are not yet facing the problem of a full war economy. We have to face an intermediate problem, or what some journalist, writing in the "Financial News," has called a near-war economy. It is that problem, of how to organise a near-war economy, that these Budget proposals, together with the other connected acts of the Government, should solve, but they fail most lamentably even to approximate to a solution. As my right hon. Friend the Leader of the Opposition said on the day when the Budget proposals were announced, we need most urgently a national plan, but we do not find one here.

What should that plan provide? I suggest that there are five essential elements which it should provide. First, it should provide the necessaries of life for all our people and full provision for their effective defence both against bombs and against poverty. That is not provided here. Secondly, it should provide that there should be no cake for anyone until all have bread and the nation has a sufficiency of arms. But that is not provided for. Gross luxury continues and grossly luxurious expenditure. Large incomes, even after all deductions have been made by way of taxation, are still being received and are still spent upon objects quite unessential to the public welfare. In the third place, a national plan should provide in this national crisis an opportunity of work for every willing worker. It should provide, in the fourth place, social justice in the carrying of great burdens and, in the fifth place it should provide a deliberate and efficient scheme to mobilise men, money and materials for the common good and for the security of all. There is nothing like that in this Budget and in the connected acts of Government policy.

Millions of citizens are still short of the necessaries of life and have gone short for years, but the Chancellor proposes mean little additions to the taxes on sugar and tobacco, mean little cuts in the standard of living of the poor, which, when the time comes, we shall oppose. The Chancellor has said that all social improvements, including the development of pensions and other social services, must be indefinitely postponed. He told us that in his Budget Statement. My hon. Friends and myself do not accept that view. We believe that this country is amply rich, if the wealth were properly distributed and the production of wealth properly organised, to take much better care than we do now of the aged, the sick and the disabled. We challenge the contention of the right hon. Gentleman that improvements in this field must be indefinitely postponed. Immense tasks of production await us, notably in the field of arms, yet nearly 2,000,000 of our fellow-citizens are standing idle in the market place because neither any private capitalist nor the Government have hired them. That is a criminal waste of labour-power in this time of crisis. Huge incomes are still being received by a small number, in business, at the Bar and in other professions, and also by the idle receipt of unearned income in enormous sums. Huge profits are still being made by armament manufacturers and others. Huge fortunes are still being accumulated and transferred on the deaths of their owners after comparatively small deductions by way of taxation. [Interruption.] I intend to give figures in a moment to justify my statement.

Tax evasion by the rich is rampant, and the Chancellor has only played with the problem. With regard to the limitation of arms' profits, since the proposal to introduce conscription, it has been suggested by the Prime Minister that the Chancellor is working out some more comprehensive scheme than has yet been announced, concerning which I assume he will have something to tell the Committee later this evening. Meanwhile, I venture to say, using an old Parliamentary phrase, that up till now the Government's method of dealing with profits on arms manufacture has been no better than mess, muddle and make-believe. Profits are still accruing in enormous quantities to small numbers of selected people, manufacturers and shareholders. So far as direct taxation is concerned, the Chancellor in this Budget is making only paltry little additions to the Surtax and the Estate Duty. I shall have something to say on those subjects before I sit down.

We are spending some £600,000,000 upon defence under this Budget. My hon. Friends have asserted before, and I assert again, that for this vast expenditure the nation is not getting value for money. We are paying too much for the arms we get, and we are not getting enough arms. We are not getting value for the vast expenditure, which amounts to something like half of the total national outgoings. It is notorious, and it is common talk in the Air Force, in the Territorial Army and in the anti-aircraft formations, that splendid bodies of first-class volunteers are still short of equipment and training material. They waste their time forming threes—I think that is the modern formation—and marching round and round barrack squares and drill halls. They have not the material which is necessary to equip them to do the work for which they volunteered. On top of that you are now going to throw a mass of conscripts; equally, there is no effective plan for the early arming and effective equipment of those conscripts. My hon. Friends have put forward the view, which has been supported from other parts of the House, that a real Ministry of Supply might do two things; on the one hand, it might save the taxpayers very large sums of money by co-ordinating production and rationalising purchases. It might be a great instrument of public economy. It might also effectively organise the supply of the equipment which to-day is so deficient. In spite of pressure from all parts of the House, the Government have put up one long obstinate resistance to the creation of a Ministry of Supply, but at last—at long last—under heavy pressure they have created only a sham Department of Supply in the War Office. For this reason they are themselves directly responsible, through their failure to set up a proper Ministry of Supply, both for the extravagance of expenditure and for the poor result in terms of equipment and arms.

There is no plan in this Budget for deliberately checking on a large scale the production of luxuries which to-day are competing for labour and material which an; necessary for the production of arms. May I give two illustrations? Steel is still being used to build new cinemas in highly vulnerable areas—steel which would be much better used for the making of munitions—and soon there will be a shortage of steel and the price will soar. Again, there are still workmen engaged to-day in making engines for expensive high-powered motor cars—men who, by reason of their skill, could make engines for aeroplanes, and should be making engines for aeroplanes. Soon there will be a shortage of skilled labour, and you will begin to talk to the trade unions, quite unnecessarily, about dilution. The skilled men are there, but they are being mis-employed at the present time in producing the luxuries of peace rather than arms for defence in war.

One could multiply examples showing that the Government have no plan for allocating to the most urgent needs the skilled labour and essential materials that are necessary for the arms programme. This would have been well within the scope of the Budget, because the Chancellor could have imposed, and, we submit, should have imposed, heavy excise duties on luxury articles which absorb skilled labour suitable for arms production and materials which are used in the production of arms. For example, if, instead of imposing the increased horse-power tax upon private motors, a heavy excise duty had been placed on new cars, coupled with a heavy import duty on imported motor cars, that would have been much more effective from the point of view of diverting essential labour and materials from peace-time luxury production into the sphere of the arms production programme. The Chancellor might have found other examples equally beneficial from that point of view, by heavy excise duties on new production of luxuries coupled with heavy import duties on the imports of corresponding articles. This problem of bottle-necks, of which we hear so much, is a problem which would never have become urgent had the Government tackled long ago, with special reference to the arms programme, the question of priorities in production and in the calls to be made upon the skilled labour and supplies of material available.

So far as import duties are concerned, my hon. Friends have never been pedantic Free Traders, or pedantic Protectionists either; we have our own line of approach to these problems; but the present position is that our balance of trade, or rather our balance of payments, is adverse. It was adverse last year; it is more adverse to-day. This calls for certain remedial measures which are not to be found in the Budget. Although the balance of payments is adverse, there are certain necessary operations which, taken by themselves, would make it more adverse still. For example, there is need for increased food storage in this country on a much greater scale than anything hitherto attempted by the Government. The hon. Member for Oxford University (Sir A. Salter) has drawn attention to this matter in several very cogent contributions, and we on this side believe that the policy of storage of food and essential commodities, including oil, should be pursued on a very much more ambitious scale than hitherto. And yet, if it is so pursued, the tendency will be to make our balance of payments still more adverse.

Some shuffling answers were given a few moments ago from the Government Front Bench to questions from one of my hon. Friends about the supply of nickel from Canada to Germany. Surely, a common-sense solution would be that, if Canada has nickel to sell, and if nickel is useful for making arms, the Government of this country should buy up the Canadian nickel export surplus and not allow it to pass into the hands of those who, if they turn it into arms, will not use those arms otherwise than against us and our friends. Surely, therefore, here is an opportunity for the Government to embark on yet another process of storing essential commodities, in this case metals necessary for the making of munitions, and to cut out the Canadian export of nickel to Germany by intercepting it and purchasing it themselves. The same may be true of other commodities exportable from our Dominions, of high value for making arms. We have no nickel mines in this country, nor has Germany, and surely we ought to get hold of all the nickel and see that it does not go to the wrong quarter. But an operation of this kind would still further increase the tendency for our balance of payments to become adverse.

To take a third example, we have given political guarantees in Eastern Europe, quite rightly; my hon. Friends have supported the giving of them; but of what use are political guarantees unless they are backed up with economic and financial facilities? Certainly none of us on this side of the House will complain at very substantial payments or credit facilities afforded to Rumanians and others in the East of Europe for the purpose of purchasing what they require, either directly from us or from others, with whom we would facilitate their transactions by credit operations. I am told, and, indeed, it is common talk, that a departmental log-fight is now raging between the Treasury and the Foreign Office. The Treasury thinks£10,000,000 is enough for the Balkans, but the Foreign Office thinks that a larger sum is necessary for the purpose of supporting effectively the political guarantees given, and perhaps to be given, in that part of the world. Generally speaking, whatever may be said about the conflicts between other Departments, in departmental contests between the Treasury and the Foreign Office the Treasury is always wrong—always too parsimonious, too shortsighted, too little aware of the political advantages that may accrue in the sphere of foreign relations from larger financial contributions. But if as, I hope, the Foreign Office view in this case prevails over the Treasury view, that will be a factor tending still further to increase our adverse balance of payments.

Thus far I have been referring to desirable lines of policy which would still further increase our adverse balance. It is important, therefore, also to state the lines along which the balance of payments may be rectified, and I submit to the Committee four lines along which that rectification could be brought about. In the first place, in order to diminish our dependence upon certain classes of imports, it is more than ever necessary that here at home we should encourage the production of food on a larger scale than hitherto, under fair conditions of labour and without undue profiteering by middlemen, and to this end should organise distribution as well as production. We should be happier if the present Ministry of Agriculture were addressing their minds effectively to that task. In the second place, we should encourage our export trade by many devices which are open to us, and which are not open to the objection that they increase the adverse balance of payments, but which, on the contrary, would decrease it. If we could stimulate the cotton export trade and other export trades which have now fallen into decay, we should be doing something at any rate to provide effective finance for a large part of our imports in the most obvious manner, namely, by the export of British products. For this reason, any reorganisation of the cotton and other industries is of special importance if it can enable them to win back lost markets and enter new ones.

In the third place—and this is a point to which I have already referred—we should do everything we can to check unnecessary luxury imports into this country. The Chancellor has many lines of taxation open to him here. There are expensive motor cars; there are silk goods, which have already been mentioned by my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence); there are wines. I am sure that our friends the French, who have taken, very naturally, so much interest in our internal affairs lately, would not grudge a slightly increased import duty upon wines, designed to diminish somewhat our total importations, in order the better to enable us to carry out our financial obligations in the directions I have mentioned. There are many other steps which the Chancellor could take in order to damp down and discourage the importation of luxury goods into this country. I would go as far as to say that no imports which are not serviceable, either directly or indirectly, for the manufacture of armaments, or to meet the necessary requirements of the working people of this country, should be encouraged.

In the fourth place, we should prevent all unnecessary exports of capital, and, in particular, take steps to check the panic and unpatriotic flight from sterling into American dollars which has been proceeding for some time. How far along the road towards complete Exchange control it would be necessary to go is a matter that, I think, the Chancellor should examine with his advisers. For my part, if there is no way short of complete Exchange control—such as our friends in New Zealand are now carrying out: setting us an excellent example—whereby unpatriotic exports of capital can be checked, I think the time has come when full Exchange control should be established. Along these lines, it would be possible, given intelligence and vigour, to redress that adverse element in the balance of payments which is showing itself already, and which it is necessary should be met by effective counter-measures.

Now I come to the question of the taxation of wealth. It will be recalled that in the days of Queen Victoria there was a famous agitator who went about the country crying, "What ransom will property pay? What ransom will the rich pay for the security of their possessions?" Those were days of peace in international relations, that deep Victorian peace, which passeth the understanding of this troubled generation. That agitator was the present Prime Minister's father. What ransom will property pay now, under the shadow of war, when the threat to those of great possessions is much more imminent, much more totalitarian, than it was then? It is indeed clear that if there is war and we are defeated, they will be stripped even of the shirts on their backs. The price of security has gone up since the days when the Prime Minister's father asked that question, and it is still rising. We hear much in these days of the phrase "Conscription of wealth"—the more insistently since the Government are now proposing the conscription of youth. My right hon. Friend the Member for East Edinburgh, in his very interesting speech, developed this point, and in a moment I intend to quote a passage from his speech. The conscription of wealth has become a much more urgent matter, to be pressed much more vigorously, since the Government have declared for the conscription of youth.

The Chancellor in this Budget is proposing only a mere fleabite of additional taxation of the rich. I will cite one or two figures to prove the truth of that statement, from the last issue of the Inland Revenue Commissioners' Report, issued this year: first, as regards Surtax, and then as regards Estate Duty. As regards Surtax, figures for the latest year for which particulars are given, allowing for the one year's delay in the assessment of Surtax, show that 96,000 people in this country had an income of £484,000,000—an average of just over £5,000 a year for that class. That average covers, of course, enormous inequalities. The incomes run up to £100,000 and £150,000 a year in certain cases. The Surtax paid in that year amounted to £57,000,000—to which, of course, we must add Income Tax at the standard rate. If you assume there were no allowances or abatements—and, of course, every Surtax payer has allowances and abatements in proportion to the marriage state, the number of his children, and whether any of the income is earned—and that the straight standard rate of 5s. 6d. in the £ was collected on all the Surtax payers' income, you have to add to that £57,000,000 a further £133,000,000, making a total of £190,000,000 to be deducted from the £484,000,000. That leaves £294,000,000 after the deduction of tax. If you take account of the allowances and abatements, there is clearly over £300,000,000 a year still accruing—an average of well over £3,000 after the payment of taxation, as compared with an average of just over £5,000 a year before the payment of taxation. Evidently the Surtax payers were not unduly impoverished by taxation on the pre-Budget level.

The Chancellor has scaled up the Surtax rates so as to take another £4,000,000 this year, and £5,000,000 in a full year. He is taking less than 1 per cent. of the total income of Surtax payers in addition to what had been taken before. Having regard to the needs of the time and the justice of the case, that is a miserable little nibble. The Chancellor gives a series of figures in the White Paper of the new effective rates after he has increased the Surtax. The effective rates do not on any income reach as much as 14s. in the £, however large the income. They reach 10s. in the £only on incomes of £30,000 a year, and 5s. 6d. in the £—that is, the standard rate—only on incomes of over £3,000. Therefore, it can indeed be said that there is still a large taxable surplus remaining in the pockets of the Surtax payers.

In regard to Estate Duty, the latest Inland Revenue report shows that the net capital values passing at death in 1937–38 amounted to £595,000,000. It is interesting to observe that £29,000,000 of this belonged to 16 millionaires. Sixteen millionaires died last year. The deaths vary in number each year and that fact upsets the regularity of the revenue. Another £22,000,000 belonged to 34 semi-millionaires with fortunes of between £500,000 and £1,000,000. The total sum collected in Estate Duty for the year 1937–38 was £79,000,000. If we subtract that from the £595,000,000 net capital value, it leaves £516,000,000 to be inherited after Estate Duty is paid, and when you make a further deduction under Legacy and Succession Duty of £10,500,000, you get a net inheritance, after all payments of Death Duties, of £505,000,000.

What is the Chancellor of the Exchequer taking in additional Estate Duty this year? He is taking only another £3,000,000 this year, and £5,000,000 in a full year; that is less than one per cent. of the total net inherited wealth after all payments of Death Duties. That also, I say, is a miserable little nibble. These fleabites do not make a rich man's ransom. They are altogether inadequate to the needs of the time. There is, even in times of deep peace with no threat of war, something indecent in an economic system where under one man may get 15s. or £1 or even £2 a week and another man, not in any respect a better man, gets £500 or £1,000 a week. It is indecent enough even in times of assured peace, and how much more indecent in this twilight between peace and war when our material possessions and our lives are equally threatened.

Therefore, the Labour party has made already in this Debate certain proposals for a special and additional levy on privately-owned wealth, a levy which in our view should continue at least throughout the period of crisis which we are now traversing, and should certainly continue just as long as the conscription of youth continues. My right hon. Friend the Member for East Edinburgh developed this subject in some detail in his speech the other day. He gave figures which have not been controverted and are based on the total wealth in private hands; and I am quoting only some of the more essential of the various statistics that he gave to the Committee. If you take persons having a capital wealth of more than £50,000 you have a total of £8.000,000,000 capital valuation at present levels. That represents stocks and shares and other forms of property owned by some 50,000 lucky persons each of whom has at least wealth of a capital value of £50,000. Carrying it a little further down the scale, if you take persons with £20,000 capital wealth per head, there are of these some 120,000, and they own in the aggregate £10,000,000,000. My right hon. Friend the Member for East Edinburgh, before the Government had publicly announced the conscription of youth, suggested that a contribution could be devised on a graduated scale, graduated perhaps from ½ per cent. to 2 per cent. per annum, on these private fortunes of great magnitude. A contribution averaging 1 per cent. would bring in, if limited to persons owning wealth of £50,000 and upwards, a sum of £80,000,000, and in the other case would bring in £100,000,000 a year. My right hon. Friend said that if we were to have the conscription of life a far larger contribution than that would be needed from those who own the vast wealth of the country.

Since my right hon. Friend spoke it has been announced that the Government are going to press through this House a Measure for military conscription of a certain class of young men. That adds immense strength to the moral argument put forward by my right hon. Friend and other speakers. I would put it in this way: At the very least, alongside proposals for the conscription of life you should put this special levy upon people possessing far far more than the average wealth in the community, in many cases wealth completely unearned, in many cases wealth obtained by inheritance and good fortune, or by lucky speculation, or by other methods which cannot be truthfully described as service to the community. Upon this small minority of persons a special levy should be imposed over and above the other taxes, an annual contribution based according to a graduated scale upon their individual holdings of wealth. There should be a compulsory register of these people. It should be kept up to date from year to year, and this levy should be imposed for such length of time as we are still in this continuing crisis, this state of affairs which I have described as a twilight between war arid peace, certainly as long as the provisions for the conscription of young men remain. The purpose should be to avoid as far as possible making any further additions to the National Debt during this time. The National Debt is rising to a figure which gravely endangers the future solvency of the national Budget. Further additions to the National Debt in these times are both an economic and a moral outrage. Up and down the country plain men ask how can it be justified that you should call on some to be prepared to give their lives while others are invited only to lend their money? That contrast is profoundly repugnant to the sense of decency of large numbers of people and even to many of the wealthy section of the community.

This proposal of my right hon. Friend the Member for East Edinburgh will provide that the special levy should be paid either in cash, or, probably for the greater part, by the handing over of securities to the amount covered in the annual contribution due to be made. The Government would thus obtain purchasing power for the purchase of munitions, for the payment of soldiers' wages and munition workers' wages and for other objects of public expenditure, just in the same measure as they would obtain it by an increase of the National Debt. At the present time the Government when increasing the National Debt issue new securities to the public, sell new Treasury bonds or Defence Loan or whatever it may be, and they get from the public purchasing power in exchange for that issue of new securities. Under this plan, as adumbrated by my right hon. Friend, if it could be carried out completely the Government would equally obtain purchasing power by cash payments or by the sale of existing securities which would be handed over. From the point of view of the Government the thing is the same; from the point of view of the community it is very different. By this scheme you avoid further additions to the Debt and instead of that you make a special call upon those who are best able to meet that call. The proposal is of the same family as the capital levy which was debated during and after the War, but it differs in certain essential features. The capital levy which was proposed during and after the War, and which had the support of Mr. Bonar Law and others and of most of the more clear-headed economists and many prominent financiers, was designed to clear away a large part of the dead-weight burden of debt arising from the War; it was designed greatly to reduce the burden of the National Debt. It was to be a once-for-all contribution designed to cut in half the National Debt as it existed at that time. If that proposal had then been adopted it would have made all the Budget problems of the present Chancellor and his predecessors far more manageable. It would also have satisfied the sense of justice of a great body of people in this country. It was not adopted.

The proposal to-day differs from it in two respects. First of all this proposal, which we make here and shall make outside the House at the right time and in the right manner, differs from that in that it is a proposal for an annual levy on large private accumulations of wealth, to be continued during the period of crisis finance. It is designed, not to reduce the present enormous burden of dead-weight debt, but merely to prevent its further appreciable increase. None the less it makes the same appeal to the plain man's sense of justice. I hope that, when he replies later, the Chancellor of the Exchequer will be able to indicate just how much further the Government are disposed to move towards a further conscription of wealth by way of balancing the proposals for the conscription of life which have been made since the intro- duction of the Budget. We have had discussions as to what is meant exactly by "conscription of wealth." Some hon. Members opposite have quibbled over definitions. They have suggested that we have conscription of wealth in this country as long as, say, there is a Id. in the £ tax on income, so long as, shall we say, there is some compulsory import upon commodities. That is not what we on this side mean and what most people outside mean by the conscription of wealth. If war comes it may be that we shall come to this in its extreme form—the conscription of wealth would mean that every member of the community would be given an allowance from the Government, on which he and his family would have to live, and all the apparatus for payment of dividends, rent, interest and profits, would be liquidated, at any rate for the period of the war. All luxury expenditure would be cut out altogether. That is the extreme and logical development of the conscription of wealth. I repeat that, if war comes, it may come to that.

The Labour party, traditionally moderate in all its proposals, is not to-day suggesting anything as extreme as that. We are proposing only a further step towards the elimination of the gross inequalities that still prevail, in order to obtain from those best able to pay a much more substantial contribution than the Chancellor has proposed should be put upon them for the urgent needs of the country. The right hon. Member for Epping (Mr. Churchill), on Thursday in another context used these words: You will find that when a great number of people go into danger they do look around them to try to find out whether everything is fair and square."—[OFFICIAL REPORT, 27th April, 1939; col. 1376, Vol. 346.] That is very true. The great mass of our fellow-countrymen to-day feel that they are very much in danger. They have been brought into danger, and they are looking around them to see whether everything is fair and square. They are looking at this Budget and the gaps in it, in particular the failure to control the profits of armament manufacturers and the failure to exact from those with far more than the average wealth a proper contribution to the needs of the time. They are looking at this Budget with questioning eyes, and I think that an increasing number of them have less and less confidence in those who sit on the Front Bench opposite. This Budget will be judged not upon any narrow and detailed discussion of the rather small measures which the Chancellor of the Exchequer is producing by way of tax additions and tax adjustments, but rather in the light of these large moral and economic issues which some of my hon. Friends have brought forward in the course of the Debate and to the discussion of which I have endeavoured to add something in these remarks.