Expenditure Arising Out of the War.

Part of Supplementary Vote of Credit, 1941. – in the House of Commons on 16th December 1941.

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Photo of Mr Frederick Pethick-Lawrence Mr Frederick Pethick-Lawrence , Edinburgh East

The Chancellor of the Exchequer has, with lucidity and comprehensiveness, put before us the financial position of the country to-day, and in the brief remarks which I propose to address to the Committee I should like, in the first place, to welcome most heartily the new scheme which the right hon. Gentleman has adumbrated. I think that when amounts have to be paid, in taxation, of such dimensions as those now being demanded, both in the figures themselves and in their proportion to the incomes on which they are imposed, the existing system of payment may present great difficulties, and a scheme of the kind which the Chancellor of the Exchequer is now proposing, by which these amounts will, in effect, be payable in instalments should be a relief and should prove of great advantage both to the taxpayer and to the Revenue. Of course, we shall await the details and in particular the rate of discount if there is to be any, before we can express final approval, but it seems to me that the scheme is one Which will be welcome and which is, I might almost say, overdue, and I am glad that the right hon. Gentleman has taken a step in that direction.

There is no doubt whatever that these decisions which the House of Commons makes from time to time to put another £1,000,000,000 to the credit of the Government for the prosecution of the war are of supreme importance, but we take them now so much for granted that it is not necessary to go into great detail in Debate in this Chamber. There are, however, one or two things which may be said with advantage. In the first place, with regard to the prospects for the future and the question of how much the Chancellor will be called on to pay out during the remainder of the financial year, I notice that the right hon. Gentleman was somewhat cautious. I do not wonder that that should be so, in view of what is happening not only in those Continents where war had already been raging, but in those in which it has now started to rage and may rage in the future. We now see nearly the whole world brought into the conflict. The areas which are still outside it are so small that we may speak of the war to-day as a world war in the literal sense.

The public, I think, want to know how far the new developments are likely to increase the actual war costs. It seems to me that there are three possible directions in which the actual cost of war might be increased. We might he involved in additional direct expenditure. We might be compelled to make good a certain withdrawal of help from the United States. We might be compelled to increase our aid to Russia, to make up for help which in other ways might be withdrawn. I gather from what the Chancellor of the Exchequer has said, that although in one or in all of these elements the cost might be augmented, he does not seriously expect that it will be on a very large scale, comparatively to the vast expenditure to which we are already committed. That may seem strange to some people, and I think to the country generally, because this war in the East is not a little matter—it may be a very large matter. I suppose that the real answer is that when you are engaged in total war, the fact that your total war is obliged to take place in more than two continents does not necessarily, and, indeed, cannot, add very much to your total war effort or your total war expenditure. I suppose we may take it as more or less true, therefore, that our war expenditure, short of any inflationary process, if it has not exactly reached what you might call a peak, has, at any rate, reached nearly the maximum which it will reach during the remaining period. We have to face the fact that, for whatever time the war continues, somewhat in excess of £4,000,000,000 a year is the sum that the country will have to face. I had already looked at the progress of Revenue; and my impression was confirmed by what the Chancellor has said, that we may certainly hope to reach the estimated Revenue, and probably some quite useful and substantial additions thereto.

But that will not take away in any degree the tremendous importance of saving, because, if once saving were inadequate to fill the gap between taxation and Revenue, inflation would begin, with disastrous consequences. I would like to join my voice with that of the Chancellor of the Exchequer in urging that everything possible be done to avoid inflation. The Chancellor of the Exchequer made some interesting observations with regard to the fact that the public as a whole were divided between those who were doing their best and really saving manfully, those who were saving half-heartedly, and those who were not doing it at all. My hon. Friend the Member for Aberavon (Mr. Cove) asked how that was divided up between the different sections of the community. I have been thinking about that, not only while the Chancellor was speaking, but even before he began. This is my conclusion. I think that it affects all classes of the community except the very poor, who cannot in any circumstances save with advantage either to themselves or to the community, because if they were to try to do so, on their very meagre incomes, they would fall so far below the poverty line that not only would they suffer themselves, but the community would suffer through their malnutrition.

Let me begin with the well-to-do. When the war began, and Lord Simon, who was then Chancellor of the Exchequer, brought in his first Budget, I was of opinion that the taxation which he imposed was as much as could be borne in the earlier stages, because I knew quite well that, particularly among the very well-to-do, if there were to be any very large burden of new taxes imposed, they could not in a short period so readjust their living economy as to pay those taxes out of income. Since then, two and a quarter years have gone by, and I think the position is now very different. Many of the expenses of the very well-to-do consisted in payments to their staffs. Many of those staffs have been called up or have gone into munitions work, and the cost of paying their wages has been relieved. In the second place, it has been possible to cut down commitments in various other ways. Many of the well-to-do who at the beginning of the war could not pay their way except by withdrawing capital—which is, of course, negative saving—ought now to have so far pulled in their method of life that they can not only meet the whole of their expenditure out of their income, and pay the whole of the very heavy taxation imposed upon them, but have money to save. Some may not have money to save after paying all that, but just to the extent that they are able, if not to save, at any rate to live within their income, they are making a considerable contribution to the war. If they sell their capital to pay their outgoings, thinking that it does not matter, they are doing a serious injury to the war effort, because not only are they not saving, but they are increasing the gap by the negative saving which comes from expenditure on current necessities out of capital.

When we come to what are called the middle income class, there it must be, I think, largely a matter of one individual against another. There are some individuals in that section of income range who have had their incomes very seriously diminished, quite apart from the effect of taxation, and when increased rates of taxation have fallen upon them as well it has become impossible for them to save. On the other hand, some members of that class may be retaining their full income, or even increasing it. They can meet their taxes, and they have been able to cut down their expenditure very considerably; therefore, they ought to be able to hand over substantial sums to the Chancellor of the Exchequer.

Then we come to the manual working class—those above the poverty line, whom I have already written out of the picture. Here again, there are great differences between one family and another. I would say of these, as of the poorest section, that to sacrifice the standard of life which makes for the full health and efficiency of themselves and their families would be a grave blunder, which would injure not only them but the country which they have to serve. If they took it from their children, again, they would be injuring the future of the country for which this war, above everything, is being conducted. But, on the other hand, there may well be in certain families those who regard the extra income which they get not in the way that will be most beneficial to the State, and therefore, in that class, as well as in the others, this admonition to save all that is possible over and above what is really needed for efficient and healthy life is applicable.

That is my answer to my hon. Friend the Member for Aberavon (Mr. Cove). It depends upon circumstances. I think that in every class of the community there are many people who do not save but who could and should save. It only remains to answer the question, What would be the addition to the savings totals if all those who could save did so on the scale that the most worthy are already doing? As far as I can see at the moment there would be something like double the savings which are being put aside at the present time, and that would be amply sufficient to make sure of non-inflation. I do not think that we ought to rest content until every individual who can save to his own advantage and that of the community comes into line with those who are so faithfully bearing the burden at the present time.

I think that the Chancellor of the Exchequer has helped in this respect, and I want him to continue to help by keeping down the cost of living and preventing any inflationary tendencies from letting the cost of living up. As long as he can do that, and do it successfully, then the appeal to save can be made and should be made to every section of the community. It should be brought home to the people that, if they want to win the war, and if they want to win it most rapidly and want to protect those who are in a weaker financial position than themselves from suffering privation as a result of financing the war, they should spare no effort and consider no sacrifice not involving their own health and efficiency too great, to achieve these ends.