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 Pierse Loftus Mr Pierse Loftus , Lowestoft

It is not my intention to begin a separate Debate. I was going to ask my right hon. Friend the Chancellor to issue a White Paper showing what has been done so that hon. Members could see in detail the legislation that has been passed. The general principle, which I advocate to-day, is to fix prices at a certain level as they were, say, in the first week in November. The prices of all goods and services have to remain at that level. Then wages are stabilised subject to the condition that if there is a rise in the cost of living every employer has to pay 25 cents a week extra for every one point rise. This alteration takes place every three months. I commend that to my hon. Friend because I feel that we could work on those lines in this country and stabilise the prices of goods and services so that no one in any shop could sell at a greater price than, say, in the first week of November, and so that the charges of rents, railways, water and similar companies could not be more than in November, subject, however, to an appeal to a Government tribunal which could allow an exceptional increase in charges. I appeal to my right hon. Friend to issue a White Paper showing what the Canadian Government have done.

My hon. Friend the Member for Faversham congratulated my right hon. Friend on raising these vast amounts of money at a low rate of interest. I cannot support those congratulations with quite as much enthusiasm because I realise that the Treasury has complete control over the rates of interest to-day, that a considerable proportion of the money raised is created by the banking system at a cost not exceeding 1 per cent., and that, therefore, when we pay 2½ per cent. on that money we are paying far too much. Looking at this huge amount of £1,000,000,000, I again, for the fourth or fifth time, urge my right hon. Friend to follow the warning and advice given him by the "Economist" two or three years ago that for all these moneys created to fill the gap at a cost of about 1 per cent. the State should pay not more than 1 per cent. We are passing a vote of credit for £1,000,000,000. The Chancellor has told us that the total war expenditure is £8,100,000,000. Let us look ahead. The total National Debt left after the last war was in the nature of £7,000,000,000. We all know the immense burden that that was on the nation and how it hindered desirable national expenditure in many ways. The money was raised at an average of 5 per cent. It was a crushing burden on the nation. We have already spent £8,100,000,000—not all, of course, from loans, but partly from taxation. Surely it is not pessimistic to suggest that we may end this war with an additional National Debt of probably well over £10,000,000,000 and possibly £14,000,000,000 at an average rate of 2½ to 3 per cent. Then the burden of this war will be the same as the terrible burden of 5 per cent. on £7,000,000,000 after the last war. I must confess that I view with apprehension this colossal piling up of debt. I agree that it is necessary under the orthodox financial system. Whether that system is necessary, whether it can continue under the strain of the war, is another question. After all, we are passing a vote of credit for £1,000,000,000.

What is credit? Credit is the capacity of an individual, or a group of individuals, or a nation to supply goods and services, and that capacity to supply is financed by the creation of monetary means. Therefore, this £1,000,000,000 is a draft, as it were, on the national capacity to supply goods and services for war use, and in due course that national credit will be converted into the monetary means to produce the goods—by the various methods of taxation, war savings, and filling the gap by created money. It is almost a tragic paradox that, drawing as we are on our national credit, the nation should not create its own national credit practically without cost, and I feel that if we go on spending these vast and yet vaster sums we shall have so to adapt our technique as to avoid piling up this colossal burden of debt at comparatively high rates of interest.

I am not going to deal with the actual technique by which this £1,000,000,000 will be converted into purchasing power for the Government. I know there are great difficulties in modifying the technique, because the machinery by which the technique is worked consists of the Bank of England working in co-operation with the Treasury. My right hon. Friend, when we ask him about the Bank of England, always informs us that it is a private company, and turns aside questions in that way, but in actual fact we know that the Chancellor of the Exchequer and the Governor of the Bank of England are really in partnership, though we are never quite certain which of them is the senior partner. We hope that he will persuade the various authorities, the Treasury, the Governor of the Bank and others, to consider with an unprejudiced mind a new technique for reducing this appalling burden of debt interest. I make no attack on the integrity of those who direct the Bank of England and the Treasury, above all not on the Governor of the Bank of England, but he is a fanatical adherent of the old orthodox system. He is the stem undeviating Calvin of the dogma of deflation, prepared to condemn the great majority of mankind to the hell of economic depression for the sake of the small body of the elect, the rentiers and the moneylenders. I feel that we must break down all those ideas of the past, as we are facing to-day conditions which the men who created the old financial system of the last century could not possibly imagine and could not possibly face to-day, and which we cannot face in the future if we adhere rigidly to an outworn financial method.