Motion made, and Question proposed,
That a Supplementary sum, not exceeding £1,000,000,000 be granted to His Majesty, towards defraying the expenses which may be incurred during the year ending on the 31st day of March, 1943, for general Navy, Army and Air services and supplies in so far as specific provision is not made therefor by Parliament; for securing the public safety, the defence of the realm, the maintenance of public order and the efficient prosecution of the war; for maintaining supplies and services essential to the life of the community; and generally for all expenses, beyond those provided for in the ordinary Grants of Parliament, arising out of the existence of a state of war.
On a point of Order. I should like to inquire how far this Debate may range to-day, whether it will be possible to discuss the question of pension appeal tribunals and how far it will be possible to raise other matters. I do not know, Colonel Clifton Brown, whether you are prepared to give any Ruling on whether we can discuss the setting-up of pension appeal tribunals.
As this is a subject to which some prominence has been given, perhaps it would be just as well if I were to give an answer on the point now. Any discussion on pension appeal tribunals would be completely out of Order. It would involve legislation and therefore cannot be discussed now. Generally, all matters concerned with the prosecution of the war can be discussed in so far as they are not already dealt with by the various Votes of the Departments, such as the Ministry of Pensions or other Departments, upon which we have separate discussions on separate days. Otherwise, the conduct of the war is a general subject for discussion upon a Vote of Credit. The setting-up of pension appeal tribunals would involve legislation and therefore cannot be discussed.
May I draw your attention to the fact that pension appeal tribunals were set up by the War Pensions (Ad- ministrative Provisions) Act, 1919, and that that Act, in Section 7, gave a statutory right to men to receive pensions? If it requires legislation to set up pension appeal tribunals, is legislation also required to give a statutory right to pensions? Is there, in fact, any statutory right to pensions at the present time, or are we acting entirely under the Royal Warrant? It seems to me this is a very urgent matter. If legislation is required, it ought to be brought in at a very early date in order to clarify a difficult and awkward situation.
I quite appreciate the hon. Member's point of view, and I dare say that other hon. Members have sympathy with him. It is not my wish to be obstructive, but the Rules of the House have to be obeyed, and I have to administer them. Pensions in respect of this war are paid under the Royal Warrant, and actually I believe they have no statutory authority, nor, I believe, is that required. The pension appeal tribunals which are in operation are limited to dealing with cases arising out of the last war, and they do not operate solely under the Act which the hon. Member quoted but also under Section 2 of the Act of 1920, which limits pensions to cases arising out of the war of 1914–18. I think that is the answer to the hon. Member. While it is not for me to suggest what might be discussed on other occasions, perhaps I may call attention to the fact that there will be occasions shortly when Members can have a fairly free run of subjects and when nothing is out of Order.
Before proceeding to deal with the Vote of Credit, I should like to refer to the visit which is now being paid to this country by one who stands very high in the counsels of the United Nations—Mr. Morgenthau, Secretary of the United States Treasury. My hon. Friends will agree with me when I say how glad we are to welcome Mr. Morgenthau here. He has been a lifelong friend of democracy and an unbending opponent of tyranny, and we welcome him on that account; and we welcome him also as one who has done much to promote that mutual understanding between Britain and America which has served us so well and not least in the field of war finance. Our relationships in this connec- tion have been of the happiest character, and are a good augury of the way in which we shall together deal both with the many problems which arise now and with others with which we shall be confronted when the war is over. I have before referred to the important statements made by the President of the United States both in regard to the American Mutual Aid Agreement and to Lend-Lease operations, and we all greatly appreciate the wisdom and the width of those declarations, which will mean so much to the future happiness of mankind and with which we are in the fullest agreement. We in this country have already devoted much time and thought to the important question of post-war international financial and economic relations, and our American friends can rely upon our fullest co-operation both with them and with the other United Nations, in seeking and obtaining that common policy which will be such a vital necessity to the whole world after the war.
To-day I have to ask the Committee for a further Vote of Credit rather earlier than I expected. That is not because the last Vote is lasting for a shorter period than was estimated. It is merely in order to meet what we think will be the general convenience of hon. Members with regard to the arrangements for future Business. This further Vote of £1,000,000,000 will make a total of £4,000,000,000 for Votes of Credit during the current financial year and a total of £12,050,000,000 since the beginning of the war. When I spoke on the last Vote of Credit on 9th September our war expenditure had recently averaged £12,250,000 a day. Since then, the daily average has been about £12,750,000, made up of £10,500,000 on the Fighting and Supply Services and £2,250,000 on Miscellaneous War Services, and these rates represent, in each case, an increase of £250,000 a day. On last Saturday, 17th October, £544,000,000 remained out of the £1,000,000,000 voted in September, and that sum, together with the further £1,000,000,000 which I ask the Committee to vote to-day, is expected to last until about the second week in February.
It is possible that we may now have passed the period of striking increases in the rate of our war expenditure, but even if this is so, it does not mean for a moment that the problem of financing the war on sound lines will now take an easier turn or that we can relax in our efforts. The contrary is in fact the case. In financing the earlier years of the war, we had the advantage of accumulated nest-eggs, and other capital sums available for investment. As these are used up, we have to utilise other means to take their place, in which still further savings from current income, still greater economies and the absolute avoidance of wasteful expenditure must take a high place. Waste, extravagance, and self-indulgence are completely out of tune with the spirit and the needs of these critical days, and it is imperative also not only that the huge sums we raise should be wisely and prudently spent, but that we should obtain full value for this vast expenditure. A decent and proper standard of living is obviously essential to the war effort itself, but if we seek more, or insist on spending for spending's sake, instead of saving all we can, we endanger the sound economic structure which we have built up and we act unfairly and unworthily towards all those who are fighting for us.
The Committee will no doubt expect me to-day to refer to the out-turn of our finances during the half-year which ended on 30th September. My right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) knows well, as do others of my hon. Friends, that it is never safe to jump to conclusions from the half-year's figures about the out-turn for the whole year, and I do not propose to do so to-day. Comparisons with the figures for the corresponding half of the last financial year do, however, throw up some interesting and instructive facts. In the first place, it is remarkable that although our total expenditure was higher by some £350,000,000, or 16 per cent., than in the first half of the last year, the amount which we actually had to borrow, at £1,438,000,000, was some£70,000,000 less. That result was partly due to the receipt of £155,000,000 on account of the Canadian Government's generous contribution, but it is mainly due to the higher and unprecedented level of taxation. The revenue is doing very well, both absolutely and by comparison with last year. We cannot, by simple arithmetic, suggest what the year's out-turn is going to be, because every important item of revenue has its own peculiar features and possibilities, but I think we can count on obtaining all that I budgeted for. On the expenditure side also I should be rash to prophesy, but I see to-day no reason why the final result should differ appreciably from the Budget estimate. The increase in the expenditure of the half-year over the first half of last year is more than half of the estimated increase for the whole year. That was to be expected in view of the fact that the rate of expenditure was so much less in the first half of 1941 than in the second half.
Figures showing the way in which we have borrowed are specially instructive. Small savings, it is true, brought in £40,000,000 less than last year and accounted for 18 per cent. as against 20 per cent. of our borrowings, but the drop is practically all accounted for by decreased sales of Defence Bonds, due, no doubt, largely to the fact that last year's figure included more sales in large sums to people who have now reached the permissible limit of holdings. Sales of Savings Certificates are slightly down, but the quality of the saving is improving, since the greater proportion of the certificates is being taken out in small denominations. These figures for small savings lent to the Exchequer must not be taken as meaning that the total volume of savings, in all forms, is decreasing or is even stationary. On the contrary. I have reason to believe that it is increasing. Up-to-date figures are not available, but I am advised that when they are available they are likely to show that the total volume of personal savings has, I am glad to say, continued to increase quarter by quarter.
My hon. Friends will no doubt have observed an announcement in to-day's Press that, owing to the increasing volume of savings work, a rearrangement has been made in the head post of the Savings Movement and that I have been fortunate in securing as chairman of the committee my right hon. and gallant Friend the Member for Westmorland (Colonel Oliver Stanley). Before leaving this subject, I should like to refer to a matter upon which representations have been made to me by the National Savings Committee and. in which several of my hon. Friends who are here now have taken a keen interest. I mean the question whether the present limit of holdings of Savings Certificates should be increased. As my hon. Friends know, that limit is at present fixed at 500 certificates, which is equivalent to a purchase price of £375. Some such limit is obviously justifiable on a security which carries a very generous rate of interest free of tax. It would be wrong that those who are better off should be able to invest unlimited sums at a rate of interest equivalent, with the tax at 10s. in the £ to over six per cent. per annum, and to a much higher rate for Surtax payers.
We have carried out a statistical inquiry which suggests that, out of about 15,500,000 holders who possess certificates, some 750,000, or just under five per cent., possess the full 500, but it also suggests that an appreciable proportion of those holders, about 40 per cent. overall, but about 60 per cent. of those who bought all their certificates during the war, bought all their 500 certificates at one time. In the light of such figures we must not exaggerate the effect of the existing limit on the volume of small savings out of income. It has, of course, always been open to anyone who has reached the limit to desposit his further savings in a savings bank or to invest them in small amounts in Defence Bonds or in the Post Office issues of War Bonds or Savings Bonds. At the same time I realise the attraction which this form of the National Savings Certificate has for a large number of people, and I do not wish—I know that a large number of my hon. Friends press this upon me—by rigidly adhering to the present limit to give anyone ground for feeling that there is no need for more of his savings to help to finance the war.
I have decided, therefore, to make a supplementary issue of certificates, but at a lower rate of interest. It will be generally agreed that anyone who already holds the full 500 certificates should in future be content with terms which are more in line with what he would be able to get on other classes of War Loan. The terms of the new certificate will therefore be as follow: The purchase price will be £1, and it will gradually increase in value so that it will amount to 23s. at the end of 10 years. That is equivalent to an overall rate of interest of £1 8s. 2d per annum, tax free. These certificates will not be repayable until 90 days after purchase, but will thereafter be repayable on demand. Holdings of the new certificates will be limited to 250 units, which may be held whether or not any of the existing certificates are held. The existing issue of certificates will, of course, continue on sale on the same terms as hitherto. In present conditions it will take some time to carry out all the printing and other arrangements for the new issue, and it is undesirable to launch it when post offices are subject to their December pressure. The new certificates will therefore be on sale early in January. The precise date will be announced later, but I think the Committee and the workers and members of the Savings Movement will be glad to know of this decision at the earliest possible moment.
I will try to do so and to give the precise figures. We are entering on the fourth year of war, and when we survey the financial sphere during the past three years, we need not be dissatisfied with much that has taken place there. Comparisons with previous periods are dangerous if they are prompted by complacency, but if they are drawn to give us confidence they will be useful. We can, I suggest, gain great encouragement from the comparison between what we have achieved during the first three years of this war and the course of events in the first three years of the last war. Despite our immensely greater task, our achievements on this occasion have been more than proportionately greater and have been not inconsiderable. Our total expenditure in 1939–42 was about two and a half times as great as in the period 1914–1917, but the amount raised in taxation was four times as much and was 40 per cent. of the expenditure, as against 21 per cent. last time. The result has been that the amount we have had to borrow in the last three years was only two-thirds greater than in 1914–17. What is more important is that whereas the average rate of interest on the increase in the debt from 1914–17, excluding floating debt, was 5 per cent., the corresponding rate for 1939–42 was only 2½ per cent. For the floating debt the average rate fell from about 4½ per cent. to about 1 per cent.
Yes. One other comparison is truly significant of the national effort. According to calculations made during the last war, the small investor then contributed rather more than £200,000,000 to War Loans during the first three years of the war. This time the corresponding three-year figure is £1,500,000,000. Behind these achievements lies the striking fact that in the industrial field our people here have at one and the same time given their whole power in prodigious efforts to provide and forge the weapons of war, and have also made the very many material sacrifices necessary to maintain our financial strength and to keep our national life economically and socially healthy. They are like those who rebuilt the walls of Jerusalem under Nehemiah:
Everyone with one of his hands wrought in the work, and with the other hand held a weapon.
It is indeed a great sign and a good augury that whatever sterner trials may still lie ahead, we shall meet them with that staying power and confidence which have always been our strength, and with that persistence and determination which will assuredly give us the victory.
I had not intended to intervene after the Chancellor of the Exchequer in this Debate, but the exceedingly interesting speech of my right hon. Friend has induced me to say just a few words. In the first place I should like to add my welcome to that which has already been given by the Chancellor of the Exchequer to the illustrious Secretary of the Treasury, Mr. Morgenthau, from the United States. We welcome him here personally as a friend of this country, and we welcome too the collaboration between the two Finance Ministers of this country and of the other great democracy across the Atlantic. I personally regard it as of supreme importance that in this matter of finance our country and the United States should keep in step, as the Chancellor correctly said, not only during the war but after the war. My mind goes back to the last war, and I remember the tragic results of being out of step financially with the United States. In the first place, owing to the fact that there was no Lend-Lease in those days, we found ourselves with a very heavy monetary debt which played a very serious part in the after-war situation. Further than that, when the war came to an end there was definitely a competitive movement in the two countries with regard to finance which led to the most disastrous consequences.
I, for one, attribute a great deal of the economic misfortunes of the early years after the war to the fact that this country and the United States were out of step with each other. Had that been avoided, not only would the financial position of this country have been a great deal better but the economic position of Europe as a whole would have been entirely different, and it may even be that the present calamitous war would never have arisen at all. Therefore I very much hope that the coming of Mr. Morgenthau to this country will help to keep our finances and those of the United States in step, and enable the two Finance Ministers to take those precautions in advance which will mean that after the war a satisfactory financial policy in common is adopted. Added to that, I hope my right hon. Friend and his colleague from the United States will put their heads together, not merely to extract all they can out of the taxpayer but to see whether they cannot learn some lessons from one another for preventing the yoke from chafing. The public have to bear this enormous burden and pull the heavy load of the war expenditure, but it is very important that there should be no unnecessary injury to them in so doing.
My right hon. Friend told us of his proposals with regard to Savings Certificates. We have known for a long time that a great deal of pressure has been brought to bear upon him to extend the possibility of taking out Savings Certificates from the original limit of 500 £1 certificates bought for 15s. each to a larger figure. Some of those suggestions were prompted by people who wanted to enable themselves to obtain income free of taxation. The Chancellor could not have yielded directly to that proposal, because it is well known that many certificate holders are people of, broadly, two classes—people genuinely making an effort to save, and people who for themselves and their families were putting what wealth they had into Saving Certificates in order to obtain a monetary advantage for themselves, which they were perfectly entitled to do but which was not the main purpose of the creation of these certificates.
I confess it came as a great surprise to me how very small a proportion of people had the full amount of certificates, showing that, in fact, Savings. Certificates were being used mainly, overwhelmingly, for the object for which they were created. I think the Chancellor has found a very happy solution of the difficulty. He says, "Very well, we will extend the number of Savings Certificates an individual may hold, but, of course, we cannot allow this reduction in taxation because it is quite clear it might be quite considerable." A man in some cases has taken out 500 Certificates for himself, 500 for his wife and 500 for each of seven children and thereby evaded, not merely Income Tax but Surtax. The £4,000 or £5,000 he has invested may represent a very large sum indeed for a man who is very well off and is perhaps paying Surtax of 5s., 6s. or 7s. in the £ in addition to 10s. Income Tax. I think the Chancellor's proposals are a happy compromise along these lines.
I am sorry to have offended, but I was only saying that I thought the proposal with regard to Savings Certificates announced by the Chancellor was sound, because if he had taken another course he would have been going against his own revenue. I quite appreciate that if I were to go further, I should be going further than you, Colonel Clifton Brown, would wish. I conclude by saying I think that what the Chancellor has told us about war savings which have been put by is a very remarkable tribute to what I might call the common people of this country, because I would remind the House that they come on top of the very heavy taxation which the Chancellor of the Exchequer has imposed in successive Budgets, and therefore the fact that there is this saving on this sevenfold scale by the small investors as against the last war is a remarkable tribute to the fact that the people of this country feel that it is their war which they have been forced to support by their determination to preserve the' liberties of this country and of the world intact.
I was very interested to hear what the Chancellor of the Exchequer had to say about small savings. It is impossible to exaggerate the importance of this question. We have only to see how great a proportion of this immense sum which we are asked to vote will be paid out in the form of wages, to realise the perpetual danger of inflation, particularly having regard to the fact that a large proportion of the money has been raised not by taxation, but by borrowing. It is impossible therefore to exaggerate the importance of getting small savings to diminish what would otherwise be a dangerous increase in spending power. It seems to me important for two other reasons. The possession of small savings after the war will be of great value, not only to the owner but to the State. Secondly, I am one who believes profoundly that the creation of what will be to a large extent a new class of small capitalists will tend to make for stability.
I will conclude then by saying that I am very pleased to see that my right hon. and gallant Friend the Member for Westmorland (Colonel Stanley) has joined the organisation which is responsible for these savings, and by expressing the hope that he will be successful in infusing still greater energy into that body.
If we were to allow these colossal figures to go through without discussion, we should be open to reproof, quite rightly, from the Leader of the House, who, incidentally, is absent himself. A larger House would have been justified by the most interesting and attractive statement of the Chancellor of the Exchequer. It may be that Members are staggered by the size of the expenditure. The figures are almost beyond our comprehension. They sound large enough in sterling, but if our American friends had to present this Supplementary Estimate in their currency, they would be talking of an expenditure of 20,000,000,000 dollars a year and of a total expenditure since the beginning of the war of 60,000,000,000 dollars. I have a vivid memory of the discussions during the last war, when I was a Member of this House. It was thought that those comparatively modest figures could not be shouldered without something like bankruptcy resulting, but we have been educated to realise that, provided that along with this expenditure goes control of commodities and of prices, a determined people, ready to back the Government, can carry on without serious inconvenience.
I am glad the right hon. Gentleman paid tribute to the common people, for their patience in submitting to the cutting-down of their expenditure and willingly exercising economy in ordinary life, and also for their contributions in Savings Certificates and in other directions. It is suggested by many people that we live in an extravagant age, and that if people have more money in their pockets, they are likely to use it in wasteful expenditure. I do not think the right hon. Gentleman has yet stated the number of persons, men, women and children, who have taken certificates in one form or another, and I would like to hear the figure. It is remarkable that the rank and file of the people are prepared, from their earnings, which in many cases are very scanty, to take up Savings Certificates. I have seen in the country how agricultural labourers, who have a very hard struggle to make ends meet, are taking up such certificates.
It is very remarkable how the common people, many of whom have a hard struggle to make ends meet, are doing their bit in one way or another, and not always doing it from a selfish point of view, although it is, of course, a wise provision for the future. It is their patriotism and their desire to bear a fair share of the burden which are being appealed to. My right hon. Friend gave a very satisfactory statement on how the financial provisions of his Budget are working out. I would be out of Order, I am sure, if I attempted to follow him, but I am glad to know that his finance is proving sound. When he assumed office he did a very wise thing. He got the assistance of certain distinguished economists and outside experts, and so widened his outlook. Some thought that people with unorthodox ideas might lead him down perilous paths. It may be that, on the contrary, he has converted some of them. At any rate, it is not unfair to say that his finance has been justified by results. Compare the rates of interest in the last war and now. I do not believe that one person in a million would have thought we could have carried on this great war, with colossal borrowing, and have kept the rate of interest to 2½ per cent. Certainly no one thought it possible in the last war. That it has been done is a tribute not only to the wisdom of my right hon. Friend, but to the various financial interests, bankers and others, who have played the game, who have cooperated with him, and who have shown willingness to try to prevent some of the disastrous experiences of the last war.
I was also interested in his comparison between the amount of taxation in this war and in the last, and the fact that we now submit to four times the amount of taxation which we had then. That is one of the greatest safeguards against inflation. We always have the danger of inflation ahead. As long as we submit to bearing the burden in this generation instead of handing it on to the future, so long we may hope to control expenditure and prevent a serious amount of inflation. I only got up to congratulate my right hon. Friend—I think it is due to him—and to promise him our cooperation as long as he continues on his present path.