Ii. Amendment of Law

3. Purchase Tax – in the House of Commons on 25th April 1944.

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Motion made, and Question proposed, That it is expedient to amend the law relating to the national debt and the public revenue, and to make further provision in connection with finance."—[Sir John Anderson.]

Photo of Mr Arthur Greenwood Mr Arthur Greenwood , Wakefield

After your very arduous duty, Major Milner, I rise just for a few moments. First, having listened to Budget speeches for over 20 years, may I congratulate my right hon. Friend on the lucidity of his statement? It is no easy task to deliver a Budget speech. I would also congratulate him on the brevity of the speech, having regard to previous Budget speeches to which I have had to listen. I think my right hon. Friend has not only been listened to with interest, but, at the end of his speech, the whole Committee gave a great sigh of relief to know that no further burdens were going to be placed on the very hard-driven British public.

Photo of Mr George Griffiths Mr George Griffiths , Hemsworth

They have not got any more.

Photo of Mr Arthur Greenwood Mr Arthur Greenwood , Wakefield

I think it is, in that way, a unique Budget Statement. I remember, in over 20 years, no Budget Statement which has made so wide a sweep of our national affairs as my right hon. Friend has done to-day. I agree with what he said about our national income. It is perfectly clear that a Budget is an impossible thing to conceive and to draft apart from the nation's production at the time, and I am very glad that my right hon. Friend emphasised that side of the problem. It is an inter- esting Budget from another point of view, that, though he has given us nothing, though he has imposed nothing, he has dangled a sort of prospective carrot before the nose of industry in this country.

He would be a very bold man who, without reflection, attempted to make a serious and considered speech after listening to the Chancellor of the Exchequer, and I shall, therefore, confine myself, as is customary on these occasions, to a few general remarks. I think my right hon. Friend has proved to us that, notwithstanding the strains and stresses of the war, Britain's financial stability remains unaltered. It is a great tribute, not merely to successive Chancellors of the Exchequer, but to the quality of our people, whose deep interest in the cause we are all serving now leads them to take whatever harsh taxation may fall upon them. It is, I think, a good thing that we have raised, or shall, in this coming year, raise, a bigger proportion of our income from taxation than in any previous year during the war. We have, I think it is right to say, carried the burden of taxation due to the total cost of the war in this country far more bravely than any other of the belligerents. That is to our credit, and reflecting upon what my right hon. Friend might be concealing in his mind, I reflect myself that I see no reason for greatly increased taxation if real savings can be maintained, and one would have thought that, in this time of rationing and scarcity, and when, if ever in our history, we should forgo luxuries, it ought to be possible in the coming year to maintain our rate of savings, and, as my right hon. Friend has now introduced a system of "Pay as you earn," I should hope that in the coming year the people of this country will lend us their savings.

My right hon. Friend insisted, quite rightly, on what to me is the capital fact in our present financial situation—our capacity for production. I have said this on more than one occasion in this House, and I have been scolded for a certain sentence which I used—scolded in the highest quarters. I make no apology for my statement. I still maintain that, in this sort of situation, pounds, shillings and pence have become—I did not say they were—meaningless symbols, and my right hon. Friend, I am glad to think, has sustained me in my statement by the emphasis he has placed upon production during the war.

Photo of Mr George Griffiths Mr George Griffiths , Hemsworth

They missed that point all the time.

Photo of Mr Arthur Greenwood Mr Arthur Greenwood , Wakefield

When the war is over, and we have new strains and stresses to face, nobody in this country, after the undertakings that have been given in the name of this Parliament and people, is going to come to the House and say that the only way to fulfil our social undertakings is by a measure of financial economy. You are never going to clothe the people of this country by cutting their cloth. You can only clothe the people of this country and satisfy their needs by increasing the value of their resources by the use of their labour. That seems to be unexceptionable and indeed, very orthodox economy. I shall be surprised if anybody dissents from that, and I repeat again, that I feel indebted to the right hon. Gentleman for coming to my assistance in this argument. We really cannot live on the scale of expenditure that this country must face in the years immediately after the struggle on our present production income. It is impossible. Therefore, we have to look forward, and I am glad that the right hon. Gentleman has stressed that point. Indeed the case for his industrial reliefs is not, as I understand it, that he wants to relieve the profit-makers. I might argue about that if I chose to do so. His case is that he wants to render British industry far more efficient. With that I think all of us can readily agree.

My right hon. Friend pointed out the danger we might be in of inflation. There is always cast upon the shoulders of the Chancellor in war-time the responsibility of delivering a homily about inflation. In my view we are a long way from inflation at the present time, but we must bow to the homily that my right hon. Friend has delivered to us. If we can maintain our rate of real saving, and can continue to restrict consumption within reasonable limits, there is not need for inflation, On the other hand, there might be new charges and new claims to be met, which it would be difficult to resist, and my right hon. Friend and many hon. Friends around me thought that the Chancellor attached a little too much importance to the wages issue as affected by the increase of costs and not perhaps sufficient importance to the other charges which are outside the purview of the working people to whose wages my right hon. Friend has referred.

I do not intend to take up the time of the Committee longer, except to say one final word. Nothing that the Chancellor asks of this House for the prosecution of the war will be denied him, in any quarter of the House, certainly not by hon. Friends behind me. By that we stand. We do not mind a little castigation about the fear of inflation, but our will and our hearts are as good as they were at the beginning of the war, and all the financial resources that my right hon. Friend desires, will, as far as we are concerned, be poured out before him.

Photo of Sir Percy Harris Sir Percy Harris , Bethnal Green South West

May I be allowed the great privilege of adding my felicitations to those already offered to the Chancellor of the Exchequer on having so successfully passed through the great ordeal of presenting a Budget for the first time? These felicitations. I can assure him, come from my heart. I have a very genuine appreciation of his personality and his courage. He is such a modest man that do not mind expressing my feelings. He has had a remarkable career. He has not gone from log cabin to White House, but he has gone from the position of a humble civil servant to the greatest post, almost, in the land, that of Chancellor of the Exchequer. He has filled a number of posts of such a varied character that it is hardly possible to enumerate them. He was once Under Secretary in Ireland; he has been the head of the Inland Revenue; he has seen the other side, as servant, and now he comes as master. He has been Governor of an important Province of India, and in this House he has been Home Secretary, Lord President of the Council, and has held I do not know what other posts. Now he has had the great opportunity of his life-time to present the Budget.

I can go back even further than my right hon. Friend the Member for Wakefield (Mr. Greenwood). I go back to the time of the last war. I remember the masterly statements of Mr. Reginald McKenna, Mr. Sonar Law, the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), and, during more recent dates, of the various Chancel- lors. The characteristic of this particular Budget is the unexampled courage that the Chancellor has shown in coming down to the House and doing the exceptional thing of asking the country for no new taxation, except for a nominal penny on beer. That wants some courage. I do not believe that there is a precedent, as far as I can recall, for any Chancellor presenting the same Budget as that of the year before. But there is optimism behind it. There is an optimism that will have healthy reactions on the country. The right hon. Gentleman represents the confidence in his mind of certain victory. He shows that he is satisfied that the nation now is so secure that he can rely on the revenue meeting the remarkable figures of the previous year.

We have some reason for self-satisfaction. This immense revenue is possible in this tiny little island of ours in the North Sea, because of the industry of our people and the enterprise, courage and initiative of both our industrialists and working people. It is a great credit to the whole country that at this time, in 1944, the fifth year of the war, we can show increased revenue from taxation and an assurance that we shall get the necessary balance out of the savings of the people. I was very glad that my right hon. Friend referred to the generous contribution of great promise to us from Canada, but we ought not to overlook—and there is a danger of it—the fact that we have the advantage of Lend-Lease machinery with the United States of America. If it were not for the co-operation of the American continent and the Dominions, the record of our financial position would be a very different story.

But, from my point of view, the greatest anticipation of the Budget Statement of my right hon. Friend is his anticipation of post-war conditions. I agree with him that times are going to be very difficult when the war is over. When the war with Germany is over, we shall still have in the offing the difficult problem of the war in the Far East. But it is right and sound that, in making his statement to the nation, he should give encouragement to those responsible for the industry of the country, to make their blue-prints in anticipation of post-war conditions. I fundamentally agree with him. It cannot be too often repeated that we shall, after the war, be a debtor instead of a creditor country. If we are to carry on after the war and keep our people on the same standard of living as they had before 1939, we must have a large and increasing foreign trade. That will depend upon the initiative and enterprise of our people, but they must have, as the right hon. Gentleman so rightly says, the wherewithal to do so. Therefore, it is right that he should have attempted to work out such improvements of our industrial organisation, through the machinery of finance, as will mean that our industrialists are not handicapped in competition with industrialists of other countries. Particularly that applies to their being encouraged to invest in capital assets by the improvement in the machinery of taxation and to invest more in scientific research, where we are very much behind other countries and have a good deal of leeway to make up. I believe, too, his emphasis that it is the policy of His Majesty's Government to aim at full employment, will be a measure of hope to those men now engaged in the perilous work of waging war. Their one terror is that, when the war is over, they may be faced with mass unemployment with all the uncertainty and the appalling evils which followed in the last post-war period. But that the right hon. Gentleman should spend half an hour of his statement trying to give confidence that the Government are facing up to the problem and thinking it out, will be a message of hope to those men in the Services.

We have another year before us. I recognise that every one of us in this House has his responsibility to hold up the arms of the Chancellor of the Exchequer in these difficult times. There is a tremendous temptation to press upon him all kinds of extra expenditure. He has always the unpleasant task of footing the bill and sometimes of having to put his foot down. Our pledges as a Parliament, more or less to social security, to a housing policy, to a forward education policy and to a generous system of pensions will cost money, and we realise the Chancellor's difficulties. But in the statement he has made, he has shown a grasp and understanding of the position which, I am sure, will give the Committee the confidence to support him, when he is in difficulties, and when he has to be unsympathetic as well as when he can give a satisfactory reply. I do again congratulate him on the success of his first Budget Statement. I only hope—and I cannot say anything better—that his statement next year will be equally satisfactory.

Photo of Mr Stanley Holmes Mr Stanley Holmes , Harwich

I think I have known the Chancellor of the Exchequer longer than most Members of the Committee and I have followed his career with the greatest interest and admiration. It will probably be a very long time before the general public understands the great contribution which he has made to our war effort during the past four and a half years, and this is not the time to dwell upon lit. Ho has, to-day, opened his first Budget and he has followed largely the lines of his predecessors. It is obviously no matter of "following my leader," because there can be no doubt that the late Sir Kingsley Wood consulted with the present Chancellor and that the policy which has been carried out in the past few years and was embodied in the Budgets of His Majesty's Government, had his full approval.

It would be difficult to find anybody in the country who would quarrel with the financial policy of this country since 1939. There have been, of course, people who have been critics from time to time but I think most of them have realised in due course that the Treasury were right and that they were wrong. Let me call attention to the main principles which underlie our financial policy. It was recognised that expenditure was going to be on a colossal scale, and that a long-term policy must be faced. The determination by the then Chancellor of the Exchequer was that the necessary money should be obtained, approximately half by loan, and half by taxation. The Chancellor has shown us to-day that we have done even better in the way of raising money by taxation than he or we expected. The second most important decision to my mind was that we should raise our loans by voluntary means. There were some who were of opinion that there should be a compulsory extraction from people's income, but the Treasury were right. The people of this country hate control, whatever the Minister of Home Security may tell us, and would resent any attempt to dragoon them into a compulsory system of war contributions. But they enjoy the "Salute the Soldier" weeks, and enjoyed the weeks held in previous years, with the competition of town against town, and all the variegated social events bound up with them.

In the next place, our war financial policy has been that those who have the largest incomes should make the largest contribution. The effect for the past four years has been that over a certain limit Income Tax and Surtax have amounted to 19s. 6d. in the £ for example, the very few people in this country who have an income of: £72,000 a year pay £67,000 a year in Income Tax and Surtax. An eminent Socialist, Mr. Bernard Shaw, has pointed out that if he did any work in any year the Treasury took all the money, and gave him a commission of 6d. in the £ to collect it. But the war has to be paid for and those with broadest backs have, rightly, to bear the biggest burden. Then the Chancellor and his predecessor proceeded to tax luxuries and those commodities that are not essential to existence —tobacco, beer, cosmetics and many other articles which add to the pleasantness of life for men and women. But the Treasury took an entirely opposite view with regard to essentials. Food is the principal necessity, and it was decided that in order to keep down the price and prevent inflation, subsidies would be paid by the Treasury. The wisdom of this cannot be doubted.

This financial policy which I have briefly and inadequately sketched, has resulted in our being able to finance the war expenditure without more than minor inflation, and has placed us in the position that we shall be able to deal with post-war conditions without unnecessary difficulties. We have heard a very interesting and instructive talk to-day from the Chancellor of the Exchequer, with regard to post-war prospects and post-war finance, and one must pay a great tribute to him. I am sure it is something we shall all want to read over again when we get our OFFICIAL REPORT in the morning; and it certainly was most helpful and instructive to us all.

I only want to refer to two further matters. The first is Pay-as-you-earn. Some of us will remember Albert Chevalier's song "Mrs. 'Enery'Awkins," of whom it was said: First she said she wouldn't,Then she said she couldn't,Then she said, 'Well perhaps I'll see'. That was the attitude of the Treasury with regard to pay-as-you-earn. When, at last, they said they would see, and they settled down to the job, and decided that they could do it, they have been splendid and I think a great tribute should be paid to them for having worked out, at great speed, a most difficult system of taxation with both ability and sympathy. This system has been in force for about three weeks, and, of course, there has been a certain amount of grumbling, both by employers and workers. Now to employers I would venture to point out that pay-as-you-earn is much more satisfactory to the workers than the previous system of commencing to pay tax on earnings received nine months previously, particularly if, owing to seasonal conditions, the wages at the time when the tax was imposed were less than the wages when the pay subjected to tax was earned. I would urge employers to recognise that they are rendering a national service if they assist to the utmost the implementing of this new system. To the workers I would urge that they need not worry if a few pence too much is deducted by way of tax from any weekly pay packet. Any over-payment can subsequently be put right; at the end of any financial year ending 5th April, the amount payable by any worker for the whole year can be ascertained and, if it is found that the total of the tax deducted week by week exceeds the amount for which the individual worker was liable during the year, a refund will be made. For example, if a shilling a week too much is deducted from a worker's wages through the year, he will be entitled to a refund of £12S. at the end of it.

Photo of Mr George Griffiths Mr George Griffiths , Hemsworth

And if there is any increase in the family, he gets so many pounds for it. A circular was sent round to all the workers. They know what the hon. Member is talking about.

Photo of Mr Stanley Holmes Mr Stanley Holmes , Harwich

My hon. Friend opposite seems to think that what I am saying is unnecessary. I can only say that workers are coming to me constantly asking why 3d. has been deducted this week and 4½d. the next week and directly I tell them that it does not matter, as we can put it right during or at the end of the year, they are quite satisfied and do not worry.

Photo of Mr George Griffiths Mr George Griffiths , Hemsworth

A chap at the pit where I worked last week paid 7s. too much, but he got it back this week. He showed me the pay packet.

Photo of Mr Stanley Holmes Mr Stanley Holmes , Harwich

That is all I want to say with regard to pay-as-you-earn. With regard to Excess Profits Tax, one knows perfectly well that this was a tax imposed in time of war. The Chancellor practically said to-day that it was not a tax from the Treasury but a political tax, put on for definite political purposes. It was described some time ago by "The Times" as "a rough and ready war-time expedient." Well it is; it is very rough on a number of people. The Chancellor appears to recognise that it is a tax which is unfair, as between man and man and trader and trader. Although he may refuse concessions at the moment, I hope he will continue to pursue his thoughts on the matter, for it is obvious that he is aware of the inequalities. Probably, by next year, he will be able to do something to remedy them. In mentioning these two points, I want once again to congratulate the Chancellor on his first Budget.

Photo of Sir Adam Maitland Sir Adam Maitland , Faversham

There is great wisdom in many of our Parliamentary customs and traditions, and we find from experience that they are founded upon the knowledge which has been gained by those who have preceded us in this House. It is a tradition that on Budget Day, immediately after the Budget Statement, nothing is said but a few words and complimentary remarks to the Chancellor for his feat of delivering his Budget Statement, and congratulations upon his proposals. It is in the light of reconsideration and reflection that the real discussion comes, and I think that is the wisdom of the tradition which has grown up in this House that there should be no long speeches, and certainly not of criticism, immediately after the Chancellor has resumed his seat. I propose to follow that tradition but I would also like to follow tradition and pay a tribute to the Chancellor for a statement to which we have all listened with great interest. I think it is essentially a statement which we shall want to read and carefully consider, and I hope it will be found to be worthy of the consideration we can give to it. One thing certainly struck me, that the Chancellor was not content just to speak about the achievements, which he might well have done. I believe that at the proper time, and when these things can be seen in right perspective, not the least of the achievements of this nation in the war effort will be found to have taken place in those realms of finance which are so mysterious yet which indirectly and directly affect every person in this country.

I think that the way in which the people have responded to all the calls made upon them, to the onerous taxation which has been imposed, the cheerful and willing way in which they have in fact always been ahead of the Executive in their readiness to bear these sacrifices, is not the least of the nation's achievements. The right hon. Gentleman the Member for Wakefield (Mr. Greenwood) said that, so far as he and his immediate friends were concerned, they were still in good heart, ready to give and ready to bear any sacrifice demanded of them. I think he spoke not only for his own immediate friends but for the Committee as a whole. Yet we must remember that we shall also probably say, "Thank heaven there are no new taxes in this Budget." Probably the dominating note of this Budget is that the Chancellor has not imposed any new taxation. On that he is to be congratulated and on that, too, I think we may see a ray of hope for the future. Budget Day is not only stocktaking for the past but a glimpse of the future, and I was very much impressed by the suggestions of my right hon. Friend with regard to the way in which he is proposing to help industry in the future.

I regard this not so much as a matter of pounds, shilling and pence but rather that we in this Committee have a distinct duty in regard to the laying down of certain fundamental principles in regard to all matters which affect taxation. One of those principles is that the wisest taxation is that which can be borne most easily by those upon whom it is imposed. It is not necessarily sectional. It is merely platitudinous to say that taxation must be placed upon the shoulders of those best able to bear it.

It is important that in any taxation which we impose we should have regard to all the reactions of that imposition and, therefore, I was particularly glad to hear that in the suggestions the Chancellor made for helping industry the background of it was: What proposal can I make which will have the best effects on the general welfare of the community at large? Not the least of those considerations which I am sure the Chancellor had in his mind was the desire that we all have that in any legislation which is proposed it shall all tend to absorb into industry, when the war is over, the people who come back from the fighting fronts, in a way which will will give them the best conditions and remuneration possible.

I welcome the proposals the Chancellor made, although I think they may cause disappointment in certain industrial quarters, particularly the proposals in regard to depreciation allowances. I do not know whether my second thoughts will be as complimentary as they are now, but I can say at the moment that we have much enjoyed the speech of my right hon. Friend and that we congratulate him upon being the first Chancellor to come here in war-time and present a Budget with no new taxation. It is hoped that by the time the next Budget comes along there will be some remittance of taxation. Indeed, my right hon. Friend hinted that it may well be that, if certain events materialise, the expenditure which he has predicted to-day may not, in fact, be incurred. Then I am sure that Members on all sides will ask, not how my right hon. Friend proposes to raise taxation, but how he proposes to divide the surplus. I congratulate my right hon. Friend and wish him good luck in the years to come.

Photo of Sir Waldron Smithers Sir Waldron Smithers , Chislehurst

Last July I was taken seriously ill and was at death's door for four months. This is the first occasion since then that I have been able to address the House and I want first of all to say a big "Thank you" to hon. Members of all parties for the great kindness they extended to me while I was ill.

The Chancellor of the Exchequer has made a remarkable statement to-day. It was a courageous statement because it was true and Truth alone shall make us free. He referred among other things—and it is difficult to follow the points of a long speech immediately after you have heard it—to the three great dangers facing this country—the danger of inflation, the danger of loss of our export trade and the danger of losing the stability of sterling and our means of exchange. I propose to deal with these. He used many words but I suppose that the word he used most was the word "pound." The buoyancy of the revenue during last year has been remarkable, and that buoyancy has been due mainly to the fact that our Treasury and our financial advisers have stuck to sound principles. I would remind the Chancellor of a saying of Burke's: To tax and to please … is not given to men. I am sure my right hon. Friend realises that, and means to be quite fearless and that in later stages of our financial discussions, he will stick to sound principles, face facts and turn a deaf ear to the theorists and the vote-catchers. If he will do that, then he will be rendering an inestimable service not only to this country but to the whole world, because if things remain stable in England she can make a tremendous contribution to the stability of the whole world. If my right hon. Friend sticks to sane and sound principles, he will also be doing an inestimable service especially to the poorest of our people. I would remind my right hon. Friend of what the Minister of Labour said recently: If Britain stands as a stable economic influence she will play her greatest role in history. The Chancellor as I have said mentioned the word "pounds." I would like to ask: what sort of pounds? Are they worth twenty, fifteen or ten shillings? Unless the purchasing power of the pound sterling is maintained, the Chancellor has less real value to collect and, therefore, less real value to distribute. I suggest to Members and to the public as a whole that it is in our best interest, that it is our duty, to back up the Chancellor in trying to avoid any undue inflation. If we do not, we may disintegrate in a generation, in the same way as France disintegrated after the last war. It is our duty to face facts. When we consider the demands that are being made almost daily through the representatives of the people by the hundreds of thousands and even by millions of our fellow subjects for increases in pay and allowances and wages, and other Government expenditure, what is really meant by these demands is that we are asking the Government to distribute millions more of what we call currency notes. When the Financial Secretary replies to the Debate, I would ask him to try to deal with the question which is so often asked, namely, how we can spend £14,000,000 a' day in war-time, and not spend that amount in peace time.

Photo of Mr David Logan Mr David Logan , Liverpool Scotland

If it were well spent, it would be good economy.

Photo of Sir Waldron Smithers Sir Waldron Smithers , Chislehurst

You cannot spend it, if you have not got it.

Photo of Mr George Griffiths Mr George Griffiths , Hemsworth

That is true; that is why they want it.

Photo of Sir Waldron Smithers Sir Waldron Smithers , Chislehurst

The pound note, which may be called the unit of our currency, is the means by which we exchange goods and services, and it is very important to everybody to consider how much goods and how much service the pound note will command. The value of the pound sterling is what it will purchase in this country; it is impossible to export sterling. If I owe a debt to a fellow countryman, I can pay him in pounds, shillings and pence, but if I owe a debt to a foreigner I have to go to an exchange dealer and buy from him the currency which is used by the foreigner, whether marks, francs, escudos or dollars. It is vitally important to every one and to our food position that the pound sterling, as the Chancellor said, should remain stable and should command as much foreign currency as possible. If the Committee will forgive me, I want for a moment to go into some detail, because I do not think the position of how the pound sterling works is properly appreciated. The pound note—I have one here—reads as follows:

Photo of Mr David Logan Mr David Logan , Liverpool Scotland

Will the hon. Gentleman send some samples round?

Photo of Sir Waldron Smithers Sir Waldron Smithers , Chislehurst

It reads: Bank of England. I promise to pay the Bearer on Demand the sum of One Pound. That is signed by Sir Kenneth Peppiatt, the Chief Cashier of the Bank of England. Suppose I walked into the Bank of England to-morrow and said to him "I have here an I.O.U. on the Bank of England and I ask you to redeem it"? What would he give me in exchange? He could only give me another piece of paper, another £ note, except that up to £2 he could pay me in silver. Why is it that you can take that piece of paper to a station, cinema or a shop and buy a ticket, a seat or some food or other necessaries of life? Behind that piece of paper there used to be gold. But gold is no longer there, and to-day there is behind that piece of paper, other pieces of paper, namely Government securities, and the Bank of England holds those Government securities as a security for our currency notes. Having mentioned the Bank of England, may I pay a tribute to the retiring Governor, Mr. Montagu Norman

Photo of Sir Waldron Smithers Sir Waldron Smithers , Chislehurst

The securities behind our currency are good, because the British taxpayer is behind them. The Sinking Fund and the interest and the redemption money are secured on the taxable capacity of the people of this country, the most law-abiding people in the world. There is no finer security. The Chancellor, if I remember rightly, said that we have another great asset behind our currency and the purchasing power of the pound sterling, namely, confidence at home and abroad in the integrity, honesty of our people, in our Constitution and in our institutions. He also said that we have had in this generation to pay for two wars. We have parted with an enormous amount of wealth, and they have cost enormous sacrifice and lives. But we still have that personal and individual character and the knowledge and experience of our business men, second to none in the world. Therefore, once again, we can offer that character, knowledge and experience in the service of mankind.

I would ask the Committee to bear with me while I examine the Bank of England return in regard to currency notes. This return is published every Thursday and appears in "The Times" every Friday. The amount of currency notes in circulation last Thursday was, in round figures, £,1,121,000,000. About £30,000,000 of those were on the credit side of the banking department. The Bank of England is divided into two departments—the issue department and the banking department. In the issue department it acts as agent for the Government and any profit on the issue of currency notes is paid to the Government, and the amount of the profits for the last year for which I have figures—1943—is just over £9,000,000. The real value of the currency notes is equal to the real value of the Govern- ment security behind it. If more notes are issued than the financial and economic structure of the country can bear, the result must be inflation, and the purchasing power of the pound sterling goes down. Roughly, if you double the issue of the notes you halve their value, and you get into what is called the vicious spiral. I have here a whole packet of German notes printed just after the last war. They are nominally worth £1,000 apiece. Soon after these were issued, they were not worth the paper they were written on. You could not get your boots blacked for £1,000 because the Germans used the printing press, to try to catch up their national expenditure.

The Chancellor referred to our post-war position and some of the difficulties we shall have to face. There are certain facts which are not party politics at all which Members of all parties have to face. One is that England is different from every other big country in the world, in that we are not self-supporting. We are compelled, in order to live, to import from a third to a half of our food and raw material and partly owing to the money that we spend in the cause of freedom, our economic position is declining. In 1913 we had a credit balance of trade of £206,000,000. In 1938 there was a debit balance of trade of £54,000,000. So that between 1913 and 1938 we were £260,000,000 worse off. Germany went in for inflation because she is more or less self-supporting. Even with their currency down to zero, the German people were still able to live and at the same time to build the ghastly war machine which has brought such devastation and trouble into the world, and if we are not careful it is necessary to state the unpalatable truth that it is Germany's fate that we are in some danger of repeating. If the Chancellor were to agree to all demands made on him for increases of Government expenditure of every kind, he would be agreeing to the issue of inadequately secured currency notes and you might arrive at a situation where if a man received £20 he would be getting only what £3 £4 or purchased previously. The other day the Secretary of State for War pointed out the danger of inflation when certain demands were made for increases of pay and allowances. Of course he wants to do the best he can for the serving soldier, but he has been secretary to two or three Chancellors of the Exchequer. He knows the danger of inflation and quite rightly pointed it out. The Minister of Labour, with all the responsibility and knowledge which office brings, said recently that Parliament is becoming largely a Dutch auction with parties engaged in a regular campaign of competition. He, as an old trade-union official, did not want £10 a week if he could buy only £2 worth of stuff with it. He would rather have £5 with which he could have £5 worth of stuff. Mr. Ramsay MacDonald, speaking at Kilmarnock in 1933 and referring to the crisis of 1931 said: Two years ago the problem we had to face was not merely a question of the distribution of wealth. It was a question of the existence of the wealth itself. Boldness, courage and honesty were required to face the situation. Those words were spoken II years ago. How true they are to-day! It is courage and honesty that the Chancellor has shown to-day. Inflation results from the creation of a vast amount of additional purchasing power owing to the enormous excess of the public expenditure over the revenue from taxation, and the rapid increase of our colossal National Debt.

I want to put up one or two suggestions of what my right hon. Friend can do to avoid inflation. He can increase taxation. He can persuade people to increase their private savings. I should like to join with him in the tribute he paid to Lord Kindersley and his collectors all over the country. He can appeal to the people to spend less and to save more. My third suggestion is that he should press as hard as he can, for a reduction of public, as opposed to private, expenditure and waste. Not nearly enough attention has been given to this aspect of the matter. Someone worked out the other day that, by drawing a comb through the expenditure and waste in the Government Services, £1,000,000 a day could be saved. I do not know how true that is, but I think that more attention should be paid to this aspect. The Chancellor referred to the policy of stabilisation. Before this Budget the Treasury was stabilising the prices of food and the necessaries of life to the extent of £200,000,000 a year, and that money, spent on stabilisation, meant 6s. a week to every man, woman and young person engaged in industry. In addition, it was of great benefit to people with fixed incomes and old age pensioners.

I would take up a point my right hon. Friend made about small savings. I have it from an authoritative source that the small savers have accumulated the astounding amount of nearly £6,000,000,000. Having lost our overseas investments, the interest on which came back here in meat, maize, coffee and so forth, however wonderful the response that has been to the War Savings, Warship Weeks, Wings for Victory Weeks, and the Salute the Soldier Weeks, those savings invested in Government securities, are only a claim on home products. They will not give us the right and the title to import a pint of petrol, or a quarter of wheat or any commodity from abroad, and that is a very serious position indeed. It is only common justice, when the time comes for these loyal small savers to draw out what they have put in, that the pound they draw out should be as nearly as possible of the same purchasing power as the pound they put in. The Prime Minister said in his broadcast to the nation on 21st March, 1943: At the end of this war there will be 7,000,000 or £8,000,000 people in the country with £200 or £300 apiece—a thing unknown in history. These savings of the nation, arising from the thrift, skill, or devotion of individuals, are sacred. The State is built round them, and it is the duty of the State to redeem this faith in an equal degree of value. Neither the Prime Minister nor the Chancellor of the Exchequer is omnipotent, and it is the duty of all of us to realise the danger of inflation and to back up the Government in every way we can. The Chancellor gave the figures of the National Debt as £19,593 millions. The total National Debt, in 1913, was £661 millions. These are formidable figures and the country will have to face them with courage. The difficulties can be overcome if we avoid inflation, and continue to apply sane and sound principles of finance. The right hon. Gentleman also referred to the help that we get from overseas. I wonder if the country realises what that really means. America is sending us, not only munitions of war, but food and raw materials on Lend-Lease principles. I do not know of any account that is being kept of this. I have not seen any published. Canada in 1942–43, made us a princely gift of £225,000,000 and in 1943–44 a further gift to the Allied cause on Lend-Lease principles of the same amount, and she is going to do the same this year. I understand that Canada is also supporting the cost of her own forces wherever they are. This money is being given to us for one purpose and one purpose only, to win the war. We and they may, quite justifiably, ask whether we are entitled to use any of it to feather our own nests at home, and to make ourselves more secure in the world, where in many parts the word "security" has no meaning whatever.

We are no longer a creditor nation. In order to live we shall have to export physical goods because our power to import through invisible exports has been largely dissipated. And it is necessary that we should export goods at a price which the consumer abroad will and can pay. Whatever schemes are brought into operation—and I hope they will do something to alleviate the difficulties of international commerce—the fact remains that people will still buy in the cheapest and sell in the dearest market. The foreign consumer will not pay for our social services when the cost of those services is added to the cost of production of our goods, as it must be. The Chancellor to-day has talked about the cost of this and the cost of that, but there is one service we rendered to the world which cannot be assessed in terms of pounds, shillings and pence. That is the 15 months when we stood alone. Last Sunday was St. George's Day, and we commemorated the time when St. George stood up to the dragon and saved civilisation. I hope that our negotiators will see when the day of reckoning comes that that sacrifice and leadership on the part of our country are taken into account.

It is dangerous from the point of view of inflation to enact, now, too many proposals for the post-war period. It means going to the people and saying, "We will give you this, that and the other," and it is wicked and criminal and a cruel form of sport to make promises which may not be fulfilled to people., a large percentage of whom do not understand a lot about money and foreign exchange. By all means let us think things out, and be ready with plans, but do not let us commit ourselves too deeply until we know better how things will be after the war. The Prime Minister's plan is much better —a four-year plan after the war followed by another four-year plan when we know better how we stand. We cannot take money out of the common pot unless we put something into it and you cannot make a pint pot hold a quart by appointing a committee.

The State is not a fairy godmother with a bottomless purse. There are many claims on the available wealth of the country, and in those claims there is, and must be, priority. The war is not yet won. It is costing £14,000,000 a day. We have pledged ourselves to finish the war against Japan when the war with Germany is over. Then there will be the cost of an army of occupation. It is no good beating the Germans unless we keep them beaten, and we must have some share in whatever policing may be necessary. Then there will be the servicing of the National Debt and the payment of interest and the repayment of capital to those who so loyally put up the money to win the war. We will have to go to the help of the occupied and satellite countries when the war is over. A fortnight ago, a B.B.C. correspondent, broadcasting from Naples, pointed out the ghastly conditions of the people there. There were no trams buses or banks, their savings were gone, and there were no water, sewers or gas. All they asked for was food, and food now. That is the condition of the greater part of occupied Europe. Surely one of the first claims on the resources of the world must be to help these poor people.

The idea that material comfort is our chief goal and aim, that we should avoid hardship and sacrifice, that we can have security without sacrifice, and that we can harp always on our rights instead of our duties—all these things lead to decay and to inflation I would like to make one last quotation and to revive the memory of one of the finest characters I ever new. He was Mr. Murray Brumwell, of "The Tinics," and he wrote this: These are grave days, and democracy in this country will soon be put to the grand test. Will it show itself worthy of its inheritance, or will it allow itself to be led captive by politicians and planners who promise it everything but freedom? The ability to pay taxes, the happiness of our people and material prosperity necessitate a spiritually-reinforced foundation. If we apply sound principles, if we avoid inflation, if we, by hard work and lowering cost of production, regain our export trade, we can, we must and we shall, climb the hill of difficulty. If we depart from sound principles, if we do not face facts and the truth, then we shall rush down the hill and, like the Gadarene swine, be drowned in the sea of destruction.

Photo of Mr David Logan Mr David Logan , Liverpool Scotland

I listened with great pleasure to the words of the Chancellor. This is the first time in the fifteen years I have been in the House that I have intervened in a Budget Debate. To-day the Chancellor is marking a wonderful epoch. Reading some of the books of a few years ago, I found references to a Chancellor telling the nation in a four hours' speech, that with a £90,000,000 Budget there was likely to be disaster. Yet to-day we have a Budget of £6,000,000,000, and we seem to go about our duties in the ordinary commonplace way.

References have been made to the question of inflation. I am not a pessimist with regard to this matter. I used to handle reichmarks and sell them 40 to the pound sterling. They got to 1,000, then to 20,000 and to 30,000. I remember the time in Vienna when currency of the nominal value of £600 which had only just been made would be put on a table, and you would be offered a Hamburg cigar for it. I do not think we need be afraid if we use the common sense that Englishmen ought to use, in regard to the question of where we stand. I view economics, not from a Marxian point of view but from the practical point of view of experience in life and from experiences in handling money all my life, though retaining very little of it. My wife also handled a lot but retained very little, and we came down to a 50–50 basis. That is how the Chancellor stands. I was pleased that in that 50–50 process the Chancellor made no further depredations in regard to money. I was pleased also that he dealt with the questions of research and our industrial position. If this nation is to be important in the world, our lusty manhood and our employers of labour must co-operate. Therein will lie the strength and unity of our country. Our factories and ironworks must get busy, and our Mercantile Marine must sail the seven seas. Thus will employers of labour be able to learn that, not by reduction in the earning capacity of their people, but by "the economy of high wages," shall we prosper and avoid the evil of inflation.

The Budget is unique. It teaches employers and labour that, in the coming new era, co-operation will be most essential. I do not know of any period of history when co-operation has been more needed for the salvation of an empire. There will be a new world in which men will have to think and move differently from what they did in the old. Young men will want better openings in life, not needing to go out to foreign lands in order to earn their living as did my own sons when they came back from the last war. We ought to be able to provide in the future not only the markets for our industry, but the brains, sinews and muscles of every Britisher, in whatever part of the world he may be placed. We have sustained the brunt of this war, and I know of no better bond than that of the man who impresses upon a note the promise that, if given the power, he will work, and pay.

I have no fear that we shall not be able to rise to the occasion. Sacrifice has been unquestioningly made by the youth of this nation in the war. They have gone out to protect a sacred little bit of their country, a bed or a fireplace in the ordinary surroundings of the cottage or the mansion, in order that they might be able to come back to their own homes when it was all over. Every man in the three Fighting Services is looking forward to the day when he can come back to a happy, peaceful England. It is for legislators and others who have the true interests of the nation at heart to co-operate to prevent that hope being disappointed.

When the war is over, we shall not go into a time of dreams and imagination. There will be a hard world before us, not roses and sunshine. Markets will have to be found, and work be done. The foundations are being laid to-day. The prospectus is now being placed before us. I can see country life being revivified, industrial plant coming to life in our engineering factories, industries getting rid of rotten, obsolete stuff and putting up-to date machinery in its place. Employers will be compelled to pay an honest wage to their workers, who will give a fair return by the use of up-to-date machinery. In the past, that has not been the case, industries having been bolstered up with improvised machinery which no foreign firm would have tolerated. In future cheapness must not interest us as a nation. We must produce the best, after studying the results of scientific research, and, with the help of the State, this country's factories and workmen will enable us to meet our liabilities.

I am pleased that the Chancellor has to-day brought forward a Budget which will make men think and work for a system in which we shall work in cooperation, and in which new machinery will be given a chance to operate. The technical school will have to take the place of the grammar school, and many boys will have to be taught trades in order to become skilled craftsmen. If we get co-operation we shall get a happy family, and there will be no fear of not having a chance for a fuller life.

Sir Robert Tasher:

In considering Budget proposals we first ask whether they will inspire confidence, and secondly, whether they will be agreeable to the majority of the people of the country. The third and most important question is, Are they just? In view of the fact that no alterations are proposed by the Chancellor to present taxation, I suggest that now is the time to correct Sections of former Acts which operate oppressively against one section of the community. I therefore invite the attention of the Chancellor to Section 7 (7b) of the Finance Act, 1894, which says: The value of the benefit accruing or arising from the cesser of an interest ceasing on the death of the deceased shall if the interest extended to less than the whole income of the property be the principal value of an addition to the property equal to the income to which the interest extended. I submit that this language is unintelligible gibberish to the ordinary layman. It has been interpreted by the Estate Duty Office in the following manner: If a person dies and leaves stocks and shares, and there is an annuity on those stocks and shares, no duty is payable, but if the annuity is upon property, then duty is payable. In other words if Mr. A secures an annuity from the Post Office or from an insurance company no duty is payable. If, however, the same amount of annuity is upon property duty is payable. There is nothing to prevent the Post Office or the insurance company investing the sum paid for the annuity in land or in any other commodity. This cannot be right. I suggest to the Chancellor that here is an opportunity to correct this misinterpretation of what a former Parliament meant.

There is another direction in which I invite the Chancellor to make investigation, and that is the extraordinary number of Rules and Regulations issued by the Treasury which have all the force of law. The House is not consulted about these things. The Horse has given the Treasury power to make Rules and Regulations, which they proceed to do. They can and do interpret and give rulings in any manner they choose. May I point out that in the majority of cases when such a ruling is given the taxpayer is in the unfortunate position of being defenceless? His only remedy is through a court of law. The majority of people cannot afford to contest the ruling in court. The rich man might, certainly, but the ordinary individual cannot, if it is a contest with the Inland Revenue or one of the various Departments acting under the Treasury, because he would be facing ruin. One knows from experience that if one is in conflict with the Inland Revenue or a Government Department one's redress is to a court of law. If the Inland Revenue lose they go to the Court of Appeal. If they lose again they will go to the House of Lords. Having gone through those three stages the small man will be hopelessly ruined.

I want to submit to the Chancellor that this is un-English. It is unconstitutional, it needs correction. Do not let us drift into the position of regarding the State as a deity and the official as omnipotent. In a case which I sent to the Chancellor of the Exchequer, a trustee is bound to comply with the law and in endeavouring to do so he may run foul of the demands of the Exchequer. One might not as a trustee agree to the value of the property of the trust made by the District Valuer, why may say it is worth X pounds. If the trustee disagrees he is placed in a most unfortunate position because he is required to make a false declaration saying that the property is worth 25 to 50 per cent. more than its real value, which will be to be placed in an impossible position. He is compelled to pay the demand of the Estate Office. Surely, this is the opportunity, in the Budget, to correct something which is quite wrong.

Let me give another example. The House determined that for purposes of war damage the value of property shall be that of 1939, but the same Treasury, through the District Valuer, value the property at what he considers the value at the time of death, namely 1944. If they value the property to-day at 50 per cent. more than before the war the successor to that property will have to pay duty on that 50 per cent., though if the property were destroyed by enemy action the amount of compensation would be limited to the 1939 value. I will not weary the Committee by quoting dozens of instances, but I am saying to the Chancellor that such an extraordinary condition of affairs undermines the confidence of a vast number of people who have invested their all in property. No Government can expect to enjoy the confidence of people who feel that they are victims of oppression through a Government Department. I regret to have to criticise the Treasury because I would pay tribute to one section of it, the Inland Revenue, which deals with Income Tax. My experience is that their decisions are governed by equity. After all, in this House we are responsible for the legislation they administer, and I am bound to say that I believe the Inland Revenue officials find themselves in the same unhappy position as the taxpayer. Do let us bear that in mind. In any strictures I may indulge in in connection with the Treasury I am not unmindful of the fact that many of their difficulties have been brought about by ourselves. Do not let us put the blame on the wrong shoulders.

I will give one short quotation from the Prime Minister. He said this: It must be remembered that the function of Parliament is not only to pass good laws, but to stop bad laws.—[OFFICIAL REPORT, 4th April, 1944; col. 1803, Vol. 398.] I appeal to the Chancellor of the Exchequer to make directions and bring to an end these bad laws. It seems to me that unless it is done under the Financial Resolutions there will be no other opportunity during the year. I am one of those who said that I would wholeheartedly support taxation up to too per cent, on profits made out of the war. But with the qualification that such taxation should include everybody; it should not be limited to employers. If it had included everybody, many of our labour troubles would have been avoided. Mr. W. L. Moylan said recently that the Excess Profits Tax is unjust, and he gave this reason: It is, in fact, equivalent to saying to a worker, 'You shall not earn any more wages beyond your pre-war amount, no matter how efficient you are or how hard you work.' The Chancellor has pointed out that, in certain mitigating circumstances, a 20 per cent. repayment is to be made at the end of the war. I wonder whether it would be wise to say to the whole of the manufacturing community at the end of the war, "Here is 20 per cent. of the Excess Profits Tax that you have paid during the war." Would they be able to spend it; would labour be available, would materials be available? It should be recollected that there will be £250,000,000 to £300,000,000 repaid to operatives, described by a former Chancellor of the Exchequer as a nest egg. If you are going to throw all that money on the market, I seriously suggest to the Chancellor that there will be the danger of inflation, because there will be so much money to spend that people will be just throwing it about. I observe that other Members wish to address the Committee, and, therefore, I will cut out about 90 per cent. of what I had risen to say. I have made it a rule to address the House for not more than 10 minutes, and I intend to observe that rule to-day. I hope that what I have said will engage the attention of the Chancellor of the Exchequer.

Photo of Commander William King-Hall Commander William King-Hall , Ormskirk

I will certainly keep within 10 minutes with the few observations that I wish to make. I wish to pay my tribute to the Chancellor for what he has said to-day, and to explain why I liked his speech. The feature about his speech, and about the whole way in which the Budget was presented, that struck me was that it was essentially a non-party approach to our economic problems, an independent person's approach to these problems. It comforts me, as an Independent supporter of the National Government, to notice that the Chancellor of the Exchequer has not a party label tied round his neck in the books of reference. If it is good enough for him, it is certainly good enough for me to be described as a National Member of Parliament. Another thing about the speech was that it was essentially non-emotional. It was a scientific examination of our economic problems, based, I am sure, on a very careful examination of the facts put before him, no doubt, by his experts. I was not surprised at that, because I think that my right hon. Friend has a scientific mind. If there was any emotion in his speech, I thought I detected it in those passages in which he was able to make taxation concessions in the interest of scientific research. That seemed to me to be, in particular, the part of his speech which came from his heart as well as from his head. One of the dangers to which we have to face up is that not only is an enormous amount of nonsense talked about our economic problems, but an enormous amount of emotional nonsense is talked about them.

One could describe the Chancellor's attitude as coming between two extremes. One extreme is the school of thought which says that pounds, shillings and pence do not matter any more. One hears it said—and I am bound to say that it is a view taken by many people in this country—"One thing that this war has done is to show us that it is no good saying that we cannot afford to do anything." That is one extreme statement; on the other side there is the extreme statement, "Finance governs everything." Neither of those statements is true: they are both mis-statements, and the truth lies between them. The great value of my right hon. Friend's speech was that it was a corrective between those two extreme statements: on the one hand, that pounds, shillings and pence do not matter any more, and, on the other, that finance is the governing consideration. What the Chancellor really told the nation is, "You cannot afford everything at once, and, if you want to have anything at all, I will tell you what you have to do. You have to be efficient and you have to export. Those are the two fundamental considerations, and your standard of living will entirely depend on the efficiency with which you produce, which, in its turn, will govern the price for which you can export abroad."

Another point about the Chancellor's speech will, I believe, be noted in the history books of the future. I believe that he was deliberately laying the foundations of a long-term economic policy. There was a continuity about it. I have not been in the House long enough to have heard many Budget speeches, but I have read many of the Budget speeches of the past. Nobody reading the Budget speeches of the last 50 years will find any real economic continuity running through them. To-day, the Chancellor has laid the foundations of a continuity of economic policy. A corollary goes with that. I would like to support what was said by my hon. Friend the Member for the Scotland Division of Liverpool (Mr. Logan). He drew attention to the need of co-operation in industry. Of course, that is going to be the essential thing: there must be co-operation in industry between capital and labour. But I would like to ask the Committee, both sides of it, Can you have co-operation between capital and labour, the kind of co-operation which is going to be essential to the successful carrying out of this long-term economic policy, of which the Chancellor has set up the framwork to-day, if you are going to have a political dogfight in Parliament between the parties? If you are going to have that co-operation, it will have to be running right through not only the economic side but the political side of our life as well. I am naturally prejudiced about this, but I cannot see how any Chancellor of the Exchequer, whether it is my right hon. Friend or one of his successors in a year or two, will be able to get up and make the kind of non-party, independent-minded, scientific speech about our economic problems that my right hon. Friend has made to-day without cooperation at all levels of our national life. I cannot see how my right hon. Friend, or his successor in a couple of years' time, is going to be able to do that if there is, in fact, a party dog-fight going on in this House, unless, by one of those extraordinary modifications of functions which the British people are able to bring about, the Chancellor, although a member of the Government, is not regarded as a party politician. That seems to me to be a more difficult thing to bring about than to stop the party dog-fight.

In one last word, I want to appeal to the Chancellor. I think he said somewhere in his speech something to the effect that so much depended on the self-discipline of the nation, and I strongly agree with him there. If we cannot get the nation to realise that a certain maintenance of control and maintenance of saving, about which I spoke in an Adjournment Debate last Friday, which I hope the Chancellor will look at, if we cannot get the nation to do this by self-control, no amount of pressure from above is going to have any effect and the Chancellor's policy falls to the ground. I therefore submit to him the constructive suggestion that the Treasury should give thought to the question whether it is not the function of the Treasury, operating through the Ministry of Information, the B.B.C. and other organs of publicity, to begin the task of educating the people of this country in the economic facts which the Chancellor set forth so brilliantly, lucidly and clearly in his speech to us to-day.

The facts of war finance are set out in the admirable document presented by the Financial Secretary, but it is not a popular document. It is very popular among people trying to write popular articles or make broadcasts, because there is first-class material to be extracted from it, but it will not be a best seller nor is it intended to be. I ask the Chancellor to consider whether it would not be reasonable for the Treasury to produce a document informative to the public on what our financial system has done during the war, just as the War Office, the Admiralty, and Bomber Command produced their popular, yet accurate, books describing their achievements on the war front. The whole essence of the Chancellor's policy which he has launched to-day will disappear unless it is supported by the voluntary sef-discipline of the public, and I am sure the Chancellor will not disagree with me in saying that, in order to get that discipline, the public must understand what it is all about, what inflation means, and so forth. The blessing of the situation is that the public want to know about these things. They want this information and are thirsting for it, and I hope the Treasury will not think that to provide the public with this information and instruction is one of the least important of its duties.

Photo of Lieut-Colonel Sir Walter Smiles Lieut-Colonel Sir Walter Smiles , Blackburn

I would like to congratulate the Chancellor on having tried to erect an Anderson shelter over industry. Everybody here knows very well that our soldiers, sailors and airmen, and everybody else in the country, in the long run depend upon the industry of this country being efficient, and so I would thank the Chancellor, on their behalf, for the concessions he has made in the direction of science and in the depreciation and obsolescence of machinery. When I was in Blackburn last week-end a man there said to me, "It is going to be very dangerous in this country, because we are going to be left with mills full of old machinery, and all our machinery manufacturers in England, and in the United States, and perhaps even Germany, are going to be getting to work to re-equip the mills and factories all over the world, while we here will be left with the old-fashioned stuff." It seems to me that the Chancellor has gone some way, in his Budget speech to-day, to meet that fear. We all remember that, after the last war, as was illustrated in the film, "Colonel Blimp," people said that we were a trading country and must put Germany on her legs again. As we all know, a tremendous lot of money was put into Germany, both by us and the United States, to re-equip that country, and we know the result.

As well as that, I think the Chancellors of the future must keep an eye upon the money sent from this country overseas. Look at Brazil. Brazil is starting a lot of manufactures at the present moment. Look at the Argentine. The Chancellor cannot say this, but I, as a back bencher, can say it. They got the money and the materials from us and then they do not pay us back. I do not mind them not paying us back when they are down and out themselves, but now these countries are very prosperous, and yet they are not paying their debts. One bank in San Paolo reduced the interest on its gold bonds issued in this country from 6 per cent. to 2 per cent., while at the same time paying 20 per cent. on its ordinary shares in its own country. Look at the Argentine railways and the dividends they are paying. Look at the Primitiva Gas Company. The Argentine Government are alleged to be only offering a quarter of a million for a property worth many times that amount. That money, if paid up in full, would come to this country and improve our exchange, but if they only pay a sixth of what people say the property is worth, taxpayers in this country will have to make up the deficiency.

I think many of us, especially those connected with small, director-controlled companies, ought to thank the Chancellor for the concession described on page 13 of his Financial Statement. It is a very important one indeed to the small man, especially director-controlled companies. As the Chancellor said, it is proposed to increase by £1,000 their standards which are not computed by reference to the profits of a standard period. I think that is a most valuable contribution. Of course, you always get these borderline cases, and it is impossible for any Chancellor to legislate for them all. One could have hoped—but I am afraid it would cost too much—that the Chancellor would cut out the words, "which are not computed by reference to the profits of a standard period." That might cost too much money, but it would certainly make a difference to a great many companies and enable them to buy new machinery now.

I may quote one borderline case. I know a company, with the small capital some £20,000, which had a new engine on order which would cost more than 10 per cent. of its capital. This engine was on order in 1939, but, of course, the war came along and the engine could not be bought. This year, by using as much pressure as they could in putting forward their case, the company has at last got permission to buy the engine, and it is being manufactured now. But they fail, between two stools, because neither did they get the engine when it was cheap in peace-time nor, so far as I can see from what the Chancellor has said to-day, will they get any benefit from the Chancellor's proposal, as they would if the engine, which will have to be paid for in 1944–45, was to be bought in 1945–46.

I would point out to the Chancellor of the Exchequer that some of the countries inside the British Empire have not the Excess Profits Tax of 100 per cent. I am not saying I disagree with our 100 per cent. tax, as probably, on the whole it has worked out fairly, but, on the other hand, there are companies inside the British Empire manufacturing cotton and other things which only pay an Excess Profits Tax of 66⅔ per cent. Say an Indian and a Lancashire company each makes:£100,000 per annum more than its pre-war standard. At the end of five years the Indian company will have £150,000 more than the company in Lancashire and naturally will be in a much better position to put in new machinery and re-equip. The Chancellor of the Exchequer must pay very great attention to industry. The prosperity of all— the doctors, the dentists, the soldiers and sailors, all—depends upon the industry and the manufacturing ability of this country.

Photo of Mr David Kirkwood Mr David Kirkwood , Dumbarton District of Burghs

And the employers and shareholders.

Photo of Mr George Griffiths Mr George Griffiths , Hemsworth

It is the workers who produce everything.

Photo of Lieut-Colonel Sir Walter Smiles Lieut-Colonel Sir Walter Smiles , Blackburn

All is produced by the man who works with his brain and the man who works with his hands. I am sorry that the Chancellor has not been able to grant some relief on one thing. The people who have suffered most from taxation and the war are the young married people with children. I hope that when he is able to make any alleviation of taxation he will first consider the young married people with two or three children. We have had Debates showing how the birth-rate has been falling and high taxation is largely to blame, but I believe it is very hard indeed for young parents to bring up children properly at the moment. I look forward to the time when Chancellors of the future may be able to allow £100 per annum free of tax for each child under 16.

Photo of Mr Thomas Brown Mr Thomas Brown , Ince

I want to add my compliments and congratulations to the Chancellor of the Exchequer upon his very able Budget speech. Perhaps it is due to his vast and comprehensive experience in the many walks of life along which he has travelled, but he certainly arrested our attention and compelled us, by his logic and eloquence, to focus our thoughts upon many things of great importance at the moment. He also carried us, with a great depth of vision, into the future, and what the future might hold for us, provided—and he made this stipulation very clearly and forcibly—we all played our part, business men, industrialists and workers. The success of the future, particularly in the post-war period, would, he told us, be dependent very largely upon how we played our part.

I was greatly disturbed by his long reference to the increased wages of the many classes of workers in this country. He gave to the Committee the impression of a sense of danger which would arise from increasing the wages of the workers of this country. He appeared, at the tail-end of his deliberations, to be rather scathing in his remarks, suggesting that an increase of wages given to the workers of this country, would be a potent danger. On that point I completely and entirely disagree with him. I believe that, not only now, but in the days which lie ahead, the increased wages which have been conceded to the workers of this country, due to war-time conditions, will stand this country in good stead, provided those wages, such as they are, can be maintained. It would, however, be idiocy on the part of the Government or industrialists or business men to attempt to reduce the wages of the workers of this country.

Photo of Mr George Griffiths Mr George Griffiths , Hemsworth

There will be a row if they do.

Photo of Mr Thomas Brown Mr Thomas Brown , Ince

Whether there is a row or not the future can only determine, but if we have to pull together, we have to pull together in the right way. It may be true to say at the moment—I have listened to these arguments both from these benches and from the opposite benches—"What is the use of giving workers high wages if they cannot purchase the goods?" While it may be true that there is a limitation on the spending of these high wages on the goods that they need, there is this to be said: While they cannot spend their wages on the things they badly need, because of the rationing scheme, they are investing their money in savings, and they are entitled, at least, to some compliment for that. They are saving their money when they cannot buy goods. But there will come a day—and the Chancellor was very optimistic—in the very near future, when the replacement of the goods which the workers so badly need, will have to take place. They will have to spend their money. I have always understood that the British working man is the best spender in the world, if he has the money to spend; and because he has it to spend, he creates additional employment and keeps in employment those men and women who produce the goods he requires.

I was very glad to hear what the Chancellor had to say on how he proposes to tackle the question of research work and scientific investigation. He has certainly been very sharp on the uptake after the Debate a few days ago. He has shown himself capable of seizing upon an opportunity after the Debate on scientific research. I was particularly pleased to bear his reference to research in coal and oil. As an ex-miner, I believe that coal, which has, rightly, been described as the all-purpose commodity of this country, has been, to a very large degree, wasted in the past. A great many of the byproducts which ought to have been produced in this country have been allowed to flow freely away. At the moment we are told by the scientists that coal contains 240 by-products; we are only producing at present about 40. In the main, in this country we concentrate upon the production of four by-products from coal; one is gas, another is coke, another tar and ammoniacal liquor. Millions of gallons of ammoniacal liquor go down the sewers of this country, and this could have been avoided and it could have been used for the purpose of developing and increasing the productivity of our soil by the application of sulphate of ammonia, which is a very valuable fertiliser. I was very glad to note that the Chancellor is prepared to lend financial assistance to that particular aspect of research and scientific investigation.

I was also delighted to hear him make reference to the potential productivity of industry in the future. We have heard it said from time to time, not only in this place, but in another place, that this is going to be a poverty-stricken country after the war. I refuse to believe that we shall be poorer after this war, and the Chancellor has indicated that to-day. The potential productivity of this country cannot be estimated or described. We are possessed of the raw material and of the man-power, of the engineers and of skilful technicians and—I put this proviso in—if we can marshal all the forces that have been marshalled for the purpose of prosecuting the war, to the present stage, we can marshal those forces in such a way that the potential productivity to which the Chancellor referred will be an accomplished fact.

I have one regret. I was hoping, as the Chancellor proceeded with his speech, that he would make reference to some alleviation of the dire need of the old age pensioners. I was anticipating that he would, at least, come forward with something of a tangible character for the old-age pensioners of this country. He had an opportunity, but maybe he wanted to claim that he was presenting a Budget which did not increase taxation: I think, however, that if he had introduced some new taxation, which was devoted to the alleviation of the poverty-stricken conditions of our old age pensioners, not one hon. Member would have made any complaint.

While the Chancellor has given the Budget for the country, I want to give the budget of our old age pensioners. Here is a budget for the accuracy of which I can vouch, of a single pensioner living in lodgings. His total income is 225. per week—10s. old age pension, 125. supplementary. Now for the expenditure. He has to pay 6s. a week for lodgings, 4s. 6d for two ounces of cheap tobacco—he is helping the revenue of this country—boots and clothes club 3s., recreation is., insurance to avoid a paupers funeral 6d., various things such as soap, razor blades and all the other incidentals which go to make up "the daily round and common task," another is. He has a total expenditure of 16s., but that does not include his food. He has 6s. left to provide 28 meals during the week, four meals a relay seven days a week. It works out at approximately 2½d. per meal. I do not think any man—I have made this challenge before—either on the other side of the Committee, from that Front Bench, or out in the country can justify the continuance of the inadequate pensions now being paid to our old age pensioners.

May I put another budget very briefly? It is the budget of a pensioner and his wife. They receive 205. old age pension and 19s. supplementary pension, a total income of 39s. Rent is 8s. a week, coal 4s. 6d. a week, boots and clothes club 5s., insurance is., two ounces of cheap tobacco 4s. 6d., household replacements is. 6d., light is. 6d. So you go on until the total expenditure for the things they require other than food is £I 10s, which leaves them with 9s. to provide not 28 but 56 meals, and this works out at just under 2d. per meal. Then examine what the old age pensioners of this country are called upon to do in the light of what has been done in connection with other walks of life. If you examine the cost per meal at British Restaurants, which are models of efficiency and cheap feeding, they, with all the modern appliances and opportunities to buy bulk raw material, cannot produce a meal at an average price of less than is. Even school feeding—

Photo of Lieut-Colonel Sir William Wayland Lieut-Colonel Sir William Wayland , Canterbury

May I say to the hon. Gentleman that in my constituency the British Restaurants are offering very good dinners at 8d. and 9d.?

Photo of Mr Thomas Brown Mr Thomas Brown , Ince

I do not doubt for one moment that the experience of the hon. Member opposite is of that character. I happen to be chairman of a British Restaurant, and we can produce meals at 9d., but I said that the average, taken over the whole country, according to recent figures published, is 1s. per meal. Even education committees, subsidised by the Board of Education, cannot produce meals at less than 4d. per head.

Photo of Mr Thomas Brown Mr Thomas Brown , Ince

I gather I am right on that score at any rate. There is an opportunity afforded here to the Chancellor of the Exchequer to come forward with a bold, courageous policy. Let us cease tinkering with this business; let us get on with the job and settle once and for all the pensions that are to be paid to our old age pensioners.

Photo of Mr Samuel Hammersley Mr Samuel Hammersley , Willesden East

I do not propose to follow the last speaker, but to make one or two general observations on the Budget Statement. I would like to add my voice to the voices of previous speakers in congratulating the Chancellor of the Exchequer on an informative, impartial, scientific statement of our financial affairs. What pleased me particularly about the Chancellor's statement was that he emphasised, in effect, that wartime finance is not so much a balancing of revenue and expenditure as the use of our financial resources as an instrument of policy. It is in respect of that financial policy of which the Budget Statement is a main indication that I would like to make one or two observations.

Before I come to that I would like also to congratulate the Chancellor on removing certain hardships in connection with our industrial taxation matters which have pressed themselves on his notice. In connection with E.P.T., those concerns whose capital or substituted standard is the standard on which they are to be taxed, are to have this standard increased by £1,000. That is all to the good, but it will possibly create certain anomalies and I would like the Financial Secretary to reply to this particular point later in the Debate. The Chancellor has given this extra £1,000 as an addition to the E.P.T. standard of those concerns whose E.P.T. standard is fixed by consideration either of their capital, or of some substituted standard, but he has not given it in the case of concerns whose E.P.T. standard is fixed in relation to their profits. Supposing you have a company whose profit standard is £2,500 and whose capital standard is £2,000. They have, of course, chosen their profits standard which is £2,500. Now, under the proposed legislation if they had in fact chosen the capital standard, their standard of profits for E.P.T. would be £3,000. In circumstances like that, will companies be given the opportunity to go back from their profits standard to either a capital or substituted standard and thereby gain the advantage of this £1,000 additional standard? This is a matter of some interest, particularly to the small concerns whom I imagine the Chancellor desired to benefit.

As I have said, the main interest of the very informative statement by the Chancellor was that he was using the financial resources of the country as an instrument of financial policy to direct our affairs and not merely to balance our revenue and expenditure. The first thing I noted was that he considered it to he of the greatest importance to prevent inflation. As I understood the Chancellor, he was not saying that there ought to be high wages, or in any way impugning the policy of high wages. What he did say was that it was essential to retain the proper relationship between wages and prices. He pointed out that in order to keep prices down, the community had, from year to year, to provide substantial sums of money and that awing to the development of the war, these necessary subsidies were increasing rapidly and that in such circumstances he could not continue indefinitely this system which divorced wages from prices—which allowed wages to go up and which called upon the community as a whole to keep prices steady. I thought that that was a very desirable statement of policy and something which, should have been pointed out.

Then my right hon. Friend dealt with the importance of our export trade, and with that I found myself in complete agreement, except' in so far as he seemed to suggest that exports were necessary in order to maintain full employment. I am not quite sure that that is the right emphasis to express. I think the proper way of looking at exports is that they are essential in order to pay for imports, and that it is because we propose to follow an internal policy of full employment that we require essential imports. Therefore, as we have to pay for these imports, we must have exports. Personally, I do not think it is hardly the right way of looking at the problem to say that exports are essential as a means of maintaining full employment. I think we should make it quite clear that we do not intend, in future, to carry out the policy which was carried out by practically all other countries during the great depression of 1929–32 of endeavouring to export our unemployment. That is in my judgment an entirely wrong policy.

We should realise that prospects for our exports depend upon an expanding world trade and that we should not, if we get into difficult circumstances, endeavour to stimulate our export trade merely in the hope of reducing our unemployment. Such a policy, in turn, would result in other nations bringing embargoes against our exports, which would result in a restriction of world trade from which all nations would suffer. It is in the belief that expanding world trade is the only solution of our problems that I rather regretted that the Chancellor did not say something about the necessity of entering into financial arrangements, in connection with exports and so forth, with the United States of America. I, personally, welcome greatly the publication of the recent Stabilisation Fund proposals. I understand there is to be an opportunity for a Debate on those proposals and, therefore I will not deal with that now. I hope to have a later opportunity of saying something on the particular proposals in connection with that Fund, because the arrangements which we can make between ourselves and America will indeed determine whether or not we shall have a really expansive world economy.

The third point of policy which I noted in the Chancellor's speech, was the question of the rehabilitation of British indus- tries. I welcome the arrangement which the Chancellor forecast. He told us that the initial cost of new plant, machinery and buildings would be-in varying degree allowed as a charge against the profits of the business; he told us about increased depreciation allowances and he told us that obsolescence allowances for old machinery would be admitted, even if that particular machinery was not replaced. All these proposals are very much to the good, and I am sure that my right hon. Friend's remarks in connection with research, were welcomed in all parts of the Committee. But I was a little disappointed that it was all to be in the future; that he did not indicate that something would be done now. If we wait until the cessation of hostilities to put in the whole of this new plant, and make these various necessary arrangements in connection with the rehabilitation of British industry, we shall find it very difficult. I make the plea, in conclusion, that something should be done, even before hostilities end, to fill our requirements of new machinery and equipment, which requirements are very much in the minds of all people who are concerned with the future of British industry.

Photo of Mr Thomas Sexton Mr Thomas Sexton , Barnard Castle

It is impossible to grasp some of the large figures that have been placed before us to-day. It is beyond the human intellect to realise a National Debt of £19,000,000,000. If we take the population of the country at 46,000,000 and average it out, every man, woman and child is in debt to the extent of £426. When we examine the National Debt and find that much the greater part of it has been spent on war, we are inclined to ask whether it has been worth while. It has been said that the price of liberty is eternal vigilance. The price of liberty, in hard cash, is the major part of that huge National Debt which we have paid and are prepared to keep on paying till we secure liberty for all the freedom-loving nations of the world. When we come to our annual expenditure, the figures again are astronomical, but the average is something that we can understand. The expenditure in 1943 amounted to £178 per head. We have now reached the happy state of providing by taxation a half of that huge expenditure, and that is a very satisfactory state of affairs on which the country can congratulate itself, because never before in the history of war has this country reached such a high percentage of revenue to expenditure. No other of the United Nations has reached that high figure.

I should like now to discuss the bridgehead which the Government are setting up, to pass over from war to peace. The Chancellor gave us an encouraging report on what the Government propose to do to assist industry. That is the foundation of a full employment programme, and I am sure everyone will be pleased at what the Government propose to do. But I endorse what has been said from these benches with regard to the Chancellor's pronouncement as to the disadvantage sometimes of high wages. The Budget will be an encouragement not only to those who have heard it expounded, but also to our fighting forces, because it expresses the determination of the country to go right through and win the war. We have been and are still having "Salute the Soldier" weeks. This Budget is not only a salute to the soldier, but to all the Forces wherever they may be, and the saluting base for them is the post of duty wherever that may be, on the beachhead at Anzio, on Monastery Hill at Cassino, in Burma, whether it is high in the sky or anywhere on the Seven Seas. I congratulate the Chancellor and his able assistant on producing such a Budget. I also want to thank them and Members of the Committee for the support they are giving to it, because it will be an inspiration to the boys and girls who are standing at the post of duty.

Photo of Mr John Tinker Mr John Tinker , Leigh

I may not be as fulsome in my praise of the Chancellor as others have been, but there is one point to which I want to draw attention and on which I would ask for an explanation. I gathered that the subsidies given to stabilise prices are going to be interfered with to balance the rise in wages. The right hon. Gentleman mentioned that the cost of living had gone to 28 per cent. and remained there and that the subsidies which had gone up from £10,000,000 to £190,000,000 and would probably go beyond £200,000,000, would have to be examined. That conveyed to me that subsidies are going to be cut down to allow the cost of living to rise. If that is behind the right hon. Gentleman's mind, there is only one answer to it—that the spiral will continue and there will be an attempt to get increased wages. The stabilisation of prices has meant to fixed incomes, and lowly incomes, some kind of security in war-time. No one objected to it. It was welcomed by all. Some of us wanted to go further and give greater subsidies, so that those with lower incomes would be sure of getting the commodities of life that they are entitled to. I should like some fuller explanation of the right hon. Gentleman's statement. If it means what it suggests to me, the Budget is going to create a serious position.

I thought that, on the whole, the Chancellor's speech tended to back up private enterprise. If he is going to see that private enterprise gets all the advantages that can be got, it will not be a satisfactory Budget. I want him to be careful how he pursues this line, because we on these benches stand for an entire change of the social system. He must not back up private enterprise to enable it to retain its present hold on the community, and I hope that he will have some regard to the feeling in the country. I want to make a reference to the late Chancellor. I heard each of his Budget speeches, and I felt that he was an able, industrious, astute man, who knew all the moves of the game and tried to meet the wishes of the House of Commons. Another man who is missing in the present Budget Debate is my late friend David Adams, who was Member for Consett. Everybody remembers him sitting on the bench behind me waiting for his opportunity, and he was generally the last to speak on the first day. He was a man who commended himself to us for his keen attention to finance. I was looking up the other day the speech that he made on the last Budget, and I refer to it because it leads me to my present theme. This is what he said after my speech: I sympathise fully with, and declare my self an adherent of, the view expressed by my hon. Friend the Member for Leigh (Mr. Tinker), that if it is desirable to conscript life, it may be equally desirable to conscript wealth."—[OFFICIAL REPORT, 12th April, 1943; col. 1027, Vol. 388.] There is no attempt in the Budget to deal with the equalisation of wealth. We cannot get any satisfactory progress until that matter has been fully dealt with. Reference was made in one speech to a man with an income of £72,000 a year who paid £67,000 in taxes. That would lead us to believe that rich people are getting fewer, because all their money is going into taxation. I have here, however, a long list of fortunes left by people and published in the papers for April. I have been watching them to see whether there is any reduction of rich people in the country. I have here reference on one day to fortunes of £180,000, £80,000 £70,000, £39,000 and £19,000. On the next day there were fortunes of £140,000 £98,000, £65,000, and £63,000; and on another day there were fortunes of £787,000, 136,000, and £103,000. If these people pay such a tremendous amount by way of taxation, how do they retain these vast sums until they diet The Financial Secretary replied to me when last I raised this question and said that I was wrong in thinking that fortunes had been acquired in war time. They are, however, still being acquired in some way or another. If they are not acquired in war time, some people have done jolly well in times gone by. The system is wrong that allows that to go on. This is a kind of thing on which Members like me feel strongly in a position such as the present one. There is an item in the Financial Statement to the effect that there will be an increase of £11,000,000 in supplementary pensions.

Photo of Mr Charles Williams Mr Charles Williams , Torquay

I am afraid that we cannot go into the question of supplementary pensions or into matters of teachers' or Service men's pay. They are right outside this Debate.

Photo of Mr John Tinker Mr John Tinker , Leigh

I may be wrong, but I want to challenge your Ruling, Mr. Williams. This item is in the Financial Statement, and I claim the right to deal with what is in that statement. Your predecessor in the Chair allowed this matter to be dealt with.

Photo of Mr Charles Williams Mr Charles Williams , Torquay

We have had this question again and again before the Committee, and it has always been ruled that the Committee cannot, on Budget day, go into questions of pay, pensions and things of that sort. Those matters must stand, on their own, in the Estimates.

Photo of Mr Arthur Woodburn Mr Arthur Woodburn , Clackmannan and Eastern

Has not the Chancellor intimated through this White Paper for the first time that there it to be an extra £11,000,000 spent on supplementary pensions? While I agree with your Ruling, Mr. Williams, that it would be wrong to discuss the whole question, I respectfully submit that my hon. Friend is in Order in discussing the Chancellor's estimate for the coming year.

Photo of Mr Charles Williams Mr Charles Williams , Torquay

I think not. The whole object of the Estimates is to deal with the various questions covered by them. To-day we are dealing with the finances of the country.

Photo of Mr John Tinker Mr John Tinker , Leigh

Do I understand, Mr. Williams, that you are ruling me out of Order in dealing with supplementary pensions, which is an item in the Financial Statement and was referred to by the Chancellor and other speakers? Am I not allowed to draw a comparison between those who own the wealth of the country, and those who have no wealth, and to deal with the question of the way in which the money should be raised?

Photo of Mr Charles Williams Mr Charles Williams , Torquay

I must be quite plain on this. We deal with supplementary pensions on an Estimate which relates to them. We certainly cannot then bring up questions of taxation and methods of collecting the money for them. In the same way, when we discuss the collection of the money, we cannot deal with the question whether these pensions should be raised or not. What the Chancellor said was that money was wanted for this, that and the other thing, but he did not go into the details of why it was wanted. He simply stated that it was wanted for pensions and I did not hold up the hon. Member for referring to that. I held him up to stop him going further into the pensions question.

Photo of Mr John Tinker Mr John Tinker , Leigh

It is difficult to challenge your Ruling, Mr. Williams, because you are generally so fair, but I feel very keenly on a matter of this kind. I will leave the matter now and follow it up at some other time. Although everybody is pleased that there is no increased taxation, I am not altogether satisfied with the Chancellor's statement. It had a conservative outlook on the present position and it seemed to indicate that the Chancellor wants to build up a system in line with the present system, with the old idea of private enterprise governing our lives. I do not think that that is the view of the country, and it ought not to be the view of this Committee. I hope that the Chancellor will pay some regard to the feeling in the country, which is that we should work towards a co-operative system, in which all affairs should be in the hands of the State. If we back up private enterprise in this Budget, we shall do the wrong thing.

Photo of Lieut-Colonel Sir William Wayland Lieut-Colonel Sir William Wayland , Canterbury

I rise only to give expression to the agreement of the agricultural community with the Chancellor's statement about loans for reconstruction of farmhouses and farm buildings. It is saddening, when going through the country, to see the state to which farmhouses, cowsheds, not to mention fences, have been reduced because there has been no money, or very little, to put them right. The owner of the land who lets his farm has not the money, and the tenant cannot find the money, even if he wished to. It has been estimated that it would take at least £100,000,000 to put into a proper state of repair all the farmhouses in this country. The £1,000,000 or £2,000,000 will be gratefully accepted as a loan, and I hope that the sum will be considerably added to afterwards, so that in a few years' time we shall not see derelict farmhouses, or fences strung together with a little barbed wire, not for want of willingness to put them right, but for the want of capital. As an agriculturist, I express, on behalf of the agricultural community, our thanks to the Chancellor for what he is doing.

Ordered: That the Chairman do report Progress, and ask leave to sit again."—[Mr. A. S. L. Young.]

Resolutions to be reported To-morrow. Committee also report Progress; to sit again To-morrow.