Amendment of Law

Orders of the Day — Ways and Means – in the House of Commons on 27th April 1944.

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Question again 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 J. Anderson.]

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

When one contemplated the Chancellor's task in introducing the Budget this year, one felt that since there were unlikely to be any changes in the Budget, it would be rather a difficult matter for him, with his well-known economy of words, to occupy the usual time in presenting the Budget Statement; but after we had heard that statement we realised that it was probably as full of economic meat as any "dish" that has even been presented to this House. I should also say that, from the point of view of the development of what might be called the educative discussions introduced by Chancellors in recent years, his speech marks a very notable contribution, and even an advance. Nobody expected any change; we have had plenty of post mortems about the past, and we expected some anticipation of the future, and in that regard we were not disappointed. After listening to the Chancellor and hearing the views of hon. Members I find we all regard it as a kind of "hope-for-the-future Budget." It could, perhaps, have been more optimistic. I think the Chancellor might be described as a cautious optimist, which would be in line with his race and also with his general outlook, and I do not think we could say that it was in any way a pessimistic Budget.

He gave us a very justifiable warning about inflation, a question to which I should like to devote a few words, because it is one in which I have taken an interest for many years. The question of inflation is a very complicated one, and is difficult, perhaps, to follow, and I at least have to reduce it to rather simple language to bring it inside my own comprehension. I think the Chancellor was wise in calling attention to the danger of starting a spiral of increased prices, increased wages, and again increased prices and increased wages, and so on round the vicious circle. It ought to be made clear to the people that merely increasing the money of the nation, does not add one pound of sugar or one ounce of tea to what is in the shops. It would be a simple matter, from the printing point of view, for the Chancellor to double everybody's wages by printing the next issue of £1 notes with a "2" on them instead of a "1," but it is clear that issuing £2 notes instead of £1 notes, does not increase the real wealth of the nation, and it is a mistake for workers and firms and others merely to seek after more money, if the money does not represent something real. Indeed, instead of being an advantage it might be a disadvantage, because it would reduce the value of the money we already have, and, eventually as we saw in Germany, make money almost worthless. I always remember a picture I saw of a cinema in Germany where the charge for admission was one piece of coal. The paper money was of no use. A note for a million marks could not have got one into the cinema, but a piece of coal would give admission. The only purpose of money is, as the right hon. Gentleman the Financial Secretary to the Treasury said in his speech yesterday, as a measurement of something real in the way of values.

The question arises, Have we inflated up to this moment? Our note issue has increased by about £900,000,000, and some people take the view that if we issue more notes, we are automatically inflating the currency; but that does not follow at all, because £1 notes are really substitute money for real money, which is still, as a matter of fact, based upon gold in our country—Whatever anybody may say, it is at least still measured by gold—and, so long as money power in the way of notes and currency is not increased beyond what is necessary to carry on the transactions of the country, we have not got inflation. There is no possibility of running modern industry on gold alone, and therefore we use substitutes for gold money in the form of paper, cheques and other currency. There is no distinction between printing notes and using cheque money based on credit created by the banks. So far as I can judge, for the purposes of the Government the banks have, since the war, created credit to the amount of about £2,000,000,000 by Treasury Bills alone, Treasury, deposit receipts have now reached a figure of £1,389,000,000. That money has necessarily come into existence because of the increase of production, the increase of activity and the necessity for more money to make payments and to facilitate transactions and the production of goods for use in war.

The creation of that money is not necessarily inflation, if it has not gone beyond the point where it is required to arrange the production of goods and their distribution in the proper way. A large part of the increase, therefore, represents goods and services. It is true that in time of war the services and goods which are created are wasteful eventually from the point of view of humanity; that is, we are producing goods for almost immediate destruction, and from that point of view they are not a great contribution to the building up of new wealth and means of production in the future. They are necessary as an insurance in order to preserve the existence of our society, and that is their purpose. It is like living in a house with fire breaking out periodically. In such a case the insurance premium would be a good bit higher than if one lived in a stone house; and when we are living in a world that is likely to blaze every now and then, the means of fire prevention must be greatly strengthened. Actually, however, there has been a great increase in the annual creation of wealth and services since this war began, and, therefore, also in the income of the nation. Money, as the Financial Secretary to the Treasury said yesterday, is the standard by which we measure our real production.

The money income of the nation has increased by £2,500,000,000, an increase of about 77 per cent, since before the war. But it is interesting to note that our personal spending—that is, what we consume for our own personal needs—has, in money terms, increased only by 20 per cent.; but when we come to the real facts behind the money, making allowance for the increase of prices and taxes and so on, our personal consumption of goods as a nation has decreased by 20 per cent., an this in spite of the fact that, in many parts of the country, people are probably getting more food, and that some people have a better standard of life than they had in normal times. Any inflationary effect that might have arisen from the existence in normal times of a large amount of spending power in the nation has been prevented by the various measures that have been taken. There is the absence of food in the shops and the absence of the kind of goods the people would buy, except perhaps liquid food, as some people describe beer, and in that case a large part of the spending comes back to the Chancellor and is really a gift to the nation without any demand for interest.

Photo of Mr Arthur Molson Mr Arthur Molson , High Peak

It is in short supply.

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

It is all the more remarkable that the Chancellor gets more money out of the shortage of beer than he used to get when there was a plentiful supply, which proves my point that a great part of that expenditure comes back to the Exchequer. Moreover, we have rationing and other controls. So long as these are in existence you cannot have the full effects of inflation, because we measure inflation by a general rise in prices, by their leaping upwards. If the Government keep prices down there cannot be inflationary effects during that period of control.

Inflation could take place in the case of goods outside controls, but here the Government have put handicaps on the purchase of those goods by luxury taxes and in other ways. Inflationary effects are observable in certain of the luxury goods which are outside the controls, but as those goods are outside the purview of the great majority of the people they are not really a serious factor. I think the Chancellor mentioned that £600,000,000 extra has been paid out in wages, and certainly that figure has been mentioned in some documents. Wages had gone up last year by over £700,000,000 since 1938, and those wages, if they came into the purchasing market, with the present scarcity of goods, would, of course, send prices sky-high, following the rule of supply and demand. But they are not coming into the purchasing market, because the things the people want are not there to buy, and partly also because the Chancellor recovers some of the money by way of taxation and some by the many persuasive ways by which the workers and others are induced to hand back their money to the Chancellor as loans.

In this connection I would make a reference to savings weeks campaigns. It is true that a great deal of the money which is collected during these savings weeks would come to the Government in any case. If workers are paying insurance contributions the insurance companies must invest the money somewhere, and at the moment it would probably go to the Government. Frankly, however, I see nothing wrong in an insurance company in London or Edinburgh which is gathering money from some outlying village or outlying town giving that town or village the pride of making these premiums as a contribution to the War Loan by adjusting its contribution in such a way that it sends in the money when that town or village is having its savings week. There is something worth while in ceremony even in these days, and if we are to make a sacrifice it seems much less hard if we all make it together and can feel that we are doing so in company. I have had the experience of raising money for other organisations, and I find that people are often prepared to pay 5s. for a ticket for something which is worth only 1s. in order to make a contribution. Because they are doing it in a social way they rather enjoy doing it, whereas if one were to ask them direct for a contribution of 5s. they would feel that parting with it was a terrific wrench. Therefore, I think the criticism of these savings weeks has been a little misplaced.

Photo of Mr Alfred Edwards Mr Alfred Edwards , Middlesbrough East

As one who has engaged in that criticism, may I ask whether the hon. Gentleman will explain how this parade and so forth can in any way help the war effort? Does it or does it not help to produce more goods to fight the war, because that is the impression which has been given?

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

The workers are weekly and daily giving up a part of their income to the Chancellor, and they do not expect any wonderful effects from that, but they do like some kind of acknowledgment. These weeks are a kind of public acknowledgment of the sacrifice that is being made by many people with not too much to spare, and the public have a feeling that the State and the community generally are recognising what they are doing.

Photo of Mr Richard Stokes Mr Richard Stokes , Ipswich

But that does not answer the question which was put to the hon. Member.

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

The point is that if the workers did not subscribe and tried to spend the money there would be the inflationary effects which we are trying to avoid.

Photo of Mr Alfred Edwards Mr Alfred Edwards , Middlesbrough East

My point is, Does it or does it not make the slightest difference to the output for the war effort?

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

Oh yes, it does. The workers in this way abstain from spending money on goods the production of which would divert labour from the production of munitions. That cannot be altogether prevented by rules and regulations, because we are not a totalitarian State and there are certain freedoms of movement and thus possibilities of diverting labour from munitions. The whole purpose of these weeks is to get the nation to make savings in a voluntary way and not by compulsion. The Chancellor takes as much as he can from people by compulsion, but he cannot know the minimum limits to which people are prepared to reduce their real income, and if you leave them to judge how far they are prepared to tax themselves it is a much healthier way in which to get the maximum from them. Last year we handed back to the Chancellor of the Exchequer in savings 20 per cent, and in taxes 36 per cent, of the money which had gone into the country's hands as spending power and, therefore, I say there is no evidence of what is called a serious tendency towards dangerous inflation. I think that the whole Committee—and this has been shown by the Debate—were a little alarmed at the Chancellor's hint that he was going to unpeg the cost of living.

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

Unpeg and repeg. I do not know whether you would call it a slippery slope upwards or a slippery slope downwards, but once you start on that progress the Committee is afraid that it is going to be the beginning of what took place during and after the last war. That would be extremely alarming and the Committee, generally, I think, regard that as rather an alarming statement and I believe it is the general hope that the Government will reconsider their decision because, quite frankly, I do not think the results achieved by the Government would be worth the trouble it is going to cause them and us.

Let us see some of the things that are going to happen. I have been in this House for four and a half years and have seen the amount of time spent here trying to adjust pensions, workmen's compensation, dependants' allowances, soldiers' allowances and everything else towards meeting what is called the "cost of living" and putting them on a proper basis. The time spent in this manner has been disproportionate to what ought to have been the business of this House during the past four and a half years. There has been a continuous harassing of the Government and the Government must have spent a considerable amount of their time deliberating whether 6d., 1s. or 2s. should be put on this or that. We have now reached a stage where the Government have gone a long way towards meeting all the worst complaints, and I have observed from the discussions in the House that it is becoming more and more difficult for Members to bring forward any real case of hardship, but if the cost of living is going to be increased we are going to bring all these difficulties back again.

The rise in the cost of living does not affect people on the higher standard of wages, but it does affect those on lower standards of income. An increase of 6d. or 1s. is something of great importance to a person who is living on 22s. a week, and it is the belief all over the country that it would start up once again our traversing the vicious circle of pushing up pensions and wages, and that the Government will get no rest in the next two or three years and will waste a lot of time to no good purpose. I respectfully suggest to the Chancellor of the Exchequer that in addition it is going to vitiate a great deal of the legislation he is at present contemplating.

The 4½d. or 5d. charged for the school meal is already a problem for the mother of a family of three or four, and if you put an extra 1d. on the school meal, or an increase of 10 per cent., then you start again a problem that has almost been settled. The Government have agreed to children's allowances and to a number of things in connection with social insurance. All these standards have probably been set by now, and in my view if we alter the present price levels it may not be possible, eventually, to peg them, and you are going to upset the standards of all these proposals and cause an unnecessary confusion all for the sake of a few million pounds a year.

Photo of Mr George Griffiths Mr George Griffiths , Hemsworth

May I ask my hon. Friend when the Government agreed to children's allowances? They may have made a statement, but that was over 12 months ago. They have not come to it yet.

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

I have a great deal more faith than my hon. Friend behind in this matter. The Chancellor made the statement and, as I said, he is a cautious optimist and does not make statements unless he is prepared to back them up and, in that regard, I am prepared to take his word that these children's allowances are coming. In any case, the school meals and social insurance proposals will all be upset. I have not heard any sound reason given for the proposed re-pegging of prices, and the hon. Member for Kidderminster (Sir J. Wardlaw-Milne), I think, was the only Member who gave any support to the idea, but gave no reason at all for his support. [An HON. MEMBER: "There were plenty of others."] Were there? If there were, I did not hear them. As to wages, the very fact that we are not increasing our personal consumption indicates to me that there is no justification for the fear that better wages are going to cause any inflationary tendency at the moment.

The Chancellor in his speech said that industry after the war would require to be reconstituted and rebuilt. I agree that the workers have a great interest in seeing that the industry of this country is fit to carry on immediately the war ends, and I shall support anything that is required to establish the industries of this country and make them fit. There is only one doubt which came into my mind. If I remember rightly, the cotton industry in the last war accumulated an immense amount of money which it did not spend at the time on new machinery, and then, when the end of the war came, they sold out to Jimmy White and company and his speculator friends, and instead of that money being ploughed back into the cotton industry in the form of modernised plant, that industry was deprived of it and has been on the rocks ever since. Could the Chancellor indicate in what way we are going to be safeguarded against the benefits which are being given to industry not being used for that purpose? I quite agree with the purpose and welcome the proposal, but I do think that it is an important point. Should past experience be repeated, there will be resentment in the country if industry and its workers are put on a starvation basis after the war.

I wanted, however, to make a related point from the workers' side of rehabilitating industry. What the workers are saving for after the war can be called in general post-war credits. The workers can only realise their increases after the war. It is not only industry which will require to be reconstituted after the war, but the health and the well-being of the workers will also need to be restored. The strain on industrial workers during the past four years has been terrific, and after this war it will be necessary that the workers shall have an opportunity of having their health rebuilt. This rest cure took place after the last war in the most deplorable fashion. The miners and engineers were locked out for three or four months, fortunately, in the most beautiful summer weather I remember. They certainly got the fresh air, but if they are to have a holiday after the war that is not the best way to give them one. I think it would be much better if we realised that after this war we shall have to rebuild not only the machinery and not only reconstitute industry, but we shall have to reconstitute the health and well-being of the employees in industry. I think what the workers are putting into War Loan and post-war credits is just as important a part of reconstruction as the concessions the Chancellor made to industry, because industry is no use unless the workers themselves are as fit as the machinery they are going to work.

I think therefore that the increased wages that are not being spent are eventually going to be of benefit to the country. When we reach that period of slump or when the boom passes it is the purchasing power of our people which is going to provide the finest market in the world. It is true that the export trade is important, but that is only a part. The greatest and most important part of the trade is what we produce for ourselves and consume for ourselves. It is true that we have to produce to exchange for goods abroad, but there is no reason why we cannot do a lot for ourselves and see that there is no repetition of the crime which took place after the last war of men and youths starving on street corners when they were willing and capable of producing the goods needed, but were not allowed to do so. It is up to the State to see that we produce for ourselves and to see that nobody is idle—that everybody has a job to do. I do not take the view that the worst harm that was done to the workers during the last war was not paying them unemployment benefit. Being forced to live without work was the worst injury ever committed to human dignity. When these unemployed men and youths are now brought into activity, we see not only a change in their outlook, but an improvement in their whole moral fibre and the character of the country is re-established. We should sweep aside those "dismal Jimmies" who are talking about poverty and degradation after this war. It is all nonsense.

We have lost a good deal of wealth both abroad and at home. We have lost many of our youths and, unfortunately, we may lose many more. We have lost homes and have not been able to build but, on the other hand, we have stimulated invention in a way which has never been done in previous wars. The ingenuity of our people has been developed in a way which I think has never been equalled in any past history. We have drawn closer to the Dominions and the United States, and I hope we are never going to lose those ties. What is, perhaps, more important is that we have come closer to each other. We have learned to understand each other. I hope that is not going to be lost but, perhaps more important as a nation, we have found our soul. Perhaps we did not reach the low level of the French in cynicism, but we had our share. We now know that we can create something and the Government must harness that idea. When we look back and see what we accomplished in 1940, how we organised in arms and industry, who will set a limit to the accomplishments of such a people in peace, given the proper aims? This year's Budget has begun to grease the slipways, one might say, to launch us into the new order. Parliament will succeed if it gives an inspiring lead. God help us all if we wait until we are pushed.

Photo of Mr Peter Bennett Mr Peter Bennett , Birmingham, Edgbaston

It must have been apparent to all who listened to the Chancellor of the Exchequer presenting his Budget that we had, in him, a man who had devoted a very considerable amount of thought to the subject and had approached it from a new angle as regards the industrial point of view. We are very grateful to him, because we were getting a little disheartened with the continual struggle to persuade the movement to take the up-to-date point of view. We understand how it has all arisen. It has been built up from the old days when industry was a very different thing from what it is today. The conditions under which the Income Tax Jaw developed were totally different in our grandfathers' day, and round Income Tax practice there has been woven a sort of case law which has become almost holy and untouchable. The result was that the Inland Revenue were not looking at the subject from the industrialists' point of view. They were disallowing writings-off, which we knew were necessary, and treating special expenditure as a class of item assessable for tax. We knew that those items were there every year as long as we were in business, but they treated them as if they were profits, which we could take out of the business. The Chancellor of the Exchequer put his finger on the spot, when he agreed that whatever might have been reasonable or tolerable in the olden days, when Income Tax was at a low figure and when we could say "Well, of course, Income Tax is 5s. in the pound, but the way you treat it, it amounts to 6s. or 7s.," now that it is 10s. in the pound, industry cannot afford to be treated in such a way, when you are actually paying 12s. or more in the pound. The effect was to cramp our style and it was getting more difficult. It was puzzling us more and more, in regard to the days to come.

At long last, the Chancellor of the Exchequer has taken the commercial point of view and has started to bring Revenue practice into line with enlightened, up-to-date commercial practice. It is a very welcome change and I should like to thank him for it. I extend those thanks to all the people in the Revenue Department who have been working on this matter since the time when Sir Kingsley Wood promised that he would appoint a committee to go into the case that had been put forward. For once, a committee has produced satisfactory results. It has not told us that this was not yet the time to alter the law, but it has agreed that we have made out a case. The Chancellor is now going to put it into operation, and we are very grateful. The progressive industries are particularly grateful. We have had the good fortune to be associated with industries that have an opportunity for more rapid advance than some others, and those industries are very grateful for the concession made by the Chancellor in respect of research expenditure. It is a very valuable and long-sighted concession.

In the past it has been a great hindrance to have to look at laboratory expenditure and wonder how much of it the Revenue would allow us to write off and how much they would treat as capital. That class of operation is very uncertain. There is no 100 per cent, certainty with laboratory work. You have to take chances. The result is that we hesitated to incur expenditure on something which was problematical and might not turn out successful. Now the Chancellor has come to our assistance and has assured us that we need have no concern in that matter and that we can write off the capital that we invest in experimental research laboratories. That will enable us to go ahead. I am certain that good results will accrue. My right hon. Friend has knowledge of the problem from the period when he was Lord President of the Council. We expected him to take a broad, sympathetic view of the matter, and we have not been disappointed. My friends of the Parliamentary Scientific Committee are very grateful to him, and so are all of us in industry, for the turning of pious expressions of approval of research into active measures. We are encouraged by the action which the Chancellor has taken. It is of great importance to us as a nation that we should make up some of the leeway that accumulated in the years before the war.

The Chancellor has taken one other step which is very long overdue. He has recognised that buildings grow old and have to be scrapped, like other parts of industrial equipment. We have been arguing that for years, but did not meet with a very sympathetic response. Now we are to be allowed to write off something. One has only to wander around the industrial districts to notice how quickly building procedure advances. When first we came into business we went up an entry and developed a shop. Then we went on to multi-storied buildings. Now we have to go into single-storey buildings. In America, up-to-date factories can be seen, and people come back to us here and say: "That is what you want to do. You should move along those lines if you mean to develop." The Revenue's idea was, however, that our buildings had to last for ever, and the position was not made easy for us. Now the Chancellor has recognised that we have to scrap our buildings as we scrap other plant, and he will help us to do it. We have been trying to do it in our own way for years. He is encouraging us now, and I am sure the results will be good.

Some allowance in respect of new plant and machinery is being made to us by the Chancellor, and that will help also. As was pointed out from these Benches yesterday, he is really only giving us the allowances earlier than we would otherwise have had them, but that will help the progressive manufacturer to start the refurnishing of his organisation. We shall be able to copy our friends in America. Particularly welcome is the withdrawal of the condition that it was necessary to replace before we were allowed to write off the balance of the old plant. I knew that the Revenue were becoming very reasonable and helpful, but now we have got the whole of that matter out of the way. If we decide to stop using iron or iron castings, in order to go in for some completely new process—suppose we wish to use plastics—we shall not have to consider whether we have to write off the balance of the plant which we have scrapped. We have to be prepared in this country to do more of that than we have done in the past. The Chancellor is in agreement on this point, and we are grateful to him.

While we are grateful, we do not feel that the Chancellor has done all that he might do, or that there is no further to go. Now that we have started clearing and cleaning up, I hope that the Chancellor will keep his team at work and will remove a few more of the anomalies and ancient practices so that Revenue practice and up-to-date commercial practice may be one and the same thing in time to come. There is no reason why they should not. I have been trying to urge upon Government Departments for years that they ought to come and see how we handle machine accounting and up-to-date office machinery. We could not do without it, yet the Government, who have a very much bigger organisation than we have, seem to think it is a bit too advanced. I hope that as time goes on a new atmosphere will prevail and that the Revenue will be willing to look at our problems as up-to-date business men have to look at them and as I know the Chancellor of the Exchequer would look at them himself if he were in industry. So, while thanking him for all that he has done, I would remind him that the job is not entirely done. Now that he has set his hand to the plough I am certain that he will not turn back.

Like others, I appreciate the Chancellor's difficulty in dealing with the 100 per cent. Excess Profits Tax position, but I want to assure him that the story which is put forward that it removes the incentive to efficiency is quite correct. It is preventing firms from creating reserves, and we shall have to pay the price for it when we come to reconstruct. I am not quarrelling with the principle, with which we all agree at the time, but it was rushed into existence. The matter was not dealt with scientifically and the arrangements surrounding it were not thought out so as to avoid difficulties. We are suffering, and shall suffer in the future, when we come to reorganise our industrial machine. I am warning the Chancellor, because I am certain that many other people will come along later and say "I told you so." The concession which he has made of the £1,000 to the smaller concerns is very welcome indeed. The Chancellor said that the concession would cost £12,500,000 in a full year. I compared that figure with what he also told us about the rate at which post-war credits were being accumulated. He told us that £40,000,000 or £50,000,000 were being accumulated per annum in post-war credits. If the concession to the small people is to mean £12,500,000, it is a figure quite comparable to the amount which the larger firms and big industries with vast employing power are accumulating. I was very struck, as I am sure many other Members were, with the fact that the concession will affect 30,000 smaller manufacturers, of whom 10,000 will never pay any more E.P.T. as a result. That is a very considerable concession which will be very valuable. I come from "the city of a thousand trades," where we have a very large number of small people, to whom this concession will mean everything.

All that the Chancellor has done leaves untouched a very large number of hard cases. I know that hard cases make bad law, but these are not ordinary hard cases. They are hard cases because of the unfairness of the incidence of war conditions upon different sections of the community. As I listened to the Chancellor, it seemed to me that he was helping those who were able to help themselves, but there are a great many people who will not be able to help themselves, even after all that he has done for them. They are not in a position to take advantage of his help. There are businesses with no pre-war standard, because they were established and developed for war purposes at the Government's own request. I have mentioned this matter before and I feel bound to bring it up again. I was one of those who attended the present Lord Chancellor when he was Chancellor of the Exchequer and discussed with him the introduction of what has now become the E.P.T. It was to be 60 per cent, to start with. We had just started rearmament and this was to be an armaments duty. I put forward the point that companies had been pressed by the Government to establish organisations in pursuance of the rearmament programme, and that there was no hope of their being able to get a satisfactory standard.

Those of the Chancellor's advisers who were present at that interview will remember that when I brought these cases forward they said each time "Those are special cases. We agree that they are difficult, and special treatment will be found for them." I have been pointing them out ever since E.P.T. went to 100 per cent., but nobody has found any method of applying special treatment, because it is regarded as a matter of great difficulty. I will give the Committee one case. I know of an organisation—I have no direct connection with it and therefore I can mention it—which has a capital of only £100,000. They have had many millions of pounds of turnover, developing a munition of war of the greatest possible value to this country. They made about £8,000 gross profit. Ten shillings in the pound reduces that to £4,000 and War Damage Contribution takes £3,000. Therefore they are left with £1,000, out of which to make all the necessary capital expenditure for development in the future. They have thousands of workpeople, and some of the people ask them: "What are you going to do in the future? How are you going to run the business?" Of course, being in such a position, they are quite unable to make any promises or plans.

The second class of companies are those who had very bad times previous to the introduction of Excess Profits Tax. These are people who were slowly climbing out of a slump. Any investigation would show that these people are entitled to something more than low profits. In the last war we had a Board of Referees and it was possible to go in front of that Board of Referees with hard cases and state the case to them, and if the Board of Referees was satisfied that a case had been made out, having heard the industrialists and been made aware of the conditions in certain industries, then an extra 5 per cent, would be given on capital to compensate for the admitted difficulties. This would be some return for the contribution made to the State. I feel that these admitted hard cases should not be lightly put on one side. Something should be done for them. I would like the Chancellor of the Exchequer to look into them and see that the promise made to me is fulfilled, that something will be done for those industries that may be in need.

In the national interest many industries have been expanded; my own organisation is one of those that was asked to do more and more, to increase output, to go into different parts of the country, and to use managements to train new workers. This was a pleasant thing to do and was a satisfactory thing for the organisation, but many people, in the national interest, were told just the reverse—that it was not necessary to expand and that they must contract. They were told it was not necessary for their workpeople to go elsewhere, in different directions, and that they must concentrate their firms. In addition, there is one very sad lot of people who in addition to all these troubles have had bombs dropped on them and have had much damage. Yet all these people will be needed when the war is over, to find employment. When the war ends, those people will be asked to "right about face" and efficient industry will have to become even more efficient and to turn from making guns, ammunition and all the paraphernalia of war. They will be told these are not essential but that we need other essential commodities which we want to send overseas. We will then find that we have helped and encouraged firms in the engineering and light industries to make munitions, and then to close down their plants in the national interest. These are the people for whom we will need help. The workers will come along and ask those firms "What next?" Are you going to turn the factory over to make something else, some new metals, new jigs and tools? That will be a very troublesome and difficult process but still we will get through it.

Meanwhile other firms will know how and what to make, especially what goods we want to send overseas, but may not have been left with "a bean" with which to start. They will not be able to get a return from Excess Profits Tax, and they will not get any post-war credits because they are not making profits. I think the Chancellor of the Exchequer should regard Excess Profits Tax as one charge, on industry as a whole, earned by some sections of industry who have had the opportunity, but on the other hand, not earned by some who have been told not to do as the others have done, in the national interest. I ask the Chancellor if he cannot consider placing a national reserve, out of the Excess Profits Tax, produced by industry and earned by the whole nation, and use that reserve to help the unfortunates who will need finance to get going again, when we re-start after the war. If it were possible to hold out a hope of issuing loans free of interest repayable over a considerable period, these people would have some heart to make their plans. To-day they have not got that heart. I come as I have said from "the city of a thousand trades." Many there have been fortunate, but many have not had opportunities. One of my hon. Friends has already referred to Birmingham, where whole industries have been shut down and there are many in my constituency. The Chancellor of the Exchequer is looking ahead. He should study these cases and see whether something cannot be done to help those people and give them hope of being able to use their employing power in the days of peace.

Photo of Sir Edward Campbell Sir Edward Campbell , Bromley

I shall not detain the Committee long. I want to congratulate my right hon. Friend the Chancellor of the Exchequer on his businesslike and statesmanlike oration of the day before yesterday. It is a wonderful Budget and what I appreciate most of all about it is the fact that many questions which were raised during the last Budget Debate and since by Members of Parliament have been met by the Chancellor of the Exchequer this year. It only shows Members that if only they think out proper criticisms, Ministers will consider them carefully. Very often we find that a political Opposition, whatever party it is, puts forward schemes which are practically impossible to realise, but I have noticed in this Budget quite a number of points which were raised when my right hon. Friend the late Sir Kingsley Wood was Chancellor of the Exchequer and which have evidently been considered by the present Chancellor or by my right hon. Friend the Financial Secretary to the Treasury and by officials. I would like also to thank the Chancellor very much, if I may be permitted to do so, for his very generous tribute to my late friend, Sir Kingsley Wood.

I remember Lord Stamp, who was a constituent of mine, about seven or eight years ago when Sir Kingsley Wood was doing very well as Postmaster-General, asking me if I thought he would go very far, if in fact he would be Chancellor of the Exchequer. The public looked on Sir Kingsley as a great Postmaster-General and I believe later, when history comes to be written, he will be shown to have given some of his greatest service as Secretary of State for Air and last but by no means least as Chancellor of the Exchequer. The generous tribute which the present Chancellor paid in his Budget speech two days ago is worthy of a very great man. We do not often throw bouquets about officially, and a man is a great man, if he appreciates his predecessor and also finds it unnecessary to change everything just to show how different he is from his predecessor. The late Chancellor showed that he was a great man by his actions in this House, and I appreciate the kind things said about him by his successor in office.

Photo of Mr Alfred Edwards Mr Alfred Edwards , Middlesbrough East

I also wish to say that the Chancellor of the Exchequer the other day impressed me more than any of his predecessors has done, as a man who has got his teeth in these problems and as a man who has put more of his own ideas into the Budget than any previous Chancellor of the Exchequer. He has grappled with great problems and though one might disagree with him, he gives the impression of being one who tried to bring out a good Budget and present practical plans in a businesslike way.

My hon. Friend the Member for Edg-baston (Sir Peter Bennett) said that hard cases make bad law. He then went on to show how bad law makes hard cases. One thing that has struck me in this Budget is the treatment of the small man in regard to Excess Profits Tax. Those who criticise the profit motive in the capitalist system know perfectly well that we have not yet found an alternative to the profit motive, but we can work to achieve removal of some of the inequities in the present system. So strongly entrenched in human nature is the profit motive, that we cannot hope to abolish it. I and some of my colleagues believe that later we can evolve a much more equitable system but that remains to be proved. We have not yet been entrusted with that opportunity but even if we were, we would still have to make the present system work more efficiently to justify ourselves. And if we do justify ourselves, then I hope hon. Gentlemen on the other side of the Committee will do some introspective research and come to the same conclusions as we have arrived at, but not from theory.

Probably the most callous experience in relation to this Excess Profits Tax matter is that people who have been trading with our enemies in those vital years 1935, 1936 and 1937 were building up standards and very substantial standards of profits for themselves. These people who were building up those profits are the people who had every reason to build up high profits in the present war. I am not bound to develop that matter now. I do not believe E.P.T. was intro- duced to check the small man; it was introduced to check people making enormous fortunes out of armaments. It was intended to do that, and I believe, looking back, that we would have been wiser to stick to the original proposal for the limitation of dividends. That would have done less harm and would have had the same effect as E.P.T.

I must admit too that we on this side of the House were responsible to some extent for the introduction of E.P.T. We wanted no profits out of the war. That was the original scheme that the House of Commons had in mind in introducing E.P.T.—the then Chancellor of the Exchequer said in this war there would be no profiteering. Would it not have been better to have it made known in advance that at the end of this war, or the year following the end of this war, we would make an assessment of every firm's position and those who were richer at the end of the war than at the beginning should pay a very substantial proportion in taxes?

In spite of Excess Profits Tax and other things, people are making substantial fortunes. They say that they are not, but we know that they are. Some people are building up fortunes quites involuntarily; people who have their money in land and property cannot help being richer. Everybody who finds himself richer after the war than he was in the year before the war should be made to pay something of it. [An HON. MEMBER: "Will those who are worse off be recompensed?"] I do not think that that follows. We expect at the end of a war to be poorer than we were at the beginning. All the profit-owning people, at the end of the war, should take into account the cost of the war, and write down their assets accordingly, All people, without any class distinctions, are giving freely of their sons, but they are only lending their money. That means that we regard our money as being more sacred than human life. There is something very wrong about that. If we were honest with ourselves, we would say that this war has cost so much, and that we are all so much worse off. There is no doubt that our present taxation system throws the greater burden on the workers. It is no loss to those who have a little surplus. It is not what you have paid out, but what you have left, that makes the difference between comfort and discomfort. It was a little surprising to hear the Chancellor admit that he, on behalf of the Government, determined the cost of living. We have always known that that was so: when other Chancellors have got up and made all this ballyhoo about inflation, frightening the life out of people, we have known that inflation is not something external which attacks us. The Government determine, not whether we shall have inflation—we already have it—but how much inflation we shall have. This matter will look very bad when it is analysed. One day we get a White Paper giving increased allowances to people, and on the next day the Chancellor says that he will take it out of their pockets again, by increasing the cost of living. Would it not be better just to tell these people the net amount they are going to get?

There are some people who receive no benefits, but who seem to have all the troubles in this war. Those are the people living on pensions. I am not speaking only of old age pensioners, so well represented here by my hon. Friend the Member for Leigh (Mr. Tinker), but for other people, who have given their service to the country and have received a pension, in order that at the end of their lives they may keep up the standard of life which they have enjoyed in the past. Some of these people have been hit very heavily. They have had to give up their homes and their standard of living, and they will never have a chance of rising again. Would the Chancellor consider the possibility of not taxing indirectly the cost of living for old age pensioners and people: like that? I am not sure that I would not go so far as to say that pensions up to £500 should not be taxed, because those people, who have spent their lives in the service of their country, have no chance of recovering their position, and this would be a way of showing appreciation of what they have done.

The Chancellor of the Exchequer said that he would like to have a standard rather higher than it is at present. But when has this country had as high a standard as it has to-day? The average standard of life—this is a most gruesome thought—is higher for the masses of the people than ever it has been before. Most people, including Members of this House, do not go short of a meal, or of an extra meal if they want it. We cannot call that making a sacrifice. I know some people who are much healthier through eating less. But if the Chancellor can tell us that he is going to maintain the present standard of living, and even make it a little higher, he will, believe me, receive the congratulations of this side of the House. I hope he will tell us that he is going to do that.

I wish the Government could make up their mind on this point. One speaker has told us that we shall be so poor after the war that we shall never be able to hold our own again, but the Chancellor seemed to suggest that we should be much richer after the war. He spoke of the productivity of labour being higher. Everybody knows that we shall be much richer after the war in terms of productivity, and that is the only test that matters. Nothing else matters but the productivity of the people of this country. A hundred per cent, of the cost of every commodity, in every market, is wages, and nothing else really enters into it. Every penny that goes into a man's pocket through the social services comes back to the Chancellor in taxation. It is time that the country woke up to the fact that nothing matters except keeping the wage packets full. If that happened there would be no unemployment. The Chancellor said also that stabilisation was not sacrosanct. I will tell him one thing which is sacrosanct, and that is a minimum standard of living. I wish that he would commit himself on that. It is to be hoped that the working people are not to be made to pay a heavy penalty for unemployment and all that sort of thing. The penalty for unemployment should be placed where it belongs. If that is once conceded, a great deal will have been done to bridge the gap between the two parties here.

I noticed one remark in the speech of the hon. Member for Kidderminster (Sir J. Wardlaw-Milne) to the effect that it was silly to say that we could go on spending as we were spending to-day. I am not sure that it is necessary to do so. Some hundreds of millions of pounds spent in scientific research would be the best investment this country could make. A great deal has already been done, but I wonder if anyone has thought of that philanthropist who gave £2,000,000 a few years ago to assist medical research. That was a very fine thing, for Lord Nuffield to give back the money to the people from whom he had taken it. He said that he was doing it because he was advised that it would save the lives of thousands of our citizens every year. Did anyone stop to think that we were allowing thousands of our people to die every year because we would not spend £2,000,000—which, from the national point of view, is merely petty cash—to save them? It was a very fine thing for a gentleman who had enjoyed the benefits of the McKenna Duties, and all sorts of other assistance, to give £2,000,000 back in this way.

I want to say a final word in self-defence, because of what some of my colleagues have said about me in connection with war savings. No one can say that all the war savings, from the beginning of the war to the present day, have produced a single extra aeroplane or a single extra ship. The other week a great deal of money was spent to put up paraphernalia in Trafalgar Square, and thousands of people were stopped from getting to their work, in order that they might be told that if they saved more money it would produce more weapons. It is insulting the working people to think that they want these silly stunts in order to keep up their morale. There is not the slightest justification for that belief. It is only claimed that one-third of these vast sums of money are small savings. I do not believe that 10 per cent. of the so-called savings are genuine savings, in any sense of the word. We are using hundreds of thousands of people in all these silly campaigns, holding up traffic and all that, pretending that it is helping the war effort, when, in fact, it is hindering the war effort. A colleague asked about the Prudential investing so much money in a given week. What would the Prudential have done if they had not put their money into this form of investment? They would have left it in the banks, and the Chancellor would have got it for 1⅘ per cent. Why should we have all this pretence, this telling of untruths to the workers, to make them believe that it is their savings, when it is not? I object to your telling the workers lies, because if you do that, some day, in a crisis, they will not believe you when you tell them the truth. It is time this thing came to an end. It is thoroughly dishonest right through.

I discussed this matter with Lord Kindersley, and he asked me what I would do to keep up morale. I said, "With all this organisation you have got, run campaigns for, production, set one workshop against another, do what I saw done in America, by putting up production figures day by day. Have a production index figure of 100, and say, 'Here is somebody with 120, and somebody else with 115.' Make competitions of that kind and add some bonus, and that, at least, would be intelligible to the workers and would be a success." This War Savings Campaign is thoroughly dishonest. You are providing privileged investment for certain people, but the amount of actual saving is very small—above what it would normally be. The amount of extra war production is absolutely nil, and that is the reason why I am against this campaign. I must repeat, finally, that the right hon. Gentleman's speech throughout struck me as a thoroughly impressive speech, delivered by one who is determined to take progressive steps.

Photo of Sir Stanley Reed Sir Stanley Reed , Aylesbury

Much as we respect the hon. Member for East Middlesbrough (Mr. A. Edwards), that respect would be much increased if he would discard, for one speech, at least, the fly-blown phylactery on war savings which he has paraded before us to-day. I want to say that nobody associated with the War Savings Movement, particularly in the country villages and small provincial towns, can possibly hold the views which the hon. Member has expounded here today, or maintain for one moment, with one vestige of truth, that this movement does not stimulate savings, does not stimulate investment and that it does not bring into the Treasury forms of investment many of which would not otherwise come in. That is the experience of every one of us who takes an active part in it.

Photo of Mr Alfred Edwards Mr Alfred Edwards , Middlesbrough East

May I ask the hon. Member one question? I challenge him to give to the country any statistics of any kind to justify the statement he has just made. The Chancellor has consistently refused to give us any figures, and I believe that the reason is because he cannot give us statistics to prove what he says. Will the hon. Member give us some figures?

Photo of Sir Stanley Reed Sir Stanley Reed , Aylesbury

My hon. Friend is well aware of the definition of statistics, but I am more concerned with the psychological and moral aspects of this question, which have been expounded with convincing force by the hon. Member for East Stirling (Mr. Woodburn), to which there has not been, and to which there never will me, an effective answer. I am sorry that the hon. Member for East Stirling is not in his seat, but perhaps the hon. Member for Gower (Mr. Grenfell) will carry to him this one reflection. I think there was nobody in the Committee at the time who did not listen with very great respect and interest to his wise and very human contribution to this discussion, yet I say this in no spirit of polemic, because I think it is a fundamental point, that the hon. Member did, and many hon. Members on the other side always do, underestimate the tremendous importance of our export trade. It is quite true, as the hon. Member said, that in the main the means of prosperity will rest on the home market, but in our peculiar economic condition— our unbalanced economic condition— hardly a single article for home consumption can be made unless by means of some imported products, and, unless we can pay for that imported product, we cannot develop the home market we are most anxious to obtain. I would like to ask the hon. Member if he and his colleagues will try to keep that point in mind, because it seems to me, as one who has been vitally connected with the export market, as a buyer, not as a seller, that a very large part of the prosperity we hope for is dependent on it.

There are three points in this Budget to which I should like to draw the attention of the Committee. In the first place, this Budget treats finance as a constructive effort, not just as a matter of accounting or statistics. It uses the Budget and the Financial Statement as a means for immediately and prospectively strengthening the economic and industrial position of this country, and in that respect I think the Chancellor is entitled to a special measure of gratitude. Then there is the other point made by the hon. Baronet the Member for Bromley (Sir E. Campbell), which illustrates what I would call the elasticity of mind of the Treasury. I have never subscribed, and never will, to the doctrine that the Treasury is a hidebound institution simply devoted to cutting down expenditure. Every one of us has seen, year by year in this House, that, when concrete and reasonable suggestions are put in the Budget Debates, they very often bear fruit in the succeeding Budget. It is quite impossible for any Chancellor, even if he were the Archangel Gabriel, to reconstruct the massive structure of a Budget during the actual passage of that Financial Statement, and all we can hope for—which, I am glad to say, we frequently receive—is that suggestions put forward in these discussions gradually bear fruit in later statements to the House.

The third point in this Budget—and, to me, it is one of tremendous, and, one is inclined to say, sinister import—is the stress the Chancellor laid on the frightful aggregation of our sterling debts to overseas countries. They are mounting up with great rapidity, simultaneously with the reduction of our sterling assets, and this situation, unless remedied, may weaken, if not defeat, the reconstructive effort which will have to be made, just as it did after the last war. If we are to go back to the balanced economy, and full employment, which we are so determined to use our utmost efforts to attain, there is only one way of dealing with this matter of sterling liabilities, and hon. Members can draw their own conclusions and select any name for it they please.

Following upon the suggestion I made about the elasticity of the Treasury, in taking note of proposals made during the Debate, may I ask the Financial Secretary if he will put this thought at the back of his mind? Those of us who have been actually engaged in industry, and who have tried, to the limit of our poor powers, to look at the human side of industry, and the conditions of those engaged in industry after they leave the factories, and go back to their own homes, have always found that the most difficult problem they have to face is to find a reasonable level of adjustment between the positions of the bachelor and the married man. We have found that a rate of wages or salaries on which the bachelor was comparatively affluent, has been very hard indeed on the married man with children. We assume that it is desirable, in the interests of the community and of our society, that men and women of marriageable age should marry and have children, and the point arises as to how far can we adjust our taxation and our social system as to bring a better method of justice between these two classes of the community.

Take the wage-earner of £5 a week who is a bachelor. When he has paid his living expenses, he has approximately £127 a year with which to meet his extras. Is there any comparison betwen the position of a married man with two children and of such a bachelor? If we are to develop the idea of equal pay for women and men, we may then create another additional favoured body in the community. I am not so much however concerned with this class as with the people earning £400 or £500 a year. Is not this the class on which our taxation system presses very heavily indeed? I am not here to sing the virtues of people, with £400 or £500 a year. They have been sung, far more ably than I could do it, by an hon. Member of this House who formerly sat on the opposite bench and who now sits on this side, and who has described them as among the very salt of the community. I will give the name privately, if it is desired, because it was not disclosed in the public hearing and I do not feel justified in giving his name now. He regarded this class as one of the most stable elements in the community, working hard, living quite simply, never grumbling and rarely asking anything from the State.

If you take the bachelor with £500, after he has paid his dues, he will have £344 left. Take a married man with two children. After he has paid his taxes, he gets only £424. Is there any comparison whatsoever between the positions of these two classes of the community—a bachelor with £344, with no dependants and no family liabilities, and the married man, who has two children, with £424? I would ask the Financial Secretary if the Chancellor and he would look into that matter between now and the next Budget and see whether it is not possible, under the income tax, to produce some greater equality between these two classes of the community. If family allowances and children's allowances come, they may have some effect, but it seems to me to be far better to do it by way of Income Tax adjustment, than through direct family allowances. I put these thoughts before the Financial Secretary feeling perfectly confident that he and his chief will give them consideration. I trust they may find some means of a better adjustment; and, with that, I am confident to leave the issue in their hands.

Photo of Mr David Eccles Mr David Eccles , Chippenham

On Tuesday I listened for the first time in my life to a Financial Statement, and I must say that I now believe in beginner's luck. I cannot think of any compliment to pay the Chancellor which he has not received already, except, perhaps, to reinforce what the hon. Member for Walsall (Sir G. Schuster) said about the Treasury. It does seem as if we have found a Department of State not only anxious to coordinate the whole field of economic policy, but one which is in the position to do so, and also has the ability to do so. If the Treasury are now to guide and survey the whole field of our economic policy, that is an immense step forward in tightening up the machinery of government, and the Treasury would be a guide and co-ordinator, and not, as the hon. Member for East Middlesbrough (Mr. A. Edwards) suggested, a dictator. So far as I understood him, the hon. Member for East Middlesbrough thought the Chancellor of the Exchequer could control the whole of the price levels of this country at his will. I believe that to be absolutely untrue. There are forces entering into the price level question which are quite outside the scope of the Chancellor of the day. All that he can do is to see that the various factors have some relation to each other, but he certainly cannot determine the number or size—

Photo of Mr David Eccles Mr David Eccles , Chippenham

The Chancellor said he would make an adjustment in these particular relationships but, as I understood the Chancellor, he would never claim to have dictatorial powers so that he could control the cost of living. Many hon. Members in this Debate have spoken of the national income as a dynamic thing, how it grows and contracts, and how our material blessings are bound up with its health and resilience; and how our taxation is not just an amputation from national income. It is a very skilled operation and greatly affects its power of growth in the future. It is for that reason that such a general welcome has been given to the post-war tax proposals of the Chancellor which are specially designed to promote efficiency and employment.

I am very glad that my right hon. Friend linked this so closely with the export trade. A certain over-optimism about our export postion is still current. We shall never be able to live by taking in each other's washing. We have in this country to sell our goods abroad and to find people who are willing to buy them. I do not believe that we have any right to assume that the food and the raw materials which we need to import will be easier to buy than the manufactured goods which we have to offer. That is the assumption behind the argument of hon. Members who say that, just because we are a large importing country, we shall be able to pay for what we want. If the population of the world increases and their standard of life increases, and especially if their nutrition is better, as we all hope it will be, then the primary commodities of the world will become scarcer, and scarcer in terms of the sort of manufactured goods we export.

The peculiarity of our economic position is that our interest in full employment is essentially international. There may be countries, like Russia, which can achieve full employment without very much regard to the comparative cost of production at home and abroad. We shall never be in that position. We shall never be comfortable with regard to our exports unless the whole world is flourishing and is fully employed. I ask my right hon. Friend, if he will not agree that the domestic policies of employment of foreign countries and their success in achieving them will affect to a very much greater degree the volume of our exports than any tariffs which we or they may put on or take off.

I find during the war great difficulty in bringing home to the man-in-the-street just how hard we shall have to work after the war to re-establish export trade. This difficulty springs perhaps from two reasons. First, in wartime everything is scarce. Everything you can spare and send abroad is easily snapped up. If you can engage in export trade at all to-day, it is as simple as selling beer on a Saturday night. The second reason is that in the long, and very often honourable, record of mercenary armies we can now claim pride of place. No other country has ever been subsidised to fight the world's battles on the scale on which we are being subsidised now.

The hon. Member for Birkenhead East (Mr. Graham White) described this ancient practice of sending material aid to a country which is fighting a war in which we are interested as Socialism. If that is a correct description, then I have learnt that Socialism has many more and many more respectable ancestors than I was previously aware of. Those subsidies are very great. I suppose that the annual value of the food which we now receive on Lend-Lease terms, in United States prices, is equal to more than half the total output of British agriculture, and that the annual value of Lend-Lease to the British Empire is more than £2,000,000,000, more than two-thirds of the Budget which we are considering today. These facts obscure our export difficulties after the war. The time will come when these great shipments of food and raw materials on Lend-Lease terms will cease, and then we shall have to pay our way.

I am not at all gloomy about the prospects of this country being able to compete with larger and richer countries after the war. We did very well in the past. In the time of Queen Elizabeth our wealth and our population, compared to France and Spain, were just about the same as our wealth will be after this war compared to the United States and Russia. Numbers are not everything, and a large land-mass is not everything. Quality of population counts for a great deal and, as history shows, can turn the scale against pretty formidable opposition. Quality of population, or in this case, the efficiency of production, brings me to the subject of the rate of savings and investment to which many hon. Members have referred.

The figures given by the Chancellor of savings in war-time are really remarkable and reflect very great credit upon our people. I disagree as thoroughly with the hon. Member for Middlesbrough, East on this subject as I agreed to-day with his colleague the hon. Member for East Stirling (Mr. Woodburn). I think that the reading of these two speeches in the OFFICIAL REPORT to-morrow will give some cause for amusement. What will the post-war White Papers tell us about the rate of savings in the future? I believe that we dare not go back to our pre-war rate of savings. We have been under-investing for years. That is the principal reason why the United States can pay higher wages than we can. The American workman has invested behind him twice the horse-power that the British workman has. That is an inferiority of capital equipment that cannot go on; it must be reversed. I believe that the whole Committee is agreed about this, although we may differ on the method of achieving the capital equipment we want.

One controllable factor, a very important factor in preserving the right balance between consumption and capital expenditure, is the Budget, and that brings me to the question of whether the size of wartime Budgets may not be a danger to our post-war capital equipment. We may, perhaps, be tempted to allocate excessive sums to consumption expenditure because of the habit we have got into of wartime Budgets of this size. If we do that, without thinking where the post-war investment is coming from, we shall get our economy out of balance. As individuals, we dispose of our money between consumption, taxation and saving. Obviously, the more taxation takes, the less there is for the other two. In war-time, the Government get over the bad effect of taxation on the rate of saving by holding down consumption, but with results with which all hon. Members are familiar. Is there a kitchen which does not now lack a pot or pan or dishcloth; is there a window-sill that could not do with a coat of paint? A tremendous volume of consumption is piling up and the Government will be very hard put to it to preserve the value of the £ immediately after the war. If we all try to restock and repaint at the same moment nothing can stop inflation, not even the Chancellor armed with the powers which the hon. Member for Middlesbrough, East, thinks he has. The House will have to give strong support to the Government to hold back and to regulate the pent-up waters of savings, certificates, tax credits and all the rest. But, do what we will, the public is going to insist on spending a much larger proportion of their post-war income on consumption than they are now. From where will come the capital required for re-equipping our industry? As consumption rises, will the taxes go down? If taxes remain up, will the Government spending change from spending on consumption to spending on investment?

The problem, as I see it, is just the same looked at in terms of materials and labour as it is in money. Will there be enough labour and materials in the immediate period after the war to carry out the capital projects which are necessary to raise the efficiency of our agriculture and industry? Hon. Members will remember the words in the Financial Memorandum to the Education Bill—very frightening words, I think they were. There, it was stated that, even after 1947, there may not be labour and materials available to carry out the school building programme. That shows clearly enough that the Government anticipate a scramble for our resources, and that scramble will be due to the unleashing of consumption. It comes to this that, if this House passes reconstruction measures, which together with the service of debt, the cost of Defence and other Government expenditure, make it necessary for the Chancellor after the war to take 35 per cent, of the national income, as he is doing now, then unless we continue to hold down private consumption, and unless we prevent the people from restocking their kitchens and their cupboards, it will be impossible to have a sufficient volume of new savings for carrying out the re-equipment of industry.

Agriculture is a good case in point. There is an industry where the farmers are making considerably more than they were before the war but they entered the war hopelessly under capitalised. Twenty-five years of poor profits had seen to that and now, with the present rate of taxation, farmers and landlords will not have the money in the bank at the end of the war with which to buy livestock and machinery and repair the buildings, and to build up the efficiency of agriculture as it ought to be built up. I was glad, therefore, to hear my right hon. Friend say that he was taking some steps towards helping the capital re-equipment of agriculture. I would ask him to make an investigation as to whether it would not be wise after the war to stop spending the taxpayers' money in subsidising food to the same extent and spend it on the capital development of the background of farming. It might be better to spend £50,000,000 on water supply and electricity and cottages in order to give a background to farming and to give a general productivity to the land than to go on handing out £50,000,000 or more on subsidies on food which has to be grown under inefficient conditions. I throw that out as a suggestion to the Chancellor of the Exchequer.

Photo of Mr David Grenfell Mr David Grenfell , Gower

The hon. Member is really proving the reverse of what he has already advocated in this Debate. He has over emphasised the importance of capital equipment and he has ignored altogether the lessons of recent years in this regard. He said that America has been able to equip a per capita equipment vastly superior to our own but he forgot the lack of balance, when, in 1933, America, with the most excellent capital equipment and machinery, experienced the worst slump in the history of the world.

Photo of Mr David Eccles Mr David Eccles , Chippenham

I thank the hon. Member for drawing my attention to that. I quite agree that the Americans did not arrange their domestic policy so as to make proper use of the capital equipment that they had; that they failed to keep up their volume of physical production was in spite of having good capital equipment and not because of it.

Photo of Mr David Grenfell Mr David Grenfell , Gower

They had no consumption. That is the main point.

Photo of Mr David Eccles Mr David Eccles , Chippenham

I am sorry I cannot argue that further. In my view everything the Chancellor is doing to encourage industry to invest in new plant and buildings is welcome, but not apparently welcome to the hon. Member for Gower (Mr. Grenfell). Many firms have accumulated large cash reserves, and I hope the Chancellor will not rest satisfied with that. What matters is that there should be labour and materials available to turn those cash reserves into capital projects when the time comes. I think we owe it to the British workman to put the best tools in his hand after the war, and that anyone who refrains from consumption in order to put tools into the hands of the next generation after the war will, in a very literal way, be saving the country.

In conclusion I hope I have not painted too gloomy a picture. The future of the country, as I see it, may be difficult but it is going to be exciting. We have lost our surplus fat, we have become hardened in war and, in the great struggle for our way of life, we have had to throw overboard much of the accumulated property of the past. That is not altogether a bad thing, for with the treasure has gone a lot of junk. I am sure that now we should tell the world, as was implicit in my right hon. Friend's statement on Tuesday, that this is not "positively our last appearance" but the beginning of a new performance, and a much better one than that on which the curtain is soon to fall.

Photo of Mr Alfred Edwards Mr Alfred Edwards , Middlesbrough East

Will the hon. Member answer one question before he sits down? I have followed his most interesting argument very carefully in view of the divided opinion in the Committee upon this question. Does his suggestion involve keeping rigid controls for a considerable time after the war?

Photo of Mr David Eccles Mr David Eccles , Chippenham

In my opinion we must keep control over the allocation of raw materials, which is the essential means of seeing what type of production there should be, at least until we know where we stand in regard to foreign trade.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

The times that we are facing, with the great events pending which will decide the fate of this country and of Europe, demand that everything we say and do should be directed towards achieving the greatest unity and resolution among the people of this country. In the light of that we have to ask ourselves if this Budget, and the policy statement made by the Chancellor in introducing the Budget, are going to help towards that end. Anyone who gives serious consideration to the situation existing in the country, and to the effect that the Chancellor's speech will have on the masses of the workers, must answer that this Budget Statement will have the reverse effect. It will have very evil consequences amongst the masses of the workers of this country, on whom so much depends.

The question of prices and wages is not something for the future, although the Chancellor might try to give that impression. At the present moment the engineers, one of the most important sections of industry in this country, have a wage claim before the tribunals, and the policy statement made by the Chancellor was practically an instruction to the tribunals—if not an instruction, very strong guidance—not to consider any increases in wages. It is bound to have a terriffic effect so far as the engineering workers are concerned. Not only so, but the whole suggestion of policy contained in the speech and in the character of the Budget, which fails in many directions, makes it clear that once again the poorest of the poor shall be the first affected, the low-paid workers with no possibility of getting an increase and the old age pensioners. I have even heard here in the Lobbies the policemen complaining about the situation they will be in if this policy develops. They recognise that it is a policy deliberately directed towards reducing their standards as well as those of the working class, reducing wages by the method of inflating prices.

In connection with this it is necessary to note the very great care that is always expressed not to relate increase of profits to prices. Always we must be very guarded and careful about profits, which are very sacred. The lives of the working class, and of the people in general, may be conscripted and used as the Government see fit, but profits always have to be treated as sacrosanct, and nothing must be said about them. It is common in this House to hear hon. Members compare the wages of soldiers with the wages of workers, but they never compare the wages of soldiers with the profits of employers or the incomes of bank directors. We must never touch on this. I would challenge anyone, in connection with the Budget and the policy statement of the Chancellor, to examine his speech with me word by word or sentence by sentence. Nowhere in the speech will be found the slightest trace of any influence of Labour policy in that speech. The Chancellor was not speaking as the Chancellor of a Coalition Government; he was speaking as a confirmed Tory, representing Toryism and Tory policies, and the amount of support he received from the Tories made that as clear as possible.

It has been suggested that this Budget and this policy speech represent a landmark. But what kind of a landmark? It represents a reversal from control to the letting loose in this country of a pack of ravenous wolves. Yes; control has to go and the wolves are to be let loose once again. The Financial Secretary said yesterday that we were going to be in difficulties; because of man-power and material, it would be difficult to get consumption goods and capital goods at the same time. Consider the production that we are getting at the present time and then consider that when the war is over, four or five million men and women will be released ready to produce. Yet it is said there are going to be difficulties. Why will there be difficulties? The Financial Secretary gave the game away without realising that he was doing so, and I challenge the Chancellor on the statement of his Financial Secretary to give any other explanation than the one I will give him. The Financial Secretary said yesterday that it is a practical fact that it will be when the fighting is over that the danger of inflation arises. But he did not stop to ask how that would come about. Maybe the Chancellor can tell us, but maybe the Chancellor would not like to tell us, because it would not suit his Tory friends.

The danger of inflation arises when the fighting is over because, when the fighting is on, an attempt is made to organise and regulate and control production and distribution and, when the fighting is over, we are left at the mercy of a gang of money-grabbers—not concerned with the community, not concerned with the brave lads who fought in the war, only concerned with grabbing profits. Those who were in this House at the end of the last war had an exhibition of what happened when the fighting was over and, the controls were removed. I am told that on the other side of the House there was an awful and fearsome spectacle, the gang of war profiteers. If it was any worse than the spectacle before us now when the Benches opposite are filled, then truly it must have been an awful spectacle. Nevertheless, the fact was that this House was packed with war profiteers whose one concern was to get rid of control.

Photo of Mr Evelyn Walkden Mr Evelyn Walkden , Doncaster

That was what the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) said.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

Somebody said they were hard-faced men who had done well out of the war. There are hard-faced men on the other side to-day who have not done so badly out of the war. That is the trouble, and that is what will create the danger of inflation, the question of removing control. When the Chancellor was speaking I interjected on the question of control and said that control would have to be maintained. The Chancellor remarked that there was room for self-control. I marvel sometimes at my own self-control, in view of what goes on in here. However, there is one thing certain, neither the Chancellor nor any politician, priest, nor philosopher, who has ever lived has ever been able to discover how self-control can be operated by those who are after profit. That is utterly impossible. They must be continually fighting to increase their profit; if they do not, one of their competitors is going to cut them down, so they have to keep at it. It is a vicious system which nothing can stop. Here we have a situation where it is clear, from the Chancellor's speech, that the desire is to cut down the standards of the working class. It is very significant that we get legislation which will impose heavy terms of imprisonment on anyone who advocates strikes and, following that, this proposition for imposing worse conditions on the workers.

A very difficult situation arose in the mining industry, but after much care and attention the problem has been solved to a considerable extent and there is some possibility of maintaining peace in that industry for the period of the war. Now, just after having reached agreement there, we get a statement of financial policy from the Chancellor that will create the greatest possible trouble in other industries, particularly in the engineering industry. I had a letter to-day from the Engine and Boiler Workshops Stewards Committee of Messrs. John Brown, Clydebank. When the Chancellor talked about prices and wages, he gave the impression that wages were so high that it would not be a bad thing if prices were pushed a little higher, but he must have forgotten that his own White Paper gives the lie to that idea. Trade union leaders have all the time maintained that the method of arriving at the cost-of-living index figure, by the Ministry of Labour, was all wrong, and the White Paper entirely explodes that Ministry of Labour figure and shows that there has been no great rise of wages. Instead of wages being above prices they have been far below. The letter I have received from this Shop Stewards' Committee says: It is an insult to think that workers are happy and content with wages and conditions until some 'irresponsible element' comes along. We ourselves judge our conditions and have used the machinery of negotiation to rectify them and what do we find? A classic example is the engineering industry. We accept dilution and lower our market value, with the result that our basic wage is 66s., and standard rate Is. 10⅜d. per hour. The Chancellor has put forward his policy at a time when overtime has been cut and when, in some cases, working hours have been cut because of the changes that are being made. I wonder what the trade union leaders who are at the I.L.O. Conference in America will think of this Budget and its policy? They are discussing there the bright new world that is to come after the war, yet the Chancellor has made it clear that he and his supporters are determined to get back to the bad old world immediately the war is over. The desire on the part of the Tories in this House is, as I have said, to get back to the bad old world. The Chancellor also said something about getting rid of rationing and there were cheers from the benches behind him. Members opposite fail to realise that it is only since we have had rationing that the children of this country have had the chance of being properly fed. Rationing gives them a fair share of whatever food is available at a time when their parents are working and earning money with which to buy the food. But those on the other side of the Committee are not concerned about the children. The gourmands want their own capacious stomachs filled, no matter how many are starving. That is what happened after the last war. It has been said that there are no rich people left in this country.

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

Yet one could buy some Hebridean Islands the other day.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

I do not know whom Members on the other side are trying to deceive; they certainly do not deceive anybody on this side of the House, or any workers in the country. The rich are taking thousands of millions of pounds every year which they have never done a stroke of work to earn.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

As I said the other day, we are sacrificing men, women and innocent children to keep in existence ancient monuments in the form of our old aristocracy and hard-faced business men in the City who contribute nothing towards the welfare of our people. I want to tell the Chancellor and the Government that hope for the future lies not in making concessions to Toryism, the City of London, monopoly capitalists or the ancient aristocracy; it lies in co-operation between the Government, trade union organisations and the mass of our working people. An hon. Member opposite a short while ago said that in Russia they can organise their economy so that the question of foreign trade does not matter. He said that while that was possible in Russia it was not possible to do it here. Why not? [An HON. MEMBER: "Because we cannot grow our own food here."] The reason why it is not possible is because the people here do not own and control the means of doing it. It is not possible because a few robbers have control of the land and the industries of this country. The hon. Member opposite can sneer, but he forgets that these people starved millions in this country before the war, when there were over 3,000,000 unemployed and when there was an allowance of 2s. or 3s. a week for a child.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

Is it any wonder that so many of our children were sacrificed?

Photo of Mr Arthur Molson Mr Arthur Molson , High Peak

The hon. Gentleman accused me of sneering. I was smiling at the thought, which nobody on the other side seems to have put forward, that this country could be self-supporting in food.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

The Soviet Union contains very many different countries and nationalities. The other day we were discussing in this House the British Empire and I took occasion to make an interjection calling attention to the fact that the countries constituting the Empire could be bound together in the closest ties of co-operation through the various labour movements in the different countries, as has been done in the Soviet Union. With that co-operation you would have every conceivable material for the development of our self-sufficiency. There is nothing that the Russians have that we have not got.

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

Put that in your pipe and smoke it.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

But there is something that we have that they have not got; they have not got robber landlords or a gang of bloated capitalists, who are concerned only about making profits while the masses of the people suffer.

Photo of Mr Arthur Molson Mr Arthur Molson , High Peak

Are we to understand that the hon. Member is also advocating the unification of the British Empire?

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

The British Empire as we knew it is dead and gone, but the nations that make it up, including a free India, not an India with its political leaders in jail—

Photo of Colonel Albert Ward Colonel Albert Ward , Kingston upon Hull North West

Perhaps the hon. Member will get back to the Budget.

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

On a point of Order. My hon. Friend was asked a question. Surely he ought to be given the chance of answering it.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

We are capable of what Soviet Russia has done if we have full control of the land and industries of this country and can organise and direct them so as to get maximum production and the most just and beneficial method of distribution. Does the Chancellor agree with that? Do any of the Tories on the other side object to that? If the Chancellor and the Government pursue the policy outlined in the right hon. Gentleman's speech it will be a dangerous policy, full of the possibilities of disintegration. If they want unity of the people in order to bring about as early as possible the end of this terrible war, and to bring in its train a lasting peace, then they must finish with the monopoly capitalists and direct the Budget and its policy towards unity of the masses of the people, so that they may get not only victory in war but also victory in peace and the possibility of a happy future for the people of this country.

Photo of Captain James Duncan Captain James Duncan , Kensington North

We have listened to a characteristic outburst from the hon. Member for West Fife (Mr. Gallacher), to which I think we can safely leave the Chancellor to reply. I wish to call attention to the Greek chorus which has attended his speech. The hon. Member for Dumbarton Burghs (Mr. Kirkwood) behaved exactly like a member of a Greek chorus, but I cannot believe for one moment that it is a question of a new David and Goliath.

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

I do not follow the hon. and gallant Member. Perhaps he will repeat what he has said.

Photo of Colonel Albert Ward Colonel Albert Ward , Kingston upon Hull North West

I think it is much better to get on with the Budget.

Photo of Captain James Duncan Captain James Duncan , Kensington North

Then we will leave it at that. I wish to congratulate the Chancellor on the magnificent statement he made on Tuesday, and upon the contents of his Budget. He put the cat among the pigeons, if by pigeons I can call his colleagues of the War Cabinet his fantails, particularly those who have been negotiating wages and prices with certain classes of the population recently, and gave a warning not only to them but to the country. I should also like to congratulate the taxpayers, because I feel that they have submitted to very high taxation for some years now with courage and patience and that they deserve the thanks of the House for the way in which they have not only paid up but lent voluntarily as well.

With regard to the financial arrangements for Excess Profits Tax, I understand that firms that pay E.P.T. get a 20 per cent, credit which will be subject to tax when it is paid after the war. It does not seem to me that that is income. It is in the nature of assistance for reconstruction, and is therefore a capital repayment. It only happens once, so it is in the nature of a casual payment, and it would be much fairer to talk about a 10 per cent, capital repayment rather than 20 per cent, subject to tax, because 20 per cent, sounds a considerable amount, but in fact it is only half that sum, and it would be much more satisfactory to call it a 10 per cent. capital credit and then everyone would know where he stood. The Chancellor of the Exchequer also stressed the importance of the export trade, and I should like to bring that home too. It is important to realise that the goods that we export cannot be ordered to be exported because foreigners have to buy them and, in order to induce them to buy, we have to provide the goods in the right quantity, of the right quality, at the right price and of the right design.

The right hon. Gentleman devoted a large part of his speech to the relationship between prices and costs. I absolutely agree with him in that, and realise the tremendous importance of avoiding inflation in the post-war period and now and of keeping these relations between costs and prices on a level keel. He pointed out that the cost of living had risen from 28 per cent, above pre-war in 1941 to 29 per cent, in 1944, and that wage rates had risen from 22 per cent, above pre-war in 1941 to 40 per cent, in 1944, and that something had to be done to bring the two things into relationship. He suggested that wage-rates must be brought into relation with costs or costs into relation with wage-rates. Bearing in mind the importance of the export trade, and the price of the articles which we must induce foreigners to buy, I am prepared to say that we ought to try to do both, because in so many of the articles that we have to produce for overseas after the war price is important and, if other countries are going to compete at lower wages, we must reduce our prices and costs in order to bring them into relation in both the ways I have mentioned.

With regard to post-war industry and agriculture, I want to congratulate my right hon. Friend on the beginning of a first-class industrial and financial policy. It is certainly on the right lines, and I shall watch its development with very great interest and shall support the general lines of the policy. It is of very great importance both from the point of view of the export trade and of the workers themselves. The hon. Member for Middlesbrough East (Mr. A. Edwards) referred to a national minimum, and I wish to see a national minimum in the interests of the workers. We hope to achieve that through a policy of what is commonly called "full employment." Whatever we like to call it I do not want to see the poorest paid workers earning such a low wage that they cannot bring up healthy families and live in decent conditions. I entirely disagree with the hon. Member for West Fife in his diatribes against this side as being robbers and gangsters. We are as much in favour of the welfare of the workers as any other party, and the proof of it is the numbers that we have here at present.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

If Conservative Members are so concerned about the welfare of the workers, why was there so much unnecessary suffering and starvation amongst them between the two wars, with the Conservative Party in power most of the time?

Photo of Captain James Duncan Captain James Duncan , Kensington North

If I attempted to tell the hon. Member that I am sure I should be called to Order. I now wish to refer to the size of the post-war Budget. The present Budget totals £5,937,000,000—the figures are so enormous that they are difficult to understand—of which sum borrowing accounts for £2,837,000,000 and taxes £3,100,000,000. While one may hope that borrowing on any large scale will not be necessary after the war, at any rate after the first year or two, we shall still have to find the enormous sum of £3,100,000,000, taking the revenue from taxes alone. According to page 13 of the Tables that is 36 per cent, of the national income. If you assume—I am not quite sure to what extent one can assume—that the national private income, personal and impersonal, remains in the region of £8,500,000,000, in my opinion 36 per cent, of that is far too high. Mr. Norman Crump in the "Sunday Times" some weeks ago said he did not fear a Budget of £2,000,000,000, which is 25 per cent, of the national income. My own view is that something in the nature of 20 per cent, rather than 25 per cent, would be much nearer the figure. My view has always been that all taxation is bad and that it is best, as far as one can, to leave the money to fructify in the pockets of the people. Obviously we must envisage a very much larger Budget of national expenditure than prewar, but something in the nature of £1,500,000,000 or £1,600,000,000 rather than £2,000,000,000 would seem to be the figure to aim at.

I entirely agree with everything that has been said here and in the Press as to the essential character of the National Savings Scheme and the success that has attended it, and I also congratulate all the voluntary workers, and those led by Lord Kindersley, who have made such a success of the movement. But the time will come after the war when, in my opinion, national savings should be diverted and the Government should cease to rely on these vast sums. My first reason is that the Government already have a very heavy potential burden in the repayment of these National Savings Certificates at any moment and, as this burden grows, so a bigger proportion has to be set aside year by year to meet the potential obligations.

It is desirable after the war that the burden should grow less rather than continue to grow bigger. My second reason is that capital after the war is going to be very difficult to find, particularly by industry. I believe we ought to divert it if we possibly can, because the main channel of getting capital will not be through the big capitalist people but through the smaller and medium savers. That ought to be diverted to industry in some way. I should like to see the workers take a shareholding interest in their own factories. I should like to see Birmingham workers take a shareholding interest in Birmingham factories, but, as a corollary, we must envisage some control over the investments that are made.

I am not prepared, at the moment, to say exactly how I would do it, but I would like the Chancellor to consider, in the months that are coming, some form of control of investment, or licensing of stock exchanges and a prohibition of outside broking, dealing in stocks or whatever it may be, because I feel that, in order to protect the worker investor, we must exercise some form of discretionary control so that he is not "done" in the way the capitalist used to be "done" before the war. I put that suggestion forward in a somewhat hesitating spirit, because, at the moment, neither I, nor, I think, anybody else, has thought it out, but I believe, for the two reasons I have given, that we must at some time, fairly soon after the war, take definite steps to divert savings to industry, away from the State, assuming, of course, that savings will go on now that the habit has been formed. I hope my right hon. Friend will think about it.

In conclusion, I would like to say that I think this Budget is a sound, statesmanlike Budget. Having imposed no increases in taxation, it has created a feeling of relief among people that things are not worse. It is also a forward-looking Budget—forward-looking beyond victory to the peace. It is a Budget on which, I think, the Government as a whole are to be congratulated. I hope the Government will take a firm stand upon my right hon. Friend's statement, in the policy they will, pursue in the future.

Photo of Mr John Campbell Mr John Campbell , Antrim

I had a string of points that I could have raised on my right hon. Friend's statement of the day before yesterday, but many of them have been covered already by other speakers. I would, however, like to concentrate on two which, I think, will not be raised by other hon. Members. But before doing so may I join in the chorus of congratulations offered to my right hon. Friend? I think he surprised everyone, except the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) by introducing a war-time Budget in which no increases of taxation occurred. Further, I think he should be congratulated on a Budget speech which so gripped the Committee—at any rate one Member of it—from start to finish.

The first point I want to refer to is an item in the Financial Statement. Hon. Members see there, year after year, the entry "Payments to the Northern Ireland Exchequers." I have discussed that point with a great many hon. Members, and a great many people outside, and in nearly every case I have found that that is taken to mean that the taxpayer of Great Britain subsidises the Exchequer of Northern Ireland to the tune of several millions. Several people—in several cases, curiously enough, they were Scottish Liberals— have said to me, "We cannot afford to keep Northern Ireland in the United Kingdom if we have to subsidise it year after year to the tune of so many millions." The hon. and gallant Member for Oxford University (Petty Officer Herbert) mentioned the point when he returned from Newfoundland last year. He described to the House how, in his opinion, it was necessary to find some means of subsidising the Government of Newfoundland, while giving the country a measure of self-government. He said it was necessary to find some means to do this, and gave, as a possible method, that of the Government of Northern Ireland where, he said, it was being done all the time without troubling anyone.

My right hon. Friend knows that that is entirely untrue. Northern Ireland has never received a subsidy from anyone. What happens is that the Imperial Exchequer here levies taxes in Northern Ireland, on exactly the same basis and with the same machinery as it does in this country. As a result, the Exchequer here last year collected from Northern Ireland taxes amounting to £38,000,000 and then handed nearly £7,000,000 back to the Government of Northern Ireland to finance services transferred to that Government. I claim, therefore, that the entry which appears in the Blue Paper should not read "Payment to Northern Ireland" but "repayment of taxes collected in Northern Ireland." I have been told that there is some insuperable objection to making this entry in an intelligible manner, but I have not discovered what that objection is, and I hope my right hon. Friend will find time to deal with that small point because it is misleading people as to the value of the connection of Northern Ireland with England.

The second point I want to make refers to the statement by my right hon. Friend on the export trade in the post-war period. He said that, in his view, we should aim at continuing a contract rather than trying to get the last cent out of the contract that happens to be current at the moment. I do not quite know what he had in mind when he said that, but, so far as my small experience goes, that has never been the policy of the Board of Trade. I hope that in the future he will see that the hand of the Treasury, which reaches into every Department of government were expenditure is incurred, and which controls very strictly that expenditure, will guide the Board of Trade in procuring revenue to meet that expenditure. Other hon. Members in this Debate have already suggested that the function of the Treasury has been widened in that direction and I hope my right hon. Friend will widen it still further.

One instance I have in mind happens to concern the industry I know most about, the linen trade, which supplies the most employment in my constituency with the exception of agriculture. In prewar days the linen trade procured for its products more dollars for this country than any other industry in the United Kingdom, except the whisky trade, so it is of some interest to my right hon. Friend when he is considering where his revenue is to come from. After the last war, the textile machinists were encouraged to export textile machinery to all the countries of the earth, and it was extremely difficult, at the high prices then ruling, for the textile industry of this country to renew obsolete and worn-out machinery. At the present time it must be common to all exporting industries, or nearly all exporting industries, that their machinery has suffered five years wear and tear without any possibility of maintenance and overhaul. In addition, I know of many cases where machinery has been completely ruined by being used for the production of war necessities for which the machinery was never designed.

It is, therefore, most essential, not only that my right hon. Friend should see that the money is available to industry as several hon. Members have suggested, but that when the money is available the Board of Trade makes it physically possible for that machinery to be available to industry. I do not want the Board of Trade to say that the first call on this machinery must be for export, for the rehabilitation of the textile industries of Europe and for procuring the necessary currency by export to outside markets. What we ought to do is to look to the long-term contracts and make sure, if we have to export machinery to rehabilitate European industry, that we export the worn-out machinery which the factories and mills of this country will have to throw out, as and when they are able to replace it by up-to-date machinery.

Those are my two points, but before sitting down I would like again to congratulate my right hon. Friend on his extremely wise and far-seeing statement of policy in regard to the post-war period. I would further like to say that we must contrive, when the time comes, to put that policy into operation and to see that my right hon. Friend still occupies the post of Chancellor of the Exchequer.

Photo of Sir Murdoch Macdonald Sir Murdoch Macdonald , Inverness

Having listened on Tuesday to the Chancellor's speech and to several hon. Members who dealt with specific points, may I, for a few moments, deal with two points which occur to me? The Chancellor mentioned reliefs which he proposed to give to industrialists, and pointed out that these reliefs would also be applicable to agricultural parties. I think that all those interested in agriculture, as I am— representing an agricultural constituency and temporarily representing another great agricultural constituency—will be deeply grateful to the Chancellor for having mentioned the concessions which he intimated on Tuesday. A second point which he dealt with, equally affected agriculture. It was the further help towards grants, to enable long-term loans to be obtained at more reasonable rates than they are at present. I, myself, as a Member of Parliament, have had applications made to me to help individuals to obtain loans. Usually the applicants have had very little tangible credit, other than their own good faith and good name. Of course, in those circumstances, it has been very difficult to obtain agricultural credits. But this step of the Chancellor in reducing the rates will help very greatly to enable people to raise money, who, hitherto, have been unable to do so themselves. If the present system continues, there will still be a great number of very practical people willing to become farmers, particularly small farmers, who will not be able to produce much or any collateral.

I was very glad to hear the other day of the system maintained in Scottish banking companies years ago whereby, if the local agent was able to judge whether a man was trustworthy and ought to be given a credit, that was sufficient for the head office to authorise the credit being given. Years ago the bigger banks absorbed the smaller concerns, and I understand that credits could since then be obtained only at the head offices and that the position of the individual without adequate collateral did not count. The only question was what collateral security he had for the loan he wanted. Recently, I understand, one of the big banks has reversed that policy and has appointed a general manager to consider the advancing of the money to small people who demand it for trade or agriculture on their good faith rather than only on collateral securities, so that while the Chancellor has made an advance in making the terms of loan a good deal easier much has yet to be done to help a great number of people, who are worthy to advance money to, in order to assist them to take farms and help in production.

When all these things are done, however, the Chancellor will have to face the great problem of industry versus agriculture. The agriculturists would like, if they could, to control prices. That would, in effect, mean that foreign imports, which must form a large part of the foodstuffs of this country, would be sold at a higher price than the import price. The industrialist, on the other hand, who will, after the war, have to sell his products in a free market against external competition, will find his interest will be to sell as cheaply as possible. If he does he will then say "I must have the food supplies of the people who produce my goods for me as cheap as possible." That, of course, will be in contradiction to what the agriculturists would like. I would like to explain another system than the system of subsidies which the Chancellor has adopted from his predecessors, but I will not trouble the Committee with it now because a more suitable occasion may arise.

My system would give a much greater relief and benefit to the farmer whom the present system is intended to benefit— not the farmer of the very best land, but the farmer on the class of land that is poorer than the best. He is the man whose land we want to keep in cultivation. We want to engage as many people as possible on the land. Under the present system of subsidies a farmer who has first-class land gets the same treatment as the farmer on poor land. On first-class land, the farmer can produce seven to nine quarters of barley per acre and gets about —40, but the farmer on poor land who can produce only three or four quarters gets —16 to —18.

The Chancellor will have one day to face the fact that there is a big divergence between the interests of the agriculturists and the industrialists. That can best be met by introducing some new system which will do justice to both. I would like again to congratulate the Chancellor on having made these two important steps in ameliorating the condition of agriculture, by providing for the 20 per cent, relief on buildings for proprietors. After all, proprietors build by far the greater number of buildings on agricultural properties, and I know many such properties where the rental value or the nominal interest value is about the value of the rental of the whole farm. The Chancellor has also made a most important provision by allowing long-term loans at reasonable rates. It will affect by far the greater number of farmers who, after all, are small farmers.

Photo of Mr George Griffiths Mr George Griffiths , Hemsworth

Like the hon. Member for Antrim (Mr. Campbell), I have two points I want to put across. Before doing so I would like to congratulate the Chancellor on his Budget. He has had heaps of congratulations in the last two days which are enough to smother him. I am satisfied that his speech on Tuesday was the best he has made since he came to the House. I listened to him speaking on the Beveridge Report when he had his tongue in his cheek. He floundered about very much that day. As a colleague behind me says, he was on a sticky wicket. On Tuesday I sat opposite the Chancellor and I thought he did remarkably well. He finished up on the top, when he said that it would be the same mixture as last year. From my point of view there was a fly in the ointment. That was his apparent threat to wages. He may say that it was not a threat, and although the House may think it was not a threat, you will find, if you look at certain of the newspapers yesterday and to-day, that a great crowd outside think it was a threat. [An HON. MEMBER: "It was a warning."] When you get a warning, it is sometimes equal to a threat. I represent a big industrial constituency, and my people do not forget the way in which wages were cut down without mercy after the last war.

Photo of Mr George Griffiths Mr George Griffiths , Hemsworth

I am not sure that they are all right. They are not all right as far as he is concerned, because he told ms that he was telling them in his Division the other day that a man and wife would get —2 a week under the Beveridge scheme and that they would be able to go to Blackpool. They have got that ready for him for the next election. The majority of the workers feel that what the Chancellor said is a kind of threat that they have got to get ready for a reduction in wages. My people have said to me repeatedly, "We have got to watch it, and we want to hold what we have gained." I am satisfied that this point in the Budget has unsettled thousands of workers. It has made them uncomfortable, and I do not want the workers, because of this statement, not to throw their full weight into their work during the war, and after the war also. I would like to say a word to the hon. and gallant Member for North Kensington (Capt. Duncan) before he goes out. He said he was glad that the workers had got into the spirit of saving. That is all eyewash and bunkum. Those who got any money in the past tried to save it. My wages were not very high and I tried every week to put a shilling or two on one side. I would like the hon. and gallant Gentleman to know that, before he was born, some of the workers were doing a bit of saving.

Photo of Captain James Duncan Captain James Duncan , Kensington North

I agree that, before I was born, the spirit of thrift was very great, but I am not sure that I agree with the hon. Gentleman that it was so great just before the war.

Photo of Mr George Griffiths Mr George Griffiths , Hemsworth

The reason they did not save before the war was that they had no money to save. It took them all their time to live. I want to issue this warning to the Chancellor. The hon. Member for West Fife (Mr. Gallacher) spoke about the old age pensioner and the people who have fixed incomes. If the cost of living goes up, they will come to us, and we shall have to plead with the Chancellor of the Exchequer to increase pensions and standard incomes. Look at the newspapers to-day. Some of the leading trade union leaders who have been throwing their full weight into the war since 1939 are now sending out a cry of alarm at the statement made by the Chancellor regarding wages. I will leave that point for a moment. I know there are many other Members who wish to speak. I have been sitting here for three days trying to get a look in, so I must give other people the same chance. I was very pleased to hear the Chancellor's statement about scientific research. He said that he was interested in the Debate last week about scientific research. So was I, but I was disappointed in that discussion, especially with the speech of the hon. Member for Pudsey and Otley (Sir G. Gibson) who said he wanted scientific research, so that industry could develop. I listened attentively all that day and I do not think anybody mentioned medical scientific research. I want the Chancellor of the Exchequer and the scientists of this country to develop medical research for the advantage of the industrial workers. If the industrial workers are not healthy, it is no use industry having all the scientific research you like, because they cannot produce.

I well remember, before I came to this House, the scientific research of Dr. Banting, in a back room in Toronto. He had been in the last war. He was in France, where he saw scores of our lads die like flies from diabetes. He went into his back room at Toronto along with a pal called Charlie Best and they applied what knowledge they had to the discovery of insulin. Has that not been a great boon to the world? It has been a great boon to me. I am alive now, after 22 years of diabetes. I am almost as alive as some of those who have not got it. [HON. MEMBERS: "More."] I thank God that Dr. Banting lived, because he gave life to hundreds of thousands of people through his medical scientific research. We want medical scientific research to go further, because there are other ailments from which the human frame suffers, and for which, I believe, medical research could find a cure. There is not a cure for diabetes, but thank God we have now the greatest palliative that has ever been discovered. I am desirous that the Chancellor of the Exchequer should ask the scientists to do their best in medical research for the health of the worker. I have nothing further to say, but I hope that what I have said the Chancellor will not forget.

Photo of Captain Leonard Plugge Captain Leonard Plugge , Rochester Chatham

Before proceeding with the main part of my speech I should like to mention to the hon. Member who has just spoken that the Medical Research Council was referred to on more than one occasion during the recent Debate upon scientific research. This council comes under the Lord President of the Council. It has done wonderful work in conjunction with other authorities and is in constant touch with the Department of Scientific and Industrial Research.

I want to add my congratulations to those which have already been expressed to the Chancellor of the Exchequer on his Budget speech this year. Rarely have we been privileged to listen to such a clear exposé of the situation, and all opinions, both here and outside, agree that the Budget this year was presented by a business man on business lines. Although it terminated with the sentence "The same mixture as before," and although it came as a relief to many people who thought there would certainly be some increase in indirect taxation, the Budget, in effect, is not the exact same mixture, it is diluted, for the Chancellor of the Exchequer has granted very many concessions which in fact amount to reductions in taxation. He mentioned among many, a very generous allowance for obsolete machinery, relief from E.P.T. for small concerns, allowances on buildings to agriculture, a change in the duties on oil and, in a very interesting sentence, he referred to the taxation on motor cars. He said: The first question that presents itself is whether there would be any advantage in altering the distribution of the total taxation from these sources as between the licence on the vehicle and the tax on the fuel."— [OFFICIAL REPORT 25th April, 1944; col. 657, Vol. 399.] That is a very important sentence which shows great understanding and I will later take the opportunity of making my observations on the point, and try to take advantage of the Chancellor's open mind.

The Chancellor made a most generous gesture towards the relief of taxation for scientific research. That is a subject in which I have the greatest interest. Before making my observations to the Committee on this part of his speech I would like to review very shortly several other points in the Chancellor's address. The gesture of the Chancellor of the Exchequer in giving relief from E.P.T. to the smaller manufacturers, will be most welcome throughout the country. I have always felt that the Excess Profits Tax was very unfair. I agree with the motives which prompted it. It was not right that anybody should make money out of such a dreadful calamity as a great war, but nevertheless many anomalies which arose out of 100 per cent. E.P.T. did a great deal to curtail our production. E.P.T. provided very clamant injustices. In Rochester, in my constituency, there is a most glaring example. I am thinking of Short Bros., seaplane manufacturers of Rochester. Mr. Oswald Short, that great aeroplane constructor for 20 years between the two wars, tried very hard to keep his firm going. It had specialised during the last war in flying boats and seaplanes and yet, following the Armistice, with no orders they were making any bits or pieces they could to keep alive. All sorts of small odd jobs of work, such as parts for bodies for buses for the London Passenger Transport Board, park benches, wooden spoons, packing cases were accepted as orders; nothing was refused even if showing a loss. Mr. Oswald Short was practically selling his shirt in order to keep his firm going, paying and retaining his skilled workers because he thought they might be required at short notice to manufacture aeroplanes on a large scale. He sensed the danger his country was running. He was penalised for having done so, because he was allowed to retain only 6d. in the — £on the earnings of his company and now he pays the penalty for having done his duty.

I ask the Committee to compare the treatment Mr. Oswald Short has received with that of certain tobacco manufacturers who were making £10,000,000 profit in the years before the war, and they were very lucky. They are according to the E.P.T. law allowed now to go on making £10,000,000 a year.

I welcomed the Pay-as-you-earn measure as I think other hon. Members did, but I welcome it from an original angle. I look upon it as amounting to a complete washing out of Income Tax. In years to come when a workman asks what his wages are going to be, he will be concerned not with what his firm pays for his hire, but with his wages proper and not with the income tax paid by his firm at all. He will want to know how many pounds will be inserted in his envelope when he walks away from his works. Consequently, after a certain time, he will lose sight of the fact that he is paying any Income Tax at all. Therefore, Pay-as-you-earn is really a tax upon the employer for the privilege of employing a man. It will be the employer who will really pay the tax because the worker will not see it and will forget about it. It will never enter his life or his calculations. I have always been in favour of indirect taxation and against income tax. It is much more satisfactory for the person who earns the money, to be able to handle it and to spend it. If he wants to buy something in a shop or to give his wife or his friend a present let it be an expensive present, he should be able to handle his full money before it leaves him to go to the State. I would like to see Income Tax abolished altogether, and an equivalent amount raised as an indirect tax on all the actions which everybody goes through while he lives, such as buying a house, renting a cottage, repairing a window, telephoning, listening in and all other things. Pay while you travel and pay while you breathe. Citizens should have to pay a small token towards the State when they do all those things. The matter would not be noticed by the taxpayer, because the sums would be paid continuously in small quantities. That is a much easier way and much more pleasant way to raise taxes, and the Chancellor of the Exchequer has found that he can raise greater sums in that manner too, without complaint.

Photo of Mr John Mack Mr John Mack , Newcastle-under-Lyme

Will the hon. and gallant Member tell me what the large Income Tax payers of the present day would do with the amounts they would be able to keep, after they had spent all they could, if his marvellous plan came into operation?

Photo of Captain Leonard Plugge Captain Leonard Plugge , Rochester Chatham

No doubt my hon. Friend will be able to find some solution to that position. I have not much time in which to develop the point further. It is a very good suggestion that I have just made, because a man is only a clearing house, he can spend little on himself; his money is usually spent by his women folk, and his dependants, and on those he employs.

I would like to pass from indirect taxation and to draw the attention of the Committee and of the Chancellor to the disadvantage of letting the taxpayer know at every moment that he is paying and when he is paying taxes. There is no use in continual reminder. It annoys the taxpayer. I want particularly to draw attention to the Entertainments Duty contributed by cinemas. In picture houses the prices of the seats are always advertised as so much for the seat and so much for the Entertainments Duty and so much for the total. It unnecessarily reminds the poor cinema-goer that he has to pay so much to the State for his right to entertainment. I do not drink, but if we go and buy a bottle of whisky we are not told that the price of the whisky is 9d., that with the bottle and the trader's profit it is 4s. 9d. and that the tax is 21s. I do not think the practice of reminding the taxpayer that he has to pay the taxes should be allowed wide publicity outside and inside the cinemas. It is quite unnecessary, and against all common sense and national policy.

To my great disappointment, the Chancellor of the Exchequer did not make any reference to the relief of taxation to the live theatre. There is a great difference between the live theatre and the cinema. In the live theatre there are artistes who appear in person, and day after day give of their best. They are producing a film every single day whereas in the cinema there is art only in the film production. The showing of the film over and over again is a mechanical process. The film runs through the projector, under the supervision of a very responsible and skilful engineer. The picture house performance ought not to be put on the same footing as the live theatre where the artisans are the artistes and the artistes the artisans. I would like, therefore, to ask the Chancellor to consider giving more relief of taxation to the live theatre as against the cinema, now that he has so thoughtfully become the champion of the writer, the playwright and the author.

I come to the question of motor taxation. The Chancellor mentioned that there was an overwhelming argument against transferring the total amount of the taxation on motor cars from the horsepower tax to the consumption of petrol, running expenses as against lump sum for licences of cars. I cannot agree with that view. Every argument, except for two points, is in favour of levying motor car taxation on the petrol consumed. The two points I refer to which might be an advantage in the present situation are, first, that since it is necessary to register a vehicle, all motor car owners have to pay for the cost of registering the number and type of vehicle. The second point was that made by the Chancellor of the Exchequer himself. He stated that the present practice has protected the industry and discouraged foreign cars being sold and used in this country. Surely that is not a proper way to protect the industry. It would be most wrong, for instance, to lay down that cotton spinners in Manchester should weave their calicoes only in the specific widths of two and three inches because those are the widths used most in this country, thus discouraging the buying of cotton from outside. Cotton merchants would not be able to sell their cotton outside either.

The proper way to protect an industry is by a tariff. Look at the advantages of transferring the total amount of motor car taxation to the petrol consumed. The owner of a motor car would not be compelled to pay a lump sum. I have already made the point that it is better to levy taxation in small amounts. The next advantage is that people would pay as they went and in relation to the amount of time during which they used their motor car on the roads. Indirectly, the full petrol tax would be a tax on horsepower, on size, and on road use, because a powerful motor car uses more petrol but it tears up the roads more by rapid acceleration, weighing heavier and going faster. In every way, taxation on petrol consumed would be more fruitful and more just. After the war we must reduce deaths by relieving congestion on the roads, and if people have to pay each time they go on the road perhaps they will not go out so often or so far. Some people have to pay a big sum for owning a car even when they use it very little. In some cases the tax on large cars is exorbitant. We should encourage motorists to own more than one car. The smaller one could be used with less congestion for town work.

I brought a sixteen-cylinder car back from the States and when it was licensed by the L.C.C. they said it was the most powerful car they had ever licensed and it was 67 rateable horse power. What with horse power tax and insurance it cost about —3 a week practically to open the door of the car. It is the most unfair taxation ever imposed. Such a car should be taxed as it is used. The Chancellor of the Exchequer made no mention of the relief from taxation of petrol consumed by boats on rivers and on the sea. If you bring your yacht round the British coast, you must pay taxes on the petrol you use, which sums really go towards the making of the roads. If you take the boat to the Riviera it will cost you 8d. a gallon for fuel. Surely it is not right to do anything to encourage use of foreign seaside resorts. We should encourage people using rivers and the sea for transportation and we should discourage when we can the abuse of our roads which are already so congested.

I wanted to mention the subject of relief given by the Chancellor for scientific research. I am with him entirely on that subject. It is unfortunate that in this House, though we have many great and eminent men, there are only some 22 Members who hold a scientific degree. Five years ago with my hon. and gallant Friend the Member for South Nottingham (Major Markham) I founded the Parliamentary and Scientific Committee (and for its first four years of existence I served as Chairman of that Committee). At that time I led several deputations and made many representations to the Chancellor of the Exchequer, who was at that time the Lord President of the Council, and we realise now how very fortunate we were that the then Lord President, who is now the Chancellor of the Exchequer, holds a degree in science. We could not have brought our representations to anyone more sympathetic. The Parliamentary and Scientific Committee differs from the usual Committees of this House. Owing to there being so few Members holding scientific degrees, it was thought to be a good thing, if we could have representatives from outside scientific bodies throughout the country. Five years ago this body was founded with eight mem- bers, and now it has over 200 members. I hope the Chancellor of the Exchequer will not mind my saying that the Parliamentary and Scientific Committee feels that it has played its share in drawing the attention of the Government to the needs for relief of taxation for scientific research of every kind, and on behalf of that Committee and on behalf of all scientific research workers I wish to thank my right hon. Friend.

We are quite fortunate in that this present Government holds four Members with scientific degrees. Not only the Chancellor of the Exchequer but also the Minister of Aircraft Production, the Minister of Reconstruction, Lord Woolton, and the Paymaster-General, Lord Cherwell, who is a very distinguished scientist of world renown. The Chancellor of the Exchequer has given us really more than we could possibly have expected in the way of relief for pure science, applied science, and the advance pilot stage of invention and production. But one thing he has forgotten, and that is the simple inventor who works in his own private laboratory. He has not got a company, he has not got a research department and he may, for several years, have been using money that he has earned in other directions on scientific inventions. Should he not also receive relief? Will he receive any royalties after the war for his war inventions? At present only manufacturing firms with E.P.T. standards can obtain profits from inventions.

I have made all the points I have been allowed to make and I will conclude by thanking the Chancellor of the Exchequer on behalf of the scientific research workers in this country because they deserve what they have received. They are the spearhead of our industry and the commandos of our industrial workers. May their status, which stands so high, be, by my right hon. Friend's proposals, further increased, to the benefit of us all.

Photo of Mr Edward Smith Mr Edward Smith , Ashford

It is very refreshing for a poor author to follow the hon. and gallant Member for Chatham (Captain Plugge) with his large motor cars and his yachts, because we know in the theatre the value of contrasts. As an insignificant member of the profession of authorship I want to thank the Chancellor of the Exchequer for the very highly significant concessions which he has made to the poor calling of quill- driving. When last I put down my routine Question on this subject a few weeks ago and received the routine sympathetic negative in reply, I little thought I should to-day be raising the song of harvest-home. I do not think it would have happened if Mr. Bernard Shaw had not followed me up by writing a characteristically delightful letter to "The Times," and, whatever one may think of "The Times," it still does publish some delightful letters. Mr. Shaw calls himself a Socialist, but he always seems to me to be the most confirmed Tory I have ever encountered, so he is well qualified to speak or rather write for the two largest parties in this House, and especially well qualified to speak for authors, since he is the acknowledged and honoured leader of my profession. I am proud to have been the little dog, though he detests little dogs, that yapped in front of him.

I would like to tell the Committee what this concession means to us authors. We are poor men. The author, like the inventor and the scientist, is the age-old prototype of the starving beggar. We might even be described as the untouchables of Western civilisation. If our shadow so much as falls on the bread of an editor or a theatrical manager or a film magnate it seems to turn it mouldy at once. Yet the sun still shines even on us sometimes. Sometimes, once in many years, we may sell the copyright or film rights of something or other outright for a lump sum. If we are very, very lucky, we may get £10,000 for it. But under the previous system of taxation that capital, and it is our capital, was dissipated in Income and Super Tax, and we left our children to the State and our widows to the Civil List. But now, thanks to the Chancellor of the Exchequer's spreading the burden of taxation of these lump payments over a period of years, we may be able to provide for our old age and even lay up a tiny nest egg for our offspring.

We are having a "Salute the Soldier" Campaign. I would like to inaugurate a "Salute the Chancellor" Campaign, and, if he will tackle the question of double taxation as efficiently as he has tackled the question of copyright, I am quite prepared to canonise him in the name of St. John of the Fountain Pen. We authors had got so low that many of us had given up trying to write; it is too costly, which is only another way of saying it does not bring us in enough. Yet we have an im- portant function to perform, especially as the world grows to rely more and more upon the spiritual union of the English-speaking peoples. Successive Governments in this country in the past—and even this House, I regret to say—have looked askance at literature. Witness the various Copyright Acts, particularly that iniquitous one which seizes every literary asset an author possesses 25 years after his death and hands it over, not to the State—which would be bad enough—but to the vested interests which exploit literature, and which merely grow a little fatter by not paying the author's heirs his meagre royalties. But now, for the first time in living memory, a Chancellor of the Exchequer has actually done something for the untouchables of literature. I believe that the bill of divorcement between Parliament and literature stands a fair chance of annulment. I hope, too, that once this double taxation issue is settled, we may see the parties remarry, to their mutual advantage. If so, this will all be owing to St. John of the Fountain Pen. I have the honour, in the name of literature and of the Society of Authors, to thank the Chancellor for his timely consideration.

Photo of Mr Pierse Loftus Mr Pierse Loftus , Lowestoft

I would like to join the general chorus of congratulation to my right hon. Friend for giving us "the mixture as before." I am glad that he did not increase the dose, because it might have retarded our convalescence when this savage, raging crisis of the war is over. I welcome particularly the concession of 20 per cent, on new plant and new ships. The inclusion of new ships brings some hope of reconstructing our fishing fleets, which so desperately need reconstruction. I welcome the assistance to agriculture, especially cheap loans; but I would ask my right hon. Friend whether those cheap loans will also be available to reconstruct the fishing fleets. Our fishing fleets were grossly neglected between the two wars. Men worked for the most meagre rewards at this most dangerous occupation. When the war came they responded nobly to the call made upon them. I hope that, by means of cheap loans, they will be provided with modern ships after the war. I turn to a little criticism of my right hon. Friend the Chancellor of the Exchequer. I think that he painted in over-sombre tones the effect of the loss of our foreign investments. I think that his picture did not convey a quite accurate impression of the whole of the 20 years before the war. He stated: The wide favourable margin on the balance of payments which was used in the past to make fresh loans abroad, had, however, disappeared. In some years we had a favourable balance of moderate dimensions. In other years we had an adverse one. By and large, our position was this: our international income had been reduced and we were living right up to it, not beyond it, but up to it, for the first time in our modern industrial history. That was the change produced by the first world war."—[OFFICIAL REPORT, 25th April, 1944; col.665, Vol. 399.] That conveys the impression that between the wars we had no favourable balance, but, actually, according to the Board of Trade Returns, in the 10 years ending 1928 we had a total favourable balance of nearly £1,300,000,000. Let the Committee realise what that means. If those Board of Trade figures are correct, during those 10 years we could have imported and paid for goods to the value of £1,300,000,000 more than we actually did. Take the year 1928. The favourable balance of trade in that year was £149,000,000—I have the exact figures here if anyone wants the details— which means that we could have imported goods to that value over what we did import. The favourable balance represents a refusal to import what you are entitled to import by your purchasing power. That seems to me an important fact to bear in mind when we discuss the difficulties of our export trade and the effect on our national economy of the loss of our foreign investments. We hear a great deal of the awful effect of the fact that in this war we have lost over £1,000,000,000 of our foreign investments and that in the last war we lost about the same amount. We have lost over £2,000,000,000 of foreign investments. We are told that that is going to have an immense effect on our future. I cannot accept that. I will quote the words of one well-known to this House, the late Sir Arthur Michael Samuel, Lord Mancroft, who, in "The Times Trade Supplement" on 1st November, 1930, wrote: On a cautious estimate I say we have lost not less than £2,000,000,000 in overseas investments during the past 60 years. It is not unlikely that our loss has been much heavier, perhaps even £4,000,000,000. In other words, by repudiation, by unwise or reckless foreign investment, we have lost according to his estimate £2,000,000,000 to £4,000,000,000. That represents investments which we could have used to import goods to that value. Therefore I cannot believe the present loss is going to be as severe to our future economic position as suggested, nor can I believe that we shall find so much difficulty as is alleged in exporting goods to pay for the raw materials and food which we require to import. The easy argument is so often used that you have to cheapen goods in order to sell them abroad. In 1930, therefore, the primary producing countries had to cheapen their beef, mutton, and so on, to sell to us. That is an obvious fallacy.

But I feel that after this war we shall have to have, in many aspects, control of imports, and use that weapon of control of imports as a means to export, and there may also have to be certain regulation of exports. Take one market in which we are concerned—the great Russian market. They have, of course, control of imports and exports. Take my own constituency, Lowestoft, where we are greatly concerned with the export of herrings to Russia. There was chaos between the wars, for reasons which I do not want to go into now, but in future, surely, by arrangement and regulation of imports from Russia we can regulate our exports to Russia and achieve these two desirable things which we want to obtain. Another fact never referred to by those who warn us about the difficulty of paying for imports and so on is the point which was stressed by the hon. Member for East Aberdeen (Mr. Boothby)—that British agriculture can easily produce £200,000,000 worth of goods a year more than it did pre-war. That is a fact to bear in mind. Think of the markets there will be for our goods for many years, and realise the problem that the primary countries have to face.

We talk as if the only problem was how we are to export to pay for imported goods. How are we to persuade the countries of South America and so on to accept these goods? Do we not remember that they have a problem as well? They are producing vast quantities of primary goods and must find a market for these goods. In 1929 and 1930 you had conditions in which goods, sheep, wheat and so on were destroyed because they could not be sold. Surely, by proper control and regulation, we could find markets for all we want to export. I feel that, while we must take care of the export position and while we must plan ahead, we must not over-exaggerate the necessity for a huge drive for exports. I feel that behind the over-exaggeration of the difficulties of export, there may be factors at work, influences at work, in the City, trying to revive the old scheme of international trade—the struggle for a huge favourable balance at all costs, leading to international ill-will. I think we have got to avoid that and allow international trade to proceed on the mutually advantageous exchange of goods and services. To accomplish that, we have to have a proper financial policy, and, in going about the country and talking to people, I have discovered, not only among leaders of industry but among people in all sections of industry, a crystallisation of ideas as to the requirements of the future.

I think that industry generally is agreed that there are three essentials which we must have in our post-war financial policy. First, a generally stable price level. That price level must be suitable to the employment of all our national resources; to give full production and full employment. A pledge was given by the late Sir Kingsley Wood that that would be the policy of His Majesty's Government after, the war. Might I pause for a moment to add my tribute to the many already given to the memory of the late Sir Kingsley Wood, not only to his public services, but to his personal kindness and courtesy to me on all occasions, and particularly on one occasion, when stricken with grave illness, his kind sympathy made a great difference at that time of trial.

The second general idea of industry is this. There should be no rigid fixed foreign exchange rates. I do not want to go into that matter, but only to say that never again must we sacrifice a satisfactory internal price level to rigid foreign exchange. The third point is the maintenance of a cheap money policy. This is so important in connection with housing after the war. It is desperately essential that we should keep interest rates low. We must have cheap money and low interest rates for industry generally, and particularly for reconstructing industry. It is interesting to note that, roughly 700 years ago, Pope Innocent issued an encyclical pointing out that, if the rich could lend at high interest rates with security there would be no capital available to the farmer to build farm buildings and buy the implements of farming, and the production of food would languish and the people might starve. Lord Keynes has pointed out that this is in accordance with modern economic theory, that you must keep rates of interest low to force capital into productive enterprises. I confess I was a little bit disturbed by the remark of the Financial Secretary in yesterday's Debate, when he was discussing plans after the war, and he said this: Will the capital required for such plans, when added to the existing demands on the market from Government, industrial and other sources, cause such competition for the capital available as to jeopardise the level of interest rates which we all look to see maintained for the general benefit of the community?"— [OFFICIAL REPORT, 26th April, 1944; col. 884, Vol. 309.] I am a little disturbed. The suggestion is that competition and the demand for capital after the war will force up interest rates, but the demand for capital in the post-war years, however great, cannot be anything like as big as the demand for capital to-day, for war savings and so on. To-day we keep interest rates low because the Government have complete control of interest. Did the right hon. Gentleman foreshadow the abandonment after the war of Government control of interest? I must warn my right hon. Friend that it will be impossible to maintain cheap money after the war unless you control foreign exchange.

There is one other point which has been expressed in this Debate and which concerns the danger of inflation immediately after the war. I think that fear is justified. What will happen is this. There will be a vast volume of purchasing power on the market. There will be a great shortage of consumable goods. In order to prevent inflation, we shall have to bring up, as soon as we can, the supply of consumable goods to equal the purchasing power on the market. In order to do that we must have heavy capital expenditure in switching over industry from war production to peace production. I hope that the Treasury will not feel it necessary to restrict capital expenditure for two or three years after the war in accordance with some theory that capital expenditure in these years must only equal the amount of national savings; that the greater portion must go in housing and the remainder to industry. If necessary, in order to avoid inflation, we must even for a year or two after the war, as we have had all during the war, create Government credits to hurry up the switch over of productive industry from war to peace, so as to get the supply of consumable goods on to the market as quickly as we can to equal the vast amount of purchasing power; and thereby minimise the risk of inflation.

I conclude by again congratulating the right hon. Gentleman upon his admirable speech and wishing him every success in the control of our finances in the future. The control of finance is mixed up with all our policy, in all Departments, including the Foreign Office. It was the defects of our financial policy, the bad financial policy after the last war initiated by London and New York, which caused the world deflation. It was that deflation which destroyed the purchasing power of the primary producers throughout the world and which led to vast unemployment here, in the United States and in Germany, and which helped to give power to dictators, who have been the curse of our modern world. Therefore, while I congratulate my right hon. Friend, I frankly do not envy him the burden of responsibility which he must carry in so shaping our post-war policy, not only to avoid the errors we made after the last war, but to initiate a policy which will give us a steady and rising standard of living at home and help to ensure peace and goodwill among all men.

Photo of Mr Walter Higgs Mr Walter Higgs , Birmingham West

The hon. Member for Bromley (Sir E. Campbell), with his inside information, told the Committee that the Chancellor of the Exchequer takes notice of these Debates and to a great extent formulates any future legislation on the discussions which take place. I have some hints to give to the Chancellor of which I hope he will take note. I would like also to join in congratulating him upon the remarkable reception his Budget has had. But it is open to criticism. I also appreciate the many references that are made to industry, but I must remind the Chancellor that industry wants something more than lip service. It has got some concessions, according to the statement of the Chancellor, but we must not think that the concessions in the Budget speech will put industry upon its feet again after the war. Apart from taxation, the burden of the application of taxation on industry is very considerable. Thirty years ago, before the last war, the average industrialist could understand his balance sheet; it is impossible to-day. It has to be explained to him by the specialist. Does it not ever enter the head of the Chancellor that the continual additions to taxation should be consolidated and simplified? If we proceed for another 30 years like the last 30 years, the specialist himself will not be able to understand the Finance Acts. I hope that the Chancellor, now that he has got into his stride in office, will pay some attention to these remarks. I believe that one per cent, of the industrial population is engaged in dealing with the finances of industry, primarily for taxation purposes. The accountants' profession has increased threefold since 1914. Is the Chancellor aware of the obligation that has been added to the preparation of the balance sheet owing to the Excess Profits Tax and N.D.C.? I am not complaining about taxes, but criticising the manner in which these taxes have been applied to industry and of the unnecessary additional clerical work.

I now wish to refer to some portions of the speech of the Chancellor. He referred to the advantage of the inventive boldness and enterprise of our industrialists, scientists and technicians and to the fact that overseas trade will benefit. That was a very wise observation to make. This nation became the great exporting nation of the world during the 19th century owing to its inventive capacity. It was primarily due to its being the pioneer nation in the application of mechanical power. It was not necessarily due to our fiscal system. I would remind the Chancellor that Income Tax did not then enter into production to any considerable extent. A certain portion of taxation now does enter into production, and it is that portion which is going to be detrimental to overseas trade in the future. Under the heading of taxation of industry and excess profits, the Chancellor says that the 100 per cent, rate springs from other considerations than those of purely fiscal policy, and these other considerations remain to-day in full force. I differ from the Chancellor. There is no Member of this honourable House who, at the time when the 100 per cent. Excess Profits Tax was applied, imagined that the war would continue, for five years. Five years of industrial development is a very considerable period, and, owing to that one factor alone, I politely remind the Chancellor that conditions have altered very considerably. I am not criticising the rise in wages. Wages have risen, and that is another condition that has altered. We are also to-day proud of the fact that we meet 50 per cent, of our expenditure from revenue. I think it is about time that industry was allowed to plough back more than it is permitted to do at the present moment. I would remind the Chancellor that we are legislating for domestic expenditure, we are actually passing the legislation and putting the Acts on the Statute Book. What are we doing for industry of a concrete character? Nothing at all which is similar to the legislation which we are enacting for the expenditure of money.

Photo of Mr Walter Higgs Mr Walter Higgs , Birmingham West

I am not objecting to domestic legislation, I consider it necessary and desirable, but it is essential to get the wherewithal to pay for it, and that can only come out of industry.

Photo of Mr William Cove Mr William Cove , Aberavon

The Government give you a lot of orders these days.

Photo of Mr Walter Higgs Mr Walter Higgs , Birmingham West

With regard to the Chancellor's observation that £40,000,000 or £50,000,000 is accumulating for the benefit of industry after the war, it sounds a large amount but let me take a concrete case. A firm in the engineering industry with a capital of £100,000 may have a turnover of the same amount. Before the war the net profit on that turnover would have been £10,000. To-day in the absence of competition and with the production of repetition articles, we will say it is making a profit of £20,000, £10,000 of which goes in E.P.T. £1,000 is returned to that firm after the war which, so far, has lasted five years. Therefore, the hypothetical firm I have mentioned obtains after the war a total sum of approximately £5,000. To a firm with a capital of £100,000 of what use is £5,000 to put it on its feet again? Yet the Chancellor thinks that industry is getting great benefit from his concession in that respect.

Photo of Mr William Cove Mr William Cove , Aberavon

It is enough for a holiday.

Photo of Mr Walter Higgs Mr Walter Higgs , Birmingham West

We are most grateful to the Chancellor for the —1,000 concession he has granted to the small concern, but there is the intermediate concern, the large firm with pre-war standards. A case was given by the hon. Member for Edgbaston (Sir P. Bennett) where a firm had a considerable turnover—I think he said millions—and made a net profit of £1,000 after a year's trading.

With regard to war damage being payable out of taxable profits, I cannot understand why it was ever arranged, unless it is following the custom of fire insurance where, when tax is paid on the premium, the benefits are not taxed. I think that is probably the reason why war insurance is paid out of profits, but does the Chancellor realise that war damage insurance is compulsory and fire insurance is not? That throws a very different light on the matter. Further on in his speech the Chancellor referred to the reduction of Income Tax in respect of any profits that are not distributed. He cannot see his way clear to granting a concession in that direction. I think it is a very unfortunate observation. I would subscribe to limiting the distribution of profits if he would permit this ploughing of them back in industry. It is so essential to have that money when we change back from war to peace, for it is going to be far more difficult than the change from peace to war. I am not asking for this extra concession in order that the shareholder may have a greater profit; I am asking for it for the good of all concerned. Limit the profit, do not let the shareholders have it, but do give us a little consideration and a little hope for the future in order that we may pay for these social services.

The Chancellor, under "Industrial Re-equipment: Plant and Machinery," has allowed an increased percentage to be written off. I will give the Chancellor actual figures. If we buy a machine tool for £1,000, in ten years' time that machine tool, written off at the rate of 10 per cent, per annum, will be worth £110. My experience is that no machine tool ten years old is worth approximately one-tenth of what it was when purchased. The Chancellor rather eats his own words later on when he says: It may happen, on the other hand, that a trader may sell plant and machinery at a price in excess of the written-down value."— ["OFFICIAL REPORT, 25th April, 1944; col. 673, Vol. 399.] He thus admits that it is usually sold at a lower price. The Chancellor has given us nothing; we got it back before in obsolescence. I must inform the Committee that these concessions which the Chancellor is granting will not put industry on its feet again. Later, under the same heading, he refers to the 2 per cent, which he is to grant on depreciation of buildings, another concession for which we are very thankful. But there is a little mathematical error here. He says that 10 per cent, of the expenditure will be allowed straight away. When you have taken 10 per cent, from 100, and you get 2 per cent, per annum, it does not take 50 years to write the rest off, it is 45 years. Little errors of that description getting into a Bill cause no end of trouble afterwards. I asked my hon. and gallant Friend to tap my leg when I had exceeded my time, and he has just done so. I had a lot more to say, but I will only express my appreciation again of the admirable manner in which the Chancellor presented his Budget, though it leaves much to be desired and I hope he will give it further consideration before he introduces his Finance Bill.

Photo of Sir Geoffrey Mander Sir Geoffrey Mander , Wolverhampton East

I cannot help feeling that the Chancellor must find a little monotonous the continuous tributes he is receiving and the numerous bouquets that have been handed to him—though I did think that the bouquet of the hon. Member for West Birmingham (Mr. Higgs) contained a good many thistles—and he may feel that he would like somebody to treat him more roughly. I cannot do that, because I quite agree, with the good things that have been said about his Budget statement. I think it was a most admirable review of the post-war situation, and I only hope that we shall get an equally lucid, clear, and concise disquisition before long on another subject, the Barlow, Scott and Uthwatt Reports. The interesting thing about the Chancellor's speech, I thought, was that he was not dealing with finance merely from the old-fashioned point of view of raising so much money to pay for national requirements; he was looking upon his position from the new point of view as one of the Departments of State of overriding importance, influencing the whole of our economy in industry and in policy both at home and abroad.

That, undoubtedly, is the part which the Treasury will have to play in the future, and I am very glad that the Chancellor recognises that they must take a very wide view, in the national interest, and not just think about money raising, as has been done in the past. The statement shows that the Government are giving attention to post-war planning. They have done something in the way of the concessions which have been made for (businesses in regard to E.P.T. and depreciation, which undoubtedly will be of assistance to business men in turning over after the war from what they are doing now to the new era of production. The Chancellor also said—and I am glad he did so, because it is important—that the policy of the Government is full employment. Of course, that involves a very definite policy; it means that all sorts of plans and controls will have to be put into operation, some of which were referred to by my hon. Friend the Member for Lowestoft [Mr. Loftus). We do not want any return to what happened after the last war, when there was mass unemployment, a reduction in wages and the Geddes' Axe. We do not want another Geddes' Committee or another Geddes' Axe coming down on useful expenditure on social services and education, as happened on an enormous scale so disastrously after the last war.

One of the things that will be required, as the hon. and gallant Member for North Kensington (Captain Duncan) said, is something in the nature of a national investment board to guide and influence the flow of investment, not only of Government money but of private investment too. Apart from the controls we shall need to have a national minimum wage. That certainly must be an essential part of the new order. The Chancellor made a very important reference to export trade, and to the steps that would have to be taken to that end. We still have great good will in all parts of the world and it will probably be never so high as it will be immediately after the war. We can count on that, but we must not rely on it; we must adapt ourselves to the particular circumstances and requirement of our customers, which will not be exactly the same as they were before the war. A policy of stimulating exports in every possible way necessarily carries with it a policy of low tariffs, because with a high tariff policy you get high costs and you cannot have a good export trade. I imagine that after the war the fiscal controversy may take on rather a different aspect. I would not advocate, for example, an immediate return to unilateral free trade, and I think there may be those on the other side who would take the view that a moderate tariff, with a desire to come to multi-lateral arrangements all over the world for reducing tariffs everywhere to the lowest possible level, is the right policy at which to try and aim. I hope the Chancellor, on some other occasion, will introduce a double Budget—one dealing with revenue and the other with capital expenditure. Surely it is very unbusinesslike for the State to pay for capital investment, for the benefit of the nation, out of revenue. No business firm would do it, and I do not see why the State should do it either. Therefore, one of the reforms we ought to see carried out after the war is this reform of two Budgets—one for capital investment and the other for revenue.

The Chancellor made reference to 100 per cent. E.P.T and said there was to be no change. I am sure he is perfectly right because whether it was wise to impose it at that moment it would, to-day, be psychologically a profound error to take any of it off until the war is over. The right hon. Gentleman has done something in various ways to even out the injustices that undoubtedly arise, but the general principle most certainly ought to remain. With regard to research I am glad the Chancellor has responded to the overwhelming wish of the House. It is all very well for Members here to speak with enthusiasm of the benefits that come from an expenditure of money on research, but it is a fact that in industry there is still a considerable number of people who have not yet quite appreciated that point of view and who look with some reluctance on the expenditure of money on research. It is, therefore, a very wise thing to give these people every possible incentive to go in for expenditure of that kind, which will benefit the State and industry so greatly.

I want to say a few words about the concession the Chancellor has made to authors—a very admirable one, which has been most gratefully accepted. I would ask him whether he thinks he ought to stop there? I would ask him to consider, and perhaps say something about, the case of a musician who, perhaps, had composed a great work over a period of years and then sells his copyright. Ought he not to be as much entitled to receive the same concession as authors? Then there is the case of artists. No doubt many of them, like the Prime Minister, paint their pictures in a comparatively short space of time, within 12 months, but there are some artists who spend years over their work, and I should have thought that there was a good deal to be said for treating them in the same way as authors. I hope the right hon. Gentleman will undertake to give consideration to that point, even if he is not able to deal with it specifically to-day.

Lastly, the programme sketched by the Chancellor refers to post-war days and post-General Election days. The Parliament that will carry out this policy will be a new one, elected freely. There will be no coupon and every party will have the opportunity of sending their representatives here. A new House, altered considerably in composition, will have a very difficult task. It will be very difficult, indeed, for one party alone, whether of the Right or the Left, to plough through those most difficult years if they are to be subjected to the normal peace-time party atmosphere. So I hope that we shall find some means of working in sufficient harmony right through those most difficult days. In time of war feelings are subdued and kept underground in the interests of unity but in peace-time that pressure is released and the difficulties are infinitely greater. Whoever may be given the task of governing the country after the war, the Chancellor has, at any rate, indicated ways and means in his Budget statement which are entirely sound in the national and international interest.

Photo of Mr Arthur Molson Mr Arthur Molson , High Peak

Last year my hon. Friend the Member for Oxford (Mr. Hogg) remarked: We are gradually passing through a transitional stage between two different conceptions of what our Budget is …It was gradually developing into an annual review of our whole economic life and resources."—[OFFICIAL REPORT, 14th April, 1943; col. 1317, Vol. 388.] I feel that my right hon. Friend's speech this year indicates that entirely new outlook. He himself said: I should hope that the Budget would increasingly be an occasion when the financial and economic health of the country as a whole could be reviewed, with a diagnosis of the causes of any unfavourable symptoms and a prognosis of the future to explain medicine or tonic."—[OFFICIAL REPORT, 25th April, 1944; col. 653, Vol. 399.] In the past the annual Budget represented the degree of the economic activities and responsibilities of the Governments of the 19th century. That was a time when the State undertook only very limited economic activities, when its philosophy was one of laissez faire, as regards foreign countries its policy was one of Free Trade, and the exchanges were controlled by the Gold Standard. In the 20 years between the two wars, the whole of that conception was rapidly changing. The State was increasing its activities, both in participating more directly in the economic life of the country and in influencing it, in many financial ways.

It was coming to accept responsibility for the employment of the people and the prosperity of the country as a whole. It used tariffs, subsidies and quotas. It managed the currency for the whole of the sterling area. In fact during those years we were moving in the direction of a planned economy. Now I believe we have pretty well arrived there. The Budget is now greater in size than ever it was before, but it is in a certain sense relatively of less importance, for these White Papers which the present Chancellor of the Exchequer, like his predecessor, has produced deal with the whole trading balance of the nation as a whole, in which the income and expenditure accounts of the Treasury are only a single part, though no doubt a very important one.

This new conception of the responsibility of the Government, and the Chancellor of the Exchequer in particular, to direct and guide the general economic activities of the country as a whole has been coming into existence almost unperceived during the 20 years between the wars. What has led to the production of these White Papers dealing with the national income is, as I understand it, the need that the Treasury felt, not only for being clear themselves as to how far we were avoiding the danger of inflation, but also for being able to explain to the people of the country how it was that we could and would maintain the purchasing value of the £. I am not quite sure to what extent the danger of inflation has been entirely avoided. There has, certainly, been a decline in the purchasing value of the £, so far of about 30 per cent. I should like to ask the Chancellor whether he feels that there has been a limited and controlled inflation, as a result of the increase, from about £350,000,000 to £1,150,000,000 in the note circulation. It has certainly meant that there has been a very great increase in the purchasing power that has been in circulation, although I recognise that, as the result of the special efforts of the country, there has also been a great increase in the production of real wealth.

This White Paper, which shows that the war is financed, partly out of taxation and partly from other sources, is of great interest and value, not only in the war but for what it may enable us to do when the war is over. Fifty-two per cent, this year of OUT total expenditure is covered by taxation and the remaining 48 per cent, by personal and other kinds of savings, by drawing on stocks and capital at home and by the sale of investments abroad. Just as it is important for us to have this balance sheet in war-time, in order to ensure that there is an equilibrium between our purchasing power and our production and so avoid the danger of inflation, so, in peace-time, it will be necessary to see the same kind of balance sheet, to guard against the danger of deflation and consequent unemployment. Therefore I was very much interested when the Chancellor said: For the purpose of a policy of full employment it will be necessary, year by year, to bring under review the income and expenditure not only of the Exchequer, but of the country as a whole, and not only its income but its capital expenditure and its savings."—[OFFICIAL REPORT, 25th April, 1944; col. 653, Vol. 399.] At the end of the war the first danger is not going to be one of deflation but rather one of inflation. I hope therefore that the right hon. Gentleman will consider the importance at that time of postponing the payment of soldiers' deferred pay, post-war income credits and war damage compensation, until the goods are available for which it is intended that those payments should be made. If the payment is made before the houses and the furniture and the goods are available, we shall be threatened more acutely than we axe at present by the danger of inflation. I was, in this respect, very much en- couraged by what the Chancellor is proposing to do in the way of so adjusting taxation at the end of the war as to facilitate and encourage expenditure in capital goods for the re-equipment of our industry. My hon. Friend the Member for Chippenham (Mr. Eccles) mentioned that the American worker has' twice the capital equipment behind him that the British working man has.

I do not know whether that is an accurate figure based upon a calculation, but it is certainly very interesting because It corresponds precisely with the calculation made in an article by Mr. Rostar in "The Economic Journal" of April, 1943, showing that the output per American worker is just about double that of the British worker. If it be the case that the American worker disposes of double the amount of capital, that would account for his increased productivity. Faced as we shall be with the immense Difficulties of restoring and increasing our export trade after the war, it is obvious that we shall have to spend lavishly in order to re-equip our industry and to enable us to compete with the lower wages of other countries overseas.

I am glad my right hon. Friend has taken the line that he has with regard to the stabilisation of the cost of living. Some of my hon. Friends and I in the past have pointed out that if the cost of living was to be stabilised it was very desirable that wages should be stabilised also. The fact that the Minister of Labour and some of his friends have so firmly resisted any proposal of that kind has now made it inevitable that the Chancellor should take the line he has. I hope he will see that we are not confronted with the situation that occurred at the end of the last war when, as a result of the Government's financial control of the coal industry, the cost of producing coal exceeded by £60,000,000 the proceeds from the sale of the coal and was met by Exchequer subsidy.

With regard to the immediate post-war problems, I am glad that a number of speakers have pointed out that we shall be obliged to pay by our exports for everything that we have to import from abroad. I believe that the greatest contribution we in this country can make to a prosperous world is to see that we are able to import on a large scale and are able to pay for those imports. I hope, therefore, that our friends and Allies, especially the United States of America, will follow a policy which will enable this country after the war to pay for its keep at a high standard of living. We were originally put on the basis of cash-and-carry, when the war began. Because our ships carried the munitions of war through dangerous seas, a large proportion of them were sunk, and because we had to pay in cash our overseas investments have gone down at the present time, as the Chancellor pointed out, by a total of £3,000,000,000. Lend-Lease was only introduced at a subsequent time, and it is significant that the name of the Lend-Lease Act, was "An Act for the defence of the United States of America." I feel that the statement that my right hon. Friend made, that 90 per cent, of the overseas investments which we have been obliged to realise have gone in payment to our Allies and associates, is a very significant one. I trust that the Government will press the United States to revise the terms upon which Lend-Lease assistance is given, not so much for us, but in order to enable us to serve the common cause of all the United Nations.

At the end of the war we must be assured of an opportunity for fair and free competition in neutral markets and a reasonable prospect of access to the American market. My hon. Friends put forward a document some time ago in which they said they believed in the vital need for this country to develop to the fullest extent its own resources, and they believed also in the inter-dependence of nations. In this Budget I feel that the Chancellor has gone a long way to ensure to British industry and agriculture that it will have an opportunity of developing to the fullest extent our national resources. I hope that full employment in this country can, with the friendly co-operation of the United States, be turned to the general advantage of the world and of the United Nations, and that it will be spread through the inter-dependence of us all.

Photo of Mr Walter Elliot Mr Walter Elliot , Glasgow Kelvingrove

As the three days' Debate draws to its close, one naturally has to cudgel one's brains to make some original contribution to it. I think that the only original contribution I can make in the first place is not to congratulate the Chancellor on the magnificent, superb and absolutely unprecedented Budget speech which he has made. I think it would be a certain impertinence to heap congratulations on him as if we thought that he was rot going to introduce a good Budget or that he would not be capable of making a good Budget speech. Of course he could do it, and all we can say is that he has made a very promising start and that we believe he will surpass it in the years to come. It would be a pity indeed if the Committee of Ways and Means, having had the Chancellor's Budget unfolded to it, could find nothing else to do except to sing a chorus of adulation, because it would mean that if there were some snags concealed somewhere, the Chancellor would hear about them very bitterly in the near future. The real contribution of the Chancellor on this occasion is that he finds himself a big enough man not to cut about the work of his predecessor but to allow the development of the Budget scheme which was drawn up some years ago to proceed, and, in particular, to carry out this year the development, with certain useful modifications, of the Budget which was laid out by our old friend Sir Kingsley Wood, whose absence we all feel so keenly to-day.

While the Budget has met with great approval, there are many points on which the Committee has given its close and even critical attention. I think that the three points which the Committee appreciated most about the Chancellor's speech were: first, the obvious keenness and enthusiasm with which he spoke of scientific research; second, the fact that he has been able to make some allowance towards depreciation and wear, and tear of plant and machinery, which is obviously going to be a great problem after the war; and, third, that he was able again to reassure us as to the remarkable way in which the spending power of this country is being turned over by the people to the Government in the form of war savings and is not being pressed upon the market to force up an inflationary spiral. The Committee gave a good deal of attention, and I am sure that more will be heard about it in future, to what the Chancellor called the re-pegging of the cost of living, at a higher figure than that at which he has previously been able to hold it. What the Committee feel concerned about is not so much the pegging, but the fact that the peg had to come out before it could be put in again and that it might skid a little in the process.

To take the three points on which the Chancellor has been universally congratulated, the first is his encouragement of scientific research. I think that we were all most interested in the proposal which he made but I think we should like it to be further elucidated. In one passage he spoke very strongly about the need for scientific and industrial research and he made a strong point of the fact that any payment … made by a trader to a central research body approved by the Department of Scientific and Industrial Research shall be allowed, as and when made, as a deduction in computing the profits of the concern."—[OFFICIAL REPORT, 25th April, 1944; col. 679, Vol. 399.] I should like to ask him whether that would also apply to a project approved by either of the other two Councils who used to be under his charge when he was Lord President of the Council. The two bodies to whom I refer are the Medical Research Council and the Agricultural Research Council. In both those fields of scientific research it is more and more becoming a matter of collective work and less and less a matter of individual examination.

Let me deal first with medical research, which was stressed so strongly and appropriately by the hon. Member for Hemsworth (Mr. G. Griffiths) who has more reason than almost anyone else in this Committee to appreciate the achievements of modern medical science. Let me, remind the Chancellor that a great deal of money is now expended along these lines of research by great corporate bodies in the United States, such as the great insurance companies. They pay a great deal of money for the encouragement of medical research, for instance, for the simple reason that the longer they can keep their clients paying contributions and the more they can postpone the moment when their clients come down upon them for death benefit, the more prosperous they, as companies, are likely to become. A great many by-products most valuable to the community have arisen from this activity For instance, a great deal of the "drink more milk" propaganda campaign was directly financed by insurance companies in the United States on the simple ground that those who did drink more milk would come down less on the insurance companies for sickness or death benefits. Again, the Chancellor of the Exchequer knows the widespread effects of rheumatism. If he could find some way of dealing with industrial rheumatism, he would save more money for many of the great sickness and insurance funds in which he is greatly interested, than by almost any other single step that he could take. I trust very much that go-ahead firms who are willing to do things of that kind may be allowed to come under the same heading as the very proper concession which my right hon. Friend proposes to make in the case of industrial firms. As the hon. Member for Hemsworth said, it is useless to have a strong and healthy industrial plant if there are not strong and healthy workers to operate it.

I hope very much that research in another field to which I attach a good deal of importance may be allowed to come into it also, the field of industrial psychology. It is a field which has been all too little explored but I am certain that, after the war, possibly for a year and a half after the strain upon us all is lifted, this will be one of the biggest industrial questions in our time. I do not think the human race is built to run at the pace at which it has been driven in this country during the war years. I recently had an opportunity of leaving this country for a few months for work in another sphere. When I returned, I was struck with the appearance on the faces of people, including hon. Members of this House and Ministers, and people one met in the street. They were living and working under a strain, of which I do not believe they were completely conscious.

Photo of Mr Walter Elliot Mr Walter Elliot , Glasgow Kelvingrove

In 1942 I heard the Minister of Labour himself say that the output per man-hour in this country had gone up by 44 per cent. He said, and this squares rather oddly with the remarks which I have just heard from the previous speaker, that the ordinary worker on the Clyde or the Tyne was doing double the output of the great work done by the men in the Kaiser shipbuilding yards. For every ton of ship-work which Kaiser's men were putting out, the Clyde and Tyne men are putting out two. The strain on the workers in this country shows itself in numerous unexpected ways, and in none of them more than in sporadic strikes. I do not think it was entirely an accident that some of them finished after the Easter holidays. I am certain that the whole question of the management of labour, the proper distribution of rest breaks and the proper use of leisure, not merely short periods but longer periods of leisure, will prove of enormous importance to practical firms and business men in this country in the few months immediately succeeding the war. A longer break than had previously been allowed might well be a great economy and might well lead to greater output. I am not at all sure that the drive and clamour of the Dunkirk period were of ultimate advantage to produtcion. Many practices introduced then, such as the enormously long hours of work of women, have been got away from only with the greatest difficulty. They were a great disadvantage to the output of this country.

It would be a pity, since research activities on such matters are carried on by small and struggling institutions, that a firm which was willing to put its hand into its pocket and subscribe towards them could not also have the same advantage as the firm which is willing to put its hand into its pocket for investigating radio-location, electrical machinery, greater efficiency of steam jets, boilers, or half-a-dozen other things which can properly be the subject of the concession, according to the Chancellor's speech. I should hope he has included agriculture in it. The individual farmer is incapable of carrying out the lengthy researches which are necessary to make advances in agricultural science, but if the farmer is willing to contribute towards an enterprise approved by the Agricultural Research Council or some enterprise carried on in some college or university, that would be a practical method of encouraging the improvement which we all desire in agriculture.

It is suggested that the agricultural corporations are going to have more money foe loans. I have always found it easier to get into debt than out of it. The word that goes with "credit" is "debit," and the other word for "loan" is "debt." If the industry is efficient and its prices are satisfactory, credit will be available through the ordinary run of affairs, and it will be unnecessary to take these special measures. I do not wish to stress that point, but I see a difference between being given a loan and being given an improve- ment in scientific knowledge. I would very much rather have an improvement in scientific knowledge.

As for the third point, the great flood of savings which is now being borne into the care of the Government by War Savings Certificates and in other ways is a remarkable phenomenon in our country. It is perhaps linked up with the apprehension expressed by Members on various sides of the Committee as to the unpegging and repegging of the standard of living. They have feared that confidence might be shaken, with the danger either of spiralling wages or of a movement into goods and away from paper, which might do great damage to the future of this country.

I think it is necessary, however, that hon. Members in all parts of the Committee should appreciate and understand the Chancellor's argument and support him in that. I think the point is that we have come to the time when there is very little more left in the top ranges of taxation. If we took everything over £5,000 a year, it would not square one item in the flood of White Papers now being poured out. Therefore, taxation to meet: all these White Papers must come out of the middle and lower grades of income. The danger arrives of Parliament telling people how they are to spend their own money. We shall find when we go to the constituencies in the next General Election a different attitude towards Income Tax. When Income Tax comes down to the butcher, the baker and the candlestick-maker they are apt to regard it as an entirely different matter from what it was when it was merely a question, to use the classic American phrase, of how much we could soak the rich. We have come to the point when the absorbent power of the rich has been practically reduced to nothing. I hear scornful laughter from the hon. Member for West Fife (Mr. Gallacher). I would only say it is a fact that if we take all the money at the top range we shall have at the utmost £50,000,000 or £60,000,000, and really that goes no distance at all in squaring the enormous commitments and liabilities which we are at present incurring and encouraging the Chancellor to incur.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

There could be a capital levy.

Photo of Mr Walter Elliot Mr Walter Elliot , Glasgow Kelvingrove

A capital levy only means that you take goods and look for a customer, and that means we must either sell them to each other or send them abroad, in which case we are sending out the capital by which we shall have to find exports. I think I see the Chancellor's point of view and I take it that he means there is a danger that if you tax too highly the small incomes you will interfere with money which people themselves can utilise better than Parliament can utilise it for them. When it comes to that point, one has to speak carefully, but I hope the Chancellor has laid for ever the suggestion that agricultural subsidies are simply gifts to farmers, because there has been a universal chorus of "Do not touch the subsidies; these subsidies help the poor." Let us take it for granted then that these subsidies do help the poor and let us not discuss them in future on the basis of whether or not they are good for the farmer but on the basis of whether or not they are good for the consumer.

The danger of the present situation has been stressed by many speakers as a danger that we shall not, in the future, be able to rely on overseas investments and that therefore we shall require to export or die. My hon. Friend the Member for East Aberdeen (Mr. Boothby) said yesterday that there was a certain advantage or bracing quality about that as well as a certain disadvantage. I think the fact is w*e have been rather hypnotised by the idea that for many years Great Britain has lived on her income from foreign investments. The Chancellor of the Exchequer put it so clearly that I cannot do better than read what he actually said. He said, referring to the years before the last war: These annual receipts amounted to a very large sum, and they would have sufficed, had we chosen so to use them, to defray a large proportion of our import bill for food and raw materials and other commodities that we imported from overseas. In fact, we did not need to use much of this external income for that purpose. Our exports visible and invisible, were large enough in those days to cover most of our imports, and we used most of our income from overseas investments for the purpose of making fresh investments. That is to say we pyramided these sums abroad and never actually drew on them at all. It is quite true that the Chancellor pointed out that the last war dealt a heavy blow at our overseas investments. He said: The wide favourable margin on the balance of payments which was used in the past to make fresh loans abroad, had, however, disappeared. In some years we had a favourable balance of moderate dimensions. In other years we had an adverse one. By and large, our position was this: our international income had been reduced and we were living right up to it, not beyond it, but up to it, for the first time in our modern industrial history."—[OFFICIAL REPORT, 25th April, 1944; cols. 664 and 665, Vol. 399.] I merely quote the words of the Chancellor of the Exchequer as indicating that this country has moved from the position of an investing nation to that of a trading nation. That is not such a terrible disaster, but the fact is we are not now in a position to make overseas investments on the large scale and shall not be in such a position for some time. But there is an enormous opportunity for overseas development, and I think we should pay eventual attention to overseas development as well as to overseas trading. We must, however, realise that those who have paid us over money in recent years have done so as much because they liked our beautiful eyes as because we had certain investments which gave us a theoretical claim to payment of certain sums. In fact the world backed us because it liked the sort of people we were. Shakespeare as well as James Watt played a great part in the support the world gave us in the war years. I wish to stress the point, however, that the overseas investments of this country were the result of our surpluses sent abroad and left there. Surpluses will not be available for some time to come and we shall have to send abroad trading exports, the purpose of which will be to bring in imports and not to produce investment interest. The enormous sterling balances built up here will have to be paid for by exports before we can think of producing any surplus for investment abroad.

Various estimates have been given of those adverse balances, but I think the most authoritative one was that given by "The Economist" about a year ago, suggesting that they amounted to about £1,000,000,000 from our eight chief suppliers. I am taking the figures secondhand from a pamphlet published by my hon. Friend who spoke last. Those balances will have to foe liquidated before we can think of making foreign investments. I certainly feel that there is an immediate need for the export of goods from this country to go on; and it will have to go on at a very high rate. But I say again —and this is where I differ from hon. Friends of mine in different parts of the Committee—that I do not believe that that points to a helter-skelter scramble of Free Trade. It points to a system of high organisation of bulk purchases, trade agreements, what you will. It is impossible to take advantage of modem production unless you can look forward with assurance for a period of three, four, or five years. In such circumstances, it is impossible for us really to expect that we can agree with those who wish to sweep away the barriers, and to produce again the international scramble which, heaven knows, had no very beautiful results in the past. It is not correct to say that the slump came after Ottawa. Ottawa came after the slump. After Ottawa, between 1932 and 1937, our exports to foreign countries went up by 35 per cent., our exports to Empire countries went up by 52 per cent., and our imports of raw materials went up by 82 per cent. I do not see that this is a disadvantage to this country or a disadvantage to the world.

People say that the greatest thing that the United States can do is to produce an export surplus. I say that in the long run the greatest thing that the United States can do is to become so prosperous that it wishes to buy goods from all the rest of the world. Those who are considering the new prospect before us must take very closely into account the method of contract. One can imagine the theoretician going to a business house, and saying, "How are you doing; what are your prospects?" and the business man saying, "I am doing very well; I have orders for years ahead, and I am thinking of expansion." Thereupon the theoretician says, "Poor fellow, you have entered into restrictive covenants; I believe that you have even engaged in discrimination; you have given some of your old and trusted customers better terms than you have given to others. That is all wrong. Scrap your covenants, and hawk the stuff at the factory gates." I do not believe that that method is best for either the individual or the nation. I hope that that argument will be seriously considered when various new projects, such as even the currency agreement, are being considered. I see a danger that, under the currency agreement, the United States currency will be the first of the scarce currencies, and, therefore, the first of the rationed currencies, and that thus there will be an organisation built up by the United States themselves whose first object would be that of restricting their trade. I should be very unwilling to see such a thing come about. It would inevitably be interpreted as a piece of sharp practice or even of bad faith.

I should be out of Order in pursuing that question to any great extent, but I speak as one who had a certain amount of experience in working trade agreements. In four years as Minister of Agriculture, I had to draw up and administer many such agreements. I had to square the results of agreements with Dominion producers, home producers, foreign producers, with friendly producers, and with unfriendly producers. We had to make certain changes. During my term we had for instance to arrange for the creation of the Canadian bacon industry, and make room here for its output. Where would we have been to-day without that Canadian bacon industry? Was it a bad thing to see that we should have a certain alternative source of supply, as well as the Danish source of supply? Was it a bad thing for us to remove part of our source of supply from out of the jaws of the German wolf, and to obtain it over a route which we could depend upon? For certainly, if we hold the Atlantic we shall win any war, and if we lose the Atlantic we lose any war into which we enter. Now, that Canadian supply is running, smoothly, surely, and continuously. It is that continuous flow which is the key of modern production. The method of contract is one of the great keys for getting the maximum use out of flow production. It is by flow production that we shall get the quick expansion of consumer goods, which we must have to liquidate the great paper balances built up against us both here and overseas. Without flow production, you cannot get the adequate supply of goods; without long-term contracts, you cannot get flow production; and without some degree of international choice—of planning, if you wish to use the word—you cannot get the long-term contracts. I hope, therefore, that, from all points of view, it will be possible for the Chancellor of the Exchequer to keep these things in mind when he comes not merely to draft a Budget, but to draw up the economic policy of which the Budget is merely an instrument.

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

I hope that the Committee will allow me, in the first instance, to tender our congratulations to my right hon. and gallant Friend the Member for Kelvingrove (Lieut.-Colonel Elliot) on his safe return, obviously in such magnificent form, from an important mission to our West African territories, a mission so gallantly undertaken before he had completely recovered from the most trying and serious accident of which he was a victim about a year ago. This is the first occasion on which I have sat through a three days' Debate on a Budget and the attendant Budget Resolutions. The Committee will not misunderstand me when I say that I have found the experience decidedly heartening. I should like, most sincerely, to thank all those hon. Members, in all quarters of the Committee, who have thought and spoken kind things about the work that has gone into the making of this Budget. I do so not on my own account only, but also on behalf of those who, over many months, have been collaborating with me in this task. There is no department of Government work, not even the fashioning and production of instruments of war, to which those who have been called "the boys in the back room" make a greater or more significant contribution than the construction and labour which necessarily precede the presentation of a Budget. This three-day Debate has ranged over a wide field, and I do not know that I am very good at picking out points for the purpose of a winding-up speech, but I will do my best, and those hon. Members who think that I have overlooked them will, I am sure, forgive me.

I would like, first, to dispose of one or two small points made by various hon. Members, which seem to be deserving of a reply. The hon. Member for Antrim (Mr. Dermot Campbell) referred to a payment which is shown as made to the Government of Northern Ireland, and he thought that the manner in which that payment, of some £6,000,000, is exhibited in the Financial Statement is not, perhaps, the best that could be devised. Actually, that payment, which is made for the equalisation of standards, has to be made as it appears in the paper because of the provisions of the Government of Ireland Act. The hon. Member for East Wolverhampton (Mr. Mander) made a reference, as did the hon. Member for Ashford (Mr. E. P. Smith), to the modest provision made in this Budget for the relief of authors. The hon. Member for East Wolverhampton suggested that that relief might, perhaps, be extended to certain other classes, such as musicians or artists. I will certainly look into that, and if I find all the circumstances similar I will see whether the principle cannot be extended.

I would like to say just a few words about Excess Profits Tax, to which several hon. Members have devoted parts of their speeches. The hon. Member for Duddeston (Sir O. Simmonds) whom I did not hear, made certain comments and suggestions, and he had previously put certain points to me, all of which I have considered. But, as the Committee knows, I came to the conclusion that this was not the moment for interfering radically with the structure of the Excess Profits Tax. I fully recognise that there are matters of great importance to industry, which in due course will have to be taken into consideration, such as the question of terminal losses and other questions, which I think must be considered when we come to contemplate provision for the decay and eventual death of that exceptional war-time tax. The hon. and gallant Member for North Kensington (Captain Duncan) thought it was wrong to talk of the E.P.T. credit as 20 per cent. I do not think I agree. I do not think I share his view that the amount in question is to be regarded as capital and not income. I think it is income held in suspense and not subjected to the normal effect of taxation, and when it comes out of suspense, and has to be dealt with before it can be made available to those to whom it will eventually go, Income Tax has to be collected, but, in all the calculations in regard to that matter, we naturally take the net and not the gross amount, and the net amount is 10 per cent.

I should like to address the Committee for a few moments on the question of motor taxation. The hon. Member for Kidderminster (Sir J. Wardlaw-Milne) asked whether I did not realise that the question of revising the basis of motor taxation had been a live issue and had been before the Treasury for many years. Of course, I am aware of that, but I am also aware of the fact that there is, from the Chancellor's point of view, an embarrassing conflict of expert opinion as to how any changes that may be desirable should be carried out.

One hon. and gallant Gentleman, I think the Member for Chatham (Captain Plugge), complained that no reason had been given for the view I have expressed that it would not be desirable to make any substantial change-over from the vehicle basis to the fuel basis. There are two substantial reasons which I will just mention in passing. One is that any such switch-over would, in fact, mean a very significant, and, from many points of view, undesirable change in the incidence of the tax, unless,, of course, revenue were to be sacrificed, which, as I pointed out, is not possible in present circumstances. For example, if the whole weight were thrown on fuel, then those motor users who use their motors continuously, as many people in small businesses have to do, would pay proportionately very much more, whereas, on the other hand, those who use their motor cars, sometimes of very high horse-power, as luxury vehicles for occasional journeys, would pay very little. That is the reason against making a substantial switch-over.

There is another consideration of a more technical character. To convert the existing vehicle tax into a tax on fuel would mean raising, to a very high level indeed, the duty on the fuel, and the problem of discriminating then between mineral oil used as motor fuel and mineral oil used for other purposes—industrial purposes— would become very much more difficult. These are reasons for not deciding hastily on any substantial change of that character, but I am, as I said, and I would like to repeat this, aware of various currents of opinion about the effect of the existing vehicle tax. I know that in some quarters the view is held that the form of tax is very largely responsible for the direction which the motor car manufacturing industry has taken, whereas, on the other hand, the view is held that there are other factors that may have contributed even more to the present position of our motor industry—factors such as road mileage in this country, gradients, garage facilities and so forth. But all these are matters which I am very anxious to take into consideration, if only those interested in motor manufacture could get together and try to harmonise and simplify their views, as far as possible, before they come to me.

I pass naturally from the subject of motor taxation to oil taxation. In that connection, my hon. Friend the Member for Walsall (Sir G. Schuster) asked whether I could give him any further information about the kind of inquiry that I had in mind when I announced that my right hon. Friend the Minister of Fuel and Power and I were setting on foot a technical inquiry. My right hon. Friend and I intend that inquiry to be comprehensive. It will not be limited strictly to fiscal considerations, and I shall be perfectly ready to consider such questions as, for example, subjects on which the Government might undertake research or small-scale experimental development in such matters as the production of mineral oil from coal by new processes. All these matters are of great moment if we are to secure that a very important branch of the chemical industry in this country is to be enabled to carry on its work in reasonably favourable conditions. That is a matter to which I attach very great importance from the point of view of our industrial future. Petroleum technology has great possibilities for this country, but it has been subject, because of the heavy incidence of taxation on the raw material, to peculiar disabilities and handicaps.

May I at this point say one word about the provision in the Budget with regard to research? One hon. Member suggested that I had failed to include one important section in the sub-division I made of research in three parts. He was referring to the training of research workers. I did not overlook that, and I would remind the Committee that, in my speech, I made special reference to the great importance of seeing that scientific workers engaged in research were given adequate remuneration, but the training of research workers, I believe, is best provided in research work itself. With the preliminary education and technical training of such people I really, in this connection, have no direct concern. That is a matter for the Education Bill and for the University Grants Committee.

I was moved by what my hon. Friend the Member for Hems worth (Mr. G. Griffiths) said about medical research. I do not want to draw any distinction what- ever between one kind of research and another. If I stressed particularly research in connection with industry, it is because it is in regard to that kind of research that capital expenditure is for the most part incurred, and the relief which I propose should be given to research is relief in respect of capital expenditure. But I can assure my hon. Friend and the Committee that medical research and agricultural research, to which my right hon. and gallant Friend the Member for Kelvingrove referred, will be treated on exactly the same footing as industrial research.

Now I pass to the question of the relief of industry by means of the devices which I have described in my Budget speech. The hon. Member for Chesterfield (Mr. Benson), who had a good deal to say on this subject, fell into a fallacy which was repeated, rather to my surprise, by my hon. Friend the Member for Edgbaston (Sir P. Bennett). Both of these hon. Gentlemen suggested that the 20 per cent, initial contribution towards capital expenditure on plant and equipment was nothing more than an anticipation of the depreciation allowances which have always been available. I do not agree with that. I agree that if things were to remain in the future exactly as they have been in the past, then an initial grant would be in the nature of a non-recurrent grant in anticipation of depreciation allowances to come along in due course year by year, but we do not expect things to remain as they have been in the past. The particular reason for giving the reliefs is that I hope they will have the effect of greatly speeding up the process of the modernisation of plant, and if and when that happens this relief will not be merely an anticipation; it will be a substantial relief occurring all the time as plant is scrapped and modernised.

In that connection, account must be taken of a quite important modification that I have made in the existing system by providing that plant which is not replaced, provided only the concern is a continuing concern, shall qualify for the full obsolescence allowance, taking into account anything realised on the disposal of the plant itself. I have every reason to think, and I believe from the favourable references that have been made to this provision in the Budget by other speakers, that my belief is shared fairly generally, and this provision will be found to be a most potent influence, putting us as a nation more on a level with other industrial nations in regard to this important matter of the modernisation of plant and buildings. I referred a moment ago to an intervention by the hon. Member for Chesterfield, and while I am dealing with his contribution to the Debate there is one other matter to which he referred on which I have some comment to make.

He fell into another error owing to his rather excessive faith in a merely arithmetical calculation, because he looked at the White Paper and he repeated something which I had in fact said in my Budget speech, that it appeared that the recent additions to the national income, which I put at £600,000,000, comparing the year before last with last year, had in fact all been accounted for by increased taxation and saving. It was quite right up to that, and then he went on to say that the whole thing was, therefore, merely a matter of bookkeeping. The whole object of our policy is to ensure that additional income, additional spending power, is mopped up in taxation and in savings, but it is not just a matter of cause and effect. It takes some doing. We have succeeded, but we have not succeeded without a certain amount of difficulty. It is also the fact that the people who get the additional income are not by any means the same people who contribute the equivalent amount in additional taxation and additional savings. It is very important that that fallacy should be disposed of.

Now I come to the speech of my hon. Friend the Member for East Aberdeen (Mr. Boothby), who wound up yesterday. He made a most eloquent speech, to which it was a pleasure to listen, and there was very much in it with which I found myself in agreement, but if he will forgive my saying so, I thought that towards the end of his speech, as he became more eloquent, he fell more and more into error. I thought that he was altogether too buoyant and carefree when he spoke of our accumulated indebtedness and of our external position generally. I thought that he really succeeded in putting the cart well ahead of the horse, because he did enunciate to me the surprising doctrine that, in regard to our external affairs, imports were the things that we should concentrate upon, and he implied that the exports might perhaps be left to take care of themselves. Imports are certainly necessary. They are necessary to maintain our standard of life and to provide the raw materials for our industries. The imports have to be paid for by exports and that is what requires the effort. I was reminded, when he spoke, of a Scottish saying, which, perhaps, may appeal to some of my hon. Friends opposite, and perhaps even to the hon. Gentleman. The saying refers to the unfortunate man who Looked at the müne, and lichted in the midden. —if I may translate, the man who "looked at the moon and landed in the rubbish heap." The object of every effort that we human beings make is to gain some advantage, perhaps for ourselves, perhaps for our friends, perhaps for the whole community, but, if we concentrate on the advantage and forget about the effort, we get nowhere.

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

I hope my hon. Friend will forgive me, I have very little time.

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

Only one sentence. As the right hon. Gentleman has rather beaten me up, I wanted to say that my main argument was addressed to the building up of export surpluses, which I thought had not done much good.

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

I think we are a very long way from building up export surpluses. I hope I was not too severe; I will try my hon. Friend on another point. He spoke about the basis of our taxation and said something, which I think I must take up, about the difference between taxation on capital and taxation on income. That point was also taken up by my hon. Friend the Member for East Wolverhampton. In both cases the point was quite fallacious. You cannot, in the ordinary way, tax capital. You may assess your tax on the basis of capital but what you always do in practice is to tax income. You may not tax directly, when you assess your tax on capital, the income of the person taxed, in that case you bring about a redistribution, but you collect your tax always from income. That is the point I want to make. The second point I want to make in this connection is that it is fallacious to suppose that our present system of budgeting errs to any considerable extent in mixing up capital transactions with revenue transactions. Actually, the capital transactions that figure in our annual Budgets are relatively very small indeed; most of the capital expenditure of this country in which the State takes a hand is incurred by local authorities. They raise the capital, the State contributes to the service of the loan. So that while I absolutely agree with what I believe to have been the point that my hon. Friends were making, that in our review of our national finances we have to distinguish clearly in our minds between capital transactions on both sides of the account and revenue transactions on both sides of the account, the criticism does not really apply, to anything like the extent I believe my hon. Friends supposed, to the actual budgetary system by which we have hitherto been governed.

I have very little time left to me but I must say something on the question of price stabilisation, the only feature, I believe of my Budget which has been criticised to any substantial extent. I appreciate the grounds of criticism. I wish that I might have carried my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) all the way with me. He was very moderate in what he said by way of criticism. I recognise that his great experience gives him a special title to speak on these matters, and I always pay attention, as the Committee does, to what he has to say. My hon. Friend the Member for East Stirling (Mr. Woodburn) took up the same topic and criticised the action which I have taken in deciding to re-peg the cost of living. My right hon. Friend said, I think, though I am not quoting his exact words, that it looked rather as if I had started a process in which wages and prices, or prices and wages, were going to chase each other up the vicious spiral. I had nothing of that sort in mind. All that I have really suggested is a slow and reluctant movement of prices dragged up after wages, but still left, under my proposal, far behind, and I have made no attack at all either on wages or wage rates. I made it clear that what I had to say applied equally to all items of cost which go to raise prices. I referred specifically to the elements of cost in connection with overseas purchases, which we cannot control and, in reply to any objection, I referred also to the importance of keeping down contract costs, which is a matter in the hands, of industrialists.

I would like to say to my hon. Friend the Member for Hemsworth that I made no threat; I tried to indicate a warning, and I should like to explain quite simply why I came to the decision which certain hon. Members have criticised. It is not quite fair to suggest that I am starting a process of inflation, even on a modest scale. You do not criticise the fire brigade when fire breaks out; you do not always hold the police responsible when there is an increase of crime; or, to go back to my own metaphor, it may be that a physician may have to say to a patient, "You have fallen into bad ways and you require treatment. I am going to do my best for you, but I cannot promise you absolutely that I will restore you fully to the man you were." Now that is the position here. I am not threatening the stabilisation policy; I am not departing from it. But it was inherent in the stabilisation policy that prices, on the one hand, and wages, on the other, should keep more or less in step. If I were to allow them to get too much out of step, stresses and strains would be set up in our economic system which might lead us into serious difficulty later on. The real question to which I had to address myself was whether one should bring home that lesson now or wait until later. I thought it was best to bring it home now, but I do not contemplate any runaway change, and, let me say, I am very fully alive to the effect of any change in the cost of living on the poorest people in the community. I propose to watch very carefully the movements of the food items in the cost-of-living index.

It has been suggested, despite the very favourable and sympathetic nature of the speeches that have been made, that in laying so much stress on impersonal reliefs—reliefs to industry and so on—I have rather left out of account the human factor. That was not in my mind at all, but we are here in Committee of Ways and Means, we are not in Committee of Supply; we are dealing with the general financial situation and the raising of revenue. I fully accept what my right hon. Friend said about the importance of collaboration in maintaining the standard of life of the people; I fully accept what has been said about the necessity of paying attention to the health of the people when the strains of war are relaxed; I agree to a considerable extent—although not quite to the whole extent—with what my right hon. and gallant Friend the Member for Kelvingrove had to say about industrial psychology. All these things require adequate attention, but they are outside the scope of the Budget; they come into the sphere of Supply, and I would not like Members of the Committee, who have been so very kind to me, to think that in concentrating attention on industrial relief I was leaving out of account what is, and what must be, the ultimate objective, as I tried to make it clear in my broadcast the other night. We have been fighting for life itself, for survival. Our efforts will not come to an end with the achievement of that objective. We have to go on making great efforts still, and those efforts will be directed to the single purpose of furthering the well-being of our people.

Question put, and agreed to.

Resolved: 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.

Resolution to be reported To-morrow; Committee to sit again To-morrow.