My hon. Friend the Member for East Aberdeen (Mr. Boothby) spoke with a fire and enthusiasm which I can hardly hope to imitate. Connoisseurs of the Chancellor of the Exchequer's oratory tell me that his speech on the wireless last night was fully up to the level of vulgarity of his peroration in the Budget last year, and he ended up by saying:
Good night, and good luck to Woodcock.
It did not turn out to be a very good omen for the British champion. The British champion, I understand, was knocked out by a "sucker's punch." I am told a "sucker's punch" is a left hook, and a left hook is precisely what the Chancellor has attempted to give the British people in his Budget. I think for the moment he has them "punch drunk," particularly on the subject of the surplus of £270 million. In this House one could tell from the tone of the Chancellor's speech that he did not expect to be taken seriously; before a semieducated audience, he could hardly hope to get away with it. He spoke of £292 million, of windfalls, his litter of rabbits, but, if one looks at the actual items, things like the working capital of the U.K.C.C., we see in fact that a large part of the credit side of the Budget consisted of capital items. I do not particularly mind him putting capital items on the credit side of the Budget, provided he puts the equivalent debit items on the debit side above the line. But, that is precisely what he has not done. On the debit side, but below the line, and therefore not counted in his Budget, he put £330 million for war damage, £60 million E.P.T. refund, and
£70 million postwar credits, a total of £460 million. The Financial Secretary is a very distinguished casuist and I have no doubt he will make a very good explanation, but what I would like to know is what makes the refund of a postwar credit more of a capital item than the surplus capital of the U.K.C.C.? It appears to me that precisely the opposite is the case.
If we count both types of items above the line, we find there was a deficit of £190 million. That is not counting genuine capital items like £290 million for housing which are rightly below the line. There is no doubt that the Budget was unbalanced, and the Chancellor's attempt to appease the angry shade of Gladstone was not successful. The Chancellor likes plenty of varnish with his truth, but in this case he would have been wiser to give the unvarnished truth. In regard to tobacco, it would be better to tell the truth, for the increased tax is most unpopular. I hope that when the right hon. Gentleman replies, he will let us know whether the Chancellor of the Exchequer has the permission of his hon. Friend the Member for East Coventry (Mr. Crossman), in view of our experience the other day. Then we found that our whole strategy changed between Tuesday and Thursday, and it may be that our balance of payments will change likewise.
The Chancellor's speech was curiously out of harmony with what we know to be the state of our country, the state of our country as put forward by the President of the Board of Trade in the economic Debate. There were a number of things he omitted to mention. For instance, the cost inflation, which has been going on this year at a steadily increasing rate—he said nothing about the maldistribution of labour, and nothing whatever about the general distortion of our economy, nor about the effect on our economy of having expenditure and taxation permanently at present levels. Secondly, I think a curious thing about his speech was the way he produced those two grisly skeletons, the cost of-living subsidies and our balance of payments, out of a box, took a look at them, and put them back again.
The subsidies have been a problem for years, but all the Chancellor said was that we must pause and review the matter afresh. I do not know what that means. I suppose it means that he knows the position to be untenable, that prices will not
come down again, to the pegged level, that he does not know what to do about it, and that he is very much hoping that the new cost-of-living index will provide him with some sort of statistical alibi. I think that is what one could read into what he said. The balance of payments, as my hon. Friend the Member for Chippenham (Mr. Eccles) pointed out, is by far the most pressing, difficult and deadly problem we have to face. The Chancellor said:
Later on His Majesty's Government will inform the House of the conclusions they have reached on this issue."—[OFFICIAL REPORT, 15th April, 1947; Vol. 436, C. 70.]
I do not know what those conclusions will be. All we can do is either to export more, import less or borrow some more money. All those things are extremely significant for this Budget, and the conclusion one must come to is either that the Chancellor means nothing at all by his statement or, it he does mean something, that the present set-up of the Budget is bogus.
The Chancellor had very little room for manoeuvre in this Budget. I do not criticise a number of the things he has done but I would say this about the profits tax. The hon. Member for Chesterfield (Mr. Benson) in the last Budget Debate made a most eloquent speech against the Profits Tax. Unfortunately, he did not have the leisure in his speech this year, to repeat what he said then. The only thing I would say about that is that the Chancellor is putting up this tax at the same time as he admits that a great many people who are being charged it are this year suffering smacking
losses. What he is really doing is ensure that people in industry lose both on the swings and the roundabouts. I do not think that in the end that will be a very wise thing to do.
To turn to more general topics, to our general monetary and budgetary policy, the Chancellor of the Exchequer, in the economic Debate, made a fleeting appearance. It was a case of Hamlet without the Prince, or of the Prince only appearing in one of the more irrelevant scenes. I can well understand the Chancellor's motives but it was a pity, because economic policy cannot be discussed in isolation from monetary and budgetary policy. In their economic White Paper hon. Members opposite have rejected direction of labour, have rejected State fixing of wages and have rejected planning in detail. I entirely agree with them but if those three things are rejected, what real controls are left? Only two that mean anything—our monetary policy and our budgetary policy. If those controls are used wrongly, and if the Chancellor gets the price mechanism working against him instead of for him, he will stultify all other Government plans, however good they may be in themselves. That is precisely what has happened. The Chancellor has not only an unbalanced Budget but an unbalanced economy. The Chancellor is the arch anti-planner. I believe, in deference to the hon. Member for West Fife (Mr. Gallacher), the Marxist term is "confusionist."
I will deal first with monetary policy, on which my hon. Friend the Member for Chippenham spoke so well. The Chancellor did not invent it. The technique pursued now is exactly the same technique as has been pursued in the last 16 years. Long-term rates were lower under Goschen in the 90's. No one denies that when there is a debt of £24,000 million, interest rates have to be controlled. No one denies that it is a most potent method of Government control, and is one of the most important they possess. To put up the straw bogy that everyone on this side wants to raise interest rates to six per cent. is childish and not worth refuting. The criticism is that an attempt has been made to force down long-term interest rates from three to 2½ per cent., by issuing stock which no one wanted to buy, in a period when our resources were overstrained and we were suffering from under-employment.
What the Chancellor of the Exchequer has been doing is to apply Lord Keynes' cure for low blood pressure to a case of high blood pressure. The results have been very remarkable. The Chancellor left out all the evils. He did not mention them at all. During the last nine months of 1946, bank deposits increased at an average monthly rate of £104 million compared with £36,500,000 average increase during the war period—nearly three times as much. During the last nine months of last year bank deposits increased by an amount which was equal to 40 per cent. of all bank deposits outstanding at the beginning of the war. The Chancellor of the Exchequer succeeded in producing the most rapid increase of credit in our history at a time of great inflationary pressure. I doubt if any Chancellor of the Exchequer has ever been guilty of such gross folly.
The result is inflated Stock Exchange prices, so that anyone living on capital is given a bonus to do it instead of incurring a penalty. The policy penalises thrift and puts increased pressure on all prices and controls. It weakens sterling in the international markets—it has done that to some tune—and lastly, the Government are trumping their own ace if and when the next trade depression comes. Perhaps that is the most important point.
For what has this been done? The Chancellor gave a typical—one must not use the word "dishonest"—answer. Anyway he did not look the truth squarely in the face. When he was talking about savings in interest, he reckoned the figures as gross and not net. He did not take off Income Tax. One half per cent. on £1,000 million less tax at 9s. in the £ represents a saving of only £2,750,000. The Chancellor said our main hope of tax reduction rested on the cheap money policy. If that is true, our hopes are thin. I do not know whether hon. Gentlement opposite really believed what the Chancellor was saying. If they believed him they must have wondered very much why he did not reduce interest rates to 1 per cent. That would be much more sensible if economy in interest is the only criterion.
The Chancellor described this as improving Britain's credit. That is grand nonsense and, as Dr. Johnson said, grand nonsense is insupportable. The test of whether your credit is good is whether anybody is willing to lend to you. Nobody is willing to lend to the Chancellor. That is why bank deposits have increased. That is the reason why small savings were only £330 million. Of that figure £159 million of the increase was in the Post Office Savings Bank which takes money for short periods, and pays 2 per cent. more than the market rate for it. Much of it is, in fact, not new money. Lastly, foreign Governments are increasingly unwilling to leave balances here, with the notable exception of General Franco.
It is not public buying that has put prices up in the market. It is the Chancellor of the Exchequer who has been buying and who has forced the banks to buy. He has been taking enormous quantities of his own dirty linen. The more stocks he creates as a result of nationalisation, the more he will have to buy. The Chancellor is like the small boy who was warned not to drink sea water. The small boy said, "Never mind, there is plenty more." So long as electric power can be maintained for the printing presses, there is "plenty more" money for the Chancellor with which to buy his stocks.
The Whole effect is damaging to thrift. The Chancellor of the Exchequer is running a great campaign—and I see that Field Marshal Montgomery has been raked in now—to persuade everybody to be a rentier. At the same time he is crushing the life out of rentiers. There is to be no nonsense about euthanasia. The Chancellor will find that he will have to create more and more money in order to hold prices at this level. The time is past when hot air, at whatever pressure it may be emitted is enough.
I turn now to the Budget. What is wrong is the size of it; it is out of all proportion to the national resources in real terms. That is masked for the moment by the fact that we are borrowing over £1 million a day from abroad and that last year we went in for de-stocking at a rate of £200 million approximately. The size of the Budget is the reason our economy is stumbling, before we have reached our real test—what will happen when the sellers' market ends. This great expenditure is a result of propaganda by hon. and right hon. Gentlemen opposite that the war was fought to make the world safe for Lord Beveridge.
The consequences of the war were, first, a dislocation of our economy; secondly, that we became a debtor nation instead of a creditor nation; and, thirdly, that we came out of it with our people morally and spiritually exhausted In spite of that, we said that we must have shorter hours, higher wages, that we must make good all arrears of depreciation and re-equip industry, have 75 per cent. more exports, keep the cost of living steady, have a great housing programme, carry out all the planned social reforms, and at the same time improve the standard of living. I mention things like hours and wages, depreciation and re-equipment, because although they are not strictly budgetary items, they are the principal factors which the Chancellor ought to bear in mind when making his plans. We want all these things at once. To expect all these things to happen at once is to expect another miracle of the loaves and fishes.
I wish to ask the right hon. Gentleman the Chancellor two questions. First, does he really believe that the flow of domestic savings, plus net borrowing from abroad, can cover the Government's below-the-line expenditure, plus capital expenditure by industry, at any tolerable level? He has got to bear in mind that gross fixed capital formation last year was only two-thirds of prewar. He must also remember that private savings out of income fell from 15 per cent. in 1945 to 8 per cent. in 1946. In fact, what does he really think about the £1,000 million gap? We heard much about it in the economic Debate, but the Chancellor has not deigned to mention it in this Debate. That gap was calculated before the fuel crisis. What does the right hon. Gentleman think about it?
The second question is, Does the Chancellor really think that national and local government expenditure, which is now running at something just over 50 per cent. of national income, can be sustained without the cost of inflation continuing? These are questions which the Chancellor and his friends have never faced. They never talk about them. One cannot help wondering whether any serious effort has been made to get the shape of the national income right—which is the main task of the Chancellor—and whether any rational and conscious choice between priorities is being made. I should have thought that a rational and conscious choice between priorities was the essence of democratic planning. Any statement from this side of the Committee that one cannot have one's cake and eat it is always pleasing to the Scribes and Pharisees opposite, and the Chancellor took a typical spring cruise in the s.s. "Whited Sepulchre" yesterday when talking about deflation. Of course, these things are very unpopular. Everybody likes to think he can get something for nothing, but I do not believe that the real consequences have ever been put—certainly they have not been put by hon. Gentlemen opposite—to the people of this country; and the consequences of not getting the national income into right shape are very serious—not only more queuing, more rationing, more scrounging, more tax-dodging, not only the fact that such a very large part of the new Britain will be under the counter—not only these things, serious as they are, but steadily rising prices which the Government cannot control; they cannot control cost inflation, wages, or raw material prices. Up they go, and that is bound to happen on the Government's policy. It means that and it also means a decline in our diplomatic power, it means inefficient production leading to unemployment, and lastly it means what so many of my hon. Friends have pointed out, a coming foreign exchange crisis—a crisis in our balance of payments. It is no good being optimistic about that. The only way we shall get out of it on present policy, going on as hon. Gentlemen opposite are now going on, will be by going on our knees to America for another loan. That is what they will have to do, go back to the country so liberally abused by hon. Gentlemen opposite. The hon. Member for West Fife (Mr. Gallacher) may talk about not selling herrings to Russia, but he will not get any credit out of Russia, he cannot buy wheat from Russia. The only place he can get the things we can live on is the hard currency countries, and that is what the Government will have to do. I believe that if these points were put to the British people, and they realised the consequence of this free and easy nonsense, the people would say, "I did not vote for this."
It is easy enough to see the rocks ahead, but I see no reason whatever why anybody on this side of the Committee at any rate should have any ultimate lack of faith in the future of our country, because our problems are far from insoluble. If only those in power would give up hit-and-miss methods, if they would show a little foresight and be willing to make some adjustment between means and ends—call it planning if the name smells sweeter—if they would realise that the immediate essential is to catch the train—then there would be hope, and much suffering could be avoided. What the country needs is
A daring pilot in extremity,
Pleased with the danger when the waves went high.
What it has got, is a nigger minstrel.