As always, we have been delighted to listen to the right hon. Gentleman the Financial Secretary give his description of various parts of the Bill. I cannot quite agree with him when he says there are no mysteries in it. Certainly, Clauses 14 to 18 open up a subject to which very little reference has been made in the previous discussions. That is the subject of retirement benefits. When it comes to real mysteries, I think if any hon. Member can say that he understands every word of Clauses 28 to 31 with regard to the Profits Tax, then the days of Maskelyne and Devant are quite finished. There is one other point I want to take up at once with the right hon. Gentleman concerning the Clause which deals with the Savings Bank and puts the Consolidated Fund behind its accounts. The right hon. Gentleman commented on something that I had said, I think at Question time, to the effect that that Clause was a very bad case of "tacking." The right hon. Gentleman said that the Chancellor and he had no hesitation in moving the Procedure Resolution in order that this might be put into the Bill. I dare say they had no hesitation at the time, but that entirely proves that it was a "tacking" Clause. That is exactly the point that I was making. If it had not been necessary to pass this special Resolution, the question would not have arisen at all. I am afraid the right hon. Gentleman has not really persuaded me upon that point.
The Finance Bill, of course, is the legislative form of the tax proposals of the Budget, and we shall naturally consider the details later on. I think in a Second Reading Debate our job is to consider the spirit that is behind these proposals, to try to weigh up the sins of omission and commission of the Chancellor of the Exchequer—and there are many of both kinds—the relevance of his policy to the facts of today—incidentally, the facts of today are not necessarily the facts of a month ago—and the whole bearing of the financial ideas, of which the Finance Bill is some exposition, upon the economic situation. It may be that the Chancellor has already explained all these things, but if he has, I can remember neither the argument nor the occasion. To misquote the Financial Secretary's quotation a short time ago, "Methinks, anyhow, it must have been very bad." This Bill covers very vast expenditure. I am not going into all the details. I only want to bring vividly before hon. Members one fact. Needless to say, the Government have not mentioned it. That is, that the Chancellor estimates the total tax revenue to be received this year as £80 million more than the estimate that he made last year for total tax revenue. That is very staggering.
In putting his proposals before us, the Chancellor has been guilty of, perhaps, three great offences. What he really does is to ride with great gusto up to the fences; then he abandons any idea of jumping them He does a lot of gesticulating instead. The first fence from which he ran away was this—and I hope this will be an occasion when he will try to jump over it; if he does not, perhaps he would tell us when that occasion will be. We have never had any kind of reasoned statement from the Chancellor of what, in his view, his contribution is to the general economic policy of the country as it was debated in the three days' Debate on the economic situation, in this House and in another place. The Chancellor took no part in that Debate, the general idea being that he could not anticipate his Budget Statement. But the Budget Statement was made, and he never told us anything on that occasion about how he was going to use the financial weapon to help in our very serious economic situation. He talked a lot about cheap money in his Budget speech. He made a lot of obiter dicta on this subject, but did not give us a connected account of how his mind was moving—if, indeed, it does move. We shall be very grateful if this is the right occasion for him to do so. If not, could he hold out any hopes later on? It was not much good providing us with the various White Papers such as the Economic Survey, the White Paper on National Income and Expenditure, and all the rest of it, unless he gives us some idea of his views. That was the first fence that the Chancellor refused to jump.
The second fence that he refused to jump is this. This is relevant to discussion on the Finance Bill, because that Bill is the authority for raising the necessary
money to meet our expenditure. He admitted that the present system of subsidy on food is too high, in these words:
… we shall have to devise, in due course, a modified policy, which will no longer aim at an absolute stability, and will, I hope, cost the taxpayer less money."—[OFFICIAL REPORT. 15th April, 1947; Vol. 436, c. 46.]
He admits that he will have to devise something which will cost the taxpayers less, but he has not done so. Nothing has happened.
The third fence is that he admits that expenditure is too high. In his winding-up speech, he said:
There is much scope for reduction in defence expenditure yet, much scope for reduction in overseas expenditure of various kinds, and for a reduction in some selected parts of our domestic expenditure. I think that there are too many civil servants."—[OFFICIAL REPORT 17th April, 1947; Vol. 436, c. 461.]
But, having told us what he thinks, nothing is happening. So little is happening that a reply to a Question was recently given in this House to the effect that there was not going to be any overall cut in the Civil Service, for reasons which seemed to the Government good.
Those are the offences with which I charge the right hon. Gentleman. He has not given us a full view of the financial panorama as he sees it. He has not dealt with the expenditure on food subsidies, though he admits it is too high and must be pulled down. He has not dealt with the economies which he admits are necessary. Those are the things he will have to explain.
The evil that men do lives after them; The good "—
such as there is in this matter—
is oft interrèd with their bones.
The eyil will, no doubt, live after the Chancellor of the Exchequer unless he mends his ways.
It is agreed nowadays that the Budget can be used as a most potent instrument for guiding and helping the economic situation. The old theory that the Budget was just a matter of balancing accounts has gone out of fashion, at any rate, temporarily, and the Chancellor has often said that he agrees with the modern theory. He agrees with it, but I do not see that he is yet acting upon it. In fact, he is off with the old love, but he has not gone on with the new one yet. He is in suspended animation between the two [Interruption.] I am sorry if the hon. Lady the Member for Epping (Mrs. Manning) takes that amiss. If the Budget is to be this important economic weapon, it is obvious that it can have a very great scope and can work with very quick results. It is unnecessary for me to go on about the problem. The Government themselves have stated it in the simplest words. It was the Chancellor, or the President of the Board of Trade, who said that the problem was one of too much money chasing too few goods. That gap has got to be reduced somehow.
It can be reduced either by checking money production, the money in circulation, and, or from below, by raising the production of goods. The Finance Bill can help in that connection to influence production, either by the effect of the Chancellor's decisions on the total amount of money circulating, which, of course, he is able to consider very carefully all the time, or by the distribution of tax reliefs, or by imposing new taxes on various classes of taxpayers or on various commodities, goods and services. The Chancellor does not seem to have gone far enough in either direction to meet the needs of today. When dealing with the monetary situation, his purpose must be to reduce the gap between the supply of goods and purchasing power, and when dealing with taxes his purpose should be to increase the incentives to production. Does he do those things in the Finance Bill? I cannot see that he does them to anything like the extent necessary. It is agreed that there is a danger today of too much money and too few goods. It is agreed that if the persistent gap between Government expenditure and Government revenue covered by borrowing continues, it will be of an inflationary character. It is agreed by the Government that we must try to stop it. It does not matter what words the Government use—whether "deflationary," "anti-inflationary," "counter-inflationary" or "disinflationary"—the idea is to close the gap somehow. That is accepted by everybody.
Does the Bill do that? Here we come up against the problem which the Financial Secretary described on the first issue about the amount of money in circulation. The Financial Secretary claimed that there was this surplus, and therefore, on the face of it, as that face was exposed by the Chancellor and the Financial Secretary, there is a substantial surplus, which was all to the good, towards closing the gap. That is exactly where we quarrel with the Chancellor. We do not admit there is this wonderful surplus of £270 million. The Financial Secretary said it was very sound to have a surplus. It is sound enough to have a surplus; the point is whether there is one. If there was this surplus, the Financial Secretary said, it would be a bulwark against the flood, and the fact that there was a surplus would be shown as the year proceeded. I find that hard to understand. Either there is a surplus, or there is not. What the weeks and months as the year proceeds have to do with it, I do not know. It still remains our view that the Chancellor has juggled about with terminal receipts and terminal expenditure, to use the jargon of the day, and with what he puts above and below the line. The thing to remember is that what is put above and what is put below the line—in other words, what the Chancellor decides shall be paid for entirely out of revenue and what he decides shall be helped along by borrowing to cover the expenditure—is a matter for his own choice. He settles it. Therefore, the Chancellor is the one who can say at any given moment whether there will or will not be, whether there shall or shall not be, a surplus, because it depends upon what he borrows and what he finances out of taxation.
There is one other great source which I do not think has received much attention so far, but which should be noted, and it is that, with the Government now engaging in so much trade—for example, in food—the Chancellor can, by instructing the Minister of Food to draw rather more upon his stocks, create quite a different financial picture, although it may not be sound national economy to run down the stocks in one or other commodity. It lies very much within the Chancellor's hands as to whether or not there is to be a theoretical surplus. However, on the figures as presented to us hitherto, in spite of the arguments which the Financial Secretary has made, we still hold the view that the surplus as disclosed, explained and expounded by the Chancellor is largely fictitious, or bogus.
The Chancellor said that Government borrowing this year will be only for the creation of capital assets. That, broadly speaking, is the sort of line he will take. Of course, that sounds all right if one is satisfied the Government will not try to create more capital assets than can be properly provided by the savings likely to be available, because if they do they will end by being in a worse position than that in which they started. From the experience we have had so far, we are not certain about that. It looks all the time as if the Government were trying, on the side of capital assets and their creation, to get more out of the nation, or the national kitty, than is there. The most obvious example of their continually estimating too high what they hope to do is to be found in housing, where the Minister of Health has had all the time to lower his targets or estimates, or whatever he calls them, for he does not like those two words; certainly, the figures which the Minister of Health has allowed to be spread abroad of what might happen have been falsified very often, and very few houses have been built. It may be the Government will go on trying to get too much, and if they do we shall be in great difficulty.
Therefore, unless previous experience is overturned, the Chancellor is likely to go a bit astray there. He is likely also, in spite of the declaration that he wants only to borrow for the creation of capital assets, to have to borrow owing to the difficulties of supply, the uncertainties of the time, and the after effects of the fuel crisis, which are still continuing. That is another danger. Of course, if he goes on bolstering too quickly his cheap money policy, with which we fundamentally agree—it is only because of the pace that he has, in our view, gone astray—he may, there again, make the situation worse. On those points therefore, I conclude that the Chancellor has failed to make full use of the Finance Bill and the possibilities which it could have enshrined to deal adequately at this stage with the economic situation in its monetary aspect. The first point that I want to put to the House is the failure of the Bill to deal with that problem.
What do we find on the other side of the picture—the problem of trying to bridge the gap which the Chancellor and everybody else talks about of there being too much money and too few goods? The necessity, of course, is to boost production. Is that being done, on anything like the scale on which it might be done, in the Finance Bill? My answer is "No." First, the taxes which the Finance Bill covers are still much too high. They are too high because expenditure is much too high. I am certain there is a psychological figure above which it is impossible in a free democratic country to squeeze taxation from the willing taxpayer. Here we have £3,181 million of national expenditure, excluding the Post Office.
There is, in parenthesis, one point which I should be exceedingly grateful if the Chancellor could explain at some time. It arises partly because he has not given us his views on the Economic White Paper, but I should be glad if he would make a note of the question and give us an answer some time. On page 31 of the Economic White Paper, there is described the distribution of the national resources in 1947, and it is stated that 24 per cent. of national expenditure will go to defence and other public expenditure. I know there is a slight difference between the financial year and the calendar year, but it does not make the sort of difference that I want to ask about; I find it very hard to understand how one begins to equate 24 per cent. of national expenditure mentioned in the White Paper as going to defence and other public expenditure when, in the ordinary Financial Statement, the amount of estimated expenditure is £3,181 million. The general sort of figure of national expenditure which is given in these various documents is £8,500 million. Leaving out the odd figures, £3,000 million is not 24½ per cent. of £8,500 million. It is a great deal more than that. I should like some reconciliation to be made. It may be all right, but I do not know, and I put it to the Chancellor that, on these frightfully difficult and complicated subjects, the Government are very helpful in providing White Papers, surveying income and economic matters, but if in some they deal in terms of pounds and in other in terms of percentages, and the two do not at once leap to the eye as being reconcilable, they merely tend to make confusion worse confounded.
I now come back to the theme on which I want to say a few words—the incentives for boosting production. First, taxes are too high, and they are too high because expenditure is too high. The Chancellor accepts the fact that expenditure is too high because, as I have shown by two quotations about food subsidies and other forms of expenditure, the Chancellor admits that they should come down, although he has not done anything about it. One can either increase production and produce incentives for that purpose, or one can reduce consumption of the things which nationally one cannot afford. With regard to the encouragement of production through the machinery of taxation, we welcome what the Chancellor has done by means of the earned income allowance and so on; but we do not think he has gone far enough. There is scope for going much further, and in Committee we shall argue on those lines on some Amendments which we hope will be in Order. In so far as the Chancellor has given incentives in that direction, it seems to me that by his tax on undistributed profits he has undone a good deal of the usefulness of the idea at the back of his mind, because, as he himself has admitted in the past, that is a very foolish tax. It falls upon risk bearing and enterprise. It may be that it appeals to the Chancellor's political friends and is merely a political tax, but when one is trying to find incentives for production, it seems to me there is hardly anything that could have been more foolish. It may be that the Chancellor is merely playing at politics. It may be he fancies his chances of becoming outside-left in the Government team, but I always thought his object was to be centre-forward and captain. He had better be careful before he goes out to the wings. I put it to the Chancellor that, from the point of view of incentives to production, while I am sorry he has not gone as far as he might have done in the first case, perhaps he will be able to do something with regard to the second, the Profits Tax. The best thing would be to drop it. There will be plenty of time to discuss that later on.
On reducing consumption, the right hon. Gentleman told us that he is going to increase the duties on gas and electrical appliances. Of course, that is a matter of closing the door long after the animal has escaped. I wonder whether the Chancellor will be able to hold to that increase when it comes to cooking, because anybody who has looked at many of the prefabricated houses wonders how they will be able to get along if fresh difficulties are to be put in the way of people in regard to gas and electrical appliances. I would not be surprised if the Chancellor had to give way on this matter before we have finished with this Bill.
I listened to what the Financial Secretary said on the subject of tobacco. I hope the right hon. Gentleman will look into what was said by my hon. Friend the Member for Wood Green (Mr. Baxter) in regard to the co-ops, and the price at which they sell cigarettes. I note that the Chancellor is to make a statement on the matter at the end of the Debate. We want to give all the help we can to the reduction or alleviation of the tax in the cases where it has been most hardly felt. I am sorry for the Financial Secretary, having been a Financial Secretary myself for so long. He has not been allowed to say anything. Quite obviously it has all been settled. A month has gone by since the Budget, and all these talks have gone on since. It is obvious that nothing is going to be changed by what anybody says in the next five or six hours—at any rate I do not believe it will be so—and it would be quite contrary to precedent if it were so. It is also quite in accord with precedent for a Financial Secretary not to be allowed to say anything.
I am trying to deal with the point of how far the Chancellor's Budget is encouraging production by stimulating the incentive to produce the things that we cannot now afford. The taxation on electrical and gas appliances is a bit late in the day and the Chancellor will not be able to hold that position. On tobacco, it is likely—I put it no higher—that there will be some changes before we have finished. As it stands, the increased Duty is unfair in its incidence and speculative as to its results. Even if he got 25 per cent. saving in consumption it would save him only a very small percentage of dollars over the whole year. From the point of view of reducing the consumption of something that we cannot afford, the tax is not likely to be very successful. I will not expatiate more on this point, because I have already spoken on it.
There is another point on which I hope the Chancellor will say something. I do not think it has been adumbrated by the Financial Secretary. Will he tell us what other cuts he proposes to make in the consumption which he says we cannot afford? A month ago he said he was studying further cuts. I saw a report in a newspaper this morning of a speech made by him during the week-end, in which he returned to the theme that there were to be further cuts in dollar imports. I hope he will tell us something more today. I find that on the second possibility of helping our economic difficulties by increasing production and reducing consumption of what we cannot afford, the Chancellor has not been successful. We think that he has failed on the monetary side, and on the side of taxation, whether as incentive or as deterrent.
The Chancellor says he is worried about the external situation and that the internal situation is better than he had hoped. We do not share his complacency in that respect—not by a long way. He seems to think that physical controls are enough to deal with inflationary pressure. There, again, let him remember the vast and complicated controls which we have, some of which may be necessary—I am not arguing about that at the moment—and that, by the very fact that they are there, they check industrial enterprise and commercial development To the extent that they are effective on one side of the picture, they are a deterrent when we are trying to get incentives to further production. It is only the right hon. Gentleman who can balance up the two. We sitting on this side of the House cannot do so, but somehow we do not feel—it may be intuition—that he has got the balance quite right.
I say that the Bill fails, and that we cannot support it. It fails as a monetary and economic weapon. It aims to collect far too much in taxation. Some of the new taxes, like those on tobacco and profits, are very bad. Furthermore, its pretended accounting is absurd. Its alleged surplus is, in our view, fraudulent. Having summed up my case against the Bill, I think in quite appropriate and polite language—[Laughter.] Well, I have not stood here gesticulating like a windbag. I have merely shortly stated our views—and having done so, I shall advise my hon. and right hon. Friends to vote against the Bill, as we voted against last year's Finance Bill. On that occasion, the Chancellor made great play with the Opposition. He set out all the things which he said we were voting against. Taxes cover many expenditures. He picked out all the things which he thought might make a nasty smear upon our perfectly pure political record. No one is better than the Chancellor and his friends at smearing other. people's records. Of course, he knew, as did other hon. Members, that it was an absolutely false argument, as it will be this year if he repeats it. [Laughter.] Of course it is. Everybody knows that, in the whole vast field of governmental expenditure, there are great blocks, particularly in the social services, which we inaugurated and developed, and will continue to develop and watch with the utmost concern and sympathy all the time. The Chancellor know that: so does everybody else.
In the Bill, whether we use the word "bill" in the legislative sense, or in the sense of an account being presented, much is bad. It is from the bad things in the Bill that we wish to dissociate ourselves. In fine, it goes no way towards solving the very serious position in which we find ourselves. The Government have always admitted the seriousness of that position. Their own posters now urge the people to work, or else want We say that, in our view, for the sort of crisis which is upon us, the Bill is inadequate. It is as a protest that we shall vote against the Bill. The Bill marks the failure of the Chancellor of the Exchequer to do his duty by the nation, hard and unpleasant as that duty would have been Oddly enough, the right hon. Gentleman is normally a brave man, but in this case he has lacked the necessary courage. As that is so, we reprove him. We condemn him. We repudiate him and the views of all who sit with him. We will do so in the only way we can, in the Division Lobby. Of course, the right hon. Gentleman will carry his Bill, but as the months and years go by, people will realise that it is we on this side of the House who are right today. It is he and his friends who will be proved wrong.