Excess Profits Tax

Part of Orders of the Day — Ways and Means – in the House of Commons at 12:00 am on 13th November 1947.

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Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby 12:00 am, 13th November 1947

Referring to the Budget presented yesterday, it seems to me that it was entirely trivial in comparison with the magnitude to the task ahead. As I want to be critical of the Chancellor, I would like to start by paying a tribute to the brilliant exposition which we always expect and obtain from him. In fact, as I listened to that remarkable lucidity yesterday, I thought that if only the Chancellor were one half as vigorous in his deeds as he is skilful in his choice of words, the state of the country today might be very different from what it is.

I want to touch on three points: the gravity of the present situation, the causes of it, as I understand them, and to suggest solutions. It may very well be said that as every hon. Member knows so well the gravity of the situation today, there is really no need to stress it further, but I am not sure that the country as a whole appreciates that. We can only expect the tremendous effort which is necessary from every section of the community if we can really bring the people to realise the urgency of the situation. It is one of the greatest indictments of the Government that they have failed to do that. In his Budget speech yesterday the Chancellor did not bring that home, either by what he said or by what he proposed, in fact, as I listened to him, I thought of another doctor, not a doctor of science but a doctor of medicine, treating a patient who was desperately ill through mistreatment. I thought of that doctor perhaps realising that the gravity of his patient's health was owing to a lack of foresight and planning on his part, but not wishing to disclose that, or to prescribe the drastic remedies that were necessary, for fear of upsetting the patient's relations on whose complacency depended the payment of his fee.

The present shortages are considerable, but they are nothing to what we are likely to have in months to come, when we may be regretting the splendours of 1947. After all, during the last year and a half we have been living, as to a considerable amount of our food and raw materials, on the American Loan. We have controlled prices by a system of controls comparable to a dam erected to deal with a certain flow of water. When we cut down the import of goods and export more, then that inflationary pressure will be far greater, and I doubt whether the dam can stand up to the great pressure which it will then have to resist. In fact, we may get a further escape into the black market. We have seen what can happen in Germany when a growing shortage of goods is exploited by black market operations. In the future we have to face not only grave shortages, but also grave unemployment.

The hon. Lady the Member for Blackburn referred to food subsidies, and the Chancellor spent a good deal of time yesterday on that subject. As I understood him, he guaranteed that during the current year he would spend £392 million on subsidising food, but he did not guarantee, as he did in the past, that by doing so he would maintain the cost of living at the present level. I think he calculated that the present expenditure was the equivalent of £8 a year a head. That might be a bad bargain for a citizen to receive if an expenditure of £392 million caused such inflationary pressure that prices of food doubled or trebled. I would also say that subsiding food might be a good way of curing unemployment at a time when the demand for goods was ineffective, as in certain inter-war years, but a cure that deals with one situation is not necessarily effective in dealing with a reverse situation, when there is too much purchasing power and not too little. After all, a cure for low blood pressure is not necessarily a good one to adopt when one is suffering from high blood pressure.

The Chancellor appears to me during all his term of office to have been most unduly preoccupied with the question of balancing Government revenue and Government expenditure, ignoring—as we have said time after time on these benches—that what matters is balancing total expenditure and total resources. Just as much as we spend more than we have, by that amount we are bound to have an adverse balance. I would ask the Financial Secretary, as the Chancellor has failed to do so, if he cannot tonight give us a clear calculation of what he has estimated are our total resources, and the total expenditure estimated by him for the Government, for capital reconstruction, and by consumers. I am reminded, in thinking of the Chancellor's performance yesterday, of the story of M. Clemenceau at a time when he was Prime Minister of France and that country went through a difficult financial period. M. Clemenceau was reported to have said, "Alas, that I should have appointed as Minister of Finance the only Jew in France who cannot add." It may be that our Prime Minister today is bewailing the fact that he appointed as Chancellor of the Exchequer the only economist who, apparently, has not read Keynes. I would not accuse the right hon. Gentleman of not being able to add, but I would say after yesterday that he does not appear to be prepared to add, and to face what are the actual facts.

I will ask him three questions. First, why is it he did not foresee that his policy would lead to the balance of payments crisis, when it was so clearly foreseen in many speeches in this House and articles written in the papers? Secondly, why it was, if he did foresee it, that he tolerated vast expenditure at home and abroad? This Government have spent in grants and loans, between coming into office and March, 1947—that is, before the events of the summer—£720 million in foreign countries? I would like some explanation of why that happened. If, however, the Chancellor can show that all this expenditure at home and abroad was absolutely necessary, then why is it that he did not cut down, however ruthless it would have had to be, expenditure at home by consumers, because those two expenditures had to balance except in so far as we borrow abroad. I would remind him of what was said by the President of the Board of Trade at the beginning of the year: Total resources and total needs must automatically balance. If they do not do so in accordance with some plan, then there will be deficiencies appearing perhaps in the very things of which there is the most vital need. I now come to what seems to me the causes of the present situation. We can all agree that we are not exporting enough because we are not producing enough. I suggest that the inadequate production is not due nearly so much to bad output as to maldistribution of men and materials. That, I know, will not be altogether agreed. The hon. Member for Devonport (Mr. Foot) said in the Debate on the Address: The people of this country are producing more goods today than they ever did in their lives."—[OFFICIAL REPORT, 28th October, 1947; Vol. 443, c. 806.] If that is so—and I suspect it is exaggeration—it is an even greater indictment of the Government because, while it is not altogether their responsibility how hard everybody works, under the present system of controls it is their responsibility, to a large extent, what is produced. If we are producing this vast quantity of goods and suffering from such shortages, it is quite clear that we are producing things people do not want.