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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 Mr Philip Piratin Mr Philip Piratin , Stepney Mile End 12:00 am, 13th November 1947

Yesterday the Chancellor made a serious speech in a critical situation, and it is our responsibility to discuss whether or not the supplementary Budget helps towards resolving the problems we are now facing. The Chancellor of the Exchequer said: We must reduce the total expenditure, and we must increase the total revenue."—[OFFICIAL. REPORT, 12th November, 1947; Vol. 444, c. 396.] No one on either side of the Committee will disagree with that. The question before us, however, is, are the Chancellor's proposals going to help carry forward those principles into practice? These are wise principles, providing we accept the economic policy of the Government as correct. This is not the occasion to discuss the Government's over-all economic policy, or lack of it; but I claim that the present economic crisis could have been averted by a vigorous implementation at home and abroad of Labour's 1945 programme. Even now it is not too late to revise the policy from that of the F.B.I. to that of Labour. Without changing this policy, these measures cannot be effective in any sense.

I now come to the Chancellor's proposals. First, let us review the proposals with regard to reducing our expenditure. There are three aspects which he mentioned in his speech yesterday afternoon. The first is that the reduction in the Armed Forces would lead to a reduction in expenditure. That is incalculable at this stage. Secondly, he said with some satisfaction that the number of civil servants in the employ of the Government has been reduced by 32,000, and I am sure we welcome that on all sides, provided it does not mean that there is equally a decrease in efficiency. Thirdly, he made reference to the proposed cut of £200 million in capital expenditure, for which of course he is not primarily responsible, but which is part of the so-called plan introduced by the Minister for Economic Affairs two weeks ago. With regard to the last point, I think that a lot will depend upon what is involved in these cuts, and we have all been waiting to see the White Paper promised to us two weeks ago in order to know exactly what is involved. There have been rumours, but until we know definitely, we cannot comment. If, however, the capital expenditure cut will include a cut in capital equipment, and a cut in social services, then it will be along the classic Tory lines of policy in such circumstances, and will be a blow to the economic recovery and to our working classes.

What is the particular form of expenditure on which we could save the greatest amount of money? I would draw the Committee's attention to what was said here yesterday by an hon. Member on this side in reference to the £900 million which is being spent in this year on military expenditure. The Chancellor, it is true, referred to some saving in this item, but we must face the fact more seriously than the way in which it has been approached by the Government. I claim, and I think there are a good many hon. Members who would support this, that half of this amount of £900 could be saved, possibly not immediately, but very quickly. This sum would be saved to the advantage not only of our finances, but would likewise help to solve the manpower problem in the undermanned industries. The more men we bring out of the Forces, the less equipment will be required for them, the less expenditure will be involved, and at the same time several hundred thousand men, many of them skilled and a few certainly young, would be able to move into industries which require young men. I say quite firmly to the Chancellor that he has no right to call on the people to make sacrifices, as he is calling now and as he will be calling further, on the ground that we are facing what has been called "economic strangulation," when in fact we are lavishing £900 million on military expenditure which is not in the interests of this country.

What is the next main factor? "How to increase revenue," says the Chancellor, and there are several measures which we heard with great interest yesterday afternoon but which since then we have been able to absorb much more fully. I am certain that some hon. Members on this side who yesterday evening were congratulating the Chancellor, might be having second thoughts in their estimation of the proposals he was then introducing. His Budget aims at obtaining in a full year an increase of £208 million in revenue. There was, of course, relief on these benches when the Chancellor announced there would be no cut in food subsidies, and that it was not contemplated in the coming year to reduce the subsidies of £392 million. In this respect the Chancellor did not accept the very generous advice offered to him by the Tory spokesmen and the Tory newspapers, as did his colleague the Minister for Economic Affairs.

I, frankly, believe, however, that it was the Chancellor's intention to introduce cuts in the food subsidies. I have good reason to believe that from a number of sources of information; but the Chancellor was made aware of public feeling by representations of the Labour movement. No doubt, also, the results of the municipal elections had a bearing on the Supplementary Budget that we are now discussing. The Chancellor took note of the feeling of back benchers on this side, and I think that if there were closer contact between the Front Bench and the back benchers, we would see other results of this kind taking place. We are pleased to see that the Chancellor did respond to what was the mood of the public.

Though he did not introduce cuts in food subsidies, he has introduced the principle which the Tories have been advocating, namely, increasing indirect taxation. This policy is a blow to the working class; particularly to wage earners with large families. These people, while exempt from Income Tax, bear the greatest burden when indirect taxation such as this is imposed, for several children have to be fed, clothed and cared for; and more household equipment has to be purchased.