No, because this speech was made by the Chancellor of the Exchequer, not by the hon. Member. I understand that the right hon. and learned Gentleman is quite a lucid man, and he is perfectly capable of explaining what he meant in answer to my question. If we take the net annual income at somewhere about £9,000 million, we now find that the sum total of taxation income, plus the rates, plus social insurance contributions, which are in a way a form of tax, come to £3,600 million—that is to say, something like 40 per cent. of the national income. Except in the very short run, that cannot continue. If it is therefore necessary to have a large Budget surplus, we have to cut down both expenditure and taxation. I hope that the right hon. and learned Gentleman will consistently bear that in mind, and will see that both are done.
This is the first Finance Bill we have had since the introduction of our new Standing Orders. It is already apparent that it has been inconvenient, to put it mildly. We were not able to have a full discussion, after seeing the text and hearing the preliminary proposals, on the Report stage of the Resolutions, which will inevitably mean that this Debate will largely become a Committee stage on points which might have been cleared up then. I regret that, and I expect that the Junior Burgess for Oxford University (Sir A. Herbert) regrets it still more, because he was forced into the difficult position of voting against the proposed Betting Duty, although from what I have heard, his views are that there should be more betting duties all round. He had, therefore, to cast his vote without having any opportunity of explanation. His attitude is, of course, well known, but there are a lot of other hon. Members who would not be prepared to put themselves in that position on that account. It is a pity.
I do not want to traverse the whole ground, but there are two topics which I should like to discuss, which does not mean that the others are not important. First of all, we shall strenuously oppose the advertisement tax in its present form. We are fortified in doing so, because this Budget and Finance Bill is meant to deal with the increasingly grave situation now developing, and this tax does not profress to bring in one single penny during this Financial Year. It certainly goes against one of the principles of taxation, as the right hon. Member for the Scottish Universities (Sir J. Anderson) said the other day. Not only does it do that, but it also goes a very long distance towards something else, which is equally obnoxious, and that is leaving great powers to the Treasury to decide whether any particular bit of expenditure is or is not advertising within the meaning of the order or regulation to be made. That is a very serious proposition, and, on these two grounds alone, the tax should not be accepted. Beyond that, it is based on a most extraordinary supposition, as I understand it, that is, apparently, that all firms in every trade and in every industry, and, I think, charities and such other organisations as have to advertise or do advertise—the supposition that all these are spending twice as much on advertising today as they should spend.
That is a most extraordinary assumption. It certainly will fall very unequally between one industry and another, one trade and another. For example, there are great masses of businesses which have to advertise; they cannot help themselves. It is not a question of selling things. How does the right hon. and learned Gentleman suppose that auctioneers can get on unless they advertise where, when and what is going to be auctioned? What about theatres, cinemas and books; what about the mail order business? What about the separation which, I understand, he has in mind, if it is workable, which, of course, it is not, between advertising for the export trade and advertising for the home trade? Does he not realise that over a great field of advertising, advertising in the home field is, in fact, advertising for the export trade? I instance cinemas, for example. If there is a tremendous splash in London about a particular film, the repercussions of that obviously spread far wider than the Metropolis. Then there is the kind of advertising which is, I suppose, almost semi-statutory, like issuing prospectuses, company notices and all that kind of thing.
One could elaborate it, and I dare say my hon. Friends will elaborate it, but all I would say to the right hon. and learned Gentleman is that I hope he will not feel himself to be committed in this matter by his predecessor's plan. I put it to him that his wisest course is to withdraw the whole proposal. His predecessor drew the curtain aside, and said, "Here is a possible field." Well, let the curtain go back. If, in his wisdom, he really thinks that the Financial Secretary's reason is a good one, and that by taxing advertisements in this way, a certain amount of wood from the hoardings will be saved, let him apply to the Timber Control to see if they cannot put a check on that, without having this complicated machinery to deal with the problem. Let him withdraw it, and, if he finds it necessary—I do not necessarily prejudge the position that there may not be something in the proposal and that somehow or other some revenue could be got from this source—I just do not know—but supposing it was found to be necessary, and supposing it was found possible to do it in some other way—the right hon. and learned Gentleman could do it next year. He will not get anything from this before then. He has no advantage in any way, so far as I can see, by doing it now. This particular plan, whatever one may say about the merits, ethics and common sense or otherwise of taxing advertisements, simply will not bear examination; so let us all save ourselves a lot of time and trouble and when the right hon. and learned Gentleman gets up tonight let him say, "That is the end of that."
Another point on which I would like to say something is the Profits Tax. Although, naturally, the right hon. and learned Gentleman was not following our Debate so closely in the summer as in future he will have to follow these Debates, he will, no doubt, remember that we offered considerable opposition to it then, largely on the ground that the Chancellor of the Exchequer had propounded it at an earlier period of his existence, and as one writer said:
A Profits Tax is wrong in principle, and after the rate has been doubled, the Tax is twice as obnoxious as before.
I think that has, perhaps, got something in it. What is a much more disturbing argument, and one which is much more strange, is the proposal that the Tax should be doubled on all undistributed profits. I find it very hard to accept the arguments of this Chancellor of the Exchequer—it is very confusing to know which one one is talking about—when he last spoke, when he said that by doubling
both taxes there is a greater inducement not to distribute now than there was before. Furthermore, he talked of undistributed profits as a good anti-inflationary measure, which would stop people spending so much money at this moment in the capital goods market. I find that extremely difficult to understand. It seems to me that the argument put up by the right hon. Member next to me is much more correct, and that is, if you double this tax on the undistributed profits, there is much more likely to be a temptation for the money to be spent in the ordinary way of business, and never to go into profits at all, whether distributed or undistributed. If the answer is "To stop people spending so much money in the capital goods market," and if the argument of the right hon. and learned Gentleman is" Oh, no, that cannot be true; they cannot spend it as they want because of all the controls that exist against expenditure," then why do not these controls work equally well at the other stage?
It seems to me that this particular proposal is silly—the argument that it will tend to stop people spending so much money in the capital goods market— be-cause there is nothing, so far as I can see, to prevent them spending it at an earlier stage, except the controls which should be working over all. The right hon. and learned Gentleman modestly disclaimed taking up all the threads of financial policy in a few days, but I am afraid that in his modesty he must have picked up some of his predecessor's brief, particularly that part of it which is egregious nonsense. The difference is, of course, that he uses it not with the jokes we expected but with all the solemnity and dignity we have learnt to respect in him; but it does not make it any the less nonsense. For example, he said that one of the reasons he was doing this was that the general volume of profits had been excessive over the last year or two. I must admit that I was rather surprised at that statement, and I put the question to the right hon. and learned Gentleman, "Is it a fact, because the ordinary evidence does not show anything of the kind?" The right hon. Gentleman said just now that one or two companies had paid higher dividends than before, but these things are analysed and the statisticians work over a period of years to see what has happened.
If the right hon. and learned Gentleman, or anyone else, likes to look at the analysis of over 2,000 companies quoted by the statisticians of the "Economist," this is what he will find in this field. If they are wrong, I think that the Government should admit it; if, on the other hand, they are right, the statement put into the mouth of the right hon. and learned Gentleman by his predecessor is completely wrong. If you take 1939–40 as 100 for the index—the index of the profits was largely stabilised during the war by 100 per cent. E.P. T.—it rose in 1946–47—that is the index—to 137. That is not excessive even at that stage but that, of course, is not distributed. Very wisely, a good deal was ploughed back into businesses following advice from and appeals by, the Government. The analysis shows that the gross ordinary dividend was 130. If we deduct tax the net ordinary dividend in that year, 1946–47, over the whole field, is 111 compared with 100 in 1939–40. I therefore ask the right hon. and learned Gentleman to tell us whether he thinks that is grossly excessive or not? After all, the people, who receive these net ordinary dividends are still subject to the general rise in prices which everybody else has had to experience and, of course, to the drop in the value of money.
In passing—because the thing is so apt to be linked together—the right hon. Gentleman will also note that, according to the Ministry of Labour Index of Wages for 1939–40, the index of 100 found itself, in September, at 169. As it would be legitimate to take off 10 per cent. for the general run of taxation, P.A.Y.E., and the like, he will see that there has been a different proportionate rise in the two indices. If the argument is that the general volume of profits has been excessive, I say—and I do not think I shall be contradicted—that that is a gross exaggeration. The very premise on which this doubling of the tax on industrial profits is based is wrong. The right hon. Gentleman said earlier that not only would this tax be anti-inflationary, in stopping people from spending so much money at this time in the capital goods market, but he followed that up by saying that he hoped people would invest the money in Government securities. What does he think happens to it now? I leave that thought with him.
I conclude by saying that the Budget and this Bill, in view of the deepening economic crisis, are merely a step in the dark. The Chancellors, present and past, think that this enormous increase in taxation over the next financial year, with a very small effect this year, will be sufficient. We do not; we say that what should be done now is drastically to cut public expenditure in the last one-third of this year. Under no system of tax proposals can very much be got in at the tail end of a financial year, because the machinery and all the rest of it have to be established, and staffs collected, and so on. But the cutting down of public expenditure can be done, and in view of what the Chancellor said the other night, and his predecessor said before him, I feel sure that he will take this advice most seriously to heart.
We do not propose to vote against the Second Reading of this Bill, because we know quite well that much ought to have been done and should be done now—"now" is the important word—to deal with our present situation. We also know that, as usual, the Government have gone mostly the wrong way about it. They have the knowledge, information and best estimates of what the situation is that we have to meet and if, with that knowledge, they wish to sin against the light there is nothing we can do to stop them. We also know this, and I expect every one else in the country is beginning to know it too, that if it had not been for this Government we would not have been in our present situation. The errors, more particularly the financial errors, of the most disastrous Chancellor of modern times are the Government's errors, but the cost that has to be paid for those errors, misjudgments, and miscalculations, has to be borne by the whole nation. The real answer to this Budget and this Bill is the one which has been given so many times in this House before, and which will be repeated to the end—we must get rid of the Government.