Orders of the Day — Budget Proposals and Economic Survey

– in the House of Commons at 12:00 am on 12th April 1948.

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3.44 P.m.

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

Last week hon. Members on both sides of the Committee concentrated largely on the financial and taxation aspects of the Budget. The economic state of the country, as set forth in the White Paper, is inextricably bound up, as the Chancellor said, with matters of budgetary policy. I shall try this afternoon, as far as I can, to steer away from financial matters and confine myself in the main to either the industrial or commercial or economic facets of our problem. I noticed that the right hon. Member for Bishop Auckland (Mr. Dalton), in introducing one of his Budgets, said that a particular financial year had been a year of transition from war to peace. Now the Economic Survey for 1948 says that the year 1948 is "a year of transition." That means, I think, a year of transition from bad to worse.

I warn the Government that this well-worn cliché, "a year of transition," has now rather outlived its usefulness. Of course we all know how the phrase came to birth. Some Minister says, "Can we not show the people how well the Government are doing? Can we not say that things are going to get better next year?" One can imagine the Chancellor of the Exchequer then saying, "No, we should not do that. We should tell then that they are going to get worse." Then, after some disordered discussion, some ingenious Minister says, "Can we not say it will be a year of transition, so that if it should happen that things go from bad to worse no one can accuse us of having misled the people. In the meantime we shall have all the advantages which the sedative effect of this clichél 'a year of transition' has on the mind of the m—an in the street."

Photo of Mr Jon Rankin Mr Jon Rankin , Glasgow Tradeston

Is that the voice of experience?

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

The White Paper, at least in its historical survey, brings out clearly two things. First, it is a condemnation by "bell, book and candle" of the whole policy pursued by the right hon. Member for Bishop Auckland during his tenure of office as Chancellor of the Exchequer. The White Paper says, on page 49: no system of economic controls can be wholly proof against strong and persistent inflationary pressure, working against the general objectives of economic policy. This is the same thing as saying that the right hon. Gentleman, during his term of office, worked against "the general objectives of economic policy." It means nothing else, but just that. As I am trying to confine myself largely to those parts of the subject which are outside finance, I do not propose to develop any detailed criticism of the right hon. Gentleman's policy beyond saying that I agree wholeheartedly with the White Paper in condemning inflation, and thus also condemning its principal author, the former Chancellor of the Exchequer. I add that the effects of the inflation not only upon the whole course of our internal affairs, but also, contrary to what the Chancellor himself said, upon the problem of our external balance of payments, can scarcely be exaggerated.

The second thing which is brought out is the complete failure of planning, as we have come to know the word—I shall give figures to support this argument—or, if the term is preferred, a policy of a centrally planned economy. The word "planning" itself is very vague and imprecise, dangerously imprecise. To say, in one sense of the word, that a Government must not plan would be to say that the Government must not govern. But the now generally accepted meaning of economic planning is that the Government are to direct the whole of the production and the economic activity of the country from Whitehall. In order to gain an extra hold upon industry and to be able to enforce its plan, the Government are to nationalise this key industry or that, at the same time saying that the rest of industry, which depends on those key industries for all its ammunition so to speak, is to be left to free enterprise; they are to buy a large amount of the raw materials and to control the supply of raw materials to this industry or that, and are to impose licensing or rationing by a system of national priorities and allocations.

The Economic Survey for 1948 is the clearest possible statement of the failure of this sort of planning. There is a curious Appendix on page 56, which has one of those opiate headings which seem to delight Government Departments. It is called: Fulfilment of the Objectives of the Economic Survey for 1947. Or, as we who are outside Government Departments would say, in our vulgar vernacular, "The failure to reach any of the objectives of the Economic Survey for 1947." But I do not wish to be factious; I think that the Government should be allowed, in this hard world, this rather pathetic piece of protective colouring.

Let us see how the fulfilment worked out. The deficit on current balance of payments was estimated then to be £50 million. It turned out to be £675 million, so that in that matter the fulfilment was 93 per cent. out. I know how painful a process it is for politicians to turn back to what they have said in the past, but sometimes it pays a small dividend. I notice that on 10th March, 1947—I know that hon. Gentlemen are apt to confine their remarks to the pre-1900 era, but I am going back only to 10th March, 1947—I then actually used these words—I apologise for quoting myself but I do so, like some of my hon. Friends behind me, with great distaste— Let me warn the Government that the figure of 140 per cent. for the export trade of 1947 is manifestly unattainable."—[OFFICIAL, REPORT, 10th March, 1947; Vol. 434, c. 1010.] I went on to say that our borrowings would greatly exceed £350 million.

In actual fact, the deficit on current balance of payments has become £675 million. Exports were actually 120 per cent. over 1938, as compared with 140 per cent. in the White Paper, an error of about £150 million on that part of the objectives of the White Paper for 1947. The error over new houses between the estimate of 300,000 and the achievement of 186,140 was 38 per cent. In manpower changes, the error over coal was 30 per cent., over transport and shipping 1,900 per cent., in in agriculture and fishing 77 per cent., on distribution and service 224 per cent. and in regard to the bureaucracy it was 118 per cent.

It is, therefore, in a somewhat cynical and disillusioned frame of mind that I sit down several times a year to read economic surveys and White Papers produced by the present Government. A survey which makes such wild guesses, and gets results which are so wildly out, at least conforms to the guesses and errors of the central planners if it does nothing else. There is not the slightest doubt that similar errors will be disclosed—let us hope that they will be slightly less wide—when we are able to judge the Economic Survey for 1948 in the light of the facts. It is worth the while of the Committee to examine for a few moments what are the causes of those wild errors.

The first cause is that it is impossible to plan, in the way in which that word "plan" is now generally used, the economic system of a modern State. The Committee will remember that the Economic Survey, 1947, was subjected—at any rate this was the popular rumour—to several revisions. At least, it bore all the signs of composite authorship. By an oversight one or two things from the original draft got left in, and they gave the whole show away. One of these things was this sentence: Indeed, the task of directing by democratic method an economic system as large and complex as ours is far beyond the power of any Governmental machine, working by itself, no matter how efficient it may be What prophetic words. How soon they came out true.

The next reason for failure is because the exact meaning of planning is a matter of opinion. It means one thing to the production engineer, another to the economist, another to Field-Marshal Montgomery, another to the present Chancellor of the Exchequer and something quite different to the Minister of Health. Such complete confusion, both about the confines and the objectives of planning, and in explaining away the guesses, not surprisingly leads to failure. Today, nobody has the least idea what is meant by planning. The Prime Minister on 18th November, 1946—I would ask the Committee particularly to notice that date—said in this House: In matters of economic planning we agree with Soviet Russia."—[OFFICIAL REPORT, 18th November, 1946; Vol. 430, C. 580.] Three months later, out comes the White Paper for 1947, with a foreword by the Prime Minister, written in very different tones. Paragraph 8 of the document says: There is an essential difference between totalitarian and democratic planning. The former subordinates all individual desires and preferences to the demands of the State. How does that statement accord with the other statement made two and a half months before, that in matters of economic planning "we agree with Soviet Russia"? Or did the Prime Minister really think, in November, 1946, that economic planning in Soviet Russia was democratic?

If the Prime Minister does not know what is meant by planning, is it surprising that very few of the rest of his colleagues, or the Civil Service, or industry, know what it means, either? Professor Jewkes said in a recent book that some planners apparently believe in free planning—I think this was his classification—others in close planning, others in flexible planning, others to planning through dislocation and causing bottlenecks, and others in what Professor Jewkes calls "guess" planning. There are some kinds of almost metaphysical planning which I find very difficult to follow. Mr. Durbin is quoted by Professor Jewkes as saying: Planning does not in the least"— [HON. MEMBERS: He is a Minister."] I am sorry. I apologise to the Committee. I should have referred to him as the Parliamentary Secretary to the Ministry of Works. This fact makes it much worse than if he were just a private individual. I really do apologise to so distinguished a Member of the Government. He is quoted as saying: Planning does not in the least imply the existence of a plan. He went on: in the sense of an arbitrary industrial budget. [HON. MEMBERS: "Ah."] Being a Minister he is experienced in putting in a contingency clause as well. It shows that one of the causes of failure is that the planners, headed by the Prime Minister, do not know what they are trying to do.

I now come to the next reason. Another main cause of the failure is that a modern industrial and commercial system is far too complex to submit readily to central planning. Even in war it is extremely difficult to plan what percentage of the national resources is to be devoted to this purpose or to that, although the Government in war are themselves by far the biggest buyers, and they are often the only buyers, of what the Americans call the "end product of industry." We are now dealing with a peacetime economy in which the needs and wishes of other countries, the fashions of others, the course of markets, the success or failure of crops in primary countries, the political pressure which determines whether this or that country should protect its infant industries, and the wide and deep effects upon the rest of the world of the economic policy of the United States, are so interlinked that they make it impossible for any central body to possess the foresight or the data in time to mould a detailed plan.

If that were not hard enough by itself, the central planners, over a wide field, seem bent upon destroying the guider, the compass, the navigational aids, and the charts. Free market prices and free dealings in currency are the barometers by which impending changes in the economic cycle can be foretold and either turned to advantage or their worst effects mitigated, as the case may be. Unlike barometers, those free market prices have the additional advantage of bringing with them many of the correctives of the weather which they have foretold. Nearly all those barometers have been destroyed, either by systems of bulk buying, for which the taxpayer one day will have to pay an enormous price, or by price ceilings, minimum prices, artificial and obviously false rates of exchange, and so forth.

The last reason why each Economic Survey in turn will show each year, the complete failure of central planning is because an essential of any central scheme of planning is that labour, that is, men and women, should be planned as well. The present Chancellor of the Exchequer, who tries, I think, to face and not ignobly to evade difficulties, went so far as to say in February, 1946: No country in the world, as far as I know, has yet succeeded in carrying through a planned economy without compulsion of labour. Our objective is to carry through a planned economy without compulsion of labour."—[OFFICIAL REPORT, 28th February, 1946; Vol. 419, c. 2211.] In still plainer English this means "We are trying to do something which is manifestly impossible." We as the House of Commons, are at least entitled to know where the Chancellor stands, and where we stand in this matter now. Are the Government proposing to direct labour, or are they to continue to have powers to direct labour and then not use them? I see there are words on page 42 of the White Paper which seem to show that they are now to proceed to a much wider direction of labour and a much larger demand for industrial conscription. They say: By the use of the new labour controls, where this will contribute to the manning up of essential industries. These words are used in connection with reducing the numbers of those engaged in distribution and other consumer services.

However, whether the Government decide to use the powers they now possess to direct labour, or whether they do not use them, will, in the long run, make no difference at all, because the country is not going to submit to the direction of labour, or, if it submits, it will not submit with that readiness or willingness or alacrity without which the redistribution of labour will not be successful. If the Government do not direct labour, what on earth is the good of talking about central plans, national priorities, plans for increase in production in wool and cotton textiles and a detailed plan for this industry or that? Without the labour of man's hands and brain all the materials collected, the factories space allocated, the site cleared and the bricks piled up will remain a dump. It requires men and women alone to turn these inert materials into real products. The Socialist general in the Socialist-run battle commands, everything, except the troops. To them he cannot say, "Come" or "go."

In the peaceful economic field the dilemma is acute. It is the canker which eats into the damask rose of Socialism. This is the dilemma in short and plain words, "If you do not have direction of labour, or industrial conscription, then you cannot have a central detailed plan of the present variety or vintage. If you do have direction of labour, then goodbye to freedom." Which is it to be? What is the answer to the question which the Chancellor of the Exchequer asked himself a couple of years ago? We are entitled to be told, and I hope we shall be. Until the Government faces up to this question which I have repeatedly put to them, and I make no apologies whatever for repeating it, all the figures, targets, and abracadabra of economic planning are a waste of breath—

Photo of Mr Gilbert Mitchison Mr Gilbert Mitchison , Kettering

I wonder it the right hon. Gentleman would favour us by telling us what, if any, departure from complete anarchy in this respect, he and his hon. and right hon. Friends would favour?

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

This raises a new question—[An HON. MEMBER: "A most embarrassing question."] Not at all. I cannot go into it all but the rough answer to the question is using the price mechanism, restoring freedom and making the price mechanism work for it.

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

I am now discussing the Economic White Paper and the hon. Gentleman, who comes from a very excellent seminary, is only trying to draw a red herring across the trail. The answer is by the use of price mechanism.

I now turn to a more particular aspect of the subject. The Economic Survey for 1948 states in paragraph 131, on page 29: Steel, more than anything else, apart from dollars, will be the limiting factor in 1948 Great efforts have been made to secure the smoothest possible working of the allocation, distribution and priority machinery. But no system of control can make nine tons do the work of ten. I would add to this blinding flash of the obvious something a little less obvious. It is quite easy for a bad system of allocation to make nine tons do the work which eight tons should have done under a properly organised system. No steel budget is attempted in this document at all. I wish to ask the Government why it has been omitted. We all know that the allocation of steel has been a hopeless muddle and, according to the Government's own confession, more than two million tons of steel have been over-allocated.

Before discussing why steel has been over-allocated I must emphasise that the cause of the apparent excess of demand over supply is inflation. The general opinion of the business world during the two and a quarter years was that the Government's policy—this inflationary policy—would lead to ever increasing prices for raw materials and therefore there is the natural tendency, or instinct, to buy future requirements as quickly as possible. Some people call this prudence, and others would like to call it speculation. It is of course a very general opinion that, with an inflationary Chancellor like the former Chancellor, it is better to have commodities which will be consumed, whatever happens, than invest money in 2½ per cent. Government loans with a loss of 24 points for one's trouble in so doing. Under Socialism it is better, in other words, to owe money, which is plentiful, from inflation, rather than to be short of raw materials which are going to be scarce. Some people would call that a conspiracy. Other people call it common sense.

Those are the two main causes, which lead to the apparent shortage of steel. The third is an unsound, an inefficiently, operated system of allocation. I wish to say something a little startling, which is that I believe that the shortage of steel is, in the main, a paper shortage or, if hon. Members prefer the term, a "planned shortage," and not a real one, and that the overall shortage is of very much smaller dimensions than the figures show. Those who have had to deal with systems of allocation—another expedient which should never be continued in peace-time a day longer than is necessary—are very familiar with famines which turn out to be only statistical famines. I think the President of the Board of Trade will remember, and perhaps he will confirm the figures, that in the United States at one time during the war there was, speaking from memory, a famine of 800,000 to a million tons of copper in a single year. As the House knows, the world production of copper in 1938 was about 1,950,000 tons, under two million tons, so that to plan a statistical shortage of a million tons in the Allied World alone was quite a feat. The allocation system was drastically revised and the famine disappeared, not all at once, of course, and I do not think there was any serious dislocation to war industries for this reason.

What has happened in this country is exactly analogous to that. Demands for steel which will be used, or machined several years hence—I am not talking irresponsibly—have, in a great many instances been allocated and actually delivered and are now lying on the factory floor. I make this statement largely from personal observations. I have done my best to check it up. When the figures of the steel using industries are published, relating to last year, the force of what I am now saying will be borne home to those who have been working this allocation system.

Steel production is now running at the rate of 15 million tons per annum. On the other hand, the national product—or the total resources available for use at home—is planned at a lower figure than for 1947. How is this compatible with the statement that steel, which has an expanding production, is a major bottleneck? If steel could be expanded to these large figures, the natural consequence should be that output of all steel using industries should expand in proportion. I do not believe that shortage of steel is a major cause of the expected lower production. Perhaps the statement is the beginning of the barrage which will be laid down to try to prove that steel is a national bottleneck and, therefore, the industry ought to be nationalised into another bottleneck.

Returning to the system of allocation, the first thing to guard against in any allocation system is anticipated delivery. Once this creeps in then, even in a free capitalist country, and, of course, a fortiori in Socialist ridden countries, there is no way of avoiding a statistical paper shortage, since the demands of more than one year, and sometimes two, three or four years, are concentrated into one year. In those cases, supplies are always insufficient to meet the demand, because the demand is fictitious, and it is one against which, from its very nature, the producers of the raw material are unable to safeguard themselves or the community. I state categorically that the Government have fallen into this first and gravest error. But, of course, not only that; they have also allocated steel to the wrong users and in the wrong sequence.

It is the veriest commonplace to say that we must concentrate our efforts to build up our means of earning dollars. This has come to mean in the minds of the Government, and consequently largely in the minds of the public, only the export of manufactured goods. Far too little attention has been paid to two other hardly less important aspects of the subject. The first is the export of raw materials or semi-raw materials controlled by British companies, or from within the frontiers of the British Empire. The second is the restoration of our invisible exports.

Turning to the first, what are the raw materials or semi-raw materials which could make a large contribution to our dollar earnings—those which are large potential dollar earners? In the main, I would say that they are three. First there is oil, then tin, and then rubber. I am advised that there are ample reserves of oil under British control, and that wide plans have been drawn up for their development. The expansion of oil production from these sources would not only reduce our dependence upon oil from dollar sources, but would actually increase hard currency earnings over the next few years, but not at once, by tens of millions of dollars a year. But steel is required for both refineries and transport if these kind of objectives are to be reached, and the oil industry is short of steel and cannot get the necessary allocations.

The same thing has happened in the case of tin. At the end of the war, the Government had two powerful weapons in their hands. The first was the compensation which they were going to pay to the tin mining companies in Malaya and Siam, and the other was the facilities which they alone could command for re-equipping the industry. If they could have made up their minds—which they could not—they could have secured a very much quicker restoration of that industry. The result on our dollar earnings would have been most satisfactory. But the steel has been earmarked for ports and railways in East Africa to serve, for example, the groundnuts scheme, the future of which is at least highly uncertain. We hope that it will be successful, but in our present circumstances it is much more important to concentrate the steel allocation on the exports which we know are there, which we know we can sell, and which could be sold without any troubles with tariffs or import quotas or quantitative restrictions in foreign countries. We should leave the development of the groundnuts scheme until the hon. Lady the Parliamentary Secretary to the Ministry of Food, who I am glad to see present, is able to tell us that groundnuts can be grown in East Africa on a scale which warrants the building of a port. I do not propose to go into the question of rubber. The main crime of the Government over rubber is the muddle they have got into in the negotiations with the United States about which they had to come to the House to confess the other day. I hope that one day we shall hear that it has been cleared up.

The only other subject is invisible exports. The very word is an echo of the past. We have today invisible imports of £226 million, which it is hoped to reduce in 1948 to £98 million, compared with invisible exports of £232 million in 1938. Our position in regard to invisibles during the year 1947 had deteriorated by no less than £458 million compared with 1938. It is not really truthful to say that we are engaged in trying to build up our invisible exports. What we must try to do is to reduce our invisible imports and, one day, restore ourselves to a plus position. There are hundreds of thousands of ways, besides investment income, in which our invisible exports are built up. I use the most recherché example of which I can think. The London Arbitration Clause in international contacts brings an enormous amount of business to the City of London, in whom the rest of the world have a far greater confidence than the Socialist Government who are about to disfranchise the City. This is a recherché instance. It brings a great deal of money and business to the City of London.

I can think of many commodity markets, of which cotton is certainly one, which could easily be reopened without any further strain on our international payments, and which might bring anything from £3,000,000 to £6,000,000 of hard currency into the country. Of course, that would involve a little more freedom for the producer, the merchant and the consumer than is now afforded. It is most important that London and Liverpool and our great ports and commercial centres should once more be given the opportunity of handling international business.

I want to raise one or two more general questions. The first is this: it really is necessary for the Government to make up their minds whether an income drawn from investments is a naughty or a disreputable thing or not. If it is anti-social in Socialist thought to draw an income, large or small—it does not matter about the size: it is the principle which counts—from investments, then the Government have no right to urge people to save, and no right to open "Silver Lining" campaigns. But if what they say during the Savings Weeks is sincere, if they believe in it, then it is their duty to protect the saver. Instead, they have despoiled and defrauded him. They have used two ways to bring this about. In the first place, they have taken a large slice out of the capital of the small thrifty investor by inducing him, by all the instruments of publicity, for which by a curious irony he himself pays—and that is not the last insult—to invest his money when the rate of interest was artificially depressed and when the market had been rigged by the Treasury. The result of this artificial rise was the inevitable fall and the loss in some cases of just over a quarter of a man's savings. His savings have gone the way of so many other Socialist promises.

Not content with this, the Chancellor is now seizing other savings, perhaps bigger savings, by his capital levy. A moment's reflection will show that the levy contributes nothing to the real objective of a large Budgetary surplus. It merely represents a transfer of immobile capital from the saver to the Government, in whose hands it becomes more or less mobile. Since one saver must sell, what he sells must be bought by another, and the value of new savings pro tanto must be reduced by the amount of the levy. Incidentally, the idea that money from investments is, even in the Socialist Government's sense, always unearned income is quite false. What about the man who has built up a business and turned it into a company, but who does not pay himself a director's fee but takes his earnings out by way of dividends instead of salary? Is that unearned income in the Government's sense?

Let me be quite blunt. The Special Contribution, falling as it does on 140,000 out of 50 million, and on an even smaller number of voters, is naked class warfare of a type to which I hardly thought the right hon. and learned Gentleman would descend. Many of these people are already being taxed at 15s. in the £, and their estates are subject to a 75 per cent. duty when they die. I derive some sardonic amusement from the fact that such incomes are described by the Government as investment income. Hon. Gentlemen opposite, whose reason is so apt to be bemused by heady slogans, would get a truer perspective of this particular Budgetary proposal if they described investment income as income from savings, and if they then asked themselves whether they should penalise savers, because that is what they are doing. Let them think about that before they mount the platform at the next Savings Week.

I would like to leave the details to make a slightly broader appeal to the Government. Although it has many merits, the Budget has no message for the country. There is no sign that the Government intend to lead, or to give us hope of survival and prosperity. There is no sign that the Government and their supporters are going to cease snarling and girding against that half—and now more than half—of the nation who happen to disagree with them politically. Do hon. Gentlemen opposite really believe in their heart of hearts that the policy of this party on these benches is aimed to reduce the standard of living of the workers? Do they really believe that? [Interruption.] If they do believe it, their credulity is almost fatuous. Let me put it another way. I myself detest nationalisation in every one of its manifestations, but I do not want to see any nationalised industry fail and lose a packet of money. After all, I am one of the people who have got to pay for it, and Lord Nathan has a very large bill running up against me already.

It is really useless to speak of great nations trying to regain their places in the world by taxing themselves into prosperity. Great industrial companies cannot build up their business on losses, or at a time when profits are regarded as the fruits of Satan; they cannot thrive if at one moment the Government urge them to plough their money back into the business, at another urge them to a stillstand in dividends, and at another fine them if they capitalise reserves. But, running through all the Budget, is the hatred of whatever is outstanding in our national life. There is nothing clever or even profitable in despising and fining success wherever it rears its ugly head above the norm.

If hon. Gentlemen want analogies, they will find that progress in art and science, and also in trade, has in the main come from those whom their fellow men have described as either eccentric, abnormal or just plain mad. These people require incentives just as much as ourselves, and I beg the Government sometimes to be large-minded enough to recognise this, and sometimes to remember that a man who is not a Socialist, and who may even be immoral enough to enjoy something from his fathers' savings, may possibly make a contribution to the national effort.

Let the Government lose some of their inferiority complex about success. It is quite natural, because success has attended so few of their operations, but you never know. Let the Government try to snarl a little less at privately-owned industry. It will help. After all, if I am not allowed to make money, I might still be spurred on by being praised as a good citizen. But, when my gains and my reputation are both assailed at the same time, I feel rather inclined to throw in my hand and take to fretwork. Sometimes, men are actuated by love of gain and sometimes by the feeling that they are doing great things against their own interests, sometimes, that they are helping their country, but they will not work if the Government take away their money from them with one hand and their character and reputation with the other. The cult of the average, the worship of mediocrity, the envy of success, are in my view synonymous with the decadence of nations.

4.26 p.m.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

Although I hope to follow the right hon. Gentleman into one or two of the fields which he touched upon in the speech to which we have just listened, I do not propose to follow him in making a party speech. His remarks, as I am sure the Committee will agree, were typically negative. At every stage, he stressed the difficulties of the particular line we may be following, but never, in a single case, did he say a word about any alternative policy.

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

Let me come over there, and I will.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

That is what the nation is afraid of. The right hon. Gentleman explained the difficulties of the mechanism of planning in order to get the complicated private industry of this country to fit in with the proposals of the Government, and he indicated how difficult it would be and said that neither planning nor control could get the production related to the needs of the country.

The right hon. Gentleman talked about bulk buying, and he said that the taxpayer one day will have to pay an enormous bill for the losses on bulk buying. Of course, he and his hon. Friends can always get it both ways. If bulk buying or State enterprise fails, the taxpayer has to pay; if, on the other hand, they make profits, then it is done by monopolistic price-fixing at the expense of the consumer. We have recently had in the daily Press attacks on quite a long list of commodities on which profits have been made by bulk buying, but no word to suggest that bulk buying can make these profits. All that is said about these profits is that they were made viciously at the expense of the consumer. If the right hon. Gentleman can have it both ways, he is welcome to it, but I would like to hear from the other side some indication of the kind of policy they would be pursuing if they were here.

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

Would the right hon. Gentleman allow me? During a period of inflation, it is impossible for any buyer, however foolish, to fail to make profits. The answer to the present way of dealing with imports of raw materials is by opening the commodity exchanges.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

It is part of the right hon. Gentleman's wider policy to take the lid off controls. [Interruption.] Well, we have heard what he said about direction of labour. The right hon. Gentleman said that we cannot fulfil the national needs under a programme of planning without the direction of labour. I would like to ask him this: If his party were in power and if they took off the lid from the controls, how would they get people to go into the cotton and coal industries? How would they get people to go into all those industries into which people are reluctant to go because of the mess in which those industries were left by hon. Gentlemen opposite? Hon. Gentlemen opposite have only one policy, which they never dare to mention here—the policy they had before the war, the policy that brought about unemployment.

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

Before the right hon. Gentleman gets on to the main part of his subject, I would like him to explain how the removal of raw materials from certain industries prevents unemployment in those industries.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

I am coming to the question of the relation of raw materials to unemployment in a moment. I would ask the right hon. Gentleman to wait. I think it is quite clear that the only policy which hon. Members opposite have in this respect is that they would re-introduce the methods of direction of labour which they had on a far greater scale, and on a scale involving far more misery for our people, than we would dare contemplate.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

Who is making a party speech now?

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

As my right hon. and learned Friend said last Tuesday, the Economic Survey, which I thought we were debating today, sets out the facts as to our immediate problems and the resources which we estimate will be available to meet our needs."—[OFFICIAL REPORT, 6th April, 1948; Vol. 449, c. 38.] The state of the nation, as shown in that Survey—and this is something with which I think all hon. Members will agree—is undoubtedly serious. It arises from one fact alone, and the right hon. Gentleman did not mention that fact in the course of his speech. It arises from the fact that there is so much to do in 1948 and so little with which to do it. As my right hon. and learned Friend said last Tuesday, we have in this year two main groups of problems. First, there is the problem of balancing our external payments, of paying our way abroad; and secondly, there is the problem of doing all the things we need to do on the home front. In many ways, of course, these two are closely connected. Any measures or schemes for building up industrial potential at home, or extending plant capacity, or carrying through schemes of mechanisation and modernisation in industry, or providing new sources of home produced materials, of food—to economise in imports—or schemes to build homes for miners, farm workers and key workers in other important industries—all these are designed to have a direct and speedy effect on the balance of payments.

Similarly, measures to bring down the inflationary pressure, to which the right hon. Gentleman referred, and to bring down internal costs have a very profound effect on our ability to sell our goods abroad. Obviously, if we were to attempt to do in 1948 all that we would like to do, ranging from great Government or industrial capital development schemes down to the very natural and laudable desire of every householder to put the fabric of his house in the shape and condition in which he would like to see it, we should not have the resources, whether manpower, material or industrial capacity—and I stress particularly industrial capacity—available to do it. If we took off controls and tried to follow such a policy of doing everything we liked, we might begin to do more work, but it is true that far less would be finished than under the present system.

I would like to ask the Committee to consider for a moment the size of the job to be done in this priority field. It is plain, as was shown by the right hon. Gentleman's speech, that some Members of the Committee have not begun to consider the size of the job we have to do. The first job in 1948 must be to work towards a balance in our overseas payments position. As my right hon. and learned Friend said: We must … so manage our affairs that the drain on our reserves over the whole period of aid is brought as low as possible and virtually eliminated."—[OFFICIAL REPORT, 6th April, 1948; Vol. 449, c. 42.] The Survey at every point makes it clear that without further substantial external aid, we can have no hope of recovering equilibrium at a reasonable standard of life within the next few years. Since the Survey was published, the Economic Co-operation Act was passed by the United States Congress, and this will help us and the other countries of Western Europe substantially in this task. How much it will help us and in what way, it is not yet possible to state, because consent has yet to be given to the broad and generous plan passed by Congress.

However it may be administered, aid on the scale which has been indicated will not solve our long-term difficulty, and it certainly will not enable us immediately to increase consumption at home; but it will help us to maintain our dwindling reserves and give us breathing space in which we must achieve that great expansion of exports to which I shall be referring more fully in a moment. Also, of course, it provides a real hope of closer economic co-operation in Europe, without which the achievement of the equilibrium of the whole world would be very much longer delayed, and in that co-operation His Majesty's Government will play a leading part, as they have been playing a leading part over the past year. Standing on our own feet in the markets of the world must be priority No. 1 in 1948.

Secondly, we must carry on, with the job of repairing the war damage that was inflicted on our national economy, especially on the industrial capital fabric of the country. This means not only repairing the physical damage which was caused by air attack; it means also making up for the very long period during which it was not possible to maintain or replace industrial buildings and machinery, or to replace, particularly, those becoming worn out or obsolete.

But, thirdly, we have to go far beyond this. It is not merely making up for the gaps in our industrial fabric caused by the war. If we are to meet our export programme and all the other calls on us, we have not only to make up these gaps. We have to do an enormous amount to repair the neglect and make up for what was not done in the inter-war years. I am not saying this in any political or party sense. It is a fact that over a large range of industry, jobs need doing today which ought to have been done, and which could have been done, in the far easier years before the war when resources in manpower, steel, engineering equipment and raw materials were available in abundant supply—indeed, in overabundant supply.

Our basic industries in those years, especially steel, textiles and coal, lost ground to an alarming extent as compared with their overseas competitors. Many other industries, including, one regrets to say, some of the newer ones, instead of pursuing maximum efficiency and development, instead of taking their merchants adventurer spirit into the markets of the world, went in for the apparently easier and safer, but ultimately more disastrous policy, of the restriction of supply, price fixing, "feather bedding" and reliance on a safe protected home market. Many of these industries, too, require the infusion of new methods and new capital.

Again, in the industrial field a most urgent priority is the improvement of working conditions and amenities, especially in so many industries such as foundries, some of the textile industries, pottery and so on, where the failure to improve those conditions before the war is having a real and deterrent effect on recruitment today. In some of these industries, such as the foundries, it is not only a question of welfare amenities, but of mechanisation of out-of-date and unpopular processes, which is so urgent if we are to get the production we need.

Fourthly—and this is another priority need—there is a need for great schemes of new industrial building, especially in those areas which were neglected and depressed in the 20's and 30's.

Photo of Mr Jon Rankin Mr Jon Rankin , Glasgow Tradeston

Would my right hon. Friend deal with one point before he leaves the export question? It is a point which has troubled me, and I have raised it before. He said that our purpose was to stand on our own feet in the markets of the world. I think it is clear that that will bring us into competition with the United States on the Canadian markets.

Photo of Mr Hubert Beaumont Mr Hubert Beaumont , Batley and Morley

The hon. Gentleman is doing much more than asking a question. He is making a speech. I think it would be as well if the right hon. Gentleman was allowed to get on with his speech.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

I want to say a lot more about exports in a few minutes, and I shall be dealing particularly with the Canadian markets, so perhaps I shall then take up the point with which my hon. Friend wanted me to deal. I wanted to stress the importance and the priority of this work of building factories, especially in the Development Areas. Again, it is not in any party sense that I say a high priority had to be given by this Government, even in these times, to making good these gaps in our industrial system. It is not only the social and humanitarian motives which give this programme such a priority. I am sure that if the party opposite, or any other Government, were in power today, they also would feel that in the conditions of today, when we need the work of everyone in this country who is fit, able and willing to work, we could not afford the existence of areas of mass unemployment such as we had before the war, and such as we undoubtedly should have had in a short time after the end of the war if we had not taken special steps about it.

In 1938 there were some 450,000 registered unemployed in what are today the Development Areas, representing about 20 per cent. of the insured population in those areas, and in some districts 50 per cent., 60 per cent., 70 per cent. and even as high as 90 per cent. of the insured population. In spite of Special Area treatment given to these areas, the problem was even greater in 1938 after seven years of social recovery than it was in 1930, a year of world crisis. No Government today could have afforded anything like those figures.

We could not deal with the problem by leaving the building of the necessary factories to uncontrolled and unguided private enterprise. We aim at taking the lead. Out of 3,600 factories opened in Britain in the seven years before the war, only 350, or rather less than 10 per cent., were in the Development Areas, and that figure was only slightly higher than the number of factories closed in those areas over the same period. Today, with the very high calls on our industrial resources, and our lower reserves, factory building in those areas is in striking contrast.

Since the end of the war, in the country as a whole, 2,300 new factories and extensions have been completed, are in course of construction or are about to be started. Of these, the Development Areas, with only one-seventh of the country's working population, are accounting for nearly two-thirds of the total volume of new factory building going on in Britain. In all, a thousand new factories and extensions are in hand, for the Development Areas, costing £69 million, and scheduled to provide employment for nearly 200,000 people. Three hundred and thirty factories have already been completed and another 600 are in the course of construction.

These thousand factories, the contribution they are making already to our national production and, above all, the hope they provide for hundreds of thousands of families in those areas, represent a big programme, but they represent a programme for which the Government make no apology, either in the. Committee or in the country, although the whole Committee will, I know, realise that, taken together with the other priority programmes, they make heavy calls on our national resources.

Fifthly, again with heavy calls on our resources, there are the housing needs of the country. This is not a Debate on housing—it is on the economic position of the country—and I am referring to this again only to remind the House, as the Economic Survey makes clear, that here again we have to fit in this socially and economically necessary programme with all the other priority calls on our resources. This is made clear in the Survey, though what perhaps the Survey does not stress is the new emphasis given to the housing programme to provide homes for miners, for agricultural workers, and for key workers in other vital industries.

Sixthly—and this deals with a question which the right hon. Gentleman mentioned in a previous speech, and which perhaps is too often forgotten as a big call on our resources—the maintenance, and where-ever possible, the increase of supplies for the civilian market is also an important priority even if at so many points it has to take its place after the needs of the export market and the industrial development programme. In some cases, the great backlog of demand unfulfilled during the war years has been met and supplies are now keeping pace with needs. In some cases, production is back to prewar, as in the case of pottery. The problem here, of course, apart from the diversion to exports, is the very heavy accumulation of unreplaced breakages over the war years and—this is the kind of thing the Committee will want to realise—the needs of the new industrial canteens and school meals programmes, which is another programme for which we are not going to apologise.

But there are still many important civilian industries where production is far below pre-war. The shortage of textiles is a very obvious case. The present general clothing ration of four coupons a month is very far from adequate, especially covering, as it does, personal clothing as well as household supplies. The housewife is now particularly feeling the effect of the ration when it comes to household textiles.

There are many other cases where the public's requirements today far exceed present production and indeed far exceed pre-war demands, sometimes because of the backlog of six or seven years of unfulfilled demand as a result of production obviously and necessarily being directed to war needs, but also because full employment, higher wages and better social security standards have resulted in a call for more goods and better goods than ever before. Let me take, as one case in point, children's shoes. I do not want to go into detail on this. In the second half of 1947 we were making 150 per cent. of the pre-war rate of children's leather shoes. Partly because of the increased birth rate, but much more because there are now far more families who can afford shoes for their children, there is a shortage of children's shoes, particularly of the better quality.

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

; And because of the poorer quality today.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

It is not a question of quality. The average quality of children's shoes in this country is as good today as it was before the war. I get plenty of evidence of this from sources near my own home, including inside my own home. The plain fact is that far more families are able to afford to buy better quality shoes and want to buy better quality shoes. That is why some families who used to buy better quality shoes are now having competition, and they resent it.

These are the principal six tasks of 1948. The Survey, I think, gives some measure of their size. We are aiming to build up our exports by the end of this year to a rate 50 per cent. above the 1938 volume. We are planning a capital investment programme of £1,800 million—a considerably higher proportion of the national income than before the war. We are aiming at maintaining, and, wherever possible, increasing, supplies of consumer goods to the home market.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

Can the Minister promise that the four clothing coupons per month will be maintained? What is his present view on that point?

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

The hon. Gentleman knows perfectly well what I said in the House last time I made an announcement. At the present time, with his knowledge of the clothing and textile industry, he will realise why it is not possible to add anything further to that statement just now.

I would like to deal particularly with the position of exports, because top priority has to be given to the job of safeguarding our foreign exchange reserves, which means that top priority has to be given to exports and to those import-saving industries, including agriculture, which reduce our dependence on imports. From the moment the war ended, but more particularly in the last few months, the Government and industry have gone full out for maximum exports. From the very low levels to which our export trade was pushed during the war as part of the inter-allied combined economic strategy, our export industries—which were short of manpower, short of materials, imperfectly converted from war to peace, and faced with the difficulty of finding new markets or recapturing old ones—had succeeded by mid-1947 in pushing the rate of our exports to a figure considerably above the pre-war volume. Last summer, with the increasingly serious position of our reserves, it became necessary to set our immediate export target at a still higher figure, and at a meeting which my right hon. and learned Friend addressed in the Central Hall last September, targets were set for every exporting industry showing the rates of export which they were called upon to achieve by mid-1948 and by the end of 1948.

I may tell the Committee today that industry, workers, managers, technicians and salesmen have responded magnificently to that call. Many of the targets are nearly reached; some of the targets have already been reached. A few, as our experience in the last few months has generally shown us, we cannot now hope to reach. My right hon. and learned Friend said last Tuesday that we have found it necessary to revise a number of the export targets in the light of changed conditions, in the light of the raw materials position, in the light of consultations with the industries concerned as to what they feel they can do, and in the light of our changed knowledge about the possibility of selling certain goods abroad.

In total, the targets now provide a rate of export, by the end of this year, of 50 per cent., by volume, more than in 1938. I have referred to the shortage of steel caused by the enormous requirements of the country which our existing steel capacity—even going full out and at a record level as it is—is simply inadequate to deal with. One of the things the right hon. Gentleman entirely failed to mention—entirely failed, it seems to appreciate—is the fact that our biggest shortage in 1948, greater even than our shortage of imported raw materials, will be the shortage of industrial capacity to produce the things we need most. Because of this shortage in steel, the export target figures for the engineering and other steel-using industries have had to be reduced by nearly 10 per cent. So have the figures in one or two other industries.

On the other hand, we have been seeing how far the export rate in other industries can be increased to make up this gap, not only to make up the deficiency caused by the steel shortage, but, especially, to provide additional exports in those industries whose products are finding a ready and, indeed, unfulfilled demand in dollar markets. The export targets are being increased for whisky, carpets, linoleum, scientific instruments, wires and cables, electric lighting apparatus, and machine tools.

The Committee, I know, are very well aware of the export effort we are asking from the textile industries. Cotton especially, but wool and rayon, too, have a special opportunity in dollar markets, especially Canada. The importance of our exports to Canada this year does not need emphasising. The cost of our food import programme from Canada this year is £100 million, and in addition to that, we depend on Canada for a very considerable proportion of our timber, non-ferrous metals, and so on. Our total exports to Canada last year were only £43 million, and it is absolutely vital to push up the rate of exports this year far above that figure. A special opportunity for exporting textile goods to Canada exists, partly at least, because of the difficult position in which Canada now finds herself in purchasing United States textiles at the rate she has been buying them in the past few years. We have an opportunity now of getting back the valuable pre-war Canadian market in cottons, which we gave up as part of the Allied economic plan in the war.

So we have called upon the cotton industry for a rate of exports of 100 million yards a year to Canada compared with 8 million yards last year. The rate at which we must be exporting piece goods to Canada at the end of this year is something like 15 times the rate Lancashire was achieving when the target was set by my right hon. and learned Friend in, the autumn. To make this possible we have had to increase the total cotton export target. As the Committee knows—and this is the answer to the hon. Member for Louth (Mr. Osborne)—unless we get a spectacular increase in cotton production this year, the diversion to dollar export markets from the home market may well mean not only failure to increase our clothing ration, but the grave necescity to reducing it.

The woollen industry, which has already made a big increase in production, is being asked to export 75 per cent. more woollen and worsted goods to Canada this year than last. The rayon industry, where production is far above any prewar record at the present time—the production of staple fibre is now 60 per cent. above what it was in the peak year of 1939—the rayon industry is also making an important contribution to dollar exports, and doing what a lot of other industries are doing as well—earning dollars in North America, and saving dollars by the no less important exports to Commonwealth countries that, but for getting supplies from us, would have to make further calls on the sterling area reserves to obtain what they need from hard currency areas.

One of the things on which we stand or fall as a nation this year is the success or failure of our drive for increased textile production and increased exports of textile goods. Textiles, for a century or more, represented a staple export of this country, and their inability to do more than they have been doing since the end of the war has been one of the main causes of our difficulties.

If that is true of textiles, it is equally true of coal. Our rising rate of coal exports, which my right hon. Friend the Minister of Fuel and Power will wish to discuss more fully tomorrow, is one of the most heartening things about our export position today and the increased production which lies behind it represents a triumph of industrial recovery to which the right hon. Gentleman did not make any reference at all, and an industrial recovery which could not have been achieved under any other method than that followed last year. That industrial recovery, perhaps, provides the chief contrast between the Economic Survey we are discussing today and the Economic Survey which the House of Commons debated a year ago. The right hon. Gentleman referred to steel. Does he think that steel production would have been what it Ills been this past year if the coal mines has been carried on as they were under the party opposite? The right hon. Gentleman knows perfectly well that coal was one of the biggest dangers to steel production a year ago. It does not need any words of mine to stress the importance of coal exports, not only for their value in terms of foreign exchange, not only for their value in terms of their bargaining power in trade negotiations, but also for the contribution they can make—and are making—to the economic recovery of Europe.

I hope tomorrow to publish details of the new export targets for other industries, and I do not intend to dwell further on them today. The combined target they represent, 150 per cent. of the 1938 volume by the end of this year, is not, as my right hon. and learned Friend said last week, to be regarded as an overoptimistic target. The Government are convinced that it can be achieved. But, equally, we are under no illusion about the size of the job it represents for British industry, not only in production but also in selling the goods when they are produced. In a few moments I shall come to the problems of industrial production for export and for the other necessary tasks set out in the Survey, but it would be highly unrealistic at this present time to talk about the export drive and export targets without dealing with the very great difficulty which many industries are having in selling their products abroad.

In some cases, these difficulties arise for normal commercial reasons—difficulties associated with price; in one or two cases, difficulties associated with quality; but, also, of course, from changes in fashion. My discussions with the woollen industry have convinced me that the biggest difficulty in achieving the target is the swing in world fashions right away from woollen cloths generally, and although there is a large unsatisfied demand for worsteds, the capacity of our industry on the worsted side is not big enough to fulfil all the export orders. I am not aware that any of the things the right hon. Gentleman proposed would rapidly do anything at all to increase the capacity of that industry, either. However, difficulties of a commercial character are only a small part of our exporting problems. With the exception of a very few markets, the main handicap over a wide field of our export drive today lies in the import restrictions imposed by Governments abroad—sweeping and crippling restrictions which, in the long-term plan, it is the aim of the International Trade Charter drawn up at Havana to remove.

Many of these restrictions arise, as do our own, from the serious foreign exchange situation, and for this reason it is, with the greatest difficulty that we can secure any relaxation of them. But their effects on British exports are probably, I think, more serious than on those of any other exporting country, because a highly industrialised exporting nation such as ours of Great Britain inevitably includes among its wide range of export goods many consumer goods—clothing, textiles, pottery, household supplies, and so on—which countries faced with severe exchange problems cannot easily be persuaded to regard as essential. Such goods must necessarily loom large in our export trade. Our industrial capacity is laid out on the basis of supplying just those types of goods, and we cannot easily—in many cases, we cannot at all—switch that capacity over to producing goods which are more in accordance with what overseas countries are demanding in an age of world shortage and in an age of enforced world austerity.

We have, of course, made representations, wherever it was thought possible by such means, to persuade foreign Governments to remove or relax those import restrictions, but our main hope of securing any easement in 1948 has lain in the bilateral trade negotiations which have been undertaken in recent months, and which have led to trade and financial agreements with 32 individual countries, covering practically the whole of our trade outside the United States and Commonwealth countries. I have already told the Committee some of the difficulties which we necessarily meet in these negotiations, caused by the fact that our imports are wholly or mainly made up of foodstuffs and essential raw materials, and by the fact that our exports for paying for these goods are spread over a wide range of goods often regarded as non-essential. So, in these negotiations it is a cardinal point for us to get the maximum opening of these markets for British exports.

Though I cannot pretend that we have been as successful as we should like in this matter, we have achieved a fair success, and in the agreement with Sweden—a country which had imposed particularly rigorous import controls—we have secured a very considerable relaxation of the controls over a wide range of goods; indeed, we hope for a total export this year of £50 million compared with £30 million last year. We are having further discussions with the Swedish Government to see whether we can do more to increase the flow of trade between our two countries. Similarly, the Swiss, Italian, Portuguese, Belgian and Finnish agreements all provide for a considerable opening up of the markets of those countries once again to traditional British exports.

The £10 million worth of general imports secured under the Argentine Agreement is useful, though I will not pretend for a moment that we regard such a figure as satisfactory. We should prefer to be able to pay for a considerably larger proportion of our imports from that country by our exports this year, and we shall certainly need to do that next year. But I can sincerely inform the House that it was the best arrangement we could get—or, indeed, which any other Government could have got in the present circumstances. [Interruption.] I am prepared to discuss that with right hon. Gentlemen opposite any time they like.

In contemplating the problems and difficulties which our export drive is encountering, perhaps it is a little easy and tempting to under-rate what has actually been achieved. I have already told the House that our actual rate of export in 1947—in spite of the shortages of manpower and materials, and in spite of the fuel crisis—was at a rate which, had we been operating against a background of pre-war conditions pre-war investment income, shipping income, ratio between import and export prices and so on—would have produced a balance sheet over last year considerably better than was achieved in far easier circumstances in 1938. Our export figures are, in fact, going up month by month. At the present time we are just beginning to feel, in the increase of goods actually sent overseas, the results of the increased efforts of last autumn and winter.

In January and February we averaged £116 million a month, which is about 125 per cent. of the pre-war volume of exports. In March, in spite of the fact that we lost several working days during the Easter holidays, the provisional figures of exports were over £120 million, which is not only a new post-war record, but, with the exception of the single month of July, 1920, the highest value figure ever recorded in this country. In fact, had March been a full working month at the same daily rate, our exports would have been over £125 million, and, allowing for the price element, would have represented a physical volume not far short of 135 per cent. of the 1938 figures. But these March figures had their dark side, too. Imports at £178 million were the highest for several months; and that, too, with the exception of last July and January, 1920, represents the highest figure ever recorded in all our trading history. So, in spite of the growing volume of exports, the adverse balance—and the need to reduce this adverse balance is the central theme of the Survey—remains still the biggest problem ahead of us.

As it is with our total exports, so it is with our exports to dollar areas. In January and February our exports to the United States were running at the rate of £5·7 million a month, and to Canada at £5 million a month: together the two were not only more than £4 million a month above the same period for 1947, but were over £1½ million a month above the figure for the fourth quarter of 1947. As such a high proportion of the sterling area essential supplies has still to come from dollar areas, with the high prices of dollar supplies, with the loss of our dollar investment income and dollar shipping income, and much of our sterling area dollar income, our gold and dollar reserves for the first quarter of this year—in spite of our increased rate of exports—were still diminishing at the rate of £147 million over the quarter.

We are making a special effort to increase exports to the dollar countries. Every industry in which there is still an unfulfilled demand in the United States is being looked at to see what more can be diverted there, including—though the hon. and gallant Member for Holderness (Lieut-Commander Braithwaite) will not cheer this—whisky. Ninety per cent. of our linen goods are exported, and all the orders from the United States are being fulfilled. The cotton industry, in addition to being asked to increase exports to Canada, has been asked also to boost exports to the United States. There we are aiming for exports at the rate of 30 million yards a year—four times the figure for last year; wool, five times the figure for last year, and four times the prewar figure; and lace, silk, rayon, clothing, hosiery, footwear, bicycles, and motor cycles are now making very considerable inroads in the United States. We all recognise the difficulties of selling private cars in that country, particularly having regard to price difficulties, but there have been striking advances in that field as well. In 1938 we exported to the United States 45 cars in the whole year; in 1946 and 1947, about 1,100 cars in each year; in January, 1948, over 1,300 cars in that one month—representing an annual rate of nearly 16,000. Machinery of various kinds, metal windows, sanitary earthenware, pottery, leather, wallpaper, china clay, books and works of art are making quite considerable additions to our dollar income at the present time.

I have dealt at considerable length with the problems of increasing exports, because that is our biggest job at the present time. But it is only one of the many programmes competing for our all too scarce national resources. To increase and maintain our exports we need to have a proper and full base of industrial production. We need especially to build up our import saving industries. In fact, we need a great production effort, going far beyond the export industries. It is indeed true that 10 per cent. more throughout industry will make the difference between success and failure in achieving the objects set out in the Survey. The Government and, of course, the Committee realise the difficulties, and indeed the frustrations, which beset so many of our workers and managements who are anxious to get the 10 per cent. more—and far higher figures—but who, for reasons entirely beyond their control, and the control of the Government, cannot do so.

Many of our industries are held back at the present time by shortages of materials. As the Survey points out, throughout 1948 we shall be short of many raw materials—of which, indeed, the whole world is short. [HON. MEMBERS: "No."] For instance, a world shortage of felled timber cannot but be felt by a country such as Great Britain, which today accounts, as it did before the war, for over half the world shipments of timber. Wood pulp, newsprint, paper, hides and leather are in short supply on a world scale. World production of many of these things is not up to prewar levels, and world demand is, in many cases, on a record scale. For one thing, there is the competitive consuming power of the United States operating at a peak level; also, there are nations in the Far East where tastes and the standard of living have developed, and rightly developed, which are now coming on to the world market for raw materials already in short supply.

It is not a question merely of imported raw materials. The Survey and the Debates so far have stressed the shortage of steel. The Survey stresses, too, the shortage of basic chemicals, yet those chemicals which are responsible at the present time for the worst shortages in industrial production—soda ash, caustic soda, and sulphuric acid, on which so many Questions have been put down—are being produced today at a record rate. Here again the problem is that before the war those industries were never laid out to meet the needs of a Britain working under conditions of full employment; and those industries which did foresee the growing demand could not proceed with their plans for development and expansion because of the war. To build up that capacity—basic chemicals capacity, as well as steel and electrical generating capacity—takes up a very large part of our industrial investment programme.

That takes not only materials and manpower, but, above all, time. That is why, if we are to achieve our national objectives, we have to plan and control the allocation of these essential materials on a basis of first things first. That is why we have to put on the many and detailed controls, to which the right hon. Member referred, most of which arise only out of shortage and the need to use our national resources on priority national needs. I want to assure the right hon. Gentleman about this right away, that some of these controls, but only a proportion of them, may well be required permanently as a means, in different conditions, of maintaining full employment and improving our social standards, but a very large proportion of them, whose effects and, indeed, vexations are often quite wrongly quoted as arguments against Socialism as such, will last as long as the conditions of shortage which give rise to them last, and not a moment longer. As the Committee knows, my right hon. Friend the Minister of Supply and I have appointed examiners of controls to examine and streamline controls where-ever possible, and in consultation with the industries chiefly affected work out alternative forms of control, which will make it possible for national purposes to be fulfilled with perhaps less difficulty and frustration for individual managements and workers.

I am sure that the Committee will realise the problems with which we are faced in the rationing and allocation of industrial materials. To mention only one of them, it is a fact that the materials which are required for some particular industry or productive process are allocated among the firms concerned on the basis of some percentage of their use of this material in a base period, say, 1939, 1942 or 1947. I do not seek to defend this method of allocation; in fact, I hate it. It acts as a disincentive to enterprise and efficiency. It holds back the expanding firm, and it frequently makes no allowance for new entrants. Except where special and complicated refinements are added to the scheme, it might well fail to give the materials to those firms which are capable of the biggest contribution to exports. I should like, wherever possible, to change that system, and we are changing it in a number of industries. The fact that in very many cases trade associations are insistent on its retention, is very far from being a conclusive argument for keeping it. I am sure that hon. Members opposite will not dissent from that. But, in so many cases there is no alternative.

To remove the control would lead to an inflationary scramble for materials, which might completely defeat the needs of all national services, and might result in the wholesale closing down of firms who did not have a special "pull" with the materials suppliers. We cannot afford, either on a short-term or on a long-term basis, to see such wholesale closing, together with the loss of manpower from industries. If I were to allocate, as I should like to do, some of the scarce materials to new entrants, whether ex-Service men or not, it would mean in many cases that existing firms, perhaps firms with a world reputation for their products, already operating with high costs at a low proportion of their capacity, would be pushed to an even lower proportion and even higher costs.

The right hon. Gentleman referred to what he called the "statistical famine" caused in steel distribution by some industries overstating their needs, or in some cases putting their needs two or three years ahead, thereby getting more steel than they needed and hedging against speculation. Suppose that we were to remove controls. Does he not think that a degree of statistical inflation and speculative inflation by industrialists trying to make certain of getting their supplies years ahead would not be far greater than it is today? Does he not agree that if we were to take off these controls, the chances of getting steel into the development areas and into schemes for expanding textile machinery capacity, into shipbuilding and into the export drive, would be far less, and that it would, in fact, simply go to the—

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

I am sorry that the right hon. Gentleman has not followed my argument. That part of my argument was devoted to asking that, during the existence of an allocation system, it should be operated on an efficient basis, which is not being done at the present moment. The argument with which he is now deal- ing is quite different. I said that we should first get over the shortage by running the allocation system properly, and then I would answer whether or not controls should come off.

Photo of Mr Harold Wilson Mr Harold Wilson , Ormskirk

I was dealing with the pan of the right hon. Gentleman's remarks in which he spoke about this statistical famine. I agree with all that he said about the miscalculations made by statisticians in the United States, but we are not responsible for their miscalculations, whatever miscalculations he may think we have been responsible for in this country.

Before I conclude, I want to repeat to the Committee the desire of the Government to make our controls as flexible as we can. I have introduced several easements in export controls, particularly in textiles. Wherever we can simplify any of the industrial controls, we shall certainly do so in our own interests, no less than in the interests of the industry itself. I must warn the Committee, however—and many of our discussions on the simplifications of controls have shown this—that I see a real danger that firms in some industries may become tempted to sit back against the protection provided by these controls, and by the existence of a safe home market, in the same way as they have previously relied on organised restrictive practices. Even within the controlled schemes, there is plenty of room for healthy competition, just as below the ceiling prices there is plenty of opportunity, and every national need, for firms to charge prices below the maximum. There is a real danger of this attitude developing. We cannot afford it as a nation. That is one of the reasons which has led us to introduce the Bill to deal with monopolies. The nation cannot now afford the restrictive practices which grew up in so many industries before the war, even if it could afford them then. It is our view that the country cannot afford any restrictive practices on either side of industry. Whatever fears of unemployment might have led to practices restricting production or raising costs, and whatever fears of unemployment might have led to practices restricting production or raising costs, there is no justification today for them, and just as in the Monopolies Bill we are seeking powers to deal with restrictive business practices, so the Government will do everything in their power to secure the dropping, removal and diminution of restrictive practices of every kind on either side of industry.

In many industries, we need new methods of production and labour deployment. The cotton industry is not the only one where, on a realistic estimate, 20 per cent. more production can be got for the taking by re-deployment of labour. The fears of unemployment which underlie opposition to new methods should be things of the past. The only danger of mass unemployment in this country comes from the danger that, if our production and export is not high enough, we shall not be able to import all the materials we need for full employment.

In 1948, to secure maximum production we require maximum efficiency. It is required now as a means of increasing production, and it will be required in future years as a mean of reducing costs and improving our competitive position. That is why we set such store by whatever capital developments can be afforded within our present limited resources. That is why we also attach the highest importance, in appropriate industries, to establishing, as a matter of urgency, development councils providing for the joint participation of workers and management, together with independent members, with the problems of the industry. I hope, in particular, that these councils will be able to foster energetically this application of research to the main problems of their industry.

We as a country have a high reputation for the quality of our fundamental research, and our industrial future must now depend in a very great measure on our success in applying the lessons and benefits of this research to factory production. We hope to introduce in a day or two's time the Development of Inventions Bill. No one who has read the Economic Survey, or has paused for a moment to consider the present position of the country and the size of the job ahead of it, can be in any doubt of the need for full production. My right hon. and learned Friend's Budget last week removed any of the last lingering disincentives to full production which may have remained in the taxation system—[HON. MEMBERS: "Oh"]—yes—and provided new incentives to production. I am not dealing with the touching story of the 140,000 to whom the right hon. Gentleman referred. I would remind him that after they have paid Surtax, and the Special Contribution, they will still have far more left than most other people. I think the Committee, last week, whatever else it found to disagree about, was in full agreement that this was an incentives Budget.

I have mentioned difficulties outside the financial field which stand in the way of increased output, but, in facing these, let us not underrate the achievements, the progress we have made in many spheres of industry. Let us respond to the right hon. Gentleman's appeal that we should lose our inferiority complex about success, and talk about the successes we have achieved. The progress of factory building in the Development Areas I have referred to, and the contribution these factories are already making to our production. In the field of machinery and industrial equipment we are setting new records every month. The production of mining machinery is far above prewar; the production of commercial motor vehicles is 50 per cent. above prewar; the production of new tractors is over three times the prewar figure; the production of road-making equipment is 25 per cent. above prewar; textile production, although a long way below prewar, is moving steadily upwards; agricultural production has increased above prewar, more than that of practically every European country—and this despite a world shortage of feedingstuffs. Hon. Members opposite talk about coal. They know as well as I do that if the industry had not been nationalised we would have been down in output, by 1950, by 125 million tons. I would invite those who can add and subtract to work this out for themselves, and I will challenge them any time they like to discuss it.

These figures of increased production are only a few of the achievements. If, as a nation, we wanted to blow the trumpet, there are many we could set alongside them. Our record in the matter of industrial disputes, is, in spite of some serious blots, certainly worth noting. At this time to lose a single man-day in industrial strife, through unofficial strikes, is utterly to be condemned. But at a time when perhaps too much publicity and too much advertisement is given to individual disputes, let us not forget that our loss of seven million man-days since V.E. day—which we can ill afford—compares with 148 million man-days in the same period after the First World War—over 20 times as many. This is a record of industrial stability of which many a country overseas must wish it could boast.

The attacks made, not by the right hon. Gentleman, but by many people in the country, on workers on both sides of industry are out of place. Much has been achieved, but much more remains to be done. Our problem, the national challenge set out in the Survey, comes not from the fact that our people's efforts are poor compared with prewar, or that the nation's voluntary sacrifices are small. It is that the job is so very much greater because in 1948, as in 1947, the biggest strain on our resources is caused by the burden of having to pay for the second world war in a generation. It comes from the decision which we, as a free nation, have taken, that, setting aside thoughts of luxury and easy living, we will, as our first task, seek to stand on our own feet, pay our way in the markets of the world, rebuild our war-shattered economy and lay the foundations of new additions to our production equipment which, in the years to come, will mean a higher standard of living for our people and a new industrial greatness for our nation.

5.25 p.m.

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

The President of the Board of Trade told us that standing on our own feet must be priority No. 1 during 1948. We all agree with that. I do not think there is anything in the right hon. Gentleman's speech, and certainly he did not stint us in the volume of it, which would convince all of us that that was any more than a pious hope which has been repeated so often from the Government Benches in this Parliament, and always in vain.

As a small illustration of that may I say that when I was in Canada in 1947 I received an enormous number of complaints as to why we did not send them more goods. When I was there a year later I got no complaints at all about the quantity of goods, but I did get a great many about price. For instance, before the war we were sending about 70 million yards of cotton goods a year to Canada and the United States were sending about 15 million yards. Last year, the United States sent 100 million, and we sent 15 million. But our price was 30 per cent. above that of the Americans. The Canadians said they were trying to cut down drastically the quantity of cotton goods they were taking from America, but that they could not indefinitely pay us 30 per cent. more than the American price.

I think the Chancellor deserved the praise he received last week for his Budget statement. We can all admire the lucidity and fairness of his exposition. I am sure that we are very glad, once again, after an interval of three years, to have a Chancellor who, apparently, realises that the business of a Budget is not just to raise taxes to meet revenue, but to be the prime instrument of guiding the economy of the country. I was very glad to hear the right hon. and learned Gentleman say, last week: I would warn the Committee against the danger of developing plans which have no real relation to the actual facts of our present situation."—[OFFICIAL REPORT, 6th April, 1048; Vol. 449, C. 45.] That is exactly the charge we make, above all, against the Chancellor's predecessor—his entire failure to realise the situation. If the right hon. Gentleman were here I would like to tell him, in case he does not know it, what is written on the walls of the Federal Reserve Bank, at Washington. These words were spoken by President Wilson at the opening of the building: We shall deal with our economic system as it is and as it may be modified, not as it might be if we have a clean sheet of paper to write upon and, step by step, we shall make it what it should be. I believe that statement really illustrates the difference in view between this side of the Committee and the other. We here do not think that the present system is perfect; we do not think that in a changing world we must not have changes in our economic system, but we do think that no changes which will endanger the whole existence of our people should be taken rashly without being fully tested, and no steps taken which are not within our capacity. We say that Members opposite are all too apt to try to fit their facts to suit their theories, and act in direct disregard of the available resources. We admit that during the last 2½ years the Government have learned quite a lot. They really have learned, at last, that we have inflation, whereas the right hon. Gentleman the Member for Bishop Auck- land said, not long ago, that the danger of inflation was rapidly passing away.

Secondly, they have learned that inflation distorts the whole economy of the country. May I quote one line from the speech made by the Chancellor of the Exchequer in Edinburgh: Inflation will stimulate the manufacture of non-essential supplies for the home market. We know, and I hope that the Government realise, that inevitably inflation distorts the whole economy of the country. It means that there is no competition to get jobs or to be efficient. Before the war, when there were ten men for five jobs, we were getting appalling unemployment, and that, of course, was tragic. But the fact that that happens with deflation does not necessarily mean that the opposite is any better, and I would suggest to hon. Members opposite that the inflation from which we are now suffering is perhaps the greater evil. If we have five men looking for 10 jobs, it is inevitable that they call for greater wages than the country can afford to pay. If producers have no competition in selling their goods, they make money, not by being efficient, but by their skill in obtaining raw materials. This evil of inflation can bring upon us greater unemployment and much greater poverty than we had in the period of deflation. I think that my right hon. Friend the Member for Aldershot (Mr. Lyttelton) showed very clearly from the Government publications the limitation of controls to deal with the evil of inflation.

The fourth lesson, which I hope the Government have learned, is that excessive expenditure at home endangers our ability to buy from abroad. The Chancellor of the Exchequer told us: In the particularly difficult situation in which we find ourselves today, our internal situation is bound to affect our external balance of payments."—[OFFICIAL REPORT, 6th April, 1948; Vol. 449, c. 44.] That is not what we were led to suppose by the previous Chancellor of the Exchequer. I would suggest that, although the Government may have learned these lessons, they have bought their experience at a very bitter cost to the country. If only they had listened to the warning made so often by my right hon. Friends on this side, who, perhaps, have more experience of administration than right hon. Gentlemen opposite, then we might not now be in the precarious position in which we are. [Interruption.] I notice that some hon. Members opposite are apparently quite happy about the present situation. The hon. Member for Blackburn (Mrs. Castle) last Week was, I think, jubilant, and so the President of the Board of Trade appeared to be in the part he has played today—

Photo of Mr Percy Shurmer Mr Percy Shurmer , Birmingham Sparkbrook

The hon. Member has told us that Members on this side should listen to the statements made by right hon. Members on the Front Bench opposite. Would he tell us some of the suggestions which they propose that this Government should adopt?

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

What I tried to say was that right hon. Gentlemen on this side had expressed repeated warnings on all the four points I have raised. I do not want to take up time by going into the whole galaxy of inflationary policy, but I say that, on those four points, there have been repeated warnings which have been entirely ignored. Some hon. Members opposite appear to be rather jubilant about the present conditions. I think that that is a most unfortunate thing, and it must confuse the country. It may cause great harm, and I would suggest to them that they should take note of a paragraph which I will quote from the Economic Survey. Paragraph 243 states: Our situation is, therefore, such that, without further substantial external aid, we can have no hope of recovering equilibrium at a reasonable standard of life within the next few years. And elsewhere—paragraph 50: dislocation would be widespread and it would be impossible to avoid large-scale unemployment. Paragraph 28 states: Clearly, with our financial reserves at so dangerously low a point, we cannot afford a heavy investment in additional materials. But clearly also such an investment would bring a rich return … I do not think that there is much to be jubilant or complacent about in a situation in which we cannot even buy the raw materials necessary for the use of our people in this country. The President of the Board of Trade compared our production with other countries. I am not so concerned about a comparison with other countries in Europe of whose conditions I am not aware, or in America, where production has gone ahead so immeasur- ably greater than here, but I am concerned about the failure of our production to be in proportion to the expenditure indulged in by the Government. We have breathing space by the passing of the E.R.P., and I think that, in this House, we can nearly all of us join with the Chancellor in his very genuine and deep tribute of praise and thankfulness to that very generous people for what they have done.

May I, for a moment, if it is not thought too officious, as I have lately been in the United States, make one short comment? In the United States great attention is paid, and considerable respect is given, to what is said in this House. In the United States they do not know of the importance or unimportance of different Members. What they know is that they are Members of Parliament, and consequently, when someone like the hon. Member for Nelson and Colne (Mr. S. Silverman) gets up and talks about America as a "cheap moneylender" they do not realise the limitations of the hon. Member, as we know them so well, and they merely think of him as a Member of Parliament. Consequently, the damage of the reckless words said by the hon. Member can do immeasurable harm. We should all bear that in mind.

Photo of Miss Alice Bacon Miss Alice Bacon , Leeds North East

Surely, the opposite is true. When hon. Members go to America and make statements in America detrimental to this country, people in America do not realise how little they count.

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

The hon. Member makes a wild statement on which I have no information. What I was stating was the hon. Member's name and the words he used. The assistance from the E.R.P. which we have secured has certainly given us another breathing space, and given the Government a second chance to try to make use of the lessons which, I hope, they have learned. I would emphasise that it is only a breathing space, and that it is impossible for us to depend indefinitely on the generous aid of another country. How long that breathing space will continue depends on two things: First, the leakage of capital assets, and, secondly, on achieving our export target. We were told that the drain of export of capital last year amounted to £350 million—an appallingly large sum. I have some reason to fear that the actual sum is nearly £500 million. That was not disclosed.

I ask the right hon. Gentleman, when he winds up tomorrow, to comment on this. I would draw his attention to a note in Appendix 1 of the main tables of the National Income and Expenditure publication, in page 22, because from this it would appear to me that my fears are confirmed and that the authors, with a rather tardy conscience, feel bound, in their own words, in order that the figures should not mislead, to explain that items to the order of £100 million should perhaps more properly be treated as elements in external investment. I hope the Minister, in winding up, will tell us whether there is any justification for my fear that the drain is much larger than was admitted at the time.

I would also like to draw the attention of the Committee to the forecast in Table 10 of the Economic Survey that the drain on capital during the first half of 1948 would be £222 million less £15 million drawn from the International Monetary Fund, leaving £207 million. That was the estimate for the first six months, but so far, in the first three months, we have drawn about £150 million. That is an alarming situation if it was estimated as recently as in that publication in March that the total amount during the first six months would be £207 million, and it is already £150 million.

I suggest that the Government have failed in those major controls which are necessary. It is perhaps the way of small men in a crisis that they are sometimes apt to busy themselves with small preoccupations in order to disguise the real issues with which they are faced. I shall not presume to say that right hon. Gentlemen opposite have small minds, but I am bound to say that they have not shown during the last two and a half years that they have broad and spacious minds to deal with our economic situation. I suggest that instead of all these numerous vexatious and often trivial controls on which they spend so much energy, they should have concentrated on two things: first, control of the export of capital to see that none of it left this country; secondly, a control which would have ensured an equilibrium between total expenditure by Government, by consumer and by industrialists and total resources. In both of those fundamental controls they appear to have failed completely.

Photo of Mr Cecil Poole Mr Cecil Poole , Lichfield

In asking that the Government should control the export of capital, does the hon. Member mean that emigrants from this country should not be allowed to take a reasonable sum of money with them?

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

The amount they take is a small point. I am thinking of hundreds of millions of pounds

Mr. Shimmer:

None of this side.

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

We should not have allowed foreign countries to withdraw their sterling balances at the enormous rate they have done. My second point is in relation to our export target. I do not see how we can possibly achieve that unless we get rid of inflation. The Budget surplus is not so important in its extent as in the method by which it is achieved. For example, the new capital levy will not be a serious deterrent to inflation. I am not arguing the pros and cons of it now, but I am saying that it will not prevent consumer expenditure to anything like the £100 million it raises, yet it is responsible for one-third of the Budget surplus. It may be that the Chancellor realises this, because he told us that the Budget surplus of his predecessor was to some extent an indication of an inflationary situation. He also told us that that large Budget surplus had not diminished the inflation. I would like to draw his attention to the view held by so many of us that the extent of the Budget surplus is not by itself a certain remedy. I would also point out that the lower prices for which he is asking are bound to impose an inflationary pressure for, if prices fall, there is more money to buy the same amount of goods. For those reasons, I have no conviction that this Budget will deal adequately with the inflationary situation.

It seems to me perfectly clear that we have to do one of four things. Either we have to produce more or we have to depend indefinitely upon the United States or we have to spend much less in capital re-equipment or we have to consume less. The first is obviously the ideal way out but it takes time. As regards the second, I think we all agree that it is quite unthinkable that we should depend indefinitely on another Power. So far as capital re-equipment is concerned, we must, of course, make reductions there but knowing full well that we shall suffer for that in the future, and it is a most undesirable way of doing it. Therefore, we arrive at the fact that we have to consume less. Will that reduction be in public or private expenditure? I hold the view that the State should hold the balance between those who call for extension of the social services at the expense of the taxpayer in the cause of fairness and those who call for lower taxation at the expense of the social services in the cause of greater production. Those are two strong causes and at this time I suggest that the Government should hold the balance more in favour of reducing expenditure, thereby lowering taxation to induce greater production.

Photo of Mr Herbert Hughes Mr Herbert Hughes , Wolverhampton West

Mr. H. D. Hughes (Wolverhampton, West) rose

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

I have taken much longer than I expected, and I would rather not give way. Every time the State takes taxes from the citizen in his capacity as an income earner and pays back in social services in his capacity as a consumer, it reduces the incentive and the need to work. For that reason I would say that this is a time when the Government should be concentrating above all else upon reduction in expenditure. It has to come either from consumers or Government and I say that it should come from the Government. Like many others of his colleagues, when we say that, the Chancellor has asked: "Where?" I do not quite agree with that. If it were a question of calling for a reduction in Government expenditure in order to lighten the load on the well-to-do, I can see that we ought to establish a case, but at present that is not the position. In my opinion, it is necessary to maintain the solvency of the country to ensure that we can continue to maintain the vital social services. Therefore, I believe that it is the entire responsibility of the Government to settle where they will make the cuts that have to be made.

With regard to the proportion of direct and indirect taxation, in 1938, 43 per cent. was direct and 57 per cent. was indirect. It is astonishing that at this time it should be 50 per cent. direct and 50 per cent. indirect. Surely this is a time when we have to discourage spending all we can and to encourage producing all we can. Therefore, we should switch taxation from direct to indirect. The Chancellor said, I am sure rightly, that the workers in this country could not expect not to pay tax. I quite agree, but the Government should give relief to a large extent on direct taxation. I was glad of the alterations that the Chancellor was able to make, but I would like them far more sweeping, so that we have more people not paying direct taxation—and at an early stage a reduction in the level of taxation—getting it back by increase in indirect taxation, that is, taxes on spending and not on producing.

Here I come to a delicate point where, no doubt, I shall be much criticised by hon. Members opposite. I do not believe that Government expenditure can be cut adequately by economies avoiding waste. I am not for one moment saying that there is not a great deal of waste now, and that great improvements could not be made, for I believe that some of the Civil Service is vastly overstaffed. However, I stress that no real cut, sufficient to ensure and maintain the standard of living of our people, can be made in Government expenditure without cutting food subsidies. I do not believe that this is a time for us to be spending £400 million upon giving back money to rich and poor for nothing, whether they need it or not.

I would refer to what the Chancellor said in his Budget speech. I thought this was the most discreditable—to use a strong word—or the only discreditable, thing in his speech: Food subsidies are estimated, in round figures, to amount to £400 million for the year. We have decided to continue these subsidies at this level, because we are convinced that though, in theory, they may be inflationary, in practice, they have, in the particular circumstances of today, precisely the opposite effect."—[OFFICIAL REPORT, 6th April, 5948; Vol. 449, c. 54.] I cannot help thinking that the statement of the Chancellor was motivated either by fear of the Trades Union Congress or of exorbitant wage demands. I ask the Government whether they have such little faith in the British working man and woman as to think That the cut would not be accepted if it was shown to be the only way to maintain our solvency and our social services? Do the Government think that the level-headed British public would refuse to face facts if the facts were put to them properly? They must be told that we are consuming more than we are producing, and are doing so out of the aid given to us by a foreign country and of our rapidly diminishing gold resources; that we have to consume less, however painful that process may be. They should be told that a rise in wages would lead to an inability on our part to buy from abroad the vital necessities without which we cannot maintain present standards of living or avoid mass unemployment.

I do not believe that if the country were given the leadership it requires and shown clearly that reckless demands for higher wages would jeopardise the position of the nation, and of the social services, that the country would fail to respond. I ask the Government to recognise that we are in a crisis and that the United States have given us a period of respite which may be only short-lived. We are on a precipice, on the other side of which are mass unemployment and starvation. We should have strong leadership, if we are to get out of that situation. That will mean facing difficulties with courage, vision and determination as we have done before. That leadership has saved us in the past, but it is being denied to us today.

5.53 P.m.

Photo of Mr Ronald Williams Mr Ronald Williams , Wigan

I am sure that the Committee will extend to me the indulgence which is usually afforded, I am told, to one who is addressing it for the first time. I rise in this Debate for the purpose of putting forward one or two matters which I regard as being fundamental and for the purpose of making, at the outset of my attendance in this great Chamber, a declaration of faith not only in the work of His Majesty's Government but in the people of this country who, I am convinced, will meet the economic difficulties with which we are now faced with the quality and the character which they showed at the time when those difficulties started. I am referring, of course, to the conclusion of hostilities. There can be no question that our difficulties are the result of the sacrifices which we made during the war. Because we considered that there were principles even more important than economic principles, we started off at the end of the war in a state of honourable poverty, of which we as a nation need not feel the slightest shame.

We are entitled to say that the qualities and the principles to which we were loyal and which brought about that honourable poverty, are those to which we must look if we are to get out of our present difficulties. The Government have shown in relation to the great fields of national enterprise which have been so characteristic of their work, that they are going to be loyal to those principles, even above questions of mere temporary insolvency. I make that point because I do not apologise at all, and I do not see why any one should, for the fact that we are dependent in present circumstances upon aid which we are to receive so generously from the United States.

I speak with confidence upon this issue, despite the fact that I feel the natural trepidation and diffidence which are inseparable from a maiden speech, because, in the mining industry in which I have spent so much of the last 12 years of my life, we know full well the effect of the policy of this Government upon the price mechanism in its bearing upon miners' wages and conditions. If there had been a determination on the part of His Majesty's Government, at the conclusion of hostilities, to allow the wages of miners to be decided by the price mechanism, the economy of this country would have crashed in ruins and nothing could have saved it. Apart from the question of profit, there is the important question of the confidence which is inseparable from any economic effort. If the Government had not the confidence of the workers it would not matter what plans they put forward, those plans would be doomed to failure. The Government have the confidence of the workers of the country because the Government treat the workers as human beings and not as items on a balance sheet.

I have come into contact many times with injured miners. Those men have shown all the initiative necessary to carry on their great work and all the enterprise and energy necessary to run a business, but I have seen them die neglected and forgotten because it was felt that once their employers had paid the abominably low rates of compensation, which prevailed, that was the end of the employers' responsibility. Side by side with that state of affairs we should compare the position today when, in close consultation, the National Coal Board, and the National Union of Mineworkers are considering a supplementary compensation scheme to be submitted jointly. That could never have occurred had not the State itself engaged in the adventure and enterprise of taking over the collieries of this country.

Had the Government done nothing else, they have at least by that one act put on a proper basis the possibility of the economic recovery of this country. I go further and say that had they not done that, there is not the slightest doubt that our economy would today have been in ruins, because it is only those who have been in the most intimate touch with the mining community who realise the bitterness and disgust which was felt by the miners and who know how that feeling would have been exacerbated if we had proceeded in the post-war world in an attempt to run the industry by what is miscalled private enterprise.

Whilst I make these observations, I realise that we are living in a mixed economy, and there is a place in that economy for the profit maker. There is an honourable place for him in that economy, but I feel that there will not be any more in the history of this country a dominating place for him. That is essentially the distinction between the views of hon. Members on the other side of the Committee and those of hon. Members on this side. We do not wish—we never have—that our economy should be regulated in every detail and that every possibility of financial initiative should be discouraged. We have never suggested that at all. We have simply said—and the Government are carrying it out admirably—that certain basic industries and certain essential parts of the national economy shall be in the control of the nation. Having said that, I simply want to say in conclusion that I thank hon. Members of this Committee for the courtesy they have shown me on the occasion of my first speech in this House.

6.2 p.m.

Photo of Mr James Hutchison Mr James Hutchison , Glasgow Central

There is a courteous custom by which it falls on my shoulders to congratu- late the hon.—and, I would like to add, gallant—Member for Wigan (Mr. R. W. Williams) on his maiden address. Had it not been the custom, I would still have liked to do it because he has gallantly tackled his maiden speech with great skill and great ability and without the use of notes, so showing a knowledge of his subject which will help the Committee in its consideration. We therefore welcome his having taken this step and look forward to hearing him on this all-important question of coal many times again.

As we unfold the dismal black pages of the White Paper, we see, in effect, a short history of the failure of planning. The fatal Daltonian optimism has quite vanished. The wagon hitched to so high a star—occasionally less happily to a "Star" correspondent—has come down to earth with a bump, and the Government, from having devoted their time in the past to harping in Elysian Fields of Socialism, are now harping about the need for increased production in a world of realism. The export trade was to have been 148 per cent. of the 1938 volume. It is running at 125 per cent. at the present time. The Loan, which was to have lasted from three to five years, is already exhausted, partly owing to causes outwith the Government's control, but not a little by the failure of the grip of the Treasury during those five fatal weeks of convertibility. The Government have been financially jay-walking. Perhaps they still are. I only hope that the prognostications of this White Paper may come nearer to achievement.

It is perfectly clear—and every hon. Member has recognised it—that we are counting on American aid. It is true that in the White Paper the right hon. and learned Gentleman has stated that for the first six months the figures he uses take no account of American aid, but nevertheless they allow for the outflow of dollars going on virtually unabated, and it is to stop that outflow of dollars that E.R.P. is mainly directed. It is, therefore, escaping the issue to pretend even at the present time that Marshall aid is not of vital importance to us and is not already playing its part. The outflow of dollars is partly—but only partly, and it is very important to remember this—to be restored by the American help which we are to get. It is of the greatest importance that the country and the House should remember that this Marshall aid is to be reviewed annually and that the American Congress maintain the right to stop it if they find or believe that it is not being put to the uses for which it was intended and is not in fact achieving the purpose for which it was designed.

While I was in America there took place a most interesting Gallup Poll at the instance of the Council for Foreign Relations, a reliable body who can be counted upon not to frame their questions to get the answers they are looking for. The four answers were most revealing. One in the last week has become past history because 95 per cent. of those who responded voted in favour of Marshall aid for the 16 countries. Fifty per cent. voted against allowing any part of the aid to go indirectly to Russia or the satellite States, and in fact an Amendment, called the Mundt Amendment, has been introduced into the Bill providing that E.R.P. or any of the materials granted under E.R.P. shall not find their way into any of the exports which this country or other countries send to Russia. The third result obtained was that 85 per cent. of the American people were in favour of imposing economic control so that spending is directed to genuine recovery. None of us can complain about that. Finally, and most significant of all was that 8o per cent. of the American people were prepared to accept economic controls in the United States in order that the plan shall succeed. That is evidence of self-sacrifice which all of us who have suffered for so many years under a control system will know well how to appreciate.

There will be no second Marshall Plan, and so the Government have this tremendous task of so restoring the British economy in three and a half years that at the end of that period we may stand on our own feet. I wonder whether the country realises how close we have come to the brink of disaster? To spread understanding of that is the Government's great task. That is the great danger confronting us. How many men are going about the country today saying, "I have in my pay packet£6whereas formerly it was about ios."—without counting what they now have to pay for things out of those two sums—"my hours have been reduced. Where is the crisis? "That is the danger from which this country is suffering and that is the main problem which the Government have to overcome. The Government must get this over among all the obscurity of economics—Heaven knows, we on this side, whose job it is to try to educate the country into sound economics, know how very difficult it is—and let the country know the facts. Now it is on their shoulders. I wish the Government luck in trying to put it across to the country.

There can be no lying back on the comfort of the Marshall aid cushion. It is only by work—I underline the word "work"—that we will restore our own salvation. I implore the Government to make the position clear and to paint the picture in such a way that the man in the street can understand what would have happened to him if America had not come to our assistance. He must realise that we should have had to cut our raw materials, which would have resulted in reduced production and increased unemployment. He should realise that without this aid he could not have got the food which he will get. I estimate that he would have suffered-something like a one-fifth cut in the present diminutive ration scale. Somehow the Government must paint the picture in such vivid colours—in spite of the obscurities of economics—that the man in the street can understand how near he came to disaster and how he will risk that same disaster in 1952 if the country is not by that time on its own feet again, teaching him that neither he nor we nor anybody in this country with a spark of pride in him can wish to rely on the aid of any foreign state. We must rely upon our own endeavours and work out our own salvation.

Are we getting on our feet? We have made considerable achievements in industry despite Socialist legislation. I do not deny that 125 per cent. in volume above the 1938 figures is a tremendous achievement, but it is an achievement for private enterprise, which has the while been beset by form filling, controls, threatened by nationalisation and criticised in party politics. Despite all that, where do we find this increase in our export trade? Let hon. Members opposite turn to paragraph 17 of the White Paper and there what do they find? They find that amongst all the industries and all the manufactures upon which we are going to count for export expansion, coal, their pet darling, has the least expansion of the lot, a trifling 39 per cent. of the 1938 export volume. Machinery has 203 per cent., vehicles 272, and textiles—criticised and despised—131 per cent. What greater vindication could there be of private enterprise than for the Government to call upon those very industries—

Photo of Mr Victor Collins Mr Victor Collins , Taunton

They all depend on coal.

Photo of Mr James Hutchison Mr James Hutchison , Glasgow Central

—which are left under private enterprise to carry the great burden of this expanding export trade? It should have been easy for coal, which is the spoilt darling of the Socialist Party, and which is given a priority in food, in housing, in steel and in machinery, to contribute a share more comparable to those industries which are left in the hands of private enterprise. Compare it with the record for iron and steel, which is running now at an all-time record. Take shipbuilding, with which my own country is so closely associated, and contrast their results with civil aviation and coal.

Photo of Mr Cecil Poole Mr Cecil Poole , Lichfield

Could the hon. and gallant Member tell us what the iron and steel industry could accomplish without the help of the coal industry?

Photo of Mr James Hutchison Mr James Hutchison , Glasgow Central

Of course, coal like other raw materials goes to help in the output of steel, and once iron and steel have produced 15 million tons a year there is little left for the export trade; but if the coal industry had expanded in the way the iron and steel industry has there would be a considerable amount left for export at the present time.

The next crisis into which the Government are going to move is a price crisis. The seller's market is drying up. Hon. Members will recognise that is inherent in the White Paper. Already some markets have dried up. The President of the Board of Trade, in my view, showed too much complacency this afternoon when he spoke of record outputs and gave production figures. He did not also say we were running a record deficit, and it is that spirit of clothing up and hiding away what are the real events that is doing the country so very much harm. Time and time again in the United States we were questioned about the quality of British goods, yet the right hon. Gentleman was quite happy about quality. I can assure him that many people on the other side of the Atlantic, though not all of them by any means, were complaining about our quality, something for which Great Britain was always famous in the past.

We are rapidly approaching a price crisis, and then it will be a question of quality combined with price. Then the Socialist microscope will have to come out. No longer will there fall on our backs the odium of having to criticise wage rates, hours of work, cost of form-filling—

Photo of Mr George Porter Mr George Porter , Leeds Central

Before the hon. and gallant Gentleman leaves the quality question may I ask a question. A moment ago he said that private enterprise was responsible for our exports. Now he is telling us that the quality is in question. Is private enterprise also responsible for the quality?

Photo of Mr James Hutchison Mr James Hutchison , Glasgow Central

Certainly. I am telling the House that if the quality is not kept up, these targets, which the Government have set for private enterprise, will not be achieved. The Government will be led to undertake an examination—and I am glad they will have to make that examination and not us—of charges in industries which are sheltered, like rail traffic and load carriages rates, shipping and its discharging costs and all other components in industry's costs. The right hon. Gentleman and the Government will have to work out how far industry can go on bearing them. In Page 43 of the White Paper it is stated that hours of work for a certain range of trades have been reduced by three and a half hours in the standard working week during 1947. The country cannot afford that unless with that reduction of hours an equivalent amount of work compared with the past is still produced.

Before I sit down I want to say a word about invisible exports. We rarely hear them talked about in this House, and yet shipping, insurance, banking, the tourist trade and so on before the war made an all-important contribution in our economy. They are today the poor relations of exports. Upon their shoulders, by a curious system of accountancy, are loaded all the costs of Government expenditure overseas. I listened to evidence being given in the House of Representatives before the Committee going into Marshall Aid, and particularly the inquiry on the shipping position in that country and in ours. After the evidence which showed me clearly that the United States were prepared to welcome our getting back to our prewar shipping fleet but were not anxious that we should go further, I had a chance of talking to the high official who had been giving evidence. I asked him who, in his view, was going to provide for the hiatus created by the disappearance of the German and the Japanese merchant marine fleets and to provide the extra shipping for the greater export trade foreseen not only in the Marshall Plan but also in our own White Paper. It was perfectly clear to me from what I was told that his intention was not that we should do it, but that the United States should do it. I urge the right hon. Gentleman and the Government to face up to that position. For Heaven's sake, let us protect and foster the things we know we can do.

Photo of Mr James Hutchison Mr James Hutchison , Glasgow Central

We have been preeminent in the shipping industry and yet we are giving priority to a large number of exports, some of which we all know will be temporary, and rejecting opportunities such as are offered by insurance and shipping and consequently by the accompanying industry of shipbuilding. Are we not going to give them the protection which they ought to have? Hon. Gentlemen opposite say they are, but let them look at Paragraph 239 of the White Paper where we read: It must be our long-term policy to expand manufactures at the expense of services. What services can be meant if it is not such services as shipping, banking, and insurance? If that is the policy of the Government they are utterly and dangerously—

Photo of Mr Hector Hughes Mr Hector Hughes , Aberdeen North

Is the hon. and gallant Gentleman forgetting that half of the world shipbuilding is in British yards at the present and is a world and an all-time record?

Photo of Mr James Hutchison Mr James Hutchison , Glasgow Central

The hon. and learned Member must distinguish between shipping and shipbuilding. I am not talking about shipbuilding, but shipping, the service of carrying goods from one country to another. I should very much like to have an answer as to what is the meaning of that phrase from paragraph 239 which I have quoted. Does it mean that we are not protecting our invisible exports?

We find apart from the shipping position that the insurance of this country is being assailed in country after country. When we were debating the charters between Ceylon and this country and Burma and this country, I asked whether any steps were being taken to protect British trade in those countries, and I was informed that no such steps were necessary or contemplated. In Argentine the Argentine Government are pushing British insurance out of the country by insisting that any insurance companies in the Argentine must be controlled by a body composed of 6o per cent. of Argentine nationals. How, incidentally, does that square with the discrimination clause in the International Trade Organisation Charter. In Egypt the Egyptian Government are forcing British companies to employ a stipulated number of Egyptian nationals, irrespective of the fact that they have no insurance training and are not worth half what they have to be paid. The country's economic position demands that protection of some kind should be given to these essential invisible exports. They must no longer be left out of our considerations in Debates on economic questions where they are so rarely brought to the fore.

The policy of full employment will need a great deal of enlightenment on the part of the Government and of the trade unions. Let me here recommend that our trade unions should study a little the attitude of the American trade unions, who say that they arc not interested in nationalisation. They do not believe in it. They say, "Let the employers make as much money as they can, and we will get as much money out of the employers as we can. "That is the real reason for which trade unions were created. It will need that form of enlightenment, and the enlightenment of the electorate to achieve this policy of full employment, which hon. Members opposite and hon. Members on this side of the Committee all want to see continued, because at present the attitude of mind of trade unionists, and of hon. Members opposite, is leading that policy into direct failure. Then when unemployment once again stalks the land, they will have only themselves to blame. The fault, dear Brutus, is not in our stars,But in ourselves. No, not in the stars, nor in capitalism, nor in the result of the war, but because we do not see the writing on the wall that only work can save us and restore to us our economy.

6.22 p.m.

Photo of Major Donald Bruce Major Donald Bruce , Portsmouth North

It is very pleasant indeed to hear the voice of authentic Toryism speaking once again from the hon. and gallant Member for Central Glasgow (Colonel J. R. H. Hutchison). It is not, of course, the first time we have heard it this afternoon. I listened very carefully to the right hon. Member for Aldershot (Mr. Lyttelton), whose interjections on planning we always note with great interest to see whether one could gather from them a common theme, a common idea, which one could say had spread throughout and wholly impregnated the ranks of the Conservative party. This, after all, is the first time we have had an opportunity of discussing the economic plans of the nation, as embodied in an Economic Survey, since the publication, on 12th May, 1947, of that most remarkable document, the Conservative Party's Industrial Charter, which for the convenience of hon. Members I must immediately say is published in two versions. There is a 1s. version, which presumably the serious student of economics can study, and also a 2d. version. Indeed, there is a third version which only came out a month or two ago. The point about the first two versions is that they are in conflict with one another in quite important particulars.

I therefore had hoped that today we would have the Opposition in its best historic rôle, because I believe the Opposition should have a proper and honoured rôle in the deliberations of the House. The party I have the honour to represent in one important city in the country has also had a long rôle in Opposition. I hoped that today we would have some really constructive suggestions, because it is common ground between the parties that the Economic Survey itself states the facts of the situation. There have been very few hon. Members in any part of the Committee who have challenged the facts which have been stated—

Photo of Major Donald Bruce Major Donald Bruce , Portsmouth North

The only conflict of any significance is that hon. Members on this side of the Committee consider that the Economic Survey for 1948 embodies a plan and hon. Members opposite consider that it does not. I therefore listened very carefully for some constructive alternative. Did we get an elaboration of the very carefully set out phrases in the Industrial Charter under the skilled editorship of the right hon. Member for Saffron Walden (Mr. R. A. Butler)? No. Did we get an elucidation of some of the more abstruse parts of that rather involved document? No. All we got was a statement that the solution of our problems could only be accomplished if there were a reversion to the price mechanism.

This has been the whole burden of the Opposition's contribution not only today but in the past two or three days of the Debate—leave everything to the price mechanism again and our troubles will right themselves. It is, therefore, very instructive to read what some prominent Members of the Conservative party have said about the days when the price mechanism operated. And it should be noted that there is one conrol with which the Opposition entirely agree. They grant the Government the right at any time to utilise the financial instrument at its disposal to provide the general background within which the economy can function. It is by the handling of finance and price mechanism, according to the Opposition, that our prosperity can be regained.

I observed in a publication "Design for Freedom" with which we understand the hon. Member for Monmouth (Mr. P. Thorneycroft), who made such a fluent and vitriolic speech the other night, is connected, says: Throughout the whole period 5958 to 1939 the average number of men out of work at any time in this country was one and a half million. To finish a job in those days was to run a grave risk of having no job at all. Deprived by successive Governments of any, or any effective, answer to the problem, workers' organisations endeavoured to deal with it themselves. I cannot honestly dissent from the verdict of the hon. Member, who is a Tory, or his colleagues on the National Liberal, or is it Liberal benches, and some other dissident members of the Conservative Party, because quite obviously that statement is true. But the right hon. Member for Woodford (Mr. Churchill) has endeavoured to induce the population to believe that all the stories about the bad old days of unemployment are so much moonshine. Therefore, I was very much interested to read the remarks of the hon. Member for Monmouth, whom we hope will not be on the third bench of the Opposition for very long.

Then we got from the right hon. Member for Aldershot that price mechanism was required. But we got more than that. We also had the statement that central planning would not work, that the Government could not plan centrally, and that the experience of the last two or three years had proved this. It is, therefore, instructive to read what the right hon. Gentleman himself said in the House on 10th March last: To suggest that we believe—and it is often suggested—that the Government should not have a central and overall plan for extricating the country from its present difficulties is manifestly absurd and insults our intelligence.

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

If tomorrow the hon. and gallant Member will read what I said this afternoon, he will find that both my statements are perfectly consistent. I said that the Government could not make a plan of the present sort or vintage. What they are trying is a detailed central plan.

Photo of Major Donald Bruce Major Donald Bruce , Portsmouth North

I am pleased that the right hon. Gentleman has risen to his feet, because I thought he would do so. I want to complete the quotation I was making before returning to the appropriate section of the Industrial Charter which I believe also to be of interest to the right hon. Gentleman: They must plan the key essentials; upon that we are all agreed. But they must also plan them right and must be prepared to enforce the key controls, whatever the consequences, whether they are popular or unpopular, and whether or not they inflict hardship."—[OFFICIAL REPORT, 10th March, 1947; Vol. 434, c. 1001.] If what the right hon. Gentleman said this afternoon was consistent with what I have just read, I should be very surprised. Let us see what the Industrial Charter has to say about planning.

Photo of Major Donald Bruce Major Donald Bruce , Portsmouth North

This is the dear version, the shilling edition. I do wish that right hon. Gentlemen opposite would listen to their own Industrial Charter, because it is rather important that they should read it. This is what the Conservative Party say: Our basic principle is to devolve both the making of plans and their execution. We contrive a well-knit system of consultation and responsibility extending from the Cabinet Room"— I emphasise that "Cabinet Room"— from the Cabinet Room to the floor of the workshop … the Government and both sides of industry should work out together, at all levels, the national budget of our economy, and the carrying out of that budget or plan should be left with confidence to the enterprise and public spirit of industry. We want co-operation in making the plans and competitive enterprise in carrying them out. If that is consistent with what the right hon. Gentleman said this afternoon, I think he had better get very quickly into consultation with his absent friend the right hon. Member for Saffron Walden, otherwise I can see an even larger split developing in the Conservative Party than now exists. [HON. MEMBERS: "Read on."] The right hon. Gentleman must really take his medicine after he has given it. The right hon. Gentleman said very truly—and this was the first time we had a glimmer out of him this afternoon—that, without taking detailed powers of direction, one could not ensure the accurate working out of any plan. That is quite obvious. That is exactly why the Opposition are continuously deriding the Government for not having produced a blueprint to which the nation can work for some more strong central guidance for industry, because they know perfectly well that without adopting totalitarian methods it is entirely impossible for any Government—

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

Take your hand out of your pocket.

Photo of Major Donald Bruce Major Donald Bruce , Portsmouth North

I am following the example of some hon. Gentlemen opposite who do precisely the same thing, and I do not require lessons in manners from the right hon. Gentleman. What the Opposition say is that it is impossible, and I entirely agree with them, to prepare a plan and execute it meticulously without the direction of labour. The Opposition know that such a course is repugnant to the Government. Therefore, they imagine themselves to be in a perfectly safe and strong position to say that, whatever the Survey or plan produced by the Government, there must be no deviation from it at all, otherwise they can immediately criticise.

I would say that the Economic Survey for 1948, on the contrary, does embody a plan. It embodies a plan which it is quite impossible to achieve with any great degree of accuracy simply because so much of its execution depends on the self-discipline and co-operation of a whole people. The Opposition know this as well as anybody else. What are the methods open to a Government for carrying any plan into operation? They are able, by raw material allocations, to cause redundancies in certain industries, and they can hope thereby that there will be a movement of manpower from one industry to another. I do not know whether the right hon. Gentleman agrees with raw materials allocation. The Industrial Charter is conveniently silent on this matter. If the right hon. Gentleman reads some of the publications from his party's Conservative Political Centre, including "Topics of the Day," he will find some very interesting observations, which he ought to read. The Conservative Party are in agreement and in disagreement at the same time. These are the two fronts which they always present to the country.

There is another way in which the objects of the plan can be forwarded, and that is by direction of labour from one industry to another. Hon. Members did not like such a method, because when the direction of labour order came up it was voted against wholesale. It was, in fact, described as dictatorial, and presumably hon. Members opposite are today still willing to call it dictatorial, even when only 17 people have been so directed in the last six months. Presumably also the direction of labour on a wholesale scale is absolutely ruled out by hon. and right hon. Members opposite, as it is, indeed, by the Government. What, then, are the remaining factors that can be relied upon to put into operation a plan which involves wholesale changes of labour from one industry to another? The Government can endeavour to persuade by propaganda. Every time the Government endeavour to persuade by propaganda, we get a howl of indignation from Members of the Opposition, attacking party propagand4, the exist- ence of public relations officers and expenditure on advertisements.

The final way in which the Government are able to influence this movement, at any rate slightly, is by being able to influence the various wage levels. This is a serious problem, the problem not only of His Majesty's Government but of the whole people. It is impossible to get changes of manpower from one industry to another, in many instances, if an existing and traditional wage differential between those industries is going to be maintained. That is why I welcome the declaration of the Government on Personal Incomes, Costs and Prices, which has been reproduced at the end of the Economic Survey. The plan has been prepared in consultation with both sides of all the industries concerned, exactly in the same way as the Industrial Charter recommends. The Economic Survey for 1947 put forward the proposals much more succinctly than the Industrial Charter.

Provided that all people, in whatever industries they are engaged, will cooperate, I believe that this year's plan can be achieved. It can only be achieved, however, with very great difficulties. The difficulties are not due to inflation from the causes mentioned by hon. Members opposite, who still seem to think that the world moves around a hub centred on Throgmorton Street. They seem to think that the cheap money policy pursued by the former Chancellor of the Exchequer is the principal cause of the existing inflation. I often wish that right hon. Gentlemen opposite would argue this out with the hon. Member for Evesham (Mr. De la Bère), who represents farmers. Indeed, my own family are farmers and we know exactly what it means to have the dear money policy of the City of London at a time when an expansion in agricultural credit is required.

Hon. Members opposite seem to be under the illusion that it is the monetary policy instituted by the former Chancellor of the Exchequer that has caused all the existing inflation. That is a most dishonest argument to put forward. It is one of the most shockingly dishonest arguments that any responsible Opposition, jealous of the reputation of its party, should utter. Hon. Members opposite know perfectly well that the greatest problem of all facing this country, without which on a long-term basis our export targets cannot be achieved, lies in the restoration of its capital equipment. They know perfectly well that our war-time losses of capital equipment, which include losses of merchant shipping, obsolescence in industrial premises, damage to housing and factories, and so on, amounted altogether to about £3,000 million. They know perfectly well; yet they have the audacity to pretend that the existing suppressed inflationary conditions arise from the cheap money policy pursued by the former Chancellor of the Exchequer, and presumably continued in a slightly mitigated degree by the present Chancellor. The main difficulty which our people have to face is that of restoring our industrial potential. While that is being done, it will be quite impossible to have any substantial rise in ordinary consumption standards. We know that as much as do right hon. Gentlemen opposite.

Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby

Is the hon. and gallant Member suggesting that the difference between 3 per cent. and 2½ per cent. in current rates makes any particular difference to the requirements of the industry of the country?

Photo of Major Donald Bruce Major Donald Bruce , Portsmouth North

No, I am not, I am arguing the opposite; but if the hon. Member cares to consult with his right hon. Friend the Member for West Bristol (Mr. Stanley) he will find that the right hon. Gentleman did think so. Therefore, he should argue it out with him.

The problem is to build up our capital equipment without which our future capacity increasingly to combat the growing competition of other countries of the world cannot be built up; and the pursuing of a policy of rebuilding our capital equipment, our plant, factories, machinery and everything that goes with it, is one which immediately throws a strain upon the whole economy. Hon. Members opposite know that as well as anybody else, and it is quite dishonest to suggest that, at a time when the capital equipment of the country is having to be restored, we can have an increase in consumption standards. The 1948–49 Budget, which is linked with the Economic Survey for 1948, makes an allowance for that position. It is a sane and perfectly realistic document which, by budgeting for a surplus, and by the manner it has budgeted for that surplus, and also after having taken into account such foreign aid as may be obtained, has in fact held this position and allowed for this capital equipment reconstruction.

Therefore, I think that the Budget which has been introduced by my right hon. and learned Friend, and upon which I should like later to offer some observations in some detail as to some of the provisions, is a really realistic effort. I am reassured to find that the bulk of City opinion appears to agree with that verdict. One of the most amazing things was to read, the morning after the Budget, the City Press, and to find that not one of the responsible City writers could agree with the other about whether it was a good or a bad Budget. I think it is a good one. But I am concerned with the larger implications contained in the Economic Survey for 1948. That Survey may not be fully carried out in respect of every target. It may be seriously below in some targets; in respect of others it may be higher. Its fulfilment will depend upon the self-discipline of our people and the co-operation of industry. If we accept it in that spirit and in that challenge, we shall make a mighty good job of it in the year that lies ahead.

6.44 P.m.

Photo of Sir Waldron Smithers Sir Waldron Smithers , Orpington

I ask hon. Members not to interrupt me more than they can help, because I have given a promise that I will speak for only half an hour. I do not intend to follow the hon. and gallant Member for North Portsmouth (Major Bruce), although I have followed his activities in this House for a long time and I have heard him broadcast, and I think the ideas he holds are some of the most dangerous in the country.

The President of the Board of Trade painted as rosy a picture as he could of the general economic situation, but it is not rosy enough. I wish to show how recovery is not nearly as good as it might be. The Chancellor of the Exchequer made his Budget Statement last Tuesday with freedom and democracy on his lips but with a bludgeon of the totalitarian dictator behind his back, in his left hand. It is the Russian technique. The lust for power is insatiable and difficult to satisfy. In his broadcast the 'same evening—and I only mention this because I want to show how important these spiritual qualities of confidence and stability are to Britain at this time—the Chancellor referred to "our beloved country." Yet, when he was a freelance demagogue, he is reported to have said: If Germany should defeat Britain in a capitalist war, I do not believe it would be at all a bad thing for the British working classes. On another occasion, he is reported to have said: God, 'King and country, which being translated means capitalism, property and profits. He is also reported to have said: You have only to look at the pages of British Imperial history to hide your head in shame that you are British. What confidence can this House, the country, and, what is more important, the outside world, especially America, have in a Chancellor with such a record as that? Yet confidence lies at the root of the economic recovery of our country.

In referring to the Economic Survey and the targets for 1948, the Chancellor in his Budget speech referred several times, to their provisional and uncertain character, and said that they would be subject to revision and correction. At the end of the Economic Survey for 1948 comes Appendix r, which bears this curious title Fulfilment of the Objectives of the Economic Survey for 1947. The "Investors' Chronicle" for 13th March, 1948, shows how these targets were fulfilled. The details are there for all to see. Under nine headings the error between the estimated target and the actual achievement was 93 per cent., 155 per cent., 14¼ per cent., 38 per cent., 3o per cent., 1,900 per cent., 77 per cent., 224 per cent. and 118 per cent. No sooner do the Socialist theorists set up their targets of a planned economy than along comes a set of circumstances which knocks all their expectations for six. What guarantee is there that the targets for 1948 will be any more near the mark than were the targets for 1947?

It is admitted on all sides of the House that the country is doomed unless we get Marshall aid, and in his Budget speech the Chancellor referred to the passage of legislation by Congress for the European Recovery Plan. He expressed his deep and genuine gratitude and added: I need not emphasise what would have happened if no aid had been forthcoming … and acknowledged the gravest consequences to our standard of living. …—[OFFICIAL REPORT, 6th April, 1948; Vol. 449, c. 41–2.] He also acknowledged that Marshall aid only puts off the day of reckoning, and that we should not be able to indulge in luxuries. I ask the Committee to mark those words; I shall refer to them in a moment. The Economic Survey for 1948 is a concealed plea for Marshall aid, or at least evidence of how vital that aid is. As I have shown, the percentage of errors in the 1947 survey is amazing, and there is no guarantee that the Chancellor's true Budget surplus of f33o million will be achieved.

I would ask hon. Members on all sides of the Committee to read the book recently published by Mr. Henry Hazlitt, an influential American, called "Will Dollars Save the World?" of which a brilliant review appeared in the "Reader's Digest" for February, 1948. It is assumed that Britain's and Europe's present economic difficulties are the consequences mainly of the destruction and dislocations of war. While the appalling physical destruction and economic and political problems that the war brought upon Britain and Europe are not to be minimised, a vital question must be aked: Is the war primarily responsible for the present crisis or is the policy of State control since the war responsible? The central question is not what caused the crisis but what measures are most likely to cure it. The main obstacle to the recovery of Britain is the present economic policy followed by the Socialist Government.

The Budget and the economic outlook for the next year must largely depend on what happens in Germany. One of the most important things for the recovery of Britain is to get Germany on her economic feet again with adequate safeguards against rearmament and the removal of a cancer spot from Europe. Purges seem to be the order of the day. I say definitely, and I have information to back this up, that we need a purge and a large reduction of the British personnel on the Central Control in Germany.

The Government are spending large sums and incurring heavy losses on nationalised industries. They are being compelled inevitably to raise prices of the products of nationalised industries. There are food subsidies, increased pensions, family allowances and the like. None of these expenses, the Government insist, can be reduced, yet the Government blame rising prices not to inflation but to speculators and hoarders. The No. 1 priority must be food. The Government fixes ceiling prices mostly on necessities. The inflationary purchasing power, which is hedged off from necessities, expends itself on luxuries or other commodities which are not controlled. Necessities, therefore, are under-produced, while other cornmodities, not controlled, are over-produced and a huge misdirection and waste of labour results.

Britain wishes to buy raw materials abroad as cheaply as possible, and attempts to do this by keeping the official rates of exchange of her currency arbitrarily high. This makes British goods extremely expensive in terms of foreign currency. The chronic excess of imports was not primarily brought about by the destruction of the war. It is being brought about by the policy of this Government—

Photo of Mr Marcus Lipton Mr Marcus Lipton , Lambeth Brixton

Will the hon. Gentleman—

Photo of Sir Waldron Smithers Sir Waldron Smithers , Orpington

No, I cannot. On page 7 of the Economic Survey is written: Today, however, virtually the whole world is short of dollars. This may be taken to imply that the situation is somehow the fault of America. 140 my mind it is proof that a system of free enterprise is better, and doing more good to the world than a system of State control. The real trouble is that Britain wishes to buy more goods and services from the United States than the United States want to sell to Britain. The trouble is not a shortage of dollars, but a shortage of goods and services to exchange for dollars, at world competitive prices. It may even be found that the restoration of free markets in exchange, and the removal of controls as quickly as possible and practicable, would make virtually the whole Marshall Plan unnecessary. the sooner we stop State trading and allow the well-tried and well-proved channels of trade to operate, while there is something in the larder, the better.

A major remedy for our present desperate situation is drastically to reduce Government expenditure and postpone the extension of health, education and other services until we can afford them. All these Services have to be paid for and increase the cost of production and impede or destroy our ability to compete in the markets of the world. I repeat, priority No. I must be food. We must export goods and services at world competitive prices, the alternative is starvation. This is not a party question, but a matter of common sense. Even Mr. Speaker gave a warning at Edinburgh on 23rd May, 1947. He warned the country against being misled by what we call social security. He said that if we thought that by social security we can sit back and do nothing and that is all we need do, that was not social security but social disaster.

Here is an instructive quotation from another source: There is no guarantee that Europe will put financial assistance to proper use, or that she will not squander it and be in just as bad a case two or three years hence as she is now … If I had influence at the United States Treasury"— [HON. MEMBERS: "You have not."] I am quoting somebody. I ask hon. Members to give me a chance. If I had influence at the United States Treasury I would not lend a penny to a single one of the present Governments of Europe These words were written by Lord Keynes—John M. Keynes as he then was—in 1919. They apply with startling accuracy to conditions today.

An influential man in America, Mr. Mervyn K. Hart, President of the Economic Council in New York, gave a broadcast address in America on Marshall aid. Do not forget we are going cap in hand to America for help. He gave a broadcast on Marshall aid for which we are making a pathetic appeal in the foreword to the Economic Survey. Its title was "Let's not subsidise European Socialism." He said: Unless the details of the Marshall Plan are drastically revised, then, instead of helping to establish freedom in Western Europe, we will merely promote socialism. Socialism is unsound, and will end in economic and political bondage. Socialism has never succeeded in supporting a people. Ambition languishes, nobody gets ahead, no matter how hard he works, and so nobody tries. And yet today's misguided British leaders are asking the American taxpayers for seventeen billion dollars, and defiantly insist that they will go ahead with their socialism and nationalisation policy. One of our own leading economists, Prof. John Jewkes in his recently published book "Ordeal by Planning," says: Central planning ultimately turns every individual into a cypher and every economic decision into blind fumbling, destroys the incentives through which economic progress arises, renders the economic system as unstable as the whims of the few who ultimately control it, and creates a system of wire-pulling and privileges in which economic justice ceases to have any meaning. The Survey proves that three years of Socialism in practice has stripped away all the false trappings. The search for scapegoats, spivs and drones has proved futile. There is an increasing contempt for the law. By their policy and vanity the Government have prevented full recovery. The spiritual content of Socialism has proved a sham. American aid will be futile unless we have a new Parliament. The Economic Survey shows that never was there so pathetic a confession of administrative failure, never so frank an avowal of complete and utter ineptitude following so quickly upon the glowing boasts made at the 1945 election.

To any transatlantic reader of the Survey, Britain must appear like an inveterate drug addict, who persistently refuses to abandon his habit, but with quiet persistence sets himself bigger and better targets of hard work in the days to come, in the blissful belief that by setting such targets he automatically achieves them. Another country is in the same difficulty. Mr. Soltan Vas, the economic dictator of Hungary, said: The trouble is that we have nationalised so much of our industry that there are not enough private concerns to pay for the deficit. The "Daily Telegraph" for 9th April also publishes a serious warning which comes from two of New York's most influential papers. It says: Britain has taken another step in its progress towards the abolition of private capital and the free enterprise system. Obliteration of private capital may come more slowly in England than in Russia, but it seems to be coming just as relentlessly. Without American aid we collapse. Beggars cannot be choosers, and it may still not be too late for America to insist on some expert supervision of the expenditure of Marshall aid. I hope she will.

The Government squandered the American Loan. They have squandered a great deal of the national savings of our people. They excuse themselves in the Survey by blaming rising world prices; but this is the inevitable result of bulk purchase and State trading. It is these controls which create shortages. There is not a world shortage of food. What guarantee have we that the Government will not also pour Marshall aid down the Socialist drain? In the foreword to the Survey, in speaking of Marshall aid, it is written: On no account must such aid be used merely to provide us with greater ease or comfort Yet in his Budget speech the Chancellor envisages, among other things, an increase of £32 million for education, £145 million for National Health services, and £14 million of the taxpayers' money for the Ministry of Food to gamble with. The Government seem determined to enact their slogans and theories, and damn the consequences. Why do the Government project programmes which it is beyond our capacity to achieve? Last year wages, in spite of the appeals of the Government and the half-hearted support of the T.U.C., rose by 14 per cent. Those rising wages did not help the workers at all. They did not increase their purchasing power. The five-day, forty-hour week, holidays with pay, and output per man-hour being not nearly as high as it might be—all those factors must increase our cost of production, and impede or destroy our ability to compete in the markets of the world. Marshall aid, like the American Loan, only puts off the day of reckoning.

In all political and economic thinking—

Mr. Beehervaise:

On a point of Order. Is it permissible for the hon. Member to read his speech?

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and Northern

It is not permissible for anybody to read a speech.

Mr. Beehervaise:

In the case of back benchers apart from Ministers, is it permissible to read a speech in this Cornmittee?

Photo of Sir Charles MacAndrew Sir Charles MacAndrew , Bute and Northern

I suppose that the hon. Gentleman thinks that the hon. Member for Orpington (Sir W. Smithers) is reading his speech. I was not of that opinion. It is out of Order to read a speech, but I did not think that the hon. Gentleman was doing so.

Photo of Sir Waldron Smithers Sir Waldron Smithers , Orpington

I am discussing the intricate details of the Budget and also making quotations, I want to make sure that they are correct. I have got full notes, but I am not reading a speech. I ask hon Gentlemen to believe that what I am saying is being said in the interests of the poorest of our people. What must the Americans think of us when, in one breath, the Chancellor says: On no account must such aid be used merely to provide us with greater ease or comfort. and, in the next breath, he adds millions to provide more ease and comfort for our people, and by so doing destroys incentive? It is hypocrisy run mad.

The most pernicious and wicked item in the Budget is the capital levy. Did the T.U.C. order the Chancellor to put it in? The Chancellor did not manage to get his famous Emergency Powers Act passed on the first day when the Government came into power. He is now trying to get the same powers by more subtle and different means. In imposing the capital levy the Chancellor is following the technique of Moscow. He said: I would emphasise that this is not an annual tax."—[OFFICIAL REPORT, 6th April, 1948; Vol. 449, C. 72.] On 7th April the "Daily Herald," no doubt unwittingly, revealed the deceitfulness of this statement. One of their captions said: £100 million off Income Tax. and the article continued: Sir Stafford Cripps, in his Budget, gives more than £100 million relief in Income Tax and collects £105 million as a special contribution from those with large income investments. The £100 million relief in Income Tax and the i105 million from the capital levy must lead to inflation, because those who get relief will have that extra amount of purchasing power. Will whoever is Chancellor next year be able to continue these reliefs unless he continues the capital levy? The capital levy is smashing the one class who can pull this country out of the fire. This action will ruin the credit of the country. Government stocks have fallen ever since it was introduced.

The former Chancellor, the right hon. Member for Bishop Auckland (Mr. Dalton), made an attack and said that there was a conspiracy against the cheap money policy. I can only think that he is making a bid for Left Wing leadership. For a man to be so vain that he thinks that he can control the price of money in this country, when really it is a world price, is the same as a man trying to bale out the Atlantic with a teaspoon. One of the greatest menaces to the recovery and prosperity of Britain has been the right hon. Member for Bishop Auckland. After his grave indiscretion and resignation from the Treasury, it might have been expected that he would keep quiet for a time. His policy of cheap. money is one of the main reasons for the inflation and for the difficulties in which the country finds itself today. His broadcast on Saturday, 21st February, was truculent and nauseating. He boasted about the Budget surplus for which he claimed to be partly responsible. He justified himself by claiming that the State had taken the amount of Budget surplus from purchasing power and thus counteracted inflation. That might have been a sound argument, had that amount been frozen, but the trouble is that the purchasing power was merely diverted to Government expenditure. May I pay a tribute to the "Statist" for their help in this part of my speech.

The former Chancellor would never tell me how much of the taxpayers' money he used to buy the gilt-edged market up to a 2½, per cent. long-term basis. It is estimated that he spent £800 million of the taxpayers' money in doing that. When he got it there, he went off to America and boasted of the enhanced British credit under a Socialist Government. He did away with the Local Loans 3 per cents. and issued Treasury 2½ per cents. at par. According to the tape today, the Treasury 2½ per cents. stand at nearly 25 per cent. discount. Who is to pay the loss on that? The taxpayer.

Photo of Sir Waldron Smithers Sir Waldron Smithers , Orpington

Who is to pay the loss not only to those people who were almost compelled to take the Treasury 2½ per cents, but who is to pay in order to make up for the crushing blow to the credit of our country? Then, the present Chancellor had to issue 3 per cent. stocks for the transport and electricity payments. Tonight, according to the tape, the Transport Stocks stand at 5¾ per cent. discount, and the Electricity Stocks stand at 3⅜ per cent. discount. The right hon. Member for Bishop Auckland ought to be surcharged for those losses. The transport and electricity shareholders have never been able to get par for their Government Stock. The truth is that the right hon. Gentleman for Bishop Auckland is the king of the pachyderms, except that, temporarily, he is packing his trunk.

I want to make a quotation which comes from a very responsible business man, Sir William Shearer, in his speech to the ex-proprietors of the Scottish Power Company, when he said to the shareholders—and this is typical of the speeches of responsible men who have been running industry efficiently for years; and it is a terrible indictment of this Government: Still, I think you will agree that the policy adopted by your directors of speeding up the distribution strength of our group organisation is the right one—the honest one. Where we erred was that we could not anticipate that any British Government, renowned throughout the centuries for honesty and fair play, should have penalised producers by introducing such a confiscatory measure. The Government are breaking one of the Commandments—"Thou shalt not steal"—and will have to render an account. I have got exactly three minutes more, and I hope the Committee will show me a little patience, because I want to say something which is hard to say.

This crisis—and crisis means judgment, a judgment on the futility of Socialist policy—is neither economic, financial nor dollars. It is a spiritual and moral crisis. I am not surprised at the events in the world today. I ask hon. Members to read the 13th Chapter of St. Mark, and, while they are reading it, to look round the world today at all the events going on. I ask them to look round the world because Britain is dependent, more than any other country, on world conditions. Hon. Members all know what is going on in the world today. It is a spiritual and moral crisis: For we wrestle, not against flesh and blood, but against principalities, against powers, against the rulers of darkness of this world, and against spiritual wickedness in high places. It is also written that false prophets shall arise and deceive many. I say that a false prophet has arisen in the present Chancellor of the Exchequer, but he has' not deceived me. The only salvation for this country is for men and women to be free, within the four walls of the Ten Commandments, to use the talents which God has given them. God in his wisdom gave to Moses Ten Commandments; this Government is vainly trying to run the country with about 24,00o. The only way to save this country is to get this Government out, and I would remind this Committee and the country of a Chinese proverb—"Act now; it is later than you think." I say to the Government, in the words of our beloved leader on this side of the Committee, "Set the people free."

7.14 p.m.

Photo of Mr Percy Daines Mr Percy Daines , East Ham North

The hon. Member for Orpington (Sir W. Smithers) has taken 30 minutes of the time of the Committee, and it is rather difficult, particularly if one tries to make a debating speech, to follow the hon. Member, though it did dawn on me, after he had been speaking for some time, that he did not really like this Government, and after listening to his speech, I was also convinced that, not only did he not like the Government, but was not particularly fond of my right hon. Friend the Member for Bishop Auckland (Mr. Dalton). Having said that, I would like to bring the attention of the Committee back to the Budget again, and particularly to its economic aspects.

One of the most important tests by which the Budget will be judged, and the consequent action of the Government to implement their economic policy will be determined, is how far it affects prices in this country and how far prices must come down. I hope my right hon. and learned Friend the Chancellor will not think too unkindly of me if I say that, during his speech, he seemed to me to be something like a missionary with a halo round his head going out into the jungle to convert the tigers of private enterprise, and, having delivered himself of a moral lecture, as only he could do, he seemed to satisfy himself that they were completely converted and to finish up by putting a price ticket on them. I believe that private enterprise, particularly in distribution and in its retail aspect, cannot be changed by any moral exhortation, whether it comes from the Prime Minister or from the right hon. and learned Gentleman. Rather would I say that the action of the Co-operative movement in their one clear and united step in bringing down the prices of basic foodstuffs is a far greater contribution towards bringing down prices in this country than any moral exhortations from leading members of the Government.

In one section of his Budget speech, the Chancellor placed great emphasis on incentives and on the various reliefs that have been given, but these may have an important consequence upon the inflationary position to which so far the attention of the Committee has not been directed. In fact, the very reliefs that have been granted are bound to increase the purchasing power for the same amount of goods. In addition to that, it was emphasised by the President of the Board of Trade this afternoon that full employment itself is bound to mean increased purchasing power for the masses of the people of this country.

When the right hon. Member for Aldershot (Mr. Lyttelton) talks about returning to the sacred code of the price mechanism, he seems to me to overlook, as, to a certain extent, the Government have overlooked, the fact that in many commodities we have not the same amount of goods available as we had before the war. Because of the increased purchasing power of the masses, this threat is bound to continue. I would say to the Committee, and particularly to the Opposition, that it is a condition of the functioning of the price mechanism that there should be more goods available than there are buyers of them, and that when we have a market, as we have today, where the reverse is true, then the price mechanism cannot possibly function.

Let me give one other illustration. My right hon. Friend the Minister of Food changed his tactics in regard to the distribution of greengroceries and fruit, and I heard him argue, with his usual theoretical ability, that by increasing the number of greengrocery shops and by having plenty of competition in the retailing of greengroceries, prices were bound to come down. That just is not true, and it did not happen. It has not happened in the case of certain kinds of fruit and greengroceries because there has not been a substantial increase of supplies. It has not happened because of the increased purchasing power of the working people of the country.

I pass to another aspect of this basic question of distribution which so far has received little attention in the House, no attention in this Debate, and very little attention from the Government. In a previous economic Debate, my right hon. and learned Friend said: The same difficulty affects retail and wholesale margins, particularly the retail. Here again, the margin necessary to enable the small shop to survive means often much greater profit in the large shops, yet the bulk of the goods sold through the small shops is enormous, they are an essential part of the distribution system, and so must be maintained in being."—[OFFICIAL REPORT, i2th February, 1947; Vol. 447, c. 594.] What that means is that the Ministry of Food and the Board of Trade are fixing retail margins on the basis of the least efficient in distribution, and I cannot see how this country can continue to maintain the terrific charge that comes in retail distribution. Let us take another aspect of what this actually means. I wish to read a quotation from Mr. Douglas Houghton, general secretary of the Inland Revenue Staff Federation, who made this statement in regard to the retail trade—

Photo of Mr George Drayson Mr George Drayson , Skipton

Does the hon. Member remember that that article was questioned, that Mr. Houghton was quoting from private sources of information, and that the Financial Secretary very much regretted what he said?

Photo of Mr Percy Daines Mr Percy Daines , East Ham North

Yes, I quite agree. I expected some hon. Member opposite to make that observation, but I see no reason why the quotation should not be made, as I am quoting from the public Press. I will give the actual quotation: The public would get a surprise if the profits made by ordinary shopkeepers were posted up outside as a matter of interest to the docile creatures standing in the queue. Profit margins are palpably excessive, and if the various Ministers do not know it, it is time they did. Income Tax people do. Tax evasion is rife, capital profits are escaping taxation altogether, and excess profits continue unabated although E.P.T. has gone. I have another rather lengthy passage here which I will not inflict upon the Committee, except to submit two or three specimen quotations which show that in the boots and shoes group last year there was a 16 per cent. increase in profits; in the bazaar trade, which is well buttressed by Woolworths' reports, there was a 25 per cent. increase; in departmental stores, 20 per cent.; and even in multiple grocers, with somewhat tighter margins, 10 per cent. All this is obviously a charge on the consumer, quite apart from the enormous absorption of labour that takes place.

I do not believe that any party, including my own party, has yet faced the problem not only of limiting distributive costs but applying some measure of organisation that can overcome the dangerous uneconomic situation that exists in the retail trade of this country. I quite admit—and I make this present to anybody who cares to take up these points—that many of the figures that I am giving may be estimates rather than precise figures. As the Committee knows, we are awaiting the pilot Census of Distribution, but nevertheless there are some figures that are worthy of consideration if only to call the attention of the Government to the urgency of the problem.

In "The Economist" of 27th April, I observed that in this country there are 768,000 shops serving the population. That means in rough figures that there is one shop for every 50 persons in the country. In food shops there is one for every 79 persons in the country; and in the investigations that were made in 1936 it was shown that in many of the old towns in this country there was, on an average, one shop to 40 or 50 persons. This country cannot afford, not only in the immediate future but in the long-distance economic future, to allow the present lack of organisation in distribution to continue, with such a heavy charge and toll upon our industry.

May I again refer to the Co-operative position? I make no apology for doing so. I hold very strongly that the Cooperative system properly developed, with initiative and enterprise, is the real way by which distribution in this country can be solved, either from the test of efficiency or from the test of collectivist and Socialist principles. In 1938 the Cooperative movement, with a considerable limitation of sales outlet, did one-tenth of the retail trade of this country in one-thirtieth of its shops. Let me direct the attention of the Economic Secretary to the question of costs. He will find, as I have found in official figures which we were given by the Ministry of Food in 1944, that when food entered the distributive trade it did so at a cost of £100 million, but that the same food in its various completed stages when it reached the retailer realised no less than L1,35o million. Those figures, I submit, are disproportionate to the service rendered.

Take the question from the standpoint of labour itself. I ask not only the Economic Secretary but my right hon. Friend the Minister of Labour to pay some regard to this backward move which is again occurring in labour engaged in distribution. Giving the background facts first, between 1924 and 1938, among insured workers there was an increase of labour employed in distribution of 55 per cent. That means, roughly, to use the simple fraction method, that for every two employed, another one was added. That contrasts with a net increase of 10 per cent. in production labour. That would not be so bad if we could dismiss the point and say that the figure is not moving back again, but the same position is arising again, and during the last 12 or 18 months there has been another increase of labour in the distributive industry of nearly 500,000. I say to the Government: whether control is effected either by more realistic distributive margins or by direction of labour, we cannot afford this constant wastage on services that is occurring today. The position must be faced.

This problem of distribution is only being nibbled at, either by the Government or by any substantial elements concerned with economic thought. I do not hold that the Lucas Report is necessarily the answer to the whole of our problem, but I do say that the Lucas Report is a sketch plan of action which demands the most serious consideration of the Government. I believe the Government will be compelled by economic necessity to turn the Food Ministry from a negative Ministry of price control and of margin limitation into a creative business organisation. As a Socialist and a Co-operator, I have always held the view that it is the basic job of a Labour and Socialist Administration to see to it that every, person in the community has a basic standard of nutrition. I am not going to try to argue, or to persuade the Government, that the figure of subsidies for food should automatically be allowed to rise. On the contrary, I know from my experience in the Co-operative movement that there is a substantial case for revision and for changes in regard to many elements upon which a food subsidy is being placed. What I am pleading is for the end of the negative attitude of the Food Ministry and positive creative action in its place.

Finally, having said all that, I feel I am now almost in the same position as hon. Members opposite. I offer these words of criticism to the Government in no carping sense. I believe that, broadly and on large lines, the Budget represents a substantial measure of social advance. What criticism I have made has been, I hope, of a constructive nature to try to draw the attention of the Government and of this Committee to what I believe is one of the most wasteful forms of our economic activity—the distributive trades of this country.

7.33 p.m.

Photo of Mr George Drayson Mr George Drayson , Skipton

I have been waiting for two days to inflict my views on the Committee and I may find it necessary to say one or two things about the tax proposals in the Budget as well as deal with the Economic White Paper.

A great deal has been said about the speech made by the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton), and I think the reason why importance has been attached to what he said is because we realise more and more that what he says represents the views of a large section of his party which leans further to the Left than the majority. He must have enjoyed the opportunity that was afforded to him of revealing to the Committee the secrets of the Budget he would have introduced had he been Chancellor of the Exchequer, in the course of which we learned that the capital levy he had in mind was something very much larger than the imposition that we have before us at the present moment. There was one point in his speech with which I agree, and that was where he said that the food subsidies should be brought down to the lowest possible number of items—if we must have them, at least they should be confined to a limited number of commodities, leaving, I should imagine, all those other items of food to be dealt with by ordinary trade channels.

We are asked to put forward some constructive suggestions as to where we would effect economies. Referring to my last remarks, is it really necessary to carry on with a subsidy on the tea ration, and could not that particular department of the Ministry of Food be swept aside? I believe, too, we should get a much larger ration because when the Chancellor is budgeting for the amount of money he can afford to spend on these subsidies, he has to limit the amount of any particular food that he can let the people have by the amount of money he is prepared to spend on subsidising it.

It occurs to me that economies could be effected by reducing a large number of the Government Departments. Is there really a need at the present moment for a Ministry of Supply? What useful function does that Ministry perform? All we see is large dumps of war stores throughout the country, of which they seem very reluctant to dispose because responsible for these stores are director-generals of disposal and a whole army of assistants, and as long as they can keep just a few of the items for which they are responsible on their lists, then their jobs are secure.

We have in Yorkshire, at Byram Park, the scandal of the disposal of motor vehicles which has now been going on for more than two years. Why could not these vehicles all have been disposed of in a year at least? Instead of that, like vehicles in Germany, they have been allowed to deteriorate during the last two and a half years. The fact that some items are now realising higher prices than they did two years ago is merely the measure of the inflation that has taken place during that period. I have no doubt there is a very good job for a number of people in holding up the disposal of these items as long as possible. Many of these war stores could have been put into productive use months ago, but the Government have preferred to sit on them all this time. Is the Ministry of Supply really necessary? That is one economy we could effect. What about the Ministry of Works and the Ministry of Town and Country Planning? Could not all these three Ministries, with the Department of the Ministry of Health that is responsible for building and for housing be consolidated under one head?

I should like to see a reduction in our Armed Forces, which are costing so much at the present time. In the past, many speakers have said that we could have far better and more efficient Armed Forces at a very much smaller cost. Do we really need now a Ministry of Fuel and Power? After all, the coalmines have been nationalised and the electricity industry and the gas industry are being taken over. All we require is a Minister in the House to answer questions, or not to answer questions, as the case may be, on the various functions which have now been taken over by outside bodies. There is, of course, still the petrôleum section which I think could well be transferred to a Department of the Board of Trade. I am confident that very great savings, not only in expenditure but also in manpower, could be effected if the Government were prepared to look at this problem realistically. Hon. Members opposite—and perhaps some of my friends who hope to be sitting on their side of the House very soon—will realise, of course, that the number of jobs available would be somewhat limited. The overall benefit to the country would, however, be great.

Throughout this Debate reference has been made to Marshall aid, and the Chancellor particularly referred to it. I am glad my hon. Friend the Member for Orpington (Sir W. Smithers) voiced the view that the United States of America should consider very carefully the implications of giving aid to the present Government, who owe their present position entirely to previous American aid to the value of 4,000 million dollars which they squandered over the last two years. That is the only thing that has kept them in office, and only Marshall aid will keep them in office a few months longer. What we should make quite clear to the Americans is that Socialism throughout Europe has always been the stepping stone to a Communist State, and by the way hon. Members opposite behave we have no reason to suppose that that will not be the same in this country, if we are not able to turn them out in time. We. know the ardent desire of the Prime Minister to get the American aid, so much so that he has had to institute a sort of Hollywood Communist purge just to show the Americans across the Atlantic what good Socialists and anti-Communists the Government really are.

Photo of Mr George Drayson Mr George Drayson , Skipton

I hope that when we get. this American aid it will be used to give the maximum encouragement and aid to private enterprise in this country and throughout Europe.

Photo of Mr Percy Shurmer Mr Percy Shurmer , Birmingham Sparkbrook

To make as much profit as possible.

Photo of Mr George Drayson Mr George Drayson , Skipton

I was distressed to see in the American papers just after the Budget was published, that certain members of Congress in Carolina thought that Marshall aid was to be used to buy vast quantities of tobacco, and that the fact that the Chancellor of the Exchequer put twopence on a packet of 20 cigarettes was a blow to American generosity in coming to our assistance with Marshall aid. I hope very much that only a small amount, if any, of this aid will be spent on tobacco itself.

There are one or two particular items in the Budget about which I must make some comment as these have been put to me by constituents. Farmers are all now to come on to Schedule D by 1949. In my constituency there arc a large number of tenant farmers who will be particularly affected. They have not been used to keeping detailed accounts, although they have had to face the enormous numbers of forms required to be filled up during the last few years, and which have imposed a very great tax on their time. The new imposition the Government are placing on them will be one extra burden they will be called upon to bear while they are carrying out their essential work of producing food for the nation.

In connection with the Purchase Tax alterations, I do hope that the Chancellor of the Exchequer will look into the matter of the Purchase Tax on certain materials before we have the Finance Bill. Luxury fabrics previously carrying Purchase Tax at 125 per cent. are now to carry a rate of 66⅔ per cent. They have, in fact, had the tax reduced by 58⅓. per cent. That is very nice. But the medium ranges of materials that hitherto bore Purchase Tax at the rate of 5o per cent. have been put up to 66⅔ per cent. So just those very items that are within the purchasing range of the average housewife have, in fact, been put up by 16⅔ per cent., and the costly and more complicated materials, which manufacturers do not necessarily want to make, but have to make because of various regulations affecting the use of certain types of fibres, have gone down by 58⅓ per cent. The housewife is now having to pay 25s. a yard for material for household uses which before the war she could get for 3s. 11d.

I am sorry, too, that the Government have taken a further vested interest in the gambling industries of the country. Naturally, the more money they get out of these particular industries the more they are likely to encourage and help them in any schemes they put forward. The Government are, of course, taking far too much of the people's money. That is the real cause of our present difficulties. If money were allowed to remain in the pockets of the people, they would have more incentive. They would have opportunities to buy their own homes or to save for the time when they can. I am sure our main production problem could be solved if there were this incentive.

I was glad that the President of the Board of Trade mentioned especially the part that the textile industries can play in helping to deal with our balance of payments. I can assure him that in my own constitutency this is not regarded as a political matter, and that all the people there are doing what they can to help the country to balance its overseas payments. I should like to think that when we get Marshall aid some part of it—a large part of it—will be used to deal with our balance of payments position by establishing something in the nature of an exchange equalisation fund.

What we want is a fund that can be used to broaden the whole basis of multilateral trade throughout the world. If the American Loan of £1,000 million had been used as our gold reserves were before the war, as an exchange equalisation fund, the whole of world trade could have been increased to an enormous degree. It is still not too late. There is still a chances if we can say to other countries, "You can have a proportion of these dollars in certain circumstances, it you will allow sterling to flow more freely through the various markets of the world." I am sure that, not only by an increase of trade between this country and America, but also by freeing trade throughout the world, which with Marshall aid we can do, we can solve many of the economic problems with which we are faced at the present time.

7.49 P.m.

Photo of Mr John Mack Mr John Mack , Newcastle-under-Lyme

I do not propose to follow the peripatetic perambulations of the hon. Member for Skipton (Mr. Drayson). He has got his own difficulties. With tender solicitude, I do not think we should exacerbate his position, although I may say that I think that when he goes back to the electorate at Skipton, and gives these doleful diatribes, they, being judicious and discerning, will desire to have a representative in Parliament in future other than the hon. Gentleman.

Photo of Mr Harold Macmillan Mr Harold Macmillan , Bromley

A very offensive remark—quite unnecessarily offensive.

Photo of Mr John Mack Mr John Mack , Newcastle-under-Lyme

The right hon. Gentleman really must not be so touchy. He is doing himself an injustice when he resents what is, after all, by the practice and precept of this Committee, a legitimate piece of criticism. For my part I think there is no offensiveness in it, but that there may be a good deal of truth in it.

Photo of Mr Harold Macmillan Mr Harold Macmillan , Bromley

That is still more offensive.

Photo of Mr Louis Tolley Mr Louis Tolley , Kidderminster

Why not stand up and say it?

Photo of Mr John Mack Mr John Mack , Newcastle-under-Lyme

The right hon. Member is merely making post-prandial observations; but perhaps he will now be quiet. The hon. Member for Orpington (Sir W. Smithers) delivered himself of a speech in which he made a passionate plea for moral improvement and uplift on the part of the Government. It was a very moving plea. He felt that perhaps in some other world the Government's sins of omission and commission in the Budget would be visited upon them—for in this world they will certainly be visited upon the people of this country. But, to the everlasting credit of the Government, whatever may be said against them—and we on this side of the Committee reserve the right to criticise' constructively from time to time—they have given us a Budget which, broadly considered, is for the benefit of the people.

The "Financial Times" today contains an article entitled: I High Taxation For Ever? The sub-heading is: Effects of Social Services Expenditure and Forced Savings Policy—By a special correspondent. The article says that at the present moment we are spending £500 million a year as interest on the National Debt, and argues that that is approximately the amount we were spending before the war—taking various money changes into account—and adds that today the Budget should have been of the order of £2,000 million instead of almost twice that sum. The article argues further that two main factors are responsible: First, and most important, the remarkable post-war growth in Governmental civil expenditure—and particularly in the cost of the social services. What is gnawing at the vitals of many hon. and right hon. Members opposite is that the Government have had the decency and courage to spread the wealth of the country more evenly than it has ever been spread before. That is what the Budget does. I have been a very patient Member of this Committee, in listening to the Opposition, but, in their own interest, I have been worried about some of the things they have been saying. If that article is typical of the kind of slogan the Opposition intend to shout in the forthcoming election they will not only be defeated but will earn the opprobrium of every decent-minded person in this country.

Having said that, I now want to say something about tobacco, beer and betting.

Photo of Hon. Lancelot Joynson-Hicks Hon. Lancelot Joynson-Hicks , Chichester

Now the hon. Member is on subjects about which he knows something.

Photo of Mr John Mack Mr John Mack , Newcastle-under-Lyme

I accept that soft impeachment. I do not mind it. I do know something about those subjects, 'but what I shall say may not be popular with hon. Members on either side of the Committee. Beer is estimated to bring in £400 million, and tobacco, £560 million: a total of nearly £1,000 million. I am no kill-joy, and certainly not a strict teetotaller, but I say, as an honest expression of belief shared by some hon. Members, that this nation will have to learn to smoke less. to drink less, and to bet less.

I am not a smoker, and I will tell hon. Members why. Many years ago as a lad, I worked aboard a tramp steamer as a deck boy, where I found that I could get a big tin of perhaps no cigarettes for Is. 3d. I felt this to be such an advantage that I might as well learn to smoke. so I popped one into my mouth, and, although I pulled a wry face, felt nevertheless that I was doing something fine. Then, the bo'sun, a very big and powerful man. came up to me and in stentorian tones said: "You little worm. So you're one of these smokers, are you?" "Yes," I replied meekly; whereupon he asked: "Are you a man or a mouse?" I said that I hoped to be a man, and the bo'sun said: "Well, smoking is one of the most despicable and contemptible things that anyone can do." He proceeded to deliver a lecture on smoking, to this effect: "Tobacco is a cabbage plant that has been impregnated with all sorts of chemicals, chopped up, and wrapped in paper. You pop it into a hole in your face, set fire to it and say to yourself: 'By gum, this does soothe my nerves; it does do me good.' Whereas it not only lowers your general health but is a very expensive item."

The bo'sun went on to illustrate the money that I should have to spend on tobacco. Translated into present-day terms, buying say 25 or 3o a day meant 25s. to 35s. a week; smoking from the age of 16 to 66—a matter of 5o years—would mean smoking something like £4,000 or £5,000; he argued that in addition I would burn about £1,000 worth of tablecloths. bed linen and furniture, and that another £1,000 would be wasted in sending other people on errands to fetch cigarettes. Thus, for the expenditure of £6,000 or £7,000 I should merely be adversely affecting my health. He concluded: "I despise all men who smoke." In consequence of that very salutary admonition I have never smoked since that day.

I trust that my speech will go forth to millions of youngsters in this country, who really do not need tobacco. Tobacco is not like mother's milk; it is not necessary to life. I say to my right. hon. Friend the Financial Secretary—who is very often right, and certainly honourable—if the Government have the courage to teach the people of this country, particularly youngsters, not to smoke, or at least to smoke in very moderate degree, we shall not only save a great deal of money but, instead of making our young folk human chimneys, have done much for the economy of our country and the health of the next generation. I do not begrudge a cigarette or a pipe of tobacco to the old-age pensioner, because at that time of life a man is too old to alter his habits; in any event, he has very few pleasures, and we do want to be kindly and helpful to the old people.

Now, what about drink? Many people in this country gargle their epiglottis with copious draughts of various vintages and say, "Fine! This is good company." Frankly, I have a very poor opinion of alcoholic drink taken in excess, or in any more than sparing moderation. Of course, this is a free country, in the sense that individuals are permitted to exercise what liberty we can afford to allow them in these times.

Photo of Mr Harold Macmillan Mr Harold Macmillan , Bromley

What a splendid statement.

Photo of Mr John Mack Mr John Mack , Newcastle-under-Lyme

Certainly; it is a splendid statement. I have here a wonderful article—you must have a peep at it later on, Mr. Chairman—on a book written by a man called—do not be afraid of the name—F. Zweig, a professor, and evidently a person with money. The book is called "Labour, Life and Poverty." The author interviewed 400 hard-up men, and asked why they were poor, fed up, disgruntled, and looked as if they had lost a pound and found a penny. He discovered that on drink regular drinkers who earned£5 or a little more a week spend £2 a week, 40 per cent. of their earnings; less regular drinkers spend from 15s. to 25s. a week; and that week-enders spend only 10s. or £1 a week. When I came into the House as an unemployed man on the dole—the only case of an M.P. as far as I know—it was people like the right hon. Gentleman who used to scare the wits out of me, but now he must learn the importance of taking what is coming to him. Alcohol destroys normal temperance. Under its influence the weak man becomes foolish, the morose man weeps, and the excitable man becomes exalted. There was a saying when I was a boy, expressed by a well-known inebriate and toper: Tis my wish, when I die not one tear shall be shed;No hic jacet be placed on my tomb;But pour o'er my coffin a bottle of red,And say that his drinking is done, my brave boys,And say that his drinking is done. All sorts of music-hall jokes have been made about that. Some £560 million is expended upon drink, and what we have to do in this country, whether we like it or not, from the serious economic point of view, is to train the youth of the community that it is not all that necessary. I do not take the extreme line that some would take, of banning it altogether, but I believe that a rationing system, whereby tobacco and drink are apportioned out to those who need them, should be put into operation in this country.

Photo of Mr John Mack Mr John Mack , Newcastle-under-Lyme

My hon. Friend puts a pertinent, and a helpful point. The ex-Chancellor of the Exchequer, in his speech last week, said he did not think the workers would mind the extra id. on a pint of beer.

Photo of Mr John Mack Mr John Mack , Newcastle-under-Lyme

What they object to is a reduction in strength, or the relative weakness of beer. I hope that it will be weaker and weaker, almost to the point of being innocuous. The fact remains that when we have to go to America and spend these precious dollars on things which are burned and consumed at this time, someone should have the courage to get up in this House and speak against it. I have spoken to hon. Members on both sides of the House, and they have agreed with me, but they have said that they would not like to take this unpopular line because they would lose votes in their constituencies. As far as my constituents are concerned, I have given an honest expression of my opinion, and whatever their individual or collective views may be, they will, I think, respect my honesty. I do not believe that I shall lose any votes for what I have said in this connection. I hope, Mr. Beaumont, that you have not missed the injunction I gave.

Photo of Mr Hubert Beaumont Mr Hubert Beaumont , Batley and Morley

I obviously missed it, because I was not present. No doubt I shall read it in HANSARD tomorrow.

Photo of Mr John Mack Mr John Mack , Newcastle-under-Lyme

Knowing you, Mr. Beaumont, I appreciate that you will do so with diligence and profit.

Photo of Mr Hubert Beaumont Mr Hubert Beaumont , Batley and Morley

I guarantee the first, but I cannot guarantee the second.

Photo of Mr John Mack Mr John Mack , Newcastle-under-Lyme

I wish to say a word about gambling. It was Shakespeare who said: Oh, that men should put an enemy in their mouths, to steal away their brains. Many Members have never had the courage to say what they think about this waste of money, material and labour. Pool betting and suchlike are time-wasting, especially when indulged in to the present extent. There is nothing in these specious arguments advanced that the worker is as much entitled to his bit of pleasure while we permit the moneyed loafer to go into Belgravia or Mayfair and indulge in night-club orgies. I do not know the exact number of people who are engaged in the job of filling up forms and coupons at Liverpool and elsewhere at this time of the national emergency, but, bless my soul, it is a disgrace to the nation, when the textile factories are short of workers and the Government are offering decent wages and much better conditions.

There are times when someone has to take a chance and say what needs to be said in the House. I do not believe in being a kill-joy, but I do not like people to be mealy-mouthed and squeamish about things which affect the whole community. I say to right hon. Gentlemen on the Government Front Bench—and there are only 4½ inches between the two Benches, but a difference of t4,000 a year—that I feel, like Browning's Pied Piper of Hamelin, who when he went to the council and looked at the mayor and corporation said: 'Rouse up, Sirs! Give your brains a rackingTo find the remedy we're lackingOr sure as fate we'll send you packing.At this the Mayor and CorporationQuaked with a mighty consternation. Any Government which does not have regard to the extent of gambling are purblind and are not facing the realities of the situation. I implore them to give their earnest consideration to this subject and to be brave. If they are flung out, what does it matter; it is a big world, and, important as this House is, it is after all only a part of the nation.

I want now to refer to the "dogs." It was discovered by Professor Zweig that one in five of the workers who attended dog racing, did so in a professional capacity. These people were at "the dogs" all the year round. There were then the semi-professionals, such as shopkeepers and hawkers, who went to "the dogs" to try to make a little extra to compensate for the poor business they were doing, and met with little success, Then there were the sporty boys who went twice weekly. They were an unhappy type, the lugubrious person with scarcely a smile, whom we all know. They are a poor lot, and all I can say is that if this country cannot introduce propaganda into the schools to teach the young the way they should go, we deserve many of the difficulties which now face us.

I believe that a Budget speech is the right and appropriate time to ventilate these grievances and that it will have the effect, although it comes from my humble lips, of making the people realise that there has to be a complete turnover in the attitude of mind and habits of a great number of people. I say to my right hon. and learned Friend that I think he has worked very hard and has put up a very fine show, but I do not envy him his task. On balance, considering all the circumstances and traditions of the time, I think that the Budget has been a very good one. but I hope that next year he will do much better.

8.11 p.m.

Photo of Hon. Lancelot Joynson-Hicks Hon. Lancelot Joynson-Hicks , Chichester

During the latter part of the speech of the hon. Member for Newcastle-under-Lyme (Mr. Mack), it might have been thought that the Committee had wandered rather far from the Budget. At one moment, I thought that he was going to discuss the question of our exchange with America, when he said that we were spending so much of our hard-earned dollars on the importation of tobacco and drink. We do not in fact spend much money on importing drink from America, but we earn our dollars very largely on exporting drink to America. The hon Gentleman, in the enthusiasm of his oratory, got rather carried away across the Atlantic. Starting with Bulgaria, he added to his list beer, betting and baccy. [HON. MEMBERS: "Busy bee."] He may be known as the busy bee, but he will also be known by his intervention in this Debate on the Budget, in conjunction with the hon. Member for Orpington (Sir W. Smithers), as having made a strong and powerful appeal to the electorate for moral uplift.

If I may return to the Budget, particularly as the Financial Secretary is on the Front Bench at the moment, 1 would like to make one or two brief references to certain proposals that have been put forward. The first is one to which I do not think any reference has yet been made, and that is the reduction of Entertainments Duty in the rural areas. I should like to say a word of commendation on that, because I believe that it will go a great way towards improving the amenities, both directly and indirectly, of the rural areas, which is a course for which we have been striving for a very long time. In particular, may I remind the right hon. Gentleman that it was a course which I personally advocated in correspondence with the Treasury last year, and I was then told that it was administratively impossible. Now we have it proposed by the Treasury. I desire to call attention to this bugbear of administrative inconvenience, because I am quite sure that the Government have made it an excuse to prevent hon. Members of this House from being able to carry points advantageous to the electorate time and time again, when it has been quite unnecessary. I trust that this will be a lesson to the Government that they will not take the line of administrative inconvenience as being final in the future.

One other point which I wish to put to the Financial Secretary is with regard to Empire wine. When the Chancellor of the Exchequer made his reference to it, I do not think that there was any doubt that the majority, of hon. Members came to the conclusion that Empire wines were having restored to them Imperial preference. That, of course, is quite erroneous. If we turn to the speech of the Chancellor of the Exchequer in HANSARD, we sec that the Chancellor, Who quite properly chose his words with the greatest care, made it clear that although the Empire wine countries have made out a good case for the restoration of Imperial preference, it has only been granted in respect of heavy wines. I ask the Financial Secretary why, if as is recognised the case is identical for heavy and light wines, preference is being restored only in the case of heavy wines.

May I pass on, before coming more specifically to the economic side, to the particular question of what has been called the Special Contribution. Personally, I prefer to call it the family levy, because it is a tax which will be of the greatest hardship to the family man and his family. The tax, which I think is without precedent in this country, will be of the greatest possible hardship to the most deserving part of the community. The Financial Secretary tried to explain to us the other night what the Chancellor of the Exchequer meant when he said that this was a once-for-all tax. Having heard and re-read the persiflage of his speech, I think that all it came down to was contained in his final remarks when he said that by once-for-all he meant once-forall. That did not carry the explanation very far. What does it mean? The Chancellor of the Exchequer made it clear that it is to be a Special Contribution to meet this emergency. Does he mean that if the emergency persists, the next contribution of a special character will be different to this, or does he mean that if a different emergency arises he will again feel himself able conscientiously to impose on the community a repetition of this particular tax?

What do we mean by "once-for-all"? Does it mean anything whatever? It is perfectly clear that if the right hon. Member for Bishop Auckland (Mr. Dalton) were to be restored to the Exchequer, he would not consider himself in any way bound by anything that may have been said as regards a capital levy being once-for-all. He has made it quite clear in his speech that he holds himself open—and presumably those hon. Members of the Socialist Party who follow him and do not follow the present Chancellor of the Exchequer will also hold themselves open—to the imposition of a capital levy. What is the value of this statement "once-for-all"? The right hon. Gentleman knows perfectly well that he can no more bind any successive Government than I can. While it may be his intention—and I am prepared to accept it—that he will not himself advocate the reimposition of this particular tax, to meet these particular circumstances, that I believe is the utmost limit which can be put on the expression "once-for-all." To try to give an indication to the country that it is a tax that may not be repeated in general or in some similar form is, I submit to the Committee, misleading and highly specious.

The Chancellor of the Exchequer indicated, and, speaking after him, the right hon. Member for Bishop Auckland specifically stated, that one of the attractions of this tax was its simplicity. I want to put some points to the Committee tonight which will show that it is exactly the reverse, that its practical difficulties are so wide and so deep that it will not be worth the trouble of collecting. It is for that reason that I want to refer to this tax from an attitude from which it has not yet been approached. My right hon. Friend the Member for Aldershot (Mr. Lyttelton) referred this afternoon to the problem of private companies. I want to go a little further with this matter. There are hundreds of thousands of private companies in this country, and so far as we can understand how this tax will he levied, it is proposed to levy it upon the income from the shares of private companies. I have already received many instances of the hardship which this will cause, and I want to quote from a letter which deals with this point, because I believe it is factual and reasonable and will appeal to the Committee. It is written by the managing director of a small business, who works with two or three other full-time employees of the company. They are the sole shareholders in that company. He says: For many years past it has been our custom to draw only a small salary and divide the profits of our labour among us, as dividend, at the end of each year. This director is married, with four children, and has a gross income of £2,600 a year. He continues: I am far from being a rich man, and if I and my fellow employee-shareholders had not worked hard to earn our profit last year there would have been none to share … We do not earn exorbitant profits … Our capital is tied up in investments … It would be contrary to the intention of the Companies Act if we were forced to hawk our shares around the town to try to sell them to outsiders, but how else, except by borrowing, are we to pay this levy? The position stated is my own, but I know"— and I can confirm this from my personal knowledge— that it is typical of thousands of small private companies. Had the business been that of a sole trader, or a partnership, no question of a levy would have arisen. Had those people decided to draw out profits from that business in the form of salaries, instead of dividends, no question of a levy would have arisen. What can be the justification for differentiating between workers in a way like that? Why should a man who happens to take the fruits of his labour out of a private company by way of dividend be penalised and taxed in this way when, if he was taking them out in the form of a salary or if it was a partnership instead of a private company, or if he was working on his own, he would not be taxed? So far as I can see there is no justifiation for that whatever.

Again, we have the real difficulties which will arise in the case of the big private holding companies, which are making large sums of money because they have never increased their capital by having any public flotation. I cannot see any way in which these concerns will now be able to meet the levy, either directly or if their shares are held in trust by trustees, unless they go to the City and have a public flotation. Surely, that is contrary to the general principle which has been laid down by the Chancellor. If it has any result whatever it is bound to be of an inflationary character. That is another reason why I cannot see how the levy on invested income from private companies can possibly be continued.

What is the position in connection with foreign trusts and the income which people receive from those foreign trusts? The Chancellor may ask Parliament to release English trustees from their obligations, but neither he nor we can release foreign trustees from their obligations. I cannot see how people who, to my knowledge, are in the position of having no capital, but live entirely on income remitted to this country from foreign trusts, will be able to meet the liability which is to be imposed upon them by means of this Special Contribution.

How will this tax work out in connection with English trusts? It is said that the trustees will be authorised to dip into capital. But what about the reversioner who has rights in the capital, and the person who has bought the reversioner's rights in the capital? How will those rights be protected? It is all very well to mulct capital because of the interest which the life tenant is receiving from that capital, but that is creating hardship upon the reversioner of that interest. This is not referred to at all in connection with the Chancellor's proposal, and it may well be found that there is being created a legal obligation which cannot be carried out if the reversioner has sold his interest, and it belongs to somebody who is deriving no benefit from it at present.

There are varied life interest trusts. There may be two people with an equal interest in the income of a trust but who, owing to outside earnings or income, may have completely different contributions to make under this family levy. How is a trust fairly to produce the capital which is necessary to pay for these respective persons' different contributions by way of levy? Again, there are different interests indirectly drawn from the trust. There are any number of complications which, to my mind, render the proposal absolutely impracticable. There are the trusts which hold loans and mortgages.

The right hon. and learned Gentleman said that the proposal would not affect farming interests, or words to that effect. The Minister of Agriculture, with our full support, has been doing everything possible to try to attract capital into the agricultural industry, to recapitalise the industry and bring new life to it by what might be called landlords' capital and tenants' capital. This proposal can only have the effect of pulling out from the industry capital which is already in it and, in a number of cases, will cause farms to be sold and property on which Schedule A tax is paid, to be realised.

What is meant by "investment income"? The Chancellor referred to it as dividends, interest and other payments. What is to be understood by "other payments"—annuities, capital receipts from annuities? That does not conform to the idea of dividends, or interest on dividends. Or is it personal loans? Is the levy to be based on net or gross assessment? As everybody knows, it often happens that a person may have a substantial invested income which is returned for assessment but against which charges are also returned showing that the person who has made the return is debarred from enjoying a large portion of it. He or she has not the right to enjoy it; it may be because the income passes away under a deed of covenant or a mortgage or a charge against the buying of a house. According to the Chancellor of the Exchequer's explanatory statement the levy is to be made on the gross assessment, and consequently it is going to be based upon an income to which a person has no longer any right whatsoever and does not, in fact, receive.

I want also to refer to what I call the supreme iniquity of this proposal, and that is that it is primarily directed to cause hardship against the family man. The family man, who has saved for his children to improve their lot and conditions, is to pay in exactly the same rate as the single man, who may have no such obligation or liability to provide for at all. It is an entirely new element in our tax system, and it is an idea which I do not believe will appeal at all to the people of this country. So far as the wealthy man is concerned—the man against whom the right hon. and learned Gentleman is primarily directing the tax as a sop to his supporters, who object to him putting a further penny on beer—if he so desires he can pay this levy, and recover practically the whole of the cost from the Exchequer by way of reductions from his tax returns. At the same time he can make a profit on the transaction, so that neither the Exchequer benefits nor does any one except the wealthy man, if he so wishes and seeks to take that course.

The whole trend of the tax will be of an inflationary character. It is a tax which falls most heavily upon the widow, the retired person, and the clergy, and those are the people whom the right lion, and learned Gentleman has now had to descend to attack in order to gain what? A sum of—50 million this year to go towards the surplus which he already has and which is drawn from capital? It is consequently not in any way of an anti-inflationary character. The tax is one which is avoided by the gamblers and by those who make a living on capital appreciation and who have gambled to get capital appreciation. Some of the hon. Gentlemen opposite who spoke on this subject last week spoke as though it was going to tax capital appreciation, but those who are going to gamble to make capital appreciation avoid the tax. It is avoided by those speculating in real estate or in any other thing. It is uncertain as a tax, and I was under the impression that that was undesirable in a tax. It may be that the investment of the capital has changed on more than one occasion during the course of a year so that there is not merely two half yearly dividends but four. For that reason it is taxed at a higher rate than if the capital were to earn two half yearly dividends.

This tax is an incentive to transfer wealth abroad, and that I understood was not what the right hon. and learned Gentleman desired. If I may use a colloquial expression, those who have been wide guys and have already transferred their capital abroad will not be caught by this tax but only those who have been slow to follow that example. Presumably it is an incentive for them to speed up and follow the example of the bad men and transfer their capital abroad. It is no incentive to get money invested. Is that what the right hon. and learned Gentleman wants? Already the maximum Sur-taxpayer loses the annual value of the income from a holding of 3 per cent. sayings bonds if the rate of those bonds falls by one-eighth of r per cent.

Is it worth while at the present time getting the wealthy to invest money in Government securities? If in addition to that there is going to be a tax like a Capital Levy it is an incentive to the wealthy or the investor to hold his money in cash. It is also an incentive to buy commodities. Is that what the right hon. and learned Gentleman wants? Generally when people start selling their investments and putting their money into furniture, into stock, into horses, into motor cars, into property of one sort and another, into jewellery and into furs it is a sign that inflation has come. That is the line which the policy of the right hon. and learned Gentleman is encouraging people to adopt in this country. Is that what he wants?

It is uncivic and unsocial in all its aspects and encourages all the uncivic and unsocial vices. It is an attack on all good citizens who have been saving. I should like at this stage to say a personal word. With other hon. Members on all sides of the House, I have played my part in one way or another as a Member of Parliament and in the national interest to help Savings Campaigns. I do not suppose my efforts one way or the other were noticed by the right hon. and learned Gentleman or indeed appreciated by him, but I have supported the effort on the strength of the premises not only of this Government but of preceding Governments, which has been continually directed towards the point that it is not only in the individual's interests but in the interest of the individual's family and of the nation that he should save, and that, above all, his savings would be safe if lent to the Government. We all know the slogan, "Lend to the Government and your savings will be safe." Because of that I felt justified in supporting this movement, although I have recognised that those savings cannot in any event be called absolutely safe and that there is no guarantee of safety because under the mismanagement and bungling of the Government we may get an element of inflation and a fall in the value of these investments, but that is an ordinary risk which an investor takes.

Today what the right hon. and learned Gentleman is asking the House to do is deliberately and actively to cut into these investments and confiscate them. That step is a thing which is such a breach of faith and so contrary to every term upon which the people of this country were asked to invest their money by lending it to the Government that I for one cannot conscientiously, if this Measure is passed and so long as this Government remains is power, further support or encourage any other people to support the National Savings Campaign.

I have taken longer to say all this than I intended. There is a very great deal more I should like to say, particularly on the economic side of the Budget, but let me conclude briefly by saying this—the line which the Government are now persuing is by no means unique, and if they will not listen to us on this side of the House I wish they would turn and study history, and even recent history in Europe. The policy which they are pursuing is parallel with that of certain other countries. Those countries have already taken the course of diverting the national income from private to Government spending—of the unproductive build-up of bureaucracy, of the enforced breaking up of estates; and of the gradual and propressively more rapid elimination of the capitalist. The whole of Eastern Europe is covered with countries of that pattern and, when the moment is ripe, Communism has stepped in. The Government are sliding down that one path to which there is no other end but Communism.

8.41 p.m.

Photo of Mr John McKay Mr John McKay , Wallsend

I have listened attentively to the hon. Member for Chichester (Mr. Joynson-Hicks) and his plea on behalf of people who have an income from investments. If the people of this country knew all the details of this particular levy on investment income, I wonder what they would think about it? I feel confident that, when the people know the facts and the amount of the levy upon investment income, they will not shed many tears about it. I have taken this quotation from, I think, the "Daily Express": This is how the levy works out for people earning more than £2,000 a year in all, part of Which comes from unearned income Now, £2,000 a year is a fairly good income. It all depends upon one's position in life whether it is called a jolly good income or a poor income. I think the mass of the working people in this country will consider it a very big income. The effect, however, is this: that if one has more than £2,000 income, and £250 of that income is from investment, the levy is nil; if £300 comes from investment, the levy is £5 per year. If the figure is £350, the levy is £10. On those figures alone, I imagine that when the people of the country understand what it all means, they will think that the people to whom this particular levy applies are fairly well off after it has been implemented.

This Budget was expected to be one of the most important Budgets in the history of this country. Many negotiations have been taking place with workers, with employers, and throughout the country at large to try to get some scheme whereby we could overcome the great problem of more production. There is no doubt that there were expectations on the part of all kinds of people. There were expectations on the part of the aged pensioners, the workers, the middle class and, of course, the rich. In the few moments at my disposal, I want to try to give a fair viewpoint of the actual effects upon these particular classes of people.

We know that, to all intents and purposes, the mass of the aged people—the pensioners—have received no benefit whatever from this Budget. I am speaking of the mass, but there may be some with a slight benefit, as mentioned by the Chancellor in his speech. When one recollects the tremendous tax on beer—and we have had a lecture upon the qualities and good points of beer—and reflects that there is a great levy placed upon the people who like a drink of beer, one realises that they have been specially selected because their numbers are so enormous and because they like beer so much. Knowing that the tax is so great, one begins to wonder whether, when this extra penny per pint was being decided upon, it could not have been earmarked to help the old age pensioner. If that had been done I do not think there is one beer drinker in the country who would have groused about it. Had that been done it would not have been a great deal, but when one has not much in this world, a little help seems a big thing. That penny would have given the aged people 3s. a week; it would have cost £32 million a year.

It was expected that one of the great needs which would be met by this particular Budget would be that of supplying some special incentive to production by some manipulation of taxation, or in other ways. In considering production, we must first attempt to decide what particular class of the population increased production depends upon. On that there are, of course, differences of opinion. Some people hold that the primary factor in increasing production is to help the professional, administrative, the managerial classes. I have been engaged in production, and I have been connected with managers and administrators. I am convinced that while administrators, technicians, etc., who are born into the middle class, if I might put it that way, have an effect upon production, yet whatever they may do, a real incentive to production lies in doing something which will encourage the actual workers of this country to put more life and energy, if that is possible, into their work.

Let us admit that. The consideration then arises as to whether the Budget of itself really attempts to deal with that particular question of encouraging the workers to do more, to secure for themselves the extra marginal pounds upon which they are excessively taxed, or to help them in any other way to retain more of what they earn by increased production. When one examines the position of the workers it will be found that while it may be in the case of a single man one can point, as did the Chancellor, to some instances in which he will get some great advantage from the operation of the new taxation proposals, the question also arises as to how many single men there are, compared with married men, in industry. If the figures are analysed, one finds that there is a much bigger percentage of married men in industry than single men.

Therefore, if it is desired to increase incentives for the majority of the men in this country, one has to deal particularly with the married men. Let us see what effect this particular Budget has upon some of the married men in industry. I think we shall find, if we take the case of a married man with an income of £300, that he has a net wage, after taxation, of £286, or £5 1os. 2d. a week. What is the benefit to the married man with £300 a year? In this particular Budget, presupposing his wage remains at the same level, he gets relief to the extent of 1s. 2d. per week. That is a mighty incentive, is it not? The married man with £350 after taxation has an income of £6 4s. 7d. per week net. The total value to him from this Budget is 1s. 4d. The married man with one child who has £400 a year, a net yearly income of £379 10s., obtains a benefit of 1s. 6d. The married man with two children and f500 a year, whose net income is £472, a net weekly wage of £9 Is. 9d., get an incentive of Is. 11d.

It does not seem right, on the face of it. How is this, because these men are, on past Budgets, only reaching the 6s. tax level, and under the new proposals they are still at the 6s. rate per £. They are, therefore, getting little or no benefit out of this Budget. Their relief from taxation is very little and, to my mind, has no value, so far as incentive is concerned. What is the position with regard to the man with £2,000 a year? What ever his difficulties and trials, and despite heavy taxation which he has suffered in the past, he still has a net income of £25 to £26 a week, compared with the net wage of the average worker at £5 or £6 a week, What is the benefit from this Budget on an income of £27 to £28 per week? It is at the rate of 13s. 1d. per week against 1s. 2d. per week of the ordinary married working man.

When these things are taken into consideration, I maintain that the idea of giving an incentive to workers to obtain increased production will not operate for the big mass of the workers in the country. The type of taxpayer, so far as the wage earners are concerned, is not the particularly highly paid workers, who are getting £9, £10 or £12 a week. It is the man who is usually paying at the 6s. rate. The average wage for an adult man in April last year was only £6 4s. 1d. The best of men may make mistakes and the best advisers can make mistakes because they are in a particular category of life which fails to understand the difficulties of production. I would suggest that, if he wishes to give the workers a real incentive, the Chancellor should spread the 3s. tax up to £125 at least, with the other £125 at 6s. In that way a greater number of ordinary workers would be brought into the reduced category of taxation and be given a real incentive.

8.55 p.m.

Photo of Mr Arthur Molson Mr Arthur Molson , High Peak

I feel that not only the financial policy but the style of the White Papers has changed since the present Chancellor of the Exchequer has taken over responsibility. I would like to congratulate him upon the complete frankness with which the economic position of the country has been stated. The Debate which is taking place on these last two days deals with a more important part of the subject than the Debates which took place last week. Today, in discussing the Economic Survey, we are discussing the diagnosis of the economic condition of the nation. The Chancellor, in his speech, made it plain that the Budget is a kind of medicine which is intended to be used for the purpose of improving the general health of the country. One or two hon. Members opposite have fallen a little into error in claiming that he is the pioneer in this matter. It was the late Sir Kingsley Wood who first took advantage of the Budget Debates in order to give a survey of the economic state of the nation as a whole. I gladly recognise that there has never been a Budget speech which more frankly and fully carried that new policy to its logical conclusion.

Last year we regarded the nominal balance shown by the last Chancellor as somewhat unreal. That has been recognised by his successor this year in the new and more vigorous accounting which he has introduced. He has even gone so far as to apply that more rigorous accounting to his predecessor's Budget. He also points out what we have frequently said, that the great surplus shown at the end of the last financial year was largely due to the great degree of inflation which took place. I hope that, as a result of this Debate, it will be recognised by both sides of the Committee that we must, first, accept for the country a reduction in the standard of living. That is shown by the White Paper. Second, we must endeavour to make that inevitable reduction as slight as possible. Third, I think that the general line of descent must be slow but constant.

I believe that there must be a decline and that it is due to a number of facts which are very frankly set forth. First, there is our relative decline as an industrial nation. There was a time when we enjoyed a position of relative monopoly. Now, of course, we are confronted with competition from other countries. Oil, for example, is now competing with coal. In that sphere we do not enjoy the same advantage that we did before. Second, there is the destruction of 25 per cent. of our wealth in the last war. The third point is, I believe, indisputable. In the past we had the immigration into this country of a large number of wealthy individuals and of Colonial merchants from India and other places overseas. Under present conditions, that is not likely to continue. Fourthly, there has already begun a decline in our working population. Up to last year, that has been concealed by the increase in demobilisation from the Armed Forces, but, during this year, there will be a reduction in the working population of 323,000 persons, and that tendency cannot be rectified until 1963 at the earliest.

Next, I believe that, broadly speaking, the terms of trade have moved permanently against this country. I do not myself think that the cost of food and raw materials imported from overseas is ever likely to return to the relatively low levels that prevailed in the nineteenth century and at the beginning of the twentieth, but, even if it should be the case, and I hope it will be, that there will be a substantial fall in the present prices of food and raw materials imported from overseas, at any rate, it is equally likely that, owing to the increasing competition from other industrial countries, there will be a fall in the prices that we shall be able to obtain for the manufactured goods which we export.

Therefore, I deduce from this survey of our position, that we must face the likelihood of a permanent reduction in our standard of living. I believe that that deterioration is likely to continue for a number of years into the future. We are still selling our overseas investments. This year, we have disposed of the Argentine railways, and, for the future, we shall not have the right to dividends from those railways which were paid to this country in the form of food and raw materials. All this is on the basis that we are not taking into account at all the sterling balances which we owe to other countries. I hope and believe that the Chancellor will take a firm line about the sterling balances due to India and Egypt, which we incurred in the war which we fought in common and in which we bore so great a burden. It is only right to recollect that, in discussing this matter, we still have not taken into account what we do owe.

In this White Paper, we are told that, if, first, we receive Marshall aid, which we are now going to obtain, secondly, if we reach the export targets laid down by the Chancellor of the Exchequer, which we have not yet done, and if, in the third place, we have an unfavourable balance of trade of £183 million, we shall then be able to get through 1948 with only a moderate reduction in our standard of living. On page 53 of the Economic Survey, we read: It is clear that if we may assume that present import programmes can be maintained, both in food and in clothing, the real levels of consumption in 1948 will be appreciably, but not disastrously, lower than in 1947. What is even more serious than this appreciable reduction in our standard of living is that we still shall not be able to import the raw materials for our industries which would be necessary for that increase in production of 10 per cent. for which the Prime Minister asked and which he said would make all the difference. Paragraph 28 of the Economic Survey says that the general level of raw material imports is insufficient to allow any large rise in production in many industries … with our financial reserves at so dangerous a point, we cannot afford a heavy investment in additional materials. But clearly also such an investment would bring a rich return. … It is indeed a serious state of affairs when we cannot afford to build up the stocks of raw materials that are necessary to enable our industries to work with maximum efficiency.

That surely is the answer to the hon. Member for Stoke (Mr. Ellis Smith) when he asks for a greater long-term plan of national re-equipment. I am certainly not one who is against the re-equipment of our industries. In the last Parliament, in association with some of my hon. Friends, I suggested that at the end of the war that would be most vitally necessary, and we urged that there should be a vigorous cutting down in consumption goods in order that the maximum should be done to re-equip our industry. At present we lack the capital to be able to do that. What we are being forced to do, and what in the circumstances is the right policy, is illustrated by what has been done in the case of the railways where, with a smaller number of wagons than we had before the war, we are still obliged to export a large number of wagons which we ourselves could very well do with in this country, and to make up for it by a speedier turn-round and by greater effort on the part of those engaged in the railways.

Of our whole national production, one part has got to go to export, one part to capital re-equipment in this country, and a third part into private consumption. It is, unfortunately, the case that the whole of the economy reduction cannot be borne by private consumption, although I hope that as much as possible will be, and in so far as the Budget is calculated to reduce the purchasing power of the people of this country I believe it is right, wise and far-sighted. It will, however, also be necessary, unfortunately, for considerable restriction to be made in that part of our national production which is being used for capital re-equipment in this country.

This is where we come to the folly of the earlier years of this Government—a period in which nothing much was done to curb the demands for higher wages and shorter hours. It did not seem to cause the former Chancellor of the Exchequer very much worry, because he was by nature an inflationist. I tried to make my own small personal protest against the payment of war damage insurance at a time when there were not the goods or the houses upon which that money could be spent, and I expressed the view that it was highly inflationary. I am glad that the present Chancellor of the Exchequer is not in any way widening the present provision for the payment of postwar credits, which I believe also would be highly inflationary.

What are the Government doing to check the increase in wages, which is really the most inflationary of all the forces which have operated up to the present time? The hon. Member for East Ham, North (Mr. Daines) spoke at some length about the undesirable increase in the number of persons engaged in distribution and he pointed out, very rightly, as did my right hon. Friend the Member for Aldershot (Mr. Lyttelton), that there has been an immense increase in the number of people engaged in distribution this year, greatly exceeding the number which was provided for in the Government target for 1947. Yet what do we find? Only two days ago the National Arbitration Tribunal recommended an increase of 16s. a week in the wages of retail assistants in Scotland in confectionery establishments. That is an increase which is not needed in order to man up a particularly essential industry, but one where already there has been a great increase in the number engaged in an industry which this particular White Paper—the Economic Survey for 1948—has described as not particularly essential.

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

Would the hon. Member suggest that the wages they were receiving was sufficient for them to live on? Surely that is the basis on which any increase should be considered, and from that point of view the wages of the workers to which he referred were appallingly low.

Photo of Mr Arthur Molson Mr Arthur Molson , High Peak

I am not going into the detail of that particular wage award, beyond saying that it does not appear as if the Government's appeal and the general principles laid down in the White Paper dealing with personal incomes had been observed in that particular case.

The general argument of most of the speeches on the opposite side of the Committee has been to complain that in a number of cases there has been an increase in the distribution of dividends by limited liability companies. I hope that capital will respond to the appeal which has been made by the Government not to increase distribution, but it is an extraordinary thing that, from the opposite side of the Committee, nothing, or very little, has been said to support the Government's appeal that there should not be an increase in wages or a reduction in hours except where there is a corresponding increase in production. Manifestly, there are two reasons why that appeal can most reasonably be made. In the first place, there has been, after deduction of tax, a greater increase in wages during the last ten years than there has been in profits, and in the second place, as was shown in the speech of the Chairman of the Rugby Portland Cement Company, it is the cost of labour which has most to do with the price of a commodity when it is sold.

If 80 per cent. of industry is to be left in private hands it is most unwise that the Government should seek to penalise that particular kind of capital which has taken the maximum of risk, in the form of the ordinary shareholder. He is at present mulcted by the Profits Tax and he is going to bear the greatest part of the burden of the Special Contribution. How it is possible to expect the country to continue to respond to the appeal that has been made for an increase in savings when capital is being penalised in this way, I confess I do not understand. The Economic Secretary to the Treasury, in speaking last Wednesday night, when obviously anxious to maintain his reputation as a detached and accurate economist, said: I believe that, on balance, it will be counter-inflationary in its effect."—[OFFICIAL REPORT, Wednesday, 7th April, 1948; Vol.449, c. 289.] On balance. He obviously was well aware of the strong arguments that the Special Contribution will, in many respects, be inflationary. I have no hesitation in saying that I think the balance will be exactly on the other side: that those who, for a long time, have been bearing a very heavy burden of Income Tax and Surtax, finding now this additional burden thrust upon them—which, although the present Chancellor of the Exchequer says he has no intention of repeating it, many of his hon. Friends, and his predecessor, have said they would like to see succeeded by something far more drastic and far more widespread—will be very much inclined to spend what they have, in an inflationary way, because they will feel that there is very little chance indeed of being able to leave what, otherwise, they could have left for their sons to enjoy. The Chancellor of the Exchequer, I am sorry to note, has found that something may be true in theory but untrue in practice. I remind him that John Stuart Mill, as a small boy, received a very severe hiding from his father, James Mill, because he fell into the logical fallacy of saying something might be true in theory but false in practice. I cannot really believe that the right hon. and learned Gentleman's accurately functioning mind did really think that these two things could be simultaneously true.

I think that he would have liked to reduce the food subsidies because he knew them to be inflationary, but that, from what he knew of the attitude of the Trade Union Congress, he was able to say that in practice they have, in the particular circumstances of today, precisely the opposite eflect, since they restrain the demands which would otherwise inevitably arise for increased personal incomes to meet the increased cost of living."—[OFFICTAL REPORT, 6th April, 1948; Vol. 449; c. 54.] These food subsidies were never originally put forward as a social service at all. They were put forward during the war for the express purpose of maintaining the standing of living level, on the understanding that there would not be demands for increases in wages. Since those demands had been made, and since wages have been raised, and since the cost of living has been maintained stable, there is at the present time a general standard of living in this country which the whole of this Economic Survey goes to prove can be maintained only so long as we are able to draw upon the charity of a country overseas.

I therefore congratulate the Chancellor of the Exchequer upon the fairness, the frankness and the candour with which he has revealed the desperate economic condition of this country, and I hope that another year his Budget will be more in line with the condition of the country, and that, austere as it may be this year, it will be more austere in the times to Come.

9.20 p.m.

Photo of Mr Victor Collins Mr Victor Collins , Taunton

I agree with the hon. Member for The High Peak (Mr. Molson) in saying that it is improbable that the prices of imported food will fall substantially. That underlines the one point I want to make very briefly about our most important basic industry—agriculture. Home food production is the key point to the whole Debate on the Economic Survey, and to it we must pay particular attention, for it succeeds coal and steel as the bottleneck which must be broken, and broken decisively.

Mention has been made of the loss during the war of £3,000 million of capital equipment. I would point out that in agriculture during the inter-war years there was a far greater disinvestment than in any other main industry, and by 1939 rural England was semi-derelict. That important fact must be borne in mind in considering that part of the Economic Survey which deals with agriculture. Anyone speaking to farmers will realise that what is lacking among them generally is real confidence in the future, both in the middle-term and the long-term. They still remember the disasters of 1921 and onwards, during the inter-war years, for which hon. Members opposite were mainly responsible. That fact must be faced, and it is necessary that the Government should take decisive action in restoring the confidence of the farmers.

We are told in the White Paper that it is proposed to raise the exports of machinery to £47 million, as against an average of £40 million for the home market. I submit that in this and succeeding years it is vital to give farmers all the machinery and equipment they can possibly use, in order to increase food production now. When nearly half our imports are devoted to food and agricultural products it is absurd to export anything which will, in a major sense, increase home food production. Also, we are told that in 1948–49 it will not be possible to go further than the present position of feedingstuffs, although farmers will be allowed to keep 20 per cent. of their millable wheat and barley. If the calculations are correct that will amount to a total of about 1 million tons and if the imports of feedingstuffs from Russia, Argentina and elsewhere are substantiated, that will give us a surplus.

Some risk must be taken in this matter to encourage farmers to increase their pig and poultry production now, and the regulations must be stretched a little in order to bring in those who have no 1939 entitlement, but who can substantially increase our supplies of eggs and bacon. I am convinced that, if this step were taken now, if more machinery were made available, if we were given absolute assurances that we would get 1,000 additional combine harvesters this year, if when farmers go to tractor demonstrations they could buy the tractors and other machinery and get delivery within a few weeks, and if they know that they will, that more than anything else will give them the essential confidence.

Lastly, the men. We are told that this year we must look for 55,000 net increase in the number of men on the land, and that all but 10,000 will come from European workers and prisoners of war who will stay on in this country. I hope that we do get the additional 10,000 British workers; but, if we are to get them, there must be no question of a capital cut in the provision of additional houses in the countryside. In addition, we must see that the houses are built where they are wanted, and that everything necessary, nationally and locally, is done in bringing the farmer, the farm worker and the cottage together.

Given these things, given the absolute top priority in all that agriculture needs by way of capital equipment, and by the diversion to agriculture of all the necessary materials we can scrape together, with the provision of long-awaited electricity supply, water supply, drainage, and the various amenities the agricultural community has waited for in vain during the past 50 years, which this Government have to provide in 30 months if we are to succeed, we shall give the farming community the confidence it needs, and the people the increased food supplies they need, and shall have taken the most vital step forward in closing the export gap and in ensuring the future prosperity of our country.

9.25 p.m.

Photo of Mr David Eccles Mr David Eccles , Chippenham

We were delighted to hear the hon. Member for Taunton (Mr. Collins) defending agriculture and asking for the things we cannot get. I only hope that the Chancellor of the Exchequer will pay attention to what the hon. Member said. Our Debate has moved into the wider realms of general economic policy, as it was intended to do, and it has not fallen in standard, as the right hon. Member for Bishop Auckland (Mr. Dalton), who is not now with us, prophesied would be the case. I cannot, within the compass of a short speech, deal with every point which has been raised.

I should like to say how much we on this side enjoyed the maiden speech of the hon. Member for Wigan (Mr. R. Williams). He said that confidence was necessary to make an industry a success. I agree with him. If all industries are to be successful, then the whole country must have confidence in the Government. That is exactly what we need today and have not got. The viewpoint from which I would direct the attention of the Committee is the credit of Great Britain, and the aspect I ask hon. Members to contemplate is the balance of payments, to which many Members have already referred.

The British economy under Socialist management has been rightly compared by "The Economist" to a family living beyond its means and coming to the end of its savings. The Government, as the improvident head of that family, have borrowed from every willing lender, and are now selling up the home at a rate which cannot continue. The President of the Board of Trade told us that Marshall aid will give us a breathing space. So it will. For a little time longer, it will be possible to postpone the decision to live within our income, but that decision cannot be postponed in-definitely. Sooner or later, the British people have got to make up their minds to out down and start again at whatever the level may be where both ends meet.

There are two decisions to be taken. The first is when to return to solvency, and the second is how to do it. The timing is all-important. We have not paid enough attention to the effect upon British credit of putting off balancing our overseas account. The family that is running into debt always argue among themselves exactly when they should cut down, and whether it should be before their savings have gone, or after the last stick of furniture has been sold. The Government are in exactly the same position, and have to take precisely that decision. They could continue to make available all the dollars required to meet the sterling area deficits in the Western Hemisphere. They could continue with the import programme into the United Kingdom much as it is today. They could maintain Government and private spending, and capital investment, at levels consistent with the Budget and the Economic Survey. They could continue to do all those things until the last ounce of British gold has been liquidated and the last instalment of Marshall aid had been spent. So far as we know, that is their policy. The President of the Board of Trade disclosed that the gap between imports and exports is as big as ever, so that as far as we know the Government, having obtained Marshall aid, have decided, I suppose for a year or 18 months, to indulge in a second holiday from solvency.

What will happen, if that is their policy, at the end of the holiday? What have we to look forward to? The answer is: a far more severe and cruel collapse in the standard of life than would be necessary if the Government and the nation had the courage to cut down now and to balance the overseas account. I ask the Committee to insist that that return to solvency be made now, in the summer of 1948, for these reasons: so long as our gold reserves are seeping away, there can be no revival of confidence in sterling. So long as there can be no revival of confidence in sterling there can be no sustained, buoyant, permanent expansion of production and of exports. No one can be sure what our money will be worth in six or 12 months' time. I those conditions permanent expansion of output cannot take place.

We ought to face the fact that a nation living on capital is a bad risk. Today, foreigners will not hold pounds and that means, among other things, that they will not invest in the sterling area, where it is so necessary that investment should be made, because they do not consider that the official rate of the pound reflects the credit of a nation galloping through its final reserves. At home, those who are responsible for other people's money, and other people's employment, are in growing doubt and anxiety as to how to prepare for a day of reckoning from which they see no escape. Wage earners, protected from that anxiety while they did not know the truth, are now beginning to learn the truth and, therefore, share the anxiety, unaccompanied by any hope. This is a demoralising state of affairs, and must he stopped. It cannot be ended unless the Government are willing to abandon their wishy-washy mixture of targets for industry and exhortation for the workers.

I want to be fair. I know that targets do perform useful functions, and that Ministers have made many sincere appeals for savings, hard work and self-discipline. But hon. Members know all about these appeals. We can say what we like on the platform, but we know that the results have been poor. My hon. Friends will agree that that is not surprising, because the party opposite are not in a strong position to ask anyone to work five and a half days for five days' pay. That, in fact, is one of the hard things that sooner or later will have to be done. The party opposite came into power committed to put their domestic Socialism in front of the great issues of national survival, and they have stood by their commitment. How have they done it? The bitter truth is that temporarily they have fulfilled their undertaking to make life easier in the poorest homes, but only with vast subventions from America and enormous inroads into our accumulated reserves. That truth, for two years, was hidden by concessions to expediency and prejudice, and irreparable damage was done because invaluable time, which we can never recapture, has been lost.

I can give the Committee an example of that damage. People are now saying, and many wage earners among them, that nothing will arouse the nation except the brutal shock of hunger and unemployment. We hear more and more voices prophesying that all our gold and aid from America will be swallowed up in living beyond our means, until the hour comes when we have nothing to supplement our current earnings, and we are forced on to a cash basis, with all the disastrous consequences that must follow. It may be that events will have to take this humiliating and tragic course. If so we shall have failed as a free and experienced nation to govern ourselves, and the example of that failure upon the rest of the world may well be decisive in the struggle between Communism and free institutions.

We have only a short time left in which to prove that misery and suffering are not the only sirens that can arouse the British people. I constantly ask myself whether there is any way in which this degrading awakening can be avoided. It may well be an awakening fatal to liberty. I ask myself whether any other kind of leadership or policy can succeed where Socialist planning has broken down, as the right hon. Member for Aldershot (Mr. Lyttelton) illustrated so well in his speech. I find that this is a problem which cannot be answered in terms of finance and economics alone. I hope that the Committee will allow me to deal with it as I see it—and that is as a crisis of character and spirit.

At the end of every war, public morale always slumps. The temperature of patriotism comes tumbling down when the strain of battle and defence is suddenly removed. That always happens, and, at such a time, a wise Government would do all it could to counteract the inevitable decline in vigour and virtue of the public. After World War II we have not had a Government wise in this respect. In fact, to an impartial observer it would appear that the Socialist Government have often acted as if it were their duty to undermine the character of the people, drugging us with too much money, and by their excess of controls, depriving us of that sense of personal responsibility which always brings out the best in British men and women. The Committee will be aware that the sense of duty has been weakened in all sections of the population. At one end of the income scale wages have risen faster than goods came into the shops, and the evil consequences of that process were deliberately concealed for two years at least by adding to the subsidies, by drawing on our stocks and by spending the American Loan at breakneck speed. Even today, if one goes into a factory, one will find men who do not understand how artificial has been the standard of life which they have enjoyed as part of the national holiday from solvency.

At the other end of the income scale things have been just as bad. Cheap money has forced up the prices of stocks and shares, and stupid as well as clever speculators have been living like the Government—without shame beyond their income, and spending the inflated increments of their capital and enjoying it. These are the people who might well raise a statue to the right hon. Member for Bishop Auckland. He is their friend. I wonder how many of them and of the wage earners even now are saying to themselves, "If this is an economic crisis, may it continue for ever."

The inflation of incomes and capital values has made us feel as though we were much richer than we are and this inflation has been the cause of the controls. It is always necessary to get things the right way round. We should not have controls, or at any rate a good many of them, but for inflation. Controls and allocations, ceiling prices and guaranteed margins are taking away from the men who might lead our recovery a sense of responsibility in the outcome of their own businesses. Either they make a profit much too easily or they incur a loss through no fault of their own. That vital link between the effort which a man puts out and the result he achieves is being destroyed. He has to gamble where he would willingly invest. He has to trade from hand to mouth where he ought to be looking far ahead. There is no denying that the controls and regulations under which Socialist management has forced private business to operate in the end will demoralise the character of those engaged in business, if they have not already done so.

This is a very unfavourable climate in which to attempt a return to solvency, but none the less I am convinced that attempt must be made. It could be done it we stood firmly on three principles. First, every citizen to bear some part of the sacrifice and each person's sacrifice to be seen to be just in proportion to the capacity of the bearer. Any economic policy which puts all the burden on one class would fail. I go further and say that no policy could save us unless it commands the support of all classes. Second, in proportion as we must cut down now we must be given solid grounds for hoping that what we give up in the present we shall get back and surpass in a measurable time. I claim that the reason this Government cannot face up to the difficulties and trials of a return to solvency is precisely because the nation as a whole does not believe they are capable of restoring our fortunes at any date.

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

Mr. Fernyhough rose

Photo of Mr David Eccles Mr David Eccles , Chippenham

I must finish. The third principle is that whatever is done by administration or new legislation must be designed to strengthen the national character and to fortify the will and resolution to do what is necessary. By that test nearly all the Government's recent actions would fail. I only cite the capital levy.

With these principles in mind, what has to be done to bring our total demands into relation with our total resources? The Chancellor divided these demand, under three headings: Government spending, private spending and investment. Those three add up to more than we can afford, and that is why we have inflation. Clearly, greater production is the best remedy but, as the President of the Board of Trade has said, it takes time. The fact is that we have not time to expand sufficiently our production before our gold reserves run out. The Committee will also notice that if that expansion takes place through work on piece rates, which much of it does, it generates its own purchasing power and, therefore, does nothing to cure the inflation. Be that as it may, I am convinced that there will be no permanent and satisfactory expansion in output until after we have returned to solvency and, from that sure foundation, we can begin again to trust our money, to replenish our stocks, and to outstrip our competitors in efficiency and in price. Therefore, a return to solvency is the first step. Which of those three divisions of spending ought to be cut to achieve it?

I am bound to say that I think less than nothing of the economists who tell us we ought to cut the capital investment programme. I agree with the views expressed by my hon. Friend the Member for The High Peak (Mr. Molson) in the last Parliament rather more than with his views in this Parliament. Whatever reductions have to be made, they must not be made in capital investment. To do that would be suicidal. Britain has to increase the output per man week dramatically within a very few years, or cease to be a great Power. How on earth can we recover if we eat, drink, smoke, and bet, but do not invest? I think the President of the Board of Trade was right when, for a change, he told us something about the capital investment programme, but it is nothing like big enough. It is the only guarantee for the future. What have we got now? We have consumption on tick without any hope. It will be far better to have more privation with some hope, which is indeed what would be the case—

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

Why did the hon. Member oppose the cut in petrol?

Photo of Mr David Eccles Mr David Eccles , Chippenham

I wonder how anyone can ask the British people to work harder while all around them they see new plant and machinery going abroad and their own tools, their transport system and productive capacity wearing out and starving for want of renewals and essentials? I would have talked in quite a different way, and would say to a wage-earner: "Will you take an ounce a week less sugar and re-equip the textile industry and in two or three years you can earn three or four more ounces a week?" I should say to a rich man: "Will you divide your house and make room for another family, and then we can concentrate all the new building upon houses for key workers, factories, and productive assets?" That is the way to talk to people of whom you are not afraid, and what is clear about all the Government appeals is that fundamentally those who make the appeals are afraid of the British people.

Great sacrifices will have to be asked and they must be matched by solid grounds for hope in the future. We ought to be honest and ask ourselves what ground does the ordinary man or women have for hope today. In British workshops they see new machines and plant being given priority to go abroad. They see consumer goods being manufactured and exported at a pace and price which they know cannot continue. They see the gold reserves going, and they will not rely on American aid forever. Here there is no solid ground for hope that next year will be better than this year or the year after better than that. That is why the Government's appeals meet with such a poor response. I am not a believer in more money as an incentive. It is not more money that we need; there is plenty of money in the country. What we need is hope in our own country, and that the average man has not got today. For that the Government are responsible.

That means, therefore, that the cuts must come upon private and public spend- ing. That is a very hard decision. I did not wish to trouble the Committee with any figures tonight, but to clarify my proposal I give an estimate that expenditure has to be cut by some £600 million over and above the anticipated Budget surplus. From where are we to get the £600 million? Shall we cut it off personal consumption, or food subsidies, or the social services or defence, or where should it come from? Ultimately, the electors will have to make this decision. Theirs is the final choice, and before long they will have to make it. But it is our duty to give them a lead, and it is our duty to show that what is going on now cannot continue.

The comparison between a family living beyond its means and the British economy is exact. Suppose that this family, very short of money, are discussing Christmas presents for the children; one knows exactly how the conversation would go. An overwhelming argument could be made for giving Barbara her stockings and cigarettes, for giving Tom his farmyard, Albert one of the novelty destroyers, and so on through the whole list. Then someone chips in, mother it may be, and says, "If you go on like this, there will be nothing for breakfast." And they end up by seeing that they cannot afford all these things, there is a little give and take, and they share out what they have to spend between the children. We are in exactly that position of the family trying to give each other Christmas presents far beyond our resources.

When will we come to our national senses in this matter? Of course, I shall be told it is not practical politics to reach solvency this year. My reply to that is that this is a year of destiny, to use the words of my hon. Friend the Member for Flint (Mr. Birch). In such a year practical politics will have to give way to patriotism and faith in the future of our country. Do we really want our children to live in a truly great nation? If so, it is the duty of those of us who are of working age to reckon the cost to our generation, to cut down our expenditure in the present, and to give them the means to carry British power and influence into the future. That is our duty, and if it were put to the people, and the choice were between cutting private spending and Government spending they would choose a bit of both but they would choose more of Government spending. [Interruption.] This is the situation. The cutting down has got to be done. Someone must put the problem to the people.

Photo of Mr David Eccles Mr David Eccles , Chippenham

The interruptions show perfectly clearly that hon. Members opposite look at this simply as a matter of finance. When they do so they say, "We can justify the expenditure of this amount on social services, on rationing, clothing," or whatever it is. Every single thing can be justified one by one. We are over-spending in total and someone will have to have the courage to say so, or we shall go on sliding downhill. This is not a question of economics alone. It is a question of staying power, resolution, character and faith. If we have not these qualities nothing will go right. When my right hon. Friend the Member for Aldershot suggested today that the party opposite complained that we on this side of the Committee had no plan except to depress the working class standard of life, he raised a cheer from the Government Benches. Supposing we come back and say to the party opposite that they have no plan except to soak the rich? If that is the state of mistrust in this country, then we shall be ruined.

It is clear that mistrust of that kind is the reason why we are still moving towards bankruptcy. It is the reason why British credit is still declining. Unless we overcome this mistrust, the decline will go on until the final crash comes. It is my opinion—I dare say no one in the Committee shares it—that the British people would respond if they were spoken to by the House of Commons in words which clearly put the country above party. It is for that reason that I urge the Committee to insist that the return to solvency with all its trials and all its difficulties be made now, in the summer of 1948. We must reach a position where the world respects our money and where the confidence that comes from knowing that we are not going further downhill returns to British industry.

Ordered: "That the Chairman do report Progress, and ask leave to sit again."—[Mr. Snow.]

Committee report Progress; to sit again Tomorrow.