Orders of the Day — Budget Proposals and Economic Survey

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

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Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby 12:00, 12 April 1948

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.