Orders of the Day — Budget Proposals and Economic Survey

– in the House of Commons at 12:00 am on 13th April 1948.

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3.36 p.m.

Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire

We have now reached the fifth day of this conjoint Debate upon the national economic position and the annual Budget. I say at once that I hope that this is a precedent which will be repeated year by year. I think I was one of the first to suggest that it was high time Chancellors of the Exchequer in presenting their Budgets took a broader view than had hitherto been taken by their predecessors. They had limited themselves to what was being expended by Government Departments and then followed as best they could the usual canons of taxation that had long been laid down to raise the necessary revenue to meet the expenditure. They paid very little, if any, regard to the general national situation. I shall never forget the expression on the face of the right hon. and learned Gentleman's predecessor when, in 1940, I suggested that this procedure should be followed and that it was high time for us to depart from a precedent laid down as long ago as the time of Edward III.

It is right that Chancellors should regard themselves as occupying a much more important position than mere watch dogs over expenditure and providers of the necessary revenue. Their duty should be part of the general purpose of the Government in assisting the country through any economic difficulty with which it may be confronted. Yesterday we had a most interesting statement from the President of the Board of Trade. He covered a very wide ground and presented to the Committee a great number of figures which I am sure that we could extract from the monthly Digest of Statistics and things of that kind which the Government provide. I would much prefer the Government to publish these figures in a simplified form, leaving it to the Minister to discuss with the Committee the general implications arising from them. It would be much easier for us to follow the general trend and effect of Government policy.

What one gathered from that statement, as indeed one gathered from the publication of the White Paper and the speech of the Chancellor, was the continued seriousness of our economic position. We are still living well beyond our means and unable to pay for our imports either of food or raw materials. That is our position face to face with countries outside our own. Within our own borders there is the continued danger, unfortunately an increasing danger, of inflationary pressure. It is due to the fact that we are not yet producing sufficient consumption goods to meet the necessary needs of the people. That is really the basic cause of the inflationary pressure.

Though the Budget seems to have been drawn by the right hon. and learned Gentleman without any reference to the aid which is now coming from the United States, nevertheless, I am quite sure that he had that aid very much in mind when he was preparing it. Let us clearly understand that if that aid were not forthcoming, the estimates presented by the right hon. and learned Gentleman could not possibly be attained. We could not possibly get the revenue, either direct or indirect, if that aid were not forthcoming, and our expenditure in certain directions, because of the increased unemployment which would be inevitable, would be increased. So, once again, I join my voice on behalf of my colleagues in expressing our united and profound gratitude to that great nation, not only to its leaders, not only to Congress, but to the American people, for this unprecedented generosity on their part.

Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire

I know the hon. Member disagrees, but there are others who still value freedom and who are still anxious that freedom should be preserved and made a reality by giving as much assistance to those in need of it as possible. What is equally clear is that that assistance is only temporary; in fact, the amount of assistance we can now expect, either for ourselves or for Western Europe, will in truth and fact be less than the United States and Canada have been giving to us in the last few years. So what it really amounts to is that there must be an even greater effort than hitherto by the people of this country in trying to pay our way.

With regard to our position concerning other countries overseas, great progress has undoubtedly been made. Quite rightly, the President of the Board of Trade yesterday, in giving some figures, was able to take pride in the increase there has been, not only over the previous year, but, in many respects, a great and overall increase over 1938; but the unfortunate thing is that the targets which we were setting ourselves at the begin ping of 1947, and which we hoped to be able to reach in order to pay our way, have not yet been realised. What is more, those targets, which we hoped would be realised by today, we now know from the Government themselves, will not be realised by the end of 1948, but, instead, targets very much below them. Let me say at once that that does not depreciate the credit due to the management and workpeople of` this country, who have done in very difficult circumstances an amazing piece of work. Great credit is due to the managements in particular for their efforts to try to deal with the situation with which they never before have had to deal—shortage of materials, having to put up with second or third best, shortage of people, training and so on. Indeed, it is surprising that we have been able to achieve as much as we have done when we consider, coupled with all those difficulties, the restrictions, whether necessary or not, of licences and controls.

The main trouble with regard to our overseas position arises from the dollar shortage. However much we may desire to direct exports into dollar countries, which have increased and are still increasing, we cannot possibly hope to break even with the dollar position by our own efforts. We have never done so; at least, within the last half-dozen generations, and I cannot possibly see how we can do so in the future. Our only hope there lies in the extension of our multilateral trade. What we therefore want to do is to get back into a very open trading position with all the other countries of the world, and, by such trading, be able to reach a position in which to pay, not only indirectly but directly, our dollar debits to the dollar countries.

The President of the Board of Trade yesterday referred to the 32 agreements which he has made. I am sure that he has done the best he can with bilateral agreements, but these in themselves will not really help. Instead of being an extension of real free trade, in their ultimate effect they are quite the opposite, and are narrowing instead of widening. What we really want is to take this opportunity of extending our chances for increasing cur multilateral trade. A good deal has been done with regard to Geneva, and I wish the President had referred to it yesterday and had told us what was happening at the further conference which is now taking place.

What seems to be the greatest opportunity of all is now presented by the action of the United States. The United States have not offered their assistance to one particular country, either ourselves or any one of them, but they did ask each one of us to do the best we could to improve our own economic position by our own efforts. They asked us to do something very much further and better. They asked us to see how much we could help one another here in Britain and in Western Europe, so that we could improve our general position and take fuller advantage of the assistance which America was giving to us. It is a wonderful opportunity to put an end to what I might call these jealous national distinctions, and I myself am looking forward to either a federal or confederate—it does not matter which—Western Europe in which we can join for the economic, political and cultural benefit of us all, for our defence against any possible aggression and against any threat which there may be to our mode of life. It is a wonderful opportunity which I hope all these countries, and, in particular, this country, will seize.

It does not mean for a moment that we lose any part of our close connection with the British Commonwealth; on the contrary, it is another factor for increasing and cementing our friendships and of increasing again the channels of trade. The greater and more open these are, the better for all of us concerned, and, in particular, to ourselves, for let it be remembered that the strength of this country was built up by the fact that we were willing to trade with every country in the world and were willing to buy from every country in the world. That is why we were able, in a century and a half, to increase our population from 9 million to 45 million. We cannot feed those 45 million today, but only less than half of them, and we can only maintain the standard of living, which we have very largely created by our trade, by continuing that trade. If we are not able to do that and to buy the necessary raw materials for our industries, then, unfortunately, all that we have been able to do in regard to social legislation and the improvement of our standard of living will be affected and there will be a sharp falling off.

That, in truth and in fact, is the real answer to our internal condition and this continued inflationary pressure. The Chancellor may do his best to relieve it by taking away the surplus of income which is above the amount that can be purchased with that income either in goods or services, but the real truthful answer is that what he does can only be artificial and temporary and that the real solution is to create more consumption goods until the people are satisfied with those goods. What we need, therefore, is to encourage production more and more, and I was glad to hear the President of the Board of Trade yesterday emphasise the need for the removal from every side of restrictive practices which handicap production. I can well understand that they might have been desired in a time of depression and inflation, but at a time like this they are not only iniquitous but a crime against the people of this country.

May I now turn to the Budget itself? The expenditure on capital goods, three years after the end of the war—this is now the fourth year of supposed peace which has not yet come—is far too heavy. So often I have asked for a cut in capital expenditure which will not bring in immediate returns. I think the last occasion on which I raised that point was during the Debate on the Address. The Chancellor himself was responsible for introducing a cut of about £200 million when he was President of the Board of Trade. Let me give one illustration. I wonder whether the Committee appreciate the extent of expenditure by local governments today, quite apart from the expenditure of the central Government. It all comes from the income of the people. The expenditure by local governments today amounts to no less than £950 million—nearly as much as the pre-war Budget of the central Government. It is roughly one-ninth of our national income. It is excellent when we can afford it, but for the time being what we want is not so much capital goods as consumption goods for the people; otherwise, disaster may overcome us. I am not satisfied that there has been a sufficiently drastic cut.

What is more, we are continuing and increasing this policy of controls. As we know, controls are really the progeny of war. They were meant to deal with the war situation, and they should not be Continued more than necessary in time of peace. That seems to be agreed by everybody. The trouble with controls is that they are the most fertile of all things of which I have ever heard. One control breeds any number of new controls. It does not matter what one controls; a new control has to be brought in to deal with the situation created, and so it goes on. It should be the object of the Government to try to limit them as much as possible. I am aware that the President of the Board of Trade and another of his colleagues have been given the task of streamlining, as it was called yesterday. I wonder whether the President of the Board of Trade is the right person to deal with that. I would like the Chancellor to consider whether it is possible to appoint some outside small body to look into controls very quickly and see whether they cause more damage than the good that they are supposed to do, whether there is any truth in what was suggested by the right hon. Member for Aldershot (Mr. Lyttelton) yesterday or whether there is nothing in his suggestion, and whether they can be limited in some way.

As a result of controls, licensing and the number of forms which have to be filled up, there is a great wastage of manpower. Manpower is being taken away from production to do unproductive work connected with these controls. A great number of people are employed by the Government in this way, and there has been an increase instead of a reduction in the people so employed. The wastage does not apply only to people employed by the Government. There is an equal wastage in the people employed in industry, because apart from every man so employed in the Government, with the time he takes in sending out forms, studying them, getting information from them and filing them, every firm, company and individual has also got to waste an equal amount of time in filling them up and posting them.

Therefore, there is need for what I have asked before—the creation of a national committee to deal with expenditure, an outside body which will look at this matter, but not merely from the Government angle. We cannot blame the ordinary citizen. Anyone who takes a post thinks that he can do the job better than anybody else. It is only human nature. There should be a body whose duty would be to decide whether certain work is really essential or whether the people engaged upon it are wasting time. There ought to be a greater cut in expenditure, which of course would mean lower taxation and, in consequence, an increase in the production of consumption goods.

As has already been pointed out, taxation has reached an enormous height—a height never before reached in time of peace or even in war. It takes 40 per cent. of the national income for Government purposes. At this moment £3,500 million in taxation is being taken out of a total national wealth which is well under £10,000 million. That cannot be justified at a time like this. The only justification put forward by the Chancellor of the Exchequer for keeping taxation high is that it is necessary in order to deal with the inflationary position. It is temporary, I agree, but there is great danger in the manner in which we have been tackling this situation in the last two years and in the way in which it will be tackled in the coming year. If we increase our taxation, either direct or indirect, there is the inevitable call for increased profits, wages or salaries to enable people to meet the extra taxation. That is what has been happening.

Therefore, instead of decreasing the inflationary pressure, the very rise in wages, salaries and profits to enable the people to meet the increased taxation increases the inflationary pressure. There is only one way to deal with the problem, and it is a ruthless way. That is for the Chancellor to say, "I am taking this loose income which is causing this pressure, but I a m making it perfectly clear that there can be no increased profits, salaries or wages until that pressure has been removed." The trouble is that such a course requires great courage—more courage than is possessed, I think, by any Government. I agree that the Chancellor has introduced a better method of accounting. That is an improvement for which we have been asking for a number of years. Last year we challenged the right hon. Member for Bishop Auckland (Mr. Dalton) on whether he had really balanced his Budget. He sneered at the suggestion that he had not balanced it, and indicated that he had not only balanced his Budget but that he had a great surplus. We now know from the figures which have been published by the present Chancellor of the Exchequer that, instead of having a surplus of £636 million, as was suggested, in fact there was a deficit of £14 million. That shows how one can be misled by the way in which accounts are presented. They have been presented much more honestly and fairly by the present Chancellor of the Exchequer. I welcome the change.

I now want to come to my last point. There ought to have been, as I have said, a greater cut in expenditure. We should have had a cut in taxation. That, in turn, should have led to greater production and to more incentive to production.

There is one tax, in particular, with which I completely disagree and that is the new tax introduced by the Chancellor of the Exchequer, which is a sort of capital levy. What he had done already was this. Out of revenue alone, by direct and indirect taxation, he had succeeded in obtaining a balance of some £200 million. He said that was not sufficient to deal with the inflationary position, although nobody seems to have ventured upon an estimate as to what is the inflationary position. But he told us at the beginning of his speech, and repeated it at the end, that he thought it was necessary, in order to deal with that position, that he should have a surplus of some £300 million. Having given away with one hand and put on new taxes with the other, that left him a balance of £200 million. He then looked round and said, remembering he was dealing with this inflationary position, which is his object—"I now want another £100 million." He hit upon this device of levying this capital tax.

Let us be quite fair: in many cases it will not be a capital tax. I am quite sure that a number of people will lower their present expenditure and try to pay that tax out of their income. Thus far it will be an anti-inflationary measure. Where that cannot take place, however, and where it is taken out of capital, it cannot have anything whatsoever to do with reducing the inflationary pressure. In point of fact, money is being taken from capital and from investment and made into income, thus increasing the inflationary pressure. From the argument which the Chancellor put forward, that is wrong. I could have understood it, and his followers behind him could have understood it, if he had said, "I am doing this deliberately in order that there may be a better distribution of wealth." Although I would not agree that this is the right way to do it, I could understand that argument coming from the other side of the Committee, but it was not the argument put forward by the Chancellor of the Exchequer. There has been an amazing distribution of wealth in this country since 1894 and my predecessors and my colleagues have a very good record on that ground. It was this party which introduced Death Duties in 1894; it was this party which introduced graduated Income Tax for higher incomes, and it was this party which introduced Surtax, as it is called now, or Super Tax, as it was then called. All of which has represented an immense redistribution of wealth in this country.

After hearing the Chancellor announce this new tax the other day, I thought it was just as well to look into what had been the amount of distribution since 1894 in the amount of Death Duties, and the figures were rather interesting. I do not think Sir William Harcourt used the words which the Chancellor of the Ex- chequer used, when the latter said it was once-for-all, but he used these words: This is a small tax which will not be increased. In its first year it amounted to very nearly £11 million. It remained roughly at that level, even through the period of the Boer War, until my very famous countryman became Chancellor of the Exchequer in 1909, when it certainly made a spurt. Since that time it has gone on increasing until it is estimated by the Chancellor of the Exchequer for the coming year that he will take £160 million away from capital and turn it into income. The total through the years is £2,937 million, which has been taken out of capital through Death Duties. What the amount is from Super Tax and Surtax, in regard to redistribution of wealth, I do not know.

My main objection to this new levy is this: not only is it badly framed, even if it is framed only for one year, but there is the bad psychological effect it will have, not only on those who will have to pay it, but on everyone whom the Chancellor of the Exchequer is asking to spend less, to invest and to save income. It is for that reason, above all, that I think it is a bad tax and ought not to have been proposed.

4.6 p.m.

Photo of Mr Harold Macmillan Mr Harold Macmillan , Bromley

I think every Member of the Committee would wish to join with me in welcoming back to us the right hon. and learned Member for Montgomery (Mr. C. Davies) after his serious illness. It is particularly appropriate that he should be speaking to us on a subject to which he has given so much and such profound attention. Perhaps it would not be impertinent to add, as a personal friend for many years, that we are glad indeed to see him well again.

Photo of Mr William Gallacher Mr William Gallacher , Fife Western

That is one thing on which we are all agreed.

Photo of Mr Harold Macmillan Mr Harold Macmillan , Bromley

We are now beginning the last lap of a five-day, though happily not non-stop, Debate on finance and the economic state of the nation. Since I have no doubt that the Committee have already seen the main factors of that situation, I do not intend to weary them with a very elaborate analysis. There is little dispute today about the state in which we find ourselves. There may not be so much agreement as to how we got there. I do not propose, however, to be led into that argument, for I wish today to look forward rather than backward if I can. Nevertheless, in the course of this sombre story, I think the people can complain of a certain lack of guidance from the Government. They have not been given any clear or consistent picture. Perhaps this has been partly the result of personalities; the natural buoyancy of the former Chancellor of the Exchequer and of the Lord President of the Council may have led them to overplay the optimistic theme or at least to divert us with alternations between hope and despair. Now, at any rate, we have one conductor in charge of the orchestra whose baton all have to obey, and, therefore, the false sense of prosperity with which the people have been drugged during the first years of this Parliament is passing away.

Yet even now a great part of our population have experienced only the more attractive symptons of inflation, for the early stages of an inflation can be very agreeable. Inflation is like drink in this respect. It is the morning after the debauch which is less pleasant, and we are getting perilously near the hangover. Nevertheless, as the Chancellor of the Exchequer has shown by his Budget proposals and as his economic White Paper clearly revealed, we are all, even the least responsible, waking up to the dangers ahead, and I pray that any temporary relief that we may obtain in the near future will not lull us to sleep again. Yet in much of what we are told we are not asked to look beyond the immediate future. Grave questions are asked, but they are not answered.

I am a very devoted reader of the daily newspapers—all of them—and I often enjoy the advertisement columns almost as much as the text.

Photo of Mr Harold Macmillan Mr Harold Macmillan , Bromley

I read that, too. I hope it will keep going. I have observed recently that most of the advertisements consist of space taken up by the Government, or on behalf of the Government. I was particularly attracted by one of these displays called "Report to the Nation, No. 12, Special." It occupied about a quarter of a page of "The Times." Its primary purpose, no doubt, was to give the readers of that newspaper a graphic picture of the situation. Its secondary purpose was to advertise the short Economic Survey, price 3d., on sale at all booksellers. By the way, I cannot help feeling rather jealous of His Majesty's Stationery Office, because of the amount of paper and printing capacity which they absorb. If only I and my colleagues in the publishing trade were given more paper, we could supply all the text books necessary to educate the public at home and abroad.

However, in this remarkable document, published, I suppose, under the surveillance of the Lord President, there are headings which are formidable and even arresting. "Is our food in danger?" "Is unemployment round the corner?" "How can we turn coal into food?" Can we keep up the clothing ration?" "How much is there left in the kitty?" "Where will Britain be a year from now?" Then there are these most dramatic pictures to explain the matter simply for the readers of "The Times," I suppose; but even a child could understand them. There are these pictures of sand hour-glasses. In the first, the top half is full: "Going." In the second picture the upper glass is half empty: "Going." In the third picture the upper glass is empty: "Gone." What are the captions? They are so good I must read them. At the end of 1946 we still had £1,600 million of gold and dollar reserves. By the end of 1947 we'd used up £1,000 million of them. Then comes the question: Where shall we be by the end of this year if we go on buying and selling at the present rate without Marshall Aid? Going, going, gone! What an epitaph. But in case there should be any doubt in the readers' minds, a note says: There is so little in the kitty that we can't go on importing at the present rate unless we get American aid. If we economise by cutting imports we shall go hungry,"— this is the Lord President, or the Government— factories will close for want of raw materials and many will be out of work by December. That is, December, 1948. Of course, in December, 1947, we were rounding "recovery corner." But what is the answer? More and more production. Therefore, I think we have reached this level of agreement in all the analyses that have been made, in the speech to which we have just listened by my right hon. and learned Friend the Member for Montgomery, and in the speeches made in the first four days of this Debate. We are agreed that the first proposition for our salvation is American aid, and that the second is more production. Let us examine them a little more closely, for it is upon these we are to pin our hopes.

It is clear now that American aid will be forthcoming—capitalist aid, but none the less welcome for all that. We shall obtain our quota from the Marshall Plan, but this time we shall have to stand in the queue with other nations. For let the Committee observe that this new aid is very different from the original American Loan. That was a contribution proudly claimed as their due by the nation on whose shoulders had rested the main burden of the war; who had fought long and alone the battle for the survival of civilisation; and without whose efforts the world could not have been saved. That Loan, which many American people as well as we, thought should have been a gift—and which, in point of fact, is now a gift—was something of which we need not be ashamed, for we had a right to it. It was only fair that we should be given the initial aid to our recovery. But it was understood, in my right hon. Friend's memorable words, that it should be "a springboard, not a sofa." It was confidently expected to last five years: it has gone in two. Let us see to it, all of us, of all parties, that if we are to rely again on American aid we use it as an inspiration and not as a drug.

I have not seen—nor have the Committee been given any very precise calculations—what, in fact, will be the position of this country on the external balance of payments even with American aid. What is the total we expect to get? How long will it last? Will it be for one year, or will it be repeated? Will it be payment in free dollars, or will it be payment in kind? Or will it be a bit of both? In the White Paper it is calculated that we shall lose some £220 million worth of gold and dollars in the first six months. Three months have gone, and we have in fact lost £150 million worth, much more than half of the estimate. Are these calcula- tions reliable, or are they like so many of the calculations of the first White Paper, which ran in a margin of error of anything from 93 per cent. to 1,900 per cent.?

Marshall Aid can give us a breathing space for which we should be grateful. For this aid comes not, as is so often and so maliciously contended, from the bulging coffers of Wall Street financiers, but from the humble homes of the United States. I join with my right hon. and learned Friend the Member for Montgomery in paying that tribute. It represents in the main the genuine sacrifice of millions of ordinary American people, in factories and on the farms, thousands of miles from Europe and from European problems. It deprives them to a large extent of goods and services which they might have kept for their own use; or, alternatively, it takes from them the prospect of reduced taxation and increased leisure. It is not a trick of the "shabby money-lenders": it is an act of faith of the American common man, our loyal ally and our faithful friend.

Nevertheless, let us make no mistake: it is and can be only a stop-gap, a temporary accommodation. It cannot and must not become a habit. And, since it is a stop-gap, we are in duty bound to subject to careful scrutiny any accompanying conditions, explicit or implicit; for we must not surrender to our temporary needs any of our permanent national or Imperial interests. We are entitled to insist upon this; and I am sure we can say this publicly and clearly, without any danger of misunderstanding. In my experience of dealing with Americans—and being half American myself I have some of that experience—I think they admire and never resent plain and straightforward speaking.

Photo of Sir Arthur Baxter Sir Arthur Baxter , Wood Green

Will my right hon. Friend allow me to ask him a question? In view of his statement, with which, I think, we all on this side of the Committee agree, that the Americans are making a great sacrifice in the Marshall Aid Plan, is it honest of this Government to accept this aid and to use it for a process of nationalisation which is intended to destroy the very way of life for which America is making this sacrifice?

Photo of Mr Harold Macmillan Mr Harold Macmillan , Bromley

I must answer only for myself. I cannot answer for the Government. What I was intending to convey and what I was saying was that certain conditions—of which I have heard only rumours—are contrary to the long term interests which this Government are here to protect. I thoroughly agree that there have been many malpractices by this Government. I think that in this particular connection, grateful as we are, we must not accept any conditions which are contrary in the long term to our national and Imperial interests.

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

Mr. Mack (Newcastle-under-Lyme) rose

Photo of Mr Harold Macmillan Mr Harold Macmillan , Bromley

I will not give way, for I do not wish to develop that point. I have made it carefully, and balanced w0hat I wanted to say.

What is the next proposition upon which we are to rely? More production. That, of course, is very necessary; but it must be more production of the right things, in the right proportion, at the right price, of the right quality, and to be sold in the right market. Production is one, perhaps the most important, of our needs; but it is not the only one. Let us be frank, for in this situation, after all the romanticism and wishful thinking of past years, the Committee and the nation are in the mood for frankness. We have before us an immense task, and it cannot be reduced to a few slogans. The question which poses itself is a simple one. It is: Can this island be made a going concern?

Hon. Members:

Yes.

Photo of Mr Harold Macmillan Mr Harold Macmillan , Bromley

It is clear that this island cannot be self-supporting in the narrow sense. It cannot, like Russia, maintain itself out of its own resources, at a low level indeed, but still at a level where human life can be sustained. Even if the present "soft" Socialism were turned into "hard" or Marxist Socialism, even if still more rigid controls at every point of the economic structure were introduced and enforced, even if all incentive were altogether abandoned and the stick definitely and finally substituted for the very shrunken and attenuated carrot of today, even if the torture chamber and the concentration camp took their place in the new economic democracy, even if all that remains of the bourgeoisie and of the leisured classes were finally liquidated, even if the general standard of living were reduced to something like the Russian, it is doubtful whether the actual productivity of British agriculture, industry or commerce would be on a scale sufficient to maintain the 45 millions of people who have been brought into being by a century and a half of capitalist enterprise in this tiny part of the earth's surface.

In such conditions slave labour—for that is what it would be—would produce only the results which normally go with slave labour. Real output would fall; the quality of our products would be reduced, and consequently their saleable potentialities; our invisible exports would rapidly disappear, or be limited only to those capital sums, such as we are now liquidating, which remain. Moreover, the steps necessary to introduce and maintain this iron discipline—the true Socialist planned State—could not be taken rapidly enough to deal with the present economic crisis without so violent a revolution in our whole way of life as to provoke counter-revolution and civil war. I do not believe that in their hearts even the most sincere and the most devoted adherents of the Socialist or Collectivist faith believe that the mere application of more and better Socialism, hard instead of soft, red instead of pink, could solve our present economic crisis.

Photo of Mr Harold Macmillan Mr Harold Macmillan , Bromley

There is, however, much on which we are agreed. We are agreed that the inflation has increased, is increasing, and ought to be diminished. We are agreed that this Budget is a vast improvement on former Budgets, at least in two respects. First, the true balance is given accurately. Secondly, the surplus, if realised—and in spite of doubts as to the effects of particular measures—will be broadly deflationary. I will not comment in detail on the equity of certain measures proposed, notably the capital levy. I a m certain that from the economic view, apart from the equitable argument, this measure will operate in exactly the opposite direction from that intended. But then, I think that the levy must be regarded rather as a political than a fiscal instrument. We are agreed on the need for reducing the "inflationary pressure" I think the phrase is: at least, we all pay lip service to this idea.

I wish the Government would consider a reduction of their own expenditure: even the pruning of the admitted extravagances, which are part of the inevitable consequences of war, would have a deep and immediate moral effect upon the nation. For, unless the inflation can be checked production will not increase. Even if it should increase, under a continued inflation the time will come when it cannot be sold abroad, except by facing all the uncertainties and problems of devaluation.

If we can check the inflation; if we can avoid substantial leakage of our capital assets; if we can get some fair settlement of the raw debts—for that is what the block sterling debts really are; if we can maintain our savings—and I notice that in presenting his Budget the Chancellor made practically no reference to private savings, the first Budget I have heard for many years without that, although perhaps it was because of a guilty conscience—if we can cut our imports to the required millions without injury to our exports; if we can expand our exports by the targets proposed—and they are tremendous targets, already written down today—if we can get the right kinds of currencies for the exports we sell; if the foreign markets remain open and continue to expand their imports in a rapidly contracting world; if we can pick up a few millions here and there from the remaining international funds; if Marshall aid is sufficient in quantity and flexible in form—why, then we can scrape through for a year or two. But these are all tremendous "ifs." Even so, the main underlying problem remains. The problem is only partly economic: it is also psychological. It is not only material: it is also moral. It is not only national: it is also international.

One of the most courageous, as well as one of the most impressive speeches made in the course of this Debate was made by the hon. Member for Chesterfield (Mr. Benson), who told us: … the people of this country are steadily refusing to recognise the physical limits of the standard we can afford. … Until we can get across to the public that their demands are outside the scope of reality … we shall remain in this difficulty."—[OFFICIAL REPORT, 8th April, 1948; Vol. 449, C 389–90.] He blamed us all. And perhaps we are all worthy of blame. He appealed to us all. Well, let us answer his appeal. Yet even if we do for ourselves all these difficult things —and we must resolve to do them—even if we do all the things we ought to do, and leave undone all the things we ought not to do, I do not believe that we in this island can save ourselves by ourselves.

The original economic policy which recommended itself to the most powerful forces in the post-war world was to try to revive the free and multilateral trading system which brought such a successful increase in the world's standards of material well-being in the Victorian age. This concept dominated the United States' State Department, and was, perhaps naturally, accepted by our Government. Many international organs have been created, and still more conferences held, to promote this ideal: U.N.O., Bretton Woods, the International Bank, the American Loan, financial agreements, the interpretations placed upon the famous Article 9, the Geneva tariff conference, and the rest, are all examples of that common purpose.

But it must surely now be recognised that the fundamental premise on which such hopes depended has been proved wrong, for the economic interdependence and general improvement all over the world in the 19th century, beneficial to nations and people at widely different stages, was made possible by political security. The broad foundation of Europe and world peace was laid at Vienna in 1815 and lasted until 1914. Owing to the temporary eclipse of Russia in 1918, the system was partially revived and lasted until 1939. A second world war shattered it—perhaps for a period only, perhaps for ever. This political security was, with all its faults and occasional creakings, maintained by the Concert of Europe. It was immensely strengthened and underpinned by British industrial and financial supremacy, coupled with the Pax Britannica, which was spread over a progressively wider portion of the globe.

Now, for whatever reasons, the European Concert is destroyed beyond repair. No world system has come into being strong enough to take its place. The British Empire is much restricted in power and influence. In the East, it is more or less in liquidation. The American people, although far removed from the old isolationism, have not been able to take up the burden to the full, or with sufficient rapidity. Meanwhile, the anarchy which covers so much of the Far East and threatens the Middle East, has a vast economic effect upon the whole life of Europe Europe herself has been tragically wounded in the second world war, and lies maimed and bleeding, subject to internal disintegration and external aggression. Most important of all, the fundamental community of interest which preserved peace for a 100 years and made the Victorian the counterpart to the Antonine age, has disappeared.

In spite of all the rivalries of the great European Powers, they broadly wanted the same things—peace, material prosperity, and social stability. This is no longer true, and the world is fundamentally divided, perhaps finally. Eastern Europe and much of Asia are dominated by Soviet power, which has always openly stated as a cardinal doctrine of its Communist faith, the inevitability of a clash between capitalism and collectivism, and the necessity for world revolution. The men who control that vast country and those huge reserves have not concealed their opinions. It is strange how few people read or believed Hitler. Fewer still appear to read or believe Stalin. In the revival and co-operation of the non-Communist world lies the only real hope for British recovery. That revival must be based upon security—security comes first. By the mercy of Providence, Britain has an unsurpassed position and a unique opportunity. Let us be worthy of it.

There are three great groups outside the Communist. There is the British Commonwealth and Empire, shrunken but still great in actual and potential wealth and strength; there is Europe, or what remains of free Europe; and the United States of America and the New World. In all these groups, Great Britain has a special position. She is the head of the Empire; all Europe looks to her for leadership, and she is more closely bound by all the natural ties of kinship and tradition than ever before in her history with the United States. Last summer, I was very happy to observe that the Foreign Secretary had discovered the British Empire. With all the enthusiasm of the pioneer, he naturally seemed to think that he had founded the Empire. He blamed the Tories for neglect of the Empire, contrasting their indifference with the traditional Socialist enthusiasm for the Imperial idea. I forgive him all this, but I wish that having discovered the Empire, he had not forgotten it again.

We are at least taking steps, rather late, but better late than never, in the European field. The great movement which my right hon. Friend the Memfor Woodford (Mr. Churchill) started 18 months ago with his Zurich speech is taking shape and form. But if—and no one acclaims this more than I do—the conception of a United Europe has now touched the imagination of the Old World, where stands the United Empire? Surely, in this sphere unity of stategic, cultural and economic purpose is essential, and, in spite of the difficulties, attainable. It must be pursued with the utmost vigour and enthusiasm. As for the Anglo-American alliance, my right hon. Friend the Leader of the Opposition proclaimed his faith, in the Fulton speech over two years ago. Then, of course, it was criticised, nay, more than criticised, it was attacked with obloquy and venom. Motions were placed on the Order Paper of the House of Commons almost demanding my right hon. Friend's impeachment, and yet this bold and audacious proposal seems now almost a truism. These three groups, Europe, and Empire and the United States, have many divergent interests, and even rivalries. But they have one supreme interest, and that is peace and prosperity. Three years have slipped by, but it is not too late.

Perhaps the Committee will allow me a personal memory. Almost three years have passed since the final negotiations began which led to the total surrender of the German Army to the Anglo-American forces in the Mediterranean under Field-Marshall Lord Alexander. I well remember how it was all arranged, and how nothing remained but the final ceremony. I slipped away from our headquarters at Caserta for a day or two of quiet before facing the new problems peace would bring. I remember that I spent them in the lovely little hill town of Assisi, happily untouched by war. In those calm and sweet surroundings, dominated by the splendid church known and dear to so many of my countrymen and specially dear because it honoured the memory of the most universially loved of all European figures, I received the telegram that the Germans had signed and the war was over. Many of us remember that curious sense of emptiness and even flatness. The war had been our life for six years, and now it was over.

I looked back on the 2½ years I had spent as a civilian in a war area, and, unconscious of all the vast problems that peace would bring, and yet perhaps half realising how much the future bitter would be mixed with the present sweet, I felt that one good thing would come out of all this evil, namely, the Anglo-American co-operation by which alone victory had been achieved, and by which alone it could be fruitful. We had worked together in many lands and in strange situations—in French North Africa, in Italy and in Greece. On many issues there had been differences of approach or emphasis. They had all been resolved. Even in Greece, where during the first phase we had acted without official American support, we had been justified by their subsequent decision to accept the burden we first took up.

To all these countries we had come in war: to all we had tried to bring peace and reconstruction. Never in the long history of war have conquering nations turned so rapidly to the tasks of peace, even in the midst of war. I believe that that work is bearing some fruit today. How did we achieve it? By unity of heart and purpose. For that, political unity in the narrow sense is not an essential condition. The American Constitution did not allow of political coalition, even in war. Formal unity there was not, but real unity there was. If we are to recapture that leadership we must be worthy of it. There are, and must be, great divisions between the parties in this House. There is no harm in that. But if we are to surmount our own problems by the only means ultimately open to us—that is, by taking the lead in solving the problems of the world—there must be a return to something of that underlying unity in our own nation. Yet all the time the nation seems to grow more and more divided into fiercely contending and almost equal sections, each of which can stultify the efforts of the other.

Can we not call a halt, at least, to further exacerbation of either side? Cannot the Government be content with the positions they have already gained and with the effort to consolidate them? Must they introduce still further doubts and animosities into almost every field of national life? I greatly fear that if, in these darkening days, so full of doubts and dangers, we continue to fight together we may all go down together. If Britain falls there will fall with her the freedom of the world she saved.

4.43 p.m.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

The right hon. Gentleman the Member for Bromley (Mr. H. Macmillan) addresses the House in a distinctive manner. There is always the rolling, rhetorical phrase, reminiscent perhaps slightly of Gibbon, the dramatic gesture, the emphatic voice, but the content of his speeches varies in a most remarkable way. There are occasions when the right hon. Gentleman hides behind his manner the most vitrolic and partisan approach to our affairs. This afternoon, however, there was no sign of that, and I feel almost embarrassed, in view of the poetic phraseology at the end of the right hon. Gentleman's speech, in having to turn the mind of the Committee back to the more mundane and dreary facts and figures with which we have to contend.

Towards the end of his speech, with which, to a very large extent, we all agree, the right hon. Gentleman referred to the nation being divided. I think he might have given some advice to some of his right hon. Friends who have already spoken in this Debate, for instance, to the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton), as a result of which the atmosphere yesterday would perhaps not have been the same as it was. For my part, however, I must say that I think all of us believe in the existence of the party system, and the fact that we make speeches in this House, attacking and criticising each other, does not necessarily imply that there is no fundamental underlying unity. When the right hon. Gentleman makes a speech as he has done this afternoon—of which people are apt to say, "There is a statesmanlike speech"—I sometimes feel it is a little hard on other right hon. Gentlemen, on both sides, who, in full keeping with the party system, are more aggressive but, nevertheless, may be just as statesmanlike.

The principal purpose of my intervention in this Debate is to say a little about the industries for which I am responsible and to which a certain part of the Economic Survey devotes attention. Later in my speech I would like to turn to the wider issues of the Budget and the economic situation as a whole. No unprejudiced observer can deny that one of the most remarkable developments in the past year has been the recovery in our coal situation. I would like to make it quite clear that in saying this and giving some figures which, I think, will be regarded as favourable, I do not take the slightest personal credit. Anyone who has had Ministerial experience knows perfectly well the time lag which must exist between the taking of measures and their coming into operation. In so far as any Ministerial credit is due, the improvement is due, not to me, but to my right hon. Friend the Secretary of State for War, under whose administration many things were done, the results of which have been bearing fruit in recent months.

But I am sure that my right hon. Friend would agree with me that the credit in this matter is very little due to Ministers at all. It is directly due to the people in the industries, all of them—coal face workers, haulage men, surface men, officials, deputies, under-managers, managers, agents and members of the National Coal Board itself.—[Laughter.] There is no reason why Members opposite should laugh. Here we have a body of very able men who are doing their best, and not without success, to increase the coal output of the country. I do not believe that this improvement could have been achieved if it were not for the close collaboration between the National Union of Mineworkers and the National Coal Board. There exists between them a genuine co-operation which never existed in the industry before.

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

Has the right hon. Gentleman been quite fair in leaving out controllers, regional controllers, deputy-controllers and deputy-assistant controllers?

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

That interjection is really not worthy of the hon. Member.

What are the facts? In 22 weeks of the present coal winter the output of coal was 88.4 million tons, compared with 81.6 last year—an increase of 8½ per cent., which is rather above the target we had set for this year. If we examine the reasons for this increase, by far the most important is the increase in output per manshift. That is very satisfactory, because it is the output per manshift which is the most important factor in determining the level of costs. In addition, there are 25,000 more men, on the average, in the industry than there were a year ago, and this, I think, indicates that there is a confidence in the future of this industry Which did not then exist. The absenteeism percentage is down substantially, but I must make it plain that this is due primarily, indeed almost wholly, to the fact that the number of possible shifts worked has substantially declined. The number of shifts actually worked per wage earner is about the same.

It is sometimes said that we ought to have set a higher target, that an increase of 14 million or 15 million tons is inadequate. It is an easy game to set targets. It is easy to say there ought to have been a 10 or 20 per cent. increase, that we should have aimed at 220 million ton, or 230 million tons. Anyone can do that, but I would like to point out that this target involves an increase of two and a half to three times as much as the actual increase in 1946 over 1945, and in 1947 over 1946, the first year being under private enterprise and the second under the National Coal Board.

Therefore, I do not think that it cart possibly be maintained that this is a modest and moderate increase. It is really very substantial. It is the biggest, as a matter of fact, if one compares it with what has actually happened, since the year 1934. It was surpassed only twice in the inter-war years, in 1923 and 1929, compared with the previous years. On both of those occasions there was substantial unemployment in the industry, and the stepping up of production was therefore very much easier.

I would like now to say a word about the extension of working hours. The National Union of Mineworkers has agreed to extend the agreement for a further year. I am sure that the Committee will express their satisfaction and appreciation at that decision. Some questions were asked in the House the other day about the results on coal production of the working of extra Saturdays and of the extra half hour. I appreciate the interest which hon. Members display in matters of this kind. Although I am going to give some figures in relation to the matter, because I believe that hon. Members are interested in them, I must make it plain that the statistics do not, as my hon. Friend the Parliamentary Secretary said at that time, really enable a proper comparison to be made.

Here, for what they are worth, are the figures: In about 150 collieries with a, total output in 1947 of 6 million tons, the addition of half an hour to the length of the shift has resulted in an extra output in the last 22 weeks of about 300,000 tons, an increase of about 12 per cent. In the case of 700 collieries with an output of about 170 million tons in 1947, the introduction of Saturday work has resulted in an extra output in the same period of about 3.6 million tons, an increase of 5 per cent. The difference between those percentages is unquestionably bound up with the fact that some collieries work a Saturday shift every week, a great number work the Saturday shift every other week and a certain number do so only one week in four. Those figures illustrate the difficulty of making comparisons of this kind.

A further difficulty is that working conditions vary immensely. Whereas in some pits it may be perfectly possible to have an extra half hour for hand-cut coal without all the complication of lengthening the stint, in other collieries that is not the case. Therefore, although those figures suggest that the extra half-hour is producing better results, we certainly cannot conclude that if this system were put into universal operation instead of Saturday working, we should get better results. This is a matter which we must leave to be worked out by the National Coal Board and the National Union of Mineworkers. I am sure that it is wisest to leave them to deal with it locally, on the basis of what may be best for each individual pit.

A result of that increased production and the fact that consumption has been held down to about 3 per cent. more than last winter, we are in the happy position at the moment of having very substantial stocks. At the end of March these amounted to about 13,500,000 tons. I have often been pressed, because of the high level of stocks, to start distributing a lot more coal to the domestic consumer. We have made some concessions in that direction. Receipts of house coal by merchants this year were about 6 per cent. above those of last year, but here we come to an essential fact. It is that the first call, after meeting our industrial needs, and giving the domestic consumer sufficient to get on with, must be our exports. The fact that we have this high level of stocks now enables us to plan a much higher level of exports for the summer months. It means also that the additional stocking-up we have to do between now and the end of the summer is much smaller. Indeed, if we keep stocks at their present level, we only have to add some three million tons compared with 10 million tons last year. I shall shortly be announcing arrangements that will be made for distributing coal in the summer and indicating how much will be going to exports, how much to the home market, and so on.

I think the Committee will be interested to hear of the progress that is being made with coal exports. Last August at the Paris Conference we indicated that we might export 13 million tons, but that we could not start until April, 1948. I must confess that at that time I thought that this estimate was rash. Even as late as last autumn I was very doubtful whether we could achieve it. What has happened? We began the export of coal in a small way even before Christmas. Then we told the National Coal Board they could arrange for exports at the rate of about 200,000 tons a week from 1st January.

Some weeks later we removed any weekly restriction and we set a target not of 13 million tons, but of from 15 million to 16 million tons. That amount has already been allocated in various bilateral agreements that have been made. If, as we hope, the coal is exported in that quantity, we shall have added to the credit side of the balance of payments between £30 million and £40 million. We are exporting at the moment to a very long list of countries. I will not weary the Committee by reading them all, but they include Eire, Sweden, the Argentine, Canada, Portugal, France, and Italy. It is most satisfying to see the list growing both in the number of countries and in the amount of coal, as every week goes by.

Progress towards the 16 million tons is not always as fast as we would like. The bilateral agreements have first to be negotiated. The National Coal Board and their agents have then to negotiate the actual commercial contract. Prices have to be agreed upon and the grades of coal have to be settled. Finally, shipping arrangements have to be made. Thus there is a time-lag between the date when the bilateral agreement is made between the governments and the actual shipment of coal.

There is one other point which I must mention. While I have little doubt that we shall be able to achieve the target, we are naturally not finding it easy to supply all those countries with exactly the quality and the grades of coal that they want. There is a certain conflict between the needs of the export market for particular types of coal and the needs of the home market, and we shall have to try to preserve a fair balance. I ask the Committee to remember, when they hear complaints about the unsuitability of particular grades of coal which are available to consumers here, that we must not impose upon our foreign customers the worst and the most unsuitable grades of coal. We must give them a fair amount of the grades that are in much greater demand.

Here are the figures for export. Whereas in January the total shipment of coal for exports and bunkers was 691,000 tons, in February it was 723,000 tons. In March we expect with confidence that the figure will be more than 900,000 tons. Even so, I must make it plain that we do not regard these figures with complete satisfaction. They represent a good recovery, but there is still an enormous way to go.

Moreover, we have to be sure of our production target and we have to beat it if we possibly can. By the end of the year, we have to be producing at a weekly rate, say, in the autumn, of 4,600,000 tons. We are producing about 4¼ million tons at the moment. There is still some way to go there. As regards exports, even the target which we have set for the year is still only about one-third of what we exported before the war. Therefore, there can be no relaxation on anybody's part.

There are two other problems which increase as the months go on, and which I am certain will come to dominate the position. They are the problems of quality and costs. The problem of quality we have heard a lot about on various occasions, and I will not waste the Committee's time by going into the details now. There are difficulties, and we shall not overcome them until increased plant, including new washeries, have been built. As to costs, one could spend the whole afternoon discussing that problem. We shall need the co-operation of everyone in the industry in solving these problems.

May I say a word or two about the other major industries with which I am concerned—electricity, gas and oil? The first thing I want to say about them, and it has some connection with what the right hon. Member for Aldershot said yesterday, is that all are affected by the steel shortage. In electricity, the problem is that of the peak load. We know that we can solve that problem when we have built more generating stations. We got through the past winter rather fortunately, because the weather was mild, and we were immensely helped by the staggering of working hours. But in our effort to save steel, the generating programme has had to be cut. For that reason, we must do everything that we can, over a longer period than otherwise would have been the case, to spread the load.

Have we done everything possible? I do not think that one can expect more on the industrial side, but it did occur to me that so far as non-industrial consumers are concerned, we might make some use of the price mechanism. Here is a case where, I think, it is appropriate to investigate the possibilities and perhaps follow the line of the Post Office, which charges different tariffs according to different times of the day, so as to spread the telephone load. The same idea might be applied in the case of electricity. Accordingly, I appointed a Committee some time ago under the chairmanship of Sir Andrew Clow, to go into this whole matter. The Committee will report next month, I hope, and we shall see what they think of the problem. We must not assume that there is a solution on those lines, but at least we can be satisfied that the possibility will have been thoroughly examined.

In gas, the same problem arises. There is an acute shortage of steel, and a vast amount of expansion and even maintenance work is held up at the moment through lack of steel.

Oil, to which the right hon. Gentleman referred, is more complex. It is less within our control. I would refer hon. Members to the Economic Survey for the details of the problem, which is a very real one. There can be no doubt whatever that for the next three or four years there will be an acute shortage of oil. The main reason for this is the astonishing expansion of oil consumption in the United States, which consumes about two-thirds of the total world output. The actual increase in consumption in the U.S.A. in 1947 over 1946 was 20 million times, which is far more than our total consumption. We can readily understand how a slight change in consumption there is apt to throw out of gear any plans that we may make in the rest of the world.

The long-run solution to this problem again depends on steel—more tankers are needed and more refineries. The right hon. Gentleman seemed to imply in his remarks yesterday that we were neglecting the oil industry, and that we did not fully appreciate the immensely valuable contribution which it could make to our dollar earnings. I can assure him that we are very well aware of that. The problem is simply this: Where is the steel to come from at the moment on the scale needed? For these programmes for increasing refinery capacity require an enormous amount of steel. The right hon. Gentleman talked in his speech of paper shortages, but the fact remains that there is a real shortage of steel. It is a question of deciding whether we are going to have oil refineries or whether other parts of the engineering industry—

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

May I ask the right hon. Gentleman if the Government will consider publishing a Budget which will enable us to make more constructive suggestions than we can now? It is very notable that that is omitted from the Economic Survey.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

The right hon. Gentleman was Minister of Production during the war, and he is very familiar with the whole process of raw material allocations. So far as I know, no raw material allocations have ever been published, and, I think, quite rightly so. I will not explain why, because I have not the time to go through all the reasons for it. The broad picture cannot be questioned—engineering, shipbuilding, industrial building, mines and railways all want steel, and it is most difficult to hold a fair balance between those different consumers. The steel shortage arises because of our limited capacity on the one side, as the President of the Board of Trade said yesterday, and, on the other, because of the impossibility at the moment of getting sufficient steel imports.

Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot

Mr. Lyttelton indicated dissent.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

The right hon. Gentleman shakes his head. He may have some miraculous solution of this problem. If so, I shall be only too glad to hear it.

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

When it comes to a solution, is it not a fact that this Government has reduced the steel production of Western Germany from 17.8 million tons to four million tons?

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

The hon. Gentleman knows perfectly well that this Government did nothing of the kind. There happens to have been a war, and arising out of it a number of complicated problems of production in Western Germany, including coal as well as steel.

I would like to return to the central problem which faces the Committee and the country—that is the balance of payments in general and the dollar deficit in particular. What are the causes of this situation? One can interpret that question in more than one sense. It may mean what gives rise to this situation? What was the original reason for it? And it may mean who is responsible for not putting it right?

As to the original cause of this, there can be no doubt whatever. Hon. Members opposite sometimes speak—I know that they may not always mean it very seriously—as though the Government were responsible for the cause of the present situation. Of course, it is nothing of the kind. What are the facts? In 1948 we anticipate that exports will be 30 per cent. in volume above 1938, and imports 20 per cent. to 25 per cent. below 1938. Exports will be nearly one-third above and imports nearly one-quarter less, and yet, despite that, we Budget for a gap. That is a most astonishing fact. In 1947, the volume of our exports was slightly above the 1938 figures—about 8 per cent.—and our imports were about 25 per cent. below, and yet there was a gap of £675 million compared with only £70 million in 1938. What is the reason why, when imports are a quarter less and exports slightly more, our balance of payments deficit has increased so astonishingly?

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

It is all set out in the Survey.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

It is not all set out, but a good deal of it is.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

If hon. Members opposite had read the Survey as thoroughly as the Chancellor of the Exchequer asked them to, we could be spared much of what the right hon. Gentleman has to say, and it would give back benchers a chance.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

Perhaps the hon. Gentleman would wait until he hears what I have to say. I hope that hon. Members opposite will read the Survey and cease making the extraordinary statements which they sometimes do make.

First of all, the 1938 deficit of £70 million has increased to £180 million, simply by the increase in world prices. The terms of trade had turned against us to the extent of £190 million in 1947. Government expenditure overseas was £170 million more while the diminution in our invisible earnings in 1947 compared with 1938 was about £660 million. The total deficit in the 1938 level of imports would have been not £675 million but £1,200 million. It was reduced to £675 million by the cut in imports. It is war losses and the change in prices which are solely responsible for the present situation, and if without those causes our imports had been cut and our exports expanded in volume as they have been, we should, of course, be in a most comfortable position. We should have a surplus on 1938 prices of about 150 million and at present prices of about £300 million. Those are the facts of the situation.

Hon. Members, while saying in private that that may be so fail to say it in public; what they say in public is that our policy has been wrong because we have not put this right, because we have allowed that to go on and because we have not got back to a balanced economy. That, of course, has not always been accompanied by a clear indication of what policy the Opposition would adopt.

Photo of Mr Cyril Osborne Mr Cyril Osborne , Louth Borough

Get rid of the Government first.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

If I may respectfully say so, getting rid of the Government is not the answer. What would hon. Members propose if any other Government were in power? In this matter one is bound to be influenced by the utterances of hon. Members opposite during the last two and a half years. I cannot recall that there has been a tremendous enthusiasm on the benches opposite for the cuts that the Government have imposed. When I first went to the Ministry of Fuel and Power and the basic petrol ration was two-thirds the rate that it was in 1947, I do not recall hon. Members opposite saying, "Do not put it up, keep it down." On the contrary, I was under constant pressure all the time from hon. Members opposite to raise the petrol ration. Nor do I recall that when we had to do away with the basic ration there was much support from the benches opposite for that act. I know that in private some hon. Members agreed with us, but they did not say anything in public. When it came to cutting tobacco I do not recall that there was great enthusiasm by the Opposition. The hon. Member for Chippenham (Mr. Eccles), who spoke last night about the necessity for reductions here, there and everywhere, was amongst those who voted against the tobacco tax. Similarly in the case of newsprint, bread rationing, and everything in that connection which we have done there has been no support from the Opposition for imposing cuts.

Photo of Mr Oliver Crosthwaite-Eyre Mr Oliver Crosthwaite-Eyre , New Forest and Christchurch

The right hon. Gentleman has been quoting all these cases. Will he say something about why His Majesty's Government have never reduced the debts incurred during the war nor taken any steps so to do. That is something which would alleviate part of our present conditions?

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

I am afraid I cannot allow the hon. and gallant Gentleman to ride off the accusation made against the Opposition by a question of that kind.

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

The right hon. Gentleman did not give way, and the hon. Member for Wood Green (Mr. Baxter) is not entitled to ask a question while the Minister is on his feet.

Photo of Sir Arthur Baxter Sir Arthur Baxter , Wood Green

The right hon. Gentleman says that we on this side of the House did not vote for the tax on tobacco. The reason was that the then Chancellor of the Exchequer did not make the slightest attempt to reduce the amount of tobacco coming in, but put a tax on it which was going to be remunerative to him. It was very problematical whether it would cause any reduction in importation and consumption. That was why we voted against it.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

I am astonished at the hon. Member for Wood Green (Mr. Baxter), because my right hon. Friend the previous Chancellor of the Exchequer introduced this tax specifically to reduce the consumption of tobacco.

Photo of Sir Arthur Baxter Sir Arthur Baxter , Wood Green

We said it would not reduce it.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

It did reduce it by 20 per cent. as my right hon. and learned Friend has told us. It may not have been enough but that was all the more reason why hon. Members should have said, "Put on a higher tax," instead of advocating a lower one.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

I must go on. The hon. Member for Louth (Mr. Osborne) himself occasionally suggests austerity measures, but they are not very common in the Conservative Party. We have the position where many Opposition speakers say, "We must have some cuts," in a vague sort of way, but do not say what we ought to cut, while some say, more precisely, "We must have a more severe Budget." To our great disappointment on this side of the Committee they never get round to suggesting what should be done. Some of them, it is true, started in this particular race. The noble Lord the Member for Southern Dorset (Viscount Hinchingbrooke) bravely mounted his horse and galloped along only to fall quite soon through lack of support from his own side when he started suggesting cuts in the social services.

The hon. Member for Chippenham last night recommended a cut in the Budget and I see from reading HANSARD this morning that it was £600 million, but not a single syllable was uttered about how that cut of £600 million was to be made. It is astonishing that people should make irresponsible speeches of this kind without giving any idea of how they propose it should be done. Even the right hon. and learned Member for Montgomery (Mr. C. Davies), in his interesting speech this afternoon, said we must have further cuts in expenditure, but he failed to specify a single case.

Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire

I was limiting myself entirely to capital expenditure. I have often spoken about this, but it is frightfully difficult without the knowledge the Government possess to distinguish between one and the other. If we had the particulars for which we so often ask we would be able to advise very much better.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

I am afraid I cannot agree to that. The right hon. and learned Gentleman knows perfectly well there cannot be a cut in Government expenditure without affecting policy, and it is a perfectly simple matter to say whether we should have reductions in the social services, the food subsidies or what. We never get an answer to these things.

Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire

The Government certainly have from me.

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

The right hon. and learned Gentleman was talking about the capital expenditure programme. I am talking about the Budget.

What lies behind this attitude of the Opposition that we should have unspecified cuts? I have read the speech of the right hon. Gentleman the Member for Aldershot and it is clear that what he wants to do is to reduce the inflationary pressure to a point at which we can abandon controls altogether. That is not an unfair statement of the main theme of his speech. That is, of course, a perfectly possible alternative policy to the one we have adopted, but it is a very old fashioned policy. I could not help thinking last night as I listened to the hon. Member for Chippenham that his speech reminded one of the "new look." It is supposed to be new, but it is really something very old. It reminds one greatly of grandmother's dresses. The only difference is that in the case of the "new look" in the fashion sense grandmother's dress could be made into a modern one, but I do not think the same use could be made of the proposals of the hon. Member for Chippenham.

What is this proposal? It is fairly clear that it is to reduce incomes, reduce purchasing power, reduce demand for the home market, reduce imports, reduce costs in export trades and so by forcing down the home demand release more resources for the export trade. The effort of this will be to force up the export trade while reducing the demands here at home, and so put right the balance of payments. It is in fact exactly the old-fashioned method—a purely monetary method—

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

I know what the hon. Member is going to say, and if he will wait, I will deal with it. I have an uncanny instinct so far as he is concerned. The trouble about the purely monetary policy—a large Budget surplus, reduction in the amount of purchasing power, cuts in wages and incomes and reduced demand—is that it is a very expensive way of reaching equilibrium.

On Thursday last my hon. Friend the Member for Blackburn (Mrs. Castle) quoted some very interesting figures about production since the end of the war taken from the report of the United Nations Economic Commission for Europe. There is another table in that Report to which I would draw attention. It relates to the years after the first world war when there was no Labour Government in this country and the party opposite was in the Government as part of the Coalition. Here are the figures for manufacturing output for this country in the post-war years last time. Taking the level of production in 1913 as 100, in 1920 it had reached 92.6. That is not too bad What happens after that? The peak of the boom was in 192o. In 1921 the figure was 55.1; in 1922, 73.5; and over the next four years, it averaged 83—still 17 per cent. below the pre-war level. What was the reason? It is plain enough: it was heavy unemployment. The balance of payments may be righted in this way but at an enormous cost in the standard of living. Indeed, when one speaks of the position being righted, I do not think it is really true to say that there was a proper balance in that period.

We all agree that every Budget must be a compromise. We have to consider various different things in it. We have, first of all, to consider over-all needs, whether there should be a surplus or a deficit. We have to consider the effects that taxes will have on people's activities, on work, on savings, on investments and so on, and it ought not to be forgotten that we have to consider equity as between different persons. As to the overall needs, we agree that a surplus is desirable. We think that budgetary policy can be used as a weapon to skim off a very large part of the surplus purchasing power, but we do not regard it as the sole instrument for putting the economy right and we certainly do not think that just by piling up a Budget surplus we shall get the right result, even if we are told, as we have not been told, how that is to be done.

Three hundred million pounds is a very large surplus indeed, and it astonishes me that so many hon. Members have cheerfully said, "Go on. We must have a larger one." Many hon. Members have spoken of reducing taxes, but I do not think a single speech has been made in this Debate suggesting that they should be increased anywhere. Many have said, "Let us have a larger surplus," but nobody has said "We will put up the taxes here or there." There has been talk about expenditure being decreased, but there has been no indication what expenditure should be decreased. [HON. MEMBERS: "There has."] I agree that a few hon. Members from the back benches—not officially—have tried it on. They have suggested that food subsidies should be cut and the noble Lord the Member for Southern Dorset said that we should cut social services as well. However, there has been nothing else. What we have to remember in approaching this problem is that not only—

Photo of Mr George Odey Mr George Odey , Howdenshire

Mr. Odey (Howdenshire) rose

Photo of Mr Hugh Gaitskell Mr Hugh Gaitskell , Leeds South

I have very nearly finished—must we be told what cuts have to be made but we must also consider what the effects of any such cuts will be. It is just as appropriate to consider the effect of cutting food subsidies on people's activities, on wages and on the danger of inflation as it is to consider the effects of taxation to which the right hon. and learned Gentleman the Member for Montgomery referred. We may say that high taxes induce people to put in demands for increased wages, but so would—and far more easily—taking off food subsidies.

I therefore claim that in balancing these things against one another the Budget has commended itself in the main to the approval of the country. It is a courageous, intelligent and fair Budget. It is courageous because it required courage to insist on such a large surplus; it is intelligent because it gives relief where it is likely to produce the best result for production; it is fair because it carries on the policy for which our party stands, of placing the burdens where they can be most easily borne. It will assist us in solving our production and trade problems, but the Budget alone cannot solve these problems any more than monetary policy can. We need other instruments of planning as well as the Budget. We need, above all, the greatest possible understanding of the country's position, a willingness to put the needs of the country first above our own personal inclinations, a readiness to accept self-discipline and the will to give of our best in every sphere of production.

We are at this moment facing, as a result of the two world wars, difficulties in the economic sphere which our forefathers never dreamt of. It is for us, by our civic qualities—and we are an ancient democracy—to surmount those difficulties and prove to the world that democratic freedom is not the enemy but the ally of economic security and social justice.

5.28 p.m.

Photo of Mr Claude Lancaster Mr Claude Lancaster , Fylde

The right hon. Gentleman the Minister of Fuel and Power divided his speech into two almost equal parts. The first half seemed to me to be a reasoned and a modest account of his stewardship in his office as Minister of Fuel and Power. The second half took rather the form of a lecture on economics with which I feel sure my right hon. Friend the Member for West Bristol (Mr. Stanley) will deal more appropriately than I can.

After the realistic approach of the Chancellor in his Budget speech, the complacency of the President of the Board of Trade yesterday discouraged hon. Members on this side of the Committee. There was one significant figure in all the mass of figures which the President pro- duced in his very lengthy speech which struck home to me—that figure of £178 million of our imports for the month of March. As hon. Members will remember, it came after the description of our growing level of exports—a very satisfactory rise—but a rise only amounting in March to a level of about £120 million. It seems to me rather like a description of a Test match where someone might say, "I admit that in the first innings we did not do very well, but look at our score in the second innings—we have made over 300 runs. I admit, of course, that the Australians made 500."

The Budget discussion, which, occupied three days, was enlivened at one time by the not very edifying spectacle of the ex-Chancellor accusing a brother old Etonian of taking part in a conspiracy. There is a much more subtle conspiracy on this occasion, in my opinion, on the part of three eminent members of an even older educational establishment on the score of costs, and some little part of what I shall discuss this afternoon is about this subject. The right hon. Gentleman the Minister of Fuel and Power skated on very thin ice over that matter, but I suggest to him that it is one which at this stage of our economic affairs we cannot pass over quite as simply as that.

The Economic Survey for 1948 deals realistically with many aspects of the present situation, but little or no space is given to the level and consequent price of our exports. There is one solitary reminder at the end of the Survey, in paragraph 247, which says: The ability to sell our goods will depend upon our being able to keep in check the inflationary tendencies in our economy and to produce at a cost which is competitive. Mention is made in paragraph 16 of the increasing difficulties of selling in certain markets, but those difficulties deal at that stage more with the matter of saturation than with the cost of the commodity which, I suggest, must inevitably play an increasingly larger part.

The Minister of Fuel and Power gave some satisfactory figures in regard to the present position of our coal stocks and our immediate prospects in exports, but when he went a little into the realm of comparing the past and the present, he did less than justice even to his own case. The Chancellor, on another occasion, rightly said that it was not much good comparing 1945 with 1946. The year 1945 was a year of transition, if ever there was one; 1946 and 1947 were alike, and the comparison there is a fair one. In 1947 production went up by only 4 per cent., while costs went up by 39 per cent., and that 39 per cent. is something to which we must turn our attention.

The costs of coal, as the Committee realise, are by no means confined to that one raw material; they impinge on the whole of our economic life. Take transport. The railways are affected in three main particulars. First, the price of their motive power. I am afraid that, owing to the unsatisfactory condition of the coal now being produced, the amount of rubbish which they have to transport up and down the country may amount to some six million or seven million tons in 1947. On top of that is the amount of coal which, owing to our relatively low level of production, has to be transported from export districts inland, with the consequent increase in ton miles. This cost impinges itself progressively on the price of electric and gas power, and on the abnormal wear of power plants and throughout the whole range of our engineering industries, including shipbuilding, through its effect on their raw materials, iron and steel.

Here we have the underlying cause of the inflationary tendency in our national economy. If it were a transient phenomenon, we could accept it with some degree of equanimity, but costs in the coal industry last year in great measure were due to current production costs, not costs of a capital nature due to long-term reconstruction planning. I think the right hon. Gentleman would agree with that and, as such, they must be taken on their current value as being the costs of the production of coal at this moment in this country. I am afraid that it will be some months before we have the full figures for 1947, but I will venture a figure now which, in my opinion, will be the final result of that year. Leaving aside all question of compensation, I should be surprised if the nation has not lost £20 million in the coal industry during the year 1947, and that figure not only plays its part in necessitating higher taxes but, of course, there is a loss to the revenue which otherwise would not have occurred from a healthy and dividend-paying industry.

This is not the occasion to debate m detail the causes of this situation. Last July I ventured a number of criticisms about the organisation and administration of the National Coal Board. I received at that time support from "The Times," from the trade journals connected with this industry, a considerable body of support from the United States of America and, since then, some support from officials who have left the National Coal Board, as well as from various officers in the National Association of Mine Managers. I believe that a great deal of that criticism was reasonable and has shown itself to be in the interests of the industry. Very little in the intervening months has been done to put that situation right.

We have heard today from the right hon. Gentleman about our immediate export programme, and I suggest to him that in this matter, time is not on our side. The progress which at this moment is being made in Europe is in advance of our own. Almost two-thirds of the leeway, within their physical possibilities, which could be made up in the Ruhr has been made up; France has exceeded her 1938 production; the Silesian coalfields are getting under way rapidly and, what may be a saleable product at this moment in a sellers' market and with a world shortage may, in a few short years, be a matter of the utmost difficulty to sell. Just after the war I remember going to see a man who is more experienced in this field than anybody else in the country. I asked him what he considered to be our contribution to provide coal exports, if practicable, to the reconstruction of Europe. He said 150 million tons a year. The trickle we are producing at this moment—for it is nothing but a trickle—is on a precarious basis and the level of costs and quality may well rule it out of world markets in the next few years.

The danger of this position is two-fold. The price of this material in one way or another affects practically the whole of our manufactured articles. It is the basis of our national economy and we simply cannot afford to continue running at the level of costs which now obtain. The danger to our export markets is very real and immediate. This is not an occasion to go in great detail into what might be done to improve the position, but the cause of these high costs is first and foremost maladministration, and, until that has been dealt with, there is no prospect of improving the position. Once again, I urge on the Government to take this matter in hand, before it is too late.

5.42 p.m.

Photo of Miss Peggy Herbison Miss Peggy Herbison , Lanarkshire Northern

During the five days of this Debate I have heard many speeches, and those which I have not heard I have read. I have tried, but in vain, to find even one glimmer of a constructive suggestion from those on the opposite side of the Committee, one constructive idea which might help us to deal with the economic situation in which we find the country today, or any alternative proposals to those put forward by the Chancellor in the Budget.

To the right hon. Member for Scottish Universities (Sir J. Anderson), who spoke last week, I always listen with great interest. He rarely if ever gives us any constructive suggestions, but at least he provides us on this side of the Committee with very good material for propaganda. I noticed last week that he was much more reserved in his attack on the standard of living of the lowest wage earners of the country. In a previous speech he attacked them very greatly, and even last week his belief in cutting the social services as one way of meeting and solving our problems was so strong that he suggested—or questioned, to put it no higher—that payment of family allowances should not have been made. This is what he said last week: Two years ago, when I made adverse comments on certain actions of the Government, which I thought had aggravated our difficulties, I said that I was not disposed to blame them over much. Then he goes on to say: but I am quite sure that his"— the Chancellor's— task today would be greatly eased if he had the family allowances and some other items"— he did not say what they were; I expect old age pensions were some— of expenditure on which I have commented in the past still in hand."—[OFFICIAL REPORT, 8th April, 1948, Vol. 449, cc. 385–6.] As he represents the Scottish Universities, I think I would be right in presuming that perhaps the right hon. Gentleman is a little interested in the education of children in Scotland. I wish he could have seen the sort of children I and many Glasgow teachers attempted to educate when his party were in power, children who rarely ever knew their fathers to work one day and who had in their faces every sign of being "up against it" from the minute they were born. Those people had no work from the party opposite when I expect the hon. Member for Orpington (Sir W. Smithers) would say they were free to use the talents God gave them. I would like the right hon. Member for the Scottish Universities to go into any of the Glasgow schools today and see those children, who now have a chance of being educated because of the work the Labour Government have done in the last two years.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

Is not the hon. Lady including children's allowances in that, because that was passed by the previous Government?

Photo of Miss Peggy Herbison Miss Peggy Herbison , Lanarkshire Northern

I should have thought that the right hon. Member for West Bristol (Mr. Stanley) would have seen that I accused the right hon. Member for Scottish Universities quite clearly of stating at least twice in the House, that if his party had been in power family allowances would not have been given. These family allowances, free milk given to every child in Scotland, cheap meals and the fact that many parents are now regularly employed, are giving the teachers of Glasgow and of the industrial areas a real chance—

Photo of Sir William Darling Sir William Darling , Edinburgh South

When did the free milk scheme begin in Glasgow?

Photo of Miss Peggy Herbison Miss Peggy Herbison , Lanarkshire Northern

The free milk scheme did not begin in Glasgow until it was announced by the Minister of Education in this House that everyone would have free milk.

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

I am very sorry to disagree but I announced that when I was a Parliamentary Secretary.

Photo of Miss Peggy Herbison Miss Peggy Herbison , Lanarkshire Northern

I can deal with this because I was teaching in Glasgow in 1945 and I collected the halfpennies for the milk. The only people who got free milk were those who were really destitute. That may seem a little thing to hon. Members opposite, but to those of us who were up against it, and to these children, it means very much indeed. I say to our Chancellor of the Exchequer that it is one of the finest things he and the previous Chancellor of the Exchequer have done—to ensure that the social services of this country will not be cut.

Another suggestion which has followed almost an even tenor through speeches of hon. Members opposite is the great desire they have to return to the price mechanism. What a tragedy that would he for the real producers in this country, if the Government were to adopt it. Do not let us forget—because I think we tend to forget—that ultimately the wealth of this country depends on those who dig the coal, those who work in the steel works and those who produce the food either as farmers or as agricultural labourers. If we were to return to what hon. Members opposite so glibly term the price mechanism, it would mean a great lowering of the standard of living for the real producers of wealth in this country. I am not belittling the work of other people, for without their work they do there would be difficulties for this country. I wish to stress the importance of the real producers to any nation.

I wonder if the hon. and gallant Member for Central Glasgow (Colonel Hutchison) thinks very much of what he might term the hewers of wood and the drawers of water? In his speech last night I was horrified at the vicious, cheap attack he made on the miners of this country. I will give his words, and I hope they will be well broadcast over Scotland. Here is what he said: It should have been easy for coal, which is the spoilt darling of the Socialist Party, and which is given a priority in food,"— I wonder if the hon. and gallant Member actually means the coal or the coal workers?— 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.—[OFFICIAL REPORT, 12th April, 1948; Vol. 449, c. 683.] I am glad it was the Minister of Fuel and Power who spoke from this side of the Committee today, and showed clearly just what the miners and the mining industry have done in the past year.

For any hon. Member opposite to talk of the miners as being the spoiled darlings of this Labour Government leads me to give the hon. and gallant Member an invitation. It is not far from Central Glasgow to the constituency which I represent. There the hon. and gallant Member might see some of these spoilt darlings go down the coal mine, see them working a 14-inch seam, watch them coming up to the top soaking wet, and with no pit head baths, follow them back to the miners' rows, less than five minutes' walk from where I live, and see the conditions under which they have to live. These are the spoilt darlings of the mining industry who, in spite of all the difficulties which they are facing, did a marvellous job of work not only for themselves but for the nation and for Europe last year. On Saturday our Scottish miners are to go to Edinburgh to have presented to them a trophy for the highest production of coal in Great Britain. I wonder what those miners will be thinking if they hear of the speech which was made by the hon. and gallant Member for Central Glasgow?

I now wish to turn to some parts of the Budget. I think that the Chancellor of the Exchequer is to be congratulated upon this Budget. With most of it I agree wholeheartedly, but there is one section of workers about whose condition I am worried, those who are in the wage-earning range of say from £4 10s. to £5 15s. per week, and there are still some of our essential workers in that wage range—the platelayers on the railways, the on-cost workers in the mines—and no one can say they are unessential—and some of those in our distributive trades. What do they get from this Budget? I want to deal with the assets, because they do get something. They have got the assurance, and it is an important one, that they are still to have their food subsidies through this year; that they are still to have the social services that we in the past two and a half years have provided for them, with no cuts, as have been suggested by hon. Gentlemen opposite; that there is to be a continuance and a furthering of social security from July. All these are important things, and are things which those in this wage range are to have in common with other workers.

Then one must look at the other side. Let us consider the man who is married, with a wife and one child. Before this Budget such men were completely outside the range of Income Tax, and so they have got no relief in that respect. They have got relief in the lowering of the Purchase Tax on some of the essential goods. That is important, and their wives will find it a great help when they go shopping. But other prices have risen, and these people are finding it very difficult at the present time, even with family allowances and with all that this Government have done, to get even the essentials of life. For instance, one of my constituents told me at the week-end that she was making a pot of soup and bought three leeks for which she paid 1s. 9d. Something must be done about the prices of vegetables.

Here is a point I wish to make to the Chancellor. We have had a "Statement on personal incomes, costs and prices." I agree with almost everything that is in it. I would say that my constituents realise just what this nation is facing at present, and the problems it is up against, and they want wholeheartedly to give of their best. I know that they will do so. I agree that there is no justification for any general increase of individual money incomes. In Paragraph 7 (d) of that White Paper there is a suggestion that the freezing of wages does not apply to every worker, that there may be undermanned industries into which we want to attract workers, and that it would be foolish to freeze the wages paid in those industries. But there are other workers, perhaps not in the most essential industries but in industries which the nation needs, distributive workers, etc., who are on the wage level about which I have been speaking. What is the attitude of the Government to these people? What is the attitude of the Chancellor of the Exchequer to them? I hope it is not the one given by the hon. Member for The High Peak (Mr. Molson) yesterday. He said: Only two days ago the National Arbitration Tribunal recommended an increase of 16s. a week in the wages of retail assistants in Scotland in confectionary establishments."—[OFFICIAL REPORT, 12th April, 1948; Vol. 449. c. 736.] Is the attitude of the Government to these people, "You must not ask for a higher wage if you are receiving £4 17s. a week"? Or is the attitude of the Government the sensible one of saying to those earning £7 per week and over, "Do not ask for a rise," but of saying to the unions who are negotiating, "Those on £4 17s. per week or up to £5 10s. have not sufficient on which to live"? What these people are finding when they go to negotiate wages is, they tell me, that the employers put in front of them this Statement and say, "That is the policy of the Government, no matter what your wages are." We as Socialists cannot for one moment accept that. I want the Chancellor to make plain where the Government stand on that one point.

I turn to the use of our manpower. I have read carefully the White Paper on the economic situation of this country. I think I fully realise the problems that are facing us. Yet it is a fact that while certain industries are undermanned we find in certain places in Scotland that there is no work for our people. I have made this statement before. I suggest to the Chancellor that where he finds that he has to cut the supply of raw materials he should carefully examine where that cut is to take place. We have found that two of our factories in Lanarkshire, one of the development areas which is one of the most distressed areas, have had to cut down their workers. I understand that they have had to cut down the number of workers because of lack of supplies. I also understand that one factory in England, where there is a problem of manpower, where there are not sufficient workers for vital industries, is still carrying on the production that we in Lanarkshire have lost.

I ask the Chancellor to examine the position carefully before he makes cuts. I ask him to ensure that the development areas, which have men for whom there is no other work, and where very often it is difficult to send them into other areas because of the housing shortage, do not receive cuts. If cuts have to be made they should be made wisely, bearing in mind the greatest use of available manpower.

Finally, I say that, except for certain instances which are minor, we on this side of the Committee admire the Budget which has been produced. We admire the way in which the Chancellor and his Department are tackling their problems. We are convinced that, if he carries on with this real Socialist planning, if he does not accept many of the statements made by hon. Gentlemen opposite—as I am certain he will not—then this country of ours will overcome its difficulties and will be a shining example to Europe and the rest of the world.

6.2 p.m.

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

The hon. Lady the Member for North Lanark (Miss Herbison) has touched me on a very sore spot. I would like to get this straight at once. In the Summer of 1940, under the threat of impending invasion, we managed to get the national milk scheme through the House, and to make it an operative fact. I had the honour of working out that scheme, under the direction of Lord Woolton. I presented it and commended it to the House. The House, with its mind on other things, accepted it. I got it through very largely by under-estimating the cost to the Treasury; and I am not going to have the hon. Lady taking away from me the solitary constructive achievement that I have to my credit in a long and otherwise rather derelict public life.

Photo of Miss Peggy Herbison Miss Peggy Herbison , Lanarkshire Northern

I was dealing with free milk in schools for every child. That did not begin until after the Socialist Government came into power. I was teaching in 1945 and, as I said, I collected the halfpennies from my children for the milk.

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

That little school scheme was just child's play by comparison with the great scheme which gives a guaranteed pint of milk at the price of 2d. to every nursing mother and to every child below the age of five, with free milk for those with incomes below a certain limit. It is no use the hon. Lady saying that it was not a jolly good scheme.

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

She was very rough about it in her speech. Before I sit down, I hope also to give that glimmer, which so far she has not seen, of a constructive policy.

Photo of Mr Adam M'Kinlay Mr Adam M'Kinlay , Dunbartonshire

Before the hon. Gentleman leaves the subject of milk, may I ask him whether it was not a very good scheme, coming from a man who did not like milk?

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

The hon. Gentleman does not know me. Not only do I like milk, but there are many occasions on which I find it absolutely essential, as an antidote.

Recently the hon. Member for Ipswich (Mr. Stokes) informed this House and you, Sir, that we were all absolutely crazy, and that he was the only sane one in the House.

Photo of Mr Richard Stokes Mr Richard Stokes , Ipswich

I did not say that.

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

Yes. The hon. Gentleman, with a sweep of his arm, said: … you are all crazy."—[OFFICIAL REPORT, 2nd March, 1948; Vol. 448, c. 270.] and I think you, Mr. Beaumont—

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

I would remind the hon. Member that the Chair was excluded.

Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern

He said that we were all crazy with the exception of yourself, Mr. Beaumont. A gush of sympathy rose up in me, because I feel a little bit in that position at present. I do not know whether I am crazy, or whether most other people are crazy; but there is no doubt about it, the way I am thinking and feeling at the moment, it must be one way or the other. I have read the Debates very carefully. I have listened at times, and read them again and again; and it seems to me that very few people have even touched the fundamental realities of our present situation.

Let us have a look for a moment at the general picture. From an economic point of view, we are today an artificial community, created under conditions which no longer exist. We have been unable to adapt ourselves to these new conditions. We are heavily in debt. By and large, our industries are obsolete; and, by ourselves, we are no longer an effective economic unit in the modern world. Nobody has yet faced up to that fact, as far as I can see. As a matter of fact, we are producing only one-tenth of the world's manufactures today, as against three-tenths at the end of the last century; and whereas we then exported two-fifths, we now export only one-fifth of a much smaller volume. There is not the slightest reason to suppose that, at any rate under the old system, we are going to export any more in the years that lie immediately ahead. The probability is that we shall export less.

The main reason for this, in my submission to the Committee, is that the material basis of our economy is, under existing conditions, quite inadequate. We are one of a number of petty little national economies in a Continent whose material resources have been drained to the last drop by two world wars. But the problem is no new one. It has really been implicit in our situation ever since our world-wide commercial and industrial supremacy began to disappear at the opening of the present century. The wars were a symptom rather than a cause of the trouble. They have aggravated, but they have not essentially caused, the problem. We had a great chance after the last war ended. We did not take it. I would like to quote, from Professor E. H. Carr, a very remarkable passage that he wrote which is equally applicable to the present time. He wrote regarding the period immediately after the 1914–18 war: The victors lost the peace, and Soviet Russia and Germany won it, because the former continued to preach, and in part to apply, the once valid, but now disruptive ideals of the rights of nations and laissez faire capitalism, whereas the latter, consciously or unconsciously borne forward on the tide of 20th century revolution, were striving to build up the world into larger units under centralised planning and control. The Russians conceived this inegration in cosmic terms, though in practice they soon began to limit their activities to the area of the Soviet Union. The Germans conceived it in the more limited but gradually expanding framework of Mittel-EuropaGreat Britain and France, embedded in 19th century tradition, forfeited the initiative through failure to understand the nature of the forces at work. I believe that to be profoundly true. That is really why we lost the last peace and, therefore, were involved in a second world war. I think that we have failed again. What do we now find?

We really must get down to the guts of our situation, because it is pretty alarming. To the east, a totalitarian group which has a closed economy, and a limited external trade which can only be conducted by means of direct agreements between Government agencies. To the west, a modernised and highly industrialised America, with a genius for mass production and, as yet, unlimited scope for internal expansion, without the necessity or the desire—we must face that too—to purchase manufactured goods on any substantial scale from abroad. And in the middle, a chaotic vacuum, of which we are a part. That is the position; and that is the main cause of the fearful world disequilibrium which is at the root of our present troubles.

Why have we failed again? I submit to the Committee that it is because of our continuing failure to understand the nature of the forces at work. We are still deeply embedded in 19th century tradition. We go on putting forward in this House, from both sides, 19th century cures for 20th century ills. These cures are based on the economic dogmas of the classical school of the 19th century. They were obsolete 20 years ago; and have about as much bearing on the economic problem which confronts us today as bows and arrows or muskets would have on an atomic bomb. Many years ago the late Lord Birkenhead wrote, with truth: Economics is a dismal and it is also a purely empirical science, if indeed it can be called a science at all. Its professors grope more faithfully, but with less certainty, towards the light (or towards the dark) than the titular exponents of any other branch of human learning. That is perfectly true. The doctrines and dogmas of laissez-faire capitalism, which enshrined the principle of non-discrimination and produced the fictions of a fixed total of national capital and a fixed wages fund, are absolute nonsense. So also—and some hon. Gentlemen opposite may not like this—is the inversion of these doctrines, which is the basis of contemporary Socialist thought; and particularly of Marxist thought, which is a combination of the economic dogmas of the classical school and the Hegelian dialectic, turned upside down, and presented to a bemused electorate in pseudo-scientific fancy dress. That is really the basis of Socialist thought in this country at present, in so far as it can be called thought at all.

What is alarming about this Government is that they cling desperately to both these doctrines—the original classical school doctrine, and the inversion. The Government are deeply committed to 19th century Socialism at home, and to 19th century multilateralism abroad. All I can say is that if they continue to pursue these twin doctrines of 19th century Socialism inside this country, and 19th century multilateralism abroad, we can end only in total and fatal disaster. Our reluctance and the reluctance of the Government and of some Members of the Liberal party—of whom there are not many here at present—the reluctance of everybody, in fact, in their own hearts—to face up to the fact that we are no longer living in the 19th century, when we bossed the world and bossed it very well, is understandable. I think it is also disastrous, because, if we want to go back to the international economy of the 19th century, we must first of all restore cheap food, then dear manufactures, then free trade and free migration and, finally, a free labour market. I suggest to hon. Members on both sides of the Committee that that is not a very practicable proposition—it cannot be done.

We are committed absolutely, politically, to the maintenance of full employment and to a minimum standard for all. I hope I will not be accused of being revolutionary for saying that such a policy involves planned production and trade. Only a planned, controlled trade and industrial policy can sustain a planned social system in a highly competitive world. If anybody suggests that that is very revolutionary, I would say that it was said many years ago by a man far in advance of any hon. Gentleman opposite. The right hon. Gentleman to whom I refer is Mr. L. S. Amery, who is now unfortunately not in this House. I therefore quote a most respected leader of my own party. That is why the attempt to enforce a return to the promiscuous nondiscriminatory price competition of the 19th century has so utterly failed. As Lord Bruce pointed out the other day in another place, the international economic organisations, evolved with the full support of His Majesty's Government since the war—Bretton Woods, the I.T.O. and all the rest—were designed to function under conditions which no longer exist. They make rules for a game that is no longer being played, and is not going to be played again.

I would like hon. Members to bear with me for a moment if I quote from the description of what has been going on at the Havana Conference. My quotation is from "Time," a very good American magazine. I am glad to see that the President of the Board of Trade is here. He has deliberately given his approval to this nonsense, although he knows just as well as I do what nonsense the whole thing is. That is why I complain about him, because he is sinning against the light. This is what "Time" had to say about the boys at Havana: Like children overhearing their elders, many delegates got unexpected ideas. Said one observer from Asia: 'Many of us did not know what an economic, bloc really was … after listening to the arguments against Britain's preference system, we came to desire such a system ourselves.' Said an American delegate: 'It's been a lot like Adam in the Garden of Eden.'After delegates had suggested more than 600 amendments to the Geneva draft, a Belgian delegate made a modest proposal. Instead of affirming the principle of free trade and listing the endless exceptions, why not simply outlaw free trade and list the few instances in which it might be practised? My final quotation is this: During the conference, one U.S. newsman had written: 'There is a danger that I.T.O. will be as toothless as a hen and reduced to clucking admonitively …' Why? What had wrecked the great hopes for a healthy, worldwide free market which Americans (and not only Americans) had held at war's end? The answer was not mere stupidity or greed. It lay not merely in the notions of economic nationalism which the Nazis had spread, nor merely in the notions of State-run business which Socialism was propagating. The strongest force working against freer trade was one that had inspired, not long ago, almost Utopian optimism about the future. It was 20th Century technology. That is really true; and that is why we cannot do it.

There is a remedy, and here is the Glimmer for which the hon. Member for North Lanark has been looking so hard. I will do more than give it on my own authority. I will give it on the authority of an hon. Gentleman who is a Member of her own party—the hon. Member for North-West Hull (Mr. R. Mackay). I am told that it is not good taste to recommend one's works to the House, and I refrain, therefore, from doing so. But I think there is no reason why I should not commend to hon. Members a most remarkable book by the hon. Member for North-West Hull entitled, "Britain in Wonderland." It has the advantage of being very much cheaper than another work, to which I purposely refrain from referring. He writes, with what seems to me to be absolute truth: There is no hope for the British people if we follow the present economic policy of the Government. That seems to me a very sound sentiment, with which we on this side of the Committee can most cordially agree and which we endorse. He goes on to say: We want a long-term policy which takes into account our changed position, phrased in terms which recognise the changes that have taken place in the world. We want something more attractive than austerity at home, more imaginative than work or want, and more realistic than an impossible export drive. I think that is all perfectly true. The fact of the matter is that there is no short-term remedy for our present economic problem. The present hand-to-mouth policy of the Government merely postpones the evil day, just as the American loan policy which they pursued merely postponed the evil day; and, as then, the crash, when it comes, will be all the greater. We cannot export enough goods to the United States over the next few years to balance our trade; nor can we compete with the United States except in a limited number of specialised and rather luxury goods—amongst which I would include Scotch whisky, for which the Government have not done so very much—nor can we compete with them in free world markets.

Therefore, I suggest that we must accept for the time being a disbalance of trade. It has been done before. The U.S.A. had a very big disbalance of trade, during the 19th Century. We never had, of course; but I think it is largely because of our 19th Century experience that we exclude altogether the possibility of living, quite frankly, upon credit for the next four or five years, which is what we have, in fact, got to do—and are now doing. [An HON. MEMBER: "By accepting Marshall Aid."] Of course. I never said I was opposed to the Marshall Plan. I was opposed to the conditions upon which we accepted the first American Loan, because anybody outside a lunatic asylum could see that we could not possibly carry them out. I think the Americans have shown great generosity in drawing a veil over that and in not talking about it; but they know just as well as we do that they will not get much of that cash back again.

I understand that the Minister of Fuel and Power described the figures given by my hon. Friend the Member for Chippenham (Mr. Eccles) in his speech yesterday about our trade deficit as irresponsible; and I would only remind him and the President of the Board of Trade, who I see is now present, that the figures given last year by my hon. Friend were also described as irresponsible. In the event they turned out to be an under-estimate of the gravity of our position; and it may very well be the same now.

Having said that there is no immediate short-term remedy, I must say that I think there is a long-term remedy which lies neither in a revival of laissez-faire capitalism and free multilateral trade, nor in totalitarianism. It lies, in my submission, in the creation, by mutual cooperation, of trading areas large enough to enable us to exist in the modern world; in reciprocal trade agreements—not necessarily bilateral—and payments agreements which themselves provide the finance of international trade; and in the radical reorganisation and integration of the economy of Western Europe. The need for mass production, standardisation and an immense increase in technical productive efficiency demands this; and the only method of achieving it is by preferential arrangements. The idea that all who have these highly complicated national economies can suddenly and simultaneously plunge into a Customs Union is ludicrous. The only way in which we can approach the conception of an all-round development of larger trading areas, and ultimately realise it, is by preferential arrangements. The sterling area must be revived, which involves a revival of confidence in sterling as a currency, and that is what is lacking today, and for that this Government are very largely responsible.

This question of credit is enormously important. I said just now that there was no short-term remedy. We must therefore have credit. Credit itself depends essentially upon confidence. The modern technique of large-scale production involves risks in the financing of capital equipment, the erection of capital plant, and the marketing of capital goods, which are beyond the capacity of any one of the single States of Western Europe. Take, for example, the development of hydro-electric power in Europe. No one country could take the risk of financing a gigantic scheme of that kind. The pooling of economic resources would provide Europe with far greater negotiat- ing power, so far as obtaining credit is concerned, than she at present possesses; and it would also provide America with a field for constructive investment which does not exist at present. We want American capital investment, and technical "know-how."

What does this mean? It means internationally planned production, in the first place, of food, power, and, above all, steel. The Minister of Fuel and Power has told us that steel was the most important single factor in our economic situation, and I believe that that is true. It also involves specialisation. Do hon. Members realise that the output of all the motor car manufacturers of any European country today—the combined output of all of them—is less than that of a single firm in the United States? How can we go on like that in the modern world? It is a physical impossibility.

This brings me to what I can only describe as the nightmare of Western Germany. The hon. Member for Ipswich (Mr. Stokes) has been plugging at the Government for years on this subject; and, at the end of it, what can be said except that we have to acknowledge one of the most tragic administrative failures ever known in the whole of our history? What has been the result of our two-and-a-half years' administration and direct responsibility? Not even a currency; coal production down from 138 million tons in 1938 to 86 million tons; steel production down from 17.8 million tons to 4 million tons. We shall not get Western Europe going that way. We must get Germany—Western Germany and the Ruhr—going again; and it can only be done by international action and control. I think that the record of the Government in the matter of Western Germany is absolutely shameful. I thought there would have been an improvement when Lord Pakenham took over, but there does not seem to have been any. I do not altogether blame him, because his predecessor, the hon. Member for Attercliffe (Mr. J. Hynd), after he resigned, made a most sensible speech in which he advocated a policy which was precisely the opposite of that which he had been pursuing.

I can only assume that the wretched men who are charged with German administration are acting on Cabinet instructions; but their policy is one of insanity, and has been for many months—the blowing up of shipyards; the starving of 40 million of the most industrious, hard-working and, from the technical point of view, advanced workers in the world; preventing them from restarting their economic life, and making them starving paupers at our expense, and, when we can afford it no more, handing them over to the United States. I think that is appalling.

I would like to say, in conclusion, that the present economic proposals of the Government do not, in my opinion, touch the fringe of the problem which confronts us, and that, in some respects, they even aggravate it. The reduction of imports and the diversion of all production in this country to export, accompanied by enormous Government expenditure, is bound to increase the inflationary pressure. It must do so. If inflation is too much money chasing too few goods, then sending all the decent goods out of this country in this fantastic export policy, which cannot possibly be achieved, is bound to increase the inflationary pressure.

When it comes to expenditure, we are always being asked for constructive suggestions. I cannot believe that the addition of 800,000 civil servants is necessary for the efficient running of this country at present. Civil servants are self-multiplying, like rabbits. Once you give them a breeding ground, as you do with every additional industry which is nationalised, there is no end. They reproduce themselves automatically; and these 800,000 additional people are entirely non-productive. We have taken 800,000 intelligent people out of the productive process; and we simply cannot afford it.

If we want to increase production and so raise our standard of living again, then the only method by which we can do it is by the modernisation of our industries; a courageous and creative programme of capital development, instead of cutting it down; incentives to hard work and enterprise at every level of production and society; the end of restrictive practices of all kinds; and the trading of the only assets we have got left, which are our experience, the skill of our workers, and our home market. The Government have given us none of these things.

There is in this country—and I defy anybody to deny this—an almost universal sense of frustration. The Government have even reduced food production; none of the targets have been achieved. There is only one industry which is rip-roaring along at the height of prosperity, and that is the industry of gambling. It is the only industry in this country where one can absolutely depend on quick, effective, instantaneous service. If one wishes to make a bet, thousands of people spring to the telephone and carry out one's slightest wish. Incidentally, it is the only industry that is tax free. It is not exactly the major industrial result which I expected to be associated with the first Socialist Government in power in this country.

The English people are a tolerant and a good natured race, with vast political experience, flashes of genius, and an inspiration for finding the right man at the last moment to pull them through periods of crisis. I have felt sometimes that, for this ghastly "Roundhead" period through which we are now passing, the Chancellor might be that man; although I am dismayed by the appalling lack of vision and imagination displayed in this Budget. I do not think that, even in this wretched, austere, puritanical, Roundhead period a special levy on the savings of the middle class, a higher tax on the beer of the workers, and a few "pep" talks over the wireless about parlour games in the evening, are the final answer to our economic problems. I feel somehow that the Chancellor of the Exchequer is somewhat out of touch with the mainstream of public opinion in this country. He forgets that the English, although they do have flashes of genius, are also, and fundamentally, a bucolic race.

I want to make a practical suggestion. The Chancellor of the Exchequer, being what he is, should fill his room in the Treasury with Hogarth prints; and before he frames a Budget in the future, he should gaze upon these prints long and earnestly. I do not think he would quite understand them; but they would give him what in modern parlance is called a clue. We have to fight for our existence in a new world. We stand on the threshold of a period of decline, or a second Elizabethan age. Have we lost our national genius? If we have, the decline is inevitable. If not, I think we can once again lead the world. Mr. Amery has described the first Elizabethan age as an age of slender resources and an all-daring spirit. There can be no doubt about the slender resources. I wish I could feel quite as certain about the all-daring spirit.

6.33 p.m.

Photo of Mr William Coldrick Mr William Coldrick , Bristol North

We have listened to a very interesting speech from the hon. Member for East Aberdeen (Mr. Boothby), but it seemed to me to be full of inconsistencies. He started off by telling us that we were facing 20th century problems with 19th century minds, and he wound up by going back to the Elizabethan period. The only contribution which he made to the problem was his suggestion that we should endeavour to prevent dismantling of factories in Germany and should concentrate on creating a Western Union. He endeavoured to deny "the dismal science of economics."

From the Opposition we have had quite a number of arguments which have caused people to believe economics to be a dismal science. In the course of the arguments which have been adduced in this Debate, the old fixed wages theory has taken on a new guise. It is now being presented, as it was presented by the hon. Member for Flint (Mr. Birch), in the form of a theory that if the State collects more than one-third of the national income in the form of taxation, we are likely to promote revolution. I think the hon. Member will agree that under the old fixed wages plan, it was believed that Providence had so ordained things that one-third of the national wealth had to go in rent to the landlords, another third to the workers and another third in the form of profits. It never seems to dawn upon hon. Members opposite that it is well within the power of man to rearrange this division of wealth according to his own intelligence.

We ought to recognise that the Chancellor has done more than most people in this country to make the problems plain to the people. Briefly, the first problem is that of filling the gap in our external balance of trade. We know perfectly well that we are not able to pay for all the raw materials that we want for industry and the food with which to feed our people, out of the goods which we are producing or with money. The second problem is that which arises from the fact that there is now far more purchasing power available than there are goods to meet that purchasing power. Those problems are obviously part of the much greater problem of how to increase production in order to meet our overall needs. As I understand it, the Chancellor has endeavoured to provide the incentives which will make it possible for increased production to meet the balance required so far as our international trade is concerned. But when it comes to the question of bringing about what is generally termed disinflation, while we can all see the problem very clearly it is obvious that there are differences as to the manner in which the problem should be solved.

I notice that the right hon. Member for Bromley (Mr. H. Macmillan) paid a meed of praise to one of my own colleagues because he had suggested that the inflationary pressure came from the fact that the workers were receiving too much in the form of wages. The majority of hon. Members opposite believe that the real way to bring about disinflation is by cutting wages, social services, and so forth. On the other hand, there are those who believe that the inflationary pressure comes from another direction. For my part, I say emphatically that, by and large, people are not paid wages unless they are going to create something which is equivalent to the wages which they receive. Generally the workers create a value far in excess of any wages they receive. Consequently, while one would not encourage a runaway policy of forcing up wages, I think it is fallacious to assume that wages themselves constitute an inflationary pressure.

On the other hand, it is obvious that if people are receiving money for doing nothing, inflationary pressure results. I advise the Chancellor to have regard to the fact that there are still a lot of people who are drawing incomes without rendering any service whatsoever to the community. To these people, rather than to the wage earners, I think the Chancellor should address himself when he wants to bring about a measure of deflation. In facing up to that particular problem, I want first to say that, while I agree in general with the policies which the Chancellor is pursuing, I think there has been a tendency on the part of this Government to pursue a contradictory policy, and I am pleased to note that the Chancellor is now tending to depart from it.

We are endeavouring—and we are responding to the appeals in a large measure —to lower prices, but while the Chancellor appeals to the people to lower prices he proceeds, in my opinion, by the application of Purchase Tax, to do the very reverse. Consequently, we have contradiction here. Similarly, we apply food subsidies in order to keep prices stationary and then, as I have indicated, both Purchase Tax and Import Duties tend, on the other hand, to increase prices. It is for that reason that I am particularly pleased on this occasion that the Chancellor has at last begun to reduce the amount which is paid in the form of a Purchase Tax.

I would like to encourage him to go, much further in that direction. When dealing with these things—and I appreciate his difficulties—I think he should endeavour to bring about a certain deflation in the Budget itself, because it seems to me to be absurd to pay £400 million in the form of a food subsidy in order to keep prices down and then to collect about £300 million in the form of a Purchase Tax. It is perfectly true, of course, that the beneficiaries of the food subsidies are not altogether those who pay the luxury taxes in various directions but, on the other hand, I think we can assure the Chancellor that a very large number of the people who are paying the Purchase Tax are also the people who are receiving a contribution in the form of a food subsidy. If it is possible for them to have both concessions, we should be bringing about a deflation in the Budget which would make the position much more realistic than it is at the present moment.

The Chancellor has appealed to us at various times to effect a reduction in the cost of living, and one hon. Member was kind enough to make references to the part which the Co-operative movement in this country plays in connection with the policy of reducing prices. He gave certain figures which, while they were true, did not, I am afraid, give a complete picture. He said that in total, the sum paid by the Co-operative movement only represented a halfpenny in the pound, that is, normally 2 per cent. That is perfectly true. There is a simple explanation for it, because we recognise in the Co-operative movement that the number of articles upon which we pay Purchase Tax is relatively small in proportion to the total goods sold.

Secondly, 2 per cent. does not give a clear indication of the whole position. If we take dry goods—and this would be true of the country as a whole as well as the Co-operative movement—we find that 9 per cent. of the total sales is in the form of a Purchase Tax. It represents 25 per cent. on jewellery and fancy goods. I am suggesting, therefore, that by the pursuit of this policy of increasing the Purchase Tax in certain directions, the Chancellor is tending to increase prices. Although I may credit him with the fact that a number of prices have been reduced on this occasion, by the policy previously pursued we have tended to cause people a great deal of hardship that they would not otherwise have suffered.

Briefly, my argument against the Purchase Tax is this. I believe that the cost of production in itself constitutes a barrier sufficiently great to prevent most people purchasing various goods. The attempt on our part to raise these barriers makes it literally impossible for millions of people in this country to enjoy some of the things which I believe they are entitled to enjoy, and I will, therefore, appeal to the Chancellor to see that the Purchase Tax, if it is to be applied at all, is applied more uniformly, over a far different range of goods than the present imposition, which makes a large number of articles prohibitive to working-class people.

During this Debate a number of people have offered a large measure of criticism of the Co-operative movement because of the part that the Co-operative movement has played in responding to the Chancellor's appeal. I want briefly to answer one or two criticisms. First, a criticism is that the Co-operative movement entered into a conspiracy with the Chancellor in order to make certain concessions so that it would be able to acquire a monopoly of the trade. The second, of course, is that the Co-operative movement has been able to make these concessions because the Chancellor—or the previous Chancellor—acted in a Machiavellian manner in exempting them from Profits Tax. I think hon. Members will agree that these constitute the two main criticisms.

As one who participated in this arrangement on price reduction, I wish frankly to admit that it is possible to do a number of things by operating a co-operative principle which it is impossible to do in competitive trading—that is to say, if people are ready to co-operate in order that any surplus which may accrue shall be used for their benefit, it is possible to do things which others, who look upon everybody else as a rival in trade, find it impossible to do.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Does that include selling certain commodities at a loss?

Photo of Mr William Coldrick Mr William Coldrick , Bristol North

It would be possible on a co-operative basis to do these things. If the people who believe in private enterprise, and believe the market is a kind of battlefield on which they should enter into conflict, were to drop the idea and pool the whole of their resources, it is perfectly obvious that they could make concessions in various directions. It does not make any difference whatever in the Co-operative movement so far as the membership is concerned, because if current prices are charged any surplus which accrues is paid later in the form of a deferred discount, as a dividend. What the immediate concession does is to make a contribution to national recovery at the present moment by making it impossible for other people to charge exorbitant prices without the public knowing what should constitute the real charge. I believe a lot of the enmity which comes from the Opposition is due to the fact that they know that by this particular policy it is possible for the Co-operative movement to expose the degree to which private enterprise exploits the community even at the present time.

As to the Profits Tax and the attack upon it, I have stated my case here previously, and I do not intend to take up the time of the Committee by stating it again today. However, I make this offer to hon. Gentlemen opposite and the people they represent. If they are prepared to say that, whatever the rate of profit may be, no matter how high it may be, a £1 share shall remain at £1, and that no matter what surpluses are put back to reserve, a £1 share will still remain at 20s., and if they will give us an undertaking that they will open the membership of their businesses in such a way that every person can buy a £1 share in any concern whatever for 20s., and, as a shareholder, exercise the same rights as those who have great numbers of shares, then I shall give an undertaking on behalf of the Co-operative movement that, from the moment they adopt that policy, we will join them in a deputation to the Chancellor of the Exchequer in order to get the Profits Tax removed so far as they are concerned. I know perfectly well, as the hon. Member for Flint (Mr. Birch) wittily said, that it would be contrary to the very nature of capitalists to pursue a policy of that kind. If they sincerely believe that democracy should be applied to business, then they would recognise that individuals should be measured not by their possessions, but by what they are. When they free the gates of industry and make it possible to the poorest person to become a shareholder inside those giant organisations, in the same way as we do in the Co-operative movement, then I shall believe they are sincere in their protestations.

I think that, so far as the future is concerned, the really great problem confronting us is largely a problem of the individual and society. I recognise that the majority of Members on the opposite benches, and the majority of people for whom they speak have been very fortunate. They were born for the most part in good homes, and society gave to them the best that education could provide.

Photo of Mr William Coldrick Mr William Coldrick , Bristol North

Perhaps the Chancellor of the Exchequer was in precisely the same class. But the majority of them were in the favoured position of being able to choose their vocations, and in a thousand ways they have enjoyed advantages. I believe that their obligation to society is infinitely greater than that of other people who had less advantages. I, fortunately or unfortunately, have spent the whole of my days among people who have frequently been denied employment, who have mostly been doomed to poverty, and who, in times of illness, have received no pay. Is it any wonder, in those circumstances, that a great number of people have grown up in this country feeling no sense of obligation to society? Part of the task of this great Labour movement is, by a planned economy, to provide full employment, and, by the provision of social services, to compel society to recognise its obligations to the individual.

It is because the Chancellor of the Exchequer, as much as any man in this country, is seeking to make individuals recognise that, as they receive advantages, so also must they recognise respon- sibilities, and that, as they receive rights, so they must accept duties; it is because I believe that, although he has made a few slips here and there, even in this Budget, he is endeavouring to weld society together in such a way as to make it possible for this country to survive and to surmount its difficulties, I am prepared to lend my wholehearted support to the proposals he has placed before the Committee.

6.56 p.m.

Photo of Mr David Robertson Mr David Robertson , Wandsworth Streatham

I think the hon. Member for North Bristol (Mr. Coldrick) is a little mistaken in his views about the members of the Conservative Party, and about the people who support the party outside this Chamber. We are a cross-section of the people, just as is the party opposite. The hon. Member talked about those who were born in good homes. I was born in a good home. There was not much money in that home, however, and I can well recollect how my mother, when doing her shopping, was not able to go to the Co-operative society's shops about which the hon. Member waxes so eloquent, because they were too expensive. She went to private enterprise traders who gave much better value for money. I also recollect how, in days when I was a young chartered accountant apprentice in the City of Glasgow, I was sent out to audit the books of Co-operative societies; and I am sorry to tell the Committee, and the hon. Member in particular, that the rate of defalcation and dishonesty amongst Co-operative society managers was higher—much higher—than was found amongst those in private business. I hope these things have changed for the better.

Photo of Mr William Coldrick Mr William Coldrick , Bristol North

If there is this marked degree of dishonesty, how does the hon. Gentleman account for the surpluses that are created in the Co-operative movement, and are handed back to the people?

Photo of Mr David Robertson Mr David Robertson , Wandsworth Streatham

In war time, selling of food to a hungry population is a profitable job. The Co-operative societies were able to take over the shops of many private traders who were called up for service. That was their most outstanding contribution in South London, and if the hon. Gentleman likes, I will give him chapter and verse for that.

There are certain important facts with which I should like to deal. A year ago the right hon. and learned Gentleman, the Chancellor of the Exchequer, then President of the Board of Trade, encouraged us to believe that the Government had it in mind to prepare a long-term economic plan before another economic debate fell due. Now we are told, in the document under discussion today, that the future is still too uncertain for any specific decisions or forecasts to be made about future years. The Government, clearly, are acting under the pressure of immediate events, content still to look merely at urgent necessities, and are fearing, after nearly three years of peace, to consider a long-term policy in the light even of their own statement of the economic position. 1948 is called a year of transition and one searches in vain for anything that suggests even that the Government are thinking constructively about the future industrial and economic structure, although the White Paper does say that work on a long-term policy has begun.

In 1948, therefore, as in 1947, the House is left to consider a short-term plan without any larger background against which to assess it. For myself, I do not believe we can make a more dangerous assumption than that we are merely passing through a crisis—or a year of transition, as it is called—from which we shall emerge safely. Nor do I believe it is possible for the Government to educate the country on the realities of the position without a long-term survey being presented. Even if we make the most optimistic assumptions all along the line, the best we can hope for in 1948 is that, at the reduced level of imports and the planned increase of exports, we shall just about pay our way. This clearly is not enough permanently, if our standards are to be maintained. Not only must what are called "the export industries" grow to take the place of, for example, the services derived from the prewar interest upon foreign investments; but these same industries must produce more for the home market, which is being starved. In other words, the prewar pattern of industry is fundamentally changed. That is the crux indeed of the problem which faced Britain last year, faces it this year, and will go on facing it. The American Loan has been spent without setting us on our feet again, and if we are in the same plight at the end of Marshall Aid we shall be in a very bad way indeed.

Among the many grim effects in the Economic Survey, two are vital: first, the spectre of hunger, which haunts its pages; and secondly, the spectre of under employment. Both are due to a lack of foreign exchange; and hunger is also due to inadequate food production at home, and unemployment will be caused by an inevitable falling off in exports. Is it not obvious to the whole Committee that in this export drive—which, of course, I applaud, as we all do, because it is the only means of getting foreign exchange—we are supplying a famine-stricken world? There is a great shortage of capital and consumer goods of all kinds, and when the nations of Europe and Asia recover we shall be in the same plight as today: we shall have failed to bridge this gap, the difference between our overseas expenditure and our income, which represents the food we require and the essential raw materials we require for industry and full employment.

We should tackle food first. I am rather surprised that food has not been stressed more in this Debate, because we spend an enormous amount of the money earned by our exports in importing food to feed the people. I shall submit to the Committee an argument calling for intensively increased food production at home to provide a tremendous increase in our home-grown food supplies, leaving the bulk of what we earn from exports to pay for essential raw materials for industry and full employment. My remarks seem to cause the Minister of Fuel and Power some amusement. If he wants me to give way while he passes on the joke I shall be glad to do so, and perhaps tell him a joke in return. So long as I am speaking, however, I should like his attention, because the matter is important to me, to my constituents, and to most hon. Members.

I have been watching the work of the Minister of Agriculture in this Parliament with great interest. I remember him as an efficient Parliamentary Secretary in the Coalition Government, when he did good work. He now seems to be the perfect automaton; he knows all the answers; but he shows a complete lack of intensity in dealing with food production, in striking contrast to the intensity which prevailed during the war, when we produced 70 per cent. of our food supplies. I am sorry to say anything in the least unkind about a fellow Member, and a Minister who is doing his best; but it is very apparent that while the right hon. Gentleman knows all the answers from foxes to feedingstuffs, he is dealing with the agricultural industry as it exists today. He is questioned from both sides about many matters on food production, and he always has the right answer, whether the question be about tractors, spare parts, or anything else. However, I am certain that he has been too long in the job, and now has the routine mind. In this country there are thousands of derelict acres lying fallow, and not being cleared. In Scotland one-twentieth of the population lives in more than one half of the country. Yet 100 years ago that part of the country maintained a much larger population, a very large cattle stock, and today is capable of being restored with long-term planning, which is unfortunately missing from all the Government activities enumerated in the Economic Survey. Some problems the Government have cowardly pushed aside, dealing only with immediate needs. I believe that this land of ours is the most fertile in the world, and it must be brought back to its former state, and even better than it was in the days when the Industrial Revolution began.

During the war, when I was in the Home Guard, I used to spend my weekends in Buckinghamshire, crawling about among rotting woodland, and the rotting bracken and bushland which lie on the outskirts of towns. Those things still exist all over Great Britain today, and it would be cheap expenditure for the Government to use this huge surplus, or some of it, to clear these derelict lands and bring them back to cultivation, or at any rate to prepare for it. When they have done that it will be found that there is labour available to work on it, men and women who are under-employed because we cannot continue this one-way trade in exports all over the world. The powerful speech made by the hon. Member for East Aberdeen (Mr. Boothby) was full of sound common sense, and I hope that Members of the Government Front Bench and the Opposition Front Bench too, will pay some attention to what he said.

All our people must be harnessed to food production, just as we harnessed them to civil defence during the war. That can be done with the townsmen and city dwellers. Does anybody deny that on the outskirts of every town and city in Britain there are many idle acres lying waiting for housing or building which can not come about?—at any rate, possibly not in our lifetime. Is there any reason why people, working under the direction of a local authority who, in turn, would work under the direction of the county agricultural executive committee, should not employ their spare time in cultivating these idle acres to produce the coarse grains we need for cattle feedingstuffs? I think that the people would do it. They rose to the occasion in civil defence in war, to safeguard their property and lives. Would they not do the same for their food which, after all, is necessary to their lives?

Another food industry which can make a great contribution is the fishing industry, of which I have some special knowledge, having spent 20 very happy years in it. The Economic Survey takes 35,000 words and many figures to explain the nation's plight, but only 17 words are devoted to the fishing industry. In 1938 British fishermen landed a tonnage of fish equal to the total of imported beef, mutton and lamb. Today, we make tremendous efforts to produce exports to pay for our imported beef, mutton and lamb; yet in 1938 British fishermen—and the long-distance fishermen were working a restrictive policy, for economic reasons—landed this large volume of very fine food. In my view, fish is the main substitute for meat, and provides most of us with three or four substantial meals a week—meals which otherwise would be tea and toast. That is true not only of the home, but also of the restaurant or factory canteen. An unrationed supply of fish has enabled us to manage with a a short supply of meat and other rationed goods. I do not think I am putting it too highly in saying that fish has saved the rationing system from breaking down. If I am right, or nearly right, then surely that industry deserves more than 17 words in the Economic Survey. These are the words: It is hoped to expand the output of fisheries by about £16 million between 1946–47 and 1951–52. It is terse, vague and Micawber like. I hope the Chancellor of the Exchequer will tell us tonight what are his hidden plans for producing this £16 million, because I am confident that all of us would like to know, as well as the larger public outside and the fishing industry.

This industry is capable of great development. It made a great contribution during the war, and it is making an even greater contribution now, but it is deterred from developing and expanding by savage taxation and the nationalisation policy of the Government. I agree that the industry is going through a period of unhealthy prosperity, and that the prices of long-distance fish are far too high, but this is because of the failure of the Government to fix fair prices for near-water fish of the same variety. These are problems which should have been solved by this Government. It was done before the war with imported and home produced meat. I maintain that the industry would then modernise itself and get away from this awful wastage of sending long-distance trawlers on tip-and-run raids in the Arctic, which means that they are spending one-third of their time fishing, out of three or four weeks, with all the waste of labour, coal and capital equipment which results. It is ridiculous to send men from the Humber away into the Arctic Circle. It would be like Lever Brothers sending their employees, whom they usually engage for three or four years, out to Nigeria and bringing them home every month. How long are the Government willing to stand for this awful waste of labour, and, what is even more important, this awful waste of good food, because although this food is fresh when it is caught, it is very stale when it is landed?

The time has come for the Government to talk to the leaders of the fishing industry and ask them to revert to fleeting. There is nothing revolutionary about this, because it went on for nearly a century right up to 1915. Four great fleets moved from the Dutch coast to the Faroes, and the catches were transhipped from the catching trawlers to fast trawlers to be rushed to the markets, with the result that the fish when it reached London was only two days old. That is in striking contrast to the stale fish, often two weeks old, which represents the bulk of the catches today. Let the fish be transferred to refrigerated vessels and frozen, and then by refrigerated carriers, direct to the markets. That would increase production and the prosperity of the industry, and it would improve the conditions under which the men have to work. We might then well be in a position to export, and we should be able to give our own people a far better article and at a more economic price than today.

I throw this out to the Government as being worthy of consideration at this time when we are right up against it so far as our food supplies are concerned. The same could be done about the herring industry. The Herring Industry Board published their report this week, which says: The Board point out that quick freezing could make fresh herring of a quality hitherto unattained available to all in the off-season, and during the fishing season to parts of the country not supplied at present. What I am proposing is not revolutionary. The "Fish Trades Gazette," a leading organ of the industry on 3rd April, has this to say about it: The Department of Scientific and Industrial Research has done a great deal to bring the full benefits of modern refrigeration to the aid of the fish industry, but it is not fully realised what strides have been made unless one can see and handle the superlative products which result from careful and scientific freezing and storage of good fresh fish. I wish to impress upon the Government that there is great work to be done here, not only by intensifying the efforts in the agricultural industry, but also in the fishing industry. Both industries well deserve anything any British Government can do for them, and the fishing industry is more than deserving.

7.17 p.m.

Photo of Mr Clifford Kenyon Mr Clifford Kenyon , Chorley

I wish to follow one part of the speech of the hon. Member for Streatham (Sir D. Robertson) with which I wholeheartedly agree, and that was his reference to agriculture. Before doing so, however, I wish to bring to the notice of the Government, at the request of some of my constituents, one aspect concerning the textile industry. The textile industry is a great dollar saver, and the Government are urging in every possible way for more labour to enter the mills. But, labour is leaving the mills. Women of 60 and men of 65 are becoming pensionable and leaving the mills. Many of these people wish to carry on, but if they do so they have to forfeit their pensions. On the other hand, the Government are bringing into this country a large number of displaced persons, and some of them are coming into my constituency, which is costing a considerable amount of money.

My constituents ask why they should not be permitted to receive their pensions if they carry on working. They point out that when they entered the industry as girls and boys, many of them had to work for long periods without any pay at all, and until they received one or two looms they only earned 5s. a week. They say that it would be a measure of compensation to them now if, in their old age, they were able to retain their pensions while they continue to work in the mills. These are our best workers, they know the conditions and they turn out a good job. If the Government would make this concession, they would retain a large number of skilled workers in the industry.

Farmers are now to be asked to meet taxation on their profits. I agree that this is a very fair scheme, and that farmers should be brought into line with the other members of the community and pay taxation on their profits. I am concerned about the small farmers who have never done any book-keeping in their lives, and who do not know how to start. I do not know who will be in the greatest difficulty—the farmer when preparing his statement, or the Income Tax inspector when deciphering it. Unless accountants and banks can set up an organisation which can do farmers' book-keeping for them more time will be lost than the collection of the tax is worth.

I want to draw attention to the agricultural targets which are set up in the Economic Survey for 1948, and which have to be obtained by 1951. I believe that these targets ought to be attained in half the time. There is no sense of urgency in the agricultural community of the present position, and I believe that if they had a proper lead and a proper incentive they would reach these targets very much sooner. First of all targets are set up, and then the farmers are told that they cannot be achieved. Paragraph 152 of the Survey says what the targets are, that we ought to expand production, that we should, in particular, build up livestock, and then goes on: … even if the foundations are laid in 1948 relief from this source cannot become significant until some time in 1949. We are told that more than half the increase is to be in livestock. I agree, but we are also told that some uncertain fac- tors are involved, and paragraphs 157–158 say what some of these factors are: The effects of the drought and the shortage of feedingstuffs already experienced are serious enough to set a limit to livestock expansion during 1948–49, even given favourable conditions and the meeting of all feed and other requirements. As I say, targets are set and then the farmers are told that they cannot attain them. The paragraph goes on: The shortage of feedingstuffs threatens however, to cause some deferment in the execution of the livestock expansion programme. Unless we can expand the livestock programme in 1948 we cannot expand it in 1951–52. It takes two and a half years to produce a breeding cow, before it starts to give milk, and three years to produce a beef cow, so our production in 1951 depends upon our expansion this year, not on what is done in 1951–52. We must get down to this matter. [HON. MEMBERS: "Hear, hear."] Yes, I hope this criticism will do the Government good, but may I say that I farmed between the wars when the Opposition were in power. I know what it was to farm under a Conservative Government, and I say that nothing which this Government do will be as bad as what we had to put up with when they were in power—

Photo of Mr Clifford Kenyon Mr Clifford Kenyon , Chorley

Paragraph 160 of the Survey says: To cover the full livestock expansion programme, substantial additional supplies would be needed in the year May, 1948, to April, 1949, with further increases of supplies in subsequent years. It has recently been announced that the existing ration scales can be maintained up to 30th April, 1949. But there is no assurance of sufficient long-term supplies to make possible a full expansion programme in 1948. Finally, paragraph 168 says: To sum up: the full livestock programme for 1948, as originally drawn up, cannot now be attained although a start is being made. … This is absolute frustration. We are given the targets, yet all the time we are told that they cannot be attained.

How are the Government trying to attain the targets? For the livestock programme they have given subsidies to encourage farmers to rear more calves. This policy is absolutely wrong. The fact is that before calves can be reared feedingstuffs must be available. Those feedingstuffs do not depend upon a subsidy. The Government can provide a subsidy for 20 or 30 calves, but they cannot be reared unless the necessary feedingstuffs are available. There is no necessity for this calf subsidy, not the slightest. During the 10 years 1929–39 the calf population of the country ran between 1,700,000 and 1,800,000 a year. For the 10 years 1938–48 it ran between 1,800,000 and 1,900,000. We can only increase this figure if we have the feedingstuffs. Let me put a hypothetical case. Suppose the Government, by giving a subsidy, enable farmers to increase the figure to two million calves a year. Suppose that subsidy is 100 per cent. The subsidy is £4 for a beef calf, and £3 for a dairy calf—an average of £3 10s. per calf. That gives a total of £7 million over the year, which is being paid to obtain 200,000 calves. We should obtain 1,800,000 in any case, without the subsidy.

We shall pay £7 million in subsidy, to obtain a few more calves. If we obtain 200,000 calves it means that we have paid £35 per calf, when it is a day old. This is panic planning and panic legislation. The calf subsidy ought not to have been given.

How shall we increase the livestock population of the country? Only by increasing the foodstuffs, and that can be done only by developing our own land more and more. It is not necessary to buy so much feedingstuffs from abroad. I wish the Government would tell the farmers fairly and squarely that they cannot expect more feedingstuffs from abroad because we cannot afford to buy them and that it is for the farmers to produce more from their own resources. I am afraid that in many parts of the country farmers who all their lives have fed their cattle upon imported feedingstuffs are just sitting on their haunches waiting for the Government to teem feedingstuffs into their laps once again.

The agricultural officer for Lancashire made a speech to a number of farmers last week. I would like to quote a passage from it. He said: In Lancashire there are about 460,000 acres under grass, 80 per cent of it permanent and 20 per cent. temporary. One of these solutions to our problem of more feedingstuffs is the ploughing up of more permanent grass. We can produce more from a temporary ley than we can from permanent grass. The more we produce from our own farms the more livestock we can grow on those farms. One of the urgent necessities at the present moment on our grass farms is greater production from the permanent grass by the ploughing up of the permanent grass and the putting down either of temporary leys or of such crops as kale or potatoes. Until we get to that position, our agricultural livestock will be at a standstill. If we can deal with this matter properly we shall find a solution.

Now let me deal with another problem, that of the milk target. As set out in this Survey the milk target has to be 23 per cent. upon the production figures of the period 1936–39. In 1939 we produced 1,210 million gallons of milk. We have to increase that figure by 23 per cent. by 1951. Last year our milk production was 1,455 million gallons. To produce the extra 23 per cent. we require only 22,700,000 gallons, and we shall have reached our target. That target can be reached by next year, if we set out properly managed herds and proper production; by 1949, not 1951. There is not sufficient recognition in the Government, and among farmers in general that the target is within our reach much earlier than is set out in the Economic Survey.

The Government also intend to increase the poultry industry and the pig industry. Here I shall be rather critical again. Thousands of hen houses have been standing idle in this country for years, yet the Government have made an agreement with Eire for an extension of the poultry industry of that country. Our poultry farmers cannot understand that matter at all. If feedingstuffs are available for the development of the poultry industry in Ireland surely some must be available for the development of the poultry industry here. If those feedingstuffs come from dollar sources to Ireland they can come from dollar sources here. If we can afford them over there we can afford them here. The Government are giving £1,300,000 for the development of the Eire poultry industry. This is what creates a sense of frustration among our own people. If there is some reason why it cannot be done here, let the Government state what the reason is. Let them put the facts before us. As long as we are working in the dark and can see that money going over there when we can develop our industry here we shall not know where we stand.

Another thing which the Chancellor mentioned in his speech is that the Government are developing the pig industry in Queensland. We want pigs here and we want them badly. I know the advantages of the Queensland development and of being able to grow pigs where we grow the food. It is a good scheme, and I do not want to run it down; but we have something here that it will take Australia years to obtain. It is a population of 48 million people. Australia has 7 million. There is waste food in houses, restaurants, hotels and canteens in this country. The collection of waste food from the homes, restaurants and canteens would, if properly organised, together with what we can grow, double the pig population of this country in 12 months. Nothing breeds faster than a pig. We could do it, but nobody seems to be bothering about collecting the waste food in the majority of the towns. In some places, it is well organised; in others, it is utterly neglected. I cannot understand why this collection is under the control of the Board of Trade. I believe that it was the Coalition Government that put it under their control, but it should come either under the Ministry of Food or the Ministry of Agriculture. Until we can get down to the foundation of these things, we shall not go ahead with our agricultural progress. I feel that there is so much that we could do, so many developments that we could make, and so much more production that we could give to the country, if only we had the initiative, energy and drive that is needed, and a sense of urgency among the agricultural population.

Let me say one good word for the Government before I sit down. I welcome that the Chancellor in his speech and in his policy is encouraging amenities in the countryside. I welcome that, not for the amenities themselves, but for the recognition by the Government of the necessity of giving pleasure and enjoyment to people in the countryside. All over the world, the civilised countries are facing the same difficulty. People will not stay on the land. They are moving into the cities and into the towns. In this country, we cannot take the children out of the countryside and educate them in modern schools, teaching the girls how to cook with electric cookers and how to wash with electric washing machines, and then expect them to go back to the countryside, to the oil stove and the oil lamp. They will not do it. We educate them in modern schools and secondary schools. They are brought by bus from the countryside to those schools. They are taught art and the beauties of literature, and they go back to the countryside, where they are isolated and away from it all.

The great need of the countryside is transport—a great system of transport that will enable them to come into the towns and to return home without difficulty. Many times, years ago, before I came into this House, I came to London for one or two days on business, and I always spent one night in a theatre, watching operas, dramas and the things that we enjoy. Every time I used to think of the men and women away out yonder on the hills or in the dales, separated by miles from the enjoyment and amenities which men and women in the towns and cities had to hand. I thought that if they had to come into the towns to enjoy these things, no wonder they wanted to stay. Unless we can get the amenities of the town into the countryside, or a great system of transport, the agricultural industry will continue to lose its workers.

7.45 p.m.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

The disadvantage of being called at this late stage of the Debate is this: so many points have been raised which one wants to take up, that one is likely to lose sight of the time at one's disposal. In spite of the small amount of sugar at the end of the speech of the hon. Member for Chorley (Mr. Kenyon) I do not think that those responsible for the present Socialist planning could have derived much satisfaction from his extremely damning indictment.

With regard to the speech of the hon. Member for North Bristol (Mr. Coldrick), on behalf of the Co-operative societies and in praise of their action at the present time, I would say that the feeling of the small shopkeepers in my constituency is that the action of the Co-operative movement means that it intends to sell certain commodities below their cost price and to put the small traders out of business. These are the representations made to me, and it has been suggested to me that it is more than a coincidence that this action should be taken with the new registration period close at hand. This business of selling at below cost price sounds very much like what is alleged against the naughty capitalist cartels when it was said that they put the small trader out of business by similar methods.

Photo of Mr Richard Sargood Mr Richard Sargood , Bermondsey West Bermondsey

Mr. Sargood (Bermondsey, West) rose

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I am speaking to a timetable.

Photo of Mr Norman Dodds Mr Norman Dodds , Dartford

Will the hon. and learned Member give us an example of selling below cost price?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Sugar and butter.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Passing on from that point, about which there appears to be some controversy, may I recommend to hon. Members on the other side to read, mark and learn the remarks which were made by the hon. Member for North Bristol with regard to food subsidies, because I think his statement about the reduction of food subsidies is the only honest and straightforward statement on that subject which I have heard from Socialists. I would recommend hon. Members to read tomorrow what he said. He also stated that there were a great many people growing up without a, proper sense of responsibility. I think a contributory cause of that would be the sort of speech made by the hon. Member for North Lanark (Miss Herbison). It was a bitter, misguided and misleading speech, and from the amount of suppression of the true and suggestion of the false that there was in it, I was glad to hear her say that she is no longer teaching the young of this country. She asked for some constructive comments from this side of the Committee. I propose to address myself to two points.

First, with regard to the import programme and the amount of money that is to be spent in the first half of 1948 on food and feedingstuffs—£390 million, a total of £780 million in the full year—I suggest to the Government that that figure is so high because of the Government's fatal error in not establishing more favourable conditions of trade for this country; in other words, by their rigid adherence to the principle of bulk purchase. We, as the largest importers, could have done a great deal to reestablish more open conditions of trade with regard to commodities. If the Committee look at the consequences of the Government's bulk purchase of two commodities, they will realise what I am endeavouring to say.

I refer, first, to maize—and this has direct bearing in this Debate because the fact that the British Government, or British importers, have to pay so much more than they need for these commodities is one of the reasons that we cannot import so much as we would like. Under the Andes Agreement the price of maize—and there has been a good deal of secrecy about this—I am informed by those who know, is £27 8s. 4d. per long ton on wagon at the Argentine sea-board. It is something like £10 a ton more than for the previous year, although the statistical position was much more favourable to the buyer than it was 12 months before. To that figure has to be added £4 10s. for freight, insurance, and landing charges which gives a price of £31 10s. to £32 per ton. That compares also with the estimate of the price for Russian maize of about £31 16s. per ton. I am told by those who have spent a great deal of their time studying these matters, that these two prices are, in fact, above the true world price of maize at the present time. Therefore, because the Government have persisted in that type of transaction we have to pay more for our imports.

With regard to wheat, the situation is even more striking. On all sides of the Committee it would be agreed that it is reasonable to pay to the producer of wheat his cost of production and a fair profit. In the wheat-producing countries the various Governments have assessed that figure. In the case of Canada they have assessed for basis No. 1 North Manitoba, 135 cents a bushel. In Argentina it was between 15 to 20 pesos a quintal and in Australia 5s. to 6s. a bushel. Those are the prices which the Governments of those countries think are reasonable prices to pay to the producer. The prices we as importers are having to pay to those countries are—Canada, 155 cents as compared with 135, which I agree is not a very great difference; Argentina 65 pesos as compared with between 15 and 20 pesos; and Australia 20s. as compared with 5s. or 6s. a bushel according to the Australian handling.

The effect of that sort of bulk bargaining is twofold. First of all, it puts up the cost of our imports, and it involves manipulation of the supplies of commodities, which was exactly what the Socialist movement has said it wished very much to avoid and which, in fact, the private exchanges primarily existed to avoid in the days before the war. The position can be well summed up in these words: It is the concentration of the world selling power of wheat and other grain in the hands of a few agencies, each with the authority to cloak the true supply position, to hold back supplies, to effect an artificial home distribution or to influence acreage by decree or by varying prices paid to farmers, that the frightening prospect lies today. If importers cannot see the danger, if they cannot collectively or individually do something to get back to a fair basis of trade then the outlook is grim indeed. That seems to be a very clear statement of the evil consequences of this blind adherence to the system of bulk purchase. It does not stop with imports, because it also has a direct effect upon exports. For example, if the Australian farmer or the farmer in Argentina gets a more reasonable price for his wheat and if that price is not being intercepted by the Government concerned, he would be much more disposed to buy British machines or other British exports. Thus not only does it put up prices of imports but it hinders the export trade.

The second point I wish to stress is with regard to the arrangements for our exports. I suggest to the Committee that in many departments dealing with our export trade there is at the moment over control, and duplication, producing in our exporters a sense of frustration. The best way to illustrate that is by giving a concrete example to the Committee. There is on Merseyside a company called the Hurcal Engineering Company, whose directors are constituents of mine. Last summer they patented a hinge requiring the use of much less steel, but they were told when they filed an application for an allocation of steel that they should make it a commercial proposition before putting in an application. The officials, who are maintained at the cost of the taxpayer to promote exports, were brought into the case including the Latin American Information Department, the Export Promotion Department of the Board of Trade and the Intelligence Officer of the Export Promotion Department. These various public officials were all extremely helpful. Samples and literature were sent out to the Embassy at Buenos Aires, overseas buyers were interested and commercial counsellers overseas were told of this new hinge and urged to boost it. As a result a very substantial number of orders began to come in. I myself have seen a list of the orders as they were in the autumn of last year. There was a substantial list of orders from a number of foreign countries, including some whose currencies would have been of considerable value to us at the present time.

Not one ounce of steel has been allotted to that company yet. I took the matter up with the President of the Board of Trade. I thought it was a sufficiently clear example of what I believe is happening in many other cases for me to write to the President of the Board of Trade himself about it. I was referred by him to the Ministry of Works. The Minister of Works wrote me a very courteous letter saying that there was no prospect of any steel for this firm for the first two quarters of this year, and he was very doubtful about the third quarter. Think of the position of the foreign purchasers. Their custom was solicited in the autumn of last year. The whole export paraphernalia of the Board of Trade in the autumn of last year was put into operation to get orders for this hinge and all the time it should have been known, if any grip was being kept on the situation at all, that no steel would be allotted for it.

What effect is this sort of thing going to have on buyers overseas? There is an old saying about "this year, next year, sometime, never." In this case it certainly is not "this year" or "next year" so I suppose it is "sometime, never." That is not good enough. We are not going to do business on that basis nor are we going to get orders by that sort of method.

That is an illustration of what I believe is happening over and over again with regard to the export business. There is no real commonsense practical grip of the situation so that those producing commodities for which there is a market, and which can be sold easily, can get steel straight away. The two constructive suggestions I make to the Government with regard to improving the balance of payments of this country are, first, to abandon their blind, doctrinaire belief in bulk purchasing; and, secondly, to get a bit of practical commonsense efficiency into the business of increasing our exports.

7.58 p.m.

Photo of Mr Marcus Lipton Mr Marcus Lipton , Lambeth Brixton

The outstanding feature of the Budget which we are now discussing is, in my view, that we are budgeting for a real surplus at the end of the financial year. That is something for which hon. Members opposite have been clamouring for Heaven knows how long, and now that we are in sight of achieving that desirable aim apparently they are still dissatisfied. It is, I think, a very remarkable thing that we should be budgeting for a real surplus of £300 million, which is bound to have a disinflationary effect. To that extent I do not see why the Budget has been subjected to such a barrage of criticism from hon. Members on the other side of the Committee.

There are points on which I should welcome some further elucidation. The Chancellor of the Exchequer has said that this overall surplus could be used to counter inflationary tendencies by relieving the Government of the necessity of renewing borrowings to that extent. I would have felt more comfortable had he said that this surplus would be used to reduce Government borrowing. It is quite clear that any contraction in the floating debt, for example, would help to reduce purchasing power and would help to restrict the extent to which the banks are advancing money. During the past year bank advances have increased by no less than £297 million which means a definite increase in the total volume of purchasing power.

A very interesting statement was made by the hon. Member for Chichester (Mr. Joynson-Hicks) regarding the Special Contribution which in my view is the next important feature of the Budget. It is worth while to put on record what he said. I do so because I think that before this Debate terminates we are entitled to an expression of opinion from some hon. or right hon. Member on the Opposition Front Bench whether this statement represents the considered policy of His Majesty's Opposition. This is what he said: I for one cannot conscientiously, if this Measure is passed"— talking of the Special Contribution— and so long as this Government remains in power, further support or encourage any other people to support the National Savings Cam paign."—[OFFICIAL REPORT, 12th April, 1948; Vol. 449, c 728.] We are entitled to ask hon. Members opposite whether that represents the policy of the Conservative Party, because, if it does, it represents an indication, to put it no higher, of a deliberate and considered attempt to sabotage the National Savings movement for the remainder of the lifetime of this Government.

The Special Contribution is quite satisfactory as far as it goes. What I am concerned about is that the Special Contribution will not necessarily get at the people who ought to be got at. During one fortnight in February last as a result of the company flotations that took place during that period, 6o people took £2,500,000 in tax-free cash out of those flotations. If we multiply that over the period of the last 18 months or so during which there has been something in the nature of a flotation boom, it will be seen at a glance that very substantial sums of money have accrued to a small number of individuals and those sums of money will not be touched in any way by the Special Contribution, particularly if they were not immediately invested or did not reap immediate income. I should like the Chancellor to give some consideration to that aspect. It seems that a large sum of money will escape this provision.

Since the present Government came into power, capital issues to the extent of over £500 million have been authorised or approved by the Capital Issues Committee. It is very interesting, and is a sign of how this phase of our economic life is being worked, to compare the amounts of money which have been devoted to various headings. The total amount of issues authorised or approved for entertainment purposes comes to some £12,500,000, which is far more than the total amount of capital issues approved for agriculture and fisheries and building materials combined—

Photo of Mr Marcus Lipton Mr Marcus Lipton , Lambeth Brixton

We on this side of the Committee are entitled to criticise just as much as the right hon. Gentleman opposite but we do so not with the inten- tion of sabotaging the Government's efforts, but with a view to helping them. That figure compares most unsatisfactorily with the total amount of capital issues authorised for the textiles and clothing trade. The figure there is some £15 million. That indicates a field to which the Chancellor of the Exchequer should devote his attention in the very near future.

On the subject of the price level, it seems to me that it will be extremely difficult to achieve a stable level of prices generally unless some attempt is made to freeze or stabilise prices in our nationalised undertakings. Coal, electricity and transport have been nationalised because they represent the basic requirements of the industrial life of this country, and to whatever extent it may be necessary to subsidise the cost of the products in those nationalised industries, the expenditure entailed will be worth while if the result is a stable level of prices. For instance, the costs of transport, fuel and power affect prices in every other industry.

There is a further aspect to which I invite the Chancellor's attention. Our ideas of the relative value of occupations must be put aside because the deciding factor nowadays is not the former relativity between different occupations and industries. A brief reference to this was made in the White Paper on Personal Incomes, Costs and Prices but I do not feel that sufficient stress has been placed upon this principle in the various announcements which we have heard from the Government on this subject. It may be that a differential rate of Profits Tax according to the essential nature of the product ought to be considered because the time has now come for us to make up our minds, as between one industry or one product and another, which is the more important, which should be encouraged and which should be restricted and, if necessary, completely eliminated. A differential Profits Tax discriminating between essential and non-essential industry would provide a very valuable weapon in the hands of those who are responsible for the Government's economic plans.

In relation to the trade unions and the organised industrial workers of the country, a more definite lead should have been given by the Government. Under the haphazard system of collective bargaining whereby all the unions function indepen- dently, each one fighting for its own right irrespective of the effect on others, it is clear—we have seen it happening—that the new labour coming into the market is going into jobs where it is not needed or where it is least needed. The Chancellor himself a few days ago referred to the fact that the main undermanned industries were failing to get the increased labour that they needed. That must be contrasted with the influx into the distributive and commercial services. There, the estimated increase had been over-run during 1947 to the extent of 123,000 people. The Budget we are discussing hardly seems to be facing up to that problem. I hope that advantage will be taken of fiscal and such other measures as may be considered advisable, to ensure that the under-manned industries are given that preference which will enable them to attract the workers they so sorely need.

The Government's economic programme as formulated in the White Paper seems to postulate a national wages policy, because the Government are now trying to achieve a state of affairs in which collective bargaining by the old-fashioned methods will not operate without regard to the effect of such demands on other industries. The fundamental fact, and one that we are apt to overlook, is that industry and commerce exist primarily to provide goods and services—that is what we meant when we talked in our Socialist propaganda of production for use and not for profit—wages and dividends being important by-products, but not the whole purpose for which industry and commerce are operated.

I attach considerable importance to the maintenance of a stable cost of living at almost—I use these words advisedly—any cost, because if the Government is able to satisfy the workers of this country that it is really determined to maintain a stable price level, with all that policy may imply in the way of dividend limitation, control of profits, or whatever controls are necessary, we shall find that the people who produce the wealth of this country will respond wholeheartedly to the call that is being made upon them now. If people are made to feel that they are working for something worth while, and if they are inspired with that missionary fervour by which we must all be inspired if we are to survive our present economic difficulties, then I have no doubt of what the response will be.

8.12 p.m.

Photo of Sir Archer Baldwin Sir Archer Baldwin , Leominster

In the short time at my disposal, I do not propose to follow the arguments of the hon. and gallant Member for Brixton (Lieut.-Colonel Lipton) except on one or two points. He asked what was the attitude of the Front Bench on this side, though possibly he meant of back benchers as well, with regard to the Savings movement. He alleged that several speakers on this side of the Chamber have threatened to sabotage the movement. I think the Government have sabotaged not only the Savings movement, but also the credit of this country all over the world by going in for a capital levy. I regret that the Chancellor of the Exchequer, possibly through pressure from some of his back benchers and the T.U.C., has given way to what is, in my opinion, one of the most damaging proposals that has been brought forward in this House during the time I have been here—

Photo of Mr Joseph Alpass Mr Joseph Alpass , Thornbury

What would the hon. Member do?

Photo of Sir Archer Baldwin Sir Archer Baldwin , Leominster

—especially in view of the speech of the late Chancellor, which had such wholehearted support from his followers, in the course of what was an hour's rather chilly silence. I think that gave us the idea that this levy is not "once-for-all" at all, but if future Chancellors think that this is an easy way of getting hold of capital, they will find that chasing capital is a very difficult job, and that when they want to put their hands on it, it will not be there. [An HON. MEMBER: "Where will it be?"] I would say to the hon. and gallant Member for Brixton, on his point about capitalist confidence, that a factory which is worth £10,000 with its wheels running, can be worth 10,000 shillings in six months' time when the wheels have stopped. He also mentioned the Budget surplus. I have listened to this Debate for three or four days and, in listening to the various experts on both sides of the Committee, I have not yet made up my mind whether a Budget surplus is inflationary or not, but the conclusion I have reached is that the problem facing this country is that we are not paying for what we are buying, and it does not matter what surpluses there are in our internal budget. That fact has to be faced.

Now I will get on to the subject about which I rose to speak, agriculture. So far, during this Debate agriculture has received very little notice and I hope that my right hon. Friend the Member for West Bristol (Mr. Stanley) will find time to say a few words with regard to it. I also hope that the Chancellor will devote a certain amount of time to it in winding up. I know that he is interested in agriculture because once I had the honour of conducting a sale for him on the Cotswold Hills. I hope he is still running that farm, that he studies his annual balance-sheet with care, and finds what tremendous profits he is making on his farm.

Photo of Sir Archer Baldwin Sir Archer Baldwin , Leominster

I would like to see the hon. Member's balance sheet. I wholeheartedly support the hon. Member for Chorley (Mr. Kenyon) in most of the things he said. The only exception I have to take was when he said that the deplorable times between the wars were during the administration of the Conservative party. I would like to carry his mind back to the years 1929 to 1931. I can say, as a farmer, that in the whole 50 years during which I have been at the job, those were the most disastrous times in my experience. The Minister of Fuel and Power dealt with coal, and dwelt on the importance of that industry. I quite agree that coal is important, but agriculture is more important. There is more hope for this country in the development of its agriculture than in any other industry. If we develop our coal and our export trade, we still have to find a market and the present sellers' market may not last for ever. If we develop our agriculture, there is an eternal market in our own country at our own doorstep.

I regret that the Prime Minister is not in his place because I wish to remind him of his speech in the Debate on the state of the nation last August. I shall pick out four points he made in the course of that speech, namely, (I) We must produce more food; (2) The Government are setting a high target; (3) The maximum supply of feedingstuffs must be obtained; (4) We shall need big capital outlay. Like the hon. Member for Chorley, in connection with the first point I anticipated that there would be an all-out drive for agriculture. I anticipated that it would be treated as a battle operation, but there has been no attempt to develop land which at present is only partly developed. There has been no attempt by the agricultural executive committees to deal with the problem in a really live way. We still have in this country, according to returns of 4th June last, 16 million acres of rough grazing land. After the Prime Minister's statement I thought that some of those 16 million acres would be tackled, and production obtained from them. We see that huge sums of money are spent in the Colonies and in the Dominions, and now in Eire, on the development of agriculture. If the figures given in the Debate on the groundnuts scheme were correct, it looks as if £8 million has been expended in planting 8,000 acres.

Photo of Mr Anthony Hurd Mr Anthony Hurd , Newbury

Six thousand acres.

Photo of Sir Archer Baldwin Sir Archer Baldwin , Leominster

I will give the Government the benefit of the doubt, but it means £1,000 an acre. If the Government would spend £20 an acre on some of the 16 million acres of rough grazing in this country they would get production not in two or three years, which will need to elapse before the groundnuts scheme operates, but immediately. As the hon. Member for Chorley said, if some of the land were tackled and put to corn production we could increase the livestock which is so necessary in this country.

The Prime Minister said that the Government were setting a high target. The target he set was an increased output of £100 million by 1951. That is nothing to what we could do if we were given the ammunition. It is no good setting a target unless we have the ammunition As an old gunner, the first thing I did when set an important target was to put the best gunlayers on to the guns, and the next thing was to get a good supply of ammunition; then there was an opportunity of hitting the target. It is no good setting a target unless one knows what is necessary to reach it. What we want is confidence—which we are lacking at present—housing, labour and machinery. The third point mentioned by the Prime Minister was feedingstuffs. On 6th August the Prime Minister said: The maximum supply of feedingstuffs must be obtained … We have been doing our utmost to get feedingstuffs. … We must get our production of beef, bacon and eggs expanded rapidly."—[OFFICIAL REPORT, 6th August, 1947; Vol. 441, c. 1498.] On 21st August, the Leader of the House, addressing the county agricultural executive committees, said: Large increases of feedingstuffs must come from imports, and even scarce dollars will be spent on all that is obtainable since this operation must lead to ultimate dollar saving. The Minister of Food said on 11th March this year: Further quantities may well be available but we cannot buy them all. We cannot monopolise the export of maize in the Argentine. Speaking of other feedingstuffs from the Argentine he said: '"We have bought at this moment the particular quantities we thought were the right ones which we could afford and which it was wise to buy at this time."—[OFFICIAL REPORT, 11th March, 1948: Vol. 448, c. 1479.] The statements of the Minister of Food do not tie up with those of the Prime Minister and the Leader of the House. I maintain that all the feedingstuffs that are available should be purchased even at high prices, because it is obvious that it is better to pay a high price for raw material in the way of feedingstuffs, than to wait for someone else to use them, and then pay for the finished article at an even higher price. Those feedingstuffs are available, and it is no good the Government saying that they cannot afford to buy them. I call the attention of the Committee to what has happened in the recent agreement with the Dutch. In passing, may I say that the two best mediums of exchange in the world today are coal and steel, excepting that scarce commodity, gold. But we are sending some of these commodities to Holland to bring back, amongst other things, glasshouse strawberries, cherries, grapes, melons, bulbs and dehydrated vegetables. We are spending money on those which we could send to the Argentine in order to get feedingstuffs. Does Cle housewife want glasshouse grown strawberries, or bacon and eggs?

Photo of Mr Ernest Fernyhough Mr Ernest Fernyhough , Jarrow

Who buys the glasshouse strawberries? Not the housewife.

Photo of Sir Archer Baldwin Sir Archer Baldwin , Leominster

That is what I am saying. Why does the Socialist Party buy them? The workingclass want something good, not glasshouse goods.

Photo of Sir Archer Baldwin Sir Archer Baldwin , Leominster

The shops are full of dehydrated vegetables, and there is a company operating six factories at present. They have been producing dehydrated vegetables and, because of the mild winter, they have not been sold. Yet we are sending to Holland for more. That is Socialist planning.

Photo of Sir Archer Baldwin Sir Archer Baldwin , Leominster

In my opinion the purchase of feedingstuffs should be out of the hands of the Minister of Food entirely, and in the hands of the Minister of Agriculture. The Minister of Agriculture is the man who is trying to increase the output of agriculture in this country, but he is working against the stream when his colleague—or the person who should be his colleague—is buying eggs and poultry from all over the world, while in this country poultry houses and pigstyes are empty waiting for feedingstuffs which could be turned into manufactured products.

The Prime Minister also said that we shall need big capital outlay. From where is the big capital outlay coming? When the Chancellor of the Exchequer makes this once-for-all capital levy, no class of the community will be hit worse than the agricultural landowner, who has put back his little bit of money into the land. But the man who likes a gamble gets away scot-free. That sort of thing is driving this country into gambling as it will pay to gamble in commodities, or in land, or on racecourses, rather than to invest money, which might be the subject in the future of another capital levy. This big capital outlay has been assessed by the hon. Member for Chippenham (Mr. Eccles) as something like £1,000 million which is necessary to put our farmhouses, cottages and buildings into repair.

Photo of Mr William McAdam Mr William McAdam , Salford North

From where will that come?

Photo of Sir Archer Baldwin Sir Archer Baldwin , Leominster

There will not be any to get after the capital levy.

I wish to mention that, in regard to maize, the Minister of Food said that they could not monopolise the purchasing of maize from the Argentine. I would remind the Committee that there was an export surplus of 6½ million tons in the Argentine this year, and that there was a carry over of 2 million tons. That makes a total of 8½ million tons of which we are to get just over 1 million tons under the new agreement. Is that monopolising the Argentine maize trade? I suggest that the Minister should think again.

I must say a few words in regard to the general economic position. The people are living in a dream world. They have been doped by the American Loan; they are to be still further doped by Marshall aid. The result is that they will not face the fact that we are not paying for the commodities which we are buying, and that in a few years' time we shall have to do without or, as the White Paper says, we shall have to stop buying food and raw materials which are necessary to keep the factory wheels turning. We are living the life of a typical spendthrift. Most of us in our lives have known the type of man who has been looked upon as a really generous sort of fellow, the man who tipped everybody lavishly. The sort of man I mean is the type who was looked upon as a tremendously good fellow until funds ran out and then he was thrown on to the dust heap. That is what the Socialist Party are doing at present. They are living the life of a typical spendthrift. They are realising the money which our forefathers, with their thrift, invested all over the world. They are begging money wherever they can get it, and they are taking no steps to face up to the position of paying for the things for which we will have to pay. If they do not face up to that position, we shall hit the brick wall with a very big thud.

The people of the country are bewildered. They have had the White Paper. If the Chancellor does nothing else, I hope that he will reprint the foreword and distribute it by the million all over the country. That should be done to try to undo the work which the broadcasts of several of his colleagues have done when they talked about rounding recovery corner, and of all the good things which the Socialists have done, never pointing out that they have done all these good things on borrowed money. To illustrate the bewilderment of the people, I will quote two statements. On 12th February the Chancellor said: Until we can see our way out of our present difficulties, we should all hold our hands in this matter of personal incomes. The Secretary of State for War, on 29th February, said: A lot of nonsense is being talked about pegging wages. I agree we must curb inflation, but when a great percentage of the workers earn less than £5 per week, what right have we to tell them not to ask for more? How can the country face the fact that we cannot afford to pay any wages at all unless we economise? I listened for two days to the Debate on the Budget and at the end of that time I could not make up my mind whether or not the Budget surplus was anti-inflationary. Whilst I was cogitating I fell asleep and I had a dream. The dream was that I had been appointed Chancellor of the Exchequer and that I had to put the country right in three years. I had to make up my mind what I was to do. I came to the conclusion that nothing could save the country except the slashing of expenditure and taxation.

Photo of Dr Mont Follick Dr Mont Follick , Loughborough

How did the hon. Gentleman start?

Photo of Sir Archer Baldwin Sir Archer Baldwin , Leominster

I will tell the Committee. I called together the heads of all the Ministries. I had in my hand a blue pencil. I saw the Service Ministers first and I put the blue pencil through many of the unnecessary costs which enable people to run about in cars without doing any effective service, filling the administrative offices and using up a tremendous amount of manpower in order to keep a few soldiers capable of holding a rifle in their hands. I told them that in 12 months the whole of the Army would come out of Germany. Germany would be allowed to stand on its own legs, and they would probably be better legs than they are at present. I told the Minister of Supply and the Minister of Works that I was going to amalgamate those two offices and that they should clear out and put into industry a great deal of the unproductive labour which they employed which was a brake on the wheels of industry. That labour should go into productive industry.

In regard to the Minister of Food, I was glad to hear the hon. Member who spoke about taking £200 million from the food subsidies and the same amount from Purchase Tax. I speak entirely for myself when I say that we must tackle that problem. I would tack le it by telling the Minister of Food to cut the subsidies by £200 million and I would give direct assistance to those adversely affected by the cut. The Minister of Agriculture came in for his turn. I told him to let all the land which he was farming through the county agricultural committees as a result of which he was losing a packet of money. I told him to do away with his machinery depots and to sell the machinery. I told the Minister of Fuel and Power, with his nationalised industries, that they must stand on their own feet and not expect the Chancellor to provide money for their losses.

I told the Minister of Town and Country Planning that I did not want any more new towns in this country. I told him to build some cottages near centres of production, near the mines, the factories and centres of agriculture, to provide accommodation for the workers so that they would go where we want them. If any new towns were wanted we should send the money out to the Colonies and build them in the vast open spaces. I told the Minister of Pensions that old age pensions should be increased by 25 per cent. because of the increase in the cost of food. To the Minister of Education I said that I would not cut education, but I instructed him to provide more technical education and less academic education to teach the country that horny hands are more important than inky fingers. Finally, to give an example to the country, I cut the salaries of Members of Parliament by 20 per cent.

8.39 P.m.

Photo of Mr Frank Fairhurst Mr Frank Fairhurst , Oldham

The Committee will forgive me if I do not follow the hon. Member for Leominster (Mr. Baldwin) in his argument. [HON. MEMBERS: "It was a dream."] I wish to take up some of the points raised in the speech of the right hon. Gentleman the Member for Bromley (Mr. H. Macmillan). He presented to the Committee a highly pleasant interlude. It was a colourful, flamboyant, negative and unbalanced speech. If that is the measure of the Opposition's case to the Budget, it is very poor indeed. One of his points was in reference to the many years of quiet capitalist development that took place. He exalted it as something which we ought to look back upon and which ought to be emulated even now. I felt myself asking this question: Is the right hon. Gentleman talking with his tongue in his cheek, or has he neglected to understand the economic history of this country in the last 150 years? How and where did they amass the aggregate of profits that capitalism transferred overseas in those years to build industries that have become competing factors to our present economy? Is he aware that the tranquil period he suggested was one of misery, struggle, strife and the effort of keeping body and soul together by millions of people in this country as a result of that calm enterprise? Was he aware of the fact that the submerged populations in Africa, in India and in other parts of the British Empire were unmercifully exploited in those times? In the last 50 years we have seen the result of that policy, of wars following wars.

If I were to say that since 1900 the National Debt has advanced thirty-fold I might be under-estimating, but we have at present a National Debt of over £25,000 million. Future generations are faced with the task of paying interest on that National Debt, for God knows how long, but it is there. It is a striking feature that today, when we are living in a state of society which is supposed to be higher and far more advanced than any previous state of society, we are spending £1,200 million on His Majesty's Services and interest on the National Debt. This policy is all wrong. I am reminded of the parable of the sower: we are reaping today, not the harvest sown last year or the year before, but the harvest of a policy of private, selfish aggrandisement planted generations ago which has resulted in artificial social values being looked upon today as the things that matter, while basic and fundamental issues are looked upon as of no account.

I mean by this that there is today an effort to escape the jobs that are vital to our economy. This has been experienced in the coalmining industry, in textiles, in engineering and in every kind of heavy industry. The general tendency today seems to be to get away from the things that we must have if we are going to live. I suggest that present day values are false and that, sooner or later, we are bound to come back to the issue of what is right and proper in the general interest of our people. Why should a miner always have had an inferiority complex that he was something right down at the bottom, or why should textile operatives have suffered from the same complex that their job was of no value to the country? [An HON. MEMBER: "Rubbish."] These are the facts—as hon. Members would find out if they went amongst the industrial population. Strangely, since the mines were nationalised there has been a psychological change of feeling amongst miners and they have developed a higher moral and social outlook.

On the economic side of this Debate I want seriously to ask the Chancellor whether the Government are planning for the future. Have they a five-year plan? Can they say to this country in the near future that they believe the targets in the major and basic industries should be this or that? It is all right to talk to trade union leaders and to employers, but I suggest to the Chancellor and to the Government that if they want to develop that dynamic labour force which is latent they must talk to the people in the workshops. If we can bring into action the labour force which is now latent, and if we can convince the rank and file that their job is urgent and important—that they have a job to do and that they are vital assets in the future of the country—I believe that We shall release an energy that will do as much good as anything we have talked about so far.

If we are to achieve the results in the future, we must interest the men and women in the workshops. If we can get the interest of these people we shall be on the right road to building up the economic force that is necessary. It is all very well to talk about the quality of labour, or of the total efficiency of labour per manhour per individual, but there are other ways of explaining the position to the people themselves. The Government should try out a new policy, a policy which must permeate every industrial establishment. If they will develop that policy, or will fashion a new policy so that the individual can feel that he is an asset, that he is something more than a cog in the machine, we shall be going in the right direction.

There is the question of making up the difference between our exports and imports. We cannot re-fashion our productive machine in 12 months, or even in two or three years; but we can re-fashion and build up the determination of the people now if the right outlook is taken by the Government. I understand that on Saturday next a conference is to be held in Manchester to urge cotton operatives to get down to their job. I must tell the Chancellor that the people who are at present working in the mills are already working very hard. To expect those people to work even harder is expecting a great deal.

There is another question I would like the Chancellor to answer. Is he satisfied that a general average wage in the cotton textile industry of less than £5 a week will help him to get what he wants from that industry? Is he satisfied that such a wage, no matter by whom it is earned, is satisfactory? Let us consider the case of a man with social and family responsibilities who earns only £5 a week. It is absurd to talk about freezing wages which are under £5 a week. If the Chancellor will develop the policy I have outlined; if he will suggest to employers in the textile industry that the present average wage is too low; if they will develop the policy which they are already operating of re-fashioning and cleaning their mills; there may be a chance of bringing into the textile industry labour that is at present quite shy.

I think that he might very well have left alone the price of cigarettes, tobacco and beer. I feel that it was simply a matter of the revenue being there and that the Chancellor made up his mind to have it, but it is an irritating factor to the man-in-the-street when these things happen. On the whole, however, I believe that the Chancellor's policy is right and that he is trying to extract the means of meeting our responsibilities in the right way. I hope he will pursue his policy and that, in Budgets to come, he will demonstrate to the people he represents and to the Party he represents that he has not forgotten that he is a Socialist.

8.51 p.m.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

The hon. Member for Oldham (Mr. Fairhurst) made a most interesting speech, which he concluded with rather qualified praise of the Budget. He said that it is a good Budget as Budgets go, and I gather from the fact that he disagrees with almost everything in it that he does not think Budgets go very far.

We are now in the concluding stages of the long Debate which has followed the Chancellor's opening of the Budget. It has been a new experiment for this House, in that the Chancellor, in his opening of the Budget, not only dealt with Budget details but also explained the Economic Survey of the year. So far as that part of his speech is concerned, everybody, I am sure, will admit that the experiment has been a successful one, quite apart from the Chancellor's own performance—and perhaps he will allow one who was a humble admirer of his, from a long distance away at the Bar, to express his appreciation. The right hon. Gentleman the Bishop of—[Interruption.] Well, one never knows in these clays of "jobs for the boys." The right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) said the Chancellor was good for a beginner. I would go further and say that his speech was good for a Chancellor of any length of experience.

I think we have had a most useful and instructive Debate with many excellent speeches. Between now and next year, we shall consider whether there are any improvements which we can make in our procedure, and whether, perhaps, it would be better on future occasions, after the Chancellor's opening speech, if we canalised rather more distinctly the two subjects of the Budget details and the general economic position, and perhaps had between the two discussions rather a longer interval than was available on this occasion. Quite clearly, speaking at the end of such a long Debate, it is impossible for anyone within the limits of time available to do more than deal with a very few main points, and I hope the Committee will excuse me if I devote most of my speech to the actual details of the Budget. There are, however, two questions which I should like to ask the Chancellor on the general economic position before I come to the Budget details.

I think many of us, quite irrespective of party, when we had read the White Paper in all its grimness—and we do not in the least complain; in fact, we applaud that it should set out the facts in all their grimness—I think many of us, when we got to the end of it, said to ourselves, "Well, where do we go from here?" I do not know if the Chancellor of the Exchequer ever spends any of his spare time in following the example of a colleague of his in listening to the adventures of Dick Barton on the radio. It has already been suggested that he should become a student of Hogarth's pictures, and I do not know whether further changes in his personal habits could be advised, but, if the right hon. and learned Gentleman did that, he would find that these adventures appear in a series of instalments, and that the end of every instalment is exactly the same. The starry-eyed hero, with his two dumb assistants, had walked blindly into the trap which had been laid for him, and from which there appears to be no escape. He is surrounded by cobras, bound hand and foot and gagged, and his prison is being filled with gas, and the instalment ends with the voice of the announcer heard saying, "Will Dick Barton escape?" Then, we are told to listen in at the same time next day to learn if he does. Well, of course, we all know that he is going to escape.

That is the merit of fiction, but here we are dealing with facts, and the instalment reached in our economic future which is presented by the White Paper leaves us very much in that kind of predicament. When we have read the White Paper, when we have accepted all the assumptions for the year, when we have assumed that the targets which we hope will be reached will, in fact, be reached, then I do not think I am putting it too low by stating that the most we can say is that, after the receipt of Marshall aid, we shall be within £100 million or so of meeting our overseas balance. The figure which the President of the Board of Trade gave as to the out-turn of the balance for the first quarter would make that appear rather optimistic. Over and above Marshall aid, there will be something like £100 million which we have got to meet, either from a reduction of our imports or from continuing the drain on our now comparatively exiguous reserves. No wonder that many people, having read the White Paper, are asking, "Shall we escape, and how?"

I know how difficult it is even to give estimates for one year in the Economic White Paper, and how liable all these estimates must be to errors caused by changes of conditions, which make it much more difficult, therefore, for the Chancellor of the Exchequer to project himself still further into the economic future of this country. But I do think—and here I agree very much with what was said by the last hon. Member who spoke—that he would do us all an im- mense service if he could go beyond the confines of the Economic White Paper to give us some idea of how he sees a future advance from the not very brilliant situation in which we are left at the end of the year under review. We hear a great deal about the difficulties of increasing our own production, about the fact that costs are going to become increasingly important, about the closing of markets to our goods and the growing additional competition which will be provided by the capital equipment which we are exporting now, of which we are starving our own industries and on which we are being forced to build up our competitors abroad. I feel that, if there is to be any real feeling of hope—and only if there is a feeling of hope do we get enthusiasm and confidence—the Chancellor must give a glimpse further into the future than is presented by this Survey.

The second question I want to ask concerns central planning. I know that the right hon. and learned Gentleman is himself a very sincere believer in the merits of central socialised planning. He thinks, and the theme of his party at the last election was, that a number of these extremely intelligent people sitting in Whitehall, all-wise and far-seeing, will be able to carry on the economy of this country on an even keel without the lurches and the staggers with which I admit in the past private enterprise corrected the economic distortions that appeared from time to time. That is a very attractive picture. It may in theory, at any rate, be a very logical case, but many of us who are not so convinced of the merits of this central planning would ask the Chancellor to explain how he can uphold that theory in view of the occurrences in the brick industry. That has been a typical example of where the much boosted central planning ought to have been able to avoid the ups and downs which are always attributed to the baneful influence of private enterprise. Yet exactly the opposite has been the case.

A year ago the all-wise people in Whitehall suddenly realised, after some time, that there was a shortage of bricks. A number of brickyards, some of which I know of personally, were re-opened at the request of the Government at very considerable cost indeed to the owners of those brickyards. Within a few months the same superior people sitting in White- hall had discovered that there was not a shortage of bricks but that there was a surplus; and, no sooner had those brickyards been brought back into production, than their owners found that it was quite impossible for them to dispose of the bricks which they were producing, and those very same brickyards which were re-opened a few months ago are now in the process of closing down again. Is that a very good example of socialised central planning?

Incidentally, what about the brick control? The President of the Board of Trade told us most dramatically yesterday that he had a physical aversion to controls which were not necessitated by the shortages of the article concerned. There is certainly no shortage of bricks now. Anybody who wants to buy bricks can do so, but there is still control. There is still the whole machinery of licensing and administration for regulating the number of bricks which may be bought when, in fact, there are far more bricks than anybody is willing to buy today.

I want to devote the rest of my speech to the question of the Budget. Of course, the central feature of this Budget has been the deliberate attempt by the Chancellor of the Exchequer to achieve a real and substantial surplus and, granted that that real and substantial surplus is achieved—because that is the primary aim—to give as much as he can in the way of incentive to production. With those two aims I think I can say that all of us on this side of the Committee are completely in agreement. It seems hard in a time of great difficulty, when people have to suffer great privations, that the Chancellor should deliberately go out to get from the people in the way of taxation many millions of pounds more than are required to meet the outgoings of the Government. But hard as it may seem, and illogical as it would have seemed in past years, I am convinced that in the present crisis it is the right method of approach. This mopping up of the surplus purchasing power is not the only way to cure inflation. An increase in the production of goods is the alternative and the better way, but this mopping up of purchasing power is the only swift way, and the growing disease of inflation is one that calls for a remedy which is swift.

We have not complained, therefore, as to the general principle on which the Chancellor has framed his Budget. We recognise that, for the first time, the surplus Which is presented to this Committee and to the country is a real one. It will exist not only in the imagination of the Chancellor of the Exchequer or in the archaic accounts which were kept. Nor do we quarrel with the amount of the surplus at which the Chancellor has aimed. On the basis of accountancy which he has adopted, that is a surplus over all expenditure, revenue or capital, making no allowance whatsoever for some being below and some above the line. The sum of £300 million at which he aims is perhaps greater than many people expected. It is certainly greater than that indicated by the White Paper which is, I think, £275 million on rather a less strict basis of accountancy.

I must confess I thought that in one respect the White Paper erred on the side of optimism, and that was in respect of the amount we could expect in private savings during this year, if we compare the estimate with the results of the savings campaign of last year. It is no doubt because of the fear of some short-coming in private savings—a fear which now will have been crystallised into a certainty by some of the subsequent actions of the Chancellor—that this amount has been decided.

It is not in the reality or the amount of the surplus that the difference between us arises; the difference is in the way in which it has been achieved. Three years after the war, at a time when most, if not all, of the automatic reductions in expenditure which take place after the close of hostilities have taken place, we are faced with a burden of taxation £200 million more than it was at the highest point in the war. The Chancellor himself cannot regard as satisfactory a situation which allows him so little elbow room to meet emergencies in a world in which emergencies are now so probable.

I have not the time tonight to recapitulate the arguments which have been used by hon. Members on this side of the Committee with regard to the reduction in expenditure, or the arguments which have been put against them by hon. Members opposite. I think I have found the real cause of the complete difference of opinion that exists between the two sides of the Committee on this all-important matter in some words which were used in an interesting speech by the hon. Member for North Lanark (Miss Herbison). She congratulated the Government on having secured the social services for the people of this country, and that is the whole difference between us. If we were satisfied that the standards of life in this country really had been secured, the whole question of these major cuts in expenditure would disappear. It is because we do not believe they are secured, and because we do not believe they can be secured merely by Acts of Parliament, merely by Budget Resolutions, that we believe this to be the all-important topic which we have to face.

Let us face it. The standard of life of this country at the moment is not secured by the Chancellor of the Exchequer. It is secured by one thing and one thing only, and that is the generosity of the people of the United States of America. Does anyone pretend for one moment that if there had not been any Marshall aid, the Chancellor today would have been introducing a Budget of this character, that he would have been able to avoid, either directly or indirectly, cutting either the nominal or the real value of many of the social services which are now provided? It is that terrible fact, that we are today depending for all that we value, not upon ourselves or our own will, but upon others and others' generosity, that leads us from time to time to raise this all-important question.

I should have liked, had there been time, to go into some details of the smaller questions of economies. We may have an opportunity later on. Quite apart from the big questions of policy, I am convinced—and sincerely convinced: I am not making this point in any party spirit—that there is, in fact, a great deal of room still for improvement, not only in policy, but in the economical spending of what is now being spent. It is extremely difficult, of course, for anyone outside Government Departments to develop that theme. Government waste, if it is there, is like an iceberg: only one-tenth of it is above the surface and the other nine-tenths is submerged. From time to time we come across in our individual lives, or we have exposed to us by the Public Accounts Committee, or we have admissions by Ministers of some glaring act of waste. The South American poetess who recently turned out her Muse to grass at Claridge's for some £662 is an instance. This is the sort of thing that comes to our knowledge. I am told, for instance, that B.O.A.C. in Karachi have 27 ground men, while K.L.M. run their service with two. These are indications of the sort of thing I mean, and the sort of economies that could be effected.

Photo of Mr Joseph Alpass Mr Joseph Alpass , Thornbury

What about the Severn Bridge? The right hon. Gentleman's statement was completely untrue.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

All the money that was wasted on that. It was £90,000.

Photo of Mr Joseph Alpass Mr Joseph Alpass , Thornbury

The right hon. Gentleman said £400,000. It was at Bristol.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

I wish the hon. Gentleman's constant interruptions were as inaudible as they are unintelligible.

Seriously, I do believe there is a big field for economies of this kind, and that upon the vast extent of public expenditure today economies of quite a small proportion would be a substantial sum. The Chancellor cannot himself undertake a review of that kind because he has far too much to do. The spending Departments during and since the war have lost the whole idea of economy. I wish the Chancellor of the Exchequer would appoint someone, whether a Minister, or an outsider, but someone who would on his behalf go into these small things all over the field of Government expenditure and report to him on it. I believe that we should find there, quite apart from the bigger questions that we have been discussing, means of making large, substantial economies.

It is against that possibility of economy that we ought to discuss the taxation proposals. There is one group formed by the beer, spirits, tobacco and betting taxes. These things are always the first things to which a Chancellor turns when he wants more money. On the whole, we agree it is right that they should be the first things to which he turns. But these have not been just the first things; they have been the second, third and last things to which he turns. Already, in 12 months, each of these fields of activity has had two rises in taxation imposed upon it. It is easy to dismiss them all as pure luxuries. Last night the hon. Member for Newcastle-under-Lyme (Mr. Mack) made a most interesting speech, in which he attributed the whole of his success in life to abstinence from tobacco himself and a belief in abstinence from alcohol in others. But I do not think that quite represents the ordinary man. It is no good saying to the ordinary man that a moderate indulgence in these things is a luxury. They are so much a part of his life and his whole standards that they occur in him, as to us all—and I include myself—as necessities. I believe the Chancellor will find that, however much they are luxuries in theory they will, or may, in practice have just as much effect upon wage demands as either Purchase Tax or, indeed, subsidies.

Normally one would like to discuss this matter at much greater length, together with the Budget Resolutions on Report stage. We are not allowed to do that now. We can only vote, and by our vote we shall have to show that we do not believe these taxes would have been necessary had adequate steps been taken to reduce expenditure. Time does not permit me now to deal with the many points on Purchase Tax, the reductions in Income Tax allowances, and the question of expenses, which will form important subjects in our subsequent Finance Bill Debates.

I pass tonight, for my final point, to the one new proposal in the Budget, and therefore the one which most needs discussion in this Committee. I refer, of course, to the once-for-all capital levy. I call it a capital levy because that, in fact, is what it is. True, it is assessed on income, but in the vast majority of cases it can be paid only out of capital. Since the attacks on this levy have been made in the Committee we have had two spokesmen from the Treasury. From one, the Economic Secretary, we have had some reply. I mean no offence to the Financial Secretary; I have no doubt that had he tried—and this is no compliment—doubtless he could have made as good a reply as the Economic Secretary; but the Financial Secretary has developed a technique in winding up Debates which precludes any effort of that kind. He gives us a long statement, with all the mixture of charm and pathos of which he is capable, of the impossibility of answer- ing all the questions which have been addressed to him, which leaves him just time to end with a glowing tribute to his right hon. Friend—whoever his right hon. Friend for the moment may be. He believes, like any good Socialist, that if all cannot have answers it is better that none should have an answer.

The Economic Secretary has not yet learnt the trick. He produced three arguments in favour of this levy, none of which was very good. As we all know, he is a member of a very small, esoteric, scholastic circle, well represented on the Front Bench opposite, whose motto is: "Manners makyth man"; which we may roughly translate that so long as you are courteous you need not trouble to be convincing.

Briefly stated, these were the three arguments in favour of the levy which he advanced. He said, in the first place, that it will reduce spending out of capital, because it will make the payers feel that they are less rich. [Interruption.] I am sorry to find that there is another hon. Member who is as much out of date as the Economic Secretary. He, at least, is a year out of date. He cannot, for the last year, have looked at the financial columns of the papers, or he would have seen, if that was what was necessary in order to stop what spending out of capital there may be, that the lesson had already been administered to the investors of this country. He does not, I suppose, deny that the unfortunate capitalist, who a year ago invested in what, I believe, came to be known as "Daltons," now finds himself 25 per cent. poorer as a result, and, of course, the fall in gilt-edged has also extended to a fall in industrial securities. I do not believe there is, on the whole, an investor of any substantial character who has not, during the last year, seen anything from a 15 to 20 per cent. depreciation in his capital.

The second argument was that this was a substitute for a capital gains tax. I think there was the same fallacy there. I think that a year ago there would have been quite a lot to be said for a capital gains tax, at a time when the then Chancellor of the Exchequer's credit inflation was forcing up capital values. But this is not a year of capital gains but of capital losses, and the vast majority have suffered these losses to set off against those gains. The only people who may have avoided the losses have been the speculators, and it is the speculators who also avoid this tax.

The third reason he gave was that it was at any rate a way of soaking the rich, and that is the real reason for this tax. It has been admitted by him, and it was admitted in a candid moment by the President of the Board of Trade, that this is the Chancellor of the Exchequer's Danegeld, the tribute he is paying to the Trades Union Congress, to his "ginger group" and to the right hon. Member for Bishop Auckland. The only trouble is that we have learned from history that you never pay Danegeld "once and for all."

We object to this tax on four grounds. In the first place, we do not believe that it is of any service in the fight against inflation. It is true that it adds to the Budget surplus, but the use of the surplus in fighting inflation depends entirely on how it is built up, and whether it is built up out of what otherwise might be potential spending power. We believe that this tax, at least as regards 90 per cent. of it, will merely mean transferring an equivalent sum from private savings to the Budget surplus, and, therefore, will have no effect whatever on the inflationary position. Indeed, the proof is the fact that the Chancellor of the Exchequer—quite rightly, because in no other way could it be made to work—is to bring in legislation to enable trusts to be broken. If there is one form of money which is quite incapable of being used for inflationary purposes, it is capital invested under strict trusts. That is exactly the thing which the Chancellor proposes to break.

Secondly, we say that it is unfair as between individuals. I am not going to cover the whole range of cases brought to the Chancellor's notice already. I have a letter from an individual setting out a case which I am perfectly certain the Chancellor cannot justify. A man retired after 40 years in business, having accumulated a certain amount of savings. He heard the appeal of the Government for people who had retired from business to return to employment in the national emergency. He therefore went back and took a job in a firm connected with exports. As a result, the extra money which he earns brings his income to over £2,000, and he has to pay the levy on the whole thing. Can anyone say that it is fair that he should be subjected to the whole of this tax because he came back at the Government's request in order to take this job?

Thirdly, we believe that it is impracticable, because a large number of cases are not covered at all by the simplified procedure. The hon. Member for Chichester (Mr. Joynson-Hicks), in a most interesting speech yesterday brought forward a number of these instances, all of which we shall have to discuss when we come to the further stages of the Bill. Finally, we believe that this tax will have a most adverse effect upon savings. It has taught people that only those who do not save have been able to avoid this tax, and the lesson they have learned will be a guide in the future.

I hope that in the course of his winding-up speech, the right hon. and learned Gentleman will be able to simplify and emphasise the once-for-all pledge which he gave in the effort to stop the disastrous consequences which he knew were bound to flow from this tax. The right hon. and learned Gentleman has pledged himself. He is a man of scrupulous personal honour, as we all know, and as long as he is Chancellor of the Exchequer, or a Member of the Government, this tax will not be repeated. We should like to know, because he is mortal, and he may disappear through illness or from other causes, what is the position of the other Members of the Government? Are they bound jointly and severally by that pledge that so long as any of them are there, this tax will not be repeated?

I conclude by saying that, apart from the criticisms—and this is the main one—we shall have to bring during the further stages of the Finance Bill, there are certain matters which we welcome in the latest financial policy of the Government. The artificial cheap money policy, with its consequent credit inflation, is dead. The attempt to press all capital expenditure irrespective of the national resources is dead. Some, at any rate, of the late Chancellor of the Exchequer's ideas on taxation are dead. The right hon. Gentleman in a speech the other day asked for a statue. The Chancellor of the Exchequer has, at any rate, given him a tombstone.

9.30 p.m.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

I do not think I could be other than satisfied with the way in which these proposals have been received both in the Committee and in the country. I certainly cannot complain of the acerbity of any criticism in this Committee. The only thing I can complain of is that, on the whole, there has been so little criticism. Also one can say that this has been a very good Debate, and it has amply proved the experiment of taking together the Economic Survey for the year and the Budget. I am quite sure that it has given a much more realistic picture both to the Committee and to the country of the difficulties that beset us, and a better opportunity of examining the ways by which we may meet these difficulties.

So far as the Economic Survey is concerned, there has been a very general acceptance, indeed a uniform acceptance of both the facts and the analysis of those facts, which is contained in the Survey. The main criticism which has been made has been to question whether or not it is a useful thing for the Government to attempt to lay down a plan either annually or for longer terms. Some Members, like the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) have said that it shows that we cannot plan centrally at all. Others like the hon. Member for Streatham (Sir D. Robertson), who spoke this afternoon, said that it lacked sufficient planning.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

Exactly, which shows the difficulty of trying to find the mind of the Opposition. It might be useful if I were to attempt to explain once again what we mean by democratic planning. There is a general tendency among Members on the other side of the Committee to regard the only two alternatives as being a rigid form of planning, particularly including the direction of labour, or a completely free economy, what I think the right hon. Gentleman the Member for Woodford (Mr. Churchill) called "taking the lid off." We believe that though there may be those two alternatives, neither of them is an alternative fit or suitable for this country. There is a third alternative which we described in some detail in last year's Economic Survey—the alternative of economic planning that depends not so much upon the rigid regulation of every individual act, but upon the laying down by the Government of the desirable targets and aims in our economic life, using a certain number of governmental systems to work towards that end, but relying very largely upon the co-operation of the people of the country in order to carry it out.

That is why it is rightly called democratic planning, because the people not only partake in the formulation and the planning, in the way to which I will draw attention in a moment, but also take the major part in its carrying out. The point which the Opposition constantly raised is: How can there be planning unless we are prepared to direct labour? In our view, we can perfectly well plan but we cannot necessarily get the same certainty that the plan will be carried out 100 per cent. [Laughter.] Hon. Members giggle, which I notice they constantly do when they fail to understand an argument. I assure them that it is really not a laughing matter how we can manage our economy—[HON. MEMBERS: "Hear, hear."]—getting the results which are in the best national interest but at the same time interfering as little as possible with individual freedom. That is the objective of democratic planning, and considering that we are in such early stages of what is a great experiment in civilization—[HON. MEMBERS: "Oh."]—we have done considerably better than those who tried the experiment after the first world war.

As I understand it, the Opposition—I hope I shall get their confirmation of this—want to go all out for a free economy. I gather that the answer is "Yes." I cannot even at this moment get an answer out of them on that question.

Photo of Lieut-Commander Joseph Braithwaite Lieut-Commander Joseph Braithwaite , Holderness

What is meant by "free economy"?

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

The right hon. Gentleman the Member for Bromley (Mr. H. Macmillan), who made such an admirable speech on foreign affairs today, seems to be a little bit hurt that he should be asked to come to a matter of economy. My term for a free economy is one in which the individual is allowed to operate without any controls from the State. That is free capitalism. As I understand it, that is the objective of hon. Members opposite. [HON. MEMBERS: "No."] Then it only shows how difficult it is after five days of Debate to understand the Opposition policy.

I will take up one example which the right hon. Gentleman the Member for West Bristol (Mr. Stanley) used in his speech as to what he called "the failure of planning over brick-making." We have never suggested that in planning we could necessarily foretell the state of world market supplies in a whole range of substances, [HON. MEMBERS: "What can you foretell?"] I can tell hon. Members what we can foretell, but what we cannot foretell, for instance, is the amount of timber that will be available in two years' time in the present state of world markets. Of course, in the normal state of world markets, when these supplies of raw materials are running along normal channels in normal quantities, it is very easy to forecast, but it is excessively difficult to forecast in circumstances such as they are today. For instance, we do not know whether this year or next year we shall be able to get any supplies from Finland, which is normally one of the major suppliers of this country—

Photo of Viscount  Hinchingbrooke Viscount Hinchingbrooke , Dorset Southern

Finland has never had so much timber.

Photo of Colonel Sir Alan Gomme-Duncan Colonel Sir Alan Gomme-Duncan , Perth

Ask the hon. Member for West Fife (Mr. Gallacher). He will tell you.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

What I am debating is whether one can foretell how much there will be. [An HON. MEMBER: "You have never been able to do so."] The answer is that one cannot accurately foretell these matters.

Hon. Members:

Hear, hear.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

The noble Lord is getting too excited. As far as brickmaking is concerned, as everybody knows, in the spring of 1946 there was a great shortage of bricks owing to the fact that a great many brickworks had been shut down during the war and had not at that time been re-opened. As a result, we started in the spring of I946 to re-open the brickworks. There was never any brick control, as the right hon. Gentleman seems to think, there never has been one. The only control was the control of the price of bricks which was very largely put on in order to protect the local brickmakers from the Fletton prices. There has been no other control of bricks at all. As a result, in the course of two years the brick output was built up very largely indeed, and on the then contemplated supply of matching materials, that would have supplied adequately the building programme in the months that we are now in and in the months ahead. Unfortunately, however, owing to external circumstances, those matching materials were not available and, as a result of our financial position, we had to cut our programme of capital investment.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

Those two factors have made it difficult to cope with the brick situation but I would point out that there are no unemployed, even now, in the brickfields. We hope that by taking the steps that we are now taking, we shall be able to carry over this period of difficulty until we shall again—as we shall before long—need that quantity of bricks. That has only been possible because there has been continual observation and planning of what we ought to do about bricks.

This nervousness and anxiety on the part of the Opposition, making it impossible for them to make up their minds whether they believe in a free economy or not, is really the result of their fear of a repetition of what happened after the last war. This, fortunately, is one of those rare instances in history where we have an almost exactly parallel set of circumstances on which we can judge—[HON. MEMBERS: "Oh."] It is true, of course, that the circumstances after this war are very much more difficult.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

The right hon. and learned Gentleman says there is an exact parallel. Did we get a loan of £1,000 million from America after the last war?

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

We got a loan during the war and repudiated it after.

Photo of Hon. Oliver Stanley Hon. Oliver Stanley , Bristol West

The right hon. and learned Gentleman knows that, in point of fact, the loan we got during the war, for war materials only, had nothing to do with any post-war problem, was funded by the Conservative Government, the interest and sinking fund was paid by them, and the payments lapsed only when his Government were in power.

Hon. Members:

Withdraw.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

I do not think we need all get frightfully excited about that—

Photo of Mr Nigel Birch Mr Nigel Birch , Flintshire

A monstrous statement.

Hon. Members:

Dishonest.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

The facts are on record, and they can be looked up and verified by anybody—[An HON. MEMBER: "Look them up before you make your speech."] It is quite all right, hon. Members need not worry.

I suggested that this was a case in which we have a very applicable parallel with the period after the last war, particularly as regards the circumstances which beset the industry, the agriculture and so on of this country in the two periods—subject, of course, to the fact that this time we have suffered much more internal destruction than we did during the first world war. As we know, after the first world war, the policy which is now being put forward, as I understand it, by the Opposition, was in fact followed. That is to say, the lid was taken off very shortly after the first world war. It is, therefore, worth examining that comparison to see how their policy that was then applied succeeded, compared with the policy which has been applied after this war. I take most of these figures for the early period from the study of the transition after I9I8 made by Professor Pigou, of Cambridge. Take the figures for total industrial production. If we put the figure in 1913, the pre-war year, at 100, the total production in 1920 was 93, and in 1921 it was 55.

Let us take similar periods for this war. We have not the official index of production covering the whole war and post-war period, but a very good estimate has been made on the basis of the statistics which are extant in. the report of the United Nations Economic Commission for Europe, which was published a few days ago, figures from which have been quoted. On the basis of those figures, putting 1938 at 100, in 1947 it was about 110, curiously enough, exactly double the 55 after the last war.

I turn to exports. If we put the 1913 exports at 100, exports in 1920 were 71 and in 1921 50. If we compare that, and take 1938 at 100, the exports for 1947 were 108—these are all volume figures—and the first quarter of this year varied between 125 and 130. Let us see what happens to coal. In 1913 we produced 287 million tons. In 1920 production had fallen by nearly 60 million tons, and was only 229 million tons. In 1929 production was 163 million tons, having fallen 124 million tons from pre-war. Of course, everyone appreciates that 1931 was the year of strikes and lockouts—produced by the policy of the time. It we take what happened after this war, we find that in 1938 coal output was 227 million tons, in 1947 it was 197 million tons and it has been running in the first quarter of this year at the rate of 213 million tons.

Take the cotton industry, another of the great industries. If we put cotton yarn production in 1913 at 100, the production in 1920 was 79, and in 1921 it was 50. If we turn to the period since the second war and write the output of 1938 as l00, cotton yarn production in 1947 was 70, and production in the last two months has averaged 83.

Let me turn to another line of activity, the building of houses. In the first 45 months after the first world war, 210,000 houses were built, in all, in England and Wales. In the 32 months that have followed the second war, we have built, in total, including permanent and temporary houses and war damaged houses rebuilt, 326,000 houses. That, it will be noted, is in 32 months against the 45 months that it took to build the 210,000 houses.

Photo of Mr Arthur Molson Mr Arthur Molson , High Peak

Why in the case of houses has the right hon. and learned Gentleman changed his method of comparison? Why does he not compare the number of houses built before the outbreak of war and after the outbreak of war, as he did in the case of other industries?

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

Unfortunately, the figures are not available. If the hon. Member can find them, I shall be delighted.

Photo of Mr Arthur Molson Mr Arthur Molson , High Peak

The reason I raised the point is that, in fact, as many houses are not being built now as were being built before the war. If the right hon. and learned Gentleman had used the same basis of comparison in the case of the building of houses as he chose in the case of the other industries, he would have found that the position was entirely different and not favourable.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

That again is a fact that we can easily ascertain if the figures are available. I do not know that they are available. If they are, we shall be delighted to have them. All that I am anxious to do is to persuade hon. Members opposite to realise the facts.

To deal with the agricultural situation, which has been dealt with quite considerably by a number of hon. Members this afternoon—

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

The hon. Member for Chorley (Mr. Kenyon).

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

It was dealt with by the hon. Member for Leominster (Mr. Baldwin), the hon. Member for Streatham and by the hon. Member for Chorley. The Committee may remember a little incident connected with Part I of the Agriculture Act of 1920 in which the corn production subsidies were withdrawn. That led to a good deal of feeling among farmers at the time. Indeed, I do not think that it would be an exaggeration to say that it unsettled farming for most of the period between the wars. One, therefore, would rather expect to find that after 1921 there was a considerable drop in farming production, as indeed there was. That persisted through the following years. Taking as a test grain production of all kinds, in 1913 it was 4,935,000 tons; in 1920 it was 5,200,000 tons, and in 1921 it was 5,400,000 tons. Then in October came the withdrawal of the subsidy. In 1922 it was 4,800,000 tons; in 1923 it was again 4,800,000 tons, and that figure substantially persisted through 1924 and 1925. If we take the average for 1936 to 1939, it was 4,442,000 tons. In 1946 to 1947 it was 7,216,000 tons and in 1947–48, which was, as everybody knows, an extremely bad year, it was only 6,163,000 tons. As will be noticed, there was a very large increase.

I venture to suggest to the Committee that an examination of those figures makes it quite clear that there is at least no proof that "taking the lid off," which was tried after the first war, was more successful than the policies we have followed after the last war. The truth is, of course, that planning on the basis that I have suggested—the one which we are attempting, democratic planning—has not, in fact, been a failure at all. A great deal has been accomplished in the direction in which we sought and are seeking to go.

It is perfectly true that we have not succeeded in attaining our objective 100 per cent. In any battle, whether economic or otherwise, it is seldom that such a percentage is achieved, but we have proceeded a long way. Obviously, we cannot succeed in that effort without the cooperation of all producing interests in this country. That is why we have instituted a system of co-operation with both sides of industry throughout the whole planning mechanism. We have got the Planning Board, the N.J.A.C., N.P.A.C.I., and all the methods of consultation with the F.B.I., the B.E.C., the N.U.M. and the T.U.C. We believe—and it is our uniform experience—that industry does not want anarchy and chaos; it does not want uncontrolled profiteering either. What it does want is a measure of orderliness and guidance introduced by means of planning.

It is perfectly true, as one hon. Member has suggested, that it will be a very good thing if we could get a longer term plan upon which to operate than that which we are attempting at present. It is not an easy thing to do in the very shifting and changing circumstances of world economics in which at present we find ourselves. For instance, the changes in the terms of trade, which may have been, and are, very great from time to time, obviously make it very difficult.

The right hon. Member for West Bristol asked whether I could give some idea of the further future beyond the Survey which is now before the Committee. It is not possible, of course, to say precisely how the struggle or the battle to get our economic stability is going to proceed, but paragraphs 67 to 81 of the Economic Survey set out the five or six lines upon which we are proceeding for the longer term solution of the problem which confronts us. If the right hon. Gentleman will study those sections, as I am sure he has done already, he will find there about as much as one can say as regards the future beyond this year until one can get to the actual working out of a more detailed plan.

There is left, of course, the uncertainty of the European Recovery Programme, which we have not been able to incorporate into the Economic Survey because its terms at present are wholly uncertain. Until the Administrator gets into his office and into his stride we shall not know precisely how it is going to be applied. Whether the European Recovery Programme is of greater or lesser advantage to us, it is clear that we cannot afford in any circumstances to relax our efforts because of that programme. We have made it clear—and I hope I made it abundantly clear in my opening speech—that the preservation of our reserves at their present level is an absolutely cardinal point in any planning which we do.

Perhaps I might repeat the words I used to the House because the hon. Member for Chippenham (Mr. Eccles) said yesterday that I had said it did not matter. These were the words I used: The preservation of our resources must be a cardinal principle of our planning. … We must therefore 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, cc. 41–2.] It will not be possible to say exactly what steps are necessary to accomplish that until we know the application of the European Recovery Programme, but that will be the principle that we shall apply. We must, therefore, do our utmost to bring about at the earliest date a complete balance of our overseas payments, not merely the partial balance which is dealt with in the Survey pending elaboration of the European Recovery Programme, and I am very glad that several hon. Members today have emphasised the part that agriculture and fishing must play in this balance of our resources, because anything that can save us from imports, is obviously of the greatest value and importance.

I have already pointed out in the figures I have given the great advance that we have made in agricultural production since before the war, and we have, I think for the first time, given the farmers of this country under the Act of 1947 a stable basis upon which agriculture can go forward, and, in association with that, the new programme was put out urging the growing of £100 million worth more of livestock and cereals during the years between this year and 1951–52. Some hon. Members have complained that we have already said that that programme will not be fully achieved. That is perfectly true, because it depends upon our capacity to buy foodstuffs from overseas, and we are unable because of our balance of payments position, to spend unlimited sums of money buying coarse grains at exorbitant prices, because, if we do that, we shall have to give up human foodstuffs and replace them with animal foodstuffs. What we have done is to buy the maximum quantity which we can afford, and that will allow a certain expansion, though not the expansion we would have liked to have seen. So far as fishing is concerned, probably the landings last year were just double what they were in 1945, so that there has been a very great increase in the yield of the fishing industry and we anticipate that that will go on as well.

In these circumstances, we have made a Budget which we believe fits in with these economic difficulties that have been explained. But I do want to emphasise to the Committee that this very large surplus is a special thing for this year. It is not something that we contemplate having to Budget for next year; in fact, it would be very bad policy if we were to maintain these enormous surpluses unless they were necessary, and we must, therefore, be prepared, at almost a moment's notice, if the position changes from an inflationary to a deflationary situation, to switch our policy at the same time. I was very glad to find that, in that proposition, I had the support of two of my predecessors speaking in the course of this Debate.

Now I come to the question of the Budget itself. There again, I am glad to say, there have not been many criticisms. First of all there has been a suggestion by some hon. Members that the Budget is not deflationary enough. The right hon. Member for Oxford University (Sir A. Salter) said that, in his opinion, it was not deflationary at all. Frankly, I cannot understand the argument that he put forward, because if one looks at the figures, taking them for the year 1948, for instance—one has to be a little careful because the Economic Survey is for the calendar year and the Budget is for the Budget year, and one sometimes gets into a little confusion over the two—if we make an Estimate, amidst all the uncertainties of when payments will come in between the two years and so on, roughly speaking the position is this, as I see it. Here again, the Opposition cannot quite make up their minds whether the capital expenditure which we have estimated ought to be more than £1,800 million or less; some think it is not enough and others think it is too much, but we have put it at £1,800 million. That will be partly dealt with by the foreign deficit of £250 million which we have estimated, and that leaves a requirement for internal saving of £1,550 million.

Against that there is the Budget contribution—that is, the surplus—and also the local authority savings, the money which comes in through the insurance funds, and so on, amounting in all to about £400 million, and the depreciation account of industry which we can put at somewhere between £700 million and £800 million. That only leaves £350 million to be found by all forms of private savings. I do not think anybody would say that to cover all forms of private saving, £350 million is an unfair estimate in the coming year. Of course, people must not confuse that figure with personal savings, which are quite a different thing from all forms of private savings. I feel, therefore, that it is quite impossible to say that we have not got a large enough surplus to get the deflationary effect which we desire.

The second criticism is that we have not cut expenditure enough. I would like to go through the items and see which of them hon. Members opposite think should be cut. Perhaps they will cheer the items which they think should be cut.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

Sometimes even a parlour game will get an answer, when questions will not. First of all, interest on the Debt, £500 million; transfer payments—like family allowances and things of that sort—and social services amounting to £500 million; defence, £700 million; subsidies, £400 million; local services, such as education, roads, police and so on, £400 million. I have given items so far which amount to £2,500 million, and the total amount is £3,000 million, so that we have left an item of about £500 million, which covers all the other administrative Departments. On this item we have already made a saving this year of over 21 per cent. compared to last year, which is a very substantial saving on a whole block of administrative services.

The other factor which I think hon. Members should bear in mind is one that I mentioned in my opening speech; that is, that last year we had already effected very large savings. That is proved by the fact that despite the very large rise in prices, salaries and wages during the year, which led to a very large increase in the income side of the Revenue account, we were only one-fifth of 1 per cent. above the estimated expenditure, which means, of course, that we must have saved a great deal in the course of the year to cut it down in spite of rising costs and prices. The right hon. Member for West Bristol said there were a lot of small items where we could get economy. I am equally sure that there are a lot of small items where we can get economy, and we are working very hard, now, on those small items. We have a very active Division, the O. and M. Division, which, associated with outside experts and business men of all sorts and kinds, is now going into the organisation of various Departments and sections, in order to see where, on the latest methods of business efficiency, further saving can be made. The net result of those figures that I have given is really that there is not any further marked saving to be made at all.

Photo of Sir Godfrey Nicholson Sir Godfrey Nicholson , Farnham

But can we afford it?

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

When I went through the figures the hon. Member for Farnham (Mr. Nicholson) did not cheer at any moment. We can only afford it if we are prepared to put up the money to pay for it, and that is a subject to which I am now coming.

Everybody agrees on two principles as regards raising money. The first is that all taxation should be imposed in accordance with the principle that those should pay most who are most able to bear the load. That is a general principle long accepted. The other is that there should be a fair distribution, amongst different classes and sections of the population, of the taxation load. I would remind the hon. Lady the Member for North Lanark (Miss Herbison), on one point she made, that it is really rather hard luck to complain that people who are already completely exempt from Income Tax have got no further benefits from remission. As the Committee knows, in the course of the last two years we have, in fact, exempted very large classes of persons from payment of Income Tax, and they must now expect to see others get the benefits while they remain where they are—fully exempt from the tax.

Apart from the few items which have been criticised in the Purchase Tax list, the main criticisms have been on beer and tobacco, and the Special Contribution. I should like, first, to say one word on the Purchase Tax. I think the tax on children's clothing has been very badly received and, as a tax, it is one with which, as a grandfather, I have very little sympathy. It did, in fact, fit into the general pattern of the newly-arranged Purchase Tax provisions, where, in other classes of clothing, utility was exempt, non-utility was in the lowest class and the cloth from which one makes the materials was in the next class.

In spite of that logic, however, I propose to continue the exemption of children's non-utility clothing and, as very little tax will have accrued since 9th April, I propose to restore the exemption as from that date. That will cost me roughly £2 million this year. I hope that, with that change, the rest of the complaints about the Purchase Tax will very largely disappear and that the people who want to wear stockings will feel that the children are, after all, more important. As regards beer and tobacco, I must say I have been surprised by the extraordinarily cheerful way with which people have taken this new impost. I am quite sure that the great majority of the people have felt that they are quite prepared to bear this burden in order that their wives may get the advantages of the Purchase Tax reductions.

I come to the Special Levy. This, so far as I, and so far as the Government, are concerned, is a once-for-all levy, as I have said before, and as I now repeat. The first question that has been raised about this Levy is, whether it is inflationary or not, or whether it is disinflationary. It is entirely a matter of psychological judgment, and not of economics. The question is, what is a person likely to do who is confronted with this? First of all, of course, a great deal of it will be paid out of income and not out of capital at all. In the lower ranks, let us take a man with over £2,000 in all, who has to pay, say, £25. He is not going to sell his securities to pay £25. That will apply to a great many of the people in the lower ranks. In the higher ranks it will mean payment out of capital. However, the Committee will remember that there are a great many people at the present time in these ranges who are already living partly on capital, and so far as this induces them not to live quite so much on their capital, because they have to pay some of it away, it will not be otherwise than disinflationary. Therefore, I think I can broadly say on this, that it is more likely to be disinflationary than anything else.

I have been accused by the right hon. Gentleman for the Scottish Universities (Sir J. Anderson) and others of partisanship in applying this. It really is a very curious mentality—a sort of political superiority complex—which induces people to make remarks of that kind. Of course, they never do anything from a political point of view. All their judgments are arrived at in a plain, objective way, without any regard to any affiliations or any theories which they hold, or anything else. I am, quite frankly, not as perfect as that. I have held certain theories for a long time, political theories which I believe to be right. I am not ashamed of believing them to be right, and I feel it is my duty to do the things which I think, according to those political theories, are right. I do not think that there is anything particularly wrong in taking that attitude.

Indeed, I ask myself the question, as to which we all agree—the fest being the ability to bear the load—who could better bear the load than the people who will bear this one? Who in the country could better bear it? If anybody will point them out to me I shall be glad to know. Who in the country is in a better position to bear this load than those upon whom it is placed?

Photo of Lieut-Commander Joseph Braithwaite Lieut-Commander Joseph Braithwaite , Holderness

May I tell the right hon. and learned Gentleman? There is a perfectly simple answer. Those who have been dodging taxation during the war and since, all of whom could be caught by calling in Treasury notes.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

The hon. and gallant Gentleman has a very small knowledge, if I may say so, of these matters, if he thinks we can catch those people by calling in Treasury notes. Does he suggest that we call in Treasury notes and do not replace them by others?

Photo of Lieut-Commander Joseph Braithwaite Lieut-Commander Joseph Braithwaite , Holderness

Many will not be surrendered. It happened in France. Let the right hon. and learned Gentleman look at France.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

France is rather different from this country.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

I have had a look. I had a discussion on it. I assure the hon. and gallant Gentleman that really that would not be successful. When he says "those who always escape taxation"—of course, that is one of the difficulties: they do escape taxation. If we could find them they would not escape taxation.

Photo of Sir Stafford Cripps Sir Stafford Cripps , Bristol East

So I am afraid they are no good for taking an extra load. It is like suggesting to the caravan man that he should put the load on camels which are not there. However, I will bear the hon. and gallant Member's suggestion in mind; though I am glad to know that that is the only alternative definition of people better able to bear the load which the Opposition can put forward.

I believe, moreover, that this incidence of taxation does give a fair distribution of the extra taxation; that is to say, the effect of the beer, tobacco and betting duties falls largely on the lower income groups, and this Special Contribution falls on the higher income groups, but does not affect incentive because it falls not on people who are earning their income, but only on those who get it from investment. I should like to add one footnote to that, because I know that the Committee will be glad to hear this. To date, I have personally received £68,550 in payment of this levy, in sums varying from £10 to £21,000, which shows that there are at least some people who are glad to be patriotic and to help.

I am afraid that I have kept the Committee rather a long time. Finally, I hope the result of this Budget will be that during this year we shall be able very largely to correct the inflationary tendencies which have bedevilled our economy for the past year or two. If we are able to do that, then I think we shall have a considerable opportunity of being able to balance our external payments as well; and when we achieve that balance I am quite sure that everybody in this Committee will be equally pleased.

Several Hon. Members:

Several Hon. Members rose

Photo of Mr William Whiteley Mr William Whiteley , Blaydon

The Parliamentary Secretary to the Treasury (Mr. Whiteley) rose in his place, and claimed to move, "That the Question be now put."

Question put, "That the Question be now put."

The Committee divided: Ayes, 224; Noes, 86.

Division No. 123.AYES.10.23 p.m
Adams, Richard (Balham)Binns, J.Collins, V. J.
Adams, W. T. (Hammersmith, South)Blyton, W. RColman, Miss G. M
Alexander, Rt. Hon A. V.Boardman, H.Cook, T. F.
Allen, A. C. (Bosworth)Bowden, Flg. Offr. H. W.Corlett, Dr. J
Allen, Scholefield (Crewe)Bowles, F. G. (Nuneaton)Crawley, A.
Alpass, J. H.Braddock, Mrs. E. M. (L'pl, Exch'ge)Cripps, Rt. Hon. Sir S
Anderson, A. (Motherwell)Braddock, T. (Milcham)Crossman, R. H. S.
Awbery, S. S.Brook, D. (Halifax)Daggar, G.
Ayles, W. H.Brooks, T. J. (Rothwell)Daines, P.
Bacon, Miss A.Brown, T. J. (Ince)Dalton, Rt. Hon. H.
Baird, J.Buchanan, Rt. Hon. G.Davies, Harold (Leek)
Balfour, A.Burden, T. W.Davies, R. J. (Westhoughton)
Barton, C.Butler, H. W. (Hackney, S.)Deer, G.
Bechervaise, A. E.Callaghan, JamesDobbie, W.
Benson, G.Carmichael, JamesDugdale, J. (W. Bromwich)
Berry, H.Cobb, F. A.Dumpleton, C. W.
Beswick, F.Cocks, F. S.Durbin, E. F. M.
Bevan, Rt. Hon. A. (Ebbw Vale)Coldrick, W.Dye, S.
Bing, G. H. C.Collindridge, FEde, Rt Hon. J C
Edwards, John (Blackburn)Kinley, J.Royle, C
Edwards, N. (Caerphilly)Lawson, Rt. Hon. J. J.Sargood, R.
Evans, Albert (Islington, W.)Lee, F. (Hulme)Scollan, T.
Evans, John (Ogmore)Leonard, W.Segal, Dr. S.
Evans, S. N. (Wednesbury)Leslie, J. R.Shackleton, E. A. A.
Fairhurst, F.Levy, B. W.Sharp, Granville
Farthing, W. J.Lipson, D. L.Shawcross, Rt. Hn. Sir H. (St. Helens)
Fernyhough, E.Lipton, Lt.-Col. M.Simmons, C. J.
Field, Capt. W. JLyne, A. W.Smith, C. (Colchester)
Follick, M.McAdam, W.Smith, Ellis (Stoke)
Foot, M. M.McEntee, V. La T.Smith, H. N. (Nottingham, S.)
Forman, J. C.McGhee, H. G.Smith, S. H. (Hull, S.W.)
Fraser, T. (Hamilton)McKay, J. (Wallsend)Soskice, Sir Frank
Freeman, Peter (Newport)Mackay, R. W. G. (Hull, N.W.)Sparks, J. A.
Gaitskell, Rt. Hon, H. T. N.McKinlay, A. S.Steele, T.
Gibbins, J.Maclean, N. (Govan)Stewart, Michael (Fulham, E.)
Gibson, C. W.McLeavy, F.Stokes, R. R.
Gilzean, A.MacMillan, M. K. (Western Isles)Stross, Dr. B.
Glanville, J. E. (Consett)Mallalieu, J. P. W. (Huddersfield)Stubbs, A. E.
Gooch, E. G.Mallalieu, E. L. (Brigg)Swingler, S.
Greenwood, A. W. J. (Heywood)Mann, Mrs. J.Sylvester, G. O.
Grenfell, D. R.Manning, Mrs. L. (Epping)Symonds, A. L.
Grey, C. F.Marquand, H. A.Taylor, H. B. (Mansfield)
Griffiths, D. (Rother Valley)Mathers, Rt. Hon. GeorgeTaylor, R. J. (Morpeth)
Griffiths, Rt. Hon. J. (Llanelly)Middleton, Mrs. L.Thomas, D. E. (Aberdare)
Guest, Dr. L. HadenMillington, Wing-Comdr. E. RThomas, I. O. (Wrekin)
Guy, W. H.Mitchison, G. R.Thomas, John R. (Dover)
Hale, LeslieMoody, A. S.Thomas, George (Cardiff)
Half, Rt. Hon. GlenvilMorley, R.Thorneycroft, Harry (Clayton)
Hamilton, Lieut.-Col. R.Morgan, Dr. H. BTiffany, S.
Hannan, W. (Maryhill)Mort, D. L.Timmons, J.
Hardy, E. A.Moyle, A.Titterington, M. F.
Hastings, Dr. SomervilleMurray, J. D.Tomlinson, Rt. Hon. G
Henderson, Rt. Hn. A. (Kingswinford)Nichol, Mrs. M. E. (Bradford, N.)Ungoed-Thomas, L
Henderson, Joseph (Ardwick)Nicholls, H. R. (Stratford)Usborne, Henry
Herbison, Miss M.Oldfield, W. H.Vernon, Maj. W. F.
Hobson, C. R.Oliver, G. H.Walker, G. H.
Holman, P.Paget, R. T.Wallace, H. W. (Walthamstow, E.)
Hoy, J.Paling, Rt. Hon. Wilfred (Wentworth)Watkins, T. E.
Hubbard, T.Paling, Will T. (Dewsbury)Watson, W. M.
Hudson, J. H. (Ealing, W.)Pargiter, G A.Weitzman, D.
Hughes, Emrys (S. Ayr)Paton, Mrs. F. (Rushcliffe)West, D. G.
Hughes, Hector (Aberdeen, N.)Paton, J. (Norwich)Wheatley, Rt. Hn. J. T. (Edinb'gh, E.)
Hynd, H. (Hackney, C.)Pearson, A.Whiteley, Rt. Hon. W
Irvine, A. J. (Liverpool)Peart, T. F.Wilkes, L.
Isaacs, Rt. Hon. G. A.Perrins, W.Wilkins, W. A.
Janner, B.Porter, E. (Warrington)Williams, J. L. (Kelvingrove)
Jay, D. P. TPorter, G. (Leeds)Williams, R. W. (Wigan)
Jeger, G. (Winchester)Price, M. PhilipsWills, Mrs. E. A.
Johnston, DouglasPritt, D. N.Wise, Major F. J
Jones, D. T. (Hartlepool)Pryde, D. J.Woodburn, A.
Jones, Elwyn (Plaistow)Randall, H. E.Woods, G. S.
Jones, J. H. (Bolton)Ranger, J.Younger, Hon. Kenneth
Jones, P. Asterley (Hilchin)Rankin, J.
Keenan, W.Reid, T. (Swindon)TELLERS FOR THE AYES:
Kenyon, C.Richards, R.Mr. Snow and Mr. George Wallace.
Kinghorn, Sqn.-Ldr. E.Robens, A.
NOES.
Agnew, Cmdr. P. G.Gage, C.MacLeod, J.
Amory, D. HeathcoatGeorge, Maj. Rt. Hn. G. Lloyd (P'ke)Macmillan, Rt. Hon. Harold (Bromley)
Anderson, Rt. Hn. Sir [...] (Scot. Univ.)Gomme-Duncan, Col. A.Macpherson, N. (Dumfries)
Assheton, Rt. Hon. R.Grant LadyMaitland, Comdr. J W.
Astor, Hon. M.Grimston, R. V.Manningham-Buller, R. E.
Baldwin, A. E.Hare, Hon. J. H. (Woodbridge)Marlowe, A. A. H.
Barlow, Sir J.Harris, F. W. (Croydon, N.)Marshall, D. (Bodmin)
Bennett, Sir P.Head, Brig. A. H.Mellor, Sir J.
Birch, NigelHinchingbrooke, ViscountMolson, A. H. E.
Boles, Lt.-Col. D. C. (Wells)Hogg, Hon. Q.Morris-Jones, Sir H.
Boothby, R.Hurd, A.Morrison, Maj. J. G. (Salisbury)
Bossom, A. C.Hutchison, Lt.-Cm. Clark (E'b'rgh, W.)Mott-Radclyffe, C. E.
Bower, N.Jeffreys, General Sir G.Nicholson, G.
Braithwaite, Lt.-Comdr. J. GJennings, R.Odey, G. W.
Buchan-Hepburn, P. G. T.Joynson-Hicks, Hon. L. W.Osborne, C.
Clarke, Col. R. S.Keeling, E. H.Pickthorn, K.
Crookshank, Capt. Rt. Hon. H. F. CKendall, W. D.Ponsonby, Col. C. E.
Cuthbert, W. N.Lancaster, Col. C. G.Raikes, H. V.
Dodds-Parker, A. D.Lloyd, Selwyn (Wirral)Ramsay, Maj. S.
Drayson, G. BLow, A. R. W.Reid, Rt. Hon. J. S. C. (Hillhead)
Drewe, C.Lyttelton, Rt. Hon, O.Renton, D.
Eccles, D. M.McCorquodale, Rt. Hon. M S.Robertson, Sir D. (Streatham)
Foster, J. G. (Northwich)McFarlane, C. S.Sanderson, Sir F.
Fraser, H. C. P. (Stone)Mackeson, Brig. H. R.Scott, Lord W.
Fraser, Sir I. (Lonsdale)Maclay, Hon, J. S.Spearman, A. C. M
Stanley, Rt. Hon. O.Turton, R. HYork, C
Stoddart-Scott, Col. MWalker-Smith, D.
Thorneycroft, G. E. P (Monmouth)White, J. B. (Canterbury)TELLERS FOR THE NOES:
Thorp, Brigadier R. A. FWilliams, C. (Torquay)Major Conant and Mr. Studholme.
Touche, G. C.Willoughby de Eresby, Lord

Question put, and agreed to.

Resolved: That it is expedient to amend the law with respect to the National Debt and the public revenue, and to make further provision in connection with finance.