Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 12th April 1949.

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Photo of Mr Oliver Lyttelton Mr Oliver Lyttelton , Aldershot 12:00 am, 12th April 1949

I also know exactly what that pamphlet intends to suggest, and I appeal to anybody to look at it. This is not the first instance of this sort of thing. However, I will pass from that to some other subject more agreeable to hon. Members opposite. Since the events of last Thursday and Friday, they seem to be extremely touchy upon some ordinary points.

The Economic Survey sets a target—or hopes that we shall achieve—2½ per cent. greater productivity over the whole range of British industry in the year 1949–50. I say in parentheses that the statement is made frequently that there was a 12 per cent. rise in production during the year 1948–49. Admittedly this rise was in comparison with the figures for 1947–48, when there were special reasons why British production was low. The fuel crisis, and the mismanagement of our affairs in that year, meant very low production. But I find it extremely difficult to check up on this figure of a 12 per cent. rise in 1948, and I should very much like, even if not in this Debate, to be given the information how this figure is reached. When we are told we should increase the productivity of British industry over-all, and when, as I think, that includes the activities of the Armed Services and the distributive trades, that increased productivity of 2½ per cent. over-all means a much higher increase in British industry, and it is a very stiff task.

Yesterday the President of the Board or Trade talked about our exports to America. I think it is clear from what he said that the Government intend to do all they can, by allotting dollars for market research, or travelling into those markets, by their consuls, and by using unorthodox methods of lending money, to foster that trade. I do not like the phrase "unorthodox lending" very much, because in all my experience that is a genteel synonym for lending money to people from whom one never expects to get it back. Be that as it may, I think we may be sure from what the right hon. Gentleman said that the Government intend to do everything they can to foster this trade. If the statement of the President of the Board of Trade appeared unimpressive—and I think it did—it was because the Government cannot do very much themselves, but have to rely upon private industry to make this drive against the hard core of our economic problem.

I think that anyone who looked out of his bedroom window in his hotel in New York, or Chicago, or Cleveland, or Akron, or Detroit, or San Francisco would see the task of introducing into those markets manufactured goods from the other side of the world, as rather like what we used to say, in the old days, was the rather superfluous task of trying to sell coals to Newcastle. It has not the same significance now. I think there are probably more opportunities in Canada, where the shortage of dollars will naturally turn the Canadians to sterling markets. But one thing is quite clear: I think the Government ought to do everything they can to help the private trader, and any efforts that either the private trader or the Government make towards this problem will be given the support, wherever it can be given, at all times and in all places, of every hon. Member on either side of this Committee.

In the few minutes more for which I want to keep the Committee, I want particularly to refer to one sentence in the Economic Survey with which I very much agree. It is: Our recovery will never be complete unless we can develop a keen and adventurous spirit in management, and a readiness to welcome new and improved methods by labour. I agree with that profoundly. In this country we have not much natural wealth to fall back on. We have no oil, copper, sulphur. and no gold, and we can grow only so much wheat; and so we have got to live by our wits; we have got to be a country of ingenuity, enterprise and contrivance.

I must here say somthing about our invisible exports, because, there again, I find the change-over in the invisible exports position of the country extremely encouraging. But it is not enough, and the Government ought to get busy and start opening the terminal markets which provide facilities for world trade, and which once brought the merchants of the world and their business to London to do their transactions upon the London contracts, and to fall back upon the well-known commercial integrity of London dealers. What are we doing about it? Are we going much further than printing a resounding sentence?

Of course, the first cold douche to the keen and adventurous spirit is direct taxation. I would remind hon. Members opposite that direct taxation cuts very far down. The revenue from direct taxation comes from the tool room—if I may use that expression—just as much as it does from the board room, and direct taxes fall at their full rate upon the single man earning £8 18s. a week, which is not at all the minimum wage for a skilled man in industry today. Out of the direct taxation which we levy, and which I think amounts to about £1,400 million, no less than £500 million comes from those with under £1,000 a year gross. In addition to that, about £600 million is levied from tobacco. I believe that the right hon. Gentleman has given up, as I have, smoking, so we are not contributing to the revenue. There is also £300 million from beer and £300 million from Purchase Tax. This particular sentence in the Survey refers specifically to management, and asks for a keen and adventurous spirit in management. I must ask the Committee to look for a moment at how this works out in practice.

It is impossible for a surgeon, a doctor, a barrister, a solicitor, a prospector, a scientist or an engineer to earn more than a very limited salary. He can earn about the equivalent of £1,100 or £1,200 a year of 1913 money. That is substantially the "cap" of his earnings. I do not profess to know whether that is good Socialism or not; I am not making any observations on that and I do not profess to know whether it is deflation or disinflation or discrimination or not; all I know that it is not good sense for a country which has to live by ingenuity and enterprise. All these kinds of general phrases are not very persuasive unless backed up by actual instances. I will ask the Committee to bear with me while I give three instances, very briefly, out of my own experience.

The first relates to my own industry. We have a number of engineers in our company who, by their brilliance and technical skill, have earned the maximum income which they are allowed to retain by the age of 35. There are higher responsibilities and greater anxieties in front of them, but not a penny more pay. We are bringing up a generation who are going to say when offered promotion, "Promotion! Move from Rugby or Warwickshire up to London, with a higher scale of living and wider responsibility, and nearer the boss, without any extra pay? Promotion! Thank you for nothing. I will stay where I am." I only ask hon. Members whether they think that is the way of carrying out the rather bombast sentence in the Economic Survey— Our recovery will never be complete unless we can develop a keen and adventurous spirit in management … With regard to the second case, I had to negotiate a partnership for a young man in a professional firm of high standing. I entirely forgot to ask what share of the profits he would receive. I rang them up and said that I had forgotten to ask this, and could they say at what it worked out? The reply was, "We all take out about the same. There is no point in the senior partner taking more out, because it all goes in taxes and, therefore, we all take the same." Is this encouraging a keen and adventurous spirit in management? Of course, not.

The last instance may appear to hon. Members opposite to be even more fantastic. I was present when the chairman of one of the great public utility companies which has been now nationalised was working out his budget when he was appointed chairman. He happened to have been naughty enough to quadruple his own private companies and to make an amount of money which made him a Surtax payer, a very naughty creature. He was appointed chairman at a salary of £6,000 a year—something less than what our new commissars are getting in the nationalised industries; £2,500 a year less than Lord Citrine, for example—but owing to the Surtax which he had to pay his net receipt from the chairmanship was £150 a year. The job involved his living in London, which cost him £1,000 a year, so, for the benefit of assuming this wide responsibility, he was fined £850 a year. I have no doubt that he got an expenses allowance and came out about even—