Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 12:00 am on 18th May 1949.

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Photo of Mr Robert Boothby Mr Robert Boothby , Aberdeenshire and Kincardineshire Eastern 12:00 am, 18th May 1949

No, but they include this country. I am merely drawing attention to the fact that the Report says, and says rightly, that lack of capital investment is one of the main causes of a low rate of productivity. That argument applies to this country, in a slightly less degree, just as it does to the other European countries.

My complaint is that this Bill reduces capital investment in this country by imposing penal rates of taxation. The Report goes on to call attention to the dangers of increasing economic autarky, and to the narrow nationalism of the investment programmes which have been formulated—this is a direct reference to the programme of the right hon. and learned Gentleman— with a view to securing a balanced development in industry within national boundaries rather than a balanced development for Europe as a whole. The Chancellor's policy continues to be limited by the rigidity of his own mentality. He will try to force facts and events into the pattern of his own preconceptions. That is why he said so categorically that there would be, and could be, no devaluation of the £ sterling. He knows very well that he has been recommended to devalue by the United States. But he said it with confidence, because he believes it. Why? Because he thinks that he can himself control economic forces of the greatest magnitude.

I am not recommending devaluation at this moment, but I am pointing out the kind of arrogance, or—if that is a nasty word to use—the fantastic self-confidence with which the Chancellor talked in Rome, in face of the difficulties that are confronting us today; and suggesting that it had a slightly irritating effect in this country, and in America. It may have irritated the Italians a bit, too. The fact remains that no serious attempt has yet been made to co-ordinate the national economic systems, or the monetary and fiscal policies of any of the countries of Western Europe. The right hon. and learned Gentleman is never tired of talking, in the round and in the vague, about Western European economic co-operation; but exchange rates continue to be fixed, without any kind of monetary co-operation.

Last, and not least, the sterling balances continue to hang like a millstone round our neck. Nothing is done about them, except that an occasional payment is made, but according to no plan or principle of which we can conceive. We know very little about what is paid out, or why. It seems to me that we are getting into a frightful mess over these sterling balances. We have no guiding principle at all; and I do not see how the right hon. and learned Gentleman can now extricate us.

When I was in the United States I read a very interesting essay by an eminent American economist. Mr. Frank Graham, of Princeton University. I commend very strongly to the Chancellor one passage from this essay, because I think it deserves his serious consideration. He says: We have not yet learnt that we must either forgo fixed exchange rates, or national monetary sovereignty; that any attempt to keep exchange rates fixed while the internal value of national currencies, and therefore the relationship between national price levels, is independently determined and constantly changing, must result in a monstrous distortion of trade, and a consequent disequilibrium in international accounts. … Unco-ordinated national monetary policies, non-discriminatory multilateral trade, and exchange rates fixed even provisionally, cannot be made to mix. I believe that to be unanswerable.

I really do not think that the right hon. and learned Gentleman can go on like this very much longer without putting this country into immense jeopardy. We are heading, it seems to me, for a great national economic disaster. We can no longer spend our way out of a depression, as hon. and right hon. Gentlemen opposite think we can, if it hits us. That technique depended upon assured and ample imports of food and raw materials. Those days have gone. The producers of the world now call the tune. They are no longer willing to supply this country with the fruits of their sweated labour at below the cost of production. My hon. Friend the Member for Chippenham (Mr. Eccles) rightly said the other day that if we now wanted to try to spend our way out of unemployment we should spend ourselves straight into a foreign exchange crisis of the first magnitude. That was not true before the war.

I am therefore greatly opposed to the policy which is now being pursued by the Chancellor of the Exchequer. I am opposed to it on the ground that it is rigid, that it is punitive, and that it is narrowly nationalistic; which is funny, in a policy coming from an alleged international Socialist. I suppose that, having got his fingers on to the lever of economic power in this country, the right hon. and learned Gentleman cannot bear the thought of sharing the power with anybody else. Anyway I do not believe that a combination of austerity and rigid bilateralism is the way out for us.

I believe that the acid test of State intervention and action in the economic field is whether it promotes or curbs enterprise, increases or diminishes output, raises or lowers costs. Judged by that test, the policy of the right hon. and learned Gentleman falls completely to the ground. It should be reversed. I say that taxation in this country has to be substantially reduced, and that our expenditure has therefore got to be substantially cut. That is the real clash between the two parties. The present national income is not big enough to justify either our present rate of taxation or our present rate of expenditure.

There is, as a result, a universal sense of frustration in this country at the present time. The natural genius, energy, and enterprise of our people are being stifled. There are far too many physical controls at the lower levels of power; and some of them are actually being operated on the basis of pre-war production. You cannot keep a pig in this country unless you kept a pig in 1938. The thing is absolutely ludicrous.