It is appropriate and desirable before we disperse for the Summer Recess that we should spend a little time considering that most important document which came into force early last year, the White Paper on Personal Incomes, Costs and Prices. It is of the very greatest importance, for several reasons. We have recently been considering the economic situation, with particular reference to the dollar gap and the unbalance of overseas payments, and we have been trying to seek a remedy for that state of affairs. Whatever kind of plan we might evolve to attain a proper balance and close the gap would entirely fall to the ground if our domestic economic situation got out of hand. I am sure that the Economic Secretary would agree with me.
If we got runaway inflation, followed by all the ills of deflation and unemployment, it would have been a sheer waste of time to have made the most perfect plans in regard to our overseas position. Indeed, our internal stability is an absolute prerequisite of our international trade recovery. I think all hon. Members, certainly on this side of the House, regard that White Paper as a cement which has been pretty effective in holding together the economic situation of this country, although, as the Economic Secretary knows, I have felt that at least one of the components of that cement has been defective.
In passing I should like to say how astonished I was that one authoritative voice on the Opposition benches, in the Economic Debate the other day, namely, the hon. Member for Chippenham (Mr. Eccles), should have delivered a rather sweeping pronouncement in regard to the White Paper. I should not deal at length with his speech because he is not here, but it is relevant to refer to it because his views represent a certain school of thought. In that Debate he was not to be drawn into saying whether he was speaking for his party or for any section of it. What he said was:
The objective to which I would work is the withdrawal of the White Paper on incomes and profits."—[OFFICIAL REPORT, 14th July, 1949; Vol. 467, c. 783.]
Later in the Debate he was still clearer about his desire to sweep away this White Paper entirely. This was followed by correspondence in "The Times," in which he gave some explanation of the point of view which he and other hon. Members hold. If the White Paper should be entirely withdrawn, the result would be a kind of "free for all." There would be no more restraint on wages, a point which has perhaps been overlooked by those who adhere to that school of thought. There would also be no restraint on profits. We should probably have a sudden inflation, followed by all the evils of disinflation or deflation, and unemployment, and all the evils that they bring in their train.
I believe the essential point of the White Paper is paragraph 5, which reads:
It is essential, therefore, that there should be no further general increase in the level of personal incomes without at least a corresponding increase in the volume of production.
The White Paper was issued 18 months ago and some of us may be losing sight of that essential core, that personal incomes must not rise without a corresponding increase in the volume of production. The White Paper relates that proposition quite clearly to the need for economic stability at home, and also the question of our
overseas markets, not only gaining them but holding them.
I was extremely glad that in his statement on the balance of payments on 6th July, the Chancellor of the Exchequer said:
It is quite certain that our existing policy on personal incomes, costs and prices will have to be vigorously pursued."—[OFFICIAL REPORT, 6th July, 1949; Vol. 466, c. 2163.]
I want to look for a moment at what is meant by "vigorously pursued," and to examine how it has been pursued, vigorously or otherwise, in the past 18 months. I think I can say without any fear of contradiction that the workers and the unions have in general played their part very fully and very honourably in this policy. If any one doubted that, he would only need to refer to the statistics issued regularly by the Central Statistical Office in regard to the movement of wage rates and retail prices.
We must obviously consider those two things together. Taking 1947 as the standard with the index at 100, we find that at the time of the introduction of the White Paper, wage rates stood at 104 over the whole field. Last month they had moved to 108. Retail prices had not only moved rather more than that—five points—but they were also standing at a higher level altogether. When one bears in mind the two facts that they were at a higher level and that the movement has been greater, it is very much to the credit of the unions, the T.U.C. General Council and the general body of workers, that the general movement of wage rates has been on a lower level and to a less amount than the movement of retail prices.
Rather tardily, the President of the Board of Trade is now moving in the matter of forcing the prices of essential goods and commodities downwards. I say "rather tardily" because I and other hon. Members have long held the view that there should have been more stringent and definite action by the Government in various departments where they were able to force and keep down prices. We were very glad of the announcement yesterday that there is a reduction in connection with utility clothes, utility footwear and utility household textiles.
I do not believe that the two things are necessarily bound together. There is still very great scope for the movement of workers in less essential work to more essential work. A case has been established that many industries, particularly on the distributive side, have become inflated. The President of the Board of Trade has made it clear in a Press interview that many assistants were retained in those industries after the points rationing scheme in certain departments was abolished, perhaps to give a still better service, but at the same time this was liable to be extravagant. If there is to be a reduction of costs, certainly in those departments, that is the way to do it, rather than the way the hon. Member for Chippenham seems to suggest.
I have given way once. My time is limited, and I cannot keep on doing so. I applaud this move of the President of the Board of Trade, and I hope he will continue on these lines.
With regard to the third element in the implementation of the White Paper, I am much more doubtful of a desire to be effective. I refer to industrialists generally, to city financiers, to the Federation of British industries, to boards of directors. I have always felt that here was the weakness in the White Paper, that it merely said there should be no further rise in incomes from profits, rent and other like sources. There can be no doubt at all that profits have been much too high, and these things have a real and detrimental effect on our standard of living, on our internal stability and contentment, and on our ability to gain and retain overseas markets.
There is no need to refer to the authoritative views of the Chancellor of the Exchequer in regard to excessive profits. I would say, however, that while the workers and unions are playing their part in implementing the policy of the White Paper, the Federation of British Industries and other associated organisations were most evasive. I have previously referred in the House at some length to what they did in regard to the White Paper, and I will only mention now that the Chancellor asked them for a scheme of price and profit reductions in February of last year. All they offered was the doubtful expedient of a ceiling on dividends, and it is most significant that this year, in correspondence with the Chancellor, these organisations actually withdrew the minute concession they had made, and said that henceforth they could not put a ceiling on dividends, but would instead offer "restraint and moderation," whatever that means.
Another point in this connection is that whereas the wage rates and general levels in regard to workers are daylight clear, are published, fixed and are to be found in statistics, the gains on the other side, of the industrialists, the capital interests, and so on, in the City of London are necessarily obscure. However, it is clear that they are not concerned merely with distributed profits, dividends and interest. There are other devices from which great gain is obtained by these interests. I have referred already to the tremendous and continuing gains over company reconstruction which are going on at a rapid pace. I have also referred to bonus issues which are now in full spate. The Chancellor of the Exchequer has admitted that after less than three months of the withdrawal of the 10 per cent. duty on bonus issues, there were 116 applications, of which the Capital Issues Committee approved 115, and those applications amounted to a nominal value in bonus shares of some £43¼ million. Anyone who has watched the financial publications in the last few weeks will realise that the amount distributed in bonus issues can now not be far short of £100 million, as nearly as I can compute.
It is interesting to note that the "Financial Times" has become nervous about this matter. In the issue of 23rd July it rather suggests that this is not a very good name for them; that it is perhaps misleading people into thinking that they are really bonus issues and that another name should be devised for them. If anything was ever correctly and truly named, it is this matter of bonus issues. This paper makes the extraordinary and quite untrue statement that
A capital bonus adds not one penny to the wealth of the investor.
That cannot be sustained or argued on any basis whatsoever, whether the bonus issue is retained or is put on the market, as, in fact, a great number of these bonus issues are being put on to the market immediately, at most advantageous rates.
In that connection and also in connection with my suggestion that the President of the Board of Trade should follow up his action of yesterday by further actions, I should like to mention briefly the subject of milk, which is just as essential to the people as are clothes and shoes, of which mention was made yesterday. We have just had the advantage of a statement by United Dairies showing not only vastly increased gross profits out of milk, but also very greatly increased net profits, after taxation has been taken into account. A 15 per cent. dividend has been declared, taking up some £370,000. Reserves and carry forward represent a still greater amount at £480,000. On top of this, there has been a bonus issue of one ordinary share for every two ordinary shares held. This represents a pouring out of the reserves of the company to the tune of £1,478,400.
It certainly is full cream for the very fortunate shareholders. The ordinary shares of this Company are quoted today on the Stock Exchange at 70s. 6d. for a 20s. share, That figure may, of course, move downwards, but in the last few days, since the declaration of the bonus issue, it has tended to rise. The real value of this nearly £1½ million issue of bonus shares can, therefore, be readily computed.
I conclude by asking the Economic Secretary to make clear exactly what is in the minds of the Chancellor and the Government when they say they are going vigorously to pursue—those are his actual words—their present policy. The workers and the unions, as I have demonstrated, have done their part well and faithfully. The Board of Trade have started on the policy of enforcing price reductions, and it is most urgent, as I think the Economic Secretary will agree, that there should be an immediate and extensive movement in that direction, otherwise the present position may not be held.
The financial devices of the capitalist interests, which I contend are not only very widespread but are extremely unfair to other elements of the population, particularly the workers, are severe and detrimental in their effect on prices, bearing in mind not only the internal economic situation but, what is even more important, the retaining and gaining of overseas markets. I speak not in any carping spirit. On the contrary, I am a wholehearted supporter of the White Paper, but—
—it is most important that the Economic Secretary should make it clear how he expects to implement the vigorous pursuit of the Government in these matters and, above all, how they are to effect a real and proper balance in the various elements affected in the implementation of the White Paper.
I welcome very warmly the support which my hon. Friend the Member for Norwood (Mr. Chamberlain) has given to the policy of the White Paper. He spoke of the White Paper as cementing effectively and holding together the economic situation in this country. That, from him, is fairly high praise. I can assure him that, far from withdrawing the policy of the White Paper, at this moment we regard it as an absolutely cardinal element in our economic policy that the proposals of this White Paper in restraining increases in personal incomes of all sorts should be followed more intensively now than a year ago. Indeed, in our view the events of the last few months have justified to the hilt the action of the Government in introducing that White Paper 18 months ago, and in introducing a disinflationary Budget in the Spring of 1948 and in the Spring of this year.
We do not want to disguise the fact that the country is faced with very severe economic difficulties, particularly on the balance of payments front. In the last resort it is going to be by the efforts of the British people that these difficulties will be overcome. One main contribution to overcoming them will be the scrupulous observance of the policy of this White Paper.
My hon. Friend asked whether that policy has proved successful in the event. In the brief moment available to me, I would argue that we have had some success, mainly in the fields of retail price movements, on the one hand, and of wage rates, on the other, since the White Paper was introduced. The figures suggest that the general response has been good. My hon. Friend quoted some figures and I will quote slightly different figures and point out that, as far as the retail price index was concerned, whereas that index stood in April last year, when the first disinflationary Budget was introduced, at 108 (on the basis of it equalling 100 in June, 1947) and had risen several points in the previous few months, it stood in May this year at 111; that is to say, that over the 13 months there had been a rise of only three points; and in May this year the rise over the past 12 months compared with that over the previous 12 months was much less.
I should like to give way to my hon. Friend, but I have only a few minutes at my disposal. Wage rates, on the other hand, showed a moderate rise and, whereas in April, 1948, the index stood at 105, it had only risen to 108 in May this year, a rise almost exactly similar to that of the price index. I believe some people have slightly misrepresented the original sense of the White Paper, which in point of fact never said there should be no rise in any rates at all. The White Paper said quite clearly that in profits and rent there was no justification for any rise—
I am very sorry to interrupt, but the 17,000 workers at Austin's accepted the policy my hon. Friend is now putting forward. The cost of the meals they eat has gone up and the cost of transport for them and their children has gone up, and, while I entirely agree with my hon. Friend in regard to this policy, I say it is wrong that essential costs should go up while the wages stay at the same level.
The White Paper said that while there was no justification for a rise in profits, there was a justification for rises in wages, in certain cases mainly where an industry was undermanned, or where there were increases in production. I think people should realise when they quote figures of increased wage rates over the past year that the productivity per man-year in British industry in this past year has been rising at the rate of something like 4 per cent. or 4½ per cent., which is higher than the average. So far as profits are concerned, with certain exceptions there has been a good response. As my hon. Friend knows, the percentage of industrial companies which did not increase their dividends over the whole 12-month period from 1st April, 1948, to 31st March, 1949, was 93.1; and over the three months March to May of this year the percentage of invested capital on which dividends were not increased was 88.3; so that, roughly speaking, that degree of observance is continued.
There have always been certain exceptions, of which the cement companies are one. I deplore, and have deplored in this House, the fact that certain cement companies decided to raise their dividends, contrary to the policy of this White Paper and contrary to the national interest. That, of course, proves the case for the nationalisation of the cement industry. My hon. Friend realised that if we look at the level of distributed profits as given in the National income White Paper, this year there was a drop from £744 million in 1947 to £730 million in 1948. That was the first fall in distributed profits for many years, and that is a tribute to the success of this policy.
I agree with my hon. Friend that the reduction in prices of utility goods announced yesterday by the President of the Board of Trade is an important and essential element in this general stabilisation policy; and I also agree with him that wherever there is an equal opportunity for making such reductions we shall certainly seek to do so. I expect he will realise that in the proposals we have put forward to the O.E.E.C. in Paris for liberalisation of European trade between the softer currency countries there should be opportunities for further reduction in prices to the consumer in this country.
My hon. Friend mentioned the speech made the other day by the hon. Member for Chippenham (Mr. Eccles), who is not here today, in which he announced—apparently as the policy of the Tory Party, since he was winding up for the Opposition—an abandonment of the White Paper on Personal Incomes, Profits and Wages. That, in our view, was a most irresponsible and reckless declaration of policy. In addition, it was singularly inconsistent with the Tory attitude on this matter. The general Tory message, I understand, is that many costs on industry, and wages in particular, are too high. At the same time the hon. Member for Chippenham tells us that any restraint on wage increases should be removed.
I think this is one further evidence of the disintegration of Tory policy which we have also witnessed in the letters to "The Times" in the last few days of the hon. Member for Oxford (Mr. Hogg), who has attacked the hon. Member for Chippenham. It is very interesting as this week, when after four years of rather go-slow courtship, the Tory Party succeeded in consummating its intellectual differences and publishing a policy, that we have this internecine strife in the Press between two intellectual Members of the party. Certainly the honeymoon has been remarkably short, even for the Tory Party. I hope this House and the country will continue to give their support to this vital policy in the White Paper and take note of the disintegration in the ranks of the Party opposite.