Orders of the Day — Sterling Exchange Rate

Part of the debate – in the House of Commons at 12:00 am on 28th September 1949.

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Photo of Mr Clement Davies Mr Clement Davies , Montgomeryshire 12:00 am, 28th September 1949

That is not the point, and the right hon. Gentleman knows it. Of course, what the right hon. Gentleman has said is true. He and I used to ask for that information, and I am glad that this Government is giving it; but even so, it is tiny and paltry compared with what is available to the Government, so we cannot enter into details.

That there must be a substantial cut I should have thought was quite obvious. That has been admitted by the Chancellor of the Exchequer. In his first Budget he set out to try to conquer inflation and to do so he was going to obtain a large surplus over and above his expenditure. His policy was quite right. He referred to it again in his speech yesterday. I only wish that the steps necessary to conquer the inflationary pressure had been taken before the pound was devalued. It will be much more difficult now. Whereas he had got the revenue for which he budgeted, what has really happened is that the surplus has gone, because he has not been strong enough to stand up against the spending Departments. The result is that now he has not that surplus which he wanted in order to conquer the inflationary pressure.

What does taxation amount to in this country? Between the Government and public authorities, £4,000 million—eight shillings in every pound that is earned in production is taken under the control of the Government or public authorities and spent under the control of the Government or public authorities. Put in another way, there is already 40 per cent. State control over all earnings. It is a higher rate of taxation than occurs in any other country in the world. I do not know what happens behind the Iron Curtain, but it is so heavy that now we have reached the point at which the law of diminishing returns operates. Any attempt to increase the ratio of taxes will result in less revenue coming in.

That being so, if already the Budget is unbalanced, if already expenditure is greater than income, there will have to be cuts in expenditure. The cuts must be such that the Budget will balance; that goes without saying. Secondly, according to the Chancellor, there must be a surplus in order to conquer in flationary pressure. That is his policy, and he is right. There must be a further cut to reduce taxation to give effect to that very initiative and enterprise to which Government spokesmen refer, and upon which the strength of this country was built up, and which enabled it to fight a 10-year world war. Those are the general principles.

Where are the cuts to be made? May I remind the Government of a promise made in July, 1947, of cuts in capital expenditure? Again, one can only lay down a sort of general guide. There ought to be cuts in the capital expenditure of the Government, public authorities and private persons. The guiding principle, I should have thought, would be that expenditure on capital matters will not be allowed unless it is absolutely and truly necessary. Will it produce goods within a measurable and reasonable time which will be available either for export or use within the country?

Those ought to be the guiding principles. I think they could be used, as they have been used in the past, with regard to the capital expenditure of the Government. But what obviously has happened is that they have been allowed to run riot. Nobody wants to cut down the welfare services, or National Insurance, or anything of that kind; but there is one form of expenditure which the Government themselves, as I understood the Chancellor to say yesterday, are not proposing to allow—whatever happens with regard to the cost of living—to exceed the £465 million which it has already reached; and that is the food subsidies.

There was a time when the Chancellor said that they would not be allowed to exceed £400 million, but they have now got to £465 million. Will not the Government realise that there we are subsidising incomes which do not require subsidising? There are hon. Members in this House who are getting the benefit of that and do not want it. It really is a form of subsidising incomes out of taxation. The smaller income groups will already be hit. Food will cost more—bread, for example, has gone up from 4½d. to 5½d. or 6d. What is to happen to old age pensioners and what will happen to families? I would prefer an increase in grants to the lower income groups. I would prefer an increase in the family allowances so that the families are provided for and that we should see whether we cannot cut down the food subsidies which are a sort of dole for every one of us, whether we want it or not. Those are matters about which the Government themselves can tell us what they are prepared to do.

What incentive is there for increased production? Will the Government encourage better terms, better money for more and better work? One does not want to stop anybody at this time producing as much as he possibly can. Therefore, I suggest that all restrictive practices—I heard the President of the Board of Trade referring to "rings"—ought to be stopped. I go further: bring in legislation and make all that kind of thing in this national crisis a criminal offence. I am sure that everyone in the House will agree with that. Stopping all restrictive practices would make the country realise that the more we produce, the sooner we shall get back to the position in which we all desire to be, of not one of us owing anything to any foreign country. I would also suggest that all quotas should be removed. It is very much better to let people compete for what they want, even if prices go up, rather than that they should hoard what quotas they have.

At the best, these can only be suggestions to the Government. The guidance must come from the Government and I have waited in vain for that guidance. We have had a patchwork policy from 1945 until now. Now we are told that here is the beginning of a new era which will put us once again on our feet; here is the beginning of a new era in which we shall have to fight hard in competition with others; an era which will restore our economic position and the strength of the pound. It is for the Government to tell us what is their policy which will help us and guide us. So far, not a word of help has come from them.