With your permission, Mr. Speaker, I wish to make a statement to the House.
The Government have made it clear that any advantages to be reaped from the devaluation of the pound might easily be offset by an inflationary tendency. With devaluation we have a great opportunity to increase our exports; but, until new production can fill the gap, the increased diversion of goods from the home market which will be necessary to maintain and then to increase our foreign exchange receipts will reduce the amount of goods available, while the amount of money available to buy them remains about the same.
To counter this risk of inflation and that arising from excessive demand on the home market, we must reduce expenditure and increase production.
I will deal first with the reduction of expenditure. The Government have decided to take action which will, apart from a saving in Defence expenditure to which I will presently refer, have a total disinflationary effect when in full operation of about £250 million a year. Reductions will be made both in the capital expenditure programme and in Government expenditure on revenue account.
These are, of course, interim measures which will be reviewed before the next Budget is introduced, when any further necessary adjustments can be made to maintain the desired disinflationary effect.
Let me first take capital expenditure. In 1948, the value of goods devoted to fixed investment was about £2,000 million. This was well above the pre-war rate of capital expenditure. For the current year the figure may approach £2,100 million. We now propose, in the new programme which is coming forward for 1950, to reduce the rate of this capital expenditure by about £140 million a year. We hope that this will become fully effective in the second half of 1950. The general pattern of reduction has been worked out, and it is clear where the main weight must fall.
We need a large increase in exports of engineering equipment to hard currency markets: this must be at the expense of the home market, but care will be taken to avoid wherever possible cuts which would undermine our efforts to improve efficiency. Again, the home market is at present receiving a much larger flow of commercial vehicles than was planned, or than we can afford, and supplies must be diverted to export.
In addition to a number of smaller items, both in the industrial and in the Government field, on which some reductions can be made, we must secure a substantial total contribution from the large programmes of capital expenditure of the fuel and power industries, the expanding education programme, new housing, and the large field of miscellaneous investment.
While there can be no question of the importance to our economy as a whole of capital expenditure in the fuel and power industries, nevertheless a substantial contribution can be obtained there. So far as possible, the necessary cuts will be made at the expense of longer-term projects.
In education there will be some slowing down of our advance. We shall maintain the progress of school and technical college building, securing the necessary savings by reducing costs and postponing the expansion of the school meal service.
In the case of the housing programme, which will be reduced by some £35 million a year, the Government will see that the reduction in the number of new authorisations is made in accordance with a proper regard to priorities. By reducing the number of licences issued for the erection of houses by private persons, we shall secure that the local authority programme for the building of houses to let can proceed without any marked reduction.
In order to ensure that the labour and materials saved on the main programme do not drift into inessential works, we shall tighten up considerably the general control of building, which with certain other measures will enable us to make a further saving of about £35 million in the miscellaneous category.
I now turn to Government expenditure on revenue account. The attempt to secure economy in the administration of Government policy is nothing abnormal. Adjustments are continuously taking place both in the course of the formulation of Estimates and through improve- ments in organisation. Since July, 1948, such improvements have resulted in between a 5 per cent. and 6 per cent. saving in administrative personnel in the civilian departments other than the Post Office.
But in the present situation special economies, additional to these normal adjustments are called for. The Government have decided on reductions of expenditure which, together with the increase of Profits Tax which has already been announced, should produce well over £100 million for next year's Budget. This aggregate includes a mass of detail which will appear in next year's Estimates, but there are certain major items with which I will deal.
Before the Recess I had instructed all Ministers to review the expenditure of their Departments. This review showed that between £40 million and £45 million a year can be saved by curtailment of services which are not essential to major Government policy, and by drastic economies in the administration of other services which must be retained. These savings are spread over all Departments and cover a large number of smaller items as well as several larger reductions.
I give the following items as illustrative of the more important reductions. We propose to reduce by about £5 million the charge for education in England and Wales and Scotland by a variety of measures which include an increase in the charge for school meals by 1d. and some reduced transport facilities for pupils.
In the preliminary estimate of State expenditure for agricultural purposes in Great Britain in 1950–51 there will be reductions amounting to about £6 million. This includes raising the minimum qualifying acreage in England and Wales for potato acreage payments and the slowing down of proposed acquisition of farm land.
We propose to find about £6 million from the Vote for the Ministry of Supply. This will come in the main from some reduction in the strength of the Royal Ordnance factories, from administration cuts in the technical establishments and from minor changes in policy, which will not materially affect the research and development programme.
We propose a reduction in the administrative expenditure of the Ministry of Food by about £1,700,000, mainly by re-organisation and concentration of divisional and local offices and dropping some refinements of control. An annual saving of £800,000 will be secured by revising the register of electors only once instead of twice a year, and over £1 million will be saved by economies in the Information Services and the British Council.
Besides these reductions in existing services, we have considered services not yet in operation. We propose to defer the introduction of certain parts of the Legal Aid Scheme and to reduce by £1 million the estimated cost of the Festival of Britain. The cost of new services next year—those just mentioned together with the Sea Fish Industry Bill and the Coast Protection Bill—will amount to some £5,500,000, and this cost must be set off against reductions.
The total of these items still falls well short of what we consider necessary. We therefore intend to take certain further measures. We propose to make a charge of not more than 1s. for each prescription under the National Health Service. The purpose is to reduce excessive and, in some cases. unnecessary; resort to doctors and chemists, of which there is evidence which has for some I time troubled my right hon. Friends the Minister of Health and the Secretary of State for Scotland. The resultant saving will contribute about £10 million, although this is not the primary purpose of the charge. Arrangements will be made to relieve old age pensioners of this charge for prescriptions.
There will also be certain adjustments in the prices of some of the less essential foods. There will be increases in the prices of dried and frozen eggs and raisins. At the end of the winter we propose to remove price control on fish, and, with the abolition of maximum prices, the present subsidy on fish will be eliminated. We estimate that, with certain other adjustments, these changes will save £7 million in a full year.
After the next annual review in February of the general economic condition and prospects of the agricultural industry, we shall eliminate the Exchequer subsidy on animal feedingstuffs, which is now running at an annual rate of £36 million. The effect that, this and other factors may have either on agricultural or on consumers' prices, or both, is a matter which must be reserved for decision as a result of the annual review, but there will be no increase on this account in the subsidies on ordinary food.
These reductions are related to the anticipated expenditure during the next financial year. But they will be introduced as speedily as possible and will to some extent affect expenditure this year. Their total annual effect should be a saving of over £90 million. The effect on next year's Budget of these reductions and of the increase of the Profits' Tax which has already been announced should amount to well over £100 million.
I now come to Defence expenditure. Earlier in the year the Government set on foot a comprehensive review of the future structure of the Armed Forces. This was an inter-Service inquiry, conducted under the directions of the Chiefs of Staff at the request of the Minister of Defence, and its objects were to establish the relative roles of the three Services under the conditions of today, to ensure that we should get full value for the money spent on Defence, and to give us properly balanced Forces which could make a worthy contribution to Western Union and the Atlantic Pact.
The results of this review will determine the structure of the Armed Forces for many years to come, and the Government think it would be wrong to allow this to be prejudged by decisions taken to meet the immediate needs of the present economic situation. In the course of that review, however, recommendations for certain economies have been made and accepted and in many instances are in course of being implemented by the Services.
From these and other savings it has been possible to make reductions which, despite the effect of devaluation, will produce a saving at the annual rate of £30 million a year, amounting to £12½ million during the remainder of the current financial year. The Government's forecast of future Defence expenditure will be announced later, when their review of the future structure of the Armed Forces has been completed.
In accordance with the forecast made in July last by my right hon. and learned Friend the Chancellor of the Exchequer the Government have now settled a new dollar import programme at the reduced figure of $1,200 million a year, which will come into operation at once and should reduce our imports in the first half of 1950 to $600 million. Care has been taken in fixing this to assure sufficient essential raw materials—if they are used with full economy and no waste—to provide the increased production we require.
The decisions I have announced will not require any immediate legislation except in the matter of the charges for prescriptions which can, I understand, be dealt with in a Bill now before Parliament.
It is, of course, of first importance that these steps taken by the Government to reduce inflationary pressure should not be frustrated by any increase in private expenditure. The principles laid down in the White Paper on Personal Incomes, Costs and Prices are more important than ever. Private individuals, public and private corporations and local authorities must all exercise restraint and economise wherever possible.
Increases of spending, whether they come from increased profits, higher salaries or wages, the dissipation of savings, the use of capital accumulations for personal expenditure, or the unnecessary use of capital goods—all these increase the pressure on available goods and make for inflation. They may enable some to get rather more, but only at the expense of others.
If we are to maintain even our reduced volume of capital expenditure we need an increase in savings. Over the last 12 months there has been a very large withdrawal of small savings, which I hope will now become much smaller. I call upon everyone to assist the National Savings Movement, which has the support of all parties, and is a strong bulwark against inflation.
The measures which I have indicated, necessary as they are, form only one side of the action required to deal with the situation. The other side is increased production. This is the positive side. As the House knows, the Government have been pressing forward the drive for production. It is right to acknowledge that very great advances have been made, as the figures show—
—but these advances are spread very unevenly over industry. In many firms, and indeed in some whole industries, little or no advance in productivity has been made: if all were as good as the best our problem of production would be in a fair way to solution. If we are to seize the great opportunities for export which devaluation has opened to us, and keep up the standard of supply in the home market, we must increase our production.
Devaluation has opened up great opportunities for export, and there are already signs of an increased demand for British goods. In particular, further production efforts are needed in those industries which are capable of expanded sales in dollar areas. Instances are high quality textiles, pottery, motor vehicles, engineering goods and a wide range of consumer goods such as cutlery, carpets, jewellery and footwear. In Canada there are great opportunities for capital goods and light engineering products. Expert salesmanship will be needed and we must be able to give early delivery.
I have stressed these industries in particular because of the direct effect that sales in hard currency countries will have on our balance of payments, and this must be the first priority. But we also need goods for supplying the non-dollar markets with commodities to pay for food and raw materials which we draw from these sources. We must also have an adequate supply of goods to meet the needs of the countries of the sterling area and thus indirectly to save dollars.
I do not think that it is necessary for me to detail the various steps which the Government have taken and are taking to assist the export trades such as the export credit guarantees, market research and the rest. My right hon. Friend the President of the Board of Trade has given a full account of them. Nor need I emphasise the importance of dollar-saving home production, particularly in agriculture. The need for increased production and increased efficiency and economy extends indeed to every part of our industrial organisation.
I have been greatly encouraged by instances which have come to my notice of managements and organised labour getting together to promote efficiency. Ministers in charge of production Departments will hold special meetings with representatives of industries to consider what further steps can be taken in this direction. Leaders of both sides of industry can here make a great contribution. But joint consultation should not be confined to leaders. I hope that in every factory and industrial unit, management and workers will confer together forthwith to discuss ways and means. In these joint consultations no means of improvement should be ruled out on a priori grounds by either side.
One subject that should be seriously considered in many industries is the question of working hours. We have in this country unrivalled machinery for joint consultation. Let it be fully used to consider whether in appropriate cases additional output can be obtained by working added hours within the terms of existing arrangements or under such special arrangements as may seem necessary and desirable to both parties.
I have informed the House of the issue which is facing this country. It was made plain on a previous occasion that the wider problems of international trade, which were discussed in the tripartite talks at Washington by my right honourable and learned Friend the Chancellor of the Exchequer and my right hon. Friend the Foreign Secretary can only be solved in co-operation with others.
Today, I am dealing with the measures that we in this country must take. Devaluation has given us the opportunity, it may be the last opportunity, of restoring our position as a trading nation without a drastic lowering of our whole standard of life. That opportunity must be seized. The measures, many of them most distasteful, which we are taking are necessary and consequential on the decision to devalue. They do not affect the main structure of the welfare State. They are rather a retardation of progress in certain directions. But they will enable us to overcome our immediate difficulties.
With a willing acceptance of these necessary economies, and a resolution to let nothing stand in the way of increasing production, the nation can go forward with confidence in the future.
Naturally, it would be wrong and also mentally impossible to come to any conclusion upon the complicated and guarded statement—none the less of the gravest importance—which the Prime Minister has made. I understand we are to have an opportunity during the present week of having a Debate on these matters, and we shall avail ourselves of the brief interlude there is to give the closest attention to what is proposed, and to do our utmost to see what is the advice which we on this side should tender to the House and the country at this serious juncture.
For the moment I will only say this interrogatively. The first question we must all ask ourselves is: Are these proposals adequate to the need in which we stand? The second question that we must ask ourselves is, if these proposals are practicable and adequate, why were they or their like not put forward two or three years ago when we asked that a check should be put upon unbridled and even fantastic expenditure? Both those matters must be considered at the same time as the merits of the proposals themselves.
I wish to say that any proposals here which on their merits seem to be for the good of the country, will be supported from this side of the House even though they are unpopular. We are not dissociating ourselves in any way from that part of our duty.
I only wonder why the right hon. Gentleman did not conclude his speech with some statement of a more general character, that on this crisis he would take a step which would most effectively improve our credit and undoubtedly make for national unity and effort, namely, to withdraw the aggressive measure of the Iron and Steel Bill, without prejudice to his belief in its principle, but as being unsuited to the times. Were some step like that taken in conjunction with these proposals they would show that the Government were approaching these grave matters on a national and not on a party basis.
I do not propose to say more on this at the present moment, but I understand we arc to have a Motion for our Debate on Wednesday and Thursday. It would be for the convenience of the House if the Prime Minister or the Lord President of the Council could inform us upon the subject now.
I quite agree, and we also think it would be for the general convenience of the House if I were
to inform the House at this point of the terms of the Motion to be put in for the Order Paper by the Prime Minister and other Ministers. The terms of the Motion will be as follows:
That this House approves the line of action to deal with the present economic difficulties, as outlined in the Prime Minister's statement made on 24th October.
Is my right hon. Friend the Prime Minister aware that there will be profound and widespread regret that the cuts in defence expenditure are apparently only administrative economies, and are not accompanied by a review of overseas commitments and a new initiative for peace, which are the pre-requisites of real defence cuts?
Having regard to the formidable statement which has been made, at what point do the Government propose to give some explanation of the fact that the Chancellor of the Exchequer in his recent statement said that the only immediate effect of devaluation would probably be an increase in the price of bread?
Is the Prime Minister aware of the fact that every cut since Easter, 1947, has made a worsening of the situation and not a bettering, and will he consult with any of his Socialist colleagues—if he has any—when they will inform him that increased production and decreased consumption can only lead to a slump and mass unemployment? There is no use the Chancellor of the Exchequer shaking his head. Any Socialist will tell him that. May I draw the Prime Minister's attention to the fact that I and my colleague, my hon. Friend the Member for Mile End (Mr. Piratin), will put down an Amendment in direct opposition to the Motion which the Government propose to put down? I hope any Socialists left in this House will support that Amendment against Tory Opposition.
I should like to ask the Prime Minister or the Leader of the House whether any further information than has been given us today is to be made available before the Debate on Wednesday, either in the form of a White Paper or some other form, because the Prime Minister will realise that much of the information given to us is of a most sketchy character? That applies to the capital investment programme, in respect of which I cannot conceive how the House can have the faintest conception of what the Government's real intentions are.
I think the right hon. Gentleman will get more information when he is able to study it a little more at leisure. I considered very carefully the question of whether one could issue a White Paper, but it is very difficult, because there is a very great range of economies coming into force at different times, and also past economies have to be brought in. Therefore, I came to the conclusion that one could not issue a White Paper without making it an enormously voluminous document. I think the matter will, of course, be opened out in Debate by the Chancellor of the Exchequer. I put into my statement as much detail as I could, and I think it is quite sufficient for a Debate.
Is the Prime Minister not aware that some of the very largest of the private gains made today are not so much from distributed profits as from capital gains, whether made on the Stock Exchange or by company conversions, none of which pay anything at all to the Treasury towards the national income? Is anything to be done about that matter, and also with regard to the very great outpouring of bonus issues, all of which should be taken into consideration for equitable treatment?
Further to the question put by my hon. Friend the Member for Maldon (Mr. Driberg), on the subject of the cost of defence, may I ask my right hon. Friend whether he will consider initiating discussions with America and the Western Union Powers in order to see whether the cost of defence can be more equitably shared than it is at present?
If the Prime Minister cannot give the figure for which my hon. Friend the Member for Monmouth (Mr. P. Thorneycroft) asked, can he say whether the real surplus anticipated in the Budget will be attained or will be exceeded?
Is my right hon. Friend aware that there will be a sense of disappointment and frustration in the minds of productive workers who are being called upon to produce more, that no mention has been made at all of some method of taking the extra profit from those who will get it as a result of increased production?
In view of the obvious interest now taken by a very large section of the House in the complicated statement that the Prime Minister has made, may I ask the Lord President of the Council whether he really thinks that at this time in our national history a two-day Debate will be sufficient, and whether he would review the decision of last week to have only two days?
Might I ask the Lord President of the Council, the Prime Minister, and the Chancellor of the Exchequer to consider once again between now and Wednesday this question of the White Paper? I would ask them and their own supporters to consider whether the information we have now got is of a kind which enables us intelligently to apply our minds to the topic. I do not think it is, and I would ask the Government to reconsider that matter.
In view of the fact that the crisis which is disturbing the country is not one of the overall balance of payments but a dollar crisis, may I ask whether the Prime Minister is convinced that his proposals will cure that dollar crisis, in view of two facts? One is the recession in America coming on and due to strikes. The second is that we have no other market in which we can get dollars.
As the reduction in the housing programme is to be achieved without any reduction in local authority building, which is the less economical kind of the two forms of housing, would the Prime Minister say what measures have been concerted or considered for effecting economies in local authority building costs?
In view of the fact that old-age pensioners are not to be charged the 1s. for prescriptions, may I ask whether the same conditions will apply to the sick who are unemployed?
Before the right hon. Gentleman answers that question: in view of the fact that this is going to be, in effect, a vote of confidence and that we are bound to get some repetition of the type of speech that we had in the last Debate, may I ask the Lord President of the Council whether he will reconsider the request of the Deputy Leader of the Opposition? In other words, will he consider whether we can have a three-day Debate, preceded by a White Paper, so that this matter can be thoroughly examined, in view of its importance? I ask this as one who is glad that we are not, having a Geddes Axe. We want to examine the matter thoroughly. Otherwise, it will be a farce.
My right hon. Friend the Prime Minister has dealt with the point about the White Paper. If the hon. Member thinks that the Debate will be a repetition of the last one that is still less a reason for extending the Debate. I really think, in all the circumstances, we shall deal with the matter adequately in two days. With regard to the point in the question of my hon. Friend the Member for Luton (Mr. Warbey), I think it is a reasonable request. We would propose to suspend the Rule for one hour on Wednesday.
May I support most strongly the plea for more time? The request has now come from both sides of the House. If we cannot have three days, can we at least have a two hours' extension on Wednesday and Thursday?
Will my right hon. Friend review the decision which he has just taken with regard to an extension? Is it not evident, in the light of their contributions to the problem at the recent Earls Court conference, that the Tories opposite are quite unable to sustain the Debate for more than one day?
As the figures which the Chancellor of the Exchequer gives of revenue and expenditure in his yearly Budget are supported by Estimates which go down to the smallest detail, will the Prime Minister again consider whether—or would he say now why—the figures which he has given today cannot be supported by details in the same way?
The hon. Gentleman knows well that there are laid before the House very detailed Estimates. He would not expect those all to be repeated. These figures will appear in the Estimates in due course.
Can the right hon. Gentleman give us an assurance that this reduction of about £250 million which he has proposed will be a net reduction, or will it be overtaken and swamped by other aspects and elements of national expenditure?
On a point of Order, Mr. Speaker. In view of the very serious character of this matter, I want to ask you if you will very seriously consider calling the Motion which my colleague and I are going to put down, because it will be in opposition and will give one or other of the Ministers an opportunity of speaking.