Budget Proposals and Economic Survey

Part of Orders of the Day — Ways and Means – in the House of Commons at 12:00 am on 21st April 1950.

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Photo of Mr Eric Smith Mr Eric Smith , Grantham 12:00 am, 21st April 1950

In rising to speak for the first time in this House, I ask for that indulgence which is always shown to new Members. One of the many lessons I have learned since my election has been about the different interpretations put by hon. Members on the word "non-controversial." I will try not to overstep the bounds of controversy, but if I do, I hope the Committee will understand that I do it in a sincere attempt to be constructive. The hon. Member for Manchester, Blackley (Mr. Diamond) stated, two days ago, that he was tired of always hearing the same arguments from this side of the Committee. In as non-controversial a manner as possible, I should like to say that we find that sometimes it is necessary to repeat arguments before their full wisdom is understood.

Perhaps I might repeat one or two of those arguments, but I will also bring to the notice of the Committee one or two matters which, rather surprisingly, have not yet been mentioned. When I come to the Chancellor's proposals, I immediately find myself out of bounds. I regard them as unimaginative, unhelpful and, in many cases, unfair. Of these three points, the most serious is the lack of imagination and urgency. The year 1952 might be in the next century.

This spirit of complacency has -also been shown in the speeches of many hon. Members opposite. There is a great need for urgency. Production, we know, is rising. We need not argue about the exact percentage. We have full employment, and for that we are all happy; but no one will admit for one moment that we are all fully employed. Nor can we ever be fully employed while we suffer, as we do today, under a penal rate of taxation and under that well-intentioned but wholly impractical policy of wage freezing.

Many people in industry rightly consider themselves underpaid in view of the present high cost of living. Many others consider themselves underpaid in view of their skill. In both cases, I think, they are right. We cannot expect people to work as hard as possible when we tell them that they can have no extra reward. They cannot give of their best unless they are given a proper reward. If anyone believes that they can, then his faith in human nature far transcends my own. We are told that the wage freeze must not be broken. I agree that if it were broken we should have a grave measure of inflation, but we on this side of the Committee feel that the wage freeze policy will break down.

We consider that the only action to take is to have a definite reduction in taxation and to devise some scheme whereby skill, energy and hard work can be given its just reward. Not only can we not get full production, but that policy of wage freezing will ruin one of the most valuable things in the trade union movement, and that is the differential. We should be happier if we thought that there was somebody in the Government who had a full knowledge of our financial position who would work out the equation and apportion sums among the various Ministries, always keeping in mind that production must be the first charge and the Government's own needs the last. Today, the opposite policy seems to be working. We want production, yet the needs of the Government come first. That makes no sense. It might perhaps be described by the word "infrastructive." It seems to me to make about as much sense as the word "infrastructure" did yesterday.

Taxation is now so high that the old economic law of diminishing returns is rapidly starting to work. If the Chancellor took a brave step and reduced taxation considerably on certain articles, he would find that production would go up and that revenue would not decrease. Production is up today, and that redounds greatly to the credit of all who work in industry; but I consider that a great proportion of that improvement has been due to capital development. We should encourage more capital development. There is an overwhelming need for it all over the country, yet undistributed profits are not encouraged. There should be no tax whatever on undistributed profits. Industry should be encouraged to plough back as much as possible by way of further capital development.

I do not know whether it is the word "profit" that is to blame. Perhaps this money should be described in the balance sheet as "undistributed assets." That might make the job slightly easier. Let us encourage more capital development and not tax lorries which, of course, are a form of capital development. Last year we had what was described as our annual crisis, the crisis of devaluation. The £ was devalued, and that allowed us a short respite. Our export figures are up as a result. That came as no surprise to many on this side of the Committee. Devaluation enabled many of our exporters to sell goods which they had had to finance in warehouses unable to sell them because of high costs. It allowed them to get rid of this onerous burden.

I feel that a further devaluation will be necessary. That is not a damaging rumour: it is merely facing the fact that the value of the £ is below the official rate. It is a cliché to say that today we are suffering a crisis of confidence. It is lack of confidence in the £ which is damaging our foreign trade. I advise the Chancellor again to take what some of his supporters might call an over-brave step. I should like him to seek American help. I should like him to seek a solution to the sterling balances position. That is not an insoluble problem. It only appears insoluble today because there is no policy whatever on sterling balances. If they were considered in the light of how they were first accumulated many of these balances might be found to be our assets. Let us find some solution there—seek American help, seek the co-operation of the Empire, and then free the £ altogether.

That may sound to be an over-brave step, but if devaluation is to come again —which is a real danger—do not let us devalue to a certain figure. It is impossible, in present-day conditions, to find die right figure at which the £ should be valued. Let us free the £ completely. I believe that the immediate reaction will not be a flight from the £ but a restoration of confidence by the foreigner in sterling. In time it would be found that the £ would increase in value. Confidence would return. That is not a revolutionary idea. It is merely a return to sound financial commonsense.

It was our boast a short time ago that London was the centre of world finance. I am afraid that it is no longer our proud boast. One of the reasons is this lack of confidence due, perhaps, first of all, to the purely political but extremely damaging action of the nationalisation of the Bank of England. One used to hear the phrase "As safe as the Bank of England." Now it is turned into" As safe as the Government." I leave hon. Members to judge which is the best. Another reason is—and I say this, even though it may be controversial, in a spirit of non-controversy — the misguided speeches of hon. Members opposite about the City of London. Many of their statements may have caused a certain amount of excitement among the uninitiated, but each of these statements has damaged our foreign credit.

I appeal to the Chancellor to keep politics out of the City of London. It is one of his most valuable assets, and if we can be rid of these damaging speeches, if we can carry out the measures I have suggested, he will find it a very real asset indeed. If hon. Members opposite do not yet understand what goes on in the City of London, I should be delighted to show them. I work there myself. I might even regale them with that famous City of London dish, fish and chips. I appeal to the Chancellor for further urgency; for further tax reduc- tions. I am certain that if those tax reductions are made there will be no loss of revenue; I appeal to him to keep production as the first charge and the Government's needs as the last; and to free sterling, which will bring back a return of confidence in this country.