I beg to move, "That the Bill be now read a Second time."
There is one thing about this Bill which I trust will commend itself equally to every Member of the House. Whereas the Finance Act, 1948, had 82 Clauses and 11 Schedules and last year's Finance Act, 52 Clauses and 11 Schedules, this year we have only 40 Clauses and five Schedules. In substance, however, this Bill is based on the same general aims of economic policy as previous Budgets of the last few years, and the House will make a truer judgment of this Bill if it regards it as one of a series, because the nation's economic problems have been much the same, and because we cannot do everything we want to do in every annual Budget.
Our supreme economic aim in these last years has been to close the dollar gap and to achieve economic independence at the end of the Marshall Aid period. As contributions to that aim, the Finance Bills of the last few years, including this Bill, have had four main purposes. First, we have sought to establish the stability of incomes and prices which are so vital to the export drive by a policy of Budget surpluses and by taxation designed to restrict excessive spending. To that end, we have raised the Profits Tax on distributed company profits, maintained high Income Tax and Surtax on company profits and on large incomes, and raised Death Duties on the big estates while, at the same time, lowering them on the smaller estates, thus incidentally contributing to a more democratic distribution of property in this country.
Secondly, we have sought to restrain the pressure for a rise in the cost of living by subsidising the real necessities of life, like food and rent, by allowing complete tax exemption for almost all utility goods, and by reducing the Purchase Tax on a wide range of general household goods. In the 1948 Act, we applied the higher rates of Purchase Tax to luxury goods and the lower rates to most goods of general use; and in that process we gave a net relief on Purchase Tax revenue to the taxpayer of £39 million a year. That, incidentally, is one reason why there is so little room left today by way of Purchase Tax for further lowering the cost of living.
Thirdly, we have sought to stimulate productive effort and saving by progressive Income Tax reliefs. Before this year's Budget, nearly four million persons had been excluded since 1945 from paying Income Tax. Of course, some of these individuals have crept back by earning more. The total Income Tax concessions since 1945, including those in the present Bill, amount to £650 million. Those who complain that the many millions of people exempted from Income Tax altogether are not helped by this year's Income Tax concession should remember—obvious though perhaps this it—that that is because we have already so framed the Income Tax as to exempt them from paying tax altogether.
In addition, by last year's doubling of the initial allowance for depreciation we gave a very substantial incentive andrelief to industrial re-equipment, which also, let it be remembered, is estimated to cost us £40 million this year and £75 million next year. This in itself contributes materially to the need for further revenue this year to maintain the required ordinary Budget surplus.
Fourthly, we have tried to use taxation where possible to encourage economy in the consumption of imported commodities, mainly by the increase in the Tobacco Duty in 1947. I do not think that many people will now deny that that increase, although perhaps unpopular at the time, was both necessary and successful. Anyone who examines impartially the figures for production, productivity, exports and investment at the present time, not to mention unemployment, will, I think, agree that these policies, which have dictated the present Bill also have at least been not wholly unsuccessful.
Our main proposal in the present Bill is the relief given to all Income Tax payers by the lowering of the two reduced rates of tax. That continues the policy of giving relief in the form of a stimulus to productive effort, particularly in those ranges of income where overtime prevails. It was that aim which in our view justified us selecting, in all the present circumstances, this particular form of relief rather than others. It has also, I hope, given an added stimulus to personal saving, which it is so clearly vital to maintain over these next few years.
Hon. Members opposite have often argued that high taxation is a deterrent to saving. If that is so, this tax relief should be a stimulus to saving. In so far as it is, recovery will be assisted. In so far as it is not, I suppose that that argument will be that far weakened.
If we were to give these Income Tax reliefs and retain the ordinary Budget surpluses needed to finance the housing programme and the rest of the capital investment programme without inflation, it was necessary to find equivalent revenue. That is the main purpose of the increase in the petrol tax, and it is one of the major purposes of the new Purchase Tax on lorries—I am advised they should strictly be called "commercial vehicles," but I will call them "lorries" for the purpose of brevity—which is the next important proposal in the Bill.
Therefore, anyone in the House who opposes these new taxes will also be opposing the Income Tax reliefs, because if the one is abandoned the other must also be abandoned. [HON. MEMBERS: "Nonsense."] Of course, if the Opposition had shown us during the Budget Debates where equivalent economies could be made, or where revenue could have been raised, they might have had a reply to that argument. Not merely did they fail to do so, however, but throughout this Parliament they have constantly made proposals—which I will not enumerate in detail because I should be out of Order in doing so—for increased expenditure on defence and other things.
The Leader of the Opposition, who was the author of the petrol tax, like so many other valuable things, admitted in the Budget Debate last month that we should not cut ourselves off from this source of revenue. The increase in tax will apply to imported motor spirit and other light hydrocarbon oils, and also to heavy oils used as fuel in diesel-engined road vehicles. Indigenous light oils and heavy oil used as fuel in road vehicles will maintain their preferences. Industrial benzol—about which we were asked in the Budget Debate—which is used in the manufacture of chemicals, is unaffected by the rise in tax.
In our view, the increase in this tax should encourage economy in a commodity which, despite the increasing success of our policy of substituting sterling for dollar oil, still bulks very large in our import programme. The right hon. Gentleman the Member for Saffron Walden (Mr. R. A. Butler) said, during the Budget Debate, that in accepting the practice of rationing by price we had departed from one of the major beliefs of the Labour Government. I think he falls into a confusion. We have never been opposed in principle to rationing by price in the case of luxury commodities, or commodities where the needs of different consumers greatly vary, or where coupon rationing is difficult or impossible. We believe in rationing by coupon in the case of real necessities when they are scarce. Permanent rationing of luxury or semi-luxury goods would, I should have thought, been advocated by no one.
Let us also remember that by control of retail prices and distributive margins the Government have, in fact, been holding down the price of petrol in these post-war years to a figure which is not merely much below the price in most European countries, but is also much below what it would be if we followed the policy generally favoured by Members opposite and allowed market forces to have free play. If that method of raising the retail price and making what the right hon. Member for Bristol, West (Mr. Stanley) called a start in rationing by price were adopted, the result would be an unnecessary extra profit of many millions, perhaps tens of millions of pounds, for the oil companies.
Surely, if we are going to take a step away from indefinite rationing of pleasure petrol, it is better that these millions should accrue to the Exchequer and be used for the general relief of Income Tax. Nor must we forget that our oil imports have been steadily rising since the war. The total imports, retained for consumption, of light hydrocarbon oils have risen from 1,254 million gallons in 1946–47 to 1,430 million gallons in 1949–50, as compared with 1,393 million gallons in 1938–39.
When it is argued, therefore, that the rise in the price of petrol must raise some costs of distribution, and that there will be some hard cases, we must remember that petrol has been sold in this country in these last years consistently below what would probably be its price in a free market, and that imports have been steadily rising. That is no more than a statement of the facts. Therefore, if we want some economies, if we are not willing to advocate indefinite rationing, and if we do not want to present large profits to the oil companies, what is the practical alternative to the proposal we have adopted?
Our other purpose in imposing the new 33⅓ per cent. tax on lorries was to encourage exports and to restrain an excessive increase in this part of the investment programme. I see that the City Editor of "The Times" said, very reasonably, on 10th May that:
The new taxes on road transport are calculated to tip the present distribution of the output of motor vehicles still further in favour of exports.
It is really very strange that the Opposition should object to the use of the fiscal weapon for the restraint of the investment programme. The right hon. Member for Bristol, West, spoke in the Budget Debate as if the investment programme should be allowed to expand without any control at all. Yet we all remember Lord Woolton saying in October, 1947:
I ask, in these days of over-full employment,
and employment is no less full now than in 1947,
for postponement of all work of a public nature and for the discouragement of all capital expenditure, whether by Government or private industry.
In the Economic Debate last October, the Leader of the Opposition said:
Far larger reductions than the £250 million of capital and Government expenditure, which the Government propose, are the least that can enable us to escape from an unmeasured disaster."—[OFFICIAL REPORT, 27th October, 1949; Vol. 468, c. 1626.]
Therefore he thought that our investment programme was too large.
The right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden) in rather more modest language—said, in the same Debate—that the cuts in both the investment programme and Government expenditure were insufficient to combat inflation. If the right hon. Gentleman thinks that the total investment programme is too large, why does he object to a restraint on the commercial vehicles part of it? If he really objects to that, presumably he means to cut the rest of the programme, including expenditure on schools, industrial equipment, generating plant, oil refineries, re-equipment of the coal and steel industries and all the rest of it. I believe that he is to take part in this Debate; in which case I hope he will tell us what it is he wishes to cut. Otherwise we shall be bound to assume from his speech of last autumn, that he wants to make a cut in all these items—all except commercial vehicles.
In point of fact, the more our economic situation is reviewed, the clearer two things become. First, the expanding tendency of our total investment programme of well over £2,000 million is one of the major factors tending to raise the cost of living at the present time. Secondly, of all sections of that programme, the excess flow of commercial vehicles on to the home market above reasonable needs is the one which can be cut with the least damage. That excess of about £35 million a year is comparable in size with the increase over the previous target which we are making in the housing programme next year. Every section of the investment programme is being held down so far as possible to what is strictly economically necessary. There is surely no reason why commercial vehicles should be exempted, so as to provide a rate of increase which may be very desirable in itself, like many other things, but which is certainly not strictly necessary in relation to other needs and to our existing transport capacity.
The next proposal in the Bill which seems to have attracted most attention is the retrospective provision applying Surtax to sums paid in exchange for restrictive covenants. In the last two years most sections of the community, in a joint effort to assist national recovery and keep the cost of living down, have shown great restraint, patience, and, indeed, sacrifice, in refraining from grasping higher incomes. It is surely, therefore, intolerable in those circumstances that the outrageous payments made by two motor car firms for restrictive covenants, not I think very worthy in themselves, should go scot free or be allowed to spread.
Some, including the hon. and learned Gentleman the Member for Hove (Mr. Marlowe), have criticised the retrospective effect of our proposal. To that there seem to be two sufficient answers. The first is that, with due respect to him, it is merely a wild exaggeration to compare these proposals of ours with laws in totalitarian countries, which made something a crime which was not a crime when it was committed. These proposals do not make anything a criminal offence, but merely make subject to tax certain payments which, according to the spirit of the law, should have been subject to tax in any case, and which were merely devised in order to evade the existing law.
Secondly, though I agree it would be undesirable to propose a retrospective measure even of this kind without due warning, the situation is entirely different when due warning has been given. In the Budget speech of two years ago the Chancellor spoke of dressing up what is really remuneration in a non-taxable capital form, such as a
restrictive covenant on an individual's employment,
and he said,
Such devices, by which a man aims to evade paying his fair share of Income Tax, are intolerable in our present state of affairs, and I must give warning that the position will be closely watched, and that the Government will not hesitate to propose legislation, with retrospective effect, to deal with any such devices."—[OFFICIAL REPORT, 6th April, 1948; Vol. 449, c. 70–71.]
If, after that warning, we had hesitated to bring in this proposal we should have been simply inviting other large tax evaders to think up new ways of getting round the spirit of the law before those ways were closed. I think the "Economist" of 6th May fairly summed up the matter in saying:
The Lord-Black cases have not made a good impression, and the Government gave fair warning about upsetting the legal devices that were exploited by them.
Actually two other eminent authorities on the benches opposite, the hon. and learned Member for Wirral (Mr. Selwyn Lloyd) and the right hon. and learned Gentleman the Member for West Derby (Sir D. Maxwell Fyfe) both spoke about this matter and gave their approval to this policy. The right hon. and learned Gentleman said:
The justification for retroactive legislation is that a reasonable and definite warning has been given to people likely to practise the matter to be struck at, and they have been given the opportunity to avoid that course."—
[OFFICIAL REPORT, 28th April, 1949; Vol. 464, c. 499–500.]
We entirely agree with that. It has been a well established practice in the past, followed by Conservative as well as other Governments, to act retrospectively in taxation matters when due warning has been given. Indeed, the Finance Acts of 1936, 1937, 1938, 1939 and 1940 all contain retrospective provisions affecting Surtax.
Certain minor proposals in the field of Customs and Excise are included in Clauses 6 to 16 of this Bill. First, there are the changes in duty necessitated by the decision to increase the gravity of beer without increasing the price, an arrangement which, I think, has given satisfaction to almost everybody except my hon. Friend the Member for Ealing, North (Mr. J. Hudson). The procedure for giving relief from import duties on machinery is improved, and the Bill provides also for the repayment of Customs duties where the goods have to be returned or destroyed by the importer. The Entertainments Duty is reduced in the case of cinema shows which also include "living" entertainments, and certain Excise allowances on exported whisky are abolished. The definition of pool betting is also amended, and a loophole is closed up by which promoters of fixed odds plus betting managed to escape the liability for duty.
The Inland Revenue Clauses of the Bill seek, first of all, to re-state and clarify the rules for Income Tax payable by husband and wife. It is laid down in particular that the various allowances for a wife's earned income are to be set against the tax on the wife's own earnings, a matter on which I expect my right hon. and learned Friend the Solicitor-General will have one or two things to say later on in our proceedings.
The Inland Revenue is also given power to collect from the wife Income Tax or Surtax assessed on her husband in so far as it is attributable to her income. It is at present possible for a wife with an unearned income of, say, £20,000 a year to live on it entirely tax-free and successfully to defy both the Inland Revenue to extract tax from her impecunious husband, and her husband to extract it from her. Such cases have actually occurred. An income of £20,000 a year tax free in these days is rather out of line with what most of the community can secure.
The Inland Revenue section of the Bill also gives further tax relief to industrial research, and extends what is called the "mills, factories allowance" for another five years. Finally, it closes loopholes in the 1940 Finance Act, which have enabled Death Duties to be avoided by the disposition of life interest in property in various ways.
Those are our proposals. We believe that the major ones, by encouraging productive effort, economy in spending, and restraining the less necessary investment expenditure, will contribute to our supreme purpose of full national recovery. If the Opposition object to our positive taxation proposals, and if they want to be taken seriously by the electorate as seeking the welfare of this country, they must tell us one of two things—in what other ways would they raise Revenue, or how would they make major cuts in expenditure.
I notice that the latest pretext of hon. Members opposite for evading this question is to tell us that they have not the expert knowledge for them to say. But I am afraid that that will convince no one, because if they do not know what economies can be made, how do they know that any economies can be made? And how if they do not know, can they be sincere in telling the country that there is large scale expenditure going on now which might be cut?
The plain truth is that our present level of Government expenditure and taxation have been made necessary and inevitable by four things. First, by the social security system for which the electorate and Parliament have voted, and which the Opposition professed to support throughout the General Election; secondly, by the emergence of the cold war, which has thrust additional and unexpected defence responsibilities upon us; thirdly, by our decision to carry through a far-reaching programme for the re-equipment of our own and the Commonwealth's productive resources—and in productive resources, I include health and education as well as industrial plant; and, fourthly, the maintenance of the food subsidies at the level necessary to prevent a disastrous runaway inflation of wages and prices.
Unless we are willing to abandon one or more of those four policies, sweeping reductions in expenditure or taxation cannot be made at once; and those who pretend they can are not merely misleading the people, but are raising false expectations which may one day react heavily on their own heads. We hope that as national production and income rises at the current encouraging rate, total Government expenditure—provided that defence expenditure can be kept within reasonable bounds—should become a smaller proportion of the total national income, though, of course, decisions of Parliament already made have committed us, in the sphere of social security particularly to rising expenditure in the future. But when the Opposition, while constantly putting forward individual proposals for increased expenditure, claims that it can make big immediate reductions in taxation, it is either deceiving itself or else betraying the fact that it does not really believe in our welfare services.
In the Budget Debate the hon. Member for Chippenham (Mr. Eccles) used a curious phrase when he spoke of what he called:
The driving force of a working-class Budget in all its undisciplined humanity and in all its shapeless suicidal power."—[OFFICIAL REPORT, 19th April, 1950; Vol. 474, c. 239.]
Those strange words seem to me to breathe a remarkable spirit of hostility to the human aspirations of most of the British people. [HON. MEMBERS: "Nonsense."] Hon. Members opposite must face the fact that we have to choose between either sacrificing those aspirations and the welfare State or else accepting a level of taxation higher than pre-war on company profits and large income and large fortunes.
I believe that most hon. Members opposite know in their hearts that that is true. The right hon. Gentleman the Member for Bristol, West closed his speech in the Budget Debate by addressing the Chancellor with the words:
Heaven save us from a man who always knows he is right."—[OFFICIAL REPORT, 24th April, 1950; Vol. 474, c. 716.]
Perhaps, however, that is one better than men who know in their heart of hearts that they are wrong.
The hon. Gentleman the Financial Secretary to the Treasury began his observations with a reference to the relative brevity of the Finance Bill which he thought we would welcome. That is one of the few topics upon which we can agree. He went on to ask us to address ourselves to this Finance Bill as being one of a series, and that is what I also would wish to do, because I think that is the correct way in which to look at both our present and future prospects. Perhaps I ought at the outset to make one observation on the hon. Gentleman's rather curious definition of petrol. I do not know whether he intended it or not but, as I understand it, he described petrol as a luxury. Is that really the Government's view?
All right. If the hon. Gentlemen meant pleasure petrol he will, of course, be aware that pleasure petrol is an infinitely small proportion of the total petrol which will be taxed by the Government's proposals. Is it now the Government's policy to tax a commodity which is an essential for industry because there is a relatively small number of people who may use a small proportion of it to get some fleeting pleasure out of it? If that is now the Government's view we should very much like to know.
The pleasure petrol about which the hon. Member talks is less than 10 per cent. of the total for motoring altogether. How much of this less than 10 per cent. is quite inevitable? How much is used by the doctors and other professional classes who have to use motor cars to fulfil their duties? I wonder how much of it in these days is real week-end joy-riding which is, I suppose, due to the terrible jaunting tendency which the British public have? But this proposal seems to be carrying the kill-joy principle to extremes. I hope that we shall have some further explanation of that from the Chancellor of the Exchequer later on. Meanwhile, the Opposition do not think that petrol can possibly be regarded as a luxury. It is a very important element in the conduct of our industry and, despite the hon. Gentleman's fearful warnings of our fate, we shall vote against that on the Finance Bill when the time comes.
The hon. Gentleman quite rightly referred to the sequence in which the Finance Bill must be taken. It seems to me that in this Second Reading Debate we have to try to examine how far the Bill matches the needs of the hour, and if we are to do that, we have first to consider what are the realities of our financial and economic situation. They are, I submit, that even last year we had a deficit on our current balance of trade of about £70 million. It is quite true that the Government hope that this year there will be a favourable balance, and so do we all, but that will have to be achieved with diminishing help from overseas; it will also have to be achieved in the face of increasing competition from Germany and Japan, and we shall also have to watch the unpredictable future course of American business activity.
In this connection I noticed a paragraph from the same City column—not the same day—of "The Times" which has already received the approval of the hon. Gentleman. I noticed it this morning. I hope that this part of the column will receive as much approval from him as that which he read out. These are the words:
The truth is that the United States boom has become something of a symbol, a symbol of the continuing vulnerability of the rigid United Kingdom economy with its system of controls of incomes and prices, of subsidies and oppressive taxation, that devaluation has so far failed to break open.
I hope that the hon. Gentleman agrees with those words as warmly as with those which he quoted to us.
Unfortunately, no. So our progress is only relative. It seems to me that those words represent exactly the position with which we are now confronted, and all this—I was glad that the hon. Gentleman mentioned it—has to be set against the background of the international situation. I fear that, in my judgment, there is nothing in the outlook there which would warrant our taking the optimistic view that we shall have fewer burdens to carry in that sphere. The contrary is more likely. The additional cost of the South-East Asia events and the charges that the Malaya campaign must lay upon us; all these matters are not likely to decrease within the next year or so. I would say that we shall only succeed in our polices if we do all we can to make British economy efficient and that must mean keeping down costs.
We have also to see that that economy is sufficiently flexible to meet any adverse
circumstances which have not been foreseen, because the House will recall that since the Finance Bill last year there have been some events which were not foreseen at that time. During the Second Reading of the Finance Bill last year, this very same stage, the Chancellor used these words:
… we have got to remain flexible in our policies because, in the conditions of the world today, those circumstances may change very quickly and really comparatively suddenly."—[OFFICIAL REPORT, 18th May, 1949; Vol. 465, c. 570.]
They certainly did. Only a few months afterwards showed the truth of that need though it did not show that we had the flexibility for which the Chancellor had so properly called a few months before. The House will recall that a few months later a comparatively minor change in American conditions brought to a head an exchange crisis of the greatest gravity which was only met in the end by devaluation, a device to which no one had wished to resort.
The question we have to ask ourselves today is whether, when we consider this Finance Bill, we have greater flexibility than we had a year ago. The answer, I fear, is clearly that we have not. Although the Chancellor may feel satisfied that all is well with his policies, we must remind him that he was equally confident a year ago when he told us at this same stage of the Finance Bill that his policies "continue to satisfy the necessary conditions for sound sterling." Well, it did not quite work out that way. In the light of what happened afterwards, our faith in the confidence of the Government today must be correspondingly limited.
This Debate on the Finance Bill—and the Finance Bill is the annual means whereby revenue is raised—seems a not inappropriate time to discuss taxation and the effect that its present high incidence has upon our economy. In a society such as ours, if we are to provide, as we all wish to do, a steadily rising standard of living, we have to do all in our power to promote industrial efficiency. There is no argument about that. Indeed it is a pretty good criterion by which to test our present burden of taxes.
A serious factor, as it seems to me, is that the financial policy of the Government has now almost completely liqui- dated the private investor. It was the private investor in former years who was the main source of what is called risk and venture capital, the type of capital that finances projects which at the moment appear to have an uncertain commercial future. It is the taking of hazards of this kind, of which scores of examples will be in the minds of hon. Members, that has helped to build up our economic life in the past.
Not to build up unemployment. Taking hazards to build up a new industry does not create unemployment. If it is successful, it creates industry; if it is unsuccessful the man loses the money he puts into it. An excellent example is Lord Nuffield, and there are scores of others. Lord Nuffield has not created unemployment; he and his colleagues who are now selling their motor cars in America have done a good job for us all.
That may have been so, but I do not think the hon. Gentleman has quite seized my argument. What I am saying is that under the policy of the Government the private investor has practically ceased to be.
If the hon. Gentleman really thinks that is the connection, and feels satisfied with it, I certainly cannot shake him in his complacency, but I would say myself that it is not a happy situation where risk capital is not available for new developments which may be absolutely imperative for the future of British industry. To assert what he does is to fly in the face of all the experience of industry both in this country and in the United States of America.
I apologise for interrupting the right hon. Gentleman, but does he not agree that it was extremely difficult to get risk capital, as so defined, to come in and take this risk at the time when the country needed it, and was not that one of the causes of unemployment?
It has happened a great many times. Perhaps the hon. Gentleman will consider the example of Malaya, which has been developed by what might be called risk capital. But the point I am making is that it has virtually ceased to exist. If the hon. Gentleman thinks it never did any good, he need not be disturbed, but for our part we think that is a misfortune and may well prove a misfortune for the future development of British industry. That was the point I wished to make and I hope it has now been made quite clear.
Let us leave the question of risk capital out of account for the moment. It is quite true, of course, that companies with more established positions will not have the same difficulty in getting the capital they need, but even here the position is far from satisfactory. We are in a condition today where the costs of new capital equipment have risen and are still rising sharply. Therefore, for even the strongest firms there is a real problem in providing an adequate supply of capital for new investments and for the modernisation of plant, despite the help which the hon. Gentleman spoke of as being given there, which was to a large extent an ante-dated rather than an additional aid. For that we are grateful, but the problem is still there and that re-equipment cannot be met by the depreciation allowances.
A further consequence of this situation is that because of this taxation, especially when levied on undistributed profits, companies must charge prices for their goods which are adequate not only to meet the cost of production but also to provide something for re-equipment. The Chancellor was saying last year, and there was force in the argument, how immensely important it was to get these prices down. I suggest that one of the difficulties facing companies in that connection is that when they have to use a large part of their profits for re-equipment they cannot at the same time bring their prices down, and the higher the taxation the more difficult is the problem of capital re-equipment and the less possibility there is of reducing prices.
So I say it is largely for this reason that the Profits Tax, especially on undistributed profits, is bound to keep efficiency at a lower level than need be. In present conditions of world competition the Profits Tax on undistributed profits seems to us to be one of the most indefensible in all our long and dismal category of taxation. It is likely that on the Committee stage of the Bill we shall move an Amendment to abolish this raiding of reserves at a time when they are more than ever necessary for industry.
If hon. Members disagree with our view about this, let me try to put the point more simply. Surely we must agree that the whole of the increasing cost of the social services cannot be financed except out of the increased earnings of the nation? The larger the sphere of the activities of the welfare State, the larger the load of taxation which industry has to bear. It does not seem to me to be reasonable to argue, as the Chancellor did in the Budget and as the hon. Gentleman did again this afternoon, that because production, productivity, exports, and so forth are all going up, therefore industry is not weighed down by the burden of taxation.
That is not how the problem should be looked at. The question is how much more production might have gone up had industry not had to carry its present immensely heavy burden of taxation. That is the way the problem ought to be viewed—I am glad the hon. Gentleman finds this amusing. I hope he will also agree with me when I say that it is in this light we regard these proposed duties on petrol and commercial vehicles. They both constitute further burdens on the cost of production at a time when we should be doing all we can to reduce those costs so that we can continue to compete successfully in export markets. These duties will also inevitably prove for many millions of people an addition to the cost of living, which just now, above all things, we surely want to avoid. We shall, therefore, as I said at the beginning, continue our opposition to these duties.
I turn now to another aspect of high taxation, to which the hon. Gentleman also referred, and I am glad that he did: its effect upon savings. We welcome the proposed reductions in earned income allowances and we hope that they will have some effect upon savings, but it is in truth only by lower rates of taxation, and by a confidence that the cost of living will not continue to rise, that we shall get increased savings. The factor which probably militates most against small savings is the fear that when the time comes eventually to cash the savings certificates, the purchasing power of money will have continued to decline so much that there will be very little advantage to the saver. Nothing could create more confidence in the saving community than the knowledge that efforts were being made to keep down the cost of living.
The House ought to be reminded just how serious is the position about these savings figures, because they are vital—to use that much abused word literally—to the Government's plans. The House will recall that as short a time ago as 1946–47 there was an excess of receipts over withdrawals of about £325 million. The following year the excess fell to £188 million; in 1948–49 it fell to £37 million, and last year withdrawals exceeded receipts, I think, by £67 million. That must be very disturbing.
Even if that were true, the hon. Member will see that it does not in any way invalidate my argument; so that for the Chancellor, who has need of these savings, it is a very disturbing fact that they should be falling in this way.
I repeat that I am confident that nothing could more encourage the savings public than to know that the purchasing power of money was not going to decline after people had bought their savings. If the Government would apply their minds to that aspect of the problem, then I believe that the response might be there. At any rate, for anyone who feels, as I certainly do, that this is a disturbing trend, these figures call for some examination and comment.
I now want to make two practical suggestions in connection with the Bill. The first is to suggest to the Chancellor that he should immediately appoint and set in action the second committee of inquiry into tax incidence on industry, to which he referred in his Budget statement last year. I have the passage here but the Chancellor will recall it and it is not necessary for me to quote it. Last year the right hon. and learned Gentleman set up a committee under the chairmanship of Mr. Millard Tucker to study the computation of business profits. He told us at that time that the report of the committee would not be available during the passage of the Finance Bill, but was to be regarded as a preliminary—I think I am right—to a comprehensive inquiry into the incidence of taxation and its effect on risk bearing. Certainly that is a very important topic; there is no dispute about that on either side of the House. Is it not possible, therefore, to get on now with setting up this committee and to hasten its deliberations?
The second suggestion which I want to put forward was that which was made by my hon. Friend the Member for Croydon, East (Sir H. Williams) in the course of the Budget Debate; and I think that it was proposed in a similar form from these benches about two years ago. We make it as a suggestion for examination at the present time. It concerns the Purchase Tax. This tax has so many anomalies that there is not one of us who has not had scores of examples presented to him at different times of the various ways in which it adds to the uncertainties of the businessman, and especially of the retailer. I have been told that so wide is the uncertainty as to the future of the trend of this tax, that it has an effect on the level of stocks carried by shops after the Christmas shopping until the Budget is out of the way. I do not know whether that is true, but, however that may be, we are also agreed about the tactical difficulties of discussing this tax in the House.
Therefore, I repeat the suggestion of my hon. Friend: would it not be possible to have some impartial examination of the tax by a Purchase Tax advisory committee, which would receive representations from the traders concerned? This committee, being a responsible body, would then give advice to the Treasury. In the non-political atmosphere of that committee, various items on which Purchase Tax is levied could be carefully scrutinised, and in this way the whole tax might become less erratic in its incidence than at present. It seems to me that that committee is more than ever necessary now, because the Chancellor is beginning to levy this tax on capital goods—I am referring, of course, to the tax on commercial vehicles. At any rate, we present that as a suggestion to the Government for examination.
But while we put forward these proposals we do not want on that account to accept that the Purchase Tax is to be a permanent means of raising revenue. It was a temporary expedient introduced during the war, and it would be most disagreeable to have to accept it as an enduring part of our economy.
High taxation is also very relevant to my next topic—the balance of payments. As I think I have shown earlier, high taxation means high prices, and high prices mean a reduction in our competitive advantage in international trade. Earlier in this Parliament, I referred to a comparison between British and American prices; the Chancellor is familiar with that. I was interrupted at the time because hon. Members opposite thought I was about to refer to France, Italy, Germany or somewhere else, but it was America to which I referred. I have the figures here and I hope that this time the Government will make some comment upon them.
These are the wholesale price index figures which are published in the statistics of the United Nations. They are not some wicked Tory publication or anything of that kind; they are perfectly all right. If we take the index figure of 1937 as 100, we find the curious thing that in 1947, 10 years later, our general figure and that of America were exactly the same at 176. The date on which they were the same was in November, 1947. After that, both figures went up; the American figure went up only a little and then dropped back to approximately the same, but ours continued to rise. It has even continued to rise since I mentioned the matter in my opening speech of the present Parliament. The American figure is now 177, almost exactly the same as in 1947, whereas ours has gone up to 226. That is a very disturbing fact in connection with our ability to compete with American industry in the export market.
I hope that the Government will have something to tell us about their view of this and how this situation can be met. It is all the more important when we shall have to meet increasing competition from Germany, as to which there cannot be complaint because we wish German economy to recover. When we have to meet that competition also, and when that industry, for a variety of reasons, is carrying less heavy tax burdens than we are, I do not altogether accept the assurance which was given yesterday at Question time by the Under-Secretary of State for Foreign Affairs, which rather belittled the seriousness of this German competitive factor. It is bound to grow. Indeed, if the policies which are being worked out by the Governments concerned are to be successful, it must grow.
It is true, of course, that our balance of payments on current accounts has never been favourable since the war. It is equally true, I add, in case any hon. Gentleman opposite should generate any indignation, that for several years before the war it was not favourable either. But of course, the position then was entirely different. We had large reserves and large overseas investments, and therefore a comparatively small unfavourable balance for a few years was nothing like the formidable problem which it is now.
This year we expect, we are told, to have a surplus on current account, yet the trade returns so far do not seem to indicate that. The figures of our visible trade show that in the first four months of this year we had a deficit of £125 million which must be compared with an adverse balance of only £107 million for the same period last year. That does not seem to me to show an improvement, and hon. Gentlemen opposite who are continually complaining that we on this side are too gloomy in our presentation of these matters should just consider and ponder over that figure at their leisure.
I must now make some reference to this question of high taxation and the "wages freeze," to which the hon. Gentleman referred. As was said in the Budget Debate—I think by the Chancellor himself—we are now faced by an automatically increasing expenditure on a formidable scale. The Chancellor has no margin of taxable capacity, and he may be faced with a fall in revenue. There is in all this a manifest danger of further inflation, which is all the more acute because it comes at the end of five years of rising prices. In the last two years the Government have sought to rely on the tempo- rary expedient of the establishment of the stabilisation of personal incomes to check these dangerous tendencies. This policy, to which we on this side of the House have given support, was defensible as a temporary device to tide us over our difficulties.
On the whole, I think it is fair to say that trade unions and companies have preserved the terms of the stabilisation White Paper which came out in February, 1948, but the fact is that the Government have not played their part in this business, because it was clearly the duty of the Government, while asking industry for this effort, and once they had called for a restraint in personal incomes, to set their own house in order and, to use their favourite expression, to put a "ceiling" on their expenditure, and to do everything they could to make sure that the cost of living increased no further and that inflation was halted. The Government, as everybody knows, failed to do this. Prices have continued to rise; they are still rising, and it seems most extraordinary that through their own failure to check inflation the Government should put the trade union leaders into such an unenviable and embarrassing position as they are in today. Inflation must be stopped so that these expedients—and they are nothing more than expedients—can be done away with.
I observed that in the Budget Debate some hon. Members said that inflation has already been dealt with; that it is at an end. If hon. Gentlemen really do think that, why do we still have to have the personal incomes stablisation policy at all? It is only there as a check against inflation. If there is no more inflation to hold a check against, why do we have to hold it? There is one passage from the White Paper of 1948 which I would recall to the House. It runs like this:
Relative income levels must be such as to encourage the movement of labour to those industries where it is most needed, and should not, as in some cases they still do, tempt it in a contrary direction.
As we all know, manpower planning has failed, as it was bound to do. The "wage freeze" policy must be a curb on the highest production, and if rewards are curbed we cannot escape the fact that that will also curb the effort.
Of course high taxation is itself inflationary; it directly leads at once to claims for wage increases, especially when it takes the form of a tax on beer and tobacco, the Purchase Tax, and so on. Whatever explanations can be given, the fact remains that at the moment the lower paid worker is worse off as a result of the Budget the Government have introduced. He is now ground between high taxation and higher prices, even though he only pays indirect taxation. Has it not been reckoned that on incomes of £10 a week or less the average expenditure of tax paid by the family is 31s. a week on beer and tobacco? Arguments are sometimes used which seem to imply that this high taxation is necessary for full employment. We on this side of the House take exactly the opposite view. We believe that continuing high taxation would inevitably lead in the end to unemployment. It must reduce full employment because it reduces industrial efficiency and weakens our competitive position in world markets, and thus endangers our whole balance of payments.
To sum up, the danger, as we see it, which now faces us is that our prices are so high, our economy is so rigid that there is so little slack left to draw upon, that we are more than ever vulnerable to changing conditions in the world over which we ourselves may not have any control. This seems to us in every respect perilous for the future, and it is on that account above all others that we maintain that this Finance Bill does not match up to the needs of the hour, and does not give our nation the assistance for which it calls today.
The right hon. Member for Warwick and Leamington (Mr. Eden) has evinced considerable concern about the continuing increase in the cost of living. That is a concern which, I need hardly add, is widely shared on this side of the House. Part of the advance, of course, is due to reasons over which this country has no control whatsoever; but there are sectors of our economy where we can bring to bear either the right policies or the wrong, and this evening I should like to examine our policy, and the effect that policy has on taxation towards the agricultural industry of our country. The staple needs of the little people are relatively simple and relatively stable. They are food, clothes and houses, and anything which tends to increase the cost of this triumvirate of necessities must be examined with meticulous care.
There was one other aspect of the speech of the right hon. Gentleman, to whom we always listen with close attention, about which I, too, am concerned, and that is the competitive force we shall be able to bring to bear in international markets, having regard to the resurgent Japanese, German and Italian industries. Before the war those three countries—I speak from memory, but I think my figures will be roughly correct—accounted for about 25 per cent. of world trade. At the moment, I doubt very much whether it is more than 7½ per cent.; but as the right hon. Gentleman said, that situation is changing every day, and we must overhaul our resources without further delay.
I am glad to have caught your eye today, Mr. Speaker, because this is the first time I have had the honour and privilege of addressing the House since a Manchester speech which evoked some controversy and caused a slight increase in unemployment. I had been wondering whether the House would really like to know what I actually said at Manchester. It might not be a bad thing to have it on record. After all, I paid a pretty heavy price for making that speech—something about which I make no complaint at all. Having said that, I should like to give to the House a summary of what I said at Manchester, because the issues which were raised there are in fact the issues that the right hon. Gentleman has been talking about this afternoon. Before I go on to the speech, I want to tell the House what made me make a speech of that nature.
Under the terms of the 1947 Agriculture Act we are now required to fix prices for certain farm commodities as far ahead as 1952–53 and 1954. As those commodities will have to be paid for very largely out of taxation, it seems to me this might be the appropriate moment to draw attention to the fact that as things stand at the moment, and without some change, we shall be compelled to take unlimited quantities of these commodities at guaranteed prices, irrespective of whether there is a market for these commodities or not. Of course, if there is a loss to be sustained, it will be a mere duplication of what happened over potatoes last year.
The House will recall that last year under this "Heads the farmers win and tails the nation loses" arrangement, the taxpayer had to find £12 million for potatoes surplus to requirements, which were paid for at the agreed guaranteed price and then sold back to farmers for a song for stock feeding. It was this, with other factors, which caused me to make the speech at Manchester which, as I have said, did create some controversy. For the record and because I think it is strictly relevant to these large sums we are now to raise in taxation, I would like to quote a few passages from that speech. I said:
At a time when a rising tide of food prices threatens an industrial peace which is the envy of the world, and the foundation of Britain's economic recovery, we must all be prepared to examine this problem of food prices with intellectual precision and serenity.
Last year over £280 million was spent in subsidies on food produced by the British farmer. Despite this, much home food was far more costly than its imported equivalent.
We may all legitimately aspire to some sort of historical future. Here comes a word which assures me of mine. I have been lampooned, cartooned, and I have even provided B.B.C. comedians with a new joke. That, Sir, is probably the most meritorious achievement of the three.
No other nation featherbeds its agriculture like Britain and the time has arrived to ask ourselves whether the cost of providing farmers with guaranteed prices and assured markets has not now reached a level which neither consumer nor taxpayer can afford.
Hitler's blockade created in Britain a siege economy. A psychology of production at any cost grew up and still survives. But today there is a new economic climate throughout the world. Production at any cost no longer means life to Britain—it could mean death.
Britain cannot afford to perpetuate an out-of-date agricultural pattern inherited from siege conditions. Neither can any sector of our economy be permanently insulated from the postwar economic facts of life ….
Every pound's worth of food bought by the British housewife includes 13s. worth from abroad. Ability to import"—
and this is where the right hon. Gentleman's speech this afternoon was quite applicable—
turns on ability to export and our future capacity to buy, not only food, but petrol,
timber, copper, aluminium, all we need to clothe ourselves and furnish our industries, will depend not on unlimited high cost home agricultural production, but on the competitive force our coal, textile and manufacturing industries generally are able to bring to bear in international markets, this, plus the extent to which we can get our traditional invisible exports to work. This will be particularly so when Marshall Aid ends.
I then went on to say that in those circumstances we must not be averse from asking ourselves the most difficult, searching and, if necessary, embarrassing questions. Then I went on to ask one or two—[Laughter.] They seem to me to be phrased in the most diplomatic language and I was very surprised at the furore they created.
The first question I asked was: Can the British farmers' present privileged position be maintained? I shall go on to discuss that privilege in due course. I pointed out that net aggregate farm incomes of £55 million in 1938 were 5½ times higher, £284,500,000, in 1949. I went on to say that in every progressive industry of which I have knowledge, as productivity went up costs fell and the fall was reflected in selling prices. I pointed out the astonishing and undeniable fact that this industry, agriculture—and this is why the industry costs the taxpayer so much—reverses the process. It is really astounding. If the same thing had gone on in the motor industry, Austin Tens would now be about £2,000 apiece. I went on to ask another of these inoffensive questions:
Where are the ever increasing charges for the products of British agriculture going to land us? The British taxpayer has not a bottomless purse out of which to subsidise the agricultural industry "—
[HON. MEMBERS: "Hear, hear."] Here is another to cheer:
and the industrial worker who sees the contents of his wife's shopping basket costing more and more is beginning to get restive.
Then I went on to the pièce de résistance:
Do high subsidies conceal a good deal of agricultural inefficiency and inertia?
There has been nothing like that since Hiroshima.
And could it be that too much security for the bad farmer is just about the worst way of stimulating that healthy, stable British agricultural industry which is what Britain needs?
There were one or two more points which I touched upon but what I have said will
perhaps give to the House the general idea. I wound up by saying:
The legitimate aspirations of British farmers … must always command the fullest support of any thinking person. Nevertheless, with respect to Sir James Turner"—
who made some observations about some observations of my own—
in face of the threat to our economic recovery and the restoration of our financial self-respect by the rising tide of food prices, I am unable to reconcile myself to the role of a 20th century Canute.
That carefully thought out oration had results which are not unknown to the House.
I wish to examine this question of privilege. I asked whether the agricultural industry's present privileged position could be maintained, and the House may well think it fair that I should bring some evidence to bear in justification of the statement that this industry is privileged. Before I do that I wish to say that every intelligent person recognises that a healthy, vigorous stable British agricultural industry is a strategic, social and hygienic necessity for Britain. We all accept that. Nevertheless it would be foolish to pretend that the taxpayer will be forever willing to dole out the very substantial sums now being poured into this industry at a time when we may be experiencing vicissitudes which happily we are spared at the moment, not least because of the generous assistance that is forthcoming from across the Atlantic.
It would be foolish to pretend that British agriculture can be maintained as an island of protected high cost production in a sea of diminishing commodity and other prices. It is not we who sound the tocsin who are the enemies of agriculture; it is they who foster the belief that this mirage can be a reality. I agree with the right hon. Member for Warwick and Leamington that whether we are able to maintain a population of 50 million will turn on the competitive force which we are able to bring to bear in international markets. That will be the determining factor, and that competitive force is of course greatly affected by the cost of living in this country. The contents of his wife's shopping basket play a very important part in the demands that her husband is compelled to make in the matter of wages, so we must, as a matter of national survival, scrutinise these ever increasing living costs with great care.
Who can deny that concessions to farmers at the taxpayers' expense are running around our economy like cockroaches? There would appear to be in this country one set of economics for farmers and another for lesser mortals. Rates of farm houses are less than those paid by many a municipal tenant—less than those paid by many £4 12s. 6d. a week railwaymen living in a municipal house. There is of course the great boon which ownership of land gives in the matter of Death Duties—a 45 per cent. remission. If a millionaire, knowing he was "on his way," took his money out of stocks and shares and property of various kinds and put it into land and completed the transaction 48 hours before he said goodbye, his estate would save £360,000 in Death Duties. That is a very substantial concession.
Now we get this 9d. per gallon petrol concession. Every other sector of capitalist society has to pay the increase. The poor old railways have to pay, as have the nationally owned road haulage services, municipally owned bus undertakings, regional hospital ambulances and private citizens, but not the farmers. This is really carrying things too far. This sort of thing puts the industry on a cost plus basis. What incentive to efficiency is there to be if we are to shelter this industry from every wind that blows? That is a reasonable question.
Large sums of money have been poured into this industry for the past few years by two methods. One of these consists of direct subsidies on the Vote of the Minister of Agriculture. In 1945–46 the direct subsidy on the Ministry of Agriculture Vote was £8,924,000. By 1948–49 it had risen to £22,062,000, and last year, 1949–50, it was £26 million. In addition to this, during the last financial year, about £277 million, or over 60 per cent. of the Ministry of Food's trading losses, arose on home grown food. In other words that £277 million, or the vast majority of it, went to British farmers, so that in the financial year 1949–50 the taxpayer poured into the lap of the British farmer more than £300 million. Consumers provided another £290 million, making £591 million total turnover. For this the nation got less than one-third of its food, leaving two-thirds still to be bought from abroad. In this £591 million total turnover, £284½ million was profit, was "net aggregate income," the euphemistic term used—heaven knows why—in connection with this industry.
This high cost of the 30 per cent. of our food produced at home is of major importance for another reason than because of the effect it has on our competitive costs. Every time we do a deal with foreigners—the Irish, the New Zealanders, the Argentines, it does not matter who they are—as soon as the commodity we propose to discuss is named, out comes the question, "What are you paying your own farmers?" That becomes the yardstick, the common denominator as it were, of the negotiations. It is very interesting to note this rise in farm prices. It has been very progressive. I am no "sour puss," no kill-joy. I want everybody to do all right. But I am very much afraid that this industry is doing all right—too all right—at the expense of the harassed housewife and the financially anaemic taxpayer. That is why I am venturing to bring these matters to the attention of the House.
As I have said, the aggregate net income of this industry in 1938 was £55½ million. By 1947 it had gone up to £183½ million. In 1948 it had gone up to £220½ million; and in 1949, last year, it was £284½ million. No one should be surprised at these figures, having regard to the prices being paid to this industry for its produce. Even in the early 'thirties efficient farmers were making reasonable profits. At that time much milk was being sold for butter-making, at a price as low as 5d. a gallon. It takes 2½ gallons of milk to make a pound of butter, and butter was selling at 1s. 4d. per pound.
Right up until 1940 the overall, year-round, average price for milk to the farmer was only 1s. 3d. a gallon. But since then, by the end of the war, the price had gone up to 2s. l½d. per gallon; and today there is a guaranteed market at 2s. 9½d. a gallon for every gallon produced. I would very much like to know how this figure of 2s. 9½d. is arrived at. I would like to know the methods of costing employed, because I know where milk was produced last year at 9½d. a gallon.
The hon. Member may be a judge of rubbish, but if he will see me after we have made our contributions here, I will show him the official figures which prove it. Milk was produced at 9½d. a gallon last year, and so I want to know something about the methods of costing that are employed to justify this price of 2s. 9½d. a gallon which we are compelled to pay, and which is costing the nation £106 million in subsidy. From 1948–49 agricultural production went up by 35 per cent. The net aggregate farm incomes, or profit, went up by 411 per cent.; that is a 35 per cent. production increase and a 411 per cent. profit increase. I notice that, according to the Economic Survey, production last year was up by £38 million and the profit, the net aggregate income, was up by £25 million. Some people might think that £25 million, with a £38 million increase in production, was rather too much, and it would not be surprising if they did.
But we are getting used to this. Every year for a number of years now the 12-round contest for the housewife's purse has been won by the National Farmers' Union in a canter. There can be no doubt that when it comes to negotiating, these boys are very hot indeed. I always admire ability, and I want to say to the Government that whenever we have international trading negotiations to conduct abroad the National Farmers' Union should always provide the opening bats. But when it comes to home affairs I hope we shall stop treating the wicket-keeper as though he were the umpire; because if we do not we shall deserve to be stumped. The fact of the matter is that the N.F.U. is a price and profit boosting organisation. I make no complaint about that. That is its function. I fear that the mistake we make is to treat the N.F.U. as though it were an impartial arbiter concerned only to "render unto Caesar that which is Caesar's"; concerned only to hold the balance fairly as between the farmer and the consumer. It would be unfair to expect the N.F.U. to accept that rôle.
Earlier on I said something about productivity, and the effect on prices of mechanisation and increased productivity. Before the war there were 50,000 tractors in the British agricultural industry, and now there are 275,000 tractors. I was interested to see in the "British Farmer" recently that a Mr. Rickard was farming 124 acres himself, with no other aid than that of his son and one land girl. There can be no doubt that mechanisation has brought great saving to the agricultural industry and I would like to repeat a question which I asked outside this House. What was the wage cost per pound sterling of sales in 1938, and what is the wage cost per pound sterling of sales in 1949? I cannot see why there should be any reluctance to provide those figures.
The N.F.U. seem somewhat coy in the matter. I do not know why. Surely these figures exist, otherwise how can a claim be substantiated for the constant increases in prices which they are able to obtain? Surely the wage costs per pound of sales would be the essence, the hard core, of the claim for increased prices. Therefore, I think we are entitled to get them. The N.F.U. have said recently that the figure of £284,500,000 profit which was made last year, broken down, means an income of £750 per agricultural holding. Of course, that does not sound very much. What the N.F.U. omitted to tell the nation was that, of 360,000 agricultural holdings in this country, 68,000 are under five acres, and another 70,000 are between five and 15 acres. No wonder the average is only £750. I know men who cultivate five acres as a pastime after doing a week's work in other spheres.
There are many questions which I should like to ask, and I shall certainly seize such opportunities that present themselves, because I believe that this industry is the Achilles' heel of the national economy. I think that the more interest the House of Commons takes in it, and in particular, in its methods of costing, the better for the health of the industry and of the nation.
I do not think that the House will expect me to say anything of a personal nature. I do not really feel it to be necessary. I knew what I was doing. I knew that if I fell over these back benches with a questionnaire in my hand nobody would read it, but that if I fell from the second storey of Dean Bradley House, a lot of people would become inquisitive, including a coroner and 12 jurymen. And the jurymen are still at work. I have had 598 letters in connection with this farming controversy, and only three have been in opposition.
Before I sit down, I will read one of the 30 letters that I have bad from
farmers, because it is most illuminating. The original of this letter can be seen. I will not reveal the name of the writer, the name of the farmhouse or the district, but it is bona fide and the original letter can be seen. The farmer's writing, like my own is not too good, so I typed it out for better reading. He starts by saying things which I am far too modest to repeat to the House. Then he goes on to those matters of greater importance:
We as farmers have been feather bedded, all that you say is true. We never had such money literally thrown at us. Practically everything we grow and breed is subsidised and we make enormous profits. There is not a farmer who has not his own banking account and it contains not hundreds but thousands of pounds. I know farmers who have actually taken a sack full of pound notes to the bank, and the managers up and down the country know them also.
Take potatoes: we were paid £10 an acre for growing them. I have 300 acres, 100 in potatoes. I received £1,000 for growing 100 acres. I sold the crop for £5,000. That is a total of £6,000 for 100 acres of potatoes. I had 200 acres of fertile land with crops and stocks besides. Out of this £5,000 for potatoes, £1,000 went in costs and labour. That left me with a net profit of £4,000. My farm is £300 a year rent. I made excellent profits on the other 200 acres in wheat, sugar beet and stock. I cleared another £4,000. It was money for nothing, money for jam. Second best profit was my milk. Never was such easy money. All you say is quite true, I feel guilty of the profits we are making. I speak against my own class I know, but I think all subsidies should close. We farmers are getting rich too easily. The time should come when we should pull our weight. We can farm and make good profit if no subsidies existed. Most farmers could retire tomorrow.
One assumes that it was the previous year.
I am grateful to the House for the indulgence shown to me. I do not think that in this critical period in history it matters very much what happens to individuals. I think that we are standing at a very critical crossroads, and that the important thing is that we should all be willing to ask ourselves those difficult, searching and sometimes embarrassing questions which will alone lead us to the right answers. I think the duty of us all in this period is to be Englishmen first, and politicians afterwards.
I am satisfied that I planted an acorn that will produce a forest of oaks, and the significance of the oak in the long annals of English history will not escape this House of Commons. I had a decision to make. I thought it over very carefully and then I asked myself this one question, and that settled the matter; Who dies if England lives, and who lives if England dies?
The House always listens with great sympathy to speeches made on occasions such as this. I am sure that all hon. Members would wish me to congratulate the hon. Member for Wednesbury (Mr. S. N. Evans) on the courage he has shown in his speech and on the fact that none of us doubt that he has acted from a high sense of duty. As to the wisdom of his actions, as to the prudence that he has shown, as to his own interpretation of his duty, it is not for me to comment. As to the substance of his speech, I would only say that I trust that agricultural policy will not in future be a battle ground for party warfare. It is essential that agricultural policy should become what the Americans call "bi-partisan."
I disagree with a lot of what the hon. Gentleman said. I have sympathy with some of what he said, but I will not touch upon that. Those who have the immediate task of answering him are the Government whom he supports, and I am sure that they will answer. Again, I put forward the plea that agriculture shall not in the future be a battleground for party warfare. I am sure that the hon. Gentleman has not lost any respect in the House as a result of his actions, and I hope that he will yet be able to serve his country in some Government. So much for the speech of the hon. Gentleman. I will now return to the Finance Bill.
I was very much interested in the words which the Financial Secretary used at the beginning of his speech. He referred to the cost of living. He said that the main object of the Government was the internal stability of wages and prices, and he inferred that that policy had succeeded, thanks to high taxation, to taxes on profits and to other operations. I was amazed to hear such an opening to a speech moving the Second Reading of the Finance Bill. Is there any evidence to show that that policy has succeeded? The hon. Gentleman was right, of course, to infer that the cost of living, the internal stability of wages and prices, is the key to the whole position. I wonder if he was here at Question Time this afternoon, when we heard that the purchasing power of the pound as compared with 1945 has fallen to 16s. 1d.? Who knows how far it will have to fall as a result of this Finance Bill?
The truth is that, as has been stated by the hon. Member for Wednesbury and by my right hon. Friend, our whole position depends upon the maintenance of this stability of wages and prices, and it hangs on a tenuous thread. The flimsy barrier between us and inflation is the wage freeze policy. I cannot understand any speech being made in this Debate which does not fasten on to that truth and drive it home completely. I believe that the wage freeze policy is a monstrous remedy for a monstrous condition that should never have been brought about. Be that as it may, we are here to face the facts, and the fact today is that, as is admitted by speakers on the other side of the House, the wage freeze policy is crumbling, and yet it is the only barrier between us and inflation.
The question that we shall be putting to the country during the coming months and at the next General Election is this: Is there no connection between the rises in the cost of living and the level of Government expenditure, which has now reached 43.5 per cent. of the national income? It is a question which even the most uninstructed elector can understand. He can understand that when we tax necessities, the price goes up, and that, when the price goes up, the cost of living goes up. He can understand, too, that the general level of high taxation is reflected in everything.
Hon. Members opposite are often apologising for this Budget as being dull and of little importance. I regard it as one of the most important which I have ever heard introduced, because it reveals the fundamental cleavage that exists between the two sides of the House. It is the cleavage between the Government, those people who believe that the first priority must be full employment—and full employment only obtainable by constant inflationary measures—and those of us who believe that the first priority must be a stable cost of living. We accuse the exponents of full employment as a first priority as being like a person who is trying to pluck the fruit before he has planted the tree. I warn the Government benches that the cost of living is going to be the only political issue at the next General Election, and that we shall win, and win undoubtedly, if the cost of living continues to increase, as it will do.
Before the hon. Gentleman leaves that point, would he tell us, so that we may be appraised of the actual facts, how much the cost of living has gone up, as shown by the Index, over the last nine of 12 months, and how much the Wages Index has gone up in a similar period?
I am concerned with the internal purchasing power of the pound, and I pay very little attention to the cost of living figures. In spite of my esteem for the hon. Gentleman, I pay very little attention either to his views, since the day that he told us that he did not mind if 100 per cent. of the national income was taken by the Government. For a high-powered capitalist like himself, I thought that was rather astounding, and I have rather lost faith in him since.
We can do away with all statistics except those of the internal purchasing power of the pound, and when we have, as was revealed today at Question Time, a purchasing power of the pound today in the neighbourhood of perhaps 15s. 6d., as compared with four or five years ago, it is quite clear at once that the cost of living is going up.
We can set aside all these indices, since everybody knows that the Cost of Living Index itself is very much open to question. I admit I used a rather extravagant phrase, being rather in a hurry. [An HON. MEMBER: "Did not the cost of living go up in the 'thirties?"] If the cost of living is going up—and every housewife knows that it is—it does not matter very much whether it did in the 'thirties or not. If hon. Members opposite knew what it was really like to be a railwayman earning £4 12s. 6d. a week, and if they had any real knowledge of the lower paid workers, they would know perfectly well that what I have said is correct, and if they try to tell the housewife that the cost of living is not going up I know the answer they will get.
We shall fight the Government tooth and nail on the cost of living, for the main cleavage between the parties is that between the Government, who say that full employment must be the first priority, and ourselves, who say that a stable cost of living must be the first priority. I tell them that Socialism will stand or fall in this country insofar as it controls or fails to control the cost of living. That is the blunt fact of the economic situation today.
I want to come now to the much debated subject of the economies which we on this side would suggest, because that is a perfectly fair question which is constantly flung at us. As I read the situation, either we make cuts of our own choice or they will be forced upon us. If the wage freeze policy breaks down, if there is a vicious rising spiral of wages, costs and prices, economies will be forced upon us because the money will not be there. This is our last chance when the money is still there, and when we can make economies of our own choice and volition. I must admit that I find it a singularly difficult subject, because no Government would ever propose dispensing with any of the major services, leaving aside the food subsidies. Economies must be made in these services, and the question we must ask ourselves is to what extent are economies in the administration of these services possible.
I happen during the present Parliament to have been a member of the Public Accounts Committee, and I have found how difficult it is, when one gets bare summaries of the expenditure of a particular department, to pin on to the head of that department definite fields where economies can be arrived at. I have learned a lot, not so much from the evidence provided for the Public Accounts Committee, which it would be a breach of privilege on my part to divulge, but from the financial papers which are accessible to every hon. Member and which I have read as a member of that Committee. I say that it is quite obvious from the evidence which every hon. Member of the House can obtain that the Civil Service is still not imbued with the spirit of economy.
There are plenty of straws brought out into the open which show which way the wind is blowing, and, if the House will bear with me for a few minutes, I will give two or three important examples which lead me to the conclusion that the spirit of economy does not reign in the Civil Service. It leads me also to believe that there is a suspicion that when one knows how easy it is to conceal these items in the public accounts, it is easy to believe that the fact that there have been only this small number of cases which have come out into the daylight is presumptive evidence that there are many more which have not reached the Comptroller and Auditor-General and which do not appear in any of the printed papers supplied to Members of Parliament.
Let me take an example from the Home Office, which is generally acknowledged to be one of the best administered Government Departments. Some years ago this House passed the National Fire Service Bill, which set up a National Fire Service College. Whether that is necessary or not is not my concern today, though I should have thought that country firemen could just as well be sent on courses of instruction to London or the larger cities as to a college. That college has been in existence for some time, and the cost per student per week is no less than £40. It must be the most expensive educational establishment in the world. I asked the Home Secretary a supplementary question about it the other day, and he said that he was much worried about it, and that the matter was having his attention, or words to that effect. But those responsible for running the Home Office must have known for a considerable period of time that this wanton and wasteful expenditure of the taxpayers' money was going on; yet nothing has been done about it.
I turn now to the Ministry of Health. Let us take the subject of the remuneration of dentists. As the House may be aware, some 18 months or two years ago a dentist in Scotland earned as much as £18,000 in a period of six months; that is, at the rate of £36,000 a year. All honour to him; no doubt, he is a hardworking and excellent dentist. But is not that presumptive evidence that the Ministry of Health did not know its business when it fixed the remuneration for dentists? These may be relatively tiny sums of money in themselves, but they are straws which show which way the wind is blowing.
Again, let us take the groundnuts scheme. We remember the fanfare of trumpets with which that scheme was introduced by the then Minister of Food. What is to be shown for it today? Between £30 million and £40 million of the taxpayers' money has been thrown away in a reckless gamble. It may have been right to take the gamble, but I cannot believe it could have been right to maintain the same high rate of expenditure all the way through after the prospective failure had become apparent. Then there is the waste of money on the Information Services.
If the right hon. Gentleman will take the crop prospects that were held out to us in the original estimates, and if he will look at the figures showing the crop yield at the present time, he will find that the original estimates were completely without foundation. That is my justification for saying that the money has been thrown away.
Does not the hon. Gentleman agree that every farmer who sows a crop takes a risk as regards the weather, but he does not regard his money as thrown away simply because a climatic change results in a loss in a particular year?
It certainly is a loss to the farmer. I say that if both sides of the House had been aware of the reckless nature of that gamble they would not have been so willing to vote those very large sums of money. It may have been necessary to take the gamble, but the fact that nobody recognised that it was a gamble or explained that it was a gamble is evidence that public money is handled lightly and irresponsibly by the present Administration. I do not think anyone would deny that.
Finally, let us take the conversion of locomotives from coal to oil, and then their conversion back again from oil to coal at a cost of £3 million. I agree that those five examples which I have given do not amount to hundreds of millions of pounds, but the mere fact that these extravagances have come to light show that it would be comparatively easy for an administration which was economy minded to secure economies amounting to several hundreds of millions of pounds.
That is my answer to hon. Members opposite who ask us, "Where would you economise?" After all, we are told by the Chancellor of the Exchequer that we have arrived at a narrow balance. He claimed merit for his cleverness in arriving at that narrow, precarious balance, and for keeping it steady. But it does not need enormous economies amounting to thousands of millions of pounds to tip the scale against inflation or against further rises in the cost of living.
I, personally, do not feel happy living on a knife edge; it is not a nice sort of thing to sit on. I think it is a condemnation of the Chancellor that we should be living in this precarious position. The slightest trade recession or variation in world prices of commodities, or a world trade depression would overthrow our foreign trade position. A very slight increase in the cost of living would be certain to break down the wage freeze policy. Indeed, I fear it is breaking down now.
It is easy, when in opposition, to speak less responsibly than one should, but even if I were a supporter of the Government, I could not go to the lower paid workers today and say that I upheld the wage freeze policy. I pay my tribute to the patriotic way in which the trade unions have acted. I believe they are under the impression that they have been acting from the highest motives and with perfect sincerity. But is it not a prostitution of trade unions that the whole of that magnificent machinery should be applied at full pressure for the purpose of keeping down wages to near starvation level?
Can any hon. Member opposite go to people earning £4 12s. 6d. or £4 15s. a week who are living in towns without gardens and allotments and tell them that that is the first fruits of Socialism, and that, as far as they can see, there will never be any improvement unless, as the Financial Secretary said today, the sum total of the national income increases and the present level of Government expenditure remains stationary? That is what Socialism has brought this country to—not for any unworthy motive, but for the very worthy motive of creating full employment.
But where hon. Members opposite have made a mistake is in not seeing the catch, that full employment has only been maintainable by keeping up a steady inflationary pressure. I still hope to see the day when hon. Members opposite will be converted to the point of view that the foundation of everything is stability in the internal purchasing power of the pound. Until that happens, and so long as the present Government remain in power, we shall go down the Gadarene path to disaster. I can assure hon. Members opposite that the rising cost of living is something which will lose them the support of even their most faithful supporters.
I did not intend to speak on the subject of agriculture, but in view of the statement made by my hon. Friend the Member for Wednesbury (Mr. S. N. Evans), I feel I must deal with some of the points he raised. He tried to justify the statement which he made in Manchester, and which he read out to the House fairly fully. I do not think he is yet clear in his own mind on the difference between agricultural subsidies and food subsidies, because he is laying the blame for the cost fairly and squarely on the shoulders of the farmers. And he is calling them agricultural subsidies.
The Ministry of Food import to this country food on which £164 million subsidies were paid. They sell that food to the consumers in this country at a lower figure than the purchase price. Are they subsidising the foreign farmer? They pay to the farmers of this country a certain figure for their produce and they sell that produce to the consumers in this country at a lower figure. They are then considered to be subsidising the farmers. If in the case of imported food they are subsidising the consumer, then they are subsidising the consumer in the case of home-produced food. The arguments are on the same level.
Moreover, when he come to his figures of £55 million profit in 1938 and £284½ million profit in 1949, my hon. Friend is overlooking a very practical thing. It is that agriculture in 1938 was a depressed industry. Thousands of acres of land in this country were not even cultivated. They were derelict. There was not a tenant on them. They were standing absolutely idle. Today, all those acres are cultivated, and the comparison between agriculture working 100 per cent. and agriculture working at 50 per cent. is totally unfair. If all the acres which are cultivated and are producing today had been cultivated and were producing in 1938, the figures would have been totally different and the comparison accordingly would have been much less.
My hon. Friend made much play about the housewife's basket and the amount of money the farmer was taking out of it. If the food subsidies were removed how much more would it cost the housewife to have her food today? Did not every hon. Member, on this side of the House at least, fight in his election campaign for the continuance of the food subsidy? Then my hon. Friend the Member for Wednesbury comes here and puts an argument against it.
I have to say this in defence of the agricultural position. In the last five years we put through certain Bills which became Acts, such as the Hill Farming Act which put forward certain subsidies and the Agriculture Act which also enabled certain subsidies to be made. As every hon. Member knows, we have from time to time in this House put forward Bills for subsidies. Where I considered a subsidy to be wrong I fought against it. The Minister of Agriculture will agree that I fought him all the way through on the calf subsidy.
But, in discussions on Bills involving agricultural subsidies, guaranteed prices and assured markets in the last five years, my hon. Friend the Member for Wednesbury has never once raised his voice in opposition. If these things are wrong today they were wrong then. When he had an opportunity of opposing these things when they went through it is useless for an hon. Member to come along afterwards and say, "These things are absolutely wrong, they are a burden and ought to be removed." It is a rather belated conversion on the part of my hon. Friend when he comes to this position now.
We have also to remember that the facts show that pre-war, all over the world, where we had the production of cheap food we had also cheap labour. If we have cheap food again we shall have cheap labour. Is that what we are fighting for here? Do we want to have cheap labour in agriculture again and, with it, cheap farmers in order that the industries of this country may have cheap food? The main cost of any wage is food. The industrialist builds up his demand for lower wages and the worker builds up his demand for higher wages upon the cost of food. Bring the cost of food down, as it was in the pre-war years, and every industrialist will be demanding a lower wage. That is what we have to fight.
It is a fact that whenever agriculture becomes depressed in any country in the world, industry becomes depressed afterwards. If we are to keep up the standard of living for our people right through the whole scale from the agricultural labourer to the top we have to keep agriculture on a firm and secure foundation. This is a problem that is facing every country in the world. This is the reason why America has pegged the price of wheat. The American farmer was one of the most depressed in pre-war years, but America is no longer going to allow that position to arise. Therefore, she has pegged the price of farm produce in order that the standard of life of her agriculturists shall be kept up. That is what we are doing here.
My hon. Friend has brought forward a great number of figures. I have no time to analyse many of them now. It is impossible to do so; but I question many of them very much indeed. When I point out the comparison between his £55 million and £284½ million it shows there are many factors he has never taken into consideration at all. I must deny completely that agriculture is in a privileged position. Agriculture is in no more privileged a position than any other industry. We have pulled our weight. We have raised ourselves from a depressed industry to the position that we have reached today, and it is through our work and labour, as well as the assistance that the Government has given us, that we are making the production that we are making today.
Let me put to the House the reasons why I think that we are in this position now. In the pre-war years of depression, over the 20 years, shall we say, from 1919 to 1939, the position of agriculture was one of the worst in industry in this country. Instead of capital being poured into the industry, capital was withdrawn all through those years. Then, when war breaks out, there comes a tremendous demand that agriculture shall put forward its greatest efforts on 20 years of depression. We had to mechanise the farms, we had to cultivate, we had to fertilise, and in those years a tremendous amount of capital was poured into the land and into agriculture. My hon. Friend takes not notice of that. All through those years, out of their incomes farmers were pouring capital back into the land in order that it would produce. That is something my hon. Friend does not consider.
He also points out that the number of tractors has risen from 50,000 in the prewar years to 250,000 now, but he does not tell us how many of those tractors are paid for. He does not tell us how much money is owing to the banks and to the hire purchase people by farmers. The figure is tremendous, and over the last two years has been increasing because farmers are putting capital back into the land and into building.
Then my hon. Friend makes a comparison between the rates of council houses and the rates of farmhouses. I wonder how many farmhouses my hon. Friend has been into, or whether he has read the report of a committee which has been examining our farmhouses? The council house has electricity, and all the modern amenities and services; but very few farmhouses have electricity or those services. The majority of farmhouses need completely renewing; they are out of date, old, decrepit and done for. Anyone can find this out if he goes out into the countryside and looks for himself. To compare the rates of a council house with the rates of a farmhouse today is grossly unfair, and if my hon. Friend had only considered these things I think he would have changed his attitude.
The argument of my hon. Friend boils down to this. He wants the old pre-war policy of unlimited food imports. If we again have the unlimited importation of food, with food dumped on us, down goes our agriculture, down goes our standard of life, and we are again back to the years of depression. In considering the food and agricultural subsidies I think that the position the Government have taken up is absolutely justified. To say that the National Farmers Union are laying down these figures to my right hon. Friends the Ministers of Agriculture and Food and just cantering away with it is simply rubbish. Surely Government Departments are capable of examining all these figures. Authentic figures are taken throughout the country by various universities; the costing committees of those universities are today examining the accounts of farmers and their farming methods, and they prepare authentic figures upon which all costs can be based. These are things which Ministries have at their disposal, and which they can consider.
When considering why costs rise with the development of agriculture, we can examine the question as it is put before us from time to time in this very House. Today some of our highest productive agricultural land is taken for building houses, aerodromes, buildings of all descriptions, and for opencast mining. Thousands of acres of our best productive land are taken, farmers are driven back on to the poorer land, the marginal land and hill land, and production falls. The result is that costs are bound to rise. If the mining industry had to close down our best mines would not the costs of producing coal in the other mines rise? In exactly the same way, as long as good agricultural land is taken for building and opencast mining costs are bound to rise.
When the result of this re-investment of capital in agriculture is finally felt, when we have got rid of these heavy charges of loans and debts, and when we are able to develop our land and bring it back into a more fertile state, we shall be able to produce far more cheaply than we can today, and the lasting benefit will be to the people of this nation as well as to the agricultural community. Anyone who examines the agricultural position fairly and squarely will be bound to say that agriculture is not a burden on the nation but is an asset from every point of view; and the greatest asset for the workers of our country is to keep up the standard of life of the agricultural industry. If the standard of life of the agricultural industry falls, others will fall with it.
Far be it from me to take any part whatsoever in this domestic dispute between the hon. Member for Chorley (Mr. Kenyon) and his hon. Friend the Member for Wednesbury (Mr. S. N. Evans). I can only sit back and observe, and await developments. If I may say so, I thought that the hon. Member for Chorley dealt very faithfully with the arguments put forward by his hon. Friend.
I should now like to come back to the main structure of the Budget, because upon that all other matters will depend. If that main structure is weak or in any way begins to crumble, many of the other matters we have been discussing will fall. Today, the Financial Secretary began by stating that this Finance Bill was shorter than usual. I would suggest that it might have been even shorter still. As I had occasion to say during the Budget Debate, really it is the remedy as before; and I think the Chancellor himself will admit that what we are doing is carrying on the policy which he himself initiated.
We are now in exactly the same position with regard to our financial and economic principles as we were in at the outset. Incidentally, as we know from experience, that policy has only led us from one crisis to another without any effort being made to see whether the principles underlying the policy were correct or not. What it amounts to is that the whole of this structure depends upon one factor in particular. If I might use the expression, it is the keystone in the arch of the financial and economic structure built up by the Chancellor, and that is the continuance of the wages stop. If that in any way begins to go or break away, then the whole of this structure will be imperilled.
In his Budget statement the Chancellor said that nowadays the Government of the day
must accept responsibility for the general economic health of the whole community,
and added that
the Budget itself can be described as the most important control and as the most powerful instrument for influencing economic policy which is available to the Government."—[OFFICIAL REPORT, 18th April, 1950; Vol. 474, c. 38, 40.]
Assuming that that is so, there are several aspects I should like to discuss, but in the light of our present circumstances the matter which I think must be regarded as of paramount importance is whether the Budget, and this Bill which is intended to give it statutory effect, will help the country to improve its balance of payments. In order to consider that question I first of all turn to our position face to face with other countries—and that means, what is our position and what is likely to be our position in regard to exports and imports?
It will be remembered that in the White Paper issued in February, 1946, the Government estimated that in order that we might break even our exports must be increased to 175 per cent. of the volume of 1938. We all know that that figure has not been reached and that we are quite a long way from it. My estimate is that by 1952, when Marshall Aid will have ended, we shall require to export 190 per cent. by comparison with the 1938 figure. That will depend, again, upon the maintenance of export capital. It should be remembered also, that the repayments of the loans to the United States and Canada will require a larger amount of exports than would have been the case before devaluation.
That figure of 190 per cent. must be maintained certainly for a very long time and probably indefinitely. That will tax our capacity to the utmost and, as the right hon. Member for Warwick and Leamington (Mr. Eden) very rightly pointed out, that will have to be maintained in face of increasing competition not only from the United States but also from Germany and Japan. Even assuming that we can keep down our capital exports to only £300 million a year, it will involve a very heavy drain upon our productive capacity.
How can the Government assist? By ensuring that the expansion of exports shall not be checked by internal demands, which means that it shall not be checked by inflation, which again means that it shall not be checked by over-spending. Promises on over-spending were made both in 1947 and 1949, but those promises were not implemented and Government expenditure today, as every one admits, is colossal, and there seems to be no check to it. All the time there is the possibility that it may have to increase. Incidentally, we could, as I suggested earlier, have a very interesting Debate on the extent to which more and more control over consumption will be taken by the Government, and less and less choice given to the individual. At the present moment there seems to be no check on Government expenditure, and no attempt to cut it down has been made by right hon. Gentlemen opposite and their supporters. That being so, where are we to turn? We turn to see what can happen about personal consumption.
I thought I had answered the hon. Member on more than one occasion. I told him what the principles were and I think I repeated them at least twice in this House and four or five times in the last Parliament.
The hon. Member was not long in the last Parliament, but if he cares to look up HANSARD he will find them. Is it or is it not right that, as the Chancellor said in his Budget statement, the Government should guide the economic policy of the country? That being so, if they allow the expenditure to climb to such a height that our whole economic policy is in danger, is it for me or any individual to suggest where the cuts should be made or must expenditure go on unrestrained until the whole policy collapse? I should have thought that it was the primary duty of the Government themselves to come forward with their own balanced statement on the whole position.
Let me turn to personal consumption. There will be an increase in production and, therefore, an increase in earnings, but before I deal with what will happen to that I should like to consider what part of the output in this country will be available for inland use; and the best way in which I can arrive at that is to consider what will be required for exports. I will consider it, first of all, upon our present output before I come to the estimated increase in production. Of course, there is a worsening position due to devaluation. Our present import prices are already 9 per cent. higher than they were in 1949 and our export prices are only 3 per cent. higher than they were in 1949.
If those prices are maintained I estimate that we shall need about £100 million more of goods for export this year. That will mean, on the present rate of production, that there will be £100 million of goods less for consumption in this country. In addition to that—a point which was mentioned by the right hon. Member for Warwick and Leamington—there was an adverse balance in existence last year of £70 million, which it is proposed shall be turned this year into a favourable balance of £50 million. Therefore, another £120 million of goods must be sent out of the country. Adding these two items together, it means that there will be £220 million of goods less for inland consumption. Turning to the Economic Survey, I find that the Government themselves propose to take £183 million more in consumption. There is, therefore, something like £400 million less for personal consumption. If I were going into more accurate figures I could point out, of course, that there is £30 million for deduction in purchase of stock.
I come to what is the estimated increase in production. There is an estimated increase of roughly £300 million—and I hope that is a conservative estimate. Let us, however, assume that it is true. We find that £400 million has gone and that there is a new £300 million worth of production which was not being produced last year. On balance there will, therefore, be fewer consumption goods this year to the extent of £100 million, but earnings will have increased because production will be increasing. There will, therefore, be an increased inflationary pressure. There can be no doubt about that.
Let us see what happens with regard to the revenue and these earnings. The Chancellor proposes to take out of that £400 million, £100 million extra in tax receipts. That leaves another £300 million still there as the increased earnings. That will be left. What is to happen with regard to that? Is it to be expected that the private savings will absorb a large part of that? I wish that that expectation would be realised, but we all know that private savings have been tending to decline, and are steadily declining all the time. What is left? There is then business savings. That would mean that the increased earnings made by businesses—increased profits, if hon. Members would prefer so to call them—must be kept, and not distributed in dividends to the shareholders or—because of the Government policy—distributed in higher, better wages for the workers.
Fortunately, managements on the whole—there are, of course, always exceptions to the rule—have realised the need for holding back any profits they make and not distributing them as dividends, because they have realised the great need there is for ploughing those back into business. There may be that amount of saving. But the main one will be a complete dependence upon the wage position, and unless there is a stop upon wage increases there is going to be inflation which the right hon. and learned Gentleman has feared all along and which he has been attempting to avert.
As I said earlier, that really is the keystone of the structure created by the Chancellor. That puts a tremendous strain upon individual desires and the natural instinct of every man. There is no man, wherever he may be, who does not desire and try to increase his earnings, not only for his own benefit, but so that he may improve the standard of living of his own family. It is a right and proper desire. But what the Chancellor is asking men to do is to restrain themselves in order that he may maintain his own financial and economic structure.
Further, while I am on this business saving; business saving will, of course, be made more difficult by these two taxes, the tax on lorries, which will have to come out of capital, and the tax on petrol, which will have to come out of profits. Incidentally, that will also, as we already know, not only increase the cost of distribution and the cost of production: it is already meaning increased fares and, therefore, the lessening of the possible saving working people and ordinary individuals can make.
I only wish that Members on both sides of the House would read again the report of the very interesting Debate in this House in 1928. The principles remain the same, but it depends upon which side of the House they sit as to the way hon. Members look at them, and the way in which they advance them. It will be remembered that the first Petrol Duty was introduced by the right hon. Gentleman the Leader of the Opposition, who was then the Chancellor of the Exchequer; and he, with the full accord and assent of the then Conservative Party, who were in a majority in this House, advanced the very arguments which have been advanced by the present Chancellor of the Exchequer; and they were violently opposed, in exactly the same terms as they are now being opposed by the Conservatives, by Mr. Philip Snowden and Mr. William Graham. I can say that there has been no change either in principle or in argument in this party. We opposed those arguments at that time as we oppose them now and for exactly the same reason. The only regret I have is that I have not so powerful a voice as the one who was then uttering his objections to them. I refer to David Lloyd George.
These taxes will help a little against inflation by draining off some £30 million, but the main pressure will remain, and all that will be there to stop it is voluntary restraint exercised by individual men—and the trade union leaders. One cannot praise too highly the trade union leaders. Theirs must be a very uncomfortable position when the pressure is coming from all over the country, and they have all the time got to say, "In order that we may maintain the Chancellor of the Exchequer in his position we beg of you to hold back your proper and just claims for increased wages."
If that breaks, let us just consider for a moment or two what may then happen. First of all, the money in circulation will not be increased. Let us assume that. If that is so, and one does not resort to the printing machine, what will happen? Interest rates will rise. That will mean a check upon investment. Prices are bound to rise, and again, possibly, the Chancellor will have to introduce a new check upon prices, while the desire of everyone is for a drop in prices at the present moment, not only for our own selves here, but in order to help us to increase our power of competition with other countries abroad. Prices will rise, and, as I say, if there is a check on investment it will mean inevitably unemployment. If, on the other hand, one does resort to the printing machine, and more money is put into circulation, interest rates may be pegged but prices will certainly rise. There will then be more and more inflationary pressure. It will be progressive. There will then be a new devaluation, and a new crisis, and a series of crises, and a general collapse of this whole structure. What, therefore, is the true solution?
If there is no increase in personal savings, there should be an increase in the Budget surplus. I take it the Chancellor himself will agree. But if he cannot get that surplus by increased taxation—and he knows that he cannot: we have already reached saturation point—and if he attempts to increase the rate of taxation, the amount of his receipts will be less. Therefore, if that is so—if the highest level of taxation is reached—there is only one thing the right hon. and learned Gentleman can do, and that is to decrease expenditure, and it is his duty to do it. It is his duty to inquire in what way he can do it.
As I said earlier, a promise was made in 1947, and another one again in 1949; and those promises have never been fully carried out. What it really comes to is this, that the Government prefer, rather than do their duty and build up a strong economic structure, to put a burden upon the individual to exercise this unnatural restraint. It is for that reason that I think that the Budget produced by the right hon. and learned Gentleman, and this Bill which is intended to bring it into statutory effect, are really based upon wrong principles, and may lead this country into far more dire trouble than it has yet faced.
It is with mixed feelings of awe and trepidation that I rise to speak in this House for the first time—awe for this House and all its traditions; trepidation because for quite an hour today I was convinced that this Debate had become one upon agriculture, a subject about which I know nothing. I can only hope that the House will accord me, in its true tradition, that indulgence which is always accorded to maiden speakers here. This is a subject upon which it is not easy to avoid controversy, and if I stray into those paths I can only hope that my offence will be to some extent mitigated by the fact that I shall try to be constructive and not destructive.
I believe that the people of all parties in this country are sadly disappointed by the contents of this Finance Bill; sadly disappointed because five years after the stress and strain of war they had come to expect—and I believe quite rightly to expect—some real, and substantial remission in taxation. Unhappily at this late stage today we are spending more than we spent in the last and most expensive year of the war. In those days, we did have something to show for it. We could put 1,000 bombers over Germany by night, a million men into the field, and the whole of the British Fleet was mobilised. We knew where the money was going in those days. Goodness knows where it goes today.
These minor tax changes are rather like the little game of Box and Cox. Do not they pale into insignificance when one considers the confiscatory weight of taxation which this country is now labouring under and will labour under so long as this Government's unbridled expenditure goes on? I know that we on this side of the House have been challenged again and again to say what we would do and where we would cut down—[HON. MEMBERS: "Hear, hear."] "Hear, hear," indeed; I believe that there is room for cutting down.
Think of all the Government Departments that surround us here in London. There must be many of us who, if we did not serve in a Government Department during the war served on the staffs of the three Services, and who know the wastage that goes on; for example people writing letters to others in the next room to themselves. I believe that if inquiries were made, a tremendous pruning process could take effect. Last year, the Prime Minister came to this House with the figure of £250 million. That used to be a big figure in this country's finances. It represented the cuts made. At every meeting which I held during the General Election I said, "Is there a single person in this room in any way affected by these gigantic cuts?" There was never a murmer or an answer. That is why I ask the Chancellor of the Exchequer to look into this question very seriously, because I am sure that if cuts had to be made they would and could be made very quickly.
To return to the details of the Finance Bill, I represent a constituency which lies in the outer suburbs of London. In the vast majority, it is inhabited by factory workers and black-coated workers of the lower financial degrees. These people have to travel long distances daily to their work, and they are grievously distressed, one and all, no matter to what party they belong, by this additional tax of 9d. per gallon on petrol, because they know that it must go hand-in-hand with a rise in fares which will affect them every day on their way to work. This tax, unfortunately, cannot be contained in a vacuum of its own. If it were only to apply to the basic ration coupons that would be all very well. As it stands today, it must of necessity seep into every inlet and channel of our industrial and national life. That can only have one result. Such a sharp rise will have its effect gradually all over the country, and the bogy of inflation and the high cost of living which worries the Chancellor of the Exchequer and the nation will become even larger.
It is true, I grant, that it is to some extent offset by the reductions made in the lower status of taxation. I for one welcome these reductions, but I wish that when they were made the Chancellor could have seen his way to do something about the aged, the crippled and the needy in respect of postwar credits. I admit that some four years ago a slight compromise was made for old-age pensioners of 60 and 65. Now I ask the Chancellor of the Exchequer to consider this question: What about the people between 50 and 60 who have fallen upon evil days and who find it difficult to pay their Income Tax? What about people of that age who are suffering from incurable diseases? I see no reason why that particular age group in these circumstances could not receive special, individual treatment.
Pray do not think that I am suggesting that further boards and tribunals should be set up to look into their individual requirements. We have plenty of tribunals in that respect. Perhaps, however, the rent tribunals, which have quite a lot of time on their hands, might go into cases of hardship and recommend them for consideration to the Treasury. The difference which it would make to the vast expenditure which goes on every year would be slight, but the difference which it would make in those homes would, mark my words, be of very great consequence.
The Government's greatest problem in the months that lie ahead must of necessity be this matter of the wage freeze. We on this side of the House appreciate the patriotic, noble manner in which the trade unions have held back; but for how long can they go on if the cost of living is to continue to rise? I should have thought that this Finance Bill was the one instrument which the Government could have used, if they cared to do so, to stem this rising tide of inflation. There is absolutely nothing in the Bill which attempts in any way to do that. Every day we see savings decreasing instead of increasing. Something, somehow, has got to be done about it.
Nothing has been done for the middle-classes—that section of the community at times so much derided. They are the people who in the past have built up the economic stability of this country, for, although they have never had much money, they have always relied upon themselves and have always been too proud to accept assistance from the State. If ever there was a section of the community which the Chancellor of the Exchequer should cherish and keep alive it is them. Nothing has been done for them. Many of them, I know, in my own constituency are at their financial end and have drawn upon their savings to the last possible degree to pay the crushing taxes which now exist.
I think that it was in the Debate on the Budget, or perhaps it was earlier, that the Chancellor of the Exchequer said that if the voluntary savings of individuals were insufficient the Government must itself make up the deficiency in the nation's savings by accumulating a Budget surplus. I should have preferred to see that Budget surplus used in a different way. I would have liked to see the Chancellor use the whole of it in tax remissions. I would have liked him to take that chance. It would have been a risk indeed, but it would have been taking a risk with the loyalist and most responsive people in the world; a people who do not like to live on expediency, but a people who, if they are told the stark, naked truth and exactly what is required of them, will respond to a man.
If the Chancellor of the Exchequer some weeks ago had been able to come to the Despatch Box and say that the whole of this surplus would go in tax remissions but by the end of the year we must see the equivalent in savings in this country, I am quite certain that the whole nation would have responded to that appeal. Think of the psychological effect of such a tax remission throughout the country. Think of the difference it would have meant in every home and to every man who looks to his future, and think, above all, of the difference it would have have made abroad, because there it would have been seen in all certainty that once again England was reverting to those principles of thrift and enterprise which have made us for generations the greatest trading nation in the world.
I am very glad that the pleasurable duty should fall to me of congratulating the hon. Member for Ruislip-Northwood (Mr. F. P. Crowder) on his maiden speech. I regret to think that it is almost 20 years since I made my maiden speech, and I still remember the anxieties with which I approached it and the very great kindness with which it was received. I sincerely congratulate the hon. Member on his speech, which was beautifully delivered, persuasive, clear and sincere. We hope to hear him speak on many other occasions. I should also like to congratulate the hon. and gallant Member for Finchley (Captain Crowder) on the great pleasure he must have had in hearing his son make his maiden speech. That is not too frequent an occurrence in the House, but we are all very human in these matters and we on these benches have learned to rejoice with those who rejoice. We are very glad that the hon. Member's severest critic must be more than satisfied.
I should like to say something congratulatory to my right hon. and learned Friend, but I am afraid that I have one or two remarks to make which are somewhat critical. My right hon. and learned Friend, however, is to be congratulated upon introducing a Budget at all after what was said last autumn about his future, the future of the Government and of the country, and the most fearful things that lay ahead. It seems rather a remarkable thing that we are sitting this afternoon, comparatively calmly, discussing this Finance Bill with some hope, at any rate, of living tomorrow, next week and the month after. [Laughter.] I am speaking of the nation and not of the Government. The Government have no need to doubt that. Their reliance is upon the desire of Members not to repeat the performance of a couple of months ago, and the laudable desire of Members on both sides to have something like three months holiday with pay, which none of us would lightly forego as the prospect gets closer and closer.
Having congratulated my right hon. and learned Friend on introducing this Bill, I should like to draw attention to one or two matters in regard to it. We have heard a great deal about the wage-freeze. I know something about it, because the profession to which I belong has never been noted for making great demands for increases in salaries, nor has it been in receipt of large salaries. There is the famous case of the Scottish elder who put it in a nutshell at a recognition meeting for the new minister, when he prayed to the Lord to keep him humble, as was the Lord's duty and added: "We will keep him poor, as is ours."
We have not made untoward demands on the community. We still marry people for roughly the same fees as 20 or 30 years ago, and I should not like to embarrass my sex by proposing any increase it what is likely to be a serious expenditure. For that matter, burial fees have not increased either, although that is not a matter about which I should like to say very much at this moment, there being occasions when one can have all kinds of anticipations.
I hope and believe that the workers have realised the importance and the gravity of the situation that confronts us, but I also believe that they realise something else. They have responded magnificently to the call of the Government and of the leaders of all parties, but they are beginning to wonder whether the time has not arrived when there ought to be some let-up. They are getting a little anxious about these repeated requests to produce more and to work harder without any encouragement of a let-up.
That is what puzzles me about this beer business. I am not a great authority on this subject, and I have no personal axe to grind in the matter. I shall drink no more beer now that its gravity has been increased, and I should not have drunk any less had it not been increased, but I hear a great deal about it. I represent an industrial constituency which has been well educated in writing, at least, for I have collected a great many autographs. I find that my constituents ask a great deal about cheaper beer, but I have never had any requests for stronger beer. I am told that the greater gravity will make the beer more potent, and I am informed—I can only pass on hearsay evidence—that beer gives men better vision, that a man may see two where there was only one and sometime something that is not there at all. I can understand the greater potency if it is for the purpose of seeing more than is in the Budget.
My point is that this is going to cost £3¼ million which I should like to see diverted towards paying post-war credits to certain classes. I was very glad that the hon. Member for Ruislip-Northwood mentioned this question of post-war credits. It is a very fine thing, when a Member speaks for the first time in this House, that he should refer to people in trouble and difficulty. I am particularly concerned with the position of widows left in straitened circumstances and who cannot draw their post-war credits. I hope I am not putting it too strongly, but I am beginning to feel that it is almost immoral to hold back this money from people like that at this time.
There may be cases where the financial hardship is not so great, but because people do not receive their post-war credits they draw on their war savings. I doubt, therefore, whether the Chancellor is very much better off in many respects. I hope that he will be able to consider this question of widows left in the most distressing circumstances. People do not understand the niceties of our finances, but feel that they are being deprived of what is theirs.
I am not a great authority upon petrol, but I do not think the Financial Secretary meant quite what he suggested, that motoring is a matter of pleasure. I think that motoring is a perfectly proper thing, and I am glad that no longer is it the perquisite of any class of society. Today there are large numbers of working people, due to the full employment policy for which my right hon. and learned Friend must always take a large amount of credit, who can run cars and at weekends take out their families. I used to object to motoring in the days when people took their cars on the Sabbath to golf courses, but now that working people can take their families to church in their cars it is quite a different matter. I am sure that men and women work harder during the week when they have the thought of a little weekend trip to the lovely vales of Worcestershire to see the fruit trees in blossom at this time of the year, or to the gardens which can refresh them. These things are not pleasure but as much part of their lives, as bread.
I understand that owing to this tax the spirit used for dry cleaning will also be affected, and that there will be an increase in the charges for cleaning and renovating suits and costumes and all the rest of it. Not all can afford to pay 30 guineas for a suit. That plus the increased transport charges will bear very hardly upon a great many people, and not all of them will benefit in the reduction of Income Tax. I am grateful to my right hon. and learned Friend for that concession, because I shall benefit to the full extent and I will not have any more to pay for petrol. I can see that benefit without the increased gravity of the lubricating spirit and I am grateful for it, but there are a large number of my fellow men and women who will not benefit.
For the low paid workers there will be no remission of taxation, and they will have to pay for the very taxes which the Financial Secretary to the Treasury told us were being made to pay for the reduction in taxation. That does not seem to me to be quite fair shares for all, because they will be paying for me and I have no desire that they should. I wish something could be done to relieve and encourage them. That is not perhaps as good a story as ought to come from these benches on the Finance Bill, but I put these matters forward in a gentle spirit hoping that my right hon. and learned Friend will be able to do something for these people.
There are just two other matters which I should like to mention before I sit down. I want to make an earnest appeal for some more consideration for disabled ex-Service men, who have to use motor cars and petrol driven machines for their transport. It would be a dreadful thing if those who had lost their independence of movement and all the other faculties which we have and enjoy so much were further penalised. We should not be here at all in this House even differing from one another, if it had not been for men like these and the sacrifices they made. Neither this House nor the country must ever forget that. I beg the Chancellor to consider whether he cannot make some concession to these people, and if he does I will forgive him for the gravity of the beer and all the other things, because this means so much to these people.
I want to raise a matter, which may seem a small thing. It is the Purchase Tax on batteries for certain types of radio receiving apparatus. These are the types which are mostly used by old age pensioners, who have to pay twice as much licence duty as they used to pay. This is not the place to speak about what they get for their money—nor would I be allowed to do so—but they have to pay double for the licence, and if something could be done to ease the Purchase Tax on these batteries—I do not think the tax is very much—it would mean a great deal to people who today are finding that 3d. or 4d. extra expenditure in a week is a matter of disequilibrium.
That is all I desire to say, and I should like to close as I began. I think we ought to be grateful, after all we went through in the war and in the years since, that we are still able to present a Budget, as well as look forward to prosperity and to a continuance of employment. I hope that some let-up may be given to the people upon whom we depend, and that the people, whose work has produced our wealth, should have, as I have always advocated, the first share of that wealth and also the last share.
This is the first occasion on which I have had the opportunity of addressing this House, and I would ask hon. Members to show their usual indulgence and I hope reasonable tolerance of any shortcomings in my speech.
I want to spend a few minutes on the subject of the relationship between the Government's financial policy, which is exemplified in this Finance Bill, and the wage-freeze policy. It has become abundantly clear that there is a very definite danger of the whole barrier of wage restraint crumbling into ruins in the near future. Therefore, I was in entire agreement with the hon. Member for Gloucestershire, South (Mr. Crosland) when in the Budget Debate he argued that in view of the present proposals of the Government, it seemed highly likely that they would have to make some spectacular intervention in the field of wages before the autumn is out.
We are all agreed that any substantial and appreciable rise in wages in the near future would be extremely damaging. At one stroke it would wipe out all the benefits of devaluation, such as they are, and it would reverse the trend towards the overall balance in our dollar trade, which has made such very satisfactory progress during the past few months. The Financial Secretary to the Treasury this afternoon said that, roughly speaking, this Finance Bill is the same mixture as before, and the Chancellor of the Exchequer has said something similar. A most important ingredient of the mixture as before was the Chancellor's policy of freezing wages, salaries and dividends.
One is driven to the conclusion that so long as the Government continue with their existing financial policy, so long will the Government be forced to try to maintain some form of wage-freeze. If this is so, it seems to be quite incredible that the Ministers concerned are not prepared to come out completely and clearly in favour of a national wages policy, which is the only thing that makes any sense of a wage-freeze. In any case, I should have thought that that would have been sound Socialism. Here I should like to recommend, in all humility to hon. Members opposite, a re-reading of that most lucid pamphlet "Keeping Left," which I and many of my hon. Friends at the last election found to be the only clear and coherent exposition of Socialist policy which was published at the time of the election. It would be fair briefly to summarise the policy by saying that it is one of permanent controlled inflation.
The inevitable result of a policy of that sort is a permanent upward pressure on wages, and, therefore, the authors have come to the very natural conclusion that the only logical outcome of that is a national wages policy, which is then briefly sketched in. It is not my purpose on this occasion to go into all the merits or demerits of that particular Socialist thesis, except in so far as it has a reference to the wage-freeze. I submit that as long as we have a measure of inflation in our economy and continual rising prices the Government will be forced to continue some wage-freeze policy. This in turn will be quite unworkable and in many cases utterly unjust, unless backed by a national wages policy. I would hasten to add that I have not the slightest faith in a policy of controlled inflation; secondly, I firmly dislike the wage-freeze; and, thirdly, I abominate a national wages policy.
I should like, therefore, to turn to the alternatives to this very dangerous course, upon which we are set at the moment. The first essential, I suppose. is quite obvious. We must get rid once and for all of the remaining inflationary pressure in our economy, which seems to be an inseparable companion to Socialist rule. It must be done, too, before we abandon the wage-freeze policy. Consequently, we must try to make those who are at the moment concerned about higher pay understand that high cash wages are not the only or even the best method of obtaining higher real wages. There is the alternative of lower prices, and the natural precursor to lower prices is lower Government expenditure and a corresponding reduction in taxation.
We can all perfectly well appreciate the ordinary wage-earner's point of view at present. He is faced, on the one hand, with ever-rising prices, and, on the other, with very large figures for gross profits shown year after year by the firm for which he works. As he feels the pinch he very naturally thinks that the simple solution to his problem would be for him to have a larger share of the gross profits of the industry in which he works. There is no doubt that in certain cases that would be perfectly right and fair, but in the vast majority of cases, as the Chancellor knows and as he has stated, these profits are not excessive when it is realised that after paying heavy taxation the firms have then to provide for the modernisation and expansion of the industry.
A simple illustration is given by the shipping industry. Let us take a shipping company running one of the great Atlantic lines. I understand that before the war one of those ships cost about £4 million, and, of course, the depreciation allowances were based on that figure. After 25 years have gone by and the time comes to replace that ship, it will cost £12 million at the very minimum, which is three times the figure allowed by the taxation authorities for depreciation. A difference of roughly £8 million has to be found by the company, presumably out of reserves which have been set aside out of their gross profits.
In order to set aside £8 million in reserves, a company has to make a gross profit before taxation of something like £15 million. That is a colossal sum of money, yet it is only what is absolutely necessary to keep a fleet modern and in a condition in which it is capable of competing for the traffic on those routes and so earning a livelihood for all the people employed by the company. That is £15 million in order to stay in the same relative position. I really believe that the Red Queen would have been hailed as a financial pundit at this time because we have to do an immense amount of running to stay in the same place.
I wonder if the Chancellor could find a scheme which would enable earnings to be relieved of taxation when they are set aside in companies' accounts for replacement and are then so used. Obviously if they are not used for replacement they become subject to taxation. That kind of scheme seems to have a very great advantage because any concessions which the Chancellor made along those lines would increase the amount of private capital saving. He would therefore not have to try to recoup himself with any alternative method of taxation because he could simply reduce his below-the-line surplus in the Budget by a similar amount. The scheme seems to have very few drawbacks. The only alternative if it were not a reasonable proposition would be a reduction in the tax on undistributed profits in companies, but I do not think that that would meet the case as well as the scheme which I have suggested.
A further point which leads me to suppose that the Chancellor will have great difficulty in holding back the tied wages in the coming months is his rather optimistic figures for the amount which he expects in the way of capital formation out of private savings. This figure is supposed to increase to £160 million over the 1949 figure. That does not include the increasing amounts which are put aside in the way of depreciation allowances, and surely very little of that—even none of it—can be expected to come from increased personal private savings. Therefore, we must presume that it will come out of profits placed to reserve from companies' trading. If that very greatly increased figure is to be obtained the gross profits that have to be earned by private industry have to rise by something well over £200 million in the coming year. I really cannot see how he can possibly hope to restrain wages in face of ever-increasing profits of that kind.
Higher prices and higher profits are the inevitable results of the Government's past and present financial policy, and if the Government pursue them I can only think that it will lead to a very grim day of reckoning for all of us. If they are determined to pursue these existing policies it seems to me that, quite logically, they must proceed towards a national wages policy sanctioned by the Cabinet as suggested by the authors of "Keeping Left." Should this course of action not commend itself to those who are now leading the very rapid retreat from the pure doctrine of Socialism, they must turn their steps in an entirely different direction and pursue a policy which I shall briefly summarise as follows.
Firstly, they must make a concerted and final attack to obliterate the remaining inflationary pressure in this country. Secondly, they must reorganise the machinery of taxation so that the gross profits accurately reflect the real surplus wealth created during the past year by various trading companies. This sum, after being duly emasculated by the Chancellor, would then be the true sum available to be allocated and divided up for the expansion and development of the industry for the benefit of the workers in the industry and for the benefit of the shareholders. Then the trade union leaders would see much more clearly where their charges of excessive profits were justified and where they were not.
Thirdly, when the first two of these objectives have been achieved and prices and profits cease to rise and even start to decline—but not before—the Government should remove the clamp on wages and let us get back to genuinely free collective bargaining again. Then the efficient and expanding industries, suitably prompted by trade union leaders, could start paying higher and higher wages and so gradually draw off labour from the inefficient and the contracting businesses.
I believe that this is the way of our salvation. I believe that it is the only way to ensure an efficient and flexible economy in this country which will emerge triumphant from the extremely competitive conditions which now lie directly ahead of us, and that only thus can British industry harvest for all our fellow countrymen the better, higher and fuller standard of life which they so richly deserve.
I have great pleasure in congratulating the hon. Member for Oswestry (Mr. Ormsby-Gore) on making such a fine contribution to his first Debate in this House. The name he carries is well known to old Members of this House and to students and others who have been interested in politics, and it is evident that more things are hereditary in this House than people give it credit for. We hope he will continue to make contributions of the same thoughtful character in the future.
What has struck me about the discussion today has been the amount of misconception there seems to be in regard to what is called "Government expenditure." The so-called great increase in Government expenditure is very largely because the Government have assumed a great deal of the expenditure which was formerly the responsibility of private individuals and institutions. The fact that the Government pay for the hospitals, instead of the public doing so through some other medium, does not mean that there is any increase in expenditure. It would be quite an easy matter for the Government to reduce Government expenditure by transferring the hospitals to the local authorities and by transferring the food subsidies to the people to pay in the shops.
The question is not whether or not Government expenditure should be reduced in these ways but whether the policies which entail the Government spending that money are correct or not. The Opposition are justified—it is their duty in this House—in criticising and, if necessary, exposing any mistakes which there may be in the conduct of the affairs of the House, but it is also their duty to suggest the alternative if the policies pursued by the Government are not correct. So far as the Opposition have not done that, they have failed today to justify the criticisms which they have made. Indeed, some of the statements that have been made have been extremely irresponsible.
This continual reference to the wage-freeze is in itself an irresponsible statement because there is no such thing as a wage-freeze as the policy of the Government. The policy of the Government is a restriction on personal incomes and expenditure of all kinds, and the continual suggestion that the lower wage earner can have his wages raised without setting free the income and expenditure of this country is an extremely irresponsible encouragement of a breakdown of the suggestion of the Government for personal restraint on incomes. I hope, therefore, that the Opposition, in this Debate, will live up to their responsibilities and, if they are criticising the policy of the Government, will state clearly to the country what alternative they would propose. So far, they have not responded to that challenge on any occasion of which I am aware.
I wish to speak for only a few minutes to deal with a rather different aspect. The right hon. Member for Warwick and Leamington (Mr. Eden) quite rightly dealt with the Budget as part of a complete system of economic control. The Budget is no longer a method by which we merely deal with Government expenditure and raise the money for it, but a method of redistributing the income of the country, stimulating certain parts of enterprise and restraining others. Indeed, the justification for the tax on commercial vehicles is because that expenditure, so far as capital investment is concerned, was rising considerably. Therefore, it is put on as a restraint. That naturally will raise money and the money has been distributed in personal spending power by a reduction in Income Tax. Therefore, it is not just a fiscal arrangement; it is part of the national economic planning which is exercised partly through the Budget.
We must face the question: Are we going to abandon planning or continue with it? As I understand the Opposition, they say they will abandon planning. To my mind that would lead to disaster and a complete breakdown. In fact, my criticism of the hon. Member for Wednesbury (Mr. S. N. Evans) today is that he is suggesting a complete abandonment of the planning policy of the Government for agriculture.
I will describe one bit of it in which I hope the hon. Member will support me. If we were to abandon the guaranteed prices for agriculture, that would be an abandonment of planning in that sphere. If we were to abandon the plan for developing agriculture by opening up and using the marginal land of the country to the full, leaving agriculture to the competitive element of the scramble that it had to meet prior to the war, that would be an abandonment of planning in that sector.
My purpose is to deal with the industrial question relating to the development areas. I plead with the Government and the Chancellor to ensure that in the committee which is dealing with taxation and the results of taxation on industry, planning will go a stage further than so far we have taken it. The right hon. Member for Warwick and Leamington referred to risk capital, and I think we must admit that, with taxation at its present level, the opportunities for people to invest or take risks in opening up industries in development areas and places where they are not likely to be profitable, become less and less likely. We have opened up quite a number of development areas. In the Highlands we set free a great area as a Highland development area. So far, we have not been able to induce one industry to go into that area, nor has any industry developed in that area although certain inducements have been offered.
Now the question we must face sooner or later is where do we go from there, if, with all the encouragement given to private enterprise, we are unable to get industries to go into those areas? Are we to allow those areas to decay—Greenock, the Highlands, the Merseyside? Are we to allow unemployment and misery to develop in depressed areas again in the future, or shall we take some steps as a Government to see that industry is properly distributed? Naturally, industry will go to the place where it can make the best profits with the least trouble, and if the country says to the industrialist, "You must not go where it is easiest for you to work, you must go where it is most difficult and where you cannot make profits," that policy must fail.
We have not got a direction of labour policy or a direction of industry policy. We depend on the inducement of payment by results to the worker to get him to increase his effort and output. If we ask industry to go to these development areas, then the Government must provide the industrialist with inducements. If we fail to induce the industrialist to go there, it brings us up against another problem which is whether the country itself must take some steps to retain its population in those areas, and to make use of the social services already established there, which are a great national investment. I could suggest ways and means because the Government have great research stations of their own. They have great establishments which they must put in some part of the country or another, and many of these could be distributed in such a way as to counterbalance the difficulty private enterprise must have.
I say quite frankly that in most of these things it is preferable that it should be done by private enterprise being induced to go to those areas but, failing that, the Government and the country must consider whether some other steps cannot be taken to see that industry goes there. I will suggest one method which might be tried. If the Government request industry to go into a development area, there might be some special concession regarding taxation in the early years so that the industry might have a chance of establishing itself. It must either be done in that way or by subsidy, but in any case this problem must be dealt with.
After all, the whole purpose of industry in this country is for the sake of the people who live in it, and it is wrong that we should allow the population to concentrate more and more around London. Other areas in the country must be de- veloped, and I speak especially for the great area of the Highlands. We have been able to stop depopulation there, and we hope we shall be able to maintain that position. The planning of agriculture has done much good for the Highlands but, nevertheless, we still have the problem that although we have established development areas the inducements have not attracted private enterprise to them. I would like to see the committee which is to discuss taxation survey the country not only from the point of view of the present economy but of future economy, so that planning will ensure that industry is distributed throughout the country in the best way to suit the population. It is not economy to have taxes coming from a successful industry near London if the money obtained in that way has to be spent in maintaining people in idleness in some other part of the country.
The country is an economic unit; it is a social unit. It must be planned as such, because, after all, the finest wealth which we produce is our men and women. In the past the Highlands have sent men and women, not only all over the country, but indeed all over the world to play their part. We certainly regard the country as one of the finest breeding grounds of fine men, and I hope that for the Highlands, the Merseyside and for all the various development areas, some further policy will be enunciated in the near future.
I ask the House to listen to me with the special indulgence which it reserves for those who speak before it for the first time, and if I transgress the conventional bounds of moderation, I ask the House to reserve its wrath for a future occasion. Whatever I may say, I am chastened in advance by understanding for the first time the full wisdom of the old text:
God is in Heaven, and thou upon earth: therefore let thy words be few.
I have the honour to represent Cardiff, North, a constituency, which, as most Members of the House will know, lies at the heart of the Welsh capital. It is distinguished in many ways—in its incomparable Civic Centre, in the National Museum of Wales, its University College, Cardiff Castle, and, I think I should add, even Cardiff Arms Park. It is also distinguished, or at least distinguishable, by the fact that alone of Welsh
towns it sends a Conservative Member to this House.
I should like to discuss the effect of the Bill upon old age pensioners in particular. My choice has been influenced in part by a letter which I received recently from a pensioner, which I will read to the House:
I write to you as I see you are trying to help us old age pensioners. I am 71 years old, my wife is 68 years old. I am by trade a rat catcher all my life, and worked in the Houses of Parliament and other places. I have lost my work as the Food Minister has taken it over.
I think that these next words should be weighed very carefully:
I have saved up and live in my own house. I have a good wife, I love her, but sometimes after being married close on 50 years we have to think how to live. She has to go out to work after 50 years. I am proud and I do not want charity.
He goes on to tell me that—
I have sold my ferrets and dogs and my net traps, but I may do the work only they say I am too old.
I suggest that while letters of that kind are written, it is a mockery to talk about our country as being already a welfare State.
The Bill should be considered, not simply in isolation, but' in relation to existing social conditions. Things do not seem to me to have got any better for old age pensioners since 14th May, 1948, when the chairmen of five branches of old age pensioners' associations in the Rhondda—where they know much about poverty—wrote to the "Western Mail":
After three years, old age pensioners are now in worse condition than before the Labour Party came into power. We find that the cost of living has gone up to such an extent that the aged people will have to go without the vital necessities of food and other things that matter in life.
I do not seek in a maiden speech to apportion fair shares of blame for that. But that is the voice of the Rhondda, and the House will know what has happened to the cost of living since May, 1948, when that letter was written.
The Bill does nothing for the old age pensioner. Dearer petrol will mean dearer and less frequent visits to and from relatives. It may in some cases put the price of the Summer outing to which they so look forward beyond their purses; and it will be reflected in rising prices in
shops, which in turn will be aggravated by the higher cost of distribution which will eventually be caused by the increased tax on new commercial vehicles. Very few will benefit from Income Tax relief or from stronger beer. The House may recall that the National Secretary of the Federation of Old Age Pensioners' Associations, said of the reduction in the price of beer after the last Budget:
This will not cheer the old people. Many of them had to give up beer long ago.
The Bill fails to tackle the problem of rising prices because it fails to reduce excessive Government expenditure.
Hon. Members opposite have asked during the Debate what items of expenditure we on this side would cut and by how much. On a later occasion, when I am more open to be challenged, I should like to give a fairly substantial list; but I should like to give now two examples which I have discovered by process of Question and answer in the House. There are today, for the benefit of the Cabinet and other Government Ministers, 38 cars. These cost the taxpayer £37,600 every year. In addition, in the official car pool there is an average of 573 cars which cost the taxpayer £383,000 a year. Comparing those figures with 1938 it will be seen that in those days only the Home Secretary and Service Ministers had cars provided for them. No comparable figures are available for the official car pool. I would cut this expenditure by 75 per cent. for a start and so save the taxpayer £300,000 a year.
Hon. Gentlemen opposite sometimes say, "But even such cuts as those would not save enough to reduce taxation or to decrease inflationary pressure." In the first place, that is no argument for waste, and secondly, that is only an assumption until the policy of detailed economy has been applied to every field of State expenditure.
A further assumption which is made—it is one which I resent very much—is that the Tory way to cut Government expenditure would be to cut the social services. Grant for the sake of argument, and for that reason alone, that such a charge is true, I should like to ask this question. What principle would separate it from the Socialist policy, as we have known it, of maintaining a high level of Government expenditure, partly at the price of reducing the purchasing power of social service benefits and so cutting them in that way? But the old age pensioner does not have to choose between the "cosh" of a pension cut and having his pocket picked by inflation.
I think that there is a third policy, which is one that is avoided by the Bill. When hon. Gentlemen opposite say that they do not know what that policy is, they must surely have been aware of the policy on which the last election was fought by the party on this side of the House, for which almost half the nation voted. It is only when that policy is applied in full that the cost of living can be brought down, that private savings can again be renewed, and the cuts already made in the social services can be restored.
It falls to my lot, even though I may feel a little unworthy, to compliment the hon. Member for Cardiff, North (Mr. Llewellyn), who has just made his first speech in this House. I can with some appreciation understand the ordeal which he has undergone during the last few hours by saying that even though I have been here for five years, I am almost as scared of speaking today as, probably, the hon. Member who has just spoken here for the first time. Therefore I say with feeling that I congratulate him. He spoke with great clarity and sincerity, and even though there may be on both sides of the House people who do not agree with all that he said, I am sure that as Parliamentarians, both amateur and professional, we hope that he will time and time again, make his contributions to these Debates.
Having worked off a little of my nervousness in congratulating the hon. Gentleman, I feel that at this juncture I should declare my interest, in view of what I have to say. As a Co-operative Member of Parliament I am speaking on behalf of the Co-operative movement, but in so doing my remarks will apply equally to progressive private enterprise. I wish to deal with two aspects of these financial proposals; first in respect to petrol, and secondly in respect to the 33⅓ per cent. tax on commercial vehicles.
We of the Co-operative movement are concerned about the increase in the cost of petrol, largely because it will mean a heavy increase in the cost of delivering coal, bread and milk, particularly when there is a door-to-door delivery. The door-to-door delivery applies mainly to milk and bread. We are very much concerned that, once again, farmers seem to be in a privileged class; they are spared paying the increase for fuel for their farm vehicles, and we cannot see the sense in the tendency to increase the cost of bread and milk when an attempt is being made to keep down the cost of food production.
The 33⅓ per cent. tax on commercial vehicles will also tend to increase the price of food. It will, of course, considerably increase the costs of the Co-operative movement in delivering bread and milk. Once again the farmers escape the impact of the tax on farm tractors, and for the life of me, I cannot see that farm tractors are more important than the vehicles which convey milk in bulk, or even the vehicles which take bread from bakeries to distributing depots. I have some sympathy with my hon. Friend the Member for Wednesbury (Mr. S. N. Evans), because there is evidence that private enterprise farming is in a privileged class, whereas private enterprise on the distributive side and Co-operative enterprise have to pay in taxation every time.
The glaring anomaly is not so much on the petrol vehicle as on the electrically driven vehicle, on which there is a 33⅓ per cent. tax. At present there are in this country about 15,000 electrically driven vehicles, and it is estimated that the use of these vehicles saves 14,500,000 gallons of petrol, or 2½ million dollars a year. The charging of the batteries takes place in off-peak load periods, and the cost of the 200 million units required all go to swell the income of the nationalised electricity authorities. Other factors encouraging the use of these vehicles are that, with them there is an absence of noise and petrol fumes, and they are safer to the public because their maximum speed is only 16 to 18 miles an hour.
Another aspect which I hope the Chancellor will consider is that an electrically driven vehicle costs roughly £200 to £400 more than a petrol driven vehicle of the same size. But that is not the worst aspect. I believe it is fantastic to apply a 33⅓ per cent. tax to the electric battery and, in addition, to the charger, which is an essential component. It may be that the Chancellor thinks that if he relieves these vehicles of this tax there will be a switching over from petrol driven vehicles to electrically driven vehicles. Investigation will show that to be an illusion, because the electrically driven vehicle is only of value for short hauls, or for door-to-door delivery, so that it is no substitute for petrol driven vehicles.
Yes, but I would point out that they cost from £200 to £400 more than a petrol driven vehicle of the same size.
I wish to put to the Chancellor four points to support the giving of some concession to the electrically driven vehicle. First, they can only be used for short hauls and will thus not deprive the railways of any business whatever. Secondly, in the interest of cleanliness and economy of labour in making door-to-door deliveries it is advisable to encourage this type of vehicle. Thirdly, and most important, they save dollars. Fourthly, if the object in introducing the tax is to encourage more of these vehicles to be diverted to overseas markets, that does not apply because they are of no use in other countries where the distribution problems are entirely different from our own, and every attempt that has been made to sell them abroad has been a complete failure. There is, therefore, no force in that objection.
For these and other reasons I hope that the Chancellor will examine the tax on these vehicles. I understand that the cost of remitting it would be no more than £500,000. I further suggest that to inflict a 33⅓ per cent. tax on electric batteries and on the chargers, both necessary components, is most unjust. I should like to know whether replacement batteries—because the battery will not last the life of the vehicle—are also subject to the 33 per cent. tax. On those grounds, and for many other good reasons, speaking on behalf of the Cooperative movement, I hope that some concession may be given.
I am sorry that the hon. Member for Wednesbury (Mr. S. N. Evans) is not in his place because I hoped that I might have brought a little light into the darkness of his mind concerning farming matters. He said it was time the House had a look at the method of costings in the annual price review. As Parliamentary Secretary to the Ministry of Food, he had a better chance of doing that than probably anybody else here, but he seems to have maintained the tradition which has become a standing joke in the farming world, that the Ministry of Food and the Ministry of Agriculture never communicate with each other. Had he wanted to, he could very well have had access to those costings and seen how the prices were arrived at.
What strikes me about his remarks is that there is a possible danger in them of discrediting a system of fixing farm prices which has been very carefully and conscientiously built up over the last few years. It was started by my right hon. Friend the Member for Southport (Mr. R. S. Hudson) during the Coalition Government and has been carried on in this Government by right hon. Gentlemen opposite. That system is the whole basis of our present farming economy. I admired the courage of the hon. Member for Wednesbury and the fluency with which he put over his case, but I admired that more than I admired his knowledge of the subject.
I would like to meet his friend who wrote to him about potatoes. I was trying to calculate what would be the profit on potatoes, if they worked out at the level suggested by his correspondent. I calculated it to be about £60 million, or a quarter of the total profitability of the whole industry. Every one who knows anything about farming knows that the figure of £10 an acre which we were given as the cost of growing potatoes is just complete nonsense. In fact it is about £40 or £50 an acre, which makes a very different picture. If the hon. Member is prepared to accept information of that kind without making any attempt at all to check it up, as he could easily have done, it seems that he starts either with a prejudiced mind, or with a mind which is prepared to be gulled by old wives' tales.
The hon. Member quoted a figure of 9½d. a gallon for milk. I have seen milk produced in a good many countries in the world, but I should be glad to know who can produce it at 9½d. a gallon. In the present picture of food subsidies the subsidy on milk takes rather more than £100 million a year. That is getting well towards half the total figure of the sum expended on home-grown produce. Some £30 million is on milk given away, in other words a welfare grant, and the rest is a subsidy of 2d. a quart, no more.
In fact, if our milk were sold retail today at the cost price, it would still be approximately half the price which milk is now costing in America. When I was in the neighbourhood of New York last year I was interested to discover that the retail price of milk was about 28 cents a quart. Hon. Members can work that out at the present rate of exchange and they will discover that the price here today, without subsidy, is about half the price in America. I give these two examples to show that in the speech which was so convincingly and fluently delivered, completely unreal figures were given by someone who had been led away by prejudice and was not prepared to look at the facts as they really are.
In regard to the annual price review, the hon. Member said that the National Farmers' Union was a body concerned with price and profit boosting, and that they could not be regarded as an impartial body at all. Of course they have the interests of their members to look after and would be failing in their duty if they did not do so. But it is worth remembering that almost throughout the war period, when procurement was the main aspect of food supply, prices paid for home agricultural produce were below world prices and farmers were quite content to accept what was regarded as a reasonable level of profit at a time when, if they wished to exploit their bargaining position, they could have demanded a very much higher level.
I think it is only reasonable now, that the country generally and this House particularly should give credit where credit is due to the Farmers' Union for the restraint they showed when in a very strong bargaining position.
The hon. Member is making a point that the National Farmers' Union, representing the farmers, showed a degree of restraint. Am I to understand he is making the point that it is reasonable that they should not show that restraint now? Does the hon. Member agree that engineers showed restraint and are still showing restraint?
The hon. Member has made a point which is quite irrelevant to the point I was making. Of course the Farmers' Union are still showing restraint and as hon. Members opposite will know, in this year's price review the extra cost which fell on the community was borne by the farming industry as to two-thirds, and only one-third was recouped by higher prices. Throughout they have shown a very proper sense of national responsibility.
The remark of the hon. Member for Wednesbury that farmers were only concerned to boost prices and profits was a complete travesty of the actual facts. I feel that, coming from an ex-Minister who had an opportunity to look into the methods of costing, the remarks were completely unworthy. In the actual system of price fixing a very careful cost structure is built up by the Ministry of Agriculture on one side and the Farmers' Union on the other. The whole industry is very carefully costed and each year in the price review the various items of additional cost are brought into account—for instance the extra cost if there is a rise in wages, or in feedingstuffs, or fertilisers and so on—and so a total figure is arrived at which is the additional cost of running the industry.
On the other hand, a profit figure is built up of what is the total profit of the industry and, in order to maintain the existing level of profit in the industry, it is simple then to calculate what additional sum must be brought in and awarded the industry in the coming year. That is then broken down over the various commodities in proportion where the emphasis is required on a particular commodity—for instance, pigs this year—or it may be spread evenly over the different commodities which are included in the review.
The whole system has been worked out with the greatest care and it is a thoroughly reliable system. It is a complicated one and the general public, naturally, cannot easily understand it, but it would be of the greatest disservice to agriculture in particular and to the national economy as a whole if the public did not have confidence that it was a sound and fair way of fixing prices.
There is a point I should like to make on the hon. Member's general comparison of profit levels between pre-war and the present time. He made great play with the fact that the pre-war level was £55 million and the present level is £285 million. In the pre-war profit figure there was no element of capital expenditure; in fact there was a very substantial element not of capital expenditure going into the industry but, rather, the reverse, running down the capital cost and within the depressed level of the industry no maintenance was possible for existing plant. But, today the picture is quite different. As we see in the Economic Survey, capital expenditure in the industry is £70 million a year. When that is deducted from the figure of £280 million, we get to a figure of about £210 million and that is the figure to compare with the £55 million before the war.
Then again, if we bear in mind that the pre-war level of production has increased by something like 50 per cent., we can see that the level of profitability has only increased something like three times over the time when the industry was known to be depressed. Furthermore the general rise in prices of feeding stuffs is something of the order of four times as much while the rise in wages is almost three times. We are all glad we can pay higher wages, but the position is clear that there is a general increase in costs of something like three times the prewar level.
That gives some perspective to the general picture of the real economic position and profitability of the industry as a whole. I feel sure that, although there are obviously certain aspects of the remarks of the hon. Member for Wednesbury which are a domestic matter—that is to say the particular policy in question is the Government policy and therefore they are responsible for it—nevertheless, there are national aspects of it, and to those I have tried to draw attention and to the fact that this price structure and the system of the annual price review are really the foundation of the industry. If the general public came to think that it was not a sound one, a great deal of harm would be done.
We are coming to a time when certain products are becoming available in world markets which are accessible to us and which we can purchase possibly at lower prices than our own. It may be necessary, in order to maintain a balanced healthy agricultural husbandry here, to produce certain quantities of these commodities at higher prices than at that at which we can purchase them from elsewhere, because unless we have a balanced husbandry we would very soon have no industry at all. It is true to say that with the exception probably of milk and potatoes, which we can produce in this country cheaper than anyone can produce that at any time, there is probably some country in the world at some time of the year which can produce the rest of the commodities cheaper than we can. To take a simple example, Australia or South Africa, where the seasons are reversed compared with ours, will have their flush periods for produce such as eggs at a time when we are having our scarce periods, and in that situation will have prices cheaper than ours.
If we wish to maintain a healthy productive industry we have to see that a balanced proportion of the various commodities are produced here. From that it is clear that the whole economic structure depends upon the soundness of the annual price review. I think the point is fairly established that in its negotiations with the Government over the past eight or nine years the National Farmers' Union has shown a very proper sense of its responsibility to the nation as a whole. I hope I have made the point, in reply to the points made by the hon. Member for Wednesbury, that his idea of the matter is completely distorted and is making complete nonsense of the whole picture as it really is.
I shall deal with food subsidies not from the point of view of how they affect the farmer, tout from the point of view of how they affect the housewife. I am painfully conscious that these subsidies are occupying such a huge portion of our national finance and have to be pegged at £410 million or £425 million this year. But I feel that in the alteration in markets and in the possibilities of increased commodities coming into the country, in which the housewife will wish to share, those subsidies may have to be increased or there may be a re-arrangement of the subsidies.
We recently had two price increases—4d. per lb. on butter and 2d. on bacon. The increase on butter meant—I am quoting from the "Economist" of 15th April—a saving to the Chancellor of £12 million, and the increase on bacon meant a saving of £6 million. In other words, those two increases amount to a total saving to the Exchequer of £18 million. The rise in butter increased the price index figure by.42 of a point and the rise in bacon increased the index figure by.13 of a point. In other words, on a total saving of £18 million, the index figure increased by more than half a point.
If the subsidy on butcher meat, which is 3d. per lb., had been taken off, the Chancellor would have saved not £18 million but £40 million and the index figure would have risen by less than half a point. If the Government had taken the subsidy off eggs the amount saved would have been over £40 million and the index figure would have risen by only.6 of a point; so that if by a re-arrangement the subsidy had been taken off butcher meat and eggs, the Chancellor would have saved about £80 million and the result would have been an index figure not so adverse as that caused by his saving of only £18 million on butter and bacon.
The issue of the "Economist" of 15th April postulates that the Chancellor might have reduced the subsidy on butcher meat by half. I find myself in strong agreement with that article in the "Economist." It bears out my experience as a housewife. It is very easy for the housewife to know exactly what she is paying for sugar and what the subsidy is. The same is true of butter. She knows if she is being cheated of her subsidy. In the case of sugar, cheese, butter, margarine, tea, potatoes and bread, the housewife knows immediately if she is being cheated. But in the case of butcher meat, no. With the greatest skill in the world and a housekeeping experience of over 30 years behind me I cannot check up on my butcher. He can "twist" me right and left and I can only stand in simple humble faith and take what he slings over the counter at me, treat it with the greatest care and afterwards perhaps just give it holus-bolus to the dog, as I did last Sunday.
We are completely in the hands of our butchers. A ticket is supposed to hang somewhere beyond the reach of us all. If one is so bold as to go behind the counter and examine this notice about the various cuts, how is one to tell whether the meat on the counter is first grade or second grade? I asked my butcher the other day. I said, "I cannot tell, you may still be cheating me. I do not know if that is first or second quality." He replied, "Believe me, if it is second quality it will very likely taste far better than first quality." The housewife, therefore, does not know and has no way of checking whether that £40 million is being passed on to her or not. Price tickets brought on to the counter would help very greatly.
Another thing that deters women from facing up to the butcher is the fact that butchers have an amount of offal such as liver, kidney, etc., and the housewife is afraid to challenge the butcher in case she may have to wait an awful long while before she gets any offal.
In the case of eggs, I submit that there could be a re-arrangement of subsidy. For a rise of.6 of a point in the index the Government could save £40 million by withdrawing the subsidy on eggs. Far be it from me to suggest the withdrawal of a subsidy on anything, but I fear there may have to be re-adjustments, and I ask the Chancellor to look in these directions. Eggs are supposed to range from 2d. to 3½d. each; 3s. 6d. a dozen for the very large new laid; 3s. a dozen for the not so large new laid; 2s. 9d. a dozen for the large imported fresh eggs, until we get to 2s. a dozen for eggs which had best not be described. Between this range of 2s. and 3s. 6d. how is the housewife to know that the subsidy is being passed on to her?
Again I say that I am completely baffled. I sometimes get a 6d. reduction. I had it this week-end. Instead of eggs at 3s. 6d. they came in at 3s., but they were very small and it looked as though they had been laid by bantams. I think we are entitled to some redistribution of that subsidy. The nation which pays £80 million, at least ought to feel reassured that the housewives are really getting the benefit of this subsidy.
There is a point which I wish to make about Purchase Tax. It is that there are items on which I think Purchase Tax ought to be increased. I do not agree with the Tory leaflet which shows childrens' shoes, household buckets and cooking utensils, as being subject to Purchase Tax, because it is simply not true. Children's underwear and clothing is not subject to Purchase Tax, nor is three-quarters of the adult clothing. Sheets, woollen blankets, tea cloths, glass cloths, kitchen cloths—all these utility goods bear no Purchase Tax at all. Neither does domestic glassware and crockery. On brooms, brushes, dustpans, buckets, pails and babies' baths there is no Purchase Tax; or on cookers, wash boilers and coppers, electric irons and kettles, sewing thread, mending and knitting wool, curtain cloth and domestic cloth. All the utility ranges are completely free from Purchase Tax. For hon. Members to go round telling how dreadful is this Purchase Tax is a gross exaggeration.
But here is an item that bears Purchase Tax. I have in my hand an illustration of frocks for the Royal garden party. There is one here described as, "madly simple," and the price is 52 guineas, plus £12 5s. 9d. Purchase Tax.
I am trying to ask, Sir, that Purchase Tax on this item should be increased. The Purchase Tax on garments is apparently 33⅓ per cent. I understand that the Purchase Tax on items like cold cream is a 100 per cent. I hope I am in order in urging certain increases in Purchase Tax. I think that the incidence can tend to be unfair if we get., for example, a Purchase Tax of 33⅓ per cent. on utility stockings which are fully fashioned and' only 33⅓ per cent. on a 64-guinea dress. There is 100 per cent. Purchase Tax on jewellery, whether it is sham or whether it is real. Surely dresses like this one costing 60 guineas, and this one which Sylvia James is wearing, costing £49, ought to bear a much more steeply graded tax than a mere 33⅓ per cent. I hope that the Chancellor will give some heed to that suggestion.
Taking the Budget as a whole, I am neither delighted nor disappointed about it. I think it is a security Budget. It is a Budget to guarantee stability of employment and security of employment. I am certain that, in spite of what hon. Members opposite have said today about being disappointed, they are not really disappointed. What were they saying on the platforms three months ago? They were saying, "Why is this election being held in February? Why is it being held in the month of snowstorms and sleet and wind? It is because the Labour Party want to get it over before they unleash this awful Budget on your heads." I think that is the purport if not the exact words. It is the tenor of the remarks of most of the hon. Ladies and hon. Gentlemen on the Opposition benches. I do not think any of them can truly say that they are disappointed. I do not think that I am disappointed with the Budget in any way. I realise the precautions taken for the stability of our finances and for the security of full employment. That means most in every home and it means most to our country as a whole.
This being the first occasion on which I have had the privilege of addressing this House, I must in my criticism of the Bill endeavour to refrain from being too controversial. I would ask the House to consider the incidence of the new impost on petrol, and oils and the Purchase Tax on commercial vehicles particularly in reference to their incidence on agriculture. I believe these to be deplorable taxes because they must force up the cost of living and the cost of food.
If further taxes must indeed be raised I can see the possible arguments in favour of the taxing of the fuel of cars, coaches and charabancs in an austere world where many of their journeys can or must be regarded as frivolous. But surely a tax is bad which, in one swipe directed primarily at the road transport industry, falls also indiscriminately on the raw materials of such productive industries as the manufacture of paint, rubber, gelatine, glue, fertilisers, foodstuffs, linoleum and plastics; and as has already-been referred to by one hon. Member opposite this afternoon, the service of dry cleaning which is an excellent system for the economic preservation of utility garments in an austere world.
This duty on hydrocarbon oils will add no less than £5 million a year to the cost of these productive and in many cases exporting industries. All this was taken in, in one swipe, in the imposition of this tax on road transport fuel. In addition to these increases in costs is the increase in the cost of transport which is an element in the price of almost every product in the country. It has been argued that this increase in the cost of road transport can be overcome by diverting the traffic to the railways which, since then, have been permitted to increase their rates. But this diversion of traffic cannot, of course, be done.
I would give the House information about a firm with which I am connected personally. It manufactures essential components for power stations and other industrial buildings. These compounds have to be specially and carefully handled. They have to be specially unloaded and stacked on the site of the buildings. This can only be done by drivers and men trained to do that unloading and stacking. It is impossible to divert that sort of traffic to the railways. Therefore, the increased cost of transport to such firms as that must inevitably lead to a further rise in the prices of their products.
The new Purchase Tax on lorries will have the effect of keeping the older, less efficient, fuel-wasting vehicles on the roads. It will also tie up a large number of fitters in the garages and repair shops to maintain these vehicles. Those fitters might otherwise be employed in productive industry. The tax is also bound to discourage the increased efficiency of transport departments of firms which could be brought about by introducing new and up-to-date vehicles with their lower consumption and smaller maintenance costs. That is a possible annual improvement in efficiency which will be discouraged as long as the tax remains on these vehicles.
Perhaps in the case of electrically propelled vehicles the tax is even more unreasonable. These vehicles do not consume any dollar petrol or oil. As several hon. Members have said, they take electricity for charging their batteries at off-peak periods, which is very much desired by the electricity generating authorities. It seems most unreasonable that these vehicles should also bear the weight of the tax.
In the highly esteemed agricultural industry where the places of production on farms are widely scattered, there is in most cases no alternative to road transport. The element of road transport which comes into the cost of food production must, therefore, once again tend to force up prices. I should like to draw attention to the use of petrol not for transport on farms but for cultivation and other non-transport uses. Here the Chancellor has offered a remission of the increase of 9d. in Petrol Duty. If the remission operates, as I understand it will, by means of a fixed allowance for each implement or machine, it appears to me that at best the system can be but rough and ready and full of anomalies.
One farmer might have a tractor in constant use. It might be the only machine he has on his farm. Another man might have two tractors, the second of which he uses only on certain occasions when there is an extra amount of work to be done. Presumably those two tractors would qualify for exactly the same rebate or remission, although one might consume much more fuel than the other in the course of a year. This is a rough and ready system. One farmer might have a milking machine in operation twice every day. Another farmer, perhaps his neighbour over the fence, might use his milking machine only in emergencies. On other occasions he might milk by hand. Presumably, the man who uses his machine only in emergencies will get exactly the same rebate as the man who uses a machine twice a day. That is extraordinary.
Then there are stationary engines used on every farm for grinding and crushing feedingstuffs, for pumping water and generating electricity. The anomalies here would be tremendous if a fixed rebate was operated. One man might use an engine once a month, or once a fortnight, for pumping water. Another man might use a similar machine almost every day. I cannot see how the system would operate with any fairness. Even if it was operated, the farmer would still have to bear the full weight of the increased duty until he received his rebate. Unless the Treasury disgorge at more regular intervals than they are in the habit of doing with many of these rebates, it might be a very long time before the farmer received the money. If a farmer was working on a fairly large scale with a well mechanised farm, he might have to advance a considerable amount of money in a year.
The anomaly which existed before the increased duty—that tractors running on paraffin or diesel oil pay no duty whatever—is still not cleared up. That problem has been left untouched. Now that a step has been taken which admits that some kind of remission can be given, the whole position should be inquired into and all the anomalies cleared up. If half a duty can be remitted, why cannot the whole duty be remitted so that the position comes into line and a tractor running on petrol, paraffin or diesel oil will run on duty free fuel. Why should one run on a duty free fuel, and another on a half duty fuel with some kind of remission or rebate? A move should be taken to bring all three into line.
The position which has been reached, in agriculture at any rate, is that the industry receives certain subsidies and, on the other hand, pays duty on its fuel to the amount of £2 million a year. The position is somewhat out of balance. It cannot possibly be argued that the whole duty could not be taken off petrol for agricultural tractors and machinery. I believe that the argument in the past has been that there would be too many administrative difficulties, but if it is possible to make a remission of half a duty, why cannot the whole duty be remitted? If the whole duty can be remitted, as it is now for the fishing industry, why cannot it be remitted for the very closely associated farming industry? Fishing boats receive a full remission of duty. Why should not agricultural tractors and machinery also receive a full remission?
I suggest to the House an alternative to all these rebates, remissions and drawbacks. Would it not be far simpler and far more equitable to provide duty free supplies of petrol and hydrocarbon oils for industrial and essential agricultural purposes? This would be no revolutionary step, because already diesel oil, on which there is a duty of 1s. 6d. a gallon when it is used in road transport vehicles, is obtained free of duty for industrial use in stationary engines and on farms. It would be parallel with a position which already exists. In the case of alcohol, I suppose that no one would dream of paying 32s. 4d. for a bottle of methylated spirits. It is no revolutionary proposal to have a duty free commodity available at the same time as one carrying a duty when it is used for another purpose.
Petrol, diesel oil and hydrocarbon oils could be made available duty free for the purposes I have mentioned. Perhaps the petrol could be coloured, say, with a blue dye for duty free purposes. That would overcome all the administrative difficulties, all the rebates, remissions and other drawbacks, and it would bring into line the whole of the fuel position. Hydrocarbon oils for industrial purposes would be available in a duty free form, just as are the other raw materials of industry. This step would remove many injustices and anomalies. It would be a move towards lowering the price of food and reducing the cost of living.
This is my maiden effort at attempting to congratulate a maiden speaker. Therefore I have all the more pleasure in offering to the hon. and gallant Member for Harborough (Lieut.-Commander Baldock) my sincere congratulations on the way he survived what is always an ordeal in this House. He laid before us many practical suggestions, including the patriotic one that we should have red, white and blue petrol. In any case, he gave the Minister something to take notes about. The hon. and gallant Gentleman has evidently studied the subject, and I am sure that the whole House listened with pleasure to the practical contribution which he made to our Debate. Indeed, the hon. and gallant Gentleman has done better than many senior Members of the House in this Debate in one respect—he stuck more closely to the Finance Bill that we are supposed to be discussing.
I make no complaint about the range of the Debate, because the Budget nowadays is more than just a financial Measure. This Budget has been rightly used by the Chancellor as a social instrument to redistribute the national income and to rearrange some of our domestic economies. It has appeared quite clearly from the discussions that the whole policy of full employment depends upon the Budget. Even wage rates are now fixed to some extent by the Budget. This year we have been told that there is a national dividend of some £200 million to be expected in personal incomes in the coming year and that the Budget controls to a large extent the prices we pay for our goods. In all those ways the Budget now governs our lives more closely than it ever did before.
It is just as well, from another point of view, that we have been able to range in this Debate, over such a wide subject, because the Finance Bill does not give us too much scope for Debate. It has been referred to in the Press as a dull Budget. As the hon. Member for Coatbridge and Airdrie (Mrs. Mann) pointed out, it has not been an electioneering Budget. The Chancellor has resisted that temptation. He has made it a realistic Budget. Indeed, the only three high lights of the Finance Bill are the Petrol Tax, the increase in the Purchase Tax on commercial vehicles, and the adjustments in the rates of Income Tax. I regard the other points as very minor compared with those three.
I must confess that I am quite unimpressed by most of the arguments that have been put up by people who are claiming that the increase in Petrol Tax will lead to a drastic increase in prices. I feel that advantage is being taken of the small increase in the Petrol Tax, which amounts to something like a ½d. a mile. It is going to be made an excuse for quite unreasonable increases in the prices of various commodities and services. It will be quite unfair if the small increase in the tax is to be used in that way.
With regard to the Income Tax adjustments, by which all of those who pay Income Tax will benefit, the only disappointment many of us feel is that those improvements cannot affect the lowest paid workers or those who live on very low incomes. If people are not paying Income Tax we cannot relieve them of any, and to that extent they do not benefit. In view of that, I wonder if, even at this stage, the Chancellor could not consider whether some adjustment could be made in some of the other allowances.
An example is the case of the householder who does not have a housekeeper resident with him. I am thinking of people like a widower. The wife dies suddenly and the man is left with a house, perhaps with some children or someone else. Because there is no housekeeper resident with him, as laid down in the regulations, he does not come under the heading of a taxpayer having a person to look after children, or a married man having a person to look after children owing to the wife's total incapacity, or an unmarried man or woman having a female relative living with him or her. Because such people have not a housekeeper actually living in the house they are not entitled to the £180 personal allowance. People in that position might well be regarded as entitled to something more than the basic allowance for a single person.
As we have an opportunity of riding some of our private hobby horses, may I mention another suggestion I think the Chancellor must consider, either in this Budget or in the near future? This is with regard to Purchase Tax. It has been laid down by the Chancellor that he is not going to make big reductions or alterations in the Purchase Tax this year. But he must take cognizance of many of the anomalies that now exist. There is plenty of scope, administratively, for rearranging the classes of goods within the three categories of Purchase Tax—one-third, two-thirds and 100 per cent., and to make some of these categories a little more sensible than they are at present.
One example, with which the Financial Secretary is familiar, is the Purchase Tax on mirrors. They are regarded officially as luxuries and are charged 100 per cent. tax. If the mirror forms part of a piece of furniture, it is either free of Purchase Tax if the furniture is utility, or it is charged only at one-third. That does not make sense. Here is one clear case where, even by administrative Order perhaps, the mirrors could be taken out of the category of 100 per cent. and be put into one of the lower categories. It would be good for trade. It would present a useful article to the home because in many cases it would enable people to obtain mirrors where they cannot afford them at present.
I do not think anyone has touched in this Debate on the tax on sports and entertainments. Here again is a field absolutely bristling with anomalies at present. I call the attention of the Treasury to three specific points. The first is the Entertainments Tax charged for admission to cinemas. It is much higher than the tax for what are called "live shows," for the theoretical reason, I understand, that the live show provides employment. That is all very well theoretically. However, if, for example, we take the case of a film star who appears on the film, there is a charge of 7d. on a 1s. 6d. seat. If that same film star appears on the music hall there is a tax of only 1d. on that same 1s. 6d. seat. That sort of difference runs all through. There is a 10½d. tax on a 2s. seat at the cinema and a 2d. tax on the same seat at the theatre or music hall. There is a 1s. 6d. tax on a 3s. 6d. seat at the cinema, but a 5d. tax on the same seat at what are called live shows.
One might have a British film such as "Hamlet" being charged a heavy tax, yet if an American film star appeared on the stage there is a much smaller tax on the same priced seat. That is something which ought to be looked at very quickly in the interests of both the industry and the public. I ask the Chancellor to note particularly that the cinema is the entertainment that caters primarily for the poorest section of the community and, therefore, ought to have special attention.
Another anomaly under the same heading is in regard to speedway racing. I understand the Treasury take the peculiar view that speedway is not a live sport. Their view is that speedway must bear a heavier tax than boxing, football or ice hockey because, they say, speedway depends not on the skill of the riders but on the power of the engines and it is only a matter of a test of speed. Anyone who has been to a speedway meeting knows that that is sheer nonsense. One can have four motor-cycles of exactly the same power of engine and one of them will win, not because of the machine but because of the skill of the rider on that machine. There is, therefore, in my opinion a clear case for speedway racing to be put on the same footing as what I would call the other comparable live sports.
Finally, I turn to the question of greyhound totalisators. Once again there is discrimination between the treatment accorded to greyhound racing tracks and that accorded to horse racing tracks. On horse racing tracks the totalisator is taxed at the rate of 10 per cent., whereas on greyhound racing tracks the tax is 16
per cent. Why the differentiation? I have never been able to obtain a satisfactory reply to that question. Last year the Chancellor said, in his Budget speech, that improvements in this matter were deferred because a Royal Commission was sitting or was about to sit. The Chancellor said:
Consideration of other improvements in the Betting Tax must now await the Royal Commission's report upon the general matter of betting and gambling."—[OFFICIAL REPORT, 6th April, 1950; Vol. 463, c. 2094.]
But look at what was said by the Chairman of that Commission:
While we consider it our duty to consider the principle involved in the taxation of betting, and the effect of taxation on the extent of betting, the purely fiscal aspect of taxation, whether a higher or lower rate is practicable or desirable in any particular case is, in the opinion of the Commission, a matter for His Majesty's Government and not one on which the Commission is called on to make any recommendation.
I ask the Chancellor to observe that this is not a matter which can be deferred until the Royal Commission has reported, but is something which should be dealt with separately, and I would say immediately.
From the Chancellor's point of view the results of this increased tax have been quite unsatisfactory. The law of diminishing returns has operated and the result of increasing the tax to 16 per cent. has been a very heavy drop in the tax collected. I will not weary the House with the figures because I know the Chancellor is familiar with them, but I have the figures with me if the House should care to hear them. The drop in taxation returns has been very heavy indeed. On the ground of discrimination alone I suggest that here is another case where there should be a readjustment in the tax, and I hope the Chancellor will take note of it.
Having mentioned some minor matters in connection with the Finance Bill and made a few remarks about the impact of the Budget as a whole on our economic position, I finish by saying that I think we ought to congratulate the Chancellor on his courage in putting such a Budget before the country at this time. It is a realistic Budget which is not intended as vote catching, which will not catch any votes and which may upset a lot of people, but it is a Budget which faces the serious position in which the country stands today and one in which the Chancellor has been able to impose a tax on one commodity—petrol—which I do not think will harm the country and to use the proceeds of that tax to help that section of the community which in his opinion is most deserving of help.
May I also crave the indulgence of the House in a maiden speech? I trust that I shall not trespass too much on its generosity during my few remarks. I would say immediately that I approach my task with an inherited respect and admiration for this House and its traditions.
During my few remarks I want to lead up to a plea for mitigation of the Profits Tax on undistributed profits, with particular reference to its effect on working capital and liquid cash resources. I regard that part of the Profits Tax as being harmful to industrial wealth and productivity. If I approach this problem from the industrial rather than from the political angle, it is because I am more familiar with the former than with the latter.
The Chancellor of the Exchequer, in his Budget speech, stated that it would be nonsense to say that industry was either weighed down or crushed down by the weight of taxation. That may be his view, but from my experience I would say that he would find it difficult to discover anyone engaged in the direction and management of industry who would not agree that industry is at least severely handicapped, and I think he would also find that the initiation of new projects is today becoming more attuned to the cash available than to the desirability of the projects themselves.
When I referred to industrial wealth. I hope my meaning was quite clear to all hon. Members. Perhaps I may make it so by explaining that I am not referring in any way to personal wealth, to the personal possession of worldly goods, or the personal possession of money in any of its forms. Rather would I divide industrial wealth into two sides which, in agricultural terms, I might express as live and dead stock. On the livestock side I would claim that the brains and muscles of those employed in industry most definitely comprise wealth and capital and so, indeed, does their health, though in later years that certainly tends to become what the accountant would call a wasting asset. But if we endeavour to preserve, maintain and improve the live stock of our industrial wealth, as we do by our National Health Services, it is surely logical that we should equally look after the dead stock, or the machinery, plant and buildings.
In my approach to this problem I am guided by two principles. First, my interpretation of capital is that capital is an asset which can earn reward, and, in my submission, is entitled to it when usefully employed; and secondly, wealth is very much easier to destroy than it is to create. It must be acknowledged, I think, that all those items of industry which go to make up what I call the strict cost of production are up between two and four times. It follows that the amount of working capital required has to be proportionate to that, and I think it is very much to the credit of industry that it has been able to find that additional working capital without calling on outside help.
Beyond those items in the strict cost of production, there is a great deal more which modern, up-to-date managements desire to carry out: modernisation—and industry must modernise if it is either to hold costs or to reduce them; there are extensions; and there is research in its widest sense. Cash to provide for these items can come only in one of two ways: it can either come from profits ploughed back into industry, or it can come from the issue of fresh capital—subject to the Capital Issues Committee being agreeable. I would suggest that any management which endeavoured to raise fresh capital, unless it was convinced that that money was to be expended in such a way that it would either reduce costs or increase production, or both, would be heading straight for disaster.
Each new piece of plant that is installed in replacement today is not the exact replacement of the old plant. New plant being put in today is a better one, I hope and believe; and, as such, it costs more than that article which it replaces. So the replacement allowances which are based on the original cost of the piece of machinery being thrown out do not provide the funds for the newly installed article or piece of machinery. There is another thing to remember. Any newly erected factory is a very different building from one built 50 or 60 years ago. No up-to-date and modern management would dream of erecting a new building unless they were going to provide canteens, rest rooms, individual lockers, medical services for light and serious injuries. That is not a dream. There are such factories which are known, I imagine, to many hon. Members. I hope there are many more than I know personally.
The cash must come from profits ploughed back into the business. A great deal has been done in recent years, but industry has been enabled to do that out of profits ploughed back not in one year only but over a great many years, and when doing this modernisation it has been doing it out of reserves, which has usually meant the selling out of gilt-edged securities. Now industry, I should say, is illiquid, or very nearly so. There is a general shortage of capital for industrial purposes, especially internal sources of finance.
The Chancellor may think that I have forgotten the initial allowances which he made last year. I do not wish in any way to discount the advantages of that doubling of the initial allowances on plant and machinery, but I think we should get it into proper perspective. That doubling of the initial allowances does not in any way alter the total amount of the depreciation on any article. It increases the first year's allowances at the cost of later years', and I think it is, therefore, not unfair to say that it is equivalent to a deferred tax liability. I refer to the initial allowances on plant and machinery. Those alterations were in respect of plant and machinery, and did not in any way help over buildings. Perhaps the Government committee which, I understand, is now considering the taxation of trading profits, may have something to say about that.
As I said earlier that I considered that capital in all its forms is entitled to a fair reward when usefully employed, so logically it is entitled to any surplus over the fair reward. That, quite frankly, means profit sharing, of which I am in favour; but, in my view, it can come only on initiative from the top, and after confidence has been established between the two sides in a business through joint consultation machinery. If the Chancellor of the Exchequer wants a little encourage- ment to alleviate this burden on industry, he is no doubt aware that the Finance Minister for India last March abolished the business profits tax, which, although not the same, does bear a certain resemblance to his Profits Tax.
When considering profits and the difficulty of ploughing them back into industry, the Chancellor readily acknowledged that he takes not only 9s., and takes it first, but he also takes another 2s. at least and takes it first, namely, 55 per cent. of the taxable profits, whereas the 1938 percentage was only 33 per cent. Comparisons, though odious, may be interesting, and large corporations in America today are, I believe I am correct in saying, taxed at only 7s. 6d. in the pound and smaller corporations at a lesser rate.
As the Revenue is now collecting tax on what appears to be a high profit resulting from the use of low-priced assets, some further tax allowance is due to industry to assure that capital equipment is maintained at a high standard. I think that industry may well say to the Chancellor today, after what it has done out of its fat and out of its reserves ploughed back during the last year: "Give us a chance to bring ourselves up-to-date and to keep ourselves there." For these reasons and in the interests of full employment, I ask the Chancellor of the Exchequer to consider the abolition of the Profits Tax on undistributed profits.
Since it is only a short time ago that I made my own maiden speech, it is with considerable humility that I congratulate the hon. Member for Wokingham (Mr. Remnant) on his. He dealt with a subject of great interest to many of us on both sides of the House who have been in industry all our lives. Although we cannot entirely agree with all of his argument, he maintained the tradition of maiden speakers in using a relatively non-controversial argument. But this was no doubt because he was carrying on the tradition of his father who was, I understand, a Member of this House for 28 years. I hope that we shall hear the hon. Gentleman on this subject on many occasions in the future, and we shall take great pleasure in controverting his arguments.
I had the disadvantage of being ill during the Budget Debate. There is a certain advantage in being able to read the arguments dispassionately, and it is true that the illness from which I suffered tended to predispose me to sympathy with the point of view of the Opposition. I looked for the constructive proposals which I hoped they would put forward, but as usual, rather than make a contribution towards solving our problems they seemed to prefer, in the words of Gladstone, "to make a luxury of panics."
It became the habit, and Members have referred to it during this Debate, to regard the Budget as the basis of our economic planning. It is therefore assumed sometimes that there are no disagreements in principle between the two sides of the House over our economic affairs. I believe this is wrong. I believe that there are fundamental differences of opinion, if not between all members on each side, at any rate between the centre of gravity of the party opposite and the weight of opinion on this side. The truth is that the party opposite—perhaps both parties opposite—will not accept the fundamental change that has taken place in our social relationships. They continue to cling, whatever the facts, to the outworn notion that society is based on the economic relationships of the free market, a state of affairs which as some of the discussions that have taken place this evening show clearly, no longer exists, and has not existed for a considerable time.
I think that hon. Members opposite are conscious of the anomaly of their position since they became a Protectionist party; and, since many of them have been participating in schemes for the control of industrial output and the fixing of prices by agreement. I think with very few exceptions we all agree that farmers should receive prices in excess of the economic price that would be determined in a free market.
That is extremely interesting, because I want to know the view of the Liberal Party. The Leader of that party has told us today that he does not agree with my hon. Friend the Member for Wednesbury (Mr. S. N. Evans) in what I thought was the perfect example of Liberal economics which he was putting forward. I take it, therefore, that the Leader of the Liberal Party belongs to the radical wing of the party and that the hon. Member for Cardigan (Mr. Bowen) belongs to the non-radical wing. I think it is agreed that most houses must be let at below the economic rent. I doubt whether the Opposition, if ever they got into office, would find it possible to run the railways in free competition—in the full classical sense—with road transport.
There are, of course, many reasons for these changes that have been taking place over many years. I would name the growth of cost accounting which has attempted to substitute true price for the market price; the immobility of resources and the amoral results of the free market economy where there are great differences of personal income. I think it is true to say that prices today are not the result of the ordinary haggling of a free market. Most price fixing is not related to social costs and social needs. I believe that the community must determine these social costs and needs, and it is the duty of the Government to see that prices take account of them.
Therefore, the Budget today, in addition to serving the purposes of economic planning and raising revenue, serves also other purposes very different from those of the days of liberal economics so wistfully referred to in the Budget Debate by the hon. Member for Chippenham (Mr. Eccles). Of course, he was correct when he said that the advent of full democracy by the abolition of the property qualification for the franchise changed the whole social situation, but for many years the change in the social situation was hidden by the extent to which there was large scale unemployment. I detected, when reading in my jaundiced bed, a certain hankering in his speech for the days when those with no property rights had no say in the Government of the country.
Here, it is true, is the crux of our social and economic problems today. The truth is that the majority of hon. Members opposite have no faith that our democracy can find a new solution to our economic relationships, while we on this side have that faith. It is true that the fulfilment of that faith means a great moral effort of voluntary co-operation, but the framework must be set by the Government. It is in that context that we must consider the Budget and the Finance Bill which follows from it.
I feel, therefore, that it is wrong to consider taxation, as hon. Members opposite are always considering it, purely as money required for Government expenditure. One-third of the taxation is used, in fact, for transferring income in accordance with accepted socialist principles. There is one form of taxation which has, of course, important consequences for social and economic planning. I refer to taxes on commodities such as Purchase Tax and Excise Duties. These taxes to some extent take social costs into account when prices are fixed.
The Financial Secretary, in opening the Debate, pointed out what would have been the situation in an entirely free market if the price of petrol had been uncontrolled before the imposition of this additional tax. In fact, the price would rocket to the great profit of the oil companies, as my hon. Friend the Financial Secretary said. It seems to me that the addition of the new tax merely takes account of certain social costs, as for instance, the dollar shortage. It is true, as the Financial Secretary said that this is rationing by the purse, but he also pointed out that we have never intended that all goods should be rationed but only those that form the essential bulk of family expenditure.
Purchase Tax, as my hon. Friend the Member for Coatbridge and Airdrie (Mrs. Mann) pointed out, hardly enters into commodities in this category. Purchase Tax receipts in 1949–50 were £282 million, but transfer incomes and subsidies on food and housing amounted to £1,390 million. Thus Purchase Tax was less than one quarter of transfer incomes and, in fact, only just over 3 per cent. of total personal expenditure. It applies hardly at all on essential family expenditure, the only exceptions being in groups 32 (Toilet soap), 14 (electric light bulbs) 9 (floor coverings) and 12 (electric appliances). It is doubtful whether half the items in these groups are items of essential family expenditure, and it would, therefore, amount to less than 6d. per family per week.
Purchase Tax has another effect. It has an extremely beneficial effect on the cost of living. It makes possible the development of utility production, that is to say the production of goods to speci- fied standards in large quantities and at low cost. The results in one industry of which I know a little, the furniture industry, have been startling. It has resulted in a great increase of quality and has revolutionised the productive methods of the industry, bringing it into a highly modern state. When Purchase Tax can be removed, it should be removed in the order of family expenditure as family incomes rise. In many cases it would be best done by establishing new utility specifications in new types of commodities, from which tax alone is removed. Various examples come to mind such as radio, vacuum cleaners, floor coverings. This would encourage the great advantages of specialisation and standardisation. I would suggest that there should be set up a permanent planning staff or committee between the Treasury and the Board of Trade continually examining all the schemes of Purchase Tax and utility production and maintaining flexibility. In order to see what sort of commodities are most suitable for this purpose use should be made of the existing Social Survey.
Some hon. Members opposite would say that these ideas, if put into operation, would be harmful to our exports mainly in high quality goods. Sometimes they claim that these goods are an overspill from our home trade. In so far as the argument relates to the overspill, it is an argument from mass production, and there we are not doing too badly if one looks at things like hosiery and motor cars. We might also take a lesson from Switzerland, which exports 97 per cent. of its watches.
But if by high quality goods are meant luxuries, these play a small part in our total exports. Half our total exports are of capital goods. If we look at our total exports to the United States and Canada for the first two months of this year, it will be found that they total for the first two months of 1950 £31,321,000, and what can be called luxuries included in that total amounted to £1,409,000. That includes decorated pottery, of which we are exploiting the lot without difficulty. There is great danger in regarding as buyers for our exports only a few sophisticated readers of the "New Yorker" or a few Argentine millionaires if only for the reason that their tastes may be very different from that of the upper-class markets on which some of the industries were built up in this country. If hon. Members wish for an example of that they should look at the history of Rolls Royce's attempt to enter the American market in the '20's and '30's.
The principal market for consumer goods is in future in high' quality mass production goods at low prices, which the utility standard attempts to establish. [Laughter.] An hon. Member laughs, but it is being done very successfully by firms who have gone out with this class of goods. It is exactly that class of goods which can build up a very large part of our export of consumer goods at present. If the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) would like to exchange experiences with me afterwards, I will tell him where I obtained the information and what is being done.
If a luxury industry could only be maintained in this country by reversing our whole social policy, it had far better go. The truth is that the growing democratic world will not for long tolerate great extremes of wealth and poverty. The requirements of social policy at home no less than of our future markets abroad, demand the same adjustment in the scale and method of our production of goods for popular consumption, and these adjustments can well be encouraged by a judicious use of taxation policy.
I am particularly glad to have the opportunity of following the hon. Member for Edmonton (Mr. Albu). About two years ago, shortly after he was elected to the House, I was walking through one of the corridors here as a visitor, and to my surprise I was warmly shaken by the hand by one of the Labour Members of Parliament who said, "I am so glad to see you here." I said, "I do not know why," and the Member of Parliament looked at me and said, "Surely you are our new Member for Edmonton?" However, it should now be apparent that there is a certain difference between us, if not in appearance. I followed with a great deal of interest the hon. Gentleman's arguments about the effect of Purchase Tax on the export of high quality articles. I shall be interested to see whether he votes against the reduction of Purchase Tax on high quality motor cars.
I want to take up one or two points made by the Financial Secretary. He dealt with the Black-Lord cases, as they are now known. I agree that those arrangements were wrong, and I support the Government in their action in making those payments taxable, but I do so with considerable misgiving, and my misgivings are increased by some of the arguments employed by the Financial Secretary. I do not like the argument that the issue of a warning by the Chancellor creates a justification. It is not the prerogative of the Chancellor to impose taxation, it is the prerogative of this House. I do not think that a warning from the Chancellor can be taken as a substitute for the ancient right of this House.
The Financial Secretary also argued that, although the Government were imposing taxation retrospectively, they were not making these payments retrospectively illegal. That is true, but is it not also true that they are, in fact, imposing a fine on the combined resources of these two gentlemen and the companies? As I understand it, while the payments are to be taxed, and I think properly taxed, in the hands of the recipients as if they had been remuneration, they are not to be treated as remuneration for the purposes of the accounts of the companies who paid them. If that is so, it is not a position which can be supported.
The Financial Secretary put forward the argument that if hon. Members on this side of the House voted against the new taxes they were also voting against the concessions in taxation. I find that a most extraordinary argument. It seems to be based on a certain over-acceptance of the modern mystic of the economist. It seems to be based on the belief that the Chancellor can estimate to the last million pounds in a Budget of £4,000 million how much he needs to close the investment-savings gap. If the hon. Gentleman believes that I think he would believe anything. I feel that in his approach to the question of relating purchasing power to goods available, the Chancellor is somehow rather like a gentleman called Procrustes, who used to invite visitors to lie on his bed and then adjusted the visitor to the bed rather than the bed to the visitor. It achieved the adjustment but sometimes the person concerned was killed in the process.
In the course of the Debate on the Budget Resolution there were several quotations from major and minor poets, but the lines that ran through my mind as I heard the Chancellor making his Budget statement, were from "Adonais":
Woe is me, winter has come and gone, But grief returns with the revolving year.
That seemed to be the message. Budgets may come and go, crises may come and go, Chancellors, it appears, may even come and go, but high taxation and high expenditure continue indefinitely under the present dispensation. The policy of the Labour Party since they have been in power has been what my hon. Friend the Member for Oswestry (Mr. Ormsby-Gore) in his excellent maiden speech described as one of controlled inflation, a policy based on the creation of a great deal of purchasing power by extensive Government expenditure and the restraining of that purchasing power by controls and by heavy taxation.
It was a policy introduced first by the right hon. Gentleman who is now the Minister of Town and Country Planning. He called it "lubricating the economy with a sufficiency of purchasing power"—a characteristically modest description of his achievements. Some people I know regarded it as going further than that, and one authority on economic matters whom this House respects described the effect of his policy as overfull employment. I think we should rightly congratulate the Chancellor on the great loyalty with which he has carried out the policy first laid down by his distinguished predecessor. There were one or two temporary aberrations—a slight change of view about rates of interest perhaps, a slight difference of opinion on the question of bonus shares but, by and large, the policy has been the same, one of high taxation and high Government expenditure.
The Financial Secretary asid that this Finance Bill was one of a series and therefore, I suggest, in considering it we should consider the policy which this series of Finance Bills has underpinned. And we must consider this policy not as if we were living in a closed economy but realising that we are living in an economy open at all times to all the influences of world trade and world economic developments. If we were living in a closed economy we could argue, no doubt, the relative merits and demerits of the policy of controlled inflation and high expenditure. Hon. Members on the opposite side would claim that it was the cause of present production levels and present levels of employment. Other hon. Members might argue the dangers that arise from the draining of industrial capital, from rising prices, from the effect on thrift and on incentives. All those arguments would be interesting but they would not be relevant to our position as a country open to the economic tides that sweep the globe.
One of the most important lessons of the last year or so has been the extent to which our present rigid high cost economy is open to the influences generated by any movements, upwards or downwards, in the American economy. I think it was a year ago that the Chancellor was saying that we in this country were making progress. I believe he was so injudicious as to say that we were then on the right road. In October he was warning the House unless we could immediately achieve greater production at lower cost we should be facing widespread unemployment and a catastrophic fall in our standard of living. That was six months after we had been on the right road.
Now, apparently, we are on the right road again. There is a certain periodicity about these things and I want to know what will be happening in another six months' time. There is another reason why a high cost economy must be dangerous in our position as a trading nation. As I see it, it must lead to the maintenance of restrictions upon the transferability or convertibility of sterling. I should have thought that hon. Members on both sides would agree that the greatest possible degree of sterling convertibility should be a prime aim of our policy.
I think it is sometimes said that the reason why the Government are a little reluctant to enter into the European payments agreement is because they are afraid that the system of bilateral trading agreements which has been built up will be undermined and that the position of sterling will be undermined. The Government are very wise to be chary of rushing too soon into a scheme of this kind, because the position of sterling is entirely different from that of any other currency. We have obligations of a nature and on a scale that cannot be compared with the obligations which are carried by the franc or by any other European currency. But it does not follow that we should continue to wrap up sterling in a whole complex or network of bilateral pacts for the purpose of maintaining a high cost economy which could not survive here if it were open to the winds of world competition.
Those winds of world competition are undoubtedly growing. Figures show that in recent months the export price indices of a number of our competitors have been falling. It is clear also that German and Japanese competition is gathering momentum. Hon. Members who are in touch with industrial and commercial matters will have had many examples of German and Japanese firms quoting for contracts for machinery, pottery, textiles and a dozen other things, at prices 30 or 40 per cent. below our present-day prices. We must realise that we shall have to face increasing competition, and increasing price competition, from countries abroad.
Hon. Members opposite may say, "If you look at these countries where prices are falling, you will find that unemployment is rising." That may well be true. It may be unfortunate—indeed, it is—if other countries choose to deflate their prices at the cost of unemployment, but we can do nothing about it. If they choose to adopt that policy we must recognise the fact and base our policies upon it. I do not think that there is any hope of having within a reasonable time any co-ordinated credit policy between the major trading nations of the world. Therefore, we shall be faced with the position where competing nations will have lower price structures, perhaps at the cost of unemployment.
The challenge to this country and to this House is whether we can bring down our price structure to meet that competition without incurring unemployment. In these matters the danger of unemployment lies ahead, and not behind, and the challenge to be met is the challenge of bringing down prices without unemploy- ment rising. It is quite clear that the one major step which the Government can, and should, take to bring that purpose about is to reduce Government expenditure and taxation.
When we have these Debates on financial matters, the Chancellor usually sits there with his two henchmen on either side of him, rather like Horatius guarding the bridge, resisting our suggestions that economies should be made. I remember that in June of last year the Economic Secretary to the Treasury said in the House:
… the idea that tens of millions of pounds can be saved by administrative economies without changes in policy is sheer moonshine."—[OFFICIAL REPORT, 23rd June, 1949; Vol. 466, c. 520–1.]
That was in June. Then in October, the Prime Minister announced that:
… between £40 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."—[OFFICIAL REPORT, 24th October, 1949; Vol. 468, c. 1018.]
And we were told by the Chancellor in his Budget statement that in the course of the last financial year savings amounting to £114 million had been achieved without, apparently, changes in major Government policy. When we are faced with rather conflicting statements of that kind from the Government benches when we argue the case for administrative economies, we cannot be blamed if we feel that the suggestions which we put forward are not treated as they should be treated.
Then there is the question of food subsidies. I think that the right hon. and learned Gentleman and his colleagues are rather jealous of their reputation as intellectual acrobats, and perhaps they were a little piqued by the efforts of the Parliamentary Secretary to the Minister of Fuel and Power who succeeded in proving, to his own satisfaction, at any rate, that by putting up the price of petrol the cost of motoring, could be reduced. Certainly the Chancellor was driven to excel himself in replying to the Debate on the Budget Resolution in his exegesis into the subject of food subsidies, when he argued, as far as I could understand him, that 24 out of 25 people in this country cannot afford to pay market prices for their food and therefore need a subsidy.
That does seem to me to be a very peculiar argument. The food subsidies are worth rather less than the cost of a packet of 20 cigarettes per head per week, yet the average expenditure per head per week on alcohol and tobacco in this country is over 11s. But further than that, it is surely absurd to say that 24 out of 25 people need a subsidy, for where in the world will that subsidy come from? From the other one? Really, I do not think that that argument was worthy of the Chancellor, and he would be well advised to look again into the arguments on food subsidies which have been advanced by my hon. and right hon. Friends over the past few months.
The point I wanted to make was this: that a high cost economy in an increasingly competitive world cannot continue to maintain employment and to maintain the standard of living of our people. We must reduce costs, and the first and vital step that must be taken is a reduction of Government expenditure and a reduction of taxation.
Today we have heard from the Opposition some very interesting speeches, all on the same theme of the reduction of expenditure, although several Opposition speakers were exceedingly careful to avoid giving details of the reductions they would advocate. They have never answered the questions that we on this side have been putting to them for a year or more: Where would the cuts come? On what exactly would the Opposition reduce expenditure? When one or two Opposition speakers referred to these matters, I thought they were sailing very near the wind in inviting criticism from their own side of the House.
This evening I wish to say a little on the subject of agriculture. It has been mentioned previously today, but I think there are one or two necessary remarks still to be made on the subject. First, I want to draw attention to the speech of the hon. Member for Guildford (Mr. Nugent). His was, I thought, a very good speech; a speech which indicated that the debating strength of the agricultural section of the party opposite has gained greatly by the acquisition of the new Member for Guildford. But he is one who will particularly draw upon himself the criticism of his own party if, as time goes on, he continues along the line that he took today.
The hon. Gentleman paid a tribute, and a very worthy tribute, to the Government's agricultural policy, which he described as sound and thoroughly reliable. I was very pleased indeed that he should describe our planned agricultural system as distinctly preferable to that of America—where there is a system of free enterprise—particularly in relation to milk which, he said, was arranged far better for the consumer and for the farming community.
I now wish to make a few remarks about the amazing speech—if I may so call it—of my hon. Friend the Member for Wednesbury (Mr. S. N. Evans). Characteristically courageous, bold and forthright he repeated in this House some of the remarks that he made in his Manchester speech. I do not know whether he made that speech in Manchester hoping that what Manchester said today the rest of the country might be saying tomorrow, but I do assure him, the House and the farming community that the views he put forward are not strongly supported—in fact, hardly supported at all—from this side of the House.
He said that he had fears that for a long time to come—indeed for an unlimited period—we should have to take from the farmers unlimited quantities of agricultural produce. But that is embodied in the Agriculture Act, 1947, which was supported by my hon. Friend, and which, apart from Section 1, which was opposed in Committee by the party opposite, was supported by the whole House.
That is an essential feature of the Agriculture Act, 1947. But in any case there need be no fear regarding the produce which may be coming from the agricultural community in a period of full employment—and as long as we have a Labour Government we shall have full employment—as there will always be a market for agricultural produce grown and produced in this country. The only fear which might arise would be if there were a change in Government and, therefore, a change in employment policy and a reduction in the effective market waiting for all the agricultural produce which can be grown and produced in Britain.
My hon. Friend gave an example of potatoes and pointed out how potatoes were taken from the farmers at guaranteed prices last year, and there was a surplus which had to be sold back to the farmers for stock feeding at reduced prices. That was all part of the plan to ensure that there should be an adequate supply of potatoes for the community. We have 50 million people to feed in this country, and we have to ensure that there are sufficient potatoes available for them. The surplus was an insurance against scarcity, a scarcity which had occurred the year before when potatoes had to be rationed. Unfortunately, we are not in a position to plan the weather, and all the jeers of the Opposition cannot show how the weather can be planned to produce a regular supply of potatoes, or other essential commodities from our land year after year.
My hon. Friend the Member for Wednesbury quoted from a farmer who had told him he was now being better "feather bedded" than ever in his life. There was an amazing sentence in that letter in which the farmer said that he takes sacks of notes to the bank and that his banking account is bigger than ever before. I wonder whether the Ministry of Food, the Ministry of Agriculture, or any of the Ministries have taken to paying in notes by the sackful, and where on earth the farmer obtained the sackful of notes to take to the bank. It seems to me that that farmer was not indulging in what is normally known as legal commercial activity, and the hon. Member for Wednesbury, before taking at face value the statement which his farmer friend made to him, should inquire more closely into the facts. If he does not get his facts correctly, particularly about the banking of notes, it may be that he does not get the facts right about other things and that he draws wrong conclusions from them.
He asked a very sensible businessman's question: why is it that in every other industry, as output increases the cost of production per unit decreases but not in agriculture? The answer is very simple. I am afraid my hon. Friend was treating agriculture as a factory industry working on a fixed site in workshop or factory, and conditioned mainly by the extent, size, or speed of the machinery used. Actually the situation is entirely different. We are working on a limited acreage of good farming land and, as more is used in housing, industrial development, schools, playing fields and even for sand and gravel pits, farmers are driven to use less good land for agriculture. If we want greater production from our land we must be prepared to accept that it costs more as the quality of the land declines. That is why grants are made for the use of marginal land, because its fertility and productivity are less than those of good land.
My hon. Friend referred to subsidies, and implied that the farmer was doing extremely well out of subsidies which came from the housekeepers' pockets and from the community generally. But that is to take an entirely wrong view of the subsidies paid to agriculture. It is true that they are paid to the farmer, but they are in the main for the benefit of the consumer, and they serve to keep down the price of food and help to stabilise the cost of living. The farmers are certainly making better profits than ever before. We have eliminated the fear of bankruptcy and losses which were prevalent in the farming community in the days between the wars. We have now enabled them, by means of the profits they are making, due to the guaranteed prices, to make good the neglect of years on their land, and to build up their equipment and buy machinery in the increased quantities to which my hon. Friend referred. That is being done at the express wish of the Government.
Farmers have invested in machinery, buildings and in equipment from 1947 to 1950 more than £280 million. That is all invested from farmers' takings and profits in their own industry, and represents an annual amount of more than four times the net income per annum in prewar years. As a result they are naturally getting much better productivity from their land. It is giving them a fair return for their work and is enabling them to give their workers a decent life, with decent wages and better conditions.
My hon. Friend has referred to the better deal being given to the farmer enabling him to look after his farm workers better than he used to do. Surely the increase in the wages of farm workers cannot be regarded as proportionate to the instance given by my hon. Friend the Member for Wednesbury (Mr. S. N. Evans) about a farmer who planted 100 acres of potatoes for which he received £1,000 subsidy and then made a profit of £4,000 on the crop? Surely my hon. Friend is not justifying that?
Many of us would like to have further details of that marvellous transaction before accepting those figures at their face value.
The question was raised by my hon. Friend the Member for Wednesbury of greater efficiency in the farming industry. As in all industries, greater efficiency can only be attained if the tools, equipment and the necessary articles for enabling the industry to function properly, and which will naturally increase productivity, can be provided. That has been made possible by the increased amounts which the farmers have been allowed to earn from their own industry.
If we were to scrap the present system of guaranteed prices and assured markets, a suggestion which my hon. Friend made without suggesting what should go in its place—presumably he wants to go back to the old price fixing by the higgling of the market or something of that kind-it might eliminate the inefficient farmer by bankruptcy, and the better farmer might come to the top, but it would also mean that we should be going back to the old system of farming of pre-war days which had such poor results so far as that industry was concerned.
It would not produce the results we have had since the war by which we are producing 138 per cent. of what we were producing in pre-war days. That demonstrates that the present method of conducting our agriculture produces results. We do not intend to go back to the old system, and we should reassure the farming community that we have no such intentions. Guaranteed prices and assured markets are here to stay, and are building up our agricultural industry in a way that was never done in the days before the war.
The hon. Member for Goole (Mr. G. Jeger), having devoted his entire speech to the speech of his hon. Friend the Member for Wednesbury (Mr. S. N. Evans), has once more shown us that there is a certain difference of opinion among hon. Members opposite, an impression not lessened by the intervention of his hon. Friend the Member for Manchester, Exchange (Mr. W. Griffiths). It would interest us all to know whether in this difference of opinion on helping the farmer, hon. Members opposite are about equally divided. In his Budget speech, the Chancellor told us that the Budget was the most powerful weapon for Influencing economic policy. That, if I may say so, was one of the things he told us which quite a few of us knew already. But if he puts taxes so high that he cannot go any higher, and if he will not cut expenditure at all, then the power of that instrument is sensibly curtailed.
I believe that the fundamental problem before this country today is how to make sure of being able to import the food and raw materials necessary to maintain our present standard of living and to increase it. I would remind right hon. Gentlemen opposite that two years ago, before Congress passed the Marshall Aid, they were very worried indeed about that aspect. My hon. Friends on this side of the House, and I, believe that in order to make sure of that food we have to cut Government expenditure which compiles the enormous total of 43 per cent. of the national resources. The Financial Secretary asked the question, which he never tires of asking, what was it that we would propose to cut? I would suggest to him that if cuts in expenditure are for the purpose of relieving the taxpayer then it is our responsibility if we advocate it to show that the advantages outweigh the disadvantages.
But that is not the case. Let us remember that the Chancellor, in his Budget speech, also told us, as he has often done before, that any development of inflationary tendencies would mean that the programme of full employment would collapse in ruins. If to avoid this inflationary tendency it is necessary—as I am convinced it is—to make cuts in Government expenditure, then it seems to me that it is for the Government in Office to choose what cuts fit in best with their own policy.
The Government claim, as I understand it from listening to speakers today, is that though they have had a tricky time, all is pretty well now; and if not, at any rate it would be very much worse under any other administration. That seems to me to be a rough and ready précis of their outlook. I would remind right hon. Gentlemen opposite that the Economic Survey for last year showed that our reserves were then at a dangerously low level. All that has happened since then is that they have now recovered to round about that level. I would remind them that the Treasury Bulletin suggests that in dollar terms both Canadian and United States figures for the first quarter of this year were still below the level of the first quarter of 1949. In fact, the position seems to me to be that we are dependent on everything possible going right.
We are dependent on the United States continuing the manufacture and piling up of goods and buying from the sterling area. I think that there is no prospect of a serious recession in the United States, but nobody can predict that there may not be such a set-back as would stop manufacture and their buying from the sterling area materials at the present rate. We are dependent on the United States continuing their extraordinary generous treatment at the same rate, and on the wage-freeze being more or less maintained.
Paragraph 132 of the Economic Survey states:
… this competitive power rests today largely upon the price advantage resulting from the present rates of exchange and will be diminished with every rise in the United Kingdom price level.
We are depending on there being no very serious increase in competition from abroad. Again the Survey states, at paragraph 58:
… the United Kingdom must expect sterner competition
from Germany and Japan and other non-dollar exporters.
Finally we are dependent upon those people who keep earning dollars for us in the sterling area being content to hold sterling. Such improvement as there has been, has not been because of an increase in our exports, but because in other parts of the sterling area we have been able to sell for dollars to America vastly greater quantities of raw materials. The fact of the matter is that there is no margin of safety at all today. We may scramble through if everything goes extremely well. A man who is a reckless driver of a motor car may get from here to Kings Cross without an accident, but he will be taking unwarrantable risks with the lives of other people. If he continues to drive recklessly indefinitely, disaster is sure to come eventually.
We cannot be secure until we can increase our exports so that we stand on our own legs. In spite of world boom conditions, in spite of the fact that as a result of war debts sterling is plentifully field by buyers throughout the world, we are selling abroad today just the same amount as we were selling in 1913. In the Budget Debate my right hon. Friend the Member for Aldershot (Mr. Lyttelton), who gave us a great deal more information than any right hon. Gentleman opposite, discussed some most interesting figures about exports.
I have examined those figures as carefully as I can with those who know a great deal more about them than I do. As far as I can see, the position is that if we make a reasonable increase in invisible exports, if there is a substantial reduction in military expenditure abroad, after allowing for such necessary exports of capital and for Marshall Aid, we shall have got to make an increase in volume of 80 per cent. in order to import less than in 1938. That means that we have to increase our exports from now on by a sum of between £300 million and £400 million. That means that we have either to expand production a great deal or consume much less at home, which will hurt considerably.
It means that we must produce at a price and quality which will enable us to sell to those countries from whom we need to buy or who can provide us with acceptable means of payment. I remember that about four years ago when things were a good deal easier, the Lord President of the Council, in one of those erratic moments which sometimes occur, made a very wise and statesmanlike speech in which he said that the real problem of statesmanship in the field of industry and economics is to see trouble coming and prevent ourselves getting into the smash. He said "We are determined that we are not going to be caught unawares by blind economic forces under this administration." There has been a considerable retreat by the Government since then. The Economic Survey this year no longer gives plans and targets, but estimates instead. Statisticians were provided where statesmen are needed. When things go well, the Government make the pretence that that is just how they planned: when they go badly, it is an act of God.
I should like to take up the question of production. Hon. Gentlemen opposite are often most complacent about how well everything is going. There was a most interesting article recently in Lloyds Bank Review by Professor Devons in which he said:
When figures are bandied about as a prop for political propaganda, it becomes difficult to distinguish between evidence and prejudice and it is not surprising if the whole subject is now much confused.
In fact, the Professor shows that figures are only accurate when the census is taken. The last published census was in 1935, and even then in terms of employment, industries covered about one half of the economic activity of the country.
Of course, it also entirely excludes quality. For example, production of coal and beer may have gone up, and yet consumers may say it is more stones and water that they have got. I think that is why the Central Statistical Digest on one occasion said:
It is impossible to obtain an exact measure and difficult to obtain even a rough idea of the comparative levels of production before and after the war.
Between 1934 and 1945, the two dates when there was a census, there was an increase of production of 34 per cent. Professor Devons thinks that between 1924 and 1937 the increase was 50 per cent., whereas the next 12 years, between 1937 and 1949 the Official Digest suggests 24 per cent. and the London and Cambridge Economic Service, which is perhaps a little more careful in its diagnosis, suggests 5 per cent.
The real point, of course, is not only production. What matters is the price at which we can produce and the quality of what we produce. I do not want to be thought defeatist at all and I want to quote from a short extract from an admirable set of articles that appeared in the "Manchester Guardian" this month. It said:
We still possess the industrial skill and inventiveness, the merchanting ability and knowledge to make these things possible. The question is whether the structure of our economy will allow the advantages to be used. Skill and inventiveness are not applied automatically. The individual business will apply them fully on two conditions: it must be unable to make easy profits without them, and
it must have a reasonable hope of thriving if it is skilful and inventive.
I believe we can get a situation now where there is employment for almost everyone, but we may be quite sure that if there is to be absolute security for every trader in his existing trade and every worker in existing work it can only be achieved by a very low standard of living indeed. We must always remember that we are a huge population in a small island with little mineral wealth. We can only live well if we are a rich country and we can only do that if we are very efficient indeed. I am quite sure that to do it we have to have the stimulus of competition where profits are quite hard to get.
The Chairman of the Anglo-American Council on Productivity pointed out that competition is
the burr under the saddle that kept Americans going. It had the very important effect of stimulating them to do new and different things to improve their products and get costs down … competition for work is evident both in time and in price … there is competition to gain and retain the jobs which provide the high standard of living of the American building operative.
I am quite sure that if we are to be efficient in this country we have to have competition. The Productivity Report states that:
Firms with ideas and willing to take risks must be able to get quickly the materials and labour that they need.
We are suffering today from suppressed inflation. If that is not so why, as my right hon. Friend the Member for Warwick and Leamington (Mr. Eden) said, is there a wage stop and why is there price control? The Survey estimates an increase in the supply of goods in the current year at 1949 prices of £300 million. It estimates that public authorities will take £150 million more. I have calculated that to offset the higher exports and the lower imports would take another £200 million.
What assurance is there that we are not going to have more inflation? The Economic Survey only says:
The figure for private savings shown in the table is not a forecast but simply the sum which it is estimated will be required if a resurgence of inflationary pressure is to be avoided.
What more disastrous instance of wishful thinking without basis can we have?
The Government spends so much that profits are easy to make, but they then tax them so much that they cannot be spent. These high taxes are a very different matter today. On average every man, woman and child is paying 30s. a week. A few weeks ago a table was published showing that the average family with an income of £10 net a week was paying taxes a contribution of 67s. a week and receiving in benefits 57s. a week. I think it is just possible that some of these families might prefer to take a bit less if they could pay a smaller amount and have a greater choice in the use of their money.
I believe it was very widely thought that the present Minister of Town and Country Planning was one of the worst Chancellors this country has ever had and, after talking to many supporters of the party opposite, I came to the conclusion that that was an opinion which was not confined to the Conservative Party. When the right hon. and learned Gentleman became Chancellor there was a great admiration for his integrity, courage and clear grasp of the situation and I believe that that, too, was not entirely confined to the Conservative Party.
Looking back, however, with all my respect for the right hon. and learned Gentleman, I wonder whether there is, in fact, so very much difference between him and his predecessor, whether in fact they are not both so controlled by Socialist doctrine that, although the pace towards poverty may be different and the present Chancellor may take much less pleasure in what he does, the actual policy is just the same. It is a fact that it is the Socialist policy, from which they seem unable to escape, which creates a permanent excess demand and a position of inflation suppressed by controls, pleasant enough while it lasts but rather like the state of intoxication which, I am told, is also pleasant while it lasts but terrible afterwards. [HON. MEMBERS: "Try it."] I am giving evidence second hand.
What we call planning is to create a position where there is some chance that people will voluntarily do what the Government want them to do, instead of having to prevent them from doing what the Government do not want them to do by a series of cumbersome controls. It is our policy to see that the volume of purchasing power is in balance with the volume of goods, that profits are neither too hard to make, as they were before the war when it led to serious unemployment, nor too easy to make, as they are now, which leads to an artificial situation from which we shall suffer in the long run. That is planning at a high level.
Hon. Members opposite are very fond of talking about the bad days between the wars. I sometimes wonder whether it is perhaps because they are devoid of constructive proposals of their own that they prefer to fall back upon abuse of the past, of what happened long ago in Governments in which their own leaders took an active part. I suggest that they should learn by their past. That might help in the future.
If we take an analysis of what really happened, I think hon. Members would find that before 1913, when world demand was expanding in every direction, our industries were going full steam ahead with all the start they had and were doing very well. After the First World War there was no longer that general expanding demand but, mistakenly—and I am not making an electioneering speech, for it was the responsibility of all parties—we tried to protect ourselves by cumbersome devices and by inflexibility from adjustments which should have taken place, whereas we should have switched to making those things which other countries needed. In fact, we had a rigidity which did not do that at all.
But if we were rigid in those inter-war years we are a hundredfold more rigid today and we shall pay a far heavier price when the time comes. Speaking for myself, I am convinced that to try to protect ourselves by restricting world trade means a lower standard of living for this country. The only way in which we can possibly have a higher standard of living, situated as we are, is by expanding world trade and seeing that we get a full share in it.
I have tried to show that though we are scrambling through at the moment, we are in a perilous position because there is no margin of safety; I have tried to show that we are not doing nearly as well as this country is capable of doing; and I have tried to show that the only way in which we can get efficiency is either by harsh physical controls beloved of the totalitarian Powers, or by restoring competition and the hope of reward. I think today the Government have got the choice of either avoiding unpopularity by not making cuts the country will not like and then drifting to disaster, or, to use the words of the Lord President, "See trouble coming and prevent getting into the smash." That will need courage and determination, and those qualities have not been very apparent in the present Government.
I am sure that the hon. Member for Scarborough and Whitby (Mr. Spearman) will excuse me if I do not follow him in every one of the arguments he has put forward, as I cannot for two reasons. The first is that I could not hear him at all. The second one is that having regard—[HON. MEMBERS: "Speak up."]—having regard to the lateness of the hour I am quite sure the right hon. Member for Aldershot (Mr. Lyttelton)—[HON. MEMBERS: "Cannot hear."] All right, I asked for it. I was only pointing out the reasons why I could not follow the hon. Member for Scarborough and Whitby completely. However, two words came over the space which divides us. One was "inflation" and the other was "disaster."
In those respects, of course, what the hon. Gentleman said was in keeping with what every hon. Member below and above the Gangway on the opposite side of the House has said for the whole of this Debate. They are against inflation. They see inflation. They have two good, solid proposals for ending inflation. The first one is to increase wages, as put forward by the right hon. Member for Warwick and Leamington (Mr. Eden) and the right hon. Gentleman the Leader of the Liberal Party. First, we are to remove inflation by encouraging the increasing of wages. The second method is to increase the amount of purchasing power by decreasing taxation. Those are the two solid arguments—and the only ones—advanced on the opposite side in the whole of the Debate for reducing inflation, which the Conservative Party and the Liberal Party say exists in our economy at the moment.
And as to disaster, of course—well, the hon. Member for Scarborough and Whitby and the hon. Member for Chippenham (Mr. Eccles) has quite accustomed us to the doom and gloom which they have foreseen in our affairs. Indeed, I understand that the hon. Member for Chippenham is now talking about suicide. He will no doubt be relieved to know from my hon. Friend the Member for Stalybridge and Hyde (Mr. Lang) that he is quite prepared to bury him at the same cost now as before the war: there is no increase in that respect.
I am sorry that this gloom has spread all over the Conservative benches in this Budget Debate. Even such a cheerful—I was going to say "Charlie," but I am sure that would not be a proper remark—such a cheerful Member as the right hon. Gentleman the Member for Bristol, West (Mr. Stanley) was in, as he said, one of his "more depressed moments," and today the right hon. Member for Warwick and Leamington was speaking about the gloom and doom that he foresaw for this country. I think that the most appropriate thing that anybody on this side of the House could say to hon. and right hon. Gentlemen Opposite would be, "Cheer up, things may not be quite so bad." I have a little notice next to my shaving mirror which says, "Do not worry. It may not happen." Let me add for the benefit of hon. Members opposite who apparently do not look forward but backward: not only may it not happen, but it has not happened.
On the occasion when I last had the opportunity of addressing the House on these matters I referred to the extraordinary good business that our large companies are doing, as shown by "The Times" reports of the annual general meetings of those companies, which, of course, I should think, provide most reliable evidence of what is going on. I am sure that the right hon. Member for Aldershot will agree. These large companies publish in their own words in the commercial pages of "The Times" their reports of their meetings, and the headlines are their own headlines, and they review what success the companies have.
Of course in any number of companies one can see these highly-successful results. I was challenged last time on the basis that although these results had been satisfactory up to a year ago, from then on the position would be terrible. In order to make quite sure of that point, I have brought with me last month's copies of "The Times"—the bulk of which I hope will not inconvenience anyone—and I invite the right hon. Gentleman to select a day during the last month, and I will read out to him every single company report as published in "The Times."
As the hon. Member knows, that is not the case. As time is getting on, and as, apparently, no one is prepared to challenge what I am saying, perhaps they will agree with me that under this terrible burden of taxation which we are continually hearing about, business has never been better in this country than it is now.
I think that every hon. Member who has been present during this Debate would say that its feature has been the very excellent maiden speeches which we have heard this afternoon. I think that they reached a level which has perhaps never been surpassed and very seldom equalled in the late history of the House. There were speeches by my hon. Friend the Member for Ruislip—Northwood (Mr. F. P. Crowder) and my hon. Friend the Member for Oswestry (Mr. Ormsby-Gore) and in both those cases we thought of a parent here in one case and not far distant in the other. There were also maiden speeches by the hon. Member for Wokingham (Mr. Remnant)—and we remember the Parliamentary reputation which his father enjoyed—by the hon. Member for Cardiff, North (Mr. Llewellyn), and the hon. and gallant Member for Harborough (Lieut.-Com-mander Baldock). I could not help thinking that if this was the standard reached by the maidens, what was expected of those who have long ago lost their maiden allowance in this particular race and I felt rather nervous about having to wind up.
The hon. Member for Blackley (Mr. Diamond) tried to fasten on me, amongst others, the label of being an apostle of gloom. I am not that at all. I admit, however, the impeachment of being the apostle of danger, and I do not think there is any right hon. Gentleman on the Front Bench opposite in a responsible position who would deny that we are in very grave economic danger. When the elections are not imminent very stark-things are said by Ministers, and as the elections approach, their outlook becomes more optimistic.
I do not want to repeat the argument which I made during the Budget Debate upon the dangers of our economic situation, but, in my view, these dangers have not changed during the last two or three weeks. They are, first of all, that a country which has no remaining taxable sources of revenue, which has a balance of payment so very delicately adjusted as ours, and, above all, which depends on the highly-artificial measures of wage limitations, by a voluntary wage-freeze and dividend limitation, is in a very precarious position, and is a precarious foundation on which to erect an economic structure. We are quite unable to see how we should live through even a minor depression in American business, so I make no apology for referring to this background, and I think that we should discuss all the budgetary measures with a mind to it.
I very much hope that the Chancellor this evening will be able to record a further rise in our reserves of dollars and hard currency. I do not know if it is his intention to tell us tonight, but my impression was that the general pick-up in American business in recent months—I think it is about 1 or 2 per cent. under the peak reached last year—has had a distinct effect on British economy. That effect is produced by American stock piling, and from the more than ordinary demands for raw materials which is now being felt.
Even if the Chancellor is not going to tell us, very shortly we shall be able to see that our reserves in dollars and hard currencies have risen because I repeat—and when I say this the Chancellor always smiles in a rather superior way—that convertibility of the pound must be the prime, although it be a distant, object of the Treasury. The Treasury Bench always laugh at that, because it is such an obvious thing to say. Nevertheless they do not carry out the necessary measures to attain such an end.
Quite apart from the many factors which are required and which we must mobilise if we are to make sterling a convertible currency, we shall have to create a much greater international confidence in our country and even in our political structure. We must have a cessation of the attacks on capital, and we hope that certain Ministers will stop these unbridled speeches about the redistribution of wealth being retribution. Speeches like that do not create international confidence, and they make the convertibility of sterling all the more difficult.
Even if all the factors are working for us, we need much larger dollar and gold reserves in order to protect ourselves from fluctuations, and these are the conditions which are precedent to any return to convertibility. I would not like to estimate how much of our present dollar and gold currency reserves of about 1,984 million dollars are necessary for the bank with which we carry out transactions for the sterling area, but it would be a large proportion of it. If we consider that last year—I must now switch over to sterling because it is very difficult for a non-official person to know the rates of exchange and how to express these deficits—there was a deficit of £380 million and against that we had 1,984 million dollars, it surely has to be recognised that for only a few months at last year's rate could we sustain our present reserves. We are all agreed they must be increased as one of the precedents to the covertibility of sterling.
I am very glad that my hon. Friend the Member for Scarborough and Whitby (Mr. Spearman), in his thoughtful speech, again drew attention to the figures of productivity. Although I believe the general tendency of production is good, we must be very careful not to pass any optimistic forecasts upon them. The last thing I should like to do would be to run down the efforts of the most skilful body of workmen in the world, but whatever the figures are for production, it is not high enough, it is not what it should be, and, above all, it is not what it must be.
We are entitled to expect greater results from the huge capital investment which has been put into British industry since the war, a capital investment which derives solely from five years of boom and of unprecedented demand for goods in the sellers' market. Even now for many commodities and manufactured articles that boom is not over. I do not wish to recapitulate the arguments used during the Budget Debate, but I wish to concentrate on the Budget itself and its fiscal provisions. I do not want to make my remarks too long, because I want to leave the Chancellor of the Exchequer plenty of time in which to answer the questions addressed to him, the very pertinent questions, by the hon. Member for Wednesbury (Mr. S. N. Evans). In this particular case, I have no doubt the Financial Secretary will complain that the Opposition have not answered the hon. Members questions, just as he always seems to think it is our duty to introduce the Budget and his duty to criticise it.
On this occasion, we are looking forward with some interest to what is known in trade union circles as a "jurisdictional dispute" between someone who has let out a large portion of the Labour policy in a rather inadvertent manner, and the Chancellor of the Exchequer. We shall listen with interest to see how they get on. It is always painful when a Minister has to eat his words, as happened with the Chancellor of the Exchequer on devaluation, but he will find it much more agreeable to eat one of his late colleague's words in the House.
Turning to the Budget itself, I should say that its first characteristic is its lack of imagination. It is a Budget of an exhausted Government which has lost all faith in itself and in most of its favoured policies. There is no financial, political, social or commercial creed discernible in this Budget. There is no shred of policy which runs through this patchwork. We have ceased to hear that nationalisation is the cure for all our economic ills. That is a subject which Socialists do not mention. We do not know whether Members opposite believe that nationalisation or further nationalisation is to be the cure for our economic evils.
I shall be interested to hear from the Chancellor whether he still believes in that. Does he still believe in further nationalisation? I believe, if rumour is true, that the party opposite are about to go to Dorking, turning their backs on the Isle of Wight and other seaside resorts, in order to eliminate nationalisation from the party programme. I do not know whether Members opposite really believe that the cure for our economic troubles is in nationalisation, but I am quite sure they all feel that nationalisation is not going to be a very good cure for their electoral difficulties. If rumour is true, the section headed by the Lord President, who believe that nationalisation should be mentioned under their breath until after the General Election, are going to win the day. I shall be very interested to see whether I have any success as a prophet.
However cynical it may appear to us, my guess is that the anti-nationalisers are at the moment in the ascendant. When Members are talking about the economic background to the Budget, surely the subject of nationalisation is not so irrelevant as they would like to make it. The mood of this Budget, as was touched on by my hon. Friend the Member for Oswestry, is the physic as before, the old spoonful of brimstone without the treacle, which used to be the fare of the boys at Dotheboys Hall. This prescription has to be paid for by the taxpayer.
That is why I say the Budget is so unimaginative. It simply consists of spending all the Government can lay their hands on, saying that they cannot make any economies, and then adding up all the expenses and taxing the country £200 million above the sum. Then, since there are no other sources of taxable income, some new taxes are added here and there and the same amount is taken off elsewhere. It is all delightfully simple, and any fourth form schoolboy who could learn up a little patter about "democratic planning" could produce the physic, always the same bottle and always the same label, but perhaps not quite as well as the right hon. and learned Gentleman.
What, in our opinion on this side of the House, are the fundamental weaknesses of the Budget? There are four most important. First of all, its size; secondly, it depends upon an ever buoyant revenue; thirdly, there is very little service paid to the idea of incentive; the budgetary policy of the present Government remains a deterrent to production, hard work and saving; and lastly, it appears not to realise in any way the serious problem of the increased costs of our social services which will face us over the next decade or 20 years.
I want to spend a moment or two discussing those four fundamental weaknesses. First, the size of the Budget: nearly £4,000 million five years after the war, 43 per cent. of the national income being spent by the Government, and no prospects whatever of any relief to the taxpayer under this Administration. We remain the most heavily taxed nation in the world. The situation is really much worse than this, because we have grave fears—and I do not think those fears are on this side of the House only—whether we shall be able to finance all that we have to finance, even at this level of taxation. The Treasury apparently admit that taxation cannot be increased; we have used up all the taxable sources, as I think is clear from looking at the Budget.
The next point is the supposition upon which the Budget is based—that revenue will remain buoyant. The hon. Member for Blackley with a large bundle of "The Times" or the "Manchester Guardian," I do not know which——
—tried to point out that all company profits have been going up in the last year. Well, I think, very likely that is true. At any rate, he ought to know; he is a director of some very successful companies, and is one of the most successful capitalists in the Socialist Party. First, I want to see if I can understand the Government's outlook on profits. The Chancellor seems to me—I hope I am not doing him an injustice—to be always inveighing against profits. Last year he used rather violent terms when be said:
I draw the attention of the right hon. Gentleman "—
that was my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler)—
to the fact that one of the reasons prices are so high is because profits have been so frightfully high over the last few years."—[OFFICIAL REPORT, 18th May, 1949; Vol. 465, c. 563.]
But the vast skyscraper of Government expenditure can only be financed out of profits, and to me one of the most puzzling parts of the Chancellor's precise and attractive mind is that he is continually inveighing against profits! on which alone the stability of his Budget rests. I agreed very much with my hon. Friend the Member for Scarborough and Whitby, that what we must aim at is a country where profits are much harder to make, and where they must also be much easier to keep. What is utter nonsense is to have a Budget of
£4,000 million and then complain that we are solvent because profits are too high.
I should like to have some statement from the Chancellor about what he considers to be the prospects of revenue from companies' profits this year. That would be more useful than looking at the pages of "The Times." I know quite well that during the first three or four months companies' profits have been rising, but I have been rather frightened to see that several industrial companies, and some of the largest, have recently reported sharp falls in their earnings for 1949. The hon. Member for Blackley rather challenged me on this point, and if he has time when he has finished reading through the files of "The Times" I recommend him to read the reports of the Dunlop Rubber Company and Imperial Chemical Industries. These are two companies which have had a sharp fall in profits.
I should like the Chancellor to devote a moment or two to an analysis of what we all agree is a vital part of our Budget discussion—whether he really thinks the present level of companies' profits will be maintained. I have the impression that profit margins are narrowing, that competition is growing greater, not only from Japan, Italy and Germany, but generally growing greater, and that the sellers' market is being replaced more by a buyer's market; and I should have guessed that we must very soon see a fall in revenue from taxation of industry. I should like to know what the Government have to tell us about this.
I now turn to the deterrents to production, hard work and savings in the Budget. Some concessions are made which will affect overtime work, but the day when we can talk of the absence of incentives has passed and we ought to use the positive term, "the general budgetary policy of the Government is a deterrent." This not only applies to workers in the mines, the fields and the workshops; it applies everywhere. It deters professional men such as barristers, solicitors, surgeons or physicians from undertaking further responsibilities and further work unless they get some monetary advantage. If a man is successful now beyond a certain point there is not a great urge to assume new risks and new responsibilities.
I want to say with very great seriousness to hon. Members opposite that the administration of big companies now is becoming increasingly difficult because it is impossible to offer rewards of any sort to those who succeed to the highest positions, and, however whole-hearted the efforts of the workpeople on the floor of the shop may be, it depends on the policy, foresight, experience and wisdom of directors and managers if their efforts are not to be frustrated.
Frequently in my own experience I have had to fine people by promotion. It is worth while examining for a moment what happens. We may have a successful engineer who runs a large works in the provinces, lives two or three miles out of the provincial city, has 10 acres, a cow and a few chickens, and a substantial salary, but, unfortunately for him, the day comes when he has to be promoted and there is no means by which we can give him another penny in expendable income for assuming new responsibilities. He may have to go to London where the cost of living is much higher, but he cannot take the cow or the chickens there, and he also happens to be much nearer the boss, which is always a bore, as the Financial Secretary will know. At the end of the day—I am prepared to show hon. Members the actual figures—he is fined several hundred pounds a year.
Is that the way in which a country which depends upon the intelligence and skill of its technologists and engineers is likely to survive the very hard economic weather through which we have to live? So far British industry has largely carried on by the momentum of past tradition, and the day is now upon us—I really measure these words most carefully—when young men entering the field of productive industry no longer look for monetary rewards which attend success; their minds are now turned towards safety and amenities without responsibility and they are now endeavouring to eschew risks and pursue a policy of safety-first wherever they can.
Of course, again the Profits Tax and the swingeing rate of Income Tax are interfering with the provision of capital for industry, and that at a time when personal savings are becoming almost impossible. We all agree that the increased cost of capital equipment, the increased cost of carrying stocks and works-in-progress, the increased cost of imported raw material due to devaluation, are all making it imperative to increase our capital investment in industry. There are other problems lying behind that. The amount of capital investment per capita of the industrial population in this country is still far too low, but just at this time when the provision of industrial capital has become more and more pressing, the Government devise measures which seem designed to deplete the working capital of industry and other policies which take tax off undistributed profits.
My fourth point about the weaknesses is the bleak outlook for the taxpayer and for budgetary stability if the social services are not administered with much greater care and much more regard to economy than they are. I believe that the benefits we derive from these social services are great. For instance, in the case of the National Health Service, quite apart from the individual benefits, I believe that capital sunk in the health of the nation is good business, but only when we can afford to pay for it.
The hon. Member who is so fond of making irrelevant interruptions jeers, but this is an extremely serious matter because I really think that, actuarily, if we take all the social services together, we shall have the utmost difficulty in paying for them and maintaining the stable purchasing power of the £. I do not believe, in spite of that jeer, that my anxieties are not shared by hon. Members opposite because I think they are far too responsible to disregard them. I give this warning, that these social services at this level and their mounting cost will be extremely difficult to finance.
Do not let us forget, however, that there is always an easy way out—the continual depreciation of the purchasing power of money. That is what has happened already. The Government have already cut the social services by quite a large amount and they have done it the easy way, in the hope—I will not put it as offensively as that, but one of the ways why inflation is so attractive when one is over-spending is that the beneficiary finds out rather late in the day that his benefits have been cut. It is quite obvious that either a serious tightening up of all this administration has to take place or else that we shall pay for the social services in paper pounds at ever-reducing real advantages.
Those who are sticking on stamps today and who stuck them on a year or two ago are going to be paid the benefits in pounds which are far less valuable than those were when they stuck on the stamps. I live in perpetual fear that the Government will take the easy way out, hoping not to be found out, by cutting the social services through inflation. I think this is one of the most pressing problems of our day, and the Budget and budgetary policy show no realisation of these dangers.
I will not detain the House much longer but I want to devote one or two minutes to the Clauses in the Bill. Clauses 1 to 5 deal with increases in duty on petrol. They seem to me, even after the rather halting explanation tendered by the Financial Secretary, to be inappropriate to our economy today. Here again we see the illogicality and anomalies of Government thinking. They are always telling us that one of the keys to paying the bill and maintaining our present standards of life is by cheapening costs and by increased productivity—we all agree with that; but these additions to the costs of petrol and light oils, quite apart from imposing further taxes upon a not inconsiderable part of the population, may increase costs of distribution, consequently having an effect upon the cost of living. They mean also increased costs of production, whether the commodities transported are for use at home or for export abroad.
We all know, if we want to look for an example of what happens, that the Transport Commission will have to pay something like £6 or £7 million extra in its fuel bill for the services which it provides; and this will happen all over the road traction industry. I am bold enough to disbelieve that in levying this tax the Government have not had an eye upon the earnings of the nationalised railways. Here we see another pernicious effect of nationalisation. It is the beginning of a policy to divert, artificially in this case, traffic—it will not be long before it is other business—away from the efficient private sector and into the inefficient nationalised industry.
The general incidence of this duty is to burden road transport industry with a bill of £73 million. There is the subsidiary point, of course, that these light oils are also used in painting, dyeing, cleaning, rubber goods, seed-crushing, printing and so forth. I do not think that under the present proposals any rebate can be claimed for the light oils which are used for these purposes, and we shall introduce Amendments to try to secure this.
Then we come to the Purchase Tax on commercial vehicles. There are a mass of administrative anomalies in this subject which we shall bring out during the Committee stage. Of course, the plain result is an increased cost to transport of another £13 million, so that with the £73 million for the petrol duty we reach a total of £86 million—I think that that is about the figure—upon the haulage industry as a whole. The Government avowedly are putting the Purchase Tax on commercial vehicles in order to restrict the expansion of the fleet of vehicles on the road. It would be rather franker to say that it is being done to try to assist the hard pressed railways which, under their extravagant administration, are a much greater burden around our necks than they should be.
I cannot help feeling that some of these measures will not be very successful in helping the railways and I believe the hopes which have been expressed to be falsified. I do not know whether hon. Members have had the advantage of reading an article in the "Sunday Pictorial" by the hon. Member for Coventry, East (Mr. Crossman), whose suggestion of putting the railways on their feet is that the Government should cut the interest on the compensation stock which has been given to the stockholders. Considering that many people think that the hon. Member for Coventry, East, is very closely in the counsels of the Labour Party, I hope that the Chancellor will take this opportunity of denying that particular expedient, which of course would have the effect of plunging Government credit into a permanent decline.
The suggestion which I made in the article was a different one, namely, that we should give a subsidy to the railways. I made no mention of cutting the interest on the compensation stock.
I have not got it with me. I have read it, but unfortunately, unlike the hon. Member for Blackley (Mr. Diamond), I have not brought my file of the "Sunday Pictorial" with me. I certainly do not wish to press the point if I am in error, but I shall look up the words.
I want to say a word or two about the Lord-Black case. Personally, I have every sympathy with companies that wish to tie up, if that is the right expression, senior executives whose skill has built up the expansion of their companies and possibly made a great contribution to the export drive. When there are so many deterrents and no possibility of success being attended by monetary rewards, or by any substantial ones, it is very natural that companies should look for means of retaining these successful executives. We should not forget that motor vehicles are a very important export and I think, to the United States, they rank only second to whisky. I feel that the method pursued in the case of these two gentlemen was not a correct one and that all the companies wishing to tie up executives can do is to give them long agreements for salaries, of which they will receive very little benefits and, possibly, with pension rights at the end of their lives. But the restrictive covenants in the case of these two gentlemen are the child of an economic system Which is becoming more unworkable and ineffective and it is far better to devote our criticisms to the nature of the system, rather than to be overshocked at the abuses which such a system can breed.
Retroactive legislation has always a vicious element in it and we should try to avoid it when we can, but two wrongs cannot make a right. The true answer is to try to remove the deterrents to success and in a properly organised society people will not pursue these expedients. In the words of the Chancellor, the Lord-Black agreements only serve to highlight the deep-seated maladjustments of our economic system.
If we look at the Death Duties everyone will agree that they are another deterrent—[Laughter.] I quite agree they are a deterrent to die, but they are certainly another deterrent to saving, particularly big saving. The Government go on making speeches on the need for saving and all the time their policy is directed to removing both the means and the impulse to saving. Just as my hon. Friend the Member for Scarborough and Whitby contended, every family earning under £10 a week pays out about 11s. more in taxes than it receives in social benefit, so we can read in that an analogy of the Budget policy of the Government which adds on a few taxes here and there, pares a little away, and calls it a Budget policy.
The Opposition will not, of course, divide on the Second Reading of the Finance Bill, little though they think of it. That is for the simple reason that if we divide against the whole Bill we would have to divide against certain things necessary for the national life. We shall therefore await the Committee stage to pick out particular provisions which we think inappropriate and inapplicable. [Interruption.] May I remind one or two hon. Members that the Chancellor of the Exchequer is shortly to speak and that they ought not to leave the Chamber, even though there is not to be a Division? We must wait until the Committee stage and to move to take out of the Bill those provisions which we think are inapplicable to our present situation.
Without any desire to retain an audience at this late hour of the night, I would warn hon. Members that even the most surprising things have happened as regards Divisions. This Debate has, I think, been an interesting Debate, and as the right hon. Member for Aldershot (Mr. Lyttelton) stated, we have had a number of maiden speeches to which we have all listened with very great interest. It is true that one would have liked the opportunity to correct some of the fallacies to which one has listened, but that would not be in accordance with the rule of the House as regards maiden speeches.
No, not yet. At one time, indeed, I began to wonder whether this was not a hereditary House in which we were sitting for the maiden speakers to whom we have listened today. I should like to tender my very warm congratulations to them as so many other people have done in the course of this Debate.
It would be the most convenient course, I think, if I were to take the comments that I wish to make in the order in which the speeches have been made to the House, beginning therefore with that of the right hon. Member for Warwick and Leamington (Mr. Eden). He began his speech by referring to what he called the realities of the financial and economic situation. It is perhaps perfectly natural that people on the other side of the House tend to focus the eye of reality upon the less fortunate elements in the financial situation, and that people on this side of the House tend to do rather the opposite. I try myself to keep as objectively between the two as I can. If any hon. Member will agree to read my Budget speech I think he will find every single point which the right hon. Gentleman put this afternoon, no doubt taken from my Budget speech. The reality is of course that we should look at the situation with its advantages as well as its disadvantages.
I do not propose again to go through the rather long review which I gave of that situation. [HON. MEMBERS: "Hear, hear."] I am delighted that hon. Members opposite were so pleased with it. I did my best to put the facts on both sides of the picture before them. When one reviews the whole picture it is one which is not, on the whole, unsatisfactory considering the difficulties we have had to face in the last four or five years. I entirely agree with the right hon. Gentleman that we must do all we can to keep down our costs, especially in view of the importance of maintaining our competitive situation in the growingly difficult international market in which we have to do our business. Hence, of course, one of the reasons for our policy of food subsidies, which has indeed had a very considerable effect upon keeping down the general cost of manufacture of all our articles.
We do indeed also want a greater degree of flexibility, again a matter to which the right hon. Gentleman referred, but not I think in quite the same sense in which I utilised the phrase. I was referring to a need, if necessary, to apply inflationary policies instead of deflationary policies if we should get a changeover in our circumstances. But perhaps the greatest degree of flexibility we need in our economy as a whole today is that to be obtained by having larger gold and dollar reserves. It is that flexibility which will enable us to meet the sort of financial difficulties which we came across last year and which had such a profound effect upon our economy.
I shall not give way to the temptation which the right hon. Member for Alder-shot (Mr. Lyttelton) put before me of giving any further figures of dollar reserves. They will be given in due course after 30th June, when the figures for the quarter are completed. I am sure he will agree with me that it would be most unfortunate to publish casually figures of this sort, which might lead to misunderstanding as to a particular movement over a short period of time.
I am much obliged. It would be a casual date rather than a casual statement.
One of the extraordinary things which the right hon. Member for Warwick and Leamington stated was that the private investor had been almost liquidated. I wonder if he has taken the trouble to look at the actual figures of private savings? As it happens, personal savings in the years 1948 and 1949 were almost precisely the same percentage of disposable personal income as they had been in 1938–4.8 per cent. in each case. In 1938, when the disposable personal income was £4,500 million roughly, the gross personal saving was £217 million; and in 1948, when the disposable personal income was £8,500 million, the personal saving was £409 million, so that it has remained almost exactly the same percentage. If we add to that the fact that company savings have gone up enormously over the last two or three years, we find that the total volume of private savings has immensely increased, and has not decreased at all.
This idea that somehow or other we have dried up the fount of private per- sonal savings is a complete fallacy. If we take even small savings, there again it is a complete fallacy. What has happened with small savings is that withdrawals have increased very much indeed. This is a quite different point. [Laughter.] Really hon. Gentlemen must look at these things realistically. The number of people who are saving money today and the amount they save are almost as great as ever. But perfectly naturally people who put aside large sums of money during the war are now withdrawing them in order to spend them as they intended when they put them aside. Personal savings and war savings are not as a whole permanent savings. They are money put aside for a period of time until it is wanted to spend for furnishing a house or going for a long holiday or something of that kind. That has been the experience of it. As the volume of savings for the last few years was growing very rapidly and arrived at enormous figures during the war, it is natural that there is a great amount of encashment of those savings now as they come to fruition.
But the point as to whether there is the money available to save is shown by the new savings made each week and each month. Although these were slightly down—the difference between £941 million and £903 million between 1948 and 1949—they are not significantly down, so that the general volume of private savings has in fact been maintained in a rather remarkable way. If we add to that the very much larger investment in insurance capital—saving through premiums, which is a very well accepted method of saving after all—we will find that the total volume has kept up extremely well.
But what has happened—and this is why some hon. Gentlemen think that savings have dried up—is that investment in this country has been planned or directed into the most essential things during the last few years because we have not the resources in materials and manpower to allow them to be wasted, as they were after the First World War. Those who remember, for instance, the boom in gramophone manufacture which led to enormous wastage after the First World War, will see that that sort of thing has been stopped. The Capital Investments Committee have not allowed capital to be collected for that purpose, and various building and other controls have seen that such capital resources as we had were used to the best possible purposes and to a very considerable extent for the purpose of increasing the efficiency of our industry. The result is that we have been able in this period since the end of the war to do very much more in the reconstruction of our industry in the way of buildings, machinery and plant than we were ever able to do before. That is, I think, an end which everybody in this House agrees was a most desirable and essential end.
The right hon. Gentleman then suggested that the good results which we had admittedly obtained as regards exports and productivity, and other matters which he mentioned, were not any evidence that taxation was not too high. I just do not understand how it can be argued that high taxation is stopping these results being produced when the results are in fact being produced It would be a different thing if one could point to pre-war figures and say, "Look how much better we did in those days when taxation was not so high. Comparatively today we are not doing so well." But that cannot be done. It is the other way round. In fact, of course, high taxation and these good results are all of them part of the consequences of the conditions through which we are living.
That is one of the conditions through which we are living.
The right hon. Gentleman then asked me whether we would be prepared to proceed with the second committee on Income Tax. I thought I made it clear originally that the results of the first committee must be the basis of the work of the second committee. Therefore, we cannot really proceed until such time as the first committee reports, though we are making preparatory arrangements, now, so that we shall get off, we hope, to a good start as soon as we get that report. There is no intention to delay the matter. We are as anxious as anybody to get the results of this committee. Whether we shall agree on how it is to be applied is another matter.
It was only set up at that time, and we do not think we shall get the report until towards the end of this year. This is an extremely difficult and complicated technical matter, and we do not want an ill-digested report. We want a thoroughgoing and good report.
The right hon. Gentleman also asked whether we would be prepared to have a committee to examine the incidence of Purchase Tax. That is done thoroughly now by the Customs and Excise Department. I think they are aware of the difficulties and anomalies, and the other matters which have been mentioned. These are put up from time to time to Ministers who decide whether action should be taken. I do not think that any better result would be achieved by setting up such a committee as he has suggested.
There was another thing said by the right hon. Gentleman about Purchase Tax with which I would not necessarily agree. He said that of course we must not consider Purchase Tax to be anything more than a temporary tax. Purchase Tax has in fact taken the place of most of the indirect taxation which existed before. We have taken tax off tea and sugar and things of that sort.
No, we have put it on tobacco, for reasons which the right hon. Gentleman knows—because of the dollar position. But a great deal of indirect taxation has come off consumable commodities. We now have Purchase Tax, which is raising nearly £300,000,000 a year. Whoever wants to take off the Purchase Tax will have to find another way of raising that money before he does so, that is all.
The right hon. Gentleman then went on to deal with what he referred to as "the wage-freeze." He said that, so far as the Government were concerned, they had not played their part, because they had not stopped inflation. Whatever else there is disagreement about I thought that most people were agreed—certainly the Press are—that at the beginning of this financial year we had reached a degree of disinflation which was satisfactory. We have the position completely under control as, indeed, we had a year ago. I would remind the hon. Member for Barnet (Mr. Maudling) and others who have spoken on this that they seem to forget the position in inflation from which we started. They forget that in 1944–45 the Budget expenditure above the line was £6,063 million and in 1945–46 £5,484 million. These were not sums that could be raised by taxation but sums carrying on from the war. No one blames anybody for them, but they disclose a highly potential inflationary situation.
The right hon. Gentleman seemed to forget what we have been engaged in since the Budget of 1945–46 is reducing that entire position, and last year and this year again we reached the stage where we had this disinflation at a satisfactory position. This is a very considerable achievement, and when we had our big Budget surpluses in the year before last and last year, right hon. and hon. Gentlemen opposite thought this was a very good policy with which they entirely agreed, and that we ought to have Budget surpluses in order to get this degree of disinflation. We have now succeeded supported by good judgment on both sides of the House of Commons on this question of Budget surpluses.
How, therefore, it can be said that the Government have not carried out their part by maintaining the disinflationary condition, I really do not understand. A great deal has been said in the course of the Debate about the danger of inflation, of suppressed inflation, controlled inflation and all the other kinds of inflation. The truth is that as long as there is full employment and the position of the servant is thus strong as against the master, there will be the danger of wages and salaries going up. That is an inevitable incident of full employment. It is not an incident necessarily of inflation, but, as I said in my Budget speech, in that condition of full employment we are naturally on a rather narrow ledge between inflation on the one side and deflation on the other. We have to try to preserve ourselves on that ledge. It is nothing like as easy as it used to be in the days before the war when we were not on a knife edge but were able to wander about on a fairly level plain.
Therefore, I think the right hon. Gentleman was not justified in accusing us of not carrying out our part of the policy of restraint in wages and salaries. Indeed, it almost seemed to me as if the right hon. Gentleman was playing at politics rather in the King Street pattern, and trying to create difficulties between the T.U.C. and the Government. What does the right hon. Gentleman suggest as his remedy to this matter of restraint? He is encouraging people to let the lid fly off and have bigger wages, salaries and profits.
What is his remedy as regards avoiding inflation? It is apparently to do away with the food subsidies. How is that going to help? That is merely going to put up prices all round, and that will then mean more wages and more salaries. This is the classic path to inflation—and this is the policy of the right hon. Gentleman. I think really we must come to the conclusion that he is not so stupid as he would seem, but that this is merely mischief making on the grand scale, and that he has caught the infection from his leader.
Now, the only other constructive suggestion that the right hon. Gentleman put forward was that we should do away with the Profits Tax on undistributed profits. Of course, that would help the restraint in wages quite a lot! But the right hon. Gentleman is not concerned with that. What I should like to know is, where he is going to replace the money. This is another £60 million. Well, where is he going to get £60 million from? Or does he want to reduce the overall balance in the Budget? Does he want a deficit Budget? None of these questions is answered.
I could go through the whole Budget and give an excellent reason why every single tax should be taken off—an excellent reason. Anybody can, because, after all, nobody likes taxes. [HON. MEMBERS: "Oh."] Nobody likes taxes. These are harsh necessities of civilisation, that is all. And we must put up with them. But it really is not any good simply to say "I do not like this tax: I think it ought to come off," unless one can suggest what is going to be put in its place.
I pass from the right hon. Gentleman to what I may call the strange agricultural interlude.
May I ask the right hon. and learned Gentleman one question? Can he make any comment on those figures which I have now quoted twice—the U.N.O. figures about the prices rises in the United States?
Broadly speaking, they are not comparable figures, to start with, of course, because the content of the two figures is so very different. For instance, a very large content in the American price is the price of maize, which, naturally, does not enter here into our wholesale prices practically at all; and in that particular case there was a fall in that price to a third over the period the right hon. Gentleman has mentioned. The other matter, of course, is that a great number of our prices—in fact, the larger part of the increase in our prices—is due to the increased prices of imports—
The hon. Gentleman says "no." Of course it vitiates any comparison which the right hon. Gentleman was seeking to draw as between the position of our economy from the point of view of the cost of production. If we suddenly change the rate of exchange we do not change all our costs of production but we do change the price of the article which we are importing. Therefore, it is not a comparable figure.
This is surely of some importance. These figures are given as comparable in the United Nations paper here, and if they are anything like right it does show that our prices are becoming increasingly maladjusted—to use one of the Chancellor's words—with those of the United States. If the matter is too complicated to explain now I hope the right hon. and learned Gentleman will find an opportunity of explaining it—not in a letter—so that not only I but others who are interested in it: may know what the facts are.
Let me explain why it is obviously false. He may not understand it. I want to explain it. It is obviously false because since devaluation it has been the position that our prices can make our goods saleable in the American market, even though a tariff has existed in that country. That has been our experience in fact and that has been caused, of course, by devaluation, and that was one of the reasons for devaluation. The devaluation which puts up our wholesale prices, because of import prices going up, does not, as the right hon. Gentleman himself said, correspondingly put up our export prices. We are, therefore, able to sell our goods in the markets because of the new rate of exchange which is brought about.
If I may return to the strange agricultural interlude, the hon. Member for Wednesbury (Mr. S. N. Evans) brought into the Debate a very important matter but one which is not really very relevant to the Second Reading of the Finance Bill. There is only one thing which I propose to say about it, and it is that this Government do not intend to repeat the folly of the Coalition Government after the First World War by now going back upon the policies and promises made to the fanning community with care and forethought in the Agriculture Act of 1947, and which we have since carried out in association with our policy of food subsidies.
The right hon. and learned Member for Montgomery (Mr. C. Davies) painted a gloomy picture again of the future economic hellfire into which our economic sins would precipitate us. He described it as being one which would burn certainly for a very long time and certainly indefinitely. I was not quite aware of the significance of that last sentence. Anyway, his way out of it was to increase the Budget surplus. This was interesting, because I think the right hon. and learned Gentleman is the only Member who has spoken today to suggest that we are not taxing enough or that we ought to have a bigger surplus.
The right hon. and learned Gentleman knows perfectly well that I did not suggest increased taxation. I told him at the time that in that connection we had reached saturation point. If we are not to have increased taxation the only other remedy is to cut expenditure.
I quite understand—he would cut expenditure without cutting taxation. The object of hon. Members opposite, of course, is to decrease expenditure in order to cut taxation, while the right hon. and learned Gentleman's idea is to cut expenditure to maintain a larger surplus. In my Budget speech I gave detailed reasons why we believe that the surplus we have aimed at is about the right figure. I have no reason to change the views which I then expressed and I do not propose to repeat them now.
The right hon. and learned Gentleman also spoke of what he called the unnatural restraint in wages and personal incomes. He, too, is apparently desirous of encouraging a breakaway from this policy, like other right hon. and hon. Members opposite, and no doubt for the reasons which I have already given. I can only say that I do not regard it as unnatural to behave sensibly in order to maintain the value of your own personal income and your standard of living. That seems to me to be quite a natural thing for any conscious human being to do. I think it is unnatural, except for some motive of political destruction, to try to persuade people to do the contrary to that.
The hon. Member for Stalybridge and Hyde (Mr. Lang) was good enough to tell me that I was lucky to have survived and I am most grateful to him for his kind reference to me in that respect. Like all of us, he would like to save certain other people from the incidence of taxation increases or benefit them by tax remissions—certain classes of people. Unfortunately, we really cannot use taxa- tion for the purpose of dealing selectively with individual cases of hardship. If one wants to do that one must do it by some other means—grants or something else. Taxation would become impossible if one were to go into qualifications of that kind.
There is no question of selectively taxing Sir John Black or Mr. Lord. It is a principle of taxation, which was generally thought, in spirit, to apply and which has been disregarded completely in these two and in a number of other cases. There are only two cases that happened to become, as it were, famous in the Press. There are a lot of others. I have referred already to the speech of the hon. Member for Barnet which referred to the item of what he called suppressed inflation.
I would like at this stage just to say a word or two about the Petrol Tax, which has been raised by several hon. Members and right hon. Gentlemen in the course of this Debate. The arguments on this, of course, have been already repeated a number of times. This is marginally a dollar commodity at present and anyway there is a considerable dollar content in it. It is, therefore, something that we want to use as economically as possible. It is not sensible, once rationing in the major industrial sphere has ceased to be effective, as it has—it is not rational to allow this imported commodity to remain comparatively cheap, and, therefore, one which people do not strive to use with great economy. That is a very good reason in our view for putting this extra tax on petrol today. As regards the rest of the users, other than the industrial users, it is, we feel, wise to move towards a greater permitted use, which we are doing, while at the same time we get a price which will somewhat restrain the too free use of the commodity. This is a combined method of trying to approximate to a position where this, in some cases luxury and in other cases necessary, commodity will be utilised with the greatest economy so far as our imports are concerned.
I would like to say one word more about the wages and income problem which the right hon. Gentleman and many others have raised. This problem of what is called the wage-freeze, or what I prefer to call the restraint on personal incomes, is not peculiar to this country. One has had exactly the same problem, for instance, in Holland. One has had exactly the same problem in France, where it is creating a very great difficulty indeed. The Dutch have dealt with it in a particular way as hon. Members know, by setting up a machinery and getting an arrangement with regard to stopping increases in wages and salaries. And it arises, as I have already mentioned, out of and as an incident of full employment, and we cannot avoid it unless we are going to get rid of full employment, and that nobody professes to want to do.
Therefore, we must face this problem and try to devise some method by which we can get over it. I ventured to make a statement about it in the course of my Budget speech which was carefully drawn up. There is a need to develop a policy which will accord with our developing production; that is to say, as we increase our national wealth by increasing our production and productivity, we must have some means by which we can rationally distribute the results of that increased production. That is what we all want to see.
People talk about the lower paid wage earners wanting to get more. We want to see a method of doing that without upsetting the differentials which are essential to industry. These are vexed and difficult problems, and we believe they are problems which can be solved by and with the assistance of the two sides of industry, and that it would not be wise, as some hon. Gentlemen have suggested, for the Government to lay down a wages policy—whatever that means—for industry. That cannot be done and it would not be successful if we tried. What we are trying to do is to do everything we can to assist in a solution of that problem. We do not think it would assist in that if we were now at this stage to drop taxes on profits.
Very little has been said specifically in the course of the Debate on the question of degrees of expenditure. We have had the old repetition of the old story, "Why does not the Government reduce expenditure; why does not it decide upon what points that reduction should fall?" and, "It is not for us—the Opposition—to point out the point where they should be made, or how that could be done." That would be quite all right if hon. Gentlemen opposite did not consistently reiterate that it could be done and that there were large savings to be made.
Certainly, we find some every year, every month, every week. That is why we have O. & M. divisions in departments in order to find more economical ways. What I am pointing out is that the Opposition cannot say in the same breath, "We know there are savings which can be made but we do not know what savings can be made." That is what they are trying to say all the time. I am not going through the list of expenditure as I did last year, and ask the Opposition on each item where they wanted to save. We got no answer then. They were not prepared then to say which items they would cut, and they have only said in the course of this Debate, "Surely you can find some savings among all these figures." Therefore, I am not prepared to go through these figures tonight.
The right hon. Member for Aldershot, who wound up for the Opposition, says he is the apostle of danger. Well, we all believe that we are living in a dangerous world today, and anyone who does not must be a fool. But that does not mean we necessarily need approach our problems with the depressing view that we can never overcome that danger. We believe that we can, in the same way that we have overcome these dangers over the last few years.
Yes, one of the things was devaluation. It was perfectly right and it overcame the difficulty. There is no doubt about that. Even hon. Gentlemen do not suggest the contrary. That was one of the methods we had to adopt because unfortunately during the war and afterwards the depletion of our reserves was such that we were not in the pre-war position when we could handle very big swings without any appreciable difficulty.
The right hon. Gentleman the Member for Aldershot went on to say that it is most desirable we should get convertibility in our currency. I entirely agree. I have said it on many occasions, but I have also said that it was a good long way off, and one of the essentials before that is to build up our reserves so as to take the shock of happenings in other parts of the world without destroying our own economy. If, as the right hon. Gentleman says, one of the most important factors is to build up a good international opinion of what we are doing in this country then I do not think the Opposition are doing very much in that way.
He went on to deal with productivity and said that the increases in productivity were suspect. I am not sure what he means by that. It is good argument to get rid of figures which you do not much like because they are too good. The actual fact is that these figures have a comparable basis—are comparable one with another. They may not absolutely agree with other people's calculations on the same basis, but taking one period with another they are calculated——
The right hon. Gentleman well knows that the two calculations are made on different bases. You must not take a calculation made on one basis and compare it with a calculation made on another basis: you must take them made on one basis or the other. That is a perfectly simple rule in using statistics. He then went on to say that our Budget lacked imagination in that there was no discernible creed. That is surprising because a moment before I had been told by the hon. Member for Scarborough and Whitby that I rigidly stand by a Socialist creed and that was why the Budget was not any good. Hon. Members opposite must make up their minds which of these two things is right. A moment later the right hon. Gentleman said that one could really give to the Budget the motto "The physic as before." In his other speeches he has always said that Socialism was leading the country wrong. "The physic as before." Then we must be true Socialists in this Budget. Then we must be leading the country wrong. Then he must be talking nonsense. It was shortly after that he made his reference to the fourth-form schoolboy, and I cannot help thinking that it had some sort of relationship with the thought running through his mind at the time.
In criticisms at the end, when he was summing up, he said that one of the first objectives should be to have a Budget which was not a deterrent, and that this Budget was a deterrent. All the evidence is to the contrary. It is no good repeating these statements unless there is evidence. Does anyone think that the dentists are being deterred by the Budget from earning lots of money—which was one of the cases of professional men given by the right hon. Gentleman? They seem to be much more affected by the number of people they can pass through their consulting rooms in a short period of time. I have never heard it suggested that because of this Budget they are starting to earn less money. This is realy a chimera: this deterrent effect does not exist.
What he really means is: "Why will you not let us keep more of our profits? If you did we could pay our people much higher salaries." This is the question—whether we want people in this country to earn much higher salaries than, say, the Ministerial salaries or any others on that sort of level. At present there is nothing to stop people from earning up to £5,000 a year, but if you want to earn £100,000 a year that cannot be done.
The real difference between us and the right hon. Gentleman here, is that he wants to see an economy which has great monetary prizes for the captains of industry and their chief servants. We do not. We want to moderate the differentials—to bring the lower people up and let the upper people come down, so that we get a more even distribution. That has been one of the reasons for our budgetary policy throughout these four or five years—to get a better distribution of wealth in this country.
Not at all. If the right hon. Gentleman only understood, it is not at all curious. What we are saying is, "Unless you moderate your demands now, you will not be able to achieve them in the future." [Interruption.] Hon. Gentlemen are always saying to us, "You never look ahead." Who is not looking ahead now? It is they who are not looking ahead, to see what the effect of their speeches tonight is going to be. They are not wondering whether they are launching the country on a great inflation as a result of their encouragement to the Communist propaganda, which the trade unionists are fighting with great courage in the unions today.
The hon. Gentleman unfortunately has not had the opportunity in the course of this Debate to make his usual offensive speech. He is suffering slightly from frustration.
I hope I have covered the majority of the points which hon. and right hon. Members have raised. It does not seem to me that there are any of them which materially affect the Finance Bill. They do not think so, as they are not going to divide on it tonight. We believe that in the circumstances of the present time this Finance Bill does the maximum which we can safely do. It gives some moderate relief in a quarter where it is much needed. It imposes a moderate tax in a direction that has hitherto not suffered any increase since long before the war. We believe, therefore, that this, if you like, unchanged policy, which we are quite proud of, and not ashamed of—this unchanged policy of trying to keep down inflation and of maintaining full employment, which we regard as cardinal to the future happiness of our people, is the wisest policy to pursue, and we ask the House therefore to support the Bill.
I make no apology for attempting to prolong this discussion on the Finance Bill, because the speech to which we have just listened has failed most lamentably to defend it. The right hon. and learned Gentleman said it meant the medicine as before, and that it is continuation of the policy of the Government. The effect of the Government's policy on the people of this country will be a steadily deteriorating standard of living, and the problem which this House of Commons has to settle—and which the next one will have to settle—is how to make the purchasing power of the pound worth anything like that what it is today, and how to maintain the employment of our people. The trouble which is being created for future generations is the steadily diminishing purchasing power of the £ and the prospect of unemployment. It is because the right hon. and learned Gentleman has failed lamentably to indicate how this Bill will contribute to a solution of these problems that it is worth while spending a moment or two examining some of the grosser half-truths he has put before the House.
May I, first of all comment on the reference to the speech of my right hon. Friend the Member for Leamington (Mr. Eden), about which the Chancellor of the Exchequer said that everything in it had been culled from his own Budget speech. But my right hon. Friend made his speech in about a fifth of the time the right hon. and learned Gentleman took and that is a matter on which I think the Chancellor might well ponder before sneering at my right hon. Friend. The right hon. and learned Gentleman suggested that the position of personal savings today was a good as in 1938. I am sorry that the right hon. and learned Gentleman has seen fit to leave the Chamber. He should have stayed to face the music, because he played exactly the same trick on the House last year when dealing with company profits. He gave the gross figure as though it was the net. Today, when making a comparison between savings in 1938 and 1949, in exactly the same way, he failed to distinguish the difference between gross and net.
If we look at the White Paper on National Income and Expenditure, 1946–49, we see, in Table 20, that gross personal savings in 1938 were £217 million and, in 1948, £409 million. The relation which these figures bear to gross income is comparable, I agree, but what the right hon. and learned Gentleman did not deal with was the net figure. If we look at page 25 of the White Paper we see that in 1938 the net savings was £139 million and that in 1949, although the personal expenditure had increased from £4,300 million to £8,400 million—approximately double—the figure for net savings was only £174 million, a very small gross increase. To suggest that the figures for 1938 and 1948 show a similar proportion is misleading the House.
Then the Chancellor of the Exchequer went on to talk about Purchase Tax and suggested that one reason why it could not be abolished was that it would destroy the balance between direct and indirect taxation which existed before the war If we look at page 34 of the same publication, we find the figures of indirect taxation paid in 1938 and in 1948, item by item. They were: beer, in 1938, £66 million; in 1948, £305 million. Wines and spirits, in 1938, £41 million; in 1948, £121 million. Tobacco, in 1938, £84 million; in 1948, £606 million. Purchase Tax, nothing in 1938, in 1948, £300 million. Entertainments, in 1938, £8 million; in 1948, £49 million. Betting, nothing in 1938, and £20 million in 1948. Other receipts, in 1938, £138 million; in 1948, £171 million.
In fact if the whole of the Purchase Tax were abolished the proportion between direct and indirect taxation would not be substantially altered. But the point which affects the people of this country is the enormous gross increase in indirect taxation. A suggestion was made with regard to the tax on undistributed profits. My right hon. Friend has indicated that we will later move an Amendment to abolish this tax. The right hon. and learned Gentleman, so far as I could understand him, asked how that could be paid for. What an awful thing it would be, he said, to diminish his surplus to pay for it. But if the tax were removed from the undistributed profits it would represent company savings, and that would not affect the overall position.
The reason we want it removed is because we know quite well that at present British industry is slowly bleeding to death. The reserves which companies are able to make are quite inadequate to ensure the efficient replacement of their depreciating plant. One of my hon. Friends gave, as an example, the shipping companies. Anyone who knows anything about British shipping knows that it is one of our most valuable earners of dollars and of foreign currency. At present, it is becoming increasingly impossible for money to be set aside for the construction of new ships. All along the line it will be found that, as replacement costs rise, insufficient sums have been placed to reserve to cover those costs. I suggest that the right hon. and learned Gentleman's answer to my right hon. Friend's proposal is completely inconclusive.
The right hon. Gentleman seemed to show a degree of complacency about the present situation which I found quite intolerable. I will only give one figure which I thought was worthy of reference tonight. The wholesale prices index has risen by 10.2 since April, 1949, and in March, 1950, it rose by 1.8. The effect that that rise will have on our costs of production, and on our cost of living was, I would have thought, so obvious as to be worthy of some comment by the right hon. and learned Gentleman. His only contribution towards reducing the costs of production in this Finance Bill is to increase the cost of petrol, which is a very important item in many processes and in transport charges, and to put an additional tax on commercial motor vehicles used at home and on various light industrial oils.
The last point which I wish to make, before some of my hon. Friends carry on the Debate, is with reference to reduction of expenditure. Again and again we are told that reduction of expenditure is impossible. Then, when the next crisis occurs, the right hon. and learned Gentleman comes along and announces reductions. We are told that it is administratively impossible to make economies, but as soon as there is a crisis we are told that economies will be effected. I think that the detailed case is more useful than the general statement. I will give two examples of the sort of things that are going on, so far as public administration is concerned, in fields of expenditure where many millions of the taxpayers' money are involved.
The first example concerns the North Wirral Hospital Management Board, and its audit. One hundred and nineteen auditor man-days were spent on auditing accounts of £250,000; a four-page report was produced, containing nothing which would have been worth presenting to a commercial undertaking. A difference of a penny was commented upon in one page, and in another, three-halfpence was argued about. One hundred and nineteen auditor man-days on that! The clerical staff has increased from 25 to 46; the clerical expenses of one hospital have gone up from £300 to £1,300; a group engineer has just been appointed, and within two months of his appointment he has made application for the employment of 12 men, and I suppose that that will mean, a little later, the provision of workshops, vehicles, and apparatus. But nothing will be done more efficiently for these hospitals than it is being done at present. A private Empire is being built up, and that, without exaggeration, is happening all over the country.
I would pass now to my second illustration. In the "Teachers' World" of 22nd February, 1950, the head of a secondary school, it is reported, received 40 copies of "Alice in Wonderland"; the title and publisher were correct, but it was discovered that the edition was too juvenile for a secondary school, and it was decided that these copies should go to a primary school, some 300 yards away. In the old days these copies would have been taken across by a schoolboy, who would have got an effective receipt from the headmistress. But now, she has to make out an application for transfer, in quadruplicate, and the goods have to be moved officially—and that means a lorry and two men. These are the sort of things that are happening, I believe, in every sphere of public administration, and in the face of such evidence we cannot take it from the Front Bench opposite that it is not possible to make further economies. The fact is that the Government have not the courage——
No, I will not give way to the hon. Member. [HON. MEMBERS: "Why not?"] Because of the disgraceful thing he said when speaking about Burma the other day; because of his suggestion that the British Army had ravaged Burma; I certainly will not give way to him. I was about to say that the real dilemma which confronts the Government is that they have not the courage to tackle this expenditure, which is one of the worst inflationary pressures. The other dilemma facing the Government is that they will not make up their mind about their attitude to private enterprise, and the making of profit by private companies and private individuals. Until we get these two things straight—and that will not happen until we get a change of Government—there is no prospect that we can guarantee that our people will be able to maintain their standard of living and employment, or that we shall be able to offer better days in the future.
I am indeed sorry that the Chancellor of the Exchequer, that apostle of mediocrity, has left the House, possibly for the lowest common denominator which he worships. He really does believe that industry, which he wants to raise to the greatest degree of productivity, can continue under the threat, which he has expressed to-night, that his one desire is to produce mediocrity with the result that the spark which makes the machine go, shall have no incentive against those of less capacity. That is the inescapable conclusion that we must draw from what he has said. But we cannot suppress the private enterprise genius of that type of person; I would warn him however that we can still export it.
I think we should all remember that the recent Budget is the first we have had since devaluation, and it was astonishing to hear the right hon. and learned Gentleman trying to make us believe that everything he said last year had no meaning and no basis at all. The Chancellor cooed at us. He said, "Of course, we had this £6,000 million expenditure in 1945 and £5,000 million expenditure in 1946. All that was difficult but we saw it coming, because we plan everything ahead." The right hon. and learned Gentleman, until one Sunday last September, was against devaluation. His theme song—because he, too, had a song in his heart—was "No, no, a thousand times no, "but on the Monday morning it was," The man that broke the bank at Monte Carlo." He did great disservice to this country and he shook the confidence of the rest of the world in the integrity of the Chancellor of the Exchequer.
Tonight, he took another step in that direction. He pointed out that the effects of devaluation were now past, and that the Government had helped to overcome all the difficulties of selling goods in the dollar area. That is totally untrue. He must know perfectly well that goods can be sold in the dollar area for one reason and one reason only—a continuation of the most favourable trading conditions in North America. If that fails, he and every Member of this House knows that we shall not be able to continue selling these goods.
It is a gross deception of the workers of this country and of industry to come to this House and say, "We, by our voluntary act of devaluation "—he was saying, before that, that it was forced upon us—" have found one way of overcoming this difficulty." It would have been more honest and effective if he had said, "We have a difficult period in front of us. All the commodities in the pipeline were manufactured with raw materials purchased before devaluation, but now we will have to buy at the new rates and we shall begin to feel the full effects of devaluation." He did not do that, and that is why I accuse him, quite openly, of a deception in which one in his responsible position should not indulge.
I do not want to keep the House long, and I want to get on to petrol. We have had another dose of the dollar content in petrol. When will the Government tell us what this expression of theirs means? There must be a dollar content in petrol in other countries, and yet they have been able to find a way to buy petrol to let their public have it, as, for instance, is the case in Australia. To carry out the Chancellor's plans let us at least carry out an idea which I present to him—let us colour petrol so that we shall know whether we are good or bad. Let us have austerity petrol which would be coloured white. Let us have week-end petrol, for instance, coloured red, and let us have wicked Tory petrol, which would be coloured blue. Let us have halfway petrol which doctors can use for visiting their patients, but for nothing else. I do not know what colour that would be.
Let us have a little bit of honesty by the Chancellor in presenting this case. Let the Chancellor say what he means, which would be, "I do not want the people to have motoring, because I think it would benefit that part of the public whom I do not wish to favour." That is all part of the worship of mediocrity. The right hon. and learned Gentleman tonight did a great disservice to his party, to himself and to the country in not presenting this matter in a more honest light.