Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 12:00 am on 16 May 1950.

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Photo of Sir Austen Albu Sir Austen Albu , Edmonton 12:00, 16 May 1950

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.