Orders of the Day — Budget Proposals

Part of the debate – in the House of Commons at 12:00 am on 12th March 1952.

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Photo of Sir Arthur Salter Sir Arthur Salter , Ormskirk 12:00 am, 12th March 1952

No, Sir. I will tell the right hon. Gentleman exactly what I think we should do and have done. I think we should fortify our minds by carefully considering every relevant argument and factor. Having done that, we should then arrive at our conclusion, as my right hon. Friend said, as an act of judgment. That is what we have done, and that is why, I think wisely, we have not been more dogmatic and definite in these particular figures.

These are some of the main points to which I wish to give some kind of answer to the right hon. Gentleman. There is one other important question to which I will refer a little later—the balance between the burdens and reliefs proposed in this Budget. I think these and the other particular points to which I have referred are best set against the background of the Government's general policy. The Budget supplements the emergency action already taken to deal with the balance of payments crisis. It is, of course, this crisis which now dominates the whole situation.

The Committee will recall the£350 million programme of cuts in November, the further£150 million as part of the Commonwealth Finance Ministers' plan in January, and the further£100 million announced yesterday to which I have already referred. These measures, though the actual cuts operative this year are only a little over half by comparison with 1951 as a whole, are bound, of course, to cause hardship and loss and to aggravate the problem of domestic inflation.

No one who considers the facts given by the Chancellor yesterday can doubt that these cuts are necessary, but we should not underrate either the hardship or the loss, or the restriction of external trade which they must involve. It is well, I think, that as these effects become evident in the months to come, we should all realise what would have happened if this action had not been taken and if the deficit in our balance of payments and the drain on our reserves had continued as in recent months and if the situation had been allowed to drift.

It is easier to discuss this now because we have taken measures to see that the situation will not be allowed to drift. Had it been allowed to drift, our reserves would have been exhausted in a very short time. We no longer have Marshall Aid to bridge the gap between what we earn and what we spend. We might in that case not have been able to buy enough food for bare sustenance or enough raw materials to keep our factories working fully. There would then have been extending—and rapidly extending—areas of semi-starvation and of mass unemployment. That is by far the greatest danger of large-scale unemployment which has menaced this country in recent years; that is what we are preventing by these austere emergency cuts and the other measures which have been explaind to the Committee.

None of us believes for a moment that the real and permanent solution of our problem is to be found in austerity and restrictions. It must be found in increased production and exports—in expansion. But in a crisis' such as we now have it is only cuts and restrictions which operate quickly enough. It is only the first chapter. Yesterday's announcement with its new cuts added another page to that chapter. But it also opened the next and more hopeful chapter of increased production and exports encouraged by new incentives.

The real answer, in the long run, to the balance of payments difficulty is not to cut out imports, but so to purge and strengthen our economy that it keeps in balance of itself. The first conditions of raising our exports to a level at which they will pay for our essential imports is to arrest inflation, to prevent an easy and soft home market from absorbing an undue proportion of our resources, and allowing prices to rise too high to meet external competition. That is the inescapable relation between the internal and the external economy. There never was a country less capable of basing its policy on a close economy and living as an isolated and insulated community than this little congested Island of 50 million with few raw materials, except coal, and not more than about half the food we need to feed our population.