I will answer that in a moment. The Budget represents the internal aspect of our policy in this problem. Its leading ideas may be simply stated. The surplus, as estimated before yesterday is left, with a very small subtraction, to counter inflation. The new revenue this year from new taxation and savings through the reduction of the food subsidies are all devoted to relieving the worst hardships and injustices that have arisen with inflation and rising prices and to providing incentive tax concessions to workers.
Here are the two aspects of the Budget. I should like to comment first on the use of the surplus in relation to inflation. Is it necessary and is it sufficient? And here I will answer the hon. Member for Stechford (Mr. Jenkins). Some will perhaps say that, after having surrendered in this current year a realised surplus of between£300 million and£400 million for the extinction of debt, we might have used at least a substantial part of this anticipated surplus of over£500 million to relieve a people burdened both by excessive taxation and the higher cost of living.
I would ask such critics to remember that all the new measures we are necessarily taking to deal with the balance of payments crisis—the reduction in imports and the increase in exports—are of course inflationary in effect because they reduce what is available for consumption without a corresponding reduction in spending power. This is an additional factor to the inflation arising from increases in wages and incomes over production and an excess of investment over savings. I do not think that it can be reasonably contended that it was not necessary to do as much as we are doing to counter inflation. We should have betrayed our trust if we had squandered our surplus.
But is what we have done sufficient? Should we, as some have urged, have increased the surplus by net additions to revenue as well as by economies? I would ask such critics to consider the following points in their cumulative effect.
We are leaving the surplus practically intact. Indeed, if we make some allowance, as we might reasonably do, for the considerable deflationary impact on industries this year of the£100 million contemplated next year from the Excess Profits Levy and the Profits Tax we might be said to be in effect even adding to the surplus which acts as a counter-inflationary force.
The surplus is£538 million above the line on a conventional basis. This compares with£39 million budgeted for last April. The above the line surplus is£687 million under the alternative classification introduced in 1948 by Sir Stafford Cripps to distinguish more accurately between current and capital items. But what is more striking, there is a small surplus even of all receipts over all outgoings, capital and current alike. This contrasts with a deficit in last year's Budget of£457 million.
Next there is a cut in civil expenditure, about which questions have been asked of my right hon. Friend the Chancellor. That will be dealt with later in this debate. But there is a cut, a definite cut, even in terms of money in spite of higher prices. This means that over the whole of this range we are more than absorbing inflation. Then there is the cutting down of civil investment, partly by physical allocation and partly by financial measures, to an estimated extent of£100 million in real terms. In this connection a very important factor is the increase in the Bank rate from 2½per cent. to 4 per cent. to which I have already referred.
The same critics should also remember that in deciding to give incentive tax reliefs in the lower brackets we have not, 'heavily taxed as we are, hesitated to impose extra taxes to provide the means.