Precisely. We now know which newspaper the hon. Member reads, but I do not suspect the right hon. Gentleman of doing the same.
The right hon. Gentleman's main criticism of last year's economic performance was that we did not apply the gain we made on the terms of trade either to an improvement in the balance of payments or to increasing investment. I think that he repeated that argument again on the wireless last night. I should like to deal with it, because it is certainly far from accurate.
First, take the question of the terms of trade. It is certainly true that we gained considerable advantage from the further improvement in the terms of trade. That is, of course, clearly recognised in the Economic Survey; but I would say to the right hon. Gentleman that it just is not true to say that the change in terms of trade has no relation whatever to the policy of the Government.
Does he seriously argue that our attitude to the International Wheat Agreement has had no effect on the price of wheat? We are criticised for opening commodity markets and getting away from discrimination against dollar goods. One of the main reasons is to avoid the premium prices that we were having to pay for raw materials when there was this discrimination.
It is equally true that while the effect of the terms of trade upon imports can be quantified, and is quantified, in the Survey, we cannot estimate in figures the effect of the terms of trade on exports. It is equally true that the sort of world in which prices of raw materials are falling is the sort of world in which prospects for British exports are getting more difficult. Anyone who has tried to sell in countries which produce cotton knows precisely what that means.
On the question of the balance of payments, the right hon. Gentleman is always a little critical of us for appearing, as he says, to produce a rather misleading impression of what really are the facts. He is always a little cross with us for including figures of defence aid. It would be rather distorting the comparison between one year and another if we excluded defence aid and at the same time included the whole of the defence burden on the economy internally and externally.
What the right hon. Gentleman did not refer to was the question of stocks. Last year he was rather cross with me about stocks. He suggested that we did not say enough about stocks. He tried to argue that we were distorting the facts of the balance of payments because stocks had gone down. The right hon. Gentleman made no reference to stocks for the very good reason that stocks in total last year increased by £170 million and stocks of imported commodities increased by £90 million. That surely is very relevant to his own argument of last year.
It is also untrue to say that the improvement in the terms of trade was not used to improve our balance of payments, last year. The improvement in the terms of trade undoubtedly enabled us to import a great deal more in 1953 than we had done in 1952. In 1952 we were reduced to a low level of imports which it was quite impossible to continue. We were reduced to that level of imports because we had to impose cuts to get over the balance of payments crisis which would not have been anything like as heavy if the right hon. Gentleman had imposed them himself while he was in office, as he could have done.
The fact is that in 1953 there was a big increase in long-term investment from this country. There was also a substantial increase in the gold reserve. The increase in the gold reserve was paralleled by an almost equivalent increase in short-term sterling liabilities. The conclusion to be drawn is that there is much still to be done. The conclusion that is not to be drawn is that there was no progress. The progress last year was very much greater than the progress in 1951. Then we were going forward; in 1951 we were moving backwards.
The next point is what happened to investment in this country in 1953. 1 should like to say a few words about the figure for personal savings. That appears in the Survey in Table 9 and it has caused a good deal of interest. The figure used to be called "Personal saving" and it is now called "Balance, including personal saving." The point is that the figure of £928 million is a balancing or residual figure. It should be made clear that this figure is liable to a very wide margin of error indeed.
What is quite clear is that there was an upturn in personal and private savings last year and the year before. It would be unwise to try to give an exact measurement. What is clear—and it is apparent from independent evidence of life insurance, national savings and so on—is that there has been a substantial increase in personal and private savings which obviously flows from the different taxation and monetary policy of the present Government.
It is also important to bear in mind that these savings which took place in 1953 are not something now available for investment. They were counter balanced by the reduction in the Government surplus and the change from external dis-saving to external saving. The volume of personal savings which we achieved in 1953 is in no way a measure of the amount of additional investment which could have taken place, which is determined only by the amount of additional capacity that there was available in the investment goods industries last year.
The right hon. Gentleman tried to draw a considerable distinction between investment in the public and private sectors of industry, and said that investment in public industry increased and that in private industry did not. There is one important factor which he overlooks, and that is that throughout the financial year 1952–53 there were no initial allowances. In his own Budget of 1951 he deliberately withdrew the initial allowances with the express purpose of restraining investment in 1952–53. He must have under-estimated the effect of his own policies. It was not until the Budget of 1953 that initial allowances were restored. It is not possible to bring new factories and machinery into being overnight as a result of the restoration of the allowances. It takes time.
What has been taking place during 1953 is a considerable increase in the number of approvals for new factory buildings. There was an increase of 50 per cent. in the last half of 1953 over the level of the last half of 1952. Moreover, the flow of new orders to the capital goods industries, which was falling in the first part of last year, has started to move up again. There has been a definite improvement in 1953.
But, of course, it is equally true that that improvement has not gone far enough, particularly in comparison with our industrial competitors abroad. So far as I can calculate from the figures that I have been able to obtain, the load of taxation upon British industry is still definitely heavier than taxation on either German or American industry, and we all know what the Germans have recently been doing about the taxation of their industry. If we are to hold our own in world markets, clearly we must take account of these facts. We must recognise that, so long as British industry is carrying this comparatively high burden, it is going to be difficult to compete with our overseas competitors.
What is holding back investment in productive industry? As the right hon. Gentleman pointed out, the Economic Survey said that it is not shortage of cash in total which is holding back investment. I think that is true. The liquid position of companies as a whole has considerably improved in the last two years, which is necessary after the very difficult situation in 1951, when the liquid position deteriorated very seriously. But what is true in total of companies is certainly not true in every case. While many companies have better cash resources than they had, there are many industries where shortage of liquid cash is still a deterrent to further productive effort.
Over and above that, it is clear that what weighs in the minds of people who have to invest money in industry is whether the net return on their investment after taxation is adequate to justify the risk of investment. That is surely a fundamental economic feature of investment, and that is one of the main factors which is keeping investment below the level to which we want to see it rise.
Therefore, in considering his Budget, my right hon. Friend sought for a means of further relief which, in the first place, would be tied directly to new industrial investment, and secondly would not in the initial stages put any noticeable additional burden on the Revenue. In the first few years this investment allowance will add very little at all to the burden on the Revenue. Moreover, if as we believe, the new allowance will succeed in stimulating a great deal of new investment, that investment will provide additional taxable capacity in industry. If it works, the scheme will to a considerable extent pay for itself out of the expansion which will take place.
Therefore, the investment allowance meets two problems which my right hon. Friend is facing of how to give a further stimulus to industrial expansion without risking a return to inflation, and without giving away too rapidly further purchasing power.
This has been referred to as a subsidy. I cannot see that the investment allowance is any more a subsidy to industry than the life assurance allowance is to life assurance, or the non-distribution relief is to non-distribution. If an allowance is given to only one part of industry, one part will be subsidising the other. If the allowance were given to export industry, clearly it would be a subsidy to exports. But when the allowance goes to reduce the total burden of taxation on all industry, that reduction being effected by an allowance for productive industry, I do not see how it can be called a subsidy.
I think it was Plato who said that it can be described as a pleasure when one stops banging one's head against a wall, but it is a strange form of pleasure. Similarly, this is a strange form of subsidy. If a modern highway robber should take away the clothes of the right hon. Member for Leeds, South, and then give him back his shirt, he would be warmer than if he had lost all his clothes, but he would not be subsidised.
The main question which the right hon. Gentleman did not face in his speech was: Was my right hon. Friend right to aim at a balance in his Budget above the line? I got the impression that the right hon. Gentleman thought that he was. He said, for example:
The fact is that the pressure of demand is there, and it is only if one gets a rapid rise in revenue from high productivity over and above commitments that there is room to make any substantial concession."—[OFFICIAL REPORT, 7th April, 1954; Vol. 526, c. 37]
But he complained about the absence of figures and of estimates of what was going to happen to the economy each year. I do not think there has ever been a time when the public have been so deluged with economic statistics and information as they are at the present time. The latter part of the Economic Survey gives a clear indication of the way in which the Government saw our economy developing in the course of 1954. So clear was it that many leading journals, including the "Economist," seemed to draw from it a remarkably accurate deduction.
What the right hon. Gentleman was trying to complain about was that this forward look to the pressures within the economy in 1954 did not contain any detailed statistics. I will give the right hon. Gentleman a good reason why it did not. He used to put those statistics in himself. They were completely wrong in most cases. Take his own Budget for 1951. There were two crucial figures in his Budget speech. He estimated the change in the Overseas surplus as a reduction of £200 million. The actual out-turn was £685 million.