Orders of the Day — Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 22nd April 1955.

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Photo of Sir Eric Fletcher Sir Eric Fletcher , Islington East 12:00 am, 22nd April 1955

I am particularly pleased that it falls to my lot to be able to congratulate the hon. Member for Norfolk, South (Mr. J. E. B. Hill) on the most interesting maiden speech which we have just heard. I speak with some knowledge of the hon. Member before he came here, and I think he will realise that the Committee has listened with very great interest to what he had to tell us about agricultural conditions in his own constituency and elsewhere.

The Committee always listens with great attention to a Member when speaking with such obvious sincerity and firsthand knowledge of a subject to which he has devoted a great deal of thought. The hon. Member put forward some very constructive suggestions which will no doubt be taken to heart by the Government and the Treasury and elsewhere.

In the ordinary way I should go on to say that I felt sure that the Committee would wish to have many other opportunities of hearing the hon. Member. But as we are on the eve of the dissolution, and the hon. Member represents a marginal constituency which we shall hope to capture from the Government in the forthcoming General Election, he will not expect me to say that on this occasion. In the unlikely event, however, of his return here after the General Election. I am sure we shall all wish to have many other opportunities of hearing contributions from him to our debates.

Now I want to turn to rather more controversial matters, and to indicate what I regard as the four major criticisms of the Budget. We think that the Chancellor has exposed himself to criticism on four counts, not only here but in the country. First, in deciding to give away in tax concessions £140 million, the Chancellor is taking an unjustified gamble with the nation's economy. Other hon. Members have pointed out that his decision on tax concessions this year on the scale proposed is inconsistent with the gloomy picture which he painted of our economy as recently as February. His whole attitude in the Budget speech contradicted the warnings that he uttered only a few weeks ago about the seriousness of our balance of payments situation.

It is only fair to say that no one on the Government benches has stated so clearly as the Chancellor has done the precarious nature of our economy. He has warned the country that our balance of payments is in a very delicate state, and has said that we should be heading for another serious financial crisis unless energetic steps were taken to correct the adverse trend.

All responsible economists and commentators throughout the country whose opinions I have read since the Budget have expressed their amazement at the decision which the Chancellor felt able to make this year in giving away £140 million. It is regarded as being totally out of line with the serious warnings that were given in February last. Can anybody really doubt that this sudden change of attitude on the part of the Chancellor has been influenced by the fact that we are on the eve of a General Election?

I do not wish to weary the Committee with a lot of quotations. I am quite content to refer to the article by Professor E. V. Morgan which appeared in the "Manchester Guardian." He voiced the serious misgivings that are felt by responsible economists everywhere about the Chancellor's attitude, and he summed it up in language which I should like to quote. Describing the Budget, he said: The Chancellor's analysis of the financial situation raises three crucial questions. Can production expand at the pace which the Chancellor expects? Will the demands of domestic consumers be as modest as he believes? And, even if both these expectations are fulfilled, will the margin for increasing efforts be sufficient to pay for our rapidly rising import bill? After considering the matter, Professor Morgan comes to the conclusion, as many other commentators have done, that the Chancellor has adopted a most optimistic assumption about the balance of payments situation, and that, if his assumptions are not fulfilled, there may well be a serious recurrence of domestic inflation and a very substantial adverse balance in our foreign account.

We all hope that the Chancellor's gamble may come off, but we are entitled to point out that it is a very serious gamble for him to take at this particularly dangerous and critical time. We are also entitled to indict the Chancellor, as we do, with having made a reckless and dangerous gamble of this kind on the eve of a General Election. I do not think anyone would have expected such a gamble to have been taken in the course of an ordinary Budget speech.

Secondly, our criticism of the Budget as a whole is that it is inflationary. Inflation in this country produces very serious consequences and evils, particularly for the worst-off sections of the community. During the whole of the Chancellor's tenure of office at the Treasury, we have suffered from a measure of inflation.