Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 28th October 1955.

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Photo of Mr Douglas Houghton Mr Douglas Houghton , Sowerby 12:00 am, 28th October 1955

I realise the difficulty of immediate steps to abolish the derating provisions, but the Government have already foreshadowed a review of rent control and other measures by which they hope to take the unrealism out of the economy. If the Government had said that in their programme there was a review of the derating provisions of the 1929 Act, we should at least have understood that they were making their survey over the whole field.

My real concern about this Budget is its possible consequences on industrial peace. We are already seeing the first signs of industrial discontent. The trade unions are going to ask how much of these proposals are necessary to deal with the current crisis, and to what extent have the fellow-travellers of this Budget been brought in under the cloak of economic difficulties. We have good reason for believing that a good deal of what the Chancellor and the Government are proposing is merely the introduction of the Tory philosophy and economic and social policy, and that, if they can hang that on the peg of the balance of payments crisis, they think they will get by more easily than if they had introduced it in the normal way.

All the measures which have been introduced so far have the avowed object of sending up the cost of living. That is their avowed purpose, and the Government are saying to the people, "You have too much money to spend; if we put up the prices, you will spend less." That is the sum total of the proposal which has been put before the Committee.

Many trade unionists will regard this as equivalent to a cut in wages. After all, if the purchasing power of wages is reduced, by whatever means, that is equivalent to a cut in wages. The Purchase Tax, which is intended to take money out of the pockets of the wage and salary earners, will automatically reduce the amount of money which can be spent over the same area of goods and services as before. I know that, in theory, none of this money loses its value until it is spent, but we cannot live without spending, even if it is only on scrubbing brushes, and the Chancellor has said that the proposals which he has put before the Committee are intended to touch everyone.

I do not myself believe that the Budget by itself provides legitimate grounds for pay claims, but I do not suppose for a moment that that will stop them being made. I believe that politically inspired wage claims are a bad thing. The basis of wage claims should be the profitability of industry, a rise in the national income, a demand for an increased share in higher production and so on, and, from a theoretical point of view, there are no more grounds for pay increases in higher taxation than there are grounds for pay cuts following reductions of taxation, but it is doubtful how far that economic theory will prevail among the trade unionists. I forecast that the trade union leaders will have a very thankless time in the very near future, and some of them a very rough time.

I want to make a practical proposal to the Chancellor. It is that he should invite the Trades Union Congress to see him, and that there should be a frank exchange of views about this situation. The T.U.C. has no direct influence over the pay claims of its constituent members, but the T.U.C. has, in a long tradition now, expressed itself on current economic and social questions. There is to be a meeting of the Economic Committee of the General Council of the T.U.C. next Tuesday morning, and that Committee has been empowered to make a statement on behalf of the T.U.C. It is very desirable, in the interests of the trade union movement and of the country, that the T.U.C. should at least understand frankly and fully what are the aims of the Chancellor and what hopes he holds out that the restraint that he is asking for in the measures now proposed will bring beneficial results.

That is the great doubt overhanging the situation today. Will these measures be productive of a slackening of the pressure of home demand? Will they bring about the result which the Chancellor and all of us desire of taking inflation out of the economy. The trade union movement naturally fears in present circumstances that this is the beginning of an attack upon standards of life, and its members naturally react very sharply and quickly and want to take defensive action. It matters not to them whether the money is taken out of the pockets by the Government or whether other influences cause a rise in the cost of living. Their reaction is the same either way, even though the capacity of the employer to concede wages claims may be reduced by action taken by the Government.

I am very anxious indeed about the maintenance of industrial peace, because there is no doubt, say what we like, that the docks strike, which was not an official but an inter-union dispute, was a very lamentable occurrence and did serious damage to our economic affairs. We do not want that kind of thing to happen in the future. I am one of the few trade unionists in active life today who were present at the declaration of the General Strike at the Memorial Hall, Farringdon Street, in April, 1926. That was a grave turning point in trade union history. If we are to have misunderstandings about Government policy, if there is to be a growing hostility between the trade union movement and the Government, there is no doubt that industrial trouble will follow.

In the interests of the whole country it is desirable that that should be averted if at all possible. I sincerely hope that the Chancellor will regard the trade union movement as a very important factor in the methods that he is adopting in the economic field. I dissent completely from the Chancellor's methods for dealing with this immediate situation, although largely his hands have been tied by the folly of the earlier part of the year. Had he not given tax reliefs in April, he would have been able to use direct taxation as one of the weapons in hand to deal with the present situation. I have no doubt that the political inhibition of eating one's words completely and going back on one's tracks prevented him from adopting such a method. Also it is difficult to impose increased taxation half way through the fiscal year.

It is significant, however, to remember that the tax reliefs which were given to industry in the Budget of this year have not even yet begun to be felt by industry. Industry will get its first relief next January. We therefore have the extraordinary contradiction of the Chancellor levying additional taxation over wide areas of consumer goods at a time when substantial tax reliefs still lie ahead for industry, trade and business.

The only people who have begun to feel the relief of the tax concessions given last spring are those who are paying tax under Pay-As-You-Earn. More tax is still paid on profits and gains under Schedule D than is paid under Pay-As-You-Earn under Schedule E. The major part of the tax reliefs conceded last April have still to come, and that strikes one as making a very strange contradiction in the present circumstances.