At any rate, the right hon. Gentleman very quickly sought relief from these powerful and valid attacks by resorting to cider and perry—incidentally transgressing the rules of order, and in a number of minor and detailed points, many of them of considerable importance and interest, but points which will be debated in Committee on the Finance Bill.
The right hon. Gentleman seemed to get into extreme confusion—at any rate, he got me into extreme confusion—about the question of the Estimates and whether they are to have any validity, or whether we shall be debating fanciful Estimates. He gave us no valid argument on that. When he talked about an increase of pay for civil servants—and I agree and support all he said about the Civil Service—did he mean that the cost of these increases is to appear in these fanciful Estimates, or will it come in later Estimates, in which case the cut would presumably be greater than the £100 million to which the Chancellor referred, because there will have to be a cut of £100 million as well as the cutting out of the increased cost of these services? Otherwise, the £100 million does not mean anything and could be wiped out by Supplementary Estimates.
I can understand the right hon. Gentleman not wanting to defend the Budget, or the economic policy upon which it rests. The longer we think about the Budget, more than ever do we come to the conclusion that the Chancellor very sadly failed to measure up to the occasion. The nation awaited a Budget of authority and leadership and instead it has had a flash Budget. The effect, if not the intention of the Budget, has been to divert the attention of the public from the great issues which are facing the country. I do not say that that was the right hon. Gentleman's intention, but it has certainly been the affect of what he did. The nation expected a lead and what it got was a speech full of sound and literary quotations signifying very little.
The main theme of the speech was misplaced. It should have been on raising investment and raising exports. Savings should have been an integral part of that policy and not taken in isolation. Of course, this is only one third of a Budget, although the speech was long enough for two. [An HON. MEMBER: "It was shorter than the Opposition's."] Our speeches have been packed with meaning and, on the whole, this afternoon has been taken up so far by the other side of the Committee.
The first part of the Budget was, of course, on 17th February, when the right hon. Gentleman cut investment and put up the cost of bread and milk by £28 million. Then came the contribution to the Budget of the Postmaster-General, who raised postal charges by £15 million, and then the proposals which we are now debating. If we are to judge the economic effect of the whole of the Government's policy since the right hon. Gentleman has been in office and its impact on the standard of living, we have to take all those things together.
The real significance of this Budget is that, despite some rather uncomradely attempts by the right hon. Gentleman to dissociate himself from his predecessor—upon which my hon. Friend the Member for Stechford (Mr. Roy Jenkins) commented—the basic economic policy is absolutely unaltered. Like his predecessor, the Chancellor has swallowed whole the mystique and mumbo-jumbo of the banks and the City that we must use a monetary policy and nothing else. One of the great defects of relying solely upon the use of the Bank Rate is that, in modern conditions in Britain, it has to go very much higher than used to be the case before the war if it is to achieve results, owing to the mass of Treasury Bills, and for other reasons.
In a recent article, Lloyds Bank Review, went so far as to suggest that it might be necessary to raise the rate to double figures in order to achieve the sort of effect which a 5 per cent. or 6 per cent. Bank Rate was intended to achieve in pre-war conditions. Even the advocates of the use of monetary policy and the Bank Rate alone admit that it has many disadvantages and defects—and the greater the Bank Rate the graver the defects.
A very high Bank Rate involves the maximum payment to overseas holders of sterling. Since taking office the Government have increased this charge upon the country by about £150 million a year, which, as a result of the Bank Rate policy, is paid to overseas holders of sterling. This is a new factor that has come into existence since the war. Before the war it had the opposite result, but now if we raise the Bank Rate it immediately puts a strain upon our balance of payments, which means that we have to rely upon attracting hot money. That is the only way in which the balance of payments position can be improved by raising the Bank Rate. As far as one can make out from the figures, some of the recent improvement in our reserves is due to the attraction of hot money. This is a very undependable asset for the reserves upon which the whole sterling area depends, because it can flit as easily as it came.
A very high Bank Rate also puts the maximum burden upon local authorities, and this is a direct cut in social services—housing, schools and other forms of local authority capital investment. Now there is worse to come, because this uncovenanted £100 million economy hangs like the Sword of Damocles over all the social services. Nobody knows where it will fall; all we know is that it will fall upon some services, and no doubt very heavily.
The worst effect of all of relying upon a high Bank Rate as the main weapon of control is that it depresses the whole economy indiscriminately. There was one very significant sentence in the Chancellor's Budget speech. He said:
We cannot afford to run our economy flat out …"—[OFFICIAL REPORT, 17th April, 1956 Vol. 551, c. 855.]
That means that a high Bank Rate will work only if we get the whole economy into low gear. It means that we solve our problems—if "solve" is the right word—by producing less than we otherwise could.
Not only has the right hon. Gentleman taken over the whole of this policy of relying solely upon monetary control, but he has added to it, as his first personal act as Chancellor, a further specific cut in investment. He has withdrawn the investment allowances; he has tightened up the working of the Capital Issues Committee, and he has made direct cuts in the nationalised industries and local authorities. Could anything be more foolhardy than to cut down capital investment when we are already falling behind our competitors—particularly Germany, Russia and the United States? As Lord Chandos said the other day, this is a policy of saving ourselves by eating the seed corn. It is a most shortsighted policy to cut capital investment upon which our future prosperity depends.
One of the most engaging characteristics of the Chancellor is that he blandly assumes that everyone but himself is to blame. The workers, the consumers, the investors and even the Lord Privy Seal are to blame, although the people who have increased investment were only responding to the stimulus and invitation of the Government. He seems to be blissfully unconscious of the fact that this is an unnecessary, self-engendered crisis, for which the Government must bear a considerable responsibility.
The E.C.E. Survey and our own Economic Survey make it clear that the United Kingdom stands practically alone in the world in being in a state of economic crisis. The rest of the world is prosperous. Only in this country, under this Government, has there been this tremendous rise in prices. One of the few international tables where the United Kingdom stands right at the head is the table of the cost of living. We stand at the head of the thirteen main nations. Between 1951 and 1955 prices in Western Germany rose by 3 per cent.; in the United States by 4·1 per cent. and then, after all the other countries, the United Kingdom is at the top with a 23·6 per cent. rise. That is quite unique and outstanding, and the Government must bear a considerable degree of responsibility for it. There is no other explanation for its happening.
Indeed, faced by these figures, the Chancellor has a choice of only two arguments. He must either say that he has really, honestly been trying to keep down prices—in which case he confesses, on behalf of himself and his Government, a unique and calamitous failure as a result of which we stand alone in the world—or that he has been deliberately pushing up prices on the principle of "Boyle's Law," which is that we fight the cost of living by putting up prices. That is what has happened.
Not only are rising prices hitting the least well-off most—the people with small fixed incomes and especially the old-age pensioners—but this Government have so managed things that they have increased working-class prices faster than the general average of prices. Their worst effects fall upon the workers and the poorest people. The all-item index in the cost-of-living index went up by 6 per cent. in 1955 while food prices, which particularly affect workers and old-age pensioners, rose by 8 per cent. Now the Chancellor has deliberately carried still further his policy of discriminating against the working class. He has put an extra charge of £23½ million upon bread. This is an extremely regressive and unfair tax. It is a tax not merely upon all bread; the subsidy is upon the National loaf, which is eaten mainly by the poorer people, especially by old-age pensioners.
I doubt whether the Chancellor has ever seen the National loaf in his house. This cut in subsidy will have no effect at all upon him. I have not seen the National loaf in my house. Very few hon. Members here have had it in their houses.