The Financial Secretary to the Treasury began his speech by repeating with some pride that the Chancellor of the Exchequer was not going to take any credit for the£37 million of waived interest. He spoke almost as if no benefit was coming from this waiver at all. This really is a case of taking the cash and letting the credit go.
I was intrigued by the rather extraordinary doctrine, as I understood it, of the Financial Secretary that virtue ends at£10,000 a year. That was in spite of his very heated defence of the interests of the downtrodden Surtax payer. This idea that the Surtax payer has not benefited at all from tax reductions cannot be sustained. Of course, the Surtax payer has benefited from the two reductions of 6d. in the standard rate of Income Tax. from the tax exemptions of Top Hat schemes and in all sorts of ways. This picture of the poor downtrodden Surtax payer to whom no benefits have come at all is entirely fanciful.
The Financial Secretary argued that we could not claim any credit as an Opposition for the abolition of the Entertainments Duty, because it was imposed by the Opposition. He cannot have it both ways; he cannot then claim any credit for the reduction of the pots-and-pans tax, which is merely reducing by half the taxation that was put on by his own Government. If he uses that argument, he must stick to it throughout.
We knew from the Budget speech that "Boyle's" law had now been repealed with the departure of the hon. Member for Handsworth (Sir E. Boyle) from the Treasury office; but we now have a new law, "Powell's" law, which is: the bigger the share of income kept by anyone the better for him. [Laughter.] Yes, "the better for him and the better for the country "—that was the point of the Financial Secretary's argument. That is really an argument in favour of regressive direct taxation.
We are very grateful to the Financial Secretary for the careful, thorough, if slightly arid, way in which he dealt with the detailed matters in the Finance Bill. These are, in their nature, matters that we cannot discuss until we have seen the Finance Bill. There will be many points which we shall have to take up then. We shall, of course, give very careful attention to them, and we shall naturally accept the right hon. Gentleman's offer to co-operate to try to improve and make watertight anything in the legislation about oversea trading corporations.
The main purpose of our debate is to consider the Budget as a whole against the background of the national economy. I would make two comments on the past year on matters which were rather glossed over by the Chancellor and were not mentioned at all by the Financial Secretary. The first is the very grave position of our gold and dollar reserves. As a result of one more year of Conservative Government the reserves are perilously low,£789 million. There is a new feature, that more than a quarter,£200 million, of these perilously low reserves are actually borrowed and are costing us interest. This fact about our economic situation is vastly more important than the plight of the Surtax payer.
There is a very interesting article on this matter in today's Daily Express, which the Chancellor may have noticed, by Mr. Frederick Ellis. He says:
While the markets were making Budget-merry yesterday I sat sadly thinking of the financial facts of life. Sadly, because there is no cause for joy once you have penetrated the Surtax veneer of Mr. Thorneycroft's Budget. The£is still the barometer of Britain
and the£stands or falls not on the odd£100 million Mr. Thorneycroft tosses our way but on the state of the gold and dollar reserves.
That is an extremely frank, honest City view that must worry the Chancellor in his own inner heart.
The other feature of the past year is one about which the Chancellor showed himself to be extremely touchy, namely the fact—because it is a fact—that the economy was entirely stagnant in 1956. There is no doubt about the economic stagnation in this country. The facts in the Economic Survey are irrefutable on this point. For two years the level of United Kingdom output has been stationary. The figure for February, 1957, is the same as it was for March, 1955. The Government have indeed been vastly more successful in creating a plateau of production than a plateau of prices. Then there is the mournful, dismal sentence on page 15 of the Survey:
Industrial production did not expand at all.
That is a black epitaph on the outcome of the year for which the present Prime Minister was responsible as Chancellor. The result of his year of stewardship was total stagnation of industrial production.
This stagnation has not been an accident but the result of deliberate policy. It has been the way the Government chose to get out of the danger of a balance-of-payments crisis, an import crisis. In his Budget statement, the Chancellor had a very revealing passage on this matter. He said:
In 1955, production was high and the rate of production was growing. But in the process we were bringing imports into the country faster than we could earn the money to pay for them. There was the beginning of a situation similar to that which got out of control in 1951.
It was due to Korea, of course, but I will not pursue that point at the moment. The Chancellor went on to say—
We had to apply a check."—[OFFICIAL REPORT, 9th Aprl, 1957; Vol. 568, c. 968.]
The extraordinary admission in that passage means that directly production gets high we must, for that reason, and for that reason alone, apply a check. That is what the Chancellor said. He said that production was high and rising, and therefore a check had to be applied.
What hope is there of expansion if we cut back growth directly it shows itself? What chance is there of doubling the standard of living in twenty-five years? Indeed, this doctrinal view of the Chancellor, which he stated very clearly, as he will see if he will look back at what he said in his own Budget speech, is an inevitable consequence of the Conservative determination to leave the economy to the play of economic forces without any steering or control.
The Financial Secretary laughed a great deal at the idea that the economy should be somewhat steered or controlled, but look at what happens if we have no controls and no steering, at all. If we have a full employment economy which is left to a free-for-all, as production rises imports must of course be sucked in, and we must run towards a balance-of-payments crisis. The Government and the Chancellor have a doctrinal attachment to this laissez faire idea, and it leads the Government into an inextricable dilemma. They are always either curing a threatened balance-of-payments crisis by inducing stagnation, or curing stagnation by inducing a threatened balance-of-payments crisis. They have always to rotate, fluctuate and move about between those two positions. One thing which is quite clear from the Chancellor's Budget is that he cannot escape this dilemma; indeed, he has placidly and tamely accepted it.