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Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 11th April 1957.

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Photo of Mr Patrick Gordon Walker Mr Patrick Gordon Walker , Smethwick 12:00 am, 11th April 1957

I am talking about the present time and the consequences of having no controls at all. Even if the hon. Gentleman can persuade himself that controls may lead to trouble, he cannot persuade himself that the absence of controls does not lead to trouble—he certainly cannot.

The great need of the country is, of course, to increase fixed investment; otherwise we shall continue to fall behind our main competitors, as my right hon. Friend the Member for Huyton (Mr. Wilson) showed we were in all important indices and still are. I think that the grimmest sentence in the Budget was …I foresee … probably a slight increase in fixed investment.…"—[OFFICIAL REPORT, 9th April, 1957; Vol. 568, c. 981] this coming year. It is to be only a "slight increase", and only "probably" at that, and he was completely complacent about it. The Chancellor does nothing whatever about this very slight increase which may only probably appear in the economy this year. The Financial Times has been clear and flat about this. It describes this as "a negative Budget for investment."

The refusal of the Chancellor to do anything about increasing investment, although he knows that it will increase only very slightly, is, of course, a deliberate and calculated decision, and the Chancellor made his reasons for this decision clear in his statement. He said, in effect, that he felt that the economy was somewhat re-inflating itself, left to itself. He said that the indices of mounting consumer expenditure were indications of this. He might also have cited the grounds on which he made his own Estimates, because he assumed in his Estimates an increasing yield from taxation before the Budget changes; that they were going to go up merely because of inflation in the economy. He calculated that the Income Tax yield would go up before any changes in the Budget by£116 million and, as my hon. Friend the Member for Stech-ford (Mr. Roy Jenkins) said last night, this is really the pure fruit of inflation in the economy.

In the light of the Chancellor's own analysis and his own estimates of revenue, the concessions to the Surtax payers are really quite wrong and quite illogical in the terms of his own economic argument. If the spare£100 million is due to inflation, he should not give it away in a manner likely to increase inflation. The Surtax concessions will exacerbate the economic problem as analysed by the Chancellor of the Exchequer himself, because, of course, the Surtax concessions are inflationary in two ways. They are directly inflationary because a large part of them will be spent. That was the real justification for the Chancellor making these concessions. He talked about rewards for the people at the top, but rewards must be rewards, and rewards must be increased expenditure.