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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 Tom Iremonger Mr Tom Iremonger , Ilford North 12:00 am, 11th April 1957

I am glad to follow the hon. Member for Feltham (Mr. Hunter), because some of his comments were particularly interesting in the context in which I first wanted to consider the Budget. I proposed to ask the Committee to consider with me what are the criteria by which one should judge a Budget.

One becomes aware, in talking to one's friends about the country, that the ordinary reaction to a Budget is to judge it by the question, "What is there in it for me?" That is perfectly reasonable and understandable, and it would not be human to judge it in any other way; but in this Committee we have to judge it by a somewhat different standard, and I submit that at this moment in our economic history the standard by which each successive Budget should be judged is on how it stands up to the question, "What does this Budget do to strengthen the£abroad?"

If a Budget really strengthens the£abroad, then it cannot fail to do positive good right through the shunting process from the international market down to the humblest home. I think, therefore, that we have to look at this Budget in that context, and not to judge it so very much from the point of view of individual gain or lack of gain among those who may have had hopes about it in the past.

In trying to assess how far a Budget helps to strengthen the£we have to use three criteria—we have to ask three possibly somewhat sophisticated and remote questions. The first question is, "What demand does this Budget make, in effect, upon the men and materials which are all we have with which to make our livelihood in this island?" By materials I mean the earth, which we have tilled for generations until we have turned it from an arid tract into the most productive soil in the world, and our coal, and very little else—except our imports from other countries.

Secondly, we should judge each Budget by how far it helps or hinders an increase of real production. I do not mean production in the sense of the Blue Book. I do not mean national product. which is only another way of classifying national expenditure and national income. I mean what we should get if we could put everything—manufactured goods, time, entertainment—into a mincing machine, mince it up and serve it out in a solid block. That is the real, absolute, actual product. If a Budget tends in any way to increase that, it is good: if it does not, it is bad.

There is a third question. How far does the Budget actually increase the national product in the Blue Book sense —in the sense of the black angel side of its personality in the form of the national product of income and expenditure and the money which we use to measure what we actually produce? As this third element lengthens in proportion to the second, so our£goes down here and in the world markets. Those, I am sure, are the standards by which we should judge a Budget, and the standards by which we should try, heaven help us, to influence other people to judge a Budget.

Every Budget proposal should also have to pass these tests. We should have to ask, how far does this actually increase consumption here at home? How far does this actually encourage or discourage saving—or refraining from consuming? How far does this encourage or discourage the conversion of any saving there may be into actual positive investment and the creation of wealth? How far is it likely to increase what we can sell abroad from our national product? if a Budget can be judged as successful by those standards then the reward will be, as we have said so often that it has become almost platitudinous, expansion, prosperity and power.

Power is very important. Someone will always have power, whether in the country or in the world, and if one has ally faith in one's own country and in one's own people—as has the hon. Gentleman the Member for Rotherham (Mr. Jack Jones)—then I think one should want one's own country and people to have the power; and power is nothing but wealth. That is really why the Budgets we consider here are very important international events.

Of course, if the Chancellor's policy as embodied in his Budget is a failure, then sooner or later the£will be devalued, and sooner or later the power and influence of this country will decline. Some might welcome that hut, frankly, I would not.

With those considerations in mind, I want to look at only two of the Budget proposals. I want to say a word about the decision to remove part of the Purchase Tax put on in the 1955 autumn Budget of my right hon. Friend the Lord Privy Seal, the relief from which has been extended in scope, as the Financial Secretary pointed out this afternoon.

When that Purchase Tax was put on, it was put on for a specific purpose, and I maintain that that purpose has been achieved. I supported the Budget in which that Purchase Tax was imposed. I am glad that it has now been taken off, but I do not think that its having been taken off is in any way an argument, as some people have been suggesting in the last few days, that the policy which nut it on was a failure. Whether or not that policy was a failure can be seen in the degree by which our exports have increased, and the lesser degree by which our imports have increased.

The imposition of that Purchase Tax was a measure to strengthen the£I therefore think that it was good and justified. It has worked, and it is now possible to take it off. Those of us who supported the Purchase Tax measure in this House recognised that it was unpleasant but necessary, hut, now that it has done its job, we are glad to see it reduced. Its relaxation is justified provided, but only provided. that every ounce—or whatever measure is used—of extra demand that the release of purchasing power makes upon our men and materials is balanced by extra earnings from exports abroad. If that balance is not achieved, then the Purchase Tax should not have been taken off.

The second proposal on which I want to comment briefly is the decision to increase the Income Tax allowances for children. About any concession that the Chancellor of the Exchequer makes we should ask whether it is inflationary or not. Prima facie any concession is inflationary, but I think that, in the long run, no concession can be more productive, no Government expenditure more, in the real sense, all investment than a concession or expenditure which tends to keep children at school and improve the educational standard of those whom we turn out into the productive life of the country.

Apart from the Budget proposals, I welcome three features of the general economic background. One has not been mentioned in the debate but it will be dealt with very fully in the next few days. It is defence, which has a bigger bearing than anything else upon our economic situation. I welcome, more than anything in the Economic Survey or in the Chancellor's survey or in the Budget proposals, the positive move that is being made to cut Government expenditure on defence. There can be no more inflationary expenditure than expenditure on defence.

If we spend our time and money on defence we shall be in the position of the farmer who spends his whole life scaring away the crows. We shall not grow anything and not achieve anything. I am not saying that it is not important to scare the crows. I am not saying that the cure for too much expenditure on defence may not often be worse than the disease. I believe that right hon. Gentlemen opposite, who took the responsibility for the Government rearmament plan after the Korean war, took a right and courageous decision. In politics a "courageous" decision means one that is opposed by one's friends.

If right hon. Gentlemen opposite had not done what they did, we should have paid much more dearly for our failure to protect ourselves than we have done by the undoubted economically adverse effect of that rearmament. I am thankful that the time has now come when we can cease to waste our substance on a policy which in the long run cannot possibly bring us any good and whose only virtue was that, with God's help, it might have avoided something worse. The Defence White Paper is a sign of hope and salvation for our economic future.

I welcome the proposals to introduce more stringent control of banking finance by the Capital Issues Committee, because I think that it will definitely limit the quantity of money in the system. The quantity is important, otherwise the Government's whole monetary policy makes nonsense. It will go a long way towards creating savings and ensuring that those savings are invested. The Chancellor has made a right decision in spotting a loophole there and stopping it.