Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 12:00 am on 28th April 1959.

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Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham 12:00 am, 28th April 1959

): The hon. Member for Manchester, Withington (Sir R. Cary), who has spoken on a strictly non-party issue, has the support of all of us, and we would all grant him a figure of "X" millions of pounds at the earliest possible moment, but I am afraid that he will have great difficulty in finding a formula which is at all workable, even with the best will in the world, in order to encourage and preserve rural bus services.

The Chancellor has been congratulated so often on his modesty that I am sure that by now he is getting rather vain on the subject. Although I would readily attribute to him that virtue, especially intellectual modesty, I would rather congratulate him on his courage as an expansionist in a den of restrictionist Tories in producing the most imaginative economic policy ever produced by any Tory Government in a conscious attempt to use the money apparatus to meet the industrial and production means of our economy.

The right hon. Gentleman's only difficulty is that, being surrounded by restrictionists, he has to take every step with the utmost caution, and hence a little late. He has to make all the concessions irresistibly attractive to the restrictionists who surround him. He cannot make the tax concessions and reliefs where his own good sense of values and fair play would indicate that he is bound to make them, but where they will appease the natural deflationists on his own side of the House.

On the other hand, the Chancellor has shown great courage in producing a Budget which is imaginatively expansionist in its general tone, even though we on this side of the House cannot approve the particular directions which the Chancellor has chosen for tax relief and even though it is necessary for him to cover up with a barrage of restrictionist and deflationist platitudes the policy which he adopts.

Since the Chancellor has been in office, he has steadily undermined and sabotaged—it is all to his credit—the work of his predecessor. I think that his predecessor, the right hon. Member for Monmouth (Mr. P. Thorneycroft) was very popular as a person on this side of the House, but I am sure that we are increasingly reconciled to his departure from the Chancellorship by every speech he makes in the House. His speech in the Budget debate was no exception. He wagged a warning finger at the Chancellor, who has had the spirit to expand all forms of currency, front line or secondary. He warned the Chancellor that he would, as a result of the concessions he has made, have to go to the public and borrow more money. He warned the Chancellor that even Governments have to pay back the money they borrow.

If the right hon. Member for Monmouth really believes that in this day and age, I am bound to say that his concepts well fit him to be in charge of the funds of a Boy Scout troop and amount to a serious disqualification when it comes to managing the more complex finances of such a great industrial country as ours. If he honestly went into the Chancellorship and had sleepless nights because he could not immediately envisage, or even envisage in the distant future, the repayment of our National Debt, I am bound to say that he has serious disqualifications for ever returning to that office.

This country can never pay off its National Debt. The National Debt of a modern society and modern economy is, as it were, a second-line currency no more redeemable than the £ note. The £ note is a promise to pay by the Governor of the Bank of England or someone on his behalf. If one goes to the Bank of England for it to honour that promise to pay, it promptly proceeds to give one another promise to pay in its place. The same applies to Government borrowing in all forms.

There is no office where intellectual modesty in these days is more apt and more calculated to produce some success than the one which the Chancellor has the honour to occupy, because he is attempting to deal with so many unpredictables from all parts of the world which impinge upon his plans. He is attempting to forecast the tendencies to save of people at home, productive tendencies abroad and the imponderable ebb and flow of economic tides in the world, which no one has begun to understand.

I am very much afraid that, owing to the lack of support which the Chancellor has from the benches behind him, at the first difficulty he meets he is liable to have to be as good as his words and retreat into conventionally wise restrictionism—the "boy on the burning deck" restrictionism of the right hon. Member for Monmouth.

I think that the hon. and gallant Member for Worthing (Brigadier Prior-Palmer) most picturesquely expressed the general sentiment held on the other side of the House when he said that he was afraid that the Chancellor's shot in the arm might produce an inflationary spiral. Without attributing too much to the mixed metaphor, the hon. and gallant Member very aptly described the sentiment on the other side of the House. The thinly veiled hostility of the Chancellor's predecessor and assistants at the Treasury make me alarmed that, should he bump into trouble with an exchange crisis, a price rise or anything of that kind, he will be pressed with the policies of restrictionism.

The Chancellor will not meet with any special difficulties in implementing the economic policy which he has undertaken, not only in the Budget but in the previous financial Measures, which form a coherent pattern.

I ought to venture, with all modesty, to give a warning to the Chancellor. It is easy to overestimate the impact of these financial Measures. I often think that King Canute and his advisers would have gone down in the history books with a very different reputation if the courtiers had timed the king's arrival at the beach as the tide was going out. I am bound to say that some of the triumphant financial measures which Chancellors have taken have succeeded only because, even if the Chancellors had not ventured in that direction, the economic tide was moving that way and things would have happened in that way in any event.

I warn the Chancellor that by his economic and financial policy he has, in effect, told the tide to come in rather more rapidly. I think that it will, because there is a great deal of evidence that the tide was on the turn, quite apart from the Chancellor's measures. That does not make me welcome any less the fact that the Chancellor has abandoned the restrictionist approach of the right hon. Member for Monmouth and has given a much needed, and even belated, stimulus to our economy.

However, I wish to give the Chancellor a little aid and comfort from this side of the House. Though we deplore the fact that he has not made the concessions in the way we would have done, we unhesitatingly back him in his expansionist policy, because, after all, the central economic problem of the Western world since 1919 has been that there has been a departure of interest between the industrial productive power and the money mechanisms. The key problem ever since 1919 has been how to bring together again the needs of the productive industrial machine, on the one hand, and the money mechanisms, on the other.

The attitude hitherto has been that one can allow one's productive apparatus to work provided only that it is without prejudice to the money mechanisms, whereas the Chancellor, for the first time on the Tory side of thinking, has adopted what is fundamentally, we believe, the Labour Party view that the money mechanisms must be adapted to meet the needs of production. If the Chancellor has the courage to carry on in that line, he will undoubtedly have a good deal of success.

The only point I must warn him against is this. The right hon. Member for Monmouth and his followers, who believe that production must be made to conform to the needs of the money mechanisms, are by no means permanently routed. They will urge upon the Chancellor that he should budget for an overall surplus and that he should cover in his Budget not merely the current spending but his capital account spending.

I do not understand why this should have some magic. I do not know what law of logic says that we should pay out of current taxation for capital formation. But this is much favoured by the right hon. Member for Monmouth, who we know has this nightmare that he will have to pay back what the Government has borrowed, by the Governor of the Bank of England and by many other persons of great influence on the Chancellor's side. The Chancellor has defied them for a moment, but at the least sign of trouble he will have them on his trail again.

Another threat they will hold over him is this. The arch-deflationists who believe that we should adapt production to the needs of a somewhat fossilised money mechanism have always threatened us that our currency at home and abroad will be in danger once the money mechanism is forced to change in order to meet the needs of current productive inventiveness.

Let us deal with this briefly. First, the deflationists have always warned us that the devaluation of the unit of currency at any time and in any amount is necessarily, and in itself, evil. That is not true, although I am bound to say that every Chancellor of the Exchequer we have had since the war has pledged himself to do his best to maintain the value of the unit of currency. Luckily for the country, none of them has succeeded, because of the devaluation of the unit of currency. When as a result of six years of war we have had to bring into being a vast stack of paper money, unrepresented by any real wealth because it had been destroyed in the war, we have set up a defence mechanism in the economy, bringing into some sort of relationship with production the burden of a fixed interest debt.

If the Chancellor's predecessors had obeyed the nostrums preached by the so-called sound financiers and had successfully preserved the pre-war value of the £, the economy would now be at a virtual standstill, because the burden of debt arising from the war would have been beyond the power of industry to sustain. Germany is always held up to us as a prime example of a virile and flexible economy. The German economic recovery owed no small part of its impetus to the fact that this process of relieving the economy from the burden of a paper debt unrepresented by real values, which inevitably follows a war, was carried out in Germany more thoroughly, drastically, surgically and deliberately than in any other country. They proceeded to devalue their currency by 80 per cent. or 90 per cent. in one operation.

When the right hon. Gentleman is pestered at any stage by his reactionary colleagues—as he will be—he should remind them that if their obstinacy in these matters had been successful we should have been in a very bad way indeed. The reactionaries opposite also tell us that it is all very well having all this production, but we dare not bring it to a point where it threatens our balance of payments position. Even the Chancellor pays lip-service to that proposition. I admit that it is only lip-service, but it is lip-service to the ideals of the right hon. Member for Monmouth even when engaged on the steady and systematic sabotage of the former Chancellors policy. I am frightened that he may have his words quoted back at him.

I hope the Chancellor realises where that philosophy gets us. If the solution to our balance of payments difficulties is to sabotage production, whether it is done in a scientific and surgical manner by the Treasury, by way of credit restrictions and the withdrawal of capital, or what you will, it means that the Chancellor is on the side of the unofficial strikers. If the object is to slow down production, and if the country is to be asked not to go all out because it will unbalance our balance of payments abroad, why should the right hon. Gentleman and his able assistants be troubled to think up schemes of economic and financial restriction?

Let them encourage the unofficial strikers. Let them encourage all those who have a vested interest in restrictive practices which everybody normally preaches against. They are splendid things for slowing down production and not putting a burden upon the balance of payments position. The Chancellor must know that the doctrine which he preaches makes him a sort of Luddite of the Right. He is saying that because of the need to balance payments abroad we must restrict production at home.

If that sort of problem arises the right way to solve it is not to have Luddism at home but to sell some of our foreign securities which were built up for a rainy day. It would have been far better if, in 1957, we had sold two hundred million £s worth of dollar securities than to have had a permanent setback in the road and rail efficiency programme, or put it out of alignment. It would have been far better if we had sold a couple of hundred million £s worth of those securities and devoted them to urgently required re-equipment at home, or temporarily suspended the liberalisation of trade abroad. If the Chancellor meets an exchange crisis in the course of his expansionism—and the signs are hopeful that he will not—I hope that he will look for a solution in this direction.

His best course is to make international arrangements in good time to protect us from again being placed into the imbecile situation of 1957 when, with a first-class export surplus, we found ourselves running an exchange crisis caused by people hedging on sterling which caused us to make a drastic readjustment of our financial policy. His best course would be to make international arrangements to underpin sterling. I know that something has been done in that direction, but I hope that more will be done. That would be a tremendous defence, which would prevent us finding it necessary to do injury to our economy when temporary runs on the reserves occur.

Deflationists are very keen upon statistical exercises whereby they create a sum of money on paper which will involve tremendous investment or tremendous savings, and the like. Many of their theories have no evidence to support them. I hope the Chancellor will continue to resist the notion that it is his duty to budget for a surplus in times such as these. In fact, the Chancellor's boldness is boldness only by contrast with the attitude of his predecessor, because he is budgeting for a current surplus. I wonder when we must budget to balance our account on current account. Why should the nation pay currently more tax than is required for current expenditure, when it is quite plain that there is no sort of inflationary pressure in this country, and no sort of failure on the part of the country to export what is required to pay for its imports?

As I have said, since 1919 the great threat has been that we have had two interests pulling against each other—the industrial interest on the one hand, and the purely financial interest on the other. There have been some very interesting moves. The exchange of the present Chancellor for the right hon. Member for Monmouth has been paralleled, oddly enough, in the economic scene outside. The purely financial interests that used to be powerful advocates of the policies pursued by the right hon. Member for Monmouth have realised that they are not applicable in these days, and we have seen all the classic financial institutions—the banks, the insurance companies and the pension funds—acquiring interests in industrial assets and ceasing to be pure money financiers; that is to say, they are becoming part businessmen and part financiers. This is the first external sign that we have had of the resolving of the conflict between pure financial capital and industrial capital, and it is a very wholesome sign, which bodes well. It means that the Chancellor will not be quite so subject to pressure from the right as he otherwise would be.

We must examine the consequences of this movement. If we are really to draw together the purely money power and the productive interests, and if the needs of production are to predominate over the needs of the money mechanism, we must also see that something is done about the traditional approach to savings generally. Is it not the Chancellor's duty, as the most modern-minded of all Tory Chancellors so far, to review in his modern-minded way the whole approach to the savings of working people?

The Chancellor keeps advertising, "Your savings are safe and always increasing." I am not blaming him; it was his predecessors who were responsible for this slogan, but it would be truer if they had said, "Your savings are safe and always decreasing in their real buying power." I am not going to venture to put forward a snap solution to the savings problem in this debate, because it would not be proper for me to do so, but the Chancellor must review the whole question of working-class savings. He must find some way in which they can be geared to the increasing real wealth of the community. We are now moving into an area of general agreement that the increase in the real wealth of the community is the prime object of both parties. It is therefore necessary to ensure that the workers' savings should be safe in terms not only of monetary units but of real wealth, by ensuring that they increase yearly in the same manner as does the wealth of the community.

It is remarkable that the most Marxist and materialist of the trade union pension funds have not been so quick off the mark as have the princes of the Church in appreciating the facts of the modern world in which we live. It is a healthy sign that there should be this drawing together of the money power and the industrial and productive interests, but it is important that when we see it happening we should realise all the consequences, one of which is the need to protect the real value of the workers' savings.

Although I am on the side of expansion, like the Chancellor, and although I am insistent on the money mechanisms being made to serve the needs of production, and that production must not be strangled to suit the needs of outmoded money mechanisms, I would point out that nobody on this side of the House is prepared to suggest wild, speculative or unstable movements of currency. We say that we must face the world in which we live and be ready to accept certain tendencies in the value of currency at certain times, especially after a war.

It may be that we are not in for quite such an amount of depreciation in our currency in the future as was inevitable after the war, with the vast amounts of paper money that we created. I congratulate the Chancellor on having the courage to produce an expansionist financial policy, perched precariously as he is in a nest of deflationists and archrestrictionists, and those who have acquired a regular habit of financial sadism in taking the maximum amount of tax from people in all sections of the community—a habit in which they have been able to indulge too liberally in the years since the war.

Nothing that I have said by way of congratulating the Chancellor must be taken as any diminution of the criticism freely made by my hon. Friends of certain aspects of the implementation of his policy. The great moral outrage of our society has not been that economic movements have produced discrepancies of wealth between different classes. Deplorable as that may be, the fundamental economic and moral outrage of our economy has been the failure to permit the advantages accruing from all kinds of inventiveness to be available to every- body by full use of our productive power. The way in which they are shared becomes increasingly less relevant the more production we can amass. It is in that spirit that I approach the Chancellor's Budget, and I support what has been said by the Opposition Front Bench, namely, that we shall assess his policies more for their overall economic effect than for any particular sin he may have committed in the distribution of his tax reliefs.