HC Deb 22 April 1913 vol 52 cc270-4

There are two considerations which I had better take into account in forming my Estimate with regard to the balance, one is the normal growth of the revenue in times of fairly good trade a growth which every Chancellor of the Exchequer always depends upon owing to the steady increase of the population and the wealth of the population. This varies a good deal in different taxes. The second is the exceptional growth which always arises in cases of unusually good trade. Those two, I think, I can depend upon this year. There is a very considerable difference in estimating revenue between good and bad trade, and I think it is worth the Committee's while to realise what a very serious difference trade does make to the revenue. If hon. Members will take two years, one a year of good trade and the other a year of bad trade, and observe the effect upon the revenue, they will see why a Chancellor of the Exchequer always makes the most careful inquiries into trade prospects before he ever prepares his forecast. The year 1907 was exceptionally good. Though the consumption of spirits and beer was then falling, in 1907 spirits rose by 1.8 per cent. and beer fell by only.6 per cent. In 1908, which was a bad year, spirits fell by 4.8 per cent. and beer by 2.4 per cent. Thus beer dropped four times as much in 1908 as it had done in the previous year. In 1907 tea rose by 1.6 per cent. and tobacco by 3.9 per cent. In 1908 tea only rose by.5 per cent. and tobacco by.7 per cent. There is an enormous difference there. Tea rose three times as much in 1907 and tobacco about five and a half times as much. That shows what a serious difference trade makes in your calculations.

Every year a Chancellor of the Exchequer, as the right hon. Gentleman (Mr. Austen Chamberlain) knows, has to make inquiries as to what are the trade prospects. This year, owing to the fact that there are one or two disturbing elements, I have made more careful investigations than usual, and I have made them in every quarter. The Estimate which I have formed is based, not on weighing and balancing conflicting statements which I have received from different parts of the country, but on practically the unanimous opinion of those who are engaged in well-nigh every trade and industry in this country. Last year the greatest disturbing element was the miners' strike. It checked business for weeks, and it held up almost every industry and dislocated trade. The volume of business was undoubtedly enormously depressed for the first weeks of the financial year owing to the miners' strike. Still the tide rose so high that it swept away every barrier.

The disturbing factor to-day is the trouble in the East, and that is the problem that I find is engaging the thought of every business man I have consulted, and I have consulted a good many in every part of the Kingdom. Up to the present it does not seem to have diminished the activity of the workshops in the slightest degree, but it has exercised a very retarding effect upon new orders coming in. New orders are more scanty and slow, and that is very natural. Business men are waiting to see what will happen before they launch out on new enterprises and new expenditure. When trade is good orders flow in, because there is a general sense of confidence.

That general sense of confidence is undoubtedly for the moment arrested in conquence of the doubt as to what is going to happen in the East. It is not so much the actual field of conflict which is creating this nervous apprehension, but the fear that it might be extended. It is having a greater effect on the Continent than here—a much greater effect. The Rank Rate here for the last six months has been higher than it has ever been, at least for a very considerable time. It is very unusual to have a Bank Rate of 5 per cent. from October to April—it has now been reduced—but that is very largely a precautionary measure here. On the Continent there is another state of things. I am told that on the Continent there is a most unusual hoarding up of cash, and, taking France, Germany, and Austria together, there has been something like £60,000,000 of cash which has been hoarded up owing to the fear of what is going to happen. That has naturally created a very great money stringency on the Continent, much more stringency than anything which has been felt in this country. Last year all these great Continental countries were competing with us in great new issues of capital for foreign development. This year there has been a great fall in the amount of capital which has been laid out for development in Germany and in France, and certainly in Austria. What I am told by business men is this: The order books now are full. That is what I hear from everybody. They will be full for months. There is enough work already ordered to keep the workshops and factories of this country—and I believe that is true of the Continent—in full work for months to come, and the question now is whether these orders will hold out until confidence is restored and new orders begin to flow in.

I have naturally made inquiries of business men, and, of course, I have made very careful inquiries from what they call the diplomatic sources, and I must say there is a greater feeling of confidence and a much greater feeling of buoyancy than existed a few weeks ago. The general feeling is that the greatest danger is over, and undoubtedly that which constituted the greatest element of irritation has almost entirely been eliminated. There is a general feeling that in a very short time peace will be restored and we shall get normal conditions. The waste of war will, of course, have to be repaired, and that will take time, but the trade boom is so high, prosperity in all these countries has been so great, and the flood has taken such dimensions that it will not take long to repair the devastation of war, and the countries of Europe will enjoy a prosperity such as they have never witnessed before. That is the conclusion, I am very pleased to be able to say, to which business men have come. I am not giving my own view; I am giving what I have gathered are the opinions of business men in every quarter of this country, and that is their anticipation. There are one or two indications on the other side which I think justifies completely that anticipation. There are no indications at the present time that the trade boom has reached its climax. There are none of the usual indications. We have not yet completed the cycle. I do not say that is conclusive. For instance, wholesale prices have not reached the usual boom figure. That is one indication. There are no signs of over-production. Business is healthy; it is business to meet real needs and real demands. The foreign trade was at its highest last year, and it is still expanding. Unemployment has reached the lowest figure it has reached, I think, in our time. It is lower even than it was in the time of the South African war, and there is this difference: employment then was very largely due to the fact that a very considerable number of Reserves had been taken away from their work, and their places had had to be filled up. There were also workmen who had to be employed upon the material and business of war. To-day, employment is due to the fact that men are engaged in productive, profitable work, and therefore to that extent it is infinitely more healthy.

There is another factor. The harvests last year were exceptionally good. I agree that the home harvest was disappointing, but taking the world's harvest, it was a record, and everyone knows what an effect that has upon trade. Last year the cereal crops of the world were heavier by 250,000,000 quarters than in the previous year. That makes an enormous difference in business. It increases the wealth of our own customers, it reduces the cost of living here, and therefore increases the purchasing power of the people, and undoubtedly it is a factor of the greatest importance.

Then there is another factor. In the last two years the great profits which have been made have been spent very largely upon increasing works. New works have been erected in this country, old works have been extended, old machinery has been scrapped, new machinery has been set up, so that the productive power of this country has been increased just at the time when the purchasing power of our best customers has also been expanded. There has been an enormous subscription of new capital for development abroad, not merely here, but in Paris, in Berlin, and in New York. Most of this has been spent in the countries which are our best customers—Canada, Argentina, Brazil, Russia, and Australia. There are thousands of miles of new railways being constructed in those countries now, and, as everyone knows, this capital is exported not in the form of cash and gold, but in the form of goods, and it has undoubtedly stimulated and quickened the activity of trade throughout the world. There is also the enormous production of gold in recent years. Last year it reached £100,000,000; ten years ago it was £66,000,000; and twenty years ago it was £33,000,000. Although one may very well exaggerate the effect of that upon trade and commerce, there is no doubt at all that the immediate effect is of a quickening character. Taking all these things into account, I feel justified, upon the basis of opinions that have been given to me by some of the ablest and most experienced business men in the country, in forecasting my revenue this year on the assumption that we have entered upon the most glowing year that British trade has yet seen.