HC Deb 25 April 1939 vol 346 cc986-9

I have got so far, therefore, an expenditure of £922,500,000 and an estimated revenue of £918,300,000. If it were not for the necessity of providing for the large increases in Defence which have been decided on since the Defence Estimates were presented, the Budget problem would be a simple one for the estimated revenue is within some £4,000,000 of the rest of the estimated expenditure.

As it is, we have now reached the pith and kernel of the matter. Let us take the main heads of expenditure for the present year and see how far a revenue of £918,000,000 will enable us to meet that expenditure. We shall, of course, take out of that revenue the Fixed Debt charge and associated charges of £247,000,000, and we shall take out the Civil Votes of £447,500,000. We shall find ourselves left, out of the total produce of taxes at their present level, with £223,500,000 available towards meeting this year's defence expenditure.

I must now recall the Committee's memory to two statements which were made to Parliament earlier in the year on the subject of the cost of defence expenditure and how it should be met. The White Paper, which was issued in February, stated that defence expenditure this year was then estimated at a total of no less than £580,000,000. That was in fact at that time the approximate total of the expenditure, whether out of loan or Votes, to be shown in the Estimates then about to be presented for the Army, the Navy, and the Air Force, together with air-raid precautions, food storage, and certain supplementary needs already in sight.

A few days later, on 20th February, when moving the Money Resolution on which the Defence Loans Act was founded, I thought it was in the public interest there and then to take this figure of £580,000,000 and to state how I intended to divide it between borrowing and tax revenue. I took this course, unusual as it might appear, in the month of February because I felt that, without anticipating my Budget, I might remove uncertainties and contribute to the building-up of a measure of confidence which might encourage trade and business. Undoubtedly the action that was then taken was widely welcomed, and we may fairly attribute to it an influence of encouragement during the last two months which was all the more valuable because of the anxieties in the political situation.

The division of the total of £580,000,000 which I then announced, as the Committee will remember, was this—£350,000,000 to be provided by loan money and £230,000,000 to be provided from revenue. As I have already pointed out, the actual figures show very nearly £230,000,000 to be provided from this year's revenue. Those totals were, of course, very round figures, and I have explained that, instead of the figure of £230,000,000, the actual figure to be found in Estimates is £227,750,000. Now that it is realised to-day that this year's revenue, on the basis of existing taxation, after meeting other calls, leaves only £223,500,000 to help to meet the bill for defence, it will be appreciated that there was point in the warning that I gave two months ago that my announcement should not be regarded as pre-judging the Budget statement.

But there is another and far more important fact which now emerges in this connection, far more serious than this difference between £223,500,000 and £227,750,000. The fact that emerges is this: The figure of £580,000,000 from which we started and upon which my calculation was based is no longer the correct and valid figure. It has been greatly enlarged in consequence of the recent decision to double the Territorial Army and of other measures of acceleration and expansion necessitated by recent events. Therefore, we must now proceed upon the assumption that in the coming year, not £580,000,000, but a total in the region of at least £630,000,000 will be required for defence in all its aspects. It may well be more. It is this stupendous figure of £630,000,000 that I wish to compare with the figure of £400,000,000 for defence last year and £265,500,000 the year before. It measures the size of the effort that has to be made, and I think it measures the determination of the whole country to make the effort. The result is that, instead of having to split £580,000,000 into two parts, as I did in February last, I now have to propose to the Committee a distribution of £630,000,000 between loan and taxes, remembering that taxation on its present basis will provide £223,500.000.

I do not wish, in a matter of this deep gravity, to keep the Committee on tenterhooks or to waste any time about it. How are we to deal with this extra sum of at least £50,000,000 for which we have to provide, one way or another, in the present financial year? It would be a very simple method and one which might give some temporary relief and even a brief popularity to add the whole £50,000,000 straight off, without more ado, to the loan figure, and make the total approximately £400,000,000 of loan money wanted in a single year, thus exhausting in a single year the whole of the additional borrowing power for which I got authority in the Defence Loans Act two months ago. I do not consider that this simple solution would be justified. If there is a limit to what can be conveniently or tolerably raised by taxation, there is also a definite limit to what can be wisely and successfully raised by borrowing. In any event the fraction of Defence expenditure to be met by borrowing this year is already very large, and, heavy as the burden of taxation is on all of us, the country is thoroughly roused to the necessity of further sacrifice. In the long run it will not be in the country's interest light heartedly to attempt to throw this additional sum wholly into the borrowing scale. We shall make it less difficult to borrow hereafter and we shall more justly mark the determination of those whom we represent to face the realities if we recognise, in the circumstances now facing us, that there must be additional taxation over and above the amount required to cover the £227,750,000 shown in the published Estimates as required for Defence.

I propose then to state at once how I would revise my announcement of last February. I would revise it in the following manner: Of the additional expenditure of £50,000,000 which we now have to contemplate, I propose that £20,000,000 shall come out of revenue, which will be provided by means of a margin of that amount for Defence Supplementary Estimates. Including that margin, the amount to be provided out of revenue will therefore become £247,750,000. Consequently I must propose to the Committee additional taxation sufficient to fill the gap between the last figure and the £223,500,000 available—that is, approximately, an additional £24,000,000. I do not think however, that we represent the extent of this additional effort by dwelling on the £24,000,000. Adding this £24,000,000 to the estimated revenue on the present basis, what is really involved is this, that the British taxpayer, within these 12 months, will have to find in all £942,000,000, while Defence loans will furnish approximately another £380,000,000.