§ Now at last we can pass from the results of last year to the prospects and estimates of the present year. On page 11 of the Blue Paper there are certain gaps to be filled up. I propose to leave the Fixed Debt Charge at £230,000,000, and to repeat the precaution taking in recent years of getting authority to borrow for the purpose of meeting the statutory sinking funds if the provision within the Fixed Debt Charge should not prove sufficient.
§ In close relation to the Fixed Debt Charge is another matter that I ought to mention. The Finance Act of 1930 contained a provision that, if a deficit occurred in any year, an equivalent amount should be set 981 aside in the following year for the redemption of debt. That is a counsel of perfection which neither Lord Snowden, the author of the proposition, nor my predecessor ever felt able to apply. I will not say that the 1930 rule has been more honoured in the breach than in the observance because it has never been observed at all. Since 1930 there have been three occasions, I think, on which the Chancellor of the Exchequer of the time has felt justified in asking Parliament to waive that rule, and I propose to adopt the same course now; the justification for waiving it now, when we have such heavy borrowing to undertake, is at least as great as on any of the three previous occasions.
§ As regards the other Consolidated Fund Services, payments to Northern Ireland are estimated at £10,000,000, and all the other Consolidated Fund services at £7,200,000. The increase in this last figure is accounted for by the fact that, under the Act confirming last year's Agreement with the Government of Eire, payments of approximately £4,000,000 a year in respect of land purchase in Eire now fall on the Consolidated Fund instead of on Votes. The total estimate, therefore, for the Consolidated Fund services for 1939 will be £247,200,000, an increase of £5,100,000 over the Budget figure for 1938.
§ The Committee should note that in 1939, as in 1938, no payment will be due to the Post Office Fund. I shall explain shortly what the position is. For each of the seven years ending with 1939–40 a statutory obligation was placed on the Post Office to contribute a fixed net sum annually to the Exchequer. The Post Office was to contribute annually £10,750,000. If the net surplus of the Post Office revenue, as calculated under the Acts in any of these years, exceeded that figure, the excess was to go into a fund called the Post Office Fund. If the net surplus in any year was insufficient to provide the fixed contribution of £10,750,000, then the fund was to make good the deficiency to the Exchequer. What has actually happened is that in the first three years of the seven the net surpluses allowed payments to be made to the fund, that is, the surplus was more than the statutory figure. But for 1936, 1937 and 1938 the net surplus fell short of the fixed contribution, and the Post Office Fund was 982 accordingly draw upon to make up the difference. In 1939 the Post Office has to face substantial expenditure resulting from the recent Wages Awards, and a shortage in the net surplus is again expected, but the balance which remains in the Post Office Fund itself will be insufficient this year to make good the estimated deficiency. The arrangements, therefore, for regulating the financial relations between the Post Office and the Exchequer must be re-examined, and I propose to review the position with my right hon. Friend the Postmaster-General during the course of the coming year.
§ There remain the Supply Services, the figures for which, with the exception of the provision of Supplementaries, are already known to the Committee. I will defer the topic of Supplementary expenditure for Defence, a most serious and important question, to a little later, but it is a cardinal issue of the present Budget.
§ As regards supplementary provision for Civil needs, the Committee is already aware of proposals for assisting the shipping industry and for aiding agriculture. Other Civil demands are likely to present themselves, and I am therefore bound to anticipate during the year considerable Civil expenditure not covered by the present Votes. On the other hand most strenuous efforts must be made to effect savings on the sums already voted, and for this reason I hope it may be enough to provide a margin for Civil Supplementary Estimates of £5,000,000. Excluding the self-balancing items for the Post Office and Broadcasting and reserving the question of Defence Supplementaries, the total for. Supply Services will, therefore, be £675,244,000.
§ I ask the Committee to observe how this vast sum raised out of revenue is divided between Civil Supply Services and Defence. The Committee is aware that expenditure on Air-Raid Precautions and on Food Storage has hitherto been classed as civil expenditure and included in the Civil Votes, but it is clearly a portion of our bill for Defence and if hon. Members look at the form of the Blue Paper they will see that I have had it changed and rearranged so that the figures for Defence expenditure include expenditure from revenue on Air-Raid Precautions and Food Storage. The Civil total is, of course, reduced by the same amount.
983§ These are the figures. The total expenditure on Air-Raid Precautions in the present year is estimated to be £42,191,000 of which £37,000,000 is to come from borrowed money and £5,191,000 from revenue. The estimated expenditure on food reserves is £5,000,000 of which £3,500,000 is to be found from revenue and £1,500,000 from borrowed money. If we treat these revenue charges as taken from the Civil Votes and as added to Defence, where they really belong, the result is that the total provision to be made for Civil Supply Services, including the margin of £5,000,000 for supplementaries, is £447,500,000, while the real charge against revenue attributable to Defence is £227,738,000. Hon. Members may remember that two months ago I spoke of raising £230,000,000 out of revenue for Defence this year. That was the figure I gave in February and this figure of £227,738,000 is a more accurate estimate of the total.
§ I must again remind the Committee that while I have already mentioned and made provision for a margin of Civil Supplementary Estimates of £5,000,000 I have not yet called attention to supplementary provision for Defence with which I shall have to deal before I close. But omitting Defence Supplementaries whatever these may be, the total expenditure from revenue for which I have to provide in this year's Budget adds up to £922,444,000.
§ Before going further, the Committee may wish to know how the estimated cost of the Civil Supply Services this year compares with that provided for in the Budget of 1938. I exclude in each case expenditure on Air-Raid Precautions and Food Reserves and the margins for Civil Supplementaries in both years. On that basis, last year's Budget provided for Civil Supply Services a sum of £430,500,000, and the corresponding figure for 1939 is £442,500,000. We are, therefore, providing £12,000,000 more on Civil Votes this year than last year. How does that come about? It is due to the increased provision for social services such as pensions (nearly £4,000,000), education (nearly £1,500,000) and housing (£811,000). It is due also to increases for agricultural subsidies (£1,726,000), Indian defence (over £4,000,000), roads (£2,000,000) and Newfoundland (£830,000).
984§ There are other items, of course, like war pensions which show a decrease.
§ However well justified each of these increases may be I would point out to the Committee that the result, combined with the necessity for further supplementary provision, presents a formidable problem. There is an automatic and necessary increase in the cost of Contributory and Old Age Pensions and the fact that such abnormally large sums have to be provided out of revenue for Defence has not meant and does not mean that our social services should be reduced. But the cost of social services and of civil expenditure, apart from war pensions and debt, as a whole is increasing. The total growth since 1925 from taxes alone may be put at £186,000,000, and in the same period as regards local rates, notwithstanding the derating of productive industry and notwithstanding increased Exchequer assistance, the sum collected from local rates has increased from £168,000,000 in 1925 to an amount estimated at about £210,000,000. With these figures before them and in view of the enormous sums which have to be found in present circumstances for Defence hon. Members will see how inevitable is the conclusion that new internal projects calling for major additions to expenditure are not, in present circumstances, possible. We now reach a result which brings us close to the central issue of the Budget The result is that apart from any question of Defence Supplementaries, the expenditure for which I must provide in my Budget reaches a total of £922,444,000. That is some £5,000,000 less than the amount which the revenue last year actually produced.