HC Deb 01 July 1941 vol 372 cc1279-302
Captain Crookshank

I beg to move, in page 35, line 16, at the end, to insert: Provided that the relief to be given under this Sub-section in the case of a married woman whose husband survives her shall be calculated as if, in the enactments referred to in Section thirty-eight of the Finance Act, 1924, any reference to a widow included a reference to a surviving husband We so often have the case of the widow brought before the House that it is a change to deal with that of the widower. But this is due to the extension of the relief from Death Duties in the case of death during operations of war which is granted in the Clause to the estates of civilians. When the Clause was drafted it adapted the words of the Finance Act of 1924, but as that was dealing with the Armed Forces of the Crown it was not likely that many widowers would be concerned. However, now it is extended to the civilian population it is just as likely that the surviving spouse should be the husband as that it should be the wife, and it is in order to deal fairly with both these cases that I ask the House to accept this Amendment.

Amendment agreed to.

Captain Crookshank

I beg to move, "That the Bill be now read the Third time"

In moving the Third Reading, may I just call attention very briefly to one or two important considerations which we have discussed and which are now to be found in the Measure? It is one of the great contributions that the people of this country are making to carry on the war, and it is necessary to strengthen the financial arm just as it is to strengthen those of the Armed Forces. In this Bill the more interesting Clauses which we touched upon are Clause 6, which introduces the system of crediting after the war some part of the allowances which have been taken away by this Bill; Clause 8, which alters for a considerable number, though by no means all, of the farming taxpayers the incidence of their Income Tax; Clauses 20, 21 and 22, which were inserted at rather a late stage to deal with tax-free payments in order that the beneficiaries of such payments should pay their share of the extra increase of the burden of war taxation, whereas those who have to pay out should be relieved of some part of their burden in order, in many cases, that there may be more available for the residuary legatees; and Clause 24, which has been touched upon to-day, dealing with borrowed money to be treated as capital for Excess Profits Tax purposes. There is also Clause 30, which we have just touched upon, with its very rigorous action against the tax-dodger, and in that connection I will draw attention once again to what my right hon. Friend has said, namely, that if it is still found to persist in spite of these wide powers, he feels himself at liberty to take more strict action, retrospectively if necessary, because the one thing this House and the people will not tolerate is tax dodging in time of war. Finally, in Clause 41 we have the relief from Death Duties in the case of civilian casualties, which it has been found wise to insert in view of the dangers which are about us every day and every night.

Those are the more notable Clauses in the Bill, but it would not be right for the House to part with this Bill to-day without being reminded once again that this is the most enormous burden of taxation that has ever been placed upon the people of this country. Perhaps I may illustrate that by one or two concrete instances, in order to bring it home to hon. Members once again what they and their constituents are being called upon to pay. Even before the war, of course, after 1936, Budgets were swollen by rearmament expenditure, and in 1939 already the Budget was 30 per cent, higher than the average for the 10 years previous to 1936, largely as a result of the development of rearmament. Since then we have had four war Budgets. They have all heavily increased taxation, and the total increases made by those four war Budgets in a full year is no less a sum than £778,000,000, and that war increase in the Budgetary demands is higher than the average for the 10 years prior to 1936 of the whole tax revenue. That is to say, in these two years we have added, over and above, more than what was the average for the 10 years prior to 1936 of all our expenditure. The sum total of what has been put on in a full year comes to somewhere near £1,000,000,000 more than the last pre-war Budget. I think it is worth while reflecting upon that in order to show that we as a nation are making a very great financial effort. By the spread of the Income Tax, the deduction and reduction of the allowances, the increase in the standard rate and the high Surtax rate, it emerges quite clearly that the burden on all sections of the community is extremely heavy.

At one end of the scale you have the unmarried man earning 46s. a week, who will have to pay somewhere about 3s. a week in direct Income Tax, whereas at the other end you get a married man earning, say, £10,000, £25,000 or £50,000 a year paying away in direct Income Tax 68 per cent., 84 per cent. and 91 per cent. of his income. In both these cases there must be a very great readjustment of their commitments, their circumstances, and their way of living. I am not here to say or to offer any view as to who will find it more difficult to do so; I just give the figures to the House. If you take the case of the married couple with an earned income of £10,000 a year, in July two years ago, as a result of Income Tax and Surtax, they would have been left with £5,795 of their £10,000 to spend as free income. Under last year's Budget that sum was reduced to £3,952, and this year it is down to £3,168. A moment's reflection will show that that needs a very great change in the circumstances of those people.

It is just as heavy in comparison— maybe heavier; I am not expressing an opinion about that—in the case of the £?300 a year married man. On 1st July two years ago he would have expected to be left, after paying direct taxes, with £295. Last year that figure had dropped to £280, and this year to £257 15s., so he, too, will have to make very considerable readjustments, though, of course, the fact remains that in the latter case he will be credited with £16 5s. under the arrangements under Clause 6 to fructify when the war is over. If anybody cares to study the Financial Statement which is issued on Budget day, he will discover that the married couple whose income is £150,000 a year—of which there are very few indeed in this country—are: left with only £7,106 to spend out of their gross income of £150,000. He will then appreciate that in point of fact there cannot be more than a handful of people in this country to-day with a five-figure free income left to enjoy, and hon. Gentlemen on both sides of the House will realise how heavy have been the exactions made in the four war Budgets and how great is the toll which my right hon. Friend is asking from the country to-day. And he is asking it, and will receive it without a murmur from anyone at all.

The most striking thing, though, of course, one would have expected it, is that one has not heard a single criticism of the heavy weight of taxation. Whether we are dealing with the case of the £10,000 man and wife or the £300 a year man and wife, the burdens and the changes which this Bill involves are really tremendous. But it is the price that we are, all of us, in one way or another, prepared to pay in order that we may carry on the war successfully. If there is any truth in what has so often been said that we are prepared to fight to the last man and the last penny, this document, unintelligible though it may be to many people in its details, is one further proof of the view of this House that it is prepared to put upon its constituents any burden that may be required in order that victory may be achieved. It is in that belief, and in the certainty that it will be accepted by the country as the right course to adopt, that I am sure the House will wish to congratulate the Chancellor on the successful outcome of his Budget, and pass, as soon as may be, the Bill at its Third Reading.

Mr. Benson (Chesterfield)

I am certainly very pleased to congratulate the Chancellor on a very courageous Budget. This Budget, and the Finance Bill which follows it, is certainly the heaviest burden which has been placed on the people of this country. The Chancellor has handled it well from beginning to end. He gave us something without precedent, a White Paper which was of immense value, and certainly his genial handling of the Committee and Report stages has got a very heavy Finance Bill through in very quick time. The Financial Secretary to the Treasury, in moving the Third Reading, referred to the heavy burden it represents. I am not sure whether the heaviness of the burden is a relevant matter. The only thing we have to consider is whether it is adequate, and that is a matter which time alone will show. The Chancellor has, to a certain extent, gambled. He has left a gap which he hopes will be filled by savings, by a voluntary effort of the people. So far as I could estimate the figures of that gap, I should say it was in the neighbourhood of £400,000,000, a rather serious figure, in view of the rate of taxation, and in view of the fairly large savings which are already flowing in. We have to consider that gap very seriously, because unless it is filled we cannot escape inflation. Indeed, the basis for inflation has been laid at the present time.

There has been an enormous increase in purchasing power; the volume of currency has increased far beyond any possibility of expenditure on the decreased volume of goods. What has saved us from inflation, as the "Economist" pointed out last week, is that although the volume of currency has increased sharply, the velocity of circulation has dropped sharply, and so has left us more or less as we were. With a large amount of unabsorbed purchasing power, and an increase in the volume of currency, it is a very serious matter that there should still be an un-bridged gap which can only be filled by a very much more strenuous Savings Campaign that we have at the present time. As a matter of fact, our Savings Campaign has, I think, been as weak as any part of our war effort. I am not at all certain that it would not be a good thing to have a change in the head of our War Savings Movement, because Lord Kindersley has certainly shown extraordinarily little ingenuity and imagination. There is one thing I would like to say. We have had, since the war, some very short-sighted financial policy. The Chancellor has certainly produced the first real war Budget we have had, and for that we are grateful, but I hope that we are not going to have a reversion, shall I say, to the short-sightedness that gummed up our financial policy in the first 18 months of the war. We have to look ahead and consider very seriously whether savings are going to bridge that gap of £400,000,000. I would emphasise that the first £400,000,000 of savings is easy; the second £400,000,000 is raised not quite so easily. It is the final £400,000,000 which represents the difficulty; in fact, the gap is a very large gap.

The Chancellor's problem is, or ought to be, what is to happen if we do not bridge that gap. He has to drain off, in, some way or other, the increased purchasing power of the country, particularly if there is to be a continuous decrease in the volume of goods available. One of his difficulties is that the bulk of purchasing power and the bulk of increased purchasing power lies at the lower end of the scale, and that will present him with a number of problems as to how to get at it. One thing is quite certain, that the burdens and the sacrifices imposed by total war are so great that they will not be borne unless they are borne with a great degree of equality, a far greater degree of equality than the burdens borne before the war. We are all equal before the bombs; the bombs rain on the just and unjust, the rich and poor, alike. There is equality in conscription, but can the Chancellor say we are equal before him? I do not think he can. The Chancellor cannot, like the military, demand equality of sacrifice, because I do not think that, in an unequal society, the words "equality of sacrifice" applied to financial matters have any meaning at all. The Chancellor may have done his best; his gradation rises from a penny in the at one end of the scale to 19s. 6d. in the £ at the other. It is an unparalleled attempt to impose an equal burden, but the inequality remains.

Let me admit that the man who is paying 19s. in the £probably has commitments which he cannot reduce. The majority of those who are paying 19s. in the £ have to disinvest, not merely to live, but to meet commitments which they cannot avoid. They have to disinvest still further to meet their living expenses. But, granted all that, they are not making a very great sacrifice in the face of war conditions. A little shrinkage in their capital will not mean anything to them after the war because in these large incomes—which are nearly all unearned—there is a vast sum of capital represented. Whether that capital is reduced by £10,000, £20,000, £30,000, or even £100,000, as a result of the war, it is, so far as the comforts of life are concerned, a matter of complete indifference. What does it matter to a millionaire whether his capital is £1,000,000 or £900,000? He cannot feel any difference, although he may see a difference in his ledger.

Mr. Stokes (Ipswich)

Will my hon. Friend explain how he proposes that the possessors of this capital shall raise the money with which to pay the Chancellor? It seems to me a very important point.

Mr. Benson

As I have said, they are raising the money by disinvestment.

Mr. A. C. Reed (Exeter)

Ask the Chancellor what instructions he has given to the banks in regard to that.

Mr. Benson

Is it not a fact that a man paying £143,000 on £150,000 has commitments to meet which are far above the remaining £7,000? We know perfectly well that those liabilities are met by disinvestment.

Sir Granville Gibson (Pudsey and Otley)

Is the hon. Member not aware that in business life money is not necessarily liquid in the banks, and that a major portion of the capital of a firm may consist of bricks and mortar, machinery and plant? It is not always so easy to part with capital as the hon. Member thinks it is.

Mr. Benson

I do not know that all capital is invested in that way. At any rate, I am merely pointing out what the effects are. Hon. Members may argue whether it is good, bad or indifferent; the fact is that disinvestment is taking place at present on a large scale. No matter how heavy a burden the Chancellor imposes upon these people, they are still in a position to live in luxury. The "negative income" which is left after they have met their taxation and commitments still enables them to live at a very high standard. No real personal sacrifice has been imposed upon them. That does not apply to the small man who finds that he has suddenly had £30 or £40 added to the amount of his Income Tax. The country is very conscious that, no matter how high the taxation may be—and nobody will deny that it is high—there is no equality of sacrifice, so far as comforts are concerned. This consciousness may become a serious matter for the Chancellor.

My hon. Friends here are supporting me so far; I am not sure that they will support me in what I am going to say now. If the Chancellor cannot get his money from savings, he will have to get it by taxation; and he will have to go when the increase in purchasing power is, and where the bulk of the purchasing power is. The Chancellor must go to the lower end of the scale. But if the Chancellor is to obtain his taxation from the lower end of the scale, he will have to place still heavier burdens on the other end.. In order to get at the lower end, he may have to fix the burden at the higher end beyond the theoretical limit. I can quite see the possibility of an Income Tax on unearned incomes of 25s. in the £. There is a feeling of equalitarianism about now, such as there has never been before. This very high rate of taxation is going to involve new technical problems. It is these technical problems that the Chancellor ought to be thinking about now. If this burden of war-time taxation continues, we shall be compelled to adopt very unorthodox measures. I want the Chancellor to consider that the possibility of raising vast sums depends more upon people feeling that they are being treated with equality, that there is equality of sacrifice—if that has any meaning in financial matters—than upon any other factor. The Chancellor may have to go outside merely fiscal methods. He may have to go to the Board of Trade, and say, "I cannot produce more in taxation unless you help me by imposing far more rigid rationing and by curtailing luxury spending" It is the feeling that other people may go to a luxurious restaurant and get a good meal while the miner's wife is finding great difficulty in getting a couple of ounces of cheese or something for the sandwich for her husband's "snap" which will impose more difficulty than anything else in connection with the raising of bulk taxation. If we are to raise burdens beyond a certain point they must bear a semblance of equality. To establish that semblance of equality in a state of society in which there are vast ranges of inequality, will tax the Chancellor's ingenuity.

Dr. Russell Thomas (Southampton)

I do not intend to detain the House for many minutes, but there are one or two points I wish to make on the Third Reading of the Bill. I regard the higher taxation in the Bill as highly commendable. Perhaps some of us think that the Chancellor of the Exchequer has still not removed sufficient of our purchasing power, but if he attempts to do that, I suggest that he does it, blindly as it were, from whatever classes possess the purchasing power, bearing in mind their commitments. Perhaps he has laid too much stress upon borrowing and has put off too many of our burdens to another day. Nevertheless, I feel as one who has a rather high goal in mind with regard to the fiscal policy of this country, that he has gone a considerable way towards that goal, and far further than I thought he might have gone. There is one point that he ought to bear in mind. It was a pity—and I say it very advisedly—that the Chancellor of the Exchequer should have proposed a repayment to the taxpayer at the end of the war. I think he should have taken full advantage of the spirit of sacrifice of the British people, as I do not think that they would have asked for anything in return. At the end of the war hundreds of millions of pounds will be returned to the people of this country and will be added to the large sums of interest to be paid on the borrowing which will amount, probably, to from £500,000,000 to £700,000,000 a year. The purchasing power returned to the people at the end of the war as interest on borrowed money, will be increased by the largesse given by the Chancellor and that interest will be paid not only to the banks and insurance companies, but to the humblest people in the land who hold savings certificates, and to the innumerable members of savings groups throughout the country.

There is another point that we ought to bear in mind, and it is intimately connected with this matter. This country after the war will be a debtor country. We shall no longer be a creditor country as we have always been during most of our industrial history. We were able to carry on during the first 18 months of the war because of our investments abroad, but after the war we shall be a debtor country. Let us see what that means in regard to the distribution of purchasing power. I do not think that there will be any unemployment in this country so long as normal foresight and judgment are observed. There ought to be no unemployment. The wheels of industry will be turning everywhere and every factory chimney will belch forth smoke. We shall be making large quantities of goods, not for ourselves, but mainly for foreign consumption in order to pay for our essential foodstuffs and raw material, but at the same time the Chancellor of the Exchequer will be distributing largesse to the taxpayer. We shall have a limited amount of goods in the country and a large amount of purchasing power, and the Chancellor and the House well know what that will mean.

When this Bill is passed he should continuously bear in mind the future fiscal policy of the country. You cannot separate the war fiscal policy from the post-war fiscal policy. There is no line of demarcation; one runs into the other. They are not interlocked or intertwined but fused into one another. The Chancellor of the Exchequer should ever bear in mind the burden that this Bill is laying upon the country now and in the future. It should be considered by him in all its aspects and he should endeavour to lighten the burden so as to be prepared for any crises or developments that might occur. He should see to it that he lightens the burden so that our people, who are fighting for freedom, are not borne down to a condition of industrial slavery and serfdom at the end of the war, and sacrificed on the altar of Mammon by the high priests of the Golden Temple.

I feel that the Chancellor of the Exchequer and Parliament have acted wisely in retaining Clause 30 in the Bill, which was Clause 26 before the Report stage. Under normal conditions, I would have opposed it strongly and considered it contrary to our constitution and to my conception of liberty. I dislike inquisitions into the motives of the subject unless they are criminal or something of that nature. Indeed Parliament has a long history of struggle in which it has endeavoured to remove the arbitrary powers of the Crown. But in time of war, when we are fighting for our existence, the laws must be silent. The Chancellor of the Exchequer is entitled to look for motive when he thinks there is a possibility of Excess Profit Tax being evaded. That tax had as its intention the removal of profits made out of the war, and I consider that in these perilous times the Chancellor is entitled to take the most stringent measures when he thinks it might be evaded. It is a tax which lends itself to evasion.

In this Bill he has forged a weapon which is essential for us in our fight for victory. Some of us think that he has not sharpened that weapon enough; others, possibly, by their arguments have tended to blunt it. Nevertheless, it is an extraordinary good weapon, and I think he has done remarkably well and I do not wish to criticise in any way.

I intend to be helpful in anything I say. I do not suppose it will be of much help, but at lease it is genuine. I am not one who likes to engage in destructive criticism and I take this opportunity to dissociate myself entirely and completely, here and now, before many witnesses and in this House, from the carping, nagging and persistent criticism, so constantly levelled against the Prime Minister and the Government, for motives best known to themselves, by those two or three Members who usually sit on the Government side of the House just below the Gangway.

Sir John Wardlaw-Milne (Kidderminster)

I would like to join with others in congratulating my right hon. Friend the Chancellor of the Exchequer upon a very courageous Budget. The question I want to raise to-day is not that of the problems with which he has finished at the moment, but of the problems which lie ahead and which arise to some extent out of this Finance Bill. I fear the task of my right hon. Friend is only beginning. The problem of finance in this war effort will be with him every day. My right hon. and gallant Friend who moved the Third Reading spoke of the effect of this Bill as strengthening the financial aspect of our war effort. I agree that in certain respects it does this very definitely, but what 1 am concerned with is whether, as a result of this Bill—and I put it to the House frankly that this is the primary question in my mind at the moment—we are to get a greater war production or not. I understand there is a possibility that the House will be discussing in the near future the question of production in all its aspects, and I have no intention of anticipating that Debate to-day. I am concerned only with the effect on production of the financial measures we are taking and with the problem which lies ahead of my right hon. Friend. I have several times stated in public debate—contrary perhaps to the opinions just expressed by the hon. Member for Southampton (Dr. Russell Thomas) —that I thought it a great mistake that we ever imposed the Excess Profits Tax at the rate of 100 per cent. In my view it was panic legislation and 1 have always believed that we should get more revenue and better results at a lower rate of tax. But that is not the matter which I wish to raise in detail now. What I propose to raise is the effect of that tax and other Clauses in this Bill on the production we are getting to-day.

Clause 23 of the Bill does not really help us. The mere fact that a man will get back 20 per cent. of what he has paid out, or that a firm will get back a small part of what it has paid in Excess Profits Tax, less Income Tax at that date, whatever the rate may then be, will not solve the problem which confronts the Chancellor of the Exchequer. At the present time a large number of concerns working for the war effort are unable to finance the extensions which are necessary to give us the production we require for the war. That is the real problem. I want, if I may, to give the House an illustration of what I mean. We are dealing with conditions as they are; I am not concerned at the moment with ideas about the future or what conditions might be then. So long as you have private enterprise you must not remove the incentive to gain. If you do, your private enterprise will not work. That may be, to some, a sound reason for changing that system at some future time but we are dealing with conditions as they are, and the problem is whether we are using the financial system we have to-day in a manner which will really ensure the success of our war effort

War production is involving a great number of concerns in ever-increasing expenditure. They have had to enlarge their plant and expand their capacity much beyond that necessary in pre-war years and, in fact, a good deal beyond what is probably justifiable by peace-time conditions of the future, so far as they can see ahead. There will be no dispute about that. It is urgently necessary that this expansion should continue. Under our present financial system and conditions of taxation, as laid down in this Bill, private enterprise has had largely removed from it any incentive to extend production. The normal machinery of financing production does not operate to-day. In many cases the proprietors of these concerns would not be justified, except for the war effort, in proposing any extension at all. They certainly could not justify it as a long-term policy to their bankers and the result is that they cannot obtain loans to meet their requirements. Expansions are therefore financed only in cases when the cost can be charged to revenue; this is rarely possible and means a slackening of effort and a retardation of the output required.

It may be said that the Government come to the rescue. That is true in certain cases only and even then it is by no means always with the speed necessary to secure the extensions required. Where the Government are taking over the whole plant, the question of finance is comparatively simple but a large amount of the output we want to-day must come from smaller concerns working on their own account. They cannot all get Government assistance and in some cases, where it is available, they do not get it quickly enough to give us the production we require. I am not saying that this difficulty of getting Government finance is entirely, or even perhaps mainly, the fault of the Government. It is a problem which no Government have ever had to face before. They have not the staff and expert people to examine these questions but it seems to me that the Chancellor will have to consider seriously in the near future, whether he can, in some way or other, promote the necessary finance for what I might call the middle-grade firms, whose expansion is absolutely essential for the war effort. There is one thing I hope we shall not say. It is that we cannot afford to finance this kind of production. We cannot afford not to finance it. That is the position. In the old sense of the word there is nothing we can afford but we are at war all must be sacrificed for victory. It is not a question of dividends. Limit the dividends if you like; it is quite immaterial. As a matter of fact the ordinary industrialist, in the strain of the war effort, has long passed from the consideration of dividends. All he is interested in is to remain solvent and to try to keep his business going until the post-war years.

We are not immediately interested in what will happen to him after the war. Let us be quite frank. What we want is his production now and that problem is one which this Bill does not help. During the Committee stage of this Bill, I and some of my hon. Friends raised the question of allowances in the case of companies which had not come to full fruition of their enterprise. There is also, of course, the very difficult question of the depreciation of assets which is taking place in consequence of the war effort. As a result of that effort, you have machinery which is working far beyond its normal pressure and is being worn out. There is no inducement to the manufacturer to work his machinery in this way. He is not properly recompensed for the destruction or deterioration of his assets. We want in this war, indeed, we must have, a system which will give incentive to both employer and workman to produce to the utmost of their capacity. The Prime Minister said in this House a few days ago that we had not the guns with which to defend our aerodromes in Crete. Then there was the very serious statement made by Colonel Knox yesterday showing what we are losing at sea. We not only want the United States to deliver the goods to us. We must produce to the utmost of our capacity here at home. As I have said, it is not a question of what we can afford. It is a question of what we must afford.

I appreciate that at the present time, as my hon. Friend opposite said, inequalities exist, and I agree with him that a great many people are going to live on the realisation of capital. I do not suppose he looks forward to that situation in the country any more than the rest of us do. It is a situation that is very bad for all —it is the destroying of our national capital. No doubt a very far-reaching programme of social reconstruction may be necessary after the war. A vast part of the great concentrated war effort will come to an end over night, and we cannot adapt ourselves to peace conditions in a day. If there is no planning ahead, there will be chaos. The Chancellor's problem will be the combination of two things, getting the utmost out of the present capacity of the country for the war effort, and planning ahead for the peace.

My right hon. Friend must face the fact —there is no other way, I am afraid— that the financial system will have to be altered in such a way as to give, first, that incentive of which I have spoken to meet immediate requirements; secondly, we must have a wages and a price policy, for otherwise there will be increased inflation; and thirdly, we must plan ahead the financial policy which, after the war, will provide the necessary credit for expanding industry and consumption. Consumption is the keynote for the post-war future. I hesitate to enter this field for more than a sentence, but I think that after the war there will arise the necessity of placing in the hands of the people of the country the ability to use the credit which they themselves create in a way which they have never been able to do before. Whatever may be the merits of these matters, which will have to be discussed in future, I hope the Chancellor will consider now whether it is not possible to do something to procure from the industrialists that expanding production and that incentive to the utmost output which is absolutely essential if we are to win the war.

Mr. A. Edwards (Middlesbrough, East)

I should like to remind the hon. Member for Kidderminster (Sir J. Wardlaw-Milne) that there is something facing the working-class people which is worse than war, and that is peace. Peace reminds them of the dreadful conditions that may prevail immediately after the war. Yet, at the moment when we are asking them to do more, we are confessing that we are doing very little to prevent them from being thrown back into conditions of poverty.

Sir J. Wardlaw-Milne

I agree with the hon. Member, but it is not one class only that will suffer.

Mr. Edwards

It is not a very sound argument to say that if somebody is paying i9s. 6d. in taxation from every pound of income, he is making a sacrifice. There is no sacrifice when a person has abundance; there is sacrifice only when a person has to pay more than he can afford.

Sir J. Wardlaw-Milne

The question is, what will be the value of the residue?

Mr. Edwards

There are people who are able to live without making any real sacrifice in their standard of living, because they can use their capital. This reminds me of another point, which I have put to the Chancellor on previous occasions, concerning the disinvestment of capital. At the present time, people not only disinvest in order to live, but make substantial profits in the process. The Chancellor ought to decide that for the duration of the war, at any rate, all capital profits are to be taxed both for Income Tax and Excess Profits Tax. I want now to refer to Clause 2, for which I am grateful, which enables the Chancellor to abolish Import Duties. Had the Chan- cellor had the courage to make such a provision a year ago, he would have saved many millions of pounds for the country. The right hon. Gentleman's mistake is that he has not really strengthened his financial arm, to which the Financial Secretary referred. I suggest, without any fear of contradiction, that it can be shown that in this Finance Bill the Chancellor has made the money which he is raising worth very much less. He has to provide the money for the increased output for our war effort, but he has to do more than that—he has to raise an extra sum of money to cover the depreciated value which he has himself caused.

The right hon. Gentleman has taken powers to abolish Import Duties. The important thing is that he should use those powers. I want again to remind the Chancellor of something of which I have spoken for the last 18 months, but which he and his advisers have persistently ignored. The Government have deliberately raised the price of goods, which is inflation, and nothing else. They have powers to control prices, but instead of doing that, they have deliberately increased prices. An announcement was made this morning that the price of household coke and blast furnace coke is to be raised.

Mr. Speaker

The hon. Member must confine his remarks to what is in the Bill. I have allowed the Debate to be very wide, but I cannot allow it to become wider

Mr. Edwards

In Clause 2 the Chancellor has taken powers to abolish Import Duties, and my purpose is to show that he can save millions of pounds for the country if he exercises those powers. Let me take another case. The Government have increased the cost of machine tools, which represent one of our largest purchases, by 60 per cent. Is there any sense in such a financial policy? The Chancellor has deliberately increased the market value of machine tools in this country by 60 per cent. With regard to steel, the Import Duties were removed some time ago, but in other ways, under powers which he has under various Acts, the right hon. Gentleman has put up the price of steel to an entirely fictitious figure. This is a very serious matter. The right hon. Gentleman is destroying the very foundation of our financial system. There is no stable price struc- ture, and the Budget means nothing if, having said that the cost in the coming year will be so much, the right hon. Gentleman in the meantime destroys prices, so that the money is worth only two-thirds of what it originally was worth. If the right hon. Gentleman will use his powers to abolish, not partially but absolutely, all Import Duties, he will be able to reduce prices by a very considerable amount, and he will be able to reduce the cost of the war by more millions than he has referred to to-day in rejecting certain Amendments. What is also important is that he would be able under this Clause to release some thousands of men. At a time like this I have the right to remind the Chancellor that he alone is responsible for any inflation that is occurring. He alone is producing inflation, and he alone can prevent it, because he has the power to fix prices. Day by day he is raising prices and increasing costs in different industries, and those increased costs, in turn, come back to himself. Can there be anything more inane than that?

Again, I would draw the attention of the House to world prices. The world prices of raw materials have risen by 11 per cent. only since the war began, whereas in this country they have risen by 70 per cent. That is inflation, a waste of money, and pure nonsense, and if the Chancellor pursues that policy, he will have to raise more money. He raises prices and then sends Lord Kindersley around to the working people. All the time he is making that money very much less in value than the figure which he has told the people it is worth. This raising of money by War Savings is really not good enough. I hope the Chancellor is going to face the problem, and stop Lord Kindersley deceiving the people. Would it not be more sensible to say that we can get the money at ⅛ instead of 2£ per cent.? Do not tell the people you are raising £1,200,000,000, when you are probably raising only about £300,000,000. The time has come to be straight and honest with the people.

Mr. Pethick-Lawrence (Edinburgh, East)

The Debate to-day has shown both approval and criticism of the Chancellor and the Bill of which we are now taking farewell. Personally, I find myself in a good deal of agreement with some of the criticism which has been made. Although I do not go so far as my hon. Friend the Member for East Middlesbrough (Mr. A. Edwards) I agree that the Government have a great deal more power to control prices than most people inside or outside this House seem to realise. I do not think I would go as far as to say that the Government are responsible for the increases in prices. Although the Government may not have done all that they could, I would rather say that they have done a good deal more than some expected, and a very great deal more than was done in the last war, when our financial system was thoroughly bad.

The really important thing is that we are going through a transition stage. In the days before the war the Government had very little control over prices, either of commodities, or of money. To-day the Government has almost absolute power over prices of commodities and of money. That is a stupendous change. Nearly 10 years ago I went to a country which has come very largely into the picture during the last few days. I had an extraordinarily interesting time, and I found that the economics of the Soviet Union were different from those of any country in history. Probably they were different then from what they will be again there or anywhere else. At that time the Government of Russia had complete control of the price figures. They could decide, not only the price of an article, but the differential price, according to the purchaser, according to the place where he was allowed to buy it, and according to the conditions under which the sale took place.

The result was that there was no overt market at all. The price of a piece of cheese to a workman might be less than one-tenth of the price charged to another purchaser. The same thing applied to all articles. I remember being rather inquisitive about what would happen in the case of a family whose teapot had been cracked. I asked a girl what she would do if her teapot were broken and she wanted to buy another in its place. I asked that question because there were practically no shops. "Oh," she said, "Mother goes down to the co-operative every day, and once in a while when she sees a teapot she buys it" That seemed to be a fantastic state of affairs, but we are getting somewhere near it at the present time. When you want an article you have to wander about and scrounge for it, and you may find it, or you may not. And so we are moving in the directions of the position which existed in Russia some ten years ago. Maybe we shall get still nearer to it as time goes on.

This Budget, and what the Chancellor has done, is typically British. Here we are, facing the burdens of taxation, and facing conditions of existence which would have been unimaginable a few years back. We are facing them not in gloom and despair, but with a smile, and with a welcome to the Chancellor who has castigated us in this cruel manner. All this shows the good side of the British character. We have set our teeth, and we are not going to yield to this man who has broken every covenant of Divine and human law. We are going to face the situation whatever the cost. The Chancellor has shown a spirit of good will in his efforts, and he and his loyal staff at the Treasury have not spared themselves, by day or night, in meeting individual people and trying to work things out. Certainly they have shown a fine British spirit, which we all praise.

Of course our British qualities have their weaker side. We do not look very far ahead. We do not plan for the future, and we are just a little bit happy-go-lucky. Had we planned a little further ahead a few years ago, some of us believe there would not have been a war, because Hitler would have been crushed before he became so difficult to subdue. On the financial side, if we had looked a little further ahead, we might have made our situation somewhat easier. I do not think we are looking very far ahead now, to the days which will follow the war. Perhaps it is as well. We know we have to tread a certain path, and there is a hymn which says, "One step enough for me" After the war, we shall not be able to afford great luxurious expenditures in certain directions. We must make certain at the same time that if we lose these great expenditures on the one side, we also lose the great evil of dire poverty on the other. I believe that view is in accordance with the spirit of the people, high and low. There may be a few exceptions of people who want to go back to old ways and live luxuriously at the expense of others, but I believe it is also true of the British spirit that pervades all ranks of society, that the people hope for greater equality in the days to come.

I have never believed in absolute equality. I know quite well that you cannot have it. I remember a story that came from Russia about the operas which they arranged to have when the war was over. They were just about to start when it was found that the leading tenor was missing and the performance had to be held up. They hunted high and low for him, and in the end they found him in the topmost gallery selling programmes. They said, "Do you not know that we are all waiting for you?" He said, "Yes, I know that, but you told me that all the tasks that we perform in this society are of equal value, and I prefer gelling programmes" I hope my hon. Friends opposite will not use that story against some of us. I merely relate it to explain my statement that I do not think you can have an absolutely equal society. I do not think you can have a system in which all services, rendered by every one, are of equal value in an economic sense. But you must get way from the utterly unequal system that we had before. I have no wish to go back to that system of society. I have said before, and I say it again, that I believe our people to be of that mind.

This Bill places enormous burdens on the people. Those burdens, in my opinion, will be borne courageously and cheerfully and with the song of victory not far away. But the human frame can bear only a certain amount of strain, and I hope we shall realise that fact. We have put upon human beings during these last 14 months an enormous burden and, if, sometimes, they are not doing exactly all that everyone thinks they should do, I want the House to remember this stupendous physical and nervous strain that has been put upon the people and not demand more of flesh and blood than it can bear. I believe that every demand the Chancellor is making can be met. It may be that he will have to demand more in the years to come than he is demanding at present, but, as my hon. Friend behind said, he must bear in mind that while the people will do everythng they can, as long as they feel that others are having to face the same difficulties as themselves, what they will not stand is injustice. They will not stand for grave burdens being put upon themselves while other people, apparently for no reason, get off very much more lightly and continue to have a good time. I do not think any large section of people in this country are luxuriating at the present day, but there are a few slackers, probably in all classes of society. They ought to be rounded up. It may be that between now and next year, if the war is still continuing then—it is possible that it may not be, that we may see a cracking on the other side, and that it will end all the sooner because we are preparing fully for its continuance—the Chancellor will have to see whether there is not some method by which he can round up the slackers, so that by a common effort, in which all take part, we may pull our weight in securing victory.

The Chancellor of the Exchequer (Sir Kingsley Wood)

I wish to add only a few words to all that my hon. Friends have said to-day. They have been good enough to refer to me in very generous terms. I must say that but for the co-operation of the House as a whole it would have been impossible to get the Bill through in the time we have, and I thank the House very much indeed for what they have done, because it has been by their good will that it has been possible to achieve a Bill such as we have to-day. I should also like to thank my right hon. and gallant Friend the Financial Secretary and the learned Attorney-General and the learned Solicitor-General, and also my officers at the Treasury, for the very great assistance they have rendered me. They have very much lightened the weight which otherwise would have fallen upon my shoulders. On the Third Reading of a Measure of this kind one is entitled, I feel, to look back just for a few moments, and in doing so I think the chief reflection one has, and no doubt it will be shared by all my hon. Friends who have taken part in these Debates, is astonishment at the way in which the burdens which it has been necessary to impose by this Budget have been accepted. I must confess that when I first considered the Budget I did not anticipate the full and willing acceptance that it has received on all hands and from all sections of society.

It is not my purpose to try to give judgment upon the question whether some people are faring better in this war than others, but my object in the Budget was to deal fairly with the community as I found it, and to work out a practical plan which would be accepted as fair, just in so far as it lay in the power of any individual to do so. I think it was largely the fact that it was felt that an honest endeavour had been made to apportion our very considerable burdens as fairly as possible that has made the Budget as acceptable as it is. I also feel that behind the fact that the Budget has been received so wholeheartedly lies a general appreciation by the people as a whole, greater, I think, than at any time in our history, of how vital a factor finance has become in our war effort. At no time, I suppose, have so many people followed with so much knowledge and care the proposals made in a Budget. I do not suppose that there have been so many people well-informed about financial affairs at any time in our history as there are to-day; and that is all to the good. These people, at least, appreciate in general terms what is meant by inflation, and they can see to-day the justification for Measures which have been deliberately designed to abate that danger.

In a sense, this Budget was not a financial Budget. While it is only sound common sense to pay our way as far as we can, I did not bring forward my proposals in order to conform to some theoretical requirements, for instance, that the people of this generation should bear on their shoulders some mathematical proportion of the total cost of the war. Nor did I bring them forward for the reason that, without them, the money for the war could not be found. If, out of natural sympathy for the people of this country in their present tremendous ordeal, we had chosen to spare them further drastic taxation, the money to finance the war would still have been found, but only at a terrible price and at the cost of serious inflation. I ask the House and the country to view the Budget in that context and to regard it as a part, and an integral feature, of the Government's economic policy, which finds expression also in many other directions—the limitation of supplies, the concentration of industry, the rationing of food and price control. The question before us is not whether we can finance the war but whether we shall do so in a manner calculated to abate inflation and thus to avoid the severest hardships on all classes of the community, including those with the smallest resources. I can assure the House that, in our Finance Bill, it has been my desire to pursue this fight against inflation, and that that will continue to be my constant endeavour.

I should like to leave with the House one final thought before the Bill is read the Third time. The current rates of taxation have been fixed, but to deal with the inflationary gap we have to look to the increase in the rate of genuine savings, on which I based my calculation at that time. One of the finest efforts in this war has been the voluntary Savings Movement, and the House and the country owe a great debt to that movement. It is not easy for us to find voluntary savings, and the growth of genuine savings must be related to a policy of rigid economy in private affairs, to drastic curtailment of civilian consumption and to an understanding by everyone that every penny saved and lent to the nation is an essential contribution to victory.

Although the War Weapons Weeks have now come to an end, the National Savings Movement, far from remaining content with the results up to date, is intensifying its effort, and I would only say in conclusion that, though I appreciate and am aware of criticisms of various kinds—which are natural in connection with any great movement—I want to thank the hon. Members of the House for the great part so many of them have taken in connection with the National Savings Movement. I appeal to them today not to relax their efforts. Further effort is now being made which I do not think will be open to any of the criticisms of my hon. Friend opposite, and I am particularly anxious, because so much depends upon it, that the voluntary Savings Movement in this country should not only be maintained but increased in the months to come. It is of great moment for every one of us, and I hope my hon. Friends will continue to assist. I am very grateful to the House for their help, and I can only say that I trust that the hopes upon which this Budget was based will be fulfilled, and that it will be regarded as a great contribution to victory by the people of this country.

Question, "That the Bill be now read the Third time," put, and agreed to.

Bill read the Third time, and passed.