Question again proposed,
That it is expedient to amend the law relating to the National Debt and Public Revenue, and to make further provision in connection with Finance."—[Sir K. Wood.]
§ Mr. Pethick-Lawrence (Edinburgh, East)
Budget Day in the House of Commons is always something of a festival on which we are all carried away by the glamour of the occasion, and in the grey light of the next morning we have to weigh up the disclosed facts as they affect ourselves and the nation we collectively represent. My own comments to-day will be as objective as possible, and I propose to deal, first, with the Chancellor's speech, secondly, with his Budgetary proposals, and thirdly, with the White Paper on national income which he has placed in our hands. Every Chancellor has his own technique. The present Prime Minister, when he filled that office, used to indulge his fancy in flights of rhetorical imagination. Mr. Neville Chamberlain presented a company balance-sheet and a profit and loss account. Sir John Simon delivered a speech to the jury. I confess that I liked the unembellished statement yesterday at least as much as any of these, and I congratulate the Chancellor of the Exchequer on holding the wrapt attention of the Committee for nearly two and a quarter 1083 hours without using a word too much and without showing any signs of personal fatigue
Speaking from this bench, I unequivocally endorse his remarks about the assistance rendered by the United States of America. Lend-Lease was a happy inspiration of the President to lift the transaction out of the realm of business, in which our American cousins, like ourselves, are quite able to drive a hard bargain, into the atmosphere of neighbourliness and of common action in the common cause. The American people, as we all know, have responded to the appeal made by their President, and even in the present Congress, which is by no means too friendly to the President politically, they have repeated that endorsement. The Chancellor made a very important statement when he told us—as I understood him—that at the present time our outgoings under the Lend-Lease principle to all the Allies are equal to the incomings from such Allies as are providing Lend-Lease to us.
§ The Chancellor of the Exchequer (Sir Kingsley Wood)
No, only so far as America is concerned.
§ Mr. Pethick-Lawrence
So far as incomings from America are concerned, our outgoings to our Allies are equal.
§ Mr. Pethick-Lawrence
That is what I should have said. I would also like to pay my tribute to the generous action of Canada in continuing its substantial gift of another billion dollars (in American reckoning) for a further year. I hope that this remarkable and far-sighted decision will form a precedent for the post-war behaviour of nations, a subject to which I will return towards the close of my speech. A further point I noted with great satisfaction was the Chancellor's very important statement, made, I understood, on the authority of the Government as a whole, that it was their intention to continue the policy of cheap money when the war is over. This is a great deal more than a financial decision. It is, of course, the primary intention of the Government to avoid inflation, and if they are to do that, it will be necessary to preserve rationing and to control consumption into the period immediately following the war. 1084 Unless the Government intend to do that, they will not, of course, be able to maintain their policy of cheap money, because those are inherent and underlying assumptions. I need not point out to the Chancellor that the period after the war will be one of great difficulty for many reasons, not least because there is a vast amount of hoarded currency in the country which, including the bank till money, is about £20 per head of the population, and unless the Government tread very warily, much of that will come out and tend to throw out of gear our immediate post-war economy.
Now I will turn to the actual Budgetary proposals of the Chancellor. First of all, I want to say a word or two about the global figure of expenditure. I notice that the Chancellor has budgeted for an increase of only £100,000,000, or thereabouts, on the actual incurred expenditure of the last financial year. That is to be compared with an actual increase from 1941–42 to 1942–43 of no less than £750,000,000. Now it may well be that as we approach the peak of our war effort there will not be the same increase in expenditure year by year, but I confess that the drop from the increase in last year of £750,000,000 to only £100,000,000 in the forthcoming year seems to me to be a most unlikely expectation. I suggest to the Chancellor that he has under-estimated the global expenditure and that we may well reach a considerably higher figure than he has suggested. It may no doubt be true that the revenue will also yield a higher figure than he expects, just as it did in the last financial year, but I doubt whether that will cover the whole of the likely over-account of expenditure, and I invite the Chancellor's serious attention to that point.
Coming to the Chancellor's taxation proposals, I would certainly commend his courage in trusting the British people to be willing to bear a further burden of taxation when he might have argued that it could be left alone. If he had taken that less courageous course, he would have been supinely waiting for inflation to take place, and I am quite sure that the British people, who have borne with such courage and fortitude and without complaint the colossal burdens which the Chancellor put upon them in previous years, will be glad that he has 1085 continued that policy and that he is still keeping the giant danger of inflation at bay. I come now to the method of taxation. The Chancellor has chosen to place the whole burden of taxation on indirect, rather than direct, taxes. Ordinarily, I should have taken very strong exception to that line of conduct. There are many things to be said against indirect taxation. It is haphazard in its incidence; it is regressive in its results, and I think the House would have supported me in that opposition. But I feel that a great deal of that opposition has lost its force in the present year and that there is something to be said on this occasion, when the immense burden of Income Tax is being borne by all sections of the people, for selecting instead the few luxuries left to us for another turn of the screw.
It is the object of war economy to limit the expenditure of the public on articles many of which have to travel to this country from overseas. Therefore, in these exceptional circumstances, I think my objection to indirect taxation is, to a large extent, mitigated. But at the same time I should like to put before the Chancellor this point of view. Those for whom I speak have in previous years, when they have opposed indirect and favoured direct taxation, been told, "It is just part and parcel of the 'Soak the rich' campaign, and it is because you on the Opposition benches speak for the people who do not have to bear much direct taxation that you are favouring that course." I do not think that can be said at the present time, because the manual workers of this country are already bearing a heavy burden of direct taxation, and any increase in the rate would obviously fall upon them. It is a question of whether direct or indirect taxation is the right method of approach. Therefore, when some of my hon. Friends on this side object to this increase, I hope they will be listened to and that it will be realised that they are not speaking from a sectional point of view but on a ground of general principle.
It is for the bulk of the people, I venture to suggest, to decide which kind of burden they choose to bear, and though I do not think that the bulk of the people will complain of these new taxes, there still remains a large number of people with very small incomes upon whom, as we have said before, these increases—absurd as it may seem to people to whom an extra 1086 penny or two means nothing—entail very great hardships. Though I do not want to oppose this method of taxation in this year, I would point out to the Chancellor that this is the second year in which we have had an increase in indirect as against direct taxation, and I can express my comment best by saying, "Not guilty, but don't do it again."
To some extent the Chancellor has met my criticism on the position of the poorest section of our people by his very welcome concessions, and again I would compliment him upon his courage in being willing to make concessions at a time when he is increasing taxation. It is very often the idea of Chancellors that they should have one Budget which is all increases of taxation, and, in another year, when things have become better, that they should have another Budget which is all reductions of taxation. I think that is not a good plan. I agree with the Chancellor that when taxes are being imposed at a specially high rate, it is of supreme importance that hard cases should be dealt with, because it is when there is a high rate of taxation that the yoke presses most severely in these special cases.
The Committee will remember that last year we put certain hard cases before the Chancellor, and we are fortunate that he has, in a great number of instances, met our complaints. There is the case of the child who is an invalid after he has reached the age of 16. The Chancellor has arranged, as I understand the proposal, that the parent is now to get £50 allowance for him as the dependant allowance, the amount therefore going up to the total of £80 income in the aggregate. In effect, the child is still treated as a child even after he has passed the age of 16. Then there is the housekeeper allowance. The housekeeper business has got into a good deal of a muddle as I am sure the Chancellor will agree and I believe the time will come when it will have to be thoroughly straightened out and the people who are entitled to relief, given relief along quite definite and suitable lines. The Chancellor has not felt it right to do that now, but he has made a concession of a very sound character which will apply only to cases in which there are children in the home. That probably marks a good line of distinction, and I feel that we have had a valuable concession from the right hon. Gentleman for this year, though it 1087 does not cover quite all the hard cases. Someone was telling me to-day of a man who has to have a housekeeper to look after invalid members of the family, and these are, of course, outside the provision to which I have referred. These are points which the Chancellor will still have to consider, but, in the main, by and large, I think we may regard the concession as very satisfactory.
There is one other point in that connection to which I feel the Chancellor ought to pay attention. It is the case of special expenses incurred by a family on account of illness. The Chancellor, supported by the recommendation of the Committee which dealt with this matter some years ago, has consistently refused to make any allowance for illness in assessing income. I realise that it is a very difficult subject and not at all easy to handle but it does represent a serious hardship. One case brought to my notice was that of a man who had a wooden leg. He pointed out that the cost of servicing his wooden leg every year ran away with a quite substantial part of his income. It is not easy to see why, if a man has an allowance in respect of tools which become depreciated in the course of his work, he should not be entitled to an allowance for depreciation of an artificial limb. I do not know whether the right hon. Gentleman will consider that there is point in that argument. It is only a small part of a very large issue, but while we do not expect the right hon. Gentleman to make any alteration this year, I hope he will not shut his mind to the possibility of some extension of allowances in that direction, in a future year.
I come now to the Purchase Tax. There also I think the Chancellor has to a considerable extent met the view which some of my hon. Friends and I took, that one of the main objects of the Purchase Tax was to limit expenditure on articles of consumption which were not really necessary. Though the Purchase Tax was objected to by many people, that advantage seemed to me to be of importance. Since the tax was originally imposed, however, considerable changes have taken place, the most important of which have been the Orders made by the Board of Trade. These have effectively limited consumption, and therefore, the raison d'être of the Purchase Tax, to that extent, has largely gone by the board. 1088 The suggestion was made to the Chancellor that in every case where the Board of Trade had issued an Order of that kind, he could afford to remit the Purchase Tax. The Chancellor has not been able to go quite as far as that, but the concessions he has made do go a considerable way in that direction, and I think I may say, speaking both for myself and for my hon. Friends who have raised this point, that we appreciate what has been done. Though it is not 100 per cent. of what we asked, yet we feel that the main part of the grievance has been met.
In fact, the Purchase Tax now is getting much nearer to the selective tax on unnecessary expenditure, which I should have preferred to see at the beginning. The metamorphosis is still far from complete, but we certainly are grateful for what has been done. In that connection I should like to say, speaking generally, that we take no exception to the increase in the luxury portion of the tax to the higher figure of 100 per cent. It may be that there are one or two small items included in that category which are not strictly luxuries, but that is not a very important point, and I would not like to press it any further.
I come now to the Excess Profits Tax. I cannot pretend to have followed meticulously all the precise changes and concessions about Excess Profits Tax which the Chancellor announced. I do understand the concession about wasting assets, such as quarries, and no doubt when I have further particulars I shall understand more in detail what the Excess Profits Tax proposals are. I have always taken the view that if the Excess Profits Tax is to be maintained at 100 per cent., every step should be taken to make it substantially fair, and I have no reason to suppose the Chancellor and the Treasury are giving away unnecessary points with regard to this; therefore, in the main, subject to a better appreciation of details, I am quite agreeable to, and commend, what the Chancellor proposes to do.
A small technical point arises with regard to the Excess Profits Tax and also with regard to the post-wax credit? under the Income Tax. It is quite natural, as we do not have anything in the nature of a profit and loss account, but an income and payments account, that the full amount of receipts from the Excess Profits Tax and from Income Tax should 1089 appear in the ordinary way as revenue, but I think the Committee ought to bear in mind that, as far as the post-war credits part of the Income Tax is concerned, it is only revenue in the sense that it is a receipt during the year. In fact, although not in form, it is a compulsory loan. It is really much more like a short-term borrowing than it is in fact a tax receipt. With regard to the 20 per cent. that is to be repaid to business houses paying Excess Profits Tax in certain circumstances, that in a modified form is also the case. I do not see how the national accounts could be presented in a different way, but the point ought not to be forgotten.
I come now to the Income Tax. The Chancellor has told us that he has had no occasion to modify his view that the present way of dealing with Income Tax still holds the field. Of course, it will not have escaped the attention of those who read the American news that in the United States there has been a great campaign about "Pay as we go," which means, in fact, payment of Income Tax in the year in which it is incurred instead of paying a year afterwards. I venture to think the last word has not been said on that question in this country. The position is working out fairly well at the present time, because wages, salaries and other emoluments are much more level than they were at one time, but the time will come when the whole basis of wages will be changed, as it is bound to be at the end of the war, and also in every workman's life there will come the time when he will retire from work. I am bound to say that I foresee very considerable difficulties looming ahead with regard to our post-dated taxation of incomes, and I am not at all sure that we shall not, in spite of the difficulties, have to face up to some readjustment of our taxation on the lines of paying as we go, as it has been discussed in the United States.
One other matter in connection with the Income Tax to which I wish to refer is the question of working wives. Hon. Members know that the incomes of husbands and wives are assessed together for the purpose of the payment of Income Tax and Surtax. A good deal of exception has been taken to that, but, on the other hand, the married couples, while they lose at one end of the scale, gain quite substantially at the other end. During recent years, since the allowance 1090 for the spouse has become part of the law—in the old days there was a fixed Income Tax which took no account of whether a person was single or married—I have never thought it would be right to assess a married couple precisely on the same basis as if they were two single individuals, because in some cases the wife is earning no money, and in some cases she is earning money, and the economy of the household does depend upon the couple and not upon the individual circumstances of the two separate persons. At the same time I have always taken the view that the wife's position should not be subordinated to that of her husband, and when in the present war a large number of wives began to work for wages, the question arose about the payment of tax, and not only about the payment of tax, but about the post-war credits. Then, last year, the Treasury, to save itself trouble, treated the wife as a mere appendage of the husband and sent to the husband only a statement about the post-war credit. In that way, of course, the Treasury did a thoroughly illegitimate thing. It took the money at the source from the wife and, without informing her, proposed to hand it back to the husband at the end of the war. That is quite an intolerable position, and I am quite sure the Chancellor cannot stand for that. I hope he contemplates taking some action to rectify the matter. The only right way would be to send information both to the husband and to the wife telling them what the respective shares of the post-war credit should be, but if the Chancellor is not prepared to go as far as that because the Treasury does not want at the present time to go into elaborate calculations in all cases of what the division between husband and wife should be, at least I hope he will agree that the wife should' be informed that she is entitled to a post-war credit and can find how much it will be, if she wishes it to be divided, by application to the tax authorities.
I have completed my survey of the Budget proposals, and I come now to the third item, the White Paper. The White Paper is a most informative document, and I think the Chancellor and the Treasury have rendered a very great service to the community, and especially to economists and statisticians, in getting it out. I hope they will continue this practice not only through the war, but in 1091 the years that follow. We have the receipts and payments method of presenting the figures, and it is all the more essential that we should get in the form of a White Paper the statistics which enable us to understand the larger position. I have read through the White Paper since it was produced yesterday, and although I have got the hang of a good deal of it, I cannot profess to have mastered it all, and I suggest, not by way of criticism but by way of further improvement when another White Paper comes out, that it might possibly be made a little more self-explanatory to the ordinary reader. There is one point in particular to which I want to draw attention. Unless I am mistaken, the word "net", as applied to income, is used in two entirely different senses in different tables. In one case, it means after deduction of expenses of industry, and in another it is used to mean income after the payment of tax. Those are two entirely different uses of the word, and I think they are very confusing to the ordinary person. I do not think the fact that they are explained in some small footnotes later on enables them to be too easily understood. The prime purpose, as I understand it—and I think it has fulfilled it admirably—is to discuss the inflationary gap, and I think there is no one who does not appreciate that the facts so disclosed have enabled us to realise that that gap is very much smaller than we had supposed before.
That is not the only use to which the White Paper can be put. Another useful fact disclosed is that the total increase in private incomes since 1938 is of the order of 50 or 60 per cent. if I read the figures aright. That is, of course, a monetary increase, and it is not easy to translate it into terms of real wealth, but I gather that after allowances have been made it will not be so very much less than that amount. Another question that is answered in the White Paper is the distribution of income, which again is of great value. A further matter on which it would be interesting to get information is not dealt with, and that is the distribution of savings between persons of different incomes. If we had known that distribution, we might have been able to answer a question which is posed, I think, by the Minister of Production in a speech last Saturday, when he said: 1092It is a most unfortunate fact for our Socialist friends that rich people, who accumulate capital and savings and who pass their money out into development, are necessary to the prosperity of the State.Of course, allowance must be made for the circumstances and the audience that he was addressing at the time, but, after all, even in those circumstances, it is necessary for a Minister of the Crown to be accurate in his facts. I question very much—my information is all the other way—whether capital developed in private enterprise is being financed by what are properly called the rich. I divide the population into three. There are at one end the rich, roughly the Surtax payers, and at the other end the poor, who are not paying Income Tax and who have a difficulty in making ends meet. The vast bulk of the population, from manual workers up to professional men, are broadly within those two limits. My information is that the first class, taken in the aggregate, are certainly not during the war making any contribution to the real, genuine bonâ fide savings of the community, and not only are they not doing it during the war, but they did not do it for some years before the war began. During the war-time their commitments are so great that large numbers of them are, willy nilly, actually disinvesting—the only method under heavy direct taxation of meeting those commitments. Even prior to the war it has been stated, I believe, by a high authority that it is not that class which at present is providing the sinews of capital investment. I suggest that the Chancellor of the Exchequer has a word with his right hon. Friend and advises him to be accurate in his facts.
This White Paper has an important bearing on the problem of post-war economy. At what level will the national income stand when a substantial part of demobilisation has taken place? This does not only affect such a matter as the implementation of the Beveridge Report. It affects the whole standard of life of our people, and it seems to me a question which now, as the war is entering on what we hope will be its final phase—I am not suggesting any premature termination—at any rate we should begin to examine. It is not very easy to deduce that from the White Paper. It must be agreed that in the transition from war to peace the structure of production will be fundamentally 1093 changed. To take the principal outstanding case, the income of the men and women in the Forces to-day is, of course, taken at their Service pay, whether in cash or in kind. When they are demobilised it will be taken at what they can earn in industry, which may be something entirely different. Owing to the difficulty of basing it on the White Paper, I should prefer to go back to pre-war economy and endeavour to relate post-war to pre-war. I recently spoke of a figure of 100 per cent. increase in our national income, and that figure was very seriously criticised in the Debate that followed, both on its own account and on account of the fact that I had not given due weight to the question of our export trade. I have thought over this criticism, and I want to make certain points to show exactly where the changes and increases in the national income should come.
In the first place, there should in future, contrary to what was the case in the inter-war years, be no financial obstacle in the way of full employment. It is now clearly demonstrated that, in order to keep full employment, there must be a certain amount, very likely proportioned to the whole income, of capital investment, and, if that capital investment is not being undertaken by private enterprise, it must be undertaken by the State, and just as capital development undertaken by private enterprise is financed out of savings, so the capital development of the State, which must replace and make good any shortage of the enterprise of private individuals, must take place out of savings and be in effect borrowed money. It is only when the capital investments of private individuals plus the capital investments of the State rise to the full quota that we shall get full employment and the full economy of the nation.
Assuming that can be done, what order of magnitude will that increase imply? Unemployment in the intermediate years was in the neighbourhood of 2,000,000 and even more, but unemployment was by no means the whole measure of the under employment of the labour of the country. First, there was short time, and, secondly, there were large numbers of people who would have sought employment but who were told that it was unpatriotic to seek employment and thereby turn out of work men who needed it to keep themselves and their families. When you allow for full 1094 employment, which does not mean, of course, employment to the last man, and allow for the working of full hours instead of short time, and allow also for the people who are willing and anxious to work but were kept out on patriotic and other grounds, I do not think it is too much to put the increase under that head at 20 to 25 per cent.
Then there is the increase in technical efficiency. It has been demonstrated for a good many years that the increase in technical efficiency amounts to something not less, but rather more, than 1 per cent. per annum. If we take five years after demobilisation, which carries us into 1949 or 1950, and compare the position then with that prevailing in 1938, I think that as a minimum under normal conditions technical efficiency might be supposed to increase the productivity of the country by some 12 per cent. We all know that technical efficiency is immensely accelerated by the necessities of war. Therefore, I think that that figure may well be far below the realisable achievement. Therefore, I would not be surprised if we can count upon, not a 12 to 15 per cent., but a 15 to 20 per cent. or even higher increase on that score. These are the two large items to which I have given some tentative figures.
I come to a number of smaller items, all of which, I believe, will be important, but it would be foolish to try and allocate percentages to them. There is, first, the employment of women. Women have surprised a great many people by their general capacity and the wonderful work they have done during the war. I do not think that anyone visualised the work that some of them have effectively and efficiently performed. The principle I go on is that of choosing the best man for the job, using "man" in a neutral sense. I want to see the best man, whether male or female, employed on the job. The idea that there must be a sex division of labour is untenable. I was rather amused the other day at the answer given to a correspondent of mine when he suggested that, by way of releasing a number men for the Forces and other work, women should take on driving some of the trams. The letter that he received from the Ministry of Labour said that in view of the traffic problems and the security of the general public it was thought undesirable that women should be given this complicated and difficult job. I 1095 could not help thinking, when women are driving enormous lorries as many of them are, and Army transport vehicles of all kinds, that the suggestion that they could not drive a tram, which in some ways is much simpler and less liable to cause traffic accidents, was rather an absurd anachronism. I hope that view will not last much longer in the Ministry of Labour. Women have gone into industry in much greater numbers than in the last war, and whether they will want to remain is a matter the women must decide. Many will want to go back to their homes but a number will prefer to remain in industry, and they will lend an additional strength to the labour of the country.
Then there is the increase in the population. Although we may see a decrease coming, the population at the present time is still increasing. That should add to the national income. Then there is the lengthening of the working age. We are constantly bemoaning the fact that the age of the population is increasing, and we talk about the number of additional old age pensioners compared with the working population. I do not take that pessimistic view, because the same fact which makes people live longer also makes them survive into old age with added strength. The view of my hon. Friends has always been that pensions should not be fixed age pensions but retirement pensions. I believe that great numbers of our population would much prefer to go on working. Take the Prime Minister. If we were to suggest to him that because he had reached a certain age he would naturally wish to retire, he would scorn our remarks and tell us that he was perfectly capable of carrying on, and we all believe he is. The great bulk of our people would much rather go on working than retire while in full possession of their strength. So, while I hope that we may write off a certain age at the beginning by increasing the school leaving age to 15 or 16, there is reason to believe that a lengthening of the working age would give us additional labour.
I have already mentioned choosing the best person for the job in the matter of sex, and the same thing applies in the matter of class. For the complicated managerial functions and the highest posts in industry we need to have the largest possible pool from which to draw 1096 our resources That has been limited in the past by class sectional ideas, but I believe that the coming of wider ideas will give us better men than we have had before. Then there is the question of a reduction in the costs of selling and distribution generally. I was told once by someone who professed to know that it cost as much to sell a Rolls-Royce as it cost to make it. Undoubtedly, with the shortage of employment, unnecessary numbers of people have gone into distribution, and I believe that there could be a considerable increase of productive methods if we reduced the number of people in distribution and if distribution were more efficiently and economically conducted in the future than in the past.
Then there is the prevention of sickness. I think that the average number of days in the year lost by sickness is not less than two weeks. A great deal of that might be prevented. It is true, I hope, that we shall increase the length of holidays and that that will be some set-off, but that will add to efficiency, whereas sickness not only withdraws people at the time of sickness but reduces their efficiency before and after sickness intervenes. Then there is improved skill by better education. If we are going to keep the children at school until 16, we hope that they will be better men and women when they grow up. There is a stronger population owing to their being better nourished and having better food. It is said that these increases to which I have made reference belong to factory production only and not to the large amount of labour which is performed in the form of service. There is, of course, some truth in that, but, on the other hand, I think that our service will be much more efficient. The service of the housewife, for instance, will be more efficient because of labour-saving devices and better constructed places in which to live and work. Then there is the effect of people having gardens and allotments. We have seen in the war what an enormous amount of products, particularly vegetable products, can be produced in that way. Related to that there is the general better development of the land which I hope will emerge at the end of the war.
Taking all these lines of progress together, I think that there is reason to hope that we can make an enormous increase in the national income. There 1097 is one thing which I have not mentioned that has to be put on the other side. That is the loss of foreign investments. This is undoubtedly serious, but at the same time, even if we go back to 1914, it is only a matter of hundreds of millions, whereas we are talking of thousands of millions in the question of the national income. It is commonly said that we paid for our food imports out of our foreign investments. That is not strictly true, because the income from our foreign investments was nearly always re-invested in foreign countries and did not come across at all. We paid for our food and raw materials largely by means of our exports and our shipping services, and we re-invested abroad the great bulk of the income from our foreign investments. I was criticised when I made that speech in the House a little while ago and was told that, apart from those questions with which I have been dealing, we could not hope to increase our national income unless we increased our exports. There is a good deal of misconception in that idea. Our exports are of supreme importance because they are a matter of structural employment. They are of supreme importance also because we must have imports in order to get the food and raw materials which we need. But they are not a measure of our prosperity. They are a measure of how far we meet this vital need. I do not see any real difficulty with regard to that after the war.
We have to remember that when the war ends almost the whole of Europe and to an equal, perhaps greater extent, Asia and other parts of the world will be in dire need. Immense help will be required from us and those countries which have not been under the Hitler yoke. They have been as much part of the war as we have and have been even more severely hit by the war than we have. Just as the principle of Lend-Lease was necessary between the various countries which are actively prosecuting the war, so I suggest that this principle will have to be observed when the war is over between those parts of the world which have not been under the Hitler yoke and those parts which have. Just as this far-sighted decision was taken not merely out of neighbourliness but out of the recognition of a common need, so when the war is over that will be the case 1098 with regard to the peoples of the world. We shall have to give support at the beginning without making a bargain for its return. That is the essence of the Lend-Lease principle. May I put it in this rather human way. When a woman has a little baby she feeds it with her milk without making any bargain. She does not say to the newly born infant, "If I give you all this milk free in the early part of your life, you must contract with me to repay me when you get older and must look after me in my old age." Any such suggestion would be ludicrous. That idea applies after the war.
We have got to give open handedly of our substance to large parts of the world in order to make the world as a whole able to play its part in the common life of humanity. That must apply first and foremost to Europe, and I venture to suggest it should apply over a much longer period to parts of Asia, particularly India and China. We have discussed India from the political point of view many times in this House, and we are not getting on very well, but we have not discussed it very often from an economic point of view. It may be that both in this country and in India itself we have to change over from the political to the economic aspect of the question. A friend of mine is very keen on one project, the building of roads in India. In the old days we tied India together by a railway system, but somehow or other, and no doubt at great capital cost, we shall one day have to provide roads for India, because at present large parts of India, many of its half-million villages, are absolutely unconnected by road and are still in a very backward state.
§ Sir Stanley Reed (Aylesbury)
Is my right hon. Friend aware that for some years past there has been a Road Board in India actively engaged in constructing these roads and financed by a levy on petrol?
§ Mr. Pethick-Lawrence
I was not aware of that. But in so far as it has been done it has been on a comparatively small scale. It could be undertaken on a very much larger scale if the capital was forthcoming. China has quite as large a problem. A few days ago I listened to a very amusing lecture under the Ministry of Information by Mrs. Bigland, who described the Burma Road and the perils 1099 and dangers she had experienced in travelling along it. It is quite clear that there are immense opportunities for developments in China along these lines. If we look at the world as a whole, as we are bound to do, after the war there will be boundless opportunities for the expansion of our industry and of our exports, and important as it is that we should have savings it is of even still greater importance that our savings should find their way into investments of real value for this country and for the world as a whole.
I do not pretend that when I spoke here of 100 per cent. increase in real income, and when I repeat the figure to-day, I am making a documented forecast of what it will be. Rather, I set that as a target at which we should aim, with every intention of reaching it as nearly as we can, say, five years after demobilisation. I may not have convinced all the Committee that the full figure is realisable, but I hope at least that I have dispelled the defeatist mentality that suggests that after the war the nation as a whole will have to reduce its standard of life and to refuse to abolish want and destitution. This country can, if we will, be a land of prosperity. A kingdom of well-being is within our grasp. Will we stretch out our hand and take it?
§ Mr. Loftus (Lowestoft)
The right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) has given the Committee a most interesting speech, affording us all cause for deep thought. I will not attempt to cover the whole of his ground, but I should like to make some comment on certain of his remarks. At the end of his speech he pointed out the great productive capacity of this country and how we could use it to double, probably, our national income and therefore to raise our standard of life. But a few minutes before he pointed out the problem that Europe would be faced with after this war, when Europe will be depleted of the necessities of life, and how it will be necessary for us to give to Europe materials which we may be ill able to spare. I feel that we in this country do not yet realise what the state of Europe will be after the war. It may well be that the depletion of the herds of cattle, poultry, swine and so on, and the loss of horses will have been so great that it will take many years to restock Europe and to provide the peoples of Europe with the 1100 same standard of life even that they had before the war. We cannot suddenly increase our livestock on a sufficient scale to stock all Europe again, and it may well be that we shall be faced with the spectacle in most countries in Europe, possibly in all countries, of people, especially children, under-nourished and with an appeal to us to go to their aid. Then I trust that even at some temporary sacrifice of our own standard of living we shall save Europe and help to build up Europe again, because, whether we like it or not, we are part and parcel of one great European civilisation, and we must do our best to restore it after the disaster of this war.
The right hon. Gentleman referred to our foreign investments. He said that we had generally reinvested a large part of the interest. That is the case, and in some years we reinvested the whole lot. In those boom years just after the last war we reinvested at least the whole of the interest due, but a few years later, when the slump came in 1929–30–31–32, I think we received the whole of the interest in material imports, and actually had an unfavourable balance of trade after allowing for the receipt of interest in goods. The position had varied yearly according to circumstances.
The right hon. Gentleman made a remark earlier in his speech which I hope my right hon. Friend the Chancellor noted. He spoke of the great volume of currency notes in the country. I think he said they average £20 per head, and though I have not worked it out certainly the fiduciary issue has been increased from time to time, and there is this great volume of notes. This may indicate many things, but one thing which I am sure it means is that there is a very great evasion of Income Tax through the practice of paying cash for large transactions. Every hon. Member has heard stories of payment for great purchases of all kinds being made in notes. We have heard stories of men buying about £1,000 worth of furniture and paying for it in notes. Why? It is obvious that many people are using notes. They keep books, and the cheques go through the books, and possibly only one-quarter of their transactions are paid by cheque and three-quarters by notes. That is a method for evasion of Income Tax which I am sure is being largely practised. How to 1101 counter it I really do not know, but my right hon. Friend the Chancellor has experts at the Treasury, and I hope he will be able to put them on to the track of this increased dodging of Income Tax to see whether something cannot be done to stop it.
The right hon. Member for East Edinburgh said that manual workers today are bearing a heavy burden of Income Tax, and that is the case. The number of Income Tax payers to-day is about 10,000,000. I do not think we have yet realised what a revolutionary change that is bound to produce after the war in the general economic outlook of the nation. Before the war if there was pressure on the Chancellor to undertake expenditure on, say, armaments, social services or anything else, the easiest way out for him was to put 6d. on the Income Tax. Industry murmured, and the Income Tax payers murmured, but the Income Tax payers were a minority and the great majority of the people approved. With the heavy expenditure after the war this spread of the Income Tax is bound to continue, and in future the majority of the voters will be Income Tax payers, and therefore it will not be so easy for a hard-pressed Chancellor to solve his problems by adding 6d. to the Income Tax. Indeed, it will be much more difficult for him. There will be great pressure for a reduction of the Income Tax instead of an increase.
Let me give this by way of illustration. In many municipalities where rates were thought to be too high and where the tenants of houses paid rates direct, desirable, even essential and beneficial, improvements were often refused by the ratepayers because they were scared by the cry: "It will mean 3d. or 6d. extra on the rates." We all know of cases in which that has happened. I think there is a possible danger that in the post-war years there may be desirable changes in national policy which would involve heavy expenditure and which might mean an increase in Income Tax, and the same kind of feeling among these millions of Income Tax payers, probably the majority of the voters, may check, hinder or delay even desirable expenditure. That is a point of view we should bear in mind. It will have a great influence in certain directions in the future, although we cannot estimate it accurately at present.
1102 In the discussions on the Beveridge plan it has been pointed out on the wireless and elsewhere that contributors will pay 4s. 3d. per week and will get all those great benefits in return, but I feel it necessary to say that the average working man, and especially the better paid of them, will pay far more than 4s. 3d. per week. The greater part of the expenditure upon the benefits will come out of taxes not contributions, and the greater part of the taxes will be the Income Tax. The average worker will not only pay his 4s. 3d., but Income Tax as well for these benefits. We should be fair and point out to our people that those great benefits will not be received for a mere 4s. 3d. per week contribution.
Now I will turn to the details of the Budget, and first I will congratulate the Chancellor of the Exchequer upon his marvellous effort yesterday. It was an immense effort of physical endurance. I remember that when the present Prime Minister was Chancellor of the Exchequer he would pause in the middle of his Budget speech to say that he had to fortify the revenue. I noticed that the revenue was not fortified until at the end of two hours and ten minutes speaking yesterday. My right hon. Friend has produced a Budget which is, on the whole, generally acceptable. He had to raise more revenue. Direct taxation had reached the limit, and the only extra revenue possible was by taxing the only ways in which people are spending money, and that is what he has done. The Tobacco Duty has one disadvantage, in that it will bear very hardly on the old age pensioners. They have very small incomes, and to the old man pensioner a pipe is often one of the great enjoyments of his life. I know that the Government propose to tackle the old age pension problem presently, but the tax will fall immediately. I hope that the right hon. Gentleman will not deprive the old age pensioner of an occasional pipe, and that the public assistance committees will bear this in mind in dealing with supplementary pensions until we get a general revision of the old age pension.
The concession which the right hon. Gentleman has given in regard to wasting assets and depreciation is admirable, but I regret that the Treasury and the Chancellor of the Exchequer have not really tackled the question thoroughly. It is a great handicap on our industry. If we are 1103 to have national reconstruction on a proper basis after the war, we must revise our present system of depreciation allowances. All machinery wastes with wear and tear. The Treasury allow a certain percentage as an expense for wear and tear of machinery and ultimately for replacement. Every industry that can afford to do so writes off probably three or four times for depreciation as much as the Treasury allow, and has to do so to keep the business in a sound position. The Treasury allowance for depreciation is inadequate and is only about one-third of what it should be. We are often told that manufacturers here are slow compared with the Americans in installing new machinery. Why? I think the reason is the Treasury allowance for depreciation. After the war I want our industries, large and small, to be on the look-out for the most efficient machinery and methods, and the Treasury should encourage them.
§ Mr. A. Edwards (Middlesbrough, East)
Is not the obsolescence allowance provided to encourage people to instal new machinery earlier?
§ Mr. Loftus
Yes. To turn to another aspect, a small allowance is made for factory buildings, but I would like to see these allowances considerably increased, provided that they were accumulated and used to replace obsolete factories by modern and efficient buildings.
I have said before, and I want to say again, that we are burdening the future with unnecessary charges of interest and I conceive it my duty to point this out yet again, and even to risk boring the Committee by giving lion. Members quotations from thoroughly orthodox sources to strengthen my position. If we are burdening the future with needless charges of interest, it will be a serious handicap for our future, and ought to be stopped. I make this final appeal to my right hon. Friend that he should take such action as will put this matter right. Take the methods of the last war. On 6th August, 1914, we passed a Currency Act making Treasury notes of £1 and 10s. legal tender. At that time Dr. Leaf, the Chairman of the Westminster Bank, said that that issue of Treasury notes wasessentially a war loan free of interest and, as such was a highly profitable expedient from the point of view of the Government.1104 It was only the Treasury notes that were issued by the Government. Upon that issue of these Treasury notes there was rapidly piled up a great credit structure by the joint stock banks in lendings to their customers who subscribed to Government loans at 5 per cent., and thus there was built up our vast National Debt. The eminent American economists, Messrs. Curtis and Townsend, have pointed out, however, that these inflationary loans, like the Treasury notes, could have been issued free of interest. They write:For these inflationary loans the government supplied the cash basis and thus enabled the banks to make the loans. The cash basis was issued as a non-interest bearing debt and there was no economic reason why the loans should not have been free of cost other than the cost of collection and book-keeping.In this war we have to meet our expenditure from the receipts from taxes and from genuine savings of the people, and in addition we have to bridge the inflationary gap by the creation of bank credits. The banks charge 1⅛ per cent. but subsequently convert these credits into long term loans at 2½. The "Economist" answered this claim on 1st February, 1941, by saying:If the banks answer that the cost of servicing the additional deposits thus created makes it imperative that they obtain a return of 2½ or 3 per cent. on, some part of their additional assets the counter must be that the facilities and services granted to the depositors should be paid for by the depositors themselves … it would be wholly wrong if the expense of doing banking business were allowed to override the principle that the purchasing power newly created to finance the community and based on the Government's credit should not bear more than the most nominal rate of interest.That rate of interest—I prefer to call it a service charge—should not be more than one half of one per cent. That is the figure which the "Economist" has been preaching for the last three and a half years. All such creations of credit have a tendency towards inflation. It is as well that we should know what inflation means in this country. Let me quote from the "Economist" of January, 1940.To the man in the street, the technique of inflation is to print paper money. The sort of money which would have to be created if the Government were unable to meet all its expenditure from revenue and from national savings would be Bank credit and it is in the deposits of the Joint Stock Banks that that money after its first expenditure by the Government would be accumulated. Inflation in the British context, means the creation of joint stock bank credit.1105 Last July the deposits in the joint stock banks had increased by over £1,000,000,000 and the cash assets by about £110,000,000. I expect that the increased deposits to-day compared with pre-war are about £1,300,000. That is all index of the inflationary tendency. Mr. G. D. H. Cole writes:—There is nothing more inflationary in creating new money without interest than in adding to the volume of bank advances.This point is so important that I should like to quote from an another economist, who is a well-known critic of social credit Mr. E. Durbin writes as follows:A net increase of credit differs in no moral or legal way from the printing of notes ….but if monetary expansion is proceeding in this way something must be done and done quickly to prevent any creation by the banks in excess of the sums consciously determined by the Treasury … it will in all probability be necessary to limit them (bank advances) to their present volume.If the Financial Secretary says, "What method do you propose?" I will not venture to propose any method of my own. I will propose here the method for financing the war when there has to be a creation of credit, advocated by the "Economist," a clear, simple method. I hope the Financial Secretary may find time to-day or on the next Sitting Day to reply as to why this method should not be used.The most direct and appropriate method of inflating if it cannot be avoided would therefore seem to be the creation of additional credits by loans direct from the joint stock bank to the Government. A ways and means advance of £10,000,000 from the Bank of England' has the effect of increasing the cash of the joint stock banks by £10,000,000 and would in certain circumstances permit an increase in the banks deposits of nine or ten times that amount. These considerations seem to point to something in the nature of long term ways and means advances by the joint stock banks to the State with an average life of, say, 20 years. Normally when a bank creates credit by creating advances it is entitled to the going rate of remuneration for that service. But in the circumstances here envisaged it would be the community's credit which would be liquefied and the community represented by the Exchequer would be entitled to require that the rate of interest should be no more than the cost of handling the funds, say, half of one per cent. per annum. The banks' legitimate profits would not be damaged by such a rate since these advances to the State would be a net addition to their normal volume of business. Indeed the resulting inflation would tend to increase their normal turnover. These advances should not in fact rank as part of the ordinary business of the banks but as a special supplementary service that they render to the community.1106 These 20 years' advances (to ensure liquidity) should be rediscountable at par by the Bank of England though at a rate of discount which would discourage undue recourse to the Bank. I put forward this practical proposal not of my own but as one advocated month after month by the "Economist" newspaper. It would reduce very greatly the burden of interest we are piling up for the post-war years. I hope we may receive clear reasons as to why this should or should not be done. I am encouraged in making this demand by looking back on the past. For many years some of us, a small group inside this House and outside, have been demanding monetary reform under very discouraging conditions. It is a strange fact that either in this House or in the Press you could attack wih impunity ancient, immemorial, human institutions, the family, marriage, property, religion, and yet maintain a reputation of complete respectability. But if a few years ago you ventured to criticise in a constructive and most moderate manner the financial system, you were suspect at once and regarded almost as outside the pale and as rather disreputable. Yet during the last year or two we have seen public opinion change with great rapidity. Chambers of commerce, various trade organisations, such as the textile trade organisation and so on—all those bodies are coming out now with recommendations and suggestions and policies such as we were advocating seven and eight years ago. Now we see what were regarded as wild ideas becoming entirely orthodox.
I feel myself that ultimately the State itself without damaging in any way the joint stock banks, without interfering with their ownership or management, will resume directly or indirectly the control of the creation and expansion and contraction of all kinds of credit money. Meantime I put forward to-day this immediate moderate reform. I will conclude by saying that we who advocate monetary reform do not believe that it will by itself create a new heaven and a new earth and eradicate original sin from the heart of man, but we do say that if you attempt after this war to re-establish the old rigid monetary system as you did after the last war, then your schemes of reconstruction will fail utterly. We do say that if you want to combine security for those who suffer from the hardships of life, and 1107 individual liberty to the greatest extent, you must build on the basis of a reformed monetary system. Finally, after this war, when the young men come home from the Armed Forces, if we want to give them scope for the qualities they are showing in war, for courage, initiative, preparedness to take risks, if we wish to give them scope to exercise those qualities in peace, then we must not cramp and restrict them by the bands of an outworn financial system, but we must establish some monetary policy which will give the utmost scope for those qualities of individualism and initiative which will maintain liberty in this country and help to build up a higher standard of living and a happier and healthier civilisation for the future of our people.
§ Mr. Graham White (Birkenhead, East)
My hon. Friend the Member for Lowestoft (Mr. Loftus) will perhaps forgive me if I do not immediately follow him into the technical sphere into which he led the discussion. I wish, in the comparatively brief observations I propose to address to the Committee, to draw my sword, figuratively, to stand beside the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) in his stout attack on financial and economic defeatism after the war. It is true that we are confronted with many difficulties, but looking back upon the way in which our finances have stood the strain of war, and the knowledge we have acquired, I share his view that if we proceed with courage and with caution, there is no reason why we should be apprehensive in regard to the future.
Before I go any further I also want to associate myself with what has been said by previous speakers with regard to the performance of the Chancellor of the Exchequer. We are indebted to him, and increasingly indebted to him, for the increasing volume of information which he is making available to us about our national finances as a whole. The two White Papers which have been published are indeed an important contribution to our understanding of national finance, and the importance of that understanding is growing with the increasingly important part finance plays in our affairs. I am not without hope that some day we may actually have the information on which we can build up a national balance-sheet. 1108 There has been apprehensiveness as to the consequences of the loss of our overseas investments. Without wishing to suggest for a moment that foreign investments are not important, it would be comforting to know how much of our immense expenditure in these days is being invested in capital goods and resources which we hope will stand us in good stead after the war. It is only when we have a national balance-sheet, and not only an account of payments and receipts, that we shall really know just where we are and whether we are undertaking tasks outside our resources. The Chancellor of the Exchequer in the last two or three years has been gradually putting the nation in a position to make up its mind about a large number of matters which hitherto have been concealed.
The earlier Budgets of the war were criticised, and very rightly so, because they showed quite clearly that the mobilisation of our resources had fallen very much behind that of our enemies. That reproach has passed away in the last two Budgets. They do indicate that we are now fully mobilised, or nearly fully mobilised, and that we can only make our attack upon the enemy more effective and bring the end more quickly by more scientific organisation of our man-power and also of our material resources. It is upon that aspect of our affairs that we hope that the Government and the various supply Ministries are concentrating at the present time. But it does simplify the task of the Chancellor of the Exchequer to this extent. From now on his task will be, the pattern of our war finance being well established, to gather in by taxation or by borrowing the increased cost of the war. In general, speaking on my own behalf and, I believe, that of my friends, we cordially approve the various steps which he has taken in this Budget in order to carry on that continuing process.
It is a remarkable Budget of which it can be said that no one need pay any increased tax at all unless he wishes to do so, but I would associate myself with the few sentences of the hon. Member for Lowestoft that there is one part of the community who would suffer, temporarily at all events, from the Budget, that is, old age pensioners. Those of us who live on a somewhat more generous scale could dispense with what has in 1109 fact become indispensable to the existence of the old age pensioners. It affects them much more than the rise in the price of tea, which, at the time it was made, was criticised for the same reason. It will place a burden upon the resources of the old age pensioners which will not touch other people. As we know, in the King's Speech the promise was made that the position of the old age pensioners would be dealt with. We anticipate an announcement from the Government as to when that promise will be fulfilled, and if the Chancellor can tell us when it is proposed——
§ The Temporary Chairman (Major Sir Edward Cadogan)
We cannot discuss the question of old age pensioners in this Debate.
§ Mr. White
Thank, you, Sir Edward, for drawing my attention to that. When the war comes to an end, our finances and the responsibility of the Chancellor will become tremendously more important. It is quite true that in time of war the power of finance is not what it was sometimes supposed to be. We have had to bring in to our help all sorts of price controls and commodity controls. But when the war ends the directive power of finance will be terribly important, and far more effective, and the responsibility of the Chancellor of the Exchequer will be greater than it is at present. Vital decisions will have to be taken as to the possibility of stimulating industries which may flag, or, what is more likely in the early years, putting a brake on where necessary. There will be the responsibility of deciding the priorities of expenditure; in reconstruction, social security and defence. When we survey what we have accomplished in four years, and the general mobilisation of our resources which has taken place, I refuse to take any pessimistic view of what we can do if we keep our heads.
I associate myself most cordially with what has been said about inter-Allied financial relations during this war. All the Allied countries are profoundly indebted to the foresight and wisdom of President Roosevelt for his introduction of a new element in international finance, which we now know under the name of Lend-Lease. That transaction and the generous contribution of the Canadian Government have lifted the whole of international finance on to a level of human 1110 conduct which we have never witnessed before. It is not too much to hope that when this war comes to an end the same spirit of co-operation will govern our transactions. If we have any doubt whether that should be the case, let us cast our minds back to the miserable history of Allied indebtedness after the last war. In the policy of Lend-Lease and in the policy of the Canadian Government we have had a standard set for financial transactions of this order which might save us from the follies which were perpetrated after the last war.
I was glad that the Chancellor of the Exchequer referred to India. It is such an unusual thing to hear of a country which has derived benefit without, as far as one can see, any economic disadvantage from this war. The conversion of India from a debtor to a creditor State has taken place in an incredibly short space of time. Sterling securities to the order of something like £350,000,000 have already been repaid or are in process of being repaid, and sterling credits in India have been built up to almost the same volume, and the process continues. That cannot fail to be of benefit to India when the time comes for her to take her place in the councils of Asia. I notice that there has been some criticism in India of the disposition of those balances, but those balances have accrued from the fact that we have taken such an enormous portion of the cost of the defences of India on to our own shoulders. Whatever may be the disposition of those sterling balances in India, whether they are spent in this country or in some other country, a remarkable change has taken place in her finances. When one hears, as one sometimes does even in this House, talk of the Imperial exploitation of India, I hope Members will turn to this transaction and put it alongside other matters which they may have in their minds.
My hon. Friend the Member for Lowestoft drew attention to some matters of taxation. I wish to thank the Chancellor for what he has said about Excess Profits Tax. That matter has been giving considerable concern. There is no question of any change in the rate of the Tax or any dispute about its incidence, but we have felt for some time that insufficient attention was being given to the indirect consequences of the Tax. Some of us were in doubt whether as a consequence of this Tax, willingly accepted by everyone, 1111 at the end of the war we might find ourselves in a position where instruments of production were useless in our hands. I was glad to hear what my right hon. Friend said with regard to an investigation. That is what is wanted. He said:It is necessary to look closely at the facts, and, above all, to find out what is the real effect of the tax provisions in actual cases over a period of time. That is why I hope, as the next step, to set on foot a detailed examination by the Board of Inland Revenue of the various matters which have been raised."—[OFFICIAL REPORT, 12th April, 1943; cols. 961–2, Vol. 388.]I have no doubt that that will be done, and I hope that no aspect of the effects of this tax will be excluded from the inquiry. There are cases, which are not intended by the Legislature, where concerns, through some chance organisation of their capital, are being mulcted much more heavily than other concerns. I hope that the inquiry will be complete, and that all considerations will be taken into account, so that we may not, when the time comes, find ourselves confronted with difficulties which it may be impossible to overcome.
I wish also to express satisfaction that the Chancellor of the Exchequer, not yielding perhaps so easily in this respect, proposes to hold an inquiry into the post-war Income Tax position. It is clear to everybody who has given consideration to the matter that a problem of major importance will arise in connection with Income Tax payments at the end of the war. There will be a large number of women who will return to their homes carrying with them tax liabilities for which they may not have been able to make any provision. One can imagine homecomings when the husband's earnings have been reduced, or perhaps have ceased to exist, and he is expected to provide for the wife when she returns home. Then there is the case of the ex-Service man who has gone into the Forces leaving behind him an undischarged tax liability. What is to happen to him when he comes back? All these cases in the aggregate present the possibility of a major difficulty unless some scheme can be devised for adapting our Income Tax system to a pay-as-you-go principle. Apart from that, the Income Tax system as a whole is now a conglomeration of bits and pieces. It has been added to and subtracted from until it is difficult to know what is left. One hopes 1112 that at the earliest possible moment steps will be taken to bring about a logical and effective system.
The Chancellor of the Exchequer spoke about the necessity of economy. We must all feel that economy and the scientific management of expenditure and the like are extremely important. This is brought to mind by the activities of the Board of Inland Revenue. I cannot help asking whether the Organisation and Methods Department of the Treasury have been asked to co-operate in surveying the activities of the Board of Inland Revenue. There seems to be a certain amount of documentary evidence that they have not. At this time of year taxpayers are being inundated with a mass of incomprehensible forms, which are of no value whatever. There might be a great economy in paper and time and man-power if the activities of the Board were surveyed. It is chiefly in methods of that kind that we can exercise a certain amount of economy and organisation, which will make our war effort, even though we are fully mobilised, more effective. I was pleased to read in the Press last week an announcement that the Ministry of Food's Costings Department had, by a process of investigation and consolidation, so reduced the cost of distribution that £2,250,000 would be available during the current year for the reduction of the subsidy on milk. That kind of operation is capable of very wide extension. I know that the Organisation and Methods Department of the Treasury has been increased more than once during the war, but the whole field, especially in the organisation of the supply Ministries, has by no means been covered. I should be very glad if my right hon. Friend would deal with this matter, to see whether there is any prospect of something more being done before the war comes to an end. I should be very glad if he could give his mind and attention to that matter.
There is one other matter upon which I would say a few words. It was suggested to me by the hon. Member for Lowestoft, and it is that of the rates of interest. I do not want to follow him into the technicalities in that sphere, but the rates at which we are borrowing money are a matter upon which the Chancellor of the Exchequer might be entitled to feel a good deal of satisfaction. I imagine that money is being borrowed by this 1113 country at the rate of about 1¼ per cent. net, and, compared with transactions in the last war, it is indeed a satisfactory and wonderful improvement. I have the satisfaction of knowing that it is his view that control must continue after the war. I regard it as being essential. I have been asking myself in recent weeks whether the Savings Campaign is as effective as it ought to be and whether it is using every available reason to induce people to come into line and take their share in that work.
We see sometimes criticism of "Wings for Victory" weeks and of these various other organisations. They are sometimes described as "ballyhoo," whatever that elegant term may mean. I have taken part in several of these "weeks" lately, and I am satisfied that they play a very useful part in the organisation. There was mention to-day of the hoarding of notes. A distinctive feature in one of the "weeks" in which I took some part was the extraordinary number of old notes which were brought out of hoardings or stockings and paid in to the savings account. These efforts produce a feeling of common effort and stimulate savings, but something has to be done to make them more effective and bring in those who are standing aloof still. I am doubtful whether the present methods are entirely successful. We have it on the authority of the Chancellor of the Exchequer himself in a recent speech that for every individual who has War Savings Certificates there are two who have not. We also know that when a survey was made at Sheffield only 44 families out of every 100 had in fact made any contribution to the savings effort at all. It should be considered whether or not we might not introduce a more human touch, rather than a pure investment and interest rate touch, into the campaign and give rather more emphasis to the fact that taking part in the War Savings Movement is one way in which ordinary citizens can take a very humble part in the war, and that it is their duty to do that. It is something by which they can do the right thing for the country and also for themselves at the same time. The certificates which they get might be regarded as certificates of friendship for the people in the Services. I am inclined to consider whether the policy and advertisement propaganda do not require some slight re-orientation.
1114 As to the rates of interest to which the hon. Member for Lowestoft referred, I do not know why, in connection with the War Savings Campaign, loans free of interest are never mentioned. If you look very carefully, somewhere at the bottom of the list of securities, you find, last and probably the least, "Loans without interest." That is a line that ought to be illuminated and brought to the front. If my hon. Friend the Member for Lowestoft feels that the rates of interest are too high, he can easily put the matter right as far as his friends are concerned by telling them that they can lend their money without any interest at all.
§ Mr. Loftus
I was not objecting to the rates of interest on genuine savings. I was taking the line advocated by the "Economist" that interest on created credit should be merely the cost of creation without the permanent burden of high interest.
§ Mr. White
I thought my hon. Friend's observations were of a somewhat wider application. It only remains for me to express my faith that the financial arrangements made by the country in this war are far better than we could have imagined a few years ago. We have raised sums of money which we would not have thought were possible, and the taxpayers and the country as a whole are sharing burdens which most people would have thought intolerable. Therefore, I believe, after the enormous effort of mobilisation in the country which resulted in the transformation of industry, we can turn to the task of re-mobilisation—not demobilisation, which has a very ugly aspect and sinister significance—of people for industry and peace with sober confidence and hope.
§ Mr. Kirkwood (Dumbarton Burghs)
I want to begin by congratulating the Chancellor of the Exchequer on his physical feat yesterday. I watched him very closely for over two hours, and he juggled with millions as if they were a few pence. He did not even require a drink of water. I want to take this opportunity of publicly' thanking him and the Financial Secretary to the Treasury for their kindness and patience in receiving the deputations of engineers which I introduced on the question of Income Tax. When I sat here and listened to the Chancellor of the Exchequer juggling with these millions, I thought what a fortunate race and genera- 1115 tion we are—the richest generation that ever was in the history of the world. There never were such riches exposed and explained in the history of the world as the Chancellor of the Exchequer explained to us yesterday. If there had been any shadow of a doubt left in my own mind about the advocacy and statements which we Socialists have been making without any apology for the last 40 years that we were living in the age about which the prophets of the past dreamed—the age of superabundance—it would have been removed. We are in that age now.
We used to advocate a better world, and we have stood here time and again and tried to prove to the House how the means were at the disposal of the Chancellor of the Echequer to use for the benefit of the many. We Socialists—and I mean Socialists—have always held that the great outstanding statesman has yet to arrive who will seize upon that great power and find ways and means to distribute what we have to produce. He has not arrived on the scene yet. I had great hopes that the present Chancellor of the Exchequer would make some attempt, because he told us that we are spending £15,000,000 a day on war, and we could not spend that unless it was produced. It is not money; it is not gold, silver, copper or paper that sustains the Army, the Air Force, the ships, aeroplanes, guns and tanks. It is the productive power of the working class, and the Chancellor has drawn on that power of the working class. It is a guarantee that the economic resources of this country are capable of producing £15,000,000 a day. The opportunity is waiting for the man and our party—the Labour Party—will support that man. When I had served my time as an engineer 50 years ago, the then rate of wages was 6¾d. an hour. There is no chance of getting any Income Tax out of 6¾d. now. The advance that we have made in my time, and right from the inception of the Labour movement, has been done by the collaboration of the trade union movement and the Labour move-meat, and we have accomplished wonders. But we have had to wring it from the Tories, and I hope that that collaboration which has performed miracles in my time will be more firmly cemented than ever and that the Labour Party will see to it that no attempt is made to divorce the Labour Party from the trade unionists.
1116 What a power the Chancellor has. What is the Chancellor of the Exchequer? He is an individual who is in control of the economic resources of this country, the richness of which we have no idea. I said just now that our rate of wages on the Clyde 50 years ago was 6¾d. an hour. When we made application for an increase in wages, for better conditions, for time and a half for overtime and double time for Sunday—which have been brought about in my time—we were always met with the reply that it would ruin the country.
§ Mr. Kirkwood
We were told that it would drive trade out of the country and that the result would be nothing but unemployment. The lawyers, vagabonds that they are, made out that case for the employers.
§ The Deputy-Chairman (Mr. Charles Williams)
The hon. Gentleman is now going into the virtues of lawyers and other people, and he is not in Order in doing that now, although I have no doubt that he was giving an illustration to refer to the argument of the Chancellor in his Budget.
§ Mr. Kirkwood
I will not transgress, Mr. Williams, but the Chancellor, before he was the Chancellor, was a lawyer.
§ The Deputy-Chairman
I am very interested in the Chancellor's past, but it is not the hon. Member's duty to encourage me to be interested in that past now. Another time, perhaps.
§ Mr. Kirkwood
Thank you for the advice. I want to appeal to the Chancellor of the Exchequer. I have no hesitancy in asking for plenty, because I know it is there. My appeal can be granted if the Chancellor, who has the power, has the will. It is not an empty till I am asking him to open. There was never the like before. I want to speak about a matter which is causing serious discontent and about which I have led deputations. The shipbuilders of this country are not giving of their best.
§ Mr. Kirkwood
Yes, and my son is one of them. Why are not the shipbuilders giving of their best? [Interruption.] I will tell the hon. Member if he will listen.
§ The Deputy-Chairman
I must ask hon. Members behind the hon. Member for Dumbarton Burghs (Mr. Kirkwood) not to interrupt him.
§ Mr. Kirkwood
The point I was making is a serious one for this country. Shipbuilders are absolutely refusing to work overtime, and I will give their justification because I am supporting them in their advocacy, although not in their action. I am using what little influence I may have, and have done so with success, on the Clyde, but I have not the same influence on the Tyne, where they have put their scheme into operation and are working only 47 hours a week. Let me explain their grievance. The Chancellor imposes Income Tax on the shipbuilders in the summer when they are working two, three and, in some instances, four nights a week and sometimes even Saturday afternoon and Sunday. For Sunday alone it means to them on an average 35s. a week extra. That is when the Income Tax is applied, when they are making what are considered to be big wages, although I do not think they are big wages compared with some of the boys around here who do not seem to work at all and get 20 times as much.
§ Mr. Kirkwood
Then the shipbuilders have to pay Income Tax in the winter time when the blackout is in operation, and the atmosphere has been created all over the country that it is bad policy to work on a Sunday. In my own country, the land of the brave and the free—[Laughter]An Atheist's laugh's a poor exchange For Deity offended!In my native land the idea of working on Sunday has been rejected by the employers. They do not believe in working on Sundays. They say, "Go to the 1118 kirk," but they do not go themselves. The result is that men have to pay Income Tax at the time they are earning half the money that they earn in the summer. I have put this point to the Chancellor and the Financial Secretary, through deputations which I have led. Assessors of taxes in the West of Scotland and chartered accountants drew up a scheme after reading my speech on this subject, and I submitted it to the Chancellor over a year ago. Whitehall said that it was not practicable, but the Dominion of Canada has adopted the idea of deducting Income Tax when the money is earned. It was said that the idea I presented would mean so much extra staff and that employers had satisfied Whitehall of the difficulties owing to their shortage of staff. They instanced to me three of the bigger shipyards and engineering shops to which they know I have access and said that they have less staff now, but the fact is that they have from 5,000 to 15,000 more hands. However, I admitted their contentions, but my argument is that it would be easier to get over those difficulties than to have the whole shipbuilding industry of this country labouring under what they consider to be an injustice. I think it is an injustice. Surely if Canada can deduct Income Tax when the money is earned, there should be brains enough in the Chancellor's establishment to find a way out. I feel that I am not appealing to deaf ears; I have supporters for this idea in every quarter of the House, and the Chancellor yesterday gave an indication that the door was not entirely closed. Is that in the Financial Secretary's head?
§ Mr. Kirkwood
Thank you very much. There is another thing I want to say. I believe that this mighty Empire, rich beyond any dreams, could find ways and means of raising enough money to give our old age pensioners 30s. a week each. That is what I want to see. However, my time is about up, because others wish to speak. I could go on for a long time advocating the cause of the working classes. I do not drink, and I do not smoke—[An HON. MEMBER: "What do you do with your money?"]. I do not give it to the pawnshop. The reason I am appealing for the workers is because I feel that it should go out from this Committee that we are anxious to have peace 1119 on earth and good will among men, and by that I do not mean the fighting abroad; I mean at home. The Chancellor can afford to extend the right hand of fellowship and to be generous to the working class. If you have a discontented working class, you will not get the best from them. I try to be gentlemanly in dealing with my opponents and they are gentlemanly in dealing with me, but I have to watch them anxiously. Ah, they would woo me. The Chancellor is going to trammel the pleasures of the working class.… Pleasures axe like poppies spread,You seize the flower, the bloom is shed;Or like the snowfall in the river,A moment white—then melts for ever.It must be remembered that my class has been working under a war strain for over three years. It is only those who have been in the workshop or in the pit who know what the constant grind means. There is nothing else in front of them day in and day out. The circumstances for them are quite different from what they are for the soldier. The soldier is a soldier only temporarily—at least, we hope so. But the worker has it in front of him all his life. It is the monotony that makes the workers discontented. Man cannot live by bread alone; a man cannot go on working every day of the week, with nothing else in front of him. He must have relaxation. Not all workers are built on the lines that I am. I have been in a theatre a dozen times in my life. The average member of the working class requires to go and see a football match. Nobody loves a football match better than I do I have seen only three this year. I never have the time to go. My whole week-end is taken in trying to get peace and trying to get the workers to remain at their work. They must have the cinemas, which are essentially working-class entertainment. So is football.—[Interruption.]—I do not deny that, but in the country to which I belong tens of thousands go to football matches every Saturday, and those tens of thousands are not from the ruling class, but from the working class. I am interested in the working class; the other boys are able to look after themselves. I hope the Financial Secretary will use his influence to see that the Chancellor gives what assistance he can to allay the discontent that is abroad as a result of the method of pro- 1120 cedure that he has adopted up to now in raising the money. He does not require these cheeseparing methods when he can get untold millions in other ways. The country will support him in doing that, and making this a better world than he and I have found it.
§ Sir Peter Bennett (Birmingham, Edgbaston)
I am sure the whole Committee will support the hon. Member for Dumbarton Burghs (Mr. Kirkwood) in his endeavours to find a simpler form of levying Income Tax upon the workers. We have the Chancellor's word that he would welcome such a scheme, and I hope the united endeavours of hon. Members will assist in producing it. At the present time the workers are accepting the present method because they have been told it is necessary and is the only fair method, but there is a universal feeling that it is a method which it will not be so easy to operate when the wages packet is less than it is now. There are many schemes that can be carried through on a rising wage level which it will be much more difficult to operate when the pay packet gets less every week.
I want to return to the subject of taxation and industry. The Chancellor was very kind to us in his speech. Instead of passing off the subject with a few words, he gave to it practically 10 per cent. of the time he was speaking. We are getting on if we are able to impress upon him that we are worth 10 per cent. of his time. At present there is a great deal of discussion about all sorts of reports and schemes. The position now is better than it was in the last war. Then, the war came to an end suddenly and we were caught napping without any schemes, and indeed still working on schemes for increasing the output of munitions. This time there are plenty of schemes for post-war reconstruction, and that is all to the good, but the Prime Minister rightly and wisely called attention to the danger, that the country was beginning to think that the war is as good as won. It is not. We must get back to the job.
There is, however, one Department of the Government in which they might be giving considerable thought and attention to post-war matters,' because they have all the information and experience. The Government ought to be thinking how they will use the finances of the nation to help the nation back to peace-time activities 1121 when the time for that comes. We have been reminded in this Debate that unemployment has been banished to all intents and purposes. The reason for that is clear. It is that nowadays industry has practically only one customer. All the vast enterprises associated with the war machine and in providing the equipment, arms, food and other necessities for the Armed Forces receive their orders direct from the Government, and dependent upon those Services are most of the indirect activities of the country. Industry has one customer and one paymaster. In many ways, from the manufacturing point of view, we are in an El Dorado. We have our difficulties as manufacturers, but we have never had such continuous pressure to produce goods without giving a thought to how they are to be sold. If a factory can make anything, or can be converted to make anything, it is told to get on with the job. The State gives orders and the State helps the manufacturer to organise his production. In some cases the manufacturer is told to concentrate because he can make more that way. We did not get that sort of instruction in peace time. In other cases, if he has empty departments, the State helps him to fill them. If he wants additional premises, the State requisitions them for him.
§ The Deputy-Chairman
The hon. Member may not discuss requisitioning and State Orders, but must keep directly to the taxes that have to be imposed. If he is referring to these matters to illustrate some point, he is well within the Rules of Order, but I think he was carrying the subject further.
§ Sir P. Bennett
I was carried away by my own eloquence. I was trying to show that at the present time we are being helped by the Government in the production of war goods, but that directly the war ends there will be a totally different state of affairs. It will be vital to get back to normal as quickly as possible and to get back to work men who have been stood off. It took us a long time to get into our stride in war production, but the reverse process will be a very much more difficult one because it will have to be done in less time. The Chancellor has met deputations with regard to this matter. Those deputations have put before him some of the difficulties that there will be—the alterations, the new tooling, the 1122 opening up of businesses that have been closed down or contracted. At that time, instead of the State being the only buyer, with limitless demands, the public will be the buyer, with very varied demands. Who will provide the facilities, who will provide the costs which the Government have provided in the case of the war-time expansion? The Government will no longer be the fairy godmother. The public will not take over that function. The goods will be expected to be there. The Chancellor has met the representatives of industries and has consulted them. Yesterday he made very important announcements which are very welcome and very helpful. He said that this is mainly an excess profits question, but he said nothing whatever about assisting industries which are not making excess profits.
I divide industries into three classes—first, the industries that have good pre-war standards and which ought to be able to accumulate reserves; secondly, the companies with poor pre-war standards which cannot accumulate reserves and which in many cases will be out of pocket at the end of the war, and thirdly, there is the very hard class consisting of those which have been closed down or restricted, many of which are living on capital. In his statement the Chancellor did not say anything to help them. He almost entirely dealt with the first class, those with a good pre-war standard, who are making excess profits. The other two, as far as I can gather from inquiries that I have made, are in many cases in a parlous condition. It is no crime to have manufactured non-essential goods in peace-time. When the war comes to an end their efforts will be needed to find work. The last particulars that we had, I think compiled in 1936, show that 91 per cent. of the factories in the country employed fewer than 100 people, and that represented 32 per cent. of the labour in all the factories. If you add the other 5 per cent. of those employing between 100 and 250, you get a figure which represented 52 per cent. of the labour in 1936. Many of these have gone on to war work, but a large number have not. You have these businesses, which Support that large number of workers, in this difficulty. They have had to close down because the goods that they made were not wanted in war conditions. What message has the Chancellor of the Exchequer for these people? If in peace-time we were concentrating 1123 and closing down, some scheme would be worked out by which a levy would be made on all the prosperous ones to help those who had been closed down. I maintain that E.P.T. should be regarded as a whole. It should be looked upon as a national fund, and part of it should be allocated to helping those who, not because they were inefficient or had mis-conducted themselves, but because they were not needed for the immediate war effort, had closed down.
§ Mr. Kirkwood
The hon. Member wants employers to be assured that they are not going to be poverty-stricken after the war. I am quite in favour of that if the same thing applies to the workers and they have as good wages when they are not working as when they are.
§ The Deputy-Chairman
I am not quite sure whether that observation was addressed to me or to the hon. Member, but this is a matter of taxation and not of post-war wages, so the hon. Member would not be in Order in answering it now.
§ Sir P. Bennett
I will discuss it privately with the hon. Member. There is another class of manufacturer who has a very poor pre-war standard but to-day is working all out. Everyone thinks he is prosperous, but he is unable to make any provision whatever for reserves to overcome the difficulties with which he will be faced when war conditions come to an end, and, in addition, he has the difficulty of providing from his capital the war damage contribution. I have seen the accounts of some of these organisations, and, when they clear everything up and pay back the money that they owe to the Government, they will have made a mighty effort and have got nothing out of it and will be unable to carry on afterwards. I mention these matters because I consider that they are of first importance to the nation. We are talking of resettlement of our men afterwards. We hear of the improvements which we should like to see in our social position", but it all depends on the rehabilitation of industry if we are to accomplish these objectives, and when I say "industry" I include agriculture. On the success which attends the rehabilitation of our industries will depend the extent to which we shall be able to do the other things that we wish, and I hope the Chancellor will 1124 be able to give some word to show what is likely to be done when the time comes.
§ Mr. John Beattie (Belfast, West)
I am glad of the privilege of speaking to this honourable Assembly to-day. I do so for one reason only, that I come from an area which has been bled white by taxation, an area known as the six counties of the Province of Ulster, an area which is unfitted to carry an equal responsibility with the British taxpayer, but one which has for many years now had to shoulder an equal responsibility with the rich island which this House represents. It is my bounden duty to ask the Chancellor of the Exchequer to alleviate the burden to an extent which would be commensurate with the carrying capacity of that area. I am not going to ask for something and give nothing in return. I am prepared to give the reasons why the right hon. Gentleman should make this burden easier to bear in the future than it has been in the past, and then to open up ways and means whereby he can recoup himself to a certain extent for the revenue that he may lose by the suggestion that I am going to put to him. My area is very poor in material resources. It is too poor to he asked to go on the step-by-step policy with this country. In 1920 this House gave a Charter to Ireland as a whole, and, arising out of it, two Governments were established. Before that time the carrying capacity of Ireland was recognised as being on a lower basis than Great Britain. I think the figure of differentiation was 45 to 55. If you got 45 per cent. of taxation from Ireland as a whole, you were fully satisfied that you were getting your full pound of flesh. That 45 per cent. carrying capacity still appertains to the 26 counties of Ireland, but let me review the parrying capacity of the six counties of the North-East corner of Ireland.
Previous Chancellors of the Exchequer demanded from the Government of Northern Ireland a revaluation of the six counties, a revaluation which doubled the taxation of that area. Many of us in Northern Ireland suspected that the inspiration for this revaluation never came from this House but that it was inspired from one of the Houses set up under the Government of Ireland Act due to the poverty-stricken state of the area at that time. At the very time that this revaluation was taking place we were plumbing the depths of despair. At no time up to that period had Northern Ireland ever 1125 made any contribution under the Government of Ireland Act known as the Imperial contribution, but we commenced to make a contribution under the revaluation, and it was made at the sacrifice of the working classes. They had to bear the burden of the increased taxable capacity of the six counties. From that time to the present we have seen our mills, our workshops and our factories fading away. Eighteen linen mills and 32 factories have closed their doors forever. They have faded out of existence owing to over-taxation and to the alteration in the valuation of the six counties of the North East corner of Ireland. I do not begrudge any development of industry in Great Britain or anywhere else, but the linen industry has developed in England and Scotland while ours, which was once notable throughout the world, is in decay. Again I see the closing down of two shipyards, one in Londonderry and the other in Belfast, bought over by a big English syndicate so as to co-ordinate shipbuilding. The industry could have absorbed 22,000 workmen. Thousands of our men and women and boys and girls have been driven from their homeland to take up work in this country and abroad. Why? Because we in this House have not given consideration to the economic position of the six counties of Ulster. This House has in times gone by made itself very accommodating by giving accommodating legislation to this particular group of representation from the Province of Ulster without due consideration to the outcome, the tragedy or the pitfalls which face every individual who does not understand the area for which this House is legislating.
I am prepared to make a suggestion for the recoupment of the Income Tax so as to relieve industry and do something to instil life into that area known as Northern Ireland. The essential thing we need at the moment is financial help. Do not be deceived or misguided by an Imperial contribution paid into the Exchequer of this Government. That does not count for anything. If you look at the destruction that that contribution has left behind, you will feel in your heart of hearts that you have no justification for taking it from an area that is unable to bear the burden. We spend £16,000,000 a year in Northern Ireland keeping up a puppet Government——
§ The Deputy-Chairman
I have given the hon. Gentleman pretty considerable maiden licence already, but it would not be fair on other Members who might wish to repudiate matters concerning puppet or other Governments if I allowed him to develop his speech on those lines. Any criticism of the Ulster Government would be out of Order in the same way as criticism by a London Member of the London County Council would be. I regret having to interrupt a maiden speech.
§ Mr. Beattie
I am not saying this with any disrespect to the Government of Northern Ireland. I use the term "puppet Government" frequently in the sense of a Government without any financial control. We have no financial control in Northern Ireland, and I was giving that illustration in order to appeal to the Chancellor to give some consideration to the various aspects of the life of the working classes and industry in Northern Ireland. £16,000,000 is a big lot of money to be gathering from six counties, an area the size of Yorkshire, with 1,250,000 people, an area that has not the same opportunity of development as Yorkshire and that has never been given consideration by this Government so far as war factories and industries are concerned. We pay equal taxation, but we do not get equal consideration. We only get the crumbs off the table of the employing class in Britain, the things they do not want. I say with all respect to the hon. Member for Dumbarton Burghs (Mr. Kirkwood), whom I have known for the last 30 years, that we have some of the finest workmen in Europe in Northern Ireland. That £16,000,000 a year could at least be spent in a direction that would be beneficial to the people of Northern Ireland. It would bring back two-fold a benefit to the people of Great Britain.
I ask the Chancellor to give some relief from the 10s. rate of Income Tax and restore the 7s. 6d. and a relief from the 6s. 6d. rate to 5s. If he gave that relief, he would only put us on a par with the rest of the country which is known as Eire. He would still have a valuation which was established by this Government, which said that it was a fair and reasonable taxable capacity Through the revaluation, however, we have been compelled to double our taxation. I ask for a cancellation of that doubling and for a return to the 7s. 6d. and 5s. rates. If 1127 the Government will do that, they will retain for the people of Northern Ireland their trade and industry and will help them to build up something for after the war. To-day, the whole outlook for after the war is hopeless. All that we can see staring us in the face is the shipment of people and industries outside our own country. We love our country, and we believe that our home life should be kept intact. We appeal to the Chancellor not to take the last drop of lifeblood from that part of Ireland by asking it to walk step by step with the great British Isles, the richest country in the world. We cannot do it, never could do it, and we never will be able to follow in those steps.
Some think that the working class in Northern Ireland might oppose taxation because of the resentment sometimes felt against this Government. Some people would try to infer that the people of Ireland are opposed to the war. I am out to raise taxation for the furtherance of the war, provided it does not leave the area from which the taxation is gathered in a state from which it can never recover—a derelict area. I support the Prime Minister of this Government 100 per cent. in his war effort, and I stand by the honourable position of the Labour movement and the Labour Party in this House. I must, however, always be careful and guarded against destroying something, and I believe that this over-taxation will destroy the birthplace and homeland of myself and my fellow workers. I suggest that we might usefully ask the Chancellor to save huge sums of money by the withdrawal of the Parliament from Northern Ireland and by bringing legislation to this House. I suggest as a patriotic gesture that for the duration of the war we in Northern Ireland can do without a Government. Members in this House are daily spending public money and legislating for one thing or another. That legislation goes to Northern Ireland and not one comma or letter is ever changed, but the Government of Northern Ireland can in their own way spend money as the Government of this country can. Why have dual spending? I am prepared to suggest that 90 per cent. of the people of Northern Ireland would shake hands with you if you took them over for the duration of the war and terminated the life of the Northern Ireland Government for that period. I say that 1128 with all seriousness, because I feel that things have been badly handled.
I come from an area where it has been suggested that I have appeared in many places in London. The only place in which I have appeared in London has been this House, but on my last visit home I heard that I had been doing great work in elocution, that I had been reciting here and reciting there, that I had been making speeches, here, there and everywhere. There must be a double of mine who is a Member of this Parliament, because I never appeared in any of the scenes where I was supposed to have appeared according to the Belfast evening newspapers. Therefore, whatever appeal I may have made to this Committee I shall be misrepresented in any case. But I would say to the Chancellor that if he gives to the people of Northern Ireland that sympathetic consideration which I have appealed for, he will live to see, as I hope he will, prosperity returning, because I am sure he will not agree that our housing, our education, our social services should be sacrificed to make a contribution to him so as to keep up the hoodwinking loyalty which comes from Northern Ireland every now and again. I know that certain artificial things do appear in this Parliament. I know that the loyalty of the area from which I come is only conditional loyalty, loyalty of a kind that means "If you don't pay up when we want it we are disloyal."
§ The Deputy-Chairman
I really regret having to interrupt the hon. Member's speech, but if I allow this question of loyalty, which is so far from the subject of the Budget, to be argued, I am Very much afraid that other hon. Members will claim the right to reply, and therefore I would ask the hon. Gentleman to confine his remarks to the Budget.
§ Mr. Beattie
I am very much annoyed myself to think that you have had to get to your feet twice, Mr. Williams, to call me to Order. I was about to finish. I shall not be one bit annoyed or disturbed by any reply which I may receive from any part of this Committee; I am more disturbed at disturbing you in your capacity as Deputy-Chairman of Ways and Means, and if I have said anything which is not just in accordance with the dignity and prestige of this Assembly, I hope hon. Members will forgive me Thank you.
§ Sir George Schuster (Walsall)
I am sure I shall have the whole Committee with me in congratulating the hon. Member for West Belfast (Mr. J. Beattie) on the eloquence and confidence which he has displayed in the very formidable ordeal of a maiden speech, and I feel sure, too, that the Committee will recognise that that beautiful part of the United Kingdom from which he comes is to be congratulated on having acquired so able and gallant an advocate.
I wish to be very brief and to refer to specific points in connection with the Budget. I am greatly tempted to follow my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) in the spacious review he gave us of economic issues, but I am afraid I must deny myself that pleasure and will content myself with saying that with a great part of what he said I find myself in agreement; and that I think the mere fact that he could make such a speech with reference to the papers that have been put before us with this Budget is itself an eloquent testimony to the value of the change which has come about in our discussions of financial policy.
That brings me to the first thing that I want to say. As everyone else has done, I want to congratulate my right hon. Friend the Chancellor of the Exchequer on his Budget and the way it has been put before us. It all seems so easy now that I think we do not quite realise, in relation to these terrific operations, how well the public finances have been handled in this war. If I might turn to phraseology which is very familiar to us in these days, when we are thinking so much of war production, I might say to my right hon. Friend that his Department is now so perfectly "tooled up" that the production of Budgets has become almost an unskilled or semi-skilled repetitive operation. In saying that, I do not wish to be thought to be saying anything derogatory to my right hon. Friend, because it is he who has introduced into his Department this very fine equipment of what I might describe as precision tools, and the point I chiefly want to make is that I do want to see that this really super-excellent equipment is fully utilised. We have in the Treasury now a team of experienced, public-spirited and brilliant men who represent something of which this country can be very proud, and it is right that we in Parlia- 1130 ment should testify our gratitude for their work.
I feel that if we recognise this fact we should go on to recognise that the Treasury ought to be taking on a role of constantly expanding importance. Therefore I want to put forward again a point of view which I have put in Parliament before, namely, that it is of the highest importance, now that we recognise the proper function of public finance in relation to the national economy and the essential inter-connection of all these issues in the planning, direction and guidance of our economic activities, that there should be some organ of government which surveys the national economic activities as a whole. I cannot see where that organ can be found except in the Treasury. I should like to ask that, whenever a particular proposal comes forward—whether from the Minister of Agriculture in respect of agricultural policy, or from other quarters for special assistance to some industry that we wish to foster by protective duties, or for help to the continuance of vital activities by the subsidisation of wages, that, in all those cases the Treasury should be represented at our Debates in order to give us the Treasury point of view on the effect of such proposals upon our economic activities as a whole.
Having made that general point, I want now to present one or two specific points as regards the organisation for handling our economic policy. I do not think we have heard enough in these Debates of all that is necessary to ensure that we get "good value for money." I use that expression in the widest sense as meaning the most effective utilisation of our available resources. I should like to know that the Chancellor recognises, perhaps more than is the case at present, an overriding responsibility in the Treasury for ensuring that the methods employed by the various supply Departments in checking that they are getting "good value for their money" are working effectively. This is a matter of most vital importance, not only for the war effort, but for the conditions which may come hereafter. We are obviously greatly concerned in war-time to know how the methods used by the Ministry of Supply, the Ministry of Aircraft Production and the Admiralty for price-fixing are working, and that they are effective to promote efficiency in production. But what I want now to em- 1131 phasise is that we have a great opportunity during the war for developing an effective technique on this vitally important matter, and that success in this will be of the greatest importance hereafter. Let me explain why.
We all recognise now that it will be right that the Government in future should exercise a more close guidance of the economic activities of the country. That may take the form of stimulating certain activities, for example, by giving subsidies to certain industries or protection to others. We shall want to know, and this House will be greatly concerned to know-that those subsidies or protective duties are not used to bolster up inefficiency. It is of immense importance that we should have a technique that will enable Government Departments to put an effective check upon inefficiency, and I want to urge that it should be recognised as a responsibility of the Treasury to study these matters and to give a lead as well as to watch what is being done by the spending Departments.
Let me turn to another closely connected subject—the matter of statistics. The Chancellor has already promised twice that we are to have an improved system of statistics. I greatly appreciate that promise, and I urge that it should be fulfilled as quickly as possible. I recognise that there cannot be immediate publication of full statistics, but the organisation at least should be got ready. I want to urge three things. First, there should be some centralised direction and control of all our Government statistics. Secondly, and this is vitally important, our statistics should be up-to-date. Statistics which are not up-to-date are valueless. Thirdly, there should be proper interpretation of the statistics- I venture to suggest that a good deal is to be learned on this matter from the practice of Canada. We have not heard enough about Canada and her great war contribution in this Debate. We have also much to learn from Canada.
The next point I want to make is in reference to the demand for what the Chancellor referred to as something like a national balance sheet. I do not want myself to ask for anything in the nature of a national balance-sheet, because I do not believe that the idea of a balance-sheet can suitably be applied to the national 1132 economy. But I do want to ask the Chancellor to be sure that we have available, for publication, if necessary, when the time comes, a pretty complete inventory of all the capital assets that have been financed by Government money during the war. We shall want to know where we stand, and this House will be concerned with seeing that those assets are properly disposed of. We are entitled from that point of view to ask—at the appropriate time—for some comprehensive statement of the capital assets of the Government.
I have only one other main point. I very much welcome what the Chancellor said as to the attention which he is now giving to the wider significance of taxation in its reaction upon the industrial life of the country. Many of us are interested in this matter. This interest, I would emphasise, is not based on a selfish point of view and any desire to achieve a more profitable position for companies with which we may be connected. We are, however, deeply concerned about the way in which the present very heavy system of taxation may affect the efficient conduct of business and the provision of the right amount of resources for improving the capital equipment of the country. I do not want to say any more about the matter, because I hope very much there will be an opportunity for discussion in connection with the Finance Bill. Perhaps my right hon. Friend will then be able to consider being rather more specific as to the wide review of which he indicated there may be some possibility.
I have only one thing I wish to say in conclusion. I venture to regard it as rather unfortunate that my right hon. Friend the Member for Wakefield (Mr. A. Greenwood) again referred yesterday to the "meaningless symbols" of pounds, shillings and pence. I believe I know what has always been in his mind on this matter, and if I apprehend it rightly, there is a great deal of significance in his approach, but the White Paper has put us right in this matter. It has shown us that pounds, shillings and pence are indeed only symbols or perhaps rather only symptoms of underlying realities. But to say that they are "meaningless" is to mislead everybody who listens to remarks of that kind. It is particularly unfortunate that this should be suggested now, because pounds, shillings and pence are the 1133 measure of what people do when they allow their money to go into Government securities or Savings Bank balances. Today we are encouraging people not to convert their earnings into consumption goods or into buying and furnishing the houses to which they look forward as their family homes. We are urging them rather to let it accumulate as money to their credit, so that it may be at the disposal of the Government and spent in ways in which, according to the national interest, it should be spent. If we create the suggestion that the symbol by which their balances are measured is something which has no meaning in relation to the houses, furniture and other goods which they want ultimately to purchase with their investments, or balances or Income Tax credits, when the war is over, if we encourage that sort of idea, I think we are doing a great disservice to the National Savings Movement into which so much effort is being put.
These are the only points I wish to make, and in conclusion I would again like to congratulate my right hon. Friend, who will, I think, go down to history as the Chancellor who, to his lasting credit, has adopted methods which have helped this House and the country to understand what is the true function of public finance in relation to the national economy.
§ Sir Arnold Gridley (Stockport)
I should like, if I may, to add a modest word of praise to the Chancellor for two things yesterday. First, for making a very dull subject extremely interesting; and, secondly, for the fact that he was in such good voice. This is not a Chamber renowned for its good acoustics, but I am sure that no one had any difficulty yesterday in hearing the Chancellor in any quarter of the House. In fact, I thought he must have been spending two or three days strengthening himself at the rear end of that wonderful animal which the Minister of Production seems to have produced during the week-end, a cow on some indescribable pasture being strenuously milked by the Chancellor of the Exchequer. Perhaps the Chancellor drew refreshment and strength from that source.
The first thing I would like to do is to thank the Chancellor for the indications which he gave yesterday that at least some of industry's anxieties as to whether the difficulties which not only beset them now but which may be magnified during the post-war period are to be met in what he 1134 called terminal settlements. I gather from that he means that matters like deferred repairs, obsolescence of machinery and buildings put up during the war but which may have very little value after the war, are to be dealt with generously so far as writing down is concerned, and that the depreciation of stocks is to be taken care of in the same way. There was one other point I was not quite clear about but about which perhaps we may have a little further explanation later—the question of how profits ploughed back as capital into the business were to be treated. At any rate in these four matters and one or two others to which he referred I think the Chancellor has given to industrialists something substantial which so far they have not felt they were encouraged to look forward to.
After all, what those of us who are engaged in production are most anxious about, what every decent employer is anxious about, is how he is going to deal with the immediate post-war problems in such a way as to enable him to continue maximum employment. That we look upon as our most responsible and anxious task, and we are encouraged by what we heard yesterday from the Chancellor. He also referred—and here I do not agree with my hon. Friend the Member for Walsall (Sir G. Schuster)—to the fact that he was not closing his eyes to an examination of the possibility of a two-part Budget. I do not think the two-part Budget is possible in war-time, but when we reach the post-war period—and we must consider it in the meantime—I think there is much to be said for a very close examination of a two-part Budget dealing with capital assets as distinct from revenue expenditure, if for no other reason than that, however much our anxieties about implementing the Beveridge Report and social schemes of that sort may be in agreement or divided, the most hopeful way of being able to deal with social progress would be to treat capital as capital, borrow what may be necessary on our capital assets, and therefore have on the expenditure side of our revenue accounts merely the interest on the capital borrowed, instead of having to write off the whole of the capital in the course of 12 months. That is all I want to say on that point. I think it is a matter upon which the minds of those who understand these things better, perhaps, than I and some others do, should be directed.
1135 One other matter to which the Chancellor referred that I would like to say a word about is the question of the taxation which has to be met out of their weekly wage packets by our working men and women. We all know the difficulties there are in a system of "Pay as you go," but one of the difficulties which has been mentioned is that you may be taking from the worker a larger amount in the way of tax than he will ultimately be liable for. That is only another way of compulsory saving. At the present time we are taking more than we really think he should be liable for, and he is to get a refund at the end of the war. I see very little difference in principle between deducting so many pence in the pound each week as you go along, and refunding at the end of a period when the reconciliation as to liability has been made, and in taking more money than you really need at the moment in order to force a person to lend it compulsorily at present.
§ Sir A. Gridley
I think a good many would, from what I have heard discussed among them. There are three or four questions I would like to put briefly to the Chancellor which I hope either he or my hon. Friend the Financial Secretary may deal with, whichever of them is to reply. While recognising the absolute necessity and propriety of raising the extra £100,000,000 which must be raised this year if our expenditure that has to come out of taxation is to be met, I regret exceedingly the necessity to impose so large an amount as an extra 5d. an ounce on tobacco. I do not say that because I am a heavy smoker myself. The people I am thinking about especially are the pipe smokers; I am not so concerned about cigarettes as the pipe, which is such a solace to the old age pensioner and others. There is no doubt that tobacco is now a most expensive luxury, no matter whose pocket is taxed, and while I recognise that this is not a matter which can properly be pursued at the moment, may I just say that I hope the Chancellor will be able to give the Committee some indication, today if possible, or at least without delay, that before many weeks elapse the position of the old age pensioner may be dealt with perhaps in some other way and with 1136 less loss to the Exchequer than any reduction in this increased Tobacco Duty would create?
I would like to know whether at some time or other the Chancellor would consider what I think is one of the hardest-driven sections of our people, what I call the mid-income earners of this country. I little realised when I spoke in this House a few weeks ago and referred to the hard lot of the middle classes, what I was letting myself in for. The consequence of referring to them is that I have been simply deluged with correspondence from all over the country. If I could only divulge the pitiful nature of many of these letters, I do not think Members on either side of the House would feel otherwise than that it was a duty upon us to try somehow to relieve the intolerable burden of the retired Civil Service pensioners and other people of the mid-income class, who have no chance whatever of adding to their incomes in war-time and very little chance of reducing their expenditure. It is upon that section of our population that the burden of taxation falls with the greatest severity. I hope that the Chancellor will be able to give some hope to these people that before long their very much bowed backs may be lifted.
My third question is this: There is to be, we understand, a refund to industrial undertakings after the war of 20 per cent. of their Excess Profits Tax liability. Last year it was made much clearer by the Chancellor that that refund would be subject to two conditions only; that it should not be used for paying dividends or for creating bonus shares. The difficulty at the moment is that we do not know whether to look upon that sum, which is to come some day, as a really tangible asset or not. Very few concerns consider it proper even to include it in their balance-sheets. That probably is the right policy. I certainly do not include it in the balance-sheet of any concern with which I am associated. But if that amount is not to come back sooner or later, we shall be in a very parlous position after the war. It would be advantageous if, just as the private individual gets a certificate, which is something he can show, for the amount of refund which is to come to him, the Chancellor would consider whether some form of recognisable scrip could be issued to industrial concerns for that deferred asset.
1137 I know there are many others who want to speak, and, although there are one or two other points I would have liked to touch upon, the only other thing I will say is this: We cannot over-stress the enormous gratitude we feel for the help rendered to this country by the Dominion of Canada and our cousins in the great United States of America. What we should have had to face in the way of additional borrowing or taxation but for the great financial assistance we have received, Heaven only knows. We can show our gratitude in one most helpful way. We have in this country hundreds of thousands of our cousins from the United States. It is most important that the good feeling that is gathering momentum now should roll forward, so that we can co-operate most heartily later on post-war problems. Everyone of us in this House can be a real ambassador in these times, and so can all our people outside, because there are very few who are not brought into frequent contact with American soldiers or airmen. The words that the Prime Minister used a year or two ago—"Let it roll"—when he referred to the way the affairs of this country and of America were being mixed up were most prophetic. We have two rivers to think about: the Mississippi on the other side, and Old Father Thames, which washes the walls of the Palace of Westminster—[An HON. MEMBER: "And the Volga."] Yes, I am very glad of that interruption, because the Volga is a river which ought to be mentioned in circumstances like these. Let the bonds of friendship between the three countries roll on, like the Mississippi, the Thames and the Volga.
§ Mr. Woodburn (Stirling and Clackmannan, Eastern)
The Budget that was exposed to us yesterday is a milestone in the history of financial affairs. Until some years ago, this country and the world were concerned in the main with allowing the maximum number of people to do as they liked, and with limiting to the very minimum the interference of Governments, by restrictions or guidance, with private enterprise. To-day we are examining a Budget which does not confine itself to the expenditure of the Government, but embraces the expenditure of the whole nation. In the document which the Chancellor prepared for us yesterday, and which he explained with so much lucidity, he showed that it must now become the function of the Treasury not only to ex- 1138 amine the income and expenditure of the Government, but to take into account the income and expenditure of every individual in the country. One hon. Gentleman mentioned savings. There is no doubt that this is a most important part of the Chancellor's income. There is a great deal of misunderstanding, even among Members of this House, about the purpose of the so-called Savings Campaigns. We should deprecate any reflection being cast on these efforts to induce people to save at this time. I recognise quite well that, from the point of view of national income, if the same savings came into the Treasury without a Weapons Week there would be no change in the Budget; but I see no reason why there should not be some public impetus from time to time to give a new incentive to savings. There is no reason why we should not cheer if we do things well, and if we do things in company we get a feeling of exaltation which we do not get from doing things in isolation. In regard to these savings tribute ought to be paid to the large number of people who are giving their services week in and week out, collecting at doors and gathering in the small sums. From these small sums have arisen many of the millions with which the Chancellor is dealing. Reference is sometimes made to building societies and insurance companies, but their investments do not belong necessarily to wealthy people. These organisations are merely collecting agencies of another kind, and very often the hundreds of millions that are in appearance the property of the big insurance companies are owned in reality by miners, workers and others who are contributing from day to day. From wherever these savings come, if they are genuine savings, they are restrictive of the spending power of the nation.
There is one very important aspect of saving. It does not matter how much more the workers are earning to-day, they receive no more in reality, because the goods are not in the shops. If the Chancellor of the Exchequer doubled wages tomorrow, it would not put one extra pound of sugar or one extra ounce of tea into the shops. We are now giving a reward to workers for extra labour. They are responding by putting extra wages into savings. In this promise for redistribution of national income after the war, we shall have the very salutary bringing together 1139 of the upper and nether grades of society. At the end of this war I hope that we shall have approached much nearer to the Swedish type of society, where the distances between rich and poor are not so far apart. The nearer we get to that, the healthier will be our society.
The Chancellor of the Exchequer yesterday described some points with regard to Excess Profits Tax to which the hon. Member for Stockport (Sir A. Gridley) has just referred. I gather that the 20 per cent. to be returned after the war is an additional return in order that firms which have become impoverished during the war will be able to rehabilitate themselves and that in no way is this concession to be regarded as a post-war credit to be returned at the end of the war without conditions. If that has been made the case, it was not the understanding when the Chancellor of the Exchequer first introduced it. Any firm expecting to rake in 20 per cent. without bringing their plant and machinery up to date and making themselves efficient to take part in society will be under a grave misunderstanding.
§ Sir A. Gridley
If the hon. Member will look up the Debate which took place on 14th April, 1942, he will see that what I said is practically a repetition of the Chancellor of the Exchequer's own words.
§ Mr. Woodburn
I must accept the hon. Member's statement, but certainly that was not the understanding on these Benches of what the Chancellor of the Exchequer intended when he yielded to the demand to put that 20 per cent. aside in order to rehabilitate industry after the war. The Chancellor of the Exchequer yesterday indicated that further provision was to be made for this by allowing certain kinds of depreciation to be taken into consideration for the reserve of Excess Profits Tax. He suggested that machinery might be being worn out to-day or might be in such a state after the war that firms would require greater assistance than was at present provided. He suggested that money laid aside would be in some way exempt from taxation. At present the depreciation of firms is exempted from taxation. Firms already have a certain amount of depreciation set aside which is not taken into account for taxation and which will accumulate, because as the Chancellor of the Exchequer said that it 1140 cannot be spent now. I was not clear what extra amount was to be set aside and whether it was an additional sum and to what extent concession was to be made. We need a little more detail of the exact sum or portion to be set aside for this extra depreciation. When I say that, I am not ignoring the fact that many firms are wearing their machinery to such an extent to-day that the present rate of depreciation will not be sufficient to recoup them or enable them to put it back in condition. On the other hand, although I never suspect them of over generosity, the Treasury will have to see that they are not allowing any of these points to be overlooked.
I regarded the statement made by the Chancellor of the Exchequer yesterday that the Government were going to pursue the policy of controlling interest rates, and their cheap money policy, after the war, as being one of the most important statements made in this House with regard to post-war reconstruction. I am certain that if there was any suggestion of letting interest rates rip after the war as they did after the last war, our civilisation itself might come crashing about our ears. There is only one point that I would like the Chancellor of the Exchequer to make clear, and that is the position of local authorities. While Government expenditure may be financed at cheap rates, are local authorities to be protected in respect of their expenditure and borrowing at cheap rates? I was informed this morning that some local authorities are already having to pay much higher rates than are being paid by the Government in this regard. Therefore it is important that local authorities, who will be carrying out so much of this work after the war, should be protected as well.
The right hon. Gentleman the Chancellor of the Exchequer, I take it, is always open to suggestions as to where he can get more money. I have been fortunate sometimes in giving him a hint in that direction which has worked out successfully. In this case I am certain it would work out successfully, but I am not so certain that he would adopt it. What strikes people to-day is the amount of money being made on paper by the appreciation of capital assets, and some of that is being realised by disposal for cash. Houses which were valued at £400 are being sold at £800. If a present seller 1141 at £800 had made any contribution by improving the house, he would be justified in getting extra. People have no more right to gain the capital appreciation of property or of any other asset in the shape of windfalls out of the war than has any other profiteer. This matter is causing a good deal of feeling in the country. Friends of mine tell me, without any activity on their part, that their capital wealth has appreciated by more than they are paying the Chancellor in taxation. I realise that at the moment that is merely on paper and that when the war comes to an end it may collapse like many other bubbles which may be pricked.
I hope that after this war there will not be any collapse and that it will be the policy of the Government to see that no collapse takes place and that production and employment are maintained. Where, when property changes hands to-day, a person is realising a profit on his capital, quite unjustified in connection with the war—bonus shares and other things have been prohibited—I see no reason why the Chancellor of the Exchequer should not take increment taxation out of these very considerable profits. I offer my suggestion as one way of adding to his income. It applies also to land. Some people are distressed to see that whole areas of land are changing hands just now and suspect that it is not for the benefit of the land but that people are buying it in order to resell it to make speculative profits. When that sort of thing takes place it causes bad feeling especially among Scottish people, who have long memories of the misuse of the land of their country.
I would like to refer for a few moments to workers' Income Tax. I think there would be no difficulty in working a scheme on the lines suggested by my hon. Friend. I suggest that workers would be willing to pay their tax now and have a refund later. Almost a third of the families of this country have voluntarily joined co-operative societies, into which they deliberately pay more than they need for six or seven months in order to draw savings later. There are many families in this country who would not have been brought up in decency and who would not have had roofs over their heads had it not been for the system of prudential saving established by the cooperative societies. I suggest that the Chancellor should make himself the 1142 cashier of the greatest co-operative society in the world—the British public. If he will take wage-earners and salary-earners into his confidence, as he did yesterday, and try this for a year, I think he would confer benefits on them, because they would get rid of the worry of what was to happen to them next year. Women with six children in the family have quite enough to do to balance their budget for the next week or two, let alone thinking a year ahead. I am satisfied that when over-employment comes to an end and we come back to normal employment, there will be a complete collapse of the possibility of collecting these contributions.
§ Sir Alfred Beit (St. Pancras, South-East)
Is it not a fact that the bigger the family the greater the ultimate relief? Does the hon. Gentleman consider that with Income Tax at its present high level, families could bear the full rate and wait, it may be for a full year, before getting a refund?
§ Mr. Woodburn
I am glad the hon. Member has interrupted because I have no intention of suggesting that everybody should pay the full rate, including those who are married, with two or more children. The Chancellor is proposing to introduce a scheme of family allowances which takes into account the number of children. Obviously, it would be quite a simple matter to arrange it on a graded basis, as I think Income Tax limits are already arranged for married and family men. While it might not be simple, I think it could be done on a rough scale, but at any rate it should always be on the side of giving back a dividend. May I give an example? A business man came to me, very worried, because he had received an account from an electricity department for the difference between what he consumed and what he ought to have consumed. Being a Socialist I am evidently supposed to be responsible for municipal and Government enterprise and he said to me, "Is this your economy? You force me to burn more electricity than I want." I replied, "I am not responsible for that; it is the bad psychology of your municipality. What they ought to have done was to have charged you a penny per unit more and given you a rebate. Then you would have been delighted." That is the psychology of the British public and the Chancellor should adopt it in regard 1143 to Income Tax. If you pull something retrospectively out of the British public they hate it, but if you take it in advance, and then give them something back, they are delighted.
As I have already said, this Budget has been a milestone. National income is becoming a matter for the whole population. It is said that we are spending £15,000,000 a day on the war and I have heard that that has caused misunderstanding. People are wondering how we can spend this sum, when, normally, we spend £3,000,000 or £4,000,000 a day. But it all depends how much of our income we are prepared to let the Chancellor spend. At the moment we allow him to spend most of it, and we hope he is taking good care of it, but after the war we may not feel quite so generous. We are reducing ourselves to what I might call a Spartan diet and I do not think it will be necessary when the war ends, to go back to the old days of squandering and extravagance. By our redistribution of income we have accomplished what we did not achieve in the past; we have established, to some extent, a health minimum. Owing to the nutritional value of food and the better level of income, we have, in certain categories of child welfare, less disease and less preventible disease than ever before. I suggest to the Chancellor that when the war ends we should not allow old disparities to return. We should say "We will start from our Spartan diet and build up first things first. Before going back to luxuries let us see that we lay the foundations of health and well-being."
I hope it will not be long before the Chancellor intimates the Government's decision and proposals regarding those foundations of social security. No Government can deny that their first duty to the people is to see that every man, woman and child is physically and mentally sound. If we do less than that, we are building up tragedy for the future and an expense which cannot be met by any Budget. I understand that we are spending £300,000,000 a year on preventible disease. There is a tremendous resource for the Chancellor, if he can save that sum. That is what we would like to see after the war. When we have the whole of the national income in this concrete and composite form, let us keep on thinking in terms of the nation and people and 1144 make a fair distribution of the national income. If we do so I am satisfied that there is nothing we cannot accomplish towards making this nation all that we would like to see it.
§ Mr. Craik Henderson (Leeds, North-East)
I think it has seldom happened in a whole day's Debate that there has been such unanimity as we have seen on all sides of the Committee. Apart from the speech of the hon. Gentleman the Member for Dumbarton Burghs (Mr. Kirkwood), which to some extent was answered by the hon. Member for East Stirling (Mr. Woodburn), I find myself in almost complete agreement with everybody who has spoken so far to-day. While I was in almost complete agreement with the hon. Member for East Stirling, I did not agree with his idea—and I do not think the Chancellor will either—of a tax on capital appreciation. If you are to have that, there must be some refund for losses. It would be a bad state of affairs if, when there was a bad spell, the Chancellor were faced with such refunds.
§ Mr. Woodburn
Suppose, for example, somebody sells a piece of land to which he has done nothing and then suddenly makes an extra £1,000 because of something the Government have done, is there any justification for that sum remaining entirely in the hands of the person who has benefited from fortuitous circumstances?
§ Mr. Henderson
I agree with the hon. Member that there is a great deal to be said for that point of view, but it is a question of practical politics. Would it be practicable or not for the country to adopt such a tax? For instance, every little retail business, every co-operative society, at some time or other has an appreciation on the goods in its shop. If this system were carried to a logical conclusion, there would be such a mass of people going round checking, that we would never get anything done. I agree that, on principle, there is much to be said for the hon. Member's contention, but to my mind it is an impracticable suggestion.
On one thing there has been complete unanimity, and that is in congratulating the Chancellor of the Exchequer. I think we can say that never in our history has so much been paid by so many to one man. Certainly, my right hon. Friend 1145 has managed to extract an enormous amount of money with an extraordinary amount of good will from all classes of the community. I expect many hon. Members have read what Edmund Burke said on the American taxation:To tax and to please, no more than to love and to be wise, is not given to man.I do not know anything about loving and being wise, but as regards taxing and pleasing not being given to man, the Chancellor has certainly disproved that statement. I think the people of this country also deserve congratulations. In many cases the taxation has been a very heavy burden, and it has been shouldered with extraordinary patience and good humour. I think one of the most extraordinary things in the Debate has been the unanimity, on all sides, in asking the Chancellor if possible to find some method by which the working man's Income Tax can be borne in the period in which it is earned. I join in that appeal. I know it is a difficult problem, but it is one of tremendous importance, and I appeal to the Chancellor to give his most sympathetic consideration to it. I go further and ask the Chancellor to consider also, if possible, the ordinary Income Tax payer and the Surtax payer, not from the point of view of extracting a penny less from them but only from the point of view of making the extraction more easy. In the case of the Surtax payer it is particularly difficult because Surtax is paid on a period even further back than the Income Tax period. The position is all right when trade is good, but when there is a fall in income, I suggest to the Chancellor that it might easily mean a much increased selling of stocks in order to meet Surtax and that this might affect the market and lead to a reduction in the amount which he obtains from Estate Duties, and so on. When taxation is up to its present rate, there is, I think, a particular duty on the Chancellor to try to make the extraction, not as to the amount but as to the method, as little burdensome as possible. I think it will be agreed on all sides of the Committee that, whether for the working man or the Surtax payer, it is good business for the State to extract taxation in a manner as little burdensome as possible. I should like the Chancellor to tell us how far he is finding bad debts in respect of Income Tax and Surtax; whether there has been any increase, and how far those payments are in arrears. 1146 I imagine there is a considerable hidden reserve both in regard to Excess Profits Tax, Income Tax and Surtax.
There were one or two statements in the Chancellor's speech to which I think more publicity ought to be given. The first is that we have spent £1,500,000,000 in the United States. That is something which is not realised by many people, and I think all possible publicity ought to be given to it. I should be glad if the Financial Secretary could tell me how far if at all the £1,500,000,000 is covered by Lend-Lease.
§ Mr. Henderson
I thought so and wanted that brought out. Another statement to which I hope the Chancellor will see that full publicity is given is that Lend-Lease aid is no greater than the help we are affording to all our Allies without charge. That is a statement which is not appreciated by a fraction of the people in this country and certainly not by a fraction of the people abroad. Another very interesting point is that the charges for interest on the National Debt—which at the present time seems to amount to about £16,000,000,000 or £17,000,000,000, as appears from the White Paper—are only about £325,000,000 or £310,000,000, which is less than we were paying in 1928. It is a very remarkable fact, and ought to be very encouraging, that after more than three years of war we are paying less in interest on the National Debt than we were in 1928.
To come to the figures in the Budget, our expenditure less our revenue still leaves a gap of over £3,000,000,000. A certain part of that has been found by dis-investment and by the generous grant from Canada. It seems that our floating debt has increased by about £785,000,000. I do not think the Chancellor said very much about that figure. Personally, I think it is a rather disquieting figure, and I should be glad if the Financial Secretary would say something about it. However we calculate it, it is obvious that after we take into account all our ingatherings there is still a considerable gap between that and our expenditure. That is, of course, the gap which, unless it is carefully watched, may lead to inflation, and on all sides of the Committee it is agreed that inflation is something that we must do our best to prevent. There are only three ways in which that gap can be closed or lessened—by increased taxation, 1147 by increased lending on Government securities, or by a reduction in expenditure. As far as increased taxation is concerned, I think it is obvious that, with present values, we have got to about the end of what we can expect in the way of taxation. If the Committee will allow me, I would like to give a quotation from Emerson, which I recently came across and which, I think, will appeal to the Chancellor in regard to the proposed taxation. Emerson wrote:Was it Bonaparte who said that he found vices good patriots? He got five millions from the love of brandy, and he should be glad to know which of the virtues would pay him as much. Tobacco and opium have broad backs and will cheerfully carry the load of armies.I think we should all agree that, apart from inflation, the Chancellor of the Exchequer cannot hope to extract much more by way of taxation. In fact I doubt whether he would have imposed the present taxation had it not been that taxation is now being used as an instrument of policy and not merely as a means of obtaining revenue. In this case the policy is to withdraw spending capacity from the country, because there are not the goods available for people to spend their money on. I think that the Chancellor has about reached the limit at which he can gain more by raising taxation.
When we come to the question of lending on Government security, I think more could be done. I believe there is evidence that only about one in three of the working people are lending, to any extent at any rate, through savings certificates and so on. It would be greatly to their advantage and to that of the country if they could be persuaded to lend more, and we ought to do what we can to encourage them to lend more. But we must realise that to a working-man a Government loan, on its present basis, is not terribly attractive. If a working man manages to invest £33 6s. 8d., the return is 10 shillings per annum. I think the Chancellor ought to consider whether a more attractive form of lending could not be evolved, which would appeal to the working man who has £5 to invest. It is not particularly attractive to him to put into savings certificates. I think a smaller rate of interest with some premium at the end, would attract many people who are not attracted at present.
The third method is by economy—by reducing expenditure. It is inevitable in 1148 war time that there should be a certain degree of waste. It cannot be helped. Quick decisions have to be taken and you have to take the chance that there may be a loss. But that does not mean that there should be any unnecessary waste and the country views this question with grave anxiety. They are being called upon to pay taxation to an extent never known before but they will bear it patiently and cheerfully, provided they are satisfied that it is not being wasted. In war-time there is always a certain amount of squander-mania, and in war time squander-mania is epidemic. I think it is the duty of the Chancellor to be the Minister of Health to deal with the epidemic of squander-mania. The country realises that a certain amount of waste may be inevitable, but there is a feeling that more could be saved. There is general appreciation of the Select Committee, which is doing great work, but the man who can do most is the Chancellor of the Exchequer. Like everyone else, I appreciate this as a wise Budget which shows the financial strength of the country and assures us that no lack of finance will impair our war effort.
§ Mr. Jewson (Great Yarmouth)
I agree with what is evidently the general sense of the Committee that the Chancellor of the Exchequer deserves our congratulations for the way in which he has kept the finances of the country on an even keel during a very stormy period. It shows that he has been on the right course. That is proved by the fact that he has only had to make such a very small adjustment this year in the direction in which he is going. I feel that he is entitled to our thanks for the way in which he has handled his great task. It is a sign of silent strength that he has been able to make some concessions in direct taxation, which I am sure will be of great use to those on whom such taxation falls and will sensibly ease the burden that they are carrying. Like many others, I was very disappointed when we were told that, so far, no practicable scheme had been put forward for altering the system of payment of Income Tax on wages. Having a great deal to do with wage-earners, I know how they regard this matter. It does not matter if you take too much from them when they are drawing good wages, provided you pay back any over-plus. The hardship comes when they have small wages and have to pay Income Tax in proportion to higher wages 1149 earned some time previously. It cannot be beyond the wit of man to bring into force some satisfactory system which will get over the difficulty. I am sure we have not heard the last of "Pay as you go," and I hope it will not be long before we hear something specific about it.
In opening his Budget the Chancellor referred to what we had to do after the war. I have never regarded it as our duty not to think about what is to happen afterwards, but to concentrate wholly and solely on the present, until war is over. On the contrary, it is our duty to consider what must be done after the war, and I was glad that the Chancellor referred to that time. We shall not be spending £15,000,000 a day—at least, I hope not—but we shall be spending a large amount of money, and we shall have to face expenditure which is not before us at the moment. There will be, for example, the rehabilitation of coastal towns in the defence areas and some way of dealing with the former residents of such places whose liabilities are piling up under what we know as moratoriums. We shall need a very large amount after the war, and it is therefore our duty to avoid as far as we can doing anything under our heavy taxation system which will interfere with the income of the country when the war is happily over.
In that connection I want to refer to a phase of the Excess Profits Tax. This can, of course, never be a good tax in the ordinary sense of the word. It cannot be really fair as between one and another, but no one is grumbling about that at the present time. We realise that it is necessary, and those on whom it falls accept it, if not with equanimity, at any rate with the realisation of its necessity. I am concerned that we should see that the new enterprises which had just come into being when war broke out and have since, through the skill and enterprise of their owners, developed into large concerns, should not find themselves at the end of the war without those resources which they need to carry on their trade and to produce the income and the employment which the country then will greatly need. I have a case in mind of a small business which, owing to a bright idea of the owners, has been producing a profit of some £20,000 per annum during the last two years. There is no pre-war standard, and practically the whole of the profit is swept into the Chancellor's 1150 net. I do not mention that in order to arouse pity or consideration for the company, but because we ought to consider, now that we have got to this stage in the war, whether it is not in the interests of the country that some arrangement should be made to meet a case like that and to make sure that after the war those businesses which have been built up solely by enterprise in the last year or two, and are the sort of thing the country needs, should have the resources at their command which are necessary so that they will be strong bodies instead of sickly specimens, suffering from want of nourishment. Here is definitely a case which the Chancellor ought to consider.
I was pleased that my right hon. Friend could give us such splendid figures about small savings. The fact that there are so many small savings will be a great source of strength to the country after the war—I do not mean only financial strength—for it means that all of us will have a vested interest in avoiding inflation. For some reason the term "vested interest" seems to have come to be considered as a term of abuse. There is no reason for that. Why should we not have vested interests, and have we not all got them? The more we have of them the better. We must especially thank the Chancellor for the way in which he has to a very large degree avoided inflation, and I hope that he will be able to carry us through on the same lines. I have never taken the view that there should be antagonism between the various classes engaged in industry. I am sure the right view is that we are all in the same boat. There may be, as one speaker said, too high payments in some cases and too low payments in others, and that can be adjusted, but the captain and the crew must work together. This increase in the number of vested interests in small savings and of Income Tax payers is all for the good of the country. The Budget entitles us to look forward with great confidence to the future, and the Chancellor is entitled to our thanks for what he has done.
§ Mr. Richards (Wrexham)
The Debate on the Budget is unique in the fact that very little criticism has been offered to it. The Committee is in a mood of congratulating the Chancellor on a remarkable statement, and I should like to add my congratulations to him for the physical energy that he showed in his long 1151 presentation and in the detailed review he gave us of the Budgetary finances and of the finances of the country generally. When he was delivering his speech yesterday I was reminded of the lines:And still they gazed, and still the wonder grew,That one small head could carry all he knew.I think that that is an apt description of the attitude of the Commitee generally towards the Chancellor. We should be grateful to the Treasury for what they are doing in trying to get us to appreciate the position of the Budget in relation to the national finances generally. We are, after all, interested in the fact that the Government are taking a large and growing proportion of the national income. Consequently we are grateful to the Treasury for acquainting us to some extent with the rise and fall of that national income. The Budget is phenomenal in its magnitude. It approaches pretty nearly £6,000,000,000. As the Chancellor pointed out, the increase in prices in this war has been nothing like it was during the last war. They have not risen more than 30 per cent., while in the last war they rose by 90 to 100 per cent. If we based the figures of the Budget on the 1921 figures, they would be very much greater than they are. Instead of being about £6,000,000,000, they would be in the neighbourhood of £8,000,000,000 or £9,000,000,000. These are stupendous figures, and it is remarkable how well we are doing considering the burdens that we are bearing.
The making of a Budget, it has been said by one hon. Member, has become a very fine technique, and we are proud of the fact that the Financial Statement made by the Chancellor of the Exchequer each year grows in lucidity and comprehensiveness. The making of a Budget, reduced to its lowest elements, is in a way a fairly simple matter. There is on the one side the expenditure. Reference has been made to the terrible expenditure we are incurring, and the Chancellor suggested that in connection with this expenditure we were concerned primarily with the question of waste and, secondly, with the question of efficiency. I rather agree with those hon. Members who have pointed out that perhaps we are not yet as keen on getting rid of waste as we might be. Even in this fourth year of the war there are 1152 instances of extravagant profits and extravagant charges for services rendered. I know the difficulties—how a thing is required in a hurry and materials are scarce and difficult to get, as are workmen, and that the costs are in many cases rather high.
Then, to meet all our expenditure, the Chancellor must find the money, and the question that faces him is whether he will get it by taxation or by borrowing. One is glad to find that the amount being raised by taxation has considerably increased recently, because I think, and I feel that most of my colleagues on these benches would agree, that taxation is the honest way of meeting a burden of this kind. I recognise that in some cases taxation may possibly be excessive, but it is the honest way of attempting to carry the burden, and one is glad to find that the Chancellor is wedded to the honest way and has turned his back upon the dishonest way. If I remember rightly, the figures given yesterday indicated that taxation raises some 56 per cent. of the total cost of the war in any one year. To raise the money by borrowing would be very attractive to certain members of the community, but then we should have the tragic fact that people who were in a position to lend to the Government would find themselves much better off at the end of the war than they were at the beginning, that is to say, there would have been a redistribution of wealth, and, to put it rather crudely, the wealthy would have become wealthier and the poor have become poorer. The poor have not the means to lend to the Government to the extent we would like, and from that point of view borrowing is quite wrong, because it gives an opportunity for an increase of wealth, as happened in the last war, to the wealthy and led at the same time to the impoverishment of the poor.
Having decided that he is going to raise money by taxation, the next problem of the Chancellor is to balance the advantages of direct as against indirect taxation. Here, again, I think he is on the side of the angels. He has decided that the bulk of the burden should be laid on the shoulders of the direct taxpayers, but I would point out that by this time the direct taxpayers include a very considerable proportion of the people whom we normally regard as wage earners. First we lowered the taxable limit so as to bring within the range of Income Tax people who were not 1153 within it before, and there has also been a considerable increase in the earnings of workpeople; and so, as the Chancellor pointed out yesterday, when we are speaking of the Income Tax payers we are referring to a much larger proportion of the community than we were in former years. I think that is all to the good; it is the kind of redistribution of wealth we welcome, because it means that a large number of people whose incomes hitherto have been rather low have, at any rate for a time, been enjoying increased incomes.
Looking over the yields from the various sources of revenue, one is struck by the fact—as shown on page 4 of the White Paper—that there is no indication that we have reached the taxable limit in any case. It is remarkable how the Income Tax exceeded by some £90,000,000 the estimate of the Chancellor of the Exchequer; and if we go right down the list, we do not find any signs of faltering, of the burden being too heavy at any point, except one, Which honestly I do not quite understand. I refer to the combined National Defence Contribution and Excess Profits Tax. The Chancellor estimated that he would get from that source £425,000,000 this year. He has been disappointed, because the yield fell short of that by no less than £47,000,000. That, however, does not contradict what I have attempted to show, that all sources of revenue show a considerably increased yield. Even in that case there was an increased yield of £108,000,000. What puzzles me is why the estimate was put so high as £425,000,000.
§ Sir Frank Sanderson (Ealing)
Is my hon. Friend taking into consideration that a sum of no less than £443,000,000 was raised by Tax Reserve Certificates, and that that amount of money will all accrue to the Treasury in the long run? Of that amount a considerable proportion is in the form of Excess Profits Tax which has not yet been paid.
§ Mr. Richards
I thank the hon. Member for the correction, but I do not see that it meets my point. My point was that the Chancellor's estimate was £425,000,000, although the actual yield the year before was £269,000,000. What is still more remarkable is that if we turn to the estimate for this year, we find that it is £500,000,000. The Treasury is seldom far out in its estimates, and I do not understand why, having failed so clearly 1154 with its estimate last year, it should persist in estimating for £500,000,000 this year.
§ Sir F. Sanderson
I intervene only to try to help my hon. Friend. It is because in the meantime the Tax Reserve Certificates will have been passed over to the Treasury in payment of Excess Profits and other taxes which have already been incurred. Hence, the £443,000,000 is in effect taxation already collected in advance.
§ Mr. Richards
Then the Chancellor is holding certificates for an amount which he will take over in the course of the year. There is one interesting feature of the Budget to which, so far, I have not heard any reference. To have continued with the taxation which had already been in operation would have meant that the Chancellor would have been faced with a deficit of something like £100,000,000, and the new taxation is to cover that. It is interesting to see that he has not budgeted for any surplus this time. I was rather surprised that no more than a general reference was made to the many social services for which most speakers want to see something done in the way of providing for the future. I know it would be out of Order if I were to discuss it, but I rather understood from the Debate we had on the Beveridge Report that there was a definite promise that children's allowances should be included. No provision has been made for that matter, and it is an additional disappointment to the country, which is already pretty considerably disappointed by the attitude of the Government upon the Beveridge Report.
One of the most interesting aspects of the speech of the Chancellor of the Exchequer was his reference to the Lend-Lease Act. We all rejoice, as he very finely put it, in the spirit which actuated the passing of that Act by the United States of America, and we still further rejoice that the spirit has evidently permeated the dealings of the two nations with each other. I only hope that, at the end of the war, that same fine spirit will animate the feelings of the nations towards one another. We remember the tragic attempts made by this country to calculate and to pay the measure of its debt to the United States of America after the last war, one of the most tragic happenings during the 25 years which separated the two wars. 1155 When America got the gold, she did not seem to know what to do with it. I hope this is an indication that we are getting practice in a different kind of attitude towards one another and that, if there are any debts at the end of the war—I presume there will be some—they will be forgiven and forgotten, in the spirit in which the Chancellor of the Exchequer spoke, and that we shall be able to start unencumbered by the experiences we had between 1918 and 1939.
§ Sir Granville Gibson (Pudsey and Otley)
I do not often agree with the hon. Member for Dumbarton Burghs (Mr. Kirkwood), but I did agree with him as to the desirability of a weekly payment, by the working masses of this country in respect of their Income Tax. I appreciate the difficulty met with, respecting workers who are on piece-work or whose wages vary from time to time, and I think the hon. Member's suggestion might help to overcome it. Any credit balance standing to the account of the contributors at the end of the year could be carried forward to the next period and the correction made later on. Meanwhile, regular deductions from their funds would be made from time to time. I do not see why some scheme on those lines could not be worked out.
I join with other hon. Members in congratulating the Chancellor of the Exchequer upon his great effort yesterday. I was rather impressed with that part of his speech in which he dealt with Lend-Lease and spoke of reciprocal aid operating on a considerable scale in Australia and New Zealand. He went on to say:But this is not the whole story. The aid that we receive from the United States and Canada solves almost completely our financial problems in North America, but in the rest of the world we have to fend for ourselves.Then he further said:But it does mean that a financial situation of some difficulty is being created for us in the future of which we should be aware. Our exports … cannot buy us more than a trifle towards these external costs."—[OFFICIAL REPORT, 12th April, 1943; col. 941, Vol. 388.]I can imagine that the Chancellor had in mind the desirability of stabilising the exchanges in relation to each other at the earliest possible moment, as set out in this scheme for an international clearing union.
1156 Out of the speech of over two hours by the Chancellor, one sentence struck me very forcibly indeed. It was that in which he said that exports recently have fallen to one-quarter of what they were in pre-war days. Those of us who are interested in the export trade will be aware of various reasons why our export possibilities have been limited. The first is in order to supply the home market. Secondly, it is because our production for export purposes was lower than previously, because in the meantime we had needed workers for more important tasks. Our export of £400,000,000 before the war has been reduced to £100,000,000 per annum. Hon. Members will realise how serious the position may be if we want to pick up the threads after the war.
I remember a Debate upon economic policy, in which the hon. Member for Lowestoft (Mr. Loftus) said that it was easy to take up this differential between the £400,000,000 of our exports before the war and our £800,000,000 of imports, by growing £200,000,000 worth more produce in this country, when we should not need to export within £200,000,000 as much as we had exported before. It does not work out that way. There was a differential of £400,000,000 before the war. If we exported £400,000,000 less because we produced £200,000,000 in our agricultural life, the differential would still be the same £400,000,000. The anxiety of industry is to know how to fill that gap after the war. We realise how some countries, including the Dominions of the Empire, are buying from countries from which they never bought before. The Chancellor said in a speech the other day that exports are the lifeblood of the country. Despite what was said by the hon. Member for East Stirling (Mr. Woodburn) to-day about a period of prosperity and abundance after the war, I feel that the future is fraught with a certain amount of difficulty.
The Chancellor has given small concessions to industry. I would not describe them entirely as parsimonious. The reason I welcome them is that they will assist in providing more employment for the people of the country. The Chancellor referred to the fact that £300,000,000 of Income Tax post-war credits are in the hands mainly of the working classes of this country to-day. I am afraid of what is to happen to that money after the war. 1157 What steps is the Chancellor proposing to take to direct the spending of it along right and proper lines? How can it, to use his own words, be directed to expenditure for capital purposes, unless there is some restriction on the part of the Exchequer on the people of this country with regard to their spending of this £300,000,000, which is mounting up rapidly year by year during the war period? I ask myself the question many a time why, if people who are wage-earners have these post-war credit certificates handed to them year by year, there are no certificates handed out to the industrialists who are paying large amounts of Excess Profits Tax in respect of the 20 per cent. credit on E.P.T. payments? Is it because there are alterations of amounts in regard to the credit year by year, perhaps because of good years and bad years? Whatever it is, we ought to know, because, as has been said to-day, business men as a whole throughout the country at the present time, at any rate, do not regard those credits of 20 per cent. as being real but rather mythical, and there is no real evidence, no real guarantee or promise on the part of the Government, that those amounts will be paid at some date in the future.
There is another point to which I should like to refer—the question of terminal losses to which the Chancellor referred, losses involved in changing business premises from war to peace. I have asked the Chancellor of the Exchequer several questions over the past year or so about the case of a firm removing its premises from A to B. I know the Government pay the cost of taking the plant and machinery down and conveying it to new premises and also installing it, but there was no promise that after the war that plant and machinery could be taken back to A at the cost of the Government. It seemed to me only fair and reasonable that if the Government insisted on a firm moving their plant and machinery, they should put it back at the cost of the Government. The hon. Member for Northampton (Mr. Summers) raised this matter on the Adjournment the other week, and the Financial Secretary made, I thought, quite a generous concession or semi-promise. But it seems to me that if a firm is liable for E.P.T. to the Government, or has paid E.P.T. in connection with profits it has made, when this machinery is transferred back to the original place 1158 after the war, the firm will receive a payment to the extent of 80 per cent., but if it has only being paying Income Tax and not E.P.T., it will be allowed only 50 per cent. of the cost of re-installation, and if the firm has not been paying either Income Tax or E.P.T., it will have all the cost to pay itself. This is no Government declaration but was given to me by someone who is regarded as an expert on tax matters. I would like the Financial Secretary, if he could, to deal with this particular point, because, if it is as I have mentioned, it is decidedly unfair, as the expense has been incurred by the Government and the man himself has no say in the matter at all. He was compelled to have his plant and machinery removed. There might be some firms which have been concentrated or which might be de-concentrated and which have never made any profits in the period to enable them to pay Income Tax or E.P.T. during the war, whose profits are non-existent. It would be unfair for them to have to pay for the cost of re-installation of plant and machinery.
There are other terminal losses which I suppose would come under the same heading. In the case of contracts a firm may have with employees and staff, if the war came to an end would they be reimbursed, because they had paid their staff or employees for, say, one month or longer after finishing their period of service? There is one more point I would like to touch upon, the question of wasting assets. I know that for many years industrialists in this country have pressed various Chancellors to make some concessions in this particular direction. One knows perfectly well that in the case of mines, oil wells and, as mentioned in the Chancellor's Budget Statement, sand and gravel, people are taking out their assets from their mines or pits, are taking capital out which can never be put back again. In my works if I buy some primary products and process and sell them, I have my plant and machinery, and I can buy some more goods and make some more finished goods. May I instance a case of sand and gravel which came to my notice the other day? A friend of mine has had part of his sand and gravel area taken from him compulsorily, to be worked under the control of the Air Ministry by a certain contractor. It means that he is giving up the life of that gravel pit at twice the 1159 speed he normally would, that it will last only half the time.
§ Mr. Stokes (Ipswich)
Are not all the young men giving their lives and not getting anything for it?
§ Sir G. Gibson
I know very well that people are giving their lives, but it has nothing to do with the argument I am trying to put before the Committee. In this case the sand and gravel are being taken out at twice what would be the normal rate, and the payment made in this case by the Air Ministry would in my opinion undoubtedly be an increase of profit to the concern whose capital has been taken away from it, or shall I say the assets have been wasted at twice the normal speed because of the action of the Government?
§ Sir G. Gibson
They bought it, and they expected their capital to be there, and there is no provision for amortisation, no allowance by the Inland Revenue.
§ Sir G. Gibson
Yes, but the hon. Member does not see the point at all. The fact is that there is this gravel pit, and gravel is being taken out at the rate of, say, for example, 100 tons a week. I do not know what the actual figure is. Supposing because of the action of the Air Ministry 200 tons are now being taken, the profit on the second hundred tons will come into the accounts of that company and be counted in with the E.P.T. which they pay. [An HON. MEMBER: "Quite right."] I think it is quite wrong, because it is being wasted at twice the speed it normally would be, and it is the capital of the business which is being wasted day by day, and there is no allowance for it. Therefore, when the Finance Bill comes along I hope the Chancellor will give this not a generous, but a just interpretation and fair and reasonable consideration.
I have taken up as much time as I ought to, though I have some other points 1160 I should have liked to raise. I feel that the Chancellor of the Exchequer has done his job very well indeed. Reading the newspapers this morning, we see that throughout the country the speech he made yesterday has met more or less with approval, and I am perfectly satisfied that if we give the Government support in connection with this Budget speech and, when the Finance Bill comes along, support along the lines of doing what we can to assist the national effort, I am sure that in time this country will pull through successfully.
§ Mr. W. H. Green (Deptford)
Among the many extraordinary statements to which we have just listened there is one to which I would call attention. The hon. Member seemed to suggest that the post-war credits that belong to the workers of this country should, when they are paid, have some condition attached to them as to how the money should be spent. I thought that a most extraordinary proposition.
§ Sir G. Gibson
I did not say anything of the kind. What I said was that the Chancellor stated yesterday that the £350,000,000 could be used for capital purposes. I was asking how that could be done unless there was some control over the direction in which it was spent.
§ Mr. Green
I hope that such an idea will not gain currency outside. It seems to me insulting to the working class that they should be regarded as the one section who are to be told how their savings are to be used. I am sure the hon. Member did not mean that, but his words might reasonably convey that meaning. I do not wish to break the unusual sequence of the congratulations with which practically every speaker, to-day and yesterday, has prefaced his speech. We must all agree that the Chancellor of the Exchequer made a wonderful success of his task. I think that the man in the street agrees with the view that there is not much to complain about in the Budget. It is extraordinary that as the war years have gone by and the amounts that the Chancellor has required have increased, 1161 the unanimity with which his demands have been supported have become more marked. The Chancellor must be an exceedingly happy man when he thinks that, despite the enormous difficulties facing him, he has been able so to frame a Budget which has met with approval from every side of the Committee.
We all recognise that some of the concessions he has made will be exceedingly valuable to a fairly small class. I would not minimise the fact that he has made those concessions. I would like to thank him for the concessions he has made with regard to Purchase Tax. I have some little official connection with the co-operative movement, and I know that when the present Lord Simon first introduced the Purchase Tax there was tremendous opposition from those who sit with me, and particularly from the co-operative movement. As a result of representations by the National Council of Labour and other representative bodies, the sting of the Purchase Tax has been gradually eliminated. I believe that the percentage that the average working-class household spends on goods which are subject to Purchase Tax is exceedingly small, now that furniture, clothing and boots have been exempt from the operation of the Tax. We are delighted to know that the point often put from these benches, that taxation of the household commodities that the working-class purchase was a real hardship, has been accepted, and that the hardship is about to be removed. The co-operative movement will have a sense of gratitude to the Chancellor for that concession.
The present Chancellor has won considerable renown in dealing with the most difficult financial position with which this country has ever been faced. But there is a further field of glory awaiting him, and I wonder whether he is ingenious enough to conquer it. The man outside is saying, "Why should one section of the community be able to escape? Why is there one section of the community which, so far, no Chancellor has succeeded in roping in"? I refer to the teetotaller and the non-smoker. I know that my colleagues can say that they will smoke the extra pipe with satisfaction and drink the extra nip of whisky with a certain amount of pleasure, because they are making this country safe for the teetotaller and the non-smoker; but I question whether that is good enough. I would like to see the 1162 Chancellor exert his ingenuity to rope in this section somehow.
§ Mr. G. Griffiths
Does my hon. Friend want to force the teetotaller and non-smoker to drink and smoke?
§ Mr. Green
No; I am not sure what sort of caper they would cut if they started. I do not want that. But I would suggest that some means might be found of bringing them into the range of this increasing taxation. There is another point. I wonder sometimes whether hon. Members—those sitting on the Treasury Bench particularly, and to a less degree Members sitting behind them and Members sitting beside me—are able to put themselves in the other fellow's place. Two or three pipefuls less per week will not be the lot of any Member of this House. It will not trouble any Member of this House seriously that an extra 5d. is put on his tobacco, or that his whisky has gone up; but I wonder whether we have thought of the tens of thousands of highly-respectable people in this country who are existing on very small incomes, derived from small investments or pensions or superannuation, and how they are going to feel these increases.
Then there are the old age pensioners, I almost hate to bring in this subject, because it is becoming almost as hackneyed as that of the widows and orphans in the old days. Not long ago there was some added relief to the old age pensioner, amounting, I think, to 2S. 6d. per week. I suggest that by the imposts of the last two Budgets you have more than taken away all that. It will be said that the right course is to increase the old age pension. That may be so, but what is the good of increasing the pension if you put the amount of the increase on to the cost of something which has become almost a necessity? I know the Chancellor can say, "This expenditure, after all, is a luxury"; but the old man who has spent all his life in industry and is now trying to exist on an old age pension, even with a supplementary pension, if he smokes a couple of ounces of tobacco a week and drinks half a dozen pints of beer a week—which is quite a moderate amount—will not have much left.
The Chancellor indicated that Service men will be, to some extent, exempt from the additional tax on tobacco. I wonder whether the Chancellor has taken the trouble to inquire from the Secretary of 1163 State for War whether a decent amount of tobacco and cigarettes is available in the N.A.A.F.I. canteens. My information from men in the Forces is that tobacco is almost unobtainable in the canteens, and that cigarettes are obtainable on a very limited basis. My own boy told me that he had been successful in getting no more than eight ounces of tobacco at his N.A.A.F.I. canteen in the last 12 months. He said, "What is the use of the Chancellor saying that the troops will get tobacco and cigarettes at the reduced rates from the canteens, when there is none to be got there?" I suggest that the Chancellor could usefully look at the point I have made with regard to non-smokers.
§ Mr. Hammersley (Willesden, East)
The Financial Secretary is due to speak in a few minutes; therefore, I must restrict my remarks to a few sentences. It would be invidious of me, however, if I were not to join in the chorus of congratulations to the Chancellor of the Exchequer. I do so, not because other speakers have congratulated him but because, in my judgment, that congratulation is well-deserved. During the last 17 years I have listened to many speeches by Chancellors of the Exchequer and I have observed in the course of those years, a gradual but substantial change in the character of the Budget statements. Just before the war we witnessed the change-over from what might be described as a book-keeping statement of income and expenditure to the use of the Budget statement as an instrument of State policy.
The speech of the Chancellor of the Exchequer fell under two heads, first what he proposed to do for the present financial year, and secondly his indications of what it was proposed to do through finance in the future. The problem is not one of raising money. There is no difficulty about getting the money. Money can be raised by borrowing or by loans from the banks. The problem with which the Chancellor of the Exchequer had to deal was the use of the financial instrument of State policy in such a way that no financial factor was allowed to interfere with the prosecution of the war with the maximum effort possible. This he has done by giving relief where the shoe pinches most. The allowances which he has given for dependants and house- 1164 keepers, will be welcomed in all parts of the Committee. The assistance which he has given with respect to utility articles by the removal of Purchase Tax is very desirable not only from the point of view of the purchasers themselves but also from the point of view of the producers and their ability to maintain a continuous line of mass production. He has carried out this policy further by narrowing the channels of non-essential expenditure, thus neutralising the increased purchasing power in the pockets of the people.
There is one special class on which I would like to say a word and to which the Chancellor of the Exchequer did not refer. It is a class in which the shoe pinches very much, the class of concerns or companies that have been closed down by reason of the concentration of production. Those companies are silent. They are not only not able to spend the usual amount of money, in repairs and renewals, but they are unable to keep themselves abreast of technical developments. They are losing in two ways. They are losing because they cannot maintain themselves normally, and they are also losing because they are not able to keep in touch with the great strides of technical development which are being made throughout the world. A particular example comes to my mind in the Lancashire cotton trade where 50 per cent. of the mills are silent. These mills are not allowed to spend any money of any character. They cannot maintain their manufacturing plant. They cannot bring their canteens into condition and so forth. That is a point which I hope the Chancellor of the Exchequer will look into and which could perhaps be considered further when we come to the Finance Bill.
The indication of the future intentions of the Chancellor of the Exchequer were given by his expression of opinion, which I took to be a Government statement of policy, that they proposed to maintain cheap money. That of course is highly desirable. There are many considerations to be taken into account. You can only keep cheap money by restricting the uses to which money can be put. That indicates a maintenance of controls keeping on some rationing and so forth. This statement of policy will be greatly welcomed. I finish, as I began, by congratulating the Chancellor of the Exchequer upon a sound and constructive Budget.
§ The Financial Secretary to the Treasury (Mr. Assheton)
We have now had the opportunity of listening to speeches from all sides of the Committee and I think the Committee will agree that the Chancellor of the Exchequer has had very general approval for his Budget proposals, and such slight study as I was able to make of the morning papers confirms that impression. I cannot attempt to answer all the numerous questions which have been raised by hon. Members in the course of the Debate, but I will try to answer some of them. Some of the more important questions will be dealt with by the Chancellor himself when my right hon. Friend sums up the Debate. First, I will take a number of points raised yesterday in the Debate which followed the Chancellor's speech. My hon. Friend the Member for Holborn (Sir R. Tasker) made some complaint about the difficulty of the man with a very high income who had also to pay war damage contribution. He gave the example of the man who was paying Income Tax at the rate of 19s. or 19s. 6d. in the £ and also had to find 2s. in the £ for war damage payment. I am sure we all have great sympathy with the man whose income is so great that he has to pay such heavy taxes. But I must remind my hon. Friend that the war damage premium of 2s. in the £ definitely represents part of a capital payment and not an income payment, and the owners of property who have been unfortunate enough to have had their property destroyed are being compensated partly at the expense of those who have been more fortunate.
My hon. Friend also raised a question about the deduction of tax from annuitants. He complained that some particularly small annuitants were treated rather severely because the tax was deducted at the full rate of 10s. in the £. I would like to remind him that it is open to any such taxpayer to ask for a rebate from the Inland Revenue authorities as soon as he has received his payment and as soon as a certificate can be furnished to the authorities. Therefore, there is no reason why, in fact, there should be any particular difficulty on that account. There was one more point he raised—it was a question which has been raised before—connected with obtaining probate. He asked how executors can find the necessary funds with which to pay Estate Duty before they have obtained probate. Of 1166 course you cannot sell any of the securities belonging to the estate before probate has been obtained but nevertheless you are expected to pay Estate Duty. That, on the face of it, may sound rather difficult but it is a provision made in order to safeguard the revenue, for if an estate were broken up, the Estate Duty might not be collected. The banking arrangements in this country are, fortunately, so highly developed that there is no real difficulty for executors in this type of case.
My hon. Friend the Member for Leigh (Mr. Tinker), who is not in his place now, made one of his attractive speeches in which he really tried to persuade the Committee, rather on the lines of the hon. Member for West Fife (Mr. Gallacher), that we wanted a different economic system altogether. I do not propose to enter into arguments of that kind now, but I will, if I may, deal with one or two particular points he raised. He asked a question about compensation for loss of office to directors and others and I cannot do better than quote to him an answer to a Question which my right hon. Friend gave the other day:Generally speaking, compensation for loss of office as such is not income for the purposes of Income Tax. There may, however, be cases in which circumstances are such that payment described as compensation for loss of office is assessable to tax as emoluments for the office. The question of liability would depend in each instance on the facts of the particular case."—[OFFICIAL REPORT, 6th April, 1943; col. 505, Vol. 388.]This is a matter on which the Inland Revenue are keeping a close watch. I think my hon. Friend can feel assured of that. My hon. Friend also read to the Committee a list of the fortunes which had been left by citizens of this country during recent months and asked how it was possible to leave such fortunes, in spite of the fact that taxation was so high during the war. I think the fair answer is that the fortunes which are left by people who die during the war were accumulated before the war. I should be very surprised to learn that a large fortune, or even a small one, had been accumulated since the war began.
§ Mr. Assheton
Yes, except possibly in the black market. Whether any of those who have operated in the black market are dead yet I do 1167 not know. A much more important question which my hon. Friend raised was that of interest rates, and I would like to say a word or two about that. My hon. Friend rather suggested that the rate of interest should be very much lower than it is now, although he did not go quite so far as others, who suggested that they should disappear altogether. My right hon. Friend the Chancellor is always anxious and willing to receive loans from citizens of this country free of interest and I am happy to tell the Committee that he has already received, up to date, loans amounting to £55,000,000 free of interest—a very substantial amount of money. Anything that can be done to encourage lending to the Government free of interest is all to the good. But, of course, it would be impossible to expect everyone to lend money to the Government free of interest, for various reasons. Let us take, for example, the case of the insurance companies. Unless insurance companies receive interest on their investments, they would not be able to pay to their policy-holders the sums of money which they have contracted with those policy-holders to pay. Take, again, the case of charitable organisations managed by trustees. It is quite impossible for them to lend money free of interest, because from the interest on their investments they make the payments to the beneficiaries of those charities. None the less, I think the Committee appreciates how extremely well this business of interest has been managed during the war.
I would like to give the Committee a figure which I do not think they have had before. The net increase in the Debt during the war amounts to £8,460,000,000 and the increase in the full year's interest charge amounts to £167,000,000. Therefore, the average cost of the increase is 2 per cent. That is to say, the average cost of the money raised since the war began is 2 per cent. When you take into account the fact that Income Tax is at the rate of 10s. in the pound, that reduces the rate of interest to one per cent., a rate of interest about which very few Members of the Committee will complain.
§ Mr. Benson (Chesterfield)
Can the Financial Secretary say whether that includes savings certificates and accruing interest?
§ Mr. Assheton
Yes, Sir, it includes a full year's accruing interest on savings certificates and not merely the amount paid on certificates encashed.
My hon. Friend the Member for Barnsley (Mr. Collindridge) raised a point about compensation. I was not quite certain whether he was referring to ordinary workmen's compensation or not, but if he was referring to disability payments while a man is receiving them, they are not liable to tax. If he was referring to lump sums payable for the loss of a husband or a relative they, too, are not subject to Income Tax. However, if my hon. Friend will let me have details of any particular case in which he is interested I will do my best to give him an answer. My hon. Friend then raised the question of women workers who travel to their work and who, in certain cases, are not entitled to any reduction of tax in respect of their travelling expenses. I daresay the Committee will remember what happened about that matter. Let me make it quite clear that there is no sex differentiation, but it so happens that a large number of women did not work before the war and, therefore, it is likely that they have noticed this particular point. A concession was made by my right hon. Friend in order to meet the difficulty of a worker who went to work in a different place from that in which he had previously worked. There were cases for example in which the Minister of Labour directed workers accustomed to work in one pit, to work in another pit 5 or 10 miles away, and it was thought right, in those circumstances, that this concession should be made. I do not think it is at all wise to suggest extending that concession.
§ Mr. Murray (Spennymoor)
Is the same facility offered now to women who are directed from one factory to another?
§ Mr. Assheton
There is no discrimination whatever between the sexes in this matter. If they are directed so that they have to travel a greater distance than previously, then they are able to take advantage of this concession.
Many Members have referred to the concessions made by the Chancellor with regard to dependants and housekeeper allowances and I am quite certain that the Committee, as a whole, have welcomed these proposals. My right hon. 1169 Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) made some points to which the Chancellor will make reference on our next Sitting Day. I am afraid I have not time to deal with one or two smaller points, which I should have liked to take up. There was in my right hon. Friend's speech, as in the speeches of other hon. Members, a suggestion that direct taxation rather than indirect taxation might have been raised. My right hon. Friend did not complain of what the Chancellor had done, but he said, in effect, "You must not do it again." I would like to direct his attention to the position this year compared with last year. Of the total amount of money to be raised by taxation in the coming year, which is £2,373,000,000—excluding Excess Profits Tax and National Defence Contribution—59 per cent. is from direct taxation and 41 per cent. from indirect, whereas last year, calculating on the same basis, it was 58 per cent. from direct, and 42 per cent. from indirect taxation. So it works out that during the coming year indirect taxpayers will contribute rather less in proportion than they did last year.
My hon. Friend the Member for East Birkenhead (Mr. Graham White) referred to the question of workmen's wages, and the deduction of the tax on the "pay as you go" method. I am sure the Committee was very glad to hear what the Chancellor said on that matter. He said that his advisers were engaged in a close examination of the particular aspects of the matter connected with the change-over after the war and that in that consideration the question of a current earnings basis for the deduction of the tax would not be ruled out of their deliberations. I hope the Committee will not press the Chancellor to go further than that on this occasion, because there is no doubt whatever that the matter is receiving careful consideration.
My hon. Friend the Member for Lowestoft (Mr. Loftus), in a speech which was as interesting as his speeches always are—taking one as they do somewhat into the financial stratosphere, which my hon. Friend the Member for Ipswich (Mr. Stokes) enjoys just as much as my hon. Friend the Member for Lowestoft—made one proposal which he undoubtedly thought to be a practical proposal, so that I will, with his permission, deal with it for a moment or two. He suggested 1170 that the banks should, in fact, lend to the Government money on a 20-years basis. I doubt very much whether his plan whereby the banks should lend to the Government on a 20-years basis, and that those assets should be segregated from ordinary banking business, is a practicable suggestion. Against those assets the banks would undoubtedly have liabilities in the way of deposits which are liable to withdrawal like any other part of their deposits, and the banks must, of course, have a balanced portfolio of assets to match with them. I cannot go into that matter at great length now, but if my hon. Friend would care to discuss the matter with me at any time, I would be glad to do so.
§ Mr. Loftus
May I point out that the plan I put forward was not my plan, but a detailed plan advocated by the "Economist," which overcomes the difficulties mentioned by my hon. Friend.
§ Mr. Assheton
My hon. Friend says that the plan was put forward in the "Economist," but I was not quite sure whether he said they advocated it or whether it was one of their correspondents who put it forward. I would like to talk to him about it on some future occasion.
A good many hon. Members who criticised mildly the Chancellor's increase in indirect taxation and the fact that direct taxation was not increased, recognised, as did the right hon. Member for East Edinburgh, that the position is very different now since we have something like 12,000,000 direct taxpayers. Whereas in the old days the direct taxation fell on the richer portion of the community, nowadays so many people are paying Income Tax that, at any rate one ground for the old controversies has undoubtedly been removed. I think the Committee will appreciate also that these new taxes are put upon various articles and, although it may be unpleasant to abstain from purchasing them, nevertheless it is possible to abstain from purchasing them. The point has been made by several hon. Members that some hardship might be suffered by people with very small incomes. No doubt that is so. There is some hardship. But I would ask the Committee to remember that the Government have not shown themselves unmindful of the needs of the old age pensioners, and that there is in the Estimates which were presented to the 1171 House recently a figure of no less than £43,000,000 for supplementary pensions for that purpose. One must not overlook the fact that these supplementary pensions were granted in 1940. That is a very considerable contribution.
The Committee will also recognise that the Government's scheme for keeping down the cost of living, and granting subsidies to do so, does, in fact, benefit all those people with small incomes just as much as it benefits the rest of the community. I would like to draw the attention of my hon. Friend the Member for Southampton (Dr. Russell Thomas) to that particular point, because he raised it in connection with people having small fixed incomes.
I would like to tell the Committee how it struck me when I first moved from the Ministry of Supply to the Treasury. I came from a Department which spends an enormous amount of money; in fact, the Ministry of Supply alone spends in a-year more than the total amount of money which is collected in Income Tax, a very startling fact when the revenue from Income Tax is over £1,000,000,000 a year. It was always a mystery to me to know how this money was found, and everybody admits that the Chancellor has been extraordinarily successful in finding it. Since I have been at the Treasury, I have taken some trouble to try to inform myself how this money is raised. The total amount which is to be raised in the coming year is something like £16 million a day, if one takes into account not only expenditure on the war but the expenditure on other items. Of this sum of near £16 million a day, nearly £8 million is borrowed, and £8 million is raised from taxes. Let me take, first, the £8 million which comes from taxes. Of that, £3½ million comes from Income Tax and Surtax, £1⅓ million comes from Excess Profits Tax and National Defence contributions and £¼ million from Death Duties. What else is there to come out of taxation? The smokers are to find more than £1 million a day. Those among us who consume liquor will contribute over £¾ million a day. The Purchase Tax will contribute £¼ million a day, and other taxes, such as entertainments and taxes on oil, matches and motor vehicles, and all those things, amount to something like £½ million a day. That, of course, is 1172 taxation at unprecedentedly high levels and even then we are raising only half of what we are spending.
Let us, therefore, look for a moment at the other £8 million which we borrow and see how that is borrowed. First, there is the item which is described in the White Paper by the rather ugly and un-pleasing term of "Overseas disinvestment," a term which I am sure would have revolted our Victorian ancestors. The term was originally coined to refer to the process of raising funds by selling foreign investments, but it also covers now the increase of our indebtedness to overseas, and during the coming year it is estimated that this will amount to £1¾ million a day. The next important item is £1¼ million a day which comes from borrowing the credit balances of official funds, like the War Risks Insurance (Marine and Commodities) Fund, and other funds which are called extra-Budgetary funds, and also from surpluses accumulated by local authorities in their sinking funds and so on. Then we come to a sum of £½ million a day which represents sums set aside by businesses for depreciation in so far as those sums are not actually spent on replacements. Finally, we have by far the biggest and most important item, £4½ million, which represents private savings and undistributed profits, including reserves against taxation. That is a stupendous sum of money to raise every day.
Looking at these figures it becomes even clearer than before that we have to pursue the Savings Campaign with all our energy. The fact that more than half the sums that we borrow come in that way means that we must not slacken at all in our efforts to raise money. All that makes up the other £8 million which the Government are borrowing one way and another every day. Of course, these are rough and ready figures, and I hope it will not be thought that they represent to a very close or exact sum, what the position is; but they give a general picture, and it is very important never to forget that we are only raising by taxation half the money that we are spending. The catalogue of the sources of our borrowing, of course, does not mean that all the sums I have mentioned are lent directly to the Treasury. Savings may reach us through indirect channels, like the banks, insurance companies and building societies, and the items, taken together, are 1173 really a measure of the amounts by which our net assets overseas are reduced and by which we at home abstain from consuming. However, so long as the Treasury borrowings, in whatever form, are balanced in this sort of way, I think we can hope that the borrowings are not inflationary.
I can answer one point raised by the right hon. Gentleman the Member for East Edinburgh with regard to the post-war credit certificates of married women. My right hon. Friend has considered the matter, and an arrangement is now being made which I hope will meet the point in a satisfactory way. The post-war credit certificate for any year is usually issued to the husband when some notice or form is being sent to him in respect of his next year's liability. For instance, in the case of Schedule E taxpayers, in which wage-earners are included, the post-war credit certificate for 1942–3 will normally be issued with the notice of assessment for 1943–4. The notice of assessment in respect of the wife's earnings is not sent to her but to her husband, but under the new arrangement, at the same time as the notice of assessment is sent to the husband, the wife will be sent a separate notification to her home address, if known, or else to her place of employment, informing her that the certificate for the previous year is being issued. The notification will explain her rights in the matter and will emphasise that in the normal course, when the husband and wife agree on apportionment, the credit will be divided accordingly.
There are two reservations which must be made. The arrangement that I have described can apply only in the case of wives who are in employment and are being taxed by deduction from wages. This, in itself, represents an extremely troublesome addition to the vast amount of work that the Inland Revenue have to do at a time when the staff is very hard pressed, and I fear it would not be possible to extend the arrangement to the case of every wife who has an income. I hope, however, that the publicity which has now been given to the matter will make the position generally known, and my right hon. Friend is arranging to have posters put up in factories, and for other explanations of the matter to be given from time to time, in wireless broadcasts.
§ Mr. Pethick-Lawrence
Will the statement to the wife specify the division or 1174 say that the division can be made if they wish it?
§ Mr. Assheton
It will say the latter. It is a complicated matter, and, if it can be settled by mutual agreement, it will save everyone a great deal of trouble. The second reservation is that, although our aim will be to arrange for the notification to the wife to go at about the same time as the certificate goes to the husband, we cannot guarantee that this will be done in every case. I hope however that in the majority of cases it will be possible. I think this should put the position of the married woman on a more satisfactory basis than it has been in the past.
§ Mr. Woodburn
Will the hon. Gentleman make it clear also that these post-war credits will be regarded as savings under the Determination of Need Act?
§ Mr. Assheton
Yes, that has been stated by the Chancellor on more occasions than one. That is the case, and that arrangement has been made.
I cannot close without referring to the remarkable series of Budgets which my right hon. Friend has introduced. I think the Committee will be particularly grateful to him for the fact that, quite clearly, he listens to what Members say. A Minister who does that always wins approval and appreciation. The other evening when I was reading "Hamlet," I came upon these lines in the speech which Polonius made to Laertes when offering him some useful advice:Give every man thine ear, but few thy voice;Take each man's censure, but reserve thy judgment.It occurred to me that my right hon. Friend had read that and taken it to heart.
§ Mr. Assheton
I had not overlooked that, and I was coming to it. I was going to remark that Polonius was a Lord Chamberlain and not a Chancellor of the Exchequer.
§ Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again,"—(Major Sir James Edmondson)—put, and agreed to.
§ Committee report Progress; to sit again this day.