HC Deb 22 July 1943 vol 391 cc1104-14

Motion made, and Question proposed, That a Supplementary sum, not exceeding £1,000,000,000, be granted to His Majesty, towards defraying the expenses which may be incurred during the year ending on the 31st day of March, 1944, for general Navy, Army and Air services and supplies in so far as specific provision is not made therefor by Parliament: for securing the public safety, the defence of the realm, the maintenance of public order and the efficient prosecution of the war; for maintaining supplies and services essential to the life of the community; and generally for all expenses, beyond those provided for in the ordinary Grants of Parliament, arising out of the existence of a state of war.

The Chancellor of the Exchequer (Sir Kingsley Wood)

I have to ask the Committee for a further Vote of Credit to meet the expenses on the war, but in view of our recent Debates on finance, I propose to confine my remarks simply to the Vote of Credit itself. The last Vote of Credit is likely to be exhausted before the end of August, and in view of the forthcoming Recess, it is necessary to make this further provision now. The new sum of £1,000,000,000 should suffice to cover our expenditure until early in November next, When I asked the Committee for the last Vote of Credit, on 25th May, I said that the rate of expenditure in the first few weeks of the financial year had been about £13,500,000 a day, of which about £11,000,000 was on the Fighting and Supply Services, leaving £2,500,000 for miscellaneous war services. I then explained how the Vote of Credit in the present financial year will be affected by the different arrangements made by the Government of Canada in the generous help they are giving us, and that the effect of the change is to reduce the totals of the Vote of Credit expenditure below what otherwise would be necessary and that this has to be borne in mind in any comparison that may be made with statements about the amount of previous rates of expenditure.

Up to the present the average daily rate of war expenditure since the beginning of April has been about £13,250,000. Expenditure on the Fighting and Supply Services has remained at £11,000,000 a day, and on miscellaneous war services there is a drop of about £250,000 a day. That drop is of no particular significance. It so happens that during June a varied list of services required less than in April or May, and there were also some special receipts. I also explained on the last occasion that the rate of expenditure in the early weeks of this financial year was not necessarily a guide to the prospective rates for the future. During the first quarter of this year we spent cash on supplies from Canada which in future will be largely sent to us on Lend-Lease terms without payment. We also received certain non-recurring sums for current assets purchased by the Canadian Government, and these sums were used to reduce the amount which it was necessary to issue out of the Vote of Credit during the period. I estimate that if we had not paid for our Canadian supplies and had not received payment for the capital assets in question, our average expenditure during the last quarter would have been at the rate of just under £13,500,000 a day, made up of about £10,750,000 on the Fighting and Supply Services and £2,750,000 on miscellaneous war services.

So far as present trends are concerned, we may no doubt still expect some continuation of the gradual rise that has taken place in expenditure on the three Fighting Services. As regards the Supply Departments, my right hon. Friend the Minister of Production stated the other day that during the second quarter of this year production was some 40 per cent. higher than in the first quarter of 1942. He was referring to the output of completed armaments, munitions and so on. The Vote of Credit has to bear the cost of production at all stages before completion, as, for example, when the Departments make progress payments, and the production costs corresponding to the high level of output will already have been reflected in past increases in Vote of Credit expenditure. It seems possible that for the rest of the year there will be a further increase in output, but it is not yet clear how far that will affect the total production costs now being borne by the Vote of Credit. The rate of expenditure on miscellaneous war services in which there have been appreciable fluctuations in the past is particularly difficult to forecast. At this date the Committee will not expect me to attempt more precisely to evaluate for the rest of the year these various branches of Vote of Credit expenditure. As I have previously stated, this year's Vote of Credit represents a substantially larger provision for war expenditure than last year—a matter which could only be one of satisfaction to us, as it is another tangible demonstration of our still rising strength.

This is the 18th Vote of Credit since the beginning of the war. The total of all our war expenditure has now reached the prodigious figure of £14,500,000,000. The additional expenditure which we have yet to face certainly means that we must in no way relax our efforts in the financial field but rather increase them, not only in avoiding every waste and extravagance and securing every reasonable economy, but in fully maintaining our policy and practice of financing the war on sound and proper lines. In voting this further considerable sum to-day, we can justly claim that it represents once more not only that staying power which has always been our strength but also our confident belief in the attainment, in conjunction with our Allies, of the complete defeat of our enemies and the victory of our cause.

Mr. Pethick-Lawrence (Edinburgh, East)

; I am certain the Committee will pass unanimously the proposal put forward by the Chancellor of the Exchequer. I should like to remind the Committee of the immense advance that we have made in the two months since the last Vote of Credit was carried. The war in all its sections has taken on an entirely new complexion since that day, and the position in which the Armies of the United Nations are at the present time is wholly different from what it was only as recently as that time, and still more different from what it was when the Vote of credit before that was passed. None of us is in a position to forejudge what may be the position when the money which we are now voting is nearly used up. I am sure, however, that we all realise that though the present phase of the war may, in the words of President Roosevelt, be said to be the beginning of the end, as against the end of the beginning, that end is not yet. It is true that the light from the sun of victory has begun to show itself over the horizon, but the sun has not yet risen, and we are some way off from the time when day will actually break upon a disordered world.

If this were a more extensive Debate, I would venture to enlarge upon another question which arises from the war expenditure and the consequences of it, but I understand that it is not desired to go into great details to-day. That must not be in any way taken to represent a lack of interest in the Committee or the House in the expenditure of this large amount of money and the consequences which it involves. In fact, what we are doing is in effect, although not in form or substance, to consolidate the decisions which the House is taking every day. This much I would like to say on a matter about which I asked a Question to-day. I am sure that all Members of the Committee realise the vast importance of the question of the rates of exchange between the different currencies of the nations of the world. It affects what is going on during the war, but it will affect with far-reaching consequences what takes place after the war. I hold, and I believe it will be generally supported, that some of the mistakes we made after the last war in matters of exchange played a large part in bringing about the disastrous events in the inter-war years which led up to the war which we are now waging. Therefore, I am sure that at an appropriate time the House will wish to have more facts with regard to the intentions of the Government as to fixing the rates of exchange. I realise, as I am sure the Committee does, that the rates that have been fixed in the present instance were not a matter for this country alone. They represent the joint decision of the British Treasury and the United States Government. We had to make our decision in the light of the views of the United States. I was very glad to hear the Chancellor use the word "provisional" of the rates fixed, and I would emphasise that this has been made realistic to us by the fact that the rate fixed in North Africa is not identical with the rate selected for Sicily. Therefore, the rate fixed to-day is not finally binding on us in our relations with Italy in the years to come. Nevertheless, the Committee will realise the great difficulty of playing about with exchange rates and changing them. That cannot be done easily; it can only be done with great difficulty, if it can be done at all. Therefore, I wish to point out to the Chancellor the great importance of fixing these rates correctly, so that they do correspond with real parity of purchasing power, and may be suitable in the years to come to regulate the flow of trade between different countries and prevent the grave consequences of maladjusted exchanges, which might work havoc with the future trade, prosperity and peace of the world.

Mr. Hely-Hutchinson (Hastings)

I understand that it is not the desire of the Committee to have an extended Debate on this Vote of Credit, not because the Committee is not interested in it, but because there is other Business to discuss to-day, but I would like to echo something which was implicit in the suggestion of the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) when he gave evidence that as a result of considering this Vote of Credit his thoughts flew to our post-war position, particularly as it may find expression in the rates of exchange between other countries and our own. I should like to say that my thoughts flew to the post-war position, but on an even wider basis than he indicated, for I am not inclined to pay too much attention to rates of exchange, price levels or rates of interest as ends in themselves, because I think they are expressions in terms of money of activities which really deal with men and materials. I should like my right hon. Friend the Chancellor to know that some of us would welcome an opportunity of a comprehensive Debate upon the post-war position. There may be such an opportunity when we are discussing the Overseas Trade Department, but I am not sure that that opportunity would not be rather limited. We need to consider a large number of factors which enter into our post-war position.

Mr. Benson (Chesterfield)

Position of what?

Mr. Hely-Hutchinson

Our post-war position vis-à-vis other countries; out general position in the world with regard to trade and our general financial relations with other countries.

The Chairman

rose—

Mr. Hely-Hutchinson

I am not proposing to discuss that now. I am only trying to reinforce my right hon. Friend's suggestion, and say that I hope an opportunity will be given to us to have a wider discussion.

Sir Frank Sanderson (Ealing)

My right hon Friend the Chancellor has, quite naturally and rightly, stressed the need of conserving our resources, and I should like to ask him whether he is able to tell the Committee whether it is permissible for foreign nationals to withdraw their credits and send them abroad. I understand that a considerable amount of foreign securities have been or are being sold in London, and the credits from those sales have been exported abroad. If that be true, it seems to me quite wrong that foreign nationals should have any special preference over restrictions which control our own nationals, and I feel that it is a practice which my right hon. Friend should consider and see that it is stopped forthwith. If it is not true, I hope he will take the first opportunity to make a clear and comprehensive statement on the position.

Mr. Craven-Ellis (Southampton)

I have in the past congratulated the Chancellor of the Exchequer upon the successful way in which he has managed the Budget within the framework of the machinery which the Government have designed for this purpose, but, while I congratulate him, I am at the same time extremely critical of the machinery under which he is operating the Budget. We have a Vote of Credit for £1,000,000,000, and, as far as I am able to judge, before this war is over there will be many other Votes of Credit. The National Debt stands at just over £18,000,000,000, and if we finish this war with a National Debt below £22,000,000,000, we shall be extremely fortunate. But I am concerned with what all these Votes of Credit ultimately mean. We are already paying in taxation no less than £1,700,000,000 in excess of what we were paying in 1938. In 1938 that represented a percentage of 24 per cent., and the figure for 1942 represented a percentage of 38 per cent. The point to which I wish to direct the attention of the Committee is this: In 1938 the national income was £4,900,000,000, and in 1942 it was £7,800,000,000, and taxation called for no less than 38 per cent. of this. One has to bear in mind that the larger national income of £7,800,000,000 in 1942 was made up to a very large extent by several million women being employed in British industry who were not employed in 1938 and the payment of very substantial bonuses and overtime. When the war is over and we get down to what one would call normal conditions, it is obvious that the national income will be substantially less than £7,800,000,000, but while that income will come down substantially the taxation will go up. Therefore, instead of taxation requiring 38 per cent. of the national income, as in 1942, it may well require—

The Chairman

The hon. member is not entitled now to discuss taxation after the the war.

Mr. Craven-Ellis

While I bow to your Ruling, Major Milner, I only wanted to warn the country of the dangers of this method of financing the war. If we are to continue with this method of financing the war, I have grave fears for the future of British industry and of most people who are engaged in that industry. Is there no alternative to the machinery which the Government have set up for financing the war? I believe there is. In 1939 the Federation of Master Cotton Spinners and the Parliamentary and Monetary Committee circulated to Parliament a proposal for financing the war, and in that pamphlet we advocated that the Chancellor should consider what is known as excess Income Tax. Hon. members should not confuse it with Excess Profits Tax. I submit that had the Chancellor—

The Chairman

The hon. member will appreciate that under this Vote we are discussing expenditure. The Vote of Credit is for expenditure arising during the war, and the question of methods of taxation does not arise.

Mr. Craven-Ellis

I feel that I have not gone more outside the bounds of your Ruling, Major Milner, than the previous two speakers, who were speaking on postwar rates of exchange. However, I submit to your Ruling, and if I am prevented from dealing with this subject in the way in which I think it should be dealt with, I would remind the Chancellor that if he is coming to this House every two or three months with these Votes of Credit, in that way using the present machinery devised by the Government, we shall end this war in a very serious position, and the sooner we realise it the better. I am surprised, holding these views, that we hear so little from the Ministers responsible of what will be the post-war programme. The right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) has said that the Committee will be unanimous in supporting this Vote of Credit. I do not want to disappoint him, but if there were a Division, seeing that I am not able to debate this matter to the extent that I feel is necessary, I would vote against this Vote of Credit.

Mr. Stephen (Glasgow, Camlachie)

My hon. Friends and I take a somewhat different line on these matters from most other hon. Members, but we have indicated that we have no wish unduly to take advantage of the opportunities provided for expressing our views. Since I came into the House of Commons, more than 20 years ago, this House has been responsible for enthusiastic support of many policies which have involved a good deal of expenditure. I once introduced a Bill in connection with old age pensions, with the aim of increasing the pension to £1 a week. Many people then asked me where the money would be found. Now I come here, and hear credits of £1,000,000,000 voted again and again. It is worth while pointing out that if expenditure had been devoted in the past both in this country and elsewhere to developing the well-being of the people, there would be no need for this tremendous waste of money in war. In the future I hope the truth will be realised that money spent on the well-being of the people is better than expenditure upon war and destruction.

Sir Stanley Reed (Aylesbury)

To-day, and upon an earlier occasion, the Chancellor of the Exchequer has drawn our attention to the easement in our finances resulting from the generosity of the Canadian Government. Will he now, or on some convenient occasion, tell us how far the easement in our finances has been influenced by the action of the Government of India in their effort to meet the heavy expenditure of the Armed Forces in the Middle and Far East? I am not referring to the repatriation of the sterling debt, which has left only an insignificant sum outstanding, but to those very large sterling balances which are being built up in this country to the credit of the Government of India. I think I am correct in saying that our financial conduct of the war would have been much more difficult without acquiescence in this policy. I hope the Chancellor will be able to inform us how our finances have been eased by this action and what is the amount of the sterling balances on the latest accounting date.

Mr. David Adams (Consett)

It is very interesting to hear that but for the Canadian Government's generosity towards our war expenditure, this already colossal sum of £1,000,000,000 would probably have been substantially higher. The Chancellor of the Exchequer has mentioned that where economies can be effected they ought to be achieved. While we recognise that in the non-combatant section of the Armed Forces, particularly in this country, there must unquestionably be great redundancy, no one would suggest at this stage there can be any spectacular economies, but I hope that the Chancellor and his advisers will keep a very close watch upon the advice which is given to them in. the various Reports of the Select Committee upon National Expenditure, where suggestions are made for opportunities of substantial economies, immediately there is a diminution in our war production. That we are on the edge of this phase would appear to be evident.

On Tyneside certain classes of labour hitherto accustomed to working on piece, have recently been placed on time work. Under this change, output falls, of course, for lower individual and squad wages, to about one-third or one-half of piecework production. Close Treasury attention to this changing aspect of industry's war tasks, if it develops—and it may do so rapidly with our expanding victories—would inevitably provide wide fields for financial retrenchment.

Sir K. Wood

I am indebted to the Committee for their acceptance of this Vote, and I will take account of and consider everything that has been said. I regret that my hon. Friend the Member for Southampton (Mr. Craven-Ellis) was not able to develop his argument on this occasion. If he would like to send me anything in writing about his proposal, I will, as he knows, always look at it and consider it. I should like to reply in a few words on the question of how far foreign nationals can withdraw their assets. If the hon. Member who asked me the question would send me further particulars about it, I will consider what action can be taken. In the meantime, I am informed that foreign-owned sterling balances can normally be withdrawn and spent anywhere within the sterling area on the purchase of goods and services, but sterling securities owned by non-residents cannot be sold nor can money be borrowed in the United Kingdom against them. It would therefore be wrong to say that foreign-held assets can be withdrawn, in the way that the hon. Member indicates.

I agree that it should not be thought, because we are only having a short Debate to-day, that Parliament is not concerned and interested in this matter. It can be said with truth that Parliament has discussed in one form or another methods of finance and related questions more frequently during this war than in any other period. If one looks back at the number of important Debates we have had since the beginning of the war, it cannot be said that Parliament has in any way neglected its duty. We have given many days and much consideration to questions of finance, and I shall be only too glad to consider, in connection with the Leader of the House, suggestions that have been made for further discussions at a later date.

Question put, and agreed to.

Resolved, That a Supplementary sum, not exceeding £1,000,000,000, be granted to His Majesty, towards defrnying the expenses which may be incurred during the year ending on the 31st day of March, 1944, for general Navy, Army and Air services and supplies in so far as specific provision is not made therefor by Parliament; for securing the public safety, the defence of the realm, the maintenance of public order and the efficient prosecution of the war; for maintaining supplies and services essential to the life of the cornmunity; and generally for all expenses, beyond those provided for in the ordinary Grants of Parliament, arising out of the existence of a state of war.

Resolution to be reported upon the next Sitting Day; Committee to sit again upon the next Sitting Day.