HC Deb 11 April 1949 vol 463 cc2567-600

Mr. Attlee said at Glasgow yesterday that there was no reservoir untapped by which the people could get more benefits, except the reservoir of their own skill and effort.

If a section of the workers made use of a key position to do little work and extract disproportionate wages, they are just as much exploiters as the property owners who used to hold the nation to ransom. They are acting anti-socially."

The bit about the property owners holding the nation to ransom is not true.

The L.C.C. and the county council elections show that the people are at last realising that State control is disastrous, and that the very Budget which the Chancellor has introduced shows that he is compelled to come back in some degree to the principles advocated from this side of the Committee. Some of the election promises have been kept, but only with borrowed money.

There is a summary published in "The Recorder" this week of a speech—[Interruption.]—It is not the opinion of "The Recorder"; it reports a speech made by Mr. Leslie Gamage, which I want to go on record in HANSARD. He said at a meeting of the General Electric last week: We are living in a strange kind of world—a topsy-turvy world. … It is a world of weeping, wailing and nationalisation of teeth—a world in which the whole British nation is living, apparently unashamedly, on the voluntary charity of another great nation, whilst internally a large portion of our population is living, equally without shame, on the enforced charity of the rest—a mass degradation unheard of in our history, which is sapping the moral fibre of our people, and all the more dangerous because its full effects may not be seen for a decade. There has never before been such need for enterprise. They were implored by the present political leaders to put forth all possible enterprise, and yet every incentive to do so was taken away—in every risk we are called upon to take we know that the bulk of any winnings will go to the State; the losses will be for us to bear.

He talked about production from overseas getting worse and the inevitable reduction of our exports.

Mr. Ellis Smith (Stoke)

What dividend did the General Electric pay?

Sir W. Smithers

I hope that it paid a very big one. It seems all wrong to deprive people of initiative and enterprise, who make their businesses a success and earn profits, of those profits compare them with the losses made by all the nationalised industries which we see to date.

I said just now "especially in England" because England is different from every other country in the world, in that we are not and cannot become self-supporting. We have to export on world competitive prices or starve. Our costs of production, now that the seller's market is drying up, are too high. Whatever the sacrifice, if we are to exist we have to get our export costs of production down to world competitiveness, and we have to produce goods at a price which the foreign consumer can and will pay. The sellers' market is drying up. I was talking only the other day to some big industrialists, grand people who are trying their best to help the country. They all said in effect that the export returns will not show it for four or five months because of the orders already booked, but the orders were not coming in anything like so fast, and they saw a great difficulty in exporting, say, towards the end of the year.

We have talked in millions, but there is no difference in principle between the Budget of your home and mine and the Budget of the country. It may be £1 a day or £100 million a day, but the principle is ever the same. If we spend more than our income, we can go to the money lenders for a time, but the more we borrow and the longer we put off the day of reckoning, the more terrible is that day of reckoning. I tried without success to look up in "David Copperfield" the quotation about "income £20, expenditure £19 19s. 6d.—happiness; income £20, expenditure £20 0s. 6d.—misery." The policy of Socialism takes away incentive and initiative. It may be a hard thing to say that the only spur for progress is the fear of loss and the hope of gain. If we take away initiative and incentive, we take away the mainspring of the watch and then expect the watch to go.

I would remind the Committee, as we are allowed to take a broad view of the Economic Survey, that our Civil Estimates have risen in this century from £23 million in 1900 to £2,100 million in 1949—nearly 100 times as big. The other day, I spoke to a very prominent Socialist and gave him those figures. He said, "That is the only way of distributing wealth." When I pointed out to him that by doing that we took away all incentive and all initiative, and soon there would be no wealth to distribute, he said, "I never thought of that." [HON. MEMBERS: "Name."] There is honour among thieves. That is what the Chancellor has had to think of this year. He has had to face facts.

I hope that hon. Members read the annual speeches of the chairmen of the "big five" banks, because they see how the business of the country is going from day to day and where the ups and downs are. They all unanimously advocate a reduction in Government expenditure. We have been asked how we would cut the social services. They have got to be cut because if they are not they will cut themselves. The Chancellor of the Exchequer told us only a week ago that the purchasing power of the £ was 7s. 1d. as compared with its purchasing power in 1914. If this squandermania goes on—and the Chancellor has had to stop it because he has seen the red light—we shall only he paying our benefits on social services in pieces of paper which will gradually have less and less purchasing power.

I want to turn to the Paper the Prime Minister issued as a result of a speech in 1948. On 4th February, 1948, the Prime Minister made an appeal to the country to restrict dividends, profits and wages, and the Chancellor of the Exchequer on several occasions—I speak from memory; I think it was at Workington and at a Press conference—acknowledged that the bargain in respect of dividends and profits had been kept. I went to the very efficient research department in the House of Commons Library about a week ago to find out the figures of the rise in wages since the Chancellor made his appeal. I find that since the appeal was made the rise has been between £90 million and £100 million on an annual basis, which proves that the Government are not able to resist the demands of the T.U.C.

The T.U.C. are their paymasters and masters, and unless the Government have courage to stand up to them in any future demands for wages, disaster will follow. We know there are demands for 500,000 railwaymen, and that further demands are coming in from all over the country. I ask this simple question. What is the good of a thousand pounds a week if the money is worthless? I have a 20,000 mark note that was issued by Germany after the 1914–18 war. Its value then was about £1,000, but in the end it was not worth the paper on which it was written, and yet, because that country was self-supporting, and in spite of the fact that their currency crashed, they were able to build up a war machine which necessitated the last war.

I would remind Members again that ours is a country which is not self-supporting. We cannot afford to destroy confidence in our currency. We must export at world competitive prices. One of the most dangerous speeches in this Debate was the speech of the hon. and gallant Member for Central Hull (Captain Hewitson). All I would say about his speech is that if there is an avalanche of wage claims and strikes we are simply heading straight for Communism. I see that there are 12,000 dockers out on strike tonight. I wonder whether they realise the desperate situation of this country. What a wonderful gesture it would be if the dockers and others, instead of striking, would say, "Yes, we realise the country is in danger and we will put in half a day's work a week for no pay at all." [Laughter.] Members laugh, but it is that kind of gesture that would see the country through.

Mr. Edward Evans (Lowestoft)

What about those who go to the Savoy and Ritz every night?

Sir W. Smithers

Another point is that e cannot have high wages unless the wages are there, and wages depend on production; we cannot have wages unless the production is there with which to pay them.

I hope Members have studied the Labour Party's programme for their conference which was published in "The Times" of 29th March. Most of the resolutions are sheer folly and madness. I hope the Government will have the courage to resist these resolutions, otherwise it will be national suicide.

Mr. Ellis Smith

Why does not the hon. Member go to the conference?

Sir W. Smithers

I wish I could, but I have not been invited.

This Budget and the country are dependent on Marshall Aid. I would remind Members that Marshall Aid is still renewable annually. There is no time to lose, because in three years' time Marshall Aid ends. We must be able to stand on our own feet within three years, and the only way to do that is to get this Government out and return to free enterprise and face the facts now. Whatever hardships that might cause now, it will be as nothing to the complete disaster which will otherwise result.

There are many reasons for our difficulties and why the Chancellor has had to face up to the facts. One of the main reasons for our difficulties is bulk purchasing and State trading. If only we could get rid of the Minister of Food the country would be a better place, because bulk purchasing inevitably means bulk selling. State trading is dangerous because it generates not only economic heat but political and international heat as well. We had much better stick to our Empire and have free trade within the Empire. The losses of the Ministry of Food are too appalling for words. We have been told of £10 million lost on potatoes, which will probably be nearly £20 million. Vegetables and potatoes have been imported at a time when the Minister of Agriculture has been imploring farmers to grow them, and in many parts of the country vegetables and potatoes are being ploughed in because of the purchases from abroad by the Minister of Food.

Reference has been made to the 1931 crisis. I can speak with some knowledge of that crisis, because I was, as it were P.P.S. to Mr. Neville Chamberlain when he and his party were in Opposition. All I can say is that we are approaching another similar crisis. We may have ups and downs and bits of luck here and there, but the end is certain, and we have no Marshall Aid then. The position is so much worse today that if a crash came—I think it must come while the present Government are in power—it would be far worse than it was in 1931. The outstanding point in the O.E.E.C. report is that, when the end of the Marshall period comes, Western Europe will still have a deficit of 3 billion dollars on current account. I do not know whether hon. Members opposite realise that.

The Government have been compelled to face facts. I have mentioned the 1931 crisis. Let us learn something of what happened then. We face a similar situation today. Mr. Ramsay MacDonald, speaking at Kilmarnock on 22nd September, 1933, two years after the 1931 crisis, said: Two years ago the problem that we had to face was not merely the question of the distribution of wealth, it was the question of the existence of wealth itself. That is true today. In "The Times" of 3rd October, 1931, one of our finest Englishmen, Lord Grey of Falloden, wrote this: My own belief is that the policy of the present [Socialist] Opposition would lead to national ruin and consequent distress and suffering such as this country has never yet seen and the severity of which is immeasurable. It was true, then, and it is true today. When a family is bankrupt—after all, we are bankrupt today because we are living on borrowed money—they do not take on more servants. They economise. Yet, from 1939 to 1948 the total number of civil servants in national and local government rose by 761,000. The figure comes from the "Monthly Digest of Statistics," for December, 1948. This is an estimate, which was got out by an accountant. It may be all right 100 or so either way. I give it to show the enormous amount involved by multiplying the thousands and thousands of civil servants. My friend reckons that if we take the money paid to a civil servant, who is a drone in the hive, and if we take account of what he would earn if he were a worker bee in the hive, each of those 761,000 would cost us £1,500 a year. If we multiply that £1,500 by 761,000 we get the sum of £1,141 millions a year. I give that figure to show the enormous amount involved in the increases. We must somehow or other cut it down.

I would ask hon. Members to read the article by Lord Brand in "Lloyds Bank Review" for April, 1949, a remarkable article. He said this: I should define very broadly the Government's main duty to be to maintain firm the framework within which the bees are to make and store the honey rather than to try to make the honey themselves.… I have a feeling, I hope without foundation, that if he [the Chancellor of the Exchequer] were to stand in front of a beehive he might exclaim: 'But this is too disorderly for anything. These bees are flying about in every conceivable direction. There must be great waste and inefficiency here. We must bring some order and planning to all this.' The Government have been compelled in the Budget to face facts. They have had to call a halt to the food subsidies. The National Coal Board had to face facts. It had to say to Monkton Collieries: "Unless you produce at a competitive price you will have to close down." The Ministry of Transport had to say on 16th March that railway fares were at a peak. I beg hon. Members to read the report of Sir Cyril Hurcombe in "The Times" of 26th March, on the losses of the railways. With all these experiences of the losses on nationalised industries the Government are going to commit the further folly of nationalising iron and steel.

Part of the money in the Budget is for Defence. The Chancellor of the Exchequer is the economic and financial dictator of this country. If, unfortunately, we have to go to war with Russia, what would be his attitude? He got into power by revolutionary talk and stays in power by talking orthodoxy. I believe his one ambition in life, whatever he says, is to stay in power.

Mr. Ellis Smith

Do not go too far, he is listening.

Sir W. Smithers

As evidence of what I have said, I would point out that on 10th February the Chancellor of the Exchequer made an appeal for recruitment to the Forces. Here are two sentences from his appeal: Twice our country has exhausted itself by pouring out its resources to save the world from being dominated by totalitarian dictators."— he is trying his best to be a totalitarian dictator— The more equal the distribution of wealth in the country and the more each of us demands a voice and influence in our national affairs, the greater is the obligation we carry to take part in the protection of those good things. He talked about the distribution of wealth, but very soon there will be no wealth to distribute. He said: The uniform of the Armed Forces is and should be a hall mark of good citizenship. Yet what did he say before he had responsibility of office?

Every possible effort should be made to stop recruiting for the Armed Forces.

Mr. Ellis Smith

That was a long while ago.

Sir W. Smithers

When a member of an audience described what he called the menace of Germany, the right hon. and learned Gentleman said he thought it would not be a bad thing for the working class if Germany defeated us, but it would be a disaster for the profit makers and capitalists. He also said: Money cannot make armaments. Armaments can only be made by the skill of the British working class and it is the British working class which will be called on to use them. Today you have the most glorious opportunity that the workers ever had if you will only use the necessity of Capitalism in order to get power yourselves. The capitalists are in your hands. Refuse to make armaments; refuse to use them. That is the only way you can keep this country out of war and obtain power for the working class. Refuse to make armaments and the capitalists are powerless. The right hon. and learned Gentleman also said: God, king and country, which, being translated, means capitalist, property and profits.… If we are plunged into war I devoutly hope that the workers of this country will use it for the purpose of revolution. I, as a citizen of this country, want to know where he stands today. [Interruption.] I gave the Chancellor notice that I was to make this attack on him, but he has not found courage to come and sit on the Front Bench. I want to know where he stands. Does he want an increased Army to carry out his fell wishes when the revolution comes?

I wish to conclude with a quotation from Rudyard Kipling—[Laughter]—if the House will allow me. With respect to his memory, I am altering one word: In the 1945 election we were promised abundance for all, By robbing selected Peter to pay for collective Paul; But, though we had plenty of money, there was nothing our money could buy, And the gods of the copybook headings said: 'If you don't work you die!' Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew, And the hearts of the meanest were humbled and began to believe it was true That All is not Gold that Glitters and Two and Two make Four— And the Gods of the Copybook headings limped up to explain it once more. And after this is accomplished, and the brave new world begins, When all men are paid for existing and no man must pay for his sins. As surely as water will wet us, As surely as fire will burn, The gods of the copybook headings With slaughter and terror return. The Chancellor in his Budget had to realise that if he did not present something in the way of an orthodox proper financial statement, he would have the old laws, "the gods of the copybook headings," coming back to slaughter him and the country.

8.41 p.m.

Mr. Ronald Mackay (Hull, North-West)

We have listened today to two good debating speeches, and I do not think that I should be doing justice to the Committee if I did not express the enjoyment which we have derived from the speech to which we have just listened from the hon. Member for Orpington (Sir W. Smithers). I am glad that the Chancellor, although about to be slaughtered by the old gods who are about to come back to life, is ready to face what is to come to him in the future if the hon. Member's words turn out to be correct.

Sir W. Smithers

They are.

Mr. Mackay

I would like to direct the attention of the Committee to two or three problems which I wish to put before them in regard to the whole question of the Budget and particularly in connection with the Economic Survey. We have so far had a very wide discussion on the financial implications of the Budget with which I do not wish particularly to deal tonight. I do not think that anyone can deny, in considering the speeches, particularly that of the Chancellor of the Exchequer, that whether one is critical or not, this is easily one of the most important Budget speeches which this House has ever heard. It is particularly important among the Budget speeches since the war, because we are confronting and are confronted with a dilemma which the Chancellor has not yet resolved but of which no doubt he is quite aware, which has been expressed in a lot of critical speeches to which hon. Members have listened with sympathy.

We have, on the one hand, this proposition or general description of the position that taxation is now taking 40 per cent. of the national income, food subsidies are in the region of £485 million, and the social services have come to stay, and at their present level of expenditure. That point is very interesting and important because we are accepting that part of the national division of income which is at present allocated to the social services. We also have the proposition put to us that we cannot increase taxation any further. On the other hand, there is that group of Members who have been raising questions which are self-evident and which we must all accept. They are that even though these factors are true and raise difficulties in our minds, the fact still is that the cost of living is high, that a large number of people, in spite of what my hon. Friend the Member for Sowerby (Mr. Houghton) says are earning very small amounts of income per week and that they constitute a very large section of the community. Further, it is evident to anyone who goes around the country that in many of our warehouses we have goods of different kinds, stocks of all kinds, which we cannot sell either in this country or abroad.

In the light of the speech of the President of the Board of Trade, with which I hope to deal later, this is rather astonishing to me. I can take the Chancellor or the President to factory after factory, warehouse after warehouse, in this country in which there are woollen goods and other textile goods manufactured for export, the best goods which this country produces. Those warehouses are full. I have spent the week-end advising a firm who own a factory not far from the constituency of the Chancellor of the Exchequer and not far from one with which I was associated in days gone by. This firm is very worried, it has so much money tied up in stock which is not selling sufficiently well. The firm is unable to get rid of the goods which it is able to manufacture. This is not an isolated case. It is a state of affairs to be found in factories in Bradford and Leeds.

This is the dilemma with which we are confronted. There are things in the economic system which we want to change but obviously there is nothing which can be changed in the Budget for the reasons put forward by the Chancellor in his speech. We cannot consider at the present time increases in taxation or re- leases from taxation as a way in which some of these things might be dealt with, and I wish to make some suggestions with regard to a constructive way in which to deal with these problems. The Chancellor made it clear that the future of this country lies in increased production. He went on to make it clear that that does not mean that we can get any more manpower to increase our production in the sense of efficiency. I wish to look at the problem from that point of view to see if this dilemma can be resolved, because it is not a dilemma of a Socialist community at all. It is the dilemma of Great Britain in the mid-period of the twentieth century when her whole position in the world is changed. I do not think that fact is being adequately faced.

I would suggest that the whole policy we are accepting for the moment is the wrong policy. I do not deny that the Budget conclusions are the only ones to which any one could come today; but if we think that within a few years we can solve the dollar crisis we are making a mistake. I suggest that the dollar scarcity has come to the world for good, or at any rate for the whole of this century, and we have to think entirely differently from the past and on the basis of the White Paper.

The President of the Board of Trade made it clear that we are trying to sell more goods in American and Canadian markets. I would suggest that this is really quite impossible. America today, with 140 million people, is producing more than are all the other 260 million people in the world put together; more than Britain; more than the millions of people in Europe, India and China. America today has a national income which is as great as that of all the peoples in the rest of the world put together. There, 140 million people have a national income as high as that of all the other peoples in the world put together. At the same time, from the point of view of savings, in 1948 savings in the United States were as great as those of every other country in the world put together, including Russia, the whole of Europe, India and China. Yet we are saying that we can get together and, by multilateral trading, by changing the basis of our economy or making things which the American and Canadian markets will take, hope to be able to right this position within a few years. I would ask the Committee and the Government to think out this one again.

If Great Britain had played the part in the nineteenth century which America is playing today in world production we should never have had the prosperous and successful nineteenth century which we had. Look at the problem in another way. If we compare Great Britain before the first world war and America last year we shall find—and this is the interesting thing—that the external trade of Britain was many times her savings. If we look at the position of America, her savings are and have been for many years greater than her external trade. And American savings were internal, domestic, to the extent of 80 or 90 per cent.; whereas the savings of Great Britain were overseas, and provided the markets in which we could sell our goods. The whole comparison shows the different position in the world today of America and this country. I would seriously suggest to the Committee and the Chancellor—although I am sure that he realises this and probably understands it ten times better than I—that if it is correct that because of the enormous part America plays in the world there is to be a continued dollar shortage, then we have to consider what we are to do to be able to deal without it. We have the interesting position that the terms of trade are no longer in our favour.

The Chancellor drew attention to what I thought was a most interesting feature in the course of his speech. Dealing with food, he pointed out that the trouble is the increased price of foodstuffs in this country, but no one will say that the farmworker should go back to the 30s. a week he had before the war. The £4 10s. a week has come to stay, and so have the high prices of food. In comparison with the low prices with which our trade was built up before 1930, high prices of foodstuffs have come to stay. The terms of trade will never be in our favour. That is my conclusion.

When we look at the problem further, we remember that they have bulk buying in America—a point which the hon. Member for Orpington ought to recall. We know that has made the farmers there prosperous. They have fixed prices there and also in Australia and New Zealand. They will not go back on them. To the extent to which they sell wool, meat, wheat and butter to this country and Europe, we shall never see the prices which meant depression in many of the primary producing countries in the past. There is a dollar shortage which is permanent; we have terms of trade which will never be as favourable as they were and never sufficiently favourable for us to be able to make ourselves into a satisfactory export market as we hope to do.

Then we consider the sellers' market which obviously is declining and has been declining for many years. One of the most interesting features in the Interim Report and in Mr. Hoffman's Report to Congress on E.C.A., on 14th February, is that in the main industrial production has increased since the war, but world trade has not increased. It is only 75 per cent. of what it was in 1938. In the Interim Report of the European Recovery Programme there is a very interesting series of paragraphs showing that for 35 years trade in manufactures has been going down. Europe which used to export about one-third or more of the exports of the world now exports less than one-tenth. At the moment the export figures for this country for 1948 have been dealt with on a sellers' market which every one realises is going to break in a world in which the trade in manufactured goods is going down.

I ask hon. Members to read—I think it is in the Library—the recent report of the Australian Tariff Board. They should see the extent to which Australia, a member of the Commonwealth, is keeping out rayon goods from this country in order to let six or eight firms in Australia, by the most absurd operation of tariffs of over 300 to 400 per cent., build up their position. That is true the world over. Yet, these are the markets in which we think we shall be able to sell our exports. The President of the Board of Trade, in a very interesting speech on the whole problem of trade with Canada, I think, misses the whole point. The point can be seen in the article by Professor Mackintosh in "Lloyds Bank Review." We are big exporters of steel to Canada, but they are making their own strip mills and they will be independent of British steel. I do not say that they are doing that in order to be independent of Britain. They are doing it because that is the general tendency in the world today, to build up industries in individual countries. That will have an enormous effect on our exports abroad.

Quite apart from that, we have the whole price problem of bilateral trade which we have been developing. There has been plenty of comment from Canada. The Canadian Reserve Bank Report draws attention to this at very great length. It points out that as a result of the way in which we have been carrying out bilateral trade in Europe, our prices have gone up. As a result of that, in other words, Marshall Aid is having the effect of putting up the export prices of European goods. That will mean a wider gap between this country and Canada.

The whole problem is very difficult and is tied up with the question of dollars. Therefore, it is most important that we should make up our minds. This afternoon the President of the Board of Trade knocked bilateral trade completely on the head. I was delighted to hear him. It is most important that it should be knocked on the head. He said that he realised that it is expensive and uneconomic and an entirely wrong way for this country to try to trade. Therefore, we are left with multilateral trade in a world which is a declining field for manufactured exports, in a world in which there is a dollar shortage which is bound to be permanent, and in a world where the markets we have had for the last few years are going down.

I ask the Committee this question: Can we ever make an economic success of this country by continuing this process of multilateral trade? If it is said that we can go on with the export drive to build up multilateral trade, what are we going to do? The answer to that is not simple but it is clear, and it is that the economic areas of the world are different in the twentieth century from what they were in the nineteenth. We have to learn from American prosperity. If a country of 140 million people can build up this enormous production, why are they able to do it?

One can say that they have not been at an economic disadvantage in two world wars, and that is quite true, but it is not the only answer. We might say that it is because they are very intelligent people, and we might go on to give a whole lot of reasons. The fundamental reason is that they have a large market, where there is much more planning than hon. Gentlemen opposite would acknowledge. It is a very large market. The President of the Board of Trade told us today that in the Colonies and Canadian markets we have 180 million people who are wanting our goods, an area which can become not self-sufficient but very near self-supporting.

I suggest that the factors that make for American prosperity are a large market, with mass production and standardisation, and I suggest that this country could recover the prosperity which it has not seen since the years before the first world war if we could get ourselves quickly into some system by which we had a common currency with the 10 or 15 countries of Western Union and could get rid of the Customs barriers that now exist, whatever political consequences that might entail, which would result in creating a real market for the people of this country to sell their goods, as they used to do in Paris and the other capitals of Europe, with the free movement of population and all that that entails.

In order to achieve that prosperity, we must have the proper integration of our industries with the industries of Western Europe, which will alone be able to bring this about. Once we have done that, a lot of things will follow. If we take away the Customs barriers that now exist between Britain and the European countries, it may mean bankruptcy in a lot of cases. I do not deny it, and the sooner it comes about the better, because one of the factors concerned is the inefficiency of private enterprise. About 80 per cent. of our industry is still in the hands of private enterprise and the same applies on the Continent, and the sooner the barriers are down, the better it will be.

If we are to have private enterprise, then let us have competition but, by these things we are preventing this competition in Europe, while American industry has this competition and the extent to which it is efficient is evidenced by its free trading market. I do not fear this question. It may mean many bankruptcies, but the sooner that happens the better, because as I say they would only show up the inefficiency of private enterprise. But it might also mean unemployment, and that is a serious matter. I want to see the economic activities of Britain at least integrated with Continental production and the goods in our warehouses sold abroad. When we come to consider the very interesting list of the goods which we may get in 1951 and 1952 under Marshall Aid, we should honestly face the fact that many of these things we need not be getting at all, if we had a common basis of trade and production with Europe.

Let me give one example, because it is the clearest example in this case, with regard to bread and wheat. When we look around Europe today, we see that we shall not be able to get sufficient wheat from Europe as a whole in order to be able to live and we have to turn to the Western Hemisphere but, if we look at the Interim Report of the European Recovery Programme, we see that it was made quite clear that it is only if we develop the wheatfields of Europe and integrate them with our own, that this scheme will apply at all. I cannot find the paragraph, but it is there. The fact is that the working party set up by O.E.E.C. in Paris did state that by proper handling in France and other European countries the grain production of Europe could be increased by 17 per cent., which would mean that we should not be dependent on the Western Hemisphere at all in 1952.

One could go on with this sort of discussion in many ways, but I do not want to delay the Committee; I only want to point out that, at the moment, we are developing our economy in isolation from the other European countries. We are having something given to us by the French under this Budget, but, in fact, there are large resources in Europe which we could be getting. Admittedly, the dairy and agricultural products of France are dearer than those we are at present getting, but the problem could be resolved if we drew the conclusions which are to be drawn from the fact of American production, that it is the large area that is responsible for their large production. If we face the position of the dollar shortage in the world today and recognise what that means to our attempt at multilateral trade, and recognise that we have not much opportunity of making a success of that trade, we must draw the conclusion that it is important to get ourselves into a larger area.

I wish to suggest to the Chancellor that he develops what has already been developed in Paris, to a degree much higher and at a rate much faster than it is being developed. If we could have a common currency with Europe at the end of 1950, and get rid of the Customs barriers at the same time, we should have an area and a population and resources similar to those of the United States. It is on those lines that our prosperity is to come. If we go on as we have been going, back to the world of 1931 or 1939, we shall not succeed. The only solution of the dollar and productive problem is to get into a big trading area of the Western European type and bring about the changes necessary to do that.

9.3 p.m.

Major Bruce (Portsmouth, North)

The Committee always listens with very great interest to the views of my hon. Friend the Member for North-West Hull (Mr. R. Mackay) whose knowledge of international trade, and whose views on Western Union, are extremely well known. I shall deal with his principal contention a little later in my remarks. I wish first to return to the dilemma he posed to the Chancellor when he put before the Committee the position which he thought arose from the fact that, at the present time nearly 40 per cent. of the national product went in taxation. This is a dilemma which has been put forward during the last two or three days by the majority of hon. Members opposite. The case as they put it, is that if one takes away an undue amount from the personal spendable income of the vast majority of the population then, no matter what we may return to them by way of social services, whether by ordinary welfare or food subsidies, that is the essential process which stultifies initiative.

Indeed, the position was put by the right hon. Member for West Bristol (Mr. Stanley) in his broadcast last Thursday night, when he said that he had little use for a future in which all of us were going to get mathematically equal slices of an ever decreasing cake. That, I think, is the broad, general philosophy which has so far underlain the bulk of the observations addressed to this point by the Opposition. It undoubtedly arises from the examination of the figures for national income and expenditure which disclosed that, whereas in 1938 individual consumers as a whole were allocated 72 per cent. of the national product, in 1948 they had only 62 per cent. From that has been drawn this extremely dismal and gloomy picture of a population which, owing to this particular process, is becoming, stultified and will presently cease to exercise any initiative at all.

Before we make up our minds whether or not there is any truth in the contention, we have to examine what the whole body of consumers in this country received in 1948 and what they received in 1938. If we turn to the figures for national income and expenditure in 1946–48 in Cmd. 7649, Table 21, we find that 72 per cent. of the national product in 1938 enabled the population at large to purchase goods and services of the value of £4,262 million. In 1948, although the consuming public had only 62 per cent. of the national product, they were able, after making adjustments for prices back to the 1938 level, to spend £4,400 million.

That indicates straight away, whatever the Opposition may say, that far from the cake having been diminished over these years it has increased. Moreover, as hon. Members will know, even though in 1938, after payment of taxes the population had 72 per cent. of the national product to spend on consumer goods and services, there were great inequalities in those days, and that 72 per cent. was very unevenly divided to a point where it produced considerable suffering among vast sections of our population. Even though today we have 62 per cent. of a rather larger cake, at least that 62 per cent. is distributed with far more justice and fairness than it has ever been before.

If the share of the population in the money that will buy consumer goods has declined by 10 per cent. owing to the action of the Government, where has that 10 per cent. gone? The Opposition would have us believe that that 10 per cent. has, in the main, gone to defence and welfare services, and that it has been spent by the Government in providing a whole series of new social services, which do not seem to receive the unqualified support of hon. Members opposite, despite their utterences in this Chamber. Indeed, it is true, because in 1938 we were devoting 15 per cent. of the national product to Government current expenditure, whereas in 1948 we were devoting 18 per cent.; that is where 3 per cent. of the 10 per cent. has gone—in defence, food subsidies and the social services. It is because it has gone in that quarter that the Opposition say that we are in a welfare State.

But by far the greatest amount of the 10 per cent. by which the consumers' share has been reduced between 1938 and 1948 has gone into a terrific capital investment programme. It is exactly to this capital investment programme that the Opposition very rarely refer, yet today it is taking 20 per cent. of the national product as against 14 per cent. gross before the war—an increase of 6 per cent.; and if there are hardships, then one of the principal causes of the hardships which are undergone by our people today is the fact that this country is embarked on the greatest capital investment programme that it has ever known. If one turns to the appendix to the Economic Survey for 1949 one finds what a terrific investment programme it is. There are two ways of regarding it. One can regard an investment programme as a rather irksome necessity which takes money out of the pocket of the people, money which they would otherwise spend on consumer goods and services. But there is another way altogether of regarding it: there is a way of regarding it as a strengthening of the sinews for our country's prosperity.

I should like to invite the Opposition to say which portions of the capital investment programme, as set out in the appendix to the Economic Survey for 1949, they would like to delete. The invitation was given to the right hon. Member for Saffron Walden (Mr. R. A. Butler) when we were debating in this House the four-year programme submitted to O.E.E.C., and on that occasion the right hon. Gentleman preferred not to commit himself. He was asked whether the investment programme, amounting to over £2,000 million a year, was too large or too small, and the right hon. Gentleman did not care to reply. Perhaps when the hon. Member for Flint (Mr. Birch) replies tonight, he might care to give his observations on that point. It has been separated out to meet the convenience of the right hon. and gallant Member for Gainsborough (Captain Crookshank), who seemed to be a little confused about Government current expenditure on the services provided and Government expenditure on capital investment. For his clarification, let us make it quite clear that the £2,330 million investment this year is in respect of investment by private industry and also by the Government and is, in fact, incorporated in the capital investment programme appendix to the Economic Survey for 1949.

Do the Opposition wish us to cut down the £27 million or £28 million we are to invest to make for the better mining of deep-mined coal? These things do not have any immediate impact "on the frying-pan," as my hon. and gallant Friend the Member for Central Hull (Captain Hewitson) would say, but in the North Country new mining shafts are being sunk, new collieries are being opened and much mechanisation is going on at the present time in order to assist in increasing the production of coal. Do the Opposition want that portion of the capital investment programme to be cut down? Alternatively, do they wish us to reduce the investment of £114 or £115 million which we are making on generation, main transmission, distribution, maintenance and repair for the supply of electricity in this country because, so far as I have heard observations from the Opposition, every time there has been a "shedding of the load" there has been an indignant howl as to why we were not starting more generating plants.

Would they like to abandon the investment in the North of Scotland Hydro-Electric Board, a project with great possibilities in opening up the Highlands and with great possibilities in adding to the wealth of Scotland, or do they wish that we should cut down the £115 million which we as a country are devoting to the expansion of the refinery capacities, because we are trying to increase the capacity of refineries overseas by over 40 per cent. this year. Hon. Members opposite are always interested in the various movements which take place in the rationing of petrol. Do they wish us to take these capital investment steps which will result in the increase of this particular form of wealth? Perhaps, alternatively, they might like to cut down the number of locomotives, carriages and wagons we are to manufacture this year. As my hon. and gallant Friend the Member for Central Hull would say, these things cannot be put into the frying-pan, but they are all part of the vital capital investment programme without which the economy of this country cannot possibly run and without which the possibility of our being able to play an effective part in Western Union, or in whatever trading area we create, would be remote.

Perhaps, to go a little further, the Opposition would like us to cut down on the investment we are making in road vehicles—in trolley buses, in single decker buses, and in goods vehicles. Or, perhaps, they would like us to cut down investment in shipping, or, perhaps, they would like us to cut down our investment in improving the ports of Hull, Liverpool and Southampton. Or, perhaps, they would prefer us not to make investment in civil aviation in the purchase of aircraft. We have not noticed any criticism, when the Estimates have been debated, of the Government's projects for capital expenditure on those lines.

Or perhaps the Opposition would prefer not to invest this year £38 million on Post Office engineering. Yet there are continuous demands from the other side of the Committee—and, indeed, from Members in all quarters of the Committee—for better telephone services. People can afford the telephone now, and there are 550,000 people on the waiting lists. Even hon. Members opposite are not likely to be deterred by some 14s. extra on the telephone bill. Or, perhaps—and this is, indeed, in keeping with their pre-war policy—they would like capital investment in the iron and steel industry cut down, because the Government propose to invest £50 million. Do the Opposition want to stop the great new iron and steel mill at Margam or the cogging mill at Brierley, or the steel furnace at Ebbw Vale?

If the Opposition want to cut down this investment, to relieve the people of the burden which is imposed by the capital investment programme, whereabouts would they like the cuts to be made? Perhaps they would like to reduce the investment in other manufacturing industries. Perhaps they would like to cut down the £400 million which it is proposed to invest this year in making new plant, new factories. The Opposition have to face up to this. Is the capital investment programme as a whole too small or too large? If it is too small, where can it be extended? If it is too large, where can it be cut down? I observe that the right hon. and gallant Member for Scottish Universities (Lieut.-Colonel Elliot), in an article in the "News of the World" the other week, advocated expansion of the housing programme. The right hon. Member for Saffron Walden advocates extension of the educational services.

Mr. Oliver Lyttelton (Aldershot)

But not in the "News of the World."

Major Bruce

Oh, no. One of the things we have to remember is—although this is a mixed benefit—that we have a million more children to educate this year, and that needs a capital investment programme to the tune of some £30 million. I do not think I need deal with the Health Service, in view of the fact that the right hon. Member for Woodford (Mr. Churchill) saw fit to lead his men down the hill again when we debated that.

I think that the country as a whole has appreciated and understood the reasons for a shortage of consumer goods and services, which does arise from the very heavy capital investment proaramme which this country is pursuing, but I do not think that it yet appreciates that the extent of the capital investment programme must have fiscal consequences, and that unless this colossal Government investment programme is financed by private savings and company reserves, then, to the extent to which they are deficient, the deficit must be covered by a Budget surplus. A surplus of the sort the Chancellor has budgeted for is, of course, the biggest safeguard in this respect. Without a Budget surplus, so budgeted for in the existing circumstances, considerable inflation would follow. The first people always to suffer in inflation are the working people, especially should inflation ever become uncontrolled. Ever since the Government announced the capital investment proaramme, first, in the four-year plan and, secondly, in the Economic Survey, it has been quite clear that the Chancellor of the Exchequer would have to budget for a surplus. Conservative policy in relation to this is obscure, and I hope that when the hon. Gentleman replies he may be able to make it quite clear what the policy is. In a document published by the hon. Member for Monmouth (Mr. P. Thorneycroft) a while back, he said: The vast schemes of capital construction which have been initiated by the Government have proved utterly beyond the means of Britain to carry out. They have not. On the contrary, the country has carried out its capital investment programme with the utmost success. On the other hand, we have the view of the hon. Member for Chippenham (Mr. Eccles), who in "Forward from the Industrial Charter," for which I believe he was rather severely castigated in the "Financial News," stated: The choice before us is between pressing forward to an American standard of production, and falling back to a European standard of consumption. If we want the former, we must drive ahead with investment. Any other policy must inevitably lead to an intolerable reduction in the standard of life as soon as the last instalment of American aid has been spent. It would be interesting to know whether what is advocated by the hon. Member for Chippenham is also the Conservative policy, and, if so, are they prepared to stand up to the extra fiscal burdens which must fall on the population should any enhanced investment programme be applied.

The other alternative was that posed by the right hon. Member for West Bristol in a broadcast the other night when he said to the listeners, if I may quote his exact words: But there is a way out. It would be a risk depending on you. If we could give you the chance, would you, whoever you are and whatever you do, give us in return that increased production and those larger savings which alone could justify the risk? It would be worth trying. Anything is better than the dead-end to which we have now got. For a long time I have been trying to place the right hon. Gentleman's occupation. When I listened to him over the radio, I knew that I had discovered what is his occupation. It is the occupation of a croupier in a gambling saloon. He was inviting the nation to take a chance. Faites vos jeux, messieurs. That is exactly what he was doing. Many times before the Conservative Party have demanded or, rather, have asked the country to take a risk. A party without any policy whatsoever and with a conflicting policy about capital investment—all that it has to offer to the country in discussing an important think like the Budget, is to say, "Please take a chance with us."

That does not exempt us, however irrelevant the Conservative policy may be on this problem, from facing up to the position ourselves. What we have to realise in this House and, indeed, wherever we are in the country, is that we are now waging a war against the consequences of war, that we are to all intents and purposes still engaged on just as important a struggle and in many ways facing just as outstanding odds as we were in the war days. We should take comfort from the fact that so far, since the end of the war and despite all the hardships, physical and fiscal, we have made as a nation a net capital investment of over £3,500 million. In fact, this country today has repaired over two-thirds of the physical damage and obsolesence sustained by us in six years of war. That is an achievement of which the whole nation can be proud, despite the sneers that come from the Tory Party. If we face the fact that we are up against the consequences of war, we have to face the necessity for all of us in all parts of the nation to maintain that same self-discipline we imposed upon ourselves during the war. I know that it is the official Conservative Party's view, enunciated from the Opposition Front Bench, that there should be no self-discipline—as discipline is now condemned by Members opposite.

But the course open to us is a course which in honour we must take. We are receiving external aid from the United States, who are assisting us in solving our balance of payments problem, and the financial solution of the balance of payments problem and the recovery of this country precisely lies in the maintenance of this very high capital investment programme we have today. In honour to ourselves, and in respect to the United States, it is wise that we still continue this high capital investment programme, even if it hurts. Let us remember, so long as we continue to devote 6 per cent. more of the national product to building up this nation's real wealth as compared with the amount devoted to this purpose when the country was governed by the Conservative Party in 1938, this continued sacrifice will be necessary. The true picture is that this country is not a welfare State at all. At the moment this country is an investment State. The over- whelming mass of our national income is going towards investments in the future.

I hope the Committee will give to the world at large the picture of an island that has endured much in the war, but which nevertheless has endeavoured since the war to make proper provision for its own defence, and at the same time it has made far more extensive provision for the welfare of the ordinary people than any other Government previously in power and has embarked on a capital investment programme in terms of new equipment, new factories, housing and schools and other facilities to a far greater extent than any other previous Government. All of this is being done by increased production. It does not lie in the mouths of Members opposite to say that this is a welfare State, stultifying initiative and ambition, because an investment State it truly is. The fact of the matter is that the measures we have taken for our defence and the welfare of our people, together with the measures we are taking for investment, which will continue to hurt, and rightly so, for some little time, have all been made possible by the productive energies of our people.

The Conservative Party appear to have no confidence in production. In a pamphlet issued some little time ago, they said: Little can be done in a year or two to increase output per head to compensate for lack of manpower. If we are to continue or improve on it, we must as a nation show resourcefulness and initiative. Since these lines were written and published, this nation has increased its production industrially and agriculturally by over 20 per cent. It is the people of this country who are answering the Tory Party. It is the people of this country who will show the world that this country is giving leadership to the world and is organising its affairs so as to make for the maximum happiness of its people and make the maximum contribution to the peace of the world.

9.30 p.m.

Mr. Nigel Birch (Flint)

The hon. and gallant Member for North Portsmouth (Major Bruce) shows himself an active student of White Papers, Tory pamphlets, talks on the wireless, and the "News of the World." The only thing on which I think he got astray was when he said that we on this side of the Committee had never criticised the investment programme of nationalised civil aviation. If he will add HANSARD to his other studies he will find that he is wrong in that. His remarks upon the investment State, I will refer to later in my speech.

I think it is agreed that this Budget might be described as a climacteric Budget. For a few moments I should like to look back to see how we have got where we have got, and the consequences that follow from the route that we have pursued. I suppose that many hon. Members opposite regret the Chancellor of the Duchy of Lancaster, who first put our feet on the broad way which has led where in fact it has led. The trouble about his policy was not only that expenditure was extremely high but that our economy was wholly unbalanced. In spite of many efforts made by myself and my hon. Friends we never could persuade him to agree that there was any connection whatever between external and internal finance.

Where this policy led was to a major foreign exchange crisis. In 1947 in gold and dollars we lost £1,025 million. In 1947 and 1948 we lost a total of £1,447 million. The way that we met this deficit is of immense significance for our present and future policy. In those two years 1947 and 1948 we only met that deficit by gifts to quite a small extent, to the extent of £169 million. We met it from the American and Canadian credits to the extent of £889 million, all of which we should remember will have to be repaid one day; to the extent of £80 million from the South African gold loan, which we are already beginning to repay; and to the extent of £75 million by drawings on the International Monetary Fund. That was a serious thing to do, because those who set up the International Monetary Fund conceived drawings on it as in the nature of iron rations, only to be consumed in the last extremity.

On top of this, we have run down our gold and dollar holdings by £207 million. As well as dealings in dollars and gold we have sold foreign assets outside the sterling area of £51 million in 1947 and £155 million in 1948. In 1948, that total included the Argentine Railways. It is as well to remember that the reason why we got cheap meat from the Argentine last year was because we sold them something solid in exchange for it, and at a low price. As an indication of the way in which things are still going, in recent trade agreements with Yugoslavia and Poland, in each case our remaining assets in those countries were liquidated and thrown into the current balance. When we bought Canadair aircraft in July last year we did not pay but added the price to the interest-free loan we have from Canada and said that we would look at the total again in 1951. To sum up, we have sold all the assets on which we could lay our hands, borrowed all the money we could get, taken all the gifts we could get. The only reserve which is realisable we have left is £471 million in gold which largely belongs to sterling area countries and not to us.

I think my hon. Friend the Member for Chippenham (Mr. Eccles) was right to talk about the difficulty we shall have in applying Keynesian policy if we are faced with unemployment because we have so very little fat left. One can only remove the railings around one's house once and those railings have been removed. Some hon. Members who have spoken today and who have said in their constituencies when they were fighting by-elections, that the Socialist Party have solved the problem of unemployment, have gone rather far. If I might venture advice I would say to them, "Stick to the faked photos; they will not bounce so high."

In the autumn of 1947 there was a sharp change in policy. The President of the Board of Trade, speaking today, said what a strange thing it was that the Tory Party did not always make the same criticisms. It is rather foolish to make the same criticism of a different policy. I noticed a most interesting article in "Tribune" a few weeks ago attempting to "rebunk" the right hon. Member for Bishop Auckland (Mr. Dalton). So foolish and question-begging was the article, that I could not help feeling that he must have written the article himself. That may or may not be the case, but the article gave credit to him for the policy pursued by the present Chancellor of the Exchequer. I would say to both right hon. Gentlemen that very little credit is due to either, because the policy had to be changed. If one runs through £1,025 million of gold and foreign exchange in one year, that pace is too hot for anyone, even the right hon. Member for Bishop Auckland, to keep up.

Given our present level of expenditure, I do not think the present Chancellor of the Exchequer had any alternative but to pursue the policy he has pursued. I do not want to step between him and his critics behind him—they have been many and bitter and have said he was an austere man and "The east wind made flesh" and so on—but I would say to them that in this country, dependent as we are on our foreign trade and wholly without reserves, poised as we are on a razor edge, any improvidence in our Budget now will be immediately and drastically punished.

Some of the right hon. and learned Gentleman's critics remind me of Mr. Justice Piddington's Commission in Australia in 1920–21. That was a Commission set up to decide what the basic wage in Australia ought to be and this distinguished man, Mr. Justice Piddington, and his friends went exactly into what beer and cigarettes a man ought to have and how many times he should go to the cinema and so on. But, when they added up all the basic wages, they found they came to far more than the total national income of Australia. The argument that they ought to have had this wage is just the same as the arguments of hon. Gentlemen behind the Chancellor. They say that we ought to have this and that, without regard to what is possible.

I do not think I should leave the Chancellor of the Exchequer without giving him credit for certain things. I think we can give him credit for the recognition, at long last, after most desperate efforts from this side of the Committee, of the pre-eminence of financial budgetary and monetary control. Those are the real ways in which we can direct our economy. The President of the Board of Trade was today taking great credit for physical controls. Our attitude to physical controls has always been perfectly simple. We say that we may sometimes have to have them in the same way that one sometimes has to have a bandage or make use of crutches. They are not a sign of progress but a sign of inefficiency or disease in our economy. When one gets out of one's difficulties, one can do away with them as the Chancellor is doing, but very slowly and much behind the facts. Secondly, I think we can congratulate ourselves on having very much better accounts. The Chancellor has not gone as far as Professor Hicks would like him to go. I should have liked him to go most of the way with Professor Hicks. The people of this country, however, now have some tenuous thread through the maze into which the right hon. Member for Bishop Auckland led them. They can see some sense in the Budget accounts which they were previously not able to discern.

We can, too, take some satisfaction, as did my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) in our overall balance of payments. I think that in 1946 we should have said that it would be quite easy to have an overall balance of payments in 1948. In 1947 we should have said that it was quite impossible. In the event it came off, but it is a thinnish reed on which to lean. The test of whether we have a balance is whether we can buy the things we need in order to live. We shall always be able to sell unrequited exports; we shall always be able to sell goods under bilateral agreements if we give for the goods which we receive in exchange more than they are worth in the world market. We shall always be able to sell for weak or valueless currency. I do not think that it will be much consolation in 1952, if the Chancellor were unfortunately still in office, and he were to come to the House and say "It is splendid. We are in overall balance but we cannot buy any meat or feedingstuffs or any raw materials." The pleasure which our people would derive from being in overall balance, would be severely tempered if that occurred.

But with all the credit which we can give the Chancellor, the fact remains that last year, a year of good harvests, a year of a sellers' market, a year when our main competitors, Germany and Japan, were only beginning to creep back into world trade, we still had a deficit of hard currency of £360 million. Not only did we have this large deficit; we still do not look like being able to close it. But the solution to this great problem of how we are to deal with our balance of payments is greatly prejudiced by the fact that our taxation at 40 per cent. of our national income is, I profoundly believe, freezing and ossifying our economy, making all possible solutions far more difficult and preventing that upsurge in our national income and production which ought to take place.

If I heard the President of the Board of Trade aright, he said today that our physical production was 40 per cent. above what it was in 1935. I do not know from where he got those figures. The Central Office of Statistics uses 1947 as a base year and does not go back so far as that. The London and Cambridge Economic Service, taking the index of production in 1935 as 99, has an index of production in 1948 of 119. The Monthly Bulletin of Statistics of the United Nations, using 1937 as a base year with an index of 100, puts production in 1947 at 98, and the highest month this year October, at 115.

Mr. H. Wilson

As the hon. Gentleman has questioned the figures, perhaps I might refer him to the authority for them. If he would look at the "Monthly Digest of Statistics" for August last, I think the third page of the introduction, and see the figures there, and the figures which have been published since of the monthly production, including the months of the 1948 period to which I referred, he will find they are correct.

Mr. Birch

The right hon. Gentleman has taken trouble to hide his light under a bushel. The only point I would add is that we have to remember that production in America is running at 212 per cent. of what it was in the base period of 1935 to 1939.

I said our economy was being stultified. I think that savings are one of the best illustrations of that. If we look at table 13 of the National Income White Paper we see there that the total sum set aside through the action of public authorities in 1946 was negative to the extent of £802 million. On the other hand, private savings, gross personal savings, were £822 million. In 1948, after the right hon. Gentleman's treatment, we find public savings at £752 million, and, on the other hand, personal savings have gone down to £220 million; so a very large part of the money which the right hon. Gentleman is saving, is simply being dis-saved by private people.

Turning to the subject which the hon. and gallant Member for North Portsmouth was talking about, the subject of our capital equipment, I believe that it is wholly untrue to say that capital creation is much greater than it was before the war. In the January number of "Lloyds Bank" Mr. Chambers, an authority and an ex-member of the Board of Inland Revenue, who really knows something about this, adduced that apart from certain privileged industries such as the coal industry, the physical volume of capital as distinct from its value expressed in inflated currency, has probably diminished over the last year or year and a half. I believe that is the real truth and that the figures in the White Paper are misleading.

One of the most dangerous of all the ossifications is the fact that no new business can start and build up capital. We had a great deal of talk from the President of the Board of Trade about all these adventurers getting on their horses and galloping off in every direction. I do not think that Drake and Frobisher if they are regarded as merchant adventurers, or the gentlemen adventurers trading into Hudson Bay, had to pay a tax of 19s. 6d. in the £. I should be sceptical as to whether they would have had got very far if they had. I do not think we shall capture the American markets—which I agree with the right hon. Gentleman and disagree with the hon. Member for North-West Hull (Mr. R. Mackay) are absolutely vital—unless new ideas can have a chance. The right hon. Gentleman may have as many targets as he likes—his speech was another rash of targets—but he will not get anywhere with the present economy running as it is.

Another major factor in ossifying our economy is the high costs of nationalised industry and the vast headquarters they maintain, "where men accumulate and wealth decays." The President of the Board of Trade became very eloquent about the coal trade, but if he looks at coal exports in the last quarter of 1948 he will see that they are 36 per cent. of what they were in 1938. Iron and steel and the manufactures thereof are 134 per cent. of what they were in 1938. If he nationalises steel and de-nationalises coal no doubt he will be able to reverse those figures.

The danger we are in, is shown by the fact that the Chancellor has nothing to play with in a year in which it is vital to give all the incentives he can. No incentive whatever has been given to anybody in this Budget. We are without the three vital incentives which Alfred Marshall, one of the greatest economists, said were vital to economic progress, namely freedom, hope and change. Why has all this come about? We have had a great many difficulties, but I do not doubt that one of the major factors has been the level of expenditure.

Though we are in overall balance now, we are in balance at a level of expenditure which leaves the right hon. and learned Gentleman no play of any sort whatever. It is interesting to look at what is left out of the White Paper on this subject. In Paragraph 110 it says: The Government is steadying prices by subsidies on essential goods and by direct control. It is also saving through a Budget surplus. Similarly, employers and employees must exercise restraint on prices, dividends and wages; and everyone must save through the National Savings Movement or in other ways. Not a single word about what the Government could do by spending a little less. This is the first Government in history which has spent the taxpayers' money on buying distorting mirrors for the people to look at themselves in. We have had this long period of drifting on expenditure and of drifting on food subsidies, about which the right hon. and learned Member for Montgomery (Mr. C. Davies), who leads the Liberal Party, spoke to such a gallant band of followers.

We have had this great revelation in the 117 pages of Supplementary Estimates of the way our affairs are run. The Civil Service and Revenue Departments net Supplementary Estimates were 11 per cent. of the original estimate. This is staggering. Even more startling are the gross errors. The Colonial and Middle Eastern Services Supplementary Estimate were 411 per cent. of the original Estimate. The Miscellaneous Works Services Supplementary Estimate was 78 per cent. of the original Estimate; the National Health Service (England and Wales) Supplementary Estimate was 43 per cent. of the original Estimate; and in the case of food, in spite of the Minister of Food's fun and games with potatoes and wine, they were only 16 per cent. up.

This does not look like sensible administration. It looks to me as if the Treasury had been done down by deliberate under-estimating by certain Ministers. I cannot help feeling that that must be the reason for this circular which, so far as I can find out, is wholly unprecedented in our financial history. The tradition of the Treasury has been a very stern one, probably far too stern in the past. Joseph Chamberlain when he was trying to get Colonial development going and when Hicks Beach was the Chancellor of the Exchequer, wrote some very bitter words. He wrote: The influence which the Gladstonian garrison of the Treasury have upon Beach's mind is very disastrous. It may have been. The trouble is that they have capitulated in an evil hour. This circular is a sort of half-crown padlock on the main door when the citadel is already in possession of the enemy. Hon. Gentlemen opposite talk about what a terrible thing it is that Purchase lax has not gone down. The Supplementary Estimates alone are roughly equal to the total sum produced by Purchase Tax. That is a sobering thought. Bad administration—administration which is admitted to be bad by this circular—is equal in cost to the total product of the Purchase Tax.

One other point upon our expenditure. The hon. Member for Nelson and Colne (Mr. S. Silverman), who has left the stricken field, said that nobody on this side of the Committee ever talked about armament expenditure. I have often talked about it. I do not admit that the total is by any means sacrosanct. Far the greatest Secretary of State for War we have had in this century was Haldane. He produced on the day a balanced and efficient force ready to the last button and efficiently mobilised. He did that with a falling level of expenditure. Now we have vast expenditure and nothing to show for it. What can we expect? Who is running it? The Secretary of State for War and the Minister of Defence—a union of foolscap and blotting paper. As the hon. and gallant Member for North Portsmouth said, we do well to scrutinise capital expenditure as well as current expenditure. Well, what about the groundnuts scheme? What more obscene piece of idiocy is there? What about the surplus belting ordered by the National Coal Board?

What we are suffering from is grossly bad administration, combined with the Piddington Spirit that spirit that confuses "ought" and "is." We are ill-prepared for the chill winds which will blow in 1952. We are without resources to deal with the situation that may arise if there is a check both to our exports and our national income. We are running a level of public expenditure hardly sustainable in fair weather with a seller's market and Marshall Aid. Our services and all the good things we do, can only be sustained with expanded production and a higher level of the national income. But the right hon. Gentleman has left himself no scope to stimulate that expansion. He cannot show the way, and if we fail as a country to get in balance by 1952, I believe that the verdict of history will be that the right hon. Gentleman has sacrificed the permanent interests of this country for a temporary political object. The right hon. and learned Gentleman is always urging us on, but is making it impossible for us to go. I end by saying that his words were spoken by the poet Omar Khayyam: The Stars are Setting, and the Caravan Starts for the Dawn of Nothing—Oh, make haste! Ordered, "That the Chairman do report Progress and ask leave to sit again."—[Mr. Snow.]

Committee report Progress; to sit again Tomorrow.