§ Let me now turn to the precise amount of the surplus for which we should budget this year. We must have regard to our past experiences in this field and also to the present condition of our economy. As a result of our policies and efforts in 1948 and 1949, as I have said, our internal situation is on the whole less inflationary than at any time since the war. But having reached that condition does not mean that the problem of a proper balance between national output and ex- 67 penditure has been permanently solved. We must continue to take the necessary measures to maintain that balance which is in constant danger of being upset and so of destroying our policy of full employment. This means quite simply that we must ensure that the extra demands which will be made on our national production this year will not exceed the increase in production which we expect.
§ As I stated earlier, we are planning for the deficit we ran on international account in 1949 to change to a small but essential surplus. This favourable change in our foreign balance creates a fresh difficulty in maintaining our internal balance, since some £120 million of the extra production in 1950 will be required to replace the supplies we have received as gifts or loans in 1949, measured by that net deficit of £70 million, and to provide for the net gifts or loans or repayment of debt that we in our turn shall make, which will be measured by our net surplus of £50 million. This £120 million must be a first charge on our extra production in 1950.
§ Earnings we expect to increase with the growth of production and productivity, just as they did last year. On the basis of the present rates of direct taxation we must reckon, therefore, on an increase in personal expenditure on consumption of at least £200 million. Current expenditure on goods and services by all public authorities will go up by some £180 million. This makes a total for all these three items of at least £500 million, to meet which an equivalent amount of extra production will be required. This is on the basis of our not increasing our capital expenditure substantially above its present level.
§ To meet these extra demands the Economic Survey estimates that our extra production in 1950 will amount to about £500 million at market prices. We have, therefore, a balance between increased output and the increased demands upon it, but with no margin whatever to spare for creating still further increases in personal consumption by tax remissions.
§ As explained just now, the prospect can be looked at in another way, from the standpoint of capital expenditure and savings. Capital expenditure is likely to be roughly the same in 1950 as in 1949. But the change from a deficit to a surplus 68 on international account means that our domestic savings will have to be increased by £120 million to compensate for that change.
§ If the voluntary limitation of dividend distribution continues, and it is of the first importance to the country that it should, we ought to see some further growth of company savings through profits put to reserve. There will also be an automatic increase in the sums set aside for depreciation, because the increase in initial allowances granted last year will become effective this year. Personal savings, in the form of small savings, have been somewhat disappointing. Withdrawals last year exceeded new small savings by nearly £68 million, but that is not altogether unnatural during a year- when more goods have been available for consumption, seeing that a great many people saved in the past so that they could spend the money when the goods came into the shops. New gross savings totalled £778 million apart from the increase in the savings put into insurance policies and building societies.
§ I do not propose to count on any spectacular increase in small savings this year; but we cannot afford to have less savings than at present, and I look confidently to the great army of voluntary workers in the Savings Movement to continue their good work over the next 12 months, with all the energy and enthusiasm that they command.
§ If, then, we are to continue to avoid inflation and so make it possible to continue full employment, we must secure an overall balance in our Budget, which means an above-the-line surplus large enough to meet all the below-the-line liabilities. The Committee will see, therefore, from the figures I have already given for 1950–51 that on the basis of last year's taxation there is no scope for remission.
§ In the light of this over-riding factor I am afraid that all the attractive suggestions put forward for remissions of taxation—which, if they were added together, would reach perhaps £1,000 million sterling—must be put firmly on one side. And much though I appreciate the arguments for a more generous distribution of post-war credits, I am afraid that any of the extensions that have been suggested would be far too costly for us to afford.
In fact the extra wealth we hope to create by improved and increased pro- 69 duction this year will be used up, in the ways I have shown by improvement in our foreign balance, by increased personal consumption through increased earnings, and by increased social services and benefits. These are the forms in which the increased national dividend is being distributed, and it is out of the question that in addition to these we should give a further dividend by way of any net remission of taxation.