BUDGET PROPOSALS AND ECONOMIC SURVEY

HC Deb 20 April 1950 vol 474 cc335-456

3.54 p.m.

Mr. Oliver Lyttelton (Aldershot)

Yesterday my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler), my hon. Friend the Member for Chippenham (Mr. Eccles) and other hon. Friends on this side of the House confined their contributions chiefly to the Budget as such. Today I want to discuss more particularly the Economic Survey for 1950, and the national setting in which the Budget must be viewed. Let me say at the outset that the Economic Survey does nothing to relieve my anxiety about the course of our national affairs. I shall try to explain as objectively as I can the cause of my anxieties.

Before I do so I should hasten to add that there are some features in our national economy which ought to be of great satisfaction to all of us. Three or four of these features are as follow. First, the rise in productivity, however suspect the figures may be; which shows a favourable trend. The figures are subject to a very wide margin of error. Both the Financial Secretary and the President of the Board of Trade have given them such a definiteness that it might be thought that they are readily ascertainable. They are not; they are subject to a very wide margin of error. I notice that in a newspaper article the President of the Board of Trade used a definite figure, and he appeared to be losing his statistical background and undertaking a journalistic one.

Secondly—and this is outside the scope of the Economic Survey itself—there are the increased figures of our gold and currency reserves and of a dollar surplus for the quarter ending 31st March, 1950. We have to be careful not to regard this surplus as one that is likely to recur for long without new measures. Lastly, there is, of course, the high level of our exports. I believe it is a record expressed in pounds sterling, and that is a matter of great satisfaction, but it must be tempered to some extent by the fact that the volume appears to be little more than getting us back and perhaps a little over the point from which we started before devaluation. Be that as it may, the Chancellor's statement on the dollar surplus set out all the qualifications with conspicuous fairness.

Certain features are good, but it is the sum of all the features set out in the Survey that increases my pressing sense of anxiety. Let me turn to that document first of all. At the beginning the writer of the document was faced with the difficulty of explaining away devaluation, and it cannot be explained away. There is still a sort of hint that devaluation was an enlightened act of policy and not what it was—just a bowing to, and acceptance of, the inevitable. The Chancellor of the Exchequer also was at some pains not to explain what part devaluation had in what he calls democratic planning. Of course, those Members who accuse the Government of having planned devaluation do them the greatest injustice. They planned nothing of the kind. In fact, it was economic events which governed the Government, and not the Government which governed events. As I said, in the Economic Survey devaluation is dismissed almost in silence, and where it is mentioned in passing it is delicately suggested, as in the fuel crisis, that it was not the Government but the bad economic weather that was to blame.

To speak more generally, it has proved impossible in the Economic Survey to write a White Paper to support any prediction that prosperity is round the corner, and for those who like to dig beneath the surface, it is quite clear that what is waiting for us round the corner are deadly economic perils. I must explain why I reach this stark conclusion. The subject is very complicated, the terminology with which applied economics has clothed itself is particularly repulsive, and the figures have so many noughts after them that the imagination boggles at the attempt to relate them to ordinary everyday experience. I ask for the indulgence of the Committee in attempting the task.

Before I do so I should like to say there is no solid suggestion of any improvement in the internal position, or very little. In fact, if all the assumptions come right and if all the Government's geese prove to be swans, the citizen will have a couple of per cent. to play about with. There are, of course, to be the same restraints upon personal consumption and upon wages and dividends, and everybody is to behave themselves, except the Government.

It is upon a very precarious foundation of shifting sands that the Government seek to build their economic edifice. I say that it is precarious chiefly because I am anxious at the absence of safety margins wherever we look; or, changing the terms to a military metaphor, I feel that all the reserves have already been thrown into the battle. Though at the time of devaluation the line was swept back, it has since been restored and some local improvements have been made; but if the enemy should launch another attack there are no reserves, no mass of manoeuvre in the hands of the commander-in-chief to throw into the battle, and to restore the line if it is penetrated. Where is this lack of margin of safety to be seen? I will give three instances which I think are of sufficient importance to warrant the attention of the Committee.

First of all, there is no margin of taxable capacity in the country. Secondly, there is no margin in our balance of payments. Thirdly, there is no margin in the so-called personal incomes policy. The first matter, that of taxable resources, is one of the weakest parts of the foundation. It is generally agreed in all quarters of the Committee, I believe, that any further rise in taxation could only be a further deterrent to production and to hard work, and would be at the expense of savings. I believe, and there is much evidence to show, that we have already passed the limit at which taxation is disinflationary—if I have to follow that phraseology and that it is even becoming inflationary by obliging people to live on their capital and to sell their Govern- ment securities of whatever kind in order to meet the rising cost of living.

Now I turn to the balance of payments. I thought that, in a speech which from its length was obviously intended to be comprehensive, the Chancellor devoted far too little time to the subject of sterling balances and other exports of capital. Surely the size of the decrease in our sterling balances, or of the increase in our overseas investments, has a very significant bearing on disinflationary or deflationary pressure. Many economists think that a sober handling of sterling balances over the last four years would notably have reinforced our economic structure and reduced inflationary pressure. I found in the Economic Survey that the paragraph dealing with sterling balances was easily the most interesting in the whole document. I trust that the Government, now that they have made a beginning, will continue the good work and will give us the figures more fully and more frequently than once a year.

The Survey shows that between 1948 and 1949 the amounts of blocked sterling declined from £1,600 million to £1,350 million, a decline of £250 million, while the comparatively free, unrestricted kind rose from £1,750 million to about £2,000 million. Let me first deal with capital investments abroad. For the purposes of this part of my argument it would seem to me that reduction in sterling balances and capital investment abroad both represent, in different shape, the export of capital.

Let me go back a little and follow the course of our export of capital overseas, as well as of the movements in our sterling balances over the last two and a half years. In the two and a half years ended 30th June, 1949, we paid off a total of £467 million in sterling debts owed overseas, and in addition we made just under £500 million of capital investment overseas, making a total of £966 million of.export of capital overseas; that is, just under £400 million a year. In the second half of 1949 there was an abrupt change. Our net overseas investment increased very rapidly to £197 million, at the rate of nearly £400 million a year, nearly twice its previous rate. What we owed abroad, our foreign sterling debts, instead of decreasing as they had been doing, actually increased by £110 million. Therefore, we invested £197 million abroad and increased our debts by £110 million. Thus the net export of capital in the last half of 1949 was reduced to £97 million.

It would appear from the rather cryptic or Sibylline footnote at the bottom of Table 7, that £60 million of that increase was due to writing up of sterling obligations, due to devaluation. If we had guaranteed any country its debt at four dollars to the £ under a so-called gold clause, it is clear that, after devaluation, the figures of our sterling indebtedness have to be adjusted upwards. If we look at the overall figure of sterling balances, the debts owned by this country overseas, we find that in 1949 they hardly changed at all. They stood at £3,359 million at the end of 1948. By the end of 1949 they had fallen to £3,344 millions, which is a difference of a mere £15 million.

Much of the increase in the unrestricted balances is due to the action of countries such as Australia, which is popularly supposed to have over £400 million at its disposal in London. One thing is certain—and this is why I say that this balance of payments situation is so precarious; it is that the accumulation of sterling on this scale must stop one day. Those who have accumulated it will want to be paid either in cash or in goods.

It is very pertinent to our national position to ask how long sterling area countries will be willing to pile up sterling balances on this scale. Speaking in banking terms, these sterling debts and obligations are now quicker than they were. What has happened is that the more or lass restricted sterling balances that we have under notice have gradually come down and that those which are much quicker liabilities have gone up. This underlines the insecurity of our balance of-payments position.

It is now necessary also to underline the true significance of these figures as they relate to exports, to show to what point our exports have to expand in order, first of all, to pay for our necessary imports, and secondly to pay for the export of capital. I think that the export of capital is unlikely to sink below £250 million. I do not know whether that is the right figure. I need hardly remind the committee that the export of capital takes a number of forms, such as unrequited exports to run down sterling balances, overseas investments in the Colonies such as in the groundnuts scheme or the financing of the Orange Free State goldmines. It will very soon take another form, and that is paying the service and the interest on the American and Canadian loans, which become payable in December, 1951. I do not think—I would be glad to be corrected—that it is likely that we shall get on with a lower export of capital than £250 million.

The figure which exports must attain on that assumption and premise is indeed formidable. In 1938—I apologise to the Committee for plunging into figures again —our retained imports cost us £774 million, of which £466 million was covered by visible British exports. By 1949, we were only importing 87 per cent. of the 1938 figures. Accordingly, that ought to have cost us £673 million, which is 87 per cent. of £774 million. They actually cost us £1,910 million. That was a rise in our imports to 283 per cent. of the 1938 level. At the same time the volume of British exports was 151 per cent. of the 1938 level, and their value was £1,730 million, a rise in price of only 248 per cent. compared with 1938.

I calculate that at present prices the sterling value of imports in 1950 seems likely to be at about 310 per cent. of 1938, whereas exports might possibly reach 255 per cent. It means that to cover the imports alone we should have to export a little over 160 per cent. of our 1938 volume but, unfortunately, we have much more than our necessary imports to cover. We have to turn our 1949 deficit on current account of £70 million into a surplus of £50 million. That is the aim of the Economic Survey, and supposing that our invisible exports remain at their 1949 figure of £110 million, we should have to increase our exports to 170 per cent. of the 1938 volume.

These goals appear to be very high and the road to them very, very steep. For example, can we spare this volume of exports from our own needs? Can we sell them to countries which will pay us in money with which we can buy what we want? Above all, are we likely to be able to do this in a world in which supply is already overtaking demand and where, for example, there are coal surpluses in a number of countries, and where German and Japanese competition, which has been absolutely negligible during the whole of this period, is now beginning to make itself felt? I have news of a contract in Turkey taken by German manufacturers at about 42 per cent. of the lowest international price and there are evidences in Pakistan that Japanese machinery is being offered at 30 per cent. or 40 per cent. below current British prices.

The second dangerous part of the foundation—the first was that we have no taxable margin—is that to maintain our balance of payments and to reach the goal we have in mind, an enormous volume of exports will be necessary. The third precarious part of the foundation relates to the wage freeze and to dividend limitation. I do not think that the keenest advocates of these two measures would describe them as other than highly artificial.

The wage freeze is maintained under an ever-increasing pressure of the rising cost of living, and the extent of this rise in the cost of living, which we shall one day have to face, has not been fully felt because there are large stocks in the country on which we are living. When we have to buy for current consumption out of current supplies at the exchange of 2.80 dollars to the £ in the Western hemisphere, the cushion will by then have been removed and we must expect to see steeper and quicker rises in the cost of living. If the wage freeze is a highly artificial measure, so also is dividend limitation.

If the Committee will remember the export figures I have given, I should say that one thing stands out clearly: that it is imperative that British industry and production should be expanded as rapidly as possible if these targets are ever to be hit. The slowest way to do this—although it is a sure way—is to plough back profits into industry. What is really required is a combination of conservative finance and adequate retention of profits in the business, plus conservatively increased dividends in order to attract new capital into these enterprises, and foreign capital if need be, in order that British industry may expand as rapidly as possible and not as slowly as possible.

It is no answer to a critic of the wage freeze or of dividend limitation to say that without them the Government economic policy would collapse. I agree profoundly with my right hon. Friend the Member for Warwick and Leamington (Mr. Eden) when he said that we must support dividend limitation and the wage freeze at this moment, because the house of cards would collapse without them. However, that is no answer. There should not be an economic system which depends for its stability upon two such impermanent, ephemeral and insubstantial barriers as wage freeze and dividend limitation. No economic policy ought to be erected on that foundation. We can all make calculations and engage in economic exercises if we are allowed to introduce those abnormal features. That is the third reason why I say that we are building up on the shakiest of foundations.

I have given three major instances—no margin of taxable capacity, the extremely insecure position regarding the balance of payments, and the artificial and insecure foundations regarding the so-called personal income profits—and my right hon. Friend the Member for Woodford (Mr. Churchill) reminds me that the "infrastructure" is defective. [Laughter.] In this precarious position, our expectations of holding even our present level are based upon a number of major assumptions—continued American prosperity, a continued demand for British exports and the ability of the exporter to supply them at competitive prices, an increase in productivity, an increase in profits—for all that hon. Members opposite may say, that is what the Government are budgeting for, and profits arc now falling—continued restraint in private spending and in private claims.

May I weary the Committee for a few moments by discussing these matters? First, the continuation of American prosperity. I need look no further for my argument on this point than to the second report of O.E.E.C. on the European Recovery Programme. This is what it says: A decisive condition for the solution of the dollar problem is the maintenance of a high level of business activity in the United States and in all countries.… This paragraph ends with pretty strong words— The sort of expansion of dollar earnings which the O.E.E.C. countries contemplate is inconceivable in conditions of declining business activity in the United States. Secondly, we have to assume that foreign countries will continue their demand for British exports, and that British exporters will be able to produce at figures which compare favourably with the severe competition that will be seen more and more from Germany and Japan. There, again, the continuance of competitive costs will depend largely upon the success of the wage freeze. I quite agree with what the President of the Board of Trade said some time ago, that there is a field for British exports in the United States hitherto untapped. However, I do not share the almost astronomical views expressed sometimes about the total size we may reach. It was significant to read in one American document that the total British exports to the United States are scarcely more than the turnover of one large New York department store.

The next assumption is that there is to be an increase in productivity. I find all the figures for 1949 on this subject extremely doubtful, and I think the Financial Secretary was the first occupant of the Government Front Bench to give out these figures with any qualifications at all. Of course they have to be qualified greatly. They are analysed with great perspicuity and penetration in an article in "Lloyds Bank Review" this week written by Professor Ely Devons. I believe it to be true that the undoubted increase in productivity is due—and the Chancellor said so himself—mainly because we are now beginning to reap the results of the vast capital investment made in our industries since the war ended. It must be due to that, because the working population is not working the same hours—I am not saying anything about the effort put in—as they were, and this increase is largely due to better tools.

The Financial Secretary committed himself last night, in a moment of inadvertence, to a statement that the increase of production which has taken place in the last five years was unprecedented.

The Financial Secretary to the Treasury (Mr. Douglas Jay)

I did not actually use the word "unprecedented." I said that production now was higher than ever before.

Mr. Lyttelton

The Financial Secretary has a mind which would be more suitable to a Venetian cardinal in the Middle Ages. He is always weighing these things, but "unprecedented" is a very fair synonym for what he said. He said that it was higher than ever before. I wish to quote Professor Devons on this matter: In the eleven years from 1924 to 1935, during the inter-war period, which we are now led to believe was one of stagnation, the best estimates that can be made suggest that the increase in production was actually 34 per cent. Later he said: If 1949 is compared with 1937 production, according to the index and weighting system used, on the most favourable basis the increase was 24 per cent., and, on the least favourable basis, no more than 5 per cent.

The Chancellor of the Exchequer (Sir Stafford Cripps)

Does he know there has been a war?

Mr. Lyttelton

I would like to address that question more to the Financial Secretary as he put in no such qualifications as the Chancellor is now trying to assert, but came out with the flat statement that never had the increase in production been so steep.

Mr. Harold Macmillan (Bromley)

There had been a war before.

Mr. Lyttelton

I only wish to bring the light of realism to bear on these figures, which are extremely suspect and which we should accept with great reserve. From my own observation of industry I am sure there is an increasing trend in production, and when I say that is mainly due to the provision of new tools I am not seeking in any way to detract from the effort the working men and women of this country are making in the drive for production.

I believe there will be a further increase in productivity in 1950. I think it will be above the figures on which the Chancellor has based his calculations. The reason is that I do not think the number and efficiency of our machine tools of all kinds have yet reached their peak and we have still to remember that we have a long way to go before we can put industrial power at the bench at the command of the workers of this country on a scale comparable to that in the United States o! America. I think it not unreasonable to suppose that there will be an increase in productivity, but the time is not very far off when this aid will cease to have an effect on the picture and then we shall have to rely upon decreases in restrictive practices on the labour side and, if hon. Members like, on the employers' side as well.

The Minister of State for Economic Affairs (Mr. Gaitskell)

We do.

Mr. Lyttelton

The right hon. Gentleman says, "We do." I am not trying to make a smart point, but there has been no incentive whatever to the employing side to restrict the output of their works in the last five years, and the worst restrictive practices at the moment are entirely on the labour side. [An HON. MEMBER: "0h."] If the hon. Member is interested in that matter, he should look at the figures in the building industry and compare the output as well as methods now available with those before the war.

Mr. Pannell (Leeds, West)

What about engineering? Can the right hon. Gentleman address himself mainly to engineering?

Mr. Lyttelton

I was addressing myself to engineering and said that the output of engineering has gone up a great deal and that is due largely to better tools. I say that if he wishes to have a view of the reverse picture, he should look at the figures relating to the building industry. I have yet to hear it contradicted that the low output is largely due to restrictive practices on the labour side.

We shall very soon have to realise that true industrial prosperity comes not from wage freezes and dividend limitation and production per man hour which does not compare favourably with the American level, but that prosperity lies in a high wage and high production country. I want to see wages here rise, but they cannot do so as long as our affairs are managed as they are, and unless we get on the other side of the account something comparable in output.

The fourth assumption is an increase in profits sufficient to make private savings 25 per cent. higher than in 1949. The difference between personal savings and private savings is, I suppose, that private savings are almost entirely retained profits and reserves created in joint stock companies. We need no reminder that the policy pursued by the Government makes an increase in personal savings most unlikely. I think the figure of 25 per cent. is a slight understatement. I get it from paragraph 13 of the Economic Survey which supposes an increase of private savings from £637 million in 1949 to £805 million in 1950. I know the figure is the residual figure put in in order to balance the accounts. I think very few business leaders, whether in industry or commerce, would think private savings could possibly rise by 25 per cent. in 1950 at a time when international competition is becoming so much more intense.

There appears also to be a rather curious Left-wing idea that the way to keep up the revenue and to secure the safety of our social services, is to carry on a drive against profits. I hope some of these figures will convince those who support that idea that it is a very erroneous line of argument. Amongst many economic perplexities, one thing is quite certain; if profits of joint stock companies continue the trend they began last year—to decline—the revenue will fall and the gap between what we have to spend on the social services and what we are able to raise will grow wider and one day will grow into a chasm.

The fifth assumption is a continued restraint in any form of private claims and private spending. Alone the Government are to continue unchecked vast and ever mounting public expenditure. If austerity begins anywhere, in the Chan cellor's mind, it does not begin at home. Dividends are to be limited, private consumption is to be reduced and wages frozen, and the ordinary observer would say that the counterpart must be drastic cuts in Government expenditure.

Mr. Harold Davies (Leek)

Where?

Mr. Lyttelton

I will come to that.

Mr. Davies

In defence? In health?

Mr. Lyttelton

I will come to that. We were told a year ago that no administrative cuts whatever were possible in the Government structure, but since then the Government have announced cuts of £140 million, so that when they start trying they find they can do better than they say.

I have tried, I think fairly, to show some of the background under which we approach the economic affairs of 1950 and to set out what I think to be the major assumptions which have to be taken for granted if the Survey is not to be a mere essay on what might be. In grammatical terms the Survey is never written in the present or the future tenses, but in the subjunctive or optative—" it may be "or" it might be." I go as far as to say that nearly all the major assumptions which I have mentioned will have to be fulfilled if our position is not to decline very drastically. If any single assumption is not fulfilled, we shall be faced with another crisis which we shall be much less able to sustain than the last because our resources have become correspondingly more strained.

I wish to conclude by pointing out some of the anomalies of the Government's economic policy. First of all, there was the revealing passage in the Chancellor's speech concerning the need for a Budget surplus in order to counteract and reduce inflationary pressure. The Chancellor tried to show that private savings—I agreed with him— were insufficient to keep back inflation and that the Government had, therefore, to make the savings themselves, which is a sort of modern Socialist conception. In order to make these savings they have either to maintain the present crushing burden of taxation or to increase it, thereby making impossible the very savings on which they say they cannot rely. It is a sort of vicious circle.

I confess quite openly that I am not without apprehension that some of our fiscal policy is designed to further purely political ends. If company profits are taxed at the present rate, tax is levied upon the population at the present rate and the price of capital equipment continues to rise, the day will come—for which I think the Socialists hope—when it will no longer be possible to finance private industry out of private savings. I believe that at that moment the Government intend to move in on the private sector and say, "Because we have removed all the means, you yourselves cannot save the necessary money to finance industry, and therefore we are going to do it for you." This is one of the most serious inroads which the Socialist State could make on private enterprise.

The Government's present policy, whatever it may be-it is merely a thing of shreds and patches-cannot possibly last for long. On the private sector we have on one hand this crushing taxation P.A.Y.E., Income Tax, Surtax, Purchase Tax and the swingeing duties on tobacco and beer. It is an extraordinary thing that an average family of four people earning under £10 a week pays not less than 31s. a week in duty on beer and tobacco. To these taxes which are paid while people are alive must be added the confiscatory Death Duties, whose effect was not, of course, so electorally important because they are confined to a comparatively small but nevertheless important class of people. Death Duties remove another incentive to save. All these taxes remove at one and the same time the means of saving and the impulse to save.

Not content with this, the Government proceed to threaten further measures of nationalisation, or, rather, they did before the General Election, and I do not suppose that in their heart of hearts they have dropped these schemes. They deter savings by threats of nationalisation. The most significant industry threatened in this connection is insurance. An American correspondent passing through London asked me on the telephone to what I attributed the "dis-saving," which is the new word. I replied "A Government which taxes at this rate and which threatens to nationalise the few industries where private capital can find an outlet is of course, the cause. Next time you come back ask me something hard."

Again I wish to drive home the point that the Government's economic policy is only posible, first of all, if a series of unlikely assumptions are predicated and if a number of artificial barriers, which cannot possibly be maintained over a long period, are set up over such things as the rewards of labour and capital. In all these circumstances I say that it is only too clear that the welfare State will become the fare-ill State in the next year or two. The Budget and what we can glean of economic policy from reading the Survey show a complete disregard of the dangers and ignore the fact that an entirely new start is necessary. A start must be made on Government expenditure. We have to get away from many of the physical controls and restore proper financial control. We have to wind up some Ministries and see the last of some Ministers. We must reduce the whole cost of administration and allow the people to look after themselves a little bit more without always having somebody from the Ministry looking over their shoulders. We have to reach a higher state of defence at a lower cost by concentrating on the long-service men, which is the cheapest form of defence, and perhaps reducing the number of short-service men, which is the most expensive form of defence. I will not reiterate our attitude towards the food subsidies. The argument was very fully put by my right hon. Friend the Member for Warwick and Leamington (Mr. Eden).

Anybody who goes about the country knows that waste is rife, and it must be hunted down wherever it is found. One of the first places to look for it is in the ever-increasing staffs and ever-mounting tide of paper with which the nationalised industries, the commissions, the boards and all the rest of it are cluttered. No one is worse than the National Coal Board. One thing which is certain is that no country situated as ours is could weather even the slightest economic shower in its present strained position, and least of all a country whose Government ended the Economic Survey for 1950 with these words—and had the effrontery to put them in italics: "The Government, therefore, regard it as of vital importance that we should continue the major economic and financial policies by which we have been guided over the last three years." I assure hon. Members opposite that this is the part of the Survey where I detect the ministerial rather than the official hand. May I be so bold, in conclusion, as to re-write that paragraph as it should be re-written? It would then run like this, "The Government, therefore, regard it as of vital importance that, we should continue the economic and financial policies by which we have proceeded from expedient to expedient and from crisis to crisis, which produced the convertibility crisis of 1947 and the economic defeat of devaluation in 1949, and which may be relied upon to continue to produce other crises of no less severity."

4.28 p.m.

The President of the Board of Trade (Mr. Harold Wilson)

The right hon. Member for Aldershot (Mr. Lyttelton) protested because an American journalist did not ask him something hard. A number of my hon. Friends asked him something hard a few minutes ago and he said that he would come to it, but he sat down without coming to it. It was the question which has been put to right hon. Gentlemen opposite so often—which cuts are they going to make in Government expenditure? For one wild moment I thought the right hon. Gentleman was going to answer that question.

Mr. Churchill (Woodford)

The right hon. Gentleman only wants it for electioneering.

Mr. Wilson

We know the promises on that subject which the right hon. Gentleman uses for electioneering, but we have not yet had the answer from his right hon. Friend who said, a few minutes ago, that he was coming to it. I was interested to hear, in his concluding words, before he started re-writing the Economic Survey, a reiteration of what appears to be Conservative Party policy on one item of expenditure, namely, the food subsidies. As I understand it—he will correct me if I am wrong—he reiterated the statement made by his right hon. Friend the Member for Warwick and Leamington (Mr. Eden) last October that these would be cut.

Mr. Lyttelton

Would it not be far better to let hon. Members read HANSARD and see what my right hon. Friend said, rather than that they should have to listen to a distorted paraphrase?

Mr. Wilson

I was putting this point for elucidation. I was very ready that the right hon. Gentleman should say 'what he meant by it. The whole Committee knows that since the right hon. Member for Warwick and Leamington made his statement, which I have read and studied very carefully before, during and since the General Election, the Conservative Party suddenly discovered that this might be a little unpopular, and therefore we had a promise from the Conservative Party during the General Election that any additional hardship caused by dearer food arising from cuts in the food subsidies would be made up by increased social security benefits. At that time, I think the right hon. Gentleman expressed some concern because the food subsidies made food cheaper, not only for those with lower incomes, but for the rich as well, and one was interested to see—

Mr. Churchill

Could the right hon. Gentleman not address himself constructively to that point if he is looking for economies? Is it necessary to give a food subsidy for people who can perfectly well afford to pay the market price?

Mr. Wilson

I do not know whether the right hon. Gentleman has considered the administrative difficulties of having two prices, one for the rich and one for the poor, but if he is concerned, as I understand he is—

Mr. Churchill

I think you ought to be.

Mr. Wilson

—that the rich are "getting away with it," then, of course, it is always possible for the Conservative Party to come forward with proposals for higher rates of Surtax.

I noticed in the speeches of both the right hon. Member for Saffron Walden (Mr. R. A. Butler) and the right hon. Member for Aldershot a quotation from Gilbert and Sullivan. They both described the speech of my right hon. and learned Friend as "a thing of shreds and patches," but I noticed that the right hon. Member for Aldershot did not go on to complete the quotation. He might have gone on to say My catalogue is long, Through every passion ranging And to your humours changing I tune my supple song. I can understand the embarrassment of the right hon. Member for Aldershot, after tuning the song of the Tory Party to any changing humours which they thought would catch votes in the recent election, having to come down to this Committee and make all their promises add up—or, at least, to conceal the fact that their promises never will add up.

I was glad to hear the right hon. Member for Aldershot join with my right hon. and learned Friend in expressing satisfaction at the continuing buoyancy of our export trade. As he said, expressed in terms of pounds sterling, we have in recent months seen record figures - of exports; and in terms of volume, also. As the right hon. Gentleman will know. the figures for the first quarter of this year were some 10 per cent. above the first quarter of last year. I know that both sides of the Committee would pay tribute to the export trades, industries and merchants, and I think would also in fairness attribute to the effectiveness of Government controls the fact that these export targets were reached.

All this has been in the face of continued pressure and opposition from the party opposite in the matter of increased exports. Throughout the last four or five years we have had opposition to this policy of austerity and to the policy of diverting goods from the home market. In October, 1947, the right hon. Member for Woodford (Mr. Churchill) himself criticised the export drive. He said that a fertile and healthy export trade could be maintained only on the overspill of a much larger internal and domestic trade. He said: …exports are only the steam over the boiling water in the kettle. They are only that part of the iceberg that glitters above the surface of the Ocean."—[OFFICIAL REPORT. 28th October, 1947; Vol. 443, c. 701.] This same philosophy underlay those motor manufacturers who howled down my right hon. and learned Friend some four years ago when he proposed that 50 per cent. of the motor cars made in this country should be exported. Yet in the first quarter of this year, 80 per cent. of the motor cars manufactured are being exported, many of them to hard currency areas, and the industry is doing very well.

Mr. Lyttelton

May I ask the President, in this very interesting part of his speech, also to discuss the reasons why the Purchase Tax is being reduced on the higher-priced cars? They cannot be exported unless they have a home market.

Mr. Wilson

That is perfectly simple. We are exporting, among the lower-priced vehicles, up to 80 or 90 per cent. of the bulk without a large home market. As my right hon. and learned Friend explained on Monday, with some of these high-priced cars it is necessary to have a higher rate of production and to bring the price down a little in order to sell them in the American market. That is what is being done. At the same time, an assurance has been given by the manufacturers that the greater part of the increased production will go to export. But the Opposition—

Mr. David Eccles (Chippenham)

rose—

Mr. Wilson

I have given way several times already. The Opposition will remember opposing increased exports of almost everything we have sent abroad —electrical equipment, textile machinery, transport, civil engineering and agricultural equipment, commercial vehicles—to use a phrase which has been used a little this week—and mining machinery; and in the consumer field, almost everything from nylons to shirts. But this has been done, and this is one reason why our exports are now at so high a level.

The Committee have rightly expressed concern about the position of our dollar exports. Certainly, following devaluation we have halted the decline in dollar exports which occurred in the few months before devaluation. As far as Canada is concerned, we are seeing now a steady upward trend which, I think, is the result of all the efforts which have been put in by British industry and by the Government to develop trade with Canada over the past two or three years. The engineering industry particularly is making a great effort in Canada, but, of course, we cannot expect to get results overnight. As Sir Harry Gilpin has said, we cannot neglect a market for 30 years and then expect to conquer it in a few weeks. But following the Gilpin Report, following the extraordinary and special assistance being given by the Export Credit Guarantees Department, we are now seeing new developments in engineering exports to Canada. At the Toronto Trade Fair we expect to see the biggest exhibition of certain engineering products we have ever staged in any part of the world.

While the dollar drive must continue to occupy a central place in our export effort, the Committee will be in no danger of forgetting our trade with the Commonwealth. Our exports to the Commonwealth in the five immediate pre-war years amounted to about 43 per cent. of our total exports; in 1949 they increased to 51 per cent. of our total exports. Our trade with the Commonwealth has enabled us not only to pay for a considerable proportion of our imported food and raw materials, but also to, make a tremendous contribution to capital development, especially in the colonies. The value of our exports of capital equipment to the Commonwealth as a whole has, despite our shortages, increased nearly five-fold as compared with pre-war, and to the colonies, nearly six-fold as compared with pre-war.

The development of imports from the Commonwealth has, obviously, been one of the most important economic events of the last four or five years. Hon. and right hon. Gentlemen opposite have talked many times since the war, as well as before it, about the need to develop trade with the Commonwealth and to develop our imports from the Commonwealth. The difference has been that they have talked about it whereas we have done it. [An HON. MEMBER: "Nothing of the sort."] I do not want to bother the Committee with too many figures, but if I take our total imports in the five pre-war years, 36 per cent. came from the Commonwealth; in 1947, that figure was 42 per cent.; in 1949, 45 per cent.

Mr. Lyttelton

We have no dollars.

Mr. Wilson

If we take food alone—I am excluding Canada because, as I hear the right hon. Gentleman murmur, we have no dollars—in 1938 the figure was 36 per cent. Because of the devastation of certain Commonwealth areas, the figure fell to 29 per cent. immediately after the war; it has now recovered to 37 per cent. In the case of raw materials of which, before the war, we were getting 34 per cent. of our imports from the Commonwealth, excluding Canada, that figure was 37 per cent. in 1947; today, it is 46 per cent., and is still rising.

I will give one or two illustrations—[HON. MEMBERS: "Groundnuts."] Hon. Gentlemen cannot dissociate their minds from groundnuts when we discuss colonial development or imports from the Commonwealth. They seem to be totally unaware of the tremendous schemes of development going on throughout the Commonwealth as a result of the activities of His Majesty's Government and long-term contracts. Their attitude on this subject proves that they really are the spiritual descendants of those Whigs and Tories who once successfully carried in this House a Motion to abolish the Board of Trade on account of its waste of public money because it had proposed to establish a plantation in Nova Scotia.

If I might give one or two illustrations—

Mr. Lyttelton

Will the right hon. Gentleman deal with the shortage of dollars?

Mr. Wilson

Of course. I should have thought that the development of supplies from the Commonwealth is one of the most important ways of solving the dollar problem.

Mr. Lyttelton

I had hoped that the right hon. Gentleman would deal with the fact that our increase in purchases from the Empire, which is very useful in helping to close the dollar gap, is also due to the fact that we cannot buy the commodities anywhere else.

Mr. Wilson

A good deal of this is done by Government bulk purchasing agencies, which right hon. and hon. Gentlemen opposite do not like, and is done as a deliberate policy on the part of the Government. Let us take hardwood, which, until recently, was bought on public account. In 1938, 42 per cent. of our imports came from dollar areas, whereas in 1949 the percentage was 13. We have, meanwhile, increased our hardwood imports from the Commonwealth, excluding Canada, from 4.8 million cubic feet in 1938 to 12.6 million cubic feet in 1949; and from our African colonies from 1.6 million cubic feet in 1938 to 9.7 million cubic feet in 1949. These are real achievements. To take tobacco, imports from Southern Rhodesia have increased from 19 million lb. in 1938 to 46 million lb. in 1949. We intend to see this development go still further, the only limit being the extent to which Southern Rhodesia can stand increased production without destroying her food production and wrecking her economy.

Even in the case of raw cotton, which it is not easy or quick to develop in many of the Commonwealth colonies, we received 6 per cent. of our imports from the colonies in 1949 compared with 3 per cent. before the war. I should stress the importance of centralised buying in this development because without the Raw Cotton Commission we could not have developed cotton within the Empire, as we could not have offered the producers of non-dollar cotton in certain colonies inducements of long-term contracts which no private firm or the Liverpool Cotton Association could have offered.

I profoundly believe that the fullest development of trade within the Commonwealth must be the corner stone of any economic recovery for this country. That is the policy we have followed, and we shall continue to follow it. I equally believe that the developments that we have achieved there would not have been possible without the bulk buying and long-term contracts which right hon. and hon. Gentlemen opposite have opposed.

A number of hon. Gentlemen yesterday attacked bulk buying as one of the causes of our difficulties. The right hon. Gentleman did not do so today. The Opposition approach to the question of bulk buying is, of course, entirely doctrinaire. Our approach is not. My right hon. Friend the Lord President of the Council made this clear some time ago, and our actions have confirmed what he said. Over the past year or two, for example, the Board of Trade has reverted to private purchase wool, rubber, hardwood, flax, hides, molasses and industrial alcohol and paper making material. Raw cotton is, of course, permanently on the basis of centralised bulk purchase, and I am sure that the Opposition realise—if they do not I think the people in Liverpool do—that there could never have been a freely functioning cotton market of the kind advocated by the party opposite in conditions of dollar shortage and close currency control.

A few weeks ago the hoardings and house ends of this country were disfigured by exhortations about voting for the party opposite and fighting the rising cost of living. We have not heard from the party opposite a single proposal devoted to reducing the rising cost of living, not a single constructive suggestion. The kind of thing they suggest is that abolishing bulk buying will do it. I would remind them, as the Economic Commission for Europe stated in their Report for 1948, that: The explanation of the relatively low prices paid by the United Kingdom for its imports of food and raw materials appears to lie largely in the extensive use which it has made of long-term contracts and bulk purchase agreements covering a large proportion of its purchases. It is suggested that one aspect of the rise in the cost of living is due to the centralised buying of cotton. I would remind hon. Gentlemen opposite that wool, which has reverted to private purchase, has increased in price by at least as much as cotton, and has done so in, on the whole, vastly easier circumstances. If we take food as another example, I notice that the hon. Member for Thirsk and Malton (Mr. Turton) recently wrote in the "News of the World" an article which I have no doubt had a great appeal for the discriminating clientele of that newspaper. He said that reversion to private purchase would lead to more and cheaper food. But the hon. Member for Aberdeenshire, East (Mr. Boothby), not long ago stated in the "Daily Mail "even the Opposition cannot claim that he was misreported: The Argentine Government are in a position to squeeze us because … we are … dependent on supplies from overseas. if we were to confine the purchase of meat to competing private traders, in present circumstances, the price could and would be forced up to calamitous heights. That is the view of the hon. Member for East Aberdeenshire, who speaks with great authority on food questions. Yet the Conservative Party can go to the country and suggest that they would reduce the cost of living by abolishing bulk purchase. The hon. Member says, on the contrary, that the cost would rise to "calamitous heights."

Mr. Blackburn (Birmingham, Northfield)

Is it not the case that the hon. Member has also very honestly written that this country has been saved hundreds of millions of pounds by bulk purchase of foodstuffs, mainly from Canada, which reinforces my right hon. Friend's point?

Mr. Wilson

I hope that my hon. Friend will be successful in being called upon to take part in the Debate.

I turn from that topic to a point which has been made on a number of occasions by Opposition spokesmen. It has been made in this Debate. We also had it from the right hon. Gentleman the Member for Warwick and Leamington. They relaxed for one moment the Iron Curtain. When they were challenged at the time of the Election they told us one control they would remove. The right hon. Gentleman attacked the- system of allocating materials to manufacturers on the basis of fixed quotas. He said: It would be healthy to feel a fresh wind of competition in British industry. unnecessary controls over industry, like the timber control, for example, we will abolish because they merely make materials scarcer.and stop prices coming down. He said he would like to see coming into British industry the "vigorous newcomer "who was now squeezed out.

When the right hon. Gentleman told us that the party opposite would abolish timber control I suppose he meant that they would abolish the system of licensing for the consumption of timber—he did not make that clear. So far as practically all the hardwood is concerned, that control was abolished about a year ago. If he was referring to the control over the consumption of softwood, that would mean the end of the housing programme of this country. It is possible that he was referring to the reversion of timber buying to private trade. Again, so far as hardwood is concerned, this was in force some weeks before his broadcast.

In view of the right hon. Gentleman's remarks about the efficiency and enterprise of the vigorous newcomer, perhaps I should remind the Committee of what happened when hardwood was handed over to private purchase. I am sure that the right hon. Member for Aldershot would like to hear this because of his fanciful picture of a country free from restrictive practices except on the labour side. It is true that there are no longer the same temptations to private manufacturers to enter into restrictive agreements as there were before the war. On the whole, the industry is doing a lot better than before the war. But to suggest that there are no restrictive practices except on the side of labour is presenting an entirely distorted picture.

The right hon. Member for Warwick and Leamington did not tell the country in his broadcast that when the Board of Trade negotiated with the timber trade the merchants asked that, on reversion to private purchase, they should be allowed not only to keep the market to themselves—to cut out that vigorous newcomer for whom the right hon. Gentleman was so solicitous--but also that they should be allowed to operate a ring dividing the market up among themselves under quotas which were privately fixed. We could not, of course, possibly accept any such arrangement. When we told the industry so they accepted that decision under protest, but they still asked to be protected against the right hon. Gentleman's vigorous newcomer by assurances that for an indefinite time no new entrants should be allowed in the trade. This, also, we had to refuse. In fact, I can assure the right hon Gentleman that in this case, as in so many more, it took a Socialist Minister to make free enterprise both free and enterprising.

As for softwood, it is totally wrong to suggest that the timber control is keeping prices up. If it is true that private purchasers of timber could do the job much more cheaply, I would like to ask why it was that in recent discussions about the possible reversion of softwood buying to private purchase my insistence that any such reversion must be accompanied by a ceiling price control, to protect the cost of the housing programme and the consumer, was rejected by representatives of the trade as being impracticable? These are points which the Opposition really should deal with when they attempt to put forward suggestions that the cost of living would be cheaper under the kind of administration which they suggest.

I wish to say something about the position of the consumer in this country, because a good deal of the Debate so far has dealt with the position of the consumer and particularly with the rising cost of living. I think that the whole Committee would express concern at the continued high cost of clothing and household textiles. Prices are now more than double pre-war. The causes for this will be clear to the Committee. In the first place there is the high cost of raw materials, to which I have already drawn the attention of the Committee, both for the bulk purchased and privately purchased materials.

Mr. Lyttelton

Due to devaluation.

Mr. Wilson

Certainly, partly due to devaluation, which I seem to remember the right hon. Gentleman saying, some months ago, was an inevitable event. in- is partly due, also—largely due—to n- creases in wages in the textile and clothing industry. In the textile industry wages are something like 170 per cent. above pre-war. If they had not risen we would not have had any hope of getting the workers back into the cotton mills. Thirdly, distribution charges are higher, mainly through increases in distribution costs whch would have been a good deal higher if they had not been controlled by our policy of price control.

Therefore, when the Opposition talk about fighting the rising cost of living we should be interested to know which of these three items they think they could reduce. They could not reduce the price of imported material. They could not—I am sure they would not—decrease the cost of distribution, because when, last year, I reduced the margin on the utility price by 5 per cent. there was an outcry in many parts of the country. It was stimulated principally by that group of non-political traders surrounding Sir Walter Womersley, the former Member for Grimsby, and the National Chamber of Trade, which, I think, has one or two Conservative vice-presidents. The hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) attended a mass protest meeting at the Central Hall and fanned the smouldering embers of revolt. Members of the Conservative Party tabled a Prayer against the price reductions but. typically, had not the courage to vote against them when it came to the point.

I do not think the Conservative Party would achieve their election pledges and poster hoarding promises by reducing distribution costs. It is plain to me and to my hon. Friends on this side of the Committee—and perhaps to some hon. Members on the other side—that the only way in which they could honour their promise to fight the rising cost of living would be by the traditional and time-honoured Tory method of slashing wages—[HON. MEMBERS: "No."]—because that is the only way open to them to do it.

If there is another way we still have to hear about it from them. We have never yet heard a single proposal for reducing the cost of living; except that they told us they would reduce the Purchase Tax. But during the General Election I do not think there was a single tax in this country which, at some point or other, they did not promise to reduce immediately they came into power.

I would say a word about utility production, because this is a matter of considerable concern in relation to the cost of living and the many questions being debated by this Committee. There has been pressure on us from some trade quarters, supported by at least one leading member of the Tory Party, to bring the utility clothing programme to an end. I want to make it quite clear that it is the intention of the Government that the utility scheme—one of our greatest national assets today and a great safeguard to the housewife in guaranteeing both quality and fair prices—should be maintained.

I am quite certain that it is the view of all of us on this side of the Committee that the benefits of the utility production scheme in ensuring good quality standards should be carried forward, by some means or other, as a permanent feature of our economy. It is a matter of great concern that utility production, in cotton at any rate, has fallen so far short of our needs. In trade circles, and, I think, in some political circles—one or two hon. Gentlemen opposite have said so—this is being blamed on what is being regarded as the unduly niggardly attitude on the part of the Board of Trade in fixing prices.

Prices have been increased, and in the case of certain utility supplies which are very scarce—including nursery squares, and so on—they have been increased on a generous scale. But should supplies of utility cotton cloth not be forthcoming now on an adequate scale, I am sure that the House, and certainly the housewife, will insist that further steps should be taken—not excluding the reimposition of certain controls now taken off—to ensure adequate supplies. For one thing, non-utility prices in general are not controlled; and if there is evidence that these, even with the deterent of Purchase Tax, are exercising an undue pull on production away from utility, there is a very simple remedy available in the reimposition of price control on non-utility materials.

We simply cannot go on putting up prices of goods in short supply—which would certainly be happening in a free market without any control—in order to resist the pull of the most profitable lines. When some of the more detailed controls were removed last summer from cotton production, under strong pressure from the trade, to enable the industry to adjust its production to that of changing requirements both at home and abroad, the most specific assurances were given that utility production as well as production for export would be fully maintained. But we have to see whether these assurances have been fully honoured. When, also, we took the price control from the early stages of cotton production we had assurances that restraint would be observed, and that there would be no attempt to cash in on the greater freedom

In the pre-devaluation situation it was a sound thing to take off price control in cotton production as much as we could. But devaluation has led to a great increase in the price of raw cotton, and there has since been evidence that spinners and weavers, and the highly organised finishing trades, have been increasing their prices to the final buyer. the merchant converter, far more than was necessitated by the increases in the price of raw cotton. The merchant converter has been squeezed against the price ceiling fixed by the Department and this, of course, is a temptation to him to increase the proportion of non-utility production.

The Committee is already aware—and the right hon. Gentleman who commented on restrictive practices will be interested in this—of the establishment of a highly organised minimum price fixing arrangement among the cotton spinners who were once regarded as the quintessence of competitive industry. We have heard hon. Members opposite advocate, as an argument for removing controls, that it would release hoards of bureaucrats and officials from Government service for more productive work. The hon. Member for Wimbledon (Mr. Black) argued that last night. There were about 25 specialists previously occupied on price control in Government service. I do not know whether hon. Gentlemen opposite would call them bureaucrats. They were occupied on what hon. Gentlemen opposite would regard as unproductive work, protecting the consumer against excessive prices.

With the end of this form of control. these 25 specialists left Government service and were free for productive work. as the Opposition always recommends. Now I am told that at the Yarn Spinners' Association there are some very familiar faces to be seen. These gentleman, instead of being employed in keeping prices down, are now engaged on what I suppose hon. Gentlemen opposite regard as the more productive work of fixing floor prices for the trade.

My hon. Friend the Parliamentary Secretary, who has himself great practical experience of textile production and marketing, is looking into all these questions with the cotton trade. Until his discussions are complete there is no more that I can say to the Committee, though I am sure that hon. Gentlemen will agree, as, I am sure, Lancashire will agree, that the present degree of freedom from control which the cotton industry enjoys carries with it obligations of restraint in the interests of the consumer, and that in the matter both of supplies and prices the interests of the consumer must be protected.

The only way in which the rising cost of living can be fought by weapons within our own control is by increasing productivity and the rate of production in a whole range of British industry. On many occasions the Committee has expressed its concern at the slow rate of improvement in productivity, especially in cotton and certain other textile industries. I am sure the Committee will be glad to have seen the very considerable strides forward in output and the increase in the numbers employed in the cotton industry over the past year. On the weaving side. which has experienced great difficulties in this campaign because of its long history and post-war problems, redeployment had really begun to move forward. In what has been achieved here, every tribute is due to my hon. and learned Friend the Member for Islington, North (Mr. Moelwyn Hughes) who, with great patience and skill, has presided over the work of redeploying the wages structure of the industry to meet modern needs.

Where, a year ago, the emphasis was on these new methods in order to increase production, today, this has become a vital necessity for Lancashire, both in the maintenance and in the increase of her export markets and in her contribution to a higher standard of living for the British consumer. The ideas underlying redeployment are, of course, capable of extension to many other industries. In many industries individual units have recorded great successes, but I know that the Committee will agree that there are many industries today where much greater energy needs to be shown to bring up the level of productivity of the less efficient units to those of the best, because in many cases the level of our best is second to none in the world. It is to provide the leadership and co-operation in individual industries, as well as for the provision of much needed common services, that development councils have been established in a number of industries.

I hope that we shall have the support of hon. Members opposite on this point, because this need not be a party question at all. I hope that they will agree that development councils need to be established in a very considerable range of industries where they do not at present exist. It is certainly the policy of the Government that these should be set up wherever they can contribute to the greater efficiency and productivity of the industry and wherever they can enable the industry to play its full part in the nation's recovery.

Another field where improvements can be made in the interests both of producer and consumer is in distribution. Hon. Members on both sides of the Committee have expressed their concern about the high cost of distribution of fruit and vegetables and about those unduly high charges which a week-end speaker referred to as, "A third man interposed between producer and consumer." It is not within my province, this afternoon, to discuss the marketing of fruit and vegetables, though this is a matter bristling with problems. It is one which, in the view of the Government, must be tackled, and we are accordingly considering what can be done. My hon. Friend the Parliamentary Secretary is at present considering the question of the merchanting of textiles, on which the Cotton Working Party Report, some three or four years ago, made it clear that reforms were necessary; but little or nothing has been done.

The existence of a large number of individual merchant converters—though many of these are playing a great and effective part in the dollar export drive —means that in far too many cases cloth is being ordered in quantities far too small to permit efficient production and the economies of long run productions. One of the original ideas of the utility scheme was that efficient production would result from standardisation. I am convinced that much more can be done to reap these advantages and to lower the cost of distribution and production. I am sure that hon. Gentlemen opposite will agree that there are few matters more important in the country than the cost of living, and. that the high charge of distribution on the nation's resources—

Lieut.-Commander Gurney Braithwaite (Bristol, North-West)

That is why the Petrol Duty has been raised.

Mr. Wilson

If the hon. and gallant Gentleman studies this matter, he will agree that there is a far greater increase in the cost of distribution to the consumer than has been added by the increase in the cost of petrol. I have just been dealing with certain points which are necessary for the reduction of the costs to the consumer.

Lieut.-Commander Braithwaite

Is it, then, Socialist policy to deal with the increased cost of distribution by raising the Petrol Duty and adding to the cost of distribution?

Mr. Wilson

I have not yet heard from any hon. Member opposite any suggestion of an alternative method of helping my right hon. and learned Friend with his Budget. Not a single suggestion has come, either on the side of taxation or on the side of expenditure. It is no good hon. Gentlemen opposite bewailing particular increases in taxation when they have not suggested any alternative.

Mr. Lyftelton

Is it suggested that we should introduce the Budget?.

Mr. Churchill

The alternative is a reduction of expenditure.

Mr. Wilson

It would have been extremely interesting to have seen, if only as an exercise, a picture of a Tory Budget after their election promises. The right hon. Gentleman the Member for Woodford who, I am sorry to say, was out for a few minutes when we were having a discussion on the reduction of expenditure, has now said that there must be big reductions in expenditure. He alone can tell us which are to be the reductions in expenditure which are necessary. But every time we ask he says that if he told us what was in his mind, we would use it for electioneering purposes. I am ready to give way to the right hon. Gentleman if he will tell us what the cuts in expenditure should have been.

Mr. Churchill

Should the opportunity come when we shall have the chance of presenting our design and policy to the nation, we shall not hesitate to propose definite reductions in expenditure coupled with definite remissions of taxation.

Mr. Wilson

The right hon. Gentleman had every opportunity of presenting his grand design to the nation before the election. He had every chance to tell the country what he would do before the election. If he now tells us that he will not tell the country before the next election, but only after the election, then he must realise that it will be a very, very long time before he has a chance to tell' the country.

If I may come back to the subject of distribution—and I know it is a difficult one for hon. Gentlemen opposite, because it is not possible for us to mention distribution without certain ill-intentioned persons suggesting that we are about to propose the nationalisation of retail trade —I do not think I need to repeat the statement of my right hon. and learned Friend that this suggestion is utter nonsense. I am sure that hon. Gentlemen opposite will agree with us that distribution margins must be kept to the lowest possible levels which are compatible with efficient distribution, with a reasonable standard of service and a reasonable standard of living for those connected with distribution.

My Department is continuously reviewing the margins of retail distributors; we are at present reviewing them to see whether any further reductions are possible. We are doing that in consultation with the trade, as I have already informed the House. Many margins are fixed on the basis of a percentage of the selling price, so that, when the selling price increases, there is often a windfall gain to the distributor, and these are at present being reviewed by my Department in consultation with the trade and against the background of any increases in the cost of distribution itself.

The last thing I want to say relates to the question of quality, because I am sure that the Committee will agree that quality is becoming increasingly important for the consumer, and especially the quality of clothing and household goods. Value for money involves reasonable quality as well as reasonable price, and every possible means of securing the highest possible quality is essential. That is one reason why we lay such stress on the maintenance of the utility scheme, and that is why work is now proceeding in the Board of Trade on the proposal to establish a Consumers' Advice Centre, which was the subject of a Question the other day by my hon. Friend the Member for Coventry, South (Miss Burton). We are examining other suggestions which have been made for ensuring the highest possible quality of goods reaching the public. Apart from what can be achieved by increased efficiency in production and distribution, there is a strong feeling in the country that it is the Government's duty to protect the consumer to the full against any abuse of monopoly power, whether by single combines or by price-fixing or other restrictive associations.

The House passed unanimously the Monopolies and Restrictive Practices (Inquiry and Control) Act some two years ago and we are still awaiting the first report of the Monopolies Commission. A good deal of concern has been expressed about the time required by the Commission for dealing with the cases referred to it, but I can assure the Committee, and I hope hon. Members opposite will agree, that when inquiries of such importance have to be conducted with a judicial form of approach, the Commission has been well advised to tackle these problems with the utmost thoroughness and to work out the best possible procedures and methods for a type of inquiry which is new in this country. I propose, when I receive the reports of the first investigations of the Commission, to review the existing machinery for dealing with inquiries to ensure that the considerable number of cases which it will be my duty to refer to the Commission, as the result of representations received both by hon. Members as well as by persons and organisations outside this House, can be expeditiously dealt with.

Lieut.-Colonel Lipton (Brixton)

Can my right hon. Friend tell me whether he envisages the possibility of having a number of chairmen investigating different things simultaneously in order to get an opportunity of their reports being dealt with?

Mr. Churchill

A bit more about bootlaces.

Mr. Wilson

We will look at that and any other particular suggestions when we have the first reports of the Monopolies Commission. I did not know that bootlaces were produced under monopolistic conditions, but I am prepared to consider referring them to the Monopolies Commission if the right hon. Gentleman wants me to do so.

There is also the question of re-sale price maintenance, on which I have already made a statement to the House following the report of the Lloyd Jacob Committee. I have had discussions with the various re-sale price maintenance interests, the last of them with the associations represented on the newly-formed and so-called Fair Prices Defence Committee, and I am bound to tell the Committee that I see no prospect, from what these associations have said to me, of their ever agreeing to bring their schemes to an end. The Government are considering what proposals it will be necessary to bring forward in these circumstances for the protection of the consumer. I trust that hon. Members opposite, who, in "The Right Road for Britain," declared their intention to encourage competition in the shops, will be only too glad to co-operate with the Government in whatever steps are necessary to deal with re-sale price maintenance. However, time will show.

Mr. Lyttelton

Will they include the national monopolies?

Mr. Wilson

I do not know whether the national monopolies are operating resale price maintenance or are members of any retail price cartels.

Mr. Lyttelton

If a monopoly like that in coal is set up, it does not have to concert its actions with the consumer, because it has all the power in its own hands.

Mr. Wilson

It would be inappropriate for me to discuss certain private monopolies which have never been the subject of Debate in this House, because the matter is sub judice, having been referred to the Monopolies Commission.

I do not think there is any doubt on either side of the Committee, whether we are considering the overseas balance of payments or the problem of the cost of living at home, that, despite the great progress we have made, we are facing difficult and critical years ahead. Overseas, we have the sellers' market moving more and more into buyers' market conditions, and we have the powerful growth of German and Japanese competition making itself felt. In these conditions, British industry will need all its resilience, all its efficiency and all its inventiveness and skill—and we will not get it by making price-fixing associations when Government controls come off, as in the cases which I have just illustrated —particularly in production for the consumer at home, if we are to succeed in the fight to reduce prices and provide the best possible quality for the consumer.

I have still to hear anyone suggesting from the opposite benches any alternative to the policy put forward for taking us through these difficult years. The policy outlined by my right hon. and learned Friend is the only hope of bringing the country through, and, to coin a phrase which is not unfamiliar to hon. Gentlemen opposite, this is, in fact, the road.

5.29 p.m.

Mr. Vosper (Runcorn)

In addressing this House for the first time, may I claim, in a conventional but none the less sincere manner, the indulgence of the Committee, and express the hope that hon. Members will grant to me the courtesy which I have already witnessed being accorded so many times in the last few weeks. In accepting the advice which hon. Members have offered me concerning the subject-matter and time of delivery of a maiden speech, one is at a great disadvantage on this occasion in following in the wake of the very high standard which we have experienced recently. The right hon. Gentleman the President of the Board of Trade will excuse me if, on this occasion, I do not follow him in his argument, because I wish to deal with a different 'aspect of the matter, though I should like on a future occasion, to be able to do so, more especially as the right hon. Gentleman spoke in my own constituency a few weeks ago.

We were told on Tuesday that the Budget is now not merely a means of determining taxation levels for the next 12 months, but a major economic force that must affect us in the years ahead. Therefore, it is doubly important that its diagnosis should be accurate and that the remedies it proposes should be to our national well-being in the distant future, and not only in the immediate present.

That being so, I suggest that the problem which faced the Chancellor before he made his proposals was not merely the balancing of the Budget, or the providing of a surplus, but how to stimulate the further efforts of our people and increase the national income, thereby maintaining the buoyancy of his own revenue. I agree that in the last few years we have experienced increased productivity in industry, but those responsible believe that it could have been much greater—and can still be much greater—if further and correct stimulants are applied. Therefore, I welcome the proposals concerning the tax on overtime which will help in that direction. At the same time, I do not think that they go far enough, nor, as hon. Members opposite believe, low enough.

The second task which the Chancellor should have had in mind was the removal from our system of every remaining ounce of inflationary tendency. I cannot share the view of the hon. Member for Gloucestershire, South (Mr. Crosland), who thinks that we should take a risk and ignore any inflationary tendency. I believe that a small inflationary tendency now would be much more serious than would have been a large inflationary tendency two years ago, when we had a sellers' market. Therefore, I believe that we should continue our policy of disinflation. In these circumstances, I propose to direct my few remarks to the question of whether we are certain that we are achieving the disinflation needed, and whether we are doing it in the right manner.

We are told in the Economic Survey that we are to set aside from our national income in the coming year a sum of £2,435 million for investment. I have no quarrel with the size of that sum, but it is vital that every penny of it should be covered by savings of one kind or another. The question is, are we certain to achieve that saving, and will the balance of that saving show the correct disposition? We must fully equate our savings to our investments. In the first place, our saving will be done for us in the form of the Budget surplus, together with saving by local authorities, and will account for one-quarter of the total saving necessary. Secondly, £900 million will be provided for us in the form of depreciation allowances.

Although depreciation allowances are quite inadequate for the industrial purposes for which they are designed, they are a gilt-edged essential of our saving system. Those two items—the Budget surplus and depreciation allowances—go a long way towards providing our savings. But it is in the third group that the importance lies, because we are asked to find £905 million in the coming year from other private savings. Important, surely, because whether or not we achieve that, depends on the efforts and the thrift of our people. That being so, I would have expected to hear about some inducements being given to individuals and industry to save instead of relying on the usual exhortations and a certain amount of wishful thinking.

Half of this other private saving is to come in the form of company reserves or undistributed profits—those sums on which so many predatory glances are cast. In view of their importance to the disinflationary and financial policy, I would ask that responsible bodies should refrain from making what can only be termed irresponsible demands on undistributed profits, and that they should not be further decimated by taxation or as additions to wages. Otherwise, the success will be shortlived, and the inflation which will follow will destroy any advantage which the workers may get. We cannot stress too strongly the importance of undistributed profits in our Savings Movement.

With regard to the other part of our private saving, the most important contribution is the saving by individuals. Even if it is the tail end of our Savings Movement, I believe that, in this case, it is the tail that wags the dog. These are the savings in the form of building societies, insurance, and, most important of all, the National Savings Movement. I do not think that any Member of this Committee can feel really complacent about the present state of the Savings Movement. We are well aware of the figure, and we were told last year by the Financial Secretary that it was not really so bad. It was only that we were withdrawing savings, and not that we were not putting in new savings. I do not think that anyone can feel that is all right, for surely, it is the tendency to stop saving which should worry us.

We are asked in the Economic Survey—and this in rather an uncertain manner—to find an additional £170 million from other private saving in undistributed profits and personal savings. The Economic Survey says: The figure for other private saving shown in the table is not a forecast, but simply the sum which it is estimated will be required. If we are to achieve this sum, we shall need more in the way of encouragement and, possibly, something in the way of positive fiscal policy from this Committee.

If we study the trend of saving over the last few years, we find that it has been away from private saving and towards public saving of one kind or another. We are told in the White Paper on the National Income that the percentage of disposable income of the people saved in the form of private savings was the same in 1949 as in 1938-4.8 per cent. I suggest that is a most unrealistic comparison because, in 1938, we were not in an inflationary condition, and saving was not expected to be as great as it is today. In this figure of personal saving we find the items of Death Duties and special contributions included. We all know that that proportion has vastly increased over the last 10 years.

If we make a truer comparison of personal voluntary saving between the years 1946 and 1949 we find that, whereas in 1946, 50 per cent. of the total saving of this country was saved voluntarily by individuals, in 1949 only 7 per cent. was so saved. In fact there has been a drop of 700 per cent. I should have thought that that would have caused some alarm to the right hon. and learned Gentleman because in 1949, in his Budget statement, the Chancellor speaking of the Savings Movement, said: I very, much hope that in this financial year we shall realise a substantial net surplus of savings."—-[OFFICIAL REPORT, 6th April, 1949 Vol. 463, c. 2079.] Instead, of course we had a deficit of £68 million. Therefore, this year, I was interested to see what observation would be made and I find just this: …I look confidently to … the Savings Movement to continue their good work."—[OFFICIAL REPORT, 18th April, 1950; Vol. 474, c. 68.] I have no brief from the National Savings Movement—indeed I am not even a member—but I feel that that magnificent movement does need more than tributes from this Committee and from the right hon. and learned Gentleman. It wants some positive incentive to encourage people to save. It wants the tools with which to do the job.

If we look at the reasons why people are not saving today we can possibly put forward constructive proposals. First, there is the welfare State. I am a supporter of it, but in the minds of many it does give the impression that saving is no longer necessary. If that is so, we must revise our ideas. Thrift is surely an essential even of a welfare State. Secondly, those who can find a margin to save are not encouraged to save when they know that a 1945 15s. savings certificate is now, despite accrued interest, worth only 13s. 10½d.

Thirdly, is it not time we had a further look at the rate of interest? I know there are many problems connected with an increase in the general rate of interest, but surely an increase in the rate of interest on the national savings certificate would be worth while and would make its purchase more attractive. Fourthly, there was a time when we saved for posterity. I do not think many do that now. Although in this Budget we have no proposals for increasing Death Duties, there are in the minds of many hon. Gentlemen opposite, as mentioned by the hon. Member for Stechford (Mr. Jenkins) yesterday, the idea of a capital tax. If that is the policy, we cannot expect people to save at the same time. Any proposal to that effect must be related to the detrimental effect on savings.

There is also the vexed question of Post-war Credits. They were never a form of voluntary savings, but I find that those people who suffered as a result of experience of Post-war Credits are disinclined to join savings movements today. We want a more positive and clear policy and declaration of the Government's intentions in this matter. It has been raised already in this Debate. I was disappointed not to hear last night some pronouncement in this respect, particularly with regard to people who have died before drawing their credits.

I ask people why they do not save and I usually get the answer "Give us something to save with." I feel that the poster "Someone worth saving for" might have another title. This brings us to the question of tax reduction, on which other hon. Members have spoken and will speak. Though I agree with the Chancellor that if we are to reduce, or to give away, the Budget surplus we would not get a corresponding increase in saving, I feel that some small reduction in the surplus, accompanied by a purge of Government expenditure thus realising a reduction in taxation, would increase savings if they were made attractive along the lines I have mentioned and on other lines.

I realise the Chancellor is not going back on his taxation policy, but is it not the time now or in the immediate future to make savings alone a little more worth while and to correct this drift away from private to public saving? Although public saving may produce money to balance our investments, surely it is a bad trend for many reasons. It is bad because it means that capital is concentrated into narrow channels of public corporations and the like and very little capital is available to back initiative and enterprise and to take the risks that capital has taken so often in the past. It is bad, too, because thrift is in itself an essential virtue of happy family life.

I ask the Government, first, for an assurance that private or personal saving is to be encouraged and that the tendency to direct more and more savings into the public sphere shall be discontinued. Secondly, I should like to hear more of 3 positive policy to make these savings worth while. The alternative must surely be further inflation and a rise in costs at a time when, more than ever in our history, costs should be kept down.

5.46 p.m.

Mr. Keenan (Liverpool, Kirkdale)

It falls to me to congratulate the hon. Member for Runcorn (Mr. Vosper) on his maiden speech. I congratulate him on the easy manner in which he delivered it, on the fact that he knew so well the subject about which he was speaking and the fact that he obviously meant what he said. I am sure that, as with so many other maiden speeches we have had in this Debate, we have enjoyed his contribution and the Committee will look forward to his speaking on many occasions again.

I want to take a rather unusual role in this Debate. This is the first time I have got in on a Budget Debate and have listened to practically every speech delivered since the Chancellor opened the Debate on Tuesday. It has struck me that almost every hon. Member has contrived to say how much better he would have done had he been in the Chancellor's place. This brings to light something that is fundamentally wrong in the arrangements for presenting the Budget. This procedure has been developed over the centuries and, I suppose, it will take a long time to alter it. However, I hope that one day Parliament will be wise enough to make that alteration.

The point is that no matter what is said about alternative forms of taxation, we know that little or no notice will be taken of suggestions in this Debate. We know that the Budget will either go through with very little variation, or be defeated. It seems to me therefore that if we are wise—and I suppose we are wise but are hidebound with tradition—we should make a different arrangement. We should select a time some months before the Budget when we could all "have a go" and inform the Chancellor how much we know about this subject. He could then have the pool of our knowledge, so that when he made up his Budget he could probably present something which would satisfy some of us instead of a Budget like this one which apparently satisfies nobody.

I want to fall into the common failing and throw some pebbles. I understand that it is bricks which are thrown from the other side of the Committee. Before throwing those few pebbles, however, I should like to say that I rather liked the approach of the hon. Member for Runcorn who spoke with such feeling about the Savings Movement. Although he is not actively associated with the movement, he praised it and he recognised the great work which has been done by some public-spirited people during the war and since.

Yesterday an hon. Member said that people were not saving, and he suggested that they were saving better in the '30's. I would remind the hon. Member that in the '30's a lot of people could not live, let alone save. It is true, as the hon. Member for Runcorn has said, that there is perhaps less desire to save because of the welfare State having come into being —not in a complete form, of course, but while old age is not fully provided for, it is at least protected. I agree that there is not the same opportunity to save as there was just after the war when there was more overtime and there was more money knocking about; gratuities, for example. We have to face a new position.

The hon. Member for Runcorn mentioned a subject that I have been rather concerned about; I refer to Post-war Credits. I have gained the impression during the last few years that we had agreed that progressively we should reduce Post-war Credits, and that the age at which they are cashed, instead of remaining at 65 for men and 60 for women, might be reduced to 64 and 59 and so on as the opportunity presented itself. I am prepared to accept the fact that in the difficult financial circumstances it may not be possible to do that, but I hope that very soon we shall be able to satisfy those who are looking forward to the liquidation of those Post-war Credits, and that we shall be able to let them know more than they know at present as to when they are likely to be paid.

I am not at all happy about the Income Tax reduction. Like many other Members, particularly those on this side of the Committee, I would have preferred the easement to have taken some other form. Hon. Members opposite prefer us to relieve those people who do not require tax relief. I know they want that relief, but my point is they do not need it. They would pay no tax at all if they could get away with it; I do not suppose that I should pay tax if I could avoid it. Nobody wants to loose what wealth he has got if he can help it. The struggle in regard to the division of the spoils of industry is as keen today as it was long before any of us was born.

We might, however, have done better than change the taxation from 3s. to 2s. 6d. and from 6s. to 5s. I do not like that because it leaves at least 7 million of the lower paid workers untouched. They get no benefit from that tax remission. It is no good saying that it helps a man who works overtime. I agree that this remission is desirable and necessary, but there are nearly 7 million workers in the country who do not pay tax at all. We did a good job in removing them from the sphere of taxation, but they will not benefit from this remission.

I want to follow up a suggestion that was made last night on family allowances. There is one thing on which hon. Members on both sides of the Committee are in general agreement. I know the Opposition claim that they initiated family allowances, although I believe that the late Miss Rathbone had a lot more to do with it than most people. The fact is that the first child is not paid for. If instead of a tax remission, there had been introduced into family allowances a payment for the first child on the 5s. basis, I understand that the cost would be approximately £70 million a year. I should like to hear whether that figure is correct. It might cost more, but I think it would be well worth it. That would provide for these lower-paid workers who invariably have families. If one of those workers is a single man and does not, therefore, get a family allowance, I am not very much worried, but such a proposal would give the benefit of the change in taxation to the lower-paid workers with families. That would have been much better than the taxation relief proposed by the Chancellor.

There is another matter in which I am interested, and to which I referred in the Finance Bill Debate last year. I believe about half the population indulge in football pools. Whether or not this is worthwhile, it provides people with a lot of fun and occasionally somebody gets a good cut out of the pool. What I am concerned about is that the horseracing totalisator escapes taxation. I do not think that betting in any form should escape. I understand that the problem has been examined, but I could never understand why the horseracing totalisator, whose revenue in 1948 was £26 million, should escape while the humble subscriber to the football pool has to pay 30 per cent. of what is subscribed in the total pool. I think that should be altered.

There are several subjects about which should like to speak, but I am anxious in particular to say something about the housing situation, because I have not had an opportunity on recent occasions of discussing it. When the Chancellor announced two days ago that there was to be a restoration of the housing cut, so that the programme for this year would be 200,000, I must confess that I did not feel at all happy, for it looks as though the programme for 1951 and 1952 may be the same. I want to tell the Chancellor and the Ministry of Health that that is ',not good enough. That programme does.not even look at the housing problem of the country.

I know we have done very well under all the circumstances—as much, perhaps, as possible; but everybody must agree that it is not enough. I suggest that more of the capital investment programme should be taken from other items, if there is a limit to what we can spend, and used for housing purposes. There is no need for super-stores or super-cinemas or even for the alterations which are taking place in property of that kind, nor even for the drive for increased school accommodation. I know that recent teachers' conferences have condemned, as they have in previous years, and with a great deal of justification, the neglect of a century, the bad schools, the inadequate classrooms, the large classes and the rest of it. But I do not agree that we should go on with a heavy school programme before we have built the houses.

I feel that all building which can be stopped, except the building of factories by which we live and by which we must improve our productivity, should be stopped so that progress can be made with housing.

Mr. Mellish (Bermondsey)

What about hospitals?

Mr. Keenan

We have to consider the question of extensions of hospitals, but I am prepared to say that the building of houses is more important than the building of schools. In the city of Liverpool, we have a live list of applications for houses of nearly 40,000, and about 1,000 people bombed out in 1941, are still without houses.

The building of houses is more important than other building. There is a greater need for bedrooms than for classrooms. I know—and I believe all people in the industrial areas must know of similar instances—of families in the constituency which I have represented for the last five years including one of the most severely bombed places in the country—Bootle—where the children have never been able to sleep in a bed because there is no bedroom into which their parents can put a bed. The children sleep on the floor. We cannot expect to see a healthy, good child, able to go to a decent classroom, when he comes from a home in which he does not even have a bedroom. Housing should come before all other considerations and we should devote all our efforts to it.

Mr. Mellish

Who is the controlling body?

Mr. Keenan

The controlling body in Liverpool is the city council, and I am quite prepared to say that they have not done as much as I think they could have done. Even if they had done all that was possible, however, with the limited supply of materials and of labour, it still would not have been enough, and that is why I want this greater emphasis on housing, to the exclusion of other things. It should be bedrooms before cinemas or classrooms or anything else, so that most of our children can have homes in which to live. I know it will be a long-term problem, but the more we build this year, the sooner the problem will be solved.

Mr. James Hudson (Ealing, North)

Would my hon. Friend also be willing to demand that there should be no further repairs or extensions to public houses?

Mr. Keenan

I think hon. Members know perfectly well that I should not care a hang if they did not brew any more beer or distil any more whisky, but I am not the person for whom they are catering. I would not care if we did not import any more tobacco; I like it, but I could do without it. The fact remains that the majority of the people want alcoholic drink and want tobacco—as I want tobacco when I can get it—and we must accept that they have a right to these things and must make the necessary provision. My objection is to building new "pubs," or greatly decorating "pubs "when we want houses, or using up paint on "pubs" when we want houses.

I think I have said all that time permits if I want to be in accord with the spirit of the Committee on a Budget Debate and not take up more time than should be occupied by any one hon. Member. I have had an opportunity of ventilating these grievances, of "flying the kites "as all hon. Members do—and perhaps consideration will be given to them subsequently. That is, perhaps, what most hon. Members have done in throwing their bricks or pebblestones at the Chancellor.

Hon. Members opposite have been rather complacent in this Debate. They have not been able to answer the questions put to them about what they said during the General Election. I did not think they would be able to answer because there are no answers to some of the questions asked. They would not have been able to implement their promises had the electorate foolishly given them the opportunity. I warn them that we are in a stage of social development and in a world which is different from that of 20 years ago. The position we adopt is one in which we have to make adjustments and make the most of our democratic institutions while we have them, in order to preserve them. The Opposition are opposed to the measures of the Socialist Government to preserve the country in that way, but I warn them that if they upset that adjustment, they must not be surprised if, later, there comes an even greater force which will prevent them from enjoying even the privileges with which democratic institutions provide them.

6.9 p.m.

Captain Soames (Bedford)

I am most grateful to be able to take advantage of the established custom of asking for the indulgence of the Committee in making my maiden speech. I had thought that the fact that we were in Committee would, to a certain extent, mitigate the anxiety which I felt, but I do not think that that is so.

I want to discuss what is, in my opinion, the most serious internal economic problem facing the country today—the cost of living. In his Budget statement the Chancellor expressed anxiety over the excessive drawing out of private savings, and in his speech, in column 68 of the OFFICIAL REPORT, he gave us his considered opinion that the reason for this drawing out was the fact that more goods are available for consumption. I venture to suggest to the right hon. and learned Gentleman that that is not the reason.

This withdrawal is taking place because ever since 1945 the cost of living has been steadily rising and because the people are finding it increasingly difficult to maintain their standard of living, however meagre it may be, without drawing out their savings. A reversal of this ominous trend will never be brought about until the Government tackle with effect the problem of the rising cost of living. This is not just a question of economics: it is a matter of survival. The problem must be tackled at the root. Manufactured products cannot be made cheaper if wages rise; wages cannot be held steady if the price of food continues to rise.

Here we come down to what is the basic factor in the cost of living, and that is the price of food; and it is to the agricultural industry that we must look to make a real effort to cut its costs of production. The attempt in recent years to prevent the cost of food rising through subsidies has now failed. This is shown by the recent announcement of the increased prices of various foods. Is it not somewhat ironical that these increased prices of food have been brought about owing to the fact that food has become more plentiful? Unless we can cut our costs of food production at home this process will continue with all its attendant dangers of increasingly irresistible wage demands and subsequent inflation.

I hope I am not stepping outside the bounds which tradition prescribes for maiden speakers when I say that I understand that the hon. Member for Wednesbury (Mr: S. N. Evans) is reported to have asked whether food prices are not unnecessarily high owing to inefficiency and inertia in the agricultural industry. I most earnestly hope that these views are not widely held by the party opposite. At all events, they have not passed unnoticed by our shrewd farmers, who are well known for their political wisdom. In fact, no one realises the urgent need to cut the cost of food production better than do the farmers themselves. Does not the whole future of the stability of their industry depend on it?

What is preventing farmers cutting production costs? It is not widespread inefficiency or inertia. It is a shortage of capital. There is an urgent need for the provision of up-to-date buildings, cottages, water supplies, electricity, and machinery and equipment of all kinds; but far from an increase being made in the capital investment programme for the industry, the Economic Survey forecasts a reduction in 1950 to the level of only 21 per cent. of the total national investment programme. Is this the measure of the importance which the Government attach to the industry? The amount of capital to be devoted, for instance, to the purchase of machinery and equipment was reduced from £53 million in 1948 to £49 million in 1949, and this is again to be reduced to £45 million in 1950.

The reason given in the Survey for this undesirable situation is that the demand for machinery has somewhat declined. Do the Government consider the industry has reached a sufficient state of mechanisation to be able to reduce the amount of capital to be devoted to this end? If so, I cannot see what chance the farmers will have of cutting their costs of production. Does the Chancellor really think that the reason why the demand for machinery has fallen off is because the farmers do not want to mechanise more? Is it not more likely to be because the capital to buy the machinery is just not available? No other industry suffers from the lack of availability of capital as severely as agriculture. No other industry needs it more, and no other industry is in a position to play such an important and primary role in a reduction of the cost of living.

The problem to be decided is, Where can this capital be found? Would it not be a wise and far-sighted policy for the country to loan to the agricultural industry a capital sum of money sufficient to carry out the necessary modernisations? The total sum involved, spread over a period of five years, need not be more than half of what is spent in any one year on food subsidies. The return which that capital sum, which would anyway be repayable, would bring to the whole nation would be a steady and ever increasing reduction either in the cost of food or in the annual expenditure on food subsidies. Surely that would be a sound national investment? I wish to make it clear that I am not suggesting that the industry has any desire to receive gifts or charity. On the contrary, what it needs, if it is to be able to cut production costs, is the infusion of fresh capital such as other industries constantly seek and receive in the normal course of business.

I suggest that the Government should launch and support a land loan at a favourable rate of interest. I hope and think that this loan would be widely subscribed to throughout the whole country. It would offer many advantages. Firstly, the necessary amount of capital would be found; secondly, it would give townspeople an interest in the land; and thirdly, the money invested would bear, in a sense, a double dividend: there would be the interest payable by the farmers, and also, by the lowering of agricultural costs, the enormous benefits of cheaper food. I should think that that would commend itself as an investment however small to every family in the land. Now, as to how the loan would be used. In the first place, it would be available to farmers who wished to increase their degree of mechanisation and bring about various capital improvement likely to lower their costs of production.

Just as our internal economic situation demands cheaper food production, so does our general economic position demand increased food production. The Bill for imported food is running at somewhere about £800 million a year in foreign currencies. In his Budget statement the Chancellor reiterated the importance of reducing our imports. Every bit of food that we can grow at home will be a help towards this end. There are large areas of land which were very adequately cultivated 100 years ago without the aid of machinery, which are inherently fertile, and which can be brought into economic production once the initial capital has been found.

We know the Government have taken steps to inquire into this question of reclaiming more land. Presumably this inquiry would not be taking place unless the Government intended to bring some of the land into cultivation—under the direction, we hope, not of the State but of the farmers.

Here again, the main problem will inevitably be one of capital, and this will be the second use to which the loan would be put. Farmers usually err on the side of discretion, and they will not take up a loan to reclaim land which, in their view, is not capable of producing food at an economic price.

Now, as to the question of labour. This should not present a very serious problem, since any men who have become redundant through increased mechanisation on the land already under cultivation would move to those areas which have been reclaimed, and we should thus have the same labour force spread over a wider area and, therefore, producing more food. I should not like to hazard a guess as to how many acres would be reclaimed and farmed on a sound economic basis, but it is a fact that in 1875 we had 4,000,000 acres under wheat in this country, whereas today we are struggling to attain our target of 2,000,000 acres. Furthermore, in 1875, with a population round about 25 million, we were all but self supporting. In spite of all the scientific progress made since then, the target for the agricultural industry is to grow sufficient food to feed 25 million people by 1952.

Of course, a lot of land that was under cultivation at the end of the last century has been taken over for other purposes, but there are still many thousands of acres now lying virtually derelict which could be brought into production with good effect.

It is important that this problem of the physical reclamation of land should not be tackled with too much speed; though I must confess that the Government have not given us cause for anxiety on that point up to now. It would be fatal if an attempt were made to reclaim a lot of land which could never be farmed economically, and which would be a constant drain on our capital resources. I would urge the Government, when they come to decide on the acreage to be reclaimed, to maintain a nice and proper balance between the country's necessity to grow more food and the equally important and urgent need to grow it more cheaply.

I should not like to leave this matter without saying that surely the time has now come to cease taking good agricultural land for such other industrial purposes as the production of opencast coal. Nothing would be gained from reclaiming 1,000 acres of land at considerable expense if at the same time 1,000 acres of good agricultural land were taken away for some other purpose. The Government must make up their minds how great an importance they attach to an increased production of food.

I suggest that if the necessary capital can be found, by means of a loan, the agricultural industry can fire the first shot in the fight to halt the inflationary spiral of rising prices and wages. If this can be achieved there will be every prospect of our being able to meet the increasing competition in the world markets while at the same time improving, or at least preserving, our standard of living at home.

6.23 p.m.

Mr. Clement Davies (Montgomery)

I find myself particularly fortunate this evening, not only in having been in the Chamber to listen to the speech which has just delighted us all, but because it falls to my lot to congratulate the hon. and gallant Member for Bedford (Captain Soames) upon the success of his maiden speech. It is always a very difficult matter, as we older Members know, to address this House for the first time, but the hon. and gallant Gentleman has discharged that duty with clarity, sincerity and a fairness which has delighted us all. May I add that his task must have been a little more difficult than that which falls to the lot of many hon. Members on such an occasion, in that he had here present listening to him his great and respected leader? May I also congratulate that great leader upon the addition to his forces whom we have heard tonight? I am sure that the House will be listening again with renewed attention on any occasion upon which the hon. and gallant Gentleman addresses it.

Now let me turn to this Budget. I have now heard many Budgets in the course of my life, some of them memorable, some of them startling. I have been wondering what adjective to apply to this Budget, and the only one that occurs to me is that it is a dull, unimaginative Budget. Dull, because really it could have been summed up in a sentence if the Chancellor had so chosen, by saying: "I have nothing to add to what I said last year. I repeat the dose, and I hope the patient will go on with it."

Very rightly, of course, the Chancellor had to deal with the whole economic situation. The purpose of the Budget ordinarily is to provide the necessary money to meet Government expenditure, but during the war we considered that the Budget statement should take in a much larger purview—namely, the state of the country, the national income as a whole, and the national expenditure. Now, more details with regard to both national income and national expenditure are provided than were ever provided before the war, and we are therefore in a much better position to consider the effect of proposed taxation and proposed expenditure, and the effect that they will both have upon the country.

The Chancellor very rightly said that the Budget provides the Government with an opportunity better than any other, of laying down a policy which will determine the course they desire that the country should follow. The Chancellor went so far as to say that the Budget could be used for the purpose of making a happy country. Happy according to what? Happy according apparently, to the Chancellor's standards and not according to individual standards. I believe that this is a doctrine which might quite easily be applied in any totalitarian country. On the other hand, I believe that happiness is a matter for each individual, and not a matter for direction.

The first purpose of the Chancellor is, of course, to balance his Budget, and nowadays—certainly since 1940—we have decided that the annual balances are not enough and that we should take a much longer view, so that one does not in a time of depression increase taxation and at a time of boom decrease taxation; that we should aim at a balance over a period much longer than one year, so that in time of depression we can lower taxation and at a time of boom maintain a high taxation, and so build up a surplus which will enable us to resort to loans in a time of depression. That seems to be now an accepted principle on all sides [HON. MEMBERS: "No."] Well, I thought it was. At any rate, all have been party to it for quite a considerable time.

Further than that, we have also decided that in a time of threatened inflationary pressure we should indulge in a measure of compulsory saving so as to take from the individual any surplus money which he might be tempted to use over and above what is required by him for maintaining his standard of life. With that again I of course agree, having advocated that course of action over a series of years, including when debating former Budgets. So far then I agree.

Then one has to consider, apart from these general principles, what is the present position. Unfortunately, I and many others here belong to a generation which has now lived in a state of war for most of the years of this century—certainly since the year 1908. Either it has been a threatened war and a preparation for war—which nowadays can be described as either a "cold" war or a "phoney" war—or a period of actual active war.

It is really a reflection upon the statesmanship and leadership in every country in the world, that in the year 1950, after fighting during two world wars of four years and six years respectively, even now in this country, when we are anxious about our food supplies, our standard of life, our social welfare, and improvements in our education, we are called upon to spend upon our national defence a sum equal to the total Budget in 1938. Do not let it be thought for a moment that I do not think that that insurance to maintain our own mode of life is not necessary. Of course it is. But I am appalled at the high cost of it; and I am still more appalled at the fact that the statesmen or leaders of the world cannot devise some other measure by which we can live together without having to resort to arms.

Allowing for all that, I am of opinion that at the present moment we in this country are spending far and away more than we can really afford. I agree, as I always do—I think everybody does—with the sentiments which are so well expressed by the Chancellor of the Exchequer. Unfortunately, his proposals usually fall far short of what is necessary to make his sentiments a reality, or to carry them into practical effect.

We have come through difficult times not only during the war but since the war and there are difficult times ahead of us. The time is rapidly drawing near when not only shall we have to stand upon our own feet without any assistance from Marshall Aid but we shall have to begin to repay the loans from the United States and Canada. It is, therefore, incumbent upon us to build up our reserves and especially our gold reserves because, be it always remembered, we are the central bank not only for ourslves but for the whole of the sterling area.

The growth in our export trade is indeed remarkable. I think that the right hon. Member for Aldershot (Mr. Lyttelton), who gave the Committee so many figures this afternoon and handled them so ably, was rather understating when he said there ought to be now an increase over 1938 of 70 per cent. in our exports. I believe that in order that we may really get our food and the necessary raw materials to maintain full production and our standard of living that must be increased even to over 80 per cent. A tremendous task is, therefore, in front of us.

Once again I was glad to hear the Chancellor emphasise the need for world trade and the desirability of freeing the world from restrictions so that trade can flow freely between countries. I am always puzzled, however, by the somewhat contradictory attitude adopted by the Government. While they desire, according to the Chancellor of the Exchequer and the President of the Board of Trade, the greatest freedom in world trade, and emphasise, what is undoubtedly the fact, that the prosperity of this country will depend upon the free interchange of goods and services between us and all countries, they, at the same time, impose restrictions and controls upon internal trade and production. The two things, to my mind, are flatly contradictory.

Of course, trade at once began to revive when confidence in sterling was re-established. One could not expect people to buy or sell in sterling when they had no confidence in its fictitious value as it stood up to September last. The whole prosperity of this country has been built up upon multilateral trade, readiness to buy from and sell to all the countries of the world ready to trade with us, and upon the ready acceptance of sterling as providing a secure means of exchange and a value which everyone could accept. So I am a little surprised that the Chancellor now claims the credit for the improvement which has taken place since the devaluation of sterling, when we recall that between July and September he steadfastly refused to adopt that course.

I shall not forget when he came to the House in July and read a statement about the crisis which had befallen us, similar to the one that had befallen us in July, 1947. We had gone from one crisis to another and this was the most serious of the lot. Having finished his statement, a number of questions were asked and one hon. Member opposite asked the Chancellor, "Did he intend to devalue sterling?" His firm answer from that Box was "Certainly not," and loud cheers came from all his supporters on that side. Now he seems to us to pride himself on having devalued sterling as a deliberate policy—

Mr. Norman Smith (Nottingham, South)

The "Manchester Guardian "answered that.

Mr. Davies

—and he should, therefore, have full credit for everything that has happened since. I am glad to see that the hon. Member for Nottingham, South (Mr. Norman Smith) pays so much attention to the "Manchester Guardian" —a very sound paper—and I would suggest that he should always follow the principles laid down by that good Liberal paper.

Now the question is: Does this Budget balance revenue against expenditure and also provide the Chancellor with that surplus which he regards as necessary to meet any inflationary pressure? On paper that seems to have been achieved. but has it in fact been achieved? That, as I think the right hon. and learned Gentleman in his speech pointed out. remains to be seen. It depends upon so many factors, or, if he prefers the word, upon so many assumptions, and if any one of them breaks down, then the Budget ceases to balance. The first one. as I see it, is that there shall be a continued rise in production. Secondly, that there shall be a continued rise in exports. That, of course, will depend upon whether the cost of production remains the same. goes down or goes up. If it goes up, then one is in jeopardy. Even if it remains the same, one is in difficulties.

We know that we are now not only face to face with severe competition from those who have been in the competitive market since the end of the war, but we have now passed from a sellers' market to a buyers' market; and we now know that Germany and Japan are once again entering the export market. The costs of production are, therefore, all important. A rise in those costs may mean a loss of markets. Then there would follow a decrease in production, a decrease in national revenue, and a decrease in taxable income which would mean an unbalanced Budget.

Next it depends upon the maintenance of full employment, and that means, of course, that there is work, and productive work, awaiting every employable man and woman. That again depends upon the maintenance of the present structure. All this is inter-linking with the continuance of the freeze in wages. The Chancellor of the Exchequer has himself admitted that if there is a rise in wages there will be a rise in costs which may eliminate certain export markets, and, therefore, we should not be in a position either to have the revenue necessary to meet this high Government expenditure, but, what is worse, we should not have the necessary money to purchase our imports of food and raw materials. If that happens, then the whole structure comes tumbling down.

That is the really serious situation which the Chancellor himself has described. If any one of his assumptions fails, not only will the Budget be unbalanced but disaster may then be facing the country. He has built up his Budget on the assumption that all will go well from now on, not merely in this country but in world markets outside, and especially in the American market. The Chancellor was right to pay tribute to the management and the workers for the way in which they have responded to the call of this country, but he was even more right to pay tribute to the workers for the restraint which they have shown during this period.

Have we any right, therefore, to rely as much as the Chancellor is relying upon the continuance of this restraint? I should have thought that the natural instinct of everyone of us, wherever he may be and in whatever walk of life, was to earn more and to gain a higher reward for such services as he can give. It is putting a tremendous strain upon people to ask them to continue to accept less than that to which they think they are entitled. No wonder there is at this moment this pressure going on all the time outside. I emphasise that because the Chancellor says that if that failed him, if the natural instinct is allowed free play and people do get more than they are receiving at the moment to which they think they are justly entitled, then his Budget also fails.

The balance does not depend merely on that and the continuation of the wage freeze, but upon one other factor referred to by the right hon. Member for Aldershot and the right hon. Member for Saffron Walden (Mr. R. A. Butler), namely, upon whether private savings in 1950 will increase by some 27 per cent. over 1949. The Financial Secretary made some passing reference last night to the basis upon which that estimate is made. But how can it be made? With high taxation and the tax on profits, where is there a sufficient basis for the Chancellor to say that we have come through the 1949 conditions and things have now so altered in 1950 that there will be an increase in private savings of 27 per cent.? If that fails, even if it is a percentage, then the Budget will not balance.

We are quite clearly reaching saturation point in regard to taxation. Over 43 per cent. of the national income is taken from the pockets of the people and spent by the Government. Even the Chancellor of the Exchequer seems in this Budget to admit that any increase in the ratio of taxation will now, as we have already seen in regard to some other forms of taxation, bring in a lower yield rather than an increased yield. Except for resorting to increased tax on petrol and on commercial vehicles, the Chancellor has realised that he cannot enforce any further taxation without getting less than he is receiving at the moment. That being so, what should he do?

If we cannot increase the volume of our revenue, and it is our duty to balance revenue over and above expenditure, and if a surplus is required which can be used if necessary to forestall an inflationary pressure, what is the only remedy? It is perfectly obvious that there has to be a cut in expenditure. If the Chancellor of the Exchequer cannot increase the revenue and is apparently not allowed by his colleagues in the Government or by Members opposite to balance his Budget by cutting expenditure—

Mr. Norman Smith

Or by the bankers

Mr. Davies

—his position is rather like an Alpine climber who has reached a ledge on a mountain from which he can neither go up nor down, where his very position on the ledge depends upon the fairness of the weather for the next 12 months and a blizzard of increased wages will sweep him off.

The Government and their supporters are always challenging those who criticise in this way to say where they would make the cuts in expenditure. [HON. MEMBERS: "Hear, hear."] It is all very well Members saying "Hear, hear," but they are faced with the position that if the revenue cannot be increased, they must decide what they are going to do if the Budget does not balance. Are we to go bankrupt? Is that the answer? Would it then not be necessary to say that we must cut our coat according to the cloth and look around to see what can be done without getting into any real trouble? On several occasions in previous Parliaments I have said that all we from this side can do, not having all the knowledge and assistance of the Government, not having the civil servants and accountants at our disposal, is to suggest certain general principles which could be applied. If we are brought to this impasse and cannot increase the revenue or balance the Budget, there has to be a cut in expenditure.

In these circumstances, what should the Departments be told? They should be told to make a cut in those things which will cause the least harm. The Departments would know the answer much better than we do. The hon. Member for Kirkdale (Mr. Keenan) very rightly said that so far as he was concerned he would perfer more houses and fewer schools if he were put in that difficulty. He said that if he were put into the very real difficulty if having to choose between house.; and hospitals, he would choose houses All anyone who looks at this matter honestly can do is to say that something has to be sacrificed, and let the sacrifice be that which will cause the least harm and certainly not that which will cause permanent harm.

We undoubtedly have to do without certain things. Members opposite seem to think that one can buy anything, but it depends on whether it is in existence and whether the income is in the pocket. All we can do is to lay down what we consider should be the guiding principles we would put to the individual Departments, and to say that certain matters can be postponed until we are in a sounder position.

I will give one instance that occurred in July, 1947, which is a very good one. In July, 1947, when there was one of those annual crises going on—although it was a much greater one than the crisis that occurred in 1946—the Prime Minister came down to the House and announced that there would be certain cuts in expenditure. When I spoke on that occasion, I was challenged by the Prime Minister to say what I would leave out, and I stated that there was one interesting item to which reference had been made in the House earlier in the day. For years and years we had been talking about a bridge across the Severn to join South Wales to Devon and Cornwall. Nothing had been happening throughout those years, and we had had to manage without it.

That very afternoon when the cuts were being announced a statement was made in this House that the bridge was going to be provided and steel would be found for it. I said, "That is a matter that you can postpone. Use the steel for articles which are needed and which we can sell abroad, and do away with this capital expenditure so that you will have the labour and materials available to make goods which will buy us food and the necessary raw materials." That is the kind of expense I mean. Certain matters can quite obviously be postponed for the time being without any real detriment to the country. Other matters can be pushed on with much greater enthusiasm than is being shown now, especially those which will make a good return in productive capacity so that we can turn out more goods.

The time has come for us to review the whole system of taxation and I thought the Chancellor this year would do it, because last year I remember that in the course of his Budget speech he agreed that the time had now come for such a review. I thought this year we would see it done. We want a new approach to this matter. At the moment all these things are hanging together and we cannot possibly do away with one. without bringing down the whole structure. If I may I should like to use the food subsidies as one instance of that. So long as there is a freeze in wages, food subsidies will have to be maintained. That was a war measure brought forward in this House to meet a war situation. Is it really the view of the Government and hon. Members who support them on the opposite side of the House that that has to be a permanent institution in times of peace?

Mr. Norman Smith

Yes.

Mr. Davies

The response to that is not very strong except from Social Credit. We realise that these matters all hang together, and the only way with regard to it all is to have a completely new approach. I was hoping this year that we should see that from the Chancellor.

May I turn for a moment or two to one or two other items of the Budget? I agree with the reduction in taxation on the lower grades of Income Tax payers. While this is good in itself, I agree absolutely with the hon. Member for Kirkdale that it does not in any way help the lower income groups which we are all so anxious to assist, and who have never been in the position to pay tax. I agree that those people who need our help first are the pensioners, and especially the families which are really in need. I should have preferred an extension of family allowances so as to include every child. I should have thought that that would be far and away the better way and the more profitable. As I see it, as long as we have got the present system we cannot possibly extend the benefits in the way we should like to see them extended.

I only want to refer to one or two of the proposals which are here. One of them is the taxation upon lorries, and the other the tax upon petrol. I do not like either of them. If it were desired to limit the number of lorries that were being bought it should have been left with the market. People do not buy lorries for pleasure, but because they are necessary for their business. If too many are being produced the market will solve the situation. Either prices will come down or the manufacturers will cease to make them. It cannot be said that such a situation will be solved by the putting on of a tax.

Nor do I like the tax upon petrol. Why? Our one anxiety at the present moment should be to produce as cheaply as possible in order to compete with the world. We know only too well that there is one increased cost which will at once have its effect upon the costs of production, and that is, as the right hon. Gentleman the Minister of Supply knows only too well, the cost of transport. That will at once, more effectively increase the cost of production and the cost of distribution than anything else. Why choose this particular moment when the country is in the difficulty of finding the sellers' market gone and new competitors like Germany and Japan coming in, to increase the cost of production to this country? That is why I do not like the tax.

One other word, and that is with regard to taxation on lump sum payments made in respect of restrictive covenants. Of course, it is only right that this should be subject to taxation, but let it be from today and not retrospective. I hate retrospective legislation, and it does not make it any better that the Chancellor should have said with rather a smile, "I warned these people." Since when has it become a law of this country that a warning given by a Minister, however important he may be, is to have exactly the same affect as a law passed by Parliament? By all means bring in this very necessary reform without saying anything against those who have taken advantage of the law as it stood. One does not want to support them but I do not like legislation to make illegal an act done in the past, which was perfectly legal at the time it was done. It is a bad precedent and one which the House should reject.

I think the Chancellor of the Exchequer has missed a really great opportunity now that we have reached this stage. He seems to have continued the war atmosphere, with a war mentality and with controls that were necessary in a time of war. Here we are, five years after the war has ended, still approaching all these questions on these narrow limits. It is time we realised that we need expansion and not restriction.

6.58 p.m.

Mr. MacColl (Widnes)

It is always bound to be a difficult thing to speak in the Committee for the first time, but to follow so polished a Parliamentarian as the right hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies) is only to show up the rough edges even more. The right hon. and learned Gentleman began his extremely impressive but a trifle gloomy speech, with a medical metaphor, and if it is not disrespectful to him I should like to suggest another kind of medical metaphor, which seems to me much more appropriate to the situation in which the country finds itself at present.

I was reminded of the story in St. John's Gospel of the young man who was cured of his blindness, an incident which at the time was regarded with very considerable displeasure by conservative and orthodox circles. At the beginning, those gentlemen tried to establish the proposition that the young man had not been cured at all. That is a technique which we have seen applied during this Debate. The statistics on production and other impressive figures which have shown steady improvement over the past five years have been challenged. When these conservative and orthodox circles discovered that the facts spoke for themselves and that their suggestions did not seem to work, they went to the young man and rebuked him. They told him it would have been much better if he had not been cured and that he had no business to be cured at all, because it was extremely unethical and unorthodox and that he had been cured by a sinner. What he said showed very remarkable, proletarian common sense: Whether he be a sinner or no, I know not: one thing I know, that, whereas I was blind. now I see. I think that is the general feeling in the country today at the end of five years of Socialist administration.

I do not believe that the people are very much interested in the prophecies of impending disaster. For five years they have listened to the assembled mourners round the bier waiting for the corpse to die, until the candles have burnt out. In general, we have reached a stage when we do not want so much to explain away the fact that we have remarkable prosperity and that we have full employment. but when we should try to look at some of the implications of that policy for the future. I start from the position of warmly welcoming the achievements of the Government in attaining full employment, which opens a new era for the nation. I was brought up in one of the worst depressed areas in the country, and I represent here an area with mining and heavy chemicals, where the worst possible experiences of the past have not been forgotten. Therefore I should be the last person to underrate the importance of what has been achieved.

I want to say how grateful I am to my hon. Friend the Member for Kirkdale (Mr. Keenan) for speaking as he did about capital commitments in the social services. He gave me just the text that I wanted to get me over some of the awkward difficulties of knowing how to get on to my subject. It is time that we recognised much more-1 will not say much more than those responsible for the financial policy of the Government recognise them, but more than the people and many hon. Members recognise—the full implications of the full employment policy. I want to quote what my right hon. Friend the Minister of Health said on this subject in the Debate on the Address. I wish to emphasise that I am quoting. I hope that nobody will think that I am being controversial. My right hon. Friend said: One of the consequences of full employment is that if we want to have more of a particular thing we can only have it at the expense of some other thing. That is why I describe the proposition of the Opposition as immoral, because they never told anybody who badly needs something that they cannot have more of it unless somebody else is told that they are going to have less of what they want." —[OFFICIAL REPORT, 13th March, 1950; Vol. 472, c. 865.] A lot of people regard the present pressure on our national resources as a backlog from the war, something which is purely temporary. and is likely to pass away with the passage of the years. I think it is one of the inevitable accompaniments of full employment that there is bound to be tremendous pressure on our resources. We cannot think of developing our social services unless we do so in terms of what the economists call "opportunity costs." In other words, we have to think in terms of what we are to give up. I ask the Government to give us a programme of capital development and capital investment in the social services over a period of years, a programme which will balance out the comparative claims of different proposals which we all want to see established and which we all welcome.

My hon. Friend the Member for Kirk-dale said he thought housing should, if anything, receive more consideration than it is receiving at the moment. I should be the last to deny the importance or the value of housing. As an investment, housing is tremendously needed and is of tremendous value, but it is worth while remembering the figures which were given by the Financial Secretary last night of the capital expenditure in loans to local authorities. Of those loans, 76 per cent. which is more than three-quarters, are going in housing. I believe that of the loans actually sanctioned over the past three and a half years the proportion is much nearer 82 per cent., whereas the percentage of capital investment going into schools is less than 10 per cent. Therefore, to think of education and housing as two things we can balance is to get a misleading impression of the situation.

It may be that housing is such a basic need of family life that it must receive No. I priority. I am quite prepared to accept that point of view, except that one has to remember that the idea that we can go on building houses and neglecting our other communal institutions, has been tried before and has brought disastrous results. That idea is that we do not need schools or community centres because we need first to build houses for the people. If we are to establish a priority of housing, guaranteeing that it shall have a given proportion of the national savings for the next three years, somebody has to think out what that implies for the other social services. That point of view was put, again by the Minister of Health. I apologise for quoting him so much, but he is rather a safe person to get behind in case I am accused of any Right wing deviation on this subject.

My right hon. Friend asked a right hon. Member of the Opposition whether he intended to cut schools, factories, power stations, maternity homes or old peoples' homes. Either we have to accept the assumption that those things cannot be sacrificed for housing, or the principle that housing must come first. We must look at the implications of the latter policy in connection with the general development of the other social services. Let us take the case of the maternity home. Fortunately, my contact with maternity homes has been very restricted but it seems to me that if we are to establish as the first priority of our social programme that we are to have everybody adequately housed, then we must face the implication that domiciliary confinement must be much more common because we cannot afford the capital investment for maternity homes as well as for housing the people.

The same thing applies to various measures which now rest on the Statute Book and to which the country is committed, and yet measures in regard to which nobody seems really to have got down to the job of totting up how much they will amount to. We are pledged to the provision of county colleges and health centres. Taking a smaller matter yet one, I think, of paramount importance, I would remind hon. Members that the whole of the Criminal Justice Act, which may be good or bad—in many respects I think it is bad—depends on the implementation of commitments in regard to attendance centres, detention centres, remand centres and so on. Without those provisions it cannot be made to work yet, so far as I know, the Government have succeeded in making provision for only two attendance centres and have not yet found capital for the other things.

Somebody has to tot up what it all amounts to, what we are committed to, over what stage we are going to be able to provide them and what are going to be the implications of not providing them. To go back to my protector, my right hon. Friend spoke on that point also in the Debate on the Address. He was rebuking the Opposition for not being responsible statesmen. He said: They would not make each separate proposal on its merits alone. They would try to add the sum up and then see whether the adding up of the sum amounted to anything practicable in terms of national resources."—[OFFICIAL REPORT 13th March, 1950; Vol. 472, c. 864.] That is precisely what I am asking the Government to show us. Have they added up our commitments in these respects, have they worked out what it means in terms of the national resources, which are in full use, and are they prepared to give us a programme of capital investment over a period?

If I may come to the obverse side of this picture, going away from the grand financial strategy of it and looking at it from the worm's eye view of the individual local authority, I am inclined to think that a result of this failure to look at our capital commitments in the social services as a whole has been the policy adopted in regard to capital commitments of individual local authorities.

Just after the war local authorities were invited to prepare a capital programme for three years. I was concerned in preparing one of those programmes. I know just what happened in my authority and in many other authorities. We had our election address and we looked at all the things to which we were pledged and we pinched a few things from the addresses of the Opposition boys which seemed attractive, and shoved them all into the programme because we did not want to be accused of having missed anything which there was the remotest chance of doing. The result was that we got a capital programme—precisely the same was true of the global figure—which bore no relation whatever to the national resources. That approach of the problem is bound to be a failure.

What is required is this. Having weighed up and balanced the different claims of our capital resources, it is up to the Government to give the local authorities a green light to go ahead over a reasonable period so that they may have some idea of where they are going. I do not apologise for giving a small and very local example of the kind of difficulty that arises. My constituency is a typical area of capitalist exploitation. It is an area in which an enormous amount of money has been made and from which an enormous amount of money has been taken. The result is that we have appalling slums in great quantity and no adequate civic buildings.

The local council have produced a proposal for using their powers to provide a civic restaurant and to develop it into what they hope will be a civic centre for the community. They have applied for loan sanction in two different stages. The first stage is merely to provide for the bare necessity of getting food, and the second is concerned with the possibility of developing a community centre. Financially, the two are closely linked together, because the prospects of making the first part pay, depend on the speed with which overheads can be spread over the second. However, they have had sanction for stage one only and they cannot get any undertaking that they will be allowed to proceed with stage two. I am not criticising the Government because I know their difficulties, but the difficulties from the local point of view are equally bad because prudent men cannot possibly decide whether they can go on with stage one, unless they have some certainty that in a reasonable time they can develop stage two.

The people of Widnes have shown considerable political maturity and very wise judgment quite recently and there is no doubt that if the choice was put to them and they were asked, "Would you rather have the civic building or housing? "their decision would be that they would rather have housing, and thus they would support a programme of rationing of capital investment.

I will give another illustration from my experience in the field of new towns. I am certain that one of the gravest causes of waste of manpower and time in the new towns has been the changes in the capital sanctions which they have received; in other words, instead of being able to plan their proposals over a long period, they have found that they have had to go into reverse and to modify plans in order to meet the demands of the Government for capital reductions.

The only way in which local authorities can have any kind of confidence in their judgment, the only way they can be sure of developing their programme and the only way in which they can economise with their manpower is on the basis of having a clear programme put before them. It would be very much better to say to local authorities, "This is the minimum which you can have; this is the minimum we can provide for schools; this is the minimum for houses, and so on. Within that minimum you have a pretty certain guarantee that you can go ahead. Beyond that minimum it is highly speculative. What you had better do is to put a wet towel round your bead and decide what is the best use to be made of the resources that exist and decide on the comparative claims of the different social amenities which are required with the knowledge that if you accede to one you will probably have to refuse another."

I, therefore, ask that as an accompaniment of the excellent proposals in restoring the housing cuts, which we all welcome, there should be some kind of programme over at least three years and some kind of assessment of our commitments in the way of capital investment in the field of social services, and of how much local authorities will be able to afford. This should be clearly worked out and laid before the local authorities, regional hospital boards and all others whose responsibility it is to develop our social services.

7.18 p.m.

Mr. Arthur Colegate (Burton)

It is a very pleasant duty indeed for me, in addressing the Committee for the first time after nearly live years, to have the pleasure of congratulating the hon. Member for Widnes (Mr. MacColl), who has just delivered so fluent and so confident a speech. I am sure that he, like so many others whom we have heard in the last week or two, will maintain the high traditions of speaking in this House and make many useful contributions to our Debates

Turning to the Budget, I must confess that, like so many other hon. Members on both sides, I experienced many great disappointments. In the first place, I was extremely sorry that such sketchy proposals and statements were made about possible reductions in expenditure. I should like to say at once—it was put very well by the right hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies)—that it is not our duty to give detailed proposals for reductions in expenditure which we think are necessary. It has been my duty three or four times in my life to be called in to firms who were clearly drifting on the rocks and to be asked to regulate their finances. What happens? I see the chairman and the managing director, and what do they tell me? They say that there are no possible economies that can be made, and then they say, "Where do you think that economies can be made? "I have always answered, "I cannot tell you until I have had at least a month or two to look into the structure of your business and the details of your finance.",

For anyone who has had administrative experience, as I have had, both in Government service and in private enterprise, it would be the height of presumptuousness to try to teach the Treasury and the other Government Departments, with their able advisers, exactly where and when the economies can be made, but to come to the House of Commons and say that with the exception of food subsidies, and possibly defence, it is quite impossible to make any economies in the thousands of millions of pounds of expenditure is an insult to the commonsense of the nation.

Mr. Jay

We are making economies.

Mr. Colegate

That only makes the case far worse, because, first, the Chancellor of the Exchequer says, "We cannot make any economies "and then the Financial Secretary says, "We are making economies." It will not do. They must wake up to the fact that sooner or later economies will have to be made. The sooner they set up a strong committee, with some good Treasury officials on it, to look into the business, the better. Otherwise, they will be in a very precarious position. In that connection it should be pointed out that the position of industry today ought to cause grave concern because, as the Chancellor pointed out, we are entirely dependent on the efficiency and competitive power of industry during the next few years if we are to get through without cuts in the social services and without financial disaster.

When I read the Economic Survey I was alarmed to see the attitude adopted towards the renewal, the maintenance and the development of our existing industries and the absence of any mention of new industries. If we are to survive as a great industrial nation that is one of the most important parts of our policy, and one of the most important subjects to which the Government should devote care and attention. Quite rightly, we are told in the Economic Survey that we must have extremely efficient industry. It says: A high rate of investment will also be necessary in order to enable the equipment of British industry to be kept up to date with modern developments. Yet in the Appendix we find that instead of the resources of capital investment being devoted to keeping the equipment up to date, it will be deliberately kept a little out of date. It says, on page 42. Only a very small proportion of the large annual total investment expenditure goes to new development. And, in a subsequent paragraph: New development may have to be restricted to the bare level required to carry out works already authorised. Of roads, it says: Expenditure … on road maintenance work in 1950 will allow only about 62 per cent. of the pre-war volume of maintenance work. When we come to quays and warehouses we are told: The programme … will necessitate the postponement of a number of important schemes of improvement, including the rehabilitation of war-damaged quays and warehouses. I want to know how we can carry on an increased export trade if quays and warehouses have not been repaired?

When I come to the Post Office, I find the secret of the whole business. It is this: The Post Office will, accordingly, have to continue severely restricting its purchases of telephone exchange equipment, cables, apparatus and stores. Then comes this significant, bracketed statement: (Automatic exchange equipment is a valuable export.) The Appendix shows that British industry is exporting some of its best capital equipment to those who will compete with us in two or three years, while the British manufacturer is told, "You cannot have a first-class road transport system; you will get only 62 per cent. of the pre-war volume of work on these because we are exporting the road equipment machinery to your competitors." Already a constituent of mine who is moving into an agricultural implements works has been told that he cannot have a telephone although he has a good export trade. Is that how we are to equip our modern industries to compete with products from Japan, Germany and elsewhere?

In the same way, one of the most vital things for modern industry, electricity, is to be restricted. I am told that generators are being exported to our competitors. If hon. Members opposite will look into this matter they will find that the policy of the Government, which ought to have been directed to maintaining the biggest export of consumer goods, has in many cases restricted the British manufacturer in order to export the capital equipment which he ought to be taking into his business to modernise it.

Mr. Jack Jones (Rotherham)

Does the hon. Gentleman not realise that other nations who require this equipment demand that they shall have it and that, unless they get it, the things we cannot do without will not be made available to us from those countries?

Mr. Colegate

That is not so at all. [HON. MEMBERS: "Oh !"] Oh, dear no. Modern trade is a question of exchange. [HON. MEMBERS: "Hear, hear."] We agree on that. As far as possible, in the situation in which we find ourselves, we should exchange consumer goods for consumer goods—

Mr. Jack Jones

We do.

Mr. Colegate

—and not export some of our most modern telephone equipment at the very time when we are refusing that equipment to our exporters.

Mr. George Wigg (Dudley)

Does the hon. Gentleman not realise that in between the wars the capital equipment, the absence of which he is now deprecating, was not installed in a period when we had unemployment, and that the criticisms he is making ought to be directed to his own party?

Mr. Colegate

We have been asked to discuss the Economic Survey of the present Government. I am prepared at any time in Debate to meet any criticisms about the inter-war period, but I must confine myself to the Economic Survey and the Budget. Even if the hon. Member were right, and wrong was done between the two wars, there is no reason why a wrong policy should be pursued today when it is of the utmost urgency that we should get our industries and capital equipment into the highest state of efficiency.

With regard to taxation, like the hon. Member for Runcorn (Mr. Vosper) I regret that the relief given was only in respect of Income Tax. Knowing that I represent the City of Burton-on-Trent, hon. Members will not be surprised that I thought relief ought to have been given to beer. There are reasons why that excellent industry, which gives good employment, should not suffer, as it is beginning to suffer, from the over-taxation of beer. There is this further point: the hon. Member for Runcorn mentioned the seven million people who will not be affected by the relief in Income Tax. I dare say, however, that a very large proportion of those seven million people are today being deprived of their customary daily glass of beer because the price is too high for them to buy it.

The cost of living is pressing extremely hard upon the lower-paid workers. No Member of Parliament who has canvassed his constituents personally can fail to have had this brought home to him, sometimes in a most tragic form. If we can give some little amenity, some little relaxation in austerity, let us give it to tobacco and beer, because the drinking of a glass of beer is done, not at home, but at the poor man's club—the "pub" or the "local." I think that we might have had a reconsideration of the duty on beer instead of the relief in the lower grades of Income Tax.

A real drive should have been made to eliminate the unnecessary and wasteful expenditure which we all see all around us. No one should imagine that expenditure on defence or any other particular service is sacrosanct Today, every service has to be undertaken on a basis of the utmost economy. Had the proper effort been made it would have been possible for the Chancellor to have done as so many of us hoped he would do—to reduce taxation in many fields and afford a great deal of relief particularly to the lower income grades.

7.32 p.m.

Mr. John Hay (Henley)

There is an amiable tradition in this House that it gives indulgence to any hon. Member who rises to address it for the first time, and I must ask the Committee to bear with me as they have so generously borne with so many other new Members of the House in the past few weeks. There is a corresponding tradition that he who speaks should not be controversial. I find myself in much the same difficulty as many of my hon. Friends who have intervened for the first time in this Debate, because it is difficult not to be to some extent controversial in face of this Budget and of the gravity of our economic plight. I can at least assure the Committee that if, perhaps, I occasionally stray into the realms of controversy, I shall not be intentionally provocative. I hope that my hon. Friend the Member for Burton (Mr. Colegate) will forgive me if I do not follow him along the lines of the Economic Survey which he traversed or into the delightful realms for which his constituency is so well known and of which he has reminded the Committee.

I feel that what we must do in this Debate is to realise the fundamental importance of the biggest single factor which, in my view, impedes a more rapid advance to solvency and recovery: that is, the present cost of living. That is a subject which has been put forward or referred to in many speeches during this Debate. I make no apology for referring to it again, because, as every hon. Member will have experienced at the election, we found that it was this one topic, with the possible exception of housing, which weighed more heavily and concerned more closely the individual men and women amongst the millions of electors who sent us all to Parliament.

It is a matter of the very gravest concern, and it is in their interests and ii. the collective interest of the nation as a whole, that some strong action should be taken at this stage by the Government. Unless something is done soon, I fear that the rising tide of unrest and dissatisfaction which will come upon the country may have the gravest effects upon our industrial and agricultural production—the lifeline with which we must haul ourselves to safety. That is the background against which I wish to present the remarks which I have humbly to make to the Committee.

I think it is generally acknowledged that Britain must do four things simultaneously if she is to survive. First, we must produce more, and at lower cost as we have been so often reminded. Next, we must maintain and improve the efficiency of our industries and our production. Thirdly, we must give adequate incentives to all those who contribute to the national effort, at all levels and in all classes. Fourthly, as we have been reminded during the Debate, we must keep inflation in check. All those four things have to be done together.

What is the effect of the Budget, and what has been the effect of the economic policies of the Government, which, we are told, are to be continued for at least the next 12 months, should the present Parliament last so long? To begin with, I want to refer to inflation. In his Budget statement on Tuesday, the Chancellor used some particularly strong words to set out the danger which inflation can bring to our economy. Let me remind the Committee of what he said: The greatest internal danger to the success of our external policies has been, and still is, inflation. If internal inflationary forces were to get the upper hand in our economy our balance of payments position, both overall and in dollars, would deteriorate disastrously…. We must therefore avoid any development of inflationary tendencies which would prevent us from obtaining by importation the raw materials without which our programme of increasing production and full employment would collapse in ruins."—[OFFICAL REPORT, 18th April, 1950; Vol. 474. c. 49.] Never were truer words spoken in this place or in any other.

I felt, therefore, that it was rather unfitting of the Chancellor, when he went on a little later to speak in what seemed to me to be a rather complacent manner about the success which, he believed, the policy of the Government had achieved in combating inflation. As I have always understood it, that particular policy is mainly to draw off spending power from the community as a whole so that we shall not have that excess of money chasing that scarcity of goods to which the right hon. Gentleman who is now Minister of Town and Country Planning once referred. In this connection it always seems to me that in their policy the Government believe that the end justifies the means by which it is obtained. That may be so. It may, theoretically be a desirable way of combating inflation to draw off this spending power. But do the Government realise the effect which such a policy has upon the thousands—probably millions—of people who live on very small incomes? It is those people in particular that we should remember when we come to discuss these matters.

Let me remind the Committee that.spending power is drawn off in two ways: by direct taxation, as we know, and by indirect taxation, which affects everybody. Many of the people who make no contribution at all to direct taxation still have to pay in indirect taxation. That is the reason why the cost of living today, measured not on any scales but simply from the point of view of the money which people have in their pockets to buy the necessities of life, is, in that sense, high.

During his speech the Chancellor, as did the Financial Secretary, who I am sorry to see is not now in the Chamber, said that there were now more goods in the shops. I think it was my hon. and gallant Friend the Member for Bedford (Captain Soames), who, in an admirable maiden speech today, pointed out that the reason for this was that the people simply had not the money to pay for the goods. That is why there is today the appearance of more goods in the shops. Indeed, it would be very surprising if there were not more goods in the shops, in view of the fact that people do not have the money in their pockets to purchase the things they want. Why does the Chancellor imagine that savings withdrawals in the last 12 months have exceeded deposits by £68 million? People do not draw out their money from the Post Office Savings Bank always for fun. Often they draw it out, and to an increasing degree, because they need the money on which to live, because they need it to buy the things that make that "happy life "to which the Chancellor referred in his broadcast.

The purchasing power of the £ sterling has fallen internally, as we were told a few weeks ago, to 16s. 2d. compared with a figure of 20s. in 1945. This decline is not at all surprising when it is realised that Purchase Tax is imposed over a wide range of commodities, including household articles and semi-luxuries which people need; when beer, as my hon. Friend the Member for Burton has just reminded the Committee, still bears an impost of 81-d. on the pint, when a packet of cigarettes still bears a duty of 2s. 9-1-. and when one goes to the cinema one contributes 8½1. in Entertainments Duty to support the Revenue.

Those are the things which take the people's money. This is the reason why people have less money in their pockets today. The value of money is going down, while the cost of living is going up, and I believe this is a danger signal which we shall ignore or neglect at our peril. The Chancellor says his policy is to combat inflation, but I believe his policy is a wrong one. What the Government are doing is to try to clamp down the lid on the cauldron of inflation by all manner of physical controls. What I think they should do is to lower the heat beneath the cauldron and so keep the pressure down.

That is the fundamental difference between the policy of His Majesty's Government and our policy. Our policy is to bring down the cost of living. Unless we get it down we shall not stabilise our internal economy. We shall not bring down the cost of living, nor curb inflation, nor help industry to greater effort, nor give that greater incentive at all levels that I have referred to, unless there is a cut in taxation and unless we leave people with more money to spend as they want in their own way. I do not believe we shall reduce taxation until we reduce Government expenditure. That was our policy at the General Election and for many years since the war. We are not alone in believing that Government expenditure at present is riding on too high a level. I was interested, for example, to read in an article in Lloyds Bank review for January, 1950, by Sir Hubert Henderson: The complete removal of the inflationary pressure from our economy is vital to the solution of our external problem; and retrenchment in public expenditure is an essential condition of the removal of inflationary pressure. Devaluation, and the recovery in the United States from what was never more than a mild recession, have given us further time in which to achieve this task. But the events of 1949 contain a warning which we should do well to heed. They show how serious are the dangers we shall run if sellers' markets disappear in the outside world before inflation has been arrested at home. I believe that is a very powerful reinforcement of our views and there are many eminent gentlemen in all walks of life, many great economists, who support us in our views. The Government would do well to pay heed to what these people have to say.

The level of Government expenditure has been very rightly criticised in this Debate. Since the war we have had a series of Budgets of the order of £3,000 million or more a year. Last year we spent £3,308 million. That was the Budget estimate and what was spent and, in addition, we had £170 million of Supplementary Estimates, making a grand total of £3,478 million. This year the Chancellor is budgeting for an expenditure of £3,455 million, which is very little below the total for 1949–50. I do not wonder that the Chancellor finds he has not much room for tax reliefs or reduction. Where is the money going?

Where can expenditure be reduced? That is a question we are frequently asked from the benches opposite. We were asked it in the General Election and I, for one, said exactly where I thought reductions in expenditure could be obtained. I am sorry that the President of the Board of Trade is not in his place. He challenged us this afternoon as to where we would cut expenditure. During the Easter Recess I spent some time examining the Estimates for this year and I found a number of items where economies might be made by people who are in the best position to know.

To begin with, the National Health Service is one of the biggest items of expenditure at present, as the Chancellor admitted. It is estimated that in the ensuing financial year we shall be spending £374 million, an increase of £129 million, over last year. Can the Chancellor, or even the Minister of Health, conscientiously lay his hand on his heart and say there is not the slightest room for any economy or reduction of expenditure in the whole of that tremendous amount? All of us here from time to time are given individual examples of extravagance by our constituents or our friends. I am sure there is room for economy in that service.

Then there is the administration of the Ministry of Food which is to cost £16,411,000 in this current year, nearly £5 million more than in 1941–42 when, I would remind the Committee, we were at the height of the war. We are to spend £10 million in the next year on Government stationery and printing. That is five times what it was in 1937–38. Is there no room at all for economy there? I believe there is, and I believe expenditure could be relieved and economy effected. I turn to the Overseas Food Corporation and the Groundnut Scheme, which has received financial help from the country amounting to £33,500,000 to date. I will not venture further into those realms, or I would be completely out of Order, and thoroughly controversial in a maiden speech, but for the whole of that tremendous expenditure we have not had much to show in the way of results.

I am sorry that the Minister of Supply has now gone from the Chamber. I do not know whether I have driven him out. or whether he went out before I began speaking, but it is a pity he is not present because I wanted to point out to him and to the Committee that his Ministry is to consume £115,500,000 this year, which is an increase of £7,500,000 over last year. Is there no room for economy there? I put that question to whoever is looking after the Debate on behalf of the Government at the moment. What about the Central Office of Information, which is to spend £2,750,000 in the next 12 months? That is a very expensive luxury when we are fighting a battle, as we have been told, for economic survival —nothing more or less than the survival of our nation. The British Council is to receive £2,250,000 this year, as against £130,500 in 1938–39. Government hospitality, to which we often have to refer, is to get £95,000 this year, but in 1938–39 Britain could maintain a dignified standard of hospitality on the sum of £14,000.

I see that the Ministry of Food is to continue with its surveys this year to find out what people are eating, as if we did not know. That is going to cost the taxpayer £40,000. Does the Minister of Food say that no economy could be effected there? I believe that it could be. I am sorry if I am upsetting the hon. Member opposite.

Mr. Manuel (Central Ayrshire)

The hon. Member is not upsetting me.

Mr. Hay

I know I am a new Member, but, if we are to do our job here I think I ought to say these things.

I turn finally to the Festival of Britain. I know this is a very vexed subject, but I believe it is a little too much for us to spend £5,262,000 on that festival at a time when we are fighting this same battle for economic survival. I know there are differences of opinion on both sides of the Committee and in both parties, but I feel that some kind of retrenchment could be made there. I ask the Government and the Chancellor if they can say that every single penny of all this expenditure is completely justified. I do not believe that it can all be justified. I would remind the Committee that the people of Britain have to pay and if Government policy is at fault the people have to foot the bill.

I believe the burden of taxation can be relieved if Government expenditure is reduced. We are often accused of being dishonest if we suggest that taxation could be reduced, but I do not think that a very valid complaint because I have done my best to show where I think economy could be effected in order to make a saving for the taxpayer in the form of reduced taxation. Public expenditure cannot continue at its present tremendous level. As the right hon. and learned Member for Montgomery (Mr. C. Davies) said, we must cut our coat according to our cloth; otherwise disaster is ahead. If it does continue, taxation must go on mounting, the State will take more and more from the pockets of the people and the task of making both ends meet will become harder and harder in millions of humble homes in this country.

The result must inevitably be a rising tide of wage demands which will in turn lead to industrial unrest and strife, and eventually to the aggravation of that inflationary pressure which the Chancellor is—I am quite certain sincerely—doing his utmost to reduce. There will also be a further decline in savings of all kinds, and from the human point of view probably the worst effect will be the hardship which will be imposed by this constant rising tide of the cost of living to those who live on pensions and small fixed incomes. Those are the people who will suffer.

As I see it, the Chancellor is poised precariously upon the horns of an extremely unenviable dilemma. He can either continue with these policies and infuriate the country, or abandon these policies and infuriate his friends. If he does the former I believe that not only will he infuriate the country; he may also wreck it. If he follows the latter course he may do some damage to his party. The trouble before him is one which has faced many statesmen in the past—which shall it be, nation or party? I believe that the Chancellor ought to take the former course and try to save the nation. In so doing I believe that he might not, after all, do a great deal of damage to his own party. His influence with them and with his colleagues is still very great. He could lead them to realise that even now, with the end of Marshall Aid only two short years away, retrenchment in public expenditure, lower taxation, a lower cost of living and the restoration of that flexibility to our economy which we must have if we are to weather the storms of the future, is the only course that can be followed in these difficult times.

It is never too late to mend. I urge the Chancellor to think again. Let him, if he wishes, conduct a research in the next few months into the whole extent of Government expenditure. Let him, if he wishes, consider bringing in another Budget in the autumn to effect the economies which I have suggested. If he does so, I believe that he will mitigate the damage which his short-sighted policies have so far done to the country, and I believe that he will open the door to a better, wiser and more prosperous age for Britain and all her people.

7.54 p.m.

Mr. George Wigg (Dudley)

It seems only a few days ago that I was sitting on these benches in fear and trembling, waiting to make my maiden speech, so I envy the calm of the hon. Gentleman the Member for Henley (Mr. Hay). I am certain that I was nothing like as fluent or as interesting as he has been, and I am sure that I am voicing the opinion of all parts of the Committee in congratulating him on a very able maiden speech. I hope that at some future time I may have the good fortune to follow him in Debate again, for I shall then perhaps be able to say a number of things which are surging in my heart at the present time. I will resist the temptation and say to him in all sincerity that I only wish that my own first performance had been as able, sincere, and knowledgeable as his speech today. I hope very much that it will not be very long before he again addresses us, and that I shall have the good fortune then to follow him, when I shall not be as kind as I am now.

A year ago, on Budget night, I had one or two things to say about the Budget which, I suppose, resembled the pebbles or bricks which were thrown by my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) in his admirable maiden speech yesterday. On that occasion I was critical of the Chancellor's Budget because I thought he was endangering one of the most valuable assets which this country possessed. namely, industrial peace. The wage freeze has become the object of derision, something which is treated as a joke, but I believe that the agreement on the part of the T.U.C. to hold back wage demands is something without which this country's industrial recovery could not proceed. I believe that a year ago the Chancellor unwittingly underestimated the increase of productivity which has, in fact. occurred. As a result he failed to make the concessions he could have then made. particularly to the lower paid workers. This has put the wage standstill in jeopardy.

I noted that the hon. Member for Henley postulated four requirements that should be fulfilled. They were not new. They have been heard very often from the benches opposite in the last five years. I noticed that neither the hon. Member nor his right hon. Friend the Member for Aldershot (Mr. Lyttelton) included industrial peace as one of the essential requirements for the economic recovery and prosperity of this country. I believe that the right hon. Gentleman the Member for Saffron Walden (Mr. R. A. Butler) is the author of what I presume is the Tory substitute for the wages policy. I refer to the "Industrial Charter" which, presumably, is to be the balm which is to soothe the feelings of disgruntled trade unionists who do not obtain wage increases.

I wish to address a few remarks to the Conservative Party on this subject—and I am sorry that the right hon. Gentleman the Member for Saffron Walden is not present. I addressed similar remarks to members of the Conservative Party in my own constituency. What I cannot understand about the Tory Party is why they always adopt the policy of "Never jam today, always jam tomorrow." The "Industrial Charter "contains a number of very useful points. As I understand it, workpeople are to be taken on boards of directors, there are to be employee shareholdings and profit-sharing schemes. Why have we to wait, perhaps for ever until the Tory Party is in power? Why does the right hon. Gentleman the Member for Saffron Walden, who is a director of Courtaulds, not put that scheme into operation at once for the employees of his firm? Why does he not persuade the vast number of company directors on the benches opposite to do the same?

Why have we to wait until the Tory Party get into power before we find out whether they intend to put the "Industrial Charter" into operation or not? Why have we to wait for these things? Time after time, in Dudley and Stourbridge, I have asked the Tories, "If you really believe in the `Industrial Charter' why not put it into practice at once?" I put that particularly to the right hon. Gentleman the Member for Saffron Walden. If he does not go to his company directors of Courtaulds, and persuade them to put the "Industrial Charter" into operation, I do not believe a single word of it, and I do not believe that the country does either.

I wish to turn to another aspect of Tory speeches during this Debate. Again, I would refer to the right hon. Gentleman the Member for Saffron Walden, whom I must congratulate on being listened to by his revered leader. It is not always so. When the positions have been reversed I have often heard the right hon. Gentleman the Member for Woodford (Mr. Churchill) speaking from that Box when the right hon. Gentleman the Member for Saffron Walden has been sitting either on the back benches opposite, or has even been listening behind Mr. Speaker's Chair. It was pleasant yesterday to note that the right hon. Gentleman the Member for Woodford was present to show that there is a united front.

The theme is constantly heard in this House, as it was throughout the constituencies during the General Election, that the Government would never be able to carry through their economic policy unless they had Marshall Aid, and that every achievement during the last five years must be wholly and solely due to Marshall Aid. That is a little insulting to the people of this country, and the best reply to that doctrine can be found in the writings of the right hon. Gentleman the Member for Woodford.

In his history of the war the right hon. Gentleman gives a full account of the circumstances in which Marshall Aid or, rather, its forerunner—Lend Lease—became necessary. But one thing hon. Gentlemen opposite never mention is that the main reason, indeed the only reason, for our economic difficulties and our present cost of living is that we have had a Second World War. That is the major fact accounting for the rise in prices in this country and for the fact that we are living with insufficient margins and reserves. It is because we gave all we had to give in the years from 1940 onwards. In my judgment the greatest single inflationary factor is the size of the National Debt, which has risen from £7,000 million to over £20,000 million and which is reflected in the savings of almost everybody in these Islands. Never do we hear a word about that. The right hon. Member for Saffron Walden told us the old story about Marshall Aid, but he did not tell the Committee that he, as a member of the Churchill Government before the war—[HON. MEMBERS: "The Chamberlain Government."]—the Chamberlain Government, is as much responsible for the war as any man in this country.

We have the evidence of the right hon. Member for Woodford that the war itself was unnecessary, and could have been prevented. Therefore, I hope that when the right hon. Member for Saffron Walden comes to the House again he will not only tell the truth, but will tell the whole truth; and accept the responsibility of himself and his party, and not spend all his time throwing bricks at hon. Members on this side of the Committee.

I am not disappointed over the Budget. I did not expect too much. The hon. Member for Burton (Mr. Colegate) said he was disappointed. The right hon. and learned Member for Montgomery (Mr. C. Davies) was disappointed, too. What do they expect? Do they expect the Chancellor to do some card tricks, or a quick-step? It was evident from the Economic Survey that we were not going to get very much, because the Chancellor, or his economic advisers, had decided that productivity over the coming year was not likely to rise much above 21 per cent. Here, again, we have the well-known technique, it is now almost become a fashion, of a series of broadcasts in the months preceding, given, of course, by gentlemen who are unbiased, gentlemen who are quite objective and highly competent, so it is said by the B.B.C. They are generally the same gentlemen. There is Mr. Geoffrey Crowther, Mr. Graham Hutton, Mr. Paul Bareau and, occasionally, Mr. Ray Harrod, who are all gentlemen associated with the "Economist." They talk about economic difficulties and about the Economic Survey, always under the guise of impartiality. In my judgment it is straight Conservative propaganda, trotted out as if it is non-party and the law of the Medes and Persians.

There is an idea in the country that the "Economist" occupies a peculiarly impartial position and that it is blasphemy to criticise it. There was a time, I must confess, when I believed that, but I do not believe it any longer. If there is any hon. Member of the Committee who still believes it I would draw his attention to a rather extraordinary set of circumstances. We had a Debate two or three weeks ago on Defence and the hon. and gallant Member for Carshalton (Brigadier Head) speaking not as a back bencher but on behalf of his party, tried to controvert a doctrine which I believe to be true, that recruiting for the Regular Army is tied up with unemployment. If that is an opinion with which he does not agree it is a perfectly fair thing for him to contradict it. But the hon. and gallant Member based his arguments on an article in the "Economist" and information which he had obtained from it. Being. very interested in this subject I searched through the "Economist" and could not find the article; and no wonder, because the article did not appear until this weekend. So it is perfectly clear—

Brigadier Prior-Palmer (Worthing)

As my hon. Friend is not present I would point out I happened to be in consultation with him on those figures and this is the first I have ever heard about him getting evidence from the "Economist." The evidence was taken from the statistics of the Minister of Labour for this year.

Mr. Harold Davies (Leek)

On a point of Order. May I point out that I was the Member who raised this issue, and was told that it was from the "Economist."

Mr. Wigg

I was very careful to comply with the courtesies of the House, and I gave the hon. and gallant Member for Carshalton notice that I intended to mention this point. I am not now dealing with the figures and I should be out of Order if I did. Whether the hon. and gallant Member for Worthing (Brigadier Prior-Palmer) accepts the figures he referred to or not, is beside the point. I can assure him that the deductions made by the "Economist" are quite "phoney." But that is by the way. I am talking about the fact that the "Economist," edited by Mr. Geoffrey Crowther—the unbiased Mr. Crowther—who goes to the B.B.C. and trots out his Tory bilge as if he is giving an academic account of this country's difficulties, is proved to have contact with the Tory Party and supplying information—albeit information which is open to doubt—to be used in a Defence Debate against the Government. There is another point I wish to make—does the hon. and gallant Member for Bristol, North-West (Lieut.-Commander Braithwaite) wish to interrupt?

Mr. Oliver Stanley (Bristol, West)

It was my fault; I have just entered the Chamber and I thought that perhaps the Debate was on the Adjournment Motion and not still on the Budget.

Mr. Wigg

I am very glad that the right hon. Member for Bristol, West (Mr. Stanley) has come in, because there are one or two remarks I wish to address to him—

Mr. Stanley

On the Budget?

Mr. Wigg

Yes, on the Budget, and arising out of the speech of the right hon. Member for Saffron Walden, which also was on the Budget. This is what the right hon. Member for Saffron Walden said—I quote his words to make sure that we are still discussing the Budget: Certainly, we believe that the Government must be strong, and certainly any Government that we formed would be a great deal stronger than the Government opposite."-[OFFICIAL REPORT 19th April, 1950; Vol. 474, c. 149.] I presume that has something to do with the Budget. The reason I mention it is that when the right hon. Gentleman mentioned it, I looked towards the right hon. Member for Bristol, West, and I thought of him as a member of a strong Government. I do not know how many times the right hon. Member for Bristol, West, has held office. He certainly was not the worst Secretary of State. I reserve that position for Lord Margesson. But when the right hon. Member for Saffron Walden talks about a strong Government, lie should have a look along the benches opposite and remember that after subtracting the right hon. Member for Woodford and the right hon. Member for Aldershot, what is left is the same gang that led this country to the verge of ruin before the war.

Now—and this is also to do with the Budget—they are exploiting every economic difficulty which is inherent in the world situation today in order to get one thing—power. They do not "care tuppence" how they get it. The game was given away pretty clearly by the right hon. Member for Woodford, who was careful to say that if the Tory Party got in, they, would tell the country after they got in what economies they would make. So we have to try to draw our own conclusions. I presume that the right hon. Gentleman for Bristol, West, will agree that, as I am following points already made during the Debate, that they have something to do with the Budget.

The point I wished to make when I was interrupted, concerned the reduction of tax that will be paid by the workers of this country. I am not very happy about it, because I do not think the benefit will get down to that section of the community which needs it most. I also agree that the Chancellor is in a very great difficulty. Last year about £300 million were given in wage increases and in the year previous the figure was over £600 million. That means that between £900 million and £1,000 million have been given by way of wage increases during the last two years. There are still considerable numbers of our people -people who are working hard, doing useful jobs for the community and for the country—who are still living at a much lower standard of life than they should enjoy.

The problem is how this position should be tackled. In my judgment, and, here, I entirely agree with my hon. Friend the Member for Gloucestershire, South, we are at the close of the settling down phase after the war. World economy is settling down. During the coming year the Government must work out with the T.U.C. a wages policy which will ensure that when there is an improvement in productivity, increases are given to those who need them most and that, as far as possible, those increases should be tied up directly with increases in productivity. I should have liked the Chancellor to say, "My experts tell me that productivity during the next two years will only be 2½ per cent. For the first three months of this year it is obvious that the figure is running slightly above that. If by October it becomes clear that productivity is above 2½ per cent., I am prepared to go to the T.U.C.—to the organised workers—and to say, ' here is £100 million. Now let us get together and consider how that can be allotted.'"

I hope the time will come, and come very quickly, when the Chancellor will come to the House of Commons not to disappoint hon. Members because wild expectations have been built up in the Press or because of talks on the B.B.C., but because he is a partner in a team working a wages policy. I hope he will say, "We have passed the peak for the previous year. Productivity has been at so much per cent. and it will be possible to give salary and wage increases on a certain figure. Now we have to negotiate how that sum shall be apportioned." Various suggestions have been made about how the lower wage earner can be helped, and I do not think any of them meet the bill. Help can only be given by wage increases, and I believe that the Chancellor and the Committee must face the fact that the lower-paid workers, certainly those in my constituency, will not be satisfied unless they get increases in their emoluments during the next few months.

I take the opportunity of congratulating the trade union leaders and the T.U.C. on the great restraint and patriotism they have shown ever since the end of the war. I tremble to think what would have happened to the recovery of this country had the mineworkers in 1945 tabled the demands which their economic power would have enabled them to put forward. They showed great patriotism and a very great regard for the public interest. That spirit has been shown throughout the whole trade union movement. I appeal to the leaders of that movement, as I appeal to the Chancellor, to recognise that there is still one great step to be taken during the coming weeks—I stress the words "coming weeks ": not months or years —to get together round the table and to hammer out a wages policy so that increased productivity is tied up with wage increases.

8.14 p.m.

Mr. Nugent (Guildford)

I ask the indulgence of the Committee for this my maiden speech. I should like to comment upon the Budget and the Economic Survey as they affect the agricultural industry. Of course, the Budget does not affect the industry very much except for the Purchase Tax on commercial vehicles and the increase of 9d. in the price of petrol. I rather doubt whether the suggested method of recompensing farmers who use agricultural vehicles and farm machines worked by petrol, will be as simple as the right hon. and learned -Gentleman the Chancellor seemed to think when he spoke of an annual allowance. I wonder whether the Government have considered the Canadian system of a rebate on the gallonage consumed during the year. There is always some advantage to be gained by using a system which has been used before.

The more important aspect is the effect upon agriculture of the facts disclosed in the Economic Survey. Home food production accounts for something rather less than half of our food, and anything which affects food is of immediate concern to everyone including the housewife who has to pay for it and the taxpayer who has to pay the food subsidies. I was glad that the Chancellor found time to declare again his faith in the policy of full production and the present system of what he called fair prices. As hon. Members know, that has been brought into some doubt recently by a distinguished Member on the opposite side of the Committee. In present circumstances when people are most sensitive about the cost of food, it is particularly important that the nation should have confidence in the system of food production and guaranteed negotiated prices.

The Government have negotiated prices with farmers in the last month or so, and the level of profitability is mainly their responsibility. That level is reasonable, but it is obvious that if the consuming public felt that farmers were getting an unreasonable share, it would destroy confidence in the whole system. That would have serious repercussions. The global figure may appear to be large when compared with the pre-war level, but when it is analysed in terms of what each farmer gets the position is more clearly appreciated. When one talks about profits, it is well to recollect that the average farming structure in this country is small. Two-thirds of our farms are under 100 acres and they consist of the farmer and his wife and perhaps one employee. That is the average structure.

If hon. Members opposite think about the large farms which make big profits, they are thinking about the exceptions. If the Government fixed profit levels on that basis, they would put the rest of the farmers out of business. The average profit level today is something like £750 a year. The present capital investment is over £70 million per annum which is one-quarter of the total profitability of the industry; and when income tax is deducted, which I estimate to be about one-eighth of the total annual sum, the farmer is left with a net sum of not much more than £8 a week. When one takes into account the fact that the average farmer's wife does a good whack of work, it will be appreciated that the farmer himself does not earn very much more than the farm worker's basic wage plus a reasonable amount of overtime. On that basis, it will be seen that farmers are not making any unreasonable profit. Far from it being a feather bed, although I would not say that it is hard lying, it is certainly no more than a utility standard.

It is easy enough at present to justify the present system of the guaranteed profit and the guaranteed level of prices, because the majority of the food subsidies now paid are consumer subsidies. Either the food concerned is not available elsewhere in the world, or only in dollar areas and we have no dollars to buy it, or it is available elsewhere at a higher price. Whichever way we consider the matter, they are consumer subsidies.

In those circumstances, it is fairly easy to justify a fair level of profitability, but a situation is developing now—and the right hon. and learned Gentleman did allude to it—with the impetus of O.E.E.C. and the process of liberalisation of trade, when we are accepting responsibility to purchase larger quantities of food from the European markets, and these larger quantities are becoming available at more competitive prices. I should like to know, and I hope someone on the Government Front Bench will tell us this evening, how these two liabilities or commitments are going to be related; that is to say, the supply of food from our home production to our commitment to purchase supplies of food now becoming available in O.E.E.C. countries. Obviously, unless these two policies are integrated together, we may find ourselves in a situation in which we have a surplus of food.

I am the first to want to see larger supplies of food coming from abroad at cheaper prices, but the point I want to make is that, as these food supplies become available in larger quantities and at lower prices than those at which they can be produced here, it is vitally important that the nation as a whole should understand that it cannot just be selective and decide which commodities it will have from our own home agriculture. Unless it is based on a balanced husbandry, we cannot have a healthy industry. If, when food becomes cheaper, the nation decided that it would just have. say, milk and main-crop potatoes, which we can produce here cheaper than anybody anywhere else, and that they would not have other things that are more expensive, we would very quickly reduce our own agriculture to complete wreckage. It is most necessary that these two policies should be integrated.

On the subject of the level of profitability I believe that a White Paper is about to be published which will give the details of the last price review, and I hope that it will reassure anyone who feels any doubt that the system is on a reasonable basis.

There is one other point that seems to me to be worth looking at, which has been alluded to by my hon. and gallant Friend the Member for Bedford (Captain Soames), and that is on the question of reducing costs. It is rather surprising that, although the Economic Survey has a great deal to say about expanding volume, nothing is said about reducing costs. It seems to me that by maintaining the present level of profitability, which allows for sufficient capital expenditure as well as a reasonable level of living, plus the present wage structure at a fair level, it is still possible to have a policy which aims at reducing costs as well as expanding volume.

In a general way, I know that the Ministry of Agriculture has been following that policy, and, of course, all the capital expenditure which is going in now and providing fresh buildings and more mechanisation of farms and so on, is, on the long view, gradually equipping the industry so that it is progressively becoming more efficient and reducing its costs. Yet, there are in the official policy some vestiges, left over from the wartime period, when volume was the only criterion, which I think should go now. The general policy of technical advice as given by the advisory services is invariably directed simply to acreage and volume. I have not heard of any advisory officer who is under the impression that it is his duty to consider costs as well, and it seems to me that we have reached a point in the interests of maintaining the present policy of full production when we must recognise that these two policies of expanding volume and reducing costs must be related.

But there are other ways in which costs can be reduced. We still have the feedingstuffs rationing scheme, and I am glad to see that the Parliamentary Secretary to the Ministry of Agriculture is here. I have in a different place and on other occasions given the advice that it is time we got rid of this scheme, because such advantages as we have got out of it are more than offset by the high cost effect which it has on many of the commodities which we are trying to produce. The Government have equipped themselves with a revised Marketing Act, and there are schemes for producer marketing, and it is up to the Government to give the necessary impetus to the producers to bring their schemes forward. There are several schemes already in embryo which are ready to go forward with a little encouragement from the Government. These, and any other factors which serve to reduce the costs of producing food and moving it to the consumer, are worth putting into practice.

These two points require examination. One is the integration of our commitments under our expanding home production, on the one hand, with our commitments under the liberalisation of trade with the O.E.E.C. countries, on the other. Already, we have had a warning in the effect on the horticultural industry. If there was the same effect on general farming, the result would be very serious indeed. What we require and expect is a policy which, as well as providing for an expanding volume and contracting costs, maintains the same level of profitability and the wage structure as essential parts of the picture. In doing that, we shall be moving towards the maintenance and development of a policy of full agricultural production which, I feel, has a permanent and vital part to play in the national economy as a whole.

8.27 p.m.

Mr. Norman Smith (Nottingham, South)

I am sure the Committee will recognise that the hon. Member for Guildford (Mr. Nugent) is in possession of two of the most valuable assets for making a successful maiden speech, the first, of course, being that he used no notes. How the Committee delights to hear an hon. Member making his maiden speech without any papers! The second is that of sticking to what he himself knows. Some 28 years ago, I married into agriculture—Wiltshire agriculture— and I think I understand the farming type. I am sorry to say that several members of my family, who live in the Guildford division, voted for the hon. Gentleman who has just spoken. As he is a successful poultry farmer, he may be regarded as an exceptional authority on "feather-bedding." He can rely on this party and this Government not to feather bed, still less to cosset, the farmers, but to give them a square deal.

Some of my own relatives voted Labour for the first time in February. It had nothing to do with my preaching. of course, but because they had learned that they could get a fair deal and a square deal from the Labour Government. In particular, they had a few memories of what happened after the First World War, when they were badly let down in order that the City of London could go on with the old, old game of foreign investment, paying for native labour at coolie wages and making profits to come to this country as cheap food imports. I think the hon. Gentleman can tell my relatives, his constituents, that they will be quite safe so long as Labour remains in power.

I regret that the right hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies), the Leader of the Liberal Party, is not in his place. because he did pose a most fascinating question to the Committee which I have never heard any hon. Member, answer, and which, I believe, I alone am qualified to answer. The question was: What would the Chancellor do if he found all the sources of taxation dried up—and I really think they have—and he could not cut expenditure? What would he do about that? I think I know the answer to that one. It is quite easy. The right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) knows it just as well as I do, but I will give it to the Committee.

We have heard a lot of good maiden speeches in this Debate. The best, I think, from my side of the Committee was that of my hon. Friend the Member for Gloucestershire, South (Mr. Crosland), who said he was not going to throw any bricks at the Opposition but would drop a few pebbles on the head of my right hon. and learned Friend the Chancellor —which he proceeded to do good and proper. There is no doubt that the Chancellor has carried this disinflation a little far. I propose to prove it, and, happily, it is not difficult to prove. The right hon. Gentleman the Member for Aldershot quoted quite a lot of figures today, and I may be forgiven if I quote just a few.

The extraordinary thing about the Economic Survey is that it shows how much greater is the output of industry now than it was three years ago. It gives figures showing that the gross output of industry, measured in current prices, leaving out subsidies and indirect taxation, has increased by 10 per cent. in three years, the figures being from £9,497 million to £10,410 million, which is 10 per cent. What does that mean? It means that the amount of money which industry has to get back out of the consuming market has gone up by 10 per cent. Under the capitalist system, under which we still live—it is still a capitalist system—we have to get costs back; we cannot sell at under cost. Industry has to get back actually £900 million more than it had to get back three years ago.

The extraordinary thing is that, notwithstanding this, owing to my right hon. and learned Friend's fanatical superstition about inflation there is less money in the hands of the public out of which industry can recover the £913 million—there is less money in the hands of the public wherewith to buy industry's output. I do not attach any importance to the fact that the circulating currency in the hands of the public has gone down from £1,361 million to £1,229 million in three years. What really matters is the amount of bank-created money circulating by cheque from one person's bank account to another, the sort of money with which business is being done. There has been an actual decrease in bank deposits from £5,650 million in 1947 to £5,588 million in March—£62 million less money circulating. I know it gets round a bit faster, but not fast enough to make good.

The Chancellor, taking our money out of our pockets, does not use it to finance industry, but proceeds to give it to the bankers to destroy. This has been done by reducing the floating debt to the tune of £750 million in three years. That does not mean that the bankers have got that much less money. While the Chancellor has been taking money out through the plug at the bottom of the bath, the bankers have turned on the tap at the top of the bath so that new money runs in. All that has happened is that the bankers have destroyed £750 million of floating debt on which they got only per cent. or may be per cent. and replaced it with £480 million of new money, advances or investment, on which, of course, they get far more than per cent. or per cent.—a very lucrative transaction from their point of view. Unfortunately, they have created only £480 million of new money compared with £750 million they have destroyed.

There is, from any point of view we look at it, a shortage of money. Surely, the Economic Survey gives away the whole bag of tricks about disinflation. It says, on page 8, that we came to a period in 1949 when consumers were unable to take the goods out of the shops as fast as the goods went into the shops. This disinflation—it is a rotten word, not, I believe, to be found in any dictionary and certainly a purist like the right hon. Member for Aldershot would not use a word like that willingly—has been carried much too far. It has been carried to the extent that people cannot buy what is there. I submit that there is no sense in that. There is no sense in letting industry produce goods which get into the shops, and then pumping away the people's money so that they cannot buy those goods. I submit that that is not reasonable.

What is called for at this stage is nothing less than the bogy which terrified the right hon. and learned Gentleman the Leader of the Liberal Party, and that is a deliberate Budget unbalance. The Budget, of course, ought to be unbalanced. I would put it in this way: in the bad old days of Tory rule, in the 'twenties, when the rate of gross capital formation was 10 per cent. per annum—that and no more—the bankers, in their wisdom, deemed it right to increase bank deposits at the rate of 3 per cent, per annum. Now they are actually decreasing them.

I submit that if, when the gross capital formation was 10 per cent. of the national income, as it was then, it was right to increase bank deposits at the rate of 3 per cent. per annum, it would not be wrong now—to start from now—when the gross capital formation is 20 per cent., which is a heroic rate of capital formation, to increase the bank deposits at the rate of 6 per cent. per annum—or shall we say 5 per cent.?—then we are coinciding with the rate of increased production. That would mean unbalancing the Budget to the tune of £280 million in one year, which would exactly enable us to do without the Purchase Tax.

The Purchase Tax is surely very vexatious. Let me give the Committee one instance. I have a wife who, being the daughter of a Wiltshire farmer, is a very good housewife. We are poor, and we therefore do a lot of our own work in the house, which necessitates, among other things, that my wife should have an overall to wear in the kitchen. If she goes to the store and buys a ready-made overall, a manufactured thing, what they call a print overall, she could get it for 5s. 9d., because as a manufactured article it bears Purchase Tax at the rate of 334 per cent. But if she, being a good, thrifty housewife, decides to make her own overall, she goes to the store to buy one yard of the material—it takes just one yard—and she finds she has to pay, not 5s. 9d. but 6s. I ld. for the yard because it bears purchase Tax at the rate of 664 per cent. She thus pays 6s. 11d. for her overall, apart from the cost of the braid, the reel of cotton and her own labour. By the time she has made her overall, in order to contribute to increased output and production in this country, my poor wife has to pay not 5s. 9d. but 8s. for it.

The way to get rid of the Purchase Tax is to unbalance the Budget, and the way to unbalance the Budget without inflation—it can be done quite safely, so this will interest the hon. Member for Guildford, who is very concerned about the price of farm produce—is simply this. You begin merely by nationalising all the commercial banks, the London joint stock clearing banks, which can be done for nothing. After all, if any private business is nationalised and one agrees to pay the owners in perpetuity an income more than they have ever been able to get out of the business, one is not treating them unfairly. Now, the most the bank shareholders ever got was £10 million, and that was in 1929. Suppose we give them £11 million a year and say "Now boys, you can get out; we are nationalising the banks," we begin making a saving at once. Banks hold £1,504 million of Government securities. They call it investments, but, in fact, it is all Government securities bearing interest at 24 to 3 per cent. From that, remembering that they pay tax, they are making not less than £20 million a year. Those securities would at once be cancelled and be replaced with, not something which is interest-bearing, but pound notes created at the instance of the Treasury, thus relieving the nation of £1,500 million of debt.

Yesterday my hon. Friend the Member for Birmingham, Stechford (Mr. Jenkins), called for a capital levy. I hope we are not going back to that. A capital levy entails maximum business upset, maximum political upset, heavy deflation and comparatively little yield. It is just nonsense. Indeed, a capital levy is politically barred, because when the Chancellor imposed one two years ago he undertook not to do it again, so it cannot be done again. But if the banks are nationalised, the Treasury and not the private bankers begin to exercise the prerogative of creating currency. The banks have done that, and it is very easy. We can then abolish Purchase Tax. If there is no more Purchase Tax we are £280 million down. But that is all right; production will see to that. The Treasury, by any financial means which any ingenious accountant opposite may choose to devise, will create that money; but the money does not get into circulation until the act of consumption has already taken place; it will be used for subsidising finally consumable goods, preferably food.

Capitalism and Toryism rob the common people, in high prices, of many of the advantages of full employment. The choice confronting the people at the present time, so long as we have bankers' debt finance, is, on the one hand, a Labour Government and full employment with rising prices, and, on the other hand, a Tory Government, drastic restrictions on capital expenditure, mass unemployment and lower prices because of that mass unemployment. It is easy for a Labour Government to get over that, if only we will nationalise the banks and take over their prerogative of creating currency.

I agree with hon. Members on both sides who have said that the main political question of the hour is rising prices. Of course it is. Rising prices are due very largely to the private taxation in the shape of the immense sums particularised in Table 13 of the Economic Survey: £900 million a year levied on consumers by private firms for depreciation; £530 million a year levied by private firms in higher prices so that they may plough back reserves and use them for capital expansion. If people have to pay higher prices for capital expansion, why should not the people own the capital? As it is, no one seems to own it. The hon. Member for Bristol, North-West (Lieut.-Commander Braithwaite) knows that the shareholders do not get it. The money is ploughed back and the concerns get more valuable, but the share prices do not go up. The way to give the people the ownership is by nationalising the banks and, with the proceeds, subsidising food in the manner I have suggested.

13.41 p.m.

Lieut.-Commander Gurney Braithwaite (Bristol, North-West)

Hon. Members in the Committee who had the pleasure of taking part in our financial discussions during the last Parliament will, I think, agree with me that we are invariably refreshed by the contributions of the hon. Member for Nottingham, South (Mr. Norman Smith). He is eloquent, emphatic, unorthodox, not always entirely comprehensible, and he knocks about the Government and the Opposition alike with engaging impartiality. I think that the Patronage Secretary will have some anxious days before him during the various stages of the Budget and the Finance Bill, and I suggest that he might permit the hon. Member for Nottingham, South, to pair with himself.

We have had two days of debate upon the Budget and the Economic Survey, and they have, I think, revealed that these two topics are now inextricably interwoven. It is difficult to refer to one without the other. They are joint streams which flow together, and they are, I think, likely to flow together during the lifetime of hon. Members who are seated here tonight. Both of them reek of the Socialist theory so well expressed by the Financial Secretary in one of his works—that the gentlemen in Whitehall know better than the people themselves what is good for them; that we should not be allowed to spend our own money, but a paternal, or, perhaps I should say in this case, a maternal Government should do it for us.

The right hon. and learned Gentleman, in introducing the Budget, referred to the falling off in national savings. That topic has been reiterated by several Members who have spoken since. I recall very well, in a Debate on the interim Budget which was introduced in the autumn of 1945, in the very early days of the last Parliament, a speech by the hon. Member for Nottingham, South, in which he was critical of the National Savings Movement. He predicted a course of events which has very largely occurred regarding public savings. He also gave us a dissertation upon his successful speculations upon the stock markets, although I gather tonight that he is finding more difficulty now in engaging in the same profitable operations.

I think that the poor results of national savings in the year 1949–50, when, for the first time, there has been an excess of withdrawals over deposits, is due largely to two circumstances. The first is the fall in the value of the £. The hon. Member will recall that on that day when the National Savings Movement was under fire, I came to the rescue and said that I felt that the Government of the day, whatever its complexion, ought to have the advantage of the National Savings Movement, but that if a Government were to cause doubts to arise in the minds of the people as to the stability of the currency or of our future financial position there would be an automatic decline in the national savings, which would act as a check.

We have now arrived at that situation. The reason, I believe, is that people are discouraged at the moment from lending more money to the Government in view of the Government's retention, year after year, of Post-War Credits, which, after all, are the people's own money, and to release which would, in my view, do much to swell national savings. I do not want to recapitulate certain suggestions I made in the Easter Adjournment Debate, except to say that it may be, and those better informed than myself have indicated to me this is the difficulty, that Post-War Credits have not yet caught up in all cases with the individual. In other words, the Treasury may not have married up all of the certificates in cases such as that of the munition worker who has been moved from Derby to Portsmouth. If that is so, the Government should tell us.

May I again reiterate that in my view the least the Government can do is to clean up deceased accounts as they arise and enable Post-War Credits to be set off against Income Tax claims which are still coming in for the later years of the war. Is it really impracticable to conduct a funding operation of the outstanding £650 million on, let us say, a 3 per cent. basis? I should have thought that the British credit would stand it.

All these matters, the falling off in savings and other problems which the Chancellor outlined to us, really arise from the devaluation of last autumn, which I think we ought to call by its proper name, the debasement of the currency, a policy which has been carried out throughout the ages by bad monarchs and bad Governments; it is always a loophole of escape for people who find themselves in difficulties.

Mr. Follick (Loughborough)

The Tories did it in the 1920's.

Lieut.-Commander Braithwaite

As I have given certain pledges as to the brevity of my remarks, perhaps the hon. Member will not complain if I do not pick up his interruptions.

Another symptom of the inflationary position and the rise in the cost of living was the announcement by the right hon. Lady the Minister of National Insurance of the increased scales to be given by the Assistance Board to catch up with the increased cost of living, but no sooner were they announced than the Minister of Food came along with his announcement of increases in the prices of butter and bacon. Surely, never was cart more firmly put before horse than in those two or three days.

On food subsidies there has been acceptance of some of our theories, as my right hon. Friend the Member for Warwick and Leamington (Mr. Eden) indicated the other afternoon, but the Income Tax concessions aimed to assist those in the greatest difficulty have, I suggest, already been offset as a consequence of the increased petrol duty if only interpreted in terms of public transport without going any further than that. The wage freeze and the dividend limitation, those two ugly sisters who march hand in hand both, at the moment, in a voluntary manner, are also symptomatic of the situation.

Surely, the way to get rid of the wage freeze and to increase the remuneration of the workers of this country is not to increase wages, but to reduce taxation. Let us get rid of a system by which now rather more than 8s. in the £ is taken by the Government. It seems to me that the wage thaw should commence in that manner. The National Insurance contributions are also beginning to reflect the consequences of the Government's policy. It is often forgotten by hon. Members that the contributor to the National Insurance scheme contributes on three occasions. He makes three separate payments; first, as a worker or employee; second, as one who makes a State contribution, for which all pay in one form or another by taxation, direct or indirect; and, third, of course, as a consumer of goods, because the cost of the employer's contribution is reflected in the prices which have to be paid in the shops.

I should like to say a word to the Chancellor of the Exchequer about the Purchase Tax on vehicles, coupled with the increased Petrol Duty. Not only is the Chancellor increasing the costs of distribution, against which the President of the Board of Trade inveighed earlier today in his speech, but it seems to me that that is a policy which is entirely contrary to the one he wants to see. Both of those taxes seem to us to be part of a despairing attempt to drive goods and passengers back to the British railways, the sacred cow of the Transport Commission—an example of syndicalism to which my hon. Friend the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) referred on a recent afternoon when we were discussing the nationalised industries. He reminded us that had hon. Gentlemen opposite been in office when the railways were beginning to make their appearance in this country, and had they nationalised the stage coaches, they would have made every effort to get passengers back to the stage coaches and discourage the railways.

Most of our financial ills are due to the Socialist mentality. Socialists love to push people around and order our lives. Industry and enterprise are likewise affected. I would like, in parenthesis, to endorse what was said by my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler), that one of the difficulties which the Chancellor indicated in his Budget speech—heavy drawings by local authorities on the central funds—might very much be relieved were he to follow the policy of enabling such local authorities to sell their houses to their tenants.

Some day, some Government will have to reverse this present process. I would suggest to the right hon. and learned Gentleman that he might well study, I think with improvement, the budgetary action of the Canadian Government, a Government, by the way, of a complexion agreeable to the solitary representative of the Liberal Party who is honouring us with his presence at the moment. The Liberal Government there take a view entirely contrary to that of the right hon. Gentlemen who preside over our own affairs. They have given a 10 per cent. rebate on the assessment of all incomes derived from investments in industrial equities. They are deliberately seeking to divert capital from Government investment into industry and thus to give a really notable incentive. By the same token they are saying to the industrial companies, "Having given you the flow of capital of which you stand in need we look to you to declare high dividends." There is no limitation policy on that side of the Atlantic, and no wage freeze.

In this Budget the Government have completely by-passed—this is astonishing for a Government describing itself as Labour, and I know this view is reflected upon the benches opposite—seven million of the lowest paid citizens of our country. I see one very distinguished ex-Minister nodding his head in assent at that observation, and I know that other hon. Members feel uncomfortable about the matter. How much more uncomfortable must they feel when they realise that it was this Government and this Chancellor of the Exchequer who relaxed the Married Women's (Inheritance) Act, which releases heiresses from thousands of pounds of Surtax. What an astonishing piece of Socialist economics. [An HON. MEMBER: "You supported it."] The hon. Gentleman must not say that. He must know that many of us were extremely critical of the Bill. The responsibility for the matter lies with the right hon. and learned Gentleman who is on the Treasury Bench. The Socialist Party now have the satisfaction of knowing that they deprived the Revenue of thousands of pounds by exempting those best able to pay, while they have ignored seven millions of the people who voted for them at the General Election. Certain it is that their present policy imperils not only the future of the welfare state but the whole solvency of the country. No multiplicity of statistics can conceal the stark fact that the cost of living is rising while British standards of life continue to decline.

8.58 p.m.

Mr. A. Edward Davies (Stoke-on-Trent, North)

I listened with great interest to the hon. and gallant Member for Bristol, North-West (Lieut.-Commander Braithwaite). Though I do not intend to follow him over the whole course of his argument I would make reference to one or two of the points which he mentioned. He sought to explain the decline in savings, but he missed the real reason. The reason that people are not saving so much today, especially working-class families, is because there are more things in the shops that they want. As a working-class man I have been glad of the opportunity to furnish my family with the new clothes which they wanted. Mine is an instance that could be multiplied in many other working-class families. Curtains, sheets and other things, for which we have waited to come off the ration, have become available during the last 12 months and have been bought in greater quantities than before by working-class people. This is the main reason why working people are not saving as much as they did.

Another point made by the hon. and gallant Gentleman was that our perils and troubles were due to what he called "Socialist mentality." I would strongly disagree with that statement, which is not surprising as I belong to these benches. If we take any of the basic industries which the Government have socialised since 1945, there is every reason for us to be proud of their record, and we can show without very much trouble that any other course would have been fatal to our economy. In the mining industry, production was falling and it was said that the industry was dying on its feet, that the men were discontented and that there was no future for it. Although we did something to improve the lot of the workers in that industry and to win their loyal support, we feel that they have done a very good job of work in helping to put the country well on the road to recovery. We must recognise that coal is the only natural commodity which we have in any quantity, and if we had not had it we should not have been able to produce goods for sale overseas in order to bring food and raw materials here.

Hon. Members are critical of the condition of the railways, and they talk as if the troubles which confront the Government are newly-found and directly due to the Government and a recent burden, but any observant objective student of our economic development knows that for a generation the railways have been in a parlous condition and that nothing less than the measures which we took would have given them any hope. It is no part of the policy of the Government to treat the railways as their "sacred cow," as was suggested by the hon. and gallant Member for Bristol, North-West, but undoubtedly the railways have a case as have the railwaymen who depend on them for their livelihood.

We all know that since the last war great anomalies have continued to exist, that road operators have been in a condition of comparative privilege, that the railway companies have had to operate under conditions which were imposed on them when they were a monopoly undertaking, and that road transport has been able to operate with comparative freedom, much to the disadvantage of the revenue of the railways. Surely a sound economic case can be made out, in the interests of the well-being of the country, for road, water and rail services to be integrated so that trade and commerce can have the advantage of the best possible and most ecenomical system of transport? There is no other answer to the problem.

I want to say another word about the railways in passing. Much criticism is abroad today. I noticed a leader in the "Financial Times" today on the effect on transport costs of the Chancellor's proposals. The leader said that this will mean an increase in the cost of distribu- tion, that it will have its reflection on all the commodities that we produce, that it will affect the cost of living, and that, if it aimed, as some people suggest, at relieving the railway companies, no immediate relief in that direction is likely.

While I hope that it will give the railway companies more traffic, I also hope that the railway companies will hear something about the decision which has yet to be made by the Minister on the recommendations of the Railway Rates Tribunal. Both the industry and the men employed in it want to know about that decision. Do the Government propose to let the railways carry on as they are and continue to make losses, or do they intend to accept the recommendations of the tribunal and do what I believe to be right, allow them to charge an economic price for the services which they give? I know the difficulties relating to the effects upon the services they perform and the goods they carry, but I cannot think it is right that the railways should be called upon virtually to subsidise the rest of our industry and thus be penalised.

I am not satisfied that there is any considerable room for administrative saving in the industry. If the railway companies are to be put on a sound basis, which is absolutely vital, much hard thought will have to be given to their future. I made reference to this in a recent Debate. I believe that much dead wood in terms of branch lines must be cut out. We must realise that the old function of the railway companies cannot continue. If the road services are to be related to the railway and water services of this country, some hard thinking on scientific and technical lines must take place and, having decided what is to be the development over the next 50 years, we should go ahead and spend our money upon modernising the trunk lines and base services, closing down some of the existing uneconomic lines.

Above all I welcome the proposal made by the Chancellor to restore the building programme of houses to 200,000. Every hon. Member will welcome that decision for, despite the great efforts made by the Labour Government since the end of the war to provide houses amidst all our difficulties, this remains our greatest domestic problem for it causes more tragedy, heartbreak and bitterness than any other problem.

I regard it not as an extension of the social services, or as a luxury, but as raw material, like the tools with which we work and the materials necessary for us to make our goods. It is almost as vital as food to many young couples who have never had a chance of a house of their own and who are almost in despair. I hope that the proposal to build up to 200,000 houses during the next year will not be the end of the story but that we shall re-examine this problem and, within the limits of our resources, do even more.

In that connection may I sound this note of warning. Are we quite satisfied that the 40 per cent. of building labour which is supposed to be employed on housing is being devoted to it today?

Mr. Shurmer (Birmingham, Sparkbrook)

No, it is not.

Mr. Davies

I fear from my own experience in North Staffordshire that much of the labour supposed to be on housing is being diverted to more profitable forms of work. We know that the licensing arrangements as far as non-industrial property was concerned were lifted some time ago from £10 to £100 and, as far as industrial property is concerned, up to £500 can be carried out free of licence. The fact is that many builders and building operatives are finding it more profitable to do that kind of work, regarding housing as "hospital work," as in the nature of a cushion for their spare time.

It is not good enough, and if our method of payment of building operatives, or even builders, makes (his more profitable and so takes them off their real job of house building, we should assure ourselves that the 40 per cent. of our building strength is actually building houses. For we all agree that houses are not being produced fast enough, that they are far too dear, and that building materials are getting beyond the capacity of people and local authorities to buy.

I welcome such measures as have been introduced to help the lower income groups, but I share the dismay of some of my hon. Friends that working men who do not pay Income Tax will not profit by this arrangement. Men receiving up to £1,000 a year, for instance, will benefit considerably more than those whose income is only £6 or £7 a week and who have families. The Chancellor made it clear in his speech what was his problem and that of the working class: that while more money may be available, it does not necessarily go to the right people. He said that higher wages can be given only if productivity is increased. But there are many people whose service is very valuable to the country—I refer to those, for instance, in the distributive trades, the railway service, road transport, teachers and all kinds of small professional people—who with the best will in the world could not increase their output. Their job is there to be done and they receive a fixed wage for what they do it is in no way related to output. Consequently, as we all know, there are many railwaymen and others who are living on a very meagre wage, and who will not benefit by the reduction in Income Tax.

Mr. Shurmer

They do not have motor cars either.

Mr. Davies

There are many unfortunate people who are living on small annuities, who in their declining years have paid for a small pension of, perhaps, £120 or £150 a year. Many people who were not insured for a retirement pension have a very modest income and have to depend to some extent on the National Assistance Board. I was glad to hear from my right hon. Friend the Minister of National Insurance a few days ago that some help is forthcoming for these people on the lowest income rates. There are many widows, old folk and others who rely upon help from the National Assistance Board who have a great job to make both ends meet. The Budget does not help them very much. Nevertheless we appreciate the difficulties of the Chancellor.

It is no use for the other side to complain about Government overspending. I listened to an admirable maiden speech from the hon. Member for Henley (Mr. Hay), in which he made some reference to the economies which he and his party would have made. He made reference to the Ministry of Food, the Central Office, and so on. I dare say there is room for economy in some of those places, but even when they are all taken into account they would not realise any substantial sum. We have to recognise, as my hon. Friend the Member for Chesterfield (Mr. Benson) made so clear yesterday, that if there is to be any considerable saving. a complete change of policy is involved. I thought that we were all agreed with the idea of a welfare State.

The hon. Member for Henley quoted Sir Hubert Henderson's report in the "Lloyds Bank Review "of January.

Mr. Harold Davies

He did not finish it.

Mr. Davies

What the hon. Member for Henley did not finish when quoting Sir Hubert Henderson was that there were certain standing charges that a Government of any party would have to maintain. He referred to the National Debt service, to our defence commitments and our social services, and he said that no considerable saving could be made in administration. Whether we like it or, not, whether the Tories are successful during the coming months or not, they would be confronted with these standing charges. It is totally wrong for them to mislead the country, with all these obligations around us—and we all accept them, as we are bound to do—that any considerable saving could be made.

In conclusion, I believe that we should, at least on these benches, pay increasing attention to the worst-off sections of the community. While I welcome the recent proposal for helping our poor folk, I hope that the Government will continue to exercise their minds, in view of the dangers of inflation and of rising costs, to helping the poorest of our people. I hope that as far as the lower wage groups are concerned, we shall see that something is done in co-operation with the T.U.C. to hammer out a wages policy which will give them some kind of equity.

I agree that it is not the job of the Government to dictate to the trade unions. We should be looking for trouble if we do that. Some people recommend a minimum wage, but we cannot do that in this House; that is a job for the trade unions. 'But there are many anomalies in the trade union wages structure today. Trade unionists and the T.U.C. have a responsibility to see that this matter is dealt with. We also need to take into account the disparity of earnings, not only among the lower ranks of workers, but among dentists, doctors and others who have been brought into the socialised services. There is great discontent because there is so much inequality and this is not Socialism.

9.16 p.m.

Mr. Hirst (Shipley)

I feel sure the Committee will, with its accustomed generosity, extend to me that measure of kindness which is a privilege so cherished by those who address it for the first time, like myself. I am sure the hon. Member for Stoke-on-Trent, North (Mr. Edward Davies) will forgive me if I do not follow him in his arguments as I am very short of time, if, indeed, I could follow him.

I wish to refer entirely to the Economic Survey. The words which stick in my throat are those which my right hon. Friend the Member for Aldershot (Mr. Lyttelton) referred to at the close of his speech today when he quoted from the document: The Government, therefore, regard it as of vital importance that we should continue the major economic and financial policies by which we were guided over the last three years. I do not wish to abuse my privilege, but I say, heaven preserve us from such guidance. I searched and, I fear, in vain for some concrete signs that hon. Members opposite had changed their minds—as I believe they have been known to do —and had realised at last that there is only one road by which we can assure ourselves of a sound future when Marshall Aid comes to an end. If we are to achieve that object with any measure of success, it will not be by any form of restrictive planning but by opening up opportunities and providing incentives and, above all, by permitting our commerce to manage its own business affairs without anything like as much guidance as that to which the Economic Survey refers.

That desirable, indeed essential aim, can never be achieved so long as we are taxed beyond our capacity and controlled so as to impair our ability to ensure a healthy future for the trade by which we live. No one will dispute—indeed the Chancellor affirmed it—that we are moving at an ever-increasing rate into a more competitive state of world markets. If we are to maintain our export advances let alone expand them, we must be highly competitive. For that costs must come down and production must go up. The principal cause of high costs, directly or indirectly, is without a shadow of doubt, the high level of taxation. The main cause of insufficient production is a lack of incentives which derives from the same cause. Whilst we have this vicious spiral of unsound economy, it will lead us into trouble because we cannot always rest on the advantages we have had in the last few years.

As far as I can judge from the Budget speech, we are still being asked to provide an insupportable level of taxation of practically 40 per cent. of the national income. Not for the first time has it been said in this Committee that so high a burden of taxation cannot be borne by our people if sales are to expand at home and abroad, if costs are to be lowered and if we are to maintain the standards of living we wish to see. It follows from this that the principle methods of lowering costs and providing incentives is undoubtedly a drastic cut in Government expenditure and there is plenty of scope in the administrative field, as my right hon. Friend the Member for Aldershot only too clearly indicated earlier in the Debate.

I should like to say a word on the cost of living, which is causing such disquiet and grave concern to my constituents in Shipley, as indeed it is to the constituents of every hon. Member of this Committee. The purchasing power of the £ has fallen to just over 16s. compared with what it was four or five years ago. That is shattering, and in all fairness I think that every Member, whatever his party may be, agrees that it is shattering, and that it is a grievous burden on our people. But I do not think that all hon. Gentlemen opposite realise that it is a real danger signal to the whole of our economy. Search as I will, I can find no suggestions of policy that will meet, let alone remedy, this evil in any measure.

I am sure hon. Members opposite must know that the official cost of living index is artificial, and bears little relationship to the true cost of living which our people are having to face today. We all know that the import price index has risen by 13 per cent. in the last six months and the wholesale price index by 6 per cent. The fact that manufactured stocks and wholesale stocks have held back and helped to hold the level of retail prices is a temporary phase, and with increasing momentum that difficulty, arising so largely out of devaluation, will add to the burdens of our people at a time when the Budget makes no worth while provision to make people feel that they have some reasonable future, security and chance. How is the cost of living index to be handled and kept down by this Government except by those dubious methods of robbing Peter to pay Paul, or, as likely as not, robbing Peter to pay Peter?

I wish to say a word about the fixed income groups, especially pensioners and those who have retired, for they have had a very raw deal throughout the whole period of the previous Administration, a raw deal which continues to this day. Hard as the wage earners are hit, they have in the main, as the Chancellor himself indicated this week, had several and in some cases quite substantial advances. The lot of the old age pensioners, disabled ex-Service men and those who have retired on almost a lifetime's savings, has been hard, and as Members on both sides of the Committee must admit, there are cases where it has been literally cruel. I can find no measures that will help to meet their immediate needs. I suggest that it is no solution to give them pensions and allowances, and even minor adjustments of those allowances, when at the same time the purchasing power of their money is going down as month succeeds month.

What they require is the confidence which is so aptly summed up in that phrase in my party's election manifesto "honest money." To give them "honest money "requires not palliatives but a radical change of policy on the lines we have mentioned time after time from these benches, and upon which I have, with modesty, dared to touch upon. With profound respect, and however hopeless it may be, I appeal to hon. and right hon. Gentlemen opposite, although I know that only a change of administration can give that confidence, to realise that if only they can—I mean it in all friendliness—loosen up their minds a little and try to get rid of some of that rigidity of outlook on theories which have been long exploded by facts, if only they will lift their policies from the planners' wilderness and order our affairs on realistic lines of sound national economy, we shall be turning in the right way and taking the right road for the future security of our people.

9.25 p.m.

Mr. Nigel Birch (Flint, West)

It is my privilege and pleasure to be able to congratulate the hon. Member for Shipley (Mr. Hirst) on his maiden speech. He has the distinction of having defeated a Cabinet Minister in the election which is a permanent credit to him; and he also has the distinction of having made a maiden speech which was able and devoted to the real fundamentals of our situation. It is not for me, as a humble hack-bencher, to mention the names of back-benchers who have spoken, but we had admirable speeches from my hon. and gallant Friend the Member for Bedford (Captain Soames), my hon. Friend the Member for Henley (Mr. Hay) and the hon. Member for Widnes (Mr. MacColl).

Today, we started with a very powerful speech indeed from my right hon. Friend the Member for Aldershot (Mr. Lyttelton). I cannot help feeling that the President of the Board of Trade, who followed him, must have composed his speech a very long time before this Debate. He spoke for 62 minutes, and I feel that it was an old speech, probably delivered to the Huyton Debating Society during the election. It had no reference either to the White Paper or the Budget. It was devoted to a number of debating points with which we are extremely familiar. He misrepresented our attitude towards the food subsidies, and as he is far less an artist at misrepresentation upon that topic than the Chancellor he was not very powerful. I was hoping he would refer to the question of production and productivity. He is well ahead of the Chancellor in this matter. I understand from the "Manchester Guardian" that in his election address he increased production by 40 per cent. and I was hoping he would do it again. He has a rather difficult seat and I do not think that anything less than 75 per cent. or 80 per cent. will do him much good at the next election.

There was also a long speech by the Chancellor of the Exchequer when he introduced his Budget. Some people have compared it with a train with 15 carriages containing only three passengers—Income Tax, Petrol Duty and Purchase Tax on lorries. There was also some criticism about his preamble on the subject of planning, but I must say, speaking for myself, that I found the preamble extremely interesting. It is true that there were certain glimpses of the obvious which were almost too blinding, such as "excessive demand produces inflation "; and, even more startling, "Saving is the opposite of spending." But as we go on we learn to bear these things.

There were, however, substantial points of agreement between what he said and what we believe on this side of the Committee, and I will refer more to those later. But, first of all, I agree; and I think we all agree, that the general economic health of the country is a responsibility of the Government. I agree that that is a revolution in economic thinking and that revolution was embodied in the employment White Paper issued by the Coalition Government in 1944. I also agree that the Budget is by far the most important control in the hands of the Government. We have long put forward that view, and we believe that if that major control had been more effectively used there would not have been the need to impose so many minor and detailed controls. But, strange as it may seem, I am not absolutely convinced that I agree with him in something which he added. He said: upon the ways of achieving that health "— that is the health of the economy of the country— there is no doubt that the two sides of the Committee take widely different views."—[OFFICIAL REPORT, 18th April, 1950; Vol. 474. c. 38.] It all depends on what right hon. and hon. Gentlemen opposite really do believe. I know what the hon. Member for Nottingham, South (Mr. Norman Smith) believes, but I am omitting him from the argument. From the weekly journals of the Left, which we all read with such interest and instruction, I gather that it is a matter of increasing doubt among them as to what they do believe. When the Chancellor of the Exchequer said that people did not understand the nature of democratic planning, and failed to understand it because they were wilfully misunderstanding, he seemed to imply that there was some corpus of doctrine on the subject of planning which was universally accepted by hon. Gentlemen opposite.

It simply is not true. Professor Jewkes, in a very interesting book published some time ago, listed seven different types of planning advocated by different Ministers at different times. There has been some increase since then. There has been no real coming together. There is no doubt that their views are both diverse and changing. Not only are their views being modified, but there are great differences in emphasis in the Economic Surveys themselves. Gone, for instance, are the days which we remember so well in the last Parliament, when hon. Gentlemen opposite said, "If only you close down the Liverpool Cotton Exchange, you will have no fluctuations in the price of cotton." I remember so well listening to that sort of stuff. Of course, it is rather difficult for that to survive when there have been fluctuations, overnight, of is. a pound whereas a fluctuation in the old days of ½d. a pound was quite a big one.

" Targets in the full sense "have gone. I cannot help feeling that we must owe that phrase to the Chancellor of the Exchequer. It is well worthy of him. Of course, the targets were never hit, but I think it was possible to detect among hon. Gentlemen opposite a certain belief that if the targets were put in the White Paper, then, through some process of sympathetic magic, they would be hit. I think they believed that for a long time. That also has gone. We have no targets at all now. Gone is direction of labour which is, after all, the real essence of Socialist planning. That has gone, I hope for good.

Gone, also, are many physical controls. Ministers sometimes boast about that. I think the President of the Board of Trade said that he had made a bonfire of controls. Some of his friends thought that the wrong victims had gone to the stake; but some are gone. Gone is the sanctity of the food subsidies. It was once considered evil to suggest that they could ever be reduced. In the last two Budgets they have been reduced on each occasion. We are told that we have to put a stop to the unlimited increase of the National Health Service. In the old days it was a mortal sin to suggest that all needs assessed upon a perfectionist basis should not be met. That, too, is gone. We now have a free market in fish: that was once a heresy.

The Chancellor of the Exchequer positively boasted yesterday that he was rationing petrol by price. That used to be a mortal heresy. To judge by the election speeches of the leaders of the party opposite, they do not really take very much pride, or have very much belief, in nationalised industries. The Lord President of the Council never mentioned steel in his very interesting broadcast. They seem to me to be treating nationalised industries rather like a family of illegitimate children which it is better to put out of sight and, if possible, out of mind of the neighbours.

On top of all that, we have the increasing defensive and uncertain tone of the Survey forecasts. We have got a sort of "Don't know" planning now. I will give one example, from paragraph 62 of the Economic Survey for 1950. It says: For the reasons mentioned in paragraph 46 above… That is, the effect of devaluation and uncertainty about the future allocations of Marshall Aid— … it is impossible to put forward precise estimates for the general balance of payments in 1950. Price trends following devaluation have still not fully worked themselves out. Moreover, the future course of raw material prices is dependent to a large extent on the level of United States activity. The experience of 1949 showed the disproportionately large effects produced by comparatively small variations in the United States demand. Another major uncertainty is the effect of the recent action taken to liberalise trade between this country and other members of O.E.E.C. Only experience can show what is likely to be the level of demand for many of the products now freed from control. Similar uncertainty exists about our own exports, which should benefit from parallel liberalising action taken by other countries. How profoundly true, but it is not the same sort of thing that hon. Members opposite used to say. Above all, the main symptom of "Don't know" planning is the number of assumptions of fundamental importance which have had to be made. As a report by the Government to the O.E.E.C. said "with different assumptions, the conclusions themselves would be different." That, again, if I may say so, rather smells of the Chancellor to me.

After all, what is left of Socialist beliefs? What are the residual beliefs? There is a clue, and it comes from a most interesting article by the hon. Member for East Coventry (Mr. Crossman) in the " New Statesman." In that article, the hon. Gentleman was describing how the Labour Party were to win the next election, and he said that what they wanted to do was to have a great "Clarion" campaign and stump the country. He went on to add this about the "Clarion" campaign: Six months devoted to this sort of work would not only help to win the coming election, they would create the conditions inside the Labour Party for a quite fresh approach to the problems of Socialist policy. The hon. Gentleman had been talking of quarrels between Left Wingers and Right Wingers, and he added: The Right Wingers and Left Wingers may yet discover that what they have been arguing about was ideas conceived in Opposition during the 1930's, which have ceased to have much relevance in 1950. That hon. Gentlemen should realise how little relevance the ideas of the 1930's have to 1950 is a consummation devoutly to be wished. But it may be a mistake to read too much into what was said by the hon. Member for Coventry, East. I always enjoy his speeches and articles, which are full of charm and intelligence, but, after all—

Mr. Shurmer

We have enjoyed your speech.

Mr. Birch

Thank you very much. The hon. Member for Coventry, East, is, after all, the flying saucer of the body politic, seldom or never seen twice in the same place.

As my right hon. Friend the Member for Aldershot said, this White Paper is really the intellectual dead-end of democratic Socialism, and hon. Gentlemen opposite are completely uncertain which way they are going. They are Wandering between two worlds, One dead and the other powerless to be born. The one that is dead, of course, is democratic Socialism.

Mr. Harold Davies

We have not seen much life in the zombies opposite.

Mr. Birch

On this side of the Committee, our ideas are relevant to 1950, not to 1930.

I confess I have some hopes of some of the things said by the Chancellor of the Exchequer. If we can cut through-peel off-the thick skin of self-righteousness which covers all the things he says I think we may find there is some common ground. He was upholding the employment policy of 1944, and he was upholding budgetary control. He was saying there should be help for the development areas. It is certainly worth remembering that all the help given to the development areas by this Government has been given under Conservative legislation. He was in favour of rationing vital commodities in short supply, and I think he very correctly stated the nature of the dangers which face us—though not, of course, the solutions to them.

If, as I say, we could get agreement on the fundamentals, agreement on the general lines of approach to the solution of our national problems, it would be of immense value to our country, and, I believe, incidentally of immense value to hon. Gentlemen opposite. It would be valuable to our country because we are a country dependent upon private enterprise for exports; and, after all, if we give people the certainty of being skinned in the present, and the equal certainty of having their concerns expropriated in the future, they are not likely to do quite as well as they otherwise would have done.

Moreover, we are the centre of a great banking system with ramifications on capital account all over the world, and, as we know, as my right hon. Friend the Member for Aldershot said, we have two thousand millions of quick liabilities that constitute a potential danger of the utmost gravity. That danger is gravely increased by constant threats to enterprise and constant threats to our social system in this country. It would be good, I think, because it would lead to more fruitful discussion of the real problems which confront us. It would clear the national mind. We should make fewer mistakes and run fewer risks.

The situation of this country, as I see it, is this. Obviously, great difficulties were entailed upon us by the war, but certain extremely favourable factors have operated since the war. For instance, German and Japanese competition has been far longer in developing than was generally expected. There has been consistently, with the exception of one wobble, high prosperity in America, and almost consistently in America rising prices for manufactured goods. If these conditions had applied in the 'thirties we should have had very little difficulty over employment. Above all, the United States have been willing to finance the whole of our transition from war to peace; in fact, they have more than made up, so far, the loss on invisible exports we suffered during the war.

I do not know what the planners in 1945 expected, but I should doubt whether they made such optimistic assumptions as that. Yet, in spite of the fact that things so far have worked rather better than we should have expected, I think that the conclusion of the White Paper is that, after making every favourable assumption that is possible, we are only just afloat in this country. Those assumptions have been mentioned several times in this Debate. I will run through them, briefly, again.

They are these: United States prosperity continues and their demand for sterling area products continues. There is no inflation in the non-dollar world. The first assumption is very possible and the second possible. The third assumption is that expansion of world trade—the extent of the general quantum of world trade—will take care of Japanese and German competition. That assumption seems much less probable, though it is possible. The next assumption is that the wage and dividend freeze will continue. That, I think is possible though not very likely. Based upon that assumption is one which is not explicit but implicit—which is I think even more important—and that assumption is that in spite of the wage and dividend freeze, the economy of our country will be sorted out to the best advantage, that labour and materials will flow where they are most wanted. That is a very odd assumption and one of immense importance. Now, these are very big assumptions indeed, and let me just remind hon. Gentlemen that "with different assumptions the conclusions themselves would be different."

Why is it that we are only just afloat in circumstances which have been fairly favourable? There is the whole question of Socialism, which I do not want to go into now. The main point I want to make here is that, what I believe the Government have done is what they have always criticised entrepreneurs or businessmen for doing, and that is showing excessive activity at a time when general activity was large and increasing; that is to say, they have pursued a policy—an anti-Keynesian policy—which was against the spirit of the White Paper on Employment Policy. I believe that that has been the main difficulty. In fact, there has been no planning at the centre where there should have been planning, but there has been excessive planning on the periphery where we should not have had it at all.

As my hon. Friend the Member for Chippenham (Mr. Eccles) was saying yesterday, the approach of hon. Members opposite is rather different perhaps from others; they are much more interested in spending than in earning. Earning is, after all, sometimes necessary. There may be many Marxists opposite listening to me. I do not know how many, but if there are any I think they would perhaps put some weight upon what poor Jenny Von Westphalen, Karl Marx's wife, said upon this subject. Marx, it will be remembered, lived in considerable poverty, mitigated occasionally by successful sponging on Engels. What Jenny Von Westphalen said was, "If only Karl had made some capital instead of writing about it, we should all have been much better off."

I much wish that hon. Members opposite would lay that to their hearts. if everybody had laid it to their hearts I do not believe we should have had either Communism or Fascism. It was the odious hatred of that man, no doubt induced by the fact that he failed to earn any capital but only wrote about it, which I believe has caused great evils in the world.

The importance of all this has great relevance to the subject of employment policy. It is employment policy which the Chancellor holds as the Ark of his Covenant. In this connection, I am extremely glad that the Chancellor did talk about the question of reserves. We have often talked of the importance of the question of reserves, but I think it has not been discussed much in previous Budgets —at any rate from the Government side. The figures—which I think alarming—are that our gold and dollar reserves in real terms are now only one-sixth of what they were before the war. What that means was, I think, very well shown by our report to the 0.E.E.C. for the second quarter of last year. The figures in my quotation are at the old parity. This is that paragraph: It will be seen that during the quarter under review the gold and dollar deficit was at an annual rate of over £600 million, a figure half as large again as the United Kingdom gold and dollar holdings … which were decreasing, in spite of receipts under the European Recovery Programme and the Canadian credit, at the rate of £260 million a year, or £5 million a week. That was a catastrophic position, as the Financial Secretary quite rightly said yesterday. That catastrophic position was precipitated by a minor ground swell in the American economy.

The Chancellor, when he was talking about what he would do if faced with the danger of unemployment, and with detlation, said that he "might even want to budget for a deficit." Could we do that with our reserves at this level? What happened last year? Activity in the United States fell off; we found it difficult to sell in hard currency countries; our prices were too high; and there was danger of unemployment. Did we have a Budget deficit? No. We devalued, we deflated and we froze. That meant that to keep afloat we were forced in this country deliberately to bring about a general fall in the standard of living. That is what it means. If we freeze a man's personal income and prices go up his standard of living goes down. That is what is steadily happening in this country.

Hon. Gentlemen opposite say, "What would you cut?" I should like to ask this simple question: Supposing someone is earning £5 10s. a week. He has three children and the price of clothing, boots and bread goes up. What is he to cut? What would hon. Members opposite cut? That is a reasonable question to ask. The fact is, as pointed out in the White Paper, our resources are divided between Government expenditure, capital expenditure and consumption. If consumption is left at the bottom of the list, what we are, in fact doing, is to say, "Your personal standard of living as a consumer will go down." It is right that people should face this, for that is what it really means.

What will happen if this difficulty recurs? Supposing Japanese and German competition becomes really difficult. Supposing there is another wobble of United States economy and it becomes difficult to sell our goods abroad and un- employment rises, as the Financial Secretary said that it might, through inability to sell our exports. Would there be a Budget deficit then? Would the Chancellor do that? I do not know. We have to use our imagination. None of us know what would happen. I should like everyone in the Committee to think what would happen. Might it be that in the early stages of this difficulty the Chancellor would come down and put on that expression with which we are all familiar—that expression of injured guilt —and say, "There is damaging gossip about." He might announce that there would be no devaluation. Might it be that after that announcement there would be devaluation?

If these things happen, I think that the rest follows as night follows day. There would be a revaluation broadcast saying that the whole thing was a triumph for planning, an intensive freeze and an assurance that prices would not rise, followed by a price rise. There are limits to the number of times that we can behave like that without killing the will to save and breaking up the sterling area. if we do kill the will to save and break up the sterling area, we are in grave danger of having unemployment in this country. I think that the Chancellor was right to lay stress on that danger.

I see the hon. Member for Sowerby (Mr. Houghton) in his place. I remember going to the by-election at which he was elected, and I read his election speech. It was headed, "Can I help you?" In that speech he said, "We have conquered the dragon of unemployment," and that is something which has been repeated on a thousand platforms by hon. Members opposite. The truth is that there has been no difficulty so far—

Mr. Douglas Houghton (Sowerby)

Does the hon. Gentleman deny that we have conquered unemployment?

Mr. Birch

If the hon. Gentleman listened to the Chancellor of the Exchequer, he will know that he is extremely frightened about it. The truth is that there has been no difficulty in maintaining employment so far. What we have done is to make it extremely difficult, when the real troubles occur, to deal with the situation, because, as the Chancellor said, to deal with this situation we have to have reserves.

We have to have far larger reserves than we have now, but although he has stated that he has produced no policy which is likely to bring about an increase. We have a vast mechanism of planning without any policy at the back of it. What he is doing is gambling upon a permanent economic set-fair. He is gambling on every card turning up a trump, and I believe he is in great danger of being overtaken by events. If he is, I warn him that the country is rather sick of his continually congratulating himself on catching the 'bus he is supposed to be driving.

I believe that the Chancellor's policy has raised prices and produced these recurring crises in a period of economic fair weather, and that he is determined to go on with it. Ordinary expenditure, excluding terminal charges, is 25 per cent. up on three years ago. Taxation, we all know, is 43.5 per cent. of the national income. The real point is that compared with our chief competitor, America, there is the vast difference. Taxation in the United States is only 26.5 per cent. of the national income.

I realise very well the electoral difficulties of reducing expenditure. They were brought home to us very clearly by what the Chancellor said about our policy on the food subsidies. A more gross misrepresentation there has hardly been in electoral history. Whatever one says, it is a difficult business. I believe it would be much simpler if people could be made to realise that taxes are ceasing to have a real re-distributive effect. It is a fact that taxes paid by people with an income of less than £500 a year are larger than the whole amount of money spent on the social services. A tremendous amount of all this process is simply taking money from one pocket and putting it into the other.

If people realised, as they certainly will, that this policy is leading, as it is now, to a lower standard of living being imposed on the country, and that in spite of accepting this lower standard they have not gained the real security put up to them as bait; if they realise the danger to the country, with no reserves or margin of any sort for any contingency, they would demand a driver for the national bus and not a passenger.

Ordered: "That the Chairman do report Progress, and ask leave to sit again."—[Mr. Sparks.]

Committee report Progress; to sit again Tomorrow.