BUDGET PROPOSALS AND ECONOMIC SURVEY

HC Deb 24 April 1950 vol 474 cc609-723

3.38 p.m.

Mr. Churchill (Woodford)

During the last five years the Socialist Government have spent or are spending more than £19,000 million. The Estimates for the year now before us amount to nearly £4,000 million. No one can say, therefore, that a five days' Debate and a twoand-a-half hours' speech from the Chancellor of the Exchequer are disproportionate to these colossal figures which mark the most amazing dissipation of national resources on record in any civilised community of our size. Not only is our taxation the highest in the world, not only have we used up every available resource and asset on which the Government could lay their hands, not only has the future been mortgaged in every possible way, but we have enjoyed during this period of extravagance, upwards of £1,700 million of financial aid from the United States and from our Dominions.

There is the first formidable set of facts which glare upon us today. However, I wish to state the case with sobriety and accuracy. We must not judge by the figures alone. The £4,000 million we are to find this year are, owing to the depreciation of our money, really worth not much more than £3,000 million compared with the goods and services they would have represented five years ago. The purchasing power of the £ sterling at home has fallen during this period by nearly 4s. We hear a lot of talk about the word "inflation," with its refinements of "disinflation," and so on, but that word carries little meaning to the average man. What is meant to him by the word "inflation" is the fall in the buying power of the wages he earns or of the pension on which he lives. This is a serious and homely point both to himself and in many ways even more so to his wife.

We see in our national Budget that Income Tax and Surtax provide 42 per cent. of our tax revenue, but it must not be overlooked that the continued fall in the purchasing power of our money—of the £ sterling—is a tax on the wage earners of the utmost severity, and that it falls upon pensioners and those living on fixed incomes with cruel and devastating force. It finds no place in the balance of the Budget, but it ought to hang heavy on all our minds. If we take the wages earned and the pensions drawn in Britain in the last financial year and deduct 4s. in the £ from them—that is a little more than it actually is, but I take a simple figure—we shall see how much these five years of Socialist Government have taken from the wage earners.

I have had a calculation made on the basis of the official figures of wages, pensions and Government grants for social services which shows that all these classes and masses were deprived of £1,500 million last year alone, which they would have had in goods and services if only the money values of 1945 could have been preserved. And what right have the Socialist orators to talk to us of the exploitation of the toiling masses when the Socialist Government themselves have deprived the wage earners on a gigantic scale by this devaluation or depreciation of the money they work so hard to earn? Even more has the power of our money to buy goods across the dollar exchange been reduced. As the result of devaluation, British industry and workers have now to do 12 hours work to buy the same quantities of necessary goods and raw materials as nine hours would have produced before the devaluation of the £.

It is quite true that we have not spent all this money that I mentioned just now upon ourselves or upon the revival of British industry. The Chancellor boasted in the election that he had given away over £1,300 million in loans or in repayment of so-called sterling balances—otherwise British debts incurred during the war from the countries we had defended from invasion. Indeed, he and his predecessor begged and borrowed immense sums from the United States with the one hand in order to transfer the treasure thus obtained to foreigners or overseas wartime creditors with the other.

It is common ground between all parties, and it was the main theme of the speech of the Chancellor, that we have now entered upon a period of the utmost difficulty and anxiety. The Chancellor made it clear that greater stresses lie ahead. Expenditure in his opinion, will increase irresistibly; Marshall Aid will stop in the near future; German, Japanese and other competition will rapidly and steadily increase; taxation, direct and indirect, has reached its limit. At home the cupboard is bare. Here, then, is the background, the unchallengeable background, upon which the present Budget must be examined and judged.

What, then, is the upshot of the Budget speech? Let me quote from the Economist," a well-informed and independent organ which each side is always ready to quote when its observations are in harmony with their political views. This is what the "Economist" says of the Budget: It is a recipe for ever-increasing Government expenditure, and for a permanent structure of high taxes with no hope of relief —a guarantee, in sum, of ultimate economic decay. The speech of the Chancellor showed that there was no prospect for years to come -of any improvement in the cost of living or in the rate of taxation. So, in a certain sense, we have reached finality. Utopia is no longer a dream of the future. This is it. Here we are. It is here now on top of us, and here to stay if only it does not get worse. The one thing, the Government say, is to know when you are well off and rejoice while good things last. What we are going through now is the result of five years of Socialist management and control with far more power and vastly larger financial resources than any other peace-time Government in history.

Now I come to some of the specific proposals of the Budget. None of them affects in any appreciable way the general depressing picture which the Chancellor:has painted.

We on this side of the House are naturally pleased that the Government have adopted the policy of lessening the discouragement of P.A.Y.E. to overtime and highly efficient piecework. This is one of the points on which we fought the General Election, and we are very glad to have gained this limited concession for the most active and industrious class of wage earners. I was particularly gratified myself to hear the Chancellor announce the doubling of the petrol ration. As has been pointed out in this Debate, when I raised this matter during the election I was assailed with a storm of abuse for irresponsibility, for asking for the impossible in order to gain votes. How wicked, it was said, to squander the dollars needed to buy food and raw materials without which full employment cannot, be maintained, in order to indulge the luxuries of pleasure motorists. The storm was severe but I survived it.

Now, the Government are themselves 'forced to do the very thing that was urged upon them and which they sought to discredit by mockery and misstatement. All this talk of dollar spending was, as I was advised at the time, and as the Government knew well at the time, quite unfounded. Only a few weeks later they have done themselves what they had so vehemently denounced. I gladly forgive them their abuse, the only result of which has been to deprive them of any claim upon the good will of the motoring community.

The continuing reductions of control and release of articles of food from "points" are, of course, all welcomed by us. There is no reason why they should not have been done in still greater numbers two or three years ago

Mr. Shurmer (Birmingham, Sparkbrook)

What about sweets?

Mr. Churchill

—just as there is no reason why extravagances now detected and purged, should not have been corrected three or four years ago so that we should have had the advantage of the savings. We have suffered loss and inconvenience in the interval, for no good reason except that in those days the party opposite had more hope of carrying us irrevocably into Socialism than they have now.

We are also glad, in reference to the Amendment which we moved to the Address, that the reduction of the housing target from 200,000 to 175,000, against which we voted, has been repaired and that 200,000 for this year has been restored. Why should we have to kick the party opposite into doing these things? It is not the need for giving houses to the people that has enforced this change in the last three weeks upon the Government, but only the fear that they might lose votes by refusing to alter their policy. Obviously, if it can be done now, it need never have been brought into question. Even so, we do not accept 200,000 as the target for three years to come.

Lieut.-Colonel Lipton (Brixton)

What is it?

Mr. Churchill

I have nearly finished that passage of approbation and commendation which I felt it my duty to make upon the proposals contained in the Budget. I have nothing to say against the Chancellor's proposal to exempt the high-class motor cars from Purchase Tax. I remember five years ago pointing out how a thriving and fertile export trade could only maintain its continuous perennial quality by being based upon a strong domestic industry, and how I was rebuked by the Chancellor of the Exchequer, then President of the Board of Trade, for such reactionary ideas.

I am glad to see that the right hon. and learned Gentleman's education in finance, for which we have to pay so much, is not wholly devoid of some signs of progress. He is not a star pupil but it would be too soon to say that he is completely unteachable. Of course, however, in this and some other aspects of finance he may have to encounter the criticism that he is, to use an American expression, "taking the poor man's money away from the millionaire to give it to the plain rich."

This brings me to the attitude of the Government towards wealth and large fortunes. Four years ago I travelled back from America with Lord Keynes, who had been on a Government mission and was working at the Treasury. I asked him why the then Chancellor of the Exchequer, when reducing the Income Tax by a shilling, should have made sure that the Surtax on these largest incomes was retained at the confiscatory rate of 19s. 6d. in the £. I shall never forget the look of contempt which came over his expressive features, on which already lay the shadow of approaching death, when he replied in a single word, "Hate." [HON. MEMBERS: "Cheap."] Hate is not a good guide—[An HON. MEMBER: "We have only your word for it."]—in public or in private life. I am sure that class hatred and class warfare—

Mr. Manuel (Central Ayrshire)

How do we know that he said it?

Mr. Churchill

—like national revenge, are the most costly luxuries in which anyone can indulge. The present Chancellor has boasted of the number of persons who have net incomes of £5,000 or over a year. He has boasted that it has been reduced from 11,000 before the war to 250 at the present time, and that the number of those over £6,000 has been reduced from 7,000 to 70. Those are great achievements. However necessary this extreme taxation was in the war—I was responsible, as Prime Minister, for its imposition—it certainly is not a process which increases the long-term revenue of the nation or its savings.

I will take a simple illustration. I always find these financial matters better explained by simple illustrations. I will take that which occurred to me the other day when I was looking at a cow. Late in life I have begun to keep a herd of cows, and I find that quite a different principle prevails in dealing with cows from that which is so applauded below the Gangway opposite in dealing, with rich men. It is a great advantage in a dairy to have cows with large udders because one gets more milk out of them than from the others. These exceptionally fertile milch cows are greatly valued in any well conducted dairy, and anyone would be thought very foolish who boasted he had got rid of all the best milkers, just as he would be thought very foolish if he did not milk them to the utmost limit of capacity, compatible with the maintenance of their numbers.

I am quite sure that the Minister of Agriculture would look in a very different way upon the reduction of all these thousands of his best milkers from that in which the Chancellor of the Exchequer looks upon the destruction of the most fertile and the most profitable resources of taxation. I must say the cows do not feel the same way about it as do the Socialists. The cows have not got the same equalitarian notions and dairy farmers are so unimaginative that they think mainly of getting as much milk as possible; they want a lot of political education. The Lord President of the Council is turning his attention to the agricultural sphere and, no doubt, this will stimulate his fancy as to some suggestions he may make to the farmers.

I will pursue this point, I hope not unduly. Rich men, although valuable to the Revenue, are not vital to a healthy state of society, but a society in which rich men are got rid of, from motives of jealousy, is not in a healthy state. This brings me to the applause from his own side—a comparatively remarkable event —which the Chancellor gained last Tuesday when he announced that retroactive taxation would be imposed on two individuals who had received large gifts from the shareholders of the companies for which they worked. It is not a case of sympathising with these gentlemen, or with the action of the firms concerned. Indeed, I shared the general feeling that such a transaction was unworthy of a time when the trade unions were loyally endeavouring, in the national interest, to prevent wage increases, justified by the ever-increasing cost of living

I have no doubt that the promise that the Chancellor made to introduce retroactive legislation to hit these two men was worth many votes to him in the election, and it certainly gave him his loudest cheer when he opened his Budget. It is true also that there are precedents, especially in the war, for retroactive legislation in such matters. Nevertheless, I found myself in full agreement with the statement of the leader of the Liberal Party last week in condemnation of the principle of retroactive legislation and of the idea that a warning by a Minister which had no force of law should be accepted as a justification

After all, the law, as pronounced by the highest courts in the land, was clear. It was not new; the judgment was seven years old. The Government could easily in their five years of office, have introduced into any of their Finance Bills the Clause which they now propose to deal with this matter. The transaction was open—more than open, it was blatant. It was effected and made in full confidence of the validity of the law. It would have been more in accordance with the broad principles which guide our way of life to alter the law for the future than to use retroactive legislation, however popular it may be to penalise a couple of wealthy individuals.

The Chancellor's new proposals are on a comparatively miniature scale and affect only £80 million or £90 million of money one way or the other in the immense bill of nearly £4,000 million we have to meet. They do not appreciably affect the finance of the year; 1 per cent., or 2 per cent., is the most involved in all of it. It cannot be said that they affect the life and effectiveness of the Budget which is before us. But the gravamen of the case against them is to be found in the new taxes which are now to be levied.

The increase of the tax on petrol is a new burden to the travelling public and has already led to a rise in cab fares. Bus fares, I am told, will inevitably follow. The imposition of a heavy purchase tax on vans and lorries is a direct attack upon the economy and efficiency of our production and distribution, entirely out of harmony, indeed absolutely contrary, to the exhortations and lectures which we hear so often from the Chancellor's lips.

Both the raising of the fares and the deterrent now placed on the sale and use of commercial vehicles and the tax on their fuel are, as everyone can see, designed to force the travelling public and our industry to use nationalised railways and thus offset by a countervailing evil the impending rise in railway freights and passenger fares. The Government bought the railways by compulsion, of their own free will, at a singularly odd moment in railway history and they feel they owe it to the cause of nationalisation to make them into a paying proposition, no matter what that may cost.

Moreover, I submit that it is intolerable that any new taxes should be imposed at a time like this. Remissions are welcome, but they should be made by economies in Government expenditure and not by additions to taxation. We shall feel it our duty to vote against both these new taxes when the Resolutions concerning them are reported to the House on Wednesday next. Not to do so would be to abrogate the rights of Parliament out of fear of precipitating an appeal to the people. The Government have raised these provocative issues themselves, and we have no choice but to express our sincere conviction that both the new taxes are wrong in principal and will be harmful in practice.

I always try, especially in a new House of Commons, to study the opinions of those to whom I am opposed, their expressions and moods, so far as I can. I confess I am surprised that hon. Members opposite who hold Socialist conceptions —there are, I believe, some of them—were not shocked at this rise in the bus and taxi fares. Is this not a case of rationing by the purse? Ought they not to ask themselves, on their theories, whether this is not allowing mere money to decide who can ride in a bus or taxi and who has to walk? And what about the pleasure motorist and so forth? Is it really fair that some poor man who voted Socialist at the last election, who spends his increased bus fare by lingering too long on the Chancellor's stronger beer in the public house, should have to walk home?

We on this side of the House stand for the policy of reducing both expenditure and taxation. I am repeatedly asked, "How would you cut down expenditure?" The object of the question may indeed he to procure guidance, but it could also be used for election misrepresentations. We have not the detailed information which alone would allow a precise and detailed statement to be made. We do not know what we should find if we gained access to the secrets of Whitehall. I do not accept the statements of Ministers as giving a complete or even perhaps a correct picture. We are assured that they wish to hold on to office until after the next appeal to the country is made because they fear exposure at the hands of any incoming Administration.

Be that as it may, it is not possible for an Opposition to make a detailed plan without full knowledge of the true situation and the aid of the Government Departments. But I have no doubt, after a long experience of affairs, even longer than that of the Father of the House, if I may say so, that substantial economies could be made which could be passed on to the taxpayer in a manner which would be highly beneficial to production and to savings, and that they could be made in such a way as would effectually safeguard the weak and poor. [Laughter.] Do not laugh at the weak and poor. I know that in Socialist jargon they are described as "lower income groups." These concessions, secured by a reduction of taxes, might even restore to the weak and poor a portion of what they have lost through the depreciation of the wages they earn or the pensions they receive.

I will, however, say that our Defence Services, now costing nearly £800 million, require searching attention, and that I am sure there never was a time when we got less value in fighting power from the immense sums which Parliament has voted. Our foreign dangers, which seem to he sharpening, will not be warded off by the wasteful and ineffectual expenditure of money but rather by concentration upon the modern forms of war power in the light of our knowledge. The spending of vast sums of money in ill-conceived ways may salve people's consciences and make them feel that it is all right, but that in itself affords no guarantee for our safety although, of course, it may be described as a most full and generous provision for defence.

I turn to another point. If the National Health Service is to yield, over a longterm period, the results we hoped for when the policy was adopted by the war-time National Government, it will undoubtedly be necessary to purge abuses and waste and prevent the exploitation of State benefits by thoughtless or unworthy methods or habits.

In regard to food subsidies, now fixed at £410 million—the "floor "and the" ceiling "have come together--I say without hesitation that they should be recast in such a way as to concentrate the relief upon those who really need it, and not to squander enormous sums on the majority who could well afford to pay for their own food at prices which would soon be established in a free market, and which might easily fall to the level or below the level of the existing subsidised price.

I am sure that a scheme can be rapidly evolved which would achieve a substantial reduction of Government expenditure without causing hardship to the lower income groups; and that this present time, when there is a glut of food in the markets of the world, affords the opportunity of regaining the economies, flexibility and conveniences of a free market such as has been successfully re-established in so many European countries, some of which were defeated in the war or long occupied by hostile garrisons.

There is also the general field of Government expenditure—travelling, advertising, wasteful State trading, mistaken investments in enterprises such as we have heard of before, hosts of officials, enormous hosts of officials, never needed to manage our affairs before. All these provide a fertile field for additional economy. I was asked the other day "What would you do to economise? "I have, within the limits which are open to anyone who has not access to official information, offered a full and considerable statement of the field upon which I am bound to say I think we might hopefully advance with our blue pencils.

I have referred to the advantages of a free market, subject to proper safeguards, and provision for the lower income groups. We are all agreed that we are not going to make our great reforms and advances at the expense of the poorest of the poor. On this question of a free market, I am much interested in this experiment in regard to fish, which has been liberated after nine years of control. The Minister of Health—I do not think I see him in his place—said, in one of his more exalted moments, that we were an island of coal surrounded by fish. Perhaps it was later that he added that it was mainly populated by "vermin." I think it was a different occasion. But what about the fish?

I believe that in this and in similar matters the higgling of the market will, under healthy and improving world conditions, after a month or two, give the people a far better diet than all the planning of all the planners. No doubt the markets would jump about, as we saw the fish market do, for a month or two, but in the end, and probably soon, they would come down to the true and natural level where the customer—not the "gentlemen in Whitehall "—and the consumer, know best. This is of course an old-fashioned idea, but it does not follow for that reason that it is necessarily wrong.

I have now surveyed the details of the Budget; those that I have felt it my duty to pay my tribute to, and those which I am bound to say it is equally our duty on this side of the House to resist by every means in our power. The Chancellor of the Exchequer stands before us at that Box when he speaks, uplifted, austere, almost ecclesiastical, pronouncing sombre judgments. A different aspect of his personality and outlook was presented to us at the General Election. At Bristol on 11th February he said: We are sharing out more fairly the national resources that exist. We have not shared them all out equally yet. It takes a bit of time to do these things. These were deplorable words. Never has a Chancellor of the Exchequer, with all his influence upon domestic and international credit, spoken in such a way. How the right hon. and learned Gentleman could reconcile language of that kind with the appeals in which we are asked to join to save money and invest in Savings Certificates, it is difficult to explain. What he said, in the words I have quoted, is not even fair shares for all, whatever that may mean, and undoubtedly to have any meaning it depends on who is the judge of what is fair—it is equal shares for all, a condition which is contrary to nature and to every form of progress and civilisation.

But in his Budget speech last Tuesday the right hon. and learned Gentleman fell into heresies of the opposite character, and extremes of the opposite character. This is what he said: The real difficulty is that there is still "— he was explaining why he could do nothing for the lowest paid workers- some cases of low earnings which are very difficult to correct without upsetting the relative wage levels that have been established within each industry for the different grades and classes of workpeople employed in it." —[OFFICIAL REPORT, 18th April, 1950; Vol. 474, c. 65.] I fully agree that respect must be shown for what that robust trade union leader, Mr. Arthur Deakin, has described as "differentials" in industry. But to draw from this the principle that the lowest paid workers cannot have their position improved without all the classes above them receiving simultaneous and similar advances falls into an error which is antisocial. That error is to feel aggrieved because someone less fortunate than you gains an advantage which does you no harm. The principle of levelling up is right, and is free from the hate and envy which accompanies the process of levelling down.

I am astonished that the fine intellect of the Chancellor of the Exchequer, even if all else failed him, has not guarded him from self-contradiction and erroneous doctrines of the character I have described. I trust that the right hon. and learned Gentleman will search his conscience in the matter, because, in my opinion, it is absolutely wrong to say that the lowest paid worker is not to have his wages brought up unless or until similar advances can be made to others. One of the very first Measures I had the honour to pass through this House was the "sweated trades" Bill, for the very purpose of "bringing the rear-guard in," as we used to say in those old days; and I am not at all prepared to admit that there is any excuse for the exclusion of the poorest paid workers from all help and assistance in a Budget drawn up by a Chancellor who had a few weeks before given expression to the wildest levelling and equalitarian and totalitarian views upon equal shares for all.

I hope to detain the Committee very little longer. I have tried as well as I can to present the case as we feel it; an Opposition aggrieved at the maltreatment and mismanagement of our finances. But I think it also right to say that in my long life I have never seen the nation divided quite as it is today. It is not so much divided in enmity as in opinion. The question forces itself upon us—how long can we afford to be dominated by this "ideological conflict which, as it paralyses our national judgment and action, must be deeply detrimental to an island like ours, with its 50 millions growing only half their food? I must confess that I cannot get these 50 millions out of my head. They keep recurring in one's mind —50 millions crowded in this small island, growing only half their food.

The floor which separates the two sides of the House, so evenly balanced now, is not a gulf of class; nor does it mark a breach in fundamental brotherhood. It is one of theme and doctrine. The Conservative and Liberal Parties stand for a way of life which at every stage multiplies the choices open to the individual. The Socialist devotees—I will not say the Party opposite, for many would repudiate it—stand for the multiplication of rules. There is planning on both sides, but the aim and emphasis are different. We plan for choices, they plan for rules, and in this lies one of the aspects of our melancholy domestic quarrel.

Let us look, if possible without party bias, at the effects of the present political tension as it governs our actions and our fortunes. Everyone knows that free elections, such as we have in this country, are the foundation of democracy. But no community like ours can thrive permanently in an electioneering atmosphere. It is not giving the people a fair chance, with all their hard work and other preoccupations, to ask them to live for prolonged periods under such conditions. Every word in this Debate, and others, which hon. Members opposite or we on this side speak, will be considered by large party machines with regard to the forthcoming trials of strength in the constituences.

I listened to several of the maiden speeches which were made and which have won approval from every part of the Committee. I sympathise particularly with these maiden speakers, because I felt that perhaps you, Major Milner, from the Chair might have said—this is not a criticism—" I have to warn you," as the police formula runs, "that anything you say may be used in evidence against you." Here we are, in the supreme economic crisis of our whole history, watching each other like cat and mouse. And who shall say who is the cat and who is the mouse?

I was relieved when the Prime Minister announced in the beginning of the year that there would be an election in February. I thought that at any rate this would give us a solution one way or the other of our deep-seated domestic quarrels. The election was held, and I suppose everybody did his best according to his lights. But, far from ending the electioneering period, the results of the voting have been only to prolong it. We are split half and half as I have never seen this country split before, and the question arises: How long have we got to go on with neither one side nor the other having the power to do anything to grapple effectively on its merits with the national needs.

The fortunes of other countries are no guide in these matters. Party names do not mean the same things, nor is their parliamentary government in any way the same as ours. In Belgium, for instance, which we rescued in the war, they are not worried apparently about material 'things and are entirely absorbed in a question affecting their monarchy. In France, whatever else happens, the fertile soil gives abundant food for all its people.

In Germany, everyone has the natural resolve to recover from defeat. They want to have free petrol. They want to reduce their income tax below ours. Oh, how shocking ! They even want to sing their National Anthem. But none of those countries is in the same position as our island, with our 50 million people, brought here in the great Victorian age by a vast expansion of manufactures and now left in a perilous plight.

I was thinking when I was preparing this speech about the whales who come ashore and are caught by the tide, but I remembered that I had used that before. However, when I woke up yesterday morning I found that the poor whales have come ashore again, and I must say it does seem to me that we run very great risks of finding ourselves stranded, with our immense population, on a shore which leaves very little hope of escape.

To change the metaphor, suppose we were, 50 million of us, on the fifth or sixth floor of one of these steel-structure buildings the foundations of which were being undermined and the major girders sawn through. Many societies have vanished in the past and found no recorded or recognisable place in history. But never has this hideous fate presented itself more brutally to so numerous, complex and powerful a community as we are, and never has it presented itself to a victorious nation on the morrow of its triumph in saving the freedom of the world.

Of course, there are politicians who say that it is only by suffering that the people learn, and -that the English people, above all others, insist on buying their experience fresh and new every time. Things, we are told, must get worse before they are better. I am not comforted by this. We may easily get so far downhill that we have not strength left to climb back. In the modern world everything moves very quickly. Tendencies which, 200 or 300 years ago worked out over several generations, may now reach definite decisions in a twelve-month.

I hate to feel the lowered opinion of British strength, will-power and life-thrust, which now prdvails alike in countries we have defeated and in those we have rescued. But, of course, if we go on year after year absorbed in our internal party and class fights, there may never be any chance for the might and glory of Britain to show itself again. Somehow or other we must reach firm ground again and have a Government that is not afraid or unable to do things if they are in the national interest.

I was pondering the other day upon what a difference it would have made to our fortunes if what happened in the 1950 election had happened in the election of 1945. Undoubtedly there would have been a national coalition. The old ties that had bound us together through the perils of the war had not been severed by the rough talk of the election as they have now been severed by all that has since occurred. The task before us was the completion of all we had worked for. We had won the war. We could have won the peace. An equipoise of parties would have been a national mandate for the continuance of the united action which had saved us from destruction. We had a common programme and a far-reaching four years' plan.

But darker fortunes and more harassing ordeals were reserved for our exhausted people. The conditions of 1945 have passed away. It is 1950 now. Great disasters have come upon Britain, both in the economic sphere and in her standing among the nations. With them have grown antagonisms felt on each side by millions of men and women here at home. I do not believe in coalitions that are formed only as the result of party bargainings. It is vain to suppose that anything but a blinding emergency, internal or external, would revive the comradeship of the war-time years, or that an artificial arrangement between party leaders would meet our needs.

Therefore, it is with deep anxiety, into which my personal feelings do not enter at all, that I try to read the mysteries of our immediate future. How deep shall we have to descend the dark stairway which lies before us no one can tell. This should be an awe-striking thought for this new Parliament, so rich in earnestness and quality, so baffled and so bewildered, and so near, apparently, to its latter end. All the more should it be an awe-striking thought when we remember that we are responsible for all the millions of our people who fought so well, who endured so much and who try so hard.

4.41 p.m.

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

As the right hon. Gentleman the Member for Woodford (Mr. Churchill) has said, we have enjoyed a number of excellent maiden speeches during this Debate, and they have had one great advantage to all of us in that what was said was generally novel and less familiar. I should like to refer only to two of those speeches, because those who made them have been personal acquaintances of mine for some considerable time.

My hon. Friend the Member for Gloucestershire, South (Mr. Crosland) adopted a rather new line in deciding that he could be non-controversial and yet attack the Government. He did, and, to use his own words, he "threw down upon the Front Bench some pebbles." Some maiden speakers on the Opposition side of the House appeared to me to misunderstand this example and to suppose that they, in turn, were entitled to make non-controversial speeches, equally throwing pebbles at the Government. I am bound to say that the proper analogy would be for them to throw their pebbles at the Front Bench opposite, and I hope that in future maiden speeches that course will be taken.

The other speech to which I want to refer is that of the hon. Member for Chelmsford (Mr. Ashton), whom I can remember many years ago as being the first Englishman to make a century against that famous Australian touring team in 1921. Although I myself was singularly bad at cricket, somehow or other I took the greatest possible interest in the play of those who could play. I found myself some years later attending the wedding of the hon. Member, and after that wedding I became a rather close relative by marriage, and I was therefore able to take a certain fraternal pride and interest, though strictly non-political, in the hon. Gentleman's speech. One of the features which unite us here—and I had better say this, because a good deal of what I am going to say will not unite us—is that even relatives who differ politically can agree to enjoy personal friendships.

The right hon. Gentleman the Leader of the Opposition has given us a somewhat familiar speech, and I think that during the election some of these phrases were used, and indeed some of the figures as well. We always enjoy the right hon. Gentleman's speeches, which are perhaps more lively than they are thoughtful, more witty than they are relevant, but always entertaining, and sometimes they entertain those on this side of the House rather more than hon. Members on the other side. We know that because, although the right hon. Gentleman can study the faces over here, we can study the faces on the other side, and occasionally, I must tell him, looks of great anxiety pass over them as he is speaking.

We are interested to find that the right hon. Gentleman describes as the "dissipation of our resources" all the great expenditure on the social services in the last few years. We are interested, too, to discover, after a different opinion had been put forward by other Members on the Front Bench opposite, that the party opposite have evidently decided to oppose the proposals of my right hon. and learned Friend for dealing with the cases of Sir John Black and Mr. Lord. We know that it is their intention to let these two gentlemen get away with it, and we cannot understand why that should be so, if they claim to take the same view fundamentally on this issue as we do. We know, too, that they are anxious to relieve as soon as possible, above all things, the Surtax payer.

I thought the right hon. Gentleman was getting rather far afield with his milch cow illustration. I keep no cows myself—

Mr. Churchill

It is only one of the right hon. Gentleman's examples of self-denial.

Mr. Gaitskell

—but I have always understood that it was necessary to remove the surplus milk from cows at regular intervals. Perhaps the right hon. Gentleman, when he studies the matter a little further, will see how that fits in with his own argument. As for his remarks on wages policy, they seem to me to show a misunderstanding of what my right hon. and learned Friend said on that particular subject.

The main criticism of the Opposition, and the speech of the right hon. Gentleman was no exception to it, has been directed less against the Budget proposals as such than against the general economic policy of the Government and the economic climate in which the Budget is presented. Of course, in view of the generally favourable position of production, foreign balances and employment, they have found it somewhat difficult to criticise, and have resorted instead to the now familiar dodge of threats of disaster, prophecies of gloom and suggestions of wrath to come. These were shown again very clearly in the closing passages of the right hon. Gentleman's speech, but the right hon. Member for Aldershot (Mr. Lyttelton), at an earlier stage in the Debate, put it like this: … it is quite clear that what is waiting for us round the corner are deadly economic perils … It is upon a very precarious foundation of shifting sands that the Government seek to build their economic edifice."—[OFFICIAL REPORT, 20th April, 1950; Vol. 474, c. 338-9.] Although the original Cassandra came to a bad end, the modern disciples of Cassandra are really pretty safe, because I always feel that those who foretell doom have a great advantage; it is only if they are right that people remember what they said, and only if they are wrong that it is forgotten. Those who are more cheerful, on the other hand, will be remembered only when they are wrong and be forgotten when they are right.

The right hon. Member for Aldershot described the balance of payments position as precarious. That was one of the three parts of the infrastructure, as he described it, which he criticised. In one sense nobody would deny that, but we must add the words "precarious as compared with what? "When one turns to the records and considers just how things have changed in this respect, it is impossible not to feel that the balance of payments position is far less precarious than it has been at any time during the last five years, and actually less precarious than it was even before the war.

There can be no doubt—and I think that even the right hon. Gentleman will agree—that the volume of our trade has expanded very substantially in the last few years. I do not want to weary the Committee with figures, which can be read in the White Paper itself. Nor will the right hon. Gentleman deny that the deficit on current account even in 1949 was far less than it was a few years before. We are now in surplus on current account, and we are for the moment in balance so far as our dollar account is concerned. It is a fact that not since 1935 have we had a surplus on current account, and that was the only year between 1930 and 1939 in which that was true.

The third point regarding our balance of payments position to which I would draw attention is this. We have substantially altered the pattern of post-war trade. While our imports from the dollar area have remained more or less stationary, our imports from the sterling area have doubled, our imports from the O.E.E.C. countries have trebled, and, broadly speaking, our exports correspondingly. Therefore, we are now far less dependent than we were a few years ago upon the dollar territories, and that, from the point of precariousness, of security, is surely something in our favour.

The right hon. Gentleman based his argument, as I understood it, largely upon the export of capital. He said that on the basis of having to export £250 million of capital a year, and on the basis of certain assumptions made as regards the terms of trade, it was all very difficult and we would have to get exports up to 170 per cent. of the pre-war volume. Frankly, I would not agree with everything he says there. He assumes that there is to be no increase in invisible exports, although the Survey made exactly the opposite assumption, and I certainly would not say that we must achieve that level of capital exports. But what is he trying to say? Is he suggesting that the Government are to be criticised because he believes we should export capital at a rate far higher than we did before the war? Is that his criticism of the Government, that they are not—

Mr. Oliver Lyttelton (Aldershot)

A higher money figure, but a lower percentage of the national income.

Mr. Gaitskell

Certainly not. At £250 million a year, that could not be sustained for a moment. Indeed, I would like to know where the Opposition stand on this whole matter of capital export. The right hon. Gentleman just now brought forth his usual familiar argument that we had mortgaged the future, that we had borrowed vast sums from abroad; but, at the same time, he is criticising us for repaying our debts too fast. He cannot have it both ways. Either we are accused of squandering our patrimony, as he would put it, in which case he cannot accuse us of repaying debts too fast because both those things move in opposite directions, or we are not. We would really like to know where the Opposition stand in this matter.

Perhaps I might make a few remarks about the specific subject of the sterling balances to which the right hon. Gentleman referred. Of course, everybody knows that the total of these liabilities increased very substantially during the war because of overseas expenditure, because of military expenditure. But it must be pointed out that they existed before the war as part of the sterling area capital fund—if I may use that phrase—and certainly, when adjusted for post-war prices, a large proportion of the present outstanding liabilities would be the currency reserves of sterling area central banks and the trade balances which are held here for the purpose of facilitating commerce. Those individual balances will, in any case, move up and down according to the deficit or surplus in their trade of the particular countries with the rest of the world, exactly like a private individual and his banking account.

I mention this, not because I want to go into detail on technical matters of this sort, but because I think it important that we should realise that sterling balances are not all debts which overseas countries now want to collect in repayment. I doubt whether there would be a desire for a rapid repayment of more than a part—and that a smaller part—of the total liability, according to the movement of trade. As the Committee is aware, where there has been a desire on the part of these countries, we have made annual agreements governing the rate of release. These arrangements have been made public and the figures are known, but I want to emphasise that these decisions to release part of these balances have been made not in order to maintain employment here—it was entirely unnecessary from that point of view—but because of the needs of the countries concerned to rehabilitate themselves.

I cannot see how we could possibly have justified a refusal to allow these countries to draw upon their balances at a time when we had a loan from the United States of America, to begin with, and then Marshall Aid. A refusal to do this, such as has been suggested from time to time by the Opposition, would have undoubtedly created a crisis in the sterling area and might even have led to its complete break up. The other day my right hon. and learned Friend the Chancellor of the Exchequer, in announcing the gold figures, pointed out what a great achievement in Commonwealth co-operation it was that we had all managed to carry out the plan put forward last July at the Finance Ministers' Conference. Can it be seriously supposed that we should have got that co-operation had we taken the line, so often recommended to us, of refusing to allow them to draw down the sterling balances?

Nor can it be forgotten that these countries are mostly in South-East Asia, in the Middle East, in the front line of the fight against Communism, and that in allowing them to draw down these balances we have clearly been assisting our own strategic interests. I was sorry to hear the right hon. Gentleman once again take the same sort of line about these countries. It really does not help our relations with them very much, and as a great creditor nation we really have to be rather careful about what is said on this matter. Well, we have been a great creditor nation and we are a central banker for the sterling area. The right hon. Gentleman knows this perfectly well, and we have to be careful regarding what is said in public. Anything that is likely to give the impression that we repudiate this debt is bound to cause immense damage. Nevertheless, with Marshall Aid declining, we have made it clear that we cannot go on so fast, and we hope to reach agreement on this basis as the existing arrangements come to be negotiated again.

I turn now to another point of criticism by the Opposition specifically mentioned again by the right hon. Member for Aldershot, but also by others as well—our policy on personal incomes. This is what the right hon. Gentleman said: There should not be an economic system which depends for its stability upon two such impermanent, ephemeral and insubstantial policies as wage freeze and dividend limitation."-[OFFICIAL REPORT. 20th April, 1950; Vol. 474, c. 3441 The same line has been taken by other speakers. I do not want to repeat what my right hon. and learned Friend said. It is already clear that the right hon. Gentleman has misunderstood it, and I will leave it to my right hon. and learned Friend to clear up the confusion. But I want to ask, what does the right hon. Member for Aldershot mean by that? What is the Opposition's attitude towards this problem? How would they propose to deal with it? Do they just want to do nothing? Do they want to leave the thing completely open? Because there is not a sentence, not a word, in "The Right Road for Britain" about this extremely important problem. Do they want to allow wages and prices to rise in an inflationary spiral? If not, what is their policy? How do they propose to avoid it? They say they are opposed to our policy. What do they suggest?

I believe there is only one alternative -if they are not prepared to allow a wage-profits inflation to take place-and that is by a policy of deflation, a policy, in fact, which makes this problem nonexistent only because the trade unions are so weak that they dare not ask for an increase in wages. The only way in which to make them so weak is, in effect, to create enough unemployment until that happens. As I see it, that is the only logical alternative. If there is another, perhaps the right hon. Member for Bristol, West (Mr. Stanley), would tell us this evening what it is. What is their attitude towards this vital problem? We recognise that it is the major economic problem of democracy to hold full employment without inflation.

Mr. Molson (The High Peak)

May I ask-because this is most interesting and important-are we then to envisage from this dilemma with which the Minister is attempting to confront us, that the policy of the wage freeze will have to be quite permanent unless and until there is a great increase in unemployment?

Mr. Gaitskell

Certainly not. Our policy has been made perfectly clear by my right hon. and learned Friend. He certainly would not agree, nor would I agree, to the use of the term "wage freeze "in that connection. If we want to keep full employment and avoid inflation we must have some arrangement under which increased earnings, justified by an increase in output, are distributed among the various classes of workers. The Opposition say "No, we do not even want to contemplate this problem. We would rather it were not there at all." How do they propose to get rid of it? We shall have an answer no doubt this evening.

One would conclude, therefore, that as fat as concerns these two dangers, both of key importance—the precariousness in the balance of payments and the personal incomes position—the balance of payments is certainly in far better shape than it has been since the war. As far as the threat to stability by wage-cost inflation is concerned, we say this problem is inherent in our attempt to maintain full employment without inflation; and we say it is better to have a problem of this precarious kind rather than just give it up and have a lot of unemployment.

I turn to the issue of taxation. Here there are two different questions to which we have to address ourselves. First of all, on the assumption that the present level of taxation is to be maintained—which I know is not accepted by hon. Members opposite—do we agree with the changes in the Budget? Secondly, do we think that taxation as a whole should be cut and are we prepared to pay the price? These are the two taxation issues which are raised. I propose to take the first one first, although I recognise that in many ways it is the minor issue. Nevertheless, on the assumption that we believe that it was impossible to reduce taxation without cutting off benefits we value more highly, we face the question whether the changes proposed by my right hon. Friend should have been made or not.

I should like to say a word about commercial vehicles. When the right hon. Gentleman the Member for Woodford introduced the petrol tax in 1928, curiously enough he himself used the term "commercial vehicles" and not "lorries." We are proposing this tax on commercial vehicles not for revenue purposes nor for helping the railways, but simply for limiting investment. Here again I should like to know where the Opposition stand. Do they accept the necessity of imposing some control on the rate of investment?

Do they accept the doctrine in the White Paper on Employment Policy, 1944, which deals with this subject at considerable length?

If there is no control over investment will they agree there is considerable danger of inflationary pressure here? Indeed I can tell them that there is no doubt at all that if there were no control we should have a very substantial increase in the demand for capital equipment. Do the Opposition say the whole of this control must be confined to what is sometimes called the "public sector"? If that is the case, how does the right hon. Gentleman defend his statement that the Opposition intend to go further still with the housing programme when, in fact, the housing programme is the major part of the public sector?

Mr. Churchill

If the right hon. Gentleman challenges me, it is only a fortnight ago that his decision was that 175,000 houses were the maximum. We told him it was possible to go further. He has now gone further. He seems very changeable in these matters

Mr. Gaitskell

It merely bears out the great importance of exercising control over the whole of the investment field and indeed in finding some savings elsewhere. I should like to know what proposals the Opposition are going to put forward if they are opposing this. Here are the figures for investment in this field. In 1948 the programme of investment in these vehicles, lorries and vans, was £35 million and 50,000 vehicles. The actual production and sale in the home market was £59 million and 85,000 vehicles. In 1949 the same disparity occurs. The programme was £35 million, the actual value £72½ million, and in fact twice as many motor vehicles came on the home market as were planned in that programme.

Hon. gentlemen opposite of course do not like planning. They do not like to suggest to private industry how much they should invest. If that is the case how do they propose to impose control at all? One hon. Member suggested we should actually have used physical controls, a rather surprising suggestion coming from the Opposition. We have tried to deal with this problem on that basis over the last two years. I should have expected the Opposition to welcome our attempt to deal with this problem by fiscal methods. I ask the right hon. Gentleman the Member for Bristol, West, to think this over and give us an answer this evening. It may be that they take the view that if the whole position were less inflated we would not have this demand. Perhaps they want general deflation, and disinflation on a stronger scale than we have now.

Mr. David Eccles (Chippenham)

If it be that the makers of these vehicles cannot sell the whole of their output abroad, I suppose the Government intend to direct the industry. What is to happen to production if they are not allowed to sell at home and cannot sell abroad?

Mr. Gaitskell

We are satisfied they can sell a good deal more abroad. It is worth pointing out that the motorcar industry, which has a very much higher proportion of exports than this industry, is an industry where there is a 33½ per cent. purchase tax. The right hon. Gentleman has told us that, just like the problem of personal incomes, this is another problem the Opposition would rather were not there. They would like to avoid it. The only way they can avoid it is by disinflation on such a scale that the demand will not be there for the lorries.

I should like to say a word about the Petrol Tax. I see the right hon. Gentleman the Member for Woodford is leaving the Chamber. I hope he will be coming back, because at this point in my speech I am going to refer to him.

Mr. Churchill

I was not intending to be away very long.

Mr. Gaitskell

I am most grateful to the right hon. Gentleman. I will not detain him very long either. This tax, of course, is in contrast to profit revenue. It is in fact to finance reliefs in income tax. Logically, if the Opposition vote against this they will also be voting against the proposed changes in income tax.

Mr. Churchill

Why?

Mr. Gaitskell

Because that is the reason for bringing it forward. I find on looking up the history, that the Petrol Duty introduced by the right hon. Gentleman himself in 1928 at 4d. a gallon was to provide money for the derating of industry. It was defended by him—he probably recalls the situation—partly on the ground that oil was an import competing with the basic industry of coal which was in a bad way. I do not think we need worry about that one now. He also defended it partly because of the desire of the right hon. Gentleman to help the railways which he undoubtedly felt were suffering from unfair competition. I will refresh his memory by reading out what he said on this subject in introducing his Budget. He said: We have only a limited fund of capital to employ every year in every direction,"— as a matter of fact it was not true then; it is true now— and it would not be in the public interest—and this is one of the foundations of my argument—to spend in the next few years several hundreds of millions of additional money upon our roads, apart from the present grants upon the roads, if the result were to render artificially and prematurely obsolete the splendid British Railway systems which represent a thousand million pounds of national capital, and afford employment to nearly 700,000 men."—[OFFICIAL REPORT, 24th April, 1928; Vol. 216, c. 856.] To avoid any misunderstanding I must make it plain once more that that has not been the motive so far as we are concerned. I may say that the right hon. Gentleman at that time did not seem to have much anxiety about the effect on industrial costs. The person who showed most anxiety was Mr. Snowden, and he opposed this duty but it did not prevent him when he became Chancellor a year or two later from twice increasing it, first of all in the early part of 1931 in one Government and then in the latter part of 1931 in another Government. So it certainly has a very respectable ancestry. One can say that it had the full support of both political parties in the past.

Of course, we recognise that the increase in the Petrol Tax is bound to put up some costs in some industries, but we are satisfied that substantial economies are possible particularly in road transport, and there can be no doubt at all that the remarks of the right hon. Gentleman and others on the effect on fares are greatly exaggerated. I will repeat the figures which my right hon. and learned Friend gave. The general increase in the duty will put up costs in road transport by 4 per cent., and that cannot be regarded as exceptionally high. I should like to know whether the Opposition really object in principle to the Petrol Tax. I noticed that the right hon. Gentleman used that phrase. It seems a little odd, seeing that he was the originator of this particular tax, that he should now be objecting to it in principle.

Mr. Churchill

I was objecting in principle to the imposition of additional taxation at the present time in lieu of making economies.

Mr. Gaitskell

The right hon. Gentleman also said that he objected to this tax in principle. I am sure he will find that he said that, because I was listening very carefully at the time as I knew quite well the history of it. Are the Opposition then to say that in other circumstances they think it would be appropriate to put up the tax? We now understand that they are not opposing it in principle. Do they say that there might be circumstances in which it might be increased?

Mr. Churchill

Certainly. I do not say that the Government should cut themselves off from such a source of revenue in the future. But I say that at this particular moment they have no right to impose fresh taxation, and they ought to find the money for remissions from economies in this vast expenditure.

Mr. Gaitskell

We will come to the economies in a moment. The fact is that the case for an increase in the Petrol Duty is a very powerful one, and I am certain that a number of hon. Members opposite recognise that. They know it is a dollar import. They know nothing has been put on to this tax since before the war, so that in proportion to national income or any other index one may like to take, it is much lower. The Opposition know that the cost is still very low in comparison with other countries, and they know too that it is in practice—I have always admitted this—extremely difficult, if not impossible, to ration commercial vehicles by the coupon system.

I turn to the more general issues of taxation. I am not going to deal with the suggestions put forward by the right hon. Member for Leeds, North (Mr. Peake), that we could, in fact, afford a reduction in taxation without reducing expenditure, because somehow or other it would be balanced by increased savings. I do not wish to get the right hon. Gentleman on to his feet. I am not going to deal with that. If I misunderstood him he need not worry about it because—

Mr. Osbert Peake (Leeds, North)

I really must interrupt the right hon. Gentleman. I did not suggest that he could do this. I said that a Conservative Government could do it.

Mr. Gaitskell

That seems to me to be hardly a difference that can be applied in this instance, though it might well be applied in other cases. I shall not deal with it, because with the exception of the right hon. Gentleman and perhaps my hon. Friend the Member for Gloucestershire, South, most of us recognise that one cannot and should not reduce taxation unless expenditure is reduced. That is a proposition which by and large is accepted in the Committee generally.

Of course, the great attack of the Opposition has not in fact been on the Budget. It has been on expenditure. As the right hon. Gentleman said, in their view only by cutting expenditure can we get reduced taxation. I am bound to say that the Opposition still decline to give us very much help in this matter. The right hon. and learned Member for Montgomery (Mr. C. Davies) suggested that it is for the Government to produce proposals because Private Members do not know the details. All I can say is that Private Members have no difficulty whatever in putting forward proposals for increasing expenditure on every possible occasion, and I cannot see that there is any inherent difficulty in their putting forward serious detailed proposals for cutting expenditure.

Yet the fact remains—and hon. Members know it perfectly well—that on every Supply Day we have speech after speech putting forward arguments not for decreasing but for increasing expenditure. It is not confined to this side of the Committee either. The hon. Member for Chippenham (Mr. Eccles) referred to some remarks by two of my hon. Friends during the Debate on the Supplementary Health Estimates. He will recall the passage in his speech. I would like to point out to him that demands for increased expenditure on that day, with a Supplementary Estimate of £99 million under consideration, came just as much from hon. Members opposite. One, I think, indeed suggested that we should have to spend another £200 million on the National Health Service. It really is no use their trying to evade this issue.

The same thing is true on Defence, housing and education.

The plain fact is that this issue is a policy one. It is a political issue. I know that some hon. Members realise that. The hon. Member for Chippenham made it perfectly plain in his speech, and the same applies to the hon. Member for Flint, West (Mr. Birch). They realised that this was a political issue, a policy issue, and that there had to be some degree of facing up to it on the other side. As for the right hon. Gentleman and other hon. Members, we still await anything at all precise in the way of proposals which might deal with' the situation.

There are two great issues which transcend all others in importance in this Debate, and which are at the heart and core of our economic and budgetary policy. First, should we take as our aim the full employment of our people—[Laughter.] An hon. Member laughs; I hope he will listen—in the sense that that phrase has come to be understood in these last few years when unemployment has remained for the most part between 300,000 and 400,000—below half a million? Secondly, should we accept that great system of social services, which has come to be known as the welfare State, with all that it necessarily implies in the way of high taxation and redistribution of income? These, I suppose, are the two great issues of our economic policy today.

The attitude of His Majesty's Government to both questions is abundantly clear. As to full employment, our policies and our record, so much attacked by the Opposition, prove not merely our acceptance of this aim but its achievement. We have deliberately set out, while gradually diminishing the extent of inflationary pressure, to ensure that the level of home demand was adequate for full employment. We have refrained from carrying out a policy of severe deflation which has been again and again enjoined upon us by the Opposition.

We accept the implications of this policy, that it does involve the maintenance of certain controls—for example, over building, investment and some materials which are still scarce. We accept that at present it requires the continuance of rationing of some commodities which might not be necessary if wages were lower and unemployment was greater. We recognise that it creates a most difficult problem in the sphere of personal incomes where obviously the power of the Government to prevent inflation is necessarily much less. We accept all this, because we believe not merely that unemployment and the threat of unemployment is one of the greatest single causes of unhappiness, but also because in our view the productivity of industry, on which after all our whole standard of living ultimately depends, can be increased most rapidly in an atmosphere of economic security.

As for the welfare State, we believe not merely that what has been achieved there is desirable—most people accept that—but we believe that it is worthwhile, despite the cost. Of course, this does not mean that we should not ensure that we get the best value for the money which is spent nor that we should not constantly be looking for every possible economy which leaves the structure intact. We recognise, too, that we have travelled fast and far in the last few years along this road and that for the time being no further substantial advance can be afforded. We must wait until our national income is higher, from higher productivity, before it can be afforded. But we believe that what has been done so far is right, that the country desired it and that we can afford it. We do not propose to put the clock back.

What is the attitude of the Opposition on these great issues? One thing at least is clear—that their attitude is far from clear. They are divided. They are split. They speak with different voices. Some say one thing and some say another, and not a few contradict themselves. Of course, in public most pay lip service to both these ends, but they do not will the means. They do not accept the consequences of those ends. They say they want full employment, but on every practical issue, whether it be on wages, on investments or controls, they go out of their way to attack the use of the very instruments which are necessary to its achievement.

Half the time they are back in their dream world where, as they put it, we would no longer be pressed against the ceiling, where there were ample margins, reserves of unemployed labour and where that dreadful word "priority," which is the product of full employment, was never heard. It is just the same with the welfare State. They try to deceive themselves and others that they can have their cake and eat it. Just as they pretend that full employment can be had without controls against inflation, so they make believe that there can be, here and now, substantial reductions in taxation without cutting, indeed combined with the expansion of, the social services.

They must face the choice. Some are doing so; they have already referred to it and they wish to see their party do so. It is quite clear from the speeches of the hon. Member for Chippenham, the hon. Member for Flint, West, and some others that they do not, in fact, believe in these ends. They believe we ought to have more unemployment. They are quite entitled to that view. They want to cut the social services. They want to do these things perfectly sincerely because they believe that a reversal of present tendencies is necessary for the country. As I say, that is a perfectly legitimate opinion to hold. At the other extreme, I venture to say, within the Conservative Party there are some who know that our policy in this matter is right and who are prepared to pay the price for it. They can say nothing, because they have no serious criticism of the Government to offer.

Between these two extremes there is the great amorphous mass of Conservative opinion, with its near-Socialist slogans which it does not understand, with its heart away back in the past, and led by one who has all the charm but also all the limitations of Peter Pan, who never grew up.

Mr. Oliver Stanley (Bristol, West)

He pulled you through the war.

Mr. Gaitskell

Thus divided, where will they go; on what will they stand? Will they have the courage and the consistency to say that they do not accept full employment as we have defined it? Will they have the courage openly to attack the welfare State? If so, we accept the challenge; we will fight it out and, in due course, the people shall decide on this clear cut issue.

Or—and this, I am afraid, is the most likely—will they evade the issue, will they try once more to impose upon the country their great act of political chicanery; will they try to make the people think that they need not pay the price of the Tory programme in higher unemployment and reduced benefits? I believe profoundly in the political maturity of the British nation and in their refusal to be gulled or lulled by any political party. I may say that if that is the course chosen by the Opposition, then they will get what they deserve—not merely defeat, but defeat with dishonour.

5.25 p.m.

Mr. Molson (The High Peak)

Before I begin to reply to the arguments which the right hon. Gentleman has advanced, I should, if I may, like to say that there was one passage in his speech in which I thought he fell below his standard. To refer to the right hon. Member for Woodford (Mr. Churchill) in a disparaging way, as one who has never grown up, is surely hardly what we should expect. Had he put it in another way and said that, at 75, my right hon. Friend shows an extraordinarily alert mind and still possesses a great deal more vitality than many people half his age, then I think he would have been paying a more proper tribute to the perpetual youth and vigour of my right hon. Friend.

In the few moments for which I intend to detain the Committee, I wish to take up the two main points upon which the right hon. Gentleman sought to challenge the Opposition. He asked do we accept the objective of full employment and do we accept the welfare State? He twitted us with those slight differences of opinion and emphasis which exist in all vigorous and vital parties, such as our own, and which have frequently been seen in his party. In view of the fact that the White Paper on Employment Policy was issued during the war and was the work of a Government presided over by my right hon. Friend the Member for Woodford, the answer clearly is that we do accept it.

Mr. Gaitskell

May I ask the hon. Gentleman whether he takes the view that the level of unemployment presupposed in that White Paper is one which he would support?

Mr. Molson

I know very well the point which the right hon. Gentleman is making and my answer is that I do not believe it is likely that the present extremely low figure of unemployment can permanently be maintained.

Mr. Gaitskell

Would the hon. Member attempt to maintain it?

Mr. Molson

Most certainly we should attempt to maintain it, but I would point out that it is a matter of how it is to be maintained. Let me, for example, point out that even under this Government of planners the coal crisis of 1947 resulted in a very great deal of unemployment at the time.

Mr. Gaitskell

For two weeks.

Mr. Molson

Further, if the policy of increasing exports sufficiently to be able to balance our payments failed—and it is a policy which I support—then it would not be possible to maintain full employment, even if this Government were in office.

I want to turn to what I believe to be the underlying fallacy of the policy which this Government have followed. I do not believe that there are the necessary savings in this country at the present time to enable the present economy to be maintained and developed in the way which is necessary. This is a point which I have made for three years in this kind of Debate. Last year I was not fortunate enough to obtain a reply from the present Financial Secretary to the Treasury. It was when the present Minister of Town and Country Planning was Chancellor of the Exchequer that I first asked, in a Budget Debate, where he thought the savings could be found for the great programme of capital developments in the coal, steel, electricity and gas industries and on the roads, and I quoted the Government's own estimate of what that programme would need to be.

Now we find that for two consecutive years the Economic Survey has given a figure of what it was hoped that personal savings would be. In both these years it was pointed out that the figure was not to be regarded as an estimate of the volume of personal savings which would be required if inflation were not to ensue. As was said in the Economic Survey last year: The figures of personal savings are balancing items: that shown for 1949 is not a forecast, but depends on the assumptions made about the other items. I hope that before this Debate ends, we may have an explanation of the extraordinary change in the figures of personal savings given in the Economic Survey this year and last year. Last year, in Command Paper 7649, it was stated that the personal savings in 1938 had been £221 million; that in 1948 they had been £220 million. So that, despite the immense increase in the national income, the proportion of the personal disposable income saved was in that Economic Survey taken to have fallen from 4.9 to 2.7 per cent. In the Survey this year these figures have been corrected, and it is now said that the savings in 1948 were £409 million and in 1949 £427 million—that is, an increase of nearly 100 per cent.—showing how unreliable all these figures are.

The conclusion the Government derive from that is that the proportion of personal savings now, under the present burden of taxation, is the same as it was in 1938. Now, I venture to say that I should be very much surprised indeed if the volume of savings were as great as it was before the war. First, the rich at present cannot save with Income Tax and Surtax as great as they are. That, I think, will hardly be disputed by the Government. Indeed, I believe it is one of their objects of policy to transfer incomes, so that the rich cannot save. Secondly, the rich have no inducement to save when Death Duties are as high as they are, and when there was the Special Contribution two years ago, when last year—I am sorry to see that the Financial Secretary has gone—both the Chancellor of the Exchequer and he were at pains to say that, although the ceiling might have been reached of taxable income of the rich, there was still a large amount of capital which would be available for taxation. That idea was repeated by the hon. Member for Stechford (Mr. Jenkins) in the course of this present Debate.

I wonder whether the Chancellor, when he gave the analogy of the bees who were improvident and consumed their honey before winter came, may not have thought that, if they knew that the beekeeper was going to remove a large amount of that honey himself during the summer months, the bees took a mere step of reason and precaution in consuming those sweet things themselves instead of leaving them to the bee-keeper to remove.

Finally, so far as personal savings are concerned, we come to the relatively poor, and there, as the Chancellor of the Exchequer himself pointed out last year, £68 million more were withdrawn from the small savings than were paid in. Therefore, I say that I should have thought that it was unlikely that the volume of personal savings was still 4.9 per cent., or the same as it was in 1938. I said last year, and I say again now, that if the Chancellor's financial and economic policy is based upon the expectation of substantial personal savings, then the whole of the financial policy of this Government makes it unlikely that that expectation will be fulfilled.

In effect, what we have been now obliged to do because of the—as I believe—great decline in personal savings is to rely to an increasing extent upon company undistributed profits. I welcome the change of attitude on the part of the Chancellor of the Exchequer since last year. Last year he said, on 18th May: One of the reasons why prices are so high is because profits have been so frightfully high over the last few years."—[OFFICIAL REPORT, 18th May, 1949; Vol. 465, c. 563.] He went on to give a figure of the profits; but it was a figure, in fact, which was quite meaningless because he did not state upon what total capital or upon what turnover those profits had been earned. This year the attitude has changed, and the Chancellor gave an interesting calculation in which he pointed out that some three-quarters of the gross profits were already being utilised for essential purposes which otherwise we should have to finance in some other way.

I should like to ask the Minister of State how it is that in the Chancellor's Budget Statement he expected there to be larger company undistributed profits. He has based his expectation upon there being larger undistributed profits—and that in spite of the fact that he said earlier in his speech that in the middle of last year the rise in the graph of company profits had come to an end, and that we could not expect a further increase in profits; and the recent figures I have seen in the "Economist" and elsewhere show that company profits are declining. Would it not, therefore, have been wiser for him to have reduced the tax upon undistributed company profits, which, ex hypothesi, companies will use either for the modernisation and expansion of industry or in the purchase of gilt edged securities, which tend to make those savings available for other productive enterprises?

It is because we on this side of the Committee believe that the savings of the country are really inadequate at the present time to maintain and to develop and to expand and to modernise the industrial system, and to carry out the necessary social development, that we criticise the level of taxation as it is. The effect of devaluation, and the consequent increase in the price of raw materials, surely means that companies are going to require larger working capital as a result of that increase in prices than they required before; and I should have thought it would have been undisputed that the general effect of this burden of taxation upon industry at the present time is to cause a steady depletion of the working capital of industry.

Again, the cost of replacement of worn-out machinery is now three times the cost of machinery acquired before the war. While I am glad to know that there is a committee looking into this matter of depreciation, it is manifestly impossible for industry, bearing this burden, to replace machinery bought before the war when still, and despite the concessions made last year, the maximum of the depreciation allowance is the price that it originally paid for the machinery.

When we are considering the welfare State, we say to the Government that, while we desire as much as the Government to maintain and preserve this welfare State and these social services—which, after all, were originally outlined during the war in a memorable broadcast speech made by my right hon. Friend the Member for Woodford—we desire to be realists in this matter, and that it is futile simply to go on saying, as do the Government, that we insist upon maintaining this great, costly and admirable structure unless it is financially possible to do so.

One more point and I have done. The Chancellor referred to the considerable deterioration in the terms of trade that has taken place since devaluation. I have myself referred several times to the likely trend of the terms of trade, and I regret the general optimistic, and indeed complacent. tone of the Govern- ment speeches about our balance of payments. There was a very remarkable article published some two years ago by Professor Arthur Lewis in which he analysed the terms of trade. Taking 1913 as 100, they were up to 140 in the 'thirties; they then fell in 1946 to 131, and in 1947 to 122.

In the light of what the Chancellor has now said, I have had a calculation made as to how they are moving, and they are moving very fast against us at the present time. In September, 1949, they had slightly improved to 125.7; but by February, as a result of devaluation they had fallen to 113.9. They may fall very much lower, because in 1908 to 1913 they were 97, and in 1875 to 1883 they were as low as 84. Now there are no new virgin prairies to be developed for the production of food overseas, and with an increasing demand for raw materials of all kinds import prices will probably rise; at the same time, with the return of Germany and Japan and other overseas producers into competition with ourselves, I believe that there is likely to be a downward trend in the price we shall obtain for our manufactured goods.

I therefore believe that from the point of view of our export trade, as well as from the point of view of our finances, the 'fifties of this century are likely to be more difficult than the 'forties. I believe that this present burden of taxation can only be precariously maintained as long as the conditions are as favourable to us as they are at the present time—and they are extremely favourable. We have still only incipient competition overseas; we have high activity in the United States of America; we have the stimulus from devaluation; and we have, as I think is the case, the use of sterling balances to stimulate exports. But these conditions will not continue. There may be a recession in the United States of America; there will be higher costs as a result of devaluation; the buyers' market is rapidly disappearing, and some of our industries, like the shipbuilding industry, cannot expect a general continuation of the present rate of activity.

In the 'twenties it was, I think. Monsieur Andre Siegfried who said, in comparing France and Britain, that while the national budget of France is always in chaos the budget of most Frenchmen is well balanced, whereas in the case of Britain the national budget is always perfectly balanced but often at the cost of the chaos of the budgets of private individuals. I say to the Government that this present level of taxation by which they are still, in favourable circumstances, able to balance the national budget is only being done at the cost of depleting the reserves and the resources of industry; that an increasing number of people in this country have lost all belief in the virtues of thrift; and with the level of taxation and expenditure by the Government maintained as it is the budgets of the people of this country are becoming more and more bankrupt.

5.46 p.m.

Miss Burton (Coventry, South)

In the short time available to me today I want to develop a point made by the right hon. Member for Saffron Walden (Mr. R. A. Butler) last week when he spoke about fundamentals. The right hon. Gentleman said: The duty of the Opposition, as we see it, is to awaken our country's attention to the fundamentals of our economic and financial position."—[OFFICIAL REPORT. 19th April, 1950; Vol. 474, c. 146.] That, I think, is a contention which would not be disputed by either side of the Committee. But listening this afternoon to the right hon. Gentleman the Leader of the Opposition, it did seem to me that at the next General Election there really would be no need for separate parties; that we should have both sides of the House fighting with a Labour policy. Now that, I am sure, would be repudiated very heartily by hon. Members opposite as much as my hon. Members on this side. I therefore thought we might try to see—particularly as the Opposition intend to put this matter to the vote on Wednesday—the real fundamental difference in approach to this problem made by the two main parties, because I think that is the point which has to be got over to the people of this country.

The right hon. Member for Saffron Walden would contend that the Opposition was fitted to awaken the country to a true estimate of its financial and economic position. I expect hon. Gentlemen opposite will remember that last year a booklet called "The Right Road for Britain" was published by the Opposition. I do not intend to go into that tonight; there is not time; but I thought I might be allowed to quote one sentence only from "The Times" of 25th July last year commenting on "The Right Road for Britain." "The Times" said: Conservatives will increase expenditure by raising pensions, by giving higher salaries to teachers, by improving conditions in the Regular Army, by equal pay for women in government service and even by small additions to the health scheme. Since income-tax and purchase tax are also to be reduced it is difficult to see how this can be done. At the time it seemed to me that "The Right Road for Britain" was an advance edition of the sales catalogue of the Opposition for the forthcoming General Election, and I should have thought "The Times "even would not suggest that those comments fitted the Opposition to examine competently the financial or economic position of the country.

If we then go on to "This Is The Road," which I have here, and to which the right hon. Member for Saffron Walden referred as "this now famous document," we on this side believe that the Opposition will wish it were considerably less famous when certain passages in it come to be examined. In this Committee it is never wise to pretend to knowledge that one has not got. I am certainly no economist; but I would say that the writer of "This Is The Road" very obviously is no economist either. This famous document is, I think, a worthy follower of the sales catalogue of 1949, because there again we were going to have reductions on the one hand and increased expenditure on the other. I would like to say to the Opposition in all sincerity that I think that was a sales catalogue, and I think the goods were all at bargain basement prices and the prices were those of political dishonesty.

Mr. Gerald Williams (Tonbridge)

Will the hon. Lady read what the pamphlet said about the cutting down of Government expenditure?

Miss Burton

Yes, I will come to that, and I would make this point in passing. I think that hon. Members opposite, when they are talking about Government expenditure, quite overlook the fact that in Debate in this House in 1948 it was stated that the administrative costs of the National Health Services were 2.3 per cent. of the whole, and when that is compared with private industry or insurance, which varied from 9 per cent. to 40 per cent., there is very little to be said. We are still awaiting on this side of the House for any definite steps by which the Opposition would cut expenditure, except by cutting food subsidies.

I gather that it is customary in this House when one quotes from a book to have the book with one. I have the books here but before I come to them—I do not know whether I am in good or bad company but I know that I am in very distinguished Parliamentary company in quoting from the "Economist"—I want to quote one short sentence from the "Economist" of 12th March last year. That paper was discussing the history of the two main parties of this country. I little knew at that time that I should have the chance of saying this here. It was a significant sentence. It said: While the Labour Party evolved in the country as a mechanism for getting into Parliament men and women who would seek there certain clearly laid down social objectives, the Conservative Party was erected from the top downwards…. I cut that out and kept it. Later last year, I found these three books, published by Messrs. Collins, one dealing with each of the three main parties—the Conservative, Labour and Liberal Parties. The Conservative one was written by the hon. Member for Flint, West (Mr. Birch), whose speech we so enjoyed the other night; the Labour one was written by the right hon. Member for Colne Valley (Mr. Glenvil Hall); and the Liberal one by the Editor of the "News Chronicle."

In those three books, which are presumably correct as accepted by the party organisations, were charts of the three main parties. The Liberal and Labour Party charts were similar. The Conservative chart showed no trace of a democratic assembly whatsoever. At the top we had the leader and underneath the leader were the three chief officials of the Conservative Party, nominated by the leader and chosen by the leader. That is significant. It is very significant following the article in the "Economist" and brings me to the point I want to make.

A party that has been erected from the top downwards naturally starts to think from the top downwards. If hon. Members opposite felt that that was not the policy of their party presumably they would have changed it. That is the organisation. It is not for me to say that it is wrong, but it is one with which we on this side of the House do not agree. If we go on with the point of thinking from the top downwards we come to the question of the food subsidies.

The Leader of the Opposition told us this afternoon that he would reduce the food subsidies. Hon. Members opposite have a good deal to tell us about what I would call Civil Service-ese. In the document, "This is the Road," there is a horrible sentence worthy of the most dreadful Civil Service-ese, which tells us that the food subsidies are indiscriminate in their incidence. That is a horrible remark. An hon. Member opposite has told us that it means that they fall on the rich and on the unrich, and he said, "Let us give them to those who need them." We have not heard what administrative methods would be used by the Opposition to do that. We on this side know a certain amount about the means test, and some of us have suffered under it. Whether hon. Members opposite would have a means test for food subsidies I do not know, but if that means a return to the old means test we would have nothing to do with it.

The party opposite quit sincerely, starting from the top and thinking downwards, have either not realised because of that, or not taken into consideration, that if we lower the food subsidies we would benefit the better-off at the expense of the poor. That is not party politics but common sense. I do not know whether hon. Members opposite have ever got so far as saying to their constituents that they would cut the food subsidies—I have never heard a Member opposite say that—but assuming that they have, have they considered that the subsidies amount to about £39 a year for a family of four, and that if we remove these, we shall adversely affect all families paying less than £30 a year in Income Tax, which means all families with incomes of less than £550 a year? That is the view point as seen from the top. Hon. Members opposite should reflect on that very carefully.

We have heard—and the right hon. Member for Saffron Walden told us—that this country carries the highest taxation burden in the world. What he did not add, and what I feel the party opposite would not add, possibly through no fault of their own because they start at the top instead of at the bottom, is that the food subsidies and the social services represent an average annual distribution of £20 15s. a head of the population, which is 30 per cent. of the average taxation payment. So, apart from being the highest taxed country in the world, what comes back to us is 30 per cent. of the average taxation payment. We on this side believe that that is the view point one gets from working from the bottom up. In America, the comparable amount of social benefits coming back to the taxpayer is 20 per cent. of the average taxation payment. I suggest to the party opposite that they are running true to form in all these things because they start from the top and come down.

On Friday, the right hon. Member for Leeds, North (Mr. Peake) spoke to us about the need for encouraging thrift in this country. I imagine that most of us if we run a business or works, and people come to us for jobs, would want to know something about the past record of the persons applying for the jobs. That is a perfectly customary practice. I think it not unreasonable to ask the party opposite in their great concern for thrift, whether or not in the past 20 years, which they hate being referred to, they have encouraged thrift. I suggest that that point is a fair one.

I am not going back any further than 1938. In this country we then had approximately 12 million families, and of these 8 million families had as their total savings less than £100. Half of that 8 million had as their total savings less than £2. I do not know whether hon. Members opposite would say that the people of this country were not thrifty in the 1930's, or what reason they would give for that small amount of savings of the people. We on this side welcome the concern of hon. Members opposite for the thrift of the country, but we do not believe that total savings among 8 million families of less than £100 each is a very good example of care for thrift.

Concern has now been shown by Members opposite for the lower paid workers. Everyone knows that this is not a matter for the Budget but for the T.U.C., who are not likely to be helped greatly by the contributions of Members opposite. I think that because they start at the top and work downwards it has not occurred to them that in the 1930's, and as late as 1938, nine out of 10 people working had less than £5 a week, and the great majority earned less than £2 a week. Any trade unionist could tell hon. Members that. This concern for the lower paid workers makes very good reading in the Press, but it makes very ineffective reading in those parts of the country represented by Members on this side. I should hate to be a Member opposite who went to any of the distressed areas and told them about the Opposition's concern for the lower paid workers. I do not think it would go down very well.

In the first three years of the Labour Government, 3¾ million people were relieved of paying Income Tax. The point I am trying to make is that this is the action of a Government which starts at the bottom and works up. Members opposite have always pressed for a reduction in the standard rate of Income Tax. They know very well who would benefit from that—the people at the top. If Members opposite are not ashamed of the policy of starting at the top, they should let it be known to the country. We could then go forward on that basis.

The Leader of the Opposition said that if we went on the figures available we should see the effect of five years of a Socialist Government. That shows the complete inadequacy of the Opposition to understand. We do not go on the figures but on the position of the people in the country. The ordinary people have never been as well off as they are today. We know that to be the case, and that is the result of five years of a Socialist Government. The right hon. Gentleman said they planned for choices, and we know what they are. They are the choice of the dole and of wages of £2 a week. I hope it will go out to the country before the vote is taken on Wednesday that the party opposite, because of its organisation and composition, starts naturally from the top downwards, whereas the Labour Party starts thinking from the bottom and works upwards.

6.3 p.m.

Sir Peter Bennett (Birmingham, Edgbaston)

It is very tempting to deal with the arguments of the hon. Member for Coventry, South (Miss Burton). I shall only point out to her that when I earned £2 a week, it used to buy what would cost £6 today.

I wish to deal with the increased tax on petrol and commercial vehicles. My connection with the industry is sufficiently well known for me not to have to make any disclaimer. I do not make any vehicles but I live by those people who do. Before giving a few details on how we regard these new impositions, I want to put in a claim for another Birmingham industry. The 9d. increase on light hydrocarbon oils is going to hit the paint, varnish and ink manufacturers very badly. They do not use this oil as a fuel, which has a different flash point, but for the purpose of manufacturing their commodities. They want to know whether their raw material is to jump up in price simply because of this decision to increase the tax on fuel. I ask the Financial Secretary to go into this carefully, with a view to seeing that he hits the person he intends to hit, and not quite innocent people who ought not to be touched.

This combination of an increase in the tax on petrol and a 33⅓ per cent. imposition on commercial vehicles is going to be a burden on industry as a whole. I wish to refer, in addition, to the hardship it imposes on the commercial vehicle manufacturers and users. I want it to be understood that I am trying to look at the matter from a broad point of view. This imposition will hit the whole of industry, bearing in mind, which the Chancellor of the Exchequer did not mention, that industry has already had to bear an increase of 2½ d. on petrol as a result of devaluation, making a total increase of 11½ d. a gallon since September last.

I listened very carefully to the Chancellor's argument about saving dollars. It seemed a very strange argument to me, and I could not make out the arithmetic. He is to increase the tax and double the ration, which must mean spending more dollars. On the other hand, if he hopes to get a reduction in the consumption of petrol used by commercial vehicles, all I can say is that if we are to have increased production it means the use of more transport, and therefore of more petrol. I should be very interested to know how the Chancellor has made his calculations. I do not suppose he will ever give me the details, although I think his argument is very thin.

The Committee will appreciate the effect this increased tax on commercial vehicles will have on the industrial side.

Mr. Shurmer

As we both come from the same city, and as the hon. Member is concerned with a big organisation in that city, will he explain a little more explicitly the question of the 33⅓ per cent. increase of tax on commercial vehicles and the 9d. increase on petrol and oils? Will he tell us how much they take?

Sir P. Bennett

I have only just started to make my speech. I thought for a moment that I must have missed something out, when the hon. Member interrupted. Pleasure motoring is a very small item, and luxury motoring plays an even smaller part, as anyone can see if he studies the roads during the weekend. It must be remembered that passenger cars, pleasure cars as some people call them, are mainly used during the week for trade and business purposes. The reason is because it is economical in time to do so. There was a time when I used to travel the country on commercial traveller lines, and I knew all the rail connections on the East Coast. Today, we do not send our men out to use the trains but in vehicles, not to admire the scenery, but to get to more towns and to do a great deal more business.

The effect on industry as a result of these two impositions will be very serious. "The Times" estimates that only 10 per cent. of the petrol is used for pleasure purposes. The Chancellor estimates that he will receive £73 million from the increased tax on petrol and £13 million from the increased tax on commercial vehicles, making a total of £86 million. If we deduct £7 million as representing the amount to be borne by pleasure motorists, it means that some £80 million is to be added to our manufacturing costs.

There has always been a strange complex in this country about motoring. I never could quite understand it, but it often seemed something which was deprecated. In the early days of the industry we were handicapped because no one was allowed to run vehicles on the roads of this country without a man with a flag walking in front. When we made vehicles in the early days, few people bought British cars. They preferred continental ones, because the Continent had many years' start on us through the policy followed here at home. However, in the case of commercial vehicles they were never attacked in the past. Now they are to be. Whatever may be said about British cars in other days not fulfilling the conditions of the overseas market, no one can say that the British commercial vehicles did not do so. Since the war particularly, the British commercial vehicle has occupied first place in the opinion of overseas buyers.

Why, therefore, is it being attacked now? The Chancellor of the Exchequer says that these vehicles are being increasingly used. I agree, but why are they being increasingly used? It is because these lorries represent the most efficient form of transport, with the industry organised as it is today. Capital investment has been referred to. We are going to get less value for our existing capital equipment if we do not use it fully and to the maximum extent. Continually we are lectured on the necessity of increasing our efficiency. One way of doing that is to use modern means of transport. Because we are using it and because industry is making increasing use of it, it is to be penalised.

I do not know whether the people of this country realise the enormous change that has taken place in industry in the last decade or two. I remember when the horse-drawn railway lorries pulled up at the packing-room door of a factory. In those days we had to pack the goods and put them on the lorries by a quarter-past six; twenty past six was too late. If the goods were not by then on the lorry, they had to wait until the next day before being taken away. It was more than the man's job was worth to take them later than six-fifteen. Today things are totally different. The goods are not sent out in that fashion, but are delivered in accordance with the production from the lines. They are not packed at all. This great change has been brought about through the use of motor lorries and vehicles, and if we had to pack everything as in the old days it would bring modern industry completely to a standstill.

Some years ago a railway manager came to me on this subject of packing. It is a serious problem with us when such things as motors, lamps, batteries and other classes of goods are sent together. They have to be very carefully arranged. This manager said he could help us by sending us containers. We had to explain to him that if he provided dozens of con- tainers and if he took them to the railway, we could not possibly use them because we could not use the railway schedules. Goods are made during the day and into the evening, and the up-and-down variations in the motor industry particularly necessitate getting the goods off the lines as early as possible. Supposing we sent them by rail, it would not be long before someone would be asking where were the goods. I can imagine the reply, "We sent them by rail." Back would come the remarks, "What are they doing going by the railway? Why did you not use one of your own lorries and get them here quickly?" I am using these personal examples to show that industry today cannot be tied to the methods of transport that were developed 30 or 40 years ago.

The hon. and learned Member for Kettering (Mr. Mitchison) made a remark to which my attention has been called. He complained about seeing lorries running empty. Does he know that it is owing to a Ministry of Transport regulation, which will not allow a man to carry back any but his own goods, that they are going empty? In the case of a firm like ours, where we have depots, we can often arrange for goods to be brought back when we send a load out, but in the case of the ordinary man his lorry must return empty under the Ministry of Transport regulations.

Why does he use his lorry to deliver his goods? The answer is that it pays him to do so. He does not wear out tyres, use petrol and undergo the wear and tear of his vehicle for any other reason than that it pays him to do so. Before hon. Members talk about these matters, they should look at the buses. I have seen buses taking workers to their work and going back to the depots empty. I have seen them coming out in the evenings empty in order to bring the workers home. Is anyone going to suggest that the transport manager should cut down his vehicles until he gets the exact number which can be continuously filled? There would be a riot if he did.

What is the crime alleged against the motor vehicle industry? The Chancellor suggests that the manufacturers have have been supplying more than they were allocated, but the right hon. and learned Gentleman did not mention that they have been exporting more than the set target which was given to them. He might have given them that. Last year they exported 93,000 vehicles, which compares very well with 15,000 before the war. At this present moment this country is the world's greatest exporter of commercial vehicles.

Mr. Nigel Birch (Flint, West)

And all by private enterprise.

Sir P. Bennett

Exporting is not an easy job. The Minister of State for Economic Affairs suggested in his speech that the commercial vehicle manufacturers could sell more vehicles abroad. I was tempted to say to the right hon. Gentleman, "That is all very well, but you do not know a thing about it because you have never sold them." I do not mind being lectured by a person who has done the job, but it is not easy to take it from one who has never tried to sell vehicles abroad. He should try to go round the world and sell some stuff. I am daily in touch with people who are doing it, and I can tell the Chancellor of the Exchequer that the export market is getting very difficult.

There are times when the market for which particular goods are made will not take them. The exporter runs into difficulties of currency restrictions, and so on. In such circumstances, what has a man to do? Has he to close down his works until the market is cleared by the negotiators and the Board of Trade? No, he does not do that, but he sells the vehicles in the home market, and argues that he will be able to supply the export market when it is opened up again. The commercial vehicle manufacturers tell me that they will not be able to keep the production lines moving continuously unless they can sell on the home market, and this action by the Chancellor of the Exchequer means unemployment, unless the old conditions prevail, as they will be forced to reduce output. All this, too, at a time when there is a growing demand for commercial vehicles all over the world.

Anybody might think that these manufacturers were the only people who were increasing their output to the home market. Our increases are not as great as some of the increases of commercial vehicles in other parts of the world. People do not tie up their capital in commercial vehicles because they prefer them to cash in the bank. Even though the £ is a bit rocky, people will not buy a commercial vehicle sooner than put money into the bank.

A sum of £80 million is not going to be absorbed into our economy without this being reflected in the cost of our products. Take my own organisation. It is going to mean an increase of nine per cent.—four per cent. more for petrol and five per cent. in the increased depreciation of commercial vehicles. Such an increase is not a very big item on our total overhead costs, but all the time we are planning to get our costs down. Then, through one cause and another, the spiral goes up and up, and we see all our efforts nullified by costs piling up against us. Where transport and fuel are the main items in a business, the increase is going to be greater than that. This tax is going to be a much more expensive item in their case.

The Chancellor of the Exchequer said he hardly thought that fares ought to go up as a result of this tax on petrol. I remember his telling us that following devaluation bread would cost a little more but he did not think anything else would go up. We know what has happened The same may well apply in this case; not only will fares increase but the cost of our products is going to be affected, because transport enters into the costs of nearly everything. So we are to have this extra burden to work into our costs at home just at the time when the one thing we have to try to do is to get our costs down. If we do not manage it, it will be very bad for us. As the "Financial Times" said, this proposal is like strangling efficiency for the benefit of inefficiency.

6.20 p.m.

Mr. Awbery (Bristol, Central)

The hon. Member for Edgbaston (Sir P. Bennett) spoke of the great difficulties of the sellers of motor cars, but there was nothing in his speech about those who produced the cars and other commodities. I have tried to divide into three sections the speeches which I have heard during these past five days. Some hon. Members have used the opportunity of speaking to make a general attack upon the Government. Others, because of their loyalty to the party, accepted without question the burdens which the Chancellor is laying upon us. The third section tried to examine the position carefully and if they thought the Government had done a good job during the past 12 months they gave credit to the people responsible for that progress.

I want to say a word about the people who have made that progress possible. Reading through the Economic Survey for 1950 I find that the key word is "production." Production and more production is the foundation and cornerstone of our economic recovery and rehabilitation. If we do not achieve the production specified in the Survey there will be no recovery and no rehabilitation. The workers of this country have played a more important part in this process than has any other section of the community, whether it be the sellers of motor cars, financiers or industrialists.

We are told that industries have increased their production by 29 per cent. above the 1946 figure. On Friday last, one of my hon. Friends, speaking about the industry in which he was interested, emphasised how much his industry had done in the rehabilitation of the country. All industries have increased their production by 29 per cent.

Sir Herbert Williams (Croydon, East)

All equally?

Mr. Awbery

No, on the average. I will come to them individually in a moment. The manufacuring industries have increased by 32 per cent. and textiles by 36 per cent. I was interested in the maiden speech made by the hon. Member for Clitheroe (Mr. Fort), about conditions in the textile industry. I previously contested the division which he now represents. I believe that the small town of Great Harwood had 75 per cent. unemployed for five or six years. Some of the machinery from the textile factories had been dismantled and sent to Japan to be used to compete against us. Other machinery had been broken up and sold for scrap.

The metal industries have now increased their production by 37 per cent., building by 27 per cent. and mining by 13 per cent. Those are the increases brought about by the workers of the country, whom nearly all speakers have forgotten. I would like to say a word about the coal industry. In 1945 we were producing 174 million tons. In 1948 we produced 208 million tons. It is hoped that in 1950 we shall produce from 218 to 223 million tons.

Sir Waldron Smithers (Orpington)

In 1913 we produced 287 million tons.

Mr. Shurmer

By starving the miners.

Mr. Awbery

When we came to power, in 1945, coal production was 174 million tons. This year we hope to increase that output by 35 per cent. I was particularly struck, in reading the National Coal Board's report, not only with the amount of coal which had been produced but with the fact that the number of fatal accidents was going down while production was going up. In 1947 there were 550 fatal accidents, and in 1948, 470. That is the latest figure we have. It is a great argument for nationalisation. The number of deaths is decreasing all the time.

But for the production efforts of the workers the Budget would have been infinitely worse than it is. We have not stopped; we are still moving forward. In paragraph 37 of the Economic Survey it is stated that the healthiest aspect of our economy is that we are still increasing production. Never in our history have we had so many productive workers at work and never have we had so few people idle. If those people failed to produce, there would be nothing for us but ruin and collapse. These are the people who are maligned and abused. Now we see that they have saved the situation for us. I still have faith that the workers of this country will meet the present situation as they have met others in the past, and that they will pull us through.

What shall they have in return? Surely they should have higher standards of living than most of them have today. The standard of the people whom I see in London is very much higher than the standard of the productive workers either in Bristol or in South Wales. The Survey tells us that there is no easy way to secure additional output. There is only one way to get it. It is not through the financiers but by the muscle, brain and ingenuity of the workers, who work by hand and brain.

What is the attitude of these men to the country at this critical period? Never in our industrial history have there been fewer strikes, never has there been a better industrial relationship between the workmen and the employers and never were conditions in industry better; because this had all been achieved by the trade unions. I had the pleasure of making my maiden speech about the de-casualisation of dock labour. The position in the docks is infinitely better today than it has ever been before.

Sir H. Williams

Then why do the strikes take place?

Mr. Awbery

The de-casualisation of dock labour has nothing whatever to do with the present strike.

Sir H. Williams

Surely the present strike is in opposition to de-casualisation? The stevedores do not want that to be observed.

Mr. Awbery

I do not want to enter into the pros and cons of the present strike, but there are two causes of the present trouble. One is an internal problem of the trade union itself, which we ought to allow the trade union to deal with, and the other is a question to be dealt with by machinery set up by the industry, and with which we should not interfere. If 5,000 dockers come out on strike there is a despairing cry from the Opposition that everything seems lost, but there is not a word of appreciation for the 22 million people who are at work. Out of every 5,500 people working today, only one man is on strike, and the Opposition are endeavouring to make a terrific noise over the one man. They cannot see the forest for the single tree.

These men are playing the game. Strikes are now the exception and not the rule, and it is because they are the exception that there is so much noise from the Opposition. We are told in the Survey that trade unionists are growing more conscious of the need for production. The trade union organisation is becoming a part of our social structure. As a nation, we could not do without the trade union movement. If we had no trade unions today we should have to establish them. Joint production committees have been established at factory level. Our Tory opponents approve of them, but for 25 years I was fighting, as a union official, to try to get them established and all the time I had opposition from Conservatives and the industrialists. The incentives which are being intro- duced will be welcomed by the men. The country can only go from strength to strength and from production to production by the efforts of these men. Proof of the loyalty of the workers is found in the figures which I have quoted.

I turn to the wages question. What are we doing for the men to whom we owe so much? Are we doing all we can as a nation? The wage-freeze is creating problems which we cannot ignore with impunity. For 25 years I fought against low wages, and my greatest opponents during the whole of that time were Conservatives. Now they are in Opposition they want to improve the status of the workers. The lower paid worker has been suffering from a disease which I always call "hand to mouth" disease. He has never had too much and he has often had too little. The standard of living of such workers is lower than a Christian community should permit. It is all right for people who have high wages to ask for a wage-freeze, but it is not easy for the man who cannot make ends meet. Is it reasonable for the Government to expect a man to keep his family on £4 10s. a week? I say that it is unreasonable and that that man's position must be improved.

Neither side of the Committee should underestimate the work which has been accomplished by the trade union movement in its effort to restrain the claims for higher wages. The pigeon-holes of most trade unions are full of claims for increased wages and improved conditions which have been held up. The demands of these men are strong and insistent, and they cannot be disputed. Who will deny that a man paid £4 10s. a week has an incontestable case for an increase in wages? From our production we pay wages, rent, interest and profit Then we can increase the wages by reducing the rent, the interest and the profit.

I want to say a word to hon. Members who now claim that they are helping the lower paid men. How did the Tory Party treat the workers in the past? They did not freeze wages after the last war; they liquidated them. The sluice gates were opened, and in 1921 wages flowed from the wage packets of the lower paid workers to the extent of £6 million a week, in 1922, £4,500,000 a week and in 1923 £500,000 a week.

Sir H. Williams

That was the first Tory year.

Mr. Awbery

I am speaking of a few years after the First World War. I have not finished the picture. At the same time they kept 2,250,000 unemployed, and they reduced the unemployment benefit in 1927 from 18s. to 10s. a week for a man 18 years of age and from 15s. to 8s. a week for a woman of 18. They also disallowed 500,000 claims for unemployment pay during that period. The miner's wage at that time was 9s. 3d. a day, and the cost of living was 80 per cent. above that of 1914. The nation does not want to go back to that kind of thing.

Squadron-Leader A. E. Cooper (Ilford, South)

I am sure that the hon. Member does not wish to misrepresent the position. He has given us interesting figures for 1922 and 1923. Perhaps the Committee would appreciate it if he would give the figures for, say, 1929, 1930 and 1931.

Mr. Awbery

It would not be difficult to give the figures for any period.

Squadron-Leader Cooper

Give those, then.

Mr. Awbery

The reason why I am giving the figures for 1922 and 1923 is that it is now five years after the Second World War and the only comparison is with those years.

Squadron-Leader Cooper

If the hon. Member says he is comparing figures five years after each war, all right; but one would have expected that the improvement would have been progressively better by 10 years after the First World War, whereas it was progressively worse.

Mr. Awbery

Ten years after the Second World War we shall be giving the comparative figures for 10 years after the First World War, but it is now five years after the Second World War and, therefore, the comparative figures are those for five years after the 1914-18 war.

I am anxious that as a Government we should give credit to those men who have done so much, the producers of this country. It is not too much for us to say to these lower paid men that there shall be no standstill order, that there shall be no freeze in the future, that profiteering and exploitation of every kind will be stopped, that there will be no one-way traffic as far as wages are concerned while profits are allowed to soar, but that we will cut profits down so that the wage earner will have the decent standard of living to which he is entitled.

6.40 p.m.

Mr. Aubrey Jones (Birmingham, Hall Green)

May I, Sir Charles, ask for the indulgence so much needed by one who ventures to enter the Debates in Committee for the first time? Like other maiden speakers before me, I find it difficult, in a Debate on the Budget, not to touch on some of the great issues which divide the two sides of the Committee. If I find myself unable to avoid them, I would assure hon. Members that I wish to treat them with a mind as free from partisan spirit as I can make it.

In the hon. Member for Bristol, Central (Mr. Awbery) I believe I recognise a fellow-countryman. I am sure the hon. Gentleman will agree with me in this, that if we as a country are to maintain our place in the van of nations, we have to produce efficiently and at low cost. How can a Government encourage efficient production? That is the test to be applied to this as, indeed, to any Budget. If I might offer a prescription, I would say that efficient production can be encouraged on two conditions. The first is to ensure that profits are difficult to come by, that they have to be struggled for, but when they have been secured, that an adequate residue is left for the replacement of obsolescent capital and for new capital extensions. Judged by that prescription, I submit that the economic policies of the past few years have been calculated to produce precisely the contrary effect.

May I look at this prescription from the point of view of these two aspects and, first, the aspect of taxation. There was noticeable in the speech of the Chancellor an attempt to belittle the evils of high taxation. What exactly are the effects of high taxation? Last summer the Chancellor committed himself to the observation that taxation did not enter into costs. If he meant that taxation did not enter directly into costs, I agree with him. I believe that in making that assertion the right hon. and learned Gentleman had the august backing of the Colwyn Committee.

Nor would I wish to exaggerate the discouraging effect which high taxation can have on output, at least immediately. It is perfectly true that high taxation discourages overtime and that this discouragement has come at a time when the general reduction in the hours of work has made necessary the working of more overtime. But I would not, for my part, wish to over-estimate this particular effect. The main evil of high taxation is of much longer term and we have not yet begun to appreciate it. It lies, first, in diminishing the resources available for new investment and, secondly, in its effect on the quality of the investment made with those diminished resources.

We have heard this afternoon from my hon. Friend the Member for The High Peak (Mr. Molson) of the deleterious effect of high taxation on private savings. We know perfectly well that the main constituent of personal savings nowadays is corporate or companies' savings. Yet at the time when these have acquired a new importance they, too, have had to bear an added burden of taxation. I want to elaborate the remarks of my hon. Friend by mentioning one or two figures. If we look at Table 16 of the White Paper on National Income, we find that taxation, calculated as a percentage of trading profits, amounted in 1938 to 15. Since the war the percentage has been consistently above 40. In 1947 it was 41, in 1948 it was 41, in 1949 it was 40.

I mention that table because it gives a basis of comparison with the pre-war year of 1938, but I suspect that it underestimates the amount taken in taxation because, if we look at the latest company figures published by the "Economist" we shall see that the percentage is as high as 45. At the same time the cost of capital replacement is increasing. If it is not as high as three times what it was in the days before the war, as has been mentioned this afternoon, it is certainly as high as 2½, and the combined effect of both developments is to diminish the financial resources available for new investment. Granted that since the war we have had a relatively high rate of capital formation, but it has been financed in part by the war-time accumulation of liquid assets. That accumulation is now exhausted, and we are thrown back on current profit, into which these inroads are being made. That is the really serious aspect of the matter. As for the qualitative effect on investment, we need in the national interest the pioneering activity. It is precisely the pioneering activity, as against the known and the settled activity, which is discouraged by the prospect that up to 50 per cent. of an uncertain profit is taken in taxation. There should, in short, be a greater residue from profit.

I now come to the second part of my plea, which is for a lower rate of profit. In other words, I want to add my voice to those who in the Debate have spoken of the need for disinflation. I have always listened with the deepest respect and approval to the many admonitions of the Chancellor on this subject. Yet, although the right hon. and learned Gentleman has always appeared steadfast in the utterance, I detect a certain faltering in the execution. He appeared to me to falter last year, and I am not sure that he is not faltering this year.

I grant that it is difficult to say when inflation is present. So long as there is a sellers' market, and so long as selling prices can be adapted to costs, controlled inflation can be enjoyed with impunity. However, I would remind the Committee that Japanese and German competition is growing faster than the world market is expanding. When the sellers' market turns to a buyers' market, it is then that inflation shows itself in the disparity in costs between ourselves and other countries. It is against that eventuality that we ought now to be preparing. As evidence of a continued high degree of inflation, I would point to one particular table in the Economic Survey, that on the distribution of manpower. We see there that in the past year the number of workers in an unessential trade such as the distributive trade has increased by 59,000. In essential industries it has remained stationary and in the case of coal it has declined by 27,000. That is evidence of continued inflation. I understand the difficulty of the Chancellor; he hesitates to induce a change in a given pattern of employment.

We have heard much this afternoon from the Minister of State about unemployment. We all know that it is perfectly easy to conquer unemployment at a price—for instance, the price of war or of totalitarian compulsion. The problem has been, and still is, to conquer unemployment without paying a price of that kind. But, I fear, we are paying a price today, for the conception of full employment as embodied in the Economic Survey is to take the distribution of manpower as it existed in, shall we say, 1948 and then to petrify it, to mummify it, and to accept it as immutable and as enduring for ever and ever. In other words, we renounce progress. We abjure any need to adapt ourselves to changing world conditions. In fact, we resign ourselves to arresting the new and the essential, and to supporting the declining and inessential. We have full employment today, but at the price of unemployment tomorrow. That is not the conquest of unemployment. We shall have conquered it only when we have faced the need for change and can effect the change smoothly and quickly.

The two parts of my prescription—first, a greater residue from profits, and second, a lower rate of profit—can be fulfilled only on one condition: that is, of course, a reduction in Government expenditure. I come, therefore, to that much disputed territory on which a maiden speaker should fear to tread. I believe that a reduction in Government expenditure is necessary, if only to safeguard the premises on which the Chancellor's budgetary philosophy' is based. The Chancellor made much of the Keynesian idea of using the Budget to influence the economy, but he seemed to me to disregard the limitations with which that idea is surrounded. He did not seem to be conscious of the fact that the weapon of which he is so proud is already a blunted instrument. The Keynesian idea is valid only on condition that the Budget is at a moderate level, for as soon as the Budget is at a high level and taxation threatens taxable capacity itself, it becomes a matter of the most extreme difficulty to achieve a surplus; and that is the point which the Chancellor is approaching.

The Chancellor said that if a depression were to appear he would budget for a deficit. But if a depression were to arrive, it would, in the first instance, affect our export trade. If the Chancellor were to try and compensate for declining exports by stoking up home demand, he would be hardening our costs, aggravating our export difficulties and incurring the balance of payments crises which we now know so well. In short, the Chancellor can permit himself the luxury of budgeting for a depression only if our costs are already reasonably competitive with those of the rest of the world. This is the task which we should be accomplishing now, before it is too late.

In the course of the election the Chancellor committed himself to the famous statement that a reduction in Government expenditure was impossible. What is the impediment to a reduction of Government expenditure? I suggest that the real impediment is the long ingrained habit, which was very evident this afternoon in the speech of the hon. Lady the Member for Coventry, South (Miss Burton), of looking at the Budget from the point of view of the redistribution which it effects between class and class. That habit, however, is now out of date, and there should grow in its place a new habit of looking at the Budget from the standpoint of the redistribution which it effects between tense and tense, the present and the future; because if the conclusion which I formed in the first part of my speech is right—that the real evil of high taxation is in its effect on new investment—then it follows that we are enjoying the benefits which we are today receiving—the benefits, for instance, of relatively cheap food—at the expense of the next generation and of the standard of living of our children and our children's children. If that is the case, then this enjoyment is not only unpatriotic, but falls short of the ethical standard which, I am sure, the Chancellor would wish to set himself.

All of us on both sides of the Committee are proud of our democracy. We rightly take pride in the fact that its many virtues outweigh its imperfections, but there seems to me to be one imperfection which is growing in importance. It is that a democracy is always tempted to think of the short term, and only too rarely of the long. If we on both sides encourage it in that temptation, if we seek suffrages by benefits today regardless of the cost to be paid by tomorrow, then I am afraid that we are tarnishing the finest example which we have to offer the world and, little though we may know it, we may be drawing the veil over our greatest national achievement.

6.56 p.m.

Mr. Fernyhough (Jarrow)

I think that on both sides of the Committee it is generally agreed that the standard of maiden speeches in the present Parliament has been exceptionally high. It is certainly true that the hon. Member for Hall Green (Mr. Aubrey Jones) has maintained the very high standard which has been set by previous maiden speakers and I am quite sure, because of the knowledge which he displayed and the confident manner in which he made his speech, that this augurs well for his future contributions to our Debates.

The hon. Member, like the right hon. Member for Woodford (Mr. Churchill), devoted the major portion of his speech to the question of high taxation. We have a right to ask the Opposition, if they disagree with the total amount for which the Chancellor is budgeting, where they would make the economies which they say are essential. The right hon. Member for Woodford said that we had spent £19,000 million in five years and that we were budgeting for £4,000 million in the current year; he used the usual expressions "waste" and "extravagance" and intimated that taxation was higher here than in any other country in the world.

But why is our taxation higher than elsewhere? First, we are carrying a heavier military burden, having due regard to our national income and our population, than any other nation. Do the Opposition think that there can be any substantial saving in the £780 million for which we are budgeting this year for the Armed Forces?

Sir H. Williams

Yes.

Mr. Fernyhough

There is one hon. Member who says, "Yes." His leader does not say, "Yes"; he says that they would look into it. But even if their party were in power and looked into this question, I suggest—because Member after Member on that side has been constantly demanding, during the time I have been in the House, that the pay of those in the Armed Forces should be increased; and I am all for the fellows in the Forces getting more—that even if the Opposition were able to make any saving on the £780 million, it would be eaten up by the increases which they have asked us on this side to make and which they would themselves, naturally, give to members of the Armed Forces.

The second largest item in the Budget is £490 million for the National Debt, an increase of nearly £300 million on the pre-war figure. During this Debate hon. Members opposite have argued that the interest rate should go up, but if it were to do so, then £490 million would not be enough to meet the charges on the National Debt; taxation would have to be increased.

The next item at which we can look is £242 million for education, all of which is to be incurred in following out the provisions of the Butler Act. Hon. Members opposite are committed to that Act. They surely do not believe there is any extravagance there. During the election one after another of them were saying that men and women in the teaching profession were entitled to more favourable consideration and that as soon as possible they would put into operation the principle of equal pay for equal work. There cannot be any saving on that item. The next item is housing—£60 million. Hon. Members opposite say that we have not built houses fast enough and that if they were in power, houses would spring up like mushrooms, but in that case £60 millions would not have been enough. The next item is police, £28 million. Hon. Members opposite agree that we have not enough policemen, but if we are to have more and if their pay were to be maintained, that figure would have to go up.

It would be nice to know just where the cut in Government expenditure, of which we hear so much day in and day out from the Opposition, would be made. I recognise that the Leader of the Opposition this afternoon tended to give the game away when he said that they did not know what they would find if they got back to power. In other words, they are already making excuses that if, unfortunately for this nation, the Tory Party got back to power, they would not be able to make the economies which they talk about while they are in opposition.

The fact has to be faced that if we look at every single item that goes to make up the Budget, and at the document "This is the Road," whether it be in regard to the Forces, housing, the welfare State or teachers—if all those promises were to be carried out, the £4,000 million budgeted for this year would certainly not be enough. Hon. Members opposite have to realise that the welfare State has come to stay and that the people of this country intend to enjoy its benefits. The right hon. Member for Woodford spoke of purging the Health Service of waste and extravagance in its usage. Not one man, woman or child in this country has got a pennyworth of treatment out of the Service unless a doctor, dentist, or optician has said they required it. I ask hon. Members opposite whether they are accusing their friends, the doctors, dentists and opticians of waste and extravagance.

No matter at what item we look in this great total, it would be impossible, if the party opposite intended to carry out their election promises, to cut down this total. I am very glad, however heavy the burden of taxation may be, if that is the price we have to pay for full employment, and I am prepared to back the Chancellor every time. There can be no question that if mass unemployment were to return to this country and millions of people had to experience again what they experienced in the inter-war years, the country would find itself faced with the same Communist menace as Italy, France and other European countries.

It is precisely because as a Government we have tried to meet the social needs of the people, that Communism is the innocuous force that it is in this country. If the policies of economy such as we experienced in 1921 and 1931 were to be put into operation by a Tory Government now, within three to six months we would have a Communist Party in this country quite as strong as those in France and in Italy. It is this Government which has stood between Communism and the people of this country. It is the policy of this Government of trying to make life decent for the overwhelming mass of the people that has made the Communist Party innocuous. Only on that basis can we remain free from Communism.

If there is one thing in the Economic Survey about which I am disappointed it is the fact that this year we expect to see a 40,000 increase in the number of unemployed. To me, that represents 40,000 men and women going through much the same experiences as that which millions of workers went through in the inter-war years. I beg of the Chancellor, because in my division, unemployment, which is still only about 10 per cent. of what it was under Tory rule—

Sir H. Williams

Labour rule.

Squadron-Leader Burden (Gillingham)

Is not a fact that in 1931 the electors of Jarrow saw so much of the unemployment which resulted from a Socialist Government that they returned a Conservative Member?

Mr. Fernyhough

It is true that in 1931 the people of Jarrow made a political blunder. It is certainly true also that they discovered their mistake and they demonstrated it in the recent election by returning me with a majority of over 6,000 more than any other Member ever had there. They had had the benefits of Labour majority Government rule. In 1931, it was a minority Government and we could only do what the Tories and Liberals together would permit us to do. In the 1945-50 Government we had the necessary power and the people of Jarrow appreciate more than other people what that Government did to bring back life and happiness to that part of the country.

I ask the Chancellor whether it is not possible to take some measures to avoid this estimated increase of unemployment. Because I have seen so much of the misery, distress, poverty and anxiety which unemployment causes, I can never subscribe to any policy which will inflict that social evil upon any individual. Therefore, while, in the main, I think that the Economic Survey is something of which we can be proud, and that having due regard to all the circumstances the Chancellor need make no apology for his Budget, which is essential if full employment is to be maintained, I hope that it will be possible to see that none of that 40,000 increase takes place in those areas which have had so much unemployment in the past, and which still have a larger measure of unemployment than the low average percentage for the country.

7.11 p.m.

Sir Herbert Williams (Croydon, East)

I have listened to a good deal of today's Debate and I am more and more convinced that it is a fundamental mistake to mix up the Debate on the Economic Survey and that on the Budget. To do so means that most of the speeches are not related to one another and it is not a Debate in the sense of being an examination of the Chancellor's proposals, which should be its purpose. I do not know who is to blame for this, but I regret it as an undesirable innovation. The greater the concentration of debate the better, yet we have had a speech on the dock strike by one hon. Member, a speech by another hon. Member on Jarrow—largely inaccurate. Hon. Members opposite have talked so much about the "20 years of Tory misrule" that at last they have come to believe it themselves. I was in politics during most of that period, and I say that most of what hon. Members have said is not true. [An HON. MEMBER: "What is not true?"] About Jarrow. The revival in Jarrow took place before 1945 largely as a result of the efforts made by Sir John Jarvis. I know about it and I refreshed by memory during the election because there was a poster about Jarrow in my constituency. [Laughter.]

If hon. Members, instead of laughing not very intelligently, would like to study a little constitutional history, they can go out of the Chamber, through the Central Lobby, and into St. Stephen's Hall and there, on the immediate left they will find an interesting picture. Cardinal Wolsey had gone to the House of Commons to ask for more money, and the picture shows the then Speaker, supported by the House, saying "No, we must discuss our grievances before we grant Supply." That led to the present form of our financial discussions, a very good form for a long time. We never discussed expenditure either in the House or in Committee; we discussed grievances.

There are now no opportunities to discuss expenditure. There used to be such an opportunity on the Supplementary Estimates, but I understand that some change has been made in procedure, so there was no such Debate this year on the Supplementary Estimates. The Debate was largely concentrated on one issue. What used to happen did not happen this year. I regret that. We should control expenditure because expenditure makes the Budget. We have already decided expenditure for the current year by agreeing to the Consolidated Fund Bill.

One other advantage of not having this joint Debate on the Economic Survey and on the Budget would be that it would deprive the Chancellor of an opportunity of boring us with the first hour of his speech, as he did last week. I was bored stiff, and I noticed that a large proportion of his own supporters went to sleep. There is no harm in my saying that there is one thing upon which I should like to congratulate the Chancellor. That is that he did not use the word "disinflation." I suppose that was because the Foreign Secretary, whose illness we all regret, was away. The Foreign Secretary has been terrified of that word ever since he sat on the MacMillan Committee and thought he was an authority on foreign exchange and banking. He has led many of his colleagues "up the garden" on the subject ever since. But that is a little remote from what I wish to talk about.

I have noticed a marked change on the Government Front Bench. It seems to be occupied today by the rentier class. The old producing class seem to have been gradually edged backwards. These rentiers do not quite understand the problems of the producing class. I took the trouble last night to read the biography of the Chancellor of the Exchequer. It was rather potted, but I read it because I had received letters from a number of my constituents, whom I take to be quite humble folk, expressing profound dissatisfaction about the decision to introduce retrospective legislation affecting two gentlemen whom I do not know and have not met. My constituents wrote to me because they do not like the idea of retrospective taxation. I do not like it either. There are great dangers involved in it, and we should not be led astray because it involves in this case two wealthy men.

Last night I was reading the Chancellor's autobiography—I am sorry the Chancellor is leaving the Chamber—I shall complete his biography in a moment. I observe that in his biography, the Chancellor claims to be the editor of "Cripps on Compensation." A gentleman in my constituency was the subject of great publicity on Sunday morning because he had obtained £42,000 for compensation under a Socialist Act of Parliament, the one which nationalised the gas industry. Another gentleman, whom I have met, obtained £59,000 tax-free compensation under the Electricity Act, another Act passed by the Government of the party opposite. The mistake which Sir John Black and Mr. Lord made was that they did not read "Cripps on Compensation." The other two gentlemen had done so. I find very strange the great indignation about two men receiving compensation for promising to go on working, while the other two to whom I have referred, have received compensation for promising to stop working. I hope we shall hear a little more about this.

Last Friday, the hon. Member for Sowerby (Mr. Houghton), who had probably been misled by some of the pamphlets from Transport House about what happened during the "twenty years of Tory misrule" said: Despite the troubles which confront us at the moment in the London Docks, the Labour Government have a record of maintaining industrial peace which is in striking contrast to that of Tory Governments between the two wars."—[OFFICIAL REPORT, 21st April, 1950; Vol. 474, c. 482.] Let us have a look at what happened. The strikes in question finished with the General Strike of 1926. After that, industrial disputes were comparatively small, except in 1930 and 1931. I examined all the figures last night. I cast my gaze over the whole period, not over the limited period which the hon. Member mentioned. The "triple alliance" was formed in 1919. That was a combination of trade unions of the miners, railwaymen and transport workers for the distinct purpose of achieving political ends by industrial methods. [An HON. MEMBER: "Nonsense."] It is no use saying "nonsense"; there are masses of quotations in support of that statement. A railway strike took place in September, 1919. There were preliminary discussions with the transport men and the coal-miners, who decided on that occasion not to support the railwaymen. That strike was defeated by the attitude of the general public, and virtually collapsed after about 10 days.

The next strike came in the autumn of 1920, when there was a general coal strike, which lasted about 10 days and again collapsed. We get to 1921—

Mr. Geoffrey Cooper (Middlesbrough, West)

On a point of Order. Is this strictly relevant to the Debate?

The Chairman (Major Milner)

If the hon. Member will leave these matters to the Chair it will greatly facilitate debate.

Sir H. Williams

I had no intention of speaking about this matter but for the speech of the hon. Member for Sowerby on Friday and the speech of the hon. Member for Bristol, Central (Mr. Awbery) today. I have made my protest about the width of this Debate. Having done so, I am entitled to the same rights as any other hon. Member. [HON. MEMBERS: "Oh."] Certainly. Why should I not? I came here with a larger majority than most hon. Members.

Then we had the coal strike of 1921. Still a Liberal Prime Minister. He completely dominated that Government. Then, on 15th April, we had the great tragedy—the day on which the railway men and transport men would not join in. For years that was known as "Black Friday" among the comrades. I remember all this very well—[HON. MEMBERS: "So do we."] Yes, but hon. Members opposite try to forget it, and try to induce the nation to forget it. In 1926 we had the great revolutionary movement, the General Strike. Make no doubt about that; it was admitted afterwards by many of those who spoke. That lasted for 10 days. Then they went cringing to 10, Downing Street to surrender. They were told they would not be allowed inside the front door unless they had come to surrender—[HON. MEMBERS: "Oh."] Yes, I was told that by the man who accepted the surrender. He is now dead—Stanley Baldwin. They were completely whacked, and serve them right. The dupes, the poor coalminers, went on for another eight months. There was industrial peace after that. But those responsible for promoting that industrial unrest have no right to charge other people with being responsible.

Now we move to a more interesting and later stage. I wish to talk about the Purchase Tax. As hon. Members know, on Friday my right hon. Friend the Member for Bristol, West (Mr. Stanley) raised the question of the scope of Debate on to the Finance Bill. The Chancellor said something. I was not present, but I read it and it did not seem quite clear what it meant. "We can talk about things but we cannot do anything"—I think that would be an appropriate description of what he said. There is a real problem involved. If we leave out Import Duties and the purchase taxes, the number of our taxes is comparatively small: therefore it is easy for us to discuss all of them. When we come to the Purchase Tax and the Import Duties Act we are dealing with thousands of articles: quite obviously if every one of those could be the subject of an Amendment for a reduction, one hon. Member alone could reduce the proceedings of the Debate to a complete farce. Therefore, I am not blaming the Chancellor because he has tabled his Resolution in a form which will enable some discussion to take place but which makes it impossible to propose detailed reductions.

I think the solution is the one which we adopted in 1932 in connection with the Import Duties Act. We set up an Import Duties Advisory Committee, an impartial body to which people could take their grievances. Both sides of a case would be heard and if satisfied, the committee would present a report which went through the Board of Trade if it was an industrial matter; or the Minister of Agriculture or the Secretary of State for Scotland if it were something affecting agriculture; and then to the Treasury. They would make a recommendation and I think that in general the Government accepted every recommendation. In all cases an Order was tabled so that the matter could come under the control of the House. Many of them went through without a Debate. I consider that the same procedure should be adopted in respect of Purchase Tax. If a man has a legitimate grievance there should be some tribunal before whom he can argue his case. If the tribunal is satisfied he has made out a good case, they could make a recommendation to the Chancellor of the Exchequer and an Order could be tabled and the case could go through.

I hold in my hand a letter of 11th April addressed to the President of the Association of Publishers' and Wholesalers' of Picture and Local View Cards. In it are enclosed two picture postcards which I will present to the representative of the Chancellor—the Minister of State for Economic something or other. That is his title, I think. We have new Ministries so often that it is difficult to keep count of them. One of the postcards represents the view of Knaresborough in Yorkshire, and the other represents Torquay. In general they are identical. But the Purchase Tax on the Knaresborough one is 100 per sent, and the Purchase Tax on the Torquay one is 33⅓ per cent.; the reason being that on the Torquay card appear the words, "Greetings from Torquay." No greetings from Knaresborough —100 per cent. At the end of my speech I will present these two cards, and a letter from the Customs and Excise, so that the right hon. Gentleman can go into it. The thing is childish. It is just lunacy, and I think that lunacy ought to be brought to an end.

On Friday we had a speech from the hon. Member for Nottingham, South (Mr. Norman Smith), who I believe spoke with great frequency in the last Parliament on banking, currency and exchange. He has evidently read a book written many years ago by Major Douglas—" Credit, Power and Social Democracy" I think it was called. It had a great vogue among the half-baked intellectuals of the Left Wing for a long time; until Transport House looked into it and decided it was a bad idea. Then the left-overs were bought up by Sir Oswald Mosley for the benefit of another lot of half-wits. Nevertheless, it had a lot of popularity. Because of course, it is, so far as there is a policy of full employment—I have heard of the aspiration but I have yet to hear of the policy—but so far as there is a policy, I think it is the policy of inflation; which is social credit; which is the faith of the hon. Member for Nottingham, South.

They all think they are original, but there was a Scotsman who went to France about 1700 and persuaded the King of France that the one way to prosperity was to print pieces of paper—assignats he called them—based on the security of the land of France. What he meant nobody else knew. But the King did very well out of it, and Mr. Law did very well out of it, for a time. He ruined the rentier class; and incidentally it was the rentier class, and not the working class, who promoted the French Revolution. So I think we had better be careful about the hon. Member for Nottingham, South. I do not want to see the gallows re-erected in Whitehall.

Talking of economies, it makes me tired when hon. Members opposite ask, "On what would you economise?" If they want an answer they should get this year's Financial Statement and then go to the Library and examine the Statement presented by my right hon. and gallant Friend the Member for Gainsborough (Captain Crookshank) in 1939. As hon. Members know the document analyses our expenditure under the principal headings. They should look at those headings and compare them and say to themselves, "We know that the cost of living is about double." Nobody knows exactly what it is, because it largely depends on personal habits. But in general it is about double. So they should multiply all the figures of 1939 by two, and compare them with the present estimates and say to themselves, "Are we getting good value out of all this?"

The estimates are solid with cases where economies could be made. I realise as my right hon. Friend the Leader of the Opposition says, that it is not until we have a proper opportunity of looking into it, that we can make precise proposals. When Mr. Philip Snowden and his Socialist Government were convinced that they were running on the rocks in February, 1931, they took the precaution of appointing a committee of three or four eminent persons, led by a gentleman who afterwards became Lord May. It ultimately destroyed the Government, and that is why the present Government are probably not keen to have an inquiry.

There is a fantastic waste in the National Health Service. I am not afraid to say so and I have said it up and down my constituency. There is an awful waste in hospital administration. Hospital house management committees are not permitted to see the accounts. Doctors are cluttered up by having to interview people not suffering from anything very much, and if anybody really ill goes to a doctor they cannot be overhauled. They are sent along to a hospital. The queues outside hospitals are five times as long, not because there are five times as many people needing hospital treatment, but because people cannot obtain domiciliary medical attention. A vast number of people in hospitals are people suitable for domiciliary treatment, if they could only have proper medical advice. At present they cannot get it.

The number of people who have died in the first 18 months of the National Health Service is 60,000 more than the number for the corresponding period before the Service was introduced. This is the national death service. I will not hesitate to criticise it when I see waste in every single direction. [HON. MEMBERS: "Look behind you."] I do not know who is behind me. The hon. Member for Luton (Dr. Hill) is more visible than I should be if I were behind him.

I have been stealing rather a lot of time. I am a strong opponent of long speeches. I like to speak frequently and not for too long. I could go on for another hour comfortably, but before I sit down I want to mention the Defence Service. The great waste in this direction is monstrous. The maladministration of the National Service Act is appalling. I have for a long time been a believer in some system of compulsory training. I put that in my first election address as long ago as 1918. I have been a convinced supporter of a suitable system of National Service for a long time, but the present system is a waste. It provides us with hardly any divisions which could take part at any given moment in the defence of the country.

Mr. Emrys Hughes (South Ayrshire)

The Tory conference supported it.

Sir H. Williams

Never judge me by what somebody else has said. They approved that there should be a system of National Service. They did not approve the muddle that the hon. Gentlemen's military friends have made of it. My son volunteered at the age of 17½. He was transferred temporarily to the Territorial Reserve and at 18 he went to his unit. He was trained, applied for a commission, was examined and approved, and sent to an O.C.T.U. He enlisted in the Rifle Brigade and found himself in the Royal Artillery at Aldershot. I agree with the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) that that is a very nice place. This was two years ago.

In due course he got his commission and I went to his passing-out parade. Then he was posted to Dover to a light anti-aircraft unit. He was not very far from home, and after a month he came home. I asked, "How are you getting on, Robin?" He replied, "It is absolutely marvellous. I have an unearned income." I asked him what he meant, and he answered, "I am being paid and I am doing no work." [HON. MEMBERS: "Like his father."] That seems to be somewhat irrelevant, but it does not matter. Six weeks later my son came home again, and I asked him how he was getting along. He said, "It is better than ever. There are 12 of us, with six N.C.O.S and no men." I have discussed this matter with many young men who have done their period of National Service. This waste—

The Chairman

I hope that the hon. Gentleman will not go into more detail. He has gone into a lot of detail already.

Sir H. Williams

I agree that we ought to keep to the Debate, but the decision has been made that we should have a Debate nearly as wide as that on the King's Speech. I was giving one isolated example of waste. I was about to say when, quite properly, I was pulled up, that what is true of my own son is true of the sons of thousands of people. The Government have made an awful mess of this business, and there is great waste.

The present system of taxation is such that no professional man or executive in any business can save up enough money to enable him to retire. That is the position. It is a life sentence. There are masses of people of this type in my constituency. They have to work until they die, because it has become impossible for anybody to save out of income to any appreciable extent. That is a major disaster. I do not believe in the humbug of what is called "fair shares," and none of the hon. and right hon. Gentlemen opposite believes in it. They do not practise it. If they do, why should Parliamentary Secretaries be paid less than Ministers? Why should Ministers be paid more than M.P.s?

I believe in inequality. Everybody I have ever met who is worth anything in this world believes in inequality. They want to lift themselves up and not to be dragged down to a dull level which is apparently their fate in the eyes of hon. Gentlemen opposite when they come out with the words, "Fair shares," which mean nothing. Hon. Gentlemen opposite are completely insincere. I believe in inequality: so does everybody. People want to better themselves. There is no equality in Russia. There is a greater range of inequality in Russia than there is here. The Chancellor is using this device to bring us all down to a dead level.

The time will come when men of ability will be forced to say, "This country is no longer any good to us. It denies opportunity to men of ability." The great evil of the present level of taxation is that it is destroying the initiative of the young men of ability and completely exhausting the resources of limited companies. In a moderate period of time there will inevitably be a major economic crash, because capital for the conduct of business will no longer be available. I have spoken for six minutes longer than I intended, but I have wanted to get a lot of this off my chest for a long time.

7.37 p.m.

Mr. Pargiter (Southall)

I do not propose to follow the hon. Member for Croydon, East (Sir H. Williams) in his argument, though the opportunities he presented are most tempting. I will deny myself the pleasure of dealing with many of the points he raised, and I will come to more serious matters. When I listened to the Chancellor's masterly survey and when I read the Economic Survey for 1950, I anticipated more and more that at the end I should find the words "There is no room for any changes in taxation."

It is probably true that any changes in taxation are open to attack; that concessions will be regarded as niggardly and almost useless; and that any new imposition of taxation is likely to be alleged to be disastrous to the people affected by it. They say that they will be unable to carry on business. This has been true of Budgets for a very long time—probably for all time. I do not think that we should be unduly perturbed, therefore, when we hear of the disaster which will follow from the imposition of this or that tax. It is surprising how well we seem to weather the storm. I suppose that when a Chancellor can introduce a Budget which meets with universal approval, it will be when we no longer have a free democracy, in which to discuss it.

There is one proposal the need for which I could not quite follow. It is the suggestion that the Navy should take its share of economy and that the duty-free tobacco allowance should be reduced. I do not know how much this will yield in the form of economy. It may be equitable, but I suggest that when pay was reviewed some 2½ years ago, part of the consideration for Navy pay was that the men were in receipt of certain concessions affecting dutiable goods. To that extent, it seems to me that this is the equivalent of a reduction in pay for the Navy. It may be justified—I am not arguing the merits of the particular case—but it seems to me that, in view of the difficulties which I understand are being experienced by the Royal Navy and the other Services in getting serving men to carry on for a further period, that objective will not be assisted very much by this decision to reduce this concession to the Navy. That will probably be realised in the long run. but I suggest to the Chancellor that the amount saved will not be appreciable and that it might very well have been left alone.

In regard to wages, profits and prices, it is extraordinarily difficult in the case of the taxation of profits to discover how far it is equitable or to see how far, in all instances, the amount which is placed to reserve is the proper amount for the maintenance of a particular business. It may very well be true in many cases that there are considerable liquid reserves of capital, which may or may not be necessary at some time in the future but which probably could not be proved to be really necessary today. When the effect of this process is reflected in the price of the article produced, and particularly of goods that are going abroad, for which we want the best price we can get, it is to be expected that countries with which we have bilateral trade agreements which are receiving our higher-priced goods will send us higher-priced goods by way of repayment under the agreement. To the extent to which unnecessary profits tend to maintain or increase prices, to that extent the prices charged to us are maintained at a high level and the cost of living is thereby correspondingly increased, or at least not reduced as it might have been.

In dealing with the lower income groups, who will receive no benefit from the Chancellor's tax concessions, it seems to me that there is little in it from their point of view, and that at some stage or other the very low income earner will have to receive more consideration, having regard to the general tendency for prices to increase. It is probably true that this is a matter for negotiation between the trade unions and the employers' organisations, but the latter appear to take great delight in saying "It is not us; we would give you the moon, but the Government will not let us do it." There always were times when these employers had ample opportunity to give their men the moon; they did not hide behind Conservative Governments or any other Government in those days, but merely said they could not afford to do it. Within the range of these negotiations, so far as the employers are concerned, there are plenty of opportunities for them to make some concession towards the people earning the lower incomes without unduly upsetting the stability of the nation or adding to the inflationary pressure.

With regard to the new impositions of taxation, I was brought up in a school in which it was generally established that all taxes should be direct taxes and that no taxation should indirect. It would be very difficult to apply that doctrine in toto today, but what has happened on this occasion has been that some relief has been given from direct taxation at the cost of an increase in indirect taxation. So far as petrol is concerned, the private motorist will not be unduly harmed by the increased duty, but, if the increased duty on fuel results in increased bus fares and other corollaries, it seems to me that it is time for some thinking to be done on that question.

This involves a very important part of the cost of living for a very large number of workers. We have reached the stage where, in the London area, workers now travel very considerable distances, mainly owing to housing considerations, and any increase in fares will be a direct addition to the cost of living for them and will make it very difficult for them to accept the policy of wage stabilisation. I hope that the Chancellor may possibly be persuaded to think again on this point. The Government have found a fairly easy way of separating private petrol from commercial petrol, and it seems to me that the Chancellor might quite easily devise a system which would leave the private motorist—which term includes many of us here—to pay the increased taxation with a smile, but which would not add any burden at all to the cost of transport. I commend the idea to the Financial Secretary; I do not know whether he will be enamoured of it, but I hope it will receive consideration.

Concerning the Purchase Tax, it may be that it is justifiable to reduce it on higher-priced cars, but, in one section of the commercial vehicle industry, about which I know something—the heavy vehicle section—it will have little effect except to add to the cost of vehicles generally. It is most unlikely that it will stimulate exports. I do not propose to speak about the light vehicles, because the same arguments do not apply to them as to the heavy vehicles, but this is a matter which should be looked at again.

One of the most pleasing things in the Budget to all of us is the fact that the reduction in the capital investment programme for housing is to be restored. I should like to have from the Chancellor an asurance that for the three-year period this is a minimum, and that, should the investment position allow it, we shall not necessarily be bound to the figure of 200,000, but may be allowed to increase it from year to year according to the conditions which obtain from time to time.

Generally, I think the concessions which the Chancellor has given are as much as could be expected. It is obvious that, if anybody wants a reduction of taxation in any one respect, he must be prepared for an increase in something else, because, in spite of everything that has been said about the heavy rate of taxation and heavy Government expenditure, when it comes to the point practically no instances are presented to us in which expenditure could be vastly reduced. It is only a question of where to find a few pounds or shillings, and that happens not only in Government expenditure but in all business organisations. When it comes to vast reductions in expenditure, it is fairly obvious that there is no scope for such vast reductions, unless ways and means can be devised of providing the same services by entirely new methods—and I have not heard from hon. Members opposite any suggestions for a new system which can be proved to work at a lower cost than the system by which our services are now run.

Whatever our criticisms may be, it would have been very difficult for any Chancellor to have made material alterations in the general level of taxation, and I think that is generally accepted. The small concessions which he has given are accepted, with thanks, and the new impositions will be accepted, without thanks, but, nevertheless, it will be found that industry, with its great resilience, will still absorb the small additional burden, as it always has done in the past.

7.50 p.m.

Mr. Arbuthnot (Dover)

It would be against the natural laws, I feel, for a Scot working in the City of London not to make his maiden speech on the Budget, and therefore I rise to ask for the indulgence of the Committee. Both in his speech in this House and particularly on the wireless, the Chancellor stressed the very great importance of maintaining full employment. In that objective all hon. Members and the whole country will be behind him. Hon. Members will recollect that my right hon. Friend the Leader of the Opposition, when he was Prime Minister, set up a committee on which hon. Members of all parties served with the express objective of making plans for maintaining full employment after the war. The necessity for full employment is generally agreed.

On Wednesday, I think, it was, I listened to conflicting views on the efficacy of the plans of Lord Keynes for maintaining full employment. Some people thought that Lord Keynes's ideas would be successful, while others had some doubts on the subject. I, personally, am a strong believer in Lord Keynes's theories, but I feel that they apply essentially to times when unemployment is due to a lack of purchasing power. To-day those conditions do not persist, and the Chancellor must have had the support of people of all opinions throughout the country when he drew special attention to the fact that the greatest danger of unemployment to-day lay in the possibility of our being unable to buy the necessary raw materials with which to keep the wheels of industry turning. The right hon. and learned Gentleman's actual words were: 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."—[OFFICIAL REPORT, 18th April, 1950; Vol. 474, c. 49.] When the pound was devalued in September last, that by itself, regardless of the necessity for it, made it more difficult for us to import raw materials from the dollar area, particularly, it seems to me, owing to the arbitrary and artificial rate at which the exchange was fixed. There were full reasons why we went to a figure of 2.80 dollars to the pound, but the question I now wish to ask is: have conditions not changed sufficiently to allow the Chancellor to consider whether a greater flexibility in the rate of exchange would not be in the national interest at the present time? I am not suggesting for one moment that we should free the pound completely. It is obvious that we cannot free the exchange entirely because we have to guard against wild movements of what one might call "funk" capital, but I feel that if the freedom of the pound were confined to transactions representing movements of goods and services at the present time, it would allow the pound to adjust itself to that extent. In that way, any welcome improvement in our national finances would be reflected in a greater ability to buy raw materials from the dollar area and would remove that great danger to full employment—inability to buy those raw materials.

I wish to make a special plea for two particular sections of the community who, I feel, have perhaps been neglected in the Budget. First of all, the married man with a low income. At the present moment, a married man with a wife and two children pays no Income Tax if he is earning less than seven guineas a week. Therefore, the reductions which the Chancellor has been able to make and which we all welcome do not benefit him in the least. Indeed, under this Budget he is worse off because the increases in the Petrol Duty and the 33⅓ per cent. Purchase Tax on commercial vehicles is going to raise the cost of living for him. That being so, I hope the Chancellor will consider shaking out his Budget again and trying to find some compensation that can be given to people in that unfortunate position.

The second section of the community for whom I wish to make a special plea are those whom I consider might be paid their Post-war Credits. I endorse what was said by my hon. Friend the Member for Leeds, North-West (Mr. Kaberry) with regard to those people who are suffering from incurable diseases, but I should like to add another batch of people who, I feel, ought to be paid their Post-war Credits. They are those coming into estates who are often widows distracted with grief, certainly in appalling financial straits, and often with children. I believe that if the financial path we are treading is so narrow that we cannot step aside to repay Post-war Credits in such circumstances without courting certain death, we had far rather die in the attempt than fail to make the attempt at all.

7.57 p.m.

Mr. James Hudson (Ealing, North)

It is my pleasure and privilege to offer on behalf of the Committee our congratulations to the hon. Member for Dover (Mr. Arbuthnot) on an excellently delivered speech in which he showed considerable knowledge of Lord Keynes's theories and the economic information associated with them. He went on to deal in a very human way with the problems concerning the pressure of taxation on the lives of ordinary people which, I am sure, won for him from all of us, as it certainly did from me, a continuing interest. I feel quite sure that when he is free from the advantage which a maiden speech gives to an hon. Member of not being interrupted and not being subject to any strong attack in consequence of his arguments, he will be thoroughly well qualified to deal with all the situations that may arise. I am sure we all look forward to hearing him on those occasions.

The Committee will expect me, I know, to dwell on one part of the Budget which has not yet received very much attention. First of all, however, I want to say a word or two, as did my hon. Friend the Member for Southall (Mr. Pargiter), about some of these taxes. They are justifiable enough when considered in relation to more fortunate people, but weigh very heavily indeed upon others. I agree with my hon. Friend, for example, about the Petrol Duty. I have received today from one of my constituents, a man who travels a fairly considerable distance each day on his motor cycle, a very strong complaint about the increase in the price of petrol. He says that he has worked it out very carefully and that the increase will mean an additional expense of 5s. a week to him. He mentioned his wage and it is low down the list of those who receive wages. I am sure that is the sort of burden we shall not take very much pleasure in imposing.

On the other hand, I agree that there are many people who ought to pay the increased Petrol Tax. I have not very much patience with the large body of people who, if they can get the currency in order to travel with their cars in Switzerland and Italy, will pay with the utmost cheerfulness 5s. a gallon in Switzerland and 6s. in Italy. If they can manage to pay those prices on the Continent, there is no great imposition on that class of people in having to pay 3s. here.

Now I come to the issue that interests me and to which a good many sly references have been made, though I do not think it has had much serious discussion. This is the strengthening of the beer by this austere Chancellor of the Exchequer. The right hon. Member for Saffron Walden (Mr. R. A. Butler) said this Chancellor would go down in history as having revalued the beer and devalued the pound. I do not know much about history except that it is already pretty well packed with Chancellors who have done that sort of thing. One of them, for example, was Mr. Neville Chamberlain, who strengthened the beer even more than the present Chancellor has done in this Budget, and considerably reduced the tax. The chairman of the Brewers' Society at that time, Sir Edgar Saunders, said that in gratitude for what the Chancellor had then done, the brewers, if they could, intended to spread the habit of beer drinking amongst millions of young people who, he said, until that time had never known the taste of beer.

I am afraid the brewers won some success with the assistance that the Chancellor was able to give them. I wonder whether there may not be a success too on this occasion which perhaps the Chancellor would not have desired. I regret that he should have found it necessary to take this step, presumably to provide a solace for beer drinkers who wanted a considerable reduction in price and could not get it. I praise the Chancellor at any rate for resisting that part of their demands. But the strengthening of the beer was offered as a solace to them; or was it to the drinkers that it was offered?

I suggest, from a good deal of evidence that has come my way, that the Chancellor has been thinking probably about other and quite different people. It may be he has been thinking about the farmers who, I suggest, have been producing barley unpatriotically when the main need of the country was to produce wheat to a greater and greater extent so that we would not need to pay dollars for the wheat that must otherwise be imported. One must note that the production of barley in this country is nearly as great as the production of wheat. A year or two ago it was rather more. The figures I have, show a production now a little below the production of wheat.

A great mistake has been made in making it possible for a new demand for barley to arise inevitably following the strengthening of beer. I do not know what the Chancellor can be thinking of to offer this encouragement when the necessity of keeping a proper balance between the production of wheat and that of barley should have been borne in mind However, the beer has been strengthened and if it does lead to a further increase in production, it will be bad from the point of view of the Government.

I would remind the House that the Lord President of the Council, speaking of the amount of money that is spent today on intoxicants, referred as recently as last November in a speech at Preston to the enormous sums the public now spend on drink, tobacco, cinemas, pools, gambling and, as he put it "other private fun." He went on to say: Our very heavy expenditure in these ways adds to the problems of providing for our health and housing and education and of paying our way in the world and reducing taxation. These are all problems that, presumably, we are dealing with in this Budget. He went on to say: We must ask ourselves the question whether the present rate of spending on what must be admitted to be comparatively inessentials is really consistent with all the more important and more worthwhile things which the nation want and must have. There, in my judgment, was a courageous statement of the problem that faces the country and faces the Chancellor of the Exchequer. I regret the Chancellor has not found it possible to assist the nation in the swing-over which is inevitable if the country is really facing up to these problems.

I am sorry that the Chancellor has been unable to give the assistance I should have liked to see him give. He has paid no regard to the views of the Lord President of the Council and he has paid little regard to his own statement, or, at any rate, to the statement in the Economic Survey for 1950 for which he must take responsibility. In that Survey we find these words: Last year the general improvement in supplies of goods provided people with greater freedom of choice in deciding how to spend their money. That was a good thing, and I agree that the financial policy the Chancellor has pursued has helped to produce that good thing. The statement in the Survey went on: One example was a tendency to economise in spending on drink, tobacco and entertainments in order to buy more food, clothes, things for the home…. and so on. That, in my judgment and apparently in the judgment of the Economic Survey was an excellent process to have encouraged. I submit to the Chancellor that by strengthening the beer he is doing directly the opposite of that.

Naturally, some people are extremely annoyed about the statement made in the Economic Survey. I looked up the other day an article in the "Morning Advertiser," the official organ of the liquor trade. On 4th April that paper said the tendency to divert expenditure from inessentials to essentials had a most deleterious effect upon the liquor trade. The paper says, for example, that the Treasury's statement gives the lie to the Trade's contention that people are spending less on alcoholic drinks because of the high rate of taxation upon those commodities. I think it is a good thing that there has been some reduction in expenditure on drink recently as a result of this transfer of wealth into more favourable channels. But they go to say that the statement gives the Food Minister a ready-made reason for refusing the brewers more raw materials to enable the production of stronger beer on anything like a big scale. That is precisely what the Chancellor has done. He has been given this excuse for the diversion of necessary raw materials used in the manufacture of beer which he has now decided should be stronger.

The political mistake that he has made is this. I know many Members will say that I have no right to have any knowledge of this subject, but at least I am a careful student of the matter and I collect other people's impressions. I gather that the beer which today people occasionally say has been watered down too much, is fairly well accepted all round as the general drink upon which the community may depend.

Indeed, there seems to have taken place what Lord Woolton once told me it was the intention of his Food Ministry to bring about. It was on an occasion when the churches waited on him to complain of the tendency to waste food in the manufacture of drink. His reply was that the drink produced was so much weaker than formerly that it really could be looked upon as the temperance drink for which the deputation were asking. He did not obtain our agreement entirely, but it is a good thing, and I have this on the authority of drinkers who remember the days of the strong ales and their effect. The new social habit of drinking a lighter beer has had the most beneficial consequences in the general social life of the community. I feel that a definite mistake has been made in going back on that tendency in this Budget.

I am grateful for having had an opportunity of dealing with this well-worn subject. I know that somebody has got to keep on prodding at the community which still spends £700 million a year on drink.

Sir William Darling (Edinburgh, South)

A lot of that is taxation.

Mr. Hudson

Yes, but the people do not bother about the fact that a lot of it is taxation. They are willing to pay as much as the whole of our defence Forces cost us in order to get their drink. This is a situation which should be faced frankly by every Member who wishes to wrestle with the problems of finance and the dangers of ill spending. I agree with the necessity for going slow in spending money on non-essentials in these difficult days, and although mine happens to be one of the few voices that are ever raised on this question of drink, I hope that more heed will be paid to it and that the whole question of the strengthening of beer may even yet be reconsidered before it is irrevocable.

8.15 p.m.

Sir Waldron Smithers (Orpington)

I hope the hon. Member for Ealing, North (Mr. J. Hudson) will forgive me if I do not follow him. I have promised to be very brief and I have a very serious point to put before the Committee. The hon. Lady the Member for Coventry, South (Miss Burton) gave me a wonderful lead in this respect, because she said that before people were given a job, one looked at their past record. I shall be coming to that in a minute, but before I come to my major point I want to make a few remarks in general about the Budget speeches of the Chancellor and of other Members.

I have listened to many of the speeches, and very few of them have gone to the root of our problems today. We have got to consider not what happened in the past but what kind of policy will pull this country through in the two years which we still have before Marshall Aid ends. In my opinion, the Chancellor's speech showed no realisation of the desperate state of the nation which must inevitably come about unless there is a change of policy before Marshall Aid ends. He is a "Chancellor in chains," and I think a good many of the chains are sent from Transport House. The Chancellor, in my opinion, is a fanatic and a theorist, and he is determined to enact his theories and slogans and "damn the consequences." He and his like will say or do anything to stop in power. There is no real difference between the policies of Hitler, Stalin and this Government. What they want is power.

I look upon the Budget as a counsel of despair. The philosophy of Socialism is proving to be disastrous to this country and it is disappearing in a cloud of inflation. The wild promises of the materialistic Utopia made in 1945 have only been made possible, as far as those promises have been carried out, by Marshall Aid. Several times this afternoon Jarrow has been referred to, but, painting with a broad brush, I say quite definitely that if this policy or squandermania and giving material assistance to everybody without proper regard to the administration goes on, the whole country will be a Jarrow in two or three years' time.

I now come to my major point. It is going to be difficult for me to make it because I am unworthy to make it, but it has got to be made all the same. Unless the point I am going to make is realised to the full by the whole Committee and in the country, the Budget proposals will disappear into thin air. There is a saying 2,000 years old: Seek ye first the Kingdom of God and His righteousness and all these [material] things shall be added. That saying is as true today as it was on the day when it was spoken. It can be translated into modern problems thus: Let us seek first integrity, confidence, stability, credit and the prestige of Britain, all of which things cannot be put into a balance sheet of a company and assessed in terms of pounds, shillings and pence, but they are basic to material prosperity. The presence of a Socialist Government for five years has ruined those things of which I have spoken—integrity, confidence, stability and credit. The Socialists have put the cart before the horse and it has not worked.

The whole civilised world is today faced with a tidal wave of materialistic and atheistic Communism. There must be some real world danger impending because President Truman has announced that he will today make a broadcast to America pointing out the dangers of Communism; Mr. Acheson made a very remarkable speech over the week-end on the same subject—a speech which received wide publicity M Bidault is appealing for an Atlantic Unity Pact to counter Communism; and only a week or so ago, in another place, Lord Vansittart made a remarkable speech pointing out how deeply Communism has infiltrated in this country.

To put it quite shortly, the struggle today is, Christianity versus Communism—the principles of Christianity against the materialistic and diabolical principles of Communism. The Government have instituted a purge in the Civil Service so that no one with Communist leanings shall have access to secret and confidential matters, but the cases dealt with are comparatively few and the purge does not extend to Ministers of the Crown. No civil servant with the record of the Chancellor of the Exchequer, the Secretary of State for War and the Minister of Defence would be allowed to continue in office if his record were examined.

The success of these Budget proposals depends upon the maintenance of British credit and British prestige at home and abroad and that all depends upon the character of the people in the Government and the policy they put forward. Nine times in a few months did the Chancellor of the Exchequer say that on no account would he devalue sterling, yet on 18th September last year he suddenly announced it, over the wireless, be it noted, and not on the Floor of this House. On 10th February last year the Chancellor of the Exchequer is reported, in "The Radio Times," to have ended his appeal for conscription with these words: The uniform of the Armed Forces is and should be the hall-mark of good citizenship, marking out those who are prepared not only to accept the advantages of our progress but to give their service and make their contribution to the security and stability of our future. So come in, join up and give your country your help. Only a few years earlier—and I have one quotation made after 1948—he said: God, King and Country, which being translated, means capitalist, property and profits. Again, he said: All sorts of excuses are being given why we should uphold re-armament, including the old-fashioned 'For God, King and Country' patriotism, assisted by all the tomfoolery of Jubilees and Coronations. Again: If we are plunged into war, I devoutly hope that the workers of this country will use it for the purpose of revolution. Again: When the Labour Party come into power … there is no doubt that we shall have to overcome opposition from Buckingham Palace. …

Hon. Members

What is this to do with the Budget?

Sir W. Smithers

The Budget depends upon getting this Government out of office. Here is further evidence of the totalitarian trend of the Chancellor of the Exchequer. He wrote: The Socialist Government's first step will be to call Parliament together at the earliest moment, and place before it an Emergency Powers Bill to be passed through all its stages on the first day. This Bill will be wide enough in its terms to allow all that will be immediately necessary to be done by Ministerial orders. These orders must be incapable of challenge in the courts. … At the present time it is left to the courts to decide whether these [Ministerial] orders are within the powers given by Parliament…. If that is not Hitlerism, I do not know what is. In a free country, such as Britain, it has not been so easy to get full control as it was in other countries, but the Government are doing it as fast as they can. God, in His wisdom, gave us Ten Commandments. This Government have 25,400 commandments, and they do not work because they are man-made.

Even the Prime Minister is tarred with the same brush. He once wrote this—and hon. Members should hear these words: What is required is a regional authority having jurisdiction over a number of existing local government areas…. The regional authority should be a commissioner. … He is not impartial. He is a Socialist … rather like the Russian plan of commissars. There is an old saying which I must repeat: I wonder if leopards can change their spots. I say: Beware of false prophets, which come to you in sheep's clothing, but inwardly they are ravening wolves. Speaking as recently as 28th February, 1948, the Chancellor of the Exchequer is reported to have said: If we fail, as a nation, in tackling and solving our problems by methods of social democracy, then we shall find ourselves driven into totalitarian expedients. I will not weary the House with more of these dreadful quotations, although as far as I can find it, the Secretary of State for War has never actually denied his Communist tendencies, and I shall quote what he wrote in a book called "Why You Should be a Socialist," published by the Left Book Club—98 pages for twopence; I wonder who subsidised that?

The Deputy-Chairman (Colonel Sir Charles MacAndrew)

I think this is going a long way from the Resolution before the Committee.

Sir W. Smithers

What I am trying to show is that we have the wrong men behind our policy and that they cannot inspire the confidence throughout the world upon which our very existence depends. Perhaps I may be allowed to refer to one other point on Communist infiltration, and that is in connection with the B.B.C. I ask hon. Members to read Lord Craigavon's article in "Everybody's" of 15th April.

Mr. Carmichael (Glasgow, Bridgeton)

In what part of the Budget does that come?

Sir W. Smithers

The B.B.C. is subsidised by the Government and I understand that, under their licence, the Postmaster-General has the right to veto any broadcast. I have tried over and over again to call attention to this, but we cannot get a Question asked on the Floor of the House. The answer always is, "It is a recognised organisation." I do not want to go beyond that; I simply want to say this—that the whole of the Budget depends upon getting rid of Communism in this country. I am told by a responsible man at the docks that 98 per cent. of the cause of the strike at the docks today is Communism.

I believe that in his broadcast—which I did not hear myself—the Chancellor referred to a happy land. There can never be a happy land with Socialist philosophy ruling the country. There has been more misery in my division, more family troubles owing to the housing shortage than there ever was before. We cannot get the figures from the Minister of Health of the waiting lists in the country but I know that in my division there are 2,300 families tonight wanting houses. We were allowed, by the gracious permission of the Minister of Health, to build only 400 houses last year. This year the number is reduced to 125. Yet I am told that the builders have the men and the materials in the Orpington division tonight with which to build over 1,000 houses, but they are not allowed to build them. Is that a happy land? There can never be a happy land under Socialism. I remind hon. Members of the old hymn—"There is a happy land, far, far away." A happy land can only be achieved when we get the right hon. Member for Woodford (Mr. Churchill) back, at the head of a Conservative Government.

8.30 p.m.

Dr. King (Southampton, Test)

I understand that the right hon. Gentleman the Member for Bristol, West (Mr. Stanley), who is winding up for the Opposition, is to rise at a certain time, so that I have only a limited period in which to make one or two observations. I was very interested in the remarks of the hon. Member for Orpington (Sir W. Smithers), and I think it is about time that some of them were answered from this side of the Committee. Most of us were born into a much less happy England than that about which the hon. Member for Orpington is complaining. This Budget and those which have preceded it by Socialist Chancellors are a little nearer Christianity than Budgets of previous Governments, which placed most of the major burdens on the shoulders of those least able to bear them.

If the issue, as the hon. Member for Orpington suggests, is between Christianity and Communism, the only way in which that issue can be won for Christianity is by building a civilisation in this country much nearer true Christianity than the one in which we were born. The hon. Member for Orpington has been very free in his quotations from hymn books and from the Scriptures. I want to commend this Budget and the work of this Government on the lines of a very great saying indeed in the New Testament—"Suffer the little children to come unto me." If by our social legislation, if by the expenditure on social services and if by bringing health resources within the capacity of those who are the poorest children of the land we are making it possible today for all children of all classes to live healthier and happier lives, then we are contributing to a battle for the victory of real Christianity in this country.

We on this side of the Committee are wholeheartedly behind the Chancellor in the major lines of his Budget. We rejoice to think that the social services are going on and that we are doing that work of ending the Poor Law system in this country. We rejoice further that we are carrying out a system of building up fair shares for all our people. I want to say one very simple thing about this Budget and about the social services. In the various discussions we have had over this Budget there have been demands from the Opposition for economy, and behind all their case is a demand for economies either in the food subsidies, on the one hand—and in the speech of the right hon. Gentleman the Member for Leeds North (Mr. Peake) on Friday we at last got a definite statement of the policy of our opponents on the food subsidies—or in the social services, on the other.

We on this side of the House do not regard the social services as luxuries. We regard the demands of the people of this country as expressed, not in the 1944 Education Act only but in the campaign of Socialist speakers throughout this century, for equality of opportunity for all English children, as not a luxury which we may condescend to afford grudgingly from time to time. We think of it as a vital right which should be the property of every child born into this land.

Our regret about the Budgets of these days is not that the expenditure on social services is so vast, but that even now, because of the economic circumstances of today, we are compelled to deprive the children still of anything like equality of opportunity. We are securing for them equality of opportunity to build up healthy bodies. We hope that the expenditure on education will serve the same purpose for their minds. Incidentally, this expenditure could be only one-fifth or perhaps one-tenth of what it will be if the Opposition, when they were in power between the two wars, had built schools at a fraction of what it will cost us today. The demand for equality of opportunity is no luxury that we are going to hand out in little instalments year by year. As we get out of the economic crisis we shall resolutely move forward much more quickly than we can today.

I noticed that the hon. Member for Orpington talked about the prestige of Britain. I believe that our prestige is not to be measured in terms of imperial control over other countries but is to be measured in the happiness and the standard of living of all its people. From that standpoint, the prestige of Britain never stood so high as it does today.

While agreeing with the general principles of the Budget, I am worried about two things. One is that I fear in these times of economic crisis, when we talk about the wage freeze, that we are inclined to think that the present basis of reward for services in this community is becoming static and final, something which must prevail for all time. I suggest that we have not reached anything like perfection in the rewards given for work done in this community as long as we regard a doctor as worth eight times a teacher, or two-thirds a dentist; as long as we imagine that millions of English people doing an honest day's work cannot be provided with a minimum wage of £5 a week; as long as we regard 10 per cent. profit as the normal profit which Messrs. Guest, Keen and Nettlefold's may earn in times of great economic crisis and distress; and as long as we still have people living on the community and rendering no profitable service for that community, while drawing far more than they are giving, to the best of their ability by physical or mental labour.

I regret that it was not possible to give relief in this Budget to those honest English citizens who do their ordinary day's work but, because they happen to be in the unfortunate industry of agriculture, on the one hand, or of railways on the other, because they happen to be labourers in certain British industries, cannot be provided with the standard of living which is represented by £5 per week as a minimum wage. I would like, at the risk of losing the incentive of Income Tax relief, of which the Chancellor has spoken, to see that relief distributed in the form of indirect taxation; on beer, although not all of them drink it, or upon tobacco, although not all of them smoke it, or on children, although not all of the lowest paid workers in this country are married. Even in this very difficult Budget in a very difficult year I should have liked to see something given to the lowliest people in the land, the people who by force of circumstances find themselves in an industry which cannot provide them with a decent minimum wage.

I had the delightful, rare privilege for a Member of Parliament of listening-in at the week-end, and I heard a re-echo of the talk given by the right hon. Gentleman the Member for Bristol, West (Mr. Stanley) upon the Budget. I heard him reprove the Chancellor as a wicked beekeeper who kept the sugar, and pleaded for sugar for the bees. I suggest that the system from which we are gradually escaping was one which compelled some very honest bees to live under conditions where they knew that the harder they worked the sooner they would be deprived of the means of working. I hope the day is coming when we shall evolve a Budget and a state of society in which we shall provide sugar for the bees that work and in which we shall gradually have deprived the drones in the community of sugar.

8.42 p.m.

Mr. Oliver Stanley (Bristol, West)

Before I get to the main theme of my speech, I understand—perhaps the right hon. and learned Gentleman will correct me if I am wrong—that today is the Chancellor's birthday. I only hope that he has celebrated it as he himself thinks fit, although his ideas of celebration will, perhaps, not coincide with mine. Certainly we on this side of the House will wish the Chancellor many more birthdays but no more Budget days.

We are coming to the end of a long Debate. It has now lasted for five days. Hon. Members on all sides of the Committee will agree that one of the chief features of the Debate has been the many brilliant maiden speeches which we have heard from both sides. I have been particularly struck as I have listened to them, with the familiarity, the ease, and, it seemed to me sometimes, even the understanding with which so many hon. Members handled the technical jargon of modern economics. It is a matter of great admiration and envy to one like myself who did not have the advantage of being educated at either of the two seminarises which now turn out our ruling class—Winchester or the London School of Economics.

It would be invidious when so many have spoken, to refer to particular cases, but I cannot refrain from one reference to the speech by the hon. Lady the Member for Coventry, South (Miss Burton). I was particularly charmed with one of her phrases in which she accused hon. Members on this side of the Committee of thinking from the top downwards. The corollary which she applies to the Front Bench opposite is, I suppose, that their reasoning processes start in what we might call the "infrastructure" and then attempt to struggle upwards. I am much obliged to the hon. Lady for her explanation because it has now made clear to me many things which in the last five years I have been unable to understand.

Naturally during the course of these five days the ground has been well covered. It is not easy to find new subject matter and I shall, therefore, be daringly original by devoting most of my speech to the actual topics of the Budget. Before I come to that, I want to deal with one question which the Minister of State for Economic Affairs directed to me when asking what was our attitude to the wage and profits standstill. In that part of his speech I thought the right hon. Gentleman was less than gracious to the Opposition, because he knows perfectly well that under difficult circumstances we on this side of the Committee have supported the policy of the Government with regard both to wages and to profits. And he cannot have forgotten the appeal which my right hon. Friend the Member for Warwick and Leamington (Mr. Eden) addressed only at the beginning of this Parliament, on that very subject of a standstill in profits.

We believe that in the present circumstances this wage and profits freeze is an expedient which is indispensable, but we also feel that it is an expedient which is becoming more and more difficult to maintain. We believe that the real answer is to attack the causes which today are making that policy so difficult in execution; to attack that inflationary pressure which, whatever the right hon. Gentleman says, still exists; the inflationary pressure which is forcing up the cost of living and which is continuing. However, whatever loyal support may be given on one side of this House or the other to the wage freeze, will, in fact, end by destroying it.

In turning to the proposals in the Budget, may I start by saying a word with regard to the Resolution which we are now discussing. As the Committee realises, it contains words which impose some limitation on the discussion of the Purchase Tax. Last year all discussion was entirely excluded, and that exclusion was much resented not only by hon. Members upon this side of the Committee. To create a precedent whereby that feature of taxation, which perhaps most excites public interest, is entirely removed year by year from the purview of hon. Members of the Committee, was indeed something at. which to be frightened and resentful.

This year we are grateful to welcome in this Resolution some relaxation from the austerity of last year. On Friday the Chancellor—subject always of course to the Ruling of the Chair when the discussion comes along—threw further light on what he considered would be the result of this Resolution. It would appear that not only would it be possible to discuss the three main classes in which the goods fall and the possible reductions of those three figures of taxation, but that when discussing those classes, it will be possible for hon. Members who have some specific case in mind to put that forward as a reason for the change they advocate. I do not say that this is wholly satisfactory. At any rate it represents a considerable advance and it is one which, for this year, we are prepared to accept.

However, the right hon. Gentleman on Friday did not show himself averse from a suggestion that we might get together to see whether we cannot come to common agreement about the form which our future discussions on this tax shall take. I admit that there is something to be said on both sides. There is a lot to be said for the constitutional right of Members to discuss the particular tax grievances or desires of their constituents. On the other hand, my hon. Friend the Member for Croydon, East (Sir H. Williams) was quite right when he said that this is the sort of tax to which we are not accustomed in the Budget, and that if full use were made of that right, if every one of the thousand items were to be the subject of discussion and amendment, the Budget discussions could be turned into a dreary farce. Somewhere between the two courses must lie the solution on which all could agree, and certainly I think that the matter should be considered in that spirit.

I want now to turn for a moment to the alteration which is made in the Purchase Tax on luxury motor cars. This in itself, of course, is a very small thing, but it raises a principle which may be of increasing importance in the future. This is a concession which is based, not upon humanity, but upon economics. The Chancellor, in making this change, has not been guided by any zeal for social justice. He has not felt the intolerable burden of the would-be purchaser of the Rolls Royce; he has not felt that he must do something to make his life less burdensome. He has just felt that it is bad business to go on with the tax at this height, and I think that he is quite right.

But are we certain that the considerations which have led the Chancellor to make the change in this instance do not, and will not, apply with equal force to other items which are now covered by the Purchase Tax? I do not know whether hon. Members noticed a few days ago a letter in "The Times" about a project concerning a new organisation for selling high-class textiles in the United States of America, which had had to be dropped because, owing to the Purchase Tax, the home market was too limited. It seems to me that we shall have increasingly to consider in the future what might turn into a dilemma.

On the other hand, with rising competition, especially the new competition for which we have to look from Germany and Japan, the future of our exports will lie more and more in the quality goods. Certainly only in the quality goods can we hope to break into the dollar area. At the same time, the Purchase Tax is definitely designed—one can see the social purposes as far as this country is concerned, and in times of difficulty agree with them—to restrict the consumption of or, indeed, sometimes to exclude the expenditure on, luxury goods. That may well become a dilemma, the quality market abroad having to be tied to the utility market at home. I hope that the Chancellor will be very careful to watch these possibilities arising and be ready to do for other industries who can make a case, what he has done with our approval in the case of these motor taxes.

Now I turn to the question of the Purchase Tax on commercial vehicles. It is, of course, a fundamental departure from the whole history and purpose of the Purchase Tax to impose it upon articles of this character. Hitherto the Purchase Tax has been regarded entirely as a tax on articles of consumption; and it has always been the aim of the Government to exclude from its scope the raw materials or the capital equipment of industry. There are, I know, minor cases where things used in industry fall under the tax solely because it is impossible to distinguish them from exactly similar articles which go into ordinary consumption, but that is the principle upon which the Purchase Tax has been built up.

Here for the first time the Chancellor is putting this Purchase Tax fairly and squarely upon an article which is not one of ordinary personal consumption, but which is in fact the capital equipment of not one, but of a great variety of interests. After all, there can be here no question whatsoever of personal luxury or lack of personal restraint. It is not likely that anyone in a fit of anti-social extravagance will give a lorry to his girl friend or even to his wife. The lorries of which the Chancellor complained are only bought by people because in buying them they believe they will be able to transport their own, or someone else's, goods more cheaply and more efficiently.

But, we are told, people are buying too many lorries. It is quite true that people are buying these commercial vehicles in increasing numbers, but that does not necessarily mean that they are buying too many. This is. no national phenomenon, no curious kink to be observed only in this country and not elsewhere. As has been pointed out, the increase in the purchase here is less than the increase in comparable countries abroad. It is less, proportionately, than the increase in the United States of America and less even than in most of the countries of Europe. Of course it is immensely less than the increase in the under-developed countries such as India, Pakistan and South Africa.

There is nothing wrong prima facie in this increase in buying a new developing form of transport. We are told that we are living in times of increasing industrial activity and, indeed, we are. It is not surprising, therefore, that the cheapest form of industrial transport should be in increasing demand. Some play was made with the suggestion that this increasing demand in the home market was having an effect upon our export trade but no evidence whatever has come from any Member of the Front Bench opposite to support that theory. Can they give any instance where there are unfilled orders from abroad which might have been filled if only these extra vehicles had not been going into the home market? On the contrary, most opinion seems to be that the export market is getting more difficult, and there is, not increasing, but less, opportunity.

There is only one argument; that these wicked people in buying commercial vehicles in this quantity, are exceeding the target set out for them in the Economic Survey. That is dreadful, but, before we really count that to them as a crime for which there is no pardon, we would like to know who is responsible for setting the target and how it is arrived at, because our experience of targets in the Economic Survey over the last three or four years has not always been very happy. It has not always given any great idea of the accuracy with which they are arrived at. Until we are told that, I regard effective demand for an article of this kind as likely be a far better guide to the national requirements.

Any idea I had of the Government's argument for imposing this taxation, any vague idea of their reason, was completely confused when I listened to the remarkable speech—to which I shall refer later —by the Parliamentary Secretary to the Ministry of Fuel and Power on Friday. In discussing this question, the Parliamentary Secretary, "The Man from the Ministry," the authority, the oracle, said a friend of his in the business, a salesman, had told him that in fact it was very difficult to keep up the sale now in the home market. If that is so, what are we worrying about?

In any case, this is the clumsiest way of effecting the right hon. Gentleman's purpose because this extra tax falls upon all commercial vehicles: it falls on the righteous 50,000, with which the White Paper agrees, as well as the 30,000 wicked ones it wants to see done away with. It simply means that it is a tax upon an indispensable article of equipment of British industry and that the cost of that tax has to be borne by British industry as a whole.

In introducing the Petrol Tax, the Chancellor began by giving what I admit to be one very formidable reason. He said that petrol was dearer in France and Belgium. I agree that it must be most mortifying to him, in a democratically planned State, to think that there could be anywhere else in the world something to be bought at a dearer price than here. I am sure that he will never rest until he can eradicate anything of that kind from our national life. But there are some of us whose hearts are still so malignant, and whose understanding is so stubborn, that we cannot be entirely convinced by that argument. We still have a sneaking feeling that it is rather an advantage to have in this country something cheaper than it is in a competitor country. Therefore, we must, I am afraid, look for other more convincing reasons to justify the imposition of this tax.

Let us look at the results which this tax will have. I begin with the private motorist, although the Committee will realise that the private motorist, and particularly the pleasure motorist, as represented by the user of the basic ration, represents only a very small fraction of the petrol which will bear this burden—I think in the neighbourhood of 7 per cent. Of course, on this aspect of the tax we heard from the Parliamentary Secretary to the Ministry of Fuel and Power, a Minister whom I must now regard as being—in America they call it "Presidential timber"—Chancellor timber. He explained to us that as a result of this tax the pleasure motorist would be better off, that his motoring would be cheaper. The Parliamentary Secretary told us that on Friday.

I spent the week-end trying to work it out, but so far as I am concerned, it does not seem to come out, because, however I do the sum, whether I divide, add, multiply or subtract—I never quite know which I ought to do—there remains always the fact that whereas before I spent so much on petrol, I now have to spend so much more. It must be because I have not got the slide rule with which the Parliamentary Secretary said he had worked it out. However, as he is "the man from the Ministry," I suppose that we must accept what he says.

All that I beg of him and of the Chancellor is: do not let his generosity run away with him, do not let him be tempted, after having made this one present, to think that twice the tax would be twice the gift. Of course, so far as the pleasure of motoring is concerned, this is a start in rationing by price, by making it more expensive and then feeling that more of it can be allowed. My right hon. Friend the Member for Woodford (Mr. Churchill) naturally must receive some personal gratification from the step that has now been taken. I have here a whole list of quotations from speeches made at the time when he said that something might be done to increase the basic ration. But I see the Chancellor said the suggestion that more petrol should be made available was one of the most irresponsible acts—and I can quite imagine what he looked like when he said it. I must say that only the Minister of State showed some perspective and balance in this matter. He did say that it was not beyond the bounds of possibility that such improvement might be made. But he was out of step. It was quite plainly impossible to allow a man with such dangerous tendencies to stay where he was, and he has therefore made this horizontal move.

Apart from the very small proportion of petrol used by motorists for pleasure, what about the very large proportion, something like 22 per cent., which goes in the supplementary ration? Is anyone going to pretend that the supplementary ration is for pleasure purposes? All of us have had to take up such cases for our constituents, and I will say in favour of the right hon. Gentleman that when he was there, we always got a courteous response from the Ministry. In some cases we got the alleviation for which our constituents asked. But we were always made to understand that it was strictly a matter of business and the facts had strictly to be proved. Even the Parliamentary Secretary to the Ministry of Fuel and Power cannot pretend that this tax is a gift to the many who are using their supplementary ration for indispensable purposes; doctors, commercial travellers and the like.

My hon. Friend the Member for Edgbaston (Sir P. Bennett), who always speaks so splendidly and with such knowledge on these particular topics, has dealt very fully with the effects which this will have on transport both of passengers and of freight. I do not wish to enlarge on that, except to say that it surely is optimistic nonsense to brush aside the burden of a tax of this magnitude, and to pretend that, somehow or other, it can be absorbed without reflecting itself seriously in increased fares and increased freight charges. One point I want to make is with regard to the commercial users, people who use these oils not for the purpose of transport, but as part of their raw material. Is it seriously intended that this tax shall apply to industries such as paint, polish, printing, in fact industries who would find the cost of their raw materials, which enter largely into the cost of their products, raised by an act of Government policy?

In particular, I would ask the Chancellor of the Exchequer whether it is a fact that under the wording of the Resolution, for the first time industrial benzol is brought within the purview of the tax? If so, it is a very serious departure. I do not pretend to understand the technicalities but I do understand that industrial benzol is now being used in the manufacture of phenol; and phenol as such is one of the most important ingredients in a whole host of new industries, such as plastics. In fact, plants costing millions of pounds have been set up by the chemical industry to deal exactly with this new type of production, which surely is the type of production the Chancellor ought to be encouraging. To think that their very raw material, the basis of their product is to be handicapped by the Chancellor's own deliberate will, is something which seems to be almost impossible to contemplate.

We regard both these duties as thoroughly bad. We regard both as being not only irrelevant but repugnant to the main theme of the Chancellor's Budget. Surely, the most important consideration we must have in mind is, first, to do everything we can to reduce the cost of production in order that we may compete in the export market, and, secondly, to do all we can to reduce the cost of living in order to maintain the standard of wages and profits. Here, in these two cases, the right hon. and learned Gentleman is going contrary to both and is imposing upon this industry a burden which will result inevitably in a rise in the cost of production and inevitably in a direct imposition on many millions of people of an addition to the cost of living.

So many comments have been made on the broad outlook both of our budgetary and our economic policy that there is little new to be said. I saw this Budget described in one paper as, "The mixture as before." I wish I thought it was only that. I think it is, "The mixture as for ever." The Chancellor today has put himself in a position where there is no room for manoeuvre, no room for policy making. We talk about the Budget being the instrument of economic policy. So it should be, but it is nonsense to consider that it is that now. It is merely the Chancellor having to follow the lines laid down by the automatic happenings both on the revenue and the expenditure side. He is, in fact, like poor F'ankenstein, the prisoner of the monster he has created.

We have only to look how things have gone over the last two years to judge of the future. Last year the Chancellor introduced a Budget which was not very popular with hon. Members opposite, but that was largely because of outside influences. In his Budget speech he made some timid gestures about economy, and hon. Members behind him were taken in by that. Of course, they know him better now. They know that when the Chancellor is posing as the Treasury watch dog he is horrific but his bite is negligible. In his Budget last year the Chancellor was able to give quite substantial reliefs, both in direct and indirect taxation, without having to impose any corresponding increases in taxation. This year he is unable to give a substantial relief which he thinks right, beneficial and helpful, without having to impose a corresponding amount of tax increase in another direction.

Next year, to judge by the warnings which he himself gave us in his Budget speech, it will be a question of having to impose increased taxation without any thought of corresponding reliefs elsewhere, because embedded in the Chancellor's marathon of last Tuesday was a most significant warning of what we have to expect. He told us frankly of the automatically rising expenditure which, year by year, the Chancellor has got to contemplate. He warned us specifically that an end had come to that equally automatic rise in the revenue which so often has saved his predecessor and, up to now, has saved him.

He gave us the prospect of a revenue which is more likely to fall than to increase. Indeed, such matters as terminal charges and receipts are almost certain in the future not to turn in his favour but against him. Therefore, the terminal receipts are likely to fall off at a greater rate than the falling-off in terminal charges. That is what the Chancellor is asking us to contemplate—an endless vista of Budgets with rising expenditure, with no new services or gifts and nothing new to help the people. It will be just rising expenditure from what has already been incurred, and falling revenue to set against it.

Hon. Gentlemen opposite are very fond of twitting us with the question, "What are you going to cut?" The question with which we are going to twit them more and more in future is, "What are you going to tax?" I know the hon. Member for Sowerby (Mr. Houghton), who used to take a very important part in a broadcast programme called, "Can I Help You?"—which used to come on at times when Dick Barton was on holiday—was quite frank and told us what he was going to tax. He listed the reliefs in Income Tax allowances and the Purchase Tax made over the last five years, and said, "There you have got a taxable reserve, and all you need to do is to put all these taxes back again." That is to be the Budget of the future, and we are told by the Chancellor that all that has to be faced and borne because it is necessary if we are to maintain full employment. Hon. Members behind him have heard that said and have repeated it so often themselves that I think they have actually come to believe it.

I do not believe it for a minute. I do not believe that the high rate of Government expenditure has been responsible for the high standard of employment for the last five years. In fact, I think the only thing which, during those five years, has threatened to attack the high rate of employment has been the high rate of expenditure. I think it was chiefly that high rate which led to the first dollar crisis, which was only solved by Marshall Aid. It was chiefly the high rate of expenditure which led to the most recent dollar crisis, which was only ended by devaluation. It is going to be the chief cause of any further dollar crisis—a crisis which, when it comes, will have no further expedients to meet it, and can only be met by a cut in imports, with all the dire effects which that must have upon employment. It is the inflationary pressure coming from this excessive Government expenditure which is turning us into, and which, if it goes on, will keep us as, an isolated, high-cost community in an ever more competitive world.

It is pathetic that the people of this country should be asked to make these great sacrifices and to carry the great burdens that they are carrying now in the belief that they are doing it to maintain something which they value above all else. In fact, that policy is more likely to destroy the things to which they attach so much value. That is the future goal, the inevitable and unavoidable goal of Socialist policy as it now proceeds. Sometimes, in my more depressed moments—

Mr. Diamond (Manchester, Blackley)

More depressed than this?

Mr. Stanley

Oh, yes; I am always more cheerful when speaking than when I am listening to others.

Sometimes, in my more depressed moments, I even envy the fate of the Gadarene swine. After all, they did at least commit race suicide in a mood of joyous abandon; they did rush over the precipice. Better that than to go over it as we are going over it with every inch of the way democratically planned, every step to destruction encouraged by exhortations from the Chancellor. It is little consolation to know that when we come to the end, we shall find at that end, not only fair shares, but even equal shares for all. The last thing, no doubt, which we shall hear as we plunge over the brink, will be a speech from the Chancellor, mercifully abbreviated, explaining in face of all practical proof, the theoretical correctness of his intellectual processes. Heaven save us from a man who always knows he is right.

9.21 p.m.

The Chancellor of the Exchequer (Sir Stafford Cripps)

The speech of the right hon. Member for Bristol, West (Mr. Stanley) reminds me of nothing so much as a doggerel verse which I used to repeat in my youth: Were I in noble Stanley's place, When Marmion urged him to the chase, The word that then you would descry, Would bring a tear to every eye. Anybody who cares to work it out will find that the answer is an onion. I must thank the right hon. Gentleman for so kindly referring to my old age, and I must also thank him for having stated quite definitely and categorically that the Opposition were behind us in our wages and profits policy. I think that some doubt had been cast upon that both by the speech of the right hon. Member for Aldershot (Mr. Lyttelton) and also by the speech of the right hon. Gentleman the Leader of the Opposition.

Before starting to reply to the Debate, I should like to join my congratulations to those of many other hon. and right hon. Gentlemen to all who have taken part in our Debates for the first time. We can, I think, congratulate ourselves upon the high standard of those speeches, and upon the fact that as long as the electors choose men of capacity and high standing to represent them, we shall maintain the strength and the reputation of our Parliament. We have now had five days of debate covering a very wide range, and I certainly regard it as an advantage that we should have had that wide range, because it is only in a very wide setting that one can arrive at a judgment as to the correctness or otherwise of the Budget proposals.

And yet, after those five days, I am bound to admit that I find myself in great difficulty how to reply. We have heard over and over again the same arguments.

the same gloomy forebodings to which we listened throughout the whole of the last Parliament, with this one exception perhaps, that right hon. Gentlemen opposite, or most of them, have on this occasion gone out of their way to state their pleasure at certain factors in our economic situation. That is indeed a welcome change, for it does to some extent belie the alternating gloom and pleasure that swept over the faces of right hon. and hon. Members during the opening speech. It looked from this side very much like an April landscape. When any matter pointing to improvement or hope was mentioned, a dark cloud passed over the benches opposite. When some serious reservation or warning was uttered, smiles and sunny cheers broke out from them.

My difficulty, then, is to find any arguments to which to reply which were not fully covered—some hon. and right hon. Gentlemen may think too fully covered—in my opening remarks, and which have not also been fully dealt with by my right hon. Friends in their speeches. This, as the right hon. Member for Bristol, West said, is indeed a day of satisfaction for Wykehamists as regards Etonians. I would agree therefore with those who regard this as a somewhat dull Budget, as a pedestrian effort or whatever else they would like to dub it. For the truth is that this is the moment for just such a Budget.

It would have been quite easy to have taken a risk in order to provide a spectacular and popular Budget with an eye upon another election. That is, indeed, the line which is advocated freely from the other side, a line which is pretty simple for those who carry no responsibility, but it is not one that either I or my colleagues are prepared to take. Such a Budget would not have risked the position of the Government, for its adverse effect would quite probably not have been felt for a considerable time, not perhaps until after the next election, whenever that may be. In the meanwhile it would have brought an easy and full popularity. But what it would have risked, indeed more than risked, what it would have undoubtedly destroyed, in my view, is the prospect of continued full employment. That we were not prepared to do, however little popularity our Budget might bring.

The issues in this Debate have really been twofold: First, whether the Budget is to be used as the plaything of party politics, as it has been sometimes in the past and was by the Opposition at the last election, and, second, whether our method of preventing inflation and preserving our social services, full employment and overseas balance is the right one or whether we should, by reverting to the methods of a free economy, improve our prospects. It is with that second issue that I want mainly to deal this evening.

As regards the first, I can really do no better than refer to a passage in the broadcast of the right hon. Member for Bristol, West, on Wednesday last. Speaking of the Income Tax remission which I have suggested, he said: But of course the change does not do anything to help the lowest paid worker. A married man with two children has to be earning well over £7 a week before he gets any advantage. For those under that limit there is no alternative proposal, nothing to help them to meet any rise in the cost of living which may result from world conditions or may even be caused by this Budget. There is no reduction in the Purchase Tax. No—I must be accurate—there is one reduction, but as it is on luxury cars costing more than a thousand pounds it has not a very wide appeal. There is no reduction on cigarettes, beer, entertainment—those little luxuries which have become part of ordinary life. What was the deduction to be drawn from that? The deduction was that these taxes would be reduced by the Conservative Party. The right hon. Gentleman was very careful not to say that. Innuendo, suggestion, the carefully disguised half-promise which commits no one—what a masterly piece of patter which might well deceive any simple listener.

Mr. Stanley

Will not the right hon. and learned Gentleman toad the rest of it?

Sir S. Cripps

No, I certainly will not read the rest of it. [Interruption.] Quite obviously hon. Members opposite have not done so themselves, because it happens to be quite irrelevant to this point. I shall be dealing with other parts of it presently. This is the typical difference between the two sides of the Committee and the two parties on the first issue that I mentioned, and I do not think I need go any further, though one could, of course, dig back into a veritable mountain of that sort of stuff in the Conservative election literature and speeches.

Before coming to deal with the major points of difference on the second issue that I have mentioned, I should like to deal with some of the points raised by the right hon. Member for Woodford (Mr. Churchill) this afternoon. He really said nothing new at all. It was a repetition of his election speeches, full of his usual gloom, describing the tragic circumstances to which the people of this country have been reduced. There is a complete factual answer to that argument. One has only to compare the condition of the bulk of the population of this country today with what it was when the last Tory Government were in power before the war and when the right hon. Gentleman did not take a very gloomy view of the then prospects. It is quite true, of course, that there was then great wealth and there were large fortunes, but the ordinary people did not enjoy the standard of living which they are enjoying today. Nor did they enjoy the full employment that they are enjoying today.

In that regard there was one particular fallacy about the loss to wage earners, pensioners and others of some £1,500 million a year since 1945, which the right hon. Gentleman mentioned and with which I must deal. Actually, no doubt he wants to compare 1946 with 1949. The year 1946 was the first year for which a Labour Government was responsible. Between those two years the amount paid in wages rose from £3,155 million to £4,280 million; that is, an increase of over 35 per cent. Salaries in the same period increased by 27 per cent. So the fall in the purchasing power of the £, which as we all know was part of a postwar world movement that affected every other country, that fall in the purchasing power of 20 per cent. to which the right hon. Gentleman referred, was therefore considerably less than the rise in wages and salaries.

Indeed, to anybody studying the facts of the situation it is so obviously contrary to common sense to suggest that the country is now worse off than it was in 1945 or 1946. The steady increase in production since those years has not only more than maintained the real purchasing power of the workers, the salary earners and the beneficiaries of the social services, but it has enabled us to correct the very heavy adverse foreign balance, to expand greatly the social services, to make enormous capital expenditure, and to be in balance as well. No argument or rhetoric can alter those facts—and facts they are.

I must say that there was one thing which I regretted very much indeed in the right hon. Gentleman's speech and it was that he quoted a statement by a deceased civil servant against his Ministerial chief—no doubt a statement made in confidence and not with a view to publication. Had that civil servant been alive today, the right hon. Gentleman would never have repeated the statement. The. right hon. Gentleman quoted what he called the "independent paper," the "Economist," which criticised certain Budget proposals. Let me give him another quotation, if I may, to set off against that which he gave and I am sure he will most warmly support this about our economic achievement: That is a magnificent achievement for which the hard-working people of Britain deserve full credit. Nor should there be any grudging of praise to the Government for its share in the triumph. If Britain's circumstances are still straitened, still the country can reflect with solid pride on its own deeds and with solid confidence in its own ability to surmount the worst that can happen in a world where competition must grow steadily fiercer. This is a grand, tough old country and a modern country, too. The quotation ends with these words: Nobody could describe the Budget as an electioneering document. It is restrained, sombre and, within the limits of a controlled economy, it is a workmanlike document. Does not the right hon. Gentleman feel a bit ashamed of himself when he hears the leader of the "Daily Express" on the Budget?

The right hon. Gentleman was quite interesting in dealing with planning. He said that we both believe in planning—and that referred to both sides of the Committee and not only to himself and myself. He said that they, the Opposition, planned for choices. I am quite sure that the Committee would wish me somewhat to amplify what he intended to say and mean. What he means is this—that he desires, by planning, to develop our economy so as to make it possible for those who have money and wealth to chose how to use it, as they wish, without restraint in any way.

Mr. Churchill

Or brains.

Sir S. Cripps

Or brains. But we were dealing at the time with our economy, and so with money and with controls on physical things. Nobody suggested controlling brains, except possibly the butchers. It was exactly that policy which produced the state of affairs which we experienced between the two wars. We want equality of opportunity, determined not by wealth but by the intelligence and capacity of the citizen. That needs rules so far as the use of wealth is concerned, or else that wealth would again be used to monopolise all the best things, as it used to be; and that is why, as the right hon. Gentleman rightly says, we desire to plan for rules.

The right hon. Gentleman cannot get away from the fact that he wants to get back to the days and ways of a free economy. That is precisely the thing we were brought into power to combat in 1945, because the people had learned what suffering had been brought about by large-scale unemployment and poverty. As we get further away from those years of bitter experience between the two wars which were the result of the policies which the right hon. Gentleman wants to plan to re-introduce, it becomes, of course, easier to mislead the electorate with soft words and vague promises, because many of them now are people who never experienced those bitter years. Many of them did not experience 1929, 1930, or 1931 or any of the years that followed when there was great poverty and unemployment.

Mr. Churchill

Surely the three years mentioned by the right hon. and learned Gentleman were years in which a Socialist Government was in power.

Sir S. Cripps

They were the years in which a minority Socialist Government ruled this country, and certainly they did not carry out a Socialist policy; whether it was because they were a minority or not I cannot say.

The right hon. Gentleman's prescription is first to frighten the people by forebodings of gloom, and then promise everything if only they will give him their allegiance, throwing in, which I could not quite understand this afternoon, a sort of vague suggestion of a Coalition, which could only work on the basis that everybody else must abandon his policy in favour of the right hon. Gentleman.

Mr. Churchill

That would be much the best.

Sir S. Cripps

Whatever the Liberal Party may think about it, we are not having it on that basis. On the other hand, against that policy we have five years of solid achievement and as the leading Conservative paper said: Nor should there be any grudging of praise to the Government for its share in the triumph. I want to come back, if I may, to the question of expenditure. There has been a great deal of criticism and suggestion about it in the broadcast speech of the right hon. Gentleman the Member for Bristol, West, as well as in other speeches. I want to quote something from his broadcast. He said: Once I had made a really good substantial cut in Government expenditure and reduced the risk of inflation I would be prepared to take a chance with a reduced Budget surplus, a risk which I agree this Chancellor with these policies can never afford to take. This presents to us the same difficulty that we have been up against for the last three or four years—continual vague suggestions of some economies somewhere but always a refusal to specify where. Why is there that refusal? The right hon. Gentleman the Leader of the Opposition made a very neat and complete exposure of the reasons during the speech of my right hon. Friend the President of the Board of Trade on Thursday last when he said: The right hon. Gentleman only wants it for electioneering."—[OFFICIAL REPORT, 20th April, 1950; Vol. 474, c. 352.] I wonder if the Leader of the Opposition realised the implications of his very frank intervention. The obvious and only conclusion that can be drawn is that the right hon. Gentleman knows what it is the Conservatives would do, and also that if the voters were told it would mean goodbye to any chance of the Conservatives regaining power.

Today, the right hon. Member stated that he did not know enough about the expenditure. What are all the Estimates printed for, pages and pages, hundreds of pages, of them, every item detailed in them? What are Supply Days for, except to examine—[An HON. MEMBER: "Supplementary Estimates."] Yes, and the Supplementaries. They are Estimates. All I can imagine is that the right hon. Gentleman and his Friends have not had either the time or the energy to examine the Estimates. We have never had information in the course of the Debates on them. There has always been this complete lack of any frankness in this matter. The position is that the right hon. Member for Bristol, West, admitted in his broadcast that without substantial cuts in Government expenditure it would be impossible to reduce the above-the-line surplus in the Budget. No one on the Opposition benches will point out how that can be done, because the Leader of the Opposition has told us that it would have an adverse effect upon their election prospects.

Therefore, this all remains enveloped in a masterly vagueness. It is just as vague now as it was three or four years ago. I do not think that the right hon. Gentleman can complain that he has had no opportunity. I particularly gave him every opportuntiy in the broadcast I made only the night before by going through all the main items of expenditure and inviting an answer to the question: "When, where, and by how much, would the right hon. Gentleman cut any or all of them?" I am sure that millions of people must have been waiting anxiously to hear his answer.

Mr. Stanley

No. They had switched off before they got it.

Sir S. Cripps

I do not know whether the right hon. Gentleman is saying that they switched off him or me.

Mr. Stanley

They probably never switched on to me.

Sir S. Cripps

We can get a count later on from the B.B.C. to show how many people listened. I am sure that millions of them must have been anxiously awaiting his answer, but they did not get it because it might have had such a bad effect upon the electioneering prospects of the party opposite.

A great deal of play has been made about the food subsidies. It is necessary to get one point cleared up. The Leader of the Opposition asked—it is an old question—whether it was necessary to give food subsidies to people who can perfectly well afford to pay the market price. The answer is, "No," provided that you do not mind the consequent repercussions on farm prices and markets, which would be very serious—[HON. MEMBERS: "Why?"]—and the extra administrative costs. If any hon. Member will examine what goes into the food subsidies, he will see that it would be very awkward for farmers if all those were discontinued. [An HON. MEMBER: "They are agricultural subsidies."] If those are to be regarded as agricultural subsidies, then they are not food subsidies, and we need not discuss them in that context.

Let us first see who are the people who could perfectly well afford to pay the market price. Of the total population of the country, those in the families where the income is over £1,000 a year amount to about 4 per cent. Personally, I think everybody with less than that gets a deserved help out of the subsidies. Therefore, 96 per cent. would need help to be continued in one form or another. Increased family allowances, increased old age pensions, increases in every other kind of social benefit, or remissions in taxation. Unless we cut out some of these deserving people, the saving would, therefore, be 4 per cent. at the most.

There is another great difficulty about this. Food subsidies are concentrated upon certain items only, for instance, butter and cheese, and if the price of butter were allowed to rise another 1s. a pound, which it would have to, who would get the butter? Never mind how much over-all compensation one gave, at the new price these commodities would be purchased only by the better-to-do and we should have done away with the fair shares policy. Therefore, I do not think there is anything to be gained financially out of any such suggestion as has been made, but there would be a great deal to be lost both to the farming community and so far as fair shares are concerned.

The truth is that if we examine any of the suggestions of really substantial scale economies, they involve a change in policy towards a free economy, which would mean the same sort of thing in smaller or greater degree as we experienced between the wars when, I freely admit, the rich were better off—better off than they are today—at a cost of a great deal of poverty and unemployment. Anybody who wants to see how these sort of cuts can be made can look back to the Geddes Axe cuts which were made in the earlier period when the unemployed's pay was cut and when the pay of the teachers and the civil servants was cut. They were substantial cuts.

When I said in my opening speech that the two sides differed greatly as to the means to be used to achieve and maintain the economic health of the country, it was to this fundamental approach to the problem that I was referring. Of course, everyone in this Committee desires to see careful and economic administration, and we are gradually cutting down the requirements, and so the staff, as anybody can see if they look at the numbers engaged in the Civil Service, but the part of Government expenditure which is devoted to staff is extremely small. A great part of it is for providing services such as defence, education, hospitals, and so on, many of which are not new expenditure but expenditure that used to be met by the individual and is now more conveniently and fairly met by the State. If a large block of these were to be reimposed on the individual by a political decision of the first magnitude, that could, indeed, make a big saving in Government expenditure, but it is exactly that political decision which the Opposition are unwilling to announce, though they would no doubt attempt to carry it through if they were returned to power.

It has been suggested that there may be room for large-scale economies because last year we were able to cut down expenditure by some £90 million. That is quite accurate, but it seems to be overlooked that that was the result of important political decisions of the first magnitude. For instance, £36 million was saved on feedingstuffs subsidies. The transference of that sum from Government expenditure to other shoulders did effect a saving. The increased price of school meals is another case in point. A charge for prescriptions proved so difficult in the exceptions that were necessary, as everybody would agree, that it has had to be dropped for another alternative for the present. Other adjustments in food subsidies brought a further saving of £20 million.

These are all transfers back from public to private spending, and it is only further re-transfers of this type that can bring any large-scale savings. But such re-transfers accompanied by tax remissions would tend to affect the poorest section of the population more adversely because that section would not benefit from the tax remissions. So the fact that we were compelled to take these steps last autumn to hold the difficult post-devaluation situation does not provide the slightest proof that more of the same sort of saving would be either possible, advisable, or acceptable to the people of this country.

I cannot deal with many of. the other points, but there is one matter as to which I would say one word. The question has been debated whether this surplus is too large or too small; whether, in fact, we might have made remissions of taxation out of it or whether it is not sufficient to prevent us from reaching the degree of disinflation that we desire. The right hon. Member for Saffron Walden (Mr. R. A. Butler) said that I have managed to obtain a precarious balance in the Budget. He was not really talking of the Budget balance at all; he was talking of the balance in the national economy. I only want to point this out to the Committee, that if you are to maintain a state of full employment in the country, it is absolutely essential that you retain a fine balance between inflation and disinflation, in other words, that you have a balanced Budget but not with too great a surplus overall and not with too great a deficit. The so-called safety margin of the past was provided by the unemployment which we are determined to prevent.

Finally, I can only repeat what I said in opening this Debate: We are not prepared to use it for election tactics because we believe that the ultimate good of our people is more important than anything else. That ultimate good of the great majority can only be achieved if we can maintain full employment and those great social services and benefits that we have built up without affecting adversely our external balance of payments—in fact at the same time bringing about a balance in our external payments. We believe that the policies behind this Budget are the only ones to bring about these great objectives desired by the people of this country, and it is in that belief that we ask this Committee to give them their support.

Question put, and agreed to.

Resolved:

"That it is expedient to amend the law with respect to the National Debt and the public revenue, and to make further provision in connection with finance, so, however, that this Resolution shall not extend to the making of amendments of the law relating to purchase tax except amendments, if any, reducing the first, second or third rate of the tax generally for all goods to which the rate applies."

Resolution to be reported Tomorrow.

Committee to sit again Tomorrow.