§ The question we now have to consider is: can we, and should we, stop at this? Will this change alone give our industries sufficient stimulus to get production rising, and rising fast enough to overtake the decline of last year and go on to the new high levels we need? All the evidence suggests that we must do more. Even with the steps we have taken, we are not likely to bring out the full production of which we are capable. In fact, if we do no more, there is a real danger of a lull, a sort of ebb tide in the economy. We must get out of the slack water, lighten the ship and give her way. In other words, if we want 51 vision, enterprise and an expanding future, we must, if we can, throw off some of our burdens.
§ No one would deny that the burden of taxation today is too heavy, both on industry and on individuals, and that it drags down initiative and enterprise. But the question remains, can we afford to do something this year? This is the heart of this Budget. In recent years high taxation has been used as the instrument for warding off inflation. And what a blunt instrument it is! Even the highest level of taxation that was politically possible—and a far higher level than was desirable—was barely sufficient. It was continually necessary to pile up surpluses to make up the chronic deficiency in private savings—and yet much desirable investment had to be held back.
§ Now the position is quite different. In my review of this last year, I showed how the restraint of demand, working with the tide of economic forces, and reinforced by our new monetary weapon, transformed the situation. So far from demand pressing too hard upon output, demand was restrained, while productive capacity increased. As the National Income White Paper clearly shows, the nation's savings were sufficient, even with the reduced Budget surplus, to finance all the investment undertaken at home, and at the same time to allow the substantial improvement in our balance of payments.
§ I shall not weary the Committee with the figures, but they will be found in Table 6 of the National Income White Paper, which, read with the Economic Survey, more than confirms what I have said, as does some public comment. This year my economic analysis has shown that the likely level of effective demand will still be less than our productive capacity, so that again we shall not require savings through the Budget of anything like the size of previous years.
§ The final question is the amount of the surplus required. This cannot be determined by exact calculation. The way we have to take is clear; how far it would be wise to go, when so many of the factors are imponderable, must be a matter of judgment. I have to bear in mind the lull in production and the paramount need for more exports. I have to remember our present export difficulties and I am impressed by the need to use the 52 opportunity we have now to improve our competitive power. I must try to avoid increasing living costs by this Budget. Yet we must not allow inflation to return. Here I can take account of the fact that the Budget will not be operating alone, but in combination with monetary policy. I offer no forecast of the way in which the monetary weapon may be used; for its great virtue is its flexibility. But it appears to me that conditions in 1953 as we now see them will require broadly a continuation of the monetary measures in operation now.
§ After weighing all the factors, my judgment is that we should retain an above-the-line surplus of rather more than was realised last year. This is the most careful estimate that I can make and it approximates to some that have been published. The first conclusion I have drawn from this is that I shall propose no new taxes at all. For the first time since the war—and high time it is—we take a step in a new direction. The reliefs which I shall propose are designed to improve our competitive efficiency, to provide incentives for greater effort and to encourage private saving.