HL Deb 23 February 1938 vol 107 cc873-82

LORD MONKSWELL had given Notice that he would call attention to the statement in Command Paper 5609 (Public Social Services), which shows that between 1910 and 1935 the annual sum spent on Social Services has increased by nearly£45o,000,000, of which only about£50,000,000 (devoted to housing) produce any material object of permanent value; ask His Majesty's Government whether in their view this country is steadily growing poorer owing to the insufficiency of the yearly sum available for the maintenance and development of means of production; and move for Papers.

The noble Lord said: My Lords, I feel I owe you an apology for bringing before you a subject akin to one I have already raised in different forms more than once. Owing, I fear, to the obscurity of my re marks, I have never yet succeeded in eliciting from the Government of the day a clear answer to the question which for many years has caused me the gravest apprehension, as I am perfectly certain it has caused apprehension to almost every one who has had the curiosity to direct his mind towards the future. The question that disturbs me, and on which the White Paper throws a new light, is this: Is this country steadily getting poorer by the process of preventing a proper proportion of the national income from being devoted to investment in the means of production necessary to provide for the requirements of the future? Money may be spent in two ways. It may be devoted to living expenses, to buying things like food which, once used, are of no further value, or clothes which last only a short time. It may, on the other hand, be used to bring into existence things of permanent value like houses, which provide shelter so long as they stand, or factories which, so long as they are worked, enable production to continue indefinitely. There is the sharpest difference between the results of these two ways of employing money which may respectively be described as spending and investing. Money spent is used up and exhausted at once. It is not available for the production of any material object of value in the future. Money invested provides for the future requirements of the country.

If any country hopes to remain great and famous, or even to continue to exist, it is necessary to divide the national income suitably between satisfying the present requirements of its people arid making provision for their future requirements, and if insufficient provision is made for future wants progressive poverty automatically supervenes. I hope your Lordships will forgive me for repeating obvious platitudes. My want of success in making myself plain on previous occasions must be my excuse. In the White Paper it appears that through the operation of Social Services of all kinds£450,000,000 more than in 1910 are being spent annually. I may remark, incidentally, that these figures. the last available, are those for the period before rearmament began. It really does not affect the question, but I want to clear rearmament out of the way. I am, of course, aware that the value of money has dwindled since 1910, and the£50,000,000 or so spent in 1910 may be equivalent in purchasing power to£70,000,000 to-day, but in the circumstances this is a small matter.

Of the whole sum of£450,000,000, I can find only some£50,000,000, due to various Housing Acts, together with, I suppose, a certain amount of building of hospitals and schools, that can be descibed as investment, and, in view of the well-known extravagance with which housing subsidies have been granted, it is difficult not to regard the bulk of this as mere waste.£50,000,000 must in any case be more than ample to cover the investment value of all building subsidies. If this sum is deducted there is left£400,000,000 per annum that in 1910 was available for investment but is now spent—£400,000,000 per annum switched over from providing for the future and spent instead in the present.

Is there any source from which this sum or anything like it can be made good? If the country were producing goods and services greater by£400,000,000 than in 1910, we should at least as a nation be no worse off than we were then as regards the future, though we should be no better off. Machinery and means of production have in many cases improved, but, as the proportion of the population at work has diminished and there has been a general reduction of hours, it seems most improbable that improved machinery has done more than just counterbalance these reductions. If we are going to be told that production has increased sufficiently to cover the required sum, I hope my noble friend who is to reply for the Government will not forget to tell us all about costs of production, in which the expenses of Social Services must obviously be included. It is only the amount by which the value of increased production exceeds increased costs of production that is of any use for making provision for the future.

Another thing that would help us is if the working classes are saving more. In a debate we had at the end of 1936 I understood Lord Mottistone, who is an expert on this subject, to put the total annual savings of the whole of the working classes at about£100,000,000 a year. The working classes also pay the bulk of customs and excise, say£300,000,000 a year. Adding this to their savings the total annual contribution of the working classes comes to £400,000,000 a year. I do not know of any reliable statistics showing the total yearly wages of the whole of the population on the lower levels of income, but I should be very much surprised to find that they had not increased since 1910 vastly more than the equivalent of £400,000,000 in purchasing power, which is about 10s. a week a head. If I am right the contribution of incomes on the lower levels, considered as a whole, to national expenditure is a minus quantity in comparison with 1910.

The only remaining source from which any part of the £400,000,000 could come is a reduced standard of living among those persons who are subject to high direct taxation. A certain number of these have undoubtedly reduced their standard of living because they have been ruined. The people who have been ruined are mostly the owners of big agricultural estates, and their ruin has usually been followed by the migration into the towns of their labourers. But, apart from such cases as these, my own very strong impression is that the highly taxed, far from reducing their standard of living, have perceived that if they did not spend their money at once the tax collector would get it, and have acted accordingly. When it is remembered that to produce the sum required to fill the gap 10,000 persons must each save £40,000 a year on their living expenses, it is obvious that the idea is ridiculous. The latest figures show that 860 persons have £30,000 a year or more, while the whole of the 90,000 or so persons who pay Super-Tax have an income of £450,000,000 a year, and that of course is already subject to heavy taxation.

In my Motion I ask whether the Government consider that we are getting poorer—that is to say, whether the national income computed on the basis of goods and services is less per head of the population than it was. I am, of course, aware that changes in the numbers of the population and in the value of money must be taken into account when estimates are made. A certain obscurity is inevitable in estimating real income in terms of money, but I do not think that the changes that have taken place are such as to prevent a fairly close estimate from being reached. I am also aware that it is possible that in 1910 national savings available for investment were more than the equivalent of £400,000,000 to-day, so that if national production has remained the same as it then was, there would still be some surplus, and, if the standard of living apart from the Social Services were the same, we might still be making some slight provision for the future. But the standard of living has increased enormously, and there is so little to be hoped for from this source or from any adjustment of numbers or values, that I do not think they do anything at all to diminish the fears which I have expressed. Indeed it is quite the other way.

I understand that the Government consider that any suggestion that all is not well with this country's finances is unpatriotic and likely to lead to what we should all deplore. If they go so far as to consider that it is unpatriotic to examine facts on their merits, and that the patriotic thing to do is to march blindly on, I disagree. If they have their reasons for confidence why not let the country have said ground for sharing this confidence: It is impossible to overrate the value that would attach to a clear statement of why this country may look to settled prosperity in the future. We do not want to he told that the working classes are now much better off than they were. We know that already. They are naturally better of' because they are living on the capital accumulated by the thrifty in the past. What we want to hear is precisely why huge and steadily rising taxation of thrift, artificial depression of interest on capital, depreciation of the currency and a more and more adverse apparent balance of trade should make the country prosperous in the future. If an explanation is forthcoming it cannot fail to have the most beneficial results. I beg to move.


My Lords, my noble friend after an interval, I think, of some fifteen month; has again returned in one of his characteristic speeches to the question of the Social Services. I must confess that I felt a certain disappointment when I saw the noble Lord's Motion on the Paper because I thought that in my explanation fifteen months ago I must have completely satisfied him. However, that was not so, but I hope that I shall be more successful to-day. My noble friend says that the expenditure on the Social Services has increased since 1910 by a sum of £450,000,000. As a matter of fact, to be quite accurate, I believe the urn is £440,000,000, but that is only a small point. I think that a simple calculation of the increase is apt to give in some respects a misleading view of the situation. In the first place, as the noble Lord himself said, the value of money has fallen very greatly since 1910. The national income has approximately doubled, having risen from £2,000,000,000 in 1910 to £4,000,000,000 at the present time. That is partly due to an increase of population and of real wealth, but far more to a fall in the purchasing power of money which has been partly masked so far as prices of commodities are concerned by technological improvements and the consequent fall in costs of production. Apart therefore from any change of policy or new departures, the cost of Social Services might have been expected to have increased since 1910.

Of the increase of £440,000,000 no less than £276,000,000 represents entirely new Services which were unknown in 1910. Your Lordships will appreciate what these are. They are unemployment insurance and allowances, health insurance, contributory pensions, war pensions, and, last but not least, housing. But towards this sum £94,000,000 was derived from contributions and £25,000,000 from rents. Undoubtedly when every allowance has been made both for the fall in the purchasing power of money and for the contributions, the growth has been very large. But this is due—and I should like to impress this upon my noble friend—to a change of policy and to a real endeavour to improve the condition and standard of life of the people, demanding a very severe sacrifice from people who pay direct taxation. I should like to point out to the noble Lord something which people sometimes forget, and that is that members of the Government, whom he thinks are neglectful and careless about these things, pay taxation themselves. Transference from the Back Benches to the Front Bench in your Lordships' House or to the Treasury Bench in another place does not mean exemption from taxation. I wish it did. Members of the Government, in common with everybody else, would certainly welcome a reduction in the rate of taxation which we are now bearing. But I do not gather that my noble friend questions the justice of the new policy. I am glad to see him shake his head, because I would venture to say that if any person put forward a suggestion for reversing this new policy—which is, I think, in accordance with the spirit of the age—he would obtain very little hearing in the country.

The noble Lord talks about the country being impoverished and about the country being much poorer. I think in a way that is so. No one will dispute the fact that the country has been and is still being exposed to a very severe financial strain. But this has not been due exclusively to the cost of Social Services. We have passed through the most severe trade depression ever experienced. At its climax that had the effect of reducing the yield of taxation by more than £100,000,000, if we take the estimated yield in 1933 of the taxes that were in force in 1929. On the top of that we have now to meet the cost of rearmament. In the circumstances it would not be surprising if the accumulation of wealth had been seriously retarded or even interrupted. Yet what has in fact happened? We have under the unemployment insurance system statistics of the numbers employed in different industries, and among these we can distinguish several big industries which are engaged wholly or mainly on the production and maintenance of the capital equipment of the country. If we add together the numbers employed in building and construction, engineering in all its branches, together with shipbuilding and the construction of vehicles, we arrive at a very fair measure of the productive resources applied to the maintenance and development of the means of production.

The numbers actively employed in these industries in 1929 were 1,754,000. In 1932 at the worst time of the depression they fell to 1,409,000. In 1937 they had risen to 2,048,000, nearly 300,000 above the figure touched in 1929. This comparison, of course, only covers recent years and tells us nothing about the "golden age" of 1910. But we have in the decennial census returns the numbers in what is approximately the same group of industries. For England and Wales, those, whether actually employed or not, were 1,498,000 in 1911, 1,645,000 in 1921 and 1,809,000 in 1931. So it seems clear that, even allowing for a heavier percentage of unemployment at the present time, the numbers employed in these industries are substantially greater than in 1910. They have in fact grown more than in proportion to the occupied population. Hours of work have no doubt been reduced, but on the other hand technological progress has greatly increased the productivity of a given man-power.

The noble Lord said that the rich and well-to-do people were spending their incomes—in fact he implied that they were spending too much—in order to avoid taxation. I presume he meant that they were doing it in order that their estates should avoid Death Duties because it is difficult, I think, to avoid other taxation by spending your money. But, supposing they are doing this, there are evidences in other directions that saving is being maintained at a high level. In 1929, according to the statistics of companies' profits compiled by the Economist 19 per cent. of the profits were withheld from distribution and credited to reserve. In 1937 the proportion had risen to 28 per cent. And what is perhaps even more striking is the steady growth of savings among those who use the facilities specially appropriate to people of small means. If we aggregate the funds of savings banks, building societies and a number of similar institutions, we find that a total of £562,000,000 in 1913 had grown by 1929 to £2,139,000,000 and in the latest available returns to no less than £3,099,000,000. A similar tendency is to be seen in life insurance premiums, which are the staple form of saving of the middle class. The premium income of business in the United Kingdom (exclusive of industrial insurance) rose from £30,000,000 in 1913 to £76,000,000 in 1929, and after some set-back during the depression exceeded £83,000,000 in 1936. I hope that what I have said, if it does not altogether satisfy the noble Lord, will not be taken to mean that the Government are indifferent to the present high rate of taxation and the possibility of increase. The idea which is prevalent in some people's minds, that any Department can approach the Treasury with the full assurance that it will get at once whatever sum it asks for, is, I assure your Lordships, entirely erroneous. It is not so at all.

In conclusion, I should like to refer to the debate in another place on February 9, a very interesting debate on a Motion deploring the national and local expenditure, brought forward by the honourable Member for the Thanet Division (Captain Harold Balfour). In that debate my right honourable friend the Financial Secretary, in winding up, used these words: The Government are alive to the danger of the effect of high. taxes. They are also alive to the very real and universal—I use that word deliberately, because it transcends all party bounds—desire to save on armaments as soon as is human]y possible. And later on in his speech he said: The Government are alive to the necessity of maintaining the sound financial position of the country in the interests of every one in the community, not least in the interests of the many millions who derive such immense benefits from the Social Services. I am glad to be able to quote those words of my right honourable friend, as they emphasize and bear out the assurance which I should like, to give to my noble friend and to the House—namely, that while there is, in the view of His Majesty's Government, no cause at present for alarm, there is every cause for prudence in the shaping of policy and the general management of the nation's finances.


My Lords, I do not want to keep you at this late hour, but there are one or two words I must say. I need hardly say that I am not in the slightest degree convinced by what the noble Lord has said. He started off with the absolutely astonishing statement that the nation's income had doubled since 1910. But he did not give any particulars, and I was quite unable to follow whether he meant that it had doubled in goods, in services, or in money value, or what he meant at all. He simply did not say anything, except to make that astounding statement with which he started, and which I cannot for a moment accept.

Then he talked about 1910, and said that the expenditure was not then adjusted to the new policy. That is exactly what I want to know about. How can the new policy continue to exist? I gave him what I consider most adequate reasons for supposing that money which used to be saved is now spent at once. He simply did not consider the question at all. He never said a word about it. That does not bring us anywhere. As for tackling this question of how the equivalent of £400,000,o0o a year which used to be saved is now spent in Social Services—it is all in the White Paper, absolutely cut and dried—he simply did not say a word about it. He made one remark about rich people spending money. What I suggest is that the rich people go on maintaining their standard of living as before and neglect saving. Of course they do. They are not going to save for the tax collector to get money in the future. They are spending the same, and of course they hope to be able to go on as long as the Government will allow them to do so, though they are certainly not very hopeful about it. I do not think I need detain your Lordships any longer, but I must say that if the Government have nothing more than the sort of nebulous statement that my noble friend has given us to-night, they must be in a very bad way indeed. I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.

The LORD CHANCELLOR acquainted the House, That the Clerk of the Parliaments had laid upon the Table the Certificate from the Examiners that the further Standing Orders applicable to the following Bill have been complied with.

West Thurrock Estate. [H.L.]

The same was ordered to lie on the Table.