HL Deb 20 July 1944 vol 132 cc1046-82

THE EARL of GLASGOW rose to call attention to the great increase in annual expenditure which will be required to meet the programme foreshadowed by the Government's commitments for social reform; and to ask His Majesty's Government if they can indicate from what sources they expect to meet that expenditure. The noble Earl said: My Lords, in the course of asking this question I am afraid that what I am going to say will not be agreeable to some of your Lordships. However, I propose to state my points and, as I am not moving for Papers, my noble friend who will reply will be able to castigate me at his leisure. The Prime Minister has stated in a broadcast that all our energies should be devoted to winning the war, and that for Ministers to be continually asked questions about matters which have to do with peace has a bad effect abroad. Whatever your Lordships may feel about certain questions or Motions which are brought before Parliament, I have no qualms about this one, because unless it can be shown where the money is coming from to finance the large extra annual expenditure to which the country is committed for an extension of social reforms, then the nation may again be faced with a catastrophe. Therefore I hope it may be considered pertinent, even in the middle of a World War, to put this question on the Paper.

The financial commitments of the Government are two-fold. There are those due to the war, which are unavoidable, such as the interest on War Debts, which is increasing year by year. Indeed no one can foresee to what astronomical dimensions the liability of the nation for Debt Services will rise at the end of the war in the East. War pensions will have to be paid and there is the extra expenditure on the Armed Forces which will have to be maintained with much greater and more expensive equipment. The Forces, as your Lordships know, have recently received considerable rises in pay. Then there are the subsidies to maintain the level of prices of the staple foodstuffs, which now cost more than £160,000,000 per annum and will have to go on after the war for a considerable time. Finally, there are the arrears in housing which I consider are due to the war. These are necessary and unavoidable and will have to be overtaken as soon as labour and material are available. This work, in my opinion, should take precedence and priority over every other social reform. But I know the Government are keenly alive to that.

Then I come to expenditure not necessarily due to the war but which will have to be incurred in the extension of the Social Services and the carrying out of other planned schemes. For instance, the Government are committed to the principle of the Beveridge Report, some of the provisions of which they are in process of bringing into law at the present time. I do not want to be misunderstood. It is, in my opinion, only right that the nation should be committed to a well-planned scheme of social insurance, but its provisions should not be brought into law, in my view, until we know what the financial position of the country will be after the war is over. The total cost of the Beveridge scheme will amount to about £260,000,000 of extra money per annum. The actual cost to the taxpayers is £87,000,000; the rest will be made up of the contributions of employers and employees. Although those contributions will not be borne in the Budget they are nevertheless taxes.

There is a condition mentioned in the Report of Sir William Beveridge himself. He says that the British community was rich enough before the war to have avoided real want and that it would be wrong not to hope that the British community can so reorganize itself as to be as rich again? The question is, can we so reorganize? The social insurance scheme is only one item of social reform. There is educational reconstruction upon the necessity of which we are all agreed. This has the advantage from the financial point of view that it will take some considerable time, probably some years, before the full expenditure upon it will be felt. There are plans for extensive road improvements. There are the large sums for compensation from the Exchequer and the grants to local authorities for the implementing of the Town and Country Planning Bill and other matters connected with bringing the Uthwatt, Scott and Barlow Reports into operation. There is also the increase in salaries of Government servants. In December, 1942, their number was 664,577. After the war this number may be lower, but considering the variety of planned schemes to which we are committed the total number in the employment of the Government will probably be much larger than that of prewar years. Therefore, with their extra salaries, there will be a considerably greater new annual expenditure to provide for. These annual increases which run into hundreds of millions of extra money per year have got to be met and I ask: From what source is the money coining? The usual source is the taxpayer but, my Lords, the tax-paying geese are dying. At the moment they appear to be fairly well but that is because large numbers of them are living on their fat. There is only one end to that. If heavy taxation continues they will die and be of no further service to the community.

To show that we have not been unmindful of the Social Services during a great and costly war, I would remind your Lordships that these services which cost £160,000,000 in 1938 cost —219,000,000 in 1943 apart from the considerable sums being spent in connexion with the stabilization policy. In this year, 1944, they must be costing a great deal more than that. So, my Lords, taking all these things into account and considering that our monetary resources, after both wars are ended, will be very much diminished, largely due to expenditure created by the war, it does not seem to be the moment to launch out immediately on schemes to improve a standard of life which is already one of the best in the world. It is something to be proud of that we can carry the cost of the Social Services and even increase them during a costly war, but it is madness, in my opinion, to demand that the cost be still further increased when we have no idea what our economic position will be.

People in this country are being misled by politicians of all Parties into thinking that a new heaven on earth will be made for them after the war. Our soldiers are not primarily fighting for a new heaven on earth. All they want when they return is a home and a job. They are fighting for the same reasons for which your Lordships who, like myself, are considered too old to fight, would want to fight—the security of this country, the end of Nazi tyranny throughout the world, the right to think for ourselves and to worship God in our own way, for freedom of speech and the democratic way of fife. In the education debate the noble Viscount, Lord Samuel—I am sorry he is not in his place to-day—said he was glad the Government had not listened to those of little vision who say with a sneer: "How can we expect in a great war to give thought to making a new heaven on earth?" I am sure the noble Viscount, if he were here, would not think I am asking this question with a sneer in my mind or on my lips. I may have little vision but I can assure tie noble Viscount that I am as glad as he is that the Government should give thought to planning in general and to the expansion of the Social Services, but the Government should make it clear that these are long-term ideals so that false hopes are not aroused which may be followed by disillusionment.

That well-known paper the Economist said that one of the great slogans of the present age is "that if a plan is physically feasible mere shortage of public money should not stop it." The article goes on to say: The slogan is a true one, or an almost entirely true one, but in the enthusiasm over its discovery another equally true principle is being neglected—that if the physical resources are not adequate to do everything at once no financial contrivance can make them so.

With regard to this new heaven on earth it is time to face the facts and there is no better place in which to do that than your Lordships' House, for it is in this place that humbugging slogans and misleading statements by vote-catching organizations can be unmasked. So, at the risk of being platitudinous, let me state the facts, as I, an average man and not an expert, see them. After the war, instead of being a creditor nation we shall he a debtor nation; in fact we shall owe more than any other country in the world. That means a very big difference in our capacity to maintain our standard of living, and only hard work on the part of the nation will make it possible for us to regain the export trade by which we live. The period which will elapse during which those conditions prevail will entirely depend on how the whole population buckles to. Until we have regained our high position in the commercial world; until, in fact, we have become fairly prosperous, there will be no resources available for the proposed great expansion in our Social Services. As I have said, to regain our position, or as Sir William Beveridge put it to be rich again, not only will the whole population require to work but to work much harder and with higher efficiency than they have probably ever done, both roasters and men. Therefore irresponsible politicians are doing a disservice to the community when they hold out hopes and promises which it may not be possible to fulfil until after a period of years and when we have not the slightest idea what the economic position of this country will be after the war, except that it will not be good.

I fully realize that much of the extra expenditure I have mentioned is due to the war and has got to be faced, and that with regard to social reforms the Government have been wise in not giving reckless promises. Some Ministers have done good service by emphasizing that decision. Your Lordships probably know that a White Paper is to be placed on the Table next week which will contain what the Prime Minister has described as a gigantic and very expensive scheme which will embrace all the details of social service. I hope the Government are not going to weaken on that; that some conditions will be made in that White Paper, and that reckless promises will not be made. The noble Lord, Lord Woolton, once said that our people must not be led to expect a prefabricated new world after the war, and I was glad to hear the noble Lord say in the debate on currencies that the social reforms to be introduced depended on whether we could get our trade going between this and that country, and that we should not be able to afford the good things we were looking for unless we earned them. These wise words should be re-echoed up and down the country. They are the kind of things I should like to see stated by the leaders of all political Parties, although I understand that the noble Lord does not consider himself a Party politician. I hope that is true, because he is in charge of economic reconstruction which should be on an entirely non-Party basis, as it has to do with the prosperity of the country as a whole and the avoidance of unemployment. But perhaps I am asking for the moon.

The Beveridge Report is a great and beneficial scheme all of the provisions of which may be carried out in the future, but certainly not for a considerable time after the war with Japan is over. There are some people, mostly belonging to the Left Wings of the Tory and Labour Parties (the Tory Party has a Left Wing) who are determined to have as many of these social reforms as possible brought into law immediately the European war comes to an end, and if they use their influence successfully and obtain power—one of them has got to come to power—it will be tried. It seems obvious to me, without being a financial expert, that if it is considered necessary to spend hundreds of millions of extra money a year in order to give our people the highest standard of life in the world and the resources are lacking, we shall have a slump in the value of the pound, making it less than it is now. Food will cost more and the purchasing power of the wage earner will be diminished. There will be a demand by the trade unions for higher wages and manufacturers here will be unable to compete with lower wages paid to workmen in other lands. All this will naturally lead to unemployment on a large scale. How banal and obvious this is, but it has to be rubbed in.

I have to remind myself also that to get the wheels of industry going any responsible Government in power after the war must bring taxation down and abolish the Excess Profits Tax, thus further curtailing the national income, and I was sorry to see that the Chancellor of the Exchequer did not hold out any hope that this will be done. If this be so I should like the noble Lord the Minister of Reconstruction to tell us what incentive is going to be available to stimulate invention, enterprise and the provision of capital to develop new industries with all the risks attendant thereto if the successful ones are to be taxed to the hilt. What encouragement would there be for men to do what the noble Lord himself has suggested in picturesque language, "Launch out like the Elizabethan merchant venturers."? No one should know better than he the difficulty of establishing new industries without the incentive of profit, and as a high proportion of new patents and new industries never succeed the remainder must bear the burden of loss and have a temptation of considerable profit to cover such loss. The last few years have shown us that the inventive genius of this country is by no means dead under the incentive of pure patriotism, but after the war without this incentive how are we to hold our own with other nations who may give every facility and encouragement to men who are both enterprising and inventive?

There are some people who laugh at gold. May I remind them, as has been said time and again in your Lordships' House, that we live or die by our export trade and that foreign customers of our goods will only accept gold or goods of gold value? It is absurd to pretend, and I see the Chancellor of the Exchequer does not pretend, that we can do without gold or the use of gold as a yardstick of value when the rest of the world will only accept that as a standard. It is sheer wishful thinking to dream along these lines. The sophistry that money is a meaningless symbol is utter nonsense. Does anyone suppose that the United States, with its enormous hoard of gold, and Russia, with its capacity to produce more gold than any country in the world except South Africa, will submit to any other standard? And so far no other standard has ever been indicated. Even among our Dominions, in addition to South Africa, Canada, Australia and New Zealand are large gold producers and it is inconceivable to think that they would agree to any substitute for gold.

I hope that those who think this country can be run on credit, on unbalanced Budgets and continual borrowings, or on some kind of manipulation, will give up their golden fancies. These must give way to the iron ruling of economic laws. Let them face the facts. I am not qualified to talk about the results of the success or otherwise of the Government's scheme for international co-operation in the stabilization of currencies, but if we can get international co-operation for this, if we are able, as the noble Lord, Lord Keynes, has said, to regard the whole world economically as one area with countries not competing against each other to try and get a favourable balance of trade; if production and consumption can be planned internationally and any remaining tariffs can be Treed upon internationally, then there may be a chance of this country regaining sufficient prosperity to be able to spend large sums on her material needs.

There is another pointer to better things. I refer to the Government's White Paper on employment. There are indications of tremendous scope in these proposals a ad while some of them may give rise to differences of opinion, as has been shown in the debates in both Houses of Parliament, they will be welcomed as an endeavour to meet the situation which we all hope will not happen but which may. It is a great scheme and a very novel one and I wish it all the luck in the world. Sir William Beveridge in his comment on it is reported to have said: "Maintenance of a high and stable level of employment depends on the maintenance of total expenditure." This surely means that the more we consume the better off we are. I cannot refrain—I hope he will forgive me—from quoting a correspondent's letter to a Scottish paper. Writing on this point he said it reminded him of a member of his local co-operative society who bought a whole lot of chocolate and jam. He brought it into the house and calling his children together said "Eat, bairns, eat as much as you can, for the mair ye eat I'll hae the bigger a dividend."

Of course this is very controversial subject. I am not averse to controversy, because it is good for debunking, but I have tried to put this question in a way which is as free from Party or any other bias as possible. I feel fortified by knowing that there are millions of people who would like a clear and straightforward answer. I realize that the noble Lord who replies may find the greatest difficulty in giving such an answer because he does not know any more than anyone else what will be the economic state of this country after the war, but he must agree that to fulfil our hopes of great social reforms with shrunken resources is a difficult and almost insoluble proposition.

Nevertheless I am not asking this question from a despairing point of view and I do not want to be counted as one of those who continually harp on the difficulties with which we may be confronted. Like the noble Lord, Lord Westwood, in his maiden speech, I believe in optimism and self-reliance, and I hope and believe that our great nation with its indomitable courage and great recuperative powers will find good and satisfactory answers to the points that I have made. But I do think that what we are up against should be made clear. Some of your Lordships may think that after recent debates dealing with the position of this country the question is unnecessary and redundant, but there were certain points I wanted to make which would not have been relevant in the previous debates. Although like your Lordships I want the highest standard of life for our people, I am afraid they may suffer cruel disillusionment unless it is made clear by the Government that, however much the raising of those standards is desirable owing to economic circumstances due to a long and costly war the attainment of this end is only possible over a period of many years.

LORD SOUTHWOOD

My Lords, I venture to challenge the implication behind the noble Earl's Motion. The implication, as I understand it, is that at the end of the war we shall find ourselves so impoverished that we shall be unable to afford an effective programme of social reform. So far from accepting that implication I assert the direct contrary. I claim that this war will have left our country not poorer but potentially richer. Under the stress of war, our industrial and agricultural capacity will have been expanded to such an extent that our resources for output will be considerably in excess of our pre-war level. On April 2nd of last year Mr. Oliver Lyttelton told the Institute of Chemical Engineers: When peace comes we shall be confronted with the problem of turning over to peace uses all our vastly increased capacity to produce. Many other statesmen and important business men, both here and in the United States, have spoken in a similar strain. I am sure your Lordships will agree that, if it be in our power, as it undoubtedly will be, to achieve increased production after the war, there can be no ground whatever for fears of the kind implicit in this question.

Courage and enterprise on the part of statesmen can make the benefits of science and invention achieved during this war available to the masses of the people in the shape of a higher standard of living combined with social security. The Motion before this House calls attention to greatly increased prospective expenditure on Social Services. On this I would only say that we, on these Benches, welcome the prospect of that increase. It has been stated by the Government over and over again that post-war security is the right of everyone. Without committing myself to any specific figure, I compute the increased expenditure on Social Services at not more than £600,000,000 a year added to 1938 Budget overhead charges. In the term "Social Services" I include not only social insurance on the lines propounded by Sir William Beveridge; I include also improved education, to which the country is now committed; I include assisted housing, the extent of which, unfortunately, is being increased daily by the depredations of the flying bomb; I include the food subsidies which, as the Chancellor of the Exchequer disclosed the other day, now amount to £200,000,000 a year, and not £160,000,000.

THE EARL OF GLASGOW

I said over that figure.

LORD SOUTHWOOD

And this will have to be continued—at any rate in part—after the war if the country is to be spared the spate of strikes and lock-outs which occurred after the last war. My figure of £600,000,000 a year may be somewhat of an over-estimate or an underestimate, but it is really immaterial as I shall show in a moment. I am, of course, not forgetting that there will be other formidable additions to Budget overheads which cannot be ignored. There will be the post-war National Debt, probably £25,000,000,000 instead of the £8,500,000,000 of 1939. There will be the necessity, for a time at least, to maintain Fighting Services considerably in excess of pre-war standards. There will also, I have no doubt, be other contingencies that will have to be provided for in the years of readjustment following the war. These I estimate will burden the Budget with another £600,000,000 over and above the pre-1939 burden of interest and Sinking Fund.

So it comes to this: We face the prospect of a total increase of some £1,200,000,000 in Budget overheads. Every business man knows that fixed overhead charges which are onerous on a limited turnover become lighter as the turnover is increased. The bigger the turnover the lighter the burden of fixed overheads. Therefore the real answer to the noble Earl's question is that we shall be able comfortably to meet heavier commitments for Social Reform and the heavier commitments for National Debt, provided always we fully employ our productive resources and so substantially augment our national income. The trouble after the last war was that Governments—I am not accusing any individual Government—deliberately pursued restrictive instead of expansionist policies. They limited production to the market instead of planning to expand the market. How the British people have suffered from these erroneous ideas. Reduce wages! Cut down public expenditure! These were the calamitous slogans which produced endless misery. What was the result? Widespread unemployment; scores of thousands of miners idle while vast numbers of poor people were shivering beside fireless grates; children without a change of boots or shoes while countless boot and shoe operatives were on the dole.

We must never go back—and both the Government and the country are determined on this point—to the tragic stupidity of having 2,000,000 and more unemployed in this country. This was made clear by the debate on full employment in this House only a fortnight ago, which, if I may say so, was very ably handled by the noble Lord the Minister of Reconstruction. That great numbers of working people should have no job is a waste of national resources; so also is the circumstance of land, mines, factories and productive plant being unemployed or under-employed. After all, national income is but the measure of industrial and agricultural production; and if we want to increase the income we must first increase the production. But employment is not an end in itself. I suggest that what we must aim at, and what we can achieve, is a high level of prosperity. I am convinced that our nation with its marvellous inventive genius and it capacity for work, so amply demonstrated during this war, can provide a higher standard of living for all our fellow-citizens.

Really, my Lords, this country must learn the lesson of the past. The policy of parsimony does not pay. Your Lordships know that even by 1943 our real national income was greater by one-quarter than in 1938, because by 1943 our war effort had energized productive resources formerly unemployed. My figure of one-quarter is derived from the White Paper, "Sources of War Finance and Estimates of National Income," issued only last April. The national income of £4,604,000,000 in 1938 had become £5,755,000,000 in 1943 in terms of 1938 purchasing power. Now if in the fourth year of war, under grave handicaps like man-power shortage and the interference of U-boats with our seaborne supplies, we can—as we did—increase our national income by one-quarter, who shall say that we could not within reasonable time achieve a much greater increase with none of the impediments which war has placed in our way? The 1944 figures of national income are, of course, not yet available, but we may assume that the increase over 1938 is by now greater than one-quarter.

The Times Washington correspondent said on October 28 last that 1944 would see America's total production actually double that of 1938. It is a truly staggering fact, and one that we should do well to ponder, that America, with more than ten million of the cream of her manhood in uniform and therefore unemployed so far as productive resources are concerned, should have been able, not-withstanding all the hindrances of war, to increase her peace-time industrial output by not less than 100 per cent. I can conceive no more convincing testimony to the existence of the new age of technological abundance that makes possible the higher standard of living which our people rightly expect to enjoy after this war.

I do not think that I am unduly straining credulity if I suggest that wise statesmanship after this war should be able to plan sufficient employment of our productive resources to increase our national income by one-half over that of 1938; that is, to achieve an increase of something like £2,302,000,000 in terms of pre-war purchasing power. This is a conservative estimate erring, I do not doubt, on the side of caution. But, even if I were to be still more cautious, and reduce my estimate to one-third, it makes the prospective increase of £1,200,000,000 in our Budget overheads appear no longer terrifying, but quite within the realm of practical politics. And I need hardly remind your Lordships that there need be no difficulty about finding outlets for the increased production entailed in an expanding industrial economy. The first outlet would be consumable goods in the home market, strengthened by a policy of high earnings and improved Social Services. The second outlet would be for capital goods in overseas markets. I have previously urged in this House—and I make no apology for returning to the subject—the supreme importance of international economic co-operation. I submit that, entirely apart from our solemn obligation to raise the standard of living in the backward countries, it is sound business policy to do so, as we shall be creating enormous new markets for export, which the more enlightened countries with their increased production capacity will need.

Our fighting men have a right to expect, and we who remain at home have a sacred obligation to do everything in our power to provide them with, a decent job, a decent wage, a decent home, and a decent education for their children. We can do all this, I am certain, by foresight, by planning, and by tackling problems of peace as courageously and efficiently as we have grappled with the problems of war. Your Lordships will remember the outburst of unbridled and wasteful expenditure after the last war. I am not advocating a repetition of that. There is all the difference in the world between expenditure which is an investment, such as money spent on Social Services, and expenditure which is pure unremunerative extravagance. When all is said and done our real wealth is in our manhood and our womanhood and our children. I trust, therefore, that we shall hear no more of this fallacious nonsense about our postwar condition being so poor and our courage so impoverished that we shall not be able to afford social reforms.

LORD MESTON

My Lords, I should like to say a few words on this important subject. About three weeks ago the noble and learned Viscount on the Woolsack informed your Lordships that 52 per cent. of the annual expenditure of this country was being met out of revenue. That is a notable achievement, which reflects great credit upon the Government, the Chancellor of the Exchequer and the taxpayers of this country. I would remind your Lordships, however, that one of the principal reasons why we are able to finance 52 per cent of the annual expenditure of this country out of revenue is that direct taxation is so very prolific to the Chancellor of the Exchequer; and one of the principal reasons why direct taxation at the present time is bringing in so much revenue is that everyone, or almost everyone, is employed. One of the principal reasons why that is so is that we are borrowing approximately £2,000,000,000 a year. That is the crux of the whole situation. After the war we must cease to borrow on this scale; if we do not do so we must go into liquidation or depreciate the currency, for in my view there is no other alternative.

We must live within our means, and the question then arises of how that is going to be done, especially in view of the many commitments which we have incurred in recent years. In the first place the National Debt has to be considered. I do not know the size of the National Debt, and if I did I should not be allowed to disclose it; but let us suppose, for the sake of argument, that it is going to be £25,000,000,000. If that National Debt is consolidated and converted on a 2½ per cent. basis, the total amount of interest payable on the debt will be about £612,000,000 a year. That is over 100 per cent. more than the total amount of interest payable on the National Debt in 1937. Then there is the question of armaments. For some years at least after the war is will be necessary to maintain our Armed Forces on a considerably higher scale than that which exists in normal times of peace. In the domestic field it will be necessary to raise loans for the purposes of housing. It is quite true that in the course of time those loans will bring in some revenue; houses will be built and let and the Government or the local authorities, as the case may be, will take the rents. At the same time I venture to think that the amount of revenue accruing from those sources will not counterbalance the interest which the Government will have to pay on the loans.

Further, it will be necessary to raise loans for the purpose of making war damage payments. This is a delicate subject, and we do not wish to say anything which would indicate to the other side the extent to which we have suffered injury; but if anyone is under the impression that the contributions under the War Damage Act are going to be sufficient to meet all the payments under that Act, he is indeed labouring under a delusion. Then there are, or will be, additional commitments in connexion with education, national health and pensions arising out of the war. These are only some of the commitments; there are many others. I am not criticizing any of these commitments, or the purposes for which they have been or will be incurred; I am merely drawing attention to their existence and wondering where the money is coming from to meet them.

I understand that the noble Lord who preceded me took the view that the salvation of this country after the war lies in increased production, and particularly in increased export trade. I am sure we all hope that that will prove to be so; the only question is whether that hope will be translated into fact. So far as the export trade is concerned, this country will be in a better position to export than any other country in the world, with the possible exception of America, but the question arises not of whether other countries will take our exports, but of whether they will be in a position to pay for them for many years after the war. I feel myself that for many years after the war we shall have to be sending goods manufactured in this country to countries abroad and making a present of them to those countries. There was a gentleman in the Old Testament called Jeremiah who took a very pessimistic view of things. I do not wish to emulate Jeremiah, but I wish to take a practical view of these matters. I am sure we are particularly anxious to avoid in 1947 or 1948 a crisis similar to that which arose in 1931. But if we do not take a practical view of this matter I am afraid that such a crisis may possibly arise again. I may say, in conclusion, that I do not attack or criticize any political Party or any Government—in point of fact, I am sympathetic towards the Government in the great difficulties with which they are faced to-day—but I am merely seeking for an answer to the rather wide questions which I have put this afternoon.

EARL STANHOPE

My Lords, perhaps the House will forgive me if I state two platitudes which we are all rather inclined to disregard. The first is that the Government and the State have no money. It is constantly said that "the Government should pay for this" and "the State should pay for that." We do not talk about the county council paying for this and paying for that, we talk about the ratepayer paying, and of course Government have got absolutely no money ridden under the seat where my noble friend Lord Woolton sits—we only wish they had; they have to get it from the taxpayer. Therefore the correct thing to say and the honest thing to say is that this money has to be found by the taxpayer or by the ratepayer. I suggest to my noble friend that he should impress that on his colleagues in the Government. I am quite sure that in his work as Minister of Reconstruction he has over and over again come up against the attitude of mind of those who say "Oh, the ratepayer cannot afford to pay so much for education, the ratepayer cannot afford to pay for the rebuilding of the towns, the State must pay." It is not the State, of course, it is the taxpayer, and the more that is impressed on the country the more we shall realize that we must spend on the things that are essential, and that luxuries will have to wait.

My second platitude is that you cannot eat your cake and have it. There is a very large number of people who seem to think that because we can afford to pay £15,000,000 a day on fighting a world war we can therefore afford to spend very large sums when that war is over. A good many of us have had the unpleasant experience of having to face unexpected and unavoidable expenditure of a private character, such a s having to pay for the extra cost of a long illness, or surgical treatment, and we know perfectly well that wren that crisis is over we have had to pull in our horns and had to go quietly until we have re-established our financial position. It is exactly the same in regard to a nation. You cannot expect to spend £15,000,000 a day on a war or on anything else and be as well off at the end of that period as you were before it began.

Two things follow from that. Whether pockets are deep or pockets are shallow there is only a limited amount of money in those pockets on a given day. Even if some noble Lords' views are approved of and all those pockets are made the same depth, there is still that amount of money in those same pockets on that given day. If you take out of these pockets a very large part of the money in them obviously there is less left in those pockets to spend. And that is what the Government have been doing throughout the war, and doing it quite correctly and with great advantage to everybody in this nation. They have taken every penny they could get out of the pockets of the public, with the result that the public has had no money with which to buy goods. I said that was the correct thing to do, because the goods were in very small supply, and therefore the more you could reduce the demand for those goods the better chance there would be of keeping the price clown. That is what the Government have done.

But when you come to the end of the war the situation will be very different. My noble friend Lord Southwood talked about increased production. Of course, we have got increased production, but what are you going to do with your extra produce when you have produced it if nobody can afford to buy it? The noble Lord, Lord Woolton, a little time ago talked about adopting a policy of expansion in a time of crisis, and of course he was right in that case because he was foresighted; he realized that sooner or later, and probably sooner rather than later, the crisis would pass away. Therefore he went for a policy of expansion in order to be able to deal with the effects of that crisis once it has passed. But if you have great demands for Social Services, for building wonderful cities, with new roads and so on, it means that the cost of your Social Services is not only going to be much higher after the war than it was before, but it is also going to go on increasing. Therefore you are going to take more and more money out of these pockets, shallow or deep or of the same size, and there is going to be less left in those pockets with which to buy goods. I do not think even Lord Woolton would have proposed a policy of expansion if he had thought that instead of the crisis passing away it was likely to get worse. Therefore I submit that the less money you take out of the pockets of the taxpayer and the ratepayer the greater is your chance of increasing the demand for goods; and until you increase that demand for goods it is futile to talk about increasing your productive capacity.

The manufacturer of course will not increase his productive capacity and will not take on increased labour unless he can sell his goods. All of us in this House are agreed on one thing at any rate, and that is that as far as possible unemployment shall be abolished. A first essential in our minds before we think about Social Services or anything else is to see that there shall be full employment in this country. Actually I put it second for reasons I will give in a moment. Where taxes fall on a company—a producing company—those taxes must be passed on and added to the cost of the product which they produce. I think that is obvious. Already we are going to have considerable difficulty in finding an export market for our goods, because not only have this country and the United States greatly increased their productivity but I should think practically the whole world has done so. We are quite certain that the Axis Powers have developed the industries of the countries which they have occupied to the utmost possible extent for the uses of war, and presumably, unless they destroy the whole of those things as they retire, that productive capacity will exist in those countries, France and others, just as much as it is in the United States and in this country.

There are countries which have had to do without our exports for five years, some of whom have learnt how to do without them and will not require them after the war is over. But our one chance of getting back those exports is to produce goods of such high quality, at such a satisfactory price, that other people will be prepared to buy them. If you add to the price of those goods by putting heavy taxation upon them, either taxes or rates, then we are likely to find ourselves undersold in other markets and we shall have difficulty in disposing of our goods. I am told by those who ought to know—I ventured to put this to my noble and learned friend on the Woolsack some three years ago, when I did not ask him for an answer—that you cannot expect to have a satisfactory export market unless you have got a sound home market behind you. That brings me back to my point, that the State must leave in the pockets of the taxpayers as much money as it possibly can so that they can afford to buy goods, to give employment, and to sell exports.

I said that in my view there was one thing even more important than abolishing unemployment and that is the export trade. Unless we sell enough exports to buy cotton, rubber, oil—none of which we can produce—some steel, and some food, then this country is indeed in a parlous position. The first essential therefore is to build up a satisfactory export trade based on a satisfactory home market. I am not a pessimist any more than is my noble friend Lord Glasgow, and I am not, perhaps, such an optimist as my noble friend Lord Southwood. I certainly do not go as far as the Minister of Labour who says we are "broke." I admire his courage in saying that, because I think it is to the advantage of the country that he has done so; he has made us all realize that we are very much worse off than we were in 1939. My noble friend Lord Southwood does not agree. I hope when he comes to sell his goods that he will be proved right and I shall be proved wrong. All I can say is that when I ask my friends if they are going to be able to afford to buy this, that, and the other thing, they reply "No." That is true of all classes. We are all taxpayers now, and many of us are ratepayers. If Lord Woolton and his colleagues are going to pick our pockets and take the little that is in them, I foresee that this policy of expansion is likely to be followed by a slump.

The noble Lord and others talk about increased production necessarily meaning wealth. I am a farmer in these days and do very little else. It was not very long ago that we had a very mild winter, and everybody had a very fine crop of greens—the small gardener, the large gardener, the market gardener, and the rest. Lord Woolton knows what happened about that. The price that these men could get for their produce on the market was not sufficient to repay them for their labour and for the freight in getting it there. What happened? A very large number of people who grew these green vegetables some time ago are not growing them in the same quantities to-day because they are not again prepared to face a loss. If you over-produce and get a glut that may be followed by a very severe fall in prices. Our whole object should be to built up a demand in this country and abroad for our goods in order that there should not be a glut and that the whole of our produce should be sold. May I remind the House of this? There is a parable about a man who was given ten talents and he made ten talents. There was another man who was given five talents and he made five talents, but only five, not ten. If you take five talents from the man who has ten, presumably he will only make five talents, like the other man, and if you take two talents from the man who has five and leave him three, presumably he will only make three. Therefore, after you have taxed them to the extent of five talents and two talents, they will between them only produce eight talents, not fifteen.

The more money you leave in the pockets of the taxpayers and the ratepayers the sooner will you be able to build up your wealth and your prosperity, and the sooner will you be able to bring these great schemes into operation which planners are now proposing. But if we are going to force the pace at the start, and try to do all sorts of things we shall not be able to afford when the war ends, then I co become a pessimist and think that those who say that we are "broke" are more likely to be right than those who say that we shall pull through. I hope that the Government will say that, although it is perfectly right to make plans and look ahead, we have to go slow at the start, we have to realize that we have passed through a crisis and have spent a large amount of money we did not want to spend but could not avoid spending, and have first to make that good before we can hope to do very much else.

Many years ago when I was Civil Lord of the Admiralty they came to me with a scheme for rebuilding the headquarters of the Submarine Service. They put up a scheme which was a patchwork plan to make some improvement. I said: "That is not good enough. I want to see a scheme which will make this place a suitable headquarters for the Service which has to meet the greatest danger and the greatest discomfort of any part of His Majesty's Naval Service." The reply was that I should never get the money for it. I said: "No, I do not suppose I shall, but I want a scheme drawn up which can be divided into sections, and which can be done bit by bit, so that when we can go ahead we shall not be faced, as in the past, with the difficulty that something has been done which has to be pulled down before we can make further progress." That scheme was drawn up. There was a very severe Chancellor of the Exchequer in those days who was not so keen on armaments as he has been since. It was a great difficulty to get any money at all, but I got some. I started that scheme and the first part of it was done. I ceased to be Civil Lord of the Admiralty, but that scheme has now been completed, and there is now a first-class headquarters.

That was done because the plans were properly drawn up by the officers advising me at the time before any work was started at all. We did the first essentials, and left the rest to be done later. If I had put up the whole of that scheme in one year I should have got no money at all, and the scheme might never have been begun. I submit that as a parable for the bigger things facing the Government and the country at this time. The first essential is that we should all realize that the Government and the State have no money at all, and that it is the taxpayers and the ratepayers who have to find it. When we have got that firmly in our heads we should be prepared to go for the essentials that we feel must be done at once, and put off the other things until we have the money to do them properly.

LORD STRABOLGI

My Lords, I hope your Lordships will realize the real implications of this debate so far as it has gone. The noble Earl, Lord Glasgow, the noble Lord, Lord Meston, and the noble Earl, Lord Stanhope, though apparently ad-dressing their remarks to my noble friend Lord Southwood and those who represent the Labour Party, were in reality attacking the Government. They were, by implication, attacking declared Government policy.

EARL STANHOPE

No.

LORD STRABOLGI

The noble Earl may deny that he did it intentionally, but I shall endeavour to show that he did so all the same. He attacked by implication the declared policy of the Government. It is the only way they keep my right honourable friends the Labour Ministers in the War Cabinet by declaring this postwar policy for reconstruction which is endorsed by the Chancellor of the Exchequer and, of course, by Lord Woolton. That policy rests on three pillars—a tripod—full employment, high wages and international economic co-operation. Lord Woolton has said all that before, and no doubt he will say it in more eloquent language when he comes to reply. That is the declared Government economic policy for solving the admittedly difficult problems we have to face after the war. Both Lord Stanhope and Lord Glasgow have used the old fallacy that we shall not be able to export if wages are too high.

EARL STANHOPE

I said if taxes were too high, not wages

LORD STRABOLGI

Wages, too.

EARL STANHOPE

No.

LORD STRABOLGI

I exonerate the noble Earl; I shall come to the taxpayers' question in a moment. Lord Glasgow said that our manufacturers would not be able to compete with manufacturers who were paying lower wages—he does not deny it—and therefore we must get rid of these "airy, golden dreams of prosperity," as he called them, we must pull in our belts, work harder, and so on.

THE EARL OF GLASGOW

I did not say that.

LORD STRABOLGI

That was the effect of what the noble Earl said. That is the old argument that we have to reduce our wages to the coolie level of China, India, and Japan in order to compete. That has been shown to be a complete fallacy. If there is no international agreement, which country will be our greatest competitor? The United States of America. This is because, as my noble friend Lord Southwood pointed out, of the enormous increase in their productive capacity and also of their technical ability. But they paid and are paying the highest wages in the world. Very high wages are paid now in the American armament industry and in all other industry. They have gone up and no doubt after the war these high wages will continue to be paid. It is well known that though the Americans pay higher wages than any other country in the world they were our greatest competitors in the past, especially in capital goods. They were hotter competitors than Germany. I would point out with regard to Germany that, though the wages paid in Germany were not as high as our own wages, they were not so low as the wages paid in other countries in Europe, the Italian, the Polish, the Belgian, and to a certain degree the French wages.

The argument on which Lord Stanhope falls back is that it is the taxpayer who finds the money. I venture to say (and I think Lord Woolton must agree with this), that that is bound to be a complete fallacy in the future. The great taxpayer is disappearing. Take the example of Death Duties. I have said this before in your Lordships' House and again and again in another place. I have always considered our system of taking Death Duties for current expenditure to be a case of financial improvidence. We have lived on our capital. But the great fortunes of the past are disappearing. They will not exist in such numbers in the future and that source of revenue will dry up to a large extent. There will be, as has been the case in this war, a more general level of income. During the war high taxation has levelled down high incomes and a higher level of wages and steady employment have levelled up the incomes of the mass of our wage earners. We are getting to a much more level standard of society. I noticed this fallacy, if I may be allowed to put it that way, in Lord Stanhope's argument. He talked of our capacity for spending our money. I submit that that capacity is not so much limited by taxation as by the various Controls introduced by the President of the Board of Trade and by Lord Woolton. Lord Stanhope may have all the money in his pocket that he desires, but unless he has coupons he cannot buy clothes or food or petrol or many other things necessary for life. I am told that now in some parts of the country there is a new practice arising, a very reprehensible practice I am sure: Lord Woolton will be shocked by it. This is a practice whereby many women, in particular, exchange coupons instead of paying each other for goods as they require them. That is very wrong but you cannot easily stop that sort of thing.

The idea that our immense indebtedness and the payment of the Debt Services can be paid for out of taxes in the future and that the great schemes of reconstruction mentioned by Lord Glasgow and Lord Meston can be paid for out of the taxpayer's pocket, is really a complete fallacy. They will be paid for as we are paying for the war. They will be paid for by the labour of our people, utilizing our productive capacity and by the various similar means we have resorted to to finance the war. The war is not being financed to a large extent by the taxpayer. It is being paid for largely by the labour of the 37,000,000 people who remain in this country.

EARL STANHOPE

Has the noble Lord rover heard of "Pay-as-you-earn"?

LORD STRABOLGI

That again is a device to prevent inflation, to prevent a demand for a limited supply of goods. It is one of the devices which prevent an inflation of prices and it is quite right. It is a sumptuary tax. "Pay-as-you-earn," a tax imposed on wage earners, is a sumptuary tax intended to prevent an undue demand by the wives of those workers for goods of which there are a limited supply in the shops. But what Sir John Anderson gets from the taxpayer is really a bagatelle in comparison with the amount required to finance the war which is costing from £15,000,000 to £16,000,000 a day. That sum is not being paid by the taxpayer, and the indebtedness we have incurred and the payments in respect of the Debt Services and the great schemes of reconstruction that will come into operation after the war, will not be paid to any large extent by the taxpayer but will be paid for, as the war is being paid for, by the labour, the energy, the abilities and the inventive genius of our people.

THE EARL OF GLASGOW

Is it not our credit that is paying for the war? Our labour is not at this moment paying for the war; it is the credit of the country that is paying for it.

LORD STRABOLGI

I beg the noble Earl's pardon but he is entirely wrong and I will show him in one moment that he is wrong. The credit of this country is not so high as all that. Take the analogous case of Germany. The analogous case of Germany under the Hitler régime before the war—some aspects of which I believe the noble Earl made a study of and I think used to admire—the Germans had no credit, they were miserably poor, yet they reconstructed their country and made immense armaments.

THE EARL OF GLASGOW

They had internal credit at their orders.

LORD STRABOLGI

No, that was not the case. They produced a malevolent genius in the person of Dr. Schacht who recognized, as some of the leading financiers to-day now recognize, that a country's wealth depends on the labour and energies and abilities of its people and in utilizing the nation's machinery and natural resources. That is how Germany was able to rearm in a very few years, and not only that but to export vast quantities of goods into the markets of Europe and to a great extent dominate those markets. That was due to the malevolent genius of Schacht; and he has a very apt pupil, I believe, in Lord Wool-ton, at least I hope so. The genius of this scoundrel Schacht was devoted to preparing for aggression.

LORD WOOLTON

I hope the noble Lord will not think that the term "scoundrel," which he applies to Schacht, also applies to the person he regards as his pupil.

LORD STRABOLGI

No, certainly not. Schacht was a scoundrel because he devoted his undoubted abilities to preparing Germany for war and aggression and to helping the Nazi régime. Lord Woolton, and the Chancellor of the Exchequer, and my right honourable friends of the Labour Party in the War Cabinet, are not scoundrels, they are great and good men, they are preparing schemes for making a better Britain and a happier people and for helping the backward peoples of the world. That is a worthy object. Had Schacht devoted his abilities in that way in Germany instead of spending these vast sums on rearmament, Germany, instead of doing what she has done, could have devoted herself to the arts of peace and could have recovered her credit and her place in the world. That is what some of us had hoped she would do, and it probably would have been done if the Nazis had not seized power in Germany. But that matter will be discussed on another occasion. It is an interesting question how much responsibility can be charged upon us for what happened in Germany in 1933. I am supporting the Government and Lord Woolton. I would be the last person in the world to say they were scoundrels. Lord Woolton comes to this matter with a clean sheet and I have great hopes of him in the future.

I must not detain your Lordships too long but I should like to make a reference to our export trade. We are dealing with an immense problem and the subject of our export trade is a big one. I think Lord Meston, but certainly Lord Stanhope and also Lord Glasgow, said: "We want to export, and we must export in order to pay for certain imports, but who is going to be able to buy? Who will be our good buyers in the markets?" I think I am in no way misrepresenting them. As regards the undeveloped countries of the world it is a fact not to be denied that for a hundred years or more we have had to finance our customers—the United States in the days of her expansion in the Victorian era, our own Dominions, the Argentine, Brazil and so on. Probably most of your Lordships, like myself, are unfortunate shareholders in loans to build railways and other public works in South America. We exported capital goods to those countries and if we were lucky we got interest paid. It was repaid to us, of course, in meat from the Argentine, coffee from Brazil and so on. We shall have to do the same again. We call it Lend-lease now and I think some form of Lend-lease must be continued after the war by agreement between the principal victorious Powers, particularly ourselves and the United States.

Yesterday we listened to a remarkable speech from the noble Lord, Lord Rennell, describing the mechanical aptitude of the African from the Bush, the untutored, uneducated African who can be taught to handle machinery and do it extremely well. Africa is only one example. Many other countries in the world which have large populations and great natural resources require transport, electrification, bridges over their rivers, aerodromes and so on. We have only scratched the fringe of the problem in our own Empire. Our own Crown Colonies have only begun to develop in the last generation. There is an immense outlet for capital goods in our own Empire. Of course there will not be immediate payment. When the noble Earl, Lord Stanhope's ancestors financed the development of a gold mine—I hope he is fortunate enough to have had such ancestors—they did not expect a return for many years. We may have to wait for a return for many years, but do not let us pretend that the markets do not exist. The markets are there for capital goods and for consumption goods as well. The shortage of consumption goods in Europe and in many other parts of the world is appalling at the present time. The French people are again wearing wooden shoes, and there is a shortage of textiles and a shortage of the lighter goods everywhere. If it is asked how they can pay, the answer is that they can pay as we pay America in reverse Lend-lease.

My noble friend Lord Southwood spoke of economic international co-operation to which we are committed. The three noble Lords I have referred to seem to want to go back to the bad old days of the May Committee and the Geddes axe and the attempt to cure unemployment by curtailing expenditure. Surely this war should have taught us, if the last war did not, the foolishness of that idea. In another place two days ago one thousand million pounds was voted to carry on the war and the Chancellor of the Exchequer said that would carry us on till October. We are spending to-day at the rate of over £4,000,000,000 in a year. Suppose the war were prolonged unfortunately, through a series of mishaps, by an extra year over the time the Government have scheduled. None of us would hesitate to face the sacrifices and the money would be found. We are going to go through with this thing and finish it once for all and the money would be found without difficulty.

We do not pretend that you can carry on that kind of finance in peace-time but when the House of Commons can vote a thousand millions to carry on the war till October, if we want after the war a thousand millions for capital expenditure for such things as housing, building of hospitals and schools and improving our roads and transport and equipment, I hope we shall not have economists coming forward with out-of-date theories and talk about gold standards. I hope there will be a different Government in office—I hope the noble Lord, Lord Woolton, will be there as a non-Party man to help—and that we shall not hear then the sort of arguments we have heard this afternoon.

LORD WOOLTON

My Lords, I think I shall carry your Lordships with me when I say that we are very much indebted to the noble Earl for having introduced this subject. It has certainly led to one of the liveliest debates I have heard in your Lordships' House for quite a long time. While from time to time one might hive judged that there was a great divergence of opinion between those who have spoken I do not think when we go down to fundamentals there was an awful lot of difference. It is true that the noble Earl who introduced the debate was perhaps a little cautious but his speech I thought was full of understanding of the social needs of the post-war world. He referred with great sympathy to the need for housing and he did not even attack the Government's proposals that he has not seen regarding social insurance. I speak from memory, and I may be wrong in my memory but I think the Prime Minister referred to that scheme as gigantic. I do not remember that he said it was expensive.

THE EARL OF GLASGOW

Very expensive, he said.

LORD WOOLTON

Certainly he said gigantic. In one respect, however, the noble Earl was certainly wrong in stating that the Prime Minister said he would present it next week. We shall present it—the noble Lord, Lord Latham, would like me to say "shortly after"—we shall present it for the consideration of your Lordships when you return refreshed. It seemed to me that the speech of the noble Earl was somewhat characteristic of a man from the North whose native caution demanded that before he even contemplated a journey, however enticing that journey was going to be, he should feel in his pocket and make quite sure that he had the money to pay the fare to get there. There have been private rows in your Lordships' House this afternoon and I do not think it is a good thing to intervene in private rows. The noble Lord, Lord Southwood, contemplated, it seemed to me, potential wealth while the noble Earl, Lord Stanhope, was not talking of potential wealth but of present wealth. That seemed to me to be the difference between them. I had not suspected that noble Lords who spoke were attacking the Government. The noble Lord, Lord Strabolgi, who was good enough to give me support—support that I appreciated the whole time except when he mentioned Dr. Schacht—seemed to think the Government was being attacked. I was insensitive to attack. I thought that all your Lordships were asking us to do was to look facts in the face. That was the basis of the noble Lord, Lord Meston's speech. He was just asking the Government, as is their duty, to look facts in the face and there is nothing reactionary about looking facts in the face, especially if they happen to be rather uncomfortable facts.

The noble Lord, Lord Strabolgi, said we might have to contemplate the possibility that through some unhappy circumstance the war might last for another year. Of course we might. We have not finished the war yet. No sensible man would get up at this Box and say that he knew what the financial future of this country was going to be. We have no means of knowing what the ultimate cost with which we shall be burdened by the war will be. The noble Earl, as I gathered from his closing remarks, will not be disappointed in regard to this, and will not expect me to make an estimate of our future financial position. He was good enough to tell me beforehand, with great courtesy, for which I thank him, the lines on which his remarks were going to run to-day. Since there is much virtue in consistency in Ministers, I read up the report of the first debate we had in this House after I became Minister of Reconstruction in order to be quite sure that I had not committed myself then to any views that I do not hold now. I find that I said then—if you will forgive the egotism of my quoting: The country is still in danger. The danger to its physical life has not passed, unfortunately, and its commercial life will remain in danger for some years to come. We shall need all the commercial wisdow and foresight in the immediate post-war years if we are to rebuild our national prosperity. From the commercial danger of the nation"— and that is why I refer to this— there follows the danger to all those hopes for a better world that depend on the solvency of our national finance. I quote those words—and I hope that your Lordships will forgive me for doing so—because they indicate the approach that I have made to the problems to which the noble Earl has called our attention to-day.

I think that the question that faces us is this: How can we best secure the commercial prosperity and the social stability—and they must run together, we shall not get commercial prosperity unless we get social stability—of the nation? How can we best get this? The answer is difficult, but this I am quite clear about: we can dismiss the idea that we are going to do it by a restriction of expenditure. Cutting out of waste there must be. We must reduce the number of people who regulate and control our personal lives and our commercial enterprises, but, in the end, it will not be merely by an economy campaign, but by the expansion of our trade and the development of our national resources, both human and material, that we shall regain our position in the commercial world. The root of the matter is to be found in the amount of business we can do, and not in the amount of money that we can avoid spending. But what we spend must be nationally productive. We must avoid the creation of a state of affairs in which the overhead charges of getting ideal conditions are such as to prove beyond the earning capacity of the country. On the other hand, our social structure must be one that gives the conditions that will make possible the maximum of production—and production, moreover, of such a high standard of efficiency that it will be competitive in the world's markets.

The noble Earl was fearful as to whether he had been guilty of platitudes in his speech. If I may respectfully say so, his fear was unfounded. I trust that the observations which I have just made may not make it appear to him that I myself have fallen into this error. Those observations really are the application of sound business principles to the affairs of State. I wonder if your Lordships will bear with me for a few minutes whilst I elaborate this a little in relation to the development of our whole reconstruction programme? Wealth is produced by work, and to enable the people of this country to give the maximum amount of work we must secure for them those conditions that will enable them to work well. Those of us who have had experience in industry know that if we can get healthy factories with plenty of air and light, reasonable hours of work, adequate holidays and recreational facilities and some reasonable sense of security among the workpeople, so that they know they will not be thrown into unemployment if things should happen to go a little badly, then we secure a happy and contented staff, a high level of production, and we have a good chance of making a commercial success out of our enterprise. It all involves the spending of money, it all involves overhead expenses, but these charges are productive charges. That, I think, is the modernist's view about industrial conditions as opposed to the older views of two or three generations ago.

I have raised this question because I want to ask your Lordships: Does not that parallel fit the nation? Will we not get the same conditions from a nation as we should get when we look at it in the narrower field of an individual unit like a factory? A fortnight ago in the debate on the Employment Paper, I drew your Lordships' attention to the cost of industrial disputes in the years between 1922 and 1939. The figure was 250,000,000 lost days of work. I do not know what monetary figure we can put upon that loss of 250,000,000 days lost in consequence of industrial strife. We can only guess at it, but it cannot be less than £100,000,000, and it was all lost.

LORD STRABOLGI

It was much more than that.

LORD WOOLTON

Well, I am very modest in my estimate. Not only was that money lost but it left a great amount of unhappiness and acrimony behind it. Social instability is a very expensive overhead charge for any nation. And now let us look at health. The noble Lord has told us in round figures that we shall have to find, from rates, taxes and contributions from the Insurance Fund, for the early years of the Service £148,000,000 a year. We shall have to spend that to maintain a higher standard of health. It is a vast expenditure but it will not be all new expenditure, even if we adopt the proposals of Sir William Beveridge, and if we take the figures which the noble Earl quoted. Before the war, the cost to public funds was £61,000,000. But of the in- crease of £87,000,000 some £40,000,000 must be reckoned as being merely transferred from one type of payment to another type of payment. And of the remaining difference of £47,000,000 some of this must be put against the inevitable increase in the cost of the existing services due to the rise, in prices, between the period before the war and the period after the war. But what do we lose now through absence of men and women from work due to sickness? This is one of our industrial expenses—an overhead charge—that I believe we can reduce.

Do you know Low much it has cost this country to have people away through sickness-absenteeism? At current rates of absence the loss may amount to as much as £280,000,000 per annum. I am going to reduce that figure, because it must be remembered that the present rates of absenteeism are abnormally high as a result of war conditions—long hours of work, the increase in the number of married women in industry, the withdrawal of the younger and stronger men from industry to the Armed Forces, and so on. If one assumes more normal absence rates the loss which might be expected after the war amounts to a sum of £180,000,000, which we shall lose from sickness and absenteeism in a year unless we can do something to improve the general standard of health. The White Paper which we have discussed in this House on the Health Services, and which is the foundation of the noble Earl's figure of £148,000,000, contains proposals which are directed to that improvement in the standard of health which, while it is going to cost us a great deal of money, will, I believe, prove a very profitable economic expense.

I should like to direct the attention of your Lordships to a Paper which has already been referred to in the course of this debate, a most instructive Paper entitled "An Analysis of the Sources of War Finance and the Estimates of National Income and Expenditure for the year; 1938–1943" (Cd. 6520). You will find on page 20 of that Paper that in 1938 we were making from national funds payments due to unemployment and the relief of poverty amounting to £113,000,000. In 1943, when we had full employment, the figure was £17,000,000. These losses from strikes, sickness, absenteeism and unemployment are all unproductive overhead charges which, considered from an economic point of view alone, we cannot ignore when we compare the future cost of Health Services with the past, and in the aggregate they amount to vast figures.

I hope that I have not dwelt too long for your Lordships' patience on this subject. I have done so because I am anxious to show that there is this close association between improving the general social conditions of the country and improving the earning power of the country. To make these improvements, even at some cost, may be a beneficent and humane action on the part of the State, but I believe that it is one which will be commercially profitable. To do these things, however, is not the same as to promise a new heaven on earth for our soldiers when they return, and I am glad that the noble Earl said what he did on that point. The statement that our fighting men are fighting for better conditions of life when the war is over is an inadequate estimate of their patriotism; I agree with the noble Earl there. They are fighting to beat the enemies of this country, and that is enough. But they do share the hopes which we at home have too, that there will be a better and a fuller life afterwards, a life in which the individual is less liable to the malevolent effects of outrageous fortune and of mischance. I think that it is the unfairness of misfortune which has created so much social instability. We who are in the Government believe that by an extension of a system of contributory insurance—I emphasize the word "contributory"—the magic of averages may come to the rescue of the individuals who suffer from misfortunes which arise from ill health or from the failure of employment.

The future as I see it—perhaps I am not quite at one with the noble Earl here; I do not know—is not going to be a bed of roses for any class in this country. Our potential wealth is very great, but the truth is that we have spent our substance. We have spent on this war the savings of years. We have been able to conduct the war—a very long war now—and to pay for our vast Armies and their equipment by borrowing from one another and from our friends. The debt will remain when the war is over, and we shall all have to work very hard and with the full employment of an extended capacity in this country if we are going to meet the obligations of that debt. However, hard work is nothing new to the people of this country. I do not believe that there can be prosperity without sweat. History shows that we have been through this before. If we so will it as a nation, then I believe that we shall overcome, in due time, the burden of this debt. I do not believe that we shall be any less happy because we all have work to do. I think the nation will be happier if it can retain the national spirit that it has now, and the feeling that all the time we are working not only are we working for our private profit or our wages but that as a result of our labour the country is benefiting.

We must, however, have the conditions which will contribute to a full expansion of individual capacity, and I am therefore a little less fearful than the noble Earl about the expenditure of money on Social Services. I believe that they will come to pay a very handsome dividend both to the Exchequer and to human happiness. I do not judge that there is very much disagreement between myself and the noble Earl as to these general principles, but I am sure that I must be irritating him a little, because he must be saying "But have you counted the cost?" The answer is that we have; I can assure him that the Government have constantly before their mind the question of how much these things are going to cost. The Chancellor of the Exchequer to-day is daring enough in war, but, believe me, he is no spendthrift.

Moreover—and I think that this must satisfy the noble Earls, Lord Glasgow and Lord Stanhope—whatever plans we have we are submitting them to Parliament. This is not a question of the Government rushing into Social Service expenditure and coming to Parliament and saying, "Here is our legislation." We have very deliberately adopted the system of producing White Papers. The object of the White Paper is to enable a frank discussion to take place in Parliament before we embark on legislation; and before Government credit is too deeply involved we listen to the views of Parliament. Parliament is therefore in no danger of being rushed into expensive commitments without a full knowledge of the expenditure which it is incurring, and the responsibility whether we do these things, and when we do them, must properly rest squarely on the shoulders of Parliament.

I do not want to enter to-day on the broad issues of taxation policy to which the noble Earl has directed our attention, although I do not mind telling him that I should find it rather a fascinating discussion to have with him, but I must keep within the bounds of my own responsibilities. A noble Lord referred to the fact that during the war taxation is performing a double purpose, it is financing the war very considerably and it is reducing the spending power of the public. Without this check, we might easily—I think we should certainly—have been led into very high prices and into inflationary danger. I can assure the House that the Government are fully alive to the importance of reducing taxation when the war is over in order to encourage personal and industrial initiative and enterprise. But I beg the noble Earl, when he considers the social charges to which he has drawn attention, to recognize the great change which has taken place in the distribution of both income and taxation during the last few years. Since 1938 the number of people with incomes between £250 and £500 a year has risen from 1,745,000 to 5,500,000; the number of incomes between £500 and £1,000 a year has risen from 500,000 to 1,110,000; those with incomes from £1,000 to £2,000 have risen from 195,000 to 295,000; whilst the number of people with over £10,000 a year has remained unchanged at 8,000. The figures are given in the White Paper that I referred to a short time ago: the White Paper on National Income and Expenditure. Moreover, the rates of taxation on all incomes have considerably increased. I mention these figures because we no longer depend on geese that lay golden eggs.

If we are to have State schemes of social betterment they cannot be financed by taxing the rich to a greater extent than they are taxed now, and anyhow there are not enough of them left to pay for these schemes. The cost will fall, broad based, on the public at large, who will be the recipients of the benefits of these schemes. It will be for them—and I refer now particularly to the observa- tions of the noble Earl on the subject to which he directed most attention, that dealing with social insurance—it will be for them when the social insurance scheme is published to see, through their representatives in Parliament, whether they are willing to meet the cost, in contributions and in taxation, that will be necessary in order that they may have these benefits. Your Lordships will give a critical examination to these proposals when they are submitted to you after Parliament resumes. To-day I have refrained from discussing further the financial aspect of them. I hope I have not kept your Lordships too long, and I am personally grateful to the noble Earl for having raised what I think has been an interesting debate.