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Uncertain Factors Next Year

Volume 436: debated on Tuesday 15 April 1947

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There are many uncertain factors on both sides of next year's Budget. I haw already referred to a possible heavy loss of Income Tax next year. There will be much less E.P.T. revenue next year. Certainly we cannot hope next year to come anywhere near this year's high record for Miscellaneous Receipts. Much depends upon next year's expenditure. There are many terminal elements on the expenditure side, as well as on the revenue side, of the national balance sheet. What further savings shall we be able to make upon defence, upon oversea expenditure generally—partly military, partly humanitarian—such as feeding the fallen foe, which must end some time? What further savings can we make, perhaps, on the general total of subsidies? We do not know, and no one can tell yet. Furthermore, next year we shall certainly have a further increase in the expenditure on the Social Services. In particular, there will be an increase in the national expenditure on health next year, following on the transfer of the hospitals from local to national ownership.

Next year, my right hon. Friends the Minister of Health and the Secretary of State for Scotland and I will have to rearrange—we are pledged to this—the relationship of national to local finance, at a cost to the Treasury perhaps of a little money, because local authorities can be exigent and greedy sometimes. In any case, we are all agreed that we need to have a new block grant, better arranged and costing less to the Treasury, and, so far as its distribution among local authorities is concerned, acting to a greater extent than heretofore as a rate equaliser, giving more to the poorer authorities, and much less, in many cases nothing at all, to the richer, having regard to the rating relief which they will gain from the transfer of hospitals. That is one reason why we cannot regard this surplus as being available for wholesale tax reduction.

There is a second reason. This is a year when we ought, in any case, to have a Budget surplus. I have already stated several times, inside this House and outside that the aim of His Majesty's Government is not, as used to be thought the right rule, to balance the Budget each year, regardless of circumstances. Not at all. Our purpose should be to balance the Budget over a series of years. Each year we should consider, in the light of the financial and economic situation, the movement of prices, the level of employment, the relative dangers of inflation or deflation, whether, in that particular year, there should be a Budget surplus or a Budget deficit. I submit to the Committee that there can be no doubt that, on this test, this is a good year for a good surplus. There is a high level of employment. Prices are still rising—faster than we like. Unemployment, such unemployment as there is today, is due not, as in the old days, to a general shortage of purchasing power, but to shortages of particular things of factories in the development areas, of coal, of electric power, of spun yarn, whether cotton or wool, or of particular kinds of skilled labour.