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No Inflationary Break-Through

Volume 436: debated on Tuesday 15 April 1947

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Today there is plenty of purchasing power. That has been our aim. We have sought to lubricate the economic system with a sufficiency of purchasing power, much more evenly spread than before the war. That has been our aim, and we have achieved it. Therefore, deflation is no longer the immediate danger today. The immediate danger is of an inflation going beyond bounds, and breaking through the various controls that we have set up. So far, our price controls, our financial and physical controls, our production and our savings have held the inflation reasonably well in check. There has been inflationary pressure, as some of the writers in the Press say; but there has been no inflationary break-through the dams. Indeed, there is much more inflation in many other countries than there is here. Let that not be forgotten. We have managed our affairs with relative wisdom and competence, compared with some other parts of the world.

That is the position now. But another year, particularly if a trade depression started somewhere else in the world outside this island, deflation rather than inflation might be our pressing danger. In that case, if I were still Chancellor of the Exchequer, I should not hesitate to ask Parliament and the country to approve a Budget deficit, if need be, a large one, in order to redress that deflationary lack of balance. That is not the position now. If we are to balance the Budget over a series of years, we must earn the right to a Budget deficit in another year by recording a Budget surplus this year. Therefore, though I shall later propose to the Committee certain changes in taxation, some up, some down, the net effect must be to fortify rather than to weaken the revenue, both for this year and even more for the future years to which we must look forward. The Committee will recall that in my first two Budgets, within six months of each other, I made net reductions of taxation, which the Committee approved, of more than £500 million a year. The possibility of any further net reduction must now wait till next year.