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Miscellaneous

Volume 463: debated on Wednesday 6 April 1949

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28 The Profits Tax

Resolved:

"That the extent and incidence of the profits tax for past, current and future chargeable accounting periods shall be varied so as to give effect to provisions amending the law applicable to income tax allowances or deductions, or charges, in respect of machinery or plant, and to provisions as to the liability to the profits tax of persons, being underwriting members of Lloyd's or of certain other associations, who elect to take advantage of arrangements approved by the Commissioners of Inland Revenue as to special reserve funds."

29 The Special Contribution

Resolved:

"That Part V of the Finance Act, 1948, shall extend, and be deemed always to have extended, to Northern Ireland."

30 Settlement Of Appeals And Claims

Resolved:

"That any agreement, whether made before or after the passing of this Resolution, as to the way in which an appeal against an assessment to, or determination with respect to, income tax other than surtax, surtax, the profits tax, excess profits tax or the special contribution, or as to the way in which a claim for relief from excess profits tax, ought to be dealt with, and any withdrawal of any such appeal or claim, shall operate in the same way as a determination to the same effect by the Commissioners or other body having jurisdiction to hear the appeal or determine the claim."

31 Amendment Of Law

Motion made, and Question proposed:

"That it is expedient to amend the law with respect to the National Debt and the public revenue (other than purchase tax), and to make further provision in connection with finance."—[Sir S. Cripps.]

5.50 p.m.

After such a comprehensive and, indeed, masterly survey, not only of our national finances, but of almost every branch of our national life, the choice that falls to the Opposition speaker who follows the Chancellor is either to try to pursue him, heading by heading, through two and a half hours of condensed and brilliant oratory, or to content himself with brief comments on the manner of the performance while leaving the matter to later gestation. I at once reassure the Committee by saying that the latter course is the one which I propose to pursue. I do so with the greater pleasure because no one could have listened to the Chancellor's performance today without rating it as among the very best put up by any of the Chancellors to whom we have listened.

I think that the manner in which the right hon. and learned Gentleman conducted us through all he had to tell us, the manner in which he gave us an occasional symptom of encouragement, salted with the rebuke which, no doubt, our national resurgence occasionally requires, was extremely able. There were one or two occasions when I felt almost a little sympathy for one with Gladstonian Liberal instincts, wrestling with the legacy of Socialist finance, but still, the right hon. and learned Gentleman contrived even that marriage with a great measure of success, and I am sure that the whole Committee, irrespective of party, will congratulate him on a speech of really outstanding brilliance, even for him. When we come to criticise, as we shall, the contents of that speech, we shall do so with the recollection of a performance for which we are all grateful.

5.52 p.m.

Like the Deputy Leader of the Opposition, I wish to add my congratulations to the Chancellor of the Exchequer on an outstanding performance. If this were the occasion merely to consider the Budget Resolutions one would, of course, have to give them much study and, naturally, would not speak at length after my right hon. and learned Friend's Budget speech. But this occasion is something more than that. It is, after all, an economic survey and we are, therefore, entitled, if we are fortunate enough to catch your eye. Major Milner, to give some consideration to the general background which the Chancellor sketched out and deployed so very skilfully today.

I should like to congratulate my right hon. and learned Friend on his very great achievements during the past year. I do so perhaps the more sincerely because, in certain respects, I must make criticisms which I think have got to be made. However, I hope I can look at the whole matter generously enough to say that we all appreciate not only his skill but also the excellent manner in which he has piloted the country through a most difficult period, especially as regards capital investment, imports and exports, and the dollar deficit—the most intractable question of all. At the same time, some of us feel that the steps which ought to have been taken, even in these austere times, to deal with many things we have fought and worked for for so many years, have not been taken. I appreciate that a Government, even a Socialist Government, cannot turn the helm in the direction of Socialism immediately. It is a slow process; the effort must be made by easy stages. Nevertheless, I think it is right to call attention to some grave abuses in our economic and national system, and to certain grave inequalities.

There has been a call for austerity, hard work and longer hours of labour, and the balance must be watched very carefully in making these appeals, particularly when they are answered, as they have been by our working people, so effectively and wholeheartedly. Many requests for some alleviation of austerity have been refused. Recently, old age pensioners were refused a further pensions increase—I will not argue that now; there may have been justification for it—but, still, there was a refusal. Insistent requests have also been made for equal pay for equal work as between men and women. These, too, have been refused. On the other side of the picture, we see a considerable increase in the salaries of higher civil servants, which leaves many wondering whether the balance is being held evenly.

I must call attention to the fact that the White Paper on Personal Incomes, Costs and Prices, issued a year ago, when the Chancellor called for all-round sacrifices, said this:
"There is no justification at the present time for any rise in incomes from profits, rents, or other like sources."
I recall that at that time the Chancellor asked the Federation of British Industries and associated organisations not only to show general restraint, but also for a definite plan for price and profit decreases. That call was made in a letter which my right hon. and learned Friend sent to the Chairman of the Federation. The request was entirely ignored and bypassed. Certainly, there were small price reductions but there was no general scheme for price decreases. Still less was there any scheme or plan for profit decreases. Both were side-tracked, and all that the Federation offered—and it was a hollow offer—was some kind of ceiling on dividends. But even that very poor, trivial offer does not seem to have been adhered to by industrial and financial interests because we find, on page 34 of the Economic Survey, that gross dividends distributed have increased by no less a sum than £25 million.

Further, in recent correspondence with the Chancellor, the Federation and associated organisations say, quite clearly, that they can no longer be held to a policy of a ceiling on dividends. Instead, they suggest what they call a policy of restraint and moderation. What that means is very obscure to me. It is something less than the very trivial and meaningless ceiling on dividends. That was very trivial, because we all know that dividends have been and are running at incredibly high levels, and when the Federation of British Industries and associated organisations tell us that they can no longer abide by that so-called restraint, and that now they offer nothing more to the Chancellor of the Exchequer than a policy of restraint and moderation, one wonders what it is likely to amount to. It will amount to very little indeed, as anyone who has studied the history of this matter during the last 12 months must agree.

Entirely by-passed and ignored was the request by the Chancellor of the Exchequer to the Federation of British Industries and associated organisations for a scheme of decreased profits, as distinct from dividends. We find in the year 1948 that the trading profits of companies went up by no less than £246 million. In 1947 the gross company trading profits were £1,393 million, and in the year just ended they went up to no less than £1,639 million, a very considerable increase even in these days when we think in terms of millions. I stress that because I recall that a general all-round forbearance, moderation and restraint has been asked for, and largely accepted by the working classes. I call the attention of the House to this tremendous increase of the trading profits of the last year as compared with the previous year. It is no less than three times the amount that the gross trading profits were in 1938. Details of that will be found in table 4 on page 8 of the White Paper on National Income and Expenditure.

Lest anyone should take pains to compare that with the amount of increased wages, I would call attention to the fact that whereas this increase in gross profits of companies has gone up by 17 per cent. wages have increased by only 12½ per cent.—an increase very largely justified and accepted by the Chancellor of the Exchequer. Included in the increase in wages in the year 1948, compared with 1947, is the element of the greater number of workers engaged in industry. It is not solely an increase in the basic rates or in the actual wages received.

Another matter on which I feel strongly, and which I should like to mention now is the matter of company reconstruction. For quite a long time I have been considering this matter and bringing it before both the nation and the Chancellor of the Exchequer. I have had some correspondence with him about it. The reason I feel very strongly about this is that it is widespread and is being extensively used and abused, and is something which is extremely unhealthy and detrimental to our national economy. In spite of all the progress made, about which we have heard today and which the Chancellor rightly referred to, there is still a grave gap and a very grave danger. The Chancellor of the Exchequer took great pains to stress the fact that we were by no means out of the wood.

Company reconstructions are entirely wrong and pernicious, because there is a tremendous increase of share capital without any increase or benefit in the way of actual capital. It is one thing to float a new issue on the market, which is entirely justified when there is development of a concern, but it is an entirely different matter to reconstruct a company and to issue a greatly increased number of shares which are handed out to the existing shareholders. The usual procedure is for them to sell for their personal benefit a proportion of these newly inscribed shares. There is no benefit whatever to the company, and, on the other hand, it has an entirely detrimental effect, because it inflates the financial structure and tends to send up and keep up prices.

I cannot understand why in case after case the Capital Issues Committee have agreed to these company reconstructions. I am not going into the details, though I could if any Member of the Committee questions it, but I can summarise what has happened in 100 cases, which I examined in the year 1948. I appreciate that they have got to be flourishing companies before they can go through this process, but there are very few companies, as far as I can ascertain, which are not partially or fully flourishing. Certainly those of which I have got details are very flourishing, and they cover practically every form of manufacture and industry. Profits which just before the war were slightly over £3 million have increased to well over £16 million in 1947–48. In other words the profits have gone up five times. I mention that to show, first, that they are very flourishing companies and, second, that there has been no particular restraint or diminution in their profits.

The nominal capital of these companies before the recent reconstruction was £15½ million. After reconstruction the market value of the new share issue went up from £15½ million to no less than £97 million. Here is the particular point I want to make—the shareholders received in cash £31 million for a portion of these newly inscribed shares, which they have received because of the reconstruction of the company, with a new company taking over the old.

Is it a good, sound and healthy thing that between them these individuals should net over £31 million in cash, which is tax-free because it is a form of capital appreciation? This does not go through the Treasury records or machinery. I consider it a thoroughly unhealthy state of affairs that these transactions should be sanctioned by the Capital Issues Committee and that these huge sums of money should accrue to the fortunate shareholders of the reconstructed companies without being subject to tax. It might be argued that this is only a transfer of money from one set of pockets to another. That may be so. That is not my main argument against these reconstructions. Nevertheless it is a minor argument of some weight that these individuals should be able to corner this amount of cash entirely tax-free, and that this process should be going on every day. One has only to look at the "Financial Times" or the financial colums of "The Times" to see that it is going on continually and, as far as I can see, increasingly.

Of those 800 or 900 shareholders, 600 still hold shares which will bring in dividends of £3,700,000 a year. When I said that they had marketed shares to bring them in this tax-free sum of £31 million, I hope I made it clear that they were not selling all their holdings. By no means. The usual practice is to put on the market at inflated values a portion of the holding, but still to hold a proportion of these newly-inscribed shares, which are, of course, extremely valuable. I could give instances where the expectation of dividend is 25, 40, 50 per cent. and more. It illustrates the unhealthy state of affairs when a greatly increased and inflated holding of shares can still be expected to produce the same dividends. That is what is happening in case after case. That can mean only two things, an inflated financial structure—a thoroughly unhealthy thing which may come crashing down at any time—and inflated prices. I noted that in these 100 cases there is very liberal directors' remuneration of £1,250,000 a year, and the issuing houses and the underwriters also come in for very large sums over these transactions, as might be expected. In the 100 cases the issuing houses come in for something like £800,000 and the underwriters £845,000.

I appeal to the Economic Secretary, as I have appealed to the Chancellor without avail, to do something about this pernicious, wrong, unequal system. Many of us have been working in the Labour Party and for Socialism for many years and we know that we cannot achieve our aim overnight; but we ought to be moving towards the basic rule that individuals can take out of the common pool only what they put in, and no more. Perhaps we are slowly and painfully moving in that direction, but when we get practices of this kind, and the resultant wealth and luxury through individuals netting as much as £1 million tax-free over these company reconstructions, we see that we are still a long way from the ideal that no one should take out of the common pool of the community unless he puts in an equal amount.

It is not the middle classes any more than the workers against whom we are inveighing in relation to this system. Doctors, accountants and other professional men put into the pool just as much as they take out, and many of them and many workers put into the pool more than they take out. However, on the other side of the picture we get this vicious state of affairs of a small minority drawing off from the pool of goods and services far more than they contribute. One cannot blame them if the system is allowed. This system of company conversions is allowed, I regret to say, by the Capital Issues Committee. There is also the whole set-up of the City and the City interests which are largely there to facilitate this kind of process.

While I again congratulate the Chancellor of the Exchequer on his masterly performance this afternoon and the great services which he has rendered in so many directions while Chancellor of the Exchequer, I appeal to him, through the Economic Secretary, to look at the whole structure of profits and dividends and, above all, at this pernicious and wrong system of company reconstruction.

6.17 p.m.

I am sure we all congratulate the Chancellor on the sustained effort and the clarity with which he introduced his financial and economic survey. I thought that he resembled the "Iron Chancellor" when I saw him standing at the Despatch Box resisting the pressure from the left and from the right. On an occasion like this, we always feel admiration for the able Treasury and Revenue officials who labour on this massive annual balance sheet and the great work which they put in to enable this to be put before the House of Commons and the nation by the Chancellor. The country owes a great debt of gratitude to the high standard of these able officials of the Treasury and the Revenue.

This is certainly no Election Budget. Last week the official Opposition were concerned at the date of the Budget. They seemed to think there might be a connection between today's date and tomorrow's elections. This is no pre-election Budget and it is certainly no municipal election Budget. I have no doubt that the Chancellor of the Exchequer will raise no wild joy over the B.B.C. tonight when he explains his proposals. It is clear that he will leave to the Minister of Fuel and Power the extent to which we can get "lit up" and to the President of the Board of Trade the setting of the people free.

This is another Budget of taxation and tears, in 10 years of austerity. The Chancellor had a choice. He could have introduced a Liberal expansionist policy which would have meant more and cheaper goods available in the shops, which would have meant more money to spend as an incentive, which would have meant more vital production in relation to the 360 million dollar annual deficit and which would certainly have meant more competitive exports, and, in turn, more Income Tax rebates and reductions; in other words, a healthier and happier economy. The alternative is this restrictionist or disinflation policy which is dull and exacting, and is turning us all into an unenterprising mass, psychologically and nationally, of people who do not try any more and forget to smile any more. The Chancellor has continued his rake's progress on his disinflation policy. He has resisted any reduction in the Purchase Tax, and this Budget will certainly not break the shopping strike—this will be no election policy—when the shops are full of goods which, unfortunately, are not only too dear but too dull in their design.

Listening to the right hon. and learned Gentleman's important Economic Survey—upon which the life of this nation in 1952 depends—I questioned whether this was the Budget to assist the export trade in the currency and cancellation dollar crisis which this country and other countries as well will have to face. I do not think this Budget will assist the export trades to make the tremendous effort for which the Chancellor has appealed, to capture the most difficult export market in the world, where competition is more intense than anywhere else, the North American market. The coming recession or shakeup or the climacteric of collectivism, in my view, will make a hash of many of the proposals in this Budget. The Chan- cellor ought to write the word "incentives" over all the rooms at the Treasury. If ever there was an occasion when a Budget should have been prepared upon the basis of incentives, it is at the present time, if we are to capture the North American export trade for which the Chancellor has appealed again today.

Beer: we are to have a penny off the pint. Tobacco: as far as I can understand the proposals, no change. P.A.Y.E. and some reduction or some help with regard to bonus or overtime, instead of allowing the worker when he is doing his overtime to work for the Chancellor of the Exchequer: nothing at all. Income Tax reduction as an incentive: nothing at all. And the housewife. After all we heard about appeals by the various political parties at by-elections, municipal elections, and so on, as to the vital importance of the housewife's vote. We have the Tea Duty, down 6d.; sugar down, but cheese up 4d., meat up 4d., margarine up ld., butter up 2d. Football pools are up, matches ½d. up, the telephone service increased in cost. Death Duties are increased, and a machinery allowance on the new cost increase from 20 per cent. to 40 per cent. At the tail end, the small sprat to catch a mackerel—or snock—the penny a pint off beer.

I referred to the Chancellor of the Exchequer as the "Iron Chancellor." But the worker, when he listens to these proposals on the radio tonight, and when he takes up his daily paper tomorrow and reads of these changes, will go back to his football pools and dog racing with a shrug of his shoulders and will say there is no incentive there for him to put in the extra work for which the Chancellor of the Exchequer appeals so constantly and, in this Budget, so dramatically.

As regards industry, I think that executives—I will not mention the capitalists—will be thankful for the small mercies but their reaction to this Budget will be to inquire the date of the next one. I do not say they will inquire the date of the next Chancellor, but that is all they will find in this Budget to assist them in the vital question of increased production—as the Chancellor said in his speech, increasing the volume of production in order to have a greater distribution of the goods that are consumed in this country. As for the old people—on whom there is a growing burden in the high cost of living in this country today—there is nothing in this Budget at all to enable them to cope with the rising cost of living. I do not think that astronomical figures in a Budget interest the ordinary man in the street, but I was rather surprised that the Chancellor, in referring to long-term paper indebtedness, did not refer to the £1,675 million which is the long—term capital responsibility for the nationalised industries—civil aviation and so on—apart from the revenue cost which will fall on the Exchequer every year.

Then there are the national overheads. The Chancellor is to send a letter to the spending Departments telling them that we are spending £3,000 million odd a year now and that they must not increase their Estimates in the coming year. I have referred to the shake-up, or the climacteric of collectivism, which is the enormous national overhead on the people of this country at the present time. I had hoped that the Chancellor would come here this afternoon and make a bold revolutionary proposal and say, "I will get rid of the Ministry of Supply which is redundant and obsolete. I will get rid of the Ministry of Civil Aviation, which is solely a spending Department and does not help aviation, civil or otherwise." After last night I had hoped he would say "We will abolish the Ministry of Food"—not direct them not to spend more; not make those proposals which he did today as a result of which there will be an increase in the cost of living. I had hoped he would have said, "I will merge the Ministry of Food with the Ministry of Agriculture; in fact I will modernise the whole of Whitehall, local as well as regional public administration, in order to set an example of efficiency and get a reduction of the national overheads which every producer in this country has to carry as an overhead charge."

I called it "taxation with tears." On these Benches we welcome the reliefs and the concessions but, sooner or later, from that Despatch Box, this chancellor or another Chancellor will have to introduce a sound Liberal Budget based upon an expansionist policy—more for everybody by an increase in the volume of production—and a national wages policy with it. Otherwise, in 1952 we shall face a financial and economic crisis in this and other countries which will make 1931 look like a Bank Holiday.

6.29 p.m.

Various adjectives will, no doubt, be applied to this Budget. Coming from that side of the House some people will call it a courageous Budget, because the sentiments expressed and the policy pursued would perhaps be what we should expect to have heard from this side of the House. It is certainly.a cautious Budget and to that extent I think the Chancellor is right. We are not yet out of the wood, and the difficulties which face our export trade, upon which so much depends, still lie ahead. We are moving, as the right hon. and learned Gentleman reminded us, into more difficult markets and are likely to be subject to more import restrictions. I call it a consolidating Budget, one in which the Chancellor says, "The Government have made certain advances in the social services and this is a time when we must, as it were, call a halt." Perhaps in the policy pursued by the Budget we see a forecast of the policy which the Labour Party will put forward for the next General Election.

I associate myself with the remarks of the Chancellor about the efforts of the British people during 1948. I think that what they have done is remarkable. But a great deal of the credit for that must go to the Chancellor himself. He has given the right kind of lead and has shown outstanding courage. It is to him more than to any other single individual, that credit must go for the advance which we have been able to make in 1948.

Now, about the new taxation. The increased charges for telephones are a mistake. I should not be surprised if, before we have finished with the Budget and the Finance Bill, the Chancellor were to realise this and withdraw the proposed additional charges. Anything that is likely to impede the further use of the telephone is a bad thing. Today a telephone is not a luxury, neither is it only a convenience; it is a very considerable aid to efficiency. The cost of a telephone is already quite high enough, and it will he very difficult to convince the great masses of the people, at a time when the Post Office has such a big surplus of revenue, that those who use the telephone should be further taxed by an increase in charges, for that is what it amounts to. It is a tax confined only to a certain section of the community: those who use telephones. The postal services as a whole should be taken together and on balance they show a very large surplus.

Nobody could have expected any spectacular remission of taxation in the Budget, for the times do not make that possible, but, when they read the details, people will find that they have got less then they expected. When the Chancellor has so very little money at his disposal for the making of concessions, one naturally asks whether the best use has been made of such money as he is able to hand back by way of remission of taxation. This is where I criticise the Chancellor's Budget. Of the very limited amount of money which he is prepared to concede to the taxpayer, £18 million alone goes to the reduction in the price of beer. Like everybody else, I am glad that beer can be sold a penny a pint cheaper, but I must ask whether that is the best possible use which the Chancellor could have made of that amount of remission of taxation. Every one of us can think of other directions in which it could have been applied. A concession could have been made, for instance, with post-war credits. It would have been a very reasonable thing for the Chancellor to have said that when a man dies his post-war credit automatically shall be paid to his widow. By doing so, the Treasury could alleviate a great deal of hardship; hardship, however, is something of which the Treasury apparently has no knowledge.

We all know also that there are cases of hardship where people lose their employment and have to seek, perhaps, National Assistance, but are not allowed to receive their post-war credits, the payment of which would make all the difference in the world to them. I believe also that a reduction should be made in the present age limit for their payment. In any event, I would much prefer that the reliefs which the Chancellor proposes to make in other directions should have been applied for this purpose. The reduction of a penny per pint in the price of beer is not likely to make any serious difference to the person who drinks beer or to the amount which is consumed. Such a proposal shows a lack of propor- tion. If the Budget can be said to include anything at all which has an eye on the Election, either now or in the future, it is the penny a pint off beer; but when, throughout the rest of his Budget, the Chancellor obviously had regard to more serious and important issues, I regret that this should be so.

I am very sorry also that there is nothing in the Budget which will reduce the cost of living. The Chancellor is living in a fool's paradise if he imagines that there are not a tremendous number of people who find the cost of living an increasing burden. The biggest contribution which could be made to a reduction in the cost of living would be by a reduction in the Purchase Tax. There are a great many more things now on sale in the shops but for some months sales have declined for the simple reason that people have not the money with which to make purchases. It is a pity that the Chancellor has not been able this year to make some concession in the Purchase Tax, as, I think, he might have done and as people expected of him.

Therefore, while in the main I support the Budget, and applaud the courage which the Chancellor has shown in introducing it, I must confess that it contains disappointments. Those disappointments will be shared by a great many people outside this House. I hope that even now the Chancellor may think again about the matters to which I have drawn his attention and that in some respects he will make adjustments and produce at the end a Budget which would be more welcome to the great mass of the people.

6.38 p.m.

The hon. Member for Eye (Mr. Granville) said that we should have had an expansionist Budget. I should like to comment upon that. It seems to me that if a country that is up against great economic difficulties, as ours is, has got to expand in the years ahead, the only possible way of doing so, apart from increasing productivity and improving methods of co-operation—about the need for which we are all agreed, although we do not know exactly how to achieve it as rapidly as possible—the only way is by consuming as little as possible and by investing as much as possible in improving the capital equipment of the country. I do not believe it would be a step towards true expansion to say, "We will let the people consume much more this year," for that could only be done at the expense of cutting down investments for improving the equipment of the country.

The hon. Member was a little misleading, even to himself, in imagining that great financial economies could have been made by such steps as merging the Ministry of Food with the Ministry of Agriculture. The economies which lie in such a field are only fractional in terms of millions of pounds, however ruthlessly such steps might be carried through. The only way to economise substantial sums on the expenditure of different Ministries is by telling the Ministries as a matter of policy that they should stop doing some of the jobs which they are now doing. If we tell the Ministries to do less work, they will cost less money. If the hon. Member had given a list and said, "These are the jobs which Ministries are now doing but which I think they need no longer do," he might have shown how economies could be made which might have run into tens and twenties of millions.

I was not speaking of a "Geddes Axe"—I know the fallacy of a "Geddes Axe." I was talking of efficiency in national administration which is important in relation to the technique of organisation of nationalised industries and so on. In all those things efficiency is related to economy.

I quite agree. The hon. Member and I are in agreement and are in favour of the sort of progress that is made by the Organisation and Methods Department of the Treasury. Perhaps he feels that if he were in the place of the Chancellor of the Exchequer, this work would be going forward more rapidly and with more drive behind it; but it could not mean, by simply improving efficiency, an economy by 1950 of more than the order of £250,000 per Department and perhaps running up to £5, £10, or £15 million in all. The self-misleading of which the hon. Member and others are guilty is in thinking that this would be a way of noticeably reducing taxation and enabling all of us to consume more goods. If we try to consume more goods, either there will be inflation, or a cutting down on capital re-equipment, and to cut down on capital re-equipment is not an expansionist policy.

The hon. Member for Cheltenham (Mr. Lipson) said that this Budget was like one which would have come from a Chancellor from the Front Opposition Bench. I do not think that can be made out, because a Chancellor from the Front Opposition Bench would long ago have gone beyond the suggestions made by the hon. Member for Eye for improving the efficiency of Departments and thereby saving a few quarter millions here and there. A Chancellor from the benches opposite would long ago have gone to where he could get great economies of expenditure, cutting down the jobs the Departments are doing and particularly the social services, some of which, of course, he would not have had to cut down for the simple reason that he would not yet have introduced them. Thank goodness, therefore, we have had a Budget from a Labour Party Chancellor and not from a Conservative Party Chancellor.

My judgment, however, is that this Budget will come as something of a shock to public opinion outside this House, and for my part I think it will come as a somewhat salutary shock. In the last few weeks I detected, if I was not mistaken, a rather dangerous trend of public opinion—an increasing belief that somehow or other for the inhabitants of this country things in general ought, under the process of some moral law, to be getting better and better, easier and easier, as successive months and successive years roll by. This mood of, "Here we go back to normal, boys" has perhaps been encouraged by the Minister of Fuel and Power putting on the lights of London again, although I see that the coal consumption involved was very small and perhaps the pleasure very great. It has also been encouraged by decontrol of various kinds, and the nation is drifting into a thoroughly unhealthy attitude of "Good old 1938. Let us get back as quickly as we can." This country is not going back—

It is certainly not going back to what hon. Members think normal. On the contrary, in a changing and ever more difficult world, the alternative for us is either to go forward and to become a very different kind of com- munity, or at best to sink into innocuous desuetude as a community and, at worst, complete social chaos. I hope this Budget may have dispelled this attitude of "back to normal" and suggested that things do not of themselves get progressively easier, and easier for this country. We too often talk as if things ought to be getting better because we are each year one year further away from the war. We often hear speeches which begin "Four years after the war, ought it not to be better than this?" Next year, of course, it will be five years after the end of the war and people by then will think it ought to be getting better still. I would point out that as the years go by we do not get further and further away from something in the past which was causing us difficulty, but further and further into an ever-developing world trend which inevitably builds up greater and greater difficulties for this country.

I have pointed out over and over again on public platforms, and once or twice in this House that for the last 50 years there has been a trend, and continues to be a trend, by which all the things this country makes and wants to sell get commoner and relatively cheaper in the markets of the world and everything we most desperately need and want to buy gets rarer and more expensive. That has been a world-wide trend working against us for 50 years past. It may vary over a six months' period and go in our favour, but over decades this trend moves against us inexorably and, therefore, makes our problem successively harder; and anything we can do to increase productivity will only just enable us to keep pace with this developing trend.

Furthermore, in the next three years it will become harder and harder to free ourselves from the necessity of asking our generous friends in the United States for the aid which they give us. I am happy that we only ask for 900 million dollars as compared with 1,200 million dollars last year. That is a step towards economic independence which we have taken in these 12 months. It will become harder to take the next three steps of 300 million dollars less in each of the three following years. When that task has been achieved, there is another world-wide task which will be imposed upon us, if we are to stand any chance at all of sustaining our way of life and our values in this 20th century of world-wide revolution. That task is that from the moment we have freed ourselves from extraordinary American aid, it will become incumbent upon us year by year to make ever-increasing material resources available to the many millions of inhabitants of backward countries which are associated with us. We shall have to choose either to make contributions in capital development to those territories, helping them in the building of everything they need—roads, harbours, schools, hospitals, teachers' training colleges, etc.—or see those peoples one by one break from partnership with us and pass over either into chaos or into Communism, or both.

For all these reasons, I hope that this Budget will have done something to shatter the British daydream that somehow or other there is or should be some mysterious factor in the situation which should be gently wafting us onwards and onwards to ever easier material times. It may be thought that the things I am saying might give some electoral comfort to hon. Members opposite, but on reconsideration I think that the views I am putting forward, when one comes to look at them from a political point of view, are much more favourable to the political doctrines of the party to which I belong. If there was any prospect of enormously increased material resources becoming available to this country of ours, there might be a certain measure of grim rugged expediency associated with the happy slogans "Set the people free" and "Let the best man win." In those circumstances that might be the most expedient, the easiest and simplest way to run the show. But that policy becomes psychologically and politically impossible and can only lead to complete social chaos and industrial breakdown if, as I suggest, these expectations of unlimited material well being waiting for us just round the corner are purely illusory.

If my assessments of the material long-term prospects of Britain are correct, the planning of social justice becomes not less necessary but ten times more necessary than ever we previously thought it was. I wish to support what was said by my hon. Friend the Member for Norwood (Mr. Chamberlain). After all it is, in the last resort, the man or woman who puts on overalls and goes to work with his or her hands in the factories, or puts on corduroys and goes to work with his or her hands on the land—working with machines in their hands more and more, if possible—upon whom we depend. They, the working population of the country, will, I am sure, appreciate the situation in which our country finds itself in a changing world, and will give everything that is required; they will be moderate and abstemious in their demands on the total wealth of the nation, on the one condition that they are satisfied that they are living in a country which is becoming ever more and more fair and just to all its people.

It might be thought that I would feel a little gloomy in offering the forecast which I am offering to the Committee tonight. Not at all. I do not see any reason why the people of this country should not be very much happier than they are in spite of the fact that they are not going to be, as I think, very much richer. But we must look at some of the psychological consequences of not being richer. Some of the inequalities which are in any case economically not very important may be psychologically tolerable if we think of them as something with which we are putting up for a year or two until things get very much better all round. If the material wealth available to this country, however, is not likely to increase in a sensational and dramatic manner in the next few years, inequalities which might otherwise seem psychologically tolerable become intolerable when put against the realities of the situation confronting us.

I think that my hon. Friend the Member for Norwood touched accurately upon some of the important inequalities. It is all very well to offer to our working population as a reason for gaiety and enthusiasm the unquestionable fact that the poorest man in Britain is probably enjoying a standard of living 10 times higher than the world average. Someone may wish to say that it is five times or four times higher; the statistical data to make an exact comparison are probably not available. The exact comparison does not matter for the purposes of my argument. It is all very well to tell the man who works on the floor of the factory that he and his family are four or five or 10 times better off than the world average. That is not very comforting if he says, "Oh, yes, but there is someone else who never comes and works on the floor of the factory, who never seems to me to be doing any socially useful work. I have just seen in the paper that he has netted so many thousands of pounds for himself by doing nothing." The workman says that that is not fair; in the old worn phrase, people will not "wear it."

I believe that there needs to be in the next few years a reduction in the top salaries that are paid on our Government Boards and in private industry. I believe it is essential to set up now a strongly supported commission or committee of inquiry of some kind. If it cannot be done officially by Members of the Government I hope that it will be done unofficially by back bench Members of the Labour Party and others outside who can be associated with them—a powerful inquiry to investigate all the means by which some citizens are enjoying a standard of living which does not correspond to any contribution which they are making to, the well being of the community. I believe it to be part and parcel of the psychological task of persuading the generality of our people to accept this Budget that they should see that such an inquiry is established and that it is getting to work and means to achieve results. I commend that proposal to the Government Front Bench and to my colleagues in the Labour Party. I believe it to be of vital importance to the wellbeing of our future that we should press ahead with it.

6.58 p.m.

I entirely agree with the remarks which have been made by my hon. Friend the Member for Gravesend (Sir R. Acland) about the necessity to set up a commission either a Government Commission or one of back benchers with a view to equating the incomes at the top with those at the bottom. It was a great mistake for the Government to embark upon a great programme of nationalisation by giving huge salaries of £8,000 and £5,000 a year to people on the boards at the top of those industries. I believe that there is a definite demand in the country, and especially among the miners whom I represent, in favour of the constructive proposal which has just been suggested.

I wish to express some disappointment that the Chancellor of the Exchequer did not see fit, in his survey of the economic position of this country to give us some indication of what are likely to be the economic consequences of the Atlantic Pact and the economic consequences of the Foreign Secretary's policy. I believe that there was too much of a tendency in the Chancellor's speech to skate over interesting developments that are bound to come about in the economic structure of our country as a result of what I believe to be profoundly shortsighted ideas of foreign policy.

It was rather noticeable that the Chancellor laid the stress on and emphasised the economic consequences of the social services. He talked far more about burdens of that sort and the fact that we must seek realism so far as the social services are concerned. He did mention the Defence Estimates, but he relegated them to the background. He omitted to face up to the economic implications of this huge burden of £760 million with which we shall be saddled for armaments—non-productive expenditure—for every year that goes on. He even intimated that, with the development of Western Europe, we can expect no reduction in the £760 million spent on the Army, Navy and Air Force, but rather, as a result of our Western Europe defence policy, we could look forward to a possible increase in this expenditure. Even if the Chancellor is the economic and financial wizard that Dr. Schacht was, I do not think he will be able to avoid the sort of problem which Germany had to face. There is the possibility of inflation not merely as a result of increases in the social services, but as a result of huge increases in armament expenditure to which we have been committed as a result of the Pact which the Foreign Secretary has signed in Washington this week.

I put a Question to the Economic Secretary to the Treasury asking exactly what were the financial implications and what were likely to be the financial costs of the new policy represented by the Atlantic Pact. He said that it was premature to say anything at the present time. I take the view that if it is premature to assess the economic future and the financial result of a policy, then it is premature to sign it and be committed to it. I do not believe that the Chancellor has taken into consideration the fact that this country is likely to become a huge armament factory for the purpose of the new foreign policy outlined in the Pact.

I wish to deal with the implications of some of these Estimates. For example, we have been told that the Treasury is to circulate to the various spending Departments a stern warning that there shall be no Supplementary Estimates. Imagine the effect that will have in the various spending Ministries. I wonder what effect it will have on the Secretary of State for Scotland. On receipt of this advice from the Treasury that he not to have additional expenditure, is the Secretary of State for Scotland going to say, "We now have to cut down on housing, on health services, on education, on the social services"? This policy will result in a situation similar to that which existed in pre-war Germany. We laughed when Goering talked about guns before butter. Now, nearly five years after the war, we have a Chancellor of the Exchequer talking about guns before cheese—because that is the implication of reducing expenditure on food subsidies. I fail to see that there is the slightest justification at the present time for reducing the food subsidies. The whole argument which the Labour Party has been using in the country at by-election after by-election, and will presumably use—

May I interrupt my hon. Friend? It would be a pity if it went out from this Committee that we were reducing the food subsidies. My right hon. and learned Friend the Chancellor of the Exchequer made no such statement, and he does not propose to reduce them. What he said was that there must be a limit to their increase, which is quite a different thing.

I accept the correction and I am glad it has been made, because I should be the last to wish to misrepresent in any way—

May I ask the hon. Member for South Ayrshire (Mr. Emrys Hughes) whether it is not the case that the Chancellor also said that the policy in the past had been to pay the deficit on bulk buying, in other words, the subsidy on food, and in future the amount would be stabilised and no further payment would be made; which means a reduction in the food subsidy?

I understood that that was the logic of the argument, but the Minister who will reply for the Government can correct any misapprehension that I may have created. Was not the argument of the Chancellor that the price of cheese will increase by 4d. a pound—

Yes, and butter and margarine. So I suggest that the effect of this financial policy will be to increase the cost of living to the lower section of the workers, the people who are doing the hard work in the country. I suggest that this policy is leading us in the wrong direction. Next year, as the cold war develops, we shall have increasing demands from the Armed Forces and we shall be told that we shall have to reduce food subsidies. That will be the inevitable logic of the arguments from the Opposition benches. I hope that when the circular comes from the Treasury to the Scottish office the Secretary of State for Scotland will say definitely, "We are not going to cut down or economise at the expense of the social services." I hope he will take a strong stand on matters of housing, education, and every kind of social service so very badly needed in Scotland and that he will say. "We shall have to oppose the Government in order to protect the standard of life of our people." I hope that the Minister of Health will do the same.

We know which are the most powerfully entrenched vested interests in the country. They are the defence Services. This year the Army is getting £304,700,000, and there has been a Supplementary Estimate. All the arguments used in the Debate on the Army were arguments brought forward by hon. and gallant Members on both sides of the Committee. They demanded changes in the structure of the Army which would inevitably result in increased expenditure on the Army next year. I can see the Treasury circular arriving at the War Office and the Secretary of State for War saying, "No." The Secretary of State for War is optimistic about the increased number of people he will get into the Army. These men will have to have arms and we know that the cost of arming a modern Army is heavy. I hope I am wrong but I can foresee that next year there will be a Supplementary Estimate from the War Office, and additional expenditure on the Army.

Suppose Field-Marshal Montgomery says, "I want more men: I want increased expenditure." Will the Chancellor put his foot down and say, "We cannot afford that, because it will result in inflation."? This year the Navy is asking for £189,250,000. Again, all the arguments in the Debate on the Navy, which came from experts on both sides of the Committee, were to the effect that the whole of the Navy would have to be re-modelled in the light of modern armaments. There is a sum of £8 million for research. What are they to do if, when they have brought forward their proposals for remodelling the Navy. the expenditure is not sanctioned by the Chancellor?

Is not the hon. Gentleman saying, in a rather longwinded way, that he would far rather have no Army, Navy or Air Force at all?

I have already explained my position quite clearly. I am endeavouring to point out the economic and financial implications behind the policy of those who believe that a strong Army, Navy and Air Force will result in the defence of this nation. I believe that they are going forward to an economic dilemma which cannot be faced. If their argument is right, we shall go forward to national bankruptcy.

At the Air Ministry this year they are spending £207,450,000. In the Memorandum justifying this expenditure we are told that the Estimate is £34,450,000 more than in 1948–49, excluding the Supplementary Estimate. We have had demands—we had them at Question Time today—for a stronger bombing force. Today I asked the Minister of Supply what was the estimated cost of the latest type of long-distance bomber.

The hon. Gentleman can just refer to Supply, but he cannot go into details of the Estimates or the particular needs of any of the Services. He may refer to them generally, but not in any detail.

My argument was that I submitted a question to the Minister of Supply today about the cost of this Service.

That is exactly what I have explained to the hon. Gentleman. He cannot go into any detail of any particular Service. He can speak generally about the Army, Navy and Air Force, but not in detail.

I do not wish to pursue a detailed investigation of the expenditure on the various Services. I merely wish to say that when we had the various Estimates before us we asked questions which were never answered. I defy the Chancellor or any of the Ministers who represent the Treasury to say that they know exactly what the £760 million is for. There is an iron curtain of secrecy round it. We are asked to budget for £760 million and the Ministers do not know exactly the purpose of it. I consider that we are going if not into a war economy then into a pre-war economy. We shall have the manpower of this country diverted from productive work into munitions and into the Armed Forces. Inevitably that must lead to a reduction of the standard of life, to fewer consumer goods and to the position which faced Hitler Germany.

I do not think that the Chancellor can avoid that dilemma. Next year he will have to come to this Committee and ask for more money for armaments. Pressure will be put upon him to reduce the social services so that more money may be spent on the defence Services. I see no way out of the dilemma. That is why this is a disappointing Budget. It is laying the financial basis of a pre-war or war economy which must inevitably reduce the standard of life of the people. From that point of view, it should be closely scrutinised by the Members who sit on the Labour benches.

7.15 p.m.

I have never before taken part in a Debate on Budget day. Having listened to something like 25 Budget speeches, I must say that my reaction to this one is a feeling of some very slight relief. We have at last a Chancellor of the Exchequer who has, if not the keenest, then certainly one of the keenest minds in what we call the Labour movement in this country. We have a Chancellor who has realised that for the last three years we have been living in an artificial Utopia. He has realised that, even at the expense of unpopularity in his own ranks, for the sake of the country he must apply a very slight brake—it is only a very slight brake—on the vast Socialist schemes to which we have been accustomed in this House for the four years since the termination of the war in 1945.

The hon. Member for Gravesend (Sir R. Acland) thought that the Chancellor had not gone far enough in the process of securing for us a classless society. The right hon. and learned Gentleman is going some way in that direction. There has been a steep increase in Death Duties. I am sure that that will please Members on the benches opposite. On estates of £1 million, 75 per cent. will be paid instead of 65 per cent., leaving only one quarter. Even on estates which would be regarded as reasonably moderate—those of £20,000 or £40,000—a considerable addition has been made in the process of eliminating and abolishing the middle and revenue-earning classes, apart from the working-class population. As far as I have been able to follow my history, every classless society ever invented has perished. If the hon. Baronet is expecting a very vast accretion to the incomes of the working classes by the abolition of the upper classes, he is greatly overestimating the amount they will receive. I understand that it is only likely to be something like 4s. a week all told on the wages of the wage-earning population.

I am sure that we appreciate the point of view put forward by the hon. Member for South Ayrshire (Mr. Emrys Hughes) who, I understand, is a sincere pacifist. He does not believe in armaments of any kind for the Army, Navy or the Air Force. I remember a time when the then leader of the Labour Party in this House held the same view. I refer to the late highly regarded Mr. George Lansbury. Our position during the years 1939 to 1945 would have been precarious if the views expressed by the hon. Member tonight had been the views that prevailed generally in the country.

At the risk of making the Chancellor perhaps a little more unpopular than he was hitherto in his own party, I want to congratulate him on bringing forward at last a Budget which begins to face realities for the first time since 1945. I am sure that the right hon. and learned Gentleman can stand that risk: it would be very difficult for his party to do without him. Whatever Chancellors of whatever party we may have in future, it is now quite clear that the Budgets which we have had in the past few years, with all the idealism and enthusiasm which they had behind them, were definitely bound to come to an end. I am very glad that a Socialist Chancellor of the Exchequer has seen the red light and has taken some steps to apply a slight brake to the immense demands that are always forthcoming, on the supposedly unfathomable depths of the pockets of the people of this country.

7.21 p.m

I did not have the privilege of hearing the speech of my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) in which he made his protest, which I desire to support, against the Chancellor's attitude concerning the Services and the expenditure involved on armaments. I, too, want to protest particularly on that matter, because the Chancellor seems to me not only to be satisfied with the tremendous costs of the Services, for which he has to make budgetary provision, but also positively visualises increases in the enormous amounts that are now put before us. It is to me an appalling situation that the Chancellor was able to say that, in a Budget speech coming just on top of the announcement of the signing of the Atlantic Pact. That Pact which is supposed to promise peace and common action, might at least have saved some of the individual items of expenditure, either of this country or of the other countries concerned. I certainly make my protest against the attitude which is being adopted now.

I want also to say a word or two, as early as possible in the discussions on the Budget, about the attitude which the Chancellor has adopted regarding some other matters of great importance. I have always congratulated the present Chancellor on his Budget proposals, and I have heard many Budgets introduced. Of all those I have heard, this is the most appalling. The Chancellor himself has said that a great appeal must be made to the country to produce more, and that even greater enthusiasm for the production drive is now called for. People must be told why it is, after the great drive they have made in the last 12 months, enormous profits have been made that never should have been made. On top of that situation, in the Budget that has now been presented, we find that increases in the cost of food are to be placed upon the people, which will, in my judgment, make it extremely difficult for many hon. Members to secure from the workers of the country that spirit of enthusiasm for which the Chancellor called at the conclusion of his speech.

Despite the difficulties which I know the Chancellor has to meet on this question of the food subsidies, I protest against his choice this time, if indeed any time must be chosen, to take that action. The difficulties which confront us arising out of the meat situation make it difficult to understand why now, of all times, it should be proposed to increase the price of meat, thus adding to the general disabilities of working women in the country. I make my very strong protest against the Chancellor having considered it necessary to bring in that proposal.

What am I to say to the people at this time in order to justify a proposal to put extra taxes on meat, cheese and other foods, when the Chancellor, teetotaller as he is, can find it in his heart to make it easier for beer and wine drinkers? Of all the days in the year to make such a proposal, he chooses that on which the hon. Member for Orpington (Sir W. Smithers) has a Question on the Order Paper asking that 50 barrels of Algerian wine should be auctioned, and he comes here with a proposal to make wine-drinking easier and cheaper. To what extent does he think that will win from the working population of this country the enthusiasm to greater efforts in production which he expects from them? To what extent will he be assisted by that proposal?

In the matter of the production of beer, all the materials from which beer is made are required for other purposes. We have been talking this week about the meat situation and about the necessity to obtain more coarse grains in order to develop our own cattle population. It is now suggested that there shall be an easing of the situation in regard to the production of beer, so that there may be a greater demand for barley and, to that extent, a greater demand for land and a consequent decline in the amount of land that will be used for the production of grains to help us to increase our home meat supplies.

Next, there is no easement of the Purchase Tax. The Chancellor skipped lightly over it as if it were of no great account. Many of us in our movement are bitterly disappointed that no attempt is being made to take the burden of this tax off the working-class housewife in regard to a large number of commodities which are still overburdened by the Purchase Tax. It is not only the situation of the housewife about which I complain. On the producing side, the tax is having most appalling consequences. I have in my division a company engaged in the manufacture of electric water heaters, about which I have spoken in the Debates on two or three Finance Bills in the past. Gas water heaters were allowed a special remission of tax, but those people in my division who are engaged in producing electric water heaters are handicapped by a heavy Purchase Tax placed upon those articles. They are not only suffering by the fact that, like other people, they must pay more for their electric water heaters, but they are actually being deprived of their wages.

For example, in the industry to which I refer, the wages even of the lowest paid labourers are calculated on a production basis, and, if production is low—as it is as a result of this tax—their bonus is reduced. I was assured by a deputation of workers which waited on me last week that they are losing, at the lower end of the wages scale, something like 10s. or 15s. per week. I suggest that this issue ought to be investigated by the Chancellor and that it should be dealt with in this Budget. The Chancellor has totally neglected the situation of these people and has ignored their just claims in the proposals which he has submitted in his Budget. With those few words, I wish to voice my strongest protest about this matter.

I listened with something approaching not only amazement but positive alarm and fear to my right hon. and learned Friend's suggestion that he is trying to think of a tax to impose on the Health Service, towards which we on these benches have worked so hard. I suppose he would have introduced such a tax in this Budget if he could have been surer of his ground. I hope that what we say during these Debates will make it absolutely impossible for him in any Budget to introduce this tax so as to place the cost of this service upon the individual beneficiaries.

I look upon the free Health Service as a great victory won by this party—a victory not only over the party opposite but over the worse influences that have often prevailed among our own party. My mind goes back to the days of the great controversies between Philip Snowden and Ramsay MacDonald not only on the question of the health service but on the question of the insurance service, when Snowden was fighting for the free contributory insurance system. Indeed, the free Health Service has grown from that idea—a growth of which we are all proud and which we said we would defend to the very last ditch. Yet the Chancellor comes here and tells us that he is looking for an opportunity to place a special burden on the beneficiaries of the health Service so as to bring home to them the value of the service which they are receiving. I can assure the Chancellor that they do not need reminding of its value. The working class are aware of it. There is pride everywhere in the accomplishment of this Labour Government in that respect. When one considers the advantage that we shall lose in our propaganda as a result of the Chancellor's suggestion for a special tax upon that service, no wonder hon. Members opposite laugh. I have no doubt that Communist Members will laugh, too.

I appeal to the Chancellor from the Labour Party point of view, which I have always defended and from the point of view of the Socialist principles that we have popularised, particularly during the last 12 months while we had been discussing this Health Service. Not for a moment should he have made such a suggestion. I, for one, will use all the influence at my command when we have another Budget to make it impossible for him to proceed with such a proposal. I regret very much that I should have had to speak in this strain, but I felt that it was my duty to raise these protests.

7.33 p.m.

I agree with my hon. Friend the Member for West Ealing (Mr. J. Hudson). I, too, was very alarmed when I heard the Chancellor make that statement about the National Health Service. After listening carefully to his long speech I was reminded of the saying about the mountain labouring and bringing forth a mouse. There has been a tremendous amount of labour involved in the preparation of this Budget, but I challenge the Chancellor or any other hon. Member to contradict this statement: If the Chancellor, having stated the financial position of the country, had said that owing to the difficulties with regard to dollar exchange, the increased burden of armaments, and the permanent burden of the National Debt, there was no justification for any change in the rate of taxation or the method of taxation, and that therefore he proposed to allow it to continue for another year, showing another surplus exactly the same as last year and the year before, I do not think a single hon. Member would have been able to say a word against it. Such a statement would have had far better results than this Budget will yield. The previous Budget gave better results than this one.

The Chancellor has given us today a two hours' treatise; he has given us a mass of documents and papers, and as for the Blue Paper in particular, I think it was specially designed to confuse rather than to make things clearer. After that special treatise on the financial situation of the country, he told us that the burden of the social services is one for which we must be prepared to pay. I have been in the Labour Party for 40 years, and during the whole of that time I have not known anybody in that party who was not aware that there would be a tremendous burden on the whole country in order to provide the social services. Indeed, we have advocated the introduction of the social services. Consequently, to be told now that there is a burden and that it must be passed over to the recipients and the people on whose behalf we have carried on this agitation for so many years, is rather astonishing particularly when it comes from one who was regarded not so long ago as flirting with the "ultra-reds." It seems to me that he has gone so far round the circle that he is now beginning to flirt with the "ultra-blues."

This is far from being a popular Budget. I do not know how the Chancellor can justify telling the ordinary housewife, "You do not get very much butter, but there will be an increase in the price; you do not get very much cheese, but there will be an increase in the price; you do not get much margarine, but there will be an increase in the price. Your husband, however, will have a penny taken off his beer." No sane woman would regard that as a statesmanlike action. We know that the working-class man has had to pay this tax on his beer. It is not very popular, but at least he has the wages with which to pay for it. For a long time the working class have had no wages to spend on beer. The working-class man is not immediately concerned with having a penny taken off the price of his beer. The negotiation was not with the fellow who buys the beer but with the fellow who makes the profits out of the beer. It is peculiar that the people who are making profits out of this industry should receive the first consideration from the Chancellor, rather than those other people.

Is it not a fact that if the Chancellor had not reduced the price by a penny, he would not have got so much revenue from the beer tax at the old rate as he will do at the reduced rate? Is not that the reason why it was done?

No, I do not agree. Is it not the case that the Chancellor had a surplus last year, and is there not a surplus this year? Since 1945, when this Government were elected, we have been trying to do two things. One has been to balance the Budget on our domestic economy, and the other to bridge the existing gap between the dollar exchange and sterling. All the arguments that have been put forward at that Box today and on previous occasions have been that we must work harder, produce more and sell our products on the North American continent. Have we not been told today and previously that our own domestic economy should balance the Budget? We have actually had a surplus. Why have we been increasing production?—to solve the problem that remains with us because all nations want dollars and very few want sterling. All nations want dollars with which to purchase on the American continent. To tell us that the Budget would not have been balanced if the penny had not been taken off beer is to tell us something which the Chancellor himself did not claim. It would be nonsensical for any- one else to claim it. The Budget would have been balanced without the penny off beer. I will not go into the question of how much the Chancellor will raise by the 4d. on cheese and the increase in the price of butter, margarine and meat. I do not think there is any justification for those increases.

I wonder when we shall have a Chancellor of the Exchequer with the courage to tackle No. 1 problem which, apart from the problem of armaments—over which we seem to have no control—is that of the National Debt. This is a problem over which we have control. Every year we have to raise £500 million for interest on the National Debt. I wonder when we shall have a Chancellor with the courage to say that he will declare a moratorium on the National Debt, and that there shall be no payments of interest for the next few years until the country gets on to its feet. That would be a revolutionary proposal, but what is the Socialist movement but a revolutionary movement?

The Socialist advocates that the capitalist system is effete, useless and dangerous and ultimately will create absolute chaos. He advocates an organised plan, an organised system of society, and he approaches all these problems, therefore, with a revolutionary outlook. I cannot for the life of me see why any hon. Member should have to go to the people and say that they must vote for the Labour Party because the Labour Party is mainly concerned about the welfare of the people of the country. When people say they are patriots of Great Britain or of England—and I understand most Englishmen are very patriotic—they mean something of an abstract nature, but what Socialism means is not abstract; it means the people. It means the welfare of the people who live in the country—our own people. If one section of the community claims every year £500 million out of the national revenue—and goodness knows how long it will go on—obviously the other people who are struggling to pay that £500 million and at the same time are struggling to raise their standards of life, of education and of social services, will have a tremendous task.

I suggest that the Chancellor, if he could not bring forward a true Socialist Budget should have left things where they were and brought forward no Budget at all, because the income from the old standards was greater than our expenditure. We were getting on to our feet. Nobody can deny that the country has done well in the last 12 months and that tremendous progress has been made, and no one can say that the new Budget will improve that. Surely that is the whole point of a Budget. If it does not improve the situation, there is no justification for it. In the new Budget the Chancellor has given to a large section of the working-class a definite sense of grievance which will be shown in the forthcoming municipal elections and that, perhaps, might awaken the Chancellor to a sense of his responsibility not only to the country, but also to the party to which he belongs.

7.45 p.m.

I have listened to the Chancellor's statement and to the remarks which have been made on the Budget. So far as the Budget is concerned, I think the Chancellor is the one man in this country to deal with the financial position, to develop the economy of the country along intelligent lines and to keep a sense of realism in our national and political life. At the same time, I believe he has not the same sense of realism so far as the ordinary folk of this country are concerned and has not the political approach which would either endear him to the mass of the people or obtain support for a political party because of the policy pursued in his Budget.

We realise that he has a tremendously difficult problem to face. One of the main features in the present life of this country is the economic recovery of the nation, and I agree with the Chancellor—and he has propagated this for years—that only by economic recovery, by increasing the productivity of the nation, can this nation sustain the present standards and eventually provide higher standards of life for the people. On the other hand, we have to recognise the menacing world situation, which is bringing about almost bankruptcy throughout the nations, and the plans for rearmament which are forced upon this country. Re-armament is costing a large sum of money and may be increased substantially; it may be something approaching £1,000 million a year before long. That, in itself, is double the ordinary food subsidies and takes a huge part of the nation's wealth. It prevents economic recovery and at the same time it burdens the nation with a tremendous amount of taxation. No one can blame the Chancellor for the position of the world today as a result of which we are compelled—although I know certain hon. Members do not agree with this—to arm to the teeth, in spite of the view expressed at the end of the war that we should be able to disband our Armed Forces and would need to spend very little on armaments throughout the world.

In passing, I say, after proper analysis, that part of the world plan of the Cominform is to work for the national bankruptcy of the capitalist nations. It is the policy of the Cominform, a policy which is cold-bloodedly pursued, because if Russia had agreed to co-operate with the remainder of the world, neither conscription nor a vast armaments programme would have been necessary. This rearmament policy, therefore, is part of the carefully designed policy of the Cominform to work in many and devious ways for the destruction of those nations now called the Western Powers.

In addition to the annual expenditure on armaments, we have a smaller part of the population which has to bear the ordinary taxation and contribute to economic recovery. Those who are spending the money and making the armaments do not form a productive part of our economy. The men in the Armed Forces are spending our national wealth and that is helping to undermine the existing standards of the nation. We have, there, fore, to face in a realistic way, the question which a political people will examine. They will see exactly why we are driven along this road of tremendous taxation at a period when we had expected relief.

Is the hon. Member not in favour of the Government taking the precautions made necessary by the action of the Cominform?

I think it is well known in this Committee and, indeed, outside, that I believe that this is part of the price we must pay, if we wish our national life to proceed along the ways the Labour Party wants. I am not blaming the Chancellor or the Government at all because this heavy burden is being placed upon us. We can but hope that sanity will return to the world, that Russia will change her attitude and come into the unity of the Powers and co-operate, instead of trying to create chaos and every form of disturbance. Were she to do that, we should be well on the way to recovery in this country and in the world. However, the fact is that the whole of our economic life is disturbed by this threat. Therefore, I agree to the raising of this amount of money, because if there is one thing which will prevent war, it is that what is left of the free world refuses to be overrun as some countries in Europe have been overrun.

Now let me deal with the methods of raising the money. I think there are methods of raising additional revenue that are neglected. For example, why do we not take over the pools and run them instead of allowing millions of pounds to run into the pockets of individuals? Why not direct that wealth into the pool of national wealth? Then, too, I would "soak" the dog tracks as much as the rich men have been "soaked" in this country. I think that with the progress made in raising the standard of living, the only people we need worry about are those right down at the bottom of the social ladder. I am not worried so much about men in fairly comfortable positions. The increased cost of living bears particularly heavily on those at the bottom of the ladder. If trading in food had been left free and unrestricted, and the so-called economic price had been charged for it, £5 million or £6 million would have been distributed in profits to trading companies and individuals, and food prices would have been substantially higher than they are.

I have worked it out that the increased prices to be charged for margarine, butter and cheese will mean about three halfpence per week per person. We are not able to buy so much of those commodities that the increased cost of them will bear very heavily on most people. Twopence a pound on butter when the ration is three ounces and a penny a pound on margarine, and fourpence a pound on cheese, when the ration is only two ounces, means an extra actual cost of about three halfpence a week. That will not bear so heavily on trade unionists who can force up wages and put in for increases of pay from time to time. However, it will bear hardly on people like the old age pensioners, who are right down at the bottom of the social ladder. They are the people with fixed incomes, a group who are not living but existing today. They are the people to whom my sympathy goes.

If food prices had not been controlled, the trade unions would never have agreed with the Government to refrain from asking for increases as they have done.

My answer to that is that I have not observed.that the trade unions have refrained from demanding increases.

On the contrary, there has been a substantial number of increases of pay given over the past year in various trades. We have a standard of life at the moment which could not be borne by the national income, and which the workers would not be enjoying but for Marshall Aid. By technical developments, by managerial skill, and by the enterprise and initiative of the workers we may hope for higher standards for the people of our country and of the world. Those standards will be achieved by greater productivity and a consequent cheapening of costs and prices. That is the sane way to national and world recovery. Anybody who does not see that, is blinking at the whole economic situation, and not facing the real problem of national and world recovery.

I should have been better pleased if the Chancellor had been able to say, "We are taking over the pools. We are to obtain substantially more from the totes, and so forth, and from the tax on betting, and we are to have a national lottery." If there are all these millions of pounds being spent on gambling, the nation ought to have some of that money, and out of that we could subsidise the old age pensioners and the widows and aged spinsters. We could subsidise reforms in this country out of the money spent on gambling. We ought not to try to reform the worker by telling him he has no right to spend his money on the tote, that he has no right to spend it on horses, or on pools. The workers have the right to spend their wages in any way they think fit, but if they spend their money on those things, then our job as legislators is to attract that money into the national pool as speedily as possible, and use it for the benefit of the community.

We have to find ways and means of getting money to raise the standards of life of those at the very bottom of the social ladder. People with higher pay can look after themselves, and they have powerful trade unions and wages boards and negotiating bodies to help them. Therefore, I find that in this Budget there is a lack of realism about the people who are really suffering in this country. They are the people with small fixed incomes who can exert no power or authority of any kind. If the old age pensioners lobbied hon. Members they would find the majority of them were in favour of raising the standards of the old age pensioners.

My hon. Friend is making out a good case for the old age pensioners, but would he not include in his plea large families of poor people who eat meat, butter and cheese, who are to have filched from them a certain part of what we had guaranteed to them? Not only old age pensions but other financial provisions such as children's allowances will also be affected by the Budget.

When the hon. Gentleman talks about filching away, I can only say that I do not put it in that way. The Chancellor thinks that money should be raised and that this is the way to raise it. I am not so worried.

I should like to interrupt the hon. Gentleman—I did it before when the hon. Member for South Ayrshire (Mr. Emrys Hughes) was speaking—to say that the Chancellor is not filching or taking. He is suggesting to the Committee that as there has been an astonishing rise in the subsidies for various articles, including food, a limit must be put to them. He is doing no more than that. He is not reducing the present subsidies. He is saying to the Committee: "I do not think we ought to allow them to soar out of sight. They began at something under £100 million; they are now more than £400 million, and by next year they will be near to £600 million. We think that is too much."

There will always be a dispute about these things. I heard the Chancellor say last year that there must be a figure beyond which we are not prepared to go, but the figure has gone up to an exorbitant amount. If the food subsidies had gone up to £1,000 million and if we had been asked to pay for them by taking away the children's allowances, there would have been a howl in the Committee. The hon. Member for West Ealing (Mr. J. Hudson) talks about children's allowances. I quite understand that a case can be made out for all the increases in the standard of life for the people of this country that have been given by the present Government. I admit and I admire the fact that, in spite of great difficulties, we have been able to advance the living standards of the people to the extent that we have done. It is not difficult for hon. Members to put that case on the platform.

I am putting the case that the people at the bottom of the ladder deserve our sympathy. The other people, who are drawing family allowances and their wages, are not in the same category. Their money has been raised during or since the war. The people with fixed incomes, like the old age pensioners, are not getting the increase that every hon. Member would say on the platform they are entitled to. What is the reason? If we represent the wishes of the people, why are the old age pensioners not getting an increase? It is because Members of Parliament are not prepared to press the Government strongly enough on behalf of the poor people at the bottom of the social ladder. I quite accept the Budget proposals, except that something of a substantial character should be done for old people and those at the bottom, whose burdens have been continually increased until they are almost intolerable.

The Chancellor of the Exchequer is one of the finest men this country could have. From the political point of view, he does things that one should not do and which have not been done in the past. He is prepared to see the truth and to go for it. He will develop a policy to meet an existing situation, and he is unresponsive to political pressures, or overtures. He recommends the present course to the Committee and stands by it. The Financial Secretary to the Treasury has given us the answer. It is that the Chancellor is making proposals to the Com- mittee. Greater protection should be demanded in this Budget for the people at the bottom of the ladder. I hope that in the coming Debates there may be general acceptance of the Budget proposals and that we shall demand something for the old people, to relieve in some substantial way their miserable existence.

The hon. Member for Shettleston (Mr. McGovern) ended his speech by paying a tribute to the Chancellor of the Exchequer. I want to underline what he said. I am sure that no right hon. Gentleman on the opposite side of the House would have had the courage to introduce this Budget. I am not surprised about that. My view is that it is a Tory Budget; nevertheless it is a Budget which the Tories would not have had the courage to introduce. It is the Economic Survey carried to its logical conclusions. When I first read the Economic Survey I was filled with foreboding but I hoped that as the White Paper was written three or four months ago, the Chancellor might perhaps reflect and ask himself a few questions before going forward headlong with the policy which he has outlined today.

What has the Chancellor set out to do? His view is that the deflationary process has not gone far enough. He has contented himself with looking for signs, and he has found the signs he sought, such as low unemployment, and concluded there is no deflationary tendency. He has found that unemployment has not increased, and he has therefore come to the conclusion that we must have a bit more of the mixture as before. It is open to any hon. Member to look for other signs. I am going to look for a sign or two myself and to make a prophecy or two. I will not accept the unemployment figures at the moment as being a guide. I look in other directions, at the physical assets. Take a look at coal. It is clearly becoming increasingly difficult to get rid of certain kinds of coal. There will be a market for some years for particular kinds of coal, but some of the lower quality kinds cannot be disposed of even now.

Let us look at oil. In May, 1947, an event occurred which I thought at the time marked a turning point in the world economic situation. America became a net importer of oil. Today so much oil is being produced in the sterling area that we cannot even store it. A few days ago an announcement was made by the Government that oil conversion, which has been held up for a couple of years, should now be proceeded with. That is a straw in the wind. The process of converting to oil from coal will increase the difficulty of disposing of some kinds of coal and there is a likelihood that within quite a short time we may have difficulty in disposing of this poor quality coal.

I have never believed that this country will be able to dispose of the same quantity of coal as raw fuel as we did before the war. I have always thought that this country's prosperity must be based upon the scientific use of its chief indigenous raw material. Having nationalised the fuel and power industries we should now co-ordinate those industries with the chemical industry and develop a great range of by-products based upon coal. That kind of thing has to be done, but I do not want to wander too much in that direction. If I am right and the Chancellor is wrong, then probably before this year is out, there will be unemployment in the coal mining industry because we cannot get rid of the coal we produce. I notice that already the Chancellor has lowered the ceiling of manpower to be taken into that industry. I regard that as significant. I know that at one time there was a considerable opinion in the House that more use ought to he made in the mines of foreign workers. At the present moment it is becoming impossible to place the E.V.W.'s already in this country. I say—and my words will go down in HANSARD—if I am right and the Chancellor is wrong, one thing which we are going to see is the emergence of unemployment in the coal industry.

I want to turn to another aspect of the Chancellor's policy. Here again this bears upon the policy of the Minister of Fuel and Power. I think that the proposal of the Minister of Fuel and Power to institute a price disincentive for electricity was "barmy." I think that events have proved that to be so. It never acted as a price disincentive at all. Electricity consumption went on as before. All that it did was to add a burden to the people who pay their accounts quarterly, while those people with slot machines got away with it. Today we have the Chancellor of the Exchequer, who, I think, has been influenced by the same reasons as those which influenced the Minister of Fuel and Power, and he is adopting the same policy about telephones. Those people who pay on the dot through the slot machine, get away with it. Those people who pay quarterly are going to be hit.

What I think the Chancellor does not understand—and I remember having an argument with him, or perhaps it is presumption on my part to say that I argued with him because I said what I had to say and he listened—is that he must get away from the idea that there is a considerable section of the community of this country who walk around with suitcases stuffed with pound notes. The overwhelming majority of our people have considerable difficulty in making both ends meet; and, therefore, if in fact we add this price disincentive—this tax, because that is what it is—to the cost of the telephone, I do not think that we shall alter peoples' social habits but only make it more difficult for them to do the things which they have been accustomed to do. I want to raise my voice in protest against what I regard as a quite iniquitous burden not only upon the private person who uses the telephone to communicate with his friends, but also upon the business community. What does it matter to the big business firms with a large turnover? After all the Chancellor is paying for this, because it will come out of the money that would otherwise go in tax; but to the small business man, the garage proprietor, the shopkeeper and others this is an added cost on his business and I think that it is wholly to be deplored.

I think that the hon. Member for Shettleston was absolutely right. Of course, we cannot consume more than we produce, and if in fact the Chancellor pumps out more purchasing power than the goods to meet it, all that would happen would be that we should run away to raging inflation. Therefore, while I do not believe that the Chancellor is right in his view about the economic situation, I do not want to advocate a wholesale pumping of purchasing power into the community. I say that he ought to distribute much better what he has to distribute. I believe that by his Budget today the Chancellor throws away one of the greatest assets that this country has had, and that is the social equilibrium which made the stabilisation of wages and prices possible. I believe that he has thrown it away—whether deliberately or not does not matter for the purpose of my argument—and I believe that the trade union leaders who have played a patriotic part in backing up the Government during the past two difficult years will have the greatest possible difficulty in holding back wage demands in the coming months. That may start off an inflationary spiral which the Chancellor of the Exchequer is trying to avoid.

If hon. Gentlemen opposite say to me, "Well, there is no other way in which he can balance his Budget," I invite their attention to the Chancellor's White Paper. Perhaps I may say in parentheses that I never noticed much enthusiasm for this White Paper before today; it received anything but a good Press. He has certainly done the Tory Party a good turn, and I think they were a little churlish to grumble at him. I want to draw attention to Table 25 in that White Paper. There is an item showing un-distributed profits. I do not complain about that because undistributed profits go back into industry and provide for the re-equipment which will lead to greater efficiency and ultimately to higher production, but let us look at the figures. Undistributed profits in 1947 were £405 million; in 1948 £540 million; and in 1949 £575 million. So that in two years we get an increase of almost 50 per cent. in undistributed profits. To what does that point? It points to the fact that profit margins are far too high. That, in its turn, points to inefficiency at a variety of levels and certainly in the distributive trades. One has striking confirmation of that if one looks at the increasing number of people who are employed in these industries.

I want to conclude on this note: I think that today the Chancellor missed a very great opportunity; not an opportunity of giving great concessions because I do not think they were within his power to give, but what he could have done was to make it clear that the policy that produced the amazing results which are shown in this White Paper—hon. Gentlemen should turn to paragraph 10 where they will see that we have an improvement of over £500 million in the course of a year—were not secured by adopting the policy which he is putting forward today. What is that policy in a nutshell? It is to abandon control and return to the price system. My objection is not to the Chancellor's Budget, but to this policy. For 30 years I have held the view that the pricing system never worked as its admirers said that it did and if it did work at all it worked in such a way as to cause poverty, unhappiness and suffering to millions. As a Socialist, I realised that there was a job for the pricing system to do. It was part of a system of an economic organisation which did not leave us to the mercy of the so-called laws of supply and demand. The Chancellor of the Exchequer has thrown all that away. It will not be the Chancellor of the Exchequer and it will not be only the Government, but it will be the country as a whole who will reap the whirlwind of what I regard as a retrograde, reactionary and, may I say, ghastly policy.

8.20 p.m.

Last Thursday the Opposition anticipated that the announcements in the Budget statement today would be so good that the London County Council elections tomorrow would be won on the Chancellor's speech, and the Leader of the House then told them that they were putting ideas into his head. After his speech today they certainly cannot charge the Chancellor with electioneering, which only shows that the charges the Opposition have levelled at us in the past, of making popular announcements on the eve of elections, are without foundation.

I agree with the sentiments expressed by my hon. Friend the Member for Shettleston (Mr. McGovern) about defence expenditure. It is regrettable that, four years after a war, in order to safeguard our future security we have to spend so many millions, for fear that an aggressor may once again attack us or our shores. While it is unpleasant, I agree that this expenditure is necessary in the state of world affairs today.

A problem to be faced will be the attitude of the Trades Union Congress to this Budget. Following the White Paper on Personal Incomes, Costs and Prices, the T.U.C. agreed not to put forward demands, unless applicable to men on a very low wage scale, provided that the cost of living was stabilised; and the Chancellor agreed to stabilise the cost of living with a food subsidy around the £400 million mark. But as prices have advanced, the day has come when the Chancellor has had to say: "Up to this figure of 465 million and no further." This year the T.U.C. has been pressing on the Government a policy for the reduction of the cost of living, and on that score they have held their hand. In face of the increased food costs proposed in the Budget, meagre though they may seem in figures, the T.U.C. are bound to review their future attitude. I think it only fair that that should be pointed out to the Government Front Bench.

I listened to my hon. Friend the Member for Dudley (Mr. Wigg)—who I am sorry to see has gone—with some amazement. He said that before the end of this year there would be unemployment in the coal industry. Well, my worry about the coal industry is that before the end of this year there will be, not unemployment but a dwindling in manpower. We know that young men are not coming into the pits, and that the labour force has been maintained with Poles and displaced persons. If the wastage continues at the rate of 70,000 a year, with the lack of recruitment and with the drying up of the flow of Poles and displaced persons, there will be a very serious manpower shortage in the industry.

Where my hon. Friend gets the idea that there will be unemployment in the industry this year, I fail to see. In the pits we are trying to increase the number of face workers so as to produce the amount set as a target this year. As one who understands coalmining, I am not prepared to guarantee that the miners will get the 215 million to 220 million tons for which they have been asked this year. They will do their best, but they have been set a formidable task. Although we are increasing the output this year, if the number of men required is not obtained we shall not reach the production figure aimed at. In the industry we shall try to get as much as we can by the end of the year but I only hope that if we do not reach that production figure, the miners will not again be criticised for not pulling their weight, because the circumstances are extremely difficult.

I agree that the Chancellor ought not to contemplate tampering with the social services, especially the free Health Service. If he does so, I believe that he will be creating difficulties for himself amongst his own supporters. If the figure of £465 million in food subsidies is to be a stable factor—and that is equivalent to 14s. a week for a man with a wife and two children—does the figure announced today, which puts 4d. a lb. on meat, mean a second cut in the meat ration?

This wants clearing up, because many hon. Members think it does mean that. The ration as announced is 8d. worth of meat and 2d. worth of corned beef. Today the Chancellor announced that the price of meat would go up. It would be helpful if the Government could assure us that people will still get the same amount of meat although the price has gone up.

I can assure my hon. Friend and the Committee generally that it is not the intention of either the Minister of Food or my right hon. and learned Friend to cut the meat ration.

I thank my right hon. Friend for that assurance. That does relieve my mind and the minds of many other hon. Members.

I consider the proposed increase in telephone charges very heavy indeed. I believe that this increase will ultimately be transferred by business concerns to the price of the manufactured product. It seems ridiculous to ask manufacturers to produce goods as cheaply as possible and then to impose this extra charge which will probably be added to the cost of their product. Further it will mean that private subscribers will give up their phones. This is no way to solve the shortage of apparatus that faces the Post Office.

Next, I wish to ask the National Assistance Board to reconsider the scales of supplementary relief to old age pensioners. A shilling a week to two persons living on £2 2s. a week means a great deal. With the increased price of coal, and of other commodities not on the ration, the old age pensioner is having a very difficult time. I do ask them to reconsider the assistance scales for persons receiving supplementary relief so that the additional cost which this Budget imposes upon them will be eased.

My final word is this. I would have preferred it, if the Chancellor had left the penny a pint on beer and redistributed an equivalent sum on the reduction of Purchase Tax. I speak not as a teetotaller but as one who likes a glass of beer. I believe that the average man would have preferred Purchase Tax relief on the essentials for his home which his wife has to buy, rather than the penny a pint off his beer. I hope that when we come to discuss the Budget further, the Chancellor of the Exchequer will look at this matter again and re-impose the penny on beer and give the money to the housewives.

Ordered: "That the Chairman do report Progress, and ask leave to sit again."—[ Mr. Snow.]

Resolutions to be reported Tomorrow; Committee report Progress; to sit again Tomorrow.